<PAGE>
Travelers
Corporate
Loan Fund Inc.
Quarterly Report
June 30, 2000
[LOGO]
<PAGE>
Travelers
Corporate
Loan Fund Inc.
[PICTURE] [PICTURE]
HEATH B. GLENN N.
MCLENDON MARCHAK
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide you with the quarterly report for the nine months
ended June 30, 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 $1.07 per share. The table below
shows the annualized distribution rate and nine-month total return based on the
Fund's net asset value per share ("NAV") at June 30, 2000 and the New York Stock
Exchange ("NYSE") closing price at June 30, 2000.1
Price Annualized Nine-Month
Per Share Distribution Rate2 Total Return2
--------- ------------------ -------------
$15.14 (NAV) 9.63% 7.84%
$13.8125 (NYSE) 10.56% 3.94%
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 last twelve months ended June 30, 2000, when compared to 21 other funds in
the loan participation fund category. Cumulative total return is based on
distributed earnings plus any change in NAV. Of course, past performance is not
indicative of future results.
-------------------
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 (total 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 had invested. However, the price at which the
investor buys or sells shares of the Fund is at its market (NYSE) price as
determined by the supply of and demand for the Fund's shares.
2 Total returns are based on changes in NAV and the market value,
respectively, and 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 $0.1215 for twelve months. This rate is as of July 14, 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>
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 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.
On July 14, 2000, the Fund declared a regular monthly dividend for July 2000 of
$0.1215 per share, representing a $0.0015 increase from June's dividend of $0.12
per share. This represents the fifth consecutive month of increases to dividends
from ordinary income (not including the distribution of excess accumulated
income in the month of April). These dividend increases are primarily the result
of the recent series of Federal Reserve Board ("Fed") interest rate increases
that continue to positively contribute to the cash flow of the Fund.
Portfolio Review
Consistent with our original investment mandate, the Fund's portfolio is made up
of entirely floating or variable rate collateralized senior loans that performed
competitively during the period. During the period, the Fund's portfolio was
invested in 27 industry sectors with the largest industry concentration of 16.1%
in the telecommunications industry. In addition, we have interests in loans made
to 61 issuers.
The Fed increased short-term interest rates by 50-basis points3 on May 16, 2000.
This was the sixth rate increase in a series of rate increases by the Fed since
June 30, 1999 totaling 175 basis points. 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 into the Fund's
cash flow. As a result, we have been able to increase the monthly dividend paid
on the Fund five times over this period of Fed rate increases.
As interest payable on the loans in the portfolio is 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.
-------------------
3 A basis point is 0.01% or one one-hundredth of a percent.
4 LIBOR is the rate that most creditworthy international banks dealing in
euro charge each other for large loans.
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2 2000 Quarterly Report to Shareholders
<PAGE>
The market price of the Fund's shares has remained relatively stable since our
last report. However, the Fund's shares continue to trade at a meaningful
discount to the NAV of the Fund. As noted in our earlier reports, we believe
that the Fund's shares continue to be negatively affected by the high rates of
return investors have come to expect from stocks which has reduced the appeal of
relatively "conservative" corporate loans also by and the 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 Travelers Corporate Loan Fund already employs this
"mark-to-market" technique favored by the SEC.
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.
Generally, default rates in the corporate loan sector have remained high since
our last report. We expect that this condition may continue in the near term. We
have remained extremely selective about the assets that we have added to the
portfolio during this period and are happy to report that there were no defaults
in the Fund.
This remains 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 Fund's portfolio.
We have had acceptable flow of new assets into the portfolio and asset levels
have remained strong. Looking forward, we expect asset levels will remain
satisfactory.
Another one of our goals in managing 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.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 3
<PAGE>
Corporate Loan Market Outlook
While we have been able to maintain satisfactory asset levels, the corporate
loan market continues to suffer from limited new issue supply as investor demand
remains high while new issue generation is relatively low. Competition will
continue to be strong for assets that are well structured and priced. On the
bright side, new issue volume has been increasing since June. Should the high
yield market continue to recover, new issue flow into the loan market should
continue to improve, as another important source of financing will be available
for the structuring of new transactions.
