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, P.O. Box 15189, Springfield, MA 01115-5189
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(Address of principal executive offices) (Zip code)
Patrica J. Walsh, Vice President, Secretary and Chief Legal Officer
1500 Main Street, Suite 2800, P.O. Box 15189, 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: 12/31/08
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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, 110 F Street NE,
Washington, DC 20549. 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 annual shareholder report transmitted to
shareholders pursuant to Rule 30e-1 of the Investment Company Act of
1940, as amended.
[LOGO] MASSMUTUAL PARTICIPATION INVESTORS
2008 ANNUAL REPORT
MASSMUTUAL PARTICIPATION INVESTORS
c/o Babson Capital Management LLC
1500 Main Street
Suite 600, P.O. Box 15189
Springfield, Massachusetts 01115-5189
(413) 226-1516
http://www.BabsonCapital.com/mpv
ADVISER
Babson Capital Management LLC
1500 Main Street, P.O. Box 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.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
MPV
Listed
NYSE
PROXY VOTING POLICIES & PROCEDURES;
PROXY VOTING RECORD
The Trustees of MassMutual Participation Investors (the "Trust") have delegated
proxy voting responsibilities relating to the voting of securities held by the
Trust to Babson Capital Management LLC ("Babson Capital"). A description of
Babson Capital's proxy voting policies and procedures is available (1) without
charge, upon request, by calling, toll-free 1-866-399-1516; (2) on the Trust's
website at http://www.BabsonCapital.com/mpv; and (3) on the U.S. Securities and
Exchange Commission's ("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, 2008 is available (1) on the
Trust's web-site at http://www.BabsonCapital.com/mpv; and (2) on the SEC's
website at http://www.sec.gov.
FORM N-Q
The Trust files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. This information is
available (i) on the SEC's website at http://www. sec.gov; and (ii) at the SEC'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 on the Trust's website at http://
www.BabsonCapital.com/mpv or upon request by calling, toll-free, 1-866-399-1516.
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MassMutual Participation Investors
MASSMUTUAL PARTICIPATION INVESTORS
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MassMutual Participation Investors is a closed-end investment company, first
offered to the public in 1988, whose shares are traded on the New York Stock
Exchange.
INVESTMENT OBJECTIVE & POLICY
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MassMutual Participation Investors (the "Trust") is a closed-end 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 either 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 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.
In this report you will find a complete listing of the Trust's holdings. We
encourage you to read this section carefully for a better understanding of the
Trust. We cordially invite all shareholders to attend the Trust's Annual Meeting
of Shareholders, which will be held on April 24, 2009 at 1:30 P.M. in
Springfield, Massachusetts.
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MassMutual Participation Investors 1
TOTAL ANNUAL PORTFOLIO RETURN (AS OF 12/31 EACH YEAR)*
[BAR CHART APPEARS HERE]
MASSMUTUAL PARTICIPATION 4.77 8.11 3.41 5.70 23.72 25.14 22.51 18.64 9.95 -6.01
INVESTORS (BASED ON CHANGE
IN THE NET ASSET VALUE WITH
REINVESTED DIVIDENDS)
RUSSELL 2000 INDEX 21.26 -3.03 2.49 -20.48 47.25 18.33 4.55 18.37 -1.57 -33.79
BARCLAYS CAPITAL U.S. 2.39 -5.86 5.28 -1.41 28.97 11.13 2.74 11.85 1.87 -26.16
CORPORATE HIGH YIELD INDEX
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
* Data for MassMutual Participation Investors (the "Trust") represents portfolio
returns based on change in the Trust's net asset value assuming the reinvestment
of all dividends and distributions. These returns differ from the total
investment return based on market value of the Trust's shares due to the
difference between the Trust's net asset value and the market value of its
shares outstanding (see page 12 for total investment return based on market
value). Past performance is no guarantee of future results.
PORTFOLIO COMPOSITION AS OF 12/31/08*
[PIE CHART APPEARS HERE]
Private / 144A Public High
High Yield Debt Yield Debt
65.5% 12.3%
Private / Restricted Public Equity
Equity 0.3%
15.3%
Cash & Short Term
Investments
6.6%
*Based on value of total investments (including cash)
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2 MassMutual Participation Investors
TO OUR SHAREHOLDERS
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I am pleased to share with you the Trust's Annual Report for the year ended
December 31, 2008.
THE TRUST'S 2008 PORTFOLIO PERFORMANCE
The Trust's net total portfolio rate of return for 2008 was negative 6.01%, as
measured by the change in net asset value and assuming the reinvestment of all
dividends and distributions. The Trust's total net assets were $110,175,930, or
$11.10 per share, as of December 31, 2008. This compares to $126,625,334, or
$12.84 per share, as of December 31, 2007. The Trust paid a quarterly dividend
of 25 cents per share for each of the four quarters of 2008. Including the
fourth quarter dividend paid in January 2009, total dividends for the year were
$1.00 per share.
The table below lists the average annual net returns of the Trust's portfolio,
based on the change in net assets and assuming the reinvestment of all dividends
and distributions. Average annual returns of the Barclays Capital U.S. Corporate
High Yield Index and the Russell 2000 Small Cap Equity Index for the 1, 3, 5 and
10 years ended December 31, 2008 are provided for comparison.
Barclays Capital U.S. Russell
The Trust Corporate High Yield Index 2000 Index
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1 Year -6.01% -26.16% -33.27%
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3 Year 7.03% -5.59% -8.29%
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5 Year 13.45% -0.80% -0.93%
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10 Year 11.15% 2.17% 3.02%
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Past performance is no guarantee of future results.
The year 2008 was a challenging one at all levels. The U.S. economy declined
into a recession and most asset classes performed below expectations. The
mortgage and credit market crisis that began in mid-2007 expanded into a
widespread economic recession that reached beyond the U.S. into every corner of
the world. As credit markets weakened, businesses that relied on borrowing,
including a number of well known financial firms, could not get the funds they
needed and either closed or were acquired by others. Governments around the
globe pumped capital into various institutions to try to improve the situation,
but this had limited success. A crisis in investor confidence led to a flight to
quality. This resulted in U.S. Treasury bills and bonds at record low yields.
As 2008 came to an end, significant concerns existed about the U.S. economy. How
far will the downturn extend? When will the downturn end? What events will lead
to a recovery? The unemployment rate was 7.2 percent in December and is expected
to rise in 2009, according to the U.S. Department of Labor. Inflation spiked to
5.4 percent in August, but then plummeted to just 0.1 percent by year-end. The
value of the dollar versus several other currencies rebounded in 2008 after
dropping precipitously in 2007. Corporate credit defaults around the globe rose
after five straight years of decline, according to Moody's Investors Service.
Moody's global issuer-weighted speculative-grade default rate finished the year
at 4 percent, up from 0.9 percent in 2007. Moody's expects the default rate to
jump in 2009 to more than 15 percent in the U.S., well beyond its historical
average of 5 percent.
PORTFOLIO ACTIVITY
The Trust's investment activity during 2008 was very lumpy. During the first
quarter of the year, the mezzanine and private equity markets in which the Trust
participates continued to be affected by the credit dislocation that began in
2007. Less credit was available to fund transactions than had previously been
available, so new investment activity was very slow. Credit became more readily
available during the second and third quarters of 2008. As a result, new
investment activity and portfolio company sale activity increased
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MassMutual Participation Investors 3
during both quarters. Equally as important, the trend towards more conservative
capital structures that began toward the end of 2007 continued into 2008. New
investments were structured with lower leverage than had generally been the case
during the last several years. At the same time, pricing on these investments
was also more favorable than it has been for several years. As the third quarter
ended, however, the turmoil in the financial markets once again impacted middle
market leveraged buyout activity. Senior debt financing became increasingly
scarce and significantly more expensive as a number of senior debt providers
withdrew from the market. Investment activity in the fourth quarter slowed
dramatically as a result, and the slowdown has continued into 2009.
Overall, the Trust closed 23 new private placement transactions during 2008 and
added to nine existing private placement investments. Total private placement
purchases in 2008 were $28,001,715.
Left to right:
Clifford M. Noreen
President
Roger W. Crandall
Chairman
[PHOTO OF PRESIDENT AND CHAIRMAN]
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4 MassMutual Participation Investors
New private placement investments completed during 2008 were: ASAP Industries
LLC; AWX Holdings Corporation; All Current Holding Company; CDNT, Inc.; Clough,
Harbour and Associates; Coeur, Inc.; Crane Rental Corporation; ESP Holdco, Inc.;
FCX Holdings Corporation; GQ Holdings LLC; Hospitality Mints Holding Company;
KPI Holdings, Inc.; MVI Holding, Inc.; MedSystems Holdings LLC; MEGTEC Holdings,
Inc.; Milwaukee Gear Company; Power Services Holding Company; REI Delaware
Holding, Inc.; Specialty Commodities, Inc.; Synteract Holdings Corporation; THI
Acquisition, Inc.; UMA Enterprises, Inc.; and Xaloy Superior Holdings, Inc.
In addition, the Trust added to existing private placement investments in
American Hospice Management Holding LLC; Fuel Systems Holding Corporation;
Morton Industrial Group, Inc.; Navis Global; NetShape Technologies, Inc.; Power
Services Holding Company; Smart Source Holdings LLC; Tangent Rail Corporation
and Truck Bodies & Equipment International.
Left to right:
Richard E. Spencer, II
Vice President
Michael P. Hermsen
Vice President
Jill A. Fields
Vice President
Patricia J. Walsh
Vice President,
Secretary & Chief
Legal Officer
Michael L. Klofas [PHOTO OF OFFICERS]
Vice President
James M. Roy
Vice President
& Chief Financial
Officer
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MassMutual Participation Investors 5
OUTLOOK FOR 2009
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The year 2009 opened with a new U.S. President and with worldwide financial
markets under severe pressure. The recession has business and consumers in a
self-perpetuating negative cycle - nervous consumers and companies cut back
spending, which puts pressure on company earnings, often necessitating
businesses to lay off staff, further fanning fear. Governments continue to look
at capital injections to help start a recovery, but banks are hesitant to lend,
despite interest rates from the Federal Reserve at near zero. How long will it
take before the world's economies return to a normal state? As always, no one
can predict the future with any degree of certainty.
The current recessionary economic conditions have adversely affected the
financial performance of many of the Trust's portfolio companies. In addition,
middle market leveraged buyout activity, which drives new investment and
portfolio company sale activity for the Trust, remains very slow. This will
continue until senior debt financing becomes more widely available. As a result,
we expect 2009 to be another challenging year, and one during which we will
spend significant efforts on managing the Trust's existing portfolio of
companies.
Regardless of the economic environment the Trust continues to repeatedly employ
the investment philosophy that has served it well since its inception: investing
in companies which we believe have a strong business proposition, solid cash
flow and experienced, ethical management. This philosophy, combined with Babson
Capital's seasoned investment-management team and the Trust's financial
position, contribute to the Trust's being well positioned for future investment
opportunities that meet its investment objectives and policies. As always, I
would like to thank you for your continued interest in and support of MassMutual
Participation Investors.
Sincerely,
/s/ Clifford M. Noreen
Clifford M. Noreen,
President
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 in 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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2008 Record Net Investment Short-Term Tax Long-Term
Dividends Date Income Gains Effect Gains
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Regular 5/5/2008 0.2500 -- --
8/1/2008 0.2500 -- --
10/31/2008 0.2500 -- --
12/31/2008 0.2500 -- --
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$1.0000 $ -- $1.0000 $ --
================================================================================
The Trust did not have distributable net long-term capital gains in 2008.
