Travelers
Corporate
Loan Fund Inc.
Annual Report
September 30, 2001 Ticker Symbol: TLI
[GRAPHIC]
Travelers
Corporate
Loan Fund Inc.
[PHOTO]
HEATH B. MCLENDON
Chairman
[PHOTO]
GLENN N. MARCHAK
Vice President and Investment Officer
Dear Shareholder:
We are pleased to provide you with the annual report for the Travelers
Corporate Loan Fund Inc. ("Fund") for the year ended September 30, 2001. In
this report, we have summarized a review of economic conditions and our outlook
going forward. A summary of the Fund's performance can be found in the
appropriate sections that follow. We hope you find this report useful and
informative.
Performance Update
During the reporting period, the Fund distributed income dividends totaling
$1.26 per share and capital gains of $0.02 per share. The table below shows the
annualized distribution rate and twelve-month total return based on the Fund's
September 30, 2001 net asset value per share ("NAV") and the New York Stock
Exchange ("NYSE") closing price./1/
Annualized Twelve-Month
Price Per Share Distribution Rate/2/ Total Return/2/
--------------- -------------------- --------------
$14.15 (NAV) 6.45% 2.44%
$12.82 (NYSE) 7.11% (4.33)%
---------
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 (NYSE) value noted in the above chart. The annualized
distribution rate assumes a current monthly income dividend rate of $0.076
for twelve months. This rate is as of October 31, 2001 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 Fund Inc.
1
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 senior secured corporate loans.
We are pleased to report that, based on data provided by Lipper Inc.
("Lipper")/3/, the Fund had the third highest cumulative total return for the
nine- and twelve-month periods ended September 30, 2001, when compared to the
39 other funds in the "Loan Participation" category. Cumulative total return is
based on distributed earnings plus any change in NAV. Of course, past
performance is not indicative of future results.
On October 15, 2001, the Fund declared a regular monthly dividend for October
of 7.60 cents per share. The October 2001 monthly dividend payout was reduced
by 3/4 of one cent per share from the rate paid in September 2001 and is the
tenth in a series of dividend reductions beginning in January 2001. The
dividend reductions have been largely in response to the series of ten easings
of short-term interest rates totaling 450 basis points by the U.S. Federal
Reserve Board ("Fed") that began on January 3, 2001. The Fed has reduced
short-term interest rates during the period from 6.50% to 2.00%, the lowest
level in 40 years. The first five rate reductions were each 50 basis points/4/
and the next two were 25 basis points each. The last three cuts, including the
most recent cut on November 6, 2001 were 50 basis points each. Please note that
the last two rate reductions occurred after the reporting period ended.
Unlike fixed-rate investments, interest rates of corporate loans will
periodically adjust in response to changes in short-term interest rates. These
rate adjustments have provided investors with higher income during periods of
rising interest rates and lower income during periods of declining interest
rates. Our dividend strategy during this period is to adjust the dividend to
match the decline in interest earned on the investments in the Fund's portfolio
as closely as possible to the reduction in short-term interest rates.
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Portfolio Review
Consistent with our original investment mandate, the portfolio is made up
entirely of floating or variable rate corporate loans. As of September 30, 2001
the Fund had total net assets of approximately $138.4 million that had an
average equivalent rating of Ba3 and was invested in 29 industry sectors with
the largest industry concentration of 12.6% in the telecommunications industry.
We had interests in loans made to 82 issuers.
---------
3 Lipper is an independent mutual fund-tracking organization.
4 A basis point is one one-hundredth (1/100 or 0.01%) of one percent.
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2001 Annual Report to Shareholders
2
Prior to the terrorist attacks on the World Trade Center and Pentagon
("Attack"), the Fund performed well increasing from $14.42 on June 30, 2001 to
$14.47 on September 10, 2001. As a result of the accelerating weakness in the
economy and higher degree of uncertainty and volatility in the financial
markets brought on by the Attack, prices in the corporate loan market weakened
considerably. Similarly, subsequent to the Attack, the NAV of the Fund dropped
to $14.15 on September 30 and $14.01 on October 30. This represents a 3.18%
decline in the Fund's NAV between September 10 and October 30.
The drop in the Fund's NAV appears consistent with the general decline in
prices in the corporate loan market since the Attack. According to LSTA/LPC
(Loan Syndication and TradingAssociation/Loan Pricing Corporation)
mark-to-market pricing/5/, the average loan price dropped 3.2% between
September 10 and October 30, 2001.
One key aspect of the Fund's management policy is that its NAV is calculated 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.
As noted earlier, the regular monthly dividend was decreased by 3/4 of one
cent to 7.60 cents on October 15, 2001. We continue to believe that the odds
are in favor of the Fed continuing to reduce short-term interest rates and
should that occur, we anticipate that the Fund's dividend would be directly
affected, all things being equal. We believe that while the nominal rate of the
Fund's dividends has decreased as the Fed reduced short-term interest rates,
the Fund's real rate of return should remain strong as we continue to expect
the rate of inflation will decline.
