<PAGE>
1998 ANNUAL
REPORT
[LOGO MASSMUTUAL
APPEARS PARTICIPATION
HERE] INVESTORS
PHOTO:
IMAGE OF PEOPLE ON
THE NEWYORK STOCK
FLOOR
1998 PORTFOLIO
HIGHLIGHTS REVIEW
PERFORMANCE EXPANSION ANALYST
IN THE U.S. REVIEW
TAX
INFORMATION
<PAGE>
INVESTMENT
OBJECTIVE AND
POLICY
BACKGROUND
MassMutual Participation Investors, a closed-end investment company, had its
initial public offering in October 1988 and its shares are listed on the New
York Stock Exchange. The share price of Participation Investors can be found in
the financial section of most newspapers as "MasPrt" or "MassMuPrt" under the
New York Stock Exchange listings. The trading symbol is "MPV".
INVESTMENT OBJECTIVE
The investment objective of the Trust is to maximize total return by providing a
high level of current income, the potential for the growth of income, and
capital appreciation, by investing primarily in a portfolio of privately placed
fixed income securities, at least half of which normally include equity
features. The Trust will also invest in publicly-traded securities, again with
emphasis on convertible issues. Equity related issues provide the opportunity to
realize capital gains, which, if realized will be reinvested in income-producing
securities, permitting the Trust to increase its future dividend payments.
DIVIDEND POLICY
The Trust pays quarterly dividends and intends to distribute substantially all
of its net income to shareholders each year. All registered shareholders are
automatically enrolled in the Dividend Reinvestment and Cash Purchase Plan
unless cash distributions are requested.
Dividends are distributed in January, May, August and November.
ANNUAL MEETING
MassMutual Participation Investors' Annual Meeting of Shareholders is scheduled
to be held on April 23, 1999 at 1:00 p.m. in Springfield, Massachusetts.
We cordially invite all shareholders to attend.
- -------------------------------------------------------------------
MASSMUTUAL PARTICIPATION
INVESTORS
1295 State Street
Springfield, Massachusetts 01111-0001
(413) 744-8480
www.massmutual.com/mpv
ADVISER
Massachusetts Mutual Life Insurance
Company
AUDITOR
PricewaterhouseCoopers LLP
Springfield, Massachusetts 01101
CUSTODIAN
The Chase Manhattan Bank, N.A.
TRANSFER AGENT & REGISTRAR
Shareholder Financial Services, Inc.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
- -------------------------------------------------------------------
MPV
NYSE
LOGO
THE NEW YORK STOCK EXCHANGE
TABLE OF CONTENTS
To Our Shareholders ....................................................Intro
Tax Information ........................................................Intro
Statement of Assets and Liabilities ....................................... 1
Statement of Operations ................................................... 2
Statement of Cash Flows ................................................... 3
Statement of Changes in Net Assets ........................................ 4
Selected Per Share Data ................................................... 5
Schedule of Investments .................................................6-21
Notes to Financial Statements ..........................................22-24
Report of Independent Accountants .........................................25
<PAGE>
TO OUR
SHAREHOLDERS
It is a pleasure to present the 1998 Annual Report for MassMutual Participation
Investors. The Trust has been one of the top performing closed-end bond funds
not only for the past two years, but also for an extended period of time, as
reported by Lipper Analytic Services, Inc.
Photo of:
Gary Wendlandt and
Stuart Reese at a table
reading newspaper
(L to R) Gary E. Wendlandt, Chief Investment Officer of Massachusetts Mutual
Life Insurance Company and Stuart H. Reese, President of the Trust
MASSMUTUAL PARTICIPATION INVESTORS
Summary Financial Information
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
YEAR ENDED PER YEAR ENDED PER
DECEMBER 31, 1998 SHARE DECEMBER 31, 1997 SHARE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total net assets $ 105,199,998 $ 11.33 $ 106,155,585 $ 11.52
Net investment income $ 8,904,647 0.97 $ 8,013,308 0.87
Realized gain (net of tax) $ 6,440,897 0.69 $ 10,021,006 1.09
Change in unrealized appreciation $ (6,579,078) (0.71) $ 368,411 0.04
Shares outstanding 9,288,323 9,216,665
Key Ratios:
Ratio of total expenses
to average net assets 2.51% 2.05%
Ratio of operating expenses
to average net assets 1.16% 1.12%
Portfolio turnover 55% 71%
.........................................................................................................
</TABLE>
PORTFOLIO REVIEW
As of December 31, 1998, the Trust had approximately 76% of its portfolio in
private placement securities. In 1998, the Trust closed a total of 17 new or
add-on private placements for a total of $21.4 million. In the fourth quarter,
the Trust closed 3 private placement securities totalling $6.1 million. The
private placements that were added in the fourth quarter are ATI Acquisition
Corporation, America's Body Co., and Lund International Holdings, Inc. (A brief
description of each of these investments is provided in the Schedule of
Investments.) The fixed income components of these investments have a weighted
average coupon of 11.64% per anum.
Private placement investments are the core of Participation Investors'
portfolio. These investments normally have a fixed income component with an
equity feature (mezzanine investments). Generally, private placement investments
are made by institutions. By investing alongside MassMutual, Participation
Investors is able to offer individual shareholders access to an otherwise
unavailable asset class. This is where we believe we add the most value.
Net investment income for the three months ended December 31, 1998 rose to
$2,369,911 or $.26 per share, from $2,086,536 or $.23 per share for the prior
quarter. The primary reason for the increase is that the third quarter's numbers
reflected certain
<PAGE>
one-time charges and the fourth quarter's numbers reflect some one-time fees
received.
The table on the right shows some of the highlights of the gains realized from
the portfolio during the year.
An advantageous event that happened in January 1999 was the sale of Lloyd's
Barbecue Company. A little more than a year ago, we made an investment of
approximately $1.75 million in Lloyd's. In January, the company was sold and we
received a gain on our investment of $2.1 million.
MASSMUTUAL PARTICIPATION INVESTORS
- ------------------------------------------
Issuer Gains ($000s)
- ------------------------------------------
Sequentia, Inc. 1,862
Unipac Corporation 1,198
Hein-Werner Corp. 1,650
TACC International Corp. 726
Rent-Way,Inc. 638
..........................................
An issue that has received a lot of attention this past year is "Year 2000" or
"Y2K". Y2K is one of MassMutual's highest priorities. As of December 31, 1998,
MassMutual's critical computer technology hardware and software, including
applications supporting the Trust, was substantially "Year 2000 Compliant"
according to MassMutual Y2K certification standards. To address the issue of
interdependency between the company and external entities, MassMutual is seeking
assurances from vendors, customers, service providers, governments and others,
to determine their Year 2000 readiness. MassMutual will consider the responses
to these inquiries in the development of any contingency plans needed for Year
2000.
ANOTHER YEAR OF EXPANSION IN THE U.S.
1998 marked the eighth consecutive year of economic expansion in the United
States, once again confounding those who were looking for the economy to falter.
While economic growth continued, inflation remained virtually dormant. Producer
prices, which often lead changes in consumer prices, actually declined in 1998.
Interest rates fell for most of the year, ending December at near-record low
levels. Contributing to the easing of interest rates was the fact that the U.S.
government had a $70 billion surplus in fiscal year 1998 after several decades
of deficits. Another surplus is forecast for the current fiscal year.
OVERSEAS: SOME PROGRESS, SOME NEW CHALLENGES
In Asia, where severe financial problems first came to a head in 1997, there was
some progress. The stock markets of Thailand and South Korea rebounded
noticeably in 1998, indicating that investors are beginning to overcome their
generalized fear of Southeast Asian markets and instead are making investment
decisions on a nation-specific basis. This is a key prerequisite for meaningful
recovery in the region.
One key concern continues to be the extent to which the problems in Asia will
spread to other emerging markets, and eventually to the U.S. This concern gained
renewed force in August, when Russia announced a substantial devaluation of its
currency, the ruble, and defaulted on much of its foreign debt.
EQUITIES AND BONDS RIDE THE ROLLER COASTER
U.S. equities were uniformly strong during the first three months of the year,
as concerns about Asia receded into the background and investors focused on
strong economic growth. In April, a two-tiered market emerged, with
large-capitalization technology and other growth issues leading the S&P 500
Index and the Dow Jones Industrial Average higher through mid-July. The Russell
2000 Index, however, trended lower throughout the second quarter, indicating
that many small-capitalization stocks were not participating in the rally.
Indeed, even the S&P 500's gains are largely due to its twenty largest
components. The rally, therefore, was quite narrow.
Photo of:
Stephen Kuhn,
Mark Ackerman,
Robert Joyal,
Charles McCobb,
and Clifford Noreen
standing in front of
columns
(L to R) Stephen L. Kuhn, Vice President and Secretary, Mark B.
Ackerman, Treasurer, Robert E. Joyal, Senior Vice President,
Charles C. McCobb, Jr., Vice President and Chief Financial
Officer, and Clifford M. Noreen, Vice President
<PAGE>
TOTAL ANNUAL
RETURN
. MassMutual Participation Investores
(Based on earnings and change in net asset value)
. S&P Industrial Stock Index
. Lehman Brothers Government/Corporate Bond Index
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
MassMutual Corporate Investors S&P Industrial Stock Index Lehman Brothers Government/
(Based on earnings and change Corporate Bond Index
in net asset value)
<S> <C> <C> <C>
1 Year 10.91 33.77 9.46
3 Year 16.44 29.20 7.32
5 Year 15.66 24.70 7.30
10 Year 12.51 19.29 9.33
</TABLE>
Bonds were by no means immune to the third quarter's volatility. Up to that
point, interest rates, which began the year at low levels, had trended
irregularly lower, as the yield curve gradually flattened.
As happened with equities, the credit markets regained some confidence when the
Federal Reserve Board lowered interest rates. Spreads narrowed considerably by
year-end, although not nearly to their levels before the crisis.
LOOKING AHEAD TO 1999
The central economic event of 1999 is likely to be a mild slowdown in the U.S.
economy. Softness in corporate earnings, a symptom of reduced consumer spending,
may be evident. Federal Reserve Board policy, which was extremely accommodating
in response to the 1998 crisis in the financial markets, has returned to a
neutral stance and will likely remain so until circumstances clearly mandate a
change. Inflation may rise a little but should remain unthreatening. In this
environment, we should continue to serve shareholders well with our focus on
thorough research and identifying value in the financial markets.
Sincerely,
Stuart H. Reese
President
BOND FUND
RANKING
CLOSED-END BOND FUND RANKING*
Based on earnings and change in net asset value
For the years ending 12/31/97 -- 12/31/98
- ---------------------------------------------------------
1 year 2 year** 5 year** 10 year**
- ---------------------------------------------------------
1998 8/340*** 2*** 2*** 3***
1997 2/344*** 18 7 N/A
.........................................................
* Source:Lipper Analytical Services,Inc.
** Number of Funds decrease. Not all Funds exist in period.
*** MassMutual Corporate Investors was #1.
LETTER FROM TRUSTEES
The Trustees of MassMutual Participation Investors wish to congratulate the
management of the Trust, MassMutual, on its outstanding performance achievement.
The Trust has not only been a top performer in the Lipper rankings in recent
years, but has also performed admirably over an extended period of time.
The Trustees of MassMutual
Participation Investors
<PAGE>
ANALYST
REVIEW
Photo of:
Michael Klofas and
Michael Hermsen
standing by window
discussing business
(L to R) Michael L. Klofas, Vice President and
Michael P. Hermsen, Vice President
Michael P. Hermsen and Michael L. Klofas are officers of the Trust responsible
for the origination, analysis and execution of new investments made by
MassMutual Participation Investors and the ongoing monitoring of existing
portfolio companies.
