<PAGE>
- -------------------------------------------------------------------------------
1
DEAR SHAREHOLDERS:
We are pleased to provide this report for CIGNA High Income Shares, covering the
six months ended June 30, 1997.
THE MARKET ENVIRONMENT
In general, market conditions were positive in the second quarter and first half
of 1997. High-yield bonds outperformed Treasuries and investment-grade
corporates while lagging behind the explosive returns of stocks. For the second
quarter, high yield quality spreads to US Treasury Bonds narrowed by 17 basis
points, and B-rated bonds outperformed BBs. New high yield issuance volume was
very robust at approximately $69 billion in the first half compared with a
record $79 billion for all of 1996. The communications and media sectors
continued to be the largest, issuers of new securities, accounting for 28% of
total new issuance. Overall, quality levels for new issues held steady during
the first half of the year.
FUND ACTIVITY
We took advantage of the abundant supply of new issues, actively trading
"oversubscribed" deals and selectively investing in higher-yielding, attractive
total return issues, while preserving the Fund's yield and retaining its average
credit quality. Due to the attractive risk/return conditions in B-rated bonds,
we maintained our overweighting in this quality sector, emphasizing high-coupon,
short-duration securities. In addition, we focused on issues that were potential
candidates for merger and acquisition activity. Finally, we enhanced the Fund's
returns by gradually increasing the exposure to foreign emerging market credits,
taking advantage of the strong performance in that sector.
Overall, the Fund continues to be well-diversified and is invested in 93
companies at quarter end. Top industry categories are: Telecommunications
(16.5%), Broadcast and Media (16.5%), Containers and Paper (10.1%),
Entertainment (10.1%), and Food and Beverages (9.9%). Average maturity is 8.0
years, and average credit quality is B. Borrowing under the Fund's line of
credit has been maintained below 33% of assets during this reporting period. On
June 30, borrowings were at approximately 25% of assets.
FUND PERFORMANCE
CIGNA High Income Shares has performed well so far this year, returning 7.46%
for the second quarter and 9.34% year-to-date on a net asset value basis. This
compares favorably with the Fund's benchmark, the Lehman Brothers High Yield
Bond Index, which returned 4.65% for the quarter and 5.82% year-to-date. Based
on the per share market value of its NYSE-listed shares, the Fund has returned
5.43% for the quarter and 11.29% year-to-date. The Fund's performance exceeded
its benchmark's return due to its continued heavy weighting of B-rated issues,
its high average yield, and the Fund's leveraged position.
OUTLOOK
Our outlook is essentially for "more of the same." We expect the following
trends to continue: the rapid pace of new issuance; narrow credit quality
spreads; strong demand for the high yield asset class; and competitive
performance results on both an absolute and relative basis for the asset class.
Other than temporary bouts of "indigestion" brought on by supply/demand
imbalances or an unforeseen external shock to the system, we see nothing on the
horizon to prevent continued strong results for high-yield investors in 1997.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro,
Chairman of the Board and President
CIGNA HIGH INCOME SHARES
<PAGE>
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CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1997 (Unaudited) 2
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------
BONDS AND NOTES - 126.3%
AUTO AND TRUCK - 3.4%
A.P.S., Inc., 11.875%, 2006 $4,000 $3,880
Johnstown American Industries, Inc.,
