<PAGE>
- --------------------------------------------------------------------------------
CG Variable Annuity Accounts I & II 1
Dear Investor:
We're pleased to provide you with this annual report for Connecticut General
Variable Annuity Accounts I and II for the twelve months ended December 31,
1998.
Following is a summary of key performance results:
For Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity increased 27.28% from the
December 31, 1997 level, from $161.689 to $205.797.
. For all other qualified individual contracts, Accumulation Unit Values
increased 27.72%, from $170.976 to $218.379.
. Accumulation Unit Values for Group Qualified Contracts with 50 participants
or more increased 28.37% from $197.749 to $253.841 during the period from
January 1, 1998 to December 31, 1998.
. Over the last five years (January 1, 1994 to December 31, 1998), the Unit
Values for Group Qualified Contracts with 50 participants or more increased
185.70%.
For Non-Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity increased 27.28% from the
December 31, 1997 level, from $142.594 to $181.493.
. For all other non-qualified individual contracts, Accumulation Unit Values
increased 27.73%, from $151.764 to $193.841.
. Accumulation Unit Values for Group Non-Qualified Contracts increased 28.36%
from $175.514 to $225.298 during the period from January 1, 1998 to
December 31, 1998.
. Over the last five years (January 1, 1994 to December 31, 1998), the Unit
Values for Grou Non-Qualified Contracts increased 185.70%.
In addition to the financial statements for your annuity contracts, this report
includes the financial statements and a list of holdings for the CIGNA Variable
Products S&P 500 Index Fund, the mutual fund supporting Variable Annuity
Accounts I & II.
Thank you for letting us serve your investment needs. We look forward to our
continuing relationship in the coming years.
/s/ Byron D. Oliver
Byron D. Oliver
President,
CIGNA Retirement & Investment Services
<PAGE>
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CG Variable Annuity Account I 2
Statement of Assets and Liabilities
December 31, 1998
Assets:
Investment in CIGNA Variable
Products S&P 500 Index Fund
at net asset value, 4,475,512
shares at $19.73 per share
(cost $49,531,762; net
unrealized appreciation
$38,770,090) $88,301,852
-----------
Total assets 88,301,852
-----------
Liabilities:
Payable to Connecticut General
Life Insurance Company 188,653
-----------
Total liabilities 188,653
-----------
Net Assets $88,113,199
===========
Net Assets Represented by:
Accumulation Unit
Unit Value
------------ --------
Group contracts:
50 participants or more 194,725 $253.841 $49,429,189
Less than 50 participants 31,203 235.328 7,342,940
Tax deferred annuity
contracts issued after
May 1, 1976 87,440 206.981 18,098,419
Individual contracts:
Variable annuity contracts 16,696 218.379 3,646,056
Flexible annuity contracts 15,548 205.797 3,199,732
Reserve for variable annuity
contracts in distribution
period 6,396,863
-----------
$88,113,199
===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account I 3
Statement of Changes in Net Assets
Year ended December 31,
1998 1997
---- ----
From Operations:
Investment Income -- net $ 1,546,217 $ 1,167,000
Realized gain on investments -- net 3,669,899 2,401,283
Change in unrealized appreciation
on investments -- net 15,023,546 12,891,218
------------ ------------
Increase in net assets resulting
from operations 20,239,662 16,459,501
------------ ------------
From Unit Transactions:
Participant contributions -- net 527,075 697,550
Amount transferred out of Account -- net (717,670) (488,998)
Withdrawal of funds on terminated
contracts -- net (6,588,990) (3,025,087)
Annuity benefit distributions (1,061,549) (972,942)
Mortality guarantee adjustment (277,383) 539,849
Equalization adjustment 14,272 (38,853)
------------ ------------
Decrease in net assets derived
from unit transactions (8,104,245) (3,288,481)
------------ ------------
Increase in Net Assets 12,135,417 13,171,020
Net Assets:
Beginning of year 75,977,782 62,806,762
------------ ------------
End of year $ 88,113,199 $ 75,977,782
============ ============
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account I 4
Statement of Operations
Year ended December 31,
1998 1997
----------- -----------
Investment Income:
Dividends $ 1,935,734 $ 1,466,855
----------- -----------
Expenses:
Mortality and expense risk 389,517 299,855
----------- -----------
Investment Income -- Net 1,546,217 1,167,000
----------- -----------
Realized Gain on Investments:
Proceeds from sale of shares 10,221,692 6,747,450
Cost of shares sold 7,208,088 6,022,719
----------- -----------
Realized gain from security
transactions -- net 3,013,604 724,731
Capital gains distribution 656,295 1,676,552
----------- -----------
Realized Gain on
Investments -- Net 3,669,899 2,401,283
----------- -----------
Unrealized Appreciation on
Investments:
Beginning of year 23,746,544 10,855,326
End of year 38,770,090 23,746,544
Change in Unrealized Appreciation
on Investments -- Net 15,023,546 12,891,218
----------- -----------
Increase in Net Assets
Resulting from Operations $20,239,662 $16,459,501
=========== ===========
Ratio of Net Investment Income
to Average Net Assets 1.885% 1.682%
Number of Accumulation Units
Outstanding at End of Period 345,612 377,258
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account I Notes To Financial Statements 5
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). 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 market value and reserve assumptions, that affect
recorded amounts. Actual results could differ from those estimates. Significant
estimates are discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to prior years' amounts to conform with the
1998 presentation.
