SCHEDULE 14A
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MassMutual Participation Investors
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MassMutual Participation Investors
Springfield, Massachusetts 01111
[LOGO OF MASSMUTUAL PARTICIPATION INVESTORS APPEARS HERE]
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
TIME
Friday, April 24, 1998
at 1:00 p.m.
PLACE
Oak Room
Massachusetts Mutual
Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
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Please date, fill in and sign the enclosed form
of proxy and mail it in the enclosed return
envelope which requires no postage if mailed
in the United States
-----------------------------------------------
MassMutual Participation Investors
Springfield, Massachusetts
Dear Shareholder:
The 1998 Annual Meeting of Shareholders will be held in the Oak Room of
Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111, at 1:00 p.m., Springfield time, on Friday, April 24, 1998.
A Notice and a Proxy Statement regarding the meeting, a proxy card for your vote
at the meeting and a postage prepaid envelope in which to return your proxy card
are enclosed.
By promptly returning the enclosed proxy card, you as a shareholder can help
the Trust avoid the necessity and expense of sending follow-up letters to obtain
the attendance of a majority of the outstanding shares. You are earnestly
requested to sign and return the proxy card in order that the necessary quorum
may be represented at the meeting. If you find you can be present in person, you
may, if you wish, revoke your proxy then and vote your shares in person.
At the meeting, shareholders will elect four Trustees of the Trust, approve
or disapprove the selection of Coopers & Lybrand L.L.P. as auditors, and approve
or disapprove the continuance of the current Investment Advisory and
Administrative Services Contract between the Trust and its investment adviser,
Massachusetts Mutual Life Insurance Company. The Trustees recommend that the
shareholders elect the nominated Trustees, ratify the selection of Coopers &
Lybrand L.L.P., and approve the continuance of the Investment Advisory and
Administrative Services Contract.
I look forward to your attendance at this meeting because it will provide us
with an opportunity to inform you about the progress of MassMutual Participation
Investors.
Sincerely,
/s/ Gary E. Wendlandt
Gary E. Wendlandt
Chairman
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MassMutual Participation Investors
Notice of Annual Meeting of Shareholders
To the Shareholders of
MassMutual Participation Investors:
Please take notice that the Annual Meeting of Shareholders of MASSMUTUAL
PARTICIPATION INVESTORS (the "Trust") has been called to be held in the Oak Room
of Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111, on Friday, April 24, 1998, at 1:00 p.m., Springfield time,
for the following purposes:
(1) To re-elect Donald E. Benson, Richard G. Dooley, and Donald Glickman as
Trustees for three-year terms and until their successors are duly elected and
qualified;
To elect Corine T. Norgaard as a Trustee for a one-year term and until
her successor is duly elected and qualified;
(2) To ratify or reject the action taken by the Board of Trustees in
selecting Coopers & Lybrand L.L.P. as auditors for the fiscal year ending
December 31, 1998;
(3) To approve or disapprove continuance of the Trust's current Investment
Advisory and Administrative Services Contract dated October 7, 1988; and
(4) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Holders of record of the shares of beneficial interest of the Trust at the
close of business on February 24, 1998, are entitled to vote at the meeting or
any adjournment thereof.
By order of the
Board of Trustees,
/s/ Stephen L. Kuhn
Stephen L. Kuhn
Vice President and Secretary
Springfield, Massachusetts
March 3, 1998
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PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of MASSMUTUAL PARTICIPATION INVESTORS (the
"Trust") for use at the Annual Meeting of its Shareholders, to be held in the
Oak Room of Massachusetts Mutual Life Insurance Company (the "Insurance
Company"), 1295 State Street, Springfield, Massachusetts 01111, on Friday, April
24, 1998, at 1:00 p.m., Springfield time.
Any person giving a proxy has power to revoke it by mail or in person at any
time prior to its exercise by executing a superseding proxy or by submitting a
notice of revocation to the Trust. All properly executed and unrevoked proxies
received in time for the meeting will be voted in accordance with the
instructions contained therein.
Holders of the shares of beneficial interest of the Trust ("shares"), of
record at the close of business on February 24, 1998, will be entitled to one
vote per share on all business of the meeting and any adjournments. There were
9,242,210 shares outstanding on the record date. To the best knowledge of the
Trust, the only beneficial owner of more than 5% of the outstanding shares of
the Trust is the Insurance Company. The Insurance Company is deemed a beneficial
owner of more than 5% of the outstanding shares of the Trust by reason of its
owning a $12,000,000 Senior Fixed Rate Convertible Note due July 15, 2002 (the
"Note") issued by the Trust. The Insurance Company, at its option, can convert
the principal amount of the Note into common shares. The dollar amount of
principal would be converted into an equivalent dollar amount of common shares
based upon the average price of the common shares for ten business days prior to
the notice of conversion.
The mailing address of the principal executive offices of the Trust is 1295
State Street, Springfield, Massachusetts 01111. This Proxy Statement and the
accompanying letter to shareholders from the Chairman of the Board of Trustees,
Notice of Annual Meeting of Shareholders and proxy card are being mailed on or
about March 3, 1998 to shareholders of record on the record date.
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Pursuant to the Trust's By-Laws, the presence at the Annual Meeting, in
person or by proxy, of Shareholders entitled to cast a majority of the votes
shall be a quorum for the transaction of business. A plurality of the votes cast
is required to elect Trustees. Thus, the four nominees for election as Trustees
at the Annual Meeting who receive the greatest number of votes properly cast for
the election of trustees shall be elected Trustees. Under the Trust's
Declaration of Trust a majority of the shares voted is required to ratify the
selection of independent accountants.
