<PAGE>
MassMutual
CORPORATE
INVESTORS
[LOGO OF CORPORATE INVESTORS APPEARS HERE]
REPORT for the THREE
MONTHS ENDED 3/31/98
<PAGE>
MassMutual Corporate Investors
1295 State Street
Springfield, Massachusetts 01111
(413) 744-8480
MCI
------
Listed
------
NYSE
[LOGO OF CORPORATE INVESTORS APPEARS HERE]
Adviser
Massachusetts Mutual
Life Insurance Company
Auditor
Coopers & Lybrand L.L.P.
Springfield, Massachusetts 01101
Custodian
The Chase Manhattan Bank, N.A.
Transfer Agent & Registrar
Shareholder Financial Services, Inc.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
Internet website: www.massmutual.com/mci
Investment Objective and Policy
MassMutual Corporate Investors, a closed-end investment company, was offered to
the public in September 1971 and its shares are listed on the New York Stock
Exchange. The share price of Corporate Investors can be found in the financial
section of most newspapers as "MasCp" under the New York Stock Exchange
listings. The trading symbol is "MCI".
The Trust's investment objective is to maintain a portfolio of securities
providing a fixed yield and at the same time offering an opportunity for capital
gains. The principal investments are long-term corporate debt obligations and
occasionally preferred stocks purchased directly from issuers. These provide a
fixed yield and potential capital gains through warrants, conversion rights, or
other equity features which are a prerequisite to every private placement
purchased.
Corporate Investors' current portfolio is characterized by broad industrial
diversification. The entire portfolio is shown in the Schedule of Investments in
the Financial Section of this Report.
The Trust holds investments in a number of companies that are not publicly
traded at this time. Capital gains may be realized on holdings of private
companies through various methods, including directly negotiated sales, put
options and initial public offerings of stock.
The Trust pays quarterly dividends and intends to distribute substantially all
of its net income to shareholders each year. All distributions are paid in cash
unless the shareholder elects to participate in the Dividend Reinvestment and
Share Purchase Plan.
Dividends are distributed in January, May, August, and November.
<PAGE>
TO OUR SHAREHOLDERS APRIL 30, 1998
We are pleased to present MassMutual Corporate Investors' report for the first
three months of 1998.
The Trust got off to a good start this year with net assets per share increasing
to $24.71 at March 31, 1998 from $22.65 per share on December 31, 1997. This
represents a 9.1% increase in value. By comparison, the S&P Industrial Stock
Index and the Lehman Brothers Government/Corporate Bond Index were up 14.7% and
1.5% respectively.
We are also pleased to report that the regular quarterly dividend was increased
to 40 cents per share from the 37.5 cent-per-share level paid in the prior
quarter. The dividend is payable on May 15, 1998 to shareholders of record on
May 6, 1998. The net earnings of the Trust for the quarter ended March 31, 1998
were $3,435,337 or 40.2 cents per share as compared with $3,197,337 or 37.6
cents per share a quarter ago. It should be noted that unlike other quarters,
the fourth quarter's earnings are affected by income or losses that are passed
through to the Trust by our partnership investments. In the fourth quarter of
1997, we recognized a loss of $144,406 or 1.7 cents per share on these
partnership investments.
A portion of our performance for the quarter came from the "equity kicker"
components of some of our private placement investments. Mercury Computer
Systems, a company we originally made a loan to in the form of a convertible
note, completed its initial public offering. We sold some of our holdings into
the IPO realizing a gain of over $700 thousand and as of March 31, 1998, we had
an unrealized gain on our remaining holdings of over $5 million. Also, the
increase in the stock prices of D&K Healthcare Resources, Inc., Rent-Way, Inc.
and Supreme Industries, Inc. accounted for over a $4 million increase in the
value of our holdings.
New private placement investments made during the quarter included Evans
Consoles, Inc., The Tranzonic Companies, an add-on position in Latin
Communications Group, Inc. and the completion of our investment in Vitex
Packaging, Inc. These investments have a weighted average coupon of over 11.6%
on their fixed income components. (A brief description of these investments is
provided in the Schedule of Investments.) In keeping with our investment style,
we do not attempt to forecast the markets or make tactical bets. Rather, we
invest on a "bottom-up" basis, in companies where we find the best fundamental
value.
We were very active in our public portfolio as we had to raise nearly $16
million in January to pay our regular and extra dividends and to pay our taxes
on our retained long-term gains. The Trust realized over $6.9 million (or $.81
per share) in net capital gains during the quarter, with nearly $5.4 million
attributable to the sale of securities from our public portfolio. Of the $.81
per share, $.39 per share represents net short-term gains which, if not offset,
must be distributed to shareholders each year.
At the twenty-eighth Annual Meeting of Shareholders held on April 24, 1998,
Richard G. Dooley, Donald E. Benson and Donald Glickman were re-elected as
Trustees for three-year terms and Corine T. Norgaard, a new Trustee of the
Trust, was elected for a one-year term. Coopers & Lybrand L.L.P. was re-elected
as auditor of the Trust, and the Investment Services Contract between the Trust
and Massachusetts Mutual Life Insurance Company was approved.
The Trustees and management appreciate the continued interest and support of the
shareholders of Corporate Investors.
Sincerely,
/s/ Stuart H. Reese
Stuart H. Reese
President
1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES MASSMUTUAL CORPORATE INVESTORS
March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1998 - $159,852,958; 1997 - $139,538,082) $180,007,547 $147,308,753
Corporate public securities at market value
(Cost 1998 - $41,101,339; 1997 - $43,002,450) 44,003,645 45,550,692
Short-term securities at cost plus earned discount which
approximates market value 3,889,895 2,500,000
------------ ------------
227,901,087 195,359,445
Cash -- 72,905
Interest and dividends receivable, net 4,076,426 3,183,470
Receivable for investments sold 742,121 1,675,213
Other assets 24,317 12,128
------------ ------------
Total assets $232,743,951 $200,303,161
============ ============
Liabilities:
Payable for investments purchased $ 88,200 $ 354,200
Management fee payable (Note 3) 792,364 671,369
Note payable (Note 4) 20,000,000 20,000,000
Interest payable (Note 4) 136,211 136,211
Accrued expenses 102,444 109,710
Other liabilities 327,579 --
------------ ------------
Total liabilities 21,446,798 21,271,490
------------ ------------
Net Assets:
Common shares, par value $1.00 per share;
an unlimited number authorized (Note 6) 8,551,573 8,513,448
Additional paid-in capital 95,223,827 94,333,993
Retained net realized gain on investments, prior years 73,493,073 57,447,542
Undistributed net investment income (Note 2D) 4,021,655 3,075,349
Undistributed net realized gain on investments 6,950,130 5,342,426
Net unrealized appreciation of investments (Notes 2A, 2B and 5) 23,056,895 10,318,913
------------ ------------
Total net assets 211,297,153 179,031,671
------------ ------------
Total liabilities and net assets $232,743,951 $200,303,161
============ ============
Common shares issued and outstanding (Note 6) 8,551,573 8,513,448
============ ============
Net asset value per share $ 24.71 $ 21.03
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
2
<PAGE>
STATEMENT OF OPERATIONS MASSMUTUAL CORPORATE INVESTORS