1. The following is a summary of significant accounting policies consistently
applied in the preparation of the Account's financial statements:
A. The investment in CIGNA Variable Products S&P 500 Index Fund (Fund) shares
is valued at the closing net asset value per share as determined by the Fund
on December 31, 1998. The Fund was organized by CG Life in 1968.
B. The amount of the reserve for contracts in the distribution period is
determined by actuarial assumptions which meet statutory requirements. Gains
or losses resulting from actual mortality experience, the full responsibility
for which is assumed by CG Life, are offset by transfers to or from CG Life.
C. Investment transactions are accounted for on the trade date (date the order
to buy or sell is executed), and income is recorded on the ex-dividend date.
Cost of investments sold is determined on the basis of the last-in, first-out
method.
D. The operations of the Account are included in, and taxed as part of CG Life
as alife insurance company. Under Internal Revenue Code Section 817 there is
no taxable income attributable to the Account.
2. Under the terms of the annuity contracts, the Individual participant can
elect either a fixed or variable annuity benefit at retirement. The Group
participant can elect either a fixed or variable annuity benefit during the
accumulation phase and at retirement. The assets providing for the variable
annuity benefit will be invested in the Fund, and the fixed annuity contract
will be purchased from the Account's sponsor, CG Life.
1998 1997
-------- --------
Transfers to CG Life for purchase of fixed
annuity contracts during accumulation phase
(included in net amount transferred out of
Account) $800,775 $669,730
Transfers from CG Life for purchase of
variable annuity contracts during
accumulation phase (included in net amount
transferred out of Account) $106,990 $193,338
Transfers from accumulation period to
distribution period $ 23,885 $ 12,606
3. The cost of investments represents the accumulated cost of Fund shares
purchased by the Account at net asset value with net participant contributions
received and from reinvestment of all distributions made by the Fund.
4. Participant contributions are net of premium taxes (if any) and sales load of
$11,019 and $17,975 for the years ended December 31, 1998 and 1997,
respectively. These amounts are deducted from participant contributions and paid
to CG Life in accordance with the contract. Mortality and expense risk charges,
which generally range from 0.25% to 0.60%, depending on contract size, are also
paid to CG Life.
5. Withdrawal of funds on terminated contracts is net of administrative charges
of $7,928 and $9,552 for the years ended December 31, 1998 and 1997,
respectively. These amounts are paid to CG Life in accordance with the contract.
6. Contracts are sold primarliy by persons who are insurance agents of or
brokers for CG Life authorizedby applicable law to sell life and other forms of
personal insurance and who are similarly authorized to sell variable annuities.
These persons are for the most part registered representatives of CIGNA
Financial Services, Inc.
