<PAGE>
[TREE LEAVES GRAPHICS APPEARS HERE]
CIGNA Variable
Products Investment
Grade Bond Fund
________________________________________________________________________________
Semiannual Report
June 30, 2000
[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA
<PAGE>
________________________________________________________________________________
1
DEAR SHAREHOLDER:
We are pleased to provide this report for CIGNA Variable Products Investment
Grade Bond Fund (the "Fund") covering the six months ended June 30, 2000.
THE MARKET ENVIRONMENT
The growth of the U.S. economy appeared to slow significantly during the second
quarter, following six quarters of economic boom. Based on preliminary monthly
indicators of retail sales, housing, and employment, the growth in real GDP
(gross domestic product) seemed to slow to a rate of around 3%. This change was
a sudden and sharp deceleration from the 6% rate for the prior three quarters
and the 5% annualized rate of GDP over the prior six quarters.
It is safe to say that the rate of economic growth has slowed, but probably not
to the extent suggested by the most recent monthly Government economic reports.
The basic underlying fundamentals appear to support continued steady, albeit
less robust, growth for the remainder of the year.
The rate of inflation continued to drift moderately higher during the quarter,
and inflationary pressures are still evident. The Consumer Price Index (CPI) has
risen at a 3.1% rate over the past year, while the "core" CPI, which excludes
volatile food and energy components, has risen at a 2.3% annual rate. Labor
costs also remain in a steady accelerating trend, with recent total compensation
(wages and benefits) rising at close to a 5% annual rate. Energy prices surged
during the spring, with crude oil reaching $33 a barrel, while natural gas
prices rose to an all-time high.
Primarily in response to the tight labor market and concern over future wage
inflation, the Fed raised short-term interest rates during May to 6.50%, but
left rates unchanged at its June FOMC (Federal Open Market Committee) meeting.
The cumulative increase in the Fed's target interest rate during the past 12
months has been 1.75%.
STRATEGY
We increased our corporate bond allocation during the quarter and currently
carry a significant overweight in investment grade corporate bonds. We continue
to overweight Yankee bonds (e.g., Japanese and European banks) as well as
aerospace, defense and cable/media securities.
A major strategy was the purchase of high-quality, long-duration corporates.
Because of the yield curve inversion, market participants were unclear on what
benchmark to use to price long- maturity corporate bonds. This confusion caused
long corporate bonds to underperform shorter maturity corporate bonds by a wide
margin. We seized upon this buying opportunity to add high-quality, long
corporates at an attractive price level. As these trades started to meet our
profit targets, we rotated back into intermediate-duration securities. This
strategy proved positive, as performance for long corporates led the Index
during the latter part of the quarter.
PERFORMANCE
For the second quarter and year-to-date, the Fund's returns of 1.35% and 2.73%,
respectively, trailed the Lehman Brothers Aggregate Bond Index returns of 1.74%
and 3.99%, respectively.
OUTLOOK
We are positive on corporate bonds given current valuation levels. We believe
that corporate bonds offer value on an absolute basis and as an alternative to
competing spread product. We continue to be cautious regarding `event risk' and
credit deterioration. We like high quality securities of large market
capitalization, solid businesses such as telecommunication companies,
sovereigns, and drug companies. In addition, as long-maturity Treasury
securities become scarcer, we believe that investors will be forced to find long
duration
<PAGE>
________________________________________________________________________________
2
elsewhere, which would include high-quality corporate issuers. As the
Treasury buy-back and yield curve inversion create opportunities regarding the
credit curves of certain corporate bond issuers, we expect to take positions in
the most attractive part of the issuer curve.
We like Mortgage-backed Securities (MBS) versus U.S. Treasuries, but we do not
yet see the catalyst for substantial tightening of spreads. As a result, we are
maintaining our current MBS weight. We believe MBS offers very high quality and
excellent liquidity, with yield spreads wider than average. We would alter our
sector outlook if we perceived that the economy was stronger than consensus and
that the Fed would resume its tightening path. We believe that housing, while it
will continue to remain strong, has peaked and thus so have prepayments on
discount pass-throughs.
While it seems clear that the U.S. economy is no longer in an economic boom and
the rate of economic growth has peaked for the cycle, we nonetheless believe
that the most recent Government data exaggerates the magnitude of the slowdown.
It is most likely that the second quarter witnessed a temporary pause, to be
followed by a moderate re-acceleration in economic growth during the second half
of the year.
