<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 19
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19
HIGH YIELD BOND TRUST
(Exact name of Registrant)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (203) 277-0111
ERNEST J. WRIGHT
Secretary to the Board of Trustees
High Yield Bond Trust
One Tower Square
Hartford, Connecticut 06183
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: ______________
It is proposed that this filing will become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
__X__ on May 1, 1995 pursuant to paragraph (b)
_____
_____ 60 days after filing pursuant to paragraph (a)(i)
_____ on ____________ pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on ____________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE REGISTRANT WERE
REGISTERED PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940.
A RULE 24F-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED DECEMBER 31, 1994 WAS
FILED ON FEBRUARY 27, 1995.
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HIGH YIELD BOND TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of
1933
ITEM
NO. CAPTION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Fund Description;
Investment Objective
and Policies
5. Management of the Fund Fund Management and Expenses;
Additional Information
6. Capital Stock and Other Securities Fund Description; Dividends and Tax
Status; Fund Shares; Pricing Shares
7. Purchase of Securities Being Offered How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Legal Proceedings
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Restrictions; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Adviser; Additional
Other Services Information
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Securities Declaration of Trust
19. Purchase, Redemption and Pricing Valuation of Securities
of Securities Being Offered
20. Tax Status Distributions and Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Financial Statements
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
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HIGH YIELD BOND TRUST
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ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 1-800-842-0125
High Yield Bond Trust (the "Fund") is a diversified open-end management
investment company (mutual fund) whose goal is generous income. The Fund
invests primarily in corporate bonds and its portfolio ordinarily includes a
substantial number of bonds which, as a class, sell at discounts from par value
and are typically high risk securities. The generous income sought by the Fund
is ordinarily associated with high yield bonds and similar securities in the
lower rating categories of the recognized rating agencies or with securities
that are unrated ("high yield bonds"). Such high yield securities are commonly
known as "junk bonds." High yield bonds generally involve greater volatility
of price and risk of principal and income than bonds in the higher rating
categories and are, on balance, considered predominantly speculative.
Shares of the Fund are currently offered without a sales charge only to The
Travelers Fund U for Variable Annuities ("Fund U") and The Travelers Fund UL
for Variable Life Insurance ("Fund UL"), separate accounts of The Travelers
Insurance Company (the "Company" or "Travelers Insurance"). The Fund serves as
one of the investment vehicles for the variable annuity and variable life
insurance contracts issued by the Company. Funds U and UL invest in shares of
the Fund in accordance with allocation instructions received from owners of the
variable annuity and variable life insurance contracts. Such allocation rights
are described further in the accompanying prospectuses for Funds U and UL. The
rights of Funds U and UL as shareholders should be distinguished from the
rights of owners of the variable annuity and variable life insurance contracts.
The term "shareholder" as used herein refers to Funds U and UL or to any other
insurance company separate account that may use shares of the Fund as an
investment vehicle in the future.
This Prospectus concisely sets forth the information about the Fund that you
should know before investing. Please read it and retain it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information dated May 1, 1995 which has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to Travelers
Insurance, Annuity Services 5 SHS, One Tower Square, Hartford, Connecticut
06183-5030, or by calling 1-800-842-0125.
HIGH YIELD BONDS INVOLVE SUBSTANTIAL RISKS. INVESTORS SHOULD REFER TO "SPECIAL
CONSIDERATIONS RELATING TO HIGH YIELD SECURITIES" ON PAGE 5 FOR A DESCRIPTION
OF THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS ISSUED BY TRAVELERS INSURANCE AND
ITS SEPARATE ACCOUNTS. BOTH THIS PROSPECTUS AND THE CONTRACT PROSPECTUS SHOULD
BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
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THIS PAGE INTENTIONALLY LEFT BLANK.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS...................................................3
FUND DESCRIPTION.......................................................4
INVESTMENT OBJECTIVE AND POLICIES......................................4
INVESTMENT RESTRICTIONS................................................4
RISK FACTORS...........................................................5
SPECIAL CONSIDERATIONS RELATING TO HIGH YIELD SECURITIES...............5
FUND MANAGEMENT AND EXPENSES...........................................6
BOARD OF TRUSTEES......................................................6
INVESTMENT ADVISER.....................................................6
Advisory Fees..................................................6
Portfolio Manager..............................................7
SECURITIES TRANSACTIONS................................................7
TRANSFER AGENT.........................................................7
FUND EXPENSES..........................................................7
PORTFOLIO TURNOVER.....................................................7
FUND SHARES............................................................7
HOW TO BUY SHARES......................................................7
PRICING SHARES.........................................................8
HOW TO REDEEM SHARES...................................................8
DIVIDENDS AND TAX STATUS...............................................8
LEGAL PROCEEDINGS......................................................9
ADDITIONAL INFORMATION.................................................9
EXHIBIT A.............................................................10
EXHIBIT B.............................................................14
</TABLE>
HYBT-2
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FINANCIAL HIGHLIGHTS
HIGH YIELD BOND TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
The following information on per share data for the five years ended
December 31, 1994, has been audited by Coopers & Lybrand L.L.P., Independent
Accountants. All other periods presented have been audited by the Fund's prior
auditors. Coopers & Lybrand L.L.P.'s report on the per share data for each of
the five years in the period ended December 31, 1994 is contained in the 1994
Annual Report to Shareholders. The Annual Report, which contains additional
performance information, is incorporated by reference into the Statement of
Additional Information. A copy of the Annual Report can be obtained without
charge by writing to or calling the Company at the address and telephone number
listed on the cover of this Prospectus. The following information should be
read in conjunction with the financial statements contained in the 1994 Annual
Report.
<TABLE>
<CAPTION>
Year Ended December 31,
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PER SHARE DATA 1994 1993 1992 1991 +l990 1989 1988 1987 1986 ++l985
---- ---- ---- ---- ----- ---- ---- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year............... $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33 $ 10.12 $ 9.94 $ 11.41 $ 11.85 $ 10.78
Income from operations
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Net investment income............. 0.66 0.68 0.88 0.94 1.02 1.28 1.21 1.22 1.29 1.26
Net gains or losses on securities
(realized and unrealized)....... (0.76) 0.47 0.18 0.88 (1.81) (1.11) 0.20 (1.21) (0.39) 1.11
------ ------- ------- ------- ------ ------ ----- ------ ------ -----
Total from investment
operations................... (0.10) 1.15 1.06 1.82 (0.79) 0.17 1.41 0.01 0.90 2.37
Less distributions
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Distributions from net
investment income............... (0.81) (0.90) (0.94) (0.67) (0.96) (1.23) (1.48) (1.13) (1.30)
Distributions from net
realized gains.................. (0.66) -- -- -- -- -- -- -- (0.21) --
----- ----- ----- ------ ----- ----- ----- ----- ----- ------
Net asset value, end of year...... $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33 $ 10.12 $ 9.94 $ 11.41 $ 11.85
------ ------- ------- ------- ------ ------ ----- ------ ------ ------
------ ------- ------- ------- ------ ------ ----- ------ ------ ------
TOTAL RETURN * (1.26)% 14.01% 13.16% 26.11% (9.12)% 1.40% 14.57% (0.34)% 7.98% 18.66%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
year (thousands)................$ 11,716 $ 12,765 $ 10,289 $ 7,724 $ 6,238 $ 10,607 $ 59,637 $ 51,540 $ 68,120 $ 41,039
Ratio of operating expenses
to average net assets........... 1.25%** 0.99%** 0.56%** 0.56%** 0.92%** 1.67% 1.00% 0.96% 0.98% 1.28%
Ratio of net investment
income to average net assets.... 7.71% 7.69% 10.24% 11.93% 12.33% 13.37% 11.65% 10.90% 11.17% 11.24%
Portfolio turnover rate***........ 146% 19% 52% 35% 29% 87% 67% 81% 83% 141%
<FN>
* Total return is determined by dividing the increase (decrease) in value of a
share during the year, after reflecting the reinvestment of dividends
declared during the year, by the beginning of year share price. Shares in
Fund HY are only sold to Travelers Insurance separate accounts in
connection with the issuance of variable annuity and variable life
insurance contracts. Total return does not reflect the deduction of any
contract charges or fees assessed by Travelers Insurance separate accounts.
** The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by Travelers Insurance in connection with
voluntary expense limitations. Without the expense reimbursement, the ratio
of operating expenses to average net assets would have been 1.33%, 1.31%,
1.28%, 1.87% and 2.13% for the years ended December 31, 1994, 1993, 1992,
1991 and 1990, respectively.
*** Portfolio turnover rate for years ending on or after December 31, 1985
includes certain U.S. Government obligations.
+ On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund HY.
++ On August 16, 1985, Keystone Bond Trust combined with High Yield Bond Trust.
Amounts in this column include the income and capital charges of High Yeld
Bond Trust to August 16, 1985, and the activity of the combined Funds from
the date of merger.
</TABLE>
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FUND DESCRIPTION
High Yield Bond Trust (the "Fund") is registered with the Securities and
Exchange Commission as a diversified open-end management investment company,
commonly known as a mutual fund. The Fund was created under Massachusetts law
as a Massachusetts business trust on March 18, 1982.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide shareholders with
generous income. To achieve this objective the Fund invests primarily in
corporate bonds and its portfolio ordinarily includes a substantial number of
bonds which, as a class, sell at discounts from par value. These bonds are
generally below investment grade, for example, bonds rated BB or lower by
Standard & Poor's Corporation or Ba or lower by Moody's Investors Service, Inc.
These bonds are commonly known as "junk bonds" and are typically high risk
securities. (For a description of the averaged credit quality ratings of the
Fund's assets for the twelve months ended December 31, 1994, please refer to
Exhibit B to the Prospectus.)
While the Fund's investment adviser performs its own credit analyses of the
Fund's investments and does not rely on ratings assigned by rating services,
bonds rated below investment grade generally involve greater volatility of
price and risk of principal and income than bonds in the higher rating
categories and are, on balance, considered predominantly speculative. While
such bonds will likely have some quality and protective characteristics, these
characteristics are outweighed by uncertainties of major risk exposures to
adverse conditions.
The Fund considers potential for growth of capital in selecting securities.
The Fund's investments may include fixed and adjustable rate or stripped bonds,
including zero coupon and pay-in-kind bonds, debentures, notes, equipment trust
certificates, U.S. government securities and debt securities convertible into
or exchangeable for preferred or common stock. The Fund may continue to hold
preferred or common stock received in connection with convertible or
exchangeable securities. The Fund may also invest in units which are debt
securities with stock or warrants to buy stock attached. The Fund may, from
time to time, purchase new-issue or government or agency securities on a
"when-issued" or "to-be-announced" basis. The Fund may invest in both domestic
and foreign securities. At least 65% of the Fund's assets normally will be
invested in bonds and debentures.
When market conditions warrant, the Fund may adopt a defensive position to
preserve shareholders' capital by investing in money market instruments. Money
market securities must mature within one year of their purchase and consist of
U.S. government securities; certificates of deposit, demand and time deposits
and bankers' acceptances of banks which are members of the Federal Deposit
Insurance Corporation and which have assets of at least $1 billion, including
master demand notes; and repurchase agreements secured by U.S. government
securities.
The Fund may write covered call options on securities which it owns. Such an
option on an underlying security would obligate the Fund to sell, and give the
purchaser of the option the right to buy, that security at a stated exercise
price at any time until a stated expiration date of the option.
The Fund may invest up to 10% of its net assets in restricted securities
which may not be publicly sold without registration under the Securities Act of
1933 (the "1933 Act"). In most instances such securities are traded at a
discount from the market value of unrestricted securities of the same issuer
until the restriction is eliminated. If and when the Fund sells such portfolio
securities, it may be deemed an underwriter, as such term is defined in the
1933 Act, with respect thereto, and registration of such securities under the
1933 Act may be required. The Fund will not bear the expense of such
registration. The Fund intends to reach agreements with all such issuers
whereby they will pay all expenses of registration.
The Fund may also invest up to 35% of its total assets in preferred stocks,
including adjustable rate preferred and common stocks and other equity
securities, and convertible securities and warrants which may be used to create
other permissible investments. Such investments must be consistent with the
Fund's objective of providing shareholders with generous income and may be
acquired as part of a unit combining income and equity securities.
For further information about the types of investments and investment
techniques available to the Fund, including the risks associated with such
investments and investment techniques, see Exhibit A to this Prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental restrictions which may not be
changed without a vote of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940, as amended. These
restrictions and certain other fundamental restrictions are set forth in the
Statement of Additional Information. Unless otherwise stated, all references to
the Fund's assets are in terms of current market value.
HYBT-4
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The Fund will not: (1) invest more than 5% of its assets in the securities of
any one issuer; (2) borrow money, except to facilitate redemptions or borrow
money for temporary or emergency purposes and then only from banks and in
amounts of up to 10% of its gross assets computed at cost; assets pledged to
secure borrowings shall be no more than the lesser of the amount borrowed or
10% of the Fund's gross assets computed at cost; (3) invest more than 25% of
its assets in the securities of issuers in the same industry; and (4) invest
more than 10% of its assets in securities for which market quotations are not
readily available, including restricted securities.
The Fund has undertaken to a state insurance authority that so long as the
state authority requires and shares of the Fund are offered for sale to fund
variable life insurance policies in that state, the Fund will comply with
certain foreign security diversification guidelines. These guidelines provide
that: (1) as the percentage of the Fund's net asset value invested in foreign
securities increases, a corresponding increase will be made in the number of
countries in whose securities the Fund invests; and (2) the Fund will invest no
more than 20% of its net asset value in the securities of issuers located in
any one country (other than the United States). Notwithstanding the above, the
guidelines permit the Fund to invest any amount in the securities of issuers
located in the United States, and to invest an additional 15% of its net asset
value in the securities of issuers located in Australia, Canada, France, Japan,
the United Kingdom or Germany. The guidelines also require that American
Depository Receipts be treated as if they were foreign securities. This
undertaking is not a fundamental investment restriction or policy and may be
changed without a vote of shareholders.
RISK FACTORS
In addition to the special risk considerations relating to high yield
securities described below, the general risk inherent in investing in the Fund
is that the net asset value will fluctuate in response to changes in economic
conditions, interest rates and the market's perception of the underlying
portfolio securities of the Fund. Moreover, there can be no assurance that the
Fund will achieve its investment objective since there is uncertainty in every
investment.