An affirmative "majority vote" of the Trust's shares is required to approve
the continuance of the Trust's Investment Advisory and Administrative Services
Contract. A "majority vote" means either (1) the holders of at least 67% of the
Trust's shares present in person or by proxy, if more than 50% of the Trust's
outstanding shares are present or represented by proxy, or (2) a majority of the
outstanding shares of the Trust, whichever is less.
Votes cast by proxy or in person at the Annual Meeting will be counted by
persons appointed by the Trust to act as election inspectors for the meeting.
The election inspectors will count the total number of votes cast "for" approval
of the proposals for purposes of determining whether sufficient affirmative
votes have been cast. The election inspectors will count shares represented by
proxies that withhold authority to vote for a nominee for election as a Trustee
or that reflect abstentions or "broker non-votes" (i.e., shares held by brokers
or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote, and (ii) the broker or
nominee does not exercise the discretionary voting power on a particular matter)
as shares that are present and entitled to vote on the matter for purposes of
determining the presence of a quorum. As to the continuance of the Investment
Advisory and Administrative Services Contract, abstentions or broker non-votes
have the effect of a negative vote. With respect to the election of Trustees and
the ratification of the selection of an independent accountant, abstentions and
broker non-votes have no effect on the outcome of the proposal.
(1) ELECTION OF TRUSTEES
The Board of Trustees is currently comprised of nine Trustees with terms
expiring in 1998, 1999, and 2000.
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Sumner L. Feldberg's term expires in 1998 and he is retiring from the Board as
of the 1998 Annual Meeting. The terms of Messrs. Benson, Dooley and Glickman
expire this year and the Board has nominated them for three-year terms. The
Board has also nominated Corine T. Norgaard for a one-year term. Thus, following
the Annual Meeting of Shareholders, the Board will be comprised of nine
Trustees, having various terms expiring in 1999, 2000 and 2001. All nominees, if
elected, are to serve their respective terms, and until each of their successors
is duly elected and qualified.
Information Concerning Nominees
Set forth below as to each nominee for Trustee, and for each Trustee whose
term will continue after this meeting, is his or her present office with the
Trust, age, principal occupation or employment during the past five years, the
organization by which he or she is employed and its principal business, and
certain other directorships held by them.
GARY E. WENDLANDT*
(Term expires 2000)
Trustee since 1988, Chairman (since 1995) and President (1988-1995) of the
Trust. Chief Investment Officer (since 1993), Executive Vice President (since
1992), of the Insurance Company; Director, Merrill Lynch Derivative Products,
Inc. (swap dealer); Director, Oppenheimer Acquisition Corporation (holding
company for investment advisers); Supervisory Director, MassMutual/Carlson CBO
N.V. (collateralized bond fund); Chairman and Director (since 1996), Antares
Leveraged Capital Corp. (finance company); Director and President (since 1995),
DLB Acquisition Corporation (holding company for investment advisers); Director
(since 1994), MassMutual Corporate Value Partners Limited (investor in debt and
equity securities advised by the Insurance Company) and MassMutual Corporate
Value Limited (parent of MassMutual Corporate Value Partners Limited); Chairman
and Chief Executive Officer (since 1994), MassMutual Institutional Funds
(open-end investment company advised
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*Mr. Wendlandt is an "interested person" of the Trust (as defined in the
Investment Company Act of 1940, as amended) because of his position as an
officer of the Trust and of the Insurance Company.
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by the Insurance Company); Chairman (since 1995), Trustee (since 1993), Vice
Chairman (1993-1995) and President (1988-1993), MML Series Investment Fund
(open-end investment company advised by the Insurance Company); Chairman (since
1995), Trustee (since 1986) and President (1983-1995), MassMutual Corporate
Investors (closed-end investment company advised by the Insurance Company);
Director of various subsidiaries of the Insurance Company. Age: 47.
DONALD E. BENSON
(Term expires 1998)
Nominee for election. Trustee since 1986. Executive Vice President and
Director (since 1992), Marquette Bancshares (bank holding company); President
and Director (1986-1994), MEI Diversified Inc. (medical product manufacturer);
Partner (since 1996), Benson Family Limited Partnership No. 1 and Benson Family
Limited Partnership No. 2 (investment partnerships); Partner, Benson, Pinckney,
Oates Partnership (building partnership); Director (since 1997), National
Mercantile Bancorp (bank holding company) and Mercantile National Bank;
Director, Mesaba Holdings, Inc. (commuter airline); Director, Delta Beverage
Group Inc. (soft drink bottler and distributor); Director (1988-1994), IJ
Holding Corporation; Director (1984-1993), Athens Bancorp, Inc.; Trustee (since
1986), MassMutual Corporate Investors (closed-end investment company advised by
the Insurance Company). Age: 67.
MARSHALL D. BUTLER
(Term expires 1999)
Trustee since 1990. Chairman (since 1994), Nitzanim AVX Kyocera Venture Fund
(venture capital); Director (since 1993), Chairman and Chief Executive Officer
(1973-1993), AVX Corporation (manufacturer of electronic components); Director,
Kyocera Corp. and ESC Medical; Director (since 1993), Synercom Technology,
Incorporated (computer software); Chairman (since 1994), Alpha Tech-nologies
Group, Inc. (electronic components); Chairman, First Israel Mezzanine Investors
Ltd. (general partner and manager of The Israel Mezzanine Fund, L.P.); Trustee
(since 1990), MassMutual Corporate Investors (closed-end investment company
advised by the Insurance Company). Age: 71.
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MILTON COOPER
(Term expires 2000)
Trustee since 1990. Chairman (since 1992), Kimco Realty Corp. (shopping
center ownership and management); Director, Getty Petroleum Corp. (petroleum
marketing); Director, Blue Ridge Real Estate; Trustee (since 1990), MassMutual
Corporate Investors (closed-end investment company advised by the Insurance
Company). Age: 68.
