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[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA VARIABLE PRODUCTS
S&P 500 INDEX FUND
ANNUAL REPORT
DECEMBER 31, 1999
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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 year ended December 31, 1999.
THE MARKET ENVIRONMENT
For the sixth consecutive year, equities outperformed bonds by a wide margin in
U.S. financial markets. On a global basis, stocks also generally outperformed
bonds, with foreign equity markets outperforming domestic stocks. Equity markets
benefited from strong economic growth, rising corporate profits and favorable
financial liquidity trends, as reflected in the rapid growth of money and
credit. A gradual shift in global central bank monetary policies toward more
restrictive credit during the year did little to deter the favorable psychology
for common stock investing.
While 1999 appeared to be another excellent year for equity investors, there
were extreme winners and losers. The total return on the S&P 500 Index (the
"Index") was 21.04%, an unprecedented fifth consecutive year of 20+% returns.
The median Emerging Market equity fund rose by 69% while Japan's Nikkei Index
rose by 67% in dollars.
Within the U.S. market, growth managers continued to outperform value-style
managers by a wide margin. The big story in the equity market during 1999 was
the high technology sector, with the high tech-dominated NASDAQ Index
registering its best year ever with a gain of 85%.
In reality, the spectacular headline gains in high tech stocks have effectively
masked profound weakness in the broadly based domestic equity market.
Measurements of market breadth, including advance/decline statistics and the
number of new highs vs. new lows, were more symptomatic of a "bear market." The
median stock within the S&P 500 Index was virtually unchanged in price for the
year, while fully 60% of issues on the New York Stock Exchange suffered a
decline for the same period. The technology sector, which accounts for 30% of
the weighting in the S&P 500, rose by 75%, and was responsible for 90% of the
full-year Index gain. Excluding the technology sector, the remaining 70% of the
Index gained less than 8%.
The equity market of the past year has been one of the most highly concentrated
and speculative markets in decades, analogous to energy sector dominance between
1979 and 1980, and the "nifty fifty" consumer growth stock era of 1972 and 1973.
An examination of Fund results versus the market may be found in Management's
Discussion and Analysis (page 2).
OUTLOOK
We expect that domestic equities may underperform U.S. high-grade bonds for the
first full calendar year since 1993. The high-flying technology sector also
appears highly vulnerable to a reversal in investor psychology. On the plus
side, we expect cyclical stocks and value-style managers to outperform growth
managers, industrial cyclicals to outperform growth stocks, and small
capitalization stocks to outperform the large capitalization sector.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
PRESIDENT
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND MANAGEMENT'S DISCUSSION AND 2
ANALYSIS (Unaudited)
As we entered 1999, expectations for progressive economic weakness and the
potential for an accommodative response by the Federal Reserve confined U.S.
equity markets to a narrow but volatile trading range over the first two months
of the year. By the first week of March, however, it became clear that domestic
economic growth continued to be much stronger than had been expected. Equity
markets continued to exhibit a lack of breadth. Over half the names in the S&P
500 produced negative returns for the quarter. Just five stocks (Microsoft,
America Online, Citigroup, MCI Worldcom and AIG) accounted for half of the total
return for this benchmark. The continued performance dominance of a limited
number of large capitalization companies again allowed the S&P 500 to outperform
active managers.
Momentum in large technology and brokerage companies pushed growth stocks well
ahead of their value counterparts. The S&P/BARRA Growth Index returned 6.88%
through March while the S&P/BARRA Value Index returned only 2.85%. The recovery
of small and MidCap stocks in the fourth quarter of 1998 was reversed in the
first quarter of 1999 and both the S&P MidCap Index (-6.38%) and S&P SmallCap
Index (-9.00%) provided strongly negative returns.
The Fund returned 4.87% for the first quarter, compared with the 4.98% quarterly
return for the S&P. (Index results do not reflect brokerage or other investment
expenses.)
U.S. equity markets traded in a narrow range during April and May, achieving
negligible gains over that period. Concerns about the rapid growth in both
private sector debt and the money supply, as well as excess capacity, increased
potential for wage inflation and a record current account deficit had all but
made an interest rate increase during the June FOMC meeting a FAIT ACCOMPLI. By
June, however, continuing evidence of a strong rebound in corporate profits
generated by indefatigable consumer optimism, consequent demand and unmatched
productivity growth propelled the Fund to a 7.06% second quarter return,
compared with the S&P 500's 7.05% return.
Second quarter results saw many small and mid-capitalization cyclical stocks
increase in value, representing a significant shift on the part of market
participants. Accordingly, industry reversals were also in evidence as Aluminum,
Miscellaneous Metals, Chemicals, Diversified Manufacturing and Machinery all
posted better than 25% returns for the quarter while Health Care, Savings &
Loans and Drugs registered loses. As further evidence of expanding market
breadth, the S&P MidCap Index (14.16%) and S&P SmallCap Index (15.42%) provided
returns more than double those of the S&P 500 during the quarter.
In the third quarter, U.S. equity markets remained on a persistent "Fed watch",
fearful that the final 25 basis points of the 75-point easing that had been
granted last year to stem a global financial crisis would be reversed. Operating
under this pall, the equity markets drifted ultimately lower over the quarter,
giving back most of the second quarter gains. The Fund returned -6.28%, while
the S&P 500 was down -6.24%.
Market breadth exhibited in the second quarter dissipated, as did the resurgence
in value stocks. Large-capitalization technology names limited growth stocks
losses for the quarter to 3.49% as measured by the S&P/BARRA Growth Index while
the S&P/BARRA Value Index fell 9.23% during the same period.
