CIGNA VARIABLE PRODUCTS GROUP, 497, 1997-05-02

CIGNA VARIABLE PRODUCTS GROUP
497, 1997-05-02

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CIGNA VARIABLE PRODUCTS GROUP

PROSPECTUS
MAY 1, 1997

Money Market Fund

This prospectus contains information about the mutual fund listed above (the
"Fund") which is a separate portfolio of CIGNA Variable Products Group (the
"Trust"), a Massachusetts business trust.

Shares of the Fund are available and are being marketed exclusively as pooled
funding vehicles for life insurance companies writing variable annuity
contracts and variable life insurance contracts ("Variable Contracts") and for
qualified retirement and pension plans ("Qualified Plans").

This prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund, contained in a Statement of Additional Information dated May 1,
1997, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Fund at 950 Winter
Street, Suite 1200, Waltham, Massachusetts 02154. The Fund's telephone number
is (860) 726-3700. The Statement of Additional Information is incorporated by
reference into this prospectus. The Statement of Additional Information is not
a prospectus.

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Please read this prospectus and retain it for future reference.

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MUTUAL FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE MONEY MARKET FUND SEEKS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, HOWEVER, THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.

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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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CIGNA VARIABLE PRODUCTS GROUP

SUMMARY

The Trust is an open-end, diversified management investment company offering a
selection of investment vehicles for insurance companies issuing variable
annuity and variable life insurance contracts and for Qualified Plans. This
prospectus offers one fund of the Trust, the Money Market Fund.

The Fund has its own distinct investment objective. Although the Fund will be
managed by experienced professionals, there can be no assurance that the
objective will be achieved. The Money Market Fund seeks to obtain its objective
by investing in high quality, U.S. dollar denominated short-term money market
instruments.

There are risks involved with the Fund. Investments in money market instruments
are subject to the ability of the issuer to make payment at maturity. See
"Certain Investments Strategies and Policies" for a discussion of these risks.

Shares of the Fund are sold at their net asset value per share, without sales
charge. Please read your insurance company's separate account prospectus or
your Qualified Plan's documents for discussions relating to instructions on how
to invest in and redeem from the Fund.

CIGNA Investments, Inc. (CIGNA Investments), the Fund's adviser, provides the
Fund with investment management and other services. The Fund pays CIGNA
Investments a management fee for the management of investments and business
affairs. For a discussion of this, please see "Management of the Fund."

The investment objective of the Fund is deemed to be a fundamental policy which
may not be changed without the approval of a majority of the Fund's outstanding
shares (within the meaning of the Investment Company Act of 1940 (the 1940
Act)). Further information is available in the Statement of Additional
Information.

No one fund is a balanced investment plan. Investors should consider their
investment objective and tolerance for risk when making an investor decision.

The above information is qualified in its entirety by the detailed information
appearing elsewhere in this prospectus, the statement of additional
information, and, as applicable, the Variable Account prospectus or Qualified
Plan documents.

TABLE OF CONTENTS

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PAGE
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<S> <C>
SUMMARY.................................................................... 2
EXPENSE TABLE.............................................................. 3
FINANCIAL HIGHLIGHTS....................................................... 4
ABOUT THE FUND............................................................. 5
INVESTMENT PROGRAMS........................................................ 5
CERTAIN INVESTMENT STRATEGIES AND POLICIES................................. 6
INVESTMENT RESTRICTIONS.................................................... 6
ELIGIBLE PURCHASERS........................................................ 7
PURCHASE AND REDEMPTION OF SHARES OF THE FUND.............................. 7
COMPUTATION OF NET ASSET VALUE............................................. 7
DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS................................ 8
TAX MATTERS................................................................ 8
MANAGEMENT OF THE FUND..................................................... 9
PERFORMANCE................................................................ 9
THE TRUST, ITS SHARES AND BOARD OF TRUSTEES................................ 10
APPENDIX--DESCRIPTION OF MONEY MARKET INSTRUMENTS.......................... 11
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</TABLE>

2
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EXPENSE TABLE

The following Expense Table lists the transaction expenses and approximate
annual operating expenses related to an investment in the Fund. The Table does
not reflect charges and deductions which are or may be imposed under Variable
Contracts or Qualified Plans. Please refer to the applicable Variable Contract
prospectus or Qualified Plan documents for such charges. The expenses and fees
set forth in the Table are for the fiscal year beginning January 1, 1997.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
MONEY
MARKET FUND
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<S> <C>
Sales Load Imposed on Purchases.................................... None
Sales Load Imposed on Reinvested Dividends......................... None
Redemption Fees.................................................... None
Exchange Fees...................................................... None
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
MONEY
MARKET FUND
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<S> <C>
Management Fees
Investment Management Fees/1/...................................... .35%
12b-1 Fees.......................................................... None
All Other Operating Expenses
(After Reimbursement)/1/........................................... .15%
Total Fund Operating Expenses
(Reflects expense limitation. See Footnotes/1/ and/2/ below)....... .50%
</TABLE>
- -------
/1For/a more complete description of the Management Fees, see "Management of
the Trust." CIGNA Investments has voluntarily agreed to waive such portion of
its management fee as is necessary to cause the annual Total Fund Operating
Expenses of the Fund not to exceed 0.50% of the Fund's average daily net
asset value. If this waiver is not sufficient to cause the annual Total Fund
Operating Expenses of the Fund not to exceed 0.50% of average daily net asset
value, CIGNA Investments has agreed to pay such other expenses of the Fund as
is necessary to keep annual Total Fund Operating Expenses from exceeding this
percentage. These arrangements will continue in effect until May 1, 1998, and
afterwards to the extent described in the Fund's then-current prospectus. To
the extent management fees are waived by CIGNA Investments, or expenses of
the Fund are paid by CIGNA Investments, the total return to shareholders will
increase. Total return to shareholders will decrease to the extent management
fees are no longer waived or expenses of a Fund are no longer paid.

/2Total/Fund Operating Expenses for the Money Market Fund for the period from
March 1, 1996 (commencement of operations) to December 31, 1996, absent
expense reimbursement, were 1.28% (1.53% annualized) of the Fund's average
daily net asset value. Other Operating Expense and Total Fund Operating
Expenses reflect the current voluntary expense limitation effective January
1, 1997.

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FINANCIAL HIGHLIGHTS

The following financial highlights of the Money Market Fund for a share
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants, whose report on the financial statement including this
information was unqualified. This information should be read in conjunction
with the Fund's financial statements and notes thereto, which, together with
the remaining portions of the Fund's 1996 Annual Report to Shareholders, are
incorporated by reference in the Statement of Additional Information and in
this Prospectus, and which appear, along with the report of Price Waterhouse
LLP, in the Fund's 1996 Annual Report to Shareholders. For a more complete
discussion of the Fund's performance, please see the Fund's 1996 Annual Report
to Shareholders which may be obtained without charge by writing to the Fund or
calling (860) 726-3700.

--------------
Money Market Fund
--------------

<TABLE>
<CAPTION>
MARCH 1 1996+ TO
DECEMBER, 31 1996
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<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................... $ 1.00
Income from investment operations
Net investment income......................................... 0.04
Net realized and unrealized gain on securities................ --
------
Total from investment operations.............................. 0.04
------
Less Distributions:
Dividends from net investment income.......................... (0.04)
Distributions from capital gains.............................. --
------
Total Distributions........................................... (0.04)
------
Net asset value, end of period................................ $ 1.00
------
Total Return.................................................. 4.18%*
Ratios and Supplemental Data:
Net assets, end of period (000 omitted)....................... $6,003
Ratio of operating expenses to average net assets............. 0.42%**
Ratio of net investment income to average net assets.......... 4.10%***
Portfolio turnover............................................ N/A
</TABLE>

+ Commencement of operations
* 4.99% annualized.
** 0.50% annualized. Ratio of expenses to average net assets prior to
reimbursement of expenses was 1.28% (1.53% annualized).
*** 4.90% annualized. Ratio of investment income to average net assets prior to
reimbursement of expense was 3.24% (3.87% annualized).

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ABOUT THE FUND
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The Fund is a separate series of CIGNA Variable Products Group, a Massachusetts
business trust established by a Master Trust Agreement dated February 4, 1988
and registered under the 1940 Act as a diversified, open-end management
investment company (see "The Trust, Its Shares and Board of Trustees"). The
Fund has its own investment objective and policies designed to meet specific
investment goals. The Fund intends to qualify as a regulated investment company
for Federal income tax purposes. Its sole purpose is to serve as a funding
vehicle for the investment of monies paid by holders of Variable Contracts
issued through separate accounts of life insurance companies ("Life Companies")
or by Qualified Plans. Historically, the Variable Contracts have been issued by
Connecticut General Life Insurance Company ("CG Life"), an indirect, wholly-
owned subsidiary of CIGNA Corporation. CIGNA Corporation is an insurance and
financial services holding company. The Fund may also serve as a funding
vehicle for Variable Contracts issued by other life insurance companies
affiliated with CIGNA Corporation or by life insurance companies which may be
unaffiliated with CIGNA Corporation.

The Trust does not foresee any disadvantage to Variable Contract owners arising
out of the fact that the Trust offers its shares for products offered by Life
Companies which may or may not be affiliated with each other or that it offers
its shares to Qualified Plans. Nevertheless, the Trust's Board of Trustees
intends to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise between Variable Contract owners and
participants under Qualified Plans and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one or more
Life Company separate accounts or Qualified Plans might withdraw its investment
in the Trust. This might force the Trust to sell portfolio securities at
disadvantageous prices.

Shares are offered only to Eligible Purchasers (see "Eligible Purchasers").
Shares are offered at net asset value without the imposition of a sales load,
sales charge or selling commission.

INVESTMENT PROGRAMS
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The Fund's objective is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity and the maintenance
of a stable $1.00 per share net asset value by investing in short-term money
market instruments. The Fund intends to invest in money market instruments such
as U.S. Government direct obligations and U.S. Government agencies' securities.
In addition, the Fund may invest in other money market instruments such as
bankers' acceptances, certificates of deposit, commercial loan participations,
repurchase agreements, time deposits and commercial paper, all of which will be
denominated in U.S. dollars. Bankers' acceptances, certificates of deposit and
time deposits may be purchased from U.S. or foreign banks. Commercial paper is
purchased primarily from U.S. issuers but may be purchased from foreign issuers
so long as it is denominated in U.S. dollars. All of these instruments,
including commercial loan participations, are briefly described in "Description
of Money Market Instruments" and are described more fully in the Statement of
Additional Information.

Pursuant to procedures adopted by the Board of Trustees, the Fund may purchase
only high quality securities that CIGNA Investments believes present minimal
credit risks. To be considered high quality, a security must be a U.S.
government security or must be rated in accordance with applicable rules in one
of the two highest categories for short-term securities by at least two
nationally recognized rating services (or by one, if only one rating service
has rated the security) or, if unrated, judged to be of equivalent quality by
CIGNA Investments.

High quality securities are divided into "first tier" and "second tier"
securities. First tier securities have received the highest rating (e.g.
Standard & Poor's Corporation's (S&P) A-1 rating) from at least two rating
services (or one, if only one has rated the security). Second tier securities
have received ratings within the two highest categories (e.g., S&P's A-1 or A-
2) from at least two rating services (or one, if only one has rated the
security), but do not qualify as first tier securities. If a security has been
assigned different ratings by different rating services, at least two rating
services must have assigned the highest rating in

5
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order for CIGNA Investments to determine eligibility on the basis of that
highest rating. Based on procedures adopted by the Board of Trustees, CIGNA
Investments may determine that an unrated security is of equivalent quality to
a rated first or second tier security.

The Fund may not invest more than 5% of its total assets in second tier
securities. In addition, the Fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the second tier securities of a
single issuer.

The Fund will limit its investments to securities with remaining maturities of
397 days or less and will maintain a dollar-weighted average maturity of 90
days or less.

CERTAIN INVESTMENT STRATEGIES AND POLICIES
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In pursuit of its objectives and policies, the Fund may employ the following
strategies.

MONEY MARKET INSTRUMENTS. The Money Market Fund invests exclusively in Money
Market Instruments. The Money Market Fund is required to limit such investments
to those which, at the date of purchase, are "First Tier" or "Second Tier"
securities as those terms are defined in Rule 2a-7 under the 1940 Act.

SECURITIES LENDING. The Fund may lend its investment securities to qualified
institutional investors for purposes of realizing additional income. Loans of
securities by the Fund will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. Government or its agencies. The
collateral will equal at least 100% of the current market value of the loaned
securities.

INVESTMENT RESTRICTIONS
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The following summarizes the Fund's principal investment restrictions. Unless
otherwise noted, these restrictions are fundamental and may not be changed
without the approval of the lesser of (i) more than 50% of the outstanding
shares of the Fund or (ii) 67% or more of the shares of the Fund present at a
meeting if more than 50% of the outstanding shares of that Fund are represented
at the meeting in person or by proxy (see "The Trust, Its Shares and Board of
Trustees" for a description of the individual's rights with respect to giving
voting instructions to Life Companies).

Any investment restriction that involves a maximum or minimum percentage of
securities or assets shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after, and is
caused by, an acquisition or disposition of securities or utilization of assets
by the Fund.

The Fund may not:

1. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund taken at current value
would be invested in the securities of such issuer, except (a) bank
certificates of deposit and obligations issued or guaranteed as to interest and
principal by the U.S. Government or its agencies or instrumentalities, and (b)
up to 25% of the Fund's total assets taken at current value may be invested
without regard to such 5% limitation in bankers' acceptances in which the Fund
may invest consistent with its investment policies.

2. Acquire more than 10% of the voting securities of any issuer or more than
10% of any class of securities of any issuer. (For these purposes, all
preferred stocks of any issuer are regarded as a single class, and all debt
securities of an issuer are regarded as a single class.)

3. Concentrate more than 25% of its assets in any one industry, except that the
Fund may invest up to 100% of its assets in the domestic banking industry.

4. Borrow money in excess of one-third of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made, and then only as a temporary measure to
facilitate the meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio investments or for
extraordinary or emergency purposes. Such borrowings will be repaid before any
additional investments are made. Interest paid on such borrowings would reduce
the yield on the Fund's

6
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investments. (The Board of Trustees regards this restriction as setting forth
the Trust's policy with respect to the issuance of senior securities.)

ELIGIBLE PURCHASERS
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Shares may be purchased only by Eligible Purchasers. Eligible Purchasers are
limited to: (1) those separate accounts established by CG Life or by other Life
Companies that are registered as unit investment trusts under the Investment
Company Act of 1940, as amended, and that serve as the underlying investment
vehicles for Variable Contracts; (2) Qualified Plans; and (3) Connecticut
General Life Insurance Company (on behalf of Connecticut General Life Insurance
Company Field Individual Deferred Compensation Plan) ("CG Life Field Plan").
Thus, Eligible Purchasers who have purchased Fund shares are the only
shareholders. Shares may not be purchased by individuals or by the general
public. The Board of Trustees of the Trust may broaden or limit the definition
of Eligible Purchasers. Purchase of shares is subject to acceptance by the
Trust and is not binding until so accepted.

PURCHASE AND REDEMPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
Shares of the Fund are sold exclusively to and redeemed by Eligible Purchasers
on a continuous basis.

Purchase and redemption orders received by Life Companies and Qualified Plans
on a given business day from Variable Contract owners or Qualified Plan
participants, as the case may be, will be effected at the net asset value of
the Fund on such business day if the orders are received by the Fund in proper
form and in accordance with applicable requirements on the next business day.
It is each Eligible Purchaser's responsibility to properly transmit purchase
and redemption orders and payments in accordance with applicable requirements.
Individuals may not place orders directly with the Fund. The Fund does not
issue share certificates. Please refer to the prospectus of your Life Company's
separate account or Qualified Plan documents for information on how to invest
in the Fund.

Investments by Eligible Purchasers in the Fund are expressed in terms of full
and fractional shares of the Fund. All investments in the Fund are credited to
an Eligible Purchaser's account immediately upon acceptance of the investment
by the Fund.

The offering of shares of any Fund may be suspended for a period of time and
each Fund reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in CIGNA Investments's opinion, they are of a size
that would disrupt the management of a Fund.