11.75%, 2005 5,500 5,747
------------
9,627
------------
BROADCASTING & MEDIA - 16.5%
All American Communications, Inc.,
10.875%, 2001 5,000 5,231
American Media Operations, Inc.,
11.625%, 2004 3,500 3,815
Garden State Newspapers, Inc.,
12%, 2004 5,000 5,450
Grupo Televisa, S.A., 11.875%, 2006 5,000 5,613
Katz Media Corp., 10.5%, 2007 3,400 3,264
Lodgenet Entertainment Corp.,
10.25%, 2006 3,500 3,557
MDC Communications Corp.,
10.5%, 2006 2,500 2,656
Newsquest Capital PLC, 11%, 2006 3,500 3,815
Petersen Publishing Co., L.L.C.,
11.125%, 2006 2,000 2,230
Sullivan Broadcasting, Inc.,
10.25%, 2005 2,000 2,050
TCI Satellite Entertainment, Inc.,
10.875%, 2007 (144A security
acquired Feb 1997 for $5,520,000)** 5,500 5,514
TV Azteca, S.A. de C.V.,
10.5%, 2007 (144A security
acquired Jan & Feb 1997 for
$4,043,750)** 4,000 4,080
------------
47,275
------------
CABLE TV - 8.0%
Frontiervision Operating Partners, L.P.,
11%, 2006 4,000 4,190
Galaxy Telecom, L.P., 12.375%, 2005 5,000 5,325
Marcus Cable Co., L.P.,
11.875%, 2005 5,500 5,940
Multicanal S.A., 10.5%, 2007 (144A
security acquired Jan & Feb 1997
for $3,046,593)** 3,000 3,225
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 2006 4,000 4,220
------------
22,900
------------
CHEMICALS - 6.0%
Harris Chemical North America, Inc.,
10.75%, 2003 4,500 4,635
LaRoche Industries, Inc., 13%, 2004 5,000 5,525
Polymer Group, Inc., 12.25%, 2002 3,800 4,180
Polytama International Finance B.V.,
11.25%, 2007 2,750 2,839
------------
17,179
------------
CONSUMER PRODUCTS & SERVICES - 7.3%
AMF Group, Inc., 10.875%, 2006 $3,000 $3,240
Anchor Advanced Products, Inc.,
11.75%, 2004 1,250 1,325
Drypers Corp., 10.25%, 2007 500 495
Hines Horticulture, Inc., 11.75%, 2005 5,000 5,225
Lifestyle Furnishings International Ltd.,
10.875%, 2006 4,000 4,480
Renaissance Cosmetics, Inc.,
11.75%, 2004 4,500 4,601
Simmons Co., 10.75%, 2006 1,500 1,568
------------
20,934
------------
CONTAINERS AND PAPER - 10.1%
Berry Plastics Corp., 12.25%, 2004 3,500 3,859
Calmar, Inc., 11.5%, 2005 5,000 5,413
Crown Paper Co. 11%, 2005 4,500 4,477
Grupo International Durango, S.A.
12.625%, 2003 3,000 3,371
Indah Kiat Finance Mauritius,
10%, 2007 (144A security acquired
June 1997 for $1,738,572)** 1,750 1,739
Packaging Resources, Inc.,
11.625%, 2003 4,775 4,918
Printpak, Inc., 10.625%, 2006 5,000 5,300
------------
29,077
------------
ELECTRONICS AND ELECTRICAL EQUIPMENT - 7.5%
Dictaphone Corp., 11.75%, 2005 5,000 4,600
Exide Electronics Group, Inc.,
11.5%, 2006 4,000 4,180
International Wire Group, Inc.,
11.75%, 2005 4,500 4,882
11.75%, 2005 (144A security
acquired June 1997 for $1,087,500)** 1,000 1,087
Telex Communications, Inc.,
10.5%, 2007 (144A security
acquired Apr 1997 for $2,507,500)** 2,500 2,606
Viasystems, Inc., 9.75%, 2007
(144A security acquired June 1997
for $4,025,000)** 4,000 4,050
------------
21,405
------------
ENERGY - 1.8%
Statia Terminals International,
11.75%, 2003 4,900 5,145
------------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1997 (Unaudited) 3
(Continued)
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------
ENTERTAINMENT - 10.1%
Alliance Gaming Corp.,
12.875%, 2003 $4,750 $5,368
American Skiing Co., 12%, 2006 5,250 5,512
Booth Creek Ski Holdings, Inc.,
12.5%, 2007 (144A security acquired
Mar 1997 for $3,250,000)** 3,250 3,348
Casino America, Inc., 12.5%, 2003 5,500 5,679
Casino Magic of Louisiana Corp.,
13%, 2003 4,500 4,005
Trump Atlantic City Funding, Inc.,
11.25%, 2006 5,000 4,887
------------
28,799
------------
FINANCIAL - 3.2%
Affinity Group, Inc., 11.5%, 2003 3,000 3,105
Affinity Group Holding, Inc.,
11%, 2007 (144A security acquired
Mar 1997 for $1,500,000)** 1,500 1,575
Dollar Financial Group, Inc.,
10.875%, 2006 4,150 4,440
------------
9,120
------------
