<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. 25
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
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: (860) 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).
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X May 1, 1998 pursuant to paragraph (b).
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60 days after filing pursuant to paragraph (a)(1).
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on ___________ pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2).
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on ____________ pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<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 Net Asset Value
9. Legal Proceedings Legal Proceedings
<CAPTION>
CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
----------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Restrictions; Appendix
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Investment Adviser; Additional Information
Other Services
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Securities Declaration of Trust
19. Purchase, Redemption and Pricing Valuation of Securities
of Securities Being Offered
20. Tax Status Distributions and Taxes
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Additional Information
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
HIGH YIELD BOND TRUST
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
TELEPHONE 860-277-0111
- --------------------------------------------------------------------------------
High Yield Bond Trust (the "Fund" or "HYBT") is a diversified open-end
management investment company (mutual fund) whose objective is to provide
generous income to the investor. 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 a funding option
for certain variable annuity and variable life insurance contracts issued by the
Company. The term "shareholder" as used in this prospectus refers to any
insurance company separate account that may use shares of the Fund as a funding
option 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, 1998 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, by calling
1-860-277-0111, or by accessing the SEC's Website (http://www.sec.gov).
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, 1998.
<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
YEAR 2000 COMPLIANCE........................................ 9
ADDITIONAL INFORMATION...................................... 10
EXHIBIT A................................................... 11
EXHIBIT B................................................... 16
</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 for the year ended December 31, 1997, has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon appears in
the Fund's Annual Report dated December 31, 1997. All other periods presented
have been audited by other independent auditors. The information set out below
should be read in conjunction with the financial statements and related notes
that also appear in the Fund's 1997 Annual Report, which is incorporated by
reference into the SAI.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year.................. $ 8.49 $ 9.00 $ 8.49 $ 9.25 $ 8.91
Income from operations
Net investment income...... 0.76 0.91 0.80 0.66 0.68
Net gains or losses on
securities (realized and
unrealized).............. 0.65 0.41 0.41 (0.76) 0.47
------- ------- ------- ------- -------
Total from investment
operations............. 1.41 1.32 1.21 (0.10) 1.15
Less distributions from(4)
Net investment income...... (0.01) (1.83) (0.70) (0.66) (0.81)
------- ------- ------- ------- -------
Net asset value, end of
year..................... $ 9.89 $ 8.49 $ 9.00 $ 8.49 $ 9.25
======= ======= ======= ======= =======
TOTAL RETURN (1)............. 16.56% 16.05% 15.47% (1.26)% 14.01%
Net assets, end of year
(thousands)................ $25,272 $17,291 $12,902 $11,716 $12,765
RATIOS TO AVERAGE NET ASSETS
Expenses (2)............... 0.84% 0.97% 1.25% 1.25% 0.99%
Net investment income...... 9.04% 11.01% 9.37% 7.71% 7.69%
Portfolio turnover rate.... 137% 84% 222% 146% 19%
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1992 1991 1990(3) 1989 1988
- ----------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year.................. $ 8.75 $ 7.87 $ 9.33 $ 10.12 $ 9.94
Income from operations
Net investment income...... 0.88 0.94 1.02 1.28 1.21
Net gains or losses on
securities (realized and
unrealized).............. 0.18 0.88 (1.81) (1.11) 0.20
------- ------- ------- ------- -------
Total from investment
operations............. 1.06 1.82 (0.79) 0.17 1.41
Less distributions from(4)
Net investment income...... (0.90) (0.94) (0.67) (0.96) (1.23)
------- ------- ------- ------- -------
Net asset value, end of
year..................... $ 8.91 $ 8.75 $ 7.87 $ 9.33 $ 10.12
======= ======= ======= ======= =======
TOTAL RETURN (1)............. 13.16% 26.11% (9.12)% 1.40% 14.57%
Net assets, end of year
(thousands)................ $10,289 $ 7,724 $ 6,238 $10,607 $59,637
RATIOS TO AVERAGE NET ASSETS
Expenses (2)............... 0.56% 0.56% 0.92% 1.67% 1.00%
Net investment income...... 10.24% 11.93% 12.33% 13.37% 11.65%
Portfolio turnover rate.... 52% 35% 29% 87% 67%
</TABLE>
(1) 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.
