<PAGE>
- --------------------------------------------------------------------------------
1
DEAR SHAREHOLDER:
We are pleased to provide this report for CIGNA High Income Shares covering the
six months ended June 30, 1996.
HIGH YIELD MARKET PERFORMANCE
The high yield market performed very well relative to high grade bonds through
both the second quarter and first half of 1996. According to the Lehman
Brothers High Yield Index, high yield bonds returned 1.66% and 3.46%,
respectively, for the second quarter and first six months, compared to 1.34%
and -1.21%, respectively, for the rest of the fixed income market.
High yield new issue volume during the first half was $36.3 billion, the
highest for any six month period on record. Despite this heavy supply, new
issues were readily absorbed by the market.
FUND PERFORMANCE
CIGNA High Income Shares continued its excellent performance throughout the
first half of the year. Based on its net asset value, the Fund returned 3.66%
for the second quarter and 7.32% for the first six months, assuming the
reinvestment of dividends. Based on the market value of the Fund's shares
traded over the New York Stock Exchange, the Fund returned 2.67% and 7.08%,
respectively, for the quarter and year to date.
FUND ACTIVITY
We appear to be in a volatile market environment, due to investor uncertainty
and confusion over the direction of the economy and interest rates. To
capitalize on prevailing market conditions--a strong economy coupled with
rising interest rates--we employed a more defensive approach to operating the
Fund. In order to dampen portfolio volatility, we reduced exposure to lower
coupon, long duration issues and increased holdings in higher coupon, short
duration bonds. We focused on the B quality sector to minimize our
vulnerability to the BB sector's greater interest rate sensitivity. Finally, we
emphasized "positive event risk" situations, wherein companies: a) have
announced or are likely to announce IPO's; b) may become involved in merger or
acquisition activity; or c) are experiencing strong cash flow growth and
subsequent deleveraging.
Overall, the Fund continues to be well-diversified with investments in 87
companies. As of June 30, top industry holdings consisted of Containers and
Paper (16.0%), Food and Beverages (14.8%), Broadcasting and Media (13.6%),
Telecommunications (9.9%) and Consumer Products and Services (9.1%). Average
maturity was 8.2 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 June 30, borrowing was at approximately 26% of
assets.
OUTLOOK
We continue to anticipate near-term market volatility. Investors are concerned
that the Federal Reserve Bank will attempt to moderate economic growth by
raising short-term interest rates. While a strong economy bodes well for high
yield bonds, rising interest rates tend to mitigate the positive effects.
We expect the record pace of new high yield bond issuance to persist in the
second half of 1996. As long as technical market conditions remain strong, the
market should be able to handle the supply.
We remain confident that the high yield market can sustain its positive
performance relative to other domestic fixed income markets for the balance of
the year.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro, Chairman
CIGNA High Income Shares
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1996 (Unaudited) 2
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES - 130.7%
AUTO AND TRUCK - 7.8%
Aftermarket Technology Corp., 12%, 2004 $5,000 $ 5,400
