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[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA VARIABLE PRODUCTS
S&P 500 INDEX FUND
SEMIANNUAL REPORT
JUNE 30, 1998
[CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND OF COVER]
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1
DEAR SHAREHOLDERS:
We are pleased to provide this report for CIGNA Variable Products S&P 500 Index
Fund (the "Fund"), covering the six months ended June 30, 1998.
THE MARKET ENVIRONMENT
During the second quarter, the U.S. economy failed to maintain the pace of
growth established in the prior three months. Several key factors, including
continuing declines in net exports, inventory liquidations, the General Motors
strike, growing deflationary fears, and fears about the ripple effect of growing
problems in Asia, caused growing concern that the long cycle of earnings
improvements for U.S. companies was in jeopardy.
Total return for the S&P 500 Index through the first two months of the quarter
was slightly negative. Performance rebounded in June, however, as the Asian
troubles renewed a "flight to quality" which played out in part through
increased demand for liquid high quality U.S. large-cap stocks. As a result, the
S&P 500 Index finished the quarter up 3.30%, just shy of an all-time high.
FUND RESULTS
Despite the market's volatility during the second quarter, the Fund's positive
performance continued in the quarter and throughout the first half of the year.
The Fund returned 3.27% for the second quarter (3.33% before expenses of 0.07%)
and 17.56% (17.69% before expenses of 0.13%) for the first half. This compares
with 3.30% in the quarter and 17.71% in the half for the S&P 500 Index. The Fund
attempts to replicate the total return of the S&P 500 Index, after Fund
expenses.
OUTLOOK
As evidenced by the increased volatility of the S&P 500 Index during the second
quarter, market participants are increasingly divided as to the market's likely
direction. Market optimists focus on the strength of consumer spending,
stimulated by low interest rates and modest inflation. They further suggest that
the impact on the U.S. economy of events in Asia - as evidenced by renewed trade
deficit growth, falling industrial production, declining inventory investment,
and reduced corporate profits - will be temporary and mild in nature.
Concerned market watchers on the other hand focus on evidence of increasing
inflationary pressures -- especially tight labor markets and related wage
pressures and lack of productivity advances -- and on the risk of Federal
Reserve tightening.
Over the next several months, this growing confusion will likely generate
volatility in S&P 500 levels similar to that experienced in the second quarter.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro
CHAIRMAN OF THE BOARD AND PRESIDENT
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES 2
June 30, 1998 (Unaudited)
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS - 64.3%
General Electric Co. 39,400 $3,585
Microsoft Corp.* 29,000 3,143
Coca-Cola Co. 29,600 2,530
Exxon Corp. 29,600 2,111
Merck & Co., Inc. 14,400 1,926
Pfizer, Inc. 15,400 1,674
Wal-Mart Stores, Inc. 27,400 1,665
Procter & Gamble Co. 16,400 1,493
Intel Corp. 19,600 1,453
Royal Dutch Petroleum Co. 25,600 1,403
Bristol-Myers Squibb Co. 12,000 1,379
International Business Machines Corp. 11,700 1,343
Lucent Technologies, Inc. 15,368 1,278
American International Group, Inc. 8,475 1,237
Johnson & Johnson 16,200 1,195
Philip Morris Companies, Inc. 29,400 1,158
Cisco Systems, Inc.* 12,100 1,114
A T & T Corp. 19,400 1,108
du Pont (E.I.) de Nemours & Co. 13,400 1,000
SBC Communications, Inc. 22,006 880
Lilly (Eli) & Co. 13,200 872
