<PAGE>
SECURITIES ACT FILE NO. 33-20333
INVESTMENT COMPANY ACT FILE NO. 811-5480
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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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. 16 | X |
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and ___
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |___|
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Amendment No. 16 | X |
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(Check Appropriate Box or Boxes)
CIGNA VARIABLE PRODUCTS GROUP
(Exact Name of Registrant as Specified in Charter)
950 Winter Street, Suite 1200, Waltham, Massachusetts 02154
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (860) 726-3700
Alfred A. Bingham III, 950 Winter Street, Suite 1200
Waltham, Massachusetts 02154
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
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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, 1998 pursuant to paragraph (b)
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|___| 60 days after filing pursuant to paragraph (a)(1)
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|___| On (date) pursuant to paragraph (a)(1)
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|___| 75 days after filing pursuant to paragraph (a)(2)
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|___| On (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
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|___| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE>
CROSS-REFERENCE SHEET
Showing the location in the Prospectus (Part A) and the Statement of Additional
Information (Part B) of the information required to be included in response to
the items of Form N-1A:
PART A
ITEM NUMBER PROSPECTUS CAPTION
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1. Cover Page Cover Page
2. Synopsis Expense Table; Portfolio Transaction
Fees
3. Condensed Financial Information Financial Highlights
4. General Description of About the Funds; Investment Programs;
Registrant Certain Investment Strategies and
Policies; Investment Restrictions;
Appendix--Description of Money Market
Instruments
5. Management of the Fund Management of the Funds; The Trust,
its Shares and Board of Trustees;
Expense Table
5A. Management's Discussion of Fund Performance
Performance
6. Capital Stock and Other Distribution of Dividends and Capital
Securities Gains; Tax Matters; The Trust, its
Shares and Board of Trustees
7. Purchase of Securities Being Cover Page; Eligible Purchasers;
Offered Pricing of Shares; Purchase and
Redemption of Shares of the Funds;
Computation of Net Asset Value
8. Redemption or Repurchase Purchase and Redemption of Shares of
the Funds
9. Pending Legal Proceedings Not Applicable
PART B
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
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12. General Information and History General Information About the Funds
13. Investment Objectives and Investment Objectives and Policies;
Policies Futures Contracts; Options on Futures
Contracts; Risks as to Futures
Contracts and Related Options;
Investment Restrictions; Portfolio
Turnover and Brokerage Allocation;
Ratings of Securities
14. Management of the Fund Management of the Funds
15. Control Persons and Principal Control Persons and Principal Holders
Holders of Securities of Securities; Portfolio Turnover and
Brokerage Allocation
16. Investment Advisory and Other Investment Advisory and Other Services
Services
17. Brokerage Allocation and Other Portfolio Turnover and Brokerage
Practices Allocation; Activities of Affiliated
Companies
18. Capital Stock and Other General Information About the Funds
Securities
19. Purchase, Redemption and Pricing Purchase, Redemption and Pricing of
of Securities Being Offered Securities; Portfolio Turnover and
Brokerage Allocation; Limitation on
Transfers
20. Tax Status Tax Matters
21. Underwriters Not Applicable
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
PART C
The information required to be included in response to the items in Part C of
Form N-1A is set forth under the appropriate item, so numbered, in Part C to
this amendment to Registrant's Registration Statement.
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<PAGE>
CIGNA VARIABLE PRODUCTS GROUP
PROSPECTUS
MAY 1, 1998
<PAGE>
CIGNA VARIABLE PRODUCTS GROUP
PROSPECTUS
MAY 1, 1998
MONEY MARKET FUND
S&P 500 INDEX FUND
This prospectus contains information about the two mutual funds listed above
(the "Funds") which are separate portfolios of CIGNA Variable Products Group
(the "Trust"), a Massachusetts business trust. Each Fund has distinct investment
objectives and policies.
The investment objective of the Money Market Fund is to provide as high a level
of current income as is consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value by
investing in short-term money market instruments. The investment objective of
the S&P 500 Index Fund is to provide long-term growth of capital by investing
principally in common stocks.
Shares of the Funds are available and are being marketed exclusively as pooled
funding vehicles for life insurance companies writing variable annuity contracts
and variable life insurance contracts ("Variable Contracts") and for qualified
retirement and pension plans ("Qualified Plans").
This prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Additional information
about the Funds, contained in a Statement of Additional Information dated May 1,
1998, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Funds at 950 Winter
Street, Suite 1200, Waltham, Massachusetts 02154. The Funds' telephone number is
(860) 726-3700. The Statement of Additional Information is incorporated by
reference into this prospectus. The Statement of Additional Information is not a
prospectus.
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Please read this prospectus and retain it for future reference.
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Mutual Fund shares are not federally insured or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, The Federal Reserve Board
or any other agency. Shares of the Funds involve investment risks, including the
possible loss of principal. The Money Market Fund seeks to maintain a stable net
asset value of $1.00 per share, however, there can be no assurance that the
Money Market Fund will be able to maintain a stable net asset value of $1.00 per
share.
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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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1
<PAGE>
CIGNA VARIABLE PRODUCTS GROUP
SUMMARY
The Trust is an open-end, diversified management investment company offering a
selection of investment vehicles for insurance companies issuing variable
annuity and variable life insurance contracts and for Qualified Plans. This
prospectus offers two Funds of the Trust. Your Variable Contract may offer one
or more of the Funds offered by this prospectus.
Each Fund has its own distinct investment objective. Although each Fund will be
managed by experienced professionals, there can be no assurance that the
objective will be achieved. The Money Market Fund seeks to obtain its objective
by investing in high quality, U.S. dollar denominated short-term money market
instruments. The S&P 500 Index Fund seeks to obtain its objective by attempting
to replicate the composition and total return, reduced by Fund expenses, of the
S&P 500.
There are levels of risk involved with each Fund. Investments in money market
instruments are subject to the ability of the issuer to make payment at
maturity. For equity securities, there is the market risk associated with
movement of the stock market in general. In addition, there is the financial
risk related to earnings stability and overall financial soundness of individual
issuers and of issuers collectively which are a part of a particular industry.
See "Certain Investments Strategies and Policies" for a discussion of these
risks.
Shares of the Funds are sold at their net asset value per share, without sales
charge. Please read your insurance company's Variable Account prospectus or your
Qualified Plan's documents for discussions relating to instructions on how to
invest in and redeem from each Fund.
CIGNA Investments, Inc. (CIGNA Investments), the Funds' adviser, provides each
Fund with investment management and other services. Each Fund pays CIGNA
Investments a management fee for the management of investments and business
affairs. For a discussion of these, please see "Management of the Funds."
The investment objective of each Fund is deemed to be a fundamental policy which
may not be changed without the approval of a majority of each Fund's outstanding
shares (within the meaning of the Investment Company Act of 1940 (the 1940
Act)). Further information is available in the Statement of Additional
Information.
No one Fund is a balanced investment plan. Investors should consider their
investment objective and tolerance for risk when making an investor decision.
The above information is qualified in its entirety by the detailed information
appearing elsewhere in this prospectus, the statement of additional information,
and, as applicable, the Variable Account prospectus or Qualified Plan documents.
2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................. 2
EXPENSE TABLE............................................................ 4
FINANCIAL HIGHLIGHTS..................................................... 6
ABOUT THE FUNDS.......................................................... 7
INVESTMENT PROGRAMS...................................................... 8
CERTAIN INVESTMENT STRATEGIES AND POLICIES............................... 10
INVESTMENT RESTRICTIONS.................................................. 12
ELIGIBLE PURCHASERS...................................................... 13
PURCHASE AND REDEMPTION OF SHARES OF THE FUNDS........................... 13
COMPUTATION OF NET ASSET VALUE........................................... 14
DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS.............................. 15
TAX MATTERS.............................................................. 15
MANAGEMENT OF THE FUNDS.................................................. 17
PERFORMANCE.............................................................. 18
THE TRUST, ITS SHARES AND BOARD OF TRUSTEES.............................. 18
APPENDIX--DESCRIPTION OF MONEY MARKET INSTRUMENTS........................ 20
</TABLE>
3
<PAGE>
EXPENSE TABLE
The following Expense Table lists the transaction expenses and approximate
annual operating expenses related to an investment in each of the Funds. The
Table does not reflect charges and deductions which are or may be imposed under
Variable Contracts or Qualified Plans. Please refer to the applicable Variable
Contract prospectus or Qualified Plan documents for such charges. The expenses
and fees set forth in the Table are for the fiscal year beginning January 1,
1998.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ALL SERIES
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<S> <C>
Sales Load Imposed on Purchases.................................... None
Sales Load Imposed on Reinvested Dividends......................... None
Deferred Sales Load................................................ None
Redemption Fees.................................................... None
Exchange Fees...................................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MONEY S&P 500
MARKET INDEX
<S> <C> <C>
Management Fees
Investment Management Fees/1/ .35% .25%
12b-1 Fees None None
All Other Operating Expenses
(After Reimbursement)/1/ .15% None
Total Fund Operating Expenses
(Reflects expense limitation.
See Footnotes 1 and 2 below) .50% .25%
</TABLE>
___________________________
/1/ For a more complete description of the Management Fees, see
"Management of the Trust." CIGNA Investments has voluntarily agreed, as to each
Fund, to waive such portion of its management fee as is necessary to cause the
annual Total Fund Operating Expenses of each Fund not to exceed the following
percentages of each of the Fund's average daily net asset value:
Money Market Fund................................... .50%
S&P 500 Index Fund.................................. .25%
If this waiver is not sufficient to cause the annual Total Fund Operating
Expenses of any Fund not to exceed the applicable percentage of average daily
net asset value, CIGNA Investments has agreed to pay such other expenses of the
applicable Fund as is necessary to keep annual Total Fund Operating Expenses
from exceeding the applicable percentage. These arrangements will continue in
effect until May 1, 1999, and afterwards to the extent described in the Funds'
then-current prospectus. To the extent management fees are waived by CIGNA
Investments, or expenses of a Fund are paid by CIGNA Investments, the total
return to shareholders will increase. Total return to shareholders will decrease
to the extent management fees are no longer waived or expenses of a Fund are no
longer paid.
/2/ Total Fund Operating Expenses for the S&P 500 Index Fund for 1997,
absent expense reimbursements, were .55% of this Fund's average daily net asset
value. Total Fund Operating Expenses for the Money Market Fund for 1997, absent
expense reimbursement, were 1.11% of this Fund's average daily net asset value.
Other Operating Expense and Total Fund Operating Expenses reflect the current
voluntary expense limitation effective January 1, 1998.
4
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EXAMPLE OF FUND EXPENSES
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market $5 $16 $28 $63
Fund
S&P 500 Index $3 $8 $14 $32
Fund
</TABLE>
For the purpose of the example, assume reinvestment of all dividends and
distributions. This example assumes that the voluntary expense limitations
effective in 1998 would be in place for the entire periods indicated. The
example does not reflect charges and deductions which are or may be imposed
under Variable Contracts or Qualified Plans. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights of the following Funds for a share
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This information
should be read in conjunction with the Funds' financial statements and notes
thereto, which are incorporated by reference in the Statement of Additional
Information and in this Prospectus, and which appears, along with the report of
Price Waterhouse LLP, in the Funds' 1997 Annual Report to Shareholders. For a
more complete discussion of the Funds' performance, please see the Funds' 1997
Annual Report to Shareholders which may be obtained without charge by writing to
the Fund or calling (860) 726-3700.
<TABLE>
<CAPTION>
S&P 500 INDEX FUND /1/
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YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING OF $ 12.40 $ 10.75 $ 8.19 $ 9.20 $ 11.94 $ 12.83 $ 10.75 $ 11.94 $ 10.14 $ 9.41
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income* 0.25 0.22 0.21 0.19 0.16 0.12 0.19 0.26 0.28 0.25
Net realized and unrealized gain 3.86 2.17 2.80 (0.13) 0.22 0.34 3.79 (0.74) 2.67 0.72
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(loss)
TOTAL FROM INVESTMENT 4.11 2.39 3.01 0.06 0.38 0.46 3.98 (0.48) 2.95 0.97
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS:
From net investment income (0.32) (0.29) (0.27) (0.14) (0.17) (0.12) (0.20) (0.25) (0.30) (0.24)
From capital gains (0.36) (0.45) (0.18) (0.85) (2.95) (1.23) (1.70) (0.46) (0.85) -
In excess of net capital gains - - - (0.08) - - - - - -
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.68) (0.74) (0.45) (1.07) (3.12) (1.35) (1.90) (0.71) (1.15) (0.24)
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 15.83 $ 12.40 $ 10.75 $ 8.19 $ 9.20 $ 11.94 $ 12.83 $ 10.75 $ 11.94 $ 10.14
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN 33.35% 22.48% 36.82% 0.67% 2.97% 3.59% 37.46% (3.99)% 29.22% 10.33%
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of period $116,308 $71,513 $66,283 $54,728 $61,478 $68,287 $73,446 $60,658 $69,389 $61,504
(000 omitted)
Ratio of operating 0.25% a 0.60% a 0.73% 0.78% 0.66% 0.59% 0.56% 0.59% 0.56% 0.54%
expenses to
average net assets
Ratio of net investment 1.93% b 1.78% b 2.05% 2.23% 1.30% 0.94% 1.38% 2.08% 2.18% 2.16%
income to
average net assets
Portfolio turnover 4% 4% 4% 4% 185% ** 82% 77% 63% 55% 38%
Average commission rate *** $ 0.0279 $0.0272
</TABLE>
a. Ratios of expenses to average net assets prior to expense reimbursements
were 0.55% and 0.64% for 1997 and 1996, respectively.
b. Ratios of net investment income to average net assets prior to expense
reimbursements were 1.63% and 1.74% for 1997 and 1996, respectively.
* Net investment income per share has been calculated in accordance with SEC
requirements, except that end of year accumulated
undistributed/(overdistributed) net investment income has not been adjusted
to reflect current year permanent difference between financial and tax
accounting.
** During November 1993, the portfolio was indexed to the S&P 500, resulting
in a complete turnover of the portfolio at that time.
*** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rule structures may
differ.
____________________________________________________________
/1/ During periods prior to November 9, 1993, the S&P 500 Index Fund was
actively managed. On November 9, 1993, the Board of Trustees authorized CIGNA
Investments, Inc., the investment adviser to the Fund, to change the Fund's
investment strategy to an indexation approach. See "The Fund's Objective".
Prior to October 16, 1985, the Fund was a Maryland corporation. On January 2,
1996 the name of the Fund was changed from Companion Fund to CIGNA Variable
Products S&P 500 Index Fund.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
<TABLE>
<CAPTION>
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YEAR ENDED MARCH 1 1996+ TO
DECEMBER 31, DECEMBER 31,
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04
Net realized and unrealized gain on securities - -
------- ------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.04
------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.04)
Distributions from capital gains - -
------- ------
TOTAL DISTRIBUTIONS (0.05) (0.04)
------- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
======= ======
TOTAL RETURN 5.19% 4.18%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $14,540 $6,003
Ratio of operating expenses to average net assets 0.50% c 0.42% c
Ratio of net investment income to average net 5.07% d 4.10% d
assets
Portfolio turnover N/A N/A
</TABLE>
+ Commencement of operations
c Ratios of expenses to average net assets prior to reimbursement of expenses
were 1.11% and 1.28% for 1997 and 1996, respectively.
d Ratios of net investment income to average net assets prior to
reimbursement of expenses were 4.40% and 3.24% for 1997 and 1996,
respectively
ABOUT THE FUNDS
- ---------------
The Funds are separate series of CIGNA Variable Products Group, a Massachusetts
business trust established by a Master Trust Agreement dated February 4, 1988
and registered under the 1940 Act as a diversified, open-end management
investment company (see "The Trust, Its Shares and Board of Trustees"). Each
Fund has its own investment objective and policies designed to meet specific
investment goals. Each Fund intends to qualify as a regulated investment company
for Federal income tax purposes. Their sole purpose is to serve as funding
vehicles for the investment of monies paid by holders of Variable Contracts
issued through separate accounts of life insurance companies ("Life Companies")
or by Qualified Plans. The Qualified Plans and the Life Companies may or may not
make all the Funds described in this prospectus available for investment to the
Variable Contract owners or Qualified Plan participants, as the case may be.
Historically, the Variable Contracts have been issued by Connecticut General
Life Insurance Company ("CG Life"), an indirect, wholly-owned subsidiary of
CIGNA Corporation. CIGNA Corporation is an insurance and financial services
holding company. The Funds may also serve as funding vehicles for Variable
Contracts issued by other life insurance companies affiliated with CIGNA
7
<PAGE>
Corporation or by life insurance companies which may be unaffiliated with CIGNA
Corporation.
The Trust does not foresee any disadvantage to Variable Contract owners arising
out of the fact that the Trust offers its shares for products offered by Life
Companies which may or may not be affiliated with each other or that it offers
its shares to Qualified Plans. Nevertheless, the Trust's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise between Variable Contract owners and
participants under Qualified Plans and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one or more Life
Company separate accounts or Qualified Plans might withdraw its investment in
the Trust. This might force the Trust to sell portfolio securities at
disadvantageous prices.
Shares are offered only to Eligible Purchasers (see "Eligible Purchasers").
Shares are offered at net asset value without the imposition of a sales load,
sales charge or selling commission.
INVESTMENT PROGRAMS
- -------------------
Money Market Fund
- -----------------
The Fund's objective is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity and the maintenance of
a stable $1.00 per share net asset value by investing in short-term money market
instruments. Money Market instruments are high quality, short-term obligations.
The Fund intends to invest 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.
Commercial paper is purchased primarily from U.S. issuers but may be purchased
from foreign issuers so long as it is denominated in U.S. dollars. All of these
instruments, including commercial loan participations, are briefly described in
"Description of Money Market Instruments" and are described more fully in the
Statement of Additional Information.
Pursuant to procedures adopted by the Board of Trustees, the Fund may purchase
only high quality securities that 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
8
<PAGE>
different ratings by different rating services, at least two rating services
must have assigned the highest rating 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 will limit its investments to securities with remaining maturities of
397 days or less and will maintain a dollar-weighted average maturity of 90 days
or less.
S&P 500 Index Fund
- ------------------
The Fund seeks to fulfill its objective by attempting to replicate the
composition and total return, reduced by Fund expenses, of the Standard & Poor's
500 Composite Stock Price Index ("S&P 500").
The S&P 500 includes 500 selected common stocks, most of which are listed on the
New York Stock Exchange. The S&P 500 is an index emphasizing large-
capitalization stocks. A company's stock market capitalization is the total
market value of its issued and outstanding common stock. Each stock in the S&P
500 has a unique weighting, depending on the number of shares outstanding and
its current price. In seeking to replicate the performance of the S&P 500,
before deduction of Fund expenses, CIGNA Investments will attempt over time to
allocate the Fund's investment among common stocks in approximately the same
proportions as they are represented in the S&P 500, beginning with the heaviest
weighted stocks that make up a larger portion of the index's value. CIGNA
Corporation is part of the S&P 500. Consequently, the Fund purchases shares of
CIGNA Corporation stock. CIGNA Corporation and Standard & Poor's Corporation
have no control over each other.
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 this index exactly. 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. In addition, the Fund may omit or remove
any S&P 500 stock from the Fund if, following objective criteria, CIGNA
Investments judges the stock to be insufficiently liquid or believes the merit
of the investment has been substantially impaired by extraordinary events or
financial conditions. Under normal conditions, the Fund anticipates holding at
least 480 of the S&P 500 issues at all times.
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
9
<PAGE>
of the public regarding the advisability of investing in securities generally,
or in the Fund particularly, or the ability of the S&P 500 to track general
stock market performance. S&P's only relationship to CIGNA Investments or the
Fund is the licensing of certain trademarks and trade names of S&P and 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 record 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.
Standard & Poor's 500 Composite Stock Price Index(R) is a trademark of S&P and
has been licensed for use by 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.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
- ------------------------------------------
In pursuit of their objectives and policies, the Funds may employ one or more of
the following strategies.
Money Market Instruments and Money Market Funds
- -----------------------------------------------
The S&P 500 Index Fund may invest in Money Market Instruments and in money
market mutual funds (including money market mutual funds managed by CIGNA
Investments) to invest uncommitted cash balances pending investment in
securities included in its index or to meet anticipated short-term cash needs.
The S&P 500 Index Fund will invest in Money Market Instruments (as described in
the appendix to this prospectus) and in money market mutual funds for temporary,
defensive purposes only under extraordinary circumstances. Of course, the Money
Market Fund invests exclusively in Money Market Instruments. Only the Money
Market Fund is required to limit such investments to those which, at the date of
purchase, are "First Tier" or "Second Tier" securities as those terms are
defined in Rule 2a-7 under the 1940 Act.
Futures Contracts and Related Options
- -------------------------------------
The S&P 500 Index Fund may invest in futures having an aggregate face value of
up to 20% of its total assets. The S&P 500 Index Fund may do so in order to
maintain cash reserves while simulating full investment in the underlying S&P
500 and to limit transaction costs should invested assets need to be sold to
meet redemption requests, or to seek higher investment returns when a futures
contract or option is priced more attractively than the underlying index. A
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<PAGE>
futures contract on an index (such as the S&P 500) is an agreement between two
parties (buyer and seller) to take or make delivery of an amount of cash equal
to the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. In the case of futures contracts traded on U.S. exchanges,
the exchange itself or an affiliated clearing corporation assumes the opposite
side of each transaction (i.e., as buyer or seller). A futures contract may be
satisfied or closed out by delivery or purchase, as the case may be, of the
financial instrument or, in the case of index futures contracts, by payment of
the change in the cash value of the index. Frequently, using futures to effect
a particular strategy instead of using the underlying or related security or
index will result in lower transaction costs to the Fund.
