CONNECTICUT NATURAL GAS CORPORATION
                        -----------------------------------
                                          
                               EMPLOYEE SAVINGS PLAN
                               ---------------------
                                          
                         FINANCIAL STATEMENTS AND SCHEDULES
                         ----------------------------------
                                          
                       AS OF DECEMBER 31, 1996, 1995 AND 1994
                       --------------------------------------
                                          
                                   TOGETHER WITH
                                   --------------
                                          
                      REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                      ----------------------------------------
                                          

     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     <PAGE>


     
     
     
     
     
                        CONNECTICUT NATURAL GAS CORPORATION
                        -----------------------------------
    
                               EMPLOYEE SAVINGS PLAN
                               ---------------------
    
                                       INDEX
                                       -----
    
    
    
                                                                            PAGE
                                                                            ----

    Report of Independent Public Accountants                                  1


    Financial Statements:                                                    
      Statement of Net Assets Available for Benefits                         
        with Fund Information as of December 31, 1996                         2 


      Statement of Net Assets Available for Benefits
        with Fund Information as of December 31, 1995                         4


      Statement of Changes in Net Assets Available for Benefits           
        with Fund Information for the Year Ended December 31, 1996            6 

      Statement of Changes in Net Assets Available for Benefits
        with Fund Information for the Year Ended December 31, 1995            8


      Statement of Changes in Net Assets Available for Benefits
        with Fund Information for the Year Ended December 31, 1994           10 


    Notes to Financial Statements and Schedules                              11 



    Schedules:                                                               
      Schedule I - Item 27a - Schedule of Assets Held for Investment         
        Purposes as of December 31, 1996                                     16


      Schedule II - Item 27d - Schedule of Reportable Transactions for    
       the Year Ended December 31, 1996                                      17
                                                                               

      All schedules, except those as set forth above, are omitted as not  
      applicable or not required.


    
    <PAGE>


    
    
    
    
    <PAGE>


    
     
     
                                ARTHUR ANDERSEN LLP

    
                     REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                     ----------------------------------------
    
   To the Plan Administrator of Connecticut Natural  
       Gas Corporation Employee Savings Plan:
    
   We have audited the accompanying statements of net assets available for
   benefits with fund information of Connecticut Natural Gas Corporation
   Employee Savings Plan (the Plan) as of December 31, 1996 and 1995, and the
   related statements of changes in net assets available for benefits with
   fund information for each of the three years in the period ended December
   31, 1996.  These financial statements and schedules referred to below are
   the responsibility of the Plan's management.  Our responsibility is to
   express an opinion on these financial statements and schedules based on our
   audits. 
    
   We conducted our audits in accordance with generally accepted auditing
   standards.  Those standards 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.  An audit also includes assessing the accounting principles
   used and significant estimates made by management, as well as evaluating
   the overall financial statement presentation.  We believe that our audits
   provide a reasonable basis for our opinion.
    
   In our opinion, the financial statements referred to above present fairly,
   in all material respects, the net assets available for benefits with fund
   information of the Plan as of December 31, 1996 and 1995, and the changes
   in its net assets available for benefits with fund information for each of
   the three years in the period ended December 31, 1996, in conformity with
   generally accepted accounting principles.
    
   Our audits were made for the purpose of forming an opinion on the basic
   financial statements taken as a whole.  The supplemental schedules of
   assets held for investment purposes and reportable transactions are
   presented for purposes of additional analysis and are not a required part
   of the basic financial statements but are supplementary information
   required by the Department of Labor's Rules and Regulations for Reporting
   and Disclosure under the Employee Retirement Income Security Act of 1974. 
   These supplemental schedules have been subjected to the auditing procedures
   applied in the audits of the basic financial statements and, in our
   opinion, are fairly stated in all material respects in relation to the
   basic financial statements taken as a whole.
    
    

                                             By Arthur Andersen LLP
                                             ----------------------
                                             Arthur Andersen LLP
    
   Hartford, Connecticut
   April 30, 1997<PAGE>
<TABLE>
<CAPTION>
     
                                                                 -2-
                                                                   
                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 -----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                                STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                                --------------------------------------------------------------------
                                                       AS OF DECEMBER 31, 1996
                                                      ------------------------
                                                                   


                                                  Participant Directed
                          ---------------------------------------------------------------------
    <S>                  <C>               <C>            <C>          <C>         <C>
                                                          The Putnam
                         Putnam Fiduciary   The George     Fund for      Putnam       Putnam
                           Trust Company    Putnam Fund   Growth and     Vista     International
                         Stable Value Fund   of Boston      Income        Fund      Growth Fund
                         ----------------  ------------   ----------   ----------   -----------
    Assets
    ------
    Investments, at
      current value           $ 1,010,028   $ 3,553,346  $ 5,778,562  $ 1,653,502    $  422,679 
                              -----------   -----------  -----------  -----------   ----------- 
    Cash and temporary                    
      investments                    -             -            -            -             -    
                              -----------   -----------  -----------  -----------   ----------- 
    Accounts receivable
      from broker                    -             -            -            -             -    
                                                                                                
                              -----------   -----------  -----------  -----------   ----------- 
                                                                                                

        Total Assets            1,010,028     3,553,346    5,778,562    1,653,502       422,679 
                              -----------   -----------  -----------  -----------   ----------- 

