<PAGE>
Travelers
Corporate
Loan Fund Inc.
Semi-Annual Report
March 31, 2000
[GRAPHIC]
<PAGE>
Travelers Corporate Loan Fund Inc.
[PHOTO] [PHOTO]
HEATH B. MCLENDON GLENN N. MARCHAK
Chairman Vice President and Investment Officer
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the period ended
March 31, 2000 for the Travelers Corporate Loan Fund Inc. ("Fund"). We hope you
find this report useful and informative. During the reporting period, the Fund
distributed income dividends totaling $0.70 per share. The table below shows the
annualized distribution rate and six-month total return based on the Fund's net
asset value per share ("NAV") and the New York Stock Exchange ("NYSE") closing
price at March 31, 2000.1
Price Annualized Six-Month
Per Share Distribution Rate2 Total Return
--------- ------------------ ------------
$15.14 (NAV) 9.39% 5.00%
$13.625 (NYSE) 10.44% (0.15)%
Special Shareholder Notice
The Fund's investment objective is to maximize current income consistent with
prudent efforts to preserve capital. The Fund seeks to achieve this objective by
investing primarily in a professionally managed portfolio of interests in
floating
---------------
1 The NAV is calculated by subtracting total liabilities from the closing
value of all securities held by the Fund, plus all other assets. This
result (net assets) is divided by the total number of shares outstanding.
The NAV fluctuates with the changes in the market price of the securities
in which the Fund has invested. However, the price at which the investor
buys or sells shares of the Fund is its market (NYSE) price as determined
by supply and demand.
2 Total returns are based on changes in NAV and the market value,
respectively. Total returns assume the reinvestment of all dividends and/or
capital gains distributions in additional shares. The annualized
distribution rate is the Fund's current monthly income dividend rate,
annualized, and then divided by the NAV or the market value noted in the
above chart. This annualized distribution rate assumes a current monthly
income dividend rate of $0.1185 for twelve months. This rate is as of May
19, 2000 and is subject to change. The important difference between a total
return and an annualized distribution rate is that the total return takes
into consideration a number of factors including the fluctuation of the NAV
or the market value during the period reported. The NAV fluctuation
includes the effects of unrealized appreciation or depreciation in the
Fund. Accordingly, since an annualized distribution rate only reflects the
current monthly income dividend rate annualized, it should not be used as
the sole indicator to judge the return you receive from your Fund
investment. Past performance is not indicative of future results.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 1
<PAGE>
or variable rate collateralized senior loans. Unlike fixed-rate investments, the
interest rates from these collateralized loans will periodically adjust in
response to changes in short-term interest rates. These rate adjustments provide
investors with higher income during periods of rising interest rates and lower
income during periods of declining interest rates.
We are proud to report that, based on data provided by Lipper, Inc., a major
fund-tracking organization, the Fund had the highest cumulative total return for
the twelve month period ended March 31, 2000, when compared to the other 34
other funds in the loan participation fund category. Cumulative total return is
based on distributed earnings plus the change in NAV. Of course, past
performance is not indicative of future results.
On April 14, 2000, the Fund declared a regular monthly dividend for April 2000
of $0.1325 per share, representing an increase from February's dividend of
$0.1070 per share. The higher dividend in April was primarily the result of the
distribution of excess income accumulated in the Fund since the beginning of the
year and the recent series of Federal Reserve Board ("Fed") interest rate
increases that continue to positively contribute to the Fund's cash flow.
Portfolio Review
Consistent with our original investment mandate, the portfolio is made up of
entirely floating or variable rate collateralized senior loans of U.S. issuers
that performed competitively during the period. As of March 31, 2000, the Fund
had total net assets of approximately $148.1 million that had an average
equivalent rating of "Ba3." During the period, the Fund's portfolio was invested
in 23 industry sectors with the largest industry concentration of 14.2% in the
telecommunications industry. The Fund has interests in loans made to 55 issuers.
We continue to maintain a comfortable margin over the NAV of $15.00 per share at
the inception of the Fund. One key aspect of the Fund's management policy is
that its NAV is calculated to date on a "mark-to-market" basis using current
market prices for each loan in the Fund as determined weekly by a third party
pricing service.
The Fed increased short-term interest rates by 25 basis points3 on February 2,
2000 and March 21, 2000. The last rate increase was the fifth 25 basis point
increase in a series of rate increases by the Fed,the first of which was on June
30, 1999, the second on August 24, 1999 and the third on November 16, 1999.
Most, if not all, of the effects of earlier rate increases have been reflected
in the Fund's cash flow and the effect of the later rate increases has continued
to work its way
-------------------
3 A basis point is 0.01% or one-hundredth of a percent.
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
into the Fund's cash flow. As a result, we have been able to increase the
monthly dividend paid on the Fund four times over this period of Fed rate
increases. A portion of the last dividend increase, reflects the fact that we
have seen an increased impact on cash flow of these rate increases as more time
has elapsed.
