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Previous: IDS UTILITIES INCOME FUND INC, NSAR-A, 1996-08-29 |
Next: TOWER MUTUAL FUNDS, 497, 1996-08-29 |
<PAGE>
TO OUR SHAREHOLDERS July 31, 1996
We are pleased to present MassMutual Participation Investors' report for the
first six months of 1996.
The Trustees declared a dividend of $.19 per share payable on August 8, 1996 to
shareholders of record on July 31, 1996. A dividend of $.19 per share was paid
in the preceding quarter.
Despite an increase in interest rates during the first half of the year, which
lowers bond values, Participation Investors achieved record setting asset
levels. Aided in part by the rising stock market and some favorable events in
our private portfolio, the Trust's net asset value ended the second quarter up
5.4% from the first quarter. This performance outpaced both the S&P Industrial
Stock Index and the Lehman Brothers Government/Corporate Bond Index which were
up 5.1% and 0.5% respectively. For the first half, the Trust's total return
based on net asset value was 5.8%, compared with an 11.5% gain in the S&P and a
loss of 1.9% in the Lehman Index.
The Trust had an outstanding quarter in terms of capital gains, realizing net
gains of nearly $3 million. The Trust's biggest gain realized during the quarter
came from one of our private investments, Steerage Corporation, which we put on
our books about 2 1/2 years ago. Litton Industries Inc. acquired Sperry
Marine Inc., whose parent company is Steerage Corporation, in a transaction that
produced a gain of nearly $1.9 million for the Trust. Also from our private
investment portfolio we continued to sell portions of RailTex, Inc. for a gain
of $188 thousand. On the public side, we eliminated positions in Republic
Industries, Inc. and Chesapeake Energy Corp. after realizing gains of
approximately $440 thousand and $227 thousand respectively. These numbers bring
our year-to-date net realized gains to $5.7 million or $.62 per share. Of the
$.62, $.20 represents short-term gains which are distributed to shareholders
each year.
There are also some noteworthy unrealized gains in the Trust's private placement
portfolio. CompuCom Systems, Inc.'s stock price rose over 26% during the
quarter, boosting the value of our 418,361 shares. Another one of our
investments, TransMontaigne Oil Company, merged with a public company, Sheffield
Exploration Company. Each share of TransMontaigne was converted into one share
of the surviving corporation, whose stock price ended the quarter at $11.25. Our
common stock has a cost of $3.09 per share and our warrants have an exercise
price of $3.60 per warrant creating good value for the portfolio.
The second quarter's net investment income increased to $1,734,964 or 18.8 cents
per share from $1,717,737 or 18.6 cents per share from the previous quarter.
Also, we closed on two new private placement investments and made an additional
investment in Classic Sports Partners, L.P. during the quarter. The new
investments are Hussey Seating Company and NM Holdings, LLC. Hussey is a family
owned business founded over 160 years ago, which now is the leading North
American manufacturer of spectator seating. NM Holdings is a special purpose
enterprise formed for the purpose of acquiring film rights to completed motion
pictures from Twentieth Century Fox Film Corporation. Together, these
investments provide an average yield of approximately 10.8% and have equity
features. In addition to the new investments, there are three more private
placement investment opportunities under review which will be purchased pending
successful negotiations.
We thank you for your continued support and interest in Participation Investors.
Sincerely,
/s/Stuart H. Reese
Stuart H. Reese
President
1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES MassMutual Participation Investors
June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1996 - $64,888,418; 1995 - $56,371,301) $ 69,905,002 $ 59,833,175
Corporate public securities at market value
(Cost 1996 - $25,636,565; 1995 - $21,124,658) 26,637,771 22,183,512
Short-term securities at cost plus earned discount which
approximates market value 13,038,601 8,503,926
------------ ------------
109,581,374 90,520,613
Cash 1,196,479 58,192
Interest and dividends receivable, net 1,638,773 1,601,614
Receivable for investments sold 544,684 835,045
Other assets 8,085 8,085
------------ ------------
Total assets $112,969,395 $ 93,023,549
============ ============
Liabilities:
Payable for investments purchased $ 1,333,206 $ 957,139
Management fee payable (Note 3) 222,970 206,468
Note payable (Note 4) 12,000,000 --
Interest payable (Note 4) 170,940 --
Accrued expenses 144,308 96,408
------------ ------------
Total liabilities 13,871,424 1,260,015
------------ ------------
Net Assets:
Shares of beneficial interest, par value $.01 per share;
an unlimited number authorized 92,167 92,167
Additional paid-in capital 84,895,820 84,895,820
Retained net realized gain on investments, prior years 582,457 204,495
Undistributed net investment income (Note 2D) 1,836,282 1,852,123
Accumulated net realized gain on investments 5,673,455 198,201
Net unrealized appreciation of investments (Notes 2A and 5) 6,017,790 4,520,728
------------ ------------
Total net assets 99,097,971 91,763,534
------------ ------------
Total liabilities and net assets $112,969,395 $ 93,023,549
============ ============
Shares of beneficial interest issued and outstanding 9,216,665 9,216,665
============ ============
Net asset value per share $ 10.75 $ 9.96
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
2
<PAGE>
STATEMENT OF OPERATIONS MassMutual Participation Investors
For the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 4,334,581 $ 3,842,414
Dividends 65,442 94,450
------------ ------------
Total income 4,400,023 3,936,864
------------ ------------
Expenses:
Management fee (Note 3) 438,179 397,968
Trustees' fees and expenses 26,652 24,679
Transfer Agent/Registrar's expenses 18,500 55,187
Custodian's fees -- 12,431
Interest (Note 4) 415,800 --
Reports to shareholders 14,513 21,207
Audit and legal 22,295 25,020
Other 11,383 10,476
------------ ------------
Total expenses 947,322 546,968
------------ ------------
Net investment income 3,452,701 3,389,896
------------ ------------
Net realized and unrealized gain (loss) on investments (Notes 2A and 2B):
Net realized gain on investments 5,673,455 2,443,323
Net change in unrealized appreciation/depreciation of investments (3,563,162) 6,158,729
------------ ------------
Net gain on investments 2,110,293 8,602,052
------------ ------------
Net increase in net assets resulting from operations $ 5,562,994 $ 11,991,948
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
3
<PAGE>
STATEMENT OF CASH FLOWS MassMutual Participation Investors
For the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 4,064,371 $ 3,766,230
Interest expense paid (415,800) --
Operating expenses paid (539,027) (525,364)
Federal income tax paid (203,518) --
------------ ------------
Net cash provided by operating activities 2,906,026 3,240,866
Cash flows from investing activities:
Change in short-term portfolio securities, net (1,043,713) (7,841,402)
Purchase of portfolio securities (31,656,142) (17,549,028)
Proceeds from disposition of portfolio securities 34,464,236 25,328,781
------------ ------------
Net cash provided by (used for) investing activities 1,764,381 (61,649)
------------ ------------