Qualified for Dividend Interest Earned on
Annual Dividend Received Deduction* Qualified Dividends** U.S. Gov't. Obligations
Amount Per Share Percent Amount Per Share Percent Amount Per Share Percent Amount Per Share
---------------------------------------------------------------------------------------------------------
$1.00 6.5605% 0.0655 6.8105% 0.0680 0% 0.0000
=========================================================================================================
* Not available to individual shareholders
** Qualified dividends are reported in Box 1b on IRS Form 1099-Div for 2008
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6 MassMutual Participation Investors
FINANCIAL REPORT
Consolidated Statement of Assets and Liabilities 8
Consolidated Statement of Operations 9
Consolidated Statement of Cash Flows 10
Consolidated Statements of Changes in Net Assets 11
Consolidated Financial Highlights 12
Consolidated Schedule of Investments 13-34
Notes to Consolidated Financial Statements 35-40
Report of Independent Registered Public Accounting Firm 41
Interested Trustees 42-43
Independent Trustees 44-46
Officers of the Trust 47
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MassMutual Participation Investors 7
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $111,788,842) $ 100,077,804
Corporate public securities at market value
(Cost - $20,268,522) 15,593,179
Short-term securities at amortized cost 5,710,652
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121,381,635
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Cash 2,443,883
Interest and dividends receivable 1,540,728
Receivable for investments sold 108,651
Prepaid taxes 150,000
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TOTAL ASSETS 125,624,897
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LIABILITIES:
Dividend payable 2,481,811
Payable for investments purchased 412,776
Investment advisory fee payable 247,896
Note payable 12,000,000
Interest payable 88,933
Accrued expenses 146,414
Accrued taxes payable 23,000
Other payables 48,137
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TOTAL LIABILITIES 15,448,967
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TOTAL NET ASSETS $ 110,175,930
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NET ASSETS:
Common shares, par value $.01 per share; an unlimited
number authorized $ 99,272
Additional paid-in capital 92,554,767
Retained net realized gain on investments, prior years 32,871,737
Undistributed net investment income 1,781,677
Accumulated net realized loss on investments (745,142)
Net unrealized depreciation of investments (16,386,381)
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TOTAL NET ASSETS $ 110,175,930
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COMMON SHARES ISSUED AND OUTSTANDING 9,927,243
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NET ASSET VALUE PER SHARE $ 11.10
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See Notes to Consolidated Financial Statements
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8 MassMutual Participation Investors
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2008
INVESTMENT INCOME:
Interest $ 12,304,497
Dividends 650,486
Other 46,992
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TOTAL INVESTMENT INCOME 13,001,975
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EXPENSES:
Investment advisory fees 1,091,087
Interest 702,229
Trustees' fees and expenses 163,000
Professional fees 159,750
Reports to shareholders 108,000
Custodian fees 27,557
Transfer agent/registrar's expenses 23,000
Other 55,415
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TOTAL EXPENSES 2,330,038
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INVESTMENT INCOME - NET 10,671,937
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NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments before taxes (1,191,905)
Income tax benefit 26,877
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NET REALIZED LOSS ON INVESTMENTS AFTER TAXES (1,165,028)
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NET CHANGE IN UNREALIZED DEPRECIATION OF INVESTMENTS (16,888,301)
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NET LOSS ON INVESTMENTS (18,053,329)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (7,381,392)
==============
See Notes to Consolidated Financial Statements
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MassMutual Participation Investors 9
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2008
NET INCREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net $ 2,123,561
Purchases of portfolio securities (40,195,877)
Proceeds from disposition of portfolio securities 40,235,986
Interest, dividends and other received 13,928,434
Interest expense paid (706,051)
Operating expenses paid (1,598,522)
Income taxes paid (855,715)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 12,931,816
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Cash flows from financing activities:
Cash dividends paid from net investment income (12,176,492)
Cash dividends paid from net realized gain on investments (187,646)
Receipts for shares issued on reinvestment of dividends 847,131
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NET CASH USED FOR FINANCING ACTIVITIES (11,517,007)
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NET INCREASE IN CASH 1,414,809
Cash - beginning of year 1,029,074
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CASH - END OF YEAR $ 2,443,883
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RECONCILIATION OF NET DECREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (7,381,392)
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Decrease in investments 18,458,145
Decrease in interest and dividends receivable 1,452,713
Decrease in receivable for investments sold 846,701
Increase in prepaid taxes (150,000)
Increase in payable for investments purchased 412,776
Decrease in investment advisory fee payable (37,011)
Decrease in interest payable (3,822)
Increase in accrued expenses 21,299
Decrease in accrued taxes payable (732,592)
Increase in other payables 44,999
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TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS 20,313,208
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 12,931,816
==============
See Notes to Consolidated Financial Statements
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10 MassMutual Participation Investors
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
2008 2007
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INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $ 10,671,937 $ 12,057,960
Net realized (loss) gain on investments (1,165,028) 1,184,026
Net change in unrealized depreciation of investments (16,888,301) (1,644,141)
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NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (7,381,392) 11,597,845
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Increase from common shares issued on reinvestment of dividends
Common shares issued (2008 - 65,632; 2007 - 56,329) 847,131 828,061
Dividends to shareholders from:
Net investment income (2008 - $1.00 per share;
2007 - $1.23 per share) (9,915,143) (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 (16,449,404) 110,321
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NET ASSETS, BEGINNING OF YEAR 126,625,334 126,515,013
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NET ASSETS, END OF YEAR (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $1,781,677 AND $991,196, RESPECTIVELY) $ 110,175,930 $ 126,625,334
============== ==============
See Notes to Consolidated Financial Statements
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MassMutual Participation Investors 11
CONSOLIDATED FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding:
For the years ended December 31,
2008 2007 2006 2005 2004
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE: BEGINNING OF YEAR $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84
---------- ---------- ---------- ---------- ----------
Net investment income (a) 1.08 1.23 1.10 0.99 1.00
Net realized and unrealized
gain (loss) on investments (1.82) (0.05) 0.77 1.09(b) 1.36
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.74) 1.18 1.87 2.08 2.36
---------- ---------- ---------- ---------- ----------
Dividends from net investment
income to common shareholders (1.00) (1.23) (1.18) (1.01) (1.10)
Dividends from net realized gain
on investments to common shareholders -- (0.02) (0.01) -- --
Increase from dividends reinvested 0.00(c) 0.01 0.01 0.01 0.03
---------- ---------- ---------- ---------- ----------
TOTAL DIVIDENDS (1.00) (1.24) (1.18) (1.00) (1.07)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE: END OF YEAR $ 11.10 $ 12.84 $ 12.90 $ 12.21 $ 11.13
---------- ---------- ---------- ---------- ----------
PER SHARE MARKET VALUE: END OF YEAR $ 9.05 $ 13.18 $ 14.70 $ 14.05 $ 13.31
========== ========== ========== ========== ==========
Total investment return
Net asset value (d) (6.01%) 9.95% 18.64% 22.51% 25.14%
Market value (25.36%) (1.30%) 16.81% 17.25% 25.77%
Net assets (in millions): End of year $ 110.18 $ 126.63 $ 126.52 $ 119.02 $ 107.61
Ratio of operating expenses to average
net assets 1.33% 1.36% 1.17% 1.45% 1.63%
Ratio of interest expense to average
net assets 0.58% 0.56% 0.57% 0.80% 0.89%
Ratio of income tax expense to average
net assets (e) 0.00% 0.48% 2.68% 2.83% 0.16%
Ratio of total expenses before custodian
reduction to average net assets (e) 1.91% 2.40% 4.46% 5.12% 2.68%
Ratio of net expenses after custodian
reduction to average net assets (e) 1.91% 2.40% 4.42% 5.08% 2.68%
Ratio of net investment income to average
net assets 8.74% 9.32% 8.43% 8.45% 9.60%
Portfolio turnover 32% 33% 34% 32% 51%
(a) Calculated using average shares.
(b) Amount includes $0.10 per share in litigation proceeds.
(c) Rounds to less than $0.01 per share.
(d) 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.
(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 borrowings:
Total principal amount (in millions) $ 12 $ 12 $ 12 $ 12 $ 22.5
Asset coverage per $1,000 of indebtedness $ 10,181 $ 11,552 $ 11,543 $ 10,918 $ 5,783
See Notes to Consolidated Financial Statements
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12 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 90.84% (A) Percentage Date Cost Fair Value
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PRIVATE PLACEMENT INVESTMENTS - 88.43%
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 $ 1,273,197 11/21/07 $ 1,246,396 $ 1,204,156
Limited Partnership Interest (B) 12.26% int. 11/21/07 119,009 114,966
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1,365,405 1,319,122
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A S A P INDUSTRIES LLC
A designer and manufacturer of components used on oil and natural gas wells.
12.5% Senior Subordinated Note due 2015 $ 600,667 12/31/08 521,754 621,192
Limited Liability Company Unit Class A-2 (B) 677 uts. 12/31/08 74,333 70,616
Limited Liability Company Unit Class A-3 (B) 608 uts. 12/31/08 66,899 6
------------- -------------
662,986 691,814
------------- -------------
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 -- 10,728
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 548,227
------------- -------------
1,125,000 1,683,955
------------- -------------
A W X HOLDINGS CORPORATION
A provider of aerial equipment rental, sales and repair services to non-residential construction and maintenance contractors
operating in Indiana.
10.5% Senior Secured Term Note due 2014 $ 420,000 05/15/08 411,600 403,527
13% Senior Subordinated Note due 2015 $ 420,000 05/15/08 377,928 398,149
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
------------- -------------
885,182 858,887
------------- -------------
ADVANCED TECHNOLOGIES HOLDINGS
A provider of factory maintenance services to industrial companies.
15% Senior Subordinated Note due 2013 $ 1,113,134 12/27/07 1,090,508 1,087,185
Preferred Stock (B) 546 shs. 12/27/07 270,000 273,973
------------- -------------
1,360,508 1,361,158
------------- -------------
AERO HOLDINGS, INC.
A provider of geospatial services to corporate and government clients.
10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 907,228
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 651,497 697,818
Common Stock (B) 150,000 shs. 03/09/07 150,000 249,041
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 62,725
------------- -------------
1,781,277 1,916,812
------------- -------------
MassMutual Participation Investors 13
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
ALL CURRENT HOLDING COMPANY
A specialty re-seller of essential electrical parts and components primarily serving wholesale distributors.
12% Senior Subordinated Note due 2015 $ 603,697 09/26/08 $ 549,053 $ 575,074
Common Stock (B) 713 shs. 09/26/08 71,303 67,735
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 507 shs. 09/26/08 46,584 5
------------- -------------
666,940 642,814
------------- -------------
AMERICAN HOSPICE MANAGEMENT HOLDING LLC
A for-profit hospice care provider in the United States.
12% Senior Subordinated Note due 2013 $ 1,687,503 * 1,606,040 1,699,982
Preferred Class A Unit (B) 1,706 uts. ** 170,600 136,480
Preferred Class B Unit (B) 808 uts. 06/09/08 80,789 80,789
Common Class B Unit (B) 16,100 uts. 01/22/04 1 --
Common Class D Unit (B) 3,690 uts. 09/12/06 -- --
------------- -------------
* 01/22/04 and 06/09/08. ** 01/22/04 and 09/12/06. 1,857,430 1,917,251
------------- -------------
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 05/18/05 826,230 793,954
Common Stock (B) 263 shs. 05/18/05 263,298 19,048
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 4,994
------------- -------------
1,148,890 817,996
------------- -------------
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 1,145,126 1,121,851
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 73,882
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 25,965
------------- -------------
1,335,984 1,221,698
------------- -------------
C D N T, INC.
A value-added converter and distributor of specialty pressure sensitive adhesives, foams, films, and foils.
10.5% Senior Secured Term Note due 2014 $ 429,070 08/07/08 420,489 415,289
12.5% Senior Subordinated Note due 2015 $ 429,070 08/07/08 388,799 409,279
Common Stock (B) 41,860 shs. 08/07/08 41,860 39,767
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 32,914 shs. 08/07/08 32,965 329
------------- -------------
884,113 864,664
------------- -------------
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 --
------------- -------------
14 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B) 55 shs. * $ 252 $ 139,733
------------- -------------
*12/30/97 and 05/29/99.
CLOUGH, HARBOUR AND ASSOCIATES
An engineering service firm that is located in Albany, NY.
12.25% Senior Subordinated Note due 2015 $ 1,270,588 12/02/08 1,177,994 1,271,170
Preferred Stock (B) 147 shs. 12/02/08 146,594 139,261
------------- -------------
1,324,588 1,410,431
------------- -------------
COEUR, INC.
A producer of proprietary, disposable power injection syringes.
12% Senior Subordinated Note due 2016 $ 642,857 10/10/08 581,786 620,718
Common Stock (B) 321 shs. 10/10/08 32,143 30,536
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 495 shs. 10/10/08 48,214 5
------------- -------------
662,143 651,259
------------- -------------
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 1,050,671
Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 23,674
Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 17,124
------------- -------------
1,324,652 1,091,469
------------- -------------
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. 07/05/07 370,796 908,072
Preferred Stock Series C (B) 4,757 shs. 07/05/07 158,912 428,137
Common Stock (B) 380 shs. 07/05/07 4 4
Limited Partnership Interest (B) 6.88% int. * 103,135 --
------------- -------------
*08/12/04 and 01/14/05. 632,847 1,336,213
------------- -------------
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 1,297,464 1,281,088
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 47,632
------------- -------------
1,370,081 1,328,720
------------- -------------
CRANE RENTAL CORPORATION
A crane rental company.
13% Senior Subordinated Note due 2015 $ 1,215,000 08/21/08 1,090,910 1,164,112
Common Stock (B) 135,000 shs. 08/21/08 135,000 128,250
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 72,037 shs. 08/21/08 103,143 720
------------- -------------
1,329,053 1,293,082
------------- -------------
MassMutual Participation Investors 15
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 $ 923,021 $ 963,529
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 824,832
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 32,030
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 88,005
------------- -------------
1,339,140 1,908,396
------------- -------------
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 1,392,067 659,713
Warrants, exercisable until 2011, to purchase common
stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 --
------------- -------------
*10/24/96 and 08/28/98. 1,960,217 659,713
------------- -------------
DUNCAN SYSTEMS, INC.
A distributor of windshields and side glass for the recreational vehicle market.
10% Senior Secured Term Note due 2013 $ 308,571 11/01/06 303,942 287,347
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 442,141 443,852
Common Stock (B) 102,857 shs. 11/01/06 102,857 78,996
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 24,802
------------- -------------
893,603 834,997
------------- -------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
Common Stock (B) 3,656 shs. * 365,600 609,991
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 179,629
------------- -------------
*10/30/03 and 01/02/04. 464,319 789,620
------------- -------------
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 $ 1,198,584 01/08/08 1,177,088 1,112,909
Common Stock (B) 349 shs. 01/08/08 174,701 165,775
------------- -------------
1,351,789 1,278,684
------------- -------------
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 40,875 111,618
------------- -------------
16 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
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.
Limited Liability Company Unit Series F 36,913 uts. 04/12/07 $ 36,913 $ 106,057
Limited Liability Company Unit Series G 2,852 uts. 04/12/07 2,852 8,194
------------- -------------
39,765 114,251
------------- -------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control center systems.
Common Stock (B) 45,000 shs. 05/06/04 6 842,151
------------- -------------
F C X HOLDINGS CORPORATION
A distributor of specialty/technical valves, actuators, accessories, and process instrumentation supplying a number of industrial,
high purity, and energy end markets in North America.
