<PAGE>
To Our Shareholders October 31, 1997
We are pleased to present MassMutual Corporate Investors' report for the first
nine months of 1997.
The Trustees declared a dividend of $.75 per share payable on November 14, 1997
to shareholders of record on October 31, 1997. This is the third consecutive
increase to the quarterly dividend. A dividend of $.73 was paid in the
preceding quarter. This increase in the dividend is attributable to higher
quarterly net investment income of $3,378,460 versus $3,066,951 a quarter ago.
The net assets of the Trust hit another all time high of $49.03 per share at
September 30, 1997 versus $45.54 per share on June 30. This translated into a
9.38% return for the third quarter, based on change in net assets with
reinvestment of dividends. This outpaced both the S&P Industrial Stock Index and
Lehman Brothers Government/Corporate Index, which were up 6.71% and 3.50%
respectively. For the first nine months of the year, the Trust's total return,
as measured by change in net assets with reinvestment of dividends was 25.19%
compared to 6.33% for the Lehman Government/Corporate and 29.02% for the S&P
Industrial Stock Index. For the third quarter ended September 30, 1997, the
results in the Lipper Closed End Funds Performance Analysis*, which classifies
the Trust in the General Bond Funds category, ranked the Trust's performance
number one for the 3 month, year to date, 1, 5, 10, and 15 year periods.
Golden Bear Acquisition Corp.; Lloyd's Barbecue Company; N2K, Inc.; Process
Chemicals, LLC; and TACC International Corporation are five new private
placement investments made during the quarter. Golden Bear manufactures asphalt
and specialty lubricating and processing oils and Lloyd's manufactures and
markets packaged barbecue meats and related products. In both cases buyout
sponsors with whom we have solid relationships made investments alongside ours.
N2K is one of the first music companies to successfully merge online technology
with original music and entertainment content. We provided financing in the
form of a bridge loan with warrants to provide growth capital until an initial
public offering was achieved. On October 19, 1997, N2K had it's initial public
offering and was able to repay our loan leaving us with warrants with a nice
unrealized gain. TACC International Corporation is a leading domestic
manufacturer of adhesives and sealants to which we provided financing for two
acquisitions. Process Chemicals was formed by a buyout group as a platform
company to acquire specialty chemical and mineral companies. All of these
investments allow us to participate in the long term growth of the companies via
their equity features while providing a weighted average coupon on their fixed
income components of approximately 12.8%. For a more complete description of
our investments in these companies, see the Schedule of Investments section of
this report.
The Trust realized over $5.8 million (or $1.38 per share) in net capital gains
during the quarter. $1.4 million (or $.34 per share) came from the partial sale
of Exide Electronics common stock. Over half of the position of this private
placement investment had been sold at quarter end. On the public securities
side, we sold our remaining position of SFX Broadcasting realizing a gain of
$1.1 million. While our realized gains for the third quarter were not as
substantial as the second quarter, our total net gains for the first nine months
of the year amounted to $25,916,624 or $6.09 per share of which $4,707,314 or
$1.11 per share represents net short term gains. Net shortterm gains are
distributed to shareholders each year.
The Trustees and management appreciate the continued interest and support of the
shareholders of Corporate Investors. We invite you to visit our new internet
site www.massmutual.com/mci.
Sincerely,
/s/ Stuart H. Reese
Stuart H. Reese
President
* Source: Lipper Analytical Services
<PAGE>
Statement of Assets and Liabilities MassMutual Corporate Investors
September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1997 - $165,771,465; 1996 - $126,197,688) $179,888,968 $134,003,508
Corporate public securities at market value
(Cost 1997 - $40,995,454; 1996 - $63,209,864) 45,966,639 65,961,287
Short term securities at cost plus earned discount which
approximates market value -- 155,000
------------ ------------
225,855,607 200,119,795
Cash -- 1,831,281
Interest and dividends receivable, net 3,988,779 3,798,623
Receivable for investments sold 3,855,606 990,381
Other assets 4,043 4,043
------------ ------------
Total assets $233,704,035 $206,744,123
============ ============
Liabilities:
Payable for investments purchased $ 3,941,700 $ 3,606,982
Management fee payable (Note 3) 782,593 683,193
Note payable (Note 4) 20,000,000 20,000,000
Interest payable (Note 4) 136,211 136,211
Accrued expenses 95,715 132,909
Other liabilities 56,444 --
------------ ------------
Total liabilities 25,012,663 24,559,295
------------ ------------
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 57,447,542 45,926,213
Undistributed net investment income (Note 2D) 3,391,077 2,807,740
Undistributed net realized gain on investments 25,916,624 20,046,191
Net unrealized appreciation of investments (Notes 2A, 2B and 5) 19,088,688 10,557,243
------------ ------------
Total net assets 208,691,372 182,184,828
------------ ------------
Total liabilities and net assets $233,704,035 $206,744,123
============ ============
Common shares issued and outstanding 4,256,724 4,256,724
============ ============
Net asset value per share $ 49.03 $ 42.80
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
2
<PAGE>
Statement of Operations MassMutual Corporate Investors
For the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 12,240,028 $ 11,334,011
Dividends 471,483 239,627
------------ ------------
Total income 12,711,511 11,573,638
------------ ------------
Expenses:
Management fee (Note 3) 2,180,847 1,997,349
Trustees' fees and expenses 80,467 74,374
Transfer Agent/Registrar's expenses 64,706 86,901
Interest (Note 4) 799,500 799,500
Reports to shareholders 20,520 25,560
Audit and legal 42,294 25,277
Other 20,207 21,076
------------ ------------
Total expenses 3,208,541 3,030,037
------------ ------------
Net investment income 9,502,970 8,543,601
------------ ------------
Net realized and unrealized gain (loss) on investments (Notes 2A and 2B):
Net realized gain on investments 25,916,624 20,046,191
Net change in unrealized appreciation/depreciation of investments 7,132,248 (9,008,594)
------------ ------------
Net gain on investments 33,048,872 11,037,597
------------ ------------
Net increase in net assets resulting from operations $ 42,551,842 $ 19,581,198
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
3
<PAGE>
Statement of Cash Flows MassMutual Corporate Investors
For the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 11,335,499 $ 10,917,615
Interest expense paid (799,500) (799,500)
Operating expenses paid (2,251,470) (2,183,309)
Federal income tax paid (6,210,942) (1,984,882)
------------ ------------
Net cash provided by operating activities 2,073,587 5,949,924
------------ ------------
Cash flows from investing activities:
Change in short-term portfolio securities, net 920,211 3,144,402
Purchase of portfolio securities (100,117,322) (88,363,740)
Proceeds from disposition of portfolio securities 109,640,091 91,430,703
------------ ------------
Net cash provided by investing activities 10,442,980 6,211,365
------------ ------------
Net cash provided by operating and investing activities 12,516,567 12,161,289
------------ ------------
Cash flows from financing activities:
Cash dividends paid from net investment income (8,684,884) (8,711,848)
Cash dividends paid from net realized gain on investments (3,915,019) (4,143,459)
------------ ------------
Net cash used for financing activities (12,599,903) (12,855,307)
------------ ------------
Net decrease in cash (83,336) (694,018)
