<PAGE>
Travelers
Corporate
Loan Fund Inc.
[GRAPHIC]
<PAGE>
Travelers Corporate
Loan Fund Inc.
[PHOTO OF HEEATH B. MCLENDON] [PHOTO OF GLENN N. MARCHAK]
HEATH B. GLENN N.
MCLENDON MARCHAK
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide you with the fiscal first quarter report for the
period ended December 31, 1999 for the Travelers Corporate Loan Fund Inc.
("Fund"). We hope you find the report useful and informative. During the
reporting period, the Fund distributed income dividends totaling $0.40 per
share. The table below shows the annualized distribution rate and three-month
total return based on the Fund's net asset value per share ("NAV") at December
31, 1999 and the New York Stock Exchange ("NYSE") closing price at December 31,
1999./1/
Price Annualized Three-Month
Per Share Distribution Rate/2/ Total Return
--------- -------------------- ------------
$15.11 (NAV) 7.62% 2.55%
$14.063 (NYSE) 8.19% 0.86%
As a result of portfolio operations, the Fund earned a surplus of $950,000 over
what was paid to investors during the preceding twelve-month period.
Consequently the Fund's Board of Directors elected to distribute special income
dividend of $0.113 per share and a short-term capital gain of $0.0269. This
brought our total distributions for calendar year 1999 to $1.20 per share.
- --------------
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 its market (NYSE) price as
determined by supply and demand.
2 Total returns are based on changes in NAV or the market value 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 report. This annualized distribution rate
assumes a current monthly income dividend rate of $0.096 for twelve months.
This rate is as of January 31, 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.
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Travelers Corporate Loan Inc. 1
<PAGE>
The table below shows the total distribution, including the special dividends
and short-term capital gains, for calendar year 1999 based on the Fund's NAV at
December 31, 1999 and the NYSE closing price at December 31, 1999:
Price Annual
Per Share Distribution
--------- ------------
$15.11 (NAV) 7.94%
$14.063 (NYSE) 8.53%
Based on data provided by Lipper Inc., a major fund-tracking organization, the
Fund had the highest cumulative total return for the calendar year 1999 of all
the funds in the Loan Participation Fund category. Cumulative total return is
based on distributed earnings plus the change in NAV.
Portfolio Review
Consistent with our original strategy, the Fund's portfolio is made up entirely
of floating or variable rate collateralized senior loans of U.S. issuers. We are
pleased to report that the loans in the portfolio continue to perform well. As
of December 31, 1999, the Fund had total net assets of $147.8 million which had
an average rating of "Ba3". During the reporting period, the Fund's portfolio
was invested in twenty-three industries with the largest industry concentration
of 11.7% in the telecommunications industry. We have made loans to 49 issuers.
We continue to maintain a comfortable margin over our NAV at the inception of
the Fund of $15.00 per share. An important management policy of the Fund is that
its NAV has been 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.
Several of the trends in the financial markets that, on a relative basis, tend
to positively effect the stock price of funds in the corporate loan asset class
continued from the last quarter into the current quarter. Those trends include a
general expectation for higher interest rates and ongoing investor uncertainty
in the high-yield bond market. However, the high rates of return earned by
stocks during the past several months would typically tend to draw investors out
of corporate loans and into stocks. In our opinion, general investor bullishness
on the future return potential of stocks may be one of the most potent factors
negatively affecting the stock price of closed-end corporate loan funds along
with other types of income-oriented securities.
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") of
how corporate loan portfolios are priced. The SEC has recently called into
question the application of the "fair value" valuation methodology employed by
some corporate loan funds. The SEC appears to be suggesting that
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2 1999 Quarterly Report to Shareholders
<PAGE>
funds should use a valuation methodology more in line with the "mark-to-market"
method. As noted earlier the Fund already employs this "mark-to-market"
technique.
The Federal Reserve Board ("Fed") increased short-term interest rates on
November 16, 1999 by 25 basis points. This was the third 25 basis point increase
in a series of rate increases by the Fed, the first of which was on June 30 and
the second on August 24, 1999.3 As interest earned 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 increase should improve the return on the
Fund's portfolio, all things being equal. (Of course, no guarantees can be made
that this will occur.) Since the loans in the 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.
