<PAGE> 1
ANNUAL REPORT
December 31, 1997
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
[Travelers Life & Annuity Logo]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Managed Assets Trust, 114,804 shares (cost $1,761,500) ........................... $ 2,026,296
High Yield Bond Trust, 24,382 shares (cost $215,673) ............................. 241,137
Capital Appreciation Fund, 120,351 shares (cost $4,644,550) ...................... 5,574,661
Cash Income Trust, 3,347,375 shares (cost $3,347,375) ............................ 3,347,375
The Travelers Series Trust, 496,993 shares (cost $5,181,966) ..................... 5,328,832
Templeton Variable Products Series Fund, 529,432 shares (cost $10,458,089) ....... 11,591,894
Fidelity's Variable Insurance Products Fund, 840,173 shares (cost $17,653,628) ... 21,041,079
Fidelity's Variable Insurance Products Fund II, 243,515 shares (cost $3,671,170) . 4,385,702
Dreyfus Stock Index Fund, 127,138 shares (cost $2,750,538) ....................... 3,273,804
American Odyssey Funds, Inc., 38,833 shares (cost $533,298) ...................... 554,406
Travelers Series Fund Inc., 345,419 shares (cost $4,982,688) .................... 5,843,986
Greenwich Street Series Fund, 44,121 shares (cost $689,440) ...................... 777,407
-----------
Total Investments (cost $55,889,915) ........................................ $63,986,579
Receivables:
Dividends ........................................................................ 74,450
Premium payments and transfers from other Travelers accounts ..................... 18,755
Other assets ....................................................................... 4
-----------
Total Assets ................................................................. 64,079,788
-----------
LIABILITIES:
Payable for contract surrenders and transfers to other Travelers accounts .......... 18,479
Accrued liabilities ................................................................ 3,136
-----------
Total Liabilities ............................................................ 21,615
-----------
NET ASSETS: ........................................................................... $64,058,173
===========
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends .......................................................................... $ 2,833,924
EXPENSES:
Insurance charges .................................................................. $ 363,873
Administrative charges ............................................................. 22,481
-----------
Total expenses ................................................................... 386,354
-----------
Net investment income .......................................................... 2,447,570
-----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold ................................................... 14,840,064
Cost of investments sold ......................................................... 13,389,728
-----------
Net realized gain .............................................................. 1,450,336
Change in unrealized gain on investments:
Unrealized gain at December 31, 1996 ............................................. 3,488,881
Unrealized gain at December 31, 1997 ............................................. 8,096,664
-----------
Net change in unrealized gain for the year ..................................... 4,607,783
-----------
Net realized gain and change in unrealized gain .............................. 6,058,119
-----------
Net increase in net assets resulting from operations ............................... $ 8,505,689
===========
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS FUND UL
FOR VARIABLE LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 2,447,570 $ 1,858,620
Net realized gain from investment transactions .................. 1,450,336 532,275
Net change in unrealized gain on investments .................... 4,607,783 1,534,477
------------ ------------
Net increase in net assets resulting from operations .......... 8,505,689 3,925,372
------------ ------------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 12,005,909 and 15,169,725 units, respectively).. 19,096,022 21,543,041
Participant transfers from other Travelers accounts
(applicable to 8,679,346 and 10,670,706 units, respectively) .. 13,453,685 14,576,672
Contract surrenders
(applicable to 3,304,273 and 3,002,978 units, respectively) ... (5,554,224) (4,214,910)
Participant transfers to other Travelers accounts
(applicable to 9,048,261 and 9,824,019 units, respectively) ... (13,733,134) (14,195,827)
Other payments to participants
(applicable to 23,301 units) .................................. (33,914) --
------------ ------------
Net increase in net assets resulting from unit transactions 13,228,435 17,708,976
------------ ------------
Net increase in net assets ................................ 21,734,124 21,634,348
NET ASSETS:
Beginning of year ............................................... 42,324,049 20,689,701
------------ ------------
End of year ..................................................... $ 64,058,173 $ 42,324,049
============ ============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Fund UL for Variable Life Insurance ("Fund UL") is a separate
account of The Travelers Insurance Company ("The Travelers"), an indirect wholly
owned subsidiary of Travelers Group Inc., and is available for funding certain
variable life insurance contracts issued by The Travelers. Fund UL is registered
under the Investment Company Act of 1940, as amended, as a unit investment
trust. The Travelers interest in the net assets of Fund UL was $3,401,482 at
December 31, 1997.
Participant premium payments applied to Fund UL are invested in one or more
eligible funds in accordance with the selection made by the owner. As of
December 31, 1997, the eligible funds available under Fund UL are: Managed
Assets Trust; High Yield Bond Trust; Capital Appreciation Fund; Cash Income
Trust; U.S. Government Securities Portfolio, Utilities Portfolio, Zero Coupon
Bond Fund Portfolio Series 1998, Zero Coupon Bond Fund Portfolio Series 2000 and
Zero Coupon Bond Fund Portfolio Series 2005 of The Travelers Series Trust;
Alliance Growth Portfolio, Smith Barney Income and Growth Portfolio, Smith
Barney High Income Portfolio, MFS Total Return Portfolio and AIM Capital
Appreciation Portfolio of Travelers Series Fund Inc.; Total Return Portfolio of
Greenwich Street Series Fund (formerly Smith Barney Series Fund) (all of which
are managed by affiliates of The Travelers); Templeton Bond Fund (Class 1
shares), Templeton Stock Fund (Class 1 shares) and Templeton Asset Allocation
Fund (Class 1 shares) of Templeton Variable Products Series Fund; High Income
Portfolio, Growth Portfolio and Equity-Income Portfolio of Fidelity's Variable
Insurance Products Fund; Asset Manager Portfolio of Fidelity's Variable
Insurance Products Fund II; and Dreyfus Stock Index Fund. All of the funds are
Massachusetts business trusts, except for Travelers Series Fund Inc. and Dreyfus
Stock Index Fund which are incorporated under Maryland law. Not all funds may be
available in all states or to all contract owners.
