<PAGE>
CIGNA
CORPORATE VARIABLE
UNIVERSAL LIFE
ANNUAL
REPORT
[PICTURE]
[LOGO]
DECEMBER 31, 1998
CORPORATE INSURANCE
<PAGE>
ANNUAL REPORT
CIGNA
CORPORATE VARIABLE
UNIVERSAL LIFE II
DECEMBER 31, 1998
CORPORATE INSURANCE
[LOGO]
<PAGE>
TABLE OF CONTENTS
PRESIDENT'S LETTER
ECONOMIC REVIEW AND OUTLOOK
REPORT OF INDEPENDENT ACCOUNTANTS
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
SCHEDULE OF CHANGES IN UNIT VALUES
FUND REPORTS
THE ALGER AMERICAN FUND ANNUAL REPORT
Alger American Small Cap Portfolio
Alger American MidCap Growth Portfolio
Alger American Growth Portfolio
BT INSURANCE FUNDS TRUST ANNUAL REPORT
EAFE-Registered Trademark- Equity Index Fund
Small Cap Index Fund
CIGNA VARIABLE PRODUCTS GROUP ANNUAL REPORT
CIGNA Money Market Fund
S&P 500 Index Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ANNUAL REPORT
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP II Investment Grade Bond Portfolio
JANUS ASPEN SERIES TRUST ANNUAL REPORT
Janus Aspen Series Worldwide Growth Portfolio
MFS-REGISTERED TRADEMARK- VARIABLE TRUST-REGISTERED TRADEMARK- ANNUAL
REPORT
MFS Emerging Growth Series
MFS Total Return Series
OCC ACCUMULATION TRUST ANNUAL REPORT
Small Cap Portfolio
Managed Portfolio
Equity Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND ANNUAL REPORT
Templeton International Fund Class I
<PAGE>
Byron D. Oliver [Logo]
President
[Photo]
P. O. Box 2975
Routing 17C
Hartford, CT 06104
Dear CIGNA Client:
It is a pleasure to provide you with this annual report on the performance of
your Corporate Variable Universal Life Insurance product for the period ending
December 31, 1998.
The report includes financial data for each of the portfolio options available
under your product. In addition, we have included an Economic Overview and
Outlook for the Fourth Quarter 1998 by Robert DeLucia of CIGNA Investment
Management. This overview deals with significant national and international
trends affecting key markets. I hope you will take a few minutes to read it
carefully.
Your Corporate Variable Universal Life Product is designed specifically to meet
your needs in the corporate marketplace. The CIGNA Corporate Insurance Team is
dedicated to meeting your executive benefit funding needs with the sophisticated
financial solutions that are essential to attracting and retaining executive
talent...the talent needed to grow a business in this increasingly competitive
market.
We're extremely proud to have you as a client and look forward to an enduring
partnership built on understanding, trust, and our ability to provide financial
solutions of recognized value to your organization.
If you have any questions or comments about this report, please feel free to
call Mary Ellen Jaske in our CIGNA Corporate Insurance Department at
860.534.4154. Mary Ellen is available Monday through Friday, 8 am to 5 pm.
Sincerely,
Byron D. Oliver
President, CIGNA Retirement & Investment Services
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
ECONOMIC AND FINANCIAL REVIEW
In a broad historical context, 1998 appears to represent a watershed year in the
U.S. economy and financial markets. The years leading up to 1998 -- in
particular, the 1995-97 timeframe -- experienced extraordinary economic
performance: steady economic growth, low inflation, strong corporate profit
growth and declining interest rates. Globally, economic output expanded rapidly,
inflation was under control, and world trade flourished. However, during 1998,
the eighth year of the current economic expansion, despite continued economic
growth and low inflation, significant fundamental economic and financial
imbalances were beginning to develop beneath the surface of the U.S. economy. On
a global basis, major regions of the world, particularly Asia, experienced
severe economic and financial dislocation.
In fact, the most important influence on economic events in 1998 was the
collapse of the emerging markets of Asia -- including the continued recession
within Japan, and the subsequent spreading of the "Asian Contagion" to Russia
and Latin America. Repercussions from the Asian economic crisis were felt
worldwide, although the consequences for the U.S. and Continental Europe have
been relatively modest to date. But the official growth in global GDP (gross
domestic product) fell from approximately 4% in both 1996 and 1997 to roughly 2%
during 1998, and is likely to weaken further in 1999.
The major economic fallout from the Asian crisis was the spreading of powerful
deflationary forces around the globe. The most profound impact was on the
manufacturing sectors of the world economy -- particularly, industrial
commodities -- as world commodity prices fell to 21-year lows late in the year
(with crude oil falling to $10 per barrel, the lowest quote since 1986). The
intense pressures currently felt by manufacturing sectors can be attributed
directly to the Asian economies. As major consumers of basic commodities, the
emerging markets of Asia are primarily responsible for the severe decline in
world demand for basic industrial materials and components. Moreover, as a
result of massive over-investment during much of the current decade, the Asian
economies suffer from severe overcapacity in many industrial products;
consequently, Asian industries continued to exert downward pressure on world
commodity prices by flooding the markets with their goods. The result has been
downward pressure on world inflation and downward pressure on business
profitability worldwide.
The U.S. economy has thus far felt only minor impact from the Asian crisis, a
manifestation of the inherent resiliency of the U.S. economic system and our
heavy reliance on services and high-value-added manufacturing. In some
respects, the U.S. economy has even benefitted from the Asian crisis, as the
spreading deflationary forces actually enhanced purchasing power for U.S.
consumers.
-1-
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
However, two notable victims within our domestic economy emerged from the Asian
crisis -- manufacturing and corporate profits. Domestic manufacturing has begun
to contract, as measured by factory output, orders, and employment (but
fortunately, represents less than 20% of the total U.S. GDP). Overall, U.S. GDP
increased at a very impressive 3.7% rate during 1998, with consumer inflation
averaging around 1.5%. U.S. corporate profits, on the other hand, experienced
their first full year of decline since the 1990-1991 recession.
For world financial markets, 1998 was a year of extreme volatility, instability
and contradiction. Financial markets experienced several massive swings in
investor psychology and market sentiment. It was also a year of almost
unprecedented volatility across the entire spectrum of investment markets:
domestic and foreign, debt and equity, and high-grade and low-grade quality
market sectors.
Through mid-July, the S&P 500 Index rose to an all-time high. What followed
during the summer and early weeks of autumn was the most severe global financial
panic since October 1987 -- characterized by an extreme aversion to risk and a
massive "flight to quality." This dramatic reversal in investor sentiment was
triggered by the Russian debt default and near failure of a very large U.S.
hedge fund, while the economic crisis in Asia worsened and began to spread to
Brazil. As investors bailed out of risky assets of all types, the price of U.S.
