MassMutual
Participation Investors
Report for the
Nine Months Ended September 30, 2009
[LOGO]
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
INTERNET WEBSITE
www.babsoncapital.com/mpv
MassMutual Participation Investors
c/o Babson Capital Management LLC
[LOGO] 1500 Main Street, Suite 2200
Springfield, Massachusetts 01115
(413) 226-1516
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INVESTMENT OBJECTIVE AND POLICY
MassMutual Participation Investors (the "Trust") is a closed-end management
investment company, first offered to the public in 1988, whose shares are traded
on the New York Stock Exchange under the trading symbol "MPV". The Trust's share
price can be found in the financial section of most newspapers as "MassPrt" or
"MassMuPrt" under the New York Stock Exchange listings or Closed-End Fund
Listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term debt obligations purchased directly from their
issuers, which tend to be smaller companies. At least half of these investments
normally include equity features such as common stock, warrants, conversion
rights, or other equity features that provide the Trust with the opportunity to
realize capital gains. The Trust will also invest in publicly traded debt
securities (including high yield securities), again with an emphasis on those
with equity features, and in convertible preferred stocks and, subject to
certain limitations, readily marketable equity securities. Below-investment
grade or high yield securities have predominantly speculative characteristics
with respect to the capacity of the issuer to pay interest and repay principal.
In addition, the Trust may temporarily invest in high quality, readily
marketable securities.
Babson Capital Management LLC ("Babson Capital") manages the Trust on a total
return basis. The Trust distributes substantially all of its net income to
shareholders each year. Accordingly, the Trust pays dividends to shareholders in
January, May, August, and November. All registered shareholders are
automatically enrolled in the Dividend Reinvestment and Cash Purchase Plan
unless cash distributions are requested.
FORM N-Q
The Trust files its complete schedule of portfolio holdings with the U.S.
Securities and Exchange Commission ("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 upon request by calling, toll-free, 866-399-1516.
PROXY VOTING POLICIES & Procedures; PROXY VOTING RECORD
The Trustees of the Trust have delegated proxy voting responsibilities relating
to the voting of securities held by the Trust to Babson Capital. A description
of Babson Capital's proxy voting policies and procedures is available (1)
without charge, upon request, by calling, toll-free 866-399-1516; (2) on the
Trust's website: http://www.babsoncapital.com/mpv; and (3) on the SEC's website
at http://www.sec.gov. Information regarding how the Trust voted proxies
relating to portfolio securities during the most recent 12-month period ended
June 30 is available (1) on the Trust's website: http://www.babsoncapital.
com/mpv; and (2) on the SEC's website at http://www.sec.gov.
MPV
Listed
NYSE
MassMutual Participation Investors
TO OUR SHAREHOLDERS
October 31, 2009
We are pleased to present the September 30, 2009 Quarterly Report of MassMutual
Participation Investors (the "Trust").
The Board of Trustees declared a quarterly dividend of 25 cents per share,
payable on November 13, 2009 to shareholders of record on October 26, 2009. The
Trust had previously paid a 25 cent per share dividend for the preceding
quarter.
During the third quarter, the net assets of the Trust increased to $111,833,864
or $11.22 per share compared to $109,871,490 or $11.05 per share on June 30,
2009. This translates into a 3.83% total return for the quarter, based on the
change in the Trust's net assets assuming the reinvestment of all dividends.
Longer term, the Trust returned -0.12%, 4.05%, 11.43%, and 11.56% for the 1-,
3-, 5- and 10-year time periods, respectively, based on the change in the
Trust's net assets assuming the reinvestment of all dividends. The Trust earned
24 cents per share of net investment income for the quarter, compared to 23
cents per share in the previous quarter.
The Trust's share price increased 2.1% during the third quarter, from $11.04 per
share to $11.27 per share. The Trust's market price of $11.27 per share equates
to a 0.4% premium over the September 30, 2009 net asset value per share of
$11.22. The Trust's average quarter-end premium for the 3, 5 and 10-year periods
was 2.9%, 6.5% and 5.0%, respectively. U.S. equity markets, as approximated by
the Russell 2000 Index, increased 19.28% for the quarter. U.S. high yield fixed
income markets, as approximated by the Barclays Capital U.S. Corporate High
Yield Index increased 14.22% for the quarter.
During the third quarter, banks and other senior debt providers finally began to
make more capital available to finance middle market buyout transactions. As a
result, the deal flow available to the Trust increased steadily as the quarter
progressed. The Trust closed two new private placement investments and two
"follow-on" investments in existing portfolio companies during the quarter. The
total amount invested by the Trust in these transactions was approximately $3.1
million. The two new investments were in International Offshore Services LLC and
Northwest Mailing Services, Inc., while the two follow-on investments were in
NetShape Technologies, Inc. and Telecorps Holdings, Inc. (A brief description of
these investments can be found in the Consolidated Schedule of Investments.) We
are pleased with the quality of the recent additions to the Trust's portfolio,
as new investments continue to be more conservatively structured and
attractively priced than has been the market norm for the past several years.
Transaction activity has remained fairly strong in the early part of the fourth
quarter, and our current backlog of deals bodes well for fourth quarter new
investment activity.
The weak economy continues to negatively impact the ability of many of our
existing portfolio companies to service their debt. We are spending considerable
time working closely with the transaction sponsors and the management teams of
these companies to remedy these situations. We expect these activities to
continue for the next several quarters. One of our portfolio companies, Radiac
Abrasives, Inc., was sold during the quarter with the Trust realizing a gain on
its investment. While realization activity has been slow during the first three
quarters of the year, there are signs that activity levels are increasing.
Thank you for your continued interest in and support of MassMutual Participation
Investors.
Sincerely,
/s/ Michael L. Klofas
Michael L. Klofas
President
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PORTFOLIO COMPOSITION AS OF 9/30/09 *
[PIE CHART APPEARS HERE]
PRIVATE / RESTRICTED PUBLIC EQUITY
EQUITY 0.5%
13.1%
PRIVATE / 144A HIGH
CASH & SHORT TERM YIELD DEBT
INVESTMENTS 69.8%
3.7%
PUBLIC HIGH YIELD
DEBT
12.9%
* Based on market value of total investments (including cash)
Cautionary Notice: Certain statements contained in this report may be "forward
looking" statements. Investors are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on which they are
made and which reflect management's current estimates, projections, expectations
or beliefs, and which are subject to risks and uncertainties that may cause
actual results to differ materially. These statements are subject to change at
any time based upon economic, market or other conditions and may not be relied
upon as investment advice or an indication of the Trust's trading intent.
References to specific securities are not recommendations of such securities,
and may not be representative of the Trust's current or future investments. We
undertake no obligation to publicly update forward looking statements, whether
as a result of new information, future events, or otherwise.
