<PAGE>
CG VARIABLE ANNUITY ACCOUNTS I & II
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,
1996.
Following is a summary of key performance results:
For Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity increased 21.13% from the
December 31, 1995 level, from $101.272 to $122.670.
. For all other qualified individual contracts, Accumulation Unit Values
increased 21.56%, from $106.339 to $129.262.
. Accumulation Unit Values for Group Qualified Contracts with 50 participants
or more increased 22.17% from $121.763 to $148.759 during the period from
January 1, 1996 to December 31, 1996.
. Over the last five years (January 1, 1992 to December 31, 1996), the Unit
Values for Group Qualified contracts with 50 participants or more increased
77.69%.
For Non-Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity
increased 21.13% from the December 31, 1995 level, from $89.312 to $108.183.
. For all other non-qualified individual contracts, Accumulation Unit Values
increased 21.56%, from $94.390 to $114.738.
. Accumulation Unit Values for Group Non-Qualified contracts increased 22.17%
from $108.072 to $132.033 during the period from January 1, 1996 to
December 31, 1996.
. Over the last five years (January 1, 1992 to December 31, 1996), the Unit
Values for Group Non-Qualified Contracts increased 77.69%.
In addition to the financial statements for your annuity contracts, this report
includes the financial statements and a list of holdings for 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/ Thomas C. Jones
Thomas C. Jones
President,
CIGNA Individual Insurance
/s/ Byron D. Oliver
Byron D. Oliver
President,
CIGNA Retirement & Investment Services
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Statement of
Assets and Liabilities
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investment in CIGNA Variable Products S&P 500 Index Fund
at net asset value, 5,077,689 shares at $12.40 per share
(cost $52,108,799; unrealized appreciation $10,855,326) $62,964,125
-----------
Total assets 62,964,125
-----------
LIABILITIES:
Payable to Connecticut General Life Insurance Company 157,363
-----------
Total liabilities 157,363
-----------
NET ASSETS $62,806,762
===========
<CAPTION>
NET ASSETS REPRESENTED BY:
Accumulation Unit
Units Value
------------ --------
<S> <C> <C> <C>
Group contracts:
50 participants or more 238,436 $148.759 $35,469,501
Less than 50 participants 37,135 138.631 5,148,062
Tax-deferred annuity contracts issued
after May 1, 1976 98,421 122.149 12,022,027
Individual contracts:
Variable annuity contracts 18,959 129.262 2,450,678
Flexible annuity contracts 16,652 122.670 2,042,701
Reserve for variable annuity contracts
in distribution period 5,673,793
-----------
$62,806,762
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
2
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
<TABLE>
<CAPTION>
Statement of
Changes in Net Assets
Year ended December 31, 1996 1995
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Investment income-- net $ 1,161,630 $ 1,217,190
Realized gain on investments-- net 3,305,638 1,611,839
Change in unrealized appreciation
on investments-- net 7,539,388 13,658,575
-------------- --------------
Increase in net assets resulting
from operations 12,006,656 16,487,604
-------------- --------------
FROM UNIT TRANSACTIONS:
Participant contributions - net 731,040 814,579
Amount transferred out of Account - net (413,295) (786,241)
Withdrawal of funds on terminated contracts - net (6,493,913) (6,399,909)
Annuity benefit distributions (884,485) (772,981)
Mortality guarantee adjustment (146,462) 305,637
Breakage (7,807) 4,075
-------------- --------------
Decrease in net assets derived
from unit transactions (7,214,922) (6,834,840)
-------------- --------------
INCREASE IN NET ASSETS 4,791,734 9,652,764
NET ASSETS:
Beginning of year 58,015,028 48,362,264
-------------- --------------
End of year $62,806,762 $58,015,028
============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Statement of
Operations
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,412,703 $ 1,439,181
Expenses:
Mortality and expense risk 251,073 221,991
------------ ------------
Investment Income-- Net 1,161,630 1,217,190
------------ ------------
REALIZED GAIN ON INVESTMENTS:
Proceeds from sale of shares 8,864,464 7,853,234
Cost of shares sold 7,748,643 7,176,648
------------ ------------
Realized gain from security
transactions-- net 1,115,821 676,586
Capital gains distribution 2,189,817 935,253
------------ ------------
Realized Gain on
Investments-- Net 3,305,638 1,611,839
------------ ------------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS:
Beginning of year 3,315,938 (10,342,637)
End of year 10,855,326 3,315,938
------------ ------------
Change in Unrealized Appreciation (Depreciation)
on Investments-- Net 7,539,388 13,658,575
------------ ------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 12,006,65 $ 16,487,604
============ ============
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.923% 2.288%
NUMBER OF ACCUMULATION UNITS OUTSTANDING
AT END OF YEAR 409,603 459,641
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Notes to
Financial Statements
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.
