|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: NATIONAL CAPITAL MANAGEMENT CORP, 10QSB, 1997-08-20 |
Next: AHA INVESTMENT FUNDS INC, NSAR-B, 1997-08-20 |
<PAGE>
TO OUR SHAREHOLDERS JULY 31, 1997
We are pleased to present MassMutual Participation Investors' report for the
first six months of 1997.
There are several noteworthy items to report this quarter: 1) An increase in the
quarterly dividend; 2) Higher quarterly net investment income; 3) An all-time
high net asset value; and 4) Significant realized capital gains.
The net assets of the Trust hit another all-time high level at $11.65 per share
at June 30, 1997. This translated into an 8.8% return for the quarter, and 12.6%
year-to-date, as measured by change in net assets with reinvestment of
dividends.
Net investment income of the Trust for the second quarter was also higher at
$1,959,604 or 21.3 cents per share versus $1,923,676 or 20.9 cents per share for
the quarter ended March 31. Reflecting this increase, the Trustees raised the
quarterly dividend to $.21 per share payable on August 14, 1997 to shareholders
of record on July 31, 1997, up from the $.20 per share level a quarter ago. For
the six months ended June 30, 1997, net investment income was $3,883,280 or 42.1
cents per share as compared to $3,452,701 or 37.5 cents per share for the same
period last year.
There were significant positive events that occurred in the portfolio during the
quarter. Telex Communications Corp. is a company to which we made a private
placement loan in 1989. We held $1,500,000 of its 14.5% subordinated notes and
nominal cost warrants until 1994, when the company underwent a recapitalization
and our loan was repaid at a $81,563 gain. However, we held our warrants and
participated in the recapitalization by buying $750,000 of their 12% publicly
traded bonds. On May 6, 1997, Telex was acquired at a price which gave us a
$3,540,282 gain on our warrants as well as a $108,750 gain on our bonds. Another
investment, PanEnergy Corporation (originally our note was with Grand Valley Gas
Company) was acquired by Duke Power Corporation. As a result, our $1.5 million
convertible note was converted and our stock sold for a gain of nearly $1.6
million. Other significant gains realized during the quarter were in Kuhlman
Corporation ($833 thousand) and CompuCom Systems, Inc. ($912 thousand). We have
completed our sale of CompuCom, with our original $1.5 million investment
yielding total gains of $4.0 million over the past several years. Our total net
gains for the first six months totaled $9,522,093 or $1.03 per share of which
$659,325, or $.07 per share, represents short-term gains which are distributed
to shareholders each year.
We closed on four new private placement investments during the second quarter.
We were able to help Eagle Pacific Industries, Inc., the sixth largest extruder
of small and medium diameter plastic pipe and tubing, refinance some of its
existing debt as well as finance the construction of additional manufacturing
capacity. We helped finance the purchase of Truseal Technologies, Inc., a
manufacturer of sealant systems for windows and doors, and Hartzell
Manufacturing, Inc., an engineering, manufacturing, and assembly services
company, both of which were purchased by buyout sponsors with whom we have solid
relationships. And we helped Pacific Coast Feather Company, the second and third
largest seller of down comforters and bed pillows respectively, refinance their
bank debt. For a more complete description of our investments in these
companies, see the Schedule of Investments section of this report.
One final noteworthy item is the closing of a revolving credit facility in which
the Trust may borrow an additional $15 million. This should provide additional
investment flexibility and allow us to enter and exit the market as conditions
warrant.
The Trustees and management appreciate the continued interest and support of the
shareholders of Participation Investors.
Sincerely,
/s/ Stuart H. Reese
Stuart H. Reese
President
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES MASSMUTUAL PARTICIPATION INVESTORS
June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Assets:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1997 - $94,046,012; 1996 - $64,888,418) $ 97,984,382 $ 69,905,002
Corporate public securities at market value
(Cost 1997 - $18,218,621; 1996 - $25,636,565) 19,661,880 26,637,771
Short-term securities at cost plus earned discount which
approximates market value 1,057,938 13,038,601
------------ ------------
118,704,200 109,581,374
Cash 1,261,202 1,196,479
Interest and dividends receivable, net 1,935,383 1,638,773
Receivable for investments sold 458,366 544,684
Unamortized bond issuance costs 12,277 --
Other assets 8,085 8,085
------------ ------------
Total assets $122,379,513 $112,969,395
============ ============
Liabilities:
Payable for investments purchased $ 2,441,087 $ 1,333,206
Management fee payable (Note 3) 241,652 222,970
Note payable (Note 4) 12,000,000 12,000,000
Interest payable (Note 4) 171,016 170,940
Accrued expenses 124,913 144,308
------------ ------------
Total liabilities 14,978,668 13,871,424
------------ ------------
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 5,423,509 582,457
Undistributed net investment income (Note 2D) 2,047,172 1,836,282
Accumulated net realized gain on investments 9,560,548 5,673,455
Net unrealized appreciation of investments (Notes 2A, 2B and 5) 5,381,629 6,017,790
------------ ------------
Total net assets 107,400,845 99,097,971
------------ ------------
Total liabilities and net assets $122,379,513 $112,969,395
============ ============
Shares of beneficial interest issued and outstanding 9,216,665 9,216,665
============ ============
Net asset value per share $ 11.65 $ 10.75
============ ============
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
STATEMENT OF OPERATIONS MASSMUTUAL PARTICIPATION INVESTORS
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Investment Income (Note 2B):
Interest $ 4,740,289 $ 4,334,581
Dividends 119,403 65,442
------------ ------------
Total income 4,859,692 4,400,023
------------ ------------
Expenses:
Management fee (Note 3) 467,962 438,179
Trustees' fees and expenses 29,209 26,652
Transfer Agent/Registrar's expenses 20,947 18,500
Interest (Note 4) 418,309 415,800
Reports to shareholders 7,000 14,513
Audit and legal 19,640 22,295
Bond issuance cost 223 --
Other 13,122 11,383
------------ ------------
Total expenses 976,412 947,322
------------ ------------
Net investment income 3,883,280 3,452,701
------------ ------------
Net realized and unrealized gain (loss) on investments (Notes 2A and 2B):
Net realized gain on investments 9,522,093 5,673,455
Net change in unrealized appreciation of investments (1,315,054) (3,563,162)
------------ ------------
Net gain on investments 8,207,039 2,110,293
------------ ------------
Net increase in net assets resulting from operations $ 12,090,319 $ 5,562,994
============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
STATEMENT OF CASH FLOWS MASSMUTUAL PARTICIPATION INVESTORS
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net increase (decrease) in cash:
Cash flows from operating activities:
Interest and dividends received $ 4,247,979 $ 4,064,371
Interest expense paid (418,233) (415,800)
Operating expenses paid (567,429) (539,027)
Federal income tax paid (2,606,720) (203,518)
------------ ------------
Net cash (used for) provided by operating activities 655,597 2,906,026
------------ ------------
Cash flows from investing activities:
