<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. 22
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22
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).
---
on May 1, 1997 pursuant to paragraph (b).
---
X 60 days after filing pursuant to paragraph (a)(1).
---
on ____________ pursuant to paragraph (a)(1).
---
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, 1996 WILL BE FILED
WITH THE COMMISSION PRIOR TO MARCH 1, 1997.
<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
Distributions; Shareholder Rights; Net
Asset Value
7. Purchase of Securities Being Offered Shareholder Rights
8. Redemption or Repurchase Share Redemption
9. Legal Proceedings Legal Proceedings
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
----------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Restrictions; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Adviser; Additional 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
- --------------------------------------------------------------------------------
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, 1997 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, 1997.
<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
FUND ADMINISTRATION................................................................... 7
SECURITIES TRANSACTIONS............................................................... 7
FUND EXPENSES......................................................................... 7
TRANSFER AGENT........................................................................ 8
SHAREHOLDER RIGHTS.................................................................... 8
NET ASSET VALUE....................................................................... 8
TAX STATUS............................................................................ 9
DIVIDENDS AND DISTRIBUTIONS........................................................... 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 seven years ended December
31, 1996, 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, 1996 is contained in the
Fund's Annual Report which should be read along with this report and which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990+
- ----------------------------------------------------------------------------------------------------------------------------
<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
Income from operations
Net investment income........ 0.80 0.66 0.68 0.88 0.94 1.02
Net gains or losses on
securities (realized and
unrealized)................ 0.41 (0.76) 0.47 0.18 0.88 (1.81)
------- ------- ------- ------- ------ ------ -------
Total from investment
operations............... 1.21 (0.10) 1.15 1.06 1.82 (0.79)
Less distributions
Distributions from net
investment income.......... (0.70) (0.66) (0.81) (0.90) (0.94) (0.67)
Distributions from net
realized gains............. -- -- -- -- -- --
------- ------- ------- ------- ------ ------ -------
Net asset value, end of
year....................... $ $ 9.00 $ 8.49 $ 9.25 $ 8.91 $ 8.75 $ 7.87
======= ======= ======= ======= ====== ====== =======
TOTAL RETURN*..................% 15.47% (1.26)% 14.01% 13.16% 26.11% (9.12)%
RATIOS/SUPPLEMENTAL DATA....... $ $12,902 $11,716 $12,765 $10,289 $7,724 $ 6,238
Ratio of expenses to average
net assets.................% 1.25%** 1.25%** 0.99%** 0.56%** 0.56%** 0.92%**
Ratio of net investment
income to average net
assets.....................% 9.37% 7.71% 7.69% 10.24% 11.93% 12.33%
Portfolio turnover rate......% 222% 146% 19% 52% 35% 29%
<CAPTION>
------------------------------
1996 1995 1994 1989 1988 1987
- ------------------------------------------------------------------------------------------------
<S> <C<C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
year....................... $ 10.12 $ 9.94 $ 11.41
Income from operations
Net investment income........ 1.28 1.21 1.22
Net gains or losses on
securities (realized and
unrealized)................ (1.11) 0.20 (1.21)
------- ------- -------
Total from investment
operations............... 0.17 1.41 0.01
Less distributions
Distributions from net
investment income.......... (0.96) (1.23) (1.48)
Distributions from net
realized gains............. -- -- --
------- ------- -------
Net asset value, end of
year....................... $ 9.33 $ 10.12 $ 9.94
======= ======= =======
TOTAL RETURN*.................. 1.40% 14.57% (0.34)%
RATIOS/SUPPLEMENTAL DATA....... $10,607 $59,637 $51,540
Ratio of expenses to average
net assets................. 1.67% 1.00% 0.96%
Ratio of net investment
income to average net
assets..................... 13.37% 11.65% 10.90%
Portfolio turnover rate...... 87% 67% 81%
</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, 1996, 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
- --------------------------------------------------------------------------------
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, 1996, 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 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.
HYBT-4
<PAGE> 8
INVESTMENT RESTRICTIONS
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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.
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 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
HYBT-5
<PAGE> 9
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 Asset 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
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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 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.
HYBT-6
<PAGE> 10
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, 1996, TAMIC received a fee equal to %
of the Fund's average net assets for its services as investment adviser.