    Liabilities
    -----------
    Accounts payable to
      broker                         -             -            -            -             -    
                                                                                                
                              -----------   -----------  -----------  -----------   -----------
     Net Assets
         Available for
         Benefits             $ 1,010,028   $ 3,553,346  $ 5,778,562  $ 1,653,502    $  422,679 
                              ===========   ===========  ===========  ===========   =========== 
</TABLE>
    

     The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
     
                                                                 -3-
                                                                   
                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 -----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                                STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                                --------------------------------------------------------------------
                                                       AS OF DECEMBER 31, 1996
                                                      ------------------------
                                                                   
                                                                    Non-
                                                                 Participant
                                         Participant Directed     Directed
                                         --------------------    -----------
   <S>                                 <C>          <C>          <C>           <C>
                                         Putnam       Common       Common
                                         Income       Stock         Stock
                                          Fund         Fund         Fund         Total
                                       ----------   ----------   ----------    --------
    Assets
    ------
    Investments, at
      current value                     $ 115,529   $ 4,762,743  $ 5,027,978  $22,324,367 
                                      -----------   -----------  -----------  ----------- 
    Cash and temporary
      investments                            -            8,564       (5,077)       3,487 
                                      -----------   -----------  -----------  ----------- 
    Accounts receivable
      from broker                            -            5,764       19,628       25,392 
                                      -----------    ----------- -----------  ----------- 

                                                                                          

        Total Assets                      115,529     4,777,071    5,042,529   22,353,246 
                                      -----------   -----------  -----------  ----------- 

    Liabilities
    -----------
    Accounts payable to 
    broker                                 -            (14,572)     (15,380)     (29,952)
                                      -----------   -----------  -----------  ----------- 
        Net Assets
         Available for
         Benefits                       $ 115,529   $ 4,762,499  $ 5,027,149  $22,323,294 
                                      ===========   ===========  ===========  =========== 
</TABLE>
    

     The accompanying notes are an integral part of this financial statement.




<PAGE>
<TABLE>
<CAPTION>
                                                                   
                                                                 -4-
                                                                   
                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 -----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                                STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                                --------------------------------------------------------------------
                                                       AS OF DECEMBER 31, 1995
                                                      ------------------------
                                                                   


                                                  Participant Directed
                          ---------------------------------------------------------------------
   <S>                   <C>               <C>           <C>           <C>         <C>
                                                          The Putnam
                         Putnam Fiduciary   The George     Fund for      Putnam       Putnam
                           Trust Company    Putnam Fund   Growth and     Vista     International
                         Stable Value Fund   of Boston      Income        Fund      Growth Fund
                         ----------------  ------------   ----------   ----------   -----------
    Assets
    ------
    Investments, at
      current value           $ 1,179,925   $ 3,170,234  $ 4,759,631    $ 754,331     $ 227,244 
                              -----------   -----------  -----------  -----------   ----------- 
    Cash and temporary                    
      investments                    -             -            -            -             -    
                              -----------   -----------  -----------  -----------   ----------- 
    Accounts receivable:
      Connecticut         
      Natural Gas Corp.              -             -            -            -             -    
      Employees                     3,379        13,332       27,755       11,074         2,432 
                              -----------   -----------  -----------  -----------   ----------- 
                                    3,379        13,332       27,755       11,074         2,432 
                              -----------   -----------  -----------  -----------   ----------- 
        Total Assets            1,183,304     3,183,566    4,787,386      765,405       229,676 
                              -----------   -----------  -----------  -----------   ----------- 
    Liabilities
    -----------
    Accounts payable to
      broker                         -             -            -            -             -    
                              -----------   -----------  -----------  -----------   ----------- 
      Net Assets
         Available for
         Benefits             $ 1,183,304   $ 3,183,566  $ 4,787,386    $ 765,405     $ 229,676 
                              ===========   ===========  ===========  ===========   =========== 
</TABLE>
    

     The accompanying notes are an integral part of this financial statement.



<PAGE>
<TABLE>
<CAPTION>
     
                                        -5-
                                          
                        CONNECTICUT NATURAL GAS CORPORATION
                        -----------------------------------
                               EMPLOYEE SAVINGS PLAN
                               ---------------------
       STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
       --------------------------------------------------------------------
                              AS OF DECEMBER 31, 1995
                             ------------------------
                                                                   
                                                       Non-
                                                    Participant
                            Participant Directed     Directed
                            --------------------    -----------
    <S>                   <C>          <C>          <C>           <C>
                            Putnam       Common       Common
                             Income       Stock        Stock
                              Fund        Fund         Fund         Total
                          ----------   ----------   ----------     --------
    Assets
    ------
    Investments, at
      current value         $ 161,811  $ 2,151,168  $ 7,302,281  $19,706,625 
                          -----------  -----------  -----------  ----------- 
    Cash and temporary
      investments              -            35,959      115,485      151,444 
                          -----------  -----------  -----------  ----------- 
    Accounts receivable:<PAGE>
      Connecticut         
      Natural Gas Corp.          -            -          36,558       36,558 
      Employees                   847        4,430         -          63,249 
                          -----------  -----------  -----------  ----------- 
                                  847        4,430       36,558       99,807 
                          -----------  -----------  -----------  ----------- 
        Total Assets          162,658    2,191,557    7,454,324   19,957,876 
                          -----------  -----------  -----------  ----------- 

    Liabilities
    -----------
    Accounts payable to
      broker                   -           (35,318)    (113,764)    (149,082)
                          -----------  -----------  -----------  ----------- 
        Net Assets
         Available for
         Benefits           $ 162,658  $ 2,156,239  $ 7,340,560  $19,808,794 
                          ===========  ===========  ===========  =========== 
</TABLE>
    

     The accompanying notes are an integral part of this financial statement.

