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[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA VARIABLE PRODUCTS
MONEY MARKET 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 Money Market
Fund (the "Fund"), covering the six months ended June 30, 1998.
MARKET REVIEW
Asia's distress is starting to have an impact on the U.S. industrial sector, as
the combined effect of collapsing exports to Asia and domestic inventory
reductions take their toll. The Purchasing Managers' Index fell to 49.6 in June,
the first reading below 50 in two years. While the industrial sector has
weakened, consumers are still spending strongly, with vehicle sales in June
reaching an eleven-year high. First quarter growth in gross domestic product was
revised up to 5.4%, but early estimates on second quarter growth are calling for
closer to a 1% to 2% level.
FUND ACTIVITY AND PERFORMANCE
On June 30, 1998, the portfolio composition was as follows: top-tier commercial
paper, 72%; top tier foreign commercial paper, 4%; and U.S. Government and
agencies, 24%. The Fund is well diversified.
Total return for the six months ended June 30, 1998 was 2.57%, 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 2.42% and 2.68%,
respectively, for the six months ended June 30, 1998. As of June 30, 1998, the
Fund's annualized 7-day yield was 5.15%, and its average portfolio maturity was
40 days. (Fund and Lipper returns are after expenses and reinvestment of
dividends.)
OUTLOOK
The focus going forward will be on the effects of the Asian crisis and the
continued flight to quality that has spurred "safe haven" capital flows to the
United States from Japan. Asia's problems and their increasing impact on the
U.S. economy imply that interest rates may move lower. However, domestic demand
is expected to remain fairly strong, which we feel could keep the Federal
Reserve ("Fed") on hold for the remainder of 1998. The Fund is structured to
take advantage of our expectation of stable interest rates. We will continue to
focus on the situation in Asia and U.S. economic trends as keys to further Fed
action and 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 2
June 30, 1998 (Unaudited)
MARKET
PRINCIPAL VALUE
(000) (000)
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COMMERCIAL PAPER - 71.7%
American Express Co., 5.51%, 8/7/98 $ 648 $ 644
Assoc. First Capital Corp., 5.58%, 7/10/98 656 655
Becton Dickinson and Co., 5.55%, 7/22/98 592 590
Bell Atlantic Financial Services, 5.52%,
7/24/98 730 727
BellSouth Telecommunications, Inc.,
5.48%, 9/3/98 720 713
Campbell Soup Co., 5.49%, 7/21/98 400 399
Chevron USA, Inc., 5.58%, 7/8/98 603 602
Clorox Co., 5.51%, 7/7/98 587 586
Coca-Cola Co., 5.5%, 7/14/98 693 692
Ford Motor Credit Co., 5.52%, 7/2/98 685 685
Fortune Brands, Inc., 5.55%, 8/11/98 250 248
General Electric Capital Corp., 5.53%,
7/3/98 701 701
Heinz (H.J.) Co., 5.53%, 7/31/98 160 159
Household Finance Corp., 5.53%, 7/13/98 607 606
Merck and Co., Inc., 6.05%, 7/1/98 780 780
Motorola, Inc., 5.49%, 8/20/98 670 665
Penny, (J.C.) Funding Corp., 5.58%, 7/29/98 728 725
Pfizer, Inc., 5.5%, 7/6/98 532 532
Rubbermaid, Inc., 5.52%, 8/27/98 500 496
Sara Lee Corp., 5.75%, 7/8/98 621 620
Shell Oil Co., 5.47%, 7/17/98 652 650
Smithkline Beecham Corp., 5.54%, 7/15/98 702 700
Southern Co., 5.52%, 7/16/98 269 268
Teco Finance, Inc., 5.51%, 8/18/98 541 537
Toys 'R' Us, Inc., 5.48%, 7/13/98 652 651
Unilever Corp., 5.48%, 7/24/98 384 383
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15,014
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FOREIGN - 3.9%
Den Norske Stats Olejeselskap (Statoil),
5.51%, 7/10/98 357 357
National Australia Funding Delaware, Inc.,
5.5%, 7/20/98 458 457
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814
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PRINCIPAL VALUE
(000) (000)
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U.S. GOVERNMENT & AGENCIES - 24.1%
Federal Farm Credit Banks, 5.6%, 10/01/98 $ 250 $ 250
Federal Home Loan Banks,
5.8%, 9/18/98 500 500
5.58%, 3/11/99 250 250
5.75%, 5/27/99 500 500
5.598%, 6/17/99* 500 500
Federal National Mortgage Assoc.,
5.4%, 2/2/99 765 764
5.631%, 4/28/99* 500 500
5.261%, 6/2/99* 550 548
Student Loan Marketing Assoc.,
5.82%, 9/16/98 250 250
5.621%, 11/12/98* 1,000 1,000
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5,062
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TOTAL INVESTMENTS IN SECURITIES - 99.7%
(Total Cost - $20,889,884) 20,890
Cash and Other Assets, Less Liabilities - 0.3% 55
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NET ASSETS - 100.0%
(Equivalent to $1.00 per share based on
20,944,748 shares outstanding) $20,945
=========
*Variable rate security. Rate is as of June 30, 1998.
