<PAGE> 1
Registration Statement No. 333-96517
811-07411
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment NO. 2
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
----------------------------------------------------
B. Name of Depositor: THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
C. Complete Address of Depositor's Principal Executive Offices:
One Tower Square,
Hartford, Connecticut 06183
D. Name and Complete Address of Agent for Service:
Ernest J. Wright, Secretary
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
--------
on ___________ pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
--------
on __________ pursuant to paragraph (a)(1) of Rule 485.
--------
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
-------- a previously filed post-effective amendment.
E. Title of securities being registered:
Variable Life Insurance Policies.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940
the Registrant hereby declares that an indefinite amount of its
Variable Survivorship Life Insurance Policies is being registered
under the Securities Act of 1933.
F. Approximate date of proposed public offering:
As soon as practicable following the effectiveness of the
Registration Statement
<PAGE> 2
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
________ Check the box if it is proposed that this filing will become effective
on _______________ at ________ pursuant to Rule 487. _________
<PAGE> 3
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 Company; Distribution
5 The Travelers Fund UL II for Variable Life Insurance
6 The Travelers Fund UL II for Variable Life Insurance
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Company; The Travelers Fund UL for Variable Life
Insurance, The Investment Options; How the Policy Works; Transfers of Cash
Value; The Separate Account and Valuation; Voting Rights; Disregard of Voting
Instructions; Dividends; Lapse and Reinstatement
11 Prospectus Summary; The Investment Options
12 Prospectus Summary; The Investment Options
13 Charges and Deductions; Distribution
14 How the Policy Works
15 Prospectus Summary; Applying Premium Payments
16 The Investment Options; Applying Premium Payments
17 Prospectus Summary; Right to Cancel; The Separate Account and Valuation;
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 Company
26 Not applicable
27 The Company
28 The Company; Management
29 The Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 The Company; Distribution
36 Not applicable
37 Not applicable
38 Distribution
39 The Company; Distribution
40 Not applicable
41 The Company; Distribution
42 Not applicable
43 Not applicable
44 Applying Premium Payments; Accumulation Unit Values
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
----------- ---------------------
<S> <C>
45 Not applicable
46 The Separate Account and Valuation; Access to Cash Values
47 The Investment Options
48 Not applicable
49 Not applicable
50 Not applicable
51 Prospectus Summary; The Company; How the Policy Works; Death Benefits and
Lapse and Reinstatement
52 The Investment Options
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 5
PROSPECTUS
This Prospectus describes The Travelers Variable Life, an individual variable
universal (flexible premium) life insurance Policy (the "Policy") offered by The
Travelers Life and Annuity Company (the "Company"). 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 variable funding options (the "Investment Options").
During the Policy's Right to Cancel Period, 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 (or later if state laws requires).
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 you have directed your premium payments. You bear the investment risk
under the policy. The Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. The Policy will
remain in effect for as long as the Cash Surrender Value can pay the monthly
Policy charges (subject to the Grace Period provision), or for a longer period
as may be provided under the Lapse Protection Guarantee Rider.
We offer two death benefits under the Policy -- the "Level Option" and the
"Variable Option." Under either option, the death benefit will never be less
than the Amount Insured (less any outstanding Policy loans or Monthly Deduction
Amounts due and unpaid). You choose one at the time you apply for the Policy,
however you may change the death benefit option, subject to certain conditions.
This Policy may be or become a modified endowment Policy under federal tax law.
If so, any partial withdrawal, Policy surrender or loan may result in adverse
tax consequences or penalties.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
EACH OF THE INVESTMENT OPTION PROSPECTUSES ARE INCLUDED WITH THE PACKAGE
CONTAINING THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS 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 OF ANY BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS JULY 3, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary of Special Terms............. 3
Prospectus Summary.................... 5
General Description................... 10
How the Policy Works.................. 10
Beneficiary......................... 10
Applying Premium Payments........... 10
The Investment Options................ 11
Policy Benefits and Rights............ 14
Transfers of Cash Value............. 14
Telephone Transfers................. 14
Automated Transfers................. 14
Dollar-Cost Averaging............ 14
Portfolio Rebalancing............ 15
Lapse and Reinstatement............. 15
Additional Insurance Benefits....... 15
Lapse Protection Guarantee Rider.... 15
Exchange Rights..................... 16
Right to Cancel..................... 16
Access to Cash Values................. 16
Policy Loans........................ 16
Cash Value and Cash Surrender
Value............................ 17
Death Benefit......................... 17
Payment of Proceeds.............. 19
Payment Options.................. 19
Maturity Benefits..................... 20
Coverage Extension Rider......... 20
Maturity Extension Rider......... 20
Charges and Deductions................ 20
General.......................... 20
Charges Against Premium............. 21
Front-End Sales Charge........... 21
State Premium Tax Charge......... 21
DAC Charge....................... 21
Monthly Deduction Amount............ 21
Cost of Insurance Charge......... 21
Administrative Expense Charge.... 22
Charges for Supplemental Benefit
Provisions..................... 22
Charges Against the Separate
Account.......................... 22
Mortality and Expense Risk
Charge......................... 22
Underlying Fund Fees................ 22
Surrender Charges................... 22
Transfer Charge..................... 23
Reduction or Elimination of
Charges.......................... 23
The Separate Account and Valuation.... 23
The Travelers Fund UL II for
Variable Life Insurance (Fund UL
II).............................. 23
How the Cash Value Varies........... 23
Accumulation Unit Value............. 24
Net Investment Factor............... 24
Changes to the Policy................. 24
General............................. 24
Changes in Stated Amount............ 25
Changes in Death Benefit Option..... 25
Additional Policy Provisions.......... 25
Assignment.......................... 25
Limit on Right to Contest & Suicide
Exclusion........................ 25
Misstatement as to Sex and Age...... 26
Voting Rights....................... 26
Other Matters......................... 26
Statements to Policy Owners......... 26
Suspension of Valuation............. 26
Dividends........................... 26
Mixed and Shared Funding............ 26
Distribution........................ 27
Legal Proceedings and Opinion....... 27
Experts............................. 27
Federal Tax Considerations............ 27
General............................. 27
Tax Status of the Policy............ 28
Definition of Life Insurance..... 28
Diversification.................. 28
Investor Control................. 28
Tax Treatment of Policy Benefits.... 29
In General....................... 29
Modified Endowment Contracts..... 29
Exchanges........................ 30
Aggregation of Modified Endowment
Contracts...................... 30
Policies which are not Modified
Endowment Contracts............ 30
Treatment of Loan Interest....... 31
The Company's Income Taxes....... 31
The Company........................... 31
IMSA................................ 31
Management............................ 32
Directors of The Travelers Life and
Annuity Company.................. 32
Senior Officers of The Travelers
Life and Annuity Company......... 33
Example of Policy Charges............. 33
Illustrations......................... 34
Performance Information............... 36
Appendix A............................ A-1
Financial Statements of the Separate
Account
Financial Statements of the Company
</TABLE>
2
<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.
BENEFICIARY(IES) -- the person(s) named to receive the 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 segments of the Separate Account or Portfolio to which
you may allocate premiums or Cash Value 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 RIDER -- a rider which provides that the Policy will
not lapse if a required amount of premium is paid. (Not available in all
states.)
LAPSE PROTECTION PREMIUM -- an amount shown on the Policy Summary page, the
cumulative amount of which must be paid in order for the Lapse Protection
Guarantee to be in effect.
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 and charge a fixed rate of
interest.
MATURITY DATE -- The anniversary of the Policy Date on which the Insured is age
100.
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.
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 sales expense
charges, premium tax charges, and Deferred Acquisition Cost Charge (DAC).
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.
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,
for this class of policies and certain policies, the investment experience of
which is kept separate from that of
3
<PAGE> 8
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.
UNDERLYING FUND -- the underlying mutual fund(s) that correspond to each
Investment Option. Each Investment Option invests directly in a Fund.
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 4:00 p.m. Eastern time.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
4
<PAGE> 9
PROSPECTUS SUMMARY
--------------------------------------------------------------------------------
WHAT IS FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE?
The Flexible Premium Variable 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.
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: (Funds offered may change)
<TABLE>
<S> <C>
Capital Appreciation Fund GREENWICH STREET SERIES FUND:
Dreyfus Stock Index Fund Equity Index Portfolio (Class I)
Managed Assets Trust Total Return Portfolio
Money Market Portfolio JANUS ASPEN SERIES:
Aggressive Growth Portfolio -- Service Shares
DEUTSCHE ASSET MANAGEMENT VIT TRUST: Global Technology Portfolio -- Service
EAFE Equity Index Fund Shares Worldwide Growth
Small Cap Index Fund Portfolio -- Service Shares
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND: TRAVELERS SERIES FUND, INC.:
Equity Income Portfolio -- Initial Class AIM Capital Appreciation Portfolio
Growth Portfolio -- Initial Class Alliance Growth Portfolio
High Income Portfolio -- Initial Class MFS Total Return Portfolio
Putnam Diversified Income Portfolio
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND Smith Barney High Income Portfolio
II: Smith Barney Large Capitalization Growth
Asset Manager Portfolio -- Initial Class Portfolio
Smith Barney Large Cap Value Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUSTS: TRAVELERS SERIES TRUST:
Templeton Growth Securities Fund (Class 1) U.S. Government Securities Portfolio
Zero Coupon Bond Portfolio 2005
</TABLE>
Additional Investment Options may be added from time to time. For more
information see "The Investment Options." Refer to each Fund's prospectus for a
complete description of the investment objectives, restrictions and other
material information.
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 Issue Date, your Net Premium 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
either (depending on state law) a refund of premiums paid less any loans, or a
refund of cash value less
5
<PAGE> 10
any loans plus any charges that were deducted by mailing us the Policy and a
written request for cancellation within a specified period.
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 greater
of 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 plus the Cash Value or the Minimum Amount
Insured.
POLICY VALUES: As with other types of non-term insurance policies, this Policy
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 100% of the Cash
Value, less surrender penalties.
You may cancel all or a portion of your Policy while the Insured is living and
receive all or a portion of the 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.
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.
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 to several others.
LAPSE PROTECTION GUARANTEE RIDER: This Rider allows for your Policy to remain
in effect until the Insured's death. You are required to pay at least the
cumulative applicable Lapse Protection Premium displayed on your Policy 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
Guarantee 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.
TAX CONSEQUENCES: Currently, the federal tax law excludes all Death Benefit
payments from the gross income of the Beneficiary. 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.
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. These charges are summarized
below, and explained in detail under "Charges and Deductions."
6
<PAGE> 11
POLICY CHARGES:
- SALES AND PREMIUM EXPENSE CHARGES -- A sales charge, a premium tax
charge, and a Deferred Acquisition Cost ("DAC") charge are applied to
each premium.
<TABLE>
<CAPTION>
TOTAL
PREMIUM
STATED SALES PREMIUM EXPENSE
AMOUNT CHARGE TAX DAC CHARGE
------------------- ------ ------- ------- -------
<S> <C> <C> <C> <C>
$50,000 - $4,999,999 1.50% 2.25% 1.25% 5.0%
$5,000,000+ 0 2.25% 1.25% 3.5%
</TABLE>
- MONTHLY DEDUCTION -- deductions taken from the value of your Policy each
month to cover cost of insurance charges, the monthly administrative
expense charges and charges for optional benefits.
The table for monthly administrative expense are per thousand of Stated
Amount charges that apply for the first three policy years and for three
years following any increases in the Stated Amount (excluding Cost of
Living Adjustments and increases in Stated Amounts due to Death Benefit
Option changes). There is no differentiation between these current and
guaranteed monthly administrative expense charges.
<TABLE>
<CAPTION>
ISSUE AGE CHARGE ISSUE AGE CHARGE
--------- ------ --------- ------
<S> <C> <C> <C>
0 - 46 0.08 53 - 55 0.12
47 - 48 0.09 56 - 57 0.13
49 - 50 0.10 58 - 59 0.14
51 - 52 0.11 60 - 85 0.15
</TABLE>
For policies with Stated Amounts of less than $100,000, there is an
additional $6 per month administrative charge until the Maturity Date.
- FULL SURRENDER CHARGE -- applies if you surrender your policy for its
full Cash Value or the Policy lapses, during the first 10 years or for 10
years after requesting an increase in coverage. The surrender charge is a
per thousand of stated amount charge.
For a male age 45 with a preferred nonsmoker underwriting class, the per
thousand surrender charges are as follows:
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charges 7.18 6.46 5.74 5.03 4.31 3.59 2.87 2.15 1.44 0.72
</TABLE>
For a male age 85 with a standard smoker underwriting class, the per
thousand surrender charges are as follows:
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Full 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
</TABLE>
The per thousand surrender charges shall never exceed the amounts listed
above.
- PARTIAL SURRENDER CHARGE -- applies if you surrender part of the Cash
Value of your Policy.
For a male age 85 with a standard smoker underwriting class, the per
thousand surrender charges are as follows:
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Partial 22.86 20.57 20.32 18.28 13.72 11.43 9.14 6.85 4.57 2.28
</TABLE>
The per thousand surrender charges shall never exceed the amounts listed
above.
- TRANSFER CHARGE -- There is currently no charge for transfers. However,
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
(twelves times in New York) in any Policy Year, and to charge $10 for
each additional transfers.
7
<PAGE> 12
ASSET-BASED CHARGES:
- MORTALITY AND EXPENSE RISK CHARGE -- applies to the assets of the
Investment Options on a daily basis which equals an annual rate of .85%
for the first 15 years and .20% thereafter.
- UNDERLYING FUND FEES -- the separate account purchases shares of the
Underlying Funds on a net asset value basis. The shares purchased already
reflect the deduction of investment advisory fees and other expenses. The
fees are shown in the table below.
TRAVELERS VARIABLE LIFE
2000 FUND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MANAGEMENT OTHER TOTAL
FEE EXPENSES EXPENSES
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE
FUND NAME REIMBURSEMENT) 12B-1 FEES REIMBURSEMENT) REIMBURSEMENT)
Capital Appreciation Fund (Janus) 0.75% 0.08% 0.83%
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Managed Assets Trust 0.50% 0.10% 0.60%
Money Market(1) 0.32% 0.08% 0.40%
DEUTCHE ASSET MANAGEMENT VIT TRUST:
EAFE Equity Index Fund(2) 0.26% 0.39% 0.65%
Small Cap Index Fund(2) 0.13% 0.32% 0.45%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND:
Equity Income Portfolio Initial Class(4) 0.48% 0.08% 0.57%
Growth Portfolio Initial Class(4) 0.58% 0.07% 0.66%
High Income Portfolio Initial Class 0.58% 0.11% 0.69%
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
II:
Asset Manager Portfolio Initial Class(4) 0.53% 0.09% 0.63%
GREENWICH STREET SERIES FUND:
Equity Index Portfolio(7) 0.21% 0.07% 0.28%
Total Return Portfolio(8) 0.75% 0.04% 0.79%
JANUS ASPEN SERIES FUND:
Aggressive Growth(3) 0.65% 0.25% 0.02% 0.92%
Global Technology(3) 0.65% 0.25% 0.13% 1.03%
Worldwide Growth(3) 0.65% 0.25% 0.05% 0.95%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Templeton Growth Securities Fund(5) 0.83% 0.05% 0.88%
TRAVELERS SERIES FUND, INC.:
AIM Capital Appreciation Portfolio(6) 0.80% 0.04% 0.84%
Alliance Growth Portfolio(6) 0.80% 0.02% 0.82%
MFS Total Return Portfolio(6) 0.80% 0.04% 0.84%
Putnam Diversified Income Portfolio(6) 0.75% 0.08% 0.83%
Smith Barney High Income Portfolio(6) 0.60% 0.06% 0.66%
Smith Barney Large Cap Value(6) 0.65% 0.02% 0.67%
Smith Barney Large Cap Growth(6) 0.75% 0.11% 0.86%
TRAVELERS SERIES TRUST:
U.S. Govt Securities 0.32% 0.16% 0.48%
Zero Coupon Bond Portfolio 2005 0.10% 0.05% 0.15%
</TABLE>
(1) Other Expenses have been restated to reflect the current expense
reimbursement arrangement with Travelers Insurance Company. Travelers has
agreed to reimburse the Portfolio for the amount by which its aggregate
expenses (including the management fee, but excluding brokerage commissions,
interest charges
8
<PAGE> 13
and taxes) exceeds 0.40%. Without such arrangement, Total Expenses would
have been 0.50% for the Money Market Portfolio.
(2) These fees reflect a voluntary expense reimbursement arrangement whereby the
Adviser has agreed to reimburse the funds. Without such arrangement, the
Management Fee, Other Expenses and Total Expenses for the Deutsche VIT EAFE
Equity Index Fund and Small Cap Index Fund would have been 0.45%, 0.69%, and
1.14% and 0.35%, 0.83%, and 1.18%, respectively. Effective April 2000, the
Trust's name was changed from BT Insurance Funds Trust to Deutsche Asset
Management VIT Funds.
(3) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of offset arrangements.
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds,
or FMR on behalf of certain funds, custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund 's expenses. With these reductions, the total operating expenses
presented in the table are 0.56% for Equity-Income Portfolio, 0.65% for
Growth Portfolio, and 0.62% for Asset Manager Portfolio.
(5) On 2/8/00, a merger and reorganization was approved to merge the assets of
Templeton Stock Fund into Templeton Global Growth Fund (which then changed
its name to Templeton Growth Securities Fund), effective 5/1/00. The above
table shows restated total expenses based upon the fees and assets of
Templeton Global Growth Fund as of 12/31/99, and not the assets of the
combined fund on 5/1/00. However, if the table reflected the combined
assets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Other Expenses 0.05%, and Total Annual Operating Expenses 0.85%.
The Fund's administration fee is paid indirectly through the management fee.
