<PAGE> 1
Registration Statement No. 2-76639
811-3428
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 21
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21
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, 1996 pursuant to paragraph (b).
---
___ 60 days after filing pursuant to paragraph (a)(1).
___ on ____________ pursuant to paragraph (a)(1) of Rule 485.
___ 75 days after filing pursuant to paragraph (a)(2).
___ on ____________ pursuant to paragraph (a)(2) 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, 1995 WAS
FILED ON FEBRUARY 29, 1996.
<PAGE> 2
HIGH YIELD BOND TRUST
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933
<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN PROSPECTUS
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<S> <C> <C>
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 Board of Trustees; Investment Adviser;
Securities Transactions; Fund 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 Fund Shares
8. Redemption or Repurchase Share Redemption
9. Legal Proceedings Legal Proceedings
<CAPTION>
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
----------------------------------
<S> <C> <C>
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 Information
Other Services
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
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
HIGH YIELD BOND TRUST
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-422-3985
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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 separate
accounts of The Travelers Insurance Company and The Travelers Life and Annuity
Company (the "Company" or "The Travelers"). The Fund serves as one of the
investment vehicles for certain variable annuity and variable life insurance
contracts issued by the Company. The term "shareholder" as used herein refers to
any insurance company separate account that may use shares of the Fund as an
investment vehicle now or 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 ("SAI") dated May 1, 1996 which has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. A copy may be obtained, without charge, by writing to The Travelers,
Annuity Services, One Tower Square, Hartford, Connecticut 06183-5030, or by
calling 860-422-3985.
HIGH YIELD BONDS INVOLVE SUBSTANTIAL RISKS. INVESTORS SHOULD REFER TO "RISK
FACTORS" 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 A VARIABLE
ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT ISSUED BY THE TRAVELERS. 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, 1996.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS.................................................................. 3
FUND DESCRIPTION...................................................................... 4
INVESTMENT OBJECTIVE AND POLICIES..................................................... 4
INVESTMENT RESTRICTIONS............................................................... 5
RISK FACTORS.......................................................................... 5
BOARD OF TRUSTEES..................................................................... 6
INVESTMENT ADVISER.................................................................... 6
Portfolio Manager................................................................... 7
SECURITIES TRANSACTIONS............................................................... 7
TRANSFER AGENT........................................................................ 7
FUND EXPENSES......................................................................... 7
FUND SHARES........................................................................... 8
PRICING SHARES........................................................................ 8
SHARE REDEMPTION...................................................................... 9
DIVIDENDS AND TAX STATUS.............................................................. 9
LEGAL PROCEEDINGS..................................................................... 9
ADDITIONAL INFORMATION................................................................ 9
EXHIBIT A............................................................................. 10
EXHIBIT B............................................................................. 15
</TABLE>
HYBT-2
<PAGE> 6
FINANCIAL HIGHLIGHTS
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HIGH YIELD BOND TRUST
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
The following information on per share data for the six years ended December 31,
1995, 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 applicable years
in the period ended December 31, 1995 is contained in the SAI. Refer to the
cover of this Prospectus for information on obtaining a free copy of the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990+ 1989
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
year....................... $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33 $ 10.12
Income from operations
Net investment income........ 0.80 0.66 0.68 0.88 0.94 1.02 1.28
Net gains or losses on
securities (realized and
unrealized)................ 0.41 (0.76) 0.47 0.18 0.88 (1.81) (1.11)
------- ------- ------- ------ ------ ------- -------
Total from investment
operations............... 1.21 (0.10) 1.15 1.06 1.82 (0.79) 0.17
Less distributions
Distributions from net
investment income.......... (0.70) (0.66) (0.81) (0.90) (0.94) (0.67) (0.96)
Distributions from net
realized gains............. -- -- -- -- -- -- --
------- ------- ------- ------ ------ ------- -------
Net asset value, end of
year....................... $ 9.00 $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87 $ 9.33
======= ======= ======= ====== ====== ======= =======
TOTAL RETURN*.................. 15.47% (1.26)% 14.01% 13.16% 26.11% (9.12)% 1.40%
RATIOS/SUPPLEMENTAL DATA....... $12,902 $11,716 $12,765 $10,289 $7,724 $6,238 $10,607
Ratio of expenses to average
net assets................. 1.25%** 1.25%** 0.99%** 0.56%** 0.56%** 0.92%** 1.67%
Ratio of net investment
income to average net
assets..................... 9.37% 7.71% 7.69% 10.24% 11.93% 12.33% 13.37%
Portfolio turnover rate...... 222% 146% 19% 52% 35% 29% 87%
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1988 1987 1986
- -----------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
year....................... $ 9.94 $ 11.41 $ 11.85
Income from operations
Net investment income........ 1.21 1.22 1.29
Net gains or losses on
securities (realized and
unrealized)................ 0.20 (1.21) (0.39)
------- ------- -------
Total from investment
operations............... 1.41 0.01 0.90
Less distributions
Distributions from net
investment income.......... (1.23) (1.48) (1.13)
Distributions from net
realized gains............. -- -- (0.21)
------- ------- -------
Net asset value, end of
year....................... $ 10.12 $ 9.94 $ 11.41
======= ======= =======
TOTAL RETURN*.................. 14.57% (0.34)% 7.98%
RATIOS/SUPPLEMENTAL DATA....... $59,637 $51,540 $68,120
Ratio of expenses to average
net assets................. 1.00% 0.96% 0.98%
Ratio of net investment
income to average net
assets..................... 11.65% 10.90% 11.17%
Portfolio turnover rate...... 67% 81% 83%
</TABLE>
* 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 HYBT are only sold to The Travelers 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 The Travelers separate accounts.
** The ratios of expenses to average net assets for 1990 and later years reflect
an expense reimbursement by The Travelers in connection with voluntary
expense limitations. Without the expense reimbursement, the ratio of
operating expenses to average net assets would have been 1.28%, 1.33%, 1.31%,
1.28%, 1.87% and 2.13% for the years ended December 31, 1995, 1994, 1993,
1992, 1991 and 1990, respectively.
+ On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund HYBT.
HYBT-3
<PAGE> 7
FUND DESCRIPTION
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High Yield Bond Trust (the "Fund") is registered with the SEC 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 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, 1995, 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 ("PIK") 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.
HYBT-4
<PAGE> 8
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 (the "1940
Act"). 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.
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 repurchase agreements maturing in more than seven days
and other securities for which market quotations are not readily available,
including restricted securities.
RISK FACTORS
- --------------------------------------------------------------------------------
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.
There can be no assurance that the Fund will achieve its investment objective
since there is uncertainty in every investment. Income and yields on high yield
securities, as on all securities, will fluctuate over time.
In addition, there are 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 include (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
HYBT-5
<PAGE> 9
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 PIK 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 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
PIK 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. Travelers Assets Management International Corporation's
("TAMIC") 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.
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 SAI.
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
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 Inc., a
HYBT-6
<PAGE> 10
financial services holding company, and its principal offices are located at One
Tower Square, Hartford, Connecticut 06183.
In addition to providing investment advice to the Fund, TAMIC acts as investment
adviser for other investment companies which fund variable contracts issued by
the Company, as well as for individual and pooled pension and profit-sharing
accounts, domestic insurance companies affiliated with The Travelers, and
nonaffiliated insurance companies.
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>
ANNUAL AGGREGATE NET ASSET
MANAGEMENT FEE VALUE OF THE FUND
- -------------- -------------------
<C> <S> <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 fiscal year ended December 31, 1995, TAMIC received a fee equal to .50%
of the Fund's average net assets for its services as investment adviser.
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 consider the number of Fund shares 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 that provide research
services. TAMIC may use these services in advising the Fund as well as in
advising its other clients.
TRANSFER AGENT
- --------------------------------------------------------------------------------
The Travelers Insurance Company, 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 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. Additionally, high portfolio turnover may involve
HYBT-7
<PAGE> 11
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.
Pursuant to a Management Agreement dated May 1, 1996 between the Fund and The
Travelers Insurance 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, 1995, the Fund paid 1.25% of its average
net assets in expenses. These expenses would have been 1.28% of the Fund's
average net assets if the Company had not paid for any of the Fund's expenses.
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.
Shares of the Fund are currently sold only to insurance company separate
accounts in connection with variable annuity and variable life insurance
contracts issued by the 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 ("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 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
HYBT-8
<PAGE> 12
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.
SHARE REDEMPTION
- --------------------------------------------------------------------------------
Fund shares are redeemed at the redemption value next determined after the Fund
receives a 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 between
purchase and redemption.
The Fund computes the redemption value at the close of the 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
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 SEC so that disposal of the Fund's investments or determination of its net
asset value is not reasonably practicable; or (4) the SEC, 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 PIK 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.
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> 13
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 9.
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 9.
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.
HYBT-10
<PAGE> 14
UNITED STATES (U.S.) GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. 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 U.S. Government or its agencies or
instrumentalities include direct obligations of the U.S. Treasury and securities
issued or guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the U.S., 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, Student Loan Marketing Association and Federal National Mortgage
Association.
Some obligations of U.S. 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 U.S.; 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 U.S. 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. U.S. Government securities will not
include international agencies or instrumentalities in which the U.S.
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 1940 Act 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 experience a gain or loss equal to the
appreciation or depreciation in value from the commitment date. TAMIC employs a
rigorous credit quality procedure in determining the counterparties with which
it will
HYBT-11
<PAGE> 15
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 by
the 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 U.S. 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 U.S. BANKS
The obligations of foreign branches of U.S. 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
HYBT-12
<PAGE> 16
sovereign risk). In addition, evidences of ownership of such securities may be
held outside the U.S. 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 U.S. BRANCHES OF FOREIGN BANKS
Obligations of U.S. 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
U.S. 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 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
HYBT-13
<PAGE> 17
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-14
<PAGE> 18
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.
HYBT-15
<PAGE> 19
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
U.S., 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.
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.
HYBT-16
<PAGE> 20
The table below shows the averaged credit quality ratings of the Fund's assets
for the twelve months ended December 31, 1995:
<TABLE>
<CAPTION>
S&P OR
MOODY'S RATING PERCENTAGE
----------------- ----------
<S> <C>
AAA....................................................... 9.37%
AA1....................................................... 0.00%
AA2....................................................... 0.00%
AA3....................................................... 0.00%
A1........................................................ 0.00%
A2........................................................ 0.00%
A3........................................................ 0.00%
BAA1...................................................... 0.00%
BAA2...................................................... 0.00%
BAA3...................................................... 0.21%
BA1....................................................... 1.58%
BA2....................................................... 0.17%
BA3....................................................... 0.14%
B1........................................................ 8.04%
B2........................................................ 25.26%
B3........................................................ 50.37%
CAA....................................................... 4.83%
CA........................................................ 0.00%
C......................................................... 0.03%
-------
100.00%
=======
</TABLE>
HYBT-17
<PAGE> 21
HIGH YIELD BOND TRUST
PROSPECTUS
TIC Ed. 5-96
Printed in U.S.A.
L-11173
<PAGE> 22
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 23
STATEMENT OF ADDITIONAL INFORMATION
HIGH YIELD BOND TRUST
MAY 1, 1996
This Statement of Additional Information ("SAI") is not a prospectus
but relates to, and should be read in conjunction with, the Fund's prospectus
dated May 1, 1996. A copy of the prospectus is available from The Travelers
Insurance Company, Annuity Services, One Tower Square, Hartford, Connecticut
06183-5030 or by calling 860-422-3985.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
VALUATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DECLARATION OF TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT ADVISER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
REDEMPTIONS IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
<PAGE> 24
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the High Yield Bond Trust (the "Fund") is
to provide 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;
2
<PAGE> 25
(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 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
3
<PAGE> 26
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, 1995, the Fund had capital loss carryovers of
approximately $4,562,238 which expires in 1996-2003. The Fund intends not to
distribute realized gains until the carryovers are exhausted. The Fund may not
realize gains sufficient to use the carryovers before they expire.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name Present Position and Principal Occupation During Last Five Years
---- ----------------------------------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith Barney Inc. ("Smith Barney");
Chairman and Member Chairman (1993-present), Smith Barney Strategy Advisors, Inc.;
388 Greenwich Street President (1994-present), Smith Barney Mutual Funds Management Inc.;
New York, New York Chairman and Director of forty-one investment companies associated with
Age 62 Smith Barney; Chairman, Board of Trustees, Drew University; Trustee,
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++; prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers Inc.