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1
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2009
(UNAUDITED)
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $117,836,018) $ 100,634,812
Corporate public securities at market value
(Cost - $17,319,828) 16,192,116
-------------
116,826,928
Cash 4,493,817
Interest receivable 3,017,325
Receivable for investments sold 152,137
Prepaid taxes 150,000
Other assets 6,273
-------------
TOTAL ASSETS 124,646,480
-------------
LIABILITIES:
Payable for investments purchased 132,742
Investment advisory fee payable 251,626
Note payable 12,000,000
Interest payable 262,933
Accrued expenses 153,786
Other payables 11,529
-------------
TOTAL LIABILITIES 12,812,616
-------------
TOTAL NET ASSETS $ 111,833,864
=============
NET ASSETS:
Common shares, par value $.01 per share;
an unlimited number authorized $ 99,644
Additional paid-in capital 92,963,768
Retained net realized gain on investments, prior years 32,871,737
Undistributed net investment income 4,219,476
Accumulated net realized gain on investments 8,157
Net unrealized depreciation of investments (18,328,918)
-------------
TOTAL NET ASSETS $ 111,833,864
=============
COMMON SHARES ISSUED AND OUTSTANDING 9,964,376
=============
NET ASSET VALUE PER SHARE $ 11.22
=============
See Notes to Consolidated Financial Statements
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2
CONSOLIDATED STATEMENT OF OPERATIONS MassMutual Participation Investors
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)
INVESTMENT INCOME:
Interest $ 9,051,041
Dividends 792
Other 19,781
-------------
TOTAL INVESTMENT INCOME 9,071,614
-------------
EXPENSES:
Investment advisory fees 736,088
Interest 522,000
Trustees' fees and expenses 124,313
Professional fees 112,500
Reports to shareholders 81,000
Custodian fees 21,000
Transfer agent/registrar's expenses 18,000
Other 50,550
-------------
TOTAL EXPENSES 1,665,451
-------------
INVESTMENT INCOME - NET 7,406,163
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments before taxes 760,386
Income tax expense (7,087)
-------------
Net realized gain on investments after taxes 753,299
Net change in unrealized depreciation of investments (1,942,537)
-------------
NET LOSS ON INVESTMENTS (1,189,238)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,216,925
=============
See Notes to Consolidated Financial Statements
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3
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)
NET INCREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net $ 5,736,626
Purchases of portfolio securities (17,490,043)
Proceeds from disposition of portfolio securities 15,260,518
Interest, dividends and other income received 7,274,406
Interest expense paid (348,000)
Operating expenses paid (1,162,684)
Income taxes paid (180,087)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,090,736
-------------
Cash flows from financing activities:
Cash dividends paid from net investment income (7,450,175)
Receipts for shares issued on reinvestment of dividends 409,373
-------------
NET CASH USED FOR FINANCING ACTIVITIES (7,040,802)
-------------
NET INCREASE IN CASH 2,049,934
Cash - beginning of year 2,443,883
-------------
CASH - END OF PERIOD $ 4,493,817
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,216,925
-------------
Decrease in investments 4,554,707
Increase in interest and dividends receivable (1,476,597)
Increase in receivable for investments sold (43,486)
Increase in other assets (6,273)
Decrease in payable for investments purchased (280,034)
Increase in investment advisory fee payable 3,730
Increase in interest payable 174,000
Increase in accrued expenses 7,372
Decrease in accrued taxes payable (23,000)
Decrease in other payables (36,608)
-------------
TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS 2,873,811
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,090,736
=============
See Notes to Consolidated Financial Statements
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4
CONSOLIDATED STATEMENTS MassMutual Participation Investors
OF CHANGES IN NET ASSETS
For the nine
months ended For the
09/30/09 year ended
(Unaudited) 12/31/08
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income - net $ 7,406,163 $ 10,671,937
Net realized gain (loss) on investments 753,299 (1,165,028)
Net change in unrealized depreciation of investments (1,942,537) (16,888,301)
------------- -------------
Net increase (decrease) in net assets resulting from operations 6,216,925 (7,381,392)
Increase from common shares issued on reinvestment of dividends
Common shares issued (2009 - 37,133; 2008 - 65,632) 409,373 847,131
Dividends to shareholders from:
Net investment income (2009 - $0.50 per share;
2008 - $1.00 per share) (4,968,364) (9,915,143)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,657,934 (16,449,404)
NET ASSETS, BEGINNING OF YEAR 110,175,930 126,625,334
------------- -------------
NET ASSETS, END OF PERIOD/YEAR (including undistributed net
investment income of $4,219,476 and $1,781,677, respectively) $ 111,833,864 $ 110,175,930
============= =============
See Notes to Consolidated Financial Statements
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5
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING:
For the nine months For the years ended December 31,
ended 09/30/2009 -----------------------------------------------------------------
(Unaudited) 2008 2007 2006 2005 2004
--------- --------- --------- --------- --------- ---------
Net asset value:
Beginning of year $ 11.10 $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84
--------- --------- --------- --------- --------- ---------
Net investment income(a) 0.74 1.08 1.23 1.10 0.99 1.00
Net realized and unrealized
gain (loss) on investments (0.12) (1.82) (0.05) 0.77 1.09 (b) 1.36
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.62 (0.74) 1.18 1.87 2.08 2.36
--------- --------- --------- --------- --------- ---------
Dividends from net investment
income to common shareholders (0.50) (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 (0.50) (1.00) (1.24) (1.18) (1.00) (1.07)
--------- --------- --------- --------- --------- ---------
Net asset value: End of period/year $ 11.22 $ 11.10 $ 12.84 $ 12.90 $ 12.21 $ 11.13
--------- --------- --------- --------- --------- ---------
Per share market value:
End of period/year $ 11.27 $ 9.05 $ 13.18 $ 14.70 $ 14.05 $ 13.31
========= ========= ========= ========= ========= =========
Total investment return
Net asset value(d) 5.79% (6.01%) 9.95% 18.64% 22.51% 25.14%
Market value 30.12% (25.36%) (1.30%) 16.81% 17.25% 25.77%
Net assets (in millions):
End of period/year $ 111.83 $ 110.18 $ 126.63 $ 126.52 $ 119.02 $ 107.61
Ratio of operating expenses
to average net assets 1.40%(e) 1.33% 1.36% 1.17% 1.45% 1.63%
Ratio of interest expense
to average net assets 0.63%(e) 0.58% 0.56% 0.57% 0.80% 0.89%
Ratio of income tax expense
to average net assets (f) 0.01%(e) 0.00% 0.48% 2.68% 2.83% 0.16%
Ratio of total expenses before custodian fee
reduction to average net assets (f) 2.04%(e) 1.91% 2.40% 4.46% 5.12% 2.68%
Ratio of net expenses after custodian fee
reduction to average net assets (f) 2.04%(e) 1.91% 2.40% 4.42% 5.08% 2.68%
Ratio of net investment income
to average net assets 9.05%(e) 8.74% 9.32% 8.43% 8.45% 9.60%
Portfolio turnover 13% 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) Annualized.
(f) 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 $ 12 $ 22.5
Asset coverage per $1,000
of indebtedness $ 10,319 $ 10,181 $ 11,552 $ 11,543 $ 10,918 $ 5,783
See Notes to Consolidated Financial Statements
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6
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 90.13%:(A) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
CORPORATE RESTRICTED SECURITIES - 89.99%: (A)
PRIVATE PLACEMENT INVESTMENTS - 85.66%
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 $ 1,302,382 11/21/07 $ 1,274,945 $ 1,328,430
Limited Partnership Interest (B) 12.26% int. 11/21/07 119,009 113,278
------------ ------------
1,393,954 1,441,708
------------ ------------
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 12/31/08 521,754 618,687
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
------------ ------------
662,986 689,309
------------ ------------
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 -- 12,801
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 1,519,992
------------ ------------
1,125,000 2,657,793
------------ ------------
A W X HOLDINGS CORPORATION
A provider of aerial equipment rental, sales and repair services to non-residential construction and maintenance contractors
operating in the State of Indiana.
10.5% Senior Secured Term Note due 2014 $ 420,000 05/15/08 411,600 396,235
13% Senior Subordinated Note due 2015 $ 420,000 05/15/08 380,633 386,509
Common Stock (B) 60,000 shs. 05/15/08 60,000 --
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 21,099 shs. 05/15/08 35,654 --
------------ ------------
887,887 782,744
------------ ------------
ADVANCED TECHNOLOGIES HOLDINGS
A provider of factory maintenance services to industrial companies.
15% Senior Subordinated Note due 2013 $ 1,138,368 12/27/07 1,115,662 1,161,136
Preferred Stock (B) 546 shs. 12/27/07 270,000 250,018
------------ ------------
1,385,662 1,411,154
------------ ------------
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7
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 958,419
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 656,294 727,200
Common Stock (B) 150,000 shs. 03/09/07 150,000 153,556
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 38,676
------------ ------------
1,786,074 1,877,851
------------ ------------
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 09/26/08 552,444 615,475
Common Stock (B) 713 shs. 09/26/08 71,303 70,507
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 507 shs. 09/26/08 46,584 50,136
------------ ------------
670,331 736,118
------------ ------------
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 1,687,503
Preferred Class A Unit (B) 1,706 uts. ** 170,600 264,086
Preferred Class B Unit (B) 808 uts. 06/09/08 80,789 97,087
Common Class B Unit (B) 16,100 uts. 01/22/04 1 9,347
Common Class D Unit (B) 3,690 uts. 09/12/06 -- 2,142
------------ ------------
1,857,430 2,060,165
------------ ------------
APEX ANALYTIX HOLDING CORP.
A provider of audit recovery and fraud detection services and software to commercial and retail businesses in the U.S. and Europe.
