UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5531
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MassMutual Participation Investors
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(Exact name of registrant as specified in charter)
1500 Main Street, Suite 600, Springfield, MA 01115-5189
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(Address of principal executive offices) (Zip code)
Rodney J. Dillman, Vice President and Secretary
1500 Main Street, Suite 2800, Springfield, MA 01115-5189
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(Name and address of agent for service)
Registrant's telephone number, including area code: 413-226-1000
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/08
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
Attached hereto is the semi-annual shareholder report transmitted to
shareholders pursuant to Rule 30e-1 of the Investment Company Act of
1940, as amended.
MASSMUTUAL
PARTICIPATION INVESTORS
REPORT FOR THE
SIX MONTHS ENDED JUNE 30, 2008
[LOGO]
ADVISER
Babson Capital Management LLC
1500 Main Street, P.O. 15189
Springfield, Massachusetts 01115-5189
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Boston, Massachusetts 02110
COUNSEL TO THE TRUST
Ropes & Gray LLP
Boston, Massachusetts 02110
CUSTODIAN
Citibank, N.A.
New York, New York 10043
TRANSFER AGENT & REGISTRAR
Shareholder Financial Services, Inc. MassMutual Participation Investors
P.O. Box 173673 c/o Babson Capital Management LLC
Denver, Colorado 80217-3673 [LOGO] 1500 Main Street, Suite 600
1-800-647-7374 Springfield, Massachusetts 01115
(413) 226-1516
INTERNET WEBSITE
www.babsoncapital.com/mpv
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INVESTMENT OBJECTIVE AND POLICY
MassMutual Participation Investors (the "Trust") is a closedend management
investment company, first offered to the public in 1988, whose shares are traded
on the New York Stock Exchange under the trading symbol "MPV". The Trust's share
price can be found in the financial section of most newspapers as "MassPrt" or
"MassMuPrt" under the New York Stock Exchange listings or Closed-End Fund
Listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term debt obligations purchased directly from their
issuers, which tend to be smaller companies. At least half of these investments
normally include equity features such as common stock, warrants, conversion
rights, or other equity features that provide the Trust with the opportunity to
realize capital gains. The Trust will also invest in publicly traded debt
securities (including high yield securities), again with an emphasis on those
with equity features, and in convertible preferred stocks and, subject to
certain limitations, readily marketable equity securities. Below investment
grade or high yield securities have predominantly speculative characteristics
with respect to the capacity of the issuer to pay interest and repay principal.
In addition, the Trust may temporarily invest in high quality, readily
marketable securities.
Babson Capital Management LLC ("Babson Capital") manages the Trust on a total
return basis. The Trust distributes substantially all of its net income to
shareholders each year. Accordingly, the Trust pays dividends to shareholders
quarterly in January, May, August, and November. All registered shareholders are
automatically enrolled in the Dividend Reinvestment and Cash Purchase Plan
unless cash distributions are requested.
Form N-Q
MassMutual Participation Investors files its complete schedule of portfolio
holdings with the U.S. Securities and Exchange Commission for the first and
third quarters of each fiscal year on Form N-Q. This information is available
(i) on the U.S. Securities and Exchange Commission's website at
http://www.sec.gov; and (ii) at the U.S. Securities and Exchange Commission's
Public Reference Room in Washington, DC (which information on their operation
may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio
holdings as of each quarter-end is available upon request by calling, toll-free,
866-399-1516.
PROXY VOTING POLICIES & PROCEDURES; PROXY VOTING RECORD
The Trustees of MassMutual Participation Investors have delegated proxy voting
responsibilities relating to the voting of securities held by the Trust to
Babson Capital Management LLC. A description of Babson Capital's proxy voting
policies and procedures is available (1) without charge, upon request, by
calling, toll-free 866-399-1516; (2) on MassMutual Participation Investors'
website: http://www. babsoncapital.com/mpv; and (3) on the U.S. Securities and
Exchange Commission ("SEC") website at http:// www.sec.gov. Information
regarding how the Trust voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30 is available (1) on MassMutual
Participation Investors' website: http://www. babsoncapital.com/mpv; and (2) on
the SEC's website at http://www.sec.gov.
MPV
Listed
NYSE
TO OUR SHAREHOLDERS MassMutual Participation Investors
July 31, 2008
We are pleased to present the June 30, 2008 Quarterly Report of MassMutual
Participation Investors (the "Trust").
The Board of Trustees declared a quarterly dividend of 25 cents per share,
payable on August 15, 2008 to shareholders of record on August 1, 2008. The
Trust had previously paid a 25 cent per share dividend for the preceding
quarter.
The mezzanine and private equity markets in which the Trust participates have
begun to recover from the effects of the credit dislocation that occurred in
2007. Deal volume has rebounded over the past few months as credit continues to
be available for middle market leveraged transactions. In the current market,
new investments are being structured with lower leverage than they were in 2007,
while pricing on these investments is more favorable than it has been for
several years.
During the quarter, the Trust made private placement investments in two new
issuers and two "follow-on" investments, totaling approximately $2.6 million.
The follow-on investments purchased by the Trust were American Hospice
Management Holding LLC and Fuel Systems Holding Corporation. The two new issuers
were A W X Holdings Corporation and GQ Holdings LLC. The weighted average coupon
of these investments was 13.31%. (A brief description of these investments can
be found in the Consolidated Schedule of Investments.)
During the quarter ended June 30, 2008, net assets of the Trust decreased to
$125,650,592 or $12.68 per share compared to $127,127,512 or $12.85 per share on
March 31, 2008, which translates into a 0.61% total return for the quarter,
based on the change in the Trust's net assets assuming the reinvestment of all
dividends. Longer term, the Trust returned 6.01%, 17.69%, and 12.21% for the 1-,
5- and 10-year time periods, respectively, based on the change in the Trust's
net assets assuming the reinvestment of all dividends. The Trust earned 23 cents
per share of net investment income for the quarter, compared to 26 cents per
share in the previous quarter.
U.S. equity markets, as approximated by the Russell 2000 Index, increased 0.58%
for the quarter. U.S. fixed income markets, as approximated by the Lehman
Brothers U.S. Corporate High Yield Index increased 1.76% for the quarter.
During the quarter ended June 30, 2008, the market price of the Trust decreased
3.4% from $13.65 per share to $13.19 per share. The Trust's market price of
$13.19 per share equated to a 4.0% premium over the June 30, 2008 net asset
value per share. The Trust's average quarter-end premium for the 3-, 5-, and
10-year periods was 11.1%, 10.6% and 6.4%, respectively.
Thank you for your continued interest in and support of MassMutual Participation
Investors.
Sincerely,
/s/ Clifford M. Noreen
Clifford M. Noreen
President
Portfolio Composition as of 6/30/08 *
[PIE CHART APPEARS HERE]
Public High Yield Debt 18.6% Private Investment Grade Debt 0.8%
Public Equity 0.8% Private / Restricted Equity 13.8%
Private / 144A High Yield Debt 57.2% Cash & Short Term Investments 8.8%
*Based on market value of total investments
Cautionary Notice: Certain statements contained in this report may be "forward
looking" statements. Investors are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on which they are
made and which reflect management's current estimates, projections, expectations
or beliefs, and which are subject to risks and uncertainties that may cause
actual results to differ materially. These statements are subject to change at
any time based upon economic, market or other conditions and may not be relied
upon as investment advice or an indication of the Trust's trading intent.
References to specific securities are not recommendations of such securities,
and may not be representative of the Trust's current or future investments. We
undertake no obligation to publicly update forward looking statements, whether
as a result of new information, future events, or otherwise.
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1
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008
(UNAUDITED)
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $98,510,329) $ 93,969,644
Corporate public securities at market value
(Cost - $28,489,599) 25,816,933
Short-term securities at amortized cost 10,676,366
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130,462,943
Cash 965,874
Interest receivable 2,799,003
Receivable for investments sold 3,898,548
Other assets 12,594
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TOTAL ASSETS 138,138,962
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LIABILITIES:
Investment advisory fee payable 282,714
Note payable 12,000,000
Interest payable 88,933
Accrued expenses 116,723
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TOTAL LIABILITIES 12,488,370
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TOTAL NET ASSETS $ 125,650,592
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NET ASSETS:
Common shares, par value $.01 per share; an unlimited
number authorized $ 99,112
Additional paid-in capital 92,387,793
Retained net realized gain on investments, prior years 32,808,045
Undistributed net investment income 3,395,923
Accumulated net realized gain on investments 4,173,070
Net unrealized depreciation of investments (7,213,351)
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TOTAL NET ASSETS $ 125,650,592
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COMMON SHARES ISSUED AND OUTSTANDING 9,911,164
=============
NET ASSET VALUE PER SHARE $ 12.68
=============
See Notes to Consolidated Financial Statements
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2
CONSOLIDATED STATEMENT OF OPERATIONS MassMutual Participation Investors
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(UNAUDITED)
INVESTMENT INCOME:
Interest $ 5,917,602
Dividends 105,447
Other 39,136
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Total investment income 6,062,185
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EXPENSES:
Investment advisory fees 568,751
Interest 354,229
Trustees' fees and expenses 84,000
Professional fees 78,200
Reports to shareholders 54,000
Custodian fees 13,957
Transfer agent/registrar's expenses 12,000
Other 18,590
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TOTAL EXPENSES 1,183,727
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INVESTMENT INCOME - NET 4,878,458
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments before taxes 3,776,610
Income tax expense (87,118)
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Net realized gain on investments 3,689,492
Net change in unrealized appreciation of investments (7,715,271)
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NET LOSS ON INVESTMENTS (4,025,779)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 852,679
=============
See Notes to Consolidated Financial Statements
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3
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(UNAUDITED)
NET DECREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term
portfolio securities, net $ (3,007,925)
Purchases of portfolio securities (12,517,455)
Proceeds from disposition of portfolio securities 18,200,873
Interest, dividends and other received 6,050,920
Interest expense paid (358,051)
Operating expenses paid (830,625)
Income taxes paid (842,710)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 6,695,027
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Cash flows from financing activities:
Cash dividends paid from net investment income (7,216,891)
Cash dividends paid from net realized gain on investments (187,646)
Receipts for shares issued on reinvestment of dividends 646,310
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NET CASH USED FOR FINANCING ACTIVITIES (6,758,227)
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NET DECREASE IN CASH (63,200)
Cash - beginning of year 1,029,074
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CASH - END OF PERIOD $ 965,874
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RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 852,679
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Decrease in investments 9,376,837
Decrease in interest receivable 194,438
Increase in receivable for investments sold (2,943,196)
Increase in other assets (12,594)
Decrease in investment advisory fee payable (2,193)
Decrease in interest payable (3,822)
Decrease in accrued expenses (8,392)
Decrease in accrued taxes payable (755,592)
Decrease in other payables (3,138)
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TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS 5,842,348
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,695,027
=============
See Notes to Consolidated Financial Statements
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4
CONSOLIDATED STATEMENTS OF CHANGES MassMutual Participation Investors
IN NET ASSETS
For the six
months ended For the
06/30/08 year ended
(Unaudited) 12/31/07
----------- --------
(DECREASE) INCREASE IN NET ASSETS:
Operations:
Investment income - net $ 4,878,458 $ 12,057,960
Net realized gain on investments 3,689,492 1,184,026
Net change in unrealized appreciation of
investments (7,715,271) (1,644,141)
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Net increase in net assets resulting from
operations 852,679 11,597,845
Increase from common shares issued on
reinvestment of dividends Common shares
issued (2008 - 49,553; 2007 - 56,329) 646,310 828,061
Dividends to shareholders from:
Net investment income (2008 - $0.25 per
share; 2007 - $1.23 per share) (2,473,731) (12,127,939)
Net realized gains on investments (2007 -
$0.02 per share) -- (187,646)
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TOTAL (DECREASE) INCREASE IN NET ASSETS (974,742) 110,321
NET ASSETS, BEGINNING OF YEAR 126,625,334 126,515,013
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NET ASSETS, END OF PERIOD/YEAR (including
undistributed net investment income of
$3,395,923 and $991,196, respectively) $ 125,650,592 $ 126,625,334
============= =============
See Notes to Consolidated Financial Statements
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5
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING:
For the six months For the years ended December 31,
ended 06/30/2008 --------------------------------------------------
(Unaudited) 2007 2006 2005 2004 2003
----------- ---- ---- ---- ---- ----
Net asset value:
Beginning of year $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84 $ 8.78
------- ------- ------- ------- ------- -------
Net investment income (a) 0.49 1.23 1.10 0.99 1.00 0.80
Net realized and unrealized
gain (loss) on investments (0.41) (0.05) 0.77 1.09(b) 1.36 1.21
------- ------- ------- ------- ------- -------
Total from investment operations 0.08 1.18 1.87 2.08 2.36 2.01
------- ------- ------- ------- ------- -------
Dividends from net investment
income to common shareholders (0.25) (1.23) (1.18) (1.01) (1.10) (0.96)
Dividends from net realized gain
on investments to common shareholders -- (0.02) (0.01) -- -- --
Increase from dividends reinvested 0.01 0.01 0.01 0.01 0.03 0.01
------- ------- ------- ------- ------- -------
Total dividends (0.24) (1.24) (1.18) (1.00) (1.07) (0.95)
------- ------- ------- ------- ------- -------
Net asset value: End of period/year $ 12.68 $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84
------- ------- ------- ------- ------- -------
Per share market value:
End of period/year $ 13.19 $ 13.18 $ 14.70 $ 14.05 $ 13.31 $ 11.65
======= ======= ======= ======= ======= =======
Total investment return
Market value 1.97% (1.30%) 16.81% 17.25% 25.77% 35.50%
Net asset value (c) 0.69% 9.95% 18.64% 22.51% 25.14% 23.72%
Net assets (in millions):
End of period/year $125.65 $126.23 $126.52 $119.02 $107.61 $ 94.40
Ratio of operating expenses
to average net assets 1.32%(d) 1.36% 1.17% 1.45% 1.63% 1.65%
Ratio of interest expense
to average net assets 0.56%(d) 0.56% 0.57% 0.80% 0.89% 0.97%
Ratio of income tax expense
to average net assets (e) 0.14%(d) 0.48% 2.68% 2.83% 0.16% --
Ratio of total expenses before custodian fee
reduction to average net assets (e) 2.02%(d) 2.40% 4.46% 5.12% 2.68% 2.62%
Ratio of net expenses after custodian fee
reduction to average net assets (e) 2.02%(d) 2.40% 4.42% 5.08% 2.68% 2.62%
Ratio of net investment income
to average net assets 7.76%(d) 9.32% 8.43% 8.45% 9.60% 8.55%
Portfolio turnover 10% 33% 34% 32% 51% 55%
(a) Calculated using average shares.