Treasury bonds soared and yields plummeted, as investors scrambled for the
ultimate form of safety and liquidity. Credit markets tightened abruptly, and
equities around the globe plunged in value. Small capitalization stocks, as
measured by the Russell 2000 Index, declined 35% to 40%, European equities fell
by 25% to 30%, and U.S. large capitalization stocks declined nearly 20%.
During the first week of October, major central banks around the world, led by
the Federal Reserve ("Fed"), clearly signaled their willingness to ease credit
by lowering interest rates and injecting liquidity into the system. In response,
markets reversed course and rallied quickly and dramatically, ending the
shortest bear market in U.S. stock market history.
For full-year 1998, equities generally outperformed bonds, although both markets
were characterized by extraordinary divergences. Within the U.S. equity market,
large capitalization stocks outperformed the small-cap sector by the widest
margin in many years. The total return on the S&P 500 Index was nearly 29% -- an
unprecedented fourth consecutive year of 20% plus gains -- while the small
capitalization Russell 2000 Index actually fell by 3%. Dramatic divergences were
even evident within the S&P 500 Index: despite its overall gain of 29%, nearly
one-half of the stocks in the Index were down for the year. Conversely, almost
one-half of the entire growth in the Index for 1998 can be attributed to only a
dozen jumbo capitalization component stocks. As an indication of the popularity
of a handful of prominent
-2-
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
technology stocks, the NASDAQ composite rose by nearly 40% for the year.
Within the U.S. bond market, long-term Treasuries rewarded investors with a
16.6% total return, while low-grade (high yield) corporates had a total return
of less than 2%. Overall, the Lehman Brothers Aggregate Bond Index returned 8.7%
for the year. Globally, European equity markets produced excellent gains,
helping to propel the MSCI EAFE Index to a 20% total return. Conversely,
emerging stock and emerging bond mutual funds lost 27% and 21%, respectively
(compared to Lipper), while Japanese stocks continued to languish. For global
investors, 1998 was clearly a year of tremendous extremes.
-3-
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
OUTLOOK
We expect 1999 to be an enormously challenging year for virtually all world
economies, with major regions remaining in recession. And we do not expect a
rapid recovery anytime soon, given the profound structural problems that exist.
The most critical problem is the massive surplus of global manufacturing
capacity, which, in tandem with high levels of debt and troubled banking systems
in many countries, is spreading deflationary forces around the world. The result
is declining returns on investment, a rise in bankruptcies and problem bank
loans, and a fragile global financial system. Central banks worldwide, led by
the Federal Reserve, have responded to spreading financial risk by aggressive
monetary ease. While this has been temporarily successful in containing the
problem, it is not a permanent solution.
Consequently, it appears likely that all regions of the world will experience
either recession or sharply slower growth during 1999. While the Asian region
should experience another year of economic contraction, there are some
encouraging signs that these economies are no longer in a free-fall, and have
begun to stabilize somewhat -- particularly in South Korea, the region's largest
economy. Renewed deterioration in economic conditions is still possible,
however, and a return to pre-1997 economic growth is at least several years
away.
Despite a series of well-publicized government policy initiatives, Japan will
likely suffer an unprecedented third year of economic contraction. Consumer
spending continues to be weak, while capital investment is inhibited by plunging
profitability and massive overcapacity. Most importantly, the Japanese banking
system is in a state of paralysis. Banks are unable to make loans to
creditworthy businesses, and the economy remains in a severe credit crunch. It
is unlikely that the recent banking legislation or fiscal stimulus package will
bring about a sustained recovery in the foreseeable future. Meanwhile, any
renewed weakness in the Japanese yen will help Japanese exports, but could put
renewed pressure on the currencies of China and the other Asian markets.
During 1999, economic conditions in Latin America are likely to deteriorate.
Brazil, the largest economy in the region and the eighth largest in the world,
is sliding into a deep recession, which will adversely impact other Latin
American economies. The collapse in world commodity prices, particularly oil and
copper, will prove especially painful to the region.
Once again, the best-performing economies of the world in 1999 are likely to be
the U.S. and Continental Europe, although each should experience a significant
slowdown in the rate of growth. One exception to the optimistic outlook for
Europe is the United Kingdom, which is on the verge of a recession and will
likely experience a mild downturn in 1999. In the U.S., although the economy has
exhibited impressive
-4-
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
growth through year-end 1998, there has emerged clear evidence of economic
imbalances and excesses, which could contribute to a more serious economic
slowdown if allowed to persist. On the consumer side, household spending has
outpaced personal income for several years, resulting in a sharp decline in the
savings rate and large build-up of consumer debt, currently at an all-time high.
Similarly, corporate debt is growing at the fastest rate in nearly a decade. And
business capital investment has grown at an unsustainable rate during the past
five years, causing a sharp acceleration in the growth of U.S. capital stock,
resulting in excess capacity in many industries. Fundamentally, the decline in
corporate cash flow and the fall in capacity utilization should lead to a
decline in capital investment, which will likely begin during 1999.
We expect all sectors of the U.S. economy to experience a gradual slowdown in
growth during 1999. The trade sector is already depressed and should weaken
further. General manufacturing is already in decline, while capital spending
appears to be at a cyclical peak. Consumer spending will likely be the last
sector to weaken. Our assumption is that two forces will combine to produce a
gradual slowdown in consumer spending during the year. The first, a weakening
job market resulting from corporate profit declines, should cause a sharp
slowdown in employment and personal income. The second is a saturation in key
consumer markets, at a time when household debt levels are at a historic high.
Our forecast for the U.S. economy for 1999 assumes that economic growth slows to
approximately one-half of 1998's 3.7% growth rate. Inflation is expected to
remain under excellent control and average only 1.5% for the year. Corporate
profits remain vulnerable to further declines, and will likely contract by 5%
for the full year. Assuming profits achieve only a modest recovery in 2000, the
period 1997-2000 will be one of zero profit growth for U.S. corporations.
The combination of progressive economic weakness, very low inflation and growing
financial risks worldwide in 1999 should allow the Fed to ease credit
aggressively and implement several additional interest rate cuts. The risk to
our forecast is that the current momentum in the U.S. economy continues for
longer than we anticipate -- a result primarily of persistent, robust consumer
spending. The implications would be higher than expected interest rates for the
near term, and a continued rally in stock prices.