Net cash provided by operating and investing activities 4,670,407 3,179,217
------------ ------------
Cash flows from financing activities:
Cash dividends paid from net investment income (3,502,333) (3,133,666)
------------ ------------
Net cash used for financing activities (3,502,333) (3,133,666)
------------ ------------
Net increase (decrease) in cash 1,168,074 45,551
Cash - beginning of year 28,405 12,641
------------ ------------
Cash - end of period $ 1,196,479 $ 58,192
------------ ------------
Reconciliation of net increase (decrease) in net assets to net cash from
operating and investing activities:
Net increase in net assets resulting from operations $ 5,562,994 $ 11,991,948
------------ ------------
Increase in investments (1,994,113) (9,030,501)
Decrease in interest and dividends receivable, net 166,101 2,330
(Increase) decrease in receivable for investments sold 321,326 (755,217)
Increase in other assets (8,085) (8,085)
Increase in payable for investments purchased 833,206 957,139
Increase in management fee payable 8,576 23,249
Decrease in accrued expenses (16,080) (1,646)
Decrease in accrued taxes (203,518) --
------------ ------------
Total adjustments to net assets from operations (892,587) (8,812,731)
------------ ------------
Net cash provided by operating and investing activities $ 4,670,407 $ 3,179,217
============ ============
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------------------------------
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS MassMutual Participation Investors
For the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 3,452,701 $ 3,389,896
Net realized gain on investments 5,673,455 2,443,323
Net change in unrealized appreciation/depreciation of investments (3,563,162) 6,158,729
------------ ------------
Net increase in net assets resulting from operations 5,562,994 11,991,948
Dividends to shareholders from:
Net investment income (1996 - $.19 per share; 1995 - $.18 per share) (1,751,166) (1,659,000)
------------ ------------
Total increase 3,811,828 10,332,948
Net Assets, beginning of year 95,286,143 81,430,586
------------ ------------
Net Assets, end of period (including undistributed net investment
income in 1996 - $1,836,282; 1995 - $1,852,123) $ 99,097,971 $ 91,763,534
============ ============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
5
<PAGE>
SELECTED PER SHARE DATA
Selected data for each share of beneficial interest outstanding for the
periods ended:
<TABLE>
<CAPTION>
For the
six months For the
ended 6/30/96 year ended
(Unaudited) 12/31/95
-------------- ------------
<S> <C> <C>
Net asset value:
Beginning of period $ 10.34 $ 8.84
---------- ----------
Net investment income .37 .73
Net realized and unrealized gain on investments .23 1.50
---------- ----------
Total from investment operations .60 2.23
---------- ----------
Dividends from net investment income to common shareholders (.19) (.73)
---------- ----------
Total distributions (.19) (.73)
---------- ----------
Net asset value:
End of period $ 10.75 $ 10.34
========== ==========
Per share market value:
End of period $ 8.88 $ 9.13
========== ==========
Total investment return:
Market value (.77)%* 34.65%
Net asset value 5.77 %* 26.11%
Net assets (in millions):
End of period $ 99.10 $ 95.29
Ratio of expenses to
average net assets .99%* 1.71%
Ratio of net investment
income to average net 3.58%* 7.56%
assets
Portfolio turnover 34.74%* 59.27%
</TABLE>
*Percentages represent results for the period and are not annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS MassMutual Participation Investors
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Corporate Restricted Principal Acquisition at Acquisition Cost at 6/30/96
Securities - 63.35%: (A) Amount Date Date (Note 2B) (Note 2A)
------------ -------- ------------- ------------ ------------
<C> <C> <C> <C> <C>
American Exploration Company - A.S.E.
An independent oil and gas company engaged
principally in the acquisition, development
and management of oil and gas
properties.
11% Senior Subordinated Note due 2001 $ 1,500,000 12/27/91 $ 1,482,300 $ 1,480,644 $ 1,465,050
Warrant, exercisable until 2001, to purchase
40,513 shares of common
stock at $22.37
per share (B) 40,513 shs. 12/27/91 24,857 19,356 40,513
------------ ------------ ------------
1,507,157 1,500,000 1,505,563
------------ ------------ ------------
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 $ 250,000 11/23/93 244,900 250,000 270,125
------------ ------------ ------------
Atlantic Aviation Corporation
An operator and provider of business aircraft
services and fueling services to commercial
airlines.
9.85% Senior Note due 1999 $ 738,675 1/31/90 713,434 738,675 731,141
------------ ------------ ------------
J. Baker, Inc. - O.T.C.
A wholesaler and retailer of shoes.
11.21% Senior Subordinated Note due 1999 $ 900,000 6/21/89 897,660 893,445 890,460
------------ ------------ ------------
Warrant, exercisable
until 1999, to purchase
27,355 shares of common
stock at $18.80 per share (B) 27,355 shs. 6/21/89 2,736 73,285 2,736
------------ ------------ ------------
900,396 966,730 893,196
------------ ------------ ------------
Berkshire Medical Center, Inc.
A non-profit, regional
acute care hospital.
10.5% Senior Note due 1999 $ 784,091 5/15/89 784,091 784,091 805,653
------------ ------------ ------------
Boyle Leasing Technologies, Inc.
A leasing company
specializing in the leasing
and rental of microticket business equipment.
12% Senior Subordinated Note due 2001 $ 1,000,000 8/16/94 899,723 930,548 978,700
------------ ------------ ------------
BP Prudhoe Bay Royalty Trust - N.Y.S.E.
A trust which shares in the production of
petroleum from the Alaskan North Slope.
13,190 Units of Beneficial Interest 13,190 uts. 2/28/89 329,750 209,434 197,850
------------ ------------ ------------
Cains Foods, L.P.
A producer of mayonnaise, sauce and pickle
products for both the retail and
food service markets.
10% Senior Secured Term Note due 2004 $ 756,756 9/29/95 750,778 756,756 742,378
11.5% Senior Subordinated Note due 2004 $ 472,975 9/29/95 471,414 449,343 463,941
8% Junior Subordinated
Convertible Note due 2004, convertible
into 39 partnership points at $1,388.89
per point $ 54,054 9/29/95 42,148 54,054 104,303
Warrant, exercisable until 2006, to
purchase 19 partnership points at 19 pts. 9/29/95 19 25,130 48,893
------------ ------------ ------------
$.01 per point (B)
1,264,359 1,285,283 1,359,515
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Corporate Restricted Principal Acquisition at Acquisition Cost at 6/30/96
Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------ ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Catalina Lighting, Inc. - N.Y.S.E.
A designer, importer and distributor of residential
and office lighting fixtures.
8% Convertible Subordinated Note due 2002,
convertible into 50,000 shares of common
stock at $7.50 per share $ 375,000 3/31/94 $ 355,013 $ 375,000 $ 349,650
-------------- ----------- ------------
The Chronicle Publishing Company
A media company including newspaper publishing,
television broadcasting and cable operations.
9.5% Senior Note due 1997 $ 166,667 2/21/91 160,467 165,927 168,733
-------------- ----------- ------------
Classic Sports Partners, L.P.
A cable sports television
network.
Limited Partnership Interest 322 uts. 4/18/95 28,980 322,222 257,778
-------------- ----------- ------------
The Coast Distribution System - A.S.E.