(b) Amount includes $0.10 per share in litigation proceeds.
(c) Net asset value return represents portfolio returns based on change in the Trust's net asset value assuming the
reinvestment of all dividends and distributions which differs from the total investment return based on the Trust's market
value due to the difference between the Trust's net asset value and the market value of its shares outstanding; past
performance is no guarantee of future results.
(d) Annualized.
(e) As additional information, this ratio is included to reflect the taxes paid on retained long-term gains. These taxes paid
are netted against realized capital gains in the Statement of Operations. The taxes paid are treated as deemed
distributions and a credit for the taxes paid is passed on to shareholders.
Senior securities:
Total principal amount (in millions) $ 12 $ 12 $ 12 $ 12 $ 22.5 $ 22.5
Asset coverage per $1,000
of indebtedness $11,471 $11,552 $11,543 $10,918 $5,783 $ 5,195
See Notes to Consolidated Financial Statements
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6
CONSOLIDATED SCHEDULE OF INVESTMENTS MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 74.78%:(A) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
PRIVATE PLACEMENT INVESTMENTS - 71.22%
A H C HOLDING COMPANY, INC.
A designer and manufacturer of boilers and water heaters for the commercial sector.
15% Senior Subordinated Note due 2015 $ 1,244,460 11/21/07 $ 1,219,601 $ 1,208,697
Limited Partnership Interest (B) 7.93% int. 11/21/07 119,009 113,060
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1,338,610 1,321,757
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A T I ACQUISITION COMPANY
A for-profit post-secondary school serving students in Texas, Florida and Arizona.
12% Senior Subordinated Note due 2012 $ 1,125,000 04/08/04 1,125,000 1,125,000
Warrant, exercisable until 2012, to purchase
preferred stock at $.01 per share (B) 7 shs. 11/16/07 -- 9,158
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 210,521
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1,125,000 1,344,679
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A W X HOLDINGS CORPORATION
A provider of aerial equipment rental, sales and repair services to non-residential
construction and maintenance contractors operating in the State of Indiana.
10.5% Senior Secured Term Note due 2014 $ 420,000 05/15/08 411,600 418,272
13% Senior Subordinated Note due 2015 $ 420,000 05/15/08 376,282 416,983
Common Stock (B) 60,000 shs. 05/15/08 60,000 57,000
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 21,099 shs. 05/15/08 35,654 211
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883,536 892,466
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ADVANCED TECHNOLOGIES HOLDINGS
A provider of factory maintenance services to industrial companies.
15% Senior Subordinated Note due 2013 $ 1,080,460 12/27/07 1,066,743 1,068,019
Preferred Stock (B) 546 shs. 12/27/07 270,000 256,501
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1,336,743 1,324,520
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AERO HOLDINGS, INC.
A provider of geospatial services to corporate and government clients.
10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 895,014
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 648,598 687,474
Common Stock (B) 150,000 shs. 03/09/07 150,000 127,246
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 32,049
------------- -------------
1,778,378 1,741,783
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7
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
AMERICAN HOSPICE MANAGEMENT HOLDING LLC
A for-profit hospice care provider in the United States.
12% Senior Subordinated Note due 2013 $ 1,125,000 01/22/04 $ 1,055,949 $ 1,075,960
12% Senior Subordinated Note due 2013 $ 562,503 06/09/08 551,253 559,629
Preferred Class A Unit (B) 1,706 uts. * 170,600 68,240
Preferred Class B Unit (B) 808 uts. 06/09/08 80,789 80,798
Common Class B Unit (B) 16,100 uts. 01/22/04 1 --
Common Class D Unit (B) 3,690 uts. 09/12/06 -- --
------------- -------------
1,858,592 1,784,627
------------- -------------
ARROW TRU-LINE HOLDINGS, INC.
A manufacturer of hardware for residential and commercial overhead garage doors in North America.
12% Senior Subordinated Note due 2012 $ 861,702 05/18/05 822,201 814,299
Common Stock (B) 263 shs. 05/18/05 263,298 45,497
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 11,928
------------- -------------
1,144,861 871,724
------------- -------------
BRAVO SPORTS HOLDING CORPORATION
A designer and marketer of niche branded consumer products including canopies, trampolines,
in-line skates, skateboards, and urethane wheels.
12.5% Senior Subordinated Note due 2014 $ 1,207,902 06/30/06 1,142,813 1,219,981
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 141,377
Common Stock (B) 1 sh. 06/30/06 152 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 164 shs. 06/30/06 48,760 49,685
------------- -------------
1,333,671 1,411,043
------------- -------------
CAPESUCCESS LLC
A provider of diversified staffing services.
Preferred Membership Interests (B) 806 uts. 04/29/00 3,598 --
Common Membership Interests (B) 10,421 uts. 04/29/00 46,706 --
------------- -------------
50,304 --
------------- -------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B) 55 shs. ** 252 279,466
------------- -------------
* 01/22/04 and 09/12/06.
** 12/30/97 and 05/29/99.
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8
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
COEUR, INC.
A producer of proprietary, disposable power injection syringes.
8.75% Senior Secured Term Note due 2010 $ 141,304 04/30/03 $ 141,304 $ 141,761
11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 231,575 240,418
Common Stock (B) 72,464 shs. 04/30/03 72,463 172,102
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 118,985
------------- -------------
468,659 673,266
------------- -------------
CONNECTICUT ELECTRIC, INC.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
12% Senior Subordinated Note due 2014 $ 1,267,387 01/12/07 1,182,283 1,115,744
Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 11,999
Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 8,680
------------- -------------
1,324,652 1,136,423
------------- -------------
CONNOR SPORT COURT INTERNATIONAL, INC.
A designer and manufacturer of outdoor and indoor synthetic sports flooring and other temporary flooring products.
Preferred Stock Series B-2 (B) 9,081 shs. 07/05/07 370,796 370,796
Preferred Stock Series C (B) 4,757 shs. 07/05/07 158,912 158,913
Common Stock (B) 380 shs. 07/05/07 4 4
Limited Partnership Interest (B) 4.43% int. * 103,135 --
------------- -------------
632,847 529,713
------------- -------------
COREPHARMA LLC
A manufacturer of oral dose generic pharmaceuticals targeted at niche applications.
12% Senior Subordinated Note due 2013 $ 1,350,000 08/04/05 1,293,920 1,333,643
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 53,882
------------- -------------
1,366,537 1,387,525
------------- -------------
DAVIS-STANDARD LLC
A manufacturer, assembler, and installer of a broad range of capital equipment that is used in the extrusion, conversion,
and processing of plastic materials.
12% Senior Subordinated Note due 2014 $ 978,261 10/30/06 920,768 988,544
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 690,164
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 30,487
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 68,904
------------- -------------
1,336,887 1,778,099
------------- -------------
* 08/12/04 and 01/14/05.
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9
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
DIVERSCO, INC./DHI HOLDINGS, INC.
A contract provider of janitorial and equipment maintenance services and temporary production labor to industrial customers.
Membership Interests of MM/Lincap
Diversco Investments Ltd. LLC (B) 13.57% int. 08/27/98 $ 366,495 $ --
Preferred Stock (B) 1,639 shs. 12/14/01 1,392,067 751,555
Warrants, exercisable until 2011, to purchase
common stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 --
------------- -------------
1,960,217 751,555
------------- -------------
DUNCAN SYSTEMS, INC.
A distributor of windshields and side glass for the recreational vehicle market.
10% Senior Secured Term Note due 2013 $ 308,571 11/01/06 303,942 302,203
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 439,999 475,698
Common Stock (B) 102,857 shs. 11/01/06 102,857 120,230
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 37,749
------------- -------------
891,461 935,880
------------- -------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
Common Stock (B) 3,656 shs. ** 365,600 585,690
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 172,472
------------- -------------
464,319 758,162
------------- -------------
E S P HOLDCO, INC.
A manufacturer of power protection technology for commercial office equipment, primarily supplying the office equipment
dealer network.
14% Senior Subordinated Note due 2015 $ 1,180,784 01/08/08 1,160,178 1,151,716
Common Stock (B) 349 shs. 01/08/08 174,701 165,775
------------- -------------
1,334,879 1,317,491
------------- -------------
E X C ACQUISITION CORPORATION
A manufacturer of pre-filled syringes and pump systems used for intravenous drug delivery.