Prior to every investment we make, we perform an extensive analysis and
evaluation of the underlying company. The companies in which we invest are
usually leaders in their industries and provide products or services which are
highly valued by their customers. Companies that become part of the MassMutual
Participation Investor's portfolio also have demonstrated stable historical cash
flows, with future cash flows being reasonably predictable. Perhaps most
importantly, companies in which we invest have strong management teams and are
usually owned by experienced investor groups, also known as sponsor groups.
A critical factor in the success of the Trust's investment activities is our
development of strong relationships with our portfolio companies and the sponsor
groups which own them. Each year, a significant number of new investment
opportunities are brought to us by sponsor groups with whom we have previously
done business, or from other sponsor groups which have been referred to us.
These groups recognize the value of relationship investing and appreciate our
responsiveness, long-term investment perspective and ability to provide
additional capital to portfolio companies if needed.
Despite the difficulties experienced by many financial markets during 1998,
investment opportunities in the private placement mezzanine market remained
plentiful. Additionally, favorable market conditions enabled us to liquidate a
number of holdings and realize significant gains upon their disposition.
TAX
INFORMATION
The following table summarizes,for income tax purposes,the cash distributions
paid by MassMutual Participation Investors for the calendar year 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1998 DIVIDEND PAYMENTS RECORD DATE NET INVESTMENT INCOME SHORT TERM GAINS TAX EFFECT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Regular 05/6/98 0.24 --
07/31/98 0.24 --
10/30/98 0.24 --
12/31/98 0.24 --
Extra 12/31/98 -- 0.18
..............................................................................................................................
Total Dividends 0.96 0.18 1.14 represents
income for tax
purposes
</TABLE>
The following table summarizes the tax effects of the the retention of long-term
capital gains for 1998.
- --------------------------------------------------------------------------------
AMOUNT PER SHARE FROM 2439
- --------------------------------------------------------------------------------
1998 Gains Retained $0.7997 Line 1a
Long-term Gains Retained (20%) 0.7997
Taxes Paid 0.2799 Line 2*
Basis Adjustment 0.5198 **
................................................................................
* If you are not subject to federal tax (e.g.,a charitable organization,IRA,or
Keogh Plan),you may be able to claim a refund by filing Form 990-T.
** For federal tax purposes,you may increase the adjusted basis of your shares
by this amount (the excess of Line 1a over Line 2).
<TABLE>
<CAPTION>
ANNUAL DIVIDEND QUALIFIED FOR DIVIDEND INTEREST EARNED ON
RECEIVED DEDUCTION U.S. GOVERNMENT OBLIGATIONS
- -------------------------------------------------------------------------------------------------
AMOUNT PER SHARE PERCENT AMOUNT PER SHARE PERCENT AMOUNT PER SHARE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1.14 3.67586% .041816 0.0000% $0.0000
.................................................................................................
</TABLE>
<PAGE>
CONSOLIDATED
STATEMENT OF MASSMUTUAL PARTICIPATION INVESTORS
ASSETS AND ....................................................................
LIABILITIES December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Notes 2A, 2B and 5)
(See Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1998 -- $89,032,073; 1997 -- $98,863,703) $ 90,091,617 $104,464,368
Corporate public securities at market value
(Cost 1998 -- $35,366,716; 1997 -- $27,615,706) 34,793,188 29,080,135
Short-term securities at cost plus earned discount which approximates market value 5,846,029 1,399,717
- ---------------------------------------------------------------------------------------------------------------------------
130,730,834 134,944,220
Cash 2,030,611 62,841
Interest and dividends receivable, net 2,431,555 2,390,354
Receivable for investments sold 265,024 84,332
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $135,458,024 $137,481,747
===========================================================================================================================
LIABILITIES:
Dividends payable $ 3,901,096 $ 3,594,499
Payable for investments purchased -- 100,000
Management fee payable (Note 3) 237,182 238,850
Note payable (Note 4A) 12,000,000 12,000,000
Revolving Credit Agreement (Note 4B) 10,500,000 10,500,000
Interest payable (Note 4) 195,944 222,821
Accounts payable 676,823 --
Accrued expenses 147,232 211,353
Accrued taxes (Note 2D) 2,599,749 4,458,639
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 30,258,026 31,326,162
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Shares of beneficial interest, par value $.01 per share;
an unlimited number authorized 92,883 92,167
Additional paid-in capital 85,739,379 84,895,820
Retained net realized gain on investments, prior years 13,703,839 5,423,509
Undistributed net investment income (Note 2D) 357,094 402,704
Undistributed net realized gain on investments (Note 2D) 4,820,787 8,276,291
Net unrealized appreciation of investments (Notes 2A, 2B and 5) 486,016 7,065,094
- ---------------------------------------------------------------------------------------------------------------------------
Total net assets 105,199,998 106,155,585
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and net assets $135,458,024 $137,481,747
===========================================================================================================================
Shares of beneficial interest issued and outstanding 9,288,323 9,216,665
===========================================================================================================================
Net asset value per share $ 11.33 $ 11.52
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
STATEMENT OF ...................................................................
OPERATIONS For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
===============================================================================================================
<S> <C> <C>
INVESTMENT INCOME (NOTE 2B):
Interest $ 11,258,613 $ 9,882,497
Dividends 388,403 292,721
- ---------------------------------------------------------------------------------------------------------------
Total income 11,647,016 10,175,218
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 987,685 964,592
Trustees' fees and expenses 84,638 66,974
Transfer Agent/Registrar's expenses 52,755 49,925
Custodian's fees 9,000 --
Interest (Note 4) 1,471,432 983,508
Reports to shareholders 12,000 13,000
Audit and legal 41,280 45,900
Other 83,579 38,011
- ---------------------------------------------------------------------------------------------------------------
Total expenses 2,742,369 2,161,910
- ---------------------------------------------------------------------------------------------------------------
Net investment income (1998 -- $.97 per share; 1997 -- $.87 per share) 8,904,647 8,013,308
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 2A AND 2B):
Realized gain on investments 9,040,646 14,479,645
Provision for federal income taxes (Note 2D) (2,599,749) (4,458,639)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 6,440,897 10,021,006
Net change in unrealized appreciation/depreciation of investments (6,579,078) 368,411
- ---------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (138,181) 10,389,417
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 8,766,466 $ 18,402,725
===============================================================================================================
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
STATEMENT OF ...................................................................
CASH FLOWS For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
==================================================================================================================
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Interest and dividends received $ 11,372,634 $ 8,956,003
Interest expense paid (1,498,309) (931,627)
Operating expenses paid (659,902) (1,091,813)
Federal income tax paid (4,458,639) (2,606,720)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,755,784 4,325,843
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Change in short-term portfolio securities, net (4,446,491) 3,626,497
Purchase of portfolio securities (70,840,271) (96,366,567)
Proceeds from disposition of portfolio securities 81,914,204 87,570,487
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 6,627,442 (5,169,583)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating and investing activities 11,383,226 (843,740)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash dividends paid from net investment income (7,814,698) (7,700,370)
Cash dividends paid from net realized gain on investments (1,600,758) (1,884,963)
Proceeds from borrowings under revolving credit agreement -- 10,500,000
Note issuance costs paid -- (12,500)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (9,415,456) 902,167
- ------------------------------------------------------------------------------------------------------------------
Net increase in cash 1,967,770 58,427
Cash -- beginning of year 62,841 4,414
- ------------------------------------------------------------------------------------------------------------------
Cash -- end of year $ 2,030,611 $ 62,841
==================================================================================================================
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS
TO NET CASH FROM OPERATING AND INVESTING ACTIVITIES:
Net increase in net assets resulting from operations $ 8,766,466 $ 18,402,725
- ------------------------------------------------------------------------------------------------------------------
(Increase) decrease in investments 4,213,386 (24,237,709)
Increase in interest and dividends receivable, net (41,201) (849,915)
(Increase) decrease in receivable for investments sold (180,692) 3,885,770
Decrease in payable for investments purchased (100,000) (35,000)
Increase (decrease) in management fee payable (1,668) 20,254
Increase (decrease) in interest payable (26,877) 51,881
Increase in accounts payable 676,823 --
Note issuance costs paid -- 12,500
Increase (decrease) in accrued expenses (64,121) 53,835
Increase (decrease) in accrued taxes (1,858,890) 1,851,919
- ------------------------------------------------------------------------------------------------------------------
Total adjustments to net assets from operations 2,616,760 (19,246,465)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating and investing activities $ 11,383,226 $ (843,740)
==================================================================================================================
</TABLE>
Supplemental disclosure of non-cash financing activities:
In 1998, the Trust issued 71,658 shares of beneficial interest as
reinvestment of dividends paid from net investment income in the amount of
$700,318 and from net realized gains in the amount of $143,957.
See Notes to Financial Statements.
3
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
STATEMENT OF ..................................................................
CHANGES IN NET For the years ended December 31, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS: 1998 1997
=======================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,904,647 $ 8,013,308
Net realized gain on investments 6,440,897 10,021,006
Net change in unrealized appreciation/depreciation of investments (6,579,078) 368,411
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,766,466 18,402,725
Net increase in shares of beneficial interest transactions 844,275 --
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1998 -- $.96 per share; 1997 -- $.83 per share) (8,950,257) (7,617,829)
Net realized gains on investments (1998 -- $.18 per share; 1997 -- $.19 per share) (1,616,071) (1,783,170)
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (955,587) 9,001,726
Net Assets, beginning of year 106,155,585 97,153,859
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, end of year (including undistributed net investment income
in 1998 -- $357,094; 1997 -- $402,704) $ 105,199,998 $ 106,155,585
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SELECTED PER........................................................................................................................
SHARE DATA Selected data for each share of beneficial interest outstanding for the years ended:
For the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 11.52 $ 10.54 $ 10.34 $ 8.84 $ 9.13 $ 8.58 $ 8.58 $ 8.29 $ 9.14 $ 9.21
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.97 0.87 0.76 0.73 0.66 0.68 0.69 0.82 0.87 0.86
Net realized and unrealized
gain (loss) on investments (0.02) 1.13 0.42 1.50 (0.30) 0.57 0.07 0.35 (0.84) (0.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.95 2.00 1.18 2.23 0.36 1.25 0.76 1.17 0.03 0.81
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income to
common shareholders (0.96) (0.83) (0.78) (0.73) (0.65) (0.69) (0.69) (0.82) (0.88) (0.84)
Distributions from net
realized gain on investments
to common shareholders (0.18) (0.19) (0.20) -- -- -- (0.07) (0.06) -- (0.04)
Distributions from return
of capital to common
shareholders -- -- -- -- -- (.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.14) (1.02) (0.98) (0.73) (0.65) (0.70) (0.76) (0.88) (0.88) (0.88)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value:
End of year $ 11.33 $ 11.52 $ 10.54 $ 10.34 $ 8.84 $ 9.13 $ 8.58 $ 8.58 $ 8.29 $ 9.14
- ------------------------------------------------------------------------------------------------------------------------------------
Per share market value:
End of year $ 12.00 $ 11.63 $ 9.25 $ 9.13 $ 7.38 $ 8.00 $ 7.38 $ 8.63 $ 6.63 $ 8.25
====================================================================================================================================
Total investment return:
Market value 15.82% 43.05% 15.40% 34.65% 0.35% 17.67% (6.33)% 44.00% (9.82)% (7.77)%
Net asset value 10.91% 24.10% 14.60% 26.11% 4.02% 15.01% 9.11% 14.34% 0.31% 9.10%
Net assets (in millions):
End of year $105.20 $106.16 $ 97.15 $ 95.29 $ 81.43 $ 84.11 $ 79.05 $ 78.76 $ 75.82 $ 83.58
Ratio of operating expenses
to average net assets 1.16% 1.12% 1.11% 1.28% 1.25% 1.26% 1.26% 1.28% 1.23% 1.27%
Ratio of interest expense
to average net assets 1.35% 0.93% 0.85% 0.43% -- -- -- -- -- --
Ratio of total expenses
to average net assets 2.51% 2.05% 1.96% 1.71% 1.25% 1.26% 1.26% 1.28% 1.23% 1.27%
Ratio of net investment
income to average
net assets 8.16% 7.59% 7.18% 7.56% 7.30% 7.66% 7.89% 9.50% 9.79% 9.18%
Portfolio turnover 54.53% 70.88% 68.48% 59.27% 51.42% 34.28% 36.04% 32.98% 16.25% 77.84%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes To Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED
SCHEDULE OF MASSMUTUAL PARTICIPATION INVESTORS
INVESTMENTS ........................................................................................................................