<PAGE>
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CG Variable Annuity Account I Notes To Financial Statements (Continued) 6
7. Accumulation Units Information
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER-UNIT DATA
----------------------------------
December 31,
--------------------------------------------------------------------
Group Contracts: 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
50 participants or more:
<S> <C> <C> <C> <C> <C>
Net asset value:
- ------------------------------
Beginning of year $197.749 $148.759 $121.763 $ 89.219 $ 88.848
End of year 253.841 197.749 148.759 121.763 89.219
-------- -------- -------- -------- --------
Net increase in net asset
value resulting from
operations $ 56.092 $ 48.990 $ 26.996 $ 32.544 $ 0.371
======== ======== ======== ======== ========
Accumulation units outstanding:
- -------------------------------
End of year 194,725 216,798 238,436 261,172 308,233
======== ======== ======== ======== ========
Less than 50 participants:
Net asset value:
- -------------------------------
Beginning of year $183.806 $138.631 $113.772 $ 83.580 $ 83.449
End of year 235.328 183.806 138.631 113.772 83.580
-------- -------- -------- -------- --------
Net increase in net asset
value resulting from
operations $ 51.522 $ 45.175 $ 24.859 $ 30.192 $ 0.131
======== ======== ======== ======== ========
Accumulation units outstanding:
- -------------------------------
End of year 31,203 35,265 37,135 45,992 50,443
======== ======== ======== ======== ========
Tax-deferred annuity contracts
issued after May 1, 1976:
Net asset value:
- -------------------------------
Beginning of year $161.809 $122.149 $100.335 $ 73.775 $ 73.725
End of year 206.981 161.809 122.149 100.335 73.775
-------- -------- -------- -------- --------
Net increase in net asset
value resulting from
operations $ 45.172 $ 39.660 $ 21.814 $ 26.560 $ 0.050
======== ======== ======== ======== ========
Accumulation units outstanding:
- -------------------------------
End of year 87,440 91,439 98,421 115,290 121,840
======== ======== ======== ======== ========
</TABLE>
<PAGE>
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CG Variable Annuity Account I Notes To Financial Statements (Continued) 7
7. Accumulation Units Information (Continued)
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER-UNIT DATA
----------------------------------
December 31,
--------------------------------------------------------------------
Individual Contracts: 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Variable annuity contracts:
Net asset value:
- ------------------------------
<S> <C> <C> <C> <C> <C>
Beginning of year $ 170.976 $ 129.262 $ 106.339 $ 78.306 $ 78.370
End of year 218.379 170.976 129.262 106.339 78.306
--------- --------- --------- -------- --------
Net increase (decrease) in
net asset value resulting
from operations $ 47.403 $ 41.714 $ 22.923 $ 28.033 $ (0.064)
======== ======== ======== ======== ========
Accumulation units outstanding:
- ------------------------------
End of year 16,696 17,789 18,959 19,685 23,011
======== ======== ======== ======== ========
Flexible annuity contracts:
Net asset value:
- ------------------------------
Beginning of year $ 161.689 $122.670 $101.272 $ 74.835 $ 75.158
End of year 205.797 161.689 122.670 101.272 74.835
--------- --------- --------- -------- --------
Net increase (decrease)
in net asset value
resulting from operations $ 44.108 $ 39.019 $ 21.398 $ 26.437 $ (0.323)
======== ======== ======== ======== ========
Accumulation units outstanding:
- ------------------------------
End of year 15,548 15,967 16,652 17,502 19,687
======== ======== ======== ======== ========
</TABLE>
8. Diversification Requirements. Under the provisions of Section 817(h) of the
Internal Revenue Code (Code), a variable annuity contract, other than a contract
issued in connection with certain types of employee benefit plans, will not be
treated as an annuity contract for federal tax purposes for any period for which
the investments of the segregated asset account on which the contract 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, as set forth in
regulations issued by the Secretary of the Treasury.
The Secretary of Treasury has issued regulations under Section 817(h) of the
Code. CG Life believes that the Account satisfies the current requirements of
the regulations, and it intends that the Account will continue to meet such
requirements.
