<PAGE> 1
Registration Statement No.33-63927
811-07411
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 1
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
----------------------------------------------------
(Exact Name of Trust)
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Name of Depositor)
One Tower Square, Hartford, Connecticut 06183
---------------------------------------------
(Complete Address of Depositor's Principal Executive Offices)
Ernest J. Wright
Secretary
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
---------------------------
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on __________pursuant to paragraph (a)(1) of Rule 485.
Check the box if it is proposed that this filing will become effective
/ / on _______ at_____ pursuant to Rule 487. ______
AN INDEFINITE AMOUNT OF VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS WAS
REGISTERED PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940. A RULE
24f-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 WAS FILED ON FEBRUARY
28, 1997.
<PAGE> 2
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 Cover page
2 Cover page
3 Not applicable
4 The Insurance Company; Distribution
5 The Travelers Fund UL for Variable Life Insurance
6 The Travelers Fund UL for Variable Life Insurance
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Insurance Company; The Travelers Fund
UL for Variable Life Insurance, The Investment Options; The
Policy; Transfers of Cash Value; Cash Value and Cash Surrender
Value; Voting Rights; Disregard of Voting Rights; Dividends;
Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution of the Policies
14 The Policy
15 Prospectus Summary; Allocation of Premium Payments
16 The Investment Options; Allocation of Premium Payments
17 Prospectus Summary; Right to Cancel Period; Cash Value and
Cash Surrender Value; Policy Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax
Considerations; Dividends
19 Statements to Policy Owners
20 Not applicable
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Insurance Company
26 Not applicable
27 The Insurance Company
28 The Insurance Company; Management
29 The Insurance Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Insurance Company; Distribution of the Policies
36 Not applicable
37 Not applicable
38 Distribution of the Policys
39 The Insurance Company; Distribution of the Policies
40 Not applicable
41 The Insurance Company; Distribution of the Policies
42 Not applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
43 Not applicable
44 Allocation of Premium Payments; Accumulation Unit Values
45 Not applicable
46 Cash Value and Cash Surrender Value
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Insurance Company; The Policy; Death
Benefits and Lapse and Reinstatement
52 The Investment Options; Substitution
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 4
THE TRAVELERS LIFE AND ANNUITY COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE: (800) 334-4298
THE TRAVELERS MARKETLIFESM
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
PROSPECTUS
MAY 1, 1997
This Prospectus describes The Travelers MarketLifesm, an individual variable
universal (flexible premium) life insurance Policy (the "Policy") offered by The
Travelers Life and Annuity Company (the "Company") and funded by The Travelers
Fund UL II for Variable Life Insurance ("Fund UL II"). A Policy Owner may choose
the amount of life insurance coverage desired with a minimum Stated Amount of
$50,000. The premium payment may be allocated by the Policy Owner to one or more
of the mutual funds underlying Fund UL II (the "Investment Options").
The Policy has a Right to Cancel Period during which the Applicant may return
the Policy to the Company for a refund. The Right to Cancel Period expires on
the latest of ten days after you receive the Policy, ten days after we mail or
deliver to you a written Notice of Right to Cancel, or 45 days after the
Applicant signs the application for insurance.
There is no guaranteed minimum Cash Value for a Policy. The Cash Value of the
Policy will vary to reflect the investment performance of the Investment Options
to which premium payments have been allocated, and the Policy Owner bears the
investment risk for all amounts so allocated. Additionally, the Cash Value is
reduced by the various fees and charges assessed under the Policy, as set forth
in this Prospectus. The Policy will remain in effect for as long as the Cash
Surrender Value is sufficient to pay the monthly charges imposed under the
Policy subject to the Continuation of Insurance provision of the Policy, or for
such longer period as may be provided under the Lapse Protection Guarantee.
A Policy Owner will have two options with respect to the death benefit under the
Policy -- the "Level Option" and the "Variable Option." Under either option, the
death benefit will never be less than the Stated Amount (less any outstanding
Policy loans or Monthly Deduction Amounts due and unpaid). A Policy Owner may
also elect to change the death benefit option, subject to certain conditions.
It may not be advantageous to replace your existing life insurance policy or
supplement an existing flexible premium variable life insurance policy with the
Policy described in this Prospectus.
This Policy may be or become a modified endowment Policy under federal tax law.
If it is classified as a modified endowment Policy, any partial withdrawal,
Policy surrender or loan may result in adverse tax consequences or penalties.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
EACH OF THE INVESTMENT OPTIONS. EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE
INCLUDED WITH THE PACKAGE CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED
OR GUARANTEED BY ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.................................................... Glossary 1-2
PROSPECTUS SUMMARY........................................................... Summary 1-3
THE INSURANCE COMPANY........................................................ 1
THE POLICY................................................................... 1
The Policy Application..................................................... 1
Beneficiary................................................................ 2
Assignment................................................................. 2
Allocation of Premium Payments............................................. 2
Right to Cancel............................................................ 2
Statements to Policy Owners................................................ 2
CHARGES AND DEDUCTIONS....................................................... 3
Charges Against Premium.................................................... 3
Front-End Sales Charge.................................................. 3
State Premium Tax Charge................................................ 3
Monthly Deduction Amount................................................... 3
Cost of Insurance Charge................................................ 3
Policy Administrative Charge............................................ 3
Charges for Supplemental Benefit Provisions............................. 4
Charges Against the Separate Account....................................... 4
Mortality and Expense Risk Charge....................................... 4
Administrative Expense Charge........................................... 4
Charges Against the Investment Options..................................... 4
Surrender Charges.......................................................... 4
Percent of Premium Charge............................................... 4
Per Thousand of Stated Amount Charge.................................... 5
Maximum Sales Charges...................................................... 5
Reduction or Elimination of Charges........................................ 6
Transaction Charge......................................................... 6
POLICY BENEFITS AND RIGHTS................................................... 6
Cash Value and Cash Surrender Value........................................ 6
Policy Loans............................................................... 7
Lapse and Reinstatement.................................................... 7
Lapse Protection Guarantee................................................. 8
Exchange Rights............................................................ 8
Death Benefit.............................................................. 8
Changes in Death Benefit Option......................................... 10
Payment Options......................................................... 10
Limit on Right to Contest and Suicide Exclusion......................... 11
Misstatement as to Sex and Age.......................................... 11
Changes in Stated Amount................................................ 11
Maturity and Maturity Extension Benefits................................ 12
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
THE SEPARATE ACCOUNT AND THE INVESTMENT OPTIONS.............................. 12
The Travelers Fund UL II for Variable Life Insurance (Fund UL II).......... 12
The Investment Options..................................................... 12
General.................................................................... 17
Accumulation Unit Values................................................... 18
Mixed and Shared Funding................................................... 18
Substitution............................................................... 18
TRANSFER OF CASH VALUE....................................................... 19
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS).................................. 19
PERFORMANCE INFORMATION...................................................... 19
MISCELLANEOUS................................................................ 22
Voting Rights.............................................................. 22
Disregarding Voting Instructions........................................... 23
Suspension of Valuation.................................................... 23
Dividends.................................................................. 23
Distribution............................................................... 23
Legal Proceedings and Opinion.............................................. 23
Independent Accountants.................................................... 24
Registration Statement..................................................... 24
FEDERAL TAX CONSIDERATIONS................................................... 24
General.................................................................... 24
TAX STATUS OF THE POLICY..................................................... 24
Definition of Life Insurance............................................... 24
Diversification............................................................ 25
Investor Control........................................................... 25
TAX TREATMENT OF POLICY BENEFITS............................................. 26
In General................................................................. 26
Modified Endowment Contracts............................................... 26
Exchanges.................................................................. 26
Policies which are not Modified Endowment Contracts........................ 27
Treatment of Loan Interest................................................. 27
Aggregation of Modified Endowment Contracts................................ 27
The Company's Income Taxes................................................. 27
MANAGEMENT................................................................... 28
ILLUSTRATIONS................................................................ 29
APPENDIX..................................................................... 35
A -- Annual Minimum Premiums............................................... 35
B, B(1), B(2) -- Surrender Charges......................................... 36-38
C -- Current Monthly Administrative Charge................................. 39-40
C(1) -- Guaranteed Monthly Administrative Charge........................... 41
Financial Statements
</TABLE>
<PAGE> 7
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the Investment Options.
ANNUAL MINIMUM PREMIUM -- the Policy Owner must pay a first premium greater than
or equal to one-quarter of this amount for the Policy to be issued. (Please
refer to Appendix A.)
BENEFICIARY(IES) -- the person(s) named to receive the death benefits of this
Policy at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding Policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers Life
and Annuity Company located at One Tower Square, Hartford, Connecticut 06183.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the Portfolios to which you may allocate premiums or Cash
Value through segments of the Separate Account available under Fund UL II.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner.
LAPSE PROTECTION GUARANTEE -- a benefit which provides that the Policy will not
lapse during the first three Policy Years if a required amount of premium is
paid.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any Policy loan, and to which we credit a fixed rate of interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
95.
MINIMUM AMOUNT INSURED -- the amount of Death Benefit required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- the amount of charges deducted from the Policy's
Cash Value which includes cost of insurance charges, administrative charges, and
any charges for supplemental benefits.
MONTHLY PREMIUM THRESHOLD -- an amount shown on the Policy Summary page, the
cumulative amount of which must be paid during the first three Policy Years in
order for the Lapse Protection Guarantee to be in effect.
NET AMOUNT AT RISK -- an amount equal to the death benefit minus the Cash Value.
NET PREMIUM -- the amount of each premium payment applied to purchase
Accumulation Units under the Policy, less the deduction of front-end sales
charges and premium tax charges.
PLANNED PREMIUM -- the amount of premium which the Policy Owner chooses to pay
to the Company on a scheduled basis, and for which the Company will bill the
Policy Owner, either annually, semiannually or through automatic monthly
checking account deductions.
POLICY DATE -- the date on which the Policy, benefits and provisions of the
Policy become effective.
POLICY MONTH -- monthly periods computed from the Policy Date.
Glossary-1
<PAGE> 8
POLICY OWNER (YOU, YOUR OR OWNER) -- the person having rights to benefits under
the Policy during the lifetime of the Insured; the Policy Owner may or may not
be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT -- assets set aside by The Travelers Life and Annuity Company,
the investment experience of which is kept separate from that of other assets of
The Travelers Life and Annuity Company; for example, The Travelers Fund UL II
for Variable Life Insurance.
STATED AMOUNT -- the amount originally selected by the Policy Owner used to
determine the Death Benefit, or as may be increased or decreased as described in
this Prospectus.
VALUATION DATE -- a day on which the Separate Account is valued. A Valuation
Date is any day on which the New York Stock Exchange is open for trading. The
value of Accumulation Units will be determined as of the close of trading on the
New York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
Glossary-2
<PAGE> 9
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
WHAT IS VARIABLE UNIVERSAL LIFE INSURANCE?
The Flexible Premium Variable Universal Life Insurance Policy is designed to
provide insurance protection on the life of the Insured and to build Cash Value.
Like other life insurance it provides an income-tax free death benefit that is
payable to the Beneficiary upon the Insured's death. Unlike traditional,
fixed-premium life insurance, the Policy allows you, as the Owner, to allocate
your premium, or transfer Cash Value to various Investment Options. These
Investment Options include equity, bond, money market and other types of
portfolios. Your Cash Value may increase or decrease daily, depending on
investment return. There is no minimum amount guaranteed as it would be in a
traditional life insurance policy.
SUMMARY OF MARKETLIFE FEATURES
INVESTMENT OPTIONS: You have the ability to choose from a wide variety of
well-known Investment Options. These professionally managed stock, bond and
money market funding options cover a broad spectrum of investment objectives and
risk tolerance. Currently, the following Investment Options (subject to state
availability) are available under Fund UL II:
<TABLE>
<S> <C> <C> <C>
AIM CAPITAL APPRECIATION PORTFOLIO TEMPLETON ASSET ALLOCATION FUND
ALLIANCE GROWTH PORTFOLIO TEMPLETON BOND FUND
DREYFUS STOCK INDEX FUND TEMPLETON STOCK FUND
FIDELITY VIP EQUITY-INCOME PORTFOLIO TRAVELERS CAPITAL APPRECIATION FUND
FIDELITY VIP GROWTH PORTFOLIO TRAVELERS CASH INCOME TRUST
FIDELITY VIP HIGH INCOME PORTFOLIO TRAVELERS MANAGED ASSETS TRUST
TRAVELERS U.S. GOVERNMENT SECURITIES
FIDELITY VIP II ASSET MANAGER PORTFOLIO PORTFOLIO
MFS TOTAL RETURN PORTFOLIO TRAVELERS ZERO COUPON BOND PORTFOLIO 1998
SMITH BARNEY HIGH INCOME PORTFOLIO TRAVELERS ZERO COUPON BOND PORTFOLIO 2000
SMITH BARNEY INCOME AND GROWTH PORTFOLIO TRAVELERS ZERO COUPON BOND PORTFOLIO 2005
SMITH BARNEY TOTAL RETURN PORTFOLIO UTILITIES PORTFOLIO
</TABLE>
For more information, including the investment objectives and investment
advisers, refer to page 12, and the prospectuses for each Investment Option.
PREMIUMS: When applying for your Policy, you state how much you intend to pay,
and whether you will pay annually, semiannually or monthly via checking account
deductions. You may also make unscheduled premium payments in any amount. No
premium payments will be accepted if receipt of such premiums would disqualify
the Policy as life insurance under applicable federal tax laws.
You indicate on your application what percentage of each Net Premium you would
like allocated to the Investment Options. You may change your allocations by
writing to the Company or by calling 1-800-334-4298.
During the underwriting period, any premium paid will be held in a non-interest
bearing account. After the Policy Date and until the applicants' right to cancel
has expired, your Net Premium will be invested in Cash Income Trust. After that,
the value will be distributed to each Investment Option in the percentages
indicated on your application.
RIGHT TO EXAMINE POLICY: You may return your Policy for any reason and receive a
full refund of your premium by mailing us the Policy and a written request for
cancellation within a specified period (p. 2).
Summary-1
<PAGE> 10
CHARGES AND DEDUCTIONS: Your Policy is subject to the following charges, which
compensate the Company for administering and distributing the Policy as well as
paying Policy benefits and assuming related risks:
POLICY CHARGE
- - Premium Expense Charge -- A sales charge and a premium tax charge are applied
to each premium based on the size of your Policy.
<TABLE>
<CAPTION>
TOTAL
SALES PREMIUM PREMIUM
STATED AMOUNT CHARGE TAX EXPENSE
------------------------- ------ ------- -------
<S> <C> <C> <C>
less than $500,000 2.5% 2.5% 5.0%
$500,000 to $999,999 2.0% 2.5% 4.5%
$1,000,000 and over 0% 2.5% 2.5%
</TABLE>
This charge pays some distribution expenses and state and local premium taxes
(p. 3).
- - Monthly Deduction -- deductions taken from the value of your Policy each month
to cover cost of insurance charges, Policy administrative charges and charges
for optional benefits (p. 3).
- - Surrender Charge -- applies if you surrender your Policy for its full Cash
Value or the Policy lapses, during the first 10 years and for 10 years after
requesting an increase in coverage. The surrender charge consists of a percent
of premium charge and a per thousand of face amount charge (p. 4).
- - Partial Surrender Charge -- applies if you surrender part of the value of your
Policy (p. 4).
ASSET-BASED CHARGES
- - Mortality and Expense Risk Charge -- applied to the assets of the Investment
Options on a daily basis which equals an annual rate of .80% for the first
fifteen years and .45% thereafter (p. 4).
- - Administrative Charge -- applies to the assets of the Investment Options on a
daily basis which equals an annual rate of .10% for the first fifteen years
and 0% thereafter (p. 3).
- - Fund Investment Management Fees -- the purchase of shares of the Investment
Options happens on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses.
DEATH BENEFITS: At time of application, you select a death benefit option. Under
certain conditions you may be able to change the death benefit option at a later
date. The options available are:
- - Level Option (Option 1): the death benefit will be equal to the Stated Amount
or the Minimum Amount Insured.
- - Variable Option (Option 2): the death benefit will be equal to the greater of
the Stated Amount of the Policy plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of insurance policies, MarketLife will
accumulate a Cash Value. The Cash Value of the Policy will increase or decrease
to reflect the investment experience of the Investment Options. Monthly charges
and any partial surrenders taken will also decrease the Cash Value. There is no
minimum guaranteed Cash Value.
ACCESS TO POLICY VALUES: You may borrow against your Policy's Cash Surrender
Value. The maximum loan amount allowable is 90% of the Cash Surrender Value.
After year 13, the Company offers zero net cost loans (p. 7).
You may cancel a portion of your Policy while the Insured is living and receive
a portion of the Cash Surrender Value. You may also cancel the entire Policy to
receive the full Cash Surrender Value. Depending on the amount of time the
Policy has been in force, there may be a charge for the partial or full
surrender (p. 4).
Summary-2
<PAGE> 11
TRANSFERS OF POLICY VALUES: You may transfer all or a portion of your Cash Value
among the Investment Options. You may do this by writing to the Company or
calling 1-800-334-4298 (p. 19).
You can use automated transfers to take advantage of dollar cost
averaging -- investing a fixed amount at regular intervals. For example, you
might have a set amount transferred from a relatively conservative Investment
Option to a more aggressive one, or several others (p. 19).
LAPSE PROTECTION GUARANTEE: This guarantees that, regardless of the performance
of the Investment Options that you select, your Policy will remain in effect for
the first three Policy Years. You are required to pay at least the cumulative
applicable Monthly Premium Threshold displayed on your Policy's Contract Summary
page. Any loans or partial surrenders are deducted from premium paid to
determine if the Lapse Protection Guarantee is in effect.
GRACE PERIOD: If the Cash Surrender Value of your Policy becomes less than the
amount needed to pay the Monthly Deduction Amount, and the lapse protection
rider is not in effect, you will have 61 days to pay a premium that is
sufficient to cover the Monthly Deduction Amount. If the premium is not paid,
your Policy will lapse.
EXCHANGE RIGHTS: During the first two Policy Years, you can exchange this Policy
for one that provides benefits that do not vary with the investment return of
the Investment Options (p. 8).
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary (p. 26). At any point in time,
the Policy may become a modified endowment contract ("MEC"). A MEC has an
income-first taxation of all loans, pledges, collateral assignments or partial
surrenders. A 10% penalty tax may be imposed on such income distributed before
the Policy Owner attains age 59 1/2. The Company has established safeguards for
monitoring whether a Policy may become a MEC (p. 26).
Summary-3
<PAGE> 12
THE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Travelers Life and Annuity Company (the "Company") is a stock insurance
company which has been continuously engaged in the insurance business since its
incorporation in the state of Connecticut in 1973. The Company writes individual
life insurance and individual and group annuity contracts on a non-participating
basis, and acts as depositor for Fund UL II. The Company is licensed to conduct
life insurance business in a majority of the states of the United States, and
intends to seek licensure in the remaining states, except New York. The
Company's obligations as depositor for Fund UL II may not be transferred without
notice to and consent of Policy Owners.
The Company is a wholly owned subsidiary of The Travelers Insurance Company,
which is an indirect wholly owned subsidiary of Travelers Group Inc. The
Company's principal executive offices are located at One Tower Square, Hartford,
Connecticut 06183, telephone number (860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Commissioner of Insurance. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner, and a
full examination of its operations is conducted at least once every four years.
In addition, the Company is subject to the insurance laws and regulations of any
jurisdiction in which it sells its insurance policies, as well as to various
federal and state securities laws and regulations.
THE POLICY
- --------------------------------------------------------------------------------
The Policy described in this Prospectus is both an insurance product and a
security. The Policy is first and foremost a life insurance Policy with death
benefits, Cash Values and other features traditionally associated with life
insurance. The Policy is deemed to be "variable" because unlike the fixed
benefits of an ordinary whole life insurance Policy, the Cash Value and, under
certain circumstances, the Death Benefit of the Policy may increase or decrease
depending on the investment experience of the Investment Options to which the
Premium Payment has been allocated. As an insurance product, the Policy is
subject to the insurance laws and regulations of each state or jurisdiction in
which it is available for distribution.
THE POLICY APPLICATION
Individuals wishing to purchase a Policy must submit an application to the
Company. As with traditional insurance Policies, a Policy Owner may state the
amount of insurance desired (the "Stated Amount"), which amount may not be less
than $50,000. A Policy Owner may request an increase or decrease in the Stated
Amount of the Policy in writing from time to time. (See "Changes in Stated
Amount," page 11.) No change in the terms or conditions of the Policy will be
made without the consent of the Policy Owner.
A Policy will be issued only on the life of an Insured who supplies evidence of
insurability satisfactory to the Company. Acceptance is subject to the Company's
underwriting rules.
No premium payments will be accepted if receipt of such premiums would
disqualify the Policy as life insurance.
Insurance coverage under a Policy will begin only after the Applicant has
satisfied all outstanding underwriting delivery requirements, and after the
Company has received the first premium. The Policy Date is the date used to
determine all future cyclical transactions on the Policy, e.g., Deduction Dates,
Policy Months and Policy Years. The Policy Date may be prior to, or the same
date as, the date on which the Policy is issued (the "Issue Date"). During the
underwriting period, any premium paid under the Policy will be held in a
non-interest bearing suspense account.
1
<PAGE> 13
BENEFICIARY
The Applicant names the Beneficiary in the application for the Policy. The
Policy Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by sending a written request to the Company. If no
Beneficiary is living when the Insured dies, the Death Benefit will be paid to
the Policy Owner, if living; otherwise, the Death Benefit will be paid to the
Policy Owner's estate.
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. The
Company is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
ALLOCATION OF PREMIUM PAYMENTS
The first premium will be applied to the Policy on the later of the Policy Date
or the date it is received at the Company's Home Office. During the Applicant's
Right to Cancel Period, the Company will allocate Net Premiums to the Cash
Income Trust. At the end of the Applicant's Right to Cancel Period, the account
value in Cash Income Trust will be allocated (in whole percentages) among the
Investment Option(s) selected on the Application to purchase Accumulation Units.
Net Premium payments received on or after the expiration of the Applicant's
Right to Cancel Period will be allocated among the Investment Options to
purchase Accumulation Units in such Investment Options as directed by the Policy
Owner or, in the absence of directions, as stated in the original application.
The number of Accumulation Units of each Investment Option to be credited to the
Policy once a Premium Payment has been received by the Company will be
determined by dividing the Premium Payment applied to the Investment Option by
the Accumulation Unit Value of the Investment Option next computed following
receipt of the payment.
RIGHT TO CANCEL
An Applicant has a limited right to return the Policy for cancellation by
returning the Policy, by mail or personal delivery, to the Company or to the
agent who sold the Policy. The Policy must be returned either (1) within 10 days
after delivery of the Policy to the Policy Owner, (2) within 45 days of
completion of the Policy application, or (3) within 10 days after the Notice of
Right to Cancel has been mailed or delivered to the Applicant whichever is
latest. The Company will return to the Applicant a refund of the greater of all
premium payments paid for the Policy, or the sum of (1) the difference between
the premium paid, including any fees or charges, and the amounts allocated to
the Investment Option(s), (2) the value of the amounts allocated to the
Investment Option(s) on the date on which the Company receives the returned
Policy, and (3) any fees and other charges imposed on amounts allocated to the
Investment Option(s).
STATEMENTS TO POLICY OWNERS
The Company will maintain all records relating to Fund UL II and the Investment
Options. At least once in each Policy Year, the Company will send to Policy
Owners a statement containing the following information: (1) the Stated Amount
and the Cash Value of the Policy (indicating the number of Accumulation Units
credited to the Policy in each Investment Option and the corresponding
Accumulation Unit Value); (2) the date and amount of each premium payment; (3)
the date and amount of each Monthly Deduction; (4) the amount of any outstanding
Policy loan as of the date of the statement, and the amount of any loan interest
charged on the Loan Account; (5) the date and amount of any partial cash
surrenders and the amount of any partial surrender charges; (6) the annualized
cost of any supplemental benefits purchased under the Policy; and (7) a
reconciliation since the last report of any change in Cash Value and Cash
Surrender Value. The Company will also send any other reports required by any
applicable state or federal laws or regulations.
2
<PAGE> 14
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE
Upon receipt of a Premium Payment, and before allocation of the payment among
the Investment Options, the Company deducts a front-end sales charge of 2.5%.
This charge is reduced to 2% for Policies with an initial Stated Amount of
$500,000 or more, and to 0% for Policies with an initial Stated Amount of
$1,000,000 or more. Additional sales charges may be assessed upon any full or
partial surrender. (See "Surrender Charges" page 4.)
Sales charges are intended to cover the Company's actual sales expenses,
including agent sales commissions, advertising and the printing of the
prospectuses. The Company expects to recover the sales expenses of a Policy. To
the extent sales expenses are not covered by the sales charges, the Company will
recover such expenses from its surplus. This surplus may include profit from the
mortality and expense risk charge.
STATE PREMIUM TAX CHARGE
A charge of 2.5% of each premium payment will be deducted for state premium
taxes (except for Policies issued in the Commonwealth of Puerto Rico where no
premium tax is deducted). These taxes vary from state to state and currently
range from 0.75% to 3.5%; 2.5% is an average. Because there is a range of
premium taxes, a Policy Owner may pay a premium tax charge that is higher or
lower than the premium tax actually assessed in his or her jurisdiction.
The Company also reserves the right to charge the assets of each Investment
Option for a reserve for any income taxes payable by the Company on the assets
attributable to that Investment Option. (See "Federal Tax Considerations," page
24.)
MONTHLY DEDUCTION AMOUNT
The Company will deduct from the Cash Value of the Policy a Monthly Deduction
Amount to cover certain charges and expenses incurred in connection with the
Policy. The Monthly Deduction Amount will be deducted pro rata from each of the
Investment Options values attributable to the Policy on the first day of each
Policy Month (the "Deduction Date"), commencing on the Policy Date. The dollar
amount of the Deduction Amount will vary from month to month. The following is a
summary of monthly charges and expenses which make up the Monthly Deduction
Amount:
COST OF INSURANCE CHARGE
Cost of Insurance is deducted from the Policy Cash Value on a monthly basis. The
amount of deduction is a function of the amount of insurance coverage on the
date of the deduction and the current cost per dollar for insurance coverage.
The cost per dollar of insurance coverage varies annually and is based on age,
sex and risk class of the Insured.
POLICY ADMINISTRATIVE CHARGE
For the first three Policy Years, a monthly administrative charge is deducted
from the Cash Value of the Policy. This charge also applies to any increase in
the Stated Amount excluding Cost of Living Adjustments and increases in Stated
Amounts due to Death Benefit Option changes. This charge is used to cover
expenses associated with issuing the Policy.