SPECIAL CONSIDERATIONS RELATING TO HIGH YIELD SECURITIES
The Fund invests aggressively and seeks to maximize return over time from a
combination of many factors, including high current income, and capital
appreciation from high yielding bonds and other similar securities ("high yield
securities," also commonly known as "junk bonds"). Such aggressive investing
involves risks which are greater than the risks of investing in higher quality
debt securities. These risks are discussed in greater detail below and include
risks from (1) changes in credit status, including weaker overall credit
conditions of issuers and risks of default; (2) industry market and economic
risk; (3) interest rate fluctuations; (4) volatility of net asset value
resulting from broad and rapid changes in the value of underlying securities;
(5) possible legislation having adverse effects on high yield bond prices; and
(6) greater price variability and credit risks of certain high yield securities
such as zero coupon and PIK securities. While these risks provide the
opportunity for maximizing return over time, they may result in greater upward
and downward movement of the net asset value per share of the Fund. As a
result, they should be carefully considered by investors.
Investors should be aware of the following market, economic and credit
factors influencing high yield securities: (1) securities rated BB or lower by
Standard & Poor's Corporation ("S&P") or Ba or lower by Moody's Investors
Service, Inc. ("Moody's") are considered predominantly speculative with respect
to the ability of the issuer to meet principal and interest payments; (2) the
value of high yield securities may be more susceptible to real or perceived
adverse economic, company or industry conditions than is the case for higher
quality securities; (3) a widespread economic downturn could result in
increased defaults in the high yield market; (4) adverse market, credit or
economic conditions could make it difficult at certain times to sell certain
high yield securities held by the Fund; (5) the secondary market for high yield
securities may be less liquid than the secondary market for higher quality
securities which may affect the value of certain high yield securities held by
the Fund at certain times; (6) there may not always be readily available market
quotations for certain securities; (if this occurs, the investment adviser will
use its best judgment to assign values to those securities); and (7) zero
coupon and pay-in-kind securities may be subject to greater changes in value
due to market conditions, the absence of a cash interest payment and the
tendency of issuers of such securities to have weaker overall credit conditions
than other high yield securities. These characteristics of high yield
securities make them generally more appropriate for long-term investment.
The generous income sought by the Fund is ordinarily associated with
securities in the lower rating categories of the recognized rating agencies or
with securities that are unrated. Such high yield securities are generally
rated BB or lower by S&P or Ba or lower by Moody's. The Fund may invest in
securities that are rated as low as D by S&P and C- by Moody's. The Fund
intends to invest in D rated debt only in cases where the investment adviser
determines that there is a distinct prospect of improvement in the issuer's
financial position as a result of the completion of reorganization or
HYBT-5
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otherwise. The Fund may also invest in unrated securities which offer
comparable yields and risks as securities which are rated, as well as in
non-investment quality zero coupon and pay-in-kind securities. (For a
description of these rating categories, please refer to the Statement of
Additional Information.)
Since the Fund takes an aggressive approach to investing, the investment
adviser tries to maximize the return by controlling risk through
diversification, credit analysis, review of sector and industry trends,
interest rate forecasts and economic analysis. TAMIC's analysis of securities
focuses on values based on factors such as interest or dividend coverage, asset
values, earnings prospects and the quality of management of the company. In
making investment recommendations, TAMIC also considers current income,
potential for capital appreciation, maturity structure, quality guidelines,
coupon structure, average yield, percentage of zero coupon and PIK securities,
percentage of non-accruing items, and yield to maturity. TAMIC also considers
the ratings of Moody's and S&P assigned to various securities but does not rely
solely on ratings assigned by Moody's and S&P because (1) Moody's and S&P
assigned ratings are based largely on historical financial data and may not
accurately reflect the current financial outlook of companies, and (2) there
can be large differences among the current financial conditions of issuers
within the same rating category. Achievement of the Fund's investment objective
is more dependent upon TAMIC's own credit analysis than is the case for higher
quality bonds.
Income and yields on high yield securities, as on all securities, will
fluctuate over time.
FUND MANAGEMENT AND EXPENSES
BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the
Fund. Subject to the provisions of the Declaration of Trust, the business and
affairs of the Fund shall be managed by the Trustees or other parties so
designated by the Trustees. Information relating to the Board of Trustees,
including its members and their compensation, is contained in the Statement of
Additional Information.
INVESTMENT ADVISER
As described above, the Board of Trustees monitors the activities of those
entities which provide investment advisory services to the Fund. Travelers
Asset Management International Corporation (TAMIC) provides investment advice
and, in general, supervises the management and investment program of the Fund.
TAMIC is a registered investment adviser which has provided investment
advisory services since its incorporation in 1978. TAMIC is an indirect wholly
owned subsidiary of Travelers Group, and its principal offices are located at
One Tower Square, Hartford, Connecticut 06183. In addition to providing
investment advice to the Fund, TAMIC also acts as investment adviser for other
investment companies which fund variable contracts issued by the Company,
including The Travelers Timed Bond Account for Variable Annuities, The
Travelers Money Market Account for Variable Annuities, The Travelers Quality
Bond Account for Variable Annuities, Cash Income Trust, Managed Assets Trust
and the U.S. Government Securities Portfolio of The Travelers Series Trust; as
well as for individual and pooled pension and profit-sharing accounts and for
domestic and offshore insurance companies affiliated with Travelers Insurance.
ADVISORY FEES
For furnishing investment management and advisory services to the Fund, TAMIC
is paid an amount equivalent on an annual basis to the advisory fee schedule
set forth in the table below. The fee is computed daily and paid weekly.
<TABLE>
<S> <C> <C>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE FUND
- --------------------- -------------------
0.50% of the first, $ 50,000,000, plus
0.40% of the next, $100,000,000, plus
0.30% of the next, $100,000,000, plus
0.25% of amounts over $250,000,000
</TABLE>
For the fiscal year ended December 31, 1994, TAMIC received a fee equal to .50%
of the Fund's average net assets for its services as investment adviser.
HYBT-6
<PAGE>
PORTFOLIO MANAGER
The Fund has been managed by Eric Dobbin since October, 1994.
Mr. Dobbin has been the high yield portfolio manager for the Company's
Securities Department since August, 1994. Prior to that time he was head of
high yield security research at Smith Barney which he joined in 1989.
SECURITIES TRANSACTIONS
Under policies established by the Board of Trustees, TAMIC selects
broker-dealers to execute transactions for the Fund subject to the receipt of
best execution. When selecting broker-dealers to execute portfolio transactions
for the Fund, TAMIC may follow a policy of considering as a factor the number
of shares of the Fund sold by such broker-dealers. In addition, broker-dealers
may from time to time be affiliated with the Fund, TAMIC, or their affiliates.
The Fund may pay higher commissions to broker-dealers which provide research
services. TAMIC may use these services in advising the Fund as well as in
advising its other clients.
TRANSFER AGENT
Travelers Insurance, One Tower Square, Hartford, Connecticut 06183, serves as
the Fund's transfer agent and dividend disbursing agent.
FUND EXPENSES
In addition to the investment advisory fees discussed above, the other
principal expenses of the Fund include the charges and expenses of the transfer
agent, the custodian, the independent auditors, and any outside legal counsel
employed by either the Fund or the Board of Trustees; the compensation for the
disinterested members of the Board of Trustees; the costs of printing and
mailing the Fund's prospectuses, proxy solicitation materials, and annual,
semi-annual and periodic reports; brokerage commissions, interest charges and
taxes; and any registration, filing and other fees payable to government
agencies in connection with the registration of the Fund and its shares under
federal and state securities laws.
Pursuant to a Management Agreement dated May 1, 1993 between the Fund and the
Company, the Company has agreed to reimburse the Fund for the amount by which
the Fund's aggregate annual expenses, including investment advisory fees but
excluding brokerage commissions, interest charges and taxes, exceed 1.25% of
the Fund's average net assets for any fiscal year.
For the fiscal year ended December 31, 1994, the Fund paid 1.25% of its
average net assets in expenses. These expenses would have been 1.33% of the
Fund's average net assets if the Company had not paid for any of the Fund's
expenses.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rates for the fiscal years ended December 31,
1992, 1993 and 1994 were 52%, 19% and 146%, respectively. High portfolio
turnover may involve correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Fund, as well as
additional gains or losses to shareholders.
FUND SHARES
The Fund currently issues one class of shares which participate equally in
dividends and distributions and have equal voting, liquidation and other
rights. When issued and paid for, the shares will be fully paid and
nonassessable by the Fund and will have no preference, conversion, exchange or
preemptive rights.
Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares. Shares are redeemable, transferable
and freely assignable as collateral. There are no sinking fund provisions.
(See the accompanying separate account prospectus for a discussion of voting
rights applicable to purchasers of variable annuity and variable life
insurance contracts.)
Under Massachusetts law it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. However, the Fund's Declaration
of Trust provides that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.
HOW TO BUY SHARES
Shares of the Fund are currently sold only to The Travelers Fund U for
Variable Annuities and The Travelers Fund UL for Variable Life Insurance in
connection with variable annuity and variable life insurance contracts issued
by the
HYBT-7
<PAGE>
Company. Shares of the Fund are not sold to the general public. Fund shares are
sold on a continuing basis, without a sales charge, at the net asset value next
computed after payment is made by the insurance company to the Fund's
custodian. However, the separate accounts to which shares are sold may impose
sales and other charges, as described in the appropriate contract prospectus.
Although the Fund is not currently aware of any disadvantages to contract
owners of either variable annuity or variable life insurance contracts because
the Fund's shares are available with respect to both products, an
irreconcilable material conflict may conceivably arise between contract owners
of different separate accounts investing in the Fund due to differences in
tax treatment, management of the Fund's investments, or other considerations.
The Fund's Board of Trustees will monitor events in order to identify any
material conflicts between variable annuity contract owners and variable life
insurance policy owners, and will determine what action, if any, should be
taken in the event of such a conflict.
PRICING SHARES
The net asset value of a Fund share is computed as of the close of trading on
each day on which the New York Stock Exchange is open, except on days when
changes in the value of the Fund's securities do not affect the current net
asset value of its shares. The New York Stock Exchange is currently closed on
weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of the Fund is arrived at by determining the value of the
Fund's assets, subtracting its liabilities, and dividing the result by the
number of shares outstanding.
The Fund values short-term money market instruments with maturities of sixty
days or less at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest approximates market. All other investments are valued at
market value or where market quotations are not readily available, at fair
value as determined in good faith by the Fund's Board of Trustees.
HOW TO REDEEM SHARES
Shareholders may redeem Fund shares at the redemption value next determined
after receipt by the Fund of a proper redemption request. The redemption value
is the net asset value adjusted for fractions of a cent and may be more or
less than the shareholder's cost depending upon changes in the value of the
Fund's portfolio securities between purchase and redemption.
The Fund computes the redemption value at the close of the New York Stock
Exchange at the end of the day on which it has received all proper
documentation from the shareholder. Redemption proceeds are normally wired or
mailed either the same or the next business day, but in no event later than
seven days thereafter.
The Fund may temporarily suspend the right to redeem its shares when: (1) the
New York Stock Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable; or (4) the Securities and Exchange Commission,
for the protection of shareholders, so orders.
DIVIDENDS AND TAX STATUS
The Fund has qualified, and intends to qualify in the future, as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for each fiscal year.
The distribution requirements described above may have an adverse effect on
the Fund to the extent it invests in high yield securities structured as zero
coupon and pay-in-kind bonds. An investment company typically accrues income on
those securities prior to the receipt of cash payments. Therefore, the Fund may
have to dispose of its portfolio securities under disadvantageous circumstances
to generate cash, or leverage itself by borrowing cash, to satisfy distribution
requirements.
Capital gains and dividends are distributed in cash or reinvested
in additional shares of the Fund, without a sales charge. Although purchasers
of variable contracts are not subject to federal income taxes on distributions
by the Fund, they may be subject to state and local taxes and should review the
accompanying contract prospectus for a discussion of the tax treatment
applicable to purchasers of variable annuity and variable life insurance
contracts.
HYBT-8
<PAGE>
LEGAL PROCEEDINGS
There are no pending material legal proceedings affecting the Fund.
ADDITIONAL INFORMATION
Except as otherwise stated in this Prospectus or as required by law, the Fund
reserves the right to change the terms of the offer stated in this Prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
HYBT-9
<PAGE>
EXHIBIT A
DESCRIPTION OF CERTAIN TYPES OF INVESTMENTS AND
INVESTMENT TECHNIQUES AVAILABLE TO THE FUND
ZERO COUPON BONDS
Zero coupon bonds do not pay interest for several years, then they pay a full
coupon interest until maturity. They are sold at a substantial original issue
discount that equals the missing interest payment compounded at the coupon
rate. Additionally, zero coupon bonds give the issuer the flexibility of
reduced cash interest expense for several years, and they give the purchaser
the potential advantage of compounding the coupons at a higher rate than might
otherwise be available.
However, zero coupon bonds are very risky for the investor. Because the cash
flows from the bonds are deferred and because zero coupon bonds often represent
very subordinated debt, their prices are subject to more volatility than most
other bonds.
A variant of zero coupon bonds are step-up bonds. These bonds pay a low
initial interest rate for several years and then a higher rate until maturity.
They are also issued at an original issue discount.
For federal income tax purposes, a purchaser of zero coupon bonds (either
initially or in the secondary market) is treated as if the buyer had purchased
a corporate obligation issued on the purchase date with an original issue
discount. The purchaser is required to take into income each year as ordinary
income an allocable portion of such discounts determined on a 'constant yield'
method. Any such income increases the holder's tax basis for the zero coupon
bond, and any gain or loss on a sale of the zero coupon bonds relative to the
holder's basis, as so adjusted, is a capital gain or loss. Certain federal tax
law income and capital gain distribution requirements may have an adverse
effect on the Fund to the extent the Fund invests in zero coupon bonds. See
"Dividends and Tax Status," page 8.
PAY-IN-KIND BONDS
Pay-in-kind (PIK) bonds pay interest either in cash or in additional
securities at the issuer's option for a specified period. Like zero coupon
bonds, PIK bonds are designed to give the issuer flexibility in managing cash
flow. Unlike zero coupon bonds, however, PIK bonds offer the investor the
opportunity to sell the additional securities issued in lieu of interest and
thus obtain current income on the original investment. Certain federal tax law
income and capital gain distribution requirements may have an adverse effect on
the Fund to the extent that the Fund invests in PIK bonds. See "Dividends and
Tax Status," page 8.
RESET BONDS
The interest rate on reset bonds is adjusted periodically to a level which
should allow the bonds to trade at a specified dollar level, generally par or
$101. The rate can usually be raised, but the bonds have a low call premium,
limiting the opportunity for capital gains. Some resets have a maximum rate,
generally 2.5% or 3% above the initial rate.