We expect the domestic economy to expand at a 4% annual rate during the
remainder of the year, a growth rate above current market and consensus
expectations. The implications of this forecast are very significant. In the
context of a fully employed economy, a 4% rate of growth is simply too rapid to
alleviate inflationary pressures. Consequently, the Fed will likely continue to
tighten monetary conditions during the remainder of this year. As the year 2001
unfolds, we expect the domestic economy to exhibit a pattern of progressive
weakness with increasing recession risk.
The primary influence on the markets will be the need for continued monetary
restraint by the Fed in order to counter the emerging inflation risk, which
inevitably exerts downward pressure on the price of all financial assets. The
big unknown is the intensity of these opposing forces, specifically the duration
and severity of the monetary tightening necessary to effectively reduce economic
growth to a non-inflationary rate.
On a short-term basis, we continue to believe that fixed income markets are
better positioned than equity markets to withstand the economic and financial
pressures that lie ahead.
Sincerely,
/s/ Ruchard H. Forde
Richard H. Forde
PRESIDENT
CIGNA VARIABLE PRODUCTS
INVESTMENT GRADE BOND FUND
<PAGE>
--------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND INVESTMENTS IN SECURITIES 3
JUNE 30, 2000 (UNAUDITED)
MARKET
PRINCIPAL VALUE
(000) (000)
-------------------------------------------------------------------
LONG TERM BONDS AND NOTES - 93.8%
CONSUMER AND RETAIL - 1.1%
Rite-Aid Corp., 7.7%, 2027 $ 475 $ 209
Wal-Mart Stores, Inc., 6.875%, 2009 625 611
-----------
820
-----------
ENTERTAINMENT AND COMMUNICATIONS - 6.1%
ITT Corp., 7.4%, 2025 325 278
Lenfest Communications, Inc., 8.25%, 2008 905 892
Nextel Communications, Inc., 310 243
Step Coupon (0 to 9/15/02), 2007
NTL Communications Corp., 200 131
Step Coupon (0 to 10/1/03), 2008
Orange PLC, 9.0%, 2009 780 788
Time Warner, Inc., 8.18%, 2007 590 602
U.S. West Communications, Inc., 7.2%, 2004 565 555
Vodafone Airtouch PLC, 7.75%, 2010 (144A
security acquired June 2000 for $745)* 750 732
Winstar Communications, Inc., 0%, 2010
(144A security acquired April
and June 2000 for $342)* 715 329
-----------
4,550
-----------
FINANCIAL - 13.2%
Abbey Nat'l. Cap., Floating Rate, 8.963%,
2049 765 760
American Express Credit Corp., 6.4%, 2005 350 345
Banc One Corp., 7.75%, 2025 225 210
Bank One Corp.,
5.625%, 2004 500 466
6.0%, 2009 250 217
Bank Toyko Mitsubishi Ltd, 8.4%, 2010 340 344
BSCH Issurances Ltd, 7.625%, 2009 320 318
Deutsche Telekom Int'l Finance, 8.25%, 2030 740 751
FertiNitro Finance, Inc., 8.29%, 2020 (144A
security acquired Feb. 2000 for $138)* 205 127
Finova Capital Corp., 6.625%, 2001 190 178
Ford Motor Credit Co.,
5.8%, 2009 285 248
7.875%, 2010 1,845 1,845
Korea Development Bank, 7.625%, 2002
(144A security acquired September
1999 for $631)* 635 630
MARKET
PRINCIPAL VALUE
(000) (000)
---------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.0%, 2009 $ 365 $ 325
National Westminister Bank PLC,
7.375%, 2009 250 243
Prudential Ins. Co. of America, 6.875%,
2003 625 617
Sanwa Finance Aruba AEC, 8.35%, 2009 340 338
Skandinaviska Enskilda, 6.625%, 2049 250 246
Shinhan Bank, 7.25%, 2002 620 596
Sumitomo Bank Int'l. NV, 8.5%, 2009 335 338
Wells Fargo & Co., 7.2%, 2003 730 727
----------
9,869
----------
FOREIGN GOVERNMENT - 3.2%
Brazil (Republic of), Floating Rate, 7.375%,
2024 220 174
Poland (Government of) Step Coupon (4% to
10/27/00), 2024 805 519
Quebec (Province of Canada), 7.5%, 2023 870 858
Russia (When Issued), 2.25%, 2030 270 102
United Mexican States, 9.785%, 2010 510 533
Venezuela (Republic of), Floating Rate,
7.875%, 2007 179 145