December 31, 1998
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
CORPORATE RESTRICTED SECURITIES--85.64%:(A) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Private Placement Investments -- 75.95%
ATI ACQUISITION CORPORATION
A manufacturer of disposable nonwoven protection products.
Senior Floating Rate Revolving Credit
Note due 2006 $ 272,727 12/16/98 $ 272,727 $ 272,727 $ 272,727
10% Senior Secured Note due 2006 $1,181,817 12/16/98 1,175,908 1,181,817 1,173,544
12% Subordinated Note due 2008 $ 909,090 12/16/98 911,635 854,555 909,090
Common Stock (B) 181,818 shs. 12/16/98 145,454 181,818 145,454
Warrant, exercisable until 2008, to purchase
common stock at $1 per share (B) 129,870 shs. 12/16/98 1,299 54,545 1,299
- ------------------------------------------------------------------------------------------------------------------------------------
2,507,023 2,545,462 2,502,114
------------------------------------
ACCTECH, LLC
A designer and marketer of specialized cleaning products.
Senior Floating Rate Revolving Credit
Note due 2002 (B) $ 406,260 10/31/96 406,260 406,260 101,565
Senior Secured Series A Floating Rate
Note due 2002 (B) $ 357,694 10/31/96 352,333 357,694 89,424
10.1% Senior Secured Series A Note due 2002 (B) $ 520,536 10/31/96 507,210 520,536 130,134
12% Senior Secured Series B Note due 2004 (B) $ 549,000 10/31/96 577,603 494,100 137,250
Membership Interests (B) 2 int. 10/31/96 131,756 73,511 233
Warrant, exercisable until 2004, to purchase
membership interests at $.0l per interest (B) l int. 10/31/96 -- 54,900 --
- ------------------------------------------------------------------------------------------------------------------------------------
1,975,162 1,907,001 458,606
------------------------------------
ADVENTURE ENTERTAINMENT CORPORATION
An owner and operator of themed family entertainment centers.
7% Redeemable Series B Preferred Stock 903 shs. 10/31/97 88,050 890,955 859,148
Warrant, exercisable until 2005, to purchase
Class A common stock at $.01 per share (B) 3,222 shs. 10/31/97 32 12,495 32
- ------------------------------------------------------------------------------------------------------------------------------------
88,082 903,450 859,180
---------------------------------
AMERICA'S BODY CO./LCP HOLDING CO
A designer and manufacturer of commercial work vehicles.
12% Senior Subordinated Note Due 2007 $1,750,000 11/2/98 1,652,175 1,495,033 1,673,525
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 29 shs. 11/2/98 -- 256,667 --
- ------------------------------------------------------------------------------------------------------------------------------------
1,652,175 1,751,700 1,673,525
------------------------------------
APPLIED PROCESS SOLUTIONS, INC
An engineer and manufacturer of process systems for the oil
and gas industry.
Limited Partnership Interests of Maloney
Industries, Inc.(B) 284 uts. 10/20/95 253,125 334,343 273,158
Limited Partnership Interests of APS
Growth LLC (B) 400,000 uts. 9/28/98 341,292 400,000 328,189
Warrant, exercisable until 2004, to purchase
limited partnership interests at $.01 per unit (B) 148 uts. 10/26/95 148 -- 158,059
- ------------------------------------------------------------------------------------------------------------------------------------
594,565 734,343 759,406
----------------------------------
ARDENT SOFTWARE, INC. -- O.T.C.
A manufacturer and distributor of database management software.
Common Stock (B) 41,885 shs. 12/14/95 125,655 343,375 770,684
- ------------------------------------------------------------------------------------------------------------------------------------
125,655 343,375 770,684
----------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF.........................................................................................................................
INVESTMENTS December 31, 1998
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
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 $1,597,122 $1,000,500
Common Stock (B) 15,675 shs. 3/19/97 61,875 82,500 41,250
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 47,044 shs. 3/19/97 47,044 86,673 470
- ------------------------------------------------------------------------------------------------------------------------------------
1,746,237 1,766,295 1,042,220
-------------------------------------
AVERSTAR, INC.
A provider of software systems, services and products to a
variety of information technology users.
Senior Floating Rate Revolving Credit
Note due 2001 $ 199,829 5/30/97 199,829 199,829 199,829
Senior Floating Rate Revolving Term
Note due 2002 $ 626,106 8/31/95 626,106 621,473 626,106
Senior Secured Floating Rate Note due 2001 $1,100,000 2/27/98 1,090,320 1,100,000 1,100,000
13% Senior Subordinated Note due 2002 $ 399,659 8/31/95 4,068 365,372 418,403
Class A Common Stock (B) 6,726 shs. 8/31/95 6,895 9,192 16,951
Class B Common Stock (B) 18,600 shs. 8/31/95 19,087 25,418 46,872
Class G Common Stock (B) 48,423 shs. 8/31/95 1,059 52,000 122,026
Class A Common Stock of IES Holdings (B) 1,471 shs. 2/27/98 -- -- --
Class B Common Stock of IES Holdings (B) 4,067 shs. 2/27/98 -- -- --
Warrants of IES Holdings (B) 10,588 shs. 2/27/98 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
1,947,364 2,373,284 2,530,187
-------------------------------------
BERKSHIRE MEDICAL CENTER, INC.
A non-profit, regional acute care hospital.
10.5% Senior Note due 1999 $ 226,364 5/15/89 226,364 226,364 230,846
- ------------------------------------------------------------------------------------------------------------------------------------
226,364 226,364 230,846
-----------------------------------
BETA BRANDS, INC. -- T.S.E.
A manufacturer of hard candy and chocolate-coated products
sold primarily to the Canadian market.
Senior Secured Tranche A Floating Rate
Note due 2004 $1,147,000 12/23/97 1,136,906 1,147,000 1,138,283
14.75% Senior Secured Tranche B Note due 2005 $ 332,255 12/23/97 345,545 332,255 345,545
Limited Partnership Interests of CM
Equity Partners (B) 405,584 int. 12/22/97 324,467 398,325 365,026
Warrant, exercisable until 2005, to purchase
common stock at $.81 per share (B) 107,267 shs. 12/23/97 1,073 -- 1,073
- ------------------------------------------------------------------------------------------------------------------------------------
1,807,991 1,877,580 1,849,927
-------------------------------------
BOYLE LEASING TECHNOLOGIES, INC.
A leasing company specializing in the leasing and rental
of microticket business equipment.
12% Senior Subordinated Note due 2001 $ 600,000 8/16/94 539,832 576,250 616,920
- ------------------------------------------------------------------------------------------------------------------------------------
539,832 576,250 616,920
-----------------------------------
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 $ 325,850 8/29/96 325,850 325,850 162,925
Senior Secured Series A Floating Rate
Term Note due 2002 $1,172,085 8/29/96 1,159,544 1,172,085 586,043
12% Series B Term Note due 2004 $ 266,000 8/29/96 261,877 255,309 133,000
Membership Interests (B) 133 int. 8/29/96 106,400 67,245 6,434
Warrant, exercisable until 2004, to purchase
membership interests at $.01 per interest (B) 8 int. 8/29/96 -- 13,300 --
- ------------------------------------------------------------------------------------------------------------------------------------
1,853,671 1,833,789 888,402
-------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF.........................................................................................................................
INVESTMENTS December 31, 1998
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
CAINS FOODS, L.P.
A producer of mayonnaise, sauce and pickle products for
both the retail and food service markets.
Senior Secured Floating Rate
Revolving Credit Note due 2000 $ 421,621 9/29/95 $ 421,621 $ 421,621 $ 418,324
10% Senior Secured Term Note due 2004 $ 648,648 9/29/95 648,648 648,648 651,502
11.5% Senior Subordinated Note due 2004 $ 472,975 9/29/95 447,855 455,099 478,462
8% Junior Subordinated Convertible Note
due 2004, convertible into partnership
points at $1,388.89 per point $ 54,054 9/29/95 54,054 54,054 67,043
Warrant, exercisable until 2006, to purchase
partnership points at $.01 per point (B) 19 pts. 9/29/95 25,130 25,130 31,428
- -----------------------------------------------------------------------------------------------------------------------------------
1,597,308 1,604,552 1,646,759
------------------------------------
CAPITOL VIAL, INC
A producer of plastic vial containers.
Common Stock (B) 33 shs. 12/30/97 131 164 131
- -----------------------------------------------------------------------------------------------------------------------------------
131 164 131
-------------------------------
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 common stock at $7.31 per share $ 375,000 3/31/94 355,012 375,000 342,037
- -----------------------------------------------------------------------------------------------------------------------------------
355,012 375,000 342,037
----------------------------------
CHAPARRAL RESOURCES, INC. -- O.T.C
An international oil and gas exploration and production company.
Common Stock (B) 2,460 shs. 12/3/97 1,599 1,599 761
- -----------------------------------------------------------------------------------------------------------------------------------
1,599 1,599 761
---------------------------------
CIRRUS LOGIC, INC. -- O.T.C.
A designer and manufacturer of integrated circuits.
10.22% Secured Leverage Lease Notes due 2002 $ 546,195 11/1/96 534,069 546,195 535,161
10.14% Secured Leverage Lease Notes due 2004 $ 626,916 11/1/96 608,421 626,915 609,990
- -----------------------------------------------------------------------------------------------------------------------------------
1,142,490 1,173,110 1,145,151
------------------------------------
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 $ 233,500 6/26/89 240,948 233,500 225,654
- ------------------------------------------------------------------------------------------------------------------------------------
240,948 233,500 225,654
-----------------------------------
CONSUMER PRODUCT ENTERPRISES, INC.
A manufacturer of colored acrylic felt for consumer use.
Senior Secured Floating Rate
Revolving Credit Notes due 2000 $ 169,180 12/8/95 169,180 169,180 168,559
10.75% Senior Secured Term Note due 2003 $ 507,031 12/8/95 512,278 507,031 505,560
12% Senior Subordinated Note due 2005 $ 400,287 12/8/95 401,929 382,240 393,723
Common Stock (B) 92,280 shs. 12/8/95 69,210 92,280 69,210
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 69,210 shs. 12/8/95 692 25,426 692
- ------------------------------------------------------------------------------------------------------------------------------------
1,153,289 1,176,157 1,137,744
-------------------------------------
CONTICO INTERNATIONAL, INC.
A developer, manufacturer and marketer of consumer,
commercial and industrial plastic products.