For the three months ended
March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 4,349,705 $ 3,905,383
Dividends 224,013 155,441
----------- -----------
Total income 4,573,718 4,060,824
----------- -----------
Expenses:
Management fee (Note 3) 792,363 671,369
Trustees' fees and expenses 29,281 24,848
Transfer Agent/Registrar's expenses 15,000 12,706
Interest (Note 4) 266,500 266,500
Reports to shareholders 10,673 8,520
Audit and legal 18,500 14,733
Other 6,064 4,589
----------- -----------
Total expenses 1,138,381 1,003,265
----------- -----------
Net investment income (1998 - $.40 per share; 1997 - $.36 per share) 3,435,337 3,057,559
----------- -----------
Net realized and unrealized gain (loss) on investments (Notes 2A and 2B):
Net realized gain on investments 6,931,997 5,342,426
Net change in unrealized appreciation/depreciation of investments 7,143,443 (1,637,527)
----------- -----------
Net gain on investments 14,075,440 3,704,899
----------- -----------
Net increase in net assets resulting from operations $17,510,777 $ 6,762,458
=========== ===========
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
3
<PAGE>
STATEMENT OF CASH FLOWS MASSMUTUAL CORPORATE INVESTORS
For the three months ended
March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 4,193,246 $ 3,775,696
Interest expense paid (266,500) (266,500)
Operating expenses paid (853,058) (732,867)
Federal income tax paid (8,639,902) (6,210,942)
------------ ------------
Net cash used for operating activities (5,566,214) (3,434,613)
------------ ------------
Cash flows from investing activities:
Change in short-term portfolio securities, net (1,046,070) (1,657,790)
Purchase of portfolio securities (31,146,507) (23,540,403)
Proceeds from disposition of portfolio securities 43,986,953 35,092,595
------------ ------------
Net cash provided by investing activities 11,794,376 9,894,402
------------ ------------
Net cash provided by operating and investing activities 6,228,162 6,459,789
------------ ------------
Cash flows from financing activities:
Increase in receipts for shares issued on reinvestment of dividends 927,958 --
Cash dividends paid from net investment income (2,768,573) (2,555,201)
Cash dividends paid from net realized gain on investments (4,467,858) (3,915,019)
------------ ------------
Net cash used for financing activities (6,308,473) (6,470,220)
------------ ------------
Net decrease in cash (80,311) (10,431)
Cash - beginning of year 80,311 83,336
------------ ------------
Cash - end of period $ -- $ 72,905
============ ============
Reconciliation of net increase (decrease) in net assets to net cash from
operating and investing activities:
Net increase in net assets resulting from operations $ 17,510,777 $ 6,762,458
------------ ------------
(Increase) decrease in investments (1,486,972) 7,070,176
Increase in interest and dividends receivable, net (506,037) (167,069)
Increase in receivable for investments sold (582,409) (992,679)
Increase in other assets (24,317) (12,128)
Increase (decrease) in payable for investments purchased (61,800) 6,075
Increase in management fee payable 69,145 25,359
Decrease in accrued payable (45,500) --
Decrease in accrued expenses (4,823) (21,461)
Decrease in accrued taxes (8,639,902) (6,210,942)
------------ ------------
Total adjustments to net assets from operations (11,282,615) (302,669)
------------ ------------
Net cash provided by operating and investing activities $ 6,228,162 $ 6,459,789
============ ============
</TABLE>
See Notes to Financial Statements.
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4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS MASSMUTUAL CORPORATE INVESTORS
For the three months ended
March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 3,435,337 $ 3,057,559
Net realized gain on investments 6,931,997 5,342,426
Net change in unrealized appreciation/depreciation of investments 7,143,443 (1,637,527)
------------- -------------
Net increase in net assets resulting from operations 17,510,777 6,762,458
Increase in receipts for shares issued on reinvestment of dividends 927,958 --
------------- -------------
Total increase 18,438,735 6,762,458
Net Assets, beginning of year 192,858,418 172,269,213
------------- -------------
Net Assets, end of period (including undistributed net investment income
in 1998 - $4,021,655; 1997 - $3,075,349) $ 211,297,153 $ 179,031,671
============= =============
</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
three months For the
ended 3/31/98 year ended
(Unaudited) 12/31/97
------------- ----------
<S> <C> <C>
Net asset value:
Beginning of year $ 22.65 $ 20.23
---------- ----------
Net investment income .40 1.49
Net realized and unrealized gain on investments 1.66 2.87
---------- ----------
Total from investment operations 2.06 4.36
---------- ----------
Dividends from net investment income to common shareholders -- (1.42)
Distributions from net realized gain on investments to common shareholders -- (.52)
---------- ----------
Total distributions -- (1.94)
---------- ----------
Net asset value:
End of period $ 24.71 $ 22.65
========== ==========
Per share market value:
End of period $ 25.88 $ 25.75
========== ==========
Total investment return:
Market value .50%* 52.43%
Net asset value 9.09%* 27.14%
Net assets (in millions):
End of period $ 211.30 $ 192.86
Ratio of operating expenses to average net assets .44%* 1.69%
Ratio of interest expenses to average net assets .13%* .56%
Ratio of total expenses to average net assets .57%* 2.25%
Ratio of net investment income to average net assets 1.72%* 6.66%
Portfolio turnover 14.36%* 66.23%
</TABLE>
*Percentages represent results for the period and are not annualized.
All per share amounts have been restated after giving effect to the two-for-one
split of the Trust's common shares authorized on December 19, 1997 effective
January 20, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities - 85.19%: (A) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- ----------
Private Placement Investments - 75.15%
<S> <C> <C> <C> <C> <C>
AccTech, LLC
A designer and marketer of specialized cleaning products.
Senior Floating Rate Revolving Credit Note $ 680,760 10/31/96 $ 680,760 $ 680,760 $ 628,545
due 2002
Senior Secured Series A Floating Rate Note $ 715,389 10/31/96 704,665 715,389 678,761
due 2002
10.1% Senior Secured Series A Note due 2002 $ 1,073,083 10/31/96 1,045,612 1,073,083 1,029,945
12% Senior Secured Series B Note due 2004 $ 1,098,000 10/31/96 1,155,206 1,002,327 1,105,137
Membership Interests (B) 5 int. 10/31/96 264,080 228,524 247,575
Warrant, exercisable until 2004, to purchase 3 int. 10/31/96 -- 109,800 --
Membership Interests at $.01 per interest (B)
---------- ---------- ----------
3,850,323 3,809,883 3,689,963
---------- ---------- ----------
Adventure Entertainment Corporation
An owner and operator of themed family
entertainment centers
7% Redeemable Series B Preferred Stock 1,668 shs. 10/31/97 162,563 1,670,730 1,614,229
Warrant, exercisable until 2005, to purchase 6,447 shs. 10/31/97 64 25,005 64
Class A Common Stock at $.01 per share (B)
---------- ---------- ----------
162,627 1,695,735 1,614,293
---------- ---------- ----------
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 $ 583,334 11/23/93 571,434 583,334 607,542
---------- ---------- ----------
Ardent Software, Inc. - O.T.C
A manufacturer and distributor of database
management software
Common Stock (B) 83,770 shs. 12/14/95 251,310 686,750 971,732
---------- ---------- ----------
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 3,179,333 3,400,033
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 3,517,679 3,617,878
---------- ---------- ----------
Averstar, Inc.
A provider of software systems, services and products
to a variety of information technology users.