NationsBank Corp. 11,360 869
Bell Atlantic Corp. 18,694 853
Disney ( Walt) Co. 8,100 851
Ford Motor Co. 14,000 826
Citicorp 5,500 821
Travelers Group, Inc. 13,442 815
American Home Products Corp. 15,600 807
Schering-Plough Corp. 8,800 806
Chase Manhattan Corp. 10,584 799
BellSouth Corp. 11,900 799
Federal National Mortgage Association 12,700 772
PepsiCo, Inc. 18,400 758
Abbott Laboratories 18,400 752
Hewlett-Packard Co. 12,500 748
Gillette Co. 13,200 748
BankAmerica Corp. 8,600 743
Home Depot, Inc. 8,800 731
Dell Computer Corp.* 7,800 724
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Mobil Corp. 9,400 $720
Warner-Lambert Co. 9,600 666
American Express Company 5,700 650
Morgan Stanley, Dean Witter,
Discover & Co. 7,070 646
Chevron Corp. 7,700 640
GTE Corp. 11,400 634
First Union Corp. 10,528 613
Unilever NV 7,600 600
Ameritech Corp. 13,200 592
WorldCom, Inc.* 12,200 591
McDonald's Corp. 8,300 573
Compaq Computer Corp. 20,076 570
General Motors Corp. 8,500 568
Time Warner, Inc. 6,600 564
Boeing Company 11,876 529
Amoco Corp. 11,800 491
Allstate Corp. 5,298 485
MCI Communications Corp. 8,133 473
Chrysler Corp. 8,000 451
Banc One Corp. 7,748 432
Federal Home Loan Mortgage Corp. 8,700 409
Minnesota Mining and Manufacturing Co. 4,900 403
Tyco International Ltd. 6,400 403
Gap (The), Inc. 6,450 397
Schlumberger Ltd. 5,800 396
Texaco, Inc. 6,600 394
Wells Fargo & Co. 1,066 393
U. S. Bancorp, Inc. 9,102 391
Merrill Lynch & Co., Inc. 4,200 387
Xerox Corp. 3,800 386
Monsanto Company 6,900 386
Motorola, Inc. 7,000 368
Sprint Corp. 5,100 360
Medtronic, Inc. 5,600 357
Computer Associates International, Inc. 6,412 356
Northern Telecom Ltd. 6,000 340
Airtouch Communications, Inc.* 5,800 339
Sara Lee Corp. 5,900 330
Norwest Corp. 8,800 329
MediaOne Group, Inc.* 7,300 321
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 3
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Raytheon Co., Class B 5,400 $319
Emerson Electric Co. 5,200 314
First Chicago NBD Corp. 3,453 306
Kimberly-Clark Corp. 6,632 304
Colgate-Palmolive Co. 3,400 299
Campbell Soup Company 5,600 298
Atlantic Richfield Co. 3,800 297
Allied-Signal, Inc. 6,600 293
Eastman Kodak Co. 4,000 292
Oracle Systems Corp.* 11,512 283
Associates First Capital Corp., Class A 3,669 282
Sears, Roebuck & Company 4,600 281
Bank of New York, Inc. 4,600 279
U.S. West, Inc. 5,899 277
Pharmacia & Upjohn, Inc. 6,010 277
Texas Instruments, Inc. 4,700 274
Anheuser-Busch Companies, Inc. 5,800 274
CBS Corp. 8,500 270
Dayton Hudson Corp. 5,400 262
Dow Chemical Co. 2,700 261
United Technologies Corp. 2,800 259
Morgan (J.P.) & Co. 2,200 258
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TOTAL 100-LARGEST STOCKS 72,961
- ----------------------------------------------------------------
Duke Power Co. 4,362 258
Fleet Financial Group, Inc. 3,016 252
EMC Corp.* 5,600 251
Viacom, Inc., Class B* 4,300 250
Automatic Data Processing, Inc. 3,400 248
Lockheed Martin Corp. 2,330 247
Heinz (H.J.) Co. 4,300 241
Walgreen Co. 5,800 240
Caterpillar, Inc. 4,400 233
Columbia/HCA Healthcare Corp. 8,000 233
General Re Corp. 900 228
Gannett Co., Inc. 3,200 227
Tele-Communications, Inc., Class A* 5,900 227
Southern Company 7,900 219
Penney (J.C.) Co., Inc. 3,000 217
Mellon Bank Corp. 3,100 216
SunTrust Banks, Inc. 2,600 211
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
CIGNA Corp. 3,000 $207
American General Corp. 2,898 206
Amgen, Inc.* 3,100 203
Illinois Tool Works, Inc. 3,000 200
BankBoston Corp. 3,600 200
Waste Management, Inc. 5,700 200
PNC Bank Corp. 3,700 199
Cendant Corp.* 9,504 198
Bestfoods 3,400 197
Washington Mutual, Inc. 4,545 197
MBNA Corp. 5,812 192
May Department Stores Co. 2,900 190
KeyCorp 5,316 189
Kellogg Co. 5,000 188