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 11 shs. 06/28/04 40,875 97,897
------------- -------------
* 10/24/96 and 08/28/98.
** 10/30/03 and 01/02/04.
---------------------------------------------------------------------------------------------------------------------------------
10
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
ELECTRA BICYCLE COMPANY LLC
A designer and marketer of branded leisure bicycles.
10.5% Senior Secured Term Note A due 2009 $ 36,437 04/12/07 $ 35,709 $ 36,317
10.5% Senior Secured Term Note B due 2012 $ 377,126 04/12/07 371,400 373,825
12% Senior Secured Term Note C due 2012 $ 291,498 04/12/07 271,410 286,699
Limited Liability Company Unit Series F 36,913 uts. 04/12/07 36,913 84,425
Limited Liability Company Unit Series G 2,852 uts. 04/12/07 2,852 6,523
------------- -------------
718,284 787,789
------------- -------------
ENZYMATIC THERAPY, INC.
A manufacturer and distributor of branded natural medicines and nutritional supplements.
Limited Partnership Interest (B) 0.70% int. 03/30/00 281,250 168,622
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 15,415 shs. 03/30/00 135,000 105,833
------------- -------------
416,250 274,455
------------- -------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control center systems.
Common Stock (B) 45,000 shs. 05/06/04 6 462,983
------------- -------------
F H S HOLDINGS LLC
A national provider of customized disease management services to large self-insured employers.
12% Senior Subordinated Note due 2014 $ 1,265,625 06/01/06 1,187,405 1,265,625
Preferred Unit (B) 84 uts. 06/01/06 84,368 99,498
Common Unit Class B (B) 734 shs. 06/01/06 64,779 --
------------- -------------
1,336,552 1,365,123
------------- -------------
FLUTES, INC.
An independent manufacturer of micro fluted corrugated sheet material for the food and consumer products
packaging industries.
10% Senior Secured Term Note due 2013 $ 524,791 04/13/06 516,919 495,493
14% Senior Subordinated Note due 2014 $ 317,177 04/13/06 287,906 299,187
Common Stock (B) 62,535 shs. 04/13/06 62,535 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 17,680 shs. 04/13/06 27,676 --
------------- -------------
895,036 794,680
------------- -------------
FOWLER HOLDING, INC.
A provider of site development services to residential homebuilders and developers in the Raleigh/Durham region of
North Carolina.
12% Senior Subordinated Note due 2013 $ 1,252,174 02/03/06 1,150,084 1,149,419
Common Stock (B) 98 shs. 02/03/06 97,826 23,193
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 31,905
------------- -------------
1,358,258 1,204,517
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
11
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
FUEL SYSTEMS HOLDING CORPORATION
An independent North American supplier of fuel tanks for a wide variety of commercial vehicles.
12% Senior Subordinated Note due 2014 $ 1,237,500 01/31/06 $ 1,162,144 $ 928,125
Preferred Stock (B) 16,792 shs. 06/12/08 16,792 8,396
Common Stock (B) 112,500 shs. 01/31/06 112,500 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 73,275 shs. 01/31/06 63,113 --
------------- -------------
1,354,549 936,521
------------- -------------
GOLDEN COUNTY FOODS HOLDING, INC.
A manufacturer of frozen appetizers and snacks.
12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 914,607 980,700
8% Series A Convertible Preferred Stock, convertible into
4.25% of the fully diluted common shares (B) 77,643 shs. 11/01/07 77,643 73,761
------------- -------------
992,250 1,054,461
------------- -------------
GQ HOLDINGS LLC
A developer and distributor of tools, equipment, and supplies to the natural and engineered stone industry.
15% Senior Subordinated Note due 2015 $ 1,217,159 06/27/08 1,192,816 1,219,227
Common Stock (B) 3,867 shs. 06/27/08 132,841 126,197
------------- -------------
1,325,657 1,345,424
------------- -------------
H M HOLDING COMPANY
A designer, manufacturer, and importer of promotional and wood furniture.
12% Senior Subordinated Note due 2013 (D) $ 1,170,000 02/10/06 1,084,725 --
Preferred Stock (B) 21 shs. * 21,428 --
Common Stock (B) 180 shs. 02/10/06 180,000 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 67 shs. 02/10/06 61,875 --
------------- -------------
1,348,028 --
------------- -------------
HIGHGATE CAPITAL LLC
An acquirer of controlling or substantial interests in manufacturing and marketing entities.
Series A Preferred Units (B) 0.30% int. 07/21/94 91,867 --
------------- -------------
HOME DECOR HOLDING COMPANY
A designer, manufacturer and marketer of framed art and wall decor products.
12.5% Senior Subordinated Note due 2012 $ 1,081,731 ** 1,007,958 1,052,323
Common Stock (B) 33 shs. ** 33,216 35,232
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. ** 105,618 112,018
------------- -------------
1,146,792 1,199,573
------------- -------------
* 09/18/07 and 06/27/08.
** 06/30/04 and 08/19/04.
---------------------------------------------------------------------------------------------------------------------------------
12
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
INSURANCE CLAIMS MANAGEMENT, INC.
A third party administrator providing auto and property claim administration services for insurance companies.
Common Stock (B) 37 shs. 02/27/07 $ 1,100 $ 41,987
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 11 shs. 02/27/07 324 12,369
------------- -------------
1,424 54,356
------------- -------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A manufacturer of steel protective computer and network systems for the industrial and office environments.
12% Senior Secured Note due on demand (D) $ 25,055 03/01/04 1 --
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------- -------------
149,501 --
------------- -------------
JASON, INC.
A diversified manufacturing company serving various industrial markets.
13% Senior Subordinated Note due 2010 $ 510,187 08/04/00 487,161 497,687
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,245 187,824
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 37,720
------------- -------------
1,017,507 723,231
------------- -------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 809,870 840,461
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 134,214
------------- -------------
863,398 974,675
------------- -------------
K H O F HOLDINGS, INC.
A manufacturer of premium disposable tableware products serving both the foodservice and consumer channels.
14% Senior Subordinated Note due 2014 $ 1,244,572 10/15/07 1,219,824 1,232,098
Common Stock (B) 116,827 shs. 10/15/07 116,827 110,986
------------- -------------
1,336,651 1,343,084
------------- -------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the custom framing market.
13.5% Senior Subordinated Note due 2013 $ 1,314,869 05/25/06 1,259,235 1,302,963
Common Stock (B) 71,053 shs. 05/25/06 71,053 66,449
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 40,775
------------- -------------
1,368,159 1,410,187
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
13
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
K W P I HOLDINGS CORPORATION
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
12% Senior Subordinated Note due 2014 $ 1,227,000 03/14/07 $ 1,127,298 $ 1,134,002
Common Stock (B) 123 shs. 03/13/07 123,000 70,810
Warrant, exercisable until 2017, to purchase
common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 51,237
------------- -------------
1,336,188 1,256,049
------------- -------------
K-TEK HOLDING CORPORATION
A manufacturer of instrumentation for liquid and bulk solids level detection for process and storage tanks.
14% Senior Secured Note due 2015 $ 1,163,636 12/20/07 1,142,650 1,128,363
Preferred Stock (B) 192,314 shs. 12/20/07 192,314 182,698
Common Stock (B) 54,326 shs. 12/20/07 543 543
------------- -------------
1,335,507 1,311,604
------------- -------------
MAIL COMMUNICATIONS GROUP, INC.
A provider of mail processing and handling services, lettershop services, and commercial printing services.
12.5% Senior Subordinated Note due 2014 $ 516,177 05/04/07 483,072 508,085
Limited Liability Company Unit (B) 12,763 uts. * 166,481 174,214
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 25,675
------------- -------------
672,334 707,974
------------- -------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of wine bottles.
7.19% Senior Secured Tranche A Note due 2010 (C) $ 232,695 09/03/04 232,695 229,334
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 165,842 169,780
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 21,704
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 15,682
------------- -------------
454,675 436,500
------------- -------------
MICROGROUP, INC.
A manufacturer of precision parts and assemblies, and a value-added supplier of metal tubing and bars.
12% Senior Subordinated Note due 2013 $ 1,421,795 ** 1,349,926 1,406,725
Common Stock (B) 238 shs. ** 238,000 292,372
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. ** 86,281 106,642
------------- -------------
1,674,207 1,805,739
------------- -------------
* 05/04/07 and 01/02/08.
** 08/12/05 and 09/11/06.
---------------------------------------------------------------------------------------------------------------------------------
14
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
MOMENTUM HOLDING CO.
A designer and supplier of upholstery fabric to commercial furniture manufacturers and architectural and design firms.
12% Senior Subordinated Note due 2014 $ 618,802 08/04/06 $ 557,982 $ 620,378
Limited Partnership Interest (B) 11.24% int. 08/04/06 56,198 106,703
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 111,226
------------- -------------
670,885 838,307
------------- -------------
MONESSEN HOLDING CORPORATION
A designer and manufacturer of a broad line of gas, wood, and electric hearth products and accessories.
12% Senior Subordinated Note due 2014 (D) $ 1,350,000 03/31/06 1,249,875 1,215,000
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 --
------------- -------------
1,323,000 1,215,000
------------- -------------
MORTON INDUSTRIAL GROUP, INC.
A manufacturer of highly engineered metal fabricated components.
12% Senior Subordinated Note due 2014 (D) $ 1,292,246 08/25/06 1,187,021 1,163,021
30% Series A Preferred Stock (B) 9,027 shs. 03/03/08 9,027 8,124
Common Stock (B) 57,754 shs. 08/25/06 57,754 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 91,923 shs. 08/25/06 79,380 --
------------- -------------
1,333,182 1,171,145
------------- -------------
MOSS, INC.
A manufacturer and distributor of large display and exhibit structures.
Limited Partnership Interest of
Riverside Capital Appreciation Fund I, L.P. (B) 21.37% int. * 199,301 664,620
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 122 shs. 12/21/05 20,941 40,689
------------- -------------
220,242 705,309
------------- -------------
NABCO, INC.
A producer of explosive containment vessels in the United States.
14% Senior Subordinated Note due 2014 $ 377,057 02/24/06 339,804 188,528
Limited Liability Company Unit (B) 437 uts. ** 436,984 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 68 shs. 02/24/06 19,687 --
------------- -------------
796,475 188,528
------------- -------------
* 09/20/00, 05/23/02 and 02/21/07.
** 02/24/06 and 06/22/07.
---------------------------------------------------------------------------------------------------------------------------------
15
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
NAVIS GLOBAL
A designer, manufacturer, seller and servicer of finishing machinery for the knit and woven segments of the global textile industry.
12% Senior Subordinated Note due 2014 (D) $ 705,457 05/28/04 $ 630,721 $ 352,729
8.75% Senior Secured Note due 2011 $ 327,478 05/28/04 327,478 320,277
Common Stock (B) 385,233 shs. 05/28/04 385,233 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 --
------------- -------------
1,418,168 673,006
------------- -------------
NESCO HOLDINGS CORPORATION
A sales and leasing company that provides equipment to the electric utility, telecommunications, and various other industries.
12% Senior Subordinated Note due 2015 $ 1,125,000 08/02/07 999,658 1,129,227
Common Stock (B) 225,000 shs. 08/02/07 225,000 213,750
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 632
------------- -------------
1,327,500 1,343,609
------------- -------------
NETSHAPE TECHNOLOGIES, INC.