(2) The ratios of expenses to average net assets for 1990 and later years
reflect an expense reimbursement by The Travelers in connection with
voluntary expense limitations. Without the expense reimbursement, the ratio
of operating expenses to average net assets would have been 1.28%, 1.33%,
1.31%, 1.28%, 1.87% and 2.13% for the years ended December 31, 1995, 1994,
1993, 1992, 1991 and 1990, respectively. For the fiscal years ended December
31, 1997 and 1996, there were no expense reimbursements by The Travelers in
connection with the voluntary expense limitations.
(3) On May 1, 1990, TAMIC replaced Keystone Custodian Funds, Inc. as the
investment adviser for Fund HYBT.
(4) For the years ended December 31, 1996 and later distributions from realized
gains include both net realized short-term and long-term capital gains.
Prior to 1996, net realized short-term capital gains were included in
distributions from net investment income. For the year ended December 31,
1997, the distribution amounts represents less than $0.01 per share.
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, 1997, 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
- --------------------------------------------------------------------------------
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 total assets in the securities
of any one issuer with regard to 85% of Funds assets; (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
- --------------------------------------------------------------------------------
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, 1997, TAMIC received a fee equal to .50%
of the Fund's average net assets for its services as investment adviser.
PORTFOLIO MANAGER
The High Yield Bond Trust is managed by Thomas L. Hajdukiewicz. Mr. Hajdukiewicz
joined The Travelers Insurance Company as a Vice President and Portfolio Manager
in January of 1997. Prior to coming to TAMIC, Mr. Hajdukiewicz served as an
Analyst/Portfolio Manager with MacKay Shields Financial Corporation and as a
Financial Analyst with America Capital Asset Management.
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, 1997, the Fund paid 0.84% of its average net
assets in 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. 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.
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
HYBT-8
<PAGE> 12
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.
YEAR 2000 COMPLIANCE
- --------------------------------------------------------------------------------
Generally, computer programs were designed without considering the impact of the
upcoming change in the century. As a result, software and computer systems may
need to be upgraded or replaced in order to comply with "Year 2000"
requirements. If not corrected, these computer applications could fail or create
erroneous results by or at the Year 2000. The business, financial condition, and
result of operations of a company, investment advisor, separate account and/or a
mutual fund could be materially and adversely affected by the failure of its
systems and applications (or those either provided or operated by third-parties)
to properly operate or manage dates beyond the year 1999.
Travelers Life and Annuity and its affiliates have investigated the nature and
extent of the work required for computer systems to process beyond the turn of
the century, and have made progress toward achieving this goal, including
upgrading and/or replacing existing systems. We are confirming with our service
providers that they are also in the process of replacing or modifying their
systems with the same goal. We expect that our principal systems will be Year
2000
HYBT-9
<PAGE> 13
compliant by early 1999. While these efforts involve substantial costs, we
closely monitor associated costs and continue to evaluate associated risks based
on actual expenses. While it is likely that these efforts will be successful, if
necessary modifications and conversions are not completed in a timely manner,
the Year 2000 requirements could have a material adverse effect on certain
operations of 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-10
<PAGE> 14
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-11
<PAGE> 15
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-12
<PAGE> 16
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-13
<PAGE> 17
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-14
<PAGE> 18
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-15
<PAGE> 19
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-16
<PAGE> 20
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.
6. D -- Debt rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during the grace period. The D rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
HYBT-17
<PAGE> 21
The table below shows the averaged credit quality ratings of the Fund's assets
for the twelve months ended December 31, 1997:
<TABLE>
<CAPTION>
S&P OR
MOODY'S RATING PERCENTAGE
- ------------------------------------------------------------ ----------
<S> <C>
AAA..................................................... 13.36%
AA1..................................................... --
AA2..................................................... --
AA3..................................................... --
A1...................................................... --
A2...................................................... --
A3...................................................... --
BAA1.................................................... --
BAA2.................................................... --
BAA3.................................................... --
BA1..................................................... --
BA2..................................................... 1.00%
BA3..................................................... 7.90%
B1...................................................... 9.62%
B2...................................................... 22.85%
B3...................................................... 35.51%
CAA..................................................... 7.85%
CA...................................................... 1.31%
C....................................................... --
D....................................................... --
NR...................................................... 0.60%
------
100.00%
======
</TABLE>
HYBT-18
<PAGE> 22
HIGH YIELD BOND TRUST
PROSPECTUS
TIC Ed. 5-98
Printed in U.S.A.