The S&P 500 Index Fund may also purchase and write call options and put options
on indexes and futures contracts on indexes. An option on a futures contract
gives the holder the right, in return for the premium paid, to assume a long
position (in the case of a call) or a short position (in the case of a put) in a
futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. An option on a futures contract
generally may be closed out (before exercise or expiration) by an offsetting
purchase or sale of an option on a futures contract. See the information set
forth below and the Statement of Additional Information for information on the
risks associated with these investments.
The S&P 500 Index Fund's use of index futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the regulations of the Commodity Futures Trading Commission relating to
exclusions from regulation as a commodity pool operator. Those regulations
currently provide that the Funds may use commodity futures and option positions
(i) for bona fide hedging purposes without regard to the percentage of assets
committed to margin and option premiums, or (ii) for other purposes permitted by
the entity's principal regulator (in the case of the Funds, the Securities and
Exchange Commission) to the extent that the aggregate initial margin and option
premiums required to establish such non-hedging positions do not exceed 5% of
the liquidation value (i.e., the net asset value) of the applicable Fund's
portfolio. For further information regarding futures contracts and options
thereon, see the Statement of Additional Information.
Risk Factors Relating to Futures Contracts and Options
- ------------------------------------------------------
The use of futures contracts and options may involve risks not associated with
other types of instruments which the S&P 500 Index Fund intends to purchase. In
particular, a Fund's position in futures contracts and options may be closed out
only on an exchange which provides a liquid secondary market therefor, and there
can be no assurance that a liquid secondary market will exist for any particular
futures contract or option. The inability to close out options and futures
positions could have an adverse impact on a Fund's ability to effectively hedge
its securities and might, in some cases, require a Fund to deposit cash to meet
applicable margin requirements. A Fund's ability to hedge effectively through
transactions in futures contracts or options depends on the degree to which
price movements in its holdings correlate with price movements of the futures
and options. It is possible that there may be an imperfect correlation between
the hedging instrument and the hedged securities, which could result in an
ineffective hedge and a loss to the Fund. See the Statement of Additional
11
<PAGE>
Information for a further description of the Funds' investments in futures
contracts.
Asset Coverage
- --------------
To assure that a Fund's use of futures and related options are not used to
achieve excessive investment leverage, a Fund will cover such transactions, as
required under applicable interpretations of the Securities and Exchange
Commission, either by owning the underlying securities, entering into an off-
setting transaction, or by establishing a segregated account with the Fund's
custodian containing securities in an amount at all times equal to or exceeding
the Fund's commitment with respect to these instruments or contracts.
Securities Lending
- ------------------
Each Fund may lend its investment securities to qualified institutional
investors for either short-term or long-term purposes of realizing additional
income. Loans of securities by a Fund will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. Government or its
agencies. The collateral will equal at least 100% of the current market value of
the loaned securities.
Turnover
- --------
The frequency of Fund transactions - the Fund's portfolio turnover rate - will
vary from year to year depending on market conditions and a Fund's cash flows.
The S&P 500 Index Fund's annual portfolio turnover rate is not expected to
exceed 100%.
INVESTMENT RESTRICTIONS
- -----------------------
The following summarizes the Funds' principal investment restrictions. Unless
otherwise noted, these restrictions are fundamental and may not be changed
without the approval of the lesser of (i) more than 50% of the outstanding
shares of a Fund or (ii) 67% or more of the shares of that Fund present at a
meeting if more than 50% of the outstanding shares of that Fund are represented
at the meeting in person or by proxy (see "The Trust, Its Shares and Board of
Trustees" for a description of the individual's rights with respect to giving
voting instructions to Life Companies).
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 a Fund.
A Fund may not:
1. Invest in the securities of any issuer if, immediately after such investment,
more than 5% of the total assets of the Fund taken at current value would be
invested in the securities of such issuer, except (a) bank certificates of
deposit and obligations issued or guaranteed as to interest and principal by the
U.S. Government or its agencies or instrumentalities, and (b) up to 25% of the
Money Market Fund's total assets taken at current value may be invested without
regard to such 5% limitation in bankers' acceptances in which the Fund may
invest consistent with its investment policies.
12
<PAGE>
2. Acquire more than 10% of the voting securities of any issuer or more than 10%
of any class of securities of any issuer. (For these purposes, all preferred
stocks of any issuer are regarded as a single class, and all debt securities of
an issuer are regarded as a single class.)
3. Concentrate more than 25% of its assets in any one industry, except that the
Money Market Fund may invest up to 100% of its assets in the domestic banking
industry.
4. Borrow money in excess of one-third of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at the
time the borrowing is made, and then only as a temporary measure to facilitate
the meeting of redemption requests (not for leverage) which might otherwise
require the untimely disposition of portfolio investments or for extraordinary
or emergency purposes, except that the S&P 500 Index Fund may enter into futures
contracts, as indicated. Such borrowings will be repaid before any additional
investments are made. Interest paid on such borrowings would reduce the yield on
the Fund's investments. (The Board of Trustees regards this restriction as
setting forth the Trust's policy with respect to the issuance of senior
securities.)
ELIGIBLE PURCHASERS
- -------------------
Shares may be purchased only by Eligible Purchasers. Eligible Purchasers are
limited to: (1) those separate accounts established by CG Life or by other Life
Companies that are registered as unit investment trusts under the Investment
Company Act of 1940, as amended, and that serve as the underlying investment
vehicles for Variable Contracts; and (2) Qualified Plans. Thus, Eligible
Purchasers who have purchased Fund shares are the only shareholders. Shares may
not be purchased by individuals or by the general public. The Board of Trustees
of the Trust may broaden or limit the definition of Eligible Purchasers.
Purchase of shares is subject to acceptance by the Trust and is not binding
until so accepted.
PURCHASE AND REDEMPTION OF SHARES OF THE FUNDS
- ----------------------------------------------
Shares of the Funds are sold exclusively to and redeemed by Eligible Purchasers
on a continuous basis.
Purchase and redemption orders received by Life Companies and Qualified Plans on
a given business day from Variable Contract owners or Qualified Plan
participants, as the case may be, will be effected at the net asset value of the
applicable Fund on such business day if the orders are received by the Fund in
proper form and in accordance with applicable requirements on the next business
day. It is each Eligible Purchaser's responsibility to properly transmit
purchase and redemption orders and payments in accordance with applicable
requirements. Individuals may not place orders directly with the Funds. The
Funds do not issue share certificates. Please refer to the prospectus of your
Life Company's Variable Account or Qualified Plan documents for information on
how to invest in each Fund.
Investments by Eligible Purchasers in each Fund are expressed in terms of full
and fractional shares of each Fund. All investments in the Funds are credited to
an Eligible Purchaser's account immediately upon acceptance of the investment by
a Fund.
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<PAGE>
The offering of shares of any Fund may be suspended for a period of time and
each Fund reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in CIGNA Investments's opinion, they are of a size
that would disrupt the management of a Fund.
COMPUTATION OF NET ASSET VALUE
- ------------------------------
State Street determines the net asset value of shares of each of the Funds as of
the close of business on the New York Stock Exchange ("NYSE") on each day the
NYSE is open for trading and, for the Money Market Fund, on Good Friday, so long
as banks are open, and on any other day on which there is a sufficient degree of
trading in a Fund's investments that the current net asset value of its shares
might be materially affected. The NYSE is closed on New Year's Day, President's
Day, Good Friday, Martin Luther King Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. The computation of net asset value is
made by dividing each Fund's total net assets by the number of outstanding
shares of such Fund at the time of calculation. Net assets are the excess of a
Fund's assets over its liabilities. Equity securities, including warrants, that
are listed on a national securities exchange or that are part of the NASDAQ
National Markets system are valued at the last sale price or, if there has been
no sale that day, at the last bid price. Debt and other equity securities
actively traded in the over-the-counter market, including listed securities
whose primary markets are believed to be over-the-counter, are valued at the
most recent bid price, which may be based upon valuations furnished by a pricing
service or from independent securities dealers. Short-term investments with
remaining maturities of up to and including 60 days are valued at amortized cost
which approximates market value. Except in the case of the Money Market Fund,
short-term investments that mature in more than 60 days are valued at current
market quotations. Other securities and assets of a Fund, with the exception of
futures contracts, which are discussed below, are appraised at fair value as
determined in good faith by, or under the authority of, the Board of Trustees of
the Trust. The net asset value so computed applies to all purchase orders and
redemption requests in the hands of State Street, duly executed in accordance
with applicable instructions, on the day of such determination. Any orders
received after such time are executed at the net asset value next determined.
Futures Contracts
- -----------------
Initial margin deposits made upon entering into futures contracts are recognized
as assets due from the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the value
of the 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. Variation margin payments are made or received, depending
upon whether unrealized losses or gains are incurred. When the contract is
closed, the Fund records a realized gain or loss equal to the difference between
the proceeds from (or cost of) the closing transaction and the Fund's basis in
the contract.
Options on Futures Contracts
- ----------------------------
The premium paid by a Fund for the purchase of a call or put option on futures
contracts is recorded as an investment and subsequently "marked-to-market" to
reflect the current market value of the option purchased. The current market
value of a purchased option on futures contracts is the last reported sale price
or, if no sales are reported, the last bid price. If an option on futures
14
<PAGE>
contracts which a Fund has purchased expires on the stipulated expiration date,
the Fund realizes a loss in the amount of the cost of the option. If a Fund
exercises a purchased put option on futures contracts, it realizes a gain or
loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If a Fund exercises a
purchased call option on futures contracts, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
Valuation of Money Market Investments
- -------------------------------------
Money market investments owned by the Money Market Fund 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 Money Market 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 they may alter this
procedure. The shareholders of the Fund will be notified prior to any such
change, unless such 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.
DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS
- -------------------------------------------
It is expected that shares of the Funds will be held under the terms of Variable
Contracts or Qualified Plans. Under current tax law, dividends or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a Variable Contract or Qualified Plans. Depending on the Variable
Contract or Qualified Plan, withdrawals from the contracts may be subject to
ordinary income tax and, in addition, to a 10% penalty tax on withdrawals before
age 59 1/2.
Each Fund is treated as a separate entity for federal income tax purposes. Each
Fund intends to pay out all of its net investment income and net realized
capital gains for each year. Dividends and net realized capital gains, if any,
from the Funds will be distributed at least annually (except that dividends are
declared and paid daily in the case of the Money Market Fund). After
distribution from a Fund (other than the Money Market Fund), the Fund's share
price drops by the amount of the distribution. Because dividends and capital
gain distributions are reinvested in shares of the Fund paying the dividend or
distribution, the total value of a shareholder's account will not be affected
because, although the shares will have a lower price, there will be
correspondingly more of them.
TAX MATTERS
- -----------
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to take all
other action required to ensure that no Federal income taxes will be payable by
the Funds. As a result, each Fund will generally seek to distribute annually to
Shareholders most or all of its undistributed taxable income and any
undistributed net realized capital gains (after use of any available capital
loss carry forwards). Because of this policy, the Funds do not anticipate being
15
<PAGE>
subject to the 4% excise tax imposed on the undistributed income of mutual
funds.
The Trust was established as the underlying investment for Variable Contracts
issued by the Life Companies. (See "About the Funds")
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of Variable Contracts held in the Funds. The Code provides
that a Variable Contract shall not be treated as an annuity contract or life
insurance for any period (and any subsequent period) for which the investments
of the underlying Fund are not, in accordance with regulations prescribed by the
Treasury Department, adequately diversified. Disqualification of the Variable
Contract as an annuity contract or life insurance would result in imposition of
federal income tax on contract owners with respect to earnings allocable to the
Variable Contract prior to the receipt of payments under the Variable Contract.
Section 817(h)(2) of the Code is a safe harbor provision which provides that
contracts such as the Variable Contracts meet the diversification requirements
if, as of the close of each quarter, the underlying Fund assets meet the
diversification standards for a regulated investment company and no more than
fifty-five percent (55%) of the total assets consists of cash, cash items, U.S.
Government securities and securities of other regulated investment companies.
There is an exception for securities issued by the Treasury Department in
connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg. 1.817-
5), which established diversification requirements for the investment portfolios
underlying Variable Contracts. The Regulations amplify the diversification
requirements for Variable Contracts set forth in Section 817(h) of the Code and
provide an alternative to the safe harbor provision described above. Under the
Regulations, an investment portfolio will be deemed adequately diversified if
(i) no more than 55 percent of the value of the total assets of the portfolio is
represented by any one investment; (ii) no more than 70 percent of such value is
represented by any two investments; (iii) no more than 80 percent of such value
is represented by any three investments; and (iv) no more than 90 percent of
such value is represented by any four investments. For purposes of these
Regulations all securities of the same issuer are treated as a single
investment.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of Variable Contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
As indicated elsewhere in this prospectus, Fund shares are also offered for sale
to Qualified Plans. The Regulations also provide that satisfaction of the
requirements of the Regulations shall not be prevented by reason of the fact
that shares in the investment company (i.e., a Fund) may be held by the trustee
of a qualified pension or other retirement plan (i.e., Qualified Plan).
Each Fund will be managed in such manner as to comply with these diversification
requirements. It is possible that in order to comply with the diversification
requirements, less desirable investment decisions may be made which would affect
the investment performance of the Fund.
16
<PAGE>
MANAGEMENT OF THE FUNDS
- -----------------------
The investment adviser to each of the Funds is CIGNA Investments, an indirect,
wholly-owned subsidiary of CIGNA Corporation. CIGNA Investments also serves as
investment adviser for other investment companies including investment companies
sponsored by affiliates of CIGNA Corporation, and for a number of pension,
advisory, corporate and other accounts. As of December 31, 1997, CIGNA
Investments and other affiliates of CIGNA Corporation manage combined assets of
approximately $64 billion. CIGNA Investments's mailing address is 900 Cottage
Grove Road, Hartford, Connecticut 06152.
Pursuant to a Master Investment Advisory Agreement the Trust, on behalf of the
Funds, employs CIGNA Investments to manage the investment and reinvestment of
the assets of the Funds. 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 Funds and what portion, if any, of the assets of
the Funds shall be held in cash and other temporary investments. CIGNA
Investments is also responsible for overall management of the business affairs
of the Trust and the Funds.
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 relevant Fund's average daily net assets, as follows: S&P 500 Index
Fund--0.25%, Money Market Fund--0.35%.
Each Fund will bear its own expenses. Operating expenses for each Fund generally
consist of investment management fees, custodian fees, fees for necessary
professional and brokerage services, costs of regulatory compliance, costs
associated with maintaining legal existence and all other costs not specifically
borne by CIGNA Investments. Trust-wide expenses not identifiable to any
particular Fund will be allocated among the Funds. CIGNA Investments has
voluntarily agreed to reimburse the Funds to the extent that the annual
operating expenses (excluding interest, taxes, amortized organizational expense,
transaction costs in acquiring and disposing of portfolio securities and
extraordinary expenses) of a Fund exceed a percentage of the value of the
relevant Fund's average daily net assets, as follows: S&P 500 Index Fund--0.25%,
Money Market Fund--0.50%.
The investment management fee payable in 1997 to CIGNA Investments by the S&P
500 Index Fund was 0.25% of average daily net assets, and total expenses of this
Fund in 1997 were 0.55% of average daily net assets. The investment management
fee payable in 1997 to CIGNA Investments by the Money Market Fund was 0.35% of
average daily net assets, and total expenses of this Fund in 1997 were 1.11% of
average daily net assets.
CIGNA Investments investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
State Street Bank and Trust Company ("State Street"), Boston, Massachusetts
02105 serves as transfer agent and dividend disbursing agent for the Funds.
State Street is also custodian of the assets of the Funds.
From time to time, the Funds may pay brokerage commissions on portfolio
transactions to brokers who may be deemed to be affiliates of CIGNA Corporation
17
<PAGE>
under the 1940 Act, as amended. See the Statement of Additional Information for
further details.
PERFORMANCE
- -----------
Each Fund's performance may be quoted in advertising in terms of yield and total
return if accompanied by performance of your Life Company's separate account.
Performance is based on historical results and not intended to indicate future
performance. For additional performance information, contact your Life Company
for a free annual report.
The Money Market Fund's yield refers to the income generated by an investment in
the Fund over a specified seven day period, expressed as an annual percentage
rate. Its effective yield is calculated similarly, but assumes that the income
earned from investments is reinvested. The Money Market Fund's effective yield
will tend to be slightly higher than its yield because of this compounding
effect. For the S&P 500 Index Fund, Yield refers to the income generated by an
investment in the Fund over a specified 30-day (or one month) period, expressed
as an annual percentage rate.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment in each Fund, including changes in share price (except
for the Money Market Fund) and assuming each Fund's dividends and capital gain
distributions, if any, are reinvested. A cumulative total return reflects a
Fund's performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual returns tend to smooth out variations
in a Fund's return, you should recognize that they are not the same as actual
year-by-year results. To illustrate the components of overall performance, a
Fund may separate its cumulative and average annual returns into income results
and capital gain or loss.
Yields and total returns quoted for the Funds include the effect of deducting
each Fund's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Qualified Plan. Since shares of the Funds
may only be purchased by Eligible Purchasers, you should carefully review the
prospectus of the Variable Contract you have chosen or Qualified Plan documents
for information on relevant charges and expenses. Excluding these charges from
quotations of each Fund's performance has the effect of increasing the
performance quoted. You should bear in mind the effect of these charges when
comparing a Fund's performance to that of other funds.
THE TRUST, ITS SHARES AND BOARD OF TRUSTEES
- -------------------------------------------
The Trust is a Massachusetts Business Trust established in 1988. The Board of
Trustees is authorized in the Trust's Master Trust Agreement to create new
series of shares (funds) without the necessity of a vote of shareholders of the
Trust. The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 each. Currently the
Trust is offering shares of two Funds.
Under the Master Trust Agreement no annual or regular meetings of shareholders
are required. Meetings of shareholders of a series will be held from time to
time to consider matters requiring a vote of such shareholders in accordance
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<PAGE>
with the requirements of the 1940 Act, state law or the provisions of the Master
Trust Agreement. It is not expected that shareholder meetings will be held
annually.
Except as otherwise provided under the 1940 Act, the Board of Trustees will be a
self-perpetuating body until fewer than two thirds of the Trustees are Trustees
who were elected by shareholders of the Trust. In the event less than a majority
of the Trustees serving as such were elected by shareholders of the Trust, a
meeting of shareholders will be called to elect Trustees. Under the Master Trust
Agreement, any Trustee may be removed by vote of two thirds of the outstanding
Trust shares; holders of 10% or more of the outstanding shares of the Trust can
require that the Trustees call a meeting of shareholders for purposes of voting
on the removal of one or more Trustees.
Shares of the Trust may be owned by separate accounts of Life Companies or by
Qualified Plans (see "About the Funds" and "Eligible Purchasers"). Pursuant to
current interpretations of the 1940 Act, the Life Companies will solicit voting
instructions from contract owners with respect to any matters that are presented
to a vote of shareholders. With respect to the Qualified Plans, the trustees of
such Plans will vote the shares held by the Qualified Plans, except that in
certain cases such shares may be voted by a named fiduciary or an investment
manager pursuant to the Employee Retirement Income Security Act of 1974. There
is no pass-through voting to the participants in the Qualified Plans.
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 Fund. On any matter submitted to a vote of
shareholders, all shares of the Trust then issued and outstanding shall be voted
in the aggregate. However, on matters affecting an individual Fund, a separate
vote of shareholders of that Fund would be required. Shareholders of a Fund
would not be entitled to vote on any matter which does not affect that Fund but
which would require a separate vote of another Fund.
When issued, shares of a Fund 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.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed on behalf of
the Trust. The Master Trust Agreement provides for indemnification from the
Trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, 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.
A majority of the Trustees is not affiliated with CIGNA Corporation or any of
its subsidiary companies. The Trustees meet quarterly to review the results of
the Funds, to monitor investment activities and practices, and to review and act
upon future plans for the Funds. The role of the Trustees is not to approve
specific investment purchases and sales, but rather to exercise a control and
review function.
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APPENDIX
- --------
DESCRIPTION OF MONEY MARKET INSTRUMENTS
- ---------------------------------------
U.S. GOVERNMENT DIRECT OBLIGATIONS--Bills, notes, and bonds issued by the U.S.
Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES--Certain Federal agencies such as the
Government National Mortgage Association have been established 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.
BANKERS' ACCEPTANCES--A bill of exchange or time draft drawn on and accepted by
a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
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.
TIME DEPOSITS--A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.
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
a Fund may invest in loans collateralized by mortgages on real property. Each
Fund will limit its investments in commercial loan participations to those which
are considered by the Trustees (with the advice of CIGNA Investments) to be of
comparable quality to permitted commercial paper investments.
REPURCHASE AGREEMENTS--A repurchase agreement is a contractual undertaking
whereby 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
20
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agreement, a bank or securities dealer, with the U.S. Government security
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. Such 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.
21
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Custodian and Transfer Agent:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Investment Adviser:
CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152
Independent Accountants:
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
22
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C I G N A V A R I A B L E P R O D U C T S G R O U P
-------------------------------------------------------
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 8
==============================================================================
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for CIGNA Variable Products Group, (the
series of CIGNA Variable Products Group are referred to as the "Funds" and each
separately as a "Fund"), having the same date as the date of this Statement of
Additional Information. Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the prospectus. No
investment in shares of any of the Funds should be made without first reading
the prospectus for the Funds. A copy of the prospectus for the Funds may be
obtained from CIGNA Variable Products Group c/o CIGNA Investments, 900 Cottage
Grove Road, S-215, Hartford, CT 06152-2215.