Investment Strategy
The Fund's investment objective is to maximize current income consistent with
prudent efforts to preserve capital. The Fund seeks to achieve its objective by
investing primarily in a professionally managed portfolio of floating or
variable rate collateralized senior loans. Unlike fixed-rate investments, the
interest rate on these collateralized loans will periodically adjust in response
to changes in short-term interest rates. These rate adjustments should provide
investors with higher income during periods of rising interest rates and lower
income during periods of declining interest rates.
Our investment strategy remains consistent with prior reporting periods. Our
focus on finding the highest quality assets at reasonable prices is the core
principle of our investment strategy. And while we are comfortable with the
level of diversification in the Fund's portfolio, we continue to look to improve
the Fund's diversification at the margin. As default rates have increased and
the financial markets have continued to be somewhat volatile, we are still
extremely selective about the assets we are adding to the portfolio.
At the same time, we continue to monitor our existing 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.
- -------------
3 On Wednesday, February 2, 2000 after this letter was written, the Fed
raised interest rates 0.25% to 5.75%.
4 LIBOR is the rate the most creditworthy international banks dealing in euro
charge each other for large loans.
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Travelers Corporate Loan Fund, Inc. 3
<PAGE>
There continues to be a large number of loans in the portfolio that are
prepaying or being refinanced earlier than we would typically expect. We have
been able to quickly replace a large portion of this portfolio runoff. However,
we do expect asset levels to be a bit more volatile in the near term as we
search for new loans to replace those that we anticipate will runoff.
Our goal in the Fund remains constant: work hard to optimize the Fund's
diversification and target opportunities while operating within the parameters
of our high credit standards. We look 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 assets class.
Corporate Loan Market Update and Outlook
The corporate loan market is generally suffering from limited supply at this
time. Several factors have led to this condition. First, there continues to be
new capital being invested in corporate loans. Second, there has been more
portfolio runoff in the last several months than would typically be expected.
Third, new corporate loan issuance in late 1999 slowed sharply largely as a
result of Y2K concerns.
Due to these conditions, corporate loan fund portfolio managers tend to be
underinvested. In response, portfolio managers have bid up the prices of loans
in the secondary market as they attempt to fill up their portfolios.
Correspondingly, competition for new loan transactions that are well structured
intensified during the reporting period. As a result of this heated competition,
there has been downward pressure on credit spreads. We expect that credit
spreads will continue to soften in the near future until new loan issuance
catches up with new money entering the market and loan runoff subsides.
On the positive side, since the end of 1999, the quantity of new loans offered
to the market has improved. This is not surprising as Y2K concerns have receded.
Additionally, the Fed has increased short-term interest rates three times and
the general expectation in the financial markets is that interest rates will
continue to rise. An increase in short term interest rates would typically
mitigate the negative affects of tightening in credit spreads.
While there is significant competition in the market for new loan issuance,
investors have continued to generally hold the line on credit standards. In our
view, this trend bodes well for future transactions under evaluation.
Economic Outlook
Looking back at the beginning of 1999, the near collapse of the Asian economies
in late 1998 was on everyone's mind and few investment professionals would have
predicted the type of economic growth that actually occurred in 1999. The U.S.
economy has continued its strong pace through the
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4 1999 Quarterly Report to Shareholders
<PAGE>
fourth quarter of 1999 and into 2000. If the economy continues to grow through
February, we will have experienced the longest economic expansion in U.S.
history. U.S. consumer confidence is high and continues to grow. In fact,
consumers enjoyed one of their best Christmas's ever buoyed by a strong
employment market and a renewal of strength in stock prices. Yet all of this
growth has still not produced inflation problems in the U.S. with inflation
continuing to be well behaved. Growth has also continued to pick up in the rest
of the world.
In our opinion, there are no clouds currently on the horizon that are likely to
slow the U.S. economy enough in the near term to keep the Fed from raising
short-term rates in the first half of 2000. Concerns over potential Y2K computer
problems had kept the Fed from being more aggressive in increasing rates earlier
and also led them to provide significant liquidity to the financial system.
While higher interest rates going forward should slow the housing sector, the
tight employment market, strong stock market and high consumer confidence should
mitigate the drag that higher interest rates would normally have.