15% Senior Subordinated Note due 2015 $ 1,118,571 10/06/08 1,096,200 1,061,988
Preferred Stock (B) 2,298 shs. 10/06/08 229,804 218,310
Common Stock (B) 1,625 shs. 10/06/08 1,625 1,544
------------- -------------
1,327,629 1,281,842
------------- -------------
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 1,190,841 1,139,063
Limited Liability Company Units of
Linden/FHS Holdings LLC (B) 84 uts. 06/01/06 84,368 42,484
Common Unit Class B (B) 734 shs. 06/01/06 64,779 --
------------- -------------
1,339,988 1,181,547
------------- -------------
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 04/13/06 516,919 463,069
14% Senior Subordinated Note due 2014 $ 317,177 04/13/06 289,204 278,022
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 --
------------- -------------
896,334 741,091
------------- -------------
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 1,123,044 --
Common Stock (B) 98 shs. 02/03/06 97,826 --
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 --
------------- -------------
1,331,218 --
------------- -------------
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 (D) $ 1,237,500 01/31/06 1,149,638 309,375
Preferred Stock (B) 16,792 shs. 06/12/08 16,792 --
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 --
------------- -------------
1,342,043 309,375
------------- -------------
MassMutual Participation Investors 17
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
GOLDEN COUNTRY FOODS HOLDING, INC.
A manufacturer of frozen appetizers and snacks.
12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 $ 914,607 $ 810,000
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 --
------------- -------------
992,250 810,000
------------- -------------
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 $ 1,226,592 06/27/08 1,201,773 1,104,732
Common Stock (B) 3,867 shs. 06/27/08 132,841 106,271
------------- -------------
1,334,614 1,211,003
------------- -------------
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 --
------------- -------------
*09/18/07 and 06/27/08. 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 * 1,013,439 1,028,975
Common Stock (B) 33 shs. * 33,216 27,069
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 86,064
------------- -------------
* 06/30/04 and 08/19/04. 1,152,273 1,142,108
------------- -------------
HOSPITALITY MINTS HOLDING COMPANY
A manufacturer of individually-wrapped imprinted promotional mints.
12% Senior Subordinated Note due 2016 $ 1,098,837 08/19/08 1,016,628 1,042,588
Common Stock (B) 251 shs. 08/19/08 251,163 238,602
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 65 shs. 08/19/08 60,233 1
------------- -------------
1,328,024 1,281,191
------------- -------------
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 53,436
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 11 shs. 02/27/07 324 15,742
------------- -------------
1,424 69,178
------------- -------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A manufacturer of steel protective computer and network systems for the industrial and office environments.
12% Senior Subordinated Note due on demand $ 25,055 03/01/04 1 --
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------- -------------
149,501 --
------------- -------------
18 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
JASON, INC.
A diversified manufacturing company serving various industrial markets.
13% Senior Subordinated Note due 2010 $ 510,187 08/04/00 $ 491,439 $ 490,920
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,218 51,509
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 10,344
------------- -------------
1,021,758 552,773
------------- -------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 813,493 827,158
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 136,976
------------- -------------
867,021 964,134
------------- -------------
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 $ 1,263,334 10/15/07 1,238,088 1,210,407
Common Stock (B) 116,827 shs. 10/15/07 116,827 120,737
------------- -------------
1,354,915 1,331,144
------------- -------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the custom framing market.
13.5% Senior Subordinated Note due 2013 $ 1,329,717 05/25/06 1,275,911 1,269,919
Common Stock (B) 71,053 shs. 05/25/06 71,053 59,759
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 36,669
------------- -------------
1,384,835 1,366,347
------------- -------------
K P I HOLDINGS, INC.
Pace Industries is the largest player in the U.S. non-automotive, non-ferrous die casting segment.
13% Senior Subordinated Note due 2014 $ 1,115,217 07/16/08 1,042,077 1,061,083
Common Stock (B) 235 shs. 07/15/08 234,783 223,041
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 51 shs. 07/16/08 50,836 1
------------- -------------
1,327,696 1,284,125
------------- -------------
K W P I HOLDINGS CORPORATION
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
12.75% Senior Subordinated Note due 2014 $ 1,229,301 03/14/07 1,133,747 1,054,436
Common Stock (B) 123 shs. 03/13/07 123,000 47,720
Warrant, exercisable until 2017, to purchase
common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 34,529
------------- -------------
1,342,637 1,136,685
------------- -------------
K-TEK HOLDING CORPORATION
A manufacturer of instrumentation for liquid and bulk solids level detection for process and storage tanks.
14% Senior Subordinated Note due 2015 $ 1,181,178 12/20/07 1,159,367 1,126,191
Preferred Stock (B) 192,314 shs. 12/20/07 192,314 204,579
Common Stock (B) 54,326 shs. 12/20/07 543 79,165
------------- -------------
1,352,224 1,409,935
------------- -------------
MassMutual Participation Investors 19
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
M V I HOLDING, INC.
A manufacturer of large precision machined metal components used in equipment which services a variety of industries, including the
oil & gas, mining, and defense markets.
13% Senior Subordinated Note due 2016 $ 644,786 09/12/08 $ 597,100 $ 607,823
Common Stock (B) 32 shs. 09/12/08 32,143 30,533
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 35 shs. 09/12/08 34,714 --
------------- -------------
663,957 638,356
------------- -------------
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 05/04/07 483,072 495,840
Limited Liability Company Unit (B) 12,763 uts. * 166,481 222,150
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 31,103
------------- -------------
*05/04/07 and 01/02/08. 672,334 749,093
------------- -------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of wine bottles.
8.26% Senior Secured Tranche A Note due 2010 (C) $ 207,815 09/03/04 207,815 205,449
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 167,495 166,526
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 10,416
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 7,526
------------- -------------
431,448 389,917
------------- -------------
MEDSYSTEMS HOLDINGS LLC
A manufacturer of enteral feeding products, such as feeding tubes and other products related to assisted feeding.
13% Senior Subordinated Note due 2015 $ 608,401 08/29/08 534,359 581,580
Preferred Unit (B) 66 uts. 08/29/08 66,451 63,128
Common Unit Class A (B) 671 uts. 08/29/08 671 637
Common Unit Class B (B) 250 uts. 08/29/08 63,564 3
------------- -------------
665,045 645,348
------------- -------------
MEGTEC HOLDINGS, INC.
A supplier of industrial and environmental products and services to a broad array of industries.
12% Senior Subordinated Note due 2016 $ 1,144,068 09/24/08 1,048,910 1,083,484
Preferred Stock (B) 56 shs. 09/24/08 54,040 1
Limited Partnership Interest (B) 205,932 int. 09/16/08 205,932 195,635
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 18 shs. 09/24/08 18,237 --
------------- -------------
1,327,119 1,279,120
------------- -------------
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 * 1,354,600 1,376,331
Common Stock (B) 238 shs. * 238,000 426,254
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. * 86,281 155,475
------------- -------------
*08/12/05 and 09/11/06. 1,678,881 1,958,060
------------- -------------
20 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
MILWAUKEE GEAR COMPANY
A manufacturer of high-precision custom gears and gear drives used by original equipment manufacturers operating in a number of
industries.
13% Senior Subordinated Note due 2014 $ 1,246,154 07/21/08 $ 1,172,806 $ 1,203,237
Preferred Stock (B) 139 shs. 07/21/08 138,374 131,459
Common Stock (B) 9 shs. 07/21/08 10,000 9,500
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 6 shs. 07/21/08 5,510 --
------------- -------------
1,326,690 1,344,196
------------- -------------
MOMENTUM HOLDING CO.
A designer and supplier of upholstery fabric to commercial furniture manufacturers and architectural and design firms.
Limited Partnership Interest (B) 11.24% int. 08/04/06 56,198 133,841
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 139,514
------------- -------------
112,903 273,355
------------- -------------
MONESSEN HOLDING CORPORATION
A designer and manufacturer of a broad line of gas, wood, and electric hearth products and accessories.
14% Senior Subordinated Note due 2014 $ 1,490,051 07/25/08 1,391,897 1,341,046
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 --
------------- -------------
1,465,022 1,341,046
------------- -------------
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% Convertible Preferred Stock (B) 41,289 shs. 07/28/08 19,708 37,160
------------- -------------
1,206,729 1,200,181
------------- -------------
NABCO, INC.
A producer of explosive containment vessels in the United States.
14% Senior Subordinated Note due 2014 $ 431,692 02/24/06 368,348 215,846
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 --
------------- -------------
* 02/24/06 and 06/22/07. 825,019 215,846
------------- -------------
NAVIS GLOBAL
A designer, manufacturer, seller and servicer of finishing machinery for the knit and woven segments of the global textile industry.
12% Senior Secured Term Note Series A due 2009 $ 144,462 11/14/08 144,462 143,651
14% Senior Subordinated Note due 2014 (D) $ 764,921 05/28/04 630,722 --
10.75% Senior Secured Note due 2011 (D) $ 348,150 05/28/04 327,479 87,037
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 --
------------- -------------
1,177,399 230,688
------------- -------------
MassMutual Participation Investors 21
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
NESCO HOLDINGS CORPORATION
A sales and leasing company that provides equipment to the electric utility, telecommunications, and various other industries.
12% Senior Secured Subordinated Note due 2015 $ 1,125,000 08/02/07 $ 999,658 $ 1,095,863
Common Stock (B) 225,000 shs. 08/02/07 225,000 286,345
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 80,419
------------- -------------
1,327,500 1,462,627
------------- -------------
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 02/02/07 745,713 709,077
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 1.38% int. 02/01/07 539,978 113,415
Limited Liability Company Unit Class D of
Saw Mill PCG Partners LLC (B) 8 uts. 12/18/08 8,147 8,150
Preferred Stock Class A (B) 1 sh. 12/18/08 726 721
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 10,100
------------- -------------
1,342,651 841,463
------------- -------------
NYLONCRAFT, INC.
A supplier of engineered plastic components for the automotive industry.
9% Senior Secured Note due 2009 $ 464,286 01/28/02 464,286 348,215
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 820,159 428,572
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 --
------------- -------------
1,555,613 776,787
------------- -------------
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 $ 273,405 01/03/06 269,304 257,730
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 358,563 359,150
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 --
------------- -------------
847,943 616,880
------------- -------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and British Columbia.
12% Senior Subordinated Note due 2009 (D) $ 511,000 08/07/98 511,000 102,200
12% Senior Subordinated Note due 2009 (D) $ 244,154 02/09/00 213,313 48,831
Warrants, exercisable until 2009, to purchase
common stock at $.01 per share (B) 2,270 shs. * 30,841 --
------------- -------------
*08/07/98 and 02/29/00. 755,154 151,031
------------- -------------
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. 01/17/06 302,885 595,934
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 100,616
------------- -------------
393,309 696,550
------------- -------------
22 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 $ 1,206,177 07/03/06 $ 1,153,202 $ 1,156,054
Preferred Unit (B) 202 uts. 07/03/06 202,320 257,722
Preferred Unit (B) 36 uts. 07/03/06 36,420 46,393
Common Unit Class I (B) 78 uts. 07/03/06 -- 4,041
Common Unit Class L (B) 17 uts. 07/03/06 -- 854
------------- -------------
1,391,942 1,465,064
------------- -------------
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 1,149,505 1,193,497
Preferred Stock (B) 19 shs. 03/31/06 174,492 210,497
Common Stock (B) 12 shs. 03/31/06 13,500 37,937
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 22,075
------------- -------------
1,343,385 1,464,006
------------- -------------
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.
14% Senior Subordinated Note due 2012 $ 701,250 04/27/07 650,554 647,704
Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 --
------------- -------------
684,031 647,704
------------- -------------
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 1,068,043 1,067,049
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 --
------------- -------------
1,208,668 1,067,049
------------- -------------
POSTLE ALUMINUM COMPANY LLC
A manufacturer and distributor of aluminum extruded products.
12% Senior Subordinated Note due 2014 $ 1,080,000 10/02/06 1,009,845 540,000
Limited Liability Company Unit 733 uts. 10/02/06 270,000 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 182 shs. 10/02/06 65,988 --
------------- -------------
1,345,833 540,000
------------- -------------
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 1,147,640 1,207,555
Limited Partnership Interest (B) 12.55% int. 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
------------- -------------
1,330,455 1,296,949
------------- -------------
MassMutual Participation Investors 23
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 --
------------- -------------
*08/12/94 and 11/14/01. 75,582 --
------------- -------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and chassis products.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 838,923 902,812
Common Stock 187,500 shs. 05/28/04 187,500 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share 199,969 shs. 05/28/04 199,969 --
------------- -------------
1,226,392 902,812
------------- -------------
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 1,138,718
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 106,457
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 50,237
------------- -------------
1,325,995 1,295,412
------------- -------------
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 1,258,307
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 --
------------- -------------
1,323,000 1,258,307
------------- -------------
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 1,124,954 1,197,705
Common Stock (B) 153,191 shs. 02/10/06 153,191 242,217
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 110,122
------------- -------------
1,341,566 1,550,044
------------- -------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 530,988 524,441
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 13,326
------------- -------------
596,077 537,767
------------- -------------
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. 06/02/99 146,456 583,470
------------- -------------
24 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 $ 777,710 $ 759,675
Common Stock (B) 324 shs. * 340,378 335,982
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 73,356
------------- -------------
*09/10/04 and 10/05/07. 1,178,217 1,169,013
------------- -------------
SMART SOURCE HOLDINGS LLC
A short-term computer rental company.
12% Senior Subordinated Note due 2015 $ 1,176,924 * 1,074,470 1,136,038
Limited Liability Company Unit (B) 328 uts. * 337,762 402,957
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 83 shs. * 87,231 102,069
------------- -------------
*08/31/07 and 03/06/08. 1,499,463 1,641,064
------------- -------------
SPECIALTY COMMODITIES, INC.
A distributor of specialty food ingredients.