A.P.S., Inc., 11.875%, 2006 3,500 3,631
Collins & Aikman Products Co., 11.5%, 2006 3,500 3,544
Foamex L.P., 11.25%, 2002 5,000 5,025
Johnstown American Industries, Inc.,
11.75%, 2005 3,500 3,290
--------
20,890
--------
BROADCASTING & MEDIA - 13.6%
Adams Outdoor Advertising Limited Partnership, 10.75%, 2003
(144A security acquired March 1996 for $1,500,000)** 1,500 1,541
Allbritton Communications, Inc., 9.75%, 2006 2,000 1,830
American Media Operations, Inc., 11.625%, 2004 5,500 5,610
Garden State Newspapers, Inc., 12%, 2004 5,000 5,275
Grupo Televisa, S.A., 11.875%, 2006 (144A security acquired
May 1996 for $5,091,250)** 5,000 5,094
Lamar Advertising Co., 11%, 2003 3,395 3,497
Newsquest Capital plc, 11%, 2006 (144A security acquired
April 1996 for $3,500,625)** 3,500 3,509
Park Broadcasting, Inc., 11.75%, 2004 (144A security
acquired May 1996 for $4,897,050)** 5,000 4,987
Park Newspapers, Inc., 11.875%, 2004 (144A security
acquired May 1996 for $3,038,750)** 3,000 3,030
Sullivan Broadcasting, Inc., 10.25%, 2005 2,000 1,930
--------
36,303
--------
CABLE TV - 7.4%
CAI Wireless Systems, Inc., 12.25%, 2002 4,750 4,964
Marcus Cable Co., L.P., 11.875%, 2005 5,500 5,644
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 2006 4,000 3,910
Wireless One, Inc., 13%, 2003 5,000 5,175
--------
19,693
--------
CHEMICALS - 5.4%
Harris Chemical North America, Inc.,
10.75%, 2003 4,500 4,399
LaRoche Industries, Inc., 13%, 2004 5,000 5,300
Polymer Group, Inc., 12.25%, 2002 4,333 4,680
--------
14,379
--------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS & SERVICES - 9.1%
AMF Group, Inc., 10.875%, 2006 (144A security acquired
March 1996 for $4,005,000)** $4,000 $ 3,940
Hines Horticulture, Inc., 11.75%, 2005 5,000 5,175
Icon Health & Fitness, Inc., 13%, 2002 5,000 5,575
Remington Products Co., L.L.C., 11%, 2006 (144A security
acquired May & June 1996 for $2,982,520)** 3,000 2,962
Simmons Co., 10.75%, 2006 (144A security acquired April
1996 for $1,500,000)** 1,500 1,485
TAG Heuer International SA, 12%, 2005 (144A security
acquired Dec. 1995 and Jan. 1996
for $5,006,250)** 5,000 5,213
--------
24,350
--------
CONTAINERS AND PAPER - 16.0%
Applied Extrusions Technologies, Inc., 11.5%, 2002 3,462 3,497
Berry Plastics Corp., 12.25%, 2004 5,500 5,844
Calmar, Inc., 11.5%, 2005 5,000 4,875
Crown Paper Co. 11%, 2005 5,500 5,239
Four M Corp., 12%, 2006 (144A security acquired May 1996
for $3,025,000)** 3,000 3,060
Packaging Resources, Inc., 11.625%, 2003 (144A security
acquired May 1996, for $4,500,000)** 4,500 4,567
Silgan Corp., 11.75%, 2002 5,000 5,075
Riverwood International Corp., 10.875%, 2008 5,000 4,925
Tjiwi Kimia International Finance Co.,
13.25%, 2001 5,000 5,600
--------
42,682
--------
ELECTRONICS AND ELECTRICAL EQUIPMENT - 5.8%
Dictaphone Corp., 11.75%, 2005 5,000 4,825
International Wire Group, Inc., 11.75%, 2005 5,500 5,459
Telex Communications, Inc., 12%, 2004 4,750 5,088
--------
15,372
--------
ENERGY - 1.3%
Trans Texas Gas Corp., 11.5%, 2002 3,500 3,482
--------
ENTERTAINMENT - 4.3%
Alliance Gaming Corp., 12.875%, 2003 4,750 4,714
American Skiing Co., 12%, 2006 (144A security acquired June
1996, for $5,101,163)** 5,250 5,101
GNF Corp., 10.625%, 2003 1,500 1,631
--------
11,446
--------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1996 (Unaudited) 3
(Continued)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
ENVIRONMENTAL - 0.7%
Mid-American Waste Systems, Inc., 12.25%, 2003+ $3,000 $ 1,800
--------
FINANCIAL - 4.0%
Affinity Group, Inc., 11.5%, 2003 5,000 5,112