Outside the United States, most economies are at early stages of recovery with
no constraints on growth on the horizon for 2000. As a result, many
manufacturing sectors of the U.S. economy are improving from a relatively weak
year due to the negative effects of the 1998 Asian crisis.
As a result of the strength of the U.S. economy and the widely held belief that
the Fed will increase interest rates, the market is now pricing in a 75 basis
point increase in the federal funds rate by July. In our view, the most likely
scenario is a slow rise in rates as the Fed continues the path it took in 1999
until employment growth starts to slow. This is likely to be the case as long as
inflation remains under control. The risks to our expectations are on the side
of substantially higher interest rates. If wage growth or the consumer price
index accelerates, there will be concerns that the Fed has been slow to cut off
inflationary pressures. This in turn will lead to a steeper yield curve and
sharper short-term rate increases until the markets are comfortable that
inflation is under control.
Another risk comes from the U.S. dollar. The growing U.S. trade deficit was
essential to pulling the world economies through the Asian crisis and even now
helps to balance the U.S. labor shortage with the excess labor capacity in most
of the rest of the world.
However, the trade deficit requires financing and if investors get nervous for
some reason, the dollar could weaken substantially which would ultimately lead
to more inflationary pressures in the U.S. All U.S. markets would also be weak
under that scenario if foreigners started selling U.S. securities.
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Travelers Corporate Loan Fund Inc. 5
<PAGE>
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 will seek the best risk
adjusted returns available from corporate loans and work to provide you with a
stable, long-term investment with potentially favorable real rates of return.
Sincerely,
/s/ Heath B. McLendon /s/ Glenn N. Marchak
Heath B. McLendon Glenn N. Marchak
Chairman Vice President and
Investment Officer
January 15, 2000
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6 1999 Quarterly Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) December 31, 1999
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<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
========================================================================================
<S> <C> <C>
Senior Collateralized Loans -- 97.8%
Aerospace/Defense -- 4.7%
$7,387,451 DeCrane Aircraft Holdings, Inc. Term B 9/30/05 $ 7,405,920
2,500,000 DeCrane Aircraft Holdings, Inc. Term D 12/24/06 2,500,000
- ----------------------------------------------------------------------------------------
9,905,920
- ----------------------------------------------------------------------------------------
Automotive -- 7.4%
5,000,000 American Axle & Manufacturing Holdings, Inc. Term B 4/30/06 4,987,500
3,750,000 Dura Automotive Systems Term B 3/3/06 3,747,750
1,973,684 JL French Automotive Term B 10/21/06 1,978,618
4,950,000 Stoneridge Inc. Term B 12/31/05 4,947,030
- ----------------------------------------------------------------------------------------
15,660,898
- ----------------------------------------------------------------------------------------
Building Materials -- 3.1%
1,496,053 Better Materials and Aggregates Term B 9/30/07 1,495,155
2,000,000 Hanley-Wood, LLC Term B 9/21/07 1,998,800
3,000,000 Trussway Holdings Inc. Term B 12/31/06 2,994,300
- ----------------------------------------------------------------------------------------
6,488,255
- ----------------------------------------------------------------------------------------
Chemicals -- 6.8%
3,000,000 Georgia Gulf Corp. Term B 11/1/06 3,015,000
1,500,000 Huntsman ICI Chemical LLC Term B 5/18/07 1,506,600
1,500,000 Huntsman ICI Chemical LLC Term C 5/18/08 1,506,600
5,192,017 Lyondell Petrochemical Co. Term B 6/30/05 5,247,053
2,977,500 Lyondell Petrochemical Co. Term E 5/17/06 3,048,365
- ----------------------------------------------------------------------------------------
14,323,618
- ----------------------------------------------------------------------------------------
Construction Machinery -- 1.4%
3,000,000 United Rentals Term C 6/30/06 2,985,000
- ----------------------------------------------------------------------------------------