PORTFOLIO MANAGER
The portfolio manager for the Fund is F. Denney Voss, who joined the Company in
1980. Mr. Voss is a Senior Vice President of the Company and a Vice President of
TAMIC and has served as the Fund's portfolio manager since March 1996. Mr. Voss
has also managed TAMIC's Quality Bond Account for Variable Annuities and
American Odyssey Intermediate-Term Bond Fund since March 1995. Additionally, he
has been responsible for managing the Company's portfolios backing general
account insurance products since August 1994. Prior to transferring to the
Travelers Securities Department in 1994, Mr. Voss performed various sales and
trading functions for Smith Barney Inc., a subsidiary of Travelers Group Inc.
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
The Fund has entered into an Administrative Services Agreement, whereby
Travelers Insurance will be responsible for the pricing and bookkeeping services
for the Fund at an annualized rate of 0.06% of the daily net assets of the Fund.
The Travelers Insurance Company, at its expense, may appoint a sub-administrator
to perform these services. The sub-administrator may be affiliated with The
Travelers Insurance Company.
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.
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
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.
HYBT-7
<PAGE> 11
Pursuant to a Management Agreement dated May 1, 1993 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, 1996, the Fund paid 1.25% of its average
net assets in expenses. These expenses would have been % of the Fund's
average net assets if the Company had not paid for any of the Fund's expenses.
TRANSFER AGENT
- --------------------------------------------------------------------------------
First Data Investor Services Group, Inc., Exchange Place, Boston, MA 02109,
serves as the Fund's transfer agent and dividend disbursing agent.
SHAREHOLDER RIGHTS
- --------------------------------------------------------------------------------
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.
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.)
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.
NET ASSET VALUE
- --------------------------------------------------------------------------------
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 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.
HYBT-8
<PAGE> 12
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.
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.
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
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."
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."
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, 1996:
<TABLE>
<CAPTION>
S&P OR
MOODY'S RATING PERCENTAGE
----------------- ----------
<S> <C>
AAA....................................................... %
AA1....................................................... %
AA2....................................................... %
AA3....................................................... %
A1........................................................ %
A2........................................................ %
A3........................................................ %
BAA1...................................................... %
BAA2...................................................... %
BAA3...................................................... %
BA1....................................................... %
BA2....................................................... %
BA3....................................................... %
B1........................................................ %
B2........................................................ %
B3........................................................ %
CAA....................................................... %
CA........................................................ %
C......................................................... %
-------
100.00%
=======
</TABLE>
HYBT-17
<PAGE> 21
HIGH YIELD BOND TRUST
PROSPECTUS
TIC Ed. 5-97
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, 1997
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, 1997. 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. This SAI should be read in conjunction
with the accompanying 1996 Annual Report for the Fund.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 1
VALUATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 2
DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . 3
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 3
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . 6
Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . 7
REDEMPTIONS IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . 7
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 8
</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;
1
<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 illiquid securities.
VALUATION OF SECURITIES
Current value for the Fund's portfolio securities is determined as
follows: Securities that are traded on an established exchange are valued on
the basis of the last sales price on the exchange where primarily traded prior
to the time of valuation. Securities traded in the over-the-counter market,
for which complete quotations are readily available, are valued at the mean of
the bid and asked prices at the time of valuation. Short-term money market
instruments having maturities of sixty days or less are valued at amortized
cost (original purchase cost as adjusted for amortization of premium or
accretion of discount) which, when combined with accrued interest receivable,
approximates market; should this valuation of a security not approximate
market, TAMIC will value the security at a price deemed in good faith to be
fair by the Board of Trustees. Short-term money market instruments having
maturities of more than sixty days, for which complete quotations are readily
available, are valued at current market value. The Board of Trustees of the
Fund values the following at prices it deems in good faith to be fair: (1)
securities, including restricted securities, for which complete quotations are
not readily available, (2) listed securities if in the Board's opinion the last
sales price does not reflect a current market value or if no sale occurred, and
(3) other assets. Market quotations are not considered to be readily available
for certain long-term corporate bonds and notes; such investments are stated at
fair value on the basis of valuations furnished by a pricing service, approved
by the Trustees, which determines valuations for normal, institutional size
trading units of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
2
<PAGE> 26
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, 1996, the Fund had capital loss carryovers of
approximately $_________which expires in ___________. 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.