As a result of the above-average economic uncertainty which lies ahead, we
expect world financial markets to exhibit continued volatility and turbulence
during most of 1999. Generally speaking, we continue to view the economic
environment as favorable for high-grade bond markets and unfavorable for equity
markets. Within the U.S. credit market, the yields on U.S. Treasury bonds are
likely to remain under downward pressure for most of 1999, but are unlikely to
decline significantly from current levels. However, fixed income investors are
-5-
<PAGE>
CIGNA ECONOMIC REVIEW AND OUTLOOK: 4Q98
---------------------------------------
likely to achieve better total returns in the non-Treasury or "spread" sectors
of the high-grade debt domestic market because of the currently elevated levels
of credit spreads.
Conversely, the economic fundamentals do not appear favorable for equities, and
a resumption of the decline in global equity markets, which began during the
summer months, is likely to occur at any time during 1999. Specifically, the two
most formidable obstacles to a sustained uptrend in equity prices are the
unfavorable outlook for corporate earnings and the excess valuations of
corporate equities. In principle, common stocks represent claims on corporate
assets and cash flows, both of which are being negatively impacted by the
relentless deflationary pressures within the global economy. At the same time,
virtually all measures of stock market valuation are at an all-time high.
Our 1999 outlook can be summarized as a period of steady declines in the rate of
economic growth, resulting from a combination of global deflationary pressures
and a worrisome build-up of economic imbalances within both the U.S. household
and corporate sectors. This would appear to be an environment favorable for
high-grade bonds. Conversely, given the continued squeeze on corporate profit
margins along with the very rich valuations of common stocks, the domestic
equity market appears fundamentally unattractive at current levels, and is
likely to produce disappointing returns during calendar year 1999, following
four consecutive years of unprecedented gains.
-6-
<PAGE>
PRICEWATERHOUSECOOPERS [LOGO]
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
One Financial Plaza
Hartford CT 06103
Telephone (860) 240 2000
REPORT OF INDEPENDENT ACCOUNTS
To the Board of Directors of Connecticut General
Life Insurance Company and Participants of the
CG Corporate Insurance Variable Life Separate Account 02
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the sub-accounts, Alger
American Fund - Alger American Growth Portfolio, Alger American MidCap Growth
Portfolio, Alger American Small Capitalization Portfolio; CIGNA Variable
Products Group - CIGNA Variable Products Money Market Fund, CIGNA Variable
Products S&P 500 Index Fund; Fidelity Variable Insurance Products Fund -
Equity-Income Portfolio, High Income Portfolio; Fidelity Variable Insurance
Products Fund II - Investment Grade Bond Portfolio; Janus Aspen Series - Janus
Aspen Series Short-Term Bond Portfolio, Janus Aspen Series Worldwide Growth
Portfolio; MFS Variable Insurance Trust - MFS Emerging Growth Series, MFS Total
Return Series; OCC Accumulation Trust - OCC Equity Portfolio, OCC Managed
Portfolio, OCC Small Cap Portfolio; Templeton Variable Products Series Fund -
Templeton International Fund - Class 1 (constituting the CG Corporate Insurance
Variable Life Separate Account 02, hereafter referred to as "the Account") at
December 31, 1998, the results of each of their operations and the changes in
each of their net assets for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Account'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 generally accepted
auditing standards 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, 1998 by
correspondence with the custodians, provide a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 19, 1999
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
CIGNA Variable Products
Alger American Fund Sub-Accounts Group Sub-Accounts
---------------------------------------------- ------------------------------
MidCap Small S&P 500
Growth Growth Capitalization Money Market Index
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in variable insurance
funds at fair value $ 512,805 $ 279,014 $ 598,312 $ 213,147 $27,262,227
Receivable from Connecticut
General Life Insurance Company - 598 90 - -
Receivable for fund shares sold 12,197 - - 10,755 3,935
----------- ----------- ----------- ----------- -----------
Total assets 525,002 279,612 598,402 223,902 27,266,162
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General
Life Insurance Company 12,197 - - 10,755 3,935
Payable for fund shares purchased - 598 90 - -
----------- ----------- ----------- ----------- -----------
Total liabilities 12,197 598 90 10,755 3,935
----------- ----------- ----------- ----------- -----------
Net assets $ 512,805 $ 279,014 $ 598,312 $ 213,147 $27,262,227
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Accumulation units outstanding -
Contracts sold before May 1, 1998 29,858 19,198 23,818 19,624 1,708,791
Net asset value per accumulation unit $ 17.174509 $ 14.533269 $ 14.358496 $ 10.861410 $ 15.363576
Accumulation units outstanding -
Contracts sold after April 30, 1998 - - 24,144 - 90,399
Net asset value per accumulation unit - - $10.616506 - $11.162600
----------- ----------- ----------- ----------- -----------
Accumulation net assets $ 512,805 $ 279,014 $ 598,312 $ 213,147 $27,262,227
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
Fidelity Variable
Fidelity Insurance
Variable Insurance Products Products Fund II
Fund Sub-Accounts Sub-Account
---------------------------- ----------------
Equity- High Investment
Income Income Grade Bond
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in variable insurance
funds at fair value $ 1,101,890 $ 1,079,507 $ 5,897,291
Receivable from Connecticut
General Life Insurance Company - 363 -
Receivable for fund shares sold 9,846 - 170
----------- ----------- -----------
Total assets 1,111,736 1,079,870 5,897,461
----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General
Life Insurance Company 9,846 - 170
Payable for fund shares purchased - 363 -
----------- ----------- -----------
Total liabilities 9,846 363 170
----------- ----------- -----------
Net assets $ 1,101,890 $ 1,079,507 $ 5,897,291
----------- ----------- -----------
----------- ----------- -----------
Accumulation units outstanding -
Contracts sold before May 1, 1998 83,871 98,758 466,141
Net asset value per accumulation unit $13.137868 $10.930880 $11.693725
Accumulation units outstanding -
Contracts sold after April 30, 1998 - - 42,614
Net asset value per accumulation unit - - $10.474584
----------- ----------- -----------
Accumulation net assets $ 1,101,890 $ 1,079,507 $ 5,897,291
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Janus Aspen Series MFS Variable Insurance
Sub-Accounts Trust Sub-Accounts
