MassMutual
Participation Investors
Report for the
Nine Months Ended September 30, 2010
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
* Member of the MassMutual Financial Group
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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 either the New York Stock Exchange listings or Closed-End Fund
Listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term debt obligations purchased directly from their
issuers, which tend to be smaller companies. At least half of these investments
normally include equity features such as 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
THE NEW YORK STOCK EXCHANGE
TO OUR SHAREHOLDERS MassMutual Participation Investors
October 31, 2010
We are pleased to present the September 30, 2010 Quarterly Report of MassMutual
Participation Investors (the "Trust"). The Board of Trustees declared a
quarterly dividend of 25 cents per share, payable on November 12, 2010 to
shareholders of record on November 1, 2010. The Trust paid a 25 cent per share
dividend for the preceding quarter. The Trust earned 25 cents per share of net
investment income for the third quarter of 2010, compared to 24 cents per share
in the previous quarter.
During the third quarter, the net assets of the Trust increased to $120,460,047
or $12.00 per share compared to $114,929,455 or $11.47 per share on June 30,
2010. This translates into a 6.9% 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 16.9%, 5.7%, 10.2%, and 11.8% 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's share price increased 7.1% during the quarter, from $12.91 per share
as of June 30, 2010 to $13.83 per share as of September 30, 2010. The Trust's
market price of $13.83 per share equates to a 15.3% premium over the September
30, 2010 net asset value per share of $12.00. The Trust's average quarter-end
premium for the 3, 5 and 10- year periods was 1.54%, 5.92% and 7.88%,
respectively. U.S. equity markets, as approximated by the Russell 2000 Index,
increased 11.3% for the quarter. U.S. fixed income markets, as approximated by
the Barclays Capital U.S. Corporate High Yield Index, increased 6.7% for the
quarter.
The Trust closed four new private placement investments and two "follow-on"
investments in existing portfolio companies during the third quarter. The four
new investments were in Associated Diversified Services, Barcodes Group, Inc., F
F C Holding Corporation and MBWS Ultimate Holdco, Inc., while the two follow-on
investments were in Northwest Mailing Services, Inc. and Pacific Consolidated
Holdings LLC. A brief description of these investments can be found in the
Consolidated Schedule of Investments. The total amount invested by the Trust in
these six transactions was $3,808,000.
As evidenced by the increased level of new investment activity, our deal flow
during the third quarter was very robust, and has remained so as we moved into
the fourth quarter. A variety of factors, including upcoming possible tax law
changes, renewed vigor from private equity buyers after 12-18 months of limited
activity, and the presence of cash-rich strategic buyers, have contributed to
the high level of transaction volume. Of course, without an adequate supply of
debt and equity capital, strong deal flow does not translate into new
investments. Fortunately, there currently is a plentiful supply of equity
capital. The availability of debt capital, particularly senior debt, has
continued to improve and is adequate to meet the needs of the market. As a
result, we currently are very busy processing new transactions and expect that
our efforts will result in a number of attractive new investments for the Trust
in the fourth quarter of 2010. Barring any external shocks, we expect our
investment activity to remain strong into 2011. Leverage multiples continued to
increase during the quarter, but not to what we would view as excessive levels.
Pricing and return expectations for new investments were stable during the
quarter, and remain relatively favorable in our view. All in all, conditions are
favorable for new investment activity.
The condition of our existing portfolio continued to improve in the third
quarter. Sales and earnings for most of our portfolio companies have trended
upward so far in 2010, after showing a deteriorating trend for all of 2009. It
continues to be particularly refreshing to see some of our companies which had
underperformed expectations begin to show improved results. Patience and, in
certain cases, additional equity support from the equity sponsor group sometimes
coupled with the deferral of interest on our debt obligations, has proven to be
the right approach to helping these companies rebound. We had several more
instances during the quarter in which companies which had stopped paying
(Continued)
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1
cash interest on our debt obligations resumed payment due to their improved
operating results and liquidity position. Realization activity, which generally
correlates highly with improved performance, also remained strong during the
quarter. There were three companies in the Trust's portfolio, Diversco, Inc.,
K-Tek Holding Corporation, and Waggin' Train Holdings LLC, which were
successfully sold during the quarter. One additional company, PAS Holdco LLC,
was also sold for a nice gain in the first week of October. There continues to
be a significant number of portfolio companies that are in various stages of a
sale process and we are hopeful that many of these will turn into successful
realizations in the upcoming quarters.
Certainly market conditions are constantly changing. As I have stated in prior
quarters though, we will not waver in our approach to investing - we will
continue to maintain the same discipline and investment philosophy that has
served the Trust's shareholders well for so many years. Thank you for your
continued interest in and support of MassMutual Participation Investors.
Sincerely,
/s/ Michael L. Klofas
Michael L. Klofas
President
PORTFOLIO COMPOSITION AS OF 9/30/10 *
[PIE CHART APPEARS HERE]
PRIVATE / RESTRICTED PUBLIC EQUITY
EQUITY 0.4%
12.4%
CASH & SHORT TERM PRIVATE / 144A HIGH
INVESTMENTS YIELD DEBT
3.5% 69.5%
PUBLIC HIGH YIELD
DEBT
14.2%
* 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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2
CONSOLIDATED STATEMENT OF MassMutual Participation Investors
ASSETS AND LIABILITIES
SEPTEMBER 30, 2010
(UNAUDITED)
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $115,205,680) $ 103,182,218
Corporate restricted securities at market value
(Cost - $3,352,463) 3,499,457
Corporate public securities at market value
(Cost - $19,007,782) 19,036,105
-------------
125,717,780
Cash 4,543,267
Interest receivable 3,163,774
Receivable for investments sold 49,542
Other assets 6,269
-------------
TOTAL ASSETS 133,480,632
-------------
LIABILITIES:
Investment advisory fee payable 271,035
Note payable 12,000,000
Interest payable 262,933
Accrued taxes payable 331,168
Accrued expenses 136,058
Other payables 19,391
-------------
TOTAL LIABILITIES 13,020,585
-------------
TOTAL NET ASSETS $ 120,460,047
=============
NET ASSETS:
Common shares, par value $.01 per share; an unlimited
number authorized $ 100,346
Additional paid-in capital 93,724,310
Retained net realized gain on investments, prior years 32,871,737
Undistributed net investment income 3,585,421
Accumulated net realized gain on investments 2,026,378
Net unrealized depreciation of investments (11,848,145)
-------------
TOTAL NET ASSETS $ 120,460,047
=============
COMMON SHARES ISSUED AND OUTSTANDING 10,034,604
=============
NET ASSET VALUE PER SHARE $ 12.00
=============
See Notes to Consolidated Financial Statements
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3
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(UNAUDITED)
INVESTMENT INCOME:
Interest $ 8,904,831
Dividends 79,087
Other 36,734
-------------
TOTAL INVESTMENT INCOME 9,020,652
-------------
EXPENSES:
Investment advisory fees 781,559
Interest 522,000
Trustees' fees and expenses 149,152
Professional fees 103,500
Reports to shareholders 83,000
Custodian fees 18,000
Transfer agent/registrar's expenses 13,500
Other 31,759
-------------
TOTAL EXPENSES 1,702,470
-------------
INVESTMENT INCOME - NET 7,318,182
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments before taxes 2,092,662
Income tax expense (333,717)
-------------
Net realized gain on investments after taxes 1,758,945
Net change in unrealized depreciation of investments before taxes 6,753,151
Net change in deferred income tax expense 84,963
-------------
Net change in unrealized depreciation of investments after taxes 6,838,114
-------------
NET GAIN ON INVESTMENTS 8,579,059
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 15,915,241
=============
See Notes to Consolidated Financial Statements
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4
CONSOLIDATED STATEMENT OF CASH FLOWS MassMutual Participation Investors
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(UNAUDITED)
NET INCREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net $ 7,529,400
Purchases of portfolio securities (20,506,031)
Proceeds from disposition of portfolio securities 15,642,979
Interest, dividends and other income received 7,066,351
Interest expense paid (348,000)
Operating expenses paid (1,207,746)
Income taxes paid (38,549)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,138,404
-------------
Cash flows from financing activities:
Cash dividends paid from net investment income (7,500,695)
