MASSMUTUAL
PARTICIPATION INVESTORS
Report for the
Nine Months Ended September 30, 2006
[LOGO]
ADVISER
BABSON CAPITAL MANAGEMENT LLC
1500 Main Street
Springfield, Massachusetts 01115
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
[LOGO] MassMutual Participation Investors
c/o Babson Capital Management LLC
1500 Main Street, Suite 600
Springfield, Massachusetts 01115
(413) 226-1516
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICY
MassMutual Participation Investors (the "Trust") is a closed-end management
investment company, first offered to the public in 1988, whose shares are
traded on the New York Stock Exchange under the trading symbol "MPV". The
Trust's share price can be found in the financial section of most newspapers as
"MassPrt" or "MassMuPrt" under the New York Stock Exchange listings.
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 corporate debt obligations purchased directly
from their issuers, which tend to be smaller companies. At least half of these
investments normally include equity features such as warrants, conversion
rights, or other equity features that provide the Trust with the opportunity to
realize capital gains. The Trust will also invest in publicly traded debt
securities (including high yield securities), again with an emphasis on those
with equity features, and in convertible preferred stocks and, subject to
certain limitations, readily marketable equity securities. In addition, the
Trust may temporarily invest in high quality, readily marketable securities.
Babson Capital Management LLC ("Babson Capital") manages the Trust on a total
return basis. The Trust distributes substantially all of its net income to
shareholders each year. Accordingly, the Trust pays dividends to shareholders
quarterly in January, May, August, and November. All registered shareholders are
automatically enrolled in the Dividend Reinvestment and Cash Purchase Plan
unless cash distributions are requested.
FORM N-Q
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: 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: http://www.sec.gov.
MPV
Listed
NYSE
TO OUR SHAREHOLDERS
October 31, 2006
The following is the September 30, 2006 Quarterly Report of MassMutual
Participation Investors (the "Trust"). The Trust's Board of Trustees declared a
quarterly dividend of 24 cents per share, payable on November 14, 2006, to
shareholders of record on October 30, 2006. A dividend of 24 cents per share was
paid in the previous quarter.
U.S. equity markets, as measured by several broad market indices, increased
during the quarter ended September 30, 2006. Large stocks, as approximated by
the Dow Jones Industrial Average, increased 5.37%, while smaller stocks, as
approximated by the Russell 2000 Index, increased 0.44%. For the nine months
ended September 30, 2006, returns were 7.73% and 8.69%, respectively. U.S. fixed
income markets, as measured by selected indices, posted increased returns during
the quarter. The Lehman Brothers Government/Credit Index and the Lehman Brothers
U.S. Corporate High Yield Index increased 3.91% and 4.07%, respectively, for the
quarter. For the nine months ended September 30, 2006, returns were 2.71% and
7.34%, respectively.
For the quarter ended September 30, 2006, the Trust earned 26 cents per share.
The Trust earned 26 cents per share in the previous quarter this year. The
Trust's net assets as of September 30, 2006 totaled $132,677,953 or $13.55 per
share compared to $129,932,933 or $13.29 per share on June 30, 2006. This
translated into a portfolio return of 3.81% for the quarter and 15.13% for the
nine months ended September 30, 2006 based on the change in the Trust's net
assets assuming the reinvestment of all dividends. Long term, the Trust's
portfolio had average annualized returns of 23.31%, 18.89%, and 14.45% for the
1-, 5-, and 10- year periods ended September 30, 2006, respectively, based on
the change in net assets assuming reinvestment of all dividends.
During the quarter, the Trust made private placement investments in four new
issuers and closed two "follow on" investments, totaling approximately $4.7
million. The follow on investments purchased by the Trust were in MicroGroup,
Inc. and Terra Renewal Services, Inc. The four issuers added to the portfolio
were Momentum Holding Co., Morton Industrial Group, Inc., P A S Holdco LLC, and
Stanton Carpet Holding Co. The weighted average coupon of these investments was
12.37%. (A brief description of these investments can be found in the
Consolidated Schedule of Investments.)
Finally, the Trust is sad to report the passing of our good friend and colleague
Jack Laughery. Jack had loyally served the Trust and its shareholders as a
Trustee for over 10 years. His contributions and wit will be missed.
Thank you for your continued interest in and support of MassMutual Participation
Investors.
Sincerely,
/s/ Clifford M. Noreen
---------------------------
Clifford M. Noreen
President
--------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
PORTFOLIO COMPOSITION AS OF 09/30/06*
Private/Restricted Equity 14.7%
Cash & Short Term Investments 8.9%
Public High Yield Debt 23.5%
Private High Yield Debt 46.7%
Public Equity 0.1%
Private Investment Grade Debt 6.1%
*Based on market value of total investments
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1
CONSOLIDATED STATEMENT OF MASSMUTUAL PARTICIPATION INVESTORS
ASSETS AND LIABILITIES
September 30, 2006
(Unaudited)
Assets:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $98,757,888) $ 98,586,743
Corporate public securities at market value
(Cost - $34,462,744) 34,383,132
Short-term securities at amortized cost 8,599,658
-------------
141,569,533
Cash 4,422,386
Interest receivable 2,764,347
Receivable for investments sold 1,295,086
Other assets 6,326
-------------
TOTAL ASSETS $ 150,057,678
-------------
Liabilities:
Payable for investments purchased $ 4,343,836
Investment advisory fee payable 298,525
Note payable 12,000,000
Interest payable 272,282
Accrued expenses 176,779
Accrued taxes payable 288,303
TOTAL LIABILITIES 17,379,725
-------------
TOTAL NET ASSETS $ 132,677,953
=============
Net Assets:
Common shares, par value $.01 per share; an unlimited
number authorized $ 97,911
Additional paid-in capital 90,770,104
Retained net realized gain on investments, prior years 25,860,275
Undistributed net investment income 3,975,363
Accumulated net realized gain on investments 12,396,022
Net unrealized depreciation of investments (421,722)
-------------
TOTAL NET ASSETS $ 132,677,953
=============
COMMON SHARES ISSUED AND OUTSTANDING 9,791,141
=============
NET ASSET VALUE PER SHARE $ 13.55
=============
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
2
CONSOLIDATED STATEMENT OF OPERATIONS MASSMUTUAL PARTICIPATION INVESTORS
For the nine months ended September 30, 2006
(Unaudited)
Investment Income:
Interest $ 8,913,480
Dividends 500,856
-------------
TOTAL INVESTMENT INCOME 9,414,336
-------------
Expenses:
Investment advisory fees 874,216
Interest 549,945
Trustees' fees and expenses 93,000
Reports to shareholders 65,000
Professional fees 57,000
Transfer agent/registrar's expenses 11,400
Other 22,335
-------------
TOTAL EXPENSES 1,672,896
-------------
INVESTMENT INCOME - net 7,741,440
-------------
Net realized and unrealized gain (loss) on investments:
Net realized gain on investments before taxes 11,875,682
Income tax expense (178,074)
-------------
Net realized gain on investments 11,697,608
Net change in unrealized appreciation of investments before taxes (1,757,668)
Net change in deferred income tax expense 4,449
-------------
Net change in unrealized appreciation of investments (1,753,219)
NET GAIN ON INVESTMENTS 9,944,389
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,685,829
=============
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
3
CONSOLIDATED STATEMENT OF CASH FLOWS MASSMUTUAL PARTICIPATION INVESTORS
For the nine months ended September 30, 2006
(Unaudited)
Net increase in cash:
Cash flows from operating activities:
Interest and dividends received $ 8,460,604
Interest expense paid (375,945)
Operating expenses paid (1,125,422)
Income taxes paid (3,599,264)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,359,973
-------------
Cash flows from investing activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net 6,198,008
Purchases of portfolio securities (32,193,019)
Proceeds from disposition of portfolio securities 31,144,217
-------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,149,206
-------------
NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES 8,509,179
-------------
Cash flows from financing activities:
Cash dividends paid from net investment income (7,515,740)
Receipts for shares issued on reinvestment of dividends 663,071
-------------
NET CASH USED FOR FINANCING ACTIVITIES (6,852,669)
-------------
NET INCREASE IN CASH 1,656,510
Cash - beginning of year 2,765,876
-------------
CASH - END OF PERIOD $ 4,422,386
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,685,829
-------------
Increase in investments (9,149,637)
Increase in interest and dividends receivable (319,828)
Increase in receivable for investments sold (809,819)
Decrease in other assets 6,454
Increase in payable for investments purchased 4,343,836
Increase in investment advisory fee payable 30,732
Increase in interest payable 174,000
Decrease in accrued expenses (26,749)
Decrease in accrued taxes payable (3,425,639)
-------------
TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS (9,176,650)
-------------
NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES $ 8,509,179
=============
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
4
CONSOLIDATED STATEMENTS OF MASSMUTUAL PARTICIPATION INVESTORS
CHANGES IN NET ASSETS
For the nine
months ended For the
09/30/2006 year ended
(Unaudited) 12/31/2005
------------- -------------
Increase in net assets:
OPERATIONS:
Investment income - net $ 7,741,440 $ 9,643,282
Net realized gain on investments 11,697,608 8,306,079
Net change in unrealized appreciation (depreciation) of
investments (1,753,219) 2,350,516
------------- -------------
Net increase in net assets resulting from operations 17,685,829 20,299,877
Net increase from common shares issued on reinvestment
of dividends Common shares issued (2006 - 46,911;
2005 - 71,671) 663,071 927,722
Dividends to shareholders from:
Net investment income (2006 - $0.48 per share; 2005 -
$1.01 per share) (4,689,913) (9,818,640)
------------- -------------
TOTAL INCREASE IN NET ASSETS 13,658,987 11,408,959
NET ASSETS, BEGINNING OF YEAR 119,018,966 107,610,007
------------- -------------
NET ASSETS, END OF PERIOD/YEAR (including undistributed net
investment income of $3,975,363 and $923,836, respectively) $ 132,677,953 $ 119,018,966
============= =============
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
5
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,
09/30/2006 -------------------------------------------------------------------------------
(Unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value:
Beginning of year $ 12.21 $ 11.13 $ 9.84 $ 8.78 $ 9.12 $ 9.75
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (a) 0.79 0.99 1.00 0.80 0.87 0.93
Net realized and unrealized
gain (loss) on investments 1.02 1.09(b) 1.36 1.21 (0.35) (0.61)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.81 2.08 2.36 2.01 0.52 0.32
----------- ----------- ----------- ----------- ----------- -----------
Dividends from net investment
income to common shareholders (0.48) (1.01) (1.10) (0.96) (0.86) (0.96)
Change from issuance of shares 0.01 0.01 0.03 0.01 -- 0.01
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.47) (1.00) (1.07) (0.95) (0.86) (0.95)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value:
End of period/year $ 13.55 $ 12.21 $ 11.13 $ 9.84 $ 8.78 $ 9.12
----------- ----------- ----------- ----------- ----------- -----------
Per share market value:
End of period/year $ 15.38 $ 14.05 $ 13.31 $ 11.65 $ 9.40 $ 9.10
=========== =========== =========== =========== =========== ===========
Total investment return
Market value 15.13% 17.25% 25.77% 35.50% 12.58% (8.02)%
Net asset value (c) 13.06% 22.51% 25.14% 23.72% 5.70% 3.41%
Net assets (in millions):
End of period/year $ 132.68 $ 119.02 $ 107.61 $ 94.40 $ 83.59 $ 86.09
Ratio of operating expenses
to average net assets 1.19%(d) 1.45% 1.63% 1.65% 1.27% 1.22%
Ratio of interest expense
to average net assets 0.58%(d) 0.80% 0.89% 0.97% 1.08% 1.47%
Ratio of total expenses
to average net assets 1.77%(d) 2.25% 2.52% 2.62% 2.35% 2.69%
Ratio of net investment income
to average net assets 8.20%(d) 8.45% 9.60% 8.55% 9.42% 9.70%
Portfolio turnover 25.64% 31.50% 51.25% 55.08% 35.32% 21.58%
(a) Calculated using average shares.