INCREASING RATE NOTES
Increasing rate notes (IRNs) have interest rates that increase periodically
(by 1/4% per quarter, for example). IRNs are generally used as a temporary
financing instrument since the increasing rate is an incentive for the issuer
to refinance with longer term debt.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the United States Government include a
variety of Treasury securities that differ only in their interest rates,
maturities and dates of issuance. Treasury bills have maturities of one year or
less; Treasury notes have maturities of one to ten years; and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include direct obligations of the United States
Treasury and securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Home Loan Banks, Federal Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Maritime Administration, The
Tennessee Valley Authority, District of Columbia Armory Board and Federal
National Mortgage Association.
HYBT-10
<PAGE>
Some obligations of United States Government agencies and instrumentalities,
such as Treasury bills and Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
United States; others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the Treasury; still others,
such as bonds issued by the Federal National Mortgage Association, a private
corporation, are supported only by the credit of the instrumentality. Because
the United States Government is not obligated by law to provide support to an
instrumentality it sponsors, the Fund will invest in the securities issued by
such an instrumentality only when TAMIC determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable
investments. United States Government securities will not include international
agencies or instrumentalities in which the United States Government, its
agencies or instrumentalities participate, such as the World Bank, the Asian
Development Bank or the Inter-American Development Bank, or issues insured by
the Federal Deposit Insurance Corporation.
WHEN-ISSUED SECURITIES
The Fund may, from time to time, purchase new-issue Government or Agency
securities on a "when-issued" or "to be announced" ("TBA") basis ("when-issued
securities"). The prices of such securities will be fixed at the time the
commitment to purchase is made, and may be expressed in either dollar price or
yield maintenance terms. Delivery and payment may be at a future date beyond
customary settlement time. It is the customary practice of the Fund to make
when-issued or TBA purchases for settlement no more than 90 days beyond the
commitment date.
The commitment to purchase a when-issued security may be viewed as a senior
security, and will be marked to market and reflected in the Fund's net asset
value daily from the commitment date. While it is TAMIC's intention to take
physical delivery of these securities, offsetting transactions may be made
prior to settlement, if it is advantageous to do so. The Fund does not make
payment or begin to accrue interest on these securities until settlement date.
In order to invest its assets pending settlement, the Fund will normally invest
in short-term money market instruments and other securities maturing no later
than the scheduled settlement date.
The Fund does not intend to purchase when-issued securities for speculative
or "leverage" purposes. Consistent with Section 18 of the Investment Company
Act of 1940 and the General Policy Statement of the SEC thereunder, when the
Fund commits to purchase a security on a when-issued or TBA basis, it will
identify and place in a segregated account high-grade money market instruments
and other liquid securities equal in value to the purchase cost of the
when-issued securities.
TAMIC believes that purchasing securities in this manner will be advantageous
to the Fund. However, this practice does entail certain additional risks,
namely the default of the counterparty on its obligations to deliver the
security as scheduled. In this event, the Fund would endure a loss (gain) equal
to the price appreciation (depreciation) in value from the commitment date.
TAMIC employs a rigorous credit quality procedure in determining the
counterparties with which it will deal in when-issued securities, and in some
circumstances, will require the counterparty to post cash or some other form of
security as margin to protect the value of its delivery obligation pending
settlement.
WRITING COVERED CALL OPTIONS
The Fund may write or sell covered call options. By writing a call option,
the Fund becomes obligated during the term of the option to deliver the
securities underlying the option upon payment of the exercise price.
The Fund may only write "covered" options. This means that as long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option or in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The principal reason for writing call options is to obtain, through a receipt
of premiums, a greater current return than would be realized on the underlying
securities alone. The Fund receives a premium from writing a call option which
it retains whether or not the option is exercised. By writing a call option,
the Fund might lose the potential for gain on the underlying security while the
option is open.
Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could impair the Fund's ability to use such
options to achieve its investment objectives.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities of one year
or less, such as bank certificates of deposit, bankers' acceptances, commercial
paper (including master demand notes) and obligations issued or guaranteed
HYBT-11
<PAGE>
by the United States (U.S.) Government, its agencies or instrumentalities, some
of which may be subject to repurchase agreements.
CERTIFICATES OF DEPOSIT
Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest
to the bearer of the receipt on the date specified on the certificate. The
certificate can usually be traded in the secondary market prior to maturity.
Certificates of deposit will be limited to U.S. dollar-denominated
certificates of United States banks which have at least $1 billion in deposits
as of the date of their most recently published financial statements (including
foreign branches of U.S. banks, U.S. branches of foreign banks which are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation, and savings and loan associations which are insured by the Federal
Deposit Insurance Corporation).
The Fund will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Fund does not
currently intend to purchase such foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by foreign banks.
OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS
The obligations of foreign branches of United States banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected
by governmental action in the country of domicile of the branch (generally
referred to as sovereign risk). In addition, evidences of ownership of such
securities may be held outside the United States and the Fund may be subject to
the risks associated with the holding of such property overseas. Various
provisions of federal law governing domestic branches do not apply to foreign
branches of domestic banks.
OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the
foreign bank has its head office. In addition, there may be less publicly
available information about a United States branch of a foreign bank than about
a domestic bank.
BANKERS' ACCEPTANCES
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Fund must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.
COMMERCIAL PAPER RATINGS
The Fund's investments in commercial paper are limited to those rated A-1 by
Standard & Poor's Corporation (S&P) or Prime-1 by Moody's Investors Service,
Inc. (Moody's). These ratings and other money market instruments are described
as follows.
Commercial paper rated A-1 by S&P has the following characteristics:
Liquidity ratios are adequate to meet cash requirements. The issuer's long-term
senior debt is rated "A" or better, although in some cases "BBB" credits may be
allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation
HYBT-12
<PAGE>
of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public preparations to meet such obligations. Relative strength or weakness of
the above factors determines how the issuer's commercial paper is rated within
various categories.
FOREIGN SECURITIES
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. Additionally, dividends payable on foreign
securities may be subject to foreign taxes withheld prior to distribution.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by the Portfolio will not be registered with, nor will
the issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about the
securities and the foreign company or government issuing them than is available
about a domestic company of government entity. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.
HYBT-13
<PAGE>
EXHIBIT B
CORPORATE BOND RATINGS
High Yield Bond Trust invests primarily in corporate bonds rated below
Investment Grade. For Moody's Investors Service (Moody's), this means bonds
rated Ba or lower; other rating agencies, including Standard & Poor's
Corporation, Duff & Phelps, Fitch Investors Service, Inc. have similar rating
categories.
MOODY'S CORPORATE BOND RATINGS
1. Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes are not likely to impair the fundamentally
strong position of such issues.
2. Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or there may be other
elements present which make the long term risks appear somewhat larger than in
Aaa securities.
3. A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
4. Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
5. Ba--Bonds which are rated Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
6. B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
7. Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
8. Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other market
shortcomings.
9. C--Bonds which are rated as C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
S&P CORPORATE BOND RATINGS
A Standard & Poor's Corporation (S&P) corporate bond rating is a current
assessment of the creditworthiness of an obligor, including obligors outside
the United States, with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers, or lessees.
Ratings of foreign obligors do not take into account currency exchange and
related uncertainties. The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it considers reliable.
The ratings are based, in varying degrees, on the following considerations:
a. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
b. Nature of and provisions of the obligation; and
c. Protection afforded by and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
HYBT-14
<PAGE>
PLUS (+) OR MINUS (-): To provide more detailed indications of credit
quality, ratings from "AA" to "A" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Bond ratings are as follows:
1. AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
2. AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
3. A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
4. BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Although it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
5. BB, B, CCC, CC and C--Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation, and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
The table below shows the averaged credit quality ratings of the Fund's
assets for the twelve months ended December 31, 1994:
<TABLE>
<CAPTION>
ASSET OR
MOODY'S RATING PERCENTAGE
-------------- ----------
<S> <C>
AAA 9.30%
AA1 0.00%
AA2 0.00%
AA3 0.00%
A1 0.00%
A2 0.00%
A3 0.00%
BAA1 0.00%
BAA2 1.45%
BAA3 5.97%
BA1 7.78%
BA2 14.47%
BA3 26.61%
B1 10.84%
B2 7.63%
B3 13.85%
CAA 1.88%
CA 0.00%
C 0.21%
100.00%
-------
</TABLE>
HYBT-15
HIGH YIELD BOND TRUST
PROSPECTUS
TIC Ed. 5-95
L-11173 Printed in U.S.A.
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HIGH YIELD BOND TRUST
May 1, 1995
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with, the Fund's prospectus dated
May 1, 1995. A copy of the Prospectus is available from The Travelers Insurance
Company, Annuity Services 5 SHS, One Tower Square, Hartford, Connecticut
06183-5030.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES.....................................1
INVESTMENT RESTRICTIONS...............................................1
VALUATION OF SECURITIES...............................................2
DISTRIBUTIONS AND TAXES...............................................2
TRUSTEES AND OFFICERS.................................................3
DECLARATION OF TRUST..................................................4
INVESTMENT ADVISER....................................................5
Advisory Fees.................................................5
BROKERAGE.............................................................5
ADDITIONAL INFORMATION................................................6
FINANCIAL STATEMENTS..................................................6
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the High Yield Bond Trust (the "Fund") is to
provide shareholders with generous income. To achieve this objective the Fund
invests primarily in corporate bonds, and its portfolio ordinarily includes a
substantial number of bonds which, as a class, sell at discounts from par value
and which are rated by Standard & Poor's Corporation as below investment grade
(BBB). The Fund considers potential for growth of capital in selecting
securities. The Fund's investments may include fixed and adjustable rate or
stripped bonds, including zero coupon and pay-in-kind bonds, debentures, notes,
equipment trust certificates, U.S. government securities and debt securities
convertible into or exchangeable for preferred or common stock. The Fund may
also invest in units which are debt securities with stock or warrants to buy
stock attached. At least 65% of the Fund's assets will normally be invested in
bonds and debentures. While Travelers Asset Management International
Corporation (TAMIC) performs its own credit analyses of the Fund's investments
and does not rely on ratings assigned by rating services, bonds rated below
investment grade are, on balance, considered predominantly speculative.
INVESTMENT RESTRICTIONS
None of the restrictions enumerated in this paragraph may be changed without
a vote of the holders of a majority of the Fund's outstanding shares, as
defined in the Investment Company Act of 1940 (the "1940 Act"). The Fund will
not:
(1) invest more than 5% of its total assets, computed at market
value, in the securities of any one issuer;
(2) invest in more than 10% of any class of securities (as defined
in the Declaration of Trust) of any one issuer;
(3) invest more than 5% of the value of its total assets in
companies which have been in operation for less than three years;
(4) borrow money, except to facilitate redemptions or for emergency
or extraordinary purposes and then only from banks and in amounts of
up to 10% of its gross assets computed at cost; while outstanding,
according to the 1940 Act, a borrowing may not exceed one-third of
the value of the Fund's net assets, including the amount borrowed;
the Fund has no intention of attempting to increase its net income by
borrowing and all borrowings will be repaid before additional
investments are made; assets pledged to secure borrowings shall be no
more than the lesser of the amount borrowed or 10% of the Fund's gross
assets computed at cost;
(5) underwrite securities, except that the Fund may purchase
securities from issuers thereof or others and dispose of such
securities in a manner consistent with its other investment policies;
in the disposition of restricted securities the Fund may be deemed to
be an underwriter, as defined in the Securities Act of 1933 (the "1933
Act");
(6) purchase real estate or interests in real estate, except through the
purchase of securities of a type commonly purchased by financial
institutions which do not include direct interests in real estate or
mortgages, or commodities or commodity contracts;
(7) invest for the primary purpose of control or management;
(8) make margin purchases or short sales of securities;
(9) make loans, except that the Fund may purchase money market securities,
buy publicly and privately distributed debt securities and lend limited
amounts of its portfolio securities to broker-dealers; all such
investments must be consistent with the Fund's investment objective and
policies;
(10) invest more than 25% of its total assets in the securities of
issuers in any single industry; or
(11) purchase the securities of any other investment company except in the
open market and at customary brokerage rates and in no event more than
3% of the voting securities of any investment company. When consistent
with its investment objectives, the Fund may purchase securities of
brokers, dealers, underwriters or investment advisers. The Fund is
subject to restrictions in the sale of portfolio securities to, and in
its purchase or retention of securities of, companies in which the
management personnel of TAMIC have a substantial interest.
The Fund has undertaken to a state insurance authority that, so long as the
state authority requires and shares of the Fund are offered for sale to fund
variable life insurance policies in that state, the Fund will comply with
certain foreign security diversification guidelines. These guidelines provide
that (1) as the percentage of the Fund's net asset value invested in foreign
securities increases, a corresponding increase will be made in the number of
countries in whose securities the Fund invests; and (2) the Fund will invest no
more than 20% of its net asset value in securities of issuers located in any
one country (other than the United States). Notwithstanding the above, these
guidelines permit the Fund to invest any amount in securities of
-1-
<PAGE>
issuers located in the U.S. and an additional 15% of its net asset value in
securities of issuers located in Australia, Canada, France, Japan, the United
Kingdom or Germany. These guidelines require that American Depository Receipts
be treated as if they were foreign securities. This undertaking is not a
fundamental investment restriction or policy and may be changed without a vote
of shareholders.
The Fund may make investments in an amount of up to 10% of the value of the
Fund's net assets in restricted securities which may not be publicly sold
without registration under the 1933 Act. In most instances such securities are
traded at a discount from the market value of unrestricted securities of the
same issuer until the restriction is eliminated. If and when the Fund sells
such portfolio securities, it may be deemed an underwriter, as such term is
defined in the 1933 Act, with respect thereto, and registration of such
securities under the 1933 Act may be required. The Fund will not bear the
expense of such registration. The Fund intends to reach agreements with all
such issuers whereby they will pay all expenses of registration. In determining
securities subject to the 10% limitation, the Fund will include, in addition to
restricted securities, repurchase agreements maturing in more than seven days
and other securities not having readily available market quotations.
VALUATION OF SECURITIES
Current value for the Fund's portfolio securities is determined as follows:
Securities that are traded on an established exchange are valued on the basis
of the last sales price on the exchange where primarily traded prior to the
time of valuation. Securities traded in the over-the-counter market, for which
complete quotations are readily available, are valued at the mean of the bid
and asked prices at the time of valuation. Short-term money market instruments
having maturities of sixty days or less are valued at amortized cost (original
purchase cost as adjusted for amortization of premium or accretion of discount)
which, when combined with accrued interest receivable, approximates market;
should this valuation of a security not approximate market, TAMIC will value
the security at a price deemed in good faith to be fair by the Board of
Trustees. Short-term money market instruments having maturities of more than
sixty days, for which complete quotations are readily available, are valued at
current market value. The Board of Trustees of the Fund values the following at
prices it deems in good faith to be fair: (1) securities, including restricted
securities, for which complete quotations are not readily available, (2) listed
securities if in the Board's opinion the last sales price does not reflect a
current market value or if no sale occurred, and (3) other assets. Market
quotations are not considered to be readily available for certain long-term
corporate bonds and notes; such investments are stated at fair value on the
basis of valuations furnished by a pricing service, approved by the Trustees,
which determines valuations for normal, institutional size trading units of
such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders.