The amount charged varies by Policy and will be stated in the Policy. The charge
currently varies by issue age, Stated Amount and smoker/non-smoker
classification (see Appendix C for chart of current charges). The current Policy
administrative charge are lower than the guaranteed maximum charge (see Appendix
C(1) for the guaranteed maximum charges).
3
<PAGE> 15
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if the Policy Owner has elected any of the following supplemental benefit
provisions: Waiver of Monthly Deduction Rider, Child Term Rider, and Primary or
Other Insured Term Rider. The amount of this charge will vary depending upon the
actual supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
A daily charge is deducted from Fund UL II for mortality and expense risks. This
charge is at an annual rate of 0.80% for the first fifteen (15) Policy Years,
and 0.45% thereafter. The mortality risk assumed is that the cost of insurance
charge specified in the Policy may be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and administering the
Policies will exceed the administrative charges set forth in the Policy. If all
money collected by the Company from this charge is not needed to cover the
mortality and expenses costs, the excess will be contributed to the Company's
general account.
ADMINISTRATIVE EXPENSE CHARGE
The Company reserves the right to deduct a daily charge from Fund UL II for
administrative expenses incurred by the Company. The charge is equivalent on an
annual basis to 0.10% of the assets in the Investment Options for the first
fifteen (15) Policy Years and 0% thereafter. The administrative expense charge,
is designed to cover administrative costs associated with the maintenance of the
Policies and the maximum fee is set at a level which does not exceed the average
expected cost of the administrative services to be provided while the Policy is
in force.
CHARGES AGAINST THE INVESTMENT OPTIONS
Fund UL II purchases shares of the Investment Options at net asset value. The
net asset value of the Investment Option shares reflects investment advisory
fees and other expenses already deducted from the assets of the Investment
Options. The investment advisory fees and other expenses applicable to each of
the Investment Options are described in the individual prospectuses for the
Investment Options.
SURRENDER CHARGES
There are two types of contingent surrender charges that can apply under the
Policy: a Percent of Premium Charge and a Per Thousand of Stated Amount Charge.
These surrender charges are contingent because they only apply during the first
ten Policy Years (or the first ten years following an increase in Stated
Amount). Both charges apply upon a full surrender of the Policy. Only the
Percent of Premium Charge applies upon a partial surrender.
PERCENT OF PREMIUM CHARGE
A Percent of Premium surrender charge will be assessed upon a full or partial
surrender of the Policy during the first ten Policy Years (or during the first
ten years following an increase in Stated Amount). The charge will be the
smallest of:
(a) 6% of the amount of Cash Value being surrendered; or
(b) 6% of the amount of premiums actually paid within the five years
preceding the surrender; or
(c) 9% of the total Annual Minimum Premiums for each full or partial Policy
Year during the five years preceding the surrender, whether paid or
not. (See Appendix A, "Annual Minimum Premiums.")
4
<PAGE> 16
For example (as illustrated on page 33), a Policy with a Stated Amount of
$150,000 for a 45-year old male who pays a premium of $1,969 per year for five
years (a total of $9,845), and then fully surrenders the Policy for its Cash
Value of $7,476 (assuming a 6% rate of return), the Percent of Premium surrender
charge would be $449, because (a) is $449 (6% of $7,476); (b) is $591 (6% of the
$9,845 in premiums paid); and (c) is approximately $682 (9% of the annual
minimum premium for five years). The smallest, $449, is the applicable charge.
PER THOUSAND OF STATED AMOUNT CHARGE
A Per Thousand of Stated Amount surrender charge is imposed on full surrenders,
but not on partial surrenders, and applies only during the first ten Policy
Years or the ten years following an increase in Stated Amount (other than an
increase due to a Cost of Living Adjustment or a change in Death Benefit
Option). The charge is equal to a specified dollar amount for each $1,000 of
Stated Amount to which it applies, and will apply only to that portion of the
Stated Amount (except for increases excluded above) which has been in effect for
less than ten years.
The Per Thousand of Stated Amount Charge varies by Stated Amount and original
issue age, and increases with the issue age of the Insured. For Stated Amounts
of $499,999 or less, this charge varies in the first year from $2.04 per $1,000
of Stated Amount for issue ages of 4 years or less, to $25.40 per $1,000 of
Stated Amount for issue ages of 65 years or higher. The charge is lower for
Stated Amounts over $499,999, and even lower for Stated Amounts over $999,999.
Additionally, the charge decreases by 10% each year over the ten-year period.
For example, for a 45-year old with a Stated Amount of $150,000, the charge in
the first year is $7.18 for each $1,000 of Stated Amount, or $1,077. The charge
decreases 10%, or approximately $0.72, each year, so in the fifth year, it is
$4.31 for each $1,000 of Stated Amount, or $64.65; in the tenth year, it is
$0.72 for each $1,000, or $108.
No more than 20% of the Per Thousand of Stated Amount Charge is a sales charge.
The remainder is designed to compensate the Company for administrative expenses
not covered by other administrative charges. The administrative expense
component of the Per Thousand of Stated Amount charge is set at a level which
does not exceed the average expected cost of the administrative services to be
provided while the Policy is in force. This administrative charge component of
the Surrender Charge may be reduced or eliminated when sales are made under
certain arrangements. (See "Reduction or Elimination of Charges," Page 6.) The
Per Thousand of Stated Amount surrender charges are set forth in Appendix B, and
have been further split into the sales charge component and the administrative
charge component in Appendices B(1) and B(2), respectively.
MAXIMUM SALES CHARGES
Although the total sales charges assessed under the Policy will vary based on
issue age, sex, year of surrender, amount of premium paid and amount
surrendered, the maximum total sales charge for any Policy will never exceed
26.7% of the total premiums paid.
As stated above, the front-end sales charge for a Policy with no full or partial
surrenders will never exceed 2.5% of actual premiums paid. The sales charges for
a Policy with full or partial surrenders will vary, but in no event will they
exceed the percentage of premiums paid as shown below.
5
<PAGE> 17
<TABLE>
<CAPTION>
MAXIMUM SALES CHARGES (AS A % OF
POLICY YEAR OF SURRENDER PREMIUM PAYMENTS)
- ------------------------ -----------------
<S> <C>
1 26.7%
2 24.9
3 23.1
4 21.2
5 19.4
6 16.1
7 14.4
8 12.5
9 10.6
10 8.8
11+ 2.5
</TABLE>
As the table demonstrates, the maximum sales charge for any Policy is less than
26.7% in every Policy Year other than the first (or in every year after the
first year following an increase). (See the illustrations for an example.)
REDUCTION OR ELIMINATION OF CHARGES
The Company may offer the Policy in arrangements where an employer or trustee
will own a group of policies on the lives of certain employees, or in other
situations where groups of policies will be purchased at one time. The Company
may reduce or eliminate sales charges and administrative charges in such
arrangements to reflect the reduced sales expenses and administrative costs
expected as a result of sales to a particular group.
TRANSACTION CHARGE
The Company reserves the right to limit free transfers of Cash Value from one
Investment Option to another by the Policy Owner to four times in any Policy
Year, and to charge $10 for any additional transfers. There is currently no
charge for transfers.
POLICY BENEFITS AND RIGHTS
- --------------------------------------------------------------------------------
CASH VALUE AND CASH SURRENDER VALUE
The Cash Value of a Policy changes on a daily basis and will be computed on each
Valuation Date. The Cash Value will vary to reflect the investment experience of
the Investment Options, as well as any partial Cash Surrenders, Monthly
Deduction Amount, daily Separate Account charges, and any additional premium
payments. There is no minimum guaranteed Cash Value.
The Cash Value of a particular Policy is related to the net asset value of the
Investment Options to which premium payments on the Policy have been allocated.
The Cash Value on any Valuation Date is calculated by multiplying the number of
Accumulation Units credited to the Policy in each Investment Options as of the
Valuation Date by the current Accumulation Unit Value of that Investment Option,
then adding the collective result for each of the Investment Options credited to
the Policy, and finally adding the value (if any) of the Loan Account. A Policy
Owner may withdraw Cash Value from the Policy, or transfer Cash Value among the
Investment Options on any day that the Company is open for business.
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), to surrender the Policy and receive its "Cash Surrender Value";
i.e., the Cash Value of the Policy determined as of the day the Company receives
the Policy Owner's written request, less any outstanding Policy loan, and less
any applicable Surrender Charges. For full surrenders, the Company will pay the
Cash Surrender Value of the Policy within seven days following its receipt of
the written request, or on the date requested by the Policy Owner, whichever is
later. The Policy will terminate on the Deduction
6
<PAGE> 18
Date next following the Company's receipt of the written request, or on the
Deduction Date next following the date on which the Policy Owner requests the
surrender to become effective, whichever is later.
In the case of partial surrenders, the Cash Surrender Value will be equal to the
net amount requested to be surrendered minus any applicable Surrender Charges.
The deduction from Cash Value for a partial surrender will be made on a pro rata
basis against the Cash Value of each of the Investment Options attributable to
the Policy (unless the Policy Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy. Under Option 1, the
Stated Amount of the Policy will be reduced by the amount of the partial cash
surrender. Under Option 2, the Cash Value, which is part of the Death Benefit,
will be reduced by the amount of the partial cash surrender. The Company may
require return of the Policy to record such reduction.
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties which
include a percent of premium charge and per thousand of Stated Amount charge, as
described on page 5 in more detail. No loan requests may be made for amounts of
less than $100. If there is a loan outstanding at the time a subsequent loan
request is made, the amount of the outstanding loan will be added to the new
loan request. The Company will charge interest on the outstanding amounts of the
loan, which interest must be paid in advance by the Policy Owner. The amount of
the loan will be transferred as of the date the loan is made on a pro rata basis
from each of the Investment Options attributable to the Policy (unless the
Policy Owner states otherwise) to another account (the "Loan Account"). Amounts
in the Loan Account will be credited by the Company with a fixed annual rate of
return of 4% (6% in Massachusetts) and will not be affected by the investment
performance of the Investment Options. During the first thirteen Policy Years,
the full Loan Account Value will be charged an annual interest rate of 7.4%;
thereafter 3.85% will be charged. When loan repayments are made, the amount of
the repayment will be deducted from the Loan Account and will be reallocated
based upon premium allocation percentages among the Investment Options
applicable to the Policy (unless the Policy Owner states otherwise). The Company
will make the loan to the Policy Owner within seven days after receipt of the
written loan request.
An outstanding loan amount decreases the Cash Surrender Value. If a loan is not
repaid, it permanently decreases the Cash Surrender Value, which could cause the
Policy to lapse (see "Lapse and Reinstatement" below). For example, if a Policy
has a Cash Surrender Value of $10,000, the Policy Owner may take a loan of 90%
or $9,000, leaving a new Cash Surrender Value of $1,000. In addition, the Death
Benefit actually payable would be decreased because of the outstanding loan.
Furthermore, even if the loan is repaid, the Death Benefit and Cash Surrender
Value may be permanently affected since the Policy Owner was not credited with
the investment experience of an Investment Option on the amount in the Loan
Account while the loan was outstanding. All or any part of a loan secured by a
Policy may be repaid while the Policy is still in effect.
LAPSE AND REINSTATEMENT
Except as provided below under "Lapse Protection Guarantee," the Policy will
remain in effect until the Cash Surrender Value of the Policy is insufficient to
cover the Monthly Deduction Amount. If such event occurs, the Company will give
written notice to the Policy Owner indicating that if the amount shown in the
notice (which will be sufficient to cover the Deduction Amount due) is not paid
within 61 days (the "Late Period"), the Policy may lapse. The Policy will
continue through the Late Period, but if no payment is forthcoming, it will
terminate at the end of
7
<PAGE> 19
the Late Period. If the person Insured under the Policy dies during the Late
Period, the Death Benefit payable under the Policy will be reduced by the
Monthly Deduction Amount due plus the amount of any outstanding loan. (See
"Death Benefit," page 8.)
If the Policy lapses, the Policy Owner may reinstate the Policy upon payment of
the reinstatement premium (and any applicable charges) shown in the Policy. A
request for reinstatement may be made at any time within three years of lapse
(unless a different period is required under applicable state law). The Net
Premium due upon reinstatement is at least one-quarter of the Annual Minimum
Premium, as shown in Appendix A, less any charges or fees, calculated as of the
Deduction Date next following receipt of premium by the Company. The Cash Value
of the Policy upon reinstatement will be equal to the Net Premium. In addition,
the Company reserves the right to require satisfactory evidence of insurability.
LAPSE PROTECTION GUARANTEE
Policy Owners may elect to have a Lapse Protection Guarantee benefit as part of
their Policy (as long as the Insured is not a substandard risk). The Lapse
Protection Guarantee benefit provides that if during the first three Policy
Years (the "Guarantee Period") the total premiums paid under the Policy, less
any Loan Account Value or partial surrenders, equal or exceed the cumulative
applicable Monthly Premium Threshold shown on the Policy Summary Page of the
Policy, a Lapse Protection Guarantee will be in effect. (This guarantee may not
be available in all jurisdictions.) This benefit provides that the Policy will
not lapse during the next Policy Month even if the Cash Surrender Value is
insufficient to pay the Monthly Deduction Amount due, provided the next Policy
Month is within the Guarantee Period. The Premium Threshold will change if the
Policy Owner makes a change in the Stated Amount or adds or eliminates
supplemental benefit riders under the Policy. In such event, the Company will
send the Policy Owner notice of the new applicable Premium Threshold which must
be met until the expiration of the Guarantee Period in order for the guarantee
to remain in effect.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged at any time during the first
24 months after its issuance for a general account life insurance policy issued
by the Company (or an affiliated company) on the life of the Insured. Benefits
under the new life insurance policy will be as described in that policy. No
evidence of insurability will be required. The Policy Owner has the right to
select the same Death Benefit or Net Amount At Risk as the former Policy. Cost
of insurance rates will be based on the same risk classification as those of the
former Policy. Any outstanding Policy loan must be repaid before the Company
will make an exchange. In addition, there may be an adjustment for the
difference in Cash Value between the two Policies.
DEATH BENEFIT
As with traditional life insurance Policies, the Death Benefit under the Policy
is the amount paid to the Beneficiary upon the Insured's death. The Death
Benefit will be reduced by any outstanding charges, fees and Policy loans. All
or part of the Death Benefit may be paid in cash or applied to one or more of
the payment options described below.
You may elect one of two Death Benefit options. As long as the Policy remains in
effect, the Company guarantees that the Death Benefit under either option will
not be less than the current Stated Amount of the Policy less any outstanding
Policy loan or Deduction Amount due but unpaid. The Death Benefit under either
option may vary with the Cash Value of the Policy. The Death Benefit under
either option may vary with the Cash Value of the Policy. Under Option 1 (the
"Level Option"), the Death Benefit will be equal to the Stated Amount of the
Policy or, if greater, a specified multiple of Cash Value (the "Minimum Amount
Insured"). Under Option 2 (the "Variable Option"), the Death Benefit will be
equal to the Stated Amount of the Policy plus the Cash Value (determined as of
the date of the Insured's death) or, if greater, the Minimum Amount Insured.
8
<PAGE> 20
The Minimum Amount Insured is the amount required to qualify the Policy as a
life insurance Policy under the current federal tax law. Under that law, the
Minimum Amount Insured is equal to a stated percentage of the Cash Value of the
Policy determined as of the first day of each Policy Month. The percentages
differ according to the attained age of the Insured. The Minimum Amount Insured
will be set forth in the Policy and may change as federal income tax laws or
regulations change. The percentages used to calculate the Minimum Amount Insured
decrease after the age of 40. The following is a schedule of the applicable
percentages:
<TABLE>
<CAPTION>
% SHALL
DECREASE BY
A RATABLE
PORTION FOR
ATTAINED AGE EACH FULL
MORE BUT NOT YEAR:
THAN MORE THAN FROM TO
- ---- --------- ---- ---
<S> <C> <C> <C>
0 40 250 250
40 45 250 215
45 50 215 185
50 55 185 150
55 60 150 130
60 65 130 120
65 70 120 115
70 75 115 105
75 90 105 105
90 95 105 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that, when applicable, may increase the Minimum Amount
Insured in excess of the figures shown in the schedule above. This limitation is
known as the "guideline premium limitation," and it is generally applicable
during the early years of variable universal life insurance Policies.
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under Options 1 and 2 of
the Policy. Both sets of examples assume an Insured of age 40, a Minimum Amount
Insured of 250% of Cash Value (assuming the preceding table is controlling as to
Minimum Amount Insured), and no outstanding Policy loan.
OPTION 1 -- "LEVEL" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 1 "Level" Death Benefit, the Death
Benefit under the Policy is generally equal to the Stated Amount of $50,000.
Since the Policy is designed to qualify as a life insurance Policy, the Death
Benefit cannot be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 X 250%). Since the Death Benefit in the Policy
is the greater of the Stated Amount ($50,000) or the Minimum Amount Insured
($25,000), the Death Benefit would be $50,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 X 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($50,000)
or the Minimum Amount Insured ($100,000).
OPTION 2 -- "VARIABLE" DEATH BENEFIT
STATED AMOUNT: $50,000
In the following examples of an Option 2 "Variable" Death Benefit, the Death
Benefit varies with the investment experience of the applicable Investment
Options and will generally be equal to the
9
<PAGE> 21
Stated Amount plus the Cash Value of the Policy (determined on the date of the
Insured's death). The Death Benefit cannot, however, be less than the Minimum
Amount Insured (or, in this example, 250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 X 250%). The Death Benefit ($60,000) would be
equal to the Stated Amount ($50,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 X 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($50,000 + $60,000 = $110,000).
Death Benefits are payable within seven days of the Company's receipt of
satisfactory proof of the Insured's death. The amount of Death Benefit paid to
the Policy Beneficiary may be adjusted to reflect any Policy loan, any material
misstatements in the Policy application as to age or sex of the Insured, and any
amounts payable to an assignee under a collateral assignment of the Policy. (See
"Assignment," page 2.) If the Insured commits suicide within two years following
the issue date limits on the amount of Death Benefit paid will apply. (See
"Limit on Right to Contest and Suicide Exclusion", page 11) In addition, if the
Insured dies during the 61-day period after the Company gives notice to the
Policy Owner that the Cash Surrender Value of the Policy is insufficient to meet
the Monthly Deduction Amount due against the Cash Value of the Policy, the Death
Benefit actually paid to the Policy Owner's Beneficiary will be reduced by the
amount of the Deduction Amount that is due and unpaid. (See "Cash Value and Cash
Surrender Value," page 6, for effects of partial cash surrenders on Death
Benefits.)
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option at any time prior to the Insured's death
by sending a written request to the Company. There is no direct consequence of
changing a Death Benefit option, except as described under "Tax Treatment of
Policy Benefits" on page 26. However, the change could affect future values of
Net Amount At Risk, and with some Option 2 to Option 1 changes involving
substantially funded Policies, there may be a cash distribution which is
included in the gross income of the Policy Owner. The cost of insurance charge
which is based on the Net Amount At Risk may be different in the future. A
change from Option 1 to Option 2 will not be permitted if the change results in
a Stated Amount of less than the minimum amount of $50,000. Contact your
registered representative for more information.
PAYMENT OPTIONS
Proceeds payable under the Policy will be paid in a lump sum, unless the Policy
Owner or Beneficiary selects one of the Company's payment options. Payment of
proceeds which exceed the Death Benefit may be deferred for up to six months
from the date of the request for the payment. A combination of options may be
used. The minimum amount that may be placed under a payment option is $5,000
unless the Company consents to a lesser amount. Proceeds applied under an option
will no longer be affected by the investment experience of the Investment
Options.
10
<PAGE> 22
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income-Two-thirds to Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income -- Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
The Company will make any other arrangements for periodic payments as may be
agreed upon. If any periodic payment due any payee is less than $50, the Company
may make payments less often. If the Company has declared a higher rate under an
option at the date the first payment under an option is due, the Company will
base the payments on the higher rate.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
The Company may not contest the validity of the Policy after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Policy is reinstated, the two-year period will be measured from the date of
reinstatement. Each requested increase in Stated Amount is contestable for two
years from its effective date. In addition, if the Insured commits suicide
during the two-year period following issue, subject to state law, the Death
Benefit will be limited to the premiums paid less (i) the amount of any partial
surrender, (ii) the amount of any outstanding Policy loan, and (iii) the amount
of any unpaid Deduction Amount due. During the two-year period following an
increase, the Death Benefit in the case of suicide will be limited to an amount
equal to the Deduction Amount for such increase.
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age, benefits payable
will be adjusted to what the Policy would have provided with the correct
information. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
CHANGES IN STATED AMOUNT
A Policy Owner may request in writing that the Stated Amount of the Policy be
increased or decreased, provided that the Stated Amount after any decrease may
not be less than the minimum amount of $50,000. For purposes of determining the
cost of insurance charge, a decrease in the Stated Amount will reduce the Stated
Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner.
For increases in the Stated Amount, the Company may require a new application
and evidence of insurability as well as an additional premium payment. The
effective date of any increase will be as shown on the new Policy Summary which
the Company will send to the Policy Owner. The effective date of any increase in
the Stated Amount will generally be the Deduction Date next following either the
date of a new application or, if different, the date requested by the Applicant.
There is an additional Policy Administrative Charge and a Per Thousand of Stated
Amount Surrender Charge associated with a requested increase in Stated Amount.
There is no additional charge for a decrease in Stated Amount.
11
<PAGE> 23
MATURITY AND MATURITY EXTENSION BENEFITS
If the Insured is living on the Maturity Date (the anniversary of the Policy
Date on which the Insured is age 95), the Company will pay the Policy Owner the
Cash Value of the Policy, less any outstanding Policy loan or Deduction Amount
due and unpaid. The Policy Owner must surrender the Policy to the Company before
such payment can be made, at which point the Policy will terminate and the
Company will have no further obligations under the Policy.
Upon the Insured's attaining age 94, and at any time during the twelve months
thereafter, the Policy Owner may request that coverage be extended beyond the
Maturity Date (the "Maturity Extension Benefit"). (This Maturity Extension
Benefit may not be available in all jurisdictions.) After the Company has
received such request, but prior to the Maturity date, the Policy will continue
in force until the earlier of the death of the Insured or the date on which the
Policy Owner requests that the Policy terminate. Upon termination of the
Maturity Extension Benefit, a Death Benefit will be paid as follows. On the
Maturity Date, the Death Benefit will be the Cash Value less any Loan Account
Value and less any Deduction Amounts due but not paid. After the Maturity Date,
the Death Benefit will be the Cash Value less any Loan Account Value. The Death
Benefit is based on the experience of the Investment Options selected and is
variable and is not guaranteed. After the Maturity Date, periodic Deduction
Amounts will no longer be charged against the Cash Value and additional premiums
will not be accepted.
The Company intends that the Policy and the Maturity Extension Benefit be
considered life insurance for tax purposes. The Death Benefit is designed to
comply with Section 7702 of the Internal Revenue Code of 1986, as amended, or
other equivalent section of the Code. However, the Company does not give tax
advice, and cannot guarantee that the Death Benefit and Cash Value will be
exempt from any future tax liability. The tax results of any benefits under the
Maturity Extension provision depend upon interpretation of the Internal Revenue
Code. The Policy Owner should consult his or her own personal tax adviser prior
to the exercise of the Maturity Extension Benefit to assess any potential tax
liability.
THE SEPARATE ACCOUNT AND THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE (FUND UL II)
Fund UL II was established on October 17, 1995 pursuant to the insurance laws of
the state of Connecticut, and is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment Company Act
of 1940, as amended (the "1940 Act"). The assets of Fund UL II will be invested
exclusively in shares of the Investment Options. Fund UL II meets the definition
of a Separate Account under the federal securities laws, and will comply with
the provisions of the 1940 Act. Registration of Fund UL II with the SEC does not
involve supervision by the SEC of the management or investment policies of Fund
UL II. Additionally, the operations of Fund UL II are subject to the provisions
of Section 38a-433 of the Connecticut General Statutes which authorizes the
Connecticut Insurance Commissioner to adopt regulations under it. The Section
contains no restrictions on the investments of Fund UL II, and the Commissioner
has adopted no regulations under the Section that affect Fund UL II.
Under Connecticut law, the assets of Fund UL II will be held for the exclusive
benefit of Policy Owners and the persons entitled to payments under the Policy
offered by this Prospectus. The assets held in Fund UL II are not chargeable
with liabilities arising out of any other business which the Company may
conduct. Any obligations arising under the Policy are general corporate
obligations of the Company.
THE INVESTMENT OPTIONS
You may allocate Premium Payments to one or more of the available Investment
Options. The Investment Options currently available under the Policy may be
added or withdrawn as permitted by applicable law. Please read carefully the
complete risk disclosure in each Portfolio's prospectus
12
<PAGE> 24
before investing. For more detailed information on the investment advisers and
their services and fees, please refer to the prospectuses for the Investment
Options.
The Investment Options currently available under Fund UL II are as follows:
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
AIM Capital Appreciation Seeks capital appreciation by Smith Barney Mutual Funds
Portfolio investing primarily in common Management, Inc.
stock, with emphasis on Subadviser: AIM Capital
medium sized and smaller Management, Inc.
emerging growth companies.
Alliance Growth Portfolio Seeks long-term growth of Smith Barney Mutual Funds
capital by investing Management, Inc.
predominantly in equity Subadviser: Alliance Capital
securities of companies with Management
a favorable outlook for
earnings and whose rate of
growth is expected to exceed
that of the U.S. economy over
time. Current income is only
an incidental consideration.
Dreyfus Stock Index Fund Seeks to provide investment Mellon Equity Associates
results that correspond to
the price and yield
performance of publicly
traded common stocks in the
aggregate, as represented by
the Standard & Poor's 500
Composite Stock Price Index.
Fidelity VIP Equity-Income Seeks reasonable income by Fidelity Management &
Portfolio investing primarily in Research Company
income-producing equity
securities; in choosing these
securities, the portfolio
manager will also consider
the potential for capital
appreciation. The Portfolio's
goal is to achieve a yield
which exceeds the composite
yield on the securities
comprising the Standard &
Poor's 500 Composite Stock
Price Index.
</TABLE>
13
<PAGE> 25
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Fidelity VIP Growth Portfolio Seeks capital appreciation by Fidelity Management &
investing primarily in common Research Company
stocks of well-known,
established companies and
smaller, emerging growth
companies, although its
investments are not
restricted to any one type of
security. Capital
appreciation may also be
found in other types of
securities, including bonds
and preferred stocks.
Fidelity VIP High Income Seeks to obtain a high level Fidelity Management &
Portfolio of current income by Research Company
investing primarily in high
yielding, lower rated,
fixed-income (high risk)
securities, while also
considering growth of
capital.
Fidelity VPI II Asset Manager Seeks high total return with Fidelity Management &
Portfolio reduced risk over the long- Research Company
term by allocating its assets
among stocks, bonds and
short-term fixed-income
instruments.