(b) Amount includes $0.10 per share in litigation proceeds.
(c) Net asset value return represents portfolio returns based on change in the Trust's net asset value assuming the reinvestment of
all dividends and distributions which differs from the total investment return based on the Trust's market value due to the
difference between the Trust's net asset value and the market value of its shares outstanding; past performance is no guarantee
of future results.
(d) Annualized.
Senior securities:
Total principal amount
(in millions) $ 12 $ 12 $ 22.5 $ 22.5 $ 22.5 $ 22.5
Asset coverage per $1,000
of indebtedness $ 12,056 $ 10,918 $ 5,783 $ 5,195 $ 4,715 $ 4,826
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
6
CONSOLIDATED SCHEDULE OF INVESTMENTS MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES - 74.31%:(A) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
PRIVATE PLACEMENT INVESTMENTS - 69.19%
A T I ACQUISITION COMPANY
A for-profit post-secondary school serving students in
Texas, Florida and Arizona.
12% Senior Subordinated Note due 2012 $ 1,125,000 04/08/04 $ 1,125,000 $ 1,035,356
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 12
Warrant, exercisable until 2012, to purchase
preferred stock at $.01 per share (B) 33,505 shs. 03/23/06 33,860 335
------------ ------------
1,158,860 1,035,703
------------ ------------
ADORN, INC.
A manufacturer of wall panels, cabinets, moldings and
countertops for houses and recreational vehicles.
12.5% Subordinated Note due 2010 $ 1,125,000 02/29/00 1,058,733 1,125,000
Warrant, exercisable until 2010, to purchase
common stock at $.02 per share (B) 192 shs. 02/29/00 162,931 306,447
------------ ------------
1,221,664 1,431,447
------------ ------------
AMERCABLE, INC.
A manufacturer of electric power, instrumentation
and control cables, primarily for the mining and oil and
gas industries.
12% Senior Subordinated Note due 2013 $ 583,333 04/08/05 552,420 595,000
Limited Partnership Interest (B) 0.19% int. 04/07/05 41,667 80,923
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 66 shs. 04/08/05 64,833 128,366
------------ ------------
658,920 804,289
------------ ------------
AMERICAN HOSPICE MANAGEMENT HOLDING LLC
A for-profit hospice care provider in the United States.
12% Senior Subordinated Note due 2010 $ 1,125,000 01/22/04 1,025,584 1,145,029
Preferred Class A Unit (B) 1,706 uts. * 170,600 153,540
Common Class B Unit 16,100 uts. 01/22/04 1 154,458
Common Class D Unit (B) 3,690 uts. 09/12/06 -- 37
------------ ------------
1,196,185 1,453,064
------------ ------------
ARROW TRU-LINE HOLDINGS, INC.
A manufacturer of hardware for residential and
commercial overhead garage doors in North America.
12% Senior Subordinated Note due 2012 $ 861,702 05/18/05 810,024 878,936
Common Stock (B) 263 shs. 05/18/05 263,298 302,478
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 79,301
------------ ------------
1,132,684 1,260,715
------------ ------------
AUGUSTA SPORTSWEAR HOLDING CO.
A manufacturer and distributor of athletic apparel,
activewear and team uniforms.
12% Senior Subordinated Note due 2012 $ 893,000 12/31/04 838,491 922,362
Common Stock (B) 275 shs. ** 275,108 494,950
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 73 shs. 12/31/04 63,254 130,956
------------ ------------
1,176,853 1,548,268
------------ ------------
*01/22/04 and 09/12/06.
**12/31/04, 03/31/05 and 05/02/06.
----------------------------------------------------------------------------------------------------------------------------------
7
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
BETA BRANDS LTD.
A manufacturer of hard candy and chocolate-coated
products sold primarily to the Canadian market.
5% Promissory Note due 2009 (B) $ 96,698 03/31/04 $ 96,698 $ --
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 2,421 shs. 03/31/04 1 --
------------ ------------
96,699 --
------------ ------------
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 1,135,852 1,203,203
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 134,850
Common Stock (B) 1 shs. 06/30/06 152 145
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 164 shs. 06/30/06 48,760 2
------------ ------------
1,326,710 1,338,200
------------ ------------
C & J SPEC-RENT SERVICES, INC.
A provider of coiled tubing and pressure pumping services
to the oil and gas industry in Texas and Louisiana.
10% Senior Secured Term Note due 2012 $ 886,597 08/12/05 886,567 886,567
14% Senior Subordinated Note due 2013 $ 656,406 08/12/05 600,669 656,406
Common Stock (B) 268,657 shs. 08/12/05 268,657 865,210
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 49,552 shs. 08/12/05 60,910 159,583
------------ ------------
1,816,803 2,567,766
------------ ------------
CAINS FOODS, L.P.
A producer of mayonnaise and sauce products for both the
retail and food service markets.
Limited Partnership Interest (B) 1.81% int. 09/29/95 22,519 71,629
------------ ------------
CAPESUCCESS LLC
A provider of diversified staffing services.
Preferred Membership Interests (B) 806 uts. 04/29/00 3,598 180
Common Membership Interests (B) 10,421 uts. 04/29/00 46,706 2,332
------------ ------------
50,304 2,512
------------ ------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging
pharmaceutical products.
Common Stock (B) 55 shs. * 252 27,704
------------ ------------
*12/30/97 and 05/29/99.
----------------------------------------------------------------------------------------------------------------------------------
8
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
COEUR, INC.
A producer of proprietary, disposable power
injection syringes.
8.75% Senior Secured Term Note due 2010 $ 264,493 04/30/03 $ 264,493 $ 267,988
11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 226,496 248,691
Common Stock (B) 72,463 shs. 04/30/03 72,463 121,303
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 83,866
------------ ------------
586,769 721,848
------------ ------------
COINING CORPORATION OF AMERICA LLC
A manufacturer of close tolerance parts and
metal stampings.
10.74% Senior Secured Revolving Credit Facility
due 2007 (C) $ 61,728 01/07/02 61,728 61,190
10.74% Senior Secured Tranche A Note due 2007 (C) $ 434,222 06/26/01 434,222 428,435
13% Senior Secured Tranche B Note due 2008 $ 370,370 06/26/01 370,370 370,936
Limited Partnership Interest (B) 3.65% int. 06/26/01 185,185 320,000
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 61,163 shs. 06/26/01 45,370 105,690
------------ ------------
1,096,875 1,286,251
------------ ------------
CONNOR SPORT COURT INTERNATIONAL, INC.
A designer and manufacturer of outdoor and
indoor synthetic sports flooring and other temporary
flooring products.
12% Senior Subordinated Note due 2012 (D) $ 1,059,417 * 974,588 953,475
Limited Partnership Interest (B) 4.43% int. ** 103,135 1,031
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 92 shs. * 84,829 1
------------ ------------
1,162,552 954,507
------------ ------------
CONSOLIDATED FOUNDRIES HOLDINGS
A manufacturer of engineered cast metal components for
the global aerospace and defense industries.
12% Senior Subordinated Note due 2013 $ 1,157,143 06/15/05 1,109,281 1,165,556
Common Stock (B) 269 shs. *** 278,521 242,388
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 54 shs. 06/15/05 53,295 1
------------ ------------
1,441,097 1,407,945
------------ ------------
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 1,283,231 1,340,623
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 10 shs. 08/04/05 72,617 --
------------ ------------
1,355,848 1,340,623
------------ ------------
*08/12/04 and 01/18/05.
**08/12/04 and 01/14/05.
***06/15/05 and 05/22/06.
----------------------------------------------------------------------------------------------------------------------------------
9
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
CORVEST GROUP, INC.
A manufacturer and distributor of promotional products.
12% Senior Subordinated Note due 2009 (D) $ 2,045,455 * $ 1,975,518 $ --
Common Stock (B) 30 shs. * 51,136 --
Limited Partnership Interest (B) 10.23% int. * 150,010 --
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 171 shs. * 157,343 --
------------ ------------
2,334,007 --
------------ ------------
DEXTER MAGNETICS TECHNOLOGIES, INC.
A designer, fabricator, assembler and distributor of
industrial magnets and subassemblies in North America
and Europe.