13.25% Senior Subordinated Note due 2016 $ 1,191,176 10/23/08 1,114,290 1,226,911
Common Stock (B) 15,882 shs. 10/23/08 158,824 150,879
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 5,852 shs. 10/23/08 53,285 59
------------- -------------
1,326,399 1,377,849
------------- -------------
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 1,121,923 1,094,863
Common Stock (B) 165 shs. 08/01/06 164,634 173,540
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 57,797
------------- -------------
1,335,947 1,326,200
------------- -------------
SYNTERACT HOLDINGS CORPORATION
A provider of outsourced clinical trial management services to pharmaceutical and biotechnology companies.
14% Senior Subordinated Note due 2016 $ 1,354,503 09/02/08 1,262,344 1,296,906
Redeemable Preferred Stock Series A (B) 678 shs. 09/02/08 6,629 7
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 6,778 shs. 09/02/08 59,661 68
------------- -------------
1,328,634 1,296,981
------------- -------------
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 1,257,512
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 --
------------- -------------
1,323,000 1,257,512
------------- -------------
MassMutual Participation Investors 25
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
TANGENT RAIL CORPORATION
A manufacturer of rail ties and provider of specialty services to the North American railroad industry.
13% Senior Subordinated Note due 2015 $ 1,173,909 10/14/05 $ 1,033,473 $ 1,141,551
Common Stock 1,167 shs. 10/14/05 1,167 335,416
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share 631 shs. 09/30/08 300,683 181,361
------------- -------------
1,335,323 1,658,328
------------- -------------
TERRA RENEWAL LLC
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.
6.46% Senior Secured Tranche B Note due 2012 (C) $ 865,566 * 862,359 842,888
6.50% Senior Secured Tranche B Note due 2012 (C) $ 824 09/30/08 824 820
12% Senior Subordinated Note due 2014 $ 664,062 ** 635,829 638,665
Limited Partnership Interest of
Saw Mill Capital Fund V, LLC (B) 2.27% int. *** 85,292 310,224
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 50,121
------------- -------------
* 04/28/06 and 12/21/06. ** 04/28/06 and 09/13/06. *** 03/01/05 and 10/10/08. 1,618,042 1,842,718
------------- -------------
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 1,118,635
Series A Preferred Stock (B) 219 shs. 10/26/07 219,203 100,880
------------- -------------
1,332,219 1,219,515
------------- -------------
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 03/02/07 479,190 472,771
13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 327,520
Common Stock (B) 71,542 shs. 03/02/07 71,542 65,965
Warrant, exercisable until 2014 to purchase
common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 18,195
------------- -------------
885,863 884,451
------------- -------------
TRANSPAC HOLDING COMPANY
A designer, importer, and wholesaler of home decor and seasonal gift products.
12% Senior Subordinated Note due 2015 $ 938,651 10/31/07 877,460 821,541
Common Stock (B) 110 shs. 10/31/07 110,430 99,387
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 1
------------- -------------
1,034,270 920,929
------------- -------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 886,735 868,024
Common Stock (B) 571 shs. * 570,944 524,929
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 41,833
------------- -------------
*08/31/05 and 04/30/07. 1,498,700 1,434,786
------------- -------------
26 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
TRANZONIC COMPANIES (THE)
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 $ 1,307,549 $ 1,354,970
Common Stock (B) 315 shs. 02/04/98 315,000 353,505
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 249,137
------------- -------------
1,806,965 1,957,612
------------- -------------
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.
16% Senior Subordinated Note due 2010 (D) $ 1,222,698 * 1,133,973 305,675
16% PIK Note due 2010 $ 113,939 12/30/08 -- 28,485
Preferred Stock Series B (B) 128 shs. 10/20/08 127,677 --
Common Stock (B) 393 shs. * 423,985 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 81 shs. * 84,650 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 558 shs. 10/20/08 -- --
------------- -------------
* 07/19/05 and 12/22/05. 1,770,285 334,160
------------- -------------
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 37,821 133,837
------------- -------------
U M A ENTERPRISES, INC.
An importer and wholesaler of home decor products.
15% Senior Subordinated Note due 2015 $ 904,370 02/08/08 885,550 823,081
Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 422,604
------------- -------------
1,355,115 1,245,685
------------- -------------
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 04/30/04 932,300 948,044
Common Stock (B) 96 shs. 04/30/04 96,400 66,685
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 84,393
------------- -------------
1,140,806 1,099,122
------------- -------------
VISIONEERING, INC.
A designer and manufacturer of tooling and fixtures for the aerospace industry.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 451,941 449,255
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 336,180 358,316
Common Stock (B) 70,588 shs. 05/17/07 70,588 89,994
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 25,502
------------- -------------
890,169 923,067
------------- -------------
MassMutual Participation Investors 27
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 $ 947,805 $ 928,541
Common Stock (B) 14,006 shs. * 140,064 146,284
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 131,526
------------- -------------
* 09/24/04 and 12/22/06. 1,186,807 1,206,351
------------- -------------
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 --
14.5% PIK Note due 2010 $ 215,976 06/30/07 180,500 --
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 --
------------- -------------
1,281,875 --
------------- -------------
WAGGIN' TRAIN HOLDINGS LLC
A producer of premium quality meat dog treats.
14% Senior Subordinated Note due 2014 $ 1,151,874 11/15/07 1,128,036 1,051,273
Limited Liability Company Unit Class B (B) 224 uts. 11/15/07 223,757 96,857
Limited Liability Company Unit Class C (B) 224 uts. 11/15/07 -- 96,857
------------- -------------
1,351,793 1,244,987
------------- -------------
WALLS INDUSTRIES, INC.
A provider of branded workwear and sporting goods apparel.
Limited Partnership Interest (B) 0.20% int. 07/12/04 1,974 --
Common Stock (B) 2,133 shs. 12/21/07 -- --
------------- -------------
1,974 --
------------- -------------
WELLBORN FOREST HOLDING CO.
A manufacturer of semi-custom kitchen and bath cabinetry.
12.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 854,909 804,985
Common Stock (B) 101 shs. 11/30/06 101,250 43,838
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 21,887
------------- -------------
1,001,949 870,710
------------- -------------
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 05/14/07 562,443 545,329
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 44,187 --
------------- -------------
667,938 545,329
------------- -------------
XALOY SUPERIOR HOLDINGS, INC.
A provider of melt processing components and ancillary equipment for both plastic injection molding and extrusion applications.
15% Senior Subordinated Note due 2015 $ 1,200,000 09/08/08 1,176,000 1,121,429
Common Stock (B) 150 shs. 09/08/08 150,000 135,000
1,326,000 1,256,429
------------- -------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 107,773,300 97,424,749
------------- -------------
28 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
INTEREST DUE PRINCIPAL
CORPORATE RESTRICTED SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST FAIR VALUE
---------------------------------------------------------------------------------------------------------------------------------
RULE 144A SECURITIES - 2.41%:(A)
BONDS - 2.41%
Cenveo Corporation 10.500% 08/15/16 $ 45,000 $ 45,000 $ 26,100
Charter Communications Op LLC 8.000 04/30/12 750,000 736,875 615,000
Compucom Systems, Inc. 12.500 10/01/15 670,000 649,332 455,600
Douglas Dynamics LLC 7.750 01/15/12 485,000 462,040 252,200
G F S I, Inc. (C) 10.500 06/01/11 358,000 343,948 298,930
Packaging Dynamics Corporation of America 10.000 05/01/16 975,000 969,781 443,625
Ticketmaster Entertainment, Inc. 10.750 08/01/16 250,000 250,000 135,000
Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,293 426,600
------------ ------------
TOTAL BONDS 4,013,269 2,653,055
------------ ------------
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 4,015,542 2,653,055
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $111,788,842 $100,077,804
------------ ------------
MassMutual Participation Investors 29
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
INTEREST DUE PRINCIPAL
CORPORATE PUBLIC SECURITIES - 14.15%:(A) RATE DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
BONDS - 12.79%
Appleton Papers, Inc. 8.125% 06/15/11 $ 250,000 $ 250,000 $ 172,500
Aramark Corporation (C) 6.693 02/01/15 100,000 100,000 75,500
C R H America, Inc. 5.300 10/15/13 500,000 418,430 351,872
C V S Caremark Corporation 5.750 06/01/17 500,000 407,380 470,735
Cincinnati Bell, Inc. 7.000 02/15/15 550,000 394,625 420,750
Citigroup, Inc. 5.500 04/11/13 500,000 437,890 486,842
Comcast Corporation 6.500 01/15/15 500,000 443,545 491,466
El Paso Corporation 12.000 12/12/13 25,000 22,249 24,813
Electronic Data Systems Corporation 7.125 10/15/09 500,000 501,171 508,313
Enterprise Products Operating Co. 9.750 01/31/14 375,000 375,000 381,858
Ford Motor Credit Co. 7.375 10/28/09 250,000 249,375 219,555
General Motors Acceptance Corporation 5.850 01/14/09 750,000 740,349 745,112
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 104,000
Goldman Sachs Group, Inc. 4.750 07/15/13 500,000 418,645 449,326
Goodyear Tire & Rubber Co. 9.000 07/01/15 64,000 65,182 51,520
Inergy LP 8.250 03/01/16 75,000 75,000 58,500
Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 715,620 538,200
Interline Brands, Inc. 8.125 06/15/14 830,000 824,237 655,700
Iron Mountain, Inc. 8.750 07/15/18 500,000 513,882 431,250
Johnson Controls, Inc. 5.500 01/15/16 500,000 398,125 387,469
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 76,000
Mediacom Broadband LLC 9.500 01/15/13 750,000 585,000 566,250
Nortek, Inc. 10.000 12/01/13 100,000 98,957 68,000
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 342,500
Pepsico, Inc. 7.900 11/01/18 500,000 517,909 612,824
Pliant Corporation (C) 11.850 06/15/09 857,441 838,594 458,732
Quicksilver Resources, Inc. 7.125 04/01/16 350,000 334,250 187,250
Rental Service Corporation 9.500 12/01/14 175,000 175,815 96,250
Rogers Wireless, Inc. 7.500 03/15/15 560,000 590,854 554,472
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 157,781
Stewart & Stevenson LLC 10.000 07/15/14 735,000 755,246 455,700
Tenneco, Inc. 8.125 11/15/15 550,000 270,000 253,000
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 27,038
Titan International, Inc. 8.000 01/15/12 70,000 70,000 51,800
Transdigm, Inc. 7.750 07/15/14 150,000 151,216 123,000
Tube City IMS Corporation 9.750 02/01/15 1,000,000 990,963 350,000
Tyco International Group SA 6.000 11/15/13 625,000 545,313 586,447
United Components, Inc. 9.375 06/15/13 535,000 535,687 224,700
United Rentals, Inc. 6.500 02/15/12 325,000 235,621 256,747
Verizon Communications 8.750 11/01/18 500,000 497,190 586,611
Virgin Media Finance PLC 8.750 04/15/14 790,000 592,500 592,500
Vought Aircraft Industries 8.000 07/15/11 650,000 647,882 438,750
------------ ------------
TOTAL BONDS 16,763,683 14,091,633
------------ ------------
30 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
INTEREST DUE PRINCIPAL
CORPORATE PUBLIC SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 0.29%
CKX, Inc. (B) 52,500 $ 422,625 $ 192,675
Directed Electronics, Inc. (B) 195,118 982,868 78,047
ITC^DeltaCom, Inc. (B) 94,588 827,645 47,294
Intrepid Potash, Inc. (B) 185 5,920 3,842
------------ ------------
TOTAL COMMON STOCK 2,239,058 321,858
------------ ------------
CONVERTIBLE BONDS - 1.07%
Citadel Broadcasting Corporation 4.000% 02/15/11 $ 250,000 194,063 176,875
Nabors Industries LTD 0.940 05/15/11 750,000 660,625 617,813
Transocean, Inc. 1.500 12/15/37 500,000 411,093 385,000
------------ ------------
TOTAL CONVERTIBLE BONDS 1,265,781 1,179,688
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 20,268,522 $ 15,593,179
------------ ------------
INTEREST DUE PRINCIPAL
SHORT TERM SECURITIES RATE/YIELD* DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 5.18%
Devon Energy Corporation 1.250% 01/02/09 $ 1,290,000 $ 1,289,955 $ 1,289,955
R R Donnelley & Sons Company 5.059 01/05/09 1,700,000 1,699,046 1,699,046
Textron, Inc. 6.259 01/06/09 2,000,000 1,998,264 1,998,264
Volkswagen of America 6.113 01/06/09 724,000 723,387 723,387
------------ ------------
Total Short-Term Securities $ 5,710,652 $ 5,710,652
------------ ------------
Total Investments 110.17% $137,768,016 $121,381,635
------ ------------ ------------
Other Assets 3.85 4,243,262
Liabilities (14.02) (15,448,967)
------ ------------
Total Net Assets 100.00% $110,175,930
====== ============
(A) In each of the convertible note, warrant, convertible preferred and common stock investments, the issuer has agreed to provide
certain registration rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 12/31/08.
(D) Defaulted security; interest not accrued.
(E) Illiquid securities. At December 31, 2008, the value of these securities amounted to $97,424,749 or 88.43% of net assets.