A manufacturer of powder metal and metal injection molded precision components used in industrial,
consumer, and other applications.
12% Senior Subordinated Note due 2014 $ 810,000 02/02/07 745,713 749,479
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 540 uts. 02/01/07 540,000 182,464
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 16,249
------------- -------------
1,333,800 948,192
------------- -------------
NYLONCRAFT, INC.
A supplier of engineered plastic components for the automotive industry.
9% Senior Secured Note due 2009 $ 464,286 01/28/02 464,286 441,072
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 814,200 642,857
Common Stock (B) 178,571 shs. 01/28/02 178,571 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 138,928 shs. 01/28/02 92,597 --
------------- -------------
1,549,654 1,083,929
------------- -------------
OAKRIVER TECHNOLOGY, INC.
Designs, engineers and assembles high precision automated process equipment for the medical device industry,
with a focus on defibrillators and stents.
10% Senior Secured Note due 2012 $ 298,260 01/03/06 293,786 286,597
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 356,620 371,602
Common Stock (B) 184,176 shs. 01/03/06 184,176 --
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 --
------------- -------------
870,482 658,199
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
16
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and British Columbia.
12% Senior Subordinated Note due 2008 (D) $ 511,000 08/07/98 $ 511,000 $ 229,950
12% Senior Subordinated Note due 2008 (D) $ 244,154 02/09/00 213,313 109,869
Limited Partnership Interest of Riverside VIII, VIII-A and
VIII-B Holding Company, L.P. 10.66% int. * 808,386 --
Warrants, exercisable until 2008, to purchase
common stock at $.01 per share (B) 15,166 shs. ** 206,041 --
------------- -------------
1,738,740 339,819
------------- -------------
ONTARIO DRIVE & GEAR LTD.
A manufacturer of all-wheel drive, off-road amphibious vehicles and related accessories.
Limited Liability Company Unit (B) 1,942 uts. 01/17/06 302,885 570,665
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 96,349
------------- -------------
393,309 667,014
------------- -------------
P A S HOLDCO LLC
An independent provider of maintenance, repair and overhaul services to the
aerospace gas turbine engine and airframe markets.
14% Senior Subordinated Note due 2014 $ 1,188,263 07/03/06 1,134,521 1,177,942
Preferred Unit (B) 202 uts. 07/03/06 202,320 237,524
Preferred Unit (B) 36 uts. 07/03/06 36,420 42,757
Common Unit Class I (B) 78 uts. 07/03/06 -- --
Common Unit Class L (B) 17 uts. 07/03/06 -- --
------------- -------------
1,373,261 1,458,223
------------- -------------
P I I HOLDING CORPORATION
A manufacturer of plastic film and bags for the general industrial, medical, and food industries.
12% Senior Subordinated Note due 2013 $ 1,215,000 03/31/06 1,145,787 1,220,182
Preferred Stock (B) 19 shs. 03/31/06 174,492 204,305
Common Stock (B) 12 shs. 03/31/06 13,500 36,060
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 20,983
------------- -------------
1,339,667 1,481,530
------------- -------------
PACIFIC CONSOLIDATED HOLDINGS LLC
A manufacturer of rugged, mobile liquid and gaseous oxygen and nitrogen generating systems used in
the global defense, oil & gas and medical sectors.
12% Senior Subordinated Note due 2012 $ 690,683 04/27/07 636,556 644,524
Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 --
------------- -------------
670,033 644,524
------------- -------------
* 08/07/98, 02/23/99, 12/22/99 and 02/25/03.
** 08/07/98 and 02/29/00.
---------------------------------------------------------------------------------------------------------------------------------
17
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
PARADIGM PACKAGING, INC.
A manufacturer of plastic bottles and closures for the nutritional, pharmaceutical, personal care
and food packaging markets.
12% Senior Subordinated Note due 2011 $ 1,125,000 12/19/00 $ 1,059,732 $ 1,091,346
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 --
------------- -------------
1,200,357 1,091,346
------------- -------------
POSTLE ALUMINUM COMPANY LLC
A manufacturer and distributor of aluminum extruded products.
12% Senior Subordinated Note due 2014 $ 1,080,000 10/02/06 1,006,857 1,066,151
Limited Liability Company Unit 733 uts. 10/02/06 270,000 181,009
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 182 shs. 10/02/06 65,988 45,020
------------- -------------
1,342,845 1,292,180
------------- -------------
POWER SERVICES HOLDING COMPANY
A provider of industrial motor repair services, predictive and preventative maintenance, and
performance improvement consulting, serving the petrochemical, mining, power generation,
metals, and paper industries.
12% Senior Subordinated Note due 2016 $ 1,255,814 02/11/08 1,144,254 1,230,314
Limited Partnership Interest 94,092 uts. 02/11/08 94,092 89,387
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 700 shs. 02/11/08 88,723 7
------------- -------------
1,327,069 1,319,708
------------- -------------
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.
9.8% Redeemable Exchangeable Preferred Stock (B) 332 shs. 08/12/94 33,217 --
Common Stock (B) 867 shs. * 42,365 --
------------- -------------
75,582 --
------------- -------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and chassis products.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 823,760 928,793
Common Stock 187,500 shs. 05/28/04 187,500 166,874
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share 199,969 shs. 05/28/04 199,969 177,971
------------- -------------
1,211,229 1,273,638
------------- -------------
QUALSERV CORPORATION
A provider of foodservice equipment and supplies to major restaurant chains and their franchisees.
Limited Partnership Interest (B) 4.90% int. 07/09/04 1 --
------------- -------------
1 --
------------- -------------
* 08/12/94 and 11/14/01.
---------------------------------------------------------------------------------------------------------------------------------
18
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
R A J MANUFACTURING HOLDINGS LLC
A designer and manufacturer of women's swimwear sold under a variety of licensed brand names.
12.5% Senior Subordinated Note due 2014 $ 1,200,277 12/15/06 $ 1,106,663 $ 1,194,039
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 91,702
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 43,274
------------- -------------
1,325,995 1,329,015
------------- -------------
R E I DELAWARE HOLDING, INC.
An engineer and manufacturer of highly complex, close tolerance components, assemblies,
tooling and custom automation equipment primarily for aerospace, medical and defense/radar markets.
12% Senior Subordinated Note due 2016 $ 1,350,000 01/18/08 1,306,541 1,327,160
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 --
------------- -------------
1,323,000 1,327,160
------------- -------------
RADIAC ABRASIVES, INC.
A manufacturer of bonded abrasive and super abrasive grinding wheels in the United States.
12% Senior Subordinated Note due 2014 $ 1,196,809 02/10/06 1,121,966 1,220,745
Common Stock (B) 153,191 shs. 02/10/06 153,191 199,860
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 90,865
------------- -------------
1,338,578 1,511,470
------------- -------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 526,444 548,795
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 49,768
------------- -------------
591,533 598,563
------------- -------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A manufacturer of vertical panel saws and routers for the wood working industry.
Class B Common Stock (B) 846 shs. 06/02/99 146,456 593,284
------------- -------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 774,260 808,126
Common Stock (B) 324 shs. * 340,378 371,511
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 81,113
------------- -------------
1,174,767 1,260,750
------------- -------------
* 09/10/04 and 10/05/07.
---------------------------------------------------------------------------------------------------------------------------------
19
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
SMART SOURCE HOLDINGS LLC
A short-term computer rental company.
12% Senior Subordinated Note due 2015 $ 1,176,924 * $ 1,071,129 $ 1,170,285
Limited Liability Company Unit (B) 328 uts. * 337,796 311,553
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 83 shs. * 87,231 1
------------- -------------
1,496,156 1,481,839
------------- -------------
SPECIALTY FOODS GROUP, INC.
A manufacturer and distributor of branded meat products.
Limited Partnership Interest of MHD Holdings LLC (B) 0.76% int. 08/29/00 363,576 --
------------- -------------
STANTON CARPET HOLDING CO.
A designer and marketer of high and mid-priced decorative carpets and rugs.
12.13% Senior Subordinated Note due 2014 $ 1,185,366 08/01/06 1,119,611 1,166,985
Common Stock (B) 165 shs. 08/01/06 164,634 243,416
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 81,070
------------- -------------
1,333,635 1,491,471
------------- -------------
T H I ACQUISITION, INC.
A machine servicing company providing value-added steel services to long steel products.
12% Senior Subordinated Note due 2016 $ 1,350,000 01/14/08 1,276,383 1,325,958
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 --
------------- -------------
1,323,000 1,325,958
------------- -------------
TANGENT RAIL CORPORATION
A manufacturer of rail ties and provider of specialty services to the North American railroad industry.
13% Senior Subordinated Note due 2013 $ 1,173,909 10/14/05 1,031,043 1,173,909
Common Stock (B) 1,167 shs. 10/14/05 1,167 493,699
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 618 shs. 10/14/05 155,860 261,445
------------- -------------
1,188,070 1,929,053
------------- -------------
* 08/31/07 and 03/06/08.
---------------------------------------------------------------------------------------------------------------------------------
20
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
TERRA RENEWAL SERVICES, INC.
A provider of wastewater residual management and required environmental reporting, permitting,
nutrient management planning and record keeping to companies involved in poultry and food processing.
6.7% Senior Secured Tranche B Note due 2012 (C) $ 16,487 * $ 16,386 $ 16,037
6.97% Senior Secured Tranche B Note due 2012 (C) $ 851,552 * 848,436 828,287
12% Senior Subordinated Note due 2014 $ 664,062 ** 634,811 660,861
Limited Partnership Interest of
Saw Mill Capital Fund V, L.P. (B) 2.27% int. 03/01/05 66,448 387,073
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 67,292
------------- -------------
1,599,819 1,959,550
------------- -------------
TORRENT GROUP HOLDINGS, INC.
A contractor specializing in the sales and installation of engineered drywells for the retention
and filtration of stormwater and nuisance water flow.
12.5% Senior Subordinated Note due 2013 $ 1,185,366 10/26/07 1,113,016 1,163,971
Series A Preferred Stock (B) 219 shs. 10/26/07 219,203 208,240
------------- -------------
1,332,219 1,372,211
------------- -------------
TOTAL E & S, INC.
A manufacturer of a wide variety of equipment used in the oil and gas industry.
10.5% Senior Secured Term Note due 2013 $ 486,487 03/02/07 479,190 485,333
13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 340,715
Common Stock (B) 71,542 shs. 03/02/07 71,542 43,454
Warrant, exercisable until 2014 to purchase
common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 11,986
------------- -------------
885,863 881,488
------------- -------------
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.
13% Senior Subordinated Note due 2010 $ 1,356,000 02/05/98 1,295,496 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 423,192
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 298,250
------------- -------------
1,794,912 2,077,442
------------- -------------
TRANSPAC HOLDING COMPANY
A designer, importer, and wholesaler of home decor and seasonal gift products.
12% Senior Subordinated Note due 2015 $ 938,651 10/31/07 875,522 913,930
Common Stock (B) 110 shs. 10/31/07 110,430 104,909
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 1
------------- -------------
1,032,332 1,018,840
------------- -------------
* 04/28/06 and 12/21/06.
** 04/28/06 and 09/13/06.
---------------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 $ 884,939 $ 934,631
Common Stock (B) 571 shs. * 570,944 723,238
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 57,637
------------- -------------
1,496,904 1,715,506
------------- -------------
TRUCK BODIES & EQUIPMENT INTERNATIONAL
A designer and manufacturer of accessories for heavy and medium duty trucks, primarily
dump bodies, hoists, various forms of flat-bed bodies, landscape bodies and other accessories.