On May 16, 2000 the Federal Open Market Committee raised interest rates 0.50% to
6.50% and indicated that it will implement more rate increases in the months to
come if necessary. Additionally, as the U.S. economy has continued to grow
rapidly, many reports predict that the Fed will continue to raise short-term
rates several more times over the remainder of 2000.
As interest payable on the loans in the portfolio are based on the London Inter
Bank Offered Rate ("LIBOR")4, a short-term interest benchmark, the Fed's rate
increases should improve the return on the Fund's portfolio, all things being
equal. (Of course, no guarantee can be made that this will in fact occur.) In
addition, since the loans in the Fund's portfolio have varying interest rate
reset dates, it may take some time for the full effect of any rate increase to
completely work its way into the portfolio.
While several of the trends in the financial markets on a relative basis tend to
positively affect the stock price of corporate loan mutual funds, the market
price of the Fund's shares declined since our last report. Although we are
unable to identify all of the reasons for this decline, we believe that there
are several contributing factors. First, the high rates of return investors have
come to expect from stocks has reduced the appeal of "conservative" corporate
loans. Second, certain technical factors, including shares of the Fund being
sold by shareholders to generate cash to pay tax liabilities, also negatively
effected the price of Fund shares both in March and in the first half of April.
Lastly, in our opinion, the price of corporate loan funds in general, has also
been affected by recent scrutiny by the Securities and Exchange Commission
("SEC") as to how corporate loan portfolios are priced. As noted in our last
report, the SEC has called into question the application of the "fair value"
valuation methodology employed by some corporate loan funds. The SEC appears to
be recommending that corporate loan funds use a valuation methodology more in
line with the "mark-to-market" method. As noted earlier in the report, the Fund
already employs this "mark-to-market"technique favored by the SEC.
Several recent trends in the financial markets should tend to have a positive
influence on the share price of the Fund. The most obvious trend is the
continuing general expectation for higher interest rates. Secondly, in our
opinion, the technical factors that have recently had a negative impact on the
-------------------
4 LIBOR is the rate that most creditworthy international banks dealing in
euro charge each other for large loans.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 3
<PAGE>
Fund's share price may have, at least for now, begun to dissipate. Lastly,
ongoing investor uncertainty in the high-yield bond and stock markets might
influence investors to move to more conservative asset classes such as corporate
loans. It is possible that the recent significant downturn in the stock market
may have tempered investors' expectations for high rates of return for stocks.
Investment Strategy
Our investment strategy remained consistent with previous reporting periods:
identify what we believe are the highest quality assets at what we think are
reasonable prices. And while we are comfortable with the current level of
diversification in the portfolio, we continue to look to improve the Fund's
diversification at the margin. As default rates have increased to a level of
more than 5% in late 1999 and early 2000, we remained extremely selective about
the assets we have added to the portfolio during the period and we are pleased
to report that there were no defaults in the Fund. Yet, while default rates have
begun to decline recently,a significant amount of volatility remains in the
financial markets.
This is a time when we need to be vigilant in applying our credit discipline
when reviewing assets we consider adding to the portfolio. At the same time, we
continue to monitor our existing Fund holdings in an attempt to identify
negative trends in advance of any potential credit problems. Moreover, we seek
to ensure that changing economic and financial market factors do not result in
an unacceptably high level of vulnerability for any of the corporate loans held
in the portfolio.
There has been a sufficient level of new issuance in the corporate loan market
to allow us to replace loans in the portfolio that repaid earlier than we had
originally expected. We anticipate that we should be able to maintain
satisfactory asset levels during the quarter as we are aware of several loans in
the portfolio that expect to be prepaying ahead of schedule. As always, we will
continue to carefully select replacements to the portfolio.
Our goal in the Fund remains constant: work hard to optimize the Fund's
diversification and target select opportunities while operating within the
parameters of our high credit standards. And while the future is always
uncertain, we seek to bring our shareholders the best combination of quality and
price in the assets we purchase to achieve the best risk-adjusted returns
available in the corporate loan asset class.
Corporate Loan Market Outlook
Although new loan issuance has recently been strong, the corporate loan market
is generally suffering from limited supply as investor demand has been very
high. We expect that competition will continue for new loan transactions that
are, in our view, well-structured and priced.
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
Despite the strong demand for loans, credit spreads and structures for newly-
issued loans have become more favorable as investors have reacted to the higher
level of defaults that have occurred in late 1999 and into 2000. Over the near
term, we anticipate that many investors may continue to be credit sensitive, due
to the recent number of defaults, which in turn, should continue to provide an
attractive environment for investing in new issues. However, while new issuance
has recently been high,it is difficult to predict what level of new issuance we
can expect over the next few months due to higher volatility in the financial
markets.