Common Stock 310 shs. 07/19/01 309,783 426,449
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share 157 shs. 07/19/01 132,677 216,143
------------ ------------
442,460 642,592
------------ ------------
DIRECTED ELECTRONICS, INC.
A designer and distributor of brand name
automotive security systems, audio products and
installation accessories.
Common Stock (B) 126,817 shs. 12/19/05 40,518 1,723,440
Limited Partnership Interest (B) 4.61% int. ** 26,223 345,767
------------ ------------
66,741 2,069,207
------------ ------------
DIVERSCO, INC./DHI HOLDINGS, INC.
A contract provider of janitorial and equipment
maintenance services and temporary production labor to
industrial customers.
Membership Interests of MM/Lincap
Diversco Investments Ltd. LLC (B) 13.57% int. 08/27/98 366,495 --
Preferred Stock (B) 1,639 shs. 12/14/01 1,392,067 1,252,858
Warrants, exercisable until 2011, to purchase
common stock of DHI Holdings, Inc.
at $.01 per share (B) 6,676 shs. *** 201,655 --
------------ ------------
1,960,217 1,252,858
------------ ------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
14% Senior Subordinated Note due 2011 $ 984,375 10/30/03 908,118 1,004,063
Common Stock (B) 3,656 shs. **** 365,600 380,224
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 111,967
------------ ------------
1,372,437 1,496,254
------------ ------------
*03/05/99 and 03/24/99.
**12/22/99 and 09/14/05.
***10/24/96 and 08/28/98.
****10/30/03 and 01/02/04.
----------------------------------------------------------------------------------------------------------------------------------
10
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
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 $ 68,734
------------ ------------
EAGLE PACK PET FOODS, INC.
A manufacturer of premium pet food sold through
independent pet stores.
12% Senior Subordinated Note due 2011 $ 803,572 * 782,381 811,608
Warrant, exercisable until 2011, to purchase
common stock at $.02 per share 2,163 shs. 09/24/04 20,893 34,048
------------ ------------
803,274 845,656
------------ ------------
EAST RIVER VENTURES I, L.P.
An acquirer of controlling or substantial interests in
other entities.
Limited Partnership Interest (B) 0.03% int. 01/01/01 6,609 2,027
------------ ------------
ENZYMATIC THERAPY, INC.
A manufacturer and distributor of branded natural
medicines and nutritional supplements.
Limited Partnership Interest (B) 0.70% int. 03/30/00 281,250 33,750
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 15,415 shs. 03/30/00 135,000 22,500
------------ ------------
416,250 56,250
------------ ------------
EURO-PRO CORPORATION
A designer, marketer and distributor of floor care, steam
cleaning and small kitchen products and appliances.
13.25% Senior Subordinated Note due 2011 $ 1,125,000 09/09/03 1,106,131 112,500
16.03% Overdue Interest Secured Note due 2008 (C) $ 75,952 01/13/06 68,357 68,357
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 23,229 shs. 09/09/03 18,869 --
------------ ------------
1,193,357 180,857
------------ ------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control
center systems.
Common Stock (B) 45,000 shs. 05/06/04 6 --
------------ ------------
F H S HOLDINGS LLC
A national provider of customized disease management
services to large, self-insured employers.
12% Senior Subordinated Note due 2014 $ 1,265,625 06/01/06 1,177,102 1,283,724
Preferred Unit (B) 84 uts. 06/01/06 83,530 75,177
Common Unit (B) 844 uts. 06/01/06 844 759
Common Unit Class B (B) 734 shs. 06/01/06 64,779 58,301
------------ ------------
1,326,255 1,417,961
------------ ------------
*09/24/04 and 4/20/06.
----------------------------------------------------------------------------------------------------------------------------------
11
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
FLUTES, INC.
An independent manufacturer of micro fluted corrugated
sheet material for the food and consumer products
packaging industries.
10% Senior Secured Term Note due 2013 $ 524,791 04/13/06 $ 516,919 $ 521,585
14% Senior Subordinated Note due 2014 $ 314,029 04/13/06 280,929 312,599
Common Stock (B) 62,535 shs. 04/13/06 62,535 56,282
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 17,680 shs. 04/13/06 27,676 177
------------ ------------
888,059 890,643
------------ ------------
FOWLER HOLDING, INC.
A provider of site development services to residential
homebuilders and developers in the Raleigh/Durham
region of North Carolina.
12% Senior Subordinated Note due 2013 $ 1,252,174 02/03/06 1,129,229 1,260,942
Common Stock (B) 98 shs. 02/03/06 97,826 88,047
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 1
------------ ------------
1,337,403 1,348,990
------------ ------------
FUEL SYSTEMS HOLDING CORPORATION
An independent North American supplier of fuel tanks for
a wide variety of commercial vehicles.
12% Senior Subordinated Note due 2014 $ 1,237,500 01/31/06 1,152,609 1,241,660
Common Stock (B) 112,500 shs. 01/31/06 112,500 101,250
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 73,275 shs. 01/31/06 63,113 733
------------ ------------
1,328,222 1,343,643
------------ ------------
H M HOLDING COMPANY
A designer, manufacturer, and importer of promotional and
wood furniture.
12% Senior Subordinated Note due 2013 $ 1,170,000 02/10/06 1,087,272 1,158,390
Common Stock (B) 180 shs. 02/10/06 180,000 162,000
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 67 shs. 02/10/06 61,875 1
------------ ------------
1,329,147 1,320,391
------------ ------------
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 91,867 737
------------ ------------
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 * 991,580 1,104,650
Common Stock (B) 33 shs. * 33,216 44,369
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 141,066
------------ ------------
1,130,414 1,290,085
------------ ------------
*06/30/04 and 08/19/04.
----------------------------------------------------------------------------------------------------------------------------------
12
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A manufacturer of steel protective computer and network
systems for the industrial and office environments.
12% Senior Secured Note due 2007 $ 949,004 03/01/04 $ 938,546 $ 711,753
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------ ------------
1,088,046 711,753
------------ ------------
ITC^DELTACOM, INC.
A provider of integrated communications services in the
southeastern United States.
13.63% Senior Secured Note due 2009 (C) $ 1,179,095 07/26/05 1,155,605 1,181,311
17.13% Senior Secured Note due 2009 (C) $ 189,668 07/26/05 166,881 189,447
Warrant, exercisable until 2009, to purchase
convertible preferred stock at $.01 per share (B) 54,468 shs. 07/26/05 18,156 94,774
------------ ------------
1,340,642 1,465,532
------------ ------------
JASON, INC.
A diversified manufacturing company serving various
industrial markets.
13% Senior Subordinated Note due 2008 $ 510,187 08/04/00 486,882 505,851
14% Cumulative Redeemable Preferred Stock Series A (B) 153 shs. 08/04/00 153,119 149,708
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,245 375,461
Warrants, exercisable until 2008 and 2009, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 21,544
------------ ------------
1,170,347 1,052,564
------------ ------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets
and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 798,999 844,717
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 24,057
------------ ------------
852,527 868,774
------------ ------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the
custom framing market.
13.5% Senior Subordinated Note due 2013 $ 1,280,865 05/25/06 1,218,520 1,275,917
Common Stock (B) 71,053 shs. 05/25/06 71,053 63,948
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 436
------------ ------------
1,327,444 1,340,301
------------ ------------
KEEPSAKE QUILTING, INC.
A seller of quilting fabrics, books, patterns, kits and
notions to consumers.
8.89% Senior Secured Revolving Note due 2007 (C) $ 52,418 06/16/00 52,418 52,505
8.89% Senior Secured Tranche A Note due 2007 (C) $ 117,941 07/19/00 117,941 117,110
12% Senior Secured Tranche B Note due 2008 $ 314,509 06/16/00 306,481 316,704
Limited Partnership Interest of
Riverside XVI Holding Company, L.P. (B) 3.02% int. 06/12/00 190,563 131,959
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 633 shs. 06/12/00 26,209 44,235
------------ ------------
693,612 662,513
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
13
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
KELE AND ASSOCIATES, INC.
A distributor of building automation control products.
12% Senior Subordinated Note due 2012 $ 969,643 02/27/04 $ 895,651 $ 998,732
Preferred Stock (B) 12 shs. 11/24/04 237,794 241,915
Common Stock (B) 6 shs. 02/27/04 6,814 117,852
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 6 shs. 02/27/04 4,124 107,787
------------ ------------
1,144,383 1,466,286
------------ ------------
KEYSTONE NORTH AMERICA, INC.
An operator of funeral homes in North America.
Common Stock 28,577 shs. 02/08/05 137,444 167,848
------------ ------------
LIH INVESTORS, L.P.
A manufacturer and marketer of a broad line of external
accessories for new and used sport utility vehicles, trucks
and vans.
12.5% Senior Subordinated Note due 2008 $ 2,036,000 * 1,902,996 1,984,132
Common Stock (B) 3,057 shs. * 213,998 46,734
Warrant, exercisable until 2006, to purchase
common stock at $.11 per share (B) 8,245 shs. * 318,838 126,047
------------ ------------
2,435,832 2,156,913
------------ ------------
MAGNATECH INTERNATIONAL, INC.
A supplier of process equipment and related parts used
in the manufacturing of medium and high-pressure
reinforced hoses.
12% Senior Subordinated Note due 2014 $ 675,000 04/05/06 627,872 672,057
13% Preferred Stock (B) 299 shs. 04/05/06 299,295 284,335
Common Stock (B) 66 shs. 04/05/06 66,202 62,890
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 7 shs. 04/05/06 6,832 --
------------ ------------
1,000,201 1,019,282
------------ ------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of
wine bottles.
9.98% Senior Secured Tranche A Note due 2010 (C) $ 397,783 09/03/04 397,783 399,832
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 160,924 181,566
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 30,224
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 2
------------ ------------
614,845 611,624
------------ ------------
MAXON CORPORATION
A manufacturer of industrial combustion equipment and
related shut-off valves and control valves.
12% Senior Subordinated Note due 2012 $ 549,837 09/30/04 506,617 565,977
8.75% Senior Subordinated Note due 2012 $ 660,322 09/30/04 660,322 681,324
Common Stock (B) 218,099 shs. 09/30/04 218,099 397,813
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 87,755 shs. 09/30/04 51,941 160,065
------------ ------------
1,436,979 1,805,179
------------ ------------
*12/23/98 and 01/28/99.
