UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5531
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MassMutual Participation Investors
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(Exact name of registrant as specified in charter)
1500 Main Street, Suite 600, P.O. Box 15189, Springfield, MA 01115-5189
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(Address of principal executive offices) (Zip code)
Rodney J. Dillman, Vice President and Secretary
1500 Main Street, Suite 2800, P.O. Box 15189, Springfield, MA 01115-5189
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(Name and address of agent for service)
Registrant's telephone number, including area code: 413-226-1000
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/07
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
Attached hereto is the annual shareholder report transmitted to
shareholders pursuant to Rule 30e-1 of the Investment Company Act of
1940, as amended.
[LOGO] MASSMUTUAL PARTICIPATION INVESTORS
2007 ANNUAL REPORT
MASSMUTUAL PARTICIPATION INVESTORS
c/o Babson Capital Management LLC
1500 Main Street
Suite 600, P.O. Box 15189
Springfield, Massachusetts 01115-5189
(413) 226-1516
http://www.BabsonCapital.com/mpv
ADVISER
Babson Capital Management LLC
1500 Main Street, P.O. Box 15189
Springfield, Massachusetts 01115-5189
INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM
KPMG LLP
Boston, Massachusetts 02110
COUNSEL TO THE TRUST
Ropes & Gray LLP
Boston, Massachusetts 02110
CUSTODIAN
Citibank, N.A.
New York, New York 10043
TRANSFER AGENT & REGISTRAR
Shareholder Financial Services, Inc.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
MPV
Listed
NYSE
PROXY VOTING POLICIES & PROCEDURES;
PROXY VOTING RECORD
The Trustees of MassMutual Participation Investors (the "Trust") have delegated
proxy voting responsibilities relating to the voting of securities held by the
Trust to Babson Capital Management LLC ("Babson Capital"). A description of
Babson Capital's proxy voting policies and procedures is available (1) without
charge, upon request, by calling, toll-free 1-866-399-1516; (2) on the Trust's
website at http://www.BabsonCapital.com/mpv; and (3) on the U.S. Securities and
Exchange Commission's ("SEC") website at http://www.sec.gov. Information
regarding how the Trust voted proxies relating to portfolio securities during
the most recent 12-month period ended June 30, 2007 is available (1) on the
Trust's web-site at http://www. BabsonCapital.com/mpv; and (2) on the SEC's
website at http://www.sec.gov.
FORM N-Q
The Trust files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. This information is
available (i) on the SEC's website at http://www.sec.gov; and (ii) at the SEC's
Public Reference Room in Washington, DC (which information on their operation
may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio
holdings as of each quarter-end is available on the Trust's website at
http://www.BabsonCapital.com/mpv or upon request by calling, toll-free,
1-866-399-1516.
MASSMUTUAL PARTICIPATION INVESTORS
MassMutual Participation Investors is a closed-end investment company, first
offered to the public in 1988, whose shares are traded on the New York Stock
Exchange.
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MassMutual Participation Investors
INVESTMENT OBJECTIVE & POLICY
MassMutual Participation Investors (the "Trust") is a closedend investment
company, first offered to the public in 1988, whose shares are traded on the New
York Stock Exchange under the trading symbol "MPV". The Trust's share price can
be found in the financial section of most newspapers as "MassPrt" or "MassMuPrt"
under either the New York Stock Exchange listings or Closed-End Fund listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term debt obligations purchased directly from their
issuers, which tend to be smaller companies. At least half of these investments
normally include equity features such as warrants, conversion rights, or other
equity features that provide the Trust with the opportunity to realize capital
gains. The Trust will also invest in publicly traded debt securities (including
high yield securities), again with an emphasis on those with equity features,
and in convertible preferred stocks and, subject to certain limitations, readily
marketable equity securities. Below investment grade or high yield securities
have predominantly speculative characteristics with respect to the capacity of
the issuer to pay interest and repay principal. In addition, the Trust may
temporarily invest in high quality, readily marketable securities.
Babson Capital Management LLC ("Babson Capital") manages the Trust on a total
return basis. The Trust distributes substantially all of its net income to
shareholders each year. Accordingly, the Trust pays dividends to shareholders
quarterly in January, May, August, and November. All registered shareholders are
automatically enrolled in the Dividend Reinvestment and Cash Purchase Plan
unless cash distributions are requested.
In this report you will find a complete listing of the Trust's holdings. We
encourage you to read this section carefully for a better understanding of the
Trust. We cordially invite all shareholders to attend the Trust's Annual Meeting
of Shareholders, which will be held on April 25, 2008 at 1:00 P.M. in
Springfield, Massachusetts.
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1
MassMutual Participation Investors
TOTAL ANNUAL PORTFOLIO RETURN (AS OF 12/31 EACH YEAR)*
[BAR CHART APPEARS HERE]
10.91 4.77 8.11 3.47 5.70 23.72 25.14 22.51 18.64 9.95 MASSMUTUAL PARTICIPATION
INVESTORS (BASED ON CHANGE
IN THE NET ASSET VALUE WITH
REINVESTED DIVIDENDS)
-2.56 21.26 -3.03 2.49 -20.48 47.25 18.33 4.55 18.37 -1.57 RUSSELL 2000 INDEX
1.87 2.39 -5.86 5.28 -1.41 28.97 11.13 2.74 11.85 1.87 LEHMAN BROTHERS U.S.
CORPORATE HIGH YIELD INDEX
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
* Data for MassMutual Participation Investors (the "Trust") represents portfolio
returns based on change in the Trust's net asset value assuming the reinvestment
of all dividends and distributions which differs from the total investment
return based on market value of the Trust's shares due to the difference between
the Trust's net asset value and the market value of its shares outstanding (see
page 12 for total investment return based on market value); past performance is
no guarantee of future results.
PORTFOLIO COMPOSITION AS OF 12/31/07*
[PIE CHART APPEARS HERE]
Private / 144A Cash & Short Term
High Yield Debt Invesments
54.0% 6.1%
Private Investment Public High
Grade Debt Yield Debt
1.4% 21.4%
Private / Restricted Public Equity
Equity 1.4%
15.7%
*Based on value of total investments (including cash)
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2
MassMutual Participation Investors
TO OUR SHAREHOLDERS
I am pleased to share with you the Trust's Annual Report for the year ended
December 31, 2007.
THE TRUST'S 2007 PORTFOLIO PERFORMANCE
The Trust's net total portfolio rate of return for 2007 was 9.95%, as measured
by the change in net asset value, assuming the reinvestment of all dividends and
distributions. The Trust's total net assets were $126,625,334, or $12.84 per
share, as of December 31, 2007 compared to $126,515,013, or $12.90 per share, as
of December 31, 2006. The Trust paid a quarterly dividend of 25 cents per share
for each quarter of 2007, with the fourth quarter dividend paid in January 2008.
In addition, the Trust declared a special year-end dividend of 25 cents per
share, paid in January to shareholders of record on December 31, 2007, bringing
total dividends for the year to $1.25 per share. We are very pleased with the
Trust's 2007 portfolio performance.
The table below lists the average annual net returns of the Trust's portfolio,
based on the change in net assets, assuming the reinvestment of all dividends
and distributions, compared to the average annual returns of the Lehman Brothers
U.S. Corporate High Yield Index and the Russell 2000 Index for the 1, 3, 5 and
10 years ended December 31, 2007.
Lehman Brothers U.S. Russell
The Trust Corporate High Yield Index 2000 Index
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1 Year 9.95% 1.87% -1.57%
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3 Year 16.91% 5.39% 6.80%
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5 Year 19.86% 10.90% 16.24%
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10 Year 13.01% 5.51% 7.08%
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Past performance is no guarantee of future results.
[PHOTO OF PRESIDENT AND CHAIRMAN]
Left to right:
Clifford M. Noreen
PRESIDENT
Roger W. Crandall
CHAIRMAN
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3
MassMutual Participation Investors
The U.S. economy and investment markets started the year strong but 2007 will
long be remembered for the major mortgage- and credit-market crisis that wreaked
havoc in the second half of the year and into 2008. The issues began in the
residential sub-prime mortgage market, where underwriting standards that began
loosening in 2005 allowed many homeowners to borrow debt that could only be
supported by continuously rising home prices. As housing prices softened,
mortgage defaults and foreclosures rose dramatically and mortgage related
collateralized debt obligation (CDO) products also suffered. General investor
confidence began to tumble, and the major stock market indexes experienced
declines and volatility not seen in some time, eventually closing the year with
modest gains but concerns among many analysts of what could be next.
Overall, the US economy finished 2007 on an uncertain note. The unemployment
rate was 5 percent in December, up from 4.5 percent the previous year, according
to the US Department of Labor. Also, core inflation was 2.3 percent at year's
end, not quite as bad as the 2.6 percent increase during 2006. The value of the
dollar versus several other currencies, however, dropped precipitously in 2007.
The corporate credit market continued a remarkable run, as corporate credit
defaults around the globe continued their downward trend for the fifth
consecutive year, according to Moody's Investors Service. Moody's global
issuer-weighted speculativegrade default rate finished the year at 0.9 percent,
down from 1.7 percent in 2006 and its lowest level since 1981. Moody's expects
the default rate to climb in 2008 to 4.8 percent and reach its historical
average of 5 percent in 2009. Corporate bond spreads widened significantly in
the second half of 2007 and the trend continued at the beginning of 2008.
PORTFOLIO ACTIVITY
Overall, the Trust closed 20 new private placement transactions during 2007 and
added to five existing private placement investments. Total direct placement
purchases were $23,908,409.
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4
MassMutual Participation Investors
New private placement transactions invested in during the year were: Advanced
Technologies Holdings, Inc.; A H C Holding Company Inc.; Aero Holdings, Inc.;
Connecticut Electric, Inc.; Electra Bicycle Company LLC; Golden Country Foods
Holding, Inc.; NetShape Technologies, Inc.; K H O F Holdings, Inc.; K W P I
Holdings Corporation; K-Tek Holding Corporation; Mail Communications Group,
Inc.; Nesco Holdings Corporation; Pacific Consolidated Holdings LLC; Smart
Source Holdings LLC; Torrent Group Holdings, Inc.; Total Equipment & Service,
Inc.; Transpac Holding Company; Visioneering, Inc.; Waggin' Train Holdings LLC;
and Workplace Media Holding Co.
In addition, the Trust added to existing private placement investments in HM
Holding Company; Moss, Inc.; NABCO, Inc.; Savage Sports Holding, Inc.; and
Transtar Holding Company.
The Trust also had 14 realizations in 2007.
[PHOTO OF OFFICERS]
Left to right:
James M. Roy
VICE PRESIDENT & CHIEF
FINANCIAL OFFICER
Rodney J. Dillman
VICE PRESIDENT, SECRETARY
& CHIEF LEGAL OFFICER
Jill A. Fields
VICE PRESIDENT
Michael P. Hermsen
VICE PRESIDENT
Michael L. Klofas
VICE PRESIDENT
Richard E. Spencer, II
VICE PRESIDENT
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5
MassMutual Participation Investors
OUTLOOK FOR 2008
The year 2008 opened with worldwide financial markets under pressure. The credit
crisis continues to find new victims and with each new report, investor
confidence wanes further. Consumer confidence showed cracks in late 2007, and
the housing market may take some time to hit bottom. Oil prices rose to new
heights in the latter half of 2007 and approached $100 per barrel. Early Fed
action in 2008 indicates that it is targeting lower interest rates to help the
residential real estate market and weakening economy. As always, no one can
predict the future with any degree of certainty.
Despite all this, merger and acquisition activity continued at a record pace in
2007, although activity is expected to be lower in 2008. Last year saw $4.5
trillion in announced deals worldwide, up 24 percent from 2006, according to
Thomson Financial, and included the three largest leveraged buyouts in history.
Private equity firms had been a significant part of the activity in the first
six months of 2007 (reportedly more than 30 percent of total volume), but nearly
disappeared in the second half of the year and are expected to be very quiet at
the start of 2008. Corporate buyers are expected to be more active players, as
they are flush with cash.
Regardless of the economic environment, however, the Trust continues to
repeatedly employ the investment philosophy that has served it well since its
inception: investing in companies which we believe have a strong business model,
solid cash flow and experienced, ethical management. This philosophy, combined
with Babson Capital's seasoned investment-management team and the Trust's
financial position, contribute to the Trust being well positioned for future
investment opportunities that meet its investment objectives and policies. As
always, I would like to thank you for your continued interest in and support of
MassMutual Participation Investors.
Sincerely,
/s/ Clifford M. Noreen
Clifford M. Noreen,
President
Cautionary Notice: Certain statements contained in this report may be "forward
looking" statements. Investors are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date in which they are
made and which reflect management's current estimates, projections, expectations
or beliefs, and which are subject to risks and uncertainties that may cause
actual results to differ materially. These statements are subject to change at
any time based upon economic, market or other conditions and may not be relied
upon as investment advice or an indication of the Trust's trading intent.
References to specific securities are not recommendations of such securities,
and may not be representative of the Trust's current or future investments. We
undertake no obligation to publicly update forward looking statements, whether
as a result of new information, future events, or otherwise.
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2007 Record Net Investment Short-Term Tax Long-Term
Dividends Date Income Gains Effect Gains
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Regular 5/7/2007 0.2500 -- --
7/27/2007 0.2500 -- --
10/29/2007 0.2500 -- --
12/31/2007 0.2500 -- --
Special 12/31/2007 0.2310 0.0190 --
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$ 1.2310 $ 0.0190 $ 1.2500 $ --
================================================================================
The following table summarizes the tax effects of the retention of capital gains
for 2007:
AMOUNT PER SHARE FORM 2439
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2007 Gains Retained 0.1802 Line 1a
Long - Term Gains Retained 0.1802
Taxes Paid 0.0631 Line 2*
Basis Adjustment 0.1171 **
* If you are not subject to federal capital gains tax (e.g., charitable
organizations, IRAs and Keogh Plans), you may be able to claim a refund by
filing Form 990-T.
** For federal income tax purposes, you may increase the adjusted cost basis of
your shares by this amount (the excess of Line 1a over Line 2).