Knight Edwards Of Counsel (1988-present), Partner (1956-1988), Edwards & Angell,
Member Attorneys; Member, Advisory Board (1973-1994), thirty-one mutual funds
2700 Hospital Trust Tower sponsored by Keystone Group, Inc.; Member, Board of Managers, seven
Providence, Rhode Island Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Age 72 Trustee, five Mutual Funds sponsored by The Travelers Insurance
Company.++
Robert E. McGill, III Retired manufacturing executive. Director (1983-1995), Executive Vice
Member President (1989-1994) and Senior Vice President, Finance and
295 Hancock Street Administration (1983-1989), The Dexter Corporation (manufacturer of
Williamstown, Massachusetts specialty chemicals and materials); Vice Chairman (1990-1992), Director
Age 64 (1983-1995), Life Technologies, Inc. (life science/biotechnology
products); Director, (1994-present), The Connecticut Surety Corporation
(insurance); Director (1995-present), Calbiochem Novachem International
(life science/biotechnology products); Director (1995-present), Chemfab
Corporation (specialty materials manufacturer); Member, Board of
Managers, seven Variable Annuity Separate Accounts of The Travelers
</TABLE>
4
<PAGE> 27
<TABLE>
<S> <C>
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
Lewis Mandell Dean, College of Business Administration (1995-present), Marquette
Member University; Professor of Finance (1980-1995) and Associate Dean (1993-
606 N. 13th Street 1995), School of Business Administration, and Director, Center for
Milwaukee, WI 53233 Research and Development in Financial Services (1980-1995), University
Age 53 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 Portfolio Manager (1992-present), HLM Management Company, Inc.
Member (investment management); Assistant Treasurer, Pensions and Benefits.
222 Berkeley Street Management (1989-1992), United Technologies Corporation (broad- based
Boston, Massachusetts designer and manufacturer of high technology products); Member, Board
Age 48 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 Assistant Secretary (1994-present), Counsel (1987-present), The
Secretary to the Board Travelers Insurance Company; Secretary, Board of Managers, seven
One Tower Square Variable Annuity Separate Accounts of The Travelers Insurance Company+;
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 55 Travelers Insurance Company.++
Kathleen A. McGah Assistant Secretary and Counsel (1995-present), The Travelers Insurance
Assistant Secretary to the Board Company; Assistant Secretary, Board of Managers, seven Variable Annuity
One Tower Square Separate Accounts of The Travelers Insurance Company+; Assistant
Hartford, Connecticut Secretary, Board of Trustees, five Mutual Funds sponsored by The
Age 45 Travelers Insurance Company.++ Prior to January 1995, Counsel, ITT
Hartford Life Insurance Company.
Ian R. Stuart Vice President and Chief Financial Officer, The Travelers Insurance
Treasurer Company (1996-present); Vice President and Financial Officer, Financial
One Tower Square Services Department (1994-1995), Second Vice President and Assistant
Hartford, Connecticut Financial Officer, Financial Services Department (1991-1993), The
Age 39 Travelers Insurance Company; Senior Manager (1986-1991), Price
Waterhouse; Treasurer, Board of Trustees, five Mutual Funds sponsored
by The Travelers Insurance Company.++
</TABLE>
+ 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. and also
5
<PAGE> 28
owns shares and options to purchase shares of Travelers Group Inc., the
indirect parent of The Travelers Insurance Company.
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 retainer of $17,000 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 fee of $2,000 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).
6
<PAGE> 29
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>
7
<PAGE> 30
For the three years ended December 31, 1993, 1994 and 1995 the
advisory fees were $58,972, $61,647 and $62,591, respectively.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay
for all redemptions in cash, the Fund may authorize payment to be made in
portfolio securities or other property.
However, the Fund has obligated itself under the 1940 Act to redeem
for cash all shares presented for redemption by any one shareholder up to
$250,000, or 1% of the Fund's net assets if that is less, in any 90-day period.
Securities delivered in payment of redemptions would be valued at the same
value assigned to them in computing the net asset value per share.
Shareholders receiving such securities would incur brokerage costs when these
securities are sold.
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 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.
8
<PAGE> 31
The total brokerage commissions paid by the Fund for the fiscal years
ended December 31, 1993, 1994 and 1995 were $5,938, $44,063 and $71,924,
respectively. For the fiscal year ended December 31, 1995, 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. Commissions in the amount of $1,250 were paid to
Shearson/American Express an affiliate of TAMIC, which equals 1.74% of High
Yield Bond Trust's aggregate brokerage commission paid to such brokers during
1995. The percentage of the High Yield Bond Trust's aggregate dollar amount of
transactions involving the payment of commissions effected through
Shearson/American Express was 2.01%.
ADDITIONAL INFORMATION
The Travelers Insurance Company acts as transfer agent and dividend
disbursing agent for the Fund. The Travelers Insurance Company is a stock
insurance company chartered in 1864 in Connecticut and continuously engaged in
the insurance business since that time. It is a wholly owned subsidiary of The
Travelers Insurance Group Inc., which is an indirect wholly owned subsidiary of
Travelers Group Inc., a financial services holding company. The Travelers
Insurance Company's Home Office is located at One Tower Square, Hartford,
Connecticut 06183, telephone number 860-422-3985. On April 1, 1996, The
Travelers Insurance Company and an affiliate owned 100% of the Fund's
outstanding shares.
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 have been audited by Coopers & Lybrand
L.L.P., as indicated in their report thereon, and are included beginning on
page F-1 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 SAI 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 SAI 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.
9
<PAGE> 32
FINANCIAL STATEMENTS
F-1
<PAGE> 33
HIGH YIELD BOND TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $12,791,407) . . . . . . . . $12,591,681
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,401
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,270
Receivable from The Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . 3,156
-----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,924,571
-----------
LIABILITIES:
Payable for investment management and advisory fees . . . . . . . . . . . . . . . . . 881
Accrued expenses:
Reimbursable expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,156
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,236
-----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,273
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,902,298
===========
NET ASSETS REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,457,598
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,476
Accumulated net realized gains (losses) on investment security transactions . . . . . (6,529,050)
Net unrealized depreciation on investment securities . . . . . . . . . . . . . . . . (199,726)
-----------
Total net assets (applicable to 1,432,658 shares outstanding at $9.00 per share) $12,902,298
===========
</TABLE>
See Notes to Financial Statements
-20-
<PAGE> 34
HIGH YIELD BOND TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,329,872
EXPENSES:
Investment management and advisory fees . . . . . . . . . . . . . . $ 62,591
Accounting and audit fees . . . . . . . . . . . . . . . . . . . . . 61,639
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . 3,136
Printing and postage . . . . . . . . . . . . . . . . . . . . . . . 21,401
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . 8,378
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 352
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,055
-----------
Total expenses before reimbursement from The Travelers . . . . . 159,552
Less: Reimbursement from The Travelers . . . . . . . . . . . . . . (3,156)
-----------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 156,396
----------
Net investment income . . . . . . . . . . . . . . . . . . . 1,173,476
----------
REALIZED GAIN AND CHANGE IN UNREALIZED LOSS ON
INVESTMENT SECURITIES:
Realized gain from investment security transactions:
Proceeds from investment securities sold . . . . . . . . . . . . 25,261,753
Cost of investment securities sold . . . . . . . . . . . . . . . 24,865,862
-----------
Net realized gain . . . . . . . . . . . . . . . . . . . . . 395,891
Change in unrealized loss on investment securities:
Unrealized loss at December 31, 1994 . . . . . . . . . . . . . . (421,485)
Unrealized loss at December 31, 1995 . . . . . . . . . . . . . . (199,726)
-----------
Net change in unrealized loss for the year . . . . . . . . . 221,759
----------
Net realized gain and change in unrealized loss . . . . . 617,650
----------
Net increase in net assets resulting from operations . . . . . . . $1,791,126
==========
</TABLE>
See Notes to Financial Statements
-21-
<PAGE> 35
HIGH YIELD BOND TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,173,476 $ 949,721
Net realized gain (loss) from investment security transactions . . . 395,891 (30,534)
Net change in unrealized gain (loss) on investment securities . . . . 221,759 (1,108,223)
----------- -----------
Net increase (decrease) in net assets resulting from operations . 1,791,126 (189,036)
----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM NET INVESTMENT INCOME . . . . . . . . . (960,192) (919,615)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . 1,749,523 2,094,990
Dividend reinvestment . . . . . . . . . . . . . . . . . . . . . . . . 960,192 919,615
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . (2,354,757) (2,954,925)
----------- -----------
Net increase in net assets resulting from capital share transactions 354,958 59,680
----------- -----------
Net increase (decrease) in net assets . . . . . . . . . . . . 1,185,892 (1,048,971)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . 11,716,406 12,765,377
----------- -----------
End of year (including undistributed net investment income as follows:
December, 1995 $1,173,476 and December, 1994 $949,721) . . . . . . $12,902,298 $11,716,406
=========== ===========
</TABLE>
See Notes to Financial Statements
-22-
<PAGE> 36
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 ("The Travelers"), an indirect
wholly owned subsidiary of Travelers Group 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,
1995, Fund HY had capital loss carryovers totaling $4,562,238 which
may be available to offset any future realized taxable gains, to the
extent provided by regulations. These amounts expire during the
period 1996-2003.
OTHER. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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.
-23-
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS
Purchases and sales of securities other than short-term investments
aggregated $24,892,284 and $24,762,913, respectively, for the year
ended December 31, 1995. Realized gains and losses from security
transactions are reported on an identified-cost basis.
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 assets. These fees are paid to
Travelers Asset Management International Corporation, an indirect
wholly owned subsidiary of Travelers Group Inc.
The Travelers has agreed to reimburse Fund HY for the amount by which
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 Travelers Group 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>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994
-------- ---------
<S> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,291 243,214
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . (276,334) (348,173)
Shares issued in reinvestment of distributions from net investment 122,473 105,582
-------- --------
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,430 623
======== ========
</TABLE>
As of December 31, 1995, 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 The Travelers.
5. SUBSEQUENT EVENT
On January 23, 1996, in accordance with the Board of Trustees, a
dividend was declared with a distribution of net investment income of
$0.94 per share, payable on January 23, 1996, to shareholders of
record as of January 22, 1996. This distribution is not reflected in
the accompanying financial statements.
-24-
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. FINANCIAL HIGHLIGHTS*
(Selected data for a share outstanding throughout each year.)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year . . . . . . . . . $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87
Income from operations
Net investment income . . . . . . . . . . . . . . 0.80 0.66 0.68 0.88 0.94
Net gains or losses on securities (realized and unrealized) 0.41 (0.76) 0.47 0.18 0.88
------- ------- ------- ------- ------
Total from investment operations . . . . . . . 1.21 (0.10) 1.15 1.06 1.82
Less distributions
Distributions from net investment income . . . . (0.70) (0.66) (0.81) (0.90) (0.94)
------- ------- ------- ------- ------
Net asset value, end of year . . . . . . . . . . . . $ 9.00 $ 8.49 $ 9.25 $ 8.91 $ 8.75
======= ======= ======= ======= ======
TOTAL RETURN** 15.47 % (1.26)% 14.01 % 13.16 % 26.11 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (thousands) . . . . . . . $12,902 $11,716 $12,765 $10,289 $7,724
Ratio of expenses to average net assets*** . . . 1.25 % 1.25 % 0.99 % 0.56 % 0.56 %
Ratio of net investment income to average net assets 9.37 % 7.71 % 7.69 % 10.24 % 11.93 %
Portfolio turnover rate . . . . . . . . . . . . . 222 % 146 % 19 % 52 % 35 %
</TABLE>
* The information set forth in Note 6 replaces the data presented in
prior years as supplementary information.
** 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 The
Travelers 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 The Travelers separate accounts.
*** The ratio of expenses to average net assets reflects an expense
reimbursement by The Travelers in connection with voluntary expense
limitations, including those described in Note 3. Without the expense
reimbursement, the ratios of expenses to average net assets would have
been 1.28 %, 1.33%, 1.31%, 1.28%, and 1.87% for the years ended
December 31, 1995, 1994, 1993, 1992, and 1991, respectively.
