<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1997
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Managed Assets Trust, 5,100 shares (cost $85,258) ............................... $ 90,013
Capital Appreciation Fund, 25,798 shares (cost $1,088,981) ...................... 1,194,973
Cash Income Trust, 1,157,528 shares (cost $1,157,528) ........................... 1,157,528
The Travelers Series Trust, 10,372 shares (cost $124,010) ....................... 130,409
Templeton Variable Products Series Fund, 72,427 shares (cost $1,548,414) ........ 1,542,514
Fidelity's Variable Insurance Products Fund, 97,994 shares (cost $2,171,934) .... 2,365,681
Fidelity's Variable Insurance Products Fund II, 14,622 shares (cost $248,975) ... 263,348
Dreyfus Stock Index Fund, 38,321 shares (cost $900,597) ......................... 986,761
Travelers Series Fund Inc, 162,857 shares (cost $2,515,185) ..................... 2,709,373
Greenwich Street Series Fund, 26,954 shares (cost $468,444) ..................... 474,929
--------------
Total Investments (cost $10,309,326) ........................................ $ 10,915,529
Receivables:
Dividends ....................................................................... 20,428
Premium payments and transfers from other Travelers accounts .................... 282,037
Other assets ...................................................................... 49
--------------
Total Assets ................................................................ 11,218,043
--------------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts ......... 10,236
Accrued liabilities ............................................................... 570
--------------
Total Liabilities ........................................................... 10,806
--------------
NET ASSETS: $ 11,207,237
==============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends ................................................. $ 163,054
EXPENSES:
Insurance charges ......................................... $ 44,302
Administrative charges .................................... 5,491
--------------
Total expenses .......................................... 49,793
--------------
Net investment income ................................. 113,261
--------------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold .......................... 4,747,592
Cost of investments sold ................................ 4,687,765
--------------
Net realized gain ..................................... 59,827
Change in unrealized gain on investments:
Unrealized gain at December 31, 1996 .................... 1,341
Unrealized gain at December 31, 1997 .................... 606,203
--------------
Net change in unrealized gain for the year ............ 604,862
--------------
Net realized gain and change in unrealized gain ..... 664,689
--------------
Net increase in net assets resulting from operations ...... $ 777,950
==============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ............................................ $ 113,261 $ 21,487
Net realized gain from investment transactions ................... 59,827 1,105
Net change in unrealized gain on investments ..................... 604,862 1,341
------------ -----------
Net increase in net assets resulting from operations ........... 777,950 23,933
------------ -----------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 6,023,535 and 1,060,645 units, respectively) .... 9,467,190 1,566,170
Participant transfers from other Travelers accounts
(applicable to 3,924,751 and 677,084 units, respectively) ...... 6,145,464 983,742
Contract surrenders
(applicable to 597,609 and 38,985 units, respectively) ......... (983,426) (58,243)
Participant transfers to other Travelers accounts
(applicable to 3,898,149 and 550,220 units, respectively) ...... (5,898,576) (816,967)
------------ -----------
Net increase in net assets resulting from unit transactions .. 8,730,652 1,674,702
------------ -----------
Net increase in net assets ................................. 9,508,602 1,698,635
NET ASSETS:
Beginning of period .............................................. 1,698,635 --
------------ -----------
End of period .................................................... $ 11,207,237 $ 1,698,635
============ ===========
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
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, 1997, 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 Greenwich Street Series
Fund (formerly Smith Barney Series Fund) (all of which are managed by affiliates
of The Travelers); Templeton Bond Fund (Class 1 shares), Templeton Stock Fund
(Class 1 shares) and Templeton Asset Allocation Fund (Class 1 shares) 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. Not all funds may be available in all states or
to all contract owners.
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.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date.
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.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$13,312,812 and $4,747,592, respectively, for the year ended December 31, 1997.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was $10,309,326
at December 31, 1997. Gross unrealized appreciation for all investments at
December 31, 1997 was $614,676. Gross unrealized depreciation for all
investments at December 31, 1997 was $8,473.