VALUATION OF MONEY MARKET INVESTMENTS
- --------------------------------------------------------------------------------
Money market investments owned by the Fund are valued at amortized cost, which
approximates market value, in accordance with rules adopted by the Securities
and Exchange Commission. Using the amortized cost valuation method allows the
Money Market Fund to maintain its net asset value at $1.00 per share. There is
no assurance that this method will always be used, or if used, that the net
asset value under certain conditions will not deviate from $1.00 per share. If
the Board of Trustees deems it inadvisable to continue the practice of
maintaining the net asset value of $1.00 per share they may alter this
procedure. The

7
<PAGE>

shareholders of the Fund will be notified prior to any such change, unless such
change is only temporary, in which case the shareholders will be notified after
the change. See the Statement of Additional Information for more information on
amortized cost procedures.

DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS
- --------------------------------------------------------------------------------
It is expected that shares of the Fund will be held under the terms of Variable
Contracts or Qualified Plans. Under current tax law, dividends or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a Variable Contract or Qualified Plans. Depending on the Variable
Contract or Qualified Plan, withdrawals from the contracts may be subject to
ordinary income tax and, in addition, to a 10% penalty tax on withdrawals
before age 59 1/2.

The Fund is treated as a separate entity for federal income tax purposes. The
Fund intends to pay out all of its net investment income and net realized
capital gains (if any) for each year. Dividends and net realized capital gains,
if any, from the Fund will be declared and distributed daily.

TAX MATTERS
- --------------------------------------------------------------------------------
The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to take all
other action required to ensure that no Federal income taxes will be payable by
the Fund. As a result, the Fund will generally seek to distribute annually to
Shareholders most or all of any undistributed taxable income and any
undistributed net realized capital gains (after use of any available capital
loss carry forwards). Because of this policy, the Fund does not anticipate
being subject to the 4% excise tax imposed on the undistributed income of
mutual funds.

The Trust was established as the underlying investment for Variable Contracts
issued by the Life Companies. (See "About the Funds")

Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of Variable Contracts held in the Fund. The Code provides
that a Variable Contract shall not be treated as an annuity contract or life
insurance for any period (and any subsequent period) for which the investments
of the underlying mutual fund are not, in accordance with regulations
prescribed by the Treasury Department, adequately diversified. Disqualification
of the Variable Contract as an annuity contract or life insurance would result
in imposition of federal income tax on contract owners with respect to earnings
allocable to the Variable Contract prior to the receipt of payments under the
Variable Contract. Section 817(h)(2) of the Code is a safe harbor provision
which provides that contracts such as the Variable Contracts meet the
diversification requirements if, as of the close of each quarter, the
underlying mutual fund assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consists of cash, cash items, U.S. Government securities and
securities of other regulated investment companies. There is an exception for
securities issued by the Treasury Department in connection with variable life
insurance policies.

On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying Variable Contracts. The Regulations amplify the
diversification requirements for Variable Contracts set forth in Section 817(h)
of the Code and provide an alternative to the safe harbor provision described
above. Under the Regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55 percent of the value of the total assets of
the portfolio is represented by any one investment; (ii) no more than 70
percent of such value is represented by any two investments; (iii) no more than
80 percent of such value is represented by any three investments; and (iv) no
more than 90 percent of such value is represented by any four investments. For
purposes of these Regulations all securities of the same issuer are treated as
a single investment.

The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of Variable
Contracts by Section 817(h) of the Code have been met, "each United

8
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States government agency or instrumentality shall be treated as a separate
issuer."

As indicated elsewhere in this prospectus, Fund shares are also offered for
sale to Qualified Plans. The Regulations also provide that satisfaction of the
requirements of the Regulations shall not be prevented by reason of the fact
that shares in the investment company (i.e., a Fund) may be held by the trustee
of a qualified pension or other retirement plan (i.e., Qualified Plan).

The Fund will be managed in such manner as to comply with these diversification
requirements. It is possible that in order to comply with the diversification
requirements, less desirable investment decisions may be made which would
affect the investment performance of the Fund.

MANAGEMENT OF THE FUND
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The investment adviser to the Fund is CIGNA Investments, an indirect, wholly-
owned subsidiary of CIGNA Corporation. CIGNA Investments also serves as
investment adviser for other investment companies including investment
companies sponsored by affiliates of CIGNA Corporation, and for a number of
pension, advisory, corporate and other accounts. CIGNA Investments and other
affiliates of CIGNA Corporation manage combined assets of approximately $70
billion. CIGNA Investments's mailing address is 900 Cottage Grove Road,
Hartford, Connecticut 06152.

Pursuant to a Master Investment Advisory Agreement the Trust, on behalf of the
Fund, employs CIGNA Investments to manage the investment and reinvestment of
the assets of the Fund. Subject to the control and periodic review of the Board
of Trustees, CIGNA Investments determines what investments shall be purchased,
held, sold or exchanged by the Fund and what portion, if any, of the assets of
the Fund shall be held in cash and other temporary investments. CIGNA
Investments is also responsible for overall management of the business affairs
of the Trust and the Fund.

As full compensation for the investment management and all other services
rendered by CIGNA Investments, the Fund pays CIGNA Investments a separate fee
computed daily and paid monthly at the annual rate of 0.35% of the value of the
Fund's average daily net assets.

The Fund will bear its own expenses. Operating expenses for the Fund generally
consist of investment management fees, custodian fees, fees for necessary
professional and brokerage services, costs of regulatory compliance, costs
associated with maintaining legal existence and all other costs not
specifically borne by CIGNA Investments. Trust-wide expenses not identifiable
to any particular fund of the Trust will be allocated among the various funds
of the Trust. CIGNA Investments has voluntarily agreed to reimburse the Fund to
the extent that the annual operating expenses (excluding interest, taxes,
amortized organizational expense, transaction costs in acquiring and disposing
of portfolio securities and extraordinary expenses) of the Fund exceed 0.50%
percentage of the value of its average daily net assets. The investment
management fee payable in 1996 to CIGNA Investments by the Money Market Fund
was .35% of average daily net assets, and total expenses of this Fund from
March 31, 1996 (inception) to December 31, 1996 were 1.28% of average daily net
assets.

CIGNA Investments investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.

State Street Bank and Trust Company ("State Street"), Boston, Massachusetts
02105 serves as transfer agent and dividend disbursing agent for the Fund.
State Street is also custodian of the assets of the Fund.

From time to time, the Fund may pay brokerage commissions on portfolio
transactions to brokers who may be deemed to be affiliates of CIGNA Corporation
under the 1940 Act, as amended. See the Statement of Additional Information for
further details.

PERFORMANCE
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The Fund's performance may be quoted in advertising in terms of yield and total
return if accompanied by performance of your Life Company's separate account.
Performance is based on historical results and not intended to indicate future
performance. For addi-

9
<PAGE>

tional performance information, contact your Life Company for a free annual
report.

Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in the Fund, assuming the Fund's dividends and
capital gain distributions, if any, are reinvested. A cumulative total return
reflects the Fund's performance over a stated period of time. An average annual
total return reflects the hypothetical annually compounded return that would
have produced the same cumulative total return if the Fund's performance had
been constant over the entire period. Because average annual returns tend to
smooth out variations in the Fund's return, you should recognize that they are
not the same as actual year-by-year results.

Yields and total returns quoted for the Fund include the effect of deducting
the Fund's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Qualified Plan. Since shares of the Fund
may only be purchased by Eligible Purchasers, you should carefully review the
prospectus of the Variable Contract you have chosen or Qualified Plan documents
for information on relevant charges and expenses. Excluding these charges from
quotations of the Fund's performance has the effect of increasing the
performance quoted. You should bear in mind the effect of these charges when
comparing the Fund's performance to that of other mutual funds.

THE TRUST, ITS SHARES AND BOARD OF TRUSTEES
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The Trust is a Massachusetts Business Trust established in 1988. The Board of
Trustees is authorized in the Trust's Master Trust Agreement to create new
series of shares (funds) without the necessity of a vote of shareholders of the
Trust. The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. Currently the
Trust is offering shares of two Funds.

Under the Master Trust Agreement no annual or regular meetings of shareholders
are required. Meetings of shareholders of a series will be held from time to
time to consider matters requiring a vote of such shareholders in accordance
with the requirements of the 1940 Act, state law or the provisions of the
Master Trust Agreement. It is not expected that shareholder meetings will be
held annually.

Except as otherwise provided under the 1940 Act, the Board of Trustees will be
a self-perpetuating body until fewer than two thirds of the Trustees are
Trustees who were elected by shareholders of the Trust. In the event less than
a majority of the Trustees serving as such were elected by shareholders of the
Trust, a meeting of shareholders will be called to elect Trustees. Under the
Master Trust Agreement, any Trustee may be removed by vote of two thirds of the
outstanding Trust shares; holders of 10% or more of the outstanding shares of
the Trust can require that the Trustees call a meeting of shareholders for
purposes of voting on the removal of one or more Trustees.

Shares of the Trust may be owned by the CG Life Field Plan, by separate
accounts of Life Companies or by Qualified Plans (see "About the Funds" and
"Eligible Purchasers"). Pursuant to current interpretations of the 1940 Act,
the Life Companies will solicit voting instructions from contract owners with
respect to any matters that are presented to a vote of shareholders. With
respect to the Qualified Plans, the trustees of such Plans will vote the shares
held by the Qualified Plans, except that in certain cases such shares may be
voted by a named fiduciary or an investment manager pursuant to the Employee
Retirement Income Security Act of 1974. There is no pass-through voting to the
participants in the Qualified Plans.

Shares of the Fund will entitle their holders to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of any other fund of the Trust. On any matter
submitted to a vote of shareholders, all

10
<PAGE>

shares of the Trust then issued and outstanding shall be voted in the
aggregate. However, on matters affecting an individual fund of the Trust, a
separate vote of shareholders of that fund would be required. Shareholders of a
fund would not be entitled to vote on any matter which does not affect that
fund but which would require a separate vote of another fund.

When issued, shares of the Fund are fully paid and nonassessable, and have no
preemptive or subscription rights. There are no conversion rights. Shares do
not have cumulative voting rights, which means that in situations in which
shareholders elect Trustees, holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees of the Trust and the
holders of less than 50% of the shares voting for the election of Trustees will
not be able to elect any Trustees.

Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed on behalf
of the Trust. The Master Trust Agreement provides for indemnification from the
Trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations.

A majority of the Trustees is not affiliated with CIGNA Corporation or any of
its subsidiary companies. The Trustees meet quarterly to review the results of
the Fund, to monitor investment activities and practices, and to review and act
upon future plans for the Fund. The role of the Trustees is not to approve
specific investment purchases and sales, but rather to exercise a control and
review function.

APPENDIX
- --------------------------------------------------------------------------------

DESCRIPTION OF MONEY MARKET INSTRUMENTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT DIRECT OBLIGATIONS--Bills, notes, and bonds issued by the U.S.
Treasury.

U.S. GOVERNMENT AGENCIES SECURITIES--Certain Federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.

BANKERS' ACCEPTANCES--A bill of exchange or time draft drawn on and accepted by
a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.

CERTIFICATES OF DEPOSIT--A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.

TIME DEPOSITS--A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.

COMMERCIAL PAPER--The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues
vary from a few days to nine months.

11
<PAGE>

underlying loan. The loans underlying such participations may be secured or
unsecured, and a Fund may invest in loans collateralized by mortgages on real
property. Each Fund will limit its investments in commercial loan participa-
tions to those which are considered by the Trustees (with the advice of CIGNA
Investments) to be of comparable quality to permitted commercial paper invest-
ments.

REPURCHASE AGREEMENTS--A repurchase agreement is a contractual undertaking
whereby the seller of securities (limited to U.S. Government securities,
including securities issued or guaranteed by the U.S. Treasury or the various
agencies and instrumentalities of the U.S. Government) agrees to repurchase the
securities at a specified price on a future date determined by negotiations.
The repurchase agreement may be considered a loan by a Fund to the issuer of
the agreement, a bank or securities dealer, with the U.S. Government security
serving as collateral for the loan.

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices, such as a Federal Reserve composite index.

12
<PAGE>

Custodian and Transfer Agent: State Street Bank and Trust Company 225 Franklin
Street Boston, Massachusetts 02110

Investment Adviser: CIGNA Investments, Inc. 900 Cottage Grove Road Hartford,
Connecticut 06152

Independent Accountants: Price Waterhouse LLP 160 Federal Street Boston,
Massachusetts 02110

Printed on recycled paper
LOGO

CIGNA VARIABLE PRODUCTS
GROUP

PROSPECTUS
MAY 1, 1997
<PAGE>

CIGNA VARIABLE PRODUCTS GROUP

PROSPECTUS
MAY 1, 1997

MONEY MARKET FUND
S&P 500 INDEX FUND

This prospectus contains information about the two mutual funds listed above
(the "Funds") which are separate portfolios of CIGNA Variable Products Group
(the "Trust"), a Massachusetts business trust. Each Fund has distinct
investment objectives and policies.

The investment objective of the Money Market Fund is to provide as high a level
of current income as is consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value by
investing in short-term money market instruments. The investment objective of
the S&P 500 Index Fund is to provide long-term growth of capital by investing
principally in common stocks.

Shares of the Funds are available and are being marketed exclusively as pooled
funding vehicles for life insurance companies writing variable annuity
contracts and variable life insurance contracts ("Variable Contracts") and for
qualified retirement and pension plans ("Qualified Plans").

This prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Additional information
about the Funds, contained in a Statement of Additional Information dated May
1, 1997, has been filed with the Securities and Exchange Commission and is
available upon request without charge by writing to the Funds at 950 Winter
Street, Suite 1200, Waltham, Massachusetts 02154. The Funds' telephone number
is (860) 726-3700. The Statement of Additional Information is incorporated by
reference into this prospectus. The Statement of Additional Information is not
a prospectus.

- --------------------------------------------------------------------------------

Please read this prospectus and retain it for future reference.
- --------------------------------------------------------------------------------

MUTUAL FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERN-
MENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE, HOWEVER, THERE CAN BE NO ASSURANCE THAT THE
MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.

CIGNA VARIABLE PRODUCTS GROUP

SUMMARY

The Trust is an open-end, diversified management investment company offering a
selection of investment vehicles for insurance companies issuing variable annu-
ity and variable life insurance contracts and for Qualified Plans. This pro-
spectus offers two Funds of the Trust. Your Variable Contract may offer one or
more of the Funds offered by this prospectus.

Each Fund has its own distinct investment objective. Although each Fund will be
managed by experienced professionals, there can be no assurance that the objec-
tive will be achieved. The Money Market Fund seeks to obtain its objective by
investing in high quality, U.S. dollar denominated short-term money market in-
struments. The S&P 500 Index Fund seeks to obtain its objective by attempting
to replicate the composition and total return, reduced by Fund expenses, of the
S&P 500.

There are levels of risk involved with each Fund. Investments in money market
instruments are subject to the ability of the issuer to make payment at maturi-
ty. For equity securities, there is the market risk associated with movement of
the stock market in general. In addition, there is the financial risk related
to earnings stability and overall financial soundness of individual issuers and
of issuers collectively which are a part of a particular industry. See "Certain
Investments Strategies and Policies" for a discussion of these risks.

Shares of the Funds are sold at their net asset value per share, without sales
charge. Please read your insurance company's separate account prospectus or
your Qualified Plan's documents for discussions relating to instructions on how
to invest in and redeem from each Fund.

CIGNA Investments, Inc. (CIGNA Investments), the Funds' adviser, provides each
Fund with investment management and other services. Each Fund pays CIGNA In-
vestments a management fee for the management of investments and business af-
fairs. For a discussion of these, please see "Management of the Funds."

The investment objective of each Fund is deemed to be a fundamental policy
which may not be changed without the approval of a majority of each Fund's out-
standing shares (within the meaning of the Investment Company Act of 1940 (the
1940 Act)). Further information is available in the Statement of Additional In-
formation.

No one Fund is a balanced investment plan. Investors should consider their in-
vestment objective and tolerance for risk when making an investor decision.