12.5% Senior Subordinated Note due 2016 $ 1,012,500 04/28/09 835,326 1,042,875
Preferred Stock Series B (B) 1.623 shs. 04/28/09 162,269 16
Common Stock (B) 723 shs. 04/28/09 723 7
------------ ------------
998,318 1,042,898
------------ ------------
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 05/18/05 832,799 732,447
Common Stock (B) 263 shs. 05/18/05 263,298 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 --
------------ ------------
1,155,459 732,447
------------ ------------
* 01/22/04 and 06/09/08.
** 01/22/04 and 09/12/06.
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8
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 1,148,853 $ 1,171,382
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 46,302
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 16,273
------------ ------------
1,339,711 1,233,957
------------ ------------
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 08/07/08 420,489 402,875
12.5% Senior Subordinated Note due 2015 $ 429,070 08/07/08 391,509 389,153
Common Stock (B) 41,860 shs. 08/07/08 41,860 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 32,914 shs. 08/07/08 32,965 --
------------ ------------
886,823 792,028
------------ ------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B) 55 shs. * 252 385,762
------------ ------------
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 1,308,706
Preferred Stock (B) 147 shs. 12/02/08 146,594 139,261
------------ ------------
1,324,588 1,447,967
------------ ------------
COEUR, INC.
A producer of proprietary, disposable power injection syringes.
12% Senior Subordinated Note due 2016 $ 642,857 10/10/08 581,786 662,143
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
------------ ------------
662,143 692,684
------------ ------------
CONNECTICUT ELECTRIC, INC.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
12% Senior Subordinated Note due 2014 (D) $ 1,267,387 01/12/07 1,182,283 633,694
Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 --
Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 --
------------ ------------
1,324,652 633,694
------------ ------------
* 12/30/97 and 05/29/99.
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9
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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. 07/05/07 158,912 463,018
Common Stock (B) 380 shs. 07/05/07 4 4
Limited Partnership Interest (B) 6.88% int. * 103,135 --
------------ ------------
632,847 1,371,094
------------ ------------
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 1,303,161 1,350,000
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 95,669
------------ ------------
1,375,778 1,445,669
------------ ------------
CRANE RENTAL CORPORATION
A crane rental company.
13% Senior Subordinated Note due 2015 $ 1,215,000 08/21/08 1,098,420 1,239,300
Common Stock (B) 135,000 shs. 08/21/08 135,000 96,760
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 72,037 shs. 08/21/08 103,143 51,632
------------ ------------
1,336,563 1,387,692
------------ ------------
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 10/30/06 926,681 984,484
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 550,433
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 34,493
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 37,366
------------ ------------
1,342,800 1,606,776
------------ ------------
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 --
------------ ------------
1,960,217 659,713
------------ ------------
* 08/12/04 and 01/14/05.
** 10/24/96 and 08/28/98.
--------------------------------------------------------------------------------------------------------------------------------
10
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 315,204
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 445,662 493,458
Common Stock (B) 102,857 shs. 11/01/06 102,857 82,492
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 25,900
------------ ------------
897,124 917,054
------------ ------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
Common Stock (B) 3,656 shs. * 365,600 604,820
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 178,106
------------ ------------
464,319 782,926
------------ ------------
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 $ 1,216,653 01/08/08 1,194,321 1,183,528
Common Stock (B) 349 shs. 01/08/08 174,701 56,621
------------ ------------
1,369,022 1,240,149
------------ ------------
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 40,875 140,506
------------ ------------
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 $ 1,152,031 10/06/08 1,128,635 1,164,625
Preferred Stock (B) 2,298 shs. 10/06/08 229,804 128,669
Common Stock (B) 1,625 shs. 10/06/08 1,625 --
------------ ------------
1,360,064 1,293,294
------------ ------------
F H S HOLDINGS LLC
A national provider of customized disease management services to large self-insured employers.
12% Senior Subordinated Note due 2014 (D) $ 1,265,625 06/01/06 1,175,533 632,813
Limited Liability Company Units of Linden/FHS
Holdings LLC (B) 84 uts. 06/01/06 84,368 --
Common Unit Class B (B) 734 uts. 06/01/06 64,779 --
------------ ------------
1,324,680 632,813
------------ ------------
* 10/30/03 and 01/02/04.
--------------------------------------------------------------------------------------------------------------------------------
11
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 (D) $ 524,791 04/13/06 $ 516,919 $ 131,198
14% Senior Subordinated Note due 2014 (D) $ 317,177 04/13/06 283,220 --
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 --
------------ ------------
890,350 131,198
------------ ------------
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 (D) $ 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 --
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 --
------------ ------------
GOLDEN COUNTY FOODS HOLDING, INC.
A manufacturer of frozen appetizers and snacks.
12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 914,607 810,000
16% PIK Note due 2015 $ 207,545 12/31/08 169,580 166,036
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 --
------------ ------------
1,161,830 976,036
------------ ------------
H M HOLDING COMPANY
A designer, manufacturer, and importer of promotional and wood furniture.
12% Senior Subordinated Note due 2013 (D) $ 1,170,000 02/10/06 1,084,725 --
Preferred Stock (B) 21 shs. * 21,428 --
Common Stock (B) 180 shs. 02/10/06 180,000 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 67 shs. 02/10/06 61,875 --
------------ ------------
1,348,028 --
------------ ------------
* 09/18/07 and 06/27/08.
--------------------------------------------------------------------------------------------------------------------------------
12
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 91,866 $ --
------------ ------------
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 * 1,022,243 1,074,883
Common Stock (B) 33 shs. * 33,216 28,072
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 89,252
------------ ------------
1,161,077 1,192,207
------------ ------------
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 1,071,987
Common Stock (B) 251 shs. 08/19/08 251,163 66,151
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 65 shs. 08/19/08 60,233 17,099
------------ ------------
1,328,024 1,155,237
------------ ------------
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 60,292
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 11 shs. 02/27/07 324 17,761
------------ ------------
1,424 78,053
------------ ------------
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 --
------------ ------------
INTERNATIONAL OFFSHORE SERVICES LLC
A leading provider of marine transportation services, platform decomissioning, and salvage services to oil and gas producers, in the
shallow waters of the Gulf of Mexico.
14.25% Senior Subordinated Secured Note due 2017 $ 1,350,000 07/07/09 1,217,417 1,390,500
Limited Liability Company Unit (B) 1,647 uts. 07/07/09 98,833 16
------------ ------------
1,316,250 1,390,516
------------ ------------
* 06/30/04 and 08/19/04.
--------------------------------------------------------------------------------------------------------------------------------
13
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
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 (D) $ 510,187 08/04/00 $ 449,086 $ 255,094
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,312 --
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 --
------------ ------------
979,499 255,094
------------ ------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 819,336 843,750
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 96,998
------------ ------------
872,864 940,748
------------ ------------
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 $ 1,282,379 10/15/07 1,256,778 1,308,026
Common Stock (B) 116,827 shs. 10/15/07 116,827 88,614
------------ ------------
1,373,605 1,396,640
------------ ------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the custom framing market.
13.5% Senior Subordinated Note due 2013 $ 1,344,732 05/25/06 1,292,963 1,143,022
Common Stock (B) 71,053 shs. 05/25/06 71,053 --
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 --
------------ ------------
1,401,887 1,143,022
------------ ------------
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 (D) $ 1,115,217 07/16/08 1,042,077 836,413
Convertible Preferred Stock Series C (B) 29 shs. 06/30/09 29,348 21,750
Convertible Preferred Stock Series D (B) 13 shs. 09/17/09 12,958 9,720
Common Stock (B) 235 shs. 07/15/08 234,783 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 51 shs. 07/16/08 50,836 --
------------ ------------
1,370,002 867,883
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
14
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
K W P I HOLDINGS CORPORATION
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
12.75% Senior Subordinated Note due 2014 $ 1,372,848 03/14/07 $ 1,256,317 $ 1,098,278
Common Stock (B) 123 shs. 03/13/07 123,000 --
Warrant, exercisable until 2019 to purchase
preferred stock at $.01 per share (B) 71 shs. 07/07/09 -- --
Warrant, exercisable until 2017, to purchase
common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 --
------------ ------------
1,465,207 1,098,278
------------ ------------
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 $ 1,198,984 12/20/07 1,176,925 1,222,964
Preferred Stock (B) 192,314 shs. 12/20/07 192,314 217,065
Common Stock (B) 54,326 shs. 12/20/07 543 28,343
------------ ------------
1,369,782 1,468,372
------------ ------------
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 $ 649,635 09/12/08 601,873 662,626
Common Stock (B) 32 shs. 09/12/08 32,143 32,446
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 35 shs. 09/12/08 34,714 35,040
------------ ------------
668,730 730,112
------------ ------------
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 05/04/07 483,072 516,177
Limited Liability Company Unit (B) 12,763 uts. * 166,481 175,556
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 24,579
------------ ------------
672,334 716,312
------------ ------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of wine bottles.
