<PAGE>
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS January 31, 1996
- --------------------------------------------------------------------------------
- -------------------------- It is a pleasure to submit to you MassMutual
Corporate Investors' Annual Report covering the
year ended December 31, 1995. This has been a
particularly rewarding year for investors after
weathering the difficult markets of 1994. The
Trust's results this year included increased net
investment income; a net asset value at a record
level; the realization of significant capital
gains; sixteen new private placement investments;
and the declaration of a special $.92 per share
dividend in addition to our regular four quarterly
dividends of $.70 per share.
Portfolio Activity
During the fourth quarter, net investment income
slid modestly to $.67 per share from $.68 per share
during the third quarter. As we mentioned in our
last quarterly report, two of our private placement
issuers, CompuCom Systems, and Exide Electronics,
forced conversion of our notes into stock. Since
this occurred in the fourth quarter, our earnings
were reduced. However, we were very active in the
private placement market during the quarter as we
closed six new investments totalling approximately
$13.4 million. The six new investments are Consumer
Product Enterprises, Inc., Maloney Industries,
Inc., Pharmaceutical Buyers, Inc., Sequentia, Inc.,
Unidata, Inc., and an add-on investment in Latin
- -------------------------- Communications Group. (A brief description of these
PRESIDENT STUART H. REESE companies is provided in the Schedule of
Investments.) The fixed income components of these
investments have an average coupon of over 11.5%
and offer the potential of capital gains via their equity features. For the
year, our sixteen new investments helped bring the Trust's net investment income
up to $2.63 per share from $2.33 per share in 1994.
We were also very active in the 144A market during the year, where we purchased
twenty-one issues at a cost of over $17.7 million. The 144A issues are
restricted in the sense that they can only be resold to qualified institutional
buyers. However, due to the number of qualified buyers participating in the
market, most essentially trade like public securities. Many of the 144A
securities we purchased this year were either sold at a gain, or have since
converted to public securities through registration and face no trading
restrictions. The remainder are listed in our Corporate Restricted Securities
section of the Schedule of Investments.
The Board of Trustees has approved a modification to the Trust's non-fundamental
investment policies. The Trust will now be able to purchase 144A investments and
syndicated bank loans without a concurrent investment by the Adviser,
MassMutual. Any such investment, however, must be readily marketable.
Equity Orientation
Medium- to long-term corporate debt obligations which provide the Trust with
current income and enable us to pay dividends and expenses, are the core of
Corporate Investors' portfolio. Oftentimes our investments provide the Trust
with the opportunity to participate in any future prosperity of a company by
means of an equity participation feature. Our equity participation is normally
obtained through conversion features, warrants to purchase common stock or the
direct purchase of the issuer's common stock. As of January 15, 1996, there were
twelve private placement portfolio companies, whose stock are publicly traded,
in which the combined stock market value exceeded the Trust's cost by
approximately $16.7 million. At December 31, 1995, equity related issues
accounted for approximately 42% of the portfolio.
Pie chart here.
<PAGE>
Capital Gains
For the year, we were very successful in generating capital gains. Even after
some year-end tax-motivated selling, the Trust realized over $10.3 million in
net gains. The following table lists some of the larger capital gains realized
from partial or complete dispositions of investments from our private portfolio.
Capital gains in CompuCom Systems, Inc., Nu Horizons Electronics Corp., and
Sanitary Dash Manufacturing Co., Inc. were all realized in the fourth quarter.
<TABLE>
<CAPTION>
ISSUER GAIN ($000S)
------ ------------
<S> <C>
CP Clare Corporation 1,490
CompuCom Systems, Inc. 995
Golden State Vintners 376
Monro Muffler Brake, Inc. 902
Nu Horizons Electronics Corp. 502
Olsten Corporation 365
Sanitary Dash Manufacturing Co., Inc. 1,589
Unistrut Corporation 1,374
</TABLE>
Of the total net gains realized during the year, roughly $3.3 million were from
our public portfolio. While Corporate Investors only invests in the public
markets with capital not immediately required for private placement commitments,
we continue to be successful in finding relative values and generating
additional income and gains for the Trust.
Performance
From a performance perspective, investors in the Trust did very well. With our
net asset value per share setting record-high levels during the year, we ended
1995 at $39.60, after dividends and taxes, as compared to $32.94 per share at
the end of 1994. The Trust's total return performance for the year ended
December 31, 1995 based on stock market price and reinvestment of dividends was
29.2%, while based on earnings and change in net asset value was 33.8%. In
comparison, the Lehman Brothers Government/Corporate Bond Index was up 19.2% and
the Standard & Poor's Industrial Stock Index was up 34.6% for the same period.
The following chart shows the performance of Corporate Investors over the last
twenty years based on earnings and change in net asset value compared to
recognized benchmarks.
Performance chart here
<PAGE>
On The Economic Front
The past year saw the continuation of a very good economic environment for
investors in both stocks and bonds. The U.S. economic growth rate as measured by
Gross Domestic Product continued to slow throughout the year from its heated
level of 4.1% in 1994 to roughly 2.5% in 1995. The Federal Reserve Board, which
had been raising rates during 1994 in an attempt to slow growth somewhat, was
able to change course and move rates lower. Because the economy is cyclical, the
Fed wanted growth to slow to a more moderate, sustainable level - a "soft
landing" from 1994's rapid pace - to prolong the positive part of the current
economic cycle.
While the Federal Reserve Board actually increased rates as late as February
1995, the bond market had begun to rally as early as November 1994 on the belief
that growth would slow enough to indicate a change in monetary policy. The
market was correct. The Fed's February rate increase of 1/2 point was followed
during the year by two cuts of 1/4 point each in July and December. Yields on
U.S. securities fell significantly during this period, which drove dramatic
price appreciation for Treasuries. The prices in most other bond sectors
followed suit, with 1995 resulting in one of the strongest bull markets for
bonds in history.
Backed by low interest rates and a strong bond market, stocks reached all-time
highs in 1995. The Dow Jones Industrial Average made new highs almost daily,
hitting a peak of 5216 and closing the year at 5117. In addition to support from
the bond market, stocks reacted to continued positive earnings reports, merger
and consolidation activity, an improving export picture and increasing
productivity and efficiency throughout corporate America.
Even in the face of a slower economy, sales and earnings remained strong through
the end of 1995. The U.S. had its biggest productivity gain on record in 1995
and exports grew, aided in the early part of the year by a weak dollar, which in
turn created improvements in trade. Going into 1996, we expect to see exports
remain strong, as U.S. businesses recognize that future growth will come in part
from operating in a global market. This opinion is supported by the heavy
outlays we have seen for business equipment, which should further enhance
competitiveness, productivity and export activity for the coming year.
We expect this environment will lead to a satisfactory flow of investment
opportunities for the Trust. Thank you for your continued support and interest
in Corporate Investors.
Sincerely,
Stuart H. Reese
President
Tax Information
Net investment income and short-term gain dividends received by shareholders
must be reported for federal income tax purposes as ordinary income. Dividend
payments made in May, August, November 1995, and January 1996 are taxable in the
1995 tax year. The Trust distributed $2.6266 per share of net investment income
and $1.0934 per share of short-term gains for the year 1995. In total, $3.72
represents income for tax purposes.
In years when net long-term capital gains are realized, the Board of Trustees
either votes to retain the gains for reinvestment, or to distribute them to
shareholders. For 1995, the Trustees voted to retain the gains for future
growth. These gains, even though not distributed to shareholders, are taxable.
In January 1996, the Trust distributed IRS Form 2439 to shareholders of record
as of December 29, 1995. Your proportionate share of the retained capital gains
is reported on Line 1 of the form ($1.332266 per share) and must be reported on
Schedule D of your income tax return as long-term capital gains. Since the Trust
paid the required federal income tax on the retained capital gains, you are
entitled to a tax credit. Your share of the tax paid by the Trust is shown on
Line 2 of IRS Form 2439 ($.466293 per share) and should be reflected on your tax
return as a tax credit (which will reduce your Federal income tax liability and
might result in a tax refund). Those shareholders whose accounts are not subject
to federal capital gains tax (e.g. charitable organizations, IRAs and Keogh
Plans) can claim a refund by filing Form 990-T. In addition, all shareholders
are entitled to increase, for federal income tax purposes, the cost basis of
their shares by the excess of Line 1 over Line 2. This amounts to $.865973 per
share.
The extent to which the following dividend payments qualify (as provided in the
Internal Revenue Code and subject to certain limitations set forth therein) for
the dividend received deduction for corporations, is shown in the table below.
Also shown is the amount of interest earned on U.S. Government obligations.