MFS Total Return Portfolio Seeks to obtain above-average Smith Barney Mutual Funds
income (compared to a Management, Inc.
portfolio entirely invested Subadviser: Massachusetts
in equity securities) Financial Services Company.
consistent with the prudent
employment of capital.
Generally, at least 40% of
the Portfolio's assets will
be invested in equity
securities.
Smith Barney High Income Seeks high current income. Smith Barney Mutual Funds
Portfolio Capital appreciation is a Management, Inc.
secondary objective. The
Portfolio will invest at
least 65% of its assets in
high-yielding corporate debt
obligations and preferred
stock.
</TABLE>
14
<PAGE> 26
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Smith Barney Income and Seeks current income and Smith Barney Mutual Funds
Growth Portfolio long-term growth of income Management, Inc.
and capital by investing
primarily, but not
exclusively, in common
stocks.
Smith Barney Total Return Seeks to provide total Smith Barney Mutual Funds
Portfolio return, consisting of Management, Inc.
long-term capital
appreciation and income. The
Portfolio will seek to
achieve its goal by investing
primarily in a diversified
portfolio of dividend-paying
common stock.
Templeton Asset Allocation Seeks high level of total Templeton Investment Counsel,
Fund return with reduced risk over Inc.
(Class 1) the long term through a
flexible policy of investing
in stocks of companies in any
nation and debt obligations
of companies and governments
of any nation. Changes in the
asset mix will be adjusted in
an attempt to capitalize on
total return potential
produced by changing economic
conditions throughout the
world.
Templeton Bond Fund Seeks high current income Templeton Investment Counsel,
(Class 1) through a flexible Policy of Inc.
investing primarily in debt
securities of companies,
governments and government
agencies of various nations
throughout the world.
Templeton Stock Fund Seeks capital growth through Templeton Investment Counsel,
(Class 1) a policy of investing Inc.
primarily in common stocks
issued by companies, large
and small, in various nations
throughout the world.
Travelers Cash Income Trust Seeks to provide high current The Travelers Asset
income while emphasizing Management International
preservation of capital and Corporation (TAMIC)
maintaining a high degree of
liquidity by investing in
short-term money market
securities deemed to present
minimal credit risks.
Allocations to this portfolio
are neither insured nor
guaranteed.
</TABLE>
15
<PAGE> 27
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Travelers Capital Seeks growth of capital TAMIC
Appreciation Fund through the use of common Subadviser: Janus Capital
stocks. Income is not an Corporation
objective. The Fund invests
principally in common stocks
of small to large companies
which are expected to
experience wide fluctuations
in price in both rising and
declining markets.
Travelers Managed Assets Seeks high total investment TAMIC
Trust return with reduced risk Subadviser: The Travelers
through a fully managed Investment Management Company
investment Policy. Assets of (TIMCO)
the Managed Assets Trust will
be invested in a portfolio of
U.S. stocks, bonds and money
market securities.
Travelers U.S. Government Selects investments from the TAMIC
Securities Portfolio point of view of an investor
concerned primarily with
highest credit quality,
current income and total
return. The assets of the
U.S. Government Securities
Portfolio will be invested in
direct obligations of the
United States, its agencies
and instrumentalities.
Travelers Utilities Portfolio Seeks to provide current Smith Barney Mutual Funds
income through investment in Management, Inc.
equity and debt securities of
companies in the utility
industries.
Travelers Zero Coupon Bond Seeks to provide as high an TAMIC
Fund Portfolio 1998 investment return as Subadviser: TIMCO
consistent with the
preservation of capital
investing in primarily zero
coupon securities that pay
cash income but are acquired
by the Portfolio at
substantial discounts from
their values at maturity. The
Zero Coupon Bond Fund
Portfolios may not be
appropriate for Policy Owners
who do not plan to have their
premiums invested in shares
of the Portfolios for the
long term or until maturity.
</TABLE>
16
<PAGE> 28
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Travelers Zero Coupon Bond Seeks to provide as high an TAMIC
Fund Portfolio 2000 investment return as Subadviser: TIMCO
consistent with the
preservation of capital
investing in primarily zero
coupon securities that pay
cash income but are acquired
by the Portfolio at
substantial discounts from
their values at maturity. The
Zero Coupon Bond Fund
Portfolios may not be
appropriate for Policy Owners
who do not plan to have their
premiums invested in shares
of the Portfolios for the
long term or until maturity.
Travelers Zero Coupon Bond Seeks to provide as high an TAMIC
Fund Portfolio 2005 investment return as Subadviser: TIMCO
consistent with the
preservation of capital
investing in primarily zero
coupon securities that pay
cash income but are acquired
by the Portfolio at
substantial discounts from
their values at maturity. The
Zero Coupon Bond Fund
Portfolios may not be
appropriate for Policy Owners
who do not plan to have their
premiums invested in shares
of the Portfolios for the
long term or until maturity.
</TABLE>
Each Investment Option is subject to certain investment restrictions which may
not be changed without the approval of a "majority vote of the outstanding
voting securities" of that Fund (as defined in the Investment Company Act of
1940). There is no assurance that the Investment Options will achieve their
stated objectives.
More detailed information regarding the Investment Options may be found in the
current prospectuses for the Investment Options; these prospectuses are included
with and must accompany this Prospectus. Policy Owners are urged to read these
documents carefully before investing.
GENERAL
All investment income of and other distributions to each Investment Option of
Fund UL II arising from the applicable Investment Option are reinvested in
shares of that Investment Option at net asset value. The income and realized
gains or losses on the assets of each Investment Option of Fund UL II are
therefore separate and are credited to or charged against the Investment Option
without regard to income, gains or losses from any other Investment Option or
from any other business of the Company. The Company will purchase shares in the
Investment Options in connection with premium payments allocated to the
applicable Funds in accordance with Policy Owners' directions and will redeem
shares in the Investment Options to meet Policy obligations or make adjustments
in reserves, if any. The Investment Options are required to redeem Fund shares
at net asset value and to make payment within seven days.
17
<PAGE> 29
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each segment of the Separate Account was
initially established at $1. Thereafter, the Accumulation Unit Values will vary
to reflect the investment experience of the applicable Investment Option and
will be determined on each Valuation Date by multiplying the Accumulation Unit
Value on the preceding Valuation Date by the Net Investment Factor for that
Investment Option for the Valuation Period then ended. The Net Investment Factor
for each of the Investment Options is equal to the net asset value per share of
the corresponding Investment Option at the end of the Valuation Period (plus the
per share amount of any dividends or capital gain distributions by that Fund, if
the dividend date occurs in the Valuation Period then ended, and plus or minus
any per share credit or charge by the Company for any tax reserves) divided by
the net asset value per share of the corresponding Investment Option at the
beginning of the Valuation Period (plus or minus any per share credit or charge
by the Company for any tax reserves), and subtracting from that amount any
applicable administrative expense charge, and mortality and expense risk charge.
Applicants should refer to the prospectuses for each of the Investment Options
for a description of how the assets of each Investment Option are valued. These
valuation procedures directly affect the Accumulation Unit Value of the
Investment Option, and therefore the Cash Value of the Policy.
All valuations made under the Policy (e.g., the determination of Cash Value or
Cash Surrender Value, Policy loans, partial cash surrenders, payment of death
benefits, and the determination of the number of Accumulation Units to be
credited to a Policy with each Net Premium payment), will be made on the
Valuation Date next following the Company's receipt of the request.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for variable
life insurance and variable annuity Separate Accounts to invest in the
Investment Options simultaneously. Although neither the Company nor the
Investment Options currently foresees any such disadvantages either to variable
life insurance or to variable annuity Policy Owners, the Investment Options'
Boards of Directors intend to monitor events to identify any material conflicts
between such Policy Owners and to determine what action, if any, should be taken
in response thereto. If any of the Investment Options' Boards of Directors
conclude that separate mutual funds should be established for variable life
insurance and variable annuity Separate Accounts, the Company will bear the
attendant expenses, but variable life insurance and variable annuity Policy
Owners would no longer have the economies of scale resulting from a larger
combined fund. Please consult the prospectuses of the Investment Options for
additional information.
SUBSTITUTION
The Company reserves the right, subject to compliance with appropriate state and
federal laws, to make additions to, deletions from, or substitutions for Fund UL
II and the Investment Options which fund the Policy. If shares of any of the
Investment Options should no longer be available for purchase by the Fund UL II,
or if, in the judgment of the Company further investment in such shares becomes
inappropriate for purposes of the Policy, shares of another open-end management
investment company, or a portfolio thereof, may be substituted for shares of the
Investment Options held in the Investment Options. Substitution may be made with
respect to both existing investments and the investment of any future Premium
Payments. However, no substitution of securities will be made without prior
notice to Policy Owners, and without prior approval of the Securities and
Exchange Commission, all to the extent required by the 1940 Act or other
applicable law. Subject to Policy Owner approval, the Company reserves the right
to end Fund UL II's registration under the 1940 Act.
18
<PAGE> 30
TRANSFER OF CASH VALUE
- --------------------------------------------------------------------------------
As long as the Policy remains in effect, the Policy Owner may request that all
or a portion of the Cash Value of a particular Investment Option be transferred
to other Investment Options.
The Company reserves the right to restrict the number of such transfers to four
times in any Policy Year and to charge $10 for each additional transfer;
however, there is currently no charge for transfers. The Policy Owner may make
the request in writing by mailing such request to the Company at its Home
Office, or by telephone (if an authorization form is on file) by calling
1-800-334-4298. The Company will take reasonable steps to ensure that telephone
transfer requests are genuine. These steps may include seeking proper
authorization and identification prior to processing telephone requests.
Additionally, the Company will confirm telephone transfers. Any failure to take
such measures may result in the Company's liability for any losses due to
fraudulent telephone transfer requests.
As a result of a transfer, the number of Accumulation Units credited to the
Investment Option from which the transfer is made will be reduced by the number
obtained by dividing the amount transferred from the Investment Option by the
Accumulation Unit Value of that Investment Option on the Valuation Date on which
the Company receives the transfer request. The number of Accumulation Units
credited to the Investment Option to which the transfer is made will be
increased by the number obtained by dividing the amount transferred to the
Investment Option by the Accumulation Unit Value of that Investment Option on
the Valuation Date on which the Company receives the transfer request.
DOLLAR-COST AVERAGING (AUTOMATED TRANSFERS)
- --------------------------------------------------------------------------------
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from certain of the Investment Option to other Investment Option through
written request or other method acceptable to the Company. You must have a
minimum total Policy Value of $1,000 to enroll in the Dollar-Cost Averaging
program. The minimum total automated transfer amount is $100.
You may start or stop participation in the Dollar-Cost Averaging program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the other provisions and terms of the Policy, including
provisions relating to the transfer of money between Investment Options. The
Company reserves the right to suspend or modify transfer privileges at any time
and to assess a processing fee for this service.
Before transferring any part of the Policy Value, Policy Owners should consider
the risks involved in switching between investments available under this Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. Potential investors should consider their financial ability to continue
purchases through periods of low price levels.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Fund UL II's Investment Options may show the percentage
change in the value of an Accumulation Unit based on the performance of the
Investment Option over a period of time, usually for the past one-, two-,
three-, five-, and ten year periods determined by dividing the increase
(decrease) in value for that unit by the Accumulation Unit Value at the
beginning of the period.
For Investment Options of Fund UL II that invest in underlying funds that were
in existence prior to the date on which the Investment Option became available
under the Policy, average annual rates of return may include periods prior to
the inception of the Investment Option. Performance
19
<PAGE> 31
calculations for Investment Options with pre-existing Investment Options will be
calculated by adjusting the actual returns of the Investment Options to reflect
the charges that would have been assessed under the Investment Options had the
Investment Option been available under Fund UL II during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options. The following
chart reflects the guaranteed maximum .80% mortality and expense risk charge and
.10% administrative expense risk charge. The rates of return do not reflect the
2.5% front-end sales charge or the 2.5% state premium tax charge (both of which
are deducted from premium payments) nor do they reflect surrender charges or
Monthly Deduction Amounts. The surrender charges and Monthly Deduction Amounts
for a hypothetical Insured are depicted in the Example following the Rates of
Returns. For information about the Charges and Deductions assessed under the
Policy, see page 3. For illustrations of how these charges affect Cash Values
and Death Benefits, see the Illustrations beginning on page 29. The performance
information described in this prospectus, may be used from time to time in
advertisement for the Policy, subject to National Association of Securities
Dealers, Inc. ("NASD") and applicable state approval and guidelines.
AVERAGE ANNUAL RETURNS THROUGH 12/31/96
<TABLE>
<CAPTION>
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------------------------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 13.84% -- -- --
Alliance Growth Portfolio 28.12% -- -- --
Capital Appreciation Fund (Janus Sub-Adviser) 26.95% 17.39% 16.53% 11.79%
Dreyfus Stock Index Fund 21.35% 18.00% 13.56% --
Fidelity VIP Equity-Income Portfolio 13.20% 17.11% 16.86% --
Fidelity VIP Growth Portfolio 13.62% 14.70% 14.09% --
Smith Barney Income & Growth Portfolio 18.66% -- -- --
Smith Barney Total Return Portfolio 24.23% -- -- --
Utilities Portfolio (Smith Barney Sub-Adviser) 6.47% -- -- --
Templeton's Stock Fund 21.24% 13.39% 15.46% --
BOND FUNDS
Fidelity VIP High Income Portfolio 12.96% 9.61% 13.88% 10.09%
Smith Barney High Income Portfolio 12.10% -- -- --
Templeton's Bond Fund 8.43% 5.19% 6.08% --
Travelers U.S. Gov't Securities Portfolio 0.53% 5.05% -- --
Travelers Zero Coupon Bond Portfolio 1998 3.12% -- -- --
Travelers Zero Coupon Bond Portfolio 2000 1.84% -- -- --
Travelers Zero Coupon Bond Portfolio 2005 0.52% -- -- --
BALANCED FUNDS
Fidelity VIP II Asset Manager Portfolio 13.52% 6.98% 10.22% --
MFS Total Return Portfolio 13.37% -- -- --
Templeton's Asset Allocation Fund 17.73% 11.18% 12.94% --
Travelers Managed Assets Trust 12.71% 11.18% 9.18% 10.11%
MONEY MARKET FUNDS
Travelers Cash Income Trust(1) 3.42% 3.02% 2.53% --
</TABLE>
The information presented in the above chart represents the percentage change in
the value of an Accumulation Unit of the underlying investment options for the
periods indicated, and reflects all expenses of the underlying funds, as well as
the guaranteed maximum 0.80% mortality and expense risk charge and 0.10%
administrative expense charge against amounts allocated to the underlying funds.
The rates of return do not reflect the 2.5% front-end sales charge or the 2.5%
state premium tax charge (both of which are deducted from premium payments) nor
do they
20
<PAGE> 32
reflect surrender charges or monthly deduction amounts. These charges would
reduce the average annual return reflected.
(1) An investment in Cash Income Trust is neither insured nor guaranteed by the
United States Government. There is no assurance that a stable $1.00 value
will be maintained.
MARKETLIFE HYPOTHETICAL EXAMPLE2
MALE NONSMOKER AGE 40 WITH A LEVEL DEATH BENEFIT
OF $300,000 AND ANNUAL PREMIUM PAYMENTS OF $5,000
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS
------------------------------------ ------------------------------------
TOTAL ACCUMULATED SURRENDER TOTAL ACCUMULATED SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
- ---------------------------------- ---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio $5,000 $ 4,267 $ 1,451 N/A N/A N/A
Alliance Growth Portfolio 5,000 4,894 2,041 N/A N/A N/A
Capital Appreciation Fund (Janus
Sub-Adviser) 5,000 4,845 1,994 $ 25,000 $32,628 $30,746
Dreyfus Stock Index Fund 5,000 4,608 1,772 25,000 30,817 28,935
Fidelity VIP Equity-Income
Portfolio 5,000 4,264 1,449 25,000 30,539 28,657
Fidelity VIP Growth Portfolio 5,000 4,282 1,465 25,000 29,112 27,230
Smith Barney Income & Growth
Portfolio 5,000 4,495 1,665 N/A N/A N/A
Smith Barney Total Return
Portfolio 5,000 4,730 1,886 N/A N/A N/A
Smith Barney Utilities Portfolio 5,000 3,981 1,182 N/A N/A N/A
Templeton's Stock Fund 5,000 4,603 1,767 25,000 30,268 28,386
BOND FUNDS
Fidelity VIP High Income Portfolio 5,000 4,254 1,439 25,000 26,511 24,629
Smith Barney High Income Portfolio 5,000 4,218 1,405 N/A N/A N/A
Templeton's Bond Fund 5,000 4,064 1,260 25,000 22,244 20,362
Travelers U.S. Gov't Securities
Portfolio 5,000 3,732 948 25,000 20,515 18,633
Travelers Zero Coupon Bond
Portfolio 1998 5,000 3,841 1,050 N/A N/A N/A
Travelers Zero Coupon Bond
Portfolio 2000 5,000 3,787 1,000 N/A N/A N/A
Travelers Zero Coupon Bond
Portfolio 2005 5,000 3,732 948 N/A N/A N/A
BALANCED FUNDS
Fidelity VIP II Asset Manager
Portfolio 5,000 4,278 1,461 25,000 24,743 22,860
MFS Total Return Portfolio 5,000 4,272 1,455 N/A N/A N/A
Templeton's Asset Allocation Fund 5,000 4,455 1,628 25,000 27,804 25,922
Travelers Managed Assets Trust 5,000 4,244 1,429 25,000 25,668 23,786
MONEY MARKET FUNDS
Travelers Cash Income Trust 5,000 3,853 1,062 25,000 19,644 17,762
</TABLE>
The charges used in the above example consist of a front-end sales charge of
2.5%, a state premium tax charge of 2.5%, the guaranteed maximum 0.80% mortality
and expense risk charge and 0.10% administrative expense charge, all expenses of
the underlying funds, and monthly deduction charges including cost of insurance
and a contract administrative charge (in this example, the administrative charge
is 0%).
(2) These hypothetical examples show the effect of the performance quoted on
cash values. Performance, loans and withdrawals will affect the cash value
and death benefit of your policy. Since the values of the portfolios will
fluctuate, the cash value at any time may be more or less than the total
principal investment made, including at the time of surrender of the policy,
when surrender charges may apply.
21
<PAGE> 33
The benefits illustrated above may differ for other policies as a result of
differences in investment allocation, premium timing and amount, death benefit
type, as well as the age and underwriting of the classification of the insured
(which could result in higher costs of insurance). Because MarketLife is a
variable universal life insurance policy, actual performance should always be
considered in conjunction with the level of death benefit and cash values.
EXAMPLE OF POLICY CHARGES
The following chart illustrates the surrender charges and Monthly Deduction
Amounts that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deduction Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification).
- --------------------------------------------------------------------------------
Male, Age 35
Preferred Non-Smoker
Annual Premium: $850.00
Hypothetical Gross Annual Investment Rate of Return: 8%*
Face Amount: $100,000
Level Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
SURRENDER CHARGES SALES CHARGE FOR THE POLICY YEAR
------------------------------- COMPONENT OF ----------------------------
ADMINISTRATIVE SURRENDER COST OF
POLICY CUMULATIVE SALES CHARGE CHARGE CHARGE AS % OF INSURANCE ADMINISTRATIVE
YEAR PREMIUMS COMPONENT COMPONENT CUM. PREM. CHARGES CHARGES
- ------ ---------- ------------ -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 850.00 $91.20 $ 364.80 10.73% $ 145.00 $96.00
2 $ 1,700.00 $90.40 $ 361.60 5.32% $ 157.00 $96.00
3 $ 2,550.00 $90.00 $ 360.00 3.53% $ 168.00 $96.00
5 $ 4,250.00 $92.80 $ 371.20 2.18% $ 190.00 $ 0
10 $ 8,500.00 $59.40 $ 237.60 0.70% $ 250.00 $ 0
</TABLE>
* Hypothetical results shown above are illustrative only and are based on the
Hypothetical Gross Annual Investment Rate of Return shown above. This
Hypothetical Gross Annual Investment Rate of Return should not be deemed to be
a representation of past or future investment results. Actual investment
results may be more or less than those shown. No representations can be made
that the hypothetical rates assumed can be achieved for any one year or
sustained over any period of time.
MISCELLANEOUS
- --------------------------------------------------------------------------------
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote the
shares of the Investment Options at regular and special meetings of the
shareholders of the Investment Options in accordance with instructions from
Policy Owners (or the Policy beneficiaries, as the case may be) having a voting
interest in Fund UL II. The Company will vote shares for which no instructions
have been given or shares which are not otherwise attributable to Policy Owners
in the same proportion as it votes shares for which it has received
instructions. If the 1940 Act or any rule promulgated thereunder should be
amended, however, or if the Company's present interpretation should change and,
as a result, the Company determines it is permitted to vote the shares of the
Investment Options in its own right, it may elect to do so.
The voting interests of the Policy Owner (or the Beneficiary) in the Investment
Options will be determined as follows: Policy Owners may cast one vote for each
$100 of Cash Value of the Policy allocated to the Investment Option, the assets
of which are invested in the particular Investment Option on the record date for
the shareholder meeting for that Fund. Fractional votes are counted.
22
<PAGE> 34
If, however, a Policy Owner has taken a loan secured by the Policy, amounts
transferred from the Investment Option(s) to the Loan Account in connection with
the loan will not be considered in determining the voting interests of the
Policy Owner.
Policy Owners should review the prospectuses for the Investment Options to
determine matters on which shareholders may vote and the definition of a
majority vote required on some matters.
DISREGARDING VOTING INSTRUCTIONS
When permitted by state insurance regulatory authorities, the Company may
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the investment objective or policies of Fund UL
II or one of the Investment Options, or to approve or disapprove an investment
advisory Policy of one of the Investment Options. In addition, the Company may
disregard voting instructions in favor of changes in the investment policies or
the investment adviser of any of the Investment Options which are initiated by a
Policy Owner if the Company reasonably disapproves of such changes. A change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or if the Company determines that
the change would have an adverse effect on its general account in that the
proposed investment policy for an Investment Option may result in overly
speculative or unsound investments. In the event that the Company does disregard
voting instructions, a summary of that action and the reasons for such action
will be included in the next annual report to Policy Owners.
SUSPENSION OF VALUATION
The Company reserves the right to suspend or postpone the date of any payment of
any benefit or values for any Valuation Period (1) when the New York Stock
Exchange ("Exchange") is closed; (2) when trading on the Exchange is restricted;
(3) when an emergency exists as determined by the SEC so that disposal of the
securities held in the Investment Options is not reasonably practicable or it is
not reasonably practicable to determine the value of the Investment Option's net
assets; or (4) during any other period when the SEC, by order, so permits for
the protection of security holders.
DIVIDENDS
No dividends will be paid under the Policy.
DISTRIBUTION
The Company intends to sell the Policies in all jurisdictions where it is
licensed to do business and where the Policy is approved. The Policies will be
sold by life insurance sales representatives who are registered representatives
of the Company or certain other registered broker-dealers. The maximum
commission payable by the Company for distribution would be no greater than 50%
of the actual premium paid in the first twelve months. Any sales representative
or employee will have been qualified to sell variable life insurance Policies
under applicable federal and state laws. Each broker/dealer is registered with
the Securities and Exchange Commission under the Securities Exchange Act of 1934
and all are members of the National Association of Securities Dealers, Inc.
Tower Square Securities, Inc. ("Tower Square"), an indirect wholly owned
subsidiary of Travelers Group, Inc., serves as principal underwriter of the
Policies described herein.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Policy, Fund UL II
or any of the Investment Options.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the variable universal life insurance Policy described in this
Prospectus and the organization of the Company, its authority to issue the
Policy under Connecticut law and the validity of the forms of
23
<PAGE> 35
the Policy under Connecticut law have been passed on by General Counsel of the
Company.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, 100 Pearl Street, Hartford,
Connecticut, are the independent auditors for Fund UL II. The services provided
to Fund UL II include primarily the audit of Fund UL II's financial statements.
The financial statements of Fund UL II for the year ended December 31, 1996 have
been audited by Coopers & Lybrand L.L.P., as indicated in their report thereon
and are included herein in reliance upon the authority of said firm as experts
in accounting and auditing.
The financial statements of The Travelers Life and Annuity Company as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been included herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the Registration Statement, its
amendments and exhibits, to which reference is made for further information
concerning Fund UL II, the Investment Options, the Company and the Policy.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
- --------------------------------------------------------------------------------
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
24
<PAGE> 36
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. There is less guidance on the
application of the rules with respect to a Policy that is issued on a
substandard basis (i.e., a premium class involving higher than standard
mortality risk). Thus, it is not clear whether such a Policy would satisfy
Section 7702, particularly if the Policy Owner pays the full amount of premiums
permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. The Separate
Account through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the diversification requirements prescribed by the Treasury
Department.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income each year. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the policy owners received the desired tax benefits because they were not owners
of separate account assets. For example, a Policy Owner of this Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the Policy Owner being treated as the owner of the assets of the
Separate Account. In addition, the Company does not know what standard will be
set forth in the regulations or rulings which the Treasury is expected to issue,
nor does the Company know if such guidance will be issued. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of a pro rata share of the assets
of the Separate Account.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
25
<PAGE> 37
TAX TREATMENT OF POLICY BENEFITS
- --------------------------------------------------------------------------------
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. Therefore, it is important to check
with a tax adviser prior to the purchase of a policy.
MODIFIED ENDOWMENT CONTRACTS
In light of Policy premium requirements, a Policy will, in almost all cases, be
a modified endowment contract. (See, however, the discussion below on a Policy
issued in exchange for another life insurance contract.)
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner for tax purposes. All pre-death distributions (including
loans, partial withdrawals and collateral assignments) from these Policies will
be included in gross income on an income-first basis to the extent of any income
in the Policy (the cash value less the Policy Owner's investment in the Policy)
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless a
specific exception to the penalty applies. The penalty does not apply to amounts
which are distributed on or after the date on which the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
26
<PAGE> 38
POLICIES WHICH ARE NOT MODIFIED ENDOWMENT CONTRACTS
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the owner and
no part of a loan will constitute income to the owner. However, the treatment of
loans taken on earnings after the tenth Policy Year, or of loans taken to
acquire a Travelers long-term care policy is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
THE COMPANY'S INCOME TAXES
The Company is taxed as a life insurance company under federal income tax law.
Presently, the Company does not expect to incur any income tax or the earnings
or the realized capital gains attributable to Fund UL II. However, the Company
may assess a charge against the Investment Options for federal income taxes
attributable to those accounts in the event that the Company incurs income or
capital gains or other tax liability attributable to Fund UL II under future tax
law.
27
<PAGE> 39
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Directors and Executive Officers of The Travelers Life and
Annuity Company. Unless otherwise indicated, the principal business address for
all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Travelers Group Inc. include, prior to December
31, 1993, Primerica Corporation or its predecessors.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Jay S. Benet............ 1996 Senior Vice President since February 1994 and Vice
Director President (1990-1994) of The Travelers Life and Annuity
Company; Partner (1986-1990) of Coopers & Lybrand.