    


<PAGE>
<TABLE>
<CAPTION>
                                                                 -6-

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 ----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                           STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                           -------------------------------------------------------------------------------
                                                FOR THE YEAR ENDED DECEMBER 31, 1996
                                                -------------------------------------

                                                       Participant Directed
                                      -----------------------------------------------------
   <S>                                <C>            <C>           <C>           <C> 
                                          Putnam
                                         Fiduciary                 The Putnam
                                       Trust Company  The George    Fund for      Putnam
                                       Stable Value   Putnam Fund  Growth and      Vista
                                           Fund        of Boston     Income        Fund
                                       ------------- ------------- -----------   ----------
   Additions to net assets
    attributed to:                                                             
    Dividends and interest income         $   62,418   $  322,456   $  494,326   $   97,303 
                                          ----------  -----------  -----------  ----------- 
    Realized gains                                   
     (losses), net                              -          15,609       51,138       31,889 
                                          ----------  -----------  -----------  ----------- 
            Unrealized appreciation
     (depreciation) of investments              -         172,914      486,678       93,150 
                                          ----------  -----------  -----------  ----------- 
     Contributions:
       Employees                              54,790      194,884      402,688      198,989 
       Employer                                3,879       12,008       21,946       26,051 
                                          ----------  -----------  -----------  ----------- 
         Total contributions                  58,669      206,892      424,634      225,040 
                                          ----------  -----------  -----------  ----------- 

     Transfers, net                            4,406      (15,109)     (12,853)     522,063 
                                          ----------  -----------  -----------  ----------- 
     Other, net                                 -           -             -          -      
                                          ----------  -----------  -----------  ----------- 
   Total additions (deductions)              125,493      702,762    1,443,923      969,445 
                                          ----------  -----------  -----------  ----------- 
   Deductions from net assets
     attributed to:  
     Benefits paid to participants          (298,769)    (332,982)    (452,747)     (81,348)
                                          ----------  -----------  -----------  ----------- 
   Net increase (decrease)                  (173,276)     369,780      991,176      888,097 
                                          ----------  -----------  -----------  ----------- 
   Net Assets Available 
    for Benefits:
       Beginning of year                   1,183,304    3,183,566    4,787,386      765,405 
                                          ----------  -----------  -----------  ----------- 
       End of year                        $1,010,028   $3,553,346   $5,778,562   $1,653,502 
                                          ==========  ===========  ===========  =========== 
</TABLE>
   The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
                                                                 -7-

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 ----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                           STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                           -------------------------------------------------------------------------------  
                                                FOR THE YEAR ENDED DECEMBER 31, 1996<PAGE>
                                                -------------------------------------
                                                                       
                                                                                 Non-
                                                                              Participant
                                                Participant Directed           Directed
                                       -------------------------------------  -----------
   <S>                                <C>           <C>           <C>         <C>           <C>

                                          Putnam       Putnam       Common      Common
                                      International    Income       Stock        Stock
                                       Growth Fund      Fund         Fund         Fund        Total
                                       -----------  -----------   ----------  ----------    ----------
   Additions to net assets
    attributed to:                                              
    Dividends and interest income      $     5,660  $     9,705  $   212,290   $  384,533   $ 1,588,691 
                                       -----------  -----------  -----------   ----------   ----------- 

    Realized gains
     (losses), net                           3,292       (3,856)     (13,004)     (44,265)       40,803 
                                       -----------  -----------  -----------  -----------   ----------- 
            Unrealized appreciation
     (depreciation) of investments          42,243       (2,131)     346,939      507,602     1,647,395 
                                       -----------  -----------  -----------  -----------   ----------- 
     Contributions:
       Employees                            46,065       14,846       57,958         -          970,220 
       Employer                              7,795        1,703      317,692       86,597       477,671 
                                       -----------  -----------  -----------  -----------   ----------- 
         Total contributions                53,860       16,549      375,650       86,597     1,447,891 
                                       -----------  -----------  -----------  -----------   ----------- 
     Transfers, net                        116,277      (61,437)   2,005,626   (2,549,645)        9,328 
                                       -----------  -----------  -----------  -----------   ----------- 
     Other, net                               -            -            (447)      (1,503)       (1,950)
                                       -----------  -----------  ------------ -----------   ----------- 
   Total additions (deductions)            221,332      (41,170)   2,927,054   (1,616,681)    4,732,158 
                                       -----------  -----------  -----------  -----------   ----------- 
   Deductions from net assets
    attributed to:  
     Benefits paid to participants         (28,329)      (5,959)    (320,794)    (696,730)   (2,217,658)
                                       -----------  -----------  -----------  -----------   ----------- 
   Net increase (decrease)                 193,003      (47,129)   2,606,260   (2,313,411)    2,514,500 
                                       -----------  -----------  -----------  -----------   ----------- 
   Net Assets Available 
    for Benefits:
       Beginning of year                   229,676      162,658    2,156,239    7,340,560    19,808,794 
                                       -----------  -----------  -----------  -----------   ----------- 
       End of year                     $   422,679  $   115,529  $ 4,762,499  $ 5,027,149   $22,323,294 
                                       ===========  ===========  ===========  ===========   =========== 
</TABLE>
   The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
                                                                 -8-