Qualified for Dividend Interest Earned on
Annual Dividend Received Deduction*** Qualified Dividends**** U.S. Gov't. Obligations
Amount Per Share Percent Amount Per Share Percent Amount Per Share Percent Amount Per Share
---------------------------------------------------------------------------------------------------------
$1.25 14.2106% 0.1775 15.1898% 0.1897 0% 0.0000
=========================================================================================================
*** Not available to individual shareholders
**** Qualified dividends are reported in Box 1b on IRS Form 1099-Div for 2007
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6
MassMutual Participation Investors
FINANCIAL REPORT
Consolidated Statement of Assets and Liabilities.......................... 8
Consolidated Statement of Operations...................................... 9
Consolidated Statement of Cash Flows...................................... 10
Consolidated Statements of Changes in Net Assets.......................... 11
Consolidated Selected Financial Highlights................................ 12
Consolidated Schedule of Investments...................................... 13-34
Notes to Consolidated Financial Statements................................ 35-39
Report of Independent Registered Public Accounting Firm................... 40
Interested Trustees....................................................... 41-42
Independent Trustees...................................................... 43-45
Officers of the Trust..................................................... 46
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7
MassMutual Participation Investors
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $98,834,452) $ 100,222,485
Corporate public securities at market value
(Cost - $32,978,150) 32,092,037
Short-term securities at amortized cost 7,525,258
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139,839,780
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Cash 1,029,074
Interest receivable 2,993,441
Receivable for investments sold 955,352
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TOTAL ASSETS 144,817,647
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LIABILITIES:
Dividend payable 4,930,806
Investment advisory fee payable 284,907
Note payable 12,000,000
Interest payable 92,755
Accrued expenses 125,115
Accrued taxes payable 755,592
Other payables 3,138
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TOTAL LIABILITIES 18,192,313
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TOTAL NET ASSETS $ 126,625,334
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NET ASSETS:
Common shares, par value $.01 per share; an unlimited
number authorized $ 98,616
Additional paid-in capital 91,741,979
Retained net realized gain on investments, prior years 32,187,872
Undistributed net investment income 991,196
Accumulated net realized gain on investments 1,103,751
Net unrealized appreciation of investments 501,920
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TOTAL NET ASSETS $ 126,625,334
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COMMON SHARES ISSUED AND OUTSTANDING 9,861,611
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NET ASSET VALUE PER SHARE $ 12.84
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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8
MassMutual Participation Investors
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2007
INVESTMENT INCOME:
Interest $ 12,735,335
Dividends 1,750,121
Other 60,406
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TOTAL INVESTMENT INCOME 14,545,862
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EXPENSES:
Investment advisory fees 1,168,468
Interest 720,475
Professional fees 180,800
Trustees' fees and expenses 157,000
Reports to shareholders 110,000
Custodian fees 28,500
Transfer agent/registrar's expenses 20,000
Other 102,659
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TOTAL EXPENSES 2,487,902
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INVESTMENT INCOME - NET 12,057,960
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments before taxes 1,904,589
Income tax expense (720,563)
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NET REALIZED GAIN ON INVESTMENTS 1,184,026
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Net change in unrealized appreciation of investments before taxes (2,028,367)
Net change in deferred income tax expense 384,226
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NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (1,644,141)
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NET LOSS ON INVESTMENTS (460,115)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,597,845
=============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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9
MassMutual Participation Investors
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2007
NET DECREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net $ (328,363)
Purchases of portfolio securities (43,655,661)
Proceeds from disposition of portfolio securities 45,755,626
Interest, dividends and other received 13,818,169
Interest expense paid (716,653)
Operating expenses paid (1,782,528)
Income taxes paid (3,540,046)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 9,550,544
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Cash flows from financing activities:
Cash dividends paid from net investment income (11,896,704)
Cash dividends paid from net realized gain on investments (96,562)
Receipts for shares issued on reinvestment of dividends 828,061
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NET CASH USED FOR FINANCING ACTIVITIES (11,165,205)
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NET DECREASE IN CASH (1,614,661)
Cash - beginning of year 2,643,735
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CASH - END OF YEAR $ 1,029,074
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RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,597,845
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Decrease in investments 1,858,297
Decrease in interest and dividends receivable 7,385
Increase in receivable for investments sold (698,860)
Increase in investment advisory fee payable 248
Increase in interest payable 3,822
Decrease in accrued expenses (17,622)
Decrease in accrued taxes payable (3,203,709)
Increase in other payables 3,138
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TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS (2,047,301)
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,550,544
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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10
MassMutual Participation Investors
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 2007 and 2006
2007 2006
------------ ------------
INCREASE IN NET ASSETS:
OPERATIONS:
Investment income - net $ 12,057,960 $ 10,728,662
Net realized gain on investments 1,184,026 6,733,116
Net change in unrealized appreciation of
investments (1,644,141) 814,564
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 11,597,845 18,276,342
------------ ------------
Increase from common shares issued on reinvestment
of dividends
Common shares issued (2007 - 56,329; 2006 - 61,052) 828,061 867,979
Dividends to shareholders from:
Net investment income
(2007 - $1.23 per share; 2006 - $1.18 per share) (12,127,939) (11,551,712)
Net realized gains on investments (2007 - $0.02
per share; 2006 - $0.01 per share) (187,646) (96,562)
------------ ------------
TOTAL INCREASE IN NET ASSETS 110,321 7,496,047
------------ ------------
NET ASSETS, BEGINNING OF YEAR 126,515,013 119,018,966
------------ ------------
NET ASSETS, END OF YEAR (INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME OF $991,196 AND $1,028,648,
RESPECTIVELY) $126,625,334 $126,515,013
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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11
MassMutual Participation Investors
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding:
For the years ended December 31, 2007 2006 2005 2004 2003
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE: BEGINNING OF YEAR $ 12.90 $ 12.21 $ 11.13 $ 9.84 $ 8.78
Net investment income (a) 1.23 1.10 0.99 1.00 0.80
Net realized and unrealized
gain (loss) on investments (0.05) 0.77 1.09(b) 1.36 1.21
TOTAL FROM INVESTMENT OPERATIONS 1.18 1.87 2.08 2.36 2.01
Dividends from net investment
income to common shareholders (1.23) (1.18) (1.01) (1.10) (0.96)
Dividends from net realized gain on
investments to common shareholders (0.02) (0.01) -- -- --
Increase from dividends reinvested 0.01 0.01 0.01 0.03 0.01
---------- ---------- ---------- ---------- ----------
TOTAL DIVIDENDS (1.24) (1.18) (1.00) (1.07) (0.95)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE: END OF YEAR $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84
---------- ---------- ---------- ---------- ----------
PER SHARE MARKET VALUE: END OF YEAR $ 13.18 $ 14.70 $ 14.05 $ 13.31 $ 11.65
========== ========== ========== ========== ==========
Total investment return
Market value (1.30)% 16.81% 17.25% 25.77% 35.50%
Net asset value (c) 9.95% 18.64% 22.51% 25.14% 23.72%
Net assets (in millions): End of year $ 126.63 $ 126.52 $ 119.02 $ 107.61 $ 94.40
Ratio of operating expenses to average
net assets 1.36% 1.17% 1.45% 1.63% 1.65%
Ratio of interest expense to average
net assets 0.56% 0.57% 0.80% 0.89% 0.97%
Ratio of income tax expense to average
net assets (d) 0.48% 2.68% 2.83% 0.16% --
Ratio of total expenses before custodian
reduction to average net assets (d) 2.40% 4.46% 5.12% 2.68% 2.62%
Ratio of net expenses after custodian
reduction to average net assets (d) 2.40% 4.42% 5.08% 2.68% 2.62%
Ratio of net investment income to average
net assets 9.32% 8.43% 8.45% 9.60% 8.55%
Portfolio turnover 33% 34% 32% 51% 55%
(a) Calculated using average shares.
(b) Amount includes $0.10 per share in litigation proceeds.
(c) Net asset value return represents portfolio returns based on change in the Trust's net asset
value assuming the reinvestment of all dividends and distributions which differs from the total
investment return based on the Trust's market value due to the difference between the Trust's net
asset value and the market value of its shares outstanding; past performance is no guarantee of
future results.
(d) As additional information, this ratio is included to reflect the taxes paid on retained long-term
gains. These taxes paid are netted against realized capital gains in the Statement of Operations.
The taxes paid are treated as deemed distributions and a credit for the taxes paid is passed on
to shareholders.
Senior securities:
Total principal amount (in millions) $ 12 $ 12 $ 12 $ 22.5 $ 22.5
Asset coverage per $1,000 of
indebtedness $ 11,552 $ 11,543 $ 10,918 $ 5,783 $ 5,195
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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12
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 79.16% (A) Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
PRIVATE PLACEMENT INVESTMENTS - 74.56%
A H C HOLDING COMPANY, INC.
A DESIGNER AND MANUFACTURER OF BOILERS AND WATER HEATERS FOR THE COMMERCIAL SECTOR.
15% Senior Subordinated Note due 2015 $ 1,230,991 11/21/07 $ 1,206,371 $ 1,223,203
Limited Partnership Interest (B) 7.93% int. 11/21/07 119,009 113,060
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1,325,380 1,336,263
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A T I ACQUISITION COMPANY
A FOR-PROFIT POST-SECONDARY SCHOOL SERVING STUDENTS IN TEXAS, FLORIDA AND ARIZONA.
12% Senior Subordinated Note due 2012 $ 1,125,000 04/08/04 1,125,000 1,125,000
Warrant, exercisable until 2012, to purchase
preferred stock at $.01 per share (B) 7 shs. 11/16/07 -- 8,801
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 10,848
------------- -------------
1,125,000 1,144,649
------------- -------------
ADVANCED TECHNOLOGIES HOLDINGS
A PROVIDER OF FACTORY MAINTENANCE SERVICES TO INDUSTRIAL COMPANIES.
15% Senior Subordinated Note due 2013 $ 1,080,000 12/27/07 1,058,400 1,080,418
Preferred Stock (B) 546 shs. 12/27/07 270,000 256,501
------------- -------------
1,328,400 1,336,919
------------- -------------
AERO HOLDINGS, INC.
A PROVIDER OF GEOSPATIAL SERVICES TO CORPORATE AND GOVERNMENT CLIENTS.
10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 925,619
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 645,918 716,335
Common Stock (B) 150,000 shs. 03/09/07 150,000 142,500
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 378
------------- -------------
1,775,698 1,784,832
------------- -------------
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 1,046,517 1,081,718
Preferred Class A Unit (B) 1,706 uts. * 170,600 59,710
Common Class B Unit (B) 16,100 uts. 01/22/04 1 161
Common Class D Unit (B) 3,690 uts. 09/12/06 -- 37
------------- -------------
*01/22/04 and 09/12/06. 1,217,118 1,141,626
------------- -------------
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 05/18/05 818,433 823,981
Common Stock (B) 263 shs. 05/18/05 263,298 47,690
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 12,503
------------- -------------
1,141,093 884,174
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
13
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 $ 846,053 $ 893,000
Common Stock (B) 275 shs. * 275,108 1,039,145
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 73 shs. 12/31/04 63,254 274,942
------------- -------------
*12/31/04, 03/31/05 and 05/02/06. 1,184,415 2,207,087
------------- -------------
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 1,140,670 1,222,791
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 131,814
Common Stock (B) 1 sh. 06/30/06 152 26,037
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 164 shs. 06/30/06 48,760 46,325
------------- -------------
1,331,528 1,426,967
------------- -------------
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. * 252 279,466
------------- -------------
*12/30/97 and 05/29/99.
COEUR, INC.
A PRODUCER OF PROPRIETARY, DISPOSABLE POWER INJECTION SYRINGES.
8.75% Senior Secured Term Note due 2010 $ 202,899 04/30/03 202,899 204,996
11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 230,003 243,545
Common Stock (B) 72,464 shs. 04/30/03 72,463 208,588
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 144,210
------------- -------------
528,682 801,339
------------- -------------
CONNECTICUT ELECTRIC, INC.
A SUPPLIER AND DISTRIBUTOR OF ELECTRICAL PRODUCTS SOLD INTO THE RETAIL AND WHOLESALE MARKETS.
12% Senior Subordinated Note due 2014 $ 1,267,387 01/12/07 1,182,283 1,215,226
Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 78,482
Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 56,769
------------- -------------
1,324,652 1,350,477
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
14
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
CONNOR SPORT COURT INTERNATIONAL, INC.
A DESIGNER AND MANUFACTURER OF OUTDOOR AND INDOOR SYNTHETIC SPORTS FLOORING AND OTHER TEMPORARY FLOORING PRODUCTS.
Preferred Stock Series B-2 (B) 9,081 shs. 07/05/07 $ 370,795 $ 403,296
Preferred Stock Series C 3,781 shs. 07/05/07 158,913 126,409
Common Stock (B) 380 shs. 07/05/07 18,333 4
Limited Partnership Interest (B) 4.43% int. * 103,135 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 92 shs. ** 84,829 --
------------- -------------
*08/12/04 and 01/14/05. **08/12/04 and 01/18/05. 736,005 529,709
------------- -------------
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 1,115,385 1,168,714
Common Stock (B) 269 shs. * 278,521 762,586
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 54 shs. 06/15/05 53,295 154,233
------------- -------------
*06/15/05 and 05/22/06. 1,447,201 2,085,533
------------- -------------
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 1,290,633 1,356,750
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 57,870
------------- -------------
1,363,250 1,414,620
------------- -------------
DAVIS-STANDARD LLC
A MANUFACTURER, ASSEMBLER, AND INSTALLER OF A BROAD RANGE OF CAPITAL EQUIPMENT THAT IS USED IN THE EXTRUSION, CONVERSION, AND
PROCESSING OF PLASTIC MATERIALS.
12% Senior Subordinated Note due 2014 $ 978,261 10/30/06 918,656 1,017,391
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 846,233
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 29,018
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 92,437
------------- -------------
1,334,775 1,985,079
------------- -------------
DIRECTED ELECTRONICS, INC.
A DESIGNER AND DISTRIBUTOR OF BRAND NAME AUTOMOTIVE SECURITY SYSTEMS, AUDIO PRODUCTS AND INSTALLATION ACCESSORIES.
Common Stock (B) 195,118 shs. * 982,868 323,896
------------- -------------
*12/19/05 and 06/17/06.