DISTRIBUTIONS AND TAXES
The Fund has qualified and intends to qualify in the future as a regulated
investment company under Subchapter M of the Internal Revenue Code. Thus, the
Fund is relieved of any federal income tax liability by distributing all of its
net investment income and net capital gains, if any, to its shareholders.
When the Fund makes a distribution, it intends to distribute only its net
capital gains and such income as has been predetermined to the best of the
Fund's ability to be taxable as ordinary income. Therefore, net investment
income distributions will not be made on the basis of distributable income as
computed on the Fund's books, but will be made on a federal taxation basis.
As of December 31, 1994, the Fund had a capital loss carryover of
approximately $6,553,958 which expires in 1995-2002. The Fund intends not to
distribute realized gains until the carryover is exhausted. The Fund may not
realize gains sufficient to use the carryover before it expires with the
passage of time.
-2-
<PAGE>
TRUSTEES AND OFFICERS
Name Present Position and Principal Occupation During Last Five Years
- ---- ----------------------------------------------------------------
*Heath B. McLendon
Chairman and Member
388 Greenwich Street
New York, New York
Age 61
Managing Director (1993-present), Smith Barney Inc. ("Smith Barney");
Chairman (1993-present), Smith Barney Strategy Advisors, Inc.; President
(1994-present), Smith Barney Mutual Funds Management Inc.; Chairman and/or
Director and President of thirty investment companies associated with Smith
Barney; Chairman, Board of Trustees, Drew University; Trustees, The East New
York Savings Bank; Advisory Director, First Empire State Corporation; Chairman,
Board of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Chairman, Board of Trustees, five Mutual Funds sponsored by
The Travelers Insurance Company.++
Knight Edwards
Member
2700 Hospital Trust Tower
Providence, Rhode Island
Age 71
Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell, Attorneys;
Member, Advisory Board, (1973-1994) thirty-one mutual funds sponsored by
Keystone Group, Inc.; Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Robert E. McGill, III
Member
One Elm Street
Windsor Locks, Connecticut
Age 63
Director (1983-present), Executive Vice President (1989-1994), Senior Vice
President, Finance and Administration (1983-1989), The Dexter Corporation
(manufacturer of specialty chemicals and materials); Vice Chairman (1990-1992),
Director (1983-present), Life Technologies, Inc. (life science/present
products); Director (1993-present), Analytical Technology, Inc. (manufacturer
of measurement instruments); Director (1994-present), The Connecticut Surety
Corporation (insurance); Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Lewis Mandell
Member
368 Fairfield Road, U41F
Storrs, Connecticut
Age 52
Professor of Finance (1980-present) and Associate Dean (1993-present), School
of Business Administration, and Director, Center for Research and Development
in Financial Services (1980-present), University of Connecticut; Director
(1992-present), GZA Geoenvironmental Tech, Inc. (engineering services); Member,
Board of Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The Travelers
Insurance Company.++
Frances M. Hawk
Member
222 Berkeley Street
Boston, Massachusetts
Age 47
Portfolio Manager (1992-present), HLM Management Company, Inc. (investment
management); Assistant Treasurer, Pensions and Benefits Management (1989-1992),
United Technologies Corporation (broad-based designer and manufacturer of high
technology products); Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
Ernest J. Wright
Secretary to the Board
One Tower Square
Hartford, Connecticut
Age 54
Assistant Secretary (1994-present), Counsel (1987-present), The Travelers
Insurance Company; Secretary, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+; Secretary, Board of
Trustees, five Mutual Funds sponsored by The Travelers Insurance Company.++
Ian R. Stuart
Treasurer
One Tower Square
Hartford, Connecticut
Age 38
Vice President and Financial Officer, Financial Services Department
(1994-present), Second Vice President and Financial Officer, Financial Services
Department (1991-1994), The Travelers Insurance Company; Senior Manager
(1986-1991), Price Waterhouse; Treasurer, Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance Company.++
<PAGE>
+ These seven Variable Annuity Separate Accounts are: The Travelers
Growth and Income Stock Account for Variable Annuities, The Travelers Quality
Bond Account for Variable Annuities, The Travelers Money Market Account for
Variable Annuities, The Travelers Timed Growth and Income Stock Account for
Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable Annuities
and The Travelers Timed Bond Account for Variable Annuities.
++ These five Mutual Funds are: Capital Appreciation Fund, Cash Income
Trust, High Yield Bond Trust, Managed Assets Trust and The Travelers Series
Trust.
* Mr. McLendon is an "interested person" within the meaning of the 1940
Act by virtue of his position as Managing Director of Smith Barney Inc., an
indirect wholly owned subsidiary of Travelers Group Inc. Mr. McLendon also owns
shares and options to purchase shares of Travelers Group Inc., the indirect
parent of The Travelers Insurance Company.
-3-
<PAGE>
The Dexter Corporation, of which Mr. McGill is a director, entered into
contracts with The Travelers Insurance Company to provide short-term disability
and life insurance benefits to employees of The Dexter Corporation, and to
administer the health and dental benefits programs for employees of The Dexter
Corporation.
Members of the Board of Trustees who are also officers or employees of
Travelers Group Inc. or its subsidiaries are not entitled to any fee. Members
of the Board of Trustees who are not affiliated as employees of Travelers Group
Inc. or its subsidiaries receive an aggregate annual retainer of $10,000 for
service on the Boards of the five Mutual Funds sponsored by The Travelers
Insurance Company and the seven Variable Annuity Separate Accounts established
by The Travelers Insurance Company. They also receive an aggregate annual fee
of $1,800 for each meeting of such Boards attended.
DECLARATION OF TRUST
The Fund is organized as a Massachusetts business trust. Pursuant to certain
decisions of the Supreme Judicial Court of Massachusetts, shareholders of such
a trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, even if the Fund were held to be a
partnership, the possibility of its shareholders incurring financial loss for
that reason appears remote because the Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or the Trustees, and because
the Declaration of Trust provides for indemnification out of Fund property for
any shareholder held personally liable for the obligations of the Fund.
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, a Trustee
shall not be liable for the neglect or wrongdoing of any such person; provided,
however, that nothing in the Declaration of Trust shall protect a Trustee
against any liability for his willful misfeasance, bad faith, gross negligence
or the reckless disregard of his duties.
Shareholders first elected Trustees at a meeting held on September 23, 1985,
and most recently elected Trustees on April 23, 1993. No further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, and unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Except as set forth above, the Trustees shall continue to hold office, unless
required by law, and may appoint successor Trustees. Trustees may voluntarily
resign from office, or a Trustee may be removed from office: (1) at any time by
two-thirds vote of the Trustees; (2) by a majority vote of Trustees where any
Trustee becomes mentally or physically incapacitated; and (3) either by
declaration in writing or at a meeting called for such purpose by the holders
of not less than two-thirds of the outstanding shares or other voting interests
of the Fund. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as trustee, if requested in writing
to do so by the holders of not less than 10% of the outstanding shares or other
voting interests of the Fund. The Fund is required to assist in Shareholders'
communications. In accordance with current laws, insurance companies using the
Fund as an underlying investment option within their variable contracts will
request voting instructions from contract owners participating in such
contracts and will vote shares of the Fund in the same proportion as the voting
instructions received.
Voting rights are not cumulative, so that the holders of more than 50% of the
shares voting in the election of Trustees can, if they choose to do so, elect
all of the Trustees of the Fund, in which event the holders of the remaining
shares will be unable to elect any person as a Trustee.
No amendment may be made to the Declaration of Trust without a "vote of a
majority of the outstanding voting securities" of the Fund (as defined in the
1940 Act).
-4-
<PAGE>
INVESTMENT ADVISER
Travelers Asset Management International Corporation (TAMIC), an indirect
wholly owned subsidiary of Travelers Group Inc., furnishes investment
management and advisory services to the Fund in accordance with the terms of an
Investment Advisory Agreement which was approved by shareholders on April 23,
1993. As required by the 1940 Act, the Advisory Agreement will continue in
effect for a period more than two years from the date of its execution only so
long as its continuance is specifically approved at least annually (i) by a
vote of a majority of the Board of Trustees, or (ii) by a vote of a majority of
the outstanding voting securities of the Fund. In addition, and in either
event, the terms of the Advisory Agreement must be approved annually by a vote
of a majority of the Board of Trustees who are not parties to, or interested
persons of any party to, the Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval and at which the Board of
Trustees is furnished such information as may be reasonably necessary to
evaluate the terms of the Advisory Agreement. The Advisory Agreement further
provides that it will terminate automatically upon assignment; may be amended
only with prior approval of a majority of the outstanding voting securities of
the Fund; may be terminated without the payment of any penalty at any time upon
sixty days' notice by the Board of Trustees or by a vote of a majority of the
outstanding voting securities of the Fund; and may not be terminated by TAMIC
without prior approval of a new investment advisory agreement by a vote of a
majority of the outstanding voting securities of the Fund.
Under the terms of the Advisory Agreement, TAMIC shall:
(1) obtain and evaluate pertinent economic, statistical and financial data
and other information relevant to the investment policy of the Fund,
affecting the economy generally and individual companies or industries,
the securities of which are included in the Fund's portfolio or are
under consideration for inclusion therein;
(2) be authorized to purchase supplemental research and other
services from brokers at an additional cost to the Fund;
(3) regularly furnish recommendations to the Board of Trustees with respect
to an investment program for approval, modification or rejection by the
Board of Trustees;
(4) take such steps as are necessary to implement the investment
program approved by the Board of Trustees; and
(5) regularly report to the Board of Trustees with respect to
implementation of the approved investment program and any other
activities in connection with the administration of the assets of
the Fund.
ADVISORY FEES
For furnishing investment management and advisory services to the Fund, TAMIC
is paid an amount equivalent on an annual basis to the advisory fee schedule
set forth in the table below. The fee is computed daily and paid weekly.
<TABLE>
<CAPTION>
Aggregate Net Asset
Annual Management Fee Value of the Fund
--------------------- -------------------
<S> <C> <C>
0.50% of the first $ 50,000,000, plus
0.40% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $250,000,000.
</TABLE>
For the three years ended December 31, 1992, 1993 and 1994 the advisory fees
were $46,752, $58,972 and $61,647, respectively.
BROKERAGE
Subject to approval of the Board of Trustees, it is the policy of TAMIC, in
executing transactions in portfolio securities, to seek best execution of
orders at the most favorable prices. The determination of what may constitute
best execution and price in the execution of a securities transaction by a
broker involves a number of considerations, including, without limitation, the
overall direct net economic result to the Fund, involving both price paid or
received and any commissions and other cost paid, the efficiency with which the
transaction is effected, the ability to effect the transaction at all where a
large block is involved, the availability of the broker to stand ready to
execute potentially difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are judgmental and
are weighed by management in determining the overall reasonableness of
brokerage commissions paid. Subject to the foregoing, a factor in the selection
of brokers is the receipt of research services, analyses and reports concerning
issuers, industries, securities, economic factors and trends, and other
-5-
<PAGE>
statistical and factual information. Any such research and other statistical
and factual information provided by brokers is considered to be in addition to
and not in lieu of services required to be performed by TAMIC under its
Investment Advisory Agreements. The cost, value and specific application of
such information are indeterminable and hence are not practicably allocable
among the Fund and other clients of TAMIC who may indirectly benefit from the
availability of such information. Similarly, the Fund may indirectly benefit
from information made available as a result of transactions for such clients.
Purchases and sales of bonds and money market instruments will usually be
principal transactions and will normally be purchased directly from the issuer
or from the underwriter or market maker for the securities. There usually will
be no brokerage commissions paid for such purchases. Purchases from the
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include the spread between
the bid and asked prices. Where transactions are made in the over-the-counter
market, the Fund will deal with primary market makers unless more favorable
prices are otherwise obtainable. Brokerage fees will be incurred in connection
with futures transactions, and the Fund will be required to deposit and
maintain funds with brokers as margin to guarantee performance of future
obligations.
TAMIC may follow a policy of considering the sale of shares of the Fund a
factor in the selection of broker-dealers to execute portfolio transactions,
subject to the requirements of best execution described above.
The policy of TAMIC with respect to brokerage is and will be reviewed by the
Board of Trustees periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
The total brokerage commissions paid by the Fund for the fiscal years ended
December 31, 1992, 1993 and 1994 were $12,063, $5,938 and $44,063,
respectively. For the fiscal year ended December 31, 1994, no portfolio
transactions were directed to certain brokers because of research services. No
formula is used in placing portfolio transactions with brokers which provide
research services and no specific amount of transactions is allocated for
research services. No brokerage business was placed with any brokers affiliated
with TAMIC during the past three fiscal years.
ADDITIONAL INFORMATION
The Travelers Insurance Company (the "Company") acts as transfer agent and
dividend disbursing agent for the Fund. The Company is a stock insurance
company chartered in 1864 in Connecticut and continuously engaged in the
insurance business since that time. The Company is a wholly owned subsidiary of
The Travelers Insurance Group Inc., which is indirectly owned, through a wholly
owned subsidiary, by Travelers Group Inc. On April 1, 1995, the Company owned
100% of the Fund's outstanding shares. The Company's Home Office is located at
One Tower Square, Hartford, Connecticut 06183, telephone (203) 277-0111.
Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York 11245,
is the custodian of all securities and cash of the Fund.
Coopers & Lybrand L.L.P., Independent Accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for the Fund. The services
provided to the Fund include primarily the examination of the Fund's financial
statements. The financial statements included or incorporated by reference in
the Prospectus, Statement of Additional Information and Registration Statement
have been audited by Coopers & Lybrand L.L.P., as indicated in their report
thereon, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing.
Except as otherwise stated in its prospectus or as required by law, the Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information or
to make any representation not contained in the Fund's prospectus, this
Statement of Additional Information or any supplemental sales literature issued
by the Fund, and no person is entitled to rely on any information or
representation not contained therein.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Fund's registration statement filed with
the Securities and Exchange Commission which may be obtained from the
Commission's principal office in Washington, D.C. upon payment of the fee
prescribed by the Rules and Regulations promulgated by the Commission.
FINANCIAL STATEMENTS
The financial statements contained in the Fund's December 31, 1994 Annual
Report to Shareholders are incorporated herein by reference. A copy may be
obtained by writing to The Travelers Insurance Company, Annuity Services--5 SHS
One Tower Square, Hartford, Connecticut 06183-5030, or by calling
1-800-842-0125.