^ Effective yield at purchase
PIK - Payment-in-kind
MassMutual Participation Investors 31
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
AEROSPACE - 2.77% CHEMICAL, PLASTICS & RUBBER - 0.13%
Gencorp, Inc. $ 104,000 Capital Specialty Plastics, Inc. $ 139,733
P A S Holdco LLC 1,465,064 ------------
Transdigm, Inc. 123,000 139,733
Visioneering, Inc. 923,067 ------------
Vought Aircraft Industries 438,750 CONSUMER PRODUCTS - 8.05%
------------ Aero Holdings, Inc. 1,916,812
3,053,881 Bravo Sports Holding Corporation 1,221,698
------------ G F S I, Inc. 298,930
AUTOMOBILE - 5.12% K N B Holdings Corporation 1,366,347
Fuel Systems Holding Corporation 309,375 Momentum Holding Co. 273,355
Goodyear Tire & Rubber Co. 51,520 R A J Manufacturing Holdings LLC 1,295,412
Jason, Inc. 552,773 Royal Baths Manufacturing Company 537,767
Johnson Controls, Inc. 387,469 The Tranzonic Companies 1,957,612
Nyloncraft, Inc. 776,787 Walls Industries, Inc. --
Ontario Drive & Gear Ltd. 696,550 ------------
Qualis Automotive LLC 902,812 8,867,933
Tenneco, Inc. 253,000 ------------
Titan International, Inc. 51,800 CONTAINERS, PACKAGING & GLASS - 4.14%
Transtar Holding Company 1,434,786 Flutes, Inc. 741,091
United Components, Inc. 224,700 Maverick Acquisition Company 389,917
------------ P I I Holding Corporation 1,464,006
5,641,572 Packaging Dynamics Corporation of America 443,625
------------ Paradigm Packaging, Inc. 1,067,049
BEVERAGE, DRUG & FOOD - 4.87% Pliant Corporation 458,732
Aramark Corporation 75,500 Vitex Packaging Group, Inc. --
Golden County Foods Holding, Inc. 810,000 ------------
Hospitality Mints Holding Company 1,281,191 4,564,420
Pepsico, Inc. 612,824 ------------
Specialty Commodities, Inc. 1,377,849 DISTRIBUTION - 1.92%
Vitality Foodservice, Inc. 1,206,351 Duncan Systems, Inc. 834,997
------------ F C X Holdings Corporation 1,281,842
5,363,715 ------------
------------ 2,116,839
BROADCASTING & ENTERTAINMENT - 2.89% ------------
Charter Communications Op LLC 615,000 DIVERSIFIED/CONGLOMERATE, MANUFACTURING -10.67%
Citadel Broadcasting Corporation 176,875 A H C Holdings Company, Inc. 1,319,122
CKX, Inc. 192,675 Arrow Tru-Line Holdings, Inc. 817,996
Comcast Corporation 491,466 C D N T, Inc. 864,664
Mediacom Broadband LLC 566,250 Douglas Dynamics LLC 252,200
Virgin Media Finance PLC 592,500 Evans Consoles, Inc. 842,151
Workplace Media Holding Co. 545,329 K P I Holdings, Inc. 1,284,125
------------ MEGTEC Holdings, Inc. 1,279,120
3,180,095 Milwaukee Gear Company 1,344,196
------------ Nortek, Inc. 68,000
BUILDINGS & REAL ESTATE - 1.18% Postle Aluminum Company LLC 540,000
K W P I Holdings Corporation 1,136,685 Radiac Abrasives, Inc. 1,550,044
Texas Industries, Inc. 27,038 Truck Bodies & Equipment International 334,160
TruStile Doors, Inc. 133,837 Xaloy Superior Holdings, Inc. 1,256,429
------------ ------------
1,297,560 11,752,207
------------ ------------
32 MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE, SERVICE - 10.79% HOME & OFFICE FURNISHINGS, HOUSEWARES, AND
A W X Holdings Corporation $ 858,887 DURABLE CONSUMER PRODUCTS - 10.51%
Advanced Technologies Holdings 1,361,158 Connor Sport Court International, Inc. $ 1,336,213
C R H America, Inc. 351,872 H M Holding Company --
CapeSuccess LLC -- Home Decor Holding Company 1,142,108
Clough, Harbour and Associates 1,410,431 Justrite Manufacturing Acquisition Co. 964,134
Crane Rental Corporation 1,293,082 K H O F Holdings, Inc. 1,331,144
Diversco, Inc./DHI Holdings, Inc. 659,713 Monessen Holding Corporation 1,341,046
Dwyer Group, Inc. 789,620 Stanton Carpet Holding Co. 1,326,200
Fowler Holding, Inc. -- Transpac Holdings Company 920,929
GQ Holdings LLC 1,211,003 U M A Enterprises, Inc. 1,245,685
Insurance Claims Management, Inc. 69,178 U-Line Corporation 1,099,122
Interline Brands, Inc. 655,700 Wellborn Forest Holding Co. 870,710
Iron Mountain, Inc. 431,250 ------------
Mail Communications Group, Inc. 749,093 11,577,291
Nesco Holdings Corporation 1,462,627 ------------
Tyco International Group 586,447 LEISURE, AMUSEMENT, ENTERTAINMENT - 1.99%
------------ Electra Bicycle Company LLC 114,251
11,890,061 O E D Corp/Diamond Jo Company Guarantee 342,500
------------ Savage Sports Holding, Inc. 1,169,013
ELECTRONICS - 1.52% Ticketmaster Entertainment, Inc. 135,000
Connecticut Electric, Inc. 1,091,469 Tunica-Biloxi Gaming Authority 426,600
Directed Electronics, Inc. 78,047 ------------
Electronic Data Systems Corporation 508,313 2,187,364
------------ ------------
1,677,829 MACHINERY - 11.36%
------------ A S A P Industries LLC 691,814
FARMING & AGRICULTURE - 1.13% Davis-Standard LLC 1,908,396
Protein Genetics, Inc. -- E S P Holdco, Inc. 1,278,684
Waggin' Train Holdings LLC 1,244,987 Integration Technology Systems, Inc. --
------------ K-Tek Holdings Corporation 1,409,935
1,244,987 M V I Holding, Inc. 638,356
------------ Manitowoc Company, Inc. 76,000
FINANCIAL SERVICES - 1.73% Morton Industrial Group, Inc. 1,200,181
Citigroup, Inc. 486,842 Navis Global 230,688
Ford Motor Credit Co. 219,555 NetShape Technologies, Inc. 841,463
General Motors Acceptance Corporation 745,112 Pacific Consolidated Holdings LLC 647,704
Goldman Sachs Group, Inc. 449,326 Power Services Holding Company 1,296,949
Highgate Capital LLC -- R E I Delaware Holding, Inc. 1,258,307
------------ Safety Speed Cut Manufacturing Company, Inc. 583,470
1,900,835 Stewart & Stevenson LLC 455,700
------------ ------------
HEALTHCARE, EDUCATION & CHILDCARE - 5.52% 12,517,647
A T I Acquisition Company 1,683,955 ------------
American Hospice Management Holding LLC 1,917,251
F H S Holdings LLC 1,181,547
Synteract Holdings Corporation 1,296,981
Touchstone Health Partnership --
------------
6,079,734
------------
MassMutual Participation Investors 33
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
MEDICAL DEVICES/BIOTECH - 3.62% TELECOMMUNICATIONS - 2.53%
Coeur, Inc. $ 651,259 All Current Holding Company $ 642,814
E X C Acquisition Corporation 111,618 Cincinnati Bell, Inc. 420,750
ETEX Corporation -- Intelsat Bermuda Ltd. 538,200
MedSystems Holdings LLC 645,348 ITC^DeltaCom, Inc. 47,294
MicroGroup, Inc. 1,958,060 Rogers Wireless, Inc. 554,472
OakRiver Technology, Inc. 616,880 Verizon Communications 586,611
TherOX, Inc. -- ------------
------------ 2,790,141
3,983,165 ------------
------------ TRANSPORTATION - 1.70%
MINING, STEEL, IRON & NON PRECIOUS NABCO, Inc. 215,846
METALS - 1.46% Tangent Rail Corporation 1,658,328
T H I Acquisition, Inc. 1,257,512 ------------
Tube City IMS Corporation 350,000 1,874,174
------------ ------------
1,607,512 UTILITIES - 0.07%
------------ El Paso Corporation 24,813
NATURAL RESOURCES - 0.18% Inergy LP 58,500
Appleton Papers, Inc. 172,500 ------------
Cenveo Corporation 26,100 83,313
Intrepid Potash, Inc. 3,842 ------------
------------ WASTE MANAGEMENT / POLLUTION - 2.78%
202,442 Terra Renewal LLC 1,842,718
------------ Torrent Group Holdings, Inc. 1,219,515
OIL & GAS - 2.23% ------------
Enterprise Products Operating Co. 381,858 3,062,233
Nabors Industries LTD 617,813 ------------
Quicksilver Resources, Inc. 187,250 Total Corporate Restricted and Public
Transocean, Inc. 385,000 Securities - 104.99% $115,670,983
Total E & S, Inc. 884,451 ============
------------
2,456,372
------------
PHARMACEUTICALS - 1.21%
CorePharma LLC 1,328,720
------------
1,328,720
------------
PUBLISHING/PRINTING - 0.14%
Sheridan Acquisition Corporation 157,781
------------
157,781
------------
RETAIL STORES - 0.88%
CVS Caremark Corporation 470,735
Olympic Sales, Inc. 151,031
Rental Service Corporation 96,250
United Rentals, Inc. 256,747
------------
974,763
------------
TECHNOLOGY - 1.90%
Compucom Systems, Inc. 455,600
Smart Source Holdings LLC 1,641,064
------------
2,096,664
------------
34 MassMutual Participation Investors
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
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 capital. 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
--------------------------------------------------------------------------------
MassMutual Participation Investors 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
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 each quarter to approve the value of the
Trust's portfolio securities as of the close of business on the last business
day of the preceding quarter. This valuation requires the approval of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not interested persons of the Trust or of Babson Capital. In making
valuations, 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 $97,424,749 (88.43% of net assets) as of December 31,
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 December 31, 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.
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 on 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, prepayment speeds, credit risk,
etc.)
Level 3: significant unobservable inputs (including the Trust's own
assumptions indetermining 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 December 31, 2008:
Assets Total Level 1 Level 2 Level 3
-----------------------------------------------------------------------------
Restricted
Securities $ 100,077,804 $ -- $ 2,653,055 $ 97,424,749
Public
Securities 15,593,179 321,858 15,271,321 --
Short-term
Securities 5,710,652 -- 5,710,652 --
-----------------------------------------------------------------------------
Total $ 121,381,635 $ 321,858 $ 23,635,028 $ 97,424,749
-----------------------------------------------------------------------------
--------------------------------------------------------------------------------
36 MassMutual Participation Investors
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
Following is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value:
RESTRICTED 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* (8,700,186) -- -- (8,700,186)
Purchases, sales,
issuances &
settlements (net) 12,041,797 -- -- 12,041,797
Transfers in and / or
out of Level 3 -- -- --
-----------------------------------------------------------------------------
ENDING BALANCE AT
12/31/2008 $ 97,424,749 $ -- $ -- $ 97,424,749
* 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 12/31/08 is ($10,990,162).
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 long-term gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains. For the year ended December 31, 2008, the
Trust did not have any net realized taxable long-term capital gain.
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.
Net investment income and realized gains or losses of the Trust as presented
under accounting principles generally accepted in the United States of
America may differ from distributable taxable earnings due to earnings from
the MMPI Subsidiary Trust as well as certain permanent and temporary
differences in the recognition of income and net realized gains or losses on
certain investments. Permanent differences will result in re-classifications
to the capital accounts. In 2008, the Trust increased undistributed net
investment income and decreased additional paid in capital by a total of
$33,687 to more accurately display the Trust's financial position on a
tax-basis in accordance with accounting principles generally accepted in the
United States of America. These re-classifications had no impact on net asset
value.
--------------------------------------------------------------------------------
MassMutual Participation Investors 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
The MMPI Subsidiary Trust is not taxed as a regulated investment company.
Accordingly, prior to the Trust 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 year December 31,
2008, the MMPI Subsidiary Trust has accrued income tax expense of $36,815.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of the existing assets and liabilities and their respective
tax basis. As of December 31, 2008, the MMPI Subsidiary Trust has a deferred
tax asset of $90,898 for which a full valuation reserve has been recorded. No
future tax benefit is expected to be realized from this asset as of December
31, 2008.
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 December 31, 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.
As of December 31, 2008, the components of distributable earnings on a tax
basis included $1,834,155 of undistributed ordinary income and ($940,203) of
a net realized capital loss carryforward. The loss carryforward will expire
on December 31, 2016. Such distributions and distributable earnings on a tax
basis are determined in conformity with income tax regulations, which may
differ from accounting principles generally accepted in the United States of
America (GAAP).
The difference between net taxable distributable earnings to GAAP earnings is
$142,583 which is comprised of various timing differences.
The tax character of distributions declared during the years ended December
31, 2008 and 2007 was as follows:
Distributions paid from: 2008 2007
------------ ------------
Ordinary Income $ 9,915,143 $ 12,315,585
Long-term Capital gains $ -- $ --
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 year ended December 31, 2008, there were
no credit balances used to reduce custodian fees.
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.
--------------------------------------------------------------------------------
38 MassMutual Participation Investors
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory fee equal to 0.225% of the value of the Trust's net
assets as of the last business day of each fiscal quarter, an amount
approximately equivalent to 0.90% 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.
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 year ended
December 31, 2008, the Trust incurred total interest expense on the Note of
$696,000.