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 --
Warrants, exercisable until 2011, to purchase
common stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 --
------------- -------------
*10/24/96 and 08/28/98. 1,960,217 --
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
15
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
DUNCAN SYSTEMS, INC.
A DISTRIBUTOR OF WINDSHIELDS AND SIDE GLASS FOR THE RECREATIONAL VEHICLE MARKET.
10% Senior Secured Term Note due 2013 $ 308,571 11/01/06 $ 303,942 $ 307,084
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 438,009 485,689
Common Stock (B) 102,857 shs. 11/01/06 102,857 154,873
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 48,626
------------- -------------
889,471 996,272
------------- -------------
DWYER GROUP, INC.
A FRANCHISER OF A VARIETY OF HOME REPAIR SERVICES.
Common Stock (B) 3,656 shs. * 365,600 560,855
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 165,159
------------- -------------
*10/30/03 and 01/02/04. 464,319 726,014
------------- -------------
E X C ACQUISITION CORPORATION
A MANUFACTURER OF PRE-FILLED SYRINGES AND PUMP SYSTEMS USED FOR INTRAVENOUS DRUG DELIVERY.
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 11 shs. 06/28/04 40,875 97,932
------------- -------------
ELECTRA BICYCLE COMPANY LLC
A DESIGNER AND MARKETER OF BRANDED LEISURE BICYCLES.
10.5% Senior Secured Term Note A due 2009 $ 72,875 04/12/07 71,417 72,516
10.5% Senior Secured Term Note B due 2012 $ 404,453 04/12/07 397,519 400,789
12% Senior Secured Term Note C due 2012 $ 291,498 04/12/07 271,410 286,489
Limited Liability Company Unit Series F 36,913 uts. 04/12/07 36,913 35,068
Limited Liability Company Unit Series G (B) 2,852 uts. 04/12/07 2,852 2,709
------------- -------------
780,111 797,571
------------- -------------
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 72,070
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 15,415 shs. 03/30/00 135,000 45,233
------------- -------------
416,250 117,303
------------- -------------
EVANS CONSOLES, INC.
A DESIGNER AND MANUFACTURER OF CONSOLES AND CONTROL CENTER SYSTEMS.
Common Stock 45,000 shs. 05/06/04 6 534,195
------------- -------------
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 1,184,234 1,274,077
Preferred Unit (B) 84 uts. 06/01/06 83,524 83,530
Common Unit (B) 844 uts. 06/01/06 844 73,097
Common Unit Class B (B) 734 uts. 06/01/06 64,779 63,548
------------- -------------
1,333,381 1,494,252
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
16
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
FLUTES, INC.
AN INDEPENDENT MANUFACTURER OF MICRO FLUTED CORRUGATED SHEET MATERIAL FOR THE FOOD AND CONSUMER PRODUCTS PACKAGING INDUSTRIES.
10% Senior Secured Term Note due 2013 $ 524,791 04/13/06 $ 516,919 $ 524,368
14% Senior Subordinated Note due 2014 $ 317,177 04/13/06 286,706 317,307
Common Stock (B) 62,535 shs. 04/13/06 62,535 29,025
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 17,680 shs. 04/13/06 27,676 8,206
------------- -------------
893,836 878,906
------------- -------------
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 1,143,612 1,207,433
Common Stock (B) 98 shs. 02/03/06 97,826 56,794
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 78,129
------------- -------------
1,351,786 1,342,356
------------- -------------
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 1,159,203 1,146,751
Common Stock (B) 112,500 shs. 01/31/06 112,500 22,500
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 73,275 shs. 01/31/06 63,113 14,655
------------- -------------
1,334,816 1,183,906
------------- -------------
GOLDEN COUNTRY FOODS HOLDING, INC.
A MANUFACTURER OF FROZEN APPETIZERS AND SNACKS.
12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 914,607 1,005,457
8% Series A Convertible, cumulative Preferred Stock,
convertible into 4.25% of the fully diluted common shares 77,643 shs. 11/01/07 77,643 73,761
------------- -------------
992,250 1,079,218
------------- -------------
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 1,084,725 585,000
Preferred Stock (B) 11 shs. 09/18/07 10,714 --
Common Stock (B) 180 shs. 02/10/06 180,000 --
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 67 shs. 02/10/06 61,875 --
------------- -------------
1,337,314 585,000
------------- -------------
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 --
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
17
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
HOME DECOR HOLDING COMPANY
A DESIGNER, MANUFACTURER AND MARKETER OF FRAMED ART AND WALL DECOR PRODUCTS.
12.5% Senior Subordinated Note due 2012 $ 1,081,731 * $ 1,002,911 $ 1,086,480
Common Stock (B) 33 shs. * 33,216 39,838
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 126,661
------------- -------------
*06/30/04 and 08/19/04. 1,141,745 1,252,979
------------- -------------
INSURANCE CLAIMS MANAGEMENT, INC.
A THIRD PARTY ADMINISTRATOR PROVIDING AUTO AND PROPERTY CLAIM ADMINISTRATION SERVICES FOR INSURANCE COMPANIES.
Common Stock 37 shs. 02/27/07 1,100 --
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share 11 shs. 02/27/07 324 --
------------- -------------
1,424 --
------------- -------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A MANUFACTURER OF STEEL PROTECTIVE COMPUTER AND NETWORK SYSTEMS FOR THE INDUSTRIAL AND OFFICE ENVIRONMENTS.
12% Senior Secured Note due 2008 (D) $ 25,055 03/01/04 1 --
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------- -------------
149,501 --
------------- -------------
JASON, INC.
A DIVERSIFIED MANUFACTURING COMPANY SERVING VARIOUS INDUSTRIAL MARKETS.
13% Senior Subordinated Note due 2010 $ 510,187 08/04/00 483,194 501,545
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,245 424,886
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 85,329
------------- -------------
1,013,540 1,011,760
------------- -------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A MANUFACTURER OF SAFETY PRODUCTS SUCH AS STORAGE CABINETS AND CONTAINERS.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 806,517 852,188
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 131,999
------------- -------------
860,045 984,187
------------- -------------
K H O F HOLDINGS, INC.
A MANUFACTURER OF PREMIUM DISPOSABLE TABLEWARE PRODUCTS SERVING BOTH THE FOODSERVICE AND CONSUMER CHANNELS.
14% Senior Subordinated Note due 2014 $ 1,233,173 10/15/07 1,208,510 1,234,184
Common Stock (B) 116,827 shs. 10/15/07 116,827 110,986
------------- -------------
1,325,337 1,345,170
------------- -------------
K N B HOLDINGS CORPORATION
A DESIGNER, MANUFACTURER AND MARKETER OF PRODUCTS FOR THE CUSTOM FRAMING MARKET.
13.5% Senior Subordinated Note due 2013 $ 1,305,062 05/25/06 1,247,285 1,318,375
Common Stock (B) 71,053 shs. 05/25/06 71,053 67,557
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 41,455
------------- -------------
1,356,209 1,427,387
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
18
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
K W P I HOLDINGS CORPORATION
A MANUFACTURER AND DISTRIBUTOR OF VINYL WINDOWS AND PATIO DOORS THROUGHOUT THE NORTHWESTERN UNITED STATES.
12% Senior Subordinated Note due 2014 $ 1,227,000 03/14/07 $ 1,123,038 $ 1,204,110
Common Stock (B) 123 shs. 03/13/07 123,000 116,850
Warrant, exercisable until 2017, to purchase
common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 1
------------- -------------
1,331,928 1,320,961
------------- -------------
K-TEK HOLDING CORPORATION
A MANUFACTURER OF INSTRUMENTATION FOR LIQUID AND BULK SOLIDS LEVEL DETECTION FOR PROCESS AND STORAGE TANKS.
14% Senior Secured Tranche B Note due 2015 $ 1,157,143 12/20/07 1,136,314 1,148,981
Preferred Stock (B) 192,314 shs. 12/20/07 192,314 182,698
Common Stock (B) 54,326 shs. 12/20/07 543 543
------------- -------------
1,329,171 1,332,222
------------- -------------
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 $ 618,750 04/05/06 578,768 626,014
13% Preferred Stock (B) 299 shs. 04/05/06 299,295 338,209
Common Stock (B) 66 shs. 04/05/06 66,202 217,095
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 7 shs. 04/05/06 6,832 22,398
------------- -------------
951,097 1,203,716
------------- -------------
MAIL COMMUNICATIONS GROUP, INC.
A PROVIDER OF MAIL PROCESSING AND HANDLING SERVICES, LETTERSHOP SERVICES, AND COMMERCIAL PRINTING SERVICES.
12.5% Senior Subordinated Note due 2014 $ 516,177 05/04/07 483,072 513,746
Limited Liability Company Unit (B) 12,176 uts. 05/04/07 158,824 150,883
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 18
------------- -------------
664,677 664,647
------------- -------------
MAVERICK ACQUISITION COMPANY
A MANUFACTURER OF CAPSULES THAT COVER THE CORK AND NECK OF WINE BOTTLES.
9.73% Senior Secured Tranche A Note due 2010 (C) $ 286,891 09/03/04 286,891 285,982
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 164,308 176,380
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 22,960
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 16,589
------------- -------------
507,337 501,911
------------- -------------
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 * 1,345,547 1,421,234
Common Stock (B) 238 shs. * 238,000 159,028
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. * 86,281 58,005
------------- -------------
*08/12/05 and 09/11/06. 1,669,828 1,638,267
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
19
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
MOMENTUM HOLDING CO.
A DESIGNER AND SUPPLIER OF UPHOLSTERY FABRIC TO COMMERCIAL FURNITURE MANUFACTURERS AND ARCHITECTURAL AND DESIGN FIRMS.
12% Senior Subordinated Note due 2014 $ 618,802 08/04/06 $ 555,603 $ 631,178
Limited Partnership Interest (B) 11.24% int. 08/04/06 56,198 87,773
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 91,494
------------- -------------
668,506 810,445
------------- -------------
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 1,259,338 1,280,787
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 81 shs. 03/31/06 73,125 1
------------- -------------
1,332,463 1,280,788
------------- -------------
MORTON INDUSTRIAL GROUP, INC.
A MANUFACTURER OF HIGHLY ENGINEERED METAL FABRICATED COMPONENTS.
12% Senior Subordinated Note due 2014 $ 1,292,246 08/25/06 1,194,861 1,190,012
Common Stock (B) 57,754 shs. 08/25/06 57,754 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 91,923 shs. 08/25/06 79,380 --
------------- -------------
1,331,995 1,190,012
------------- -------------
MOSS, INC.
A MANUFACTURER AND DISTRIBUTOR OF LARGE DISPLAY AND EXHIBIT STRUCTURES.
Limited Partnership Interest of
Riverside Capital Appreciation Fund I, L.P. (B) 19.20% int. * 199,301 344,456
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 122 shs. 12/21/05 20,941 21,088
------------- -------------
*09/20/00, 05/23/02 and 02/21/07. 220,242 365,544
------------- -------------
NABCO, INC.
A PRODUCER OF EXPLOSIVE CONTAINMENT VESSELS IN THE UNITED STATES.
14% Senior Subordinated Note due 2014 $ 352,389 02/24/06 326,397 176,195
Limited Liability Company Unit (B) 437 uts. * 436,984 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 26 shs. 02/24/06 19,687 --
------------- -------------
*02/24/06 and 06/22/07. 783,068 176,195
------------- -------------
NAVIS GLOBAL
A DESIGNER, MANUFACTURER, SELLER AND SERVICER OF FINISHING MACHINERY FOR THE KNIT AND WOVEN SEGMENTS OF THE GLOBAL TEXTILE INDUSTRY.
12% Senior Subordinated Note due 2014 $ 705,457 05/28/04 650,065 695,800
8.75% Senior Secured Note due 2011 $ 327,497 05/28/04 327,497 326,259
Common Stock (B) 385,233 shs. 05/28/04 385,233 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 --
------------- -------------
1,437,531 1,022,059
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
20
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
NESCO HOLDINGS CORPORATION
A SALES AND LEASING COMPANY THAT PROVIDES EQUIPMENT TO THE ELECTRIC UTILITY, TELECOMMUNICATIONS, AND VARIOUS OTHER INDUSTRIES.
12% Senior Subordinated Note due 2015 $ 1,125,000 08/02/07 $ 999,658 $ 1,117,327
Common Stock (B) 225,000 shs. 08/02/07 225,000 213,750
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 632
------------- -------------
1,327,500 1,331,709
------------- -------------
NETSHAPE TECHNOLOGIES, INC.
A MANUFACTURER OF POWDER METAL AND METAL INJECTION MOLDED PRECISION COMPONENTS USED IN INDUSTRIAL, CONSUMER, AND OTHER APPLICATIONS.
12% Senior Subordinated Note due 2014 $ 810,000 02/02/07 745,713 754,623
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 540 uts. 02/01/07 540,000 486,000
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 --
------------- -------------
1,333,800 1,240,623
------------- -------------
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 1,002,784
10% Preferred Stock (B) 135 shs. 03/29/04 135,044 137,123
Common Stock (B) 3,418 shs. 03/29/04 3,418 141,285
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 4,565 shs. 03/29/04 3,877 188,683
------------- -------------
1,125,000 1,469,875
------------- -------------
NYLONCRAFT, INC.
A SUPPLIER OF ENGINEERED PLASTIC COMPONENTS FOR THE AUTOMOTIVE INDUSTRY.
9% Senior Secured Note due 2009 $ 464,286 01/28/02 464,286 441,072
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 808,625 642,857
Common Stock (B) 178,571 shs. 01/28/02 178,571 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 138,928 shs. 01/28/02 92,597 --
------------- -------------
1,544,079 1,083,929
------------- -------------
OAKRIVER TECHNOLOGY, INC.
DESIGNS, ENGINEERS AND ASSEMBLES HIGH PRECISION AUTOMATED PROCESS EQUIPMENT FOR THE MEDICAL DEVICE INDUSTRY, WITH A FOCUS ON
DEFIBRILLATORS AND STENTS.
10% Senior Secured Note due 2012 $ 323,115 01/03/06 318,268 322,647
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 354,816 392,407
Common Stock (B) 184,176 shs. 01/03/06 184,176 117,607
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 27,505
------------- -------------
893,160 860,166
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
21
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
OLYMPIC SALES, INC.