Although new issue supply has, on balance, been below optimum levels, loan
investors have maintained credit discipline in reaction to the high level of
defaults the market has been experiencing. As a result, credit spreads and
structures for newly issued loans have continued to be favorable for investors.
As default levels have remained high, investors will likely continue to be
credit sensitive, which in turn, should continue to provide an attractive
environment for investing in new issues.
The telecommunications sector remains the one sector that has continued to see
robust new issuance. This will likely continue to be the case for some time.
Secondary market prices in this sector have firmed but on balance remain soft,
as many investor portfolios have reached their limit for the industry.
We remain decidedly conservative about investments in the developing
telecommunications industry. However, in the rush of new telecommunications
issues, we have found several telecommunications names that we feel meet our
stringent investment criteria. As a result, telecommunications is now the
largest industry component in the portfolio. We remain very comfortable with the
investments we have made in the telecommunications industry.
Economic Outlook
Signs that the economy was returning to a more moderate path enabled financial
markets to recover in late May and June after suffering for most of the first
two months of the second quarter. The financial markets benefited as investors
placed a higher probability on the likelihood that the end of the series of Fed
short-term interest rate increases were within sight. The key to this change in
expectations was the May unemployment report, which actually saw a decline in
private sector jobs. There has also been a drop off in the pace of consumer
spending, housing starts and auto sales. In addition, various inflation measures
and commodity prices have improved from the levels they were at in the first
quarter.
--------------------------------------------------------------------------------
4 2000 Quarterly Report to Shareholders
<PAGE>
We are more cautious in our view of short-term interest rates for several
reasons. The second quarter has been slower in each of the last two years only
to see growth reaccelerate in the second half. U.S. employment markets continue
to be tight, relying on productivity growth to keep wage pressures from
building. We are not sure that the slowdown in employment growth is due to lower
demand for labor or just an inability to find workers. Consumer sentiment has
remained strong despite higher interest rates and a more volatile stock market.
The strong employment market is a big support for the consumer. Finally, world
economic growth is broad based, though slowing.
Our forecast currently places the highest probability on steady short-term
interest rates, assuming a slower 2% to 4% growth path because of the last year
of interest rate and oil price increases. However, we place a 30% probability
that growth and/or inflation could reaccelerate to recent levels and cause the
Fed to tighten aggressively. We see little chance of rate cuts in the near term.
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
July 17, 2000
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 5
<PAGE>
Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan") which is a convenient, simple and efficient way to reinvest your
dividends and capital gains, if any, in additional shares of the Fund. Below is
a summary of how the Plan works.
Plan Summary
If you participate in the Dividend Reinvestment Plan, your dividends and capital
gains distributions will be reinvested automatically in additional shares of the
Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or higher than the net asset value ("NAV") per share as
of the determination date (defined as the fourth New York Stock Exchange trading
day preceding the payment for the dividend or distribution), plan participants
will be issued new shares of common stock at a price per share equal to the
greater of: (a) the NAV per share on the valuation date or (b) 95% of the market
price per share on the valuation date.
If the market price is less than the NAV per share as of the determination date,
PFPC Global Fund Services ("Plan Agent") will buy common stock for your account
in the open market. If the Plan Agent begins to purchase additional shares in
the open market and the market price of the shares subsequently exceeds the NAV
per share, before the purchases are completed, the Plan Agent will cease making
open-market purchases and have the Fund issue the remaining dividend or
distribution in shares at a price per share equal to the greater of either the
NAV per share on the valuation date or 95% of the market price at which the Fund
issues the remaining shares.
A more complete description of the current Plan appears in the section of this
report beginning on page 19. To find out more detailed information about the
Plan and about how you can participate, please call PFPC Global Fund Services at
(800) 331-1710.