The above information is qualified in its entirety by the detailed information
appearing elsewhere in this prospectus, the statement of additional informa-
tion, and, as applicable, the Variable Account prospectus or Qualified Plan
documents.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................... 2
EXPENSE TABLE.............................................................. 3
FINANCIAL HIGHLIGHTS....................................................... 4
ABOUT THE FUNDS............................................................ 5
INVESTMENT PROGRAMS........................................................ 6
CERTAIN INVESTMENT STRATEGIES AND POLICIES................................. 7
INVESTMENT RESTRICTIONS.................................................... 9
ELIGIBLE PURCHASERS........................................................ 10
PURCHASE AND REDEMPTION OF SHARES OF THE FUNDS............................. 10
COMPUTATION OF NET ASSET VALUE............................................. 10
DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS................................ 11
TAX MATTERS................................................................ 11
MANAGEMENT OF THE FUNDS.................................................... 12
PERFORMANCE................................................................ 13
THE TRUST, ITS SHARES AND BOARD OF TRUSTEES................................ 14
APPENDIX--DESCRIPTION OF MONEY MARKET INSTRUMENTS.......................... 15
</TABLE>

- --------------------------------------------------------------------------------

2
<PAGE>

EXPENSE TABLE

The following Expense Table lists the transaction expenses and approximate
annual operating expenses related to an investment in each of the Funds. The
Table does not reflect charges and deductions which are or may be imposed under
Variable Contracts or Qualified Plans. Please refer to the applicable Variable
Contract prospectus or Qualified Plan documents for such charges. The expenses
and fees set forth in the Table are for the fiscal year beginning January 1,
1997.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ALL SERIES
- --------------------------------------------------------------------------------
<S> <C>
Sales Load Imposed on Purchases...................................... None
Sales Load Imposed on Reinvested Dividends........................... None
Redemption Fees...................................................... None
Exchange Fees........................................................ None
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
MONEY S&P 500
MARKET INDEX
- --------------------------------------------------------------------------------
<S> <C> <C>
Management Fees
Investment Management Fees/1/................................... .35% .25%
12b-1 Fees....................................................... None None
All Other Operating Expenses
(After Reimbursement)/1/........................................ .15% None
Total Fund Operating Expenses
(Reflects expense limitation. See Footnotes/1/ and/2/ below).... .50% .25%
</TABLE>
- -------
/1For/a more complete description of the Management Fees, see "Management of
the Trust." CIGNA Investments has voluntarily agreed, as to each Fund, to
waive such portion of its management fee as is necessary to cause the annual
Total Fund Operating Expenses of each Fund not to exceed the following
percentages of each of the Fund's average daily net asset value:

<TABLE>
<S> <C>
Money Market Fund..................................................... .50%
S&P 500 Index Fund.................................................... .25%
</TABLE>

If this waiver is not sufficient to cause the annual Total Fund Operating
Expenses of any Fund not to exceed the applicable percentage of average daily
net asset value, CIGNA Investments has agreed to pay such other expenses of
the applicable Fund as is necessary to keep annual Total Fund Operating
Expenses from exceeding the applicable percentage. These arrangements will
continue in effect until May 1, 1998, and afterwards to the extent described
in the Funds' then-current prospectus. To the extent management fees are
waived by CIGNA Investments, or expenses of a Fund are paid by CIGNA
Investments, the total return to shareholders will increase. Total return to
shareholders will decrease to the extent management fees are no longer waived
or expenses of a Fund are no longer paid.

/2Total/Fund Operating Expenses for the S&P 500 Index Fund for 1996, absent
expense reimbursements, were .64% of this Fund's average daily net asset
value. Total Fund Operating Expenses for the Money Market Fund for the period
from March 1, 1996 (commencement of operations) to December 31, 1996, absent
expense reimbursement, were 1.28% (1.53% annualized) of this Fund's average
daily net asset value. Other Operating Expense and Total Fund Operating
Expenses reflect the current voluntary expense limitation effective January
1, 1997.

3
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights of the following Funds for a share
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants, whose report on the financial statement including this
information was unqualified. This information should be read in conjunction
with the Funds' financial statements and notes thereto, which, together with
the remaining portions of the Funds' 1996 Annual Report to Shareholders, are
incorporated by reference in the Statement of Additional Information and in
this Prospectus, and which appear, along with the report of Price Waterhouse
LLP, in the Funds' 1996 Annual Report to Shareholders. For a more complete
discussion of the Funds' performance, please see the Funds' 1996 Annual Report
to Shareholders which may be obtained without charge by writing to the Fund or
calling (860) 726-3700.

----------------

S&P 500 INDEX FUND/1/

----------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period.... $ 10.75 $ 8.19 $ 9.20 $ 11.94 $ 12.83 $ 10.75 $ 11.94 $ 10.14 $ 9.41 $ 13.37
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income*.. 0.22 0.21 0.19 0.16 0.12 0.19 0.26 0.28 0.25 0.25
Net realized and
unrealized gain (loss). 2.17 2.80 (0.13) 0.22 0.34 3.79 (0.74) 2.67 0.72 0.54
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. 2.39 3.01 0.06 0.38 0.46 3.98 (0.48) 2.95 0.97 0.79
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income................. (0.29) (0.27) (0.14) (0.17) (0.12) (0.20) (0.25) (0.30) (0.24) (0.36)
From capital gains...... (0.45) (0.18) (0.85) (2.95) (1.23) (1.70) (0.46) (0.85) -- (4.39)
In excess of net capital
gains.................. -- -- (0.08) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions..... (0.74) (0.45) (1.07) (3.12) (1.35) (1.90) (0.71) (1.15) (0.24) (4.75)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 12.40 $ 10.75 $ 8.19 $ $9.20 $ 11.94 $ 12.83 $ 10.75 $ 11.94 $ 10.14 $ 9.41
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total investment return. 22.48% 36.82% 0.67% 2.97% 3.59% 37.46% (3.99)% 29.22% 10.33% 3.90%
Ratios and supplemental
data:
Net assets, end of
period (000 omitted)... $71,513 $66,283 $54,728 $61,478 $68,287 $73,446 $60,658 $69,389 $61,504 $70,501
Ratio of operating
expenses to average net
assets................. 0.60%a 0.73% 0.78% 0.66% 0.59% 0.56% 0.59% 0.56% 0.54% 0.51%
Ratio of net investment
income to average net
assets................. 1.78%b 2.05% 2.23% 1.30% 0.94% 1.38% 2.08% 2.18% 2.16% 1.83%
Portfolio turnover...... 4% 4% 4% 185%** 82% 77% 63% 55% 38% 75%
Average commission
rate***................ $0.0272
</TABLE>
a Ratio of expenses to average net assets prior to expense reimbursements was
0.64% for 1996.
b Ratio of net investment income to average net assets prior to expense reim-
bursements was 1.74% for 1996.
* 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 difference between financial and tax ac-
counting.
** During November 1993, the portfolio was indexed to the S&P 500, resulting in
a complete turnover of the portfolio at that time.
*** For fiscal years beginning on or after September 1, 1995, a fund is re-
quired 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 vari-
ous markets where trading practices and commission rule structures may dif-
fer.
- -------
/1/During periods prior to November 9, 1993, the S&P 500 Index Fund was
actively managed. On November 9, 1993, The Board of Trustees authorized
CIGNA Investments, Inc., the investment adviser to the Fund, to change the
Fund's investment strategy to an indexation approach. See "The Fund's
Objective". Prior to October 16, 1985, the Fund was a Maryland corporation.
On January 2, 1996 the name of the Fund was changed from Companion Fund to
CIGNA Variable Products S&P 500 Index Fund.

4
<PAGE>

FINANCIAL HIGHLIGHTS (continued)

----------------

MONEY MARKET FUND

----------------

<TABLE>
<CAPTION>
MARCH 1, 1996+ TO
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................... $ 1.00
------
Income from investment operations
Net investment income......................................... 0.04
Net realized and unrealized gain on securities................ --
------
Total from investment operations.............................. 0.04
------
Less Distributions:
Dividends from net investment income.......................... (0.04)
Distributions from capital gains.............................. --
------
Total Distributions........................................... (0.04)
------
Net asset value, end of period................................ $ 1.00
======
Total Return.................................................. 4.18%*
Ratios and Supplemental Data:
Net assets, end of period (000 omitted)....................... $6,003
Ratio of operating expenses to average net assets............. 0.42%**
Ratio of net investment income to average net assets.......... 4.10%***
Portfolio turnover............................................ N/A
</TABLE>

+ Commencement of operations.
* 4.99% annualized.
** 0.50% annualized. Ratio of expenses to average net assets prior to
reimbursement of expenses was 1.28% (1.53% annualized).
*** 4.90% annualized. Ratio of investment income to average net assets prior to
reimbursement of expense was 3.24% (3.87% annualized).
ABOUT THE FUNDS
- --------------------------------------------------------------------------------

The Funds are separate series of CIGNA Variable Products Group, a Massachusetts
business trust established by a Master Trust Agreement dated February 4, 1988
and registered under the 1940 Act as a diversified, open-end management
investment company (see "The Trust, Its Shares and Board of Trustees"). Each
Fund has its own investment objective and policies designed to meet specific
investment goals. Each Fund intends to qualify as a regulated investment
company for Federal income tax purposes. Their sole purpose is to serve as
funding vehicles for the investment of monies paid by holders of Variable
Contracts issued through separate accounts of life insurance companies ("Life
Companies") or by Qualified Plans. The Qualified Plans and the Life Companies
may or may not make all the Funds described in this prospectus available for
investment to the Variable Contract owners or Qualified Plan participants, as
the case may be. Historically, the Variable Contracts have been issued by
Connecticut General Life Insurance Company ("CG Life"), an indirect, wholly-
owned subsidiary of CIGNA Corporation. CIGNA Corporation is an insurance and
financial services holding company. The Funds may also serve as funding
vehicles for Variable Contracts issued by other life insurance companies
affiliated with CIGNA Corporation or by life insurance companies which may be
unaffiliated with CIGNA Corporation.

5
<PAGE>

under Qualified Plans and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one or more Life Company
separate accounts or Qualified Plans might withdraw its investment in the
Trust. This might force the Trust to sell portfolio securities at
disadvantageous prices.

Shares are offered only to Eligible Purchasers (see "Eligible Purchasers").
Shares are offered at net asset value without the imposition of a sales load,
sales charge or selling commission.

INVESTMENT PROGRAMS
- --------------------------------------------------------------------------------

MONEY MARKET FUND
- --------------------------------------------------------------------------------
The Fund's objective is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity and the maintenance
of a stable $1.00 per share net asset value by investing in short-term money
market instruments. The Fund intends to invest in money market instruments such
as U.S. Government direct obligations and U.S. Government agencies' securities.
In addition, the Fund may invest in other money market instruments such as
bankers' acceptances, certificates of deposit, commercial loan participations,
repurchase agreements, time deposits and commercial paper, all of which will be
denominated in U.S. dollars. Bankers' acceptances, certificates of deposit and
time deposits may be purchased from U.S. or foreign banks. Commercial paper is
purchased primarily from U.S. issuers but may be purchased from foreign issuers
so long as it is denominated in U.S. dollars. All of these instruments,
including commercial loan participations, are briefly described in "Description
of Money Market Instruments" and are described more fully in the Statement of
Additional Information.

The Fund will limit its investments to securities with remaining maturities of
397 days or less and will maintain a dollar-weighted average maturity of 90
days or less.

S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
The Fund seeks to fulfill its objective by attempting to replicate the
composition and total return, reduced by Fund expenses, of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500").

The S&P 500 includes 500 selected common stocks, most of which are listed on
the New York Stock Exchange. The S&P 500 is an index emphasizing large-
capitalization stocks. A company's stock market capitalization is the total
market value of its issued and outstanding common stock. Each stock in the S&P
500 has a unique weighting, depending on the number of shares outstanding and
its current price. In seeking to replicate the performance of the S&P 500,

6
<PAGE>

before deduction of Fund expenses, CIGNA Investments will attempt over time to
allocate the Fund's investment among common stocks in approximately the same
proportions as they are represented in the S&P 500, beginning with the heaviest
weighted stocks that make up a larger portion of the index's value. CIGNA
Corporation is part of the S&P 500. Consequently, the Fund purchases shares of
CIGNA Corporation stock. CIGNA Corporation and Standard & Poor's Corporation
have no control over each other.

The Fund is subject to market risk--i.e., the possibility that common stock
prices will decline over short or even extended periods. The U.S. stock market
tends to be cyclical, with periods when stock prices generally rise and periods
when prices generally decline.

While the Fund seeks to match the performance of the S&P 500, its stock
portfolio performance may not match this index exactly. While CIGNA Investments
generally will seek to match the composition of the S&P 500 as closely as
possible, it may not always invest the Fund's stock portfolio to mirror the S&P
500 exactly. For instance, the Fund may at times have its portfolio weighted
differently from the S&P 500 because of the difficulty and expense of executing
relatively small stock transactions. In addition, the Fund may omit or remove
any S&P 500 stock from the Fund if, following objective criteria, CIGNA
Investments judges the stock to be insufficiently liquid or believes the merit
of the investment has been substantially impaired by extraordinary events or
financial conditions. Under normal conditions, the Fund anticipates holding at
least 480 of the S&P 500 issues at all times.

The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P"). S&P makes no representation or warranty, express or
implied, to the record or beneficial owners of shares of the Fund or any member
of the public regarding the advisability of investing in securities generally,
or in the Fund particularly, or the ability of the S&P 500 to track general
stock market performance. S&P's only relationship to CIGNA Investments or the
Fund is the licensing of certain trademarks and trade names of S&P and of the
S&P 500 which is determined, composed and calculated by S&P without regard to
CIGNA Investments or the Fund. S&P has no obligation to take the needs of CIGNA
Investments or the Fund or the record or beneficial owners of the Fund into
consideration in determining, composing or calculating the S&P 500. S&P is not
responsible for and has not participated in the valuation of the Fund or the
pricing of the Fund's shares or in the determination or calculation of the
equation by which the Fund's portfolio investments are to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the Fund.

Standard & Poor's 500 Composite Stock Price Index(R) is a trademark of S&P and
has been licensed for use by the Fund.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 OR
ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY CIGNA INVESTMENTS, RECORD OR BENEFICIAL OWNERS
OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

CERTAIN INVESTMENT STRATEGIES AND POLICIES
- --------------------------------------------------------------------------------
In pursuit of their objectives and policies, the Funds may employ one or more
of the following strategies.

MONEY MARKET INSTRUMENTS. The S&P 500 Index Fund may invest in Money Market
Instruments to invest uncommitted cash balances pending investment in
securities included in its index or to meet antici-

7
<PAGE>

pated short-term cash needs. The S&P 500 Index Fund will invest in Money Market
Instruments (as described in the appendix to this prospectus) for temporary,
defensive purposes only under extraordinary circumstances. Of course, the Money
Market Fund invests exclusively in Money Market Instruments. Only the Money
Market Fund is required to limit such investments to those which, at the date
of purchase, are "First Tier" or "Second Tier" securities as those terms are
defined in Rule 2a-7 under the 1940 Act.

FUTURES CONTRACTS AND RELATED OPTIONS. The S&P 500 Index Fund may invest in
futures having an aggregate face value of up to 20% of its total assets. The
S&P 500 Index Fund may do so in order to maintain cash reserves while
simulating full investment in the underlying S&P 500 and to limit transaction
costs should invested assets need to be sold to meet redemption requests, or to
seek higher investment returns when a futures contract or option is priced more
attractively than the underlying index. A futures contract on an index (such as
the S&P 500) is an agreement between two parties (buyer and seller) to take or
make delivery of an amount of cash equal to the difference between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written. In the case of futures
contracts traded on U.S. exchanges, the exchange itself or an affiliated
clearing corporation assumes the opposite side of each transaction (i.e., as
buyer or seller). A futures contract may be satisfied or closed out by delivery
or purchase, as the case may be, of the financial instrument or, in the case of
index futures contracts, by payment of the change in the cash value of the
index. Frequently, using futures to effect a particular strategy instead of
using the underlying or related security or index will result in lower
transaction costs to the Fund.