Effective July 12, 1995, the following funds were no longer available to new
contract owners under Fund UL. These funds are: American Odyssey Core Equity
Fund, American Odyssey Emerging Opportunities Fund, American Odyssey
International Equity Fund, American Odyssey Long-Term Bond Fund, American
Odyssey Intermediate-Term Bond Fund and American Odyssey Short-Term Bond Fund of
American Odyssey Funds, Inc.
The following is a summary of significant accounting policies consistently
followed by Fund UL 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 form a part of the total
operations of The Travelers and are not taxed separately. The Travelers 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. Fund UL is not taxed as a "regulated investment
company" under Subchapter M of the Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$31,020,647 and $14,840,064, respectively, for the year ended December 31, 1997.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was $55,889,915
at December 31, 1997. Gross unrealized appreciation for all investments at
December 31, 1997 was $8,108,762. Gross unrealized depreciation for all
investments at December 31, 1997 was $12,098.
-4-
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. CONTRACT CHARGES
Insurance charges and administrative charges up to a maximum of 0.80% and 0.10%,
respectively, of the average net assets of Fund UL on an annual basis, are
allowed for mortality and expense risks and administrative expenses assumed by
The Travelers. For Price I contracts (all InVest Contracts, MarketLife Contracts
issued prior to July 12, 1995, and MarketLife Contracts issued on or after July
12, 1995 where state approval for Enhanced MarketLife had not yet been
received), the insurance charges were 0.60% and the administrative charges were
waived by The Travelers for the year ended December 31, 1997. For Price II
contracts (all MarketLife Contracts issued on or after July 12, 1995, where
state approval for Enhanced MarketLife has been received), the insurance charges
are 0.80% for the first fifteen policy years, and 0.45% thereafter. The
administrative charges for these contracts are 0.10% for the first fifteen
policy years and 0% thereafter.
The Travelers 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). The
Travelers received $131,429 and $106,276 in satisfaction of such contingent
surrender charges for the years ended December 31, 1997 and 1996, respectively.
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
MANAGED ASSETS TRUST
Price I ................................. 631,186 $2.690 $ 1,697,949
Price II ................................ 122,866 2.671 328,128
HIGH YIELD BOND TRUST
Price I ................................. 96,477 2.515 242,606
CAPITAL APPRECIATION FUND
Price I ................................. 969,080 2.711 2,627,169
Price II ................................ 1,095,887 2.691 2,949,431
CASH INCOME TRUST
Price I ................................. 160,685 1.551 249,254
Price II ................................ 2,016,280 1.540 3,105,001
THE TRAVELERS SERIES TRUST
U.S. Government Securities Portfolio
Price I ................................. 138,133 1.300 179,581
Price II ................................ 1,042,966 1.291 1,346,102
Utilities Portfolio
Price I ................................. 70,674 1.697 119,954
Price II ................................ 34,592 1.685 58,288
Zero Coupon Bond Fund Portfolio Series 1998
Price I ................................. 1,000,000 1.116 1,115,894
Price II ................................ 8,353 1.108 9,259
Zero Coupon Bond Fund Portfolio Series 2000
Price I ................................. 1,001,379 1.121 1,122,297
Price II ................................ 36,677 1.113 40,831
Zero Coupon Bond Fund Portfolio Series 2005
Price I ................................. 1,041,763 1.165 1,213,483
Price II ................................ 105,916 1.157 122,553
</TABLE>
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Bond Fund
Price I ................................. 147,319 $1.192 $ 175,618
Price II ................................ 264,591 1.183 313,140
Templeton Stock Fund
Price I ................................. 2,837,594 1.617 4,589,102
Price II ................................ 1,578,248 1.606 2,533,963
Templeton Asset Allocation Fund
Price I ................................. 1,820,911 1.565 2,848,947
Price II ................................ 728,294 1.553 1,131,223
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
High Income Portfolio
Price I ................................. 975,103 1.515 1,477,604
Price II ................................ 1,292,867 1.504 1,944,960
Growth Portfolio
Price I ................................. 3,005,309 1.839 5,526,710
Price II ................................ 2,264,973 1.826 4,135,061
Equity-Income Portfolio
Price I ................................. 2,311,361 1.981 4,578,953
Price II ................................ 1,719,857 1.967 3,382,482
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Price I ................................. 2,569,808 1.460 3,751,635
Price II ................................ 437,656 1.449 634,303
DREYFUS STOCK INDEX FUND
Price I ................................. 501,723 2.203 1,105,221
Price II ................................ 1,019,666 2.187 2,229,952
AMERICAN ODYSSEY FUNDS, INC.
American Odyssey Core Equity Fund
Price I ................................. 29,927 2.218 66,390
American Odyssey Emerging Opportunities Fund
Price I ................................. 197,206 1.459 287,685
American Odyssey International Equity Fund
Price I ................................. 82,883 1.408 116,698
American Odyssey Long-Term Bond Fund
Price I ................................. 63,209 1.366 86,321
American Odyssey Intermediate-Term Bond Fund
Price I ................................. 1,145 1.166 1,335
American Odyssey Short-Term Bond Fund
Price I ................................. 2,753 1.208 3,325
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
TRAVELERS SERIES FUND INC.