6.78% Senior Secured Tranche A Note due 2010 (C) $ 168,042 09/03/04 168,042 166,914
12.5% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 170,213 172,534
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 6,819
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 4,927
------------ ------------
394,393 351,194
------------ ------------
* 05/04/07 and 01/02/08.
--------------------------------------------------------------------------------------------------------------------------------
15
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 614,508 08/29/08 $ 544,558 $ 626,798
Preferred Unit (B) 66 uts. 08/29/08 66,451 71,000
Common Unit Class A (B) 671 uts. 08/29/08 671 30,138
Common Unit Class B (B) 250 uts. 08/29/08 63,564 11,214
------------ ------------
675,244 739,150
------------ ------------
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 1,127,236
Preferred Stock (B) 56 shs. 09/24/08 54,040 58,279
Limited Partnership Interest (B) 205,932 int. 09/16/08 205,932 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 18 shs. 09/24/08 18,237 --
------------ ------------
1,327,119 1,185,515
------------ ------------
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 * 1,362,207 1,436,013
Common Stock (B) 238 shs. * 238,000 337,426
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. * 86,281 123,076
------------ ------------
1,686,488 1,896,515
------------ ------------
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 1,177,306 1,230,173
Preferred Stock (B) 139 shs. 07/21/08 138,374 131,716
Common Stock (B) 9 shs. 07/21/08 10,000 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 6 shs. 07/21/08 5,510 --
------------ ------------
1,331,190 1,361,889
------------ ------------
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 56,198 126,364
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 131,720
------------ ------------
112,903 258,084
------------ ------------
* 08/12/05 and 09/11/06.
--------------------------------------------------------------------------------------------------------------------------------
16
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 1,350,000 07/25/08 $ 1,271,272 $ 1,080,000
14% PIK Note due 2014 $ 359,867 07/25/08 312,512 287,894
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 --
------------ ------------
1,656,909 1,367,894
------------ ------------
NABCO, INC.
A producer of explosive containment vessels in the United States.
14% Senior Subordinated Note due 2014 $ 431,692 02/24/06 370,490 323,769
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 --
------------ ------------
827,161 323,769
------------ ------------
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 2010 $ 67,416 11/14/08 67,416 67,416
14% Senior Subordinated Note due 2014 (D) $ 764,921 05/28/04 660,453 --
10.75% Senior Secured Note due 2011 (D) $ 348,118 05/28/04 347,086 87,030
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 --
------------ ------------
1,149,691 154,446
------------ ------------
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 1,136,250
Common Stock (B) 225,000 shs. 08/02/07 225,000 346,845
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 97,411
------------ ------------
1,327,500 1,580,506
------------ ------------
* 02/24/06 and 06/22/07.
--------------------------------------------------------------------------------------------------------------------------------
17
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 627,618
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 1.38% int. 02/01/07 539,978 --
Limited Liability Company Unit Class D of
Saw Mill PCG Partners LLC (B) 22 uts. * 22,083 11,040
Preferred Stock Class A (B) 1 sh. 12/18/08 726 360
Preferred Stock Class A-1 (B) 1 sh. 09/30/09 1,209 605
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 --
------------ ------------
1,357,796 639,623
------------ ------------
NORTHWEST MAILING SERVICES, INC.
A producer of promotional materials for companies that use direct mail as part of their customer retention and loyalty programs.
12% Senior Subordinated Note due 2016 $ 1,207,895 07/09/09 1,001,888 1,256,211
Limited Partnership Interest (B) 1,421 uts. 07/09/09 142,105 135,000
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 1,852 shs. 07/09/09 185,163 19
------------ ------------
1,329,156 1,391,230
------------ ------------
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 (D) $ 857,143 01/28/02 820,159 --
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 --
------------ ------------
1,555,613 348,215
------------ ------------
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 $ 167,771 01/03/06 165,255 171,233
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 361,756 392,709
Common Stock (B) 184,176 shs. 01/03/06 184,176 136,048
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 31,817
------------ ------------
747,087 731,807
------------ ------------
* 12/18/08 and 09/30/09.
--------------------------------------------------------------------------------------------------------------------------------
18
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and British Columbia.
12% Senior Subordinated Note due 2009 (D) $ 511,000 08/07/98 $ 511,000 $ 76,650
12% Senior Subordinated Note due 2009 (D) $ 244,154 02/09/00 213,313 36,623
------------ ------------
724,313 113,273
------------ ------------
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. 01/17/06 302,885 240,042
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 40,528
------------ ------------
393,309 280,570
------------ ------------
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 $ 1,224,360 07/03/06 1,173,762 1,236,604
Preferred Unit (B) 202 uts. 07/03/06 202,320 281,552
Preferred Unit (B) 36 uts. 07/03/06 36,420 50,683
Common Unit Class I (B) 78 uts. 07/03/06 -- 171,450
Common Unit Class L (B) 17 uts. 07/03/06 -- 36,220
------------ ------------
1,412,502 1,776,509
------------ ------------
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 1,155,486 1,215,000
Preferred Stock (B) 19 shs. 03/31/06 174,492 231,669
Common Stock (B) 12 shs. 03/31/06 13,500 53,713
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 31,255
------------ ------------
1,349,366 1,531,637
------------ ------------
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 $ 704,835 04/27/07 660,393 675,760
Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 --
------------ ------------
693,870 675,760
------------ ------------
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 1,081,714 1,119,352
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 93,799
------------ ------------
1,222,339 1,213,151
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
19
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
PEARLMAN ENTERPRISES, INC.
A developer and distributor of tools, equipment and supplies to the natural and engineered stone industry.
Preferred Stock Series A (B) 1,236 shs. 05/22/09 $ 59,034 $ --
Preferred Stock Series B (B) 7,059 shs. 05/22/09 290,050 --
Common Stock (B) 21,462 shs. 05/22/09 993,816 --
------------ ------------
1,342,900 --
------------ ------------
POSTLE ALUMINUM COMPANY LLC
A manufacturer and distributor of aluminum extruded products.
3% Senior Subordinated PIK Note due 2014 (D) $ 1,163,700 10/02/06 1,066,355 290,925
Limited Liability Company Unit Class A 733 uts. 10/02/06 270,000 --
Limited Liability Company Unit 76 uts. 05/22/09 38,140 36,049
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 4,550 shs. 10/02/06 65,988 --
------------ ------------
1,440,483 326,974
------------ ------------
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 1,153,083 1,280,930
Limited Partnership Interest (B) 12.55% int. 02/11/08 94,092 48,744
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 700 shs. 02/11/08 88,723 96,065
------------ ------------
1,335,898 1,425,739
------------ ------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and chassis products.
12% Senior Subordinated Note due 2012 $ 922,612 05/28/04 846,452 948,254
Common Stock (B) 187,500 shs. 05/28/04 187,500 30,995
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 199,969 shs. 05/28/04 199,969 33,056
------------ ------------
1,233,921 1,012,305
------------ ------------
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 1,189,097
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 84,048
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 39,662
------------ ------------
1,325,995 1,312,807
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
20
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 1,365,987
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 30,196
------------ ------------
1,323,000 1,396,183
------------ ------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 538,325 542,790
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 --
------------ ------------
603,414 542,790
------------ ------------
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. 06/02/99 146,456 264,562
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 783,332 814,655
Common Stock (B) 324 shs. * 340,378 543,999
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 118,773
------------ ------------
1,183,839 1,477,427
------------ ------------
SENCORE HOLDING COMPANY
A designer, manufacturer, and marketer of decoders, receivers and modulators sold to broadcasters, satellite, cable and telecom
operators for encoding/decoding analog and digital transmission video signals.
12.5% Senior Subordinated Note due 2014 $ 934,615 01/15/09 816,574 853,234
Common Stock (B) 69 shs. 01/15/09 69,231 17,308
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 149 shs. 01/15/09 149,084 1
------------ ------------
1,034,889 870,543
------------ ------------
SMART SOURCE HOLDINGS LLC
A short-term computer rental company.