The S&P 500 Index Fund may also purchase and write call options and put options
on indexes and futures contracts on indexes. An option on a futures contract
gives the holder the right, in return for the premium paid, to assume a long
position (in the case of a call) or a short position (in the case of a put) in
a futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. An option on a futures contract
generally may be closed out (before exercise or expiration) by an offsetting
purchase or sale of an option on a futures contract. See the information set
forth below and the Statement of Additional Information for information on the
risks associated with these investments.

The S&P 500 Index Fund's use of index futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the regulations of the Commodity Futures Trading Commission relating to
exclusions from regulation as a commodity pool operator. Those regulations
currently provide that the Funds may use commodity futures and option positions
(i) for bona fide hedging purposes without regard to the percentage of assets
committed to margin and option premiums, or (ii) for other purposes permitted
by the entity's principal regulator (in the case of the Funds, the Securities
and Exchange Commission) to the extent that the aggregate initial margin and
option premiums required to establish such non-hedging positions do not exceed
5% of the liquidation value (i.e., the net asset value) of the applicable
Fund's portfolio. For further information regarding futures contracts and
options thereon, see the Statement of Additional Information.

RISK FACTORS RELATING TO FUTURES CONTRACTS AND OPTIONS. The use of futures
contracts and options may involve risks not associated with other types of
instruments which the S&P 500 Index Fund intends to purchase. In particular, a
Fund's position in futures contracts and options may be closed out only on an
exchange which provides a liquid secondary market therefor, and there can be no
assurance that a liquid secondary market will exist for any particular futures
contract or option. The inability to close out options and futures positions
could have an adverse impact on a Fund's ability to effectively hedge its
securities and might, in some cases, require a Fund to deposit cash to meet
applicable margin requirements. A Fund's ability to hedge effectively through
transactions in futures contracts or options depends on the degree to which
price movements in its holdings correlate with price movements of the futures
and op-

8
<PAGE>

tions. It is possible that there may be an imperfect correlation between the
hedging instrument and the hedged securities, which could result in an
ineffective hedge and a loss to the Fund. See the Statement of Additional
Information for a further description of the Funds' investments in futures
contracts.

ASSET COVERAGE. To assure that a Fund's use of futures and related options are
not used to achieve excessive investment leverage, a Fund will cover such
transactions, as required under applicable interpretations of the Securities
and Exchange Commission, either by owning the underlying securities, entering
into an off-setting transaction, or by establishing a segregated account with
the Fund's custodian containing securities in an amount at all times equal to
or exceeding the Fund's commitment with respect to these instruments or
contracts.

SECURITIES LENDING. Each Fund may lend its investment securities to qualified
institutional investors for either short-term or long-term purposes of
realizing additional income. Loans of securities by a Fund will be
collateralized by cash, letters of credit, or securities issued or guaranteed
by the U.S. Government or its agencies. The collateral will equal at least 100%
of the current market value of the loaned securities.

TURNOVER. The frequency of Fund transactions--the Fund's portfolio turnover
rate--will vary from year to year depending on market conditions and a Fund's
cash flows. The S&P 500 Index Fund's annual portfolio turnover rate is not
expected to exceed 100%.

INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following summarizes the Funds' principal investment restrictions. Unless
otherwise noted, these restrictions are fundamental and may not be changed
without the approval of the lesser of (i) more than 50% of the outstanding
shares of a Fund or (ii) 67% or more of the shares of that Fund present at a
meeting if more than 50% of the outstanding shares of that Fund are represented
at the meeting in person or by proxy (see "The Trust, Its Shares and Board of
Trustees" for a description of the individual's rights with respect to giving
voting instructions to Life Companies).

A Fund may not:

1. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund taken at current value
would be invested in the securities of such issuer, except (a) bank
certificates of deposit and obligations issued or guaranteed as to interest and
principal by the U.S. Government or its agencies or instrumentalities, and (b)
up to 25% of the Money Market Fund's total assets taken at current value may be
invested without regard to such 5% limitation in bankers' acceptances in which
the Fund may invest consistent with its investment policies.

3. Concentrate more than 25% of its assets in any one industry, except that the
Money Market Fund may invest up to 100% of its assets in the domestic banking
industry.

4. Borrow money in excess of one-third of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made, and then only as a temporary measure to
facilitate the meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio investments or for
extraordinary or emergency purposes, except that the S&P 500 Index Fund may
enter into futures contracts, as indicated. Such borrowings will be repaid
before any additional investments are made. Interest paid on such borrowings
would reduce the yield on the Fund's investments. (The Board of Trustees
regards this restriction as setting forth the Trust's policy with respect to
the issuance of senior securities.)

9
<PAGE>

PURCHASE AND REDEMPTION OF SHARES OF THE FUNDS
- --------------------------------------------------------------------------------
Shares of the Funds are sold exclusively to and redeemed by Eligible Purchasers
on a continuous basis.

Purchase and redemption orders received by Life Companies and Qualified Plans
on a given business day from Variable Contract owners or Qualified Plan
participants, as the case may be, will be effected at the net asset value of
the applicable Fund on such business day if the orders are received by the Fund
in proper form and in accordance with applicable requirements on the next
business day. It is each Eligible Purchaser's responsibility to properly
transmit purchase and redemption orders and payments in accordance with
applicable requirements. Individuals may not place orders directly with the
Funds. The Funds do not issue share certificates. Please refer to the
prospectus of your Life Company's separate account or Qualified Plan documents
for information on how to invest in each Fund.

Investments by Eligible Purchasers in each Fund are expressed in terms of full
and fractional shares of each Fund. All investments in the Funds are credited
to an Eligible Purchaser's account immediately upon acceptance of the
investment by a Fund.

COMPUTATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
State Street determines the net asset value of shares of each of the Funds as
of the close of business on the New York Stock Exchange ("NYSE") on each day
the NYSE is open for trading and on any other day on which there is a
sufficient degree of trading in a Fund's investments that the current net asset
value of its shares might be materially affected. The NYSE is closed on New
Year's Day, President's Day, Good Friday, Martin Luther King Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The
computation of net asset value is made by dividing each Fund's total net assets
by the number of outstanding shares of such Fund at the time of calculation.
Net assets are the excess of a Fund's assets over its liabilities. Equity
securities, including warrants, that are listed on a national securities
exchange or that are part of the NASDAQ National Markets system are valued at
the last sale price or, if there has been no sale that day, at the last bid
price. Debt and other equity securities actively traded in the over-the-counter
market, including listed securities whose primary markets are believed to be
over-the-counter, are valued at the most recent bid price, which may be based
upon valuations furnished by a pricing service or from independent securities
dealers. Short-term investments with remaining maturities of up to and
including 60 days are valued at amortized cost which approximates market value.
Except in the case of the Money Market Fund, short-term investments that mature
in more than 60 days are valued at current market quotations. Other securities
and assets of a Fund, with the exception of futures contracts which are
discussed below, are appraised at fair value as determined in good faith by, or
under the authority of, the Board of Trustees of the Trust. The net asset value
so computed applies to all purchase orders and redemption requests in the hands
of State Street, duly executed in accordance with applicable instructions, on
the day of such deter-

10
<PAGE>

mination. Any orders received after such time are executed at the net asset
value next determined.

FUTURES CONTRACTS
- --------------------------------------------------------------------------------
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking-to-market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are made
or received, depending upon whether unrealized losses or gains are incurred.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract.

OPTIONS ON FUTURES CONTRACTS
- --------------------------------------------------------------------------------
The premium paid by a Fund for the purchase of a call or put option on futures
contracts is recorded as an investment and subsequently "marked-to-market" to
reflect the current market value of the option purchased. The current market
value of a purchased option on futures contracts is the last reported sale
price or, if no sales are reported, the last bid price. If an option on futures
contracts which a Fund has purchased expires on the stipulated expiration date,
the Fund realizes a loss in the amount of the cost of the option. If a Fund
exercises a purchased put option on futures contracts, it realizes a gain or
loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If a Fund exercises a
purchased call option on futures contracts, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.

VALUATION OF MONEY MARKET INVESTMENTS
- --------------------------------------------------------------------------------
Money market investments owned by the Money Market Fund are valued at amortized
cost, which approximates market value, in accordance with rules adopted by the
Securities and Exchange Commission. Using the amortized cost valuation method
allows the Money Market Fund to maintain its net asset value at $1.00 per
share. There is no assurance that this method will always be used, or if used,
that the net asset value under certain conditions will not deviate from $1.00
per share. If the Board of Trustees deems it inadvisable to continue the
practice of maintaining the net asset value of $1.00 per share they may alter
this procedure. The shareholders of the Fund will be notified prior to any such
change, unless such change is only temporary, in which case the shareholders
will be notified after the change. See the Statement of Additional Information
for more information on amortized cost procedures.

DISTRIBUTION OF DIVIDENDS AND CAPITAL GAINS
- --------------------------------------------------------------------------------
It is expected that shares of the Funds will be held under the terms of
Variable Contracts or Qualified Plans. Under current tax law, dividends or
capital gain distributions from any Fund are not currently taxable when left to
accumulate within a Variable Contract or Qualified Plans. Depending on the
Variable Contract or Qualified Plan, withdrawals from the contracts may be
subject to ordinary income tax and, in addition, to a 10% penalty tax on
withdrawals before age 59 1/2.

Each Fund is treated as a separate entity for federal income tax purposes. Each
Fund intends to pay out all of its net investment income and net realized
capital gains for each year. Dividends and net realized capital gains, if any,
from the Funds will be distributed at least annually (except that dividends are
declared and paid daily in the case of the Money Market Fund). After
distribution from a Fund (other than the Money Market Fund), the Fund's share
price drops by the amount of the distribution. Because dividends and capital
gain distributions are reinvested in shares of the Fund paying the dividend or
distribution, the total value of a shareholder's account will not be affected
because, although the shares will have a lower price, there will be
correspondingly more of them.

TAX MATTERS
- --------------------------------------------------------------------------------
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to take all
other action required to ensure that no Federal in-

11
<PAGE>

come taxes will be payable by the Funds. As a result, each Fund will generally
seek to distribute annually to Shareholders most or all of its undistributed
taxable income and any undistributed net realized capital gains (after use of
any available capital loss carry forwards). Because of this policy, the Funds
do not anticipate being subject to the 4% excise tax imposed on the
undistributed income of mutual funds.

The Trust was established as the underlying investment for Variable Contracts
issued by the Life Companies. (See "About the Funds")

Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of Variable Contracts held in the Funds. The Code provides
that a Variable Contract shall not be treated as an annuity contract or life
insurance for any period (and any subsequent period) for which the investments
of the underlying Fund are not, in accordance with regulations prescribed by
the Treasury Department, adequately diversified. Disqualification of the
Variable Contract as an annuity contract or life insurance would result in
imposition of federal income tax on contract owners with respect to earnings
allocable to the Variable Contract prior to the receipt of payments under the
Variable Contract. Section 817(h)(2) of the Code is a safe harbor provision
which provides that contracts such as the Variable Contracts meet the
diversification requirements if, as of the close of each quarter, the
underlying Fund assets meet the diversification standards for a regulated
investment company and no more than fifty-five percent (55%) of the total
assets consists of cash, cash items, U.S. Government securities and securities
of other regulated investment companies. There is an exception for securities
issued by the Treasury Department in connection with variable life insurance
policies.

Each Fund will be managed in such manner as to comply with these
diversification requirements. It is possible that in order to comply with the
diversification requirements, less desirable investment decisions may be made
which would affect the investment performance of the Fund.

MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
The investment adviser to each of the Funds is CIGNA Investments, an indirect,
wholly-owned subsidiary of CIGNA Corporation. CIGNA Investments also serves as
investment adviser for other investment companies including investment
companies sponsored by affiliates of CIGNA Corporation, and for a number of
pension, advisory, corporate and other accounts. CIGNA Investments and other
affiliates of CIGNA Corporation manage combined assets of approximately $70
billion. CIGNA Investments's mailing address is 900 Cottage Grove Road,
Hartford, Connecticut 06152.

12
<PAGE>

Pursuant to a Master Investment Advisory Agreement, the Trust, on behalf of the
Funds, employs CIGNA Investments to manage the investment and reinvestment of
the assets of the Funds. Subject to the control and periodic review of the
Board of Trustees, CIGNA Investments determines what investments shall be
purchased, held, sold or exchanged by the Funds and what portion, if any, of
the assets of the Funds shall be held in cash and other temporary investments.
CIGNA Investments is also responsible for overall management of the business
affairs of the Trust and the Funds.

As full compensation for the investment management and all other services
rendered by CIGNA Investments, each Fund pays CIGNA Investments a separate fee
computed daily and paid monthly at annual rates based on a percentage of the
value of the relevant Fund's average daily net assets, as follows: S&P 500
Index Fund--0.25%, Money Market Fund--0.35%.

Each Fund will bear its own expenses. Operating expenses for each Fund
generally consist of investment management fees, custodian fees, fees for
necessary professional and brokerage services, costs of regulatory compliance,
costs associated with maintaining legal existence and all other costs not
specifically borne by CIGNA Investments. Trust-wide expenses not identifiable
to any particular Fund will be allocated among the Funds. CIGNA Investments has
voluntarily agreed to reimburse the Funds to the extent that the annual
operating expenses (excluding interest, taxes, amortized organizational
expense, transaction costs in acquiring and disposing of portfolio securities
and extraordinary expenses) of a Fund exceed a percentage of the value of the
relevant Fund's average daily net assets, as follows: S&P 500 Index Fund--
0.25%, Money Market Fund--0.50%.

The investment management fee payable in 1996 to CIGNA Investments by the S&P
500 Index Fund was 0.25% of average daily net assets, and total expenses of
this Fund in 1996 were 0.64% of average daily net assets. The investment
management fee payable in 1996 to CIGNA Investments by the Money Market Fund
was .35% of average daily net assets, and total expenses of this Fund from
March 31, 1996 (inception) to December 31, 1996 were 1.28% of average daily net
assets.

State Street Bank and Trust Company ("State Street"), Boston, Massachusetts
02105 serves as transfer agent and dividend disbursing agent for the Funds.
State Street is also custodian of the assets of the Funds.

From time to time, the Funds may pay brokerage commissions on portfolio
transactions to brokers who may be deemed to be affiliates of CIGNA Corporation
under the 1940 Act, as amended. See the Statement of Additional Information for
further details.

PERFORMANCE
- --------------------------------------------------------------------------------
Each Fund's performance may be quoted in advertising in terms of yield and
total return if accompanied by performance of your Life Company's separate
account. Performance is based on historical results and not intended to
indicate future performance. For additional performance information, contact
your Life Company for a free annual report.

The Money Market Fund's yield refers to the income generated by an investment
in the Fund over a specified seven day period, expressed as an annual
percentage rate. Its effective yield is calculated similarly, but assumes that
the income earned from investments is reinvested. The Money Market Fund's
effective yield will tend to be slightly higher than its yield because of this
compounding effect. For the S&P 500 Index Fund, Yield refers to the income
generated by an investment in the Fund over a specified 30-day (or one month)
period, expressed as an annual percentage rate.

Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in each Fund, including changes in share price
(except for the Money Market Fund) and assuming each Fund's dividends and
capital gain distributions, if any, are reinvested. A cumulative total return
reflects a Fund's performance over a stated period of time. An

13
<PAGE>

average annual total return reflects the hypothetical annually compounded
return that would have produced the same cumulative total return if a Fund's
performance had been constant over the entire period. Because average annual
returns tend to smooth out variations in a Fund's return, you should recognize
that they are not the same as actual year-by-year results. To illustrate the
components of overall performance, a Fund may separate its cumulative and
average annual returns into income results and capital gain or loss.

Yields and total returns quoted for the Funds include the effect of deducting
each Fund's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Qualified Plan. Since shares of the Funds
may only be purchased by Eligible Purchasers, you should carefully review the
prospectus of the Variable Contract you have chosen or Qualified Plan documents
for information on relevant charges and expenses. Excluding these charges from
quotations of each Fund's performance has the effect of increasing the
performance quoted. You should bear in mind the effect of these charges when
comparing a Fund's performance to that of other funds.