-6-
<PAGE>
HIGH YIELD BOND TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11173S TIC Ed. 5-95
Printed in U.S.A.
<PAGE>
COPY OF ANNUAL REPORT DATED DECEMBER 31, 1994 TO
WHICH THE REGISTRANT'S FINANCIAL STATEMENTS ARE
INCORPORATED IN THE PROSPECTUS/STATEMENT OF
ADDITIONAL INFORMATION BY REFERENCE TO THIS FILING
<PAGE>
THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS
ANNUAL REPORTS
HIGH YIELD BOND TRUST
DECEMBER 31, 1994
THETRAVELERS (logo with umbrella)
THE TRAVELERS INSURANCE COMPANY
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
<PAGE>
TIMCO (logo with globe)
A COMPANY OF THETRAVELERS (logo with umbrella)
The Travelers Investment Management Company ("TIMCO")
provides equity management and advisory services for the following
Travelers Variable Product Mutual Funds contained in this report:
The Capital Appreciation Fund and the Social Awareness Stock
Portfolio. Additionally, TIMCO is the sub-adviser for Managed
Assets Trust.
TAMIC (logo with globe and lines)
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION
Travelers Asset Management International Corporation
("TAMIC") provides fixed income management and advisory services
for the following Travelers Variable Product Mutual Funds contained
in this report: U.S. Government Securities Portfolio, High Yield
Bond Trust , Managed Assets Trust and Cash Income Trust.
JANUS CAPITAL
CORPORATION (logo with two faces)
Janus Capital Corporation ("Janus") is the sub-adviser for Capital
Appreciation Fund. As sub-adviser, Janus is responsible for the
daily management of Capital Appreciation Fund.
SMITH BARNEY (logo)
An asset management group of Smith Barney, Greenwich Street
Advisors provides management services for the Utilities Portfolio.
<PAGE>
THETRAVELERS (logo with umbrella)
THE TRAVELERS VARIABLE PRODUCTS MUTUAL FUNDS
INVESTMENT ADVISORY COMMENTARY AS OF DECEMBER 31, 1994
ECONOMIC REVIEW AND OUTLOOK
Economic growth kicked into high gear in 1994, and the economy used
up any excess capacity in product and labor markets. The fitful
recovery of the previous three years was replaced by a broad-based
expansion. Unemployment fell to 5.4% at year-end, from 7.0% at the
end of 1993. This robust economic activity was accompanied by few
signs of higher inflation. The Consumer Price Index rose just 2.7%
during 1994, the same as during the prior year. However, certain
commodity prices showed large gains, and there was evidence by
year-end of a modest acceleration in wage gains.
The Federal Reserve ("Fed") started a tightening policy in
February, while there still appeared to be slack in the economy.
Fed actions served to push 3-month T-bill rates up from 3.1% at the
start of the year to 5.7% at year-end. The yield curve rose and
flattened significantly during the year. Yields on one-year
Treasury bills rose by over 350 basis points, while yields on the
30-year bond were up over 150 basis points. At year-end, there
was little evidence that Fed tightening had started to slow growth.
In the fourth quarter, the economy grew at an annual rate of 4.5%,
well above the 2.0-2.5% pace that many economists think is
compatible with price stability.
There is normally a lag of 6-12 months between Federal Reserve
actions and the resulting impact on the economy. Coming into 1994,
Fed policy was very accommodative of economic growth, with real
money market interest rates (adjusted for inflation) close to zero.
Monetary policy became truly restrictive only with the last 2 or 3
rates hikes. With unemployment at levels that many economists view
as inflationary, we expect the Fed to push money market interest
rates somewhat higher in 1995. We think that the Federal Reserve
will succeed in slowing economic growth, and that inflation will
stay below 4% during 1995 and into 1996. However, convincing
evidence of the slowdown may take a while longer to emerge.
FIXED-INCOME MARKET COMMENTARY
Like a neutron bomb, which kills people but leaves buildings
intact, rising interest rates in 1994 decimated complicated
strategies much more than it hurt broad market averages. During
the fourth quarter, Orange County and emerging markets investors
were added to the casualty list, joining the hedge funds and
various corporate users of derivatives that were hurt earlier in
the year. While derivatives and mortgage backed securities have
taken much of the blame for these incidents, the rise in short-term
interest rates hurt any strategy that was based on leverage or
benefited from the prior three years of low short-term rates.
For the year, cash was the best performing asset, while stocks
treaded water and bonds had their worst year in recent history.
The Lehman Long Treasuries index showed a negative return of 7.6%
for the full year 1994. The long end of the yield curve stabilized
late in the year, allowing long Treasuries to outperform cash
during the fourth quarter. For the year as a whole, mortgage
backed securities and corporates outperformed similar duration
Treasuries. Late in the year, corporate spreads widened modestly
with growing concerns over the 1995 economic outlook; as a result,
long corporates underperformed similar duration Treasuries in the
fourth quarter.
<PAGE>
We have been concerned by tight spreads on corporate issues
throughout 1994. We expect issuance of new corporates to be light
in the first half of 1995; this will help to support prices of
corporate issues. Corporates are still likely to underperform
Treasuries if a significant economic slowdown develops. We think
inflation will stay below 4% in 1995. We also expect stable to
modestly lower yields on Treasuries with maturities of 5 years or
longer. If we are correct, bond investors will enjoy real returns,
after inflation, of 4-7% in 1995. If the Federal Reserve is
successful in containing economic growth and inflation, lower
interest rates (stronger bond prices) are likely in 1996.
EQUITY MARKET COMMENTARY
Despite increased pressure by the Federal Reserve Board and a
string of potentially dangerous financial crises, the U.S. stock
market managed to achieve a broad-based gain in the second half of
1994. Surprisingly strong corporate earnings offset the negative
effect of higher interest rates on equity valuations. During the
final six months of 1994, the S&P 500 Stock Index provided a total
return of 4.9%, including dividends. The stocks of small and
medium sized companies provided comparable returns over that
period, but with considerably higher volatility.
Technology stocks led the market during the second half. The
office and business equipment group was up over 25%, owing to
continued booming sales of personal computers and a sharp rebound
in networking stocks. Semi conductor stocks advanced in concert,
reflecting strong demand for memory chips and microprocessors.
Investors also returned to many defensive and recently out-of-favor
"growth" groups in the second half. In the consumer staples
sector, for example, beverage stocks rose 24% on earnings
surprising and improving international growth prospects. In the
health care sector, drug and medical product stocks rebounded over
20%.
On the negative side, rising interest rates and fears of an
impending economic slowdown hurt many interest sensitive and early
cycle groups. Airline, trucking and railroad stocks were down over
10%. Auto stocks were off 8%. Regional banks declined 12%. In the
energy sector, independent producers and drilling companies were
down 12%, due to weaker oil and gas prices and the poor outlook for
new production.
We remain constructive, but cautious, in our outlook for stocks in
1995. With the S&P 500 Stock Index trading at only 14.5 times
operating earnings, the equity market starts the year with
reasonable valuation support. A more stable interest rate
environment could even help to reverse the broad-based market price
to earnings ratio contraction that has occurred over the past year.
Where we think the stock market is most likely to run into problems
is on the earnings front. Corporate earnings are expected to grow
8-10% in 1995, but most of that growth is expected to occur in the
first half of the year. By the third quarter, we expect a
noticeable deceleration in earnings growth. With equity indices
near their all-time highs, the stock market is probably more
vulnerable than the bond market to negative surprises, given the
relative performance of the two asset classes over the past year.
TIMCO (logo of globe) TAMIC (logo globe with lines)
A COMPANY OF THETRAVELERS(logo TRAVELERS ASSET MANAGEMENT
with umbrella) INTERNATIONAL CORPORATION
<PAGE>
HIGH YIELD BOND TRUST
The high yield bond market ended 1994 with a weak overall rate of
return by historical standards as continued federal government
interest rate increases battered the bond markets. Various indices
of performance show high yield bonds returned approximately
negative 1% in 1994.
The year 1994 was important for the high yield market because the
market moved to yields and spread levels where investors are more
appropriately rewarded for taking the enhanced level of risk which
these securities entail. We believe 1995 represents an excellent
opportunity because of the confluence of several factors: high
yield bonds now yield significantly more than investment grade
bonds (by 350-650 basis points) and provide total returns on a
yield to maturity comparable with long run equity rates of return
(12%-14%), and supply-demand balance has returned to the market as
issuers are boycotting the high yield market in favor of other less
expensive financing sources (including bank debt). Overall, the
high yield market looks exceptionally appealing now on a relative
value basis, which was certainly not the case in early 1994.
We have shifted our strategy to focus on companies with improving
fundamentals away from a strategy of "safer" BA credits. As a
result, the portfolio's average quality has dropped to the B range.
We believe our actions to restructure the portfolio in 1994 will
bear fruit during 1995. Specific additions we made were in
companies in transition where new managements or new markets are
enabling companies to meaningfully boost revenues and profits.
Investments where we backed new management terms include FTD and
Rickels. A company whose debt we bought which is accessing new
markets is United International Holdings, a cable TV company. The
securities we sold fell into two categories: 1) companies with
improving fundamental performance where the outstanding bonds
already anticipate further future growth and 2) companies which are
basically stagnant or declining. Examples of growing companies
where we liquidated positions include Stone Container and John Q.
Hammons. Companies not exhibiting a positive enough revenue and
profit trend which we sold include Unisys and Marvel III Holdings.
(Line chart representing the following table of numbers)
<TABLE>
<S> <C> <C> <C> <C>
High Yield Bond Trust Lehman Brothers Aggregate Bond Consumer Price Index First Boston High Yield
Index Index Top Tier
10000 10000 10000 10000
12/85 11866 12210 10379 11866
12/86 12813 14074 10503 14448
12/87 12769 14462 10967 16076
12/88 14630 15603 11450 18024
12/89 14835 17870 11982 20398
12/90 13482 19469 12731 21359
12/91 17002 22584 13110 26779
12/92 19239 24255 13501 29971
12/93 21935 26620 13870 34997
12/94 21658 25843 14251 34801
Average Annual Total Returns Ended December 31, 1994:
1 year -1.26%
5 years 7.86%
10 years 8.03%
</TABLE>
This chart assumes an initial investment of $10,000
made on December 31, 1984. Returns include the reinvestment of all
distributions at Net Asset Value and the change in share price for
the stated period, but exclude insurance and administration charges
assessed by Travelers Insurance separate accounts.
The Lehman Brothers Aggregate Bond Index is an unmanaged, but
commonly used measure of bond performance. The First Boston High
Yield Index, Top Tier is a broad based market measure of high yield
bonds, commonly known as "junk bonds."
Past performance is not predictive of future performance.
Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
<PAGE>
<TABLE>
HIGH YIELD BOND TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $11,464,336) $ 11,042,851
Receivables:
Dividends 63
Interest 239,019
Investment securities sold 473,750
Receivable from Travelers Insurance 10,222
------------
Total Assets 11,765,905
------------
LIABILITIES:
Cash overdraft 24,201
Payable for investment management and advisory fees 645
Accrued expenses:
Reimbursable expenses 10,222
Other expenses 14,431
------------
Total Liabilities 49,499
------------
NET ASSETS $ 11,716,406
------------
------------
NET ASSETS REPRESENTED BY:
Paid-in capital $ 18,102,640
Undistributed net investment income 949,721
Accumulated net realized gains (losses) on investment security transactions (6,914,470)
Net unrealized depreciation on investment securities (421,485)
------------
Total net assets (applicable to 1,380,228 shares outstanding at $8.49 per share) $ 11,716,406
------------
------------
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
HIGH YIELD BOND TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 1,084,000
Dividends 19,875
------------
Total income $ 1,103,875
EXPENSES:
Investment management and advisory fees 61,647
Accounting and audit fees 72,543
Custodian fees 8,550
Printing and postage 15,101
Trustees' fees 5,733
Registration fees 802
-----------
Total expenses before reimbursement from Travelers Insurance 164,376
Less: Reimbursement from Travelers Insurance (10,222)
-----------
Net expenses 154,154
------------
Net investment income 949,721
------------
REALIZED AND CHANGE IN UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized loss from investment security transactions:
Proceeds from investment securities sold 21,084,861
Cost of investment securities sold 21,115,395
-----------
Net realized loss (30,534)
Change in unrealized gain (loss) on investment securities:
Unrealized gain at December 31, 1993 686,738
Unrealized loss at December 31, 1994 (421,485)
-----------
Net change in unrealized gain (loss) for the year (1,108,223)
------------
Net realized and change in unrealized gain (loss) (1,138,757)
------------
Net decrease in net assets resulting from operations $ (189,036)
------------
------------
Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
HIGH YIELD BOND TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income $ 949,721 $ 907,313
Net realized loss from investment security transactions (30,534) (145,584)
Net change in unrealized gain (loss) on investment securities (1,108,223) 753,804
------------ ------------
Net increase (decrease) in net assets resulting from operations (189,036) 1,515,533
------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME (919,615) (951,764)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 2,094,990 4,411,975
Dividend reinvestment..................... 919,615 951,764
Payment for shares redeemed............... (2,954,925) (3,450,890)
------------ ------------
Net increase in net assets resulting from capital share transactions 59,680 1,912,849
------------ ------------
Net increase (decrease) in net assets (1,048,971) 2,476,618
NET ASSETS:
Beginning of year 12,765,377 10,288,759
------------ ------------
End of year (including undistributed net investment income as follows:
December, 1994 $949,721 and December, 1993 $907,313) $ 11,716,406 $ 12,765,377
------------ ------------
------------ ------------
See Notes to Financial Statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
High Yield Bond Trust ("Fund HY") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Shares of
Fund HY are currently offered, without a sales charge, to separate
accounts of The Travelers Insurance Company ("Travelers
Insurance"), an indirect wholly owned subsidiary of The Travelers
Inc., in connection with the issuance of certain variable annuity
and variable life insurance contracts.
The following is a summary of significant accounting policies
consistently followed by Fund HY in the preparation of its
financial statements.
SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last-reported sale price as of
the close of business of the New York Stock Exchange on the last
business day of the year; securities traded on the over-the-counter
market and listed securities with no reported sales are valued at
the mean between the last-reported bid and asked prices or on the
basis of quotations received from a reputable broker or other
recognized source.
When market quotations are not considered to be readily available
for long-term corporate bonds and notes, such investments are
stated at fair value on the basis of valuations furnished by a
pricing service. These valuations are determined for normal
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and various
relationships between securities which are generally recognized by
institutional traders. Securities, including restricted
securities, for which pricing services are not readily available
are valued by management at prices which it deems in good faith to
be fair.