Change in short-term portfolio securities, net 3,943,475 (1,043,713)
Purchase of portfolio securities (44,005,372) (31,656,142)
Proceeds from disposition of portfolio securities 46,297,754 34,464,236
------------ ------------
Net cash provided by investing activities 6,235,857 1,764,381
------------ ------------
Net cash provided by operating and investing activities 6,891,454 4,670,407
------------ ------------
Cash flows from financing activities:
Cash dividends paid from net investment income (3,737,204) (3,502,333)
Cash dividends paid from net realized gain on investments (1,884,962) --
Cash paid for issuance of debt (12,500) --
------------ ------------
Net cash used for financing activities (5,634,666) (3,502,333)
------------ ------------
Net increase in cash 1,256,788 1,168,074
Cash - beginning of year 4,414 28,405
------------ ------------
Cash - end of period $ 1,261,202 $ 1,196,479
============ ============
Reconciliation of net increase (decrease) in net assets to net cash from
operating and investing activities:
Net increase in net assets resulting from operations $ 12,090,319 $ 5,562,994
------------ ------------
Increase in investments (7,997,689) (1,994,113)
(Increase) decrease in interest and dividends receivable, net (394,944) 166,101
Decrease in receivable for investments sold 3,511,736 321,326
Increase in other assets (8,085) (8,085)
Increase in payable for investments purchased 2,306,087 833,206
Increase in management fee payable 23,056 8,576
Increase in interest payable 76 --
Increase in amortized bond issuance costs 223 --
Decrease in accrued expenses (32,605) (16,080)
Decrease in accrued taxes (2,606,720) (203,518)
------------ ------------
Total adjustments to net assets from operations (5,198,865) (892,587)
------------ ------------
Net cash provided by operating and investing activities $ 6,891,454 $ 4,670,407
============ ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS MASSMUTUAL PARTICIPATION INVESTORS
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 3,883,280 $ 3,452,701
Net realized gain on investments 9,522,093 5,673,455
Net change in unrealized appreciation of investments (1,315,054) (3,563,162)
------------ ------------
Net increase in net assets resulting from operations 12,090,319 5,562,994
Dividends to shareholders from:
Net investment income (1997 - $.20 per share; 1996 - $.19 per share) (1,843,333) (1,751,166)
------------ ------------
Total increase 10,246,986 3,811,828
Net Assets, beginning of year 97,153,859 95,286,143
------------ ------------
Net Assets, end of period (including undistributed net investment
income in 1997 - $2,047,172; 1996 - $1,836,282) $107,400,845 $ 99,097,971
============ ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
SELECTED PER SHARE DATA MASSMUTUAL PARTICIPATION INVESTORS
Selected data for each share of beneficial interest outstanding for the periods
ended:
<TABLE>
<CAPTION>
For the
six months For the
ended 6/30/97 year ended
(Unaudited) 12/31/96
------------- ------------
<S> <C> <C>
Net asset value:
Beginning of year $ 10.54 $ 10.34
----------- ----------
Net investment income .42 .76
Net realized and unrealized gain on investments .89 .42
----------- ----------
Total from investment operations 1.31 1.18
----------- ----------
Dividends from net investment income to common shareholders (0.20) (0.78)
Distributions from net realized gain on investments to common shareholders -- (0.20)
----------- ----------
Total distributions (0.20) (.98)
----------- ----------
Net asset value:
End of period $ 11.65 $ 10.54
=========== ==========
Per share market value:
End of period $ 10.13 $ 9.25
=========== ==========
Total investment return:
Market value 11.73%* 15.40%
Net asset value 12.58%* 14.60%
Net assets (in millions):
End of period $ 107.40 $ 97.15
Ratio of operating expenses to average net assets .55%* 1.11%
Ratio of interest expenses to average net assets .42%* .85%
Ratio of expenses to average net assets .97%* 1.96%
Ratio of net investment income to average net assets 3.85%* 7.18%
Portfolio turnover 39.03%* 68.48%
</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, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities - 72.29%: (A) Amount Date Date (Note 2B) (Note 2A)
--------------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
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 $ 383,299 8/22/89 $ 379,160 $ 389,049 $ 385,523
---------------- ----------- ------------
AccTech, LLC
A designer and marketer of specialized cleaning
products.
Senior Floating Rate Revolving Credit Note
due 2002 $ 274,380 10/31/96 274,380 274,380 266,615
Senior Secured Series A Floating Rate
Note due 2002 $ 381,833 10/31/96 376,110 381,833 374,349
10.1% Senior Secured Series A Note due
2002 $ 573,233 10/31/96 558,559 573,233 560,106
12% Senior Secured Series B Note due
2004 $ 549,000 10/31/96 577,603 497,244 575,462
Membership Interest 2 int. 10/31/96 131,756 166,000 131,756
Warrant, exercisable until 2004, to
purchase 1 Membership Interest at $.01
per interest (B) 1 int. 10/31/96 -- 54,900 --
---------------- ----------- ------------
1,918,408 1,947,590 1,908,288
---------------- ----------- ------------
American Exploration Company - A.S.E.
An independent oil and gas company engaged
principally in the acquisition, development
and management of oil and gas properties.
11% Senior Subordinated Note due 2004 $ 1,500,000 12/27/91 1,482,300 1,480,644 1,540,800
Warrant, exercisable until 2004, to
purchase 51,671 shares of common stock
at $15.53 per share (B) 51,671 shs. 12/27/91 24,857 19,356 25,939
---------------- ----------- ------------
1,507,157 1,500,000 1,566,739
---------------- ----------- ------------
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 $ 166,667 11/23/93 163,267 166,667 175,467
---------------- ----------- ------------
Associated Vintage Group, Inc.
A provider of custom wine production services
in the United States.
11% Senior Subordinated Note due 2005 $ 1,667,500 3/19/97 1,637,318 1,582,642 1,656,828
Common Stock (B) 15,675 shs. 3/19/97 61,875 82,500 61,869
Warrant, exercisable until 2005, to
purchase 47,044 shares of common stock
at $.01 per share (B) 47,044 shs. 3/19/97 47,044 86,673 47,044
---------------- ----------- ------------
1,746,237 1,751,815 1,765,741
---------------- ----------- ------------
Atlantic Aviation Corporation
An operator and provider of business aircraft
services and fueling services to commercial
airlines.
10.05% Senior Note due 1999 $ 552,548 1/31/90 533,667 552,548 552,548
---------------- ----------- ------------
Berkshire Medical Center, Inc.
A non-profit, regional acute care hospital.
10.5% Senior Note due 1999 $ 616,364 5/15/89 616,364 616,364 632,204
---------------- ----------- ------------
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 8/16/94 899,720 951,347 1,001,800
---------------- ----------- ------------
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities - (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
--------------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
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 $ 202,491 $ 219,284
---------------- ----------- ------------
Budget Group, The (formerly Team Rental) - 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
2003, convertible into 49,611 shares of
common stock at $20.16 per share $ 1,000,000 12/18/96 899,220 1,000,000 1,535,100
---------------- ----------- ------------
C&K Manufacturing and Sales Company
A manufacturer and distributor of branded
packaging and supply products.