A wholesale distributor of recreational vehicle
and marine parts and accessories.
11.2% Senior Subordinated Secured Note
due 1999 $ 700,100 6/26/89 722,434 700,100 712,282
-------------- ----------- ------------
CompuCom Systems, Inc. - O.T.C.
A personal computer dealer specializing in serving
corporate accounts.
Common Stock (B) 418,361 shs. 9/24/92 909,902 920,394 4,322,192
-------------- ----------- ------------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use.
10.75% Senior Secured $ 699,790 12/8/95 706,998 699,790 686,284
Term Note due 2003
12% Senior Subordinated $ 461,400 12/8/95 463,292 436,686 441,191
Note due 2005
Senior Secured Floating
Rate Revolving
Credit Note due 2000 $ 115,350 12/8/95 115,350 115,350 115,350
Common Stock (B) 92,280 shs. 12/8/95 69,210 92,280 69,210
Warrant, exercisable until 2005, to purchase
69,210 shares of common stock at $.01
per share (B) 69,210 shs. 12/8/95 692 25,426 692
-------------- ----------- ------------
1,355,542 1,369,532 1,312,727
-------------- ----------- ------------
Contico International, Inc.
A developer, manufacturer and marketer of
consumer, commercial and industrial plastic
products.
12% Senior Subordinated Note due 2003 $ 500,000 3/23/93 522,800 500,000 511,200
-------------- ----------- ------------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Corporate Restricted Principal Acquisition at Acquisition Cost at 6/30/96
Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Control Devices, Inc.
A producer of high quality electromechanical
circuit protector devices and photo-optic sensors.
10% Senior Secured Note due 2004 $ 609,000 7/29/94 $ 610,827 $ 609,000 $ 638,780
11% Senior Subordinated Note due 2004 $ 261,000 7/29/94 257,059 261,000 276,973
11% Cumulative Preferred Stock 34 shs. 7/29/94 29,734 33,640 34,542
Common Stock (B) 25,282 shs. 7/29/94 8,410 8,410 76,794
Warrant, exercisable until 2004, to purchase
32,718 shares of common stock at $.01
per share (B) 32,718 shs. 7/29/94 327 -- 99,135
-------------- -------------- ------------
906,357 912,050 1,126,224
-------------- -------------- ------------
Corrections Corporation of America -- O.T.C.
An operator of private prisons and correctional
facilities for federal, state and local governments.
11.08% Senior Secured Note due 2000 $ 280,066 12/11/90 279,904 279,716 295,021
-------------- -------------- ------------
Discount Auto Parts
A retailer of auto parts.
9.8% Senior Secured Note due 2003 $ 1,050,000 11/2/89 1,014,405 1,050,000 1,115,100
-------------- -------------- ------------
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 $ 1,333,333 9/24/93 1,330,578 1,322,145 1,342,000
10% Preferred Stock 1,559 shs. 9/24/93 117,976 155,950 123,279
Common Stock (B) 107 shs. 9/24/93 10,717 10,717 80
Warrant, exercisable from 1998 until 2001,
to purchase 112 shares of common stock at
$.01 per share (B) 112 shs. 9/24/93 11 11,188 11
-------------- -------------- ------------
1,459,282 1,500,000 1,465,370
-------------- -------------- ------------
Exide Electronics Group, Inc. -- O.T.C.
A manufacturer and servicer of uninterruptible
power systems.
Common Stock (B) 114,679 shs. 9/2/92 1,486,200 1,500,000 1,034,977
-------------- -------------- ------------
Fay's, Inc. -- N.Y.S.E.
An operator of a discount drug store chain.
9.95% Mortgage Note due 2004 $ 1,227,500 12/14/89 1,193,990 1,227,500 1,187,729
-------------- -------------- ------------
Firth Rixson, Inc.
A U.S. subsidiary of Johnson & Firth Brown;
a producer of specialty metal components, steel
and iron castings, and specialty engineering.
9.82% Senior Guaranteed Note due 2001 $ 285,620 4/5/91 285,572 285,620 290,304
-------------- -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
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.
15% Senior Subordinated Note due 2005 $ 1,395,509 4/28/95 $ 1,389,235 $ 1,317,613 $ 1,408,766
Common Stock (B) 270 shs. 4/28/95 70,559 135,000 6,176
Warrant, exercisable until 2005, to purchase
190 shares of common stock at $.01 per
share (B) 190 shs. 4/28/95 49,116 85,227 4,342
Incentive Warrant, exercisable from 1998 until
2000, to purchase 10 shares of common stock
at $.01 per share (B) 10 shs. 4/28/95 1,656 1,136 220
-------------- -------------- ------------
1,510,566 1,538,976 1,419,504
-------------- -------------- ------------
Hardy Oil & Gas USA, Inc.
Engages in exploration and development of oil
and gas reserves.
8.46% Guaranteed Senior Note due 2004 $ 1,500,000 1/11/95 1,452,600 1,500,000 1,391,700
Warrant, exercisable until 2004, to purchase
135,000 shares of common stock at #1.86
per share (B) 135,000 shs. 1/11/95 13,500 -- 101,993
-------------- -------------- ------------
1,466,100 1,500,000 1,493,693
-------------- -------------- ------------
Hein-Werner Corp. - A.S.E.
A manufacturer of automotive service and collision
repair equipment and hydraulic cylinders.
8% Convertible Subordinated Note due 1999,
convertible into 227,617 shares of common
stock at $6.59 per share $ 1,500,000 9/29/89 1,459,650 1,500,000 1,529,591
-------------- -------------- ------------
Highland Homes Holdings, Inc.
A single family homebuilder operating in the
Dallas-Fort Worth and Atlanta areas.
10.75% Senior Note due 1999 $ 750,000 11/18/93 742,575 739,765 754,275
Warrant, exercisable until 2001, to purchase
5 shares of common stock at $17,897.31
per share (B) 5 shs. 11/18/93 1 10,235 52
-------------- -------------- ------------
742,576 750,000 754,327
-------------- -------------- ------------
Hunton & Williams
A major law firm in Richmond, Virginia.
10.06% Senior Secured Note due 2000 $ 184,375 12/21/90 178,696 184,375 189,630
-------------- -------------- ------------
Hussey Seating Company
A manufacturer of spectator seating products.
10% Senior Secured Note due 2003 $ 450,000 6/12/96 438,120 450,000 442,125
12% Subordinated Secured Note due 2006 $ 675,000 6/12/96 663,660 562,773 675,540
Senior Secured Floating Rate Note due 2003 $ 450,000 6/12/96 445,545 450,000 445,590
Senior Secured Floating Rate Revolving Note
due 2003 $ 495,000 6/12/96 490,149 495,000 490,149
Warrant, exercisable until 2006, to purchase
1,776 shares of common stock at $.01 per
share (B) 1,776 shs. 6/12/96 18 112,500 18
-------------- -------------- ------------
2,037,492 2,070,273 2,053,422
-------------- -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Intermetrics, Inc.
A provider of software systems, services and
products to a variety of information technology
users.