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), known
as the Companion Fund prior to January 2, 1996, shares is valued at the
closing net asset value per share as determined by the Fund on December 31,
1996. 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's tax return, which is taxed 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.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Transfers to CG Life
for purchase of fixed
annuity contracts during
accumulation phase
(included in net
amount transferred
out of Account) $497,991 $831,061
Transfers from CG Life
for purchase of variable
annuity contracts during
accumulation phase
(included in net
amount transferred
out of Account) $ 84,696 $ 44,820
Transfers from
accumulation period
to distribution period $253,279 $210,235
</TABLE>
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 $21,505 and $22,833 for the years ended December 31, 1996 and 1995,
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 $14,375 and $12,189 for the years ended December 31, 1996 and 1995,
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 Advisors, Inc.
5
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Notes to
Financial Statements (Continued)
7. ACCUMULATION UNITS INFORMATION
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER UNIT DATA
----------------------------------
December 31,
----------------------------------------------------------
Group Contracts: 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
50 participants or more:
Net asset value:
-------------------------------------
Beginning of year $121.763 $ 89.219 $88.848 $86.503 $83.718
End of year 148.759 121.763 89.219 88.848 86.503
-------- -------- ------- ------- -------
Net increase in net unit value $ 26.996 $ 32.544 $ 0.371 $ 2.345 $ 2.785
======== ======== ======= ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 238,436 261,172 308,233 353,129 403,359
======= ======= ======= ======= =======
Less than 50 participants:
Net asset value:
-------------------------------------
Beginning of year $113.772 $ 83.580 $83.449 $81.459 $79.044
End of year 138.631 113.772 83.580 83.449 81.459
-------- -------- ------- ------- -------
Net increase in net unit value $ 24.859 $ 30.192 $ 0.131 $ 1.990 $ 2.415
======== ======== ======= ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 37,135 45,992 50,443 52,486 63,109
======== ======== ======= ======= =======
Tax-deferred annuity contracts
issued after May 1, 1976:
Net asset value:
-------------------------------------
Beginning of year $100.335 $ 73.775 $73.725 $72.031 $69.957
End of year 122.149 100.335 73.775 73.725 72.031
-------- -------- ------- ------- -------
Net increase in net unit value $ 21.814 $ 26.560 $ 0.050 $ 1.694 $ 2.074
======== ======== ======= ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 98,421 115,290 121,840 124,827 128,504
======== ======== ======= ======= =======
</TABLE>
6
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Notes to
Financial Statements (Continued)
7. ACCUMULATION UNITS INFORMATION (continued)
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
Individual Contracts: 1996 1995 1994 1993 1992
--------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Variable annuity contracts:
Net asset value:
---------------------------------------
Beginning of year $106.339 $ 78.306 $78.370 $76.684 $74.589
End of year 129.262 106.339 78.306 78.370 76.684
-------- -------- ------- ------- -------
Net increase (decrease) in net unit
value $ 22.923 $ 28.033 $(0.064) $ 1.686 $ 2.095
======== ======== ======= ======= =======
Accumulation units outstanding:
---------------------------------------
End of year 18,959 19,685 23,011 30,646 44,003
======== ======== ======= ======= =======
Flexible annuity contracts:
Net asset value:
---------------------------------------
Beginning of year $101.272 $ 74.835 $75.158 $73.800 $72.035
End of year 122.670 101.272 74.835 75.158 73.800
-------- -------- ------- ------- -------
Net increase (decrease) in net unit
value $ 21.398 $ 26.437 $(0.323) $ 1.358 $ 1.765
======== ======== ======= ======= =======
Accumulation units outstanding:
---------------------------------------
End of year 16,652 17,502 19,687 22,970 25,148
======== ======== ======= ======= =======
</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 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.