Cash - beginning of year 83,336 2,525,299
------------ ------------
Cash - end of period $ -- $ 1,831,281
============ ============
Reconciliation of net increase (decrease) in net assets to net cash from
operating and investing activities:
Net increase in net assets resulting from operations $ 42,551,842 $ 19,581,198
------------ ------------
Increase in investments (23,369,542) (4,933,738)
Increase in interest and dividends receivable, net (972,378) (36,056)
(Increase) decrease in receivable for investments sold (3,173,072) 200,105
Increase in other assets (4,043) (4,043)
Increase (decrease) in payable for investments purchased 3,593,575 (708,523)
Increase in management fee payable 136,583 51,082
Decrease in accrued expenses (35,456) (3,854)
Decrease in accrued taxes (6,210,942) (1,984,882)
------------ ------------
Total adjustments to net assets from operations (30,035,275) (7,419,909)
------------ ------------
Net cash provided by operating and investing activities $ 12,516,567 $ 12,161,289
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS MASSMUTUAL CORPORATE INVESTORS
For the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 9,502,970 $ 8,543,601
Net realized gain on investments 25,916,624 20,046,191
Net change in unrealized appreciation/depreciation
of investments 7,132,248 (9,008,594)
------------ ------------
Net increase in net assets resulting from operations 42,551,842 19,581,198
Dividends to shareholders from:
Net investment income (1997-$1.44 per share;
1996-$1.40 per share) (6,129,683) (5,959,414)
------------ ------------
Total increase 36,422,159 13,621,784
Net Assets, beginning of year 172,269,213 168,563,044
------------ ------------
Net Assets, end of period (including undistributed net
investment income in 1997 - $3,391,077;
1996 - $2,807,740) $208,691,372 $182,184,828
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
5
<PAGE>
SELECTED PER SHARE DATA MASSMUTUAL CORPORATE INVESTORS
Selected data for each common share outstanding for the periods ended:
<TABLE>
<CAPTION>
For the
nine months For the
ended 9/30/97 year ended
(Unaudited) 12/31/96
------------- ----------
<S> <C> <C>
Net asset value:
Beginning of year $ 40.47 $ 39.60
---------- ----------
Net investment income 2.23 2.65
Net realized and unrealized gain on investments 7.77 1.84
---------- ----------
Total from investment operations 10.00 4.49
---------- ----------
Dividends from net investment income to common
shareholders (1.44) (2.70)
Distributions from net realized gain on
investments to common shareholders -- (.92)
---------- ----------
Total distributions (1.44) (3.62)
---------- ----------
Net asset value:
End of period $ 49.03 $ 40.47
========== ==========
Per share market value:
End of period $ 42.00 $ 38.50
========== ==========
Total investment return:
Market value 13.02%* 22.44%
Net asset value 25.19%* 15.42%
Net assets (in millions):
End of period $ 208.69 $ 172.27
Ratio of operating expenses to average net assets 1.29%* 1.70%
Ratio of interest expenses to average net assets .43%* .61%
Ratio of total expenses to average net assets 1.72%* 2.31%
Ratio of net investment income to average net assets 5.11%* 6.44%
Portfolio turnover 50.96%* 64.89%
</TABLE>
*Percentages represent results for the period and are not annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities - 72.03%: (A) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
AccTech, LLC
A designer and marketer of specialized cleaning
products.
Senior Floating Rate Revolving Credit Note $ 460,920 10/31/96 $ 460,920 $ 460,920 $ 440,178
due 2002
Senior Secured Series A Floating Rate Note $ 750,500 10/31/96 739,250 750,500 727,234
due 2002
10.1% Senior Secured Series A Note due 2002 $1,125,750 10/31/96 1,096,931 1,125,750 1,096,593
12% Senior Secured Series B Note due 2004 $1,098,000 10/31/96 1,155,206 997,011 1,141,481
Membership Interests (B) 5 int. 10/31/96 264,080 332,000 264,080
Warrant, exercisable until 2004, to purchase 3 int. 10/31/96 -- 109,800 --
Membership Interests at $.01 per interest (B)
---------- ---------- ----------
3,716,387 3,775,981 3,669,566
---------- ---------- ----------
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 2004 $3,000,000 12/27/91 2,964,600 2,961,288 3,197,100
Warrant, exercisable until 2004, to purchase 103,342 shs. 12/27/91 49,714 38,712 499,452
common stock at $15.53 per share (B)
---------- ---------- ----------
3,014,314 3,000,000 3,696,552
---------- ---------- ----------
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 $1,166,667 11/23/93 1,142,867 1,166,667 1,212,867
---------- ---------- ----------
Associated Vintage Group, Inc.
A provider of custom wine production services in
the United States.
11% Senior Subordinated Note due 2005 $3,335,000 3/19/97 3,274,636 3,169,968 3,364,681
Common Stock (B) 31,350 shs. 3/19/97 123,750 165,000 123,738
Warrant, exercisable until 2005, to purchase 94,107 shs. 3/19/97 94,107 173,346 94,107
common stock at $.01 per share (B)
---------- ---------- ----------
3,492,493 3,508,314 3,582,526
---------- ---------- ----------
BP Prudhoe Bay Royalty Trust - N.Y.S.E.
A trust which shares in the production of petroleum
from the Alaskan North Slope.
Beneficial Interests 26,180 uts. 2/28/89 654,500 392,855 472,876
---------- ---------- ----------
Budget Group, The - O.T.C.
An operator of Budget Rent-A-Car franchises, retail
used car sales facilities and van pool territories.
7% Convertible Subordinated Note due $2,000,000 12/18/96 1,798,440 2,000,000 3,083,600
2003, convertible into common stock at ---------- ---------- ----------
$20.16 per share
C&K Manufacturing and Sales Company
A manufacturer and distributor of branded
packaging and supply products.
Senior Secured Floating Rate Revolving $ 651,700 8/29/96 651,700 651,700 617,486
Credit Facility due 2002
Senior Secured Series A Floating Rate Term $2,343,234 8/29/96 2,318,161 2,343,234 2,245,287
Note due 2002
12% Series B Term Note due 2004 $ 533,000 8/29/96 524,738 508,574 512,959
Membership Interests (B) 266 int. 8/29/96 212,800 262,840 212,800
Warrant, exercisable until 2004, to purchase 73 16 int. 8/29/96 1 26,650 --
Membership Interests at $.01 per interest (B)
---------- ---------- ----------
3,707,400 3,792,998 3,588,532
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Cains Foods, L.P.
A producer of mayonnaise, sauce and pickle
products for both the retail and food service
markets.
Senior Secured Floating Rate Revolving $ 216,216 9/29/95 $ 216,216 $ 216,216 $ 214,854
Credit Note due 2000
10% Senior Secured Term Note due 2004 $ 1,513,512 9/29/95 1,513,512 1,513,512 1,505,188
11.5% Senior Subordinated Note due 2004 $ 945,945 9/29/95 895,706 904,164 943,769
8% Junior Subordinated Convertible Note $ 108,108 9/29/95 108,108 108,108 194,908
due 2004, convertible into partnership points
at $1,388.89 per point
Warrant, exercisable until 2006, to purchase 39 pts. 9/29/95 50,261 50,261 91,364
partnership points at $.01 per point (B) ---------- ---------- ----------
2,783,803 2,792,261 2,950,083
---------- ---------- ----------
Catalina Lighting, Inc. -- N.Y.S.E.
A designer, importer and distributor of residential
and office lighting fixtures.
8% Convertible Subordinated Note due $ 1,500,000 3/31/94 1,420,050 1,500,000 1,378,500
2002, convertible into common stock at $7.31 ---------- ---------- ----------
per share
Classic Sports, Inc.
A cable sports television network.
Convertible Preferred Stock, convertible into 644 shs. * 544,444 304,121 918,32
common stock at $1,000 per share (B) ---------- ---------- ----------
Coast Distribution System, The -- A.S.E.
A wholesale distributor of recreational vehicle and
marine parts and accessories.
11.2% Senior Subordinated Secured Note $ 233,400 6/26/89 240,845 233,400 232,980
due 1999
Common Stock (B) 108,646 shs. 6/27/85 560,613 568,101 399,927
---------- ---------- ----------
801,458 801,501 632,907
---------- ---------- ----------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use.