The one industry where robust new issuance has recently exceeded investor demand
has been the telecommunications sector. Many investor portfolios have reached
their limit for telecommunications industry exposure and, as a result, secondary
market prices have softened. In our opinion, telecommunications issuance may
remain strong in the coming months and secondary market prices for what we think
are marginal telecommunications names will probably remain weak.
We are decidedly conservative about investments in the developing
telecommunications industry. However, in the rush of new telecommunications
issues, we have added several telecommunications names that we feel meet our
stringent investment criteria. As a result, telecommunications is now the
largest industry component in the portfolio. Although we have seen a drop-off in
secondary market price of some of the telecommunications companies that we own,
the effect on the portfolio has been marginal. In spite of the increase in price
volatility in this sector, we are very comfortable with the investments we have
made in the telecommunications industry.
Economic Outlook
As of February 2000, the expansion of the U.S. economy has been the longest in
history. The economy's persistent strength continued in the first quarter of
2000 and consumer confidence has remained high. In response to this strong
economic growth, the Fed continued its tightening policy in the first quarter,
rising interest rates in two 25 basis point increments. As previously noted, the
Fed raised interest rates by 0.50% on May 16, 2000.
U.S. consumers have continued to spend, with auto sales at record levels in
February and, despite a rise in mortgage rates, home sales remained largely
unaffected. Employment markets continue to be tight which also contributed to
high consumer confidence. The strong employment market has yet to negatively
impact wage inflation, largely as a result of the fact that productivity growth
has been incredibly strong. However, there have been signs of more tightness in
the labor market such as unfilled job positions and more focus by employers on
perks and benefits. These indicators lead us to think that higher wage inflation
in some form is imminent if growth continues to be as strong as it has been.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 5
<PAGE>
In our opinion, there is nothing on the horizon likely to slow the economy
enough in the near term to prevent the Fed from continuing to raise interest
rates. Consumers seem to be handling higher oil prices without much impact.
While higher interest rates may slow the growth of the housing sector, the tight
labor market, strong stock market and high levels of consumer confidence have,
for the most part, forestalled any negative impact normally associated with
higher interest rates.
Overseas, most economies are at early stages of recovery with no visible
constraints on growth in the next few years. As a result of improved global
growth, many manufacturing and commodity sectors in the U.S. economy are
improving from several years of relative weakness caused by the Asian crisis.
In our view, the Fed is most likely to continue to raise interest rates until
indications become more apparent that economic growth is beginning to slow. We
believe this is likely to be the case as long as inflation remains under
control. The risks to this scenario are on the side of substantially higher
interest rates until the financial markets are convinced that inflation is under
control.
While no guarantees can be made,as short-term interest rates increase,the
earnings from the Fund's portfolio should increase as well, all other factors
being equal. As long as interest rates do not increase to a level where they
adversely affect economic activity,rising interest rates should be favorable to
corporate loans.
Thank you for investing in the Travelers Corporate Loan Fund Inc. We look
forward to seeking to achieve our objectives of maximizing current income
consistent with prudent efforts to preserve capital. We promise to seek the best
risk-adjusted returns available from corporate loans and to work hard to provide
you with a stable, long-term investment with competitive rates of return.
Sincerely,
/s/ Heath B. McLendon /s/ Glenn N. Marchak
Heath B. McLendon Glenn N. Marchak
Chairman Vice President and
Investment Officer
May 17, 2000
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
=====================================================================================
SENIOR COLLATERALIZED LOANS -- 96.8%
Aerospace/Defense -- 4.6%
<S> <C> <C> <C> <C>
$ 7,375,056 DeCrane Aircraft Holdings, Inc. Term B 9/30/05 $ 7,393,494
2,493,750 DeCrane Aircraft Holdings, Inc. Term D 12/24/06 2,506,219
-------------------------------------------------------------------------------------
9,899,713
-------------------------------------------------------------------------------------
Automotive -- 4.9%
3,750,000 Dura Automotive Systems, Inc. Term B 3/31/06 3,747,750
1,963,296 J.L. French Automotive Castings,
Inc. Term B 10/21/06 1,968,205
4,937,500 Stoneridge, Inc. Term B 12/31/05 4,937,500
-------------------------------------------------------------------------------------
10,653,455
-------------------------------------------------------------------------------------
Building Materials -- 5.0%
1,492,105 Better Minerals and Aggregates Term B 9/30/07 1,491,210
2,000,000 Hanley-Wood, Inc. Term B 9/21/07 1,998,800
1,400,000 Onex ABCO LP (Magnatrax) Term B 11/15/05 1,402,660
2,948,167 Panolam Industries International,
Inc. Term B 1/31/07 2,951,999
3,000,000 Trussway Holdings Inc. Term B 12/31/06 2,994,300
-------------------------------------------------------------------------------------
10,838,969
-------------------------------------------------------------------------------------
Chemicals -- 8.9%