Receipts for shares issued on reinvestment of dividends 624,316
-------------
NET CASH USED FOR FINANCING ACTIVITIES (6,876,379)
-------------
NET INCREASE IN CASH 1,262,025
Cash - beginning of year 3,281,242
-------------
CASH - END OF PERIOD $ 4,543,267
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 15,915,241
-------------
Increase in investments (6,475,719)
Increase in interest receivable (1,641,579)
Increase in receivable for investments sold (3,929)
Increase in other assets (6,269)
Increase in investment advisory fee payable 26,698
Increase in interest payable 174,000
Decrease in accrued expenses (21,514)
Increase in accrued taxes payable 210,205
Decrease in other payables (38,730)
-------------
TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS (7,776,837)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,138,404
=============
See Notes to Consolidated Financial Statements
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5
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the nine
months ended For the
09/30/10 year ended
(Unaudited) 12/31/09
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income - net $ 7,318,182 $ 9,375,528
Net realized gain on investments 1,758,945 1,012,575
Net change in unrealized depreciation of investments 6,838,114 (2,299,878)
------------- -------------
Net increase in net assets resulting from operations 15,915,241 8,088,225
Increase from common shares issued on reinvestment of dividends
Common shares issued (2010 - 51,365; 2009 - 55,996) 624,316 616,488
Dividends to shareholders from:
Net investment income (2010 - $0.50 per share; 2009 -
$1.00 per share) (5,004,885) (9,955,268)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,534,672 (1,250,555)
NET ASSETS, BEGINNING OF YEAR 108,925,375 110,175,930
------------- -------------
NET ASSETS, END OF PERIOD/YEAR (including undistributed net
investment income of $3,585,421 and $1,272,124,
respectively) $ 120,460,047 $ 108,925,375
============= =============
See Notes to Consolidated Financial Statements
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6
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS MassMutual Participation Investors
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING:
For the
nine months
ended For the years ended December 31,
09/30/2010 -----------------------------------------------------------------
(Unaudited) 2009 2008 2007 2006 2005
--------- --------- --------- --------- --------- ---------
Net asset value:
Beginning of year $ 10.91 $ 11.10 $ 12.84 $ 12.90 $ 12.21 $ 11.13
--------- --------- --------- --------- --------- ---------
Net investment income (a) 0.73 0.94 1.08 1.23 1.10 0.99
Net realized and unrealized
gain (loss) on investments 0.86 (0.13) (1.82) (0.05) 0.77 1.09(b)
--------- --------- --------- --------- --------- ---------
Total from investment operations 1.59 0.81 (0.74) 1.18 1.87 2.08
--------- --------- --------- --------- --------- ---------
Dividends from net investment
income to common shareholders (0.50) (1.00) (1.00) (1.23) (1.18) (1.01)
Dividends from net realized gain
on investments to common shareholders -- -- -- (0.02) (0.01) --
Increase from dividends reinvested 0.00(c) 0.00(c) 0.00(c) 0.01 0.01 0.01
--------- --------- --------- --------- --------- ---------
Total dividends (0.50) (1.00) (1.00) (1.24) (1.18) (1.00)
--------- --------- --------- --------- --------- ---------
Net asset value: End of period/year $ 12.00 $ 10.91 $ 11.10 $ 12.84 $ 12.90 $ 12.21
--------- --------- --------- --------- --------- ---------
Per share market value:
End of period/year $ 13.83 $ 12.20 $ 9.05 $ 13.18 $ 14.70 $ 14.05
========= ========= ========= ========= ========= =========
Total investment return
Net asset value (d) 14.95% 7.60% (6.01%) 9.95% 18.64% 22.51%
Market value 13.36% 40.86% (25.36%) (1.30%) 16.81% 17.25%
Net assets (in millions):
End of period/year $ 120.46 $ 108.93 $ 110.18 $ 126.63 $ 126.52 $ 119.02
Ratio of operating expenses
to average net assets 1.40%(e) 1.41% 1.33% 1.36% 1.17% 1.45%
Ratio of interest expense
to average net assets 0.62%(e) 0.63% 0.58% 0.56% 0.57% 0.80%
Ratio of income tax expense
to average net assets (f) 0.40%(e) 0.00% 0.00% 0.48% 2.68% 2.83%
Ratio of total expenses before custodian fee
reduction to average net assets (f) 2.42%(e) 2.04% 1.91% 2.40% 4.46% 5.12%
Ratio of net expenses after custodian fee
reduction to average net assets (f) 2.42%(e) 2.04% 1.91% 2.40% 4.42% 5.08%
Ratio of net investment income
to average net assets 8.67%(e) 8.55% 8.74% 9.32% 8.43% 8.45%
Portfolio turnover 13% 23% 32% 33% 34% 32%
(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 $ 12
Asset coverage per $1,000
of indebtedness $ 11,038 $ 10,077 $ 10,181 $ 11,552 $ 11,543 $ 10,918
See Notes to Consolidated Financial Statements
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7
CONSOLIDATED SCHEDULE OF INVESTMENTS
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 88.56%:(A) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
PRIVATE PLACEMENT INVESTMENTS - 85.66%
A E COMPANY, INC.
A designer and manufacturer of machined parts and assembly structures for the commercial and military aerospace industries.
11% Senior Secured Note due 2015 $ 807,692 * $ 791,538 $ 831,652
13% Senior Subordinated Note due 2016 $ 807,693 11/10/09 722,973 839,017
Common Stock (B) 184,615 shs. 11/10/09 184,615 175,384
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 92,308 shs. 11/10/09 68,566 923
------------ ------------
* 11/10/09 and 11/18/09. 1,767,692 1,846,976
------------ ------------
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 $ 1,342,450 11/21/07 1,315,376 1,355,875
Limited Partnership Interest (B) 12.26% int. 11/21/07 119,009 211,457
------------ ------------
1,434,385 1,567,332
------------ ------------
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 $ 450,500 12/31/08 391,316 459,510
Limited Liability Company Unit Class A-2 (B) 677 uts. 12/31/08 74,333 114,819
Limited Liability Company Unit Class A-3 (B) 608 uts. 12/31/08 66,899 103,338
------------ ------------
532,548 677,667
------------ ------------
A S C GROUP, INC.
A designer and manufacturer of high reliability encryption equipment, communications products, computing systems and electronic
components primarily for the military and aerospace sectors.
12.75% Senior Subordinated Note due 2016 $ 1,227,273 10/09/09 1,051,875 1,264,091
Limited Liability Company Unit Class A (B) 1,249 uts. 10/09/09 122,727 116,595
Limited Liability Company Unit Class B (B) 1,473 uts. 10/09/09 144,716 15
------------ ------------
1,319,318 1,380,701
------------ ------------
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 (D) $ 420,000 05/15/08 411,600 315,000
13% Senior Subordinated Note due 2015 (D) $ 420,000 05/15/08 375,946 --
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 --
------------ ------------
883,200 315,000
------------ ------------
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8
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
ADVANCED TECHNOLOGIES HOLDINGS
A provider of factory maintenance services to industrial companies.
15% Senior Subordinated Note due 2013 $ 1,172,906 12/27/07 $ 1,150,436 $ 1,184,635
Preferred Stock (B) 546 shs. 12/27/07 270,000 271,516
------------ ------------
1,420,436 1,456,151
------------ ------------
AERO HOLDINGS, INC.
A provider of geospatial services to corporate and government clients.
10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 930,000
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 663,647 720,000
Common Stock (B) 150,000 shs. 03/09/07 150,000 256,500
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 64,604
------------ ------------
1,793,427 1,971,104
------------ ------------
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 09/26/08 557,538 609,734
Common Stock (B) 713 shs. 09/26/08 71,303 54,627
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 507 shs. 09/26/08 46,584 38,844
------------ ------------
675,425 703,205
------------ ------------
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. ** 170,600 286,167
Preferred Class B Unit (B) 808 uts. 06/09/08 80,789 115,493
Common Class B Unit (B) 16,100 uts. 01/22/04 1 51,245
Common Class D Unit (B) 3,690 uts. 09/12/06 -- 11,745
------------ ------------
* 01/22/04 and 06/09/08. ** 01/22/04 and 09/12/06. 1,857,430 2,152,153
------------ ------------
APEX ANALYTIX HOLDING CORPORATION
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 04/28/09 861,372 1,032,750
Preferred Stock Series B (B) 1,623 shs. 04/28/09 162,269 254,727
Common Stock (B) 723 shs. 04/28/09 723 113,528
------------ ------------
1,024,364 1,401,005
------------ ------------
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9
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 984,209 05/18/05 $ 882,714 $ 836,577
Preferred Stock (B) 33 shs. 10/16/09 33,224 16,610
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 --
------------ ------------
1,238,598 853,187
------------ ------------
ASSOCIATED DIVERSIFIED SERVICES
A provider of routine maintenance and repair services primarily to electric utility companies predominantly on electric power
distribution lines.
10% Senior Secured Term Note due 2016 (C) $ 323,700 09/30/10 323,700 331,509
13% Senior Subordinated Note due 2017 $ 296,180 09/30/10 296,180 328,435
Limited Liability Company Unit Class B (B) 36,000 uts. 09/30/10 36,000 34,200
Limited Liability Company Unit Class B OID (B) 27,520 uts. 09/30/10 27,520 275
------------ ------------
683,400 694,419
------------ ------------
BARCODES GROUP, INC.