PORTFOLIO TURNOVER
The Fund's portfolio turnover for the fiscal years ended December 31,
1994, 1995 and 1996 were _______, __________, and ________, respectively.
High portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs, which will be borne directly by the Fund.
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.; President
388 Greenwich Street (1994-present), Smith Barney Mutual Funds Management Inc.; Chairman and
New York, New York Director of forty-one investment companies associated with Smith Barney;
Age 63 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 73 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 65 (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
</TABLE>
3
<PAGE> 27
<TABLE>
<S> <C>
Corporation (specialty materials manufacturer); Member, Board of
Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
Lewis Mandell Dean, College of Business Administration (1995-present), Marquette
Member University; Professor of Finance (1980-1995) and Associate Dean
606 N. 13th Street (1993-1995), School of Business Administration, and Director, Center for
Milwaukee, WI 53233 Research and Development in Financial Services (1980-1995), University
Age 54 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 of
Age 49 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 56 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 46 Travelers Insurance Company.++ Prior to January 1995, Counsel, ITT
Hartford Life Insurance Company.
Lewis E. Daidone Managing Director of Smith Barney, Senior Vice President and Treasurer
Treasurer of 41 investment companies associated with Smith Barney, and Director
388 Greenwich Street and Vice President of SBMFM and TIA; Treasurer, Board of Trustees, five
New York, New York Mutual Funds sponsored by The Travelers Insurance Company.++
Age 38
Irving David Vice President of Smith Barney, Asset Management Division (March
Controller 1994-present); Controller, Board of Trustees, five Mutual Funds
388 Greenwich Street sponsored by The Travelers Insurance Company.++
New York, NY
Age 35
Thomas M. Reynolds Director of Smith Barney, Asset Management Division; Controller and
Controller Assistant Secretary of 35 investment companies associated with Smith
388 Greenwich Street Barney, (September 1991-present); Controller, Board of Trustees, five
New York, NY Mutual Funds sponsored by The Travelers Insurance Company.++
Age 36
</TABLE>
4
<PAGE> 28
+ 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 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 $19,000 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. Once a Board Member retires, 50% of the retainer
amount will be paid annually. They also receive an aggregate fee of $2,500 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
5
<PAGE> 29
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).
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.
6
<PAGE> 30
ADVISORY FEES
For furnishing investment management and advisory services to the
Fund, TAMIC is paid an amount equivalent on an annual basis to the advisory fee
schedule set forth in the table below. The fee is computed daily and paid
weekly.
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE FUND
--------------------- -----------------------
<S> <C> <C>
0.50% of the first $ 50,000,000, plus
0.40% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $250,000,000.
</TABLE>
For the three years ended December 31, 1994, 1995 and 1996 the advisory
fees were $61,647, $62,591 and $_________ , 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
7
<PAGE> 31
fees will be incurred in connection with futures transactions, and the Fund
will be required to deposit and maintain funds with brokers as margin to
guarantee performance of future obligations.
TAMIC may follow a policy of considering the sale of shares of the
Fund a factor in the selection of broker-dealers to execute portfolio
transactions, subject to the requirements of best execution described above.
The policy of TAMIC with respect to brokerage is and will be reviewed
by the Board of Trustees periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
The total brokerage commissions paid by the Fund for the fiscal years
ended December 31, 1994, 1995 and 1996 were $44,063, $71,924 and $_______,
respectively. For the fiscal year ended December 31, 1996, 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 $_____ were paid to
Shearson/American Express an affiliate of TAMIC, which equals ____% of High
Yield Bond Trust's aggregate brokerage commission paid to such brokers during
1996. 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____%.
ADDITIONAL INFORMATION
On April 1, 1997, The Travelers Insurance Company and its affiliates
owned 100% of the Fund's outstanding shares. 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 Company's Home Office is located at One Tower Square, Hartford, Connecticut
06183, telephone number 860-422-3985.
First Data Investor Services Group, Inc., Exchange Place, Boston, MA,
02109, acts as transfer agent and dividend disbursing agent for the Fund.
PNC Bank NA, 200 Stevens Drive, Lester, PA, 19113 and Barclay's Bank,
PLC, 75 Wall Street, New York, NY, 10265 are the custodians of all securities
and cash of the Fund.