Senior Secured Floating Rate Revolving $ 146,110 12/8/95 146,110 146,110 146,110
Credit Notes due 2000
10.75% Senior Secured Term Note due 2003 $1,214,205 12/8/95 1,226,772 1,214,205 1,215,541
12% Senior Subordinated Note due 2005 $ 800,575 12/8/95 803,858 760,912 793,770
Common Stock (B) 184,560 shs. 12/8/95 138,420 184,560 138,420
Warrant, exercisable until 2005, to purchase 138,420 shs. 12/8/95 1,384 50,853 1,384
common stock at $.01 per share (B) ---------- ---------- ----------
2,316,544 2,356,640 2,295,225
---------- ---------- ----------
Control Devices, Inc. -- O.T.C.
A producer of high quality electromechanical circuit
protector devices and photo-optic sensors.
Common Stock (B) 174,200 shs. ** 26,242 26,242 2,351,704
---------- ---------- ----------
D&K Healthcare Resources, Inc. -- OTC
A wholesale pharmaceutical
distribution company.
11% Subordinated Note due 1997 $ 541,667 12/29/87 495,842 541,667 541,72
11% Convertible Subordinated Note due $ 875,000 12/29/87 956,113 875,000 1,777,125
1997, convertible into common stock at $3.30
per share
---------- ---------- ----------
1,451,955 1,416,667 2,318,846
---------- ---------- ----------
</TABLE>
* 4/18/95 and 6/3/96.
** 7/29/94 and 10/8/96.
- --------------------------------------------------------------------------------
8
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Delta Beverage Group, Inc.
A Pepsi soft drink bottler.
Common Stock (B) 966 shs. 3/8/88 $ 181,486 $2,006,380 $ 181,486
---------- ---------- ----------
Diversco, Inc.
A contract provider of janitorial and equipment
maintenance services and temporary production
labor to industrial customers.
Senior Floating Rate Term Note due 2002 $ 432,957 10/24/96 430,316 432,957 430,836
10.16% Senior Term Note due 2002 $ 1,298,871 10/24/96 1,300,429 1,298,871 1,319,004
12% Senior Subordinated Note due 2003 $ 1,249,000 10/24/96 1,277,852 1,115,167 1,309,202
Membership Interests (B) 2,992 int. 10/24/96 224,393 305,190 224,392
Warrant, exercisable to 2003, to purchase 1,791 int. 10/24/96 18 147,609 18
Membership Interests at $.01 per interest (B)
---------- ---------- ----------
3,233,008 3,299,794 3,283,452
---------- ---------- ----------
Eagle Pacific Industries, Inc. -- O.T.C.
An extruder of small and medium diameter plastic
pipe and tubing in the United States.
8% Redeemable Convertible Preferred Stock, 3,300 shs. 5/9/97 3,286,140 3,300,000 3,401,640
convertible into common stock at $4.26 per share ---------- ---------- ----------
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 1,983,218 2,030,000
10% Preferred Stock 2,339 shs. 9/24/93 176,964 233,925 202,883
Common Stock (B) 161 shs. 9/24/93 16,075 16,075 92,117
Warrant, exercisable from 1998 until 2001, to 168 shs. 9/24/93 17 16,782 96,271
purchase common stock at $.01 per share (B)
---------- ---------- ----------
2,136,272 2,250,000 2,421,271
---------- ---------- ----------
Exide Electronics Group, Inc. -- O.T.C.
A manufacturer and servicer of uninterruptible
power systems.
Common Stock (B) 90,658 shs. 9/2/92 1,174,895 1,185,804 1,959,387
---------- ---------- ----------
Fleming Acquisition Corporation
A supplier of highquality, premium printed labels for
distilled spirits, wine, food and household products.
Common Stock (B) 545 shs. 4/28/95 1,231,111 272,500 20,511
Warrant, exercisable until 2005, to purchase 380 shs. 4/28/95 98,235 170,455 14,289
common stock at $.01 per share (B)
Incentive Warrant, exercisable from 1998 19 shs. 4/28/95 3,308 2,273 722
until 2000, to purchase common stock at $.01
per share (B)
---------- ---------- ----------
1,332,654 445,228 35,522
---------- ---------- ----------
Golden Bear Acquisition Corp.
A manufacturer of asphalt and specialty lubricating
and processing oils.
17% Senior Subordinated Note due 2005 $ 3,111,000 7/18/97 3,140,866 3,042,034 3,149,576
12% Preferred Stock 311 shs. 7/18/97 314,907 311,111 316,110
Common Stock (B) 14,000 shs. 7/18/97 58,380 77,840 58,380
Warrant, exercisable until 2007, to purchase 23,333 shs. 7/18/97 233 69,999 233
common stock at $.01 per share (B)
Warrant, exercisable until 2010, to purchase 17,111 shs. 7/18/97 171 -- 171
common stock at $.01 per share (B)
---------- ---------- ----------
3,514,557 3,500,984 3,524,470
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
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 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 $3,082,800
Warrant, exercisable until 2005, to purchase 272,934 shs. 1/11/95 27,000 -- 515,845
common stock at (pounds)1.84 per share (B) -------------- ---------- ----------
2,931,300 3,000,000 3,598,645
-------------- ---------- ----------
Hartzell Manufacturing, Inc.
A provider of contract engineering, manufacturing,
and assembly services for a variety of industrial
manufacturing companies.
12.5% Senior Subordinated note due 2005 $ 2,626,300 4/18/97 2,659,129 2,322,274 2,742,645
Common Stock (B) 70,968 shs. 4/18/97 601,074 801,438 601,096
Warrant, exercisable until 2005, to purchase 33,379 shs. 4/18/97 3,338 315,156 3,338
common stock at $.01 per share (B) -------------- ---------- ----------
3,263,541 3,438,868 3,347,079
-------------- ---------- ----------
Hein-Werner Corp. -- A.S.E.
A manufacturer of automotive service and collision
repair equipment and hydraulic cylinders.
Warrant, exercisable until 1999, to purchase 59,713 shs. 9/3/96 -- -- 64,252
common stock at $6.28 per share (B) -------------- ---------- ----------
Highland Homes Holdings, Inc.
A single family home builder operating in the
Dallas-Fort Worth and Atlanta areas.
12.75% Senior Note due 1999 $ 2,250,000 11/18/93 2,227,725 2,219,324 2,330,100
Warrant, exercisable until 2001, to purchase 10 shs. 11/18/93 1 20,451 36,193
common stock at $17,897.31 per share (B) -------------- ---------- ----------
2,227,726 2,239,775 2,366,293
-------------- ---------- ----------
Hudson River Capital, LLC
Acquires controlling or substantial interests in
manufacturing and marketing entities.
Series A Preferred Units (B) 88,730 uts. 7/21/94 787,309 887,304 842,939
-------------- ---------- ----------
Hussey Seating Company
A manufacturer of spectator seating products.
Senior Secured Floating Rate Revolving $ 337,500 6/12/96 334,192 337,500 334,766
Note due 2003
Senior Secured Floating Rate Note due 2003 $ 789,130 6/12/96 781,318 789,130 789,130
10% Senior Secured Note due 2003 $ 860,870 6/12/96 838,143 860,870 854,069
12% Subordinated Secured Note due 2006 $ 1,350,000 6/12/96 1,327,320 1,143,333 1,393,065
Warrant, exercisable until 2006, to purchase 3,553 shs. 6/12/96 36 225,000 36
common stock at $.01 per share (B) -------------- ---------- ----------
3,281,009 3,355,833 3,371,066
-------------- ---------- ----------
Intermetrics, Inc.
A provider of software systems, services and
products to a variety of information technology
users.