12% Senior Subordinated Note due 2013 (D) $ 1,222,698 ** 1,133,973 1,100,428
Common Stock (B) 393 shs. ** 423,985 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 81 shs. ** 84,650 --
------------- -------------
1,642,608 1,100,428
------------- -------------
TRUSTILE DOORS, INC.
A manufacturer and distributor of interior doors.
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 40,283 101,253
------------- -------------
U M A ENTERPRISES, INC.
An importer and wholesaler of home decor products.
15% Senior Subordinated Note due 2015 $ 884,324 02/08/08 866,694 874,240
Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 446,082
------------- -------------
1,336,259 1,320,322
------------- -------------
U-LINE CORPORATION
A manufacturer of high-end, built-in, undercounter ice making, wine storage and refrigeration appliances.
12.5% Senior Subordinated Note due 2012 $ 996,500 04/30/04 925,417 976,270
Common Stock (B) 96 shs. 04/30/04 96,400 83,748
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 105,988
------------- -------------
1,133,923 1,166,006
------------- -------------
VICTORY VENTURES LLC
An acquirer of controlling or substantial interests in other entities.
Series A Preferred Units (B) 1 ut. 12/02/96 236 --
------------- -------------
* 08/31/05 and 04/30/07.
** 07/19/05 and 12/22/05.
---------------------------------------------------------------------------------------------------------------------------------
22
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
VISIONEERING, INC.
A designer and manufacturer of tooling and fixtures for the aerospace industry.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 $ 451,940 $ 456,382
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 334,704 367,312
Common Stock (B) 70,588 shs. 05/17/07 70,588 37,240
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 10,553
------------- -------------
888,692 871,487
------------- -------------
VITALITY FOODSERVICE, INC.
A non-carbonated beverage dispensing company focused on the foodservice industry.
13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 940,536 922,611
Common Stock (B) 14,006 shs. * 140,064 107,485
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 96,642
------------- -------------
1,179,538 1,126,738
------------- -------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily envelopes and tags used on tea bags.
12.5% Senior Subordinated Note due 2012 $ 900,000 07/19/04 785,152 810,000
14.5% PIK Note due 2010 $ 112,500 06/30/07 102,027 101,250
Limited Liability Company Unit Class A (B) 219,375 uts. 07/19/04 219,375 --
Limited Liability Company Unit Class B (B) 96,848 uts. 07/19/04 96,848 --
------------- -------------
1,203,402 911,250
------------- -------------
WAGGIN' TRAIN HOLDINGS LLC
A producer of premium quality meat dog treats.
14% Senior Subordinated Note due 2014 $ 1,134,767 11/15/07 1,112,092 1,102,606
Limited Liability Company Unit Class B (B) 224 uts. 11/15/07 223,757 212,572
Limited Liability Company Unit Class C (B) 224 uts. 11/15/07 -- 2
------------- -------------
1,335,849 1,315,180
------------- -------------
WALLS INDUSTRIES, INC.
A provider of branded workwear and sporting goods apparel.
Limited Partnership Interest (B) 0.20% int. 07/12/04 1,974 2,595
Common Stock (B) 2,133 shs. 12/21/07 -- 2,804
------------- -------------
1,974 5,399
------------- -------------
WELLBORN FOREST HOLDING CO.
A manufacturer of semi-custom kitchen and bath cabinetry.
12.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 852,816 876,872
Common Stock (B) 101 shs. 11/30/06 101,250 61,549
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 30,729
------------- -------------
999,856 969,150
------------- -------------
* 09/24/04 and 12/22/06.
---------------------------------------------------------------------------------------------------------------------------------
23
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------- -------- ------------- -------------
WORKPLACE MEDIA HOLDING CO.
A direct marketer specializing in providing advertisers with access to consumers in the workplace.
13% Senior Subordinated Note due 2015 $ 613,692 05/14/07 $ 560,674 $ 552,323
Limited Partnership Interest (B) 12.26% int. 05/14/07 61,308 --
Warrant, exercisable until 2015, to purchase
common stock at $.02 per share (B) 47 shs. 05/14/07 44,186 --
------------- -------------
666,168 552,323
------------- -------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 93,555,444 89,493,343
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
24
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
SHARES OR
INTEREST DUE PRINCIPAL
CORPORATE RESTRICTED SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST FAIR VALUE
------ -------- ------------ ------------ ------------
RULE 144A SECURITIES - 3.56%:
BONDS - 3.56%
Cenveo Corporation 10.500% 08/15/16 $ 45,000 $ 45,000 $ 44,438
Charter Communications Op LLC 8.000 04/30/12 750,000 736,875 708,750
Compucom Systems, Inc. 12.500 10/01/15 670,000 648,405 619,750
Douglas Dynamics LLC 7.750 01/15/12 485,000 462,190 415,888
G F S I, Inc. (C) 10.500 06/01/11 375,000 360,505 356,250
Intergen NV 9.000 06/30/17 375,000 371,959 388,125
Nortek, Inc. 10.000 12/01/13 100,000 98,957 95,000
Packaging Dynamics Corporation of America 10.000 05/01/16 975,000 969,845 648,375
Ryerson, Inc. 12.000 11/01/15 30,000 30,000 29,775
SandRidge Energy, Inc. 8.000 06/01/18 180,000 182,423 180,900
Tenneco, Inc. 8.125 11/15/15 50,000 50,000 45,250
TRW Automotive, Inc. 7.250 03/15/17 500,000 440,000 420,000
Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,453 523,800
------------ ------------
TOTAL BONDS 4,952,612 4,476,301
------------ ------------
CONVERTIBLE PREFERRED STOCK - 0.00%
ETEX Corporation (B) 194 179 --
------------ ------------
TOTAL CONVERTIBLE PREFERRED STOCK 179 --
------------ ------------
PREFERRED STOCK - 0.00%
TherOX, Inc. (B) 26 1,032 --
------------ ------------
TOTAL PREFERRED STOCK 1,032 --
------------ ------------
COMMON STOCK - 0.00%
Touchstone Health Partnership (B) 292 1,062 --
------------ ------------
TOTAL COMMON STOCK 1,062 --
------------ ------------
TOTAL RULE 144A SECURITIES 4,954,885 4,476,301
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $ 98,510,329 $ 93,969,644
------------ ------------
---------------------------------------------------------------------------------------------------------------------------------
25
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
INTEREST DUE PRINCIPAL MARKET
CORPORATE PUBLIC SECURITIES - 20.55%:(A) RATE DATE AMOUNT COST VALUE
------ -------- ------------ ------------ ------------
BONDS - 19.31%
Appleton Papers, Inc. 8.125% 06/15/11 $ 250,000 $ 250,000 $ 236,250
Aramark Corporation (C) 6.373 02/01/15 100,000 100,000 93,500
Boyd Gaming Corporation 7.125 02/01/16 150,000 146,625 110,625
Bristow Group, Inc. 7.500 09/15/17 75,000 75,000 75,188
Cablevision Systems Corporation 8.000 04/15/12 500,000 505,183 472,500
Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 532,125
Clayton Williams Energy, Inc. 7.750 08/01/13 575,000 557,000 552,000
Countrywide Alternative Loan Trust (C) 2.802 11/20/35 1,003,048 735,498 757,261
Dynegy Holdings, Inc. 8.375 05/01/16 665,000 675,379 645,050
Dynegy Holdings, Inc. 7.500 06/01/15 250,000 223,274 230,625
Edison Mission Energy 7.750 06/15/16 35,000 35,000 34,825
Electronic Data Systems Corporation 7.125 10/15/09 500,000 501,892 515,633
Esterline Technologies 7.750 06/15/13 175,000 175,000 175,875
Ford Motor Credit Co. 7.375 10/28/09 750,000 748,125 683,084
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 128,050
General Motors Acceptance Corporation 5.850 01/14/09 750,000 740,858 712,185
Goodyear Tire & Rubber Co. 7.857 08/15/11 350,000 327,250 347,813
Goodyear Tire & Rubber Co. 9.000 07/01/15 64,000 65,209 63,840
Goodyear Tire & Rubber Co. 8.625 12/01/11 250,000 261,072 252,500
H C A, Inc. 9.250 11/15/16 500,000 508,539 515,000
Hughes Network Systems 9.500 04/15/14 525,000 535,216 530,906
Indymac INDX Mortgage Loan Trust 2.693 11/25/36 1,022,830 734,229 715,375
Inergy LP 8.250 03/01/16 75,000 75,000 73,875
Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 716,153 695,175
Interline Brands, Inc. 8.125 06/15/14 830,000 824,237 800,950
Iron Mountain, Inc. 8.750 07/15/18 500,000 514,354 515,000
Kansas City Southern Railway 8.000 06/01/15 50,000 50,000 50,625
Koppers, Inc. 9.875 10/15/13 170,000 170,000 178,500
Leucadia National Corporation 7.000 08/15/13 628,000 632,461 609,160
Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 207,500
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 95,000
Mariner Energy, Inc. 8.000 05/15/17 400,000 402,544 387,000
Markwest Energy Operating Co. 6.875 11/01/14 550,000 532,750 518,375
Mediacom Broadband LLC 8.500 10/15/15 750,000 765,431 670,312
N T L Cable PLC 9.125 08/15/16 790,000 813,154 740,625
Neiman Marcus Group, Inc. 10.375 10/15/15 600,000 600,000 600,000
---------------------------------------------------------------------------------------------------------------------------------
26
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
INTEREST DUE PRINCIPAL MARKET
CORPORATE PUBLIC SECURITIES:(A)(Continued) RATE DATE AMOUNT COST VALUE
------ -------- ------------ ------------ ------------
North American Energy Partners 8.750% 12/01/11 $ 200,000 $ 200,000 $ 202,000
NOVA Chemicals Corporation (C) 5.953 11/15/13 515,000 511,538 437,750
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 455,000
Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 336,875
Petrohawk Energy Corporation 9.125 07/15/13 750,000 761,747 768,750
Pliant Corporation (C) 11.850 06/15/09 809,482 820,658 813,528
Quebecor Media, Inc. 7.750 03/15/16 575,000 551,385 534,750
Quicksilver Resources, Inc. 7.125 04/01/16 600,000 583,125 558,750
Range Resources Corporation 7.250 05/01/18 25,000 25,000 24,813
Rental Service Corporation 9.500 12/01/14 500,000 506,499 417,500
Rogers Wireless, Inc. 7.500 03/15/15 560,000 592,883 592,812
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 207,000
Steel Dynamics, Inc. 6.750 04/01/15 100,000 100,000 95,750
Stewart & Stevenson LLC 10.000 07/15/14 750,000 770,837 740,625
Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 239,375
Tenneco, Inc. 8.625 11/15/14 500,000 501,126 441,250
Tesoro Petroleum Corporation 6.500 06/01/17 250,000 250,000 224,375
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 34,825
Titan International, Inc. 8.000 01/15/12 70,000 70,000 68,600
Transdigm, Inc. 7.750 07/15/14 150,000 151,303 148,125
Tube City IMS Corporation 9.750 02/01/15 1,000,000 991,526 922,500
United Components, Inc. 9.375 06/15/13 535,000 535,842 500,225
United Rentals, Inc. 7.750 11/15/13 325,000 325,000 260,000
Vought Aircraft Industries 8.000 07/15/11 650,000 648,100 604,500
Warner Music Group Corporation 7.375 04/15/14 125,000 125,000 103,905
------------ ------------
TOTAL BONDS 25,342,983 24,255,890
------------ ------------
COMMON STOCK - 1.09%
Comcast Corporation 16,800 310,632 318,696
Directed Electronics, Inc. (B) 195,118 982,868 331,701
Distributed Energy Systems Corporation (B) 14,000 177,078 700
EnerNOC, Inc. (B) 23,500 648,410 421,825
ITC^DeltaCom, Inc. (B) 94,588 827,645 283,764
Intrepid Potash, Inc. (B) 185 5,920 12,169
------------ ------------
TOTAL COMMON STOCK 2,952,553 1,368,855
------------ ------------
---------------------------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
INTEREST DUE PRINCIPAL MARKET
CORPORATE PUBLIC SECURITIES:(A)(Continued) RATE DATE AMOUNT COST VALUE
------ -------- ------------ ------------ ------------
CONVERTIBLE BONDS - 0.15%
Citadel Broadcasting Corporation 4.000% 02/15/11 $ 250,000 $ 194,063 $ 192,188
------------ ------------
TOTAL CONVERTIBLE BONDS 194,063 192,188
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 28,489,599 $ 25,816,933
------------ ------------
INTEREST DUE PRINCIPAL MARKET
SHORT TERM SECURITIES RATE/YIELD* DATE AMOUNT COST VALUE
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 8.51%
Duke Energy Corporation 2.902% 07/02/08 2,460,000 2,459,802 2,459,802
Gannett Company, Inc. 3.253 07/07/08 1,937,000 1,935,951 1,935,951
I T T Industries, Inc. 2.903 07/08/08 1,277,000 1,276,280 1,276,280
O G E Energy Corporation 2.852 07/01/08 2,506,000 2,506,000 2,506,000
Oneok, Inc. 2.802 07/09/08 2,500,000 2,498,333 2,498,333
------------ ------------
TOTAL SHORT-TERM SECURITIES $ 10,676,366 $ 10,676,366
------------ ------------
TOTAL INVESTMENTS 103.84% $137,676,294 $130,462,943
------------ ------------
Other Assets 6.12 7,676,019
Liabilities (9.96) (12,488,370)
------ ------------
TOTAL NET ASSETS 100.00% $125,650,592
====== ============
(A) In each of the convertible note, warrant, and common stock investments, the issuer has agreed to provide certain registration
rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 06/30/08.