<TABLE>
<CAPTION>
ANNUAL QUALIFIED FOR DIVIDEND INTEREST EARNED ON
DIVIDEND RECEIVED DEDUCTION U.S. GOVERNMENT OBLIGATIONS
------------------ ---------------------------
AMOUNT PERCENT AMOUNT PER SHARE PERCENT AMOUNT PER SHARE
------ ------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$3.72 3.4190% $0.1272 0.0000% $0.0000
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 6)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1995 - $107,891,090; 1994 - $89,153,223) $122,100,451 $ 86,801,228
Corporate public securities at market value
(Cost 1995 - $64,555,717; 1994 - $69,992,800) 69,912,193 67,277,131
Short-term securities at cost plus earned
discount which approximates market value 3,173,413 4,791,740
------------ ------------
195,186,057 158,870,099
Cash 2,525,299 12,341
Interest and dividends receivable, net 3,762,567 2,991,579
Receivable for investments sold 1,190,486 2,120,646
------------ ------------
TOTAL ASSETS $202,664,409 $163,994,665
============ ============
Liabilities:
Dividend payable $ 6,895,893 $ 2,979,707
Payable for investments purchased 4,315,505 --
Management fee payable (Note 3) 632,111 525,874
Note payable (Notes 4 and 5) 20,000,000 20,000,000
Interest payable (Notes 4 and 5) 136,211 136,211
Accrued expenses 136,763 119,720
Accrued taxes (Note 2D) 1,984,882 --
------------ ------------
TOTAL LIABILITIES 34,101,365 23,761,512
------------ ------------
Net Assets:
Common shares, par value $1.00 per share;
an unlimited number authorized 4,256,724 4,256,724
Additional paid-in capital 98,590,717 98,590,717
Retained net realized gain on investments, prior
years 42,226,727 42,226,727
Undistributed net investment income (Note 2D) 223,553 205,398
Undistributed net realized gain on investments 3,699,486 21,251
Net unrealized appreciation (depreciation) of
investments (Notes 2A and 6) 19,565,837 (5,067,664)
------------ ------------
TOTAL NET ASSETS 168,563,044 140,233,153
------------ ------------
TOTAL LIABILITIES AND NET ASSETS $202,664,409 $163,994,665
============ ============
COMMON SHARES ISSUED AND OUTSTANDING 4,256,724 4,256,724
============ ============
NET ASSET VALUE PER SHARE $ 39.60 $ 32.94
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 14,506,509 $ 13,122,144
Dividends 541,626 454,152
------------ ------------
TOTAL INCOME 15,048,135 13,576,296
------------ ------------
Expenses:
Management fee (Note 3) 2,434,580 2,189,815
Trustees' fees and expenses 95,152 94,304
Transfer Agent/Registrar's expenses 105,494 91,661
Custodian's fees 19,764 30,745
Interest (Notes 4 and 5) 1,066,000 1,066,000
Reports to shareholders 34,080 54,169
Audit and legal 63,016 59,362
Other 52,398 62,684
------------ ------------
TOTAL EXPENSES 3,870,484 3,648,740
------------ ------------
NET INVESTMENT INCOME 11,177,651 9,927,556
------------ ------------
Net realized and unrealized gain (loss) on
investments (Notes 2A and 2B):
Realized gain on investments 10,338,634 2,081,294
Provision for federal income tax (Note 2D) (1,984,882) --
------------ ------------
Net realized gain on investments 8,353,752 2,081,294
Net change in unrealized
appreciation/depreciation of investments 24,633,501 (8,562,027)
------------ ------------
NET GAIN (LOSS) ON INVESTMENTS 32,987,253 (6,480,733)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $44,164,904 $ 3,446,823
============ ============
</TABLE>
See Notes to Financial Satements.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 13,505,631 $ 12,270,176
Interest expense paid (1,066,000) (1,092,650)
Operating expenses paid (2,681,205) (2,572,620)
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,758,426 8,604,906
------------- ------------
Cash flows from investing activities:
Change in short-term portfolio securities, net 1,820,308 98,054
Purchase of portfolio securities (113,804,230) (75,599,707)
Proceeds from disposition of portfolio securities 116,657,281 78,811,758
------------- ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 4,673,359 3,310,105
------------- ------------
NET CASH PROVIDED BY OPERATING AND INVESTING
ACTIVITIES 14,431,785 11,915,011
------------- ------------
Cash flows from financing activities:
Cash dividends paid from net investment income (10,454,506) (10,134,746)
Cash dividends paid from net realized gain on
investments (1,464,321) (1,784,081)
------------- ------------
NET CASH USED FOR FINANCING ACTIVITIES (11,918,827) (11,918,827)
------------- ------------
NET INCREASE (DECREASE) IN CASH 2,512,958 (3,816)
Cash - beginning of year 12,341 16,157
------------- ------------
CASH - END OF YEAR $ 2,525,299 $ 12,341
============= ============
Reconciliation of net increase (decrease) in net
assets to net cash from
operating and investing activities:
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 44,164,904 $ 3,446,823
------------- ------------
(Increase) decrease in investments (36,315,958) 8,956,070
Increase in interest and dividends receivable,
net (770,988) (623,922)
Decrease in receivable for investments sold 930,160 619,505
Decrease in other assets -- 22,499
Increase (decrease) in payable for investments
purchased 4,315,505 (466,934)
Increase (decrease) in management fee payable 106,237 (31,770)
Decrease in interest payable -- (26,650)
Increase in accrued expenses 17,043 19,390
Increase in accrued taxes 1,984,882 --
------------- ------------
TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS (29,733,119) 8,468,188
------------- ------------
NET CASH PROVIDED BY OPERATING AND INVESTING
ACTIVITIES $ 14,431,785 $ 11,915,011
============= ============
</TABLE>
See Notes to Financial Satements.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 11,177,651 $ 9,927,556
Net realized gain on investments 8,353,752 2,081,294
Net change in unrealized
appreciation/depreciation of investments 24,633,501 (8,562,027)
------------ ------------
Net increase in net assets resulting from
operations 44,164,904 3,446,823
Dividends to shareholders from:
Net investment income (1995 - $2.63 per share;
1994 - $2.32 per share) (11,180,747) (9,858,565)
Net realized gains on investments (1995 - $1.09
per share; 1994 - $.48 per share) (4,654,266) (2,060,263)
------------ ------------
TOTAL INCREASE (DECREASE) 28,329,891 (8,472,005)
NET ASSETS, BEGINNING OF YEAR 140,233,153 148,705,158
------------ ------------
NET ASSETS, END OF YEAR (INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME IN 1995 - $223,553;
1994 - $205,398) $168,563,044 $140,233,153
============ ============
</TABLE>
See Notes to Financial Satements.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
Selected data for each common share outstanding for the periods ended:
<TABLE>
<CAPTION>
For the For the
six months year
For the years ended December 31, ended ended
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86 6/30/86
---- ---- ---- ---- ---- ---- ---- ---- ---- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of
period $ 32.94 $ 34.93 $ 30.76 $ 28.74 $ 26.73 $ 29.47 $ 30.29 $ 31.16 $ 34.77 $ 34.42 $ 28.29
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income 2.63 2.33 2.16 2.23 2.79 2.69 2.77 3.09 3.00 1.43 3.01
Net realized and
unrealized gain
(loss) on investments 7.75 (1.52) 4.81 2.59 2.02 (2.63) (.29) (.14) (2.01) .86 6.16
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 10.38 .81 6.97 4.82 4.81 .06 2.48 2.95 .99 2.29 9.17
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends from net
investment income to
common shareholders (2.63) (2.32) (2.16) (2.24) (2.80) (2.64) (2.77) (3.11) (4.31) (1.43) (2.92)
Distributions from
net realized gain on
investments to
common shareholders (1.09) (.48) (.64) (.56) -- (.16) (.53) (.71) (.29) (.51) (.12)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (3.72) (2.80) (2.80) (2.80) (2.80) (2.80) (3.30) (3.82) (4.60) (1.94) (3.04)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of period $ 39.60 $ 32.94 $ 34.93 $ 30.76 $ 28.74 $ 26.73 $ 29.47 $ 30.29 $ 31.16 $ 34.77 $ 34.42
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Per Share Market Value:
End of period $ 35.75 $ 31.13 $ 29.75 $ 26.13 $ 28.00 $ 21.25 $ 25.13 $ 33.00 $ 38.50 $ 41.75 $ 37.38
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total investment return:
Market value 29.19% 14.03% 24.84% 3.18% 45.83% (4.15)% (14.54)% (2.92)% 4.76% 27.07%* 43.18%
Net asset value 33.76% 2.36% 23.41% 17.36% 18.27% .42% 8.93% 10.20% 4.44% 12.00%* 36.49%
Net assets (in millions):
End of period $168.6 $140.2 $148.7 $131.0 $122.3 $ 113.8 $ 125.4 $ 127.8 $ 129.5 $ 142.5 $ 139.9
Ratio of expenses to
average net assets 2.45% 2.48% 2.93% 2.69% 2.77% 2.90% 2.70% 2.43% 1.95% 1.05%* 2.44%
Ratio of net investment
income to average net
assets 7.09% 6.75% 6.61% 7.44% 9.70% 9.33% 8.90% 9.87% 8.77% 4.32%* 9.89%
Portfolio turnover ratio 66.90% 46.68% 76.01% 60.59% 45.96% 23.74% 20.00% 28.18% 39.95% 31.26%* 62.45%
</TABLE>
*Percentages represent results for the period and are not annualized.
See Notes to Financial Satements.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities - 72.44%: (A) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
American Exploration Company - A.S.E.
An independent oil and gas company engaged
principally in the acquisition, development and
management of oil and gas properties.
