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[CIGNA TREE LOGO GRAPHIC APPEARS IN HERE]
CIGNA VARIABLE PRODUCTS
MONEY MARKET FUND
ANNUAL REPORT
DECEMBER 31, 1999
[CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND OF PAGE]
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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 year ended December 31, 1999.
MARKET REVIEW
1999 was another recordsetting year for the U.S. economy, and U.S. consumers
were both the benefactors and the beneficiaries. During the past three years,
consumer spending increased at an estimated 5% rate, but real wage income has
increased at an estimated 6% rate. When you include capital gains in the
calculation with income and savings, the U.S. savings rate was approximately
10%. For the economy, this translated into a fourth consecutive year of
approximately 4% real GDP growth. The current economic expansion, which is
entering its ninth year, is the longest business cycle expansion in American
history. The 1990s will be remembered as a period of healthy economic growth,
low inflation, rising corporate profitability, strong job creation, and rising
productivity.
During 1999, global fixed income markets reacted adversely to the continued
strong momentum in the domestic economy and revival in economic growth
worldwide. The continued robust growth in private credit demands and rise in
private debt ratios also has put upward pressure on global interest rates and
downward pressure on bond prices. The surge in world oil prices and industrial
commodity prices has led to an uptick in consumer inflation, as did increases in
interest rates announced by the Federal Reserve (the "Fed"), the Bank of
England, and the European Central Bank.
Continued inflationary concerns in the fourth quarter resulted in the Fed
raising rates in November. The increase by the Federal Reserve on November 16
marked the third tightening move for 1999, which completely reversed the 75
basis point easing from the 1998 market crisis.
FUND ACTIVITY AND PERFORMANCE
On December 31, 1999, the portfolio composition was as follows: top-tier
domestic commercial paper, 45.2%; top tier foreign commercial paper, 7.9%; and
U.S. Government and Agencies, 46.4%. The Fund is well diversified.
Total return for the year ended December 31, 1999 was 4.83%. 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 4.49% and 4.74%, respectively, for the year ended December 31, 1999. As
of December 31, 1999, the Fund's annualized 7-day yield was 5.39%, and its
weighted average portfolio maturity was 25 days.
OUTLOOK
The U.S. economy shows virtually no signs of slowdown, with the possible
exception of housing, despite the steep rise in interest rates and the
increasing monetary restraint by the Fed. For fiscal-year 2000, we expect GDP
growth to slow only modestly from the nearly 4% growth achieved in 1999 and the
4% average annual growth of the 1996-99 period. It is our view that interest
rates have not risen to levels sufficient to choke off the strong momentum in
domestic demand from households and businesses. Our basic conclusion is that a
variety of existing powerful economic forces will continue to overwhelm the
restraining effects of the current level of interest rates until they rise to
higher levels and remain at those levels for an extended period. Within the
household sector, these forces include a strong labor market, continued ample
availability of consumer credit, and the powerful influence of the "wealth
effect", resulting from large equity market gains.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 2
Similarly, within the business sector it is our view that the current level of
interest rates is not sufficient to obstruct the current strong momentum in
capital and inventory investment, and the production of exported goods. Capital
expenditures should continue to benefit from the boom in technology and, in
general, the high rates of return on new investment relative to the cost of
capital. In addition, basic manufacturing will also benefit from inventory
rebuilding and a recovery in demand for U.S. goods for export, as a result of
the recovery in global economies.