Short-term investments for which a quoted market price is available
are valued at market. Short-term investments for which there is no
reliable quoted market price are valued by computing a market value
based upon quotations from dealers or issuers for securities of a
similar type, quality and maturity.
REPURCHASE AGREEMENTS. When Fund HY enters into a repurchase
agreement (a purchase of securities whereby the seller agrees to
repurchase the securities at a mutually agreed upon date and price),
the repurchase price of the securities will generally equal the amount
paid by Fund HY plus a negotiated interest amount. The seller under
the repurchase agreement will be required to provide to Fund HY
securities (collateral) whose market value, including accrued interest,
will be at least equal to 102% of the repurchase price. Fund HY
monitors the value of collateral on a daily basis. Repurchase
agreements will be limited to transactions with national banks and
reporting broker dealers believed to present minimal credit risks.
Fund HY's custodian will take actual or constructive receipt of all
securities underlying repurchase agreements until such agreements
expire.
TAXES. Fund HY has qualified, and intends to continue to qualify each
year, as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a regulated
investment company, Fund HY is relieved of any federal income tax
liability by distributing all of its net taxable investment income
and net taxable capital gains, if any, to its shareholders. Fund
HY further intends to avoid excise tax liability by distributing
substantially all of its investment income. Therefore, no federal
income tax provision has been made by Fund HY in its financial
statements. As of December 31, 1994, Fund HY had capital loss
carryovers totalling $6,553,958 which may be available to offset
any future realized taxable gains, to the extent provided by
regulations. These amounts expire during the period 1995-2002.
OTHER. Security transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date. Distributions to
shareholders are recorded at the close of business on the record
date.
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $16,198,690 and $17,327,805, respectively, for the year
ended December 31, 1994. Realized gains and losses from security
transactions are reported on an identified-cost basis.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
3. FUND CHARGES
Investment management and advisory fees are calculated daily at
annual rates which start at 0.50% and decrease, as net assets
increase, to 0.25% of Fund HY's average net asset value. These
fees are paid to Travelers Asset Management International
Corporation, an indirect wholly owned subsidiary of The Travelers
Inc.
Travelers Insurance has agreed to reimburse Fund HY for the amount
by which all of Fund HY's aggregate annualized operating expenses,
excluding brokerage commissions and any interest charges and taxes,
exceed 1.25% of Fund HY's average net assets. Trustees and officers
of Fund HY who are also officers and employees of The Travelers
Inc., or its subsidiaries, receive no compensation directly from
Fund HY.
4. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest without par value.
Transactions in shares of Fund HY were as follows:
<TABLE>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
<S> <C> <C>
1994 1993
---- ----
Shares sold 243,214 499,440
Shares redeemed (348,173) (390,101)
Shares issued in reinvestment of
distributions from net investment income 105,582 115,365
--------- ----------
Net 623 224,704
--------- ----------
--------- ----------
</TABLE>
As of December 31, 1994, all outstanding shares of beneficial
interest were owned by The Travelers Fund U for Variable Annuities
and The Travelers Fund UL for Variable Life Insurance, both of
which are separate accounts of Travelers Insurance.
5. SUBSEQUENT EVENT
On January 27, 1995, the Board of Trustees declared a distribution
of net investment income of $0.70 per share, payable on January 30,
1995, to shareholders of record as of January 27, 1995. This
distribution is not reflected in the accompanying financial
statements.
<PAGE>
<TABLE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. FINANCIAL HIGHLIGHTS*
(Per share data for a share outstanding
throughout the year)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA:
- --------------------
Net asset value, beginning of year $ 9.25 $ 8.91 $ 8.75
Income from operations
--------------------
Net investment income 0.66 0.68 0.88
Net gains or losses on securities (realized and unrealized) (0.76) 0.47 0.18
---------- ---------- ----------
Total from investment operations (0.10) 1.15 1.06
Less distributions
--------------------
Distributions from net investment income (0.66) (0.81) (0.90)
---------- ---------- ----------
Net asset value, end of year $ 8.49 $ 9.25 $ 8.91
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN*** (1.26)% 14.01% 13.16%
- --------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of year (thousands) $11,716 $12,765 $10,289
Ratio of expenses to average net assets 1.25%** 0.99%** 0.56%**
Ratio of net investment income to average net assets 7.71% 7.69% 10.24%
Portfolio turnover rate 146% 19% 52%
<CAPTION>
1991 1990#
---------- ----------
<S> <C> <C>
PER SHARE DATA:
- --------------------
Net asset value, beginning of year $ 7.87 $ 9.33
Income from operations
--------------------
Net investment income 0.94 1.02
Net gains or losses on securities (realized and unrealized) 0.88 (1.81)
---------- ----------
Total from investment operations 1.82 (0.79)
Less distributions
--------------------
Distributions from net investment income (0.94) (0.67)
---------- ----------
Net asset value, end of year $ 8.75 $ 7.87
---------- ----------
---------- ----------
TOTAL RETURN*** 26.11% (9.12)%
- --------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of year (thousands) $ 7,724 $ 6,238
Ratio of expenses to average net assets 0.56%** 0.92%**
Ratio of net investment income to average net assets 11.93% 12.33%
Portfolio turnover rate 35% 29%
*The information set forth in Note 6 replaces the data
presented in prior years as supplementary information.
**The ratio of expenses to average net assets for 1990 and
later years reflects an expense reimbursement by Travelers
Insurance in connection with voluntary expense limitations,
including those described in Note 3. Without the expense
reimbursement, the ratios of operating expenses to average
net assets would have been 1.33%, 1.31%, 1.28%, 1.87% and
2.13% for the years ended December 31, 1994, 1993, 1992,
1991 and 1990, respectively.
***Total return is determined by dividing the increase
(decrease) in value of a share during the year, after reflecting
the reinvestment of dividends declared during the year, by the
beginning of year share price. As described in Note 1, shares in
Fund HY are only sold to Travelers Insurance separate
accounts in connection with the issuance of variable annuity
and variable life insurance contracts. The total return does
not reflect the deduction of any contract charges or fees
assessed by Travelers Insurance separate accounts.
#On May 1, 1990, TAMIC replaced Keystone Custodian Funds,
Inc. as the investment adviser for Fund HY.
</TABLE>
<PAGE>
<TABLE>
HIGH YIELD BOND TRUST
STATEMENT OF INVESTMENTS
DECEMBER 31, 1994
<CAPTION>
NO. OF MARKET
SHARES VALUE
------- ------
<S> <C> <C>
COMMON STOCKS (0.7%)
CHEMICALS AND ALLIED PRODUCTS (0.4%)
Uniroyal Ltd. (A) (C) 5,999 $ 46,493
---------
CONGLOMERATE (0.1%)
United International Holdings (C) 1,134 7,086
---------
FINANCE (0.2%)
Perry Capital Corp. (C) 500 25,000
---------
TOTAL COMMON STOCKS
(COST $32,086) 78,579
---------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
BONDS (90.8%)
COMMUNICATION (19.6%)
Adelphia Communication,
9.50% Notes, 2004 (C) $ 250,000 202,720
Adelphia Communication,
9.875% Notes, 2005 250,000 202,500
Diamond Cable Communications
PLC, 0.00% Notes, 2004 500,000 244,375
Mobile Telecommunication
Technologies Corp.,
13.50% Notes, 2002 500,000 508,750
NWCG Holdings Corp.,
0.00% Notes, 1999 500,000 257,500
Paging Network, Inc.,
11.75% Notes, 2002 250,000 248,750
USA Mobile Communication,
14.00% Notes, 2004 500,000 503,125
---------
2,167,720
---------
CONSTRUCTION (4.7%)
Hovnanian Enterprises,
9.75% Notes, 2005 700,000 514,500
---------
CONGLOMERATE (5.1%)
Jordan Industries, Inc.,
10.375% Notes, 2003 500,000 443,750
United International Holdings,
0.00% Notes, 1999 (C) 250,000 120,375
---------
564,125
---------
FINANCE (6.6%)
CDV Acquisition Corp.,
9.75% Notes, 2003 300,000 276,000
Lomas Mortgage USA, Inc.,
9.75% Notes, 1997 500,000 452,500
---------
728,500
---------
Principal Market
Amount Value
----------- ---------
FOOD (9.8%)
Family Restaurant, Inc.
0.00% Notes, 2004 $ 250,000 $ 136,250
Family Restaurant, Inc.,
9.75% Notes, 2002 250,000 196,875
Foodmaker, Inc.,
9.75% Notes, 2002 500,000 378,750
Heileman Acquisition,
9.625% Notes, 2004 500,000 377,500
---------
1,089,375
---------
METAL PRODUCTS (3.1%)
Acme Metals, Inc.,
0.00% Notes, 2004 500,000 342,500
---------
MINING (2.0%)
Freeport-McMoRan Resources LP,
8.75% Notes, 2004 250,000 221,875
---------
PAPER AND ALLIED PRODUCTS (2.0%)
Mail-Well, Inc.
10.50% Notes, 2004 250,000 218,750
---------
PETROLEUM REFINING AND
RELATED INDUSTRIES (4.6%)
Flores & Rucks,
13.50% Notes, 2004 500,000 503,750
---------
RETAIL (18.5%)
Flagstar Corp.,
10.75% Notes, 2001 250,000 234,375
Flagstar Corp.,
11.25% Debentures, 2004 250,000 208,125
Florists Transworld Delivery,
14.00% Notes, 2001 (C) 500,000 475,000
Hosiery Corp. of America,
13.75% Notes, 2002 (C) 250,000 249,640
Rickel Home Centers,
13.50% Notes, 2001 500,000 482,500
Service Merchandise, Inc.
9.00% Debentures, 2004 500,000 387,500
---------
2,037,140
---------
SERVICES (7.7%)
Americold Corp.,
11.50% Bonds, 2005 500,000 452,500
Continental Medical Systems, Inc.,
10.875% Notes, 2002 500,000 401,250
---------
853,750
---------
STONE, CLAY, GLASS AND
CONCRETE PRODUCTS (3.8%)
NVR, Inc.
11.00% Notes, 2003 500,000 420,000
---------
<PAGE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------- ------
<S> <C> <C>
TRANSPORTATION (3.1%)
Delta Airlines, Inc.,
8.95% Equip. Tr., 2012 $ 373,089 $ 342,544
---------
UTILITIES (0.2%)
Eastern Utilities Association,
17.50% Notes, 1992 (A)(D)(E) 54,200 6,233
Eastern Utilities Association,
17.50% Notes, 1993 (A)(C)(D)(E) 100,000 15,000
---------
21,233
---------
TOTAL BONDS
(COST $10,493,730) 10,025,762
----------
SHORT-TERM INVESTMENTS (8.5%)
COMMERCIAL PAPER (6.3%)
AT&T Capital Corp.,
5.77% due January 27, 1995 200,000 198,074
Pacific Gas & Electric Co.,
5.97% due January 11, 1995 500,000 498,436
---------
696,510
REPURCHASE AGREEMENTS (2.2%) ---------
Merrill Lynch Government
Securities, Inc., 5.25% Repurchase
Agreement dated December 30,
1994, due January 3, 1995,
collateralized by: United States of
America Treasury, $260,000,
6.5% due April 30, 1999 242,000 242,000
---------
TOTAL SHORT-TERM
INVESTMENTS
(COST $938,520) 938,510
---------
TOTAL INVESTMENTS (100%)
(COST $11,464,336) (B)(F) $ 11,042,851
-----------
-----------
NOTES
(A) Non-income Producing Security.
(B) At December 31, 1994, net unrealized
depreciation for all securities was $421,485.
This consisted of aggregate gross unrealized
appreciation for all securities in which there
was an excess of market value over cost of
$84,030 and aggregate gross unrealized
depreciation for all securities in which there
was an excess of cost over market value of
$505,515.
(C) Management Priced Security.
(D) Paid-in-kind Security.
(E) Amount of principal to be paid to bondholders
will be determined upon resolution of
bankruptcy proceedings. (Fund HY did not
receive principal amount due.)
(F) The cost of investments for federal income tax
purposes amounted to $11,491,078. Gross
unrealized appreciation and depreciation of
investments, based on identified tax cost,
December 31, 1994, were as follows:
Gross unrealized appreciation $ 84,030
Gross unrealized depreciation (532,257)
---------
Net unrealized depreciation $ (448,227)
---------
---------
See Notes to Financial Statements
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of High Yield Bond Trust:
We have audited the accompanying statement of assets and
liabilities of
HIGH YIELD BOND TRUST
including the statement of investments, as of December 31, 1994,
and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial
statements and financial highlights are the responsibility of
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights 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 securities
owned as of December 31, 1994, by correspondence with the custodian
and brokers. 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 and financial highlights
referred to above present fairly, in all material respects, the
financial position of High Yield Bond Trust as of December 31,
1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 15, 1995
<PAGE>
This page intentionally left blank.
<PAGE>
Investment Advisers
------------------------
(CAPITAL APPRECIATION FUND AND
SOCIAL AWARENESS STOCK PORTFOLIO)
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Hartford, Connecticut
(MANAGED ASSETS TRUST, HIGH YIELD
BOND TRUST, CASH INCOME
TRUST AND U.S. GOVERNMENT SECURITIES PORTFOLIO)
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
Hartford, Connecticut
(UTILITIES PORTFOLIO)
GREENWICH STREET ADVISORS
New York, New York
Independent Accountants
------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
Custodian
------------------------
SHAWMUT BANK CONNECTICUT, N.A.
Hartford, Connecticut
This report is prepared for the general information
of contract owners and is not an offer of shares of Managed Assets
Trust, High Yield Bond Trust, Capital Appreciation Fund, Cash
Income Trust, U.S. Government Securities Portfolio, Social
Awareness Stock Portfolio or Utilities Portfolio. It should not be
used in connection with any offer except in conjunction with the
Prospectuses for the Variable Annuity and Variable Universal Life
Insurance products offered by The Travelers Insurance Company and
the Prospectuses of the underlying mutual funds, which collectively
contain all pertinent information, including the applicable selling
commissions.
VG-181 (Annual) (12-94) Printed in U.S.A.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of Independent
Accountants are contained in the December 31, 1994 Annual Report to
Shareholders and are incorporated by reference in the Statement of
Additional Information. The Registrant's financial statements include:
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the years ended December 31,
1994 and 1993
Statement of Investments as of December 31, 1994
Notes to Financial Statements
(b) Exhibits
1. Declaration of Trust. (Incorporated herein by reference to Exhibit
1(b)(1) to the Registration Statement on Form N-1 filed on March 19,
1982.)