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 deducted for
mortality and expense risks and administrative expenses assumed by Travelers
Life during the first fifteen years that a policy is in effect. Beginning in the
sixteenth year that a policy is in effect, these charges are reduced to 0.45%
and 0%, respectively on an annual basis. As of December 31, 1997 all contract
owners had insurance charges and administrative charges of 0.80% and 0.10%,
respectively.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES (CONTINUED)
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 $25,191 in satisfaction of such contingent surrender
charges for the year ended December 31, 1997. Travelers Life received no
contingent surrender charges for the period August 8, 1996 (date operations
commenced) to December 31, 1996.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
UNIT NET
UNITS VALUE ASSETS
------- ----------- ----------
<S> <C> <C> <C>
Managed Assets Trust ........................... 33,700 $ 2.671 $ 89,999
Capital Appreciation Fund ...................... 444,866 2.691 1,197,299
Cash Income Trust .............................. 909,353 1.540 1,400,377
The Travelers Series Trust
US Government Securities Portfolio ........... 37,194 1.291 48,004
Utilities Portfolio .......................... 32,611 1.685 54,951
Zero Coupon Bond Fund Portfolio Series 1998... 2,347 1.108 2,602
Zero Coupon Bond Fund Portfolio Series 2000... 8,316 1.113 9,258
Zero Coupon Bond Fund Portfolio Series 2005... 13,500 1.157 15,620
Templeton Variable Products Series Fund
Templeton Bond Fund .......................... 96,130 1.183 113,769
Templeton Stock Fund ......................... 689,681 1.606 1,107,321
Templeton Asset Allocation Fund .............. 212,085 1.553 329,421
Fidelity's Variable Insurance Products Fund
High Income Portfolio ........................ 250,378 1.504 376,662
Growth Portfolio ............................. 449,618 1.826 820,850
Equity-Income Portfolio ...................... 597,615 1.967 1,175,344
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio ...................... 181,740 1.449 263,400
Dreyfus Stock Index Fund ....................... 460,680 2.187 1,007,491
Travelers Series Fund Inc
Alliance Growth Portfolio .................... 638,546 1.708 1,090,930
Smith Barney Income and Growth Portfolio ..... 185,237 1.589 294,432
Smith Barney High Income Portfolio ........... 170,588 1.256 214,339
MFS Total Return Portfolio ................... 326,125 1.480 482,675
AIM Capital Appreciation Portfolio ........... 541,898 1.177 637,587
Greenwich Street Series Fund
Total Return Portfolio ....................... 318,844 1.489 474,906
-----------
Net Contract Owners' Equity .................... $11,207,237
===========
</TABLE>
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------- ----------
<S> <C> <C>
MANAGED ASSETS TRUST (0.8%)
Total (Cost $85,258) 5,100 $ 90,013
----------- ----------
CAPITAL APPRECIATION FUND (10.9%)
Total (Cost $1,088,981) 25,798 1,194,973
----------- ----------
CASH INCOME TRUST (10.6%)
Total (Cost $1,157,528) 1,157,528 1,157,528
----------- ----------
THE TRAVELERS SERIES TRUST (1.3%)
U.S. Government Securities Portfolio (Cost $47,228) 4,117 47,966
Utilities Portfolio (Cost $48,808) 3,594 54,958
Zero Coupon Bond Fund Portfolio Series 1998 (Cost $2,716) 260 2,603
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $9,445) 918 9,261
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $15,813) 1,483 15,621
----------- ----------
Total (Cost $124,010) 10,372 130,409
----------- ----------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (14.1%)
Templeton Bond Fund (Cost $112,780) 10,288 113,780
Templeton Stock Fund (Cost $1,110,163) 47,528 1,102,179
Templeton Asset Allocation Fund (Cost $325,471) 14,611 326,555
----------- ----------
Total (Cost $1,548,414) 72,427 1,542,514
----------- ----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (21.7%)
High Income Portfolio (Cost $347,743) 27,735 376,648
Growth Portfolio (Cost $753,888) 22,086 819,403
Equity-Income Portfolio (Cost $1,070,303) 48,173 1,169,630
----------- ----------
Total (Cost $2,171,934) 97,994 2,365,681
----------- ----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (2.4%)
Asset Manager Portfolio
Total (Cost $248,975) 14,622 263,348
----------- ----------
DREYFUS STOCK INDEX FUND (9.0%)
Total (Cost $900,597) 38,321 986,761