Sun Microsystems, Inc.* 4,300 187
National City Corp. 2,600 185
Fifth Third Bancorp 2,925 184
Seagram Company Ltd. 4,400 180
First Data Corp. 5,400 180
Household International, Inc. 3,600 179
Wachovia Corp. 2,100 177
ConAgra, Inc. 5,600 177
Burlington Northern Santa Fe Corp. 1,789 176
Baxter International, Inc. 3,200 172
Lowes Companies, Inc. 4,200 170
HBO and Company 4,800 169
AMR Corp.* 2,000 167
Franklin Resources., Inc. 3,100 167
PG & E Corp. 5,300 167
Lehman Brothers Holdings, Inc. 2,140 166
NIKE, Inc., Class B 3,400 166
Boston Scientific Corp.* 2,300 165
Pitney-Bowes, Inc. 3,400 164
Marsh & McLennan Companies, Inc. 2,700 163
Enron Corp. 3,000 162
Chubb Corp. 2,000 161
Hartford Financial Services Group, Inc. 1,400 160
Deere & Co. 3,000 159
Tellabs, Inc.* 2,200 158
Costco Companies, Inc.* 2,500 158
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 4
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
CVS Corp. 4,000 $156
Ralston Purina Co. 1,300 152
International Paper Co. 3,507 151
Edison International 5,100 151
Albertson's, Inc. 2,900 150
Phillips Petroleum Co. 3,100 149
PPG Industries, Inc. 2,100 146
Textron, Inc. 2,000 143
United Healthcare Corp. 2,200 140
Federated Department Stores, Inc.* 2,600 140
State Street Corp. 2,000 139
Halliburton Co. 3,100 138
Wrigley (Wm.) Jr. Company 1,400 137
Aon Corp. 1,950 137
Kroger Co.* 3,200 137
Norfolk Southern Corp. 4,500 134
Mattel, Inc. 3,145 133
Aluminum Co. of America 2,000 132
Cognizant Corp. 2,100 132
FPL Group, Inc. 2,100 132
Williams Companies, Inc. 3,900 132
Aetna, Inc. 1,726 131
Comerica, Inc. 1,950 129
Consolidated Edison Co. of N.Y., Inc. 2,800 129
Archer-Daniels-Midland Co. 6,648 129
Guidant Corp. 1,800 128
Union Pacific Corp. 2,900 128
Progressive Corp, Ohio 900 127
Honeywell, Inc. 1,500 125
HealthSouth Corp.* 4,700 125
Becton, Dickinson and Co. 1,600 124
USX-Marathon Group 3,600 124
Applied Materials, Inc.* 4,200 124
General Mills, Inc. 1,800 123
3Com Corp.* 4,000 123
Cardinal Health, Inc. 1,300 122
Goodyear Tire & Rubber Co. 1,900 122
Masco Corp. 2,000 121
SunAmerica, Inc. 2,100 121
Clear Channel Communications, Inc.* 1,100 120
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Rockwell International Corp. 2,500 $120
Lincoln National Corp. 1,300 119
CSX Corp. 2,600 118
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TOTAL 200-LARGEST STOCKS 89,837
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Sysco Corp. 4,600 118
Hershey Foods Corp. 1,700 117
Texas Utilities Co. 2,800 117
Delta Air Lines, Inc. 900 116
Bankers Trust New York Corp. 1,000 116
Avon Products, Inc. 1,500 116
Service Corporation International 2,700 116
Computer Sciences Corp.* 1,800 115
St. Paul Companies, Inc. 2,732 115
Clorox Co. 1,200 114
Ascend Communications, Inc.* 2,300 114
Loews Corp. 1,300 113
FDX Corp.* 1,800 113
Limited, Inc. 3,400 113
Tenet Healthcare Corp.* 3,600 113
ALLTEL Corp. 2,400 112
Kmart Corp.* 5,800 112
Comcast Corp., Class A (Special) 2,700 110
BB and T Corp. 1,600 108
Conseco, Inc. 2,300 108
Occidental Petroleum Corp. 4,000 108
Beneficial Corp. 700 107
Northern Trust Corp. 1,400 107
Rite Aid Corp. 2,800 105
Houston Industries, Inc. 3,407 105
American Electric Power Co., Inc. 2,300 104
Air Products & Chemicals, Inc. 2,600 104
Unocal Corp. 2,900 104
Marriott International, Inc. 3,200 104
Tribune Co. 1,500 103
Weyerhaeuser Co. 2,200 102
Fort James Corp. 2,300 102
Schwab (Charles) Corp. 3,150 102
UNUM Corp. 1,800 100
Newell Company 2,000 100
Omnicom Group 2,000 100
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 5
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Summit Bancorp 2,100 $100
Pioneer Hi-Bred International, Inc. 2,400 99
McGraw-Hill, Inc. 1,200 98
Winn-Dixie Stores, Inc. 1,900 97