12% Senior Subordinated Note due 2015 $ 1,176,924 ** 1,079,914 1,176,924
Limited Liability Company Unit (B) 328 uts. ** 337,762 272,481
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 83 shs. ** 87,231 69,020
------------ ------------
1,504,907 1,518,425
------------ ------------
* 09/10/04 and 10/05/07.
** 08/31/07 and 03/06/08.
--------------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
SPECIALTY COMMODITIES, INC.
A distributor of specialty food ingredients.
13.25% Senior Subordinated Note due 2016 $ 1,205,175 10/23/08 $ 1,131,035 $ 1,241,331
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
------------ ------------
1,343,144 1,392,269
------------ ------------
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 1,125,694 1,105,070
Common Stock (B) 165 shs. 08/01/06 164,634 13,038
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 4,342
------------ ------------
1,339,718 1,122,450
------------ ------------
SYNTERACT HOLDINGS CORPORATION
A provider of outsourced clinical trial management services to pharmaceutical and biotechnology companies.
14% Senior Subordinated Note due 2016 $ 1,364,800 09/02/08 1,276,154 1,392,096
Redeemable Preferred Stock Series A (B) 678 shs. 09/02/08 6,629 23,054
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 6,778 shs. 09/02/08 59,661 --
------------ ------------
1,342,444 1,415,150
------------ ------------
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 1,350,000
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 39,699
------------ ------------
1,323,000 1,389,699
------------ ------------
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 1,173,909
Common Stock (B) 1,167 shs. 10/14/05 1,167 488,518
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 631 shs. 09/30/08 300,683 264,143
------------ ------------
1,335,323 1,926,570
------------ ------------
TELECORPS HOLDINGS, INC.
A provider of equipment and services to producers of television shows and motion pictures.
12.75% Senior Subordinated Note due 2016 $ 1,681,677 * 1,474,695 1,732,127
Common Stock (B) 143 shs. 09/02/09 5,823 5,532
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 4,187 shs. * 173,349 42
------------ ------------
1,653,867 1,737,701
------------ ------------
* 05/20/09 and 09/02/09.
--------------------------------------------------------------------------------------------------------------------------------
22
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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.
12% Senior Subordinated Note due 2014 $ 664,062 * $ 637,480 $ 531,250
6.75% Term Note due 2012 (C) $ 861,861 * 858,653 775,675
Limited Partnership Interest of
Saw Mill Capital Fund V, LLC (B) 2.27% int. ** 85,292 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 --
------------ ------------
1,615,163 1,306,925
------------ ------------
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 1,007,561
Series A Preferred Stock (B) 219 shs. 10/26/07 219,203 --
------------ ------------
1,332,219 1,007,561
------------ ------------
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 03/02/07 479,190 462,163
13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 256,478
Common Stock (B) 71,542 shs. 03/02/07 71,542 --
Warrant, exercisable until 2014 to purchase
common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 --
------------ ------------
885,863 718,641
------------ ------------
TRANSPAC HOLDING COMPANY
A designer, importer, and wholesaler of home decor and seasonal gift products.
12% Senior Subordinated Note due 2015 (D) $ 938,651 10/31/07 873,498 797,853
Common Stock (B) 110 shs. 10/31/07 110,430 --
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 --
------------ ------------
1,030,308 797,853
------------ ------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 889,663 927,180
Common Stock (B) 571 shs. *** 570,944 519,016
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 41,362
------------ ------------
1,501,628 1,487,558
------------ ------------
* 04/28/06 and 09/13/06.
** 03/01/05 and 10/10/08.
*** 08/31/05 and 04/30/07.
--------------------------------------------------------------------------------------------------------------------------------
23
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
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 $ 1,326,978 $ 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 271,830
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 191,575
------------ ------------
1,826,394 1,819,405
------------ ------------
TRUCK BODIES & EQUIPMENT INTERNATIONAL
A designer and manufacturer of accessories for heavy and medium duty trucks, primarily dump bodies, hoists, various forms of flatbed
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 (D) $ 338,540 12/30/08 84,635 84,635
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 -- --
------------ ------------
1,854,920 390,310
------------ ------------
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 36,032 120,575
------------ ------------
U M A ENTERPRISES, INC.
An importer and wholesaler of home decor products.
15% Senior Subordinated Note due 2015 $ 924,872 02/08/08 904,738 903,270
Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 12,267
------------ ------------
1,374,303 915,537
------------ ------------
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 04/30/04 943,396 847,025
Common Stock (B) 96 shs. 04/30/04 96,400 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 --
------------ ------------
1,151,902 847,025
------------ ------------
* 07/19/05 and 12/22/05.
--------------------------------------------------------------------------------------------------------------------------------
24
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
VISIONEERING, INC.
A designer and manufacturer of tooling and fixtures for the aerospace industry.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 $ 451,941 $ 464,797
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 338,606 374,294
18% PIK Convertable Preferred Stock (B) 21,361 shs. 03/13/09 41,440 39,368
Common Stock (B) 70,588 shs. 05/17/07 70,588 1,970
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 558
------------ ------------
934,035 880,987
------------ ------------
VITALITY FOODSERVICE, INC.
A non-carbonated beverage dispensing company focused on the foodservice industry.
13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 959,785 994,887
Common Stock (B) 14,006 shs. * 140,064 152,980
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 137,547
------------ ------------
1,198,787 1,285,414
------------ ------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily envelopes and tags used on tea bags.
12.5% Senior Subordinated Note due 2012 (D) $ 900,000 07/19/04 785,152 --
14.5% PIK Note due 2010 (D) $ 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 $ 1,169,238 11/15/07 1,145,033 1,192,619
Limited Liability Company Unit Class B (B) 224 uts. 11/15/07 223,757 254,503
Limited Liability Company Unit Class C (B) 224 uts. 11/15/07 -- 118,259
------------ ------------
1,368,790 1,565,381
------------ ------------
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 11/30/06 858,327 774,563
Common Stock (B) 101 shs. 11/30/06 101,250 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 --
------------ ------------
1,005,367 774,563
------------ ------------
* 09/24/04 and 12/22/06.
--------------------------------------------------------------------------------------------------------------------------------
25
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
WORKPLACE MEDIA HOLDING CO.
A direct marketer specializing in providing advertisers with access to consumers in the workplace.