Alliance Growth Portfolio
Price I ................................. 235,405 $1.721 $ 405,056
Price II ................................ 1,234,462 1.708 2,109,030
Smith Barney Income and Growth Portfolio
Price I ................................. 36,024 1.600 57,637
Price II ................................ 424,342 1.589 674,488
Smith Barney High Income Portfolio
Price I ................................. 28,586 1.264 36,130
Price II ................................ 358,300 1.256 450,194
MFS Total Return Portfolio
Price I ................................. 142,872 1.490 212,943
Price II ................................ 437,292 1.480 647,206
AIM Capital Appreciation Portfolio
Price I ................................. 116,099 1.183 137,359
Price II ................................ 936,917 1.177 1,102,352
GREENWICH STREET SERIES FUND
Total Return Portfolio
Price I ................................. 37,563 1.499 56,308
Price II ................................ 484,110 1.489 721,062
-----------
Net Contract Owners' Equity .................. $64,058,173
===========
</TABLE>
-7-
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT OPTIONS NO. OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
MANAGED ASSETS TRUST (3.2%)
Total (Cost $1,761,500) 114,804 $ 2,026,296
----------- -----------
HIGH YIELD BOND TRUST (0.4%)
Total (Cost $215,673) 24,382 241,137
----------- -----------
CAPITAL APPRECIATION FUND (8.7%)
Total (Cost $4,644,550) 120,351 5,574,661
----------- -----------
CASH INCOME TRUST (5.2%)
Total (Cost $3,347,375) 3,347,375 3,347,375
----------- -----------
THE TRAVELERS SERIES TRUST (8.3%)
U.S. Government Securities Portfolio (Cost $1,479,742) 130,966 1,525,755
Utilities Portfolio (Cost $148,527) 11,683 178,638
Zero Coupon Bond Fund Portfolio Series 1998 (Cost $1,122,796) 112,182 1,125,190
Zero Coupon Bond Fund Portfolio Series 2000 (Cost $1,155,180) 115,279 1,163,167
Zero Coupon Bond Fund Portfolio Series 2005 (Cost $1,275,721) 126,883 1,336,082
----------- -----------
Total (Cost $5,181,966) 496,993 5,328,832
----------- -----------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (18.1%)
Templeton Bond Fund (Cost $482,060) 44,193 488,780
Templeton Stock Fund (Cost $6,583,386) 307,149 7,122,795
Templeton Asset Allocation Fund (Cost $3,392,643) 178,090 3,980,319
----------- -----------
Total (Cost $10,458,089) 529,432 11,591,894
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (32.9%)
High Income Portfolio (Cost $3,052,156) 252,034 3,422,625
Growth Portfolio (Cost $7,968,559) 260,407 9,661,116
Equity-Income Portfolio (Cost $6,632,913) 327,732 7,957,338
----------- -----------
Total (Cost $17,653,628) 840,173 21,041,079
----------- -----------
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (6.9%)
Asset Manager Portfolio
Total (Cost $3,671,170) 243,515 4,385,702
----------- -----------
DREYFUS STOCK INDEX FUND (5.1%)
Total (Cost $2,750,538) 127,138 3,273,804
----------- -----------
AMERICAN ODYSSEY FUNDS, INC. (0.9%)
American Odyssey Core Equity Fund (Cost $46,111) 3,292 65,611
American Odyssey Emerging Opportunities Fund (Cost $299,735) 20,076 287,690
American Odyssey International Equity Fund (Cost $102,480) 7,425 114,942
American Odyssey Long-Term Bond Fund (Cost $80,495) 7,611 81,739
American Odyssey Intermediate-Term Bond Fund (Cost $1,286) 123 1,264
American Odyssey Short-Term Bond Fund (Cost $3,191) 306 3,160
----------- -----------
Total (Cost $533,298) 38,833 554,406
----------- -----------
TRAVELERS SERIES FUND INC. (9.1%)
Alliance Growth Portfolio (Cost $1,966,130) 116,421 2,520,506
Smith Barney Income and Growth Portfolio (Cost $651,344) 38,393 732,153
Smith Barney High Income Portfolio (Cost $469,336) 36,079 486,347
MFS Total Return Portfolio (Cost $744,214) 53,896 860,188
AIM Capital Appreciation Portfolio (Cost $1,151,664) 100,630 1,244,792
----------- -----------
Total (Cost $4,982,688) 345,419 5,843,986
----------- -----------
GREENWICH STREET SERIES FUND (1.2%)
Total Return Portfolio
Total (Cost $689,440) 44,121 777,407
----------- -----------
TOTAL INVESTMENT OPTIONS (100%)
(COST $55,889,915) $63,986,579
===========
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MANAGED ASSETS TRUST HIGH YIELD BOND TRUST
------------------------------ --------------------------
1997 1996 1997 1996
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 56,368 $ 212,189 $ 151 $ 58,484
----------- ----------- --------- ---------
EXPENSES:
Insurance charges ..................................... 11,874 9,244 1,465 1,710
Administrative charges ................................ 339 266 -- --
----------- ----------- --------- ---------
Net investment income (loss) .................... 44,155 202,679 (1,314) 56,774
----------- ----------- --------- ---------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 374,254 398,836 234,846 266,166
Cost of investments sold .......................... 292,317 355,102 225,775 261,596
----------- ----------- --------- ---------
Net realized gain (loss) ........................ 81,937 43,734 9,071 4,570
----------- ----------- --------- ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 49,154 113,258 (2,411) 16,476
Unrealized gain (loss) end of year ................ 264,796 49,154 25,465 (2,411)
----------- ----------- --------- ---------
Net change in unrealized gain (loss) for the year 215,642 (64,104) 27,876 (18,887)
----------- ----------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 341,734 182,309 35,633 42,457
----------- ----------- --------- ---------
UNIT TRANSACTIONS:
Participant premium payments .......................... 427,367 385,858 34,411 59,862
Participant transfers from other Travelers accounts ... 132,340 446,005 93,271 210,756
Contract surrenders ................................... (269,781) (197,168) (143,838) (49,202)
Participant transfers to other Travelers accounts ..... (253,757) (363,218) (98,507) (225,122)
Other payments to participants ........................ -- -- -- --
----------- ----------- --------- ---------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 36,169 271,477 (114,663) (3,706)
----------- ----------- --------- ---------
Net increase (decrease) in net assets ........... 377,903 453,786 (79,030) 38,751
NET ASSETS:
