<PAGE>
[LOGO]
MASSMUTUAL
Participation Investors
1999 ANNUAL REPORT
UNMATCHED
Integrity
STRONG
Performance
SOLID
FOUNDATION
<PAGE>
INVESTMENT OBJECTIVE AND POLICY
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".
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.
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.
MassMutual Participation Investors' Annual Meeting of Shareholders is scheduled
to be held on April 28, 2000 at 1:00 p.m. in Springfield, Massachusetts. We
cordially invite all shareholders to attend.
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TABLE OF CONTENTS
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To Our Shareholders............................................................1
Tax Information................................................................4
Statement of Assets and Liabilities............................................6
Statement of Operations........................................................7
Statement of Cash Flows........................................................8
Statement of Changes in Net Assets.............................................9
Selected Per Share Data.......................................................10
Schedule of Investments ...................................................11-27
Notes to Financial Statements..............................................28-30
Independent Auditors' Report..................................................31
MASSMUTUAL PARTICIPATION INVESTORS
1295 State Street
Springfield, Massachusetts 01111-0001
(413) 744-8480 . www.massmutual.com/mpv
ADVISER
David L. Babson and Company, Incorporated
AUDITOR
Deloitte & Touche LLP
New York, New York 10281
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
[LOGO OF MPV NYSE]
<PAGE>
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TO OUR
Shareholders
[PHOTO]
Photo of
Robert E. Joyal, CFA
President
Highlights of the Trust's results this year included new private placement
investments and short-term capital gains resulting in a special $0.41 per share
dividend in addition to significant long-term gains retained by the Trust.
It is a pleasure to present to you MassMutual's Participation Investors' Annual
Report covering the year ended December 31, 1999. Highlights of the Trust's
results this year included new private placement investments and short-term
capital gains resulting in a special $0.41 per share dividend in addition to
significant long-term gains retained by the Trust.
REVIEW OF 1999
The current economic expansion, which began in the summer of 1991, will become
the longest in the nation's history in the first quarter of 2000. The real rate
of GDP growth in 1999 will exceed 4 percent but is unlikely to match the 4.6
percent rate of 1998. Still coming so late in the expansion it is genuinely
impressive, and all the more so since price gains have remained moderate despite
a sharp rise in oil prices.
1999 was a difficult year for bond funds in general. The year was characterized
by an increasing interest rate environment. The yield on 10-year Treasuries
increased from 4.65% on December 31, 1998 to 6.44% on December 31, 1999. The
Lehman Brothers Government/ Corporate Bond Index and the Merrill Lynch High
Yield Bond Index returned -2.15% and 1.57% for the year, respectively. The S&P
Industrial Stock Index returned 25.89% for the year, fueled largely by the
technology sector.
<TABLE>
<CAPTION>
MASSMUTUAL PARTICIPATION INVESTORS
Summary Financial Information
- ---------------------------------------------------------------------------------------------
YEAR ENDED PER YEAR ENDED PER
DECEMBER 31,1999 SHARE DECEMBER 31,1998 SHARE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total net assets $ 97,014,656 $10.40 $105,199,998 $ 11.33
Net investment income $ 9,022,037 0.97 $ 8,904,647 0.97
Realized gain $ 5,931,984 0.64 $ 9,040,646 0.97
Change in unrealized
appreciation/depreciation $ (10,123,944) (1.08) $ (6,579,078) (0.71)
Shares outstanding 9,332,786 9,288,323
Key Ratios:
Ratio of total expenses
to average net assets 2.63% 2.51%
Ratio of operating expenses
to average net assets 1.25% 1.16%
Portfolio turnover 66% 55%
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</TABLE>
1
<PAGE>
[PHOTO]
Photo of
Stuart H. Reese, CFA
Chairman
UNMATCHED
Integrity
The Trust's total return, which is calculated based on earnings and change in
net asset value, was 4.77% for the year. Net assets decreased to $97,014,656 or
$10.40 per share on December 31, 1999 from $105,199,998 or $11.33 the previous
year.
1999 was another very active year for the Trust in terms of private placement
activity. During the year the Trust closed on fourteen new private placement
investments and completed additional fundings of eight existing private
companies. During the fourth quarter the Trust added Directed Electronics, Inc.,
Fasteners for Retail, Inc., Nexell Therapeutics, Piping Supply Holdings, Inc.
and Snyder Industries, Inc. (A brief description of each of these investments is
provided in the Schedule of Investments). The fixed income portions of these
investments have a weighted average coupon of approximately 12.4%.
As of December 31, 1999, private placement investments accounted for
approximately 69% of the Trust's investments and increased to approximately 82%
(based on market value) by the end of January. Private placements are the
principal investment vehicle of the Trust and typically contain a fixed income
component along with a call on the issuer's equity.
For the three months ended December 31, 1999, net investment income was
$2,072,961 or $0.23 per share, down from $2,352,534 or $.25 per share for the
prior quarter. For the year net investment income increased slightly to
$9,022,037 or $0.97 per share compared to $8,904,647 or $0.97 per share a year
ago.
This was not only an outstanding year for the Trust in terms of new investment
activity but also for the realization of gains from investments made in prior
years. For the year ended December 31, 1999 the Trust realized over $5.9 million
of gains or $0.64 per share. Some of the more notable gains included Control
Devices, Inc., Lloyd's Barbecue Company and Ardent Software.
Control Devices, Inc. is a producer of electromechanical circuit protection
devices and photo-optic sensors. Our original investment of approximately $1
million dates back to 1994 and consisted of a revolving credit facility, senior
and subordinated notes along common stock and warrants. The notes were prepaid
in 1996. In March of this year the common shares were sold to a strategic buyer
for $16.25 per share. Our cost basis in this security was approximately $0.09
per share, giving the Trust a gain of $1.6 million.
Lloyd's Barbecue Company is a manufacturer and marketer of packaged barbecue
meats and related products. We originally purchased $1.75 million of
subordinated notes and partnership interests in September of 1997. In early
[PHOTO]
Photo of
Charles C. McCobb, CFA
Vice President and
Chief Financial Officer
2
<PAGE>
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TOTAL
Annual Return
[GRAPH]
MassMutual Lehman Brothers
Participation S&P Industrial Government/Corporate
Investors Stock Index Bond Index
1995 26.11 34.64 19.24
1996 14.60 23.03 2.90
1997 24.10 31.04 9.75
1998 10.91 33.77 9.46
1999 4.77 25.89 -2.15
1999, Lloyd's was sold to multinational food company for a gain of over $2
million on our original investment.
We invested $1.5 million in Ardent Software in 1995 under the name Unidata, Inc.
Unidata was a manufacturer and distributor of database management software. In
1998 Unidata was merged into Vmark Software and was renamed Ardent Software,
Inc. At that time our notes were prepaid and we exercised our warrants. During
the course of 1999, we sold our holdings of Ardent common stock for a gain of
$0.8 million.
[PHOTO]
Photo of
Stephen L. Kuhn
Vice President and Secretary
PREVIEW OF 2000
Several factors could combine to alter the economic picture in 2000. First,
while it should be another good year, the economy may not be as strong as it was
in 1999. Second, Fed policy will continue to dominate the behavior of financial
markets and the Fed is likely to insist on slowing the economy's growth pace,
despite the fact it is an election year. Third, interest rates are expected to
rise, and stocks could find the going more difficult.
The early signs of a slower economic growth pace have already begun to emerge.
The housing sector is showing lower housing starts and sales of new and existing
houses and non-farm payroll growth did not match that of 1998. However, the
slowing should be relatively orderly and growth for the year should not be far
below the 3.6 percent average growth rate recorded in the 1992-1999 period.
[PHOTO]
Photo of
Clifford M. Noreen
Vice President
SOLID
FOUNDATION
3
<PAGE>
[PHOTO]
Photo of
Mark B. Ackerman, CFA
Treasurer
ORGANIZATIONAL CHANGE
On January 1, 2000 the investment management organization of Massachusetts
Mutual Life Insurance Company (MassMutual) was consolidated into David L. Babson
and Company, a federally registered investment adviser located in Cambridge, MA.
Following reorganization, Babson has approximately $66 billion in assets under
management.
MassMutual owns and controls more than 95% of Babson's voting stock and the
investment professionals of MassMutual are now employees of Babson. The
Investment Advisory and Administrative Services Contract of MassMutual
Participation Investors has been assigned to Babson. The fund continues to be
managed by the same individuals who will remain in Springfield. As a result,
there will be no change in the level of service currently provided.
Sincerely,
Robert Joyal
President
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TAX
Information
The following table summarizes, for income tax purposes, the cash distributions
paid by MassMutual Participation Investors for the calendar year 1999.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1999 DIVIDEND PAYMENTS RECORD DATE NET INVESTMENT INCOME SHORT-TERM GAINS TAX EFFECT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Regular 05/05/99 0.2400 --
07/30/99 0.2400 --
10/29/99 0.2400 --
12/31/99 0.2400 --
Extra 12/31/99 0.0018 0.4082
- --------------------------------------------------------------------------------------------------------
Total Dividends 0.9618 0.4082 1.37 represents
income for tax
purposes
</TABLE>
The following table summarizes the tax effects of the retention of long-term
capital gains for 1999.
<TABLE>
<CAPTION>
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AMOUNT PER SHARE FROM 2439
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
1999 Gains Retained $0.2274 Line 1a
Long-term Gains Retained (20%) 0.2274
Taxes Paid 0.0796 Line 2*
Basis Adjustment 0.1478 **
- --------------------------------------------------------------------------------------------------------
</TABLE>
* 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>
$1.37 2.66995% $0.036578 0.0000% $0.0000
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</TABLE>
4
<PAGE>
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ANALYST
Review
[PHOTO]
Photo of
Richard C. Morrison
Vice President
Richard C. Morrison is a Vice President and senior analyst of the Trust. Dick
has had the pleasure of being actively involved in the formation of the fund in
1988, as well as having made many of the investments for the Trust over the
ensuing years. Dick takes particular pride and enjoyment over the fact that the
original idea of the Trust to invest in private placement with equity features
was attractive then and continues to be the core of the Trust's portfolio.