FOOD AND BEVERAGES - 9.9%
Americold Corp., 12.875%, 2008 5,000 5,350
Archibald Corp., 10.25%, 2004 1,750 1,750
CFP Holdings, Inc., 11.625%, 2004 4,150 4,275
Del Monte Corp., 12.25%, 2007
(144A security acquired April &
May 1997 for $5,299,625)** 5,250 5,670
North Atlantic Trading, Inc.,
11%, 2004 (144A security
acquired June 1997 for $3,578,125)** 3,500 3,544
Star Markets Co., Inc., 13%, 2004 4,000 4,540
Van de Kamps, Inc., 12%, 2005 3,000 3,315
------------
28,444
------------
HEALTH CARE - 1.2%
Owens & Minor, Inc., 10.875%, 2006 3,000 3,345
------------
INDUSTRIAL - 9.4%
Alvey Systems, Inc., 11.375%, 2003 3,770 3,902
Crain Industries, Inc., 13.5%, 2005 5,500 6,242
Goss Graphic Systems, Inc.,
12%, 2006 4,625 5,088
Interlake Corp., 12.125%, 2002 5,025 5,276
Neenah Corp., 11.125%, 2007
(144A security acquired April 1997
for $2,282,500)** 2,250 2,385
Viacap S.A., 11.375%, 2007
(144A security acquired May 1997
for $4,037,450)** 4,000 4,180
------------
27,073
------------
METALS - 5.4%
Acindar Industria Argentina de
Aceros S.A., 11.25%, 2004 $2,500 $2,637
Euramax International PLC
11.25%, 2006 4,000 4,270
Gulf States Steel, Inc., 13.5%, 2003 2,500 2,500
Kaiser Aluminum & Chemical
Corp., 12.75%, 2003 4,500 5,974
------------
15,381
------------
MISCELLANEOUS - 5.7%
Central Tractor Farm & Country, Inc.,
10.625%, 2007 3,000 3,105
Michaels Stores, Inc.,
10.875%, 2006 4,000 4,300
Sullivan Graphics, Inc., 12.75%, 2005 5,500 5,665
United Stationers Supply Co.,
12.75%, 2005 3,000 3,375
------------
16,445
------------
TELECOMMUNICATIONS - 16.5%
CCPR Services, Inc., 10%, 2007
(144A security acquired Jan & Feb
1997 for $3,510,000)** 3,500 3,439
Dobson Communications Corp.,
11.75%, 2007 3,650 3,595
Fonorola, Inc., 12.5%, 2002 4,450 4,940
IXC Communications, Inc.,
12.5%***, 2005 5,500 6,236
Metrocall, Inc., 10.375%, 2007 1,250 1,150
Phonetel Technologies, Inc.,
12%, 2006 4,375 4,441
Pricellular Wireless, Inc.,
10.75%, 2004 2,000 2,075
Qwest Communications International,
Inc., 10.875%, 2007 (144A security
acquired March & April 1997
for $3,986,875)** 4,000 4,360
Sprint Spectrum, L.P., 11%, 2006 4,000 4,420
Sygnet Wireless Inc., 11.5%, 2006 5,000 5,100
Talton Holdings, Inc., 11%, 2007
(144A security acquired June 1997
for $4,500,000)** 4,500 4,523
WinStar Equipment Corp.,
12.5%, 2004 (144A security
acquired Mar 1997 for $3,000,000)** 3,000 2,932
------------
47,211
------------
TEXTILES - 4.3%
Anvil Knitwear, Inc., 10.875%, 2007
(144A security acquired Mar 1997
for $4,553,750)** 4,500 4,545
Avondale Mills, Inc., 10.25%, 2006 3,500 3,684
Dan River, Inc., 10.125%, 2003 3,750 3,975
------------
12,204
------------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES INVESTMENTS IN SECURITIES June 30, 1997 (Unaudited)
(Continued) 4
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------
TOTAL BONDS AND NOTES
(Cost - $343,795,538) $361,564
------------
UNITS - 4.5%
ICF Kaiser International, Inc., 13%, ***
2003 (each $1,000 unit includes
4.8 warrants for Common Stock) 5,000 5,050
NS Group, Inc., 13.5%, 2003
(each $1,000 unit includes
one warrant for Common Stock) 4,080 4,855
Optel, Inc., 13%, 2005 (144A
security acquired Feb 1997 for
$3,250,000)** 3,250 3,104
------------
TOTAL UNITS
(Cost - $12,707,109) 13,009
------------
NUMBER
OF SHARES
------------
WARRANTS - 0.1%
Exide, Inc., Exp. 2006* 4,000 100
IHF Capital, Inc., Class A & L* 5,000 275
Wireless One, Inc., Exp. 2000* 15,000 -
------------
TOTAL WARRANTS (Cost - $287,316) 375
------------
TOTAL INVESTMENTS IN SECURITIES - 130.9%
(Total Cost - $356,789,963) 374,948
Liabilities, Less Cash and Other Assets - (30.9%) (88,571)
------------
NET ASSETS - 100% (equivalent to $7.70 per
share based on 37,198,730 shares outstanding) $ 286,377
============
* Non-income producing securities.