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6 2000 Quarterly Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) June 30, 2000
--------------------------------------------------------------------------------
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
================================================================================
SENIOR COLLATERALIZED LOANS -- 97.2%
Aerospace/Defense -- 4.6%
$ 7,356,394 DeCrane Aircraft Holdings, Inc. Term B 9/30/05 $ 7,374,785
2,487,509 DeCrane Aircraft Holdings, Inc. Term D 12/24/06 2,493,728
--------------------------------------------------------------------------------
9,868,513
--------------------------------------------------------------------------------
Automotive -- 4.9%
3,750,000 Dura Automotive Systems, Inc. Term B 3/31/06 3,747,750
1,960,699 J.L. French Automotive Casting, Inc. Term B 10/21/06 1,965,601
4,834,569 Stoneridge, Inc. Term B 12/31/05 4,834,569
--------------------------------------------------------------------------------
10,547,920
--------------------------------------------------------------------------------
Building Materials -- 5.0%
1,488,158 Better Materials and Aggregates Term B 9/30/07 1,487,265
2,000,000 Hanley-Wood, Inc. Term B 9/21/07 1,998,800
1,395,144 Onex ABCO LP (Magnatrax) Term B 11/15/05 1,397,794
2,940,778 Panolam Industries International,
Inc. Term B 1/31/07 2,944,601
2,992,500 Trussway Holdings Inc. Term B 12/31/06 2,986,814
--------------------------------------------------------------------------------
10,815,274
--------------------------------------------------------------------------------
Chemicals -- 7.3%
2,984,987 Georgia Gulf Corp. Term B 11/10/06 3,009,165
1,485,000 Huntsman ICI Chemical LLC Term B 6/30/07 1,497,028
1,485,000 Huntsman ICI Chemical LLC Term C 6/30/08 1,497,028
1,544,693 Lyondell Petrochemical Co. Term B 6/30/05 1,562,148
7,957,406 Lyondell Petrochemical Co. Term E 5/17/06 8,196,128
--------------------------------------------------------------------------------
15,761,497
--------------------------------------------------------------------------------
Construction Machinery -- 1.4%
3,000,000 United Rentals, Inc. Term C 6/30/06 2,962,500
--------------------------------------------------------------------------------
Consumer Products -- 4.6%
945,256 American Safety Razor Co. Term B 4/30/07 948,186
2,840,657 Doane Pet Care Co. Term B 11/12/05 2,844,350
3,069,387 Doane Pet Care Co. Term C 11/12/06 3,073,377
1,985,000 Holmes Products Corp. Term B 2/5/07 1,987,581
1,000,000 Shop Vac Corp. Multi-Draw 7/7/07 1,000,000
--------------------------------------------------------------------------------
9,853,494
--------------------------------------------------------------------------------
Electric -- 1.9%
4,000,000 Western Resources, Inc. Term Loan 3/17/03 4,005,200
--------------------------------------------------------------------------------
Entertainment -- 4.7%
3,000,000 Corus Entertainment Inc. Term B 9/30/07 2,994,300
1,700,000 Hoops, L.P. Term A 10/28/05 1,695,750
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
--------------------------------------------------------------------------------
10,208,350
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 7
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 2000
--------------------------------------------------------------------------------
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
================================================================================
Environmental -- 3.6%
$ 2,272,727 Allied Waste North America, Inc. Term B 7/30/06 $ 2,136,364
2,727,273 Allied Waste North America, Inc. Term C 7/30/07 2,563,636
3,000,000 Casella Waste System, Inc. Term B 12/14/06 2,970,000
--------------------------------------------------------------------------------
7,670,000
--------------------------------------------------------------------------------
Food -- 1.8%
1,323,250 New World Pasta Co. Term B 1/28/06 1,324,970
2,000,000 NSC Operating Co. (Nutrasweet) Term B 6/1/07 2,010,000
500,000 NSC Operating Co. (Nutrasweet) 2nd Lien 6/1/10 498,750
--------------------------------------------------------------------------------
3,833,720
--------------------------------------------------------------------------------
Gaming -- 1.2%
1,333,333 Isle of Capri Casinos, Inc. Term B 3/2/06 1,340,000
1,166,666 Isle of Capri Casinos, Inc. Term C 3/2/07 1,172,500
--------------------------------------------------------------------------------
2,512,500
--------------------------------------------------------------------------------
Healthcare -- 3.3%
936,375 Stericycle, Inc. Term B 11/10/06 944,615
6,114,497 Stryker Corp. Term B 12/4/05 6,145,070
--------------------------------------------------------------------------------
7,089,685
--------------------------------------------------------------------------------
Home Construction -- 0.9%
2,000,000 Lennar Corp. Term B 5/2/07 2,000,000
--------------------------------------------------------------------------------
Independent Energy -- 4.6%
10,000,000 Heating Oil Partners LP Term Loan 9/30/03 9,975,000