11% Senior Subordinated Note due 2001 $ 3,000,000 12/27/91 $ 2,964,600 $ 2,961,288 $ 2,912,400
Warrant, exercisable until 2001, to purchase
81,026 shares of common stock at $22.37
per share (B) 81,026 shs. 12/27/91 49,714 38,712 81,026
-------------- ------------ ------------
3,014,314 3,000,000 2,993,426
-------------- ------------ ------------
Ammirati & Puris, Inc.
An advertising agency that specializes in
representing a limited number of large and
high quality clients.
14% Senior Secured Note due 1998 $ 1,750,000 11/23/93 1,714,300 1,750,000 1,968,225
-------------- ------------ ------------
Associated Natural Gas Corporation - N.Y.S.E.
A natural gas marketing company which
purchases and resells natural gas to utilities and
industrial users.
9% Convertible Subordinated Note due
2004, convertible into 135,563 shares of
Panhandle Eastern common stock at $22.13
per share $ 3,000,000 12/30/92 2,934,000 3,000,000 3,325,350
-------------- ------------ ------------
BP Prudhoe Bay Royalty Trust - N.Y.S.E.
A trust which shares in the production of
petroleum from the Alaskan North Slope.
26,180 Units of Beneficial Interest 26,180 uts. 2/28/89 654,500 428,217 382,883
-------------- ------------ ------------
Cains Foods, L.P.
A producer of mayonnaise, sauce and pickle
products for both the retail and food service
markets.
10% Senior Secured Term Note due 2004 $ 1,513,512 9/29/95 1,513,512 1,513,512 1,540,453
11.5% Senior Subordinated Note due 2004 $ 945,945 9/29/95 895,706 896,697 975,932
Senior Secured Revolving Floating Rate
Term Note due 2000 $ 151,351 11/6/95 151,351 151,351 151,351
8% Junior Subordinated Convertible Note
due 2004, convertible into 78 partnership
points at $1,388.89 per point $ 108,108 9/29/95 108,108 108,108 88,495
Warrant, exercisable until 2006, to purchase
39 partnership points at $.01 per point (B) 39 pts. 9/29/95 50,261 50,261 39
-------------- ------------ ------------
2,718,938 2,719,929 2,756,270
-------------- ------------ ------------
Catalina Lighting, Inc. - N.Y.S.E.
A designer, importer and distributor of residential
and office lighting fixtures.
8% Convertible Subordinated Note due 2002,
convertible into 200,000 shares of common
stock at $7.50 per share $ 1,500,000 3/31/94 1,420,050 1,500,000 1,435,928
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Classic Sports Partners, L.P.
A cable sports television network.
Limited Partnership Interest (B) 600 uts. 4/18/95 $ 540,000 $ 600,000 $ 480,000
-------------- ------------ ------------
The Coast Distribution System - A.S.E.
A wholesale distributor of recreational vehicles
and marine parts and accessories.
11.2% Senior Subordinated Secured Note
due 1999 $ 466,700 6/26/89 481,588 466,700 486,161
Common Stock (B) 130,753 shs. 6/27/85 674,685 678,636 745,294
-------------- ------------ ------------
1,156,273 1,145,336 1,231,455
-------------- ------------ ------------
CompuCom Systems, Inc. - O.T.C.
A personal computer dealer specializing in
serving corporate accounts.
Common Stock (B) 1,073,720 shs. 9/24/92 1,061,480 2,362,185 9,690,323
-------------- ------------ ------------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use.
10.75% Senior Secured Term Note due 2003 $ 1,399,580 12/8/95 1,413,996 1,399,580 1,420,714
12% Senior Subordinated Note due 2005 $ 922,800 12/8/95 926,584 872,106 933,874
Senior Secured Floating Rate Credit Note
due 2000 $ 307,600 12/8/95 307,600 307,600 307,600
Common Stock (B) 184,560 shs. 12/8/95 138,420 184,560 138,420
Warrant, exercisable until 2005, to purchase
138,420 shares of common stock at $.01
per share (B) 138,420 shs. 12/8/95 1,384 50,853 1,384
-------------- ------------ ------------
2,787,984 2,814,699 2,801,992
-------------- ------------ ------------
Control Devices, Inc.
A producer of high quality electromechanical
circuit protector devices and photo-optic sensors.
10% Senior Secured Note due 2004 $ 1,829,100 7/29/94 1,834,587 1,829,100 1,990,975
11% Senior Subordinated Note due 2004 $ 783,900 7/29/94 772,063 783,900 868,013
11% Cumulative Preferred Stock 101 shs. 7/29/94 89,306 101,036 109,958
Common Stock (B) 75,933 shs. 7/29/94 25,259 25,259 104,218
Warrant, exercisable until 2004, to purchase
98,267 shares of common stock at $.01
per share (B) 98,267 shs. 7/29/94 983 -- 134,134
-------------- ------------ ------------
2,722,198 2,739,295 3,207,298
-------------- ------------ ------------
Corrections Corporation of America - O.T.C.
An operator of private prisons and correctional
facilities for federal, state and local governments.
11.08% Senior Secured Note due 2000 $ 455,301 12/11/90 460,971 454,732 495,732
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
D&K Wholesale Drug, Inc. - O.T.C.
A wholesale pharmaceutical distribution company.
11% Subordinated Note due 1997 $1,083,334 12/29/87 $ 991,684 $1,083,334 $1,100,016
11% Convertible Subordinated Note due 1997,
convertible into 265,490 shares of common
stock at $3.30 per share $ 875,000 12/29/87 956,113 875,000 1,636,079
------------ ---------- ----------
1,947,797 1,958,334 2,736,095
------------ ---------- ----------
Delta Beverage Group, Inc.
A Pepsi soft drink bottler.
Common Stock (B) 966 shs. 3/8/88 181,486 2,006,380 181,486
Edmund Publications Corporation
A publisher of paperback books.
12.5% Senior Note due 1996 (B) $1,937,500 9/9/88 1,912,700 1,937,500 193,750
12.5% Convertible Senior Note due 1996,
convertible into 50 shares of common
stock at $1,250 per share (B) $ 62,500 9/9/88 67,594 62,500 6,250
------------ ---------- ----------
1,980,294 2,000,000 200,000
------------ ---------- ----------
Elgin National Industries, Inc.
An operator in the specialty fastener, mineral
processing equipment, engineering, construction
and electrical distribution industries.
13% Senior Subordinated Note due 2001 $2,000,000 9/24/93 1,943,216 1,983,216 2,078,000
10% Preferred Stock 2,339 shs. 9/24/93 176,964 233,925 188,520
Common Stock (B) 161 shs. 9/24/93 16,075 16,075 30,176
Warrant, exercisable from 1998 until 2001,
to purchase 168 shares of common stock at
$.01 per share (B) 168 shs. 9/24/93 17 16,782 17
------------ ---------- ----------
2,136,272 2,249,998 2,296,713
------------ ---------- ----------
Engel Industries, Inc.
A manufacturer of specialized metal fabricating
equipment.
10% Senior Secured Note due 1996 $ 175,000 11/5/86 152,040 175,000 175,000
13% Senior Note due 1995 (B) $ 585,000 8/30/85 592,254 585,000 234,000
14% Subordinated Note due 1995 (B) $ 190,000 8/30/85 193,800 190,000 28,500
14% Convertible Subordinated Note due 1995,
convertible into 350 shares of common stock
at $500 per share (B) $ 175,000 8/30/85 179,620 175,000 26,250
------------ ---------- ----------
1,117,714 1,125,000 463,750
------------ ---------- ----------
Ermanco Inc.
A manufacturer of a complete line of conveyors.
11.18% Senior Note due 1997 $ 162,500 3/23/89 158,275 162,500 162,500
------------ ---------- ----------
Es Dee Florida Corporation
A manufacturer of tubular plumbing products
and accessories.
Common Stock (B) 275 shs. 10/31/95 27,500 31,625 28,463
------------ ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Exide Corporation - N.Y.S.E.
A manufacturer of lead acid batteries.
2.9% Convertible Senior Subordinated Note
due 2005, convertible into 3,764 shares of
common stock at $57.64 per share (C) $ 300,000 12/11/95 $ 217,235 $ 217,235 $ 216,750
-------------- ------------ ------------
Exide Electronics Group, Inc. - O.T.C.
A manufacturer and servicer of uninterruptible
power systems.
Common Stock (B) 229,358 shs. 9/2/92 2,972,400 3,000,000 3,213,876
-------------- ------------ ------------
Fay's, Inc. - N.Y.S.E.
An operator of a discount drug store chain.
10% Convertible Senior Note due 1998,
convertible into 143,331 shares of common
stock at $5.23 per share $ 750,000 1/31/83 728,700 750,000 967,604
-------------- ------------ ------------
Fleming Acquisition Corporation
A supplier of high-quality, premium printed
labels for distilled spirits, wine, food and
household products.