----------------------------------------------------------------------------------------------------------------------------------
14
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
MEDASSIST, INC.
A provider of patient eligibility and accounts receivable
management services to hospitals and physician practices.
8% Preferred Stock (B) 44 shs. 10/28/04 $ 44,289 $ 44,576
Common Stock (B) 13,863 shs. 10/28/04 18,576 46,196
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 47,090 shs. 05/01/03 21,534 156,924
------------ ------------
84,399 247,696
------------ ------------
MICROGROUP, INC.
A manufacturer of precision parts and assemblies, and a
value-added supplier of metal tubing and bars.
12% Senior Subordinated Note due 2013 $ 1,421,795 * 1,335,748 1,446,612
Common Stock (B) 238 shs. * 238,000 214,200
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 87 shs. * 86,281 1
------------ ------------
1,660,029 1,660,813
------------ ------------
MOMENTUM HOLDING CO.
A designer and supplier of upholstery fabric to commercial
furniture manufacturers and architectural and design firms.
12% Senior Subordinated Note due 2014 $ 618,802 08/04/06 550,250 625,962
Limited Partnership Interest (B) 56,198 uts. 08/04/06 56,198 50,578
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 586 shs. 08/04/06 56,705 6
------------ ------------
663,153 676,546
------------ ------------
MONESSEN HOLDING CORPORATION
A designer and manufacturer of a broad line of gas, wood
and electric hearth products and accessories.
12% Senior Subordinated Note due 2014 $ 1,350,000 03/31/06 1,252,360 1,344,113
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 81 shs. 03/31/06 73,125 1
------------ ------------
1,325,485 1,344,114
------------ ------------
MORTON INDUSTRIAL GROUP, INC.
A manufacturer of highly engineered metal
fabricated components.
12% Senior Subordinated Note due 2014 $ 1,292,246 08/25/06 1,187,403 1,312,047
Common Stock (B) 57,754 shs. 08/25/06 57,754 51,979
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 91,923 shs. 08/25/06 79,380 919
------------ ------------
1,324,537 1,364,945
------------ ------------
*08/12/05 and 09/11/06.
----------------------------------------------------------------------------------------------------------------------------------
15
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
MOSS, INC.
A manufacturer and distributor of large display and
exhibit structures.
9.48% Senior Secured
Revolving Note due 2010 (C) $ 54,941 07/03/06 $ 52,941 $ 53,418
9.48% Senior Secured Tranche A Note due 2010 (C) $ 550,000 12/21/05 544,500 553,071
12% Senior Secured Tranche B Note due 2010 $ 200,000 12/21/05 177,059 202,497
Limited Partnership Interest of
Riverside Capital Appreciation Fund I, L.P. (B) 19.20% int. * 29 73,254
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 122 shs. 12/21/05 20,941 12,688
------------ ------------
795,470 894,928
------------ ------------
NABCO, INC.
A producer of explosive containment vessels in the
United States.
12% Senior Subordinated Note due 2014 $ 330,882 02/24/06 305,386 326,929
Limited Partnership Interest (B) 344 uts. 02/24/06 344,120 326,914
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 26 shs. 02/24/06 19,687 --
------------ ------------
669,193 653,843
------------ ------------
NEFF MOTIVATION, INC.
A manufacturer and distributor of customized awards and
sportswear to schools.
12.5% Senior Subordinated Note due 2011 $ 562,500 01/31/03 495,224 573,750
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 112 shs. 01/31/03 95,625 137,706
------------ ------------
590,849 711,456
------------ ------------
NONNI'S FOOD COMPANY
A producer and distributor of premium biscotti and bagel
chips in North America.
12.25% Senior Subordinated Note due 2012 $ 986,538 03/29/04 982,661 982,412
10% Preferred Stock (B) 135 shs. 03/29/04 135,044 134,145
Common Stock (B) 3,418 shs. 03/29/04 3,418 26,235
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 4,565 shs. 03/29/04 3,877 34,997
------------ ------------
1,125,000 1,177,789
------------ ------------
NYLONCRAFT, INC.
A supplier of engineered plastic components for the
automotive industry.
9% Senior Secured Note due 2009 $ 464,286 01/28/02 464,286 454,120
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 796,180 810,561
Common Stock (B) 178,571 shs. 01/28/02 178,571 89,286
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 138,928 shs. 01/28/02 92,597 69,465
------------ ------------
1,531,634 1,423,432
------------ ------------
*09/20/00 and 05/23/02.
----------------------------------------------------------------------------------------------------------------------------------
16
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
O R S NASCO HOLDING, INC.
A wholesale distributor of industrial supplies in
North America.
13% Senior Subordinated Note due 2013 $ 1,256,152 12/20/05 $ 1,181,428 $ 1,262,496
Common Stock (B) 93,848 shs. 12/20/05 93,848 84,463
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 52,820 shs. 12/20/05 52,292 528
------------ ------------
1,327,568 1,347,487
------------ ------------
OAKRIVER TECHNOLOGY, INC.
Designs, engineers and assembles high precision
automated process equipment for the medical device
industry, with a focus on defibrillators and stents.
10% Senior Secured Note due 2012 $ 323,115 01/03/06 318,268 321,202
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 350,945 390,467
Common Stock (B) 184,176 shs. 01/03/06 184,176 165,758
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 41,249 shs. 01/03/06 35,900 412
------------ ------------
889,289 877,839
------------ ------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and
British Columbia.
12% Senior Subordinated Note due 2008 $ 1,193,154 ** 1,187,454 1,153,539
Limited Partnership Interest of Riverside VIII, VIII-A and
VIII-B Holding Company, L.P. 10.66% int. * 808,386 808,347
Warrants, exercisable until 2007 and 2008, to purchase
common stock at $.01 per share (B) 15,166 shs. ** 206,041 204,198
------------ ------------
2,201,881 2,166,084
------------ ------------
ONTARIO DRIVE & GEAR LTD.
A manufacturer of all-wheel drive, off-road amphibious
vehicles and related accessories.
13% Senior Subordinated Note due 2013 $ 1,047,115 01/17/06 941,992 1,050,883
Limited Partnership Interest (B) 1,942 uts. 01/17/06 302,885 272,597
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 3
------------ ------------
1,335,301 1,323,483
------------ ------------
OVERTON'S HOLDING COMPANY
A marketer of marine and water sports accessories in the
United States.
12% Senior Subordinated Note due 2014 $ 962,104 04/28/06 899,851 963,977
Common Stock (B) 50 shs. 04/28/06 50,000 45,000
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 49 shs. 04/28/06 44,322 --
------------ ------------
994,173 1,008,977
------------ ------------
*08/07/98, 02/23/99, 12/22/99 and 02/25/03.
**08/07/98 and 02/29/00.
----------------------------------------------------------------------------------------------------------------------------------
17
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
P A S HOLDCO LLC
An independent provider of maintenance, repair and
overhaul services to the aerospace gas turbine engine and
airframe markets.
14% Senior Subordinated Note due 2014 $ 1,147,684 07/03/06 $ 1,088,856 $ 1,145,025
Preferred Unit (B) 202 uts. 07/03/06 202,320 192,204
Preferred Unit (B) 36 uts. 07/03/06 36,420 34,599
Common Unit Class I (B) 78 uts. 07/03/06 -- 1
Common Unit Class L (B) 17 uts. 07/03/06 -- --
------------ ------------
1,327,596 1,371,829
------------ ------------
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 1,134,584 1,214,462
Preferred Stock (B) 19 shs. 03/31/06 174,492 165,788
Common Stock (B) 12 shs. 03/31/06 13,500 12,150
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 --
------------ ------------
1,328,464 1,392,400
------------ ------------
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 2008 $ 1,125,000 12/19/00 1,068,605 1,103,788
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 148,258
------------ ------------
1,209,230 1,252,046
------------ ------------
PROTEIN GENETICS, INC.
A producer of bovine artificial insemination products,
related breeding and healthcare products and specialty
genetics sold to the dairy and beef industries.
9.8% Redeemable Exchangeable Preferred Stock (B) 332 shs. 08/12/94 33,217 --
Common Stock (B) 867 shs. * 42,365 --
------------ ------------
75,582 --
------------ ------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and
chassis products.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 779,727 964,238
Common Stock 187,500 shs. 05/28/04 187,500 345,938
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share 199,969 shs. 05/28/04 199,969 368,943
------------ ------------
1,167,196 1,679,119
------------ ------------
QUALSERV CORPORATION
A provider of foodservice equipment and supplies to major
restaurant chains and their franchisees.
14% Senior Subordinated Note due 2012 (D) $ 1,002,475 07/09/04 976,254 601,485
Limited Partnership Interest (B) 4.90% int. 07/09/04 137,195 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 280 shs. 07/09/04 25,973 --
------------ ------------
1,139,422 601,485
------------ ------------
*11/14/01 and 08/12/94.
----------------------------------------------------------------------------------------------------------------------------------
18
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
RADIAC ABRASIVES, INC.
A manufacturer of bonded abrasive and super abrasive
grinding wheels in the United States.
12% Senior Subordinated Note due 2014 $ 1,196,809 02/10/06 $ 1,113,256 $ 1,188,802
Common Stock (B) 153,191 shs. 02/10/06 153,191 137,872
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 696
------------ ------------
1,329,868 1,327,370
------------ ------------
RIVER RANCH FRESH FOODS LLC
A supplier of fresh produce to the retail and
foodservice channels.
13% Senior Subordinated Note due 2011 (D) $ 975,000 09/29/04 891,404 780,000
Limited Partnership Interest (B) 21,500 uts. 09/29/04 150,000 --
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,481 shs. 09/29/04 83,596 --
------------ ------------
1,125,000 780,000
------------ ------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured
marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 512,992 572,230
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 49,116
------------ ------------
578,081 621,346
------------ ------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A manufacturer of vertical panel saws and routers for the
wood working industry.