(6) Expenses are as of October 31, 1999 (the Fund's fiscal year end). There were
no fees waived or expenses reimbursed for these funds in 1999.
(7) The Portfolio Management Fee for Equity Index Portfolio includes 0.06% for
fund administration.
(8) The Portfolio Management Fee for the Appreciation Portfolio, the Total
Return, and the Diversified Strategic Income Portfolio includes 0.20% for
fund administration.
9
<PAGE> 14
GENERAL DESCRIPTION
--------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable life insurance
Policy offered by The Travelers Life and Annuity Company ("Company"). The policy
offers:
- Flexible premium payments (you select the timing and amount of the
premium)
- A selection of investment options
- A choice of two death benefit options
- Loans and partial withdrawal privileges
- The ability to increase or decrease the Policy's face amount of insurance
- Additional benefits through the use of optional riders
This Policy 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 a security
because the Cash Value and, under certain circumstances, the Amount Insured, and
Death Benefit may increase or decrease depending on the investment experience of
the Investment Options chosen.
THE APPLICATION. In order to become a policy owner, you must submit an
application to the Company. You must provide evidence of insurability. On the
application, you will also indicate:
- the amount of insurance desired (the "Stated Amount"); minimum of $50,000
- your choice of the two death benefit options
- the beneficiary(ies), and whether or not the beneficiary is irrevocable
- your choice of investment options.
Our underwriting staff will review the application, and, if approved, we will
issue the Policy.
HOW THE POLICY WORKS
--------------------------------------------------------------------------------
You make premium payments and direct them to one or more of the available
investment options. The policy's Cash Value will increase or decrease depending
on the performance of the investment options you select. In the case of death
benefit option 2, the Death Benefit will also vary based on the investment
options' performance.
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.
Your Policy becomes effective once our underwriting staff has approved the
application and once the first premium payment has been made. The Policy Date is
the date we use to determine all policy charges, for example, the deduction
dates, policy months, policy years. The Policy Date may be before or the same
date as the Issue Date (the date the policy was issued). During the underwriting
period, any premium paid will be held in a non-interest bearing account. Your
policy will stay in effect as long as the policy's cash surrender value can pay
the policy's monthly charges (subject to state variations).
APPLYING PREMIUM PAYMENTS
We apply the first premium on the later of the Policy Date or the date we
receive it at our Home Office. During the Right to Cancel Period, we allocate
net premiums to the Investment Options selected by you (subject to state law).
10
<PAGE> 15
The investment options are segments of the separate account. They correspond to
underlying funds with the same names. The available investment options are
listed below.
We credit your policy with accumulation units of the investment option(s) you
have selected. We calculate the number of accumulation units by dividing your
net premium payment by each investment option's accumulation unit value computed
after we receive your payment.
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, withdrawn or substituted as permitted by applicable state or federal law.
We would notify you before making such a change. Please read carefully the
complete risk disclosure in each Investment Option's prospectus before
investing. For more detailed information on the investment advisers and their
services and fees, please refer to the prospectuses for the Investment Options.
In addition, Travelers has entered into agreements with either the investment
adviser or distributor of certain of the underlying funds in which the adviser
or distributor pays us a fee for providing administrative services, which fee
may vary. The fee is ordinarily based upon an annual percentage of the average
aggregate net amount invested in the underlying funds on behalf of the Separate
Account.
The Investment Options currently available under Fund UL II are as follows:
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Capital Appreciation Fund Seeks growth of capital through the Travelers Asset Management
use of common stocks. Income is not an International Company LLC
objective. The Fund invests ("TAMIC")
principally in common stocks of small Subadviser: Janus Capital
to large companies which are expected Corp.
to experience wide fluctuations in
price in both rising and declining
markets.
Dreyfus Stock Index Fund Seeks to provide investment results Mellon Equity
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.
Managed Assets Trust Seeks high total investment return TAMIC
through a fully managed investment Subadviser: Travelers
policy in a portfolio of equity, debt Investment Management Company
and convertible securities. ("TIMCO")
Money Market Portfolio Seeks high current income from short- TAMIC
term money market instruments while
preserving capital and maintaining a
high degree of liquidity.
DEUTSCHE ASSET MANAGEMENT
VIT TRUST
EAFE Equity Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the EAFE index.
Small Cap Index Fund Seeks to replicate, before deduction Bankers Trust Global
of expenses, the total return Investment Management
performance of the Russell 2000 index.
FIDELITY'S VARIABLE
INSURANCE PRODUCTS FUND
Equity Income Seeks reasonable income by investing Fidelity Management &
Portfolio -- Initial primarily in income-producing equity Research Company ("FMR")
Class securities; in choosing these
securities, the portfolio manager will
also consider the potential for
capital appreciation.
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Growth Portfolio -- Seeks capital appreciation by purchas- FMR
Initial Class ing common stocks of well-known,
established companies, and small
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.
High Income Portfolio -- Seeks to obtain a high level of FMR
Initial Class current income by investing primarily
in high yielding, lower-rated,
fixed-income securities, while also
considering growth of capital.
FIDELITY'S VARIABLE INSURANCE
PRODUCTS FUND II
Asset Manager Seeks high total return with reduced FMR
Portfolio -- Initial risk over the long-term by allocating
Class its assets among stocks, bonds and
short-term fixed-income instruments.
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Templeton Growth Seeks high current income by investing Templeton Global
Securities Fund primarily in debt securities of compa- Advisors Limited
(Class 1) nies, governments and government
agencies of various nations throughout
the world.
GREENWICH STREET
SERIES FUND
Equity Index Portfolio Seeks to replicate, before deduction TIMCO
of expenses, the total return
performance of the S&P 500 index.
Total Return Portfolio An equity portfolio that seeks to pro- SSB Citi Funds Management LLC
vide total return, consisting of ("SSBC")
long-term capital appreciation and
income. The Portfolio will invest
primarily in a diversified portfolio
of dividend-paying common stocks.
JANUS ASPEN SERIES
Aggressive Growth Seeks long-term capital growth by Janus Capital Corporation
Portfolio -- Service investing primarily in common stocks (Janus)
Shares selected for their growth potential,
normally investing at least 50% in the
equity assets of medium-sized
companies.
Worldwide Growth Seeks long-term growth of capital in a Janus
Portfolio -- Service manner consistent with the
Shares preservation of capital. It pursues
its objective by investing primarily
in common stocks of companies of any
size throughout the world. The
Portfolio normally invests in issuers
from at least five different coun-
tries, including the United States.
The Portfolio may at times invest in
fewer than five countries or even a
single country.
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
Global Technology Seeks long-term growth of capital. It Janus
Portfolio -- Service pursues its objective by investing
Shares primarily in equity securities of US
and foreign companies selected for
their growth potential. Normally, it
invests at least 65% of its total
assets in securities of companies that
the portfolio manager believes will
benefit significantly from advances or
improvements in technology.
TRAVELERS SERIES FUND, INC.
AIM Capital Appreciation Seeks capital appreciation by Travelers Investment Adviser
Portfolio investing principally in common stock, ("TIA")
with emphasis on medium-sized and Subadviser: AIM Capital
smaller emerging growth companies. Management Inc.
Alliance Growth Portfolio Seeks long-term growth of capital by TIA
investing predominantly in equity Subadviser: Alliance Capital
securities of companies with a Management L.P.
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.
MFS Total Return Seeks to obtain above-average income TIA
Portfolio (compared to a portfolio entirely Subadviser: Massachusetts
invested in equity securities) Financial Services
consistent with the prudent employment
of capital. Generally, at least 40% of
the Portfolio's assets will be
invested in equity securities.
Putnam Diversified Income Seeks high current income consistent TIA
Portfolio with preservation of capital by Subadviser: Putnam Investment
allocating its investments among the Management, Inc.
following three sectors of the
fixed-income securities markets, a
U.S. Government Sector, a High Yield
Sector and an International Sector.
Smith Barney High Income Seeks high current income. Capital SSBC
Portfolio appreciation is a secondary objective.
The Portfolio will invest at least 65%
of its assets in high-yielding
corporate debt obligations and
preferred stock.
Smith Barney Large Cap Seeks current income and long-term SSBC
Value Portfolio growth of income and capital by
investing primarily, but not
exclusively, in common stocks.
Smith Barney Large Seeks long-term growth of capital by SSBC
Capitalization Growth investing primarily in equity
Portfolio securities of companies with large
market capitalization.
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
INVESTMENT OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------- -------------------- -----------------------------
<S> <C> <C>
TRAVELERS SERIES TRUST
U.S. Government Seeks to select 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 Securi-
ties Portfolio will be invested in
direct obligations of the United
States, its agencies and
instrumentalities.
Zero Coupon Bond Fund Seeks to provide as high an investment TAMIC
Portfolio Series 2005 return as 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>
POLICY BENEFITS AND RIGHTS
--------------------------------------------------------------------------------
TRANSFERS OF CASH VALUE
As long as the Policy remains in effect, you may make transfers of Cash Value
between Investment Options. We reserve the right to restrict the number of free
transfers to four times (twelve times in New York) in any Policy Year and to
charge $10 for each additional transfer; however, there is currently no charge
for transfers.
We calculate the number of Accumulation Units involved using the Accumulation
Unit Values we calculate at the end of the business day on which we receive the
transfer request.
TELEPHONE 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.
AUTOMATED TRANSFERS
DOLLAR-COST AVERAGING
You may establish automated transfers of Policy Values on a monthly or quarterly
basis from any Investment Option(s) to any other Investment Option(s) through
written request or other method acceptable to the Company. You must have a
minimum of $5,000 in the fund from which amounts will be transferred out of 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
14
<PAGE> 19
Policy. 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.
PORTFOLIO REBALANCING
You may elect to have the Company periodically reallocate values in your policy
to match your original (or your latest) funding option allocation request.
LAPSE AND REINSTATEMENT
Except as provided below under "Lapse Protection Guarantee Rider", the Policy
will remain in effect until the Cash Surrender Value of the Policy can no longer
cover the Monthly Deduction Amount. If this happens we will notify you in
writing that if the amount shown in the notice is not paid within 61 days (the
"Grace Period"), the Policy may lapse. The amount shown will be enough to pay
the deduction amount due. The Policy will continue through the Grace Period, but
if no payment is received by us, it will terminate at the end of the Grace
Period. If the person Insured under the Policy dies during the Grace Period, the
Death Benefit payable will be reduced by the Monthly Deduction Amount due plus
the amount of any outstanding loan. (See "Death Benefit," below.)
If the Policy lapses, you may reinstate the Policy by paying the reinstatement
premium (and any applicable charges) shown in the Policy. You may request
reinstatement within three years of lapse (unless a different period is required
under applicable state law). Upon reinstatement, the Policy's Cash Value will be
equal to the amount provided by the Net Premium. In addition, the Company
reserves the right to require satisfactory evidence of insurability.
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, there are ten riders which may be added to your
base Policy including the primary insured term, spouse term, child term,
accidental death benefit, cost of living adjustment, waiver of deduction amount,
specified amount payment and lapse protection guarantee rider. The last rider is
described below. The Coverage Extension Rider and the Maturity Extension Rider
are described in the "Maturity Benefits" section. There may be additional costs
associated with these riders. Depending on your circumstances, it may be less
costly to purchase more Death Benefit Coverage under the primary insured term
rider than under the base variable policy.
LAPSE PROTECTION GUARANTEE RIDER
You may elect to have a Lapse Protection Guarantee Rider added to the Policy at
issue (provided that the Insured meets all underwriting requirements for this
Rider). The Lapse Protection Guarantee Rider benefit provides that if during the
lifetime of the Insured the total premiums paid under the Policy, less any Loan
Account Value and partial surrenders, equal or exceed the cumulative applicable
Lapse Protection Premium shown on the Policy Summary Page of the Policy, a Lapse
Protection Guarantee will be in effect. (This feature may be included in the
base policy in some jurisdictions and may not be available in all
jurisdictions.) This rider 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. The Lapse Protection Premium 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 Lapse Protection Premium
which must be met in order for the guarantee to remain in effect. The lapse
protection premium requirement increases after the 10th policy year.
15
<PAGE> 20
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged during the first 24 months for
a form of non-variable permanent individual life insurance policy issued by the
Company (or an affiliated company, if allowed by state law) 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. You have the right to
select the same Death Benefit or Net Amount At Risk as the former Policy at the
time of exchange. 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 we will make an exchange. In addition, there may be an
adjustment for the difference in Cash Value between the two Policies.
RIGHT TO CANCEL
An Applicant may cancel the Policy by returning it via mail or personal delivery
to the Company or to the agent who sold the Policy. The Policy must be returned
by the latest of:
(1) 10 days after delivery of the Policy to you
(2) 45 days of completion of the Policy application
(3) 10 days after the Notice of Right to Cancel has been mailed or
delivered to the Applicant whichever is latest, or
(4) later if required by state law.
We will refund either (depending on state law) any premiums paid less any loans,
or the Cash Value of the Policy on the date we receive the returned Policy, plus
any charges that were deducted, less any Loan Account Value.
We will make the refund within seven days after we receive your returned policy.
ACCESS TO CASH VALUES
--------------------------------------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 100% of the Policy's Cash Value (determined on the day on which the
Company receives the written loan request), less any surrender penalties.
Subject to state law, no loan requests may be made for amounts of less than
$500.
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. During the first fifteen
(15) Policy Years, the full Loan Account Value will be charged an annual
interest rate of 5.66% (7.4% in NY & MA); thereafter 4.76% (6.54% in NY & MA)
will be charged.
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 New York and Massachusetts) and will
not be affected by the investment performance of the Investment Options. 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.
16
<PAGE> 21
An outstanding loan amount decreases the Cash Surrender Value. If a loan is
taken or a loan is not repaid, it permanently decreases the Cash Surrender
Value, which could cause the Policy to lapse (see "Lapse and Reinstatement.")
For example, if a Policy has a Cash Surrender Value of $10,000, the Policy Owner
may take a loan of 100% or $10,000, leaving a new Cash Surrender Value of $0.00.
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.
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 date of the Company's receipt of the
written request, or on the date 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
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.
DEATH BENEFIT
--------------------------------------------------------------------------------
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 in the following
pages.
17
<PAGE> 22
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
be at least the current Stated Amount of the Policy less any outstanding Policy
loan and unpaid monthly Deduction Amount due. 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.
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 equals a stated percentage of the Policy's Cash Value
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 is set
forth in the Policy and may change as federal income tax laws or regulations
change. The following is a schedule of the applicable percentages. For attained
ages not shown, the applicable percentages will decrease evenly:
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE
------------ ----------
<S> <C>
0-40 250
45 215
50 185
55 150
60 130
65 120
70 115
75 105
95+ 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance Policies that may increase the Minimum Amount Insured shown above.
This limitation known as the "guideline premium limitation," generally applies
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. The 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).
18
<PAGE> 23
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 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).
PAYMENT OF PROCEEDS
Death Benefits are payable within seven days after we receive satisfactory proof
of the Insured's death. The amount of Death Benefit paid 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.")
Subject to state law, 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.") In addition, if the Insured
dies during the Grace Period then 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," for effects of
partial surrenders on Death Benefits.)
PAYMENT OPTIONS
We will pay policy proceeds in a lump sum, unless you or the Beneficiary select
one of the Company's payment options. We may defer payment of proceeds which
exceed the Death Benefit 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 we consent to a lesser amount.
Proceeds applied under an option will no longer be affected by the investment
experience of the Investment Options.
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
We will make any other arrangements for periodic payments as may be agreed upon.
If any periodic payment due any payee is less than $100, we may make payments
less often. If we have
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declared a higher rate under an option on the date the first payment under an
option is due, we will base the payments on the higher rate.
MATURITY BENEFITS
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The Maturity Date is the anniversary of the Policy Date on which the Insured is
age 100. If the Insured is living on the Maturity Date, the Company will pay you
the Policy's Cash Value less any outstanding Policy loan or unpaid Deduction
Amount. You must surrender the Policy to us before we make a payment. After
payment, we will have no further obligation under the Policy.
COVERAGE EXTENSION RIDER
The Coverage Extension rider allows coverage to be extended beyond the Maturity
Date as long as there is Cash Value in the Contract. Upon request from the
owner, the Company will continue to keep the policy in force until the death of
the Insured or request for payment of the full cash surrender value, as defined
by this rider, prior to the death of the Insured. The death benefit will equal
the amount insured, less any outstanding loans. This Rider can be selected only
from the policy anniversary when the Insured is age 99 to the Maturity Date. Any
monthly deduction amounts due must be paid for this rider to take effect. There
is no charge for this rider, however, it is available only if the Insured's
Issue age is 80 or less.
MATURITY EXTENSION RIDER
When the Insured reaches age 99, and at any time during the twelve months
thereafter, you 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. If we receive such a request before the Maturity
Date and any past Monthly Deduction Amounts have been paid, the Policy will
continue until the earlier of the Insured's Death or the date on which you
request that the Policy terminate. When the Maturity Extension Benefit ends, a
Death Benefit consisting of the Cash Value less any Loan Account Value will be
paid. The Death Benefit is based on the experience of the Investment Options
selected 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. This rider is available for Issue Ages 81 to 85.
We intend that the Policy and the Maturity Extension Rider will 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.
CHARGES AND DEDUCTIONS
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GENERAL
We deduct the charges described below. The charges are for services and benefits
we provide, costs and expenses we incur, and risks we assume under the Policies.
Services and benefits we provide include:
- the ability for you to make withdrawals under the Policies;
- the ability for you to obtain a loan under the Policies;
- the death benefit paid on the death of the Insured;
- the available funding option and related programs (including dollar-cost
averaging and portfolio rebalancing);
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- administration of the various elective options available under the
Policies; and
- the distribution of various reports to policy owners.
Costs and expenses we incur include:
- expenses associated with underwriting applications, increases in the
stated amount, and riders;
- losses associated with various overhead and other expenses associated
with providing the services and benefits provided by the Policies;
- sales and marketing expenses including commission payments to your sales
agent; and
- other costs of doing business.
