<PAGE>
CIGNA INTERNATIONAL STOCK FUND
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1996
[HORIZONTAL GLOBE GRAPHIC APPEARS HERE]
<PAGE>
CIGNA INTERNATIONAL STOCK FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
- -------------------------------------------------------------------------------
The world equity markets moved modestly higher in 1996. For the year ended
December 31, 1996, CIGNA International Stock Fund gained 6.36%, exceeding by
0.31% the Morgan Stanley EAFE index return. The EAFE total return has again been
impacted by underperformance of the largest market in the EAFE Index - Japan.
The Japanese market fell 15.5% in US terms over the year. This compares to a
21.09% return for Europe and 20.54% for Asia Pacific ex Japan.
The aggressive easing of monetary policy in Japan is now 18 months old. This has
resulted in a reversal of fortune for the Yen which closed the year at 115.70
against the US dollar, 45% below the peak of 79.75 which was reached in April of
1995. The liquidity boom has driven bond prices in Japan to incredible levels
(the benchmark 10 year Japanese government bond yield falling to 2.75%).
Japanese investors have ignored other asset classes such as stocks and property;
overseas financial assets have been preferred. The Japanese liquidity boom has
therefore been a major factor driving global financial markets.
The Japanese market peaked in 1989. We are now entering the eighth year of the
bear market. The hangover from the so called "bubble economy" has been a long
one and painful one. Needless to say sentiment in Japan remains depressed.
Despite recent elections, dramatic economic reforms, which are needed to restore
confidence, still appear unlikely. It is not all doom and gloom however, there
are some sectors which are performing well, notably the export sector which is
benefiting from lower interest rates and a weaker Yen. The delayed impact of
monetary easing, which is now 18 months old, should also not be underestimated.
We remain confident that the end to the bear market is approaching and are
likely to increase our position in Japan during 1997.
Low inflation and steady economic growth combined with expanding financial
liquidity have been the major factors driving world equity prices. Anything that
upsets any of these factors represents a risk to stock prices. A continuation of
the low inflationary growth scenario still appears to be the most likely outcome
in 1997. We do see some risk to this scenario in countries that are in the late
stages of the economic cycle. A key markets in this regard are the US and the
UK. We therefore expect to see inflationary pressures and tightening of
liquidity to occur in these markets in the first half of 1997.
Key overseas markets such as Japan and Germany, however are still a long way
behind in the interest rate cycle. This should reduce the impact that a Fed
tightening will have on international markets. Indeed a correction in the US
financial markets could prove to have a positive impact on the Japanese equity
market as it would lead to a return of capital to Japan, as Japanese investors
repatriate funds.
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (Unaudited)
1/11/93 - 12/31/96
- ----------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 Year 3 Year Life of Fund
6.36% 4.16% 12.80%
- ----------------------------------
CIGNA Lipper
Point of International EAFE Index - International
Measurement Stock Fund Total Return Funds
----------- ---------- ------------ -----
1/11/93 $10,000 $10,000 $10,000
12/31/93 $14,273 $13,940 $13,256
12/31/94 $14,669 $14,521 $14,287
12/31/95 $15,167 $15,887 $15,889
12/31/96 $16,132 $17,754 $16,850
- --------------------------------------------------------------------------------
CIGNA International Stock Fund's performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions, and changes in
net asset value. The Fund does not charge a sales load. The Fund's investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Past performance