The Fund is structured to take advantage of the rising interest rate environment
we anticipate continuing in 2000. The Fund has exposure in both fixed and
floating rate securities, with the emphasis on floaters tied to libor, treasury
bills and prime indices. We will continue to focus on the developing trends in
the U.S. economy as keys to further Fed action and adjust our portfolio strategy
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
DECEMBER 31, 1999 3
MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------------
COMMERCIAL PAPER - 53.1%
DOMESTIC - 45.2%
Allied Signal, Inc., 5.83%, 1/18/00 $ 1,100 $1,097
American Express Credit Corp, 5.15%, 1/19/00 1,263 1,260
Amer. Telephone & Telegraph Co., 4.1%, 1/11/00 1,042 1,041
Bell Atlantic Financial Services, 5.95%, 1/18/00 700 698
Bell Atlantic Network Funding, 6.5%, 1/11/00 550 549
Ford Credit Auto Owner Trust, 5.351%, 7/17/00 493 493
Ford Motor Credit Co., 6.01%, 1/03/00* 517 517
Ford Motor Credit Co., 5.74%, 8/18/00 750 750
Gannett Co., Inc., 5.95%, 1/14/00 1,200 1,197
General Mills, Inc., 5.85%, 1/04/00 535 535
H. J. Heinz Company, 5.55%, 1/03/00 424 424
Indiana Gas Company, 6.45%, 1/04/00 1,000 999
Laclede Gas Company, 6.65%, 1/07/00 500 499
Motorola, Inc., 5.83%, 1/21/00 1,000 997
Navistar Financial Owner Trust, 5.00%, 6/15/00 70 70
Pacaar Financial Corp., 6.3%, 1/24/00 1,000 996
Pfizer Inc, 5.85%, 1/20/00 443 442
SBC Communications, Inc., 6.25%, 1/18/00 1,290 1,286
Wal-Mart Stores, Inc., 6.55%, 1/05/00 329 329
-----------
14,179
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FOREIGN - 7.9%
B.B.V. Finance (Delaware), Inc., 6.22%, 01/10/00 1,200 1,198
BP Capital PLC, 6.53%, 01/06/00 1,282 1,281
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2,479
-----------
TOTAL COMMERCIAL PAPER 16,658
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MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES - 46.4%
Federal Farm Credit Banks, 6.29%, 3/23/00* $ 500 $ 500
Federal Home Loan Banks,
4.9%, 1/14/00 550 550
5.913%, 3/24/00* 750 750
5.04%, 3/29/00 750 750
5.07%, 4/7/00 600 600
5.08%, 4/10/00 575 575
5.15%, 5/17/00 750 750
5.873%, 6/9/00* 670 670
5.57%, 8/14/00 500 498
5.924%, 10/04/00* 1,600 1,599
Federal National Mortgage Assoc.,
5.923%, 4/12/00* 1,000 1,000
Student Loan Marketing Assoc.,
6.113%, 1/12/00* 1,500 1,500
6.113%, 1/20/00* 1,000 1,000
6.053%, 3/8/00* 800 800
6.113%, 8/3/00* 1,000 1,000
6.063%, 9/29/00* 1,000 1,000
6.266%, 10/4/00* 1,000 1,000
-----------
14,542
-----------
TOTAL INVESTMENTS IN SECURITIES - 99.5%
(Total Cost - $31,200,150) 31,200
Cash and Other Assets, Less Liabilities - 0.5% 145
-----------
NET ASSETS - 100.0% $31,345
===========
*Variable rate security. Rate is as of December 31, 1999.
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 ASSETS AND LIABILITIES
DECEMBER 31, 1999
(IN THOUSANDS)
--------------
ASSETS:
Investments in securities at value
(Cost - $31,200,150) $ 31,200
Cash on deposit with custodian 4
Interest receivable 177
Receivable from adviser 5
Investment for Trustees' deferred compensation plan 2
----------------
TOTAL ASSETS 31,388
----------------
LIABILITIES:
Accrued audit and legal fees payable 12
Accrued advisory fees payable 10
Custodian fee payable 8
Administrative fees payable 6
Distribution payable 5
Payable for Trustees' deferred compensation plan 2
----------------
TOTAL LIABILITIES 43
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NET ASSETS (Equivalent to $1.00 per share
based on 31,345,169 shares outstanding) $ 31,345
================
COMPONENTS OF NET ASSETS:
Paid in capital $ 31,345
Undistributed net investment income -
Accumulated net realized gain on investments -
Unrealized appreciation of investments -
----------------
NET ASSETS $ 31,345
================
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $ 1,640
----------------
EXPENSES:
Investment advisory fees 110
Custodian fees 44
Administrative services 28
Auditing and legal fees 14
Shareholder reports 2
Other 4
----------------
Total expenses 202
Less expenses waived by investment adviser (45)
----------------
Net expenses 157
----------------
NET INVESTMENT INCOME 1,483
----------------
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 $ 1,483
================
The Notes to Financial Statements are an integral part of these statements.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 5
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
--------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,483 $ 1,045
Net realized gain from investments - 1
------------- -----------
Net increase in net assets from operations 1,483 1,046
------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,483) (1,045)
From net realized capital gains - (1)
------------- -----------
Total distributions to shareholders (1,483) (1,046)
------------- -----------
CAPITAL SHARE TRANSACTIONS:
Net increase from fund share transactions 2,733 14,072
------------- -----------
NET INCREASE IN NET ASSETS 2,733 14,072
NET ASSETS:
Beginning of period 28,612 14,540
------------- -----------
End of period $ 31,345 $28,612
============= ===========
</TABLE>
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 6
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
December 31, 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 TimesSquare Capital Management, Inc.