12% Senior Subordinated Note due 2003 $ 500,000 3/23/93 522,800 500,000 532,900
- ------------------------------------------------------------------------------------------------------------------------------------
522,800 500,000 532,900
-----------------------------------
</TABLE>
8
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
CONTROL DEVICES, INC. -- O.T.C
A producer of high quality electromechanical circuit
protector devices and photo-optic sensors.
Common Stock (B) 96,666 shs. * $ 14,562 $ 8,737 $1,469,323
- ------------------------------------------------------------------------------------------------------------------------------------
* 7/29/94 and 10/8/96 14,562 8,737 1,469,323
-------------------------------------
DEALER SOLUTIONS HOLDINGS, INC
A vertical application software company.
Convertible Preferred Stock (B) 111,111 shs. 5/12/98 250,000 250,000 200,000
Warrant to purchase common stock
at $.01 per share (B) 21,556 shs. 5/12/98 -- -- 216
- ------------------------------------------------------------------------------------------------------------------------------------
250,000 250,000 200,216
-------------------------------------
DISCOUNT AUTO PARTS
A retailer of auto parts.
9.8% Senior Secured Note due 2003 $ 750,000 11/2/89 724,575 750,000 788,775
- ------------------------------------------------------------------------------------------------------------------------------------
724,575 750,000 788,775
-------------------------------------
DIVERSCO, INC./DHI HOLDINGS, INC
A contract provider of janitorial and equipment maintenance
services and temporary production labor to industrial customers.
12% Senior Subordinated Note due 2006 $1,407,000 8/28/98 1,399,543 1,279,091 1,391,242
Membership Interests of MM/Lincap Diversco
Investments Ltd., LLC (B) 3,665 int. * 293,196 366,495 293,196
Warrant, exercisable until 2003 & 2006, to purchase
common stock of DHI Holdings, Inc.
at $.01 per share (B) 1,814 shs. * 18 201,654 18
- ------------------------------------------------------------------------------------------------------------------------------------
* 10/24/96 and 8/28/98 1,692,757 1,847,240 1,684,456
-------------------------------------
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 common stock at $4.26 per share 1,700 shs 5/9/97 1,692,860 1,700,000 1,731,620
- ------------------------------------------------------------------------------------------------------------------------------------
1,692,860 1,700,000 1,731,620
-------------------------------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control center systems.
Senior Secured Tranche A Floating Rate
Note due 2005 $ 640,000 3/2/98 635,136 640,000 635,648
8.85% Senior Secured Tranche A Note due 2005 $ 640,000 3/2/98 596,096 640,000 603,136
11.75% Senior Secured Tranche B Note due 2006 $ 350,000 3/2/98 371,875 297,329 371,665
Common Stock (B) 13,524 shs. 2/11/98 38,000 47,691 38,000
Limited Partnership Interests of CM
Equity Partners (B) 635 int. 2/11/98 50,820 63,525 50,820
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 17,391 shs. 3/2/98 174 56,000 174
- ------------------------------------------------------------------------------------------------------------------------------------
1,692,101 1,744,545 1,699,443
-------------------------------------
FAXSAV INCORPORATED -- O.T.C
An Internet communications company.
Common Stock (B) 117 shs. 11/9/98 380 380 362
- ------------------------------------------------------------------------------------------------------------------------------------
380 380 362
-------------------------------------
</TABLE>
9
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ...................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FLEMING ACQUISITION CORPORATION
A supplier of high-quality, premium printed labels for
distilled spirits, wine, food and household products.
Common Stock (B) 270 shs. 4/28/95 $ 609,908 $ 135,000 $ 12,150
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 190 shs. 4/28/95 49,116 85,226 8,543
Incentive Warrant, exercisable from 1998 until 2000,
to purchase common stock at $.01 per share (B) 10 shs. 4/28/95 1,671 1,136 432
- ------------------------------------------------------------------------------------------------------------------------------------
660,695 221,362 21,125
--------------------------------------
GOLDEN BEAR OIL SPECIALTIES
A manufacturer of asphalt and specialty lubricating and
processing oils.
17% Senior Subordinated Note due 2005 $1,618,862 7/18/97 1,634,403 1,587,219 1,657,068
12% Series A Convertible Preferred Stock 126 shs. 6/19/98 125,880 125,884 126,774
12% Preferred Stock 156 shs. 7/18/97 15,746 155,556 99,278
Common Stock (B) 10,400 shs. 7/18/97 43,369 38,920 104
Warrant, exercisable until 2005, to purchase
common stock at $.001 per share (B) 11,670 shs. 7/18/97 117 35,010 117
Warrant, exercisable until 2010, to purchase
common stock at $.001 per share (B) 8,556 shs. 7/18/97 86 -- 86
- ------------------------------------------------------------------------------------------------------------------------------------
1,819,601 1,942,589 1,883,427
--------------------------------------
GRAND LYON ENTERPRISES LLC
A manufacturer and marketer of Grand Lyon Bordeaux Ketchup.
Limited Liability Interests (B) 1,102 int. 5/15/98 110,174 110,174 99,157
- ------------------------------------------------------------------------------------------------------------------------------------
110,174 110,174 99,157
--------------------------------------
HARTZELL MANUFACTURING, INC./CMS HOLDING COMPANY
A provider of contract engineering, manufacturing, and assembly
services for a variety of industrial manufacturing companies.
12.5% Senior Subordinated Note due 2007. $1,313,100 * 1,329,514 1,175,875 1,330,564
Common Stock (B) 31,769 shs. * 299,165 398,889 299,167
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 15,010 shs. * 1,669 157,572 1,501
- ------------------------------------------------------------------------------------------------------------------------------------
* 4/18/97 and 10/8/98 1,630,348 1,732,336 1,631,232
--------------------------------------
HATCO CORPORATION
A specialty 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 1,750,000
- ------------------------------------------------------------------------------------------------------------------------------------
1,739,675 1,750,000 1,750,000
--------------------------------------
HIGHLAND HOMES HOLDINGS, INC.
A single family home builder operating in the Dallas-Fort
Worth and Atlanta areas.
12.75% Senior Note due 1999 $ 187,500 11/18/93 185,644 187,500 193,650
- ------------------------------------------------------------------------------------------------------------------------------------
185,644 187,500 193,650
--------------------------------------
HUDSON RIVER CAPITAL, LLC
An acquirer of controlling or substantial interests in
manufacturing and marketing entities.
Series A Preferred Units (B) 22,183 uts. 7/21/94 196,827 143,122 210,735
- ------------------------------------------------------------------------------------------------------------------------------------
196,827 143,122 210,735
--------------------------------------
HUNTON & WILLIAMS
A major law firm in Richmond, Virginia.
9.84% Senior Secured Note due 2000 $ 90,875 12/21/90 89,356 90,875 92,783
- ------------------------------------------------------------------------------------------------------------------------------------
89,356 90,875 92,783
--------------------------------------
</TABLE>
10
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
HUSSEY SEATING COMPANY
A manufacturer of spectator seating products
Senior Secured Floating Rate
Revolving Note due 2003 $ 225,000 6/12/96 $ 222,796 $ 225,000 $ 225,000
Senior Secured Floating Rate Note due 2003 $ 318,750 6/12/96 315,595 318,750 318,750
10% Senior Secured Note due 2003 $ 318,750 6/12/96 310,335 318,750 318,750
12% Subordinated Secured Note due 2006 $ 675,000 6/12/96 663,660 582,220 732,038
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 1,776 shs. 6/12/96 18 112,500 170,981
- ------------------------------------------------------------------------------------------------------------------------------------
1,512,404 1,557,220 1,765,519
------------------------------------------
IRON MOUNTAIN INC. -- O.T.C.
A records management company.
Common Stock (B) 1,768 shs. 6/26/98 33,804 33,795 57,383
- ------------------------------------------------------------------------------------------------------------------------------------
33,804 33,795 57,383
------------------------------------------
J. BAKER, INC. -- O.T.C.
A wholesaler and retailer of shoes.
12.96% Senior Subordinated Note due 1999 $ 300,000 6/21/89 299,220 300,000 289,140
Warrant, exercisable until 1999, to purchase
common stock at $18.80 per share (B) $ 27,355 6/21/89 2,736 73,285 274
- ------------------------------------------------------------------------------------------------------------------------------------
301,956 373,285 289,414
------------------------------------------
JACKSON PRODUCTS, INC.
A manufacturer and distributor of a variety of
industrial and highway safety products.
Common Stock (B) 217 shs. 8/16/95 21,702 21,702 89,065
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 999 shs. 8/16/95 99,838 99,866 410,060
- ------------------------------------------------------------------------------------------------------------------------------------
121,540 121,568 499,125
------------------------------------------
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 1,543,229 1,630,993
Warrant, exercisable until 2004, to purchase
common stock at $.01 per share (B) 28,717 shs. 12/2/96 28,717 166,700 287
- ------------------------------------------------------------------------------------------------------------------------------------
1,721,222 1,709,929 1,631,280
------------------------------------------
LATIN COMMUNICATIONS GROUP
An operator of Spanish-language media in North America.
5% Subordinated Note due 2005 (B) $ 23,297 2/4/98 16,308 16,938 16,737
Common Stock (B) 49,295 shs. * 319,444 413,242 462,137
- ------------------------------------------------------------------------------------------------------------------------------------
* 2/14/95, 12/1/95, 2/27/96 and 2/4/98 335,752 430,180 478,874
------------------------------------------
LIH INVESTORS, L.P.
A manufacturer and marketer of a broad line of external
accessories for new and used sport utility vehicles,
trucks and vans.
12.5% Senior Subordinated Note due 2006 $1,628,800 12/23/98 1,417,056 1,417,245 1,594,432
Common Stock (B) 25,476 shs. 12/23/98 178,332 178,333 142,666
Warrant, exercisable until 2006, to purchase
common stock at $.11 per share (B) 42,410 shs. 12/23/98 424 211,744 424
- ------------------------------------------------------------------------------------------------------------------------------------
1,595,812 1,807,322 1,737,522
------------------------------------------
LLOYD'S BARBECUE COMPANY
A manufacturer and marketer of packaged barbecue meats
and related products.
18% Senior Subordinated Note due 2006 $ 863,307 9/30/97 863,307 863,307 863,307
Membership Interests of LFPI Mainstreet (B) 9,362 uts. 9/30/97 936,250 936,199 2,434,250
- ------------------------------------------------------------------------------------------------------------------------------------
1,799,557 1,799,506 3,297,557
------------------------------------------
</TABLE>
11
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
LOUIS DREYFUS NATURAL GAS CORPORATION -- A.S.E
An independent oil and gas company engaged principally
in the acquisition, development and management of oil
and gas properties.
Warrant, exercisable until 2004, to purchase
common stock at $17.81 per share (B) 51,671 shs. 12/27/91 $ 24,857 $ 19,356 $ 5,167
- ------------------------------------------------------------------------------------------------------------------------------------
24,857 19,356 5,167
----------------------------------------
MAXTEC INTERNATIONAL CORP
A manufacturer and distributor of remote control operating
systems for overhead cranes.
Senior Floating Rate Revolving Credit
Facility due 2001 $ 164,839 6/28/95 164,839 164,839 164,839
Common Stock (B) 38,462 shs. 6/28/95 96,059 115,386 110,771
Warrant, exercisable from 1998 until 2005, to
purchase common stock at $.01 per share (B) 19,795 shs. 6/28/95 49,325 85,714 56,833
- ------------------------------------------------------------------------------------------------------------------------------------
310,223 365,939 332,443
----------------------------------------
MERIT INDUSTRIES, INC
A designer and manufacturer of coin-operated video and
dart games.