cannot guarantee comparable future results. The Fund's performance has been
compared with the total return performance for the Morgan Stanley Capital
Markets Europe, Australia, Far East Index (EAFE) and with the Lipper
International Funds. The EAFE index performance does not reflect brokerage
charges or other investment expenses. The Lipper International Funds average
total return consists of funds which invest their assets in securities whose
primary trading markets are outside the United States. The average total return
is reduced by brokerage charges, advisory fees and other fund expenses.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES AND EQUIVALENTS - 90.5%
ARGENTINA - 0.6%
YPF Sociedad Anomima ADR** (Oil & Gas) 2,000 $ 50,500
------------------
AUSTRALIA - 5.6%
Ausmelt Ltd. (Metal) 15,000 35,768
Burns Philip Co. (Food & Household Products) 25,000 44,512
Crown Casino Ltd. (Leisure) Warrants* 50,000 16,096
Deepgreen Minerals (Mining) 200,000 3,974
Fosters Brewing Group (Brewing) 40,000 81,075
Highlands Gold Ltd. (Mining) 88,000 51,761
Meekatharra Minerals (Mining)* 150,000 53,652
Star Mining Corp. (Mining)* 370,000 30,880
Westpac Banking Co. (Banking) Warrants* 30,000 132,342
------------------
450,060
------------------
CHILE - 0.3%
Compania de Telecomucicacion ADR** (Telecommunication) 250 25,281
------------------
DENMARK - 2.3%
ALM Brand (Insurance) 600 18,334
BG Bank (Banking) 1,250 58,566
Novo Nordisk AS (Pharmaceuticals) 225 42,396
Tele Danmark AS (Telecommunication) 1,250 68,963
------------------
188,259
------------------
FRANCE - 4.4%
Ass Generale de France (Insurance) 1,000 32,283
AXA (Insurance) 742 47,193
Carrefour (Food Retailing) 85 55,307
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Credit Commerciale de France (Banking) 815 $ 37,699
ELF Aquitaine (Oil) 615 55,982
LVMH Moet Hennessy (Luxury Goods) 180 50,269
Lyonnaise Des Eaux (Water Utility) 410 38,159
Societe Generale de Banque (Banking) 345 37,303
------------------
354,195
------------------
GERMANY - 4.7%
Allianz AG Holdings (Insurance) 25 45,490
Basf AG (Chemicals) 1,000 38,524
Bayer AG (Chemicals) 800 32,649
Commerzbank AG (Banking) 1,300 33,032
Daimler Benz AG (Multi - Industry)* 800 55,108
Deutsche Bank AG (Banking) 900 42,052
Deutsche Telekom (Telecommunication) 2,907 61,302
Dresdner Bank AG (Banking) 1,500 44,938
Merrill Lynch Outperformance (Banking) Warrants* 2,500
358
Siemens AG (Electricals & Electronics) 500 23,557
------------------
377,010
------------------
HONG KONG - 6.4%
Cheung Kong (Real Estate) 15,000 133,331
Cheung Kong Infras (Building Heavy Construction) 32,000 84,815
China Res Beijing (Real Estate) 150,000 95,029
HSBC Holdings (Banking) 2,892 61,882
Hang Seng Bank (Banking) 5,000 60,767
Hutchison Whampoa Ltd. (Conglomerate) 10,000 78,544
------------------
514,368
------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ITALY - 2.1%
Credito Italiano (Banking) 32,650 $ 35,857
Eni SPA (Oil) 7,750 39,772
Italgas (Gas Utility) 7,000 29,232
San Paolo (Banking) 2,650 16,246
Telecom Italia (Telecommunication) 18,125 47,075
------------------
168,182
------------------
JAPAN - 27.9%
Asahi Bank (Banking) 6,000 53,363
Bank of Tokyo Mits (Banking)* 5,000 92,824
Bridgestone Corp. (Tire & Rubber) 6,000 113,980
Canon Aptex Inc. (Machinery) 8,800 119,299
Canon, Inc. (Precision Instrument) 5,000 110,526
Catena Corp. (Office Furnishings) 6,000 44,245
CI Kasei Co. (Chemicals) 5,000 32,381
Daifuku Co., Ltd. (Industrial Machinery) 5,000 63,034
Fujitsu Ltd. (Electronics) 8,000 74,605
Ind Bank Japan (Banking) 3,240 56,233
Komori Corp. (Industrial Machinery) 3,000 63,725
Kyocera Corp. (Electronics) 2,000 124,687
Matsumotokiyoshi (Retail Grocery) 4,000 131,249
Matsushita Electric (Electronics) 3,000 48,960
Miroku Joho Service Co., Ltd. (Accounting Soft Services) 4,000 72,878
Mitsubishi Material Corp. (Non-ferrous Metals)* 15,000 60,617
Mitsui Fudosan Co. (Real Estate) 8,000 80,131
Namco (Leisure) 2,000 61,307
Nikko Securities Co., Ltd. (Investments)* 8,000 59,684