Olympic Financial Ltd., 13%, 2000 5,000 5,475
--------
10,587
--------
FOOD AND BEVERAGES - 14.8%
Americold Corp., 12.875%, 2008 5,000 5,100
Brunos, Inc., 10.5%, 2005 3,000 2,959
Curtice Burns Foods, Inc., 12.25%, 2005 5,000 4,800
Pathmark Stores, Inc.,
11.625%, 2002 4,250 4,229
12.625%, 2002 1,300 1,313
Ralphs Grocery Co., 10.45%, 2004 4,000 3,920
Smiths Food and Drug Center, Inc., 11.25%, 2007 3,000 3,022
Specialty Foods Corp., 11.25%, 2003 5,125 4,382
Star Markets Co., Inc., 13%, 2004 4,000 4,160
Van de Kamps, Inc., 12%, 2005 5,250 5,565
--------
39,450
--------
HEALTH CARE - 3.1%
Dade International Inc., 11.125%, 2006 (144A security
acquired April 1996 for $2,250,000)** 2,250 2,329
Owens & Minor, Inc., 10.875%, 2006 3,000 3,041
Unilab Corp., 11%, 2006 3,000 2,820
--------
8,190
--------
INDUSTRIAL - 7.5%
Alvey Systems, Inc., 11.375%, 2003 1,000 1,035
Crain Industries, Inc., 13.5%, 2005 5,500 5,830
IMO Industries, Inc., 11.75%, 2006 (144A security acquired
April 1996, for $3,975,350)** 4,000 4,110
Interlake Corp., 12.125%, 2002 5,025 5,025
RBX Corp., 11.25%, 2005 4,000 3,900
--------
19,900
--------
METALS - 4.6%
GS Technologies Operating Co., Inc., 12%, 2004 3,150 3,221
Jorgensen (Earle M.) Co., 10.75%, 2000 3,250 3,217
Kaiser Aluminum & Chemical Corp., 12.75%, 2003 5,500 5,803
--------
12,241
--------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS - 5.5%
Guitar Center Management Co., Inc., 11%, 2006 (144A
security acquired June 1996 for $1,758,125)** $1,750 $ 1,758
Primeco, Inc., 12.75%, 2005 5,000 5,200
Sullivan Graphics, Inc., 12.75%, 2005 5,000 4,650
United Stationers Supply Co., 12.75%, 2005 3,000 3,217
--------
14,825
--------
TEXTILES - 7.8%
Avondale Mills, Inc., 10.25%, 2006 (144A security acquired
April 1996, for $3,451,275)** 3,500 3,434
CMI Industries, Inc., 9.5%, 2003 3,935 3,394
Dan River, Inc., 10.125%, 2003 5,250 5,040
Synthetic Industries, Inc., 12.75%, 2002 4,500 4,759
Tultex Corp., 10.625%, 2005 4,000 4,140
--------
20,767
--------
TELECOMMUNICATIONS - 9.9%
Comnet Cellular, Inc., 11.25%, 2005 4,000 4,260
Fonorola, Inc., 12.5%, 2002 4,450 4,806
Galaxy Telecom, Inc., 12.375%, 2005 5,000 5,175
IXC Communications Inc., 13%***, 2005 (144A security
acquired Sept. 1995 for $3,953,350)** 4,000 4,180
Pronet, Inc., 11.875%, 2005 4,500 4,410
Western Wireless Corp., 10.5%, 2006 3,500 3,465
--------
26,296
--------
TRANSPORTATION - 2.1%
Sea Containers Ltd.,
Series A, 12.5%, 2004 3,500 3,920
Series B, 12.5%, 2004 1,500 1,620
--------
5,540
--------
TOTAL BONDS AND NOTES
(Cost - $343,448,852) 348,193
--------
UNITS - 3.2%
Exide Electronics Group, Inc., 11.5%, 2006
(each $1,000 unit includes one warrant for Common Stock) 4,000 4,240
ICF Kaiser International, Inc., 12%, 2003
(each $1,000 unit includes 4.8 warrants for Common Stock) 4,500 4,298
--------
TOTAL UNITS
(Cost - $8,243,250) 8,538
--------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1996 (Unaudited) 4
(Continued)
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 0.1%
(Cost - $266,665)
Thrifty Payless Holdings, Inc., Class B* 14,250 $ 246
--------
WARRANTS - 0.1%
BPC Holdings Corp., Exp. 2004* 5,500 110
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 - $437,223) 356
--------
TOTAL INVESTMENTS IN SECURITIES - 134.1%
(Total Cost - $352,428,990) 357,333
Liabilities, Less Cash and Other Assets - (34.1%) (90,839)
--------
NET ASSETS - 100%
(equivalent to $7.30 per share based on 36,508,696 shares
outstanding) $266,494
========
</TABLE>
* Non-income producing securities.