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 ----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                           STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                           -------------------------------------------------------------------------------
                                                FOR THE YEAR ENDED DECEMBER 31, 1995
                                                -------------------------------------

                                                              Participant Directed
                                             -----------------------------------------------------
   <S>                                 <C>           <C>          <C>            <C>          <C> 
                                          Putnam
                                         Fiduciary                               The Putnam
                                       Trust Company  Putnam U.S.   The George    Fund for      Putnam
                                       Stable Value   Government    Putnam Fund  Growth and     Vista
                                           Fund      Income Trust    of Boston     Income        Fund
                                       ------------- ------------ -------------  -----------  ----------
   Additions to net assets
    attributed to:                                                                          
    Dividends and interest income         $   66,142  $   79,432    $   237,487 $   314,524   $   38,861 

    Realized gains                                   
     (losses), net                              -         87,221         88,744     160,068          672 
                                          ----------  -----------   ----------- -----------  ----------- 
            Unrealized appreciation
     (depreciation) of investments              -         (9,024)       427,496     777,724      (12,240)
     Contributions:
       Employees                              56,824      69,103        232,176     450,914       11,074 
       Employer                                 -           -              -           -            -    
                                          ----------  -----------   ----------- -----------  ----------- 
         Total contributions                  56,824      69,103        232,176     450,914       11,074 
                                          ----------  -----------   ----------- -----------  ----------- 
     Transfers, net                          345,106  (1,154,001)       (53,943)     51,678      727,678 
                                          ----------  -----------   ----------- -----------  ----------- 
     Other, net                                 -            -            -            -          -      
                                          ----------  -----------   ----------- -----------  ----------- 
   Total additions (deductions)              468,072    (927,269)       931,960   1,754,908      766,045 
                                          ----------  -----------   ----------- -----------  ----------- 
   Deductions from net assets
     attributed to:  
     Benefits paid to participants          (434,158)   (151,101)      (242,087)   (280,196)        (640)
                                          ----------  -----------   ----------- -----------  ----------- 
   Net increase (decrease)                    33,914  (1,078,370)       689,873   1,474,712      765,405 
                                          ----------  -----------   ----------- -----------  ----------- 
   Net Assets Available 
    for Benefits:
       Beginning of year                   1,149,390   1,078,370      2,493,693   3,312,674        -     
                                          ----------  -----------   ----------- -----------  ----------- 
       End of year                        $1,183,304  $     -       $ 3,183,566 $ 4,787,386   $  765,405 
                                          ==========  ===========   =========== ===========  =========== 
</TABLE>
   The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
                                                                 -9-

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 ----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                           STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                           -------------------------------------------------------------------------------  
                                                FOR THE YEAR ENDED DECEMBER 31, 1995
                                                -------------------------------------
                                                                       
                                                                                 Non-
                                                                              Participant
                                               Participant Directed            Directed
                                       -------------------------------------  -----------
   <S>                                <C>           <C>          <C>         <C>            <C>

                                          Putnam       Putnam      Common       Common
                                      International    Income       Stock        Stock
                                       Growth Fund      Fund        Fund          Fund        Total
                                       -----------  -----------   ----------  ----------    ----------
   Additions to net assets
    attributed to:                                              
    Dividends and interest income        $   2,076    $     470  $   147,466 $   452,733    $ 1,339,191 
                                       -----------  -----------  ----------- -----------    ----------- 
    Realized gains
     (losses), net                              89          278      (31,712)    (84,982)       220,378 
                                       -----------  -----------  ----------- -----------    ----------- 
            Unrealized appreciation
     (depreciation) of investments             839        1,111      (97,147)   (246,344)       842,415 
                                       -----------  -----------  ----------- -----------    ----------- 
     Contributions:
       Employees                             2,432          847       91,652        -           915,022 
       Employer                               -            -            -        482,636        482,636 
                                       -----------  -----------  ----------- -----------    ----------- 
         Total contributions                 2,432          847       91,652     482,636      1,397,658 
                                       -----------  -----------  ----------- -----------    ----------- 
     Transfers, net                        224,270      160,191     (279,647)     10,500         31,832 
                                       -----------  -----------  ----------- -----------    ----------- 
     Other, net                               -            -             217         582            799 
                                       -----------  -----------  ----------- -----------    ----------- 
   Total additions (deductions)            229,706      162,897     (169,171)    615,125      3,832,273 
                                       -----------  -----------  ----------- -----------    ----------- 
   Deductions from net assets
    attributed to:  
     Benefits paid to participants             (30)        (239)    (413,662)   (614,720)    (2,136,833)
                                       -----------  -----------  ----------- -----------    ----------- 
   Net increase (decrease)                 229,676      162,658     (582,833)        405      1,695,440 
                                       -----------  -----------  ----------- -----------    ----------- 
   Net Assets Available 
    for Benefits:
       Beginning of year                     -            -        2,739,072   7,340,155     18,113,354 
                                       -----------  -----------  ----------- -----------    ----------- 
       End of year                       $ 229,676    $ 162,658  $ 2,156,239 $ 7,340,560    $19,808,794 
                                       ===========  ===========  =========== ===========    =========== 
</TABLE>
   The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
                                                                -10-