Senior Floating Rate Revolving Credit Note $ 240,000 5/30/97 240,000 240,000 240,000
due 2001
Senior Floating Rate Revolving Term Note $ 1,332,143 8/31/95 1,320,881 1,332,143 1,332,143
due 2002
13% Senior Subordinated Note due 2002 $ 799,318 8/31/95 813,520 715,613 836,486
Class A Common Stock (B) 2,941 shs. 8/31/95 13,789 18,384 365
Class B Common Stock (B) 8,134 shs. 8/31/95 38,173 50,837 1,007
Warrant, exercisable until 2007 to purchase 21,176 shs. 8/31/95 2,118 104,000 2,456
Class D common stock at $.01 per share (B) -------------- ---------- ----------
2,428,481 2,460,977 2,412,457
-------------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
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 $2,011,011
13.25% Cumulative Exchangeable Preferred Stock 99 shs. 8/16/95 985,500 823,332 840,951
Common Stock (B) 434 shs. 8/16/95 43,426 43,426 39,083
Warrant, exercisable until 2005, to purchase 1,999 shs. 8/16/95 199,735 199,735 1,999
common stock at $.01 per share (B) -------------- ---------- ----------
3,199,661 2,999,926 2,893,044
-------------- ---------- ----------
Kappler Safety Group, Inc.
A manufacturer of protective apparel for the
industrial/safety, clean room and healthcare markets.
13% Senior Subordinated Note due 2004 $ 3,333,000 12/2/96 3,383,995 3,031,298 3,387,661
Warrant, exercisable until 2004, to purchase 57,418 shs. 12/2/96 57,418 333,300 72,576
common stock at $.01 per share (B) -------------- ---------- ----------
3,441,413 3,364,598 3,460,237
-------------- ---------- ----------
Latin Communications Group
An operator of Spanish language media in North
America.
Common Stock (B) 88,438 shs. * 628,945 812,504 884,380
-------------- ---------- ----------
Lloyd's Barbecue Company
A manufacturer and marketer of packaged barbecue
meats and related products.
18% Senior Subordinated Note due 2006 $ 1,627,500 9/30/97 1,627,500 1,627,500 1,965,694
Membership Interests of LFPI Mainstreet (B) 1,872 uts. 9/30/97 1,872,500 1,872,500 1,498,000
-------------- ---------- ----------
3,500,000 3,500,000 3,463,694
-------------- ---------- ----------
Maloney Industries, Inc.
Engineers and manufactures process systems for the
oil and gas industry.
13% Subordinated Note due 2004 $ 2,025,000 10/26/95 2,378,250 2,025,000 2,213,932
Limited Partnership Interests (B) 568 uts. 10/20/95 506,250 733,259 585,989
Warrant, exercisable until 2004 to purchase 297 uts. 10/26/95 297 -- 306,094
Limited Partnership Interests at $.01 per unit (B) -------------- ---------- ----------
2,884,797 2,758,259 3,106,015
-------------- ---------- ----------
Maxtec International Corp.
A manufacturer and distributor of precision test and
measurement equipment and overhead crane control
systems.
Senior Floating Rate Revolving Credit $ 461,538 6/28/95 461,538 461,538 458,031
Facility due 2001
Common Stock (B) 76,923 shs. 6/28/95 192,115 230,769 173,077
Warrant, exercisable from 1998 until 2005, to 39,563 shs. 6/28/95 98,581 171,429 39,563
purchase common stock at $.01 per share (B) -------------- ---------- ----------
752,234 863,736 670,671
-------------- ---------- ----------
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 1,512,000
-------------- ---------- ----------
N2K, Inc.
A music entertainment company, which uses the
internet as a global platform for the
promoting and merchandising of music and
related merchandise.
14% Senior Note due 1998 $ 1,000,000 8/6/97 993,600 1,000,000 996,600
Warrant, exercisable until 2004, to purchase 27,778 shs. 8/6/97 1,111 -- 1,111
common stock at $12 per share (B)
-------------- ---------- -----------
994,711 1,000,000 997,711
-------------- ---------- -----------
</TABLE>
* 2/14/95, 12/1/95 and 2/27/96.
- --------------------------------------------------------------------------------
11
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NM Holdings LLC
A company created to acquire motion picture film
rights from Twentieth Century Fox.
10% Senior Note due 2001 $ 1,000,000 6/28/96 $ 980,600 $1,000,000 $1,001,500
12% Subordinated Note due 2001 $ 980,000 6/28/96 982,156 980,000 1,000,384
Membership Interests 20,000 int. 6/28/96 15,000 2,436 15,000
---------- ---------- ----------
1,977,756 1,982,436 2,016,884
---------- ---------- ----------
Nu Horizons Electronics Corp. - O.T.C.
A distributor of high technology active and passive
electronic devices.
8.25% Convertible Subordinated Note due $ 1,411,800 8/31/94 1,425,918 1,411,800 1,502,296
---------- ---------- ----------
2002, convertible into common stock at $9
per share
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 2/5/93 832,000 833,333 856,416
8% Convertible Preferred Stock due 2001, 83,333 shs. 2/5/93 166,667 166,667 159,067
convertible into common stock at $2 per share
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 153,600
---------- ---------- ----------
1,332,000 1,333,333 1,169,083
---------- ---------- ----------
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 $ 817,500 11/30/95 851,917 817,500 854,042
10.5% Senior Secured Convertible Note due $ 195,000 11/30/95 205,335 195,000 218,712
2005, convertible into common stock at
$50,000 per share
Common Stock (B) 7 shs. 11/30/95 253,125 337,500 210,209
---------- ---------- ----------
1,310,377 1,350,000 1,282,963
---------- ---------- ----------
Piedmont Holding, Inc.
A general aviation fixed based operator with repair,
maintenance and overhaul certification.
12% Senior Subordinated Note due 2001 $ 2,171,426 7/15/92 2,189,232 2,171,426 2,251,118
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 66,973
Warrant, exercisable until 2001, to purchase 5,042 shs. 7/15/92 3,227 -- 89,344
common stock at $.05 per share (B) ---------- ---------- ----------
2,476,962 2,457,136 2,689,374
---------- ---------- ----------
Plastipak Packaging, Inc.
A manufacturer of plastic containers.
10.64% Senior Subordinated Note due 2006 $ 3,500,000 10/25/96 3,403,750 3,414,588 3,504,900
Warrant, exercisable until 2006, to purchase 97 shs. 10/25/96 55,593 93,625 62,195
common stock at $.01 per share (B) ---------- ---------- ----------
3,459,343 3,508,213 3,567,095
---------- ---------- ----------
Precision Dynamics, Inc.
A manufacturer of custom designed solenoid valves
and controls.
Senior Secured Floating Rate Revolving $ 635,689 7/22/96 629,395 635,689 630,222
Credit Facility due 2003
Senior Secured Floating Rate Term Note due 2003 $ 2,902,400 7/22/96 2,873,956 2,902,400 2,879,761
12% Senior Secured Term Note due 2004 $ 489,000 7/22/96 482,545 399,692 498,633
8% Preferred Stock 232 shs. 7/22/96 220,231 231,822 220,232
Common Stock (B) 599 shs. 7/22/96 21,699 28,978 21,694
Warrant, exercisable until 2004, to purchase 322 shs. 7/22/96 3 97,800 3
common stock at $.01 per share (B) ---------- ---------- ----------
4,227,829 4,296,381 4,250,545
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Process Chemicals, LLC
A platform company used by C3 Chemical Ventures
to acquire specialty chemical and mineral companies.