13% Senior Subordinated Note due 2015 $ 613,692 05/14/07 $ 565,304 $ 567,056
Limited Partnership Interest (B) 12.26% int. 05/14/07 61,308 --
Warrant, exercisable until 2015, to purchase
common stock at $.02 per share (B) 47 shs. 05/14/07 44,186 --
------------ ------------
670,798 567,056
------------ ------------
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 (D) $ 1,229,741 09/08/08 1,203,293 614,870
Common Stock (B) 150 shs. 09/08/08 150,000 --
------------ ------------
1,353,293 614,870
------------ ------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 112,371,878 95,787,665
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
26
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Shares or
Interest Due Principal
CORPORATE RESTRICTED SECURITIES: (A) (Continued) Rate Date Amount Cost Fair Value
------- -------- ------------ ------------ ------------
RULE 144A SECURITIES - 4.33%:
BONDS - 4.33%
ACCO Brands Corporation 10.625% 03/15/15 $ 45,000 $ 44,326 $ 47,081
Affinia Group, Inc. 10.750 08/15/16 25,000 24,700 26,813
Allegheny Energy Supply 8.250 04/15/12 500,000 518,944 550,790
Anheuser-Busch Inbev Wld, Inc. 7.720 01/15/19 500,000 499,615 591,630
Appleton Papers, Inc. 11.250 12/15/15 252,500 250,000 204,841
Cenveo Corporation 10.500 08/15/16 45,000 45,000 42,300
Compucom Systems, Inc. 12.500 10/01/15 670,000 650,817 624,775
Douglas Dynamics LLC 7.750 01/15/12 485,000 461,804 417,100
G F S I, Inc. (C) 10.500 06/01/11 358,000 343,948 266,710
Gannett Company, Inc. 8.750 11/15/14 25,000 24,616 24,500
Gannett Company, Inc. 9.375 11/15/17 60,000 59,149 58,800
H C A, Inc. 9.875 02/15/17 15,000 14,526 15,975
MGM Mirage, Inc. 10.375 05/15/14 30,000 29,203 32,025
MGM Mirage, Inc. 11.125 11/15/17 50,000 48,706 54,625
Markwest Energy Operating Co. 6.875 11/01/14 35,000 27,653 32,725
Newpage Corporation 11.375 12/31/14 375,000 367,074 365,625
Packaging Dynamics Corporation of America 10.000 05/01/16 975,000 969,680 441,187
Sealed Air Corporation 7.875 06/15/17 500,000 492,132 527,245
Speedway Motorsports, Inc. 8.750 06/01/16 35,000 33,932 36,400
Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,042 486,000
------------ ------------
TOTAL BONDS 5,461,867 4,847,147
------------ ------------
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 5,464,140 4,847,147
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $117,836,018 $100,634,812
------------ ------------
----------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES - 14.48%:(A) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
BONDS - 13.51%
Allegheny Technologies, Inc. 9.375% 06/12/19 $ 500,000 $ 522,147 $ 566,085
Allied Waste NA 7.125 05/15/16 500,000 506,250 527,500
Aramark Corporation (C) 3.983 02/01/15 100,000 100,000 86,750
Bunge Limited Finance Corporation 8.500 06/15/19 500,000 512,170 576,415
C R H America, Inc. 5.300 10/15/13 500,000 418,430 516,065
C V S Caremark Corporation 5.750 06/01/17 500,000 407,380 535,252
Citigroup, Inc. 5.500 04/11/13 500,000 437,890 511,663
Comcast Corporation 6.500 01/15/15 500,000 443,545 557,146
Corrections Corporation of America 7.750 06/01/17 75,000 72,901 77,438
Cytec Industries, Inc. 8.950 07/01/17 600,000 604,097 648,124
Denbury Resources, Inc. 9.750 03/01/16 25,000 23,318 26,562
El Paso Corporation 12.000 12/12/13 25,000 22,549 28,561
Electronic Data Systems Corporation 7.125 10/15/09 500,000 500,058 501,014
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 104,000
Goldman Sachs Group, Inc. 4.750 07/15/13 500,000 418,645 521,797
Goodyear Tire & Rubber Co. 10.500 05/15/16 50,000 48,002 54,250
Inergy LP/Inergy Fin 8.250 03/01/16 75,000 75,000 75,375
Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 714,782 677,925
International Game Technology 7.500 06/15/19 500,000 499,720 554,075
Iron Mountain, Inc. 8.750 07/15/18 500,000 513,135 520,000
Iron Mountain, Inc. 8.375 07/15/18 20,000 19,925 20,675
Johnson Controls, Inc. 5.500 01/15/16 500,000 398,125 517,940
Lubrizol Corporation 8.875 02/01/19 500,000 496,280 617,191
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 86,500
N R G Energy, Inc. 8.500 06/15/19 100,000 98,348 100,375
Nortek, Inc. 10.000 12/01/13 100,000 98,957 102,000
Owens Corning, Inc. 9.000 06/15/19 30,000 29,516 32,400
Pliant Corporation (C) 11.850 12/15/09 857,441 834,631 738,471
Quicksilver Resources, Inc. 7.125 04/01/16 350,000 334,250 303,625
Rental Service Corporation 9.500 12/01/14 175,000 175,734 168,875
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 189,000
Stewart & Stevenson LLC 10.000 07/15/14 735,000 755,033 676,200
Teck Resources Ltd 9.750 05/15/14 25,000 23,895 27,500
Teck Resources Ltd 10.250 05/15/16 40,000 37,952 45,200
Teck Resources Ltd 10.750 05/15/19 30,000 28,508 34,875
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 33,600
----------------------------------------------------------------------------------------------------------------
28
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Shares or
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES: (A) (Continued) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
The Valspar Corporation 7.250% 06/15/19 $ 500,000 $ 501,547 $ 541,980
Ticketmaster Entertainment, Inc. 10.750 07/28/16 250,000 250,000 256,250
Titan International, Inc. 8.000 01/15/12 70,000 70,000 67,725
Tube City IMS Corporation 9.750 02/01/15 1,000,000 990,072 810,000
Tyco International Group SA 8.500 01/15/19 125,000 124,996 151,859
Tyco International Group SA 6.550 10/01/17 500,000 457,495 523,410
United Components, Inc. 9.375 06/15/13 535,000 535,441 429,337
United Rentals, Inc. 6.500 02/15/12 325,000 235,625 325,812
Vought Aircraft Industries 8.000 07/15/11 650,000 647,540 643,500
------------ ------------
TOTAL BONDS 14,470,890 15,110,297
------------ ------------
COMMON STOCK - 0.51%
A123 System, Inc. 350 4,725 7,462
CKX, Inc. (B) 52,500 422,625 352,275
Directed Electronics, Inc. (B) 195,118 982,867 81,949
ITC^DeltaCom, Inc. (B) 94,588 827,645 122,019
Intrepid Potash, Inc. (B) 185 5,920 4,364
------------ ------------
TOTAL COMMON STOCK 2,243,782 568,069
------------ ------------
CONVERTIBLE BONDS - 0.46%
Citadel Broadcasting Corporation 4.000% 02/15/11 $ 250,000 194,063 37,500
Transocean, Inc. 1.500 12/15/37 500,000 411,093 476,250
------------ ------------
TOTAL CONVERTIBLE BONDS 605,156 513,750
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 17,319,828 $ 16,192,116
------------ ------------
TOTAL INVESTMENTS 104.47% $135,155,846 $116,826,928
============ ------------
Other Assets 6.99 7,819,552
Liabilities (11.46) (12,812,616)
------- ------------
TOTAL NET ASSETS 100.00% $111,833,864
======= ============
(A) In each of the convertible note, warrant, and common stock investments, the issuer has agreed to provide
certain registration rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 09/30/09.
(D) Defaulted security; interest not accrued.
(E) Illiquid security. At September 30, 2009, the values of these securities amounted to $95,787,665 or 85.66%
of net assets.