13% Senior Subordinated Note due 2002 $ 400,000 8/31/95 $ 406,760 $ 351,627 $ 403,520
Senior Floating Rate Revolving Term Note
due 2002 $ 666,640 8/31/95 660,440 666,640 661,107
Common Stock (B) 5,542 shs. 8/31/95 25,978 34,638 25,978
Warrant, exercisable until 2007, to purchase
10,588 shares of Class D common stock at
$.01 per share (B) 10,588 shs. 8/31/95 1,059 52,000 1,059
-------------- -------------- ------------
1,094,237 1,104,905 1,091,664
-------------- -------------- ------------
Jackson Products, Inc.
Manufactures and distributes a variety of
industrial and highway safety products.
12.25% Senior Subordinated Note due 2004 $ 985,000 8/16/95 962,148 966,226 979,090
13.25% Cumulative Exchangeable Preferred
Stock 4,928 shs. 8/16/95 407,467 411,708 409,155
Common Stock (B) 21,702 shs. 8/16/95 21,702 21,702 21,702
Warrant, exercisable until 2005, to purchase
99,919 shares of common stock at $.01
per share (B) 99,919 shs. 8/16/95 999 99,866 999
-------------- -------------- ------------
1,392,316 1,499,502 1,410,946
-------------- -------------- ------------
Kuhlman Corporation -- N.Y.S.E.
A manufacturer of non-automotive engine
components.
Warrant, exercisable until 2002, to purchase
50,000 shares of common stock at $8.32
per share (B) 50,000 shs. 4/30/92 53,000 81,000 367,220
-------------- -------------- ------------
Latin Communications Group
An operator of Spanish-language media in
North America.
10.4% Senior Secured Note due 2001 $ 875,000 2/14/95 876,138 875,000 883,663
Senior Secured Floating Rate Revolving
Note due 2002 $ 287,500 * 287,500 287,500 282,268
Secured Floating Rate Term Note
due 1998 $ 93,750 12/1/95 93,750 93,750 91,931
7% Convertible Preferred Series A Stock,
convertible into 9,000 shares of common
stock at $10 per share 9,000 shs. 2/14/95 80,275 90,000 78,691
Convertible Preferred Series B Stock,
convertible into 16,000 shares of common
stock at $10 per share 16,000 shs. 2/14/95 120,000 160,000 120,000
Common Stock 14,461 shs. ** 46,895 156,252 117,188
-------------- -------------- ------------
1,504,558 1,662,502 1,573,741
-------------- -------------- ------------
</TABLE>
*7/13/95 and 12/1/95.
**12/1/95 and 2/27/96.
- --------------------------------------------------------------------------------
11
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Maloney Industries, Inc.
Engineers and manufactures process systems for
the oil and gas industry.
13% Subordinated Note due 2004 $ 1,012,500 10/26/95 $ 1,070,213 $ 1,012,500 $ 1,044,191
Limited Partnership Interest 284 uts. 10/20/95 253,125 337,500 253,125
Warrant, exercisable until 2004, to purchase 148
shares of common stock at $.01 per share (B) 148 shs. 10/26/95 148 -- 148
-------------- -------------- ------------
1,323,486 1,350,000 1,297,464
-------------- -------------- ------------
Maxtec International Corp.
A manufacturer and distributor of precision
test and measurement equipment and overhead
crane control systems.
12.5% Subordinated Secured Note due 2003 $ 329,670 6/28/95 336,560 250,362 330,890
Senior Floating Rate Revolving Credit
Facility due 2001 $ 329,670 6/28/95 325,516 329,670 326,176
Senior Secured Floating Rate Note due 2001 $ 461,539 6/28/95 457,615 461,539 458,261
Common Stock (B) 38,462 shs. 6/28/95 96,059 115,386 86,540
Warrant, exercisable from 1998 until 2005,
to purchase 19,795 shares of common stock
at $.01 per share (B) 19,795 shs. 6/28/95 49,291 85,714 19,795
-------------- -------------- ------------
1,265,041 1,242,671 1,221,662
-------------- -------------- ------------
NM Holdings LLC
A company created to acquire motion picture film
rights from Twentieth Century Fox.
10% Senior Note due 2001 $ 500,000 6/28/96 490,300 500,000 490,300
12% Subordinated Note due 2001 $ 490,000 6/28/96 491,078 490,000 491,078
Membership interest 10,000 int. 6/28/96 7,500 10,000 7,500
-------------- -------------- ------------
988,878 1,000,000 988,878
-------------- -------------- ------------
Nu Horizon Electronics Corp. -- O.T.C.
A distributor of high technology active and passive
electronic devices.
8.25% Convertible Subordinated Note due
2002, convertible into 78,433 shares of
common stock at $9 per share $ 705,900 8/31/94 714,159 705,900 780,902
-------------- -------------- ------------
PanEnergy Corporation (formerly Associated
Natural Gas Corporation) - N.Y.S.E.
An owner and operator of natural gas gathering,
transmission and processing facilities.
9% Convertible Subordinated Note due 2004,
convertible into 67,781 shares of common
stock at $22.13 per share $ 1,500,000 12/30/92 1,467,000 1,500,000 2,005,479
-------------- -------------- ------------
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 2/5/93 832,000 833,333 858,500
8% Convertible Preferred Stock due 2001,
convertible into 83,333 shares of common
stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 148,115
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 160,000
-------------- -------------- ------------
1,332,000 1,333,333 1,166,615
-------------- -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Penske Truck Leasing, L.P.
A full service maintenance truck leasing company.
9.73% Senior Secured Note due 1996 $ 750,000 11/15/89 $ 732,750 $ 750,000 $ 758,850
-------------- -------------- ------------
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 $ 483,750 11/30/95 504,116 483,750 487,088
10.5% Senior Secured Convertible Note due
2005, convertible into 2 shares of common
stock at $50,000 per share $ 97,500 11/30/95 102,677 97,500 103,286
Common Stock (B) 3 shs. 11/30/95 126,750 169,000 126,750
-------------- -------------- ------------
733,543 750,250 717,124
-------------- -------------- ------------
Piedmont Holding, Inc.
A general aviation fixed based operator with
repair, maintenance and overhaul certification.
12% Senior Subordinated Note due 2001 $ 1,357,151 7/15/92 1,368,280 1,357,151 1,423,380
Senior Redeemable Cumulative Preferred Stock 140,983 shs. 7/15/92 140,983 140,983 140,983
Common Stock (B) 1,887 shs. 7/15/92 1,283 1,887 63,358
Warrant, exercisable until 2001, to purchase
2,521 shares of common stock at $.05 per
share (B) 2,521 shs. 7/15/92 1,613 -- 84,544
-------------- -------------- ------------
1,512,159 1,500,021 1,712,265
-------------- -------------- ------------
PRN Holdings, Inc.
Rents critical care equipment to hospitals and
other healthcare providers.