Shares of each Fund will entitle their holders to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of any Fund. On any matter submitted to a vote of
shareholders, all shares of the Trust then issued and outstanding shall be
voted in the aggregate. However, on matters affecting an individual Fund, a
separate vote of shareholders of that Fund would be required. Shareholders of a
Fund would not be entitled to vote on any matter which does not affect that
Fund but which would require a separate vote of another Fund.

When issued, shares of a Fund are fully paid and nonassessable, and have no
preemptive or subscription rights. There are no conversion rights. Shares do
not have cumulative voting rights, which means that in situations in which
shareholders elect Trustees, hold-

14
<PAGE>

ers of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees of the Trust and the holders of less than 50% of the
shares voting for the election of Trustees will not be able to elect any
Trustees.

A majority of the Trustees is not affiliated with CIGNA Corporation or any of
its subsidiary companies. The Trustees meet quarterly to review the results of
the Funds, to monitor investment activities and practices, and to review and
act upon future plans for the Funds. The role of the Trustees is not to approve
specific investment purchases and sales, but rather to exercise a control and
review function.

APPENDIX
- --------------------------------------------------------------------------------

COMMERCIAL PAPER--The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues
vary from a few days to nine months.

COMMERCIAL LOAN PARTICIPATIONS--Participating interests in loans made by a
bank, or a syndicate of banks represented by an agent bank, to corporate
borrowers. Loan participations may extend for the entire term of the loan or
may extend only for short "strips" that correspond to stated payments on the
underlying loan. The loans underlying such participations may be secured or
unsecured, and a Fund may invest in loans collateralized by mortgages on real
property. Each Fund will limit its investments in commercial loan
participations to those which are considered by the Trustees (with the advice
of CIGNA Investments) to be of comparable quality to permitted commercial paper
investments.

15
<PAGE>

U.S. Government security serving as collateral for the loan.

16
<PAGE>

Custodian and Transfer Agent: State Street Bank and Trust Company 225 Franklin
Street Boston, Massachusetts 02110

Investment Adviser: CIGNA Investments, Inc. 900 Cottage Grove Road Hartford,
Connecticut 06152

Independent Accountants: Price Waterhouse LLP 160 Federal Street Boston,
Massachusetts 02110

Printed on recycled paper
LOGO

CIGNA VARIABLE PRODUCTS GROUP

PROSPECTUS
MAY 1, 1997
<PAGE>

C I G N A V A R I A B L E P R O D U C T S G R O U P
------------------------------------------------------

S T A T E M E N T O F A D D I T I O N A L I N F O R M A T I O N

M A Y 1, 1 9 9 7

==============================================================================

This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for CIGNA Variable Products Group, (the
series of CIGNA Variable Products Group are referred to as the "Funds" and each
separately as a "Fund"), having the same date as the date of this Statement of
Additional Information. Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the prospectus. No
investment in shares of any of the Funds should be made without first reading
the prospectus for the Funds. A copy of the prospectus for the Funds may be
obtained from CIGNA Variable Products Group c/o CIGNA Investments, 900 Cottage
Grove Road, S-215, Hartford, CT 06152-2215.

The financial statements for CIGNA Variable Products Group for fiscal year ended
December 31, 1996, as contained in the Annual Reports to Shareholders dated
December 31, 1996, are hereby incorporated by reference into this Statement of
Additional Information. The financial statements for the fiscal year ended
December 31, 1996 have been examined by Price Waterhouse LLP, independent
accountants, whose report thereon also is incorporated herein by reference.

The financial statements of the Funds will be delivered with this Statement of
Additional Information.

Page 1
<PAGE>

TABLE OF CONTENTS
-----------------
PAGE
----

General Information About the Funds......................... 3
-----------------------------------

Investment Objectives and Policies.......................... 3
----------------------------------

Futures Contracts.......................................... 9
-----------------

Options on Futures Contracts............................... 10
----------------------------

Risks as to Futures Contracts and Related Options.......... 11
-------------------------------------------------

Investment Restrictions.................................... 12
-----------------------

Tax Matters................................................ 14
-----------

Activities of Affiliated Companies......................... 16
----------------------------------

Control Persons and Principal Holders of Securities........ 16
---------------------------------------------------

Management of the Funds.................................... 16
-----------------------

Investment Advisory and Other Services..................... 19
--------------------------------------

Portfolio Turnover and Brokerage Allocation................ 21
-------------------------------------------

Performance Information.................................... 23
-----------------------

Purchase, Redemption and Pricing of Securities............. 26
----------------------------------------------

Dividends.................................................. 27
---------

Limitation on Transfers.................................... 27
-----------------------

Ratings of Securities...................................... 27
---------------------

Page 2
<PAGE>

GENERAL INFORMATION ABOUT THE FUNDS
- -----------------------------------

The Trust offers for sale two series portfolios or Funds:

Money Mark Fund
S&P 500 Index Fund
- ------------------

Prior to January 2, 1996 the sole series of the Trust was the S&P 500 Index
Fund, which was formerly known as Companion Fund. The Money Market Fund was
added to the Trust on January 2, 1996.

Prior to November 9, 1993, Companion Fund sought to fulfill its investment
objective through an active management strategy, investing primarily in common
stocks of established medium to large-size companies selected by CIGNA
Investments, Inc. ("CIGNA Investments"), its investment adviser, as having
prospects for above-average earnings growth. On that date, at the request of
Connecticut General Life Insurance Company ("CG Life") (which on its own behalf
and through its separate accounts was the Fund's sole shareholder), the Board of
Trustees of the Trust authorized CIGNA Investments to change Companion Fund's
investment strategy to the indexation approach described in the prospectus.

CIGNA Variable Products Group is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company, and
was organized as a Massachusetts business trust pursuant to a Master Trust
Agreement dated February 4, 1988. On April 26, 1988, the Trust acquired the
assets and liabilities of Companion Fund, a series of shares of CIGNA Annuity
Funds Group (n/k/a CIGNA Funds Group). As mentioned above, Companion Fund is
now known as the S&P 500 Index Fund. Under the Master Trust Agreement, the
Board of Trustees is authorized to create new series of shares without the
necessity of a vote of shareholders of the Trust.

Each Fund is a separate series of the Trust. The assets received by the Trust
from the issue or sale of shares of each of the Funds, and all income,
earnings, profits and proceeds thereof, are specifically allocated to the
appropriate Fund, subject only to the rights of creditors. They constitute the
underlying assets of each of Fund, are required to be segregated on the books
of account, and are to be charged with the expenses in respect to such Fund.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund shall be allocated by or under the direction of the Board of
Trustees in such manner as the Board determines to be fair and equitable.

Each share of each Fund represents an equal, proportionate interest in that
Fund with each other share and is entitled to such dividends and distributions
out of the income belonging to such Fund as are declared by the Board. Upon
any liquidation of the Trust, shareholders of a Fund are entitled to share pro
rata in the net assets belonging to such Fund available for distribution.

INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------

The following information supplements the material contained in the prospectus
regarding each Fund's investment objectives and policies.

Page 3
<PAGE>

Description of Money Market Instruments
- ---------------------------------------

U.S. GOVERNMENT DIRECT OBLIGATIONS--issued by the U.S. Treasury and include
bills, notes, and bonds.

. Treasury bills are issued with maturities of up to one year. They
are issued in bearer form, are sold on a discount basis and are
payable at par value at maturity.

. Treasury notes are longer-term interest bearing obligations
with original maturities of one to ten years.

. Treasury bonds are longer-term interest bearing obligations
with original maturities from ten to thirty years.

U.S. GOVERNMENT AGENCIES SECURITIES--Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. These agencies include the Bank for Cooperatives,
Federal Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks,
Federal National Mortgage Association, Government National Mortgage Association,
Export-Import Bank, and Tennessee Valley Authority. Issues of these agencies,
while not direct obligations of the U.S. Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the U.S. Government itself will pay interest and principal
on securities as to which it is not legally obligated to do so.

BANKERS' ACCEPTANCES--A banker's acceptance is a bill of exchange or time draft
drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange. When
the draft is accepted by a bank, the bank guarantees to pay the face value of
the instrument on its maturity date. An investor can purchase a banker's
acceptance in the secondary market at the going rate of discount for a specific
maturity. In addition to purchasing bankers' acceptances from domestic branches
and foreign branches of U.S. commercial banks, bankers' acceptances denominated
in each case in U.S. dollars, may be purchased from foreign branches and U.S.
branches of foreign banks having at least one billion dollars (U.S.) of assets.
Maturities are generally six months or less.

CERTIFICATES OF DEPOSIT--A certificate of deposit ("CD") is a negotiable
interest-bearing instrument with a specific maturity. Certificates of deposit
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market, prior to
maturity. Each Fund may invest in U.S. dollar denominated CD's issued by
domestic branches and foreign branches of U.S. banks which are members of the
Federal Reserve System; by foreign branches and U.S. branches of foreign banks
and by U.S. domiciled savings and loan institutions having in each case at least
one billion dollars (U.S.) of assets. CD's issued by foreign branches of U.S.
banks are called "Eurodollar CD's" while CD's issued by U.S. branches of foreign
banks are called "Yankee CD's."

COMMERCIAL LOAN PARTICIPATIONS--Each Fund will limit its investments in loan
participations to those which are considered by CIGNA Investments to be of

Page 4
<PAGE>

comparable quality to permitted commercial paper investments. These ratings are
described under "Ratings of Securities." Further, for the purposes of each
Fund's investment restrictions, each loan participation will be treated as an
obligation of both the originating bank (or agent bank in the case of loans
originated by a syndicate of banks) and the corporate borrower. In addition,
each Fund may only invest up to 5% of the value of its total assets in loan
participations.

Loan participations in which a Fund may invest may vary in legal structure.
Occasionally, lenders assign to another institution both the lenders' rights and
obligations under a credit agreement. Since this type of assignment relieves
the original lender of its obligations, it is called a novation. Such novations
are relatively rare since they typically require the consent of the borrower.
More typically, a lender assigns only its right to receive payments of principal
and interest under a promissory note, credit agreement or similar document. A
true assignment shifts to the assignee the direct debtor-creditor relationship
with the underlying borrower. Alternatively, a lender may assign only part of
its rights to receive payments pursuant to the underlying instrument or loan
agreement. Such partial assignments, which are more accurately characterized as
"participating interests," do not shift the debtor-creditor relationship to the
assignee, who must rely on the original lending institution to collect sums due
and to otherwise enforce its rights against the agent bank which administers the
loan or against the underlying borrower. An active secondary market for
particular loan participations may not develop, which would result in a
substantial restriction on a Fund's ability to liquidate such participations
prior to maturity.

REPURCHASE AGREEMENTS--Each Fund may engage in repurchase agreement transactions
in pursuit of its investment objective. Under the terms of a typical repurchase
agreement, a Fund purchases an underlying U.S. Government security, including
securities issued or guaranteed by the U.S. Treasury or agencies and
instrumentalities of the U.S. Government, for a relatively short period (most
likely overnight and usually not more than five days) subject to an obligation
of the seller to repurchase, and the Fund to resell, the security at an agreed
upon price and time, thereby determining the yield during the Fund's holding
period. The arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The Funds may enter
into repurchase agreements with banks having $1 billion or more of assets and
with broker/dealers having net capital of $100 million or more. The Funds
require that the counter-party's obligation under repurchase agreements be
sufficiently collateralized so that the value of the underlying collateral
securities at least equals the amount of the repurchase agreement. Also, the
Funds require that the underlying securities be held by the custodian of Fund
assets, either physically or under the Federal Book Entry System.

Repurchase agreements could involve certain risks in the event of default or
insolvency of the repurchasing bank or broker/dealer, including possible delays
or restrictions upon a Fund's ability to dispose of the underlying securities.
CIGNA Investments, in accordance with procedures adopted by the Board of
Trustees of the Trust, monitors and evaluates the credit-worthiness of banks and
dealers with which the Funds engage in repurchase agreements.

TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot

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<PAGE>

be traded in the secondary market. U.S. dollar denominated time deposits may be
purchased from domestic branches and foreign branches of U.S. banks which are
members of the Federal Reserve System (not including savings and loan
institutions) and from foreign branches and U.S. branches of foreign banks
having at least one billion dollars (U.S.) of assets.

U.S. dollar denominated certificates of deposit, time deposits and bankers'
acceptances issued by foreign branches of U.S. banks or by foreign banks either
in the U.S. or abroad may present investment risks in addition to the risks
involved in investments in obligations of, or guaranteed by, domestic banks.
Such risks include future political and economic developments, the possible
imposition of withholding taxes on interest income payable on such obligations,
the possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls or the adoption of other governmental
restrictions. Generally, foreign branches of U.S. banks and U.S. branches of
foreign banks are subject to fewer U.S. regulatory restrictions than are
applicable to domestic banks, and foreign branches of U.S. banks may be subject
to less stringent reserve requirements than domestic banks. U.S. branches of
foreign banks and foreign branches of U.S. banks may provide less public
information than, and may not be subject to the same accounting, auditing and
financial record-keeping standards as, domestic banks. Foreign branches of
foreign banks generally would not be subject to any U.S. regulatory restrictions
or disclosure, financial recordkeeping or accounting requirements.

COMMERCIAL PAPER--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other business entities.
Maturities on these issues vary from a few days to nine months. Commercial
paper may be purchased from U.S. domiciled issuers. Commercial paper may also
be purchased from foreign issuers issued either in the U.S. ("Yankee" commercial
paper) or abroad if, in any case, such paper is denominated in U.S. dollars.

OTHER CORPORATE OBLIGATIONS--Each Fund may purchase notes, bonds and debentures
issued by corporations and other business entities. However, the Money Market
Fund will purchase such obligations only if at the time of purchase there are
397 days or less remaining until maturity or if they carry a variable or
floating rate of interest.

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, or state and local
government issuers, and certain debt instruments issued by domestic banks or
corporations or other business entities, may carry variable or floating rates of
interest. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices, such as a Federal
Reserve composite index.

The Money Market Fund may invest in variable and floating rate instruments even
if they carry stated maturities in excess of 397 days, upon certain conditions
contained in a rule of the Securities and Exchange Commission, but will do so
only if there is a secondary market for such instruments or if they carry demand
features permitting them to be redeemed upon notice of seven (7) days or less at
par, or both.

The Money Market Fund will not invest in variable amount master demand notes. A
Fund's right to obtain payment at par on a demand instrument upon demand

Page 6
<PAGE>

could be affected by events occurring between the date a Fund elects to redeem
the instrument and the date redemption proceeds are due which affect the ability
of the issuer to pay the instrument at par value. CIGNA Investments will
monitor on an ongoing basis the earning power, cash flow and other liquidity
ratios of the issuers of such instruments, and will similarly monitor the
ability of an issuer of a demand instrument to pay principal and interest on
demand.