TJX Companies, Inc. 4,000 97
Dover Corp. 2,800 96
Public Service Enterprises Group, Inc. 2,800 96
New York Times Co., Class A 1,200 95
Unicom Corp. 2,700 95
Providian Corp. 1,200 94
Browning-Ferris Industries, Inc. 2,700 94
Corning, Inc. 2,700 94
Quaker Oats Co. 1,700 93
Ingersol-Rand Co. 2,100 93
AMP, Inc. 2,712 93
Transamerica Corp. 800 92
Coastal Corp. 1,300 91
Interpublic Group of Companies, Inc. 1,500 91
Gateway 2000, Inc.* 1,800 91
Burlington Resources, Inc. 2,110 91
Aegon NV ARS 1,042 90
Dominion Resources, Inc. 2,200 90
Republic New York Corp. 1,400 88
Dresser Industries, Inc. 2,000 88
Hilton Hotels Corp. 3,100 88
Donnelley (R.R.) & Sons Co. 1,900 87
Parametric Technology Corp.* 3,200 87
American Stores Co. 3,600 87
FirstEnergy Corp. 2,800 86
Ahmanson (H. F.) & Co. 1,200 85
Tandy Corp. 1,600 85
Praxair, Inc. 1,800 84
PacifiCorp 3,700 84
Barrick Gold Corp. 4,400 84
Rohm & Haas Co. 800 83
Northrop Grumman Corp. 800 82
VF Corp. 1,600 82
Torchmark Corp. 1,800 82
Carolina Power & Light Co. 1,900 82
PECO Energy Co. 2,800 82
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Mercantile Bancorporation, Inc. 1,600 $81
Cincinnati Financial Corp. 2,100 81
MGIC Investment Corp. 1,400 80
Union Carbide Corp. 1,500 80
Southwest Airlines Co. 2,700 80
Toys 'R' Us, Inc.* 3,400 80
Genuine Parts Co. 2,250 78
Nordstrom, Inc. 1,000 77
Cooper Industries, Inc. 1,400 77
Fortune Brands, Inc. 2,000 77
Alcan Aluminum Ltd. 2,800 77
TRW, Inc. 1,400 76
Crown Cork & Seal Co., Inc. 1,600 76
Owens-Illinois, Inc.* 1,700 76
Tenneco, Inc. 2,000 76
Dun & Bradstreet Corp. 2,100 76
MBIA, Inc. 1,000 75
Times Mirror Co., Class A 1,200 75
Synovus Financial Corp. 3,150 75
Golden West Financial Corp. 700 74
Jefferson-Pilot Corp. 1,275 74
General Dynamics Corp. 1,600 74
Bay Networks, Inc.* 2,300 74
SAFECO Corp. 1,600 73
Green Tree Financial Corp. 1,700 73
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TOTAL 300-LARGEST STOCKS 99,281
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DTE Energy Co. 1,800 73
Sherwin-Williams Co. 2,200 73
Central & Southwest Corp. 2,700 73
Entergy Corp. 2,500 72
U.S. Airways Group, Inc.* 900 71
Consolidated Natural Gas Co. 1,200 71
Seagate Technology, Inc.* 3,000 71
Eaton Corp. 900 70
Unisys Corp.* 2,400 68
Black & Decker Corp. 1,100 67
Dow Jones & Co., Inc. 1,200 67
Knight-Ridder, Inc. 1,200 66
Rubbermaid, Inc. 2,000 66
Georgia-Pacific Corp. 1,100 65
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 6
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Amerada Hess Corp. 1,200 $65
Hasbro, Inc. 1,650 65
Equifax, Inc. 1,800 65
Micron Technology, Inc. 2,600 65
Avery Dennison Corp. 1,200 64
Huntington Bancshares, Inc. 1,900 64
Frontier Corp. 2,000 63
Whirlpool Corp. 900 62
Eastman Chemical Co. 1,000 62
Baker Hughes, Inc. 1,800 62
Thermo Electron Corp.* 1,800 62
Humana, Inc.* 2,000 62
Countrywide Credit Industries, Inc. 1,200 61
International Flavors & Fragrances, Inc. 1,400 61
GPU, Inc. 1,600 61
Grainger (W.W.), Inc. 1,200 60
Cox Communications, Inc., Class A* 1,229 60
Comcast Corp., Class A 1,500 60
Western Atlas, Inc.* 700 59
Dana Corp. 1,100 59
Champion International Corp. 1,200 59
Maytag Corp. 1,200 59
Baltimore Gas & Electric Co. 1,900 59
UST, Inc. 2,200 59
Novell, Inc.* 4,600 59
Brown-Forman Corporation, Class B 900 58
Dillard Department Stores, Inc., Class A 1,400 58
Tricon Global Restaurants, Inc.* 1,840 58
Johnson Controls, Inc. 1,000 57
Cinergy Corp. 1,620 57
AutoZone, Inc.* 1,800 57
Circuit City Stores, Inc. 1,200 56
Block (H & R), Inc. 1,300 55
Harcourt General, Inc. 900 54
Parker-Hannifin Corp. 1,425 54
Biomet, Inc. 1,600 53
Ameren Corp. 1,300 52
Northern States Power Co. 1,800 52
Union Pacific Resources Group, Inc. 2,949 52