From an analytical viewpoint, prior to any investment, we perform an extensive
analysis and evaluation of the company and its industry, from both an historical
and a future perspective. We look for companies and industries that generate
meaningful and stable cash flow and we focus on a company's debt load in
relation to the cash it generates. We invest in companies that provide products
or services which are highly valued and which have the potential for serious
growth in the years ahead. We place particular emphasis on the management teams
of the companies in which we invest, since good people with proven track records
within their industry, who have a total commitment to their business, are the
ones who generally excel and provide healthy returns on our investments.
Our decades-long presence in the private placement market has allowed us to
build a very large network of contacts and relationships with the investment
banking community and particularly with private investment firms which organize
and invest in the acquisition of select, well-established middle market
companies. These groups value relationship investing and appreciate our
responsiveness and long-term investment perspective and they provide us with an
ongoing flow of attractive investments for the Trust.
STRONG
Performance
5
<PAGE>
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CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
MASSMUTUAL PARTICIPATION INVESTORS
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December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
========================================================================================
<S> <C> <C>
ASSETS:
Investments (Notes 2A, 2B and 5)
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost 1999-- $107,273,175; 1998-- $89,032,073) $ 94,529,844 $ 90,091,617
Corporate public securities at market value
(Cost 1999-- $20,484,878; 1998-- $35,366,716) 23,590,626 34,793,188
Short-term securities at market value
(Cost 1999-- $6,416,149; 1998-- $5,846,029) 6,415,804 5,846,029
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124,536,274 130,730,834
Cash 186,625 2,030,611
Interest and dividends receivable, net 2,230,094 2,431,555
Receivable for investments sold 79,268 265,024
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Total assets $ 127,032,261 $135,458,024
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LIABILITIES:
Dividend payable $ 6,066,311 $ 3,901,096
Management fee payable (Note 3) 218,775 237,182
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) 230,144 195,944
Accounts payable 184,170 676,823
Accrued expenses 75,259 147,232
Accrued taxes (Note 2D) 742,946 2,599,749
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Total liabilities 30,017,605 30,258,026
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NET ASSETS:
Shares of beneficial interest, par value
$.01 per share; an unlimited number authorized 93,328 92,883
Additional paid-in capital 86,248,491 85,739,379
Retained net realized gain on investments, prior years 18,524,626 13,703,839
Undistributed net investment income (Note 2D) 406,381 357,094
Undistributed net realized gain on investments (Note 2D) 1,379,758 4,820,787
Net unrealized appreciation (depreciation) of
investments (Notes 2A, 2B and 5) (9,637,928) 486,016
- ----------------------------------------------------------------------------------------
Total net assets 97,014,656 105,199,998
- ----------------------------------------------------------------------------------------
Total liabilities and net assets $ 127,032,261 $135,458,024
========================================================================================
Shares of beneficial interest issued and outstanding 9,332,786 9,288,323
========================================================================================
Net asset value per share $ 10.40 $ 11.33
========================================================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
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CONSOLIDATED STATEMENT OF OPERATIONS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
=========================================================================================================
<S> <C> <C>
INVESTMENT INCOME (NOTE 2B):
Interest $ 11,413,336 $ 11,258,613
Dividends 341,378 388,403
- ---------------------------------------------------------------------------------------------------------
Total income 11,754,714 11,647,016
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 930,699 987,685
Trustees' fees and expenses 94,244 84,638
Transfer Agent/Registrar's expenses 57,656 52,755
Interest (Note 4) 1,442,141 1,471,432
Reports to shareholders 12,000 12,000
Audit and legal 49,092 41,280
Other 146,845 92,579
- -----------------------------------------------------------------------------------------------------------
Total expenses 2,732,677 2,742,369
- -----------------------------------------------------------------------------------------------------------
Net investment income (1999 -- $.97 per share; 1998 -- $.97 per share) 9,022,037 8,904,647
- ---------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 2A AND 2B):
Realized gain on investments 5,931,984 9,040,646
Provision for federal income taxes (Note 2D) (742,946) (2,599,749)
- ---------------------------------------------------------------------------------------------------------
Net realized gain on investments 5,189,038 6,440,897
Net change in unrealized appreciation/depreciation of investments (10,123,944) (6,579,078)
- ---------------------------------------------------------------------------------------------------------
Net loss on investments (4,934,906) (138,181)
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Net increase in net assets resulting from operations $ 4,087,131 $ 8,766,466
=========================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
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CONSOLIDATED STATEMENT OF CASH FLOWS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
============================================================================================================
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Interest and dividends received $ 11,419,616 $ 11,372,634
Interest expense paid (1,407,937) (1,498,309)
Operating expenses paid (1,873,567) (659,902)
Federal income tax paid (2,599,749) (4,458,639)
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Net cash provided by operating activities 5,538,363 4,755,784
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Change in short-term portfolio securities, net (408,468) (4,446,491)
Purchase of portfolio securities (81,014,670) (70,840,271)
Proceeds from disposition of portfolio securities 84,148,047 81,914,204
- ------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 2,724,909 6,627,442
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating and investing activities 8,263,272 11,383,226
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash dividends paid from net investment income (8,624,930) (7,814,698)
Cash dividends paid from net realized gain on investments (1,482,328) (1,600,758)
- ------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (10,107,258) (9,415,456)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (1,843,986) 1,967,770
Cash -- beginning of year 2,030,611 62,841
- ------------------------------------------------------------------------------------------------------------
Cash -- end of year $ 186,625 $ 2,030,611
============================================================================================================
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS
TO NET CASH FROM OPERATING AND INVESTING ACTIVITIES:
Net increase in net assets resulting from operations $ 4,087,131 $ 8,766,466
- ------------------------------------------------------------------------------------------------------------
Decrease in investments 6,194,560 4,213,386
(Increase) decrease in interest and dividends receivable, net 201,461 (41,201)
(Increase) decrease in receivable for investments sold 185,756 (180,692)
Decrease in payable for investments purchased -- (100,000)
Decrease in management fee payable (18,407) (1,668)
Increase (decrease) in interest payable 34,200 (26,877)
Increase (decrease) in accounts payable (492,653) 676,823
Decrease in accrued expenses (71,973) (64,121)
Decrease in accrued taxes (1,856,803) (1,858,890)
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Total adjustments to net assets from operations 4,176,141 2,616,760
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating and investing activities $ 8,263,272 11,383,226
============================================================================================================
</TABLE>
Supplemental disclosure of non-cash financing activities:
In 1999, the Trust issued 44,463 shares of beneficial interest as
reinvestment of dividends paid from net investment income in the amount of
$375,814 and from net realized gains in the amount of $133,743.
See Notes to Financial Statements.
8
<PAGE>
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CONSOLIDATED STATEMENT OF CASH FLOWS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS:
=======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 9,022,037 $ 8,904,647
Net realized gain on investments 5,189,038 6,440,897
Net change in unrealized appreciation/
depreciation of investments (10,123,944) (6,579,078)
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 4,087,131 8,766,466
Net increase in shares of beneficial interest
transactions 509,557 844,275
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1999 -- $.96 per share;
1998 -- $.96 per share) (8,972,750) (8,950,257)
Net realized gains on investments (1999 --
$.41 per share; 1998 -- $.18 per share) (3,809,280) (1,616,071)
- ---------------------------------------------------------------------------------------
Total decrease (8,185,342) (955,587)
Net Assets, beginning of year 105,199,998 106,155,585
- ---------------------------------------------------------------------------------------
Net Assets, end of year (including
undistributed net investment income
in 1999 -- $406,381; 1998 -- $357,094) $ 97,014,656 $ 105,199,998
=======================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
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CONSOLIDATED SELECTED PER SHARE DATA
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding:
<TABLE>
<CAPTION>
For the years ended December 31,
==========================================================================================================================
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $11.33 $ 11.52 $ 10.54 $10.34 $ 8.84 $ 9.13 $ 8.58 $ 8.58 $ 8.29 $ 9.14
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 0.97 0.97 0.87 0.76 0.73 0.66 0.68 0.69 0.82 0.87
Net realized and unrealized
gain (loss) on investments (0.53) (0.02) 1.13 0.42 1.50 (0.30) 0.57 0.07 0.35 (0.84)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.44 0.95 2.00 1.18 2.23 0.36 1.25 0.76 1.17 0.03
- --------------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income to
common shareholders (0.96) (0.96) (0.83) (0.78) (0.73) (0.65) (0.69) (0.69) (0.82) (0.88)
Distributions from net
realized gain on investments
to common shareholders (0.41) (0.18) (0.19) (0.20) -- -- -- (0.07) (0.06) --
Distributions from return
of capital to comon
shareholders -- -- -- -- -- -- (0.01) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.37) (1.14) (1.02) (0.98) (0.73) (0.65) (0.70) (0.76) (0.88) (0.88)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value:
End of year $10.40 $ 11.33 $ 11.52 $10.54 $10.34 $ 8.84 $ 9.13 $ 8.58 $ 8.58 $ 8.29
- --------------------------------------------------------------------------------------------------------------------------
Per share market value:
End of year $10.25 $ 12.00 $ 11.63 $ 9.25 $ 9.13 $ 7.38 $ 8.00 $ 7.38 $ 8.63 $ 6.63
==========================================================================================================================
Total investment return
Market value (2.30)% 15.82% 43.05% 15.40% 34.65% 0.35% 17.67% (6.33)% 44.00% (9.82)%
Net asset value 4.77% 10.91% 24.10% 14.60% 26.11% 4.02% 15.01% 9.11% 14.34% 0.31%
Net assets (in millions):
End of period $97.01 $105.20 $106.16 $97.15 $95.29 $81.43 $84.11 $79.05 $ 78.76 $75.82
Ratio of operating expenses
to average net assets 1.25% 1.16% 1.12% 1.11% 1.28% 1.25% 1.26% 1.26% 1.28% 1.23%
Ratio of interest expense
to average net assets 1.38% 1.35% 0.93% 0.85% 0.43% -- -- -- -- --
Ratio of total expenses
to average net assets 2.63% 2.51% 2.05% 1.96% 1.71% 1.25% 1.26% 1.26% 1.28% 1.23%
Ratio of net investment
income to average
net assets 8.70% 8.16% 7.59% 7.18% 7.56% 7.30% 7.66% 7.89% 9.50% 9.79%
Portfolio turnover 66.17% 54.53% 70.88% 68.48% 59.27% 51.42% 34.28% 36.04% 32.98% 16.25%
==========================================================================================================================
</TABLE>
See Notes To Financial Statements.