15% Senior Subordinated Note due 2005 $ 2,770,601 * 2,734,046 2,606,940 2,960,941
Common Stock (B) 545 shs. 4/28/95 141,111 272,500 13,914
Warrant, exercisable until 2005, to
purchase 380 shares of common stock
at $.01 per share (B) 380 shs. 4/28/95 98,235 170,455 9,693
Incentive Warrant, exercisable from 1998
until 2000, to purchase 19 shares of common
stock at $.01 per share (B) 19 shs. 4/28/95 3,308 2,273 490
-------------- ------------ ------------
2,976,700 3,052,168 2,985,038
-------------- ------------ ------------
Forschner Enterprises, Inc.
Acquires controlling or substantial interests
in manufacturing and marketing entities.
3% Convertible Preferred Stock, convertible
into 100,000 shares of common stock at $10
per share (B) 100,000 shs. 7/21/94 950,000 1,000,000 950,000
-------------- ------------ ------------
Garnet Resources Corporation - O.T.C.
Explores and develops oil and gas properties
outside the United States.
9.5% Convertible Subordinated Debenture due
1998, convertible into 90,910 shares of common
stock at $5.50 per share (C) $ 500,000 12/14/93 500,000 500,000 425,000
-------------- ------------ ------------
Grand Metropolitan PLC -
London Stock Exchange
A leading international branded consumer
products group.
6.5% Convertible Senior Debenture due 2000,
convertible into 1,373 shares of common
stock at (pound)4.37 per share (C) $ 600,000 1/16/95 600,000 600,000 696,000
-------------- ------------ ------------
</TABLE>
*4/28/95, 8/1/95 and 11/1/95.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION> Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Hardy Oil & Gas USA, Inc.
Engages in the exploration and development of
oil and gas reserves.
8.46% Guaranteed Senior Note due 2004 $ 3,000,000 1/11/95 $ 2,904,300 $ 3,000,000 $ 2,901,300
Warrant, exercisable until 2004, to purchase
270,000 shares of common stock at pound 1.86
per share (B) 270,000 shs. 1/11/95 27,000 -- 45,900
-------------- ------------ ------------
2,931,300 3,000,000 2,947,200
-------------- ------------ ------------
Hein-Werner Corp. - A.S.E.
A manufacturer of automotive service and collision
repair equipment and hydraulic cylinders.
8% Convertible Subordinated Note due 1999,
convertible into 227,617 shares of common
stock at $6.59 per share $ 1,500,000 9/29/89 1,459,650 1,500,000 1,486,485
-------------- ------------ ------------
Highland Homes Holdings, Inc.
A single family homebuilder operating in the
Dallas-Fort Worth and Atlanta areas.
9.75% Senior Note due 2001 $ 3,000,000 11/18/93 2,970,300 2,959,098 3,078,000
Warrant, exercisable until 2001, to purchase
21 shares of common stock at $17,897.31
per share (B) 21 shs. 11/18/93 2 40,902 209
-------------- ------------ ------------
2,970,302 3,000,000 3,078,209
-------------- ------------ ------------
Intermetrics, Inc.
A provider of software systems, services and
products to a variety of information technology
users.
13% Senior Subordinated Note due 2002 $ 800,000 8/31/95 813,520 698,810 839,760
Senior Revolving Floating Rate Term Note
due 2002 $ 1,333,280 8/31/95 1,320,881 1,333,280 1,321,281
Common Stock (B) 11,085 shs. 8/31/95 51,961 69,281 51,961
Warrant, exercisable until 2007, to purchase
21,176 shares of Class D common stock at
$.01 per share (B) 21,176 shs. 8/31/95 2,118 104,000 2,118
-------------- ------------ ------------
2,188,480 2,205,371 2,215,120
-------------- ------------ ------------
Jackson Products, Inc.
Manufactures and distributes a variety of
industrial and highway safety products.
12.25% Senior Subordinated Note due 2004 $ 1,971,000 8/16/95 1,971,000 1,933,433 2,052,797
13.25% Cumulative Exchangeable Preferred
Stock 9,855 shs. 8/16/95 985,500 823,332 858,324
Common Stock (B) 43,426 shs. 8/16/95 43,426 43,426 43,426
Warrant, exercisable until 2005, to purchase
199,898 shares of common stock at $.01
per share (B) 199,898 shs. 8/16/95 199,735 199,735 1,999
-------------- ------------ ------------
3,199,661 2,999,926 2,956,546
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Kuhlman Corporation - N.Y.S.E.
A manufacturer of non-automotive engine
components.
Warrant, exercisable until 2002, to purchase
100,000 shares of common stock at $8.32
per share (B) 100,000 shs. 4/30/92 $ 106,000 $ 162,000 $ 360,370
-------------- ------------ ------------
Latin Communications Group
An operator of Spanish-language media in
North America.
10.4% Senior Secured Note due 2001 $1,750,000 2/14/95 1,752,275 1,750,000 1,830,675
Senior Secured Revolving Floating Rate
Note due 2002 $ 575,000 * 575,000 575,000 563,960
Secured Floating Rate Term Note due 1998 $ 187,500 12/1/95 182,588 187,500 182,756
7% Convertible Preferred Stock, convertible
into 18,000 shares of common stock at $10
per share 18,000 shs. 2/14/95 160,549 180,000 165,869
Convertible Preferred Stock, convertible into
32,000 shares of common stock at $10
per share 32,000 shs. 2/14/95 240,000 320,000 240,000
Common Stock (B) 11,875 shs. 12/1/95 93,783 125,004 93,783
-------------- ------------ ------------
3,004,195 3,137,504 3,077,043
-------------- ------------ ------------
Maloney Industries, Inc.
Engineers and manufactures process systems for
the oil and gas industry.
13% Subordinated Note due 2004 $2,250,000 10/26/95 2,378,250 2,250,000 2,423,700
Limited Partnership Interest (B) 568 uts. 10/20/95 506,250 675,000 506,250
Warrant, exercisable until 2004, to purchase
297 shares of common stock at $.01
per share (B) 297 shs. 10/26/95 297 -- 297
-------------- ------------ ------------
2,884,797 2,925,000 2,930,247
-------------- ------------ ------------
Maxtec International Corp.
A manufacturer and distributor of precision
test and measurement equipment and overhead
crane control systems.
12.5% Subordinated Secured Note due 2003 $ 659,340 6/28/95 673,120 493,668 688,351
Senior Revolving Credit Facility due 2001 $ 659,341 6/28/95 659,341 659,341 651,626
Floating Rate Senior Secured Note due 2001 $ 989,011 6/28/95 979,121 989,011 981,199
Common Stock (B) 76,923 shs. 6/28/95 192,115 230,769 173,077
Warrant, exercisable from 1998 until 2005,
to purchase 39,563 shares of common stock
at $.01 per share (B) 39,563 shs. 6/28/95 98,581 171,429 39,563
-------------- ------------ ------------
2,602,278 2,544,218 2,533,816
-------------- ------------ ------------
Mercury Computer Systems, Inc.
A designer, manufacturer and marketer of
computer systems.
Common Stock (B) 500,000 shs. 12/21/87 1,487,700 1,500,000 2,295,000
-------------- ------------ ------------
</TABLE>
*7/13/95 and 12/1/95.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Monro Muffler Brake, Inc. - O.T.C.
An operator of retail muffler and brake shops.
Common Stock 107,505 shs. 4/19/85 $ 173,198 $ 141,419 $ 1,342,469
-------------- ------------ ------------
Nu Horizons Electronics Corp. - O.T.C.
A distributor of high technology active and
passive electronic devices.
8.25% Convertible Subordinated Note due
2002, convertible into 235,134 shares of
common stock at $9 per share $2,116,203 8/31/94 2,137,365 2,116,203 3,547,575
-------------- ------------ ------------
PAR Acquisition Corp.
A manufacturer of fuel handling systems for
nuclear power plants and hazardous waste.
14.5% Senior Subordinated Note due 2000 $ 833,333 2/5/93 832,000 833,333 881,833
8% Convertible Preferred Stock due 2001,
convertible into 83,333 shares of common
stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 150,847
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 44,800
-------------- ------------ ------------
1,332,000 1,333,333 1,077,480
-------------- ------------ ------------
Pharmaceutical Buyers, Inc.
A group purchasing organization which specializes
in arranging and negotiating contracts for the
purchase of pharmaceutical goods and medical
equipment.
10.5% Senior Secured Note due 2005 $ 967,500 11/30/95 1,008,232 967,500 1,017,810
10.5% Senior Secured Convertible Note
due 2005, convertible into 4 shares of
common stock at $50,000 per share $ 195,000 11/30/95 205,355 195,000 207,870
Common Stock (B) 7 shs. 11/30/95 253,125 337,500 253,125
-------------- ------------ ------------
1,466,712 1,500,000 1,478,805
-------------- ------------ ------------
Piedmont Holding, Inc.
A general aviation fixed based operator with
repair, maintenance and overhaul certification.
12% Senior Subordinated Note due 2001 $2,714,283 7/15/92 2,736,540 2,714,283 2,936,311
Senior Redeemable Cumulative Preferred Stock 281,939 shs. 7/15/92 281,939 281,939 281,939
Common Stock (B) 3,771 shs. 7/15/92 2,564 3,771 81,544
Warrant, exercisable until 2001, to purchase
5,042 shares of common stock at $.05
per share (B) 5,042 shs. 7/15/92 3,227 -- 108,827
-------------- ------------ ------------
3,024,270 2,999,993 3,408,621
-------------- ------------ ------------
PRN Holdings, Inc.