The financial statements for each of the Funds of CIGNA Variable Products Group
for fiscal year ended December 31, 1997, as contained in the Annual Reports to
Shareholders dated December 31, 1997, are hereby incorporated by reference into
this Statement of Additional Information. The financial statements for the
fiscal year ended December 31, 1997 have been examined by Price Waterhouse LLP,
independent accountants, whose report thereon also is incorporated herein by
reference.
The financial statements of the Funds will be delivered with this Statement of
Additional Information.
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TABLE OF CONTENTS
-----------------
PAGE
----
General Information About the Funds.......................... 3
-----------------------------------
Investment Objectives and Policies........................... 4
----------------------------------
Futures Contracts............................................ 9
-----------------
Options on Futures Contracts................................. 10
----------------------------
Risks as to Futures Contracts and Related Options............ 11
-------------------------------------------------
Investment Restrictions...................................... 12
-----------------------
Tax Matters.................................................. 14
-----------
Activities Of Affiliated Companies........................... 16
----------------------------------
Control Persons and Principal Holders of Securities.......... 16
---------------------------------------------------
Management of the Funds...................................... 16
-----------------------
Investment Advisory and Other Services....................... 18
--------------------------------------
Portfolio Turnover and Brokerage Allocation.................. 21
-------------------------------------------
Performance Information...................................... 23
-----------------------
Purchase, Redemption and Pricing of Securities............... 26
----------------------------------------------
Dividends.................................................... 27
---------
Limitation on Transfers...................................... 27
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Ratings of Securities........................................ 27
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GENERAL INFORMATION ABOUT THE FUNDS
- -----------------------------------
The Trust offers for sale two series portfolios or Funds:
Money Market Fund
S&P 500 Index Fund
__________________
Prior to January 2, 1996 the sole series of the Trust was the S&P 500 Index
Fund, which was formerly known as Companion Fund. The Money Market Fund was
added to the Trust on January 2, 1996.
Prior to November 9, 1993, Companion Fund sought to fulfill its investment
objective through an active management strategy, investing primarily in common
stocks of established medium to large-size companies selected by CIGNA
Investments, Inc. ("CIGNA Investments"), its investment adviser, as having
prospects for above-average earnings growth. On that date, at the request of
Connecticut General Life Insurance Company ("CG Life") (which on its own behalf
and through its separate accounts was the Fund's sole shareholder), the Board of
Trustees of the Trust authorized CIGNA Investments to change Companion Fund's
investment strategy to the indexation approach described in the prospectus.
CIGNA Variable Products Group is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company, and
was organized as a Massachusetts business trust pursuant to a Master Trust
Agreement dated February 4, 1988. On April 26, 1988, the Trust acquired the
assets and liabilities of Companion Fund, a series of shares of CIGNA Annuity
Funds Group (n/k/a CIGNA Funds Group). As mentioned above, Companion Fund is now
known as the S&P 500 Index Fund. Under the Master Trust Agreement, the Board of
Trustees is authorized to create new series of shares without the necessity of a
vote of shareholders of the Trust.
Each Fund is a separate series of the Trust. The assets received by the Trust
from the issue or sale of shares of each of the Funds, and all income, earnings,
profits and proceeds thereof, are specifically allocated to the appropriate
Fund, subject only to the rights of creditors. They constitute the underlying
assets of each of Fund, are required to be segregated on the books of account,
and are to be charged with the expenses in respect to such Fund. Any general
expenses of the Trust not readily identifiable as belonging to a particular Fund
shall be allocated by or under the direction of the Board of Trustees in such
manner as the Board determines to be fair and equitable.
Each share of each Fund represents an equal, proportionate interest in that Fund
with each other share and is entitled to such dividends and distributions out of
the income belonging to such Fund as are declared by the Board. Upon any
liquidation of the Trust, shareholders of a Fund are entitled to share pro rata
in the net assets belonging to such Fund available for distribution.
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INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The following information supplements the material contained in the prospectus
regarding each Fund's investment objectives and policies.
Description of Money Market Instruments
- ---------------------------------------
U.S. GOVERNMENT DIRECT OBLIGATIONS--issued by the U.S. Treasury and include
bills, notes, and bonds.
. Treasury bills are issued with maturities of up to one year. They
are issued in bearer form, are sold on a discount basis and are
payable at par value at maturity.
. Treasury notes are longer-term interest bearing obligations with
original maturities of one to ten years.
. Treasury bonds are longer-term interest bearing obligations with
original maturities from ten to thirty years.
U.S. GOVERNMENT AGENCIES SECURITIES--Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. These agencies include the Bank for Cooperatives,
Federal Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks,
Federal National Mortgage Association, Government National Mortgage Association,
Export-Import Bank, and Tennessee Valley Authority. 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. There can
be no assurance that the U.S. Government itself will pay interest and principal
on securities as to which it is not legally obligated to do so.
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.
BANKERS' ACCEPTANCES--A banker's acceptance is a bill of exchange or time draft
drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange. When
the draft is accepted by a bank, the bank guarantees to pay the face value of
the instrument on its maturity date. An investor can purchase a banker's
acceptance in the secondary market at the going rate of discount for a specific
maturity. In addition to purchasing bankers' acceptances from domestic branches
and foreign branches of U.S. commercial banks, bankers' acceptances denominated
in each case in U.S. dollars, may be purchased from foreign branches and U.S.
branches of foreign banks having at least one billion dollars (U.S.) of assets.
Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT--A certificate of deposit ("CD") is 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
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deposit of funds and normally can be traded in the secondary market, prior to
maturity. Each Fund may invest in U.S. dollar denominated CD's issued by
domestic branches and foreign branches of U.S. banks which are members of the
Federal Reserve System; by foreign branches and U.S. branches of foreign banks
and by U.S. domiciled savings and loan institutions having in each case at least
one billion dollars (U.S.) of assets. CD's issued by foreign branches of U.S.
banks are called "Eurodollar CD's" while CD's issued by U.S. branches of foreign
banks are called "Yankee CD's."
COMMERCIAL LOAN PARTICIPATIONS--Each Fund will limit its investments in loan
participations to those which are considered by CIGNA Investments to be of
comparable quality to permitted commercial paper investments. These ratings are
described under "Ratings of Securities." Further, for the purposes of each
Fund's investment restrictions, each loan participation will be treated as an
obligation of both the originating bank (or agent bank in the case of loans
originated by a syndicate of banks) and the corporate borrower. In addition,
each Fund may only invest up to 5% of the value of its total assets in loan
participations.
Loan participations in which a Fund may invest may vary in legal structure.
Occasionally, lenders assign to another institution both the lenders' rights and
obligations under a credit agreement. Since this type of assignment relieves
the original lender of its obligations, it is called a novation. Such novations
are relatively rare since they typically require the consent of the borrower.
More typically, a lender assigns only its right to receive payments of principal
and interest under a promissory note, credit agreement or similar document. A
true assignment shifts to the assignee the direct debtor-creditor relationship
with the underlying borrower. Alternatively, a lender may assign only part of
its rights to receive payments pursuant to the underlying instrument or loan
agreement. Such partial assignments, which are more accurately characterized as
"participating interests," do not shift the debtor-creditor relationship to the
assignee, who must rely on the original lending institution to collect sums due
and to otherwise enforce its rights against the agent bank which administers the
loan or against the underlying borrower. An active secondary market for
particular loan participations may not develop, which would result in a
substantial restriction on a Fund's ability to liquidate such participations
prior to maturity.
REPURCHASE AGREEMENTS--Each Fund may engage in repurchase agreement transactions
in pursuit of its investment objective. Under the terms of a typical repurchase
agreement, a Fund purchases an underlying U.S. Government security, including
securities issued or guaranteed by the U.S. Treasury or agencies and
instrumentalities of the U.S. Government, for a relatively short period (most
likely overnight and usually not more than five days) subject to an obligation
of the seller to repurchase, and the Fund to resell, the security at an agreed
upon price and time, thereby determining the yield during the Fund's holding
period. The arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The Funds may enter
into repurchase agreements with banks having $1 billion or more of assets and
with broker/dealers having net capital of $100 million or more. The Funds
require that the counter-party's obligation under repurchase agreements be
sufficiently collateralized so that the value of the underlying collateral
securities at least equals the amount of the repurchase agreement.
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Also, the Funds require that the underlying securities be held by the custodian
of Fund assets, either physically or under the Federal Book Entry System.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the repurchasing bank or broker/dealer, including possible delays
or restrictions upon a Fund's ability to dispose of the underlying securities.
CIGNA Investments, in accordance with procedures adopted by the Board of
Trustees of the Trust, monitors and evaluates the credit-worthiness of banks and
dealers with which the Funds engage in repurchase agreements.
TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. U.S. dollar denominated time deposits may be
purchased from domestic branches and foreign branches of U.S. banks which are
members of the Federal Reserve System (not including savings and loan
institutions) and from foreign branches and U.S. branches of foreign banks
having at least one billion dollars (U.S.) of assets.
U.S. dollar denominated certificates of deposit, time deposits and bankers'
acceptances issued by foreign branches of U.S. banks or by foreign banks either
in the U.S. or abroad may present investment risks in addition to the risks
involved in investments in obligations of, or guaranteed by, domestic banks.
Such risks include future 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, the possible
establishment of exchange controls or the adoption of other governmental
restrictions. Generally, foreign branches of U.S. banks and U.S. branches of
foreign banks are subject to fewer U.S. regulatory restrictions than are
applicable to domestic banks, and foreign branches of U.S. banks may be subject
to less stringent reserve requirements than domestic banks. U.S. branches of
foreign banks and foreign branches of U.S. banks may provide less public
information than, and may not be subject to the same accounting, auditing and
financial record-keeping standards as, domestic banks. Foreign branches of
foreign banks generally would not be subject to any U.S. regulatory restrictions
or disclosure, financial recordkeeping or accounting requirements.
COMMERCIAL PAPER--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other business entities.
Maturities on these issues vary from a few days to nine months. Commercial
paper may be purchased from U.S. domiciled issuers. Commercial paper may also
be purchased from foreign issuers issued either in the U.S. ("Yankee" commercial
paper) or abroad if, in any case, such paper is denominated in U.S. dollars.
OTHER CORPORATE OBLIGATIONS--Each Fund may purchase notes, bonds and debentures
issued by corporations and other business entities. However, the Money Market
Fund will purchase such obligations only if at the time of purchase there are
397 days or less remaining until maturity or if they carry a variable or
floating rate of interest.
VARIABLE AND FLOATING RATE INSTRUMENTS--Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, or state and local
government issuers, and certain debt instruments issued by domestic banks or
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corporations or other business entities, may carry variable or floating rates of
interest. Such 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.
The Money Market Fund may invest in variable and floating rate instruments even
if they carry stated maturities in excess of 397 days, upon certain conditions
contained in a rule of the Securities and Exchange Commission.
The Money Market Fund will not invest in variable amount master demand notes. A
Fund's right to obtain payment at par on a demand instrument upon demand could
be affected by events occurring between the date a Fund elects to redeem the
instrument and the date redemption proceeds are due which affect the ability of
the issuer to pay the instrument at par value. CIGNA Investments will monitor
on an ongoing basis the earning power, cash flow and other liquidity ratios of
the issuers of such instruments, and will similarly monitor the ability of an
issuer of a demand instrument to pay principal and interest on demand.
Characteristics of the Money Market Fund
- ----------------------------------------
The types of money market instruments in which the Fund presently invests are
listed under "Description of Money Market Instruments" in the prospectus and
this statement of additional information. If the Trustees determine that it may
be advantageous to invest in other types of money market instruments the Fund
may invest in such instruments, if it is permitted to do so by its investment
objective, policies and restrictions. 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 to the risks of
obligations of U.S. institutions. Such investment risk 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.
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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 Funds 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. Such 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.
The Money Market Fund's investments in short-term corporate debt and bank money
instruments will be rated, or will be issued by issuers who have been rated, in
one of the two highest rating categories for short-term debt obligations by a
nationally recognized statistical rating organization (an "NRSRO") or, if not
rated, will be of comparable quality as determined by the Trustees of the Trust.
The Money Market Fund's investments in corporate bonds and debentures (which
must have maturities at the date of purchase of 397 days (13 months) or less)
will be in issuers who have received from an NRSRO a rating with respect to a
class of short-term debt obligations that is comparable in priority and security
with the investment in one of the two highest rating categories for short-term
obligations or if not rated, will be of comparable quality as determined by the
Trustees of the Trust. Currently, there are six NRSROs: Duff and Phelps Inc.,
Fitch Investors Services, Inc., IBCA Limited and its affiliate IBCA Inc.,
Thompson BankWatch, Inc., Moody's Investors Service Inc. and Standard & Poor's
Rating Group. See "Appendix--Description of Money Market Instruments".
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.
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, calculated by using 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 Trustees determine
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that a deviation having such a result exists, they intend to take such
corrective action as they deem necessary and appropriate, including the sale of
portfolio instruments prior to maturity in order to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends; or
establishing a net asset value per share by using available market quotations;
in which case, the net asset value could possibly be greater or less than $1.00
per share. If the Trustees deem it inadvisable to continue the practice of
maintaining the net asset value at $1.00 per share, they may alter this
procedure. The shareholders of the Fund will be notified promptly after any such
change.
Any increase in the value of a shareholder's investment in the Fund resulting
from the reinvestment of dividend income is reflected by an increase in the
number of shares in the shareholder's account.
Matters relating to all Funds
- -----------------------------
Except as described under "Investment Restrictions," the foregoing investment
characteristics 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
"Investment Restrictions" 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.
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. No physical delivery of the underlying
stocks in the index is made. Currently, stock index futures contracts can be
purchased or sold primarily with respect to broad based stock indices such as
the Standard & Poor's 500 Stock Index, the New York Stock Exchange Composite
Index, the American Stock Exchange Major Market Index, the NASDAQ - 100 Stock
Index the Value Line Stock Index, the Nikkei 225 Stock Average, the Topix, the
FT-SE100, the Major Market Index, the Matif Stock Index and the Australia All
Ordinairies.
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. Currently, there are
futures contracts based on a variety of financial instruments including long-
term U.S. Treasury bonds, U.S. Treasury notes, U.S. Treasury bills, Eurodollars,
the Japanese 10 Year Bond, the German 10 Year Bond, the Australian 10 Year Bond,
London InterBank Offer Rate, Sterling, Long Gilt and the Bond Buyer Municipal
Bond Index.
In addition to the uses permitted for futures contracts set forth in the
prospectus, the Funds may enter into interest rate futures contracts for the
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purpose of hedging debt securities in their portfolios or the value of debt
securities which the Funds intend to purchase. For example, if one of these
Funds owned long-term debt securities and interest rates were expected to
increase, they might sell interest rate futures contracts. If, on the other
hand, these Funds held cash reserves and interest rates were expected to
decline, they might purchase interest rate futures contracts. 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 Trust'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 accumulated cash balance in the writer's futures
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margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
If an option on a futures contract is exercised on the last trading date prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
The Funds may purchase put options on futures contracts to hedge against the
risk of falling prices for their portfolio securities, 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's ability to predict correctly movements in the direction of the
stock market, of interest rates or of foreign exchange rates (foreign
currencies). Because of possible price distortions in the futures and options
markets and because of the imperfect correlation between movements in the prices
of hedging instruments and the investments being hedged, even a 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
Page 11
<PAGE>
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.
INVESTMENT RESTRICTIONS
- -----------------------
Each Fund is subject to the following investment restrictions, unless otherwise
noted, which may not be changed without the approval of the lesser of (i) more
than 50% of the outstanding shares of a Fund or (ii) 67% or more of the shares
of that Fund present at a meeting if more than 50% of the outstanding shares of
that Fund are represented at the meeting in person or by proxy (see "Ownership
of Fund Shares" in the Funds' prospectus for a description of the individual's
rights with respect to giving voting instructions to Life Companies).
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 a Fund.
A Fund may not:
1. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund taken at current value
would be invested in the securities of such issuer, except (a) bank certificates
of deposit and obligations issued or guaranteed as to interest and principal by
the U.S. Government or its agencies or instrumentalities, and (b) up to 25% of
The Money Market Fund's total assets taken at current value may be invested
without regard to such 5% limitation in bankers' acceptances in which the Fund
may invest consistent with its investment policies.
2. Acquire more than 10% of the voting securities of any issuer or more than
10% of any class of securities of any issuer. (For these purposes, all
preferred stocks of any issuer are regarded as a single class, and all debt
securities of an issuer are regarded as a single class.)
Page 12
<PAGE>
3. Concentrate more than 25% of its assets in any one industry, except that the
Money Market Fund may invest up to 100% of its assets in the domestic banking
industry.
4. Invest in securities of businesses less than three years old (including
predecessors), if, as a result, more than 5% of the Fund's total assets (taken
at current value) would then be invested in such securities.
5. Make investments for the purpose of gaining control of a company's
management.
6. Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities convertible into or exchangeable
for securities of the same issuer as, and equal in amount to, the securities
sold short.
7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities. For purposes
of this restriction, the deposit or payment of initial or variation margin
payments in connection with transactions in stock index futures contracts,
financial futures contracts and related options thereon will not be deemed to be
a purchase of securities on margin by a Fund.
8. 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.
9. Invest in securities of any issuer if, to the knowledge of the Fund,
officers and trustees of the Trust or officers and directors of CIGNA
Investments who beneficially own more than 1/2 of 1% of the securities of that
issuer, together own more than 5%.
10. Make loans, except (a) by purchase of debt obligations and through
repurchase agreements referred to under "Certain Investment Practices" in the
Funds' prospectus, provided, however, that repurchase agreements maturing in
more than seven days will not exceed 10% of a Fund's total assets (taken at
current value) and (b) through the lending of its portfolio securities with
respect to not more than 25% of its total assets. (As a matter of policy,
securities loans would be made to broker-dealers pursuant to agreements
requiring that loans be continuously secured by collateral in cash or cash
equivalents at least equal at all times to the value of the securities lent. The
borrower pays to the Fund an amount equal to any dividends or interest received
on the securities lent. The Fund may invest the cash collateral received in
interest-bearing short-term securities or receive a fee from the borrower. The
Fund may call such loans in order to sell the securities involved or to exercise
voting or other rights available to it as beneficial owner of the securities
involved.)
11. Borrow money in excess of one-third of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at the
time the borrowing is made, and then only as a temporary measure to facilitate
the meeting of redemption requests (not for leverage) which might otherwise
require the untimely disposition of portfolio investments or for
Page 13
<PAGE>
extraordinary or emergency purposes, except that the Funds may enter into stock
index futures contracts and financial futures contracts. Such borrowings will be
repaid before any additional investments are made. Interest paid on such
borrowings would reduce the yield on the Fund's investments. (The Board of
Trustees regards this restriction as setting forth the Trust's policy with
respect to the issuance of senior securities.)
12. Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of
one-third of the value of its total assets (taken at the lower of cost or
current value) and then only to secure borrowings permitted by Restriction No.
11 above. (For the purpose of this restriction, collateral arrangements with
respect to margin for a financial futures contract or stock index futures
contract are not deemed to be a pledge of assets.)
13. Purchase or sell mortgages or real estate, although it may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.
14. Purchase or sell commodities or commodity contracts, except, however, that a
Fund may purchase and sell stock index futures and options thereon and financial
futures contracts and options thereon.
15. Purchase options or puts, calls, straddles, spreads or combinations thereof
except, however, a Fund may purchase and sell options on stock index futures
contracts and on stock indices and options on financial futures contracts; in
connection with the purchase of fixed income securities, however, a Fund may
acquire warrants or other rights to subscribe for securities of companies
issuing such fixed-income securities or securities of parents or subsidiaries of
such companies. (See "Description of Income Instruments for The Income Fund"
and "Description of Income Instruments for The High Yield Fund" for a
description of the policy of these Funds with respect to such warrants or other
rights.)
16. Buy or sell oil, gas or other mineral leases, rights or royalty contracts.
The foregoing percentages, as well as those percentages referred to under
"Investment Objectives and Policies," will apply at the time of the purchase of
a security and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of a purchase of such
security.
TAX MATTERS
- -----------
Each series of shares of the Trust is treated as a separate association taxable
as a corporation.
Each Fund intends to qualify 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 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 including but not limited to gains from options,
Page 14
<PAGE>
futures or forward contracts 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 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 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 assets is invested in the securities
of any one issuer (other than U.S. Government securities).
As a RIC, each Fund will not be subject to Federal income tax ("FIT") on its
income and gains distributed to shareholders if it distributes at least 90% of
its investment company taxable income for the taxable year. Under the
provisions of Section 817(h) of the Code, a variable annuity contract - other
than a contract issued in connection with certain tax qualified retirement plans
or retirement plans maintained by certain government employers - will not be
treated as an annuity contract for any period for which the investments of the
separate account, such as the separate accounts that are eligible to purchase
shares of the Fund, are not "adequately diversified". In general, the
regulations issued under Section 817(h) provide that a separate account shall be
considered adequately diversified if the assets of such separate account are
invested so that no more than 55% of the value of such assets is represented by
any one investment, no more than 70% of such value is represented by any two
investments, no more than 80% of such value is represented by any three
investments and no more than 90% is represented by any four investments. The
Code allows a separate account to look through to the assets of a regulated
investment company for purposes of the "adequately diversified" requirement.
Each Fund intends that the investments in its portfolio shall be "adequately
diversified". For these purposes, all securities of the same issuer are treated
as a single investment. However, in the case of government securities each
government agency or instrumentality is treated as a separate issuer. The
regulations include a specific definition of "government security" which
includes any security issued, guaranteed or insured by the United States or any
instrumentalities of the United States. In addition, a certificate of deposit
for any of the foregoing securities is included within the definition of a
"government security." Accordingly, certain Fund investments may be treated as
"government securities" for the purpose of Section 817(h) of the Code, even
though such investments may not be treated as a government security when such
phrase is used elsewhere in the prospectus or Statement of Additional
Information.
