<PAGE> 1
ANNUAL REPORT
DECEMBER 31, 1998
THE TRAVELERS SEPARATE ACCOUNT TM
FOR VARIABLE ANNUITIES
[TRAVELERS LIFE & ANNUITY LOGO]
The Travelers Insurance Company
The Travelers Life and Annuity Company
One Tower Square
Hartford, CT 06183
<PAGE> 2
THE TRAVELERS SEPARATE ACCOUNT TM
FOR VARIABLE ANNUITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in eligible funds at market value:
Delaware Group Premium Fund, Inc, 2,039 shares (cost $20,169) ............. $ 20,910
Dreyfus Variable Investment Fund, 4,320 shares (cost $173,243) ............ 188,724
OCC Accumulation Trust, 3,044 shares (cost $114,657) ...................... 117,789
Salomon Brothers Variable Series Funds Inc, 2,331 shares (cost $22,814) ... 25,668
Strong Variable Insurance Funds, Inc, 2,771 shares (cost $26,199) ......... 27,933
Templeton Variable Products Series Fund, 7,502 shares (cost $94,151) ...... 97,866
The Montgomery Funds III, 991 shares (cost $12,608) ....................... 15,246
The Travelers Series Trust, 47,713 shares (cost $561,843) ................. 572,520
Travelers Series Fund Inc, 206,582 shares (cost $705,135) ................. 734,328
Warburg Pincus Trust, 3,220 shares (cost $25,259) ......................... 26,374
----------
Total Investments (cost $1,756,078) ..................................... $1,827,358
Receivables:
Dividends ................................................................. 16,672
Purchase payments and transfers from other Travelers accounts ............. 60,000
Other assets ................................................................ 503
----------
Total Assets ............................................................ 1,904,533
----------
LIABILITIES:
Payables:
Insurance charges ......................................................... 627
Administrative fees ....................................................... 59
----------
Total Liabilities ....................................................... 686
----------
NET ASSETS: ................................................................... $1,903,847
==========
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 3
THE TRAVELERS SEPARATE ACCOUNT TM
FOR VARIABLE ANNUITIES
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ....................................................... $20,494
EXPENSES:
Insurance charges ............................................... $ 3,261
Administrative fees ............................................. 315
-------
Total expenses ................................................ 3,576
-------
Net investment income ....................................... 16,918
-------
REALIZED GAIN (LOSS) AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ................................ 82,084
Cost of investments sold ...................................... 82,021
-------
Net realized gain (loss) .................................... 63
Unrealized gain (loss) on investments:
Unrealized gain at December 31, 1998 .......................... 71,280
-------
Net realized gain (loss) and unrealized gain (loss) ......... 71,343
-------
Net increase in net assets resulting from operations ............ $88,261
=======
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 4
THE TRAVELERS SEPARATE ACCOUNT TM
FOR VARIABLE ANNUITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
OPERATIONS:
Net investment income ......................................... $ 16,918
Net realized gain (loss) from investment transactions ......... 63
Unrealized gain (loss) on investments ......................... 71,280
-----------
Net increase in net assets resulting from operations ........ 88,261
-----------
UNIT TRANSACTIONS:
Participant purchase payments
(applicable to 1,855,297 units) ............................. 1,815,891
Participant transfers from other Travelers accounts
(applicable to 31,676 units) ................................ 28,738
Administrative charges
(applicable to 6 units) ..................................... (3)
Contract surrenders
(applicable to 318 units) ................................... (300)
Participant transfers to other Travelers accounts
(applicable to 28,609 units) ................................ (28,740)
-----------
Net increase in net assets resulting from unit transactions ... 1,815,586
-----------
Net increase in net assets .................................. 1,903,847
NET ASSETS:
Beginning of period ........................................... --
-----------
End of period ................................................. $ 1,903,847
===========
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Separate Account TM for Variable Annuities ("Separate Account TM")
is a separate account of The Travelers Insurance Company ("The Travelers"), an
indirect wholly owned subsidiary of Citigroup Inc. (formerly Travelers Group
Inc.), and is available for funding certain variable annuity contracts issued by
The Travelers. Separate Account TM is registered under the Investment Company
Act of 1940, as amended, as a unit investment trust.