(D) Defaulted security; interest not accrued.
(E) Illiquid security. At June 30, 2008, the values of these securities amounted to $89,493,343 or 71.22% of net assets.
* Effective yield at purchase
PIK - Payment-in-kind
---------------------------------------------------------------------------------------------------------------------------------
28
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------ ------------
AEROSPACE - 3.12% BUILDINGS & REAL ESTATE - 1.11%
Esterline Technologies $ 175,875 K W P I Holdings Corporation $ 1,256,049
Gencorp, Inc. 128,050 Texas Industries, Inc. 34,825
Hughes Network Systems 530,906 TruStile Doors, Inc. 101,253
P A S Holdco LLC 1,458,223 ------------
Transdigm, Inc. 148,125 1,392,127
Visioneering, Inc. 871,487 ------------
Vought Aircraft Industries 604,500 CHEMICAL, PLASTICS & RUBBER - 0.71%
------------ Capital Specialty Plastics, Inc. 279,466
3,917,166 Koppers, Inc. 178,500
------------ NOVA Chemicals Corporation 437,750
AUTOMOBILE - 7.90% ------------
Ford Motor Credit Co. 683,084 895,716
Fuel Systems Holding Corporation 936,521 ------------
General Motors Acceptance Corporation 712,185 CONSUMER PRODUCTS - 8.83%
Goodyear Tire & Rubber Co. 664,153 Aero Holdings, Inc. 1,741,783
Jason, Inc. 723,231 Bravo Sports Holding Corporation 1,411,043
Nyloncraft, Inc. 1,083,929 G F S I, Inc. 356,250
Ontario Drive & Gear Ltd. 667,014 K N B Holdings Corporation 1,410,187
Qualis Automotive LLC 1,273,638 Momentum Holding Co. 838,307
Tenneco, Inc. 486,500 R A J Manufacturing Holdings LLC 1,329,015
Titan International, Inc. 68,600 R E I Delaware Holding, Inc. 1,327,160
Transtar Holding Company 1,715,506 Royal Baths Manufacturing Company 598,563
TRW Automotive, Inc. 420,000 The Tranzonic Companies 2,077,442
United Components, Inc. 500,225 Walls Industries, Inc. 5,399
------------ ------------
9,934,586 11,095,149
------------ ------------
BEVERAGE, DRUG & FOOD - 1.81% CONTAINERS, PACKAGING & GLASS - 4.92%
Aramark Corporation 93,500 Flutes, Inc. 794,680
Golden County Foods Holding, Inc. 1,054,461 Maverick Acquisition Company 436,500
Specialty Foods Group, Inc. -- P I I Holding Corporation 1,481,530
Vitality Foodservice, Inc. 1,126,738 Packaging Dynamics Corporation of America 648,375
------------ Paradigm Packaging, Inc. 1,091,346
2,274,699 Pliant Corporation 813,528
------------ Vitex Packaging Group, Inc. 911,250
BROADCASTING & ENTERTAINMENT- 2.32% ------------
Cablevision Systems Corporation 472,500 6,177,209
Charter Communications Op LLC 708,750 ------------
Citadel Broadcasting Corporation 192,188 DISTRIBUTION - 0.74%
Comcast Corporation 318,696 Duncan Systems, Inc. 935,880
Mediacom Broadband LLC 670,312 QualServ Corporation --
Workplace Media Holdings Co. 552,323 ------------
------------ 935,880
2,914,769 ------------
------------
----------------------------------------------------------------------------------------------------------------------------------
29
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
June 30, 2008
(Unaudited)
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------ ------------
DIVERSIFIED/CONGLOMERATE, FINANCIAL SERVICES - 2.26%
MANUFACTURING - 5.63% A W X Holdings Corporation $ 892,466
A H C Holding Company, Inc. $ 1,321,757 Highgate Capital LLC --
Arrow Tru-Line Holdings, Inc. 871,724 Leucadia National Corporation 609,160
Douglas Dynamics LLC 415,888 Nesco Holdings Corporation 1,343,609
Evans Consoles, Inc. 462,983 Victory Ventures LLC --
Nortek, Inc. 95,000 ------------
Postle Aluminum Company LLC 1,292,180 2,845,235
Radiac Abrasives, Inc. 1,511,470 ------------
Truck Bodies & Equipment International 1,100,428 HEALTHCARE, EDUCATION & CHILDCARE - 4.18%
------------ A T I Acquisition Company 1,344,679
7,071,430 American Hospice Management Holding LLC 1,784,627
------------ F H S Holdings LLC 1,365,123
DIVERSIFIED/CONGLOMERATE, SERVICE - 6.50% H C A, Inc. 515,000
Advanced Technologies Holdings 1,324,520 Tenet Healthcare Corporation 239,375
CapeSuccess LLC -- Touchstone Health Partnership --
Diversco, Inc./DHI Holdings, Inc. 751,555 ------------
Dwyer Group, Inc. 758,162 5,248,804
Fowler Holding, Inc. 1,204,517 ------------
GQ Holdings LLC 1,345,424 HOME & OFFICE FURNISHINGS, HOUSEWARES,
Insurance Claims Management, Inc. 54,356 AND DURABLE CONSUMER PRODUCTS - 8.93%
Interline Brands, Inc. 800,950 Connor Sport Court International, Inc. 529,713
Iron Mountain, Inc. 515,000 H M Holding Company --
Mail Communications Group, Inc. 707,974 Home Decor Holding Company 1,199,573
Moss, Inc. 705,309 Justrite Manufacturing Acquisition Co. 974,675
------------ K H O F Holdings, Inc. 1,343,084
8,167,767 Monessen Holding Corporation 1,215,000
------------ Stanton Carpet Holding Co. 1,491,471
ELECTRONICS - 1.58% Transpac Holdings Company 1,018,840
Connecticut Electric, Inc. 1,136,423 U M A Enterprises, Inc. 1,320,322
Directed Electronics, Inc. 331,701 U-Line Corporation 1,166,006
Distributed Energy Systems Corporation 700 Wellborn Forest Holding Co. 969,150
Electronic Data Systems Corporation 515,633 ------------
------------ 11,227,834
1,984,457 ------------
------------ LEISURE, AMUSEMENT, ENTERTAINMENT - 2.75%
FARMING & AGRICULTURE - 1.05% Boyd Gaming Corporation 110,625
Protein Genetics, Inc. -- Electra Bicycle Company LLC 787,789
Waggin' Train Holdings LLC 1,315,180 Majestic Star Casino LLC 207,500
------------ O E D Corp/Diamond Jo Company Guarantee 455,000
1,315,180 Savage Sports Holding, Inc. 1,260,750
------------ Tunica-Biloxi Gaming Authority 523,800
Warner Music Group Corporation 103,905
------------
3,449,369
------------
----------------------------------------------------------------------------------------------------------------------------------
30
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------ ------------
MACHINERY - 8.43% NATURAL RESOURCES - 0.40%
Davis-Standard LLC $ 1,778,099 Appleton Papers, Inc. $ 236,250
E S P Holdco, Inc. 1,317,491 Cenveo Corporation 44,438
Integration Technology Systems, Inc. -- Intrepid Potash, Inc. 12,169
K-Tek Holdings Corporation 1,311,604 Range Resources Corporation 24,813
Manitowoc Company, Inc. 95,000 SandRidge Energy, Inc. 180,900
Morton Industrial Group, Inc. 1,171,145 ------------
Navis Global 673,006 498,570
NetShape Technologies, Inc. 948,192 ------------
Pacific Consolidated Holdings LLC 644,524 OIL & GAS - 2.56%
Power Services Holding Company 1,319,708 Bristow Group, Inc. 75,188
Safety Speed Cut Manufacturing Company, Inc. 593,284 Clayton Williams Energy, Inc. 552,000
Stewart & Stevenson LLC 740,625 Mariner Energy, Inc. 387,000
------------ North American Energy Partners 202,000
10,592,678 Offshore Logistics, Inc. 336,875
------------ Quicksilver Resources, Inc. 558,750
MEDICAL DEVICES/BIOTECH - 2.57% Tesoro Petroleum Corporation 224,375
Coeur, Inc. 673,266 Total E & S, Inc. 881,488
E X C Acquisition Corporation 97,897 ------------
ETEX Corporation -- 3,217,676
MicroGroup, Inc. 1,805,739 ------------
OakRiver Technology, Inc. 658,199 PHARMACEUTICALS - 1.32%
TherOX, Inc. -- CorePharma LLC 1,387,525
------------ Enzymatic Therapy, Inc. 274,455
3,235,101 ------------
------------ 1,661,980
MINING, STEEL, IRON & NON PRECIOUS ------------
METALS - 1.89% PUBLISHING/PRINTING - 0.59%
Ryerson, Inc. 29,775 Quebecor Media, Inc. 534,750
Steel Dynamics, Inc. 95,750 Sheridan Acquisition Corporation 207,000
T H I Acquisition, Inc. 1,325,958 ------------
Tube City IMS Corporation 922,500 741,750
------------ ------------
2,373,983 RETAIL STORES - 1.29%
------------ Neiman Marcus Group, Inc. 600,000
MORTGAGE-BACKED SECURITIES - 1.17% Olympic Sales, Inc. 339,819
Countrywide Alternative Loan Trust 757,261 Rental Service Corporation 417,500
Indymac INDX Mortgage Loan Trust 715,375 United Rentals, Inc. 260,000
------------ ------------
1,472,636 1,617,319
------------ ------------
TECHNOLOGY - 2.01%
Compucom Systems, Inc. 619,750
EnerNOC, Inc. 421,825
Smart Source Holdings LLC 1,481,839
------------
2,523,414
------------
----------------------------------------------------------------------------------------------------------------------------------
31
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors
June 30, 2008
(Unaudited)
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------ ------------
TELECOMMUNICATIONS - 2.26% WASTE MANAGEMENT / POLLUTION - 2.65%
Cincinnati Bell, Inc. $ 532,125 Terra Renewal Services, Inc. $ 1,959,550
Intelsat Bermuda Ltd. 695,175 Torrent Group Holdings, Inc. 1,372,211
ITC^DeltaCom, Inc. 283,764 ------------
N T L Cable PLC 740,625 3,331,761
Rogers Wireless, Inc. 592,812 ------------
------------ Total Corporate Restricted and
2,844,501 Public Securities - 95.33% $119,786,577
------------ ============
TRANSPORTATION - 1.73%
Kansas City Southern Railway 50,625
NABCO, Inc. 188,528
Tangent Rail Corporation 1,929,053
------------
2,168,206
------------
UTILITIES - 2.12%
Dynegy Holdings, Inc. 875,675
Edison Mission Energy 34,825
Inergy LP 73,875
Intergen NV 388,125
Markwest Energy Operating Co. 518,375
Petrohawk Energy Corporation 768,750
------------
2,659,625
------------
See Notes to Consolidated Financial Statements
----------------------------------------------------------------------------------------------------------------------------------
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors
(UNAUDITED)
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary
of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its
investment adviser. The Trust's investment objective is to maximize total
return by providing a high level of current income, the potential for growth
of income, and capital appreciation. The Trust's principal investments are
privately placed, below-investment grade, long-term debt obligations
purchased directly from their issuers, which tend to be smaller companies. At
least half of these investments normally include equity features such as
common stock, warrants, conversion rights, or other equity features that
provide the Trust with the opportunity to realize capital gains. The Trust
will also invest in publicly traded debt securities (including high yield
securities), again with an emphasis on those with equity features, and in
convertible preferred stocks and, subject to certain limitations, readily
marketable equity securities. Below investment grade or high yield securities
have predominantly speculative characteristics with respect to the capacity
of the issuer to pay interest and repay principal. In addition, the Trust may
temporarily invest in high quality, readily marketable securities.