To be sure, the prospect of corrective measures to deal with unanticipated
growth did much to temper returns over most of the year, with the S&P earning
barely a quarter of its yearly gains through September. However, as the
country's Y2K concerns began to dissipate before year-end, investors anticipated
renewed capital investing for enterprise technology. Tax avoidance strategies
and the usual year-end window dressing actions on the part of fund managers
further supported prices of these select issues through December. As a result
the Fund returned 14.79% for the fourth quarter and 20.77% for the year. The S&P
500 provided a 14.88% return for the final quarter of 1999 and 21.04% for the
year.
At the end of 1999, we now find ourselves in the midst of the longest running
expansion in U.S. history. The economy maintained the combination of strong real
economic growth, earnings that continued to surprise on the upside, and the lack
of significant wage inflation in the tightest job market in memory. In a year
when optimistic market prognosticators were hoping for a mere reversion to the
mean for equity returns, the S&P 500 produced a fifth consecutive year of 20+%
returns. More remarkably, this was accomplished in an environment when the
Federal Reserve was reclaiming all the interest rate cuts that had largely
supported last year's equity markets.
But the seemingly strong total return for this benchmark masked the underlying
weakness of the market as a whole during the year, and in fact continues a
pattern of lack of breadth that has persisted over several years. With the
exception of a brief period in the second quarter where we witnessed some
rotation into value and lower capitalization stocks, this has been a market
dominated by the performance of large capitalization high growth issues,
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND MANAGEMENT'S DISCUSSION AND 3
ANALYSIS (Unaudited) (Continued)
particularly concentrated in communication, media and technology.
Nearly half (49.5%) of the constituents of the S&P 500 actually produced
negative returns for the year. While the average stock in this benchmark was up
13.9%, the median stock only returned 0.4%. Clearly this was a stock picker's
year. As a result the average U.S. equity mutual fund manager outperformed the
S&P 500 in 1999 with a return of 26%, according to Lipper, Inc.
Many of the concerns that existed in the markets at the end of 1999 are still
outstanding; tight labor markets, stocks that remain fundamentally overvalued, a
large current account deficit. The fact that the market was able to advance in
the face of these impediments is testimony to the impact of productivity
improvements, resulting from corporate restructurings and technological
investments over a number of years. However, the market has become increasingly
dependent on further advances in this area. Investors have forecast continuing
increases in business efficiencies through adaptation of the Internet,
business-to-business and broadband technologies. The quest for efficiencies will
likely maintain the frenzied pace of mergers and acquisition activity witnessed
in 1999. Stock investors will likely continue to price issues as if efficiencies
will be fully realized until provided evidence to the contrary.
While it is possible that the Fed will follow with further "pre-emptive strikes"
the markets seem convinced that the current administration or any new
administration will be committed to maintaining a program of sustainable growth
and will likely take these moves in stride. Many fear that a correction in
overpriced technology names may cause a correction in the broad market. However,
given the current market narrowness, a redeployment of assets into undervalued
and ignored components would appear more likely. On balance, we would project a
continued pattern of exceptional returns in specific names and somewhat more
subdued returns to the broad market in equities over the next year.
[THE FOLLOWING APPEARS AS A BAR CHART GRAPHIC]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
1/1/90 - 12/31/99
|------------------------------------------------------|
| AVERAGE ANNUAL RETURN |
| |
| 1-Year 3-Year 5-Year 10-Year |
|12/31/99 20.77% 27.47% 28.26% 17.27% |
|------------------------------------------------------|
CVP S&P 500 S&P 500
INVESTMENT INVESTMENT
12/89 $10,000 $10,000
12/90 $ 9,601 $ 9,680
12/91 $13,198 $12,635
12/92 $13,671 $13,607
12/93 $14,076 $14,968
12/94 $14,171 $15,177
12/95 $19,388 $20,856
12/96 $23,746 $25,668
12/97 $31,665 $34,235
12/98 $40,723 $44,016
12/99 $49,179 $53,277
CVP S&P 500 = CIGNA Variable Products S&P 500 Index Fund
S&P 500 = Standard & Poors 500 Index - Total Return
CIGNA Variable Products S&P 500 Index Fund's performance figures are historical
and reflect reinvestment of all dividends and capital gains distributions and
changes in the net asset value. The Fund does not charge a sales load, but may
be used with variable insurance products that contain other charges which would
affect the ultimate return to the investor. The Fund's investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Past performance cannot
guarantee comparable future results. The Fund's performance has been compared
with the total return performance for the Standard & Poor's Composite Index of
500 Stocks (S&P 500). This index is a group of unmanaged securities widely
regarded by investors to be representative of the stock market in general. An
investment cannot be made in the index. Index results do not reflect brokerage
charges or other investment expenses. As of November 1993, the Fund changed its
investment approach from active management to an index method which attempts to
replicate the total return performance of the S&P 500, after Fund expenses.