---------------------------- ----------------------------
Short-Term Worldwide Emerging Total
Bond Growth Growth Return
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in variable insurance
funds at fair value $ - $ 2,826,277 $ 1,026,589 $ 63,790
Receivable from Connecticut
General Life Insurance Company - - 893 2,238
Receivable for fund shares sold - 5,911 - -
----------- ----------- ----------- -----------
Total assets - 2,832,188 1,027,482 66,028
----------- ----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General
Life Insurance Company - 5,911 - -
Payable for fund shares purchased - - 893 2,238
----------- ----------- ----------- -----------
Total liabilities - 5,911 893 2,238
----------- ----------- ----------- -----------
Net assets $ - $ 2,826,277 $ 1,026,589 $ 63,790
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulation units outstanding -
Contracts sold before May 1, 1998 - 194,396 66,199 4,987
Net asset value per accumulation unit - $14.538727 $15.507615 $12.791189
Accumulation units outstanding -
Contracts sold after April 30, 1998 - - - -
Net asset value per accumulation unit - - - -
----------- ----------- ----------- -----------
Accumulation net assets $ - $ 2,826,277 $ 1,026,589 $ 63,790
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
Templeton
Variable
Products Series
OCC Accumulation Trust Sub-Accounts Fund Sub-Account
----------------------------------------------- ----------------
International -
Equity Managed Small Cap Class 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in variable insurance
funds at fair value $ 147,875 $ 739,373 $ 1,257,978 $ 1,296,043
Receivable from Connecticut
General Life Insurance Company 208 - 120 -
Receivable for fund shares sold - 10,593 - 1,623
----------- ----------- ----------- -----------
Total assets 148,083 749,966 1,258,098 1,297,666
----------- ----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General
Life Insurance Company - 10,593 - 1,623
Payable for fund shares purchased 208 - 120 -
----------- ----------- ----------- -----------
Total liabilities 208 10,593 120 1,623
----------- ----------- ----------- -----------
Net assets $ 147,875 $ 739,373 $ 1,257,978 $ 1,296,043
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulation units outstanding -
Contracts sold before May 1, 1998 11,240 59,386 116,250 99,869
Net asset value per accumulation unit $ 13.156140 $ 12.450284 $ 10.821353 $11.832899
Accumulation units outstanding -
Contracts sold after April 30, 1998 - - - 11,884
Net asset value per accumulation unit - - - $ 9.617966
----------- ----------- ----------- -----------
Accumulation net assets $ 147,875 $ 739,373 $ 1,257,978 $ 1,296,043
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
CIGNA Variable Products
Alger American Fund Sub-Accounts Group Sub-Accounts
----------------------------------------------- ------------------------------
MidCap Small S&P 500
Growth Growth Capitalization Money Market Index
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 482 $ - $ 1 $ 39,467 $ 520,757
EXPENSES:
Mortality and expense risk and
administrative charges 2,328 1,536 3,036 7,446 190,138
----------- ----------- ----------- ----------- -----------
Net investment gain (loss) (1,846) (1,536) (3,035) 32,021 330,619
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Capital gain distributions from
portfolio sponsors 29,450 11,691 34,120 - 223,478
Net realized gain (loss) on share
transactions 2,954 1,992 (972) - 107,742
----------- ----------- ----------- ----------- -----------
Net realized gain 32,404 13,683 33,148 - 331,220
Change in net unrealized gain (loss) 91,238 40,548 5,340 - 4,308,965
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments 123,642 54,231 38,488 - 4,640,185
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 121,796 $ 52,695 $ 35,453 $ 32,021 $ 4,970,804
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
Fidelity Variable
Fidelity Insurance
Variable Insurance Products Products Fund II
Fund Sub-Accounts Sub-Account
----------------------------- -----------------
Equity- High Investment
Income Income Grade Bond
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,536 $ 23,780 $ 235,834
EXPENSES:
Mortality and expense risk and
administrative charges 7,081 5,020 52,445
----------- ----------- -----------
Net investment gain (loss) (2,545) 18,760 183,389
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Capital gain distributions from
portfolio sponsors 16,142 15,111 27,981
Net realized gain (loss) on share
transactions (105) 51 13,754
----------- ----------- -----------
Net realized gain 16,037 15,162 41,735
Change in net unrealized gain (loss) 36,839 (50,282) 201,263
----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments 52,876 (35,120) 242,998
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 50,331 $ (16,360) $ 426,387
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Janus Aspen Series MFS Variable Insurance
Sub-Accounts Trust Sub-Accounts
----------------------------- -----------------------------
Short-Term Worldwide Emerging Total
Bond* Growth Growth Return
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 18 $ 67,675 $ - $ 77
EXPENSES:
Mortality and expense risk and
administrative charges 13 23,832 6,074 249
----------- ----------- ----------- -----------
Net investment gain (loss) 5 43,843 (6,074) (172)
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Capital gain distributions from portfolio sponsors 2 27,273 4,451 91
Net realized gain (loss) on share transactions 43 (19,943) (2,772) 34
----------- ----------- ----------- -----------
Net realized gain 45 7,330 1,679 125
Change in net unrealized gain (loss) - 479,024 216,913 3,234
----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments 45 486,354 218,592 3,359
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 50 $ 530,197 $ 212,518 $ 3,187
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
Templeton
Variable
Products Series
OCC Accumulation Trust Sub-Accounts Fund Sub-Account
---------------------------------------------- ----------------
International -
Equity Managed Small Cap Class 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 726 $ 3,601 $ 4,734 $ 15,674
EXPENSES:
Mortality and expense risk and
administrative charges 996 5,426 13,225 9,709
----------- ----------- ----------- -----------
Net investment gain (loss) (270) (1,825) (8,491) 5,965
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Capital gain distributions from
portfolio sponsors 3,143 14,415 51,695 28,023
Net realized gain (loss) on share
transactions 522 1,337 (29,631) 940
----------- ----------- ----------- -----------
Net realized gain 3,665 15,752 22,064 28,963
Change in net unrealized gain (loss) 6,897 22,152 (177,446) (28,223)
----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments 10,562 37,904 (155,382) 740
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 10,292 $ 36,079 $ (163,873) $ 6,705
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* For the period ended December 31, 1998.