American Greetings Corp., Class A 1,000 51
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Fluor Corp. 1,000 $51
Nucor Corp. 1,100 51
Columbia Energy Group 900 50
PACCAR, Inc. 950 50
Stanley Works 1,200 50
Ecolab, Inc. 1,600 50
Hercules, Inc. 1,200 49
ITT Industries, Inc. 1,300 49
Laidlaw, Inc., Class B, (non-voting) 3,900 48
Anadarko Petroleum Corp. 700 47
Ceridian Corp.* 800 47
Liz Claiborne, Inc. 900 47
Consolidated Stores Corp.* 1,300 47
Allegheny Teledyne, Inc. 2,040 47
Phelps Dodge Corp. 800 46
Apple Computer, Inc. 1,600 46
Sempra Energy* 1,654 46
Newmont Mining Corp. 1,963 46
Reynolds Metals Co. 800 45
Union Camp Corp. 900 45
Harris Corp. 1,000 45
Willamette Industries, Inc. 1,400 45
DSC Communications Corp.* 1,500 45
PP & L Resources, Inc. 2,000 45
Mirage Resorts, Inc.* 2,100 45
Mead Corp. 1,400 44
Case Corp. 900 43
ALZA Corp.* 1,000 43
Sonat, Inc. 1,100 42
Sigma-Aldrich Corp. 1,200 42
Morton International, Inc. 1,700 42
Ashland, Inc. 800 41
General Instrument Corp.* 1,500 41
SuperValu, Inc. 900 40
Mercantile Stores Co., Inc. 500 39
Echlin, Inc. 800 39
Engelhard Corp. 1,950 39
Temple-Inland, Inc. 700 38
Meredith Corp. 800 38
Adobe Systems, Inc. 900 38
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 7
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Wendy's International, Inc. 1,600 $38
Payless ShoeSource, Inc.* 496 37
Perkin-Elmer Corp. 600 37
Allergan, Inc. 800 37
LSI Logic Corp.* 1,600 37
United States Surgical Corp. 800 36
Deluxe Corp. 1,000 36
USX-U.S. Steel Group 1,100 36
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TOTAL 400-LARGEST STOCKS 104,700
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Kerr-McGee Corp. 600 35
Bausch & Lomb, Inc. 700 35
Sun Company, Inc. 900 35
Apache Corp. 1,100 35
Ryder System, Inc. 1,100 35
Raychem Corp. 1,200 35
Darden Restaurants, Inc. 2,200 35
Freeport McMoRan Copper & Gold, Inc.,
Class B 2,300 35
Placer Dome, Inc. 3,000 35
Armstrong World Industries, Inc. 500 34
FMC Corp.* 500 34
Giant Foods, Inc., Class A 800 34
Fruit of the Loom, Inc., Class A* 1,000 33
Venator Group, Inc.* 1,700 33
Great Lakes Chemical Corp. 800 32
Navistar International Corp.* 1,100 32
Brunswick Corp. 1,300 32
National Service Industries, Inc. 600 31
Manor Care, Inc. 800 31
St. Jude Medical, Inc.* 850 31
Oryx Energy Co. 1,400 31
Goodrich (B.F.) Co. 600 30
Pennzoil Co. 600 30
Thomas & Betts Corp. 600 30
Centex Corp. 800 30
Westvaco Corp. 1,050 30
Niagara Mohawk Power Co. 2,000 30
Crane Co. 600 29
Bemis Company, Inc. 700 29
Harrah's Entertainment, Inc.* 1,250 29
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Pall Corp. 1,400 $29
NICOR, Inc. 700 28
McDermott International, Inc. 800 28
Nalco Chemical Co. 800 28
KLA-Tencor Corp.* 1,000 28
Scientific-Atlanta, Inc. 1,100 28
Bard (C. R.), Inc. 700 27
Snap-On, Inc. 750 27
Mallinckrodt Group, Inc. 900 27
Advanced Micro Devices, Inc.* 1,600 27
Inco Ltd. 2,000 27
Cummins Engine Co., Inc. 500 26
King World Productions, Inc.* 1,000 26
Louisiana-Pacific Corp. 1,400 26
Timken Co. 800 25
Fleetwood Enterprises, Inc. 600 24
Owens-Corning Fiberglas Corp. 600 24
Pulte Corp. 800 24
Cabletron Systems, Inc.* 1,800 24
Silicon Graphics, Inc.* 2,000 24
Aeroquip-Vickers, Inc. 400 23
Autodesk, Inc. 600 23
Alberto-Culver Co., Class B 800 23
Cooper Tire & Rubber Co. 1,100 23
Rowan Companies, Inc.* 1,200 23
Ikon Office Solutions, Inc. 1,600 23
Shared Medical Systems Corp. 300 22
General Signal Corp. 600 22
Reebok International Ltd. 800 22
Tupperware Corp. 800 22
National Semiconductor Corp.* 1,700 22
Polaroid Corp. 600 21
Tektronix, Inc. 600 21
Sealed Air Corp.* 536 20
Boise Cascade Corp. 600 20
Homestake Mining Co. 1,900 20
Peoples Energy Corp. 500 19
Moore Corporation Ltd. 1,400 19