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CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES 4
December 31, 1999
MARKET
NUMBER OF VALUE
SHARES (000)
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COMMON STOCKS - 87.0%
Microsoft Corp.* 102,500 $ 11,967
General Electric Co. 65,100 10,074
Cisco Systems, Inc.* 65,000 6,963
Wal-Mart Stores, Inc. 88,600 6,124
Exxon Corp. 68,562 5,524
Intel Corp. 66,400 5,466
Lucent Technologies, Inc. 62,236 4,656
International Business Machines Corp. 36,000 3,888
Citigroup, Inc. 67,088 3,728
America Online, Inc.* 44,400 3,349
American International Group, Inc. 30,612 3,310
SBC Communications, Inc. 67,594 3,295
A T & T Corp. 63,386 3,217
Oracle Corp.* 28,318 3,173
Home Depot, Inc. 45,750 3,137
Merck & Co., Inc. 46,600 3,125
MCI WorldCommunications, Inc. 56,413 2,993
Coca-Cola Co. 49,100 2,860
Procter & Gamble Co. 26,100 2,860
Nortel Networks Corp. 26,520 2,679
Dell Computer Corp.* 50,700 2,586
Royal Dutch Petroleum Co. 42,700 2,581
Johnson & Johnson 27,600 2,570
Bristol-Myers Squibb Co. 39,500 2,535
Pfizer, Inc. 77,000 2,498
Sun Microsystems, Inc.* 31,000 2,400
Qualcomm, Inc. 13,200 2,325
Hewlett-Packard Co. 20,300 2,313
Yahoo Inc.* 5,200 2,250
E M C Corp * 20,312 2,219
Bell Atlantic Corp. 30,794 1,896
Time Warner, Inc. 25,700 1,862
Motorola, Inc. 12,100 1,782
BellSouth Corp. 37,800 1,770
BancAmerica Corp. 33,918 1,702
Morgan Stanley, Dean Witter, Discover & Co. 11,070 1,580
Texas Instruments, Inc. 15,900 1,540
American Express Company 8,900 1,480
Lilly (Eli) & Co. 22,000 1,463
MARKET
NUMBER OF VALUE
SHARES (000)
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Warner-Lambert Co. 17,000 $ 1,393
du Pont (E.I.) de Nemours & Co. 20,778 1,369
GTE Corp. 19,300 1,362
Wells Fargo & Co. 32,760 1,325
Tyco International Ltd. 33,239 1,292
Chase Manhattan Corp. 16,584 1,288
Federal National Mortgage Association 20,600 1,286
Ford Motor Co. 24,000 1,283
Schering-Plough Corp. 29,200 1,232
Amgen, Inc.* 20,200 1,213
Disney (Walt) Co. 41,000 1,199
Sprint Corp. 17,300 1,164
Chevron Corp. 13,000 1,126
Philip Morris Companies, Inc. 47,500 1,101
Abbott Laboratories 30,300 1,100
McDonald's Corp. 26,900 1,084
American Home Products Corp. 26,300 1,037
PepsiCo, Inc. 29,300 1,033
CBS Corp. 15,515 992
Applied Materials, Inc.* 7,500 950
MediaOne Group, Inc.* 12,100 929
General Motors Corp. 12,700 923
Compaq Computer Corp. 33,675 911
Honeywell, Inc. 15,787 911
Gillette Co. 21,600 890
Sprint Corp. (PCS Group)* 8,600 882
Medtronic, Inc. 23,400 853
Viacom, Inc., Class B* 13,800 834
Gap (The), Inc. 17,062 785
Minnesota Mining and Manufacturing Co. 8,000 783
Boeing Company 18,576 772
Colgate-Palmolive Co. 11,800 767
Computer Associates International, Inc. 10,812 756
Global Crossing Ltd.* 15,070 754
Comcast Corp., Class A (Special) 14,700 743
NEXTEL Communications, Inc., Class A* 7,200 743
Banc One Corp. 22,819 732
U.S. West, Inc. 9,999 720
Kimberly-Clark Corp. 10,732 700
Anheuser-Busch Companies, Inc. 9,300 659
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 5
December 31, 1999 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Federal Home Loan Mortgage Corp. 13,800 $ 649
Automatic Data Processing, Inc. 12,000 647
Dayton Hudson Corp. 8,700 639
Corning, Inc. 4,900 632
First Union Corp. 19,228 631
FleetBoston Fin'l. Corp. 18,101 630
Enron Corp. 14,200 630
United Technologies Corp. 9,700 630
Electronic Data Systems Corp. 9,300 623
Alcoa, Inc. 7,500 623
Unilever NV 11,335 617
Schwab (Charles) Corp. 15,950 612
Merrill Lynch & Co., Inc. 7,300 610
Schlumberger Ltd. 10,700 602
Clear Channel Communications, Inc.* 6,700 598
Bank of New York, Inc. 14,900 596
Dow Chemical Co. 4,400 588
Carnival Corp. 12,200 583
Texaco, Inc. 10,700 581
Walgreen Co. 19,800 579
Atlantic Richfield Co. 6,500 562
Solectron Corp.* 5,800 552
Emerson Electric Co. 8,800 505
ALLTEL Corp. 6,100 504
Tellabs, Inc.* 7,700 494
Marsh & McLennan Companies, Inc. 5,100 488
International Paper Co. 8,237 465
Gannett Co., Inc. 5,700 465
Pharmacia & Upjohn, Inc. 10,110 455
Fifth Third Bancorp 6,125 449
Gateway, Inc.* 6,200 447
Monsanto Company 12,500 445
Morgan (J.P.) & Co. 3,500 443
Lowes Companies, Inc. 7,400 442
SunTrust Banks, Inc. 6,400 440
MBNA Corp. 15,968 435
Eastman Kodak Co. 6,400 424
Micron Technology, Inc. 5,400 420
Firstar Corp. 19,473 411
First Data Corp. 8,300 409
MARKET
NUMBER OF VALUE
SHARES (000)
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Sara Lee Corp. 18,400 $ 406
Illinois Tool Works, Inc. 6,000 405
Associates First Capital Corp., Class A 14,538 399
Costco Whsl. Corp. 4,300 392
Allstate Corp. 16,096 386
Cendant Corp.* 14,404 383
Seagram Company Ltd. 8,500 382
American General Corp. 4,998 379