Rents critical care equipment to hospitals
and other healthcare providers.
10.25% Senior Subordinated Note due 2004 $3,000,000 9/30/94 2,876,100 2,943,750 3,186,300
Warrant, exercisable from 1997 until 2004, to
purchase 33 shares of common stock at $.01
per share (B) 33 shs. 9/30/94 2,000 56,250 358,186
-------------- ------------ ------------
2,878,100 3,000,000 3,544,486
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Protein Genetics, Inc.
A producer of bovine artificial insemination
products, related breeding and healthcare
products and specialty genetics sold to the
dairy and beef industries.
11.67% Senior Secured Note due 2004 $1,200,000 8/12/94 $ 1,184,160 $ 1,200,000 $ 1,281,600
11.51% Junior Secured Note due 1999 $ 800,000 8/12/94 783,040 800,000 819,200
9.8% Redeemable Exchangeable
Preferred Stock 10,000 shs. 8/12/94 847,900 1,000,000 940,100
Common Stock (B) 1,492 shs. 8/12/94 15 -- 109,718
-------------- ------------ ------------
2,815,115 3,000,000 3,150,618
-------------- ------------ ------------
RailTex, Inc. - O.T.C.
An operator of short-line railroads in the Midwest,
West and Canada.
12% Senior Subordinated Note due 2002 $1,500,000 2/16/93 1,599,150 1,500,000 1,785,750
Common Stock (B) 125,000 shs. 2/16/93 1,200,000 1,200,000 2,493,750
-------------- ------------ ------------
2,799,150 2,700,000 4,279,500
-------------- ------------ ------------
Rent-Way, Inc. - O.T.C.
Operates rent-to-own stores in Ohio,
Pennsylvania and Florida.
10% Convertible Subordinated Note due 2002,
convertible into 189,753 shares of common
stock at $10.54 per share (C) $2,000,000 7/18/95 1,991,220 2,000,000 2,089,080
Warrant, exercisable until 2002, to purchase
20,000 shares of common stock at $10.54
per share (B) (C) 20,000 shs. 7/18/95 200 -- 200
-------------- ------------ ------------
1,991,420 2,000,000 2,089,280
-------------- ------------ ------------
Sandoz Capital BVI, Ltd.
A manufacturer of chemicals and pharmaceuticals.
2% Convertible Note due 2002, convertible
into 1,328 shares of common stock at $91.72
per share (C) $ 150,000 9/28/95 121,755 122,554 141,750
-------------- ------------ ------------
Sequentia, Inc.
A manufacturer and distributor of fiberglass
reinforced panels used in commercial, industrial
and residential applications.
12% Subordinated Note due 2004 $2,281,400 12/14/95 2,418,284 1,803,697 2,434,026
Limited Partnership Interest of KS
Holdings, L.P. (B) 7,186 uts. 12/14/95 538,950 718,600 538,950
Warrant, exercisable until 2004, to purchase
5,449 shares of common stock at $.01 per
share (B) 5,449 shs. 12/14/95 5,449 479,094 5,449
-------------- ------------ ------------
2,962,683 3,001,391 2,978,425
-------------- ------------ ------------
Shelter Components Corporation - A.S.E.
A distributor of tools and supplies to the mobile
home industry.
Common Stock 27,536 shs. 11/5/81 8,356 9,399 428,356
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Softkey International, Inc. - O.T.C.
A leading developer and publisher of value-priced
high-quality, consumer software for personal
computers, primarily produced on CD-ROM.
5.5% Convertible Note due 2000, convertible
into 25,094 shares of common stock at $53
per share (C) $1,330,000 12/29/95 $ 996,363 $ 996,363 $ 994,175
-------------- ------------ ------------
Staples, Inc. - O.T.C.
An owner and operator of high-volume office
superstores.
4.5% Convertible Note due 2000, convertible
into 35,606 shares of common stock at $33
per share (C) $1,175,000 9/12/95 1,175,000 1,175,000 1,175,000
-------------- ------------ ------------
Star International Holdings, Inc.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $1,755,224 5/27/94 1,675,010 1,755,224 1,783,834
10.5% Subordinated Note due 2004 $ 716,418 5/27/94 716,418 716,418 718,066
Common Stock (B) 4,310 shs. 5/27/94 259,735 259,735 233,762
Warrant, exercisable until 2004, to purchase
3,224 shares of common stock at $.01
per share (B) 3,224 shs. 5/27/94 32 -- 32
-------------- ------------ ------------
2,651,195 2,731,377 2,735,694
-------------- ------------ ------------
Steerage Corporation
A manufacturer and designer of marine electronic
devices including navigation and control systems,
sensors, radar and communication systems.
10% Subordinated Note due 2003 $2,470,588 11/12/93 2,456,260 2,470,588 2,629,941
Class A Common Stock (B) 70,588 shs. 11/12/93 544,235 529,412 662,294
-------------- ------------ ------------
3,000,495 3,000,000 3,292,235
-------------- ------------ ------------
Summey Outdoor Advertising, Inc.
An operator of an outdoor advertising business
in North Carolina and South Carolina.
12% Senior Note (with contingent interest)
due 1995 (B) $ 937,500 12/13/83 886,500 937,500 468,750
10.25% Senior Note due 1999 $ 743,750 9/30/87 669,003 743,750 371,875
10.25% Convertible Senior Note due 1999,
convertible into 4% of the Company $ 50,000 9/30/87 48,795 50,000 25,000
-------------- ------------ ------------
1,604,298 1,731,250 865,625
-------------- ------------ ------------
Supreme Industries, Inc. - A.S.E.
A manufacturer of modular homes and truck bodies.
8.6% Convertible Subordinated Note due 1996,
convertible into 87,736 shares of common
stock at $4.31 per share $ 378,144 12/30/86 347,099 378,144 661,310
Common Stock (B) 429,510 shs. 5/23/79 816,328 815,733 3,237,432
Common Stock of Contempri Homes, Inc. (B) 225,640 shs. 12/31/92 7,040 123,801 7,040
Common Stock of TGC Industries, Inc. (B) 19,082 shs. 9/30/86 9,497 9,497 16,099
Warrant, exercisable until 1996, to purchase
124,102 shares of common stock at $5.45
per share (B) 225,640 shs. 12/31/92 116,761 -- 396,891
-------------- ------------ ------------
1,296,725 1,327,175 4,318,772
-------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Telex Communications, Inc.
A producer of electronic and communications
products.
Warrant, exercisable until 2004, to purchase 9,239
shares of common stock at $.01 per share (B) 9,239 shs. 5/30/89 $ 92 $ 9 $ 2,446
-------------- ------------ ------------
Thermo Electron Corporation - N.Y.S.E.
Manufactures electronic medical equipment.
4.25% Convertible Note due 2003, convertible
into 13,227 shares of common stock at $56.70
per share (C) $ 750,000 11/28/95 750,000 750,000 821,250
-------------- ------------ ------------
TransMontaigne Oil Company
An independent petroleum products marketing
company.
12.75% Senior Subordinated Debenture
due 2000 $1,200,000 3/28/91 1,274,280 1,173,226 1,293,600
Common Stock (B) 258,720 shs. * 400,000 798,595 598,916
Warrant, exercisable until 2001, to purchase
74,606 shares of common stock at $3.60
per share (B) 74,606 shs. 3/28/91 7,461 42,000 7,461
-------------- ------------ ------------
1,681,741 2,013,821 1,899,977
-------------- ------------ ------------
Turner Broadcasting System, Inc. - A.S.E.
Engages in cable TV broadcasting.
Zero Coupon Convertible Subordinated Note
due 2007, convertible into 39,500 shares of
common stock of $26.88 per share (C) $3,090,000 ** 1,220,703 1,363,254 1,398,225
-------------- ------------ ------------
Unidata, Inc.
A manufacturer and distributor of database
management software.
11.5% Senior Subordinated Note due 2003 $2,500,000 12/14/95 2,538,500 2,376,480 2,551,750
Common Stock (B) 125,000 shs. 12/14/95 375,000 500,000 375,000
Warrant, exercisable from 1997 until 2003,
to purchase 62,500 shares of common stock
at $1 per share (B) 62,500 shs. 12/14/95 625 124,250 625
-------------- ------------ ------------
2,914,125 3,000,730 2,927,375
-------------- ------------ ------------
United States Filter Corporation - N.Y.S.E.
A designer and manufacturer of systems and
equipment for the water and waste water
treatment industry.
6% Convertible Note due 2005, convertible
into 18,182 shares of common stock at $27.50
per share (C) $ 500,000 9/13/95 500,000 500,000 582,500
-------------- ------------ ------------
</TABLE>
*3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95.
**2/6/92, 4/21/94 and 6/16/94.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 12/31/95
Corporate Restricted Securities (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Unocal Corporation - N.Y.S.E.
An integrated crude oil and natural gas company
with interest in chemical geothermal energy and
metals.