8.73% Senior Secured Tranche A Note due 2007 (C) $ 242,283 06/02/99 242,283 242,283
12% Senior Secured Tranche B Note due 2007 $ 646,089 06/02/99 646,089 646,089
Class B Common Stock (B) 846 shs. 06/02/99 146,456 399,925
------------ ------------
1,034,828 1,288,297
------------ ------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 763,818 811,945
Common Stock (B) 310 shs. 09/10/04 310,345 253,171
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 57,706
------------ ------------
1,134,292 1,122,822
------------ ------------
SPECIALTY FOODS GROUP, INC.
A manufacturer and distributor of branded meat products.
Limited Partnership Interest of MHD Holdings LLC 0.76% int. 08/29/00 363,576 --
------------ ------------
STANTON CARPET HOLDING CO.
A designer and marketer of high and mid-priced decorative
carpets and rugs.
12.125% Senior Subordinated Note due 2014 $ 1,185,366 08/01/06 1,112,745 1,188,004
Common Stock (B) 165 shs. 08/01/06 164,634 148,167
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 55 shs. 08/01/06 49,390 1
------------ ------------
1,326,769 1,336,172
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
19
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
STRATEGIC EQUIPMENT & SUPPLY CORPORATION, INC.
A provider of kitchen and restaurant design, equipment
fabrication and installation services.
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 61,862 shs. 01/14/00 $ 382,501 $ --
------------ ------------
SYNVENTIVE EQUITY LLC
A manufacturer of hot runner systems used in the plastic
injection molding process.
Limited Partnership Interest (B) 1.05% int. 08/20/03 33,463 7,465
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 45,942 shs. 08/21/03 10,249 10,249
------------ ------------
43,712 17,714
------------ ------------
TANGENT RAIL CORPORATION
A manufacturer of rail ties and provides specialty services
to the North American railroad industry.
13% Senior Subordinated Note due 2013 $ 1,173,909 10/14/05 1,005,681 1,207,894
Preferred Stock (B) 1,749 shs. 10/14/05 174,924 180,220
Common Stock (B) 1,167 shs. 10/14/05 1,167 1,050
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 618 shs. 10/14/05 155,860 6
------------ ------------
1,337,632 1,389,170
------------ ------------
TERRA RENEWAL SERVICES, INC.
A provider of wastewater residual management and
required environmental reporting, permitting, nutrient
management planning and record keeping to companies
involved in poultry and food processing.
8.68% Senior Secured Tranche A Note due 2011 (C) $ 159,375 04/28/06 158,578 157,496
8.75% Senior Secured Tranche A Note due 2011 (C) $ 121,875 04/28/06 121,850 120,438
8.93% Senior Secured Tranche B Note due 2012 (C) $ 179,883 04/28/06 179,883 177,449
8.65% Senior Secured Tranche B Note due 2012 (C) $ 241,992 04/28/06 240,644 238,718
8.64% Senior Secured Tranche B Note due 2012 (C) $ 209,530 09/11/06 208,482 206,696
12% Senior Subordinated Note due 2014 $ 664,062 04/28/06 631,702 665,667
Limited Partnership Interest of
Saw Mill Capital Fund V, L.P. 2.30% int. 03/01/05 123,281 110,955
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 34,627 --
------------ ------------
1,699,047 1,677,419
------------ ------------
THE TRANZONIC COMPANIES
A producer of commercial and industrial supplies,
such as safety products, janitorial supplies, work
apparel, washroom and restroom supplies and
sanitary care products.
13% Senior Subordinated Note due 2009 $ 1,356,000 02/05/98 1,279,723 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 313,713
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 221,093
------------ ------------
1,779,139 1,890,806
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
20
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2013 $ 918,000 08/31/05 $ 879,868 $ 943,902
Common Stock (B) 432 shs. 08/31/05 432,000 410,400
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 46 shs. 08/31/05 41,021 --
------------ ------------
1,352,889 1,354,302
------------ ------------
TRONAIR, INC.
A designer, engineer and manufacturer of ground support
equipment for the business, commuter and commercial
aviation markets.
10.5% Senior Secured Term Note due 2008 $ 451,394 01/20/00 451,394 453,906
12% Senior Subordinated Note due 2010 $ 758,100 01/20/00 733,591 772,931
Common Stock (B) 129,960 shs. 01/20/00 129,960 313,464
Warrant, exercisable until 2010, to purchase
common stock at $1 per share (B) 148,912 shs. 01/20/00 56,316 359,173
------------ ------------
1,371,261 1,899,474
------------ ------------
TRUCK BODIES & EQUIPMENT INTERNATIONAL
A designer and manufacturer of accessories for heavy and
medium duty trucks, primarily dump bodies, hoists,
various forms of flat-bed bodies, landscape bodies and
other accessories.
12% Senior Subordinated Note due 2013 $ 1,222,698 * 1,140,339 1,265,878
Common Stock (B) 393 shs. * 423,985 531,803
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 81 shs. * 84,650 109,826
------------ ------------
1,648,974 1,907,507
------------ ------------
TRUSTILE DOORS, INC.
A manufacturer and distributor of interior doors.
12.5% Senior Subordinated Note due 2010 $ 562,500 04/11/03 530,873 573,750
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 50,625 64,592
------------ ------------
581,498 638,342
------------ ------------
TUBULAR TEXTILE MACHINERY
A designer, manufacturer, sale and servicer of finishing
machinery for the knit and woven segments of the global
textile industry.
12% Senior Subordinated Note due 2014 $ 705,457 05/28/04 642,333 698,772
8.75% Senior Secured Note due 2011 $ 409,310 05/28/04 409,310 408,622
Common Stock (B) 385,233 shs. 05/28/04 385,233 327,448
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 1,165
------------ ------------
1,511,612 1,436,007
------------ ------------
*07/19/05 and 12/22/05.
----------------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
-------------- -------- ------------ ------------
U S S HOLDINGS, INC.
A producer of high grade industrial and specialty
silica sands.
14% Redeemable Preferred Stock (B) 499 shs. 09/30/99 $ 272,912 $ 54,525
Convertible Preferred Stock Series A and B, convertible
into common stock at $9.26 per share (B) 72,720 shs. 12/19/96 583,365 --
Common Stock (B) 10,013 shs. 09/30/99 399,505 --
Warrants, exercisable until 2010, to purchase
common stock at $.01 per share (B) 2,459 shs. * 64,182 --
------------ ------------
1,319,964 54,525
------------ ------------
U-LINE CORPORATION
A manufacturer of high-end, built-in, undercounter ice
making, wine storage and refrigeration appliances.
12.5% Senior Subordinated Note due 2012 $ 996,500 04/30/04 904,986 1,026,010
Common Stock (B) 96 shs. 04/30/04 96,400 121,464
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 153,720
------------ ------------
1,113,492 1,301,194
------------ ------------
VICTORY VENTURES LLC
An acquirer of controlling or substantial interests in
other entities.
Series A Preferred Units (B) 0.04% int. 12/02/96 1 2
------------ ------------
VITALITY FOODSERVICE, INC.
A non-carbonated beverage dispensing company focused
on the foodservice industry.
13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 918,977 995,210
Common Stock (B) 12,585 shs. 09/24/04 125,850 152,908
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 153,005
------------ ------------
1,143,765 1,301,123
------------ ------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily
envelopes and tags used on tea bags
12.5% Senior Subordinated Note due 2012 $ 900,000 07/19/04 785,152 855,537
Limited Partnership Interest Class A (B) 0.93% int. 07/19/04 219,375 197,438
Limited Partnership Interest Class B (B) 0.41% int. 07/19/04 96,848 87,163
------------ ------------
1,101,375 1,140,138
------------ ------------
WALLS INDUSTRIES, INC.
A provider of branded workwear and sporting
goods apparel.
10% Senior Subordinated Lien Note due 2009 $ 444,079 07/12/04 444,079 444,092
14% Senior Subordinated Note due 2012 $ 574,613 07/12/04 573,287 586,105
Limited Partnership Interest (B) 0.20% int. 07/12/04 19,737 270,535
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2,133 shs. 07/12/04 1,500 29,240
------------ ------------
1,038,603 1,329,972
------------ ------------
TOTAL PRIVATE PLACEMENT INVESTMENTS $ 91,894,826 $ 91,797,938
------------ ------------
*12/19/96 and 09/30/99.