Participant purchase payments applied to Separate Account TM are invested in one
or more eligible funds in accordance with the selection made by the contract
owner. As of December 31, 1998, the eligible funds available under Separate
Account TM were: U.S. Government Securities Portfolio, Lazard International
Stock Portfolio, Large Cap Portfolio, Disciplined Mid Cap Stock Portfolio,
Disciplined Small Cap Stock Portfolio, MFS Research Portfolio, Strategic Stock
Portfolio, Jurika & Voyles Core Equity Portfolio and NWQ Large Cap Portfolio of
The Travelers Series Trust; Smith Barney High Income Portfolio, Smith Barney
Money Market Portfolio, Smith Barney Large Capitalization Growth Portfolio, AIM
Capital Appreciation Portfolio and TBC Managed Income Portfolio of Travelers
Series Fund Inc. and Salomon Brothers Variable Investors Fund of Salomon
Brothers Variable Series Funds Inc. (all of which are managed by affiliates of
The Travelers); Franklin Small Cap Investments Fund (Class 2 shares), Templeton
Developing Markets Fund (Class 2 shares) and Templeton International Fund (Class
2 shares) of Templeton Variable Products Series Fund; Small Cap Portfolio and
Capital Appreciation Portfolio of Dreyfus Variable Investment Fund; REIT Series
and Small Cap Value Series of Delaware Group Premium Fund, Inc; Montgomery
Variable Series: Growth Fund of The Montgomery Funds III; Equity Portfolio of
OCC Accumulation Trust; Strong Schafer Value Fund II of Strong Variable
Insurance Funds, Inc and Emerging Markets Portfolio of Warburg Pincus Trust. All
of the funds are Massachusetts business trusts, except for Travelers Series Fund
Inc., Salomon Brothers Variable Series Funds Inc. and Delaware Group Premium
Fund, Inc. which are incorporated under Maryland law; Strong Variable Insurance
Funds, Inc which is a Wisconsin corporation and The Montgomery Funds III which
is a Delaware business trust. Not all funds may be available in all states or to
all contract owners.
The following is a summary of significant accounting policies consistently
followed by Separate Account TM 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 Separate Account TM 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 Separate Account TM. Separate Account TM 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> 6
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments were
$1,838,100 and $82,084 respectively, for the period ended December 31, 1998.
Realized gains and losses from investment transactions are reported on an
identified cost basis. The cost of investments in eligible funds was $1,756,078
at December 31, 1998. Gross unrealized appreciation for all investments at
December 31, 1998 was $83,770. Gross unrealized depreciation for all investments
at December 31, 1998 was $12,490.
3. CONTRACT CHARGES
Insurance charges are paid for the mortality and expense risks assumed by The
Travelers. For contracts with a standard death benefit provision, these charges
are equivalent to 1.55% of the average net assets of Separate Account TM on an
annual basis. For contracts with an enhanced death benefit provision, these
charges are equivalent to 1.70% on an annual basis.
Administrative fees are paid for administrative expenses incurred by The
Travelers. This charge is equivalent to 0.15% of the average net assets of
Separate Account TM on an annual basis.
For contracts in the accumulation phase with a contract value less than $50,000,
an annual charge of $40 (prorated for partial periods) is deducted from
participant account balances and paid to The Travelers to cover contract
administrative charges.