----------- ----------
TRAVELERS SERIES FUND INC. (24.8%)
Alliance Growth Portfolio (Cost $959,520) 50,218 1,087,213
Smith Barney Income and Growth Portfolio (Cost $275,386) 15,392 293,521
Smith Barney High Income Portfolio (Cost $199,735) 15,899 214,316
MFS Total Return Portfolio (Cost $461,044) 30,099 480,374
AIM Capital Appreciation Portfolio (Cost $619,500) 51,249 633,949
----------- ----------
Total (Cost $2,515,185) 162,857 2,709,373
----------- ----------
GREENWICH STREET SERIES FUND (4.4%)
Total Return Portfolio
Total (Cost $468,444) 26,954 474,929
----------- ----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $10,309,326) $10,915,529
==========
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD AUGUST 8, 1996
(DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST CAPITAL APPRECIATION FUND CASH INCOME TRUST
-------------------- ------------------------- ---------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .............................. $ 2,064 $ 406 $ 8 $ 11,690 $ 36,259 $ 5,841
-------- ------- ----------- --------- ----------- -----------
EXPENSES:
Insurance charges ...................... 371 9 5,532 184 5,861 1,014
Administrative charges ................. 46 1 689 23 729 127
-------- ------- ----------- --------- ----------- -----------
Net investment income (loss) ....... 1,647 396 (6,213) 11,483 29,669 4,700
-------- ------- ----------- --------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment
transactions:
Proceeds from investments sold ....... 10,996 208 20,971 48,831 4,046,511 610,976
Cost of investments sold ............. 9,921 197 18,398 48,252 4,046,511 610,976
-------- ------- ----------- --------- ----------- -----------
Net realized gain (loss) ........... 1,075 11 2,573 579 -- --
-------- ------- ----------- --------- ----------- -----------
Change in unrealized gain (loss)
on investments:
Unrealized gain (loss)
beginning of period ................ (191) -- (8,725) -- -- --
Unrealized gain (loss)
end of period ...................... 4,755 (191) 105,992 (8,725) -- --
-------- ------- ----------- --------- ----------- -----------
Net change in unrealized gain
(loss) for the period............... 4,946 (191) 114,717 (8,725) -- --
-------- ------- ----------- --------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .......... 7,668 216 111,077 3,337 29,669 4,700
-------- ------- ----------- --------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ........... 37,766 213 594,332 35,577 5,786,468 1,384,589
Participant transfers from other
Travelers accounts ................. 52,750 5,304 435,944 158,113 586,545 187,058
Contract surrenders .................... (8,752) (244) (101,952) (5,130) (188,106) (32,569)
Participant transfers to other
Travelers accounts ................. (4,922) -- (9,284) (24,715) (5,568,887) (789,090)
-------- ------- ----------- --------- ----------- -----------
Net increase in net assets resulting
from unit transactions ............. 76,842 5,273 919,040 163,845 616,020 749,988
-------- ------- ----------- --------- ----------- -----------
Net increase in net assets ........... 84,510 5,489 1,030,117 167,182 645,689 754,688
======== ======= =========== ========= =========== ===========
NET ASSETS:
Beginning of period .................. 5,489 -- 167,182 -- 754,688 --
-------- ------- ----------- --------- ----------- -----------
End of period ........................ $ 89,999 $ 5,489 $ 1,197,299 $ 167,182 $ 1,400,377 $ 754,688
======== ======= =========== ========= =========== ===========
</TABLE>
-7-
<PAGE> 9
<TABLE>
<CAPTION>
ZERO COUPON BOND ZERO COUPON BOND
U.S. GOVERNMENT FUND PORTFOLIO FUND PORTFOLIO
SECURITIES PORTFOLIO UTILITIES PORTFOLIO SERIES 1998 SERIES 2000
----------------- ----------------- ---------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,262 $ 73 $ 45 $ 20 $ 141 $ 2 $ 508 $ --
- -------- -------- -------- -------- -------- -------- -------- ----------
194 2 183 -- 2 -- 30 --
24 -- 23 -- -- -- 4 --
- -------- -------- -------- -------- -------- -------- -------- ----------
2,044 71 (161) 20 139 2 474 --
- -------- -------- -------- -------- -------- -------- -------- ----------
17,836 53 1,782 -- 174 -- 1,064 --
16,929 52 1,686 -- 175 -- 1,044 --
- -------- -------- -------- -------- -------- -------- -------- ----------
907 1 96 -- (1) -- 20 --
- -------- -------- -------- -------- -------- -------- -------- ----------