----------
2,331
----------
INDUSTRIAL - 5.1%
Lockheed Martin Corp., 8.5%, 2029 390 398
Loral Corp., 9.125%, 2022 535 577
Merck & Co., Inc., 6.3%, 2026 470 411
Raytheon Co., 8.2%, 2006 (144A security
acquired Mar. 2000 for $401)* 600 609
Reliance Inds. Ltd, 10.25%, 2097 (144A
security acquired Feb. 2000 for $472)* 500 426
Sun Micro Systems, Inc., 7.35%, 2004 920 916
TFM S.A., Step Coupon (0% to 6/15/02), 2009 640 438
----------
3,775
----------
OIL & GAS - 0.9%
Conoco Inc., 6.95%, 2029 765 695
----------
SERVICES - 0.4%
Laidlaw, Inc., 7.875%, 2005** 890 258
----------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND INVESTMENTS IN SECURITIES 4
JUNE 30, 2000 (UNAUDITED) (CONTINUED)
MARKET
PRINCIPAL VALUE
(000) (000)
------------------------------------------------------------------
STRUCTURED SECURITIES - 7.1%
Citibank Credit Card Master Trust,
5.8%, 2005 $ 650 $ 628
6.1%, 2008 725 686
Commerical Mortgage Asset Trust, 6.64%, 2010 440 415
General Electric Capital Corp.,
7.5%, 2005 1,030 1,041
7.375%, 2010 675 683
IMC Home Equity Loan Trust,
Floating Rate, 6.72%, 2029 600 553
MBNA Master Credit Card Trust, 6.4%, 2005 850 839
Nationslink Funding Corp., 7.03%, 2008 445 438
----------
5,283
----------
TAXABLE MUNICIPALS - 0.6%
Mississippi Business Finance Taxable Economic
Development, 7.81%, 2024 500 473
----------
TRANSPORTATION - 0.5%
Burlington Northern Santa Fe,
6.125%, 2009 170 151
8.125%, 2020 230 230
----------
381
----------
UTILITIES - 3.5%
AES Corp., 9.5%, 2009 150 147
Allied Waste North America, Inc., 10.0%,
2009 215 179
Cleveland Electric Illuminating Co., 7.67%,
2004 45 44
Empressa Nacional De Electric, 8.125%, 2097 295 228
Korea Electric Power Corp., 6.375%, 2003 640 608
Niagara Mohawk Power Corp., 7.375%, 2003 250 247
Texas Utilities Company, 6.375%, 2004 500 476
Toledo Edison Company, 7.875%, 2004 690 674
----------
2,603
----------
MARKET
PRINCIPAL VALUE
(000) (000)
------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 52.1%
Federal Home Loan Mortgage Corp.,
5.0%, 2004 $ 500 $ 468
6.625%, 2009 1,935 1,869
6.5%, 2026 870 805
7.5%, 2030 1,550 1,526
Federal National Mortgage Assoc.,
6.0%, 2029 2,421 2,216
6.5%, 2029 5,953 5,619
7.0%, 2029 1,523 1,470
7.5%, 2030 4,345 4,282
8.5%, 2030 2,712 2,762
Government National Mortgage Assoc.,
7.5%, 2029 448 445
7.5%, 2030 995 983
8.5%, 2030 1,600 1,638
United States Treasury Bonds, 8.75%, 2017 3,805 4,792
United States Treasury Notes,
5.625%, 2001 1,500 1,484
7.875%, 2004 7,025 7,439
7.0%, 2006 400 414
6.625%, 2007 460 470
----------
38,682
----------
TOTAL LONG-TERM BONDS
(Cost - $69,868) 69,720
----------
SHORT-TERM OBLIGATIONS - 4.3%
BONDS - 2.3%
Hughes Electronic Corp., 7.451%, 10/23/00
(144A Security acquired Oct. 1999
for $499)* 500 501
Germany (Republic of), 9.0%, 10/20/00 1,210 1,169
----------
1,670
----------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND INVESTMENTS IN SECURITIES 5
JUNE 30, 2000 (UNAUDITED) (CONTINUED)
MARKET
PRINCIPAL VALUE
(000) (000)
------------------------------------------------------------------
U. S. GOVERNMENT & AGENCIES - 2.0%
Federal Home Loan Banks, 6.48%, 7/3/00 $ 1,408 $ 1,408
U. S. Treasury Bills, 6.06%, 2/1/01*** 96 96
----------
1,504
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost - $3,167) 3,174
----------
TOTAL INVESTMENTS IN SECURITIES - 98.1%
(Total Cost - $73,035) 72,894
Cash and Other Assets, Less Liabilities - 1.9% 1,419
----------
NET ASSETS - 100% $ 74,313
==========
* Indicates restricted security; the aggregate value of restricted
securities is $3,352,682 (aggregate cost - $3,428,254)
which is approximately 4.5% of net assets. Valuations have been furnished
by brokers trading in the securities or by a pricing service for all
restricted securities.