L-11173
<PAGE> 23
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 24
STATEMENT OF ADDITIONAL INFORMATION
HIGH YIELD BOND TRUST
MAY 1, 1998
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, 1998. A copy of the prospectus is available from The Travelers
Insurance Company, Annuity Services, One Tower Square, Hartford, Connecticut
06183-5030 or by calling 860-277-0111. This SAI should be read in conjunction
with the accompanying 1997 Annual Report for the Fund.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
VALUATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
REDEMPTIONS IN KIND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FUND ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 25
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 in any one issuer with
regard to 85% of the Trust's asset;
(2) invest in more than 10% of any class of securities (as defined
in the Declaration of Trust) of any one issuer;
(3) 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;
(4) 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");
(5) 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;
(6) invest for the primary purpose of control or management;
(7) make margin purchases or short sales of securities;
(8) 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;
(9) invest more than 25% of its total assets in the securities of
issuers in any single industry;
1
<PAGE> 26
(10) 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; or
(11) 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 traded on national securities markets are valued at the
closing prices on such markets; securities for which no sales prices were
reported and U.S. Government and Agency obligations are valued at the mean
between the last reported bid and ask prices or on the basis of quotations
received from reputable brokers or other recognized sources; securities maturing
within 60 days are valued at cost plus accreted discount and, or minus amortized
premium, which approximates market value; and securities that have a maturity of
60 days or more are valued at prices based on market quotations for securities
of similar type, yield and maturity.
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, 1997, the Fund had capital loss carryovers of
approximately $3,281,000 which expires in 1998-2004. 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,
1995, 1996 and 1997 were 222%, 84% and 137%, respectively. High portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Fund.
2
<PAGE> 27
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name Present Position and Principal Occupation During Last Five Years
---- ----------------------------------------------------------------
<S> <C>
*Heath B. McLendon Managing Director (1993-present), Smith Barney Inc. ("Smith Barney");
Chairman and Member Chairman (1993-present), Smith Barney Strategy Advisors, Inc.;
388 Greenwich Street President and Director (1994-present), Mutual Management Corp.;
New York, New York Director and President (1996-present), Travelers Investment Adviser,
Age 64 Inc.; Chairman and Director of forty-one investment companies
associated with Smith Barney; Chairman, Board of Trustees, Drew
University; 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 74 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 66 (1983-1995), Life Technologies, Inc. (life science/biotechnology
products); Director, (1994-present), The Connecticut Surety Corporation
(insurance); Director (1995-present), CN Bioscience, Inc. (life
science/biotechnology products); Director (1995-present), Chemfab
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
Milwaukee, WI 53233 for Research and Development in Financial Services (1980-1995),
Age 55 University of Connecticut; Director (1992-present), GZA
Geoenvironmental Tech, Inc. (engineering services); Member, Board of
Managers, seven Variable Annuity Separate Accounts of The Travelers
Insurance Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company.++
Frances M. Hawk, CFA, CFP Private Investor, (1997-present); Portfolio Manager (1992-1997), HLM
Member Management Company, Inc. (investment management); Assistant Treasurer,
222 Berkeley Street Pensions and Benefits. Management (1989-1992), United Technologies
Boston, Massachusetts Corporation (broad-based designer and manufacturer of high technology
Age 50 products); Member, Board of Managers, seven Variable Annuity Separate
Accounts of The Travelers Insurance Company+; Trustee, five Mutual
Funds sponsored by The Travelers Insurance Company.++
</TABLE>
3
<PAGE> 28
<TABLE>
<S> <C>
Ernest J. Wright Vice President and Secretary (1996-present), Assistant Secretary
Secretary to the Board (1994-1996), Counsel (1987-present), The Travelers Insurance Company;
One Tower Square Secretary, Board of Managers, seven Variable Annuity Separate Accounts
Hartford, Connecticut of The Travelers Insurance Company+; Secretary, Board of Trustees, five
Age 57 Mutual Funds sponsored by The 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 47 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 39
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 36
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 37
</TABLE>
+ These seven Variable Annuity Separate Accounts are: The Travelers
Growth and Income Stock Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities, The Travelers Money Market
Account for Variable Annuities, The Travelers Timed Growth and Income
Stock Account for Variable Annuities, The Travelers Timed Short-Term
Bond Account for Variable Annuities, The Travelers Timed Aggressive
Stock Account for Variable Annuities and The Travelers Timed Bond
Account for Variable Annuities.