Beginning of year ................................. 1,648,174 1,194,388 321,636 282,885
----------- ----------- --------- ---------
End of year ....................................... $ 2,026,077 $ 1,648,174 $ 242,606 $ 321,636
=========== =========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 36 $ 326,576
----------- -----------
EXPENSES:
Insurance charges ..................................... 30,965 12,964
Administrative charges ................................ 2,084 456
----------- -----------
Net investment income (loss) .................... (33,013) 313,156
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 839,367 141,019
Cost of investments sold .......................... 553,249 97,726
----------- -----------
Net realized gain (loss) ........................ 286,118 43,293
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 276,095 177,890
Unrealized gain (loss) end of year ................ 930,111 276,095
----------- -----------
Net change in unrealized gain (loss) for the year 654,016 98,205
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 907,121 454,654
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments .......................... 1,371,774 845,776
Participant transfers from other Travelers accounts ... 1,068,760 1,273,217
Contract surrenders ................................... (577,590) (250,675)
Participant transfers to other Travelers accounts ..... (560,317) (124,142)
Other payments to participants ........................ (651) --
----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 1,301,976 1,744,176
----------- -----------
Net increase (decrease) in net assets ........... 2,209,097 2,198,830
NET ASSETS:
Beginning of year ................................. 3,367,503 1,168,673
----------- -----------
End of year ....................................... $ 5,576,600 $ 3,367,503
=========== ===========
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ZERO COUPON BOND
U.S. GOVERNMENT FUND PORTFOLIO
CASH INCOME TRUST SECURITIES PORTFOLIO UTILITIES PORTFOLIO SERIES 1998
- ----------------------------- -------------------------- ------------------------ ----------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 148,941 $ 90,366 $ 71,639 $ 58,279 $ 234 $ 13,790 $ 60,738 $ 67,102
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
23,201 15,944 7,196 1,660 947 688 6,579 6,251
2,570 1,351 781 100 44 23 10 6
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
123,170 73,071 63,662 56,519 (757) 13,079 54,149 60,845
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
7,080,626 6,855,752 579,692 45,082 33,131 42,674 22,224 6,286
7,080,626 6,855,752 605,967 43,606 31,964 37,280 21,753 6,135
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
-- -- (26,275) 1,476 1,167 5,394 471 151
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
-- -- (33,195) 19,739 (3,421) 7,329 (1,641) 24,969
-- -- 46,013 (33,195) 30,111 (3,421) 2,394 (1,641)
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
-- -- 79,208 (52,934) 33,532 (10,750) 4,035 (26,610)
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
123,170 73,071 116,595 5,061 33,942 7,723 58,655 34,386
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
6,413,938 11,879,168 555,591 92,662 47,754 79,509 634 --
3,079,011 1,603,195 723,123 513,975 1,654 25,144 8,679 15,174
(365,525) (1,023,100) (92,796) (32,101) (28,432) (16,313) (454) (203)
(8,668,083) (11,441,681) (503,445) (20,458) (10,100) (33,120) (15,356) --
-- -- -- -- -- -- -- --
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
459,341 1,017,582 682,473 554,078 10,876 55,220 (6,497) 14,971
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
582,511 1,090,653 799,068 559,139 44,818 62,943 52,158 49,357
2,771,744 1,681,091 726,615 167,476 133,424 70,481 1,072,995 1,023,638
- ----------- ------------ ----------- --------- --------- --------- ----------- -----------
$ 3,354,255 $ 2,771,744 $ 1,525,683 $ 726,615 $ 178,242 $ 133,424 $ 1,125,153 $ 1,072,995
=========== ============ =========== ========= ========= ========= =========== ===========
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ZERO COUPON BOND ZERO COUPON BOND
FUND PORTFOLIO FUND PORTFOLIO
SERIES 2000 SERIES 2005
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 63,813 $ 63,651 $ 71,682 $ 66,990
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ..................................... 6,564 6,171 7,294 6,538
Administrative charges ................................ 13 2 63 26
----------- ----------- ----------- -----------
Net investment income (loss) .................... 57,236 57,478 64,325 60,426
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 13,930 6,328 67,978 22,857
Cost of investments sold .......................... 13,566 6,227 67,394 23,410
----------- ----------- ----------- -----------
Net realized gain (loss) ........................ 364 101 584 (553)
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... (4,359) 30,962 (2,241) 47,983
Unrealized gain (loss) end of year ................ 7,987 (4,359) 60,360 (2,241)
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year 12,346 (35,321) 62,601 (50,224)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 69,946 22,258 127,510 9,649
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments .......................... 1,592 1,303 43,451 3,937
Participant transfers from other Travelers accounts ... 36,989 2,571 37,071 143,245
Contract surrenders ................................... (877) (275) (3,931) (1,804)
Participant transfers to other Travelers accounts ..... (16) -- (57,627) (15,098)
Other payments to participants ........................ -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 37,688 3,599 18,964 130,280
----------- ----------- ----------- -----------
Net increase (decrease) in net assets ........... 107,634 25,857 146,474 139,929
NET ASSETS:
Beginning of year ................................. 1,055,494 1,029,637 1,189,562 1,049,633
----------- ----------- ----------- -----------
End of year ....................................... $ 1,163,128 $ 1,055,494 $ 1,336,036 $ 1,189,562
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON BOND FUND
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 22,190 $ 18,730