Risks we assume include:
- that insureds may live for a shorter period of time than estimated
resulting in the payment of greater death benefits than expected; and
- that the costs of providing the services and benefits under the Policies
will exceed the charges deducted.
CHARGES AGAINST PREMIUM
FRONT-END SALES CHARGE
When we receive a Premium Payment, and before allocation of the payment among
the Investment Options, we deduct a front-end sales charge of 1.5% of premium
(waived if policy stated amount plus primary insured term benefit is at least
$5,000,000).
STATE PREMIUM TAX CHARGE
A charge of 2.25% of each premium payment will be deducted for state premium
taxes (tax chargeback in Oregon) (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 or not assessed in his or
her jurisdiction.
DEFERRED ACQUISITION COST CHARGE
A charge of 1.25% of each premium payment will be deducted, which compensates
the Company for expenses associated with its federal income tax liability
relating to its receipt of premium.
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.")
MONTHLY DEDUCTION AMOUNT
We will deduct a Monthly Deduction Amount to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount is deducted
pro rata from each of the Investment Options' values attributable to the Policy.
The amount is deducted on the first day of each Policy Month (the "Deduction
Date"), beginning on the Policy Date. The dollar amount of the Deduction Amount
will vary from month to month. The Monthly Deduction Amount consists of the Cost
of Insurance Charge, Policy Administrative Expense Charge and Charges for any
Supplemental Benefit Provision. These are described below:
COST OF INSURANCE CHARGE
The amount of the Cost of Insurance deduction depends on the amount of insurance
coverage on the date of the deduction and the current cost per dollar for
insurance coverage. The cost per
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dollar of insurance coverage varies annually and is based on issue age, policy
year, sex and risk class of the Insured.
ADMINISTRATIVE EXPENSE CHARGE
An administrative charge is deducted monthly from the Policy's Cash Value. This
charge consists of a per thousand charge for the first three Policy years and
for three years following any increases 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 charge varies by issue age and Stated Amount.
For policies with Stated amounts of less than $100,000, there is an additional
$6 per month administrative charge until the Maturity Date.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS (RIDERS)
The Company will include a supplemental benefits charge in the Monthly Deduction
Amount if you have elected any supplemental benefit provision for which there is
a charge. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for mortality and expense risks. This charge is at an
annual rate of .85% for the first fifteen (15) Policy Years, and 0.20%
thereafter. This charge compensates us for various risks assumed, benefits
provided, and expenses incurred.
UNDERLYING FUND FEES
When you allocate money to the Investment Options, the Separate Account
purchases shares of the corresponding Underlying Funds at net asset value. The
net asset value reflects investment advisory fees and other expenses already
deducted. The investment advisory fees and other expenses paid by each of the
underlying Mutual Funds are described in the individual fund prospectuses for
the Investment Options and in the Policy prospectus summary. These are not
direct charges under the Policy; they are indirect because they affect each
Investment Option's accumulation unit value.
SURRENDER CHARGES
A Per Thousand of Stated Amount Surrender Charge is imposed on full and 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 for 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 original issue age, and
increases with the issue age of the Insured. 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.
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 $646.50; in the tenth year, it is
$0.72 for each $1,000, or $108.
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This charge is designed to compensate the Company for administrative expenses
not covered by other administrative charges. This charge may be reduced or
eliminated when sales are made under certain arrangements. (See "Reduction or
Elimination of Charges" below.) The Per Thousand of Stated Amount surrender
charges are set forth in Appendix A.
TRANSFER CHARGE
There is currently no charge for transfers. 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 (twelve times in New York) in any Policy Year, and to
charge $10 for any additional transfers.
REDUCTION OR ELIMINATION OF CHARGES
We 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. We may reduce or
eliminate the mortality and expense risk charge, sales or surrender charges and
administrative charges in such arrangements to reflect the reduced sales
expenses, administrative costs and/or mortality and expense risks expected as a
result of sales to a particular group.
We will not reduce or eliminate the withdrawal charge, mortality and expense
risk charge or the administrative charge if the reduction or elimination will be
unfairly discriminatory to any person.
THE SEPARATE ACCOUNT AND VALUATION
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THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE (FUND UL II)
The Travelers Fund UL II for Variable Life Insurance was established on October
17, 1995 under the insurance laws of the state of Connecticut. It is registered
with the Securities and Exchange Commission ("SEC") as a unit investment trust
under the Investment Company Act of 1940. 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. You may access the
SEC's website (http://www.sec.gov) to view the entire Registration Statement.
This registration does not mean that the SEC supervises the management or the
investment practices or policies of the Separate Account.
The assets of Fund UL II are invested exclusively in shares of the Investment
Options. The operations of Fund UL II are also subject to the provisions of
Section 38a-433 of the Connecticut General Statutes which authorizes the
Connecticut Insurance Commissioner to adopt regulations under it. 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. 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.
All investment income of and other distributions to each Investment Option are
reinvested in shares of corresponding underlying fund at net asset value. The
income and realized gains or losses on the assets of each Investment Option are
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 purchases shares of the Fund in
connection with premium payments allocated according to the Policy Owners'
directions, and redeems Fund shares to meet Policy obligations. We will also
make adjustments in reserves, if required. The Investment Options are required
to redeem Fund shares at net asset value and to make payment within seven days.
HOW THE CASH VALUE VARIES. We calculate the Policy's Cash Value each day the
New York Stock Exchange is open for trading (a "valuation date"). A Policy's
Cash Value reflects a number of
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factors, including Premium Payments, partial withdrawals, loans, Policy charges,
and the investment experience of the Investment Option(s) chosen. The Policy's
Cash Value on a valuation date equals the sum of all accumulation units times
the unit value for each Investment Option chosen, plus the Loan Account Value.
The Separate Account purchases shares of the underlying funds at net asset value
(i.e., without a sales charge). The Separate Account receives all dividends and
capital gains distributions from each underlying fund, and reinvests in
additional shares of that fund. The Accumulation Unit Value reflects the
reinvestment of any dividends or capital gains distributions declared by the
underlying fund. The Separate Account will redeem underlying fund shares at
their net asset value, to the extent necessary to make payments under the
Policy.
In order to determine Cash Value, Cash Surrender Value, policy loans and the
number of Accumulation Units to be credited, we use the values calculated as of
the close of business on each valuation date we receive the written request, or
payment in good order, at our Home Office.
ACCUMULATION UNIT VALUE. Accumulation Units measure the value of the Investment
Options. The value for each Investment Option's Accumulation Unit is calculated
on each valuation date. The value equals the Accumulation Unit value for the
preceding valuation period multiplied by the underlying fund's Net Investment
Factor during the next Valuation Period. (For example, to calculate Monday's
valuation date price, we would multiply Friday's Accumulation Unit Value by
Monday's net investment factor.)
The Accumulation Unit Value may increase or decrease. The number of Accumulation
Units credited to your Policy will not change as a result of the Investment
Option's investment experience.
NET INVESTMENT FACTOR. For each Investment Option, the value of its
Accumulation Unit depends on the net rate of return for the corresponding
underlying fund. We determine the net rate of return at the end of each
Valuation Period (that is, the period of time beginning at 4:00 p.m. Eastern
time, and ending at 4:00 p.m. Eastern time on the next Valuation Date). The net
rate of return reflects the investment performance of the investment option,
includes any dividends or capital gains distributed, and is net of the Separate
Account charges.
CHANGES TO THE POLICY
--------------------------------------------------------------------------------
GENERAL
Once the policy is issued, you may make certain changes. Some of these changes
will not require additional underwriting approval; some changes will. Certain
requests must be made in writing, as indicated below:
WRITTEN CHANGES REQUIRING UNDERWRITING APPROVAL:
- increases in the stated amount of insurance;
- changing the death benefit from Option 1 to Option 2
WRITTEN CHANGES NOT REQUIRING UNDERWRITING APPROVAL:
- decreases in the stated amount of insurance
- changing the death benefit from Option 2 to Option 1
- changes to the way your premiums are allocated (Note: you can also make
these changes by telephone)
- changing the beneficiary (unless irrevocably named)
Written requests for changes should be sent to the Company's Home Office at One
Tower Square, Hartford, Connecticut, 06183. The Company's telephone number is
(860) 277-0111.
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CHANGES IN STATED AMOUNT
You may request in writing an increase (after the first policy year) or decrease
(after the second policy year) in the Policy's Stated Amount, 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, we may require a new application and
evidence of insurability as well as an additional premium payment. The effective
date of any increase will be shown on the new Policy Summary which we will send.
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. A proportional surrender
charge applies for requested decreases in Stated Amount. The charge is
determined by dividing the amount of the decrease by the total Stated Amount and
multiplying by the full surrender charge.
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option by sending a written request to the
Company. There is no direct tax consequence of changing a Death Benefit option,
except as described under "Tax Treatment of Policy Benefits." 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 your gross income. 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 $50,000. A change from Option 1 to Option 2 is
also subject to underwriting. Contact your registered representative for more
information.
ADDITIONAL POLICY PROVISIONS
--------------------------------------------------------------------------------
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.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
We 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. Subject to state law,
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 (subject to state law). 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 paid for such increase.
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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.
VOTING RIGHTS
The Company is the legal owner of the underlying fund shares. However, we
believe that when an underlying fund solicits proxies, we are required to obtain
from policy owners who have chosen those investment options instructions on how
to vote those shares. When we receive those instructions, we will vote all of
the shares we own in proportion to those instructions. This will also include
any shares we own on our own behalf. If we determine that we no longer need to
comply with this voting method, we will vote on the shares in our own right.
OTHER MATTERS
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STATEMENTS TO POLICY OWNERS
We will maintain all records relating to the Separate Account and the Investment
Options. At least once each Policy Year, we will send you a statement containing
the following information:
- 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);
- the date and amount of each premium payment;
- the date and amount of each Monthly Deduction;
- 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;
- the date and amount of any partial cash surrenders and the amount of any
partial surrender charges or decrease charges;
- the annualized cost of any supplemental benefits purchased under the
Policy; and
- a reconciliation since the last report of any change in Cash Value and
Cash Surrender Value.
We will also send any other reports required by any applicable state or federal
laws or regulations.
SUSPENSION OF VALUATION
We reserve 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
the SEC determines that disposal of the securities held in the Underlying Funds
is not reasonably practicable or the value of the Investment Option's net assets
cannot be determined; 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.
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. This is called mixed funding. Certain funds
may be available to variable products of other companies not affiliated with
Travelers. This is called "shared funding." Although we -- and the funds -- do
not anticipate any 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
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<PAGE> 31
conflicts that may arise and to determine what action, if any, should be taken.
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.
DISTRIBUTION
The Company intends to sell the Contracts in all jurisdictions where it is
licensed to do business and where the Contract is approved. Any sales
representative or employee associated with a broker-dealer who sells the
Contracts will be qualified to sell variable life insurance under applicable
federal and state laws. Each broker-dealer is registered with the SEC under the
Securities Exchange Act of 1934, and all are members of the NASD. The Contract
is offered through both affiliated and non-affiliated broker-dealers.
The principal underwriter of the Contracts is CFBDS, Inc, 21 Milk Street,
Boston, MA. CFBDS is not affiliated with the Company or the Separate Account.
However, it is currently anticipated that Travelers LLC, an affiliated
broker-dealer, may become the principal underwriter for the Contracts sometime
in 2000.
The maximum commission payable by the Company for distribution to the
broker-dealer will not exceed 110% of the target premium and 6.5% of the excess
premium paid in the first contract year. The maximum commission payable will not
exceed 4% of the annual renewal premium paid in contract years 2-10, and will
not exceed 4% of the annual renewal premium paid after contract year 10. In
addition, Tower Square Securities, Inc, an affiliate of the Company, receives
additional incentive payments from the Company relating to its sale of the
Contracts. From time to time, the Company may pay or permit other promotional
incentives, in cash, credit or other compensation.
LEGAL PROCEEDINGS AND OPINION
There are no pending material legal proceedings affecting the Separate Account.
Legal matters in connection with the federal laws and regulations affecting the
issue and sale of the Contract described in this prospectus, as well as the
organization of the Company, its authority to issue variable life contracts
under Connecticut law and the validity of the forms of the variable life
contracts under Connecticut law, have been reviewed by the General Counsel of
the Company.
EXPERTS
The financial statements of Fund UL II as of December 31, 1999 and for the year
ended December 31, 1999 have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, and 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, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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
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<PAGE> 32
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.
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
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<PAGE> 33
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.
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
A modified endowment contract is defined under tax law as any policy that
satisfies the present legal definition of a life insurance contract but which
fails to satisfy a 7-pay test. This failure could occur with contracts entered
into after June 21, 1988, or with certain older contracts materially changed
after that date. A Section 1035 exchange of an older contract into a contract
after that date will not by itself cause the new contract to be a modified
endowment contract if the older contract had not become one prior to the
exchange. However, the new contract must be re-tested under the 7-pay test
rules.
A contract fails to satisfy the 7-pay test if the cumulative amount of premiums
paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums that would have been paid on or before
such time had the contract provided for paid-up future benefits after the
payment of seven level annual premiums. If a material change in the contract
occurs either during the first seven contract years, or later, a new seven-year
testing period is begun. A decrease to Stated Amount made in the first seven
years will cause a retest of the cumulative amount of premiums. Decreases made
after the first seven contract years are not considered a material change,
provided no other material changes have occurred prior. Tax
29
<PAGE> 34
regulations or other guidance will be needed to fully define those transactions
which are material changes. The Company has established safeguards for
monitoring whether a contract may become a modified endowment 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.
The Death Benefit of a modified endowment contract remains excludable from the
gross income of the Beneficiary to the extent described above in "Tax Treatment
of Policy Benefits." Furthermore, no part of the investment growth of the Cash
Value of a modified endowment contract is includable in the gross income of the
Contract Owner unless the contract matures, is distributed or partially
surrendered, is pledged, collaterally assigned, or borrowed against, or
otherwise terminates with income in the contract prior to death. A full
surrender of the contract after age 59 1/2 will have the same tax consequences
as noted above in "Tax Treatment of Policy Benefits."
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.
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.
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.
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
30
<PAGE> 35
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.
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 on 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.
THE 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 an indirect wholly owned subsidiary of Citigroup 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.
IMSA
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and IMSA membership in its
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities. IMSA members have adopted policies and
procedures that demonstrate a commitment to honesty, fairness and integrity in
all customer contacts involving the sale and service of individual life
insurance and annuity products.
31
<PAGE> 36
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 Citigroup include, prior to December 31, 1993,
Primerica Corporation or its predecessors, and prior to October 8, 1998,
Travelers Group Inc.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
----------------- -------- ------------------
<S> <C> <C>
George C. Kokulis.......... 1996 President and Chief Executive Officer since April
2000,
Director Executive Vice President (7/1999 to 3/2000), Senior
Vice President (1995-1999), Vice President (1993-1995)
of The Travelers Life and Annuity Company.
Glenn D. Lammey............ 2000 Executive Vice President since May 2000 and Chief
Director Financial Officer, Chief Accounting Officer and
Controller since March 2000 of The Travelers Life and
Annuity Company; Executive Vice President, Claim
Services (1997-2000), Senior Vice President, Corporate
(1996-1997) of Travelers Property Casualty Corp.; Vice
President (1988) and Chief Financial Officer (1992)
Personal Lines of The Travelers Insurance Company.
Marla Berman Lewitus....... 2000 Senior Vice President and General Counsel since August
Director 1999 of The Travelers Life and Annuity Company;
Associate General Counsel (11/98-7/99), Assistant
General Counsel (11/91-7/93) of Citigroup Inc.; Senior
Counsel (11/91-7/93) Primerica Corporation.
Katherine M. Sullivan...... 1996 Senior Vice President since May 1996 and General
Director Counsel from May 1996 to August 1999 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.
Marc P. Weill*............. 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers Life
and Annuity Company; Senior Vice President and Chief
Investment Officer of Citigroup Inc. since 1992; Vice
President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
---------------
* Principal business address: Citigroup Inc., 153 East 53rd St., New York, New
York 10043
32
<PAGE> 37
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
Glenn D. Lammey...................... Executive Vice President, Chief
Financial Officer, Chief Accounting
Officer and Controller
Marla Berman Lewitus................. Senior Vice President and General
Counsel
Brendan Lynch........................ Senior Vice President
Warren H. May........................ Senior Vice President
Kathleen A. Preston.................. Senior Vice President
Mary Jean Thornton................... Executive Vice President and
Chief Information Officer
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.
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 Deductions 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). Cost of
Insurance rates go up each year as the Insured becomes a year older.
Male, Issue Age 55
Preferred, Non-Smoker
Annual Premium: $30,000.00
Hypothetical Gross Annual Investment
Rate of Return: 8%
Face Amount: $1,000,000
Level Death Benefit Option
Current Charges
<TABLE>
<CAPTION>
TOTAL MONTHLY DEDUCTION
FOR THE POLICY YEAR
-----------------------
ADMINISTRATIVE
CUMULATIVE COST OF CHARGES AND
POLICY GROSS INSURANCE MONTHLY
YEAR PREMIUM SURRENDER CHARGES CHARGES POLICY CHARGES
------ ---------- ----------------- --------- --------------
<S> <C> <C> <C> <C>
1 $ 30,000.00 $13,010.00 $4,936.23 $2,940.00
2 $ 60,000.00 $11,710.00 $4,877.44 $2,940.00
3 $ 90,000.00 $10,410.00 $4,871.84 $2,940.00
5 $150,000.00 $ 7,810.00 $4,743.50 $1,500.00
10 $300,000.00 $ 1,300.00 $4,250.98 $1,500.00
</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 shown. No representations can be made that the
hypothetical rates assumed can be achieved for any one year or sustained over a
period of time.