A distibutor and reseller of automatic identification and data capture equipment, including mobile computers, scanners,
point-of-sale systems, labels, and accessories.
13.5% Senior Subordinated Note due 2016 $ 638,651 07/27/10 606,420 654,020
Preferred Stock (B) 13 shs. 07/27/10 131,496 124,925
Common Stock Class A (B) 44 shs. 07/27/10 437 415
Warrant, exercisable until 2020, to purchase
common stock at $.01 per share (B) 8 shs. 07/27/10 76 --
------------ ------------
738,429 779,360
------------ ------------
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 1,154,442 1,207,902
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 84,428
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 29,671
------------ ------------
1,345,300 1,322,001
------------ ------------
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 $ 377,112 08/07/08 373,019 359,355
12.5% Senior Subordinated Note due 2015 $ 429,070 08/07/08 395,705 390,249
Common Stock (B) 41,860 shs. 08/07/08 41,860 19,281
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 32,914 shs. 08/07/08 32,965 15,160
------------ ------------
843,549 784,045
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
10
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B) 55 shs. * $ 252 $ 587,055
*12/30/97 and 05/29/99. ------------ ------------
CLOUGH, HARBOUR AND ASSOCIATES
An engineering service firm that is located in Albany, NY.
12.25% Senior Subordinated Note due 2015 $ 1,270,588 12/02/08 1,177,994 1,296,000
Preferred Stock (B) 147 shs. 12/02/08 146,594 145,508
------------ ------------
1,324,588 1,441,508
------------ ------------
COEUR, INC.
A producer of proprietary, disposable power injection syringes.
12% Senior Subordinated Note due 2016 $ 642,857 10/10/08 581,786 655,714
Common Stock (B) 321 shs. 10/10/08 32,143 20,321
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 495 shs. 10/10/08 48,214 31,263
------------ ------------
662,143 707,298
------------ ------------
CONNECTICUT ELECTRIC, INC.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
10% Senior Subordinated Note due 2014 (D) $ 771,051 01/12/07 719,275 385,526
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 --
Limited Liability Company Unit Class D (B) 671,525 uts. 05/03/10 -- --
Limited Liability Company Unit Class E (B) 1,102 uts. 05/03/10 -- --
------------ ------------
861,644 385,526
------------ ------------
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. 07/05/07 158,912 475,708
Common Stock (B) 380 shs. 07/05/07 4 271
Limited Partnership Interest (B) 6.88% int. * 103,135 --
------------ ------------
*08/12/04 and 01/14/05. 632,847 1,384,051
------------ ------------
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 1,311,683 1,350,000
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 127,518
------------ ------------
1,384,300 1,477,518
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
11
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
CRANE RENTAL CORPORATION
A crane rental company.
13% Senior Subordinated Note due 2015 $ 1,215,000 08/21/08 $ 1,109,821 $ 1,212,223
Common Stock (B) 135,000 shs. 08/21/08 135,000 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 72,037 shs. 08/21/08 103,143 --
------------ ------------
1,347,964 1,212,223
------------ ------------
CUSTOM ENGINEERED WHEELS, INC.
A manufacturer of custom engineered, non-pneumatic plastic wheels and plastic tread cap tires used primarily for lawn and garden
products and wheelchairs.
12.5% Senior Subordinated Note due 2016 $ 1,155,288 10/27/09 1,002,074 1,189,947
Preferred Stock PIK (B) 156 shs. 10/27/09 156,468 148,647
Preferred Stock Series A (B) 114 shs. 10/27/09 104,374 1
Common Stock (B) 38 shs. 10/27/09 38,244 36,328
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 28 shs. 10/27/09 25,735 --
------------ ------------
1,326,895 1,374,923
------------ ------------
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 10/30/06 932,143 964,791
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 402,833
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 38,074
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 13,028
------------ ------------
1,348,262 1,418,726
------------ ------------
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 --
Warrants, exercisable until 2011, to purchase common
stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 236,518
------------ ------------
*10/24/96 and 08/28/98. 568,150 236,518
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
12
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(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 $ 231,429 11/01/06 $ 227,957 $ 236,797
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 451,010 488,572
Common Stock (B) 102,857 shs. 11/01/06 102,857 89,494
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 28,099
------------ ------------
826,487 842,962
------------ ------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
Common Stock (B) 3,656 shs. * 365,600 641,230
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 188,828
------------ ------------
*10/30/03 and 01/02/04. 464,319 830,058
------------ ------------
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 $ 1,241,169 01/08/08 1,217,802 1,228,175
Common Stock (B) 349 shs. 01/08/08 174,701 56,045
------------ ------------
1,392,503 1,284,220
------------ ------------
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 40,585
------------ ------------
EATEM HOLDING COMPANY
A developer and manufacturer of savory flavor systems for soups, sauces, gravies, and other products produced by food manufacturers
for retail and foodservice end products.
12.5% Senior Subordinated Note due 2018 $ 950,000 02/01/10 823,900 975,521
Common Stock (B) 50 shs. 02/01/10 50,000 47,500
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 119 shs. 02/01/10 107,100 1
------------ ------------
981,000 1,023,022
------------ ------------
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 $ 1,186,983 10/06/08 1,164,123 1,225,365
Preferred Stock (B) 2,298 shs. 10/06/08 229,804 112,579
Common Stock (B) 1,625 shs. 10/06/08 1,625 --
------------ ------------
1,395,552 1,337,944
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
13
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
F F C HOLDING CORPORATION
A leading U.S. manufacturer of private label frozen novelty and ice cream products.
16% Senior Subordinated Note due 2014 $ 829,268 09/27/10 $ 812,683 $ 827,903
Limited Liability Company Units Preferred (B) 171 uts. 09/27/10 153,659 145,974
Limited Liability Company Units (B) 171 uts. 09/27/10 17,073 16,219
------------ ------------
983,415 990,096
------------ ------------
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 --
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 --
------------ ------------
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 04/13/06 516,919 262,396
14% Senior Subordinated Note due 2014 (D) $ 317,177 04/13/06 283,220 --
------------ ------------
800,139 262,396
------------ ------------
GOLDEN COUNTY FOODS HOLDING, INC.
A manufacturer of frozen appetizers and snacks.
16% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 914,607 961,875
16% PIK Note due 2015 $ 250,259 12/31/08 211,238 237,746
8% Series A Convertible Preferred Stock, convertible into
fully diluted common shares (B) 77,643 shs. 11/01/07 77,643 7,556
------------ ------------
1,203,488 1,207,177
------------ ------------
H M HOLDING COMPANY
A designer, manufacturer, and importer of promotional and wood furniture.
7.5% Senior Subordinated Note due 2013 (D) $ 362,700 10/15/09 271,181 272,025
Preferred Stock (B) 21 shs. * 21,428 --
Preferred Stock Series B (B) 1,088 shs. 10/15/09 813,544 --
Common Stock (B) 180 shs. 02/10/06 180,000 --
Common Stock Class C (B) 296 shs. 10/15/09 -- --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 67 shs. 02/10/06 61,875 --
------------ ------------
* 09/18/07 and 06/27/08. 1,348,028 272,025
------------ ------------
HIGHGATE CAPITAL LLC
An acquirer of controlling or substantial interests in manufacturing and marketing entities.
Series A Preferred Units (B) 0.30% int. 07/21/94 91,867 --
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
14
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 * $ 1,020,116 $ 1,081,731
Common Stock (B) 33 shs. * 33,216 52,744
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 167,694
------------ ------------
* 06/30/04 and 08/19/04. 1,158,950 1,302,169
------------ ------------
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 1,043,895
Common Stock (B) 251 shs. 08/19/08 251,163 59,845
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 65 shs. 08/19/08 60,233 15,469
------------ ------------
1,328,024 1,119,209
------------ ------------
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 1,100 140,272
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 11 shs. 02/27/07 324 41,322
------------ ------------
1,424 181,594
------------ ------------
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 1,360,394
Limited Liability Company Unit (B) 1,647 uts. 07/07/09 98,833 --
------------ ------------
1,316,250 1,360,394
------------ ------------
JASON, INC.
A diversified manufacturing company serving various industrial markets.
13% Senior Subordinated Note due 2010 (D) $ 510,187 08/04/00 449,086 25,509
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,308 --
------------ ------------
918,394 25,509
------------ ------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 828,112 843,750
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 111,409
------------ ------------
881,640 955,159
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
15
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
K H O F HOLDINGS, INC.
A manufacturer of premium disposable tableware products serving both the foodservice and consumer channels.
Common Stock (B) 116,827 shs. 10/15/07 $ 71,515 $ 99,511
------------ ------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the custom framing market.