-25-
<PAGE> 39
HIGH YIELD BOND TRUST
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCKS (0.1%)
UTILITIES (0.1%)
Great Bay Power Co. (A) 1,500 $ 11,062
-----------
TOTAL COMMON STOCKS
(COST $ 131,522 ) 11,062
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
BONDS (86.1%)
AMUSEMENTS (7.5%)
Genmar Holdings, Inc.,
13.50% Notes, 2001 $500,000 490,000
Plitt Theatres,
10.875% Notes, 2004 500,000 452,500
-----------
942,500
-----------
CHEMICALS, PHARAMACEUTICALS AND
ALLIED PRODUCTS (3.9%)
Renaissance Cosmetics, Inc.,
13.75% Notes, 2001 500,000 498,750
-----------
COMMUNICATION (21.0%)
Adelphia Communication,
9.50% Notes, 2004 (B) 274,314 229,052
Adelphia Communication,
9.875% Notes, 2005 75,000 68,250
Clearnet Communications,
0.00% Notes, 2005 500,000 260,000
Commodore Media, Inc.,
7.50% Notes, 2003 500,000 475,000
Galaxy Telecommunication LP,
12.375% Notes, 2005 400,000 398,000
Pagemart Nationwide,
0.00% Notes, 2005 368,000 245,640
Paxson Communications,
11.625% Notes, 2002 400,000 404,000
Peoples Telecommunication Co.,
12.25% Notes, 2002 500,000 412,500
Telewest PLC,
11.00% Debentures, 2007 250,000 151,563
-----------
2,644,005
-----------
CONSTRUCTION (1.8%)
Greystone Homes, Inc.,
10.75% Notes, 2004 250,000 231,250
-----------
FINANCE (5.7%)
B.F. Saul REIT,
11.625% Notes, 2002 400,000 410,000
Trizec Financial,
10.875% Notes, 2005 300,000 310,875
-----------
720,875
-----------
METAL PRODUCTS (7.2%)
Gulf States Steel,
13.50% Notes, 2003 500,000 443,750
Sheffield Steel,
12.00% Bonds, 2001 500,000 465,000
-----------
908,750
-----------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----------
PAPER AND ALLIED PRODUCTS (3.1%)
Mail-Well, Inc.,
10.50% Notes, 2004 $400,000 $ 386,000
-----------
PRINTING, PUBLISHING AND
ALLIED INDUSTRIES (3.9%)
Sullivan Graphics,
12.75% Notes, 2005 500,000 488,750
-----------
RETAIL (13.0%)
Family Restaurant, Inc.,
0.00% Notes, 2004 (B) 250,000 27,500
Flagstar Corp.,
10.75% Notes, 2001 250,000 230,625
Flagstar Corp.,
11.25% Debentures, 2004 250,000 178,750
Foodmaker, Inc.,
9.75% Notes, 2002 500,000 455,000
Phar-Mor, Inc.,
11.72% Notes, 2002 400,000 364,000
Pueblo Xtra International,
9.50% Notes, 2003 400,000 376,000
-----------
1,631,875
-----------
SERVICES (15.5%)
Americold Corp.,
11.50% Bonds, 2005 500,000 503,750
Florists Transworld Delivery,
14.00% Notes, 2001 500,000 493,750
Regency Health Services, Inc.,
9.875% Notes, 2002 400,000 399,000
United International Holdings,
0.00% Notes, 1999 500,000 312,500
Webcraft Techs., Inc.,
9.375% Notes, 2002 250,000 238,750
-----------
1,947,750
-----------
TRANSPORTATION (3.5%)
Terex Corp.,
13.75% Notes, 2002 (C) 500,000 440,002
-----------
TOTAL BONDS
(COST $10,919,578 ) 10,840,505
-----------
SHORT-TERM INVESTMENTS (13.8%)
COMMERCIAL PAPER (9.5%)
Potomac Electric Power Co.,
5.63% due January 23, 1996 600,000 596,810
Xerox Corp.,
5.62% due January 18, 1996 600,000 597,302
-----------
1,194,112
-----------
REPURCHASE AGREEMENTS (4.3%)
Merrill Lynch Government Securities, Inc.,
5.50% Repurchase Agreement
dated December 29, 1995, due
January 2, 1996, collateralized
by: United States of America
Treasury, $550, 000,
5.625% due October 31, 1997 546,000 546,000
-----------
TOTAL SHORT-TERM
INVESTMENTS (COST $1,740,307) 1,740,112
-----------
TOTAL INVESTMENTS (100%)
(COST $ 12,791,407) (D) (E) $12,591,681
===========
</TABLE>
-26-
<PAGE> 40
NOTES
(A) Non-income Producing Security.
(B) Paid-in-kind Security.
(C) Market value of $2 warrant included.
(D) The cost of investments for federal income tax purposes amounted to
$12,826,995. Gross unrealized appreciation and depreciation of
investments, based on identified tax cost at December 31, 1995 were as
follows:
<TABLE>
<S> <C>
Gross unrealized appreciation ......... 358,053
Gross unrealized depreciation ......... (593,367)
---------
Net unrealized depreciation ........... (235,314)
=========
</TABLE>
(E) At December 31, 1995, net unrealized depreciation for all securities
was $199,726. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over cost of $358,053 and aggregate gross unrealized
depreciation for all securities in which there was an excess of cost
over market value of $557,779.
See Notes to Financial Statements
-27-
<PAGE> 41
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,
1995, 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, 1995, by correspondence with the custodian. 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, 1995, 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 7, 1996
-28-
<PAGE> 42
HIGH YIELD BOND TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11173S TIC Ed. 5-96
Printed in U.S.A.
<PAGE> 43
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 Statement of Additional Information.
The Registrant's financial statements include:
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Statement of Investments as of December 31, 1995
Notes to Financial Statements
(b) Exhibits
1. Declaration of Trust.
2. By-Laws of High Yield Bond Trust.
5. Investment Advisory Agreement between the Registrant and
Travelers Asset Management International Corporation.
8. Custody Agreement dated February 1, 1995 between the Registrant
and Chase Manhattan Bank, N.A., of Brooklyn, New York.
(Incorporated herein by reference to Exhibit 8 to Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A filed
on April 20, 1995.)
9. Transfer and Recordkeeping Agreement between the Registrant and
The Travelers Insurance Company.
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 Form 24f -2 Notice
filed on February 29, 1996.)
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 to the inclusion 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.
27. Financial Data Schedule.
<PAGE> 44
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of February 16, 1996
-------------- -------------------------------------
<S> <C>
Shares of beneficial interest, Two (2)
without par value
</TABLE>
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers are
contained in the Fund's Declaration of Trust which is being filed with this
Registration Statement as Exhibit 1.
Rule 484 Undertaking
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 45
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:
<TABLE>
<CAPTION>
Name Position with TAMIC Other Business
- ---- ------------------- --------------
<S> <C> <C>
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 Assistant Director*
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Vice President*
Phillip A. Duncan Vice President Second Vice President*
Kathyrn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
Joseph Mullally Vice President Vice President*
Emil J. Molinaro Vice President Vice President*
Jordan M. Stitzer Vice President Vice President
F. Denney Voss Vice President Senior Vice President*
Eddie Sanchez Assistant Vice President Assistant Director*
William H. White Treasurer Vice President and Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George C. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
John R. Britt Secretary Assistant Secretary *
Marla A. Berman Assistant Secretary Assistant Secretary**
Patricia A. Uzzel Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
</TABLE>
* Positions are held with The Travelers Insurance Group Inc., One Tower
Square, Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc., 388 Greenwich Street, New
York, N.Y. 10013.
<PAGE> 46
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> 47
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 11, 1996.
HIGH YIELD BOND TRUST
---------------------
(Registrant)
By: *HEATH B. McLENDON
---------------------------------
Heath B. McLendon
Chairman, Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on April 11, 1996.
<TABLE>
<S> <C>
*HEATH B. McLENDON Chairman of the Board
- ---------------------------------------
(Heath B. McLendon)
*KNIGHT EDWARDS Trustee
- ---------------------------------------
(Knight Edwards)
*ROBERT E. McGILL III Trustee
- ---------------------------------------
(Robert E. McGill III)
*LEWIS MANDELL Trustee
- ---------------------------------------
(Lewis Mandell)
*FRANCES M. HAWK Trustee
- ---------------------------------------
(Frances M. Hawk)
*IAN R. STUART Treasurer and Chief Accounting Officer
- ---------------------------------------
(Ian R. Stuart)
*By: /s/ Ernest J. Wright
----------------------------------------------------
Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
</TABLE>
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C> <C>
1. Declaration of Trust. Electronically
2. By-Laws of High Yield Bond Trust. Electronically
5. Investment Advisory Agreement between the Electronically
Registrant and Travelers Asset Management
International Corporation.
8. Custody Agreement dated February 1, 1995 between
the Registrant and Chase Manhattan Bank, N.A., of
Brooklyn, New York. (Incorporated herein by reference
to Exhibit 8 to Post-Effective Amendment No. 19 to
the Registration Statement on Form N-1A filed on
April 20, 1995.)
9. Transfer and Recordkeeping Agreement between the Electronically
Registrant and The Travelers Insurance Company.
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
Form 24f-2 Notice filed on February 29, 1996.)
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 to the
inclusion of their report.
11(B). Powers of Attorney authorizing Ernest J. Wright as Electronically
signatory for Heath B. McLendon, Knight Edwards,
Robert E. McGill III, Lewis Mandell, Frances M. Hawk
and Ian R. Stuart.
27. Financial Data Schedule Electronically
</TABLE>
<PAGE> 1
EXHIBIT 1
HIGH YIELD BOND TRUST
SUPPLEMENTAL DECLARATION OF TRUST
Dated October 1, 1985
DECLARATION OF TRUST, made at Boston, Massachusetts on October 1, 1985
by George S. Bissell, Everett P. Pope, Peter K. Simonds, Knight Edwards, Philip
B. Harley, Leroy Keith, Jr., David M. Richardson, Andrew J. Simons and Russel
R. Taylor (hereinafter with their successors referred to as the "Trustees").
WHEREAS, the Trustees have agreed to manage all property received by
them as Trustees in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same
upon the following terms and conditions for the pro rata benefit of the holders
from time to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as the "HIGH YIELD BOND
TRUST" and the Trustees shall conduct the business of this Trust under that
name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided
(a) The terms "Affiliated Person", "Assignment", "Com-mission",
"Interested Person" and "Principal underwriter" shall have the
meanings given them in the Investment Company Act of 1940 ("1940
Act");
(b) The "Trust" refers to the Massachusetts business trust
established by this Declaration of Trust, as amended from time to
time;
(c) "Declaration of Trust" shall mean this Declaration of Trust
as amended or restated from time to time;
(d) "Majority Shareholder Vote" means the vote of a majority of
Shares of a Series entitled to vote on a matter at
<PAGE> 2
a meeting or a special meeting of Shareholders not less than the "vote
of a majority" as defined in the 1940 Act;
(e) "Net Asset Value Per Share" means the net asset value per
share of the Trust determined in the manner provided or authorized in
Article VI, Section 4;
(f) "Shareholder" means a record owner of Shares of the Trust;
(g) "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust shall be divided from
time to time or, if more than one class of Shares is authorized by the
Trustees, the equal proportionate units into which each class of
Shares shall be divided from time to time, and includes where
appropriate such fractions of a Share as the Trustees may from time to
time authorize as well as a whole Share;
(h) "Trustees" refers to the Trustee or Trustees of the Trust
named or elected in accordance with Article IV and where appropriate
means a majority or other portion of them acting in accordance with
this Declaration of Trust or the By-Laws of the Trust; and
(i) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to
time.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide shareholders growth of capital.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into transferable Shares, without par
value, each of which shall represent an equal proportionate interest in the
Trust with each other Share outstanding, none having priority or preference
over another, except to the extent modified by the Trustees under the
provisions of this section. The number of Shares which may be issued is
unlimited. The Trustees may from time to time divide or combine the
outstanding Shares into a greater or lesser number without thereby changing the
proportionate beneficial interest in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or
fractions.