2,992,493 Georgia Gulf Corp. Term B 11/10/06 3,011,346
1,500,000 Huntsman ICI Chemical LLC Term B 6/30/07 1,515,000
1,500,000 Huntsman ICI Chemical LLC Term C 6/30/08 1,515,000
5,181,550 Lyondell Petrochemical Co. Term B 6/30/05 5,223,521
7,957,406 Lyondell Petrochemical Co. Term E 5/17/06 8,096,660
-------------------------------------------------------------------------------------
19,361,527
-------------------------------------------------------------------------------------
Construction Machinery -- 1.4%
3,000,000 United Rentals, Inc. Term C 6/30/06 3,007,500
-------------------------------------------------------------------------------------
Consumer Products-- 4.6%
947,625 American Safety Razor Co. Term B 4/30/07 950,563
2,847,823 Doane Pet Care Co. Term B 11/12/05 2,851,520
3,077,177 Doane Pet Care Co. Term C 11/12/06 3,081,178
1,990,000 Holmes Products Corp. Term B 2/5/07 1,992,587
1,000,000 Shop Vac Corp. Term B 7/7/07 1,000,000
-------------------------------------------------------------------------------------
9,875,848
-------------------------------------------------------------------------------------
Entertainment -- 3.9%
3,000,000 Corus Entertainment Inc. Term B 9/30/00 2,994,300
3,500,000 Six Flags Theme Parks Inc. Term B 11/5/05 3,513,300
80,000 Washington Football Group, Inc. Term A 10/29/04 80,200
1,920,000 Washington Football Inc. Term C 10/29/04 1,924,800
-------------------------------------------------------------------------------------
8,512,600
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 7
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
=====================================================================================
<S> <C> <C> <C> <C>
Food -- 0.6%
$ 1,326,600 New World Pasta Co. Term B 1/28/06 $ 1,328,325
-------------------------------------------------------------------------------------
Health Care -- 4.9%
3,500,000 Oxford Health Plans, Inc. Term B 5/13/03 3,497,900
1,000,000 Stericycle, Inc. Term B 11/10/06 1,008,800
6,130,028 Stryker Corp. Term B 12/4/05 6,153,323
-------------------------------------------------------------------------------------
10,660,023
-------------------------------------------------------------------------------------
Gaming -- 1.2%
1,333,333 Isle of Capri Casinos, Inc. Term B 3/2/06 1,340,800
1,166,667 Isle of Capri Casinos, Inc. Term C 3/2/07 1,173,200
-------------------------------------------------------------------------------------
2,514,000
-------------------------------------------------------------------------------------
Independent Energy -- 4.6%
10,000,000 Heating Oil Partners LP Term 9/30/03 9,975,000
-------------------------------------------------------------------------------------
Industrial - Other-- 10.2%
2,700,000 Casella Waste Systems, Inc. Term B 2/3/07 2,706,750
2,684,063 General Cable Corp. Term B 5/28/07 2,687,552
2,000,000 Hines Nurseries, Inc. Term B 3/10/05 2,002,600
1,488,750 Mueller Group Inc. Term B 8/16/06 1,496,194
1,488,750 Mueller Group Inc. Term C 8/16/07 1,496,194
4,631,579 SPX Corp. Term A 10/6/04 4,637,600
3,990,000 SPX Corp. Term B 12/31/06 4,012,344
2,977,500 Western Industries Ltd. Term B 6/23/06 2,975,714
-------------------------------------------------------------------------------------
22,014,948
-------------------------------------------------------------------------------------
Lodging -- 1.4%
3,000,000 Starwood Hotels & Resorts
Worldwide, Inc. IRN 2/23/03 2,970,000
-------------------------------------------------------------------------------------
Media - Cable -- 4.4%
7,000,000 Charter Communications
Operating LLC Term B 9/18/08 6,974,100
1,736,842 Classic Cable, Inc. Term B 1/31/08 1,736,842
868,421 Classic Cable, Inc. Term C 1/31/08 869,550
-------------------------------------------------------------------------------------
9,580,492
-------------------------------------------------------------------------------------
Media - Non-Cable -- 6.6%
4,850,505 21st Century Newspapers Term B 9/15/05 4,847,595
4,500,000 American Media Operation Inc. Term B 4/1/07 4,502,700
4,000,000 Susquehanna Media Co. Term B 6/30/08 4,010,000
950,000 Ziff-Davis Inc. Term B 3/31/06 951,805
-------------------------------------------------------------------------------------
14,312,100
-------------------------------------------------------------------------------------
Metals -- 0.8%
1,700,000 Ucar International Inc. Term B 2/28/07 1,701,020
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
=====================================================================================
<S> <C> <C> <C> <C>
Other - Energy -- 0.7%
$ 1,425,000 TransMontaigne Inc. Term B 7/1/06 $ 1,419,728
-------------------------------------------------------------------------------------
Other - Financial Institutions -- 3.5%
1,698,888 Bridge Information Systems,
Inc. Multi-Draw 5/29/03 1,639,427
3,160,112 Bridge Information Systems,
Inc. Term B 5/29/05 3,010,007
2,992,500 Outsourcing Solutions Inc. Term B 6/15/06 2,981,428
-------------------------------------------------------------------------------------
7,630,862
-------------------------------------------------------------------------------------
Packaging -- 1.4%
2,977,387 Graham Packaging Co. Term D 1/31/07 2,990,487
-------------------------------------------------------------------------------------
Paper -- 2.8%
1,277,778 Jefferson Smurfit Corp. Term B 3/31/06 1,284,167
2,373,967 Packaging Corp. of America Term B 4/12/07 2,387,261
2,373,967 Packaging Corp. of America Term C 4/12/08 2,387,261
-------------------------------------------------------------------------------------
6,058,689
-------------------------------------------------------------------------------------
Pharmaceuticals -- 4.8%
10,368,750 King Pharmaceuticals, Inc. Term B 12/28/06 10,356,308
-------------------------------------------------------------------------------------