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
JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS)
--------------
ASSETS:
Investments in securities at value
(Cost - $20,889,884) $ 20,890
Cash on deposit with custodian 25
Interest receivable 56
Investment for trustees' deferred
compensation
plan (Cost - $1,359) 2
Receivable from advisor 2
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TOTAL ASSETS 20,975
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LIABILITIES:
Accrued audit and legal fees payable 5
Accrued advisory fees payable 5
Payable for trustees' deferred compensation plan 2
Other accrued expenses (including $7,324 due to
affiliates) 18
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TOTAL LIABILITIES 30
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NET ASSETS (Equivalent to $1.00 per share
based on 20,944,748 shares outstanding) $ 20,945
============
COMPONENTS OF NET ASSETS:
Paid in capital $ 20,945
Undistributed net investment income -
Accumulated net realized gain on investments -
Unrealized appreciation of investments -
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NET ASSETS $ 20,945
============
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $ 458
-----------
EXPENSES:
Investment advisory fees 29
Custodian fees 19
Administrative services 9
Auditing and legal fees 5
Other 5
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Total expense 67
Less expenses waived by investment advisor (26)
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Net expenses 41
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NET INVESTMENT INCOME 417
-----------
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 $ 417
===========
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
(Unaudited)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1998 1997
----------------------
(IN THOUSANDS)
--------------
OPERATIONS:
Net investment income $417 $493
Net realized gain from investments - -
Unrealized appreciation on investments - -
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Net increase in net assets from operations 417 493
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (417) (493)
From net realized capital gains - -
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Total distributions to shareholders (417) (493)
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CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 31,498 38,203
Net asset value of shares issued
to shareholders in reinvestment
of dividends and distributions 416 494
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31,914 38,697
Cost of shares redeemed (25,509) (30,160)
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Net increase from fund share transactions 6,405 8,537
NET INCREASE IN NET ASSETS 6,405 8,537
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NET ASSETS:
Beginning of period 14,540 6,003
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End of period $ 20,945 $ 14,540
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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
(Unaudited) 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 Fund's investments are valued at amortized cost,
which the Board of Trustees has determined constitutes fair value and which at
June 30, 1998 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 Fund. 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 June
30, 1998, the Fund paid $9,032.
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
(Unaudited) (Continued) 6
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
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SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
SHARES AMOUNT SHARES AMOUNT
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<S> <C> <C> <C> <C>
Shares sold 31,498 $31,498 38,203 $38,203
Shares issued to shareholders
in reinvestment of dividends
and distributions 416 416 494 494
----------------- ----------------- ----------------- -----------------
31,914 31,914 38,697 38,697
Shares redeemed (25,509) (25,509) (30,160) (30,160)
----------------- ----------------- ----------------- -----------------
Net increase 6,405 $6,405 8,537 $8,537
================= ================= ================= =================
</TABLE>
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS
(Unaudited) (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>
(Unaudited)
SIX MONTHS YEAR MARCH 1,
ENDED ENDED 1996* TO
JUNE 30 DECEMBER 31, DECEMBER 31,
1998 1997 1996
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<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.04
Net realized and unrealized gain on securities - - -
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TOTAL FROM INVESTMENT OPERATIONS 0.03 0.05 0.04
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LESS DISTRIBUTIONS:
Dividends from net investment income (0.03) (0.05) (0.04)
Distributions from capital gains - - -
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TOTAL DISTRIBUTIONS (0.03) (0.05) (0.04)
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NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
====== ====== ======
TOTAL RETURN 2.57% 5.19% 4.18%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 20,945 $ 14,540 $ 6,003
Ratio of operating expenses to average net assets 0.25% ** 0.50% ** 0.42% **
Ratio of net investment income to average net assets 2.54% *** 5.07% *** 4.10% ***
Portfolio turnover N/A N/A N/A
</TABLE>
* Commencement of operations.
** Ratios of expenses to average net assets prior to reimbursement of
expenses were .40%, 1.11%and 1.28% respectively, for the 1998, 1997
and 1996 periods.
*** Ratios of net investment income to average net assets prior to
reimbursement of expenses were 2.38%, 4.4% and 3.24%, respectively,
for the 1998, 1997 and 1996 periods.
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 8
TRUSTEES OFFICERS
R. Bruce Albro R. Bruce Albro
Senior Managing Director, Chairman of the Board and President
CIGNA Investments, Inc.
Alfred A. Bingham III
Hugh R. Beath Vice President and Treasurer
Advisory Director,
AdMedia Corporate Advisors, Inc. Jeffrey S. Winer
Vice President and Secretary
Russell H. Jones
Vice President and Treasurer
Kaman Corporation CUSTODIAN AND TRANSFER AGENT:
Thomas C. Jones State Street Bank and Trust Company
President, CIGNA Investment P.O. Box 2351
Management and CIGNA Boston, Massachusetts 02107
Investments, Inc.
INVESTMENT ADVISER:
Paul J. McDonald
Senior Executive Vice President CIGNA Investments, Inc.
and Chief Administrative Officer, 900 Cottage Grove Road
Friendly Ice Cream Corporation Hartford, CT 06152