10
<PAGE>
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CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Warrants or Acquisition Acquisition Cost at 12/31/99
Corporate Restricted Securities--97.44%: (A) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Private Placement Investments -- 88.63%
ATI ACQUISITION CORPORATION
A manufacturer of disposable nonwoven
protection products.
Senior Floating Rate Revolving Credit
Note due 2003 $ 409,091 12/16/98 $ 409,091 $ 409,091 $ 409,091
10% Senior Secured Note due 2006 $ 1,181,817 12/16/98 1,181,817 1,181,817 1,138,326
12% Subordinated Note due 2008 $ 909,090 12/16/98 911,365 854,545 858,363
Common Stock (B) 181,818 shs. 12/16/98 181,818 181,818 145,454
Warrant, exercisable until 2008, to purchase
common stock at $1 per share (B) 129,870 shs. 12/16/98 54,545 54,545 1,299
- --------------------------------------------------------------------------------------------------------------------------------
2,738,636 2,681,816 2,552,533
---------------------------------------------
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 20,312
Senior Secured Series A Floating Rate
Note due 2002 (B) $ 346,722 10/31/96 341,525 346,722 17,336
10.1% Senior Secured Series A Note
due 2002 (B) $ 520,536 10/31/96 507,210 520,536 26,027
12% Senior Secured Series B Note
due 2004 (B) $ 549,000 10/31/96 577,603 494,100 27,450
Membership Interests (B) 2.67% int. 10/31/96 131,756 62,288 --
Warrant, exercisable until 2004, to purchase
membership interests at $.01 per interest (B) 1 int. 10/31/96 -- 54,900 --
- --------------------------------------------------------------------------------------------------------------------------------
1,964,354 1,884,806 91,125
---------------------------------------------
ADVENTURE ENTERTAINMENT CORPORATION
An owner and operator of themed family
entertainment centers.
19% Senior Subordinated Note due 2004 $ 98,746 12/9/99 98,439 98,746 98,075
7% Redeemable Series B Preferred Stock 968 shs. 10/31/97 915,364 955,876 872,599
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
- --------------------------------------------------------------------------------------------------------------------------------
1,013,835 1,067,117 970,706
---------------------------------------------
ALPHA SHIRT COMPANY
A domestic distributor of imprintable apparel
and other related items.
12% Senior Subordinated Note due 2007 $ 1,684,300 4/30/99 1,674,194 1,443,386 1,631,413
Common Stock (B) 561 shs. 4/30/99 505,035 561,150 505,035
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 305 shs. 4/30/99 3 252,645 3
- --------------------------------------------------------------------------------------------------------------------------------
2,179,232 2,257,181 2,136,451
---------------------------------------------
AMERICA 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 1,493,333 1,511,915 1,728,300
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 29 shs. 11/2/98 256,667 256,667 --
- --------------------------------------------------------------------------------------------------------------------------------
1,750,000 1,768,582 1,728,300
---------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
APPLIED SOLUTIONS, INC.
An engineer and manufacturer of process
systems for the oil and gas industry.
Common Stock (B) 148 shs. 10/26/95 $ 148 $ -- $ 24,009
Limited Partnership Interests of
Maloney Holding L.P. (B) 4.00% int. 10/20/95 253,125 334,155 265,938
Limited Partnership Interests of
APS Growth L.P. (B) 2.00% int. 9/28/98 341,292 400,000 320,000
- --------------------------------------------------------------------------------------------------------------------------------
594,565 734,155 609,947
---------------------------------------------
ASSOCIATES 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 1,608,309 83,375
Common Stock (B) 15,675 shs. 3/19/97 61,875 82,500 --
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 47,044 shs. 3/19/97 47,044 86,673 --
- --------------------------------------------------------------------------------------------------------------------------------
1,746,237 1,777,482 83,375
---------------------------------------------
AVESTAR, INC.
A provider of software systems, services and
products to a variety of information
technology users.
13% Senior Subordinated Note due 2005 $ 399,659 8/31/95 406,800 366,204 405,974
Class A Common Stock (B) 6,726 shs. 8/31/95 6,895 9,192 16,950
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 I E S Holdings (B) 1,471 shs. 2/27/98 -- -- 14
Class B Common Stock of I E S Holdings (B) 4,067 shs. 2/27/98 -- -- 41
Warrant, exercisable until 2002, to purchase
common stock of I E S Holdings at
$.01 per share (B) 10,588 shs. 2/27/98 -- -- 106
- --------------------------------------------------------------------------------------------------------------------------------
433,841 452,814 591,983
---------------------------------------------
BETA BRANDS, INC. -- T.S.E
A manufacturer of hard candy and chocolate-
coated products sold primarily to the
Canadian market.
Senior Secured Revolving Credit Note due 2005 $ 440,000 12/23/97 440,000 440,000 220,000
Senior Secured Tranche A Floating Rate
Note due 2004 $ 1,710,000 * 1,076,472 1,710,000 855,000
17.75% Senior Secured Tranche B Note
due 2005 $ 342,543 12/23/97 356,244 342,543 171,271
Limited Partnership Interests of
CM Equity Partners (B) 3.13% int. 12/22/97 3,245 391,941 97,989
Warrant, exercisable until 2005, to purchase
common stock at $.81 per share (B) 107,267 shs. 12/23/97 1,073 -- 1,073
- --------------------------------------------------------------------------------------------------------------------------------
1,877,034 2,884,484 1,345,333
---------------------------------------------
BETTER MINERALS & AGGREGATES
A producer of high grade industrial and
specialty silica sands.
14% Redeemable Preferred Stock 330 shs. 9/30/99 264,678 265,847 267,015
Redeemable Preferred Stock Series A (B) 20,999 shs. 12/19/96 145,826 194,435 184,714
Convertible Preferred Stock Series B,
convertible into Series B common stock
at $9.26 per share (B) 41,998 shs. 12/19/96 291,655 388,865 369,427
Common Stock (B) 10,013 shs. 9/30/99 359,555 399,505 359,555
Warrants, exercisable until 2005 and 2010, to
purchase Series A and B preferred stock and
common stock at $.01 per unit (B) 5,700 shs. ** 6,482 64,247 3,642
- --------------------------------------------------------------------------------------------------------------------------------
1,068,196 1,312,899 1,184,353
---------------------------------------------
</TABLE>
*12/23/97 and 1/13/99
**12/19/96 and 9/30/99
12
<PAGE>
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
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 $ 326,122 8/29/96 $ 326,122 $ 326,122 $ 97,837
Senior Secured Series A Floating Rate
Term Note due 2002 $ 1,092,158 8/29/96 1,080,472 1,092,158 327,647
12% Series B Term Note due 2004 $ 266,000 8/29/96 261,877 256,694 79,800
Membership Interests (B) 2.81% int. 8/29/96 106,400 62,750 6,281
Warrant, exercisable until 2004, to purchase
membership interests at $.01 per interest (B) 18 int. 8/29/96 1 13,300 --
- --------------------------------------------------------------------------------------------------------------------------------
1,774,872 1,751,024 511,565
---------------------------------------------
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 2005 $ 605,405 9/29/95 605,405 605,405 598,927
10% Senior Secured Term Note due 2004 $ 540,540 9/29/95 540,540 540,540 531,351
11.5% Senior Subordinated Note due 2004 $ 472,975 9/29/95 447,855 458,052 463,374
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 83,232
Warrant, exercisable until 2006, to purchase
partnership points at $.01 per point (B) 19 pts. 9/29/95 25,130 25,130 39,017
- --------------------------------------------------------------------------------------------------------------------------------
1,672,984 1,683,181 1,715,901
---------------------------------------------
CAPITOL SPECIALTY PLASTICS, INC.
A producer of dessicant stripes used for
packaging pharmaceutical products.
Common Stock (B) 55 shs. * 219 252 201
- --------------------------------------------------------------------------------------------------------------------------------
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 3/31/94 355,012 375,000 364,838
- --------------------------------------------------------------------------------------------------------------------------------
CD NOW, 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 $14.46 per share (B) 13,889 shs. 8/6/97 139 -- 139
- --------------------------------------------------------------------------------------------------------------------------------
CHAPARRAL RESOURCES, INC. -- O.T.C.
An international oil and gas exploration and
production company.
Common Stock (B) 41 shs. 12/3/97 27 1,599 291
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 12/30/97 and 5/29/99
13
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
CONSUMER PRODUCT ENTERPRISES, INC.
A manufacturer of colored acrylic felt
for consumer use.
Senior Secured Floating Rate Revolving
Credit Notes due 2000 $ 330,670 12/8/95 $ 330,670 $ 330,670 $ 325,082
10.75% Senior Secured Term Note due 2003 $ 406,959 12/8/95 411,171 406,959 387,791
12% Senior Subordinated Note due 2005 $ 400,287 12/8/95 401,929 383,984 354,735
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
- ------------------------------------------------------------------------------------------------------------------------------
1,213,672 1,239,319 1,137,510
-----------------------------------------
CONTICO INTERNATIONAL, INC.
A developer, manufacturer and marketer of
consumer, commercial and industrial
plastic products.
12% Senior Subordinated Note due 2003 $ 400,000 3/23/93 418,240 400,000 415,120
- ------------------------------------------------------------------------------------------------------------------------------
CORVEST GROUP, INC.
