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[CIGNA TREE LOGO APPEARS HERE]
CIGNA VARIABLE PRODUCTS
MONEY MARKET FUND
ANNUAL REPORT
DECEMBER 31, 1997
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1
DEAR SHAREHOLDERS:
We are pleased to provide this report for the CIGNA Variable Products Money
Market Fund (the "Fund"), covering the year ended December 31, 1997.
MARKET REVIEW
There was little surprise in the fact that the Federal Reserve (the "Fed") left
monetary policy unchanged in the fourth quarter of 1997. The ongoing crisis in
Southeast Asia, and the corresponding threat of an Asian recession and asset
deflation risks, as expected, kept the Fed on hold. Expectations are that,
although the Asian situation will reduce U.S. growth in 1998, perhaps as much as
one full percentage point, that growth will continue in the range of 2-2 1/2%.
The Fed may eventually ease monetary policy.
FUND ACTIVITY AND PERFORMANCE
On December 31, 1997, the portfolio composition was as follows: top-tier
commercial paper, 72%; top tier foreign commercial paper, 2%; and U.S.
Government and agencies, 26%. The Fund is well diversified.
Total return for the twelve months ended December 31, 1997 was 5.19%, after
expenses and reinvestment of dividends. By comparison, the Lipper Money Market
Instrument Fund Average and three-month treasury bills, as reported by Lehman
Brothers (which does not include investment expenses), returned 4.90% and 5.52%,
respectively, for the year ended December 31, 1997. As of December 31, 1997, the
Fund's annualized 7-day yield was 5.27%, and its average portfolio maturity was
35 days. (Fund and Lipper returns are after expenses and reinvestment of
dividends.)
OUTLOOK
1998 started with a bang, as long bond yields fell to historic lows in the first
few trading days. Fueling the rally were the Asian crisis and Fed Chairman Alan
Greenspan's speech on deflation. These two issues highlight both the fundamental
and technical factors that must be considered in assessing future activity. We
currently expect that Fed policy will remain steady for the first quarter of
1998. The portfolio is structured to take advantage of this environment. We
will, however, continue to monitor the situation in Asia as well as economic
trends in the U.S., as we believe both are key indicators of future Fed
direction - and will adjust our portfolio strategy accordingly.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro
Chairman of the Board and President
CIGNA Variable Products Money Market Fund
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND INVESTMENTS IN SECURITIES
December 31, 1997 2
MARKET
PRINCIPAL VALUE
(000) (000)
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COMMERCIAL PAPER - 71.9%
American Express Credit Corp.,
5.52%, 1/6/98 $ 60 $ 60
5.57%, 1/6/98 54 54
5.8%, 1/22/98 305 305
Assoc. Corp. of North America, 5.65%, 1/9/98 396 396
Bell Atlantic Financial Services, 5.85%,
1/27/98 550 548
Campbell Soup Co., 5.7%, 1/22/98 375 374
Coca-Cola Co.
5.8%, 1/8/98 330 330
5.55%, 1/13/98 194 194
Disney, (Walt) Co, 5.8%, 1/14/98 250 249
Dillard Investment Co., 5.9%, 1/7/98 509 508
Dupont (E.I.) de Nemours & Co., 5.55%,
1/12/98 275 274
Ford Motor Credit Co., 5.6%, 1/7/98 400 400
Fortune Brands, Inc., 5.85, 1/12/98 460 459
Gannett, Inc. 6.65%, 1/16/98 371 370
Hershey Foods Corp., 5.63%, 2/13/98 429 426
Hewlet Packard Co., 5.9%, 1/21/98 390 389
Household Finance Corp., 6.0%, 1/2/98 530 530
Lucent Technologies, Inc., 5.5%, 1/5/98 362 362
May Department Stores Co., 5.83%, 1/23/98 525 523
PACCAR Financial Corp., 6.2%, 1/8/98 395 394
PHH Corp., 5.58%, 2/2/98 387 385
Penny, (J.C.) Funding Corp., 5.54%, 1/15/98 320 319
Pitney Bowes Credit Corp.,
5.8%, 1/16/98 187 187
5.92%, 1/16/98 323 322
Shell Oil Co., 5.8%, 1/5/98 537 537
Sysco Corp., 5.85%, 1/20/98 537 535
Times Mirror Co., 5.65%, 2/6/98 405 403
Toshiba America, Inc., 5.55%, 1/8/98 228 228
Xerox Credit Corp., 5.55%, 1/13/98 400 399
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10,460
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FOREIGN - 1.8%
BBV Finance (Delaware), 5.51%, 1/7/98 264 264
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MARKET
PRINCIPAL VALUE
(000) (000)
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U.S. GOVERNMENT & AGENCIES - 26.0%
Federal Farm Credit Banks,
5.53%, 2/2/98 $ 500 $ 500
5.65%, 2/2/98 1,000 1,000
5.6%, 10/1/98 250 250
Federal Home Loan Banks,
5.8%, 2/5/98 125 125
5.8%, 9/18/98 500 500
Federal National Mortgage Assoc.,
5.5%, 2/18/98 150 150
Student Loan Marketing Assoc.,
5.82%, 9/16/98 250 250
5.92%, 11/12/98* 1,000 1,000
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3,775
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TOTAL INVESTMENTS IN SECURITIES - 99.7%
(Total Cost - $14,498,677) 14,499
Cash and Other Assets, Less Liabilities - 0.3% 41
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NET ASSETS - 100.0%
(Equivalent to $1.00 per share based on
14,539,904 shares outstanding) $14,540
=========
*Variable rate security. Rate is as of December 31, 1997.