Senior Floating Rate Revolving Term Note $ 1,292,177 8/31/95 1,292,177 1,292,176 1,292,177
due 2002
13% Senior Subordinated Note due 2002 $ 799,318 8/31/95 8,135 721,234 840,803
Class A Common Stock (B) 13,453 shs. 8/31/95 -- 18,384 1,668
Class B Common Stock (B) 37,200 shs. 8/31/95 -- 50,837 4,604
Class G Common Stock (B) 96,846 shs. 8/31/95 -- 104,000 12,009
Class A Common Stock of IES Holdings, Inc. (B) 2,941 shs. 2/27/98 -- -- --
Class B Common Stock of IES Holdings, Inc. (B) 8,134 shs. 2/27/98 -- -- --
Warrant, to purchase Class D
Common Stock of IES Holdings, Inc. (B) 21,176 shs. 2/27/98 -- -- --
---------- ---------- ----------
1,300,312 2,186,631 2,151,261
---------- ---------- ----------
</TABLE>
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7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Beta Brands, Inc. - T.S.E
A manufacturer of hard candy and chocolate-coated
products sold primarily to the Canadian market
Senior Secured Tranche A Floating Rate $2,294,000 12/23/97 $2,273,813 $2,294,000 $2,274,501
Note due 2004
14.75% Senior Secured Tranche B Note due 2005 $ 664,510 12/23/97 691,090 664,510 691,090
Limited Partnership Interests of CM Equity 811,168 int. 12/22/97 648,934 811,168 648,934
Partners (B)
Warrant, exercisable until 2005, to purchase 214,419 shs. 12/23/97 2,144 -- 2,144
Limited Partnership Interests at $.81 per interest (B) ---------- ---------- ----------
3,615,981 3,769,678 3,616,669
---------- ---------- ----------
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 3,711,600
---------- ---------- ----------
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 8/29/96 651,700 651,700 325,850
Credit Facility due 2002
Senior Secured Series A Floating Rate Term $2,343,234 8/29/96 2,318,161 2,343,233 1,171,617
Note due 2002
12% Series B Term Note due 2004 $ 533,000 8/29/96 524,738 509,718 266,500
Membership Interests (B) 266 int. 8/29/96 212,800 196,601 26,600
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 3,727,902 1,790,567
---------- ---------- ----------
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 $ 648,648 9/29/95 648,648 648,648 640,280
Credit Note due 2000
10% Senior Secured Term Note due 2004 $1,513,512 9/29/95 1,513,512 1,513,512 1,517,447
11.5% Senior Subordinated Note due 2004 $ 945,945 9/29/95 895,706 906,698 955,215
8% Junior Subordinated Convertible Note $ 108,108 9/29/95 108,108 108,108 135,546
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 63,537
partnership points at $.01 per point (B) ---------- ---------- ----------
3,216,235 3,227,227 3,312,025
---------- ---------- ----------
Capitol Vial, Inc.
A producer of plastic vial containers
19% Senior Subordinated Note due 2004 $3,500,000 12/30/97 3,426,500 3,500,000 3,420,200
Common Stock (B) 66 shs. 12/30/97 263 328 263
---------- ---------- ----------
3,426,763 3,500,328 3,420,463
---------- ---------- ----------
Catalina Lighting, Inc. - N.Y.S.E
A designer, importer and distributor of residential
and office lighting fixtures
8% Convertible Subordinated Note due 2002, $1,500,000 3/31/94 1,420,050 1,500,000 1,342,200
---------- ---------- ----------
convertible into common stock at $7.31 per share
Chaparral Resources, Inc. - O.T.C
An international oil and gas exploration and
production company
Common Stock (B) 9,838 shs. 12/3/97 6,395 6,395 21,585
---------- ---------- ----------
</TABLE>
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8
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
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 $ 202,358
due 1999
Common Stock (B) 77,779 shs. 6/27/85 401,340 413,766 212,415
-------------- ------------- -------------
642,185 647,166 414,773
-------------- ------------- -------------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use
10.75% Senior Secured Term Note due 2003 $ 1,214,205 12/8/95 1,226,772 1,214,205 1,215,662
12% Senior Subordinated Note due 2005 $ 800,575 12/8/95 803,858 762,348 794,490
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)
-------------- ------------- -------------
2,170,434 2,211,966 2,149,956
-------------- ------------- -------------
Control Devices, Inc. - O.T.C
A producer of high quality electromechanical circuit
protector devices and photo-optic sensors
Common Stock (B) 232,266 shs. * 34,989 26,242 3,392,482
-------------- ------------- -------------
D&K Healthcare Resources, Inc. - O.T.C
A wholesale pharmaceutical distribution company
Common Stock (B) 265,489 shs. 12/29/87 875,000 875,000 3,404,902
-------------- ------------- -------------
Delta Beverage Group, Inc.
A Pepsi soft drink bottler
Common Stock (B) 966 shs. 3/8/88 181,486 2,006,380 198,118
-------------- ------------- -------------
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 $ 415,213 10/24/96 412,680 415,213 413,386
10.16% Senior Term Note due 2002 $ 1,245,639 10/24/96 1,247,133 1,245,639 1,269,929
12% Senior Subordinated Note due 2003 $ 1,249,000 10/24/96 1,277,852 1,123,489 1,320,318
Membership Interests (B) 2,992 int. 10/24/96 224,393 299,190 224,392
Warrant, exercisable to 2003, to purchase 1,791 int. 10/24/96 18 147,609 18
Membership Interests at $.01 per interest (B)
-------------- ------------- -------------
3,162,076 3,231,140 3,228,043
-------------- ------------- -------------
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 3,397,350
-------------- ------------- -------------
convertible into common stock at $4.26 per share
Evans Consoles, Inc.
A designer and manufacturer of consoles and control
center systems
Senior Secured Tranch A Floating Rate Note $ 1,280,000 3/2/98 1,270,272 1,280,000 1,270,400
due 2005
8.85% Senior Secured Tranch A Note due 2005 $ 1,280,000 3/2/98 1,192,192 1,280,000 1,193,600
11.75% Senior Secured Tranch B Note due 2006 $ 700,000 3/2/98 743,750 588,565 743,820
Common Stock (B) 26,906 shs. 2/11/98 75,600 94,500 75,600
Limited Partnership Interests of CM Equity 1,254 int. 2/11/98 100,320 125,400 100,320
Partners (B)
Warrant, exercisable until 2006, to purchase 34,783 shs. 3/2/98 348 112,000 348
common stock at $.01 per share (B)
-------------- ------------- -------------
3,382,482 3,480,465 3,384,088
-------------- ------------- -------------
</TABLE>
*7/29/94 and 10/8/96
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Fleming Acquisition Corporation
A supplier of high-quality, premium printed labels for
distilled spirits, wine, food and household products.
Common Stock (B) 545 shs. 4/28/95 $ 1,231,111 $ 272,500 $ 27,991
Warrant, exercisable until 2005, to purchase 380 shs. 4/28/95 98,235 170,455 19,501
common stock at $.01 per share (B)
Incentive Warrant, exercisable from 1998 until 2000, 19 shs. 4/28/95 3,339 2,273 985
to purchase common stock at $.01 per share (B)
---------- ---------- ----------
1,332,685 445,228 48,477
---------- ---------- ----------
Golden Bear Acquisition Corp.
A manufacturer of asphalt and specialty lubricating
and processing oils.
17% Senior Subordinated Note due 2005 $ 3,173,220 7/18/97 3,203,683 3,106,797 3,244,300
12% Preferred Stock 311 shs. 7/18/97 31,491 311,111 320,568
Common Stock (B) 14,000 shs. 7/18/97 58,380 77,840 58,380
Warrant, exercisable until 2005, to purchase 23,333 shs. 7/18/97 233 69,999 233
common stock at $.001 per share (B)
Warrant, exercisable until 2010, to purchase 17,111 shs. 7/18/97 171 -- 171
common stock at $.001 per share (B)
---------- ---------- ----------
3,293,958 3,565,747 3,623,652
---------- ---------- ----------
Hardy Oil & Gas PLC - L.S.E.