A manufacturer and distributor of
promotional products.
12% Senior Subordinated Note due 2007 $ 2,045,455 * 1,978,773 1,895,759 1,933,978
Common Stock (B) 30 shs. * 46,024 51,136 46,024
Limited Partnership Interests 10.13% int. * 115,057 153,409 115,057
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 97 shs. * 1 157,343 1
- ------------------------------------------------------------------------------------------------------------------------------
2,139,855 2,257,647 2,095,060
-----------------------------------------
DIRECTED ELECTRONICS, INC.
A designer and distributor of brand name
automotive security systems, audio
products and installation accessories.
12% Senior Subordinated Note due 2007 $ 1,776,307 12/22/99 1,754,992 1,557,463 1,758,544
8% Convertible Class B Subordinated
Promissory Note due 2008 $ 39,474 12/22/99 37,433 39,474 37,524
Class B common stock (B) 13,816 shs. 12/22/99 124,342 138,157 124,342
Limited Partnership Interests (B) 4.56% int. 12/22/99 2,487 276,315 248,683
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 23,958 shs. 12/22/99 240 219,078 240
- ------------------------------------------------------------------------------------------------------------------------------
1,919,494 2,230,487 2,169,333
-----------------------------------------
DISCOUNT AUTO PARTS
A retailer of auto parts.
9.8% Senior Secured Note due 2003 $ 600,000 11/2/89 579,660 600,000 614,220
- ------------------------------------------------------------------------------------------------------------------------------
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 1,355,363
Membership Interests of MM/Lincap
Diversco Invstments Ltd., LLC (B) 3,665 int. 8/27/98 293,196 366,495 293,196
Warrants, exercisable until 2003 &
2006, to purchase common stock of
DHI Holdings, Inc. at $.01 per share (B) 1,814 shs. ** 18 201,655 8,360
- ------------------------------------------------------------------------------------------------------------------------------
1,692,757 1,847,241 1,656,919
-----------------------------------------
</TABLE>
* 3/5/99 and 3/24/99
** 10/24/96 and 8/28/98
14
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
EAGLE PACIFIC INDUSTRIES, INC. -- O.T.C.
An extruder of small and medium diameter plastic pipe and tubing in the United States.
14% Senior Subordinated Note due 2007 $ 1,708,500 9/16/99 $ 1,708,500 $1,708,500 $ 1,724,560
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 101,505 shs. 9/16/99 -- 1 387,343
- ------------------------------------------------------------------------------------------------------------------------------
1,708,500 1,708,501 2,111,903
-----------------------------------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control center systems.
Senior Secured Tranche A Floating Rate Note
due 2005 $ 640,000 3/2/98 635,136 640,000 636,544
8.85% Senior Secured Tranche A Note due 2005 $ 640,000 3/2/98 596,096 640,000 593,920
11.75% Senior Secured Tranche B Note due 2006$ 350,000 3/2/98 371,875 301,972 355,775
Common Stock (B) 13,524 shs. 2/11/98 38,000 47,691 38,153
Limited Partnership Interests of CM
Equity Partners (B) 63,525 int. 2/11/98 508 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
- ------------------------------------------------------------------------------------------------------------------------------
1,641,789 1,749,188 1,675,386
-----------------------------------------
EXAMINATION MANAGEMENT SERVICES, INC.
A national full-service evidence provider to the insurance industry and a provider of occupational health testing.
12% Senior Subordinated Note due 2007 $ 1,116,867 3/16/99 1,073,421 1,030,049 1,053,764
Limited Partnership Interests (B) 1,133,133 int. 3/1/99 1,019,820 1,133,133 1,019,820
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 40,888 shs. 3/16/99 40,888 93,072 40,888
- ------------------------------------------------------------------------------------------------------------------------------
2,134,129 2,256,254 2,114,472
-----------------------------------------
FASTENERS FOR RETAIL, INC.
A designer and marketer of low-cost fastners for point of purchase displays and signage in retail environments.
12.5% Senior Subordinated Note due 2007 $ 1,932,000 12/22/99 1,942,626 1,687,204 1,946,490
Class B Common Stock (B) 318 shs. 12/22/99 254,400 318,000 254,400
Warrant, exercisable until 2007, to purchase
common stock at $.02 per share (B) 312 shs. 12/22/99 3 245,034 3
- ------------------------------------------------------------------------------------------------------------------------------
2,197,029 2,250,238 2,200,893
-----------------------------------------
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 12,887
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 190 shs. 4/28/95 49,116 85,226 9,061
Incentive Warrant, exercisable until 2000, to
purchase common stock at $.01 per share (B) 10 shs. 4/28/95 1,671 1,136 458
- ------------------------------------------------------------------------------------------------------------------------------
660,695 221,362 22,406
-----------------------------------------
GOLDEN BEAR OIL SPECIALTIES
A manufacturer of asphalt and specialty lubricating and processing oils.
17% Senior Subordinated Note due 2005 $ 1,684,264 7/18/97 1,700,433 1,655,872 1,751,635
12% Preferred Stock 196 shs. 7/18/97 19,843 155,556 108,835
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
- ------------------------------------------------------------------------------------------------------------------------------
1,763,848 1,885,358 1,860,777
-----------------------------------------
</TABLE>
15
<PAGE>
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
GRAND LYON ENTERPRISES LLC
A manufacturer and marketer of Grand
Lyon Bordeaux Ketchup.
Limited Liability Interests (B) 2.50% int. 5/15/98 $ 110,174 $ 110,174 $ --
- ------------------------------------------------------------------------------------------------------------------------------
HAMILTON FUNERAL SERVICES
The largest privately held owner and
operator of funeral homes in the United
States.
15% Senior Subordinated Note due 2007 $ 1,727,706 1/25/99 1,660,153 1,699,576 1,604,348
Warrant, exercisable until 2007, to purchase
common stock at $1 per share (B) 196,421 shs. 1/25/99 1,964 28,131 1,964
- ------------------------------------------------------------------------------------------------------------------------------
1,662,117 1,727,707 1,606,312
-----------------------------------------
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 1,186,192 1,277,384
Common Stock (B) 31,769 shs. * 269,075 398,889 299,167
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 15,010 shs. * 1,501 157,572 1,501
- ------------------------------------------------------------------------------------------------------------------------------
1,600,090 1,742,653 1,578,052
-----------------------------------------
HUDSON RIVER CAPITAL, LLC
An acquirer of controlling or substantial
interests in manufacturing and
marketing entities.
Series A Preferred Units (B) 25,000 uts. 7/21/94 221,826 133,474 237,500
- ------------------------------------------------------------------------------------------------------------------------------
HUNTON & WILLIAMS
A major law firm in Richmond, Virginia.
9.84% Senior Secured Note due 2000 $ 44,125 12/21/90 43,387 44,125 44,328
- ------------------------------------------------------------------------------------------------------------------------------
HUSSEY SEATING COMPANY
A manufacturer of spectator seating products.
Senior Secured Floating Rate Revolving
Note due 2003 $ 675,000 6/12/96 668,385 675,000 662,425
Senior Secured Floating Rate Note 2003 $ 825,000 6/12/96 822,401 825,000 808,710
10% Senior Secured Note due 2003 $ 243,750 6/12/96 237,315 243,750 238,729
12% Subordinated Secured Note due 2006 $ 675,000 6/12/96 663,660 592,251 653,670
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 1,776 shs. 6/12/96 18 112,500 155,828
- ------------------------------------------------------------------------------------------------------------------------------
2,391,779 2,448,501 2,519,362
-----------------------------------------
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 1,569,415 1,604,654
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 1,736,115 1,604,941
-----------------------------------------
</TABLE>
* 4/18/97 and 10/7/98
16
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
LATIN COMMUNICATIONS GROUP
An operator of Spanish-language media in North America.
5% Subordinated Note due 2005 $ 23,297 2/4/98 $ 16,308 $ 17,703 $ 16,308
Common Stock (B) 49,295 shs. * 350,569 413,242 462,137
- --------------------------------------------------------------------------------------------------------------------------------
366,877 430,945 478,445
---------------------------------------------
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 $ 2,036,000 ** 1,771,320 1,736,337 1,794,530
Common Stock (B) 30,571 shs. ** 213,997 213,998 171,198
Warrant, exercisable until 2006, to purchase
common stock at $.11 per share (B) 57,402 shs. ** 286,597 318,838 574
- --------------------------------------------------------------------------------------------------------------------------------
2,271,914 2,269,173 1,966,302
---------------------------------------------
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 98,841
- --------------------------------------------------------------------------------------------------------------------------------
MAGNETIC DATA TECHNOLOGIES, INC./MDT HOLDINGS
A provider of post-sales services to electronic component manufacturers.
12% Senior Subordinated Note due 2007 $ 1,600,000 4/9/99 1,561,760 1,259,117 1,280,000
Limited Partnership Interest of MDT
Holdings LLC (B) 2.30% int. 4/9/99 585,900 651,000 325,500
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 394,534 shs. 4/9/99 3,945 357,486 3,945
- --------------------------------------------------------------------------------------------------------------------------------
2,151,605 2,267,603 1,609,445
---------------------------------------------
MAXTEC INTERNATIONAL CORP.
A manufacturer and distributor of remote control operating systems for overhead cranes.
Senior Floating Rate Revolving Credit
Facility due 2001 $ 230,773 6/28/95 230,773 230,773 230,773
Common Stock (B) 38,462 shs. 6/28/95 96,059 115,386 164,425
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 84,447
- --------------------------------------------------------------------------------------------------------------------------------
376,157 431,873 479,645
---------------------------------------------
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 1,175,853 943,610
Limited Partnership Interest of
Riverside X Holdings Company L.P. (B) 3.76% int. *** 498,806 554,229 277,114
Warrant, exercisable until 2006, to purchase
limited partnership interests at $.01 per share (B) 927 int. 8/19/98 9 92,706 9
- --------------------------------------------------------------------------------------------------------------------------------
1,733,434 1,822,788 1,220,733
---------------------------------------------
MICROFINANCIAL, INC.