++ These five Mutual Funds are: Capital Appreciation Fund, Money Market
Portfolio, 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. They also receive an aggregate fee of $2,500 for each meeting
of such Boards attended. Board Members with 10 years of service may agree to
provide services as an
4
<PAGE> 29
emeritus director at age 72 or upon reaching 80 years of age and will receive
50% of the annual retainer and 50% of meeting fees, if 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 28, 1997. No further meetings
of shareholders for the purpose of electing Trustees will be held, unless
required by law, and unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees.
Except as set forth above, the Trustees shall continue to hold office,
unless required by law, and may appoint successor Trustees. Trustees may
voluntarily resign from office, or a Trustee may be removed from office: (1) at
any time by two-thirds vote of the Trustees; (2) by a majority vote of Trustees
where any Trustee becomes mentally or physically incapacitated; and (3) either
by declaration in writing or at a meeting called for such purpose by the holders
of not less than two-thirds of the outstanding shares or other voting interests
of the Fund. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as trustee, if requested in writing
to do so by the holders of not less than 10% of the outstanding shares or other
voting interests of the Fund. The Fund is required to assist in Shareholders'
communications. In accordance with current laws, insurance companies using the
Fund as an underlying investment option within their variable contracts will
request voting instructions from contract owners participating in such contracts
and will vote shares of the Fund in the same proportion as the voting
instructions received.
Voting rights are not cumulative, so that the holders of more than 50%
of the shares voting in the election of Trustees can, if they choose to do so,
elect all of the Trustees of the Fund, in which event the holders of the
remaining shares will be unable to elect any person as a Trustee.
No amendment may be made to the Declaration of Trust without a "vote of
a majority of the outstanding voting securities" of the Fund (as defined in the
1940 Act).
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
5
<PAGE> 30
vote of a majority of the Board of Trustees, or (ii) by a vote of a majority of
the outstanding voting securities of the Fund. In addition, and in either event,
the terms of the Advisory Agreement must be approved annually by a vote of a
majority of the Board of Trustees who are not parties to, or interested persons
of any party to, the Advisory Agreement, cast in person at a meeting called for
the purpose of voting on such approval and at which the Board of Trustees is
furnished such information as may be reasonably necessary to evaluate the terms
of the Advisory Agreement. The Advisory Agreement further provides that it will
terminate automatically upon assignment; may be amended only with prior approval
of a majority of the outstanding voting securities of the Fund; may be
terminated without the payment of any penalty at any time upon sixty days'
notice by the Board of Trustees or by a vote of a majority of the outstanding
voting securities of the Fund; and may not be terminated by TAMIC without prior
approval of a new investment advisory agreement by a vote of a majority of the
outstanding voting securities of the Fund.
Under the terms of the Advisory Agreement, TAMIC shall:
(1) obtain and evaluate pertinent economic, statistical and financial
data and other information relevant to the investment policy of
the Fund, affecting the economy generally and individual companies
or industries, the securities of which are included in the Fund's
portfolio or are under consideration for inclusion therein;
(2) be authorized to purchase supplemental research and other services
from brokers at an additional cost to the Fund;
(3) regularly furnish recommendations to the Board of Trustees with
respect to an investment program for approval, modification or
rejection by the Board of Trustees;
(4) take such steps as are necessary to implement the investment
program approved by the Board of Trustees; and
(5) regularly report to the Board of Trustees with respect to
implementation of the approved investment program and any other
activities in connection with the administration of the assets of
the Fund.
ADVISORY FEES
For furnishing investment management and advisory services to the Fund,
TAMIC is paid an amount equivalent on an annual basis to the advisory fee
schedule set forth in the table below. The fee is computed daily and paid
weekly.
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
ANNUAL MANAGEMENT FEE VALUE OF THE FUND
--------------------- -----------------
<S> <C> <C>
0.50% of the first $ 50,000,000, plus
0.40% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $250,000,000.
</TABLE>
For the three years ended December 31, 1995, 1996 and 1997 the advisory
fees were $62,591, $72,800 and $105,287, 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.