6% Redeemable Preferred Membership Interests 20,000 int. 7/31/97 $1,967,600 $2,000,000 $1,951,200
Common Membership Interests 9 int. 7/31/97 23 25 23
---------- ---------- ----------
1,967,623 2,000,025 1,951,223
---------- ---------- ----------
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 1,032,240
11.51% Junior Secured Note due 1999 $ 600,000 8/12/94 587,280 600,000 499,920
9.8% Redeemable Exchangeable Preferred Stock 10,000 shs. 8/12/94 847,900 1,000,000 425,300
Common Stock (B) 1,492 shs. 8/12/94 15 -- 12
---------- ---------- ----------
2,619,355 2,800,000 1,957,472
---------- ---------- ----------
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 1,665,450
Common Stock (B) 35,500 shs. 2/16/93 340,800 340,800 573,325
---------- ---------- ----------
1,939,950 1,840,800 2,238,775
---------- ---------- ----------
Rent-Way, Inc. -- O.T.C.
Operates rent-to-own stores in Ohio, Pennsylvania
and New York.
10% Convertible Subordinated Note due $ 2,000,000 7/18/95 1,991,220 2,000,000 3,825,400
2002, convertible into common stock at $9.94
per share
Warrant, exercisable until 2002, to purchase 20,000 shs. 7/18/95 200 -- 195,860
common stock at $9.94 per share (B)
---------- ---------- ----------
1,991,420 2,000,000 4,021,260
---------- ---------- ----------
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 1,864,481 2,227,331
Limited Partnership Interests of KS Holdings,
L.P. (B) 7,186 uts. 12/14/95 538,950 678,741 538,950
Warrant, exercisable until 2004, to purchase 5,449 uts. 12/14/95 5,449 479,094 2,724
Limited Partnership Interests of KS Holdings,
L.P. at $.01 per unit (B) ---------- ---------- ----------
2,962,683 3,022,316 2,769,005
---------- ---------- ----------
Star International Holdings, Inc.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 1,531,343 5/27/94 1,531,343 1,531,343 1,535,631
10.5% Subordinated Note due 2004 $ 716,418 5/27/94 716,418 716,418 704,812
Common Stock (B) 4,310 shs. 5/27/94 259,735 259,735 80,981
Warrant, exercisable until 2004, to purchase 3,224 shs. 5/27/94 32 -- 60,547
common stock at $.01 per share (B) ---------- ---------- ----------
2,507,528 2,507,496 2,381,971
---------- ---------- ----------
Supreme Industries, Inc. -- A.S.E.
A manufacturer of modular homes and truck bodies.
Common Stock (B) 529,874 shs. * 1,211,985 1,248,343 4,411,205
Common Stock of Contempri Homes, Inc. (B) 256,516 shs. 12/31/92 7,040 4,952 128
Common Stock of TGC Industries, Inc. (B) 19,082 shs. 9/30/86 9,497 9,497 19,674
---------- ---------- ----------
1,228,522 1,262,792 4,431,007
---------- ---------- ----------
</TABLE>
*5/23/79, 12/15/95 and 6/9/96.
- --------------------------------------------------------------------------------
13
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Swing N'Slide Corporation -- A.S.E.
A manufacturer and distributor of home playground
equipment and accessories.
12% Subordinated Note due 2005 $ 3,125,000 3/13/97 $ 2,585,000 $ 2,469,714 $ 2,733,438
Limited Partnership Interests of Green Grass 81,548 uts. 3/13/97 293,573 447,500 293,573
Capital II, LLC (B)
Warrant, exercisable until 2005, to purchase 148,044 uts. 3/13/97 531,774 680,722 531,774
Limited Partnership Interests of Green Grass
Capital II, LLC at $.01 per unit (B)
------------ ------------ ------------
3,410,347 3,597,936 3,558,785
------------ ------------ ------------
TACC International Corporation
A leading domestic manufacturer of adhesives and
sealants in the building and construction industries.
12.5% Subordinated Note due 2005 $ 1,750,000 8/8/97 1,699,075 1,706,542 1,714,300
8% Convertible Redeemable Preferred Stock 8,244 shs. 8/8/97 1,695,225 1,750,000 1,716,050
Warrant, exercisable until 2005, to purchase 1,560 shs. 8/8/97 16 43,898 16
common stock at $.01 per share (B)
------------ ------------ ------------
3,394,316 3,500,440 3,430,366
------------ ------------ ------------
Tidewater Holdings, Inc.
An operator of a barge transportation line on the
Columbia/Snake River system.
12.5% Senior Subordinated Note due 2006 $ 2,380,000 7/25/96 2,388,092 2,334,464 2,482,102
Convertible Preferred Stock, convertible into 1,120 shs. 7/25/96 1,008,000 1,120,000 1,008,000
common stock at $1,000 per share (B)
Warrant, exercisable until 2008, to purchase 474 shs. 7/25/96 43 48,216 43
common stock at $.01 per share (B)
------------ ------------ ------------
3,396,135 3,502,680 3,490,145
------------ ------------ ------------
TransMontaigne Oil Company -- A.S.E.
An independent petroleum products marketing
company.
12.75% Senior Subordinated Debenture $ 1,200,000 3/28/91 1,274,280 1,182,028 1,274,520
due 2000
Common Stock (B) 258,720 shs. * 400,000 798,595 3,829,056
Warrant, exercisable until 2001, to purchase 74,606 shs. 3/28/91 7,461 42,000 889,304
common stock at $3.60 per share (B)
------------ ------------ ------------
1,681,741 2,022,623 5,992,880
------------ ------------ ------------
Trend Plastics, Inc.
A manufacturer and assembler of plastic injection
molded parts.
12% Subordinated Note due 2005 $ 2,513,500 3/21/97 2,592,675 2,510,371 2,665,567
Limited Partnership Interests of Riverside V 2,183 uts. 3/21/97 267,065 295,664 267,065
Holding Company L.P.
Limited Partnership Interests of Riverside V-A 4,670 uts. 3/21/97 605,024 632,619 605,023
Holding Company L.P.
Warrant, exercisable until 2005, to purchase 3,129 uts. 3/21/97 3,129 3,129 3,129
Limited Partnership Interests at $.01 per unit (B)
------------ ------------ ------------
3,467,893 3,441,783 3,540,784
------------ ------------ ------------
Truseal Technologies, Inc.
A manufacturer of sealant systems for the North
American window and door market.
12.25% Senior Subordinated Note due 2006 $ 2,675,000 6/23/97 2,733,315 2,303,772 2,766,752
Limited Partnership Interests (B) 8,246 uts. 6/17/97 742,140 824,600 742,140
Warrant, exercisable until 2006, to purchase 1,258 uts. 6/23/97 13 376,932 13
Limited Partnership Interests at $.01 per unit (B)
------------ ------------ ------------
3,475,468 3,505,304 3,508,905
------------ ------------ ------------
</TABLE>
*3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95.
- --------------------------------------------------------------------------------
14
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 9/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Netting, Inc.
A manufacturer of plastic netting for a wide variety
of industries.
11% Senior Secured Note due 2005 $ 1,583,548 5/3/95 $ 1,751,087 $ 1,583,548 $ 1,724,800
12% Subordinated Note due 2005 $ 652,050 5/3/95 733,622 621,172 748,488
Common Stock (B) 4,911 shs. 5/3/95 162,652 391,230 32,295
Warrant, exercisable until 2005, to purchase 2,795 shs. 5/3/95 92,549 35,923 18,358
common stock at $.01 per share (B)
------------ ------------ ------------
2,739,910 2,631,873 2,523,941
------------ ------------ ------------
U.S. Silica Company
A producer of high grade industrial and specialty
ground silica sands in North America.