RICHARD G. DOOLEY*
(Term expires 1998)
Nominee for election. Trustee since 1988, Vice Chairman (since 1995) and
Chairman (1988-1995) of the Trust. Consultant (since 1993), Executive Vice
President and Chief Investment Officer (1978-1993) of the Insurance Company;
Director (since 1996), Investment Technology Group, Inc.; Director, The Advest
Group, Inc. (financial services holding company), HSB Group, Inc. (formerly
known as Hartford Steam Boiler Inspection and Insurance Co.), New England
Education Loan Marketing Corporation; Trustee (since 1992), Kimco Realty Corp.
(shopping center ownership and management); Director (since 1993), Jefferies
Group, Inc. (financial services holding company); Chairman (1988-1995), Vice
Chairman (since 1995) and Trustee, MML Series Investment Fund (open-end
investment company advised by the Insurance Company); Vice Chairman (since
1995), Chairman (1982-1995) and Trustee (since 1974), MassMutual Corporate
Investors (closed-end investment company advised by the Insurance Company). Age:
68.
DONALD GLICKMAN
(Term Expires 1998)
Nominee for election. Trustee since 1992. Chairman (since 1992), Donald
Glickman and Company, Inc. (investment banking); Partner (1989-1992), Peter J.
Solomon Investment Co.; Director, CalTex Industries, Inc. (manufacturer of
windows), and Monro Muffler Brake, Inc.; Director (1993-1996), Steerage Corp.
Inc. (navigation equipment manufacturer); Director (1991-
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*Mr. Dooley is an "interested person" of the Trust (as defined in the Investment
Company Act of 1940, as amended) because of his position as an officer of the
Trust and a consultant of the Insurance Company.
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1994), Food Barn Stores, Inc.; Director (1992-1993), Astra Holdings, Inc.
(ordnance materials manufacturer); Trustee (since 1992), MassMutual Corporate
Investors (closed-end investment company advised by the Insurance Company).
Age: 64.
MARTIN T. HART
(Term expires 2000)
Trustee since 1991. President and Director, H Corporation; Co-Manager
(1983-1996), Lake Catamount Joint Venture (ski resort); Partner, Consolidated
Nursery Properties (wholesale nursery and garden center); Director, Optical
Security Group Inc. (product security), Schuler Homes, Inc. (housing), and PNB
Financial Group (bank holding company); Director (since 1997), T Netiks
(communications); Director (since 1996), PJ America (pizza restaurant); Director
(since 1994), Ardent Software, Inc. (computers); Manager (since 1994), Houston
Pizza Venture (pizza restaurant); Director (1994-1996), The Bagel Group (bagel
restaurant); Director (1992- 1996), PJVA, Inc. and PJV, Inc. (pizza
restaurants); Director (since 1993), PJNC, Inc. (pizza restaurant); Director
(1993-1995), Inco Homes (housing); Director (1992-1994), Morris Air Corp.
(airline); Director (1991- 1994), Capital Bancorp; Director (1979-1993), Valley
State Bank; Director (1980-1993), Little Valley Nurseries, Inc. (wholesale
nursery); Trustee (since 1991), MassMutual Corporate Investors (closed-end
investment company advised by the Insurance Company). Age: 62.
JACK A. LAUGHERY
(Term expires 1999)
Trustee since 1996. Chairman (since 1997), Partner (since 1996), Papa John's
New England (food service); Consultant (since 1996), Papa John's Iowa (food
service); Chairman (1994-1996), The Bagel Group (bagel restaurant); Consultant
(1994-1996), Heartland Foods (food service); Director (since 1997), Maynard
Capital Partners (investments); Director (since 1993), Papa John's International
(food service companies); Director, First Union National Bank; Manager (since
1994), Houston Pizza Venture LLC (pizza restaurant); Partner, Atlantic Beach
Sheraton and Coastal Lodging (hotels); Partner (1992-1996), Papa John's V and
Papa John's VA (food service); Partner (1993-1996), Papa John's North Carolina
(food service); Consultant (1989-1994), Hardee's Food Systems, Inc. (fast food
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restaurants); Director (1990-1997), Sprint Mid-Atlantic (tele-communications);
Director (1993-1996), Corral America (food service); Director (1981-1995),
Imasco Ltd. (food service, banking, tobacco and drug stores); Trustee (since
1996), MassMutual Corporate Investors (closed-end investment company advised
by the Insurance Company). Age: 63.
CORINE T. NORGAARD
Nominee for election. Dean (since 1996), Barney School of Business and
Public Administration, University of Hartford; Professor of Accounting and Dean
(1993-1996), School of Management, State University of New York at Binghamton;
Director, The Advest Group, Inc. (financial services holding company); Trustee,
Aetna Series Fund (investment company). Age 60.
Share Ownership of Trustees, Nominees
and Executive Officers
The following table sets forth information concerning beneficial ownership,
as of February 26, 1998, of the Trust's shares by each Trustee, and by the
Trust's nominees for Trustee and executive officers as a group.
Name Shares Percentage of
Individual Beneficially Outstanding
or Group Owned* Shares Owned
-------- ------- ------------
Gary E. Wendlandt 11,929 0.13%
Donald E. Benson 5,485 **
Marshall D. Butler 6,155 **
Milton Cooper 1,994 **
Richard G. Dooley 2,019 **
Sumner L. Feldberg 507 **
Donald Glickman 1,550 **
Martin T. Hart 12,438 0.13%
Jack A. Laughery 500 **
Corine T. Norgaard 400 **
All Trustees, Nominees
and Executive Officers
as a Group 51,349 0.56%
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*This information, not being within the knowledge of the Trust, has been
furnished by each nominee, Trustee and officer. Beneficial ownership is as
defined under Section 13(d) of the Securities Exchange Act of 1934, as amended.
Fractional shares are not reported.