Engages in exploration and development of oil
and gas reserves.
Warrant, exercisable until 2005, to purchase 273,083 shs. 1/11/95 27,015 -- 310,222
common stock at (Pounds)1.84 per share (B) ---------- ---------- ----------
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 2,334,580 2,708,241
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 3,451,174 3,312,675
---------- ---------- ----------
Highland Homes Holdings, Inc.
A single family home builder operating in the
Dallas-Fort Worth and Atlanta areas.
12.75% Senior Note due 1999 $ 1,500,000 11/18/93 1,485,150 1,479,549 1,557,600
10% Promissory Note due 1998 $ 107,088 11/18/93 -- 107,088 106,917
---------- ---------- ----------
1,485,150 1,586,637 1,664,517
---------- ---------- ----------
Hudson River Capital, LLC
Acquires controlling or substantial interests in
manufacturing and marketing entities.
Series A Preferred Units (B) 88,730 uts. 7/21/94 787,305 706,226 842,935
---------- ---------- ----------
Hussey Seating Company
A manufacturer of spectator seating products.
Senior Secured Floating Rate Note due 2003 $ 750,000 6/12/96 742,575 750,000 750,000
10% Senior Secured Note due 2003 $ 750,000 6/12/96 730,200 750,000 748,950
12% Subordinated Secured Note due 2006 $ 1,350,000 6/12/96 1,327,320 1,151,315 1,429,785
Warrant, exercisable until 2006, to purchase 3,553 shs. 6/12/96 36 225,000 36
common stock at $.01 per share (B)
---------- ---------- ----------
2,800,131 2,876,315 2,928,771
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
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 $ 2,054,570
13.25% Cumulative Exchangeable Preferred Stock 99 shs. 8/16/95 985,500 823,332 860,547
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 2,956,199
----------- ----------- -----------
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 3,052,429 3,413,992
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 3,385,729 3,486,568
----------- ----------- -----------
Latin Communications Group
An operator of Spanish-language media in
North America
5% Subordinated Note due 2005 $ 46,594 2/4/98 32,616 32,825 32,285
Common Stock (B) 89,836 shs. (*) 638,887 826,484 898,360
----------- ----------- -----------
671,503 859,309 930,645
----------- ----------- -----------
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 1,725,150
Membership Interests of LFPI Mainstreet (B) 18,725 uts. 9/30/97 18,730,001 1,872,742 1,685,250
----------- ----------- -----------
20,357,501 3,500,242 3,410,400
----------- ----------- -----------
Louis Dreyfus Natural Gas Corporation - A.S.E
An independent oil and gas company engaged
principally in the acquisition, development and
management of oil and gas properties
Warrant, exercisable until 2004, to purchase 103,342 shs. 12/27/91 49,714 38,712 210,508
common stock at $17.81 per share (B) ----------- ----------- -----------
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 2,198,745
Limited Partnership Interests (B) 568 uts. 10/20/95 506,250 677,832 298,055
Warrant, exercisable until 2004, to purchase 297 uts. 10/26/95 297 -- 155,690
Limited Partnership Interests at $.01 per unit (B) ----------- ----------- -----------
2,884,797 2,702,832 2,652,490
----------- ----------- -----------
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 6/28/95 461,538 461,538 461,538
Facility due 2001
Common Stock (B) 76,923 shs. 6/28/95 192,115 230,769 207,692
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) ----------- ----------- -----------
752,234 863,736 708,793
----------- ----------- -----------
Mercury Computer Systems, Inc. - O.T.C
A designer, manufacturer and marketer of computer
systems
Common Stock (B) 393,750 shs. 12/21/87 1,171,564 1,181,250 6,452,578
----------- ----------- -----------
(*) 2/14/95, 12/1/95, 2/27/96 and 2/4/98
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
N2K, Inc. - O.T.C
A music entertainment company which uses the
internet as a global platform for the promoting and
merchandising of music and related merchandise
Warrant, exercisable until 2004, to purchase 27,777 shs. 8/6/97 $ 278 $ -- $ 446,876
common stock at $12 per share (B) ---------- ---------- ----------
Nu Horizons Electronics Corp. - O.T.C
A distributor of high technology active and passive
electronic devices
8.25% Convertible Subordinated Note due 2002, $1,411,800 8/31/94 1,425,918 1,411,800 1,511,191
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 2/5/93 832,000 833,333 850,583
8% Convertible Preferred Stock due 2001, 83,333 shs. 2/5/93 166,667 166,667 163,000
convertible into common stock at $2 per share
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 213,333
---------- ---------- ----------
1,332,000 1,333,333 1,226,916
---------- ---------- ----------
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 $ 725,625 11/30/95 756,174 725,625 759,439
10.5% Senior Secured Convertible Note due $ 195,000 11/30/95 205,335 195,000 221,149
2005, convertible into common stock at
$50,000 per share
Common Stock 7 shs. 11/30/95 227,812 337,500 210,209
---------- ---------- ----------
1,189,321 1,258,125 1,190,797
---------- ---------- ----------
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 2,239,609
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 2,677,865
---------- ---------- ----------
Plastipak Packaging, Inc.
A manufacturer of plastic containers
10.64% Senior Subordinated Note due 2006 $3,500,000 10/25/96 3,403,750 3,419,397 3,545,150
Warrant, exercisable until 2006, to purchase 97 shs. 10/25/96 55,593 93,625 72,371
common stock at $.01 per share (B)
---------- ---------- ----------
3,459,343 3,513,022 3,617,521
---------- ---------- ----------
Precision Dynamics, Inc.
A manufacturer of custom-designed solenoid valves
and controls
Senior Secured Floating Rate Revolving $ 505,300 7/22/96 500,298 505,300 501,207
Credit Facility due 2003
Senior Secured Floating Rate Term Note due 2003 $2,739,344 7/22/96 2,712,498 2,739,344 2,719,894
12% Senior Secured Term Note due 2004 $ 489,000 7/22/96 482,545 403,760 503,572
8% Preferred Stock 232 shs. 7/22/96 220,231 231,822 189,343
Common Stock (B) 599 shs. 7/22/96 21,699 28,978 19,907
Warrant, exercisable until 2004, to purchase 322 shs. 7/22/96 3 97,800 10,715
common stock at $.01 per share (B)
---------- ---------- ----------
3,937,274 4,007,004 3,944,638
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
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 $1,950,839 $1,983,600
Common Membership Interests 9 int. 7/31/97 23 25 23
---------- ---------- ----------
1,967,623 1,950,864 1,983,623
---------- ---------- ----------
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 1,039,560
11.51% Junior Secured Note due 1999 $ 600,000 8/12/94 587,280 600,000 522,840
9.8% Redeemable Exchangeable Preferred Stock 10,000 shs. 8/12/94 847,900 1,000,000 440,100
Common Stock (B) 1,492 shs. 8/12/94 15 -- 2,249
---------- ---------- ----------
2,619,355 2,800,000 2,004,749
---------- ---------- ----------
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 1,636,050
Common Stock (B) 35,500 shs. 2/16/93 340,800 340,800 556,462
---------- ---------- ----------
1,939,950 1,840,800 2,192,512
---------- ---------- ----------
Rent-Way, Inc. - O.T.C
Operates rent-to-own stores in Ohio, Pennsylvania
and New York
Common Stock(B) 201,207 shs. 7/18/95 1,991,220 2,000,000 4,539,834
Warrant, exercisable until 2002, to purchase 20,000 shs. 7/18/95 200 -- 269,960
common stock at $9.94 per share (B) ---------- ---------- ----------
1,991,420 2,000,000 4,809,794
---------- ---------- ----------
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 1,885,305 2,347,332
Limited Partnership Interests of KS 7,186 uts. 12/14/95 538,950 718,741 646,740
Holdings, L.P. (B)
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 3,083,140 2,996,796
---------- ---------- ----------
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 1,546,197
10.5% Subordinated Note due 2004 $ 716,418 5/27/94 716,418 716,418 714,699
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 2,402,424
---------- ---------- ----------
Supreme Industries, Inc. - A.S.E
A manufacturer of modular homes and truck bodies
Common Stock (B) 551,270 shs. * 1,260,923 1,243,732 6,294,952
Common Stock of TGC Industries, Inc. (B) 19,082 shs. 9/30/86 9,497 9,497 13,415
---------- ---------- ----------
1,270,420 1,253,229 6,308,367
---------- ---------- ----------
</TABLE>
*5/23/79, 12/15/95 and 6/9/96.