2. By-Laws of High Yield Bond Trust. (Incorporated herein by reference
to Exhibit 1(b)(2) to the Registration Statement on Form N-1 filed on
March 19, 1982.) Amendments to the Registrant's By-Laws are also
incorporated herein by reference to Exhibits 24(b)(2) to Post-Effective
Amendments Nos. 10 and 14 to the Registration Statement on Form N-1A.
5. Investment Advisory Agreement between the Registrant and Travelers Asset
Management International Corporation. (Incorporated herein by reference
to Exhibit 24(b)(5) to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A filed on February 17, 1993.)
8. Custody Agreement dated February 1, 1995 between the Registrant and
Chase Manhattan Bank, N.A., of Brooklyn, New York.
9. Transfer and Recordkeeping Agreement between the Registrant and
The Travelers Insurance Company. (Incorporated herein by reference to
Exhibit 24(b)(9) to Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A filed on April 14, 1992.)
*10. An opinion and consent of counsel as to the legality of the securities
registered by the Registrant. (Incorporated herein by reference to the
Registrant's most recent 24f-2 Notice filed on February 27, 1995.)
11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants, to the
use of their name and opinion in Part A and Part B of this Form N-1A
and and to the incorporation by reference of their report.
11(B). Powers of Attorney authorizing Ernest J. Wright as signatory for
Heath B. McLendon, Knight Edwards, Robert E. McGill, III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart.
<PAGE>
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 17, 1995
Shares of beneficial interest, Two (2)
without par value
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers are
contained in the Fund's Declaration of Trust which was filed with Pre-
Effective Amendment No. 1 to the Fund's Registration Statement as Exhibit
1(b)(1) and is incorporated by reference herein.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Officers and Directors of Travelers Asset Management International Corporation
(TAMIC), the Fund's Investment Adviser, are set forth in the following table:
Name Position with TAMIC Other Business
Marc P. Weill Director, Chairman and Senior Vice President **
President
David A. Tyson Director and Senior Vice Senior Vice President *
President
David Amaral Vice President Fixed Income Trader**
John R. Calcagni Vice President Second Vice President
Gene Collins Vice President Investment Officer**
Eric Dobbin Vice President Investment Officer**
Phillip A. Duncan Vice President Investment Officer**
Emil Molinaro Vice President Vice President**
F. Denney Voss Vice President Senior Vice President**
William H. White Treasurer Vice President and
Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George C. Quaggin Assistant Treasurer Assistant Treasurer *
John R. Britt Secretary Assistant Secretary *
Marla A. Berman Assistant Secretary Assistant General Counsel**
Paul M. Danie Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
* Positions are held with The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc. , 388 Greenwich Street,
New York, New York 10013
<PAGE>
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
(2) Chase Manhattan Bank, N. A.
Chase MetroTech Center
Brooklyn, New York
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes to provide to each person to whom
a prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, High Yield Bond Trust, certifies that it
meets all of the requirements for effectiveness of this post-effective
amendment to this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on April 19, 1995.
HIGH YIELD BOND TRUST
(Registrant)
By: *HEATH B. McLENDON
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Heath B. McLendon
Chairman, Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on April 19, 1995.
*HEATH B. McLENDON Chairman of the Board
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(Heath B. McLendon)
*KNIGHT EDWARDS Trustee
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(Knight Edwards)
*ROBERT E. McGILL, III Trustee
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(Robert E. McGill, III)
*LEWIS MANDELL Trustee
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(Lewis Mandell)
*FRANCES M. HAWK Trustee
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(Frances M. Hawk)
*IAN R. STUART Treasurer and Chief Accounting Officer
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(Ian R. Stuart)
*By: /s/ Ernest J. Wright
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Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
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EXHIBIT INDEX
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
1. Declaration of Trust. (Incorporated herein by
reference to Exhibit 1(b)(1) to the Registration
Statement on Form N-1 filed on March 19, 1982.)
2. By-Laws of High Yield Bond Trust. (Incorporated
herein by reference to Exhibit 1(b)(2) to the
Registration Statement on Form N-1 filed on
March 19, 1982.) Amendments to the Registrant's
By-Laws are also incorporated herein by
reference to Exhibits 24(b)(2) to Post-
Effective Amendments Nos. 10 and 14 to the
Registration Statement on Form N-1A.
5. Investment Advisory Agreement between the
Registrant and Travelers Asset Management
International Corporation. (Incorporated herein
by reference to Exhibit 24(b)(5) to Post-
Effective Amendment No. 16 to the Registration
Statement on Form N-1A filed on
February 17, 1993.)
8. Custody Agreement dated February 1, 1995 between Electronically
the Registrant and Chase Manhattan Bank, N.A., of
Brooklyn, New York.
9. Transfer and Recordkeeping Agreement between the
Registrant and The Travelers Insurance Company.
(Incorporated herein by reference to
Exhibit 24(b)(9) to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A
filed on April 14, 1992.)
10. An opinion and consent of counsel as to the
legality of the securities registered by the
Registrant. (Incorporated herein by reference
to the Registrant's most recent 24f-2 Notice
filed on February 27, 1995.)
11(A). Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants, to the use of their name and
opinion in Part A and Part B of this Form N-1A
and and to the incorporation by reference of their
report.
11(B). Powers of Attorney authorizing Ernest J. Wright Electronically
as signatory for Heath B. McLendon, Knight
Edwards, Robert E. McGill, III, Lewis Mandell,
Frances M. Hawk and Ian R. Stuart.
<PAGE>
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of the 1st day of February, 1995 between each of the
registered management investment companies of The Travelers Insurance
Company listed below, and such others as may be added from time to time on
Schedule A attached hereto (each individually hereinafter called the
"Customer"), and The Chase Manhattan Bank, N.A., (hereinafter called the
"Bank"), whereby the Customer appoints the Bank, and the Bank hereby agrees
to act, as Custodian of the cash and securities ("Assets") of the Customer,
subject to the terms of this Agreement.
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or
other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing
or representing any other rights or interests therein and other
similar property whether certificated or uncertificated as may be
received by the Bank for the account of the Customer ("Securities");
and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank for the
account of the Customer, which cash shall not be subject to withdrawal
by draft or check. The Customer warrants its authority to: 1) deposit
the cash and Securities (Assets) received in the Accounts and 2) give
instructions (as defined in Section 9) concerning the Accounts. Upon
written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK.
Unless instructions (as defined in Section 9) specifically require another
location acceptable to the Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such
Securities are acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or it is
the legal currency for the payment of public or private debts.
Cash may be held pursuant to Instructions (as defined in Section 9) in
either interest or non-interest bearing accounts as may be available for the
particular currency. To the extent Instructions are issued and the Bank can
comply with such Instructions, the Bank is authorized to maintain cash
balances on deposit for the Customer with itself or one of its affiliates
at such reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct,
if acceptable to the Bank.
<PAGE>
3. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank will make payments from the Deposit Account upon receipt of
Instructions which include all information required by the Bank.
(b) In the event that any payment to be made under this Section 3 exceeds
the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall
be deemed a loan payable on demand, bearing interest at the rate
customarily charged by the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount
due, the Customer will promptly return any such amount upon oral or
written notification: (i) that such amount has not been received
in the ordinary course of business or (ii) that such amount was
incorrectly credited. If the Customer does not promptly return any
amount upon such notification, the Bank shall be entitled, upon oral
or written notification to the Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited.
The Bank shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency
proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
4. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank
upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the
Custody Account may be made in accordance with the customary or
established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery
of Securities out of the Custody Account may also be made in any
manner specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect
to any sale, exchange or purchase of Securities. Otherwise, such
transactions will be credited or debited to the Accounts on the
date cash or Securities are actually received by the Bank and
reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts
in its discretion if the related transaction fails to settle
within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 4 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
<PAGE>
5. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, to the extent
that the Bank is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of
Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of
the Assets. Unless the Customer sends the Bank a written exception or
objection to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In such event,
or where the Customer has otherwise approved any such statement, the Bank
shall, to the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or reasonably implied
therefrom as though it had been settled by the decree of a court of competent
jurisdiction in an action where the Customer and all persons having or claiming
an interest in the Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank of any payment, redemption or other transaction
regarding Securities in the Custody Account in respect of which the Bank has
agreed to take any action under this Agreement.
6. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"), the Bank will
give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a
Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it
deems in good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the
<PAGE>
appropriate nominee name relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner
in which such proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with Instructions.
7. NOMINIEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank or securities depository, as the case may be.
The Bank may without notice to the Customer cause any such Securities to
cease to be registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities registered in
a nominee name are called for partial redemption by the issuer, the Bank may
allot the called portion to the respective beneficial holders of such class
of security in any manner the Bank deems to be fair and equitable. The
Customer agrees to hold the Bank and their respective nominees harmless from
any liability arising directly or indirectly from their status as a mere
record holder of Securities in the Custody Account.
All securities accepted by the Bank on behalf of the Customer under the
terms of this Agreement shall be in "street name" or other good delivery from.
8. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
9. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, tested telex, TWX, facsimile
transmission, bank wire or other teleprocess or electronic instruction
or trade information system acceptable to the Bank which the Bank believes
in good faith to have been given by Authorized Persons or which are
transmitted with proper testing pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation
to conform to the telephone instructions received or the Bank's failure
to produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account or transactions
pursuant to the Agreement. The Customer shall be responsible from
safeguarding any testkeys, identification codes or other security devices
which the Bank shall make available to the Customer or its Authorized Persons.
The Bank agrees to safeguard and maintain the confidentiality of all
passwords or numbers and to limit access to this information for the purpose
of acting pursuant to this agreement.
<PAGE>
10. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this
Agreement as follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Assets. In the event of any loss to the Customer by reason
of the failure of the Bank to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss
at the date of discovery of such loss and without reference
to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which
it appoints unless such appointment was made negligently
or in bad faith.
(iii) The bank shall be indemnified by, and without liability
to the Customer for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the
scope of this Agreement if such act or omission was in
good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the
genuineness of any document which it believes in good faith
to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and
any related expenses with respect to income from or Assets
in the Accounts.
(v) The Bank will use its best efforts to maintain, during the
term of this Agreement, insurance coverage comparable to
the types, amounts and limits set forth below:
<TABLE>
<CAPTION>
Standard Limit Per
Form No. 24 Loss Aggregate
___________ _________ _________
<S> <C> <C>
* Insuring Agreements $75,000,000 $75,000,000
ABC-Basic Coverages
* Insuring Agreement 75,000,000 75,000,000
D-Forgery or Alteration
* Insuring Agreement 75,000,000 75,000,000
E-Securities (1)
* Extortion Coverage (2)
A. Threat to Persons 20,000,000 20,000,000
B. Threat to Property 20,000,000 20,000,000
* Computer Systems 75,000,000 75,000,000
Coverage (3)
* Deductible Amount 2,500,000
Notes:
_____
(1) An additional $125,000,000 insurance coverage for
securities located at custodian's head office or at
The Chase Manhattan Bank, N.A.,
<PAGE>
Chase MetroTech Center, Brooklyn, New York 11245,
Attention: Global Custody Division.
(2) No deductible (separate policy).
(3) This coverage is for electronic funds transfer systems.
There is additional coverage for all EDP equipment and
Media under Commercial Property Insurance. The limits
of this coverage are $583,000,000.
(vi) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(vii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited
to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 10, it is specifically acknowledged that the Bank shall
have no duty or responsibility to:
(i) question Instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security
other than as provided in Section 3(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or
other party to which Securities are delivered or payments
are made pursuant to this Agreement:
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons (as defined in
Section 8) issuing Instructions shall bear any responsibility
to review such confirmations against Instructions issued to
and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction,
or circumstances are such that the Bank may have a potential
conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to
other customers, act as financial advisor to the issuer of
Securities, act as a lender to the issuer of Securities, act
in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn
profits from any of the activities listed herein.
11. FEES AND EXPENSES.
<PAGE>
The Customer agrees to pay to the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket expenses.
12. MISCELLANEOUS.
(a) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States with its principal place of business
in the State of Connecticut and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or
the certification of such other facts as may be required to administer
the Bank's obligations under this Agreement. The Customer will
indemnify the Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.
(b) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their
examination of books and records pertaining to the Customer's affairs.
(c) Periodic Statements, Books and Records. The Bank shall notify the
Customer of each transaction involving securities in the Account and
will render a statement of transactions with respect to the Account
on a regular basis. Periodic statements shall be rendered as the
Customer may reasonably require, but not less frequently than monthly.
The Bank shall at all times maintain proper books and records that
shall separately identify the securities. Books and records of the
Bank (and of any agent or depository) relating to the Account shall
at all times during regular business hours of the Bank (or of any
agent or depository) be available for inspection by duly authorized
officers, employees or agents of Customer, or by legally authorized
regulatory officers who are then in the process of reviewing the
Customer's financial affairs upon adequate proof to the Bank of
such official status. The Bank agrees to maintain such records as
may be sufficient to determine and verify information concerning the
custodied securities which must be included in the Annual and
Semi-Annual Reports of the Customer, or any other report required by
applicable law.
(d) Books and Records Are Property of Customer. The Bank hereby
acknowledges that all books and records relating to the services
provided to Customer hereunder are the property of the Customer
and subject to its control; provided, however, that during the
term of the Agreement, the Customer shall not exercise such
control so as to interfere with the performance of the Bank's
duties hereunder.
(e) Governing Law; Successors and Assigns. This Agreement shall
be governed by the laws of the State of New York.
(f) Entire Agreement; Applicable Riders. Customer represents
that the Assets deposited in the Accounts are (Check one):
___ Employee Benefit Plan or other assets subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA");
_X_ Investment company assets subject to certain Securities and
Exchange Commission ("SEC") rules and regulations;
___ Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A and Exhibit 1.
<PAGE>
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between
the parties. Any amendment to this Agreement must be in writing,
executed by both parties.
(g) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect
on the basis of any particular circumstances or in any jurisdiction,
the validity, legality and enforceability of such provision or
provisions under other circumstances or in other jurisdictions and
of the remaining provisions will not in any way be affected or
impaired.
(h) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a
party of any provision of this Agreement, or waiver of any breach or
default, is effective unless in writing and signed by the party
against whom the waiver is to be enforced.
(i) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the
following addresses or such other addresses as may subsequently be
given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Customer: The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department, Cashier Division
13. CONFIDENTIALITY OF RECORDS.
The Bank agrees to treat all records and other information relating to
the Customer or the Custody Account as confidential, except that it
may disclose such information after prior notification to and prior
approval of the Customer, which will not be unreasonably withheld.
Nothing in this paragraph shall prevent the Bank from divulging
information to civil, criminal, bank, or securities regulatory
authorities or where the Bank may be exposed to civil or criminal
proceedings or penalties for failure to comply.