6
<PAGE> 31
However, the Fund has obligated itself under the 1940 Act to redeem for
cash all shares presented for redemption by any one shareholder up to $250,000,
or 1% of the Fund's net assets if that is less, in any 90-day period. Securities
delivered in payment of redemptions would be valued at the same value assigned
to them in computing the net asset value per share. Shareholders receiving such
securities would incur brokerage costs when these securities are sold.
BROKERAGE
Subject to approval of the Board of Trustees, it is the policy of
TAMIC, in executing transactions in portfolio securities, to seek best execution
of orders at the most favorable prices. The determination of what may constitute
best execution and price in the execution of a securities transaction by a
broker involves a number of considerations, including, without limitation, the
overall direct net economic result to the Fund, involving both price paid or
received and any commissions and other cost paid, the efficiency with which the
transaction is effected, the ability to effect the transaction at all where a
large block is involved, the availability of the broker to stand ready to
execute potentially difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are judgmental and are
weighed by management in determining the overall reasonableness of brokerage
commissions paid. Subject to the foregoing, a factor in the selection of brokers
is the receipt of research services, analyses and reports concerning issuers,
industries, securities, economic factors and trends, and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers is considered to be in addition to and not in
lieu of services required to be performed by TAMIC under its Investment Advisory
Agreements. The cost, value and specific application of such information are
indeterminable and hence are not practicably allocable among the Fund and other
clients of TAMIC who may indirectly benefit from the availability of such
information. Similarly, the Fund may indirectly benefit from information made
available as a result of transactions for such clients.
Purchases and sales of bonds and money market instruments will usually
be principal transactions and will normally be purchased directly from the
issuer or from the underwriter or market maker for the securities. There usually
will be no brokerage commissions paid for such purchases. Purchases from the
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include the spread between
the bid and asked prices. Where transactions are made in the over-the-counter
market, the Fund will deal with primary market makers unless more favorable
prices are otherwise obtainable. Brokerage fees will be incurred in connection
with futures transactions, and the Fund will be required to deposit and maintain
funds with brokers as margin to guarantee performance of future obligations.
TAMIC may follow a policy of considering the sale of shares of the Fund
a factor in the selection of broker-dealers to execute portfolio transactions,
subject to the requirements of best execution described above.
The policy of TAMIC with respect to brokerage is and will be reviewed
by the Board of Trustees periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated. Because the purchase and sale of bonds is a principal transaction
there are no brokerage commissions to report.
FUND ADMINISTRATION
The Fund entered into an Administrative Services Agreement during 1996
with The Travelers Insurance Company to provide pricing and bookkeeping services
at an annualized rate of .06% of the daily net assets of the Fund. Travelers
Insurance at its expense may appoint a sub-administrator to perform these
services. Mutual Management Corp. ("MMC"), an affiliate of Travelers Insurance,
has been appointed to serve in this capacity. Travelers Insurance pays MMC, as
sub-administrator, a fee calculated at an annual rate of 0.06% of the daily net
assets of the Fund. For the period ended December 31, 1996 and year ended
December 31, 1997, the administration fees were $24,332 and $11,741,
respectively.
7
<PAGE> 32
ADDITIONAL INFORMATION
On April 1, 1998, 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 has been
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 860-277-0111.
First Data Investor Services Group, Inc., 53 State Street, 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 Morgan Stanley
Trust Company, One Pierrepont Plaza, Brooklyn, NY, 11201 are the custodians of
all securities and cash of the Fund.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154, has been
selected as independent auditors to examine and report on the Fund's financial
statements for the fiscal year ending December 31, 1998.
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> 33
HIGH YIELD BOND TRUST
STATEMENT OF ADDITIONAL INFORMATION
L-11173S TIC Ed. 5-98
Printed in U.S.A.
9
<PAGE> 34
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant and the Report of
Independent Accountants are contained in the Fund's Annual Report which
is incorporated in the Statement of Additional Information by
reference. The Registrant's financial statements for the period ended
December 31, 1997 include:
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the years ended December 31, 1997 and 1996
Statement of Investments as of December 31, 1997
Notes to Financial Statements
(b) Exhibits
<S> <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 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(a). Form of Custody Agreement between the Registrant and PNC Bank, N.A., of Lester, PA.