Since the date of the Attack, the financial markets, in general, have exhibited
a higher degree of volatility. Corporate loan funds have not been exempt from
the volatility brought about by this period of uncertainty. From June 30, 2001
until September 11, 2001, the Fund's share price remained relatively stable,
trading in a range from $13.85 to $14.30. Subsequent to the Attack, the share
price of the Fund quickly fell to a closing low of $12.51 per share and a
52-week intra-day low of $12.45 per share. Since that time, the share price has
traded higher; however it has shown a higher level of volatility than in past
reporting periods. The Fund's shares continue to trade at a discount to the NAV
of the Fund and since the Attack, the discount has widened relative to
historical levels.
---------
5 The LSTA/LPC mark-to-market pricing is a partnership that provides indicative
pricing to the loan market. The LSTA is a not-for-profit trade association
that identifies and addresses key issues in the commercial loan market. The
LPC is a news data and analytics provider to the loan market.
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Travelers Corporate Loan Fund Inc.
3
Corporate Loan Market Outlook
Since the last shareholder report, the corporate loan market and the capital
markets in general have been faced with deteriorating economic fundamentals, a
higher level of uncertainty, an increasing level of defaults, and higher risk
premiums. As a result, new issuance of corporate loans has dropped off
considerably and secondary market prices have generally decreased and have been
more volatile. On the positive side, credit structures have strengthened and
pricing on new transactions has increased from already generous levels by
historical standards.
Secondary market prices remain volatile and, in general, have declined several
points on average through all industries and across the credit quality
spectrum. This across-the-board pricing decline reflects the higher level of
uncertainty in the market. Consequently, investors have required higher risk
premiums. Since the Attack, new issuance has weakened significantly from levels
that were already low as measured against historical norms. Uncertain growth
prospects, high capital costs, weak earnings and low earnings visibility are
typically not conducive to high levels of new credit creation. The weak
economic environment and the difficulty that financially weak companies are
having in accessing the capital markets continue to promote a high amount of
stressed and distressed credits.
Since the Attack, economic conditions have worsened measurably and many in the
economic community expect that the recovery will be pushed out for another
quarter from previous expectations, if not longer. Although the National Bureau
of Economic Research has not announced a recession, there appears to be strong
consensus that the economy has entered one. Corporate earnings have continued
to weaken and capital spending plans have been scaled back. The capital markets
continue to ration credit to weaker companies and the cost of credit remains
relatively high. We expect these conditions will continue in the fourth quarter
following continuing economic weakness and, as a result, we expect the
challenging conditions in the corporate loan market will continue.
At the same time, conditions for investing in the new issuance that comes to
market are favorable. Credit structures continue to become more restrictive and
credit spreads/6/ have widened from already generous pricing by historical
standards as investors have become more cautious in the current environment. We
expect that these positive trends will continue for the foreseeable future. As
the economy recovers in 2002, we expect the credit discipline that has existed
should drive stronger overall market dynamics going forward.
---------
6 Credit spread is the difference between the yield of a particular corporate
loan and LIBOR, the benchmark rate used to price these corporate loans.
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2001 Annual Report to Shareholders
4
Investment Strategy
This continues to be a difficult period for the economy, for the capital
markets in general as well as for the corporate loan market. Our strategies for
managing the portfolio during this period remain the same as those outlined in
our earlier shareholder reports: to maintain high credit standards when
selecting loans to add to the portfolio; to seek out loans that are priced
appropriately for the credit risk of the loan; to continue to improve the
Fund's diversification at the margin; to attempt to identify negative industry
trends in advance of credit problems; and to monitor all loans to spot weakness
and plan appropriate courses of action. Additionally, we seek to identify
changing economic and financial market factors that could result in an
unacceptably high level of vulnerability for any of the corporate loans held in
the portfolio.
While all components of our investment strategy are important, during this
challenging period we are emphasizing monitoring and conducting remedial action
in the Fund's portfolio. Shortly after the Attack, we performed a complete
review of all corporate loans in the portfolio in an attempt to identify
potential areas of credit weakness. We made some adjustments in the portfolio
that we felt would better position the Fund in the challenging conditions
ahead. We continually evaluate the Fund's positions in an effort to improve its
risk-return profile wherever possible.
The deterioration of prices in the loan market since the Attack has negatively
affected the Fund's NAV. As noted earlier, after increasing marginally between
June 30 and September 10, 2001, the Fund's NAV has fallen approximately 3.18%
from the date of the Attack to October 30, 2001. Importantly, the deterioration
is largely the result of unrealized losses due to the mark-to-market process.
The Fund has not suffered any payment defaults since our last shareholder
report and the majority of the loans in the portfolio have continued to perform
well. Generally, we view the decline in the Fund's NAV since the Attack as a
reflection of the loan market's assessment of a general increase in risk in the
economy. We believe that the increased level of risk in the capital markets, in
the corporate loan asset class and in the Fund will continue until the economy
begins to improve. As always, we monitor the portfolio carefully and while we
are confident in our opinion that the portfolio should continue to perform
well, we must be vigilant in maintaining the credit discipline that we have
followed in the past.