----------------------------------------------------------------------------------------------------------------------------------
22
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares or
Interest Due Principal
CORPORATE RESTRICTED SECURITIES(A)(Continued) Rate Date Amount Cost Fair Value
-------- -------- ------------ ------------ ------------
RULE 144A SECURITIES - 5.12%:(A)
BONDS - 5.12%
A E S Corporation 8.750% 05/15/13 $ 425,000 $ 469,577 $ 455,813
A E S Corporation 9.000 05/15/15 175,000 175,000 188,563
Basic Energy Services 7.125 04/15/16 625,000 610,000 603,125
Bombardier, Inc. 6.300 05/01/14 500,000 440,315 448,750
Charter Communications Op LLC 8.000 04/30/12 250,000 249,375 251,875
Douglas Dynamics LLC 7.750 01/15/12 325,000 326,674 307,125
Edison Mission Energy 7.750 06/15/16 235,000 235,000 237,938
G F S I, Inc. 11.000 06/01/11 375,000 340,343 360,000
Interactive Health LLC 7.250 04/01/11 484,000 415,137 387,200
Packaging Dynamics Corporation of Ameri 10.000 05/01/16 850,000 860,000 858,500
Petrohawk Energy Corporation 9.125 07/15/13 500,000 499,012 502,500
Service Corporation International (C) 8.000 06/15/17 500,000 495,015 478,750
Stewart & Stevenson LLC 10.000 07/15/14 600,000 613,249 607,500
T C W Leveraged Income Trust LP 8.410 11/30/06 437,144 437,144 404,009
Tenaska Alabama Partners LP 7.000 06/30/21 180,789 180,789 177,157
Tunica-Biloxi Gaming Authority 9.000 11/15/15 500,000 516,425 520,000
------------ ------------
TOTAL BONDS 6,863,055 6,788,805
------------ ------------
WARRANTS - 0.00%
Winsloew Furniture, Inc. (B) 700 $ 7 $ --
------------ ------------
TOTAL WARRANTS 7 --
------------ ------------
TOTAL RULE 144A SECURITIES 6,863,062 6,788,805
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $ 98,757,888 $ 98,586,743
------------ ------------
------------------------------------------------------------------------------------------------------------------------
23
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Interest Due Principal
CORPORATE PUBLIC SECURITIES -- 25.91%:(A) Rate Date Amount Cost Market Value
-------- -------- ------------ ------------ ------------
BONDS - 25.23%
Abitibi-Consolidated, Inc. 7.750% 06/15/11 $ 500,000 $ 514,148 $ 457,500
Allied Waste NA 7.875 04/15/13 500,000 513,544 511,250
Appleton Papers, Inc. 8.125 06/15/11 250,000 250,000 250,000
Argo Tech Corporation 9.250 06/01/11 425,000 425,000 442,000
Arrow Electronics, Inc. 7.000 01/15/07 500,000 503,871 501,843
Atlas Pipeline Partners 8.125 12/15/15 600,000 612,500 610,500
BCP Crystal US Holdings Corporation 9.625 06/15/14 355,000 355,000 385,175
Blockbuster, Inc. (C) 9.000 09/01/12 275,000 276,368 252,313
Cablevision Systems Corporation 8.000 04/15/12 500,000 507,098 506,250
Cadmus Communications Corporation 8.375 06/15/14 500,000 497,375 483,750
Chemed Corporation 8.750 02/24/11 600,000 600,000 622,500
Chesapeake Energy Corporation 7.000 08/15/14 650,000 674,735 642,688
Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 555,500
Clayton Williams Energy, Inc. 7.750 08/01/13 575,000 557,000 517,500
Del Monte Corporation 8.625 12/15/12 200,000 200,000 209,750
Dollar Financial Group 9.750 11/15/11 241,000 241,000 262,917
Dominos Pizza, Inc. 8.250 07/01/11 109,000 108,213 114,450
Dynegy Holdings, Inc. 8.375 05/01/16 665,000 676,875 676,638
Electronic Data Systems Corporation 7.125 10/15/09 500,000 504,220 522,965
Esterline Technologies 7.750 06/15/13 175,000 175,000 176,750
Exco Resources, Inc. 7.250 01/15/11 500,000 488,750 488,750
Ford Motor Credit Co. 7.375 10/28/09 750,000 748,125 728,853
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 135,200
General Motors Acceptance Corporation 5.850 01/14/09 750,000 742,534 735,343
Goodyear Tire & Rubber Co. 7.857 08/15/11 350,000 327,250 340,375
Goodyear Tire & Rubber Co. 9.000 07/01/15 100,000 102,000 101,500
GulfMark Offshore, Inc. 7.750 07/15/14 300,000 298,725 301,500
Houghton Mifflin Co. 9.875 02/01/13 500,000 526,390 528,750
Imax Corporation 9.625 12/01/10 500,000 515,365 476,250
Inergy LP 8.250 03/01/16 75,000 75,000 77,625
Intelsat Subsidiary Holding Company Ltd. 9.614 01/15/12 475,000 479,427 481,531
Interline Brands, Inc. 8.125 06/15/14 150,000 148,925 151,875
Intrawest Corporation 7.500 10/15/13 250,000 250,000 268,438
Iron Mountain, Inc. 8.750 07/15/18 500,000 515,794 518,750
K 2, Inc. 7.375 07/01/14 150,000 150,541 146,063
Koppers Inc. 9.875 10/15/13 170,000 170,000 184,025
Lazard LLC 7.125 05/15/15 375,000 374,704 390,739
Leucadia National Corporation 7.000 08/15/13 350,000 356,114 353,500
Liberty Media Corporation 5.700 05/15/13 500,000 475,805 471,811
Lodgenet Entertainment Corporation 9.500 06/15/13 375,000 375,000 401,250
Lyondell Chemical Co. 9.500 12/15/08 265,000 258,180 272,619
M G M Mirage, Inc. 6.000 10/01/09 225,000 227,140 222,188
Mac-Gray Corporation 7.625 08/15/15 300,000 300,000 306,000
Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 255,625
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 98,500
Markwest Energy Operating Co. 6.875 11/01/14 550,000 532,750 517,000
Mediacom LLC 9.500 01/15/13 750,000 745,638 766,875
Metaldyne Corporation (C) 10.000 11/01/13 340,000 341,930 343,400
N R G Energy, Inc. 7.375 02/01/16 600,000 598,750 596,250
Nalco Co. 7.750 11/15/11 250,000 250,000 255,000
------------------------------------------------------------------------------------------------------------------------
24
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Interest Due Principal
CORPORATE PUBLIC SECURITIES(A)(Continued) Rate Date Amount Cost Market Value
-------- -------- ------------ ------------ ------------
BONDS, CONTINUED
National Wine & Spirits, Inc. 10.125% 01/15/09 $ 25,000 $ 25,258 $ 25,250
Neiman Marcus Group, Inc. 10.375 10/15/15 600,000 600,000 648,000
Nextel Communications, Inc. 7.375 08/01/15 400,000 409,106 412,696
North American Energy Partners 8.750 12/01/11 200,000 200,000 199,500
Nova Chemicals Corporation (C) 8.405 11/15/13 215,000 215,000 219,300
NTL Cable PLC 9.125 08/15/16 690,000 709,721 712,425
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 500,000
Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 328,125
P Q Corporation 7.500 02/15/13 685,000 677,350 650,750
Pacific Energy Partners 7.125 06/15/14 250,000 251,907 255,000
Pacific Energy Partners 6.250 09/15/15 100,000 99,544 98,500
Pinnacle Foods Group 8.250 12/01/13 225,000 225,000 225,281
Pliant Corporation 11.850 06/15/09 643,130 643,096 717,090
Primedia, Inc. 8.000 05/15/13 500,000 513,662 453,750
Quicksilver Resources, Inc 7.125 04/01/16 600,000 583,125 568,500
Rent-A-Center, Inc. 7.500 05/01/10 250,000 250,000 251,250
Rent-Way, Inc. 11.875 06/15/10 450,000 465,505 522,000
Rock-Tenn Co. 8.200 08/15/11 500,000 503,397 520,000
Rogers Wireless, Inc. 7.250 12/15/12 90,000 90,000 94,162
Rogers Wireless, Inc. 7.500 03/15/15 560,000 599,459 597,800
Rogers Wireless, Inc. 8.000 12/15/12 90,000 90,000 95,625
Samsonite Corporation 8.875 06/01/11 500,000 523,120 523,750
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 227,812
Sierra Pacific Resources 6.750 08/15/17 330,000 331,602 330,138
Sungard Data Systems 9.125 08/15/13 75,000 75,000 77,625
Tekni-Plex, Inc. 12.750 06/15/10 500,000 483,500 425,000
Telex Communications, Inc. 11.500 10/15/08 250,000 250,000 265,000
Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 219,687
Tenet Healthcare Corporation 9.875 07/01/14 350,000 341,858 348,687
Tenneco, Inc. 8.625 11/15/14 500,000 501,250 493,750
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 35,000
Triton P C S, Inc. 8.500 06/01/13 500,000 500,000 463,750
Tyco International Group SA 6.375 10/15/11 150,000 148,500 157,243
Unisys Corporation 8.000 10/15/12 90,000 90,000 84,150
United Components, Inc. 9.375 06/15/13 535,000 536,332 529,650
United Rentals, Inc. 7.750 11/15/13 325,000 325,000 320,125
Universal City Florida 8.375 05/01/10 100,000 100,000 100,375
Universal City Florida (C) 10.239 05/01/10 100,000 100,000 102,750
Vought Aircraft Industries 8.000 07/15/11 650,000 648,799 596,375
Warner Music Group 7.375 04/15/14 125,000 125,000 121,875
Wornick Co. 10.875 07/15/11 350,000 350,000 348,250
------------ ------------
TOTAL BONDS 33,472,856 33,483,820
------------ ------------
------------------------------------------------------------------------------------------------------------------------
25
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Shares or
Interest Due Principal
CORPORATE PUBLIC SECURITIES(A)(Continued) Rate Date Amount Cost Market Value
-------- -------- ------------ ------------ ------------
COMMON STOCK - 0.04%
Bare Escentuals, Inc. (B) 200 $ 4,400 $ 5,430
Distributed Energy Systems Corporation 14,000 177,078 45,220
------------ ------------
TOTAL COMMON STOCK 181,478 50,650
------------ ------------
CONVERTIBLE BONDS - 0.64%
Citadel Broadcasting Corporation 1.875% 02/15/11 $ 300,000 $ 232,875 $ 244,125
ICOS Corporation 2.000 07/01/23 375,000 298,125 322,031
Q L T, Inc. 3.000 09/15/23 305,000 277,410 282,506
------------ ------------
TOTAL CONVERTIBLE BONDS 808,410 848,662
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 34,462,744 $ 34,383,132
------------ ------------
Interest Due Principal
SHORT-TERM SECURITIES: Rate/Yield Date Amount Cost Market Value
-------- -------- ------------ ------------ ------------
COMMERCIAL PAPER - 6.48%
ConocoPhillips 5.320% 10/02/06 $ 2,669,000 $ 2,668,211 $ 2,668,211
Detroit Edison Co. 5.300 10/02/06 2,223,000 2,222,345 2,222,345
Detroit Edison Co. 5.310 10/03/06 2,000,000 1,999,115 1,999,115
Kraft Foods, Inc. 5.330 10/04/06 1,711,000 1,709,987 1,709,987
------------ ------------
TOTAL SHORT-TERM SECURITIES $ 8,599,658 $ 8,599,658
------------ ------------
TOTAL INVESTMENTS 106.70% $141,820,290 $141,569,533
============ ------------
Other Assets 6.40 8,488,145
Liabilities (13.10) (17,379,725)
------ ------------
TOTAL NET ASSETS 100.00% $132,677,953
====== ============
(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 09/30/06.