--------------------------------------------------------------------------------
Industrial -- Other-- 7.1%
2,684,062 General Cable Corp. Term B 5/28/07 2,677,352
2,000,000 Hines Nurseries, Inc. Term B 3/28/05 2,002,600
1,485,000 Mueller Group Inc. Term B 8/16/06 1,492,425
1,485,000 Mueller Group Inc. Term C 8/16/07 1,492,425
997,500 Mueller Group Inc. Term D 8/16/07 1,002,488
3,980,000 SPX Corp. Term B 12/31/06 4,002,288
2,977,500 Western Industries Ltd. Term B 6/23/06 2,975,714
--------------------------------------------------------------------------------
15,645,292
--------------------------------------------------------------------------------
Lodging -- 1.4%
3,000,000 Starwood Hotels & Resorts Worldwide,
Inc. IRN 2/23/03 3,018,900
--------------------------------------------------------------------------------
Media - Cable -- 4.4%
7,000,000 Charter Communications Operating LLC Term B 3/18/08 6,965,000
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
--------------------------------------------------------------------------------
9,571,392
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Quarterly Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 2000
--------------------------------------------------------------------------------
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
================================================================================
Media - Non-Cable -- 7.5%
$ 4,838,131 21st Century Newspapers Term B 9/15/05 $ 4,835,228
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
1,792,112 Trader.com N.V. Term B 12/6/06 1,783,152
1,207,888 Trader.com N.V. Term C 12/6/07 1,201,848
--------------------------------------------------------------------------------
16,332,928
--------------------------------------------------------------------------------
Metals -- 0.8%
1,694,333 Ucar International Inc. Term B 12/31/07 1,695,350
--------------------------------------------------------------------------------
Other - Energy -- 0.7%
1,425,000 TransMontaigne Inc. Term B 7/1/06 1,419,728
--------------------------------------------------------------------------------
Other - Financial Institutions -- 3.2%
1,507,261 Bridge Information Systems, Inc. Multi-Draw 5/29/03 1,386,680
2,794,292 Bridge Information Systems, Inc. Term B 5/29/05 2,570,748
2,985,000 Outsourcing Solutions Inc. Term B 6/10/06 2,973,955
--------------------------------------------------------------------------------
6,931,383
--------------------------------------------------------------------------------
Paper -- 0.6%
1,277,778 Jefferson Smurfit Corp. Term B 3/31/06 1,284,167
--------------------------------------------------------------------------------
Pharmaceuticals -- 2.5%
5,478,950 King Pharmaceuticals, Inc. Term B 12/22/06 5,495,935
--------------------------------------------------------------------------------
Railroads -- 1.4%
2,000,000 Kansas City Southern Railway Co. Term B 12/29/06 2,008,800
995,000 RailAmerica, Inc. Term B 12/31/06 1,000,572
--------------------------------------------------------------------------------
3,009,372
--------------------------------------------------------------------------------
Technology -- 1.1%
2,294,250 Trend Technologies, Inc. Term B 3/9/07 2,292,873
--------------------------------------------------------------------------------
Telecommunications -- 16.1%
1,446,668 American Cellular Corp. Term B 3/31/08 1,446,667
1,653,333 American Cellular Corp. Term C 3/31/09 1,653,333
4,925,048 Centennial Cellular Operating Co. Term B 5/1/07 4,952,629
4,925,000 Centennial Cellular Operating Co. Term C 11/30/07 4,952,580
1,000,000 Crown Castle Operating Co. Term B 3/31/08 1,001,300
1,990,000 Dobson Operating Co. Term B 1/7/08 1,997,562
3,750,000 Nextel Finance Co. Term B 6/30/08 3,775,875
3,750,000 Nextel Finance Co. Term C 12/31/08 3,775,875
2,500,000 Rural Cellular Corp. Term B 9/22/08 2,498,500
2,500,000 Rural Cellular Corp. Term C 3/22/09 2,498,500
4,281,418 Superior TeleCom Inc. Term B 11/27/05 4,260,011
2,000,000 Western Wireless Corp. Term B 9/30/08 2,000,000
--------------------------------------------------------------------------------
34,812,832
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 2000
--------------------------------------------------------------------------------
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
================================================================================
Transportation Services -- 0.6%
$ 1,200,000 Evergreen International Aviation,
Inc. Term D 4/28/04 $ 1,198,560
--------------------------------------------------------------------------------
TOTAL SENIOR COLLATERALIZED LOANS
(Cost -- $209,556,512) 209,812,365
================================================================================
SHORT-TERM INVESTMENTS -- 2.8%
Time Deposit -- 2.8%
6,200,000 Chase Manhattan Bank, 6.500% due 7/5/00
(Cost -- $6,200,000) 6,200,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $215,756,512**) $216,012,365
================================================================================
* 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
2nd Lien -- Subordinate Loan to 1st Lien