Prepayments and refinancing activity has slowed and, as a result, our asset
levels have remained satisfactory. Although we believe new loan issuance will
remain low for the remainder of the year, we believe loan runoff (i.e.,
outflows from prepayments and refinancing activity) will continue to be
moderate for the foreseeable future, allowing us to maintain a more stable
level of assets. We plan to remain very selective in adding new corporate loans
to the portfolio.
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Travelers Corporate Loan Fund Inc.
5
Our goal in the Fund remains constant: work hard to optimize the Fund's
diversification and target select opportunities while operating within the
parameters of our high credit standards. 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 what we feel are the best risk-adjusted
returns available in the corporate loan asset class.
Economic Outlook
The United States economy has continued to deteriorate with the Attack being a
catalyst for further weakening and significantly increasing the likelihood of
recession. The global economic condition also has continued to weaken. The Fed
recently stated: "Heightened uncertainty and concerns about a deterioration in
business conditions both here and abroad are damping economic activity."
Subsequent to the Attack, business spending collapsed and consumer spending
cooled. With business and consumer spending in a slump, the United States
economy contracted at a 0.4% annual rate in the third quarter. This was the
first economic contraction since 1993. We expect that the rate of economic
deterioration will continue to accelerate through the end of 2001 and mark the
first recession since 1990-91.
While consumer and government spending had prolonged the record expansion that
began a decade ago, consumer spending more recently weakened measurably as
consumers have reacted to the Attack. Consumer spending is closely tied to the
health of the economy, as it comprises 2/3 of gross domestic product. Consumer
confidence was already crumbling before the Attack with the Consumer Confidence
Index ("CCI") reading at 97.60 in September, its lowest reading since 1996. In
October, the CCI dropped to 85.5, its lowest reading in 7 1/2 years. The
Commerce Department reported that inflation-adjusted personal consumption sank
1.3% in September from August, its biggest drop since 1987 and the first
decline since the economic slowdown began last fall. Weakness continues to
accelerate in the labor market. Payrolls fell by 415,000 in October, the most
since 1985, and the October unemployment rate rose to a five-year high of 5.4%,
posting the largest one-month jump in 20 years. Expectations are for a
continuation of weakness in corporate profits that will likely fuel further
weakness in employment and capital spending. After remaining strong in the face
of softer economic conditions through most of the third quarter, sales of new
homes in September dropped to the lowest level in a year and sales of existing
homes plunged more than in any month since 1995. We believe these results are
the beginning of the aftershocks of the Attack. We expect that consumers will
continue to scale back spending for the remainder of 2001 due to the
uncertainty caused by the Attack, the potential for further terrorist attacks
and the sharp increase in unemployment.
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2001 Annual Report to Shareholders
6
Weakness in the manufacturing sector continued. Manufacturing had its worst
performance in October since the depths of the 1990-91 recession according to
the National Association of Purchasing Management Manufacturing index
("NAPM")/7/. The NAPM dropped from 47.0 in September to 39.8 in October, one of
the largest drops since it began in 1931. The NAPM has been below 50.0 for 15
months; levels below 50.0 have tended to indicate contraction while those above
50.0 have tended to indicate expansion.
Given the economic slowdown and the effects of the Attack, in its efforts to
stimulate the economy, the Fed has cut short-term interest rates 50 basis
points three times since September 11. These rate cuts coupled with the
previous seven rate cuts in 2001 have reduced short-term interest rates since
the beginning of 2001 from 6.50% to 2.00%, the lowest level in 40 years and the
steepest proportional cut since the mid-1970's. The consumer price inflation
rate over the past twelve months was 2.60%. Based on a University of Michigan
study, consumers expect the inflation rate to drop to 1% in the coming year
suggesting that real short-term interest rates are approximately 1%. With weak
economic fundamentals and lower inflation expectations as a backdrop, we
believe that there is a high probability the Fed will cut rates again at the
December 11, 2001 FOMC meeting. The financial markets currently expect a 25
basis point reduction.
On the fiscal side, we expect a significant increase in government spending
that should lead to the elimination of the surplus. It seems very likely that
Congress will soon pass a package of further tax cuts and spending increases.
We expect that this unprecedented fiscal and monetary stimulus coupled with
lower energy costs, inventory rebuilding and high mortgage refinancing activity
will lead to a recovery in the second half of 2002, if not earlier. As a result
of the significant level of stimulus currently in the system, the recovery
could be rapid in the early stages. However, we expect that any rapid advance
will give way to a more moderate sustainable level of expansion as the
additional long-term costs of business brought on by the Attack, the end of the
"Peace Dividend" and a higher savings rate will somewhat hinder investment and
productivity.
The risks to this economic picture lie in prolonged weakness in consumer
confidence and spending. The rapid increase in unemployment, already visible
increase in the savings rate and threat of future terrorist attacks both here
and abroad could stifle a recovery in consumer spending. This condition may
well drive a deeper and more prolonged decline in corporate profits that, in
turn,
---------
7 The NAPM is based on a survey of purchasing executives who buy the raw
materials for manufacturing at more than 350 companies. It offers an early
reading on the health of the manufacturing sector.