("TimesSquare"), 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. TimesSquare 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, 2001 and thereafter to the extent
described in the Fund's then current prospectus.
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS 7
(CONTINUED)
The Fund reimburses TimesSquare 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 year ending
December 31, 1999, the Fund paid or accrued $27,535.
TimesSquare 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 8
(CONTINUED)
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1999 December 31, 1998
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount sold 49,605 $ 49,605 54,752 $ 54,752
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 1,482 1,482 1,044 1,044
---------- ------------ ----------- ------------
51,087 51,087 55,796 55,796
Amount redeemed (48,354) (48,354) (41,724) (41,724)
---------- ------------ ----------- ------------
Net increase 2,733 $ 2,733 14,072 $ 14,072
========== ============ =========== ============
</TABLE>
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS 9
(CONTINUED)
<TABLE>
<CAPTION>
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:
MARCH 1,
1996+ TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<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 (a) 0.05 0.05 0.05 0.04
Net realized and unrealized gain on securities - - - -
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.04
----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.04)
Distributions from capital gains - - - -
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.05) (0.05) (0.05) (0.04)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
TOTAL RETURN (B) 4.83% 5.14% 5.19% 4.18% (c)
RATIOS TO AVERAGE NET ASSETS:
Net expenses 0.50% 0.50% 0.50% 0.58% (d)
Net investment income 4.72% 4.98% 5.07% 4.92% (d)
Fees and expenses waived by the Adviser 0.14% 0.23% 0.61% 1.03% (d)
Net assets, end of period (000 omitted) $ 31,345 $ 28,612 $ 14,540 $ 6,003
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(c) Not annualized.
(d) Annualized.
+ Commencement of operations.
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10
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 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, 1999, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 2000
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CIGNA VARIABLE PRODUCTS MONEY MARKET FUND 11
TIMESSQUARE CAPITAL MANAGEMENT
In January 2000, CIGNA Investments, Inc., the Fund's manager, changed its name
to TimesSquare Capital Management, Inc. The new name underscores the critical
importance of investment management as a core CIGNA strength.
The TimesSquare Capital Management brand, like its namesake, symbolizes energy
and renaissance, and accurately reflects our intention to be at the center of
world commerce. It is also an expression of our ability to recognize and take
advantage of global economic and market themes that can be integrated across
investment disciplines.
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________
TRUSTEES OFFICERS
<S> <C> <C>
Thomas C. Jones
Hugh R. Beath PRESIDENT, CIGNA INVESTMENT
ADVISORY DIRECTOR MANAGEMENT AND CHAIRMAN OF THE BOARD, Richard H. Forde
ADMEDIA CORPORATE ADVISORS, INC. TIMESSQUARE CAPITAL MANAGEMENT, INC. PRESIDENT
Paul J. McDonald
Russell H. Jones SPECIAL ADVISOR TO THE BOARD OF
VICE PRESIDENT AND TREASURER DIRECTORS, Alfred A. Bingham III
KAMAN CORPORATION FRIENDLY ICE CREAM CORPORATION VICE PRESIDENT AND TREASURER
Jeffrey S. Winer
VICE PRESIDENT AND SECRETARY
____________________________________________________________________________________________________________________
</TABLE>
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 TimesSquare Capital Management, Inc., 900
Cottage Grove Road, Hartford, Connecticut 06152.