Deposits first received January 29, 1998.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
CIGNA Variable Products
Alger American Fund Sub-Accounts Group Sub-Accounts
---------------------------------------------- -----------------------------
MidCap Small S&P 500
Growth Growth Capitalization Money Market Index
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ (1,846) $ (1,536) $ (3,035) $ 32,021 $ 330,619
Net realized gain 32,404 13,683 33,148 - 331,220
Net unrealized gain (loss) 91,238 40,548 5,340 - 4,308,965
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from operations 121,796 52,695 35,453 32,021 4,970,804
----------- ----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 234,347 107,151 115,723 8,339,674 6,448,072
Participant transfers 178,850 100,550 387,084 (7,699,759) 3,889,673
Participant withdrawals (72,383) (19,855) (30,038) (530,422) (1,497,945)
----------- ----------- ----------- ----------- -----------
Net increase from participant
transactions 340,814 187,846 472,769 109,493 8,839,800
----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets 462,610 240,541 508,222 141,514 13,810,604
NET ASSETS:
Beginning of year 50,195 38,473 90,090 71,633 13,451,623
----------- ----------- ----------- ----------- -----------
End of year $ 512,805 $ 279,014 $ 598,312 $ 213,147 $27,262,227
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
Fidelity Variable
Fidelity Insurance
Variable Insurance Products Products Fund II
Fund Sub-Accounts Sub-Account
----------------------------- -----------------
Equity- High Investment
Income Income Grade Bond
----------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ (2,545) $ 18,760 $ 183,389
Net realized gain 16,037 15,162 41,735
Net unrealized gain (loss) 36,839 (50,282) 201,263
----------- ----------- -----------
Net increase (decrease) from operations 50,331 (16,360) 426,387
----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 436,963 220,573 424,660
Participant transfers 543,337 612,890 838,386
Participant withdrawals (111,582) (42,487) (773,867)
----------- ----------- -----------
Net increase from
participant transactions 868,718 790,976 489,179
----------- ----------- -----------
Total increase (decrease) in net assets 919,049 774,616 915,566
NET ASSETS:
Beginning of year 182,841 304,891 4,981,725
----------- ----------- -----------
End of year $ 1,101,890 $ 1,079,507 $ 5,897,291
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
Janus Aspen Series MFS Variable Insurance
Sub-Accounts Trust Sub-Accounts
----------------------------- -----------------------------
Short-Term Worldwide Emerging Total
Bond* Growth Growth Return
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ 5 $ 43,843 $ (6,074) $ (172)
Net realized gain 45 7,330 1,679 125
Net unrealized gain (loss) - 479,024 216,913 3,234
----------- ----------- ----------- -----------
Net increase (decrease) from operations 50 530,197 212,518 3,187
----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 5,631 687,079 316,114 6,219
Participant transfers (5,488) 254,640 274,990 55,960
Participant withdrawals (193) (306,422) (86,142) (5,231)
----------- ----------- ----------- -----------
Net increase (decrease) from
participant transactions (50) 635,297 504,962 56,948
----------- ----------- ----------- -----------
Total increase (decrease) in net assets - 1,165,494 717,480 60,135
NET ASSETS:
Beginning of year - 1,660,783 309,109 3,655
----------- ----------- ----------- -----------
End of year $ - $ 2,826,277 $ 1,026,589 $ 63,790
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
Templeton
Variable
Products Series
OCC Accumulation Trust Sub-Accounts Fund Sub-Account
---------------------------------------------- ----------------
International -
Equity Managed Small Cap Class 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ (270) $ (1,825) $ (8,491) $ 5,965
Net realized gain 3,665 15,752 22,064 28,963
Net unrealized gain (loss) 6,897 22,152 (177,446) (28,223)
----------- ----------- ----------- -----------
Net increase (decrease) from operations 10,292 36,079 (163,873) 6,705
----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 105,497 449,913 128,149 424,779
Participant transfers 14,836 (10,371) 89,173 342,949
Participant withdrawals (30,729) (70,856) (158,738) (55,891)
----------- ----------- ----------- -----------
Net increase (decrease) from
participant transactions 89,604 368,686 58,584 711,837
----------- ----------- ----------- -----------
Total increase (decrease) in net assets 99,896 404,765 (105,289) 718,542
NET ASSETS:
Beginning of year 47,979 334,608 1,363,267 577,501
----------- ----------- ----------- -----------
End of year $ 147,875 $ 739,373 $ 1,257,978 $ 1,296,043
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* For the period ended December 31, 1998.
Deposits first received January 29, 1998.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED TO DECEMBER 31, 1997
CIGNA Variable Products
Alger American Fund Sub-Accounts Group Sub-Accounts
----------------------------------------------- --------------------------------
MidCap Small S&P 500
Growth Growth Capitalization Money Market * Index
----------- ----------- -------------- -------------- -----------
Date deposits first received 2/24/97 2/24/97 3/31/97 12/24/96 2/24/97
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ (89) $ (242) $ (512) $ 68,033 $ 196,883
Net realized gain 102 628 2,183 - 293,784
Net unrealized gain 1,223 5,140 10,441 - 1,320,848
----------- ----------- ----------- ----------- -----------
Net increase from operations 1,236 5,526 12,112 68,033 1,811,515
----------- ----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 41,099 1,222 - 20,606,819 916,689
Participant transfers 9,624 33,892 82,004 (20,953,420) 10,900,475
Participant withdrawals (1,764) (2,167) (4,026) (260,990) (177,056)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from participant
transactions 48,959 32,947 77,978 (607,591) 11,640,108
----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets 50,195 38,473 90,090 (539,558) 13,451,623
NET ASSETS:
Beginning of period - - - 611,191 -
----------- ----------- ----------- ----------- -----------
End of period $ 50,195 $ 38,473 $ 90,090 $ 71,633 $13,451,623
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
Fidelity Variable
Fidelity Insurance
Variable Insurance Products Products Fund II
Fund Sub-Accounts Sub-Account
----------------------------- -----------------
Equity- High Investment
Income Income Grade Bond
----------- ----------- -----------
Date deposits first received 2/24/97 1/29/97 1/29/97
<S> <C> <C> <C>
OPERATIONS:
Net investment gain (loss) $ (944) $ 7,138 $ (8,846)
Net realized gain 309 1,385 110
Net unrealized gain 26,400 27,140 192,098
----------- ----------- -----------
Net increase from operations 25,765 35,663 183,362
----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 61,215 65,300 186,655
Participant transfers 105,195 217,909 4,637,295
Participant withdrawals (9,334) (13,981) (25,587)
----------- ----------- -----------
Net increase (decrease) from participant
transactions 157,076 269,228 4,798,363
----------- ----------- -----------
Total increase (decrease) in net assets 182,841 304,891 4,981,725
NET ASSETS:
Beginning of period - - -
----------- ----------- -----------
End of period $ 182,841 $ 304,891 $ 4,981,725
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
* For the Year Ended December 31, 1997 (Deposits first received December 24,
1996)
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED TO DECEMBER 31, 1997
Janus
Aspen Series MFS Variable Insurance
Sub-Account Trust Sub-Accounts
------------ ----------------------------
Worldwide Emerging Total
Growth Growth Return
----------- ----------- -----------
Date deposits first received 2/24/97 1/29/97 2/24/97
<S> <C> <C> <C>
OPERATIONS:
Net investment loss $ (1,199) $ (1,959) $ (14)
Net realized gain (loss) 715 230 8
Net unrealized gain (loss) 43,891 36,451 308
----------- ----------- -----------
