<PAGE>
- --------------------------------------------------------------------------------
1
DEAR SHAREHOLDER:
We are pleased to provide this report for CIGNA High Income Shares, covering
the quarter ended March 31, 1996.
STRONG TECHNICALS DRIVE OUTSTANDING PERFORMANCE
Despite rising interest rates, high yield bonds produced positive returns
during the first quarter of 1996, substantially outperforming the negative
total returns experienced by other sectors of the bond market. This favorable
relative and absolute performance was driven by strong technical market
conditions in January and February. Demand for high yield bonds surged as
mutual funds, pension plans and insurance companies invested substantial new
cash inflows.
The volume of new issues, typically limited early in the year, failed to keep
pace with demand. This led to limited allocations on many new issues. In
addition, bonds were bid up aggressively in the after market.
The quarter saw investors rewarded for taking credit risk as CCC rated bonds
outperformed B's, and B's outperformed BB's.
FUND PERFORMANCE
CIGNA High Income Shares displayed excellent performance over the first quarter
of 1996. The Fund exceeded its benchmark by 176 basis points, earning 3.53%,
versus a 1.77% return for the Lehman Brothers High Yield Index. On a 12-month
basis, CIGNA High Income Shares returned 19.00%, versus 14.46% for the Lehman
Index.
Taking advantage of market conditions, we actively traded the new issue
calendar. As the market became more volatile in March we adjusted to the shift
in sentiment by harvesting profits in holdings trading at low yields relative
to the market. In addition, we traded out of lower coupon and longer duration
issues, thus dampening the portfolio's fluctuations.
FUND ACTIVITY
We have been steadily building the portfolio's holdings in the media sector,
which (broadly defined) comprises cable TV, broadcasting, telecommunications,
paging and print media companies. Many of the companies in these dynamic
industries possess exciting growth characteristics and high total return
potential.
Overall, the portfolio continues to be well-diversified and currently is
invested in 76 companies. As of March 31, top industry holdings consisted of
Food and Beverages (13.9%), Containers and Paper (10.8%), Telecommunications
(9.6%), Industrial (9.5%) and Cable TV (8.1%). Average maturity was 8.1 years
and average credit quality was B.
Borrowing under the Fund's line of credit was maintained below 33% of assets
during this reporting period. On March 31, borrowings were at approximately 26%
of assets.
OUTLOOK
We expect near-term market volatility. The spring months are usually a period
when new issue volume expands and catches up with demand. However, with new
issues likely to be priced at a concession to secondary market levels, this may
cause the market to decline. Also, financial market participants appear to lack
conviction about the direction of the economy and interest rates which may
cause market fluctuations. Moreover, while the High Yield market outperformed
the rest of the bond market by a wide margin in the first quarter, some
observers now view the market as overvalued. Consequently, it may be overdue
for a reaction to the first quarter rise in interest rates.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro, Chairman
CIGNA High Income Shares
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES March 31, 1996 (Unaudited) 2
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES - 124.7%
AUTO AND TRUCK - 5.2%
Aftermarket Technology Corp., 12%, 2004 $5,000 $ 5,388