(D) Defaulted security; interest not accrued.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
------------------------------------------------------------------------------------------------------------------------
26
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
AEROSPACE - 3.11% BUILDINGS & REAL ESTATE - 1.59%
Argo Tech Corporation $ 442,000 Adorn, Inc. $ 1,431,447
Consolidated Foundries Holdings 1,407,945 Texas Industries, Inc. 35,000
Esterline Technologies 176,750 TruStile Doors, Inc. 638,342
Gencorp, Inc. 135,200 --------------
P A S Holdco LLC 1,371,829 2,104,789
Vought Aircraft Industries 596,375 --------------
-------------- CHEMICAL, PLASTICS
4,130,099 & RUBBER - 1.50%
-------------- BCP Crystal US Holding Corporation 385,175
AUTOMOBILE - 10.25% Capital Specialty Plastics, Inc. 27,704
Ford Motor Credit Co. 728,853 Koppers, Inc. 184,025
Fuel Systems Holding Corporation 1,343,643 Lyondell Chemical Co. 272,619
General Motors Acceptance Corporation 735,343 Nalco Co. 255,000
Goodyear Tire & Rubber Co. 441,875 Nova Chemicals Corporation 219,300
Jason, Inc. 1,052,564 P Q Corporation 650,750
LIH Investors, L.P. 2,156,913 --------------
Metaldyne Corporation 343,400 1,994,573
Nyloncraft, Inc. 1,423,432 --------------
Ontario Drive & Gear Ltd. 1,323,483 CONSUMER PRODUCTS - 7.53%
Qualis Automotive LLC 1,679,119 Augusta Sportswear Holding Co. 1,548,268
Tenneco, Inc. 493,750 Bravo Sports Holding Corporation 1,338,200
Transtar Holding Company 1,354,302 Euro-Pro Corporation 180,857
United Components, Inc. 529,650 G F S I, Inc. 360,000
-------------- K N B Holdings Corporation 1,340,301
13,606,327 Momentum Holding Co. 676,546
-------------- Neff Motivation, Inc. 711,456
BEVERAGE, DRUG & FOOD - 3.84% Royal Baths Manufacturing Company 621,346
Beta Brands Ltd. -- The Tranzonic Companies 1,890,806
Cains Foods, L.P. 71,629 Walls Industries, Inc. 1,329,972
Del Monte Corporation 209,750 Winsloew Furniture, Inc. --
Dominos Pizza, Inc. 114,450 --------------
Eagle Pack Pet Foods, Inc. 845,656 9,997,752
National Wine & Spirits, Inc. 25,250 --------------
Nonni's Food Company 1,177,789 CONTAINERS, PACKAGING
Pinnacle Foods Group 225,281 & GLASS - 5.49%
River Ranch Fresh Foods LLC 780,000 Flutes, Inc. 890,643
Specialty Foods Group, Inc. -- Maverick Acquisition Company 611,624
Vitality Foodservice, Inc. 1,301,123 P I I Holding Corporation 1,392,400
Wornick Co. 348,250 Packaging Dynamics Corporation of America 858,500
-------------- Paradigm Packaging, Inc. 1,252,046
5,099,178 Pliant Corporation 717,090
-------------- Tekni-Plex, Inc. 425,000
BROADCASTING & Vitex Packaging, Inc. 1,140,138
ENTERTAINMENT - 1.99% --------------
Cablevision Systems Corporation 506,250 7,287,441
Charter Communications Op LLC 251,875 --------------
Citadel Broadcasting Corporation 244,125
Liberty Media Corporation 471,811
Lodgenet Entertainment Corporation 401,250
Mediacom LLC 766,875
--------------
2,642,186
--------------
------------------------------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION:(Cont.) Market Value Market Value
-------------- --------------
DISTRIBUTION - 3.34% FARMING & AGRICULTURE - 0.00%
Corvest Group, Inc. $ -- Protein Genetics, Inc. $ --
Kele and Associates, Inc. 1,466,286 --------------
Magnatech International, Inc. 1,019,282 FINANCIAL SERVICES - 1.07%
O R S Nasco Holding, Inc. 1,347,487 Dollar Financial Group 262,917
QualServ Corporation 601,485 East River Ventures I, L.P. 2,027
Strategic Equipment & Supply Corporation, Inc. -- Highgate Capital LLC 737
-------------- Lazard LLC 390,739
4,434,540 Leucadia National Corporation 353,500
-------------- T C W Leveraged Income Trust, L.P. 404,009
DIVERSIFIED/CONGLOMERATE, Victory Ventures LLC 2
MANUFACTURING - 6.14% --------------
AmerCable, Inc. 804,289 1,413,931
Arrow Tru-Line Holdings, Inc. 1,260,715 --------------
Bombardier, Inc. 448,750 HEALTHCARE, EDUCATION
Coining Corporation of America LLC 1,286,251 & CHILDCARE - 4.31%
Dexter Magnetics Technologies, Inc. 642,592 A T I Acquisition Company 1,035,703
Douglas Dynamics LLC 307,125 American Hospice Management Holding LLC 1,453,064
Evans Consoles, Inc. -- F H S Holdings LLC 1,417,961
Radiac Abrasives, Inc. 1,327,370 ICOS Corporation 322,031
Truck Bodies & Equipment International 1,907,507 Interactive Health LLC 387,200
Tyco International Group SA 157,243 MedAssist, Inc. 247,696
-------------- Q L T, Inc. 282,506
8,141,842 Tenet Healthcare Corporation 568,374
-------------- --------------
DIVERSIFIED/CONGLOMERATE, 5,714,535
SERVICE - 5.85% --------------
Allied Waste NA 511,250 HOME & OFFICE FURNISHINGS,
Bare Escentuals, Inc. 5,430 HOUSEWARES, AND DURABLE
CapeSuccess LLC 2,512 CONSUMER PRODUCTS - 6.74%
Chemed Corporation 622,500 Connor Sport Court International, Inc. 954,507
Diversco, Inc./DHI Holdings, Inc. 1,252,858 H M Holding Company 1,320,391
Dwyer Group, Inc. 1,496,254 Home Decor Holding Company 1,290,085
Fowler Holding, Inc. 1,348,990 Justrite Manufacturing Acquisition Co. 868,774
Interline Brands, Inc. 151,875 Monessen Holding Corporation 1,344,114
Iron Mountain, Inc. 518,750 Samsonite Corporation 523,750
Keystone North America, Inc. 167,848 Stanton Carpet Holding Co. 1,336,172
Mac-Gray Corporation 306,000 U-Line Corporation 1,301,194
Moss, Inc. 894,928 --------------
Service Corporation International 478,750 8,938,987
-------------- --------------
7,757,945
--------------
ELECTRONICS - 2.85%
A E S Corporation 644,376
Arrow Electronics, Inc. 501,843
Directed Electronics, Inc. 2,069,207
Distributed Energy Systems 45,220
Electronic Data Systems Corporation 522,965
--------------
3,783,611
--------------
------------------------------------------------------------------------------------------------------------------------------------
28
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION:(Cont.) Market Value Market Value
-------------- --------------
LEISURE, AMUSEMENT, OIL AND GAS - 2.75%
ENTERTAINMENT - 4.15% Aventine Renewable Energy
IMAX Corporation $ 476,250 Basic Energy Services $ 603,125
Intrawest Corporation 268,438 Chesapeake Energy Corporation 642,688
K 2, Inc. 146,063 Clayton Williams Energy, Inc. 517,500
Keepsake Quilting, Inc. 662,513 Exco Resources, Inc. 488,750
M G M Mirage, Inc. 222,188 GulfMark Offshore, Inc. 301,500
Majestic Star Casino LLC 255,625 North American Energy Partners 199,500
O E D Corp/Diamond Jo Company Guarantee 500,000 Offshore Logistics, Inc. 328,125
Overton's Holding Company 1,008,977 Quicksilver Resources, Inc. 568,500
Savage Sports Holding, Inc. 1,122,822 --------------
Tunica-Biloxi Gaming Authority 520,000 3,649,688
Universal City Florida 203,125 --------------
Warner Music Group 121,875 PHARMACEUTICALS - 1.05%
-------------- CorePharma LLC 1,340,623
5,507,876 Enzymatic Therapy, Inc. 56,250
-------------- --------------
MACHINERY - 6.96% 1,396,873
Integration Technology Systems, Inc. 711,753 --------------
Manitowoc Company, Inc. 98,500 PUBLISHING/PRINTING - 1.28%
Maxon Corporation 1,805,179 Cadmus Communications Corporation 483,750
Morton Industrial Group, Inc. 1,364,945 Houghton Mifflin Co. 528,750
Safety Speed Cut Manufacturing Company, Inc. 1,288,297 Primedia, Inc. 453,750
Stewart & Stevenson LLC 607,500 Sheridan Acquisition Corporation 227,812
Synventive Equity LLC 17,714 --------------
Tronair, Inc. 1,899,474 1,694,062
Tubular Textile Machinery 1,436,007 --------------
-------------- RETAIL STORES - 3.14%
9,229,369 Blockbuster, Inc. 252,313
-------------- Neiman Marcus Group, Inc. 648,000
MEDICAL DEVICES/BIOTECH - 2.51% Olympic Sales, Inc. 2,166,084
Beacon Medical Products, Inc. -- Rent-A-Center, Inc. 251,250
Coeur, Inc. 721,848 Rent-Way, Inc. 522,000
E X C Acquisition Corporation 68,734 United Rentals, Inc. 320,125
MicroGroup, Inc. 1,660,813 --------------
OakRiver Technology, Inc. 877,839 4,159,772
-------------- --------------
3,329,234 TECHNOLOGY - 2.06%
-------------- C & J Spec-Rent Services, Inc. 2,567,766
MINING, STEEL, IRON & Sungard Data Systems 77,625
NON PRECIOUS METALS - 0.04% Unisys Corporation 84,150
U S S Holdings, Inc. 54,525 --------------
-------------- 2,729,541
NATURAL RESOURCES - 0.93% --------------
Abitibi-Consolidated, Inc. 457,500
Appleton Papers, Inc. 250,000
Rock-Tenn Co. 520,000
--------------
1,227,500
--------------
------------------------------------------------------------------------------------------------------------------------------------
29
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.) MASSMUTUAL PARTICIPATION INVESTORS
September 30, 2006
(Unaudited)
Fair Value/
INDUSTRY CLASSIFICATION:(Cont.) Market Value
--------------
TELECOMMUNICATIONS - 3.88%
Cincinnati Bell, Inc. $ 555,500
Intelsat Subsidiary Holding Company Ltd. 481,531
ITC^DeltaCom, Inc. 1,465,532
Nextel Communications, Inc. 412,696
NTL Cable PLC 712,425
Rogers Wireless, Inc. 787,587
Telex Communications, Inc. 265,000
Triton P C S, Inc. 463,750
--------------
5,144,021
--------------
TRANSPORTATION - 1.54%
NABCO, Inc. 653,843
Tangent Rail Corporation 1,389,170
--------------
2,043,013
--------------
UTILITIES - 3.07%
Atlas Pipeline Partners 610,500
Dynegy Holdings, Inc. 676,638
Edison Mission Energy 237,938
Inergy LP 77,625
Markwest Energy Operating Co. 517,000
N R G Energy, Inc. 596,250
Pacific Energy Partners 353,500
Petrohawk Energy Corporation 502,500
Sierra Pacific Resources 330,138
Tenaska Alabama Partners L.P. 177,157
--------------
4,079,246
--------------
WASTE MANAGEMENT/
POLLUTION - 1.26%
Terra Renewal Services, Inc. 1,677,419
--------------
TOTAL CORPORATE RESTRICTED AND
PUBLIC SECURITIES - 100.22% $ 132,969,875
==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
------------------------------------------------------------------------------------------------------------------------------------
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MASSMUTUAL PARTICIPATION INVESTORS
(Unaudited)
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary
of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its
investment adviser. The Trust's investment objective is to maximize total
return by providing a high level of current income, the potential for growth
of such income, and capital appreciation, by investing primarily in a
portfolio of privately placed below investment grade, long-term corporate
debt obligations purchased directly from their issuers, at least half of
which normally will include equity features.