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Travelers Corporate Loan Fund Inc.
7
could drive further weakening in employment and spending. If this were to
occur, we would expect further rate cuts by the Fed than are currently
anticipated and additional fiscal stimuli from Washington. Additional downside
risks to the economy include a possible disruption in oil supply from the
Middle East and the potential effects of significant erosion in key foreign
economies, most notably in Argentina and Japan.
We will endeavor 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.
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.
Sincerely,
/s/ Heath B. McLendon /s/ Glenn N. Marchak
Heath B. McLendon Glenn N. Marchak
Chairman Vice President and
Investment Officer
November 7, 2001
The information provided in this letter represents the opinion of the
investment manager and is not intended to be a forecast of future events, a
guarantee of future results nor investment advice. Further, there is no
assurance that certain corporate loans will remain in or out of the Fund or the
percentage of the Fund's assets held in various sectors will remain the same.
Please refer to pages 10 through 14 for a list and percentage breakdown of the
Fund's holdings. Also, please note any discussion of the Fund's holdings is as
of September 30, 2001 and is subject to change.
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2001 Annual Report to Shareholders
8
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 24. 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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Travelers Corporate Loan Fund, Inc.
9
Schedule of Investments September 30, 2001
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
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SENIOR COLLATERALIZED LOANS -- 99.6%
Aerospace/Defense -- 4.3%
$5,298,144 Decrane Aircraft Holdings, Inc. Term B 9/30/05 $ 5,192,181
2,456,345 Decrane Aircraft Holdings, Inc. Term D 12/24/06 2,413,359
280,547 Trans Digm, Inc. Term B 5/15/06 269,150
716,953 Trans Digm, Inc. Term C 5/15/06 688,051
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8,562,741
----------------------------------------------------------------------------------
Automotive -- 5.3%
2,984,848 Dura Automotive Systems, Inc. Term B 3/31/06 2,938,210
1,947,715 J.L. French Automotive Casting, Inc. Term B 10/21/06 1,397,485
1,998,000 Metaldyne Company LLC Term B 11/28/08 1,729,934
4,645,396 Stoneridge, Inc. Term B 12/31/05 4,506,034
----------------------------------------------------------------------------------
10,571,663
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Building Materials -- 3.9%
1,696,594 Hanley-Wood, Inc. Term B 9/21/07 1,666,903
1,307,203 Onex ABCO LP (Magnatrax) Term B 11/15/05 1,176,483
2,786,826 Panolam Industries International, Inc. Term B 1/31/07 2,703,222
2,657,923 Trussway Holdings Inc. Term B 12/31/06 2,325,683
----------------------------------------------------------------------------------
7,872,291
----------------------------------------------------------------------------------
Chemicals -- 7.8%
2,947,500 Georgia Gulf Corp. Term B 11/10/06 2,909,919
1,470,000 Huntsman ICI Chemical LLC Term B 6/30/07 1,416,100
1,470,000 Huntsman ICI Chemical LLC Term C 6/30/08 1,416,100
861,424 Lyondell Petrochemical Co. Term B 6/30/05 795,417
7,836,827 Lyondell Petrochemical Co. Term E 5/17/06 7,330,106
1,691,500 Noveon, Inc. (PMD Group, Inc.) Term B 9/30/08 1,657,066
----------------------------------------------------------------------------------
15,524,708
----------------------------------------------------------------------------------
Conglomerates -- 2.7%
1,485,000 Gentek, Inc. Term C 10/31/07 1,351,350
3,940,000 SPX Corp. Term B 12/31/06 3,931,998
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5,283,348
----------------------------------------------------------------------------------
Consumer Products -- 2.1%
933,375 American Safety Razor Co. Term B 4/30/07 901,874
1,000,000 Armkel, LLC Term B 3/28/09 998,750
1,923,706 Holmes Products Corp. Term B 2/5/07 1,293,692
997,500 Shop Vac Corp. Multi-Draw 7/7/07 990,019
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4,184,335
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Electric -- 2.0%
3,960,000 Western Resources, Inc. Term 3/17/03 3,893,999
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See Notes to Financial Statements.