A BOAT RETAILER IN WASHINGTON STATE, OREGON, CALIFORNIA AND BRITISH COLUMBIA.
12% Senior Subordinated Note due 2008 $ 511,000 08/07/98 $ 511,000 $ 504,437
12% Senior Subordinated Note due 2008 $ 244,154 02/09/00 242,972 243,442
Limited Partnership Interest of Riverside VIII, VIII-A and
VIII-B Holding Company, L.P. 10.66% int. * 808,386 --
Warrants, exercisable until 2008, to purchase
common stock at $.01 per share (B) 15,166 shs. ** 206,041 --
------------- -------------
*08/07/98, 02/23/99, 12/22/99 and 02/25/03. **08/07/98 and 02/29/00. 1,768,399 747,879
------------- -------------
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 01/17/06 955,158 1,047,115
Limited Liability Company Unit (B) 1,942 uts. 01/17/06 302,885 674,426
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 113,868
------------- -------------
1,348,467 1,835,409
------------- -------------
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 $ 1,176,469 07/03/06 1,121,168 1,199,999
Preferred Unit (B) 202 uts. 07/03/06 202,320 226,598
Preferred Unit (B) 36 uts. 07/03/06 36,420 40,790
Common Unit Class I (B) 78 uts. 07/03/06 -- 91,998
Common Unit Class L (B) 17 uts. 07/03/06 -- 19,435
------------- -------------
1,359,908 1,578,820
------------- -------------
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 1,142,340 1,239,300
Preferred Stock (B) 19 shs. 03/31/06 174,492 201,294
Common Stock (B) 12 shs. 03/31/06 13,500 25,537
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 14,860
------------- -------------
1,336,220 1,480,991
------------- -------------
PACIFIC CONSOLIDATED HOLDINGS LLC
A MANUFACTURER OF RUGGED, MOBILE LIQUID AND GASEOUS OXYGEN AND NITROGEN GENERATING SYSTEMS USED IN THE GLOBAL DEFENSE, OIL & GAS AND
MEDICAL SECTORS.
12% Senior Subordinated Note due 2012 $ 690,683 04/27/07 632,752 672,740
Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 31,771
------------- -------------
666,229 704,511
------------- -------------
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 1,097,731 1,123,650
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 155,239
------------- -------------
1,238,356 1,278,889
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
22
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
POSTLE ALUMINUM COMPANY LLC
A MANUFACTURER AND DISTRIBUTOR OF ALUMINUM EXTRUDED PRODUCTS.
12% Senior Subordinated Note due 2014 $ 1,080,000 10/02/06 $ 1,004,058 $ 1,103,884
Limited Liability Company Unit (B) 733 uts. 10/02/06 270,000 271,022
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 182 shs. 10/02/06 65,988 67,408
------------- -------------
1,340,046 1,442,314
------------- -------------
PROTEIN GENETICS, INC.
A PRODUCER OF BOVINE ARTIFICIAL INSEMINATION PRODUCTS, RELATED BREEDING AND HEALTHCARE PRODUCTS AND SPECIALTY GENETICS SOLD TO THE
DAIRY AND BEEF INDUSTRIES.
9.8% Redeemable Exchangeable Preferred Stock (B) 332 shs. 08/12/94 33,217 --
Common Stock (B) 867 shs. * 42,365 --
------------- -------------
*08/12/94 and 11/14/01. 75,582 --
------------- -------------
QUALIS AUTOMOTIVE LLC
A DISTRIBUTOR OF AFTERMARKET AUTOMOTIVE BRAKE AND CHASSIS PRODUCTS.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 809,820 921,930
Common Stock 187,500 shs. 05/28/04 187,500 68,110
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share 199,969 shs. 05/28/04 199,969 72,639
------------- -------------
1,197,289 1,062,679
------------- -------------
QUALSERV CORPORATION
A PROVIDER OF FOODSERVICE EQUIPMENT AND SUPPLIES TO MAJOR RESTAURANT CHAINS AND THEIR FRANCHISEES.
Limited Partnership Interest (B) 4.90% int. 07/09/04 1 --
------------- -------------
R A J MANUFACTURING HOLDINGS LLC
A DESIGNER AND MANUFACTURER OF WOMEN'S SWIMWEAR SOLD UNDER A VARIETY OF LICENSED BRAND NAMES.
12.5% Senior Subordinated Note due 2014 $ 1,200,277 12/15/06 1,106,662 1,224,283
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 161,538
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 76,229
------------- -------------
1,325,994 1,462,050
------------- -------------
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 1,119,163 1,232,713
Common Stock (B) 153,191 shs. 02/10/06 153,191 187,207
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 85,112
------------- -------------
1,335,775 1,505,032
------------- -------------
ROYAL BATHS MANUFACTURING COMPANY
A MANUFACTURER AND DISTRIBUTOR OF ACRYLIC AND CULTURED MARBLE BATHROOM PRODUCTS.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 522,278 567,966
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 84,722
------------- -------------
587,367 652,688
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
23
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A MANUFACTURER OF VERTICAL PANEL SAWS AND ROUTERS FOR THE WOOD WORKING INDUSTRY.
Class B Common Stock (B) 846 shs. 06/02/99 $ 146,456 $ 736,270
------------- -------------
SAVAGE SPORTS HOLDING, INC.
A MANUFACTURER OF SPORTING FIREARMS.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 771,030 830,948
Common Stock (B) 324 shs. * 340,378 623,194
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 136,064
------------- -------------
*09/10/04 and 10/05/07. 1,171,537 1,590,206
------------- -------------
SMART SOURCE HOLDINGS LLC
A SHORT-TERM COMPUTER RENTAL COMPANY.
12% Senior Subordinated Note due 2015 $ 1,038,462 08/31/07 943,515 1,033,872
Limited Liability Company Unit (B) 312 uts. 08/31/07 311,538 295,963
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 76 shs. 08/31/07 76,154 1
------------- -------------
1,331,207 1,329,836
------------- -------------
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.
12.13% Senior Subordinated Note due 2014 $ 1,185,366 08/01/06 1,117,440 1,193,510
Common Stock (B) 165 shs. 08/01/06 164,634 197,621
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 65,818
------------- -------------
1,331,464 1,456,949
------------- -------------
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 Liability Company Unit (B) 150,000 uts. 08/20/03 33,462 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
------------- -------------
43,711 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 1,023,086 1,173,909
Common Stock (B) 1,167 shs. 10/14/05 1,167 502,946
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 618 shs. 10/14/05 155,860 266,342
------------- -------------
1,180,113 1,943,197
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
24
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
TERRA RENEWAL SERVICES, INC.
A PROVIDER OF WASTEWATER RESIDUAL MANAGEMENT AND REQUIRED ENVIRONMENTAL REPORTING, PERMITTING, NUTRIENT MANAGEMENT PLANNING AND
RECORD KEEPING TO COMPANIES INVOLVED IN POULTRY AND FOOD PROCESSING.
9.25% Senior Secured Tranche B Note due 2012 (C) $ 868,863 * $ 865,646 $ 869,541
12% Senior Subordinated Note due 2014 $ 664,062 ** 633,855 668,625
Limited Partnership Interest of
Saw Mill Capital Fund V, L.P. 2.30% int. 03/01/05 66,448 228,526
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 34,627 39,842
------------- -------------
*04/28/06 and 12/21/06. **04/28/06 and 09/13/06. 1,600,576 1,806,534
------------- -------------
TORRENT GROUP HOLDINGS, INC.
A CONTRACTOR SPECIALIZING IN THE SALES AND INSTALLATION OF ENGINEERED DRYWELLS FOR THE RETENTION AND FILTRATION OF STORMWATER AND
NUISANCE WATER FLOW.
12.5% Senior Subordinated Note due 2013 $ 1,185,366 10/26/07 1,113,016 1,187,772
8% Convertible Preferred Stock 219 shs. 10/26/07 219,203 208,240
------------- -------------
1,332,219 1,396,012
------------- -------------
TOTAL EQUIPMENT & SERVICE, INC.
A MANUFACTURER OF A WIDE VARIETY OF EQUIPMENT USED IN THE OIL AND GAS INDUSTRY.
10.5% Senior Secured Term Note due 2013 $ 486,487 03/02/07 479,190 485,616
13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 341,032
Common Stock (B) 71,542 shs. 03/02/07 71,542 67,965
Warrant, exercisable until 2014 to purchase
common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 197
------------- -------------
885,863 894,810
------------- -------------
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 1,309,924 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 161,768
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 114,008
------------- -------------
1,809,340 1,631,776
------------- -------------
TRANSPAC HOLDING COMPANY
A DESIGNER, IMPORTER, AND WHOLESALER OF HOME DECOR AND SEASONAL GIFT PRODUCTS.
12% Senior Subordinated Note due 2015 $ 938,651 10/31/07 873,703 937,247
Common Stock (B) 110 shs. 10/31/07 110,430 104,909
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 1
------------- -------------
1,030,513 1,042,157
------------- -------------
TRANSTAR HOLDING COMPANY
A DISTRIBUTOR OF AFTERMARKET AUTOMOTIVE TRANSMISSION PARTS.
12% Senior Subordinated Note due 2013 $ 918,000 08/31/05 884,194 945,540
Common Stock (B) 571 shs. * 570,944 667,510
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 46 shs. 08/31/05 41,021 53,196
------------- -------------
*08/31/05 and 04/30/07. 1,496,159 1,666,246
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
25
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
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 $ 225,806 01/20/00 $ 225,806 $ 225,812
12% Senior Subordinated Note due 2010 $ 758,100 01/20/00 743,786 758,626
Common Stock (B) 129,960 shs. 01/20/00 129,960 727,978
Warrant, exercisable until 2010, to purchase
common stock at $1 per share (B) 148,911 shs. 01/20/00 56,316 834,133
------------- -------------
1,155,868 2,546,549
------------- -------------
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 * 1,148,723 1,192,784
Common Stock (B) 393 shs. * 423,985 277,121
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 81 shs. * 84,650 57,230
------------- -------------
*07/19/05 and 12/22/05. 1,657,358 1,527,135
------------- -------------
TRUSTILE DOORS, INC.
A MANUFACTURER AND DISTRIBUTOR OF INTERIOR DOORS.
12.5% Senior Subordinated Note due 2010 $ 450,000 04/11/03 432,339 454,500
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 44,432 116,119
------------- -------------
476,771 570,619
------------- -------------
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 04/30/04 919,097 991,550
Common Stock (B) 96 shs. 04/30/04 96,400 75,821
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 95,956
------------- -------------
1,127,603 1,163,327
------------- -------------
VICTORY VENTURES LLC
AN ACQUIRER OF CONTROLLING OR SUBSTANTIAL INTERESTS IN OTHER ENTITIES.
Series A Preferred Units 1 ut. 12/02/96 236 --
------------- -------------
VISIONEERING, INC.
A DESIGNER AND MANUFACTURER OF TOOLING AND FIXTURES FOR THE AEROSPACE INDUSTRY.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 451,942 460,126
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 333,332 375,534
Common Stock (B) 70,588 shs. 05/17/07 70,588 67,059
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 200
------------- -------------
887,322 902,919
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
26
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Principal Amount
Shares, Units or
Ownership Acquisition
CORPORATE RESTRICTED SECURITIES: (A) CONTINUED Percentage Date Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
VITALITY FOODSERVICE, INC.
A NON-CARBONATED BEVERAGE DISPENSING COMPANY FOCUSED ON THE FOODSERVICE INDUSTRY.
15% Senior Subordinated Note due 2011 $ 1,157,670 09/24/04 $ 1,076,461 $ 1,041,900
Common Stock (B) 14,006 shs. * 140,064 84,634
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 76,096
------------- -------------
*09/24/04 and 12/22/06. 1,315,463 1,202,630
------------- -------------
VITEX PACKAGING GROUP, INC.
A MANUFACTURER OF SPECIALTY PACKAGING, PRIMARILY ENVELOPES AND TAGS USED ON TEA BAGS.
12.5% Senior Subordinated Note due 2012 $ 900,000 07/19/04 785,152 810,000
14.5% PIK Note due 2010 56,250 06/30/07 51,402 50,625
Limited Liability Company Unit Class A (B) 219,375 uts. 07/19/04 219,375 --
Limited Liability Company Unit Class B (B) 96,848 uts. 07/19/04 96,848 --
------------- -------------
1,152,777 860,625
------------- -------------
WAGGIN' TRAIN HOLDINGS LLC
A PRODUCER OF PREMIUM QUALITY MEAT DOG TREATS.
14% Senior Subordinated Note due 2014 $ 1,126,243 11/15/07 1,103,718 1,117,998
Limited Liability Company Unit Class B (B) 224 uts. 11/15/07 223,757 212,572
Limited Liability Company Unit Class C (B) 224 uts. 11/15/07 -- 2
------------- -------------
1,327,475 1,330,572
------------- -------------
WALLS INDUSTRIES, INC.
A PROVIDER OF BRANDED WORKWEAR AND SPORTING GOODS APPAREL.
Limited Partnership Interest 0.20% int. 07/12/04 1,974 11,480
Common Stock (B) 2,133 shs. 12/21/07 -- 12,406
------------- -------------
1,974 23,886
------------- -------------
WELLBORN FOREST HOLDING CO.
A MANUFACTURER OF SEMI-CUSTOM KITCHEN AND BATH CABINETRY.
12.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 850,851 876,358
Common Stock (B) 101 shs. 11/30/06 101,250 91,125
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 1
------------- -------------
997,891 967,484
------------- -------------
WORKPLACE MEDIA HOLDING CO.
A DIRECT MARKETER SPECIALIZING IN PROVIDING ADVERTISERS WITH ACCESS TO CONSUMERS IN THE WORKPLACE.