**Less than one-tenth of one percent is not listed.
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Information Concerning Committees and
Meetings of the Board of Trustees
The Board of Trustees of the Trust has an Audit Committee, whose present
members are Messrs. Benson and Hart, neither of whom is an "interested person"
of the Trust. The Audit Committee makes recommendations to the Board of Trustees
as to the engagement or discharge of the Trust's independent accountants,
supervises investigations into matters relating to audit functions, reviews with
the Trust's independent accountants the results of the audit engagement and
considers the audit fees. The Trust does not have a standing nominating or
compensation committee.
During the past fiscal year, the Board of Trustees held six regular meetings
(one of which was a telephone conference call meeting), and the Audit Committee
met once. Messrs. Butler, Cooper and Dooley attended fewer than 75% of the Board
meetings held during 1997.
Transactions with and Remuneration of
Officers and Trustees
Pursuant to the Investment Advisory and Administrative Services Contract
with the Trust, the Insurance Company pays the salaries and fees of all officers
of the Trust and of all Trustees of the Trust who are "interested persons" of
the Trust or of the Insurance Company. Thus, during the fiscal year ended
December 31, 1997, the Trust did not pay any compensation to any of its officers
or to any of its Trustees who were "interested persons" of the Trust or of the
Insurance Company.
Trustees who are not "interested persons" of the Trust or of the Insurance
Company receive fees of $1,000 for each Trustees' meeting which they attend
(other than the organizational meeting of the Board following the Annual Meeting
of Shareholders for which no fees are paid) and annual Trustees' fees of $8,000.
No meeting fees are paid for meetings conducted by telephone conference call or
by unanimous written consent. Members of the Audit Committee receive an
additional annual fee of $600. Pursuant to a deferred compensation plan,
Trustees may defer receipt of their fees until their retirement from the Board
or some other time at their election. The aggregate direct remuneration of these
Trustees and reimbursement of their travel expenses paid by the Trust during the
fiscal year ended December 31, 1997 was approximately $59,272.
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The following table discloses the compensation paid to the Trust's
non-interested Trustees for the fiscal year ended December 31, 1997. All of the
non-interested Trustees also serve as Trustees of one other closed-end
investment company managed by the Insurance Company.
Total
Aggregate Compensation
Name of Compensation from Fund
Trustee from Trust Complex
------- ---------- -------
Donald E. Benson $7,400 $21,600
Marshall D. Butler 6,800 20,400
Milton Cooper 6,800 20,400
Sumner L. Feldberg 7,400 22,200
Donald Glickman 7,400 22,200
Martin T. Hart 8,000 23,400
Jack A. Laughery 6,800 20,400
(2) RATIFICATION OR REJECTION OF
APPROVAL OF AUDITORS
The Board of Trustees of the Trust, including all of the Trustees who are
not "interested persons" of the Trust, have selected Coopers & Lybrand L.L.P. to
act as auditors for the Trust for the fiscal year ending December 31, 1998.
Coopers & Lybrand L.L.P. are independent public accountants and have no direct
or material indirect interest in the Trust. The selection is subject to the
approval of the shareholders of the Trust at the forthcoming Annual Meeting. The
enclosed proxy card provides space for instructions directing the proxies named
therein to vote for or against ratification of that selection.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the forthcoming Annual Meeting. This representative shall have the opportunity
to make a statement if he or she desires to do so, and it is expected that such
representative will be available to respond to appropriate questions which may
be posed by shareholders.
(3) APPROVAL OR DISAPPROVAL OF
CONTINUANCE OF
INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES CONTRACT
The Trust has an Investment Advisory and Administrative Services Contract,
dated October 7, 1988 (the "Contract") with the Insurance Company which entitles
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the Trust to certain investment advisory and administrative services from the
Insurance Company. Under the Contract, the aggregate fee payable to the
Insurance Company for the fiscal year ended December 31, 1997 was $964,592. No
changes are being made in the Contract, which was last approved by shareholders
at the Trust's 1997 Annual Meeting of Shareholders held on April 24, 1997.
At its meeting on January 27, 1998, the Board of Trustees approved, and
voted to recommend that the shareholders approve, the continuance of the
Contract. Among other things, the Board considered the nature of the services
provided to the Trust by the Insurance Company including the nature of the
private placement market compared to public markets. The Insurance Company is
required to provide the Trust with a continuing investment program consistent
with its objectives which include investments in private placement debt
securities without equity features, private placement debt securities and
preferred stock with equity features attached, publicly-traded investment-grade
and non-investment grade debt securities and certain temporary investments. The
Trustees concluded that the Insurance Company has developed a sizeable,
experienced and competent staff of investment professionals (including analysts,
traders, and other support personnel) to support investment activities for a
wide variety of investments. The Trustees also considered the expenses of the
Trust assumed by the Insurance Company under the Contract; the actual fees paid
to the Insurance Company by the Trust for the services provided and expenses
assumed; a comparison of the Trust's fee schedule to fees charged by other
investment advisers whose investment activities include private placement
securities (including possible economy of scale and incentive fee features); and
possible benefits to the Insurance Company as a result of the Contract
(including intangibles such as increased visibility in the financial community).