BMC Software Inc.* 4,700 376
Network Appliance, Inc.* 4,400 365
Household International, Inc. 9,646 359
Duke Energy Co. 7,162 359
Baxter International, Inc. 5,600 352
Mellon Fin'l Corp. 10,300 351
U. S. Bancorp, Inc. 14,702 350
Halliburton Co. 8,700 350
Omnicom Group 3,500 350
Safeway, Inc.* 9,800 349
Campbell Soup Company 9,000 348
Caterpillar, Inc. 7,300 344
Weyerhaeuser Co. 4,700 337
3Com Corp.* 7,100 334
Columbia/HCA Healthcare Corp. 11,300 331
Apple Computer, Inc. 3,200 329
Southern Company 13,800 324
Conoco, Inc. 12,858 320
Analog Devices Inc. 3,400 316
Interpublic Group of Companies, Inc. 5,400 312
Washington Mutual, Inc. 11,805 307
AES Corp.* 4,100 306
Kroger Co.* 16,100 304
CVS Corp. 7,600 303
Bestfoods 5,700 300
CIGNA Corp. 3,700 298
Xerox Corp. 13,100 297
National City Corp. 12,400 294
Computer Sciences Corp.* 3,100 293
Heinz (H.J.) Co. 7,300 291
Xilins Inc.* 6,400 291
NIKE, Inc., Class B 5,700 283
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 6
December 31, 1999 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
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Guidant Corp. 6,000 $ 282
General Instrument Corp.* 3,300 281
Novell, Inc.* 7,000 280
Wachovia Corp. 4,100 279
Tribune Co. 5,000 275
Albertson's, Inc. 8,313 268
PNC Bank Corp. 6,000 267
Pitney-Bowes, Inc. 5,500 266
Providian Financial Corp. 2,900 264
Aegon NV ARS 2,765 264
Sysco Corp. 6,600 261
Cardinal Health, Inc. 5,450 261
Williams Companies, Inc. 8,400 257
Compuware Corp.* 6,900 257
Kellogg Co. 8,100 250
AFLAC, Inc. 5,200 245
Northern Trust Corp. 4,600 244
Clorox Co. 4,800 242
PE Corp. (Biosystems Group) 2,000 241
Phillips Petroleum Co. 5,100 240
McGraw-Hill Cos., Inc. 3,900 240
FDX Corp.* 5,800 237
Sears, Roebuck & Company 7,700 234
State Street Corp. 3,200 234
Comverse Technology Inc.* 1,600 232
Textron, Inc. 3,000 230
Masco Corp. 9,000 228
Burlington Northern Santa Fe Corp. 9,367 227
Lexmark Intern'l. Group, Inc. Class A* 2,500 226
May Department Stores Co. 6,950 224
Teradyne Inc.* 3,400 224
Kohl's Corp.* 3,100 224
Hartford Financial Services Group, Inc. 4,700 223
General Mills, Inc. 6,200 222
Citrix Sys. Inc.* 1,800 221
PPG Industries, Inc. 3,500 219
ConAgra, Inc. 9,600 217
Union Pacific Corp. 4,900 214
Deere & Co. 4,900 213
Federated Department Stores, Inc.* 4,200 212
MARKET
NUMBER OF VALUE
SHARES (000)
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General Dynamics Corp. 4,000 $ 211
AMR Corp. 3,100 208
Best Buy Co., Inc.* 4,100 206
Waste Management, Inc. 11,932 205
Aon Corp. 5,025 201
Dover Corp. 4,400 200
KeyCorp 9,016 199
Texas Utilities Co. 5,600 199
Lehman Brothers Holdings, Inc. 2,340 198
ADC Telecommunications, Inc.* 2,700 196
Unisys Corp.* 6,100 195
Limited, Inc. 4,500 195
Paychex, Inc. 4,800 192
Tandy Corp. 3,900 192
Seagate Technology, Inc.* 4,100 191
Wrigley (Wm.) Jr. Company 2,300 191
Staples, Inc.* 9,150 190
Edison International 7,200 189
LSI Logic Corp.* 2,800 189
KLA-Tencor Corp.* 1,700 189
Capital One Financial Corp. 3,900 188
Rohm & Haas Co. 4,585 187
Rockwell International Corp. 3,900 187
Chubb Corp. 3,300 186
Alcan Aluminum Ltd. 4,500 185
Quaker Oats Co. 2,800 184
Georgia-Pacific Corp. 3,600 183
New York Times Co., Class A 3,700 182
Ingersol-Rand Co. 3,300 182
Raytheon Co., Class B 6,800 181
United Healthcare Corp. 3,400 181
Union Carbide Corp. 2,700 180
Ralston Purina Co. 6,300 176
Circuit City Stores, Inc. 3,900 176
Molex Inc. 3,100 176
Delphi Automotive System Corp. 11,126 175
El Paso Energy Corp Del. 4,508 175
Adobe Systems, Inc. 2,600 175
Avery Dennison Corp. 2,400 175
IMS Health Inc. 6,400 174
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 7
December 31, 1999 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Avon Products, Inc. 5,200 $ 172
Coca-Cola Enterprises, Inc. 8,500 171
Lockheed Martin Corp. 7,760 170
BB&T Corp. 6,200 170
Aetna, Inc. 3,042 170
Boston Scientific Corp.* 7,700 168
Lincoln National Corp. 4,100 164
Consolidated Edison Co. of N.Y., Inc. 4,700 162
Southwest Airlines Co. 9,925 161
Unocal Corp. 4,800 161
Newell Rubbermaid, Inc. 5,507 160
Franklin Resources, Inc. 5,000 160
Public Service Enterprises Group, Inc. 4,600 160
Occidental Petroleum Corp. 7,300 158
Marriott International, Inc. 5,000 158
Kansas City Southern Inds., Inc. 2,100 157
PG & E Corp. 7,600 156
St. Paul Cos. Inc. 4,632 156
Praxair, Inc. 3,100 156
Norfolk Southern Corp. 7,500 154
Air Products & Chemicals, Inc. 4,600 154
FPL Group, Inc. 3,600 154
Dominion Resources, Inc. 3,900 153
Archer-Daniels-Midland Co. 12,474 152
AmSouth Bancorp 7,800 151
UNUM Provident Corp. 4,725 151
Republic New York Corp. 2,100 151
USX-Marathon Group 6,100 150
Coastal Corp. 4,200 149
Parametric Technology Corp.* 5,400 146