Railroads -- 1.4%
2,000,000 Kansas City Southern Railway
Co. Term B 12/29/06 2,012,600
997,500 RailAmerica, Inc. Term B 1/2/07 1,003,111
-------------------------------------------------------------------------------------
3,015,711
-------------------------------------------------------------------------------------
Telecommunications -- 14.2%
1,446,667 American Cellular Corp. Term B 2/25/08 1,446,667
1,653,333 American Cellular Corp. Term C 2/25/09 1,653,333
4,937,500 Centennial Cellular Operating
Co. Term B 5/1/07 4,965,150
4,937,500 Centennial Cellular Operating
Co. Term C 11/30/07 4,965,150
1,000,000 Crown Castle Operating Co. Term B 3/31/08 1,004,400
2,000,000 Dobson Operating Co. Term B 1/7/08 2,011,200
3,750,000 Nextel Finance Co. Term B 6/30/08 3,759,375
3,750,000 Nextel Finance Co. Term C 12/31/08 3,759,375
7,266,707 Superior TeleCom Inc. Term B 11/27/05 7,230,374
-------------------------------------------------------------------------------------
30,795,024
-------------------------------------------------------------------------------------
TOTAL SENIOR COLLATERALIZED LOANS
(Cost-- $209,173,121) 209,472,329
=====================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE*
=====================================================================================
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 3.2%
Commercial Paper -- 3.2%
$ 6,960,000 UBS Finance (Delaware) Inc., 6.280% due 4/3/00
(Cost -- $6,957,572) $ 6,957,572
=====================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $216,130,693**) $ 216,429,901
=====================================================================================
</TABLE>
* Market value is determined using current market prices which are supplied
weekly by an independent third party pricing service.
** Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
------------------------------------
IRN -- Increasing Rate Note
Multi Draw -- Multi Draw Term Loan
Term -- Term Loan
Term A -- Term Loan A
Term B -- Term Loan B
Term C -- Term Loan C
Term D -- Term Loan D
Term E -- Term Loan E
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) March 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $216,130,693) $216,429,901
Cash 192,275
Dividends and interest receivable 1,104,022
--------------------------------------------------------------------------------
Total Assets 217,726,198
--------------------------------------------------------------------------------
LIABILITIES:
Notes payable 68,700,000
Dividends payable 451,542
Management fees payable 165,754
Interest payable 127,671
Accrued expenses 172,679
--------------------------------------------------------------------------------
Total Liabilities 69,617,646
--------------------------------------------------------------------------------
Total Net Assets $148,108,552
================================================================================
NET ASSETS:
Par value of capital shares $ 9,782
Capital paid in excess of par value 146,297,239
Undistributed net investment income 1,345,393
Accumulated net realized gain from security transactions 156,930
Net unrealized appreciation of investments 299,208
--------------------------------------------------------------------------------
Total Net Assets $148,108,552
================================================================================
Shares Outstanding 9,781,667
--------------------------------------------------------------------------------
Net Asset Value $ 15.14
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 11
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000
INVESTMENT INCOME:
Interest $10,061,742
Less: Interest expense (2,086,797)
-------------------------------------------------------------------------------
Total Investment Income 7,974,945
-------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 1,119,155
Audit and legal 37,000
Shareholder and system servicing fees 27,500
Directors' fees 19,000
Shareholder communications 10,000
Registration fees 8,000
Custody 1,000
Other 15,000
-------------------------------------------------------------------------------
Total Expenses 1,236,655
-------------------------------------------------------------------------------
Net Investment Income 6,738,290
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 81,404,541
Cost of securities sold 81,205,603
-------------------------------------------------------------------------------
Net Realized Gain 198,938
-------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 565,557
End of period 299,208
-------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (266,349)
-------------------------------------------------------------------------------
Net Loss on Investments (67,411)
-------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 6,670,879
===============================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000 (unaudited)
and the Period Ended September 30, 1999
<TABLE>
<CAPTION>
2000 1999(a)
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,738,290 $ 9,436,402
Net realized gain 198,938 221,119
Increase (decrease) in net unrealized
appreciation (266,349) 565,557
--------------------------------------------------------------------------------
Increase in Net Assets From Operations 6,670,879 10,223,078
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,847,167) (8,175,111)
Net realized gains (263,127) --
--------------------------------------------------------------------------------
Decrease in Net Assets From Distributions
to Shareholders (7,110,294) (8,175,111)
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from sale of shares
(net of $225,000 offering costs) -- 146,500,000
Cost of shares reacquired -- --
--------------------------------------------------------------------------------
Increase in Net Assets From Fund Share
Transactions -- 146,500,000
