<PAGE>
AIM/CIGNA
HERITAGE
ANNUAL REPORT
DECEMBER 31, 1996
A Lasting Investment
Structure for the
Retirement of Your Life
[LOGO OF AIM
APPEARS HERE]
[LOGO OF CIGNA APPEARS HERE]
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
Letter To Our Clients.................................................... 1
CG Variable Annuity Separate Accounts
Financial Statements................................................... 2
Notes to Financial Statements.......................................... 6
Report of Independent Accountants...................................... 8
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund..................................... 9
AIM V.I. Diversified Income Fund....................................... 21
AIM V.I. Global Utilities Fund......................................... 33
AIM V.I. Government Securities Fund.................................... 44
AIM V.I. Growth Fund................................................... 51
AIM V.I. Growth and Income Fund........................................ 63
AIM V.I. International Equity Fund..................................... 75
AIM V.I. Money Market Fund............................................. 86
AIM V.I. Value Fund.................................................... 92
Directors and Officers of the Funds.................................... Inside
Back
Cover
</TABLE>
<PAGE>
The President's Letter
TCJ PHOTO
Dear Client:
It is a pleasure to provide you with this report on the performance of the
AIM/CIGNA Heritage Variable Annuity insurance product for the year ended
December 31, 1996.
The report includes a summary of sub-account performances for the past 12
months and financial data for each of the portfolio options available under
your product. In addition, we have included an informative interview with the
fund management team for AIM Variable Insurance Funds, Inc. The interview deals
with significant national and international economic trends affecting key
financial markets, and I hope you will take a few minutes to read it carefully.
As we begin a new year, the AIM/CIGNA Heritage Variable Annuity alliance
remains committed to providing financial solutions that meet your expectations
and needs. Whether your concerns involve retirement savings or asset
accumulation, the CIGNA Individual Insurance team is dedicated to offering
product solutions of recognized value--and to back those solutions with
consistently superior service, unquestioned financial security and complete
product disclosure.
As part of our service commitment--and to keep you fully informed about your
purchase and trends that could affect your financial planning decisions--you
can call our Variable Annuity information line at 1.800.522.9898, Monday
through Friday, 8 a.m. to 7 p.m. Eastern time. Our representatives will be
happy to answer any questions about this report, or to respond to any requests
or concerns.
With that, please accept my thanks for your loyalty and trust in choosing the
AIM/CIGNA Heritage Variable Annuity, and allow me to assure you that we will
continue to concentrate our efforts and resources on providing superior
solutions that meet your long-term financial goals and solve your increasingly
complex financial planning needs.
Sincerely,
/s/ THOMAS C. JONES
Thomas C. Jones
President
CIGNA Individual Insurance
AIM/CIGNA HERITAGE VARIABLE ANNUITY
SCHEDULE OF CHANGES IN UNIT VALUE
PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
12/31/95 12/31/96
ACCUMULATION ACCUMULATION
SUB-ACCOUNT UNIT VALUE UNIT VALUE % CHANGE
<S> <C> <C> <C>
AIM V.I. Capital Appreciation 15.92378352 18.467244 16.0
AIM V.I. Diversified Income 11.58511339 12.591387 8.7
AIM V.I. Global Utilities 12.50840432 13.826403 10.5
AIM V.I. Government Securities 10.99124674 11.089217 0.9
AIM V.I. Growth 13.97787385 16.280681 16.5
AIM V.I. Growth and Income 13.38512650 15.835279 18.3
AIM V.I. International Equity 13.15613040 15.578350 18.4
AIM V.I. Money Market 10.77544248 11.155653 3.5
AIM V.I. Value 15.50537319 17.590804 13.4
</TABLE>
Accumulation Unit Values are net of charges against the assets of the Variable
Account for the assumption of mortality and expense risks and for
administrative expenses.
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I.