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 ----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                           STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
                           -------------------------------------------------------------------------------
                                                FOR THE YEAR ENDED DECEMBER 31, 1994
                                                -------------------------------------
                                                                                                            Non-
                                                                                                        Participant
                                                            Participant Directed                          Directed
                                     -----------------------------------------------------------------  -----------
   <S>                               <C>           <C>           <C>           <C>         <C>          <C>           <C>
                                         Putnam
                                       Fiduciary                               The Putnam
                                     Trust Company  Putnam U.S.   The George    Fund for      Common       Common
                                      Stable Value   Government   Putnam Fund  Growth and     Stock         Stock
                                          Fund      Income Trust   of Boston     Income        Fund         Fund         Total
                                     ------------- ------------- ------------- -----------  ----------   ----------    ----------
   Additions to net assets
    attributed to:                                                                         
    Dividends and interest income       $   51,801  $    88,894   $   162,233  $   199,825 $   158,004  $   427,006   $ 1,087,763 
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
                                                   
   Realized losses, net                       -         (23,461)       (6,864)         (66)    (20,752)     (60,713)     (111,856)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
            Unrealized depreciation
       of investments                         -         (98,811)     (164,204)    (209,645)   (634,736)  (1,859,543)   (2,966,939)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
     Contributions:
       Employees                            53,792       91,679       245,201      430,814     123,277         -          944,763 
       Employer                               -            -             -            -           -         511,479       511,479 
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
         Total contributions                53,792       91,679       245,201      430,814     123,277      511,479     1,456,242 
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
     Transfers, net                        231,403     (408,181)     (86,276)       78,854     162,566      (20,510)      (42,144)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
     Other, net                               -            -            -             -           (256)        (747)       (1,003)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
   Total additions (deductions)            336,996     (349,880)      150,090      499,782    (211,897)  (1,003,028)     (577,937)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
   Deductions from net assets
     attributed to:                                             
     Benefits paid to participants         (15,553)     (14,558)      (40,954)     (18,516)    (21,411)    (352,839)     (463,831)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
   Net increase (decrease)                 321,443     (364,438)      109,136      481,266    (233,308)  (1,355,867)   (1,041,768)
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
   Net Assets Available 
    for Benefits:
       Beginning of year                   827,947    1,442,808     2,384,557    2,831,408   2,972,380    8,696,022    19,155,122 
                                        ----------  -----------   -----------  ----------- -----------  -----------   ----------- 
       End of year                      $1,149,390  $ 1,078,370   $ 2,493,693  $ 3,312,674 $ 2,739,072  $ 7,340,155   $18,113,354 
                                        ==========  ===========   ===========  =========== ===========  ===========   =========== 
</TABLE>
   The accompanying notes are an integral part of this financial statement.
<PAGE>
                                                      -11-
    
                                       CONNECTICUT NATURAL GAS CORPORATION
                                       -----------------------------------
                                                         
                                              EMPLOYEE SAVINGS PLAN
                                              ---------------------
                                                         
                                   NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
                                   -------------------------------------------

                                     AS OF DECEMBER 31, 1996, 1995, AND 1994
                                     ---------------------------------------
    
   1. Description of the Plan:
      ------------------------
    <PAGE>
      The following description of the Connecticut Natural Gas Corporation
      Employee Savings Plan (the Plan) is provided for general information
      purposes only.  More complete information regarding the Plan's provisions
      may be found in the Plan document.

      a.   General -
           -------

           The Plan is a defined contribution thrift plan open to non-union
           employees of Connecticut Natural Gas Corporation and subsidiaries
           (the Company).  The Plan was established by the Company under the
           provisions of Section 401(a) of the Internal Revenue Code (IRC), and
           it includes a qualified deferred arrangement as described in Section
           401(k) of the IRC for the benefit of eligible employees of the
           Company.  The Plan is subject to the provisions of the Employee
           Retirement Income Security Act of 1974 (ERISA).  The Plan
           Administrator is the Company.  The Compensation Committee of the
           Company's Board of Directors appointed an Administrative Committee
           to serve as manager of the Plan. Putnam Fiduciary Trust Company
           (PFTC), trustee of the Plan, holds the Plan's investments and
           executes transactions therein.
    
      b.   Eligibility -
           -----------

           Employees are eligible to participate when the following criteria
           are met:
    
         (1)    Are at least age 21.

           (2)  Are employed by the Company for one year or more.

           (3)  Have completed 1,000 hours or more of service in a 12-month
                period beginning with date of hire.

           (4)  Are on the management payroll or are subject to the Salary
                Administration Program.

           The number of employees participating in the Plan as of December 31,
           1996 and 1995 were 276 and 287, respectively.

     c.    Contributions -
           -------------

           Eligible employees may elect to participate in the Plan and
           authorize payroll deductions of not less than 1% and not greater
           than 26% of basic earnings as savings contributions to their
           accounts during each year, subject to the limits under Section 415
           of the IRC.  