(Incorporated herein by reference to Exhibit 8(a) to Post-Effective Amendment No. 27 to
the Registration Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
8(B). Form of Subcustody Agreement between Morgan Stanley Trust Company and Subcustodian.
(Incorporated herein by reference to Exhibit 8(b) to Post-Effective Amendment No. 27 to
the Registration Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
9. Administrative Services Agreement between the Registrant and The Travelers Insurance
Company. (Incorporated herein by reference to Exhibit 9 to Post-Effective Amendment
No. 22 to the Registration Statement on Form N-1A filed February 20, 1997.
9(b) Form of Transfer Agency and Registrar Agreement between the Trust and First Data
Investor Services Group, Inc. (Incorporated herein by reference to Exhibit 9(b) to
Post-Effective Amendment No. 27 to the Registration Statement on Form N-1, File No. 2-76640,
filed April 21, 1998.)
10. An opinion and consent of counsel as to the legality of the securities registered by the
Registrant. (Incorporated herein by reference to the Registrant's most recent Rule 24f-2
Notice filing on March 24, 1998.)
</TABLE>
<PAGE> 35
<TABLE>
<S> <C>
11(A). Consent of Coopers & Lybrand L.L.P., Independent Accountants.
11(A). Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants.
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. (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 Kathleen A. McGah as signatory for
Lewis E. Daidone. (Incorporated herein by reference to Exhibit 11(B) to Post-Effective
Amendment No. 22 to the Registration Statement on Form N-1A filed February 20, 1997.
27. Financial Data Schedule.
</TABLE>
Item 25. Persons Controlled By or Under Common Control With the Registrant
Not Applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of February 1, 1998
-------------- ----------------------
<S> <C>
Shares of beneficial interest, Three (3)
without par value
</TABLE>
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers are
contained in the Fund's Declaration of Trust which 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 (the "Act') 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> 36
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. Rueli, Jr. Director, Senior Vice President Vice President*
and Chief Financial Officer
F. Denney Voss Director and Senior Senior Vice President*
Vice President
John R. Britt Director and Secretary Assistant Secretary *
Harvey Eisen Senior Vice President Senior Vice President*
Joseph M. Mullally Senior Vice President Vice President*
David Amaral Vice President Assistant Director*
John R. Calcagni Vice President Second Vice President*
Gene Collins Vice President Vice President*
John F. Green Vice President Second Vice President*
Thomas Hajdukiewicz Vice President Vice President*
Edward Hinchliffe III Vice President and Cashier Second Vice President and Cashier*
Richard E. John Vice President Vice President*
Kathryn D. Karlic Vice President Vice President*
David R. Miller Vice President Vice President*
Emil J. Molinaro Vice President Vice President*
Andrew Sanford Vice President Investment Officer*
Charles H. Silverstein Vice President Second Vice President*
Robert Simmons Vice President Assistant Investment Officer*
Jordan M. Stitzer Vice President Vice President*
Joel Strauch Vice President Vice President*
William H. White Treasurer Vice President and Treasurer *
Charles B. Chamberlain Assistant Treasurer Assistant Treasurer *
George M. Quaggin, Jr. Assistant Treasurer Assistant Treasurer *
Marla A. Berman Assistant Secretary Assistant Secretary**
Andrew Feldman Assistant Secretary Senior Counsel*
Millie Kim Assistant Secretary Senior Counsel*
Patricia A. Uzzel Compliance Officer Assistant Director*
Frank J. Fazzina Controller Director *
</TABLE>
* Positions are held with The Travelers Insurance Company, One Tower
Square, Hartford, Connecticut 06183.
** Positions are held with Travelers Group Inc. , 388 Greenwich Street,
New York, N.Y. 10013.
<PAGE> 37
Item 29. Principal Underwriter
Not Applicable.
Item 30. Location of Accounts and Records
(1) Mutual Management Corp.
388 Greenwich Street
New York, NY 10013
(2) PNC Bank, N. A.
200 Stevens Drive
Lester, PA 19113
(3) Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, NY 11201
(4) First Data Investor Services Group, Inc.
53 State Street
Boston, MA 02109
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> 38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, High Yield Bond Trust, certifies that it
meets all of the requirements for effectiveness of this post-effective amendment
to this Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this amendment to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Hartford, State of Connecticut, on the 21st day of April, 1998.