13% Senior Subordinated Note due 2015 $ 613,692 05/14/07 559,053 607,451
Limited Partnership Interest (B) 12.26% int. 05/14/07 61,308 58,243
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 47 shs. 05/14/07 44,186 --
------------- -------------
664,547 665,694
------------- -------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 92,832,456 94,407,034
------------- -------------
---------------------------------------------------------------------------------------------------------------------------------
27
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
INTEREST DUE PRINCIPAL
CORPORATE RESTRICTED SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST FAIR VALUE
---------------------------------------------------------------------------------------------------------------------------------
RULE 144A SECURITIES - 4.60%:(A)
BONDS - 4.60%
Bristow Group, Inc. 7.500% 09/15/17 $ 75,000 $ 75,000 $ 75,375
Charter Communications Op LLC 8.000 04/30/12 750,000 736,875 723,750
Compucom Systems, Inc. 12.500 10/01/15 670,000 647,534 654,925
Douglas Dynamics LLC 7.750 01/15/12 325,000 326,335 281,125
G F S I, Inc. (C) 10.500 06/01/11 375,000 340,343 356,250
Intergen NV 9.000 06/30/17 375,000 371,959 394,688
Packaging Dynamics Corporation of America 10.000 05/01/16 1,200,000 1,199,327 1,056,000
Penhall International 12.000 08/01/14 325,000 333,079 302,250
Quebecor Media, Inc. 7.750 03/15/16 575,000 550,877 553,438
Ryerson, Inc. 12.000 11/01/15 30,000 30,000 29,625
Snoqualmie Entertainment Authority 9.125 02/01/15 250,000 244,063 240,625
Steel Dynamics, Inc. 6.750 04/01/15 100,000 100,000 97,000
Tenneco, Inc. 8.125 11/15/15 50,000 50,000 49,500
TRW Automotive, Inc. 7.250 03/15/17 500,000 440,000 448,750
Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,604 552,150
TOTAL BONDS 6,001,996 5,815,451
------------ ------------
TOTAL RULE 144A SECURITIES 6,001,996 5,815,451
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $ 98,834,452 $100,222,485
------------ ------------
---------------------------------------------------------------------------------------------------------------------------------
28
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
INTEREST DUE PRINCIPAL
CORPORATE PUBLIC SECURITIES - 25.34%:(A) RATE DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
BONDS - 23.62%
Allied Waste NA 7.375% 04/15/14 $ 140,000 $ 141,550 $ 139,650
Appleton Papers, Inc. 8.125 06/15/11 250,000 250,000 245,313
Aramark Corporation 8.500 02/01/15 100,000 100,000 101,250
Aramark Corporation (C) 8.411 02/01/15 100,000 100,000 97,500
Atlas Pipeline Partners 8.125 12/15/15 600,000 611,633 594,000
Basic Energy Services 7.125 04/15/16 625,000 610,043 587,500
Blockbuster, Inc. (C) 9.000 09/01/12 275,000 276,093 235,125
Boyd Gaming Corporation 7.125 02/01/16 150,000 146,625 141,750
Cablevision Systems Corporation 8.000 04/15/12 500,000 505,760 485,000
Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 536,250
Clayton Williams Energy, Inc. 7.750 08/01/13 575,000 557,000 503,125
Community Health Systems, Inc. 8.875 07/15/15 475,000 464,276 483,906
Del Monte Corporation 8.625 12/15/12 200,000 200,000 201,500
Dynegy Holdings, Inc. 7.500 06/01/15 250,000 222,261 233,750
Dynegy Holdings, Inc. 8.375 05/01/16 665,000 675,847 650,038
Edison Mission Energy 7.750 06/15/16 35,000 35,000 36,050
Electronic Data Systems Corporation 7.125 10/15/09 500,000 502,581 516,163
Esterline Technologies 7.750 06/15/13 175,000 175,000 179,375
Ford Motor Credit Co. 7.375 10/28/09 750,000 748,125 705,935
Ford Motor Credit Co. 8.000 12/15/16 375,000 358,125 320,130
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 131,300
General Motors Acceptance Corporation 5.850 01/14/09 750,000 741,353 717,251
Goodyear Tire & Rubber Co. 7.857 08/15/11 350,000 327,250 354,375
Goodyear Tire & Rubber Co. 8.625 12/01/11 250,000 262,474 260,625
Goodyear Tire & Rubber Co. 9.000 07/01/15 64,000 65,234 67,840
GulfMark Offshore, Inc. 7.750 07/15/14 300,000 298,725 303,000
H C A, Inc. 9.250 11/15/16 500,000 508,603 525,000
Hughes Network Systems 9.500 04/15/14 525,000 535,874 531,561
Idearc, Inc. 8.000 11/15/16 520,000 521,094 477,100
Inergy LP 8.250 03/01/16 75,000 75,000 77,625
Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 716,657 693,450
Interline Brands, Inc. 8.125 06/15/14 830,000 824,237 821,700
Iron Mountain, Inc. 8.750 07/15/18 500,000 514,807 525,625
Koppers, Inc. 9.875 10/15/13 170,000 170,000 178,925
Lear Corporation 8.750 12/01/16 1,000,000 950,938 910,000
Leucadia National Corporation 7.000 08/15/13 350,000 355,195 335,125
Liberty Media Corporation 5.700 05/15/13 500,000 475,805 463,206
Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 236,250
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 99,000
Mariner Energy, Inc. 8.000 05/15/17 400,000 402,642 380,500
Markwest Energy Operating Co. 6.875 11/01/14 550,000 532,750 523,875
Mediacom Broadband LLC 8.500 10/15/15 750,000 765,889 664,687
---------------------------------------------------------------------------------------------------------------------------------
29
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
INTEREST DUE PRINCIPAL
CORPORATE PUBLIC SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
BONDS, CONTINUED
Metaldyne Corporation (C) 10.000% 11/01/13 $ 340,000 $ 341,676 $ 280,500
N R G Energy, Inc. 7.375 02/01/16 600,000 598,750 585,000
N T L Cable PLC 9.125 08/15/16 790,000 813,424 782,100
Neiman Marcus Group, Inc. 10.375 10/15/15 600,000 600,000 624,750
Nextel Communications, Inc. 7.375 08/01/15 400,000 407,680 393,847
North American Energy Partners 8.750 12/01/11 200,000 200,000 197,500
NOVA Chemicals Corporation (C) 7.863 11/15/13 515,000 511,538 481,525
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 500,000
Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 336,000
Petrohawk Energy Corporation 9.125 07/15/13 750,000 762,292 789,375
Pliant Corporation (C) 11.850 06/15/09 764,203 774,565 779,487
Quicksilver Resources, Inc. 7.125 04/01/16 600,000 583,125 589,500
R H Donnelley, Inc. 8.875 01/15/16 625,000 653,069 584,375
Rental Service Corporation 9.500 12/01/14 500,000 506,864 447,500
Rock-Tenn Co. 8.200 08/15/11 430,000 441,181 445,050
Rogers Wireless, Inc. 7.500 03/15/15 560,000 594,819 612,408
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 225,000
Stewart & Stevenson LLC 10.000 07/15/14 750,000 770,972 753,750
Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 227,500
Tenneco, Inc. 8.625 11/15/14 500,000 501,192 491,250
Tesoro Petroleum Corporation 6.500 06/01/17 250,000 250,000 247,500
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 34,300
Titan International, Inc. 8.000 01/15/12 70,000 70,000 67,550
Transdigm, Inc. 7.750 07/15/14 150,000 151,385 152,250
Triton PCS, Inc. 8.500 06/01/13 500,000 500,000 517,500
Tube City IMS Corporation 9.750 02/01/15 1,000,000 992,062 900,000
United Components, Inc. 9.375 06/15/13 535,000 535,989 528,313
United Rentals, Inc. 7.750 11/15/13 325,000 325,000 282,750
Valassis Communications, Inc. 8.250 03/01/15 75,000 73,191 66,844
Vought Aircraft Industries 8.000 07/15/11 650,000 648,309 615,875
Warner Music Group Corporation 7.375 04/15/14 125,000 125,000 96,250
------------ ------------
TOTAL BONDS 30,781,510 29,906,879
------------ ------------
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30
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
SHARES OR
INTEREST DUE PRINCIPAL
CORPORATE PUBLIC SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 1.53%
Comcast Corporation (B) 16,800 $ 310,632 $ 306,768
Distributed Energy Systems Corporation (B) 14,000 177,078 5,600
EnerNOC, Inc. (B) 23,500 648,410 1,153,850
ITC^Deltacom, Inc. (B) 94,588 827,645 472,940
------------ ------------
TOTAL COMMON STOCK 1,963,765 1,939,158
------------ ------------
CONVERTIBLE BONDS - 0.19%
Citadel Broadcasting Corporation 1.875% 02/15/11 $ 300,000 232,875 246,000
------------ ------------
TOTAL CONVERTIBLE BONDS 232,875 246,000
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 32,978,150 $ 32,092,037
------------ ------------
INTEREST DUE PRINCIPAL
SHORT TERM SECURITIES RATE/YIELD* DATE AMOUNT COST MARKET VALUE
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 5.94%
Avery Dennison Corporation 5.605% 01/02/08 $ 651,000 $ 650,900 $ 650,900
Computer Sciences Corporation 5.056 01/08/08 2,616,000 2,613,431 2,613,431
Kinder Morgan Energy Partners LP 5.605 01/03/08 2,603,000 2,602,190 2,602,190
Textron Financial Corporation 5.706 01/02/08 1,659,000 1,658,737 1,658,737
------------ ------------
TOTAL SHORT-TERM SECURITIES $ 7,525,258 $ 7,525,258
------------ ------------
TOTAL INVESTMENTS 110.44% $139,337,860 $139,839,780
------ ============ ------------
Other Assets 3.93 4,977,867
Liabilities (14.37) (18,192,313)
------ ------------
TOTAL NET ASSETS 100.00% $126,625,334
====== ============
(A) In each of the convertible note, warrant, and common stock investments, the issuer has agreed to provide certain registration
rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 12/31/07.
(D) Defaulted security; interest not accrued.
(E) Illiquid securities. At December 31, 2007, the value of these securities amounted to $94,407,034 or 74.56% of net assets.
* Effective yield at purchase
PIK - Payment-in-kind
---------------------------------------------------------------------------------------------------------------------------------
31
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
AEROSPACE - 4.88% BUILDINGS & REAL ESTATE - 1.52%
Consolidated Foundries Holdings $ 2,085,533 K W P I Holdings Corporation $ 1,320,961
Esterline Technologies 179,375 Texas Industries, Inc. 34,300
Gencorp, Inc. 131,300 TruStile Doors, Inc. 570,619
Hughes Network Systems 531,561 ------------
P A S Holdco LLC 1,578,820 1,925,880
Transdigm, Inc. 152,250 ------------
Visioneering, Inc. 902,919 CHEMICAL, PLASTICS & RUBBER - 0.74%
Vought Aircraft Industries 615,875 Capital Specialty Plastics, Inc. 279,466
------------ Koppers, Inc. 178,925
6,177,633 NOVA Chemicals Corporation 481,525
------------ ------------
AUTOMOBILE - 10.30% 939,916
Ford Motor Credit Co. 1,026,065 ------------
Fuel Systems Holding Corporation 1,183,906 CONSUMER PRODUCTS - 9.31%
General Motors Acceptance Corporation 717,251 Aero Holdings, Inc. 1,784,832
Goodyear Tire & Rubber Co. 682,840 Augusta Sportswear Holding Co. 2,207,087
Jason, Inc. 1,011,760 Bravo Sports Holding Corporation 1,426,967
Lear Corporation 910,000 G F S I, Inc. 356,250
Metaldyne Corporation 280,500 K N B Holdings Corporation 1,427,387
Nyloncraft, Inc. 1,083,929 Momentum Holding Co. 810,445
Ontario Drive & Gear Ltd. 1,835,409 R A J Manufacturing Holdings LLC 1,462,050
Qualis Automotive LLC 1,062,679 Royal Baths Manufacturing Company 652,688
Tenneco, Inc. 540,750 The Tranzonic Companies 1,631,776
Titan International, Inc. 67,550 Walls Industries, Inc. 23,886
Transtar Holding Company 1,666,246 ------------
TRW Automotive, Inc. 448,750 11,783,368
United Components, Inc. 528,313 ------------
------------ CONTAINERS, PACKAGING & GLASS - 5.40%
13,045,948 Flutes, Inc. 878,906
------------ Maverick Acquisition Company 501,911
BEVERAGE, DRUG & FOOD - 3.28% P I I Holding Corporation 1,480,991
Aramark Corporation 198,750 Packaging Dynamics Corporation of America 1,056,000
Del Monte Corporation 201,500 Paradigm Packaging, Inc. 1,278,889
Golden Country Foods Holding, Inc. 1,079,218 Pliant Corporation 779,487
Nonni's Food Company 1,469,875 Vitex Packaging Group, Inc. 860,625
Specialty Foods Group, Inc. -- ------------
Vitality Foodservice, Inc. 1,202,630 6,836,809
------------ ------------
4,151,973 DISTRIBUTION - 1.74%
------------ Duncan Systems, Inc. 996,272
BROADCASTING & ENTERTAINMENT - 2.81% Magnatech International, Inc. 1,203,716
Cablevision Systems Corporation 485,000 QualServ Corporation --
Charter Communications Op LLC 723,750 Strategic Equipment & Supply Corporation, Inc. --
Citadel Broadcasting Corporation 246,000 ------------
Comcast Corporation 306,768 2,199,988
Liberty Media Corporation 463,206 ------------
Mediacom Broadband LLC 664,687 DIVERSIFIED/CONGLOMERATE, MANUFACTURING - 5.93%
Workplace Media Holdings Co. 665,694 A H C Holding Company, Inc. 1,336,263
------------ Arrow Tru-Line Holdings, Inc. 884,174
3,555,105 Douglas Dynamics LLC 281,125
------------ Evans Consoles, Inc. 534,195
Postle Aluminum Company LLC 1,442,314
Radiac Abrasives, Inc. 1,505,032
Truck Bodies & Equipment International 1,527,135
------------
7,510,238
------------
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32
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
DIVERSIFIED/CONGLOMERATE, SERVICE - 4.68% HOME & OFFICE FURNISHINGS, HOUSEWARES, AND DURABLE
Advanced Technologies Holdings $ 1,336,919 CONSUMER PRODUCTS - 8.38%
Allied Waste NA 139,650 Connor Sport Court International, Inc. $ 529,709
CapeSuccess LLC 2,512 H M Holding Company 585,000
Diversco, Inc./DHI Holdings, Inc. -- Home Decor Holding Company 1,252,979
Dwyer Group, Inc. 726,014 Justrite Manufacturing Acquisition Co. 984,187
Fowler Holding, Inc. 1,342,356 K H O F Holdings, Inc. 1,345,170
Insurance Claims Management, Inc. -- Monessen Holding Corporation 1,280,788
Interline Brands, Inc. 821,700 Stanton Carpet Holding Co. 1,456,949
Iron Mountain, Inc. 525,625 Transpac Holdings Company 1,042,157
Mail Communications Group, Inc. 664,647 U-Line Corporation 1,163,327
Moss, Inc. 365,544 Wellborn Forest Holding Co. 967,484
------------ ------------
5,924,967 10,607,750
------------ ------------
ELECTRONICS - 1.73% LEISURE, AMUSEMENT, ENTERTAINMENT - 3.28%
Connecticut Electric, Inc. 1,350,477 Boyd Gaming Corporation 141,750
Directed Electronics, Inc. 323,896 Electra Bicycle Company LLC 797,571
Distributed Energy Systems Corporation 5,600 Majestic Star Casino LLC 236,250
Electronic Data Systems Corporation 516,163 O E D Corp/Diamond Jo Company Guarantee 500,000
------------ Savage Sports Holding, Inc. 1,590,206
2,196,136 Snoqualmie Entertainment Authority 240,625
------------ Tunica-Biloxi Gaming Authority 552,150
FARMING & AGRICULTURE - 1.05% Warner Music Group Corporation 96,250
Protein Genetics, Inc. -- ------------
Waggin' Train Holdings LLC 1,330,572 4,154,802
------------ ------------
1,330,572 MACHINERY - 9.18%
------------ Davis-Standard LLC 1,985,079
FINANCIAL SERVICES - 1.55% Integration Technology Systems, Inc. --
Highgate Capital LLC -- K-Tek Holdings Corporation 1,332,222
Leucadia National Corporation 335,125 Manitowoc Company, Inc. 99,000
Nesco Holdings Corporation 1,331,709 Morton Industrial Group, Inc. 1,190,012
Penhall International 302,250 Navis Global 1,022,059
Victory Ventures LLC -- NetShape Technologies, Inc. 1,240,623
------------ Pacific Consolidated Holdings LLC 704,511
1,969,084 Safety Speed Cut Manufacturing Company, Inc. 736,270