-5-
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------------ ------------
<S> <C> <C> <C>
Delaware Group Premium Fund, Inc
REIT Series
Standard Death Benefit .............................. 13,403 $ 0.958 $ 12,841
Enhanced Death Benefit .............................. 5,447 0.957 5,216
Small Cap Value Series
Standard Death Benefit .............................. 5,244 1.005 5,272
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio
Standard Death Benefit .............................. 69,574 1.080 75,108
Enhanced Death Benefit .............................. 17,190 1.079 18,546
Small Cap Portfolio
Standard Death Benefit .............................. 90,951 0.992 90,255
Enhanced Death Benefit .............................. 9,007 0.992 8,932
OCC Accumulation Trust
Equity Portfolio
Standard Death Benefit .............................. 97,009 1.013 98,225
Enhanced Death Benefit .............................. 25,264 1.012 25,565
Salomon Brothers Variable Series Funds Inc
Salomon Brothers Variable Investors Fund
Standard Death Benefit .............................. 24,856 1.036 25,763
Strong Variable Insurance Funds, Inc
Strong Schafer Value Fund II
Standard Death Benefit .............................. 21,778 1.035 22,549
Enhanced Death Benefit .............................. 5,193 1.035 5,373
Templeton Variable Products Series Fund
Franklin Small Cap Investments Fund (Class 2 shares)
Standard Death Benefit .............................. 10,667 1.072 11,432
Enhanced Death Benefit .............................. 10,436 1.071 11,176
Templeton Developing Markets Fund (Class 2 shares)
Standard Death Benefit .............................. 12,791 1.018 13,026
Enhanced Death Benefit .............................. 2,959 1.018 3,012
Templeton International Fund (Class 2 shares)
Standard Death Benefit .............................. 70,695 0.934 65,994
Enhanced Death Benefit .............................. 21,233 0.933 19,809
The Montgomery Funds III
Montgomery Variable Series: Growth Fund
Standard Death Benefit .............................. 10,809 1.034 11,182
Enhanced Death Benefit .............................. 3,925 1.034 4,058
</TABLE>
-6-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------
ACCUMULATION UNIT NET
UNITS VALUE ASSETS
------------ ------------ ------------
<S> <C> <C> <C>
The Travelers Series Trust
Jurika & Voyles Core Equity Portfolio
Enhanced Death Benefit .............................. 4,782 $ 1.119 $ 5,352
Large Cap Portfolio
Standard Death Benefit .............................. 43,623 1.124 49,022
Enhanced Death Benefit .............................. 4,881 1.123 5,481
Lazard International Stock Portfolio
Standard Death Benefit .............................. 152,201 0.923 140,468
Enhanced Death Benefit .............................. 23,016 0.922 21,227
MFS Research Portfolio
Standard Death Benefit .............................. 99,898 1.036 103,540
NWQ Large Cap Portfolio
Standard Death Benefit .............................. 27,741 0.985 27,331
Disciplined Mid Cap Stock Portfolio
Standard Death Benefit .............................. 25,371 1.102 27,960
Enhanced Death Benefit .............................. 7,351 1.101 8,096
Disciplined Small Cap Stock Portfolio
Standard Death Benefit .............................. 18,221 0.994 18,119
Enhanced Death Benefit .............................. 6,938 0.994 6,895
US Government Securities Portfolio
Standard Death Benefit .............................. 167,258 1.046 174,943
Travelers Series Fund Inc
AIM Capital Appreciation Portfolio
Standard Death Benefit .............................. 13,025 1.074 13,983
Enhanced Death Benefit .............................. 21,451 1.073 23,013
Smith Barney Money Market Portfolio
Standard Death Benefit .............................. 157,837 1.013 159,928
Smith Barney High Income Portfolio
Standard Death Benefit .............................. 99,255 0.949 94,231
Enhanced Death Benefit .............................. 4,997 0.949 4,741
Smith Barney Large Capitalization Growth Portfolio
Standard Death Benefit .............................. 222,326 1.165 258,922