2
<PAGE> 3
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded in the books of the Trust or a transfer agent or a similar agent. The
Trustees may make such rules as they consider appropriate for the transfer of
Shares and similar matters. The record books of the Trust as kept by the Trust
or any transfer agent or similar agent, as the case may be, shall be conclusive
as to who are the holders and as to the number of Shares held from time to time
by each.
Section 3. Investments in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and, subject to
any requirements of law, for such consideration as the Trustees from time to
time authorize and may cease offering Shares to the public at any time. After
such acceptance, the number of Shares to represent the contribution may in the
Trustees' discretion be considered as outstanding and the amount receivable by
the Trustees on account of the contribution may be treated as an asset of the
Trust.
After the initial investment in the Trust, Shares (including Shares
which may have been redeemed or repurchased by the Trust) may be issued or sold
at a price which will net the Trust, before paying any taxes in connection with
such issue or sale, not less than the Net Asset Value per Share thereof;
provided, however, that the Trustees may in their discretion impose a sales
charge upon investments in the Trust.
Section 4. No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 5. Limitation of Personal Liability. The Trustees shall have
no power to bind any Shareholder personally or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription to
any Shares or otherwise. Every note, bond, contract or other undertaking
issued by or on behalf of the Trust or the Trustees relating to the Trust shall
include a recitation limiting the obligation represented thereby to the Trust
and its assets (but the omission of such a recitation shall not operate to bind
any Shareholder).
ARTICLE IV
The Trustees
Section 1. Election. At the annual meeting of shareholders in 1985
the Shareholders shall elect a Board of Trustees.
3
<PAGE> 4
Section 2. Term of Office of Trustees. After election, each Trustee
shall hold office during the lifetime of this Trust, or until the election of
his or her successor at a meeting of Shareholders; except (a) that any Trustee
may resign his or her Trust by written instrument signed by him or her and
delivered to the other Trustees which shall take effect upon such delivery or
upon such later date as is specified therein; (b)) that any Trustee may be
removed at any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has become mentally or physically incapacitated may be retired
by written instrument signed by a majority of the other Trustees, specifying
the date of his or her retirement; and (d) that a Trustee may be removed at any
special meeting of Shareholders of the Trust by a vote of a majority of the
outstanding Shares.
Section 3. Termination of Service and Appointment of Trustees. In
case of the death, resignation, retirement, removal or mental or physical
incapacity of any of the Trustees, or in case a vacancy shall, by reason of an
increase in number, or for any other reason, exist, the remaining Trustees
shall fill such vacancy by appointing for the remaining term of the predecessor
Trustee such other person as they in their discretion shall see fit. An
appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that such
appointment shall become effective only at or after the effective date of such
retirement, resignation or increase in number of Trustees. As soon as any
Trustee so appointed shall have accepted this Trust, the Trust estate shall
vest in the new Trustee or Trustees, together with the continuing Trustees,
without any further act or conveyance, and he or she shall be deemed a Trustee
hereunder. Any appointment authorized by this Section 3 is subject to the
provisions of Section 16(a) of the an 1940 Act.
Section 4. Number of Trustees. The number of Trustees serving
hereunder at any time shall be determined by the Trustees themselves, but shall
not be less than three (3) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated, the other
Trustees shall have all the powers hereunder and the certificate signed by a
majority of the other Trustees of such vacancy, absence or incapacity, shall be
conclusive, provided, however, that no vacancy which reduces the
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number of Trustees below three (3) shall remain unfilled for a period longer
than six calendar months.
Section 5. Effect of Death, Resignation, etc. of a Trustee. The
death, resignation, retirement, removal, or mental or physical incapacity of
the Trustees, or any one of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust.
Section 6. Management of the Trust. Subject to the provisions of
this Declaration of Trust, the business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary and desirable
to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that they do
not reserve that right to the Shareholders; they may fill vacancies in or add
to their own number and may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number and terminate any one or more committees; they may employ one or
more custodians of the assets of the Trust and may authorize such custodians to
employ subcustodians and to deposit all or any part of such assets in a system
or systems for the central handling of securities, retain a transfer agent or a
Shareholder servicing agent, or both, provide for the distribution of Shares by
the Trust, through one or more principal underwriters or otherwise, set record
dates, and in general delegate such authority as they consider desirable to any
officers of the Trust and committees of the Trustees and to any agent or
employee, custodian or underwriter.
Without limiting the foregoing, the Trustees in addition to all powers
granted by law shall have power and authority:
(a) to invest and reinvest cash, and to hold cash uninvested,
without in any wise being bound or limited by any present or future
law or custom in regard to investments by trustees;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate or
lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and
to execute and deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;
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(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form;
or in its own name or in the name of a custodian or subcustodian or a
nominee or nominees or otherwise;
(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern
any security of which is held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or concern, and to pay calls or subscriptions with respect
to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depository, voting Trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to,
any such committee, depository or Trustee, and to delegate to them
such power and authority with relation to any security (whether or not
so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or Trustee as the Trustees
shall deem proper;
(h) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust for any matter in controversy, including
but not limited to claims for taxes; and
(i) To borrow funds.
The Trustees shall not be required to obtain any court order to deal
with any assets of the Trust or take any other action hereunder
Section 7. Ownership of Assets of the Trust. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or by any successor
Trustees. All of the assets of the Trust shall at all times by considered as
vested in the Trustees. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or any right of partition or
possession thereof, but each Shareholder shall have a proportionate undivided
beneficial interest in the assets of the Trust.
Section 8. Payment of Expenses. The Trustees shall pay or cause to
be paid out of the principal or income of the Trust, or
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partly out of principal and partly out of income, as they deem fair, all
expenses, charges, taxes and liabilities incurred or arising in connection with
the Trust, or in connection with the management thereof, including but not
limited to the Trustees' compensation and such expenses and charges for the
services of the Trust's investment adviser or manager, administrator, auditor,
counsel, custodian, transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur.
Section 9. Investment Management and Other Services. Subject to a
favorable majority Shareholder Vote, the Trustees may enter into a contract
with any person or persons, including any firm, corporation, trust or
association in which any Trustee, Shareholder or officer of the Trust may be
interested, to act as investment advisers and/or managers of the Trust and to
provide such investment advice and/or management as the Trustees may from time
to time consider appropriate (the "Adviser"). Any such contract may authorize
the Adviser to determine from time to time what securities shall be acquired,
held or disposed of by the Trust and what portion of assets of the Trust shall
be held uninvested and to take, on behalf of the Trust, actions which the
Adviser deems necessary to implement the investment policies of the Trust,
including the placement of all orders for the purchase, sale or loan of
portfolio securities for the Trust's account with brokers or dealers or others
selected by the Adviser and the giving of instructions to the custodian of the
Trust's assets as to deliveries of securities and payments of cash for the
account of the Trust.
Subject to a favorable majority Shareholder Vote, the Adviser may
enter into an agreement to retain at its own expense any person or persons,
including any firm, corporation, trust or association in which any Trustee,
Shareholder or officer of the Trust may be interested, to provide the Trust
investment advice and/or management and any person or persons so retained may
be granted all authority which has been granted to the Adviser under the
contract which the Adviser entered in to pursuant to the preceding paragraph.
The Trustees may enter into a contract with any person or persons
including any firm, corporation, trust or association in which any Trustee,
Shareholder or officer of the Trust be interested, to act as principal
underwriter for the Shares.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote
(i) for the election or removal of Trustees as provided in Article IV, Section
1, (ii) with respect to any Adviser or person whom the Adviser may retain to
provide the Trust investment advice
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and/or management as provided in Article IV, Section 9, (iii) with respect to
any amendment of this Declaration of Trust as provided in Article IX, Section
7, (iv) to the same extent as the stockholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (v) with respect to such additional matters relating
to the Trust as may be required by law, by this Declaration of Trust, or the
By-Laws of the Trust or any registration of the Trust with the Commission or
any state, or as the Trustees may consider desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy with respect to Shares held in the name of two
or more persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or any
By-Laws of the Trust to be taken by Shareholders.
Section 2. Meetings. Meetings of Shareholders shall be held as
specified in Article IV, Sections 1 and 2 and in the By-Laws at the principal
office of the Trust or such other place as the Trustees may designate. Special
meetings of the Shareholders may be called by the Trustees or such other person
or persons as may be specified in the By-Laws and shall be called by the
Trustees upon the written request of Shareholders owning at least 25% of the
outstanding Shares entitled to vote. Shareholders shall be entitled to at least
seven days' notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by
law, to constitute a quorum for the transaction of business at a Shareholders'
meeting there must be present in person or by proxy, holders of one fourth of
the total number of Shares of the Trust then outstanding and entitled to vote
at the meeting, but any lesser number shall be sufficient for adjournment and
any adjourned session or sessions may be held within 90 days after the date set
for the original meeting without the necessity of further notice. Subject to
any applicable requirements of law, a majority of the Shares entitled to vote
on a question which were voted shall decide any questions and a plurality shall
elect a Trustee, except when a larger vote is required by any provision of this
Declaration of Trust, the By-Laws of the Trust, or any applicable provision of
law.
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Section 4. Action by Written Consent. Any action required or
permitted to be taken at any meeting may be taken without a meeting, if a
consent in writing, setting forth such action is signed by all the Shareholders
entitled to vote on the subject matter thereof and such consent is filed with
the records of the Trust.
Section 5. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Distributions and Redemptions
Section 1. Distributions. The Trustees may each year distribute to
the Shareholders of a Portfolio such interest income accrued on the assets of
the Trust's and unrealized gains and losses on that Portfolio's assets as
determined by the Trustees or as they may authorize and as herein provided,
after providing for actual and accrued expenses and liabilities (including such
reserves as the Trustees may establish) of the Trust chargeable against income
determined in accordance with good accounting practices (Net Income). The
Trustees shall have full discretion to determine which items shall be treated
as income and which items as capital and their determination shall be binding
upon the Shareholders. Distributions of each year's Net Income may be made in
one or more payments, which shall be in Shares, in cash, or otherwise and on a
date or dates and as of a record date or dates determined by the Trustees.
Each distribution pursuant to this Section 1 shall be made ratably according to
the number of Shares held by the several Shareholders on the record date for
such distribution.
Section 2. Redemptions. Upon offer by any Shareholder of all or part
of the Shares held by the Shareholder for redemption hereunder, in accordance
with such methods, upon such terms and subject to such conditions as the
Trustees may from time to time determine, the Trustees shall redeem the Shares
so offered by distributing to the Shareholder the Net Asset Value per Share
thereof next determined. With respect to all Shares, the right to redemption
or the date for payment may, however, be delayed or suspended by the Trustees
if there is an extraordinary closing or restriction of trading on the New York
Stock Exchange as determined under rules and regulations of the Commission, or
an emergency exists as a result of which it is not reasonably practicable for
the Trust to dispose of securities or fairly to determine the value of its net
assets, or as the Commission may permit. The completion of such distribution on
redemption of Shares shall constitute a full discharge of the Trust and
Trustees with respect to such Shares, and the Trustees may require that any
certificate or certificates issued by the Trust to evidence the ownership of
the Shares shall be
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surrendered to the Trustees for cancellation or notation. Shares so redeemed
shall be canceled or held by the Trust for reissue, as the Trustees may from
time to time determine.
Section 3. Payment in Kind. Subject to any generally applicable
limitation imposed by the Trustees, any distribution on redemption may, if
authorized by the Trustees, be made wholly or partly in kind, instead of in
cash. Such distribution in kind shall be made by distributing investments
constituting, in the opinion of the Trustees, a fair representation of the
various types of securities then held by the Trust being redeemed (but not
necessarily including a portion of each particular investment) and in each case
having an aggregate value equal to the amount of cash instead of which such
distribution in kind is made.
Section 4. Determination of Net Asset Value per Share. The Net Asset
Value per Share shall be computed as of the close of trading on the New York
Stock Exchange on each day on which such Exchange is open by determining the
value of all the Trust's investments, adding any other assets of the Trust,
subtracting all liabilities of the Trust and dividing the result by the number
of Shares outstanding.
Current value for portfolio securities shall be determined as follows.