33
<PAGE> 38
ILLUSTRATIONS
--------------------------------------------------------------------------------
The following pages are intended to illustrate hypothetically how the Cash
Value, Cash Surrender Value and Death Benefit can change over time for Policies
issued to a 55-year old male. The difference between the Cash Value and the Cash
Surrender Value in these illustrations reflects the Surrender Charge that would
be incurred upon a full surrender of the Policy.
Two pages of values are shown. One page illustrates the assumption that the
maximum Guaranteed Cost of Insurance Rates allowable under the Policy are
charged in all years. The other page illustrates the assumption that the current
scale of Cost of Insurance Rates are charged in all years. The Cost of Insurance
Rates charged vary by age, sex (where permitted by state law) and underwriting
classification.
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 0.85% for mortality and
expense risks and 0.67% for Investment Option expenses and thereafter 0.20% for
mortality and expense risks 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 the most recent
audited calendar year. 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 -1.52%, 4.48%, and 10.48%, respectively on a current and
guaranteed basis during the first fifteen Policy Years, and to approximate net
annual rates of -0.87%, 5.13%, and 11.13%, 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.
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, Cash Values and Cash Surrender Values illustrated.
The second column of each Illustration shows the amount that would accumulate if
an amount equal to the Premium Payment was invested to earn interest (after
taxes) at 5%, compounded annually.
Upon request, the Company will provide a comparable personalized illustration
based upon the proposed Insured's age, sex, underwriting classification, the
specified insurance benefits, and the premium requested. The illustration will
show average fund expenses or, if requested, actual fund expenses. The
hypothetical gross annual investment return assumed in such an illustration will
not exceed 12%.
34
<PAGE> 39
TRAVELERS VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED CHARGES
<TABLE>
<S> <C>
Male, Issue Age 55 Face Amount: $1,000,000
Preferred, Non-Smoker Annual Premium: $30,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- ------------------------------ ------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 31,500.00 1,000,000 1,000,000 1,000,000 15,994 17,318 18,649 2,984 4,308 5,639
2 64,575.00 1,000,000 1,000,000 1,000,000 30,943 34,607 38,447 19,233 22,897 26,737
3 99,303.75 1,000,000 1,000,000 1,000,000 44,828 51,847 59,516 34,418 41,437 49,106
4 135,768.94 1,000,000 1,000,000 1,000,000 59,048 70,486 83,515 49,938 61,376 74,405
5 174,057.38 1,000,000 1,000,000 1,000,000 72,099 89,065 109,220 64,289 81,255 101,410
6 214,260.25 1,000,000 1,000,000 1,000,000 83,882 107,498 136,778 77,372 100,988 130,268
7 256,473.27 1,000,000 1,000,000 1,000,000 94,273 125,673 166,344 89,073 120,473 161,144
8 300,796.93 1,000,000 1,000,000 1,000,000 103,112 143,446 198,090 99,212 139,546 194,190
9 347,336.78 1,000,000 1,000,000 1,000,000 110,229 160,667 232,234 107,629 158,067 229,634
10 396,203.61 1,000,000 1,000,000 1,000,000 115,454 177,188 269,063 112,854 174,588 266,463
15 679,724.75 1,000,000 1,000,000 1,000,000 107,260 244,698 511,341 107,260 244,698 511,341
20 1,041,577.55 1,000,000 1,000,000 1,040,819 7,789 269,795 972,728 7,789 269,795 972,728
</TABLE>
These hypothetical rates of returns 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 over a period of time.
35
<PAGE> 40
TRAVELERS VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT CHARGES
<TABLE>
<S> <C>
Male, Issue Age 55 Face Amount: $1,000,000
Preferred, Non-Smoker Annual Premium: $30,000.00
</TABLE>
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% --------------------------------- ------------------------------- -------------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 31,500.00 1,000,000 1,000,000 1,000,000 21,738 23,246 24,757 8,728 10,236 11,747
2 64,575.00 1,000,000 1,000,000 1,000,000 43,190 47,589 52,178 31,480 35,879 40,468
3 99,303.75 1,000,000 1,000,000 1,000,000 64,295 73,022 82,494 53,885 62,612 72,084
4 135,768.94 1,000,000 1,000,000 1,000,000 86,514 101,104 117,578 77,404 91,994 108,468
5 174,057.38 1,000,000 1,000,000 1,000,000 108,427 130,515 156,460 100,617 122,705 148,650
6 214,260.25 1,000,000 1,000,000 1,000,000 130,066 161,354 199,596 123,556 154,844 193,086
7 256,473.27 1,000,000 1,000,000 1,000,000 151,445 193,706 247,471 146,245 188,506 242,271
8 300,796.93 1,000,000 1,000,000 1,000,000 172,456 227,540 300,512 168,556 223,640 296,612
9 347,336.78 1,000,000 1,000,000 1,000,000 193,054 262,892 359,269 190,454 260,292 356,669
10 396,203.61 1,000,000 1,000,000 1,000,000 213,278 299,883 424,432 210,678 297,283 421,832
15 679,724.75 1,000,000 1,000,000 1,004,068 302,376 507,428 872,662 302,376 507,428 872,662
20 1,041,577.55 1,000,000 1,000,000 1,780,493 379,079 787,390 1,664,012 379,079 787,390 1,664,012
</TABLE>
These hypothetical rates of returns 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 over a period of time.
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 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 chart
reflects the guaranteed maximum .85% mortality and expense risk charge. The
rates of return reflect the 1.5% front-end sales charge, the 2.25% state premium
tax charge or the 1.25% DAC charge (all of which are deducted from premium
payments) but does not reflect surrender charges or Monthly Deduction Amounts.
The surrender charges and Monthly Deduction Amounts for a hypothetical Insured
are depicted in the Example
36
<PAGE> 41
following the Rates of Returns. Information about the Charges and Deductions
assessed under the Policy, can be found on page 20. Illustrations of how these
charges affect Cash Values and Death Benefits, begin on page 35. 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.
The table below shows the net annual rates of return for accumulation units of
investment options available through this Policy.
AVERAGE ANNUAL RETURNS THROUGH 12/31/1999
<TABLE>
<CAPTION>
FUND
INCEPTION
UNDERLYING INVESTMENT OPTIONS ONE YEAR THREE YEARS FIVE YEARS TEN YEARS DATE
----------------------------- -------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS:
AIM Capital Appreciation Portfolio 33.86% 12.45% -- -- 10/10/95
Alliance Growth Portfolio 23.78% 16.79% 16.76% -- 06/16/94
Capital Appreciation Fund (Janus) 43.74% 27.30% 22.80% 13.17% 03/18/82
Deutsche VIT EAFE Equity Index Fund 19.38% -- -- -- 08/22/97
Deutsche VIT Small Cap Index Fund 12.41% -- -- -- 08/25/97
Dreyfus Stock Index Fund 12.85% 14.88% 15.00% 8.86% 09/29/89
Fidelity VIP Equity Income Portfolio -0.54% 6.99% 9.17% 6.89% 10/09/86
Fidelity VIP Growth Portfolio 28.65% 18.85% 16.04% 10.26% 10/09/86
Janus Aspen Ser. Aggressive Growth -- -- -- -- n/a
Janus Aspen Ser. Global Technology -- -- -- -- n/a
Janus Aspen Series Worldwide Growth -- -- -- -- n/a
Smith Barney Equity Index Portfolio 12.97% 15.06% 15.36% -- 10/16/91
Smith Barney Large Cap Growth 22.91% -- -- -- 05/06/98
Smith Barney Large Cap Value -6.42% 4.82% 8.36% -- 06/16/94
Smith Barney Total Return Portfolio 14.20% 6.60% 9.16% -- 10/16/91
Templeton Growth Securities Fund 20.82% 6.03% 8.51% 6.34% 08/31/88
BOND FUNDS:
Fidelity VIP High Income Portfolio 1.17% 1.67% 4.48% 5.68% 09/19/85
Putnam Diversified Income Portfolio -5.44% -0.71% 2.09% -- 06/16/94
Smith Barney High Income Portfolio -4.05% 0.82% 3.60% -- 06/16/94
Travelers US Govt Securities -10.37% 1.14% 3.06% -- 01/24/92
Travelers Zero Coupon Bond 2005 -11.59% 1.06% -- -- 10/11/95
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 3.93% 7.34% 7.36% 6.08% 09/06/89
MFS Total Return Portfolio -4.01% 4.77% 6.89% -- 06/16/94
Travelers Managed Assets Trust 6.86% 9.55% 9.70% 6.04% 08/06/82
MONEY MARKET FUND:
Travelers Money Market(1) -1.80% 0.54% 0.82% 1.17% 10/01/81
</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, 0.85%
mortality and expense risk charge for the first fifteen years and 0.20%
thereafter against amounts allocated to the underlying funds, the 1.5% front-end
sales charge, 2.25% state premium tax charge, and 1.25% deferred acquisition
cost charge (all of which are deducted from premium payments). They do not
reflect surrender charges, Per $1,000 of Specified Amount charges for the first
three years, or cost-of-insurance charges. For policies with Stated Amounts of
less than $100,000, there is an additional $6 per month administrative charge
until the Maturity Date. These charges would reduce the average annual return
reflected.
(1) An investment in Money Market Portfolio is neither insured nor guaranteed by
the United States Government. There is no assurance that a stable $1.00
value will be maintained.
37
<PAGE> 42
TRAVELERS VARIABLE LIFE HYPOTHETICAL EXAMPLE*
Male Preferred Non-smoker Age 55
Level Death Benefit of $1,000,000 and annual premium payments of $30,000
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS
------------------------------- --------------------------------
CASH CASH
TOTAL CASH SURRENDER TOTAL CASH SURRENDER
UNDERLYING INVESTMENT OPTION INVESTMENT VALUE VALUE INVESTMENT VALUE VALUE
---------------------------- ---------- ----- --------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCK FUNDS
AIM Capital Appreciation Portfolio 30,000 32,251 19,241 n/a n/a n/a
Alliance Growth Portfolio 30,000 29,554 16,544 150,000 260,206 252,396
Capital Appreciation Fund (Janus) 30,000 34,898 21,888 150,000 337,423 329,613
Deutsche VIT EAFE Equity Index Fund 30,000 28,379 15,369 n/a n/a n/a
Deutsche VIT Small Cap Index Fund 30,000 26,524 13,514 n/a n/a n/a
Dreyfus Stock Index Fund 30,000 26,641 13,631 150,000 240,667 232,857
Fidelity VIP Equity Income Portfolio 30,000 23,085 10,075 150,000 183,961 176,151
Fidelity VIP Growth Portfolio 30,000 30,855 17,845 150,000 252,058 244,248
Janus Aspen Ser. Aggressive Growth n/a n/a n/a n/a n/a n/a
Janus Aspen Ser. Global Technology n/a n/a n/a n/a n/a n/a
Janus Aspen Series Worldwide Growth n/a n/a n/a n/a n/a n/a
Smith Barney Equity Index Portfolio 30,000 26,673 13,663 150,000 244,574 236,764
Smith Barney Large Cap Growth 30,000 29,322 16,312 n/a n/a n/a
Smith Barney Large Cap Value 30,000 21,530 8,520 150,000 176,998 169,188
Smith Barney Total Return Portfolio 30,000 27,001 13,991 150,000 183,874 176,064
Templeton Growth Securities Fund 30,000 28,764 15,754 150,000 178,300 170,490
BOND FUNDS:
Fidelity VIP High Income Portfolio 30,000 21,738 8,728 150,000 146,594 138,784
Putnam Diversified Income Portfolio 30,000 23,539 10,529 150,000 129,989 122,179
Smith Barney High Income Portfolio 30,000 22,158 9,148 150,000 140,274 132,464
Travelers US Govt Securities 30,000 20,489 7,479 150,000 136,547 128,737
Travelers Zero Coupon Bond 2005 30,000 20,167 7,157 n/a n/a n/a
BALANCED FUNDS:
Fidelity VIP II Asset Mgr Portfolio 30,000 24,269 11,259 150,000 168,712 160,902
MFS Total Return Portfolio 30,000 22,167 9,157 150,000 164,905 157,095
Travelers Managed Assets Trust 30,000 25,048 12,038 150,000 188,583 180,773
MONEY MARKET FUND:
Travelers Money Market 30,000 22,753 9,743 150,000 121,845 114,035
</TABLE>
The charges used in the above example consist of a front-end sales charge of
1.5%, a state premium tax charge of 2.25%, a deferred acquisition cost charge of
1.25%, the 0.85% mortality and expense risk charge, all expenses of the
underlying funds, and monthly deduction charges including cost of insurance. The
benefits illustrated above may differ from other policies as a result of
differences in investment allocation, premium timing and amount, death benefit
type, as well as age and underwriting classification of the insured (which could
result in higher cost of insurance). Because Travelers Variable Life is a
variable universal life insurance policy, actual performance should always be
considered in conjunction with the level of death benefit and cash values.
* These hypothetical examples show the effect of the performance quoted on the
cash values. Performance, loans, and withdrawals will affect the cash value
and death benefit of your policy. Since the values of the portfolio 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.