12% Senior Subordinated Note due 2006 $1,258,146 8/19/98 1,234,619 1,167,698 1,227,951
Limited Partnership Interests (B) 493,620 int. 8/12/98 444,257 474,055 426,636
Warrants, exercisable until 2006, to purchase
limited partnership interests at $.01 per share (B) 927 int. 8/19/98 9 92,706 9
- ------------------------------------------------------------------------------------------------------------------------------------
1,678,885 1,734,459 1,654,596
----------------------------------------
MICROMUSE, INC. -- O.T.C
A provider of service-level management software.
Common Stock (B) 86 shs. 11/10/98 1,634 1,634 1,509
- ------------------------------------------------------------------------------------------------------------------------------------
1,634 1,634 1,509
----------------------------------------
MW INVESTORS I LLC
A structured investment relying on Tenneco, Inc., whose
business includes natural gas, auto parts and packaging.
Floating Rate Subordinated Note due 2007 $1,685,250 12/29/97 1,685,250 1,685,250 1,687,778
5.05% Membership Interests 2,590 int. 12/29/97 28,208 62,280 64,750
- ------------------------------------------------------------------------------------------------------------------------------------
1,713,458 1,747,530 1,752,528
-----------------------------------------
N2K, INC. -- O.T.C
A music entertainment company which uses the internet as
a global platform for the promoting and merchandising
of music and related merchandise.
Warrant, exercisable until 2004, to purchase
common stock at $12 per share (B) 13,889 shs. 8/6/97 139 -- 13,281
- ------------------------------------------------------------------------------------------------------------------------------------
139 -- 13,281
-----------------------------------------
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 common stock at $9 per share $ 705,900 8/31/94 712,959 705,900 717,971
- ------------------------------------------------------------------------------------------------------------------------------------
712,959 705,900 717,971
-----------------------------------------
OLYMPIC BOAT CENTERS, INC
An operator of boat dealerships in Washington state
and British Columbia.
12% Senior Subordinated Note due 2006 $1,387,000 8/7/98 1,382,284 1,215,684 1,371,466
Limited Partnership Interests (B) 414,171 int. 8/7/98 372,754 373,685 336,307
Warrant, exercisable until 2007, to purchase
limited partnership interests at $.01
per interest (B) 12,896 int. 8/7/98 129 175,200 129
- ------------------------------------------------------------------------------------------------------------------------------------
1,755,167 1,764,569 1,707,902
-----------------------------------------
</TABLE>
12
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
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 $1,828,050
- ------------------------------------------------------------------------------------------------------------------------------------
1,768,025 1,750,000 1,828,050
--------------------------------------------
PAR ACQUISITION CORP.
A manufacturer of fuel handling systems for nuclear
power plants and hazardous waste.
14.5% Senior Subordinated Note due 2000 $ 420,833 2/5/93 420,160 420,833 420,833
8% Convertible Preferred Stock due 2001,
convertible into common stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 293,333
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 469,333
- ------------------------------------------------------------------------------------------------------------------------------------
920,160 920,833 1,183,499
--------------------------------------------
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 * 1,743,472 1,750,000 1,740,550
- ------------------------------------------------------------------------------------------------------------------------------------
* 12/20/96, 5/20/97 and 6/20/97 1,743,472 1,750,000 1,740,550
--------------------------------------------
PG&E GAS TRANSMISSION
An owner and operator of natural gas pipeline systems
principally serving Texas intrastate markets.
10.58% Senior Note due 2000 $ 142,857 12/20/90 145,239 142,857 147,557
- ------------------------------------------------------------------------------------------------------------------------------------
145,239 142,857 147,557
--------------------------------------------
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 $ 362,812 11/30/95 378,087 362,812 377,470
10.5% Senior Secured Convertible Note
due 2005, convertible into common stock
at $50,000 per share $ 97,500 11/30/95 102,668 97,500 110,380
Common Stock 3 shs. 11/30/95 113,906 169,000 100,401
- ------------------------------------------------------------------------------------------------------------------------------------
594,661 629,312 588,251
--------------------------------------------
PLASTIPAK PACKAGING, INC.
A manufacturer of plastic containers.
10.64% Senior Subordinated Note due 2006 $1,750,000 10/25/96 1,701,875 1,712,757 1,775,375
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 49 shs. 10/25/96 27,799 46,812 20,469
- ------------------------------------------------------------------------------------------------------------------------------------
1,729,674 1,759,569 1,795,844
--------------------------------------------
PLAYCORE, INC. -- 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 1,267,347 1,435,156
Limited Partnership Interests of Green
Grass Capital II, LLC (B) 40,774 uts. 3/13/97 146,786 216,956 148,825
Warrant, exercisable until 2005, to purchase
limited partnership interests of Green Grass
Capital II, LLC at $.01 per unit (B) 74,022 uts. 3/13/97 265,887 340,361 269,588
- ------------------------------------------------------------------------------------------------------------------------------------
1,705,173 1,824,664 1,853,569
--------------------------------------------
</TABLE>
13
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(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 $ 431,950 7/22/96 $ 403,583 $ 431,950 $ 413,463
Senior Secured Floating Rate Term
Note due 2003 $1,304,000 7/22/96 1,291,221 1,304,000 1,265,532
12% Senior Secured Term Note due 2004 $ 244,500 7/22/96 241,273 205,224 242,373
8% Preferred Stock 116 shs. 7/22/96 110,120 115,911 91,959
Common Stock (B) 299 shs. 7/22/96 10,849 14,489 9,953
Warrant, exercisable until 2004, to purchase
common stock at $.01 per share (B) 162 shs. 7/22/96 2 49,000 5,368
- ------------------------------------------------------------------------------------------------------------------------------------
2,057,048 2,120,574 2,028,648
--------------------------------------
PROCESS CHEMICALS, LLC
A specialty chemical company that manufactures process
chemicals for the fertilizer, asphalt and concrete industries.
6% Redeemable Preferred Membership Interests 1,000 int. 7/31/97 98,380 1,029,217 1,060,172
Common Membership Interests 4,465 int. 7/31/97 11,252 65,124 11,252
- ------------------------------------------------------------------------------------------------------------------------------------
109,632 1,094,341 1,071,424
--------------------------------------
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 8/12/94 394,720 400,000 280,000
11.51% Junior Secured Note due 1999 $ 200,000 8/12/94 195,760 200,000 120,000
9.8% Redeemable Exchangeable Preferred Stock 3,333 shs. 8/12/94 282,633 333,333 83,333
Common Stock (B) 497 shs. 8/12/94 5 -- 37
- ------------------------------------------------------------------------------------------------------------------------------------
873,118 933,333 483,370
--------------------------------------
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 2/16/93 799,575 750,000 805,575
Common Stock (B) 17,750 shs. 2/16/93 170,400 170,400 190,757
- ------------------------------------------------------------------------------------------------------------------------------------
969,975 920,400 996,332
--------------------------------------
RENT-WAY, INC. -- O.T.C.
An operator of rent-to-own stores across the United States.
Warrant, exercisable until 2002, to purchase
common stock at $9.94 per share (B) 10,000 shs. 7/18/95 100 -- 140,293
- ------------------------------------------------------------------------------------------------------------------------------------
100 -- 140,293
--------------------------------------
SHARP INTERNATIONAL CORP.
A designer and distributor of wrist watches, clocks,
pens and mechanical pencils.
11% Subordinated Debenture due 2006 $1,100,000 7/10/98 1,054,130 1,084,914 1,057,870
Warrants, exercisable until 2006, to purchase
common stock at $.01 per share (B) 17,764 shs. 7/10/98 178 15,086 178
- ------------------------------------------------------------------------------------------------------------------------------------
1,054,308 1,100,000 1,058,048
--------------------------------------
STAR INTERNATIONAL HOLDINGS, INC.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 338,059 5/27/94 338,059 338,059 341,642
10.5% Subordinated Note due 2004 $ 179,104 5/27/94 179,104 179,104 179,408
Common Stock (B) 1,077 shs. 5/27/94 64,904 64,904 37,280
Warrant, exercisable until 2004, to purchase
common stock at $.01 per share (B) 806 shs. 5/27/94 8 -- 27,892
- ------------------------------------------------------------------------------------------------------------------------------------
582,075 582,067 586,222
--------------------------------------
</TABLE>
14
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(CONTINUED) AMOUNT DATE DATE (NOTE 2B) (NOTE 2A)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
THE TRANZONIC COMPANIES
A producer of commercial and industrial supplies, such as
safety products, janitorial supplies, work apparel,
washroom and restroom supplies and sanitary care products.
12.5% Senior Subordinated Note due 2006 $ 1,356,000 2/4/98 $1,381,086 $1,183,779 $1,377,289
Common Stock (B) 315 shs. 2/4/98 283,500 315,000 283,500
Warrants to purchase shares of Class B
common stock at .01 per share (B) 222 shs. 2/4/98 2 184,416 2
- ----------------------------------------------------------------------------------------------------------------------------------
1,664,588 1,683,195 1,660,791
-----------------------------------
TIDEWATER HOLDINGS, INC.
An operator of a barge transportation line on the
Columbia/Snake River system.
Convertible Preferred Stock, convertible into
common stock at $1,000 per share (B) 560 shs. 7/25/96 504,000 560,000 374,704
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 237 shs. 7/25/96 21 24,103 158,498
- ----------------------------------------------------------------------------------------------------------------------------------
504,021 584,103 533,202
-----------------------------------
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 1,181,264 1,252,920
Common Stock (B) 203,165 shs. * 314,108 598,597 2,611,930
Warrant, exercisable until 2001, to purchase
common stock at $3.60 per share (B) 74,606 shs. 3/28/91 7,461 42,000 730,855
- ----------------------------------------------------------------------------------------------------------------------------------
* 3/28/91, 12/18/91, 9/30/92, 9/30/93, 1,595,849 1,821,861 4,595,705
9/30/94, 3/31/95 and 5/9/95 -----------------------------------
TREND TECHNOLOGIES, 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 1,218,719
Limited Partnership Interests of
Riverside V Holding Company L.P. 2,680 uts. * 327,880 295,540 221,655
Limited Partnership Interests of
Riverside V-A Holding Company L.P. 5,734 uts. * 742,789 632,342 505,874
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 1,565 uts. 3/21/97 1,565 1,565 157
- ----------------------------------------------------------------------------------------------------------------------------------
* 3/21/97, 10/16/97 and 11/19/97 2,368,623 2,184,683 1,946,405
-----------------------------------
TRIDEX CORP. -- O.T.C.
A designer and manufacturer of point-of-sale monitors and
keyboards used by retailers and restaurants.
12% Senior Subordinated Note due 2005 $ 1,500,000 4/17/98 1,478,850 1,500,000 1,402,350
Common Stock (B) 35,714 shs. 4/17/98 249,998 249,998 92,410
Warrant, exercisable until 2005, to purchase
common stock at $7 per share (B) 47,854 shs. 4/17/98 -- -- 4,785
- ----------------------------------------------------------------------------------------------------------------------------------
1,728,848 1,749,998 1,499,545
-----------------------------------
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 1,169,393 1,384,161
Limited Partnership Interests (B) 4,123 uts. 6/17/97 371,070 412,300 371,070
Warrant, exercisable until 2006, to purchase
limited partnership interests at $.01 per unit (B) 630 uts. 6/23/97 6 188,536 6
- ----------------------------------------------------------------------------------------------------------------------------------
1,738,244 1,770,229 1,755,237
-----------------------------------
</TABLE>
15
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES, UNITS,
WARRANTS OR FAIR VALUE AT FAIR VALUE
CORPORATE RESTRICTED SECURITIES: (A) PRINCIPAL ACQUISITION ACQUISITION COST AT 12/31/98
(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 $ 722,300 5/3/95 $ 798,719 $ 722,300 $ 744,764
12% Subordinated Note due 2005 $ 326,200 5/3/95 367,008 312,405 343,945
Common Stock (B) 2,457 shs. 5/3/95 81,376 195,720 3,125
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 1,398 shs. 5/3/95 46,291 17,971 1,767
- ----------------------------------------------------------------------------------------------------------------------------------
1,293,394 1,248,396 1,093,601
---------------------------------------
U.S. SILICA COMPANY
A producer of high grade industrial and specialty
ground silica sands in North America.