** Indicates restricted security; the aggregate fair value of restricted secu-
rities is $60,301,162 (aggregate cost $59,535,944) which is approximately
23% 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 June 30, 1996.
+ Defaulted security.
- ---------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
June 30, 1996
<TABLE>
<CAPTION>
MARKET % OF
QUALITY RATINGS* OF VALUE MARKET
LONG-TERM BONDS (000) VALUE
--------------------------------------
<S> <C> <C>
Ba/BB $ 35,926 10.1%
B/B 302,591 84.8%
Below B 18,214 5.1%
-------- -----
$356,731 100.0%
======== =====
</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
JUNE 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
ASSETS:
Investments at market value (Cost - $352,428,990) $357,333
Cash on deposit with custodian 29
Receivable for investments sold 3,336
Interest receivable 10,675
Investment for deferred compensation plan
(Cost - $69,230) 84
Other 20
--------
TOTAL ASSETS 371,477
--------
LIABILITIES:
Loan payable 96,300
Dividend payable July 10, 1996 at $.0675 per share 2,464
Payable for securities purchased 5,205
Accrued interest payable 584
Accrued advisory fees payable 186
Accrued trustees' fees payable 84
Other accrued expenses (including $71,050
due to affiliate) 160
--------
TOTAL LIABILITIES 104,983
--------
NET ASSETS (Equivalent to $7.30 per share based on 36,508,696
shares of beneficial interest outstanding; unlimited number of
shares authorized) $266,494
========
COMPONENTS OF NET ASSETS:
Paid in capital $317,188
Undistributed net investment income 1,317
Unrealized appreciation of investments 4,919
Accumulated net realized loss (56,930)
--------
NET ASSETS $266,494
========
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
<S> <C> <C>
INVESTMENT INCOME
INCOME:
Interest $ 20,021
EXPENSES:
Interest expense 3,021
Investment advisory fee 1,141
Administrative services 75
Shareholder reports 60
Custodian fees and expenses 51
Trustees' fees 28
Transfer agent fees and expenses 26
Auditing and legal fees 15
Other 25 4,442
------ --------
NET INVESTMENT INCOME 15,579
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from securities transactions 9,315
Unrealized depreciation of investments (6,212)
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,103
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 18,682
========
</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>
FOR THE FOR THE
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
------------- ------------
(IN THOUSANDS)
--------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,579 $ 30,224
Net realized gain from investments 9,315 1,507
Unrealized appreciation (depreciation)
on investments (6,212) 19,516
-------- --------
Net increase in net assets from operations 18,682 51,247
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
($.405 per share and
$.84 per share, respectively) (14,729) (30,104)
-------- --------
Total distributions to shareholders (14,729) (30,104)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Net increase from 360,637 and
723,005 capital shares issued to shareholders in
reinvestment of distributions, respectively 2,768 5,176
-------- --------
Net increase from capital share transactions 2,768 5,176
-------- --------
NET INCREASE IN NET ASSETS 6,721 26,319
NET ASSETS:
Beginning of period 259,773 233,454
-------- --------
End of period (Including undistributed net
investment income of $1,316,743 and $466,865,
respectively) $266,494 $259,773
======== ========
</TABLE>
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
CASH FLOWS FROM INVESTING AND
OPERATING ACTIVITIES:
Purchases of portfolio securities $(142,454)
Proceeds from sales of portfolio securities 137,627