           The Company will match a percentage of an employee's compensation
           depending on age or years of continuous service.  The amount of the
           Company contribution will be determined according to the schedule
           below.  However, if an employee's elected savings allotment is less
           than the percentage contained in the schedule, the Company will
           match no more than the percentage contributed by the employee.<PAGE>

                                                 -12-

           As of December 31, 1996, if an employee's:

      Years of Continuous
          Service are          Or      Age is     The Company Will Contribute
     --------------------      --      ------     ---------------------------
              30                         50            6% of compensation
              20                         45          4-1/2% of compensation
              10                         35            3% of compensation
         Less than l0                 Under 35         2% of compensation

      d.   Investment Options -
           ------------------

           Plan participants direct their contributions among various
           investment options in 5% increments, and they may elect to change
           their investment options once during each calendar quarter.  A
           description of each investment option is provided below:

           (1) PUTNAM FIDUCIARY TRUST COMPANY STABLE VALUE FUND - This fund
               preserves principal and seeks to achieve a high current income
               through a diversified portfolio of high-quality investment
               contracts. The average yield of the fund was 5.74% for the year
               ended December 31, 1996. 

           (2) PUTNAM U.S. GOVERNMENT INCOME TRUST - This mutual fund seeks
               current income through a portfolio of securities backed by the
               full faith and credit of the United States Government.

           (3) THE GEORGE PUTNAM FUND OF BOSTON - This mutual fund seeks a
               balance of capital growth and current income through a
               diversified portfolio of common stocks and bonds.

           (4) THE PUTNAM FUND FOR GROWTH AND INCOME - This mutual fund seeks
               capital growth and current income through a portfolio of income-
               producing common stocks.

           (5) PUTNAM VISTA FUND - This mutual fund seeks to invest in a
               variety of stocks of mostly medium-sized companies, widely
               traded larger companies and, small, less well-known companies
               that have the potential for above-average growth.

           (6) PUTNAM INTERNATIONAL GROWTH FUND - This mutual fund seeks
               appreciation of investments through a diversified collection of
               stocks in companies located outside North America.

           (7) PUTNAM INCOME FUND - This mutual fund invests in a variety of
               bonds with an emphasis on corporate bonds and selected below-
               investment-grade bonds.

           (8) COMMON STOCK FUND - This fund seeks to provide current income
               and capital appreciation through investment in the common stock
               of the Company purchased at not more than fair market value.

           The Putnam Income Fund, Putnam International Growth Fund, and Putnam
           Vista Fund were added as investment options on December 6, 1995, and
           at the same time the Putnam U.S. Government Income Trust was
           eliminated as an option.  Plan participants were required to move
           any money invested in the latter fund to one of the other investment
           options by December 22, 1995.<PAGE>
           All Company matching contributions are invested in the Common Stock
           Fund.  Beginning on March 1, 1996 and continuing on a quarterly
           basis through October 1, 1999, the Plan Administrator has directed
           that portions of the non-participant directed Common Stock Fund be
           transferred to the participant directed Common Stock Fund based upon
           a predetermined schedule.  These transfers are scheduled to take
           place on January 1, April 1, July 1, and October 1 of each year,
           with the exception of 1996 for which the March 1 transfer was in
           lieu of the April 1 transfer.  Following the transfers, Plan
           participants will have the discretion of investing the transferred
           shares of common stock in the same manner as the other amounts under



                                       -13-

           their direction in the various participant directed funds.  Also,
           effective March 1, 1996, all Company matching contributions are
           being invested in the participant directed Common Stock Fund.
    
           In addition to transfers between the various funds noted above as a
           result of investment elections made by Plan participants, transfers
           are also made to or from the Union Employee Savings Plan for those
           employees who transfer to (from) one of the Company's collective
           bargaining units.

       e.  Vesting -
           -------

           Participants are fully vested in their contributions and the
           earnings thereon.  Participants are vested in the Company matching
           contributions and the earnings thereon as follows:

<TABLE>
               <S>                                               <C>
               Years of Continuous Service are                   Percentage Vested
               -------------------------------                   -----------------
               Less than 1                                               0%                  
               1 but less than 2                                        20                   
               2 but less than 3                                        40                   
               3 but less than 4                                        60                   
               4 but less than 5                                        80                   
               5 or more                                               100                   
</TABLE>
           Participants also become fully vested in their Company matching
           contribution account if any one of the following occurs:
    
           (1) Death

           (2) Disability

           (3) Attainment of age 65 (normal retirement date)

           (4) Total or partial termination of the Plan

           (5) Discontinuance of Company contributions to the Plan
    
       Upon termination of employment before full vesting, the non-vested 
          Company match portion of a participant's common stock account shall
          be forfeited after five years if the participant is not rehired and
          applied as a credit against the employer's future contributions.

       f. Benefits -
          --------
          Upon termination of employment due to retirement, disability, or
          death, a participant (or his/her beneficiary) may elect to receive a
          lump-sum distribution equal to the value of the participant's vested
          interest in his/her account as soon as practicable following the
          termination date or defer the distribution to some future date.

          Participants may request the withdrawal of certain account balances
          prior to termination of employment.  Application for withdrawal of
          after-tax contributions and employee IRA contributions may be made
          once a year.  There are no Plan penalties for such withdrawals.
    
       g. Participant Accounts -
          --------------------

          Individual accounts are maintained for each of the Plan's
          participants to reflect the participant's share of the Plan's income
          and the participant's and the Company's contributions.  Allocations
          of Plan income are based on the share balances in the participants'
          accounts.