Beginning on January 1, 1997, KPMG Peat Marwick; LLP, independent
certified public accountants, 345 Park Ave., New York, NY 10154, became the
Fund's auditors. Coopers & Lybrand L.L.P., independent accountants, 100 Pearl
Street, Hartford, Connecticut, were the independent auditors for the Fund
through December 31, 1996. 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 in the Fund's Annual report which is incorporated
herein by reference..
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.
8
<PAGE> 32
HIGH YIELD BOND TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11173S TIC Ed. 5-97
Printed in U.S.A.
<PAGE> 33
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
The financial statements of the Registrant and the Report of Independent
Accountants will be provided in a subsequent Post-Effective Amendment.
(b) Exhibits
1. Declaration of Trust. (Incorporated herein by reference to
Exhibit 1 to Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A filed on April 11, 1996.)
2. By-Laws of High Yield Bond Trust. (Incorporated herein by
reference to Exhibit 2 to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A filed on April 11, 1996.)
5. Investment Advisory Agreement between the Registrant and
Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 5 to Post-Effective
Amendment No. 21 to the Registration Statement on Form N-1A filed
on April 11, 1996.)
8. Custody Agreement between the Registrant and PNC Bank, N.A., of
Lester, PA and Barclay's Bank of New York. (To be filed by
amendment.)
9. Administrative Services 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. (To be filed by
amendment.)
11(A). Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants. (To be filed by amendment.)
Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants. (To be filed by amendment.)
11(B). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatories for Heath B. McLendon, Knight Edwards,
Robert E. McGill III, Lewis Mandell, Frances M. Hawk and Ian R.
Stuart.
Power of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Lewis E. Daidone.
27. Financial Data Schedule. - To be filed by amendment.
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
<PAGE> 34
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 20, 1997
-------------- -----------------------
Shares of beneficial interest, Three (3)
without par value
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers are
contained in the Fund's Declaration of Trust which was filed with Post-Effective
Amendment No. 21 to this Registration Statement as Exhibit 1 on April 11, 1996.
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> 35
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 and Chairman Senior Vice President **
David A. Tyson Director, President and Senior Vice President *
Chief Investment Officer
Joseph E. Ruelli, Jr. Director, Vice President Vice President
and Chief Financial Officer
Joseph Mullally Senior Vice President Vice President*
F. Denney Voss Director and Senior Senior Vice President*
Vice President
John R. Britt Director and Secretary Assistant Secretary *
David Amaral Vice President Assistant Director*
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Vice President*
Kathyrn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
Emil J. Molinaro Vice President Vice President*
Jordan M. Stitzer Vice President Vice President
William H. White Treasurer Vice President and Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George C. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
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> 36
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) Smith Barney
388 Greenwich St.
New York, NY 10013
(2) PNC Bank, N.A.
200 Stevens Drive
Lester, PA 19113
(3) Barclay's Bank, PLC
75 Wall Street
New York, NY 10265
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> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, High Yield Bond Trust, 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 February 20, 1997.
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 February 20, 1997.
*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)
*LEWIS E. DAIDONE Treasurer
- ---------------------------
(Lewis E. Daidone)
*By: Ernest J. Wright, Attorney-in-Fact
Secretary, Board of Trustees
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
1. Declaration of Trust. (Incorporated herein by
reference to Exhibit 1 to Post-Effective Amendment
No. 21 to the Registration Statement on Form N-1A
filed on April 11, 1996.)
2. By-Laws of High Yield Bond Trust. (Incorporated herein
by reference to Exhibit 1 to Post-Effective Amendment
No. 21 to the Registration Statement on Form N-1A filed
on April 11, 1996.)
5. Investment Advisory Agreement between the Registrant
and Travelers Asset Management International Corporation.
(Incorporated herein by reference to Exhibit 1 to Post-
Effective Amendment No. 21 to the Registration Statement
on Form N-1A filed on April 11, 1996.)
8. Custody Agreements between the Registrant and To be filed by
PNC Bank, N.A., of Lester, PA and Barclay's Bank, PLC amendment
New York, NY.
9. Administrative Services Agreement between the Electronically
Registrant and The Travelers Insurance Company.
10. An opinion and consent of counsel as to the legality of To be filed by
the securities registered by the Registrant. amendment
11(A). Consent of Coopers & Lybrand L.L.P., Certified To be filed by
Public Accountants amendment
Consent of KPMG Peat Marwick LLP, Independent To be filed by
Certified Public Accountants. amendment
11(B). Powers of Attorney authorizing Ernest J. Wright or
Kathleen A. McGah as signatory for Heath B.