PIK - Payment-in-kind
----------------------------------------------------------------------------------------------------------------
29
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
AEROSPACE - 3.05% CHEMICAL, PLASTICS & RUBBER - 0.34%
Gencorp, Inc. $ 104,000 Capital Specialty Plastics, Inc. 385,762
P A S Holdco LLC 1,776,509 --------------
Visioneering, Inc. 880,987 CONSUMER PRODUCTS - 7.56%
Vought Aircraft Industries 643,500 Aero Holdings, Inc. 1,877,851
-------------- Bravo Sports Holding Corporation 1,233,957
3,404,996 G F S I, Inc. 266,710
-------------- K N B Holdings Corporation 1,143,022
AUTOMOBILE - 3.98% Momentum Holding Co. 258,084
Goodyear Tire & Rubber Co. 54,250 R A J Manufacturing Holdings LLC 1,312,807
Jason, Inc. 255,094 Royal Baths Manufacturing Company 542,790
Johnson Controls, Inc. 517,940 The Tranzonic Companies 1,819,405
Nyloncraft, Inc. 348,215 Walls Industries, Inc. --
Ontario Drive & Gear Ltd. 280,570 --------------
Qualis Automotive LLC 1,012,305 8,454,626
Titan International, Inc. 67,725 --------------
Transtar Holding Company 1,487,558 CONTAINERS, PACKAGING & GLASS - 4.41%
United Components, Inc. 429,337 Flutes, Inc. 131,198
-------------- Maverick Acquisition Company 351,194
4,452,994 P I I Holding Corporation 1,531,637
-------------- Packaging Dynamics Corporation of America 441,187
BEVERAGE, DRUG & FOOD - 4.91% Paradigm Packaging, Inc. 1,213,151
Anheuser-Busch 591,630 Pliant Corporation 738,471
Aramark Corporation 86,750 Sealed Air Corporation 527,245
Golden County Foods Holding, Inc. 976,036 Vitex Packaging Group, Inc. --
Hospitality Mints Holding Company 1,155,237 --------------
Specialty Commodities, Inc. 1,392,269 4,934,083
Vitality Foodservice, Inc. 1,285,414 --------------
-------------- DISTRIBUTION - 1.98%
5,487,336 Duncan Systems, Inc. 917,054
-------------- FCX Holdings Corporation 1,293,294
BROADCASTING & ENTERTAINMENT - 1.39% --------------
Citadel Broadcasting Corporation 37,500 2,210,348
CKX, Inc. 352,275 --------------
Comcast Corporation 557,146
Speedway Motorsports, Inc. 36,400
Workplace Media Holding Co. 567,056
--------------
1,550,377
--------------
BUILDINGS & REAL ESTATE - 1.15%
K W P I Holdings Corporation 1,098,278
Owens Corning, Inc. 32,400
Texas Industries, Inc. 33,600
TruStile Doors, Inc. 120,575
--------------
1,284,853
--------------
------------------------------------------------------------------------------------------------------------------------------------
30
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
DIVERSIFIED/CONGLOMERATE, ELECTRONICS - 1.10%
MANUFACTURING - 8.61% A123 Systems, Inc. $ 7,462
A H C Holdings Company, Inc. $ 1,441,708 Connecticut Electric, Inc. 633,694
Arrow Tru-Line Holdings, Inc. 732,447 Directed Electronics, Inc. 81,949
C D N T, Inc. 792,028 Electronic Data Systems Corporation 501,014
Douglas Dynamics LLC 417,100 --------------
K P I Holdings, Inc. 867,883 1,224,119
MEGTEC Holdings, Inc. 1,185,515 --------------
Milwaukee Gear Company 1,361,889 FARMING & AGRICULTURE - 1.92%
Nortek, Inc. 102,000 Bunge Limited Finance Corporation 576,415
Northwest Mailing Services, Inc. 1,391,230 Waggin' Train Holdings LLC 1,565,381
Postle Aluminum Company LLC 326,974 --------------
Truck Bodies & Equipment International 390,310 2,141,796
Xaloy Superior Holdings, Inc. 614,870 --------------
-------------- FINANCIAL SERVICES - 0.92%
9,623,954 Citigroup, Inc. 511,663
-------------- Goldman Sachs Group, Inc. 521,797
DIVERSIFIED/CONGLOMERATE, SERVICE - 10.53% Highgate Capital LLC --
ACCO Brands Corporation 47,081 --------------
A W X Holdings Corporation 782,744 1,033,460
Advanced Technologies Holdings 1,411,154 --------------
Affinia Group, Inc. 26,813 HEALTHCARE, EDUCATION & CHILDCARE - 6.06%
Apex Analytix Holding Corporation 1,042,898 A T I Acquisition Company 2,657,793
C R H America, Inc. 516,065 American Hospice Management Holding LLC 2,060,165
Clough, Harbour and Associates 1,447,967 F H S Holdings LLC 632,813
Corrections Corporation of America 77,438 H C A, Inc. 15,975
Crane Rental Corporation 1,387,692 Synteract Holdings Corporation 1,415,150
Diversco, Inc./DHI Holdings, Inc. 659,713 Touchstone Health Partnership --
Dwyer Group, Inc. 782,926 --------------
Fowler Holding, Inc. -- 6,781,896
Insurance Claims Management, Inc. 78,053 --------------
Iron Mountain, Inc. 540,675 HOME & OFFICE FURNISHINGS, HOUSEWARES,
Mail Communications Group, Inc. 716,312 AND DURABLE CONSUMER PRODUCTS - 9.59%
Nesco Holdings Corporation 1,580,506 Connor Sport Court International, Inc. 1,371,094
Pearlman Enterprises, Inc. -- H M Holding Company --
Tyco International Group 675,269 Home Decor Holding Company 1,192,207
-------------- Justrite Manufacturing Acquisition Co. 940,748
11,773,306 K H O F Holdings, Inc. 1,396,640
-------------- Monessen Holding Corporation 1,367,894
Stanton Carpet Holding Co. 1,122,450
Transpac Holdings Company 797,853
U M A Enterprises, Inc. 915,537
U-Line Corporation 847,025
Wellborn Forest Holding Co. 774,563
--------------
10,726,011
--------------
------------------------------------------------------------------------------------------------------------------------------------
31
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
LEISURE, AMUSEMENT, ENTERTAINMENT - 2.56% NATURAL RESOURCES - 2.17%
International Game Technology $ 554,075 Appleton Papers, Inc. $ 204,841
MGM Mirage, Inc. 86,650 Cenveo Corporation 42,300
Savage Sports Holding, Inc. 1,477,427 Cytec Industries, Inc. 648,124
Ticketmaster Entertainment, Inc. 256,250 Intrepid Potash, Inc. 4,364
Tunica-Biloxi Gaming Authority 486,000 Lubrizol Corporation 617,191
-------------- Newpage Corporation 365,625
2,860,402 The Valspar Corporation 541,980
-------------- --------------
MACHINERY - 9.88% 2,424,425
A S A P Industries LLC 689,309 --------------
Davis-Standard LLC 1,606,776 OIL & GAS - 2.61%
E S P Holdco, Inc. 1,240,149 Denbury Resources, Inc. 26,562
Integration Technology Systems, Inc. -- International Offshore Services LLC 1,390,516
K-Tek Holdings Corporation 1,468,372 Quicksilver Resources, Inc. 303,625
M V I Holding, Inc. 730,112 Total E & S, Inc. 718,641
Manitowoc Company, Inc. 86,500 Transocean, Inc. 476,250
Navis Global 154,446 --------------
NetShape Technologies, Inc. 639,623 2,915,594
Pacific Consolidated Holdings LLC 675,760 --------------
Power Services Holding Company 1,425,739 PHARMACEUTICALS - 1.29%
R E I Delaware Holding, Inc. 1,396,183 CorePharma LLC 1,445,669
Safety Speed Cut Manufacturing Company, Inc. 264,562 --------------
Stewart & Stevenson LLC 676,200 PUBLISHING/PRINTING - 0.24%
-------------- Gannett Company, Inc. 83,300
11,053,731 Sheridan Acquisition Corporation 189,000
-------------- --------------
MEDICAL DEVICES/BIOTECH - 3.76% 272,300
Coeur, Inc. 692,684 --------------
E X C Acquisition Corporation 140,506 RETAIL STORES - 1.02%
ETEX Corporation -- CVS Caremark Corporation 535,252
MedSystems Holdings LLC 739,150 Olympic Sales, Inc. 113,273
MicroGroup, Inc. 1,896,515 Rental Service Corporation 168,875
OakRiver Technology, Inc. 731,807 United Rentals, Inc. 325,812
TherOX, Inc. -- --------------
-------------- 1,143,212
4,200,662 --------------
-------------- TECHNOLOGY - 2.69%
MINING, STEEL, IRON & NON PRECIOUS Compucom Systems, Inc. 624,775
METALS - 2.57% Sencore Holding Company 870,543
Allegheny Technology, Inc. 566,085 Smart Source Holdings LLC 1,518,425
T H I Acquisition, Inc. 1,389,699 --------------
Teck Cominco, Ltd. 107,575 3,013,743
Tube City IMS Corporation 810,000 --------------
2,873,359
------------------------------------------------------------------------------------------------------------------------------------
32
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2009
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
TELECOMMUNICATIONS - 2.93% WASTE MANAGEMENT / POLLUTION - 2.54%
All Current Holding Company $ 736,118 Allied Waste NA $ 527,500
Intelsat Bermuda Ltd. 677,925 Terra Renewal LLC 1,306,925
ITC^DeltaCom, Inc. 122,019 Torrent Group Holdings, Inc. 1,007,561
Telecorps Holdings, Inc. 1,737,701 --------------
-------------- 2,841,986
3,273,763 --------------
--------------
TRANSPORTATION - 2.01%
NABCO, Inc. 323,769
Tangent Rail Corporation 1,926,570 TOTAL INVESTMENTS - 104.47% $ 116,826,928
-------------- ==============
2,250,339
--------------
UTILITIES - 0.70%
Allegheny Energy Supply 550,790
El Paso Corporation 28,561
Inergy LP 75,375
Markwest Energy Operating Co. 32,725
N R G Energy, Inc. 100,375
--------------
787,826
--------------
See Notes to Consolidated Financial Statements
------------------------------------------------------------------------------------------------------------------------------------
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary
of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its
investment adviser. The Trust's investment objective is to maximize total
return by providing a high level of current income, the potential for growth
of income, and capital appreciation. The Trust's principal investments are
privately placed, below-investment grade, long-term debt obligations
purchased directly from their issuers, which tend to be smaller companies. At
least half of these investments normally include equity features such as
common stock, warrants, conversion rights, or other equity features that
provide the Trust with the opportunity to realize capital gains. The Trust
will also invest in publicly traded debt securities (including high yield
securities), again with an emphasis on those with equity features, and in
convertible preferred stocks and, subject to certain limitations, readily
marketable equity securities. Below-investment grade or high yield securities
have predominantly speculative characteristics with respect to the capacity
of the issuer to pay interest and repay 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 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,
--------------------------------------------------------------------------------
34
MassMutual Participation Investors
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
the Trustees will consider reports by Babson Capital analyzing each portfolio
security in accordance with the relevant factors referred to above. Babson
Capital has agreed to provide such reports to the Trust at least quarterly.