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 year ended December 31, 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 YEAR ENDED COST OF INVESTMENTS
12/31/2008 ACQUIRED
-----------------------------------------------------------------------------
Corporate restricted securities $ 29,107,172
Corporate public securities 11,501,481
-----------------------------------------------------------------------------
PROCEEDS FROM
SALES OR MATURITIES
-----------------------------------------------------------------------------
Corporate restricted securities $ 18,929,615
Corporate public securities 20,459,670
-----------------------------------------------------------------------------
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of December 31, 2008. The net
unrealized depreciation of investments for financial reporting and federal
tax purposes as of December 31, 2008 is $16,386,381 and consists of
$8,459,427 appreciation and $24,845,808 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS (UNAUDITED)
AMOUNT PER SHARE
-----------------------------------------------------------------------------
MARCH 31, 2008
-----------------------------------------------------------------------------
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
-----------------------------------------------------------------------------
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)
-----------------------------------------------------------------------------
SEPTEMBER 30, 2008
-----------------------------------------------------------------------------
Investment income $ 3,817,860
Net investment income 3,237,045 $ 0.33
Net realized and unrealized
loss on investments (net of taxes) (4,637,203) (0.46)
-----------------------------------------------------------------------------
DECEMBER 31, 2008
-----------------------------------------------------------------------------
Investment income $ 3,121,930
Net investment income 2,556,434 $ 0.26
Net realized and unrealized
loss on investments (net of taxes) (9,390,347) (0.95)
--------------------------------------------------------------------------------
MassMutual Participation Investors 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
7. AGGREGATE REMUNERATION PAID TO OFFICERS, TRUSTEES AND THEIR AFFILIATED
PERSONS
For the year ended December 31, 2008, the Trust paid its Trustees aggregate
remuneration of $149,750. 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 (except for the Chief Compliance
Officer of the Trust unless assumed by Babson Capital). For the year ended
December 31, 2008, Babson Capital paid the compensation of the Chief
Compliance Officer of the Trust.
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 year ended
December 31, 2008, other than amounts payable to Babson Capital pursuant to
the Contract. For the year ended December 31, 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. CERTIFICATIONS (UNAUDITED)
As required under New York Stock Exchange ("NYSE") Corporate Governance
Rules, the Trust's principal executive officer has certified to the NYSE that
he was not aware, as of the certification date, of any violation by the Trust
of the NYSE's Corporate Governance listing standards. In addition, as
required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC
rules, the Trust's principal executive and principal financial officers have
made quarterly certifications, included in filings with the Securities and
Exchange Commission on Forms N-CSR and N-Q, relating to, among other things,
the Trust's disclosure controls and procedures and internal control over
financial reporting, as applicable.
9. SUBSEQUENT EVENTS
On January 23, 2009, the Trust announced that Roger W. Crandall stepped down
as a Trustee and Chairman of the Board of Trustees as a result of his new
position as President and Chief Operating Officer of MassMutual. Clifford M.
Noreen was appointed as a Trustee and elected to succeed Mr. Crandall as
Chairman of the Board of Trustees. He previously held the role of President
of the Trust. Mr. Noreen is currently the President of Babson Capital.
Filling the vacancy left by Mr. Noreen, Michael L. Klofas will become
President of the Trust. He was formerly a Vice President of the Trust. Mr.
Klofas is currently a Managing Director and co-head of Babson Capital's
Mezzanine and Private Equity Group.
--------------------------------------------------------------------------------
40 MassMutual Participation Investors
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Trustees of MassMutual Participation Investors
We have audited the accompanying consolidated statement of assets and
liabilities of MassMutual Participation Investors (the Trust), including the
consolidated schedule of investments, as of December 31, 2008, and the related
consolidated statements of operations and cash flows for the year then ended,
the consolidated statements of changes in net assets for each of the years in
the two-year period then ended and the consolidated financial highlights for
each of the years in the five-year period then ended. These consolidated
financial statements and consolidated financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these consolidated financial statements and consolidated financial
highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2008 by correspondence with the custodian,
or by other appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements and consolidated financial
highlights referred to above present fairly, in all material respects, the
financial position of MassMutual Participation Investors as of December 31,
2008, and the results of its operations, its cash flows, its changes in net
assets, and the financial highlights for the years described above, in
conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
February 11, 2009
--------------------------------------------------------------------------------
MassMutual Participation Investors 41
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATIONS OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
ROGER W. CRANDALL*(44) Trustee 3 years/ President, Chief Operating 2 Trustee, Chairman (since 2005),
(since 2005) 2 years/ Officer and member of Board President (2003-2005), and
Massachusetts Mutual Life 10 months (since November 2008); and Vice President (2002-2003), of
Insurance Company Executive Vice President and the Trust; Director (since
1295 State Street Chief Investment Officer 2004), Babson Capital Europe
Springfield, MA 01111 (since 2005) and Co-Chief Limited (an institutional
Chairman 1 year/ Operating Officer (since debt-fund manager); Director
(since 2005) 7 months 2007) of MassMutual; and (since 2004), Babson Capital
Chairman (since 2005), Guernsey Limited (an investment
President (2006-2007) and management company);
Chief Executive Officer Non-Executive Director (since
(since 2006), Vice Chairman 2005), Baring Asset Management
(2005), Member of the Board Limited (an investment manager/
of Managers (since 2004), adviser); Chairman (since
Member of the Board of 2005), Cornerstone Real Estate
Directors (2003-2004), and Advisers LLC (an investment
Managing Director of Babson adviser); Director (since
Capital (2000-2005). 2003), MassMutual Corporate
Value Partners Limited
(investment company); Director
(since 2003), MassMutual
Corporate Value Limited
(investment company); Director
(since 2005), MassMutual
Holdings (Bermuda) Ltd.
(holding company); Director
(since 2004), MML Assurance,
Inc. (a New York insurance
company); Director (since
2005), Oppenheimer Acquisition
Corp. (holding company);
Director (since 2004),
Jefferies Finance LLC (a
finance company); Director
(since 2004), Great Lakes LLC
(investment company); Director
(since 1999), SAAR Holdings CDO
Ltd. (investment company);
Chairman, Chief Executive
Officer and Director (since
2006), MassMutual Capital
Partners LLC (investment
company); Director (since 2006),
Invicta Advisers LLC (derivative
trading company); Director
(since 2006), Invicta Capital
LLC (derivative trading
company); Director (since
2006), Invicta Credit LLC
(derivative trading company);
Director (since 2006), Invicta
Holdings LLC (derivative
trading company); Director
(since 2006), Director (since
2006), MassMutual International
LLC (holding company); Trustee
(since 2003), President (2003-
2005), and Chairman (since
2005), MMCI Subsidiary Trust
and MMPI Subsidiary Trust; and
Trustee (since 2005), Chairman
(since 2005), President
(2003-2005), and Vice President
(2002-2003), of MassMutual
Corporate Investors (closed-end
investment company advised by
Babson Capital).
* Mr. Crandall is classified as an "interested person" of the Trust and Babson Capital (as defined in the Investment Company Act of
1940, as amended) because of his position as an Officer of the Trust; and Chairman, Chief Executive Officer, and Member of the
Board of Managers of Babson Capital.
--------------------------------------------------------------------------------
42 MassMutual Participation Investors
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATIONS OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
ROBERT E. JOYAL*(64) Trustee 3 years/ President (2001-2003) of 57 President (1999-2003) and
(since 2003) 1 year/ Babson Capital. Trustee (since 2003), of the
MassMutual Participation 10 months Trust; Director (since 2006),
Investors Jefferies Group, Inc.
1500 Main Street (financial services); Director
Suite 600, P.O. Box 15189 (since 2003), Alabama Aircraft
Springfield, MA 01115-5189 Industries, Inc. (aircraft
maintenance and overhaul);
Director (since 2007), Scottish
Re Group Ltd. (global life
reinsurance specialist);
Trustee (since 2003),
MassMutual Select Funds,
formerly MassMutual
Institutional Funds, (an
open-end investment company
advised by MassMutual); Trustee
(since 2003), MML Series
Investment Fund (an open-end
investment company advised by
MassMutual); Trustee (1998-
2003), Senior Vice President
(1998-2001) and President
(2001-2003), MMCI Subsidiary
Trust and MMPI Subsidiary
Trust; and President (1999-
2003), Trustee (since 2003),
MassMutual Corporate Investors
(closed-end investment company
advised by Babson Capital).
* Mr. Joyal retired as President of Babson Capital in June 2003. In addition and as noted above, Mr. Joyal is a director of
Jefferies Group, Inc., which has a wholly-owned broker-dealer subsidiary that may execute portfolio transactions and/or engage in
principal transactions with the Trust, other investment companies advised by Babson Capital or any other advisory accounts over
which Babson Capital has brokerage placement discretion. Accordingly, the Trust has determined to classify Mr. Joyal as an
"interested person" of the Trust and Babson Capital (as defined in the Investment Company Act of 1940, as amended).
--------------------------------------------------------------------------------
MassMutual Participation Investors 43
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATIONS OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
WILLIAM J. BARRETT(69) Trustee 2 years/ President (since 2002), 2 Trustee (since 2006),
(since 2006) 1 year/ Barrett-Gardner Associates, MassMutual Corporate Investors
MassMutual 10 months Inc. (private merchant bank); (a closed-end investment
Participation Investors and Senior Vice President company advised by Babson
1500 Main Street (1976-2002), Janney Montgomery Capital).
Suite 600, P.O. Box 15189 Scott LLC (investments).
Springfield, MA 01115-5189
DONALD E. BENSON(78) Trustee 3 years/ Executive Vice President 2 Director (1997-2008), MAIR
(since 1988) 1 years/ and Director (since 1992), Holdings, Inc. (commuter
MassMutual 10 months Marquette Financial airline holding company);
Participation Investors Companies (financial services); Director (since 1997), First
1500 Main Street Partner (since 1996), Benson California Financial Group,
Suite 600, P.O. Box 15189 Family Limited Partnership Inc. (bank holding company);
Springfield, MA 01115-5189 No. 1 and Benson Family and Trustee (since 1986),
Limited Partnership No. 2 MassMutual Corporate Investors
(investment partnerships); and (closed-end investment company
Partner (1987-2004), Benson, advised by Babson Capital).
Pinckney, Oates Partnership
(building partnership)
--------------------------------------------------------------------------------
44 MassMutual Participation Investors
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATIONS OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
MICHAEL H. BROWN(52) Trustee 3 years/ Private Investor; and Managing 2 Trustee (since 2005),
(since 2005) 10 months Director (1994-2005), Morgan MassMutual Corporate Investors
MassMutual Stanley. (a closed-end investment
Participation Investors company advised by Babson
1500 Main Street Capital); Independent Director
Suite 600, P.O. Box 15189 (since 2006), Invicta Holdings
Springfield, MA 01115-5189 LLC and its subsidiaries (a
derivative trading company owned
indirectly by MassMutual).
DONALD GLICKMAN(75) Trustee 3 years/ Chairman (since 1992), Donald 2 Director (since 1984), Monro
(since 1992) 1 year/ Glickman and Company, Muffler and Brake, Inc.
MassMutual 10 months Inc. (private investments); (automobile repair service);
Participation Investors and Partner (since 1992), Lead Director (since 1998), MSC
1500 Main Street J.F. Lehman & Co. (private Software Corp. (simulation
Suite 600, P.O. Box 15189 investments). software); and Trustee (since
Springfield, MA 01115-5189 1992), MassMutual Corporate
Investors (closed-end
investment company advised by
Babson Capital).
--------------------------------------------------------------------------------
MassMutual Participation Investors 45
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATIONS OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
MARTIN T. HART(73) Trustee 3 years/ Private Investor; and President 2 Director (since 2004), Texas
(since 1991) 2 years/ and Director (since 1983), Roadhouse, Inc. (operates
MassMutual 10 months H Investment Company LLC restaurant chain); Director
Participation Investors (family partnership). (since 1999), ValueClick Inc.
1500 Main Street (internet advertising company);
Suite 600, P.O. Box 15189 Director (since 2002),
Springfield, MA 01115-5189 Spectranetics Corp. (medical
device company); and Trustee
(since 1991), MassMutual
Corporate Investors (closed-end
investment company advised by
Babson Capital).
CORINE T. NORGAARD(71) Trustee 3 years/ President, (2004-2005), 34 Trustee (since 2005), MML
(since 1998) 10 months Thompson Enterprises Real Series Investment Fund II (an
MassMutual Estate Investment; and Dean open-end investment company
Participation Investors (1996-2004), Barney School advised by MassMutual); Trustee
1500 Main Street of Business, University of (since 2004), MassMutual
Suite 600, P.O. Box 15189 Hartford. Premier Funds, formerly The DLB
Springfield, MA 01115-5189 Fund Group (an open-end
investment company advised by
MassMutual); Trustee (since
1993), ING Series Fund
(investment company); Director
(since 1992), ING Variable
Series Fund; and Trustee (since
1998), MassMutual Corporate
Investors (a closed-end
investment company advised by
Babson Capital).
MALEYNE M. SYRACUSE(52) Trustee 3 years/ Managing Director (2000- 2 Trustee (since 2007),
(since 2007) 10 months 2007), JP Morgan Securities, MassMutual Corporate Investors
MassMutual Inc. (investments and (a closed-end investment
Participation Investors banking). company advised by Babson
1500 Main Street Capital).
Suite 600, P.O. Box 15189
Springfield, MA 01115-5189
--------------------------------------------------------------------------------
46 MassMutual Participation Investors
OFFICERS OF THE TRUST
PRINCIPAL
POSITION OCCUPATIONS
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST
ADDRESS THE TRUST OF TIME SERVED 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
CLIFFORD M. NOREEN(51) President 1 year/ President (since 2005), Vice President (1993-2005) of the Trust;
7 months Vice Chairman (since 2007), Member of the Board of Managers
MassMutual (since 2006), and Managing Director (since 2000) of Babson
Participation Investors Capital; Trustee (since 2005), and President (since 2005) MMCI
1500 Main Street Subsidiary Trust and MMPI Subsidiary Trust; and President (since
Suite 600, P.O. Box 15189 2005), Vice President (1993-2005), MassMutual Corporate Investors.