Securities that are traded on an established exchange shall be valued on the
basis of the last sales price on the exchange where primarily traded prior to
the time of the valuation. Securities traded in the over-the-counter market
and for which complete quotations are readily available shall be valued at the
mean of the bid and asked prices at the time of valuation. Subject to
instructions of the Board of Trustees, the Trust shall value the following at
prices deemed 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 Trustees' opinion the last sales price does not reflect a
current market value or if no sale occurred, and (3) other assets. The fair
value for listed securities will normally be the mean between the closing bid
and asked prices on the exchange or primary market, where available.
Money market or short-term tax free securities for which market
quotations are readily available shall be valued at prices which, in the
opinion of the person making the determination, most nearly represents the
market value of such securities which may, but need not, be the most recent bid
price obtained from one or more of the market markers for such securities.
Other securities and assets shall be valued at fair value as determined by or
pursuant to the direction of the Trustees which in the case of short-term debt
obligations, commercial paper and repurchase agreements may, but need not be,
on the basis of quoted yields for securities of
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comparable maturity, quality and type, or on the basis of amortized cost.
Expenses and liabilities of the Trust shall be accrued each day. The
manner of determining the Net Asset Value per Share may from time to time be
altered if necessary or desirable in the Trustees' judgment to conform to any
other method prescribed or permitted by any applicable law or regulation.
The Net Asset value per Share may be computed as of such other times
as the Trustees may determine and in such event the Net Asset Value per Share
may, but need not, be determined by adjusting the Net Asset Value per Share
last determined pursuant to this Section in such manner (based upon changes in
selected security prices determined by the Trustees to be relevant to the Trust
or in averages or in other standard and readily ascertain-able market data
since the last determination) as is deemed adequate to reflect a fair
approximate estimate of the probable change in Net Asset Value per Share which
has occurred since such last determination.
In determination of Net Asset Value per Share and Net Income,
liabilities may include such reserves for taxes, estimated accrued expenses and
contingencies as the Trustees or their designates may in their sole discretion
deem fair and reasonable and attributable to the Trust under the circumstances.
No accruals shall be made in respect of taxes on unrealized appreciation of
securities owned unless the Trustees shall otherwise determine. Dividends
payable by the Trust shall be deducted as at the time of but immediately prior
to the determination of Net Asset Value per Share on the record date therefor
or as the Trustees shall otherwise determine.
Determination of Net Asset Value per Share so made in good faith and
pursuant to the provisions of the 1940 Act shall be binding on all parties
concerned.
Section 5. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VI, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the Net
Asset Value per Share of the Trust's Shares or Net Income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act, or
any rule or regulation thereunder, including any rule or regulation adopted
pursuant to Section 22 of the 1940 Act by the Commission or any securities
association registered under the Securities Exchange Act of 1934, or any order
of exemption issued by said Commission, all as in effect now or as hereafter
amended or modified
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ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation.
Section 2. Limitation of Liability. Provided they have exercised
reasonable care in their selection, the Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee or Adviser of the Trust nor shall any Trustee be responsible for the
act or omission of any other Trustee, but nothing herein contained shall
protect any Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in their or his
capacity as Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, etc. The Trust shall indemnify each
of its Trustees and officers and any persons who serve at the Trust's request
as Directors, officers or Trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise (hereinafter referred
to as a "Covered Person") against all liabilities and expenses, including but
not limited to, amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any such person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such person may be or may have been involved as a
party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer or Director, except with respect to any matter as to
which such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests
of the Trust and except that no person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered Person shall
otherwise be subject
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by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of office. Expenses, including
counsel fees so incurred by any Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such Covered Person, secured by an appropriate deposit or a surety bond
approved by independent legal counsel for the Trust, to repay amounts so paid
to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article.
Except as otherwise provided by law, the Trust shall have power to
purchase and maintain insurance on behalf of a Covered Person against any
liability asserted against him and incurred by him in his capacity as a Covered
Person, or arising out of his status as such, whether or not the Trust would
have the power to indemnify him against the liability under the provisions of
this section.
Section 2. Compromise Payment. As to any matter disposed of by a
compromise payment by any Covered person referred to in Section 1 above,
pursuant to a consent decree or otherwise, no such indemnification either for
such payment or for any other expenses shall be provided unless such compromise
shall be approved as in the best interests of the Trust, after notice that it
involved such indemnification, (a) by a disinterested majority of the Trustees
then in office; or (b) by a majority of the disinterested Trustees then in
office; or (c) by any disinterested person or persons to whom the question may
be referred by the Trustees, provided that in the case of approval pursuant to
clause (b) or (c) there has been obtained an opinion in writing of independent
legal counsel to the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his action was in the best interests
of the Trust and that such indemnification would not protect such person
against any liability to the Trust to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office; or (d) by
vote of Shareholders holding a majority of the Shares entitled to vote thereon,
exclusive of any Shares beneficially owned by any interested Covered Person.
Approval by the Trustees pursuant to clause (a) or (b) or any disinterested
person or persons pursuant to clause (c) of this Section shall not prevent the
recovery from any Covered Person of any amount paid to such person in
accordance with either of such clauses as indemnification if such person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such person's action was in the
best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
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negligence or reckless disregard of the duties involved in the conduct of
office.
Section 3. Indemnification Not Exclusive. The right of
indemnification hereby provided shall not be exclusive or affect any other
rights to which any such Covered Person may be entitled. As used in this
Article VIII, the term "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person" is one against
whom the action, suit or other proceeding in question or another action, suit
or other proceeding on the same or similar grounds is then or has been pending,
and a "disinterested person" is a person against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending. Nothing contained in this
Article shall affect any rights to indemnification to which personnel of the
Trust other than Trustees and officers or other persons may be entitled by
contract or otherwise under law.
Section 4. Shareholders. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust to be held harmless from and
indemnified against all loss and expense arising from such liability.
ARTICLE IX
Miscellaneous
Section 1. Trust Not a Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally either the Trust's Trustees or officers or any
Shareholders. All persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Trust for payment
under such credit, contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
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Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing,
shall be binding upon everyone interested. Subject to the provisions of
Section 1 of this Article IX, a Trustee shall be liable for his own willful
defaults, and for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and subject to the provisions of said Section 1 shall be under no liability for
any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees pursuant
hereto or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Section 4. Termination of Trust.
(a) This Trust shall continue without limitation of time but
subject to the provisions of paragraphs (b), (c) and (d) of this
Section 4.
(b) Subject to a Majority Shareholder Vote, the Trustees, may
merge, consolidate, or sell and convey the assets of the Trust
including its goodwill to another trust or corporation organized under
the laws of any state of the United States, which is a diversified
open-end management investment company as defined in the 1940 Act, for
an adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust and which may include shares of beneficial
interest or stock of such trust or corporation. Upon making provision
for the payment of all such liabilities, by such assumption or
otherwise, the Trustees shall distribute the net proceeds of the
transaction ratably among the holders of the Shares of the Trust then
outstanding.
(c) Subject to a Majority Shareholder Vote, the Trustees may at
any time sell and convert into money all the assets of the Trust.
Either the Trustees, or the Shareholders acting by a Majority
Shareholder Vote, may at any time sell and convert into money all the
assets of the Trust. Upon making provision for the payment of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust, the Trustees
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shall distribute the remaining assets of the Trust ratably among the
holders of the outstanding Shares.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in paragraphs (b) and
(c), the Trust shall terminate and the Trustees shall be discharged of
any and all further liabilities and duties hereunder and the right,
title and interest of all parties shall be canceled and discharged.
Section 5. Filing of Copies, References, Headings. The original or a
copy of this instrument and of each Declaration of Trust supplemental hereto or
Amendment hereof shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each such
Supplemental Declaration of Trust or Amendment shall be filed by the Trust with
the Massachusetts Secretary of State and the Boston City Clerk, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any Supplemental Declarations of Trust or Amendments
have been made, and as to any matters in connection with the trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of any
such Supplemental Declaration of Trust or Amendment. In this instrument or in
any such Amendment or Supplemental Declaration of Trust, references to this
instrument, and all expressions such as "herein," "hereof," and "hereunder,"
shall be deemed to refer to this instrument as amended or affected by any such
Supplemental Declaration of Trust or Amendment. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
instrument, rather than the headings, shall control. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 6. Applicable Law. The Trust set forth in this instrument is
made in the Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of such
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a Trust.
Section 7. Amendments. This Declaration of Trust may be altered or
amended at any time by an instrument in writing signed by a majority of the
Trustees when authorized so to do by vote of Shareholders holding a majority of
the Shares entitled to vote or by any larger vote which may be required by
applicable law in any particular case except that Amendments having the purpose
of changing the name of the Trust or of supplying any omission, curing
16
<PAGE> 17
any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote. Copies of the Supplemental Declaration of Trust shall be
filed as specified in Section 5 of this Article IX.
IN WITNESS WHEREOF, the undersigned being a majority of the Trustees
of the Trust have hereunto set their hands and seals in the City of Boston,
Massachusetts, for themselves and their assigns, as of the day and year first
above written.
/s/Knight Edwards /s/Andrew J. Simons
- -------------------------- ----------------------------------
Knight Edwards Andrew J. Simons
/s/George S. Bissell /s/Everett P. Pope
- -------------------------- ----------------------------------
George S. Bissell Everett P. Pope
/s/Donald T. Ellis /s/Peter K. Simonds
- -------------------------- ----------------------------------
Donald T. Ellis Peter K. Simonds
17
<PAGE> 1
EXHIBIT 2
HIGH YIELD BOND TRUST
(formerly Keystone Bond Trust)
BY-LAWS
(As amended June 19, 1986 and January 25, 1991)
These By-Laws are made and adopted pursuant to Section 9.7 of the
Declaration of Trust establishing HIGH YIELD BOND TRUST, dated March 18, 1982,
as from time to time amended, restated or modified (the "Declaration"). All
words and terms capitalized in these By-Laws shall have the meaning or meanings
set forth for such words or terms in the Declaration. If any term or provision
of these By-Laws shall be in conflict with any term or provision of the
Declaration, the terms and provisions of the Declaration shall be controlling.
ARTICLE I
SHAREHOLDERS' MEETINGS AND RECORD DATES
Section 1.1 General. All meetings of the Shareholders shall be held,
pursuant to written notice, within or without the Commonwealth of Massachusetts
and on such day and at such time as the Trustees shall designate. Notice shall
be given by mail not less than ten (10) nor more than sixty (60) days prior to
the day named for the meeting, and shall be deemed to have been properly given
to a Shareholder when deposited in the United States mail with first class
postage prepaid or in a telegraph office with charges prepaid, directed to his
address as given to a transfer agent or such other officer or agent of the
Trust as shall keep the register for entry thereon. A certificate or affidavit
by the Secretary or an Assistant Secretary or a transfer agent shall be prima
facie evidence of the giving of any notice required by the Declaration.
Section 1.2 Notice of Adjournments. Upon adjournment of any meeting
of Shareholders, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted thereat, other than by announcement
at the meeting at which such adjournment is taken. At any adjourned meeting at
which a quorum shall be present or represented, only such business may be
transacted which might have been transacted at the meeting originally called.
If after the adjournment, the Trustees fix a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Shareholder
of record on the new record date entitled by law to receive such notice.
Section 1.3 Chairman. The Chairman shall act as chairman at all
meetings of the Shareholders; in his absence, the
<PAGE> 2
President shall act as chairman; and in the absence of the Chairman and
President, the Trustee or Trustees present at each meeting may elect a
temporary chairman for the meeting, who may be one of themselves .
Section 1.4 Proxies; Voting. Shareholders may vote at any meeting,
or by consent in writing without a meeting pursuant to Section 8.8 of the
Declaration, either in person or by proxy. Every proxy shall be executed in
writing by the Shareholder, or by his duly authorized attorney-in-fact, with
each full share represented at the meeting being entitled to one vote and
fractional shares to fractional votes. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or
any provision in the proxy to the contrary, but the revocation of a proxy shall
not be effective until notice thereof has been given to the Secretary, or such
other officer or agent of the Trust as the Secretary may direct. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
a longer time is expressly stated in such proxy, but in no event shall a proxy,
unless coupled with an interest, be voted on after three (3) years from the
date of its execution. A proxy shall not be revoked by the death or incapacity
of the maker unless, before the vote is counted or the authority is exercised,
written notice of such death or incapacity is given to the Secretary or to such
other officer or agent of the Trust as the Secretary may direct.