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(IN THOUSANDS)
--------------
ASSETS:
Investments in securities at value
(Cost - $14,498,677) $ 14,499
Cash on deposit with custodian 1
Interest receivable 57
Investment for Trustees' deferred compensation
plan (Cost - $1,359) 1
Receivable from advisor 9
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TOTAL ASSETS 14,567
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LIABILITIES:
Accrued audit and legal fees payable 7
Accrued advisory fees payable 4
Payable for Trustees' deferred compensation
plan 1
Other accrued expenses (including $4,223 due
to affiliates) 15
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TOTAL LIABILITIES 27
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NET ASSETS (Equivalent to $1.00 per share
based on 14,539,904 shares outstanding) $ 14,540
===================
COMPONENTS OF NET ASSETS:
Paid in capital $ 14,540
Undistributed net investment income -
Accumulated net realized gain on investments -
Unrealized appreciation of investments -
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NET ASSETS $ 14,540
===================
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $541
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EXPENSES:
Investment advisory fees 34
Custodian fees 32
Administrative services 20
Other 11
Auditing and legal fees 10
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Total expense 107
Less expenses waived by investment advisor (59)
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Net expenses 48
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NET INVESTMENT INCOME 493
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investments -
Unrealized appreciation of investments -
-------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS -
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $493
=============
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 4
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE MARCH 1,
YEAR ENDED 1996* TO
DECEMBER 31, DECEMBER 31,
1997 1996
---- ----
(IN THOUSANDS)
--------------
<S> <C> <C>
OPERATIONS:
Net investment income $493 $212
Net realized gain from investments - -
Unrealized appreciation on investments - -
-------------- ------------
Net increase in net assets from operations 493 212
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (493) (212)
From net realized capital gains - -
-------------- ------------
Total distributions to shareholders (493) (212)
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CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 38,202 5,887
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions 491 211
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38,693 6,098
Cost of shares redeemed (30,156) (95)
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Net increase from fund share transactions 8,537 6,003
NET INCREASE IN NET ASSETS 8,537 6,003
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NET ASSETS:
Beginning of period 6,003 -
-------------- ------------
End of period $14,540 $6,003
============== ============
</TABLE>
* Commencement of operations.
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS 5
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA Variable Products Money Market Fund
(the "Fund") is a separate series of CIGNA Variable Products Group, a
Massachusetts business trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The objective of the 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 preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATION - The investments in the Fund are valued at amortized
cost, which the Board of Trustees has determined constitutes fair value and
which at December 31, 1997 approximates cost for Federal income tax purposes.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Interest income, which includes accretion of discount, is recorded on the
accrual basis. Securities gains and losses are recognized on the specific cost
identification basis.
C. FEDERAL TAXES - For Federal income tax purposes, the Fund is taxed as a
separate entity. Its policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income and capital gains to its shareholders. Therefore, no
Federal income or excise taxes on realized income or net capital gains have been
accrued.