In connection with the investment and administrative services provided to the
Trust by the Insurance Company, the Trustees concluded that the administration
of private placement securities is more extensive, costs more and requires
greater time and expertise than a portfolio of only public securities. Valuation
of private placement securities, for example, is more time consuming and
requires significantly more expertise than valuation of
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publicly-traded securities. In making comparisons with other funds, therefore,
the Trustees considered the percentage of the Trust's portfolio comprised of
private placement securities. The Trustees also considered the Trust's
investment performance over various periods of time; comparisons of the Trust's
investment performance to other funds investing in restricted securities and
equities and to stock and bond indices; the quality of service provided by the
Insurance Company (including the size, experience and professionalism of the
Insurance Company's investment, accounting and compliance staffs); the
profitability of the Contract to the Insurance Company; the Trust's expenses and
its expense ratio compared to other similar funds; the Insurance Company's soft
dollar practices; and possible alternatives to the engagement of the Insurance
Company. The Trustees concluded, among other things, that the investment
performance of the Trust's portfolio for the twelve-month and twenty four-month
periods ended September 30, 1997 was satisfactory and that its expense ratio
(excluding interest expenses) for the fiscal year ended December 31, 1997 of
1.13% was competitive. Based on their consideration of these and other factors,
the Trustees (including a majority of the Trustees who are not "interested
persons" of the Trust or of the Insurance Company) approved, and recommended
that shareholders approve, the continuation of the Contract as now in effect.
Prior to the Annual Meeting of Shareholders on April 24, 1998, the Trustees
will meet again to review their approval and recommendation. Subject to such
further review by the Board of Trustees, the Contract will be submitted to the
Trust's shareholders for their approval or disapproval at the forthcoming Annual
Meeting.
Summary of the Contract
Under the Contract, the Insurance Company has agreed to use its best efforts
to present to the Trust a continuing and suitable investment program consistent
with the investment objectives, policies and restrictions of the Trust. The
Insurance Company has further agreed that it will request each issuer of
securities which the Insurance Company is prepared to purchase at direct
placement, and which would be consistent with the investment policies of the
Trust, to offer such securities
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also to the Trust and that it will use its best efforts to insure that such
issuer accedes to such request.
The Insurance Company, at its expense, investigates and conducts relations
with the issuers of securities purchased or to be purchased directly by the
Trust and represents the Trust in any negotiations with issuers, investment
banking firms, securities brokers or dealers and other institutions or investors
relating to the Trust's investments. The Insurance Company provides
administration of the day-to-day investment operations of the Trust and provides
the Trust with all necessary office facilities and personnel for servicing the
Trust's investments, and will pay the salaries and fees of all officers of the
Trust, of all Trustees who are "interested persons" of the Trust or of the
Insurance Company, and of all personnel of the Trust or of the Insurance Company
performing services relating to research, statistical and investment activities.
In addition, the Insurance Company, subject to the supervision of the
Trustees of the Trust, will, at its expense, furnish (or make provision for) the
management and administrative services necessary for the operation of the Trust.
These services include providing facilities for maintaining the Trust's
organization (e.g., conducting Board, Committee and Shareholder meetings),
supervising relations with the Trust's custodian, transfer agent, accountants
and other persons dealing with the Trust, providing for pricing of the Trust's
portfolio securities, coordinating the preparation of shareholder communications
and conducting shareholder relations, maintaining the Trust's records,
developing management services for the Trust and furnishing reports, evaluations
and analyses on a variety of subjects for the Trustees of the Trust.
The Trust pays the fees and expenses of Trustees who are not "interested
persons" of the Trust or of the Insurance Company. The Trust also pays the fees
and expenses of independent advisers, independent contractors, consultants,
managers and other agents which it employs other than through the Insurance
Company. In addition, the Trust is responsible for the payment of legal fees and
expenses; the fees and disbursements of transfer agents, dividend disbursing
agents, registrars, independent accountants, and custodians and depositories of
its assets; out-of-pocket business travel expenses incurred by Trustees,
officers or employees of the Trust; taxes and governmental fees; the cost of
preparing and mailing share certificates, dividends,
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reports, notices and proxy materials to shareholders; brokers' commissions or
underwriting fees; and insurance as may be required by its Board of Trustees.
Expenses incurred jointly by the Trust, the Insurance Company, MassMutual
Corporate Investors (another closed-end investment company advised by the
Insurance Company), MassMutual Corporate Value Partners Limited (an unregistered
investment fund) or any of them which are directly associated with the joint
purchase or sale of securities by any such parties are shared by such parties in
proportion to the relative amounts of such securities each is purchasing or
selling.
For its services under the Contract, the Insurance Company is paid a
quarterly fee equal to 0.225% of the value of the net assets of the Trust as of
the last business day of each fiscal quarter, an amount approximately equivalent
to 0.90% on an annual basis. A majority of the Trustees of the Trust, including
a majority of Trustees of the Trust who are not "interested persons" of the
Trust or of the Insurance Company, must approve each valuation of the Trust's
net assets used to calculate the Insurance Company's fee.
At a meeting on January 27, 1998, the Board of Trustees of the Trust
approved the valuations being made as of the close of business on December 31,
1997, and arrived at a value for the net assets of the Trust at that date of
$106,155,585.
The Contract provides that the Insurance Company will reimburse the Trust
for any amount, not exceeding the Insurance Company's entire fee for any year,
by which the aggregate annual expenses (including the management fee, but
excluding interest, taxes, brokerage expenses and extraordinary expenses)
incurred by the Trust in such year exceed any expense limitation imposed by any
state securities law or regulations thereunder applicable to the Trust. This
requirement for reimbursement of expenses may be amended or rescinded with the
approval of a majority of the Trustees of the Trust who are not "interested
persons" of the Trust or of the Insurance Company in response to changes in the
requirements of state law, provided that no amendment or rescission shall be
given retroactive effect unless required by the change in state law.
15
Under the Contract, the Trust may use the name "MassMutual" or any name
derived from or similar to the name "Massachusetts Mutual" or "Massachusetts
Mutual Life Insurance Company" only for so long as the Contract or any
extension, renewal or amendment thereof remains in effect. When it is no longer
in effect, the Trust will (to the extent that it lawfully can) cease to use such
a name or any other name indicating that it is advised by or otherwise connected
with the Insurance Company.