Consumer Products -- 4.7%
950,000 American Safety Razor Term B 4/30/07 948,860
2,855,031 Doane Pet Care Co. Term B 11/12/05 2,858,744
3,084,967 Doane Pet Care Co. Term C 11/12/06 3,088,978
1,995,000 Holmes Product Corp. Term B 2/5/07 1,997,594
1,000,000 Shop Vac Corp. Term B 7/9/07 1,000,000
- ----------------------------------------------------------------------------------------
9,894,176
- ----------------------------------------------------------------------------------------
Entertainment -- 2.6%
3,500,000 Six Flags Theme Parks Inc. Term B 11/5/05 3,502,100
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
- ----------------------------------------------------------------------------------------
5,507,100
- ----------------------------------------------------------------------------------------
Food -- 2.5%
3,990,000 Aurora Foods Inc. Term C 6/28/07 3,965,262
1,329,950 New World Pasta Co. Term B 1/28/06 1,331,679
- ----------------------------------------------------------------------------------------
5,296,941
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
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Travelers Corporate Loan Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
========================================================================================
<S> <C> <C>
Health Care -- 4.6%
$3,500,000 Oxford Health Plans, Inc. Term B 5/13/03 $ 3,497,900
6,145,547 Stryker Corporation Term B 12/4/05 6,157,224
- ----------------------------------------------------------------------------------------
9,655,124
- ----------------------------------------------------------------------------------------
Gaming -- 1.4%
2,992,500 Horseshoe Gaming Holding Corp. Term B 3/1/07 2,992,500
- ----------------------------------------------------------------------------------------
Independent Energy -- 4.7%
10,000,000 Heating Oil Partners Term 9/30/03 9,975,000
- ----------------------------------------------------------------------------------------
Industrial - Other -- 8.0%
2,684,062 General Cable Corp. Term B 5/28/07 2,684,063
1,492,500 Mueller Group Inc. Term B 8/12/06 1,492,500
1,492,500 Mueller Group Inc. Term C 8/12/07 1,492,500
4,736,852 SPX Corp. Term A 10/6/04 4,734,010
3,608,333 SPX Corp. Term B 9/30/06 3,628,540
2,985,000 Western Industries Inc. Term B 6/23/06 2,983,209
- ----------------------------------------------------------------------------------------
17,014,822
- ----------------------------------------------------------------------------------------
Lodging -- 1.4%
3,000,000 Starwood Hotels and Resorts IRN 2/23/03 2,972,700
- ----------------------------------------------------------------------------------------
Media - Cable -- 3.8%
5,000,000 Charter Communications Operating LLC Term B 3/18/08 5,006,500
2,000,000 Classic Cable Inc. Term B 1/31/08 2,000,000
1,000,000 Classic Cable Inc. Term C 1/31/08 1,001,300
- ----------------------------------------------------------------------------------------
8,007,800
- ----------------------------------------------------------------------------------------
Media - Non-Cable -- 11.5%
4,862,878 21st Century Newspapers Term B 9/15/05 4,859,961
4,500,000 American Media Operations Term B 4/1/07 4,502,700
3,000,000 Corus Entertainment Inc. Term B 9/30/07 2,994,300
5,000,000 Emmis Communications Term B 2/28/07 5,000,000
4,000,000 Susquehanna Media Co. Term B 6/30/08 4,010,000
2,900,000 Ziff-Davis Inc. Term B 3/31/06 2,905,510
- ----------------------------------------------------------------------------------------
24,272,471
- ----------------------------------------------------------------------------------------
Metals -- 2.3%
4,974,571 Ucar International Inc. Term B 12/31/01 4,977,556
- ----------------------------------------------------------------------------------------
Other - Energy -- 1.4%
3,000,000 Transmontaigne Inc. Term 7/1/06 2,988,900
- ----------------------------------------------------------------------------------------
Other - Financial Institutions -- 4.1%
2,000,000 Bridge Information Systems Multi-Draw 5/29/03 1,980,000
3,740,625 Bridge Information Systems Term B 5/29/05 3,700,974
3,000,000 Outsourcing Solutions Term B 6/15/06 2,988,900
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8,669,874
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</TABLE>
See Notes to Financial Statements.