** Indicates restricted security; the aggregate fair value of restricted
securities is $65,904,822 (aggregate cost $64,717,240) 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, 1997.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
June 30, 1997
MARKET %OF
QUALITY RATINGS* OF VALUE MARKET
LONG-TERM BONDS (000) VALUE
- ------------------------------------------------------------------
Ba/BB $ 22,516 6.0%
B/B 331,044 88.4%
Below B 21,013 5.6%
------------ ------------
$374,573 100.0%
============ ------------
*The higher of Moody's or Standard & Poor 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, 1997 (Unaudited)
(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost - $356,789,963) $ 374,948
Cash on deposit with custodian 98
Receivable for investments sold 5,483
Interest receivable 11,172
Investment for deferred compensation plan
(Cost - $97,746) 118
Other 2
------------
TOTAL ASSETS 391,821
------------
LIABILITIES:
Loan payable 97,900
Dividend payable July 10, 1997 at
$.0675 per share 2,511
Payable for investments purchased 3,489
Accrued interest payable 1,085
Accrued advisory fees payable 196
Deferred trustees' fees payable 118
Other accrued expenses (including $64,250
due to affiliate) 145
------------
TOTAL LIABILITIES 105,444
------------
NET ASSETS (Equivalent to $7.70 per share
based on 37,198,730 shares of beneficial
interest outstanding; unlimited number of
shares authorized) $ 286,377
============
COMPONENTS OF NET ASSETS:
Paid in capital $ 322,721
Undistributed net investment income 1,016
Unrealized appreciation of investments 18,178
Accumulated net realized loss (55,538)
------------
NET ASSETS $ 286,377
============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (Unaudited)
(IN THOUSANDS)
----------------------
INVESTMENT INCOME
INCOME:
Interest $ 20,554
EXPENSES:
Interest expense $3,125
Investment advisory fees 1,173
Administrative services 84
Shareholder reports 53
Custodian fees and expenses 52
Trustees' fees 28
Transfer agent fees and expenses 26
Auditing and legal fees 23
Other 20 4,584
-------- -----------
NET INVESTMENT INCOME 15,970
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain from securities
transactions 2,635
Unrealized appreciation of investments 6,266
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 8,901
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 24,871
===========
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)
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30,1997 1996
-------------------------
(IN THOUSANDS)
-------------------------
OPERATIONS:
Net investment income $15,970 $31,218
Net realized gain from investments 2,635 9,364
Unrealized appreciation on
investments 6,266 781
------------ -----------
Net increase in net assets
from operations 24,871 41,363
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($.405
per share and $.87 per share,
respectively) (15,015) (31,747)
In excess of net investment income
($.03 per share) (1,159)
------------ -----------
Total distributions to shareholders (15,015) (32,906)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Net increase from 372,119 and
678,552 capital shares issued to
shareholders in reinvestment of
distributions, respectively 3,021 5,270
------------ -----------
Net increase from capital share
transactions 3,021 5,270
------------ -----------
NET INCREASE IN
NET ASSETS 12,877 13,727
NET ASSETS:
Beginning of period 273,500 259,773
------------ -----------
End of period (Including
undistributed net investment income
of $1,016,121 and $60,782,
respectively) $ 286,377 $ 273,500
============ ============
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (Unaudited)
(IN THOUSANDS)
---------------
CASH FLOWS FROM INVESTING AND OPERATING
ACTIVITIES:
Purchases of portfolio securities $ (134,682)
Proceeds from sales of portfolio securities 134,285
Investment income received 17,731
Investment and administrative expenses paid (1,353)
Interest paid (2,513)
-----------
Cash flows provided by investing and operating
activities 13,468