All Funds except the Money Market Fund:
- ----------------------------------------------------------
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 contract or underlying stock or
securities), as defined in Section 1092 of the Code, then, generally, losses are
deferred first to the extent that the modified wash sale rules of the Section
1092 regulations apply, and second to the extent of unrecognized gains on
offsetting positions. Further, a Fund may be required to capitalize, rather
than deduct currently, any interest expense on indebtedness incurred or
continued to purchase or carry any positions that are part of a straddle.
Sections 1092 and 246 of the Code and the regulations thereunder also suspend
the holding periods for straddle positions with possible adverse effects
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<PAGE>
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 futures contracts and options
on future contracts be "marked-to-market" at the end of each year for Federal
income tax purposes. Section 1256 further characterizes 60% of any gain or loss
with respect to a futures contract as long-term capital gain or loss and 40% as
short-term capital gain or loss. If a futures contract 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.
ACTIVITIES OF AFFILIATED COMPANIES
- ----------------------------------
From time to time, as purchases of securities are made for the portfolios of
companies affiliated with CIGNA Corporation it is possible that two or more
portfolios may simultaneously purchase or sell the same security. To the extent
that two or more such portfolios, buying or selling the same security, increase
the total demand or supply, there may be an adverse effect on the price of such
security or on the amount which the Fund can purchase or sell.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ---------------------------------------------------
As of the date of this statement of additional information, all of the
outstanding shares of each Fund are owned by CG Life, which is considered an
"affiliate" of the Trust. CG Life is a stock life insurance company domiciled
in the state of Connecticut. The offices of CG Life are located at 900 Cottage
Grove Road, Bloomfield, CT 06002. CG Life is an indirect, wholly-owned
subsidiary of CIGNA Corporation. CG Life owns Fund shares on behalf of separate
accounts registered as unit investment trusts under the 1940 Act. Under the 1940
Act, unit investment trust variable contractowners are afforded pass through
voting privileges for most matters concerning Fund shares owned by the unit
investment trust. This means that although CG Life is the shareholder of the
Fund, variable contractowners will actually be voting on Fund matters.
MANAGEMENT OF THE FUNDS
- -----------------------
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. Currently each holds the equivalent
position as Trustee and/or officer of CIGNA Funds Group, CIGNA Institutional
Funds Group and CIGNA High Income Shares, 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, 950
Winter Street, Waltham, Massachusetts 02154.
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<PAGE>
R. BRUCE ALBRO*, 55, Trustee; Senior Managing Director and Division Head, CIGNA
Portfolio Advisers, a division of CIGNA Investments; Chairman of the Board and
President, CIGNA Funds Group, CIGNA Institutional Funds Group, CIGNA Variable
Products Group, CIGNA High Income Shares and INA Investment Securities, Inc.
Mr. Albro is also an officer or director of various other entities which are
subsidiaries or affiliates of CIGNA. Previously; Managing Director - Division
Head, CII. Managing Director, CII.
HUGH R. BEATH, 66, Trustee; Advisory Director, AdMedia Corporate Advisors,
Inc.; previously Managing Director, Admedia Corporate Advisors, Inc.; Chairman
of the Board of Directors, Beath Advisors, Inc.
RUSSELL H. JONES, 53, 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.
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, 40, 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 and Attorney, CIGNA.
*Trustees identified with an asterisk are considered interested persons within
the meaning of the Investment Company Act of 1940, as amended, because of their
affiliation with CIGNA Corporation or its affiliates.
The Board has created an Audit Committee from among its members which meets
periodically with representatives of Price Waterhouse 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 the Sub-Advisory Agreement with CIGNA International
Investments, and a Nominating Committee which considers the identification of
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<PAGE>
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 its Trustees who are officers or employees of CIGNA
Corporation or its affiliates. The following table shows compensation paid by
the Trust and other investment companies in the CIGNA fund complex to Trust
Trustees in 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Pension or
Retirement Total
Benefits Compensation
Accrued As from Trusts and
Aggregate Part of Estimated Annual CIGNA Fund
Name of Person, Compensation Trust Benefits Upon Complex Paid to
Position with Trusts from Trust Expense Retirement Trustees (c)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Bruce Albro, Trustee, $ - $ - $ - $ -
Chairman and President
Hugh R. Beath, Trustee (a) $3,400 - - $24,600
Russell H. Jones, Trustee $3,400 - - $24,600
Thomas C. Jones, Trustee - - - -
Paul J. McDonald, Trustee (b) $3,400 - - $24,600
Arthur C. Reeds, III,
Trustee (D) - - - -
---------- ---------------- ------------- ---------------
$10,200 $ $ $73,800
========== ================ ============= ===============
</TABLE>
(a)All but $403 of Mr. Beath's 1997 compensation was deferred under a plan for
all CIGNA funds in which he had an aggregate balance of $167,185 as of December
31, 1997.
(b) All but $403 of Mr. McDonald's 1997 compensation was deferred under a plan
for all CIGNA funds in which he had an aggregate balance of $80,886 as of
December 31, 1997.
(c) There were four (4) investment companies besides the Trust in the CIGNA fund
complex.
(D) Mr. Reeds retired from CIGNA and resigned from the Board in 1997.
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------
The investment adviser to each of the Funds is CIGNA Investments, an indirect,
wholly-owned subsidiary of CIGNA Corporation. CIGNA International Investments
serves as investment sub-adviser to The International Stock Fund. CIGNA
Investments also serves as investment adviser for investment companies
Page 18
<PAGE>
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's mailing address is 900 Cottage Grove Road, Hartford, Connecticut
06152.
Pursuant to a Master Investment Advisory Agreement 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 (CIGNA International Investments in the case of The
International Stock Fund) determines what investments shall be purchased, held,
sold or exchanged for the account of the Funds, and what portion, if any, of the
assets of the Funds shall be held in cash and other temporary investments.
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;
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; and expenses of meetings of the shareholders and Trustees.
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 each of Funds. The Trust
and other registered investment companies advised by CIGNA Investments have
agreed to reimburse CIGNA Investments for its costs of maintaining the Office of
the Treasurer and the cost of the Office of the Secretary as provided in their
respective investment advisory agreements. CIGNA Investments has estimated that
in 1998 the total expenses of the Office of the Treasurer will not exceed
$392,000 and the expenses of the Office of the Secretary are not expected to
exceed $118,000. The portion of these expenses allocated to each Fund for
calendar year 1998 are not expected to exceed the following amounts:
Office of Office of
the Treasurer the Secretary
------------- -------------
S&P 500 $ 54,780 $ 16,490
Index Fund
Money Market Fund $ 17,567 $ 5,288
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<PAGE>
In 1997 the costs incurred by the Trust for the Office of the Treasurer and the
Office of the Secretary were $53,477 and $20,114, respectively.
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 and any sub-adviser, 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 relevant Fund's average daily net assets, as
follows: Money Market Fund - 0.35% and S&P 500 Index Fund - 0.25%.
Trust-wide expenses not identifiable to any particular Fund will be allocated
among the Funds. CIGNA Investments has voluntarily agreed to reimburse the
Funds to the extent that the annual operating expenses (excluding interest,
taxes, amortized organizational expense, transaction costs in acquiring and
disposing of portfolio securities and extraordinary expenses) of a Fund exceed a
percentage of the value of the relevant Fund's average daily net assets, as
follows: Money Market Fund - 0.50% and S&P 500 Index Fund - 0.25%.
The S&P 500 Index Fund incurred a management fee payable to CIGNA Investments of
$224,054, $172,165 and $213,557 for fiscal years 1997, 1996 and 1995,
respectively. The amount payable for 1997 was waived and CIGNA Investments
reimbursed the Fund an additional $46,603 due to the then applicable expense
limitation. The amount payable for 1996 was reduced to $146,301 due to the then
applicable expense limitation. The Money Market Fund incurred a management fee
payable to CII of $33,579 and $14,474 for fiscal years 1997 and 1996. These
amounts were waived and CIGNA Investments reimbursed the Fund an additional
$25,787 and $30,209 for 1997 and 1996, respectively, due to the then applicable
expense limitation.
The Master Investment Advisory Agreement provides that it will continue from
year to year as to a 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 Fund, by vote of a majority of the outstanding voting
securities of such Fund, 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).
The 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
Page 20
<PAGE>
a series of the Trust so long as an affiliate of CIGNA Corporation shall be the
investment adviser for such series.
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.
Price Waterhouse LLP acts as independent accountants for the Trust. Its offices
are at 160 Federal Street, Boston, Massachusetts 02110. Price Waterhouse LLP
representatives annually perform an audit of the financial statements of the
Funds and provide accounting advice and services throughout the year. Price
Waterhouse LLP reports its activities and the results of its audit to the Audit
Committee of the Board of Trustees. Price Waterhouse LLP also provides certain
tax advice to the Trust.
PORTFOLIO TURNOVER AND BROKERAGE ALLOCATION
- -------------------------------------------
It is anticipated that each Fund's annual portfolio turnover will not exceed
100%. With respect to the Money Market Fund, purchases and sales of portfolio
securities are generally transacted with the issuer or a primary market maker of
these securities on a net basis, without any brokerage commission being paid by
the Funds for such purchases. Purchases from dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases and sales
for the other Funds generally involve a broker.
Transactions on U.S. stock exchanges, commodities markets and futures markets
and other agency transactions involve the payment of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular
broker may charge different commissions according to such factors as the
difficulty and size of the transaction. Transactions in foreign investments
often involve the payment of fixed brokerage commissions, which may be higher
than those in the over-the-counter markets, but the price paid usually includes
an undisclosed dealer commission or mark-up as well as a disclosed, fixed
commission or discount retained by the underwriter or dealer.
It is the policy of CIGNA Investments on behalf of its clients, including the
Funds, to have purchases and sales of portfolio securities executed at the most
favorable prices, considering all costs of the transaction, including brokerage
commissions and spreads, and research services received, consistent with
obtaining best execution.
In seeking best execution, CIGNA Investments selects broker/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.
Page 21
<PAGE>
The officers of CIGNA Investments determine, generally without limitation, the
broker/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 to the value of the brokerage or research
services performed or provided by the 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.
If two or more broker/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 broker/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, pay for
products or services other than brokerage and research services with brokerage
commissions as interpreted in SEC Release 34-23170 dated April 23, 1986.
Pursuant to that release, products and services which provide lawful and
appropriate assistance to CIGNA Investments's investment decision-making process
may be paid for with brokerage commissions to the extent such products and
services are used in that process.
Where the research service product has a mixed use, that is, the product may
serve a number of functions certain of which are not related to the making of
investment decisions, CIGNA Investments allocates the cost of the product on a
basis which they deem reasonable, according to the various uses of the product,
and maintain records documenting the allocation process followed. Only that
portion of the cost of the product allocable to research services is paid from
the Fund. The Fund does not acquire research services through the generation of
credits with respect to principal transactions or transactions in financial
futures, except in new issue fixed price underwritings.
The Trust does not presently allocate brokerage commissions to, or place orders
for portfolio transactions with, either directly or indirectly, brokers based on
their sales of shares of the Funds. Except as noted, the Trust does not
Page 22
<PAGE>
utilize an affiliated broker in effecting portfolio transactions and does not
recapture commissions paid in such transactions. Brokerage commissions paid by
the S&P 500 Index Fund for 1997, 1996, and 1995 totaled $4,338, $4,940 and
$4,667, respectively, substantially all of which were paid to firms which
provided research services to CIGNA Investments.
As of December 31, 1997, Sanford C. Bernstein & Co., Inc. ("Sanford
Bernstein"), 767 Fifth Avenue, New York, NY 10153, reported that it held
6,263,994 shares or 8.66% of the outstanding common stock of CIGNA for the
accounts of discretionary clients who have the right to receive dividends these
shares and any proceeds from the sale of these shares. Sanford Bernstein also
reported sole voting power as to 3,368,544, shared voting power as to 749,963,
and sole dispositive power as to all of these shares. Wellington Management
Company, LLP ("Wellington"), 75 State Street, Boston, MA 02109, reported that as
of December 31, 1997 it held 4,276,700 shares, or 5.91% of the outstanding
common stock of CIGNA for the accounts of discretionary clients who have the
right to receive dividends on these shares and any proceeds from the sale of
these shares. Wellington also reported sole voting power as to none, shared
voting power as to 323,700, and shared dispositive power as to all of these
shares. Swiss Bank Corporation ("Swiss Bank"), Aeschenplatz 6 CH-4002, Basel,
Switzerland, reported on a joint basis with its subsidiaries, SBC Holding (USA),
Inc. ("SBC"), Brinson Partners, Inc. and Brinson Holdings, Inc. that as of
December 31, 1997, Swiss Bank and SBC had shared voting and dispositive power
over 3,868,333 shares, or 5.35% of the outstanding common stock of CIGNA.
Brinson Partners, Inc. and Brinson Holdings, Inc. reported shared voting and
dispositive power over 3,859,472 shares.
PERFORMANCE INFORMATION
- -----------------------
Total return and yield figures for the Funds are neither fixed nor guaranteed,
and no Fund's principal is 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. The Funds may provide performance
information in reports, sales literature and advertisements if accompanied by
performance of your Life Company's separate account. The Funds may also, from
time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments
Page 23
<PAGE>
relating to investment results or other data about one or more of the Funds. The
following is a list of such publications or media entities:
<TABLE>
<CAPTION>
<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 Pensions 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:
Lipper Analytical Services Stanger Report
CDA Investment Technologies, Inc. Weisenberger
Frank Russell Co. Micropal, Ltd.
InterSec Research
Although performance data may be useful to prospective investors in comparing
with other funds and other potential investments, investors should note that the
methods of computing performance of other potential investments are not
necessarily comparable to the methods employed by a Fund.
Yield and 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.
Page 23
<PAGE>
ERV = ending redeemable value of a hypothetical $1,000 payment at the end
of the stated period.
The average annual total returns for the S&P 500 Index Fund and the Money Market
Fund for the one, five and ten year periods (or since inception, if shorter)
ended December 31, 1997 were as follows:
Periods ended December 31, 1997
1 Year 5 Years 10 Years
--------- ---------- -----------
S&P 500 Index Fund 33.35% 18.29% 16.27%
Money Market Fund 5.19% N/A N/A
Yield Quotations
- ----------------
The standard formula for calculating yield for each Fund except Money Market
Fund, as described in the prospectus, is as follows:
YIELD = 2[((a-b)/(c x d) + 1)/6/-1]
Where a = dividends and interest earned during a stated 30 day period. For
purposes of this calculation, dividends are accrued rather than
recorded on the ex-dividend date. Interest earned under this
formula must generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on yield to call
date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the period.
d = the maximum offering price per share on the last day of the period.
The standard formula for calculating annualized yield for the Money Market Fund,
as described in the prospectus, is as follows:
Y = V/1/ - V/o/ x 365
----------- ---
V/o/ 7
Where Y = annualized yield.
V/o/ = 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.
V/1/ = the value of such an account at the end of the stated
period.
The annualized yield for the Money Market Fund for the 7 days ended December 31,
1997 was 5.27%.
The standard formula for calculating effective annualized yield for the Money
Market Fund, as described in the prospectus, is as follows:
Page 25
<PAGE>
EY = [(Y+1)/365/7/] -1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
The effective annualized yield for the Money Market Fund for the 7 days ended
December 31, 1997 was 5.41%.
For the purpose of the annualized yield and effective annualized yield, the net
change in the value of the hypothetical CIGNA Variable Products Money Market
Fund account reflects the value of additional shares purchased with dividends
from the original share and any such additional shares, and all fees charged 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.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
- ----------------------------------------------
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 the Fund not reasonably
practicable.
A 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. Additional information concerning purchase and
redemption of securities may be found in the current prospectus for the Funds.
The Money Market Fund.
- ---------------------
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 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 CIGNA Variable Products 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 it uses this
valuation method. The Money Market Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will purchase only instruments
Page 26
<PAGE>
having remaining maturities of one year or less (except as otherwise noted under
"Variable and Floating Note Instruments" under "Description of Money Market
Instruments" in this Statement of Additional Information) 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.
All Other Funds
- ---------------
Information describing the valuation of securities held in these Funds is found
in the prospectus under "Computation of Net Asset Value."
DIVIDENDS
- ---------
Information concerning dividends is found in the current prospectus for the
Funds.
LIMITATION ON TRANSFERS
- -----------------------
Whenever the Trust or its duly appointed transfer agent is requested to transfer
Fund shares to other than an Eligible Purchaser, the Trust has the right at its
election to purchase such shares at their net asset value next effective
following the time at which the request for transfer is presented; provided,
however, that the Trust must notify the transferee or transferee of such shares
in writing of its election to purchase such shares within seven (7) days
following the date of such request and settlement for such shares shall be made
within such seven-day period.
RATINGS OF SECURITIES
- ---------------------
Description of Standard & Poor's Corporation ("Standard & Poor's") and Moody's
Investors Service, Inc. ("Moody's") commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS--Standard & Poor's commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
Page 27
<PAGE>
"D" for the lowest. Issues assigned an "A" rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety.
The two highest categories, A-1 and A-2, are described as follows:
"A-1" This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming
safety characteristics will be denoted with a plus (+) sign designation.
"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment capacity of rated issuers. The two highest
designations are as follows:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for
repayment of senior short-term debt obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
BOND RATINGS--S&P describes its ratings for corporate bonds as follows:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Page 28
<PAGE>
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC - Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Moody's describes its ratings for corporate bonds as follows:
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-edge." 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
which 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.
Page 29
<PAGE>
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 which 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.
MUNICIPAL BOND RATINGS--The four highest ratings of Moody's for Municipal Bonds
are Aaa, Aa, A and Baa. Municipal bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to municipal bonds which are of "high
quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat larger than Aaa-rated municipal
bonds. The Aaa- and Aa-rated municipal bonds comprise what are generally known
as "high-grade bonds." Municipal bonds which are rated A by Moody's possess many
favorable investment attributes and are considered "upper-medium-grade
obligations." Factors giving security to principal and interest of A-rated
municipal bonds are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future. Bonds rated Baa
are considered as "medium-grade" obligations. 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.
The four highest ratings of Standard & Poor's for municipal bonds are AAA
(Prime), AA (High Grade), A (Good Grade) and BBB (Medium Grade). Municipal
bonds rated AAA are "obligations of the highest quality." The rating of AA is
accorded issues with investment characteristics "only slightly less marked than
those of the prime quality issues." The category of A describes "the third
strongest capacity for payment-of-debt service." Principal and interest payments
on bonds in this category are regarded as safe. It differs from the two higher
ratings because with respect to general obligation bonds, there is some
weakness, either in the local economic base, in debt burden, in the balance
between revenues and expenditures, or in quality of management. Under certain
adverse circumstances, any one such weakness might impair the ability of the
issuer to meet debt obligations at some future date. With respect to revenue
bonds, debt service coverage is good, but not exceptional. Stability of the
pledged revenues could show some variations because of increased competition or
economic influences on revenues. Basic security provisions, while satisfactory,
are less stringent. Management performance appears adequate. The BBB rating is
the lowest "investment-grade" security rating by Standard & Poor's. The
difference between A and BBB ratings is that the latter shows more than one
fundamental weakness, or one very substantial fundamental weakness, whereas the
former shows only one deficiency among the factors considered. With respect to
revenue bonds, debt coverage is only fair.
Page 30
<PAGE>
Stability of the pledged revenues could show substantial variations, with the
revenue flow possibly being subject to erosion over time. Basic security
provisions are no more than adequate. Management performance could be stronger.
Page 31
<PAGE>
REGISTRATION STATEMENT
ON
FORM N-1A
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
- -------------------------------------------
(a) Financial Statements:
PART A:
None
PART B:
The following Financial Statements of CIGNA Variable Products S&P 500 Index
Fund and CIGNA Variable Products Money Market Fund are incorporated by
reference into Part B from the Annual Report to Shareholders of CIGNA
Variable Products S&P 500 Index Fund dated December 31, 1997 and filed
electronically with the Securities and Exchange Commission on March 6, 1998
and the Annual Report to Shareholders of CIGNA Variable Products Money
Market Fund dated December 31, 1997 and filed electronically with the
Securities and Exchange Commission on Form N-30D on March 6, 1998:
For CIGNA Variable Products S&P 500 Index Fund:
Investments in Securities, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations, Year Ended December 31, 1997
Statement of Changes in Net Assets, Years Ended December 31, 1997
and 1996
Notes to Financial Statements
Report of Independent Accountants
For CIGNA Variable Products Money Market Fund:
Investments in Securities, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations, Year Ended December 31, 1997
Statement of Changes in Net Assets, For the Year Ended
December 31, 1997 and for the period March 1, 1996
(Commencement of Operations) to December 31, 1996
Notes to Financial Statements
Report of Independent Accountants
(b) Exhibits:
(1) The First Amended and Restated Master Trust Agreement of Registrant
dated as of March 1, 1996, incorporated by reference to Post-Effective
Amendment No. 11 to Registrant's Registration Statement filed
electronically March 7, 1996.
-1-
<PAGE>
(1a) Amendment No. 1 to the First Amended and Restated Master Trust
Agreement of Registrant dated October 28, 1996, incorporated by
reference to Registrant's Registration Statement filed electronically
January 28, 1997 .
(1b) Amendment No. 2 to the First Amended and Restated Master Trust
Agreement of Registrant dated as of January 16, 1997, incorporated by
reference to Registrant's Registration Statement filed electronically
January 28, 1997.
* (2) The Amended And Restated By-Laws of Registrant dated April 29, 1997.
(3) None.