Enhanced Death Benefit .............................. 19,674 1.164 22,898
TBC Managed Income Portfolio
Standard Death Benefit .............................. 163,644 0.997 163,216
Enhanced Death Benefit .............................. 14,831 0.997 14,783
Warburg Pincus Trust
Emerging Markets Portfolio
Standard Death Benefit .............................. 27,219 0.843 22,937
Enhanced Death Benefit .............................. 4,069 0.842 3,427
------------
Net Contract Owners' Equity ................................................................ $ 1,903,847
============
</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>
DELAWARE GROUP PREMIUM FUND, INC. (1.1%)
REIT Series (Cost $15,148) 1,718 $ 15,636
Small Cap Value Series (Cost $5,021) 321 5,274
-------- --------
Total (Cost $20,169) 2,039 20,910
-------- --------
DREYFUS VARIABLE INVESTMENT FUND (10.3%)
Capital Appreciation Portfolio (Cost $83,049) 2,479 89,502
Small Cap Portfolio (Cost $90,194) 1,841 99,222
-------- --------
Total (Cost $173,243) 4,320 188,724
-------- --------
OCC ACCUMULATION TRUST (6.5%)
Equity Portfolio
Total (Cost $114,657) 3,044 117,789
-------- --------
SALOMON BROTHERS VARIABLE SERIES FUNDS INC. (1.4%)
Salomon Brothers Variable Investors Fund
Total (Cost $22,814) 2,331 25,668
-------- --------
STRONG VARIABLE INSURANCE FUNDS, INC. (1.5%)
Strong Schafer Value Fund II
Total (Cost $26,199) 2,771 27,933
-------- --------
TEMPLETON VARIABLE PRODUCTS SERIES FUND (5.4%)
Franklin Small Cap Investments Fund (Class 2 shares) (Cost $13,054) 1,523 14,056
Templeton Developing Markets Fund (Class 2 shares) (Cost $12,553) 2,545 13,031
Templeton International Fund (Class 2 shares) (Cost $68,544) 3,434 70,779
-------- --------
Total (Cost $94,151) 7,502 97,866
-------- --------
THE MONTGOMERY FUNDS III (0.8%)
Montgomery Variable Series: Growth Fund
Total (Cost $12,608) 991 15,246
-------- --------
</TABLE>
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
---------- ----------
<S> <C> <C>
THE TRAVELERS SERIES TRUST (31.3%)
Jurika & Voyles Core Equity Portfolio (Cost $4,998) 520 $ 5,335
Large Cap Portfolio (Cost $51,823) 3,128 54,523
Lazard International Stock Portfolio (Cost $152,020) 12,429 160,080
MFS Research Portfolio (Cost $97,646) 9,793 103,416
NWQ Large Cap Portfolio (Cost $27,270) 2,876 27,208
Disciplined Mid Cap Stock Portfolio (Cost $31,950) 2,515 36,069
Disciplined Small Cap Stock Portfolio (Cost $22,906) 2,813 24,951
U.S. Government Securities Portfolio (Cost $173,230) 13,639 160,938
---------- ----------
Total (Cost $561,843) 47,713 572,520
---------- ----------
TRAVELERS SERIES FUND INC. (40.3%)
AIM Capital Appreciation Portfolio (Cost $24,979) 1,921 27,822
Smith Barney Money Market Portfolio (Cost $159,714) 159,714 159,714
Smith Barney High Income Portfolio (Cost $99,144) 7,821 99,009
Smith Barney Large Capitalization Growth Portfolio (Cost $249,466) 22,508 275,725
TBC Managed Income Portfolio (Cost $171,832) 14,618 172,058
---------- ----------
Total (Cost $705,135) 206,582 734,328
---------- ----------
WARBURG PINCUS TRUST (1.4%)
Emerging Markets Portfolio
Total (Cost $25,259) 3,220 26,374
---------- ----------
TOTAL INVESTMENT OPTIONS (100%)
(Cost $1,756,078) $1,827,358
========== ==========
</TABLE>
-9-
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF SEPARATE ACCOUNT TM OPERATIONS AND CHANGES IN NET ASSETS FOR THE
PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
CAPITAL
SMALL CAP APPRECIATION SMALL CAP EQUITY
REIT SERIES VALUE SERIES PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ -- $ -- $ 488 $ 61 $ --
--------- --------- --------- --------- ---------
EXPENSES:
Insurance charges ..................................... 50 8 161 155 211
Administrative fees ................................... 5 1 16 15 20
--------- --------- --------- --------- ---------
Net investment income (loss) ..................... (55) (9) 311 (109) (231)
--------- --------- --------- --------- ---------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 33 7 97 139 244
Cost of investments sold ............................ 33 7 94 127 219
