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[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA VARIABLE PRODUCTS
MONEY MARKET FUND
SEMIANNUAL REPORT
JUNE 30, 1999
[CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND]
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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, 1999.
MARKET REVIEW
In the first half of 1999, inflation and the Federal Reserve Board ( the "Fed")
ruled. In Alan Greenspan's Humphrey Hawkins testimony in February, he gave
absolutely no hint that a shift in Fed sentiment had occurred. He did, however,
lay out the scenario for what the market is terming the "New Paradigm." In this
scenario, he explored the possibility that companies are now achieving
profitable growth by investing in productivity enhancing, cost-cutting
technology instead of higher prices. In other words, technology-driven
productivity gains have made all the difference in our current economic cycle.
However, the fear of higher rates did start to rattle the markets in the second
quarter. A series of strong economic indicators, lead by the Consumer Price
Index ("CPI"), home sales and purchasing managers reports, caused bond yields to
fluctuate around 6% and increased equity market volatility.
In late June, Greenspan cited the need for the Fed to be "modestly preemptive"
which essentially confirmed to the markets that the Federal Reserve Open Market
Committee would be raising the Fed funds rate to 5% at the June 30, meeting.
However, after the meeting, the Fed went back to a neutral bias. The end result
is a market more uncertain than ever over the future direction of Fed policy.
FUND ACTIVITY AND PERFORMANCE
On June 30, 1999, the portfolio composition was as follows: top-tier domestic
commercial paper, 51.4%; top tier foreign commercial paper, 5.8%; and U.S.
Government and agencies, 42.6%. The Fund is well diversified.
Total return for the six months ended June 30, 1999 was 2.27%, 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 2.09% and 2.27%,
respectively, for the six months ended June 30, 1999. As of June 30, 1999, the
Fund's annualized 7-day yield was 4.59%, and its average portfolio maturity was
44 days. (Fund and Lipper returns are after expenses and reinvestment of
dividends.)
OUTLOOK
We are almost 100 months into our current expansion, which makes this cycle the
longest peacetime expansion in history. The markets are close to being
overwhelmed with information under the new Fed practice of announcing policy
changes after every meeting. A more substantial tightening had been expected, so
the 25 basis point increase and an unchanged discount rate took many by
surprise.
Moderation seems to be the key. Economic indicators will be closely scrutinized
as they are reported. Every rock will be overturned looking for signs of
strength and inflation. If the Fed is comfortable being modestly preemptive, and
Fed policy is known to lag, then it is possible that one more tightening will
occur. However, the looming Y2K issue is expected to take the Fed out of play in
the fourth quarter, which leaves only the August and October meetings as likely
alternatives.
The Fund is structured to take advantage of the volatile interest rate
environment we expect to continue through year-end. The Fund has exposure in
both fixed and floating rate securities. We will look to selectively add to our
floating rate exposure as the opportunities arise. We will continue to focus on
the nuances of our current cycle for clues to future Fed action and adjust the
structure of the portfolio accordingly.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
PRESIDENT
CIGNA VARIABLE PRODUCTS MONEY MARKET FUND
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND INVESTMENTS IN SECURITIES 2
June 30, 1999 (Unaudited)
MARKET
PRINCIPAL VALUE
(000) (000)
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COMMERCIAL PAPER - 57.2%
DOMESTIC - 51.4%
Albertsons, Inc., 5.2%, 7/9/99 $ 1,000 $ 999
Archer Daniels Midland Co., 4.9%, 7/20/99 300 299
Bayer Corp., 4.8%, 7/7/99 1,000 999
Bell Atlantic Financial Services, 5.21%,
7/14/99 416 415
Cambell Soup Co., 4.98%, 7/1/99 624 624
Fortune Brands, Inc., 4.85%, 7/7/99 1,000 999
General Electric Capital Corp., 5.17%,
7/21/99 1,000 997
Morgan, (J.P.) and Co., Inc., 4.82%,7/7/99 1,000 999
Motorola Credit Corp., 4.95%, 7/1/99 861 861
Navistar Financial Owner Trust, 5.0%, 9/9/99 418 418
New York Times (The) Co., 4.86%, 7/6/99 900 899
Oge Energy Corp., 5.02%, 7/2/99 600 600
Pfizer, Inc., 4.85%, 7/6/99 820 820
Pioneer Hi-Bred Intl., Inc., 4.87%, 7/12/99 1,000 999
Rio Tinto America, Inc., 5.0%, 7/6/99 280 280
Southern California Edison Co., 4.9%, 7/8/99 948 947
TECO Finance, Inc., 4.83%, 7/23/99 1,100 1,097
Times Mirror Co., 5.2%, 7/21/99 750 748
U.S. West Communications, Inc., 5.25%,
7/13/99 1,000 998
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14,998