(4) Relative to the rights of shareholders, Article IV and Article V of
Registrant's First Amended and Restated Master Trust Agreement dated as
of March 1, 1996, incorporated by reference to Post-Effective Amendment
No. 11 to Registrant's Registration Statement filed electronically
March 7, 1996.
* (4a) Relative to the rights of shareholders, the Participation Agreement
among CIGNA Variable Products Group, CIGNA Financial Services, Inc. and
Connecticut General Life Insurance Company dated as of December 1,
1997, as hereinafter incorporated by reference in Exhibit (9e).
* (4b) Relative to the rights of shareholders, the Participation Agreement
among CIGNA Variable Products Group, CIGNA Financial Services, Inc. and
CIGNA Life Insurance Company dated as of December 1, 1997, as
hereinafter incorporated by reference in Exhibit (9f).
* (5) The Master Investment Advisory Agreement dated as of April 26, 1988
between CIGNA Variable Products Group and CIGNA Investments, Inc.
(5a) The Side Letter to the Master Investment Advisory Agreement dated as of
November 9, 1995 between CIGNA Variable Products Group and CIGNA
Investments, Inc., incorporated by reference to Post-Effective
Amendment No. 11 to Registrant's Registration Statement filed
electronically March 7, 1996.
(5b) The Side Letter to the Master Investment Advisory Agreement dated April
30, 1996 between CIGNA Variable Products Group and CIGNA Investments,
Inc., incorporated by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement filed electronically January 28,
1997.
(5c) The Side Letter to the Master Investment Advisory Agreement dated
February 25, 1997 between CIGNA Variable Products Group and CIGNA
Investments, Inc., incorporated by reference to Post-Effective
Amendment No. 15 to Registrant's Registration Statement filed
electronically April 10, 1997.
-2-
<PAGE>
(5d) The Sub-Advisory Agreement dated as of October 24, 1995 between CIGNA
Investments, Inc. and CIGNA International Investment Advisors, Ltd.
with respect to CIGNA Variable Products International Stock Fund, a
series of shares of Registrant, incorporated by reference to Post-
Effective Amendment No. 13 to Registrant's Registration Statement filed
electronically April 29, 1996.
(6) None.
(7) None.
* (8) The Custodian Contract dated as of April 15, 1988 between CIGNA
Variable Products Group and State Street Bank and Trust Company.
(8a) The Side Letter to the Custodian Contract dated as of February 15, 1996
between CIGNA Variable Products Group and State Street Bank and Trust
Company, incorporated by reference to Post-Effective Amendment No. 11
to Registrant's Registration Statement filed electronically March 7,
1996.
(8b) The Side Letter to the Custodian Contract dated as of February 25, 1997
between CIGNA Variable Products Group and State Street Bank and Trust
Company, incorporated by reference to Post-Effective Amendment No. 15
to Registrant's Registration Statement filed electronically April 10,
1997.
* (9) The Transfer Agency and Service Agreement dated as of April 15, 1988
between CIGNA Variable Products Group and State Street Bank and Trust
Company.
(9a) The Side Letter to the Transfer Agency and Service Agreement dated as
of February 15, 1996 between CIGNA Variable Products Group and State
Street Bank and Trust Company, incorporated by reference to Post-
Effective Amendment No. 11 to Registrant's Registration Statement filed
electronically March 7, 1996.
(9b) The Side Letter to the Transfer Agency and Service Agreement dated as
of February 25, 1997 between CIGNA Variable Products Group and State
Street Bank and Trust Company, incorporated by reference to Post-
Effective Amendment No. 15 to Registrant's Registration Statement filed
electronically April 10, 1997.
(9c) The Agreement For Use Of The Term "CIGNA" dated February 4, 1988
between CIGNA Variable Products Group and CIGNA Corporation,
incorporated by reference to Post-Effective Amendment No. 15 to
Registrant's Registration Statement filed electronically April 10,
1997.
(9d) Form of Trustees' Deferred Fee Agreement, incorporated by reference to
Post-Effective Amendment No. 9 to Registrant's Registration Statement
filed electronically October 16, 1995.
* (9e) The Participation Agreement dated as of December 1, 1997 among CIGNA
Variable Products Group, CIGNA Financial Services, Inc. and Connecticut
General Life Insurance Company.
* (9f) The Participation Agreement dated as of December 1, 1997 among CIGNA
Variable Products Group, CIGNA Financial Services, Inc. and CIGNA Life
Insurance Company.
-3-
<PAGE>
* (10) Consent of Counsel.
* (11) Consent of Price Waterhouse LLP.
(12) None.
(13) None.
(14) None.
(15) None.
(16) None.
* (17) Financial Data Schedule.
(18) None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
- -----------------------------------------------------------------------
As of the date hereof, no person is directly or indirectly controlled by or
under common control with CIGNA Variable Products Group.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
- -----------------------------------------
As of April 1, 1998:
(1)
Title of Class: Shares of Beneficial Interest
(2)
Name of Series Number of RecordHolders
- -------------- -----------------------
High Yield Fund -0-
Income Fund -0-
International Stock Fund -0-
Money Market Fund -1-
S&P 500 Index Fund -1-
Intermediate Bond Index Fund -0-
Long-Term Bond Index Fund -0-
Utility Index Fund -0-
REIT Index Fund -0-
Small Cap Index Fund -0-
International Index Fund -0-
Emerging Markets Index Fund -0-
- ------------------------
*Filed Herewith.
-4-
<PAGE>
ITEM 27. INDEMNIFICATION.
- -------------------------
The First Amended and Restated Master Trust Agreement, dated as of March 1,
1996, as amended (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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
- --------------------------------------------------------------
As of the date hereof, CIGNA Investments, Inc. ("CII") serves as investment
adviser to CIGNA Funds Group, CIGNA Institutional Funds Group and to CIGNA
Variable Products Group and their series of shares, and to CIGNA High Income
Shares (CIGNA Funds Group, CIGNA Institutional Funds Group, CIGNA High Income
Shares and CIGNA Variable Products Group known collectively as the "Trusts") and
to INA Investment Securities, Inc. ("IIS"), all of which
-5-
<PAGE>
(except for IIS and CIGNA High Income Shares) are open-end investment companies,
and to certain other companies, 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 business 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 - 950 Winter Street, Suite
1200, Waltham, Massachusetts 02154
IIS - Two Liberty Place, 1601 Chestnut Street, Philadelphia, Pennsylvania
19192
Substantial business and other connections of the Directors and officers of CII
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.*
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.
-6-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
R. Bruce Albro Senior Managing Director, CII; Director and
Senior Managing Director, CIGNA Investment
Advisory Company, Inc.*; Director, Global
Portfolio Strategies, Inc.*; Chairman of the
Board, President and Trustee, the Trusts;
Chairman of the Board, President and
Director, IIS.
Mary Louise Casey Senior Managing Director, CII and CIGNA
Investment Advisory Company, 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.**; Vice President, CIGNA
Institutional Funds 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.*
J. Robert Andrews Managing Director, CII.
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.
Antonio M. Caxide Managing Director, CII and CIIA**; previously
Vice President, CII and CIIA.**
Richard H. Chase Managing Director, CII.
Rosemary C. Clarke Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*
-7-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
Rosemary S. Cleaves Managing Director, CII; President and
Director, Global Portfolio Strategies, Inc.*;
previously Vice President, CII.
Dorothy Cunningham Managing Director, CII; previously Vice
President, CII.
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.
Debra J. Height Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*; previously Vice
President, 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.*
-8-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
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.
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; previously Vice
President, CII.
Thomas M. Smith 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.
-9-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
Deborah B. Wiacek Managing Director, CII; previously Vice
President, CII.
Stephen H. Wilson Managing Director, CII.
Victor E. Saliterman Senior Vice President, CII.
James A. White Senior Vice President, CII and CIGNA
Investment Advisory Company, Inc.*
Jean M. Anderson Vice President, CII.
Thomas P. Au 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.
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.*
Dennis P. Hannigan Vice President, CII.
Amy F. Hatfield Vice President, CII.
-10-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
John Hurley Vice President, CII.
Chuel D. Hwang 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.
James R. Lagasse Vice President, CII.
Mary S. Law Vice President, CII.
Margaret Y. Leong Vice President, CII.
Paul T. Martin Vice President, CII.
Daniel McDonough Vice President, CII, CIGNA International
Investment Advisors, Ltd.** and Global
Portfolio Strategies, Inc.*
Dean M. Molinaro Vice President, CII
Linda L. Morel Vice President, CII.
Alpha O. Nicholson, III Vice President, CII; Senior Counsel, CIGNA
companies*.
Ann Marie O'Rourke Vice President, CII.
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.
Suresh Raghaven Vice President, CII.
-11-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
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.
Annette Sanderson Vice President, CII.
John R. Schumann Vice President, CII.
Thomas P. Shea, III 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. VanWinkle Vice President, CII and CIGNA Investment
Advisory Company, Inc.*
Henry C. Wagner, III Vice President, CII and CIGNA Investment
Advisory Company, Inc.*; President, CIGNA
Financial Futures, Inc.*
Michael J. Walker Vice President, CII.
Carey A. White Vice President, CII.
William S. Woodsome Vice President, CII.
Alfred A. Bingham III Assistant Vice President, CII; Vice President
and Treasurer, the Trusts and IIS.
-12-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
David C. Kopp Secretary, CII, CIGNA Investment Advisory
Company, Inc.*, CIGNA International
Investment Advisors, Ltd.**, CIGNA Investment
Group, Inc.*, Global Portfolio Strategies,
Inc.* and CIGNA Financial Services, Inc.*;
Assistant Corporate Secretary, CIGNA
Corporation*; Corporate Secretary,
Connecticut General Life Insurance Company*;
Assistant General Counsel, CIGNA companies*.
CIGNA International Investment Advisors, Ltd. ("CIIA") serves as sub-adviser to
CIGNA Variable Products International Stock Fund, a series of shares of
Registrant. CIIA is an indirect, wholly-owned subsidiary of CIGNA Corporation
and an affiliate of CII. The principal address of CIIA is Park House, 16
Finsbury Circus, London EC2M 7AX, England.
Substantial business and other connections of the Directors and officers of CIIA
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, CIIA; Director and Counsel, CII*;
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.*
Robert W. Burgess Director, CIIA; Director and Senior Vice
President, CII*; Chief Financial Officer,
CIGNA Investment Management, a division of
CIGNA Corporation*; Director and Senior Vice
President, CIGNA Investment Group, Inc.*;
Director, Global Portfolio Strategies, Inc.*
Richard H. Forde Director, President and Senior Managing
Director, CIIA; Senior Managing Director,
CII* and CIGNA Investment Advisory Company,
Inc.*; Vice President, CIGNA Institutional
Funds Group.
-13-
<PAGE>
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- -------------------------------------------
Thomas C. Jones Director, CIIA and Global Portfolio
Strategies, Inc.*; 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.*; Trustee,
the Trusts; Director, IIS.
John Townley Director, Member Board of Directors and
Division Head - International Systems, CIIA;
previously Administrative Head-London Office,
CIIA; Resident Director, CIIA.
Antonio M. Caxide Managing Director, CIIA and CII*; previously
Vice President, CIIA and CII.*
Matthew P. Hutchinson Vice President, CIIA.
Daniel McDonough Vice President, CIIA and CII.*
Lee C. Mickelburough Vice President, CIIA.
Timothy F. Roberts Vice President - Finance and Chief Compliance
Officer, CIIA; Vice President, International
Finance/Global Compliance, CIGNA Investment
Management, a division of CIGNA Corporation*;
Vice President and Compliance Officer, CII*;
Compliance Officer, CIGNA Investment Advisory
Company, Inc.*
Flora Kong Financial Controller and Compliance Officer,
CIIA.
Joel W. Messing Counsel, CIIA; Assistant General Counsel,
CIGNA companies*.
David C. Kopp Secretary, CIIA, CII*, CIGNA Investment
Advisory Company, Inc.*, CIGNA Investment
Group, Inc.*, Global Portfolio Strategies,
Inc.* and CIGNA Financial Services, Inc.*;
Assistant Corporate Secretary, CIGNA
Corporation*; Corporate Secretary,
Connecticut General Life Insurance Company*;
Assistant General Counsel, CIGNA companies*.
_____________
* Filed Herewith.
-14-
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
- --------------------------------
Registrant has no principal underwriter. CIGNA Financial Services, Inc., an
indirect, wholly-owned subsidiary of CIGNA Corporation, is the distributor of
variable annuity and variable life insurance contracts, the assets of which are
invested in part in Money Market Fund and S&P 500 Index Fund.
ITEM 30. 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 are maintained by State Street Bank
and Trust Company, Boston, Massachusetts. Registrant's corporate records and
financial records are maintained c/o CIGNA Investments, Inc., 900 Cottage Grove
Road, Bloomfield, CT 06002.
ITEM 31. MANAGEMENT SERVICES.
- -----------------------------
Not Applicable
ITEM 32. UNDERTAKINGS.
- ----------------------
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
________________________
* 900 Cottage Grove Road, Bloomfield, CT
** Park House, 16 Finsbury Circus, London, England
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant, CIGNA Variable Products Group,
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment No. 16 to the Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized in the City of
Bloomfield, and State of Connecticut on the 28th day of April, 1998.
CIGNA VARIABLE PRODUCTS GROUP
R. Bruce Albro
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, this Amendment
No. 16 to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
R. Bruce Albro Chairman of April 28, 1998.
the Board of
Trustees and
President (principal
executive officer)
By: /s/ Jeffrey S. Winer
-----------------------------
Jeffrey S. Winer
Attorney-in-Fact
/s/ Alfred A. Bingham III
-----------------------------
Alfred A. Bingham III Treasurer April 28, 1998.
(principal
financial officer
and principal
accounting officer)
This Amendment No. 16 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.
R. Bruce Albro Thomas C. Jones
Hugh R. Beath Paul J. McDonald
Russell H. Jones
By: /s/ Jeffrey S. Winer April 28, 1998.
-----------------------------
Jeffrey S. Winer
-16-
<PAGE>
SECURITIES ACT FILE NO. 33-20333
INVESTMENT COMPANY ACT FILE NO. 811-5480
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
-----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 16 X
-----
and
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----
Amendment No. 16 X
-----
CIGNA VARIABLE PRODUCTS GROUP
(Exact Name of Registrant as Specified in Charter)
950 Winter Street, Suite 1200, Waltham, MA 02154
(Address of Principal Executive Office)
EXHIBITS
<PAGE>
EXHIBIT INDEX
(b) Exhibits
* (2) The Amended And Restated By-Laws of Registrant dated April 29, 1997.
* (5) The Master Investment Advisory Agreement dated as of April 26, 1988
between CIGNA Variable Products Group and CIGNA Investments, Inc.
* (8) The Custodian Contract dated as of April 15, 1988 between CIGNA
Variable Products Group and State Street Bank and Trust Company.
* (9) The Transfer Agency and Service Agreement dated as of April 15, 1988
between CIGNA Variable Products Group and State Street Bank and Trust
Company.
* (9e) The Participation Agreement dated as of December 1, 1997 among CIGNA
Variable Products Group, CIGNA Financial Services, Inc. and Connecticut
General Life Insurance Company.
* (9f) The Participation Agreement dated as of December 1, 1997 among CIGNA
Variable Products Group, CIGNA Financial Services, Inc. and CIGNA Life
Insurance Company.
* (10) Consent of Counsel.
* (11) Consent of Price Waterhouse LLP.
* (17) Financial Data Schedule.
* (24) Power of Attorney
- ----------------------------
*Filed Herewith.
<PAGE>
EXHIBIT (2)
AMENDED AND RESTATED BY-LAWS
OF
CIGNA VARIABLE PRODUCTS GROUP
ARTICLE 1
---------
Agreement and Declaration
-------------------------
of Trust and Principal Office
-----------------------------
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
----------------------------------
the Master Trust Agreement, as from time to time in effect and as the same may
be amended from time to time (the "Declaration of Trust"), of CIGNA VARIABLE
PRODUCTS GROUP, the Massachusetts business trust established by the Declaration
of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall
-----------------------------
be located in Waltham, Massachusetts.
ARTICLE 2
---------
Meetings of Trustees
--------------------
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
----------------
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at any
----------------
time and at any place designated in the call of the meeting when called by the
Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
------
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her
-1-
<PAGE>
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a meeting nor a
waiver of a notice need specify the purpose of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
------
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
--------------------------
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
---------
Officers
--------
3.1 Enumeration; Qualification. The officers of the Trust shall be a
--------------------------
Chairman of the Board of Trustees, a President, a Treasurer, a Secretary and
such other officers, including Vice President, if any, as the Trustees from time
to time may in their discretion elect. The Trust may also have such agents as
the Trustees from time to time may in their discretion appoint. The Chairman of
the Board of Trustees shall be a Trustee and may but need not be a shareholder;
and any other officer may be but none need be a Trustee or shareholder. Any two
or more offices may be held by the same person.
3.2 Election. The Chairman of the Board of Trustees, the President, the
--------
Treasurer, and the Secretary shall be elected annually by the Trustees at a
meeting at which a quorum is present. The meeting at which the officers are
elected shall be known as the annual meeting of Trustees. Other officers, if
any, may be elected or appointed by the Trustees at said meeting or at any other
time. Vacancies in any office may be filled at any time.
3.3 Tenure. The Chairman of the Board of Trustees, the President, the
------
Treasurer, and the Secretary shall hold office until the next annual meeting of
the Trustees and until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
-2-
<PAGE>
3.4 Powers. Subject to the other provisions of these By-Laws, each officer
------
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide, the
-------------------
Chairman of the Board of Trustees, or, if there is none, or in the absence of
the Chairman, the President shall preside at all meetings of the shareholders
and of the Trustees. The President shall be the chief executive officer.
3.6 Vice President. The Vice President, or if there be more than one Vice
--------------
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.7 Treasurer. The Treasurer shall be the chief financial and accounting
---------
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.8 Assistant Treasurer. The Assistant Treasurer, if any, or if there
-------------------
shall be more than one, the Assistant Treasurers in the order determined by the
Trustees (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.9 Secretary. The Secretary shall record all proceedings of the
---------
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust or the
investment adviser. In the absence of the Secretary from any meeting of the
shareholders or Trustees, an assistant secretary, or if there be none or if he
-3-
<PAGE>
or she is absent, a temporary secretary chosen at such meeting shall record the
proceedings thereof in the aforesaid books.
3.10 Assistant Secretary. The Assistant Secretary, if any, or if there be
--------------------
more than one, the Assistant Secretaries in the order determined by the Trustees
(or if there be no determination, then in the order of their election), shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
3.11 Resignations and Removals. Any Trustee or officer may resign at any
-------------------------
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. Any
Trustee shall retire as a Trustee of the Trust after attaining the age of 70
years.
ARTICLE 4
---------
Committees
----------
4.1 General. The Trustees, by vote of a majority of the Trustees then in
-------
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-Laws may not be delegated. Except
as the Trustees may otherwise determine, any such committee may make rules for
the conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
-4-
<PAGE>
ARTICLE 5
---------
Reports
-------
5.1 General. The Trustees and officers shall render reports at the time
-------
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
---------
Fiscal Year
-----------
6.1 General. The fiscal year each of the Sub-Trusts shall be fixed by
-------
resolution of the Trustees.
ARTICLE 7
---------
Seal
----
7.1 General. The seal of the Trust shall consist of a flat-faced die with
-------
the word "Massachusetts", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
---------
Execution of Papers
-------------------
8.1 General. Except as the Trustees may generally or in particular cases
-------
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
---------
Issuance of Share Certificates
------------------------------
9.1 Share Certificates. In lieu of issuing certificates for shares, the
------------------
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
-5-
<PAGE>
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder
may receive a certificate stating the number of shares owned by him or her, in
such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he or she were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
--------------------
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3. Issuance of New Certificate to Pledgee. A pledgee of shares
--------------------------------------
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
------------------------------------------
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
----------
Dealings with Trustees and Officers
-----------------------------------
10.1 General. Any Trustee, officer or other agent of the Trust may
-------
acquire, own and dispose of shares of the Trust to the same extent as if he or
she were not a Trustee, officer or agent; and the Trustees may accept
subscriptions to shares or repurchase shares from any firm or company in which
any Trustee, officer or other agent of the Trust may have an interest.
-6-
<PAGE>
ARTICLE 11
----------
Amendments to the By-Laws
-------------------------
11.1 General. These By-Laws may be amended or repealed, in whole or in
-------
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
The foregoing By-Laws were adopted by the Board of Trustees of the Trust on
April 29, 1997.
/s/ Jeffrey S. Winer
-----------------------------------
Jeffrey S. Winer
Secretary
-7-
<PAGE>
EXHIBIT (5)
MASTER INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 26th day of April, 1988 between CIGNA INVESTMENTS,
INC., a corporation organized under the laws of the State of Delaware and having
its principal place of business in Bloomfield, Connecticut (the "Adviser") and
CIGNA VARIABLE PRODUCTS GROUP, a Massachusetts business trust having its
principal place of business in Springfield, Massachusetts (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Adviser is engaged in the business of rendering investment
management services and is so registered under the Investment Advisers Act of
1940; and
WHEREAS, the Trust operates as a "series company" as contemplated by Rule 18f-2
under the 1940 Act and is authorized to issue shares of beneficial interest
("Shares") in separate series with each such series representing interest in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust intends initially to offer Shares in four series, including
Companion Fund, CIGNA Common Stock Portfolio, CIGNA Fixed Income Portfolio and
CIGNA Money Market Portfolio, (such series (the "Initial Series") together with
all other series subsequently established by the Trust with respect to which the
Trust desires to retain the Adviser to render investment advisory services
hereunder and the Adviser is willing so to do being herein collectively referred
to as the "Series");
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties hereto
as follows:
1. The Trust hereby appoints the Adviser to act as manager and investment
adviser to each of the Initial Series for the period and on the terms herein set
forth, subject to the control of the Board of Trustees of the Trust. The
Adviser hereby accepts such appointment and agrees during such period, at its
own expense, to render the services and to assume the obligations herein set
forth for the compensation herein provided.