Senior Secured Floating Rate Revolving
Credit Facility due 2002 $ 266,000 8/29/96 266,000 266,000 261,132
Senior Secured Series A Floating Rate
Term Note due 2002 $ 1,192,064 8/29/96 1,179,310 1,192,064 1,172,633
12% Series B Term Note due 2004 $ 266,000 8/29/96 261,877 253,537 263,766
Membership Interest 133 int. 8/29/96 106,400 131,420 106,400
Warrant, exercisable until 2004, to
purchase 37 Membership Interests at $.01
per interest (B) 37 int. 8/29/96 -- 13,300 --
---------------- ----------- ------------
1,813,587 1,856,321 1,803,931
---------------- ----------- ------------
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 9/29/95 750,778 756,756 743,815
11.5% Senior Subordinated Note due 2004 $ 472,975 9/29/95 471,414 451,523 463,988
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 97,454
Warrant, exercisable until 2006, to
purchase 19 partnership points at $.01 per
point (B) 19 pts. 9/29/95 19 25,130 45,682
---------------- ----------- ------------
1,264,359 1,287,463 1,350,939
---------------- ----------- ------------
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 $7.31 per share $ 375,000 3/31/94 355,013 375,000 348,750
---------------- ----------- ------------
Cirrus Logic, Inc.
A designer and manufacturer of integrated circuits.
10.22% Secured Leverage Lease Notes due
2002 $ 677,578 11/1/96 662,536 677,578 651,423
10.14% Secured Leverage Lease Notes due
2004 $ 719,093 11/1/96 697,879 719,093 684,002
---------------- ----------- ------------
1,360,415 1,396,671 1,335,425
---------------- ----------- ------------
Classic Sports, Inc.
A cable sports television network.
Convertible Preferred Stock, convertible
into 322 shares of common stock at $1,000
per share 322 shs. * 28,980 152,062 386,664
---------------- ----------- ------------
</TABLE>
* 4/18/95 and 6/3/96.
8
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MASSMUTUAL PARTICIPATION INVESTORS
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
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
due 1999 $ 466,800 6/26/89 $ 481,691 $ 466,800 $ 469,741
---------------- ----------- ------------
Consumer Product Enterprises, Inc.
A manufacturer of colored acrylic felt for
consumer use.
Senior Secured Floating Rate Revolving
Credit Notes due 2000 $ 65,365 12/8/95 65,365 65,365 65,365
10.75% Senior Secured Term Note due 2003 $ 607,103 12/8/95 614,260 607,103 601,821
12% Senior Subordinated Note due 2005 $ 400,287 12/8/95 401,928 380,110 388,999
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
---------------- ----------- ------------
1,151,455 1,170,284 1,126,087
---------------- ----------- ------------
Contico International, Inc.
A developer, manufacturer and marketer of
consumer, commercial and industrial plastic
products.
12% Senior Subordinated Note due 2003 $ 500,000 3/23/93 522,800 500,000 520,100
---------------- ----------- ------------
Control Devices, Inc. - O.T.C
A producer of high quality electromechanical
circuit protector devices and photo-optic
sensors.
Common Stock (B) 58,000 shs. * 8,737 8,737 665,547
---------------- ----------- ------------
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 $ 235,804 12/11/90 235,667 235,509 246,910
---------------- ----------- ------------
Discount Auto Parts
A retailer of auto parts.
9.8% Senior Secured Note due 2003 $ 900,000 11/2/89 869,490 900,000 951,930
---------------- ----------- ------------
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 $ 219,906 10/24/96 218,565 219,906 218,763
10.16% Senior Term Note due 2002 $ 659,719 10/24/96 660,510 659,719 664,601
12% Senior Subordinated Note due 2003 $ 624,000 10/24/96 638,414 555,290 644,592
Membership Interest 1,491 int. 10/24/96 111,821 152,095 111,821
Warrant, exercisable to 2003, to purchase
896 Membership Interests at $.01 per
interest (B) 896 int. 10/24/96 9 73,745 9
---------------- ----------- ------------
1,629,319 1,660,755 1,639,786
---------------- ----------- ------------
</TABLE>
* 7/29/94 and 10/8/96.
9
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Aquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
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, convertible into 39,902 shares of
common stock at $4.26 per share 1,700 shs. 5/9/97 $ 1,692,860 $ 1,700,000 $ 1,723,120
------------- ------------- -------------
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 1,374,933
10% Preferred Stock 1,559 shs. 9/24/93 117,976 155,950 132,807
Common Stock (B) 107 shs. 9/24/93 10,717 10,717 61,414
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 64,180
------------- ------------- -------------
1,459,282 1,500,000 1,633,334
------------- ------------- -------------
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 1,286,927
------------- ------------- -------------
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 $ 1,395,585 * 1,389,305 1,327,352 1,420,845
Common Stock (B) 270 shs. 4/28/95 70,559 135,000 10,161
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 7,144
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 1,136 361
------------- ------------- -------------
1,510,636 1,548,715 1,438,511
------------- ------------- -------------
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 1,520,250
Warrant, exercisable until 2005, to
purchase 136,467 shares of common stock
at (pounds) 1.84 per share (B) 136,467 shs. 1/11/95 13,510 -- 256,558
------------- ------------- -------------
1,466,110 1,500,000 1,776,808
------------- ------------- -------------
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 $ 1,313,100 4/18/97 1,329,514 1,158,020 1,350,655
Common Stock (B) 35,322 shs. 4/18/97 299,165 398,889 299,140
Warrant, exercisable until 2005, to
purchase 16,689 shares of common stock
at $.01 per share (B) 16,689 shs. 4/18/97 1,669 157,572 1,669
------------- ------------- -------------
1,630,348 1,714,481 1,651,464
------------- ------------- -------------
</TABLE>
* 4/28/95, 5/1/96, 2/1/97 and 5/1/97.
10
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Hatco Corporation
A speciality chemical company focused on
the production of industrial synthetic
lubricants and plasticizers.
Senior Secured Floating Rate Term Loan
due 2003 $ 1,750,000 1/31/97 $ 1,739,675 $ 1,750,000 $ 1,740,550
------------ ------------ ------------
Hein-Werner Corp. - A.S.E
A manufacturer of automotive service and
collision repair equipment and hydraulic
cylinders.
Warrant, exercisable until 1999, to
purchase 59,713 shares of common stock
at $6.28 per share (B) 59,713 shs. 9/3/96 -- -- 82,166
------------ ------------ ------------
Highland Homes Holdings, Inc.
A single family home builder operating in the
Dallas-Fort Worth and Atlanta areas.
12.75% Senior Note due 1999 $ 562,500 11/18/93 556,931 554,824 584,212
Warrant, exercisable until 2001, to
purchase 3 shares of common stock at
$17,897.31 per share (B) 3 shs. 11/18/93 1 5,118 9,057
------------ ------------ ------------
556,932 559,942 593,269
------------ ------------ ------------
Hudson River Capital, LLC
Acquires controlling or substantial interests
in manufacturing and marketing entities.
Series A Preferred Units 25,000 uts. 7/21/94 210,734 221,826 210,734
------------ ------------ ------------
Hunton & Williams
A major law firm in Richmond, Virginia.
10.06% Senior Secured Note due 2000 $ 137,625 12/21/90 135,324 137,625 141,217
------------ ------------ ------------
Hussey Seating Company
A manufacturer of spectator seating products.