Springfield, MA 01115-5189
PATRICIA J. WALSH+(43) Vice 9 months/ Vice President, Secretary, and Chief Legal Officer (since 2008) of
President, 4 months the Trust; Vice President and Associate General Counsel (since
MassMutual Secretary, 2005) of MassMutual; General Counsel and Secretary (since 2008) of
Participation Investors and Chief Babson Capital; Secretary (since 2009), MMCI Subsidiary Trust and
1500 Main Street Legal Officer MMPI Subsidiary Trust; and Vice President, Secretary, and Chief
Suite 600, P.O. Box 15189 Legal Officer (since 2008), MassMutual Corporate Investors.
Springfield, MA 01115-5189
JAMES M. ROY(46) Vice 1 year/ Vice President and Chief Financial Officer (since 2005), Treasurer
President 7 months (2003-2005), and Associate Treasurer (1999-2003) of the Trust;
MassMutual and Chief Managing Director (since 2005), and Director (2000-2005) of Babson
Participation Investors Financial Capital; Trustee (since 2005), Treasurer (since 2005), and
1500 Main Street Officer Controller (2003-2005), MMCI Subsidiary Trust and MMPI Subsidiary
Suite 600, P.O. Box 15189 Trust; and Vice President and Chief Financial Officer (since
Springfield, MA 01115-5189 2005), Treasurer (2003-2005) and Associate Treasurer (1999-2003),
MassMutual Corporate Investors.
JOHN T. DAVITT, JR.(41) Comptroller 1 year/ Comptroller (since 2001) of the Trust; Director (since 2000) of
7 months Babson Capital; Controller (since 2005), MMCI Subsidiary Trust and
MassMutual MMPI Subsidiary Trust; and Comptroller (since 2001), MassMutual
Participation Investors Corporate Investors.
1500 Main Street
Suite 600, P.O. Box 15189
Springfield, MA 01115-5189
MELISSA M. LAGRANT(35) Chief 1 year/ Chief Compliance Officer (since 2006) of the Trust; Managing
Compliance 7 months Director (since 2005) of Babson Capital; Vice President and Senior
MassMutual Officer Compliance Trading Manager (2003-2005), Loomis, Sayles & Company,
Participation Investors L.P.; Assistant Vice President-Business Risk Management Group
1500 Main Street (2002-2003), and Assistant Vice President-Investment Compliance
Suite 600, P.O. Box 15189 (2001-2002), Zurich Scudder Investments/Deutsche Asset Management;
Springfield, MA 01115-5189 and Chief Compliance Officer (since 2006), MassMutual Corporate
Investors.
DANIEL J. FLORENCE*(36) Treasurer 1 year/ Treasurer (since 2008), Associate Treasurer (2006-2008), of the
MassMutual 7 months Trust; Associate Director (since 2008), Analyst (2000-2008) of
Participation Investors Babson Capital; and Treasurer (since 2008), Associate Treasurer
1500 Main Street (2006-2008), MassMutual Corporate Investors.
Suite 600, P.O. Box 15189
Springfield, MA 01115-5189
+ Ms. Walsh was elected as Vice President, Secretary, and Chief Legal Officer of the Trust on October 17, 2008.
* Mr. Florence was elected as Treasurer of the Trust on July 22, 2008.
--------------------------------------------------------------------------------
MassMutual Participation Investors 47
MEMBERS OF THE BOARD OF DIVIDEND REINVESTMENT AND CASH PURCHASE
TRUSTEES PLAN
LEFT TO RIGHT:
MassMutual Participation Investors (the
Donald Glickman "Trust") offers a Dividend Reinvestment
Chairman, and Cash Purchase Plan (the "Plan"). The
Donald Glickman & Company, Inc. Plan provides a simple and automatic way
for shareholders to add to their
Robert E. Joyal holdings in the Trust through the
Retired President, receipt of dividend shares issued by the
Babson Capital Management LLC Trust or through the reinvestment of
cash dividends in Trust shares purchased
William J. Barrett in the open market. The dividends of
President, each shareholder will be automatically
Barrett-Gardner Associates, Inc. reinvested in the Trust by Shareholder
Financial Services Inc., the Transfer
Michael H. Brown* Agent, in accordance with the Plan,
Private Investor unless such shareholder elects not to
participate by providing written notice
Donald E. Benson* to the Transfer Agent. A shareholder may
Executive Vice President terminate his or her participation by
and Director, notifying the Transfer Agent in writing.
Marquette Financial Companies
Participating shareholders may also make
Dr. Corine T. Norgaard* additional contributions to the Plan
President, from their own funds. Such contributions
Thompson Enterprises may be made by personal check or other
Real Estate Investment means in an amount not less than $100
nor more than $5,000 per quarter. Cash
Roger W. Crandall contributions must be received by the
President and Chief Transfer Agent at least five days (but
Operating Officer no more then 30 days) before the payment
Massachusetts Mutual Life date of a dividend or distributions.
Insurance Company
Whenever the Trust declares a dividend
Martin T. Hart payable in cash or shares, the Transfer
Private Investor Agent, acting on behalf of each
participating shareholder, will take the
Maleyne M. Syracuse dividend in shares only if the net asset
Private Investor value is lower than the market price
plus an estimated brokerage commission
*Member of the Audit Committee as of the close of business on the
valuation day. The valuation day is the
OFFICERS last day preceding the day of dividend
Roger W. Crandall payment. When the dividend is to be
Chairman taken in shares, the number of shares to
be received is determined by dividing
Clifford M. Noreen the cash dividend by the net asset value
President as of the close of business on the
valuation date or, if greater than net
James M. Roy asset value, 95% of the closing share
Vice President & Chief price. If the net asset value of the
Financial Officer shares is higher than the market value
plus an estimated commission, the
Patricia J. Walsh Transfer Agent, consistent with
Vice President, Secretary obtaining the best price and execution,
& Chief Legal Officer will buy shares on the open market at
current prices promptly after the
Jill A. Fields dividend payment date.
Vice President
The reinvestment of dividends does not,
Michael P. Hermsen in anyway, relieve participating
Vice President shareholders of any federal, state or
local tax. For federal income tax
Mary Wilson Kibbe purposes, the amount reportable in
Vice President respect of a dividend received in
newly-issued shares of the Trust will be
Michael L. Klofas the fair market value of the shares
Vice President received, which will be reportable as
ordinary income and/or capital gains.
Richard E. Spencer, II
Vice President As compensation for its services, the
Transfer Agent receives a fee of 5% of
Daniel J. Florence any dividend and cash contribution (in
Treasurer no event in excess of $2.50 per
distribution per shareholder.)
John T. Davitt, Jr.
Comptroller Any questions regarding the Plan should
be addressed to Shareholder Financial
Melissa M. LaGrant Services, Inc., Agent for MassMutual
Chief Compliance Officer Participation Investors' Dividend
Reinvestment and Cash Purchase Plan,
P.O. Box 173673, Denver, CO 80217-3673.
--------------------------------------------------------------------------------
48 MassMutual Participation Investors
[LOGO] MassMutual Participation Investors
PI2597
ITEM 2. CODE OF ETHICS.
The Registrant adopted a Code of Ethics for Senior Financial Officers
(the "Code") on October 17, 2003, which is available on the
Registrant's website at www.babsoncapital.com/mpv. During the period
covered by this Form N-CSR, there were no amendments to, or waivers
from, the Code.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Trustees has determined that Mr. Donald E.
Benson, a Trustee of the Registrant and a member of its Audit
Committee, is an audit committee financial expert. Mr. Benson is
"independent" for purposes of this Item 3 as required by applicable
regulation.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
FEES BILLED TO THE REGISTRANT
KPMG LLP KPMG LLP
Year Ended Year Ended
December 31, December 31,
2008 2007
---------- ----------
Audit Fees $ 45,700 $ 53,000
Audit-Related Fees 6,125 5,700
Tax Fees 39,950 31,000
All Other Fees 0 0
---------- ----------
Total Fees $ 91,775 $ 89,700
========== ==========
NON-AUDIT FEES BILLED TO BABSON CAPITAL AND MASSMUTUAL
KPMG LLP KPMG LLP
Year Ended Year Ended
December 31, December 31,
2008 2007
---------- ----------
Audit-Related Fees $ 921,019 $1,102,280
Tax Fees 0 0
All Other Fees 0 75,000
---------- ----------
Total Fees $ 921,019 $1,177,280
========== ==========
The category "Audit Related Fees" reflects fees billed by KPMG for
various non-audit and non-tax services rendered to the Registrant,
Babson Capital Management LLC ("Babson Capital") and Massachusetts
Mutual Life Insurance Company ("MassMutual"), such as SAS 70 review,
agreed upon procedures reports. Preparation of Federal, state and local
income tax returns and compliance work are representative of the fees
billed in the "Tax Fees" category. The category "All Other Fees"
represents fees billed by KPMG for tax consulting rendered to Babson
Capital and MassMutual. The Sarbanes-Oxley Act of 2002 and its
implementing regulations allows the Registrant's Audit Committee to
establish a pre-approval policy for certain services rendered by the
Registrant's independent accountants. During 2008, the Registrant's
Audit Committee approved all of the services rendered to the Registrant
by KPMG and did not rely on such a pre-approval policy for any such
services.
The Audit Committee reviewed the aggregate fees billed for
professional services rendered by KPMG for the Registrant and for the
non-audit services provided to Babson Capital, and Babson Capital's
parent, MassMutual. As part of this review, the Audit Committee
considered whether the provision of such non-audit services were
compatible with maintaining the principal accountant's independence.
The 2007 fees billed represent final 2007 amounts, which may
differ from the preliminary figures available as of the filing date of
the Trust's 2008 Annual Form N-CSR and includes, among other things,
fees for services that may not have been billed as of the filing date
of the Trust's 2008 Annual Form N-CSR, but are now properly included in
the 2007 fees billed to the Trust, Babson Capital, and MassMutual.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant maintains an Audit Committee composed exclusively of
Trustees of the Registrant who qualify as "independent" Trustees under
the current listing standards of the New York Stock Exchange and the
rules of U.S. Securities and Exchange Commission. The Committee
operates pursuant to a written Audit Committee Charter, which is
available (1) on the Registrant's website, www.babsoncapital.com/mpv;
and (2) without charge, upon request, by calling, toll-free
866-399-1516. The current members of the Audit Committee are Donald E.
Benson, Michael H. Brown, and Corine T. Norgaard.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable for this filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
The Registrant's Board of Trustees delegated proxy voting
responsibilities relating to voting securities held by the Registrant
to its investment adviser, Babson Capital Management LLC ("Babson
Capital"). A summary of Babson Capital's proxy voting policies and
procedures is set forth below.
Summary of Babson Capital's Proxy Voting Policy
-----------------------------------------------
Babson Capital views the voting of proxies as part of its investment
management responsibility and believes, as a general principle, that
proxies should be voted solely in the best interests of its clients
(i.e. in a manner it believes is most likely to enhance the economic
value of the underlying securities and client accounts). To implement
this general principle, it is Babson Capital's policy to generally vote
proxies in accordance with the recommendations of Institutional
Shareholder Services ("ISS"), a recognized authority on proxy voting
and corporate governance, or, in cases where ISS has not made any
recommendations with respect to a proxy, in accordance with ISS's proxy
voting guidelines.
Babson Capital recognizes, however, that there may be times when Babson
Capital believes that it will be in the best interests of clients
holding the securities to (1) vote against ISS's recommendations or (2)
in cases where ISS has not provided Babson Capital with any
recommendations with respect to a proxy, vote against ISS's proxy
voting guidelines. Babson Capital may vote, in whole or part, against
ISS's recommendations or ISS's proxy voting guidelines, as applicable.
The procedures set forth in the Policy are designed to ensure that
votes against ISS's recommendations or proxy voting guidelines have
been made in the best interests of clients and are not the result of
any material conflict of interest (a "Material Conflict").
Summary of Babson Capital's Proxy Voting Procedures
---------------------------------------------------
Babson Capital has established a Proxy Committee that is responsible
for the implementation and governance of the Policy and designated
Proxy Administrators who will receive and post proxies for voting with
ISS. In accordance with the Policy, Babson Capital will generally vote
all client proxies in accordance with ISS's recommendation or proxy
voting guidelines, unless a person authorized by the Proxy Committee
(each a "Proxy Analyst"), the Proxy Committee or a designated member of
the Proxy Committee determines that it is in the clients' best interest
to vote against ISS's recommendation or proxy voting guidelines. In
these cases, Babson Capital will vote against ISS's recommendation or
proxy voting guidelines, so long as no other Proxy Analyst reviewing
such proxy disagrees with such recommendation, and no known Material
Conflict is identified by the Proxy Analyst(s) or the Proxy
Administrator. Otherwise, the proxy is to be submitted to a member of
the Proxy Committee, who shall determine how to vote the proxy unless
(i) the Proxy Analyst or Proxy Administrator has identified a Babson
Capital Material Conflict or (ii) said Proxy Committee member has
identified a Material Conflict pertinent to him or herself or a Babson
Capital Material Conflict. In such cases, the proxy shall be
submitted to the Proxy Committee, which may authorize a vote against
ISS's recommendation or proxy voting guidelines only if the Proxy
Committee determines that such vote is in the clients' best interests.
No employee, officer, director, or Board of Managers Member of Babson
Capital or its affiliates (other than those assigned such
responsibilities under the Policy) may influence how Babson Capital
votes any client proxy, unless such person has been requested to
provide such assistance by a Proxy Analyst or Proxy Committee member
and has disclosed any known Material Conflict. Any pre-vote
communications prohibited by the Policy shall be reported to the Proxy
Committee member prior to voting and to Babson Capital's General
Counsel.