------------ Stewart & Stevenson LLC 753,750
HEALTHCARE, EDUCATION & CHILDCARE - 3.96% Synventive Equity LLC 17,714
A T I Acquisition Company 1,144,649 Tronair, Inc. 2,546,549
American Hospice Management Holding LLC 1,141,626 ------------
Community Health Systems, Inc. 483,906 11,627,789
F H S Holdings LLC 1,494,252 ------------
H C A, Inc. 525,000 MEDICAL DEVICES/BIOTECH - 2.68%
Tenet Healthcare Corporation 227,500 Coeur, Inc. 801,339
------------ E X C Acquisition Corporation 97,932
5,016,933 MicroGroup, Inc. 1,638,267
------------ OakRiver Technology, Inc. 860,166
------------
3,397,704
------------
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33
MassMutual Paticipation Investors
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2007
Fair Value/ Fair Value/
Industry Classification Market Value Industry Classification Market Value
------------------------------------------------------------ ------------------------------------------------------------
MINING, STEEL, IRON & NON PRECIOUS METALS - 0.81% TECHNOLOGY - 2.48%
Ryerson, Inc. $ 29,625 Compucom Systems, Inc. $ 654,925
Steel Dynamics, Inc. 97,000 EnerNOC, Inc. 1,153,850
Tube City IMS Corporation 900,000 Smart Source Holdings, Inc. 1,329,836
------------ ------------
1,026,625 3,138,611
------------ ------------
NATURAL RESOURCES - 0.55% TELECOMMUNICATIONS - 3.17%
Appleton Papers, Inc. 245,313 Cincinnati Bell, Inc. 536,250
Rock-Tenn Co. 445,050 Intelsat Bermuda Ltd. 693,450
------------ ITC^DeltaCom, Inc. 472,940
690,363 Nextel Communications, Inc. 393,847
------------ N T L Cable PLC 782,100
OIL & GAS - 3.72% Rogers Wireless, Inc. 612,408
Atlas Pipeline Partners 594,000 Triton P C S, Inc. 517,500
Basic Energy Services 587,500 ------------
Bristow Group, Inc. 75,375 4,008,495
Clayton Williams Energy, Inc. 503,125 ------------
GulfMark Offshore, Inc. 303,000 TRANSPORTATION - 1.67%
Mariner Energy, Inc. 380,500 NABCO, Inc. 176,195
North American Energy Partners 197,500 Tangent Rail Corporation 1,943,197
Offshore Logistics 336,000 ------------
Quicksilver Resources, Inc. 589,500 2,119,392
Tesoro Petroleum Corporation 247,500 ------------
Total Equipment & Service, Inc. 894,810 UTILITIES - 2.60%
------------ Dynegy Holdings, Inc. 883,788
4,708,810 Edison Mission Energy 36,050
------------ Inergy LP 77,625
PHARMACEUTICALS - 1.21% Intergen NV 394,688
CorePharma LLC 1,414,620 Markwest Energy Operating Co. 523,875
Enzymatic Therapy, Inc. 117,303 N R G Energy, Inc. 585,000
------------ Petrohawk Energy Corporation 789,375
1,531,923 ------------
------------ 3,290,401
PUBLISHING/PRINTING - 1.51% ------------
Idearc, Inc. 477,100 WASTE MANAGEMENT / POLLUTION - 2.53%
Quebecor Media, Inc. 553,438 Terra Renewal Services, Inc. 1,806,534
R H Donnelley, Inc. 584,375 Torrent Group Holdings, Inc. 1,396,012
Sheridan Acquisition Corporation 225,000 ------------
Valassis Communications, Inc. 66,844 3,202,546
------------ ------------
1,906,757 TOTAL CORPORATE RESTRICTED AND PUBLIC
------------ SECURITIES - 104.50% $132,314,522
RETAIL STORES - 1.85% ============
Blockbuster, Inc. 235,125
Neiman Marcus Group, Inc. 624,750
Olympic Sales, Inc. 747,879
Rental Service Corporation 447,500
United Rentals, Inc. 282,750
------------
2,338,004
------------
----------------------------------------------------------------------------------------------------------------------------------
34
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary
of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its
investment adviser. The Trust's investment objective is to maximize total
return by providing a high level of current income, the potential for growth
of income, and capital appreciation. The Trust's principal investments are
privately placed, below-investment grade, long-term debt obligations
purchased directly from their issuers, which tend to be smaller companies. At
least half of these investments normally include equity features such as
warrants, conversion rights, or other equity features that provide the Trust
with the opportunity to realize capital gains. The Trust will also invest in
publicly traded debt securities (including high yield securities), again with
an emphasis on those with equity features, and in convertible preferred
stocks and, subject to certain limitations, readily marketable equity
securities. Below investment grade or high yield securities have
predominantly speculative characteristics with respect to the capacity of the
issuer to pay interest and repay principal. In addition, the Trust may
temporarily invest in high quality, readily marketable securities.
On January 27, 1998, the Board of Trustees authorized the formation of a
wholly owned subsidiary of the Trust ("MMPI Subsidiary Trust") for the
purpose of holding certain investments. The results of the MMPI Subsidiary
Trust are consolidated in the accompanying financial statements. Footnote 2.D
below discusses the federal tax consequences of the MMPI Subsidiary Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of its consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America.
A. VALUATION OF INVESTMENTS:
Valuation of a security in the Trust's portfolio is made on the basis of
market price whenever market quotations are readily available and all
securities of the same class held by the Trust can be readily sold in such
market. Nearly all securities which are acquired by the Trust directly from
the issuers and shares into which such securities may be converted or which
may be purchased on the exercise of warrants attached to such securities will
be subject to legal or contractual delays in, or restrictions on, resale and
will therefore be "restricted securities." Generally speaking, as contrasted
with open-market sales of unrestricted securities, which may be effected
immediately if the market is adequate, restricted securities can be sold only
in a public offering for which a registration statement is in effect under
the Securities Act of 1933, as amended (the "1933 Act") or pursuant to a
transaction that is exempt from registration under the 1933 Act.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Trust's Board of Trustees (the "Trustees"). Each restricted
security is valued by the Trustees 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 used thereafter for restricted
securities in appropriate circumstances. Among the factors ordinarily
considered are the existence of restrictions upon the sale of a security held
by the Trust; an estimate of the existence and the extent of a market for the
security; the extent of any discount at which the security was acquired; the
estimated period of time during which the security will not be freely
marketable; the estimated expenses of registering or otherwise qualifying the
security for public sale; estimated underwriting commissions if underwriting
would be required to effect a sale; in the case of a convertible security,
whether or not it would trade on the basis of its stock equivalent; in the
case of a debt obligation which would trade independently of any equity
equivalent, the current yields on comparable securities; the estimated amount
of the floating supply of such securities available for purchase; the
proportion of the issue held by the Trust; changes in the financial condition
and prospects of the issuer; the existence of merger proposals or tender
offers affecting the issuer; and any other factors affecting fair value, all
in accordance with the Investment Company Act of 1940, as amended (the "1940
Act"). In making
--------------------------------------------------------------------------------
35
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
valuations, opinions of counsel may be relied upon as to whether or not
securities are restricted securities and as to the legal requirements for
public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at a
discount from the market price of such unrestricted securities. The Trustees,
however, consider all factors in fixing any discount, including the filing of
a registration statement for such securities under the 1933 Act and any other
developments which are likely to increase the probability that the securities
may be publicly sold by the Trust without restriction.
The Trustees meet at least once in each quarter to approve the value of the
Trust's portfolio securities as of the close of business on the last business
day of the preceding quarter. This valuation requires the approval of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not interested persons of the Trust or of Babson Capital. In making
valuations, the Trustees will consider reports by Babson Capital analyzing
each portfolio security in accordance with the relevant factors referred to
above. Babson Capital has agreed to provide such reports to the Trust at
least quarterly.
The consolidated financial statements include private placement restricted
securities valued at $94,407,034 (74.56% of net assets) as of December 31,
2007 whose values have been estimated by the Trustees in the absence of
readily ascertainable market values. Due to the inherent uncertainty of
valuation, those estimated values may differ significantly from the values
that would have been used had a ready market for the securities existed, and
the differences could be material.
The values for Rule 144A restricted securities and corporate public
securities are stated at the last reported sales price or at prices based
upon quotations obtained from brokers and dealers as of December 31, 2007,
subject to discount where appropriate, and are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
fair value and short-term securities having a maturity of sixty days or less
are valued at amortized cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS:
Investment transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis, including the amortization of premiums and accretion of
discounts on bonds held using the yield-to-maturity method. The Trust does
not accrue income when payment is delinquent and when management believes
payment is questionable.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
C. USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
D. FEDERAL INCOME TAXES:
The Trust has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code, and intends to maintain this qualification and to
distribute substantially all of its net taxable income to its shareholders.
In any year when net long-term capital gains are realized by the Trust,
management, after evaluating the prevailing economic conditions, will
recommend that Trustees either designate the net realized long-term gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains. For the year ended December 31, 2007, the
Trust had a net realized taxable long-term capital gain balance of
$1,777,038, which the Trustees voted to retain and pay the federal capital
gain tax thereon. The Trust has accrued income tax expense of $621,963 on the
Statement of Operations related to the retained realized capital 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
--------------------------------------------------------------------------------
36
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
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 year ended December
31, 2007, the MMPI Subsidiary Trust has accrued income tax expense of
$98,600.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of the existing assets and liabilities and their respective
tax basis. As of December 31, 2007, the MMPI Subsidiary Trust has a deferred
tax asset of $71,096 for which a full valuation reserve has been recorded. No
future tax benefit is expected to be realized from this asset as of December
31, 2007. The MMPI Subsidiary Trust has recorded a deferred income tax
benefit in the current year in the amount of $384,226 resulting from the
decrease to zero of the deferred tax liability at December 31, 2006.
In, June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES - AN
INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN 48"). Management has analyzed
the Trust's tax positions taken on federal income tax returns for all open
tax years and has concluded that as of December 31, 2007, no provisions for
income tax would be required in the Trust's financial statements. The Trust's
federal and state income and federal excise tax returns for tax years for
which the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
E. DISTRIBUTIONS TO SHAREHOLDERS:
The Trust records distributions to shareholders from net investment income
and net realized gains, if any, on the ex-dividend date. The Trust's net
investment income dividend is declared four times per year, in April, July,
October and December. The Trust's net realized capital gain distribution, if
any, is declared in December.
As of December 31, 2007, the components of distributable earnings on a tax
basis included $1,026,768 of undistributed ordinary income. Such
distributions and distributable earnings on a tax basis are determined in
conformity with income tax regulations, which may differ from accounting
principles generally accepted in the United States of America.
Net investment income and net realized gains or losses of the Trust as
presented under accounting principles generally accepted in the United States
of America may differ from distributable earnings due to earnings from the
MMPI Subsidiary Trust as well as certain permanent and temporary differences
in the recognition of income and net realized gains or losses on certain
investments. Permanent differences will result in reclassifications to the
capital accounts. In 2007, the Trust increased undistributed net investment
income and decreased additional paid in capital by a total of $32,527 to more
accurately display the Trust's financial position on a tax-basis in
accordance with accounting principles generally accepted in the United States
of America. These re-classifications had no impact on net asset value.
The tax character of distributions declared during the years ended December
31, 2007 and 2006 was as follows:
DISTRIBUTIONS PAID FROM: 2007 2006
----------------------------
Ordinary Income $ 12,315,585 $ 11,648,274
Long-term Capital gains $ -- $ --
F. EXPENSE REDUCTION:
Citibank, N.A. ("Citibank") serves as custodian to the Trust. Pursuant to the
custodian agreement, Citibank receives a fee reduced by credits on cash
balances the Trust maintains with Citibank. All credit balances, if
--------------------------------------------------------------------------------
37
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
any, used to reduce the Trust's custodian fees are reported as fees paid
indirectly on the Statement of Operations. For the year ended December 31,
2007, there were no credit balances used to reduce custodian fees.