38
<PAGE> 43
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 44
APPENDIX A
--------------------------------------------------------------------------------
SURRENDER PENALTIES PER THOUSAND OF ISSUE AND INCREASE AMOUNT
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
1 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
2 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
3 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
4 2.04 1.84 1.63 1.43 1.22 1.02 0.82 0.61 0.41 0.20
5 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
6 2.19 1.97 1.75 1.53 1.31 1.10 0.88 0.66 0.44 0.22
7 2.21 1.99 1.77 1.55 1.33 1.11 0.88 0.66 0.44 0.22
8 2.23 2.01 1.78 1.56 1.34 1.12 0.89 0.67 0.45 0.22
9 2.26 2.03 1.81 1.58 1.36 1.13 0.90 0.68 0.45 0.23
10 2.39 2.15 1.91 1.67 1.43 1.20 0.96 0.72 0.48 0.24
11 2.46 2.21 1.97 1.72 1.48 1.23 0.98 0.74 0.49 0.25
12 2.54 2.29 2.03 1.78 1.52 1.27 1.02 0.76 0.51 0.25
13 2.65 2.39 2.12 1.86 1.59 1.33 1.06 0.80 0.53 0.27
14 2.75 2.48 2.20 1.93 1.65 1.38 1.10 0.83 0.55 0.28
15 2.76 2.48 2.21 1.93 1.66 1.38 1.10 0.83 0.55 0.28
16 2.77 2.49 2.22 1.94 1.66 1.39 1.11 0.83 0.55 0.28
17 2.79 2.51 2.23 1.95 1.67 1.40 1.12 0.84 0.56 0.28
18 2.82 2.54 2.26 1.97 1.69 1.41 1.13 0.85 0.56 0.28
19 2.90 2.61 2.32 2.03 1.74 1.45 1.16 0.87 0.58 0.29
20 2.86 2.57 2.29 2.00 1.72 1.43 1.14 0.86 0.57 0.29
21 2.93 2.64 2.34 2.05 1.76 1.47 1.17 0.88 0.59 0.29
22 2.99 2.69 2.39 2.09 1.79 1.50 1.20 0.90 0.60 0.30
23 3.04 2.74 2.43 2.13 1.82 1.52 1.22 0.91 0.61 0.30
24 3.06 2.75 2.45 2.14 1.84 1.53 1.22 0.92 0.61 0.31
25 3.08 2.77 2.46 2.16 1.85 1.54 1.23 0.92 0.62 0.31
26 3.14 2.83 2.51 2.20 1.88 1.57 1.26 0.94 0.63 0.31
27 3.25 2.93 2.60 2.28 1.95 1.63 1.30 0.98 0.65 0.33
28 3.37 3.03 2.70 2.36 2.02 1.69 1.35 1.01 0.67 0.34
29 3.47 3.12 2.78 2.43 2.08 1.74 1.39 1.04 0.69 0.35
30 3.49 3.14 2.79 2.44 2.09 1.75 1.40 1.05 0.70 0.35
31 3.64 3.28 2.91 2.55 2.18 1.82 1.46 1.09 0.73 0.36
32 3.78 3.40 3.02 2.65 2.27 1.89 1.51 1.13 0.76 0.38
33 3.92 3.53 3.14 2.74 2.35 1.96 1.57 1.18 0.78 0.39
34 4.08 3.67 3.26 2.86 2.45 2.04 1.63 1.22 0.82 0.41
35 4.19 3.77 3.35 2.93 2.51 2.10 1.68 1.26 0.84 0.42
36 4.43 3.99 3.54 3.10 2.66 2.22 1.77 1.33 0.89 0.44
37 4.66 4.19 3.73 3.26 2.80 2.33 1.86 1.40 0.93 0.47
38 4.91 4.42 3.93 3.44 2.95 2.46 1.96 1.47 0.98 0.49
39 5.14 4.63 4.11 3.60 3.08 2.57 2.06 1.54 1.03 0.51
40 5.69 5.12 4.55 3.98 3.41 2.85 2.28 1.71 1.14 0.57
41 6.05 5.45 4.84 4.24 3.63 3.03 2.42 1.82 1.21 0.61
42 6.41 5.77 5.13 4.49 3.85 3.21 2.56 1.92 1.28 0.64
43 6.76 6.08 5.41 4.73 4.06 3.38 2.70 2.03 1.35 0.68
44 7.13 6.42 5.70 4.99 4.28 3.57 2.85 2.14 1.43 0.71
45 7.18 6.46 5.74 5.03 4.31 3.59 2.87 2.15 1.44 0.72
46 7.66 6.89 6.13 5.36 4.60 3.83 3.06 2.30 1.53 0.77
</TABLE>
A-1
<PAGE> 45
<TABLE>
<CAPTION>
DURATION
ISSUE --------------------------------------------------------------------------
AGE 1 2 3 4 5 6 7 8 9 10
----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
47 8.14 7.33 6.51 5.70 4.88 4.07 3.26 2.44 1.63 0.81
48 8.63 7.77 6.90 6.04 5.18 4.32 3.45 2.59 1.73 0.86
49 9.11 8.20 7.29 6.38 5.47 4.56 3.64 2.73 1.82 0.91
50 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00
51 10.67 9.60 8.54 7.47 6.40 5.34 4.27 3.20 2.13 1.07
52 11.35 10.22 9.08 7.95 6.81 5.68 4.54 3.41 2.27 1.14
53 12.02 10.82 9.62 8.41 7.21 6.01 4.81 3.61 2.40 1.20
54 12.70 11.43 10.16 8.89 7.62 6.35 5.08 3.81 2.54 1.27
55 13.01 11.71 10.41 9.11 7.81 6.51 5.20 3.90 2.60 1.30
56 13.99 12.59 11.19 9.79 8.39 7.00 5.60 4.20 2.80 1.40
57 14.97 13.47 11.98 10.48 8.98 7.49 5.99 4.49 2.99 1.50
58 15.96 14.36 12.77 11.17 9.58 7.98 6.38 4.79 3.19 1.60
59 16.93 15.24 13.54 11.85 10.16 8.47 6.77 5.08 3.39 1.69
60 17.91 16.12 14.33 12.54 10.75 8.96 7.16 5.37 3.58 1.79
61 19.52 17.57 15.62 13.66 11.71 9.76 7.81 5.86 3.90 1.95
62 21.12 19.01 16.90 14.78 12.67 10.56 8.45 6.34 4.22 2.11
63 22.73 20.46 18.18 15.91 13.64 11.37 9.09 6.82 4.55 2.27
64 24.34 21.91 19.47 17.04 14.60 12.17 9.74 7.30 4.87 2.43
65 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
66 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
67 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
68 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
69 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
70 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
71 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
72 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
73 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
74 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
75 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
76 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
77 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
78 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
79 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
80 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
81 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
82 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
83 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
84 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
85 25.40 22.86 20.32 17.78 15.24 12.70 10.16 7.62 5.08 2.54
</TABLE>
A-2
<PAGE> 46
INDIVIDUAL VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
ISSUED BY
THE TRAVELERS LIFE AND ANNUITY COMPANY
HARTFORD, CONNECTICUT
L-20683 July, 2000
<PAGE> 47
ANNUAL REPORT
DECEMBER 31, 1999
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> 48
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
BT Insurance Funds Trust, 37,556 shares (cost $474,890) ............................ $ 485,472
Capital Appreciation Fund, 139,048 shares (cost $13,959,917) ....................... 15,128,425
Dreyfus Stock Index Fund, 237,186 shares (cost $8,549,801) ......................... 9,119,796
Fidelity's Variable Insurance Products Fund, 420,445 shares (cost $11,388,087) ..... 13,307,429
Fidelity's Variable Insurance Products Fund II, 74,865 shares (cost $1,302,334) .... 1,397,728
Greenwich Street Series Fund, 69,985 shares (cost $1,320,813) ...................... 1,458,014
Managed Assets Trust, 44,354 shares (cost $859,891) ................................ 936,763
Money Market Portfolio, 7,336,067 shares (cost $7,336,067) ......................... 7,336,067
Templeton Variable Products Series Fund, 217,152 shares (cost $4,661,360) .......... 4,914,376
The Travelers Series Trust, 112,152 shares (cost $1,362,030) ....................... 1,323,353
Travelers Series Fund Inc., 1,080,689 shares (cost $22,143,901) .................... 23,915,595
-----------
Total Investments (cost $73,359,091) ............................................. $ 79,323,018
Receivables:
Dividends .......................................................................... 12,267
Premium payments and transfers from other Travelers accounts ....................... 6,314,069
Other assets ......................................................................... 11
-------------
Total Assets ..................................................................... 85,649,365
-------------
LIABILITIES:
Payables:
Contract surrenders and transfers to other Travelers accounts ...................... 6,303,726
Insurance charges .................................................................. 14,874
Administrative charges ............................................................. 1,860
Accrued liabilities .................................................................. 8
-------------
Total Liabilities ................................................................ 6,320,468
-------------
NET ASSETS: ............................................................................ $ 79,328,897
=============
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 49
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................. $ 2,182,985
EXPENSES:
Insurance charges ..................................................... $ 397,527
Administrative charges ................................................ 49,690
------------
Total expenses ...................................................... 447,217
------------
Net investment income ............................................. 1,735,768
------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................................... 650,438,540
Cost of investments sold ............................................ 643,284,634
------------
Net realized gain (loss) .......................................... 7,153,906
Change in unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 ................................ 2,071,549
Unrealized gain at December 31, 1999 ................................ 5,963,927
------------
Net change in unrealized gain (loss) for the year ................. 3,892,378
------------
Net realized gain (loss) and change in unrealized gain (loss) ... 11,046,284
------------
Net increase in net assets resulting from operations .................. $ 12,782,052
============
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 50
THE TRAVELERS FUND UL II
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income ................................................... $ 1,735,768 $ 904,958
Net realized gain (loss) from investment transactions ................... 7,153,906 2,285,688
Net change in unrealized gain (loss) on investments ..................... 3,892,378 1,465,346
------------- -------------
Net increase in net assets resulting from operations .................. 12,782,052 4,655,992
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 18,476,388 and 13,807,247 units, respectively) ......... 35,436,722 23,714,477
Participant transfers from other Travelers accounts
(applicable to 355,543,526 and 112,904,264 units, respectively) ....... 735,676,151 180,481,902
Contract surrenders
(applicable to 2,397,489 and 1,573,510 units, respectively) ........... (5,462,769) (2,923,386)
Participant transfers to other Travelers accounts
(applicable to 358,082,881 and 114,570,535 units, respectively) ....... (735,489,577) (180,744,823)
Other payments to participants
(applicable to 1,822 units) ........................................... (5,081) -
------------- -------------
Net increase in net assets resulting from unit transactions ........... 30,155,446 20,528,170
------------- -------------
Net increase in net assets .......................................... 42,937,498 25,184,162
NET ASSETS:
Beginning of year ....................................................... 36,391,399 11,207,237
------------- -------------
End of year ............................................................. $ 79,328,897 $ 36,391,399
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 51
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 Citigroup 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. Fund UL II is comprised of the
MarketLife product.
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, 1999, the eligible funds available under Fund UL II were:
Managed Assets Trust; Capital Appreciation Fund; Money Market Portfolio;
U.S. Government Securities Portfolio, Utilities Portfolio, 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 Large
Cap Value Portfolio, Smith Barney High Income Portfolio, MFS Total Return
Portfolio, Putnam Diversified Income Portfolio and AIM Capital Appreciation
Portfolio of Travelers Series Fund Inc.; Total Return Portfolio and Equity
Index Portfolio of Greenwich Street Series Fund (all of which are managed by
affiliates of The Travelers); Templeton Bond Fund (Class 1), Templeton Stock
Fund (Class 1) and Templeton Asset Allocation Fund (Class 1) 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;
EAFE Equity Index Fund and Small Cap Index Fund of BT Insurance Funds Trust;
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.
Effective December 18, 1998, Zero Coupon Bond Fund Portfolio Series 1998 of
The Travelers Series Trust was fully liquidated.
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.
-4-
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$682,448,115 and $650,438,540, respectively, for the year ended December 31,
1999. Realized gains and losses from investment transactions are reported on
an average cost basis. The cost of investments in eligible funds was
$73,359,091 at December 31, 1999. Gross unrealized appreciation for all
investments at December 31, 1999 was $6,180,613. Gross unrealized
depreciation for all investments at December 31, 1999 was $216,686.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by
Travelers Life. Each business day, Travelers Life deducts a mortality and
expense risk charge which is reflected in the calculation of unit values.
This charge equals, on an annual basis, 0.80% of the amounts held in each
funding option for 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% for Travelers Marketlife policies issued prior to May
1, 1998, 0.25% for Travelers Marketlife policies issued after May 1, 1998
and 0.35% for Travelers Variable Survivorship life on an annual basis. As of
December 31, 1999 all contract owners had insurance charges of 0.80%
Administrative charges are paid for administrative expenses. This fee is
also deducted each business day and reflected in the calculation of unit
values. This charge equals, on an annual basis, 0.10% of the amounts held in
each funding option for the first fifteen years the policy is in effect.
Beginning in the sixteenth year that a policy is in effect, these charges
are eliminated. As of December 31,1999 all contract owners had
administrative charges of 0.10%.
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 $95,933 and $31,109 in satisfaction of
such contingent surrender charges for the years ended December 31, 1999 and
1998, respectively.
4. CHANGE IN ACCOUNTING
On January 1, 1999, in conjunction with the implementation of a new system,
Fund UL II changed its basis of reporting realized gains and losses for
investment transactions from an identified basis to an average cost basis.
The accounting change had no effect on net assets.
-5-
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
BT Insurance Funds Trust
EAFE Equity Index Fund ................................................... 297,463 $ 1.136 $ 337,893
Small Cap Index Fund ..................................................... 130,058 1.134 147,490
Capital Appreciation Fund .................................................. 2,419,189 6.559 15,868,506
Dreyfus Stock Index Fund ................................................... 3,193,292 3.322 10,606,961
Fidelity's Variable Insurance Products Fund
Equity-Income Portfolio .................................................. 2,431,810 2.293 5,575,316
Growth Portfolio ......................................................... 1,989,627 3.437 6,839,129
High Income Portfolio .................................................... 585,771 1.529 895,564
Fidelity's Variable Insurance Products Fund II
Asset Manager Portfolio .................................................. 768,105 1.819 1,397,422
Greenwich Street Series Fund
Equity Index Portfolio ................................................... 100,009 1.106 110,617
Total Return Portfolio ................................................... 719,187 1.873 1,347,095
Managed Assets Trust ....................................................... 257,384 3.639 936,573
Money Market Portfolio ..................................................... 4,596,491 1.668 7,666,544
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund (Class 1) ................................ 625,303 1.995 1,247,175
Templeton Bond Fund (Class 1) ............................................ 193,736 1.173 227,181
Templeton Stock Fund (Class 1) ........................................... 1,668,788 2.061 3,439,831
The Travelers Series Trust
U.S. Government Securities Portfolio ..................................... 641,970 1.339 859,667
Utilities Portfolio ...................................................... 122,243 1.955 238,992
Zero Coupon Bond Fund Portfolio Series 2000 .............................. 48,323 1.215 58,726
Zero Coupon Bond Fund Portfolio Series 2005 .............................. 137,305 1.207 165,687
Travelers Series Fund Inc.
AIM Capital Appreciation Portfolio ....................................... 2,347,246 1.940 4,554,365
Alliance Growth Portfolio ................................................ 4,047,929 2.863 11,590,475
MFS Total Return Portfolio ............................................... 1,512,701 1.666 2,520,211
Putnam Diversified Income Portfolio ...................................... 455,112 1.011 459,999
Smith Barney High Income Portfolio ....................................... 436,981 1.272 555,712
Smith Barney Large Cap Value Portfolio ................................... 980,217 1.716 1,681,766
-----------
Net Contract Owners' Equity ...................................................................................... $79,328,897
===========
</TABLE>
-6-
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
BT INSURANCE FUNDS TRUST (0.6%)
EAFE Equity Index Fund (Cost $333,495) 24,850 $ 337,958
Small Cap Index Fund (Cost $141,395) 12,706 147,514
----------- -----------
Total (Cost $474,890) 37,556 485,472
----------- -----------
CAPITAL APPRECIATION FUND (19.1%)
Total (Cost $13,959,917) 139,048 15,128,425
----------- -----------
DREYFUS STOCK INDEX FUND (11.5%)
Total (Cost $8,549,801) 237,186 9,119,796
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (16.8%)
Equity-Income Portfolio (Cost $5,216,966) 216,814 5,574,287
Growth Portfolio (Cost $5,221,004) 124,486 6,838,017
High Income Portfolio (Cost $950,117) 79,145 895,125
----------- -----------
Total (Cost $11,388,087) 420,445 13,307,429
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (1.8%)
Asset Manager Portfolio
Total (Cost $1,302,334) 74,865 1,397,728
----------- -----------
GREENWICH STREET SERIES FUND (1.8%)
Equity Index Portfolio (Cost $102,425) 3,085 110,642
Total Return Portfolio (Cost $1,218,388) 66,900 1,347,372
----------- -----------
Total (Cost $1,320,813) 69,985 1,458,014
----------- -----------
MANAGED ASSETS TRUST (1.2%)
Total (Cost $859,891) 44,354 936,763
----------- -----------
MONEY MARKET PORTFOLIO (9.2%)
Total (Cost $7,336,067) 7,336,067 7,336,067
----------- -----------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (6.2%)
Templeton Asset Allocation Fund (Class 1) (Cost $1,153,790) 53,365 1,247,145
Templeton Bond Fund (Class 1) (Cost $236,490) 22,745 227,226
Templeton Stock Fund (Class 1) (Cost $3,271,080) 141,042 3,440,005
----------- -----------
Total (Cost $4,661,360) 217,152 4,914,376
----------- -----------
</TABLE>
-7-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (1.7%)
U.S. Government Securities Portfolio (Cost $892,813) 76,025 $ 859,844
Utilities Portfolio (Cost $239,711) 15,025 239,046
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $58,914) 5,541 58,739
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $170,592) 15,561 165,724
----------- -----------
Total (Cost $1,362,030) 112,152 1,323,353
----------- -----------
TRAVELERS SERIES FUND INC. (30.1%)
AIM Capital Appreciation Portfolio (Cost $9,687,052) 497,559 10,299,480
Alliance Growth Portfolio (Cost $7,127,472) 255,384 8,397,018
MFS Total Return Portfolio (Cost $2,562,258) 155,333 2,521,059
Putnam Diversified Income Portfolio (Cost $456,612) 40,182 460,087
Smith Barney High Income Portfolio (Cost $600,784) 46,013 555,836
Smith Barney Large Cap Value Portfolio (Cost $1,709,723) 86,218 1,682,115
----------- -----------
Total (Cost $22,143,901) 1,080,689 23,915,595
----------- -----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $73,359,091) $79,323,018
===========
</TABLE>
-8-
<PAGE> 56
This page intentionally left blank
-9-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND
------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 9,057 $ - $ 3,462 $ -
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ........................................ 80 - 48 -
Administrative charges ................................... 10 - 6 -
------------- ------------- ------------- -------------
Net investment income (loss) ......................... 8,967 - 3,408 -
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 9,468 - 2,534 -
Cost of investments sold ............................... 9,125 - 2,527 -
------------- ------------- ------------- -------------
Net realized gain (loss) ............................. 343 - 7 -
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... - - - -
Unrealized gain (loss) end of year ..................... 4,463 - 6,119 -
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year .... 4,463 - 6,119 -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ............................ 13,773 - 9,534 -
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 1,934 - 23 -
Participant transfers from other Travelers accounts ...... 332,711 - 140,318 -
Contract surrenders ...................................... (3,091) - (2,384) -
Participant transfers to other Travelers accounts ........ (7,434) - (1) -
Other payments to participants ........................... - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 324,120 - 137,956 -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ................ 337,893 - 147,490 -
NET ASSETS:
Beginning of year ...................................... - - - -
------------- ------------- ------------- -------------
End of year ............................................ $ 337,893 $ - $ 147,490 $ -
============= ============= ============= =============
<CAPTION>
CAPITAL APPRECIATION FUND
----------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 199,040 $ 74,869
------------- -------------
EXPENSES:
Insurance charges ........................................ 70,272 20,764
Administrative charges ................................... 8,784 2,596
------------- -------------
Net investment income (loss) ......................... 119,984 51,509
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 127,243,897 8,939,564
Cost of investments sold ............................... 124,152,005 7,651,328
------------- -------------
Net realized gain (loss) ............................. 3,091,892 1,288,236
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... 332,086 105,992
Unrealized gain (loss) end of year ..................... 1,168,508 332,086
------------- -------------
Net change in unrealized gain (loss) for the year .... 836,422 226,094
------------- -------------
Net increase (decrease) in net assets
resulting from operations ............................ 4,048,298 1,565,839
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 3,269,696 1,598,260
Participant transfers from other Travelers accounts ...... 149,612,053 9,781,587
Contract surrenders ...................................... (887,296) (358,656)
Participant transfers to other Travelers accounts ........ (145,074,599) (8,883,995)
Other payments to participants ........................... - -
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 6,919,854 2,137,216
------------- -------------
Net increase (decrease) in net assets ................ 10,968,152 3,703,055
NET ASSETS:
Beginning of year ...................................... 4,900,354 1,197,299
------------- -------------
End of year ............................................ $ 15,868,506 $ 4,900,354
============= =============
</TABLE>
-10-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO HIGH INCOME PORTFOLIO
------------------------------ ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 135,626 $ 38,721 $ 191,104 $ 85,961 $ 311,656 $ 124,603 $ 70,671 $ 49,003
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
52,870 18,973 39,676 18,997 32,020 12,316 6,523 4,741
6,609 2,372 4,960 2,375 4,002 1,540 815 593
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
76,147 17,376 146,468 64,589 275,634 110,747 63,333 43,669
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,379,615 29,878,196 597,942 252,634 230,086 172,237 124,435 57,305
96,392,640 29,148,808 554,689 208,954 196,558 146,160 133,821 60,868
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
986,975 729,388 43,253 43,680 33,528 26,077 (9,386) (3,563)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
27,096 86,164 301,675 99,327 477,523 65,515 (56,685) 28,905
569,995 27,096 357,321 301,675 1,617,013 477,523 (54,992) (56,685)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
542,899 (59,068) 55,646 202,348 1,139,490 412,008 1,693 (85,590)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,606,021 687,696 245,367 310,617 1,448,652 548,832 55,640 (45,484)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,381,601 1,639,480 1,765,268 1,065,449 1,742,272 878,682 222,352 291,102
108,487,595 36,723,998 639,875 1,874,478 1,801,905 667,426 83,218 195,962
(735,493) (333,118) (730,264) (342,648) (542,829) (248,686) (88,109) (50,099)
(108,443,070) (32,413,993) (275,030) (151,989) (226,852) (49,786) (97,564) (48,116)
(1,247) - (1,151) - (1,337) - - -
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,689,386 5,616,367 1,398,698 2,445,290 2,773,159 1,247,636 119,897 388,849
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,295,407 6,304,063 1,644,065 2,755,907 4,221,811 1,796,468 175,537 343,365
7,311,554 1,007,491 3,931,251 1,175,344 2,617,318 820,850 720,027 376,662