Obayashi Road Corp. (Construction) 12,000 61,445
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Omron Corp. (Electrical & Electronic Equipment) 6,000 $ 112,944
Sankyo Co., Ltd. (Machinery) 2,600 76,107
Sanwa Bank Ltd. (Banking) 5,000 68,215
Sony Corp. (Electronics) 2,000 131,077
Tokio Marine & Fire Insurance Ltd. (Insurance)* 7,000 65,884
Tonami Transport (Transportation)* 15,000 81,599
Toyo Communication (Telecommunication) 7,000 104,568
Xebio Co., Ltd. (Retail Trade) 3,000 89,371
------------------
2,254,938
------------------
KOREA - 0.9%
Korea Fund, Inc. (Investment Company) 5,000 75,000
------------------
MALAYSIA - 2.5%
Konsortium Perkapa (Transportation/Marine)* 10,000 67,313
Malaysian Res Corp. (Real Estate) 15,000 59,097
Renong Berhad (Multi - Industry) * 40,000 70,956
Renong Berhad (Multi - Industry) Rights* 8,000 3,358
Renong Berhad (Multi - Industry) Warrants* 5,000 2,455
------------------
203,179
------------------
MEXICO - 1.5%
Cemex (Cement) 6,750 24,352
Desc (Miscellaneous) 2,966 16,201
Desc De C V (Miscellaneous) 10,000 54,624
Telefonos de Mexico ADR** (Telecommunications) 750 24,750
------------------
119,927
------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS - 2.5%
Ing Groep NV (Insurance & Finance) 964 $ 34,730
Kon PTT Nederland (Telecommunication) 350 13,359
Philips Electronic (Electronics) 300 12,163
Royal Dutch Petroleum (Energy) 650 114,037
Unilever NV (Food & Beverage) 180 31,861
------------------
206,150
------------------
NEW ZEALAND - 3.0%
Carter Holt Harvey Ltd. (Forest Products) 33,879 76,883
Fletcher Challenge (Forest Products) 50,000 83,775
Sanford (Agriculture) 11,000 25,663
Zuelig New Zealand Ltd. (Miscellaneous) 121,000 54,747
------------------
241,068
------------------
NORWAY - 1.1%
Hafslund ASA (Energy) 1,000 7,294
Norsk Hydro (Energy) 1,000 53,546
Saga Petroleum (Energy) 2,000 33,059
------------------
93,899
------------------
SINGAPORE - 4.7%
City Developments Ltd. (Real Estate) 5,000 45,023
Comfort Group (Transportation) 50,000 44,308
Electronic Resources (Electronics) 30,000 35,375
Electronic Resources (Electronics) Warrants* 9,000 5,306
Keppel Corp., Ltd. (Conglomerate) 5,000 38,948
Overseas-Chinese Banking Corp., Ltd. (Banking) 2,300 28,600
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Singapore Airlines Ltd. (Airline) 2,000 $ 18,152
Sing Techs Automotive (Automobile) 24,000 53,512
United Overseas Bank Ltd. (Banking) 4,000 44,594
United Overseas Land Ltd. (Real Estate) 15,000 22,833
United Overseas Land Ltd. (Real Estate) Warrants* 1,500 906
Wing Tai Holdings (Real Estate) 15,000 42,878
------------------
380,435
------------------
SOUTH AFRICA - 0.5%
Western Area Gold Mining (Mining) 3,000 41,359
------------------
SPAIN - 1.6%
Banco Bilbao Vizcaya (Banking) 450 24,298
Iberdrola SA (Utility) 2,700 38,267
Repsol SA (Energy) 815 31,263
Telefonica De Esp (Telecommunication) 1,400 32,513
------------------
126,341
------------------
SWEDEN - 1.1%
Assi Doman (Forest Products) 1,500 41,789
Astra AB (Pharmaceuticals) 1,000 49,414
------------------
91,203
------------------
SWITZERLAND - 2.8%
CS Holding (Banking) 350 35,954
Nestle SA (Food & Household Products) 35 37,576
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Novartis AG (Health & Personal Care) 35 $ 40,086
Roche Holdings AG (Health & Personal Care) 10 77,811
Schweiz Bankverein (Banking) 200 38,028
------------------
229,455
------------------
THAILAND - 1.6%
Industrial Finance Corp. (Financial Services) 20,000 53,420
PTT Exploration & Production (Oil/Gas) 5,000 72,136
------------------
125,556
------------------
UNITED KINGDOM - 12.2%
Associated British Ports Holdings PLC (Transportation) 4,000 19,599
BAT Industries PLC (Tobacco) 10,250 84,992
BTR PLC (Diversified) Warrants* 229
24
British Telecommunications PLC (Telecommunication) 10,500 71,055
Burton Group (Merchandising) 27,000 72,623
Cadbury Schweppes (Beverages & Tobacco) 10,000 84,461
Glaxo Holdings PLC (Pharmaceutical) 5,000 81,378