Net increase (decrease) from operations 43,407 34,722 302
----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 177,366 83,322 2,184
Participant transfers 1,459,273 206,614 1,763
Participant withdrawals (19,263) (15,549) (594)
----------- ----------- -----------
Net increase from participant transactions 1,617,376 274,387 3,353
----------- ----------- -----------
Total increase in net assets 1,660,783 309,109 3,655
NET ASSETS:
Beginning of period - - -
----------- ----------- -----------
End of period $ 1,660,783 $ 309,109 $ 3,655
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
Templeton
Variable
Products Series
OCC Accumulation Trust Sub-Accounts Fund Sub-Account
----------------------------------------------- -----------------
International -
Equity Managed Small Cap Class 1
----------- ----------- ----------- -----------
Date deposits first received 2/24/97 1/29/97 2/24/97 2/24/97
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment loss $ (74) $ (62) $ (4,467) $ (2,220)
Net realized gain (loss) 219 6,115 365 (13)
Net unrealized gain (loss) 2,992 27,581 19,222 (7,247)
----------- ----------- ----------- -----------
Net increase (decrease) from operations 3,137 33,634 15,120 (9,480)
----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium loads 25,651 131,629 53,337 273,855
Participant transfers 25,340 184,083 1,298,529 322,803
Participant withdrawals (6,149) (14,738) (3,719) (9,677)
----------- ----------- ----------- -----------
Net increase from participant transactions 44,842 300,974 1,348,147 586,981
----------- ----------- ----------- -----------
Total increase in net assets 47,979 334,608 1,363,267 577,501
NET ASSETS:
Beginning of period - - - -
----------- ----------- ----------- -----------
End of period $ 47,979 $ 334,608 $ 1,363,267 $ 577,501
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION
CG Corporate Insurance Variable Life Separate Account 02 (the Account)
is registered as a Unit Investment Trust under the Investment Company Act
of 1940, as amended. The operations of the Account are part of the
operations of Connecticut General Life Insurance Company (CG Life). The
assets and liabilities of the Account are identified and distinguished from
other assets and liabilities of CG Life. The assets of the Account are not
available to meet the general obligations of CG Life and are held for the
exclusive benefit of the participants.
At December 31, 1998, the assets of the Account are divided into
variable sub-accounts, each of which is invested in shares of one of
seventeen portfolios (mutual funds) of nine diversified open-end management
investment companies, each portfolio having its own investment objective.
Transfers are permitted between these portfolios and to and from a fixed
account option offered by CG Life. The fixed account is not included in
these financial statements. The variable sub-accounts are:
ALGER AMERICAN FUND:
Alger American Growth Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
BT INSURANCE FUNDS TRUST:
EAFE-Registered Trademark- Equity Index Fund*
Small Cap Index Fund*
CIGNA VARIABLE PRODUCTS GROUP:
CIGNA Variable Products Money Market Fund
CIGNA Variable Products S&P 500 Index Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND:
Equity-Income Portfolio ("Fidelity Equity-Income Portfolio")
High Income Portfolio ("Fidelity High Income Portfolio")
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II:
Investment Grade Bond Portfolio ("Fidelity Investment Grade Bond
Portfolio")
JANUS ASPEN SERIES:
Janus Aspen Series Short-Term Bond Portfolio**
Janus Aspen Series Worldwide Growth Portfolio
MFS VARIABLE INSURANCE TRUST:
MFS Emerging Growth Series
MFS Total Return Series
OCC ACCUMULATION TRUST:
OCC Equity Portfolio
OCC Managed Portfolio
OCC Small Cap Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND:
Templeton International Fund - Class 1
* Not active. No deposits received as of December 31, 1998.
** This fund was no longer offered as of September 15, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in conformity with
generally accepted accounting principles and reflect management's estimates
and assumptions, such as those regarding fair value, that affect recorded
amounts. Actual results could differ from those estimates. Significant
estimates are discussed throughout the Notes to Financial Statements. The
following is a summary of significant accounting policies consistently
applied in the preparation of the Account's financial statements:
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
<PAGE>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
A. INVESTMENT VALUATION: Investments held by the sub-accounts are
valued at their respective closing net asset values per share as determined
by the mutual funds as of December 31, 1998. The change in the difference
between cost and value is reflected as unrealized gain (loss) in the
Statements of Operations.
B. INVESTMENT TRANSACTIONS: Investment transactions are recorded on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on sales of investments are determined by the last-in, first-out
cost basis of the investment sold. Dividend and capital gain distributions
are recorded on the ex-dividend date. Investment transactions are settled
through CG Life.
C. FEDERAL INCOME TAXES: The operations of the Account form a part
of, and are taxed with, the total operations of CG Life, which is taxed as
a life insurance company. Under existing Federal income tax law,
investment income (dividends) and capital gains attributable to the Account
are not taxed.
3. INVESTMENTS
Total shares outstanding and cost of investments as of December 31,
1998 were:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
COST OF
SUB-ACCOUNT SHARES HELD INVESTMENTS
--------------------------------------------------------------------------------
<S> <C> <C>
Alger American Growth Portfolio 9,636 $ 420,344
Alger American MidCap Growth Portfolio 9,665 233,326
Alger American Small Capitalization Portfolio 13,607 582,531
CIGNA Variable Products Money Market Fund 213,147 213,147
CIGNA Variable Products S&P 500 Index Fund 1,381,765 21,632,414
Fidelity Equity-Income Portfolio 43,347 1,038,651
Fidelity High Income Portfolio 93,626 1,102,649
Fidelity Investment Grade Bond Portfolio 455,038 5,503,930
Janus Aspen Series Worldwide Growth Portfolio 97,157 2,303,362
MFS Emerging Growth Series 47,815 773,225
MFS Total Return Series 3,520 60,248
OCC Equity Portfolio 3,821 137,986
OCC Managed Portfolio 16,904 689,640
OCC Small Cap Portfolio 54,458 1,416,202
Templeton International Fund - Class 1 62,614 1,331,513
--------------------------------------------------------------------------------
</TABLE>
Total purchases and sales of shares of each mutual fund for the year
ended December 31, 1998 amounted to:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
SUB-ACCOUNT PURCHASES SALES
--------------------------------------------------------------------------------
<S> <C> <C>
Alger American Growth Portfolio $ 461,416 $ 92,998
Alger American MidCap Growth Portfolio 266,163 68,162
Alger American Small Capitalization Portfolio 544,147 40,293
CIGNA Variable Products Money Market Fund 9,192,317 9,050,804
CIGNA Variable Products S&P 500 Index Fund 11,309,560 1,915,663
Fidelity Equity-Income Portfolio 1,052,375 170,060
Fidelity High Income Portfolio 882,854 58,007
Fidelity Investment Grade Bond Portfolio 1,425,205 724,656
Janus Aspen Series Short-Term Bond Portfolio* 8,052 8,095
Janus Aspen Series Worldwide Growth Portfolio 1,192,451 486,038
MFS Emerging Growth Series 1,084,519 581,180
MFS Total Return Series 67,504 10,637
OCC Equity Portfolio 134,932 42,455
OCC Managed Portfolio 529,169 147,893
OCC Small Cap Portfolio 326,456 224,668
Templeton International Fund - Class 1 904,336 158,511
--------------------------------------------------------------------------------
</TABLE>
* For the period January 29, 1998, date deposits first received, to
September 15, 1998, the date the sub-account was no longer offered.