The Contract also provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Insurance Company is not liable to the Trust or any of its shareholders for any
act or omission or for any loss suffered by the Trust or its shareholders.
The Contract is terminable on 60 days' written notice by the Trust's Board
of Trustees, by a "majority vote" of the Trust's shares. It will terminate
automatically in the event of its assignment. Until terminated, the Contract
will remain in force from year to year to the extent approved at least annually
(a) by vote of a majority of Trustees of the Trust who are not "interested
persons" of the Trust or of the Insurance Company, cast in person at a meeting
called for the purpose of voting on such approval, and (b) specifically either
by the Trust's Board of Trustees or by a "majority vote" of the Trust's shares.
Shareholder approval of the continuance of the Contract is not a requirement
of law. The Board of Trustees, however, believes it is desirable for the Trust's
shareholders to have an opportunity to give or withhold such approval. If such
approval is withheld the Contract will not automatically terminate but the
Trustees will determine what action to take in the best interests of
shareholders of the Trust. Approval of continuance of the Contract will require
the affirmative "majority vote" of the shareholders.
Sub-Administrative Contract
The Insurance Company has entered into a sub-administrative contract with
Dean Witter Reynolds, Inc. ("DWR"), through DWR's Intercapital Division ("Inter-
capital") under which Intercapital will perform, subject to the Insurance
Company's supervision, certain
16
administrative services for the Trust. These services include coordinating the
printing and distribution of reports to shareholders of the Trust; arranging for
the distribution of proxy materials to shareholders of the Trust, and overseeing
the tabulation of proxies by the Trust's transfer agent; evaluating the terms
under which custodian, transfer agency, dividend disbursing and registrar
services will be provided to the Trust; assisting and consulting with the
Insurance Company with respect to the payment of dividends and distributions by
the Trust; making economic and market research prepared by DWR available to the
Trust and the Insurance Company; and making reports to the Board of Trustees of
the Trust. The Insurance Company, however, remains legally obligated to provide
such services to the Trust. Pursuant to the sub-administrative contract, the
Insurance Company pays Intercapital a quarterly fee equal to 0.0375% of the
value of the net assets of the Trust as of the last business day of each fiscal
quarter, an amount approximately equal to 0.15% on an annual basis.
The sub-administrative contract is terminable upon 30 days' written notice
by either party. The Insurance Company has provided DWR with such written
notice, terminating the sub-administrative contract effective March 31, 1998.
Allocation of Portfolio Brokerage
Transactions in direct placement securities are on a negotiated basis.
Brokers and dealers who execute any portfolio transaction for the Trust will be
selected primarily on the basis of obtaining the best price and execution of
each transaction. In seeking the best price and execution for securities traded
only in the over-the-counter market, the Trust will normally deal directly with
the principal market-makers unless a more favorable price may be obtained
through other brokers or dealers.
When it can be done consistent with the policy of obtaining best price and
execution, it is the Insurance Company's practice to place orders with brokers
and dealers who supply market quotations to the Trust or its agents for
portfolio evaluation purposes, or who supply research, market and statistical
information to the Trust or the Insurance Company. Except for implementing the
17
policy stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof. Although certain research,
market and statistical information from brokers and dealers can be useful to the
Trust and the Insurance Company, it is the opinion of the Insurance Company that
such information is only supplementary to the Insurance Company's own research
effort since the information must still be analyzed, weighed and reviewed by the
Insurance Company's staff. Such information may be useful to the Insurance
Company in providing services to clients other than the Trust, and not all such
information will be used by the Insurance Company in connection with the Trust.
Conversely, such information provided to the Insurance Company by brokers and
dealers through whom other clients of the Insurance Company effect securities
transactions may be useful to the Insurance Company in providing services to the
Trust.
The Trust paid $25,590 in brokerage commissions for the fiscal year ended
December 31, 1997, including approximately $114 paid to Jeffries, Inc.
("Jeffries") and $1,542 paid to Advest, Inc. ("Advest"). Jeffries and Advest are
each wholly-owned subsidiaries of companies for which one Trustee serves as
director. Portfolio turnover for the fiscal year ended December 31, 1997 was
70.88%.
Investment Adviser
The names and addresses of the principal executive officer and each director
of the Insurance Company and his or her principal occupations are set forth
below.
THOMAS B. WHEELER
1295 State Street
Springfield, Massachusetts 01111
Chairman of Board of Directors and Chief Executive Officer of the Insurance
Company.
18
ROGER G. ACKERMAN
One Riverfront Plaza
Corning, New York 14831
Chairman and Chief Executive Officer, Corning Incorporated (manufacturer of
specialty materials, communications equipment, and consumer products).
JAMES R. BIRLE
2 Soundview Drive
Greenwich, Connecticut 06836
Chairman, Resolute Partners, LLC.
FRANK C. CARLUCCI III
1001 Pennsylvania Avenue N.W.
Suite 220S
Washington, D.C. 20004
Chairman, The Carlyle Group, Inc.
GENE CHAO
733 S.W. Vista Avenue
Portland, Oregon 97205
Chairman, President and Chief Executive Officer, Computer Projections, Inc.
PATRICIA DIAZ DENNIS
175 East Houston
San Antonio, Texas 78205
Senior Vice President and Assistant General Counsel, SBC Communications,
Inc.
ANTHONY DOWNS
1775 Massachusetts Avenue N.W.
Washington, DC 20036
Senior Fellow, The Brookings Institution (non-profit research center).
JAMES L. DUNLAP
1201 Louisiana
Suite 1400
Houston, Texas 77002
President and Chief Operating Officer, United Meridian Corporation (oil
exploration).
19
WILLIAM B. ELLIS
31 Pound Foolish Lane
Glastonbury, Connecticut 06033
Retired; former Chairman, Northeast Utilities (electric utility).