Characteristics of the Money Market Fund
- ----------------------------------------

The types of money market instruments in which the Fund presently invests are
listed under "Description of Money Market Instruments" in the prospectus and
this statement of additional information. If the Trustees determine that it may
be advantageous to invest in other types of money market instruments the Fund
may invest in such instruments, if it is permitted to do so by its investment
objective, policies and restrictions. As discussed in the prospectus, the Money
Market Fund may invest in U.S. dollar-denominated obligations of U.S. and
foreign depository institutions, including commercial and savings banks and
savings and loan associations. The obligations may be issued by U.S. or foreign
depository institutions, foreign branches or subsidiaries of U.S. depository
institutions ("Eurodollar" obligations), U.S. branches or subsidiaries of
foreign depository institutions ("Yankeedollar" obligations) or foreign branches
or subsidiaries of foreign depository institutions. Obligations of foreign
depository institutions, their branches and subsidiaries, and Eurodollar and
Yankeedollar obligations may involve additional investment risks to the risks of
obligations of U.S. institutions. Such investment risk include adverse
political and economic developments, the possible imposition of withholding
taxes on interest income payable on such obligations, the possible seizure or
nationalization of foreign deposits and the possible establishment of exchange
controls or other foreign governmental laws or restrictions which might
adversely affect the payment of principal and interest. Generally, the issuers
of such obligations are subject to fewer regulatory requirements than are
applicable to U.S. banks. Foreign depository institutions, their branches or
subsidiaries, and foreign branches or subsidiaries of U.S. banks may be subject
to less stringent reserve requirements than U.S. banks. U.S. branches or
subsidiaries of foreign banks are subject to the reserve requirements of the
state in which they are located. There may be less publicly available
information about a foreign bank or a branch or subsidiary of a foreign bank
than about a U.S. institution, and such branches or subsidiaries may not be
subject to the same accounting, auditing and financial record keeping standards
and requirements as U.S. banks. Evidence of ownership of foreign depository and
Eurodollar obligations may be held outside of the United States and the Fund may
be subject to the risks associated with the holding of such property overseas.
Foreign depository and Eurodollar obligations of the Fund held overseas will be
held by foreign branches of the custodian for the Funds portfolio securities or
by other U.S. or foreign banks under subcustodian arrangements complying with
the requirements of the Investment Company Act of 1940, as amended (the "1940
Act"). CIGNA Investments will consider the above factors in making investments
in foreign depository, Eurodollar and Yankeedollar obligations and will not
knowingly purchase obligations which, at the time of purchase, are subject to
exchange controls or withholding taxes. Generally, the Fund will limit its
foreign depository and Yankeedollar investments to obligations of banks

Page 7
<PAGE>

organized in Canada, France, Germany, Japan, the Netherlands, Switzerland, the
United Kingdom and other western industrialized nations. As discussed in the
prospectus, the Fund may also invest in U.S. dollar-denominated commercial paper
and other short-term obligations issued by foreign entities. Such investments
are subject to quality standards similar to those applicable to investments in
comparable obligations of domestic issuers. Investments in foreign entities in
general involve the same risks as those described above in connection with
investments in Eurodollar and Yankeedollar obligations and obligations of
foreign depository institutions and their foreign branches and subsidiaries.

The Money Market Fund's investments in short-term corporate debt and bank money
instruments will be rated, or will be issued by issuers who have been rated, in
one of the two highest rating categories for short-term debt obligations by a
nationally recognized statistical rating organization (an "NRSRO") or, if not
rated, will be of comparable quality as determined by the Trustees of the Trust.
The Money Market Fund's investments in corporate bonds and debentures (which
must have maturities at the date of purchase of 397 days (13 months) or less)
will be in issuers who have received from an NRSRO a rating with respect to a
class of short-term debt obligations that is comparable in priority and security
with the investment in one of the two highest rating categories for short-term
obligations or if not rated, will be of comparable quality as determined by the
Trustees of the Trust. Currently, there are six NRSROs: Duff and Phelps Inc.,
Fitch Investors Services, Inc., IBCA Limited and its affiliate IBCA Inc.,
Thompson BankWatch, Inc., Moody's Investors Service Inc. and Standard & Poor's
Rating Group. See "Appendix--Description of Money Market Instruments".

The rating applied to a security at the time the security is purchased by the
Fund may be changed while the Fund holds such security in its portfolio. This
change may affect, but will not necessarily compel, a decision to dispose of a
security. If the major rating services used by the Fund were to alter their
standards or systems for rating, the Fund would then employ ratings under the
revised standards or systems that would be comparable to those specified in its
current investment objective, policies and restrictions.

The Board of Trustees has established procedures in compliance with Rule 2a-7
under the 1940 Act that include reviews of portfolio holdings by the Trustees at
such intervals as they may deem appropriate to determine whether net asset
value, calculated by using available market quotations, deviates from $1.00 per
share and, if so, whether such deviation may result in material dilution or is
otherwise unfair to existing shareholders. In the event the Trustees determine
that a deviation having such a result exists, they intend to take such
corrective action as they deem necessary and appropriate, including the sale of
portfolio instruments prior to maturity in order to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends; or
establishing a net asset value per share by using available market quotations;
in which case, the net asset value could possibly be greater or less than $1.00
per share. If the Trustees deem it inadvisable to continue the practice of
maintaining the net asset value at $1.00 per share, they may alter this
procedure. The shareholders of the Fund will be notified promptly after any
such change.

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<PAGE>

Any increase in the value of a shareholder's investment in the Fund resulting
from the reinvestment of dividend income is reflected by an increase in the
number of shares in the shareholder's account.

Matters relating to all Funds
- -----------------------------

Except as described under "Investment Restrictions," the foregoing investment
characteristics are not fundamental and the Board of Trustees may change such
policies without shareholder approval. The Board will not change a Fund's
investment objectives without the required shareholder vote as set forth in
"Investment Restrictions" below. There is risk inherent in any investment, and
there is no assurance that any of the strategies and methods of investment
available to any Fund will result in the achievement of its objectives.

FUTURES CONTRACTS
- -----------------

A stock index assigns relative values to the common stocks included in the index
and the index fluctuates with changes in the market values of the common stocks
so included. A stock index futures contract is a bilateral agreement pursuant
to which two parties agree to take or make delivery of an amount of cash equal
to a specified dollar amount times the difference between the stock index value
at the close of the last trading day of the contract and the price at which the
futures contract is originally struck. No physical delivery of the underlying
stocks in the index is made. Currently, stock index futures contracts can be
purchased or sold primarily with respect to broad based stock indices such as
the Standard & Poor's 500 Stock Index, the New York Stock Exchange Composite
Index, the American Stock Exchange Major Market Index, the NASDAQ - 100 Stock
Index the Value Line Stock Index, the Nikkei 225 Stock Average, the Topix, the
FT-SE100, the Major Market Index, the Matif Stock Index and the Australia All
Ordinairies.

An interest rate futures contract is an agreement between two parties to buy and
sell a debt security for a set price on a future date. Currently, there are
futures contracts based on a variety of financial instruments including long-
term U.S. Treasury bonds, U.S. Treasury notes, U.S. Treasury bills, Eurodollars,
the Japanese 10 Year Bond, the German 10 Year Bond, the Australian 10 Year Bond,
London InterBank Offer Rate, Sterling, Long Gilt and the Bond Buyer Municipal
Bond Index.

In addition to the uses permitted for futures contracts set forth in the
prospectus, the Funds may enter into interest rate futures contracts for the
purpose of hedging debt securities in their portfolios or the value of debt
securities which the Funds intend to purchase. For example, if one of these
Funds owned long-term debt securities and interest rates were expected to
increase, they might sell interest rate futures contracts. If, on the other
hand, these Funds held cash reserves and interest rates were expected to
decline, they might purchase interest rate futures contracts. In cases of
purchases of futures contracts, an amount of cash and cash equivalents, equal to
the market value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Trust's Custodian to
collateralize the position and ensure that the use of such futures contracts is
unleveraged.

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<PAGE>

Unlike when a Fund purchases or sells a security, no price is paid or received
by a Fund upon the purchase or sale of a futures contract. Initially, a Fund
will be required to deposit with the custodian for the Fund for the account of
the broker a stated amount, as called for by a particular contract, of cash or
U.S. Treasury bills. This amount is known as "initial margin." The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the applicable Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called "variation margin," to and from the broker will be
made on a daily basis as the price of the futures contract fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." For example, when a Fund has purchased a
stock index futures contract and the price of the underlying stock index has
risen, that position will have increased in value and the Fund will receive from
the broker a variation margin payment with respect to that increase in value.
Conversely, where a Fund purchases a stock index futures contract and the price
of the underlying stock index has declined, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
Variation margin payments would be made in a similar fashion when a Fund
purchases an interest rate futures contract. At any time prior to expiration of
the futures contract, a Fund may elect to close the position by taking an
opposite position which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund and the Fund
realizes a loss or a gain.

OPTIONS ON FUTURES CONTRACTS
- ----------------------------

An option on a futures contract gives the purchaser (the Fund) the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. If an option on a
futures contract is exercised on the last trading date prior to the expiration
date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and the closing price of the
futures contract on the expiration date.

The Funds may purchase put options on futures contracts to hedge against the
risk of falling prices for their portfolio securities, and may purchase call
options on futures contracts as a hedge against a rise in the price of
securities which they intend to purchase. Options on futures contracts may also
be used to hedge the risks of changes in the exchange rate of foreign

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<PAGE>

currencies. The purchase of a put option on a futures contract is similar to
the purchase of protective put options on portfolio securities or a foreign
currency. The purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual security or a
foreign currency. Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based or the price of the
underlying securities or currency, it may or may not be less risky than
ownership of the futures contract or underlying securities or currency.

RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
- -------------------------------------------------

There are several risks in connection with the use of futures contracts and
related options as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of hedging instruments and movements
in the price of the stock, debt securities or foreign currency which are the
subject of the hedge. If the price of a hedging instrument moves less than the
price of the stocks, debt securities or foreign currency which are the subject
of the hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt securities or foreign
currency, a Fund will experience either a loss or a gain on the hedging
instrument which will not be completely offset by movements in the price of the
stock, debt securities or foreign currency which are the subject of the hedge.
The use of options on futures contracts involves the additional risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option.

Successful use of hedging instruments by a Fund is also subject to CIGNA
Investments's ability to predict correctly movements in the direction of the
stock market, of interest rates or of foreign exchange rates (foreign
currencies). Because of possible price distortions in the futures and options
markets and because of the imperfect correlation between movements in the prices
of hedging instruments and the investments being hedged, even a correct forecast
by CIGNA Investments of general market trends may not result in a completely
successful hedging transaction.

It is also possible that where a Fund has sold futures contracts to hedge its
portfolio against a decline in the market, the market may advance and the value
of stocks or debt securities held in a Fund's portfolio may decline. If this
occurred, a Fund would lose money on the futures contracts and also experience a
decline in the value of its portfolio securities. Similar risks exist with
respect to foreign currency hedges.

Positions in futures contracts or options may be closed out only on an Exchange
on which such contracts are traded. Although the Funds intend to purchase or
sell futures contracts or purchase options only on Exchanges or Boards of Trade
where there appears to be an active market, there is no assurance that a liquid
market on an Exchange or Board of Trade will exist for any particular contract
or at any particular time. If there is not a liquid market at a particular
time, it may not be possible to close a futures position or purchase an option
at such time. In the event of adverse price movements under those
circumstances, a Fund would continue to be required to make daily cash payments
of maintenance margin on its futures positions. The extent to which the Fund
may engage in futures contracts or related options will be limited by Internal
Revenue Code requirements for qualification as a regulated investment company

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<PAGE>

and the Fund's intent to continue to qualify as such. The result of a hedging
program cannot be foreseen and may cause the portfolio of the Fund to suffer
losses which it would not otherwise sustain.

INVESTMENT RESTRICTIONS
- -----------------------

Each Fund is subject to the following investment restrictions, unless otherwise
noted, which may not be changed without the approval of the lesser of (i) more
than 50% of the outstanding shares of a Fund or (ii) 67% or more of the shares
of that Fund present at a meeting if more than 50% of the outstanding shares of
that Fund are represented at the meeting in person or by proxy (see "Ownership
of Fund Shares" in the Funds' prospectus for a description of the individual's
rights with respect to giving voting instructions to Life Companies).

A Fund may not:

1. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund taken at current value
would be invested in the securities of such issuer, except (a) bank certificates
of deposit and obligations issued or guaranteed as to interest and principal by
the U.S. Government or its agencies or instrumentalities, and (b) up to 25% of
The Money Market Fund's total assets taken at current value may be invested
without regard to such 5% limitation in bankers' acceptances in which the Fund
may invest consistent with its investment policies.

3. Concentrate more than 25% of its assets in any one industry, except that the
Money Market Fund may invest up to 100% of its assets in the domestic banking
industry.

4. Invest in securities of businesses less than three years old (including
predecessors), if, as a result, more than 5% of the Fund's total assets (taken
at current value) would then be invested in such securities.

5. Make investments for the purpose of gaining control of a company's
management.

6. Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities convertible into or exchangeable
for securities of the same issuer as, and equal in amount to, the securities
sold short.

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<PAGE>

7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities. For purposes
of this restriction, the deposit or payment of initial or variation margin
payments in connection with transactions in stock index futures contracts,
financial futures contracts and related options thereon will not be deemed to be
a purchase of securities on margin by a Fund.

8. Underwrite securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be deemed
to be an underwriter under Federal securities laws.

9. Invest in securities of any issuer if, to the knowledge of the Fund,
officers and trustees of the Trust or officers and directors of CIGNA
Investments who beneficially own more than 1/2 of 1% of the securities of that
issuer, together own more than 5%.

10. Make loans, except (a) by purchase of debt obligations and through
repurchase agreements referred to under "Certain Investment Practices" in the
Funds' prospectus, provided, however, that repurchase agreements maturing in
more than seven days will not exceed 10% of a Fund's total assets (taken at
current value) and (b) through the lending of its portfolio securities with
respect to not more than 25% of its total assets. (As a matter of policy,
securities loans would be made to broker-dealers pursuant to agreements
requiring that loans be continuously secured by collateral in cash or cash
equivalents at least equal at all times to the value of the securities lent.
The borrower pays to the Fund an amount equal to any dividends or interest
received on the securities lent. The Fund may invest the cash collateral
received in interest-bearing short-term securities or receive a fee from the
borrower. The Fund may call such loans in order to sell the securities involved
or to exercise voting or other rights available to it as beneficial owner of the
securities involved.)

11. Borrow money in excess of one-third of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at the
time the borrowing is made, and then only as a temporary measure to facilitate
the meeting of redemption requests (not for leverage) which might otherwise
require the untimely disposition of portfolio investments or for extraordinary
or emergency purposes, except that the Funds may enter into stock index futures
contracts and financial futures contracts. Such borrowings will be repaid
before any additional investments are made. Interest paid on such borrowings
would reduce the yield on the Fund's investments. (The Board of Trustees
regards this restriction as setting forth the Trust's policy with respect to the
issuance of senior securities.)

12. Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of
one-third of the value of its total assets (taken at the lower of cost or
current value) and then only to secure borrowings permitted by Restriction No.
11 above. (For the purpose of this restriction, collateral arrangements with
respect to margin for a financial futures contract or stock index futures
contract are not deemed to be a pledge of assets.)

13. Purchase or sell mortgages or real estate, although it may purchase
securities of issuers that deal in real estate and may purchase securities that
are secured by interests in real estate.

Page 13
<PAGE>

14. Purchase or sell commodities or commodity contracts, except, however, that a
Fund may purchase and sell stock index futures and options thereon and financial
futures contracts and options thereon.

15. Purchase options or puts, calls, straddles, spreads or combinations thereof
except, however, a Fund may purchase and sell options on stock index futures
contracts and on stock indices and options on financial futures contracts; in
connection with the purchase of fixed income securities, however, a Fund may
acquire warrants or other rights to subscribe for securities of companies
issuing such fixed-income securities or securities of parents or subsidiaries of
such companies. (See "Description of Income Instruments for The Income Fund"
and "Description of Income Instruments for The High Yield Fund" for a
description of the policy of these Funds with respect to such warrants or other
rights.)

16. Buy or sell oil, gas or other mineral leases, rights or royalty contracts.

The foregoing percentages, as well as those percentages referred to under
"Investment Objectives and Policies," will apply at the time of the purchase of
a security and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of a purchase of such
security.

TAX MATTERS
- -----------

Each series of shares of the Trust is treated as a separate association taxable
as a corporation.

Each Fund intends to qualify under the Internal Revenue Code of 1986 (the
"Code"), as amended, as a regulated investment company ("RIC") for each taxable
year. As of the date hereof, each Fund must, among other things, meet the
following requirements: A. Each Fund must derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities, foreign
currencies, or other income including but not limited to gains from options,
futures or forward contracts derived with respect to its business of investing
in such stock, securities or currencies. B. Each Fund must generally derive
less than 30% of its gross income from the sale or disposition of any of the
following held less than three months: i) stock or securities, ii) options,
futures, or forward contracts (other than options, futures, or forward contracts
on foreign currencies), or iii) foreign currencies (or options, futures, or
forward contracts on foreign currencies) but only if such currencies or options,
futures or forward contracts are not directly related to the Fund's business of
investing in stock, securities or options and futures thereon. There are
exceptions to the 30% test when a Fund, in combination with other factors,
realizes gains to satisfy abnormal redemptions. Abnormal redemptions occur on
any day when net redemptions exceed one percent of the Fund's net asset value.
Accordingly, the extent to which the Funds may engage in futures contracts and
related options may be materially limited by this 30% test with the exception of
the Money Market Fund which does not engage in such transactions. C. Each Fund
must diversify its holdings so that, at the end of each fiscal quarter: i) at
least 50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities and other securities, with such other securities limited,
with respect to any one issuer, to an amount not

Page 14
<PAGE>

greater than 5% of the Fund's assets and not more than 10% of the outstanding
voting securities of such issuer, and ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities).