--------- --------- --------- --------- ---------
Net realized gain (loss) ......................... -- -- 3 12 25
--------- --------- --------- --------- ---------
Unrealized gain (loss) on investments:
End of period ....................................... 488 253 6,453 9,028 3,132
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ........................ 433 244 6,767 8,931 2,926
--------- --------- --------- --------- ---------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 17,682 5,028 77,471 90,096 121,078
Participant transfers from other Travelers accounts ... -- -- 9,416 196 --
Administrative charges ................................ -- -- -- -- --
Contract surrenders ................................... (11) -- -- (36) (76)
Participant transfers to other Travelers accounts ..... (47) -- -- -- (138)
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from unit transactions ................. 17,624 5,028 86,887 90,256 120,864
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets ............ 18,057 5,272 93,654 99,187 123,790
NET ASSETS:
Beginning of period ................................. -- -- -- -- --
--------- --------- --------- --------- ---------
End of period ....................................... $ 18,057 $ 5,272 $ 93,654 $ 99,187 $ 123,790
========= ========= ========= ========= =========
</TABLE>
-10-
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
FRANKLIN SMALL TEMPLETON TEMPLETON
SALOMON CAP INVESTMENTS DEVELOPING INTERNATIONAL MONTGOMERY JURIKA & VOYLES
BROTHERS VARIABLE STRONG SCHAFER FUND MARKETS FUND FUND VARIABLE SERIES: CORE EQUITY LARGE CAP
INVESTORS FUND VALUE FUND II (CLASS 2 SHARES) (CLASS 2 SHARES) (CLASS 2 SHARES) GROWTH FUND PORTFOLIO PORTFOLIO
- ----------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 105 $ 53 $ -- $ -- $ -- $ 133 $ 20 $ 2,446
-------- -------- -------- -------- -------- -------- -------- --------
61 22 10 24 160 51 4 120
6 2 1 2 15 5 1 12
-------- -------- -------- -------- -------- -------- -------- --------
38 29 (11) (26) (175) 77 15 2,314
-------- -------- -------- -------- -------- -------- -------- --------
45 11 5 8 135 89 2 119
38 10 5 7 146 80 2 119
-------- -------- -------- -------- -------- -------- -------- --------
7 1 -- 1 (11) 9 -- --
-------- -------- -------- -------- -------- -------- -------- --------
2,854 1,734 1,002 478 2,235 2,638 337 2,700
-------- -------- -------- -------- -------- -------- -------- --------
2,899 1,764 991 453 2,049 2,724 352 5,014
-------- -------- -------- -------- -------- -------- -------- --------
13,449 26,158 21,617 15,585 83,754 12,397 5,000 49,489
9,415 -- -- -- -- 165 -- --
-------- -------- -------- -------- -------- -------- -------- --------
-- -- -- -- -- (46) -- --
-------- -------- -------- -------- -------- -------- -------- --------
22,864 26,158 21,617 15,585 83,754 12,516 5,000 49,489
-------- -------- -------- -------- -------- -------- -------- --------
25,763 27,922 22,608 16,038 85,803 15,240 5,352 54,503
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
$ 25,763 $ 27,922 $ 22,608 $ 16,038 $ 85,803 $ 15,240 $ 5,352 $ 54,503
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
-11-
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF SEPARATE ACCOUNT TM OPERATIONS AND CHANGES IN NET ASSETS FOR THE
PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
LAZARD MFS NWQ DISCIPLINED MID DISCIPLINED SMALL
INTERNATIONAL RESEARCH LARGE CAP CAP STOCK CAP STOCK
STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 1,676 $ 162 $ 133 $ -- $ 73
--------- --------- --------- --------- ---------
EXPENSES:
Insurance charges ..................................... 310 132 45 82 62
Administrative fees ................................... 29 13 5 8 7
--------- --------- --------- --------- ---------
Net investment income (loss) ..................... 1,337 17 83 (90) 4
--------- --------- --------- --------- ---------
REALIZED GAIN (LOSS) AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from investment transactions:
Proceeds from investments sold ...................... 288 107 40 78 49