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2001 Annual Report to Shareholders
10
Schedule of Investments (continued) September 30, 2001
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
----------------------------------------------------------------------------
Entertainment -- 4.8%
$2,940,000 Corus Entertainment Inc. Term B 9/30/07 $ 2,947,350
1,246,875 Entravision Communications Term B 12/31/08 1,246,875
3,500,000 Six Flags Theme Parks Inc. Term B 9/30/05 3,474,408
80,000 Washington Football Group, Inc. Term A 10/29/04 80,000
1,720,000 Washington Football Inc. Term C 10/29/04 1,726,450
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9,475,083
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Environmental -- 3.4%
1,969,954 Allied Waste North America, Inc. Term B 7/30/06 1,949,253
2,363,945 Allied Waste North America, Inc. Term C 7/30/07 2,339,104
2,497,000 Casella Waste System, Inc. Term B 12/14/06 2,448,308
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6,736,665
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Food -- 2.7%
990,000 Buffets, Inc. Term B 3/5/06 991,650
997,500 Flowers Food Inc. Term B 3/26/07 1,001,490
1,246,875 Michael Foods Inc. Term B 3/22/08 1,253,109
1,716,834 NSC Operating Co. (Nutrasweet) Term B 5/27/07 1,713,972
500,000 NSC Operating Co. (Nutrasweet) 2nd Lien 5/25/09 496,250
---------------------------------------------------------------------------
5,456,471
---------------------------------------------------------------------------
Gaming -- 3.4%
1,200,000 Alliance Gaming Corp. Term B 12/15/06 1,194,750
906,686 Ameristar Casinos, Inc. Term B 12/26/06 905,553
775,207 Ameristar Casinos, Inc. Term C 12/26/07 774,238
1,316,667 Isle of Capri Casinos, Inc. Term B 3/2/06 1,301,649
1,152,083 Isle of Capri Casinos, Inc. Term C 3/2/07 1,138,943
1,478,520 Scientific Games Corp. (Autotote) Term B 9/30/07 1,476,672
---------------------------------------------------------------------------
6,791,805
---------------------------------------------------------------------------
Healthcare -- 4.5%
1,243,750 Caremark Rx Inc. Term B 3/15/06 1,254,892
1,500,000 Kessler Rehabilitation Corp. Term B 7/27/08 1,496,250
900,000 Stericycle, Inc. Term B 11/10/06 902,110
5,324,476 Stryker Corp. Term B 12/4/05 5,346,524
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8,999,776
---------------------------------------------------------------------------
Home Construction -- 1.0%
1,980,000 Lennar Corp. Term B 5/2/07 1,977,525
---------------------------------------------------------------------------
Independent Energy -- 1.7%
3,372,505 Heating Oil Partners LP Term 9/30/03 3,372,505
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Industrial - Other -- 5.8%
2,431,626 Flowserve Corp. Term B 6/30/08 2,439,985
2,079,072 General Cable Corp. Term B 5/27/07 2,058,281
1,621,530 Mark IV Industries, Inc. Term B 9/11/08 1,570,859
See Notes to Financial Statements.
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Travelers Corporate Loan Fund Inc.
11
Schedule of Investments (continued) September 30, 2001
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
-----------------------------------------------------------------------------------
Industrial - Other -- 5.8% (continued)
$1,470,000 Mueller Group, Inc. Term B 8/16/06 $ 1,458,362
1,470,000 Mueller Group, Inc. Term C 8/16/07 1,458,362
987,500 Mueller Group, Inc. Term D 8/16/07 983,385
2,342,940 Western Industries Ltd. Term B 6/23/06 1,522,911
----------------------------------------------------------------------------------
11,492,145
----------------------------------------------------------------------------------
Insurance -- 0.7%
1,359,375 Oxford Health Plans, Inc. Term B 6/30/06 1,354,844
----------------------------------------------------------------------------------
Lodging -- 0.7%
1,500,000 Starwood Hotels & Resorts
Worldwide, Inc. IRN 2/23/03 1,458,750
----------------------------------------------------------------------------------
Media/Cable -- 8.4%
2,500,000 Century Cable Holdings (Adelphia) Term B 9/28/09 2,445,833
9,000,000 Charter Communications Operating LLC Term B 3/18/08 8,762,931
1,736,842 Classic Cable, Inc. Term B 1/31/08 1,591,816
868,421 Classic Cable, Inc. Term C 1/31/08 793,520
2,000,000 Insight Midwest LLC Term B 12/31/09 1,998,500
1,200,000 Videotron Ltee Term B 12/6/09 1,206,376
----------------------------------------------------------------------------------
16,798,976
----------------------------------------------------------------------------------
Media/Non-Cable -- 11.8%
4,776,263 21st Century Newspapers Term B 9/15/05 4,680,737
1,782,857 Advanstar Communications Inc. Term B 10/12/08 1,720,457
4,443,749 American Media Operation Inc. Term B 4/1/07 4,458,328
1,837,203 Canwest Media Inc. Term B 5/15/08 1,835,365
1,147,797 Canwest Media Inc. Term C 5/15/09 1,146,650
974,514 Emmis Communications Corp. Term B 2/28/07 949,107
1,000,000 Gray Communications Systems Term B 9/14/09 1,001,875
4,000,000 Susquehanna Media Co. Term B 6/30/08 4,025,000
1,792,112 Trader.com N.V. Term B 12/6/06 1,729,388
1,207,888 Trader.com N.V. Term C 12/6/07 1,165,611
811,624 Young Broadcasting, Inc. Term B 12/31/06 800,279
----------------------------------------------------------------------------------
23,512,797
----------------------------------------------------------------------------------
Other - Energy -- 0.5%
1,087,500 Westmoreland Mining LLC Term 6/30/02 1,087,500
----------------------------------------------------------------------------------
Other - Financial Institutions -- 2.6%
1,477,068 Bridge Information Systems, Inc. Multi-Draw 5/29/03 812,387
2,739,352 Bridge Information Systems, Inc. Term B 5/29/05 1,506,644
2,947,500 Outsourcing Solutions Inc. Term B 6/10/06 2,768,195
----------------------------------------------------------------------------------
5,087,226
----------------------------------------------------------------------------------
Paper -- 0.5%
997,500 Norske Skog Canada Finance Ltd. Term B 8/14/07 1,001,864
----------------------------------------------------------------------------------
See Notes to Financial Statements.