Burlington Resources, Inc. 4,410 146
Unicom Corp. 4,300 144
Transocean Sedco Forex Inc. 4,272 144
Tenet Healthcare Corp.* 6,100 143
Comerica, Inc. 3,050 142
Jefferson-Pilot Corp. 2,075 142
SLM Hldg Corp. 3,300 139
Delta Airlines, Inc. 2,800 139
National Semiconductor Corp.* 3,200 137
PECO Energy Co. 3,900 136
MARKET
NUMBER OF VALUE
SHARES (000)
- -------------------------------------------------------------------
Reliant Energy, Inc. 5,907 $ 135
CSX Corp. 4,300 135
Loews Corp. 2,200 134
Hershey Foods Corp. 2,800 133
Baker Hughes, Inc. 6,290 132
MGIC Investment Corp. 2,200 132
Barrick Gold Corp. 7,400 131
Becton, Dickinson and Co. 4,900 131
CenturyTel Inc. 2,750 130
Danaher Corp. 2,700 130
Allergan, Inc. 2,600 130
TRW, Inc. 2,500 130
TJX Companies, Inc. 6,300 129
Cox Communications, Inc., Class A* 2,458 127
Entergy Corp. 4,900 126
McKesson HBOC, Inc. 5,523 125
SouthTrust Corp. 3,300 125
Consolidated Natural Gas Co. 1,900 123
American Electric Power Co., Inc. 3,800 122
Dow Jones & Co., Inc. 1,800 122
Dollar General Corp. 5,318 121
Golden West Financial Corp. 3,600 121
Fort James Corp. 4,400 120
Champion International Corp. 1,900 118
Tricon Global Restaurants, Inc.* 3,040 117
Fortune Brands, Inc. 3,400 112
Conseco, Inc. 6,158 110
Huntington Bancshares, Inc. 4,579 109
Paine Webber Group, Inc. 2,800 109
Parker-Hannifin Corp. 2,125 109
Regions Financial Corp. 4,300 108
Bear Stearns Companies, Inc. 2,525 108
Kerr-McGee Corp. 1,738 108
Summit Bancorp 3,500 107
Willamette Industries, Inc. 2,300 107
Reynolds Metals Co. 1,400 107
Penney (J.C.) Co., Inc. 5,300 106
PeopleSoft, Inc.* 4,930 105
Adaptec Inc.* 2,100 105
Mattel, Inc. 7,945 104
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
December 31, 1999 (Continued) 8
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Synovus Financial Corp. 5,250 $ 104
FirstEnergy Corp. 4,600 104
Cincinnati Financial Corp. 3,300 103
Union Planters Corp. 2,600 102
Ecolab, Inc. 2,600 102
Amerada Hess Corp. 1,800 102
Progressive Corp., Ohio 1,400 102
Eaton Corp. 1,400 102
Columbia Energy Group 1,600 101
Dun & Bradstreet Corp. 3,400 100
MBIA, Inc. 1,900 100
Leggett & Platt Inc. 4,600 99
Black & Decker Corp. 1,900 99
Kmart Corp.* 9,700 98
Whirlpool Corp. 1,500 98
Dana Corp. 3,243 97
AutoZone, Inc.* 3,000 97
Bed Bath & Beyond Inc.* 2,800 97
Johnson Controls, Inc. 1,700 97
Old Kent Fin'l. Corp. 2,700 95
Knight-Ridder, Inc. 1,600 95
Phelps Dodge Corp. 1,416 95
Times Mirror Co., Class A 1,400 94
Nucor Corp. 1,700 93
Biomet, Inc. 2,300 92
Wellpoint Health Networks 1,400 92
UST, Inc. 3,600 91
Carolina Power & Light Co. 3,000 91
DTE Energy Co. 2,900 91
Grainger (W.W.), Inc. 1,900 91
Price, T. Rowe & Assoc. Inc. 2,400 89
Scientific-Atlanta, Inc. 1,600 89
Genuine Parts Co. 3,550 88
Ameren Corp. 2,700 88
Block (H & R), Inc. 2,000 88
Goodyear Tire and Rubber Co. 3,100 87
Mead Corp. 2,000 87
Maytag Corp. 1,800 86
Sealed Air Corp.* 1,636 85
Central & Southwest Corp. 4,200 84
MARKET
NUMBER OF VALUE
SHARES (000)
- -------------------------------------------------------------------
Constellation Energy Group 2,900 $ 84
Sempra Energy 4,754 83
Office Depot, Inc.* 7,500 82
Tosco Corp. 3,000 82
Anadarko Petroleum Corp. 2,400 82
Cabletron Systems, Inc.* 3,100 81
Torchmark Corp. 2,800 81
Advanced Micro Devices, Inc.* 2,800 81
Cooper Industries, Inc. 2,000 81
Inco Ltd. 3,400 80
Vulcan Materials Co. 2,000 80
Florida Progress Corp. 1,900 80
Brown-Forman Corporation, Class B 1,400 80
Nordstrom, Inc. 3,000 79
International Flavors & Fragrances, Inc. 2,100 79
Owens-Illinois, Inc.* 3,100 78
GPU, Inc. 2,600 78
Hasbro, Inc. 3,975 76
Eastman Chemical Co. 1,600 76
Northrop Grumman Corp. 1,400 76
PP & L Resources, Inc. 3,300 75
Cinergy Corp. 3,120 75
Newmont Mining Corp. 3,063 75
Bausch & Lomb, Inc. 1,100 75
Freeport McMoran Copper & Gold, Inc. 3,500 74
Apache Corp. 2,000 74
Hilton Hotels Corp. 7,600 73
Fluor Corp. 1,600 73
VF Corp. 2,400 72
Comcast Corp., Class A 1,500 72
Temple-Inland, Inc. 1,100 72
Toys 'R' Us, Inc.* 5,000 71
Sherwin-Williams Co. 3,400 71
SAFECO Corp. 2,800 70
New Century Energies, Inc. 2,300 70
Placer Dome, Inc. 6,400 69
Winn-Dixie Stores, Inc. 2,900 69
PACCAR, Inc. 1,550 69
Nabisco Group Holding Corp. 6,400 68
Equifax, Inc. 2,900 68
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES 9
December 31, 1999 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc.* 1,900 $ 68
Donnelley (R.R.) & Sons Co. 2,700 67
PE Corp. (Celera Genomics Group)* 450 67
Navistar International Corp., Inc.* 1,400 66
CMS Energy Corp. 2,100 65
Westvaco Corp. 1,950 64
Union Pacific Resources Group, Inc. 4,949 63
Goodrich, (B.F.) Co. 2,200 61
Ceridian Corp.* 2,800 60
Sigma-Aldrich Corp. 2,000 60
Northern States Power Co. 3,000 59