Senior Secured Floating Rate Revolving
Note due 2003 $ 146,250 6/12/96 144,817 146,250 145,022
Senior Secured Floating Rate Note due 2003 $ 431,250 6/12/96 426,981 431,250 427,541
10% Senior Secured Note due 2003 $ 450,000 6/12/96 438,120 450,000 446,580
12% Subordinated Secured Note due 2006 $ 675,000 6/12/96 663,660 569,780 683,843
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
------------ ------------ ------------
1,673,596 1,709,780 1,703,004
------------ ------------ ------------
Intermetrics, Inc.
A provider of software systems, services and
products to a variety of information technology
users.
Senior Floating Rate Revolving Credit Note
due 2001 $ 96,000 5/30/97 96,000 96,000 95,194
Senior Floating Rate Revolving Term Note
due 2002 $ 666,072 8/31/95 666,072 666,072 651,018
13% Senior Subordinated Note due 2002 $ 399,659 8/31/95 406,413 356,294 398,620
Class A Common Stock (B) 1,471 shs. 8/31/95 6,897 9,192 6,895
Class B Common Stock (B) 4,067 shs. 8/31/95 19,062 25,418 19,066
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
------------ ------------ ------------
1,195,503 1,204,976 1,171,852
------------ ------------ ------------
</TABLE>
11
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
J. Baker, Inc. - O.T.C.
A wholesaler and retailer of shoes.
11.46% Senior Subordinated Note due 1999 $ 600,000 6/21/89 $ 598,440 $ 600,000 $ 591,480
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
-------------- ------------ ------------
601,176 673,285 594,216
-------------- ------------ ------------
Jackson Products, Inc.
Manufactures and distributes a variety of
industrial and highway safety
products.
12.25% Senior Subordinated Note due 2004 $ 985,000 8/16/95 962,148 966,226 989,629
13.25% Cumulative Exchangeable
Preferred Stock 49 shs. 8/16/95 407,467 411,708 413,725
Common Stock (B) 217 shs. 8/16/95 21,702 21,702 19,532
Warrant, exercisable until 2005, to
purchase 999 shares of common stock at
$.01 per share (B) 999 shs. 8/16/95 999 99,866 999
-------------- ------------ ------------
1,392,316 1,499,502 1,423,885
-------------- ------------ ------------
Kappler Safety Group, Inc.
A manufacturer of protective apparel for the
industrial/safety, clean room and healthcare markets.
13% Senior Subordinated Note due 2004 $ 1,667,000 12/2/96 1,692,505 1,511,346 1,673,335
Warrant, exercisable until 2004, to
purchase 28,717 shares of common stock
at $.01 per share (B) 28,717 shs. 12/2/96 28,717 166,700 36,298
-------------- ------------ ------------
1,721,222 1,678,046 1,709,633
-------------- ------------ ------------
Latin Communications Group
An operator of Spanish-language media in North
America.
Common Stock (B) 44,219 shs. * 247,184 406,252 442,190
-------------- ------------ ------------
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 1,107,068
Limited Partnership Interest 284 uts. 10/20/95 253,125 366,629 292,994
Warrant, exercisable until 2004 to
purchase 148 units of Limited Partnership
Interest at $.01 per unit (B) 148 uts. 10/26/95 148 -- 153,047
-------------- ------------ ------------
1,323,486 1,379,129 1,553,109
-------------- ------------ ------------
Maxtec International Corp.
A manufacturer and distributor of precision
test and measurement equipment and
overhead crane control systems.
Senior Floating Rate Revolving Credit
Facility due 2001 $ 329,670 6/28/95 325,516 329,670 326,967
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
-------------- ------------ ------------
470,866 530,770 433,302
-------------- ------------ ------------
NM Holdings LLC
A company created to acquire motion picture
film rights from Twentieth Century
Fox.
10% Senior Note due 2001 $ 500,000 6/28/96 490,300 500,000 495,350
12% Subordinated Note due 2001 $ 490,000 6/28/96 491,078 490,000 494,753
Membership Interest 10,000 int. 6/28/96 7,500 9,938 7,500
-------------- ------------ ------------
988,878 999,938 997,603
-------------- ------------ ------------
</TABLE>
* 2/14/95, 12/1/95 and 2/27/96.
12
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nu Horizons Electronics Corp. - O.T.C.
A distributor of high technology active and
passive electronic devices.
8.25% Convertible Subordinated Note due
2002, convertible into 78,433 shares of
common stock at $9 per share $ 705,900 8/31/94 $ 714,159 $ 705,900 $ 742,960
-------------- ------------ ------------
Pacific Coast Feather Company
A manufacturer and marketer of natural fill
and synthetic fill bed pillows and comforters.
15.5% Senior Subordinated Note due 2004 $ 1,750,000 6/27/97 1,768,025 1,750,000 1,764,700
-------------- ------------ ------------
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 2/5/93 832,000 833,333 855,916
8% Convertible Preferred Stock due 2001,
convertible into 83,333 shares of common
stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 156,050
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 153,600
-------------- ------------ ------------
1,332,000 1,333,333 1,165,566
-------------- ------------ ------------
Paribas Capital Funding LLC
A collateralized loan obligation managed by the U.S.
Merchant Banking Group of Banque Paribas.
Subordinated Floating Rate Note due 2010 $ 1,750,000 * 1,743,467 1,750,000 1,740,725
-------------- ------------ ------------
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 $ 408,750 11/30/95 425,958 408,750 422,361
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 97,500 107,435
Common Stock (B) 3 shs. 11/30/95 126,750 169,000 105,260
-------------- ------------ ------------
655,385 675,250 635,056
-------------- ------------ ------------
Piedmont Holding, Inc.
A general aviation fixed based operator with
repair, maintenance and overhaul certification.
12% Senior Subordinated Note due 2001 $ 1,085,721 7/15/92 1,094,624 1,085,721 1,122,961
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 33,513
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 -- 44,672
-------------- ------------ ------------
1,238,503 1,228,591 1,342,129
-------------- ------------ ------------
Plastipak Packaging, Inc.
A manufacturer of plastic containers.
10.64% Senior Subordinated Note due 2006 $ 1,750,000 10/25/96 1,701,875 1,706,183 1,724,450
Warrant, exercisable until 2006, to
purchase 49 shares of common stock at
$.01 per share (B) 49 shs. 10/25/96 27,796 46,813 31,101
-------------- ------------ ------------
1,729,671 1,752,996 1,755,551
-------------- ------------ ------------
</TABLE>
* 12/20/96, 3/20/97 and 6/20/97.
13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
----------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Precision Dynamics, Inc.
A manufacturer of custom-designed solenoid
valves and controls.