- --------------------------------------------------------------------------------
13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
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 $ 2,494,850 $ 2,780,625
Limited Partnership Interests of Green Grass 81,548 uts. 3/13/97 293,573 417,728 244,644
Capital II, LLC (B)
Warrant, exercisable until 2005, to purchase 148,044 uts. 3/13/97 531,774 680,722 442,948
Limited Partnership Interests of Green Grass
Capital II, LLC at $.01 per unit (B)
----------- ----------- -----------
3,410,347 3,593,300 3,468,217
----------- ----------- -----------
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 1,708,846 1,734,425
8% Convertible Redeemable Preferred Stock 8,244 shs. 8/8/97 798,596 1,750,000 1,742,683
Warrant, exercisable until 2005, to purchase 1,560 shs. 8/8/97 16 43,898 16
common stock at $.01 per share (B)
----------- ----------- -----------
2,497,687 3,502,744 3,477,124
----------- ----------- -----------
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 2,499,000
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 3,507,043
----------- ----------- -----------
TransMontaigne Oil Company - A.S.E
An independent petroleum products marketing
company
12.75% Senior Subordinated Debenture due 2000 $ 1,200,000 3/28/91 1,274,280 1,184,942 1,281,240
Common Stock (B) 258,720 shs. * 400,000 798,595 3,078,768
Warrant, exercisable until 2001, to purchase 74,606 shs. 3/28/91 7,461 42,000 620,722
common stock at $3.60 per share (B)
----------- ----------- -----------
1,681,741 2,025,537 4,980,730
----------- ----------- -----------
Tranzonic Companies, The
A producer of commercial and industrial supplies,
such as safety products, janitorial supplies, work
apparel, washroom and restroom supplies and
sanitary care products
12.5% Senior Subordinated Note due 2006 $ 2,712,000 2/4/98 2,762,172 2,346,896 2,748,341
Common Stock (B) 630 shs. 2/4/98 567,000 630,000 567,000
Warrants to purchase shares of class B 444 shs. 2/4/98 4 368,832 4
common stock at .01 per share (B)
----------- ----------- -----------
3,329,176 3,345,728 3,315,345
----------- ----------- -----------
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 2,538,132
Limited Partnership Interests of Riverside V 5,359 uts. ** 655,759 591,115 655,760
Holding Company L.P.
Limited Partnership Interests of Riverside 11,467 uts. ** 1,485,581 1,264,026 1,485,578
V-A 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)
----------- ----------- -----------
4,737,144 4,368,641 4,682,599
----------- ----------- -----------
</TABLE>
*3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95.
**3/21/97, 10/16/97 and 11/19/97.
- --------------------------------------------------------------------------------
14
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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 $ 2,314,681 $ 2,798,319
Limited Partnership Interests (B) 8,246 uts. 6/17/97 742,140 824,661 742,140
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 3,516,274 3,540,472
----------- ----------- -----------
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 1,711,498
12% Subordinated Note due 2005 $ 652,050 5/3/95 733,622 622,427 744,380
Common Stock (B) 4,911 shs. 5/3/95 162,652 391,230 13,908
Warrant, exercisable until 2005, to purchase 2,795 shs. 5/3/95 92,549 35,923 7,893
common stock at $.01 per share (B)
----------- ----------- -----------
2,739,910 2,633,128 2,477,679
----------- ----------- -----------
U.S. Silica Company
A producer of high grade industrial and specialty
ground silica sands in North America.
15% Senior Subordinated Notes due 2005 $ 2,392,219 * 2,540,273 2,392,089 2,583,596
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)
----------- ----------- -----------
3,428,261 3,558,919 3,465,042
----------- ----------- -----------
Unipac Corporation
A manufacturer of laminated materials which are
used to seal a variety of packaging containers.
Senior Secured Floating Rate Note due 2002 $ 125,625 2/9/96 124,293 125,625 125,625
12% Senior Secured Note due 2004 $ 243,750 2/9/96 246,870 222,890 263,079
Acquisition Line of Credit due 2002 $ 703,125 9/30/96 703,125 703,125 703,125
Limited Partnership Interests of Riverside II 123 uts. ** 112,407 133,232 325,231
Holding Company L.P. (B)
Warrant, exercisable from 2000 until 2004, to 41 uts. 2/9/96 4 40,312 109,395
purchase Limited Partnership Interests of
Riverside II Holding Company L.P. at
$.01 per unit
----------- ----------- -----------
1,186,699 1,225,184 1,526,455
----------- ----------- -----------
Victory Ventures, LLC
Acquires controlling or substantial interests in
other entities.
Series A Preferred Units (B) 11,270 uts. 12/2/96 12,701 57,101 107,065
----------- ----------- -----------
</TABLE>
*12/19/96 and 2/15/97.
**2/9/96 and 9/25/96.
- --------------------------------------------------------------------------------
15
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 3/31/98
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Vitex Packaging, Inc.