Grand Metropolitan (Spirit & Wines) 8,000 62,772
Hanson PLC (Diversified) 16,700 23,461
Imperial Tobacco (Bevarages & Tobacco) 1,670 10,815
Land Securities (Real Estate) 10,000 127,805
Prudential Corp. PLC (Life Assurance) 16,200 136,550
Reuters Holdings (Media) 7,300 93,861
Zeneca Group (Health & Personal Care) 4,000 112,729
------------------
982,125
------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES - 0.1%
Millenium Chemicals (Chemicals) 238 $ 4,225
------------------
VENEZEULA - 0.1%
Corimon C A S A C A ADR** (Pollution Control) 1,000 1,125
------------------
TOTAL INVESTMENTS IN SECURITIES - 90.5%
(Total Cost - $6,660,550) 7,303,840
Cash and Other Assets Less Liabilities - 9.5% 765,607
------------------
NET ASSETS - 100.0%
(equivalent to $11.48 per share based on 702,608
shares outstanding) $ 8,069,447
==================
</TABLE>
* Non-income Producing Securities.
** An American Depository Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (Cost - $6,660,550) $ 7,303,840
Foreign currency (Cost - $484,346) 481,381
Cash on deposit with custodian 265,238
Dividends receivable 13,461
Receivable for investments sold 28,158
Receivable from advisor 9,135
Investment for deferred compensation plan (Cost - $11,971) 13,844
Other assets 1,175
------------------
TOTAL ASSETS 8,116,232
------------------
LIABILITIES:
Payable for deferred compensation plan 13,844
Other accrued expenses 32,941
------------------
TOTAL LIABILITIES 46,785
------------------
NET ASSETS (applicable to 702,608 shares of beneficial interest with par value
of $.001 per share issued and
outstanding; unlimited number of shares authorized) $ 8,069,447
==================
Shares outstanding 702,608
==================
Net asset value, offering price and redemption price per share $ 11.48
==================
COMPONENTS OF NET ASSETS:
Capital paid in $ 7,424,892
Distributions in excess of net investment income (52,695)
Net unrealized appreciation of investments, deferred
compensation plan, foreign currencies and other net assets. 642,388
Accumulated net realized gain on investments 54,862
------------------
NET ASSETS $ 8,069,447
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<S> <C>
CIGNA INTERNATIONAL STOCK FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME
INCOME:
Dividends (net of foreign taxes withheld of $20,018) $ 137,980
Interest
78
------------------
138,058
EXPENSES:
Custodian fees and expenses 81,000
Investment advisory fees 63,000
Auditing and legal fees 26,799
Administrative services 17,987
Other 16,614
------------------
Total expenses 205,400
Less expenses waived by investment advisor (116,870)
------------------
Net expenses 88,530
------------------
NET INVESTMENT INCOME 49,528
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCIES AND OTHER NET ASSETS:
Net realized gain from securities transactions 329,447
Net realized gain on foreign currencies and forward
foreign exchange contracts 32,064
Net unrealized appreciation of investments 85,202
Net unrealized depreciation of foreign currencies and
other net assets (7,869)
------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCIES AND OTHER NET ASSETS 438,844
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 488,372
==================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 49,528 $ 26,379
Net realized gain from securities transactions
and foreign currency transactions 361,511 357,599
Net unrealized appreciation (depreciation) of
investments, deferred compensation plan,
foreign currencies and other net assets 77,333 (137,808)
------------------ ------------------
Net increase in net assets from operations 488,372 246,170
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (54,926) (26,379)
In excess of net investment income (84,848) (143,621)
From net realized capital gains (195,624) (388,162)
------------------ ------------------
Total distributions to shareholders (335,398) (558,162)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS:
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 335,398 558,162