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Quarterly Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 2000
-------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $215,756,512) $ 216,012,365
Cash 17,458
Interest receivable 1,550,974
-------------------------------------------------------------------------------
Total Assets 217,580,797
-------------------------------------------------------------------------------
LIABILITIES:
Notes payable 68,700,000
Dividends payable 402,281
Management fees payable 160,292
Interest payable 101,727
Accrued expenses 100,501
-------------------------------------------------------------------------------
Total Liabilities 69,464,801
-------------------------------------------------------------------------------
Total Net Assets $ 148,115,996
===============================================================================
NET ASSETS:
Par value of capital shares $ 9,782
Capital paid in excess of par value 146,297,239
Undistributed net investment income 1,308,786
Accumulated net realized gain from security transactions 244,336
Net unrealized appreciation of investments 255,853
-------------------------------------------------------------------------------
Total Net Assets $ 148,115,996
===============================================================================
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 Nine Months Ended June 30, 2000
INVESTMENT INCOME:
Interest $ 15,456,864
Less: Interest expense (3,246,351)
-------------------------------------------------------------------------------
Total Investment Income 12,210,513
-------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 1,680,735
Audit and legal 66,360
Shareholder and system servicing fees 36,114
Directors' fees 32,197
Shareholder communications 30,857
Registration fees 5,954
Custody 2,256
Other 25,359
-------------------------------------------------------------------------------
Total Expenses 1,879,832
-------------------------------------------------------------------------------
Net Investment Income 10,330,681
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 110,637,505
Cost of securities sold 110,351,161
-------------------------------------------------------------------------------
Net Realized Gain 286,344
-------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 565,557
End of period 255,853
-------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (309,704)
-------------------------------------------------------------------------------
Net Loss on Investments (23,360)
-------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 10,307,321
===============================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Quarterly Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Statements of Changes in Net Assets
-------------------------------------------------------------------------------
For the Nine Months Ended June 30, 2000 (unaudited)
and the Period Ended September 30, 1999
<TABLE>
<CAPTION>
2000 1999(a)
===================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,330,681 $ 9,436,402
Net realized gain 286,344 221,119
Increase (decrease) in net unrealized appreciation (309,704) 565,557
---------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 10,307,321 10,223,078
---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (10,476,165) (8,175,111)
Net realized gains (263,127) --
---------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (10,739,292) (8,175,111)
---------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTES 5 AND 6):
Proceeds from sale of shares (net of $225,000 offering costs) -- 146,500,000
---------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions -- 146,500,000
---------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (431,971) 148,547,967
NET ASSETS:
Beginning of period 148,547,967 --
---------------------------------------------------------------------------------------------------
End of period* $148,115,996 $148,547,967
===================================================================================================
* Includes undistributed net investment income of: $ 1,308,786 $ 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 Nine Months Ended June 30, 2000
CASH FLOWS PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Interest received $ 15,006,598
Operating expenses paid (2,035,601)
Interest paid on bank loans (3,295,267)
Net short-term purchases (5,004,425)
Purchases of portfolio securities (105,858,626)
Proceeds from disposition of long-term securities 110,637,505
-------------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities 9,450,184
-------------------------------------------------------------------------------
CASH FLOWS used BY FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreement 1,700,000
Cash dividends paid on Common Stock (10,765,019)
-------------------------------------------------------------------------------
Net Cash Flows Used By Financing Activities (9,065,019)
-------------------------------------------------------------------------------
NET INCREASE IN CASH 385,165
Payable to Bank, Beginning of Period (367,707)