--------- ---------
EXPENSES:
Insurance charges ..................................... 2,586 1,415
Administrative charges ................................ 201 68
--------- ---------
Net investment income (loss) .................... 19,403 17,247
--------- ---------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 43,392 155,886
Cost of investments sold .......................... 43,183 160,115
--------- ---------
Net realized gain (loss) ........................ 209 (4,229)
--------- ---------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 18,576 10,933
Unrealized gain (loss) end of year ................ 6,720 18,576
--------- ---------
Net change in unrealized gain (loss) for the year (11,856) 7,643
--------- ---------
Net increase (decrease) in net assets
resulting from operations ....................... 7,756 20,661
--------- ---------
UNIT TRANSACTIONS:
Participant premium payments .......................... 121,519 129,705
Participant transfers from other Travelers accounts ... 123,156 140,133
Contract surrenders ................................... (41,897) (37,867)
Participant transfers to other Travelers accounts ..... (8,468) (110,954)
Other payments to participants ........................ (4,899) --
--------- ---------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 189,411 121,017
--------- ---------
Net increase (decrease) in net assets ........... 197,167 141,678
NET ASSETS:
Beginning of year ................................. 291,591 149,913
--------- ---------
End of year ....................................... $ 488,758 $ 291,591
========= =========
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
TEMPLETON ASSET FIDELITY'S HIGH
TEMPLETON STOCK FUND ALLOCATION FUND INCOME PORTFOLIO FIDELITY'S GROWTH PORTFOLIO
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 513,518 $ 275,458 $ 257,405 $ 100,257 $ 195,704 $ 79,896 $ 234,290 $ 212,219
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
42,347 22,487 23,292 13,519 20,332 8,457 53,174 28,119
2,080 636 868 228 1,556 346 3,145 1,081
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
469,091 252,335 233,245 86,510 173,816 71,093 177,971 183,019
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
795,451 427,910 299,373 251,298 906,455 394,532 775,032 290,824
588,414 355,680 211,031 208,598 892,824 359,601 510,153 199,573
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
207,037 72,230 88,342 42,700 13,631 34,931 264,879 91,251
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
696,253 293,901 469,194 221,298 109,472 57,063 642,147 382,429
539,409 696,253 587,676 469,194 370,469 109,472 1,692,557 642,147
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(156,844) 402,352 118,482 247,896 260,997 52,409 1,050,410 259,718
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
519,284 726,917 440,069 377,106 448,444 158,433 1,493,260 533,988
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,839,867 1,321,382 735,199 644,082 686,634 527,622 2,092,960 2,089,604
1,088,920 1,213,990 400,002 446,075 933,013 1,226,656 1,286,782 1,889,484
(668,841) (483,098) (356,661) (235,094) (260,544) (201,035) (898,220) (640,080)
(563,883) (282,267) (100,309) (144,347) (718,621) (172,976) (494,401) (317,899)
-- -- -- -- (5,003) -- (5,729) --
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,696,063 1,770,007 678,231 710,716 635,479 1,380,267 1,981,392 3,021,109
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,215,347 2,496,924 1,118,300 1,087,822 1,083,923 1,538,700 3,474,652 3,555,097
4,907,718 2,410,794 2,861,870 1,774,048 2,338,641 799,941 6,187,119 2,632,022
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 7,123,065 $ 4,907,718 $ 3,980,170 $ 2,861,870 $ 3,422,564 $ 2,338,641 $ 9,661,771 $ 6,187,119
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY'S EQUITY- FIDELITY'S ASSET
INCOME PORTFOLIO MANAGER PORTFOLIO
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 551,315 $ 109,635 $ 414,291 $ 159,369
----------- ----------- ----------- -----------
EXPENSES:
Insurance charges ..................................... 45,297 22,379 24,513 17,144
Administrative charges ................................ 2,746 811 501 161
----------- ----------- ----------- -----------
Net investment income (loss) .................... 503,272 86,445 389,277 142,064
----------- ----------- ----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 1,066,364 400,773 332,402 246,699
Cost of investments sold .......................... 796,012 317,023 276,655 224,032
----------- ----------- ----------- -----------
Net realized gain (loss) ........................ 270,352 83,750 55,747 22,667
----------- ----------- ----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 555,918 260,001 454,097 244,927
Unrealized gain (loss) end of year ................ 1,324,425 555,918 714,532 454,097
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) for the year 768,507 295,917 260,435 209,170
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 1,542,131 466,112 705,459 373,901
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Participant premium payments .......................... 1,553,084 1,546,355 792,294 819,279
Participant transfers from other Travelers accounts ... 1,216,927 1,927,954 128,939 265,125
Contract surrenders ................................... (715,570) (479,487) (414,673) (311,604)
Participant transfers to other Travelers accounts ..... (767,826) (385,897) (153,222) (200,709)
Other payments to participants ........................ (8,322) -- (69) --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 1,278,293 2,608,925 353,269 572,091
----------- ----------- ----------- -----------
Net increase (decrease) in net assets ........... 2,820,424 3,075,037 1,058,728 945,992
NET ASSETS:
Beginning of year ................................. 5,141,011 2,065,974 3,327,210 2,381,218
----------- ----------- ----------- -----------
End of year ....................................... $ 7,961,435 $ 5,141,011 $ 4,385,938 $ 3,327,210
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STOCK INDEX FUND
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 131,569 $ 38,450
----------- -----------
EXPENSES:
Insurance charges ..................................... 17,644 4,900