CAPITAL DIVERSIFIED GLOBAL GOVERNMENT AIM V.I. GROWTH AND INTERNATIONAL MONEY
APPRECIATION INCOME SUB- UTILITIES SECURITIES GROWTH SUB- INCOME SUB- EQUITY SUB- MARKET SUB-
SUB-ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ----------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in AIM
Variable
Insurance Funds,
Inc. at value.... $312,747,385 $54,027,782 $11,016,631 $20,672,196 $154,423,265 $90,415,990 $142,116,428 $54,209,410
Receivable from
Connecticut
General Life
Insurance
Company.......... -- 80,851 -- 60,198 122,013 -- -- 31,438
Receivable for
fund shares sold. 178,464 -- 3,214 -- -- 29,651 13,019 --
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Total assets.... 312,925,849 54,108,633 11,019,845 20,732,394 154,545,278 90,445,641 142,129,447 54,240,848
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
LIABILITIES:
Payable to
Connecticut
General Life
Insurance
Company.......... 178,464 -- 3,214 -- -- 29,651 13,019 --
Payable for fund
shares purchased. -- 80,851 -- 60,198 122,013 -- -- 31,438
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Total
liabilities.... 178,464 80,851 3,214 60,198 122,013 29,651 13,019 31,438
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Net assets...... $312,747,385 $54,027,782 $11,016,631 $20,672,196 $154,423,265 $90,415,990 $142,116,428 $54,209,410
============ =========== =========== =========== ============ =========== ============ ===========
Accumulation units
outstanding...... 16,934,302 4,290,852 796,782 1,864,171 9,484,547 5,709,782 9,121,429 4,855,567
Net asset value
per accumulation
unit............. $ 18.467244 $ 12.591387 $ 13.826403 $ 11.089217 $ 16.280681 $ 15.835279 $ 15.578350 $ 11.155653
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Accumulation net
assets........... $312,729,894 $54,027,782 $11,016,631 $20,672,196 $154,414,891 $90,415,990 $142,096,820 $54,167,024
Annuity reserves.. 17,491 -- -- -- 8,374 -- 19,608 42,386
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
$312,747,385 $54,027,782 $11,016,631 $20,672,196 $154,423,265 $90,415,990 $142,116,428 $54,209,410
============ =========== =========== =========== ============ =========== ============ ===========
<CAPTION>
AIM V.I.
VALUE SUB-
ACCOUNT
------------
<S> <C>
ASSETS:
Investments in AIM
Variable
Insurance Funds,
Inc. at value.... $324,463,063
Receivable from
Connecticut
General Life
Insurance
Company.......... --
Receivable for
fund shares sold. 82,382
------------
Total assets.... 324,545,445
------------
LIABILITIES:
Payable to
Connecticut
General Life
Insurance
Company.......... 82,382
Payable for fund
shares purchased. --
------------
Total
liabilities.... 82,382
------------
Net assets...... $324,463,063
============
Accumulation units
outstanding...... 18,443,298
Net asset value
per accumulation
unit............. $ 17.590804
------------
Accumulation net
assets........... $324,432,445
Annuity reserves.. 30,618
------------
$324,463,063
============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
2
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AIM V.I.
AIM V.I. AIM V.I. GLOBAL GOVERNMENT AIM V.I. AIM V.I. MONEY
CAPITAL DIVERSIFIED UTILITIES SECURITIES AIM V.I. GROWTH AND INTERNATIONAL MARKET
APPRECIATION INCOME SUB- SUB- SUB- GROWTH SUB- INCOME SUB- EQUITY SUB- SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ---------- ---------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends......... $ 466,461 $3,289,206 $ 338,902 $1,064,113 $ 578,157 $ 841,419 $ 326,898 $3,057,634
EXPENSES:
Mortality and
expense risk and
administrative
charges.......... 3,725,971 643,056 132,680 268,030 1,815,834 903,049 1,577,910 869,697
----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
Net investment
gain (loss).... (3,259,510) 2,646,150 206,222 796,083 (1,237,677) (61,630) (1,251,012) 2,187,937
----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Capital
distribution from
portfolio
sponsor.......... -- -- 61,278 -- 6,495,238 182,406 -- --
Net realized gain
(loss) on share
transactions..... (264,756) 12,971 (2,982) 12,725 (33,584) (30,814) (20,437) --
----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
Net realized gain
(loss)........... (264,756) 12,971 58,296 12,725 6,461,654 151,592 (20,437) --
Net unrealized
gain (loss)...... 41,079,909 1,406,492 743,831 (577,837) 14,610,617 11,146,372 20,458,960 --
----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
Net realized and
unrealized gain
(loss) on
investments.... 40,815,153 1,419,463 802,127 (565,112) 21,072,271 11,297,964 20,438,523 --
----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.. $37,555,643 $4,065,613 $1,008,349 $ 230,971 $19,834,594 $11,236,334 $19,187,511 $2,187,937
=========== ========== ========== ========== =========== =========== =========== ==========
<CAPTION>
AIM V.I.