15.5% Senior Subordinated Note due 2013 (D) $ 1,595,057 05/25/06 1,398,385 1,515,304
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 --
------------ ------------
1,507,309 1,515,304
------------ ------------
K P I HOLDINGS, INC.
The largest player in the U.S. non-automotive, non-ferrous die casting segment.
18% Senior Subordinated Note due 2014 (D) $ 1,115,217 07/16/08 1,042,077 1,059,456
Convertible Preferred Stock Series C (B) 29 shs. 06/30/09 29,348 --
Convertible Preferred Stock Series D (B) 13 shs. 09/17/09 12,958 --
Common Stock (B) 235 shs. 07/15/08 234,783 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 388 shs. * 50,836 --
------------ ------------
* 07/16/08 and 09/17/09. 1,370,002 1,059,456
------------ ------------
K W P I HOLDINGS CORPORATION
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
18% Senior Subordinated Note due 2014 (D) $ 1,555,404 03/14/07 1,415,638 1,244,323
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 --
------------ ------------
1,624,528 1,244,323
------------ ------------
L H D EUROPE HOLDINGS, INC.
A non-carbonated beverage dispensing company focused on the foodservice industry.
Common Stock (B) 45 shs. 12/28/09 4,191 12,825
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
16
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
M V I HOLDING, INC.
A manufacturer of large precision machined metal components used in equipment which services a variety of industries, including
the oil and gas, mining, and defense markets.
13% Senior Subordinated Note due 2016 $ 656,154 09/12/08 $ 608,288 $ 634,794
Common Stock (B) 32 shs. 09/12/08 32,143 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 35 shs. 09/12/08 34,714 --
------------ ------------
675,145 634,794
------------ ------------
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. * 166,481 170,202
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 23,830
------------ ------------
* 05/04/07 and 01/02/08. 672,334 710,209
------------ ------------
MANHATTAN BEACHWEAR HOLDING COMPANY
A designer and distributor of women's swimwear.
12.5% Senior Subordinated Note due 2018 $ 882,353 01/15/10 775,154 900,000
Common Stock (B) 118 shs. 01/15/10 117,647 111,768
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 104 shs. 01/15/10 94,579 1
------------ ------------
987,380 1,011,769
------------ ------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of wine bottles.
6.79% Senior Secured Tranche A Note due 2011 (C) $ 81,741 09/03/04 81,741 81,741
12.5% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 174,338 179,104
6.79% Senior Secured Revolver due 2011 (C) $ 44,777 09/03/04 44,777 44,777
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 11,979
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 8,655
------------ ------------
356,994 326,256
------------ ------------
MBWS ULTIMATE HOLDCO, INC.
A provider of services throughout North Dakota that address the fluid management and related transportation needs of an oil well.
12% Senior Subordinated Note due 2016 $ 883,721 09/07/10 789,623 880,053
Preferred Stock Series A (B) 1,388 shs. 09/07/10 138,797 131,860
Common Stock (B) 153 shs. 09/07/10 15,282 14,535
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 386 shs. 09/07/10 38,623 4
------------ ------------
982,325 1,026,452
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
17
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(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 $ 620,676 08/29/08 $ 557,062 $ 626,883
Preferred Unit (B) 66 uts. 08/29/08 66,451 75,897
Common Unit Class A (B) 671 uts. 08/29/08 671 --
Common Unit Class B (B) 250 uts. 08/29/08 63,564 --
------------ ------------
687,748 702,780
------------ ------------
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 1,129,821
Preferred Stock (B) 56 shs. 09/24/08 54,040 --
Limited Partnership Interest (B) 0.74% 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 1,129,821
------------ ------------
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 (D) $ 1,421,795 * 1,373,579 1,208,526
Common Stock (B) 238 shs. * 238,000 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. * 86,281 --
------------ ------------
* 08/12/05 and 09/11/06. 1,697,860 1,208,526
------------ ------------
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 1,184,076 1,121,539
Preferred Stock (B) 139 shs. 07/21/08 138,374 --
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 --
------------ ------------
1,337,960 1,121,539
------------ ------------
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 56,198 138,751
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 144,632
------------ ------------
112,903 283,383
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
18
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(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 (D) $ 1,350,000 07/25/08 $ 1,279,360 $ 675,000
14% PIK Note due 2014 (D) $ 419,713 07/25/08 342,435 209,856
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 --
------------ ------------
1,694,920 884,856
------------ ------------
NABCO, INC.
A producer of explosive containment vessels in the United States.
14% Senior Subordinated Note due 2014 (D) $ 330,882 02/24/06 304,577 --
Limited Liability Company Unit (B) 437 uts. * 436,984 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 68 shs. 02/24/06 19,687 --
------------ ------------
* 02/24/06 and 06/22/07. 761,248 --
------------ ------------
NAVIS GLOBAL
A designer, manufacturer, seller and servicer of finishing machinery for the knit and woven segments of the global textile industry.
10.75% Senior Secured Note due 2011 (D) $ 397,479 05/28/04 393,979 377,605
14% Senior Subordinated Note due 2014 (D) $ 780,219 05/28/04 664,277 195,055
------------ ------------
1,058,256 572,660
------------ ------------
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 1,125,000
Common Stock (B) 225,000 shs. 08/02/07 225,000 352,945
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 99,124
------------ ------------
1,327,500 1,577,069
------------ ------------
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 02/02/07 745,713 567,000
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 1.38% int. 02/01/07 539,990 --
Limited Liability Company Unit Class D of
Saw Mill PCG Partners LLC (B) 8 uts. * 8,147 --
Limited Liability Company Unit Class D-1 of
Saw Mill PCG Partners LLC (B) 65 uts. 09/30/09 64,940 --
Preferred Stock Class A (B) 1 sh. 12/18/08 726 --
Preferred Stock Class A-1 (B) 6 shs. 09/30/09 5,635 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 --
------------ ------------
* 12/18/08 and 09/30/09. 1,413,238 567,000
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
19
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 1,492,105 * $ 1,221,384 $ 1,528,342
Limited Partnership Interest (B) 1,724 uts. * 174,006 79,500
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 2,605 shs. * 260,479 119,007
------------ ------------
* 07/09/09 and 08/09/10. 1,655,869 1,726,849
------------ ------------
NYLONCRAFT, INC.
A supplier of engineered plastic components for the automotive industry.
10% Senior Secured Note due 2012 $ 464,286 01/28/02 464,286 441,072
15% Senior Subordinated Note due 2012 (D) $ 285,714 01/28/02 270,653 271,428
Convertible Preferred Stock A (B) 571 shs. 01/28/02 549,507 254,740
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 --
------------ ------------
1,555,614 967,240
------------ ------------
O E C HOLDING CORPORATION
A provider of elevator maintenance, repair and modernization services.
13% Senior Subordinated Note due 2017 $ 444,445 06/04/10 405,339 453,630
Preferred Stock Series A (B) 554 shs. 06/04/10 55,354 52,586
Preferred Stock Series B (B) 311 shs. 06/04/10 31,125 3
Common Stock (B) 344 shs. 06/04/10 344 327
------------ ------------
492,162 506,546
------------ ------------
OAKRIVER TECHNOLOGY, INC.
Designs, engineers and assembles high precision automated process equipment for the medical device industry with a focus on
defibrilators and stents.
10% Senior Secured Note due 2012 $ 45,982 01/03/06 45,292 45,982
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 366,606 392,709
Common Stock (B) 184,176 shs. 01/03/06 184,176 137,926
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 32,257
------------ ------------
631,974 608,874
------------ ------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and British Columbia.
12% Senior Subordinated Note due 2010 (D) $ 511,000 08/07/98 511,000 76,650
12% Senior Subordinated Note due 2010 (D) $ 244,154 02/09/00 213,313 36,623
------------ ------------
724,313 113,273
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
20
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 359,364
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 60,674
------------ ------------
393,309 420,038
------------ ------------
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 $ 1,249,031 07/03/06 1,202,546 1,249,031
Preferred Unit (B) 202 uts. 07/03/06 202,320 316,890
Preferred Unit (B) 36 uts. 07/03/06 36,420 57,044
Common Unit Class I (B) 78 uts. 07/03/06 -- 723,902
Common Unit Class L (B) 17 uts. 07/03/06 -- 152,931
------------ ------------
1,441,286 2,499,798
------------ ------------
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 1,164,439 1,215,000
Preferred Stock (B) 19 shs. 03/31/06 174,492 245,885
Common Stock (B) 12 shs. 03/31/06 13,500 117,540
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 68,395
------------ ------------
1,358,319 1,646,820
------------ ------------
PACIFIC CONSOLIDATED HOLDINGS LLC
A manufacturer of rugged, mobile liquid and gaseous oxygen and nitrogen generating systems used in the global defense, oil and gas,
and medical sectors.