D. DIVIDENDS - Dividends from net investment income and net realized gains are
declared and reinvested daily. Dividends and distributions are recorded by the
Fund on the ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined in accordance with federal tax
regulations which may differ from generally accepted accounting principles. To
the extent that such differences are permanent, a reclassification to paid in
capital may be required.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES. Investment
advisory fees are paid or accrued to CIGNA Investments, Inc. ("CII"), certain
officers and directors of which are affiliated with the Funds. Such advisory
fees are based on an annual rate of 0.35% applied to the average daily net
assets of the Fund. CII has voluntarily agreed to reimburse the Fund for any
amount by which its expenses (including the advisory fee but excluding interest,
taxes, amortized organization expenses, transaction costs incurred in acquiring
and disposing of portfolio securities, and extraordinary expenses) exceed 0.50%
of average daily net assets.
The Fund reimburses CII for a portion of the compensation and related expenses
of the Trust's Treasurer and Secretary and certain persons who assist in
carrying out the responsibilities of those offices. For the period ending
December 31, 1997, the Fund paid $20,114.
CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
3. TRUSTEES' FEES. Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of its affiliates.
Trustees may elect to defer all or a portion of their fees which are invested in
mutual fund shares in accordance with a deferred compensation plan.
4. CAPITAL STOCK. The Fund is a separate series of the Trust which offers an
unlimited number of shares of beneficial interest, without par value.
Connecticut General Life Insurance Company, an indirect, wholly-owned subsidiary
of CIGNA Corporation, is the sole shareholder of the Fund.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS
(Continued) 6
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
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Year Ended March 1, 1996* to
December 31, 1997 December 31, 1996
Shares Amount Shares Amount
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<S> <C> <C> <C> <C>
Shares sold 38,203 $38,203 5,887 $5,887
Shares issued to shareholders
in reinvestment of dividends
and distributions 494 494 211 211
----------------- ----------------- ----------------- -----------------
38,697 38,697 6,098 6,098
Shares redeemed (30,160) (30,160) (95) (95)
----------------- ----------------- ----------------- -----------------
Net increase 8,537 $ 8,537 6,003 $6,003
================= ================= ================= =================
</TABLE>
* Commencement of operations.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS
(Continued) 7
5. FINANCIAL HIGHLIGHTS. The following selected per share data, ratios and
supplemental data is computed on the basis of a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Year
Ended March 31, 1996* to
December 31, December 31,
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04
Net realized and unrealized gain on securities - -
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TOTAL FROM INVESTMENT OPERATIONS 0.05 0.04
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LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.04)
Distributions from capital gains - -
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TOTAL DISTRIBUTIONS (0.05) (0.04)
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NET ASSET VALUE, END OF PERIOD $1.00 $1.00
====== ======
TOTAL RETURN 5.19% 4.18%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $14,540 $6,003
Ratio of operating expenses to average net assets 0.50% ** 0.42% **
Ratio of net investment income to average net assets 5.07% *** 4.10% ***
Portfolio turnover N/A N/A
</TABLE>
* Commencement of operations.
** Ratios of expenses to average net assets prior to reimbursement of expenses
were 1.58% and 1.28% for the 1997 and 1996 periods, respectively.
***Ratios of net investment income to average net assets prior to reimbursement
of expenses were 4.4% and 3.24% for the 1997 and 1996 periods, respectively.
The Notes to Financial Statement are an integral part of these statements.
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8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of CIGNA Variable Products Money Market Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of CIGNA Variable Products
Money Market Fund (the "Fund") at December 31, 1997, the results of its
operations for the year then ended, changes in its net assets and the financial
highlights for the year then ended and for the period March 1, 1996
(commencement of operations) through December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachesetts
February 20, 1998
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 9
TRUSTEES: OFFICERS:
R. Bruce Albro (Chairman) R. Bruce Albro
Senior Managing Director, Chairman of the Board
CIGNA Investments, Inc. and President
Hugh R. Beath Alfred A. Bingham III
Advisory Director, Vice President and Treasurer
AdMedia Corporate Advisors, Inc.
Jeffrey S. Winer
Russell H. Jones Vice President and Secretary
Vice President and Treasurer
Kaman Corporation
CUSTODIAN AND TRANSFER AGENT:
Thomas C. Jones
President, CIGNA Investment State Street Bank and Trust Company
Management and CIGNA P.O. Box 2351
Investments, Inc. Boston, Massachusetts 02107
Paul J. McDonald INVESTMENT ADVISER:
Senior Executive Vice President
and Chief Administrative Officer, CIGNA Investments, Inc.
Friendly Ice Cream Corporation 900 Cottage Grove Road
Hartford, CT 06152
THE FUND:
950 Winter Street
Suite 1200
Waltham, Massachusetts 02154