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8 1999 Quarterly Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
========================================================================================
<S> <C> <C>
Packaging -- 1.4%
$2,984,924 Graham Packaging Co. Term D 1/31/07 $ 2,983,134
- ----------------------------------------------------------------------------------------
Paper -- 2.9%
1,277,777 Jefferson Smurfit Co. Term B 3/24/06 1,280,205
2,414,256 Packaging Corp. of America Term B 4/1/07 2,424,879
2,414,256 Packaging Corp. of America Term C 4/1/08 2,424,879
- ----------------------------------------------------------------------------------------
6,129,963
- ----------------------------------------------------------------------------------------
Pharmaceuticals -- 4.9%
10,395,000 King Pharmaceuticals, Inc. Term B 12/28/06 10,420,988
- ----------------------------------------------------------------------------------------
Telecommunications -- 11.7%
4,950,000 Centennial Cellular Operating Co. Term B 5/31/07 4,971,780
4,950,000 Centennial Cellular Operating Co. Term C 11/30/07 4,971,780
3,750,000 Nextel Finance Corp. Term B 6/30/08 3,794,625
3,750,000 Nextel Finance Corp. Term C 12/31/08 3,794,625
7,333,102 Superior TeleCom Inc. Term B 11/27/05 7,314,770
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24,847,580
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Waste Management -- 0.5%
1,000,000 Stericycle, Inc. Term B 11/10/06 1,003,100
========================================================================================
TOTAL SENIOR COLLATERALIZED LOANS
(Cost -- $206,357,227) 206,973,420
========================================================================================
SHORT-TERM INVESTMENTS -- 2.2%
Time Deposit -- 2.2%
1,750,000 Household Finance, 4.000% due 1/3/00 1,749,611
2,900,000 SBC Communications, 6.300% due 1/10/00 2,895,433
========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $4,645,044) 4,645,044
========================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $211,002,271**) $211,618,464
========================================================================================
</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.
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Travelers Corporate Loan Fund Inc. 9
<PAGE>
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Statement of Assets and Liabilities (unaudited) December 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $211,002,271) $ 211,618,464
Cash 109,465
Dividends and interest receivable 1,245,823
- --------------------------------------------------------------------------------
Total Assets 212,973,752
- --------------------------------------------------------------------------------
LIABILITIES:
Notes payable 63,700,000
Dividends payable 956,455
Management fees payable 171,148
Interest payable 117,052
Other liabilities 9,363
Accrued expenses 242,236
- --------------------------------------------------------------------------------
Total Liabilities 65,196,254
- --------------------------------------------------------------------------------
Total Net Assets $147,777,498
================================================================================
NET ASSETS:
Par value of capital shares $ 9,782
Capital paid in excess of par value 146,297,239
Undistributed net investment income 859,386
Accumulated net realized loss from security transactions (5,102)
Net unrealized appreciation of investments 616,193
- --------------------------------------------------------------------------------
Total Net Assets $147,777,498
================================================================================
Shares Outstanding 9,781,667
- --------------------------------------------------------------------------------
Net Asset Value $15.11
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Quarterly Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Three Months Ended December 31, 1999
INVESTMENT INCOME:
Interest $ 5,026,216
Less: Interest expense (1,070,905)
- --------------------------------------------------------------------------------
Total Investment Income 3,955,311
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 574,382
Audit and legal 25,205
Directors' fees 11,847
Shareholder communications 7,587
Shareholder and system servicing fees 2,845
Custody 504
Other 5,377
- --------------------------------------------------------------------------------
Total Expenses 627,747
- --------------------------------------------------------------------------------
Net Investment Income 3,327,564
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 49,340,169
Cost of securities sold 49,303,263
- --------------------------------------------------------------------------------
Net Realized Gain 36,906
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 565,557
End of period 616,193
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 50,636
- --------------------------------------------------------------------------------
Net Gain on Investments 87,542
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,415,106
================================================================================
See Notes to Financial Statements.
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Travelers Corporate Loan Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Three Months Ended December 31, 1999 (unaudited)
and the Period Ended September 30, 1999
<TABLE>
<CAPTION>
December 31 September 30(a)
==============================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,327,564 $ 9,436,402
Net realized gain 36,906 221,119
Increase in net unrealized appreciation 50,636 565,557
- --------------------------------------------------------------------------------------------------------------
Increase in Net Assets from Operations 3,415,106 10,223,078
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,922,448) (8,175,111)
Net realized gain (263,127) --
- --------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (4,185,575) (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 (770,469) 148,547,967
NET ASSETS:
Beginning of period 148,547,967 --
- --------------------------------------------------------------------------------------------------------------
End of period* $ 147,777,498 $ 148,547,967
==============================================================================================================
* Includes undistributed net investment income of: $ 859,386 $ 1,454,270
==============================================================================================================
</TABLE>
(a) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
See Notes to Financial Statements.