In the event that the Trust establishes one or more series of Shares
other than the Initial Series with respect to which it desires to retain the
Adviser to render management and investment advisory services hereunder, it
shall so notify the Adviser in writing, indicating the advisory fee which will
<PAGE>
be payable with respect to the additional series of Shares. If the Adviser is
willing to render such services, it shall so notify the Trust in writing,
whereupon such series of Shares shall become a Series hereunder.
2. (a) The Adviser, at its expense, will furnish continuously an
investment program for each Series, will determine, subject to the control and
periodic review of the Board of Trustees of the Trust, what investments shall be
purchased, held, sold or exchanged by each Series and what portion, if any, of
the assets of each Series shall be held in cash, cash equivalents or other
temporary investments and shall, on behalf of each Series, make changes in that
Series' investments. Subject always to the provisions of the Declaration of
Trust of the Trust and its Bylaws, the 1940 Act, and the control of the Board of
Trustees, the Adviser will also manage, supervise and conduct the other affairs
and business of the Trust and each Series and matters incidental thereto.
(b) The Adviser, at its own expense, shall place orders for the
purchase and sale of portfolio securities for the account of each Series with
brokers or dealers selected by the Adviser. In executing portfolio transactions
for each Series ad selecting brokers or dealers, the Adviser will use its best
efforts to seek on behalf of the Series the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
shall consider all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis). In
evaluating the best overall terms available, and in selecting the broker or
dealer to execute a particular transaction, the Adviser may also consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Series and/or other
accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay to a broker or dealer
who provides such brokerage and research services a commission for executing a
Series portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if,
but only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer--viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.
3. In addition to performing at its own expense the obligations set forth
in paragraph 2 hereof, the Adviser shall furnish at its own expense or pay the
expense of the Trust for the following:
(a) office space in the offices of the Adviser or in such other place
as may be agreed upon from time to time, and all necessary office facilities and
equipment;
(b) necessary executive and other personnel for managing the affairs
of the Trust, including personnel to perform clerical, bookkeeping, accounting
-2-
<PAGE>
and other office functions (exclusive of those related to and to be performed
under contracts for custodian, transfer, paying and plan agency services by the
bank selected to perform such services); and
(c) all information and services, other than services of counsel,
required in connection with the preparation of registration statements and
prospectuses, including amendments and revisions thereof, all annual, semiannual
and periodic reports, and notices and proxy solicitation material furnished to
shareholders of the Trust, or to holders of variable annuity contracts funded by
shares of the Trust, as the case may be, or to regulatory authorities.
4. Nothing in paragraph 3 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and mailing the items referred to in
subparagraph (c) of paragraph 3;
(b) the costs of printing and mailing of sales literature,
prospectuses and offering circulars required by regulatory authorities;
(c) compensation of Trustees of the Trust who are not directors,
officers or employees of the Adviser, CIGNA Corporation or any of its
affiliates;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the Custodian appointed by the Trust
for custodial, paying agent, transfer agent and plan agent services;
(f) charges and expenses of independent accountants retained by the
Trust;
(g) charges and expenses of any transfer agents and registrars
appointed by the Trust;
(h) issue and transfer taxes, brokers' commissions and dealers'
concessions chargeable to the Trust in connection with securities transactions
to which the Trust is a party, including any portion of such commissions
attributable to research and brokerage services as defined by Section 28(e) of
the Securities Exchange Act of 1934, as amended from time to time;
(i) taxes and corporate fees payable by the Trust to federal, state or
other governmental agencies;
(j) the cost of share certificates (if any) representing shares of a
Series;
(k) legal fees and expenses in connection with the affairs of the
Trust, including registering and qualifying its shares with federal and state
regulatory authorities; and
-3-
<PAGE>
(l) expense of shareholders' and trustees' meetings.
5. Notwithstanding the provisions of Paragraph 3 and 4:
(a) The Trust shall reimburse the Adviser for its costs of maintaining
the Office of the Treasurer of the Trust and the Office of the Secretary of the
Trust, determined in such manner as may be approved by the Board of Trustees of
the Trust. Such reimbursement shall be made by the 15th of each month with
respect to such costs accrued during the previous month.
(b) Except for printing expenses (including design, layout, and
coordination) and except as provided in paragraph 5(a) above, the Adviser shall
indemnify the Trust against any expense of personnel of the Adviser, or any
affiliate of the Adviser, which might otherwise have been charged to the Trust
under any provision of this Agreement or of the Distribution Agreement between
the trust and its principal underwriter.
6. The Adviser agrees to hold the Trust harmless with respect to any and
all damages the Trust may sustain resulting from any dishonest act of any
employee or agent of the Adviser. This Paragraph 6 is in addition to, and not
by way of limitation of, any other rights of indemnification which the Trust may
have hereunder or otherwise.
7. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar service to
others so long as its services hereunder are not impaired or interfered with
thereby.
8. The Trust shall pay the Adviser as full compensation for all services
rendered and all facilities hereunder as to a Series a management fee for that
Series determined in accordance with the appropriate portion of Schedule A
attached hereto.
9. It is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in the Adviser as directors, officers,
shareholders or otherwise, that directors, officers, agents and shareholders of
the Adviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise, that the Adviser may be interested in the Trust as a
shareholder or otherwise, and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Declaration of Trust of the Trust and the Certificate
of Incorporation of the Adviser, respectively, or by specific provision of
applicable law.
10. (a) This Agreement will take effect as of April 26, 1988. This
Agreement shall thereafter continued in full force and effect from year to year
as to a Series, if its continuance is specifically approved before May 1, 1989
and before May 1 of each subsequent year by vote of a majority of the
outstanding shares (as defined in the 1940 Act) of the Series of the Trust in
question or by the Board of Trustees of the Trust, and in either event by a
majority of the Trustees of the Trust who are not parties to the Agreement or
-4-
<PAGE>
interested persons (within the meaning of the 1940 Act) of the Trust or the
Adviser, such Trustees voting in person at a meeting called for such purpose;
provided, however, that:
(b) This Agreement may at any time be terminated as to any Series
without the payment of any penalty on 60 days' written notice to the Adviser
either by vote of the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of a Series.
(c) This Agreement shall immediately terminate in event of its
assignment (as that term is defined in the 1940 Act).
(d) This Agreement may be terminated by the Adviser in its entirety or
with respect to one or more than one of the Series on 90 days' written notice to
the Trust.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed for this purpose that the address of the
Adviser shall be 900 Cottage Grove Road, Bloomfield, Connecticut 06002 and that
the address of the Trust shall be 1380 Main Street, Springfield, Massachusetts
01103.
12. Copies of the Master Trust Agreement, as amended, establishing CIGNA
Annuity Funds Group (the "Trust") are on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this Master
Investment Advisory Agreement is executed on behalf of the Trust by officers of
the Trust as officers and not individually and that the obligations of or
arising out of this Master Investment Advisory Agreement are not binding upon
any of the Trustees, officers, shareholders, employees or agents of the Trust
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first above written.
CIGNA VARIABLE PRODUCTS GROUP CIGNA INVESTMENTS, INC.
By: /s/ John K. Armstrong /s/ George R. Trumbull
------------------------------ ---------------------------------
Chairman President
-5-
<PAGE>
Compensation Schedule for the following Series Schedule A-1
Companion Fund
The Trust shall pay the Adviser as full compensation for all services
rendered and all facilities furnished hereunder, a management fee for the Series
by applying the annual rate of 0.35% to the average daily net asset value of
each Series for the calendar year, computed in the manner used for the
determination of the offering price of Shares of the Series. The fee accrued as
of the end of each month shall be paid no later than the 15th of the following
month.
If in any calendar year the total of all ordinary business expense of the
Series (including investment advisory fees but excluding interest, taxes and
transaction costs incurred in acquiring and disposing of portfolio securities)
exceed one percent (1%) of the average daily net asset value of the Series
computed in the manner above described, the Adviser shall pay any such excess.
The above expense limitations shall be equitably prorated for any applicable
period which is less than a calendar year.
-6-
<PAGE>
Compensation Schedule for the following Series Schedule A-2
CIGNA Common Stock Portfolio
CIGNA Fixed Income Portfolio
CIGNA Money Market Portfolio
The Trust shall pay the Adviser as full compensation for all services
rendered and all facilities furnished hereunder, a management fee for each
Series by applying the annual rate of 0.50% of the average daily net asset value
of each Series for the calendar year, computed in the manner used for the
determination of the offering price of Shares of the Series. The fee accrued as
of the end of each month shall be paid no later than the 15th of the following
month.
The fee as described in the preceding paragraph shall be reduced by, or the
Adviser will reimburse the applicable Series for any amount necessary to prevent
the total expenses of the Series (including the Adviser's fee but excluding
interest, taxes, amortized organizational expenses, transaction costs in
acquiring and disposing of portfolio securities and extraordinary expenses) in
any fiscal year from exceeding 1.5% of the Fund's average daily net assets of
the Series. Reductions shall be made at the end of each quarter of the Trust's
fiscal year on an estimated basis, if appropriate, and an adjustment to reflect
the reduction on an annual basis shall be made, if necessary, in the fee payable
with respect to the last month in any fiscal year of the Trust. The Adviser
shall promptly refund any amount paid in excess of the fee determined to be due
for such year.
In the event that expenses of any Series for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any state, whether or not shares of the Series are
qualified for offer and sale in any state, the compensation due the Adviser for
such fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof, and, if necessary, the Adviser shall assume expenses of the
Series to the extent required by any such expense limitation, provided, that the
--------
Board of Trustees of the Trust may waive any specific expense limitation which,
in the judgment of the Board, is more stringent than is imposed by states
generally.
-7-
<PAGE>
Exhibit 8
CUSTODIAN CONTRACT
Between
CIGNA VARIABLE PRODUCTS GROUP
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Employment of Custodian and Property to be Held by It.....1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian...............................2
2.1 Holding Securities................................2
2.2 Delivery of Securities............................3
2.3 Registration of Securities........................8
2.4 Bank Accounts.....................................8
2.5 Payments for Shares...............................9
2.6 Availability of Federal Funds.....................9
2.7 Collection of Income.............................10
2.8 Payment of Fund Monies...........................11
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased............................13
2.10 Payments for Repurchases or Redemptions of
Shares of the Fund..............................14
2.11 Appointment of Agents............................14
2.12 Deposit of Fund Assets in Securities System......15
2.12A Fund Assets Held in the Custodian's Direct
Paper System....................................18
2.13 Segregated Account...............................20
2.14 Ownership Certificates for Tax Purposes..........21
2.15 Proxies..........................................21
2.16 Communications Relating to Portfolio
Securities......................................22
2.17 Proper Instructions..............................22
2.18 Actions Permitted Without Express Authority......23
2.19 Evidence of Authority............................24
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.......24
4. Records..................................................25
5. Opinion of Fund's Independent Accountants................26
6. Reports to Fund by Independent Public Accountants........26
7. Compensation of Custodian................................27
8. Responsibility of Custodian..............................27
9. Effective Period, Termination and Amendment..............28
10. Successor Custodian......................................30
11. Interpretive and Additional Provisions...................31
12. Additional Funds.........................................32
13. Massachusetts Law to Apply...............................32
14. Prior Contracts..........................................32
15. Trust Liability..........................................32
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between CIGNA Variable Products Group, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at 1380 Main Street, Springfield, Massachusetts, 01103,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund presently intends to offer shares in one series, the
Companion Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 12, being herein referred to as the "Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund pursuant to the provisions of the Declaration of
Trust. The Fund agrees to deliver to the Custodian all securities and cash owned
by it, and all payments of income, payments of principal or capital
<PAGE>
distributions received by it with respect to all securities owned by the
Portfolios from time to time, and the cash consideration received by it for such
new or treasury shares of beneficial interest ("Shares") of the Portfolios as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an applicable vote by the Board of Trustees of the
Fund, and provided that the Custodian shall have no more or less responsibility
or liability to the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
------------------------------------------------------------------------
Custodian.
- ---------
2.1 Holding Securities. The Custodian shall hold and physically segregate for
------------------
the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street Bank
-2-
<PAGE>
and Trust Company acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and deliver
----------------------
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
-3-
<PAGE>
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
--------
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
-4-
<PAGE>
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, but only against receipt of adequate collateral
--------
as agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumental-instrumentalities, except that in connection with
any loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized by the
-5-
<PAGE>
U.S. Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Portfolio requiring a pledge of assets by the Portfolio,
but only against receipt of amounts borrowed;
--------
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
-6-
<PAGE>
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
--------
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, specifying the securities to be
delivered, setting forth the purpose for which such delivery is
-7-
<PAGE>
to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
--------------------------
bearer securities) shall be registered in the name of the Portfolio or in
the name of any nominee of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Portfolio,
unless the Fund has authorized in writing the appointment of a nominee to
------
be used in common with other registered investment companies having the
same investment adviser as the Portfolio, or in the name or nominee name
of any agent appointed pursuant to Section 2.11 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of
this Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the name of each Portfolio of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio in a bank account
-8-
<PAGE>
established and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian for a Portfolio may be
deposited by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every such
--------
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall
be approved by vote of a majority of the Board of Trustees of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor for
-------------------
the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the account of the appropriate Portfolio such payments as are received for
Shares of that Portfolio issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Portfolio and the
Transfer Agent of any receipt by it of payments for Shares of such
Portfolio.
2.6 Availability of Federal Funds. Upon mutual agreement between the Fund and
-----------------------------
the Custodian, the Custodian shall, upon the receipt of Proper
-9-
<PAGE>
Instructions, make federal funds available to a Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which
are deposited into the Portfolio's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
--------------------
income and other payments with respect to registered securities held
hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities are
held by the Custodian or its agent thereof and shall credit such income,
as collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities
held hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2(10) shall be the responsibility of the Fund.
The Custodian will have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
-10-
<PAGE>
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
----------------------
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of a Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof;
or (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section
-11-
<PAGE>
2.12A; or (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned
by the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Portfolio;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
-12-
<PAGE>
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee of the
Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
-------------------------------------------------------------------
any and every case where payment for purchase of securities for the
account of a Portfolio is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written instructions
from such Portfolio to so pay in advance, the Custodian shall be
-13-
<PAGE>
absolutely liable to the Portfolio for such securities to the same extent
as if the securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From such
-------------------------------------------------------------
funds as may be available for the purpose but subject to the limitations
of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available for payment
to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares
of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
-14-
<PAGE>
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
--------
relieve the Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
--------------------------------------------
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
-15-
<PAGE>
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
-16-
<PAGE>
behalf of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
-17-
<PAGE>
Custodian or any such agent to enforce effectively such rights as
it may have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities System
or any other person which the Custodian may have as a consequence
of any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.12A Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
-------------------------------------------------------
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
-18-
<PAGE>
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
-19-
<PAGE>
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions establish and maintain a segregated account or accounts for
and on behalf of each Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund on behalf
of the Portfolio, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by Investment Company Act
-20-
<PAGE>
Release No. 10666, or any subsequent release or releases of the Securities
and Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
--- ----
addition to Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of each Portfolio held by it and in connection with
transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
-------
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
-21-
<PAGE>
2.16 Communications Relating to Portfolio Securities. The Custodian shall
-----------------------------------------------
transmit promptly to the Fund for each Portfolio all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices
of exercise of call and put options written by the Fund on behalf of the
Portfolio and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities being
held for the Portfolio. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Portfolio all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Portfolio desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this Article 2
-------------------
means a writing signed or initialled by one or more person or persons as
the Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered Proper
-22-
<PAGE>
Instructions if the Custodian reasonably believes them to have been given
by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of
the Fund accompanied by a detailed description of procedures approved by
the Board of Trustees, Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolio's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
-------------------------------------------
discretion, without express authority from the Fund on behalf of the
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
--------
for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
-23-
<PAGE>
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the
Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
---------------------
any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may receive and accept
a certified copy of a vote of the Board of Trustees of the Fund as
conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by
the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
------------------------------------------------------------------------
of Net Asset Value and Net Income.
---------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
-24-
<PAGE>
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Portfolio, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall also calculate
daily the net income of the Portfolio as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an officer
of the Fund to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of each Portfolio shall be
made at the time or times described from time to time in the Fund's currently
effective prospectus.
4. Records
-------
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 3la-l and 3la-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
-25-
<PAGE>
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-lA, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail., as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
-26-
<PAGE>
7. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
8. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party or
parties. The Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept indemnified by
and shall be without liability to the Fund for any action taken or omitted by it
in good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
-27-
<PAGE>
nominee assigned to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the Portfolio shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Portfolio's assets to the extent necessary
to obtain reimbursement.
9. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
--------
however that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the initial use of
a particular Securities System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has reviewed the
use by the Fund of such Securities System, as required in each case by Rule 17f-
4 under the Investment Company Act of 1940, as amended and that the Custodian
shall not act under Section 2.12A hereof in the absence of receipt of an initial
-28-
<PAGE>
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by the Fund of the Direct Paper System;
provided further, however, that the Fund shall not amend or terminate this
- -------- -------
Contract in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund may
at any time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
-29-
<PAGE>
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Trustees of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Portfolio's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
-30-
<PAGE>
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Portfolio's
securities held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
--------
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
-31-
<PAGE>
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
12. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Companion Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
13. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
14. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
15. Trust Liability
---------------
Copies of the Master Trust Agreement, as amended, establishing CIGNA
Variable Products Group (the "Trust") are on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this Custodian
Contract is executed on behalf of the Trust by officers of the Trust as officers
and not individually and that the obligations of or arising out of this
-32-
<PAGE>
Custodian Contract are not binding upon any of the Trustees, officers,
shareholders, employees or agents of the Trust individually but are binding only
upon the assets and property of the Trust.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 15th day of April, 1988.
ATTEST CIGNA VARIABLE PRODUCTS GROUP
/s/ Alfred A. Bingham III By: /s/ John K. Armstrong
- ----------------------------- -----------------------------
Vice President and Treasurer President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ M. Fitzgerald By: /s/ K. Bergeron
- ----------------------------- -----------------------------
Assistant Secretary Vice President
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<PAGE>
DATA ACCESS ADDENDUM TO CUSTODIAN AGREEMENT
-------------------------------------------
AGREEMENT between each fund listed on Appendix A, (individually a "Fund"
and collectively, the "Funds") as amended from time to time, and State Street
Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Fund pursuant to a certain Custodian Agreement (the "Custodian Agreement")
for each of the respective Funds;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZON(R)
Accounting System, in its role as custodian of each Fund, and maintains certain
Fund-related data ("Fund Data") in databases under the control and ownership of
State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Fund certain Data Access
Services solely for the benefit of the Fund, and intends to provide additional
services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
------
Street hereby agrees to provide each Fund with access to State Street's
Multicurrency HORIZON(R) Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Fund, or certain third parties approved by State Street
that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Fund and
solely with respect to the Fund or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
--------------------
Fund the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Fund to originate electronic
instructions to State Street on behalf of each Fund in order to (i) effect the
transfer or movement of cash or securities held under custody by State Street or
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<PAGE>
(ii) transmit accounting or other information (such transactions are referred to
herein as "Client Originated Electronic Financial Instructions"), and (iii)
access data for the purpose of reporting and analysis, shall be deemed to be
Data Access Services for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to
-------------------
make available to a Fund additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Fund's access to and use of any additional System made
available by State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Fund acknowledge that in connection with the Data
Access Services provided under this Agreement, each Fund will have access,
through the Data Access Services, to Fund Data and to functions of State
Street's proprietary systems; provided, however that in no event will the Fund
have direct access to any third party systems-level software that retrieves data
for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment: Designated Location. The System and the Data
-----------------------------------------
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of a Fund or the Investment Advisor or Independent
Auditor located in Hartford /Bloomfield Connecticut ("Designated Location").
b. Designated Configuration Trained Personnel. State Street shall be
------------------------------------------
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Fund agree that
each will engage or retain the services of trained personnel to enable both
State Street and the Fund to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Fund will use the System and the Data Access
------------
Services only for the processing of securities transactions, the keeping of
books of account for the Fund and accessing data for purposes of reporting and
analysis. Each Fund shall not, and shall cause its employees and agents not to
(i) permit any third party* to use the System or the Data Access Services, (ii)
sell, rent, license or otherwise use the System or the Data Access Services in
the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow
*except its Investment Adviser
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<PAGE>
or cause any information (other than portfolio holdings, valuations of portfolio
holdings, and other information reasonably necessary for the management or
distribution of the assets of the Fund) transmitted from State Street's
databases, including data from third party sources, available through use of the
System or the Data Access Services to be redistributed or retransmitted to
another computer, terminal or other device for other than use for or on behalf
of the Fund or (vi) modify the System in any way, including without limitation,
developing any software for or attaching any devices or computer programs to any
equipment, system, software or database which forms a part of or is resident on
the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
---------------
System shutdown, each Fund's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Fund may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Fund may
secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
-----
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
---------------
Fund shall not modify, enhance or otherwise create derivative works based upon
the System, nor shall the Fund reverse engineer, decompile or otherwise attempt
to secure the source code for all or any part of the System.
g. Security Procedures. Each Fund shall comply with data access
-------------------
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Fund shall have access only to the Fund
Data and authorized transactions agreed upon from time to time by State Street
and, upon notice from State Street, the Fund shall discontinue remote use of the
System and access to Data Access Services for any security reasons cited by
State Street; provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by the Fund)
after such discontinuance, assume responsibility to provide accounting services
under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
------------
the System and the Data Access Services by the Fund and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Fund and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Fund's or the Investment Advisor's business.