The consolidated financial statements include private placement restricted
securities valued at $95,787,665 (85.66% of net assets) as of September 30,
2009 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 September 30, 2009,
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, prepayments speeds, credit
risk, etc.)
Level 3: significant unobservable inputs (including the Trust's own
assumptions in determining the fair value of investments)
The inputs and methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Trust's net assets
as of September 30, 2009:
ASSETS TOTAL LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------------------------
Restricted Securities $100,634,812 $ -- $ 4,847,147 $95,787,665
Public Securities 16,192,116 568,069 15,624,047 --
-----------------------------------------------------------------------------
TOTAL $116,826,928 $568,069 $20,471,194 $95,787,665
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 12/31/2008 $97,424,749 $ -- $ -- $97,424,749
Total gains or losses
(realized/unrealized)
included in earnings* (6,719,713) -- -- (6,719,713)
Purchases, sales,
issuances &
settlements (net) 5,082,629 -- -- 5,082,629
Transfers in and /
or out of Level 3 -- -- -- --
-----------------------------------------------------------------------------
ENDING BALANCE
AT 09/30/2009 $95,787,665 $ -- $ -- $95,787,665
*The amount of net losses for the period included in earnings attributable to
the change in unrealized gains or losses relating to Level 3 assets still
held at 09/30/09 is $(5,692,959).
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.
--------------------------------------------------------------------------------
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
D. FEDERAL INCOME TAXES:
The Trust has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code, and intends to maintain this qualification and to
distribute substantially all of its net taxable income to its shareholders.
In any year when net long-term capital gains are realized by the Trust,
management, after evaluating the prevailing economic conditions, will
recommend that Trustees either designate the net realized longterm gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains.
The Trust is taxed as a regulated investment company and is therefore limited
as to the amount of non-qualified income that it may receive as the result of
operating a trade or business, e.g. the Trust's PRO RATA share of income
allocable to the Trust by a partnership operating company. The Trust's
violation of this limitation could result in the loss of its status as a
regulated investment company, thereby subjecting all of its net income and
capital gains to corporate taxes prior to distribution to its shareholders.
The Trust, from time-to-time, identifies investment opportunities in the
securities of entities that could cause such trade or business income to be
allocable to the Trust. The MMPI Subsidiary Trust (described in Footnote 1,
above) was formed in order to allow investment in such securities without
adversely affecting the Trust's status as a regulated investment company.
The MMPI Subsidiary Trust is not taxed as a regulated investment company.
Accordingly, prior to the Trust 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 nine months ended
September 30, 2009, the MMPI Subsidiary Trust has not accrued any income tax
expense.
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES - AN
INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN 48"). Management has analyzed
the Trust's tax positions taken on federal income tax returns for all open
tax years and has concluded that as of September 30, 2009, 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 exdividend date. The Trust's net
investment income dividend is declared four times per year, in April, July,
October, and December. The Trust's net realized capital gain distribution, if
any, is declared in December.
F. EXPENSE REDUCTION:
Citibank, N.A. ("Citibank") serves as custodian to the Trust. Pursuant to the
custodian agreement, Citibank receives a fee reduced by credits on cash
balances the Trust maintains with Citibank. All credit balances, if any, used
to reduce the Trust's custodian fees are reported as fees paid indirectly on
the Statement of Operations. For the nine months ended September 30, 2009,
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.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory fee equal to .225% of the value of the Trust's net assets
as of the last business day of each fiscal quarter, an amount approximately
equivalent to .90% on an annual basis. A majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or of
Babson Capital, approve the valuation of the Trust's net assets as of such
day.
4. SENIOR SECURED INDEBTEDNESS
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 nine months
ended September 30, 2009, the Trust incurred total interest expense on the
Note of $522,000.
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
--------------------------------------------------------------------------------
36
MassMutual Participation Investors
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
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.
5. PURCHASES AND SALES OF INVESTMENTS
FOR THE NINE
MONTHS ENDED
09/30/2009
PROCEEDS
COST OF FROM
INVESTMENTS SALES OR
ACQUIRED MATURITIES
---------------------------
Corporate restricted securities $11,090,241 $ 5,155,659
Corporate public securities 6,119,767 10,148,345
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of September 30, 2009. The net
unrealized depreciation of investments for financial reporting and federal
tax purposes as of September 30, 2009 is $18,328,918 and consists of
$11,382,396 appreciation and $29,711,314 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
MARCH 31, 2009
AMOUNT PER SHARE
------ ---------
Investment income $ 3,196,335
Net investment income 2,655,746 $ 0.268
Net realized and unrealized
loss on investments (net of taxes) (7,386,587) (0.744)
JUNE 30, 2009
AMOUNT PER SHARE
------ ---------
Investment income $ 2,895,878
Net investment income 2,319,080 $ 0.233
Net realized and unrealized
gain on investments (net of taxes) 4,384,624 0.450
SEPTEMBER 30, 2009
AMOUNT PER SHARE
------ ---------
Investment income $ 2,979,401
Net investment income 2,431,337 $ 0.441
Net realized and unrealized
gain on investments (net of taxes) 1,812,725 0.183
--------------------------------------------------------------------------------
37
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MEMBERS OF THE BOARD OF
TRUSTEES
Donald Glickman
Robert E. Joyal
William J. Barrett
Michael H. Brown*
Donald E. Benson*
Dr. Corine T. Norgaard*
Clifford M. Noreen
Martin T. Hart
Maleyne M. Syracuse
*Member of the Audit Committee
OFFICERS
Clifford M. Noreen
Chairman
Michael L. Klofas
President
James M. Roy
Vice President & Chief
Financial Officer
Patricia J. Walsh
Vice President, Secretary
& Chief Legal Officer
Jill A. Fields
Vice President
Michael P. Hermsen
Vice President
Mary Wilson Kibbe
Vice President
Richard E. Spencer, II
Vice President
Daniel J. Florence
Treasurer
John T. Davitt, Jr.
Comptroller
Melissa M. LaGrant
Chief Compliance Officer
--------------------------------------------------------------------------------
MassMutual Participation Investors
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan. The Plan provides a simple and automatic way for shareholders to
add to their holdings in the Trust through the receipt of dividend shares issued
by the Trust or through the reinvestment of cash dividends in Trust shares
purchased in the open market. The dividends of each shareholder will be
automatically reinvested in the Trust by Shareholder Financial Services Inc.,
the Transfer Agent, in accordance with the Plan, unless such shareholder elects
not to participate by providing written notice to the Transfer Agent. A
shareholder may terminate his or her participation by notifying the Transfer
Agent in writing.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $100 nor more than $5,000 per quarter. Cash
contributions must be received by the Transfer Agent at least five days (but no
more then 30 days) before the payment date of a dividend or distributions.
Whenever the Trust declares a dividend payable in cash or shares, the Transfer
Agent, acting on behalf of each participating shareholder, will take the
dividend in shares only if the net asset value is lower than the market price
plus an estimated brokerage commission as of the close of business on the
valuation day. The valuation day is the last day preceding the day of dividend
payment. When the dividend is to be taken in shares, the number of shares to be
received is determined by dividing the cash dividend by the net asset value as
of the close of business on the valuation date or, if greater than net asset
value, 95% of the closing share price. If the net asset value of the shares is
higher than the market value plus an estimated commission, the Transfer Agent,
consistent with obtaining the best price and execution, will buy shares on the
open market at current prices promptly after the dividend payment date.
The reinvestment of dividends does not, in anyway, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in
newly-issued shares of the Trust will be the fair market value of the shares
received, which will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder.)
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver, CO 80217-3673.
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