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 10,606,961 $ 7,311,554 $ 5,575,316 $ 3,931,251 $ 6,839,129 $ 2,617,318 $ 895,564 $ 720,027
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-11-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ASSET MANAGER PORTFOLIO EQUITY INDEX PORTFOLIO
----------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................................................. $ 56,544 $ 44,447 $ - $ -
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges .......................................... 7,891 3,774 152 -
Administrative charges ..................................... 987 471 19 -
----------- ----------- ----------- -----------
Net investment income (loss) ........................... 47,666 40,202 (171) -
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................... 233,338 84,980 6,103 -
Cost of investments sold ................................. 228,232 81,260 5,967 -
----------- ----------- ----------- -----------
Net realized gain (loss) ............................... 5,106 3,720 136 -
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................. 40,857 14,373 - -
Unrealized gain (loss) end of year ....................... 95,394 40,857 8,217 -
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year ...... 54,537 26,484 8,217 -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .............................. 107,309 70,406 8,182 -
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................... 332,908 316,953 662 -
Participant transfers from other Travelers accounts ........ 528,429 133,229 109,725 -
Contract surrenders ........................................ (118,035) (65,210) (7,889) -
Participant transfers to other Travelers accounts .......... (160,687) (11,280) (63) -
Other payments to participants ............................. - - - -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions ....................... 582,615 373,692 102,435 -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets .................. 689,924 444,098 110,617 -
NET ASSETS:
Beginning of year ........................................ 707,498 263,400 - -
----------- ----------- ----------- -----------
End of year .............................................. $ 1,397,422 $ 707,498 $ 110,617 $ -
=========== =========== =========== ===========
<CAPTION>
TOTAL RETURN PORTFOLIO
------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................. $ 56,611 $ 38,676
----------- -----------
EXPENSES:
Insurance charges .......................................... 7,468 5,776
Administrative charges ..................................... 934 722
----------- -----------
Net investment income (loss) ........................... 48,209 32,178
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................... 105,351 173,048
Cost of investments sold ................................. 102,692 163,752
----------- -----------
Net realized gain (loss) ............................... 2,659 9,296
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ................. (8,555) 6,485
Unrealized gain (loss) end of year ....................... 128,984 (8,555)
----------- -----------
Net change in unrealized gain (loss) for the year ...... 137,539 (15,040)
----------- -----------
Net increase (decrease) in net assets
resulting from operations .............................. 188,407 26,434
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments ............................... 302,453 247,970
Participant transfers from other Travelers accounts ........ 174,995 234,893
Contract surrenders ........................................ (60,556) (60,314)
Participant transfers to other Travelers accounts .......... (60,689) (121,404)
Other payments to participants ............................. - -
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions ....................... 356,203 301,145
----------- -----------
Net increase (decrease) in net assets .................. 544,610 327,579
NET ASSETS:
Beginning of year ........................................ 802,485 474,906
----------- -----------
End of year .............................................. $ 1,347,095 $ 802,485
=========== ===========
</TABLE>
-12-
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION TEMPLETON BOND FUND
MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO FUND (CLASS 1) (CLASS 1)
----------------------------- ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 47,603 $ 16,040 $ 208,307 $ 115,285 $ 133,806 $ 30,464 $ 7,557 $ 12,130
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
5,197 1,786 33,484 18,666 8,069 5,100 1,492 1,546
650 223 4,185 2,333 1,009 638 186 193
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,756 14,031 170,638 94,286 124,728 24,726 5,879 10,391
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
28,700 43,382 199,337,049 40,088,922 137,071 138,697 113,737 73,913
27,391 37,679 199,337,049 40,088,922 139,841 136,460 119,157 75,268
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,309 5,703 - - (2,770) 2,237 (5,420) (1,355)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
31,459 4,755 - - 4,636 1,084 3,417 1,000
76,872 31,459 - - 93,355 4,636 (9,264) 3,417
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
45,413 26,704 - - 88,719 3,552 (12,681) 2,417
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
88,478 46,438 170,638 94,286 210,677 30,515 (12,222) 11,453
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
216,077 148,771 18,371,838 13,513,324 298,633 318,867 142,532 26,582
243,370 212,553 218,183,818 37,931,466 153,923 261,063 24,612 121,110
(63,543) (21,950) (764,210) (555,249) (114,783) (80,180) (13,578) (9,468)
(14,357) (9,263) (230,114,295) (50,565,449) (84,066) (76,895) (111,452) (66,157)
- - - - - - - -
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
381,547 330,111 5,677,151 324,092 253,707 422,855 42,114 72,067
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
470,025 376,549 5,847,789 418,378 464,384 453,370 29,892 83,520
466,548 89,999 1,818,755 1,400,377 782,791 329,421 197,289 113,769
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 936,573 $ 466,548 $ 7,666,544 $ 1,818,755 $ 1,247,175 $ 782,791 $ 227,181 $ 197,289
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-13-
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON STOCK U.S. GOVERNMENT SECURITIES
FUND (CLASS 1) PORTFOLIO
-------------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 231,144 $ 166,239 $ 55 $ 46,257
------------- ------------- ------------- -------------
EXPENSES:
Insurance charges ....................................... 24,636 16,676 5,037 2,991
Administrative charges .................................. 3,079 2,084 629 374
------------- ------------- ------------- -------------
Net investment income (loss) ........................ 203,429 147,479 (5,611) 42,892
------------- ------------- ------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 97,089,877 25,950,404 49,199 13,179
Cost of investments sold .............................. 96,139,573 26,094,788 51,439 12,003
------------- ------------- ------------- -------------
Net realized gain (loss) ............................ 950,304 (144,384) (2,240) 1,176
------------- ------------- ------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 109,315 (7,984) (9,189) 738
Unrealized gain (loss) end of year .................... 168,925 109,315 (32,969) (9,189)
------------- ------------- ------------- -------------
Net change in unrealized gain (loss) for the year ... 59,610 117,299 (23,780) (9,927)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................... 1,213,343 120,394 (31,631) 34,141
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 586,856 895,395 134,083 50,942
Participant transfers from other Travelers accounts ..... 100,975,933 26,650,363 246,413 456,331
Contract surrenders ..................................... (241,745) (212,082) (30,946) (14,039)
Participant transfers to other Travelers accounts ....... (101,379,349) (26,276,598) (30,641) (2,990)
Other payments to participants .......................... - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................... (58,305) 1,057,078 318,909 490,244
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ............... 1,155,038 1,177,472 287,278 524,385
NET ASSETS:
Beginning of year ..................................... 2,284,793 1,107,321 572,389 48,004
------------- ------------- ------------- -------------
End of year ........................................... $ 3,439,831 $ 2,284,793 $ 859,667 $ 572,389
============= ============= ============= =============
<CAPTION>
UTILITIES PORTFOLIO
--------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 11,441 $ 3,805
------------- -------------
EXPENSES:
Insurance charges ....................................... 1,319 604
Administrative charges .................................. 165 75
------------- -------------
Net investment income (loss) ........................ 9,957 3,126
------------- -------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ........................ 27,466 15,147
Cost of investments sold .............................. 25,417 11,670
------------- -------------
Net realized gain (loss) ............................ 2,049 3,477
------------- -------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .............. 12,007 6,150
Unrealized gain (loss) end of year .................... (665) 12,007
------------- -------------
Net change in unrealized gain (loss) for the year ... (12,672) 5,857
------------- -------------
Net increase (decrease) in net assets
resulting from operations ........................... (666) 12,460
------------- -------------
UNIT TRANSACTIONS:
Participant premium payments ............................ 84,903 18,753
Participant transfers from other Travelers accounts ..... 92,153 30,394
Contract surrenders ..................................... (16,064) (15,675)
Participant transfers to other Travelers accounts ....... (22,055) (162)
Other payments to participants .......................... - -
------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions .................... 138,937 33,310
------------- -------------
Net increase (decrease) in net assets ............... 138,271 45,770
NET ASSETS:
Beginning of year ..................................... 100,721 54,951
------------- -------------
End of year ........................................... $ 238,992 $ 100,721
============= =============
</TABLE>
-14-
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND ZERO COUPON BOND FUND AIM CAPITAL APPRECIATION
PORTFOLIO SERIES 1998 PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005 PORTFOLIO
----------------------------- ------------------------------ ------------------------------ -------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ 6 $ - $ 1,849 $ - $ 3,678 $ - $ 2,031
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 7 354 122 935 331 26,824 14,139
- 1 44 16 117 41 3,353 1,767
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2) (398) 1,711 (1,052) 3,306 (30,177) (13,875)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 2,999 2,043 17,524 8,085 5,292 115,254,018 50,364,424
- 3,068 2,102 16,901 8,288 4,973 114,018,484 50,138,696
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (69) (59) 623 (203) 319 1,235,534 225,728
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (113) (1,767) (184) 612 (192) 149,668 14,449
- - (175) (1,767) (4,868) 612 612,428 149,668
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 113 1,592 (1,583) (5,480) 804 462,760 135,219
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 42 1,135 751 (6,735) 4,429 1,668,117 347,072
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- 327 5,680 3,385 30,951 28,748 2,273,185 604,531
- 56 19,836 38,105 73,021 35,774 133,209,337 62,271,932
- (543) (1,879) (2,567) (9,508) (6,320) (238,987) (176,136)
- (2,484) (5) (14,973) (184) (109) (134,410,175) (61,632,098)
- - - - - - - -
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2,644) 23,632 23,950 94,280 58,093 833,360 1,068,229
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
- (2,602) 24,767 24,701 87,545 62,522 2,501,477 1,415,301
- 2,602 33,959 9,258 78,142 15,620 2,052,888 637,587
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ - $ - $ 58,726 $ 33,959 $ 165,687 $ 78,142 $ 4,554,365 $ 2,052,888
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
-15-
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF FUND UL II OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO
------------------------------ ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ 295,413 $ 157,237 $ 137,794 $ 41,658
------------ ------------ ------------ ------------
EXPENSES:
Insurance charges ........................................ 44,147 18,971 15,507 7,456
Administrative charges ................................... 5,518 2,371 1,938 932
------------ ------------ ------------ ------------
Net investment income (loss) ......................... 245,748 135,895 120,349 33,270
------------ ------------ ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 12,091,294 281,429 122,107 99,593
Cost of investments sold ............................... 11,267,691 211,143 120,650 86,784
------------ ------------ ------------ ------------
Net realized gain (loss) ............................. 823,603 70,286 1,457 12,809
------------ ------------ ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... 593,215 127,693 63,893 19,330
Unrealized gain (loss) end of year ..................... 1,269,546 593,215 (41,199) 63,893
------------ ------------ ------------ ------------
Net change in unrealized gain (loss) for the year .... 676,331 465,522 (105,092) 44,563
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................ 1,745,682 671,703 16,714 90,642
------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 1,910,552 1,009,403 676,530 507,102
Participant transfers from other Travelers accounts ...... 19,153,955 1,692,140 546,504 550,889
Contract surrenders ...................................... (517,827) (217,311) (127,200) (73,465)
Participant transfers to other Travelers accounts ........ (14,701,709) (245,697) (97,877) (52,303)
Other payments to participants ........................... (1,346) - - -
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 5,843,625 2,238,535 997,957 932,223
------------ ------------ ------------ ------------
Net increase (decrease) in net assets ................ 7,589,307 2,910,238 1,014,671 1,022,865
NET ASSETS:
Beginning of year ...................................... 4,001,168 1,090,930 1,505,540 482,675
------------ ------------ ------------ ------------
End of year ............................................ $ 11,590,475 $ 4,001,168 $ 2,520,211 $ 1,505,540
============ ============ ============ ============
<CAPTION>
PUTNAM DIVERSIFIED INCOME
PORTFOLIO
------------------------------
1999 1998
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................ $ - $ -
------------ ------------
EXPENSES:
Insurance charges ........................................ 206 -
Administrative charges ................................... 26 -
------------ ------------
Net investment income (loss) ......................... (232) -
------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ......................... 1,022 -
Cost of investments sold ............................... 1,011 -
------------ ------------
Net realized gain (loss) ............................. 11 -
------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year ............... - -
Unrealized gain (loss) end of year ..................... 3,475 -
------------ ------------
Net change in unrealized gain (loss) for the year .... 3,475 -
------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................ 3,254 -
------------ ------------
UNIT TRANSACTIONS:
Participant premium payments ............................. 35 -
Participant transfers from other Travelers accounts ...... 457,889 -
Contract surrenders ...................................... (1,167) -
Participant transfers to other Travelers accounts ........ (12) -
Other payments to participants ........................... - -
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions ..................... 456,745 -
------------ ------------
Net increase (decrease) in net assets ................ 459,999 -
NET ASSETS:
Beginning of year ...................................... - -
------------ ------------
End of year ............................................ $ 459,999 $ -
============ ============
</TABLE>
-16-
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP VALUE
PORTFOLIO PORTFOLIO COMBINED
-------------------------------- -------------------------------- --------------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 33,483 $ 35,061 $ 42,611 $ 21,312 $ 2,182,985 $ 1,109,332
------------- ------------- ------------- ------------- ------------- -------------
3,867 3,277 9,453 4,653 397,527 181,666
483 410 1,182 581 49,690 22,708
------------- ------------- ------------- ------------- ------------- -------------
29,133 31,374 31,976 16,078 1,735,768 904,958
------------- ------------- ------------- ------------- ------------- -------------
97,738 137,335 146,365 29,031 650,438,540 156,819,235
105,172 130,279 143,113 23,783 643,284,634 154,533,547
------------- ------------- ------------- ------------- ------------- -------------
(7,434) 7,056 3,252 5,248 7,153,906 2,285,688
------------- ------------- ------------- ------------- ------------- -------------
(31,663) 14,581 31,949 18,135 2,071,549 606,203
(44,948) (31,663) (27,608) 31,949 5,963,927 2,071,549
------------- ------------- ------------- ------------- ------------- -------------
(13,285) (46,244) (59,557) 13,814 3,892,378 1,465,346
------------- ------------- ------------- ------------- ------------- -------------
8,414 (7,814) (24,329) 35,140 12,782,052 4,655,992
------------- ------------- ------------- ------------- ------------- -------------
118,579 196,364 567,119 354,087 35,436,722 23,714,477
62,015 201,227 322,548 416,926 735,676,151 180,481,902
(46,331) (21,906) (99,055) (57,784) (5,462,769) (2,923,386)
(67,121) (102,054) (110,290) (17,028) (735,489,577) (180,744,823)
- - - - (5,081) -
------------- ------------- ------------- ------------- ------------- -------------
67,142 273,631 680,322 696,201 30,155,446 20,528,170
------------- ------------- ------------- ------------- ------------- -------------
75,556 265,817 655,993 731,341 42,937,498 25,184,162
480,156 214,339 1,025,773 294,432 36,391,399 11,207,237
------------- ------------- ------------- ------------- ------------- -------------
$ 555,712 $ 480,156 $ 1,681,766 $ 1,025,773 $ 79,328,897 $ 36,391,399
============= ============= ============= ============= ============= =============
</TABLE>
-17-
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EAFE EQUITY INDEX FUND SMALL CAP INDEX FUND CAPITAL APPRECIATION FUND
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... - - - - 1,136,698 444,866
Units purchased and transferred from
other Travelers accounts ............ 307,507 - 132,394 - 29,498,495 3,060,194
Units redeemed and transferred to
other Travelers accounts ............ (10,044) - (2,336) - (28,216,004) (2,368,362)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 297,463 - 130,058 - 2,419,189 1,136,698
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 2,631,052 460,680 1,806,947 597,615 1,037,155 449,618
Units purchased and transferred from
other Travelers accounts ............ 37,195,085 14,840,446 1,064,816 1,446,746 1,222,924 729,395
Units redeemed and transferred to
other Travelers accounts ............ (36,632,845) (12,670,074) (439,953) (237,414) (270,452) (141,858)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 3,193,292 2,631,052 2,431,810 1,806,947 1,989,627 1,037,155
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME PORTFOLIO ASSET MANAGER PORTFOLIO EQUITY INDEX PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 504,806 250,378 428,153 181,740 - -
Units purchased and transferred from
other Travelers accounts ............ 203,325 323,773 502,768 296,426 107,719 -
Units redeemed and transferred to
other Travelers accounts ............ (122,360) (69,345) (162,816) (50,013) (7,710) -
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 585,771 504,806 768,105 428,153 100,009 -
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO MANAGED ASSETS TRUST MONEY MARKET PORTFOLIO
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 518,132 318,844 145,138 33,700 1,134,441 909,353
Units purchased and transferred from
other Travelers accounts ............ 274,684 319,279 135,257 122,196 144,320,269 32,514,069
Units redeemed and transferred to
other Travelers accounts ............ (73,629) (119,991) (23,011) (10,758) (140,858,219) (32,288,981)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year ..................... 719,187 518,132 257,384 145,138 4,596,491 1,134,441
============ ============ ============ ============ ============ ============
</TABLE>
-18-
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION TEMPLETON BOND FUND TEMPLETON STOCK FUND
FUND (CLASS 1) (CLASS 1) (CLASS 1)
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 477,886 212,085 156,953 96,130 1,418,179 689,681
Units purchased and transferred from
other Travelers accounts ............ 259,755 363,199 141,448 123,125 57,222,214 17,899,636
Units redeemed and transferred to
other Travelers accounts ............ (112,338) (97,398) (104,665) (62,302) (56,971,605) (17,171,138)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 625,303 477,886 193,736 156,953 1,668,788 1,418,179
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES ZERO COUPON BOND FUND
PORTFOLIO UTILITIES PORTFOLIO PORTFOLIO SERIES 1998
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 406,054 37,194 51,014 32,611 - 2,347
Units purchased and transferred from
other Travelers accounts ............ 281,407 381,386 90,088 27,452 - 339
Units redeemed and transferred to
other Travelers accounts ............ (45,491) (12,526) (18,859) (9,049) - (2,686)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 641,970 406,054 122,243 51,014 - -
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND FUND ZERO COUPON BOND FUND AIM CAPITAL APPRECIATION
PORTFOLIO SERIES 2000 PORTFOLIO SERIES 2005 PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 28,611 8,316 60,699 13,500 1,499,046 541,898
Units purchased and transferred from
other Travelers accounts ............ 21,285 35,127 84,479 52,454 90,645,661 51,302,755
Units redeemed and transferred to
other Travelers accounts ............ (1,573) (14,832) (7,873) (5,255) (89,797,461) (50,345,607)
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 48,323 28,611 137,305 60,699 2,347,246 1,499,046
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PUTNAM DIVERSIFIED INCOME
ALLIANCE GROWTH PORTFOLIO MFS TOTAL RETURN PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............... 1,831,608 638,546 919,153 326,125 - -
Units purchased and transferred from
other Travelers accounts ............ 8,471,909 1,437,723 729,801 673,650 456,279 -
Units redeemed and transferred to
other Travelers accounts ............ (6,255,588) (244,661) (136,253) (80,622) (1,167) -
----------- ----------- ----------- ----------- ----------- -----------
Units end of year ..................... 4,047,929 1,831,608 1,512,701 919,153 455,112 -
=========== =========== =========== =========== =========== ===========
</TABLE>
-19-
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
8. SCHEDULE OF UNITS FOR FUND UL II
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
SMITH BARNEY HIGH INCOME SMITH BARNEY LARGE CAP VALUE
PORTFOLIO PORTFOLIO COMBINED
---------------------------- ---------------------------- -----------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Units beginning of year ............ 383,898 170,588 592,895 185,237 17,168,518 6,601,052
Units purchased and transferred from
other Travelers accounts ......... 143,450 309,772 506,895 452,369 374,019,914 126,711,511
Units redeemed and transferred to
other Travelers accounts ......... (90,367) (96,462) (119,573) (44,711) (360,482,192) (116,144,045)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year .................. 436,981 383,898 980,217 592,895 30,706,240 17,168,518
============ ============ ============ ============ ============ ============
</TABLE>
-20-
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
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, 1999, and
the related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended. 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 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, 1999, 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, 1999, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Hartford, Connecticut
February 18, 2000
-21-
<PAGE> 69
Independent Auditors
KPMG LLP
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 Prospectus for The Travelers Fund UL II for
Variable Life Insurance product(s) offered by The Travelers Life and Annuity
Company and the Prospectuses for the underlying funds, which collectively
contain all pertinent information, including the applicable sales commissions.