Investment income received 17,134
Investment and administrative expenses paid (1,227)
Interest paid (2,740)
---------
Cash flows provided by investing and operating activities 8,340
---------
CASH FLOWS FROM SHAREHOLDER AND OTHER FINANCING ACTIVITIES:
Distributions to shareholders (net of
reinvestment of $2,767,568) (13,022)
Net borrowings 4,700
---------
Cash flows used by shareholder and other financing activities (8,322)
---------
Net increase in cash 18
Cash, beginning of period 11
---------
Cash, End of Period $ 29
=========
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 $ 18,682
Increase in value of investments (12,326)
Change in receivables and liabilities exclusive of loan and
dividend payable 1,984
---------
Net Cash Provided by Investing and Operating Activities $ 8,340
=========
</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
diversified, 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 objective, 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 financial statements. Actual results could differ from
those estimates. The following 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
market, 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
investments that mature in more than 60 days are valued at current market
quotations. 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
transactions 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.
C. FEDERAL TAXES -- It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and capital gains to its
shareholders. Therefore, no Federal income or excise taxes on realized income
have been accrued.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. Payments in excess of
financial accounting income due to differences between financial and tax
accounting, to meet the minimum distribution requirements for tax basis
income, are deducted from paid in capital when such differences are determined
to be permanent.
E. CASH FLOW INFORMATION -- Cash, as used in the Statement of Cash Flows, is
the amount reported in the Statement of Liabilities. The Fund issues its
shares, invests in securities, and distributes dividends from net investment
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
agreement 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 lender a first lien on all of its investment
securities 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 six months ended June 30, 1996 were
$92,494,560 at an average interest rate of approximately 6.55%. As of June 30,
1996, the Fund was paying interest at an average annual rate of 6.50% on its
outstanding borrowings.
3. DIVIDENDS. The Board of Trustees of the Fund declared a dividend from undis-
tributed net investment income of $.0675 per share, payable July 10, 1996 to
shareholders of record on June 28, 1996.
4. 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
carrying out the responsibilities of those offices. For the six months ended
June 30, 1996, the Fund paid or accrued $75,008.
5. 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.
6. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities
(excluding short-term obligations) for the six months ended June 30, 1996 were
$146,434,320 and $137,207,966, respectively.
As of June 30, 1996, the cost of securities for federal income tax purposes was
$352,460,240. At June 30, 1996, unrealized appreciation for Federal income tax
purposes aggregated $4,904,345 of which $9,311,643 related to appreciated
securities and $4,407,298 related to depreciated securities.
7. CAPITAL LOSS CARRYOVER. At 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 December 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
8. 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>
(UNAUDITED)
SIX MOS.