ALZA Corp.* 1,700 59
Rite-Aid Corp. 5,200 58
Bard (C. R.), Inc. 1,100 58
ITT Inds. Inc. 1,700 57
Crown Cork & Seal Co., Inc. 2,500 56
Countrywide Credit Industries, Inc. 2,200 56
USX-U.S. Steel Group 1,700 56
Harcourt General, Inc. 1,400 56
Mirage Resorts, Inc.* 3,600 55
Engelhard Corp. 2,850 54
Wendy's International, Inc. 2,600 54
Pall Corp. 2,500 54
Harrah's Entertainment, Inc.* 2,050 54
U.S. Airways Group, Inc.* 1,700 54
Niagara Mohawk Hldgs. Inc. 3,800 53
Darden Restaurants, Inc. 2,900 53
Hercules, Inc. 1,900 53
Pinnacle West Cap. Corp. 1,700 52
Stanley Works 1,700 51
St. Jude Med. Inc. 1,650 51
Quintiles Transnational Co.* 2,700 50
Ashland, Inc. 1,500 49
Liz Claiborne, Inc. 1,300 49
SuperValu, Inc. 2,400 48
Mallinckrodt Group, Inc. 1,500 48
Thermo Electron Corp.* 3,100 46
Great Lakes Chemical Corp. 1,200 46
Meredith Corp. 1,100 46
HealthSouth Corp.* 8,400 45
MARKET
NUMBER OF VALUE
SHARES (000)
- -------------------------------------------------------------------
Boise Cascade Corp. 1,100 $ 45
Allegheny Technologies, Inc. 1,970 44
Deluxe Corp. 1,600 44
Dillard's, Inc., Class A 2,100 42
Brunswick Corp. 1,900 42
Sunoco, Inc. 1,800 42
Tektronix, Inc. 1,000 39
Cummins Engine Co., Inc. 800 39
Bemis Company, Inc. 1,100 38
PerkinElmer Inc. 900 38
Silicon Graphics, Inc.* 3,800 37
Manor Care Inc.* 2,300 37
Rowan Companies, Inc.* 1,700 37
Ryder System, Inc. 1,500 37
Coors (Adolph) Co., Class B 700 37
Service Corporation International 5,100 35
Pactiv Corp. 3,300 35
Thomas & Betts Corp. 1,100 35
Millipore Corp. 900 35
Homestake Mining Co. 4,300 34
Allied Waste Industries, Inc.* 3,800 34
Consolidated Stores Corp.* 2,100 34
Autodesk, Inc. 1,000 34
FMC Corp.* 600 34
American Greetings Corp., Class A 1,400 33
NICOR, Inc. 1,000 33
Andrew Corp.* 1,693 32
Worthington Industries, Inc. 1,900 31
Alberto-Culver Co., Class B 1,200 31
Louisiana-Pacific Corp. 2,100 30
Centex Corp. 1,200 30
Snap-On, Inc. 1,150 30
Humana, Inc.* 3,300 27
National Service Industries, Inc. 900 27
Armstrong World Industries, Inc. 800 27
Briggs & Stratton Corp. 500 27
Crane Co. 1,300 26
Cooper Tire & Rubber Co. 1,600 25
Pulte Corp. 1,100 25
Shared Medical Systems Corp. 500 25
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND INVESTMENTS IN SECURITIES 10
December 31, 1999 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------------
Timken Co. 1,200 $ 24
Ball Corp. 600 24
People's Energy Corp. 700 23
Payless ShoeSource, Inc.* 496 23
Eastern Enterprises 400 23
Bethlehem Steel Corp.* 2,600 22
Tupperware Corp. 1,300 22
Great Atlantic & Pacific Tea Co., Inc. 800 22
Potlatch Corp. 500 22
Grace (W.R.) & Co. 1,500 21
Owens-Corning Fiberglas Corp. 1,100 21
Long's Drug Stores Corp. 800 21
CommScope, Inc.* 500 20
Kaufman & Broad Home Corp. 800 19
Ikon Office Solutions, Inc. 2,700 18
Polaroid Corp. 900 17
Jostens, Inc. 700 17
Autoliv, Inc. 579 17
Waddell & Reed Financial, Inc., Class B 636 16
Springs Industries, Inc., Class A 400 16
ONEOK, Inc. 600 15
ChoicePoint, Inc.* 360 15
Fleetwood Enterprises, Inc. 700 14
Corn Products International, Inc. 425 14
Pep Boys-Manny, Moe & Jack 1,300 12
Milacron, Inc. 800 12
Russell Corp. 700 12
Ryerson Tull, Inc. 600 12
Newport News Shipbuilding & Dry Dock Co. 440 12
McDermott International, Inc. 1,200 11
Neiman Marcus Group.* 421 11
Quest Diagnostics, Inc.* 362 11
NACCO Industries, Inc., Class A 200 11
Battle Mountain Gold Co. 4,500 9
Reebok International Ltd. 1,100 9
Foster Wheeler Corp. 900 8
Covance, Inc.* 725 8
Earthgrains Co. 512 8
RH Donnelley Corp. 420 8
Harland (J.H.) Co. 400 7
MARKET
NUMBER OF VALUE
SHARES (000)
- ----------------------------------------------------------------------
Tenneco, Inc. 660 $ 6
Safety-Kleen Corp.* 560 6
Roadway Express, Inc. 300 6
Strattec Security Corp.* 180 6
Agribrands International, Inc.* 130 6
Teledyne Technologies Inc.* 562 5
General Semiconductor, Inc.* 375 5
Bally Total Fitness Holding Co.* 175 5
U.S. Industries, Inc. 320 4
Waddell & Reed Financial, Inc., Class A 147 4
Schweitzer-Mauduit International, Inc. 230 3
Bassett Furniture Industries, Inc. 200 3
GC Companies, Inc.* 120 3
Aviall, Inc. 300 2
Octel Corp.* 200 2
Water Pik Tech Inc.* 197 2
Highlands Insurance Group, Inc.* 160 2
Abercrombie and Fitch Co., Class A* 92 2
Huttig. Bldg. Prods Inc.* 289 1
Crown Vantage, Inc.* 120 1
Momentum Business Application, Class A* 86 1
Crescendo Pharmaceuticals, Class A* 50 1
Allergan Specialty Ther., Inc., Class A* 40 1
Brunos, Inc.* 31 1
--------------
TOTAL COMMON STOCKS - 87.0%
(Cost - $129,849,220) 246,077
--------------
PREFERRED STOCK - 0.0%
(Cost - $19,016)
Sealed Air Corp., Class A 475 24
--------------
WARRANTS - 0.0%
(Cost - $162)
Morrison Knudsen Corp., Expire 2003* 46 1
--------------