A leasing company specializing in the leasing and rental of microticket business equipment.
12% Senior Subordinated Note due 2001 $ 400,000 8/16/94 359,888 388,772 406,280
</TABLE>
*2/14/95, 12/1/95, 2/27/96 and 2/4/98
**12/23/96 and 1/28/99
***8/12/98 and 8/11/99
17
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
NEXELL THERAPEUTICS
A provider of cell therapy technology to the medical community.
Series B Convertible Preferred Stock 2,250 shs. 11/24/99 $ 219,807 $ 2,250,000 $ 2,187,000
Warrant, exercisable until 2008, to purchase
common stock at $3 per share (B) 107,144 11/24/99 1,071 -- 1,071
- ------------------------------------------------------------------------------------------------------------------------------
220,878 2,250,000 2,188,071
----------------------------------------
NPC, INC.
A manufacturer of flexible connectors and equipment used in the installation of sewers and storm drain pipelines.
Senior Secured Floating Rate Revolving Note
due 2006 $ 61,017 6/25/99 61,017 61,017 61,017
Senior Secured Floating Rate Note due 2006 $ 1,901,695 6/25/99 1,885,721 1,901,695 1,887,242
12% Senior Secured Tranche B Note due 2007 $ 559,322 6/25/99 534,600 480,815 541,256
Limited Partnership Interest of Riverside XIII
Holding Company L.P. 2.54% int. 6/11/99 194,110 194,110 155,288
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 115 shs. 6/25/99 81,358 81,356 1
- ------------------------------------------------------------------------------------------------------------------------------
2,756,806 2,718,993 2,644,804
------------------------------------------
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 $ 635,186 8/31/94 641,538 635,186 932,770
- ------------------------------------------------------------------------------------------------------------------------------
OLYMPIC BOAT CENTERS, INC.
An operator of boat dealerships in Washington state, Wisconsin, Minnesota and British Columbia.
12% Senior Subordinated Note due 2006 $ 1,387,000 8/7/98 1,382,284 1,232,187 1,322,088
Limited Partnership Interest of Riverside VIII
Holding Company L.P. (B) 4.94% int. * 480,026 533,363 480,026
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 12,896 int. 8/7/98 129 175,200 15,553
- ------------------------------------------------------------------------------------------------------------------------------
1,862,439 1,940,750 1,817,667
------------------------------------------
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 1,795,850
- ------------------------------------------------------------------------------------------------------------------------------
PAR ACQUISITION CORP.
A manufacturer of fuel handling systems for nuclear power plants and hazardous waste.
14.5% Senior Subordinated Note due 2000 $ 4,166 2/5/93 4,160 4,166 4,166
8% Convertible Preferred Stock due 2001,
convertible into common stock at $2 per share 83,333 shs. 2/5/93 166,667 166,667 183,333
Common Stock (B) 133,333 shs. 2/5/93 333,333 333,333 293,333
- ------------------------------------------------------------------------------------------------------------------------------
504,160 504,166 480,882
------------------------------------------
</TABLE>
*8/7/98 and 2/23/99
18
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
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 $ 293,705 11/30/95 $ 306,070 $ 293,705 $ 297,935
10.5% Senior Secured Convertible Note
due 2005, convertible into common stock
at $50,000 per share $ 97,500 11/30/95 102,668 97,500 105,300
Common Stock 3 shs. 11/30/95 113,906 169,000 106,392
- ------------------------------------------------------------------------------------------------------------------------------
522,644 560,205 509,627
----------------------------------------
PIPING SUPPLY HOLDINGS, INC.
A distributor of industrial pipes, valves and fittings.
12.5% Senior Subordinated Note due 2007 $ 1,834,000 12/14/99 1,848,672 1,590,258 1,844,087
Class B common stock (B) 352 shs. 12/14/99 316,440 351,600 316,440
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 299 shs. 12/14/99 3 244,533 3
- ------------------------------------------------------------------------------------------------------------------------------
2,165,115 2,186,391 2,160,530
------------------------------------------
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 1,299,567 1,536,250
Limited Partnership Interest of Green
Grass Capital II, LLC (B) 2.98% int. 3/13/97 146,786 216,966 265,031
Warrant, exercisable until 2005, to purchase
limited partnership interest of Green Grass
Capital II LLC at $.01 per unit (B) 74,022 uts. 3/13/97 265,887 340,361 480,551
- ------------------------------------------------------------------------------------------------------------------------------
1,705,173 1,856,894 2,281,832
------------------------------------------
PRECISION DYNAMICS, INC.
A manufacturer of custom-designed solenoid valves and controls.
Senior Secured Floating Rate Revolving Credit
Facility due 2003 $ 407,500 7/22/96 403,465 407,500 379,342
Senior Secured Floating Rate Term Note
due 2003 $ 1,255,100 7/22/96 1,242,800 1,255,100 1,184,562
12% Senior Secured Term Note due 2004 $ 244,500 7/22/96 241,273 210,427 226,652
8% Preferred Stock 142 shs. 7/22/96 134,658 115,937 86,408
Common Stock (B) 299 shs. 7/22/96 10,849 14,489 7,106
Warrant, exercisable until 2004, to purchase
common stock at $.01 per share (B) 162 shs. 7/22/96 2 49,000 3,832
- ------------------------------------------------------------------------------------------------------------------------------
2,033,047 2,052,453 1,887,902
------------------------------------------
PROCESS CHEMICALS, LLC
A speciality chemical company that manufactures process chemicals for the fertilizer, asphalt and concrete industries.
6% Redeemable Preferred Membership Interests 1,262 int. * 124,205 1,307,687 1,250,410
Common Membership Interests 4,932 int. * 12,429 30,059 118,569
- ------------------------------------------------------------------------------------------------------------------------------
136,634 1,337,746 1,368,979
----------------------------------------
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 $ 216,667 8/12/94 213,807 216,667 130,000
9.8% Redeemable Exchangable Preferred Stock 2,667 shs. 8/12/94 226,157 266,667 53,334
Common Stock (B) 497 shs. 8/12/94 5 -- 37
- ------------------------------------------------------------------------------------------------------------------------------
439,969 483,334 183,371
----------------------------------------
</TABLE>
*7/31/97 and 1/4/99
19
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
RAILTEX, INC. -- O.T.C.
An operator of short-line railroads in the Midwest, West and Canada.
12% Senior Subordinated Note due 2002 $ 750,000 2/16/93 $ 799,575 $ 750,000 $ 770,175
Common Stock (B) 17,750 shs. 2/16/93 170,400 170,400 301,416
- ------------------------------------------------------------------------------------------------------------------------------
969,975 920,400 1,071,591
----------------------------------------
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 -- 87,137
- ------------------------------------------------------------------------------------------------------------------------------
SAFETY SPEED CUT MANUFACTURING
A manufacturer of vertical panel saws and routers for the wood working industry.
12% Senior Secured Tranche A Note due 2007 $ 1,938,267 6/2/99 1,938,267 1,938,267 1,926,831
12% Senior Secured Tranche B Note due 2007 $ 646,089 6/2/99 646,089 646,089 618,824
Class B common stock (B) 846 shs. 6/2/99 146,456 146,456 117,165
- ------------------------------------------------------------------------------------------------------------------------------
2,730,812 2,730,812 2,662,820
-----------------------------------------
SHARP INTERNATIONAL CORP.
A designer and distributer of wrist watches, clocks, pens and mechanical pencils.
11% Subordinated Debenture due 2006 $ 1,100,000 7/10/98 1,054,130 1,084,914 110,000
11% Subordinated Debenture due 2008 $ 1,150,000 3/26/99 1,136,890 1,132,290 115,000
Warrants, exercisable until 2006 and 2008, to
purchase common stock at $.01 per share (B) 39,860 shs. * 398 32,796 --
- ------------------------------------------------------------------------------------------------------------------------------
2,191,418 2,250,000 225,000
-----------------------------------------
SNYDER INDUSTRIES, INC.
A manufacturer of proprietary rotationally molded polyethylene containers.
12.5% Senior Subordinated Note due 2007 $ 2,250,000 12/6/99 2,186,550 1,974,392 2,178,225
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 369 shs. 12/6/99 4 306,818 4
- ------------------------------------------------------------------------------------------------------------------------------
2,186,554 2,281,210 2,178,229
-----------------------------------------
STAR INTERNATIONAL, INC.
A manufacturer of commercial cooking appliances.
9.65% Senior Secured Note due 2004 $ 293,283 5/27/94 293,283 293,283 290,497
10.5% Subordinated Note due 2004 $ 179,104 5/27/94 179,104 179,104 173,140
Common Stock (B) 1077 shs. 5/27/94 64,904 64,904 65,997
Warrant, exercisable until 2004, to purchase
common stock at $.01 per share (B) 806 shs. 5/27/94 8 -- 49,382
- ------------------------------------------------------------------------------------------------------------------------------
537,299 537,291 579,016
-----------------------------------------
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 2/5/98 1,381,086 1,192,102 1,369,289
Common Stock (B) 315 shs. 2/5/98 283,500 315,000 283,500
Warrants to purchase shares of Class B
common stock at .01 per share (B) 222 shs. 2/5/98 2 184,416 32,622
- ------------------------------------------------------------------------------------------------------------------------------
1,664,588 1,691,518 1,685,411
-----------------------------------------
</TABLE>
*7/10/98 and 3/26/99
20
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
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 $ 583,934
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 237 shs. 7/25/96 21 24,103 247,002
- ------------------------------------------------------------------------------------------------------------------------------
504,021 584,103 830,936
-------------------------------------------
TRANSMONTAIGNE OIL COMPANY -- A.S.E.
An independent petroleum products marketing company.