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PER-
FORMANCE:
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 7.19 $ 6.59 $ 7.54 $ 6.99 $ 6.62 $ 4.73
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(1) 0.43 0.84 0.86 0.97 0.98 0.94
Net realized and
unrealized gains (loss-
es) 0.09 0.60 (0.91) 0.58 0.40 1.91
-------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 0.52 1.44 (0.05) 1.55 1.38 2.85
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.41) (0.84) (0.88) (0.97) (0.98) (0.94)
Distributions in excess
of net investment in-
come -- -- (0.02) (0.03) (0.03) (0.02)
-------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.41) (0.84) (0.90) (1.00) (1.01) (0.96)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 7.30 $ 7.19 $ 6.59 $ 7.54 $ 6.99 $ 6.62
======== ======== ======== ======== ======== ========
MARKET VALUE, END OF PE-
RIOD $ 8.00 $ 7.88 $ 7.00 $ 8.38 $ 7.88 $ 7.25
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:
Per share market value 7.08% 26.24% (5.43)% 19.62% 24.36% 111.31%
Per share net asset
value (2) 7.32% 22.93% (0.76)% 23.25% 21.65% 64.13%
RATIOS AND SUPPLEMENTAL
DATA:
Net assets, end of pe-
riod (000 omitted) $266,494 $259,773 $233,454 $195,489 $176,974 $163,173
Ratio of operating ex-
penses to average net
assets 0.54% 1.12% 1.17% 1.21% 1.20% 1.26%
Ratio of interest ex-
pense to average net
assets 1.14% 2.68% 2.10% 1.66% 1.91% 2.79%
Ratio of net investment
income to average net
assets 5.88% 12.03% 12.33% 12.98% 13.81% 15.49%
Portfolio turnover 39% 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 Fund 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 Fund 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
9. QUARTERLY RESULTS (UNAUDITED). The following is a summary of quarterly
results 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
June 30, 1996 10,057 .28 7,837 .20 1,661 .05 3,406 .06
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES
Trustees
R. Bruce Albro
Senior Managing Director,
CIGNA Investments, Inc.
Hugh R. Beath
Advisory Director,
AdMedia Corporate Advisors, Inc.
Russell H. Jones
Vice President,
Kaman Corporation
Paul J. McDonald
Executive Vice President, Finance
and Chief Financial Officer,
Friendly Ice Cream Corporation
Arthur C. Reeds III
President, CIGNA Investment
Management and CIGNA
Investments, Inc.
Officers
R. Bruce Albro
Chairman of the Board and
President
Alfred A. Bingham III
Vice President and Treasurer
Lawrence S. Harris
Vice President
Alan C. Petersen
Vice President
Jeffrey S. Winer
Vice President and Secretary
- --------------------------------------------------------------------------------
CIGNA High Income Shares is a closed-end, diversified management investment
company that invests primarily in high yield fixed-income securities. The
investment adviser is CIGNA Investments, Inc., Hartford, Connecticut 06152.
Shareholders may elect to have dividends automatically reinvested in additional
shares of CIGNA High Income Shares by participating in the Automatic Dividend
Investment Plan. For a brochure describing this Plan or general inquiries 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.
- --------------------------------------------------------------------------------
Matters Submitted to a Vote of Shareholders
An Annual Meeting of the Shareholders of CIGNA High Income Shares (the "Trust")
was held on Tuesday April 30, 1996 at 2:00 p.m., Eastern Time.
Five Trustees were elected by a vote of shareholders to serve as members of the
Board of the Trust until the next Annual Meeting of Shareholders or until the
election and qualification of their successors. Shareholders of the Trust voted
to elect the following Trustees:
<TABLE>
<CAPTION>
For Vote Withheld
--- -------------
<S> <C> <C>
R. Bruce Albro 33,454,824.021 541,175.020
Hugh R. Beath 33,440,808.865 555,190.176
Russell H. Jones 33,430,366.006 565,633.035
Paul J. McDonald 33,424,916.575 571,082.466
Arthur C. Reeds, III 33,441,075.021 554,924.020
</TABLE>
The appointment of Price Waterhouse LLP to serve as independent accountants for
the fiscal year ending December 31, 1996 was ratified by a vote of shareholders
of the Trust as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
33,400,765.253 168,994.421 426,239.367
</TABLE>
There were no broker non-votes with respect to the matters submitted to a vote
of shareholders of the Trust.
No other business was transacted at the meeting.
<PAGE>
- --------------------------------------------------------------------------------
[CIGNA LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
CIGNA High Income Shares
Semiannual Report
June 30, 1996
- --------------------------------------------------------------------------------
----------------------
[CIGNA LOGO APPEARS HERE] BULK RATE
U.S. POSTAGE
PAID
CIGNA High Income Shares SO. HACKENSACK, NJ
1380 Main Street PERMIT 750
Springfield, MA 01103 ----------------------