A.P.S., Inc., 11.875%, 2006 3,500 3,570
Foamex L.P., 11.25%, 2002 5,000 4,875
--------
13,833
--------
BROADCASTING & MEDIA - 7.9%
Adams Outdoor Advertising Limited Partnership, 10.75%, 2003
(144A security acquired March 1996 for $1,500,000)** 1,500 1,500
Allbritton Communications, Inc., 9.75%, 2007 (144A security
acquired Feb. 1996 for $1,990,000)** 2,000 1,885
American Media Operations, Inc., 11.625%, 2004 5,500 5,583
Garden State Newspapers, Inc., 12%, 2004 6,000 6,180
Lamar Advertising Co., 11%, 2003 3,395 3,582
Sullivan Broadcasting, Inc., 10.25%, 2005 2,000 1,965
--------
20,695
--------
CABLE TV - 8.1%
CAI Wireless Systems, Inc., 12.25%, 2002 5,750 6,095
Marcus Cable Co., L.P., 11.875%, 2005 5,500 5,858
Rifkin Acquisition Partners, L.L.L.P., 11.125%, 2006 (144A
security acquired Jan & Feb. 1996 for $4,070,000)** 4,000 4,060
Wireless One, Inc., 13%, 2003 5,000 5,400
--------
21,413
--------
CHEMICALS - 6.3%
Harris Chemical North America, Inc., 10.75%, 2003 4,500 4,331
LaRoche Industries, Inc., 13%, 2004 5,000 5,350
Polymer Group, Inc., 12.25%, 2002 6,500 6,890
--------
16,571
--------
CONSUMER PRODUCTS & SERVICES - 7.6%
AMF Group, Inc., 10.875%, 2006 (144A security acquired
March 1996 for $4,005,000)** 4,000 3,980
Hines Horticulture, Inc., 11.75%, 2005 5,000 5,225
Icon Health & Fitness, Inc., 13%, 2002 5,000 5,575
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
TAG Heuer International SA, 12%, 2005 (144A security
acquired Dec. 1995 for $5,006,250)** $5,000 $ 5,125
--------
19,905
--------
CONTAINERS AND PAPER - 10.8%
Applied Extrusions Technologies, Inc., 11.5%, 2002 3,462 3,583
Calmar, Inc., 11.5%, 2005 5,000 5,000
Crown Paper Co. 11%, 2005 4,500 4,162
Silgan Corp., 11.75%, 2002 5,000 5,325
Riverwood International Corp., 10.875%, 2008 5,000 4,988
Tjiwi Kimia International Finance Co., 13.25%, 2001 5,000 5,500
--------
28,558
--------
ELECTRONICS AND ELECTRICAL EQUIPMENT - 5.9%
Dictaphone Corp., 11.75%, 2005 5,000 5,000
International Wire Group, Inc., 11.75%, 2005 5,500 5,376
Telex Communications, Inc., 12%, 2004 4,750 5,023
--------
15,399
--------
ENERGY - 4.7%
Energy Ventures, Inc., 10.25%, 2004 3,250 3,408
KCS Energy, Inc., 11%, 2003 (144A security acquired Jan.
1996 for $4,066,250)** 4,000 4,100
Trans Texas Gas Corp., 11.5%, 2002 5,000 4,925
--------
12,433
--------
ENTERTAINMENT - 4.0%
Bally's Grand, Inc., 10.375%, 2003 5,000 5,087
GNF Corp., 10.625%, 2003 5,500 5,486
--------
10,573
--------
ENVIRONMENTAL - 0.8%
Mid-American Waste Systems, Inc., 12.25%, 2003+ 3,000 2,175
--------
FINANCIAL - 6.2%
Affinity Group, Inc., 11.5%, 2003 5,000 5,125
American Life Holding Co., 11.25%, 2004 5,500 5,775
Olympic Financial Ltd., 13%, 2000 5,000 5,425
--------
16,325
--------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES March 31, 1996 (Unaudited) 3
(Continued)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
FOOD AND BEVERAGES - 13.9%
Americold Corp., 11.5%, 2005 $1,750 $ 1,803
Brunos, Inc., 10.5%, 2005 5,000 4,800
Curtice Burns Foods, Inc., 12.25%, 2005 5,000 4,900
Pathmark Stores, Inc.,
11.625%, 2002 3,750 3,656
12.625%, 2002 2,800 2,800
Ralphs Grocery Co., 10.45%, 2004 5,000 4,775
Specialty Foods Corp., 11.25%, 2003 5,000 4,050
Star Markets Co., Inc., 13%, 2004 4,000 4,120
Van de Kamps, Inc., 12%, 2005 5,250 5,617
--------
36,521
--------
HEALTH CARE - 6.0%
Dade International Inc., 13%, 2005 5,000 5,600
General Medical Corp., 10.875%, 2003 4,000 4,060
Thrifty Payless, Inc., 12.25%, 2004 5,500 6,105
--------
15,765
--------
INDUSTRIAL - 9.5%
Alvey Systems, Inc., 11.375%, 2003 1,000 1,040
Cabot Safety Acquisition Corp., 12.5%, 2005 4,000 4,420