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
12
Schedule of Investments (continued) September 30, 2001
FACE LOAN STATED
AMOUNT SECURITY TYPE MATURITY VALUE*
-------------------------------------------------------------------------------
Railroads -- 1.4%
$1,985,000 Kansas City Southern Railway Co. Term B 12/29/06 $ 1,993,375
862,028 RailAmerica, Inc. Term B 12/31/06 865,530
------------------------------------------------------------------------------
2,858,905
------------------------------------------------------------------------------
Refining -- 0.5%
997,500 Dresser Inc. Term B 4/10/09 1,005,231
------------------------------------------------------------------------------
Technology -- 2.3%
2,475,000 Suez Acquisition Co. Term B 11/22/06 2,425,500
2,265,538 Trend Technologies, Inc. Term B 3/9/07 2,106,951
------------------------------------------------------------------------------
4,532,451
------------------------------------------------------------------------------
Telecommunications -- 12.6%
1,041,058 American Cellular Corp. Term B 3/31/08 1,025,117
1,192,770 American Cellular Corp. Term C 3/31/09 1,173,511
2,878,037 Centennial Cellular Operating Co. Term B 5/1/07 2,753,922
2,877,806 Centennial Cellular Operating Co. Term C 11/30/07 2,753,701
1,000,000 Crown Castle Operating Co. Term B 3/31/08 980,500
1,965,000 Dobson Operating Co. Term B 1/7/08 1,922,016
994,845 Fairpoint Communications Term C 3/30/07 965,000
3,750,000 Nextel Finance Co. Term B 6/30/08 3,346,875
3,750,000 Nextel Finance Co. Term C 12/31/08 3,346,875
2,464,162 Rural Cellular Corp. Term B 10/3/08 2,412,570
2,464,162 Rural Cellular Corp. Term C 4/3/09 2,412,825
2,000,000 Western Wireless Corp. Term B 9/30/08 1,984,584
------------------------------------------------------------------------------
25,077,496
------------------------------------------------------------------------------
Tobacco -- 0.5%
932,500 Commonwealth Brands, Inc. Term B 12/31/04 930,169
------------------------------------------------------------------------------
Transportation Services -- 1.7%
1,079,440 Evergreen International Aviation, Inc. Term D 4/28/04 820,375
2,500,000 TravelCenters of America, Inc. Term B 11/14/08 2,509,375
------------------------------------------------------------------------------
3,329,750
------------------------------------------------------------------------------
TOTAL SENIOR COLLATERALIZED LOANS
(Cost -- $206,440,342) 198,231,019
------------------------------------------------------------------------------
See Notes to Financial Statements.
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
13
Schedule of Investments (continued) September 30, 2001
FACE
AMOUNT SECURITY VALUE*
--------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.4%
Commercial Paper -- 0.4%
$690,000 Household Financial Corp., 3.450% due 10/1/01
(Cost -- $689,802) $ 689,868
-------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $207,130,144**) $198,920,887
-------------------------------------------------------------------
* 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:
------------------------------------
2nd Lien -- Subordinate Loan to 1st Lien
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.
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
14
Statement of Assets and Liabilities September 30, 2001
ASSETS:
Investments, at value (Cost -- $207,130,144) $198,920,887
Cash 573,027
Dividends and interest receivable 1,178,447
---------------------------------------------------------- ------------
Total Assets 200,672,361
---------------------------------------------------------- ------------
LIABILITIES:
Notes payable (Note 4) 61,700,000
Dividends payable 249,521
Management fee payable 163,230
Interest payable 27,767
Accrued expenses 138,005
---------------------------------------------------------- ------------
Total Liabilities 62,278,523
---------------------------------------------------------- ------------
Total Net Assets $138,393,838
---------------------------------------------------------- ------------
NET ASSETS:
Par value of capital shares $ 9,782
Capital paid in excess of par value 146,219,564
Undistributed net investment income 650,377
Accumulated net realized loss from security transactions (276,628)
Net unrealized depreciation of investments (8,209,257)
---------------------------------------------------------- ------------
Total Net Assets $138,393,838
---------------------------------------------------------- ------------
Shares Outstanding 9,781,667
---------------------------------------------------------- ------------
Net Asset Value $14.15
---------------------------------------------------------- ------------
See Notes to Financial Statements.