Redeemable Preferred Stock Series A (B) 20,999 shs. 12/19/96 145,826 194,435 145,825
Convertible Preferred Stock Series B,
convertible into Series B common stock
at $9.26 per share (B) 41,998 shs. 12/19/96 291,655 388,865 291,651
Warrant, exercisable until 2005, to purchase
Series A preferred stock and Series B preferred
stock at $.01 per unit (B) 3,241 uts. 12/19/96 6,482 65 2,071
- ----------------------------------------------------------------------------------------------------------------------------------
443,963 583,365 439,547
---------------------------------------
US AIRWAYS GROUP -- N.Y.S.E.
A domestic and international airline.
10.8% Series A Secured Loan Certificates due 2003 $ 378,528 6/29/94 321,749 346,845 394,389
- ----------------------------------------------------------------------------------------------------------------------------------
321,749 346,845 394,389
---------------------------------------
VICTORY VENTURES, LLC
An acquirer of controlling or substantial
interests in other entities.
Series A Preferred Units (B) 2,817 uts. 12/2/96 3,175 6,687 5,353
- ----------------------------------------------------------------------------------------------------------------------------------
3,175 6,687 5,353
---------------------------------------
VITEX PACKAGING, INC.
A manufacturer of specialty packaging, primarily
envelopes and tags used on tea bags.
Senior Secured Floating Rate
Revolving Credit Facility due 2003 $ 316,238 1/2/98 313,708 316,238 314,088
Senior Secured Floating Rate Term Note due 2005 $ 1,092,000 1/2/98 1,083,373 1,092,000 1,084,793
12% Senior Secured Tranche B Note due 2007 $ 336,000 1/2/98 339,394 310,800 337,310
Limited Partnership Interests of
Riverside VI Holding Company L.P. 161,891 int. 12/30/97 1,295 150,222 120,172
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 44 shs. 1/2/98 -- 25,201 --
- ----------------------------------------------------------------------------------------------------------------------------------
1,737,770 1,894,461 1,856,363
---------------------------------------
Sub-Total Private Placement Investments $73,849,506 77,955,800 79,893,324
===========----------------------------
</TABLE>
16
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
CORPORATE RESTRICTED SECURITIES: (A) SHARES OR FAIR VALUE
(CONTINUED) INTEREST DUE PRINCIPAL COST AT 12/31/98
RULE 144 SECURITIES -- 9.69%: (A) RATE DATE AMOUNT (NOTE 2B) (NOTE 2A)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
BONDS -- 7.55%
ADV Accessory & AAS CAP 9.750% 10/01/07 $ 575,000 $ 574,996 $ 572,125
Atlantic Coast Airlines Inc. 8.750 01/01/07 723,299 724,284 708,392
Bell Sports, Inc. 11.000 08/15/08 350,000 350,000 353,500
Climachem, Inc. 10.750 12/01/07 100,000 96,000 100,500
Cuddy International Corp. 10.750 12/01/07 470,000 462,978 427,700
Derby Cycle Corp. 10.000 05/15/08 425,000 425,000 365,500
Enserch Exploration, Inc. 7.540 01/02/09 956,233 956,233 904,836
Great Lakes Dredge & Dock Corp. 11.250 08/15/08 350,000 350,000 358,750
McLeodUSA Incorporated 8.375 03/15/08 275,000 284,281 276,375
McLeodUSA Incorporated 9.500 11/01/08 175,000 175,000 186,375
Mrs Fields Original Cookies, Inc. 10.125 12/01/04 700,000 679,007 675,500
Oxford Health Plans 11.000 05/15/05 85,000 85,000 81,600
Philipp Brothers Chemicals, Inc. 9.875 06/01/08 325,000 307,219 318,500
Renter's Choice, Inc. 11.000 08/15/08 350,000 350,000 355,250
TCW Leveraged Income Trust, LP 8.410 03/31/04 1,500,000 1,500,000 1,500,000
Von Hoffman Press, Inc. 10.375 05/15/07 735,000 736,150 757,050
- ------------------------------------------------------------------------------------------------------------------------------
Total Bonds $ 8,094,532 8,056,148 7,941,953
===========--------------------------------
CONVERTIBLE BONDS -- 1.10%
Antec Corp 4.500 05/15/03 $ 150,000 150,000 151,312
Arbor Software Corporation 4.500 03/15/05 100,000 100,000 72,272
Equity Corporation International 4.500 12/31/04 200,000 200,000 240,126
Key Energy Group 5.000 09/15/04 500,000 500,000 220,625
Mark IV Industries 4.750 11/01/04 450,000 427,125 359,577
Oak Industries 4.875 03/01/08 100,000 103,000 103,500
Smartalk Teleservices 5.750 09/15/04 40,000 40,000 11,350
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds $ 1,540,000 1,520,125 1,158,762
===========--------------------------------
CONVERTIBLE PREFERRED STOCK -- 1.03%
DT Industries 20,000 1,000,000 560,000
Newell Financial Trust 10,000 500,000 525,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock 1,500,000 1,085,000
--------------------------
WARRANTS -- 0.01%
Energy Conversion Devices Inc. (B) 17,500 -- 12,578
- ------------------------------------------------------------------------------------------------------------------------------
Total Warrants -- 12,578
--------------------------
Total Rule 144A Securities 11,076,273 10,198,293
- ------------------------------------------------------------------------------------------------------------------------------
Total Corporate Restricted Securities 89,032,073 90,091,617
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
INTEREST DUE PRINCIPAL COST AT 12/31/98
CORPORATE PUBLIC SECURITIES -- 33.07%: (A) RATE DATE AMOUNT (NOTE 2B) (NOTE 2A)
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
BONDS -- 23.87%
Advanced Micro Devices 11.000% 08/01/03 $ 95,000 $ 100,700 $ 100,700
AEP Industries, Inc 9.875 11/15/07 750,000 744,180 755,625
Airplanes Pass Thru Trust 8.150 03/15/19 1,470,150 1,468,850 1,581,896
AMC Entertainment 9.500 03/15/09 80,000 75,300 81,600
Amphenol Corporation 9.875 05/15/07 230,000 229,625 234,600
Amtran, Inc. 10.500 08/01/04 500,000 500,000 517,500
Anchor Advanced Products 11.750 04/01/04 560,000 581,750 607,600
Archibald Candy Corp. 10.250 07/01/04 520,000 521,000 527,800
Atlantic Express 10.750 02/01/04 575,000 589,219 580,750
Atlas Air, Inc. 10.750 08/01/05 1,000,000 1,000,000 1,040,000
Brand Scaffold Services 10.250 02/15/08 350,000 336,000 332,500
Building Materials Corp. 7.750 07/15/05 125,000 121,250 123,125
Callon Petroleum Company 10.125 09/15/02 250,000 248,560 243,750
Canadian Airlines Corporation 10.000 05/01/05 230,000 230,500 196,650
Central Tractor Farm & Country, Inc. 10.625 04/01/07 300,000 293,250 307,500
Continental Airlines, Inc. 11.500 01/02/16 276,190 295,523 321,675
DecisionOne Corporation 9.750 08/01/07 75,000 75,000 34,500
Fundy Cable LTD 11.000 11/15/05 515,000 543,625 543,325
Gray Communications System, Inc. 10.625 10/01/06 150,000 158,250 159,000
Grove Worldwide 9.250 05/01/08 265,000 231,175 241,150
HMH Properties, Inc. 7.875 08/01/08 300,000 293,625 291,000
Hollinger International Publishing, Inc. 8.625 03/15/05 50,000 52,625 52,750
Hosiery Corporation of America 13.750 08/01/02 500,000 493,900 512,500
International Wire Group, Inc. 11.750 06/01/05 450,000 489,375 473,625
JH Haefner Company 10.000 05/15/08 100,000 88,750 100,000
Jordan Industries, Inc. 10.375 08/01/07 300,000 300,000 306,000
Jordan Telecom Products 9.875 08/01/07 1,050,000 1,040,798 1,050,000
Keystone Consolidated Ind Inc 9.625 08/01/07 50,000 45,250 47,750
Kitty Hawk Inc. 9.950 11/15/04 500,000 500,000 495,000
Korea Development Bank 7.250 05/15/06 325,000 300,160 291,532
Loewen Group Inc. 7.500 04/15/01 175,000 131,250 153,125
Loewen Group Inc. 8.250 04/15/03 100,000 93,750 85,000
Loewen Group Inc. 8.250 10/15/03 75,000 71,250 64,500
MJD Communications Inc. 9.500 05/01/08 75,000 75,000 73,875
MJD Communications Inc. 9.160 05/01/08 200,000 200,000 194,000
MCMS Inc 9.750 03/01/08 500,000 500,000 422,500
Mediacom LLC 8.500 04/15/08 375,000 373,125 383,906
Morris Materials Handling 9.500 04/01/08 300,000 300,000 222,000
Mrs. Fields Original Cookies, Inc. 10.500 12/01/04 150,000 132,000 144,750
NE Restaurant Company, Inc. 10.750 07/15/08 465,000 461,625 469,650
Neenah Corporation 11.125 05/01/07 400,000 403,750 411,000
Neff Corp 10.250 06/01/08 120,000 118,812 115,800
Nortek Inc 9.125 09/01/07 70,000 67,900 72,100
Northwest Airlines Corp. 8.970 01/02/15 972,651 972,651 1,116,905
Numatics Inc 9.625 04/01/08 560,000 547,144 523,600
Pierce Leahy Corp. 8.125 05/15/08 250,000 237,688 250,000
Pillotex Corporation 10.000 11/15/06 50,000 51,500 53,500
Pillotex Corporation 9.000 12/15/07 255,000 256,931 262,650
Pohang Iron & Steel Company 7.125 11/01/06 350,000 317,961 301,066
Red Roof Inns, Inc. 9.625 12/15/03 175,000 175,438 176,750
Regal Cinemas 9.500 06/01/08 475,000 453,625 489,250
Republic of Korea 8.875 04/15/08 125,000 124,781 128,341
Rogers Cantel Inc. 8.300 10/01/07 750,000 747,990 753,750
Rogers Cantel Inc. 9.375 06/01/08 125,000 126,875 131,875
Scotsman Group, Inc. 8.625 12/15/07 140,000 139,732 137,200
Scovill Fastener, Inc. 11.250 11/30/07 350,000 350,000 301,000
Sovereign Speciality Chemicals 9.500 08/01/07 175,000 175,000 177,625
Speedway Motorsports, Inc. 8.500 08/15/07 225,000 224,388 237,375
Sun Media Corporation 9.500 05/15/07 200,000 208,500 220,000
</TABLE>
18
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
CORPORATE PUBLIC SECURITIES: (A) INTEREST DUE PRINCIPAL COST AT 12/31/98
(CONTINUED) RATE DATE AMOUNT (NOTE 2B) (NOTE 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Sun Media Corporation 9.500% 02/15/07 $ 100,000 $ 100,500 $ 111,000
Telex Communications, Inc. 10.500 05/01/07 1,250,000 1,261,250 1,100,000
Therma-Wave, Inc. 10.625 05/15/04 510,000 480,625 255,000
Unicco Service Co. 9.875 10/15/07 275,000 273,708 265,375
United Refining Company 10.750 06/15/07 1,400,000 1,400,000 938,000
WR Carpenter North America 10.625 06/15/07 550,000 556,344 556,875
Wavetek Corporation 10.125 06/15/07 110,000 110,000 104,500
Williams Scotsman, Inc. 9.875 06/01/07 685,000 683,963 698,700
Windmere Durable Holdings, Inc. 10.000 07/31/08 180,000 174,712 168,300
Worldtex, Inc. 9.625 12/15/07 500,000 500,000 445,000
Ziff-Davis Inc. 8.500 05/01/08 250,000 249,085 242,500
- --------------------------------------------------------------------------------------------------------------------------------
Total Bonds $25,933,991 25,777,093 25,109,746
=========== -----------------------------
COMMON STOCK -- 4.48%
AMR Corporation (B) 2,600 188,954 154,375
American Country Holdings Inc. (B) 54,000 188,722 87,750
Benson Petroleum, LTD. (B) 100,000 77,204 37,390
BP Prudhoe Bay Royalty Trust 13,190 187,571 61,828
Budget Group, The (B) 47,164 986,991 748,728
Career Blazers, Inc. (B) 45,000 247,500 241,875