-----------
CASH FLOWS FROM SHAREHOLDER AND OTHER FINANCING
ACTIVITIES:
Distributions to shareholders (net of reinvestment of
$3,020,977) (15,283)
Net borrowings 1,900
-----------
Cash flows used by shareholder and other financing
activities (13,383)
-----------
Net increase in cash 85
Cash, beginning of period 13
-----------
CASH, END OF PERIOD $ 98
===========
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 24,871
Increase in value of investments (10,245)
Change in receivables and liabilities exclusive of
loan and dividend payable (1,158)
-----------
Net Cash Provided by Investing and Operating
Activities $ 13,468
===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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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 its 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 Assets and 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, 1999. 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 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, 1997 were $94,198,344 at an
average interest rate of approximately 6.69%. As of June 30, 1997, the Fund was
paying interest at an average annual rate of 6.83% 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 carrying
out the responsibilities of those offices. For the six months ended June 30,
1997, the Fund paid or accrued $83,674.
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
(excluding short-term obligations) for the six months ended June 30, 1997 were
$127,791,623 and $126,436,042, respectively.
As of June 30, 1997, the cost of securities for federal income tax purposes was
$356,873,088. At June 30, 1997, unrealized appreciation for Federal income tax
purposes aggregated $18,106,660 of which $19,974,893 related to appreciated
securities and $1,868,233 related to depreciated securities.
6. CAPITAL LOSS CARRYOVER. At December 31, 1996, the Fund had a capital loss
carryover for Federal income tax purposes of $54,834,030 of which $19,305,222,
$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, 1996, the Fund has elected to defer $3,307,368
of capital losses occurring between November 1, 1996 and December 31, 1996 under
these rules. Such deferred losses are being treated as arising on the first day
of the year ended December 31, 1997.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA HIGH INCOME SHARES NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) 9
<TABLE>
<CAPTION>
7. FINANCIAL HIGHLIGHTS. The following table includes data, ratios and supplemental data for a share outstanding throughout each
period and other performance information:
- ---------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
6 MOS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.43 $ 7.19 $ 6.59 $ 7.54 $ 6.99 $ 6.62
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 0.43 0.85 0.84 0.86 0.97 0.98
Net realized and unrealized gaines (losses) 0.24 0.29 0.60 (0.91) 0.58 0.40
----- ----- ----- ------ ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.67 1.14 1.44 (0.05) 1.55 1.38
----- ----- ----- ------ ----- -----
LESS DISTRIBUTIONS:
Distributions from net investment income (0.40) (0.90) (0.84) (0.88) (0.97) (0.98)
Distributions in excess of net investment income - - - (0.02) (0.03) (0.03)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.40) (0.90) (0.84) (0.90) (1.00) (1.01)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 7.70 $ 7.43 $ 7.19 $ 6.59 $ 7.54 $ 6.99
===== ===== ===== ===== ===== =====
MARKET VALUE, END OF PERIOD $ 8.88 $ 8.38 $ 7.88 $ 7.00 $ 8.38 $ 7.88
===== ===== ===== ===== ===== =====
TOTAL INVESTMENT RETURN:
Per share market value 11.29% 19.25% 26.24% (5.43)% 19.62% 24.36%
Per share net asset value (2) 9.34% 16.70% 22.93% (0.76)% 23.25% 21.65%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $286,377 $273,500 $259,773 $233,454 $195,489 $176,974
Ratio of operating expenses to average net
assets 0.53% 1.07% 1.12% 1.17% 1.21% 1.20%
Ratio of interest expense to average net
assets 1.12% 2.28% 2.68% 2.10% 1.66% 1.91%