Senior Secured Floating Rate Revolving
Credit Facility due 2003 $ 211,900 7/22/96 $ 209,802 $ 211,900 $ 210,014
Senior Secured Floating Rate Term Note
due 2003 $1,450,700 7/22/96 1,436,483 1,450,700 1,438,804
12% Senior Secured Term Note due 2004 $ 245,000 7/22/96 241,766 199,295 246,103
8% Preferred Stock 116 shs. 7/22/96 110,115 115,911 110,150
Common Stock (B) 299 shs. 7/22/96 10,868 14,489 10,847
Warrant, exercisable until 2004, to
purchase 161 shares of common stock at
$.01 per share (B) 161 shs. 7/22/96 2 49,000 2
---------- ---------- ----------
2,009,036 2,041,295 2,015,920
---------- ---------- ----------
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 8/12/94 394,720 400,000 327,920
11.51% Junior Secured Note due 1999 $ 239,484 8/12/94 234,407 239,484 191,970
9.8% Redeemable Exchangeable Preferred
Stock 3,333 shs. 8/12/94 282,664 333,333 130,000
Common Stock (B) 497 shs. 8/12/94 5 -- 4
---------- ---------- ----------
911,796 972,817 649,894
---------- ---------- ----------
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 2/16/93 799,575 750,000 834,825
Common Stock (B) 17,750 shs. 2/16/93 170,454 170,400 303,525
---------- ---------- ----------
970,029 920,400 1,138,350
---------- ---------- ----------
Rent-Way, Inc. - O.T.C
Operates rent-to-own stores in Ohio, Pennsylvania
and New York.
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 1,187,100
Warrant, exercisable until 2002, to
purchase 10,000 shares of common stock
at $9.94 per share (B) 10,000 shs. 7/18/95 -- -- 44,380
---------- ---------- ----------
1,000,000 1,000,000 1,231,480
---------- ---------- ----------
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 1,209,142 927,522 1,050,242
Limited Partnership Interest of KS
Holdings, L.P. 3,593 uts. 12/14/95 265,425 339,371 35,930
Warrant, exercisable until 2004, to
purchase 2,725 units of Limited
Partnership Interest of KS Holdings, L.P. at
$.01 per unit (B) 2,725 uts. 12/14/95 2,725 239,547 1,362
---------- ---------- ----------
1,477,292 1,506,440 1,087,534
---------- ---------- ----------
</TABLE>
14
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
-------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Star International Holdings, Inc.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 382,835 5/27/94 $ 365,339 $ 382,835 $ 379,734
10.5% Subordinated Note due 2004 $ 179,104 5/27/94 162,913 179,104 172,925
Common Stock (B) 1,077 shs. 5/27/94 58,414 64,904 20,236
Warrant, exercisable until 2004, to
purchase 806 shares of common stock at
$.01 per share (B) 806 shs. 5/27/94 8 -- 15,137
---------- ---------- ----------
586,674 626,843 588,032
---------- ---------- ----------
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 49,492 55,500
---------- ---------- ----------
1,499,500 1,493,992 1,500,000
---------- ---------- ----------
Swing N'Slide Corporation - A.S.E.
A manufacturer and distributor of home playground
equipment and accessories.
12% Subordinated Note due 2005 $ 1,562,500 3/13/97 1,292,500 1,229,022 1,311,562
Limited Partnership Interest of Green Grass
Capital II, LLC 40,774 uts. 3/13/97 146,787 223,750 118,245
Warrant, exercisable until 2005, to
purchase 74,022 units of Limited
Partnership Interest of Green Grass Capital
II, LLC at $.01 per unit (B) 74,022 uts. 3/13/97 265,887 340,361 214,072
---------- ---------- ----------
1,705,174 1,793,133 1,643,879
---------- ---------- ----------
Tidewater Holdings, Inc.
An operator of a barge transportation line on the
Columbia/Snake River system.
12.5% Senior Subordinated Note due 2006 $ 1,190,000 7/25/96 1,194,046 1,167,146 1,219,155
Convertible Preferred Stock, convertible
into 560 shares of common stock at $1,000
per share (B) 560 shs. 7/25/96 504,000 560,000 504,000
Warrant, exercisable until 2008, to
purchase 237 shares of common stock at
$.01 per share (B) 237 shs. 7/25/96 21 24,103 21
---------- ---------- ----------
1,698,067 1,751,249 1,723,176
---------- ---------- ----------
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 1,180,680 1,261,800
Common Stock (B) 203,165 shs. * 490,810 598,597 2,422,743
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 42,000 728,528
---------- ---------- ----------
1,772,551 1,821,277 4,413,071
---------- ---------- ----------
</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, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Trend Plastics, Inc.
A manufacturer and assembler of plastic injection
molded parts.
12% Subordinated Note due 2005 $ 1,256,800 3/21/97 $ 1,296,389 $ 1,255,236 $ 1,311,848
Limited Partnership Interest of Riverside V
Holding Company L.P. 1,091 uts. 3/21/97 133,532 147,832 133,532
Limited Partnership Interest of Riverside
V-A Holding Company L.P. 2,335 uts. 3/21/97 302,512 316,309 302,511
Warrant, exercisable until 2005, to
purchase 1,564 units of Limited Partnership
Interest at $.01 per unit (B) 1,564 uts. 3/21/97 1,564 1,564 1,564
------------ ------------ ------------
1,733,997 1,720,941 1,749,455
------------ ------------ ------------
Truseal Technologies, Inc.
A manufacturer of sealant systems for the North
American window and door market.
12.25% Senior Subordinated Note due 2006 $ 1,338,000 6/23/97 1,367,168 1,149,700 1,360,746
Limited Partnership Interest 4,123 uts. 6/17/97 371,070 412,300 371,070
Warrant, exercisable until 2006, to
purchase 630 units of Limited Partnership
Interest at $.01 per unit (B) 630 uts. 6/23/97 6 188,536 6
------------ ------------ ------------
1,738,244 1,750,536 1,731,822
------------ ------------ ------------
U.S. Netting, Inc.
A manufacturer of plastic netting for a wide variety
of industries.
Senior Secured Floating Rate Revolving
Note due 2000 $ 27,959 5/15/97 27,959 27,959 27,959
11% Senior Secured Note due 2005 $ 792,200 5/3/95 876,015 792,200 863,498
12% Subordinated Note due 2005 $ 326,200 5/3/95 326,200 310,453 372,749
Common Stock (B) 2,457 shs. 5/3/95 81,376 195,720 14,192
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 9,182
------------ ------------ ------------
1,357,841 1,344,303 1,287,580
------------ ------------ ------------
U.S. Silica Company
A producer of high grade industrial and specialty
ground silica sands in North America.
15% Senior Subordinated Notes due 2005 $ 1,178,396 * 1,251,327 1,178,331 1,252,282
Redeemable Preferred Stock Series A (B) 20,999 shs. 12/19/96 145,827 194,435 145,817
Convertible Preferred Stock Series B,
convertible into 41,988 shares of Series B
common stock at $9.26 per share (B) 41,998 shs. 12/19/96 291,648 388,865 291,634
Warrant, exercisable until 2005, to
purchase 3,241 units of Series A Preferred
Stock and 6,482 units of Series B Preferred
Stock at $.01 per unit (B) 3,241 uts. 12/19/96 6,482 65 3,241
------------ ------------ ------------
1,695,284 1,761,696 1,692,974
------------ ------------ ------------
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 1,201,291 1,165,875
Common Stock (B) 62,500 shs. 12/14/95 187,500 250,000 187,500
Warrant, exercisable until 2003, to
purchase 31,250 shares of common stock
at $1 per share (B) 31,250 shs. 12/14/95 313 62,125 312
------------ ------------ ------------
1,457,063 1,513,416 1,353,687
------------ ------------ ------------
</TABLE>
* 12/19/96 and 2/15/97.