                                       -14-

       h. Use of Estimates in the Preparation of Financial Statements -
          -----------------------------------------------------------

          The preparation of financial statements in conformity with generally
          accepted accounting principles and the Department of Labor Rules and
          Regulations for Reporting and Disclosure under the Employee
          Retirement Income Security Act of 1974 requires management to make
          estimates and assumptions that affect the reported amounts of assets
          and liabilities at the date of the financial statements and the
          reported amounts of income and expense during the reporting period.  
          Actual results could differ from those estimates.




   2.  Summary of Significant Accounting Policies:
       ------------------------------------------
    
       a. Basis of Accounting -
          -------------------
    
          The accompanying financial statements have been prepared on the
          accrual basis of accounting.

       b. Income Recognition -
          ------------------

          Dividend income is recorded on the ex-dividend date.  Interest income
          is recorded as earned.

       c. Investment Valuation -
          --------------------

          The Plan's investments are reflected at current value.  The shares of
          the Common Stock Fund and the Putnam mutual funds owned by the Plan,
          with the exception of the PFTC Stable Value Fund, are valued at
          market as determined by the quoted market price as of the last
          business day of the year.  The latter fund is valued at contract<PAGE>
          value (cost plus accumulated earnings) which approximates current
          value.  Purchases and sales of securities are reflected on a trade
          date basis.  Realized and unrealized appreciation (depreciation)
          presented in the statement of changes in net assets available for
          benefits with fund information are computed based on the change in
          the current value of the Plan assets from year to year.  

       d. Administrative Expenses -
          -----------------------

          Administrative expenses of the Plan may be paid by either the Company
          or the Plan.  During 1996, 1995, and 1994 the Company paid all
          administrative expenses relating to the Plan.

   3.  Federal Income Tax Status:
       -------------------------
    
       In 1994 the Plan was amended and restated to meet the requirements of
       the Tax Reform Act of 1986, and the Plan received a favorable
       determination letter from the Internal Revenue Service dated September 
       19, 1994.  The Plan has been amended since receiving the determination
       letter.  However, the Plan Administrator and management believe that 
       the Plan is designed and is currently being operated in compliance with
       the applicable requirements of the IRC.  Therefore, they believe that
       the Plan was qualified and the related trust was tax-exempt through the
       year ended December 31, 1996.  






                                       -15-

   4.  Investments:
       -----------
    
       The fair market values of individual assets that represent 5% or more of
       the Plan's net assets as of December 31, 1996 and 1995 are as follows:

       1996:
         Connecticut Natural Gas Corporation
           common stock                                  $ 9,790,721
         The Putnam Fund for Growth and Income             5,778,562    
         The George Putnam Fund of Boston                  3,553,346   
         Putnam Vista Fund                                 1,653,502
    

     
       1995:
         Connecticut Natural Gas Corporation
           common stock                                  $ 9,453,449
         The Putnam Fund for Growth and Income             4,759,631     
         The George Putnam Fund of Boston                  3,170,234
         Putnam Fiduciary Trust Company 
           Stable Value Fund                               1,179,925    
          

   5.    Concentration of Credit Risk:
         ----------------------------
    
         The Plan's assets are invested in mutual funds managed by Putnam<PAGE>
         Investments, Inc., as described in Note 1, and the Company's common
         stock.  In the event of any uncertainties in the financial marketplace
         the Plan may be exposed to financial risks.

   6.    Subsequent Event:
         ----------------

         Effective as of the close of business on March 31, 1997, CTG
         Resources, Inc. (CTG) became the holding company and parent of
         Connecticut Natural Gas Corporation (CNG).  Pursuant to this change in
         corporate organization and an Agreement and Plan of Exchange, dated as
         of December 20, 1996, by and between CTG and CNG, all outstanding
         shares of common stock of CNG, including those shares held by the
         Plan, were exchanged for shares of common stock of CTG.

   7.    Reconciliation to Form 5500:
         ---------------------------

         As of December 31, 1996, the Plan had a $43,307 pending distribution
         to a participant who elected to withdraw from the Plan and $5,297 of
         contributions from participants which were in excess of the amounts
         allowed by Section 415 of the IRC.  These amounts are recorded as
         liabilities in the Plan's Form 5500; however, they are not recorded as
         liabilities in the accompanying statement of net assets available for
         benefits in accordance with generally accepted accounting principles.

         The following table reconciles net assets available for benefits per
         the financial statements to the Form 5500 as filed by the Company for
         the year ended December 31, 1996.

                                       Benefits                    Net Assets
                                      Payable to        Other      Available
                                     Participants    Liabilities  For Benefits
                                     ------------    -----------  ------------

       Per financial statements        $  -             $ -       $22,323,294
       Accrued benefit payments         43,307            -           (43,307)
       Excess contributions
         refundable to Plan
         participants                     -              5,297         (5,297) 
                                       -------          ------    ----------- 