Section 1.5 Closing of Transfer Books and Fixing Record Dates. For
the purpose of determining the Shareholders who are entitled to notice of or to
vote or act at any meeting, including any adjournment thereof, or who are
entitled to participate in any dividend or distribution, or for any other
proper purpose, the Trustees may from time to time close the transfer books or
fix a record date which shall not be more than seventy-five (75) days before
the date of any meeting of Shareholders or the date for the payment of any
dividend or of any other distribution. If the Trustees do not prior to any
meeting of Shareholders so fix a record date or close the transfer books, then
the record date shall be the close of business on the day next preceding the
date of mailing of notice of the meeting or, in the case of a dividend or other
distribution, the close of business on the day upon which the dividend or
distribution resolution is adopted, or on such later day as the Trustees may
determine.
Section 1.6 Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election, who may but need
not be Shareholders, to act at such meeting or any adjournment thereof. If
Inspectors of Election are not so appointed, the chairman or any such meeting
may, and upon the request of any Shareholder or his proxy shall, make such
2
<PAGE> 3
appointment at the meeting. The number of Inspectors shall be either one ( 1 )
or three (3). If appointed at the meeting on the request of one or more
Shareholders or proxies, a majority of shares present shall determine whether
one or three Inspectors are to be appointed, but failure to allow such
determination by the Shareholders or proxies shall not affect the validity of
the appointment of Inspectors of Election. In case any person appointed as
Inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment made by the Trustees in advance of the convening of the meeting,
or at the meeting by the person acting as chairman. The Inspectors of Election
shall determine the number of shares outstanding, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies; shall receive votes, ballots or consents; shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote; shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
impartiality and fairness to all Shareholders. If there are three Inspectors
of Election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
On request of the chairman of the meeting, or of any Shareholder or his proxy,
the Inspectors of Election shall make a written report of any challenge or
question or matter determined by them and execute a certificate of any fact
found by them.
ARTICLE II
TRUSTEES
Section 2.1 Annual Meeting. The Trustees shall hold an annual
meeting for the election of officers and the transaction of other business
which may come before such meeting as soon as practicable after the annual
meeting of Shareholders, at the place where the Shareholders' meeting was held
or at such other place as may be fixed by resolution or the consent in writing
of all the Trustees.
Section 2.2 Regular Meetings. Regular meetings of the Trustees may
be held at such time and place as the Trustees may by resolution from time to
time determine without call or notice. If any day fixed for a regular meeting
shall be a legal holiday in the Commonwealth of Massachusetts or the place
designated for regular meetings, then the meeting shall be held at the same
hour and place on the next succeeding business day.
Section 2.3 Special Meeting. Special meetings of the Trustees shall
be held upon the call of the Chairman, the
3
<PAGE> 4
President, or the Secretary, or any two Trustees, at such time, on such day,
and at such place, as shall be designated in the notice of the meeting .
Section 2.4 Notice of Special Meetings. Notice of any Special
meeting, specifying the place, day and hour of the meeting, shall be given to a
Trustee either personally or by sending a copy thereof through the mail, with
first class postage prepaid, or by telegram, charges prepaid, to his address
appearing on the books of the Trust or supplied by him to the Trust for the
purpose of notice, at least forty-eight (48) hours prior to the time named for
such meeting. If the notice is sent by mail or by telegraph, it shall be
deemed to have been given to the person entitled thereto when deposited in the
United States mail, postage prepaid, or with a telegraph office, charges
prepaid, for transmission to such person. Notice by telephone shall constitute
personal delivery for these purposes. Neither the business to be transacted
at, nor the purpose of any meeting of the Board of Trustees need be stated in
the notice or waiver of notice of such meeting, and no notice need be given of
action proposed to be taken by unanimous consent.
Section 2.5 Waiver of Notice. Whenever any notice is required by the
Declaration of these By-Laws to be given to a Trustee, a waiver thereof in
writing, whether signed by him before or after the meeting, shall be deemed
equivalent to the giving of due notice. Attendance of any Trustee at any
meeting shall constitute a waiver of notice of such meeting except where such
Trustee attends the meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 2.6 Adjournment. Adjournment or adjournments of any meeting
may be taken, and it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted thereat other than by announcement
at the meeting at which such adjournment is taken. At any adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting originally called.
Section 2.7 Executive Committee. Subject to the provisions of
Section 3.4 hereof, the Trustees may, by resolution adopted by a majority
thereof, designate one or more of their number to constitute an Executive
Committee, and may designate one or more of their number as alternate members
of the Executive Committee, who may replace any absent or disqualified member
at any meeting of the Committee. Any such Committee, to the extent provided in
such resolution and the Declaration, shall have and exercise the authority of
the Trustees in the management of the business and
4
<PAGE> 5
affairs of the Trust and the management and disposition of Trust Property.
Vacancies in the membership of the Committee shall be filled by the Trustees.
In the absence or disqualification of any member of such Committee, the member
or members thereto present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
Trustee to act at the meeting in the place of any such absent or disqualified
member. The Executive Committee shall keep regular minutes of its proceedings
and report the same to the Trustee.
Section 2.8 Chairman; Records. The Chairman shall act as chairman at
all meetings of the Trustees; in his absence, the President shall act as
chairman; in the absence of the Chairman and President, the Trustees present
may elect one of their number to act as temporary chairman. The results of all
actions taken at a meeting of the Trustees, or by written consents of the
Trustees without a meeting, shall be recorded by the Secretary.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
Section 3.1 Officers of the Trust. The officers of the Trust shall
be a Chairman and a President, chosen from among the Trustees, and a Secretary
and a Treasurer, or persons who shall act as such, chosen from among the
Trustees or otherwise, regardless of the name or title by which they may be
designated, elected or appointed. A Vice-Chairman, Executive Vice-President,
one or more Vice-Presidents, Comptroller, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers or agents as the Trustees shall
deem necessary or appropriate to carry out the business of the Trust also may
be elected or appointed. Any two or more offices may be held by the same
person, except those of President and Secretary and provided that no officer
shall execute, acknowledge or verify any instrument in more than one capacity
if such instrument is required to be executed, acknowledged or verified by two
or more officers. In addition to the powers and duties prescribed by the
Declaration and these By-Laws, the officers and assistant officers shall have
such authority and shall perform such duties as from to time shall be
prescribed by the Trustees. The officers and assistant officers of the Trust
shall hold office until their successors are chosen and have qualified, unless
their term of office is sooner terminated by death, resignation or removal.
The Trustees may amend the title of any officer or assistant officer or create
a new office, by utilizing a word or words descriptive of his powers or the
general character of his duties. If the office of any officer or assistant
officers becomes vacant for any reason, the vacancy may be filled by the
Trustee at any time.
5
<PAGE> 6
Section 3.2 Removal of Officers, Agents or Employees. Any officer,
assistant officer, agent or employee may be removed or his authority revoked at
any time, with or without cause, by a majority of the Trustees, whenever in
their judgment the best interests of the Trust will be served thereby, but such
removal or revocation shall be without prejudice to the rights, if any, of the
person so removed to receive compensation or other benefits in accordance with
the terms of existing contracts. Any agent or employee likewise may be removed
by the President or Chairman or, subject to the supervision of the President or
Chairman, by the person having authority with respect to the appointment of
such agent or employee. Any such officer may resign at any time by written
notice signed by such officer and delivered or mailed to the Chairman,
President, or Secretary, and such resignation shall take effect upon receipt by
the Chairman, President, or Secretary, or at a later date according to the
terms of such notice.
Section 3.3 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.4 Chairman and President; Powers and Duties. The Chairman
shall, if present, preside at all meetings of the Shareholders and of the
Trustees. He shall be the chief executive officer of the Trust and shall
exercise and perform such other powers and duties as may from time to time be
assigned to him by the Trustees. Subject to such supervisory powers, if any,
as may be given by the Trustees to the Chairman, the President shall be the
chief operating officer of the Trust and, subject to the control of the
Trustees and the Chairman, shall have general supervision, direction and
control of the business of the Trust and of its employees and shall exercise
such general powers of management as are usually vested in the office of
president of a Massachusetts business corporation. In the absence of the
Chairman, the President shall preside at all meetings of the Shareholders and
of the Trustees. Subject to direction of the Trustees, the Chairman and the
President shall each have power in the name and on behalf of the Trust to
execute any and all loan documents, contracts, agreements, deeds, mortgages,
and other instruments in writing, and to employ and discharge employees and
agents of the Trust. Unless otherwise directed by the Trustees, the Chairman
and the President shall each have full authority and power, on behalf of the
Trust at any .meetings of business organizations in which the Trust holds an
interest, or to confer such powers upon any other persons, by executing any
proxies duly authorizing such persons. The Chairman and the President shall
have such further authorities and duties as the Trustees shall from time to
time determine and
6
<PAGE> 7
shall be, ex officio, members of the Executive Committee and of all standing
committees (if any) appointed by the Trustees.
Section 3.5 Executive Vice-President; Vice-President; Powers and
Duties. The Executive Vice-President, if any, shall, in the absence or
disability of the President, perform all the duties of the President, and when
so acting shall have all the powers and be subject to all of the restrictions
upon the President. In the absence or disability of the Executive
Vice-President, the Vice-President shall perform all of the duties of the
Executive Vice-President, and when so acting shall have all the powers of and
be subject to all of the restrictions upon the Executive Vice-President. If
there be more than one Vice-President, their seniority in performing such
duties and exercising such powers shall be in order of their rank as fixed by
the Trustees, or, if more than one and not ranked, then by determination of the
Trustees, or, in the absence of such determination, by the order in which they
were first elected. Subject to the direction of the Trustees, and of the
Chairman and the President, each Vice-President shall have the power in the
name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and,
in addition, shall have such other duties and powers as shall be designated
from time to time by the Trustees or the President and as by general usage
appertain to the office .
Section 3.6 Secretary; Powers and Duties. The Secretary shall keep
the minutes of all meetings of, and record of votes of, Shareholders, Trustees
and the Executive or other committees, if any. He shall give, or cause to be
given, as required by the Declaration of these By-Laws, notice of meetings of
the Shareholders and of the Trustees, and shall perform such other duties as
may be prescribed by the Trustees, the Chairman, or the President. He shall
keep in safe custody the seal of the Trust, and may affix the same, or, if
permitted, a facsimile thereof, to any instrument executed by the Trust and
attest the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall also
perform any other duties commonly incident to such office in a Massachusetts
business corporation, and shall have such other authorities and duties as the
Trustees, the Chairman, or the President shall from time to time determine.
Section 3.7 Treasurer; Powers and Duties. Except as otherwise
directed by the Trustees, the Treasurer shall have the general supervision of
the monies, funds, securities, notes receivable and other valuable papers and
documents of the Trust, and shall have and exercise under the supervision of
the Trustees and of the Chairman and President all powers and duties normally
incident to his office. He may endorse for deposit or collection
7
<PAGE> 8
all notes, checks and other instruments payable to the Trust or to its order.
He shall deposit all funds of the Trust in such depositories as the Trustees
shall designate. He shall be responsible for such disbursement of the funds of
the Trust as may be ordered by the Trustees, or the Chairman or the President.
He shall keep accurate account of the books of the Trust's transactions which
shall be the property of the Trust and which, together with all other property
of the Trust in his possession, shall be subject at all times to the inspection
and control of the Trustees. Unless the Trustees shall otherwise determine,
the Treasurer shall be the principal financial and accounting officer of the
Trust. He shall have such other duties and authorities as the Trustees, the
Chairman or the President shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize the
Investment Adviser, the Custodian, or the Transfer Agent to maintain bank
accounts and deposit and disburse funds of the Trust on behalf of the Trust.
Section 3.8 Delegation of Officers' Duties. The Trustees may elect,
or authorize the Chairman to appoint or elect, such other officers and
assistant officers as they shall from time to time determine to be necessary or
desirable in order to conduct the business of the Trust. Assistant officers
shall act generally in the absence of the officer whom they assist, shall
assist that officer in the duties of his office and shall have such other
duties and authority as may be conferred upon them by the Trustees or delegated
to them by the Chairman or President. In case of the absence or disability of
any officer or assistant officer of the Trust or for any other reason that the
Trustees may deem sufficient, the Trustees may delegate or authorize the
delegation of his powers or duties, for the time being, to any person.