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 11
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 13.0%
COMMERCIAL PAPER - 8.5%
American Express Co.,
5.25%, 1/3/00 $ 9,521 $ 9,521
3.25%, 1/6/00 2,788 2,788
Bell Atlantic Financial Services,
5.00%, 1/7/00 4,349 4,349
5.20%, 1/7/00 7,294 7,294
------------
23,952
------------
U.S. GOVERNMENT - 4.5%
Federal Home Loan Banks,
4.0%, 1/4/00 10,539 10,539
U. S. Treasury Bills,
4.95%, 1/20/00** 427 426
5.17%, 1/20/00** 827 825
4.60%, 1/27/00 ** 203 202
5.02%, 1/27/00** 631 629
5.08%, 3/2/00** 229 227
------------
12,848
------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost - $36,800,224) 36,800
------------
TOTAL INVESTMENTS IN SECURITIES - 100.0%
(Total Cost - $166,668,622) 282,902
Liabilities Less Cash and Other Assets - 0.0% (121)
------------
NET ASSETS - 100.0% $ 282,781
============
* Non-income producing securities.
** This security, or a portion thereof, was pledged as collateral for Stock
Index Futures Contracts. At December 31, 1999, the Fund was long 109 S&P
500 Futures Contracts expiring in March 2000. Unrealized gains amounted
to $1,140,437. Underlying face value was $37,078,713 and underlying
market value was $38,219,150.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost - $166,668,622) $ 282,902
Cash 15
Receivable for investments sold 21
Receivable for fund shares sold 140
Dividend receivable 219
Interest receivable 6
Variation margin receivables 88
Investment for trustees' deferred
compensation plan 155
Other 42
------------
TOTAL ASSETS 283,588
------------
LIABILITIES:
Payable for investments purchased 80
Payable for fund shares repurchased 442
Deferred trustees' fees payable 155
Accrued advisory fees payable 58
Other accrued expenses (including
$18,476 due to affiliate) 72
------------
TOTAL LIABILITIES 807
------------
NET ASSETS (Equivalent to $22.83 per
share based on 12,384,347 shares
outstanding) $ 282,781
============
COMPONENTS OF NET ASSETS:
Paid in capital $ 164,089
Distributions in excess of net
investment income (78)
Unrealized appreciation of investments 117,373
Accumulated net realized gain 1,397
------------
NET ASSETS $ 282,781
============
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 12
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Dividends (net of foreign taxes
withheld of $26,775) $ 2,695
Interest 1,728
-----------
4,423
EXPENSES:
Investment advisory fees 608
Custodian fees 158
Administrative services 97
Auditing and legal fees 37
Other 26
Trustees' fees 10
-------------
Total expenses 936
Less expenses waived by adviser (328)
-------------
Net Expenses 608
NET INVESTMENT INCOME 3,815
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments 2,975
Net realized gain from futures contracts 4,645
Net unrealized appreciation of investments 35,518
Net unrealized gain from futures contracts 8
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 43,146
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 46,961
=============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31
1999 1998
---- ----
(IN THOUSANDS)
--------------
OPERATIONS:
Net investment income $ 3,815 $ 3,387
Net realized gain from investments 2,975 737
Net realized gain from futures contracts 4,645 2,706
Net unrealized appreciation of
investments 35,518 34,804
Unrealized appreciation on futures contracts 8 1,132
-------- --------
Net increase in net assets from operations 46,961 42,766
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
($0.51 and $.40 per share) (6,138) (4,108)
From net realized gain
($.0.46 and $.18 per share) (5,449) (1,817)
-------- --------
Total distributions to shareholders (11,587) (5,925)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Net increase from capital share
Transactions 40,932 53,326
-------- --------
NET INCREASE IN NET ASSETS 76,306 90,167
NET ASSETS:
Beginning of period 206,475 116,308
-------- --------
End of period (Including overdistributed
net investment income of $77,548
and $18,123, respectively) $ 282,781 $ 206,475
========== ===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS 13
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
are 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.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS 14
(Continued)
3. 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 0.25% applied to the
daily average 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, amortized organization expenses, transaction
costs incurred in acquiring and disposing of portfolio securities, and
extraordinary expenses) exceed 0.25% of average daily net assets until April 30,
2001, and afterwards to the extent described in the Fund's prospectus.