- -------------------------------------------------------------------------------------------------
Ian R. Stuart........... 1996 Senior Vice President since November, 1996, Chief
Director Financial Officer; Chief Accounting Officer and
Controller since March 1996, Vice President (1991-1996)
of The Travelers Life and Annuity Company.
- -------------------------------------------------------------------------------------------------
Katherine M. Sullivan... 1996 Senior Vice President and General Counsel since May 1996
Director of The Travelers Life and Annuity Company; Senior Vice
President and General Counsel (1994-1996) Connecticut
Mutual; Special Counsel & Chief of Staff (1988-1994)
Aetna Life & Casualty.
- -------------------------------------------------------------------------------------------------
George C. Kokulis....... 1996 Senior Vice President since September 1995, Vice
Director President (1993-1995) of The Travelers Life and Annuity
Company.
- -------------------------------------------------------------------------------------------------
Michael A. Carpenter.... 1995 Chairman since June 1996 and President and Chief
Director Executive Officer since June 1995 of The Travelers Life
and Annuity Company; Executive Vice President of
Travelers Group Inc. since January 1995; Chairman,
President and Chief Executive Officer (1989-1994), Kidder
Peabody Group Inc.
- -------------------------------------------------------------------------------------------------
Robert I. Lipp.......... 1992 Chairman, President and Chief Executive Officer since
Director April 1996 of Travelers/Aetna Property Casualty Corp.;
Chief Executive Officer and Director since December 1993
of The Travelers Insurance Group Inc.; Vice Chairman and
Director of Travelers Group Inc. since 1991; Chairman and
Chief Executive Officer of Commercial Credit Company
(1991-1993); Executive Vice President (1986-1991),
Primerica Corporation.
- -------------------------------------------------------------------------------------------------
Marc P. Weill........... 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers Insurance
Group Inc.; Senior Vice President and Chief Investment
Officer of Travelers Group Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
- -------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 40
SENIOR OFFICERS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Senior Officers of The Travelers Life and Annuity Company,
other than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
- ---------------------------------------------------------------------------------------------
<S> <C>
Stuart Baritz Senior Vice President
Barry Jacobson Senior Vice President
Russell H. Johnson Senior Vice President
Warren H. May Senior Vice President
Elizabeth C. Georgakopoulos Senior Vice President
Christine M. Modie Senior Vice President
David A. Tyson Senior Vice President
F. Denney Voss Senior Vice President
</TABLE>
Information relating to the management of the underlying funds is contained in
the applicable prospectuses.
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate how the Account Value, Cash
Surrender Value and Death Benefit can change over time for Policies issued to a
45 year old male and a 45 year old female. The difference between the Account
Value and the Cash Surrender Value in these illustrations represents the
Surrender Charge that would be incurred upon a full surrender of the Policy.
For both male and female age 45, there are two pages of values. One page
illustrates the assumption that the maximum Guaranteed Cost of Insurance Rates,
the monthly administrative charge, mortality and expense risk charge, and
administrative expense charge allowable under the Policy are charged in all
years. The other page illustrates the assumption that the current scale of Cost
of Insurance Rates and other charges are charged in all years. The Cost of
Insurance Rates charged vary by age, sex and underwriting classification, and
the monthly administrative charge varies by age, amount of insurance and
smoker/non-smoker classification for current charges. The illustrations reflect
a deduction of 5% from each annual premium for premium tax (2.5%) and front end
sales charge (2.5%).
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. For the first fifteen Policy
Years, the current and guaranteed charges consist of 0.80% for mortality and
expense risks, 0.10% for administrative expenses, and 0.67% for Investment
Option expenses and thereafter 0.45% for mortality and expense risks, 0.00% for
administrative expenses, and 0.67% for Investment Option expenses.
The charge for Investment Option expenses reflected in the illustrations assumes
that Cash Value is allocated equally among all Investment Options and that no
Policy Loans are outstanding, and is an average of the investment advisory fees
and other expenses charged by each of the Investment Options during 1996.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6%, and 12% correspond to approximate net annual rates of
- -1.71%, 4.29%, and 10.29%, respectively on a current and guaranteed basis during
the first fifteen Policy Years, and to approximate net annual rates of -1.26%,
4.74%, and 10.74%, respectively on a current and guaranteed basis thereafter.
The actual charges under a Policy for expenses of the Investment Options will
depend on the actual allocation of Cash Value and may be higher or lower than
those illustrated.
The charge for Investment Option expenses for all illustrations is an average of
the investment advisory fees and other expenses charged by all of the Investment
Options. The Investment
29
<PAGE> 41
Option expenses for some of the Investment Options reflect an expense
reimbursement agreement currently in effect. For the year ended December 31,
1996, these reimbursement agreements affected the total operating expenses of
the Investment Options as follows:
1. The Company has agreed to reimburse Capital Appreciation Fund (CAF),
Cash Income Trust (CIT), Managed Assets Trust (MAT), the U.S. Government
Securities Portfolio (USGSP) and the Utilities Portfolio, for the amount
by which each fund's aggregate annual expenses, including investment
advisory fees, but excluding brokerage commissions, interest charges and
taxes, exceed 1.25%. The expense reimbursement agreement did not affect
the operating expenses of CIT, CAF, MAT, USGSP or Utilities Portfolio
during 1996.
2. The Company has agreed to reimburse Travelers Zero Coupon Bond Portfolio
1998, 2000 and 2005 for the amount by which each Fund's aggregate annual
expenses, including investment advisory fees but excluding brokerage
commissions, interest charges and taxes, exceed .15%. In the absence of
the reimbursement agreement with the Company, the operating expenses in
1996 would have been 2.82%, 2.49% and 2.17%, respectively.
3. The administrator and investment adviser for the Dreyfus Stock Index
Fund have agreed to reimburse the Fund for expenses in excess of 0.40%.
4. No reimbursement arrangements were in effect for the Templeton Stock,
Bond and Asset Allocation Funds during 1996.
5. FMR or the Fidelity funds have entered into varying arrangements with
third parties who either paid or reduced a portion of the fund's
expenses. Without this reduction, Total Underlying Fund Expenses would
have been: Equity Income Portfolio, 0.58%, Growth Portfolio, 0.69%; and
Asset Manager Portfolio, 0.74%. No reimbursement arrangement affected
the High Income Portfolio.
6. During the fiscal year ended October 31, 1996, there were no fees waived
or expenses reimbursed for the Smith Barney Income and Growth Portfolio,
Alliance Growth Portfolio, Smith Barney High Income Portfolio, or the
MFS Total Return Portfolio.
Although these reimbursement arrangements are expected to continue in subsequent
years, the effect of discontinuance could be higher expenses charged to Policy
Owners.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no Policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Fund UL II, since the Company is not currently deducting such charges from Fund
UL II. However, such charges may be made in the future, and in that event, the
gross annual investment rates of return would have to exceed 0%, 6% and 12% by
an amount sufficient to cover the tax charges in order to produce the Death
Benefits, Account Values and Cash Surrender Values illustrated.
Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's age, sex, underwriting classification, the specified
insurance benefits, and the premium requested. The hypothetical gross annual
investment return assumed in such an illustration will not exceed 12%.
30
<PAGE> 42
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ---------------------------------- ---------------------------------- ---------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 1,004 1,079 1,155 0 0
2 3,435 150,000 150,000 150,000 1,978 2,192 2,415 890 1,091
3 5,282 150,000 150,000 150,000 2,915 3,332 3,785 1,879 2,271
4 7,221 150,000 150,000 150,000 3,956 4,645 5,425 2,964 3,612
5 9,258 150,000 150,000 150,000 4,956 5,992 7,212 4,012 4,986
6 11,396 150,000 150,000 150,000 5,914 7,374 9,163 5,021 6,393
7 13,641 150,000 150,000 150,000 6,834 8,795 11,296 5,993 7,886
8 15,999 150,000 150,000 150,000 7,716 10,256 13,632 6,931 9,455
9 18,474 150,000 150,000 150,000 8,559 11,760 16,192 7,864 11,065
10 21,073 150,000 150,000 150,000 9,360 13,303 18,998 8,773 12,716
15 36,153 150,000 150,000 150,000 12,557 21,511 37,606 12,557 21,511
20 55,399 150,000 150,000 150,000 14,572 31,211 69,011 14,572 31,211
<CAPTION>
YEAR 12%
<S> <C>
- ------------------------
<S> <C>
1 9
2 1,301
3 2,697
4 4,345
5 6,133
6 8,146
7 10,387
8 12,831
9 15,497
10 18,411
15 37,606
20 69,011
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6% or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
31
<PAGE> 43
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Female, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,595.63
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ---------------------------------- ---------------------------------- ---------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,675 150,000 150,000 150,000 521 581 641 0 0
2 3,435 150,000 150,000 150,000 1,000 1,152 1,312 0 114
3 5,282 150,000 150,000 150,000 1,434 1,711 2,016 487 747
4 7,221 150,000 150,000 150,000 2,251 2,697 3,208 1,361 1,781
5 9,258 150,000 150,000 150,000 3,012 3,683 4,482 2,185 2,816
6 11,396 150,000 150,000 150,000 3,715 4,668 5,843 2,954 3,849
7 13,641 150,000 150,000 150,000 4,357 5,647 7,299 3,665 4,878
8 15,999 150,000 150,000 150,000 4,933 6,613 8,852 4,315 5,894
9 18,474 150,000 150,000 150,000 5,437 7,562 10,510 4,895 6,892
10 21,073 150,000 150,000 150,000 5,869 8,490 12,284 5,409 7,903
15 36,153 150,000 150,000 150,000 6,984 12,828 23,479 6,984 12,828
20 55,399 150,000 150,000 150,000 5,810 16,222 40,903 5,810 16,222
<CAPTION>
YEAR 12%
<S> <C>
- ---------------------------------
<S> <C>
1 0
2 264
3 1,034
4 2,261
5 3,567
6 4,954
7 6,431
8 8,051
9 9,815
10 11,697
15 23,479
20 40,903
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6% or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
32
<PAGE> 44
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ---------------------------------- ---------------------------------- ---------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6%
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 1,270 1,364 1,458 117 205
2 4,238 150,000 150,000 150,000 2,495 2,762 3,041 1,376 1,627
3 6,517 150,000 150,000 150,000 3,676 4,198 4,766 2,594 3,085
4 8,910 150,000 150,000 150,000 4,955 5,819 6,797 3,903 4,715
5 11,423 150,000 150,000 150,000 6,177 7,476 9,005 5,160 6,381
6 14,061 150,000 150,000 150,000 7,351 9,177 11,416 6,371 8,088
7 16,831 150,000 150,000 150,000 8,473 10,924 14,052 7,534 9,903
8 19,740 150,000 150,000 150,000 9,550 12,722 16,942 8,655 11,809
9 22,794 150,000 150,000 150,000 10,578 14,571 20,111 9,771 13,764
10 26,001 150,000 150,000 150,000 11,542 16,460 23,576 10,843 15,761
15 44,607 150,000 150,000 150,000 15,460 26,633 46,779 15,460 26,633
20 68,354 150,000 150,000 150,000 17,125 38,001 85,775 17,125 38,001
<CAPTION>
YEAR 12%
- ------------------------------------------
<S> <C>
1 294
2 1,890
3 3,619
4 5,635
5 7,818
6 10,287
7 13,031
8 16,029
9 19,304
10 22,877
15 46,779
20 85,775
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6% or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained period of time.
** Current cost of insurance charges, mortality and expense risk charge, monthly
administrative charge and administrative expense charge.
33
<PAGE> 45
MARKETLIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES**
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount $150,000
Preferred, Non-Smoker Annual Premium $1,968.75
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ---------------------------------- ---------------------------------- ---------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,067 150,000 150,000 150,000 716 791 868 0 0
2 4,238 150,000 150,000 150,000 1,367 1,563 1,770 316 500
3 6,517 150,000 150,000 150,000 1,951 2,311 2,708 973 1,311
4 8,910 150,000 150,000 150,000 2,893 3,474 4,139 1,965 2,511
5 11,423 150,000 150,000 150,000 3,756 4,623 5,653 2,884 3,699
6 14,061 150,000 150,000 150,000 4,533 5,750 7,255 3,723 4,867
7 16,831 150,000 150,000 150,000 5,212 6,843 8,942 4,469 6,002
8 19,740 150,000 150,000 150,000 5,785 7,890 10,715 5,115 7,094
9 22,794 150,000 150,000 150,000 6,240 8,877 12,572 5,650 8,128
10 26,001 150,000 150,000 150,000 6,565 9,790 14,515 6,063 9,095
15 44,607 150,000 150,000 150,000 5,962 12,797 25,695 5,962 12,797
20 68,354 150,000 150,000 150,000 169 11,409 40,606 169 11,409
<CAPTION>
YEAR 12%
<S> <C>
- ---------------------------------------------------
<S> <C>
1 0
2 695
3 1,685
4 3,136
5 4,667
6 6,281
7 7,975
8 9,802
9 11,765
10 13,816
15 25,695
20 40,606
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6% or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representation can be made that these rates of return can be
achieved for any one year or sustained period of time.
** Guaranteed cost of insurance charges, mortality and expense risk charge,
monthly administrative charge and administrative expense charge.
34
<PAGE> 46
APPENDIX A
ANNUAL MINIMUM PREMIUMS
(Per Thousand of Stated Amount)
<TABLE>
<CAPTION>
AGE MALE FEMALE
- --- ------ ------
<S> <C> <C>
0 2.80 2.42
1 2.69 2.47
2 2.59 2.48
3 2.58 2.47
4 2.58 2.47
5 2.58 2.47
6 2.58 2.47
7 2.60 2.49
8 2.62 2.52
9 2.66 2.56
10 2.72 2.62
11 2.80 2.68
12 2.89 2.76
13 3.01 2.84
14 3.13 2.94
15 3.25 3.04
16 3.38 3.16
17 3.51 3.28
18 3.62 3.40
19 3.72 3.47
20 3.81 3.53
21 3.90 3.60
22 3.98 3.67
23 4.05 3.73
24 4.08 3.71
25 4.13 3.76
26 4.30 3.93
27 4.45 4.09
28 4.61 4.26
29 4.76 4.41
30 4.92 4.60
31 5.12 4.80
32 5.32 5.02
33 5.52 5.22
34 5.74 5.46
35 5.98 5.71
36 6.33 6.01
37 6.66 6.31
38 7.01 6.64
39 7.34 6.97
40 7.69 7.34
41 8.17 7.75
42 8.66 8.18
43 9.14 8.62
44 9.63 9.11
45 10.11 9.59
46 10.79 10.13
47 11.47 10.70
<CAPTION>
AGE MALE FEMALE
- --- ------ ------
<S> <C> <C>
48 12.15 11.29
49 12.83 11.89
50 13.51 12.51
51 14.42 13.18
52 15.34 13.86
53 16.24 14.53
54 17.16 15.29
55 18.07 16.10
56 19.43 17.11
57 20.79 18.20
58 22.16 19.35
59 23.52 20.51
60 24.88 21.68
61 27.11 22.98
62 29.34 24.27
63 31.57 25.59
64 33.80 27.01
65 36.03 28.57
66 38.86 30.12
67 41.70 31.63
68 44.52 33.29
69 47.36 35.39
70 49.76 37.75
71 54.39 40.67
72 59.04 44.16
73 63.71 48.15
74 68.41 52.54
75 72.60 57.27
76 80.21 62.20
77 87.34 67.37
78 94.52 73.00
79 101.76 79.30
80 109.06 86.49
81 120.34 94.56
82 131.76 103.39
83 143.32 112.96
84 155.03 123.28
85 166.88 138.49
86 170.39 149.27
87 177.17 159.84
88 191.28 171.55
89 208.18 185.73
90 241.15 203.75
91 254.21 225.63
92 282.60 250.53
93 314.35 278.47
94 349.51 309.50
</TABLE>
APPENDIX A -- ANNUAL MINIMUM PREMIUMS
35
<PAGE> 47
APPENDIX B
PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
(First Year)
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 2.04 1.84 1.63
1 2.04 1.84 1.63
2 2.04 1.84 1.63
3 2.04 1.84 1.63
4 2.04 1.84 1.63
5 2.19 1.97 1.75
6 2.19 1.97 1.75
7 2.21 1.99 1.77
8 2.23 2.01 1.78
9 2.26 2.03 1.81
10 2.39 2.15 1.91
11 2.46 2.21 1.97
12 2.54 2.29 2.03
13 2.65 2.39 2.12
14 2.75 2.48 2.20
15 2.76 2.48 2.21
16 2.77 2.49 2.22
17 2.79 2.51 2.23
18 2.82 2.54 2.26
19 2.90 2.61 2.32
20 2.86 2.57 2.29
21 2.93 2.64 2.34
22 2.99 2.69 2.39
23 3.04 2.74 2.43
24 3.06 2.75 2.45
25 3.08 2.77 2.46
26 3.14 2.83 2.51
27 3.25 2.93 2.60
28 3.37 3.03 2.70
29 3.47 3.12 2.78
30 3.49 3.14 2.79
31 3.64 3.28 2.91
32 3.78 3.40 3.02
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 3.92 3.53 3.14
34 4.08 3.67 3.26
35 4.19 3.77 3.35
36 4.43 3.99 3.54
37 4.66 4.19 3.73
38 4.91 4.42 3.93
39 5.14 4.63 4.11
40 5.69 5.12 4.55
41 6.05 5.45 4.84
42 6.41 5.77 5.13
43 6.76 6.08 5.41
44 7.13 6.42 5.70
45 7.18 6.46 5.74
46 7.66 6.89 6.13
47 8.14 7.33 6.51
48 8.63 7.77 6.90
49 9.11 8.20 7.29
50 10.00 9.00 8.00
51 10.67 9.60 8.54
52 11.35 10.22 9.06
53 12.02 10.82 9.62
54 12.70 11.43 10.16
55 13.01 11.71 10.41
56 13.99 12.69 11.19
57 14.97 13.47 11.98
58 15.96 14.36 12.77
59 16.93 15.24 13.54
60 17.91 16.12 14.33
61 19.52 17.57 15.82
62 21.12 19.01 16.90
63 22.73 20.46 18.18
64 24.34 21.91 19.47
65+ 25.40 22.85 20.32
</TABLE>
APPENDIX B -- PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
36
<PAGE> 48
APPENDIX B(1)
PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
Sales Charge Component*
(First Year)
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 0.41 0.37 0.33
1 0.41 0.37 0.33
2 0.41 0.37 0.33
3 0.41 0.37 0.33
4 0.41 0.37 0.33
5 0.44 0.39 0.35
6 0.44 0.39 0.35
7 0.44 0.40 0.35
8 0.45 0.40 0.36
9 0.45 0.41 0.36
10 0.48 0.43 0.38
11 0.49 0.44 0.39
12 0.51 0.46 0.41
13 0.53 0.48 0.42
14 0.55 0.50 0.44
15 0.55 0.50 0.44
16 0.55 0.50 0.44
17 0.56 0.50 0.45
18 0.56 0.51 0.45
19 0.58 0.52 0.46
20 0.57 0.51 0.46
21 0.59 0.53 0.47
22 0.60 0.54 0.48
23 0.61 0.55 0.49
24 0.61 0.55 0.49
25 0.62 0.54 0.48
26 0.63 0.57 0.50
27 0.65 0.59 0.52
28 0.67 0.61 0.54
29 0.69 0.62 0.56
30 0.70 0.63 0.56
31 0.73 0.66 0.58
32 0.76 0.68 0.60
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.78 0.71 0.63
34 0.82 0.73 0.65
35 0.84 0.75 0.67
36 0.89 0.80 0.71
37 0.93 0.84 0.75
38 0.98 0.88 0.79
39 1.03 0.93 0.82
40 1.14 1.02 0.91
41 1.21 1.09 0.97
42 1.28 1.15 1.03
43 1.35 1.22 1.08
44 1.43 1.28 1.14
45 1.44 1.29 1.15
46 1.53 1.38 1.23
47 1.63 1.47 1.30
48 1.73 1.55 1.38
49 1.82 1.64 1.46
50 2.00 1.80 1.60
51 2.13 1.92 1.71
52 2.27 2.04 1.82
53 2.40 2.16 1.92
54 2.54 2.29 2.03
55 2.60 2.34 2.08
56 2.80 2.52 2.24
57 2.99 2.69 2.40
58 3.19 2.87 2.55
59 3.39 3.05 2.71
60 3.58 3.22 2.87
61 3.90 3.51 3.12
62 4.22 3.80 3.38
63 4.55 4.09 3.64
64 4.87 4.38 3.89
65+ 5.08 4.57 4.06
</TABLE>
*This is the sales charge portion of the Per Thousand of Stated Amount Surrender
Charge. It equals 20% of the charge shown in Appendix B. It decreases 10% each
year over the 10 year period.
APPENDIX B(1) -- PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE -- SALES CHARGE
COMPONENT
37
<PAGE> 49
APPENDIX B(2)
PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE
Administrative Charge Component*
(First Year)
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 1.63 1.47 1.30
1 1.63 1.47 1.30
2 1.63 1.47 1.30
3 1.63 1.47 1.30
4 1.63 1.47 1.30
5 1.75 1.58 1.40
6 1.75 1.58 1.40
7 1.77 1.59 1.42
8 1.78 1.61 1.42
9 1.81 1.62 1.45
10 1.91 1.72 1.53
11 1.97 1.77 1.58
12 2.03 1.83 1.62
13 2.12 1.91 1.70
14 2.20 1.98 1.76
15 2.21 1.98 1.77
16 2.22 1.99 1.78
17 2.23 2.01 1.78
18 2.26 2.03 1.81
19 2.32 2.09 1.86
20 2.29 2.06 1.83
21 2.34 2.11 1.87
22 2.39 2.15 1.91
23 2.43 2.19 1.94
24 2.45 2.20 1.96
25 2.46 2.17 1.93
26 2.51 2.26 2.01
27 2.60 2.34 2.08
28 2.70 2.42 2.16
29 2.78 2.50 2.22
30 2.79 2.51 2.23
31 2.91 2.62 2.33
32 3.02 2.72 2.42
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 3.14 2.82 2.51
34 3.26 2.94 2.61
35 3.35 3.02 2.68
36 3.54 3.19 2.83
37 3.73 3.35 2.98
38 3.93 3.54 3.14
39 4.11 3.70 3.29
40 4.55 4.10 3.64
41 4.84 4.36 3.87
42 5.13 4.62 4.10
43 5.41 4.86 4.33
44 5.70 5.14 4.56
45 5.74 5.17 4.59
46 6.13 5.51 4.90
47 6.51 5.86 5.21
48 6.90 6.22 5.52
49 7.29 6.56 5.83
50 8.00 7.20 6.40
51 8.54 7.68 6.83
52 9.08 8.18 7.26
53 9.62 8.66 7.70
54 10.16 9.14 8.13
55 10.41 9.37 8.33
56 11.19 10.07 8.95
57 11.98 10.78 9.58
58 12.77 11.49 10.22
59 13.54 12.19 10.83
60 14.33 12.90 11.46
61 15.62 14.06 12.50
62 16.90 15.21 13.52
63 18.18 16.37 14.54
64 19.47 17.53 15.58
65+ 20.32 18.29 16.26
</TABLE>
*This is the administrative portion of the Per Thousand of Stated Amount
Surrender Charge. It equals 80% of the charge shown in Appendix B.