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 also provides administration of the day-to-day operations of the
Trust and provides the Trust with office space and office equipment,
accounting and bookkeeping services, and necessary executive, clerical and
secretarial personnel for the performance of the foregoing services.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory fee equal to .225% of the value of the Trust's net assets
as of the last business day of each fiscal quarter, an amount approximately
equivalent to .90% on an annual basis. A majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or of
Babson Capital, approve the valuation of the Trust's net assets as of such
day.
4. SENIOR SECURED INDEBTEDNESS
A. NOTE PAYABLE:
MassMutual holds the Trust's $12,000,000 Senior Fixed Rate Convertible Note
(the "Note") issued by the Trust in 1995. The Note, as amended, is due
December 13, 2011 and accrues interest at 5.80% per annum. MassMutual, at its
option, can convert the principal amount of the Note into common shares. The
dollar amount of principal would be converted into an equivalent dollar
amount of common shares based upon the average price of the common shares for
ten business days prior to the notice of conversion. For the year ended
December 31, 2007, the Trust incurred total interest expense on the Note of
$696,000.
The Trust may redeem the Note, in whole or in part, at the principal amount
proposed to be redeemed together with the accrued and unpaid interest thereon
through the redemption date plus a Make Whole Premium. The Make Whole Premium
equals the excess of (i) the present value of the scheduled payments of
principal and interest which the Trust would have paid but for the proposed
redemption, discounted at the rate of interest of U.S. Treasury obligations
whose maturity approximates that of the Note plus 0.50% over (ii) the
principal of the Note proposed to be redeemed.
B. REVOLVING CREDIT AGREEMENT:
The Trust entered into a $15,000,000 Revolving Credit Agreement with Bank of
America N.A. (the "Agent Bank") dated May 29, 1997, which had a stated
maturity date of May 31, 2004, (the maturity date was later extended to May
31, 2007 pursuant to the First Amended and Restated Revolving Credit
Agreement). On May 31, 2007, the maturity date of this loan was extended to
May 30, 2008, and its terms were amended and restated pursuant to the First
Amendment to the First Amended and Restated Revolving Credit Agreement (the
"Revolver"), 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
Eurodollar Base 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 Eurodollar Base Rate Loans equals .35% plus the British Bankers
Association LIBOR rate, divided by 1 minus the Eurodollar Reserve Percentage.
The Trust also incurs expense on the undrawn portion of the total Revolver at
a rate of .25% from January 1, 2007 through May 31, 2007, and the amended
rate of .10% from June 1, 2007 through December 31, 2007 per annum.
As of December 31, 2007, there were no outstanding loans against the
Revolver. For the year ended December 31, 2007, the Trust incurred expense on
the Revolver of $24,475 related to the undrawn portion.
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38
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
5. PURCHASES AND SALES OF INVESTMENTS
FOR THE YEAR ENDED COST OF INVESTMENTS
12/31/2007 ACQUIRED
-----------------------------------------------------------------------------
Corporate restricted securities $ 31,739,132
Corporate public securities 11,917,394
-----------------------------------------------------------------------------
PROCEEDS FROM
SALES OR MATURITIES
-----------------------------------------------------------------------------
Corporate restricted securities $ 28,650,640
Corporate public securities 17,803,846
-----------------------------------------------------------------------------
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of December 31, 2007. The net
unrealized appreciation of investments for financial reporting and federal
tax purposes as of December 31, 2007 is $501,920 and consists of $13,263,766
appreciation and $12,761,846 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS (UNAUDITED)
AMOUNT PER SHARE
-----------------------------------------------------------------------------
MARCH 31, 2007
-----------------------------------------------------------------------------
Investment income $ 3,065,532
Net investment income 2,439,056 $ 0.25
Net realized and unrealized
gain on investments (net of taxes) 663,578 0.07
-----------------------------------------------------------------------------
JUNE 30, 2007
-----------------------------------------------------------------------------
Investment income $ 3,689,385
Net investment income 3,111,679 $ 0.32
Net realized and unrealized
loss on investments (net of taxes) (698,739) (0.07)
-----------------------------------------------------------------------------
SEPTEMBER 30, 2007
-----------------------------------------------------------------------------
Investment income $ 4,378,106
Net investment income 3,768,181 $ 0.38
Net realized and unrealized
gain on investments (net of taxes) 786,409 0.08
-----------------------------------------------------------------------------
DECEMBER 31, 2007
-----------------------------------------------------------------------------
Investment income $ 3,412,839
Net investment income 2,739,044 $ 0.28
Net realized and unrealized
loss on investments (net of taxes) (1,211,363) (0.13)
7. AGGREGATE REMUNERATION PAID TO OFFICERS, TRUSTEES AND THEIR AFFILIATED
PERSONS
For the year ended December 31, 2007, the Trust paid its Trustees aggregate
remuneration of $142,750. During the year the Trust did not pay any
compensation to any of its Trustees who are "interested persons" (as defined
by the 1940 Act) of the Trust. The Trust classifies Messers. Crandall and
Joyal as "interested persons" of the Trust.
All of the Trust's officers are employees of Babson Capital or MassMutual.
Pursuant to the Contract, the Trust does not compensate its officers who are
employees of Babson Capital or MassMutual.
Mr. Crandall, one of the Trust's Trustees, is an "affiliated person" (as
defined by the 1940 Act) of MassMutual and Babson Capital.
The Trust did not make any payments to Babson Capital for the year ended
December 31 2007, other than amounts payable to Babson Capital pursuant to
the Contract. For the year ended December 31, 2007, the Trust paid the
following amounts to MassMutual, exclusive of interest expense on the Note
explained in Footnote 4.A:
Preparation of the Trust's Quarterly
and Annual Reports to Shareholders $ 11,683
Preparation of Certain of the
Trust's Shareholder Communications 1,223
Preparation of the Trust's Annual
Proxy Statements 1,642
--------
$ 14,548
========
8. NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, FASB issued Statement of Financial Accounting Standards
No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles
from the application of FAS 157 relates to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. Management of the Trust does not believe the adoption of
FAS 157 will materially impact the financial statement amounts, however,
additional disclosures may be required about the inputs used to develop the
measurements and the effect of certain of the measurements on changes in net
assets for the period. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years.
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39
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
9. CERTIFICATIONS (UNAUDITED)
As required under New York Stock Exchange ("NYSE") Corporate Governance
Rules, the Trust's principal executive officer has certified to the NYSE that
he was not aware, as of the certification date, of any violation by the Trust
of the NYSE's Corporate Governance listing standards. In addition, as
required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC
rules, the Trust's principal executive and principal financial officers have
made quarterly certifications, included in filings with the Securities and
Exchange Commission on Forms N-CSR and N-Q, relating to, among other things,
the Trusts disclosure controls and procedures and internal control over
financial reporting, as applicable.
--------------------------------------------------------------------------------
40
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Trustees of MassMutual Participation Investors
We have audited the accompanying statement of assets and liabilities of
MassMutual Participation Investors (the Trust), including the schedule of
investments, as of December 31, 2007, and the related statements of operations
and cash flows for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the years in the four-year period then ended. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 2003 was audited by other independent
registered public accountants whose report, dated February 6, 2004, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by counting securities at the custodian
and by correspondence with the custodian, or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MassMutual Participation Investors as of December 31, 2007, and the results of
its operations, its cash flows, the changes in its net assets, and the financial
highlights for the years described above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Boston, Massachusetts
February 11, 2008
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MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATION(S) OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
ROGER W. CRANDALL* (43) Trustee 3 years/ Executive Vice President and 2 Trustee, Chairman (since
(since 2005) 1 year, Chief Investment Officer 2005), President (2003- 2005),
Massachusetts Mutual Life 10 months (since 2005) and Co-Chief and Vice President
Insurance Company Operating Officer (since (2002-2003), of the Trust;
1295 State Street Chairman 1 year/ 2007) of MassMutual; and Director (since 2004), Babson
Springfield, MA 01111 (since 2005) 7 months Chairman (since 2005), Capital Europe Limited (an
President (2006-2007) and institutional debt-fund
Chief Executive Officer manager); Director (since
(since 2006), Vice Chairman 2004), Babson Capital Guernsey
(2005), Member of the Board Limited (an investment
of Managers (since 2004), management company);
Member of the Board of Non-Executive Director (since
Directors (2003-2004), and 2005), Baring Asset Management
Managing Director of Babson Limited (an investment
Capital (2000-2005). manager/ adviser); Chairman
(since 2005), Cornerstone Real
Estate Advisers LLC (an
investment adviser); Director
(since 2003), MassMutual
Corporate Value Partners
Limited (investment company);
Director (since 2003),
MassMutual Corporate Value
Limited (investment company);
Director (since 2005),
MassMutual Holdings (Bermuda)
Ltd. (holding company);
Director (since 2004), MML
Assurance, Inc. (a New York
insurance company); Director
(since 2005), Oppenheimer
Acquisition Corp. (holding
company); Director (since
2004), Jefferies Finance LLC
(a finance company); Director
(since 2004), Great Lakes LLC
(investment company); Director
(since 1999), SAAR Holdings
CDO Ltd. (investment company);
Chairman, Chief Executive
Officer and Director (since
2006), MassMutual Capital
Partners (investment company);
Director (since 2006), Invicta
Advisers LLC (derivative
trading company); Director
(since 2006), Invicta Capital
LLC (derivative trading
company); Director (since
2006), Invicta Credit LLC
(derivative trading company);
Director (since 2006), Invicta
Holdings LLC (derivative
trading company); Director
(since 2006), Director (since
2006), MassMutual
International LLC (holding
company); Trustee (since
2003), President (2003-2005),
and Chairman (since 2005),
MMCI Subsidiary Trust and MMPI
Subsidiary Trust; and Trustee
(since 2005), Chairman (since
2005), President (2003-2005),
and Vice President
(2002-2003), of MassMutual
Corporate Investors
(closed-end investment company
advised by Babson Capital).
* Mr. Crandall is classified as an "interested person" of the Trust and Babson Capital (as defined in the Investment Company Act
of 1940, as amended) because of his position as an Officer of the Trust; and Chairman, Chief Executive Officer, and Member of
the Board of Managers of Babson Capital.
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MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATION(S) OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
ROBERT E. JOYAL* (63) Trustee 3 years/ President (2001-2003) of 57 President (1999-2003) and
(since 2003) 10 months Babson Capital. Trustee (since 2003), of the
MassMutual Participation Trust; Director (since 2006),
Investors Jefferies Group, Inc.
1500 Main Street (financial services); Director
Suite 600 (since 2003), Pemco Aviation
P.O. Box 15189 Group, Inc. (aircraft
Springfield, MA 01115-5189 maintenance and overhaul);
Director (since 2007),
Scottish Re Group Ltd. (global
life reinsurance specialist);
Trustee (since 2003),
MassMutual Select Funds,
formerly MassMutual
Institutional Funds, (an
open-end investment company
advised by MassMutual);
Trustee (since 2003), MML
Series Investment Fund (an
open-end investment company
advised by MassMutual);
Trustee (1998- 2003), Senior
Vice President (1998-2001) and
President (2001-2003), MMCI
Subsidiary Trust and MMPI
Subsidiary Trust; and
President (1999- 2003),
Trustee (since 2003),
MassMutual Corporate Investors
(closed-end investment company
advised by Babson Capital).
* Mr. Joyal retired as President of Babson Capital in June 2003. In addition and as noted above, Mr. Joyal is a director of
Jefferies Group, Inc., which has a wholly-owned broker-dealer subsidiary that may execute portfolio transactions and/or engage
in principal transactions with the Trust, other investment companies advised by Babson Capital or any other advisory accounts
over which Babson Capital has brokerage placement discretion. Accordingly, the Trust has determined to classify Mr. Joyal as an
"interested person" of the Trust and Babson Capital (as defined in the Investment Company Act of 1940, as amended).
------------------------------------------------------------------------------------------------------------------------------------
43
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATION(S) OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
WILLIAM J. BARRETT (68) Trustee 2 years/ President (since 2002), 2 Trustee (since 2006),
MassMutual (since 2006) 10 months Barrett-Gardner Associates, MassMutual Corporate Investors
Participation Investors Inc. (investments); and Senior (a closed-end investment
1500 Main Street Vice President (1976-2002), company advised by Babson
Suite 600, P.O. Box 15189 Janney Montgomery Scott Capital).
Springfield, MA 01115-5189 LLC (investments).
DONALD E. BENSON (77) Trustee 3 years/ Executive Vice President 2 Director (since 1997), MAIR
MassMutual (since 1988) 10 months and Director (since 1992), Holdings, Inc. (commuter
Participation Investors Marquette Financial airline holding company);
1500 Main Street Companies (financial services); Director (since 1997), First
Suite 600, P.O. Box 15189 Partner (since 1996), Benson California Financial Group
Springfield, MA 01115-5189 Family Limited Partnership Inc. (bank holding company);
No. 1 and Benson Family and Trustee (since 1986),
Limited Partnership No. 2 MassMutual Corporate Investors
(investment partnerships); and (closed-end investment company
Partner (1987-2004), Benson, advised by Babson Capital).
Pinckney, Oates Partnership
(building partnership)
------------------------------------------------------------------------------------------------------------------------------------
44
MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
INTERESTED TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATION(S) OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
MICHAEL H. BROWN (51) Trustee 1 year/ Private Investor; and 2 Trustee (since 2005),
MassMutual (since 2005) 10 months Managing Director (1994- MassMutual Corporate Investors
Participation Investors 2005), Morgan Stanley. (a closed-end investment
1500 Main Street company advised by Babson
Suite 600, P.O. Box 15189 Capital); Independent Director
Springfield, MA 01115-5189 (since 2006), Invicta Holdings
LLC (a derivative trading
company).
DONALD GLICKMAN (74) Trustee 3 years/ Chairman (since 1992), Donald 2 Director (since 1984), Monro
MassMutual (since 1992) 10 months Glickman and Company, Muffler Brake, Inc.