10.25% Senior Subordinated Note due 2004 $ 1,500,000 9/30/94 1,471,875 1,471,875 1,526,100
Warrant, exercisable from 1997 until 2004, to
purchase 17 shares of common stock at $.01
per share (B) 17 shs. 9/30/94 1,000 28,125 179,093
-------------- -------------- ------------
1,472,875 1,500,000 1,705,193
-------------- -------------- ------------
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 $ 400,000 8/12/94 394,720 400,000 308,320
11.51% Junior Secured Note due 1999 $ 266,667 8/12/94 261,014 266,667 196,880
9.8% Redeemable Exchangeable Preferred Stock 3,333 shs. 8/12/94 282,634 333,333 130,000
Common Stock (B) 497 shs. 8/12/94 5 -- 4
-------------- -------------- ------------
938,373 1,000,000 635,204
-------------- -------------- ------------
Quad-Graphics Inc.
A commercial printing company.
10.48% Secured Note due 2000 $ 914,597 * 900,878 914,597 914,597
-------------- -------------- ------------
</TABLE>
*6/7/89, 8/3/89 and 9/28/89.
- --------------------------------------------------------------------------------
13
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
RailTex, Inc. -- O.T.C.
An operator of short-line railroads in the
Midwest, West and Canada.
12% Senior Subordinated Note due 2002 $ 750,000 2/16/93 $ 799,575 $ 750,000 $ 852,450
Common Stock (B) 35,500 shs. 2/16/93 340,908 340,800 868,419
-------------- -------------- ------------
1,140,483 1,090,800 1,720,869
-------------- -------------- ------------
Rent-Way, Inc. -- O.T.C.
Operates rent-to-own stores in Ohio,
Pennsylvania and Florida.
10% Convertible Subordinated Note due 2002,
convertible into 100,604 shares of common
stock at $9.94 per share $ 1,000,000 7/18/95 1,000,000 1,000,000 1,096,579
Warrant, exercisable until 2002, to purchase
10,000 shares of common stock at $9.94
per share (B) 10,000 shs. 7/18/95 -- -- 34,930
-------------- -------------- ------------
1,000,000 1,000,000 1,131,509
-------------- -------------- ------------
Rogers Cablesystems Limited
A provider of cable television service in Canada.
11.09% Senior Subordinated Note due 2000 $ 500,000 6/20/90 493,450 500,000 516,050
-------------- -------------- ------------
A.T.-Sentinel, Inc.
A leveraged lease transaction guaranteed by E.I.
Dupont, the chemical company.
9.52% First Preferred Ship Mortgage Note
due 1998 $ 983,888 8/22/89 973,262 998,647 996,580
-------------- -------------- ------------
Sequentia, Inc.
A manufacturer and distributor of fiberglass
reinforced panels used in commercial, industrial
and residential applications.
12% Subordinated Note due 2004 $ 1,140,700 12/14/95 1,209,142 909,928 1,055,718
Limited Partnership Interest of KS Holdings, L.P. 3,593 uts. 12/14/95 265,425 359,300 179,650
Warrant, exercisable until 2004, to purchase
2,725 shares of common stock at $.01
per share (B) 2,725 shs. 12/14/95 2,725 239,547 1,363
-------------- -------------- ------------
1,477,292 1,508,775 1,236,731
-------------- -------------- ------------
Star International Holdings, Inc.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 416,417 5/29/94 397,387 416,417 409,255
10.5% Subordinated Note due 2004 $ 179,104 5/29/94 162,913 179,104 170,131
Common Stock (B) 1,077 shs. 5/29/94 58,414 64,904 11,269
Warrant, exercisable until 2004, to purchase 806
shares of common stock at $.01 per share (B) 806 shs. 5/29/94 8 -- 8,427
-------------- -------------- ------------
618,722 660,425 599,082
-------------- -------------- ------------
Stonehurst I LLC
A wholly owned subsidiary of Tenneco, Inc.,
whose business includes natural gas, auto
parts and packaging.
Floating Rate Subordinated Note due 2004 $ 1,444,500 12/29/94 1,444,500 1,444,500 1,444,500
5.05% Membership Interest 5,050 int. 12/29/94 55,000 55,500 55,500
-------------- -------------- ------------
1,499,500 1,500,000 1,500,000
-------------- -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Telex Communications, Inc.
A producer of electronic and communications products.
Warrant, exercisable until 2004, to purchase 5,544
shares of common stock at $.01 per share (B) 5,544 shs. 5/30/89 $ 55 $ 6 $ 5,544
-------------- -------------- ------------
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 1,175,591 1,250,160
Common Stock (B) 203,165 shs. * 490,810 598,597 1,371,358
Warrant, exercisable until 2001, to purchase
74,606 shares of common stock at $3.60
per share (B) 74,606 shs. 3/28/91 7,461 42,000 342,442
-------------- -------------- ------------
1,772,551 1,816,188 2,963,960
-------------- -------------- ------------
Unidata, Inc.
A manufacturer and distributor of database
management software.
11.5% Senior Subordinated Note due 2003 $ 1,250,000 12/14/95 1,269,250 1,192,367 1,231,500
Common Stock (B) 62,500 shs. 12/14/95 187,500 250,000 187,500
Warrant, exercisable from 1997 until 2003,
to purchase 31,250 shares of common stock
at $1 per share (B) 31,250 shs. 12/14/95 313 62,125 313
-------------- -------------- ------------
1,457,063 1,504,492 1,419,313
-------------- -------------- ------------
Unipac Corporation
A manufacturer of laminated materials which are
used to seal a variety of packaging containers.
12% Senior Secured Note due 2004 $ 187,500 2/9/96 189,900 168,016 183,150
Senior Secured Floating Rate Note due 2002 $ 491,016 2/9/96 485,811 491,016 486,106
Senior Secured Floating Rate Revolving
Credit Facility due 2002 $ 37,500 2/9/96 37,500 37,500 36,836
Limited Partnership Interest of Riverside II
Holding Company L.P. 42 uts. 2/9/96 35,126 46,835 35,126
Warrant, exercisable from 2000 until 2004,
to purchase 21 shares of common stock at
$.01 per share (B) 21 shs. 2/9/96 2 20,156 2
-------------- -------------- ------------
748,339 763,523 741,220
-------------- -------------- ------------
Uno-Ven Company
A partnership in an oil refinery and related
midwestern marketing operations.
10.1% Senior Secured Note due 2003 $ 857,143 12/1/89 835,888 857,143 896,914
-------------- -------------- ------------
USAir, Inc.
A domestic and international airline.
10.8% Series A Secured Loan Certificates
due 2003 $ 556,447 6/29/94 472,980 490,775 511,000
-------------- -------------- ------------
</TABLE>
*3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95.
- --------------------------------------------------------------------------------
15
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/96
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 $ 838,800 5/3/95 $ 927,545 $ 838,800 $ 897,516
12% Subordinated Note due 2005 $ 326,200 5/3/95 326,200 309,346 353,046
Common Stock (B) 2,457 shs. 5/3/95 81,376 195,720 2,457
Warrant, exercisable until 2005, to purchase
1,398 shares of common stock at $.01
per share (B) 1,398 shs. 5/3/95 46,291 17,971 1,398
-------------- -------------- ------------
1,381,412 1,361,837 1,254,417
-------------- -------------- ------------
Valero Energy Corporation
An owner and operator of a specialized petroleum
refinery and engages in petroleum product
marketing operations.