APPENDIX B(2) -- PER THOUSAND OF STATED AMOUNT SURRENDER CHARGE ADMINISTRATIVE
CHARGE
38
<PAGE> 50
APPENDIX C
CURRENT MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
NON-SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20 0.08 0.00 0.00
21 0.08 0.00 0.00
22 0.08 0.00 0.00
23 0.08 0.00 0.00
24 0.08 0.00 0.00
25 0.08 0.00 0.00
26 0.08 0.00 0.00
27 0.08 0.00 0.00
28 0.08 0.00 0.00
29 0.08 0.00 0.00
30 0.08 0.00 0.00
31 0.08 0.00 0.00
32 0.08 0.00 0.00
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.08 0.00 0.00
34 0.08 0.00 0.00
35 0.08 0.00 0.00
36 0.08 0.00 0.00
37 0.08 0.00 0.00
38 0.08 0.00 0.00
39 0.08 0.00 0.00
40 0.08 0.00 0.00
41 0.08 0.00 0.00
42 0.08 0.00 0.00
43 0.08 0.00 0.00
44 0.08 0.00 0.00
45 0.08 0.00 0.00
46 0.08 0.00 0.00
47 0.09 0.00 0.00
48 0.09 0.00 0.00
49 0.10 0.00 0.00
50 0.10 0.00 0.00
51 0.11 0.00 0.00
52 0.11 0.00 0.00
53 0.12 0.00 0.00
54 0.12 0.00 0.00
55 0.12 0.00 0.00
56 0.13 0.00 0.00
57 0.13 0.00 0.00
58 0.14 0.00 0.00
59 0.14 0.00 0.00
60 0.15 0.00 0.00
61 0.15 0.00 0.00
62 0.15 0.00 0.00
63 0.15 0.00 0.00
64 0.15 0.00 0.00
65+ 0.15 0.00 0.00
</TABLE>
APPENDIX C -- CURRENT MONTHLY ADMINISTRATIVE CHARGE
39
<PAGE> 51
APPENDIX C (CONT'D)
CURRENT MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 0.12 0.08 0.00
1 0.12 0.08 0.00
2 0.12 0.08 0.00
3 0.12 0.08 0.00
4 0.12 0.08 0.00
5 0.12 0.08 0.00
6 0.13 0.08 0.00
7 0.14 0.08 0.00
8 0.15 0.08 0.00
9 0.16 0.08 0.00
10 0.16 0.08 0.00
11 0.16 0.08 0.00
12 0.16 0.08 0.00
13 0.16 0.08 0.00
14 0.16 0.08 0.00
15 0.16 0.08 0.00
16 0.16 0.08 0.00
17 0.16 0.08 0.00
18 0.16 0.08 0.00
19 0.16 0.08 0.00
20 0.16 0.08 0.00
21 0.16 0.08 0.00
22 0.16 0.08 0.00
23 0.16 0.08 0.00
24 0.16 0.08 0.00
25 0.16 0.08 0.00
26 0.16 0.09 0.00
27 0.17 0.09 0.00
28 0.17 0.09 0.00
29 0.18 0.09 0.00
30 0.18 0.09 0.00
31 0.18 0.09 0.00
32 0.18 0.09 0.00
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.19 0.09 0.00
34 0.19 0.09 0.00
35 0.19 0.09 0.00
36 0.20 0.09 0.00
37 0.21 0.10 0.00
38 0.22 0.10 0.00
39 0.23 0.10 0.00
40 0.23 0.10 0.00
41 0.24 0.10 0.00
42 0.24 0.10 0.00
43 0.24 0.10 0.00
44 0.24 0.10 0.00
45 0.24 0.10 0.00
46 0.25 0.11 0.00
47 0.26 0.11 0.00
48 0.27 0.11 0.00
49 0.28 0.11 0.00
50 0.29 0.15 0.00
51 0.30 0.15 0.00
52 0.32 0.15 0.00
53 0.33 0.15 0.00
54 0.34 0.15 0.00
55 0.35 0.15 0.00
56 0.35 0.15 0.00
57 0.35 0.15 0.00
58 0.36 0.15 0.00
59 0.36 0.15 0.00
60 0.36 0.15 0.00
61 0.38 0.15 0.00
62 0.38 0.15 0.00
63 0.38 0.15 0.00
64 0.39 0.15 0.00
65+ 0.39 0.15 0.00
</TABLE>
40
<PAGE> 52
APPENDIX C(1)
GUARANTEED MONTHLY ADMINISTRATIVE CHARGE
(Per Thousand of Stated Amount)
Applicable for Three Years Following Issue or Increase
SMOKERS AND NON-SMOKERS
<TABLE>
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
0 0.16 0.08 0.00
1 0.16 0.08 0.00
2 0.16 0.08 0.00
3 0.16 0.08 0.00
4 0.16 0.08 0.00
5 0.16 0.08 0.00
6 0.16 0.08 0.00
7 0.16 0.08 0.00
8 0.16 0.08 0.00
9 0.16 0.08 0.00
10 0.16 0.08 0.00
11 0.16 0.08 0.00
12 0.16 0.08 0.00
13 0.16 0.08 0.00
14 0.16 0.08 0.00
15 0.16 0.08 0.00
16 0.16 0.08 0.00
17 0.16 0.08 0.00
18 0.16 0.08 0.00
19 0.16 0.08 0.00
20 0.16 0.08 0.00
21 0.16 0.08 0.00
22 0.16 0.08 0.00
23 0.16 0.08 0.00
24 0.16 0.08 0.00
25 0.16 0.08 0.00
26 0.16 0.09 0.00
27 0.17 0.09 0.00
28 0.17 0.09 0.00
29 0.18 0.09 0.00
30 0.18 0.09 0.00
31 0.18 0.09 0.00
32 0.18 0.09 0.00
<CAPTION>
STATED AMOUNT
------------------------------------------
ISSUE $50,000 $500,000 $1,000,000
AGE TO $499,999 TO $999,999 AND ABOVE
- ----- ----------- ----------- ----------
<S> <C> <C> <C>
33 0.19 0.09 0.00
34 0.19 0.09 0.00
35 0.19 0.09 0.00
36 0.20 0.09 0.00
37 0.21 0.10 0.00
38 0.22 0.10 0.00
39 0.23 0.10 0.00
40 0.23 0.10 0.00
41 0.24 0.10 0.00
42 0.24 0.10 0.00
43 0.24 0.10 0.00
44 0.24 0.10 0.00
45 0.24 0.10 0.00
46 0.25 0.11 0.00
47 0.26 0.11 0.00
48 0.27 0.11 0.00
49 0.28 0.11 0.00
50 0.29 0.15 0.00
51 0.30 0.15 0.00
52 0.32 0.15 0.00
53 0.33 0.15 0.00
54 0.34 0.15 0.00
55 0.35 0.15 0.00
56 0.35 0.15 0.00
57 0.35 0.15 0.00
58 0.36 0.15 0.00
59 0.36 0.15 0.00
60 0.36 0.15 0.00
61 0.38 0.15 0.00
62 0.38 0.15 0.00
63 0.38 0.15 0.00
64 0.39 0.15 0.00
65+ 0.39 0.15 0.00
</TABLE>
APPENDIX C(1) -- GUARANTEED MONTHLY ADMINISTRATIVE CHARGE
41
<PAGE> 53
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Travelers Variable Products Funds, 759,956 shares (cost $926,331).............................. $ 917,333
Templeton Variable Products Series Fund, 9,934 shares (cost $216,481).......................... 225,243
Fidelity's Variable Insurance Products Fund, 10,817 shares (cost $247,441)..................... 251,243
Fidelity's Variable Insurance Products Fund II, 563 shares (cost $9,553)....................... 9,526
Dreyfus Stock Index Fund, 2,550 shares (cost $52,165).......................................... 51,720
Travelers Series Fund Inc., 15,520 shares (cost $210,275)...................................... 208,043
Smith Barney Series Fund, 1,431 shares (cost $22,033).......................................... 22,512
-----------
Total Investments (cost $1,684,279)..................................................... $1,685,620
Receivables:
Dividends...................................................................................... 14,002
Premium payments and transfers from other Travelers accounts................................... 823
----------
Total Assets............................................................................ 1,700,445
----------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts........................ 1,048
Accrued liabilities.............................................................................. 762
----------
Total Liabilities....................................................................... 1,810
----------
NET ASSETS: $1,698,635
==========
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 54
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends.......................................................................... $ 23,667
EXPENSES:
Insurance charges.................................................................. $ 1,938
Administrative charges............................................................. 242
--------
Total expenses................................................................... 2,180
--------
Net investment income.......................................................... 21,487
--------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold................................................... 668,134
Cost of investments sold......................................................... 667,029
--------
Net realized gain.............................................................. 1,105
Unrealized gain on investments:
December 31, 1996................................................................ 1,341
--------
Net realized and unrealized gain............................................... 2,446
--------
Net increase in net assets resulting from operations............................... $ 23,933
========
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 55
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
----
<S> <C>
OPERATIONS:
Net investment income....................................................... $ 21,487
Net realized gain from investment transactions.............................. 1,105
Net unrealized gain on investments.......................................... 1,341
-----------
Net increase in net assets resulting from operations...................... 23,933
-----------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 1,060,645 units)........................................... 1,566,170
Participant transfers from other Travelers accounts
(applicable to 677,084 units)............................................. 983,742
Contract surrenders
(applicable to 38,985 units).............................................. (58,243)
Participant transfers to other Travelers accounts
(applicable to 550,220 units)............................................. (816,967)
-----------
Net increase in net assets resulting from unit transactions.............. 1,674,702
-----------
Net increase in net assets............................................. 1,698,635
NET ASSETS:
Beginning of period......................................................... -
-----------
End of period............................................................... $ 1,698,635
===========
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund UL II for Variable Life Insurance ("Fund UL II") is a
separate account of The Travelers Life and Annuity Company ("Travelers
Life"), a wholly owned subsidiary of The Travelers Insurance Company ("The
Travelers"), an indirect wholly owned subsidiary of Travelers Group Inc.,
and is available for funding certain variable life insurance contracts
issued by Travelers Life. Fund UL II is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant premium payments applied to Fund UL II are invested in one or
more eligible funds in accordance with the selection made by the owner. As
of December 31, 1996, the eligible funds available under Fund UL II are:
Managed Assets Trust; Capital Appreciation Fund; Cash Income Trust; U.S.
Government Securities Portfolio, Utilities Portfolio, Zero Coupon Bond Fund
Portfolio Series 1998, Zero Coupon Bond Fund Portfolio Series 2000 and Zero
Coupon Bond Fund Portfolio Series 2005 of The Travelers Series Trust;
Alliance Growth Portfolio, Smith Barney Income and Growth Portfolio, Smith
Barney High Income Portfolio, MFS Total Return Portfolio and AIM Capital
Appreciation Portfolio of Travelers Series Fund Inc.; Total Return Portfolio
of the Smith Barney Series Fund (all of which are managed by affiliates of
The Travelers); Templeton Bond Fund, Templeton Stock Fund and Templeton
Asset Allocation Fund of Templeton Variable Products Series Fund; High
Income Portfolio, Growth Portfolio and Equity-Income Portfolio of Fidelity's
Variable Insurance Products Fund; Asset Manager Portfolio of Fidelity's
Variable Insurance Products Fund II; and Dreyfus Stock Index Fund. All of
the funds are Massachusetts business trusts, except for Travelers Series
Fund Inc. and Dreyfus Stock Index Fund which are incorporated under Maryland
law.
The following is a summary of significant accounting policies consistently
followed by Fund UL II in the preparation of its financial statements.
SECURITY VALUATION. Investments are valued daily at the net asset values
per share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Fund UL II form a part of the total
operations of Travelers Life and are not taxed separately. Travelers Life is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended (the "Code"). Under existing federal income tax law, no taxes
are payable on the investment income of Fund UL II. Fund UL II is not taxed
as a "regulated investment company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $2,351,308 and $667,029,
respectively, for the period ended December 31, 1996. Realized gains and
losses from investment transactions are reported on an identified cost
basis. The cost of investments in eligible funds was $1,684,279 at December
31, 1996. Gross unrealized appreciation for all investments at December 31,
1996 was $13,051. Gross unrealized depreciation for all investments at
December 31, 1996 was $11,710.
3. CONTRACT CHARGES
Insurance charges and administrative charges of 0.80% and 0.10%,
respectively, of the average net assets of Fund UL II on an annual basis,
are allowed for mortality and expense risks and administrative expenses
assumed by Travelers Life. Contracts are charged 0.45% on an annual basis
and 0% after the first fifteen policy years for mortality and expense risks
and administrative expenses, respectively.
Travelers Life receives contingent surrender charges on full or partial
contract surrenders. Such charges are computed by applying various
percentages to premiums and/or stated contract amounts (as described in the
prospectus). Travelers Life received no contingent surrender charges for
the period August 8, 1996 (date operations commenced) to December 31, 1996.
-4-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Travelers Variable Products Funds
Managed Assets Trust............................. 2,471 $ 2.221 $ 5,489
Capital Appreciation Fund........................ 77,659 2.153 167,182
Cash Income Trust................................ 510,210 1.479 754,688
U.S. Government Securities Portfolio............. 1,080 1.156 1,249
Utilities Portfolio.............................. 186 1.357 252
Zero Coupon Bond Fund Portfolio Series 1998...... 40 1.054 42
Zero Coupon Bond Fund Portfolio Series 2005...... 42 1.046 44
Templeton Variable Products Series Fund
Templeton Bond Fund.............................. 110 1.165 128
Templeton Stock Fund............................. 139,885 1.448 202,564
Templeton Asset Allocation Fund.................. 16,725 1.357 22,690
Fidelity's Variable Insurance Products Fund
High Income Portfolio............................ 17,292 1.290 22,307
Growth Portfolio................................. 80,468 1.492 120,047
Equity-Income Portfolio.......................... 70,383 1.549 109,031
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio.......................... 7,858 1.212 9,525
Dreyfus Stock Index Fund........................... 31,576 1.660 52,410
Travelers Series Fund Inc.
Alliance Growth Portfolio........................ 61,648 1.336 82,363
Smith Barney Income and Growth Portfolio......... 12,845 1.267 16,269
Smith Barney High Income Portfolio............... 32,158 1.113 35,806
MFS Total Return Portfolio....................... 9,490 1.232 11,695
AIM Capital Appreciation Portfolio............... 58,901 1.059 62,348
Smith Barney Series Fund
Total Return Portfolio........................... 17,497 1.286 22,506
----------
Net Contract Owners' Equity.................................................................. $1,698,635
==========
</TABLE>
-5-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
-------- -----------
<S> <C> <C>
TRAVELERS VARIABLE PRODUCTS FUNDS (54.4%)
Managed Assets Trust (Cost $5,275) 339 $ 5,084
Capital Appreciation Fund (Cost $164,242) 4,235 155,517
Cash Income Trust (Cost $755,247) 755,247 755,247
U.S. Government Securities Portfolio (Cost $1,237) 108 1,177
Utilities Portfolio (Cost $250) 19 231
Zero Coupon Bond Fund Portfolio Series 1998 (Cost $42) 4 40
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $38) 4 37
-------- -----------
Total (Cost $926,331) 759,956 917,333
-------- -----------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (13.4%)
Templeton Bond Fund (Cost $127) 11 128
Templeton Stock Fund (Cost $194,194) 8,847 202,423
Templeton Asset Allocation Fund (Cost $22,160) 1,076 22,692
-------- -----------
Total (Cost $216,481) 9,934 225,243
-------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (14.9%)
High Income Portfolio (Cost $21,971) 1,782 22,309
Growth Portfolio (Cost $119,740) 3,850 119,895
Equity-Income Portfolio (Cost $105,730) 5,185 109,039
-------- -----------
Total (Cost $247,441) 10,817 251,243
-------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (0.6%)
Asset Manager Portfolio (Cost $9,553)
Total (Cost $9,553) 563 9,526
-------- -----------
DREYFUS STOCK INDEX FUND (3.1%)
Total (Cost $52,165) 2,550 51,720
-------- -----------
TRAVELERS SERIES FUND INC. (12.3%)
Alliance Growth Portfolio (Cost $82,752) 4,899 82,211
Smith Barney Income and Growth Portfolio (Cost $16,569) 1,081 16,286
Smith Barney High Income Portfolio (Cost $36,978) 3,025 35,816
MFS Total Return Portfolio (Cost $11,790) 876 11,536
AIM Capital Appreciation Portfolio (Cost $62,186) 5,639 62,194
-------- -----------
Total (Cost $210,275) 15,520 208,043
-------- -----------
SMITH BARNEY SERIES FUND (1.3%)
Total Return Portfolio (Cost $22,033)
Total (Cost $22,033) 1,431 22,512
-------- -----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $1,684,279) $ 1,685,620
===========
</TABLE>
-6-
<PAGE> 59
This page intentionally left blank.
-7-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S.
MANAGED CAPITAL CASH GOVERNMENT
ASSETS APPRECIATION INCOME SECURITIES UTILITIES
TRUST FUND TRUST PORTFOLIO PORTFOLIO
--------- ------------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 406 $ 11,690 $ 5,841 $ 73 $ 20
--------- ---------- ------------ -------- ------
EXPENSES:
Insurance charges.......................................... 9 184 1,014 2 -
Administrative charges..................................... 1 23 127 - -
--------- ---------- ------------ -------- ------
Net investment income (loss)......................... 396 11,483 4,700 71 20
--------- ---------- ------------ -------- ------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold......................... 208 48,831 610,976 53 -
Cost of investments sold............................... 197 48,252 610,976 52 -
--------- ---------- ------------ -------- ------
Net realized gain (loss)............................. 11 579 - 1 -
--------- ---------- ------------ -------- ------
Unrealized gain (loss) on investments:
End of period.......................................... (191) (8,725) - (60) (19)
--------- ---------- ------------ -------- ------
Net increase (decrease) in net assets
resulting from operations............................ 216 3,337 4,700 12 1
--------- ---------- ------------ -------- ------
UNIT TRANSACTIONS:
Participant premium payments............................... 213 35,577 1,384,589 - 196
Participant transfers from other Travelers accounts........ 5,304 158,113 187,058 1,289 111
Contract surrenders........................................ (244) (5,130) (32,569) (52) (56)
Participant transfers to other Travelers accounts.......... - (24,715) (789,090) - -
--------- ---------- ------------ -------- ------
Net increase in net assets resulting
from unit transactions............................... 5,273 163,845 749,988 1,237 251
--------- ---------- ------------ -------- ------
Net increase in net assets........................... 5,489 167,182 754,688 1,249 252
NET ASSETS:
Beginning of period.................................... - - - - -
--------- ---------- ------------ -------- ------
End of period.......................................... $ 5,489 $ 167,182 $ 754,688 $ 1,249 $ 252
========= ========== ============ ======== ======
</TABLE>
-8-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO ZERO TEMPLETON
COUPON BOND COUPON BOND ASSET FIDELITY'S FIDELITY'S FIDELITY'S
FUND PORTFOLIO FUND PORTFOLIO TEMPLETON TEMPLETON ALLOCATION HIGH INCOME GROWTH EQUITY-INCOME
SERIES 1998 SERIES 2005 BOND FUND STOCK FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2 $ 2 $ - $ - $ - $ - $ - $ -
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
- - - 185 14 17 123 143
- - - 23 2 2 15 18
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
2 2 - (208) (16) (19) (138) (161)
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
- - 38 944 403 222 2,278 1,521
- - 38 899 382 218 2,102 1,456
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
- - - 45 21 4 176 65
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
(2) (1) 1 8,229 532 338 155 3,309
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
- 1 1 8,066 537 323 193 3,213
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
- 34 95 28,786 6,643 9,103 24,191 25,870
42 22 70 170,043 16,563 13,550 101,793 84,495
- (13) (38) (3,739) (966) (645) (5,447) (4,170)
- - - (592) (87) (24) (683) (377)
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
42 43 127 194,498 22,153 21,984 119,854 105,818
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
42 44 128 202,564 22,690 22,307 120,047 109,031
- - - - - - - -
------------ -------------- ---------- ---------- ---------- ----------- --------- -----------
$ 42 $ 44 $ 128 $ 202,564 $ 22,690 $ 22,307 $ 120,047 $ 109,031
============ ============== ========== ========== ========== =========== ========= ===========
</TABLE>
-9-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS COMMENCED) TO DECEMBER
31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY
FIDELITY'S ALLIANCE INCOME AND SMITH BARNEY
ASSET MANAGER DREYFUS STOCK GROWTH GROWTH HIGH INCOME
PORTFOLIO INDEX FUND PORTFOLIO PORTFOLIO PORTFOLO
-------------- ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ - $ 698 $ 1,721 $ 371 $ 2,042
-------------- ------------ ------------ ------------- ------
EXPENSES:
Insurance charges...................................... 9 41 53 10 36
Administrative charges................................. 1 5 7 1 5
-------------- ------------ ------------ ------------- -------
Net investment income (loss)..................... (10) 652 1,661 360 2,001
-------------- ------------ ------------ ------------- -------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold..................... 50 480 469 101 126
Cost of investments sold........................... 48 423 405 92 128
-------------- ------------ ------------ ------------- -------
Net realized gain (loss)......................... 2 57 64 9 (2)
-------------- ------------ ------------ ------------- -------
Unrealized gain (loss) on investments:
End of period...................................... (27) (445) (541) (283) (1,162)
-------------- ------------ ------------ ------------- -------
Net increase (decrease) in net assets
resulting from operations........................ (35) 264 1,184 86 837
-------------- ------------ ------------ ------------- -------
UNIT TRANSACTIONS:
Participant premium payments........................... 106 14,990 24,811 824 -
Participant transfers from other Travelers accounts.... 9,556 39,157 58,558 15,605 35,064
Contract surrenders.................................... (102) (1,458) (1,638) (246) (95)
Participant transfers to other Travelers accounts...... - (543) (552) - -
-------------- ------------ ------------ ------------- -------
Net increase in net assets resulting
from unit transactions........................... 9,560 52,146 81,179 16,183 34,969
-------------- ------------ ------------ ------------- -------
Net increase in net assets....................... 9,525 52,410 82,363 16,269 35,806
NET ASSETS:
Beginning of period................................ - - - - -
-------------- ------------ ------------ ------------- -------
End of period...................................... $ 9,525 $ 52,410 $ 82,363 $ 16,269 $35,806
============== ============ ============ ============= =======
</TABLE>
-10-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
MFS TOTAL AIM CAPITAL
RETURN APPRECIATION TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
--------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C>
$ 385 $ 62 $ 354 $ 23,667
--------------- ------------------ ----------------- ---------------------
9 74 15 1,938
1 9 2 242
--------------- ------------------ ----------------- ---------------------
375 (21) 337 21,487
--------------- ------------------ ----------------- ---------------------
52 1,111 271 668,134
48 1,061 252 667,029
--------------- ------------------ ----------------- ---------------------
4 50 19 1,105
--------------- ------------------ ----------------- ---------------------
(254) 8 479 1,341
--------------- ------------------ ----------------- ---------------------
125 37 835 23,933
--------------- ------------------ ----------------- ---------------------
505 2,516 7,121 1,566,170
11,241 60,691 15,417 983,742
(157) (843) (635) (58,243)
(19) (53) (232) (816,967)
--------------- ------------------ ----------------- ---------------------
11,570 62,311 21,671 1,674,702
--------------- ------------------ ----------------- ---------------------
11,695 62,348 22,506 1,698,635
- - - -
--------------- ------------------ ----------------- ---------------------
$ 11,695 $ 62,348 $ 22,506 $ 1,698,635
================ ================== ================= =====================
</TABLE>
-11-
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Life Insurance Contracts of
The Travelers Fund UL II for Variable Life Insurance:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund UL II for Variable Life Insurance as of December 31, 1996, and
the related statements of operations and changes in net assets for the period
August 8, 1996 (date operations commenced) to December 31, 1996. These
financial statements are the responsibility of management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit 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. Our
procedures included confirmation of shares owned as of December 31, 1996, by
correspondence with the underlying funds. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund UL II for
Variable Life Insurance as of December 31, 1996, the results of its operations
and the changes in its net assets for the period August 8, 1996 (date
operations commenced) to December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 7, 1997
-12-
<PAGE> 65
Independent Auditors' Report
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1996 and 1995, and the related statements of
income and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 financial position of The Travelers Life and Annuity
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
January 17, 1997
8
<PAGE> 66
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums $ 9,357 $ 2,652 $ 3,498
Net investment income 89,040 63,209 66,093
Realized investment gains (losses) (9,613) 18,713 (2,074)
Other 16,223 17,466 18,702
- ----------------------------------------------------------------------------------------------------------
Total revenues 105,007 102,040 86,219
- ----------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 56,448 52,390 55,596
Amortization of deferred acquisition costs
and value of insurance in force 3,286 1,563 -
Other operating expenses 5,691 4,651 2,758
- ----------------------------------------------------------------------------------------------------------
Total benefits and expenses 65,425 58,604 58,354
- ----------------------------------------------------------------------------------------------------------
Income before federal income taxes 39,582 43,436 27,865
- ----------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 29,456 2,555 4,742
Deferred expense (benefit) (15,665) 11,964 4,798
- ----------------------------------------------------------------------------------------------------------
Total federal income taxes 13,791 14,519 9,540
- ----------------------------------------------------------------------------------------------------------
Net income 25,791 28,917 18,325
Retained earnings beginning of year 157,907 128,990 110,665
Dividends to parent 16,000 - -
- ----------------------------------------------------------------------------------------------------------
Retained earnings end of year $167,698 $157,907 $128,990
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
9
<PAGE> 67
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
(at December 31, in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value
(cost, $672,173; $678,293) $ 694,535 $ 724,639
Equity securities, at fair value (cost, $6,654; $9,453) 9,554 13,099
Mortgage loans 90,542 125,813
Real estate held for sale, net of accumulated depreciation of $0; $524 10,111 8,995
Policy loans 1,750 -
Short-term securities 70,755 51,381
Other investments 69,754 65,805
- -----------------------------------------------------------------------------------------------------------------
Total investments 947,001 989,732
- -----------------------------------------------------------------------------------------------------------------
Separate accounts 1,187,812 886,688
Deferred acquisition costs and value of insurance in force 40,027 22,560
Deferred federal income taxes 57,616 41,158
Other assets 21,827 24,501
- -----------------------------------------------------------------------------------------------------------------
Total assets $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 654,534 $ 671,027
Contractholder funds 86,097 11,947
Separate accounts 1,124,605 856,867
Other liabilities 17,179 61,247
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,882,415 1,601,088
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,314
Retained earnings 167,698 157,907
Unrealized investment gains, net of taxes 33,856 35,330
- -----------------------------------------------------------------------------------------------------------------
Total shareholder's equity 371,868 363,551
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE> 68
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 6,472 $ 1,950 $ 3,498
Net investment income received 71,083 66,219 57,240
Benefits and claims paid (70,331) (71,710) (72,298)
Interest credited to contractholders (813) - -
Operating expenses paid (5,482) (3,013) (4,400)
Income taxes refunded (paid) (23,931) (35,305) 1,030
Other (6,857) (6,772) 22,507
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (29,859) (48,631) 7,577
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 20,301 11,752 29,043
Mortgage loans 37,789 24,137 60,260
Proceeds from sales of investments
Fixed maturities 978,970 459,971 41,671
Equity securities 12,818 11,823 9,373
Mortgage loans 22,437 7,013 23,327
Real estate held for sale - - 34,181
Purchases of investments
Fixed maturities (994,443) (515,098) (204,412)
Equity securities (5,412) (156) (375)
Mortgage loans (21,450) (4,890) (5,607)
Policy loans (1,750) - -
Short-term securities, (purchases) sales, net (19,688) (5,051) (1,146)
Other investments, (purchases) sales, net (6,160) 9,274 682
Securities transactions in course of settlement (51,703) 45,727 5,722
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (28,291) 44,502 (7,281)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 96,490 5,707 -
Contractholder fund withdrawals (22,340) (1,874) -
Dividends to parent company (16,000) - -
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 58,150 3,833 -
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash $ - $ (296) $ 296
- -------------------------------------------------------------------------------------------------------------
Cash at December 31 $ - $ - $ 296
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
11
<PAGE> 69
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is a wholly
owned subsidiary of The Travelers Insurance Group Inc. (TIGI), which is
an indirect wholly owned subsidiary of Travelers Group Inc. (Travelers
Group), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment
Services; (ii) Consumer Finance Services; (iii) Property & Casualty
Insurance Services; and (iv) Life Insurance Services (through TIC and its
subsidiaries). The periodic reports of Travelers Group provide additional
business and financial information concerning that company and its
consolidated subsidiaries.
The Company offers fixed and variable deferred annuities and individual
life insurance to individuals and small businesses. It also provides
single premium group annuity close-out contracts and individual
structured settlement annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain prior year amounts have been reclassified to conform with the
1996 presentation.
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if quoted
market prices are not available, discounted expected cash flows using
market rates commensurate with the credit quality and maturity of the
investment. Fixed maturities are classified as "available for sale" and
are reported at fair value, with unrealized investment gains and losses,
net of income taxes, charged or credited directly to shareholder's
equity.
Equity securities, which include common and nonredeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's
equity, net of income taxes.
12
<PAGE> 70
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Mortgage loans are carried at amortized cost. A mortgage loan is
considered impaired when it is probable that the Company will be unable
to collect principal and interest amounts due. For mortgage loans that
are determined to be impaired, a reserve is established for the
difference between the amortized cost and fair market value of the
underlying collateral. In estimating fair value, the Company uses
interest rates reflecting the higher returns required in the current real
estate financing market. Impaired loans were insignificant at December
31, 1996 and 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, using discounted cash flow analyses and other acceptable
techniques. Thereafter, an allowance for losses on real estate held for
sale is established if the carrying value of the property exceeds its
current fair value less estimated costs to sell. There was no such
allowance at December 31, 1996 and 1995.
Short-term securities, consisting primarily of money market instruments
and other debt issues purchased with a maturity of less than one year,
are carried at amortized cost which approximates market.