------------------ ------------------
Net increase from capital share transactions 335,398 558,162
------------------ ------------------
Net increase in net assets 488,372 246,170
NET ASSETS:
Beginning of period 7,581,075 7,334,905
------------------ ------------------
End of period (including overdistributed net investment
income of $52,695 and $131,871, respectively) $ 8,069,447 $ 7,581,075
================== ==================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA International Stock Fund (the "Fund")
was organized as the sole series of CIGNA Institutional Funds Group, a
Massachusetts business trust (the "Trust") on August 10, 1992 and is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's objective is to provide long-term
growth of capital by investing primarily in common stocks, preferred stocks and
convertible debt of companies based outside the United States. 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 - Equity securities, including warrants, that are listed
on a United States or foreign securities exchange are valued at the last sale
price or, if there is no such price available, at the last bid price. Portfolio
securities that are traded on foreign securities exchanges are generally valued
at the preceding closing prices of such securities on their respective
exchanges. A security that is listed or traded on more than one exchange is
valued on the exchange determined to be the primary market for such security by
the Board of Trustees or its delegates. Other equity securities traded in the
over-the-counter market, including listed securities whose primary markets are
believed to be over-the-counter, are valued at the most recent bid price which
may be based on valuations furnished from a pricing service or from independent
securities dealers. Short-term investments with remaining maturities of up to
and including 60 days are valued at amortized cost, which approximates market.
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 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 or when such information
becomes available, and interest income is recorded on the accrual basis.
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, if any, 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 characterization of
certain income and capital gains distributions are determined in accordance 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. CURRENCY TRANSLATION AND FORWARD CURRENCY CONTRACTS - Foreign currency
amounts are translated into U.S. dollars at the prevailing exchange rates as
follows: assets and liabilities at the rate of exchange at the end of the
period, purchases and sales of securities and expenses at the rate of exchange
prevailing on the dates of such transactions. The Fund from time to time may
enter into foreign currency transactions to convert to and from different
foreign currencies and to convert foreign currencies to and from the U.S.
dollar. The Fund enters into these transactions either on a spot basis at the
spot rate prevailing in the foreign currency exchange market or uses forward
currency exchange contracts to purchase or sell foreign currencies. Realized and
unrealized gains and losses on foreign currency transactions represent foreign
exchange gains and losses arising from the sale of holdings of foreign
currencies, foreign currency exchange rate fluctuations between trade dates and
settlement dates on securities transactions, and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amount actually received.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND Notes to Financial Statements (Continued)
2. 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 0.80% applied to the average daily net assets of
the Fund. CII has voluntarily agreed to reimburse such portion of its fee and
absorb other expenses as is necessary to cause the total annual operating
expenses of the Fund not to exceed 1.10% of the Fund's average daily net assets
(1.25% prior to July 1, 1996).