As a RIC, each Fund will not be subject to Federal income tax ("FIT") on its
income and gains distributed to shareholders if it distributes at least 90% of
its investment company taxable income for the taxable year. Under the
provisions of Section 817(h) of the Code, a variable annuity contract - other
than a contract issued in connection with certain tax qualified retirement plans
or retirement plans maintained by certain government employers - will not be
treated as an annuity contract for any period for which the investments of the
separate account, such as the separate accounts that are eligible to purchase
shares of the Fund, are not "adequately diversified". In general, the
regulations issued under Section 817(h) provide that a separate account shall be
considered adequately diversified if the assets of such separate account are
invested so that no more than 55% of the value of such assets is represented by
any one investment, no more than 70% of such value is represented by any two
investments, no more than 80% of such value is represented by any three
investments and no more than 90% is represented by any four investments. The
Code allows a separate account to look through to the assets of a regulated
investment company for purposes of the "adequately diversified" requirement.
Each Fund intends that the investments in its portfolio shall be "adequately
diversified". For these purposes, all securities of the same issuer are treated
as a single investment. However, in the case of government securities each
government agency or instrumentality is treated as a separate issuer. The
regulations include a specific definition of "government security" which
includes any security issued, guaranteed or insured by the United States or any
instrumentalities of the United States. In addition, a certificate of deposit
for any of the foregoing securities is included within the definition of a
"government security." Accordingly, certain Fund investments may be treated as
"government securities" for the purpose of Section 817(h) of the Code, even
though such investments may not be treated as a government security when such
phrase is used elsewhere in the prospectus or Statement of Additional
Information.

All Funds except the Money Market Fund:
- ----------------------------------------------------------

Section 1092 of the Code affects the taxation of certain transactions involving
futures or options contracts. If a futures or options contract is part of a
"straddle" (which could include another futures contract or underlying stock or
securities), as defined in Section 1092 of the Code, then, generally, losses are
deferred first to the extent that the modified wash sale rules of the Section
1092 regulations apply, and second to the extent of unrecognized gains on
offsetting positions. Further, a Fund may be required to capitalize, rather
than deduct currently, any interest expense on indebtedness incurred or
continued to purchase or carry any positions that are part of a straddle.
Sections 1092 and 246 of the Code and the regulations thereunder also suspend
the holding periods for straddle positions with possible adverse effects
regarding long-term capital gain treatment and the corporate dividends-received
deduction. In certain cases, the wash sale rules of Section 1091 of the Code
may operate to defer deductions for losses.

Section 1256 of the Code generally requires that futures contracts and options
on future contracts be "marked-to-market" at the end of each year for Federal

Page 15
<PAGE>

income tax purposes. Section 1256 further characterizes 60% of any gain or loss
with respect to a futures contract as long-term capital gain or loss and 40% as
short-term capital gain or loss. If a futures contract is held as an offsetting
position and can be considered a straddle under Section 1092 of the Code, such a
straddle will constitute a mixed straddle. A mixed straddle will be subject to
both Section 1256 and Section 1092 unless certain elections are made by the
Fund.

ACTIVITIES OF AFFILIATED COMPANIES
- ----------------------------------

From time to time, as purchases of securities are made for the portfolios of
companies affiliated with CIGNA Corporation it is possible that two or more
portfolios may simultaneously purchase or sell the same security. To the extent
that two or more such portfolios, buying or selling the same security, increase
the total demand or supply, there may be an adverse effect on the price of such
security or on the amount which the Fund can purchase or sell.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ---------------------------------------------------

As of the date of this statement of additional information, all of the
outstanding shares of each Fund are owned by CG Life, which is considered an
"affiliate" of the Trust. CG Life is a stock life insurance company domiciled
in the state of Connecticut. The offices of CG Life are located at 900 Cottage
Grove Road, Bloomfield, CT 06002. CG Life is an indirect, wholly-owned
subsidiary of CIGNA Corporation. CG Life owns Fund shares on behalf of separate
accounts registered as unit investment trusts under the 1940 Act. Under the
1940 Act, unit investment trust variable contractowners are afforded pass
through voting privileges for most matters concerning Fund shares owned by the
unit investment trust. This means that although CG Life is the shareholder of
the Fund, variable contractowners will actually be voting on Fund matters.

MANAGEMENT OF THE FUNDS
- -----------------------

The Trustees and the executive officers of the Trust are listed below, together
with information as to their principal occupations during the past five years
and other principal business affiliations. Currently each holds the equivalent
position as Trustee and/or officer of CIGNA Institutional Funds Group and CIGNA
High Income Shares, and holds a similar position as Director and/or executive
officer of INA Investment Securities, Inc. Correspondence with any Trustee or
officer may be addressed to the Trust, 950 Winter Street, Waltham, Massachusetts
02154.

R. BRUCE ALBRO*, 54, Trustee; Senior Managing Director and Division Head, CIGNA
Portfolio Advisers, a division of CIGNA Investments; Chairman of the Board and
President, CIGNA Funds Group, CIGNA Institutional Funds Group, CIGNA Variable
Products Group, CIGNA High Income Shares and INA Investment Securities, Inc.
Mr. Albro is also an officer or director of various other entities which are
subsidiaries or affiliates of CIGNA. Previously Trustee, CIGNA Funds Group;
Managing Director - Division Head, CII; Managing Director, CII; Senior Vice
President, CII and CIGNA Investment Management Company and President, CIGNA
Capital Brokerage, Inc.

Page 16
<PAGE>

HUGH R. BEATH, 65, Trustee; Advisory Director, AdMedia Corporate Advisors,
Inc.; previously Chairman of the Board of Directors, Beath Advisors, Inc.
Chairman, President and Chief Executive Officer, ADVO-System, Inc. (presently
known as ADVO, Inc.) (direct mail advertising); Executive Vice President,
Operations, John Blair & Co. (marketing and communications); President,
Specialty Grocery Products Division, R. J. Reynolds Industries (consumer
products); and Vice President and Treasurer, Heublein, Inc. (maker of distilled
spirits).

RUSSELL H. JONES, 52, Trustee; Vice President and Treasurer, Kaman Corporation
(helicopters and aircraft components, scientific research); Trustee, Connecticut
Policy and Economic Counsel; Corporator, Hartford Seminary; Secretary,
Bloomfield Chamber of Commerce.

PAUL J. MCDONALD, 53, Trustee; Executive Vice President, Finance and Chief
Financial Officer, Friendly Ice Cream Corporation (family restaurants/dairy
products); Chairman, Dean's Advisory Council, University of Massachusetts School
of Management; Vice Chairman, Springfield YMCA; Corporator, Springfield
Institution for Savings; Trustee, Springfield College. Previously, Vice
President, Finance and Chief Financial Officer, Friendly Ice Cream Corporation.

ARTHUR C. REEDS, III*, 53, Trustee; President, CIGNA Investment Management;
President and Director, CIGNA Investment Group, Inc. and CII; Director, CIGNA
International Investment Advisors, Ltd. Mr. Reeds is also an officer or
director of various other entities which are subsidiaries or affiliates of
CIGNA. Previously Trustee, CIGNA Funds Group; Managing Director - Division
Head, CIGNA Portfolio Advisers, a division of CII; Senior Vice President, CII.

ALFRED A. BINGHAM III, 52, Vice President and Treasurer, CIGNA Funds Group
(f/k/a CIGNA Annuity Funds Group), CIGNA Institutional Funds Group, CIGNA
Variable Products Group, CIGNA High Income Shares and INA Investment Securities,
Inc.; Assistant Vice President, CII.

JEFFREY S. WINER, 39, Counsel, CIGNA; Vice President and Secretary, CIGNA Funds
Group (f/k/a CIGNA Annuity Funds Group), CIGNA Institutional Funds Group, CIGNA
Variable Products Group, CIGNA High Income Shares and INA Investment Securities,
Inc.; previously Attorney, CIGNA; Associate, Tarlow, Levy, Harding & Droney
(private law firm).

*Trustees identified with an asterisk are considered interested persons within
the meaning of the Investment Company Act of 1940, as amended, because of their
affiliation with CIGNA Corporation or its affiliates.

The Board has created an Audit Committee from among its members which meets
periodically with representatives of Price Waterhouse LLP, independent
accountants for the Trust, a Contracts Committee which, as part of its duties,
considers the terms and the renewal of the Master Investment Advisory Agreement
with CIGNA Investments and the Sub-Advisory Agreement with CIGNA International
Investments, and a Nominating Committee which considers the identification of
new members of the Board and the compensation of Trustees. The Nominating
Committee, Audit Committee and Contracts Committee consist of Trustees who are
not affiliated with CIGNA Corporation or any of its subsidiaries.

The Trust pays no compensation to any of its officers, other than the
reimbursement of the costs of the Office of the Treasurer and the Office of the
Secretary, or to any of its Trustees who are officers or employees of CIGNA

Page 17
<PAGE>

Corporation or its affiliates. The following table shows compensation paid by
the Trust and other investment companies in the CIGNA fund complex to Trust
Trustees in 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Pension or
Retirement Total
Benefits Compensation
Accrued As from Trusts and
Aggregate Part of Estimated Annual CIGNA Fund
Name of Person, Compensation Trust Benefits Upon Complex Paid
Position with Trusts from Trust Expense Retirement to Trustees (d)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

R. Bruce Albro, Trustee, $ - $ - $ - $ -
Chairman and President

Hugh R. Beath, Trustee (a) $ 3,600 - - $ 25,600

Russell H. Jones, Trustee $ 3,600 - - $ 25,600

Paul J. McDonald, Trustee (b)
$ 3,600 - - $ 25,600
Arthur C. Reeds, III,
Trustee - - - -
----------- ---------- --------- ------------
$10,800 $ 10,800 $ $ $ 76,800
============ ========== ========== ============
</TABLE>

(a) All of Mr. Beath's 1996 compensation was deferred under a deferred
compensation plan for all CIGNA funds (the "Plan") in which he had an aggregate
balance of $135,139 as of December 31, 1996. The Plan permits Trustees to defer
receipt of all compensation or to revoke the election to defer receipt of
Trustee fees and receive payment directly.

(b) All of Mr. McDonald's 1996 compensation was deferred under a deferred
compensation plan (the "Plan") for all CIGNA funds in which he had an aggregate
balance of $43,898 as of December 31, 1996. The Plan permits Trustees to defer
receipt of all compensation or to revoke the election to defer receipt of
Trustee fees and receive payment directly.

Page 18
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------

The investment adviser to each of the Funds is CIGNA Investments, an indirect,
wholly-owned subsidiary of CIGNA Corporation. CIGNA International Investments
serves as investment sub-adviser to The International Stock Fund. CIGNA
Investments also serves as investment adviser for investment companies sponsored
by affiliates of CIGNA Corporation, and for a number of pension, advisory,
corporate and other accounts. CIGNA Investments and other affiliates of CIGNA
Corporation manage combined assets of over $70 billion. CIGNA Investments's
mailing address is 900 Cottage Grove Road, Hartford, Connecticut 06152.

Pursuant to a Master Investment Advisory Agreement between the Trust and CIGNA
Investments, CIGNA Investments manages the investment and reinvestment of the
assets of the Funds.

Subject to the control and periodic review of the Board of Trustees of the
Trust, CIGNA Investments (CIGNA International Investments in the case of The
International Stock Fund) determines what investments shall be purchased, held,
sold or exchanged for the account of the Funds, and what portion, if any, of the
assets of the Funds shall be held in cash and other temporary investments.
Accordingly, the role of the Trustees is not to approve specific investments,
but rather to exercise a control and review function.

The Trust pays all expenses not specifically assumed by CIGNA Investments
including compensation and expenses of Trustees who are not Directors, officers
or employees of CIGNA Investments or any other affiliates of CIGNA Corporation;
registration, filing and other fees in connection with filings with regulatory
authorities; the fees and expenses of independent accountants; costs of printing
and mailing registration statements, prospectuses, proxy statements, and annual
and periodic reports to shareholders; custodian and transfer agent fees;
brokerage commissions and securities transactions costs incurred by the Trust;
taxes and corporate fees; legal fees incurred in connection with the affairs of
the Trust; and expenses of meetings of the shareholders and Trustees.

CIGNA Investments, at its own expense, furnishes to the Trust office space and
facilities and, except with respect to the Office of the Treasurer and Office of
the Secretary as provided in the Master Investment Advisory Agreement, all
personnel for managing the affairs of the Trust and each of Funds. The Trust
and other registered investment companies advised by CIGNA Investments have
agreed to reimburse CIGNA Investments for its costs of maintaining the Office of
the Treasurer and the cost of the Office of the Secretary as provided in their
respective investment advisory agreements. CIGNA Investments has estimated that
in 1997 the total expenses of the Office of the Treasurer will not exceed
$337,000 and the expenses of the Office of the Secretary are not expected to
exceed $94,000. The portion of these expenses allocated to each Fund for
calendar year 1997 are not expected to exceed the following amounts:

Page 19
<PAGE>

Office of Office of
the Treasurer the Secretary
------------- -------------

S&P 500 $ 43,714 $ 12,193
Index Fund

Money Market Fund $ 14,695 $ 4,099

In 1996 the costs incurred by the Trust for the Office of the Treasurer and the
Office of the Secretary were $52,557 and $25,530, respectively.

The Board of Trustees of the Trust has approved the method under which this cost
will be allocated to the Trust, and then to each Fund.

As full compensation for the investment management and all other services
rendered by CIGNA Investments and any sub-adviser, each Fund pays CIGNA
Investments a separate fee computed daily and paid monthly at annual rates based
on a percentage of the value of the relevant Fund's average daily net assets, as
follows: Money Market Fund - 0.35% and S&P 500 Index Fund - 0.25%.

Trust-wide expenses not identifiable to any particular Fund will be allocated
among the Funds. CIGNA Investments has voluntarily agreed to reimburse the
Funds to the extent that the annual operating expenses (excluding interest,
taxes, amortized organizational expense, transaction costs in acquiring and
disposing of portfolio securities and extraordinary expenses) of a Fund exceed a
percentage of the value of the relevant Fund's average daily net assets, as
follows: Money Market Fund - 0.50% and S&P 500 Index Fund - 0.25%.

The S&P 500 Index Fund incurred a management fee payable to CIGNA Investments of
$172,165, $213,557 and $201,131 for fiscal years 1996, 1995 and 1994,
respectively. The amount payable for 1996 was reduced to $146,301 due to the
then applicable expense limitation. The Money Market Fund incurred a management
fee payable to CII of $14,474 for fiscal year 1996. This amount was waived and
CIGNA Investments reimbursed the Fund an additional $30,209 due to the then
applicable expense limitation.

The Master Investment Advisory Agreement provides that it will continue from
year to year as to a Fund provided that such continuance is specifically
approved at least annually: (a) by a vote of the "majority of the outstanding
voting securities" (as such term is defined in the 1940 Act) of that Fund or by
the Board of Trustees of the Trust, and (b) by a vote of a majority of the
Trustees who are not parties to the agreement or "interested persons" (as
defined in the 1940 Act) of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. The Master Investment
Advisory Agreement provides that it (i) may be terminated at any time without
penalty (a) upon 60 days' written notice by vote of the Trustees of the Trust,
or with respect to any Fund, by vote of a majority of the outstanding voting
securities of such Fund, or (b) by CIGNA Investments upon 90 days' written
notice to the Trust in the case of the Master Investment Advisory Agreement and
(ii) will automatically terminate in the event of its "assignment" (as such term
is defined in the 1940 Act).

The Master Trust Agreement acknowledges CIGNA Corporation's control over the
name "CIGNA." The Trust and the Fund would be obliged to change their names to
eliminate the word "CIGNA" (to the extent they could lawfully do so) in the

Page 20
<PAGE>

event CIGNA Corporation were to withdraw its permission for use of such name.
CIGNA Corporation has agreed not to withdraw such permission from the Trust or a
series of the Trust so long as an affiliate of CIGNA Corporation shall be the
investment adviser for such series.