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FOREIGN - 5.8%
British Columbia (Province of), 4.83%,
8/4/99 600 597
Shell Finance PLC, 5.3%, 7/9/99 1,100 1,099
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1,696
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TOTAL COMMERCIAL PAPER 16,694
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MARKET
PRINCIPAL VALUE
(000) (000)
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U.S. GOVERNMENT & AGENCIES - 42.6%
Federal Farm Credit Banks, 4.86%, 3/23/00* $ 500 $ 500
Federal Home Loan Banks,
5.329%, 8/12/99* 500 500
5.0%, 12/29/99 500 500
4.9%, 1/14/00 550 550
5.339%, 3/24/00* 750 750
5.04%, 3/29/00 750 750
5.08%, 4/10/00 575 575
5.07%, 4/7/00 600 600
5.15%, 5/17/00 750 750
5.299%, 6/9/00* 670 670
Federal National Mortgage Assoc.,
5.349%, 4/12/00* 1,000 1,000
Student Loan Marketing Assoc.,
5.539%, 12/2/99* 1,000 1,000
5.539%, 1/12/00* 1,500 1,500
5.539%, 12/16/99* 1,000 1,000
5.539%,1/20/00* 1,000 1,000
5.479%, 3/8/00* 800 801
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12,446
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TOTAL INVESTMENTS IN SECURITIES - 99.8%
(Total Cost - $29,139,853) 29,140
Cash and Other Assets, Less Liabilities - 0.2% 58
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NET ASSETS - 100.0% $29,198
=========
*Variable rate security. Rate is as of June 30, 1999.
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, 1999 (UNAUDITED)
(IN THOUSANDS)
--------------
ASSETS:
Investments in securities at value
(Cost - $29,139,853) $ 29,140
Cash on deposit with custodian 1
Interest receivable 96
Investment for Trustees' deferred compensation plan 3
Receivable from adviser 2
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TOTAL ASSETS 29,242
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LIABILITIES:
Accrued audit and legal fees payable 5
Accrued advisory fees payable 9
Payable for Trustees' deferred compensation plan 3
Other accrued expenses (including $10,849 due to
affiliates) 27
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TOTAL LIABILITIES 44
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NET ASSETS (Equivalent to $1.00 per share
based on 29,198,314 shares outstanding) $ 29,198
=================
COMPONENTS OF NET ASSETS:
Paid in capital $ 29,198
Undistributed net investment income -
Accumulated net realized gain on investments -
Unrealized appreciation of investments -
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NET ASSETS $ 29,198
=================
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $ 745
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EXPENSES:
Investment advisory fees 52
Custodian fees 24
Administrative services 14
Auditing and legal fees 5
Other 2
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Total expenses 97
Less expenses waived by investment adviser (23)
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Net expenses 74
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NET INVESTMENT INCOME 671
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investments -
Unrealized appreciation of investments -
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NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS -
------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 671
==================
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,
1999 1998
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(IN THOUSANDS)
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OPERATIONS:
Net investment income $ 671 $ 1,045
Net realized gain from investments - 1
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Net increase in net assets from operations 671 1,046
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (671) (1,045)
From net realized capital gains - (1)
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Total distributions to shareholders (671) (1,046)
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CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 35,934 54,752
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 670 1,044
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36,604 55,796
Cost of shares redeemed (36,018) (41,724)
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Net increase from fund share transactions 586 14,072
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NET INCREASE IN NET ASSETS 586 14,072
NET ASSETS:
Beginning of period 28,612 14,540
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End of period $ 29,198 $28,612
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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, 1999 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,
transaction costs incurred in acquiring and disposing of portfolio securities,
and extraordinary expenses) exceed 0.50% of average daily net assets until April
30, 2000 and thereafter to the extent described in the Fund's then current
prospectus.