$3.50 Convertible Preferred Stock, convertible
into 8,130 shares of common stock at $30.75
per share (C) 5,000 shs. 7/21/92 $ 250,000 $ 250,000 $ 271,250
------------ ------------ ------------
U.S. Netting, Inc.
A manufacturer of plastic netting for a wide
variety of industries.
11% Senior Secured Note due 2005 $1,676,700 5/3/95 1,854,095 1,676,700 1,893,497
12% Subordinated Note due 2005 $ 652,050 5/3/95 733,622 617,314 763,551
Common Stock (B) 4,911 shs. 5/3/95 162,652 391,230 162,652
Warrant, exercisable until 2005, to purchase
2,795 shares of common stock at $.01
per share (B) 2,795 shs. 5/3/95 92,549 35,923 92,549
------------ ------------ ------------
2,842,918 2,721,167 2,912,249
------------ ------------ ------------
Wright & Lato, Inc.
A manufacturer of gold wedding bands and rings.
15% Subordinated Note due 1996 $ 200,750 12/6/83 182,580 200,750 200,750
13% Convertible Subordinated Note due
1996, convertible into 15,000 shares of
common stock at $4.28 per share $ 64,250 12/6/83 63,363 64,250 63,370
------------ ------------ ------------
245,943 265,000 264,120
------------ ------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $103,353,466 107,891,090 122,100,451
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 12/31/95
Corporate Public Securities: Rate Date Amount (Note 2B) (Note 2A)
-------- ------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 5.98%
AMR Corporation 6.125% 11/1/24 $ 800,000 799,680 828,000
Albany International Corp. 5.250 3/15/02 610,000 545,487 544,425
Comcast Corporation 1.125 4/15/07 750,000 336,642 375,000
General Instrument Corporation 5.000 6/15/00 750,000 748,314 821,250
Hollinger, Inc. 0.000 10/15/13 4,000,000 1,275,782 1,240,000
Leucadia National Corporation 5.250 2/1/03 1,000,000 1,000,000 1,020,000
Magna International, Inc. 5.000 10/15/02 875,000 888,125 888,125
MEDIQ Incorporated 7.500 7/15/03 1,000,000 1,000,000 790,000
Savoy Pictures Entertainment, Inc. 7.000 7/1/03 1,250,000 1,287,500 1,025,000
Time Warner, Inc. 0.000 6/22/13 2,000,000 767,880 825,000
United States Cellular Corporation 6.089 6/15/15 2,000,000 633,198 705,000
W M S Industries, Incorporated 5.750 11/30/02 1,160,000 1,013,800 1,015,000
------------ ---------- ------------
Total Convertible Bonds $ 16,195,000 10,296,408 10,076,800
============ ---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Warrants Market Value
Interest Due or Principal Cost at 12/31/95
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
-------- ------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Bonds - 26.18%
Affinity Group, Inc. 11.500% 10/15/03 $ 1,000,000 $ 1,010,000 $ 1,030,000
American Rice, Inc. 13.000 7/31/02 1,250,000 1,177,094 1,175,000
Atlas Air, Inc. 12.250 12/1/02 2,000,000 2,000,000 2,045,000
CF Cable TV Inc. 9.125 7/15/07 650,000 650,000 667,063
Cabot Safety Acquisition Corporation 12.500 7/15/05 1,000,000 1,000,000 1,060,000
Central Rents, Inc. 12.875 12/15/03 1,880,000 1,755,412 1,880,000
Chesapeake Energy Corporation 12.000 3/1/01 1,800,000 1,722,392 1,935,000
Consolidated Cigar Corporation 10.500 3/1/03 500,000 500,000 512,500
Container Corporation 9.750 4/1/03 1,000,000 1,000,000 975,000
Continental Cablevision, Inc. 10.625 6/15/02 500,000 500,000 533,750
Crown Packaging Ltd. 10.750 11/1/00 750,000 750,000 710,625
Data Documents, Inc. 13.500 7/15/02 3,028,000 3,033,290 3,300,520
Decorative Homes Accents, Inc. 13.000 6/30/02 1,000,000 1,000,000 990,000
Florist Transworld Delivery, Inc. 14.000 12/15/01 1,175,000 1,136,678 1,210,250
Foodbrands America, Inc. 9.750 7/15/00 1,000,000 933,379 955,000
Harman International Industries Incorporated 12.000 8/1/02 1,000,000 992,770 1,090,000
Harrah's Operating Company, Inc. 8.750 3/15/00 1,000,000 957,400 1,012,500
Harvard Industries, Inc. 11.125 8/1/05 600,000 604,813 600,000
Hosiery Corporation of America 13.750 8/1/02 1,000,000 987,800 1,080,000
Imax Corporation 7.000 3/1/01 1,400,000 1,264,137 1,375,500
Indah Kiah International Corporation 11.875 6/15/02 1,000,000 1,000,000 1,010,000
International Wire Group, Inc. 11.750 6/1/05 750,000 750,000 714,375
Ivex Packaging Corporation 12.500 12/15/02 250,000 266,562 265,000
Jones Intercable, Inc. 9.625 3/15/02 750,000 750,000 806,250
Jordan Industries, Inc. 10.375 8/1/03 1,000,000 1,000,000 890,000
Key Plastics, Inc. 14.000 11/15/15 750,000 760,462 765,000
MEDIQ/PRN Life Support Services, Inc. 11.125 7/1/99 1,000,000 1,000,000 1,000,000
Northwest Airlines Corp. 12.091 12/31/00 949,192 984,786 1,006,143
Paracelsus Healthcare Corporation 9.875 10/15/03 1,000,000 1,000,000 1,015,000
Peoples Telephone Company Inc. 12.250 7/15/02 750,000 750,000 600,000
RXI Holdings, Inc. 14.000 7/15/02 2,800,000 2,752,430 2,716,000
Renco Metals, Inc. 12.000 7/15/00 1,000,000 1,000,000 1,080,000
SFX Broadcasting, Inc. 11.375 10/1/00 1,000,000 1,000,000 1,057,500
Telex Communications, Inc. 12.000 7/15/04 1,500,000 1,500,000 1,522,500
Trans-Resources, Inc. 11.875 7/1/02 1,000,000 1,032,500 950,000
Tultex Corporation 10.625 3/15/05 1,000,000 1,000,000 1,025,000
US Air, Inc. 9.625 2/1/01 1,000,000 1,000,000 870,000
Van De Kamps, Inc. 12.000 9/15/05 350,000 350,000 364,000
Venture Holdings Trust 9.750 4/1/04 1,300,000 1,300,000 1,085,500
Waban, Inc. 11.000 5/15/04 1,000,000 1,000,000 1,025,000
Worldcorp, Inc. 13.875 8/15/97 235,000 229,125 229,125
------------ ------------ ------------
TOTAL BONDS $ 43,917,192 43,401,030 44,134,101
============ ------------ ------------
Warrants - .34%
Central Rents, Inc. (B) 1,880 shs. 67,837 112,800
Data Documents, Inc. (B) 33,894 shs. -- 288,102
Florist Transworld Delivery, Inc. (B) 1,175 shs. 41,250 58,750
RXI Holdings, Inc. (B) 2,800 shs. 50,540 56,000
Western Transmedia Co., Inc. (B) 183,117 shs. 45,780 68,669
------------ ------------
TOTAL WARRANTS 205,407 584,321
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Market Value
Corporate Public Cost at 12/31/95
Securities:-(Continued) Shares (Note 2B) (Note 2A)
------------ ------------ ------------
<S> <C> <C> <C>
Common Stock - 6.85%
Allmerica Financial Corporation 7,000 shs. $ 147,000 $ 189,000
Amerisource Health Corporation (B) 9,483 shs. 3,216 324,793
Arbor Software Corporation (B) 350 shs. 5,950 16,538
Ascent Entertainment Group, Inc.
(B) 52,500 shs. 795,816 826,875
Benson Petroleum, Ltd. (B) 200,000 shs. 154,408 152,000
Boston Beer Company (B) 3,500 shs. 70,000 83,125
CKS Group, Inc. (B) 1,400 shs. 23,800 54,600
Canadian National Railway Company
(B) 7,000 shs. 84,000 108,500
Computer Horizons Corporation 25,900 shs. 342,825 984,200
DST Systems, Inc. (B) 3,500 shs. 73,500 99,750
Data Documents, Inc. (B) 10,500 shs. 94,500 90,563
Decorative Homes Accents, Inc. (B) 1,000 shs. -- 10,000
Esmor Correctional Services, Inc.
(B) 20,625 shs. 108,814 180,469
Estee Lauder Cosmetics, Inc. (B) 3,500 shs. 91,000 122,063
Extended Stay America, Inc. (B) 10,500 shs. 136,500 288,750
Foodbrands America Inc. (B) 52,500 shs. 413,438 630,000
Gucci Group NV (B) 3,500 shs. 77,000 136,063
Harvard Industries, Inc. (B) 17,500 shs. 416,500 446,250
Lexmark International Group, Inc.