-36-
<PAGE>
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Fund acknowledges and State Street
-----------------------
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Fund by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street,
Any and all such information provided by State Street to each Fund shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Fund agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder. Each Fund further acknowledges that State Street shall not be
required to provide the Investment Advisor or the Investment Auditor with access
to the System unless it has first received from the Investment Advisor of the
Investment Auditor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C and/or Attachment C-1 to this Agreement.
Each Fund shall use all commercially reasonable efforts to assist State Street
in identifying and preventing any unauthorized use, copying or disclosure of the
Proprietary Information or any portions thereof or any of the logic, formats or
designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Fund shall
-----------
advise State Street immediately in the event the Fund learns or has reason to
believe that any person to whom the Fund has given access to the Proprietary
Information, or any portion thereof, has violated or intends to violate the
terms of this Agreement, and each Fund will, at its expense, co-operate with
State Street in seeking injunctive or other equitable relief in the name of the
Fund or State Street against any such person.
c. Injunctive Relief. Each Fund acknowledges that the disclosure of any
-----------------
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the
--------
termination of this Agreement.
5. LIMITATION ON LIABILITY
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<PAGE>
a. Limitation on Amount and Time for Bringing Action. Each Fund agrees
-------------------------------------------------
any liability of State Street to the Fund or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Fund for the preceding 24
months for such services. In no event shall State Street be liable to the Fund
or any other party for any special, indirect, punitive or consequential damages
even if advised of the possibility of such damages. No action, regardless of
form, arising out of this Agreement may be brought by the Fund more than two
years after the Fund has knowledge that the cause of action has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE FUND OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE FUND'INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
----------------
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Fund, the
-----------------------
Fund shall be solely responsible for the accuracy of any accounting statements
or reports produced using the Data Access Services and the System and the
conformity thereof with any requirements of law.
e. Force Majeure. Neither State Street or a Fund shall be liable for any
-------------
costs or damages due to delay or nonperformance under this Agreement arising out
of any cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Fund as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
Each Fund agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Fund of the Data Access Services or the System, including any
loss incurred by State Street resulting from a security breach at the Designated
Location or committed by the Fund's employees or agents or the Investment
Advisor or the Independent Auditor of the Fund and (ii) any loss resulting from
incorrect Client Originated Electronic Financial Instructions. State Street
shall be entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
-38-
<PAGE>
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Fund. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
--------
State Street training facility or at the Designated Location, to the Fund's
personnel in connection with the use of the System on the Designated
Configuration. Each Fund agrees that it will set aside, during regular business
hours or at other times agreed upon by both parties, sufficient time to enable
all operators of the System and the Data Access Services, designated by the
Fund, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for
---------------------------
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Fund shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Fund shall be solely responsible for the timely acquisition and
maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services at
the Designated Location.
(ii) State Street and the Fund each agree that they will assign qualified
personnel to actively participate during the Installation and
Conversion phase of the System implementation to enable both parties
to perform their respective obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the support
services
set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
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<PAGE>
a. Term of Agreement. This Agreement shall become effective on the date
-----------------
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
------------------------
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Fund or thirty days' notice in the case of notice from the Fund to State Street
of termination; or (ii) immediately for failure of the other party to comply
with any material term and condition of the Agreement by giving the other party
written notice of termination. In the event the Fund shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Fund.
Termination of this Agreement with respect to any given Fund shall in no way
affect the continued validity of this Agreement with respect to any other Fund.
This Agreement shall in any event terminate as to any Fund within 90 days after
the termination of the Custodian Agreement applicable to such Fund.
c. Termination of the Right to Use. Upon termination of this Agreement
-------------------------------
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Fund shall immediately cease use of the System
and the Data Access Services. Immediately upon termination of this Agreement
for any reason, the Fund shall return to State Street all copies of
documentation and other Proprietary Information in its possession; provided,
however, that in the event that either State Street or the Fund terminates this
Agreement or the Custodian Agreement for any reason other than the Fund's
breach, State Street shall provide the Data Access Services for a period of time
and at a price to be agreed upon by State Street and the Fund.
11. MISCELLANEOUS
a. Assignment: Successors. This Agreement and the rights and obligations
----------------------
of each Fund and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty,
--------
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto
----------------
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
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<PAGE>
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Agreement is not intended to supersede or modify the duties
and liabilities of the parties hereto under the Custodian Agreement or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
-------------
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has caused
this Agreement to be duly executed in its name and through its duly authorized
officer as of the date hereof.
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Ronald E. Logue
-------------------------
Title: Executive Vice President
-------------------------
Date:
-------------------------
EACH FUND LISTED, ON APPENDIX A
By: /s/ Alfred A. Bingham III
-----------------------------
Title: Vice President and Treasurer
-----------------------------
Date: 8/18/97
-----------------------------
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 AS 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 AGENT OF THE TRUST INDIVIDUALLY, BUT ARE
BINDING ONLY UPON THE ASSETS END PROPERTY OF
THE TRUST.
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<PAGE>
APPENDIX A
CIGNA Funds Group
CIGNA High Income Shares
CIGNA Institutional Funds Group
CIGNA Variable Products Group
INA Investment Securities, Inc.
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<PAGE>
ATTACHMENT A
Multicurrency HORIZON(R) Accounting System
System Product Description
--------------------------
1. The Multicurrency HORIZON(R) Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) Fund's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest(R) GlobalQuest(R) is designed to provide Fund access to the
-----------
following information maintained on The Multicurrency HORIZON(R) Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
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<PAGE>
ATTACHMENT B ADVISOR
CIGNA INVESTMENT
MANAGEMENT, INC.
___________________
STATE STREET [PC GRAPHIC APPEARS HERE]
BANK AND
TRUST
COMPANY
MULTICURRENCY Software is installed for access.
HORIZON(R) AND Click on icon for access.
GLOBALQUEST(R)
- -------------------
CIGNA FUNDS
DIAL UP ACCESS
CONFIGURATION
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<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of employment as Investment
Advisor to each fund listed on Appendix A (individually a, "Fund", collectively,
the "Funds"), as amended from time to time, it will have access to State Street
Bank and Trust Company's ("State Street") Multicurrency HORIZON Accounting
System and other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Fund and through the
use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
CIGNA INVESTMENTS, INC
By: /s/ Alfred A. Bingham III
--------------------------
Title: Assistant Vice President
--------------------------
Date: 10 /31/97
--------------------------
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<PAGE>
ATTACHMENT C-I
Undertaking
The undersigned understands that in the course of its employment as
Independent Auditor to each fund listed on Appendix A (individually a, "Fund",
collectively, the "Funds"), as amended from time to time, it will have access to
State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON
Accounting System and other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Fund and through the
use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
[Independent Auditor]
By: Price Waterhouse LLP
-----------------------------
Title:
_____________________________
Date: 11/5/97
-----------------------------
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<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Fund Designated Persons may contact State
-----------------
Street's HORIZON(R) Help Desk and Fund Assistance Center between the hours of 8
a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining
answers to questions about the use of the System, or to report apparent problems
with the System. From time to time, the Fund shall provide to State Street a
list of persons, not to exceed five in number, who shall be permitted to contact
State Street for assistance (such persons being referred to as "the Fund
Designated Persons").
b. Technical Support. State Street will provide technical support to
-----------------
assist the Fund in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
-------------------
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Fund any
-------------------
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Fund and shall offer the Fund reasonable training
on the enhancement. Charges for system enhancements shall be as provided in the
Fee Schedule. State Street retains the right to charge for related systems or
products that may be developed and separately made available for use other than
through the System.
e. Custom Modifications. In the event the Fund desires custom
--------------------
modifications in connection with its use of the System, the Fund shall make a
written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
---------------------
support the Fund's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Fund has modified the System in breach of
this Agreement.
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<PAGE>
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
CIGNA FUNDS
EFFECTIVE JULY 1, 1992
- --------------------------------------------------------------------------------
I. ADMINISTRATION
--------------
Custody, Portfolio and Fund Accounting Service - Maintain custody of fund
----------------------------------------------
assets. Settle portfolio purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements and report
cash transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Calculate net asset value daily.
Provide selected general ledger reports.
The administration fee shown below is an annual charge, billed and payable
monthly, based on average monthly net assets.
<TABLE>
<CAPTION>
Custody, Portfolio
Fund Net Assets and Fund Accounting
--------------- -------------------
<S> <C>
First $20 Million 1/10 of 1%
Next $80 Million 1/30 of 1%
Excess 1/100 of 1%
</TABLE>
Minimum Monthly Charges - Domestic Portfolio $1,000
- International Portfolio $2,000**
* New Fund Phase In - No Base Fee on new domestic funds for months 1-3.
* The administration fee for international funds reflects portfolio and fund
accounting services only. Custody fees are listed separately in Section
II.
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<PAGE>
II. Global Custody
--------------
Includes: Maintaining custody of fund assets. Settling portfolio purchases and
sales. Reporting buy and sell fails. Determining and collecting portfolio
income. Making cash disbursements and reporting cash transactions. Monitoring
corporate actions. Withholding foreign taxes. Filing foreign tax reclaims.
A. Holding Fees (basis points per portfolio per annum):
------------
<TABLE>
<CAPTION>
Group I Group II Group III Group IV Group V Group VI
- ------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Denmark Australia Austria Belgium Hong Argentina
Euroclear Canada Ireland Finland Kong Brazil
Germany France Netherlands Indonesia Italy Chile
Japan Norway Singapore Malaysia Spain Greece
New Zealand U. Kingdom Switzerland Sweden Thailand Mexico
Philippines
Turkey
</TABLE>
<TABLE>
<CAPTION>
GROUP GROUP GROUP GROUP GROUP GROUP
USA I II III IV V VI
----- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
First $ 50 Million 3.0 7.0 9.0 11.0 14.0 20.0 30.0
Next $ 50 Million 2.0 6.0 8.0 10.0 13.0 18.0 30.0
Over $100 Million 1.0 5.0 7.0 8.0 11.0 15.0 30.0
</TABLE>
B. TRANSACTION CHARGES (US dollars):
-------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
USA- See Group I Group II Group III Group IV Group V Group VI
itemized ------- -------- --------- -------- ------- --------
fee schedule $30 $60 $75 $100 $125 Greece*-
Canada Austria Australia Argentina Indonesia 20 basis
Euroclear Chile Brazil Belgium Philippines pts per
Germany Hong Kong Ireland Denmark settlement
Japan Italy Mexico Finland min $10.00
Netherlands Spain France Portugal-
Switzerland Sweden New Zealand Turkey*-
United Sweden Norway .50 per
Kingdom Thailand Singapore security
settled
max $7,500
min $250
</TABLE>
*Transaction charge waived if brokerage provided by National Securities Company.
-50-
<PAGE>
III. Portfolio Trades
----------------
[S] [C]
For each line item processed:
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $15.00
New York Physical Settlements $30.00
All other trades $16.00
Boston Book Entry $20.00
Maturity Collections $ 8.00
IV. Options
-------
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
V. Lending of Securities
---------------------
Deliver loaned securities versus cash
collateral $20.00
Deliver loaned securities versus securities
collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of
loaned securities $15.00
Deliver securities collateral versus receipt
of loaned securities $25.00
Loan administration -- mark-to-market per
day, per loan $ 3.00
VI. Interest Rate Futures
---------------------
Transactions -- no security movement $ 8.00
VII. Coupon Bonds
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
-51-
<PAGE>
VIII. Holdings Charge
---------------
For each issue maintained -- monthly charge $ 5.00
IX. Principal Reduction Payments
----------------------------
Per Paydown $10.00
X. Dividend Charges (For items held at the Request
----------------
of Traders over record date in street form) $75.00
XI. Special Services
----------------
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation
of special reports will be subject to negotiation. Fees for tax
accounting/recordkeeping for options, financial futures, and other
special items will be negotiated separately.
XII. Out-of-Pocket Expenses
----------------------
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are
not limited to the following:
Telephone
Wire Charges ($4.75 per wire in and $4.55 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15 each
Rapicom lease and supplies
XIII. Payment
-------
The above fees are expected to be paid within 30 days of receipt
of invoice.
-52-
<PAGE>
CIGNA INSTITUTIONAL FUNDS GROUP
- -------------------------------
CIGNA International Stock Fund
CIGNA Annuity Funds Group
- ---------------------------
CIGNA Annuity Money Market Fund
CIGNA Annuity Income Fund
CIGNA Annuity Equity Fund
CIGNA Annuity Growth & Income Fund
CIGNA Annuity Aggressive Equity Fund
CIGNA Variable Products Group
- -----------------------------
CIGNA Companion Fund
INA Investment Securities, Inc.
CIGNA High Income Shares
Copies of the Master Trust Agreements establishing CIGNA Institutional Funds
Group, CIGNA Annuity Funds Group, CIGNA Variable Products Group and CIGNA High
Income Shares (the "Trusts"), are on file with the Secretary of the Commonwealth
of Massachusetts, and notice is hereby given that this agreement is executed on
behalf of Trusts by an officer of the Trusts, as an officer and not
individually, and that the obligations of or arising out of this agreement are
not binding upon any of the trustees, officers, shareholders, employees, agents
or any subsequent series of the Trusts, either individually or collectively, but
are binding only upon the assets or property of the series of the Trusts listed
above.
For each of the above:
CIGNA FUNDS STATE STREET BANK AND TRUST CO
By: /s/ Alfred A. Bingham III By: /s/ Maureen T. Corcoran
---------------------------- -----------------------------------
Title: Vice President Title: Vice President
------------------------- --------------------------------
Date: 11/19/92 Date: 11/19/92
-------------------------- ---------------------------------
-53-
<PAGE>
Exhibit 9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CIGNA VARIABLE PRODUCTS GROUP
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Terms of Appointment; Duties of the Bank..........1
Article 2 Fees and Expenses.................................4
Article 3 Representations and Warranties of the Bank........5
Article 4 Representations and Warranties of the Trust.......5
Article 5 Indemnification...................................6
Article 6 Covenants of the Trust and the Bank...............9
Article 7 Termination of Agreement.........................10
Article 8 Additional Funds.................................11
Article 9 Assignment.......................................11
Article 10 Amendment........................................12
Article 11 Massachusetts Law to Apply.......................12
Article 12 Merger of Agreement..............................12
Article 13 Trust Liability..................................12
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 15th day of April, 1988, by and between CIGNA
VARIABLE PRODUCTS, a Massachusetts business trust, having its principal office
and place of business at 1380 Main Street, Springfield, Massachusetts, 01103
(the "Trust"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
corporation having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Trust desires to appoint the Bank as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and the bank desires to accept such appointment;
WHEREAS, the Trust is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Trust intends to initially offer Shares in one series, as
described on Exhibit A attached hereto (such series, together with all other
series subsequently established by the Trust and made subject to this Agreement
in accordance with Article 8, being herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
----------------------------------------
1.01 Subject to the terms and conditions set forth in
this Agreement, the Trust hereby employs and appoints the Bank to act as, and
the Bank agrees to act as the transfer agent for the Trust's authorized and
<PAGE>
issued shares of beneficial interest ("Shares"), dividend disbursing agent and
agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund of the Trust ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus') of any Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the
following services:
(a) In accordance with procedures established from
time to time by agreement between the Trust and the Bank, the
Bank shall:
(i) receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Custodian of the Trust authorized pursuant to the Declaration
of Trust of the Trust (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to
the Custodian;
(iv) at the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause
-2-
<PAGE>
to be paid over in the appropriate manner such monies as instructed
by the redeeming Shareholders;
(v) effect transfers of Shares by the registered
owners thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and distributions
declared by the Trust on account of any Fund; and
(vii) maintain records of account for and advise the Trust and its
Shareholders as to the foregoing.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), the Bank shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating proxies,
mailing, Shareholder reports and prospectuses to current Shareholders,
withholding taxes on non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required with respect
to dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
-3-
<PAGE>
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information and (ii) provide
a system which will enable any Fund of the Trust to monitor the total number of
Shares sold in each State. The Trust shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of the Bank for the Trust's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust and the reporting of
such transactions to any Fund of the Trust as provided above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
-----------------
2.01 For performance by the Bank pursuant to this Agreement, the
Trust agrees to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02 below may be
changed from time to time subject to mutual written agreement between the Trust
and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust
agrees to reimburse the Bank for out-of-pocket expenses or advances incurred by
-4-
<PAGE>
the Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Trust, will be reimbursed by the Trust.
2.03 Postage for mailing of dividends, proxies, Fund reports and other
mailings to all shareholder accounts shall be advanced to the Bank by the Trust
at least seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Trust that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Trust
-------------------------------------------
The Trust represents and warrants to the Bank that;
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
-5-
<PAGE>
4.03 All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect to all
Shares of any Fund of the Trust being offered for sale.
Article 5 Indemnification
---------------
5.01 The Bank shall not be responsible for, and the Trust shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
-6-
<PAGE>
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Trust, and
(ii) have been prepared and/or maintained by the Trust or any other person or
firm on behalf of the Trust.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Trust.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Bank shall indemnify and hold the Trust harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Trust for any action taken or omitted by it in
-7-
<PAGE>
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of any Fund of the Trust,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided the Bank or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Trust, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Trust. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Trust, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
-8-
<PAGE>
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Covenants of the Trust and the Bank
-----------------------------------
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Trust and
all amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
-9-
<PAGE>
6.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Trust on and in accordance with its request.
6.04 The Bank and the Trust agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust, the Bank will endeavor to notify the Trust and
to secure instructions from an authorized officer of the Trust as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
------------------------
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
-10-
<PAGE>
7.02 Should the Trust exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will be
borne by the Trust. Additionally, the Bank reserves the right to charge for any
other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees.
Article 8 Additional Funds
----------------
8.01 In the event that the Trust establishes one or more series of
Shares in addition to those described on Exhibit A attached hereto, with respect
to which it desires to have the Bank render services as transfer agent under the
terms hereof, it shall so notify the Bank in writing, and if the Bank agrees in
writing to provide such services, such series of Shares shall become a Trust
hereunder.
Article 9 Assignment
----------
9.01 Except as provided in Section 9.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
9.02 This Agreement shall inure to the benefit, of and be binding upon
the parties and their respective permitted successors and assigns.
9.03 The Bank may, without further consent on the part of the Trust,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
-11-
<PAGE>
1934 ("Section 17A(c)(1)"), or (ii) a BFDS subsidiary duly registered as a
transfer agent pursuant to Section 17A(c)(1); provided, however, that the Bank
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 10 Amendment
---------
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Trustees of the Trust.
Article 11 Massachusetts Law to Apply
--------------------------
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 12 Merger of Agreement
-------------------
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 13 Trust Liability
---------------
13.01 Copies of the Master Trust Agreement, as amended, establishing
CIGNA Variable Products Group (the "Trust") are on file with the Secretary of
the Commonwealth of Massachusetts, and notice is hereby given that this Transfer
Agency and Service Agreement is executed on behalf of the Trust by officers of
the Trust as officers and not individually and that the obligations of or
arising out of this Transfer Agency and Service Agreement 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.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
CIGNA VARIABLE PRODUCTS GROUP
By: /s/ John K. Armstrong
--------------------
President
ATTEST:
/s/ Everett E. Clark
- --------------------------
Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ K. Bergeron
-------------------------
Vice President
ATTEST:
/s/ M. Fitzgerald
- --------------------------
Assistant Secretary
-13-
<PAGE>
EXHIBIT A
a/o April 15, 1988
Companion Fund
-14-
<PAGE>
EXHIBIT (9e)
PARTICIPATION AGREEMENT
-----------------------
Among
CIGNA VARIABLE PRODUCTS GROUP,
-----------------------------
CIGNA FINANCIAL SERVICES, INC.
------------------------------
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
------------------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of December,
1997 by and among CONNECTICUT GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Connecticut corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and CIGNA VARIABLE PRODUCTS GROUP, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and CIGNA Financial Services, Inc. (hereinafter the "Underwriter"), a
Connecticut corporation.
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and is
available to act as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts (collectively,
the "Variable Insurance Products") to be offered by insurance companies which
have entered into participation agreements with the Fund and the Underwriter
(hereinafter "Participating Insurance Companies") and the Fund's shares are
registered under the Securities Act of 1933 ("1933 Act");
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio");
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated December 29, 1995 (File No.812-9698), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-2(b)
-1-
<PAGE>
(15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Mixed and Shared Funding Exemptive Order");
WHEREAS, CIGNA Investments, Inc. (the "Adviser") is duly registered as
an investment adviser under the 1940 Act and any applicable state securities
law;
WHEREAS, the Company has registered or will register certain variable
insurance products under the 1933 Act;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable insurance products ;
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act;
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC" or "Commission") under the Securities
Exchange Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable insurance products
and the Underwriter is authorized to sell such shares to each Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
----------------------------------
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1. the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Commission and the
-2-
<PAGE>
Fund shall use reasonable efforts to calculate such net asset value on each day
on which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts
and to qualified pension and retirement plans. No shares of any Portfolio will
be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Payment shall be in
federal funds transmitted by wire.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1. hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
-3-
<PAGE>
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis by 6:30 p.m. Hartford,
Connecticut time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act or are exempt from registration; that the
Contracts will be issued and sold in compliance in all material respects with
all applicable Federal and State laws and that the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts, unless
any Account is exempt from such registration.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with all applicable federal and state
securities laws and that the Fund is and shall remain registered under the 1940
Act. The Fund shall amend the Registration Statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as life insurance contracts (including endowment contracts) or annuity insurance
contracts under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
-4-
<PAGE>
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with applicable laws
and the Fund and the Underwriter represent that their respective operations are
and shall at all times remain in material compliance with applicable laws to
the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Connecticut and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Adviser represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Connecticut and any applicable state and federal securities laws.