(60) -- (19) -- (2) -- -- --
738 (60) 6,150 (19) (113) (2) (184) --
- -------- -------- -------- -------- -------- -------- -------- ----------
798 (60) 6,169 (19) (111) (2) (184) --
- -------- -------- -------- -------- -------- -------- -------- ----------
3,749 12 6,104 1 27 -- 310 --
- -------- -------- -------- -------- -------- -------- -------- ----------
41,530 -- 8,128 196 (14) -- 3,315 --
3,283 1,289 42,770 111 2,706 42 6,056 --
(1,585) (52) (1,855) (56) (159) -- (423) --
(222) -- (448) -- -- -- -- --
- -------- -------- -------- -------- -------- -------- -------- ----------
43,006 1,237 48,595 251 2,533 42 8,948 --
- -------- -------- -------- -------- -------- -------- -------- ----------
46,755 1,249 54,699 252 2,560 42 9,258 --
1,249 -- 252 -- 42 -- -- --
- -------- -------- -------- -------- -------- -------- -------- ----------
$ 48,004 $ 1,249 $ 54,951 $ 252 $ 2,602 $ 42 $ 9,258 $ --
======== ======== ======== ======== ======== ======== ======== ==========
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS
COMMENCED) TO DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON BOND
FUND PORTFOLIO
SERIES 2005 TEMPLETON BOND FUND TEMPLETON STOCK FUND
----------------- ------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 827 $ 2 $ 17 $ -- $ 32,428 $ --
-------- ---- --------- ----- ----------- ---------
EXPENSES:
Insurance charges ................................... 60 -- 188 -- 4,790 185
Administrative charges .............................. 7 -- 23 -- 612 23
-------- ---- --------- ----- ----------- ---------
Net investment income (loss) .................. 760 2 (194) -- 27,026 (208)
-------- ---- --------- ----- ----------- ---------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................. 11,539 -- 2,010 38 48,702 944
Cost of investments sold ........................ 10,990 -- 1,984 38 41,905 899
-------- ---- --------- ----- ----------- ---------
Net realized gain (loss) ...................... 549 -- 26 -- 6,797 45
-------- ---- --------- ----- ----------- ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period ...... (1) -- 1 -- 8,229 --
Unrealized gain (loss) end of period ............ (192) (1) 1,000 1 (7,984) 8,229
-------- ---- --------- ----- ----------- ---------
Net change in unrealized gain (loss) for
the period .................................. (191) (1) 999 1 (16,213) 8,229
-------- ---- --------- ----- ----------- ---------
Net increase (decrease) in net assets
resulting from operations ..................... 1,118 1 831 1 17,610 8,066
-------- ---- --------- ----- ----------- ---------
UNIT TRANSACTIONS:
Participant premium payments ........................ 10,172 34 36,154 95 498,265 28,786
Participant transfers from other Travelers accounts.. 6,064 22 79,416 70 510,409 170,043
Contract surrenders ................................. (1,750) (13) (2,478) (38) (109,716) (3,739)
Participant transfers to other Travelers accounts ... (28) -- (282) -- (11,811) (592)
-------- ---- --------- ----- ----------- ---------
Net increase in net assets resulting
from unit transactions ........................ 14,458 43 112,810 127 887,147 194,498
-------- ---- --------- ----- ----------- ---------
Net increase in net assets .................... 15,576 44 113,641 128 904,757 202,564
NET ASSETS:
Beginning of period ............................. 44 -- 128 -- 202,564 --
-------- ---- --------- ----- ----------- ---------
End of period ................................... $ 15,620 $ 44 $ 113,769 $ 128 $ 1,107,321 $ 202,564
======== ==== ========= ===== =========== =========
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TEMPLETON ASSET FIDELITY'S HIGH FIDELITY'S EQUITY-
ALLOCATION FUND INCOME PORTFOLIO FIDELITY'S GROWTH PORTFOLIO INCOME PORTFOLIO
- ------------------------ ------------------------ ---------------------------- ---------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,560 $ -- $ 3,008 $ -- $ 6,210 $ -- $ 14,787 $ --
- --------- -------- --------- -------- --------- --------- ----------- ---------
1,239 14 1,423 17 3,490 123 4,048 143
155 2 181 2 427 15 508 18
- --------- -------- --------- -------- --------- --------- ----------- ---------
4,166 (16) 1,404 (19) 2,293 (138) 10,231 (161)
- --------- -------- --------- -------- --------- --------- ----------- ---------
21,111 403 134,453 222 74,627 2,278 71,633 1,521