** Defaulted securities.
*** Pledged as collateral for Financial Futures Contracts. At June 30, 2000,
the Fund was long 15 5-year and 10 30-year Treasury Bond futures contracts
and short 28 10-year Treasury Bond futures contracts, all expiring in
September 2000. Net unrealized gains amounted to $19,796. Underlying face
values of the long and short positions were $2,426,563 and $(2,745,250),
respectively, and underlying market values were $2,458,672
and $(2,757,563), respectively.
------------------------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
June 30, 2000
MARKET % OF
QUALITY RATINGS* OF VALUE MARKET
BONDS (000) VALUE
-----------------------------------------------------------------
Aaa/AAA $ 45,929 64.3%
Aa/AA 3,883 5.4%
A/A 6,638 9.3%
Baa/BBB 9,618 13.5%
Ba/BB 2,820 4.0%
B/B 1,495 2.1%
Caa/CCC 209 0.3%
Ca/CC 258 0.4%
Not Rated 540 0.8%
----------------------
$ 71,390 100.0%
======================
------------------------------------------------------------------
*The higher of Moody's or Standard & Poor's Ratings.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND 6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
ASSETS:
Investments at market value
(Cost $73,035) $ 72,894
Cash 97
Interest receivable 1,011
Adviser reimbursement receivable 19
Receivable for investments sold 6,133
Variation margin receivable 20
Other 1
------------
TOTAL ASSETS 80,175
------------
LIABILITIES:
Payable for investments purchased 5,796
Accrued advisory fees payable 27
Administrative fees payable 12
Custodian fees payable 10
Shareholder reports payable 3
Audit and legal fees payable 2
Other 12
------------
TOTAL LIABILITIES 5,862
------------
NET ASSETS (equivalent to $9.79 per share
based on 7,588 shares of beneficial
interest outstanding; unlimited number
of shares authorized) $ 74,313
============
COMPONENTS OF NET ASSETS:
Paid-in capital $ 74,376
Undistributed net investment income 1,763
Unrealized depreciation of investments,
futures and currencies (103)
Accumulated net realized loss (1,723)
------------
NET ASSETS $ 74,313
============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
INVESTMENT INCOME
INCOME:
Interest $ 1,856
--------
EXPENSES:
Investment advisory fees 130
Administrative fees 12
Custodian fees 26
Audit and legal fees 2
Shareholder reports 2
Registration expense 10
Other 2
-----------
Total expenses 184
Less expenses waived by adviser (54)
-----------
Net expenses 130
-----------
NET INVESTMENT INCOME 1,726
-----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
Net realized loss from investments (939)
Unrealized appreciation of investments 667
Unrealized appreciation of futures and
currencies 19
-----------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (253)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,473
===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND 7
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ --------------
OPERATIONS:
Net investment income $ 1,726 $ 1,298
Net realized loss from investments (939) (766)
Unrealized (appreciation) depreciation on
investments 667 (788)
Unrealized (appreciation) depreciation on
Futures and currencies 19 -
------------ --------------
Net increase (decrease) in net assets
from operations 1,473 (256)
------------ --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($0.32 per share) - (1,280)
------------ --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from shares sold 34,747 42,395
Value of distributions reinvested - 1,280
------------ --------------
34,747 43,675
Cost of shares redeemed (1,168) (2,878)
------------ --------------
Net increase from capital share transactions 33,579 40,797
------------ --------------
NET INCREASE IN NET ASSETS 35,052 39,261
NET ASSETS:
Beginning of period 39,261 -
------------ --------------
End of period (including undistributed
net investment income of $1,763 and
$37, respectively) $ 74,313 $ 39,261
============ ==============
TRANSACTIONS IN CAPITAL STOCK
Shares sold 3,589 4,278
Shares issued in reinvestment of
dividends and distributions - 135
------------ --------------
3,589 4,413
Shares redeemed (122) (292)
------------ --------------
Net increase in shares outstanding 3,467 4,121
============ ==============
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) 8
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA Variable Products Investment Grade
Bond 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 Fund seeks to provide the highest current
income attainable consistent with reasonable risk as determined by the Fund's
investment adviser, through investment in a professionally managed, diversified
portfolio of fixed-income securities. The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
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 - Debt securities traded in the over-the-counter market,
including listed securities whose primary markets are believed to be
over-the-counter, are valued on the basis of valuations furnished by brokers
trading in the securities or a pricing service, which determines valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Prices are taken from the primary market in which the security trades.
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 Fund's Board of Trustees.