On January 27, 1998, the Board of Trustees authorized the formation of a
wholly-owned subsidiary of the Trust ("MMPI Subsidiary Trust") for the
purpose of holding certain investments. The results of the MMPI Subsidiary
Trust are consolidated in the accompanying financial statements. Footnote 2.D
below discusses the federal tax consequences of the MMPI Subsidiary Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of its consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America.
A. VALUATION OF INVESTMENTS:
Valuation of a security in the Trust's portfolio is made on the basis of the
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 public offering for which a registration statement is in effect under
the Securities Act of 1933, as amended (the "1933 Act") or pursuant to a
transaction that is exempt from registration under the 1933 Act.
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 Trust's Board of Trustees (the "Trustees"). Each restricted
security is valued by the Trustees at the time of its acquisition 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 used thereafter for restricted
securities in appropriate circumstances. Among the factors ordinarily
considered are the existence of restrictions upon the sale of a security held
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 for purchase; 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, as amended (the "1940
Act"). 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 1933 Act and any other
developments which are likely to increase the probability that the securities
may be publicly sold by the Trust without restriction.
The Trustees meet at least once in each quarter to approve the value of the
Trus t'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 or of Babson Capital. In
making valuations,
--------------------------------------------------------------------------------
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
the Trustees will consider reports by Babson Capital analyzing each portfolio
security in accordance with the relevant factors referred to above. Babson
Capital has agreed to provide such reports to the Trust at least quarterly.
The consolidated financial statements include private placement restricted
securities valued at $89,493,343 (71.22% of net assets) as of June 30, 2008
whose values have been estimated by the 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 Rule 144A restricted securities and corporate public
securities are stated at the last reported sales price or at prices based
upon quotations obtained from brokers and dealers as of June 30, 2008,
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.
B. ACCOUNTING FOR INVESTMENTS:
Investment transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis, including the amortization of premiums and accretion of
discounts on bonds held using the yield-to-maturity method. The Trust does
not accrue income when payment is delinquent and when management believes
payment is questionable.
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.
C. USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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:
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 that Trustees either designate the net realized longterm gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains.
The Trust is taxed as a regulated investment company and is therefore limited
as to the amount of non-qualified income that it may receive as the result of
operating a trade or business, e.g. the Trust's pro rata share of income
allocable to the Trust by a partnership operating company. The Trust's
violation of this limitation could result in the loss of its status as a
regulated investment company, thereby subjecting all of its net income and
capital gains to corporate taxes prior to distribution to its shareholders.
The Trust, from time-to-time, identifies investment opportunities in the
securities of entities that could cause such trade or business income to be
allocable to the Trust. The MMPI Subsidiary Trust (described in Footnote 1,
above) was formed in order to allow investment in such securities without
adversely affecting the Trust's status as a regulated investment company.
The MMPI Subsidiary Trust is not taxed as a regulated investment company.
Accordingly, prior to the Trust's receiving any distributions from the MMPI
Subsidiary Trust, all of the MMPI Subsidiary Trust's taxable income and
realized gains, including non-qualified income and realized gains, is subject
to taxation at prevailing corporate tax rates. For the six months ended June
30, 2008, the MMPI Subsidiary Trust has not accrued any income tax expense.
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An
interpretation of FASB Statement No. 109 ("FIN 48"). Management has analyzed
the Trust's tax positions taken on federal income tax returns for all open
tax years and has concluded that as of June 30, 2008, no provision for income
tax would be required in the Trust's financial statements. The Trust's
federal and state income and federal excise tax returns for tax years for
which the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
E. DISTRIBUTIONS TO SHAREHOLDERS:
The Trust records distributions to shareholders from net investment income
and net realized gains, if any, on the ex-dividend date. The Trust's net
investment income dividend is declared four times per year, in April, July,
October, and December. The Trust's net realized capital gain distribution, if
any, is declared in December.
F. EXPENSE REDUCTION:
Citibank, N.A. ("Citibank") serves as custodian to the Trust. Pursuant to the
custodian agreement, Citibank receives a fee reduced by credits on cash
balances the Trust maintains with Citibank. All credit balances, if any, used
to reduce the Trust's custodian fees are reported as fees paid indirectly on
the Statement of Operations. For the six months ended June 30, 2008, there
were no credit balances used to reduce custodian fees.
--------------------------------------------------------------------------------
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors
(CONTINUED)(UNAUDITED)
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES CONTRACT
A. SERVICES:
Under an Investment Advisory and Administrative Services Contract (the
"Contract") with the Trust, Babson Capital has agreed to use its best efforts
to present to the Trust a continuing and suitable investment program
consistent with the investment objectives and policies of the Trust. Babson
Capital 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. Under the Contract, Babson
Capital also provides administration of the day-to-day operations of the
Trust and provides the Trust with office space and office equipment,
accounting and bookkeeping services, and necessary executive, clerical and
secretarial personnel for the performance of the foregoing services.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory 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. A majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or of
Babson Capital, approve the valuation of the Trust's net assets as of such
day.
C. BASIS FOR BOARD RENEWAL OF CONTRACT
At a meeting of the Board of Trustees held on April 25, 2008, the Trustees
(including a majority of the Trustees who are not "interested persons" of the
Trust or Babson Capital) unanimously approved a one year continuance of the
Contract.
Prior to the meeting, the Board of Trustees requested and received from Ropes
& Gray LLP, counsel to the Trust, a memorandum describing the Board of
Trustees' legal responsibilities in connection with its review and reapproval
of the Contract. The Board of Trustees also requested and received from
Babson Capital extensive written and oral information regarding among other
matters: the principal terms of the Contract; the reasons why Babson Capital
was proposing the continuance of the Contract; Babson Capital and its
personnel; the Trust's investment performance, including comparative
performance information; the nature and quality of the services provided by
Babson Capital to the Trust; financial strength of Babson Capital; the fee
arrangement between Babson Capital and the Trust; fee and expense
information, including comparative fee and expense information; profitability
of the advisory arrangement to Babson Capital; and "fallout" benefits to
Babson Capital resulting from the Contract.
Among other things, the Trustees discussed and considered with management (i)
the aforementioned guidance provided by Ropes & Gray LLP and the information
provided by Babson Capital prior to the meeting and (ii) the reasons Babson
Capital put forth in support of the continuance of the Contract. These
considerations are summarized below.
NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY BABSON CAPITAL TO
THE TRUST
In evaluating the scope and quality of the services provided by Babson
Capital to the Trust, the Trustees considered, among other factors: (i) the
scope of services required to be provided by Babson Capital to the Trust
under the Contract; (ii) Babson Capital's ability to find and negotiate
private placement securities having equity features that are consistent with
the stated investment objectives of the Trust; (iii) the experience and
quality of Babson Capital's staff; (iv) the strength of Babson Capital's
financial condition; (v) the nature of the private placement market compared
to public markets (including the fact that finding, analyzing, negotiating
and servicing private placement securities is more labor-intensive than
buying and selling public securities and the administration of private
placement securities is more extensive, expensive, and requires greater time
and expertise than a portfolio of only public securities); (vi) the potential
advantages afforded to the Trust by its ability to co-invest in negotiated
private placements with MassMutual and its affiliates; and (vii) the
expansion of the scope of services provided by Babson Capital as a result of
recent regulatory and legislative initiatives that have required increased
legal, compliance and business attention and diligence. Based on such
considerations, the Board of Trustees concluded that, overall, it is
satisfied with the nature, extent and quality of services provided by Babson
Capital, and expected to be provided in the future, under the renewed
Contract.
INVESTMENT PERFORMANCE
The Board also examined the Trust's short-term, intermediateterm, and
long-term performance as compared against various benchmark indices presented
at the meeting. In addition, the Trustees considered comparisons of the
Trust's performance with the performance of (i) selected closed-end
investment companies and funds that may invest in private placement
securities and/or bank loans; (ii) selected business development companies
with comparable types of investments; and (iii) investment companies included
in the Lipper closed-end bond universe. It was acknowledged that, while such
comparisons are helpful in judging performance, they are not directly
comparable in terms of types of investments due to the fact that business
development companies often report returns based on market value, which is
affected by factors other than the performance of the underlying portfolio
investments. Based on these considerations and the detailed performance
information provided to the Trustees at the regular Board meetings each
quarter, the Trustees concluded that the Trust's absolute and relative
performance over time have been sufficient to warrant renewal of the
Contract.
--------------------------------------------------------------------------------
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)(UNAUDITED)
ADVISORY FEE/COST OF SERVICES PROVIDED AND PROFITABILITY/ MANAGER'S
"FALL-OUT" BENEFITS
In connection with the Trustees' consideration of the advisory fee paid by
the Trust to Babson Capital under the Contract, Babson Capital noted that it
was unaware of any registered closed-end investment companies that are
directly comparable to the Trust in terms of the types of investments and
percentages invested in private placement securities (which require more
extensive advisory and administrative services than a portfolio of publicly
traded securities, as previously discussed) other than MassMutual Corporate
Investors ("MMCI"), which also is advised by Babson Capital. Under the terms
of MMCI's Investment Services Contract with Babson Capital, MMCI is charged a
quarterly investment advisory fee of 0.3125% of net asset value as of the end
of each quarter, which is approximately equal to 1.25% annually. In
considering the fee rate provided in the Contract, the Trustees also noted
the higher fees charged by Babson Capital to Tower Square Capital Partners,
L.P. and Tower Square Capital Partners II, L.P., both private mezzanine funds
also managed by Babson Capital.