16
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares, Units,
Warrants or Fair Value Fair Value
Principal Acquisition at Acquisition Cost at 6/30/97
Corporate Restricted Securities: (A) (Continued) Amount Date Date (Note 2B) (Note 2A)
----------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Unipac Corporation
A manufacturer of laminated materials which are
used to seal a variety of packaging containers.
Senior Secured Floating Rate Note due 2002 $ 325,195 2/9/96 $ 321,748 $ 325,195 $ 325,195
12% Senior Secured Note due 2004 $ 121,875 2/9/96 123,435 110,418 129,358
Acquisition Line of Credit due 2002 $ 365,625 9/30/96 365,625 365,625 365,625
Limited Partnership Interest of Riverside II
Holding Company L.P. 61 uts. * 56,368 108,617 162,594
Warrant, exercisable from 2000 until
2004, to purchase 21 units of Limited
Partnership Interest of Riverside II Holding
Company L.P. at $.01 per unit (B) 21 uts. 2/9/96 2 20,156 54,711
------------ ----------- -----------
867,178 930,011 1,037,483
------------ ----------- -----------
US Air, Inc.
A domestic and international airline.
10.8% Series A Secured Loan Certificates
due 2003 $ 430,259 6/29/94 365,720 377,072 428,969
------------ ----------- -----------
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 $ 285,714 12/20/90 290,478 285,714 295,143
------------ ----------- -----------
Victory Ventures, LLC
Acquires controlling or substantial interests in
other entities.
Series A Preferred Units 25,000 uts. 12/2/96 26,766 28,174 26,766
------------ ----------- -----------
Sub-Total Corporate Restricted Securities $ 72,573,191 74,137,119 77,637,300
============ ----------- -----------
<CAPTION>
Market Value
Interest Due Principal Cost at 6/30/97
Rule 144A Securities: (A) Rate Date Amount (Note 2B) (Note 2A)
-------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bonds - 13.85%
Anchor Advanced Products 11.750% 04/01/04 $ 560,000 581,750 589,400
Archibald Candy Corp. 10.250 07/01/04 600,000 600,000 600,000
Aurora Foods, Inc. 6.875 02/15/07 750,000 768,750 758,438
Enserch Exploration, Inc. 7.540 01/02/09 1,000,000 1,000,000 1,000,000
Indah Kiat Pulp & Paper Corporation 10.000 07/01/07 700,000 695,429 695,429
Integrated Health Services 9.500 09/15/07 400,000 400,000 411,000
International Wire Group 11.750 06/01/05 450,000 489,375 487,125
Keystone Auto Grantor Trust 6.150 04/15/03 740,028 739,807 738,925
L-3 Corporation 10.375 05/01/07 400,000 400,000 421,000
Neenah Corporation 11.125 05/01/07 250,000 250,000 265,000
Petroleum Enhanced Trust 6.063 02/05/03 908,245 908,245 908,245
Pogo Producing 8.750 05/15/07 75,000 74,827 75,375
Ridell Sports, Inc. 10.500 07/15/07 175,000 175,000 179,375
Shoppers Food Warehouse 9.750 06/15/04 475,000 475,219 475,000
Station Casino, Inc. 9.750 04/15/07 550,000 532,950 550,000
Sun Media Corporation 9.500 05/15/07 75,000 74,405 75,750
T C W Leveraged Income Trust, LP 8.410 03/31/04 1,500,000 1,500,000 1,500,000
Telex Communications, Inc. 10.500 05/01/07 1,750,000 1,761,250 1,824,375
Therma-Wave, Inc. 10.625 05/15/04 370,000 375,625 393,125
United Refining Company 10.750 06/15/07 1,400,000 1,400,000 1,379,000
Von Hoffman Press, Inc. 10.375 05/15/07 325,000 327,250 339,625
W R Carpenter North America 10.625 06/15/07 550,000 556,344 547,250
Wavetek Corporation 10.125 06/15/07 110,000 110,000 111,925
Williams Scotsman, Inc. 9.875 06/01/07 400,000 400,000 401,000
Windy Hill Pet Foods Company 9.750 05/15/07 75,000 75,000 75,188
Wiser Oil Company 9.500 05/15/07 75,000 74,788 75,750
----------- ----------- -----------
Sub-Total Rule 144A Bonds $14,663,273 14,746,014 14,877,300
=========== ----------- -----------
</TABLE>
* 2/9/96 and 9/25/96
17
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares,
Warrants or Market Value
Interest Due Principal Cost at 6/30/97
Rule 144A Securities: (A) (Continued) Rate Date Amount (Note 2B) (Note 2A)
-------------- ------------ ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Convertible Bonds - 4.75%
Continental Airlines, Inc. 6.750% 04/15/06 $ 300,000 $ 278,625 $ 393,000
CUC International, Inc. 3.000 02/15/02 600,000 600,000 636,000
Grand Metropolitan PLC 6.500 01/31/00 300,000 300,000 423,000
Imax Corporation 5.750 04/01/03 275,000 275,000 346,500
Marriott International, Inc. 0.000 03/25/11 500,000 280,646 301,250
Molten Metal Technology 5.500 05/01/06 450,000 450,000 166,500
Personnel Group 5.750 07/01/04 50,000 50,000 53,125
Roche Holdings, Inc. 0.000 05/06/12 4,200,000 1,654,420 1,806,000
Scholastic Corp. 5.000 08/15/05 600,000 484,688 504,000
Sunrise Assisted Living 5.500 06/15/02 250,000 250,000 286,250
Thermo Electron Corporation 4.250 01/01/03 175,000 175,000 192,500
------------ --------------- ----------------
Sub-Total Rule 144A Convertible Bonds $ 7,700,000 4,798,379 5,108,125
============ --------------- ----------------
Convertible Preferred Stock - 0.33%
Hvide Capital Trust 3,430 171,500 178,789
Qualcomm Financial Trust 3,860 193,000 182,868
--------------- ----------------
Sub-Total Rule 144A Convertible Preferred Stock 364,500 361,657
--------------- ----------------
Total Rule 144A Securities 19,908,893 20,347,082
--------------- ----------------
Total Corporate Restricted Securities 94,046,012 97,984,382
--------------- ----------------
Corporate Public Securities:
Bonds - 8.88%
Airplanes Pass Thru Trust 8.150% 03/15/19 $ 1,500,000 1,498,674 1,567,500
American Airlines, Inc. 9.780 11/26/11 1,000,000 1,000,000 1,137,500
Amphenol Corporation 9.875 05/15/07 200,000 200,000 205,000
Central Rents, Inc. 12.875 12/15/03 800,000 751,650 776,000
Data Documents, Inc. 13.500 07/15/02 1,429,000 1,433,158 1,571,900
Dawson Production Services 9.375 02/01/07 400,000 394,000 410,000
Decorative Home Accents, Inc. 13.000 06/30/02 350,000 350,000 157,500
Florist Transworld Delivery, Inc. 14.000 12/15/01 375,000 385,688 397,500
Great American Cookie Co. 10.875 01/15/01 585,000 574,500 585,000
Hosiery Corporation of America 13.750 08/01/02 500,000 493,900 545,000
Key Plastics, Inc. 14.000 11/15/99 350,000 354,912 386,750
Northwest Airlines Corp. 12.092 12/31/00 450,034 464,660 472,536
Northwest Airlines Corp. 8.970 01/02/15 986,709 986,709 1,075,513
Spinnaker Industries 10.750 10/15/06 200,000 202,625 201,000
Vintage Petroleum 8.625 02/01/09 50,000 49,579 49,750