Bethlehem Steel Corp.* 1,500 19
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 8
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Autoliv, Inc. 579 $18
EG & G, Inc. 600 18
Andrew Corp.* 993 18
Potlatch Corp. 400 17
Coors (Adolph) Co., Class B 500 17
Great Atlantic & Pacific Tea Co., Inc. 500 17
Harnischfeger Industries, Inc. 600 17
Inland Steel Industries, Inc. 600 17
Longs Drug Stores Corp. 600 17
Grace (W.R.) & Co. 1,000 17
Stone Container Corp. 1,100 17
Worthington Industries, Inc. 1,100 17
Battle Mountain Gold Co. 2,800 17
Ball Corp. 400 16
ONEOK, Inc. 400 16
El Paso Natural Gas Co. 408 16
Kaufman & Broad Home Corp. 500 16
Millipore Corp. 600 16
Covance, Inc.* 725 16
Cyprus Amax Minerals Co. 1,200 16
Briggs & Stratton Corp. 400 15
Russell Corp. 500 15
Pep Boys-Manny, Moe & Jack 800 15
Earthgrains Co. 256 14
Corn Products International, Inc.* 425 14
Jostens, Inc. 600 14
NACCO Industries, Inc., Class A 100 13
Eastern Enterprises 300 13
Asarco, Inc. 600 13
Helmerich & Payne, Inc. 600 13
Newport News Shipbuilding & Dry Dock Co. 440 12
Cincinnati Milacron, Inc. 500 12
Foster Wheeler Corp. 500 11
Armco, Inc. 1,500 10
ChoicePoint, Inc.* 180 9
Springs Industries, Inc., Class A 200 9
U.S. Industries, Inc. 320 8
Quest Diagnostics, Inc.* 362 8
CommScope, Inc.* 500 8
Laidlaw Environmental Services* 2,240 8
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Schweitzer-Mauduit International, Inc. 230 $7
Harland (J.H.) Co. 400 7
Data General Corp.* 500 7
Roadway Express, Inc. 300 6
Bassett Furniture Industries, Inc. 200 6
Bally Total Fitness Holding Co.* 175 6
GC Companies, Inc.* 120 6
Strattec Security Corp.* 180 5
General Semiconductor, Inc.* 375 4
Aviall, Inc. 300 4
Octel Corp.* 200 4
Agribrands International, Inc.* 130 4
Highlands Insurance Group, Inc.* 160 3
Abercrombie and Fitch Co., Class A* 46 2
Crown Vantage, Inc.* 120 1
Crescendo Pharmaceuticals, Class A* 50 1
Allergan Specialty Ther, Inc. Class A* 40 1
Brunos, Inc.* 31 1
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TOTAL COMMON STOCKS - 64.3%
(Cost - $46,741,181) 107,249
-------------
PREFERRED STOCK - 0 .1%
(Cost - $28,291)
Aetna, Inc., Class C* 142 11
Sealed Air Corp., Class A 475 20
-------------
31
WARRANTS -0 .1%
(Cost - $162)
Morrison Knudsen Corp., Expire 2003* 46 1
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<PAGE>
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES (Continued)
June 30, 1998 (Unaudited) 9
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 35.7%
Commercial Paper - 34.4%
Albertsons, Inc., 5.55%, 7/16/98 $ 3,511 $ 3,511
American Express Co., 5.54%, 7/10/98 4,485 4,485
Assoc. Corp of North America, 5.5%,
7/14/98 4,850 4,850
Associates First Capital,
5.52%, 7/9/98 2,849 2,849
5.53%, 7/22/98 3,995 3,995
Beneficial Corp.,
5.54%, 7/1/98 2,935 2,935
5.56%, 7/23/98 5,235 5,235
Chevron USA, Inc., 5.63%, 7/13/98 3,250 3,250
Deere & Company, 5.5%, 7/7/98 5,710 5,710
Exxon Asset Management Co., 5.66%,
7/2/98 7,634 7,634
Ford Motor Credit Co., 5.5%, 7/8/98 6,005 6,005
General Electric Capital Corp.,
5.51%, 7/6/98 6,835 6,835
-------------
57,294
-------------
U.S. GOVERNMENT - 1.3%
U. S. Treasury Bills,
4.92%, 7/23/98** 404 404
5.03%, 9/3/98** 233 233
5.03%, 10/29/98** 773 773
5.14%, 11/12/98** 259 259
5.08%, 11/27/98** 200 200
5.08, 12/17/98** 376 376
-------------
2,245
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost - $59,538,622) 59,539
-------------
TOTAL INVESTMENT IN SECURITIES - 100.2%
(Total Cost - $106,308,256) 166,820
Liabilities, Less Cash and Other Assets - (0.2%) (307)
-------------
NET ASSETS - 100.0% $ 166,513
(equivalent to $18.61 per share =============
based on 8,946,276 shares outstanding)
* Non-income producing securities.