14% Senior Subordinated Note due 2012 $ 719,041 04/27/07 683,387 668,962
5% Senior Subordinated Note due 2012 $ 42,187 07/21/10 42,187 42,352
Preferred Shares Series E (B) 42,187 shs. 07/21/10 -- --
Limited Liability Preferred Unit (B) 928,962 uts. 04/27/07 33,477 --
------------ ------------
759,051 711,314
------------ ------------
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 1,102,185 1,125,000
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 139,772
------------ ------------
1,242,810 1,264,772
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(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.
15% Senior Subordinated Note due 2013 $ 817,979 06/03/10 801,797 819,790
3% Senior Subordinated PIK Note due 2014 (D) $ 1,209,017 10/02/06 1,066,355 1,148,566
Limited Liability Company Unit Class A (B) 733 uts. 10/02/06 270,000 --
Limited Liability Company Unit (B) 76 uts. 05/22/09 340 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 4,550 shs. 10/02/06 65,988 --
------------ ------------
2,204,480 1,968,356
------------ ------------
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 1,161,192 1,224,224
Limited Partnership Interest (B) 12.55% int. 02/11/08 94,092 10,310
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 700 shs. 02/11/08 88,723 20,320
------------ ------------
1,344,007 1,254,854
------------ ------------
PRECISION WIRE HOLDING COMPANY
A manufacturer of specialty medical wires that are used in non-elective minimally invasive surgical procedures.
14.25% Senior Subordinated Note due 2016 $ 1,368,089 11/12/09 1,229,892 1,405,946
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 109 shs. 11/12/09 107,970 1
------------ ------------
1,337,862 1,405,947
------------ ------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and chassis products.
13% Senior Subordinated Note due 2013 $ 922,612 05/28/04 846,452 922,612
Common Stock (B) 187,500 shs. 05/28/04 187,500 256,480
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 199,969 shs. 05/28/04 199,969 273,537
------------ ------------
1,233,921 1,452,629
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
22
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
R A J MANUFACTURING HOLDINGS LLC
A designer and manufacturer of women's swimwear sold under a variety of licensed brand names.
14.5% Senior Subordinated Note due 2014 $ 1,384,011 12/15/06 $ 1,278,986 $ 1,314,811
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 57,757
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 27,255
------------ ------------
1,498,318 1,399,823
------------ ------------
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 1,358,372
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 4,723
------------ ------------
1,323,000 1,363,095
------------ ------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 549,493 561,522
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 81,481
------------ ------------
614,582 643,003
------------ ------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A manufacturer of vertical panel saws and routers for the woodworking industry.
Class B Common Stock (B) 846 shs. 06/02/99 146,456 164,253
------------ ------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 789,537 814,655
Preferred Stock Series A (B) 35,038 shs. 05/28/10 35,038 33,288
Common Stock (B) 324 shs. * 340,378 438,115
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 95,655
------------ ------------
* 09/10/04 and 10/05/07. 1,225,082 1,381,713
------------ ------------
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 01/15/09 832,226 794,423
Common Stock (B) 69 shs. 01/15/09 69,231 --
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 149 shs. 01/15/09 149,084 --
------------ ------------
1,050,541 794,423
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
23
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
SMART SOURCE HOLDINGS LLC
A short-term computer rental company.
12% Senior Subordinated Note due 2015 $ 1,176,924 * $ 1,088,065 $ 1,161,640
Limited Liability Company Unit (B) 328 uts. * 334,371 220,664
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 83 shs. * 87,231 55,894
------------ ------------
* 08/31/07 and 03/06/08. 1,509,667 1,438,198
------------ ------------
SPARTAN FOODS HOLDING COMPANY
A manufacturer of branded pizza crusts and pancakes.
12.25% Senior Subordinated Note due 2017 $ 1,012,500 12/15/09 878,669 1,022,077
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 136 shs. 12/15/09 120,234 1
------------ ------------
998,903 1,022,078
------------ ------------
SPECIALTY COMMODITIES, INC.
A distributor of specialty food ingredients.
13.25% Senior Subordinated Note due 2016 $ 1,220,311 10/23/08 1,150,470 1,244,717
Common Stock (B) 15,882 shs. 10/23/08 158,824 113,054
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 5,852 shs. 10/23/08 53,285 41,657
------------ ------------
1,362,579 1,399,428
------------ ------------
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 1,131,270 1,155,652
Common Stock (B) 165 shs. 08/01/06 164,634 52,397
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 17,451
------------ ------------
1,345,294 1,225,500
------------ ------------
SUNDANCE INVESTCO LLC
A provider of post-production services to producers of movies and television shows.
Limited Liability Company Unit Class A (B) 3,405 shs. 03/31/10 -- --
------------ ------------
SYNTERACT HOLDINGS CORPORATION
A provider of outsourced clinical trial management services to pharmaceutical and biotechnology companies.
14.5% Senior Subordinated Note due 2016 $ 1,381,270 09/02/08 1,298,257 1,395,083
Redeemable Preferred Stock Series A (B) 678 shs. 09/02/08 6,629 144
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 6,778 shs. 09/02/08 59,661 --
------------ ------------
1,364,547 1,395,227
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
24
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 1,080,000
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 --
------------ ------------
1,323,000 1,080,000
------------ ------------
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 1,429,425
Common Stock (B) 143 shs. 09/02/09 5,823 --
Warrant, exercisable until 2019, to purchase
common stock at $.01 per share (B) 4,187 shs. * 173,349 --
------------ ------------
* 05/20/09 and 09/02/09. 1,653,867 1,429,425
------------ ------------
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 * 639,934 542,358
6.79% Term Note due 2012 (C) $ 779,834 * 777,110 730,217
8.75% Term Note due 2012 (C) $ 830 * 830 777
Limited Partnership Interest of
Saw Mill Capital Fund V, LLC (B) 2.27% int. ** 85,245 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 --
------------ ------------
* 04/28/06 and 09/13/06. ** 03/01/05 and 10/10/08. 1,536,857 1,273,352
------------ ------------
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.
14.5% Senior Subordinated Note due 2013 (D) $ 1,185,366 10/26/07 1,113,016 --
Series B Preferred Stock (B) 97 shs. 03/31/10 -- --
Common Stock (B) 273 shs. 03/31/10 219,203 --
------------ ------------
1,332,219 --
------------ ------------
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 (D) $ 341,971 03/02/07 280,347 170,986
------------ ------------
759,537 633,149
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
25
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
TRANSPAC HOLDING COMPANY
A designer, importer, and wholesaler of home decor and seasonal gift products.
14% Senior Subordinated Note due 2015 (D) $ 938,651 10/31/07 $ 873,498 $ 891,718
Common Stock (B) 110 shs. 10/31/07 110,430 6,236
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 2,816
------------ ------------
1,030,308 900,770
------------ ------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 893,993 918,000
Common Stock (B) 571 shs. * 570,944 838,662
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 66,836
------------ ------------
* 08/31/05 and 04/30/07. 1,505,958 1,823,498
------------ ------------
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 1,340,791 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 363,099
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 255,899
------------ ------------
1,840,207 1,974,998
------------ ------------
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.
8% Senior Subordinated Note due 2011 (D) $ 1,222,698 * 1,133,973 1,100,428
Preferred Stock Series B (B) 128 shs. 10/20/08 127,677 --
Common Stock (B) 393 shs. * 423,985 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 81 shs. * 84,650 --
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 558 shs. 10/20/08 -- --
------------ ------------
* 07/19/05 and 12/22/05. 1,770,285 1,100,428
------------ ------------
TRUSTILE DOORS, INC.
A manufacturer and distributor of interior doors.
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 36,032 578
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
26
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
U M A ENTERPRISES, INC.
An importer and wholesaler of home decor products.
15% Senior Subordinated Note due 2015 $ 952,932 02/08/08 $ 932,336 $ 952,338
Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 277,998
------------ ------------
1,401,901 1,230,336
------------ ------------
U-LINE CORPORATION
A manufacturer of high-end, built-in, undercounter ice making, wine storage and refrigeration appliances.
14.5% Senior Subordinated Note due 2012 $ 996,500 04/30/04 960,332 946,675
14.5% PIK Note due 2012 $ 221,640 10/06/09 196,646 210,558
Common Stock (B) 96 shs. 04/30/04 96,400 29,782
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 37,692
------------ ------------
1,365,484 1,224,707
------------ ------------
VISIONEERING, INC.
A designer and manufacturer of tooling and fixtures for the aerospace industry.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 451,942 455,356
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 340,367 366,123
18% PIK Convertible Preferred Stock (B) 21,361 shs. 03/13/09 41,440 --
Common Stock (B) 70,588 shs. 05/17/07 70,588 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 --
------------ ------------
935,797 821,479
------------ ------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily envelopes and tags used on tea bags.
