<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,
1997.
Following is a summary of key performance results:
For Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity increased 31.81% from the
December 31, 1996 level, from $122.670 to $161.689.
. For all other qualified individual contracts, Accumulation Unit Values
increased 32.27%, from $129.262 to $170.976.
. Accumulation Unit Values for Group Qualified Contracts with 50 participants
or more increased 32.93% from $148.759 to $197.749 during the period from
January 1, 1997 to December 31, 1997.
. Over the last five years (January 1, 1993 to December 31, 1997), the Unit
Values for Group Qualified contracts with 50 participants or more increased
128.60%.
For Non-Qualified Contractholders
. Accumulation Unit Values for the Flexible Annuity increased 31.81% from the
December 31, 1996 level, from $108.183 to $142.594.
. For all other non-qualified individual contracts, Accumulation Unit Values
increased 32.27%, from $114.738 to $151.764.
. Accumulation Unit Values for Group Non-Qualified contracts increased 32.93%
from $132.033 to $175.514 during the period from January 1, 1997 to
December 31, 1997.
. Over the last five years (January 1, 1993 to December 31, 1997), the Unit
Values for Group Non-Qualified Contracts increased 128.60%.
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.
As described in the 1997 semi-annual report, Lincoln National Corporation
purchased most of CIGNA's individual life insurance and annuities businesses.
None of the contracts investing in Variable Annuity Accounts I and II were
included in this transaction, so this transaction has no impact on you. However,
effective December 1, 1997, CIGNA Financial Services, Inc. replaced CIGNA
Financial Advisors, Inc. as the principal underwriter of Variable Annuity
Accounts I and II, and as underwriter for shares of the CIGNA Variable Products
S&P 500 Index Fund. As before, questions about your account can be handled
through the Annuity Service Center at (816) 435-3863.
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
1
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Statement of
Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investment in CIGNA Variable Products S&P 500 Index Fund
at net asset value, 4,799,231 shares at $15.83 per share
(cost $52,225,283; unrealized appreciation $23,746,544) $75,971,827
-----------
Receivable from Connecticut General Life Insurance Company 5,955
-----------
NET ASSETS $75,977,782
===========
<CAPTION>
NET ASSETS REPRESENTED BY:
Accumulation Unit
Units Value
------------ --------
<S> <C> <C> <C>
Group contracts:
50 participants or more 216,798 $197.749 $42,871,588
Less than 50 participants 35,265 183.806 6,481,919
Tax-deferred annuity contracts issued
after May 1, 1976 91,439 161.809 14,795,653
Individual contracts:
Variable annuity contracts 17,789 170.976 3,041,492
Flexible annuity contracts 15,967 161.689 2,581,688
Reserve for variable annuity contracts
in distribution period 6,205,442
-----------
$75,977,782
===========
</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, 1997 1996
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Investment income -- net $ 1,167,000 $ 1,161,630
Realized gain on investments -- net 2,401,283 3,305,638
Change in unrealized appreciation
on investments -- net 12,891,218 7,539,388
-------------- --------------
Increase in net assets resulting
from operations 16,459,501 12,006,656
-------------- --------------
FROM UNIT TRANSACTIONS:
Participant contributions - net 697,550 731,040
Amount transferred out of Account - net (476,392) (413,295)
Withdrawal of funds on terminated contracts - net (3,037,693) (6,493,913)
Annuity benefit distributions (972,942) (884,485)
Other principally mortality guarantee adjustment 500,996 (154,269)
-------------- --------------
Decrease in net assets derived
from unit transactions (3,288,481) (7,214,922)
-------------- --------------
INCREASE IN NET ASSETS 13,171,020 4,791,734
NET ASSETS:
Beginning of year 62,806,762 58,015,028
-------------- --------------
End of year $75,977,782 $62,806,762
============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
3
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Statement of
Operations
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,466,855 $ 1,412,703
Expenses:
Mortality and expense risk 299,855 251,073
------------ ------------
Investment Income -- Net 1,167,000 1,161,630
------------ ------------
REALIZED GAIN ON INVESTMENTS:
Proceeds from sale of shares 6,747,450 8,864,464
Cost of shares sold 6,022,719 7,748,643
------------ ------------
Realized gain from security
transactions -- net 724,731 1,115,821
Capital gains distribution 1,676,552 2,189,817
------------ ------------
Realized Gain on
Investments -- Net 2,401,283 3,305,638
------------ ------------
UNREALIZED APPRECIATION
ON INVESTMENTS:
Beginning of year 10,855,326 3,315,938
End of year 23,746,544 10,855,326
------------ ------------
Change in Unrealized Appreciation
on Investments -- Net 12,891,218 7,539,388
------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 16,459,501 $ 12,006,656
============ ============
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.682% 1.923%
NUMBER OF ACCUMULATION UNITS OUTSTANDING
AT END OF YEAR 377,258 409,603
</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) shares
is valued at the closing net asset value per share as determined by the Fund
on December 31, 1997. 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>
1997 1996
-------- --------
<S> <C> <C>
Transfers to CG Life
for purchase of fixed
annuity contracts during
accumulation phase
(included in net
amount transferred
out of Account) $669,730 $497,991
Transfers from CG Life
for purchase of variable
annuity contracts during
accumulation phase
(included in net
amount transferred
out of Account) $193,338 $ 84,696
Transfers from
accumulation period
to distribution period $ 12,606 $253,279
</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 $17,975 and $21,505 for the years ended December 31, 1997 and 1996,
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 $9,552 and $14,375 for the years ended December 31, 1997 and 1996,
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. (CFA). Effective December 1, 1997, CFA was replaced by
CIGNA Financial Services, Inc., which is an affiliate of CG Life.