19,574 382 133,952 218 71,855 2,102 69,809 1,456
- --------- -------- --------- -------- --------- --------- ----------- ---------
1,537 21 501 4 2,772 176 1,824 65
- --------- -------- --------- -------- --------- --------- ----------- ---------
532 -- 338 -- 155 -- 3,309 --
1,084 532 28,905 338 65,515 155 99,327 3,309
- --------- -------- --------- -------- --------- --------- ----------- ---------
552 532 28,567 338 65,360 155 96,018 3,309
- --------- -------- --------- -------- --------- --------- ----------- ---------
6,255 537 30,472 323 70,425 193 108,073 3,213
- --------- -------- --------- -------- --------- --------- ----------- ---------
163,825 6,643 59,161 9,103 391,611 24,191 283,616 25,870
174,058 16,563 408,795 13,550 379,350 101,793 809,707 84,495
(30,046) (966) (17,011) (645) (85,506) (5,447) (78,809) (4,170)
(7,361) (87) (127,062) (24) (55,077) (683) (56,274) (377)
- --------- -------- --------- -------- --------- --------- ----------- ---------
300,476 22,153 323,883 21,984 630,378 119,854 958,240 105,818
- --------- -------- --------- -------- --------- --------- ----------- ---------
306,731 22,690 354,355 22,307 700,803 120,047 1,066,313 109,031
22,690 -- 22,307 -- 120,047 -- 109,031 --
- --------- -------- --------- -------- --------- --------- ----------- ---------
$ 329,421 $ 22,690 $ 376,662 $ 22,307 $ 820,850 $ 120,047 $ 1,175,344 $ 109,031
========= ======== ========= ======== ========= ========= =========== =========
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS
COMMENCED) TO DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY'S ASSET ALLIANCE
MANAGER PORTFOLIO DREYFUS STOCK INDEX FUND GROWTH PORTFOLIO
--------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ 4,398 $ -- $ 35,376 $ 698 $ -- $ 1,721
--------- ------- ----------- -------- ----------- --------
EXPENSES:
Insurance charges .................................. 882 9 4,820 41 4,148 53
Administrative charges ............................. 109 1 542 5 541 7
--------- ------- ----------- -------- ----------- --------
Net investment income (loss) ................. 3,407 (10) 30,014 652 (4,689) 1,661
--------- ------- ----------- -------- ----------- --------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................. 13,082 50 37,365 480 100,575 469
Cost of investments sold ....................... 12,936 48 30,549 423 83,028 405
--------- ------- ----------- -------- ----------- --------
Net realized gain (loss) ..................... 146 2 6,816 57 17,547 64
--------- ------- ----------- -------- ----------- --------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period ..... (27) -- (445) -- (541) --
Unrealized gain (loss) end of period ........... 14,373 (27) 86,164 (445) 127,693 (541)
--------- ------- ----------- -------- ----------- --------
Net change in unrealized gain (loss) for
the period ................................. 14,400 (27) 86,609 (445) 128,234 (541)
--------- ------- ----------- -------- ----------- --------
Net increase (decrease) in net assets
resulting from operations .................... 17,953 (35) 123,439 264 141,092 1,184
--------- ------- ----------- -------- ----------- --------
UNIT TRANSACTIONS:
Participant premium payments ....................... 92,210 106 482,167 14,990 367,916 24,811
Participant transfers from other Travelers account.. 172,963 9,556 448,073 39,157 615,480 58,558
Contract surrenders ................................ (22,869) (102) (76,416) (1,458) (110,871) (1,638)
Participant transfers to other Travelers accounts.. (6,382) -- (22,182) (543) (5,050) (552)
--------- ------- ----------- -------- ----------- --------
Net increase in net assets resulting
from unit transactions ....................... 235,922 9,560 831,642 52,146 867,475 81,179
--------- ------- ----------- -------- ----------- --------
Net increase in net assets ................... 253,875 9,525 955,081 52,410 1,008,567 82,363
NET ASSETS:
Beginning of period ............................ 9,525 -- 52,410 -- 82,363 --
--------- ------- ----------- -------- ----------- --------
End of period .................................. $ 263,400 $ 9,525 $ 1,007,491 $ 52,410 $ 1,090,930 $ 82,363
========= ======= =========== ======== =========== ========
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY HIGH AIM CAPITAL
AND GROWTH PORTFOLIO INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