(B) 34,300 shs. 686,000 625,975
MSC Industrial Direct Company (B) 7,000 shs. 133,000 192,500
MEDIQ Incorporated (B) 20,000 shs. 765,529 862,600
Neuromedical Systems, Inc. (B) 7,000 shs. 105,000 140,875
Pete's Brewing Company (B) 700 shs. 12,600 9,800
Sandisk Corporation (B) 700 shs. 7,000 10,500
Scopus Technology, Inc. (B) 350 shs. 4,200 8,838
Southwest Airlines 71,429 shs. 1,000,000 1,660,724
Staffing Resources, Inc. 105,000 shs. 577,500 1,548,750
Sweetwater, Inc. (B) 26,000 shs. 182,000 97,500
Total Renal Care Holdings, Inc. (B)17,500 shs. 271,250 516,250
United States Filter Corporation
(B) 17,500 shs. 395,937 465,938
Western Transmedia Co., Inc. (B) 405,590 shs. 760,889 659,084
------------ ------------
Total Common Stock 7,939,172 11,542,873
------------ ------------
Convertible Preferred Stock - 2.12%
AMC Entertainment Inc. 29,880 shs. 747,000 1,217,610
Integon Corporation 19,700 shs. 985,000 1,182,000
Occidental Petroleum Corporation 15,900 shs. 795,000 987,788
RXI Holdings, Inc. 186,700 shs. 186,700 186,700
------------ ------------
Total Convertible Preferred Stock 2,713,700 3,574,098
------------ ------------
Total Corporate Public Securities 64,555,717 69,912,193
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Market Value
Due Principal Cost at 12/31/95
Short-Term Securities: Yield Date Amount (Note 2B) (Note 2A)
------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - 1.88%
American Electric Power Company, Inc. 6.057% 1/5/96 $ 2,075,000 $ 2,073,605 $ 2,073,605
Texas Utilities Electric Co. 6.306 1/2/96 1,100,000 1,099,808 1,099,808
------------ ------------ ------------
TOTAL SHORT-TERM SECURITIES $ 3,175,000 3,173,413 3,173,413
============ ------------ ------------
TOTAL INVESTMENTS - 115.79% $175,620,220 195,186,057
============ ------------
Other Assets - 4.44 7,478,352
Liabilities - (20.23) (34,101,365)
------- ------------
TOTAL NET ASSETS - 100.00% $168,563,044
====== ============
</TABLE>
(A) In each of the convertible note, warrant, convertible preferred and common
stock investments, the issuer has agreed to provide certain registration
rights.
(B) Non-income producing security.
(C) Indicates that securities are eligible for sale under S.E.C. Rule 144A.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
December 31, 1995
INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
Fair Value
at 12/31/95
CORPORATE RESTRICTED SECURITIES: (Note 2A)
-------------
<S> <C>
ADVERTISING - 3.51%
Ammirati & Puris, Inc. $ 1,968,225
Latin Communications Group 3,077,043
Summey Outdoor Advertising, Inc. 865,625
----------------
5,910,893
----------------
AUTO PARTS - .80%
Monro Muffler Brake, Inc. 1,342,469
----------------
BEVERAGES - .11%
Delta Beverage Group, Inc. 181,486
----------------
BUILDING MATERIALS - 4.64%
Highland Homes Holdings, Inc. 3,078,209
Shelter Components Corporation 428,356
Supreme Industries, Inc. 4,318,772
----------------
7,825,337
----------------
COMMUNICATIONS - 1.12%
Classic Sports Partners, L.P. 480,000
Telex Communications, Inc. 2,446
Turner Broadcasting System, Inc. 1,398,225
----------------
1,880,671
----------------
ELECTRICAL EQUIPMENT/
ELECTRONICS - 17.63%
Catalina Lighting, Inc. 1,435,928
CompuCom Systems, Inc. 9,690,323
Control Devices, Inc. 3,207,298
Exide Electronics Group, Inc. 3,213,876
Intermetrics, Inc. 2,215,120
Mercury Computer Systems, Inc. 2,295,000
Nu Horizons Electronics Corp. 3,547,575
Steerage Corporation 3,292,235
Thermo Electron Corporation 821,250
----------------
29,718,605
----------------
HEALTH CARE - 3.73%
D&K Wholesale Drug, Inc. 2,736,095
PRN Holdings, Inc. 3,544,486
----------------
6,280,581
----------------
JEWELRY - .16%
Wright & Lato, Inc. 264,120
----------------
MANUFACTURING-INDUSTRIAL AND
CONSUMER PRODUCTS - 17.88%
Consumer Product Enterprises, Inc. 2,801,992
Elgin National Industries, Inc. 2,296,713
Ermanco Inc. 162,500
Es Dee Florida Corporation 28,463
Exide Corporation 216,750
Fleming Acquisition Corporation 2,985,038
Forschner Enterprises, Inc. 950,000
Hein-Werner Corp. 1,486,485
Jackson Products, Inc. 2,956,546
Fair Value
at 12/31/95
Corporate Restricted Securities: (Note 2A)
-------------
(Continued)
MANUFACTURING-INDUSTRIAL AND
CONSUMER PRODUCTS (Continued)
Kuhlman Corporation $ 360,370
Maxtec International Corp. 2,533,816
PAR Acquisition Corp. 1,077,480
Sandoz Capital BVI, Ltd. 141,750
Sequentia, Inc. 2,978,425
Star International Holdings, Inc. 2,735,694
Unidata, Inc. 2,927,375
United States Filter Corporation 582,500
U.S. Netting, Inc. 2,912,249
----------------
30,134,146
----------------
METAL FABRICATING - .27%
Engel Industries, Inc. 463,750
----------------
MISCELLANEOUS - 2.46%
Protein Genetics, Inc. 3,150,618
Softkey International, Inc. 994,175
----------------
4,144,793
----------------
OIL AND GAS SERVICE - 9.00%
American Exploration Company 2,993,426
Associated Natural Gas Corporation 3,325,350
BP Prudhoe Bay Royalty Trust 382,883
Garnet Resources Corporation 425,000
Hardy Oil & Gas USA, Inc. 2,947,200
Maloney Industries, Inc. 2,930,247
TransMontaigne Oil Company 1,899,977
Unocal Corporation 271,250
----------------
15,175,333
----------------
PUBLISHING - .12%
Edmund Publications Corporation 200,000
----------------
RECREATIONAL SUPPLIES/
EQUIPMENT - .73%
The Coast Distribution System 1,231,455
----------------
RETAILING - 5.43%
Cains Foods, L.P. 2,756,270
Fay's, Inc. 967,604
Grand Metropolitan PLC 696,000
Pharmaceutical Buyers, Inc. 1,478,805
Rent-Way, Inc. 2,089,280
Staples, Inc. 1,175,000
----------------
9,162,959
----------------
SERVICES - 4.85%
Corrections Corporation of America 495,732
Piedmont Holding, Inc. 3,408,621
RailTex, Inc. 4,279,500
----------------
8,183,853
----------------
Total Corporate Restricted
Securities - 72.44% $ 122,100,451
================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS MASSMUTUAL CORPORATE INVESTORS
- --------------------------------------------------------------------------------
1. History
MassMutual Corporate Investors (the "Trust") is a closed-end, non-diversified
investment company. Massachusetts Mutual Life Insurance Company
("MassMutual") acts as its investment adviser.
The Trust commenced operations in 1971 as a Delaware corporation. Pursuant to
an Agreement and Plan of Reorganization dated November 14, 1985, approved by
shareholders, the Trust was organized as a Massachusetts business trust
effective November 28, 1985.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Valuation of Investments:
Nearly all securities which are acquired by the Trust directly from the
issuers and shares into which such securities may be converted or which may
be purchased on the exercise of warrants attached to such securities will be
subject to legal or contractual delays in or restrictions on resale and will
therefore be "restricted securities". Generally speaking, as contrasted with
open-market sales of unrestricted securities which may be effected
immediately if the market is adequate, restricted securities can be sold only
in a directly negotiated transaction to a limited number of purchasers or in
a public offering for which a registration statement is in effect under the
Securities Act of 1933.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Trustees. Each restricted security is valued by the Trustees as
of the time of the acquisition thereof and quarterly thereafter. The Trustees
have established guidelines to aid in the valuation of each security.
Generally, restricted securities are initially valued at cost or less at the
time of acquisition by the Trust. Values greater or less than cost are used
thereafter for restricted securities in appropriate circumstances. Among the
factors ordinarily considered are the existence of restrictions upon the sale
of the security by the Trust; an estimate of the existence and extent of a
market for the security; the estimated period of time during which the
security will not be freely marketable; the estimated expenses of registering
or otherwise qualifying the security for public sale; estimated underwriting
commissions if underwriting would be required to effect a sale; in the case
of a convertible security, whether or not it would trade on the basis of its
stock equivalent; if it is a debt obligation which would trade independently
of any equity equivalent, the current yields on comparable securities; the
estimated amount of the floating supply of such securities available; the
proportion of the issue held by the Trust; any changes in the financial
condition and prospects of the issuers; the existence of merger proposals or
tender offers affecting the issuers; and in addition any other factors
affecting fair value, all in accordance with the Investment Company Act of
1940. In making valuations, opinions of counsel are relied upon as to whether
or not securities are restricted securities and as to the legal requirements
for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at a
discount from the market price of such unrestricted securities. The Trustees,
however, consider all factors in fixing any discount, including the filing of
a registration statement for such securities under the Securities Act of 1933
and any other developments which are likely to increase the probability that
the securities may be publicly sold by the Trust without restriction.