A manufacturer of specialty packaging, primarily
envelopes and tags used on tea bags
Senior Secured Floating Rate Revolving $ 850,876 1/2/98 $ 844,069 $ 850,876 $ 844,324
Credit Facility due 2003
Senior Secured Floating Rate Term Note $ 2,184,000 1/2/98 2,166,746 2,184,000 2,167,403
due 2005
12% Senior Secured Tranch B Note due 2007 $ 672,000 1/2/98 678,787 621,600 672,336
Limited Partnership Interests of Riverside VI 122,182 int. 12/30/97 977 98,843 97,745
Holding Company L.P. (B)
Limited Partnership Interests of Riverside 201,600 int. 12/30/97 1,613 201,600 161,280
VI-A Holding Company L.P. (B)
Warrant, exercisable until 2007, to purchase 89 shs. 1/2/98 1 50,400 1
common stock at $.01 per share (B)
------------ ------------ ------------
3,692,193 4,007,319 3,943,089
------------ ------------ ------------
Total Private Placement Investments $148,740,264 138,905,468 158,781,849
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 3/31/98
Rule 144A Securities - 10.04%: (A) Rate Date Amount (Note 2B) (Note 2A)
-------- -------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Bonds - 3.98%
Atlantic Coast Airlines Inc. 8.750% 01/01/07 $ 572,072 572,072 576,362
Brand Scaffold Services 10.250 02/15/08 150,000 150,000 155,250
Cuddy International Corp. 10.750 12/01/07 800,000 788,048 800,000
Doe Run Resources Corp. 11.250 03/15/05 300,000 300,000 312,000
Doskocil Manufacturing Co., Inc. 10.125 09/15/07 250,000 254,688 266,250
IMPAC Group Inc. 10.125 03/15/08 750,000 750,000 763,125
McLeodUSA Incorporated 8.375 03/15/08 350,000 350,000 362,250
MCMS Inc. 9.750 03/01/08 600,000 600,000 604,500
Morris Materials Handling 9.500 04/01/08 300,000 300,000 301,500
Numatics Inc. 9.625 04/01/08 400,000 406,188 408,500
Parker Drilling Company 9.750 11/15/06 500,000 519,164 532,500
Scovill Fastener, Inc. 11.250 11/30/07 500,000 500,000 522,500
Sovereign Speciality Chemicals 9.500 08/01/07 200,000 200,000 211,000
Tekni-Plex Inc. 9.250 03/01/08 650,000 650,000 667,875
Tjiwi Kima Fin Mauritius LTD 10.000 08/01/04 500,000 497,275 417,500
Trans World Airlines 11.375 03/01/06 500,000 500,000 505,000
Von Hoffman Press, Inc. 10.375 05/15/07 380,000 382,362 406,600
Worldtex, Inc. 9.625 12/15/07 600,000 600,000 609,000
----------- ------------ ------------
Sub-Total Rule 144A Bonds $ 8,302,072 8,319,797 8,421,712
=========== ------------ ------------
Convertible Bonds - 4.40%
Arbor Software Corporation 4.500 03/15/05 $ 200,000 200,000 210,962
Centocor Inc. 4.750 02/15/05 600,000 600,000 682,572
Concentra Managed Care, Inc. 4.500 03/15/03 600,000 600,000 594,750
Costco Companies, Inc. 0.000 08/19/17 100,000 51,041 66,397
Cymer Inc. 3.500 08/06/04 375,000 377,500 303,525
Data Processing Resource Corporation 5.250 04/01/05 250,000 250,000 271,250
Equity Corporation International 4.500 12/31/04 400,000 400,000 426,632
Garnet Resources Corporation 9.500 12/21/98 500,000 500,000 50,000
Healthsouth Corporation 3.250 04/01/03 1,500,000 1,500,000 1,496,235
Kellstorm Industries, Inc. 5.750 10/15/02 350,000 350,000 401,814
Key Energy Group 5.000 09/15/04 1,000,000 1,000,000 812,690
Mark IV Industries 4.750 11/01/04 750,000 711,875 709,920
Smartalk Teleservices 5.750 09/15/04 600,000 600,000 765,564
Sunbeam Corporation 0.000 03/25/18 3,750,000 1,397,777 1,359,375
Tel-Save 4.500 09/15/02 1,080,000 1,077,000 1,138,050
----------- ------------ ------------
Sub-Total Rule 144A Convertible Bonds $12,055,000 9,615,193 9,289,736
=========== ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 3/31/98
Rule 144A Securities: (A) (Continued) Rate Date Amount (Note 2B) (Note 2A)
---------- ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Convertible Preferred Stock - 1.66%
D T Industries 40,000 $ 2,000,000 $ 2,360,000
Newell Financial Trust 20,250 1,012,500 1,154,250
------------ ------------
Total Convertible Preferred Stock 3,012,500 3,514,250
------------ ------------
Total Rule 144A Securities 20,947,490 21,225,698
------------ ------------
Total Corporate Restricted Securities 159,852,958 180,007,547
------------ ------------
Corporate Public Securities:
Bonds - 11.94%
Advanced Micro Devices 11.000% 08/01/03 $ 300,000 318,000 321,000
Aearo Company 12.500 07/15/05 1,000,000 1,000,000 1,135,000
Amphenol Corporation 9.875 05/15/07 400,000 400,000 428,000
Amtran, Inc. 10.500 08/01/04 600,000 600,000 636,438
Anchor Advanced Products 11.750 04/01/04 410,000 413,000 453,050
Atlantic Express 10.750 02/01/04 950,000 964,000 1,010,562
Callon Petroleum Company 10.125 09/15/02 500,000 497,120 522,120
Central Rents, Inc. 12.875 12/15/03 1,255,000 1,187,475 1,273,825
Chesapeake Energy Corporation 8.500 03/15/12 240,000 221,238 230,400
Continental Airlines, Inc. 9.500 12/15/01 750,000 750,000 802,500
Dawson Production Services 9.375 02/01/07 500,000 516,375 513,750
DecisionOne Corporation 9.750 08/01/07 525,000 523,250 511,875
Decorative Home Accents, Inc. 13.000 06/30/02 700,000 700,000 378,000
Florist Transworld Delivery, Inc. 14.000 12/15/01 1,475,000 1,458,956 1,637,250
Great American Cookie Co. 10.875 01/15/01 1,385,000 1,367,500 1,433,476
Hosiery Corporation of America 13.750 08/01/02 1,000,000 987,800 1,097,500
Indah Kiat International Corporation 11.875 06/15/02 1,000,000 1,000,000 915,000
International Wire Group, Inc. 11.750 06/01/05 550,000 598,125 610,500
International Wire Group, Inc. 11.750 06/01/05 750,000 750,000 832,500
Jordan Industries, Inc. 10.375 08/01/07 500,000 500,000 518,750
Jordan Telecom Products 9.875 08/01/07 1,150,000 1,139,907 1,219,000
Key Plastics, Inc. 14.000 11/15/99 750,000 760,462 821,250
Neenah Corporation 11.125 05/01/07 300,000 300,000 332,250
Northwest Airlines Corp. 12.092 12/31/00 240,568 249,590 241,771
Northwest Airlines Corp. 10.150 01/02/05 579,786 579,786 625,601
Pierce Leahy Corp. 9.125 07/15/07 175,000 175,000 183,750
Remington Products Company 11.000 05/15/06 600,000 595,506 549,000
Scotsman Group, Inc. 8.625 12/15/07 150,000 149,598 152,250
Speedway Motorsports, Inc. 8.500 08/15/07 275,000 274,252 285,312
Telex Communications, Inc. 10.500 05/01/07 1,150,000 1,162,937 1,058,000
Therma-Wave, Inc. 10.625 05/15/04 450,000 457,500 468,000
Trans World Airlines 11.500 12/15/04 500,000 494,110 527,500
Unicco Service Co. 9.875 10/15/07 325,000 323,472 332,790
United Refining Company 10.750 06/15/07 1,750,000 1,750,000 1,837,500
W R Carpenter North America 10.625 06/05/07 625,000 631,917 667,189
Wavetek Corporation 10.125 06/15/07 130,000 130,000 133,250
Williams Scotsman, Inc. 9.875 06/01/07 500,000 500,000 525,000
------------ ------------ ------------
Total Bonds $ 24,440,354 24,426,876 25,220,909
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
SCHEDULE OF INVESTMENTS MASSMUTUAL CORPORATE INVESTORS
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares
Warrants or Market Value
Interest Due Principal Cost at 3/31/98
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
---------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Common Stock - 4.91%
4Health Inc. (B) 27,000 $ 151,000 $ 124,875
American Country Holdings Inc. (B) 405,590 760,889 848,900
American Skiing Corp. (B) 35,000 630,000 586,250
Benson Petroleum, LTD. (B) 200,000 154,408 215,569
BP Prudhoe Bay Royalty Trust 26,180 383,173 384,532
Central Rents, Inc. 1,880 67,856 112,800