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
15
Statement of Operations For the Year Ended September 30, 2001
INVESTMENT INCOME:
Interest $18,448,428
Less: Interest expense (3,932,699)
----------------------------------------------------------------------------- -----------
Total Investment Income 14,515,729
----------------------------------------------------------------------------- -----------
EXPENSES:
Management fee (Note 2) 2,197,821
Audit and legal 95,891
Shareholder communications 81,774
Shareholder and system servicing fees 70,313
Directors' fees 48,592
Registration fees 22,259
Custody 6,962
Other 88,744
----------------------------------------------------------------------------- -----------
Total Expenses 2,612,356
----------------------------------------------------------------------------- -----------
Net Investment Income 11,903,373
----------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Loss From Security Transactions (excluding short-term securities):
Proceeds from sales 52,291,314
Cost of securities sold 52,567,942
----------------------------------------------------------------------------- -----------
Net Realized Loss (276,628)
----------------------------------------------------------------------------- -----------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year 570,147
End of year (8,209,257)
----------------------------------------------------------------------------- -----------
Increase in Net Unrealized Depreciation (8,779,404)
----------------------------------------------------------------------------- -----------
Net Loss on Investments (9,056,032)
----------------------------------------------------------------------------- -----------
Increase in Net Assets From Operations $ 2,847,341
----------------------------------------------------------------------------- -----------
See Notes to Financial Statements.
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
16
Statements of Changes in Net Assets
For the Years Ended September 30,
2001 2000
-----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 11,903,373 $ 13,656,396
Net realized gain (loss) (276,628) 260,605
(Increase) decrease in net unrealized depreciation (8,779,404) 4,590
---------------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,847,341 13,921,591
---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (12,370,409) (14,070,928)
Net realized gains (218,597) (263,127)
---------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (12,589,006) (14,334,055)
---------------------------------------------------------------------------------------
Decrease in Net Assets (9,741,665) (412,464)
NET ASSETS:
Beginning of year 148,135,503 148,547,967
---------------------------------------------------------------------------------------
End of year* $138,393,838 $148,135,503
-----------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $650,377 $1,067,638
---------------------------------------------------------------------------------------
See Notes to Financial Statements.
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
17
Statement of Cash Flows
For the Year Ended September 30, 2001
CASH FLOWS PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Interest and dividends received $ 18,885,328
Operating expenses paid (2,591,696)
Interest paid on bank loans (3,987,263)
Net short-term sales 1,419,349
Purchases of portfolio securities (48,362,099)
Proceeds from disposition of long-term securities 52,291,314
-----------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities 17,654,933
-----------------------------------------------------------------------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreement (4,500,000)
Cash dividends paid on Common Stock (12,719,641)
-----------------------------------------------------------------------------
Net Cash Flows Used By Financing Activities (17,219,641)
-----------------------------------------------------------------------------
NET INCREASE IN CASH 435,292
Cash, Beginning of year 137,735
-----------------------------------------------------------------------------
Cash, End of year $ 573,027
-----------------------------------------------------------------------------
RECONCILIATION OF INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FLOWS PROVIDED BY
OPERATING AND INVESTING ACTIVITIES:
Increase in Net Assets From Operations $ 2,847,341
-----------------------------------------------------------------------------
Amortization of discount on securities 102,612
Decrease in investments, at value 14,301,980
Decrease in interest payable for money borrowed (54,564)
Decrease in dividends and interest receivable 436,900
Increase in accrued expenses 20,664
-----------------------------------------------------------------------------
Total Adjustments 14,807,592
-----------------------------------------------------------------------------
Net Cash Flows Provided By Operating and Investing Activities $ 17,654,933
-----------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
2001 Annual Report to Shareholders
18
Notes to Financial Statements
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 accounting principles
generally accepted in the United States of America. At September 30, 2001,
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 undistributed net investment
loss amounting to $49,775 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,
Smith Barney Fund Management LLC ("SBFM"), the Fund's investment advisor, with
the assistance of the Travelers Asset Management International Company LLC
("TAMIC"), the sub-advisor, 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
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
19
Notes to Financial Statements (continued)
instruments with similar quality, rate, period until next interest rate reset,
maturity, terms and conditions; SBFM 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, SBFM will not rely solely on such
prices or quotations.
Facility fees and upfront fees, incurred by the Fund on loan agreements, are
amortized over the term of the loan.
2. Management Agreement and Transactions with Affiliated Persons
SBFM, a subsidiary of Salomon Smith Barney Holdings Inc., which, in turn, is a
wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
adviser for the Fund. The Fund pays SBFM a management fee for its investment
advisory and administration services calculated at an annual rate of 1.05% of
the average daily assets. This fee is calculated daily and paid monthly.
SBFM 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. SBFM pays TAMIC a fee of 0.50% of the value of the Fund's average daily
assets for the services TAMIC provides as sub-adviser. This fee is calculated
daily and paid monthly.
All officers and one Director of the Fund are employees of Citigroup or its
affiliates.