ARTICLE IV
SHARES
Section 4.1 Share Certificates. Every Shareholder shall, upon
written request to the Secretary of the Trust, be entitled to receive a
certificate in such form as the Trustees shall from time to time approve,
specifying the number of full shares held by such Shareholder; provided,
however, that no certificate shall be issued for a fractional share. Every
certificate shall bear the signature of the Chairman or President and of the
Secretary or Treasurer, and shall be sealed with the seal of the Trust.
Whenever a certificate is countersigned by a transfer agent, one or both of the
officers' signatures and the seal may be in facsimile, engraved or printed. In
case any officer or transfer agent who has signed or whose facsimile signature
appears on any share certificate shall have ceased to be such because of death,
resignation or otherwise, before the certificate is issued, it
8
<PAGE> 9
may be issued by the Trust with the same effect as if he had not ceased to be
such prior to or on the date of issue. There shall be filed with each transfer
agent a copy of the form of certificate so approved by the Trustees, certified
by the Chairman or the Secretary, and such form shall continue to be used
unless and until the Trustees approve some other form.
Section 4.2 Legend. In furtherance of the provisions of Section 6.7
of the Declaration, each certificate evidencing shares shall contain a legend
imprinted thereon to the following effect, or such other legend as the Trustees
may from time to time adopt:
"Provisions Relating to Redemption and Prohibition of Transfer of
Shares."
"If necessary to effect compliance by the Trust with certain
requirements of the Internal Revenue Code, the shares represented by this
certificate are subject to redemption by the Trustees of the Trust and the
transfer thereof may be prohibited under the terms and conditions set forth in
the Declaration. The shares represented by this certificate are also subject
to redemption by the Trustees pursuant to the provisions set forth in the
Declaration for the reduction of outstanding shares in order to maintain a
constant net asset value per share. The Trust will furnish a copy of such
terms, conditions, and provisions to the registered holder of this certificate
upon request and without charge."
ARTICLE V
MISCELLANEOUS
Section 5.1 Depositories. The funds of the Trust shall be deposited
in such depositories as the Trustees shall designate in accordance with the
provisions of the Declaration, and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including the
Adviser), as the Trustees may from time to time authorize.
Section 5.2 Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in the Declaration or these By-Laws or as the Trustees may from time
to time by resolution provide.
Section 5.3 The Seal. The seal of the Trust shall have inscribed
thereon the words "Keystone Bond Trust, a Massachusetts Voluntary Association,
Common Seal, 1982." Such seal may be used by causing it or a facsimile
thereof, to be impressed or affixed
9
<PAGE> 10
or in any manner reproduced and attested as if it had been impressed and
attested manually.
Section 5.4, Dividends and Distributions. The Chairman, President or
Treasurer of the Fund are each authorized to declare and authorize the payment
of dividends and distributions of the Fund and to report such payments to the
Board of Trustees.
ARTICLE VI
AMENDMENT OF BY-LAWS
Section 6.1 Amendment and Repeal of By-Laws. In accordance with
Section 9.7 of the Declaration, the Trustees have the power to alter, amend or
repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees
with respect to the By-Laws shall be taken by an affirmative vote of a majority
of the Trustees. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions of the Declaration.
* * * * * * * * * *
The Declaration of Trust establishing Keystone Bond Trust, dated March
18, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth
of Massachusetts, provides that the name "Keystone Bond Trust" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of
Keystone Bond Trust shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or
claim or otherwise in connection with the affairs of said Keystone Stock Trust
but the Trust Property only shall be liable.
Name changed from "KEYSTONE BOND TRUST" to "HIGH YIELD BOND TRUST" effective
December 28, 1984.
10
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT made as of this 30th day of December,
1992, between Travelers Asset Management International Corporation, a New York
general business corporation (hereinafter "TAMIC") and High Yield Bond Trust
(herein-after the "Trust"), a Massachusetts business trust established in
Massachusetts by a Declaration of Trust dated March 19, 1982, as amended and/or
restated from time to time (the "Declaration of Trust").
WITNESSETH:
WHEREAS, the Trust and TAMIC wish to enter into an agreement setting
forth the terms upon which TAMIC will perform certain services for the Trust.
NOW, THEREFORE, in consideration of the promise and the mutual
agreements herein contained, the parties hereto agree as follows:
1. The Trust hereby employs TAMIC to manage the investment and reinvestment
of the assets of the Trust and to perform the other services herein set
forth, subject to the supervision of the Board of Trustees of the Trust
(hereinafter the "Board") for the period and on the terms herein set
forth. TAMIC hereby accepts such employment and agrees during such
period, at its own expense, to render the services and to assume the
obligations herein set forth for the compensation herein provided.
2. In carrying out these obligations to manage the investment and
reinvestment of the assets of the Trust, TAMIC shall:
a. obtain and evaluate pertinent economic, statistical and financial
data and other information relevant to the investment policy of
the Trust, affecting the economy generally and individual
companies or indus-tries, the securities of which are included in
the Trust's portfolio or are under consideration for inclusion
therein;
b. be authorized to purchase supplemental research and other
services from brokers at additional cost to the Trust;
c. regularly furnish to the Board recommendations with respect to
any investment program for approval, modification or rejection by
the Board;
d. take such steps as are necessary to implement the investment
program approved by the Board; and
e. regularly report to the Board with respect to implementation of
the approved investment program and any other activities in
connection with the administration of the assets of the Trust.
3. Any investment program undertaken by TAMIC pursuant to this Agreement
and any other activities undertaken by TAMIC on behalf of the Trust
shall at all times be subject to any directives of the Board or any duly
constituted committee thereof acting pursuant to like authority.
<PAGE> 2
4. For the services rendered hereunder, TAMIC will receive an amount
equivalent on an annual basis to the following:
<TABLE>
<CAPTION>
Aggregate
Annual Net Asset Value
Management Fee of the Trust
-------------- ------------
<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>
The advisory fees will be deducted on each valuation date.
5. The services of TAMIC to the Trust hereunder are not to be deemed
exclusive and TAMIC shall be free to render similar services to others
so long as its services hereunder are not impaired or interfered with
thereby.
6. If approved by a vote of a majority of the outstanding voting securities
of the Trust (as defined in the Investment Company Act of 1940), this
Investment Advisory Agreement:
a. may not be terminated by TAMIC, without the prior approval of a
new Investment Advisory Agreement by a vote of a majority of the
outstanding voting securities of the Trust, and shall be subject
to termination, without the payment of any penalty, upon sixty
days' written notice to the investment adviser, by the Board or
by a vote of a majority of the outstanding voting securities of
the Trust;
b. shall not be amended without prior approval of a majority of the
outstanding voting securities of the Trust;
c. shall automatically terminate upon assignment by either party; and
d. shall continue in effect for a period of more than two years from
the date of its execution, only so long as such continuance is
specific-ally approved (i) at least annually by a vote of a
majority of the Board who are not parties to, or interested
persons of any party to, such agreement, cast in person at a
meeting called for the purpose of voting on such approval and at
which the Board has been furnished such information as may be
reasonably necessary to evaluate the terms of said agreement, or
(ii) by a vote of a majority of the outstanding voting securities
of the Trust.
7. This Agreement is made on behalf of the Trust by an officer or Trustee
of the Trust, not individually, but solely as an officer or Trustee
under the Declaration of Trust, and the obligations under this Agreement
are not binding upon, nor shall resort be had to the private property
of, any of the Trustees, shareholders, officers, employees or agents of
the Trust personally, but shall bind only the Trust's property.
<PAGE> 3
8. TAMIC agrees that it shall furnish to the California Commissioner of
Insurance any information or reports concerning the Trust as the
Commissioner, in the performance of his or her duties, may request.
9. TAMIC hereby acknowledges that all books and records relating to the
services provided to the Trust hereunder are the property of the Trust
and subject to its control; provided, however, that during the term of
the Agreement, the Trust shall not exercise such control so as to
interfere with the performance of TAMIC's duties hereunder.
10. This Investment Advisory Agreement is subject to the provisions of the
Investment Company Act of 1940, as amended, and the rules and
regulations of the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be signed by their respective officials thereunto duly
authorized and seals to be affixed, in the case of TAMIC, as of the day and
year first above written.
HIGH YIELD BOND TRUST
By:/s/Robert W. Crispin
Chairman, Board of Trustees
WITNESS:
/s/Thomas A. Klee
Secretary, Board of Trustees
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION
By: /s/Eliot P. Williams
Senior Vice President
ATTEST: (Seal)
/s/Harry E. Meyer
Corporate Secretary
<PAGE> 1
EXHIBIT 9
TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 1st day of July, 1991 by and between High
Yield Bond Trust, a business trust organized and existing under the laws of
Massachusetts, (hereinafter called the "Trust") and The Travelers Insurance
Company, a Connecticut stock insurance company, (hereinafter called "The
Travelers") both parties having their principal place of business at One Tower
Square, Hartford, Connecticut 01683.
WITNESSETH THAT
WHEREAS, the Trust desires The Travelers to perform certain services
for the Trust and The Travelers is willing to perform such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party, for itself and not jointly, agrees as follows:
1. SERVICES - The Travelers shall perform for the Trust the services set
forth in Exhibit A which is attached hereto and made a part hereof. Such
services shall be performed at no charge to the Trust. The Travelers shall
perform such other services in addition to those set forth in Exhibit A hereto
as the Trust shall request in writing. Any of the services to be performed
hereunder, and the manner in which such services are to be performed, shall be
changed only pursuant to a written agreement sinned by the parties hereto.
The Travelers will undertake no activity which, in its judgment, will
adversely affect the performance of its obligations to the Trust under this
Agreement.
2. EFFECTIVE DATE - This Agreement shall become effective as of the date
set forth above.
3. TERM - This Agreement shall be in effect until terminated in
accordance with Section 14 hereof.
4. STANDARD OF CARE - The Travelers shall at all times use its best
efforts and act in good faith and without negligence in performing all services
pursuant to this Agreement. The Travelers shall indemnify and hold harmless
the Trust against any losses, claims, damages, judgments, liabilities or
expenses (including reasonable counsel fees and expenses) resulting from any
action taken by The Travelers that does not meet the standard of care described
in this Section 4.
5. UNCONTROLLABLE EVENTS - The Travelers shall not be liable for damage,
loss of data, delays or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or military authority,
national emergencies, fire, flood or catastrophe, acts of God, insurrection,
war, riots, or failure of transportation, communication or power supply.
<PAGE> 2
However, The Travelers shall keep in a separate and safe place additional
copies of all records required to be maintained pursuant to this Agreement or
additional tapes or discs necessary to reproduce all such records. The
Travelers shall use reasonable care to minimize the likelihood of all damage,
loss of data, delays and errors resulting from an uncontrollable event, and
should such damage, loss of data, delays or errors occur, The Travelers shall
use its best efforts to mitigate the effects of such occurrence.
Representatives of the Trust shall be entitled to inspect The Travelers
premises and operating capabilities within reasonable business hours and upon
reasonable notice to The Travelers.
6. INDEMNIFICATION - The Trust shall indemnify and hold The Travelers,
its employees and agents harmless against any losses, claims, damages,
judgments, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from (1) transactions which occurred prior to the date The
Travelers began serving as Transfer Agent to the Trust; (2) action taken or
permitted by The Travelers in good faith with due care and without negligence
in reliance upon instructions received from the Trust in accordance with
Section 7 hereof or with respect to the Trust upon the opinion of counsel for
the Trust, as to anything arising in connection with its performance under this
Agreement; or (3) any act done or suffered by The Travelers with respect to the
Trust in good faith with due care and without negligence in connection with its
performance under this Agreement in reliance upon any instruction, order, stock
certificate or other instrument reasonably believed by it to be genuine and to
bear the genuine signature of any person or persons authorized to sign,
countersign, or execute same, and which complies with any governing documents
provided to The Travelers by the Trust and with all applicable requirements of
the Trust's current prospectus and statement of additional information, this
Agreement and instructions (it being specifically agreed that for the purpose
of this indemnification if any instruction received by The Travelers in
accordance with Section 7 hereof differs from the requirements set forth in the
current prospectus or statement of additional information then, with regard to
that difference, The Travelers need only comply with such instruction and not
the current prospectus or statement of additional information).