Accrual of income, included in other assets, is suspended on fixed
maturities or mortgage loans that are in default, or on which it is
likely that future payments will not be made as scheduled. Interest
income on investments in default is recognized only as payment is
received.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pre-tax revenues based upon specific identification of the investments
sold on the trade date. Also included are gains and losses arising from
the remeasurement of the local currency value of foreign investments to
U.S. dollars, the functional currency of the Company.
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
Separate Accounts
Separate account liabilities primarily represent structured settlement
annuity obligations, which provide guaranteed levels of return or
benefits to contractholders. The separate account assets supporting these
obligations, which are legally segregated and are not subject to claims
that arise out of any other business of the Company, are primarily
carried at fair value. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.
13
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
In addition, the Company has other separate accounts, representing funds
for which investment income and investment gains and losses accrue
directly to, and investment risk is borne by, the contractholders. Each
of these accounts have specific investment objectives. The assets and
liabilities of these accounts are carried at fair value, and amounts
assessed to the contractholders for management services are included in
revenues. Deposits, net investment income and realized investment gains
and losses for these accounts are excluded from revenues, and related
liability increases are excluded from benefits and expenses.
Deferred Acquisition Costs and Value of Insurance In Force
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition
costs relating to traditional life insurance are amortized in relation
to anticipated premiums; universal life in relation to estimated
gross profits; and annuity contracts employing a level yield method. A
10- to 25-year amortization period is used for life insurance, and a 10-
to 20-year period is employed for annuities. Deferred acquisition costs
are reviewed periodically for recoverability to determine if any
adjustment is required. Adjustments, if any are charged to income.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from annuities
contracts at the date of acquisition using the same assumptions that were
used for computing related liabilities where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
business acquired. The value of the business in force is amortized using
current interest crediting rates to accrete interest and amortized
employing a level yield method. The value of insurance in force is
reviewed periodically for recoverability to determine if any adjustment
is required. Adjustments, if any are charged to income.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 4.5% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
14
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life and certain individual annuity contracts. Contractholder Fund
balances are increased by such receipts and credited interest and reduced
by withdrawals, mortality charges and administrative expenses charged to
the contractholders. Interest rates credited to contractholder funds
range from 3.9% to 7.0%.
Permitted Statutory Accounting Practices
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices
prescribed or permitted by the State of Connecticut Insurance Department.
Prescribed statutory accounting practices include certain publications
of the National Association of Insurance Commissioners as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so
prescribed. The impact of any permitted accounting practices on the
statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment and other insurance contracts. Other
revenues also include structured settlement policyholder revenues, which
relate to contracts issued through a separate account of the Company, net
of the related policyholder benefits and expenses.
Federal Income Taxes
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.
15
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Future Application of Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. These standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. FAS
125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. The requirements of FAS No. 125 are effective for transfers
and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and are to be applied prospectively.
However, in December 1996 the FASB issued FAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which
delays until January 1, 1998 the effective date for certain provisions.
The adoption of the provisions of this statement effective January 1,
1997 will not have a material impact on results of operations, financial
condition or liquidity and the Company is currently evaluating the impact
of the provisions whose effective date has been delayed until January 1,
1998.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles to be disposed.
This statement requires a write down to fair value when long-lived assets
to be held and used are impaired. The statement also requires long-lived
assets to be disposed (e.g., real estate held for sale) be carried at the
lower of cost or fair value less cost to sell, and does not allow such
assets to be depreciated. The adoption of this standard did not have a
material impact on the Company's financial condition, results of
operations or liquidity.
Accounting for Stock-Based Compensation
The Company participates in a stock option plan sponsored by Travelers
Group that provides for the granting of stock options in Travelers Group
common stock to officers and key employees. The Company applies
Accounting Principles Board Opinion No. 25 (APB 25) and related
interpretations in accounting for stock options. Since stock options are
issued at fair market value on the date of award, no compensation cost
has been recognized for these awards. In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123).
This statement provides an alternative to APB 25 whereby fair values may
be ascribed to options using a valuation model and amortized to
compensation cost over the vesting period of the options. Had the Company
applied FAS 123 in accounting for stock options, net income would have
been reduced by an insignificant amount in 1996 and 1995.
16
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
Accounting by Creditors for Impairment of a Loan
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures," which describe how impaired loans should be measured
when determining the amount of a loan loss accrual. These statements
amended existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms. Their
adoption did not have a material impact on the Company's financial
condition, results of operations or liquidity.
4. REINSURANCE
The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide capacity for future growth and
to effect business-sharing arrangements. The Company remains primarily
liable as the direct insurer on all risks reinsured.
Life insurance in force ceded to TIC at December 31, 1996 and 1995 was
$90.7 million and $97.7 million, respectively. At December 31, 1996 and
1995, $2.2 billion and $601.2 million, respectively, was ceded to
non-affiliates.
5. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in Note 12.
Shareholder's Equity and Dividend Availability
The Company's statutory net income was $17.9 million, $23.0 million and
$5.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
Statutory capital and surplus was $254.1 million and $257.8 million at
December 31, 1996 and 1995, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $14.8 million is available in 1997 for dividend payments by
the Company without prior approval of the Connecticut Insurance
Department.
17
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative instruments for trading
purposes. The carrying value of derivative instruments was not
significant at December 31, 1996 and 1995.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1996, investments in fixed maturities had a carrying
value and a fair value of $694.5 million, compared with a carrying value
and a fair value of $724.6 million at December 31, 1995. See Note 12.
At December 31, 1996 and 1995, mortgage loans had a carrying value of
$90.5 million and $125.8 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the current real estate
financing market.
The carrying values of $2.1 million and $1.9 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1996 and 1995, respectively. The carrying values of $13.3
million and $55.3 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1996 and
1995, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various financial
instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $896.9 million and $901.0 million,
respectively, at December 31, 1996, compared to a carrying value and a
fair value of $869.1 million and $923.0 million, respectively, at
December 31, 1995. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $808.7 million
and $695.3 million, respectively, at December 31, 1996, compared to a
carrying value and a fair value of $839.1 million and $766.3 million,
respectively, at December 31, 1995.
The carrying values of short-term securities and policy loans
approximated their fair values.
18
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
7. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships.
The off-balance sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1996 and 1995.
Litigation
The Company is a defendant in various litigation matters in the normal
course of business. Although there can be no assurances, as of December
31, 1996, the Company believes, based on information currently available,
that the ultimate resolution of these legal proceedings would not be
likely to have a material adverse effect on its results of operations,
financial condition or liquidity.
8. BENEFIT PLANS
Pension Plans
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Travelers Group covering the majority of
Travelers Group's U.S. employees. Benefits for the qualified plan are
based on an account balance formula. Under this formula, each employee's
accrued benefit can be expressed as an account that is credited with
amounts based upon the employee's pay, length of service and a specified
interest rate, all subject to a minimum benefit level. This plan is
funded in accordance with the Employee Retirement Income Security Act of
1974 and the Internal Revenue Code.
The Company also participates in a nonqualified, noncontributory defined
benefit pension plan sponsored by an affiliate covering the majority of
the Company's U.S. employees. Contributions are based on benefits paid.
The Company's share of net pension expense was not significant for 1996,
1995 or 1994.
Other Benefit Plans
In addition to pension benefits, the Company provides certain health care
and life insurance benefits for retired employees through a plan
sponsored by TIGI. Retirees may elect certain prepaid health care benefit
plans. Life insurance benefits are generally set at a fixed amount.
Beginning January 1, 1996, these plans were amended to restrict benefit
eligibility to retirees and certain retiree-eligible employees. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of retiree contributions. The
Company's share of the total cost of the plan for 1996, 1995 and 1994 was
not significant.
19
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. BENEFIT PLANS, Continued
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI, the Company matches a portion of
employee contributions. Effective April 1, 1993, the match decreased from
100% to 50% of an employee's first 5% contribution and a variable match
based on the profitability of TIGI and its subsidiaries was added through
December 31, 1995. Effective January 1, 1996, the match remained at 50%
of an employee's first 5% contribution with a maximum of $1,000.
Effective January 1, 1997, employee contributions will be matched with
Travelers Group stock options. The Company's expense was not significant
for 1996, 1995 or 1994.
9. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by TIC. Settlements for these functions between TIC
and its affiliates are made regularly. TIC provides various employee
benefit coverages to certain subsidiaries of TIGI. The premiums for these
coverages were charged in accordance with cost allocation procedures
based upon salaries or census. In addition, investment advisory and
management services, data processing services and claims processing
services are provided by affiliated companies. Charges for these services
are shared by the companies on cost allocation methods based generally on
estimated usage by department.
TIGI and its subsidiaries maintain a short-term investment pool in which
the Company participates. The position of each company participating in
the pool is calculated and adjusted daily. At December 31, 1996 and 1995,
the pool totaled approximately $2.9 billion and $2.2 billion,
respectively. The Company's share of the pool amounted to $68.2 million
and $49.5 million at December 31, 1996 and 1995, respectively, and is
included in short-term securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $250
million. TIC's obligation is to pay in full to any owner or beneficiary
of the TTM Modified Guaranteed Annuity Contracts principal and interest
as and when due under the annuity contract to the extent that the Company
fails to make such payment. In addition, TIC guarantees that the Company
will maintain a minimum statutory capital and surplus level.
The Company sells structured settlement annuities to an affiliate,
Travelers Property Casualty Corp., (TAP), formerly Travelers/Aetna
Property Casualty Corp. Such deposits were $36.9 million, $36.6 million
and $37.6 million for 1996, 1995 and 1994, respectively.
The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $300.0 million and $20.5 million in 1996 and 1995,
respectively.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases are shared by the companies on a
cost allocation method based generally on estimated usage by department.
The company's rent expense was insignificant in 1996, 1995 and 1994.
20
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate
Income before federal income taxes $ 39,582 $43,436 $27,865
Statutory tax rate 35% 35% 35%
-------------------------------------------------------------------------------------------
Expected federal income taxes $ 13,854 $15,203 $ 9,753
Tax effect of:
Nontaxable investment income (15) (13) (90)
Adjustments to benefit and other reserves - - (117)
Other, net (48) (671) (6)
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
Effective tax rate 35% 33% 34%
-------------------------------------------------------------------------------------------
Composition of federal income taxes
Current:
United States $ 29,435 $ 2,555 $ 4,742
Foreign 21 - -
--------------------------------------------------------------------------------------------
Total 29,456 2,555 4,742
--------------------------------------------------------------------------------------------
Deferred:
United States (15,665) 11,964 4,798
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
The net deferred tax assets at December 31, 1996 and 1995 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $79,484 $ 67,104
Other 3,043 2,570
------------------------------------------------------------------------------------------
Total 82,527 69,674
------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments, Net 12,113 19,625
Deferred acquisition costs and
value of insurance in force 10,066 6,285
Other 662 536
------------------------------------------------------------------------------------------
Total 22,841 26,446
------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 59,686 43,228
Valuation allowance for deferred tax assets (2,070) (2,070)
------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $57,616 $41,158
------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, TIC and its life
insurance subsidiaries, including the Company, will file a consolidated
federal income tax return. Federal income taxes are allocated to each
member on a separate return basis adjusted for credits and other amounts
required by the consolidation process. Any resulting liability will be
paid currently to TIC. Any credits for losses will be paid by TIC to the
extent that such credits are for tax benefits that have been utilized in
the consolidated federal income tax return.
A net deferred tax asset valuation allowance of $2.1 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to be
realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers Group commencing in
1999, or a change in circumstances which causes the recognition of the
benefits to become more likely than not. There was no change in the
valuation allowance during 1996. The initial recognition of any benefit
provided by the reversal of the valuation allowance will be recognized by
reducing goodwill.
22
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
In management's judgment, the $57.6 million "net deferred tax asset after
valuation allowance" as of December 31, 1996, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1996, the Company has no ordinary or capital loss
carryforwards.
The "policyholders surplus account", which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $2.0 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for which
no provision has been made in the financial statements) would be
approximately $700 thousand.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross investment income
Fixed maturities $54,029 $49,486 $44,354
Equity securities 411 497 827
Mortgage loans 15,491 11,644 17,178
Real estate held for sale 3,480 2,476 6,299
Other 19,770 2,552 4,480
---------------------------------------------------------------------------------------
93,181 66,655 73,138
---------------------------------------------------------------------------------------
Investment expenses 4,141 3,446 7,045
---------------------------------------------------------------------------------------
Net investment income $89,040 $63,209 $66,093
---------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized
Fixed maturities $(11,491) $(4,240) $ (908)
Equity securities 4,613 6,138 1,675
Mortgage loans 1,979 725 36
Real estate held for sale (73) (35) -
Other (4,641) 16,125 (2,877)
-----------------------------------------------------------------------------------------
Realized investment gains (losses) $ (9,613) $18,713 $(2,074)
-----------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
a separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized
Fixed maturities $(23,953) $111,551 $(65,205)
Equity securities (746) 1,834 (27)
Other 22,431 4,390 (28)
------------------------------------------------------------------------------------------
(2,268) 117,775 (65,260)
Related taxes (794) 41,221 (22,841)
------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (1,474) 76,554 (42,419)
Balance beginning of year 35,330 (41,224) 1,195
------------------------------------------------------------------------------------------
Balance end of year $ 33,856 $ 35,330 $(41,224)
------------------------------------------------------------------------------------------
</TABLE>
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $979.0 million and $460.0 million in 1996 and 1995, respectively.
Gross gains of $8.4 million and $7.9 million and gross losses of $19.9
million and $10.3 million in 1996 and 1995, respectively, were realized
on those sales.
24
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The amortized cost and fair values of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 88,138 $ 1,637 $ 629 $ 89,146
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 115,059 10,371 61 125,369
Obligations of states and
political subdivisions 3,500 255 -- 3,755
Debt securities issued
by foreign governments 56,097 1,473 1,269 56,301
All other corporate bonds 409,294 13,862 3,277 419,879
Redeemable preferred stock 85 -- -- 85
----------------------------------------------------------------------------------------------------
Total $672,173 $27,598 $5,236 $694,535
----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 89,044 $ 2,545 $ 378 $ 91,211
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 160,988 24,267 1 185,254
Obligations of states and
political subdivisions 3,500 499 - 3,999
All other corporate bonds 424,676 21,576 2,162 444,090
Redeemable preferred stock 85 - - 85
------------------------------------------------------------------------------------------
Total $678,293 $48,887 $2,541 $724,639
------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of fixed maturities available for sale
at December 31, 1996, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Maturity Amortized Fair
(in thousands) cost value
-------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,184 $ 11,204
Due after 1 year through 5 years 50,397 50,366
Due after 5 years through 10 years 169,634 173,049
Due after 10 years 352,820 370,770
-------------------------------------------------------------------------
584,035 605,389
Mortgage-backed securities 88,138 89,146
-------------------------------------------------------------------------
Total $672,173 $694,535
-------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of interest rate scenarios. The Company does invest in other
types of CMO tranches if a careful assessment indicates a favorable
risk/return tradeoff. The Company does not purchase residual interests in
CMOs.
26
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company held CMOs with a market value
of $67.7 million and $68.6 million, respectively. The Company's CMO
holdings are 100% and approximately 94% collateralized by GNMA, FNMA or
FHLMC securities at December 31, 1996 and 1995, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $1,630 $2,845 $83 $4,392
Nonredeemable preferred stocks 5,024 138 - 5,162
----------------------------------------------------------------------------------------------------
Total $6,654 $2,983 $83 $9,554
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $3,310 $3,374 $ 68 $ 6,616
Nonredeemable preferred stocks 6,143 340 - 6,483
----------------------------------------------------------------------------------------------------
Total $9,453 $3,714 $ 68 $13,099
----------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $12.8 million and $11.8
million in 1996 and 1995, respectively. Gross gains of $4.7 million and
$4.9 million and gross losses of $155 thousand and $474 thousand in 1996
and 1995, respectively, were realized on those sales.
Real estate held for sale and mortgage loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
27
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company's real estate held for sale
and mortgage loan portfolios consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 90,394 $108,142
Underperforming mortgage loans 148 17,671
---------------------------------------------------------------------------
Total 90,542 125,813
---------------------------------------------------------------------------
Real estate held for sale 10,111 8,995
---------------------------------------------------------------------------
Total $100,653 $134,808
---------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------
<S> <C>
Past maturity $ 1,677
1997 5,662
1998 316
1999 5,088
2000 5,734
2001 5,678
Thereafter 66,387
---------------------------------------------------
Total $90,542
---------------------------------------------------
</TABLE>
Concentrations
At December 31, 1996 the Company had investments of $75.1 million in the
State of Israel and $40.6 million in Merrill Lynch Trust Series 45. In
1995, the Company had no concentration of credit risk in a single
investee exceeding 10% of shareholder's equity.
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 9.
Included in fixed maturities are below investment grade assets totaling
$40.7 million and $59.0 million at December 31, 1996 and 1995,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds that are classified as below investment
grade loans.
28
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The Company also had concentrations of investments, primarily fixed
maturities, in the following industries:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $108,850 $ -
Finance 90,222 25,853
Transportation 86,819 44,118
------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals of the previous
table were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $6,567 $ -
Finance 2,386 451
Transportation 776 18,648
----------------------------------------------------------------------------------------
</TABLE>
Concentrations of mortgage loans by property type at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $33,501 $29,820
Office 22,533 32,024
Retail 20,024 27,870
-----------------------------------------------------------------------------------------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with respect
to new mortgage loans generally require loan to value ratios of 75% or
less at the time of mortgage origination.
Non-Income Producing Investments
Investments included in the balance sheets that were non-income producing
for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loan and debt securities which were restructured
at below market terms totaling approximately $1.0 million and $17.7
million at December 31, 1996 and 1995, respectively. The new terms
typically defer a portion of contract interest payments to varying future
periods. The accrual of interest is suspended on all restructured assets,
and interest income is reported only as payment is received. Gross
interest income on restructured assets that would have been recorded in
accordance with the original terms of such assets was insignificant in
1996 and amounted to $4.9 million in 1995. Interest on these assets,
included in net investment income, was insignificant in 1996 and amounted
to $2.0 million in 1995.
29
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1996, the Company had $740.6 million of life and annuity
deposit funds and reserves. Of that total, $659.0 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $81.6 million were life and annuity products that were subject
to discretionary withdrawal by the contractholders. Included in the
amount that is subject to discretionary withdrawal were $50.4 million of
liabilities that are surrenderable with market value adjustments. An
additional $31.2 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.7%. The life insurance risks would have to be
underwritten again if transferred to another carrier, which is considered
a significant deterrent for long-term policyholders. Insurance
liabilities that are surrendered or withdrawn from the Company are
reduced by outstanding policy loans and related accrued interest prior to
payout.
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used
in) operating activities:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income from continuing operations $ 25,791 $ 28,917 $ 18,325
Adjustments to reconcile net income to
cash provided by operating activities
Realized (gains) losses 9,613 (18,713) 2,074
Deferred federal income taxes (15,665) 11,964 4,798
Amortization of deferred policy acquisition
costs and value of insurance in force 3,286 1,563 -
Additions to deferred policy acquisition costs (20,753) (3,109) (21,014)
Investment income accrued 1,308 (819) 1,085
Premium balances receivable (3,561) (2,277) -
Insurance reserves and accrued expenses (16,459) (20,081) (16,062)
Other (13,419) (46,076) 18,371
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $(29,859) $(48,631) $ 7,577
------------------------------------------------------------------------------------------------------------
</TABLE>
15. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
transfer of $2.6 million of real estate held for sale and mortgage loans
from one of the Company's separate accounts to the general account in
1995, b) acquisition of real estate through foreclosures of mortgage
loans amounting to $1.1 million, $0 and $10.3 million in 1996, 1995 and
1994, respectively.
30
<PAGE> 88
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Section 33-320a of the Connecticut General Statutes regarding indemnification of
directors and officers of Connecticut corporations provides in general that
Connecticut corporations shall indemnify their officers, directors and certain
other defined individuals against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification generally does not apply unless (1) the individual is
successful on the merits in the defense of any such proceeding; or (2) a
determination is made (by persons specified in the statute) that the individual
acted in good faith and in the best interests of the corporation; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. This insurance provides for coverage against loss from claims made
against directors and officers in their capacity as such, including, subject to
certain exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
UNDERTAKING TO REPRESENT REASONABLENESS OF CHARGES
The Company hereby represents that the aggregate charges under the Policy of the
Registrant described herein are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Company.
<PAGE> 89
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
o The facing sheet.
o The Prospectus.
o The undertaking to file reports.
o The signatures.
o Written consents of the following persons:
A. Consent of Katherine M. Sullivan, General Counsel, to the filing
of her opinion as an exhibit to this Registration Statement and to
the reference to her opinion under the caption "Legal Proceedings
and Opinion" in the Prospectus. (See Exhibit 11 below.)
B. Consent and Actuarial Opinion pertaining to the illustrations
contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Independent Accountants.
D. Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants.
EXHIBITS
1. Resolution of the Board of Directors of The Travelers Life and
Annuity Company authorizing the establishment of the Registrant.
(Incorporated herein by reference to Exhibit 1 to Registration
Statement on Form S-6 filed November 2, 1995.)
2. Not applicable.
3(a). Distribution Agreement among the Registrant, The Travelers Life and
Annuity Company and Tower Square Securities, Inc. (Incorporated
herein by reference to Exhibit 3(a) to Registration Statement on Form
S-6 filed November 2, 1995.)
3(b). Specimen Form of Selling Agreement. (Incorporated herein by
reference to Exhibit 3(b) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 filed April 25, 1996.)
3(c). Agents Agreement, including schedule of sales commissions.
4. None
5. Variable Life Insurance Policy. (Incorporated herein by reference
to Exhibit 5 to Registration Statement on Form S-6 filed November
2, 1995.)
6(a). Charter of The Travelers Life and Annuity Company, as amended on
April 10, 1990. (Incorporated herein by reference to Exhibit 3(a) to
the Registration Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
<PAGE> 90
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit 3(b)
to the Registration Statement on Form N-4, File No. 33-58131, filed
via Edgar on March 17, 1995.)
7. None
8. None
9. None
10. Application for Variable Life Insurance Policy. (Incorporated
herein by reference to Exhibit 10 to the Registration Statement on
Form S-6, filed November 2, 1995.).
11. Opinion of Counsel regarding the legality of securities being
registered.
12. Powers of Attorney authorizing Jay S. Fishman or Ernest J. Wright
as signatory for Michael A. Carpenter, Robert I. Lipp, Charles O.
Prince, III, Marc P. Weill, Irwin R. Ettinger, Donald T. DeCarlo
and Christine B. Mead. (Incorporated herein by reference to
Exhibit 12 to Registration Statement on Form S-6 filed November 2,
1995.)
12(b) Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Michael A. Carpenter, Jay S. Benet, George
C. Kokulis, Ian R. Stuart and Katherine M. Sullivan.
13. Memorandum concerning transfer and redemption procedures, as required
by Rule 6e-3(T)(b)(12)(ii). (Incorporated herein by reference to
Exhibit 3(b) to Pre-Effective Amendment No.13 to the Registration
Statement on Form S-6 filed April 25, 1996.)
27. Financial Data Schedules.
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL II for Variable Life Insurance, certifies that it meets all of
the requirements for effectiveness of this post-effective amendment to this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 25th day of April, 1997.
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
(Registrant)
By: *IAN R. STUART
-----------------------------------
Ian R. Stuart
Senior Vice President, Chief
Financial Officer
Chief Accounting Officer and Controller
The Travelers Life and Annuity
Company
Ernest J. Wright
Secretary
The Travelers Life and Annuity Company
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL II for Variable Life Insurance, certifies that it meets all of
the requirements for effectiveness of this post-effective amendment to this
registration statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 25th day of April, 1997.
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By: *IAN R. STUART
-----------------------------------
Ian R. Stuart
Senior Vice Chairman,
Chief Financial Officer
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this registration statement has been signed by the following
persons in the capacities indicated on April 25, 1997.
*MICHAEL A. CARPENTER Director, Chairman of the Board, President
- ------------------------------ and Chief Executive Officer
(Michael A. Carpenter)
*JAY S. BENET Director
- ------------------------------
(Jay S. Benet)
*GEORGE C. KOKULIS Director
- ------------------------------
(George C. Kokulis)
*ROBERT I. LIPP Director
- ------------------------------
(Robert I. Lipp)
*IAN R. STUART Director, Senior Vice President,
- ------------------------------ Chief Financial Officer,
(Ian R. Stuart) Chief Accounting Officer and Controller
*KATHERINE M. SULLIVAN Director, Senior Vice President
- ------------------------------ and General Counsel
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ------------------------------
(Marc P. Weill)
*By: Ernest J. Wright, Attorney-in-Fact
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
- ---------- ----------- ----------------
<S> <C>
OPINIONS AND CONSENTS:
A. Consent of Katherine M. Sullivan, General Counsel, to the Electronically
filing of her opinion as an exhibit to this Registration See Exhibit 11
Statement and to the reference to her opinion under the
caption "Legal Proceedings and Opinion" in the Prospectus. (See Exhibit
11 below.)
B. Consent and Actuarial Opinion pertaining to the illustrations Electronically
contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Independent Accountants. Electronically
D. Consent of KPMG Peat Marwick LLP, Independent Certified Public Electronically
Accountants.
The following Exhibits:
1. Resolution of the Board of Directors of The Travelers Life and Annuity
Company authorizing the establishment of the Registrant. (Incorporated
herein by reference to Exhibit 1 to Registration Statement on Form S-6
filed November 2, 1995.)
3(a). Distribution Agreement between the Registrant, The Travelers Life and
Annuity Company and Tower Square Securities, Inc. (Incorporated herein by
reference to Exhibit 3(a) to Registration Statement on Form S-6 filed
November 2, 1995.)
3(b). Specimen Form of Selling Agreement. (Incorporated herein
by reference to Exhibit 3(b) to Pre-Effective Amendment No.
1 to the Registration Statement on Form S-6 filed April 25, 1996.)
3(c). Agents Agreement, including schedule of sales commissions. Electronically
5. Variable Life Insurance Policy. (Incorporated herein by
reference to Exhibit 5 to Registration Statement on
Form S-6 filed November 2, 1995.)
6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10,
1990. (Incorporated herein by reference to Exhibit 3(a) to the
Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on
March 17, 1995.)
</TABLE>
<PAGE> 94
<TABLE>
<S> <C>
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October
20, 1994. (Incorporated herein by reference to Exhibit 3(b) to the
Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on
March 17, 1995.)
10. Application for Variable Life Insurance Policy. (Incorporated
herein by reference to Exhibit 10 to the Registration Statement
on Form S-6, filed November 2, 1995.)
11. Opinion of Counsel regarding the legality of securities being Electronically
being registered.
12. Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Michael A. Carpenter,
Robert I. Lipp, Charles O. Prince, III, Marc P. Weill,
Irwin R. Ettinger, Donald T. DeCarlo and Christine B.