       Per Form 5500                   $43,307          $5,297    $22,274,690
                                       =======          ======    =========== 
<PAGE>
<TABLE>
<CAPTION>
                                                 -16-
                                                                                         Schedule I
                                                                                     EIN 06-0383860
                                                                                             PN 007
                                  CONNECTICUT NATURAL GAS CORPORATION
                                  -----------------------------------
                                         EMPLOYEE SAVINGS PLAN
                                         ---------------------
                      ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
                      ----------------------------------------------------------
                                        AS OF DECEMBER 31, 1996
                                        ------------------------
   <S>                                           <C>                             <C>            <C>
                                                    Description of Investment
                                                  Including Maturity Date, Rate
       Identity of Issue, Borrower, Lessor, or     of Interest, Collateral, Par                  Current
                    Similar Party                       or Maturity Value           Cost          Value
       ---------------------------------------    -----------------------------   ---------     -----------
   *Putnam Fiduciary Trust Company Stable Value   Fund comprised of             
     Fund                                         investment contracts           $ 1,010,028    $ 1,010,028  
                                                                                 -----------    -----------  
   *The George Putnam Fund of Boston              Mutual fund comprised of      
                                                   common stocks and bonds         3,123,397      3,553,346  
                                                                                 -----------    -----------  
   *The Putnam Fund for Growth and Income         Mutual fund comprised of                   
                                                    common stocks                  4,674,651      5,778,562  
                                                                                 -----------    -----------  
   *Putnam Vista Fund                             Mutual fund comprised of
                                                    common stocks                  1,539,916      1,653,502  
                                                                                 -----------    -----------  
   *Putnam International Growth Fund              Mutual fund comprised of
                                                    common stocks                    377,049        422,679  
                                                                                 -----------    -----------  
   *Putnam Income Fund                            Mutual fund comprised of
                                                    bonds                            117,086        115,529  
                                                                                 -----------    -----------  
                                                  Participant directed -
   *Connecticut Natural Gas Corporation             Common stock                   3,960,445      4,762,743  
   *Boston Safe Company                             Daily Liquidity Fund               8,564          8,564  
                                                                                 -----------    -----------  
                                                                                   3,969,009      4,771,307  
                                                                                 -----------    -----------  
                                                  Non-participant directed -
   *Connecticut Natural Gas Corporation             Common stock                   4,161,029      5,027,978  
   *Boston Safe Company                             Daily Liquidity Fund              (5,077)        (5,077) 
                                                                                 -----------    -----------  
                                                                                   4,155,952      5,022,901  
                                                                                 -----------    -----------  
                                                    Total Common Stock Fund        8,124,961      9,794,208  
                                                                                 -----------    -----------  
                                                    Total Investments            $18,967,088    $22,327,854  
                                                                                 ===========    ===========  
</TABLE>
   *Represents a party-in-interest for the year ended December 31, 1996.

           The accompanying notes are an integral part of this schedule.
<PAGE>
<TABLE>
<CAPTION>
                                                                -17-
                                                                                                                      Schedule II
                                                                                                                   EIN 06-0383860
                                                                                                                           PN 007
                                                                                                                      Page 1 of 2
                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 -----------------------------------
                                                        EMPLOYEE SAVINGS PLAN<PAGE>
                                                        ---------------------
                                           ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
                                           ----------------------------------------------
                                                FOR THE YEAR ENDED DECEMBER 31, 1996
                                                ------------------------------------
                                                                                                                        

          <S>                     <C>                    <C>         <C>          <C>            <C>        <C>
                                                                                                               Expense
                Identity of             Description        Number of    Purchase     Selling       Lease    Incurred With
               Party Involved            of Asset        Transactions     Price       Price       Rental     Transaction
               --------------            --------        ------------   ---------   ---------     -------    -----------
          Putnam Vista Fund       Mutual fund comprised      136      $  917,447  $     -        $   -         $   -   
                                    of common stocks          22            -        139,216         -             -   

          The George Putnam       Mutual fund comprised       73         626,226        -            -             -   
            Fund of Boston          of common stocks and      39            -        434,369         -             -   
                                    bonds

          The Putnam Fund for     Mutual fund comprised       97       1,140,670        -            -             -   
            Growth and Income       of common stocks          54            -        677,210         -             -   

          Connecticut Natural     Common stock                27       3,625,890        -            -             -   
            Gas Corporation                                  101            -      4,129,240         -             -   


</TABLE>
    
           The accompanying notes are an integral part of this schedule.
<PAGE>
<TABLE>
<CAPTION>
                                                                -18-
                                                                                                                      Schedule II
                                                                                                                   EIN 06-0383860
                                                                                                                           PN 007
                                                                                                                      Page 2 of 2

                                                 CONNECTICUT NATURAL GAS CORPORATION
                                                 -----------------------------------
                                                        EMPLOYEE SAVINGS PLAN
                                                        ---------------------
                                           ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
                                           ----------------------------------------------
                                                FOR THE YEAR ENDED DECEMBER 31, 1996
                                                ------------------------------------
                                                                                                                        

          <S>                     <C>                      <C>            <C>             <C>
                                                                          Current Value
                                                                           of Asset on
                Identity of             Description           Cost of      Transaction     Net Gain
               Party Involved            of Asset              Asset          Date        or (Loss)
               --------------            --------            ---------     -----------     --------
          Putnam Vista Fund       Mutual fund comprised     $  917,447    $  917,447       $   -   
                                    of common stocks           118,179       139,216         21,037

          The George Putnam       Mutual fund comprised        626,226       626,226           -   
            Fund of Boston          of common stocks and       379,490       434,369         54,879
                                    bonds

          The Putnam Fund for     Mutual fund comprised      1,140,670     1,140,670           -   
            Growth and Income       of common stocks           543,936       677,210        133,274

          Connecticut Natural     Common stock               3,625,890     3,625,890           -   
            Gas Corporation                                  3,574,820     4,129,240        554,420

</TABLE>

    
           The accompanying notes are an integral part of this schedule.
                                          <PAGE>