10.58% Senior Note due 2000 $ 357,143 12/20/90 363,098 357,143 365,786
-------------- -------------- ------------
Victory Capital LLC
Acquires controlling or substantial interests in
manufacturing and marketing entities.
3% Convertible Preferred Stock, convertible
into 25,000 shares of common stock at $10
per share 25,000 shs. 7/21/94 250,000 250,000 237,500
-------------- -------------- ------------
Sub-Total Corporate Restricted Securities $ 56,629,086 57,870,881 62,775,476
============== -------------- ------------
</TABLE>
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 6/30/96
Rule 144A Securities Rate Date Amount (Note 2B) (Note 2A)
-------------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 3.68%
Grand Metropolitan PLC 6.500% 1/31/00 $ 300,000 300,000 328,500
Imax Corporation 5.700 4/1/03 300,000 300,000 298,500
Marriott International, Inc. 4.295 3/25/11 500,000 269,090 275,000
Molten Metal Technology 5.500 5/1/06 450,000 450,000 429,750
Renal Treatment Centers, Inc. 5.625 7/15/06 225,000 225,000 217,125
Staples, Inc. 4.500 10/1/00 575,000 575,000 613,813
Sunglass Hut International, Inc. 5.250 6/15/03 250,000 251,313 255,000
Thermo Electron Corporation 4.250 1/1/03 175,000 175,000 215,250
Thermo Terratech, Inc. 4.625 5/1/03 45,000 45,000 45,000
Turner Broadcasting System, Inc. 7.707 2/13/07 1,500,000 682,032 701,250
United Waste Systems, Inc. 4.500 6/1/01 250,000 250,000 269,375
-------------- -------------- ------------
Sub-Total Rule 144A Convertible Bonds 4,570,000 3,522,435 3,648,563
-------------- -------------- ------------
Bonds - 1.87%
Clark Schwebel, Inc. 10.500 4/15/06 200,000 200,000 206,500
============== -------------- ------------
Paiton Energy Funding 9.340 2/15/14 1,000,000 1,000,000 955,000
Remington Products Company 11.000 5/15/06 200,000 198,502 198,000
SFX Broadcasting, Inc. 10.750 5/15/06 500,000 500,000 496,250
-------------- -------------- ------------
Sub-Total Rule 144A Bonds $ 1,900,000 1,898,502 1,855,750
============== -------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Market Value
Cost at 6/30/96
Rule 144A Securities: (A) (Continued) Shares (Note 2B) (Note 2A)
---------- ------------- --------------
<S> <C> <C> <C>
Convertible Preferred Stock - 1.64%
Greenfield Capital Trust,Inc. 4,800 $ 246,600 $ 248,400
SFX Broadcasting, Inc. 7,000 350,000 364,000
Time Warner, Inc. 750 750,000 734,063
Unocal Corporation 5,000 250,000 278,750
------------ ------------
Sub-Total Rule 144A Convertible
Preferred Stock 1,596,600 1,625,213
------------ ------------
Total Rule 144A Securities 7,017,537 7,129,526
------------ ------------
Total Corporate Restricted Securities 64,888,418 69,905,002
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 6/30/96
Corporate Public Securities: Rate Date Amount (Note 2B) (Note 2A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 2.20%
Hilton Hotels, Inc. 5.000% 5/15/06 $ 1,000,000 1,000,000 1,065,000
Magna International, Inc. 5.000 10/15/02 250,000 255,625 260,000
Mascotech, Inc. 4.500 12/15/03 250,000 200,000 198,750
Republic of Italy 5.000 6/28/01 150,000 150,000 155,250
Savoy Pictures Entertainment, Inc. 7.000 7/1/03 650,000 505,375 500,500
------------ ------------ ------------
Total Convertible Bonds $ 2,300,000 2,111,000 2,179,500
============ ============ ============
Bonds - 17.20%
Airplanes Pass Thru Trust 8.150 3/15/19 $ 1,500,000 1,498,674 1,455,000
American Airlines, Inc. 9.780 11/26/11 1,000,000 1,000,000 1,115,620
American Rice, Inc. 13.000 7/31/02 750,000 708,329 671,250
Central Rents, Inc. 12.875 12/15/03 930,000 869,288 930,000
CF Cable TV, Inc. 9.125 7/15/07 350,000 350,000 352,625
Comdisco Inc. 7.750 9/1/99 1,500,000 1,598,265 1,533,030
Data Documents, Inc. 13.500 7/15/02 1,429,000 1,433,158 1,543,320
Decorative Home Accents, Inc. 13.000 6/30/02 500,000 500,000 395,000
Foodbrands America Inc. 10.750 5/15/06 500,000 500,000 500,000
Florist Transworld Delivery, Inc. 14.000 12/15/01 375,000 362,760 369,375
Harvard Industries, Inc. 11.125 8/1/05 150,000 152,063 141,000
Honda Auto Receivables 1992-A Grantor Trust 4.900 6/15/98 50,659 50,571 50,469
Hosiery Corporation of America 13.750 8/1/02 500,000 493,900 542,500
Imax Corporation 7.000 3/1/01 500,000 459,732 485,000
Jordan Industries, Inc. 10.375 8/1/03 500,000 490,625 475,000
Key Plastics, Inc. 14.000 11/15/99 350,000 354,913 354,375
Northwest Airlines Corp. 12.091 12/31/00 918,007 947,842 963,907
Northwest Airlines Corp. 8.970 1/2/15 1,000,000 1,000,000 1,047,140
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Market Value
Interest Due Principal Cost at 6/30/96
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Bonds (Continued)
Pathmark Stores, Inc. 9.625% 5/1/03 $ 750,000 $ 743,750 $ 697,500
Peoples Telephone Company, Inc. 12.250 7/15/02 250,000 250,000 242,500
RXI Holdings, Inc. 14.000 7/15/02 1,400,000 1,377,356 1,120,000
Sealy Corporation 9.500 5/1/03 500,000 482,250 485,000
Telex Communications, Inc. 12.000 7/15/04 750,000 750,000 802,500
ValuJet, Inc. 10.250 4/15/01 375,000 376,250 2,897
Van De Kamps, Inc. 12.000 9/15/05 150,000 150,000 159,750
Venture Holdings Trust 9.750 4/1/04 500,000 463,750 412,500
Wyndham Hotel Corp. 10.500 5/15/06 200,000 200,000 199,000
------------ ------------ ------------
Total Bonds $ 17,677,666 17,563,476 17,046,258
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Market Value
Cost at 6/30/96
Shares (Note 2B) (Note 2A)
------------ ------------ ------------
<S> <C> <C> <C>
Warrants - .06%
Central Rents, Inc. (B) 930 33,712 55,800
RXI Holdings, Inc. (B) 1,400 25,270 14
------------ ------------
Total Warrants 58,982 55,814
------------ ------------
Common Stock - 6.18%
America West Airlines, Inc. (B) 2,100 42,126 46,200
Amerisource Health Corporation (B) 8,250 288,750 274,313
Benson Petroleum, Ltd. (B) 100,000 77,204 73,330
C-Tec Corporation 7,500 206,250 223,125
Check Point Software Technologies Ltd. 900 12,600 21,600
Computer Horizons Corporation 11,100 146,925 438,450
Continental Airlines, Inc. (B) 7,500 401,250 463,125
Data Documents, Inc. (B) 15,817 24 193,758
Decorative Home Accents, Inc. (B) 500 -- 6,063
Diamond Offshore Drilling, Inc. (B) 2,250 110,812 128,813
Donna Karan International Inc. (B) 1,500 36,000 42,000
Energy Conversion Devices, Inc. (B) 8,250 148,500 187,688
Entremed, Inc. (B) 22,500 343,125 337,500
Extended Stay America, Inc. (B) 15,000 465,000 472,500
Florist Transworld Delivery, Inc. 4,687 13,754 22,498
Foodbrands America Inc. (B) 22,500 177,188 289,688
GTech Holdings Corporation (B) 15,000 431,250 444,375
Harvard Industries, Inc. (B) 7,500 178,500 91,875
HFS, Inc. (B) 7,500 465,000 525,000
LCS Industries, Inc. 15,000 234,356 180,000
Staffing Resources, Inc. 45,000 247,500 1,125,000