14. RELIANCE UPON DATA.
The Bank may rely on the accuracy of all data received by it through
electronic means and initiated by any person authorized by the Customer.
Every person who uses the correct passwords to obtain information by
electronic means or to make permissible transactions shall be presumed
to have the Customer's authority unless the Customer can prove that:
(a) a person using a correct password was not authorized to have access
to this information;
(b) the person using the password obtained it through or as a result of
the Bank's disclosure (whether direct or indirect); and
<PAGE>
(c) the disclosure by the Bank was not authorized by the Customer prior
to its unauthorized use.
15. OPTION GUARANTEE LETTERS OR ESCROW RECEIPTS.
The Customer covenants and agrees that in the event that the Bank shall
at any time at the Customer's request enter into an "Option Guarantee
Letter" or execute an "SD Option Clearing Corporation Escrow Receipt"
at the request of the Customer covering securities deposited with the
Bank pursuant to the Agreement, the Customer will hold the Bank harmless
from any and all loss, cost, or damage which the Bank may suffer by reason
of being requested to deliver securities or other property under such
Option Guarantee Letters or Escrow Receipts which securities and/or other
property were not in fact delivered to the Bank or to the Bank's agent for
transmittal to the Bank.
16. SUBROGATION OF RIGHTS.
At the election of the Customer, the Customer shall be entitled to be
subrogated to the rights of the Bank, with respect to any claim against
any other person or institution which the Bank may have, as a consequence
of any loss or damage to custodied securities. In such event, the Customer
shall consult with the Bank concerning selection of counsel and management
of any litigation to cover for such loss.
17. RESOLUTION OF DISPUTES.
In the event of any loss of or damage to custodied securities or dispute
between the Bank and the Customer concerning the Account, the Bank and
the Customer agree to attempt to resolve the dispute through negotiation
or a method of alternative dispute resolution. No litigation shall be
commenced without a certification by an authorized officer, employee,
or agent of either party that the dispute cannot be resolved by negotiation
or alternative dispute resolution provided in writing at least 10 days
before commencing legal action.
18. TRUSTEES AND SHAREHOLDERS OF MUTUAL FUNDS NOT PERSONALLY LIABLE.
To the extent this Agreement is made on behalf of the mutual funds
(the "Funds"), it shall be made by an officer of the Fund, not
individually, but solely as an officer or Trustee of the Fund under
its Declaration of Trust, and the obligations under this Agreement are
not binding upon, nor shall any resort be had to the private property
of, any of the Trustees, shareholders, officers, employees or agents
of the Funds personally, but shall bind only the Funds' property.
19. INFORMATION TO CALIFORNIA COMMISSIONER OF INSURANCE.
The Bank agrees that it shall furnish to the California Commissioner
of Insurance, at the Customer's expense, any information or reports
concerning the funds as the Commissioner, in the performance of his
or her duties, may request.
<PAGE>
20. DEPOSIT OF SECURITIES IN SECURITIES SYSTEM.
If the Customer wishes to deposit securities with the Bank to be held
in the Bank's account with one or more depositories or clearinghouses
or in the book-entry system authorized by the U.S. Department of the
Treasury or other federal agency (collectively referred to as
"Securities Systems") pursuant to an arrangement which is approved
by the Customer, then the Bank will do the following:
(a) The Bank's official records shall separately identify the securities
owned by the customer which are held in the account and indicate the
location of the securities.
(b) All registered securities held by the Bank pursuant to the agreement
shall be registered in the name of the Customer or its nominee, the
Bank or its nominee, or a Securities System or its nominee.
(c) The Bank will send to the Customer a confirmation of the transfer of
securities held for the Customer and furnish regular reports of
holdings of securities in the account.
(d) Upon written instructions from an authorized officer of the Customer,
any representative of the Connecticut Insurance Department shall be
entitled to examine, on the Bank's premises, the Bank's records
relating to the securities held in the account.
(e) The Bank shall maintain records sufficient to determine and verify
information relating to securities held in the account that may be
reported in the Annual and Semi-Annual Reports of the Customer, as
filed with regulatory authorities.
(f) The Bank shall be responsible for any loss of the securities held in
the account caused by the negligence of the Bank or its agents.
(g) In the event of loss of any of the securities held in the account,
the Bank shall promptly replace the securities or the value
thereof and the value of any loss of rights or privileges resulting
from said loss or securities.
(h) The Bank will hold the securities in the account subject to the
instructions of the Customer and will permit withdrawal thereof upon
the demand of the Customer.
(i) The Bank shall send to the Customer all (i) reports which it receives
from the Securities System on its systems of internal accounting control
and (ii) reports prepared by outside auditors with respect to the
Bank's systems of internal accounting control pertaining to custodian
recordkeeping, promptly upon the Bank's receipt of such reports.
(j) Securities in the account may be held only in Connecticut or in
reciprocal states under the Insurers Supervision, Rehabilitation and
Liquidation Model Act or a similar act (the Model Act).
(k) If a reciprocal state under the Model Act repeals or modifies the
Model Act so as to impair the Connecticut Insurance Commissioner's
authority over the assets of an insolvent insurer, any securities
held in the account and located in that state will be relocated to
another reciprocal state or Connecticut prior to the effective date
of said repeal or modification, unless the Connecticut Insurance
Commissioner deems the repeal or modification acceptable.
(l) The Bank may only deposit the securities in a nonproprietary account
with the Securities System that includes only assets held for the
Bank's customers.
<PAGE>
(m) Should a Securities System cease to act on behalf of the Bank, then
the securities in the account shall be promptly transferred to the
Bank or another Securities System approved by the Customer.
21. EFFECTIVE PERIOD, TERMINATION, ASSIGNMENT AND AMENDMENT.
This Agreement shall become effective as of the effective date named
herein, shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto, and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however, that the
Bank shall not act under paragraph 20 hereof in the absence of receipt
of an initial certificate of the Secretary that the board of the
Customer has approved the initial use of a particular Securities System
and the receipt of an annual certificate of the Secretary that the Board
has reviewed the use by the Customer of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended, and provided further, however, that the Customer
shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of its Rules
and Regulations or by-laws and further provided, that the Customer may
at any time by action of its Board (a) substitute another bank or trust
company for the Bank by giving notice as described above to the Bank,
or (b) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Bank by the Comptroller
of the Currency or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Customer shall pay the Bank such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Bank for its costs, expenses and disbursements.
This Agreement may not be assigned by the Bank without the consent of
the Customer, authorized or approved by a resolution of its Board
(The Board of Managers of the Variable Annuity Accounts or the Board
of Trustees of the Mutual Funds).
Additional Investment Company Separate Accounts or mutual funds may be
added to this Agreement upon the execution by the Bank and any additional
party of an amended "Schedule A" to be attached to this Agreement,
which shall list such additional Separate Accounts or mutual funds.
22. INDEMNIFICATION AND HOLD HARMLESS.
The Customer agrees to indemnify and hold harmless the Bank and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it
or its nominees in Connecticut with the performance of this Agreement
in good faith, except such as may arise from the Bank's or its
nominee's own negligent action, negligent failure to act or willful
misconduct.
<PAGE>
IN WITNESS WHEREOF, the Customer and the Bank have each executed
this Custody Agreement as of the 1st day of February, 1995, by their
duly authorized representatives.
THE TRAVELERS GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS MONEY MARKET ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED GROWTH AND INCOME STOCK ACCOUNT FOR VARIABLE
ANNUITIES
THE TRAVELERS TIMED SHORT-TERM BOND ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED AGGRESSIVE STOCK ACCOUNT FOR VARIABLE ANNUITIES
THE TRAVELERS TIMED BOND ACCOUNT FOR VARIABLE ANNUITIES
By: /s/Heath B. McLendon
____________________
Chairman
Board of Managers
CAPITAL APPRECIATION FUND
CASH INCOME TRUST
HIGH YIELD BOND TRUST
MANAGED ASSETS TRUST
THE TRAVELERS SERIES TRUST
U.S. GOVERNMENT SECURITIES PORTFOLIO
SOCIAL AWARENESS STOCK PORTFOLIO
UTILITIES PORTFOLIO
By: /s/Heath B. McLendon
____________________
Chairman
Board of Trustees
THE CHASE MANHATTAN BANK, N.A.
By: /s/George S. Snyder
Title: Vice President
<PAGE>
EXHIBIT I
_________
MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE TRAVELERS INSURANCE COMPANY AND
THE CHASE MANHATTAN BANK N.A.
EFFECTIVE FEBRUARY 1, 1995
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the "1940 Act"), as the
same may be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or
under the authority of the Securities and Exchange Commission ("SEC") or
the Exemptive Order applicable to accounts of this nature issued to the
Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981),
as amended, or unless the Bank has otherwise specifically agreed, the
Customer shall be solely responsible to assure that the maintenance of
Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority
of the SEC.
The following modifications are made to the Agreement:
Section 9. Instructions.
Add the following language to the end of Section 9:
Deposit Account Payments and Custody Account Transactions made pursuant
to Section 3 and 4 of this Agreement may be made only for the purposes
listed below. Instructions must specify the purpose for which any
transaction is to be made and Customer shall be solely responsible to
assure that Instructions are in accord with any limitations or restrictions
applicable to the Customer by law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;
<PAGE>
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of
the Bank or the Customer's transfer agent, such shares to be
purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc., relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released
only upon payment to the Bank of monies for the premium due and a
receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, the Bank will received from
brokers the Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the delivery of
Securities to be held in escrow and will have no responsibility
or liability for any such Securities which are not returned promptly
when due other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement
of the purpose for which the delivery or payment is to be made,
the amount of the payment or specific Securities to be delivered,
the name of the person or persons to whom delivery or payment is to
be made, and a certification that the purpose is a proper purpose
under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 21.
Section 10. Standard of Care; Liabilities.
Add the following subsection (c) to Section 10:
(c) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, holding the
Customer's Securities, pursuant to this Agreement afford protection
for such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities held by
the Bank and its securities depositories in New York.
Section 12. Access to Records.
Add the following language to the end of Section 12(b):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal account controls applicable to the Bank's duties under this
Agreement.
<PAGE>
SCHEDULE A
__________
</TABLE>
<TABLE>
<CAPTION>
Short Name Long Name
__________ _________
<S> <C>
VTM The Travelers Timed Short-Term Bond Account for Variable Annuities
VTA The Travelers Timed Growth and Income Stock Account for Variable Annuities
VA1 The Travelers Quality Bond Account for Variable Annuities
VAA The Travelers Growth and Income Stock Account for Variable Annuities
VM The Travelers Money Market Account for Variable Annuities
MAT Managed Assets Trust
AST Capital Appreciation Fund
HYBT High Yield Bond Trust
CIT Cash Income Trust
USGF US Government Securities Portfolio
SOAP Social Awareness Stock Portfolio
VTAS The Travelers Timed Aggressive Stock Account for Variable Annuities
VTB The Travelers Timed Bond Account for Variable Annuities
GRUF Utilities Portfolio
</TABLE>
<PAGE>
Coopers Coopers & Lybrand L.L.P.
& Lybrand
a professional
services firm
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 19 of this Registration Statement on Form N-1A of our
report dated February 15, 1995, on our audits of the financial
statements and financial highlights of High Yield Bond Trust.
We also consent to the reference to our Firm as experts under the caption
"Additional Information".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 18, 1995
<PAGE>
Exhibit 11(B)
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Heath B. McLendon of Summit, New Jersey,
Chairman of the Board of Trustees of High Yield Bond Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and KATHLEEN A. McGAH, Assistant Secretary of
said Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of High Yield Bond
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
28th day of February, 1995.
/s/Heath B. McLendon
Chairman of the Board of Trustees
High Yield Bond Trust
<PAGE>
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Knight Edwards of Providence, Rhode Island, a
member of the Board of Trustees of High Yield Bond Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said
Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of High Yield Bond
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Knight Edwards
Member of the Board of Trustees
High Yield Bond Trust
<PAGE>
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Robert E. McGill, III of Williamstown, Massa-
chusetts, a member of the Board of Trustees of High Yield Bond
Trust, do hereby make, constitute and appoint ERNEST J. WRIGHT,
Secretary of said Trust, and SARA CHAMBERLAIN, Assistant Secre-
tary of said Trust, either one of them acting alone, my true and
lawful attorney-in-fact, for me, and in my name, place and
stead, to sign registration statements of said Trust on Form
N1-1A or other applicable form under the Securities Act of 1933
for the registration of shares of Beneficial Interest of High
Yield Bond Trust and to sign any and all amendments, including
post-effective amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Robert E. McGill, III
Member of the Board of Trustees
High Yield Bond Trust
<PAGE>
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis Mandell of Storrs, Connecticut, a member
of the Board of Trustees of High Yield Bond Trust, do hereby
make, constitute and appoint ERNEST J. WRIGHT, Secretary of said
Trust, and SARA CHAMBERLAIN, Assistant Secretary of said Trust,
either one of them acting alone, my true and lawful attorney-
in-fact, for me, and in my name, place and stead, to sign regis-
tration statements of said Trust on Form N1-1A or other applica-
ble form under the Securities Act of 1933 for the registration
of shares of Beneficial Interest of High Yield Bond Trust and to
sign any and all amendments, including post-effective amendments
thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Lewis Mandell
Member of the Board of Trustees
High Yield Bond Trust
<PAGE>
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Frances M. Hawk of Sherborn, Massachusetts, a
member of the Board of Trustees of High Yield Bond Trust, do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary
of said Trust, and SARA CHAMBERLAIN, Assistant Secretary of said
Trust, either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead, to
sign registration statements of said Trust on Form N1-1A or
other applicable form under the Securities Act of 1933 for the
registration of shares of Beneficial Interest of High Yield Bond
Trust and to sign any and all amendments, including post-effec-
tive amendments thereto, that may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Frances M. Hawk
Member of the Board of Trustees
High Yield Bond Trust
<PAGE>
HIGH YIELD BOND TRUST
_____________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Ian R. Stuart of East Hampton, Connecticut,
Treasurer of High Yield Bond Trust, do hereby make, constitute
and appoint ERNEST J. WRIGHT, Secretary of said Trust, and SARA
CHAMBERLAIN, Assistant Secretary of said Trust, either one of
them acting alone, my true and lawful attorney-in-fact, for me,
and in my name, place and stead, to sign registration statements
of said Trust on Form N1-1A or other applicable form under the
Securities Act of 1933 for the registration of shares of Benefi-
cial Interest of High Yield Bond Trust and to sign any and all
amendments, including post-effective amendments thereto, that
may be filed.
IN WITNESS WHEREOF I have hereunto set my hand this
21st day of October, 1994.
/s/Ian R. Stuart
Treasurer, High Yield Bond Trust