Mead. (Incorporated herein by reference to Exhibit 12
to Registration Statement on Form S-6 filed November 2, 1995.)
12(b) Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Michael A. Carpenter,
Jay S. Benet, George C. Kokulis, Ian R. Stuart and Katherine M.
Sullivan.
13. Memorandum concerning transfer and redemption procedures, as required by
Rule 6e-3(T)(b)(12)(ii) (Incorporated herein by reference to Exhibit 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6
filed April 25, 1996.)
27 Financial Data Schedules. Electronically
</TABLE>
<PAGE> 1
ATTACHMENT B
April 16, 1997
ACTUARIAL OPINION
The illustrations included in the prospectus have been based on assumptions and
charges which are consistent with the provisions of the Vintage Life contract.
The rate structure of the contract has not been designed to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable for contract owners at the ages illustrated than for
contract owners at other ages.
Mahir Dugentas, ASA, MAAA
Director of Pricing
<PAGE> 1
ATTACHMENT C
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 1 to the
Registration Statement of The Travelers Fund ULII for Variable Life Insurance
(the "Trust") on form S-6 (File No. 33-63927) of our report dated February 7,
1997, on our audit of the financial statements of the Trust, which report is
included in the Trust's Annual Report for the period August 8, 1996 (date
operations commenced) to December 31, 1996 which is included in this
Post-Effective Amendment to the Registration Statement. We also consent to the
reference to our Firm as experts in accounting and auditing under the caption
"Independent Accountants".
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 23, 1997
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
The Travelers Life and Annuity Company:
We consent to the use of our report included herein and to the reference to our
firm as experts under the heading "Independent Accountant".
KPMG Peat Marwick LLP
Hartford, Connecticut
April 22, 1997
<PAGE> 1
EXHIBIT 3C
LIFE MARKETING GENERAL AGENT CONTRACT
BETWEEN
THE TRAVELERS LIFE AND ANNUITY COMPANY, Hartford, Connecticut (we, us, our) and
(you, your) of
For the considerations hereinafter expressed, it is mutually agreed that your
authority to act as our General Agent is granted by us and accepted by you upon
the following limitations, terms, provisions and conditions:
1. This contract shall become effective on , covering those nonvariable life
insurance and annuity policies issued by our Financial Services Department
and shown on the attached schedules.
2. You are authorized to solicit applications covering such classes of risks
as we may from time to time authorize to be solicited. You are authorized,
subject to our instructions, to collect first or single premiums with an
application and any other premiums we may ask you to collect. You shall
submit completed applications and remit premiums promptly as instructed by
our procedures.
3. In our sole discretion, we will select and price each policy form that you
may sell and we may reject any application.
4. In our sole discretion, we will appoint agents and brokers nominated by
you. Contracts may be made directly between such agents and brokers and us
on forms we supply. All commissions provided for in such contracts shall
be your obligation and deductible from the commissions we pay to you under
this contract.
5. You have no authority for or on behalf of us: to accept risks of any
kind, to make, alter, vary or discharge any policy; to extend the time
for payment of premiums; to waive or extend any policy obligation or
condition; to take payment of premiums other than in current funds; to
incur any liability or expense in our behalf; to deliver any policy
unless the applicant therefor is at the time of delivery in good health
and insurable condition; or to receive any money due or to become due to
us except as set forth in paragraph 2.
6. You acknowledge and warrant that you and your solicitors are licensed
and/or appointed as an agent under applicable state insurance laws to
solicit, negotiate and effect the contracts contemplated hereunder. In the
event that you or your solicitors are not, business will not be solicited,
negotiated or effected by said parties until such requirements are met.
You acknowledge that compensation will only be paid to appropriately
licensed and/or appointed parties.
<PAGE> 2
7. We will pay you as full compensation on premiums paid to us on policies
issued on applications obtained by or through you while this contract is
in effect, the commissions and service fees described in Parts 1, 2, 3
and 4. The commissions quoted in Parts 1 and 2 are vested subject to
Schedules A and B attached to this contract on the policy effective
date. Your right to compensation shall be subject to the limitations of
this contract, its written amendments and the Schedules issued by us
from time to time for attachment to it. If there is more than one
contract between you and us that quotes commissions on the same policy
form we will pay commission under only one such contract.
We, as a condition precedent to any obligation for payment hereunder, have
a right to reduce or set-off any compensation payable under this contract
because of any indebtedness to us.
PART 1
COMMISSIONS ON LIFE PREMIUMS PAYABLE FOR THE FIRST YEAR OF INSURANCE:
See Schedule A
PART 2
COMMISSIONS ON RENEWAL LIFE PREMIUMS:
See Schedule B
PART 3
RENEWAL COMPENSATION (OVERRIDE) IN EVENT OF TERMINATION OF CONTRACT:
At termination, the renewal override, as shown in Schedule B, shall be payable
to you, your executors, administrators or assigns. But in no event will such
override be paid beyond the tenth year of insurance.
PART 4
ALLOWANCES DURING CONTINUANCE OF THIS CONTRACT:
See Schedule C.
2
<PAGE> 3
8. At any time, by written notice to you, we may change the allowances under
this contract, and may change the compensation allowed as to policies
effective on or after the effective date of such change.
9. We will pay commissions and allowances on premiums paid for additional
benefits or increases in benefits of any kind at the same rate as is
being allowed at the time of addition or increase for the premiums of
the policies to which they are added. We will not pay compensation: on
premiums for a policy which is a conversion of Employee Special
Protection Plan, Employee Life Insurance-Plan 1 or group life insurance;
on extra premiums for a policy which are charged due to temporary flat
substandard rating because of physical impairments; or on premiums for a
policy which are waived under any provision of such policy. On policies
issued with Table 7 or above rates (Table 5 for VIP Classic), or its
equivalent in extra rates, we will pay a modified commission for the
first year of insurance in accordance with our rules.
10. If you convert one of our term policies to a different form we will pay
compensation in accordance with our rules applying to such policies at the
time of conversion.
11. Where, in our judgment, a policy replaces a policy previously issued by us
on the same policyholder (other than as a term conversion), the commission
payable for the first year of insurance on the new policy will be adjusted
in accordance with our procedures in effect at the time of such
replacement.
12. Compensation on all universal life policies which would otherwise be
payable, will not be paid on remittances received for policies following a
partial withdrawal until the sum of such remittances equals the amount of
the withdrawal, at which time we will pay compensation, if any, on
subsequent remittances.
13. While recognizing the opportunity for flexibility in policyholder service
options inherent to universal life forms of insurance, evidence of
manipulation by you of any life policies, contributions, loans, surrenders
or replacements, not deemed by us to be in the best interest of the
policyholder or us, shall cause divestiture of your right to continuing
compensation and termination of the contract.
14. If we return the premiums on a policy or any portion of such premiums for
any cause, you will refund to us on demand, the amount of compensation you
received on such returned premiums.
15. No assignment of commissions or allowances payable under this contract
shall be binding upon us without our written consent.
16. You shall not pay or allow, or offer to pay or allow, as an inducement to
any person to insure, any rebate of premium or any inducement whatever not
specified in the policy, nor will you make any misrepresentation or
incomplete comparison for the purpose of inducing a policyholder in any
other company to lapse, forfeit, or surrender insurance therein, nor
3
<PAGE> 4
will you cause any advertisement respecting us to be published or
broadcast in any form whatever without first obtaining our written
consent.
17. Nothing in this contract will be construed to imply that an employment
relationship exists between you and us. Acceptance of compensation under
this contract will constitute ratification by you of your status as an
independent contractor. You will not be treated as an employee for federal
tax purposes and you are responsible for paying your own estimated income
and self-employment tax.
18. This contract cancels all previous contracts or agreements whether oral or
written between you and us covering the lines of insurance referred to in
this contract and may be terminated by either party at any time upon
written notice to the other.
IN WITNESS WHEREOF, the parties hereto have signed this contract in duplicate.
THE TRAVELERS LIFE AND ANNUITY COMPANY
Senior Vice President
Financial Services Department
____________________________________
Agent (Firm Name)
By__________________________________
Title_______________________________
Date________________________________
4
<PAGE> 5
THE TRAVELERS LIFE AND ANNUITY COMPANY
LIFE MARKETING GENERAL AGENT CONTRACT
SCHEDULE A
Commissions on Premiums Payable After the First Year of Insurance:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMISSIONS AS A
FORM OF POLICY PERCENT OF PREMIUM
- --------------------------------------------------------------------------------
<S> <C>
Universal Life
VIP Classic (CLASUL/CLASU2) 50
TSL II 50
Term Life
Special T (APT) 40
Term Policy Fees
Special T policy fees are not commissionable.
</TABLE>
- --------------------------------------------------------------------------------
Commissions on Excess Premiums Payable for the First Year of Insurance:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMISSIONS AS
FORM OF POLICY PERCENT OF EXCESS PREMIUM OVERRIDE AS A
PERCENT TOTAL
OF EXCESS PREMIUM
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Universal Life
VIPClassic (CLASUL/CLASU2) 4 2.5 6.5
On all other forms as quoted
by the Company.
</TABLE>
This schedule of first year commissions and overrides applies to policies
effective on or after and should be filed with the Life Marketing General Agent
Contract, of which it forms a part. This schedule may be amended by the Company
at any time.
THE TRAVELERS LIFE AND ANNUITY COMPANY
Senior Vice President
Financial Services Department
5
<PAGE> 6
THE TRAVELERS LIFE AND ANNUITY COMPANY
LIFE MARKETING GENERAL AGENT CONTRACT
SCHEDULE B
Commissions on Premiums Payable After the First Year of Insurance:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
COMMISSIONS AS A OVERRIDE AS A
FORM OF POLICY INSURANCE YEAR PERCENT OF PREMIUM PERCENT OF PREMIUM
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Universal Life
VIP Classic (CLASUL/CLASU2) 2-10 4 2.5
11-15 - 2.0
TSL II 2-10 4 2.5
11-15 - 2.0
- --------------------------------------------------------------------------------------------------
Term Life
Special T (APT) 2-10 2 2.0
11-15 - 2.0
On all other forms as quoted
by the Company
- --------------------------------------------------------------------------------------------------
</TABLE>
This schedule applies to policies effective on or after and
should be filed with the Life Marketing General Agent Contract, of which it
forms a part. This schedule may be amended by the Company at any time.
THE TRAVELERS LIFE AND ANNUITY COMPANY
Senior Vice President
Financial Services Department
6
<PAGE> 7
THE TRAVELERS LIFE AND ANNUITY COMPANY
LIFE MARKETING GENERAL AGENT CONTRACT (MGL)
SCHEDULE C
UL PRODUCTS: Universal Life policy forms as noted in Schedule A of this Life
Marketing General Agent Contract.
TERM PRODUCTS: Term policy forms as noted in Schedule A of this Life
Marketing General Agent Contract.
TLAC NEW PREMIUM: New premium as defined by Addendum I of this Contract produced
by the Life Marketing General Agent in The Travelers Life and Annuity Company
(TLAC).
LIFE NEW PREMIUM: The sum of all New premium credited for the Life Marketing
General Agent within a calendar year. New premium is defined by Addendum I of
this Contract produced by the Life Marketing General Agent for all products
noted in Schedule A of contracts for both TLAC and The Travelers Insurance
Company (TIC).
GENERAL AGENT COMMISSION (GAC): A payment equal to a percentage of TLAC New
Premium earned by the Life General Agent. This percentage may vary by form of
policy and is applied to TLAC New premium. As Life New Premium exceeds the
threshold in the table below, the New GAC percentage is applied to premiums in
excess of the breakpoint.
GENERAL AGENT BONUS (GAB): A retroactive payment of allowance made when Life New
Premium crosses one of the thresholds indicated below. The retroactive payment
is made on all TLAC New Premium credited to the Life Marketing General Agent
prior to reaching the current threshold. The amount paid is dependent upon
whether the New Premiums credited were for UL or Term products. The GAB is
determined by applying the GAC percent for the current threshold less the GAC
percent for the immediately preceding threshold to the TLAC New Premium credited
to the Life Marketing General Agent prior to reaching the current threshold.
GENERAL AGENT ALLOWANCE: The sum of General Agent Commission (GAC) and
General Agent Bonus (GAB).
The Company in its sole discretion and only during the continuance of your
Contract as Life Marketing General Agent, will, subject to the maximums imposed
by law or regulation, pay the following allowances in accordance with the
schedule.
<TABLE>
<CAPTION>
Percent of TLAC New Premium
Total First Year
General Agent Commission Compensation
Life New Product Schedules A + C
Premium Threshold UL Term UL Term
- ----------------- -- ---- -- ----
<S> <C> <C> <C> <C>
$0-49,999 30 25 80 65
$50,000-124,999 35 30 85 70
$125,000-249,999 45 35 95 75
$250,000-699,999 50 40 100 80
$700,000-999,999 55 45 105 85
$1,000,000 + 60 50 110 90
</TABLE>
This schedule is effective on or after and should be filed with the
Life Marketing General Agent Contract, of which it forms a part. This schedule
may be amended by the Company at any time.
THE TRAVELERS LIFE AND ANNUITY COMPANY
Senior Vice President
Financial Services Department
7
<PAGE> 8
TRAVELERS LIFE CONTRACT
ADDENDUM I
As used in all Travelers Agent Life Contracts:
1. "FLEXIBLE" premium policy means a policy under which the policy holder
can unilaterally vary the amount or timing of premium.
2. "NEW" premium is the premium paid in the first year of the Flexible
Premium policy that is commissioned at the first year rate. Increases in
coverage after policy issue may also generate New premium. For Term
contracts, New premium is the premium required to be paid in the first
year. Certain Term contracts may have non-commissionable policy fees in
the first year.
3. "EXCESS" premium is the premium credited to a Flexible Premium policy in
the first year that is greater than New premium.
4. "RENEWAL" premium is the premium credited to a Flexible Premium policy in
all years following the first policy year with the exception of that
portion of Renewal premium designated by the Company, in its sole
discretion, as an increase.
If, in the opinion of the Company, any payment, or credit or the
acceptance of premium would cause or contribute to the Company's violation
or the exceeding of limits of state or federal law applicable to insurance
companies or life insurance contracts including, but not limited to the
Internal Revenue Code of 1986 as amended, the Company reserves the right,
in its sole discretion, to reduce, postpone, cancel or otherwise fail to
pay or credit any commission, benefit, consideration or right created
hereunder, all without further liability to the agent or the agent's
heirs, assigns, successors or administrators.
Senior Vice President
Financial Services Department
8
<PAGE> 1
EXHIBIT 10
The Travelers
Life Insurance Application
PART ONE
GENERAL INSTRUCTIONS
o Please PRINT legibly with black ink. DO NOT TYPE.
o Answer all appropriate questions fully.
o Please note instructions for each section provided in italicized print.
o Please complete any necessary supplemental forms.
o The Medical Information Bureau/Fair Credit Reporting Act notice must be
o detached and given to the Proposed Insured.
_____________________________________________
Proposed Insured's Name (print full name)
$ ADVANCED PAYMENT AMOUNT ENCLOSED
<TABLE>
<S> <C>
UNDERWRITING REQUIREMENTS ORDERED:
[ ] Blood Profile [ ] Urine Specimen [ ] ECG [ ] Paramed Exam
[ ] Treadmill ECG [ ] Inspection Report [ ] M.D. Exam
ABOVE REQUIREMENTS ORDERED FROM:
[ ] ASB Meditest [ ]EMSI [ ] PMI (Equifax) [ ] Portamedic (Hooper Holmes)
[ ] M.D. Examiner Not Name: ________________________________________________________________ (Facility or MD)
Affiliated with Address: ____________________________________________________________________________________________
the above: Phone: (___) _________________________________ Fax: (____) ________________________________________
[ ] WE HAVE NOT ORDERED UNDERWRITING REQUIREMENTS. PLEASE ARRANGE FOR US AND
ADVISE OUR OFFICE.
ATTACHED FORMS ARE REQUIRED TO PROCESS THIS CASE:
[ ] AIDS Consent Form [ ] Juvenile Supplement
[ ] State Required Replacement Form [ ] State Required Supplement
[ ] Life Financial Supplement [ ] Other (specify):
AGENCY CONTACT: Name: ________________________________________________________________________________________________________
Phone: (____) ___________________________ Fax: (____) ________________________________________________________
</TABLE>
AGENT'S NAME & PRODUCER CODE (Sticker or Plate)
SPECIAL PROCESSING UNDERWRITING INSTRUCTIONS:
________________________________________________________________________________
________________________________________________________________________________
[ ] Comments continued on back page of application.
TL-11855 The Travelers
<PAGE> 2
Life Insurance Application - General Information
PROPOSED INSURED
Questions must be answered by the Proposed Insured. If the Proposed
Insured is under age 16, complete JUVENILE SUPPLEMENT.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Print Name in Full _______________________________________________________ Social Security No. _______________________
first middle last
2. Date of Birth __________________ Birthplace _________________________________________ Sex ____ Marital Status ________
city state country if other than U.S.
3. Residence Address __________________________________________________________________________________Apt. No. _________
street and number
City ______________________________________________________________________ State _________________ Zip _____________
Phone Number ____________________ Best Time to Call _______________ Check Billing Preference: [ ]Home [ ] Business
4. If Proposed Insured has resided at address less than one year, show prior address:
Street and Number _________________________________________________________________________________ Apt. No. ________
City ________________________________________________________________ State ____________________ Zip ________________
5. Employer (Name of Firm) ______________________________________________________________________________________________
6. Business Address ___________________________________________________________________________________ Suite No. _______
street and number
City ____________________________________________________________ State ________________________ Zip ________________
Phone Number ___________________ Best Time to Call ________________ Check Calling Preference:[ ] Home [ ] Business
7. Occupation (Position or Title) __________________________________ Annual Salary $ ___________ Other Income $ _________
POLICY INFORMATION
For face amounts of $1,000,000 and over, use Financial Supplement. For spousal or child coverage, use
FAMILY INSURANCE SUPPLEMENT. For Variable Universal Life policies, complete VARIABLE UNIVERSAL
LIFE SUPPLEMENT instead of questions 8 through 12 below.
8. Life Insurance Plan _____________________________ Amount $__________ Death Benefit (UL Only): [ ]Level [ ]Increasing
If increase on existing policy: Current Amount. $______________________________ New Amount $_________________________
9. Supplemental Benefits/Term Riders, where applicable and if available:
[ ] Waiver of Premium or Monthly Deduction Amount [ ] Insured Term Rider $ _________
[ ] Cost of Living Adjustment (COLA) [ ] Accidental Death $ ___________
[ ] Accelerated Benefits Rider (TUL 91 only) [ ] Child Term Rider (Units) ______
[ ] Annual Renewable Term: Insured $ _______; Spouse $___________ [ ] Survivor Insurability Rider (First Life
Other: ______________________________________________________________________________________________________________
10. Premium Payment Plan (Check one block in either the Regular or Statement Bill section)
Regular Bill: [ ] Single [ ] Annual [ ] Semi-Annual [ ] Automatic Premium Check/Payor Soc. Sec. No.
Statement Bill: [ ] Annual [ ] Semi-Annual [ ] Quarterly [ ] Monthly
If increase on existing policy, are you changing the Premium Payment Plan? [ ] Yes [ ] No
11. Planned Premium Amount $_____________________ (Modal)
If increase on existing policy Current Amount ___________________ $ New Amount $ ___________________________________
12. Duration (Interest Sensitive Whole Life Only): [ ] Life Pay [ ] 40 Year [ ] 30 Year [ ] 20 Year [ ]
[ ] 15 Year [ ] 10 Year
[ ] Other, list product and duration(s)
POLICY OWNER
Applicant is the owner of any contract issued on this
application unless otherwise noted below. For
Multiple Ownership: Upon owner's death, indicate
whether owner ship interests pass to: [ ] Surviving
owner(s) (Joint Tenants) or [ ] Deceased Owner's
Estate (Tenants in Common)
13. Full Name and Social Security or Tax ID Number ____________________________
_______________________________________________________________________________
_______________________________________________________________________________
If succeeding ownership is desired, indicate name, address and relationship to
Insured in Agent's Comments section on front cover. Succeeding owner will
become owner upon original owner's death.
BENEFICIARY
Payment due two or more beneficiaries or to the survivor(s)
of them will be in equal shares, unless otherwise requested.
The right to change a beneficiary is reserved.
14. Beneficiary Name (specify full name(s) and relationships)__________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
THE TRAVELERS LIFE AND ANNUITY COMPANY, ONE TOWER SQUARE,
HARTFORD, CONNECTICUT 06183
TL-11855
<PAGE> 3
Policy Risk Information
TOBACCO USE DECLARATION
Have you smoked cigarettes, cigars or a pipe, chewed or used tobacco in any
other form within the last 12 months? [ ] YES [ ] NO
GENERAL RISK INFORMATION
Please give details to all YES answers in the space provided on the right. If
space insufficient, continue on Additional Information section.
<TABLE>
<CAPTION>
HAS THE PROPOSED INSURED: YES NO
<S> <C> <C> <C>
1. Been postponed, rated or declined for Life, Health, Accident or Sickness
Insurance in the past 5 years? (If YES, state reason(s) and date(s) of such action.) [ ] [ ]
2. Flown within 5 years as a pilot, student pilot or crew member of any aircraft or
as a passenger on other than a scheduled airline, or expect to make such a
flight? (If YES, complete the AVIATION SUPPLEMENT.) [ ] [ ]
3. Engaged in automobile or motorcycle racing, sports parachuting, skin or scuba
diving or hang gliding? (If YES, complete the AVOCATION SUPPLEMENT. [ ] [ ]
4. Been convicted of 2 or more moving violations of any motor vehicle law or had
driver's license suspended in the past 3 years? (If YES, list driver's
license number and details.) [ ] [ ]
5. Does insurance applied for replace existing annuity or life insurance?
(If YES, list company name, amount, replacement date and policy number.) [ ] [ ]
6. Do you intend to change your occupation or reside or travel out of the United
States or Canada? (If YES, give details of occupation change and/or complete
the FOREIGN TRAVEL OR RESIDENCE SUPPLEMENT, as appropriate.) [ ] [ ]
</TABLE>
MEDICAL HISTORY
Answer all questions unless Part Two (Medical Examination) is required. For
all YES responses, give the question number, names and addresses of doctors,
when and why consulted. Include diagnosis dates, duration of illness or injury
and if recovery was full and complete. Complete MEDICAL SUPPLEMENT if Proposed
Insured has or has had a history of high blood pressure, chest pain, diabetes,
headaches, epilepsy, asthma, digestive problems, drug or alcohol abuse. If
space insufficient, continue on Additional Information section.
<TABLE>
<CAPTION>
HAS THE PROPOSED INSURED EVER HAD, BEEN TREATED OR RECEIVED MEDICAL
CONSULTATION FOR: YES NO
<S> <C> <C> <C>
7. Heart trouble, chest pain, angina, stroke or heart murmur? [ ] [ ]
8. High blood pressure, disorder of blood, anemia or varicose veins? [ ] [ ]
9. Nervous or mental problems, paralysis, epilepsy, fainting, or disorder of the
brain, nerves or nervous system? [ ] [ ]
10. Cancer, tumors, cysts or growths, disorder of skin or glands? [ ] [ ]
11. Diabetes, albumin, sugar/blood in urine? Disease of bladder or reproductive
organs or sexually transmitted disease? [ ] [ ]
12. Arthritis, rheumatism, gout, disorder of muscles or bones, spine or joints? [ ] [ ]
13. Ulcer or disorder of stomach, intestines, liver, kidneys, gallbladder, or hernia? [ ] [ ]
14. Asthma, allergy, pleurisy, tuberculosis, lung disorder, emphysema or chronic
cough? [ ] [ ]
15. Alcoholism or use of any habit-forming drugs? [ ] [ ]
16. Disorder of the immune system, Acquired Immune Deficiency Syndrome
(AIDS), AIDS-Related Complex (ARC) or a positive test for infection by the
AIDS (HIV) virus? [ ] [ ]
HAS THE PROPOSED INSURED:
17. Had in the past 5 years any other sickness or injury not referred to above? [ ] [ ]
18. Had health examinations or medical checkups or been a patient in a hospital,
clinic or sanitarium for treatment in the past 5 years? [ ] [ ]
19. Had any surgery or been advised to have surgery which has not been
performed? [ ] [ ]
20. Had or been advised to have electrocardiogram, X-ray or other medical tests
in the past 5 years? [ ] [ ]
21. Height ____ ft. ____ in. Weight _____ lbs. Weight loss past 12 mos. _______ lbs.
</TABLE>
<PAGE> 4
Policy Risk Information, continued
22. Has a parent, brother or sister ever had heart disease, stroke, cancer,
diabetes, high blood pressure or hereditary disease? YES [ ] NO [ ]
23. Please complete the following family history information:
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________________________
| Age(s) | | Age(s) |
| (if Living) | Condition of Health* | (at death) | Cause of Death
| | | |
________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Father | | | |
________________________________________________________________________________________________________________________________
Mother | | | |
________________________________________________________________________________________________________________________________
Brothers and Sisters | | | |
________________________________________________________________________________________________________________________________
No. Living | | | |
________________________________________________________________________________________________________________________________
No. Dead | | | |
________________________________________________________________________________________________________________________________
</TABLE>
*If not "good", please provide details in Additional Information Section.
ADDITIONAL INFORMATION
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Authorization Section
DECLARATION: APPLICANT declares to the best of his/her knowledge and belief
that all of the statements and answers in Part One and Part Two, if required,
are complete and true. APPLICANT UNDERSTANDS AND AGREES THAT: (a) Part One and
Part Two, if required, and any supplements to it will form the basis for any
insurance issued; (b) Except as stated in the attached Advance Payment Receipt,
no insurance will take effect until: (1) the contract is delivered to the
Applicant; and (2) the first premium is paid in full while the health and other
conditions relating to insurability remain as described in this application;
(c) No agent is authorized: (1) to make, alter, or discharge any contract; (2)
to waive or change any condition or provision of any contract, application, or
receipt; and (3) to accept any risk or to pass on insurability. The Proposed
Insured will be the Applicant of any contract issued on this application unless
otherwise indicated below. The right to privacy is protected as required by
law.
AUTHORIZATION FOR THE RELEASE OF INFORMATION: THE PROPOSED INSURED(S) authorize
The Travelers Life and Annuity Company (referred to as The Travelers), its
Reinsurers, insurance support organizations, and medical and other information
in order to evaluate this application for insurance. The Proposed Insured
authorizes any physician, medical facility, insurance company, the Medical
Information Bureau, Inc., employer, consumer reporting agency, or other
organization, institution, or person having information available as to
employment, other insurance coverage, medical care, treatment, supplies or
advice with respect to the Proposed Insured or his/her children to furnish such
information to The Travelers, its Reinsurers or their authorized
representatives.