Administrative charges ................................ 1,557 288
----------- -----------
Net investment income (loss) .................... 112,368 33,262
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 480,285 198,684
Cost of investments sold .......................... 385,669 154,606
----------- -----------
Net realized gain (loss) ........................ 94,616 44,078
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 103,469 32,788
Unrealized gain (loss) end of year ................ 523,266 103,469
----------- -----------
Net change in unrealized gain (loss) for the year 419,797 70,681
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 626,781 148,021
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments .......................... 815,909 331,313
Participant transfers from other Travelers accounts ... 947,641 923,999
Contract surrenders ................................... (282,791) (103,195)
Participant transfers to other Travelers accounts ..... (335,492) (70,708)
Other payments to participants ........................ -- --
----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 1,145,267 1,081,409
----------- -----------
Net increase (decrease) in net assets ........... 1,772,048 1,229,430
NET ASSETS:
Beginning of year ................................. 1,563,125 333,695
----------- -----------
End of year ....................................... $ 3,335,173 $ 1,563,125
=========== ===========
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
AMERICAN ODYSSEY AMERICAN ODYSSEY
AMERICAN ODYSSEY EMERGING OPPORTUNITIES INTERNATIONAL EQUITY AMERICAN ODYSSEY
CORE EQUITY FUND FUND FUND LONG-TERM BOND FUND
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,487 $ 3,238 $ -- $ 20,349 $ 2,623 $ 2,488 $ 4,752 $ 2,672
- -------- -------- --------- --------- --------- --------- -------- --------
387 312 1,630 1,563 661 520 400 273
-- -- -- -- -- -- -- --
- -------- -------- --------- --------- --------- --------- -------- --------
1,100 2,926 (1,630) 18,786 1,962 1,968 4,352 2,399
- -------- -------- --------- --------- --------- --------- -------- --------
17,936 9,229 46,981 41,345 20,677 20,513 4,416 9,682
12,382 7,518 46,233 33,380 16,342 16,197 4,534 9,981
- -------- -------- --------- --------- --------- --------- -------- --------
5,554 1,711 748 7,965 4,335 4,316 (118) (299)
- -------- -------- --------- --------- --------- --------- -------- --------
8,895 3,143 (32,337) 4,288 14,319 3,676 (2,217) (1,341)
19,500 8,895 (12,045) (32,337) 12,462 14,319 1,244 (2,217)
- -------- -------- --------- --------- --------- --------- -------- --------
10,605 5,752 20,292 (36,625) (1,857) 10,643 3,461 (876)
- -------- -------- --------- --------- --------- --------- -------- --------
17,259 10,389 19,410 (9,874) 4,440 16,927 7,695 1,224
- -------- -------- --------- --------- --------- --------- -------- --------
10,015 10,768 59,971 93,912 27,193 30,054 28,271 26,241
1,899 3,481 8,296 9,776 7,563 16,031 -- --
(4,755) (4,419) (25,273) (29,021) (12,213) (12,104) (4,730) (5,072)
(15,920) (6,488) (37,520) (25,343) (13,029) (13,400) -- (5,423)
-- -- -- -- -- -- -- --
- -------- -------- --------- --------- --------- --------- -------- --------
(8,761) 3,342 5,474 49,324 9,514 20,581 23,541 15,746
- -------- -------- --------- --------- --------- --------- -------- --------
8,498 13,731 24,884 39,450 13,954 37,508 31,236 16,970
57,892 44,161 262,801 223,351 102,744 65,236 55,085 38,115
- -------- -------- --------- --------- --------- --------- -------- --------
$ 66,390 $ 57,892 $ 287,685 $ 262,801 $ 116,698 $ 102,744 $ 86,321 $ 55,085
======== ======== ========= ========= ========= ========= ======== ========
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
AMERICAN ODYSSEY
INTERMEDIATE-TERM AMERICAN ODYSSEY
BOND FUND SHORT-TERM BOND FUND
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 80 $ 48 $ 170 $ 104
------- ----- ------- -------
EXPENSES:
Insurance charges ..................................... 7 4 19 16
Administrative charges ................................ -- -- -- --
------- ----- ------- -------
Net investment income (loss) .................... 73 44 151 88
------- ----- ------- -------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 157 -- 470 213
Cost of investments sold .......................... 153 -- 475 214
------- ----- ------- -------
Net realized gain (loss) ........................ 4 -- (5) (1)
------- ----- ------- -------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... (23) (6) (63) (68)
Unrealized gain (loss) end of year ................ (22) (23) (31) (63)
------- ----- ------- -------
Net change in unrealized gain (loss) for the year 1 (17) 32 5
------- ----- ------- -------
Net increase (decrease) in net assets
resulting from operations ....................... 78 27 178 92
------- ----- ------- -------
UNIT TRANSACTIONS:
Participant premium payments .......................... 570 631 658 841
Participant transfers from other Travelers accounts ... 32 -- -- --
Contract surrenders ................................... (97) (124) (533) (244)
Participant transfers to other Travelers accounts ..... (157) -- -- --
Other payments to participants ........................ -- -- -- --
------- ----- ------- -------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 348 507 125 597
------- ----- ------- -------
Net increase (decrease) in net assets ........... 426 534 303 689
NET ASSETS:
Beginning of year ................................. 909 375 3,022 2,333
------- ----- ------- -------
End of year ....................................... $ 1,335 $ 909 $ 3,325 $ 3,022
======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE GROWTH PORTFOLIO
1997 1996
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ 43,645
----------- -----------
EXPENSES:
Insurance charges ..................................... 13,955 4,173
Administrative charges ................................ 1,519 461
----------- -----------
Net investment income (loss) .................... (15,474) 39,011
----------- -----------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 137,767 138,394
Cost of investments sold .......................... 106,425 126,677
----------- -----------