------------ --------------- ----------------
Total Bonds $ 9,175,743 9,140,055 9,538,449
============ --------------- ----------------
Common Stock - 3.83%
4Health Inc. (B) 6,000 33,375 35,250
ARM Financial Group, Inc. 1,500 22,500 30,000
Atlas Air, Inc. (B) 2,600 52,650 89,700
Barringer Technologies, Inc. (B) 1,000 8,563 15,000
Benson Petroleum, LTD. (B) 100,000 77,204 101,300
Central Rents, Inc. (B) 930 33,722 46,500
Chesapeake Energy Corporation 5,000 168,125 49,060
Collins & Aikman Corporation (B) 17,400 104,238 174,000
Computer Horizons Corporation (B) 4,230 26,790 144,878
Data Documents, Inc. (B) 10,717 16 131,283
</TABLE>
18
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares,
Warrants or Market Value
Interest Due Principal Cost at 6/30/97
Corporate Public Securities: (Continued) Rate Date Amount (Note 2B) (Note 2A)
-------------- ------------ ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Common Stock (Continued)
Dawson Production Services (B) 17,270 $ 213,014 $ 241,780
Decorative Home Accents, Inc. (B) 350 -- --
Florist Transworld Delivery, Inc. (B) 4,687 13,754 23,435
Great Plains Software (B) 750 12,000 20,250
Health and Retirement Property Trust 5,000 94,375 94,060
Hosiery Corporation of America (B) 500 -- 35,000
Iridium World Communications, Inc. 3,000 60,000 54,375
JLK Direct Distribution 1,500 30,000 38,438
LCS Industries, Inc. 15,000 234,356 216,555
Marker International (B) 30,000 187,500 112,500
Maximus, Inc. 6,000 96,000 107,250
Polo Ralph Lauren Corp. 2,250 58,500 61,594
Pride Petroleum Services 2,169 36,873 52,056
Qwest Communications International, Inc. 750 16,500 20,438
Red Roof Inns, Inc. (B) 19,200 272,607 345,600
Republic Industries, Inc. (B) 15,000 368,438 373,125
SFX Broadcasting, Inc. (B) 3,000 97,125 126,561
Staffing Resources, Inc. (B) 45,000 247,500 495,000
Startek, Inc. (B) 30,000 464,025 451,860
Vimpel-Communications 8,001 241,091 304,038
Western Systems Corporation (B) 54,000 188,723 124,848
--------------- ----------------
Total Common Stock 3,459,564 4,115,734
--------------- ----------------
Convertible Bonds - 3.30%
Continental Airlines 6.750% 04/15/06 $ 200,000 185,500 262,000
Hilton Hotels 5.000 05/15/06 695,000 695,000 734,962
Home Depot, Inc. 3.250 10/01/01 450,000 443,500 515,250
Magna International, Inc. 5.000 10/15/02 250,000 255,625 303,125
Phototronics Inc. 6.000 06/01/04 275,000 275,000 310,062
Renal Treatment Centers, Inc. 5.625 07/15/06 112,000 112,000 110,600
Savoy Pictures Entertainment 7.000 07/01/03 650,000 505,375 539,500
Sunglass Hut International, Inc. 5.250 06/15/03 380,000 352,912 273,600
USA Waste Services, Inc. 4.000 02/01/02 450,000 450,000 492,750
------------- --------------- ----------------
Total Convertible Bonds $ 3,462,000 3,274,912 3,541,849
============= --------------- ----------------
Convertible Preferred Stock - 2.29%
D T Industries 20,000 1,000,000 1,000,000
Merrill Lynch & Co. 13,500 308,813 322,312
Occidental Petroleum Corporation 2,306 115,300 186,786
SFX Broadcasting, Inc. 17,400 804,150 948,300
--------------- ----------------
Total Convertible Preferred Stock 2,228,262 2,457,398
--------------- ----------------
Preferred Stock - .01%
RXI Holdings, Inc. 115,538 115,538 115
--------------- ----------------
Total Preferred Stock 115,538 115
--------------- ----------------
Warrants - .01%
Barringer Technologies, Inc. (B) 5,800 290 8,335
--------------- ----------------
Total Warrants 290 8,335
--------------- ----------------
Total Corporate Public Securities 18,218,621 19,661,880
--------------- ----------------
</TABLE>
19
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Market Value
Due Principal Cost at 6/30/97
Short-Term Securities: Yield Date Amount (Note 2B) (Note 2A)
--------- ---------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - .99%
Ryder System, Inc. 6.301% 7/1/97 $ 668,000 $ 668,000 $ 668,000
Union Pacific Corporation 5.796 7/2/97 390,000 389,938 389,938
------------ --------------- ----------------
Total Short-Term Securities $ 1,058,000 1,057,938 1,057,938
============ --------------- ----------------
Total Investments - 110.53% $ 113,322,571 118,704,200
=============== ----------------
Other Assets - 3.42 3,675,313
Liabilities - (13.95) (14,978,668)
----- ----------------
Total Net Assets - 100.00% $107,400,845
====== ================
</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
<TABLE>
<CAPTION>
Fair Value
at 6/30/97
Corporate Restricted Securities: (Note 2A)
--------------
<S> <C>
ADVERTISING - .16%
Ammirati & Puris, Inc. $ 175,467
--------------
BEVERAGES - 1.64%
Associated Vintage Group, Inc. 1,765,741
--------------
BUILDING MATERIALS - .55%
Highland Homes Holdings, Inc. 593,269
--------------
CHEMICAL - 3.76%
A.T.-Sentinel, Inc. 385,523
AccTech, LLC 1,908,288
Hatco Corporation 1,740,550
--------------
4,034,361
--------------
COMMUNICATIONS - 2.54%
Classic Sports, Inc. 386,664
Latin Communications Group 442,190
Sun Media Corporation 75,750
Telex Communications, Inc. 1,824,375
--------------
2,728,979
--------------
ELECTRICAL EQUIPMENT/
ELECTRONICS - 7.68%
Catalina Lighting, Inc. 348,750
Cirrus Logic, Inc. 1,335,425
Control Devices, Inc. 665,547
Exide Electronics Group, Inc. 1,286,927
Intermetrics, Inc. 1,171,852
International Wire Group 487,125
Nu Horizons Electronics Corp. 742,960
Precision Dynamics, Inc. 2,015,920
Thermo Electron Corporation 192,500
--------------
8,247,006
--------------
HEALTH CARE - 2.54%
Berkshire Medical Center, Inc. 632,204
Roche Holdings, Inc. 1,806,000
Sunrise Assisted Living 286,250
--------------
2,724,454
--------------
MANUFACTURING - INDUSTRIAL AND
CONSUMER PRODUCTS - 29.43%
C&K Manufacturing and Sales Company 1,803,931
Consumer Product Enterprises, Inc. 1,126,087
Contico International, Inc. 520,100
CUC International, Inc. 636,000
Elgin National Industries, Inc. 1,633,334
Fleming Acquisition Corporation 1,438,511
Hartzell Manufacturing, Inc. 1,651,464
Hein-Werner Corp. 82,166
Hudson River Capital 237,500
Hussey Seating Company 1,703,004
Imax Corporation 346,500
Jackson Products, Inc. 1,423,885
</TABLE>
20
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1997
(Unaudited)
INDUSTRY CLASSIFICATION (Continued)
<TABLE>
<CAPTION>
Fair Value
at 6/30/97
Corporate Restricted Securities: (Continued) (Note 2A)
----------
<S> <C>
MANUFACTURING - INDUSTRIAL AND