Obtaining a Copy of the Policy
------------------------------
The full text of Babson Capital's Policy is available (1) without
charge, upon request, by calling 1-866-399-1516 or (2) on the
Registrant's website, www.babsoncapital.com/mpv.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The following disclosure item is made as of the date of this Form N-CSR
unless otherwise indicated.
PORTFOLIO MANAGER. Clifford M. Noreen serves as the President of the
Registrant (since 2005) and as its Portfolio Manager. Mr. Noreen began
his service to the Registrant in 1993 as a Vice President. With over 25
years of industry experience, Mr. Noreen is President, a Managing
Director and a Member of the Board of Managers of Babson Capital
Management LLC ("Babson Capital") and head of Babson Capital's
Corporate Securities Group, where he oversees public equities and
corporate credit related investments, including public and private
bonds, mezzanine, and private equity investments, and structured credit
products. Mr. Noreen joined Massachusetts Mutual Life Insurance Company
("MassMutual"), Babson Capital's parent company, in 1985 and began
leading its High Yield Team in 1992, where he was responsible for
oversight of all public high yield portfolios. In 2004, Mr. Noreen
assumed responsibility for Babson Capital's Public Corporate Credit
Group, which included the Investment Grade and High Yield Institutional
Fixed Income teams. Mr. Noreen also presently serves as President of
MassMutual Corporate Investors, another closed-end registered
investment company advised by Babson Capital. Mr. Noreen holds a B.A.
from the University of Massachusetts and an M.B.A from American
International College.
PORTFOLIO MANAGEMENT TEAM. Mr. Noreen has primary responsibility for
overseeing the investment of the Registrant's portfolio, with the
day-to-day investment management responsibility of the Registrant's
portfolio being shared with the following Babson Capital investment
professionals (together with the Portfolio Manager, the "Portfolio
Team").
Michael P. Hermsen, Michael L. Klofas, and Richard E. Spencer II are
each a Vice President of the Registrant and a Managing Director of
Babson Capital. Together they are responsible for managing Babson
Capital's Mezzanine Investment and Private Equity Investments Team
within the Corporate Securities Group, which is responsible for
finding, analyzing, negotiating and servicing mezzanine private
placement securities for the Registrant.
Mr. Hermsen joined MassMutual in 1990 and has been an officer of the
Registrant since 1992. Previously, he worked at Teachers Insurance and
Annuity Association where he was a generalist private placement
analyst. At MassMutual and then Babson Capital, Mr. Hermsen has
analyzed and invested in traditional private placements, high yield
public and private bonds, and leveraged bank loans. He has also been
responsible for managing a small portfolio of distressed investments.
Since 1993, he has focused on originating, analyzing, structuring and
documenting mezzanine and private equity investments. He holds a B.A.
from Bowdoin College and an M.B.A. from Columbia University.
Mr. Klofas joined MassMutual in 1988 and has been an officer of the
Registrant since 1989. Prior to joining MassMutual, he spent two years
at a small venture capital firm and two years at a national public
accounting firm. At MassMutual and then Babson Capital, Mr. Klofas has
analyzed and invested in traditional private placements and high yield
public bonds. He also spent four years leading Babson Capital's workout
and restructuring activities. Since 1993, he has focused on
originating, analyzing, structuring and documenting mezzanine and
private equity investments. Mr. Klofas holds a B.A. from Brandeis
University and an M.B.A. from Babson College as well as a Certified
Public Accountant designation.
Mr. Spencer joined MassMutual in 1989 after three years as a corporate
loan analyst at a major New England bank. He has been an officer of
Registrant since 1990. At MassMutual and then Babson Capital, Mr.
Spencer has analyzed and invested in traditional private placements,
high yield public and private bonds, leveraged bank loans, mezzanine
debt and private equity. From 1993 to 1999, he was the lead
restructuring professional at Babson Capital. Since 1999, Mr. Spencer
has been focused on the origination, analysis, structuring and
documentation of mezzanine and private equity investments. He holds a
B.A. from Bucknell University and an M.B.A. from the State University
of New York at Buffalo.
Jill A. Fields is responsible for the day-to-day management of the
Registrant's public high yield and investment grade fixed income
portfolio. Ms. Fields has been a Vice President of the Registrant since
2006. Ms. Fields is a Managing Director of Babson Capital with over 20
years of industry experience in high yield total return, structured
credit, leveraged loans and private placement investing. Prior to
joining Babson Capital in 1997, she was a credit analyst at Shawmut
National Bank, and the Director of Corporate Bond Research at Hartford
Life Insurance Group. Ms. Fields holds a B.S. from Pennsylvania State
University and an M.B.A. from the University of Connecticut.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO TEAM. The members of the
Registrant's Portfolio Team also have primary responsibility for the
day-to-day management of other Babson Capital advisory accounts,
including, among others, closed-end and open-end investment companies,
private investment funds, MassMutual-affiliated accounts, as well as
separate accounts for institutional clients. These advisory accounts
are identified below.
NUMBER OF
ACCOUNTS APPROXIMATE
TOTAL WITH ASSET SIZE OF
NUMBER APPROXIMATE PERFORMANCE- PERFORMANCE-
PORTFOLIO ACCOUNT OF TOTAL ASSET BASED BASED ADVISORY
TEAM CATEGORY ACCOUNTS SIZE(A) ADVISORY FEE FEE ACCOUNTS(A)
------------ --------------------- -------- ------------ ------------ --------------
Clifford M. Registered Investment
Noreen(B) Companies 1 $208.1 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 1 $26.5 million 1 $26.5 million
-----------------------------------------------------------------------------------------
Other Accounts 0 N/A 0 N/A
-----------------------------------------------------------------------------------------
Jill A. Registered Investment
Fields Companies 2 $320.8 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 1 $30.3 million 1 $30.3 million
-----------------------------------------------------------------------------------------
Other Accounts 5(C) $407.2 million 0 N/A
-----------------------------------------------------------------------------------------
Michael P. Registered Investment
Hermsen Companies 1 $208.1 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles(D) 5 $1.0 billion 5 $1.0 billion
-----------------------------------------------------------------------------------------
Other Accounts 0 N/A N/A N/A
-----------------------------------------------------------------------------------------
Michael L. Registered Investment
Klofas Companies 1 $208.1 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles(D) 5 $1.0 billion 5 $1.0 billion
-----------------------------------------------------------------------------------------
Other Accounts 0 N/A N/A N/A
-----------------------------------------------------------------------------------------
Richard E. Registered Investment
Spencer II Companies 1 $208.1 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles(D) 5 $1.0 billion 5 $1.0 billion
-----------------------------------------------------------------------------------------
Other Accounts 0 N/A N/A N/A
(A) Account asset size has been calculated as of December 31, 2008.
(B) Mr. Noreen, as the head of Babson Capital's Corporate Securities
Group, has overall responsibility for all corporate credit related
investments, including public and private bonds, mezzanine, and
private equity investments, as well as structured credit products
managed by Babson Capital. Except for the accounts noted in the table
above, Mr. Noreen is not primarily responsible for the day-to-day
management of the other accounts managed by Babson Capital's Corporate
Securities Group.
(C) Ms. Fields manages the high yield sector of the general investment
account of Massachusetts Mutual Life Insurance Company; however these
assets are not represented in the table above.
(D) The listed account and managed assets represent a portion of the
general investment account of MassMutual and C.M. Life Insurance
Company for which an individual Portfolio Team member has primary
day-to-day responsibility.
MATERIAL CONFLICTS OF INTEREST. The potential for material conflicts of
interest may exist as the members of the Portfolio Team have
responsibilities for the day-to-day management of multiple accounts.
These conflicts may be heightened to the extent the individual, Babson
Capital and/or an affiliate has an investment in one or much of such
accounts or an interest in the performance of such accounts. Babson
Capital has identified (and summarized below) areas where material
conflicts of interest are most likely to arise, and has adopted
policies and procedures that it believes are reasonably designed to
address such conflicts.
It is possible that an investment opportunity may be suitable for both
the Registrant and other accounts managed by a member of the Portfolio
Team, but may not be available in sufficient quantities for both the
Registrant and the other accounts to participate fully. Similarly,
there may be limited opportunity to sell an investment held by the
Registrant and another account. A conflict may arise where a member of
the Portfolio Team may have an incentive to treat an account
preferentially as compared to the Registrant because the account pays
Babson Capital a performance-based fee or a member of the Portfolio
Team, Babson Capital, or an affiliate has an interest in the account.
Babson Capital has adopted an investment allocation policy and trade
allocation procedures to address allocation of portfolio transactions
and investment opportunities across multiple clients. These policies
are designed to achieve fair and equitable treatment of all clients
over time, and specifically prohibit allocations based on performance
of an account, the amount or structure of the management fee,
performance fee or profit sharing allocations, participation or
investment by an employee, Babson Capital or an affiliate, whether the
account is public, private, proprietary or third party. Additionally,
the Registrant, MassMutual, Babson Capital, MassMutual Corporate
Investors, and any private investment company advised or sub-advised by
Babson Capital have obtained a blanket order from the Securities and
Exchange Commission pursuant to Section 17(d), and Rule 17(d)-1
thereunder, of the Investment Company Act of 1940, as amended, which
sets forth the conditions by which the entities can engage in private
placement co-investment activities.
Potential material conflicts of interest may also arise related to the
knowledge and timing of the Registrant's trades, investment
opportunities and broker selection. A member of the Portfolio Team will
have information about the size, timing and possible market impact of
the Registrant's trades. It is theoretically possible that a member of
the Portfolio Team could use this information for his or her personal
advantage or the advantage of other accounts he manages or the possible
detriment of the Registrant. For example, a member of the Portfolio
Team could front run a fund's trade or short sell a security for an
account immediately prior to the Registrant's sale of that security. To
address these conflicts, Babson Capital has adopted policies and
procedures governing employees' personal securities transactions, the
use of short sales, and trading between the Registrant and other
accounts managed by members of the Portfolio Team or accounts owned by
Babson Capital or its affiliates.
With respect to securities transactions for the Registrant, Babson
Capital determines which broker to use to execute each order,
consistent with its duty to seek best execution of the transaction.
Babson Capital manages certain other accounts, however, where Babson
Capital may be limited by the client with respect to the selection of
brokers or directed to trade such client's transactions through a
particular broker. In these cases, trades for a fund in a particular
security may be placed separately from, rather than aggregated with,
such other accounts. Placing separate transaction orders for a security
may temporarily affect the market price of the security or otherwise
affect the execution of the transaction to the possible detriment of a
fund or the other account(s) involved. Babson Capital has policies and
procedures that address best execution and directed brokerage.
Members of the Portfolio Team may also face other potential conflicts
of interest in managing the Registrant, and the above is not a complete
description of every conflict of interest that could be deemed to exist
in managing both the Registrant and the other accounts listed above.
COMPENSATION. The current Babson Capital compensation and incentive
program for investment professionals is designed to attract, motivate
and retain high-performing individuals.
To help Babson Capital make informed decisions, the Company
participates in annual compensation surveys of investment management
firms using McLagan Partners, in addition to other industry specific
resources. The firms selected for periodic peer-group comparisons
typically have similar asset size or business mix. Annually, a review
is conducted of total compensation versus market, to ensure that
individual pay is competitive with the defined overall market.
The compensation package for the members of the Portfolio Team is
comprised of a market-driven base salary, a performance-driven annual
bonus, and discretionary long-term incentives. The performance-driven
bonus is based on the performance of the accounts managed by the
members of the Portfolio Team relative to appropriate benchmarks,
including with respect to the Registrant, to the Russell 2000 Index and
Lehman Brothers U.S. Corporate High Yield Index. Performance of the
Registrant, like other accounts Portfolio Team members manage, are
evaluated on a pre-tax basis, and are reviewed over one and three-year
periods, with greater emphasis given to the latter. There are other
factors that affect bonus awards to a lesser extent, such as client
satisfaction, teamwork, the assets under management, and the overall
success of Babson Capital. Such factors are considered as a part of the
overall annual bonus evaluation process by the management of Babson
Capital.
Long-Term incentives are designed to share with participants the
longer-term value created in Babson Capital. Long-term incentives may
take the form of deferred cash awards (including deferred cash awards
that provide a portfolio manager with the economic equivalent of a
"shareholder" interest in the firm by linking the value of the award to
a formula which ties to the value of the business), and/or, in the case
of a portfolio manager who manages a private investment fund with a
performance fee, a deferred cash award or a direct profit sharing
interest that results in the manager receiving amounts based on the
amount of the performance fee paid by such fund. These long-term
incentives vest over time and are granted annually, based upon the same
criteria used to determine the performance-driven annual bonus detailed
above. Because the Portfolio Team members are generally responsible for
multiple accounts (including the Registrant), they are compensated on
the overall performance of the accounts that they manage, rather than a
specific account, except for the portion of compensation relating to
any performance fee award.
BENEFICIAL OWNERSHIP. As of December 31, 2008, members of the Portfolio
Team beneficially owned the following dollar range of equity securities
in the Registrant:
DOLLAR RANGE OF BENEFICIALLY OWNED*
PORTFOLIO TEAM EQUITY SECURITIES OF THE REGISTRANT
---------------------- -----------------------------------
Clifford M. Noreen None
Jill A. Fields None
Michael P. Hermsen $10,001-$50,000
Michael L. Klofas None
Richard E. Spencer II $1-$10,000
* Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934, as amended.
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 half-year 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) CERTIFICATIONS PURSUANT TO RULE 302-2(b) UNDER THE ACT.
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: March 6, 2009
----------------------------------
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: March 6, 2009
----------------------------------
By: /s/ James M. Roy
----------------------------------
James M. Roy, Vice President, and
Chief Financial Officer
----------------------------------
Date: March 6, 2009
----------------------------------