Net realized gain (loss) ........................ 31,342 11,717
----------- -----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 97,212 (310)
Unrealized gain (loss) end of year ................ 554,376 97,212
----------- -----------
Net change in unrealized gain (loss) for the year 457,164 97,522
----------- -----------
Net increase (decrease) in net assets
resulting from operations ....................... 473,032 148,250
----------- -----------
UNIT TRANSACTIONS:
Participant premium payments .......................... 431,226 264,719
Participant transfers from other Travelers accounts ... 619,763 805,494
Contract surrenders ................................... (152,219) (44,856)
Participant transfers to other Travelers accounts ..... (43,871) (6,667)
Other payments to participants ........................ (1,525) --
----------- -----------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 853,374 1,018,690
----------- -----------
Net increase (decrease) in net assets ........... 1,326,406 1,166,940
NET ASSETS:
Beginning of year ................................. 1,187,680 20,740
----------- -----------
End of year ....................................... $ 2,514,086 $ 1,187,680
=========== ===========
</TABLE>
-15-
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY INCOME SMITH BARNEY HIGH AIM CAPITAL
AND GROWTH PORTFOLIO INCOME PORTFOLIO MFS TOTAL RETURN PORTFOLIO APPRECIATION PORTFOLIO
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 5,295 $ -- $ 8,808 $ -- $ 13,265 $ -- $ 580
- --------- --------- --------- --------- --------- --------- ----------- ---------
3,376 664 1,982 1,201 4,442 1,350 7,136 1,435
399 78 222 142 432 102 807 142
- --------- --------- --------- --------- --------- --------- ----------- ---------
(3,775) 4,553 (2,204) 7,465 (4,874) 11,813 (7,943) (997)
- --------- --------- --------- --------- --------- --------- ----------- ---------
58,318 56,203 460,379 142,661 54,024 27,195 53,629 104,593
45,948 52,019 436,696 138,333 42,230 24,139 48,176 101,291
- --------- --------- --------- --------- --------- --------- ----------- ---------
12,370 4,184 23,683 4,328 11,794 3,056 5,453 3,302
- --------- --------- --------- --------- --------- --------- ----------- ---------
3,968 (1) 3,819 -- 18,241 3,089 17,258 --
80,809 3,968 17,011 3,819 115,974 18,241 93,128 17,258
- --------- --------- --------- --------- --------- --------- ----------- ---------
76,841 3,969 13,192 3,819 97,733 15,152 75,870 17,258
- --------- --------- --------- --------- --------- --------- ----------- ---------
85,436 12,706 34,671 15,612 104,653 30,021 73,380 19,563
- --------- --------- --------- --------- --------- --------- ----------- ---------
148,015 11,790 260,419 16,643 143,523 103,152 311,127 181,988
323,411 220,262 335,032 265,754 269,013 205,454 370,189 474,076
(55,944) (8,726) (17,233) (5,991) (35,983) (12,783) (82,325) (16,100)
(1,422) (3,243) (281,223) (137,360) (6,460) (10,669) (13,899) (78,288)
(1,316) -- -- -- (6,400) -- -- --
- --------- --------- --------- --------- --------- --------- ----------- ---------
412,744 220,083 296,995 139,046 363,693 285,154 585,092 561,676
- --------- --------- --------- --------- --------- --------- ----------- ---------
498,180 232,789 331,666 154,658 468,346 315,175 658,472 581,239
233,945 1,156 154,658 -- 391,803 76,628 581,239 --
- --------- --------- --------- --------- --------- --------- ----------- ---------
$ 732,125 $ 233,945 $ 486,324 $ 154,658 $ 860,149 $ 391,803 $ 1,239,711 $ 581,239
========= ========= ========= ========= ========= ========= =========== =========
</TABLE>
-16-
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF FUND UL OPERATIONS AND CHANGES IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO COMBINED
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 30,928 $ 6,053 $ 2,833,924 $ 2,057,986
--------- --------- ------------ ------------
EXPENSES:
Insurance charges ..................................... 4,608 1,339 363,873 192,440
Administrative charges ................................ 544 152 22,481 6,926
--------- --------- ------------ ------------
Net investment income (loss) .................... 25,776 4,562 2,447,570 1,858,620
--------- --------- ------------ ------------
REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold .................... 40,508 58,645 14,840,064 10,760,279
Cost of investments sold .......................... 33,582 52,193 13,389,728 10,228,004
--------- --------- ------------ ------------
Net realized gain (loss) ........................ 6,926 6,452 1,450,336 532,275
--------- --------- ------------ ------------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of year .......... 32,702 (12) 3,488,881 1,954,404
Unrealized gain (loss) end of year ................ 87,967 32,702 8,096,664 3,488,881
--------- --------- ------------ ------------
Net change in unrealized gain (loss) for the year 55,265 32,714 4,607,783 1,534,477
--------- --------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ....................... 87,967 43,728 8,505,689 3,925,372
--------- --------- ------------ ------------
UNIT TRANSACTIONS:
Participant premium payments .......................... 141,056 44,885 19,096,022 21,543,041
Participant transfers from other Travelers accounts ... 212,209 309,646 13,453,685 14,576,672
Contract surrenders ................................... (40,498) (13,169) (5,554,224) (4,214,910)
Participant transfers to other Travelers accounts ..... (10,203) (350) (13,733,134) (14,195,827)
Other payments to participants ........................ -- -- (33,914) --
--------- --------- ------------ ------------
Net increase (decrease) in net assets resulting
from unit transactions .......................... 302,564 341,012 13,228,435 17,708,976
--------- --------- ------------ ------------
Net increase (decrease) in net assets ........... 390,531 384,740 21,734,124 21,634,348
NET ASSETS:
Beginning of year ................................. 386,839 2,099 42,324,049 20,689,701
--------- --------- ------------ ------------
End of year ....................................... $ 777,370 $ 386,839 $ 64,058,173 $ 42,324,049
========= ========= ============ ============
</TABLE>
-17-
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
U.S.