Collins & Aikman Corporation (B) 17,400 104,238 89,175
E-Tek Dynamics, Inc. (B) 1,750 21,000 46,813
Excalibur Technologies Corp. (B) 10,000 98,656 61,250
Florida Panthers Holdings, Inc. (B) 19,500 373,004 181,594
Florist Transworld Delivery, Inc. (B) 9,374 13,754 46,870
General Chemical Group, Inc. 4,400 112,772 61,050
Hosiery Corporation of America (B) 500 -- 20,125
Infinity Broadcasting Corp. (B) 1,662 34,071 45,497
Irwin Naturals (B) 6,000 33,375 28,500
LCS Industries, Inc. 15,000 234,356 257,812
Midway Airlines Corp. (B) 14,586 271,956 175,032
Oxford Health Plans (B) 13,125 247,639 195,234
P.F. Chang's China Bistro, Inc. (B) 5,250 63,000 119,438
Pathways Group Inc. (B) 15,435 344,964 263,360
Princeton Video Image, Inc. (B) 25,500 178,500 76,500
Rent-Way, Inc. (B) 60,362 600,002 1,467,551
Swiss Army Brands, Inc. (B) 21,000 212,150 202,125
TSR Inc. (B) 3,500 22,960 36,313
Xoom.com, Inc. (B) 175 2,450 5,775
- --------------------------------------------------------------------------------------------------------------------------------
Total Common Stock 4,845,789 4,711,960
--------------------------
CONVERTIBLE BONDS -- 4.72%
Advanced Micro Devices 6.000 05/15/05 $ 95,000 74,712 97,713
Clear Channel Communications 2.625 04/01/03 350,000 350,000 375,851
Diamond Offshore Drilling 3.750 02/15/07 450,000 448,453 418,923
Dura Pharmaceuticals 3.500 07/15/02 315,000 319,219 231,525
EMCOR Group, Inc. 5.750 04/01/05 300,000 300,000 255,000
Family Golf Centers, Inc. 5.750 10/15/04 965,000 843,538 959,075
Hilton Hotels 5.000 05/15/06 695,000 695,000 636,794
Kellstorm Industries, Inc. 5.500 06/15/03 500,000 427,231 512,500
Level One Communications 4.000 09/01/04 185,000 172,056 274,914
Magna International, Inc. 4.875 02/15/05 400,000 395,500 409,500
Oak Industries 4.875 03/01/08 125,000 112,750 129,375
Reptron Electronics Inc. 6.750 08/01/04 100,000 100,000 46,312
Savoy Pictures Entertainment 7.000 07/01/03 650,000 505,375 624,000
- --------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds $ 5,130,000 4,743,834 4,971,482
=========== -----------------------------
Total Corporate Public Securities 35,366,716 34,793,188
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
CORPORATE PUBLIC SECURITIES:(A) INTEREST DUE PRINCIPAL COST AT 12/31/98
(CONTINUED) RATE/YIELD DATE AMOUNT (NOTE 2B) (NOTE 2A)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
SHORT-TERM SECURITIES:
COMMERCIAL PAPER -- 5.55%
Boston Scientific Corporation 6.758% 01/04/99 $ 1,870,000 $ 1,868,947 $ 1,868,947
Indiana Michigan Power Company 6.156 01/05/99 1,525,000 1,523,957 1,523,957
Safeway, Inc. 5.505 01/06/99 2,455,000 2,453,125 2,453,125
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities $ 5,850,000 5,846,029 5,846,029
============= -------------------------------
Total Investments 124.27% $ 130,244,818 130,730,834
============= -------------
Other Assets 4.49 4,727,190
Liabilities (28.76) (30,258,026)
- ------------------------------------------------------------------------------------------------------------------------------
Total Net Assets 100.00% $ 105,199,998
==============================================================================================================================
</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.
See Notes to Financial Statements.
FAIR VALUE
AT 12/31/98
CORPORATE RESTRICTED SECURITIES (NOTE 2A)
============================================================================
AUTOMOBILE -- 4.34%
ADV Accessory & AAS CAP $ 572,125
America's Body Co./LCP Holding Co. 1,673,525
Coast Distribution System, The 225,654
LIH Investors, L.P. 1,737,522
Mark IV Industries 359,577
- ----------------------------------------------------------------------------
4,568,403
---------
BEVERAGE, FOOD & TOBACCO -- 8.18%
Associated Vintage Group, Inc. 1,042,220
Beta Brands, Inc. 1,849,927
Cains Foods, L.P. 1,646,759
Grand Lyon Enterprises LLC 99,157
Lloyd's Barbecue Company 3,297,557
Mrs Fields Original Cookies, Inc. 675,500
- ----------------------------------------------------------------------------
8,611,120
---------
BROADCASTING & ENTERTAINMENT-- 0.46%
Latin Communications Group 478,874
- ----------------------------------------------------------------------------
478,874
---------
BUILDINGS & REAL ESTATE -- 1.85%
Highland Homes Holdings, Inc. 193,650
Truseal Technologies, Inc. 1,755,237
- ----------------------------------------------------------------------------
1,948,887
---------
CARGO TRANSPORT -- 1.45%
RailTex, Inc. $ 996,332
Tidewater Holdings, Inc. 533,202
- ----------------------------------------------------------------------------
1,529,534
---------
CHEMICAL, PLASTICS & RUBBER-- 6.82%
AccTech, LLC 458,606
Contico International, Inc. 532,900
Hatco Corporation 1,750,000
Philipp Brothers Chemicals, Inc. 318,500
Process Chemicals, LLC 1,071,424
Trend Technologies, Inc. 1,946,405
U.S. Netting, Inc. 1,093,601
- ----------------------------------------------------------------------------
7,171,436
---------
CONSUMER PRODUCTS -- 2.59%
Consumer Product Enterprises, Inc. 1,137,744
Newell Financial Trust 525,000
Sharp International Corp. 1,058,048
- ----------------------------------------------------------------------------
2,720,792
---------
CONTAINERS, PACKAGING & GLASS-- 4.32%
C&K Manufacturing and Sales Company 888,402
Capitol Vial, Inc. 131
Plastipak Packaging, Inc. 1,795,844
Vitex Packaging, Inc. 1,856,363
- ----------------------------------------------------------------------------
4,540,740
---------
20
<PAGE>
CONSOLIDATED MASSMUTUAL PARTICIPATION INVESTORS
SCHEDULE OF ....................................................................
INVESTMENTS December 31, 1998
FAIR VALUE
AT 12/31/98
CORPORATE RESTRICTED SECURITIES (CONTINUED) (NOTE 2A)
================================================================================
DIVERSIFIED/CONGLOMERATE --
MANUFACTURING -- 18.62%
ATI Acquisition Corporation $ 2,502,114
DT Industries 560,000
Eagle Pacific Industries, Inc. 1,731,620
Energy Conversion Devices Inc. 12,578
Evans Consoles, Inc. 1,699,443
Fleming Acquisition Corporation 21,125
Golden Bear Oil Specialties 1,883,427
Hartzell Manufacturing, Inc./CMS Holding Company 1,631,232
Hudson River Capital, LLC 210,735
Hussey Seating Company 1,765,519
Jackson Products, Inc. 499,125
Kappler Safety Group, Inc. 1,631,280
Maxtec International Corp. 332,443
Pacific Coast Feather Company 1,828,050
PAR Acquisition Corp. 1,183,499
The Tranzonic Companies 1,660,791
U.S. Silica Company 439,547
- --------------------------------------------------------------------------------
19,592,528
-----------
DIVERSIFIED/CONGLOMERATE --
SERVICE -- 2.64%
Diversco, Inc./DHI Holdings, Inc. 1,684,456
Great Lakes Dredge & Dock Corp. 358,750
Hunton & Williams 92,783
Iron Mountain Inc. 57,383
Pharmaceutical Buyers, Inc. 588,251
- --------------------------------------------------------------------------------
2,781,623
-----------
ELECTRONICS -- 9.92%
Arbor Software Corporation 72,272
Ardent Software, Inc. 770,684
Averstar, Inc. 2,530,187
Cirrus Logic, Inc. 1,145,151
Control Devices, Inc. 1,469,323
Dealer Solutions Holdings, Inc. 200,216
Micromuse, Inc. 1,509
Nu Horizons Electronics Corp. 717,971
Precision Dynamics, Inc. 2,028,648
Tridex Corp. 1,499,545
- --------------------------------------------------------------------------------
10,435,506
-----------
FARMING & AGRICULTURE -- 0.87%
Cuddy International Corp. 427,700
Protein Genetics, Inc. 483,370
- --------------------------------------------------------------------------------
911,070
-----------
FINANCE -- 3.91%
Boyle Leasing Technologies, Inc. 616,920
MW Investors I LLC 1,752,528
Paribas Capital Funding LLC 1,740,550
- --------------------------------------------------------------------------------
4,109,998
-----------
HEALTHCARE, EDUCATION & CHILDCARE -- 0.30%
Berkshire Medical Center, Inc. 230,846
Oxford Health Plans 81,600
- --------------------------------------------------------------------------------
312,446
-----------
HOME & OFFICE FURNISHINGS, HOUSEWARES,
AND DURABLE CONSUMER PRODUCTS -- 0.88%
Catalina Lighting, Inc. $ 342,037
Star International Holdings, Inc. 586,222
- --------------------------------------------------------------------------------
928,259
-----------
LEISURE, AMUSEMENT, ENTERTAINMENT -- 6.47%
Adventure Entertainment Corporation 859,180
Bell Sports, Inc. 353,500
Derby Cycle Corp. 365,500
Merit Industries, Inc. 1,654,596
N2K, Inc. 13,281
Olympic Boat Centers, Inc. 1,707,902
Playcore, Inc 1,853,569
- --------------------------------------------------------------------------------
6,807,528
-----------
MISCELLANEOUS -- 2.61%
Climachem, Inc. 100,500
Enserch Exploration, Inc. 904,836
Equity Corporation International 240,126
TCW Leveraged Income Trust, LP 1,500,000
Victory Ventures, LLC 5,353
- --------------------------------------------------------------------------------
2,750,815
-----------
OIL AND GAS -- 5.45%
Applied Process Solutions, Inc. 759,406
Chaparral Resources, Inc. 761
Key Energy Group 220,625
Louis Dreyfus Natural Gas Corporation 5,167
PG&E Gas Transmission 147,557
TransMontaigne Oil Company 4,595,705
- --------------------------------------------------------------------------------
5,729,221
-----------
PERSONAL TRANSPORTATION -- 1.05%
Atlantic Coast Airlines Inc. 708,392
US Airways Group 394,389
- --------------------------------------------------------------------------------
1,102,781
-----------
PRINTING & PUBLISHING -- 0.72%
Von Hoffman Press, Inc. 757,050
- --------------------------------------------------------------------------------
757,050
-----------
RETAIL STORES -- 1.50%
Discount Auto Parts 788,775
J. Baker, Inc. 289,414
Rent-Way, Inc. 140,293
Renter's Choice, Inc. 355,250
- --------------------------------------------------------------------------------
1,573,732
-----------
TELECOMMUNICATIONS -- 0.69%
Antec Corp 151,312
FaxSav Incorporated 362
McLeodUSA Incorporated 462,750
Oak Industries 103,500
Smartalk Teleservices 11,350
- --------------------------------------------------------------------------------
729,274
-----------
Total Corporate Restricted
Securities -- 85.64% $90,091,617
- --------------------------------------------------------------------------------
-----------
21
<PAGE>
NOTES TO MASSMUTUAL PARTICIPATION INVESTORS
FINANCIAL ......................................................................