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (439,415) 148,547,967
NET ASSETS:
Beginning of period 148,547,967 --
--------------------------------------------------------------------------------
End of period* $148,108,552 $148,547,967
================================================================================
* Includes undistributed net investment
income of: $ 1,345,393 $ 1,454,270
================================================================================
</TABLE>
(a) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 13
<PAGE>
--------------------------------------------------------------------------------
Statement of Cash Flows (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000
<TABLE>
<CAPTION>
CASH FLOWS PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
<S> <C>
Interest and dividends received $ 10,076,121
Operating expenses paid (1,314,785)
Interest paid on bank loans (2,109,769)
Net short-term purchases (5,856,783)
Purchases of portfolio securities (76,252,583)
Proceeds from disposition of long-term securities 81,404,541
--------------------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities 5,946,742
--------------------------------------------------------------------------------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreement 1,700,000
Cash dividends paid on Common Stock (7,086,760)
--------------------------------------------------------------------------------------
Net Cash Flows Used By Financing Activities (5,386,760)
--------------------------------------------------------------------------------------
NET INCREASE IN CASH 559,982
Payable to Bank, Beginning of Period (367,707)
--------------------------------------------------------------------------------------
Cash, End of Period $ 192,275
======================================================================================
<CAPTION>
RECONCILIATION OF INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FLOWS PROVIDED BY
OPERATING AND INVESTING ACTIVITIES:
<S>
Increase in Net Assets From Operations $ 6,670,879
--------------------------------------------------------------------------------------
Amortization of discount on securities 98,549
Increase in investments, at value (818,776)
Decrease in other assets 7,930
Decrease in interest payable for money borrowed (22,972)
Decrease in dividends and interest receivable 89,262
Decrease in accrued expenses (78,130)
--------------------------------------------------------------------------------------
Total Adjustments (724,137)
--------------------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities $ 5,946,742
======================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
The Travelers Corporate Loan Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a non-
diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) U.S. government
agencies and obligations are valued at the mean between the bid and ask prices;
(c) securities, excluding senior collateralized loans, for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Trustees; (d) securities maturing within 60
days are valued at cost plus accreted discount, or minus amortized premium,
which approximates value; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
an accrual basis; (g) the Fund intends to comply with the applicable provisions
of the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (h) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At September 30, 1999, reclassifications were made to the Fund's
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of net investment loss amounting to $192,979 was reclassified to paid-in
capital. Net investment income, net realized gains and net assets were not
affected by this change; (i) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment,financial markets and any other parameters used in determining these
estimates could cause actual results to differ; and (j) collateralized senior
loans will be valued at readily ascertainable market values and in the absence
of these market values the loans are valued at fair value. Fair value is
determined in accordance with guidelines established by the Fund's Board of
Directors. In valuing a loan, SSB Citi Fund Management LLC ("SSBC"), the Fund's
investment adviser, with the assistance of the Travelers Asset Management
International Company LLC ("TAMIC"), the sub-adviser, will consider among other
factors: (1) the creditworthiness of the borrower and any party interpositioned
between the Fund and the borrower; (2) the current interest rate, period until
next interest rate reset and maturity date of the collateralized senior loan;
(3) recent market prices for similar loans, if any; and (4) recent prices in the
market for instruments with similar quality, rate, period until next interest
rate reset, maturity, terms and
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 15
<PAGE>
Notes to Financial Statements (unaudited) (continued)
conditions; SSBC may also consider prices or quotations, if any, provided by
banks, dealers or pricing services which may represent the prices at which
secondary market transactions in the collateralized senior loans held by the
Fund have or could have occurred. However, because the secondary market has not
yet fully developed,SSBC will not rely solely on such prices or quotations.
Facility fees, incurred by the Fund on loan agreements, are amortized over the
term of the loan.
2. Management Agreement and Transactions with Affiliated Persons
SSBC, a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a wholly-owned subsidiary of Citigroup Inc. ("Citigroup") acts as
investment adviser for the Fund. The Fund pays SSBC a management fee for its
investment advisory and administration services calculated at an annual rate of
1.05% of the average weekly assets. This fee is calculated weekly and paid
monthly.