** Pledged as initial margin for Stock Index Futures
Contracts. At June 30, 1998, the Fund was long 209 S&P 500 Futures
Contracts expiring in Sept., 1998. Unrealized gains amounted to $806,238.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 10
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (Unaudited)
- --------------------------------------------------------
(IN THOUSANDS)
ASSETS:
Investments at market value
(Cost - $106,308,256) $ 166,820
Cash 7
Dividend receivable 110
Interest receivable 83
Investment for trustees' deferred
compensation plan (Cost - $70,769) 106
Other 22
-----------
TOTAL ASSETS 167,148
-----------
LIABILITIES:
Deferred trustees' fees payable 106
Accrued advisory fees payable 32
Variation margin payable 444
Other accrued expenses (including $22,628
due to affiliate) 53
-----------
TOTAL LIABILITIES 635
-----------
NET ASSETS (Equivalent to $18.61 per
share based on 8,946,276 shares
outstanding) $ 166,513
===========
COMPONENTS OF NET ASSETS:
Paid in capital $ 97,365
Undistributed net investment income 1,607
Unrealized appreciation of investments 61,352
Accumulated net realized gain 6,189
-----------
NET ASSETS $ 166,513
===========
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (Unaudited)
- --------------------------------------------------------
(IN THOUSANDS)
INVESTMENT INCOME
INCOME:
Dividend $ 743
Interest 1,101
---------
1,844
EXPENSES:
Investment advisory fees 173
Custodian fees 73
Administrative services 31
Auditing and legal fees 14
Shareholder reports 8
Directors' fees 5
Other 1
----------
Total expenses 305
Less expenses waived by advisor (134)
----------
Net Expenses 171
NET INVESTMENT INCOME 1,673
----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from investments 95
Net realized gain from futures contracts 5,481
Unrealized appreciation of investments 14,600
Net unrealized gain from futures contracts 806
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 20,982
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 22,655
==========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 11
Statement Of Changes In Net Assets (Unaudited)
YEAR
SIX MONTHS ENDED ENDED
JUNE 30, DECEMBER 31,
1998 1997
(IN THOUSANDS)
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $1,673 $1,731
Net realized gain from investments 95 2,336
Net realized gain from futures contracts 5,481 1,451
Unrealized appreciation of investments 14,600 19,269
Unrealized appreciation on futures contracts 806 815
--------------- ----------------
Net increase in net assets
from operations 22,655 25,602
--------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
($0 and $.32 per share) - (2,245)
From net realized gain
($0 and $.45 per share) - (2,517)
--------------- ----------------
Total distributions to shareholders - (4,762)
--------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net increase from capital share
transactions 27,550 23,955
--------------- ----------------
NET INCREASE IN NET ASSETS 50,205 44,795
NET ASSETS:
Beginning of period 116,308 71,513
--------------- ----------------
End of period (Including undistributed
net investment income of $1,606,575
and overdistributed net investment
income of $65,539) $166,513 $116,308
=============== ================
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 12
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. UTILIZATION OF INDEXATION APPROACH. CIGNA Variable Products S&P 500 Index
Fund (the "Fund") seeks to achieve its long term growth objective by attempting
to replicate the total return performance, reduced by Fund expenses, of the
Standard & Poor's 500 Composite Stock Price Index.
2. SIGNIFICANT ACCOUNTING POLICIES. 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 preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATION - Equity securities, including warrants, that are listed
on a national securities exchange or part of the NASDAQ National Market 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 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. Short-term
investments with remaining maturities of up to and including 60 days are valued
at amortized cost, which approximates market. Short-term investments that mature
in more than 60 days are valued at current market quotations. Other securities
and assets of the Fund are appraised at fair value as determined in good faith
by, or under the authority of, the Trust's Board of Trustees.
FUTURES CONTRACTS - The Fund may purchase Standard & Poor's 500 futures
contracts with the objective of earning returns on its short-term investments
equivalent to returns on the Standard & Poor's 500 Composite Stock Price Index.
As a result, the purchase of futures contracts simulates a fully invested
position in the underlying index while maintaining liquidity. Upon entering into
a futures contract, the Fund is required to pledge to the broker an amount of
cash and/or securities equal to the initial margin requirements. During the
period a futures contract is open, changes in the value of a 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.
Daily variation margin payments are received or made, depending on whether there
were unrealized gains or losses. When a contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Futures
contracts include the risk that a change in the value of the contract may not
correlate with the value of the underlying securities.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis. Securities gains and losses are determined on the
basis of identified cost.
C. FEDERAL TAXES - It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and capital gains, if any,
to its shareholders. Therefore, no Federal income or excise taxes on realized
income have been accrued.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions are
recorded by the Fund on the ex-dividend date. Payments in excess of financial
accounting income due to differences between financial and tax accounting, to
meet the minimum distribution requirements for tax basis income, are deducted
from paid in capital when such differences are determined to be permanent.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES. Investment
advisory fees were paid or accrued to CIGNA Investments, Inc. ("CII"), certain
officers and directors of which are affiliated with the Fund. Such advisory fees
are based on an annual rate of 0.25% applied to the daily average net assets of
the Fund.