10% Senior Subordinated PIK Note due 2011 $ 89,626 10/29/09 83,079 85,145
5% Senior Subordinated PIK Note due 2011 (D) $ 450,000 06/30/07 392,576 427,500
Class B Unit (B) 406,525 uts. 10/29/09 184,266 --
Class C Unit (B) 450,000 uts. 10/29/09 413,244 208,141
Limited Liability Company Unit Class A (B) 383,011 uts. * 229,353 --
Limited Liability Company Unit Class B (B) 96,848 uts. 07/19/04 96,848 --
------------ ------------
* 07/19/04 and 10/29/09. 1,399,366 720,786
------------ ------------
WELLBORN FOREST HOLDING CO.
A manufacturer of semi-custom kitchen and bath cabinetry.
14.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 858,237 865,688
Common Stock (B) 101 shs. 11/30/06 101,250 30,704
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 15,329
------------ ------------
1,005,277 911,721
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
27
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
WHEATON HOLDING CORPORATION
A distrtibutor and manufacturer of laboratory supply products and packaging.
13% Senior Subordinated Note due 2017 $ 1,000,000 06/08/10 $ 911,591 $ 1,016,848
Preferred Stock Series B (B) 703 shs. 06/08/10 70,308 7
Common Stock (B) 353 shs. 06/08/10 353 4
------------ ------------
982,252 1,016,859
------------ ------------
WORKPLACE MEDIA HOLDING CO.
A direct marketer specializing in providing advertisers with access to consumers in the workplace.
13% Senior Subordinated Note due 2015 (D) $ 613,692 05/14/07 569,649 429,584
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 --
------------ ------------
675,143 429,584
------------ ------------
XALOY SUPERIOR HOLDINGS, INC.
A provider of melt processing components and ancillary equipment for both plastic injection molding and extrusion applications.
15.5% Senior Subordinated Note due 2015 (D) $ 1,229,741 09/08/08 1,203,288 983,793
Common Stock (B) 150 shs. 09/08/08 150,000 --
------------ ------------
1,353,288 983,793
------------ ------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 115,205,680 103,182,218
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
28
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Shares or
Interest Due Principal Market
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
RULE 144A SECURITIES - 2.90%:
BONDS - 2.90%
Appleton Papers, Inc. 11.250% 12/15/15 $ 252,000 $ 250,000 $ 189,000
ArcelorMittal 6.125 06/01/18 500,000 519,176 540,758
C C O Holdings LLC 7.250 10/30/17 350,000 350,000 354,813
Cenveo Corporation 10.500 08/15/16 45,000 45,000 46,012
Coffeyville Resources LLC 9.000 04/01/15 70,000 69,658 73,850
CompuCom Systems, Inc. 12.500 10/01/15 670,000 653,060 718,575
G F S I, Inc. (C) 10.500 06/01/11 358,000 343,948 358,000
Gannett Company, Inc. 9.375 11/15/17 60,000 59,149 65,700
International Lease Finance Corporation 8.625 09/15/15 75,000 73,895 80,250
Lyondell Chemical Co. 8.000 11/01/17 100,000 100,000 109,125
Magnachip Semiconductor 10.500 04/15/18 95,000 95,245 98,562
NBC Universal 5.150 04/30/20 500,000 499,295 536,407
Sinclair Television Group, Inc. 9.250 11/01/17 200,000 194,970 214,500
ViaSystems, Inc. 12.000 01/15/15 100,000 96,793 110,000
------------ ------------
TOTAL BONDS 3,350,189 3,495,552
------------ ------------
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%
Nortek, Inc. (B) 100 1 3,905
Touchstone Health Partnership (B) 292 1,062 --
------------ ------------
TOTAL COMMON STOCK 1,063 3,905
------------ ------------
TOTAL RULE 144A SECURITIES 3,352,463 3,499,457
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $118,558,143 $106,681,675
------------ ------------
----------------------------------------------------------------------------------------------------------------
29
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES - 15.81%: (A) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
BONDS - 15.35%
ACCO Brands Corporation 10.625% 03/15/15 $ 45,000 $ 44,430 $ 50,288
Affinia Group, Inc. 9.000 11/30/14 25,000 24,250 25,750
Allegheny Technologies, Inc. 9.375 06/12/19 500,000 520,626 604,286
Allied Waste NA 7.125 05/15/16 500,000 506,196 535,625
American General Finance Corporation 6.500 09/15/17 250,000 215,000 197,500
C R H America, Inc. 5.300 10/15/13 500,000 418,430 536,692
Centurytel, Inc. 5.000 02/15/15 500,000 514,817 518,649
Citigroup, Inc. 5.500 04/11/13 500,000 437,890 536,422
Cytec Industries, Inc. 8.250 11/15/19 600,000 603,676 754,972
Diversey, Inc. 8.950 07/01/17 45,000 44,627 48,150
Equifax, Inc. 4.450 12/01/14 500,000 516,460 532,611
Exide Corporation 10.500 03/15/13 250,000 252,240 255,625
GATX Corporation 4.750 05/15/15 500,000 512,612 531,693
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 132,275
General Electric Capital Corporation 5.500 01/08/20 500,000 498,050 546,954
Goldman Sachs Group, Inc. 4.750 07/15/13 500,000 418,645 536,822
Goodyear Tire & Rubber Co. 10.500 05/15/16 50,000 48,219 56,625
Headwaters, Inc. 11.375 11/01/14 45,000 44,580 47,925
Intelsat Burmuda Ltd. 9.250 06/15/16 690,000 713,577 733,125
International Game Technology 7.500 06/15/19 500,000 499,720 594,210
International Lease Finance Corporation 5.875 05/01/13 500,000 448,188 500,000
Iron Mountain, Inc. 8.750 07/15/18 500,000 512,068 530,625
J.C. Penney Company, Inc. 7.950 04/01/17 500,000 554,735 561,250
Johnson Controls, Inc. 5.500 01/15/16 500,000 398,125 566,589
Kraft Foods, Inc. 5.375 02/10/20 500,000 516,707 556,576
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 99,750
Markwest Energy Operating Co. 6.875 11/01/14 35,000 27,789 35,394
Masco Corporation 7.125 03/15/20 350,000 349,993 357,397
Morgan Stanley 5.500 01/26/20 500,000 497,305 513,925
Nortek, Inc. 11.000 12/01/13 100,444 98,956 106,722
Owens Corning, Inc. 9.000 06/15/19 30,000 29,516 35,625
Pride International, Inc. 6.875 08/15/20 30,000 30,000 32,475
Qwest Diagnostic, Inc. 4.750 01/30/20 500,000 498,665 524,265
Rental Service Corporation 9.500 12/01/14 175,000 175,617 181,343
Sealed Air Corporation 7.875 06/15/17 500,000 492,897 541,690
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 223,031
Sprint Capital Corporation 6.900 05/01/19 440,000 405,225 442,200
Teck Resources Ltd. 10.750 05/15/19 30,000 28,605 37,779
----------------------------------------------------------------------------------------------------------------
30
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(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 $ 501,383 $ 610,202
Ticketmaster Entertainment, Inc. 10.750 07/28/16 250,000 250,000 273,750
Time Warner Cable, Inc. 5.000 02/01/20 500,000 489,790 535,463
Titan International, Inc. 8.000 01/15/12 70,000 70,000 75,250
Tube City IMS Corporation 9.750 02/01/15 1,000,000 988,790 1,020,000
Tyco International Group SA 8.500 01/15/19 500,000 457,495 584,802
Tyco International Group SA 6.550 10/01/17 125,000 124,996 166,202
United Components, Inc. 9.375 06/15/13 535,000 535,085 544,364
Verso Paper Holdings LLC 9.125 08/01/14 500,000 486,875 501,250
W P P Finance Corporation 5.875 06/15/14 500,000 507,224 554,010
------------ ------------
TOTAL BONDS 16,762,075 18,488,128
------------ ------------
COMMON STOCK - 0.46%
CKX, Inc. (B) 52,500 422,625 257,250
Directed Electronics, Inc. (B) 195,118 982,867 146,339
Intrepid Potash, Inc. (B) 185 5,920 4,823
ITC^DeltaCom, Inc. (B) 94,588 827,645 130,531
Rue21, Inc. (B) 350 6,650 9,034
------------ ------------
TOTAL COMMON STOCK 2,245,707 547,977
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 19,007,782 $ 19,036,105
------------ ------------
TOTAL INVESTMENTS 104.37% $137,565,925 $125,717,780
============ ------------
Other Assets 6.44 7,762,852
Liabilities (10.81) (13,020,585)
------ ------------
TOTAL NET ASSETS 100.00% $120,460,047
====== ============
(A) In each of the convertible note, warrant, convertible preferred and common stock investments, the issuer has
agreed to provide certain registration rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 09/30/10.