McLendon, Knight Edwards, Robert E. McGill III,
Lewis Mandell, Frances M. Hawk and Ian R. Stuart.
(Incorporated herein by reference to Exhibit 11(B)
to Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A filed on April 11, 1996.)
Power of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Lewis E. Daidone.
27. Financial Data Schedule To be filed by
amendment
</TABLE>
<PAGE> 1
EXHIBIT 9
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (the "Agreement") is hereby made
as of November 4, 1996, by and between The Travelers Insurance Company,
("Travelers") a Connecticut corporation with its principal offices in Hartford,
Connecticut, and High Yield Bond Trust (the "Trust") which is a registered open
end management investment company with its principal office in Hartford,
Connecticut.
In consideration of the premises and the mutual promises hereinafter
set forth, Travelers and the Trust hereby agree as follows:
1. Appointments. Trust hereby appoints and employs Travelers as agent to
provide the services described in this Agreement for the Trust. Travelers shall
perform the obligations and the services set forth herein in accordance with the
terms and conditions hereto.
2. Services to be Performed
A. Travelers shall be responsible for performing as agent, as of
the date of this Agreement, the pricing and bookkeeping services
commonly referred to as "back office" services described as
follows:
(1) Accounting relating to portfolio transactions of the
Trust.
(2) The determination of net asset value per share of the
outstanding shares of the Trust and the offering price, if
any, at which shares are to be sold, at the times and in
the manner described in the declaration of trust or other
organizational document, as amended, and the Prospectus of
the Trust.
(3) The determination of distributions, if any.
(4) Maintaining the books of account of the Trust.
(5) In conjunction with the Trust's custodian ("Custodian"),
receiving information and keeping records about all
corporate actions, including, but not limited to, cash and
stock distributions or dividends, stock splits and reverse
stock splits, taken by companies whose securities are held
by the Trust.
(6) Monitoring foreign corporate actions and foreign trades
and entering orders to convert foreign currency or
establish contracts for future settlement of foreign
currency.
(7) Processing and monitoring of settlement of Variable Rate
Demand Notes, GNMA's and similar instruments.
(8) Monitoring and accounting for futures and options.
<PAGE> 2
B. Travelers shall be responsible for administering a program of
securities lending for the Trust by:
(1) Carrying out security loan transactions between approved
borrowers and the Trust, including assisting the Custodian
in receiving and returning collateral for loans;
(2) Marking to market loans outstanding each day; and
(3) Ensuring that the value of collateral for loans is 100% or
more of loaned securities at market price and issuing
demands for additional collateral should the percentage
fall below 100%.
C. Travelers shall not be responsible for any other services
provided to the Trust, including, but not limited to, investment
advisory, legal, auditing and clerical services.
The Trust will be responsible for the following expenses,
including, but not limited to, (i) interest and taxes; (ii)
brokerage commissions and other costs in connection with the
purchase or sale of securities and other investment instruments;
(iii) fees and expenses of the Trust's trustees other than those
who are "interested persons" of the Trust, the Manager, the
Subadviser; (iv) legal and audit expenses; (v) custodian and
registrar fees and expenses; (vi) fees and expenses related to
the registration and qualification of the Trust's shares for
distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Trust; (viii) all other expenses
incidental to holding meetings of the Trust's shareholders,
including proxy solicitations therefor; (ix) insurance premiums
for fidelity bond and other coverage; (x) investment management
fees; (xi) expenses of typesetting for printing prospectuses and
statements of additional information and supplements thereto;
(xii) expenses of printing and mailing prospectuses and
statements of additional information and supplements thereto;
and (xiii) such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings
to which the Trust is a party and any legal obligation that the
Trust may have to indemnify the Trust's trustees, officers
and/or employees or agents with respect thereto.
Operating procedures and standards to be followed for each function may
be established from time to time by agreement between the Trust and Travelers.