CONSUMER PRODUCTS (Continued)
Kappler Safety Group, Inc. $ 1,709,633
Maxtec International Corp. 433,302
Pacific Coast Feather Company 1,764,700
PAR Acquisition Corp. 1,165,566
Plastipak Packaging, Inc. 1,755,551
Sequentia, Inc. 1,087,534
Star International Holdings, Inc. 588,032
Swing N'Slide Corporation 1,643,879
Trend Plastics, Inc. 1,749,455
Truseal Technologies, Inc. 1,731,822
U.S. Netting, Inc. 1,287,580
U.S. Silica Company 1,692,974
Unidata, Inc. 1,353,687
Unipac Corporation 1,037,483
--------------
31,603,680
--------------
METAL FABRICATING - .15%
Molten Metal Technology 166,500
--------------
MISCELLANEOUS - 17.52%
Anchor Advanced Products 589,400
Archibald Candy Corp. 600,000
Aurora Foods, Inc. 758,438
Boyle Leasing Technologies, Inc. 1,001,800
Eagle Pacific Industries, Inc. 1,723,120
Enserch Exploration, Inc. 1,000,000
Hvide Capital Trust 178,789
Indah Kiat Pulp & Paper Corporation 695,429
Keystone Auto Grantor Trust 738,925
L-3 Corporation 421,000
Marriott International, Inc. 301,250
Neenah Corporation 265,000
NM Holdings LLC 997,603
Paribas Capital Funding LLC 1,740,725
Pogo Producing 75,375
Protein Genetics, Inc. 649,894
Qualcomm Financial Trust 182,868
Ridell Sports, Inc. 179,375
Station Casino, Inc. 550,000
Stonehurst I LLC 1,500,000
T C W Leveraged Income Trust, LP 1,500,000
Therma-Wave, Inc. 393,125
United Refining Company 1,379,000
Von Hoffman Press, Inc. 339,625
W R Carpenter North America 547,250
Wavetek Corporation 111,925
Williams Scotsman, Inc. 401,000
--------------
18,820,916
--------------
OIL AND GAS SERVICE - 10.06%
American Exploration Company $ 1,566,739
BP Prudhoe Bay Royalty Trust 219,284
Hardy Oil & Gas USA, Inc. 1,776,808
Maloney Industries, Inc. 1,553,109
Petroleum Enhanced Trust 908,245
TransMontaigne Oil Company 4,413,071
Valero Energy Corporation 295,143
Wiser Oil Company 75,750
--------------
10,808,149
--------------
PUBLISHING - .47%
Scholastic Corp. 504,000
--------------
RECREATIONAL SUPPLIES/
EQUIPMENT - .44%
Coast Distribution System, The 469,741
--------------
RETAILING - 5.34%
Cains Foods, L.P. 1,350,939
Discount Auto Parts 951,930
Grand Metropolitan PLC 423,000
J. Baker, Inc. 594,216
Pharmaceutical Buyers Inc. 635,056
Rent-Way, Inc. 1,231,480
Shoppers Food Warehouse 475,000
Windy Hill Pet Foods Company 75,188
--------------
5,736,809
--------------
SERVICES - 8.94%
Atlantic Aviation Corporation 552,548
Budget Group, The 1,535,100
Continental Airlines, Inc. 393,000
Corrections Corporation of America 246,910
Diversco, Inc. 1,639,786
Hunton & Williams 141,217
Integrated Health Services 411,000
Personnel Group 53,125
Piedmont Holding, Inc. 1,342,129
RailTex, Inc. 1,138,350
Tidewater Holdings, Inc. 1,723,176
US Air, Inc. 428,969
--------------
9,605,310
--------------
Total Corporate Restricted
Securities - 91.22% $ 97,984,382
==============
</TABLE>
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
$97,984,382 (91.23% of net assets) as of June 30, 1997 ($69,905,002 at June
30, 1996) whose values have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. Due to the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the differences could be material.
The values for corporate public securities are stated at the last reported
sales price or at prices based upon quotations obtained from brokers and
dealers as of June 30, 1997, subject to discount where appropriate, and are
approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
market and 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 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. Senior Secured Indebtedness:
A. 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 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.
23
<PAGE>
B. Revolving Credit Agreement
The Fund entered into a $15,000,000 senior secured, floating rate,
revolving credit agreement (the "Revolver") with Fleet National Bank (the
"Agent Bank"), pursuant to a credit agreement dated May 29, 1997, with a
maturity date of May 31, 2004.
The Revolver bears interest at a variable per annum rate equal to the one,
two, three or six-month Eurodollar rate plus a margin of .40 percent per
annum. Interest is paid to the Agent Bank as it becomes due. The Fund also
incurs expense on the undrawn portion of the total approved credit
agreement at a rate of 0.185 percent per annum.
As of June 30, 1997, there were no outstanding loans against the Revolver.
For the period from May 29, 1997 through June 30, 1997, the Fund incurred
$2,509 of expense related to the undrawn portion.
5. Purchases and Sales of Investments
<TABLE>
<CAPTION>
For the For the
six months six months
ended 6/30/97 ended 6/30/96
------------- -------------
Cost of Investments Acquired
----------------------------
<S> <C> <C>
Corporate restricted securities $ 38,307,821 $ 12,551,984
Corporate public securities 8,122,229 20,053,532
Short-term securities 135,950,336 174,875,003
<CAPTION>
Proceeds from Sales or Maturities
---------------------------------
<S> <C> <C>
Corporate restricted securities $ 26,920,707 $ 13,191,552
Corporate public securities 15,866,890 20,957,685
Short-term securities 139,893,810 173,831,290
</TABLE>
The aggregate cost of investments is the same for financial reporting and
federal income tax purposes as of June 30, 1997. The net unrealized
appreciation of investments for financial reporting and federal tax
purposes as of June 30, 1997 is $5,381,629 and consists of $10,653,617
appreciation and $5,381,628 depreciation.
The aggregate cost of investments was 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 was $6,017,790 and consisted of $10,815,078
appreciation and $4,797,288 depreciation.
6. Quarterly Results of Investment Operations
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
------ ----- ------ -----
March 31, 1997 March 31, 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
Investment income $ 2,398,479 $ 2,202,678
Net investment income 1,923,676 $ .21 1,734,964 $ .19
Net realized and unrealized gain (loss) on investments 1,504,885 .16 (1,372,604) (.15)
<CAPTION>
June 30, 1997 June 30, 1996
----------------------- -----------------------
<S> <C> <C>
Investment income 2,451,213 2,197,345
Net investment income 1,959,604 .21 1,717,737 .19
Net realized and unrealized gain (loss) on investments 6,702,154 .73 3,482,897 .38
</TABLE>
24
|
|