Ratio of net investment income to average
net assets 5.72% 11.60% 12.03% 12.33% 12.98% 13.81%
Portfolio turnover 35% 78% 60% 72% 48% 45%
</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 period, 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
<TABLE>
<CAPTION>
8. QUARTERLY RESULTS (UNAUDITED). The following is a summary of quarterly results of operations (in thousands except for per
share amounts):
- -------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS)
INVESTMENT INCOME NET INVESTMENT INCOME ON INVESTMENTS INCR. (DECR.) IN NET ASSETS
PERIOD ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $9,853 $0.28 $7,424 $0.21 $8,614 $0.24 $10,141 $0.25
June 30, 1995 9,807 0.28 7,417 0.21 6,426 0.18 7,902 0.18
September 30, 1995 9,871 0.27 7,486 0.21 2,544 0.07 4,046 0.08
December 31, 1995 10,232 0.28 7,897 0.22 3,439 0.11 4,230 0.09
March 31, 1996 9,964 0.27 7,742 0.21 1,442 0.04 3,315 0.05
June 30, 1996 10,057 0.28 7,837 0.20 1,661 0.05 3,406 0.06
September 30, 1996 10,375 0.28 8,079 0.22 9,225 0.25 11,144 0.27
December 31, 1996 9,858 0.27 7,560 0.21 (2,183) (0.06) (4,138) (0.14)
March 31, 1997 10,260 0.28 7,970 0.21 (3,094) (0.08) (830) (0.07)
June 30, 1997 10,294 0.28 8,000 0.22 11,995 0.32 13,707 0.34
</TABLE>
<PAGE>
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CIGNA HIGH INCOME SHARES
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
<S> <C> <C>
R. Bruce Albro Paul J. McDonald R. Bruce Albro
Senior Managing Director, Senior Executive Vice President Chairman of the Board
CIGNA Investments, Inc. and Chief Administrative Officer, President
Friendly Ice Cream Corporation
Hugh R. Beath Alfred A. Bingham III
Advisory Director, Arthur C. Reeds, III Vice President and Treasurer
AdMedia Corporate Advisors, Inc. President, CIGNA Investment
Management and CIGNA Alan C. Petersen
Russell H. Jones Investments, Inc. Vice President
Vice President and Treasurer
Kaman Corporation Jeffrey S. Winer
Vice President and Secretary
</TABLE>
- --------------------------------------------------------------------------------
CIGNA High Income Shares is a closed-end, diversified management investment
company that invest primarily in high yield fixed-income securities. The
investment adviser is CIGNA Investments, Inc., 900 Cottage Grove Road, 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 (the "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.
Effective December 1, 1997, State Street Bank and Trust Company will also allow
you, at no additional cost, to deposit with it, for safekeeping and in "book
entry form," any stock certificates for the Fund's shares you may have in your
possession. You may elect to have these shares held within or outside of the
Plan. Whether or not you participate in the Plan, you may elect by notice to
State Street to have State Street sell you book entry shares. State Street will
deduct from the sales proceeds $2.50 per transaction plus $.15 per share and
remit the balance of the proceeds to you.
- -------------------------------------------------------------------------------
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 29, 1997 at 1:30 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:
FOR VOTE WITHHELD
--- -------------
R. Bruce Albro 34,857,677.358 511,128.927
Hugh R. Beath 34,839,949.358 528,856.927
Russell H. Jones 34,814,510.616 554,295.669
Paul J. McDonald 34,813,184.142 555,622.143
Arthurs C. Reeds, III 34,851,596.358 517,209.927
The appointment of Price Waterhouse LLP to serve as independent accountants for
the fiscal year ending December 31, 1997 was ratified by a vote of shareholders
of the Trust as follows:
FOR AGAINST ABSTAIN
--- ------- -------
34,786,992.537 149,334.380 432,479.368
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>
[LOGO OF CIGNA APPEARS HERE]
CIGNA High Income Shares
950 Winter Street [LOGO OF CIGNA APPEARS HERE]
Suite 1200
Waltham, MA 02154
CIGNA HIGH INCOME SHARES
- --------------------
BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ Semiannual Report
PERMIT 750
- --------------------
June 30, 1997