3. Record Keeping and Other Information. Travelers shall create and
maintain all records required by all applicable laws, rules and regulations
relating to the services to be performed herein, including but not limited to,
all applicable records required by Section 31(a) of the Investment Company Act
of 1940 ("1940 Act") and the rules thereunder, as the same be amended from time
to time. All records shall be the property of the Trust and shall be available
for inspection and use by the Trust at all times. Where applicable, such records
shall be maintained by Travelers for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
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<PAGE> 3
4. Audits, Inspections and Visits. Travelers shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by each Trust,
any agent or person designated by the Trust, or any regulatory agency having
authority over the Trust. Upon reasonable notice by the Trust, Travelers shall
make available during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for reasonable
visits by the Trust, any agent or person designated by the Trust, or any
regulatory agency having authority over the Trust.
5. Compensation. For the performance of its obligations hereunder, the
Trust agrees to pay fees to Travelers at the annualized rate of .06% of the
daily net assets. Fees will be accrued daily and quarterly within ten days of
the end of each calendar quarter.
6. Appointment of Agents. Travelers, at its expense, may at any time or
times in its discretion appoint (and may at any time remove) one or more other
parties as agent to perform any or all of the services specified hereunder and
carry out such provisions of this Agreement as Travelers may from time to time
direct; provided, however, that the appointment of any such agent shall not
relieve Travelers of any of its responsibilities or liabilities hereunder.
7. Security. Travelers represents and warrants that, to the best of its
knowledge, the various procedures and systems which Travelers has implemented
with regard to the safeguarding from loss or damage attributable to fire, theft
or any other cause (including provision for twenty-four hours a day restricted
access) of the Trust's blank checks, certificates, records and other data and
Travelers records, data, equipment, facilities and other property used in the
performance of its obligations hereunder are adequate, and that it will make
such changes therein from time to time as in its judgment are required for the
secure performance of its obligations hereunder. Travelers shall review such
systems and procedures on a periodic basis and the Trust shall have access to
review these systems and procedures.
8. Insurance. Travelers shall maintain insurance of the types and in the
amounts deemed by it to be appropriate and shall notify the Trust should any of
its insurance coverage be changed for any reason. Such notification shall
include the date of change and the reason or reasons therefor. Travelers shall
notify the Trust of any material claims against Travelers whether or not they
may be covered by insurance, and shall notify the Trust from time to time as may
be appropriate of the total outstanding claims made by Travelers under its
insurance coverage. To the extent that policies of insurance may provide for
coverage of claims for liability or indemnity by the parties set forth in this
Agreement, the contracts of insurance shall take precedence, and no provision of
this Agreement shall be construed to relieve any insurer of any obligation to
pay claims to the Trust, Travelers or other insured party which would otherwise
be a covered claim in the absence of any provision of this Agreement.
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<PAGE> 4
9. Indemnification.
A. The Trust shall indemnify and hold Travelers harmless against
any losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person
other than the Trust, including by a shareholder, which
names Travelers and/or the Trust as a party and is not
based on and does not result from Travelers willful
misfeasance, bad faith or reckless disregard of its
duties, and arises but of or in connection with Travelers
performance hereunder, or
(2) any claim, demand, action or suit (except to the extent
contributed to by Travelers willful misfeasance, bad faith
or reckless disregard of its duties) which results from
the negligence of the Trust, or from Travelers acting upon
any instruction(s) reasonably believed by it to have been
executed or communicated by any person duly authorized by
the Trust, or as a result of Travelers acting in reliance
with advice reasonably believed by Travelers to have been
given by counsel for the Trust, or as a result of
Travelers acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine
and signed, countersigned or executed by the proper
person.
B. Travelers shall indemnify and hold the Trust harmless against
any losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit brought by any person other than
Travelers, which names the Trust and/or Travelers as a party and
is based upon and arises out of Travelers willful misfeasance,
bad faith or reckless disregard of its duties in connection with
its performances hereunder.
In the event that either party requests the other to indemnify or hold
it harmless hereunder, the party requesting indemnification (the "Indemnified
Party") shall inform the other party (the "Indemnifying Party") of the relevant
facts known to the Indemnified Party concerning the matter in question. The
Indemnified Party shall use reasonable care to identify and promptly to notify
the Indemnifying Party concerning any matter which presents, or appears likely
to present, a claim for indemnification. The Indemnifying Party shall have the
election of defending the Indemnified Party against any claim which may be the
subject of indemnification or of holding the Indemnified Party harmless
hereunder. In the event the Indemnifying Party so elects, it will so notify the
Indemnified Party and thereupon the Indemnifying Party shall take over defense
of the claim and, if so requested by the Indemnifying Party, the Indemnified
Party shall incur no further legal or other expenses related thereto for which
it shall be entitled to indemnify or to being held harmless hereunder; provided,
however, that nothing herein shall prevent the Indemnified Party from retaining
counsel at its own expense to defend any claim. Except with the Indemnifying
Party's prior written consent, the Indemnified Party shall in no event confess
any claim or make any compromise in any matter in which the Indemnifying Party
will be asked to indemnify or hold the Indemnified Party harmless hereunder.