2.10.The Fund and Underwriter each severally represent and warrant
that all of its directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-1 under the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11.The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities under
its control dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage for the benefit of the Fund, and
that said bond is issued by a reputable bonding company, includes coverage for
larceny and embezzlement, and is in an amount not less than $5 million. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Shareholders Reports and Proxy Statements; Voting
----------------------------------------------------------------
3.1. The Fund shall provide the Company with as many printed copies
of the Fund's current prospectus, Statement of Additional Information and
reports to shareholders as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund
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<PAGE>
shall provide camera-ready copy or computer diskettes containing the Fund's
reports to shareholders, prospectus, and Statement of Additional Information,
and such other assistance as is reasonably necessary in order for the Company
once each year (or more frequently if the prospectus and/or Statement of
Additional Information for the Fund is amended or supplemented during the year)
to have the prospectus for the Contracts and the Fund's prospectus printed
together in one document, and to have the Statement of Additional Information,
if applicable, for the Fund and the Statement of Additional Information for the
Contracts printed together in one document, and to have shareholder reports for
the Contracts and the Fund printed together in one document. Alternatively, the
Company may print the Fund's shareholder reports, prospectus and/or its
Statement of Additional Information in combination with other fund companies'
shareholder reports, prospectuses and Statements of Additional Information. All
expenses of printing and distributing Fund prospectuses, Statements of
Additional Information and reports to shareholders shall be the expense of the
Company except as provided below. For prospectuses, Statements of Additional
Information and reports to shareholders provided by the Company to its existing
owners of Contracts (in order to update disclosure as required by the 1933 Act
and/or the 1940 Act) who, at the time such materials are distributed have
selected Fund Portfolios as underlying investment options, the cost of printing
shall be borne by the Fund. If the Company chooses to receive camera-ready copy
or computer diskettes in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of A and B where A is the number of such prospectuses distributed to
owners of the Contracts who, at the time such materials are distributed have
selected Fund Portfolios as underlying investment options, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information and reports to shareholders.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts who, at the time such materials are distributed, have selected
Fund Portfolios as underlying investment options.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund or the Company.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements in such quantity as the Company shall reasonably require
for distributing to Contract Owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners:
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
-6-
<PAGE>
so long as and to the extent that the Commission continues to interpret the
1940 Act to require pass-through voting privileges for variable contract owners.
The Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) to the
extent applicable. Further, the Fund will act in accordance with the
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
3.6 The Company will vote the shares of the Fund held by the Company
in the Separate Account in accordance with written instructions received from
certificate or policy owners. The Company will vote shares for which it has not
received instructions, as well as shares attributable to the Company, in the
same proportion as it votes shares for which it has received instructions.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within seven
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
designee of the Fund.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within seven Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or
-7-
<PAGE>
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund for any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
---
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund,
(Currently, no such payments are contemplated.)
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy
-8-
<PAGE>
materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders , the preparation of
all statements and notices required by any federal or state law, and all taxes
on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board of Trustees of the Fund will monitor the Fund for the
existence of any material irreconcilable conflict between the interests of the
contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting instructions
are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that the Company has caused or created a material
irreconcilable conflict, the Company shall at its expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
trustees), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1), withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
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<PAGE>
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
---
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within Six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules
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<PAGE>
promulgated thereunder with respect to mixed or shared funding (as defined in
the Mixed and Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
----------------
8.1. The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and their respective officers, directors, employees, agents,
affiliates and each person, if any, who controls the Fund and the Underwriter
within the meaning of the Securities Act of 1933 (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any Losses to which the
Indemnified Parties may become subject, insofar as such losses result from a
breach by the Company of this Agreement. The Company will reimburse any legal
or other expenses reasonably incurred by the Indemnified Parties in connection
with investigating or defending any such Losses. The Company shall not be liable
for indemnification hereunder if such Losses are attributable to the negligence
or misconduct of the Fund or the Underwriter in performing their obligations
under this Agreement.
8.2. Promptly after receipt by an Indemnified Party hereunder of
notice of the commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the Indemnifying Party hereunder, notify
the Indemnifying Party of the commencement thereof; but the omission so to
notify the Indemnifying Party will not relieve it from any liability which it
may have to any Indemnified Party otherwise than under this Section 8. In case
any such action is brought against any Indemnified Party, and it notifies the
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such Indemnified Party, and
after notice from the Indemnifying Party to such Indemnified Party of its
election to assume the defense thereof, the Indemnifying Party will not be
liable to such Indemnified Party under this Section 8 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than the reasonable costs of investigation.
8.3. If the Indemnifying Party assumes the defense of any such action,
the Indemnifying Party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgement in respect thereof, unless in connection with such settlement,
compromise or consent, each Indemnified Party receives from such claimant an
unconditional release from all liability in respect of such claim.
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<PAGE>
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933
Act, the 1934 Act, and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the Securities and Exchange Commission may grant (including, but not limited
to, the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by 6 months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
10.2. Effect of Termination. Notwithstanding any termination of the
---------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the
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<PAGE>
Fund and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that continuation of
availability to existing contracts shall not apply if proscribed by law or the
SEC or other regulatory body.
ARTICLE XI. Notices
--------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
CIGNA Variable Products Group
900 Cottage Grove Road
Hartford, Ct. 06152-2210
ATTENTION: Alfred A. Bingham, III S-210
If to the Company:
CIGNA Life Insurance Company
Financial Institutions, S-250
Hartford, CT 06152-2250
If to the Underwriter:
CIGNA Financial Services, Inc.
One Commercial Plaza
280 Trumbull Street
Hartford, CT 06103
ARTICLE XII. Miscellaneous
-------------
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regularly
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
the Agreement, shall not disclose, disseminate or utilize such names and
addressed and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
-13-
<PAGE>
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. This Agreement supersedes a Participation Agreement dated as of
February 27, 1996 between the Fund, the Company, and CIGNA Financial Advisors,
Inc., which is hereby terminated.
12.10. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (if one is prepared
under generally accepted accounting principles ("GAAP"), as
soon as practical and in any event within 120 days after the
end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP if
any), as soon as practical and in any event within 60 days
after the end of each quarterly period:
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<PAGE>
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
(f) such reports, materials, or data as the Fund may reasonably
request so that the Fund may fully carry out the obligations
imposed on the Fund by the Fund's Mixed and Shared Funding
Exemptive Order, and such reports, materials, and data shall
be submitted more frequently if deemed appropriate by the
Fund.
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<PAGE>
IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: /s/ Karen Goldman
-----------------------------------------
Name: Karen Goldman
-----------------------------------------
Title: AVP
-----------------------------------------
CIGNA VARIABLE PRODUCTS GROUP
By: /s/ Jeffrey S. Winer
-----------------------------------------
Name: Jeffrey S. Winer
-----------------------------------------
Title: Vice President and Secretary
-----------------------------------------
CIGNA FINANCIAL SERVICES, INC.
By: /s/ Will Bashan
-----------------------------------------
Name: Will Bashan
-----------------------------------------
Title: Senior Vice President
-----------------------------------------
Accepted and Agreed to as to Paragraph 12.9.
CIGNA FINANCIAL ADVISORS, INC.
By: /s/ Karen Goldman
-----------------------------------------
Name: Karen Goldman
-----------------------------------------
Title: AVP
-----------------------------------------
-16-
<PAGE>
Schedule A
----------
The following is a list of separate accounts and contract forms for which one or
more portfolios of CIGNA Variable Products Group are to be made available by
Connecticut General Life Insurance Company:
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account
- ------------------------ --------------------------
<S> <C>
CG Variable Life Insurance XX605481 - Group Flexible Premium Variable
Separate Account A Life Insurance Policy, - Nonpar
established May 22, 1995
CG Variable Life Insurance LN605, LN615 and state variations thereof
Separate Account II,
established July 6, 1994
CG Corporate Insurance LN620, together with riders, and state
Variable Life Insurance variation thereof
Account 02, established
February 23, 1996
CG Variable Life Insurance LN601, together with riders, and state
Separate Account FE, variation thereof
established March 21, 1997
CG Variable Annuity Separate AN425, AN426, together with riders, and
Account II, established state variation thereof
January 25, 1994
CG Variable Annuity Account I
established March 12, 1968
CG Variable Annuity Account II
established March 12, 1968
</TABLE>
-17-
<PAGE>
Exhibit (9f)
PARTICIPATION AGREEMENT
-----------------------
Among
CIGNA VARIABLE PRODUCTS GROUP,
-----------------------------
CIGNA FINANCIAL SERVICES, INC.
------------------------------
and
CIGNA LIFE INSURANCE COMPANY
----------------------------
THIS AGREEMENT, made and entered into as of the 1st day of December,
1997 by and among CIGNA LIFE INSURANCE COMPANY (hereinafter the "Company"), a
Connecticut corporation, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and CIGNA VARIABLE PRODUCTS GROUP, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
CIGNA Financial Services, Inc. (hereinafter the "Underwriter"), a Connecticut
corporation.
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and is
available to act as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts (collectively,
the "Variable Insurance Products") to be offered by insurance companies which
have entered into participation agreements with the Fund and the Underwriter
(hereinafter "Participating Insurance Companies") and the Fund's shares are
registered under the Securities Act of 1933 ("1933 Act");
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio");
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated December 29, 1995 (File No.812-9698), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-2(b)
-1-
<PAGE>
(15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Mixed and Shared Funding Exemptive Order");
WHEREAS, CIGNA Investments, Inc. (the "Adviser") is duly registered as
an investment adviser under the 1940 Act and any applicable state securities
law;
WHEREAS, the Company has registered or will register certain variable
insurance products under the 1933 Act;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable insurance products ;
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act;
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC" or "Commission") under the Securities
Exchange Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable insurance products
and the Underwriter is authorized to sell such shares to each Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
----------------------------------
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1. the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Commission and the
-2-
<PAGE>
Fund shall use reasonable efforts to calculate such net asset value on each day
on which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts
and to qualified pension and retirement plans. No shares of any Portfolio will
be sold to the general pubic.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. Payment shall be in
federal funds transmitted by wire.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1. hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
-3-
<PAGE>
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis by 6:30 p.m. Hartford,
Connecticut time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act or are exempt from registration; that the
Contracts will be issued and sold in compliance in all material respects with
all applicable Federal and State laws and that the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts, unless
any Account is exempt from such registration.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with all applicable federal and state securities
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as life insurance contracts (including endowment contracts) or annuity insurance
contracts under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
-4-
<PAGE>
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with applicable laws
and the Fund and the Underwriter represent that their respective operations are
and shall at all times remain in material compliance with applicable laws to
the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Connecticut and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Adviser represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Connecticut and any applicable state and federal securities laws.
2.10. The Fund and Underwriter each severally represent and warrant
that all of its directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-1 under the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities under
its control dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage for the benefit of the Fund, and
that said bond is issued by a reputable bonding company, includes coverage for
larceny and embezzlement, and is in an amount not less than $5 million. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Shareholders Reports and Proxy Statements; Voting
---------------------------------------------------------------
3.1. The Fund shall provide the Company with as many printed copies
of the Fund's current prospectus, Statement of Additional Information and
reports to shareholders as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund
-5-
<PAGE>
shall provide camera-ready copy or computer diskettes containing the Fund's
reports to shareholders, prospectus, and Statement of Additional Information,
and such other assistance as is reasonably necessary in order for the Company
once each year (or more frequently if the prospectus and/or Statement of
Additional Information for the Fund is amended or supplemented during the year)
to have the prospectus for the Contracts and the Fund's prospectus printed
together in one document, and to have the Statement of Additional Information,
if applicable, for the Fund and the Statement of Additional Information for the
Contracts printed together in one document, and to have shareholder reports for
the Contracts and the Fund printed together in one document. Alternatively, the
Company may print the Fund's shareholder reports, prospectus and/or its
Statement of Additional Information in combination with other fund companies'
shareholder reports, prospectuses and Statements of Additional Information. All
expenses of printing and distributing Fund prospectuses, Statements of
Additional Information and reports to shareholders shall be the expense of the
Company except as provided below. For prospectuses, Statements of Additional
Information and reports to shareholders provided by the Company to its existing
owners of Contracts (in order to update disclosure as required by the 1933 Act
and/or the 1940 Act) who, at the time such materials are distributed have
selected Fund Portfolios as underlying investment options, the cost of printing
shall be borne by the Fund. If the Company chooses to receive camera-ready copy
or computer diskettes in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of A and B where A is the number of such prospectuses distributed to
owners of the Contracts who, at the time such materials are distributed have
selected Fund Portfolios as underlying investment options, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information and reports to shareholders.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts who, at the time such materials are distributed, have selected
Fund Portfolios as underlying investment options.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund or the Company.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements in such quantity as the Company shall reasonably require
for distributing to Contract Owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners:
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
-6-
<PAGE>
so long as and to the extent that the Commission continues to interpret the
1940 Act to require pass-through voting privileges for variable contract owners.
The Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) to the
extent applicable. Further, the Fund will act in accordance with the
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
3.6 The Company will vote the shares of the Fund held by the Company
in the Separate Account in accordance with written instructions received from
certificate or policy owners. The Company will vote shares for which it has not
received instructions, as well as shares attributable to the Company, in the
same proportion as it votes shares for which it has received instructions.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within seven
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
designee of the Fund.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within seven Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or
-7-
<PAGE>
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund for any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
---
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund,
(Currently, no such payments are contemplated.)
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy
-8-
<PAGE>
materials and reports to shareholders, the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance or
transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board of Trustees of the Fund will monitor the Fund for the
existence of any material irreconcilable conflict between the interests of the
contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting instructions
are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that the Company has caused or created a material
irreconcilable conflict, the Company shall at its expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
trustees), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1), withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
-9-
<PAGE>
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
---
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within Six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules
-10-
<PAGE>
promulgated thereunder with respect to mixed or shared funding (as defined in
the Mixed and Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
----------------
8.1. The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and their respective officers, directors, employees, agents,
affiliates and each person, if any, who controls the Fund and the Underwriter
within the meaning of the Securities Act of 1933 (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any Losses to which the
Indemnified Parties may become subject, insofar as such losses result from a
breach by the Company of this Agreement. The Company will reimburse any legal
or other expenses reasonably incurred by the Indemnified Parties in connection
with investigating or defending any such Losses. The Company shall not be liable
for indemnification hereunder if such Losses are attributable to the negligence
or misconduct of the Fund or the Underwriter in performing their obligations
under this Agreement.
8.2. Promptly after receipt by an Indemnified Party hereunder of
notice of the commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the Indemnifying Party hereunder, notify
the Indemnifying Party of the commencement thereof; but the omission so to
notify the Indemnifying Party will not relieve it from any liability which it
may have to any Indemnified Party otherwise than under this Section 8. In case
any such action is brought against any Indemnified Party, and it notifies the
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such Indemnified Party, and
after notice from the Indemnifying Party to such Indemnified Party of its
election to assume the defense thereof, the Indemnifying Party will not be
liable to such Indemnified Party under this Section 8 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than the reasonable costs of investigation.
8.3. If the Indemnifying Party assumes the defense of any such
action, the Indemnifying Party shall not, without the prior written consent of
the indemnified parties in such action, settle or compromise the liability of
the indemnified parties in such action, or permit a default or consent to the
entry of any judgement in respect thereof, unless in connection with such
settlement, compromise or consent, each Indemnified Party receives from such
claimant an unconditional release from all liability in respect of such claim.
-11-
<PAGE>
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933
Act, the 1934 Act, and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the Securities and Exchange Commission may grant (including, but not limited
to, the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by 6 months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
10.2. Effect of Termination. Notwithstanding any termination of the
---------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the
-12-
<PAGE>
Fund, redeem investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts. The parties agree
that continuation of availability to existing contracts shall not apply if
proscribed by law or the SEC or other regulatory body.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
CIGNA Variable Products Group
900 Cottage Grove Road
Hartford, Ct. 06152-2210
ATTENTION: Alfred A. Bingham, III S-210
If to the Company:
CIGNA Life Insurance Company
Financial Institutions, S-250
Hartford, CT 06152-2250
If to the Underwriter:
CIGNA Financial Services, Inc.
One Commercial Plaza
280 Trumbull Street
Hartford, CT 06103
ARTICLE XII. Miscellaneous
-------------
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regularly
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
the Agreement, shall not disclose, disseminate or utilize such names and
addressed and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
-13-
<PAGE>
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. This Agreement supersedes a Participation Agreement dated as of
April 15, 1997 between the Fund, the Company, and CIGNA Financial Advisors,
Inc., which is hereby terminated.
12.10. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (if one is prepared
under generally accepted accounting principles ("GAAP"), as
soon as practical and in any event within 120 days after the
end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP if
any), as soon as practical and in any event within 60 days
after the end of each quarterly period:
-14-
<PAGE>
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
(f) such reports, materials, or data as the Fund may reasonably
request so that the Fund may fully carry out the obligations
imposed on the Fund by the Fund's Mixed and Shared Funding
Exemptive Order, and such reports, materials, and data shall
be submitted more frequently if deemed appropriate by the
Fund.
-15-
<PAGE>
IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
CIGNA LIFE INSURANCE COMPANY
By: /s/ Karen Goldman
-------------------------------------
Name: Karen Goldman
-------------------------------------
Title: AVP
-------------------------------------
CIGNA VARIABLE PRODUCTS GROUP
By: /s/ Jeffrey S. Winer
-------------------------------------
Name: Jeffrey S. Winer
-------------------------------------
Title: Vice President and Secretary
-------------------------------------
CIGNA FINANCIAL SERVICES, INC.
By: /s/ Will Bashan
-------------------------------------
Name: Will Bashan
-------------------------------------
Title: Senior Vice President
-------------------------------------
Accepted and Agreed to as to Paragraph 12.9.
CIGNA FINANCIAL ADVISORS, INC.
By: /s/ Karen Goldman
-------------------------------------
Name: Karen Goldman
-------------------------------------
Title: AVP
-------------------------------------
-16-
<PAGE>
Schedule A
----------
The following is a list of separate accounts and contract forms for which one or
more portfolios of CIGNA Variable Products Group are to be made available by
CIGNA Life Insurance Company:
Name of Separate Account Policy Form Numbers of Contracts
- ------------------------
Funded By Separate Account
-------------------
CIGNA Variable Annuity Forms: AN425, together with
Separate Account I, established riders, and state variations
October 11, 1994 thereof
-17-
<PAGE>
Exhibit (10)
April 27, 1998
CIGNA Variable Products Group
950 Winter Street
Waltham, Massachusetts 02154
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 16 to the Registration
Statement of CIGNA Funds Group (the "Trust") on Form N-1A (Registration No. 33-
20333) filed with the Securities and Exchange Commission with respect to the
Money Market Fund and the 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 April 10, 1997 filed as an Exhibit to
Post-Effective Amendment No. 15 to such Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 16 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated February 20, 1998, relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Reports to Shareholders of the CIGNA Variable Products S&P 500 Index Fund and
the CIGNA Variable Products Money Market Fund, each a separate series of the
CIGNA Variable Products Group, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and on the cover page of, and
under the heading "Investment Advisory and Other Services" in, the Statement of
Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
April 27, 1998
<PAGE>
EXHIBIT 24
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 24th day of February, 1998.
/s/ R. Bruce Albro
------------------------------------
R. Bruce Albro,
Chairman of the Board, President and
Trustee
/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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE PERIOD ENDED DECEMBER 31, 1997 AND ITS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 71,050
<INVESTMENTS-AT-VALUE> 116,146
<RECEIVABLES> 893
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 103
<TOTAL-ASSETS> 117,205
<PAYABLE-FOR-SECURITIES> 691
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206
<TOTAL-LIABILITIES> 897
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,816
<SHARES-COMMON-STOCK> 7,349
<SHARES-COMMON-PRIOR> 5,769
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 66
<ACCUMULATED-NET-GAINS> 612
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,946
<NET-ASSETS> 116,308
<DIVIDEND-INCOME> 1,439
<INTEREST-INCOME> 516
<OTHER-INCOME> 0
<EXPENSES-NET> 224
<NET-INVESTMENT-INCOME> 1,731
<REALIZED-GAINS-CURRENT> 3,787
<APPREC-INCREASE-CURRENT> 20,084
<NET-CHANGE-FROM-OPS> 25,602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,245
<DISTRIBUTIONS-OF-GAINS> 2,517
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,928
<NUMBER-OF-SHARES-REDEEMED> 660
<SHARES-REINVESTED> 311
<NET-CHANGE-IN-ASSETS> 44,795
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (146)
<OVERDISTRIB-NII-PRIOR> 63
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 224
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 495
<AVERAGE-NET-ASSETS> 89,774
<PER-SHARE-NAV-BEGIN> 12.40
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 3.86
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.36
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.23
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> CIGNA VARIABLE PRODUCTS MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 14,499
<INVESTMENTS-AT-VALUE> 14,499
<RECEIVABLES> 66
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 14,567
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27
<TOTAL-LIABILITIES> 27
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,540
<SHARES-COMMON-STOCK> 14,540
<SHARES-COMMON-PRIOR> 6,003
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 14,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 541
<OTHER-INCOME> 0
<EXPENSES-NET> 48
<NET-INVESTMENT-INCOME> 493
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 493
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 493
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,203
<NUMBER-OF-SHARES-REDEEMED> 30,160
<SHARES-REINVESTED> 494
<NET-CHANGE-IN-ASSETS> 8,537
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107
<AVERAGE-NET-ASSETS> 9,721
<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> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