Vans, Inc. (B) 3,750 71,250 63,750
Wackenhut Corporation 11,250 264,375 206,719
Western Transmedia Co., Inc. (B) 54,000 188,723 101,250
WMS Industries, Inc. (B) 6,700 154,346 164,988
------------ ------------
Total Common Stock 4,704,808 6,123,608
------------ ------------
</TABLE>
- -------------------------------------------------------------------------------
18
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
Market Value
Cost at 6/30/96
Corporate Public Securities (Continued) Shares (Note 2B) (Note 2A)
------------ ------------ ------------
<S> <C> <C> <C>
Convertible Preferred Stock - 1.24%
Integon Corp. 4,900 $ 245,000 $ 282,975
Kmart Financing, Inc. 2,950 147,500 160,038
Merrill Lynch & Co. 13,500 308,813 298,688
Occidental Petroleum Corporation 7,900 395,000 490,788
RXI Holdings, Inc. 101,953 101,986 102
------------ ------------
Total Convertible Preferred Stock 1,198,299 1,232,591
------------ ------------
Total Corporate Public Securities 25,636,565 26,637,771
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Market Value
Interest/ Due Principal Cost at 6/30/96
Short-Term Securities: Yield Date Amount (Note 2B) (Note 2A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - 13.16%
Air Touch Communications, Inc. 5.562% 7/10/96 $ 597,000 596,172 596,172
American Electric Power Company, Inc. 5.584 7/17/96 1,500,000 1,496,300 1,496,300
Carter Holt Harvey Limited 5.571 7/8/96 1,500,000 1,498,381 1,498,381
Indiana & Michigan Power Company 5.566 7/10/96 1,480,000 1,477,946 1,477,946
Kerr-McGee Credit Corporation 5.528 7/9/96 1,055,000 1,053,711 1,053,711
Ohio Power Company 5.598 7/18/96 320,000 319,157 319,157
ORIX Credit Alliance, Inc. 5.637 7/16/96 1,500,000 1,496,488 1,496,488
Pacific Telecom, Inc. 5.575 7/11/96 445,000 444,314 444,314
Public Service Company of Colorado 5.510 7/1/96 1,335,000 1,335,000 1,335,000
Sonat Inc. 5.560 7/2/96 1,505,000 1,504,768 1,504,768
Texas Utilities Electric Co. 5.477 7/9/96 140,000 139,830 139,830
Texas Utilities Electric Co. 5.546 7/15/96 1,360,000 1,357,080 1,357,080
Tyson Foods, Inc. 5.593 7/12/96 320,000 319,454 319,454
------------ ------------ ------------
Total Short-Term Securities $ 13,057,000 13,038,601 13,038,601
============ ------------ ------------
Total Investments - 110.58% $103,563,584 109,581,374
============ -----------
Other Assets - 3.42 3,388,021
Liabilities - (14.00) (13,871,424)
------- ------------
Total Net Assets - 100.00% $ 99,097,971
======= ============
</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.
- -------------------------------------------------------------------------------
19
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
<TABLE>
<CAPTION>
INDUSTRY CLASSIFICATION
Fair Value
at 6/30/96
Corporate Restricted Securities: (Note 2A)
------------
<S> <C>
ADVERTISING - .27%
Ammirati & Puris, Inc. $ 270,125
------------
BUILDING MATERIALS - .76%
Highland Homes Holdings, Inc. 754,327
------------
CHEMICAL - 1.01%
A.T.-Sentinel, Inc. 996,580
------------
COMMUNICATIONS - 4.69%
Classic Sports Partners, L.P. 257,778
Latin Communications Group 1,573,741
Rogers Cablesystems Limited 516,050
SFX Broadcasting, Inc. 860,250
Telex Communications, Inc. 5,544
Time Warner, Inc. 734,063
Turner Broadcasting System, Inc. 701,250
------------
4,648,676
------------
ELECTRICAL EQUIPMENT/ELECTRONICS - 9.21%
Catalina Lighting, Inc. 349,650
Clark Schwebel, Inc. 206,500
CompuCom Systems, Inc. 4,322,192
Control Devices, Inc. 1,126,224
Exide Electronics Group, Inc. 1,034,977
Intermetrics, Inc. 1,091,664
Nu Horizon Electronics Corp. 780,902
Thermo Electron Corporation 215,250
------------
9,127,359
------------
HEALTH CARE - 2.75%
Berkshire Medical Center, Inc. 805,653
PRN Holdings, Inc. 1,705,193
Renal Treatment Centers, Inc. 217,125
------------
2,727,971
------------
LEASING - 1.75%
Boyle Leasing Technologies, Inc. 978,700
Penske Truck Leasing, L.P. 758,850
------------
1,737,550
------------
MANUFACTURING-INDUSTRIAL AND
CONSUMER PRODUCTS - 18.90%
Consumer Product Enterprises, Inc. 1,312,727
Contico International, Inc. 511,200
Elgin National Industries, Inc. 1,465,370
Firth Rixson, Inc. 290,304
Fleming Acquisition Corporation 1,419,504
Hein-Werner Corp. 1,529,591
Hussey Seating Company 2,053,422
Imax Corporation 298,500
Jackson Products, Inc. 1,410,946
Kuhlman Corporation 367,220
Maxtec International Corp. 1,221,662
PAR Acquisition Corp. 1,166,615
Remington Products Company 198,000
Sequentia, Inc. 1,236,731
Star International Holdings, Inc. 599,082
Unidata, Inc. 1,419,313
Unipac Corporation 741,220
U.S. Netting, Inc. 1,254,417
Victory Capital LLC 237,500
------------
18,733,324
------------
METAL FABRICATION - .44%
Molten Metal Technology 429,750
------------
MISCELLANEOUS - 4.92%
Greenfield Capital Trust, Inc. 248,400
Marriott International, Inc. 275,000
NM Holdings LLC 988,878
Paiton Energy Funding 955,000
Protein Genetics, Inc. 635,204
Stonehurst I LLC 1,500,000
United Waste Systems, Inc. 269,375
------------
4,871,857
------------
OIL AND GAS SERVICE - 11.11%
American Exploration Company 1,505,563
BP Prudhoe Bay Royalty Trust 197,850
Hardy Oil & Gas USA, Inc. 1,493,693
Maloney Industries, Inc. 1,297,464
PanEnergy Corporation 2,005,479
TransMontaigne Oil Company 2,963,960
Unocal Corporation 278,750
Uno-Ven Company 896,914
Valero Energy Corporation 365,786
------------
11,005,459
------------
PUBLISHING - 1.09%
The Chronicle Publishing Company 168,733
Quad-Graphics Inc. 914,597
------------
1,083,330
------------
RECREATIONAL SUPPLIES/
EQUIPMENT - .72%
The Coast Distribution System 712,282
------------
RETAILING - 7.67%
J. Baker, Inc. 893,196
Cains Foods, L.P. 1,359,515
</TABLE>
- -------------------------------------------------------------------------------
20
<PAGE>
Schedule of Investments (Continued)
June 30, 1996
INDUSTRY CLASSIFICATION (Continued)
<TABLE>
<CAPTION>
Fair Value
at 6/30/96
Corporate Restricted Securities: (Continued) (Note 2A)
------------
<S> <C>
RETAILING (Continued)
Discount Auto Parts $ 1,115,100
Fay's, Inc. 1,187,729
Grand Metropolitan PLC 328,500
Pharmaceutical Buyers, Inc. 717,124
Rent-Way, Inc. 1,131,509
Staples, Inc. 613,813
Sunglass Hut International, Inc. 255,000
------------
7,601,486
------------
SERVICES - 5.25%
Atlantic Aviation Corporation 731,141
Corrections Corporation of America 295,021
Hunton & Williams 189,630
Piedmont Holding, Inc. 1,712,265
RailTex, Inc. 1,720,869
Thermo Terratech, Inc. 45,000
USAir, Inc. 511,000
------------
5,204,926
------------
Total Corporate Restricted
Securities - 70.54% $ 69,905,002
============
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------------------------------
21
<PAGE>
Notes to Financial Statements MassMutual Participation Investors