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. The Fund does not amortize premiums or discounts
for book purposes, except for original issue discounts which are amortized over
the life of the respective securities. Securities gains and losses are
determined on the basis of identified cost.
C. FEDERAL TAXES - It is the Fund's policy 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 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.
E. CURRENCY TRANSLATION AND FORWARD CURRENCY CONTRACTS - Foreign currency
amounts are translated into U.S. dollars at the prevailing exchange rates as
follows: assets and liabilities at the rate of exchange at the end of the
period, purchases and sales of securities and expenses at the rate of exchange
prevailing on the dates of such transactions. The Fund from time to time may
enter into foreign currency transactions to convert to and from different
foreign currencies and to convert foreign currencies to and from the U.S.
dollar. The Fund enters into these transactions either on a spot basis at the
spot rate prevailing in the foreign currency exchange market or uses forward
currency exchange contracts to purchase
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED) 9
or sell foreign currencies. Realized and unrealized gains and losses on foreign
currency transactions represent foreign exchange gains and losses arising from
the sale of holdings of foreign currencies, foreign currency exchange rate
fluctuations between trade dates and settlement dates on securities
transactions, and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amount actually received.
F. FUTURES CONTRACTS - The Fund may purchase financial futures contracts. 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.
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 0.50% of the Fund's
average net assets. 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 afterwards to the extent described in the
Fund's prospectus.
TimesSquare is an indirect, wholly-owned subsidiary of CIGNA Corporation
For administrative services, the Fund reimburses TimesSquare 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, 2000, the Fund paid or accrued
$12,350.
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 receipt of all or a portion of their fees, which are
invested in mutual fund shares in accordance with a deferred compensation plan.
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities
(excluding short-term obligations) for the six months ended June 30, 2000 were
$135,679,266 and $102,571,259, respectively.
As of June 30, 2000, the cost of securities for federal income tax purposes was
$73,172,791. At June 30, 2000 unrealized depreciation for federal income tax
purposes aggregated $278,884 of which $338,523 related to appreciated securities
and $617,407 related to depreciated securities.
5. CAPITAL STOCK. The Fund offers an unlimited number of shares of beneficial
interest without par value. All of the shares outstanding at June 30, 2000 were
held by Connecticut General Life Insurance Company relating to variable annuity
and universal life insurance contracts issued by that company.
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED) 10
6. FINANCIAL HIGHLIGHTS. The following table includes data, ratios and
supplemental data for a share outstanding throughout each period and other
performance information:
--------------------------------------------------------------------------------
(UNAUDITED) FROM MAY 3,
6 MOS. ENDED 1999* TO
JUNE 30, DECEMBER 31,
2000 1999
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.53 $ 10.00
--------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.33
Net realized and unrealized gain (loss) 0.04 (0.48)
----- ------
TOTAL FROM INVESTMENT OPERATIONS 0.26 (0.15)
----- ------
LESS DISTRIBUTIONS:
From net investment income - (0.32)
From capital gains - -
----- ------
TOTAL DISTRIBUTIONS - (0.32)
------- -------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 9.53
========= =========
TOTAL INVESTMENT RETURN (a) (c) 2.73% (c) -1.48% (c)
RATIOS TO AVERAGE NET ASSETS:
Net expenses 0.50% (b) 0.50% (b)
Net investment income 6.63% (b) 6.09% (b)
Fees and expenses borne by the Adviser 0.18% (b) 0.29% (b)
Portfolio turnover 204% (c) 303% (c)
Net assets, end of period (000 omitted) $ 74,313 $ 39,261
(a) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(b) Annualized
(c) Not annualized
* Commencement of operations
<PAGE>
________________________________________________________________________________
CIGNA VARIABLE PRODUCTS INVESTMENT GRADE BOND FUND 11
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________
TRUSTEES OFFICERS
<S> <C> <C>
Thomas C. Jones
Hugh R. Beath PRESIDENT, CIGNA RETIREMENT & INVESTMENT
ADVISORY DIRECTOR SERVICES AND CHAIRMAN OF THE BOARD, Richard H. Forde
ADMEDIA CORPORATE ADVISORS, INC. TIMESSQUARE CAPITAL MANAGEMENT, INC. PRESIDENT
Russell H. Jones Paul J. McDonald
VICE PRESIDENT AND TREASURER SPECIAL ADVISOR TO BOARD OF 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 Investment Grade Bond Fund is an open-end, diversified
management investment company that invests primarily in fixed-income securities.
The investment adviser is TimesSquare Capital Management, Inc., 900 Cottage
Grove Road, Hartford, Connecticut 06152.