15% Senior Subordinated Notes due 2005 $ 2,368,475 * 2,515,060 2,368,345 2,552,742
Redeemable Preferred Stock Series A (B) 42,001 shs. 12/19/96 291,673 388,898 291,655
Convertible Preferred Stock Series B, 84,002 shs. 12/19/96 583,352 777,802 583,310
convertible into Series B common stock at
$9.26 per share (B)
Warrant, exercisable until 2005, to purchase 6,481 uts. 12/19/96 12,963 130 6,481
Series A Preferred Stock and Series B
Preferred Stock at $.01 per unit (B)
------------ ------------ ------------
3,403,048 3,535,175 3,434,188
------------ ------------ ------------
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 2,407,302 2,363,750
Common Stock (B) 125,000 shs. 12/14/95 375,000 500,000 375,000
Warrant, exercisable until 2003, to purchase 62,500 shs. 12/14/95 625 124,250 625
common stock at $1 per share (B)
------------ ------------ ------------
2,914,125 3,031,552 2,739,375
------------ ------------ ------------
Unipac Corporation
A manufacturer of laminated materials which are
used to seal a variety of packaging containers.
Senior Secured Floating Rate Note due 2002 $ 394,219 2/9/96 390,040 394,219 394,219
12% Senior Secured Note due 2004 $ 243,750 2/9/96 246,870 221,498 261,788
Acquisition Line of Credit due 2002 $ 712,500 9/30/96 712,500 712,500 712,500
Limited Partnership Interests of Riverside II 123 uts. ** 112,737 217,232 325,241
Holding Company L.P. (B)
Warrant, exercisable from 2000 until 2004, 41 uts. 2/9/96 4 40,312 109,395
to purchase Limited Partnership Interests of
Riverside II Holding Company L.P. at $.01
per unit
------------ ------------ ------------
1,462,151 1,585,761 1,803,143
------------ ------------ ------------
Victory Ventures, LLC
Acquires controlling or substantial interests in other
entities.
Series A Preferred Units (B) 11,270 uts. 12/2/96 12,700 63,496 107,061
------------ ------------ ------------
SubTotal Corporate Restricted Securities $134,323,836 137,195,568 150,308,348
============ ------------ ------------
</TABLE>
* 12/19/96 and 2/15/97.
** 2/9/96 and 9/25/96.
- --------------------------------------------------------------------------------
15
<PAGE>
Schedule of Investments MassMutual Corporate Investors
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 9/30/97
Rule 144A Securities: (A) Rate Date Amount (Note 2B) (Note 2A)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Bonds -- 7.73%
Amtran, Inc. 10.500% 08/01/04 $ 600,000 $ 600,000 $ 612,000
Anchor Advanced Products 11.750 04/01/04 410,000 413,000 436,650
Atlantic Coast Airlines Inc. 8.750 01/01/07 600,000 600,000 606,000
Atlantic Express 10.750 02/01/04 950,000 964,000 1,007,000
Aurora Foods, Inc. 9.875 02/15/07 900,000 922,500 927,000
Doskocil Manufacturing Co., Inc. 10.125 09/15/07 125,000 125,000 128,750
I C N Pharmaceuticals, Inc. 9.250 08/15/05 400,000 400,000 417,000
Integrated Health Services 9.250 01/15/08 850,000 850,000 862,750
International Wire Group 11.750 06/01/05 550,000 598,125 602,250
ITT Publicmedia BV 9.375 09/15/07 490,000 496,388 509,600
Jordan Industries, Inc. 10.375 08/01/07 500,000 500,000 515,000
Jordan Telecom Products 9.875 08/01/07 1,150,000 1,139,907 1,181,625
L-3 Corporation 10.375 05/01/07 450,000 450,000 487,125
McLeodUSA Incorporated 9.250 07/15/07 350,000 350,000 374,500
Neenah Corporation 11.125 05/01/07 300,000 300,000 326,250
Nortek, Inc. 9.125 09/01/07 500,000 495,960 505,000
Southern Foods 9.875 09/01/07 500,000 500,000 517,500
Sovereign Speciality Chemicals 9.500 08/01/07 200,000 200,000 204,000
Speedway Motorsports, Inc. 8.500 08/15/07 275,000 274,252 277,062
Telex Communications, Inc. 10.500 05/01/07 1,150,000 1,162,938 1,175,875
Therma-Wave, Inc. 10.625 05/15/04 450,000 457,500 482,625
Tjiwi Kima Fin Mauritius LTD 10.000 08/01/04 500,000 497,275 490,625
United Refining Company 10.750 06/15/07 1,750,000 1,750,000 1,802,500
Von Hoffman Press, Inc. 10.375 05/15/07 380,000 382,362 402,800
W R Carpenter North America 10.625 06/15/07 625,000 631,917 634,375
Wavetek Corporation 10.125 06/15/07 130,000 130,000 135,200
Williams Scotsman, Inc. 9.875 06/01/07 500,000 500,000 505,000
------------ ----------- -----------
Sub-Total Rule 144A Bonds $ 15,585,000 15,691,124 16,126,062
============ ----------- -----------
Convertible Bonds -- 5.16%
Continental Airlines, Inc. 6.750 04/15/06 $ 600,000 557,250 853,500
Costco Companies, Inc. 0.000 08/19/17 600,000 300,984 321,000
CUC International, Inc. 3.000 02/15/02 1,200,000 1,200,000 1,396,500
Cymer Inc. 3.500 08/06/04 375,000 377,500 341,250
Garnet Resources Corporation 9.500 12/21/98 500,000 500,000 202,500
Grand Metropolitan PLC 6.500 01/31/00 400,000 400,000 570,000
Halter Marine 4.500 09/15/04 300,000 300,000 352,500
Interpublic Group Company 1.800 09/16/04 400,000 320,428 331,000
Key Energy Group 5.000 09/15/04 1,000,000 1,000,000 1,017,500
Level One Communications, Inc. 4.000 09/01/04 400,000 400,000 466,000
Molten Metal Technology 5.500 05/01/06 1,150,000 1,079,062 471,500
Roche Holdings, Inc. 0.000 05/06/12 3,350,000 1,340,424 1,474,000
Scholastic Corp. 5.000 08/15/05 650,000 528,125 585,000
Smartalk Teleservices 5.750 09/15/04 600,000 600,000 654,000
Tel-Save 4.500 09/15/02 1,000,000 1,000,000 1,150,000
Thermo Electron Corporation 4.250 01/01/03 250,000 250,000 291,875
Tower Automotive, Inc. 5.000 08/01/04 275,000 275,000 292,188
------------ ----------- -----------
Sub-Total Rule 144A Convertible Bonds $ 13,050,000 10,428,773 10,770,313
============ ----------- -----------
Convertible Preferred Stock -- 1.25%
D T Industries 40,000 2,000,000 2,200,000
Qualcomm Financial Trust 7,720 386,000 412,055
----------- -----------
Sub-Total Rule 144A Convertible Preferred Stock 2,386,000 2,612,055
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
Schedule of Investments MassMutual Corporate Investors
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 9/30/97