Crain Industries, Inc., 13.5%, 2005 5,500 5,624
Interlake Corp., 12.125%, 2002 5,025 4,686
K & F Industries, Inc., 13.75%, 2001 5,143 5,349
RBX Corp., 11.25%, 2005 (144A security acquired Oct. 1995
for $4,025,000)** 4,000 3,900
--------
25,019
--------
METALS - 4.8%
GS Technologies Operating Co., Inc., 12%, 2004 3,150 3,166
Jorgensen (Earle M.) Co., 10.75%, 2000 3,750 3,684
Kaiser Aluminum & Chemical Corp., 12.75%, 2003 5,500 5,830
--------
12,680
--------
MISCELLANEOUS - 5.2%
Primeco, Inc., 12.75%, 2005 5,000 5,250
Sullivan Graphics, Inc., 12.75%, 2005 5,000 5,025
United Stationers Supply Co., 12.75%, 2005 3,000 3,379
--------
13,654
--------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
TEXTILES - 6.1%
CMI Industries, Inc., 9.5%, 2003 $3,935 $ 3,109
Dan River, Inc., 10.125%, 2003 5,250 4,988
Synthetic Industries, Inc., 12.75%, 2002 4,500 4,725
Tultex Corp., 10.625%, 2005 3,000 3,112
--------
15,934
--------
TELECOMMUNICATIONS - 9.6%
Comnet Cellular, Inc., 11.25%, 2005 5,000 5,300
Fonorola, Inc., 12.5%, 2002 4,450 4,851
Galaxy Telecom, Inc., 12.375%, 2005 5,000 5,275
IXC Communications Inc., 13%***, 2005 (144A security
acquired Sep. 1995 for $5,655,315)** 5,750 5,922
Pronet, Inc., 11.875%, 2005 3,500 3,780
--------
25,128
--------
TRANSPORTATION - 2.1%
Sea Containers Ltd.,
Series A, 12.5%, 2004 3,500 3,815
Series B, 12.5%, 2004 1,500 1,590
--------
5,405
--------
TOTAL BONDS AND NOTES (Cost - $320,452,413) 327,986
--------
UNITS - 5.4%
Berry Plastics Corp., 12.25%, 2004 (each $1,000 unit
includes one warrant for Class A Common Stock) 5,500 5,940
Exide Electronics Group, Inc., 11.5%, 2006 (each $1,000
unit includes one warrant for Common Stock) 4,000 4,040
ICF Kaiser International, Inc., 12%, 2003 (each $1,000 unit
includes 4.8 warrants for Common Stock) 4,500 4,275
--------
TOTAL UNITS (Cost - $13,809,845) 14,255
--------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
COMMON STOCK - 0.1%
(Cost - $266,665)
Thrifty Payless Holdings, Inc., Class C* 47,500 237
--------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES March 31, 1996 (Unaudited)
(Continued) 4
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF SHARES (000)
- ----------------------------------------------------------------------
<S> <C> <C>
WARRANTS - 0.1%
BPC Holdings Corp., Exp. 2004* 5,500 $ 82
IHF Capital, Inc., Class A & L* 5,000 125
Payless Cashways, Inc., Exp. 1996* 3,000 1
Wireless One, Inc., Exp. 2000* 15,000 120
--------
TOTAL WARRANTS (Cost - $326,027) 328
--------
TOTAL INVESTMENTS IN SECURITIES - 130.3%
(Total Cost - $334,854,950) 342,806
Liabilities, Less Cash and Other Assets - (30.3%) (79,718)
--------
NET ASSETS - 100% (equivalent to $7.24 per share based on
36,341,703 shares outstanding) $263,088
========
</TABLE>
* Non-income producing securities.
** Indicates restricted security; the aggregate fair value of restricted
securities is $30,472,500 (aggregate cost $30,317,875) which is
approximately 12% of net assets. Valuations have been furnished by brokers
trading in the securities or a pricing service for all restricted
securities.
*** Variable rate security. Rate disclosed is as of March 31, 1996
+ Defaulted security.
- -----------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
March 31, 1996
<TABLE>
<CAPTION>
MARKET % OF
QUALITY RATINGS* VALUE MARKET
OF LONG TERM BONDS (000) VALUE
- ------------------------------------------------------
<S> <C> <C>
Ba/BB $ 44,123 12.9%
B/B 280,338 81.9%
Below B 17,780 5.2%
-------- -----
$342,241 100.0%
======== =====
</TABLE>
* The higher of Moody's or Standard & Poor's Ratings.