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: 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
50 participants or more:
Net asset value:
-------------------------------------
Beginning of year $148.759 $121.763 $ 89.219 $88.848 $86.503
End of year 197.749 148.759 121.763 89.219 88.848
-------- -------- -------- ------- -------
Net increase in net unit value $ 48.990 $ 26.996 $ 32.544 $ 0.371 $ 2.345
======== ======== ======== ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 216,798 238,436 261,172 308,233 353,129
======== ======== ======= ======= =======
Less than 50 participants:
Net asset value:
-------------------------------------
Beginning of year $138.631 $113.772 $ 83.580 $83.449 $81.459
End of year 183.806 138.631 113.772 83.580 83.449
-------- -------- -------- ------- -------
Net increase in net unit value $ 45.175 $ 24.859 $ 30.192 $ 0.131 $ 1.990
======== ======== ======== ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 35,265 37,135 45,992 50,443 52,486
======== ======== ======== ======= =======
Tax-deferred annuity contracts
issued after May 1, 1976:
Net asset value:
-------------------------------------
Beginning of year $122.149 $100.335 $ 73.775 $73.725 $72.031
End of year 161.809 122.149 100.335 73.775 73.725
-------- -------- -------- ------- -------
Net increase in net unit value $ 39.660 $ 21.814 $ 26.560 $ 0.050 $ 1.694
======== ======== ======== ======= =======
Accumulation units outstanding:
-------------------------------------
End of year 91,439 98,421 115,290 121,840 124,827
========= ======== ======== ======= =======
</TABLE>
6
<PAGE>
CG VARIABLE ANNUITY ACCOUNT I
Notes to
Financial Statements (Continued)
7. ACCUMULATION UNITS INFORMATION (continued)
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
Individual Contracts: 1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Variable annuity contracts:
Net asset value:
---------------------------------------
Beginning of year $129.262 $106.339 $ 78.306 $78.370 $76.684
End of year 170.976 129.262 106.339 78.306 78.370
-------- -------- -------- ------- -------
Net increase (decrease) in net unit
value $ 41.714 $ 22.923 $ 28.033 $(0.064) $ 1.686
======== ======== ======== ======= =======
Accumulation units outstanding:
---------------------------------------
End of year 17,789 18,959 19,685 23,011 30,646
======== ======== ======== ======= =======
Flexible annuity contracts:
Net asset value:
---------------------------------------
Beginning of year $122.670 $101.272 $ 74.835 $75.158 $73.800
End of year 161.689 122.670 101.272 74.835 75.158
-------- -------- -------- ------- -------
Net increase (decrease) in net unit
value $ 39.019 $ 21.398 $ 26.437 $(0.323) $ 1.358
======== ======== ======== ======= =======
Accumulation units outstanding:
---------------------------------------
End of year 15,967 16,652 17,502 19,687 22,970
======== ======== ======== ======= =======
</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 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 Account I (the "Account") of Connecticut General
Life Insurance Company at December 31, 1997, 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 20, 1998
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of
Assets and Liabilities
December 31, 1997
<TABLE>
ASSETS:
<S> <C>
Investment in CIGNA Variable Products S&P 500 Index Fund at net asset
value, 504,439 shares at $15.83 per share (cost $6,517,217;
unrealized appreciation $1,468,052)
Total assets $7,985,269
----------
Receivable from Connecticut General Life Insurance Company 143,574
----------
NET ASSETS $8,128,843
==========
NET ASSETS REPRESENTED BY:
<CAPTION>
Accumulation Unit
Units Value
------------ -------
<S> <C> <C> <C>
Group contracts: 6,213 $175.514 $1,090,468
Individual contracts:
Variable annuity contracts 8,474 151.764 1,286,048
Flexible annuity contracts 19,316 142.594 2,754,346
Reserve for variable annuity contracts
in distribution period 2,997,981
----------
$8,128,843
==========
</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, 1997 1996
---------- ----------
<S> <C> <C>
FROM OPERATIONS:
Investment income-- net $ 90,243 $ 101,036
Realized gain on investments-- net 354,582 409,694
Change in unrealized appreciation (depreciation)
on investments-- net 1,411,389 814,419
---------- ----------
Increase in net assets resulting
from operations 1,856,214 1,325,149
---------- ----------
FROM UNIT TRANSACTIONS:
Participant contributions - net 174,747 6,952
Withdrawal of funds on terminated contracts - net (256,923) (489,010)
Annuity benefit distributions (433,003) (400,577)