FNDULII (Annual) (12-99) Printed in U.S.A.
<PAGE> 70
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, 1999 and 1998, and the related statements of
income, changes in retained earnings and accumulated other changes in equity
from non-owner sources and cash flows for each of the years in the three-year
period ended December 31, 1999. 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, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
---------------------
Hartford, Connecticut
January 18, 2000
F-1
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $25,270 $23,677 $35,190
Net investment income 177,179 171,003 168,653
Realized investment gains (losses) (4,973) 18,493 44,871
Fee income 54,749 17,718 5,004
Other revenues 13,045 11,168 3,159
----------------------------------------------------------------------------------------------------------------------------
Total Revenues 265,270 242,059 256,877
----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 78,072 81,371 95,639
Interest credited to contractholders 56,216 51,535 35,165
Amortization of deferred acquisition costs 38,902 15,956 4,944
Operating expenses 11,326 5,012 11,554
----------------------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 184,516 153,874 147,302
----------------------------------------------------------------------------------------------------------------------------
Income before federal income taxes 80,754 88,185 109,575
----------------------------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 21,738 18,917 33,859
Deferred expense 6,410 11,783 4,344
----------------------------------------------------------------------------------------------------------------------------
Total Federal Income Taxes 28,148 30,700 38,203
============================================================================================================================
Net income $52,606 $57,485 $71,372
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,764,329; $1,707,347) $1,713,948 $1,838,681
Equity securities, at fair value (cost, $34,373; $25,826) 33,169 26,685
Mortgage loans 155,719 174,565
Short-term securities 81,119 126,176
Other invested assets 190,622 136,122
--------------------------------------------------------------------------------------------------------------------------
Total Investments 2,174,577 2,302,229
--------------------------------------------------------------------------------------------------------------------------
Separate accounts 4,795,165 2,178,474
Deferred acquisition costs 350,088 177,808
Deferred federal income taxes 74,478 12,395
Premium balances receivable 22,420 16,074
Other assets 84,605 57,524
--------------------------------------------------------------------------------------------------------------------------
Total Assets $7,501,333 $4,744,504
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $950,959 $963,171
Contractholder funds 1,174,636 947,411
Separate accounts 4,795,165 2,178,474
Other liabilities 114,408 114,690
--------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,035,168 4,203,746
--------------------------------------------------------------------------------------------------------------------------
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 167,316 167,314
Retained earnings 335,161 282,555
Accumulated other changes in equity from non-owner sources (39,312) 87,889
--------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 466,165 540,758
--------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $7,501,333 $4,744,504
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $282,555 $225,070 $167,698
Net income 52,606 57,485 71,372
Dividends to parent - - 14,000
===========================================================================================================
Balance, end of year $335,161 $282,555 $225,070
===========================================================================================================
-----------------------------------------------------------------------------------------------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
-----------------------------------------------------------------------------------------------------------
Balance, beginning of year $87,889 $70,277 $33,856
Unrealized gains (losses), net of tax (127,201) 17,612 36,421
===========================================================================================================
Balance, end of year $(39,312) $87,889 $70,277
===========================================================================================================
-----------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
-----------------------------------------------------------------------------------------------------------
Net Income $52,606 $57,485 $71,372
Other changes in equity from
non-owner sources (127,201) 17,612 36,421
-----------------------------------------------------------------------------------------------------------
Total changes in equity from
non-owner sources $(74,595) $75,097 $107,793
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $24,804 $22,300 $34,553
Net investment income received 150,107 146,158 170,460
Benefits and claims paid (94,503) (90,872) (90,820)
Interest credited to contractholders (50,219) (51,535) (35,165)
Operating expenses paid (235,166) (122,327) (64,698)
Income taxes paid (29,369) (25,214) (22,440)
Other, including fee income 46,028 (46,099) (16,128)
----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (188,318) (75,391) 8,018
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 213,402 113,456 81,899
Mortgage loans 28,002 25,462 8,972
Proceeds from sales of investments
Fixed maturities 774,096 1,095,976 856,846
Equity securities 5,146 6,020 12,404
Mortgage loans - - 5,483
Real estate held for sale - - 4,493
Purchases of investments
Fixed maturities (1,025,110) (1,320,704) (1,020,803)
Equity securities (12,524) (13,653) (6,382)
Mortgage loans (8,520) (39,158) (41,967)
Policy loans, net (5,316) (2,010) (1,144)
Short-term securities (purchases) sales, net 45,057 43,054 (88,067)
Other investments (purchases) sales, net (44,621) 1,110 (51,502)
Securities transactions in course of settlement, net (7,033) 36,459 10,526
----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (37,421) (53,988) (229,242)
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 308,953 211,476 325,932
Contractholder fund withdrawals (83,817) (83,036) (89,145)
Dividends to parent company - - (14,000)
----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 225,136 128,440 222,787
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (603) (939) 1,563
============================================================================================================================
Cash at December 31, $21 $624 $1,563
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Citigroup Inc. (Citigroup). 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.
The Company offers a variety of variable annuity products where the
investment risk is borne by the contractholder, not the Company, and the
benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
ACCOUNTING CHANGES
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
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 standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Effective January 1, 1998, the
Company adopted the collateral provisions of FAS 125 which were not
effective until 1998 in accordance with Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
SFAS 125". The adoption of the collateral provisions of FAS 125 created
additional assets and liabilities on the Company's statement of financial
position related to the recognition of securities provided and received as
collateral. There was no impact on the results of operations from the
adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE
During the third quarter of 1998, the Company adopted (effective January 1,
1998) the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants' Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use and for
determining when specific costs should be capitalized or expensed. The
adoption of SOP 98-1 had no impact on the Company's financial condition,
statement of operations or liquidity.
ACCOUNTING BY INSURANCE AND OTHER ENTERPRISES FOR INSURANCE - RELATED
ASSESSMENTS
In January 1999, the Company adopted (effective January 1, 1999) Statement
of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. The adoption of this SOP
had no impact on the Company's financial condition, results of operations
or liquidity.
ACCOUNTING POLICIES
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. Also included in fixed maturities are loan-backed and
structured securities, which are amortized using the retrospective method.
The effective yield used to determine amortization is calculated based upon
actual historical and projected future cash flows, which are obtained from
a widely accepted securities data provider. 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 non-redeemable 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.
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
current real estate financing market. Impaired loans were insignificant at
December 31, 1999 and 1998.
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.
F-7
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. All changes in
equity of these investments are recorded in net investment income.
Accrual of investment 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.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures, options, forward contracts and interest rate swaps, as a means of
hedging exposure to foreign currency, equity price changes and/or interest
rate risk on anticipated transactions or existing assets and liabilities.
Hedge accounting is used to account for derivatives. To qualify for hedge
accounting the changes in value of the derivative must be expected to
substantially offset the changes in value of the hedged item. Hedges are
monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment.
Gains and losses arising from financial futures contracts are used to
adjust the basis of hedged investments and are recognized in net investment
income over the life of the investment.
Forward contracts, and interest rate options were not significant at
December 31, 1999 and 1998. Information concerning derivative financial
instruments is included in Note 4.
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
The Company has separate account assets and liabilities 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 fee income.
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.
F-8
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS
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 15 to
20-year amortization period is used for life insurance, and a seven 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.
VALUE OF INSURANCE IN FORCE
The value of insurance in force is an asset recorded at the time of
acquisition of an insurance company. It represents the actuarially
determined present value of anticipated profits to be realized from annuity
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
annuity business acquired. The annuity contracts are 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 3.0% 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.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
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 3.3% to 10.0%.
OTHER LIABILITIES
Included in Other Liabilities is the Company's estimate of its liability
for guaranty fund and other insurance-related assessments. State guaranty
fund assessments are based upon the Company's share of premium written or
received in one or more years prior to an insolvency occurring in the
industry. Once an insolvency has occurred, the Company recognizes a
liability for such assessments if it is probable that an assessment will be
imposed and the amount of the assessment can be reasonably estimated. At
December 31, 1999, the Company's liability for guaranty fund assessments
was not significant.
F-9
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 (NAIC) 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.
The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC issued a revised statutory Accounting Practices and
Procedures Manual - version effective January 1, 2001 (the revised Manual)
that will be effective for years beginning January 1, 2001. It is expected
that the State of Connecticut will require that, effective January 1, 2001,
insurance companies domiciled in Connecticut prepare their statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted by the Connecticut insurance
commissioner. The Company has not yet determined the impact that this
change will have on its statutory capital and surplus.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods.
FEE INCOME
Fee income includes mortality and equity protection charges and fees earned
on Universal Life and Deferred Annuity businesses.
OTHER REVENUES
Other revenues include surrender, mortality and administrative charges, and
fees earned on investment and other insurance contracts.
FEDERAL INCOME TAXES
The provision for federal income taxes comprises 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.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). This statement
establishes accounting and reporting standards for derivative instruments,
F-10
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction. The
accounting for changes in the fair value of a derivative (that is, gains
and losses) depends on the intended use of the derivative and the resulting
designation. Upon initial application of FAS 133, hedging relationships
must be designated anew and documented pursuant to the provisions of this
statement. FAS 133 was to be effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. However, in June 1999 the FASB issued
Statement of Financial Standards No. 137, "Deferral of the Effective Date
of FASB Statement No. 133" (FAS 137) which allows entities that have not
adopted FAS 133 to defer its effective date to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company expects to adopt
the deferral provisions of FAS 137 and has not yet determined the impact
that FAS 133 will have on its financial statements.
2. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and
to effect business-sharing arrangements. Reinsurance is accomplished
through various plans of reinsurance, primarily yearly renewable term
coinsurance and modified coinsurance. The Company remains primarily liable
as the direct insurer on all risks reinsured.
Total in-force business ceded under reinsurance contracts is $12.8 billion
and $8.8 billion at December 31, 1999 and 1998, including $63 million and
$70 million, respectively to TIC. Total life insurance premiums ceded were
$6.5 million, $4.2 million and $2.4 million in 1999, 1998 and 1997,
respectively. Ceded premiums paid to TIC were immaterial for these same
periods.
3. SHAREHOLDER'S EQUITY
Shareholder's Equity and Dividend Availability
The Company's statutory net income (loss) was $(23.4) million, $(3.2)
million and $80.3 million for the years ended December 31, 1999, 1998 and
1997, respectively.
Statutory capital and surplus was $294 million and $328 million at December
31, 1999 and 1998, 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 $29.4 million is available in 2000 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-11
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Accumulated Other Changes in Equity from Non-Owner Sources, Net of Tax
Changes in each component of Accumulated Other Changes in Equity From Non-Owner
Sources were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
NET ACCUMULATED
UNREALIZED FOREIGN OTHER CHANGES
GAINS ON CURRENCY IN EQUITY FROM
INVESTMENT TRANSLATION NON-OWNER
($ in thousands) SECURITIES ADJUSTMENT SOURCES
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $33,856 $ -- $33,856
Unrealized gains on investment securities,
net of tax of $35,316 65,587 -- 65,587
Less: reclassification adjustment for gains
included in net income, net of tax of $(15,705) (29,166) -- (29,166)
--------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 36,421 -- 36,421
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 70,277 -- 70,277
Unrealized gain on investment securities,
net of tax of $15,957 29,632 -- 29,632
Less: reclassification adjustment for gains
included in net income, net of tax of $(6,473) (12,020) -- (12,020)
--------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE 17,612 -- 17,612
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 87,889 -- 87,889
Unrealized gains on investment securities,
net of tax of $(70,234) (130,433) -- (130,433)
Less: reclassification adjustment for losses
included in net income, net of tax of $1,741 3,232 -- 3,232
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
CURRENT PERIOD CHANGE (127,201) -- (127,201)
====================================================================================================================
BALANCE, DECEMBER 31, 1999 $ (39,312) $ -- $ (39,312)
====================================================================================================================
</TABLE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, interest rate swaps, options and forward contracts as a means of
hedging exposure to interest rate, equity price, and foreign currency risk
on anticipated transactions or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. These
derivative financial instruments have off-balance sheet risk. Financial
instruments with off-balance sheet risk involve, to varying degrees,
elements of credit and market risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of these instruments
reflect the extent of involvement the Company has in a particular class of
financial instrument. However, the maximum loss of cash flow
F-12
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
associated with these instruments can be less than these amounts. For
interest rate swaps, options, and forward contracts, credit risk is limited
to the amounts that it would cost the Company to replace the contracts.
Financial futures contracts and purchased listed option contracts have very
little credit risk since organized exchanges are the counterparties. The
Company as a writer of option contracts has no credit risk since the
counterparty has no performance obligation after it has paid a cash
premium.
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange traded financial futures contracts to manage its
exposure to changes in interest rates that arise from the sale of certain
insurance and investment products, or the need to reinvest proceeds from
the sale or maturity of investments. To hedge against adverse changes in
interest rates, the Company enters long or short positions in financial
futures contracts which offset asset price changes resulting from changes
in market interest rates until an investment is purchased or a product is
sold.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1999 and 1998, the Company held financial futures
contracts with notional amounts of $48.7 million and $41.5 million,
respectively. The deferred gains and/or losses on these contracts were not
significant at December 31, 1999 and 1998. At December 31, 1999 and
1998, the Company's futures contracts had no fair value because these
contracts are marked to market and settled in cash daily.
The Company enters into interest rate swaps in connection with other
financial instruments to provide greater risk diversification and better
match assets and liabilities. Under interest rate swaps, the Company agrees
with other parties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. Generally, no cash is
exchanged at the outset of the contract and no principal payments are made
by either party. A single net payment is usually made by one counterparty
at each due date. Swap agreements are not exchange traded so they are
subject to the risk of default by the counterparty.
As of December 31, 1999 and 1998, the Company held interest rate swap
contracts with notional amounts of $231.1 million and $165.3 million,
respectively. The fair value of these financial instruments was $9.5
million (loss position) at December 31, 1999, and was $3.4 million (gain
position) and $.7 million (loss position) at December 31, 1998. The fair
values were determined using the discounted cash flow method. At December
31, 1999, the Company held swap contracts with affiliate counterparties
with a notional amount of $43.7 million and a fair value of $4.7 million
(loss position).
F-13
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company uses equity option contracts to manage its exposure to changes
in equity market prices that arise from the sale of certain insurance
products. To hedge against adverse changes in the equity market prices, the
Company enters long positions in equity option contracts with major
financial institutions. These contracts allow the Company, for a fee, the
right to receive a payment if the Standard and Poor's 500 Index falls below
agreed upon strike prices.
At December 31, 1999 and 1998, the Company held equity option contracts
with notional amounts of $275.4 million and zero, respectively. The fair
value of these financial instruments was $32.6 million (gain position) at
December 31, 1999. The fair values were determined using the discounted
cash flow method.