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 year ended December 31, 1996,
the Fund paid or accrued $17,987.
CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
3. 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.
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, aggregated $4,496,645 and $5,035,333,
respectively, for the year ended December 31, 1996. As of December 31, 1996, the
cost of securities for Federal income tax purposes was $6,715,697. At December
31, 1996, unrealized appreciation for Federal income tax purposes aggregated
$588,143, of which $1,348,582 related to appreciated securities and $760,439
related to depreciated securities.
5. CAPITAL STOCK. The Fund offers an unlimited number of shares of beneficial
interest with a par value of $.001 per share. All of the shares outstanding at
December 31, 1996 were owned by the Century Indemnity Company. The only
transaction in capital stock for the period from January 1, 1995 to December 31,
1996 was the reinvestment of a dividend and distribution in the amount of
$335,398 and $558,162 in 29,723 and 49,745 additional shares on December 31,
1996 and December 29, 1995, respectively.
6. POST OCTOBER LOSSES. Under current tax law, certain net long-term 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
will elect to defer losses of $19,663 occurring between November 1, 1996 and
December 31, 1996.
<PAGE>
CIGNA INTERNATIONAL STOCK FUND Notes to Financial Statements (Continued)
7. FINANCIAL HIGHLIGHTS. The following selected per share data is computed on
the basis of a share outstanding throughout each period:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
January 11, 1993
Year Ended December through
31,
1996 1995 1994 December 31, 1993*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.27 $ 11.77 $ 13.21 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income** 0.08 0.15 0.04 0.09
Net realized and unrealized gains on securities
transactions, foreign currencies and forward
foreign exchange contracts 0.62 0.23 0.33 4.18
----- ----- ----- ----
TOTAL FROM INVESTMENT OPERATIONS 0.70 0.38 0.37 4.27
----- ----- ----- ----
LESS DISTRIBUTIONS:
Distributions from net investment income (0.08) (0.15) (0.04) (0.09)
Distributions in excess of net investment income (0.12) (0.12) - (0.02)
Distributions from capital gains (0.29) (0.61) (1.77) (0.95)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.49) (0.88) (1.81) (1.06)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 11.48 $ 11.27 $ 11.77 $ 13.21
========== ========== ========== ==========
TOTAL INVESTMENT RETURN 6.36% 3.40% 2.77% 42.73%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 8,069 $ 7,581 $ 7,335 7,136
Ratio of operating expenses to average net assets (a) 1.12% 1.14% 1.25% 1.25%
Ratio of net investment income to average net assets (b) 0.63% 0.37% 0.32% 0.75%
Portfolio turnover 60% 63% 63% 66%
Average commission rate*** $ 0.0121
</TABLE>
a. Ratios of expenses to average net assets prior to expense reimbursements
were 2.61%, 2.59%, 2.35% and 2.67%, respectively, for 1996, 1995, 1994 and
1993. Per share expenses prior to reduction were $0.29, $0.28, $0.29 and
$0.30, respectively.
b. Ratios of net investment income to average net assets prior to expense
reimbursements were (0.85)%, (1.08)%, (0.78)% and (0.73)%, respectively,
for 1996, 1995, 1994 and 1993. Per share net investment loss amounts prior
to reduction were $(0.10), $(0.12), $(0.10) and $(0.08), respectively.
* Commencement of operations.
** Net investment income per share has been calculated in accordance with
SEC requirements, with the exception that end of year
accumulated/(overdistributed) net investment income has not been
adjusted to reflect current year permanent differences between
financial and tax accounting.
*** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from
period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission rule
structures may differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of CIGNA International Stock Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CIGNA International Stock Fund (the
"Fund") at December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 14, 1997