(D) Defaulted security; interest not accrued.
(E) Illiquid security. As of September 30, 2010, the value of these securities amounted to $103,182,218 or
85.66% of net assets.
PIK - Payment-in-kind
----------------------------------------------------------------------------------------------------------------
31
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
AEROSPACE - 4.40% BUILDINGS & REAL ESTATE - 1.36%
A E Company, Inc. $ 1,846,976 K W P I Holdings Corporation $ 1,244,323
Gencorp, Inc. 132,275 Masco Corporation 357,397
P A S Holdco LLC 2,499,798 Owens Corning, Inc. 35,625
Visioneering, Inc. 821,479 TruStile Doors, Inc. 578
-------------- --------------
5,300,528 1,637,923
-------------- --------------
AUTOMOBILE - 5.14% CHEMICAL, PLASTICS & RUBBER - 0.49%
Exide Corporation 255,625 Capital Specialty Plastics, Inc. 587,055
Goodyear Tire & Rubber Co. 56,625 --------------
Jason, Inc. 25,509
Johnson Controls, Inc. 566,589 CONSUMER PRODUCTS - 9.88%
Nyloncraft, Inc. 967,240 Aero Holdings, Inc. 1,971,104
Ontario Drive & Gear Ltd. 420,038 Bravo Sports Holding Corporation 1,322,001
Qualis Automotive LLC 1,452,629 Custom Engineered Wheels, Inc. 1,374,923
Titan International, Inc. 75,250 G F S I, Inc. 358,000
Transtar Holding Company 1,823,498 Johnson Diversey, Inc. 48,150
United Components, Inc. 544,364 K N B Holdings Corporation 1,515,304
-------------- Manhattan Beachwear Holding Company 1,011,769
6,187,367 Momentum Holding Co. 283,383
-------------- R A J Manufacturing Holdings LLC 1,399,823
BEVERAGE, DRUG & FOOD - 6.09% Royal Baths Manufacturing Company 643,003
Eatem Holding Company 1,023,022 The Tranzonic Companies 1,974,998
F F C Holding Corporation 990,096 --------------
Golden County Foods Holding, Inc. 1,207,177 11,902,458
Hospitality Mints Holding Company 1,119,209 --------------
Kraft Foods, Inc. 556,576 CONTAINERS, PACKAGING & GLASS - 3.95%
L H D Europe Holding, Inc. 12,825 Flutes, Inc. 262,396
Spartan Foods Holding Company 1,022,078 Maverick Acquisition Company 326,256
Specialty Commodities, Inc. 1,399,428 P I I Holding Corporation 1,646,820
-------------- Paradigm Packaging, Inc. 1,264,772
7,330,411 Sealed Air Corporation 541,690
-------------- Vitex Packaging Group, Inc. 720,786
BROADCASTING & ENTERTAINMENT - 2.39% --------------
C C O Holdings LLC 354,813 4,762,720
CKX, Inc. 257,250 --------------
NBC Universal 536,407 DISTRIBUTION - 1.81%
Sinclair Television Group, Inc. 214,500 Duncan Systems, Inc. 842,962
Time Warner Cable, Inc. 535,463 F C X Holdings Corporation 1,337,944
WPP Finance Corporation 554,010 --------------
Workplace Media Holding Co. 429,584 2,180,906
-------------- --------------
2,882,027
--------------
------------------------------------------------------------------------------------------------------------------------------------
32
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
DIVERSIFIED/CONGLOMERATE, ELECTRONICS - 1.09%
MANUFACTURING - 9.33% Barcodes Group, Inc. $ 779,360
A H C Holdings Company, Inc. $ 1,567,332 Connecticut Electric, Inc. 385,526
Arrow Tru-Line Holdings, Inc. 853,187 Directed Electronics, Inc. 146,339
C D N T, Inc. 784,045 --------------
Headwaters, Inc. 47,925 1,311,225
K P I Holdings, Inc. 1,059,456 --------------
MEGTEC Holdings, Inc. 1,129,821 FINANCIAL SERVICES - 2.86%
Milwaukee Gear Company 1,121,539 American General Finance Corporation 197,500
Nortek, Inc. 110,627 Citigroup, Inc. 536,422
O E C Holding Corporation 506,546 GATX Corporation 531,693
Postle Aluminum Company LLC 1,968,356 General Electric Capital Corporation 546,954
Truck Bodies & Equipment International 1,100,428 Goldman Sachs Group, Inc. 536,822
Xaloy Superior Holdings, Inc. 983,793 Highgate Capital LLC --
-------------- International Lease Finance Corporation 580,250
11,233,055 Morgan Stanley 513,925
-------------- --------------
DIVERSIFIED/CONGLOMERATE, SERVICE - 12.94% 3,443,566
A S C Group, Inc. 1,380,701 --------------
A W X Holdings Corporation 315,000 HEALTHCARE, EDUCATION & CHILDCARE - 4.22%
ACCO Brands Corporation 50,288 American Hospice Management Holding LLC 2,152,153
Advanced Technologies Holdings 1,456,151 F H S Holdings LLC --
Affinia Group, Inc. 25,750 Qwest Diagnostic, Inc. 524,265
Apex Analytix Holding Corporation 1,401,005 Synteract Holdings Corporation 1,395,227
Associated Diversified Services 694,419 Touchstone Health Partnership --
C R H America, Inc. 536,692 Wheaton Holdings Corporation 1,016,859
Clough, Harbour and Associates 1,441,508 --------------
Crane Rental Corporation 1,212,223 5,088,504
Diversco, Inc./DHI Holdings, Inc. 236,518 --------------
Dwyer Group, Inc. 830,058 HOME & OFFICE FURNISHINGS, HOUSEWARES,
Equifax, Inc. 532,611 & DURABLE CONSUMER PRODUCTS - 8.62%
Insurance Claims Management, Inc. 181,594 Connor Sport Court International, Inc. 1,384,051
Iron Mountain, Inc. 530,625 H M Holding Company 272,025
Mail Communications Group, Inc. 710,209 Home Decor Holding Company 1,302,169
Nesco Holdings Corporation 1,577,069 Justrite Manufacturing Acquisition Co. 955,159
Northwest Mailing Services, Inc. 1,726,849 K H O F Holdings, Inc. 99,511
Pearlman Enterprises, Inc. -- Monessen Holding Corporation 884,856
Tyco International Group 751,004 Stanton Carpet Holding Co. 1,225,500
-------------- Transpac Holdings Company 900,770
15,590,274 U M A Enterprises, Inc. 1,230,336
-------------- U-Line Corporation 1,224,707
Wellborn Forest Holding Co. 911,721
--------------
10,390,805
--------------
------------------------------------------------------------------------------------------------------------------------------------
33
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
LEISURE, AMUSEMENT, ENTERTAINMENT - 1.86% NATURAL RESOURCES - 2.29%
International Game Technology $ 594,210 Appleton Papers, Inc. $ 189,000
Savage Sports Holding, Inc. 1,381,713 ArcelorMittal 540,758
Ticketmaster Entertainment, Inc. 273,750 Cenveo Corporation 46,012
-------------- Cytec Industries, Inc. 754,972
2,249,673 Intrepid Potash, Inc. 4,823
-------------- Lyondell Chemical Co. 109,125
MACHINERY - 7.26% The Valspar Corporation 610,202
A S A P Industries LLC 677,667 Verso Paper Holdings LLC 501,250
Davis-Standard LLC 1,418,726 --------------
E S P Holdco, Inc. 1,284,220 2,756,142
M V I Holding, Inc. 634,794 --------------
Manitowoc Company, Inc. 99,750 OIL & GAS - 2.60%
Navis Global 572,660 Coffeyville Resources LLC 73,850
NetShape Technologies, Inc. 567,000 International Offshore Services LLC 1,360,394
Pacific Consolidated Holdings LLC 711,314 MBWS Ultimate Holdco, Inc. 1,026,452
Power Services Holding Company 1,254,854 Pride International, Inc. 32,475
R E I Delaware Holding, Inc. 1,363,095 Total E & S, Inc. 633,149
Safety Speed Cut Manufacturing Company, Inc. 164,253 --------------
-------------- 3,126,320
8,748,333 --------------
-------------- PHARMACEUTICALS - 1.23%
MEDICAL DEVICES/BIOTECH - 3.88% CorePharma LLC 1,477,518
Coeur, Inc. 707,298 --------------
E X C Acquisition Corporation 40,585 PUBLISHING/PRINTING - 0.24%
ETEX Corporation -- Gannett Company, Inc. 65,700
MedSystems Holdings LLC 702,780 Sheridan Acquisition Corporation 223,031
MicroGroup, Inc. 1,208,526 --------------
OakRiver Technology, Inc. 608,874 288,731
Precision Wire Holding Company 1,405,947 --------------
TherOX, Inc. -- RETAIL STORES - 0.72%
-------------- J. C. Penney Company, Inc. 561,250
4,674,010 Olympic Sales, Inc. 113,273
-------------- Rental Service Corporation 181,343
MINING, STEEL, IRON & NON-PRECIOUS Rue21, Inc. 9,034
METALS - 2.28% --------------
Allegheny Technology, Inc. 604,286 864,900
T H I Acquisition, Inc. 1,080,000 --------------
Teck Resources, Ltd. 37,779 TECHNOLOGY - 2.62%
Tube City IMS Corporation 1,020,000 Compucom Systems, Inc. 718,575
-------------- Magnachip Semiconductor 98,562
2,742,065 Sencore Holding Company 794,423
-------------- Smart Source Holdings LLC 1,438,198
ViaSystems, Inc. 110,000
--------------
3,159,758
--------------
------------------------------------------------------------------------------------------------------------------------------------
34
MassMutual Participation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
TELECOMMUNICATIONS - 3.29%
All Current Holding Company $ 703,205
Centurytel, Inc. 518,649
Intelsat Bermuda Ltd. 733,125
ITC^DeltaCom, Inc. 130,531
Spirit Capital Corporation 442,200
Sundance Investco LLC --
Telecorps Holdings, Inc. 1,429,425
--------------
3,957,135
--------------
TRANSPORTATION - 0.0%
NABCO, Inc. --
--------------
UTILITIES - .03%
Markwest Energy Operating Co. 35,394
--------------
WASTE MANAGEMENT / POLLUTION - 1.50%
Allied Waste NA 535,625
Terra Renewal LLC 1,273,352
Torrent Group Holdings, Inc. --
1,808,977
--------------
TOTAL INVESTMENTS - 104.37% $ 125,717,780
==============
See Notes to Consolidated Financial Statements
------------------------------------------------------------------------------------------------------------------------------------
35
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,
--------------------------------------------------------------------------------
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors
(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 $103,182,218 (85.66% of net assets) as of September 30,
2010 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, 2010,
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.