VALUE SUB-
ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends......... $ 1,659,613
EXPENSES:
Mortality and
expense risk and
administrative
charges.......... 3,986,066
------------
Net investment
gain (loss).... (2,326,453)
------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Capital
distribution from
portfolio
sponsor.......... 16,089,510
Net realized gain
(loss) on share
transactions..... 41,831
------------
Net realized gain
(loss)........... 16,131,341
Net unrealized
gain (loss)...... 24,188,520
------------
Net realized and
unrealized gain
(loss) on
investments.... 40,319,861
------------
INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.. $37,993,408
============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
3
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I. AIM V.I.
CAPITAL DIVERSIFIED GLOBAL GOVERNMENT AIM V.I. GROWTH AND INTERNATIONAL MONEY
APPRECIATION INCOME SUB- UTILITIES SECURITIES GROWTH SUB- INCOME SUB- EQUITY SUB- MARKET SUB-
SUB-ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ----------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain
(loss)............ $ (3,259,510) $ 2,646,150 $ 206,222 $ 796,083 $ (1,237,677) $ (61,630) $ (1,251,012) $ 2,187,937
Net realized gain
(loss)............ (264,756) 12,971 58,296 12,725 6,461,654 151,592 (20,437) --
Net unrealized gain
(loss)............ 41,079,909 1,406,492 743,831 (577,837) 14,610,617 11,146,372 20,458,960 --
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Net increase from
operations...... 37,555,643 4,065,613 1,008,349 230,971 19,834,594 11,236,334 19,187,511 2,187,937
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
ACCUMULATION AND
ANNUITY UNIT
TRANSACTIONS:
Participant
deposits.......... 58,438,556 9,713,519 2,990,281 4,066,057 25,951,601 25,772,496 24,438,686 57,721,314
Participant
transfers......... 20,040,794 1,047,682 468,502 (502,335) 13,274,467 18,936,372 21,101,359 (62,556,743)
Participant
withdrawals and
annuity payments.. (13,756,884) (4,218,044) (596,803) (1,510,699) (7,263,101) (2,737,347) (4,842,259) (8,609,516)
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Net increase
(decrease) from
participant
transactions.... 64,722,466 6,543,157 2,861,980 2,053,023 31,962,967 41,971,521 40,697,786 (13,444,945)
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Total increase
(decrease) in
net assets.... 102,278,109 10,608,770 3,870,329 2,283,994 51,797,561 53,207,855 59,885,297 (11,257,008)
NET ASSETS:
Beginning of
period............ 210,469,276 43,419,012 7,146,302 18,388,202 102,625,704 37,208,135 82,231,131 65,466,418
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
End of period...... $312,747,385 $54,027,782 $11,016,631 $20,672,196 $154,423,265 $90,415,990 $142,116,428 $54,209,410
============ =========== =========== =========== ============ =========== ============ ===========
PARTICIPANT
ACCUMULATION UNIT
TRANSACTIONS (IN
UNITS):
Participant
deposits.......... 3,402,932 820,195 235,394 374,494 1,742,515 1,800,984 1,719,074 5,288,075
Participant
transfers......... 1,105,265 80,815 35,575 (45,162) 883,988 1,308,004 1,490,043 (5,718,780)
Participant
withdrawals....... (790,608) (357,986) (45,507) (138,147) (483,967) (179,018) (337,298) (785,214)
------------ ----------- ----------- ----------- ------------ ----------- ------------ -----------
Net increase
(decrease) in
units from
participant
transactions.... 3,717,589 543,024 225,462 191,185 2,142,536 2,929,970 2,871,819 (1,215,919)
============ =========== =========== =========== ============ =========== ============ ===========
<CAPTION>
AIM V.I.