4. CHARGES AND DEDUCTIONS
For all contracts sold after April 30, 1998, CG Life charges each
variable sub-account for mortality and expense risks the daily equivalent
of .70%, on an annual basis, of the current value of each sub-account's
assets during the first fifteen policy years and .25% thereafter. All
contracts sold before May
<PAGE>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1, 1998 have an annual fee for mortality and expense risks of .85% per year
during the first ten policy years, .45% per year during the eleventh
through fifteenth policy years and .15% thereafter.
For all contracts sold after April 30, 1998, CG Life charges each
variable sub-account for administrative costs, a daily deduction currently
equivalent to .10% per year during the first fifteen policy years only.
For all contracts sold before May 1, 1998, CG Life charges administrative
costs at the rate of .10% per year for the first ten policy years only.
Both the mortality and expense risk charge and the administrative fee
deductions are also assessed against amounts held in the fixed account, if
any. The fixed account is part of the general account of CG Life and is
not included in these financial statements.
The fees charged by CG Life for mortality and expense risks and
administrative fees from variable sub-accounts for the year ended December
31, 1998 amounted to:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MORTALITY AND ASSET BASED
EXPENSE ADMINISTRATIVE
SUB-ACCOUNT RISK FEES FEES
--------------------------------------------------------------------------------
<S> <C> <C>
Alger American Growth Portfolio $ 2,083 $ 245
Alger American MidCap Growth Portfolio 1,374 162
Alger American Small Capitalization Portfolio 2,702 334
CIGNA Variable Products Money Market Fund 6,652 794
CIGNA Variable Products S&P 500 Index Fund 170,096 20,042
Fidelity Equity-Income Portfolio 6,336 745
Fidelity High Income Portfolio 4,491 529
Fidelity Investment Grade Bond Portfolio 46,895 5,550
Janus Aspen Series Short-Term Bond Portfolio* 12 1
Janus Aspen Series Worldwide Growth Portfolio 21,312 2,520
MFS Emerging Growth Series 5,435 639
MFS Total Return Series 223 26
OCC Equity Portfolio 891 105
OCC Managed Portfolio 4,855 571
OCC Small Cap Portfolio 11,833 1,392
Templeton International Fund - Class 1 8,679 1,030
--------------------------------------------------------------------------------
</TABLE>
* For the period January 29, 1998, date deposits first received, to
September 15, 1998, the date the sub-account was no longer offered.
CG Life charges a one-time policy issue fee of $175 from the
accumulation value for a portion of CG Life's administrative expenses for
all contracts sold after April 30, 1998 and $250 for all contracts sold
before May 1, 1998. Policy issue fees, which are deducted from the initial
premium payment, amounted to $221,450, all of which were deducted from the
CIGNA Variable Products Money Market Fund.
For all contracts sold after April 30, 1998, CG Life deducts a premium
load of 6.5% of each premium payment to cover sales loads, state taxes and
Federal income tax liabilities. An additional 45% on premium payments up
to target premium specified in the policy will be deducted in the first
policy year and an additional 12% of premium payments up to target premium
will be deducted in policy years two through ten. In the event that the
specified amount under the policy is increased, other than a change in the
death benefit option, an additional 25% premium load on premium payments up
to the increase in the target premium will be deducted from premium
payments received during the 12 months following the increase, to the
extent such premium payments are attributable to the increase in specified
amount rather than to the previously existing specified amount.
<PAGE>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
4. CHARGES AND DEDUCTIONS (CONTINUED)
For all contracts sold before May 1, 1998, CG Life deducts a premium
load of 6.5% of each premium payment to cover sales loads, state taxes and
Federal income tax liabilities. An additional 40% on premium payments, up
to one guideline annual premium, as defined in the Account's prospectus,
will be deducted in the first policy year. In the event that the specified
amount under the policy is increased, other than a change in the death
benefit option, an additional 25% premium load on premium payments up to
the increase in the guideline annual premium will be deducted from premium
payments received during the 12 months following the increase, to the
extent such premium payments are attributable to the increase in specified
amount rather than to the previously existing specified amount.
CG Life charges a monthly administrative fee of $8 per month. This
charge is for items such as premium billing and collection, policy value
calculation, confirmations and periodic reports.
CG Life charges a monthly deduction for the cost of insurance and any
charges for supplemental riders. The cost of insurance charge depends on
the attained age, years since issue, risk class (in accordance with state
law) of the insured and the current net amount at risk. On a monthly
basis, the administrative fee and the cost of insurance charge are deducted
proportionately from the value of each variable sub-account and/or the
fixed account funding option. The fixed account is part of the general
account of CG Life and is not included in these financial statements.
CG Life charges a $25 transaction fee for each transfer between
funding options in excess of four during the policy year. No transaction
fee charges were paid to CG Life for the year ended December 31, 1998.
Fees charged by CG Life for premium loads are deducted from premium
payments. Administrative fees and the amount deducted for the cost of
insurance are included in participant withdrawals. Premium loads, net of
refunds, administrative fees and costs of insurance, by variable
sub-account, for the year ended December 31, 1998, amounted to:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
PREMIUM ADMIN- COSTS OF
LOADS, NET ISTRATIVE INSURANCE
SUB-ACCOUNT OF REFUNDS FEES DEDUCTION
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alger American Growth Portfolio $ 67,042 $ 2,505 $ 36,575
Alger American MidCap Growth Portfolio 17,119 1,208 12,068
Alger American Small Capitalization Portfolio 22,663 2,897 25,097
CIGNA Variable Products Money Market Fund 2,965,205 5,817 251,740
CIGNA Variable Products S&P 500 Index Fund 571,707 33,462 473,457
Fidelity Equity-Income Portfolio 95,805 9,121 70,128
Fidelity High Income Portfolio 28,917 1,751 32,199
Fidelity Investment Grade Bond Portfolio 37,989 8,454 93,498
Janus Aspen Series Short-Term Bond Portfolio* 391 13 180
Janus Aspen Series Worldwide Growth Portfolio 89,836 6,116 87,644
MFS Emerging Growth Series 41,098 5,273 52,047
MFS Total Return Series 3,265 280 4,994
OCC Equity Portfolio 10,581 1,620 22,975
OCC Managed Portfolio 93,545 3,178 32,486
OCC Small Cap Portfolio 14,067 1,015 15,872
Templeton International Fund - Class 1 66,157 6,068 43,649
-------------------------------------------------------------------------------------
</TABLE>
* For the period January 29, 1998, date deposits first received, to
September 15, 1998, the date the sub-account was no longer offered.