This authorization will be valid from the date signed for a period of 2-1/2
years. A photographic copy of this authorization is as valid as the original.
Information given in this application, including health care information, may
be made available without prior authorization to other insurance companies to
which an application for life or health insurance coverage is made, or to which
a claim is submitted.
ACKNOWLEDGMENT: The PROPOSED INSURED(S) acknowledge receipt of the following
notices: "Medical Information Bureau Disclosure Notice," and "Your Privacy and
The Fair Credit Reporting Act." The PROPOSED INSURED(S) and APPLICANT, if
different, have read this authorization and understand that they have a right
to receive a copy.
I have paid to ________________the sum of $_______ and hold a receipt bearing
the number imprinted hereon.
Witnessed by __________________________________________________________________
Licensed Resident Agent Proposed Insured's
Name of Proposed Insured (please print) _______________________________________
Applicant's signature, if different ___________________________________________
If Qualified Pension Plan, name of plan
and signature of Trustee.
Name and telephone number of Agent (please print)______________________________
Dated________________ At (City or Town, State)_________________________________
<PAGE> 5
Advance Payment Form
ADVANCE PAYMENT QUESTIONNAIRE
The attached receipt provides for a LIMITED AMOUNT of Life Insurance
protection, for a LIMITED PERIOD of time, subject to the terms of the receipt.
This section MUST be completed for the proposed insured to be eligible for Life
Insurance protection under the terms of the receipt.
<TABLE>
<S> <C> <C>
Has any person proposed for insurance: YES NO
(1) within the past 90 days, been admitted to a hospital
or other medical facility, been advised to be admitted,
or had surgery performed or recommended? [ ] [ ]
(2) within the past 2 years, been treated for heart
trouble, stroke, or cancer or had such treatment
recommended by a physician or other medical
practitioner? [ ] [ ]
</TABLE>
If any of the above questions are answered YES or LEFT BLANK, no representative
of The Travelers Life and Annuity Company is authorized to accept money, and NO
COVERAGE will take effect under the agreement. The Proposed Insured also
understands and agrees that in no event will insurance take effect at an age or
amount requiring a medical examination as outlined in Item 4 of the attached
receipt until completion of the medical examination.
I declare that the answers to the above questions are true to the best of my
knowledge and belief. I understand and agree to the terms of the attached
receipt.
---------------------------------------------------------
Proposed Insured's signature (parent/guardian if a minor)
---------------------------------------------------------
Applicant's signature (if different)
---------------------------------------------------------
Date
TL-1185-R-1
- -------------------------------------------------------------------------------
ADVANCE PAYMENT RECEIPT
The following receipt is to be given for advance payment at least equal to one
month's premium, but not less than $10. All premium checks must
be made payable to the company.
Do not make checks payable to the agent or leave the payee blank.
For Variable Universal Life use receipt attached to
Variable Universal Life Supplement.
Type of Policy _____________________________________
Received from ______________________________________
the sum of $ _______________________________________
in connection with an application for life insurance to The Travelers Life and
Annuity Company, One Tower Square, Hartford, CT 06183, bearing the number
imprinted on this receipt, upon the following terms and conditions:
1. Insurance under the terms of the policy applied for and subject to the
limits in Item 4 will be effective on the latest of the dates of the Part
One application, Part Two Medical examination or other medical tests if
required by the Company's underwriting rules for the Proposed Insured's
age, plan or amount of insurance applied for, provided that the above sum
is sufficient to pay in full the first premium for the policy. Coverage
under the terms of this receipt will end on the earlier of (a) 60 days
after the date of this application, or (b) the date we notify the
Applicant that there is no coverage. There is no insurance provided if
there is material misrepresentation in the Part One application,
supplement (if required) or Part Two medical examination or if the
Proposed insured commits suicide.
2. If the above sum is less than the full first premium but is at least
equivalent to a monthly premium for the amount and plan of insurance
applied for, then unless the remainder of the first premium is paid within
30 days from the date the insurance becomes effective, the insurance will
be effective as provided in Item 1 only for the fraction of one year as
the amount paid bears to the annual premium for the contract applied for.
If the sum paid is less than the equivalent of a monthly premium, no
insurance will be effected by this receipt.
<PAGE> 6
3. The above sum will be returned to the Applicant if the application is
rejected; or, if a contract is issued upon this application at other than
standard rates or for other than the amount and plan of insurance applied
for, unless acceptable to the Applicant as issued; or, on request of the
Applicant and surrender of this receipt, if within 60 days from the date
of this receipt a contract has not been issued on this application.
4. The maximum limits of insurance which may be effected under the terms of
this receipt are as follows:
<TABLE>
<CAPTION>
AGE OF NON-MEDICAL MEDICAL/PARAMEDICAL
PROPOSED INSURED AMOUNT AMOUNT
<S> <C> <C>
15 days-35 yrs. $250,000 $500,000
36-45 100,000 500,000
46-50 75,000 500,000
51-60 -0- 500,000
61-75 -0- 250,000
</TABLE>
Any insurance applied for in excess of these limits, including accidental death
benefit, and on which any premium is paid in advance, will not take effect
until the policy is delivered to the Applicant and the balance of the first
premium, if any, is paid in full, all while the Proposed Insured's health and
other conditions relating to insurability remain as described in the
application. In the event of the death of the Proposed Insured before the
excess insurance is effected, that portion of the sum received relating to the
excess insurance will be returned.
Licensed Resident Agent ____________________________
Dated ___________________
TL-11855-R
<PAGE> 7
AUTHORIZATION OF AUTOMATIC PREMIUM CHECK PAYMENT
Please attach a voided check. Make sure your address and
the bank address appear correctly on the check.
Name: _______________________________ Phone Number: ___________________________
Policy Number(s): _____________________________________________________________
I hereby authorize you, the bank, to charge my account, to cover monthly
premium payments for my policy(ies) with The Travelers Life and Annuity
Company. I understand and agree that the bank will not be liable for any
payment that may not be honored, intentionally or inadvertently, even if such
dishonor results in forfeiture of insurance. This authority is to remain in
effect until my further written notice.
Please select date of monthly withdrawal
[ ] 8th [ ] 22nd
[ ] 15th [ ] 29th
My signature below is exactly as I sign my personal checks.
Bank Name:_________________________________________
Bank Address: _____________________________________
Checking Account Number: __________________________
SIGNATURE OF DEPOSITOR __________________________________
DATE _____________________
TL-11855-A
- --------------------------------------------------------------------------------
YOUR PRIVACY AND THE FAIR CREDIT REPORTING ACT
This notice must be detached and given to the Proposed Insured
before the application is completed.
Part of our underwriting may include an investigative report prepared with
information obtained in interviews with you, your neighbors, friends or other
acquaintances as to your character, reputation, personal characteristics and
mode of living. If an investigation is made we will handle it in the strictest
confidence.
Your application, with the medical history and other information you furnish,
and the investigative consumer report if made, are the initial basis of our
under writing evaluation. Your agent supplies information about you that serves
underwriting as well as marketing research purposes. The Fair Credit Reporting
Act requires that no investigative report be made on any consumer unless:
1. the person to be reported on has been given written notice that such a
report may be or has been requested, and
2. that person is informed that he/she has the right to ask for disclosure of
the type of information being sought.
If you wish information on the nature and scope of the Consumer Report which
may be requested, or any other investigative report which may be made, write to
The Travelers Life and Annuity Company, FSD Underwriting and Issue Division,
One Tower Square, Hartford, Connecticut 06183.
TL-11855-P
<PAGE> 8
MEDICAL INFORMATION BUREAU DISCLOSURE NOTICE
Any health care information developed is necessary to classify insurance risks,
conduct normal administrative procedures and process claims, and will be used
for those purposes only. No other use of this information will be made without
first obtaining your written consent.
This information will be treated as confidential except that The Travelers Life
and Annuity Company or its Reinsurer(s) may make a brief report to the Medical
Information Bureau, Inc., a non-profit membership corporation of life insurance
companies which operates an information exchange in behalf of its members. Upon
request by another member insurance company to which you have applied for life
or health insurance coverage or to which a claim is submitted, the Bureau will
supply such company with the information it may have in its files.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. (Medical information will be disclosed
only to your attending physician, or you if requested.) If you question the
accuracy of information in the Bureau's file, you may contact the bureau and
seek a correction in accordance with the procedures set forth in the federal
Fair Credit Reporting Act. The address of the Bureau's information office is
Post Office Box 105, Essex Station, Boston, Massachusetts 02112, Telephone
(617) 426-3660.
The Travelers Life and Annuity Company or its Reinsurer(s) may release
information given in your application file, including health care information,
to other life insurance companies to which you apply for life or health
insurance or to which a claim is submitted.
TL-11855-M
TO: The Bank named on the reverse side
In consideration of your compliance with the request and authorization of the
depositor named on the reverse side The Travelers Life and Annuity Company
agrees that:
1. It will indemnify and hold you harmless from any liability or loss you may
suffer arising out of payment by you pursuant to said authorization of any
debit entry whether or not genuine, purporting to be initiated by The
Travelers Life and Annuity Company on the account of any of your
depositors, or arising out of the dishonor by you whether with or without
cause, intentionally or inadvertently, of any such debit entry purporting
to be initiated by The Travelers Life and Annuity Company.
2. It will refund to you any amount erroneously paid by you on any such debit
entry if claim for the amount of such erroneous payment is made by you
within 12 months from the date of the debit entry on which such erroneous
payment was made.
3. It will defend at its own cost and expense any action which might be
brought by any depositor or any other persons because of your actions taken
pursuant to the foregoing request or in any manner arising by reason of
your participation in the foregoing plan.
THE TRAVELERS LIFE AND ANNUITY COMPANY
Director
Authorized in resolutions adopted by the Investment Committee of The Travelers
Life and Annuity Company on June 10, 1982.
<PAGE> 9
Agent Information
AGENT'S CERTIFICATE
To help avoid processing delays, answers to the following questions MUST be
furnished with the application.
<TABLE>
<S> <C>
1. If salary allotment or other special plan, give:
Mass Marketing Case/Company Name: _____________________________________________________________
Case/Plan Number: _____________________________________________________________________________
Accounting Location Number:
2. Is the Proposed Insured employed and working regularly?
[ ] Yes [ ] No
3. Did you personally ask the questions and have the application signed in your presence?
[ ] Yes [ ] No
4. Has Proposed Insured applied for insurance elsewhere in past 90 days? (Give details in #17)
[ ] Yes [ ] No
5. Life Premium quoted: $_____________/Yr. Age__________
6. How long have you known the Proposed Insured? _________
7. Will this insurance replace any existing Annuity Life Insurance? (If YES, complete #8)
[ ] Yes [ ] No
8. Is a 1035 exchange involved? [ ] Yes [ ] No
(If YES, attach policies and forms)
Name of Insurer to be replaced and replaced contract #: _________________________________________________
If contract # not available, indicate Application or Receipt #: __________________________________________
9. Is the Proposed Insured applying for any Disability or Long Term Care with The Travelers or any
other company? (If YES, specify form and name of company) [ ] Yes [ ] No
__________________________________________________________________________________________________________
10. Will the Proposed Insured pay the premium? [ ] Yes [ ] No
If NO, who will pay the premium? _________________________________________________________________________
11. Who initiate the inquiry that resulted in this application? ______________________________________________
12. State all Life and Health insurance now in effect on the Proposed Insured. Include The Travelers and other
companies. Indicate "G" for Group and "B" for Business Insurance. If NONE so state.
- --------------------------------------------------------------------------------------------------------------------------------
| | | Total in Force | |
| Type | Year | Indemnity or | |
Company | L-Life H-Health | of Issue | Daily Benefit | PW | Amt. of ADB
| | | | |
- --------------------------------------------------------------------------------------------------------------------------------
| | | | |
- --------------------------------------------------------------------------------------------------------------------------------
| | | | |
- --------------------------------------------------------------------------------------------------------------------------------
| | | | |
- --------------------------------------------------------------------------------------------------------------------------------
13. Purpose of Insurance:
[ ] Personal (check primary reason):
[ ] Income Replacement [ ] Savings/Investment
[ ] Estate Liquidity [ ] Other ____________________
[ ] Business:
[ ] Buy-Sell [ ] Key Person
[ ] Deferred Compensation [ ] Executive Bonus
[ ] Mortgage/Loan Coverage [ ] Other ____________________
14. Is the applicant a small business owner? [ ] Yes [ ] No
If YES, how many employees in the insured's business?
[ ] 1-25 [ ] 26-50 [ ] 51-100 [ ] 100+
15. If available, is preferred rate being applied for? [ ] Yes [ ] No
16. If preferred rate is not available, is standard rate acceptable? [ ] Yes [ ] No
17. Additional Remarks: ______________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
18. Except as indicated below, I hereby declare that no person other than myself has any interest whatsoever
either directly or indirectly in this application and that I will not pay or allow any commission or compensation
directly or indirectly in connection with this application to any person.
Signed _____________________________________________________ Date _______________________________________________
(TO BE SIGNED PERSONALLY BY AGENT OR BROKER WHO COMPLETED THE APPLICATION)
</TABLE>
<PAGE> 10
AGENT LICENSING INFORMATION
1. Are you properly licensed to write business for The Travelers Life and
Annuity Company in the state where the application was secured?
[ ] Agent's License [ ] Solicitor's License [ ] Broker's License
2. Did anyone except you assist in securing the application? [ ] Yes [ ] No
If YES, who ___________________________________________________________
AGENT'S COMMENTS
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
THE TRAVELERS
The Travelers Life and Annuity Company
Hartford, CT 06183
TL-11855
<PAGE> 11
Variable Universal Life Supplement
TheTravelers
This supplement accompanies an application for a Variable Life Insurance Policy
to be issued by:
[ ] The Travelers Life and Annuity Company
[ ] The Travelers Insurance Company
PLEASE ANSWER ALL QUESTIONS COMPLETELY AND SIGN THE FORM.
<TABLE>
<CAPTION>
<S> <C>
Proposed Insured ____________________________________________________________ Occupation _______________________________________
first middle last
Date of Birth ____________________ Society Security Number __________________________ Financial Net Worth ______________________
Tax Bracket (federal plus state) ___________________________________ Investment Objective ______________________________________
</TABLE>
POLICY INFORMATION
1. Select one or more funds and indicate percent of allocation. The total
must equal 100% (Must be whole percentages.)
<TABLE>
<CAPTION>
<S> <C>
[ ] AIM Capital Appreciation Portfolio ____% [ ] Templeton Asset Allocation Fund ____%
[ ] Alliance Growth Portfolio ____% [ ] Templeton Bond Fund ____%
[ ] Dreyfus Stock Index Fund ____% [ ] Templeton Stock Fund ____%
[ ] Fidelity's Asset Manager Portfolio ____% [ ] Travelers Capital Appreciation Fund ____%
[ ] Fidelity's Equity-Income Portfolio ____% [ ] Travelers Cash Income Trust ____%
[ ] Fidelity's Growth Portfolio ____% [ ] Travelers Managed Assets Trust ____%
[ ] Fidelity's High Income Portfolio ____% [ ] Travelers U.S. Govt. Sec. Portfolio ____%
[ ] MFS Total Return Portfolio ____% [ ] Travelers Utilities Portfolio ____%
[ ] Smith Barney High Income Portfolio ____% [ ] Travelers Zero Coupon Bond Fund 1998 ____%
[ ] Smith Barney Income & Growth Portfolio ____% [ ] Travelers Zero Coupon Bond Fund 2000 ____%
[ ] Smith Barney Total Return Portfolio ____% [ ] Travelers Zero Coupon Bond Fund 2005 ____%
2. Check which supplemental benefits apply (for spousal or child coverage, complete Family Supplement):
[ ] Waiver of Monthly Deduction Amount [ ] Child Term Rider (Units)
------------------------------
[ ] Lapse Protection Guarantee Rider [ ] Cost of Living Increase Rider
[ ] Primary or Other Insured Term Rider [ ] Other
-------------------------------------------------
3. Check which death benefit applies: [ ] Option 1 (Level) [ ] Option 2 (Variable)
4. Check one block in either the Regular or Statement Bill section to indicate Premium Payment Plan.
Regular Bill: [ ] Automatic Premium Check [ ] Single [ ] Annual [ ] Semi-Annual
Statement Bill: [ ] Annual [ ] Semi-Annual [ ] Quarterly [ ] Monthly
5. Stated Amount: $ __________________________________
Planned Premium Amount: $ _________________________
L-11561-V THE TRAVELERS LIFE AND ANNUITY COMPANY, ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
THE TRAVELERS INSURANCE COMPANY, ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
- -----------------------------------------------------------------------------------------------------------------------------------
ADVANCE PAYMENT RECEIPT FOR VARIABLE UNIVERSAL LIFE INSURANCE
The following receipt is to be given only for advance payment at least equal to one-tenth (1/10) of the annual premium.
All premium checks must be made payable to the company. Do not make checks payable to the agent or leave the payee blank.
The Advance Payment Questionnaire of the application must be completed before this receipt can be used.
Type of Policy _________________________________________________________________________________________________________________
Received from _________________________________________________________ the sum of $ __________________________________________
</TABLE>
In connection with an application for life insurance to The Travelers, One
Tower Square, Hartford, CT 06183, bearing the number _______________, upon the
following terms and conditions:
1. Insurance under the terms of the policy applied for and subject to the
limits in Item 4 will be effective on the latest of the dates of the Part 1
application, Part 2 medical examination or other medical tests if required
by the Company's underwriting rules for the Proposed Insured's age, plan or
amount of insurance applied for, provided that the above sum is sufficient
to pay in full the first premium for the policy.
Coverage under the terms of this receipt will end on the earlier of (a) 60
days after the date of this application, or (b) the date we notify the
Applicant that there is no coverage.
<PAGE> 12
There is no insurance provided if there is material misrepresentation in
the Part 1 application, supplement (if required) or Part 2 medical
examination or if the Proposed insured commits suicide.
2. If the above sum is less than the full first premium but is at least
one-tenth (1/10) of the annual premium for the amount and plan of insurance
applied for, then unless the remainder of the first premium is paid within
30 days from the date the insurance becomes effective, the insurance will
be effective as provided in item 1 only for the fraction of one year as the
amount paid bears to the annual premium for the contract applied for. If
the sum paid is less than the equivalent of a monthly premium, no insurance
will be effected by this receipt.
3. The above sum will be returned to the Applicant if the application is
rejected; or, if a contract is issued upon this application at other than
standard rates or for other than the amount and plan of insurance applied
for, unless acceptable to the Applicant as issued; or, on request of the
Applicant and surrender of this receipt, if within 60 days from the date of
this receipt a contract has not been issued on this application.
4. The maximum limits of insurance which may be effected under the terms of
this receipt are as follows:
<TABLE>
<CAPTION>
AGE OF NON-MEDICAL MEDICAL/PARAMEDICAL
PROPOSED INSURED AMOUNT AMOUNT
<S> <C> <C>
15 days-35 yrs. $250,000 $500,000
36-45 100,000 500,000
46-50 75,000 500,000
51-60 -0- 500,000
61-75 -0- 250,000
</TABLE>
Any insurance applied for in excess of these limits, including accidental
death benefit, and on which any premium is paid in advance, will not take
effect until the policy is delivered to the Applicant and the balance of
the first premium, if any, is paid in full, all while the Proposed
Insured's health and other conditions relating to insurability remain as
described in the application. In the event of the death of the Proposed
Insured before the excess insurance is effected, that portion of the sum
received relating to the excess insurance will be returned.
5. If a contract is issued on this application, the first premium will be
applied to the credit of that basic contract on the later of:
a. the contract date or
b. the date we receive the first premium.
_______________________________________
Licensed Resident Agent
_______________________________________
Dated
L-11561-V-R
- --------------------------------------------------------------------------------
SUITABILITY
Please answer all questions completely and sign the form.
<TABLE>
<S> <C> <C> <C>
a. Have you, the Proposed Insured and the Applicant, if other than YES NO
the Proposed Insured, received a prospectus for the contract applied for? [ ] [ ]
Date of prospectus: ______________ Date of any supplement: _______________
b. Do you understand that the contract applied for (exclusive of any option benefits),
the entire amount of cash value and the amount of death benefit may increase or
decrease depending on investment experience? [ ] [ ]
c. With this in mind, is the contract in accord with your insurance objectives and
anticipated financial needs? [ ] [ ]
</TABLE>
APPLICANT declares to the best of her/her knowledge and belief that all of the
statements and answers in Part 1 and Part 2, if required, are complete and
true. APPLICANT UNDERSTANDS AND AGREES THAT: Part 1 and Part 2, if required,
and any supplements to it will form the basis for any insurance issued.
<PAGE> 13
ALL VALUES AND BENEFITS PROVIDED BY THE BASIC CONTRACT APPLIED FOR ARE VARIABLE
AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. EXCEPT AS STATED IN THE
ATTACHED ADVANCE PAYMENT RECEIPT, THE COMPANY WILL APPLY THE FIRST NET PREMIUM
PAYMENT TO THE CREDIT OF THE BASIC CONTRACT APPLIED FOR AS OF THE VALUATION
DATE ON OR NEXT FOLLOWING THE EFFECTIVE DATE.
Except as stated in the attached Advance Payment Receipt, no insurance will
take effect until: (1) the contract is delivered to the Applicant; and (2) the
first premium is paid in full while the health and other conditions relating to
insurability remain as described in this application. No agent is authorized:
(1) to make, alter, or discharge any contract; (2) to waive or change any
condition or provision of any contract, application, or receipt; and (3) to
accept any risk or to pass on insurability. The Proposed Insured will be the
Applicant of any contract issued on this application unless otherwise indicated
below. The right to privacy is protected as required by law.
I have paid to _________________________________________________________
the sum of ($ __________________________________________________________)
and hold a receipt bearing the number __________________________________
Dated __________________________________________________________________
at (city or town/state) ________________________________________________
________________________________________________________________________
________________________________________________________________________
Proposed Insured (Signature in full)
________________________________________________________________________
Witnessed by (Licensed Resident Agent)
________________________________________________________________________
Signature of Applicant (if other than Proposed Insured)
________________________________________________________________________
Signature of Principal
________________________________________________________________________
Signature of Broker/Dealer
L-11561-V
<PAGE> 1
EXHIBIT 11
April 24, 1997
The Travelers Life and Annuity Company
The Travelers Fund UL II for
Variable Life Insurance
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to Post-Effective Amendment No. 1 the Registration Statement
on Form S-6 filed by The Travelers Life and Annuity Company and The Travelers
Fund UL II for Variable Life Insurance with the Securities and Exchange
Commission covering flexible premium individual variable life insurance
policies, I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that:
1. The Travelers Life and Annuity Company is duly organized and existing
under the laws of the State of Connecticut and has been duly authorized
to do business and to issue variable life insurance policies by the
Insurance Commissioner of the State of Connecticut.
2. The Travelers Fund UL II Variable Life Insurance is a duly authorized
and validly existing separate account established pursuant to Section
38a-433 of the Connecticut General Statutes.
3. The variable life insurance policies covered by the above Registration
Statement, and all pre- and post-effective amendments relating thereto,
have been approved and authorized by the Insurance Commissioner of the
State of Connecticut and when issued will be valid, legal and binding
obligations of The Travelers Life and Annuity Company and of The
Travelers Fund UL II for Variable Life Insurance.
4. Assets of The Travelers Fund UL II for Variable Life Insurance are not
chargeable with liabilities arising out of any other business The
Travelers Life and Annuity Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus constituting
a part Post-Effective Amendment No. 2.
Very truly yours,
Katherine M. Sullivan
General Counsel
The Travelers Life and Annuity Company
<PAGE> 1
EXHIBIT 12(b)
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER, of Greenwich, Connecticut, Chairman of
the Board, President and Chief Executive Officer of The Travelers Life and
Annuity Company (hereafter the "Company"), do hereby make, constitute and
appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my true
and lawful attorney-in-fact, for me, and in my name, place and stead, to sign
registration statements on behalf of said Company on Form S-6 or other
appropriate form under the Securities Act of 1933 for The Travelers Fund UL II
for Variable Life Insurance Contracts, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to be
offered by the Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
June, 1996.
Michael A. Carpenter
Chairman of the Board, President
and Chief Executive Officer
The Travelers Life and Annuity Company
<PAGE> 2
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. BENET, of West Hartford, Connecticut, a director of
The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form S-6
or other appropriate form under the Securities Act of 1933 for The Travelers
Fund UL II for Variable Life Insurance Contracts, a separate account of the
Company dedicated specifically to the funding of variable life insurance
contracts to be offered by the Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
July, 1996.
Jay S. Benet
Director
The Travelers Life and Annuity Company
<PAGE> 3
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS, of Simsbury, Connecticut, a director of
The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name, place
and stead, to sign registration statements on behalf of said Company on Form S-6
or other appropriate form under the Securities Act of 1933 for The Travelers
Fund UL II for Variable Life Insurance Contracts, a separate account of the
Company dedicated specifically to the funding of variable life insurance
contracts to be offered by the Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
July, 1996.
George C. Kokulis
Director
The Travelers Life and Annuity Company
<PAGE> 4
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART, of East Hampton, Connecticut, Director,
Senior Vice President, Chief Financial Officer, Chief Accounting Officer and
Controller of The Travelers Life and Annuity Company (hereafter the "Company"),
do hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said
Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either
one of them acting alone, my true and lawful attorney-in-fact, for me, and in my
name, place and stead, to sign registration statements on behalf of said Company
on Form S-6 or other appropriate form under the Securities Act of 1933 for The
Travelers Fund UL II for Variable Life Insurance Contracts, a separate account
of the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by the Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
February, 1997.
Ian R. Stuart
Director, Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
<PAGE> 5
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN, of Longmeadow, Massachusetts,
Director, Senior Vice President and General Counsel of The Travelers Life and
Annuity Company (hereafter the "Company"), do hereby make, constitute and
appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my true
and lawful attorney-in-fact, for me, and in my name, place and stead, to sign
registration statements on behalf of said Company on Form S-6 or other
appropriate form under the Securities Act of 1933 for The Travelers Fund UL II
for Variable Life Insurance Contracts, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to be
offered by the Company, and further, to sign any and all amendments thereto,
including post-effective amendments, that may be filed by the Company on behalf
of said registrant.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
June, 1996.
Katherine M. Sullivan
Director, Senior Vice President
and General Counsel
The Travelers Life and Annuity Company
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001002920
<NAME> FUND UL II
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> AUG-08-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,684,279
<INVESTMENTS-AT-VALUE> 1,685,620
<RECEIVABLES> 14,825
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,700,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,810
<TOTAL-LIABILITIES> 1,810
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,148,524
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,341
<NET-ASSETS> 1,698,635
<DIVIDEND-INCOME> 23,667
<INTEREST-INCOME> 0
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<PER-SHARE-NAV-BEGIN> 0
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<EXPENSE-RATIO> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