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12 1999 Quarterly Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
For the Three Months Ended December 31, 1999
CASH FLOWS PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Interest and dividends received $ 4,925,290
Operating expenses paid (621,563)
Interest paid on bank loans (1,104,496)
Net short-term purchases (3,608,850)
Purchases of portfolio securities (41,496,250)
Proceeds from disposition of long-term securities 49,340,169
- ----------------------------------------------------------------------------
Net Cash Provided By Operating and Investing Activities 7,434,300
- ----------------------------------------------------------------------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreement (3,300,000)
Cash dividends paid on Common Stock (3,657,128)
- ----------------------------------------------------------------------------
Net Cash Flows Used By Financing Activities (6,957,128)
- ----------------------------------------------------------------------------
NET INCREASE IN CASH 477,172
Cash, Beginning of Period (367,707)
- ----------------------------------------------------------------------------
Cash, End of Period $ 109,465
============================================================================
RECONCILIATION OF INCREASE IN NET ASSETS
FROM OPERATIONS TO NET CASH FLOWS PROVIDED BY
OPERATING AND INVESTING ACTIVITIES:
Increase in Net Assets from Operations $ 3,415,106
- ----------------------------------------------------------------------------
Amortization of discount on securities 36,194
Decrease in investments, at value 3,949,937
Decrease in other assets 7,930
Decrease in interest payable for money borrowed (33,591)
Decrease in dividends and interest receivable 52,540
Increase in accrued expenses 6,184
- ----------------------------------------------------------------------------
Total Adjustments 4,019,194
- ----------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities $ 7,434,300
============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 13
<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 October 31, 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 Corporation ("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
- --------------------------------------------------------------------------------
14 1999 Quarterly Report to Shareholders
<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 three months ended December 31, 1999, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $41,496,250
- --------------------------------------------------------------------------------
Sales 49,340,169
================================================================================
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 788,009
Gross unrealized depreciation (171,816)
================================================================================
Net unrealized appreciation $ 616,193
================================================================================
- --------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 15
<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 December 31, 1999 was $63.7 million at a weighted
average interest rate of 6.17%, which represented 30.12% of net assets plus
borrowings. Average aggregate borrowings for the three months ended December 31,
1999, were $69,061,878 and the average annualized interest rate was 6.21%.
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 December 31, 1999, 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>
Three Months Ended Period Ended
December 31, 1999 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.
- --------------------------------------------------------------------------------
16 1999 Quarterly Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout the three months ended
December 31, 1999 (unaudited) and the period ended September 30, 1999:
December 31 September 30(1)
================================================================================
Net Asset Value, Beginning of Period $15.19 $15.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.97
Net realized and unrealized gain 0.01 0.09
- --------------------------------------------------------------------------------
Total Income From Operations 0.35 1.06
- --------------------------------------------------------------------------------
Offering Costs on Issuance of Common Stock -- (0.02)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.40) (0.85)
Net realized gains (0.03) --
- --------------------------------------------------------------------------------
Total Distributions (0.43) (0.85)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $15.11 $15.19
- --------------------------------------------------------------------------------
Total Return, Based on Market Value++ 0.86% 1.68%
- --------------------------------------------------------------------------------
Total Return, Based on Net Asset Value++ 2.55% 7.45%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $147,777 $148,548
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Net investment income 8.90% 7.48%
Interest expense 2.86 1.68
Organization expense -- 0.24
Other expenses 1.68 1.63
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 53%
- --------------------------------------------------------------------------------
Market Value, End of Period $14.063 $14.375
================================================================================
(1) For the period from November 20, 1998 to September 30, 1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 17
<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"), formerly known as First Data Investor Services Group,
Inc., 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
- --------------------------------------------------------------------------------
18 1999 Quarterly Report to Shareholders
<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
- --------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc. 19
<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.
- --------------------------------------------------------------------------------
20 1999 Quarterly Report to Shareholders
<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 Corporation
Custodian
PNC Bank, N.A.
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
FD01804 2/00