HIGH YIELD BOND TRUST
(Registrant)
By: *HEATH B. McLENDON
----------------------------
Heath B. McLendon
Chairman, Board of Trustees
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed below by the following
persons in the capacities indicated on April 21, 1998.
*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> 39
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(a). Form of Custody Agreements between the Registrant and PNC Bank,
N.A., of Lester, PA. (Incorporated herein by reference to Exhibit
8(a) to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1, File No. 2-76640, filed April 21, 1998.)
8(b). Form of Subcustody Agreements between Morgan Stanley Trust Company
of New York, NY. (Incorporated herein by reference to Exhibit 8(b)
to Post-Effective Amendment No. 27 to the Registration Statement
on Form N-1, File No. 2-76640, filed April 21, 1998.)
9. Administrative Services Agreement between the Registrant and The
Travelers Insurance Company. (Incorporated herein by reference to
Exhibit 9 to Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A filed on February 20, 1997.)
9(b). Form of Transfer Agency and Registrar Agreement between the Trust
and First Data Investor Services Group, Inc. (Incorporated herein
by reference to Exhibit 9(b) to Post-Effective Amendment No. 27 to
the Registration Statement on Form N-1, File No. 2-76640, filed
April 21, 1998.)
10. An opinion and consent of counsel as to the legality of the
securities the securities registered by the Registrant.
(Incorporated herein by reference to the Registrant's most recent
Rule 24f-2 Notice filing on March 24, 1998.)
11(A) Consent of Coopers & Lybrand L.L.P., Independent Accountants. Electronically
11(B) Consent of KPMG Peat Marwick LLP, Independent Certified Electronically
Public Accountants.
11(C). 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
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C>
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 Kathleen A.
McGah as signatory for Lewis E. Daidone. (Incorporated herein by
reference to Exhibit 11(B) to Post-Effective Amendment No. 22 to
the Registration Statement on Form N-1A filed on February 20, 1997.)
27. Financial Data Schedule Electronically
</TABLE>
<PAGE> 1
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this post-effective
amendment No. 25 to the registration statement of High Yield Bond Trust, (the
"Fund") on Form N-1A (File Nos. 2-76639) of our report dated February 24, 1997,
on our audits of the financial statements and financial highlights of the Fund,
which report is incorporated by reference in the post-effective amendment to
the registration statement.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 21, 1998
<PAGE> 1
EXHIBIT 11(A)
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
High Yield Bond Trust
We consent to the use of our report dated February 10, 1998 for High
Yield Bond Trust incorporated herein by reference and to the references to our
Firm under the headings "Financial Highlights" in the Prospectus and
"Additional Information" in the Statement of Additional Information.
KPMG Peat Marwick LLP
New York, New York
April 20, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000701387
<NAME> HIGH YIELD BOND TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 23,686,231
<INVESTMENTS-AT-VALUE> 24,829,804
<RECEIVABLES> 471,322
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 706
<TOTAL-ASSETS> 25,301,832
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,654
<TOTAL-LIABILITIES> 29,654
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,718,998
<SHARES-COMMON-STOCK> 2,554,899
<SHARES-COMMON-PRIOR> 2,036,482
<ACCUMULATED-NII-CURRENT> 1,906,327
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,496,720)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,143,573
<NET-ASSETS> 25,272,178
<DIVIDEND-INCOME> 12,591
<INTEREST-INCOME> 2,071,449
<OTHER-INCOME> 0
<EXPENSES-NET> 177,713
<NET-INVESTMENT-INCOME> 1,906,327
<REALIZED-GAINS-CURRENT> 813,430
<APPREC-INCREASE-CURRENT> 485,471
<NET-CHANGE-FROM-OPS> 3,205,228
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,738
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 811,252
<NUMBER-OF-SHARES-REDEEMED> 294,426
<SHARES-REINVESTED> 1,591
<NET-CHANGE-IN-ASSETS> 7,981,135
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4,940,128)
<OVERDISTRIB-NII-PRIOR> 172,955
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<GROSS-ADVISORY-FEES> 105,287
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 177,713
<AVERAGE-NET-ASSETS> 21,083,865
<PER-SHARE-NAV-BEGIN> 8.49
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<PER-SHARE-NAV-END> 9.89
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<AVG-DEBT-PER-SHARE> 0
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