STATEMENTS
================================================================================
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.
On January 27, 1998, the Board of Trustees authorized the formation
of a totally held subsidiary ("MMPI Subsidiary Trust") for the purpose of
holding certain investments. The results of MMPI Subsidiary Trust have been
consolidated in the accompanying financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Valuation of Investments:
Valuation of a security in the Trust's portfolio is made on the basis of
market price whenever market quotations are readily available and all
securities of the same class held by the Trust can be readily sold in such
market.
Nearly all securities which are acquired by the Trust directly from the
issuers and shares into which such securities may be converted or which may
be purchased on the exercise of warrants attached to such securities will be
subject to legal or contractual delays in or restrictions on resale and will
therefore be "restricted securities". Generally speaking, as contrasted with
open-market sales of unrestricted securities which may be effected
immediately if the market is adequate, restricted securities can be sold only
in a directly negotiated transaction to a limited number of purchasers or in
a public offering for which a registration statement is in effect under the
Securities Act of 1933.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Board of Trustees of the Trust (the "Trustees"). Each
restricted security is valued by the Trustees as of the time of the
acquisition 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 at the time of
acquisition by 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; in the case of 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
any other factors affecting fair value, all in accordance with the
Investment Company Act of 1940. In making valuations, opinions of counsel
may be relied upon as to whether or not securities are restricted
securities and as to the legal requirements for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at
a discount from the market price of such unrestricted securities. The
Trustees, however, consider all factors in fixing any discount, including
the filing of a registration statement for such securities under the
Securities Act of 1933 and any other developments which are likely to
increase the probability that the securities may be publicly sold by the
Trust without restriction.
The Board of Trustees of the Trust meets at least once in each quarter to
value the Trust's portfolio securities as of the close of business on the
last business day of the preceding quarter. This valuation requires the
approval of a majority of the Trustees of the Trust, including a majority of
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. 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 $90,091,617
(85.64% of net assets) as of December 31, 1998 ($104,464,368 at December 31,
1997) whose values have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. Due to the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the differences could be material.
The values for corporate public securities are stated at the last reported
sales price or at prices based upon quotations obtained from brokers and
dealers as of December 31, 1998, subject to discount where appropriate, and
are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
fair value 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 MASSMUTUAL PARTICIPATION INVESTORS
FINANCIAL ......................................................................
STATEMENTS
- --------------------------------------------------------------------------------
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 and when
management believes payment is questionable.
C. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
D. Federal Income Taxes
No provision for federal taxes on net investment income and short-term
capital gains is considered necessary because the Trust has elected to be
taxed as a "regulated investment company" under the Internal Revenue Code,
and intends to maintain this qualification and to distribute substantially
all of its net taxable income to its shareholders. In any year when net long-
term capital gains are realized by the Trust, management, after evaluating
the prevailing economic conditions, will recommend to the Trustees either to
designate the net realized long-term gains as undistributed and to pay the
federal capital gains taxes thereon or to distribute all or a portion of 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 to 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 is 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. For each of the periods ended December 31, 1998 and 1997, the
Trust incurred total interest expense on the Note of $831,600.
B. Revolving Credit Agreement
The Trust 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
three-month Eurodollar rate plus a margin of .40 percent per annum or the
most recent Federal Funds rate plus a margin of .50 percent per annum.
Interest is paid to the Agent Bank as it becomes due. The Trust also incurs
expense on the undrawn portion of the total approved credit agreement at a
rate of .185 percent per annum.
As of December 31, 1998, there were $10,500,000 in outstanding loans
against the Revolver and the average blended rate of interest charged on
the Revolver was 5.64%. For the period ended December 31, 1998, the Trust
incurred total interest expense on the Revolver of $639,832, including
$8,279 related to the undrawn portion.
23
<PAGE>
NOTES TO MASSMUTUAL PARTICIPATION INVESTORS
FINANCIAL ......................................................................
STATEMENTS
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENTS
For the For the
year ended year ended
12/31/98 12/31/97
---------------------------------------------------------------------------
Cost of Investments Acquired
---------------------------------------------------------------------------
Corporate restricted securities $ 48,470,229 $ 74,935,861
Corporate public securities 21,616,275 21,657,390
Short-term securities 307,503,044 203,448,960
Proceeds from Sales or Maturities
---------------------------------------------------------------------------
Corporate restricted securities $ 52,202,415 $ 53,756,027
Corporate public securities 29,005,355 29,937,498
Short-term securities 303,056,029 207,075,457
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31,1998. The net unrealized
depreciation of investments for financial reporting and federal tax purposes as
of December 31,1998 is $486,016 and consists of $12,564,570 appreciation and
$12,078,554 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31,1997. The net unrealized
appreciation of investments for financial reporting and federal tax purposes as
of December 31,1997 was $7,065,094 and consisted of $13,402,901 appreciation and
$6,337,807 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Per Per
Amount Share Amount Share
- --------------------------------------------------------------------------------------------------------
March 31, 1998 March 31, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income $2,934,166 $2,398,479
Net investment income 2,261,923 $.24 1,923,676 $.21
Net realized and unrealized gain on investments 2,420,485 .26 1,504,885 .16
June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------------------
Investment income 2,869,889 2,461,213
Net investment income 2,186,277 .24 1,959,604 .21
Net realized and unrealized gain on investments 1,793,007 .19 6,702,154 .73
September 30, 1998 September 30, 1997
- --------------------------------------------------------------------------------------------------------
Investment income 2,800,222 2,657,346
Net investment income 2,086,536 .23 2,097,193 .23
Net realized and unrealized gain (loss)
on investments (3,526,841) (.38) 7,006,521 .76
December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------
Investment income 3,042,739 2,658,180
Net investment income 2,369,911 .26 2,032,835 .22
Net realized and unrealized loss on investments (824,832) (.09) (4,824,143) (.52)
</TABLE>
24
<PAGE>
REPORT OF MASSMUTUAL PARTICIPATION INVESTORS
INDEPENDENT ....................................................................
ACCOUNTANTS To the Shareholders and the Board of Trustees of MassMutual
Participation Investors
================================================================================
In our opinion, the accompanying consolidated statement of assets and
liabilities, including the schedule of investments at December 31, 1998, and
the related consolidated statements of operations, cash flows and of changes
in net assets and the selected Per Share Data present fairly, in all material
respects, the financial position of MassMutual Participation Investors
(hereafter referred to as the "Trust") at December 31, 1998 and 1997, the
results of its operations, its cash flows and the changes in its net assets
for the years then ended and the selected Per Share Data for each of the ten
years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and selected Per Share Data
(hereafter referred to as "financial statements") are the responsibility of
the Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers Signature
Springfield, Massachusetts
February 25, 1999
25
<PAGE>
MASS MUTUAL PARTICIPATION INVESTORS
.....................................................................
January 29, 1999
- --------------------------------------------------------------------------------
Photo of:
Milton Cooper, Donald Glickman, Gary Wendlandt,
Corine Norgaard, Martin Hart, Jack Laughery,
Richard Dooley, Donald Benson, Marshall Butler
standing and sitting at conference table
- --------------------------------------------------------------------------------
MILTON COOPER *
Chairman,
Kimco Realty Corp.
DONALD GLICKMAN *
Chairman,
Donald Glickman &
Company, Inc.
GARY E. WENDLANDT
Executive Vice President and
Chief Investment Officer,
Massachusetts Mutual Life
Insurance Company
CORINE T. NORGAARD *
Dean, Barney School
of Business and Public
Administration,
University of Hartford
MARTIN T. HART **
President and Director,
H Corporation
JACK A. LAUGHERY *
Chairman,
Laughery Investments
RICHARD G. DOOLEY *
Retired Executive Vice
President and Chief
Investment Officer,
Massachusetts Mutual Life
Insurance Company
DONALD E. BENSON **
Executive Vice President
and Director,
Marquette Bancshares Inc.
MARSHALL D. BUTLER *
Chairman,
Nitzanim AVX Kyocera
Venture Capital Fund
*Member of the Board of Trustees
**Trustee and Member of Audit Committee
26
<PAGE>
DIVIDEND
REINVESTMENT AND
CASH PURCHASE
PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan. The Plan provides a simple and automatic way for shareholders to
add to their holdings in the Trust through the receipt of dividend shares issued
by the Trust or through the reinvestment of cash dividends in Trust shares
purchased in the open market. The dividends of each shareholder will be
automatically reinvested in the Trust by Shareholder Financial Services Inc.,
the Transfer Agent, in accordance with the Plan, unless such shareholder elects
not to participate by providing written notice to the Transfer Agent. A
shareholder may terminate his or her participation by notifying the Transfer
Agent in writing.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $100 nor more than $5,000 per quarter.
Whenever the Trust declares a dividend payable in cash or shares, the Transfer
Agent, acting on behalf of each participating shareholder, will take the
dividend in shares only if the net asset value is lower than the market price
plus an estimated brokerage commission as of the close of business on the
valuation day. The valuation day is the last day preceding the day of dividend
payment. When the dividend is to be taken in shares, the number of shares to be
received is determined by dividing the cash dividend by the net asset value as
of the close of business on the valuation date or, if greater than net asset
value, 95% of the closing share price. If the net asset value of the shares is
higher than the market value plus an estimated commission, the Transfer Agent,
consistent with obtaining the best price and execution, will buy shares on the
open market at current prices promptly after the dividend payment date.
The reinvestment of dividends does not, in any way, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in
newly-issued shares of the Trust will be the fair market value of the shares
received, which will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder).
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver CO 80217-3673.
OFFICERS
..............................
Richard G. Dooley
Chairman
Stuart H. Reese
President
Robert E. Joyal
Senior Vice President
Charles C. McCobb, Jr.
Vice President and
Chief Financial Officer
Stephen L. Kuhn
Vice President and
Secretary
Michael P. Hermsen
Vice President
William N. Holm
Vice President
Mary Wilson Kibbe
Vice President
Michael L. Klofas
Vice President
John B. Joyce
Vice President
Richard C. Morrison
Vice President
Clifford M. Noreen
Vice President
Mark B. Ackerman
Treasurer
Victoria Fortier
Comptroller
..............................
<PAGE>
[LOGO OF MASSMUTUAL PARTICIPATION INVESTORS APPEARS HERE]