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 year ended December
31, 1999, the Fund paid or accrued $96,624.
TimesSquare 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.
5. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, aggregated $27,917,378 and $4,430,149,
respectively, for the year ended December 31, 1999. As of December 31, 1999, the
cost of securities, excluding short term obligations, held for federal income
tax purposes was $130,263,493. At December 31, 1999, unrealized appreciation for
federal income tax purposes aggregated $115,838,542, of which $121,149,055
related to appreciated securities and $5,310,513 related to depreciated
securities.
6. CAPITAL STOCK. The Fund offers an unlimited number of shares of beneficial
interest without par value. Of the 12,384,347 shares outstanding at December 31,
1999, 12,229,351 shares were held by Connecticut General Life Insurance Company
("CG Life") relating to variable annuity and variable universal life insurance
contracts issued by CG Life. The remainder, representing 1.3% of the shares
outstanding, was held by an employee benefit plan established by CG Life for
certain of its employees.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Transactions in capital stock were as follows:
Year Ended Year Ended
December 31, 1999 December 31, 1998
Shares Amount Shares Amount
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount sold 2,989 $ 63,755 3,608 $ 61,841
Amount issued to shareholders
in reinvestment of dividends
and distributions 518 11,587 320 5,925
---------- ----------- --------- ------------
3,507 75,342 3,928 67,766
Amount redeemed (1,590) (34,410) (811) (14,440)
---------- ----------- --------- ------------
Net increase 1,917 $ 40,932 3,117 $ 53,326
========== =========== ========= ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS 15
(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>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.73 $ 15.83 $ 12.40 $ 10.75 $ 8.19
---------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.32 0.34 0.25 0.22 0.21
Net realized and unrealized gain (loss) 3.75 4.14 3.86 2.17 2.80
---------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 4.07 4.48 4.11 2.39 3.01
------ ------ ------ ----- -----
LESS DISTRIBUTIONS:
From net investment income (0.51) (0.40) (0.32) (0.29) (0.27)
From capital gains (0.46) (0.18) (0.36) (0.45) (0.18)
---------- --------- --------- -------- --------
TOTAL DISTRIBUTIONS (0.97) (0.58) (0.68) (0.74) (0.45)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 22.83 19.73 15.83 12.40 10.75
========= ======== ======== ======== ========
TOTAL INVESTMENT RETURN (B) 20.77% 28.60% 33.35% 22.48% 36.82%
RATIOS TO AVERAGE NET ASSETS:
Net Expenses 0.25% 0.25% 0.25% 0.60% 0.73%
Net investment income 1.57% 2.14% 1.93% 1.78% 2.05%
Fees and expenses waived or borne by the
Advisor 0.13% 0.19% 0.30% 0.04% -
Portfolio turnover 3% 2% 4% 4% 4%
Net assets, end of period (000 omitted) 282,781 206,475 116,308 71,513 66,283
</TABLE>
(a) 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.
(b) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
<PAGE>
- --------------------------------------------------------------------------------
16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of CIGNA Variable Products S&P 500 Index 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 S&P 500
Index Fund (the "Fund") at December 31, 1999, the results of its operations, 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 and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 2000
<PAGE>
- --------------------------------------------------------------------------------
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND 17
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 Richard H. Forde
ADVISORY DIRECTOR MANAGEMENT AND CHAIRMAN OF THE BOARD, CHAIRMAN OF THE BOARD
ADMEDIA CORPORATE ADVISORS, INC. TIMESSQUARE CAPITAL MANAGEMENT, INC. AND PRESIDENT
Paul J. McDonald
Richard H. Forde SENIOR EXECUTIVE VICE PRESIDENT
SENIOR MANAGING DIRECTOR AND CHIEF ADMINISTRATIVE OFFICER Alfred A. Bingham III
TIMESSQUARE CAPITAL MANAGEMENT, INC. FRIENDLY ICE CREAM CORPORATION VICE PRESIDENT AND TREASURER
Russell H. Jones
VICE PRESIDENT AND TREASURER Jeffrey S. Winer
KAMAN CORPORATION VICE PRESIDENT AND SECRETARY
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of the Standard & 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.
CIGNA Variable Products S&P 500 Index Fund is an open-end, diversified
management investment company that 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. The
investment adviser is TimesSquare Capital Management, Inc., 900 Cottage Grove
Road, Hartford, Connecticut 06152.