Rule 144A Securities: (A) (Continued) Rate Date Amount (Note 2B) (Note 2A)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Preferred Stock -- .03%
Jordan Telecom Products 700 $ 70,000 $ 71,050
Time Warner, Inc. 1 -- 1,140
------------ ------------
Sub-Total Rule 144A Preferred Stock 70,000 72,190
------------ ------------
Total Rule 144A Securities 28,575,897 29,580,620
------------ ------------
Total Corporate Restricted Securities 165,771,465 179,888,968
------------ ------------
Corporate Public Securities:
Bonds -- 11.08%
Aearo Company 12.500% 07/15/05 $ 1,000,000 1,000,000 1,102,500
Amphenol Corporation 9.875 05/15/07 400,000 400,000 416,000
Atlas Air, Inc. 12.250 12/01/02 1,500,000 1,500,000 1,687,500
Callon Petroleum Company 10.125 09/15/02 500,000 497,120 500,000
Central Rents, Inc. 12.875 12/15/03 1,630,000 1,530,600 1,654,450
CFP Holdings 11.625 01/15/04 200,000 200,000 200,000
Chesapeake Energy Corporation 8.500 03/15/12 500,000 459,812 486,250
Continental Airlines, Inc. 9.500 12/15/01 750,000 750,000 791,250
Data Documents, Inc. 13.500 07/15/02 3,028,000 3,033,290 3,421,640
Dawson Production Services 9.375 02/01/07 850,000 867,938 886,125
Decisionone Corporation 9.750 08/01/07 175,000 175,000 182,875
Decorative Home Accents, Inc. 13.000 06/30/02 700,000 700,000 315,000
Florist Transworld Delivery, Inc. 14.000 12/15/01 1,475,000 1,455,891 1,622,500
Great American Cookie Co. 10.875 01/15/01 1,210,000 1,187,250 1,234,200
Hosiery Corporation of America 13.750 08/01/02 1,000,000 987,800 1,080,000
Indah Kiat International Corporation 11.875 06/15/02 1,000,000 1,000,000 1,082,500
International Wire Group, Inc. 11.750 06/01/05 750,000 750,000 821,250
Ivex Packaging Corporation 12.500 12/15/02 250,000 266,562 268,750
Key Plastics, Inc. 14.000 11/15/99 750,000 760,462 845,925
Northwest Airlines Corp. 10.150 01/02/05 609,694 609,696 651,019
Northwest Airlines Corp. 12.092 12/31/00 384,761 399,190 397,266
Parker Drilling Corporation 9.750 11/15/06 750,000 744,112 798,750
Pierce Leahy Corp. 9.125 07/15/07 175,000 175,000 183,312
Remington Products Company 11.000 05/15/06 600,000 595,506 504,000
Spinnaker Industries 10.750 10/15/06 250,000 252,812 255,000
Sun Media Corporation 9.500 05/15/07 100,000 99,206 100,000
Sun Media Corporation 9.500 02/15/07 575,000 586,188 575,000
Trans-Resources, Inc. 11.875 07/01/02 1,000,000 1,032,500 1,065,000
------------- ------------- -------------
Total Bonds $ 22,112,455 22,015,935 23,128,062
============= ------------- -------------
Common Stock -- 6.54%
4Health Inc. (B) 27,000 151,000 129,924
American Country Holdings Inc. (B) 405,590 760,889 887,025
Atlas Air, Inc. (B) 5,800 117,450 162,760
Avis Rent A Car, Inc. (B) 3,850 65,450 91,919
Bell & Howell Company (B) 14,533 416,007 471,407
Benson Petroleum, LTD. (B) 200,000 154,408 253,400
Central Rents, Inc. 1,880 67,856 94,000
Chesapeake Energy Corporation 35,000 1,176,875 398,125
Collins & Aikman Corporation (B) 40,200 240,834 442,200
Complete Business Solutions (B) 11,666 329,564 332,481
Correctional Services, Inc. (B) 9,553 53,206 143,295
Data Documents, Inc. (B) 21,994 34 464,623
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares,
Yield/ Warrants or Market Value
Interest Due Principal Cost at 9/30/97
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
-------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Common Stock (Continued)
Dawson Production Services (B) 45,242 $ 570,064 $ 955,737
Edutrek International (B) 1,750 24,500 46,594
Florida Panthers Holdings, Inc. (B) 28,002 539,038 659,783
Florist Transworld Delivery, Inc. (B) 14,686 41,258 117,488
GTech Holdings Corporation (B) 24,500 704,375 837,582
Gulf Canada Resources, Ltd. (B) 58,350 459,506 532,444
Gulf Indonesia Resources, Ltd. (B) 7,000 136,500 155,750
Hosiery Corporation of America (B) 1,000 -- 70,000
J. D. Edwards & Company 3,500 80,500 117,250
LCS Industries, Inc. 35,000 546,831 665,000
Marker International (B) 70,000 437,500 367,500
Mediq Incorporated (B) 150,000 574,147 1,265,550
Network Solutions, Inc. (B) 1,750 31,500 38,062
NextLink Communications, Inc. (B) 16,100 273,700 386,400
Red Roof Inns, Inc. (B) 45,200 640,992 858,800
Republic Industries, Inc. (B) 35,000 859,688 1,152,795
Staffing Resources, Inc. (B) 105,000 577,500 840,000
Startek, Inc. (B) 52,500 820,225 712,005
------------ -------------
Total Common Stock $ 10,851,397 13,649,899
------------ -------------
Convertible Bonds -- 4.11%
Continental Airlines 6.750% 04/15/06 400,000 371,000 569,000
Dura Pharmaceuticals 3.500 07/15/02 850,000 857,031 901,000
Hilton Hotels 5.000 05/15/06 1,385,000 1,385,000 1,641,225
Home Depot, Inc. 3.250 10/01/01 675,000 669,312 825,188
Kent Electronics 4.500 09/01/04 300,000 300,000 300,750
Loews Corp. 3.125 09/15/07 1,500,000 1,500,000 1,563,750
Reptron Electronics Inc. 6.750 08/01/04 200,000 200,000 190,000
Savoy Pictures Entertainment 7.000 07/01/03 1,250,000 1,287,500 1,087,500
US Filter Corporation 4.500 12/15/01 800,000 800,000 968,000
USA Waste Services, Inc. 4.000 02/01/02 475,000 475,000 522,500
----------- ------------ -------------
Total Convertible Bonds $7,835,000 7,844,843 8,568,913
=========== ------------ -------------
Convertible Preferred Stock -- .12%
Sinclair Broadcasting Group, Inc. (B) 4,750 237,500 253,531
------------ -------------
Total Convertible Preferred Stock 237,500 253,531
------------ -------------
Warrants -- .17%
American Country Holdings, Inc. (B) 183,117 45,779 366,234
------------ -------------
Total Warrants 45,779 366,234
------------ -------------
Total Corporate Public Securities 40,995,454 45,966,639
------------ -------------
Total Investments - 108.22% $206,766,919 225,855,607
============ -------------
Other Assets - 3.76 7,848,428
Liabilities - (11.98) (25,012,663)
------- -------------
Total Net Assets - 100.00% $208,691,372
====== =============
</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.