(Unaudited)
1. History
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a closed-end diversified management investment company, whose
investment objective is to maximize total return by providing a high level
of current income, the potential for growth of such income, and capital
appreciation, by investing primarily in a portfolio of privately placed
fixed-income securities, at least half of which normally will include equity
features.
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.
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 Board of Trustees of the Trust. Each restricted security is
valued by the Board at the time of the purchase thereof and at least
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 to the Trust. Values greater or less than cost are
thereafter used 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
the extent of a market for the security; the extent of any discount at which
the security was acquired; 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; changes in the
financial condition and prospects of the issuer; the existence of merger
proposals or tender offers affecting the issuer; 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 Board,
however, considers 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
the Trustees who are not interested persons of the Trust (otherwise than as
Trustees) or of Massachusetts Mutual Life Insurance Company ("MassMutual"),
the Trust's investment adviser and administrator. 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 $69,905,002
(70.54% of net assets) as of June 30, 1996 ($59,833,175 at June 30, 1995)
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 June 30, 1996, 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.
- -------------------------------------------------------------------------------
22
<PAGE>
Notes to Financial Statements (Continued)
B. Accounting for Investments:
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis.
The cost basis of debt securities is not adjusted for amortization of
premium or accrual of discount since the Trust does not generally intend to
hold such investments until maturity; however, the Trust has elected to
accrue for financial reporting purposes, certain discounts which are
required to be accrued for federal income tax purposes.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
The Trust does not accrue income when payment is delinquent or when
management believes payment is questionable.
C. Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue 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. Investment Advisory and Administrative Services Fee
Under an investment advisory and administrative services contract with the
Trust, MassMutual has agreed to use its best efforts to present to the Trust
a continuing and suitable investment program consistent with the investment
objective and policies of the Trust. MassMutual has further agreed that it
will request each issuer of securities which MassMutual is prepared to
purchase in a private placement, and which would be consistent with the
investment policies of the Trust, to offer such securities also to the Trust
and that it will use its best efforts to insure that such request is acceded
to. MassMutual has agreed that, subject to such orders of the Securities and
Exchange Commission as may apply, it will invest concurrently with the Trust
in any such investment. MassMutual will also represent 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. Under the contract, MassMutual is obligated to provide
administration of the day-to-day operations of the Trust and will provide
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.
For its services under the investment advisory and administrative services
contract, MassMutual is paid a quarterly advisory and administrative
services fee equal to .225% of the value of the Trust's net assets as of the
last business day of each fiscal quarter, an amount approximately equivalent
to .90% on an annual basis, provided that a majority of the Trustees,
including a majority of the Trustees who are not interested persons of the
Trust or of MassMutual, approve the valuation of the Trust's net assets as
of such day.
4. Note Payable
On July 15, 1995, the Trust sold to MassMutual at par a $12,000,000 Senior
Fixed Rate Convertible Note due July 15, 2002 (the "Note") which accrues at
6.93% per annum. The Note holder, at their option, can convert the principal
amount of the Note into common shares. The dollar amount of principal
converted would be converted into an equivalent dollar amount of common
shares based upon the average price of the common shares for ten business
days prior to the notice of conversion.
- -------------------------------------------------------------------------------
23
<PAGE>
Notes to Financial Statements (Continued)
5. Purchases and Sales of Investments
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
6/30/96 6/30/95
----------- -----------
Cost of Investments Acquired
----------------------------
<S> <C> <C>
Corporate restricted securities $ 12,551,984 $ 11,131,065
Corporate public securities 20,053,532 7,482,884
Short-term securities 174,875,003 82,520,542
<CAPTION>
Proceeds from Sales or Maturities
---------------------------------
<S> <C> <C>
Corporate restricted securities $ 13,191,552 $ 13,145,899
Corporate public securities 20,957,685 12,890,594
Short-term securities 173,831,290 74,679,140
</TABLE>
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of June 30, 1996. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of June 30, 1996 is $6,017,790 and consists of $10,815,078 appreciation
and $4,797,288 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of June 30, 1995. The net unrealized
appreciation of investments for financial reporting and federal tax purposes
as of June 30, 1995 was $4,520,728 and consisted of $7,337,199 appreciation
and $2,816,471 depreciation.
6. Quarterly Results of Investment Operations
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
---------- --------- ---------- ---------
March 31, 1996 March 31, 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Investment income $ 2,202,678 $ 1,961,463
Net investment income 1,734,964 $ .19 1,703,989 $ .18
Net realized and unrealized gain (loss) on investments (1,372,604) (.15) 1,976,583 .21
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Investment income 2,197,345 1,975,401
Net investment income 1,717,737 .18 1,685,907 .18
Net realized and unrealized gain on investments 3,482,897 .38 6,625,469 .72
</TABLE>
- -------------------------------------------------------------------------------
24
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