VALUE SUB-
ACCOUNT
-------------
<S> <C>
OPERATIONS:
Net investment gain
(loss)............ $ (2,326,453)
Net realized gain
(loss)............ 16,131,341
Net unrealized gain
(loss)............ 24,188,520
-------------
Net increase from
operations...... 37,993,408
-------------
ACCUMULATION AND
ANNUITY UNIT
TRANSACTIONS:
Participant
deposits.......... 56,528,366
Participant
transfers......... (9,943,809)
Participant
withdrawals and
annuity payments.. (17,379,567)
-------------
Net increase
(decrease) from
participant
transactions.... 29,204,990
-------------
Total increase
(decrease) in
net assets.... 67,198,398
NET ASSETS:
Beginning of
period............ 257,264,665
-------------
End of period...... $324,463,063
=============
PARTICIPANT
ACCUMULATION UNIT
TRANSACTIONS (IN
UNITS):
Participant
deposits.......... 3,566,305
Participant
transfers......... (626,745)
Participant
withdrawals....... (1,086,314)
-------------
Net increase
(decrease) in
units from
participant
transactions.... 1,853,246
=============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM FEBRUARY 1, 1995 TO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. AIM V.I. GLOBAL AIM V.I. AIM V.I. AIM V.I. AIM V.I.
CAPITAL DIVERSIFIED UTILITIES GOVERNMENT AIM V.I. GROWTH AND INTERNATIONAL MONEY
APPRECIATION INCOME SUB- SUB- SECURITIES GROWTH SUB- INCOME SUB- EQUITY SUB- MARKET SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ---------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain
(loss)............. $ (1,776,221) $ 2,375,596 $ 102,645 $ 619,409 $ (852,214) $ 91,568 $ (699,439) $ 1,706,718
Net realized gain
(loss)............. (185,467) 9,483 22,972 9,074 (8,433) 1,073,494 70,775 --
Net unrealized gain. 37,366,222 2,580,177 776,711 1,067,582 18,487,083 2,522,533 13,573,062 --
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net increase from
operations....... 35,404,534 4,965,256 902,328 1,696,065 17,626,436 3,687,595 12,944,398 1,706,718
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
ACCUMULATION AND
ANNUITY UNIT
TRANSACTIONS:
Participant
deposits........... 75,416,433 10,812,192 3,456,984 4,464,331 32,668,572 21,652,744 22,515,674 90,031,694
Participant
transfers.......... 16,533,461 5,634,473 1,139,686 1,401,722 9,479,797 6,032,618 (4,928,544) (53,839,727)
Participant
withdrawals and
annuity payments... (5,071,327) (2,244,711) (300,061) (1,045,358) (2,651,893) (524,244) (3,340,047) (3,395,341)
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net increase from
participant
transactions..... 86,878,567 14,201,954 4,296,609 4,820,695 39,496,476 27,161,118 14,247,083 32,796,626
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Total increase
in net assets.. 122,283,101 19,167,210 5,198,937 6,516,760 57,122,912 30,848,713 27,191,481 34,503,344
NET ASSETS:
Beginning of period. 88,186,175 24,251,802 1,947,365 11,871,442 45,502,792 6,359,422 55,039,650 30,963,074
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
End of period....... $210,469,276 $43,419,012 $7,146,302 $18,388,202 $102,625,704 $37,208,135 $82,231,131 $65,466,418
============ =========== ========== =========== ============ =========== =========== ===========
PARTICIPANT
ACCUMULATION UNIT
TRANSACTIONS (IN
UNITS):
Participant
deposits........... 5,006,509 986,223 303,996 423,722 2,484,497 1,718,553 1,821,338 8,480,343
Participant
transfers.......... 1,041,696 527,843 104,156 134,953 722,364 480,720 (418,823) (5,068,522)
Participant
withdrawals........ (345,299) (208,269) (27,096) (100,145) (202,205) (41,974) (277,532) (319,563)
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net increase in
units from
participant
transactions..... 5,702,906 1,305,797 381,056 458,530 3,004,656 2,157,299 1,124,983 3,092,258
============ =========== ========== =========== ============ =========== =========== ===========
<CAPTION>
AIM V.I.