Collins & Aikman Corporation (B) 40,200 240,834 366,825
Columbia Sportswear Company (B) 4,900 88,200 103,512
Corporate Express 24,193 34 241,156
Dawson Production Services (B) 45,242 570,064 571,180
Decorative Home Accents, Inc. (B) 700 -- 7
EMCOR Group, Inc. (B) 5,834 127,619 125,431
Excalibur Technologies Corp. (B) 23,334 230,210 271,258
Exodus Communications Inc. (B) 2,450 36,750 68,600
Florida Panthers Holdings, Inc. (B) 35,502 681,042 789,920
Florist Transworld Delivery, Inc. (B) 14,686 41,258 146,860
General Chemical Group, Inc. 10,200 261,398 295,157
GTech Holdings Corporation (B) 16,500 474,375 641,437
Herley Industries, Inc. (B) 4,698 56,376 65,476
Hosiery Corporation of America (B) 1,000 -- 70,000
Jordan Telecom Products 700 -- 18,200
LCS Industries, Inc. 35,000 546,831 564,375
Marker International (B) 70,000 437,500 258,090
N2K, Inc. (B) 25,000 475,000 746,875
Princeton Video Image, Inc. (B) 70,000 490,000 568,750
Red Roof Inns, Inc. (B) 33,200 481,272 605,900
Republic Industries, Inc. (B) 35,000 859,688 903,420
Staffing Resources, Inc. (B) 105,000 577,500 669,375
----------- -----------
Total Common Stock 8,823,277 10,364,730
----------- -----------
Convertible Bonds - 3.84%
Clear Channel Communications 2.625% 04/01/03 $ 650,000 650,000 646,750
Dura Pharmaceuticals 3.500 07/15/02 590,000 597,031 507,111
EMCOR Group, Inc. (B) 5.750 04/01/05 650,000 650,000 661,375
Hilton Hotels 5.000 05/15/06 1,385,000 1,385,000 1,556,394
Home Depot, Inc. 3.250 10/01/01 675,000 669,313 999,843
Loews Corp. 3.125 09/15/07 900,000 900,000 867,600
Reptron Electronics Inc. 6.750 08/01/04 200,000 200,000 160,000
Savoy Pictures Entertainment 7.000 07/01/03 1,250,000 1,287,500 1,175,000
US Filter Corporation 4.500 12/15/01 800,000 800,000 882,000
USA Waste Services, Inc. 4.000 02/01/02 195,000 195,000 230,498
World Color Press, Inc. 6.000 10/01/07 400,000 400,000 433,084
----------- ----------- -----------
Total Convertible Bonds $ 7,695,000 7,733,844 8,119,655
=========== ----------- -----------
Preferred Stock - .04%
Jordan Telecom Products 700 70,000 74,200
----------- -----------
Total Preferred Stock 70,000 74,200
----------- -----------
Warrants - .11%
American Country Holdings Inc. (B) 183,117 45,779 183,117
Herley Industries, Inc. (B) 15,632 1,563 41,034
----------- -----------
Total Warrants 47,342 224,151
----------- -----------
Total Corporate Public Securities 41,101,339 44,003,645
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 3/31/98
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
-------------- --------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Short-Term Securities:
Commercial Paper - 1.84%
Aristar, Inc. 6.201% 4/1/98 $ 2,500,000 $ 2,500,000 $ 2,500,000
Conagra, Inc. 5.741 4/1/98 765,000 765,000 765,000
Conagra, Inc. 6.052 4/2/98 625,000 624,895 624,895
------------- ------------- --------------
Total Short-Term Securities $ 3,890,000 3,889,895 3,889,895
============= ------------- --------------
Total Investments - 107.86% $ 204,844,192 227,901,087
============= --------------
Other Assets - 2.29 4,842,864
Liabilities - (10.15) (21,446,798)
----- --------------
Total Net Assets - 100.00% $ 211,297,153
====== ==============
</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.
INDUSTRY CLASSIFICATION
Fair Value
at 3/31/98
Corporate Restricted Securities: (Note 2A)
------------
AEROSPACE & DEFENSE - .19%
Kellstorm Industries, Inc. $ 401,814
--------------
AUTOMOBILE - .53%
Coast Distribution System, The 414,773
Mark IV Industries 709,920
--------------
1,124,693
--------------
BEVERAGE, FOOD & TOBACCO - 6.70%
Associated Vintage Group, Inc. 3,617,878
Beta Brands, Inc. 3,616,669
Cains Foods, L.P. 3,312,025
Delta Beverage Group, Inc. 198,118
Lloyd's Barbecue Company 3,410,400
--------------
14,155,090
--------------
BROADCASTING & ENTERTAINMENT - .44%
Latin Communications Group 930,645
--------------
BUILDINGS & REAL ESTATE - 5.45%
Highland Homes Holdings, Inc. 1,664,517
Supreme Industries, Inc. 6,308,367
Truseal Technologies, Inc. 3,540,472
--------------
11,513,356
--------------
CARGO TRANSPORT - 2.70%
RailTex, Inc. 2,192,512
Tidewater Holdings, Inc. 3,507,043
--------------
5,699,555
--------------
CHEMICAL, PLASTICS & RUBBER - 8.14%
AccTech, LLC $ 3,689,963
Process Chemicals, LLC 1,983,623
Sovereign Speciality Chemicals 211,000
TACC International Corporation 3,477,124
Tekni-Plex Inc. 667,875
Trend Plastics, Inc. 4,682,599
U.S. Netting, Inc. 2,477,679
--------------
17,189,863
--------------
CONSUMER PRODUCTS - 1.56%
Consumer Product Enterprises, Inc. 2,149,956
Newell Financial Trust 1,154,250
--------------
3,304,206
--------------
CONTAINERS, PACKAGING & GLASS - 7.12%
C&K Manufacturing and Sales Company 1,790,567
Capitol Vial, Inc. 3,420,463
IMPAC Group Inc. 763,125
Plastipak Packaging, Inc. 3,617,521
Unipac Corporation 1,526,455
Vitex Packaging, Inc. 3,943,089
--------------
15,061,220
--------------
DIVERSIFIED/CONGLOMERATE -
MANUFACTURING - 17.24%
Cymer Inc. 303,525
D T Industries 2,360,000
Doskocil Manufacturing Co., Inc. 266,250
Eagle Pacific Industries, Inc. 3,397,350
Evans Consoles, Inc. 3,384,088
Fleming Acquisition Corporation 48,477
- --------------------------------------------------------------------------------
19
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 1998
(Unaudited)
INDUSTRY CLASSIFICATION (Continued)
Fair Value
at 3/31/98
Corporate Restricted Securities: (Continued) (Note 2A)
----------
DIVERSIFIED/CONGLOMERATE -
MANUFACTURING (Continued)
Golden Bear Acquisition Corp. $ 3,623,652
Hartzell Manufacturing, Inc. 3,312,675
Hudson River Capital, LLC 842,935
Hussey Seating Company 2,928,771
Jackson Products, Inc. 2,956,199
Kappler Safety Group, Inc. 3,486,568
Maxtec International Corp. 708,793
Morris Materials Handling 301,500
PAR Acquisition Corp. 1,226,916
Scovill Fastener, Inc. 522,500
Tranzonic Companies, The 3,315,345
U.S. Silica Company 3,465,042
-----------
36,450,586
-----------
DIVERSIFIED/CONGLOMERATE -
SERVICE - 2.51%
Ammirati & Puris, Inc. 607,542
Data Processing Resource Corporation 271,250
Diversco, Inc. 3,228,043
Pharmaceutical Buyers, Inc. 1,190,797
-----------
5,297,632
-----------
ELECTRONICS - 9.10%
Arbor Software Corporation 210,962
Ardent Software, Inc. 971,732
Averstar, Inc. 2,151,261
Control Devices, Inc. 3,392,482
MCMS Inc. 604,500
Mercury Computer Systems, Inc. 6,452,578
Nu Horizons Electronics Corp. 1,511,191
Precision Dynamics, Inc. 3,944,638
-----------
19,239,344
-----------
ENTERTAINMENT - .76%
Adventure Entertainment Corporation 1,614,293
-----------
FARMING & AGRICULTURE - 1.33%
Cuddy International Corp. 800,000
Protein Genetics, Inc. 2,004,749
-----------
2,804,749
-----------
HEALTHCARE, EDUCATION &
CHILDCARE - 2.92%
Centocor Inc. 682,572
Concentra Managed Care, Inc. 594,750
D&K Healthcare Resources, Inc. 3,404,902
Healthsouth Corporation 1,496,235
-----------
6,178,459
-----------
HOME & OFFICE FURNISHINGS, HOUSEWARES,
AND DURABLE CONSUMER PRODUCTS - 3.83%
Catalina Lighting, Inc. 1,342,200
Sequentia, Inc. 2,996,796
Star International Holdings, Inc. 2,402,424
Sunbeam Corporation 1,359,375
-----------
8,100,795
-----------
LEISURE, AMUSEMENT,
ENTERTAINMENT - 1.85%
N2K, Inc. 446,876
Swing N'Slide Corporation 3,468,217