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 six month period
ending June 30, 1999, the Fund paid or accrued $13,749.
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, 1999 December 31, 1998
Shares Amount Shares Amount
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<S> <C> <C> <C> <C>
Amount sold 35,934 $ 35,934 54,752 $ 54,752
Amount issued to shareholders
in reinvestment of dividends
and distributions 670 670 1,044 1,044
----------- ------------ ----------- ------------
36,604 36,604 55,796 55,796
Amount redeemed (36,018) (36,018) (41,724) (41,724)
----------- ------------ ----------- ------------
Net increase 586 $ 586 14,072 $ 14,072
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</TABLE>
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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>
(UNAUDITED)
SIX MONTHS MARCH 1,
ENDED 1996+ TO
JUNE 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
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<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.04
Net realized and unrealized gain on securities - - - -
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.05 0.04
------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.05) (0.05) (0.04)
Distributions from capital gains - - - -
------- ------- ------- ------
TOTAL DISTRIBUTIONS (0.02) (0.05) (0.05) (0.04)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
TOTAL RETURN * 2.27% 5.14% 5.19% 4.18%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 29,198 $ 28,612 $ 14,540 $ 6,003
Ratio of operating expenses to average net assets ** 0.50% ++ 0.50% 0.50% 0.42%
Ratio of net investment income to average net assets*** 4.52% ++ 4.98% 5.07% 4.10%
</TABLE>
+ Commencement of operations.
++ Annualized.
* Total return would have been lower if certain expenses had not been
reimbursed by the Adviser. Total investment return based on per share net
asset value reflects the effects of changes in net asset value on the
performance of the Fund during each period, and assumes distributions were
reinvested at net asset value.
** Ratios of expenses to average net assets prior to reimbursement of
expenses were 0.64% (annualized), 0.73%, 1.11% and 1.28%, respectively,
for the 1999, 1998, 1997 and 1996 periods.
*** Ratios of net investment income to average net assets prior to
reimbursement of expenses were 4.38% (annualized), 4.75%, *** 4.4% and
3.24%, respectively, for the 1999, 1998, 1997 and 1996 periods.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 8
<TABLE>
<S> <C> <C>
TRUSTEES Thomas C. Jones OFFICERS
Hugh R. Beath PRESIDENT, CIGNA INVESTMENT
ADVISORY DIRECTOR, MANAGEMENT AND CIGNA Richard H. Forde
ADMEDIA CORPORATE ADVISORS, INC. INVESTMENTS, INC. PRESIDENT
Alfred A. Bingham III
Paul J. McDonald VICE PRESIDENT AND TREASURER
Russell H. Jones SENIOR EXECUTIVE VICE PRESIDENT
VICE PRESIDENT AND TREASURER, AND CHIEF FINANCIAL OFFICER, Jeffrey S. Winer
KAMAN CORPORATION FRIENDLY ICE CREAM CORPORATION VICE PRESIDENT AND SECRETARY
</TABLE>
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CIGNA Variable Products Money Market Fund is an open-end, diversified management
investment company that invests primarily in short-term money market
instruments. The investment adviser is CIGNA Investments, Inc., 900 Cottage
Grove Road, Hartford, Connecticut 06152.