ROBERT M. FUREK
1 State Street
Suite 2310
Hartford, Connecticut 06103
Chairman, State Board of Trustees for the Hartford School System.
CHARLES K. GIFFORD
100 Federal Street
Boston, Massachusetts 02110
Chairman and Chief Executive Officer, BankBoston N.A. and BankBoston
Corporation.
WILLIAM N. GRIGGS
75 Wall Street
20th Floor
New York, New York 10005
Managing Director, Griggs & Santow, Inc. (business consultant).
GEORGE B. HARVEY
663 Ponus Ridge
New Canaan, Connecticut 06840
Retired; former Chairman, President and Chief Executive Officer, Pitney
Bowes, Inc. (office machines manufacturer).
BARBARA BARNES HAUPTFUHRER
1700 Old Welsh Road
Huntingdon Valley, Pennsylvania 19006
Director: The Vanguard Group of Investment Companies, The Great Atlantic and
Pacific Tea Company, Inc. (operator of retail food stores), Knight-Ridder Inc.
(publisher of daily newspapers and operator of cable television and business
information systems), Raytheon Company (electronics), Alco Standard Corporation
(diversified manufacturer and distributor).
20
SHELDON B. LUBAR
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Chairman, Lubar & Co. Incorporated (investment management and advisory
company).
WILLIAM B. MARX, JR.
5 Peacock Lane
Village of Golf, Florida 33436
Retired; former Senior Executive Vice President, Lucent Technologies Inc.
(public telecommunications systems and software).
JOHN F. MAYPOLE
P.O. Box 1223
Toccoa, Georgia 30577
Managing Partner, Peach State Real Estate Holding Company (real estate).
DONALD F. McCULLOUGH
210 Madison Avenue
New York, New York 10016
Retired; former Chairman, Chief Executive Officer and President, Collins &
Aikman Corp. (manufacturer of textile products).
JOHN J. PAJAK
1295 State Street
Springfield, Massachusetts 01111
President, Director and Chief Operating Officer of the Insurance Company.
ALFRED M. ZEIEN
Prudential Tower
Boston, Massachusetts 02199
Chairman and Chief Executive Officer, The Gillette Company (manufacturer of
personal care products).
Executive Officers of the Trust (other than Trustees) who are officers of
the Insurance Company are listed below with their current titles. The term of
each such Executive Officer is until the next meeting of the Board of Trustees
following the 1998 Annual Meeting of
21
Shareholders and until his successor shall have been chosen and qualified.
STUART H. REESE
President (since 1995), Executive Vice President (1993-1995) of the Trust.
Chief Executive Director (since 1997), Senior Vice President (1993-1997) of the
Insurance Company. Age: 42.
ROBERT E. JOYAL
Senior Vice President (since 1989) of the Trust. Executive Director (since
1997), Senior Managing Director (1996-1997), Vice President and Managing
Director (1989-1996) of the Insurance Company. Age: 53.
CLIFFORD M. NOREEN
Vice President (since 1993) of the Trust. Senior Managing Director (since
1996), Vice President (1995-1996), Second Vice President (1992-1994), of the
Insurance Company. Age: 40.
STEPHEN L. KUHN
Vice President and Secretary (since 1988) of the Trust. Vice President and
Associate General Counsel (since 1992), of the Insurance Company. Age: 51.
RAYMOND B. WOOLSON
Treasurer (since 1992) of the Trust. Senior Managing Director (since 1996),
Second Vice President (1992-1996), of the Insurance Company. Age: 39.
Other officers of the Trust who are officers or employees of the Insurance
Company are: John B. Joyce, Charles C. McCobb, Jr., Richard C. Morrison, Mary
Wilson Kibbe, Mark A. Ahmed, Roger W. Crandall, Andrew C. Dickey, Walter T.
Dwyer, Michael L. Hermsen, Michael L. Klofas, Thomas S. Li, Kathleen Lynch, Mary
Ann Z. McCarthy, Richard E. Spencer II, Lawrence D. Stillman, John B. Wheeler,
Lisa J. Yoerg, Mark B. Ackerman, Norman B. Flebotte, Bruno R. Umbro, Elizabeth
Kelliher and Lisa M. Kusek.
The Insurance Company also advises MassMutual Corporate Investors
("Corporate Investors"), a closed-end, non-diversified management investment
company, having
22
net assets of $192,858,418 million as of December 31, 1997. The Insurance
Company's Investment Services Contract with Corporate Investors provides that
the Insurance Company is to be paid a base rate (the "Base Fee Rate") of 5/16 of
1% of the net asset value of Corporate Investors (approximately equivalent to
1.25% on an annual basis), plus or minus a performance adjustment (the
"Performance Adjustment"). The Performance Adjustment is based on Corporate
Investors' performance as compared to a benchmark rate of return (the "Target
Rate") equal to 5.0 percentage points plus an unweighted, arithmetic average of
the rates of return on the Standard & Poor's Industrials Stock Price Index (the
"S&P Industrials") and the Lehman Brothers Intermediate Corporate Bond Index
(the "Intermediate Bond Index") over a rolling three-year period (the
"Measurement Period") comprising the twelve quarters ending on the last day of
each quarter (the "Valuation Date"). The Performance Adjustment is equal to 5%
of the difference between Corporate Investors' actual rate of return over the
Measurement Period and the Target Rate. If Corporate Investors' actual rate of
return exceeds the Target Rate, the Base Fee Rate is increased by an amount
equal to the Performance Adjustment; if Corporate Investors' actual rate of
return is less than the Target Rate, the Base Fee Rate is reduced by the
Performance Adjustment. The Performance Adjustment is subject to a maximum and
minimum range of 1/16 of 1% of the net asset value of Corporate Investors
(approximately equivalent to .25% on an annual basis). The advisory fee payable
by Corporate Investors is equal to the Base Fee Rate (as adjusted by the
Performance Adjustment) times the net asset value of Corporate Investors as of
the Valuation Date.