12.75% Senior Subordinated Debenture
due 2000 $ 600,000 3/28/91 637,140 591,854 618,720
Common Stock (B) 203,165 shs. * 314,108 598,597 1,208,832
Warrant, exercisable until 2001, to purchase
common stock at $3.60 per share (B) 74,606 shs. 3/28/91 7,461 42,000 215,611
- ------------------------------------------------------------------------------------------------------------------------------
958,709 1,232,451 2,043,163
-------------------------------------------
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 1,139,792
10% Junior Subordinated Note Due 2000 $ 216,287 11/30/99 216,287 216,287 206,749
Limited Partnership Interest of
Riverside V Holding Company L.P. 4.13% int. ** 471,014 387,923 310,329
Limited Partnership Interest of
Riverside V-A Holding Company L.P. 4.13% int. ** 1,075,446 834,147 625,637
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 1,565 uts. 3/21/97 1,565 1,565 157
- ------------------------------------------------------------------------------------------------------------------------------
3,060,701 2,695,158 2,282,664
-------------------------------------------
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 15,000 1,500,000 300,000
Common Stock (B) 35,714 shs. 4/17/98 249,998 249,998 29,018
Warrant, exercisable until 2005, to purchase
common stock at $2.03 per share (B) 109,091 shs. 5/26/98 -- 1 1,091
- ------------------------------------------------------------------------------------------------------------------------------
264,998 1,749,999 330,109
-------------------------------------------
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 1,185,246 1,304,015
Limited Partnership Interests (B) 5.02% int. 6/17/97 371,070 412,300 371,070
Warrant, exercisable until 2006, to purchase
limited partnership interests at $.01 per share 630 uts. 6/23/97 6 188,536 6
- ------------------------------------------------------------------------------------------------------------------------------
1,738,244 1,786,082 1,675,091
-------------------------------------------
U.S. NETTING, INC.
A manufacturer of plastic netting for a wide variety of industries.
11% Senior Secured Note due 2005 $ 629,100 5/3/95 695,659 629,100 377,020
12% Subordinated Note due 2005 $ 326,200 5/3/95 367,008 313,925 204,821
Common Stock (B) 2,457 shs. 5/3/95 81,376 195,720 2,457
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 1,398 shs. 5/3/95 46,291 17,971 14
- ------------------------------------------------------------------------------------------------------------------------------
1,190,334 1,156,716 584,312
-------------------------------------------
</TABLE>
*3/28/91, 12/18/91, 9/30/92, 9/30/93, 9/30/94, 3/31/95 and 5/9/95
**3/21/97, 10/16/97, 11/19/97 and 3/12/99
21
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares, Units,
Ownership, Fair Value at Fair Value
Corporate Restricted Securities: (A) Warrants or Acquisition Acquisition Cost at 12/31/99
(Continued) Principal Amount Date Date (Note 2B) (Note 2A)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
UNIDIGITAL, INC.
A provider within the digital image and digital media services sector.
14% Senior Subordinated Note due 2006 $ 2,250,000 09/14/99 $ 2,189,025 $ 2,137,500 $ 2,196,000
Warrant, exercisable until 2006, to purchase
limited partnership interests at $5.425
per unit (B) 77,640 shs. 09/14/99 776 112,500 776
- ------------------------------------------------------------------------------------------------------------------------------
2,189,801 2,250,000 2,196,776
-------------------------------------------
UNIPAC CORPORATION
A manufacturer of laminated materials which are used to seal a variety of packaging containers.
Limited Partnership Interest of Riverside II
Holding Company L.P. (B) 25,481 uts. * 223,548 25,481 --
- ------------------------------------------------------------------------------------------------------------------------------
US AIRWAYS GROUP -- N.Y.S.E.
A domestic and international airline.
10.8% Series A Secured Loan Certificates
due 2003 $ 320,209 6/29/94 272,177 296,877 325,588
- ------------------------------------------------------------------------------------------------------------------------------
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 6,849 5,635
- ------------------------------------------------------------------------------------------------------------------------------
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 $ 504,787 1/2/98 500,748 504,787 502,162
Senior Secured Floating Rate Tranche A
Note due 2005 $ 1,029,000 1/2/98 630,089 1,029,000 1,022,722
12% Senior Secured Tranche B Note due 2007 $ 336,000 1/2/98 339,394 310,800 324,139
Senior Secured Floating Rate Tranche C
Note due 2006 $ 646,000 9/17/99 636,772 636,771 646,000
Limited Partnership Interest of Riverside VI
Holding Company L.P. 0.03% int. ** 1,588 198,501 158,801
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 59 shs. 1/2/98 1 34,430 1
- ------------------------------------------------------------------------------------------------------------------------------
2,108,592 2,714,289 2,653,825
-------------------------------------------
Sub-Total Private Placement Investments $89,947,192 98,158,168 85,979,889
===========--------------------------------
</TABLE>
*2/9/96 and 9/25/96
**12/30/97 and 9/9/99
22
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Corporate Restricted Securities: (A) Shares or Market Value
(Continued) Interest Due Principal Cost at 12/31/99
Rule 144A Securities -- 8.81%: (A) Rate Date Amount (Note 2B) (Note 2A)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
BONDS -- 5.75%
Atlantic Coast Airlines, Inc. 8.750% 01/01/07 $ 682,423 $ 683,352 $ 627,590
Climachem, Inc. 10.750 12/01/07 100,000 96,000 25,000
Cuddy International Corp. 10.750 12/01/07 470,000 462,978 282,000
Enserch Exploration, Inc. 7.540 01/02/09 909,267 909,267 787,652
Paribas Capital Funding LLC 7.710 06/15/10 1,750,000 1,750,000 1,741,425
T C W Leveraged Income Trust, LP 8.410 03/31/04 1,500,000 1,500,000 1,428,450
Winsloew Escrow Corporation 12.750 08/15/07 700,000 683,403 683,004
- -------------------------------------------------------------------------------------------------------------------
Total Bonds $6,111,690 6,085,000 5,575,121
==========------------------------------
CONVERTIBLE BONDS -- 2.52%
Arbor Software Corporation 4.500% 03/15/05 $ 100,000 100,000 94,500
Commscope, Inc. 4.000 12/15/06 125,000 125,000 133,882
Echostar Communications, Inc. 4.875 01/01/07 600,000 600,000 731,178
General Semiconductor, Inc. 5.750 12/15/06 400,000 400,000 422,000
I2 Technologies, Inc. 5.250 12/15/06 350,000 350,000 500,937
Liberty Media 4.000 11/15/29 455,000 455,000 561,925
- -------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds $2,030,000 2,030,000 2,444,422
==========------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.51%
D T Industries, Inc. 20,000 1,000,000 500,000
- -------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock 1,000,000 500,000
------------------------
WARRANTS -- 0.03%
Energy Conversion Devices, Inc. (B) 16,216 -- 30,405
Winsloew Escrow Corporation (B) 700 7 7
- -------------------------------------------------------------------------------------------------------------------
Total Warrants 7 30,412
------------------------
Total Rule 144A Securities 9,115,007 8,549,955
- -------------------------------------------------------------------------------------------------------------------
Total Corporate Restricted Securities 107,273,175 94,529,844
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares or Market Value
Interest Due Principal Cost at 12/31/99
Corporate Public Securities: -- 24.32% (A) Rate Date Amount (Note 2B) (Note 2A)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
BONDS -- 10.84%
Airplanes Pass Thru Trust 8.150% 03/15/19 $ 1,425,314 $ 1,424,054 $ 1,324,501
Canadian Airlines Corporation 10.000 05/01/05 230,000 230,500 181,700
Derby Cycle Corp. 10.000 05/15/08 425,000 425,000 238,000
Doe Run Resources Corp 12.231 03/15/03 150,000 127,125 141,000
Doe Run Resources Corp 11.250 03/15/05 140,000 122,500 131,250
GFSI, Inc. 9.625 03/01/07 125,000 103,443 77,500
Grove Worldwide 9.250 05/01/08 265,000 231,175 79,500
Haynes International, Inc. 11.625 09/01/04 580,000 522,950 503,150
Hexcel Corporation 9.750 01/15/09 450,000 450,000 378,000
Jordan Industries, Inc. 10.375 08/01/07 300,000 300,000 300,000
Jordan Telecom Products 9.875 08/01/07 1,550,000 1,518,298 1,674,000
Jordan Telecom Products 0.000 08/01/07 575,000 491,625 621,000
Kevco, Inc. 10.375 12/01/07 225,000 123,750 56,250
M J D Communications, Inc. 9.500 05/01/08 75,000 75,000 70,875
M J D Communications, Inc. 10.321 05/01/08 200,000 200,000 187,176
MCMS, Inc 9.750 03/01/08 500,000 500,000 250,000
Morris Materials Handling 9.500 04/01/08 300,000 300,000 99,000
Neff Corp. 10.250 06/01/08 120,000 118,812 115,200
Northwest Airlines Corp. 8.970 01/02/15 947,419 947,419 952,345
Numatics, Inc 9.625 04/01/08 560,000 547,144 420,000
Pillotex Corporation 10.000 11/15/06 50,000 51,500 23,000
Quality Stores, Inc 10.625 04/01/07 300,000 293,250 276,000
Therma-Wave, Inc. 10.625 05/15/04 510,000 480,625 525,300
United Refining Company 10.750 06/15/07 980,000 980,000 607,600
W R Carpenter North America 10.625 06/15/07 550,000 556,344 313,500
Wavetek Corporation 10.125 06/15/07 110,000 110,000 90,338
WEC Co., Inc. 12.000 07/15/09 750,000 750,000 697,500
Worldtex, Inc. 9.625 12/15/07 225,000 225,000 182,250
- --------------------------------------------------------------------------------------------------------------
Total Bonds $12,617,733 12,205,514 10,515,935
-------------------------------------------
COMMON STOCK -- 9.84%
Agency.com Inc. (B) 2,625 68,250 133,875
Agilent Technologies, Inc. (B) 8,925 267,750 690,019
Akamai Technologies, Inc. (B) 1,750 45,500 573,344
American Country Holdings Inc. (B) 54,000 188,722 43,875
Associated Materials, Inc. 23,512 270,423 385,009
Benson Petroleum, LTD. (B) 100,000 77,204 86,130
BP Prudhoe Bay Royalty Trust 13,190 183,879 119,534
Budget Group, Inc. (B) 47,164 986,991 427,424