CAPITAL GOVERNMENT
MANAGED HIGH YIELD APPRECIATION CASH SECURITIES
ASSETS TRUST BOND TRUST FUND INCOME TRUST PORTFOLIO
------------ ---------- ---- ------------ ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 739,368 148,199 1,560,408 1,872,345 627,860
Units purchased and transferred from
other Travelers accounts ........ 227,450 55,716 984,555 6,298,315 1,069,761
Units redeemed and transferred to
other Travelers accounts ........ (212,766) (107,438) (479,996) (5,993,695) (516,522)
-------- -------- ---------- ---------- ----------
Units end of year .................. 754,052 96,477 2,064,967 2,176,965 1,181,099
======== ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON ZERO COUPON ZERO COUPON
BOND FUND BOND FUND BOND FUND
UTILITIES PORTFOLIO PORTFOLIO PORTFOLIO TEMPLETON
PORTFOLIO SERIES 1998 SERIES 2000 SERIES 2005 BOND FUND
--------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 98,022 1,014,502 1,003,545 1,133,350 249,756
Units purchased and transferred from
other Travelers accounts ........ 34,377 8,600 35,337 72,486 209,477
Units redeemed and transferred to
other Travelers accounts ........ (27,133) (14,749) (826) (58,157) (47,323)
-------- ---------- ---------- ---------- --------
Units end of year .................. 105,266 1,008,353 1,038,056 1,147,679 411,910
======== ========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON
ASSET FIDELITY'S FIDELITY'S FIDELITY'S
TEMPLETON ALLOCATION HIGH INCOME GROWTH EQUITY-INCOME
STOCK FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 3,378,671 2,102,272 1,809,239 4,136,339 3,309,909
Units purchased and transferred from
other Travelers accounts ........ 1,804,001 744,438 1,201,242 1,992,945 1,560,873
Units redeemed and transferred to
other Travelers accounts ........ (766,830) (297,505) (742,511) (859,002) (839,564)
---------- ---------- ---------- ---------- ----------
Units end of year .................. 4,415,842 2,549,205 2,267,970 5,270,282 4,031,218
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN
AMERICAN ODYSSEY AMERICAN
FIDELITY'S ODYSSEY EMERGING ODYSSEY
ASSET MANAGER DREYFUS STOCK CORE EQUITY OPPORTUNITIES INTERNATIONAL
PORTFOLIO INDEX FUND FUND FUND EQUITY FUND
--------- ---------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 2,734,435 940,291 34,187 191,470 76,225
Units purchased and transferred from
other Travelers accounts ........ 695,350 918,949 6,394 48,792 24,766
Units redeemed and transferred to
other Travelers accounts ........ (422,321) (337,851) (10,654) (43,056) (18,108)
---------- ---------- ------- -------- -------
Units end of year .................. 3,007,464 1,521,389 29,927 197,206 82,883
========== ========== ======= ======== =======
</TABLE>
-18-
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF UNITS FOR FUND UL FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
AMERICAN ODYSSEY AMERICAN SMITH BARNEY
ODYSSEY INTERMEDIATE- ODYSSEY ALLIANCE INCOME AND
LONG-TERM TERM SHORT-TERM GROWTH GROWTH
BOND FUND BOND FUND BOND FUND PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 44,927 833 2,640 888,431 184,663
Units purchased and transferred from
other Travelers accounts ........ 21,997 536 574 712,024 314,373
Units redeemed and transferred to
other Travelers accounts ........ (3,715) (224) (461) (130,588) (38,670)
------- ------ ------ ---------- --------
Units end of year .................. 63,209 1,145 2,753 1,469,867 460,366
======= ====== ====== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY MFS AIM CAPITAL
HIGH INCOME TOTAL RETURN APPRECIATION TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Units beginning of year ............ 138,855 317,532 548,936 300,659 29,587,869
Units purchased and transferred from
other Travelers accounts ........ 498,526 298,199 587,725 257,477 20,685,255
Units redeemed and transferred to
other Travelers accounts ........ (250,495) (35,567) (83,645) (36,463) (12,375,835)
-------- -------- ---------- -------- -----------
Units end of year .................. 386,886 580,164 1,053,016 521,673 37,897,289
======== ======== ========== ======== ===========
</TABLE>
-19-
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Life Insurance Contracts of
The Travelers Fund UL for Variable Life Insurance:
We have audited the accompanying statement of assets and liabilities of The
Travelers Fund UL for Variable Life Insurance as of December 31, 1997, 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1997, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Fund UL for
Variable Life Insurance as of December 31, 1997, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 19, 1998
-20-
<PAGE> 22
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Fund UL for Variable Life Insurance or
Fund UL's underlying funds. It should not be used in connection with any offer
except in conjunction with the applicable Variable Universal Life Insurance
Prospectus and the Prospectuses for the underlying funds, which collectively
contain all pertinent information, including the applicable sales commissions.
VG-156 (Annual) (12-97) Printed in U.S.A.