3. Investments
During the year ended September 30, 2001, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
-----------------------------------------------------------------------
Purchases $48,448,512
-----------------------------------------------------------------------
Sales 52,291,314
-----------------------------------------------------------------------
--------------------------------------------------------------------------------
2001 Annual Report to Shareholders
20
Notes to Financial Statements (continued)
At September 30, 2001, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
------------------------------------------------------------------------
Gross unrealized appreciation $ 922,342
Gross unrealized depreciation (9,131,599)
------------------------------------------------------------------------
Net unrealized depreciation $(8,209,257)
------------------------------------------------------------------------
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 was renewed on January 30, 2001. The 364 day revolving credit
agreement matures on January 29, 2002 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 aggregate borrowings
outstanding at September 30, 2001 was $61.7 million at a weighted average
interest rate of 5.34% which represented 30.84% of the net assets plus
borrowings. Average aggregate borrowings for the year ended September 30, 2001
were $66,813,405 and the average annualized interest rate was 5.41%.
5. Offering Costs
Offering costs of $607,394 were incurred at the inception of the Fund. Of this
amount, $382,394 was paid by SBFM. The balance of $225,000 was paid by the Fund.
6. Capital Shares
At September 30, 2001, the Fund had 150,000,000 shares of capital stock
authorized, ("Common Stock") with a par value of $0.001 per share.
7. Capital Loss Carryforward
At September 30, 2001, the Fund had, for Federal income tax purposes,
approximately $44,000 of unused capital loss carryforwards available to offset
future capital gains through September 30, 2009. To the extent that these
carryforward losses are used to offset capital gains, it is possible that the
gains so offset will not be distributed.
--------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
21
Financial Highlights
For a share of capital stock outstanding throughout each year ended September
30, unless otherwise noted:
2001 2000 1999/(1)/
----------------------------------------------------------------------------
Net Asset Value, Beginning of Year $15.14 $15.19 $15.00
---------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 1.22 1.40 0.97
Net realized and unrealized gain (loss) (0.93) 0.02 0.09
---------------------------------------------------------------------------
Total Income From Operations 0.29 1.42 1.06
---------------------------------------------------------------------------
Offering Costs on Issuance of Common Stock -- -- (0.02)
---------------------------------------------------------------------------
Less Distributions From:
Net investment income (1.26) (1.44) (0.85)
Net realized gains (0.02) (0.03) --
---------------------------------------------------------------------------
Total Distributions (1.28) (1.47) (0.85)
---------------------------------------------------------------------------
Net Asset Value, End of Year $14.15 $15.14 $15.19
---------------------------------------------------------------------------
Total Return, Based on Market Value (4.33)% 13.35% 1.68%++
---------------------------------------------------------------------------
Total Return, Based on Net Asset Value 2.44% 10.55% 7.45%++
---------------------------------------------------------------------------
Net Assets, End of Year (000s) $138,394 $148,136 $148,548
---------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income 8.31% 9.20% 7.48%+
Interest expense 2.75 3.04 1.68+
Organization expense -- -- 0.24+
Other expenses 1.82 1.70 1.63+
Total expenses 4.57 4.74 3.55+
---------------------------------------------------------------------------
Portfolio Turnover Rate 23% 59% 53%
---------------------------------------------------------------------------
Market Value, End of Year $12.82 $14.6875 $14.375
---------------------------------------------------------------------------
(1) For the period from November 20, 1998 (commencement of operations) to
September 30, 1999.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
22
Independent Auditors' Report
To the Shareholders and Board of Directors of
Travelers Corporate Loan Fund Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Travelers Corporate Loan Fund Inc. ("Fund") as
of September 30, 2001, and the related statements of operations and cash flows
for the year then ended, and the statements of changes in net assets for each
of the years in the two-year period then ended and financial highlights for
each of the years in the two-year period then ended and for the period from
November 20, 1998 (commencement of operations) to September 30, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of September 30, 2001 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of September 30, 2001, the results of its operations and its cash flows
for the year then ended, and the changes in its net assets for each of the
years in the two-year period then ended and financial highlights for each of
the years in the two-year period then ended and for the period from November
20, 1998 to September 30, 1999, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
November 13, 2001
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
23
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 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
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
24
Dividend Reinvestment Plan (unaudited) (continued)
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 open market
purchases in connection with the reinvestment of dividends or capital gains
distributions.
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
25
Dividend Reinvestment Plan (unaudited) (continued)
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.
-------------------------------------------------------------------------------
2001 Annual Report to Shareholders
26
Tax Information (unaudited)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
September 30, 2001:
. Total long-term capital gain distributions paid of $183,666.
-------------------------------------------------------------------------------
Travelers Corporate Loan Fund Inc.
27
Directors
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Paolo M. Cucchi
Robert A. Frankel
Paul Hardin
William R. Hutchinson
Heath B. McLendon, Chairman
George Pavia
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
[LOGO] NYSE Logo
Investment Adviser
Smith Barney 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.
125 Broad Street
10th Floor, MF-2
New York, New York 10004
FD01804 11/01