7. INSTRUCTIONS - The Travelers shall comply with all instructions issued
by the Trust in the form prescribed below which are permitted or required under
Exhibit A attached hereto. Whenever The Travelers takes action hereunder
pursuant to instructions of the Trust, The Travelers shall be entitled to rely
upon such instructions only when such instructions are signed by the President
or Treasurer of the Trust or by an individual designated in writing by the
President or Treasurer as a person authorized to give instructions hereunder.
The Trust may waive the requirement that all instructions be in writing, if
such waiver defines the occurrences not requiring written instruction,
indicates the persons authorized to give such non-written instructions, and is
signed by one of the persons pursuant to the immediately preceding sentence of
this Section 7. In the event The Travelers obtains the Trust's written waiver,
it may rely on non-written instructions received pursuant thereto.
8. CONFIDENTIALITY - The Travelers agrees to treat all records and other
information relative to the Trust and the Trust's shareholders confidentially,
and The Travelers on behalf of itself and its employees agrees to keep
confidential all such information, except, after prior notification to and
approval by the Trust, which approval shall not be unreasonably withheld and
2
<PAGE> 3
may not be withheld where The Travelers may be exposed to civil or criminal
contempt proceedings, when requested to divulge such information by duly
constituted authorities or when so requested by a shareholder of the Trust
seeking information about his own or an appropriately related account.
9. REPORTS - The Travelers will furnish to the Trust and to properly
authorized auditors, examiners, investment companies, dealers, salesmen,
insurance companies, transfer agents, registrars, investors and others
designated by the Trust in writing, such reports at such times as are
prescribed for each service in Exhibit A attached hereto.
In addition, The Travelers will furnish to the California Commissioner
of Insurance any information or reports in connection with the services
provided by The Travelers to the Trust which the Commissioner, in the
performance of his or her duties, may reasonably request.
10. RIGHT OF OWNERSHIP - The Travelers agrees that all records and other
data received, computed, developed, used and/or stored pursuant to this
Agreement are the exclusive property of the Trust and that all such records and
other data will be furnished without additional charge to the Trust in
available machine readable data form immediately upon termination of this
Agreement with respect to such Trust for any reason whatsoever. Furthermore,
upon the Trust's request at any time or times while this Agreement is in
effect, The Travelers shall deliver to such Trust at the Trust's expense, any
or all of the data and records held by The Travelers pursuant to this
Agreement, in the form as requested by the Trust. On the effective date of
termination of this Agreement with respect to the Trust or, if later, on the
date the Trust ceases to use The Travelers services, The Travelers will
promptly return to the Trust any and all records and other data belonging to
the Trust, free of any claim or retention of rights by The Travelers.
11. REDEMPTION OF SHARES - The parties hereto agree that The Travelers
shall process liquidations, redemptions or repurchases of shares of the Trust,
as the agent for the Trust, in the manner as described in the then current
prospectus and statement of additional information for the Trust.
Notwithstanding the foregoing, The Travelers shall be liable for any losses,
damages, claims or expenses resulting from The Traveler's failure to obtain the
appropriate signature guarantee with regard to any redemption or transfer
processed by The Travelers even if the current prospectus or statement of
additional information authorizes The Travelers to waive the requirement of a
signature guarantee unless The Travelers is authorized in writing by an
appropriate party to waive such a requirement.
12. SUBCONTRACTING - The Travelers may, with the prior written consent of
the Trust, subcontract with one or more of its affiliates or other persons to
perform all or part of its obligations hereunder, provided, however, that,
notwithstanding any such subcontract, The Travelers shall be fully responsible
to the Trust hereunder.
13. ASSIGNMENT - This Agreement and the rights and duties hereunder shall
not be assignable by The Travelers or the Trust hereto except by the specific
written consent of the other party.
3
<PAGE> 4
14. TERMINATION - This Agreement may be terminated on such date of which
The Travelers has given the Trust not less than 180 days prior written notice
or of which the Trust has given The Travelers not less than 90 days prior
written notice. Upon such termination, The Travelers will use its best efforts
to cooperate and assist in accomplishing a timely, efficient and accurate
conversion to the person or firm which will provide the services described
hereunder. This Agreement may be terminated by any Trust without the payment
of any penalty, forfeiture, compulsory buyout amount or performance of any
other obligation which could deter termination .
This Agreement may be terminated after written notice to The Travelers
by the Trust if there is material breach or violation of this Agreement of if
The Travelers fails to perform any of its obligations under this Agreement and
the failure continues for more than thirty (30) days after the Trust gives
notice of the failure to The Travelers or bankruptcy or insolvency proceedings
of any nature are instituted by or against The Travelers.
15. NOTICE - Any notice shall by sufficiently given when sent by
registered or certified mail to any party at the address of such party set
forth above or at such other address as such party may from time to time
specify in writing to the other party.
16. SECTION HEADINGS - Section headings are included for convenience only
and are not to be used to construe or interpret this Agreement.
17. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, The Travelers and the Trust may agree from time to time on such
provisions interpretive of or in addition to the provisions of this Agreement
as may in their combined opinion be consistent with the general tenor of this
Agreement, Furthermore, The Travelers and the Trust may agree to add to, delete
from or change the services set forth with respect to the Trust in Exhibit A of
the Agreement. Each such interpretive or additional provision, and each
addition, deletion or change is to be signed by all parties affected and
annexed hereto, and no such provision, addition, deletion or change shall
contravene any applicable federal or state law or regulation and no such
provision, addition, deletion or change shall be deemed to be an amendment of
any provision of this Agreement with the exception of Exhibit A hereto.
19. GOVERNING LAW - The Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of the State of Connecticut.
20. MASSACHUSETTS BUSINESS TRUST - The Trust is a Massachusetts business
trust established under a Declaration of Trust. The obligations of the Trust
are not personally binding upon, nor shall recourse by had against the private
property of, any of the Trustees, shareholders, officers, employees or agents
of the Trusts, but only the property of the Trust shall be bound.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE TRAVELERS INSURANCE COMPANY
By: /s/Robert E. Evans
ATTEST: (Seal)
/s/George Caspar
Corporate Secretary
HIGH YIELD BOND TRUST
By /s/ Richard J. Shima
WITNESS:
/s/Thomas A. Klee
Secretary, Board of Trustees
5
<PAGE> 6
EXHIBIT A - SERVICES
The offices of The Travelers shall be open to perform the services
pursuant to this Agreement on all days when the Trust is open to transact
business.
The services under this Agreement will include, by way of illustration
but not limitation:
1. Establishing, maintaining, safeguarding and reporting on
shareholder account information and account histories, (including
registration, name and address recorded in generally accepted
form, dealer, representative, branch, and territory information,
mailing address, distribution address, various codes and specific
information.)
2. Recording and controlling shares outstanding in certificate
("issued") and non certificate ("issued") form.
3. Maintaining a record for each certificate issued to include
certificate number, account number, issued date, number of
shares, cancelled date, or stop date, where appropriate.
4. Reconciling the number of outstanding shares of each Trust, on a
daily basis with the Trust and the Trust's custodian, promptly
correcting any differences noted.
5. Establishing and maintaining a trade file on behalf of each Trust
based on trade information furnished to the transfer agent by the
Trust or its distributors.
6. Passing upon the adequacy of documents properly endorsed and
guaranteed submitted by or on behalf of a shareholder to transfer
ownership or redeem shares.
7. Transferring ownership of shares upon the books of the Trust.
8. Redeeming shares.
9. Preparing and promptly mailing account statements to the
shareholder or such other authorized address.
10. Checking surrendered certificates for stop transfer instructions.
11. Cancelling certificates surrendered.
12. Balancing outstanding shares of record with the custodian prior
to each distribution and calculating and paying or reinvesting
distributions to shareholders of record and to open trade
receivable and free stock.
6
<PAGE> 7
13. Processing exchanges of shares of one Trust for another.
14. Reporting to the Trust and its custodian daily the capital stock
activities and dollar amount of transactions.
15. Promptly answering inquiries from shareholders, dealers, Trust
personnel, and others as requested in accordance with the terms
of this Agreement as to account matters, referring policy or
investment matters to the Trust.
16. Maintaining tax information for each account, deducting amounts
where required and furnishing to the Trust, its shareholders,
dealers and, when appropriate, regulatory bodies, the necessary
tax information all in compliance with the various applicable
laws.
17. Calculating and processing Trust mergers or stock dividends, as
directed by the Trust.
18. Maintaining all Trust records as outlined in the record and tape
retention schedule delivered by the Trust.
19. Reconciling all investment, distribution and redemption accounts
20. Making available to the Trust and its distributors at their
locations, CRTs which will provide immediate electronic access to
computerized records maintained for the Trust.
21. Providing space and such technical expertise as may be required
to enable the Trust and its properly authorized auditors,
examiners and others designated by the Trust in writing to
properly understand and examine all books, records, computer
files, microfilm and other items maintained pursuant to this
Agreement, and to assist as required in such examination.
22. Assigning a single account number to each shareholder regardless
of the number of Trusts or Portfolios owned for which the Trust
or one of its affiliates is the trustee, investment adviser or
manager (except as instructed otherwise.)
7
<PAGE> 8
The Transfer Agent will produce reports as required by the Trust
including but not limited to the following:
<TABLE>
<S> <C>
Shareholder Account Confirmation As required
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily (monthly) share proof Daily
Daily master control Daily
Account information reports When requested
(Monthly) Cumulative transaction Monthly
Shareholder master list When requested
Dividend account check reconciliation As required
</TABLE>
8
<PAGE> 1
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 21 of this
Registration Statement on Form N-1A of our report dated February 7, 1996, 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 in
accounting and auditing under the caption "Additional Information" in the
Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 11, 1996
<PAGE> 1
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 N-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 28th day
of July, 1995.
/s/Heath B. McLendon
Chairman of the Board of Trustees
High Yield Bond Trust
<PAGE> 2
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 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 N-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 28th day
of July, 1995.
/s/Knight Edwards
Member of the Board of Trustees
High Yield Bond Trust
<PAGE> 3
HIGH YIELD BOND TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Robert E. McGill, III of Williamstown, 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 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 N-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 28th day
of July, 1995.
/s/Robert E. McGill
Member of the Board of Trustees
High Yield Bond Trust
<PAGE> 4
HIGH YIELD BOND TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis Mandell of Shorewood, Wisconsin, 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 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 N-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 28th day
of July, 1995.
/s/Lewis Mandell
Member of the Board of Trustees
High Yield Bond Trust
<PAGE> 5
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 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 N-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 28th day
of July, 1995.
/s/Frances M Hawk
Member of the Board of Trustees
High Yield Bond Trust
<PAGE> 6
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 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 N-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 31st day
of July, 1995.
/s/Ian R. Stuart
Treasurer, High Yield Bond Trust
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,791,407
<INVESTMENTS-AT-VALUE> 12,591,681
<RECEIVABLES> 329,489
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,401
<TOTAL-ASSETS> 12,924,571
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,273
<TOTAL-LIABILITIES> 22,273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,457,598
<SHARES-COMMON-STOCK> 1,432,658
<SHARES-COMMON-PRIOR> 1,380,228
<ACCUMULATED-NII-CURRENT> 1,173,476
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,529,050)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (199,726)
<NET-ASSETS> 12,902,298
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,329,872
<OTHER-INCOME> 0
<EXPENSES-NET> 156,396
<NET-INVESTMENT-INCOME> 1,173,476
<REALIZED-GAINS-CURRENT> 395,891
<APPREC-INCREASE-CURRENT> 221,759
<NET-CHANGE-FROM-OPS> 1,791,126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 960,192
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 206,291
<NUMBER-OF-SHARES-REDEEMED> (276,334)
<SHARES-REINVESTED> 122,473
<NET-CHANGE-IN-ASSETS> 1,185,892
<ACCUMULATED-NII-PRIOR> 949,721
<ACCUMULATED-GAINS-PRIOR> (6,914,470)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65,591
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 159,552
<AVERAGE-NET-ASSETS> 12,497,968
<PER-SHARE-NAV-BEGIN> 8.49
<PER-SHARE-NII> .80
<PER-SHARE-GAIN-APPREC> .41
<PER-SHARE-DIVIDEND> (.70)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.00
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