SSBC has entered into a sub-investment advisory agreement with TAMIC, another
wholly-owned indirect subsidiary of Citigroup. Pursuant to a sub- advisory
agreement, TAMIC is responsible for certain investment decisions related to the
Fund. SSBC pays TAMIC a fee of 0.50% of the value of the Fund's average weekly
assets for the services TAMIC provides as sub-adviser. This fee is calculated
weekly and paid monthly.
All officers and one Director of the Fund are employees of either Salomon Smith
Barney Inc. ("SSB"),another subsidiary of Citigroup or its affiliates.
3. Investments
During the six months ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
--------------------------------------------------------------------------------
Purchases $76,197,164
--------------------------------------------------------------------------------
Sales 81,404,541
--------------------------------------------------------------------------------
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
--------------------------------------------------------------------------------
Gross unrealized appreciation $621,576
Gross unrealized depreciation (322,368)
--------------------------------------------------------------------------------
Net unrealized appreciation $299,208
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (unaudited) (continued)
4. Commitments
The Fund has entered into a 364 day revolving credit agreement and a three year
revolving credit agreement to borrow up to an aggregate of $73.5 million from a
syndicate of major financial institutions. The 364 day revolving credit
agreement matures on January 30, 2001 and the three year revolving credit
agreement matures on February 1, 2002. Borrowing rates under both of these
agreements are based on a fixed spread over LIBOR or the Prime Rate. The Fund
pays a facility fee quarterly at 0.10% and 0.15% per annum for the 364 day and
three year revolving credit agreements, respectively. The amount of aggregate
borrowings outstanding at March 31, 2000 was $68.7 million at a weighted average
interest rate of 6.33%, which represented 31.69% of net assets plus borrowings.
Average aggregate borrowings for the six months ended March 31, 2000, were
$65,239,927 and the average annualized interest rate was 6.36%.
5. Offering Costs
Offering costs of $607,394 were incurred at the inception of the Fund. Of this
amount, $382,394 was paid by SSBC. The balance of $225,000 was paid by the Fund.
6. Capital Shares
At March 31, 2000, the Fund had 150,000,000 shares of capital stock authorized,
("Common Stock") with a par value of $0.001 per share.
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30, 1999(a)
-------------------- -----------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold (net of $225,000 offering costs) -- -- 9,781,667 $146,500,000
Shares reacquired -- -- -- --
-------------------------------------------------------------------------------------------
Net Increase -- -- 9,781,667 $146,500,000
-------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 17
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout the six months ended March
31, 2000 (unaudited) and the period ended September 30, 1999:
2000 1999(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $15.19 $15.00
--------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.69 0.97
Net realized and unrealized gain (loss) (0.01) 0.09
--------------------------------------------------------------------------------
Total Income From Operations 0.68 1.06
--------------------------------------------------------------------------------
Offering Costs on Issuance of Common Stock -- (0.02)
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.70) (0.85)
Net realized gains (0.03) --
--------------------------------------------------------------------------------
Total Distributions (0.73) (0.85)
--------------------------------------------------------------------------------
Net Asset Value, End of Period $15.14 $15.19
--------------------------------------------------------------------------------
Total Return, Based on Market Value++ (0.15)% 1.68%
--------------------------------------------------------------------------------
Total Return, Based on Net Asset Value++ 5.00% 7.45%
--------------------------------------------------------------------------------
Net Assets, End of Period (000s) $148,109 $148,548
--------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Net investment income 9.08% 7.48%
Interest expense 2.81 1.68
Organization expense -- 0.24
Other expenses 1.66 1.63
--------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 53%
--------------------------------------------------------------------------------
Market Value, End of Period $13.625 $14.375
--------------------------------------------------------------------------------
(1) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<PAGE>
Dividend Reinvestment Plan (unaudited)
Pursuant to the Plan, shareholders whose Common Stock is registered in their own
names will be deemed to have elected to have all distributions reinvested
automatically in additional Common Stock of the Fund by PFPC Global Fund
Services ("Plan Agent"), as agent under the Plan, unless such shareholders elect
to receive distributions in cash. Shareholders who elect to receive
distributions in cash will receive all distributions in cash paid by check in
U.S. dollars mailed directly to the shareholder by PFPC Global Fund Services, as
dividend paying agent. In the case of shareholders such as banks, brokers or
nominees, which hold Common Stock for others who are the beneficial owners, the
Plan Agent will administer the Plan on the basis of the number of shares of
Common Stock certified from time to time by the record shareholders as
representing the total amount registered in the record shareholder's name and
held for the account of beneficial owners that have not elected to receive
distributions in cash. Investors that own shares of Common Stock registered in
the name of a bank, broker or other nominee should consult with such nominee as
to participation in the Plan through such nominee, and may be required to have
their shares registered in their own names in order to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