The Trust's Custodian and Transfer Agent is State Street Bank and Trust Company
("State Street"), Boston, Massachusetts 02107. Under its Custodian Agreement,
State Street maintains the portfolio securities of each Fund, administers the
purchases and sales of portfolio securities, collects interest and dividends and
other distributions made on the securities held in the portfolio, determines the
net asset value of shares of each Fund on a daily basis and performs such other
ministerial duties as are included in the Custodian Agreement and Agency
Agreement, copies of which are on file with the Securities and Exchange
Commission.

Price Waterhouse LLP acts as independent accountants for the Trust. Its offices
are at 160 Federal Street, Boston, Massachusetts 02110. Price Waterhouse LLP
representatives annually perform an audit of the financial statements of the
Funds and provide accounting advice and services throughout the year. Price
Waterhouse LLP reports its activities and the results of its audit to the Audit
Committee of the Board of Trustees. Price Waterhouse LLP also provides certain
tax advice to the Trust.

PORTFOLIO TURNOVER AND BROKERAGE ALLOCATION
- -------------------------------------------

It is anticipated that each Fund's annual portfolio turnover will not exceed
100%. With respect to the Money Market Fund, purchases and sales of portfolio
securities are generally transacted with the issuer or a primary market maker of
these securities on a net basis, without any brokerage commission being paid by
the Funds for such purchases. Purchases from dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases and sales
for the other Funds generally involve a broker.

Transactions on U.S. stock exchanges, commodities markets and futures markets
and other agency transactions involve the payment of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular
broker may charge different commissions according to such factors as the
difficulty and size of the transaction. Transactions in foreign investments
often involve the payment of fixed brokerage commissions, which may be higher
than those in the over-the-counter markets, but the price paid usually includes
an undisclosed dealer commission or mark-up as well as a disclosed, fixed
commission or discount retained by the underwriter or dealer.

It is the policy of CIGNA Investments on behalf of its clients, including the
Funds, to have purchases and sales of portfolio securities executed at the most
favorable prices, considering all costs of the transaction, including brokerage
commissions and spreads, and research services received, consistent with
obtaining best execution.

In seeking best execution, CIGNA Investments selects broker/dealers on the basis
of their professional capability and the value and quality of their brokerage
services. Brokerage services include the ability to execute most effectively
large orders without adversely affecting markets and the positioning of
securities in order to effect orderly sales for clients.

Page 21
<PAGE>

The officers of CIGNA Investments determine, generally without limitation, the
broker/dealers through whom, and the commission rates or spreads at which,
securities transactions for client accounts are executed. The officers of CIGNA
Investments may select a broker/dealer who may receive a commission for
portfolio transactions exceeding the amount another broker/dealer would have
charged for the same transaction if they determine that such amount of
commission is reasonable in relation to the value of the brokerage or research
services performed or provided by the broker/dealer, viewed in terms of either
that particular transaction or CIGNA Investments' overall responsibilities to
the client for whose account such portfolio transaction is executed and other
accounts advised by CIGNA Investments or accounts advised by other investment
advisers which are related persons of CIGNA Investments.

If two or more broker/dealers are considered able to offer the same favorable
price with the equivalent likelihood of best execution, the officers of CIGNA
Investments may prefer the broker/dealer who has furnished research services.
Research services include market information, analysis of specific issues,
presentation of special situations and trading opportunities on a timely basis,
advice concerning industries, economic factors and trends, portfolio strategy
and performance of accounts.

Research services are used in advising all accounts, including accounts advised
by related persons of CIGNA Investments, and not all such services are
necessarily used by CIGNA Investments in connection with the specific account
that paid commissions to the broker/dealer providing such services.

The overall reasonableness of brokerage commissions paid is evaluated
continually. Such evaluation includes review of what competing broker/dealers
are willing to charge for similar types of services and what discounts are being
granted by brokerage firms. The evaluation also considers the timeliness and
accuracy of the research received.

In addition, CIGNA Investments may, if permitted by applicable law, pay for
products or services other than brokerage and research services with brokerage
commissions as interpreted in SEC Release 34-23170 dated April 23, 1986.
Pursuant to that release, products and services which provide lawful and
appropriate assistance to CIGNA Investments's investment decision-making process
may be paid for with brokerage commissions to the extent such products and
services are used in that process.

Where the research service product has a mixed use, that is, the product may
serve a number of functions certain of which are not related to the making of
investment decisions, CIGNA Investments allocates the cost of the product on a
basis which they deem reasonable, according to the various uses of the product,
and maintain records documenting the allocation process followed. Only that
portion of the cost of the product allocable to research services is paid from
the Fund. The Fund does not acquire research services through the generation of
credits with respect to principal transactions or transactions in financial
futures, except in new issue fixed price underwritings.

The Trust does not presently allocate brokerage commissions to, or place orders
for portfolio transactions with, either directly or indirectly, brokers based on
their sales of shares of the Funds. Except as noted, the Trust does not utilize
an affiliated broker in effecting portfolio transactions and does not recapture
commissions paid in such transactions. Brokerage commissions paid by the S&P
500 Index Fund for 1996, 1995 and 1994 totaled $4,940, $4,667 and

Page 22
<PAGE>

$3,100, respectively, substantially all of which were paid to firms which
provided research services to CIGNA Investments.

As of December 31, 1996, Sanford C. Bernstein & Co., Inc. ("SCB") reported
ownership of approximately 8.1% of the outstanding common stock of CIGNA
Corporation. Accordingly, CIGNA may be deemed to be an affiliated person of SCB
pursuant to the provisions of the 1940 Act. As long as CIGNA may be deemed to
be an affiliated person of SCB, a Fund will not engage in any transaction with
SCB when SCB is acting for their own account and will engage in brokerage
transactions with SCB only under circumstances where the commission, spread or
profit received by the broker is fair and reasonable pursuant to rules
established by the Securities and Exchange Commission and procedures adopted and
monitored by the Board of Trustees of the Trust. During 1996, the Funds did not
engage in brokerage transactions with SCB. This amount of brokerage commissions
represented less than 1% of the aggregate of brokerage and underwriting
commissions paid by the Funds in 1996 and represented less than 1% of the total
value of the Funds' portfolio transactions which involved brokerage or
underwriting commissions.

PERFORMANCE INFORMATION
- -----------------------

Total return and yield figures for the Funds are neither fixed nor guaranteed,
and no Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. The Funds may provide performance
information in reports, sales literature and advertisements if accompanied by
performance of your Life Company's separate account. The Funds may also, from
time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about one or more of the Funds. The
following is a list of such publications or media entities:
<TABLE>
<CAPTION>

<S> <C> <C>
Advertising Age Financial Times Kiplinger
Barron's Financial Weekly Money
Barron's/Nelson's Financial World Mutual Fund Forecaster
Best's Review Forbes Nation's Business
Broker World Fortune New York Times
Business Week Global Investor Pensions World
Changing Times Hartford Courant Pensions & Investments
Christian Science Monitor Institutional Investor Personal Investor
Consumer Reports Insurance Forum Philadelphia Inquirer
Economist Insurance Weekly The Times (London)
Equity International International Business USA Today
FACS of the Week Week U.S. News & World Report
Far Eastern Investing Wall Street Journal
Economic Review Investor's Chronicle Washington Post
Financial Adviser Investor's Daily CNN
Financial Planning Journal of the American CNBC
Financial Product News Society of CLu & ChFC PBS
Financial Services Week

</TABLE>

Page 23
<PAGE>

Each Fund may also compare its performance to performance data of similar mutual
funds as published by the following services:

Lipper Analytical Services Stanger Report
CDA Investment Technologies, Inc. Weisenberger
Frank Russell Co. Micropal, Ltd.
InterSec Research

Although performance data may be useful to prospective investors in comparing
with other funds and other potential investments, investors should note that the
methods of computing performance of other potential investments are not
necessarily comparable to the methods employed by a Fund.

Yield and Total Return Quotations
- ---------------------------------

The standard formula for calculating total return, as described in the
prospectus, is as follows:

P(1+T)/n/=ERV

Where P = A hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the end
of the 1, 5, or 10 year periods (or fractional portion of such
period.)

Cumulative total return across a stated period may be calculated as follows:

P(1+V)=ERV

Where P = A hypothetical initial payment of $1,000.
V = cumulative total return.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the stated period.

The average annual total returns for the S&P 500 Index Fund and the Money Market
Fund for the one, five and ten year periods (or since inception, if shorter)
ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>

Periods ended December 31, 1996
1 Year 5 Years 10 Years
--------- ---------- -----------
<S> <C> <C> <C>

S&P 500 Index Fund 22.48% 12.47% 13.40%
Money Market Fund 4.18* ---------- -----------

</TABLE>

* For period from March 1, 1996 (commencement of operations) to December 31,
1996

Page 24
<PAGE>

Yield Quotations
- ----------------

The standard formula for calculating yield for each Fund except Money Market
Fund, as described in the prospectus, is as follows:

YIELD = 2[((a-b)/(c x d) + 1)/6/-1]

Where a = dividends and interest earned during a stated 30 day period. For
purposes of this calculation, dividends are accrued rather than
recorded on the ex-dividend date. Interest earned under this
formula must generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on yield to call
date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the period.
d = the maximum offering price per share on the last day of the period.

The standard formula for calculating annualized yield for the Money Market Fund,
as described in the prospectus, is as follows:

Y = V/1/ - V/o/ x 365
----------- ---
V/o/ 7

Where Y = annualized yield.
V/o/ = the value of a hypothetical pre-existing account in the Fund
having a balance of one share at the beginning of a stated seven-
day period.
V/1/ = the value of such an account at the end of the stated
period.

The annualized yield for the Money Market Fund for the 7 days ended December 31,
1996 was 5.05%.

The standard formula for calculating effective annualized yield for the Money
Market Fund, as described in the prospectus, is as follows:

EY = [(Y+1)/365///7/] -1

Where EY = effective annualized yield.
Y = annualized yield, as determined above.

The effective annualized yield for the Money Market Fund for the 7 days ended
December 31, 1996 was 5.18%.

For the purpose of the annualized yield and effective annualized yield, the net
change in the value of the hypothetical CIGNA Variable Products Money Market
Fund account reflects the value of additional shares purchased with dividends
from the original share and any such additional shares, and all fees charged to
all shareholder accounts in proportion to the length of the base period and the
Fund's average account size, but does not include realized gains and losses or
unrealized appreciation and depreciation.

Page 25
<PAGE>

PURCHASE, REDEMPTION AND PRICING OF SECURITIES
- ----------------------------------------------

The Funds may suspend redemptions or postpone the date of payment during any
period when: (a) the New York Stock Exchange is closed for other than customary
weekend and holiday closings or trading on such Exchange is restricted; (b) the
Securities and Exchange Commission has by order permitted such suspension for
the protection of the Fund's shareholders; or (c) an emergency exists as
determined by the Securities and Exchange Commission making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable.

A Fund's net asset value is calculated by dividing the number of outstanding
shares into the net assets of the Fund. Net assets are the excess of a Fund's
assets over its liabilities. Additional information concerning purchase and
redemption of securities may be found in the current prospectus for the Funds.

The Money Market Fund.
- ---------------------

The investments of The Money Market Fund are valued at amortized cost. The
amortized cost of an instrument is determined by valuing it at cost originally
and thereafter amortizing any discount or premium from its face value at a
constant rate until maturity, regardless of the effect of fluctuating interest
rates on the market value of the instrument. The amortized cost method may
result at times in determinations of value that are higher or lower than the
price the Fund would receive if the instruments were sold. During periods of
declining interest rates, use by the Fund of the amortized cost method of
valuing its portfolio may result in a lower value than the market value of the
portfolio, which could be an advantage to new investors relative to existing
shareholders. The converse would apply in a period of rising interest rates.

The valuation of the investments of CIGNA Variable Products Money Market Fund at
amortized cost is permitted by the Securities and Exchange Commission, and the
Fund is required to adhere to certain conditions so long as it uses this
valuation method. The Money Market Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will purchase only instruments having
remaining maturities of one year or less (except as otherwise noted under
"Variable and Floating Note Instruments" under "Description of Money Market
Instruments" in this Statement of Additional Information) and will invest only
in securities determined by the Board of Trustees to be of high quality with
minimal credit risks. The Board of Trustees has also established procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objective, to stabilize the Fund's price per share as computed
for the purpose of distribution, redemption and repurchase at $1.00. Such
procedures include a review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as they may deem appropriate, to determine whether
the Fund's net asset value, calculated by using readily available market
quotations, deviates from $1.00 per share, and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing shareholders.
In the event the Board of Trustees determines that such a deviation exists, it
will take such corrective action as it deems necessary and appropriate,
including selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; or establishing a net asset

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value per share by using readily available market quotations in which case, the
net asset value could possibly be greater or less than $1.00 per share.

All Other Funds
- ---------------

Information describing the valuation of securities held in these Funds is found
in the prospectus under "Computation of Net Asset Value."

DIVIDENDS
- ---------

Information concerning dividends is found in the current prospectus for the
Funds.

LIMITATION ON TRANSFERS
- -----------------------

Whenever the Trust or its duly appointed transfer agent is requested to transfer
Fund shares to other than an Eligible Purchaser, the Trust has the right at its
election to purchase such shares at their net asset value next effective
following the time at which the request for transfer is presented; provided,
however, that the Trust must notify the transferee or transferee of such shares
in writing of its election to purchase such shares within seven (7) days
following the date of such request and settlement for such shares shall be made
within such seven-day period.

RATINGS OF SECURITIES
- ---------------------

Description of Standard & Poor's Corporation ("Standard & Poor's") and Moody's
Investors Service, Inc. ("Moody's") commercial paper and bond rating:

COMMERCIAL PAPER RATINGS--Standard & Poor's commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues assigned an "A" rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety.

The two highest categories, A-1 and A-2, are described as follows:

"A-1" This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus
(+) sign designation.

"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."

Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment capacity of rated issuers. The two highest
designations are as follows:

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Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

. Leading market positions in well-established industries.

. High rates of return on funds employed.

. Conservative capitalization structures with moderate reliance on debt and
ample asset protection.

. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

. Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

BOND RATINGS--S&P describes its ratings for corporate bonds as follows:

AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB-B-CCC-CC - Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

Moody's describes its ratings for corporate bonds as follows:

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally

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stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements, their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

MUNICIPAL BOND RATINGS--The four highest ratings of Moody's for Municipal Bonds
are Aaa, Aa, A and Baa. Municipal bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to municipal bonds which are of "high
quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat larger than Aaa-rated municipal
bonds. The Aaa- and Aa-rated municipal bonds comprise what are generally known
as "high-grade bonds." Municipal bonds which are rated A by Moody's possess many
favorable investment attributes and are considered "upper-medium-grade
obligations." Factors giving security to principal and interest of A-rated
municipal bonds are considered adequate, but elements may be present which

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suggest a susceptibility to impairment sometime in the future. Bonds rated Baa
are considered as "medium-grade" obligations. They are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.

The four highest ratings of Standard & Poor's for municipal bonds are AAA
(Prime), AA (High Grade), A (Good Grade) and BBB (Medium Grade). Municipal bonds
rated AAA are "obligations of the highest quality." The rating of AA is accorded
issues with investment characteristics "only slightly less marked than those of
the prime quality issues." The category of A describes "the third strongest
capacity for payment-of-debt service." Principal and interest payments on bonds
in this category are regarded as safe. It differs from the two higher ratings
because with respect to general obligation bonds, there is some weakness, either
in the local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Management performance appears adequate. The BBB rating is the lowest
"investment-grade" security rating by Standard & Poor's. The difference between
A and BBB ratings is that the latter shows more than one fundamental weakness,
or one very substantial fundamental weakness, whereas the former shows only one
deficiency among the factors considered. With respect to revenue bonds, debt
coverage is only fair. Stability of the pledged revenues could show substantial
variations, with the revenue flow possibly being subject to erosion over time.
Basic security provisions are no more than adequate. Management performance
could be stronger.

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