4
<PAGE> 5
10. Acts of God, etc. Travelers shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication equipment of common carriers or power supply. In the
event of equipment breakdowns beyond it control, Travelers shall, at no
additional expense to the Trust, take reasonable steps to minimize service
interruptions and mitigate their effects but shall have no liability with
respect thereto. Travelers shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment.
11. Amendments. Travelers and the Trust shall regularly consult with each
other regarding Travelers performance of its obligations and its compensation
hereunder. In connection therewith, the Trust shall submit to Travelers at a
reasonable time in advance of filing with the Securities and Exchange Commission
copies of any amended or supplemented registration statements (including
exhibits) under the Securities Act of 1933, as amended, and the 1940 Act and, a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the
Trust. Any change in such material which would require any change in Travelers
obligations hereunder shall be subject to Travelers approval, which shall not be
unreasonably withheld. In the event that a change in such documents or in the
procedures contained therein materially increases the cost to Travelers of
performing its obligations hereunder, Travelers shall be entitled to receive
reasonable compensation therefor.
12. Duration, Termination, etc. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated, except by written
instrument which shall make specific reference to this Agreement and which shall
be signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
This Agreement shall continue in effect with respect to the Trust until
October 31, 1998 and indefinitely thereafter so long as such continuance is
approved at least annually by vote of such Trust's Board of Trustees; provided,
however, that this Agreement may be terminated at any time with respect to such
Trust by sixty (60) days' written notice given by Travelers to the Trust or
sixty (60) days' written notice given by the Trust to Travelers,; and provided
further that this Agreement may be terminated immediately at any time for cause
either by the Trust or by Travelers in the event that such cause remains
unremedied for a reasonable period of time not to exceed ninety (90) days after
receipt of written specification of such cause. Any such termination shall not
affect the rights and obligations of the parties under Paragraph 9 hereof.
Upon the termination hereof, the Trust shall pay to Travelers such
compensation as may be due for the period prior to the date of such termination.
In the event that the Trust designates a successor to any Traveler's obligations
hereunder, Travelers shall, at the expense and direction of the Trust, transfer
to such successor all relevant books, records and other data established or
maintained by Travelers hereunder. To the extent that Travelers incurs expenses
related to a transfer of responsibilities to a successor, Travelers shall be
entitled to be reimbursed for such expenses, including any out-of-pocket
expenses reasonably incurred by Travelers in connection with the transfer.
5
<PAGE> 6
13. LIABILITY. NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED
ON BEHALF OF THE TRUSTEES OF ANY TRUST AS INDIVIDUALS, AND THE OBLIGATIONS OF
THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS OR
SHAREHOLDERS OF A TRUST INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND
PROPERTY OF THE TRUST. TRAVELERS AGREES THAT NO SHAREHOLDER, TRUSTEE, OR OFFICER
OF THE TRUST MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF
THE TRUST ARISING OUT OF THIS AGREEMENT. WITH RESPECT TO ANY OBLIGATIONS OF THE
TRUST ARISING OUT OF THIS AGREEMENT, TRAVELERS SHALL LOOK FOR PAYMENT OR
SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE TRUST.
15. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Connecticut, without giving effect to the
choice of laws provisions thereof. The captions in this Agreement are intended
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in counterparts, each of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their respective officials thereunto duly authorized and seals to be affixed, in
the case of the Company.
HIGH YIELD BOND TRUST
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
THE TRAVELERS INSURANCE COMPANY
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
6
<PAGE> 1
EXHIBIT 11b
HIGH YIELD BOND TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Lewis E. Daidone of Holmdel, New Jersey, 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 18th day
of February, 1997.
/s/Lewis E. Daidone
Treasurer, High Yield Bond Trust