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
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, absent an exemption from registration,
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").
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 as of 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 thereafter used for restricted
securities in appropriate circumstances. Among the factors ordinarily
considered are the existence of restrictions upon the sale of a security held
by the Trust; an estimate of the existence and the extent of a market for the
security; the extent of any discount at which the security was acquired; the
estimated period of time during which the security will not be freely
marketable; the estimated expenses of registering or otherwise qualifying the
security for public sale; estimated underwriting commissions if underwriting
would be required to effect a sale; in the case of a convertible security,
whether or not it would trade on the basis of its stock equivalent; in the
case of a debt obligation which would trade independently of any equity
equivalent, the current yields on comparable securities; the estimated amount
of the floating supply of such securities available for purchase; the
proportion of the issue held by the Trust; changes in the financial condition
and prospects of the issuer; the existence of merger proposals or tender
offers affecting the issuer; and any other factors affecting fair value, all
in accordance with the Investment Company Act of 1940, as amended (the "1940
Act"). In making valuations, opinions of counsel may be relied upon as to
whether or not securities are restricted securities and as to the legal
requirements for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at a
discount from the market price of such unrestricted securities. The Trustees,
however, consider all factors in fixing any discount, including the filing of
a registration statement for such securities under the 1933 Act and any other
developments which are likely to increase the probability that the securities
may be publicly sold by the Trust without restriction.
The Trustees meet at least once in each quarter to value the Trust's
portfolio securities as of the close of business on the last business day of
the preceding quarter. This valuation requires the approval of a majority of
the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust or of Babson Capital In making valuations,
the Trustees will consider Babson Capital's reports 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 $91,797,938 (69.19% of net assets) as of September 30,
2006 whose values have been determined by the Trustees in the absence of
readily ascertainable market values. Due to the inherent uncertainty of
valuation, those values may differ significantly from the
--------------------------------------------------------------------------------
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MASSMUTUAL PARTICIPATION INVESTORS
(CONTINUED)
values that would have been used had a ready market for the securities
existed, and the differences could be material.
The values for 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, 2006, subject to discount where appropriate, and
are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
fair value and short-term securities having a maturity of sixty days or less
are valued at amortized cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS:
Investment transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis including the amortization of premiums and accretion of
discount on bonds held. 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's receiving any distributions from the MMPI
Subsidiary Trust, all of the MMPI Subsidiary Trust's taxable income and
realized gains, including non-qualified income and realized gains, is subject
to taxation at prevailing corporate tax rates. For the nine months ended
September 30, 2006, the MMPI Subsidiary Trust has accrued tax expense on net
realized gains of $178,074 and reduced accrued deferred tax expenses on net
unrealized gains by $4,449.
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.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEE
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 provides administration of the day-to-day operations of the Trust and
provides the Trust with office space and office equipment, accounting and
bookkeeping services, and necessary executive, clerical and secretarial
personnel for the performance of the foregoing services.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
Investment Advisory fee equal to .225% of the value of the Trust's net assets
as of the last business day of each fiscal quarter, an amount approximately
equivalent to .90% on an annual basis. A majority of the Trustees, includ-
--------------------------------------------------------------------------------
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MASSMUTUAL PARTICIPATION INVESTORS
(CONTINUED)
ing a majority of the Trustees who are not interested persons of the Trust or
of Babson Capital, approve the valuation of the Trust's net assets as of such
day.
4. SENIOR SECURED INDEBTEDNESS:
A. NOTE PAYABLE
MassMutual holds the Trust's $12,000,000 Senior Fixed Rate Convertible Note
(the "Note") issued by the Trust in 1995. The Note, as amended, is due
December 13, 2011 and accrues interest at 5.80% per annum. MassMutual, at its
option, can convert the principal amount of the Note into common shares. The
dollar amount of principal would be converted into an equivalent dollar
amount of common shares based upon the average price of the common shares for
ten business days prior to the notice of conversion. For the nine months
ended September 30, 2006, 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.
B. REVOLVING CREDIT AGREEMENT
The Trust entered into a $15,000,000 Revolving Credit Agreement with Bank of
America (formerly Fleet National Bank) (the "Agent Bank") dated May 29, 1997,
which had a stated matured on May 31, 2004. The maturity date of this loan
was extended to May 31, 2007, and its terms amended and restated pursuant to
the First Amended and Restated Revolving Credit Agreement (the "Revolver")
dated May 27, 2004, between the Trust and the Agent Bank.
The Revolver bears interest payable quarterly in arrears at a per annum rate
that varies depending upon whether the Trust requests a Base Rate Loan or
LIBOR Rate Loan. Interest on Base Rate loans equals the higher of: (i) the
annual "Base Rate" as set periodically by the Agent Bank and (ii) the most
recent Federal Funds Effective Rate plus .50% per annum. Per annum interest
on LIBOR Rate Loans equals .60% plus the London Inter Bank Offered Rate
("LIBOR") rate, divided by 1 minus LIBOR Reserve Rate. The Trust also incurs
expense on the undrawn portion of the total Revolver at a rate of .25% per
annum.
As of September 30, 2006, there were no outstanding loans against the
Revolver. For the nine months ended September 30, 2006, the Trust incurred
expense on the Revolver of $27,945 related to the undrawn portion.
5. PURCHASES AND SALES OF INVESTMENTS
For the nine months
ended 9/30/2006
Cost of Proceeds from
Investments Sales or
Acquired Maturities
----------- -----------
Corporate restricted securities $28,672,567 $19,699,220
Corporate public securities 7,864,287 12,254,816
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of September 30, 2006. The net
unrealized depreciation of investments for financial reporting and federal
tax purposes as of September 30, 2006 is $250,757 and consists of $11,720,648
appreciation and $11,971,405 depreciation.
Net unrealized depreciation of investments on the Statement of Assets and
Liabilities reflects the balance net of a deferred tax accrual of $170,965 on
net unrealized gains in the MMPI Subsidiary Trust.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
March 31, 2006
Amount Per Share
----------- -----------
Investment income $ 3,229,245
Net investment income $ 2,668,897 $ 0.27
Net realized and unrealized gain $ 3,988,640 $ 0.41
on investments (net of taxes)
June 30, 2006
Amount Per Share
----------- -----------
Investment income $ 3,094,537
Net investment income $ 2,530,332 $ 0.26
Net realized and unrealized gain $ 3,610,163 $ 0.37
on investments (net of taxes)
September 30, 2006
Amount Per Share
----------- -----------
Investment income $ 3,090,554
Net investment income $ 2,542,211 $ 0.26
Net realized and unrealized gain $ 2,345,586 $ 0.24
on investments (net of taxes)
--------------------------------------------------------------------------------
33
TRUSTEES OFFICERS
William J. Barrett Roger W. Crandall Chairman
Donald E. Benson* Clifford M. Noreen President
Michael H. Brown James M. Roy Vice President &
Roger W. Crandall Chief Financial Officer
Donald Glickman Rodney J. Dillman Vice President &
Martin T. Hart* Secretary
Robert E. Joyal Jill A. Fricchione Vice President
Corine T. Norgaard* Michael P. Hermsen Vice President
Mary Wilson Kibbe Vice President
Michael L. Klofas Vice President
Richard E. Spencer, II Vice President
Ronald S. Talaia Treasurer
John T. Davitt, Jr. Comptroller
Melissa M. LaGrant Chief Compliance
Officer
*MEMBER OF THE AUDIT COMMITTEE
--------------------------------------------------------------------------------
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan. The Plan provides a simple and automatic way for shareholders to
add to their holdings in the Trust through the receipt of dividend shares issued
by the Trust or through the reinvestment of cash dividends in Trust shares
purchased in the open market. The dividends of each shareholder will be
automatically reinvested in the Trust by Shareholder Financial Services Inc.,
the Transfer Agent, in accordance with the Plan, unless such shareholder elects
not to participate by providing written notice to the Transfer Agent. A
shareholder may terminate his or her participation by notifying the Transfer
Agent in writing.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $100 nor more than $5,000 per quarter.
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 any way, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in newly
issued shares of the Trust will be the fair market value of the shares received,
which will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder.)
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver CO 80217-3673.
[LOGO]
MASSMUTUAL
PARTICIPATION INVESTORS
DB1040 1106