VALUE SUB-
ACCOUNT
-------------
<S> <C>
OPERATIONS:
Net investment gain
(loss)............. $ (2,110,126)
Net realized gain
(loss)............. 2,326
Net unrealized gain. 46,641,463
-------------
Net increase from
operations....... 44,533,663
-------------
ACCUMULATION AND
ANNUITY UNIT
TRANSACTIONS:
Participant
deposits........... 93,272,878
Participant
transfers.......... 17,331,114
Participant
withdrawals and
annuity payments... (7,116,527)
-------------
Net increase from
participant
transactions..... 103,487,465
-------------
Total increase
in net assets.. 148,021,128
NET ASSETS:
Beginning of period. 109,243,537
-------------
End of period....... $257,264,665
=============
PARTICIPANT
ACCUMULATION UNIT
TRANSACTIONS (IN
UNITS):
Participant
deposits........... 6,429,791
Participant
transfers.......... 1,180,159
Participant
withdrawals........ (499,393)
-------------
Net increase in
units from
participant
transactions..... 7,110,557
=============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ORGANIZATION
CG Variable Annuity Separate Account (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
clearly 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.
During 1995, the Account changed its fiscal year end from January 31 to
December 31, effective in the year beginning January 1, 1996. Accordingly, the
eleven month transition period ended December 31, 1995, is reported in the
Statements of Changes in Net Assets.
The assets of the Account are divided into variable sub-accounts invested in
shares of a specific series of the AIM Variable Insurance Funds, Inc. (the
Fund), which are open-end mutual funds. Nine sub-accounts are currently
available for investment within the Account: AIM V.I. Capital Appreciation
Fund; AIM V.I. Diversified Income Fund; AIM V.I. Global Utilities Fund; AIM
V.I. Government Securities Fund; AIM V.I. Growth Fund; AIM V.I. Growth and
Income Fund; AIM V.I. International Equity Fund; AIM V.I. Money Market Fund;
and AIM V.I. Value Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in conformity with generally
accepted accounting principles. The following is a summary of significant
accounting policies consistently followed in the preparation of the Account's
financial statements.
A. INVESTMENT VALUATION: - Investments held by the sub-accounts are valued at
their respective closing net asset value per share as determined by the Fund
as of December 31, 1996. 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.
D. ANNUITY RESERVES: - The amount of annuity reserves is determined by
actuarial assumptions which meet statutory requirements. Gains or losses
resulting from actual mortality experience, the responsibility for which is
assumed by CG Life, are offset by transfers to or from CG Life.
3. INVESTMENTS
Total shares held and cost of investments at December 31, 1996 were:
<TABLE>
<CAPTION>
COST OF
AIM V.I. SUB-ACCOUNT SHARES HELD INVESTMENTS
- -------------------- ----------- -----------
<S> <C> <C>
Capital Appreciation................................... 16,096,108 $232,406,504
Diversified Income..................................... 5,230,182 52,200,894
Global Utilities....................................... 877,819 9,504,640
Government Securities.................................. 2,094,447 20,993,985
Growth................................................. 9,502,970 121,885,179
Growth and Income...................................... 6,015,701 76,789,618
International Equity................................... 8,686,823 111,427,599
Money Market........................................... 54,209,410 54,209,410
Value.................................................. 18,561,960 251,742,381
Total purchases and sales of shares for the year ended December 31, 1996,
amounted to:
<CAPTION>
AIM V.I. SUB-ACCOUNT PURCHASES SALES
- -------------------- --------- -----
<S> <C> <C>
Capital Appreciation................................... $76,878,269 $15,415,312
Diversified Income..................................... 19,011,509 9,822,202
Global Utilities....................................... 5,457,152 2,327,673
Government Securities.................................. 7,050,056 4,200,950
Growth................................................. 41,794,158 4,573,630
Growth and Income...................................... 44,643,310 2,551,013
International Equity................................... 44,186,893 4,740,119
Money Market........................................... 66,996,893 78,253,901
Value.................................................. 61,685,647 18,717,600
</TABLE>
4. CHARGES AND DEDUCTIONS
CG Life assumes the risk that annuitants, as a class, may live longer than
expected and also assumes a mortality risk in connection with the death
benefits of the contract. CG Life also assumes a risk that its actual
administrative expenses may be higher than amounts deducted for such expenses.
CG Life charges each variable sub-account the daily equivalent of 1.25%, on an
annual basis, of the current value of each sub-account's assets for the
assumption of these risks.
CG Life also deducts a daily administrative fee from the assets of each sub-
account as partial reimbursement for administrative expenses relating to the
issuance and maintenance of the contract and the participant's annuity account.
This charge is currently at an effective annual rate of .10%.