Other, principally mortality guarantee adjustment (37,616) (434,493)
---------- ----------
Decrease in net assets derived
from unit transactions (552,795) (1,317,128)
---------- ----------
INCREASE IN NET ASSETS 1,303,419 8,021
NET ASSETS:
Beginning of year 6,825,424 6,817,403
---------- ----------
End of year $8,128,843 $6,825,424
========== ==========
</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, 1997 1996
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 154,455 $ 156,073
Expenses:
Mortality and expense risk 64,212 55,037
---------- ----------
Investment Income -- Net 90,243 101,036
---------- ----------
REALIZED GAIN ON INVESTMENTS:
Proceeds from sale of shares 1,134,685 1,310,228
Cost of shares sold 956,797 1,138,794
---------- ----------
Realized gain from security
transactions -- net 177,888 171,434
Capital gains distribution 176,694 238,260
---------- ----------
Realized Gain on
Investments -- Net 354,582 409,694
---------- ----------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS:
Beginning of year 56,663 (757,756)
End of year 1,468,052 56,663
---------- ----------
Change in Unrealized Appreciation (Depreciation)
on Investments -- Net 1,411,389 814,419
---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,856,214 $1,325,149
========== ==========
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.207% 1.481%
NUMBER OF ACCUMULATION UNITS OUTSTANDING
AT END OF YEAR 34,003 37,079
</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)
shares is valued at the closing net asset value per share as determined by
the Fund on December 31, 1997. 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 participant
transfers to or from CG Life to purchase fixed or variable annuity contracts
during the accumulation phase. There were transfers from accumulation period to
distribution period of $163,503 during 1997. There were no transfers from
accumulation period to distribution period during 1996.
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
$325 and $401 for the years ended December 31, 1997 and 1996, 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 $455 and $517 for the years ended December 31, 1997 and 1996, 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. (CFA). Effective December 1, 1997, CFA was replaced by
CIGNA Financial Services, Inc., which is an affiliate of CG Life.
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: 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value:
--------------------------------------
Beginning of year $132.033 $108.072 $ 79.187 $78.857 $76.776
End of year 175.514 132.033 108.072 79.187 78.857
-------- -------- -------- -------- --------
Net increase in net unit
value $ 43.481 $ 23.961 $ 28.885 $ 0.330 $ 2.081
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 6,213 6,185 6,864 6,819 6,987
======== ======== ======== ======== ========
Individual Contracts:
Variable annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $114.738 $ 94.390 $ 69.507 $69.564 $68.068
End of year 151.764 114.738 94.390 69.507 69.564
-------- -------- -------- -------- --------
Net increase (decrease) in net unit
value $ 37.026 $ 20.348 $ 24.883 $(0.057) $ 1.496
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 8,474 8,484 8,566 8,823 11,050
======== ======== ======== ======== ========
Flexible annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $108.183 $ 89.312 $ 65.997 $66.282 $65.084
End of year 142.594 108.183 89.312 65.997 66.282
-------- -------- -------- -------- --------
Net increase (decrease) in net unit
value $ 34.411 $ 18.871 $ 23.315 $(0.285) $ 1.198
======== ======== ======== ======== ========
Accumulation units outstanding:
--------------------------------------
End of year 19,316 22,410 26,647 27,762 30,391
======== ======== ======== ======== ========
</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 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 Account II (the "Account") of Connecticut
General Life Insurance Company at December 31, 1997, 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 20, 1998
<PAGE>
Pages 1-13 of the Annual Report to Shareholders of CIGNA Variable Products S&P
500 Index Fund for the period ended 12/31/97, as electronically filed with the
Securities and Exchange Commission on Form N-30D on March 6, 1998, is hereby
incorporated by reference.
<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 Services 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, 1997
CG Flexible Annuity
CG Group Variable Annuity
[LOGO OF CIGNA APPEARS HERE]
Cat. # 502450 Rev 2/98