The off-balance sheet risks of interest rate options and forward contracts
were not significant at December 31, 1999 and 1998.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships and
joint ventures. The off-balance sheet risk of these financial instruments
was not significant at December 31, 1999 and 1998.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1999, investments in fixed maturities had a carrying value
and a fair value of $1.8 billion and $1.7 billion, respectively, compared
with a carrying value and a fair value of $1.7 billion and $1.8 billion,
respectively, at December 31, 1998. See Notes 1 and 10.
At December 31, 1999, mortgage loans had a carrying value of $155.7 million
and a fair value of $156.0 million and in 1998 had a carrying value of
$174.6 million and a fair value of $185.7 million. In estimating fair
value, the Company used interest rates reflecting the current real estate
financing market.
The carrying values of short-term securities and policy loans totaling
$91.3 million and $131.1 million in 1999 and 1998, respectively,
approximated their fair values and are included in other invested assets.
The carrying values of $57.6 million and $36.5 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1999 and 1998, respectively. The carrying values of $100.2
million and $98.4 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1999 and
1998, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
F-14
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999, contractholder funds with defined maturities had a
carrying value of $878.9 million and a fair value of $780.5 million,
compared with a carrying value of $725.6 million and a fair value of $698.1
million at December 31, 1998. The fair value of these contracts is
determined by discounting expected cash flows at an interest rate
commensurate with the Company's credit risk and the expected timing of cash
flows. Contractholder funds without defined maturities had a carrying value
of $481.8 million and a fair value of $409.2 million at December 31, 1999,
compared with a carrying value of $483.0 million and a fair value of $442.5
million at December 31, 1998. These contracts generally are valued at
surrender value.
5. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 4.
Litigation
In the ordinary course of business, the Company is a defendant or
co-defendant in various litigation matters incidental to and typical of the
businesses in which it is engaged. In the opinion of the Company's
management, 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.
6. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct
parent. The Company's share of net expense for the qualified pension and
other postretirement benefit plans was not significant for 1999, 1998 and
1997.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. Effective January 1, 1997,
the Company discontinued matching contributions for the majority of its
employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1999, 1998 and 1997.
7. 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 two companies. TIC handles banking functions for
the life and annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. TIC provides various employee
benefit
F-15
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
TIC maintains 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, 1999 and 1998, the pool
totaled approximately $2.6 billion and $2.3 billion, respectively. The
Company's share of the pool amounted to $31.4 million and $93.1 million at
December 31, 1999 and 1998, 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 $450
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 sold structured settlement annuities to the insurance
affiliates of Travelers Property Casualty Corp. (TAP). Premiums and
deposits were $8.9 million and $70.6 million for 1998 and 1997,
respectively. The reduction in premiums and deposits from 1997 to 1998 was
a result of a decision during 1998 to use TIC as the primary issuer of
structured settlement annuities and the Company as the assignment company.
Policy reserves and contractholder fund liabilities associated with these
structured settlements were $766.4 million and $808.7 million at December
31, 1999 and 1998, respectively.
The Company began distributing variable annuity products through its
affiliate, the Financial Consultants of Salomon Smith Barney (SSB) in 1995.
Premiums and deposits related to these products were $1.1 billion, $932.1
million and $615.6 million in 1999, 1998 and 1997, respectively. In 1996,
the Company began marketing various life products through SSB as well. New
premiums related to such products were $40.8 million, $44.5 million and
$24.4 million in 1999, 1998 and 1997, respectively.
During 1998, the Company began distributing deferred annuity products
through its affiliates Primerica Financial Services (Primerica), Citibank,
N.A. (Citibank) and The Copeland Companies (Copeland). Deposits received
from Primerica were $763 million and $216 million. Deposits from Citibank
and Copeland were immaterial for 1999 and 1998.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 Citigroup introduced the WealthBuilder stock option program.
Under this program, all employees meeting certain requirements are granted
Citigroup stock options.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases is shared by the companies on a cost
allocation method based generally on estimated usage by department. The
Company's rent expense was insignificant in 1999, 1998 and 1997.
F-16
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1999 and 1998, the Company had investments in Tribeca
Investments, L.L.C., an affiliate of the Company, in the amounts of $22.3
million and $18.3 million, respectively, included in other invested assets.
The Company has loaned $16.6 million of Corporate Bonds to SSB as of
December 31, 1999.
8. FEDERAL INCOME TAXES
The net deferred tax assets at December 31, 1999 and 1998 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1999 1998
---- ----
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $161,629 $121,150
Investments, net 14,270 --
Other 2,394 2,810
----------------------------------------------------------------------------------------------------------------
Total 178,293 123,960
----------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities:
Investments, net -- (56,103)
Deferred acquisition costs and value of insurance in force (100,537) (51,993)
Other (1,208) (1,399)
----------------------------------------------------------------------------------------------------------------
Total (101,745) (109,495)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax (Liability) Asset Before Valuation Allowance 76,548 14,465
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
----------------------------------------------------------------------------------------------------------------
Net Deferred Tax Asset After Valuation Allowance $74,478 $12,395
----------------------------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 87
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TIC and its life insurance subsidiaries, including the Company, 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 has
been, and will be, paid currently to TIC. Any credits for losses have been,
and 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.
The $2.1 million valuation allowance is sufficient to cover any capital
losses on investments that may exceed the capital gains able to be
generated in the life insurance group's consolidated federal income tax
return based upon management's best estimate of the character of the
reversing temporary differences. Reversal of the valuation allowance is
contingent upon the recognition of future capital gains or a change in
circumstances that causes the recognition of the benefits to become more
likely than not. There was no change in the valuation allowance during
1999. The initial recognition of any benefit provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
In management's judgment, the $74.5 million "net deferred tax asset after
valuation allowance" as of December 31, 1999, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1999, the Company had 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 is
approximately $2 million. Income taxes are not provided for on this amount
because under current U.S. tax rules such taxes will become payable only to
the extent such amounts are distributed as a dividend or exceed limits
prescribed by federal law. Distributions are not contemplated from this
account. At current rates the maximum amount of such tax would be
approximately $700 thousand.
9. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $136,039 $130,825 $120,900
Joint venture and partnership income 22,175 22,107 32,336
Mortgage loans 16,126 15,969 14,905
Other 4,417 3,322 2,284
--------------------------------------------------------------------------------------------------------------
178,757 172,223 170,425
--------------------------------------------------------------------------------------------------------------
Investment expenses 1,578 1,220 1,772
--------------------------------------------------------------------------------------------------------------
Net investment income $177,179 $171,003 $168,653
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 88
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
10. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $2,657 $15,620 $29,236
Equity Securities 1,193 1,819 8,385
Other 1,025 525 2,180
Joint venture and partnerships (9,848) 529 5,070
--------------------------------------------------------------------------------------------------------------
Total Realized Investment Gains (Losses) $(4,973) $18,493 $44,871
--------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included as
accumulated other changes in equity from non-owner sources in shareholder's
equity were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $(181,715) $24,336 $34,451
Other (13,979) 2,760 21,581
--------------------------------------------------------------------------------------------------------------
Total unrealized investment gains (losses) (195,694) 27,096 56,032
Related taxes (68,493) 9,484 19,611
--------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (127,201) 17,612 36,421
Balance beginning of year 87,889 70,277 33,856
--------------------------------------------------------------------------------------------------------------
Balance End of Year $(39,312) $87,889 $70,277
--------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 89
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fixed Maturities
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1999 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $211,864 $2,103 $(7,818) $206,149
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 116,082 2,613 (3,704) 114,991
Obligations of states and political
subdivisions 29,801 7 (3,312) 26,496
Debt securities issued by foreign
governments 44,159 2,813 (198) 46,774
All other corporate bonds 1,358,769 10,351 (52,811) 1,316,309
Redeemable preferred stock 3,654 41 (466) 3,229
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,764,329 $17,928 $(68,309) $1,713,948
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
GROSS GROSS
DECEMBER 31, 1998 AMORTIZED COST UNREALIZED UNREALIZED FAIR
($ in thousands) GAINS LOSSES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $220,105 $ 11,571 $(193) $231,483
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 289,376 53,782 (274) 342,884
Obligations of states and political
subdivisions 28,749 994 (17) 29,726
Debt securities issued by foreign
governments 40,786 2,966 (375) 43,377
All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168
Redeemable preferred stock 4,033 119 (109) 4,043
-----------------------------------------------------------------------------------------------------------------
Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of fixed maturities classified as available for sale
were $774 million, $1.1 billion and $857 million in 1999, 1998 and 1997,
respectively. Gross gains of $24.6 million, $32.6 million and $38.1 million
and gross losses of $22.0 million, $17.0 million and $8.9 million in 1999,
1998 and 1997, respectively were realized on those sales.
F-20
<PAGE> 90
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $486.2
million and $427.0 million at December 31, 1999 and 1998, respectively.
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1999, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
AMORTIZED FAIR
($ in thousands) COST VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
MATURITY:
Due in one year or less $40,556 $40,092
Due after 1 year through 5 years 327,632 322,082
Due after 5 years through 10 years 451,635 441,307
Due after 10 years 732,642 704,318
-------------------------------------------------------------------------------------------
1,552,465 1,507,799
-------------------------------------------------------------------------------------------
Mortgage-backed securities 211,864 206,149
-------------------------------------------------------------------------------------------
Total Maturity $1,764,329 $1,713,948
-------------------------------------------------------------------------------------------
</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.
At December 31, 1999 and 1998, the Company held CMOs with a market value of
$167.7 million and $181.6 million, respectively. The Company's CMO holdings
were 65.9% and 62.9% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1999 and 1998, respectively.
F-21
<PAGE> 91
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED
($ in thousands) COST GAINS LOSSES FAIR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Common stocks $4,966 $ 730 $ (256) $5,440
Non-redeemable preferred stocks 29,407 533 (2,211) 27,729
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $34,373 $1,263 $(2,467) $33,169
------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
Common stocks $5,185 $ 889 $(292) $5,782
Non-redeemable preferred stocks 20,641 707 (445) 20,903
------------------------------------------------------------------------------------------------------------------
Total Equity Securities $25,826 $1,596 $(737) $26,685
------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $5.1 million, $6.0 million
and $12.4 million in 1999, 1998 and 1997, respectively. Gross gains of $1.5
million, $2.6 million and $8.6 million were realized on those sales during
1999, 1998 and 1997, respectively.
Gross losses were insignificant during the same periods.
Mortgage Loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure and loans modified at interest rates below market.
At December 31, 1999 and 1998, the Company's mortgage loan portfolios
consisted of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
($ in thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
Current Mortgage Loans $151,814 $170,635
Underperforming Mortgage Loans 3,905 3,930
-----------------------------------------------------------------------------------
Total $155,719 $174,565
-----------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1999 are as
follows:
<TABLE>
----------------------------------------------------------------
<S> <C>
($ in thousands)
2000 $20,791
2001 1,563
2002 6,292
2003 4,896
2004 4,167
Thereafter 118,010
================================================================
Total $155,719
================================================================
</TABLE>
F-22
<PAGE> 92
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
Significant individual investment concentrations included:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Tishman Speyer Joint Venture $63,199 $62,400
Bell South Corp. 23,689 53,322
---------------------------------------------------------------------
</TABLE>
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 7.
Included in fixed maturities are below investment grade assets totaling
$141.4 million and $102.4 million at December 31, 1999 and 1998,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds and notes that are classified as below
investment grade bonds.
The Company's industry concentrations of investments, primarily fixed
maturities, were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------------------------------------
<S> <C> <C>
Banking $152,848 $160,713
Transportation 139,519 155,116
Electric utilities 103,897 109,027
Finance 103,385 69,916
Oil & Gas 102,739 45,172
---------------------------------------------------------------------
</TABLE>
The Company held investments in Foreign Banks in the amount of $125 million
and $115 million at December 31, 1999 and 1998, respectively, which are
included in the table above.
Below investment grade assets included in the preceding table were not
significant.
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 December 31, 1999 and 1998 balance sheets that
were non-income producing were insignificant.
F-23
<PAGE> 93
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Restructured Investments
Mortgage loan and debt securities which were restructured at below market
terms at December 31, 1999 and 1998 were insignificant. The new terms of
restructured investments 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. Interest on these assets, included in net investment income,
was insignificant.
11. DEPOSIT FUNDS AND RESERVES
At December 31, 1999, the Company had $2.1 billion of life and annuity
deposit funds and reserves. Of that total, $1.4 billion were not subject to
discretionary withdrawal based on contract terms. The remaining $.7 billion
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 $.5 billion of liabilities that are
surrenderable with market value adjustments. The remaining $.2 billion of
life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.9%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
12. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
($ in thousands)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 52,606 $ 57,485 $ 71,372
Adjustments to reconcile net income to cash provided by
operating activities:
Realized gains (4,973) (18,493) (44,871)
Deferred federal income taxes 6,410 11,783 4,344
Amortization of deferred policy acquisition costs 38,902 15,956 4,944
Additions to deferred policy acquisition costs (211,182) (120,278) (56,975)
Investment income accrued (27,072) (3,821) 908
Premium balances (466) (6,786) (3,450)
Insurance reserves (16,431) (8,431) 3,981
Other (26,112) (2,806) 27,765
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations $(188,318) $(75,391) $8,018
------------------------------------------------------------------------------------------------------------------
</TABLE>
13. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities
for 1999, 1998 and 1997.
F-24
<PAGE> 94
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
Sections 33-770 et seq, inclusive of the Connecticut General Statutes
("C.G.S.") 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 wholly 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 and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; 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.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
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 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> 95
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- The facing sheet.
- The Prospectus.
- The undertaking to file reports.
- The signatures.
ATTACHMENTS:
A. Consent of Kathleen A. McGah, Deputy 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 Mahir Dugentas pertaining to the
illustrations contained in the Prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants.
D. Powers of Attorney. (See Exhibit 12 below.)
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 and Principal Underwriting Agreement among the
Registrant, The Travelers Life and Annuity Company and CFBDS, Inc.)
(Incorporated herein by reference to Exhibit 3(a) to the Registration
Statement on Form N-4, File No. 333-60215, filed November 9, 1998.)
3(b). Specimen Form of Selling Agreement. (Incorporated herein by reference
to Exhibit 3(b) to the Registration Statement on Form N-4, File No.
333-60215, filed November 9, 1998.)
4. None
5. Form of Variable Life Insurance Policy.
6(a). Charter of The Travelers Life and Annuity Company, as amended on April
10, 1990. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement on Form N-4, File No. 333-40191, filed November
13, 1997.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on
October 20, 1994. (Incorporated herein by reference to Exhibit 6(b)
to the Registration Statement on Form N-4, File No. 333-40191, filed
November 13, 1997.)
7. None
8. Participation Agreements. (Incorporated herein by reference to
Exhibit 8 to Pre-Effective Amendment No. 2 to the Registration
Statement on Form S-6, File No. 333-96521, filed June 29, 2000.)
<PAGE> 96
9. None
10. Application for Variable Life Insurance Policy. (Incorporated herein
by reference to Exhibit 10 to Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6, File No. 333-15053, filed April
24, 1998.)
11. Opinion of Counsel regarding the legality of securities being
registered.
12(a). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Marc P. Weill. (Incorporated herein by reference to
Exhibits 12 and 12(b) to the Registration Statement and Post-Effective
Amendment No. 1 on Form S-6 filed November 2, 1995 and April 25,
1997.)
12(b). Power of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for J. Eric Daniels and Jay S. Benet. (Incorporated herein
by reference to Exhibit 12(b) to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6, File No. 333-63927, filed April
28, 1999.)
12(c). Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for George C. Kokulis and Katherine M. Sullivan.
(Incorporated herein by reference to Exhibits 15(b) to the
Registration Statement on Form S-6 filed April 25, 2000.)
12(d) Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah
as signatory for Glenn D. Lammey and Marla Berman Lewitus.
(Incorporated herein by reference to Exhibit 12(d) to Pre-Effective
Amendment No. 2 to the Registration Statement on Form S-6, File No.
333-96521, filed June 29, 2000.)
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Fund UL II for Variable Life Insurance, has duly caused 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 29th day
of June 2000.
THE TRAVELERS FUND UL II FOR VARIABLE LIFE INSURANCE
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By:*GLENN D. LAMMEY
-----------------------------------------
Glenn D. Lammey, Chief Financial Officer,
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 29th day of June 2000.
<TABLE>
<S> <C>
*GEORGE C. KOKULIS Director, Chairman of the Board, President
------------------------- and Chief Executive Officer
(George C. Kokulis) (Principal Executive Officer
*GLENN D. LAMMEY Director, Executive Vice President, Chief Financial
-------------------------- Officer, Chief Accounting Officer and Controller
(Glenn D. Lammey) (Principal Financial Officer)
*MARLA BERMAN LEWITUS Director, Senior Vice President and
-------------------------- General Counsel
(Marla Berman Lewitus)
*KATHERINE M. SULLIVAN Director
--------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
---------------
(Marc P. Weill)
</TABLE>
*By: /s/Ernest J. Wright, Attorney-in-Fact
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
------- ----------- ----------------
ATTACHMENTS::
<S> <C> <C>
A. Consent of Kathleen A. McGah, Deputy General Counsel, See Exhibit 11
to filing of her opinion as an exhibit to this Registration Statement below
and to the reference to her opinion under the caption
"Legal Proceedings and Opinion" in the Prospectus.
B. Consent and Actuarial Opinion of Mahir Dugentas pertaining to the Electronically
illustrations contained in the prospectus.
C. Consent of KPMG LLP, Independent Certified Public Accountants Electronically
<CAPTION>
EXHIBITS
<S> <C> <C>
5. Form of Variable Life Insurance Contracts. Electronically
11. Opinion of counsel as to the legality of the securities Electronically
being registered.
</TABLE>