Cacheflow, Inc. (B) 1,750 42,000 228,703
Caliper Technologies Corp. (B) 350 5,600 23,363
Career Blazers, Inc. (B) 45,000 247,500 405,000
Chartered Semiconductor-- ADR (B) 700 14,000 51,100
Cobalt Networks, Inc. (B) 437 9,614 47,360
Computer Horizons Corp. (B) 11,668 139,221 188,876
Data Return Corp. (B) 3,500 45,500 187,250
Deltathree.com, Inc. (B) 2,450 36,750 63,087
Digimarc Corp. (B) 350 7,000 17,500
Digital Impact, Inc. (B) 437 6,555 21,899
Dreamlife, Inc. (B) 21,875 243,469 351,367
E-Stamp Corp. (B) 5,250 89,250 116,813
eBenX Inc. (B) 1,000 20,000 45,250
El Sitio, Inc. (B) 2,500 40,000 91,875
Epcos AG (B) 7,000 233,338 522,812
eSPEED, Inc.-- Class A (B) 1,000 22,000 35,563
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Shares or Market Value
Corporate Public Securities: (A) Interest Principal Cost at 12/31/99
(Continued) Rate Due Date Amount (Note 2B) (Note 2A)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Expedia, Inc.-- Class A (B) 1,400 $ 19,600 $ 49,000
Finisar Corp. (B) 875 16,625 78,641
FreeMarkets, Inc. (B) 2,500 120,000 853,281
Florist Transworld Delivery, Inc. (B) 9,374 13,754 187,480
GetThere.com, Inc. (B) 1,750 28,000 70,438
Hosiery Corporation of America (B) 500 -- 20,125
iManage, Inc. (B) 350 3,850 11,244
Immersion Corp. (B) 875 10,500 33,578
Intertrust Technologies Corp. (B) 875 15,750 102,923
JNI Corp. (B) 1,750 33,250 115,500
Jupiter Communications, Inc. (B) 2,625 55,125 79,406
Korea Thrunet Co., Ltd. (B) 1,050 18,900 71,269
Maxygen Inc. (B) 1,050 16,800 74,550
McAfee.com Corp. (B) 875 10,500 39,375
MedicaLogic, Inc. (B) 5,000 85,000 105,000
Metalink Ltd. (B) 1,750 21,000 35,656
Metasolv Software, Inc. (B) 1,750 33,250 143,063
Netratings Inc. (B) 1,000 17,000 48,125
Next Level Communication, Inc. (B) 1,137 22,740 85,133
Official Payments Corp. (B) 1,750 26,250 91,000
OnDisplay, Inc. (B) 175 4,900 15,903
Pfsweb Inc. (B) 700 11,900 26,250
Preview Systems, Inc. (B) 1,000 21,000 64,875
Quintus Corp. (B) 3,500 63,000 160,563
Rainmaker Systems, Inc. (B) 1,750 14,000 35,438
Rent-Way, Inc. (B) 60,362 600,002 1,128,015
SciQuest.com, Inc. (B) 875 14,000 69,563
Swiss Army Brands, Inc. (B) 21,000 212,150 149,625
Sycamore Networks, Inc. (B) 1,225 46,550 377,300
TeleCorp PCS, Inc. (B) 700 14,000 26,600
Terra Networks, S.A. (B) 1,750 23,467 95,812
Tritel, Inc. (B) 875 15,750 27,727
Triton PCS Holdings, Inc.-- Class A (B) 1,400 25,200 63,700
VA Linux Systems, Inc. (B) 500 15,000 103,312
Xpedior Incorporated (B) 1,750 33,250 50,312
- -------------------------------------------------------------------------------------------------------------------
Total Common Stock 492,231 4,972,579 9,546,810
-----------------------------------------------
CONVERTIBLE BONDS -- 3.24%
Advanced Energy 5.250% 11/15/06 $ 375,000 374,563 446,250
Arbor Software Corporation 4.500 03/15/05 30,000 21,300 28,350
Clear Channel Communications 1.500 12/01/02 500,000 500,000 512,280
Diamond Offshore Drilling 3.750 02/15/07 460,000 455,267 464,168
Kellstorm Industries, Inc. 5.500 06/15/03 500,000 427,231 331,720
Mindspring Enterprises, Inc 5.000 04/15/06 565,000 495,838 540,988
Network Associates, Inc. 0.000 02/13/18 1,600,000 540,586 611,456
Tower Automotive, Inc. 5.000 08/01/04 250,000 226,250 205,823
- -------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds $4,280,000 3,041,035 3,141,035
==========-------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.40%
Emmis Communications 3,645 182,250 289,777
PSINet Inc. 1,670 83,500 97,069
- -------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock 265,750 386,846
-----------------------------
- -------------------------------------------------------------------------------------------------------------------
Total Corporate Public Securities 20,484,878 23,590,626
-----------------------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Market Value
Corporate Public Securities: (A) Interest Due Principal Cost at 12/31/99
(Continued) Rate/Yield Date Amount (Note 2B) (Note 2A)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
SHORT - TERM SECURITIES:
COMMERCIAL PAPER -- 6.61%
American Electric Power Company, Inc. 6.461% 01/18/00 $ 1,845,000 $ 1,839,463 $ 1,839,465
Conagra, Inc. 6.945 01/05/00 180,000 179,863 179,863
Conagra, Inc. 7.119 01/12/00 590,000 588,738 588,737
Indiana Michigan Power Company 5.684 01/06/00 1,590,000 1,588,763 1,588,760
Safeway, Inc. 5.579 01/03/00 2,220,000 2,219,322 2,218,979
- -------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities $ 6,425,000 6,416,149 6,415,804
===========-------------------------------------
Total Investments 128.37% $ 134,174,202 124,536,274
=============-------------------
Other Assets 2.57 2,495,987
Liabilities (30.94) (30,017,605)
- -------------------------------------------------------------------------------------------------------------------
Total Net Assets 100.00% $ 97,014,656
===================================================================================================================
</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
<TABLE>
<CAPTION>
Fair Value
at 12/31/99
Corporate Restricted Securities (Note 2A)
===================================================================================================================
<S> <C>
AUTOMOBILE -- 3.81%
America's Body Co./LCP Holding Co. $ 1,728,300
LIH Investors, L.P. 1,966,302
- -------------------------------------------------------------------------------------------------------------------
3,694,602
-----------
BEVERAGE, FOOD & TOBACCO -- 3.24%
Associated Vintage Group, Inc. 83,375
Beta Brands, Inc. 1,345,333
Cains Foods, L.P. 1,715,901
Grand Lyon Enterprises 0
- -------------------------------------------------------------------------------------------------------------------
3,144,609
-----------
BROADCASTING & ENTERTAINMENT -- 1.83%
Echostar Communications 731,178
Latin Communications Group 478,445
Liberty Media 561,925
- -------------------------------------------------------------------------------------------------------------------
1,771,548
-----------
BUILDINGS & REAL ESTATE -- 1.73%
Truseal Technologies, Inc. 1,675,091
- -------------------------------------------------------------------------------------------------------------------
1,675,091
-----------
CARGO TRANSPORT -- 1.96%
RailTex, Inc. 1,071,591
Tidewater Holdings, Inc. 830,936
- -------------------------------------------------------------------------------------------------------------------
1,902,527
-----------
CHEMICAL, PLASTICS & RUBBER -- 4.89%
AccTech, LLC 91,125
Contico International, Inc. 415,120
Process Chemicals, LLC 1,368,979
Trend Technologies, Inc. 2,282,664
U.S. Netting, Inc. 584,312
- -------------------------------------------------------------------------------------------------------------------
4,742,200
-----------
CONSUMER PRODUCTS -- 5.77%
Alpha Shirt Company 2,136,451
Consumer Product Enterprises, Inc. 1,137,510
Corvest Group, Inc. 2,095,060
Sharp International Corp. 225,000
- -------------------------------------------------------------------------------------------------------------------
5,594,021
-----------
CONTAINERS, PACKAGING & GLASS -- 5.53%
C & K Manufacturing and Sales Company 511,565
Capitol Specialty Plastics, Inc. 201
Fleming Acquisition Corporation 22,406
Snyder Industries, Inc. 2,178,229
Vitex Packaging, Inc. 2,653,825
- -------------------------------------------------------------------------------------------------------------------
5,366,226
-----------
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED SCHEDULE OF INVESTMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
Fair Value
at 12/31/99
Corporate Restricted Securities (Continued) (Note 2A)
================================================================================
DIVERSIFIED/CONGLOMERATE - MANUFACTURING -- 21.28%
Commscope, Inc. $ 133,882
D T Industries, Inc. 500,000
Eagle Pacific Industries, Inc. 2,111,903
Energy Conversion Devices Inc. 30,405
Evans Consoles, Inc. 1,675,386
Hartzell Manufacturing, Inc./
CMS Holding Company 1,578,052
Hudson River Capital, LLC 237,500
Hussey Seating Company 2,519,362
Jackson Products, Inc. 499,125
Kappler Safety Group, Inc. 1,604,941
Maxtec International Corp. 479,645
NPC, Inc. 2,644,804
Pacific Coast Feather Company 1,795,850
PAR Acquisition Corp. 480,832
Safety Speed Cut Manufacturing 2,662,820
The Tranzonic Companies 1,685,411
- --------------------------------------------------------------------------------
20,639,918
------------
DIVERSIFIED/CONGLOMERATE, SERVICE -- 7.77%
Diversco, Inc./DHI Holdings, Inc. 1,656,919
Examination Management Services, Inc. 2,114,472
Hamilton Funeral Services 1,606,312
Hunton & Williams 44,328
Magnetic Data Technologies, Inc./
MDT Holdings LLC 1,609,445
Pharmaceutical Buyers, Inc. 509,627
- --------------------------------------------------------------------------------
7,541,103
------------
ELECTRONICS -- 9.41%
Arbor Software Corporation 94,500
Averstar, Inc. 591,983
Directed Electronics, Inc. 2,169,333
General Semiconductor, Inc. 422,000
I2 Technologies, Inc. 500,937
Nu Horizons Electronics Corp. 932,770
Precision Dynamics, Inc. 1,887,902
Tridex Corp. 330,109
Unidigital, Inc. 2,196,776
- --------------------------------------------------------------------------------
9,126,310
------------
FARMING & AGRICULTURE -- 0.48%
Cuddy International Corp. 282,000
Protein Genetics, Inc. 183,371
- --------------------------------------------------------------------------------
465,371
------------
FINANCE -- 2.21%
Microfinancial, Inc. 406,280
Paribas Capital Funding LLC 1,741,425
- --------------------------------------------------------------------------------
2,147,705
------------
HEALTHCARE, EDUCATION & CHILDCARE -- 2.26%
Nexell Therapeutics 2,188,071
- --------------------------------------------------------------------------------
2,188,071
------------
HOME & OFFICE FURNISHINGS, HOUSEWARES
AND DURABLE CONSUMER PRODUCTS -- 3.24%
Catalina Lighting, Inc. 364,838
Fasteners for Retail, Inc. 2,200,893
Star International Holdings, Inc. 579,016