-------------------------------------------------------------------------------
Cash, End of Period $ 17,458
===============================================================================
RECONCILIATION OF INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FLOWS PROVIDED BY
OPERATING AND INVESTING ACTIVITIES:
Increase in Net Assets From Operations $ 10,307,321
-------------------------------------------------------------------------------
Amortization of discount on securities 184,986
Increase in investments, at value (487,677)
Decrease in other assets 7,930
Decrease in interest payable for money borrowed (48,916)
Increase in dividends and interest receivable (357,690)
Decrease in accrued expenses (155,770)
-------------------------------------------------------------------------------
Total Adjustments (857,137)
-------------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities $ 9,450,184
===============================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Quarterly 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 nine months ended June 30, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
==============================================================================
Purchases $105,718,539
------------------------------------------------------------------------------
Sales 110,637,505
==============================================================================
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
==============================================================================
Gross unrealized appreciation $ 769,946
------------------------------------------------------------------------------
Gross unrealized depreciation (514,093)
------------------------------------------------------------------------------
Net unrealized appreciation $ 255,853
==============================================================================
--------------------------------------------------------------------------------
16 2000 Quarterly 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 June 30, 2000 was $68.7 million at a weighted average
interest rate of 6.51%, which represented 24.06% of net assets plus borrowings.
Average aggregate borrowings for the nine months ended June 30, 2000, were
$65,834,245 and the average annualized interest rate was 6.54%.
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 June 30, 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>
Nine Months Ended Period Ended
June 30, 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
------------------------------------------------------------------------------------------------
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 nine months ended
June 30, 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 1.05 0.97
Net realized and unrealized gain (loss) (0.00)* 0.09
------------------------------------------------------------------------------
Total Income From Operations 1.05 1.06
------------------------------------------------------------------------------
Offering Costs on Issuance of Common Stock -- (0.02)
------------------------------------------------------------------------------
Less Distributions From:
Net investment income (1.07) (0.85)
Net realized gains (0.03) --
------------------------------------------------------------------------------
Total Distributions (1.10) (0.85)
------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.14 $ 15.19
------------------------------------------------------------------------------
Total Return, Based on Market Value++ 3.94% 1.68%
------------------------------------------------------------------------------
Total Return, Based on Net Asset Value++ 7.84% 7.45%
------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 148,116 $ 148,548
------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Net investment income 9.30% 7.48%
Interest expense 2.92 1.68
Organization expense -- 0.24
Other expenses 1.69 1.63
------------------------------------------------------------------------------
Portfolio Turnover Rate 51% 53%
------------------------------------------------------------------------------
Market Value, End of Period $ 13.8125 $ 14.375
==============================================================================
(1) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
18 2000 Quarterly 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 Quarterly 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
Allan J. Bloostein
Martin Brody
Dwight Crane
Robert Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Glenn N. Marchak
Vice President and Investment Officer
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSB Citi Fund Management LLC
Sub-Investment Adviser
Travelers Asset Management
International Company LLC
Custodian
PFPC Trust Company
Transfer Agent
PFPC Global Fund Services
P.O. Box 8030
Boston, Massachusetts 02266-8030
This report is intended only for shareholders of Travelers Corporate Loan Fund
Inc. It is not a Prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or any securities mentioned in this
report.
Travelers Corporate
Loan Fund Inc.
388 Greenwich Street
New York, New York 10013