Cost of investments sold ............................ 286 106 40 78 53
--------- --------- --------- --------- ---------
Net realized gain (loss) ......................... 2 1 -- -- (4)
--------- --------- --------- --------- ---------
Unrealized gain (loss) on investments:
End of period ....................................... 8,060 5,770 (62) 4,119 2,045
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ........................ 9,399 5,788 21 4,029 2,045
--------- --------- --------- --------- ---------
UNIT TRANSACTIONS:
Participant purchase payments ......................... 152,238 97,752 27,310 32,028 22,969
Participant transfers from other Travelers accounts ... 128 -- -- -- --
Administrative charges ................................ (1) -- -- (1) --
Contract surrenders ................................... (69) -- -- -- --
Participant transfers to other Travelers accounts ..... -- -- -- -- --
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from unit transactions ................. 152,296 97,752 27,310 32,027 22,969
--------- --------- --------- --------- ---------
Net increase (decrease) in net assets ............ 161,695 103,540 27,331 36,056 25,014
NET ASSETS:
Beginning of period ................................. -- -- -- -- --
--------- --------- --------- --------- ---------
End of period ....................................... $ 161,695 $ 103,540 $ 27,331 $ 36,056 $ 25,014
========= ========= ========= ========= =========
</TABLE>
-12-
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH BARNEY
U.S. GOVERNMENT AIM CAPITAL SMITH BARNEY SMITH BARNEY LARGE
SECURITES APPRECIATION MONEY MARKET HIGH INCOME CAPITALIZATION TBC MANAGED EMERGING
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO GROWTH PORTFOLIO INCOME PORTFOLIO MARKETS PORTFOLIO COMBINED
- --------------- ------------ ------------ ------------ ---------------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14,070 $ -- $ 753 $ -- $ 160 $ -- $ 161 $ 20,494
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
367 55 248 171 402 297 53 3,261
35 5 24 17 38 28 5 315
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
13,668 (60) 481 (188) (280) (325) 103 16,918
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
250 83 79,652 144 178 233 48 82,084
241 87 79,652 151 160 232 48 82,021
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
9 (4) -- (7) 18 1 -- 63
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(12,292) 2,843 -- (135) 26,259 226 1,115 71,280
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,385 2,779 481 (330) 25,997 (98) 1,218 88,261
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
164,140 34,217 187,697 99,302 255,824 178,409 25,201 1,815,891
9,418 -- -- -- -- -- -- 28,738
-- -- -- -- (1) -- -- (3)
-- -- -- -- -- (50) (12) (300)
-- -- (28,250) -- -- (262) (43) (28,740)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
173,558 34,217 159,447 99,302 255,823 178,097 25,146 1,815,586
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
174,943 36,996 159,928 98,972 281,820 177,999 26,364 1,903,847
-- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 174,943 $ 36,996 $ 159,928 $ 98,972 $ 281,820 $ 177,999 $ 26,364 $ 1,903,847
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
-13-
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT TM
FOR THE PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
SALOMON
CAPITAL BROTHERS
SMALL CAP APPRECIATION SMALL CAP EQUITY VARIABLE
REIT SERIES VALUE SERIES PORTFOLIO PORTFOLIO PORTFOLIO INVESTORS FUND
----------- ------------ ------------ --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Accumulation units beginning of period ........... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 18,917 5,244 86,764 99,998 122,510 24,856
Accumulation units redeemed and
transferred to other Travelers accounts ..... (67) -- -- (40) (237) --
------ ----- ------ ------ ------- ------
Accumulation units end of period ................. 18,850 5,244 86,764 99,958 122,273 24,856
====== ===== ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON
SMALL CAP DEVELOPING TEMPLETON MONTGOMERY JURIKA &
STRONG INVESTMENTS MARKETS FUND INTERNATIONAL VARIABLE VOYLES
SCHAFER VALUE FUND (CLASS (CLASS 2 FUND (CLASS SERIES: CORE EQUITY
FUND II 2 SHARES) SHARES) 2 SHARES) GROWTH FUND PORTFOLIO
------------- ----------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ........... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 26,971 21,103 15,750 91,929 14,780 4,782
Accumulation units redeemed and
transferred to other Travelers accounts ..... -- -- -- (1) (46) --
------ ------ ------ ------ ------ -----
Accumulation units end of period ................. 26,971 21,103 15,750 91,928 14,734 4,782
====== ====== ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
LAZARD DISCIPLINED DISCIPLINED
INTERNATIONAL MFS NWQ MID CAP SMALL CAP
LARGE CAP STOCK RESEARCH LARGE CAP STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ........... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 48,504 175,297 99,898 27,741 32,723 25,160
Accumulation units redeemed and
transferred to other Travelers accounts ..... -- (80) -- -- (1) (1)
------ ------- ------ ------ ------ ------
Accumulation units end of period ................. 48,504 175,217 99,898 27,741 32,722 25,159
====== ======= ====== ====== ====== ======
</TABLE>
-14-
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. SCHEDULE OF ACCUMULATION UNITS FOR SEPARATE ACCOUNT TM
FOR THE PERIOD JULY 20, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
U.S. SMITH BARNEY TBC
GOVERNMENT AIM CAPITAL SMITH BARNEY SMITH BARNEY LARGE MANAGED
SECURITIES APPRECIATION MONEY MARKET HIGH INCOME CAPITALIZATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
---------- ------------ ------------ ------------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Accumulation units beginning of period ........... -- -- -- -- -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 167,258 34,476 185,906 104,252 242,001 178,789
Accumulation units redeemed and
transferred to other Travelers accounts ..... -- -- (28,069) -- (1) (314)
------- ------ ------- ------- ------- -------
Accumulation units end of period ................. 167,258 34,476 157,837 104,252 242,000 178,475
======= ====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS
PORTFOLIO COMBINED
--------- ----------
<S> <C> <C>
Accumulation units beginning of period ........... -- --
Accumulation units purchased and
transferred from other Travelers accounts ... 31,364 1,886,973
Accumulation units redeemed and
transferred to other Travelers accounts ..... (76) (28,933)
--------- ---------
Accumulation units end of period ................. 31,288 1,858,040
========= =========
</TABLE>
-15-
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
To the Owners of Variable Annuity Contracts of
The Travelers Separate Account TM for Variable Annuities:
We have audited the accompanying statement of assets and liabilities of The
Travelers Separate Account TM for Variable Annuities as of December 31, 1998,
and the related statement of operations and changes in net assets for the period
July 20, 1998 (date operations commenced) to December 31, 1998. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1998, by correspondence with the
underlying funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Separate Account
TM for Variable Annuities as of December 31, 1998, the results of its operations
and the changes in its net assets for the period July 20, 1998 (date operations
commenced) to December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Hartford, Connecticut
February 17, 1999
-16-
<PAGE> 18
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 Separate Account TM for Variable
Annuities or Separate Account TM's underlying funds. It should not be used in
connection with any offer except in conjunction with the Prospectus for The
Travelers Separate Account TM for Variable Annuities product(s) offered by The
Travelers Insurance Company and the Prospectuses for the underlying funds, which
collectively contain all pertinent information, including the applicable sales
commissions.
Sep TM (Annual) (12-98) Printed in U.S.A.