- ------------------------------------------------------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES 5
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
ASSETS:
Investments at market value
(Cost - $334,854,950) $342,806
Cash on deposit with custodian 13
Receivable for investments sold 5,853
Interest receivable 10,374
Investment for deferred compensation plan
(Cost - $64,530) 79
Other 8
--------
TOTAL ASSETS 359,133
--------
LIABILITIES:
Loan payable 92,800
Dividend payable April 10, 1996 at $.0675 per share 2,453
Accrued interest payable 389
Accrued advisory fees payable 188
Accrued trustees' fees payable 79
Other accrued expenses (including $31,745 due to affiliate) 136
--------
TOTAL LIABILITIES 96,045
--------
NET ASSETS (Equivalent to $7.24 per share based on 36,341,703
shares of beneficial interest outstanding; unlimited number of
shares authorized) $263,088
========
COMPONENTS OF NET ASSETS:
Paid in capital $315,898
Undistributed net investment income 861
Unrealized appreciation of investments 7,965
Accumulated net realized loss (61,636)
--------
NET ASSETS $263,088
========
</TABLE>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C> <C>
INVESTMENT INCOME
INCOME:
Interest $ 9,964
EXPENSES:
Interest expense $1,522
Investment advisory fee 569
Administrative services 30
Shareholder reports 26
Custodian fees and expenses 25
Trustees' fees 18
Transfer agent fees and expenses 14
Auditing and legal fees 6
Other 12 2,222
------ -------
NET INVESTMENT INCOME 7,742
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from securities transactions 4,609
Unrealized depreciation on investments (3,166)
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,443
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,185
=======
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES 6
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1996 1995
-------------- ------------
(IN THOUSANDS)
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,742 $ 30,224
Net realized gain from investments 4,609 1,507
Unrealized appreciation (depreciation) on invest-
ments (3,166) 19,516
-------- --------
Net increase in net assets from operations 9,185 51,247
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($.2025 per share and
$.84 per share, respectively) (7,348) (30,104)
-------- --------
Total distributions to shareholders (7,348) (30,104)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Net increase from 193,644 and 723,005 capital
shares issued to shareholders in reinvestment of
distributions, respectively 1,478 5,176
-------- --------
Net increase from capital share transactions 1,478 5,176
-------- --------
Net increase in net assets 3,315 26,319
NET ASSETS:
Beginning of period 259,773 233,454
-------- --------
End of period (Including undistributed net invest-
ment income of $860,740 and $466,865, respective-
ly) $263,088 $259,773
======== ========
</TABLE>
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
CASH FLOWS FROM INVESTING AND OPERATING ACTIVITIES:
Purchases of portfolio securities $(60,456)
Proceeds from sales of portfolio securities 59,275
Investment income received 8,952
Investment and administrative expenses paid (591)
Interest paid (1,437)
--------
Cash flows provided by investing and operating activities 5,743
--------
CASH FLOWS FROM SHAREHOLDER AND OTHER FINANCING ACTIVITIES:
Distributions to shareholders (net of reinvestment of
$1,478,107) (6,941)
Net borrowings 1,200
--------
Cash flows used by shareholder and other financing activities (5,741)
--------
Net Increase in Cash 2
Cash, beginning of period 11
--------
Cash, end of period $ 13
========
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET INCREASE IN CASH PROVIDED BY INVESTING AND
OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 9,185
Decrease in value of investments 2,201
Change in receivables and liabilities exclusive of loan and
dividend payable (5,643)
--------
Net Cash Provided by Investing and Operating Activities $ 5,743
========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES NOTES TO FINANCIAL STATEMENTS (Unaudited) 7
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA High Income Shares (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a diversi-
fied, closed-end management investment company. The Fund's primary objective
is to provide the highest current income attainable consistent with reasonable
risk as determined by the Fund's investment adviser, through investment in a
professionally managed, diversified portfolio of high yield, high risk fixed-
income securities (commonly referred to as "junk bonds"). As a secondary ob-
jective, the Fund seeks capital appreciation, but only when consistent with
its primary objective. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the finan-cial statements. Actual results could differ from those estimates. The
follow-ing is a summary of significant accounting policies consistently followed
by the Fund in the preparation of financial statements.
A. SECURITY VALUATION -- Debt securities traded in the over-the-counter mar-
ket, including listed securities whose primary markets are believed to be
over-the-counter, are valued on the basis of valuations furnished by brokers
trading in the securities or a pricing service, which determines valuations
for normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Short-term investments with remaining maturities of up to and including 60
days are valued at amortized cost, which approximates market. Short-term in-
vestments that mature in more than 60 days are valued at current market quota-
tions. Other securities and assets of the Fund are appraised at fair value as
determined in good faith by, or under the authority of, the Fund's Board of
Trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transac-
tions are accounted for on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the ex-dividend date, and interest
income is recorded on the accrual basis. The Fund does not amortize premiums
or discounts for book purposes, except for original issue discounts which are
amortized over the life of the respective securities. Securities gains and
losses are determined on the basis of identified cost. The cost for Federal
income tax purposes is substantially the same.