Net Assets Advisory Fee
as of (on an
Name of Fund 12/31/97 annual basis)
- ------------ -------- -------------
MassMutual $192.9 million 1.25% of net assets PLUS
Corporate Performance Incentive of
Investors +/- .25% (1.0% to 1.50%)
In addition to acting as investment adviser and administrator to the Trust
and Corporate Investors, the Insurance Company acts as investment adviser to MML
Series Investment Fund and MassMutual Institutional Funds, which are open-end
management investment companies investing in publicly traded securities.
23
Like other businesses and governments around the world, the Trust could be
adversely affected if the computer systems used by the Insurance Company (and
those with which it does business on behalf of the Trust) and the Trust's other
service providers do not properly recognize the year 2000. This is commonly
known as the "Year 2000" issue. In 1996, the Insurance Company began an
enterprise-wide process of identifying, evaluating and implementing changes to
computer systems and application software to address the Year 2000 issue. The
Trust has been informed that this is one of the Insurance Company's highest
business operational priorities. The Insurance Company is also seeking
assurances from the Trust's custodian, and transfer agent in order to identify
and resolve Year 2000 issues.
(4) OTHER BUSINESS
The Board of Trustees knows of no business to be brought before the meeting
other than as set forth above. If, however, any other matters properly come
before the meeting, it is the intention of the persons named in the enclosed
proxy card to vote proxies on such matters in accordance with their best
judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
During the fiscal year ended December 31, 1997, Joseph Zubretsky and Edward
Kline inadvertently failed to timely file a Form 3 upon becoming an executive
officer of the Insurance Company.
PROPOSALS BY SHAREHOLDERS
Any shareholder intending to present a proposal at the Annual Meeting to be
held in 1999 who wishes to have such proposal included in the Trust's proxy
material for that meeting should forward the written proposal to the Trust,
Attention: Secretary. Proposals must be received on or before November 4, 1998,
to be considered for inclusion in the Trust's proxy material for its 1999 Annual
Meeting.
24
ADDITIONAL INFORMATION
Proxies will be solicited by mail and may be solicited in person or by
telephone or facsimile by officers of the Trust. The expenses connected with the
solicitation of these proxies and with any further proxies which may be
solicited by the Trust's officers in person, by telephone or by facsimile will
be borne by the Trust. In addition, the Trust may retain an outside firm to
solicit proxies, which would involve additional expenses, payable by the Trust.
If the Trust does retain such an outside firm, the anticipated cost would be
approximately $20,000. The Trust will reimburse banks, brokers, and other
persons holding the Trust's shares registered in their names or in the names of
their nominees, for their expenses incurred in sending proxy material to and
obtaining proxies from the beneficial owners of such shares.
If any shareholders desire additional information about the matters proposed
for action, the management will be glad to hear from them and to provide further
information.
ANNUAL REPORT
The Annual Report of the Trust for its fiscal year ended December 31, 1997,
including financial statements, a schedule of the Trust's investments as of such
date and other data, was mailed on or about February 28, 1998 to all
shareholders of record as of the record date. The financial statements included
in such Annual Report are incorporated herein by reference. Any shareholder may
request a copy of the Annual Report and the most recent quarterly report, which
will be furnished without charge, by calling (toll-free) the Trust's transfer
agent, Shareholder Financial Services, Inc., at 1-800-647-7374.
By order of the
Board of Trustees,
/s/ Stephen L. Kuhn
Stephen L. Kuhn
Vice President and Secretary
1295 State Street
Springfield, Massachusetts 01111
March 3, 1998
25
APPENDIX
FORM OF PROXY
MASSMUTUAL PARTICIPATION INVESTORS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Stephen L. Kuhn and Charles C. McCobb, Jr., and
each of them, attorneys and proxies of the undersigned, with power of
substitution to vote all shares of MassMutual Participation Investors (the
"Trust") which the undersigned is entitled to vote at the Annual Meeting of
shareholders of the Trust to be held in the Oak Room of Massachusetts Mutual
Life Insurance Company, 1295 State Street, Springfield, Massachusetts 01111, on
Friday, April 24, 1998, at 1:00 p.m. Springfield time, and at any adjournments
thereof (the "Annual Meeting").
THIS PROXY WILL BE VOTED ON ITEMS (1), (2) AND (3) IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN ON THIS CARD, AND IN THE ABSENCE OF INSTRUCTIONS THE
UNDERSIGNED HEREBY AUTHORIZES THE AFORESAID PROXY OR PROXIES TO VOTE FOR ITEMS
(1), (2) AND (3).
PLEASE SIGN ON REVERSE SIDE
SEE REVERSE
SIDE
Please mark votes as in this example.
1. Election of Trustees
Nominees: Donald E. Benson, Richard G. Dooley, Donald Glickman and Corine T.
Norgaard for the terms set forth in the proxy statement.
FOR WITHHELD
- --------------------------------------
For all nominees except as noted above
2. Ratification of the selection of Coopers & Lybrand L.L.P. as auditors for the
fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
3. Approval of continuance of the Trust's Investment Advisory and Administrative
Services Contract with Massachusetts Mutual Life Insurance Company, dated
October 7, 1988.
FOR AGAINST ABSTAIN
4. In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Annual Meeting.
MARK HERE FOR
ADDRESS CHANGE AND
NOTE AT LEFT.
MARK HERE IF
YOU PLAN TO ATTEND
THE MEETING.
Signature: Date:
Signature: Date:
Please sign exactly as your name or names appear. When signing as joint tenant,
all parties to the joint tenancy should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. Please mail the completed and signed proxy to SFSI, P.O. Box 173673,
Denver, CO 80217-3673.
2