- ------------------------- -------------------------- -------------------------- -------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 371 $ -- $ 2,042 $ -- $ 385 $ -- $ 62
- --------- -------- --------- -------- --------- -------- --------- --------
964 10 1,108 36 1,054 9 2,387 74
123 1 139 5 131 1 292 9
- --------- -------- --------- -------- --------- -------- --------- --------
(1,087) 360 (1,247) 2,001 (1,185) 375 (2,679) (21)
- --------- -------- --------- -------- --------- -------- --------- --------
35,099 101 26,074 126 14,712 52 42,017 1,111
29,782 92 24,019 128 13,588 48 35,849 1,061
- --------- -------- --------- -------- --------- -------- --------- --------
5,317 9 2,055 (2) 1,124 4 6,168 50
- --------- -------- --------- -------- --------- -------- --------- --------
(283) -- (1,162) -- (254) -- 8 --
18,135 (283) 14,581 (1,162) 19,330 (254) 14,449 8
- --------- -------- --------- -------- --------- -------- --------- --------
18,418 (283) 15,743 (1,162) 19,584 (254) 14,441 8
- --------- -------- --------- -------- --------- -------- --------- --------
22,648 86 16,551 837 19,523 125 17,930 37
- --------- -------- --------- -------- --------- -------- --------- --------
89,861 824 75,443 -- 75,606 505 226,505 2,516
210,747 15,605 99,684 35,064 398,068 11,241 395,085 60,691
(44,026) (246) (12,595) (95) (11,785) (157) (59,627) (843)
(1,067) -- (550) -- (10,432) (19) (4,654) (53)
- --------- -------- --------- -------- --------- -------- --------- --------
255,515 16,183 161,982 34,969 451,457 11,570 557,309 62,311
- --------- -------- --------- -------- --------- -------- --------- --------
278,163 16,269 178,533 35,806 470,980 11,695 575,239 62,348
16,269 -- 35,806 -- 11,695 -- 62,348 --
- --------- -------- --------- -------- --------- -------- --------- --------
$ 294,432 $ 16,269 $ 214,339 $ 35,806 $ 482,675 $ 11,695 $ 637,587 $ 62,348
========= ======== ========= ======== ========= ======== ========= ========
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE PERIOD AUGUST 8, 1996 (DATE OPERATIONS
COMMENCED) TO DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO COMBINED
----------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 19,156 $ 354 $ 163,054 $ 23,667
--------- -------- ------------ -----------
EXPENSES:
Insurance charges ....................................... 1,528 15 44,302 1,938
Administrative charges .................................. 186 2 5,491 242
--------- -------- ------------ -----------
Net investment income (loss) ...................... 17,442 337 113,261 21,487
--------- -------- ------------ -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 15,259 271 4,747,592 668,134
Cost of investments sold ............................ 13,281 252 4,687,765 667,029
--------- -------- ------------ -----------
Net realized gain (loss) .......................... 1,978 19 59,827 1,105
--------- -------- ------------ -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period .......... 479 -- 1,341 --
Unrealized gain (loss) end of period ................ 6,485 479 606,203 1,341
--------- -------- ------------ -----------
Net change in unrealized gain (loss) for the period 6,006 479 604,862 1,341
--------- -------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations ......................... 25,426 835 777,950 23,933
--------- -------- ------------ -----------
UNIT TRANSACTIONS:
Participant premium payments ............................ 143,153 7,121 9,467,190 1,566,170
Participant transfers from other Travelers accounts ..... 307,511 15,417 6,145,464 983,742
Contract surrenders ..................................... (17,089) (635) (983,426) (58,243)
Participant transfers to other Travelers accounts ....... (6,601) (232) (5,898,576) (816,967)
--------- -------- ------------ -----------
Net increase in net assets resulting
from unit transactions ............................ 426,974 21,671 8,730,652 1,674,702
--------- -------- ------------ -----------
Net increase in net assets ........................ 452,400 22,506 9,508,602 1,698,635
NET ASSETS:
Beginning of period ................................. 22,506 -- 1,698,635 --
--------- -------- ------------ -----------
End of period ....................................... $ 474,906 $ 22,506 $ 11,207,237 $ 1,698,635
========= ======== ============ ===========
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
U.S.