C. FEDERAL TAXES -- It is the Fund's policy to continue to comply with the re-
quirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and capital gains to its
shareholders. Therefore, no Federal income or excise taxes on realized income
have been accrued.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The timing and characteriza-
tion of certain income and capital gains distributions are determined in ac-
cordance with federal tax regulations which may differ from generally accepted
accounting principles. To the extent that such differences are permanent, a
reclass to paid in capital may be required.
E. CASH FLOW INFORMATION -- Cash, as used in the Statement of Cash Flows, is
the amount reported in the Statement of Assets and Liabilities. The Fund is-
sues its shares, invests in securities, and distributes dividends from net in-
vestment income (which are either paid in cash or reinvested at the discretion
of shareholders). These activities are reported in the Statement of Changes in
Net Assets. Information on cash payments is presented in the Statement of Cash
Flows. Accounting practices that do not affect reporting activities on a cash
basis include unrealized gain or loss on investment securities and accretion
income recognized on investment securities.
<PAGE>
- -------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) 8
2. BANK LOANS. The Fund has a revolving credit agreement with unrelated third
party lenders which will generally enable the Fund to borrow up to the lesser
of (A) $101,300,000 or (B) one-third of the Fund's Eligible Assets. The agree-
ment matures on May 1, 1998. Prior to maturity, principal is repayable in
whole or in part at the option of the Fund. In connection with the agreement,
the Fund has granted the lenders a first lien on all of its investment securi-
ties and cash, which will be enforceable in an amount of up to one-third of
the aggregate value of the investment securities and cash of the Fund.
Borrowings under this agreement bear interest at a variable rate tied to one
of several short-term rates that the Fund may select from time to time. The
average borrowings outstanding during the three months ended March 31, 1996
were $92,410,990 at an average interest rate of approximately 6.61%. As of
March 31, 1996, the Fund was paying interest at an average annual rate of
6.36% on its outstanding borrowings.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES. Investment
advisory fees were paid or accrued to CIGNA Investments, Inc. (CII), certain
officers and directors of which are affiliated with the Fund. Such advisory
fees are based on an annual rate of 0.75% of the first $200 million of the
Fund's average weekly total asset value and 0.5% thereafter.
The Fund reimburses CII for a portion of the compensation and related expenses
of the Fund's Treasurer and Secretary and certain persons who assist in carry-
ing out the responsibilities of those offices. For the three months ended
March 31, 1996, the Fund paid or accrued $29,804.
4. TRUSTEES' FEES. Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of its affiliates.
Trustees may elect to defer receipt of all or a portion of their fees which
are invested in mutual fund shares in accordance with a deferred compensation
plan.
5. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities (ex-
cluding short-term obligations) for the three months ended March 31, 1996 were
$51,532,900 and $55,172,040, respectively.
As of March 31, 1996, the cost of securities for Federal income tax purposes
was $333,913,152. At March 31, 1996, unrealized appreciation for Federal in-
come tax purposes aggregated $7,950,689 of which $11,932,079 related to ap-
preciated securities and $3,981,390 related to depreciated securities.
6. CAPITAL LOSS CARRYOVER. As of December 31, 1995, the Fund had a capital
loss carryover for Federal income tax purposes of $65,896,716 of which
$30,367,908, $30,071,289, $3,704,377 and $1,753,142 expire in 1998, 1999, 2000
and 2003, respectively. Under current tax law, capital losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following year. For the year ended December 31, 1995, the Fund has elected to
defer $325,347 of capital losses occurring between November 1, 1995 and Decem-
ber 31, 1995 under these rules. Such deferred losses are being treated as
arising on the first day of the year ended December 31, 1996.