At the request of the Trustees, Babson Capital provided information
concerning the profitability of Babson Capital's advisory relationship with
the Trust. The Board also considered the non-economic benefits Babson Capital
and its affiliates derived from its relationship with the Trust, including
the reputational benefits derived from having the Trust listed on the New
York Stock Exchange, and the de minimis amount of commissions resulting from
the Trust's portfolio transactions used by Babson Capital for third-party
soft dollar arrangements The Trustees recognized that Babson Capital should
be entitled to earn a reasonable level of profit for services provided to the
Trust and, based on their review, concluded that they were satisfied that
Babson Capital's historical level of profitability from its relationship with
the Trust was not excessive and that the advisory fee structure under the
Contract is reasonable.
ECONOMIES OF SCALE
Finally, the Trustees considered the concept of economies of scale and
possible advisory fee reductions if the Trust were to grow in assets. Given
that the Trust is not continuously offering shares, such growth comes
principally from retained net realized gain on investments and dividend
reinvestment. The Trustees also examined the breakpoint features of selected
competitive funds. The Trustees concluded that the absence of breakpoints in
the fee schedule under the Contract was currently acceptable given the
Trust's current size and closed-end fund structure.
4. SENIOR SECURED INDEBTEDNESS
A. NOTE PAYABLE:
MassMutual holds the Trust's $12,000,000 Senior Fixed Rate Convertible Note
(the "Note") issued by the Trust in 1995. The Note, as amended, is due
December 13, 2011 and accrues interest at 5.80% per annum. MassMutual, 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. For the six months ended
June 30, 2008, the Trust incurred total interest expense on the Note of
$348,000.
The Trust may redeem the Note, in whole or in part, at the principal amount
proposed to be redeemed together with the accrued and unpaid interest thereon
through the redemption date plus a Make Whole Premium. The Make Whole Premium
equals the excess of (i) the present value of the scheduled payments of
principal and interest which the Trust would have paid but for the proposed
redemption, discounted at the rate of interest of U.S. Treasury obligations
whose maturity approximates that of the Note plus 0.50% over (ii) the
principal of the Note proposed to be redeemed.
B. REVOLVING CREDIT AGREEMENT:
The Trust's $15,000,000 revolving credit agreement (the "Revolver") with Bank
of America N.A. matured on May 30, 2008.
For the six-month period ended June 30, 2008, the Trust incurred a total
expense on the Revolver of $6,229. The expense was incurred on the undrawn
portion of the Revolver from January 1, 2008 to the maturity date on May 30,
2008.
5. PURCHASES AND SALES OF INVESTMENTS
For the six
months ended
6/30/2008
Cost of Proceeds from
Investments Sales or
Acquired Maturities
-------- ----------
Corporate restricted securities $ 10,285,383 $ 13,434,014
Corporate public securities 2,232,071 7,710,055
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of June 30, 2008. The net
unrealized depreciation of investments for financial reporting and federal
tax purposes as of June 30, 2008 is $7,213,351 and consists of $8,020,766
appreciation and $15,234,117 depreciation.
--------------------------------------------------------------------------------
36
MassMutual Participation Investors
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
March 31, 2008
Amount Per Share
------ ---------
Investment income $ 3,200,898
Net investment income 2,597,669 $ 0.26
Net realized and unrealized
loss on investments (net of taxes) (2,528,865) (0.26)
June 30, 2008
Amount Per Share
------ ---------
Investment income $ 2,861,287
Net investment income 2,280,789 $ 0.23
Net realized and unrealized
loss on investments (net of taxes) (1,496,914) (0.15)
7. AGGREGATE REMUNERATION PAID TO OFFICERS, TRUSTEES AND THEIR AFFILIATED
PERSONS
For the six months ended June 30, 2008, the Trust paid its Trustees aggregate
remuneration of $77,000. During the year the Trust did not pay any
compensation to any of its Trustees who are "interested persons" (as defined
by the 1940 Act) of the Trust. The Trust classifies Messrs. Crandall and
Joyal as "interested persons" of the Trust.
All of the Trust's officers are employees of Babson Capital or MassMutual.
Pursuant to the Contract, the Trust does not compensate its officers who are
employees of Babson Capital or MassMutual.
Mr. Crandall, one of the Trust's Trustees, is an "affiliated person" (as
defined by the 1940 Act) of MassMutual and Babson Capital.
The Trust did not make any payments to Babson Capital for the six months
ended June 30 2008, other than amounts payable to Babson Capital pursuant to
the Contract. For the six months ended June 30, 2008, the Trust paid the
following amounts to MassMutual, exclusive of interest expense on the Note
explained in Footnote 4.A:
Preparation of Certain of the Trust's
Shareholder Communications $ 1,042
8. RESULTS OF SHAREHOLDER MEETING
The Annual Meeting of Shareholders was held on Friday, April 25, 2008. The
Shareholders were asked to vote to elect as trustees Michael H. Brown, Corine
T. Norgaard, and Maleyne M. Syracuse for three year terms. The Shareholders
approved the proposals. The Trust's other trustees, William J. Barrett,
Donald E. Benson, Roger W. Crandall, Martin T. Hart, Donald Glickman, and
Robert E. Joyal, continued to serve their respective terms following the
April 25, 2008 Annual Shareholders Meeting. The results of Shareholders
voting are set forth below.
% of Shares
Shares for Withheld Total Voted for
-----------------------------------------------------------------------------
Michael H. Brown
8,450,536 211,114 8,661,650 97.56%
Corine T. Norgaard
8,426,215 235,435 8,661,650 97.28%
Maleyne M. Syracuse
8,435,070 226,580 8,661,650 97.38%
9. FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Trust adopted FASB Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157
clarifies the definition of fair value, establishes a framework for measuring
fair values and requires additional disclosures about the use of fair value
measurements. FAS 157 requires companies to provide expanded information
about the assets and liabilities measured at fair value and the potential
effect of these fair valuations of an entity's financial performance.
Various inputs are used in determining the value of the Trust's investments.
Using the hierarchy established under FAS 157, these inputs are summarized in
the three broad levels listed below:
Level 1: quoted prices in active markets for identical securities
Level 2: other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayments speeds, credit risk,
etc.)
Level 3: significant unobservable inputs (including the Trust's own
assumptions in determining the fair value of investments)
The inputs and methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Trust's net assets
as of June 30, 2008:
ASSETS TOTAL LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------------------------
Private Securities $ 93,969,644 $ -- $ 4,476,301 $ 89,493,343
Public Securities 25,816,933 1,368,855 24,448,078 --
Short-term Securities 10,676,366 -- 10,676,366 --
-----------------------------------------------------------------------------
TOTAL $130,462,943 $1,368,855 $39,600,745 $ 89,493,343
--------------------------------------------------------------------------------
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Following is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value:
Private Public Short-term
Assets Securities Securities Securities Total
---------------------------------------------------------------------------
Beginning balance
at 12/31/2007 $94,083,138 $ -- $ -- $94,083,138
Total gains or losses
(realized/unrealized)
included in earnings* (1,947,008) -- -- (1,947,008)
Purchases, sales,
issuances &
settlements (net) (2,642,787) -- -- ((2,642,787)
-----------------------------------------------------------------------------
Ending balance
at 6/30/08 $89,493,343 $ -- $ -- $89,493,343
*The amount of total gains or losses for the period included in earnings
attributable to the change in unrealized gains or losses relating to Level 3
assets still held at 6/30/08 is ($3,212,241).
--------------------------------------------------------------------------------
38
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THIS PAGE IS INTENTIONALLY LEFT BLANK
MASSMUTUAL PARTICIPATION INVESTORS
MEMBERS OF THE BOARD OF OFFICERS
TRUSTEES
Roger W. Crandall
Donald Glickman Chairman
Robert E. Joyal Clifford M. Noreen
President
William J. Barrett
James M. Roy
Michael H. Brown Vice President & Chief
Financial Officer
Donald E. Benson*
Rodney J. Dillman
Dr. Corine T. Norgaard* Vice President, Secretary
& Chief Legal Officer
Roger W. Crandall
Jill A. Fields
Martin T. Hart* Vice President
Maleyne M. Syracuse Michael P. Hermsen
Vice President
*Member of the Audit committee
Mary Wilson Kibbe
Vice President
Michael L. Klofas
Vice President
Richard E. Spencer, II
Vice President
Daniel J. Florence
Treasurer
John T. Davitt, Jr.
Comptroller
Melissa M. Lagrant
Chief Compliance Officer
--------------------------------------------------------------------------------
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. Cash
contributions must be received by the Transfer Agent at least five days (but no
more then 30 days) before the payment date of a dividend or distributions.
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 anyway, 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.
41
[LOGO] MASSMUTUAL
PARTICIPATION INVESTORS
PI3344
ITEM 2. CODE OF ETHICS.
Not applicable for this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for the Registrant is included as part of
this report to shareholders under item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable for this filing. There have been no changes in any of
the Portfolio Managers identified in the Registrant's most recent
annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable for this filing.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable for this filing.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The principal executive officer and principal financial officer
of the Registrant evaluated the effectiveness of the Registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) as of a
date within 90 days of the filing date of this report and based
on that evaluation have concluded that such disclosure controls
and procedures are effective to provide reasonable assurance that
material information required to be disclosed by the Registrant
on Form N-CSR is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act)
during the Registrant's second fiscal quarter that have
materially affected, or are reasonably likely to materially
affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) ANY CODE OF ETHICS, OR AMENDMENTS THERETO, THAT IS THE SUBJECT OF
DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT
INTENDS TO SATISFY THE ITEM 2 REQUIREMENTS THROUGH THE FILING OF
AN EXHIBIT.
None.
(a)(2) A SEPARATE CERTIFICATION FOR EACH PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT AS REQUIRED BY RULE
30a-2 UNDER THE ACT.
Attached hereto as EX-99.31.1
Attached hereto as EX-99.31.2
(a)(3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23c-1
UNDER THE ACT (17 CFR 270.23c-1) SENT OR GIVEN DURING THE PERIOD
COVERED BY THE REPORT BY OR ON BEHALF OF THE REGISTRANT TO 10 OR
MORE PERSONS.
Not Applicable for this filing.
(b) If the report is filed under Section 13(a) or 15(d) of the
Exchange Act, provide the certifications required by Rule
30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or
Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or
240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be
deemed "filed" for purposes of Section 18 of the Exchange Act (15
U.S.C. 78r), or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated
by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference.
Attached hereto as EX-99.32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): MassMutual Participation Investors
----------------------------------
By: /s/ Clifford M Noreen
----------------------------------
Clifford M Noreen, President
----------------------------------
Date: August 27, 2008
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Clifford M Noreen
----------------------------------
Clifford M Noreen, President
----------------------------------
Date: August 27, 2008
----------------------------------
By: /s/ James M. Roy
----------------------------------
James M. Roy, Vice President, and
Chief Financial Officer
----------------------------------
Date: August 27, 2008
----------------------------------