- --------------------------------------------------------------------------------
18
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
Fair Value
at 9/30/97
Corporate Restricted Securities: (Note 2A)
---------
<S> <C>
ADVERTISING -- .58%
Ammirati & Puris, Inc. $ 1,212,867
-----------
AUTO PARTS -- .14%
Tower Automotive, Inc. 292,188
-----------
BEVERAGES -- 1.80%
Associated Vintage Group, Inc. 3,582,526
Delta Beverage Group, Inc. 181,486
-----------
3,764,012
-----------
BUILDING MATERIALS -- 3.50%
Highland Homes Holdings, Inc. 2,366,293
Nortek, Inc. 505,000
Supreme Industries, Inc. 4,431,007
-----------
7,302,300
-----------
CHEMICAL -- 3.50%
AccTech, LLC 3,669,566
Sovereign Speciality Chemicals 204,000
TACC International Corporation 3,430,366
-----------
7,303,932
-----------
COMMUNICATIONS -- 3.55%
Classic Sports, Inc. 918,327
Jordan Industries, Inc. 515,000
Jordan Telecom Products 1,252,675
Latin Communications Group 884,380
Level One Communications, Inc. 466,000
McLeod USA Incorporated 374,500
Smartalk Teleservices 654,000
Tel-Save 1,150,000
Telex Communications, Inc. 1,175,875
Time Warner, Inc. 1,140
-----------
7,391,897
-----------
ELECTRICAL EQUIPMENT/ELECTRONICS -- 7.79%
Catalina Lighting, Inc. 1,378,500
Control Devices, Inc. 2,351,704
Exide Electronics Group, Inc. 1,959,387
Intermetrics, Inc. 2,412,457
International Wire Group 602,250
Mercury Computer Systems, Inc. 1,512,000
Nu Horizons Electronics Corp. 1,502,296
Precision Dynamics, Inc. 4,250,545
Thermo Electron Corporation 291,875
-----------
16,261,014
-----------
HEALTH CARE -- 2.02%
D&K Healthcare Resources, Inc. 2,318,846
I C N Pharmaceuticals, Inc. 417,000
Roche Holdings, Inc. 1,474,000
-----------
4,209,846
-----------
MANUFACTURING - INDUSTRIAL AND CONSUMER PRODUCTS - 28.50%
C&K Manufacturing and Sales Company 3,588,532
Consumer Product Enterprises, Inc. 2,295,225
CUC International, Inc. 1,396,500
Cymer Inc. 341,250
Doskocil Manufacturing Co., Inc. 128,750
Elgin National Industries, Inc. 2,421,271
Fleming Acquisition Corporation 35,522
Golden Bear Acquisition Corp. 3,524,470
Hartzell Manufacturing, Inc. 3,347,079
Hein-Werner Corp. 64,252
Hudson River Capital, LLC 842,939
Hussey Seating Company 3,371,066
Jackson Products, Inc. 2,893,044
Kappler Safety Group, Inc. 3,460,237
Maxtec International Corp. 670,671
PAR Acquisition Corp. 1,169,083
Plastipak Packaging, Inc. 3,567,095
Sequentia, Inc. 2,769,005
Star International Holdings, Inc. 2,381,971
Swing N'Slide Corporation 3,558,785
Trend Plastics, Inc. 3,540,784
Truseal Technologies, Inc. 3,508,905
U.S. Netting, Inc. 2,523,941
U.S. Silica Company 3,434,188
Unidata, Inc. 2,739,375
Unipac Corporation 1,803,143
Victory Ventures, LLC 107,061
-----------
59,484,144
-----------
METAL FABRICATING -- .23%
Molten Metal Technology 471,500
-----------
MISCELLANEOUS -- 12.07%
Anchor Advanced Products 436,650
Aurora Foods, Inc. 927,000
D T Industries 2,200,000
Eagle Pacific Industries, Inc. 3,401,640
Halter Marine 352,500
Key Energy Group 1,017,500
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
Schedule of Investments (Continued)
September 30, 1997
(Unaudited)
INDUSTRY CLASSIFICATION (Continued)
<TABLE>
<CAPTION>
Fair Value
at 9/30/97
Corporate Restricted Securities: (Continued) (Note 2A)
---------
<S> <C>
MISCELLANEOUS (Continued)
L-3 Corporation $ 487,125
Lloyd's Barbecue Company 3,463,694
N2K, Inc. 997,711
Neenah Corporation 326,250
NM Holdings LLC 2,016,884
Process Chemicals, LLC 1,951,223
Protein Genetics, Inc. 1,957,472
Qualcomm Financial Trust 412,055
Southern Foods 517,500
Speedway Motorsports, Inc. 277,062
ThermaWave, Inc. 482,625
Tjiwi Kima Fin Mauritius LTD 490,625
United Refining Company 1,802,500
Von Hoffman Press, Inc. 402,800
W R Carpenter North America 634,375
Wavetek Corporation 135,200
Williams Scotsman, Inc. 505,000
-----------
25,195,391
-----------
OIL AND GAS SERVICE -- 8.18%
American Exploration Company 3,696,552
BP Prudhoe Bay Royalty Trust 472,876
Garnet Resources Corporation 202,500
Hardy Oil & Gas USA, Inc. 3,598,645
Maloney Industries, Inc. 3,106,015
TransMontaigne Oil Company 5,992,880
-----------
17,069,468
-----------
PUBLISHING -- .28%
Scholastic Corp. 585,000
-----------
RECREATIONAL SUPPLIES/EQUIPMENT -- .30%
Coast Distribution System, The 632,907
-----------
RETAILING -- 4.38%
Cains Foods, L.P. 2,950,083
Costco Companies, Inc. 321,000
Grand Metropolitan PLC 570,000
Pharmaceutical Buyers Inc. 1,282,963
Rent-Way, Inc. 4,021,260
-----------
9,145,306
-----------
SERVICES -- 9.38%
Amtran, Inc. 612,000
Atlantic Coast Airlines Inc. 606,000
Atlantic Express 1,007,000
Budget Group, The 3,083,600
Continental Airlines, Inc. 853,500
Diversco, Inc. 3,283,452
Integrated Health Services 862,750
Interpublic Group Company 331,000
ITT Publicmedia BV 509,600
Piedmont Holding, Inc. 2,689,374
RailTex, Inc. 2,238,775
Tidewater Holdings, Inc. 3,490,145
-----------
19,567,196
-----------
Total Corporate Restricted
Securities -- 86.20% $179,888,968
===========
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
Notes to Financial Statements MassMutual Corporate Investors
(Unaudited)
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) or 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 provide such
reports to the Trust at least quarterly.
- --------------------------------------------------------------------------------
21
<PAGE>
Notes to Financial Statements (Continued)
The financial statements include restricted securities valued at $179,888,968
(86.20% of net assets) as of September 30, 1997 ($134,003,508 at September
30, 1996) 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 September 30, 1997, 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 shortterm securities having a maturity of sixty days or less are
valued at amortized cost which approximates market value.
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
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.
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.
- --------------------------------------------------------------------------------
22
<PAGE>
Notes to Financial Statements (Continued)
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
September 30, 1997 was plus .0625%.
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 its option, can convert the principal
amount of the Note into common shares. The dollar amount of principal 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
nine months nine months
ended 9/30/97 ended 9/30/96
------------- -------------
Cost of Investments Acquired
----------------------------
<S> <C> <C>
Corporate restricted securities $ 73,951,448 $ 38,660,743
Corporate public securities 30,043,849 49,501,455
Short-term securities 248,273,494 196,579,791
<CAPTION>
Proceeds from Sales or Maturities
---------------------------------
<S> <C> <C>
Corporate restricted securities $ 57,469,085 $ 31,578,836
Corporate public securities 55,356,234 59,421,711
Short-term securities 249,193,705 199,724,193
</TABLE>
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of September 30, 1997. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of September 30, 1997 is $19,088,688 and consists of $31,627,158
appreciation and $12,538,470 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of September 30, 1996. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of September 30, 1996 was $10,557,243 and consisted of $25,707,402
appreciation and $15,150,159 depreciation.
- --------------------------------------------------------------------------------
23
<PAGE>
Notes to Financial Statements (Continued)
6. Quarterly Results of Investment Operations
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
---------- ------- ---------- -------
March 31, 1997 March 31, 1996
------------------ -------------------
<S> <C> <C> <C> <C>
Investment income $ 4,060,824 $ 3,739,245
Net investment income 3,057,559 $ .72 2,758,149 $ .65
Net realized and unrealized gain
(loss) on investments 3,704,899 .87 (763,492) (.18)
<CAPTION>
June 30, 1997 June 30, 1996
------------------ -------------------
<S> <C> <C> <C> <C>
Investment income 4,141,453 3,735,914
Net investment income 3,066,951 .72 2,701,597 .64
Net realized and unrealized gain
on investments 14,759,526 3.47 9,604,490 2.26
<CAPTION>
September 30, 1997 September 30, 1996
------------------ -------------------
<S> <C> <C> <C> <C>
Investment income 4,509,234 4,098,479
Net investment income 3,378,460 .79 3,083,855 .72
Net realized and unrealized gain
on investments 14,584,447 3.43 2,196,599 .51
</TABLE>
- --------------------------------------------------------------------------------
24