As partial compensation for administrative services provided, CG Life
additionally receives a $35 annuity account fee per year from each contract.
This charge is deducted from the fixed or variable sub-account of the
participant or on a pro-rata basis from two or more fixed or variable sub-
accounts in relation to their values under the contract. Fixed sub-
6
<PAGE>
CG VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CHARGES AND DEDUCTIONS (CONTINUED)
accounts are part of the general account of CG Life and are not included in
these financial statements.
Under certain circumstances, CG Life reserves the right to charge a transfer
fee of up to $10 for transfers between sub-accounts. Transfer fees, for the
variable sub-accounts, amounted to $130 for the year ended December 31, 1996.
The fees charged by CG Life for mortality and expense risks, administrative
fees and the amounts deducted for annuity account fees (included in participant
withdrawals), from variable sub-accounts, for the year ended December 31, 1996,
amounted to:
<TABLE>
<CAPTION>
MORTALITY ASSET BASED ANNUITY
AND EXPENSE ADMINISTRATIVE ACCOUNT
AIM V.I. SUB-ACCOUNT RISK FEES FEES FEES
- -------------------- ----------- -------------- --------
<S> <C> <C> <C>
Capital Appreciation........................ $3,449,973 $275,998 $150,953
Diversified Income.......................... 595,422 47,634 15,966
Global Utilities............................ 122,852 9,828 3,786
Government Securities....................... 248,176 19,854 6,050
Growth...................................... 1,681,328 134,506 66,745
Growth and Income........................... 836,156 66,893 35,144
International Equity........................ 1,461,028 116,882 58,728
Money Market................................ 805,275 64,422 15,790
Value....................................... 3,690,802 295,264 153,210
</TABLE>
No deduction for sales charges is made from a premium payment. However, if a
cash withdrawal is made, a withdrawal charge (contingent deferred sales charge)
may be assessed by CG Life. The withdrawal charge, if assessed, varies from 0-
7% depending upon the duration of each contract deposit. The withdrawal charge
is deducted from withdrawal proceeds for full withdrawals and reduces the
remaining account value for partial withdrawals. These charges are paid to CG
Life as reimbursement for services provided. These services include commissions
paid to sales personnel, the costs associated with preparation of sales
literature and other promotional costs and acquisition expenses. Withdrawal
charges paid to CG Life for the variable sub-accounts, for the year ended
December 31, 1996, amounted to $1,075,638.
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 surrenders, death benefits, transfers to other fixed or
variable sub-accounts or annuity payments in excess of net purchase payments.
6. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code of 1986
(the 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 set forth
in regulations issued by the Secretary of the Treasury. CG Life believes, based
on assurances from the Fund manager, that the Fund satisfies the requirements
of the regulations.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Connecticut General
Life Insurance Company and Participants of the
CG Variable Annuity Separate Account
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,
AIM V.I. Capital Appreciation Fund, AIM V.I. Diversified Income Fund, AIM V.I.
Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth
Fund, AIM V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM
V.I. Money Market Fund and AIM V.I. Value Fund (constituting the CG Variable
Annuity Separate Account, hereafter referred to as "the Account") at December
31, 1996, the results of each of their operations for the year then ended and
the changes in each of their net assets for each of 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, 1996 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Hartford, Connecticut
February 20, 1997
8
<PAGE>
The mutual funds' annual report is incorporated herein by reference. It has been
electronically filed with the Securities and Exchange Commission in connection
with the named entity's (AIM Variable Insurance Funds, Inc.) status as a
registered investment company under the Investment Company Act of 1940:
AIM/CIGNA Heritage Annual Report, December 31, 1996, consisting of 97
partially numbered pages. Filed: March 5, 1997, Form Type N-30D,
Registration Statement 811-7452.
<PAGE>
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund*
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Value Fund
*On May 1, 1995, AIM V.I. Utilities Fund broadened its investment strategy to
permit up to 80% of its total assets to be invested in foreign securities, and
was renamed AIM V.I. Global Utilities Fund.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Variable Annuity.
National Distributor:
CIGNA Financial Advisors
900 Cottage Grove Road
Hartford, CT 06152
[LOGO OF AIM [CIGNA LOGO CIGNA Individual Insurance is a
APPEARS HERE] APPEARS HERE] division of CIGNA.