7
<PAGE>
Report of
Independent Accountants
To the 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 Account I (the "Account") of Connecticut General
Life Insurance Company at December 31, 1996, 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 provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut
February 19, 1997
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of
Assets and Liabilities
December 31, 1996
<TABLE>
ASSETS:
<S> <C>
Investment in CIGNA Variable Products S&P 500 Index Fund at net asset
value, 553,980 shares at $12.40 per share (cost $6,812,693;
unrealized appreciation $56,663) $6,869,356
----------
Total assets 6,869,356
----------
LIABILITIES:
Payable to Connecticut General Life Insurance Company 43,932
----------
Total liabilities 43,932
----------
NET ASSETS $6,825,424
==========
NET ASSETS REPRESENTED BY:
<CAPTION>
Accumulation Unit
Units Value
------------ -------
<S> <C> <C> <C>
Group contracts: 6,185 $132.033 $ 816,624
Individual contracts:
Variable annuity contracts 8,484 114.738 973,437
Flexible annuity contracts 22,410 108.183 2,424,381
Reserve for variable annuity contracts
in distribution period 2,610,982
----------
$6,825,424
==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
9
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of
Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
---------- -----------
<S> <C> <C>
FROM OPERATIONS:
Investment income-- net $ 101,036 $ 113,973
Realized gain on investments-- net 409,694 160,383
Change in unrealized appreciation
on investments-- net 814,419 1,563,130
---------- -----------
Increase in net assets resulting
from operations 1,325,149 1,837,486
---------- -----------
FROM UNIT TRANSACTIONS:
Participant contributions - net 6,952 7,361
Withdrawal of funds on terminated contracts - net (489,010) (251,483)
Annuity benefit distributions (400,577) (355,784)
Mortality guarantee adjustment (434,472) 211,878
Breakage (21) (44)
---------- -----------
Decrease in net assets derived
from unit transactions (1,317,128) (388,072)
---------- -----------
INCREASE IN NET ASSETS 8,021 1,449,414
NET ASSETS:
Beginning of year 6,817,403 5,367,989
---------- -----------
End of year $6,825,424 $ 6,817,403
========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
10
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of
Operations
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 156,073 $ 165,212
Expenses:
Mortality and expense risk 55,037 51,239
---------- ----------
Investment Income-- Net 101,036 113,973
---------- ----------
REALIZED GAIN ON INVESTMENTS:
Proceeds from sale of shares 1,310,228 720,842
Cost of shares sold 1,138,794 667,924
---------- ----------
Realized gain from security
transactions -- net 171,434 52,918
Capital gains distribution 238,260 107,465
---------- ----------
Realized Gain on
Investments -- Net 409,694 160,383
---------- ----------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS:
Beginning of year (757,756) (2,320,886)
End of year 56,663 (757,756)
---------- ----------
Change in Unrealized Appreciation
on Investments -- Net 814,419 1,563,130
---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,325,149 $1,837,486
========== ==========
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.481% 1.870%
NUMBER OF ACCUMULATION UNITS OUTSTANDING
AT END OF YEAR 37,079 42,077
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
11
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Notes to
Financial Statements
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.
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), known
as the Companion Fund prior to January 2, 1996, shares is valued at the
closing net asset value per share as determined by the Fund on December 31,
1996. 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's tax return, which is taxed 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 1996 or 1995.
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
$401 and $424 for the years ended December 31, 1996 and 1995, 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 $517 and $568 for the years ended December 31, 1996 and 1995, 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 Advisors, Inc.
12
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Notes to
Financial Statements (Continued)
7. ACCUMULATION UNITS INFORMATION
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER UNIT DATA
----------------------------------
December 31,
--------------------------------------------------------
Group Contracts: 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value:
--------------------------------------
Beginning of year $108.072 $ 79.187 $78.857 $76.776 $74.305
End of year 132.033 108.072 79.187 78.857 76.776
-------- -------- -------- -------- --------
Net increase in net unit
value $ 23.961 $ 28.885 $ 0.330 $ 2.081 $ 2.471
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 6,185 6,864 6,819 6,987 8,563
======== ======== ======== ======== ========
Individual Contracts:
Variable annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $ 94.390 $ 69.507 $69.564 $68.068 $66.208
End of year 114.738 94.390 69.507 69.564 68.068
-------- -------- -------- -------- --------
Net increase (decrease) in net unit
value $ 20.348 $ 24.883 $(0.057) $ 1.496 $ 1.860
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 8,484 8,566 8,823 11,050 11,433
======== ======== ======== ======== ========
Flexible annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $ 89.312 $ 65.997 $66.282 $65.084 $63.528
End of year 108.183 89.312 65.997 66.282 65.084
-------- -------- -------- -------- --------
Net increase (decrease) in net unit
value $ 18.871 $ 23.315 $(0.285) $ 1.198 $ 1.556
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 22,410 26,647 27,762 30,391 33,228
======== ======== ======== ======== ========
</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 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.
13
<PAGE>
Report of
Independent Accountants
To the 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 Account II (the "Account") of Connecticut
General Life Insurance Company at December 31, 1996, 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 provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut
February 19, 1997
<PAGE>
The Annual Report to Shareholders of CIGNA Variable Products S&P 500 Index Fund
(the "Fund") for the period ended 12/31/96 is hereby incorporated by reference
to the Fund's filing on form N-30D on March 7, 1997.
<PAGE>
This report has been prepared for the information of participants of CG Variable
Annuity Accounts I & II pursuant to variable annuity contracts issued by
Connecticut General Life Insurance Company and is not authorized for
distribution to prospective investors unless preceded or accompanied by current
prospectuses of both the annuity account under discussion and CIGNA Variable
Products S&P 500 Index Fund.
- --------------------------------------------------------------------------------
CIGNA Variable Products S&P 500 Index Fund was organized by Connecticut General
Life Insurance Company in 1968. The name of the Fund was changed in January 1996
from Companion Fund to CIGNA Variable Products S&P 500 Index Fund to better
reflect the Fund's investment strategy. Both CIGNA Investments, Inc. and CIGNA
Financial Advisors, Inc. are affiliates of Connecticut General Life Insurance
Company.
CG Variable Annuity
Accounts I & II
CIGNA Variable Products
S&P 500 Index Fund
-----------------------
Annual Report
-----------------------
December 31, 1996
CG Flexible Annuity
CG Group Variable Annuity
[LOGO OF CIGNA APPEARS HERE]