<PAGE>
- -------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) 9
7. FINANCIAL HIGHLIGHTS. The following table includes data, ratios and supple-
mental data for a share outstanding throughout each period and other perfor-
mance information:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
3 MOS.
ENDED
MAR. 31, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.19 $ 6.59 $ 7.54 $ 6.99 $ 6.62 $ 4.73
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(1) 0.21 0.84 0.86 0.97 0.98 0.94
Net realized and
unrealized gains
(losses) 0.04 0.60 (0.91) 0.58 0.40 1.91
-------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 0.25 1.44 (0.05) 1.55 1.38 2.85
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.20) (0.84) (0.88) (0.97) (0.98) (0.94)
Distributions in excess
of net investment
income -- -- (0.02) (0.03) (0.03) (0.02)
-------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.20) (0.84) (0.90) (1.00) (1.01) (0.96)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 7.24 $ 7.19 $ 6.59 $ 7.54 $ 6.99 $ 6.62
======== ======== ======== ======== ======== ========
MARKET VALUE, END OF
PERIOD $ 8.00 $ 7.88 $ 7.00 $ 8.38 $ 7.88 $ 7.25
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:
Per share market value 4.29% 26.24% (5.43)% 19.62% 24.36% 111.31%
Per share net asset
value (2) 3.53% 22.93% (0.76)% 23.25% 21.65% 64.13%
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of
period (000 omitted) $263,088 $259,773 $233,454 $195,489 $176,974 $163,173
Ratio of operating
expenses to average net
assets 0.26% 1.12% 1.17% 1.21% 1.20% 1.26%
Ratio of interest
expense to average net
assets 0.58% 2.68% 2.10% 1.66% 1.91% 2.79%
Ratio of net investment
income to average net
assets 2.93% 12.03% 12.33% 12.98% 13.81% 15.49%
Portfolio turnover 15% 60% 72% 48% 45% 35%
</TABLE>
(1) Net investment income per share has been calculated in accordance with SEC
requirements, with the exception that end of year accumulated
undistributed/(overdistributed) net investment income has not been
adjusted to reflect current year permanent differences between financial
and tax accounting.
(2) Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Company
during each year, and assumes distributions were reinvested at net asset
value. These percentages do not correspond with the performance of a
shareholder's investment in the Company based on market value since the
relationship between the market price of the stock and net asset value
varied during each period.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)10
8. QUARTERLY RESULTS (UNAUDITED). The following is a summary of quarterly re-
sults of operations (in thousands except for per share amounts):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED GAIN (LOSS)
PERIOD INVESTMENT INCOME NET INVESTMENT INCOME ON INVESTMENTS NET ASSETS
ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE INCR. (DECR.) PER SHARE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1994 $ 7,437 $.28 $6,046 $.23 $(6,381) $(.25) $(4,533) $(.24)
June 30, 1994 7,366 .28 5,886 .23 (8,952) (.34) (7,825) (.34)
September 30, 1994 9,401 .27 7,444 .20 (3,486) (.07) 58,762 (.09)
December 31, 1994 9,361 .26 7,154 .20 (8,949) (.25) (8,439) (.28)
March 31, 1995 9,853 .28 7,424 .21 8,614 .24 10,141 .25
June 30, 1995 9,807 .28 7,417 .21 6,426 .18 7,902 .18
September 30, 1995 9,871 .27 7,486 .21 2,544 .07 4,046 .08
December 31, 1995 10,232 .28 7,897 .22 3,439 .11 4,230 .09
March 31, 1996 9,964 .27 7,742 .21 1,442 .04 3,315 .05
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES
TRUSTEES OFFICERS
<S> <C> <C>
R. Bruce Albro Paul J. McDonald R. Bruce Albro
Senior Managing Director, Executive Vice President, Finance Chairman of the Board and
CIGNA Investments, Inc. and Chief Financial Officer, President
Friendly Ice Cream Corporation
Hugh R. Beath
Advisory Director, Arthur C. Reeds, III Alfred A. Bingham III
AdMedia Corporate Advisors, Inc. President, CIGNA Investment Vice President and Treasurer
Management and CIGNA
Russell H. Jones Investments, Inc. Lawrence S. Harris
Vice President, Vice President
Kaman Corporation
Alan C. Petersen
Vice President
Jeffrey S. Winer
Vice President and Secretary
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
CIGNA High Income Shares is a closed-end, diversified management investment
company that invests primarily in high yield fixed-income securities. The in-
vestment adviser is CIGNA Investments, Inc., Hartford, Connecticut 06152.
Shareholders may elect to have dividends automatically reinvested in addi-
tional shares of CIGNA High Income Shares by participating in the Automatic
Dividend Investment Plan. For a brochure describing this Plan or general in-
quiries about your account, contact State Street Bank and Trust Company, Stock
Transfer Department, P.O. Box 8200, Boston, Massachusetts, 02266-8200, or call
toll-free 1.800.426.5523.
<PAGE>
[LOGO OF CIGNA APPEARS HERE]
CIGNA High Income Shares
1380 Main Street
Springfield, MA 01103
[LOGO OF CIGNA APPEARS HERE]
CIGNA High Income Shares
First Quarter Report
March 31, 1996