<PAGE>
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8
Report of Independent Accountants
To the Board of Directors and Participants of
CG Variable Annuity Account I of
Connecticut General Life
Insurance Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the selected
per unit data and ratio present fairly, in all material respects, the financial
position of CG Variable Annuity I (the "Account") of Connecticut General Life
Insurance Company at December 31, 1998, the results of its operations and the
changes in its net assets and the selected per unit data and ratio for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and selected per unit data and ratio
(hereafter referred to as "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
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCooopers LLP
Hartford, Connecticut
February 19, 1999
<PAGE>
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CG Variable Annuity Account II 9
Statement of Assets and Liabilities
December 31, 1998
Assets:
Investment in CIGNA Variable
Products S&P 500 Index Fund
at net asset value, 461,704
shares at $19.73 per share
(cost $6,160,253; net
unrealized appreciation $2,949,167) $9,109,420
----------
Total assets 9,109,420
----------
Liabilities:
Payable to Connecticut General Life
Insurance Company 96,110
----------
Total liabilities 96,110
----------
Net Assets $9,013,310
==========
Net Assets Represented by:
Accumulation Unit
Unit Value
------------ --------
Group contracts 5,514 $225.298 $1,242,293
Individual contracts:
Variable annuity contracts 7,818 193.841 1,515,449
Flexible annuity contracts 18,811 181.493 3,414,065
Reserve for variable annuity
contracts in distribution period 2,841,503
----------
$9,013,310
==========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account II 10
Statement of Changes in Net Assets
Year ended December 31,
1998 1997
----------- -----------
From Operations:
Investment Income -- net $ 113,706 $ 90,243
Realized gain on investments -- net 469,340 354,582
Change in unrealized appreciation
on investments net 1,481,115 1,411,389
----------- -----------
Increase in net assets resulting
from operations 2,064,161 1,856,214
----------- -----------
From Unit Transactions:
Participant contributions -- net 10,048 174,747
Withdrawal of funds on terminated
contracts -- net (396,562) (256,923)
Annuity benefit distributions (512,335) (433,003)
Mortality guarantee adjustment (284,476) (37,613)
Equalization adjustment 3,631 (3)
----------- -----------
Decrease in net assets derived
from unit transactions (1,179,694) (552,795)
Increase in Net Assets 884,467 1,303,419
Net Assets:
Beginning of year 8,128,843 6,825,424
----------- -----------
End of year $ 9,013,310 $ 8,128,843
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account II 11
Statement of Operations
Year ended December 31,
1998 1997
---------- ----------
Investment Income:
Dividends $ 199,619 $ 154,455
Expenses:
Mortality and expense risk 85,913 64,212
---------- ----------
Investment Income -- Net 113,706 90,243
---------- ----------
Realized Gain on Investments:
Proceeds from sale of shares 1,028,620 1,134,685
Cost of shares sold 626,933 956,797
---------- ----------
Realized gain from security
transactions -- net 401,687 177,888
Capital gains distribution 67,653 176,694
---------- ----------
Realized Gain on
Investments -- Net 469,340 354,582
---------- ----------
Unrealized Appreciation on Investments:
Beginning of year 1,468,052 56,663
End of year 2,949,167 1,468,052
---------- ----------
Change in Unrealized Appreciation
on Investments -- Net 1,481,115 1,411,389
---------- ----------
Increase in Net Assets
Resulting from Operations -- Net $2,064,161 $1,856,214
========== ==========
Ratio of Net Investment Income
to Average Net Assets 1.327%. 1.207%.
Number of Accumulation Units
Outstanding at End of Year 32,143 34,003
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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CG Variable Annuity Account II Notes To Financial Statements 12
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). 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 market value and reserve assumptions, that affect
recorded amounts. Actual results could differ from those estimates. Significant
estimates are discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to prior years' amounts to conform with the
1998 presentation.
1. The following is a summary of significant accounting policies consistently
applied in the preparation of the Account's financial statements:
A. The investment in CIGNA Variable Products S&P 500 Index Fund (Fund) shares
is valued at the closing net asset value per share as determined by the Fund
on December 31, 1998. The Fund was organized by CG Life in 1968.
B. The amount of the reserve for contracts in the distribution period is
determined by actuarial assumptions which meet statutory requirements. Gains
or losses resulting from actual mortality experience, the full responsibility
for which is assumed by CG Life, are offset by transfers to or from CG Life.
C. Investment transactions are accounted for on the trade date (date the order
to buy or sell is executed), and income is recorded on the ex-dividend date.
Cost of investments sold is determined on the basis of the last-in, first-out
method.
D. The operations of the Account are included in, and taxed as part of CG Life
as a life insurance company. Under Internal Revenue Code Section 817 there is
no taxable income attributable to the Account.
2. Under the terms of the annuity contracts, the Individual participant can
elect either a fixed or variable annuity benefit at retirement. The Group
participant can elect either a fixed or variable annuity benefit during the
accumulation phase and at retirement. The assets providing for the variable
annuity benefit will be invested in the Fund, and the fixed annuity contract
will be purchased from the Account's sponsor, CG Life. There were no transfers
from accumulation period to distribution period during 1998 or of 1997.