-----------
3,915,093
-----------
MACHINERY - .19%
Numatics Inc. 408,500
-----------
MISCELLANEOUS - .67%
Brand Scaffold Services 155,250
Doe Run Resources Corp. 312,000
Equity Corporation International 426,632
Tjiwi Kima Fin Mauritius LTD 417,500
Victory Ventures, LLC 107,065
-----------
1,418,447
-----------
OIL AND GAS - 4.53%
Chaparral Resources, Inc. 21,585
Garnet Resources Corporation 50,000
Hardy Oil & Gas PLC 310,222
Key Energy Group 812,690
Louis Dreyfus Natural Gas Corporation 210,508
Maloney Industries, Inc. 2,652,490
Parker Drilling Company 532,500
TransMontaigne Oil Company 4,980,730
-----------
9,570,725
-----------
PERSONAL TRANSPORTATION - 3.54%
Atlantic Coast Airlines Inc. 576,362
Budget Group, The 3,711,600
Piedmont Holding, Inc. 2,677,865
Trans World Airlines 505,000
-----------
7,470,827
-----------
PRINTING & PUBLISHING - .19%
Von Hoffman Press, Inc. 406,600
-----------
RETAIL STORES - 2.34%
Costco Companies, Inc. 66,397
Rent-Way, Inc. 4,809,794
-----------
4,876,191
-----------
TELECOMMUNICATIONS - 1.07%
McLeodUSA Incorporated 362,250
Smartalk Teleservices 765,564
Tel-Save 1,138,050
-----------
2,265,864
-----------
TEXTILES & LEATHER - .29%
Worldtex, Inc. 609,000
-----------
Total Corporate Restricted
Securities - 85.19% $180,007,547
===========
- --------------------------------------------------------------------------------
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS MASSMUTUAL CORPORATE INVESTORS
(Unaudited)
1. History
MassMutual Corporate Investors (the "Trust") is a closed-end, non-diversified
management 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:
Valuation of a security in the Trust's portfolio is made on the basis of
market price whenever market quotations are readily available and all
securities of the same class held by the Trust can be readily sold in such
market.
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.
- --------------------------------------------------------------------------------
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
The financial statements include restricted securities valued at $180,007,547
(85.19% of net assets) as of March 31, 1998 ($147,308,753 at March 31, 1997)
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 March 31, 1998, 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.
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.
- --------------------------------------------------------------------------------
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, safekeeping facilities, 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 March
31, 1998 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
For the For the
three months three months
ended 3/31/98 ended 3/31/97
------------- -------------
Cost of Investments Acquired
----------------------------
Corporate restricted securities $ 26,837,589 $ 67,144,607
Corporate public securities 4,351,248 58,132,257
Short-term securities 109,502,226 280,873,961
Proceeds from Sales or Maturities
---------------------------------
Corporate restricted securities $ 23,642,329 $ 51,416,597
Corporate public securities 20,917,361 77,992,854
Short-term securities 108,456,155 283,413,909
- --------------------------------------------------------------------------------
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of March 31, 1998. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of March 31, 1998 is $23,056,985 and consists of $37,226,890 appreciation
and $14,169,995 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of March 31, 1997. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of March 31, 1997 was $10,318,913 and consisted of $25,369,653
appreciation and $15,050,740 depreciation.
6. Common Shares
On December 19, 1997, the Board of Trustees authorized a two-for-one split of
the Trust's common shares effective January 20, 1998 on shares outstanding at
the close of business on December 31, 1997. The stock split increased the
common shares outstanding to 5,813,448 from 4,256,724. All per share amounts
have been restated after giving effect to the two-for-one split of the
Trust's common shares.
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24
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Trustees
Donald E. Benson(*)
Marshall D. Butler
Milton Cooper
Richard G. Dooley
Donald Glickman
Martin T. Hart(*)
Jack A. Laughery
Corine T. Norgaard
Gary E. Wendlandt
(*)Member of the Audit Committee
[GRAPHIC APPEARS HERE]
Officers
Gary E. Wendlandt, Chairman
Richard G. Dooley, Vice Chairman
Stuart H. Reese, President
Robert E. Joyal, Senior Vice
President
Charles C. McCobb, Jr., Vice President &
Chief Financial
Officer
Stephen L. Kuhn, Vice President &
Secretary
Michael P. Hermsen, Vice President
William N. Holm, Vice President
Mary Wilson Kibbe, Vice President
Michael L. Klofas, Vice President
John B. Joyce, Vice President
Richard C. Morrison, Vice President
Clifford M. Noreen, Vice President
Raymond B. Woolson, Treasurer
Mark B. Ackerman, Comptroller
Dividend Reinvestment and Share Purchase Plan
MassMutual Corporate Investors offers a Dividend Reinvestment and Share Purchase
Plan. The Plan provides a simple way for shareholders to add to their holdings
in the Trust through the receipt of dividend shares issued by the Trust or
through the reinvestment of cash dividends in Trust shares purchased in the open
market. A shareholder may join the Plan by filling out and mailing an
authorization card to Shareholder Financial Services, Inc., the Transfer Agent
Participating shareholders will continue to participate until they notify the
Transfer Agent, in writing, of their desire to terminate participation. Unless a
shareholder elects to participate in the Plan, he or she will, in effect, have
elected to receive dividends and distributions in cash.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $10 nor more than $5,000 per quarter.
Whenever the Trust declares a dividend payable in cash or shares, the Transfer
Agent, acting on behalf of each participating shareholder, will take the
dividend in shares only if the net asset value is lower than the market price
plus an estimated brokerage commission as of the close of business on the
valuation day. The valuation day is the last day preceding the day of dividend
payment. When the dividend is to be taken in shares, the number of shares to be
received is determined by dividing the cash dividend by the net asset value as
of the close of business on the valuation date or, if greater than net asset
value, 95% of the closing share price. If the net asset value of the shares is
higher than the market value plus an estimated commission, the Transfer Agent,
consistent with obtaining the best price and execution, will buy shares on the
open market at current prices promptly after the dividend payment date.
The reinvestment of dividends does not, in any way, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in
newly-issued shares of the Trust will be the fair market value of the shares
received, which will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder.)
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Corporate Investors' Dividend Reinvestment
and Share Purchase Plan, P.O. Box 173673, Denver CO 80217-3673.