Unless the Board of Directors of the Fund declares a dividend or capital gains
distribution payable only in cash, non-participants in the Plan will receive
cash and participants in the Plan will receive shares of Common Stock of the
Fund, to be issued by the Fund or purchased by the Plan Agent in the open market
as outlined below. Whenever the market price per share of Common Stock is equal
to or exceeds the net asset value per share as of the determination date
(defined as the fourth New York Stock Exchange trading day preceding the payment
date for the dividend or distribution), participants will be issued new shares
of Common Stock at a price per share equal to the greater of: (a) the net asset
value per share on the valuation date or (b) 95% of the market price per share
on the valuation date. Except as noted below, the valuation date generally will
be the dividend or distribution payment date. If net asset value exceeds the
market price of the Fund's shares of Common Stock as of the determination date,
the Plan Agent will, as agent for the participants, buy shares in the open
market, on the New York Stock Exchange or elsewhere, for the participants'
accounts as soon as practicable commencing on the trading day following the
determination date and generally terminating no later than 30 days after the
dividend or distribution payment date. If, before the Plan Agent has completed
its purchases, the market price exceeds the net asset value of a share of Common
Stock, the average per share purchase price paid by the Plan Agent may exceed
the net asset value of the Fund's shares, resulting in the acquisition
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 19
<PAGE>
Dividend Reinvestment Plan (unaudited) (continued)
of fewer shares than if the dividend or capital gains distribution had been paid
in shares of Common Stock issued by the Fund. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if the
Plan Agent is unable to invest the full dividend amount in open-market purchases
during the permissible purchase period or if the market discount shifts to a
market premium during such purchase period, the Plan Agent will cease making
open-market purchases and will receive the uninvested portion of the dividend
amount in newly issued shares of Common Stock (in which case the valuation date
will be the date such shares are issued) at a price per share equal to the
greater of (a) the net asset value per share on the valuation date or (b) 95% of
the market price per share on the valuation date.
A shareholder may elect to withdraw from the Plan at any time upon written
notice to the Plan Agent or by calling the Plan Agent at 1-800-331-1710. When a
participant withdraws from the Plan, or upon termination of the Plan as provided
below, certificates for whole shares of Common Stock credited to his or her
account under the Plan will be issued and a cash payment will be made for any
fractional shares credited to such account. An election to withdraw from the
Plan will, until such election is changed, be deemed to be an election by a
shareholder to take all subsequent dividends and distributions in cash.
Elections will be effective immediately if notice is received by the Plan Agent
not less than ten days prior to any dividend or distribution record date;
otherwise such termination will be effective after the investment of the then
current dividend or distribution. If a withdrawing shareholder requests the Plan
Agent to sell the shareholder's shares upon withdrawal from participation in the
Plan, the withdrawing shareholder will be required to pay a $5.00 fee plus
brokerage commissions.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in noncertificated form in
the name of the participant, and each shareholder's proxy will include those
shares of Common Stock purchased pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions. The Plan Agent's fee for the handling of reinvestment of
dividends and distributions will be paid by the Fund. There will be no brokerage
charges with respect to shares of Common Stock issued directly by the Fund as a
result of dividends or capital gains distributions payable either in shares or
in cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
Dividend Reinvestment Plan (unaudited) (continued)
open market purchases in connection with the reinvestment of dividends or
capital gains distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any U.S. federal income tax that may be payable on such
dividends or distributions.
Experience under the Plan may indicate that changes thereto may be desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid: (i) subsequent to notice of the
change sent to all participants at least 30 days before the record date for such
dividend or distribution or (ii) otherwise in accordance with the terms of the
Plan. The Plan also may be amended or terminated by the Plan Agent, with the
Board of Directors'prior written consent,on at least 30 days'prior written
notice to all participants. All correspondence concerning the Plan should be
directed by mail to PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 02266-8030 or by telephone at (800)331-1710.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 21
<PAGE>
Directors Investment Adviser
Allan J. Bloostein SSB Citi Fund Management LLC
Martin Brody
Dwight Crane Sub-Investment Adviser
Robert Frankel Travelers Asset Management
William R. Hutchinson International Company LLC
Heath B. McLendon, Chairman
Custodian
Officers PFPC Trust Company
Heath B. McLendon
President and Transfer Agent
Chief Executive Officer PFPC Global Fund Services
P.O. Box 8030
Lewis E. Daidone Boston, Massachusetts 02266-8030
Senior Vice President
and Treasurer
Glenn N. Marchak
Vice President and
Investment Officer
This report is intended only for
Irving P. David shareholders of Travelers Corporate Loan
Controller Fund Inc. It is not a Prospectus,
circular or representation intended for
Christina T. Sydor use in the purchase or sale of shares of
Secretary the Fund or any securities mentioned in
this report.
Travelers Corporate
Loan Fund Inc.
388 Greenwich Street
New York, New York 10013
FD01642 5/00