3. The cost of investments represents the accumulated cost of Fund shares
purchased by the Account at net asset value with net participant contributions
received and from reinvestment of all distributions made by the Fund.
4.Participant contributions are net of and premium taxes (if any) and sales load
of $598 and $325 for the years ended December 31, 1998 and 1997, respectively.
These amounts are deducted from participant contributions and paid to CG Life in
accordance with the contract. Mortality and expense risk charges, which
generally range from 0.25% to 0.50%, depending on contract size, are also paid
to CG Life.
5. Withdrawal of funds on terminated contracts is net of administrative charges
of $394 and $455 for the years ended December 31, 1998 and 1997, respectively.
These amounts are paid to CG Life in accordance with the contract.
6. Contracts are sold primarily by persons who are insurance agents of or
brokers for CG Life authorized by applicable law to sell life and other forms of
personal insurance and who are similarly authorized to sell variable annuities.
These persons are for the most part registered representatives of CIGNA
Financial Services, Inc.
<PAGE>
- --------------------------------------------------------------------------------
CG Variable Annuity Account II Notes To Financial Statements (Continued) 13
7. Accumulation Units Information
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER-UNIT DATA
----------------------------------
December 31,
---------------------------------------------------------
Group Contracts: 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value:
- -----------------------------------
Beginning of year $ 175.514 $ 132.033 $ 108.072 $ 79.187 $ 78.857
End of year 225.298 175.514 132.033 108.072 79.187
--------- --------- --------- --------- ---------
Net increase in net asset value
resulting from operations $ 49.784 $ 43.481 $ 23.961 $ 28.885 $ 0.330
========= ========= ========= ========= =========
Accumulation units outstanding:
- -----------------------------------
End of year 5,514 6,213 6,185 6,864 6,819
========= ========= ========= ========= =========
Individual Contracts:
Variable annuity contracts:
Net asset value:
- -----------------------------------
Beginning of year $ 151.764 $ 114.738 $ 94.390 $ 69.507 $ 69.564
End of year 193.841 151.764 114.738 94.390 69.507
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset
value resulting from operations $ 42.077 $ 37.026 $ 20.348 $ 24.883 $ (0.057)
========= ========= ========= ========= =========
Accumulation units outstanding:
- -----------------------------------
End of year 7,818 8,474 8,484 8,566 8,823
========= ========= ========= ========= =========
Flexible annuity contracts:
Net asset value:
- -----------------------------------
Beginning of year $ 142.594 $ 108.183 $ 89.312 $ 65.997 $ 66.282
End of year 181.493 142.594 108.183 89.312 65.997
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset
value resulting from operations $ 38.899 $ 34.411 $ 18.871 $ 23.315 $ (0.285)
========= ========= ========= ========= =========
Accumulation units outstanding:
- -----------------------------------
End of year 18,811 19,316 22,410 26,647 27,762
========= ========= ========= ========= =========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CG Variable Annuity Account II Notes To Financial Statements (Continued) 14
8. Diversification Requirements. Under the provisions of Section 817(h) of the
Internal Revenue Code (Code), a variable annuity contract, other than a contract
issued in connection with certain types of employee benefit plans, will not be
treated as an annuity contract for federal tax purposes for any period for which
the investments of the segregated asset account on which the contract 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 as set forth in
regulations issued by the Secretary of the Treasury.
The Secretary of Treasury has issued regulations under Section 817(h) of the
Code. CG Life believes that the Account satisfies the current requirements
of the regulations, and it intends that the Account will continue to meet
such requirements.
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Directors and Participants of
CG Variable Annuity Account II of
Connecticut General Life
Insurance Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the selected
per unit data and ratio present fairly, in all material respects, the financial
position of CG Variable Annuity II (the "Account") of Connecticut General Life
Insurance Company at December 31, 1998, the results of its operations and the
changes in its net assets and the selected per unit data and ratio for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and selected per unit data and ratio
(hereafter referred to as "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
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 19, 1999
<PAGE>
Pages 1-16 of the Annual Report to Shareholders of CIGNA Variable Products S&P
500 Index Fund (1940 Act File No. 811-05480) for the period ended 12/31/1998, as
electronically filed with the Securities and Exchange Commission on Form N-30D
on March 2, 1999, is hereby incorporated by reference.