In accordance with the authoritative guidance on fair value measurements and
disclosures under accounting principles generally accepted in the United
States of America ("U.S. GAAP"), the Trust discloses the fair value of its
investments in a hierarchy that prioritizes the inputs to valuation
techniques used to measure the fair value. The hierarchy gives the highest
priority to valuations based upon unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurement) and the lowest
priority to valuations based upon unobservable inputs that are significant to
the valuation (level 3 measurements). The guidance establishes three levels
of the fair value hierarchy as follows:
Level 1: quoted prices in active markets for identical securities
Level 2: other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3: significant unobservable inputs (including the Trust's own
assumptions 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, 2010:
ASSETS: TOTAL LEVEL 1 LEVEL 2 LEVEL 3
--------------------------------------------------------------------------------
Restricted Securities
Corporate Bonds $90,563,786 $ -- $3,495,552 $87,068,234
Common Stock - U.S. 8,377,394 -- 3,905 8,373,489
Preferred Stock 3,546,788 -- -- 3,546,788
Partnerships and LLCs 4,193,707 -- -- 4,193,707
Public Securities
Corporate Bonds 18,488,128 -- 18,488,128 --
Common Stock - U.S. 547,977 547,977 -- --
Preferred Stock -- -- -- --
Short-term Securities -- -- -- --
--------------------------------------------------------------------------------
TOTAL $125,717,780 $547,977 $21,987,585 $103,182,218
Following is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value:
UNREALIZED
TOTAL GAINS PURCHASES, GAINS & LOSSES
BEGINNING OR LOSSES SALES, ISSUANCES TRANSFERS IN ENDING IN NET INCOME
BALANCE (REALIZED/ & SETTLEMENTS AND/OR BALANCE AT FROM ASSETS
ASSETS: AT 12/31/2009 UNREALIZED) (NET) OUT OF LEVEL 3 09/30/2010 STILL HELD
------------------------------------------------------------------------------------------------------------------------------------
Restricted Securities
Corporate Bonds $81,465,949 $3,337,086 $2,265,199 $ -- $87,068,234 $2,187,864
Common Stock - U.S. 7,767,378 1,138,392 (532,281) 8,373,489 1,329,343
Preferred Stock 3,468,130 1,319,134 (1,240,476) 3,546,788 156,498
Partnerships and LLCs 3,536,247 1,472,509 (815,049) 4,193,707 924,338
------------------------------------------------------------------------------------------------------------------------------------
$96,237,704 $7,267,121 $ (322,607) $ -- $103,182,218 $4,598,043
====================================================================================================================================
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
B. ACCOUNTING FOR INVESTMENTS:
Investment transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis, including the amortization of premiums and accretion of
discounts on bonds held using the yield-to-maturity method. The Trust does
not accrue income when payment is delinquent and when management believes
payment is questionable.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and Federal income tax purposes on the identified cost method.
C. USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
D. FEDERAL INCOME TAXES:
The Trust has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code, and intends to maintain this qualification and to
distribute substantially all of its net taxable income to its shareholders.
In any year when net long-term capital gains are realized by the Trust,
management, after evaluating the prevailing economic conditions, will
recommend that Trustees either designate the net realized long-term gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains.
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. As of September 30, 2010, the
MMPI Subsidiary Trust has a deferred tax liability of $333,717.
Beginning with the 2009 annual financial statements, the Trust recognizes a
tax benefit from an uncertain position only if it is more likely than not
that the position is sustainable, based solely on its technical merits and
consideration of the relevant taxing authority's widely understood
administrative practices and precedents. If this threshold is met, the Trust
measures the tax benefit as the largest amount of benefit that is greater
than fifty percent likely of being realized upon ultimate settlement. The
Trust has evaluated and determined that the tax positions did not have a
material effect on the Trust's financial position and results of operations
for the nine months ended September 30, 2010.
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, 2010,
there were no credit balances used to reduce custodian fees.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES CONTRACT
A. SERVICES:
Under an Investment Advisory and Administrative Services Contract (the
"Contract") with the Trust, Babson Capital has agreed to use its best efforts
to present to the Trust a continuing and suitable investment program
consistent with the investment objectives and policies of the Trust. Babson
Capital represents the Trust in any negotiations with issuers, investment
banking firms, securities brokers or dealers and other institutions or
investors relating to the Trust's investments. Under the Contract, Babson
Capital also provides administration of the day-to-day operations of the
Trust and provides the Trust with office space and office equipment,
accounting and bookkeeping services, and necessary executive, clerical and
secretarial personnel for the performance of the foregoing services.
--------------------------------------------------------------------------------
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors
(CONTINUED)
(UNAUDITED)
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory fee equal to 0.225% of the value of the Trust's net
assets as of the last business day of each fiscal quarter, an amount
approximately equivalent to 0.90% on an annual basis. A majority of the
Trustees, including a majority of the Trustees who are not interested persons
of the Trust or of Babson Capital, approve the valuation of the Trust's net
assets as of such day.
4. SENIOR SECURED INDEBTEDNESS
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, 2010, 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 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
09/30/2010
----------
PROCEEDS
COST OF FROM
INVESTMENTS SALES OR
ACQUIRED MATURITIES
-------- ----------
Corporate restricted securities $13,486,125 $13,634,177
Corporate public securities 7,019,906 2,012,731
The aggregate cost of investments is substantially the same for financial
reporting and Federal income tax purposes as of September 30, 2010. The net
unrealized depreciation of investments for financial reporting and Federal
tax purposes as of September 30, 2010 is $11,848,145 and consists of
$12,106,802 appreciation and $23,954,947 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
MARCH 31, 2010
AMOUNT PER SHARE
------ ---------
Investment income $2,911,112
Net investment income 2,361,286 $ 0.24
Net realized and unrealized
gain on investments (net of taxes) 142,746 0.01
JUNE 30, 2010
AMOUNT PER SHARE
------ ---------
Investment income $3,007,150
Net investment income 2,444,394 $ 0.24
Net realized and unrealized
gain on investments (net of taxes) 3,134,736 0.32
SEPTEMBER 30, 2010
AMOUNT PER SHARE
------ ---------
Investment income $3,102,390
Net investment income 2,512,502 $ 0.25
Net realized and unrealized
gain on investments (net of taxes) 5,301,577 0.53
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MassMutual Participation Investors
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
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan (the "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., Transfer Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver, CO 80217-3673.
MASSMUTUAL
PARTICIPATION INVESTORS
PI5075