For policies issued after April 30, 1998, if the policy is fully
surrendered during the first 12 months after issue, a credit will be paid
equal to 100% of all premium loads previously deducted in excess of 3.5% of
all premiums paid. If the policy is fully surrendered during months 13
through 24, the credit will equal 50% of all premium loads previously
deducted in excess of 3.5% of all premiums paid. If the policy is fully
surrendered during the months 25 through 36, the credit will equal 33% of
all premium loads previously deducted in excess of 3.5% of all premiums
paid.
4. CHARGES AND DEDUCTIONS (CONTINUED)
For policies issued between May 1, 1997 and April 30, 1998, if the
policy is fully surrendered during the first 12 months after issue, a
credit will be paid equal to 100% of all premium loads
<PAGE>
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
previously deducted in excess of 3.5% of all premiums paid. If the policy
is fully surrendered during months 13 through 24, the credit will equal 50%
of all premium loads previously deducted in excess of 3.5% of all premiums
paid.
For policies issued before May 1, 1997, CG Life will refund 60% of all
premium loads previously deducted if a policy is fully surrendered during
the first 12 months after issue. If a policy is fully surrendered during
the months 13 through 24 after issue, the refund will equal 30% of all
premium loads previously deducted.
Premium load refunds for the year ended December 31, 1998 amounted to
$58,750.
For partial surrenders, a transaction charge of $25 is imposed,
allocated pro-rata among the variable sub-accounts (and, where applicable,
the fixed account) from which the partial surrender proceeds are taken,
unless the policy owner and CG Life agree otherwise.
Partial surrender transaction charges paid to CG Life attributable to
the variable sub-accounts for the year ended December 31, 1998 were not
significant.
5. DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of death benefits, surrenders, and transfers to other
fixed or variable sub-accounts.
6. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code of
1986 (the Code), a variable life insurance policy will not be treated as
life insurance under Section 7702 of the Code for any period for which the
investments of the segregated asset account, on which the policy is based,
are not adequately diversified. The Code provides that the "adequately
diversified" requirement may be met if the underlying investments satisfy
either a statutory safe harbor test or diversification requirements set
forth in regulations issued by the Secretary of Treasury. CG Life believes,
based on assurances from the mutual funds, that the mutual funds satisfy
the requirements of the regulations and that the Account therefore
satisfies the requirements of the regulations, and that the Account will
continue to meet such requirements.
<PAGE>
CG CORPORATE INSURANCE VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT 02
SCHEDULE OF CHANGES IN UNIT VALUES
FOR THE YEAR ENDED DECEMBER 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION
UNIT VALUE AT ACCUMULATION
DATE INITIALLY LATER OF 12/31/97 UNIT VALUE AT PERCENTAGE
SUB-ACCOUNT FUNDED OR INCEPTION 12/31/98 CHANGE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS SOLD BEFORE MAY 1, 1998:
Alger American Growth Portfolio 02/24/97 $11.709279 $17.174509 46.7
Alger American Mid-Cap Growth Portfolio 02/24/97 11.260065 14.533269 29.1
Alger American Small Capitalization Portfolio 03/31/97 12.546933 14.358496 14.4
- --------------------------------------------------------------------------------------------------------------------------------
CIGNA Variable Products Money Market Fund 12/24/96 10.428840 10.861410 4.1
CIGNA Variable Products S&P 500 Index Fund 02/24/97 12.052632 15.363576 27.5
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 02/24/97 11.881678 13.137868 10.6
Fidelity High Income Portfolio 01/29/97 11.534462 10.930880 (5.2)
Fidelity Investment Grade Bond Portfolio 01/29/97 10.845876 11.693725 7.8
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth Portfolio 02/24/97 11.384653 14.538727 27.7
- --------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 01/29/97 11.669186 15.507615 32.9
MFS Total Return Series 02/24/97 11.495360 12.791189 11.3
- --------------------------------------------------------------------------------------------------------------------------------
OCC Equity Portfolio 02/24/97 11.873582 13.156140 10.8
OCC Managed Portfolio 01/29/97 11.733393 12.450284 6.1
OCC Small Cap Portfolio 02/24/97 12.008588 10.821353 (9.9)
- --------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund - Class 1 02/24/97 10.926369 11.832899 8.3
- --------------------------------------------------------------------------------------------------------------------------------
CONTACTS ISSUED AFTER APRIL 30, 1998:
Alger American Small Capitalization Portfolio 06/17/98 10.000000 10.616506 6.2
- --------------------------------------------------------------------------------------------------------------------------------
CIGNA Variable Products S&P 500 Index Fund 06/17/98 10.000000 11.162600 11.6
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Investment Grade Bond Portfolio 06/17/98 10.000000 10.474584 4.7
- --------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund - Class 1 06/17/98 10.000000 9.617966 (3.8)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THIS REPORT MAY BE DISTRIBUTED ONLY TO CURRENT CONTRACT HOLDERS
OR TO PERSONS WHO HAVE RECEIVED A CURRENT CORPORATE VARIABLE
UNIVERSAL LIFE PROSPECTUS.
National Distributor
CIGNA Financial Services, Inc.
One Commercial Plaza
280 Trumbull Street
[LOGO] Hartford, CT 06103
CIGNA Retirement & Investment Services
is a division of CIGNA
570564 1/1999
<PAGE>
THIS REPORT MAY BE DISTRIBUTED ONLY TO CURRENT CONTRACT HOLDERS
OR TO PERSONS WHO HAVE RECEIVED A CURRENT CORPORATE VARIABLE
UNIVERSAL LIFE II PROSPECTUS.
National Distributor
CIGNA Financial Services, Inc.
One Commercial Plaza
280 Trumbull Street
[LOGO] Hartford, CT 06103
CIGNA Retirement & Investment Services
is a division of CIGNA
570565 1/1999