CAPITAL GOVERNMENT
MANAGED APPRECIATION CASH SECURITIES UTILITIES
ASSETS TRUST FUND INCOME TRUST PORTFOLIO PORTFOLIO
------------ ---- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 2,471 77,659 510,210 1,080 186
Units purchased and transferred from
other Travelers accounts ........ 36,681 410,307 4,201,770 37,586 34,029
Units redeemed and transferred to
other Travelers accounts ........ (5,452) (43,100) (3,802,627) (1,472) (1,604)
------- -------- ---------- ------- -------
Units end of year .................. 33,700 444,866 909,353 37,194 32,611
======= ======== ========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON ZERO COUPON ZERO COUPON
BOND FUND BOND FUND BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO TEMPLETON TEMPLETON
SERIES 1998 SERIES 2000 SERIES 2005 BOND FUND STOCK FUND
----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 40 -- 42 110 139,885
Units purchased and transferred from
other Travelers accounts ........ 2,452 8,703 15,066 98,390 623,191
Units redeemed and transferred to
other Travelers accounts ........ (145) (387) (1,608) (2,370) (73,395)
------ ------ ------- ------- --------
Units end of year .................. 2,347 8,316 13,500 96,130 689,681
====== ====== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON
ASSET FIDELITY'S FIDELITY'S FIDELITY'S FIDELITY'S
ALLOCATION HIGH INCOME GROWTH EQUITY-INCOME ASSET MANAGER
FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 16,725 17,292 80,468 70,383 7,858
Units purchased and transferred from
other Travelers accounts ........ 219,569 341,485 453,937 604,747 194,847
Units redeemed and transferred to
other Travelers accounts ........ (24,209) (108,399) (84,787) (77,515) (20,965)
-------- -------- -------- -------- --------
Units end of year .................. 212,085 250,378 449,618 597,615 181,740
======== ======== ======== ======== ========
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY
ALLIANCE INCOME AND SMITH BARNEY MFS
DREYFUS STOCK GROWTH GROWTH HIGH INCOME TOTAL RETURN
INDEX FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 31,576 61,648 12,845 32,158 9,490
Units purchased and transferred from
other Travelers accounts ........ 477,006 649,958 202,047 149,150 332,791
Units redeemed and transferred to
other Travelers accounts ........ (47,902) (73,060) (29,655) (10,720) (16,156)
-------- -------- -------- -------- --------
Units end of year .................. 460,680 638,546 185,237 170,588 326,125
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AIM CAPITAL
APPRECIATION TOTAL RETURN
PORTFOLIO PORTFOLIO COMBINED
--------- --------- --------
<S> <C> <C> <C>
Units beginning of year ............ 58,901 17,497 1,148,524
Units purchased and transferred from
other Travelers accounts ........ 536,587 317,987 9,948,286
Units redeemed and transferred to
other Travelers accounts ........ (53,590) (16,640) (4,495,758)
-------- -------- ----------
Units end of year .................. 541,898 318,844 6,601,052
======== ======== ==========
</TABLE>
-15-
<PAGE> 17
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, 1997, and
the related statement of operations for the year then ended and statement of
changes in net assets for the year ended December 31, 1997 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1997, 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 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 Fund UL II for
Variable Life Insurance as of December 31, 1997, the results of its operations
for the year then ended and the changes in its net assets for the year ended
December 31, 1997 and 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 19, 1998
-16-
<PAGE> 18
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund UL II for Variable Life Insurance
or Fund UL II's underlying funds. It should not be used in connection with any
offer except in conjunction with the applicable Variable Universal Life
Insurance Prospectus and the Prospectuses for the underlying funds, which
collectively contain all pertinent information, including the applicable sales
commissions.
FNDUL II (Annual) (12-97) Printed in U.S.A.