The Fund reimburses CII for a portion of the compensation and related
expenses of the Fund's Treasurer and Secretary and certain persons who assist in
carrying out the responsibilities of those offices. For the six months ended
June 30, 1998, the Fund paid or accrued $30,596.
CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
4. TRUSTEES' FEES. Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of its affiliates.
Trustees may elect to defer receipt of all or a portion of their fees which are
invested in mutual fund shares in accordance with a deferred compensation plan.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 13
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
5. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, aggregated $1,283,352 and $395,472,
respectively, for the six months ended June 30, 1998. As of June 30, 1998, the
cost of securities held for Federal income tax purpose was $106,749,736. At June
30, 1998, unrealized appreciation for Federal income tax purposes aggregated
$60,069,637, of which $61,041,223 related to appreciated securities and $971,586
related to depreciated securities.
6. CAPITAL STOCK. The Fund offers an unlimited number of shares of beneficial
interest without par value. Of the 8,946,276 shares outstanding at June 30, 1998
8,802,348, shares were held by State Street Bank and Trust Company as custodian
under an agreement with Connecticut General Life Insurance Company ("CG Life")
relating to variable annuity and variable universal life insurance contracts
issued by that company. The remainder, representing 1.6% of the shares
outstanding, was held by an employee benefit plan established by CG Life for
certain of its employees.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 14
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
Transactions in capital stock were as follows:
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
Shares Amount Shares Amount
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,906 $ 32,978 1,928 $ 28,750
Shares issued to shareholders
in reinvestment of dividends
and distributions - - 311 4,762
--------------------- --------------------- -------------- ------------------
1,906 32,978 2,239 33,512
Shares redeemed (309) (5,428) (660) (9,557)
--------------------- --------------------- -------------- ------------------
Net increase 1,597 $ 27,550 1,579 $ 23,955
===================== ===================== ============== ==================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 15
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Continued)
7. 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>
- --------------------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.83 $ 12.40 $ 10.75 $ 8.19 $ 9.20 $ 11.94
--------- --------- -------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income* 0.19 0.25 0.22 0.21 0.19 0.16
Net realized and unrealized gain (loss) 2.59 3.86 2.17 2.80 (0.13) 0.22
--------- --------- -------- --------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 2.78 4.11 2.39 3.01 0.06 0.38
LESS DISTRIBUTIONS:
From net investment income - (0.32) (0.29) (0.27) (0.14) (0.17)
From capital gains - (0.36) (0.45) (0.18) (0.85) (2.95)
In excess of net capital gains - - - - (0.08) -
--------- --------- -------- --------- -------- --------
TOTAL DISTRIBUTIONS - (0.68) (0.74) (0.45) (1.07) (3.12)
--------- --------- -------- --------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 18.61 $ 15.83 $ 12.40 $ 10.75 $ 8.19 $ 9.20
========= ========= ======== ========= ======== ========
TOTAL INVESTMENT RETURN 17.56% 33.35% 22.48% 36.82% 0.67% 2.97%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $166,513 $116,308 $71,513 $ 66,283 $54,728 $61,478
Ratio of operating expenses to average
net assets 0.12%a 0.25%a 0.60%a 0.73% 0.78% 0.66%
Ratio of net investment income to
average net assets 1.20%b 1.93%b 1.78%b 2.05% 2.23% 1.30%
Portfolio turnover 4% 4% 4% 4% 4% 185%**
Average commission rate*** $ 0.0286 $ 0.0279 $ 0.0272
</TABLE>
a. Ratios of expenses to average net assets prior to expense reimbursements were
0.22%, 0.55% and 0.64% for the 1998, 1997 and 1996 periods, respectively.
b. Ratios of net investment income to average net assets prior to expense
reimbursements were 1.10%, 1.63%, and 1.74% for the 1998, 1997 and 1996 periods,
respectively.
* 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 accounting.
** 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 required
to disclose its average commission rate per share for security trades on which
commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading
practices and commission rule structures may differ.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 16
TRUSTEES OFFICERS
R. Bruce Albro 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
Thomas C. Jones
President, CIGNA Investment
Management and CIGNA
Investments, Inc.
Paul J. McDonald
Senior Executive Vice President
and Chief Administrative Officer,
Friendly Ice Cream Corporation
- --------------------------------------------------------------------------------
"Standard & Poor's/R/," "S&P/R/," "S&P 500/R/," "Standard and Poor's 500," and
"500" are trademarks of Standard and Poor's Corporation (S&P) and have been
licensed for use by CG Life. The S&P 500 Index Fund is not sponsored, endorsed,
sold or promoted by S&P, and S&P makes no representation regarding the
advisability of investing in the Fund.