The Board of Trustees of the Trust meets at least once in each quarter to
value the Trust's portfolio securities as of the close of business on the
last business day of the preceding quarter. This valuation requires the
approval of a majority of the Trustees of the Trust, including a majority of
Trustees who are not interested persons of the Trust (otherwise than as
Trustees) of MassMutual. In making valuations, the Trustees will consider
reports by MassMutual analyzing each portfolio security in accordance with
the relevant factors referred to above. MassMutual has agreed to make such
reports to the Trust at least quarterly.
The financial statements include restricted securities valued at $122,100,451
(72.44% of net assets) as of December 31, 1995 ($86,801,228 at December 31,
1994) whose values have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. Due to the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the differences could be material.
The values for corporate public securities are stated at the last reported
sales price or at prices based upon quotations obtained from brokers and
dealers as of December 31, 1995, subject to discount where appropriate, and
are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
market and short-term securities having a maturity of sixty days or less are
valued at amortized cost which approximates market value.
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATMENTS CONTINUED
- --------------------------------------------------------------------------------
B. Accounting for Investments:
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis.
The cost basis of debt securities is not adjusted for amortization of premium
or accrual of discount since the Trust does not generally intend to hold such
investments until maturity; however, the Trust has elected to accrue for
financial reporting purposes, certain discounts which are required to be
accrued for federal income tax purposes.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
The Trust does not accrue income when payment is delinquent or when
management believes payment is questionable.
C. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
D. Federal Income Taxes:
No provision for federal taxes on net investment income and short-term
capital gains is considered necessary because the Trust has elected to be
taxed as a "regulated investment company" under the Internal Revenue Code,
and intends to maintain this qualification and to distribute substantially
all of its net taxable income to its shareholders. In any year when net
long-term capital gains are realized by the Trust, management, after
evaluating the prevailing economic conditions, will recommend to the Trustees
either to designate the net realized long-term gains as undistributed and to
pay the federal capital gains taxes thereon or to distribute such net gains.
During the year ended December 31, 1995, net realized long-term capital gains
for financial reporting purposes and federal income tax purposes are
$5,671,090 and were retained by the Trust and taxed at the rate of 35%
thereon.
3. Management Fee
Under an investment services contract, MassMutual has agreed to invest for
its general account concurrently with the Trust in each restricted security
purchased by the Trust. MassMutual, in addition to originating and sharing in
the purchase of such securities, represents the Trust in any negotiations
with issuers, investment banking firms, securities brokers or dealers and
other institutions or investors relating to the Trust's investments.
MassMutual provides a continuing review of the investment operations of the
Trust. MassMutual also provides the Trust with office space and office
equipment, accounting and bookkeeping services, and necessary executive,
clerical and secretarial personnel for the performance of the foregoing
services.
Under the investment services contract, as amended July 1, 1988, the Trust
pays MassMutual a quarterly base rate (the "Base Fee Rate") of 5/16 of 1% of
the value of the Trust's net assets as of the end of each fiscal quarter,
approximately equivalent to 1.25% of the net asset value of the Trust on an
annual basis, plus or minus a quarterly performance adjustment (the
"Performance Adjustment") of up to 1/16 of 1%, approximately equivalent to
.25% on an annual basis.
The Performance Adjustment is based on the Trust's performance as compared to
a benchmark rate of return (the "Target Rate") equal to 5.0 percentage points
plus an unweighted, arithmetic average of the rates of return on the Standard
& Poor's Industrial Stock Price Index and the Lehman Brothers Intermediate
Corporate Bond Index over a rolling three-year period (the "Measurement
Period") comprising the twelve quarters ending on the last day of each
quarter (the "Valuation Date"). The Performance Adjustment is equal to 5% of
the difference between the Trust's actual rate of return over the Measurement
Period and the Target Rate. If the Trust's actual rate of return exceeds the
Target Rate, the Base Fee Rate is increased by an amount equal to the
Performance Adjustment; if the Trust's actual rate of return is less than the
Target Rate, the Base Fee Rate is reduced by the Performance Adjustment. The
advisory fee payable by the Trust is equal to the Base Fee Rate (as adjusted
by the Performance Adjustment) times the net asset value of the Trust as of
the Valuation Date. The Performance Adjustment for the quarter ended December
31, 1995 was plus .0625%.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
4. Note Payable
On November 5, 1993, the Trust sold to MassMutual at par a $20,000,000 Senior
Fixed Rate Convertible Note due November 15, 2000 (the "Note") which accrues
at 5.33% per annum. The Note holder, at their option, can convert the
principle amount of the Note into common shares. The dollar amount of
principle converted would be converted into an equivalent dollar amount of
common shares based upon the average price of the common shares for ten
business days prior to the notice of conversion.
5. Purchases and Sales of Investments
<TABLE>
<CAPTION>
For the For the
year ended year ended
12/31/95 12/31/94
------------ ------------
Cost of Investments Acquired
----------------------------
<S> <C> <C>
Corporate restricted
securities $ 63,271,738 $ 23,121,640
Corporate public securities 55,424,224 52,613,297
Short-term securities 299,130,572 261,417,384
<CAPTION> Proceeds from Sales or Maturities
---------------------------------
Corporate restricted
securities $ 42,811,069 $ 34,933,962
Corporate public securities 72,653,154 43,122,880
Short-term securities 300,950,880 261,515,438
</TABLE>
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of December 31, 1995. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of December 31, 1995 is $19,565,837 and consists of $30,335,970
appreciation and $10,770,133 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31, 1994. The net unrealized
depreciation of investments for financial reporting and federal tax purposes
as of December 31, 1994 was $5,067,664 and consisted of $14,065,672
appreciation and $19,133,336 depreciation.
6. Quarterly Results of Investment Operations (Unaudited)
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
--------------- -------- --------- ---------
March 31, 1995 March 31, 1994
-------------------------- --------------------
<S> <C> <C>
Investment income 3,623,939 $ 3,370,804
Net investment income 2,738,763 $ .64 2,444,990 $ .57
Net realized and
unrealized gain on
investments 5,667,087 1.33 392,059 .09
<CAPTION>
June 30, 1995 June 30, 1994
------------------------ --------------------
Investment income 3,721,895 3,355,273
Net investment income 2,729,955 .64 2,427,481 .57
Net realized and
unrealized gain (loss) on
investments 4,705,181 3.45 (5,309,224) (1.25)
<CAPTION>
September 30, 1995 September 30, 1994
------------------------ --------------------
Investment income 3,857,326 3,377,134
Net investment income 2,873,688 .68 2,471,841 .59
Net realized and
unrealized gain on
investments 5,860,438 1.38 1,321,803 .31
<CAPTION>
December 31, 1995 December 31, 1994
------------------------ --------------------
Investment income 3,844,975 3,473,085
Net investment income 2,835,245 .67 2,583,244 .60
Net realized and
unrealized gain (loss) on
investments 6,754,547 1.59 (2,885,371) (.67)
</TABLE>
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26
<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Shareholders and Board of Trustees of MassMutual Corporate Investors
We have audited the accompanying statement of assets and liabilities of
MassMutual Corporate Investors as of December 31, 1995 and 1994, including the
schedule of investments as of December 31, 1995, and the related statements of
operations, cash flows and changes in net assets for each of the years then
ended, and the financial highlights for each of the nine years in the period
ended December 31, 1995, the six month period ended December 31, 1986 and the
year ended June 30, 1986. These financial statements and financial highlights
are the responsibility of the Trust'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 generally accepted auditing
standards. 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
December 31, 1995 by correspondence with the custodian and broker. 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
MassMutual Corporate Investors as of December 31, 1995 and 1994, the results of
its operations, its cash flows and the changes in its net assets for each of the
years then ended, and the financial highlights for each of the nine years in the
period ended December 31, 1995, the six month period ended December 31, 1986 and
the year ended June 30, 1986, in conformity with generally accepted accounting
principles.
/S/ COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
January 31, 1996
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27
<PAGE>
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MEMBERS OF THE BOARD OF TRUSTEES
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(Standing, left to right)
RICHARD G. DOOLEY
Retired Executive Vice President and Chief
Investment Officer of Massachusetts Mutual
Life Insurance Company
GARY E. WENDLANDT
Executive Vice President and Chief
Investment Officer of Massachusetts Mutual
Life Insurance Company
DONALD E. BENSON*
Executive Vice President and Director,
Marquette Bancshares Inc.
DONALD GLICKMAN
Chairman, Donald Glickman & Company, Inc.
(Seated, left to right)
MARSHALL D. BUTLER
Chairman and Chief Executive Officer,
AVX Corporation
MILTON COOPER
Chairman, Kimco Realty Corp.
(Inset, top to bottom)
MARTIN T. HART*
President and Director,
H Corporation
SUMNER L. FELDBERG
Chairman of the Board,
Waban, Inc.
*Member of the Audit Committee
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28