- --------------------------------------------------------------------------------
3,144,747
------------
LEISURE, AMUSEMENT, ENTERTAINMENT -- 6.48%
Adventure Entertainment Corporation 970,706
CDnow, Inc. 139
Merit Industries, Inc. 1,220,733
Olympic Boat Centers, Inc. 1,817,667
Playcore, Inc 2,281,832
- --------------------------------------------------------------------------------
6,291,077
------------
MINING, STEEL, IRON & NON - PRECIOUS METALS -- 1.22%
Better Minerals & Aggregates 1,184,353
- --------------------------------------------------------------------------------
1,184,353
------------
MISCELLANEOUS -- 5.25%
Climachem, Inc. 25,000
Enserch Exploration, Inc. 787,652
Piping Supply Holdings, Inc. 2,160,530
T C W Leveraged Income Trust, LP 1,428,450
Victory Ventures, LLC 5,635
Winsloew Escrow Corporation 683,011
- --------------------------------------------------------------------------------
5,090,278
------------
OIL AND GAS -- 4.75%
Applied Process Solutions, Inc. 609,947
Chaparral Resources, Inc. 291
Golden Bear Oil Specialties 1,860,777
Louis Dreyfus Natural Gas Corporation 98,841
TransMontaigne Oil Company 2,043,163
- --------------------------------------------------------------------------------
4,613,019
------------
PERSONAL TRANSPORTATION -- 0.98%
Atlantic Coast Airlines Inc. 627,590
US Airways Group 325,588
- --------------------------------------------------------------------------------
953,178
------------
RETAIL STORES -- 3.35%
A T I Acquisition Corporation 2,552,533
Discount Auto Parts 614,220
Rent-Way, Inc. 87,137
- --------------------------------------------------------------------------------
3,253,890
------------
Total Corporate Restricted
Securities -- 97.44% $94,529,844
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
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 $94,529,844
(97.44% of net assets) as of December 31, 1999 ($90,091,617 at December 31,
1998) 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, 1999, 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.
28
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
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, 1999 and 1998, the Trust incurred total
interest expense on the Note of $836,220.
B. Revolving Credit Agreement
The Trust entered into a $15,000,000 senior unsecured, 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, 1999, there were $10,500,000 in outstanding loans against the
Revolver and the average blended rate of interest charged on the Revolver was
5.70%. For the period ended December 31, 1999, the Trust incurred total interest
expense on the Revolver of $605,921 including $7,869 related to the undrawn
portion.
29
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENTS
For the year For the year
ended 12/31/99 ended 12/31/98
- --------------------------------------------------------------------------------
Cost of Investments Acquired
- --------------------------------------------------------------------------------
Corporate restricted securities $ 53,944,544 $ 48,470,229
Corporate public securities 27,070,126 21,616,275
Short-term securities 314,268,882 307,503,044
Proceeds from Sales or Maturities
- --------------------------------------------------------------------------------
Corporate restricted securities $ 36,448,279 $ 52,202,415
Corporate public securities 47,514,013 29,005,355
Short-term securities 313,860,414 303,056,029
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31,1999. The net unrealized
depreciation of investments for financial reporting and federal tax
purposes as of December 31,1999 is $9,637,928 and consists of $12,606,585
appreciation and $22,244,513 depreciation.
The aggregate cost of investments was the same for financial reporting and
federal income tax purposes as of December 31,1998. The net unrealized
appreciation of investments for financial reporting and federal tax
purposes as of December 31,1998 was $486,016 and consisted of $12,564,570
appreciation and $12,078,554 depreciation.
<TABLE>
<CAPTION>
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
(UNAUDITED) Amount Per Share Amount Per Share
- --------------------------------------------------------------------------------------------------------------------------------
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income $ 2,961,161 $2,934,166
Net investment income 2,294,359 $0.24 2,261,923 $0.24
Net realized and unrealized gain (loss) on investments (2,087,179) (0.22) 2,420,485 0.26
<CAPTION>
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income 2,967,002 2,869,889
Net investment income 2,302,183 0.25 2,186,277 0.24
Net realized and unrealized gain on investments 464,179 0.05 1,793,007 0.19
<CAPTION>
September 30, 1999 September 30, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income 3,127,288 2,800,222
Net investment income 2,352,534 0.25 2,086,536 0.23
Net realized and unrealized loss on investments (3,159,151) (0.34) (3,526,841) (0.38)
<CAPTION>
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income 2,699,263 3,042,739
Net investment income 2,072,961 0.23 2,369,911 0.26
Net realized and unrealized gain (loss) on investments (152,755) (0.02) (824,832) (0.09)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7. CHANGE IN INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP ("PwC") resigned as the Trust's principal
accountant, effective September 7, 1999. The Trust's Audit Committee
recommended engaging Deloitte & Touche LLP as the principal accountant to
audit the Trust's financial statements for fiscal year 1999. The Board of
Trustees approved the appointment of Deloitte & Touche LLP at a meeting
held on October 22, 1999.
For fiscal years 1997 and 1998, and during the period prior to PwC's
resignation, the Trust and PwC did not have any disagreements on any matter
of accounting principles or practices, financial statement disclosures, or
auditing scope or procedure, that either (1) have not been resolved to
PwC's satisfaction and (2) or, if not resolved to PwC's satisfaction, would
have caused it to make a reference to the subject matter of the
disagreement in connection with its report. Moreover, PwC's report on the
Trust's financial statements for the fiscal years 1997 and 1998 did not
contain an adverse opinion or a disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.
8. SUBSEQUENT EVENTS
On January 1, 2000, Massachusetts Mutual Life Insurance Company
("MassMutual"), the Trust's investment adviser, consolidated its investment
management organization into David L. Babson and Company Incorporated
("Babson"), a MassMutual subsidiary that is a federally registered
investment adviser (the "Reorganization"). The employees of MassMutual's
Investment Management Division and its Investment Management business were
transferred to Babson. MassMutual owns and controls approximately 98% of
the voting stock of Babson through various subsidiaries. As a result of the
Reorganization, MassMutual assigned its investment advisory contract with
the Trust to Babson. The Trustees of the Trust, including a majority of the
Trustees who are disinterested, approved the assignment. No increase in
fees or change in portfolio management personnel for the Trust occurred as
a result of the Reorganization or the assignment of the advisory contract
to the Trust.
30
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
MASSMUTUAL PARTICIPATION INVESTORS
---------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of MassMutual Participation
Investors
- --------------------------------------------------------------------------------
We have audited the accompanying consolidated statement of assets and
liabilities of MassMutual Participation Investors (the "Trust"), including the
schedule of investments, as of December 31, 1999, and the related consolidated
statements of operations, cash flows, changes in net assets, and the
consolidated financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The financial statements
of the Trust for the year ended December 31, 1998 and the financial highlights
for each of the years in the nine-year period then ended were audited by other
auditors, whose report, dated February 25, 1999 expressed an unqualified opinion
on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included verification of securities owned
as of December 31, 1999, by counting of securities at the custodian and
confirmation of securities owned at December 31, 1999 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Trust as of December 31, 1999, the results of its operations, its cash flows,
its changes in net assets, and financial highlights for the year then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
February 18, 2000
31
<PAGE>
- --------------------------------------------------------------------------------
MEMBERS OF THE
Board of Trustees
Photo of
Stuart H. Reese
Chief Investment Officer,
Massachusetts Mutual
Life Insurance Company
Photo of Milton Cooper
Chairman,
Kimco Realty Corp.
Photo of
Donald E. Benson*
Executive Vice President and Director,
Marquette Bancshares Inc.
Photo of
Richard G. Dooley
Retired Executive Vice President
and Chief Investment Officer,
Massachusetts Mutual Life
Insurance Company
Photo of
Marshall D. Butler
Chairman,
Nitzanim AVX Kyocera
Venture Capital Fund
Photo of
Donald Glickman
Chairman,
Donald Glickman & Company, Inc.
Photo of
Corine T. Norgaard
Dean, Barney School of Business and Public
Administration, University of Hartford
Photo of
Jack A. Laughery
Chairman,
Laughery Investments
Photo of Martin T. Hart*
President and Director, HCorporation
*Member of Audit Committee
32
<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.
[LOGO OF MASSMUTUAL PARTICIPATION INVESTORS]
OFFICERS
- --------------------------------------------------------------------------------
Stuart H. Reese
Chairman
Richard G. Dooley
Vice Chairman
Robert E. Joyal
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
Richard C. Morrison
Vice President
Clifford M. Noreen
Vice President
Mark B. Ackerman
Treasurer
Victoria Fortier
Comptroller
<PAGE>
[LOGO OF MASSMUTUAL PARTICIPATION INVESTORS]