Participation Investors Inc. (private investments); (automobile repair service);
1500 Main Street and Partner (since 1992), Director (since 1998), MSC
Suite 600, P.O. Box 15189 J.F. Lehman & Co. (private Software, Corp. (simulation
Springfield, MA 01115-5189 investments). software); and Trustee (since
1992), MassMutual Corporate
Investors (closed-end
investment company advised by
Babson Capital).
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MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
PRINCIPAL PORTFOLIOS
POSITION OCCUPATION(S) OVERSEEN OTHER
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST IN FUND DIRECTORSHIPS
ADDRESS THE TRUST OF TIME SERVED 5 YEARS COMPLEX HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
MARTIN T. HART (72) Trustee 3 years/ Private Investor; and 2 Director (since 2004), Texas
MassMutual (since 1991) 1 year, President and Director Roadhouse, Inc. (operates
Participation Investors 10 months (since 1983), H Investment restaurant chain); Director
1500 Main Street Company LLC (family (since 1999), ValueClick Inc.
Suite 600, P.O. Box 15189 partnership). (internet advertising
Springfield, MA 01115-5189 company); Director (since
2002), Spectranetics Corp.
(medical device company); and
Trustee (since 1991),
MassMutual Corporate Investors
(closed-end investment company
advised by Babson Capital).
CORINE T. NORGAARD (70) Trustee 3 years/ President, (2004-2005), 34 Trustee (since 2005), MML
MassMutual (since 1998) 2 years, Thompson Enterprises Real Series Investment Fund II (an
Participation Investors 10 months Estate Investment; and Dean open-end investment company
1500 Main Street (1996-2004), Barney School advised by MassMutual);
Suite 600, P.O. Box 15189 of Business, University of Trustee (since 2004),
Springfield, MA 01115-5189 Hartford. MassMutual Premier Funds,
formerly The DLB Fund Group
(an open-end investment
company advised by
MassMutual); Trustee (since
1993), ING Series Fund
(investment company); Director
(since 1992), ING Variable
Series Fund; and Trustee
(since 1998), MassMutual
Corporate Investors (a
closed-end investment company
advised by Babson Capital).
MALEYNE M. SYRACUSE (51) Trustee 6 months/ Managing Director (2000- Trustee (since 2007),
MassMutual (since 2007) 4 months* 2007), JP Morgan Securities, MassMutual Corporate Investors
Participation Investors Inc. (a closed-end investment
1500 Main Street company advised by Babson
Suite 600, P.O. Box 15189 Capital).
Springfield, MA 01115-5189
* Ms. Syracuse was appointed by the Board of Trustees to fill a newly created board seat on October 19, 2007.
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MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
OFFICERS OF THE TRUST
PRINCIPAL
POSITION OCCUPATION(S)
NAME (AGE), WITH OFFICE TERM/LENGTH DURING PAST
ADDRESS THE TRUST OF TIME SERVED 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
CLIFFORD M. NOREEN (50) President 1 year/ President (since 2005), Vice President (1993-2005) of the Trust;
MassMutual 7 months Vice Chairman (since 2007),; Member of the Board of Managers
Participation Investors (since 2006), and Managing Director (since 2000) of Babson
1500 Main Street Capital; Trustee (since 2005), and President (since 2005) MMCI
Suite 600, P.O. Box 15189 Subsidiary Trust and MMPI Subsidiary Trust; and President (since
Springfield, MA 01115-5189 2005), Vice President (1993-2005), MassMutual Corporate
Investors.
RODNEY J. DILLMAN (55) Vice 1 year/ Vice President, Secretary, and Chief Legal Officer (since 2006)
MassMutual President, 7 months of the Trust; Vice President and Associate General Counsel (since
Participation Investors Secretary, and 2000) of MassMutual; General Counsel and Secretary (since 2006)
1500 Main Street Chief Legal of Babson Capital; Secretary (since 2006), MMCI Subsidiary Trust
Suite 600, P.O. Box 15189 Officer and MMPI Subsidiary Trust; and Vice President, Secretary, and
Springfield, MA 01115-5189 Chief Legal Officer (since 2006), MassMutual Corporate Investors.
JAMES M. ROY (45) President 1 year/ Vice President and Chief Financial Officer (since 2005),
MassMutual and Chief 7 months Treasurer (2003-2005), and Associate Treasurer (1999-2003) of the
Participation Investors Financial Trust; Managing Director (since 2005), and Director (2000-2005)
1500 Main Street Officer of Babson Capital; Trustee (since 2005), Treasurer (since 2005),
Suite 600, P.O. Box 15189 and Controller (2003-2005), MMCI Subsidiary Trust and MMPI
Springfield, MA 01115-5189 Subsidiary Trust; and Vice President and Chief Financial Officer
(since 2005), Treasurer (2003-2005) and Associate Treasurer
(1999-2003), MassMutual Corporate Investors.
JOHN T. DAVITT, JR. (40) Comptroller 1 year/ Comptroller (since 2001) of the Trust; Director (since 2000) of
MassMutual 7 months Babson Capital; Controller (since 2005), MMCI Subsidiary Trust
Participation Investors and MMPI Subsidiary Trust; and Comptroller (since 2001),
1500 Main Street MassMutual Corporate Investors.
Suite 600, P.O. Box 15189
Springfield, MA 01115-5189
MELISSA M. LAGRANT (34) Chief 1 year/ Chief Compliance Officer (since 2006) of the Trust; Managing
MassMutual Compliance 7 months Director (since 2005) of Babson Capital; Vice President and
Participation Investors Officer Senior Compliance Trading Manager (2003-2005), Loomis, Sayles &
1500 Main Street Company, L.P.; Assistant Vice President-Business Risk Management
Suite 600, P.O. Box 15189 Group (2002-2003), and Assistant Vice President-Investment
Springfield, MA 01115-5189 Compliance (2001-2002), Zurich Scudder Investments/Deutsche Asset
Management; and Chief Compliance Officer (since 2006), MassMutual
Corporate Investors.
RONALD S. TALAIA (39) Treasurer 1 year/ Treasurer (since 2006) of the Trust; Director (since 2001) of
MassMutual 7 months Babson Capital; and Treasurer (since 2006), MassMutual Corporate
Participation Investors Investors. Vice
1500 Main Street
Suite 600, P.O. Box 15189
Springfield, MA 01115-5189
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MASSMUTUAL PARTICIPATION INVESTORS
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MASSMUTUAL PARTICIPATION INVESTORS
--------------------------------------------------------------------------------
MEMBERS OF THE BOARD OF DIVIDEND REINVESTMENT AND CASH
TRUSTEES REPURCHASE PLAN
LEFT TO RIGHT:
MassMutual Participation Investors
Donald Glickman offers a Dividend Reinvestment and Cash
Chairman, Purchase Plan. The Plan provides a
Donald Glickman & Company, Inc. simple and automatic way for
shareholders to add to their holdings in
Robert E. Joyal the Trust through the receipt of
Retired President, dividend shares issued by the Trust or
Babson Capital Management LLC through the reinvestment of cash
dividends in Trust shares purchased in
William J. Barrett the open market. The dividends of each
President, shareholder will be automatically
Barrett-Gardner Associates, Inc. reinvested in the Trust by Shareholder
Financial Services Inc., the Transfer
Michael H. Brown Agent, in accordance with the Plan,
Private Investor unless such shareholder elects not to
participate by providing written notice
Donald E. Benson* to the Transfer Agent. A shareholder may
Executive Vice President terminate his or her participation by
and Director, notifying the Transfer Agent in writing.
Marquette Financial Companies
Participating shareholders may also make
Dr. Corine T. Norgaard* additional contributions to the Plan
President, from their own funds. Such contributions
Thompson Enterprises may be made by personal check or other
Real Estate Investment means in an amount not less than $100
nor more than $5,000 per quarter. Cash
Roger W. Crandall contributions must be received by the
Executive Vice President, Transfer Agent at least five days (but
Chief Investment Officer and no more then 30 days) before the payment
Co-Chief Operating Officer date of a dividend or distributions.
Massachusetts Mutual Life Cash contributions must be received by
Insurance Company the Transfer Agent at least five days
(but no more then 30 days) before the
Martin T. Hart* payment date of a dividend or
Private Investor distributions.
Maleyne M. Syracuse Whenever the Trust declares a dividend
Private Investor payable in cash or shares, the Transfer
Agent, acting on behalf of each
*Member of the Audit Committee participating shareholder, will take the
dividend in shares only if the net asset
OFFICERS value is lower than the market price
plus an estimated brokerage commission
Roger W. Crandall as of the close of business on the
Chairman valuation day. The valuation day is the
last day preceding the day of dividend
Clifford M. Noreen payment. When the dividend is to be
President taken in shares, the number of shares to
be received is determined by dividing
James M. Roy the cash dividend by the net asset value
Vice President & Chief as of the close of business on the
Financial Officer valuation date or, if greater than net
asset value, 95% of the closing share
Rodney J. Dillman price. If the net asset value of the
Vice President, Secretary shares is higher than the market value
& Chief Legal Officer plus an estimated commission, the
Transfer Agent, consistent with
Jill A. Fields obtaining the best price and execution,
Vice President will buy shares on the open market at
current prices promptly after the
Michael P. Hermsen dividend payment date.
Vice President
The reinvestment of dividends does not,
Mary Wilson Kibbe in anyway, relieve participating
Vice President shareholders of any federal, state or
local tax. For federal income tax
Michael L. Klofas purposes, the amount reportable in
Vice President respect of a dividend received in
newly-issued shares of the Trust will be
Richard E. Spencer, II the fair market value of the shares
Vice President received, which will be reportable as
ordinary income and/or capital gains.
Ronald S. Talaia
Treasurer As compensation for its services, the
Transfer Agent receives a fee of 5% of
John T. Davitt, Jr. any dividend and cash contribution (in
Comptroller no event in excess of $2.50 per
distribution per shareholder.)
Melissa M. LaGrant
Chief Compliance Officer 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 P12597
ITEM 2. CODE OF ETHICS.
The Registrant adopted a Code of Ethics for Senior Financial Officers
(the "Code") on October 17, 2003, which is available on the
Registrant's website at www.babsoncapital.com/mpv. During the period
covered by this Form N-CSR, there were no amendments to, or waivers
from, the Code.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Trustees has determined that Mr. Donald E.
Benson, a Trustee of the Registrant and a member of its Audit
Committee, is an audit committee financial expert. Mr. Benson is
"independent" for purposes of this Item 3 as required by applicable
regulation.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
FEES BILLED TO THE REGISTRANT
KPMG LLP KPMG LLP
Year Ended Year Ended
December 31, December 31,
2007 2006
---------- ----------
Audit Fees $ 48,000 $ 35,500
Audit-Related Fees 5,700 5,400
Tax Fees 37,200 28,500
All Other Fees 0 0
---------- ----------
Total Fees $ 90,900 $ 69,400
========== ==========
NON-AUDIT FEES BILLED TO BABSON CAPITAL AND MASSMUTUAL
KPMG LLP KPMG LLP
Year Ended Year Ended
December 31, December 31,
2007 2006
---------- ----------
Audit-Related Fees $1,102,280 $ 912,760
Tax Fees 0 0
All Other Fees 75,000 0
---------- ----------
Total Fees $1,177,280 $ 912,760
========== ==========
The category "Audit Related Fees" reflects fees billed by KPMG for
various non-audit and non-tax services rendered to the Registrant,
Babson Capital Management LLC ("Babson Capital") and Massachusetts
Mutual Life Insurance Company ("MassMutual"), such as SAS 70 review,
agreed upon procedures reports. Preparation of Federal, state and local
income tax returns and compliance work are representative of the fees
billed in the "Tax Fees" category. The category "All Other Fees"
represents fees billed by KPMG for tax consulting rendered to Babson
Capital and MassMutual. The Sarbanes-Oxley Act of 2002 and its
implementing regulations allows the Registrant's Audit Committee to
establish a pre-approval policy for certain services rendered by the
Registrant's independent accountants. During 2007, the Registrant's
Audit Committee approved all of the services rendered to the Registrant
by KPMG and did not rely on such a pre-approval policy for any such
services.
The Audit Committee reviewed the aggregate fees billed for
professional services rendered by KPMG for the Registrant and for the
non-audit services provided to Babson Capital, and Babson Capital's
parent, MassMutual. As part of this review, the Audit Committee
considered whether the provision of such non-audit services were
compatible with maintaining the principal accountant's independence.
The 2006 fees billed represent final 2006 amounts, which may
differ from the preliminary figures available as of the filing date of
the Trust's 2007 Annual Form N-CSR and includes, among other things,
fees for services that may not have been billed as of the filing date
of the Trust's 2007 Annual Form N-CSR, but are now properly included in
the 2006 fees billed to the Trust, Babson Capital, and MassMutual.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant maintains an Audit Committee composed exclusively of
Trustees of the Registrant who qualify as "independent" Trustees under
the current listing standards of the New York Stock Exchange and the
rules of U.S. Securities and Exchange Commission. The Committee
operates pursuant to a written Audit Committee Charter, which is
available (1) on the Registrant's website, www.babsoncapital.com/mpv;
and (2) without charge, upon request, by calling, toll-free
866-399-1516. The current members of the Audit Committee are Donald E.
Benson, Martin T. Hart, and Corine T. Norgaard.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable for this filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
The Registrant's Board of Trustees delegated proxy voting
responsibilities relating to voting securities held by the Registrant
to its investment adviser, Babson Capital Management LLC ("Babson
Capital"). A summary of Babson Capital's proxy voting policies and
procedures is set forth below.
Summary of Babson Capital's Proxy Voting Policy
-----------------------------------------------
Babson Capital views the voting of proxies as part of its investment
management responsibility and believes, as a general principle, that
proxies should be voted solely in the best interests of its clients
(i.e. in a manner it believes is most likely to enhance the economic
value of the underlying securities and cliet accounts). To implement
this general principle, it is Babson Capital's policy to generally vote
proxies in accordance with the recommendations of Institutional
Shareholder Services ("ISS"), a recognized authority on proxy voting
and corporate governance, or, in cases where ISS has not made any
recommendations with respect to a proxy, in accordance with ISS's proxy
voting guidelines.
Babson Capital recognizes, however, that there may be times when Babson
Capital believes that it will be in the best interests of clients
holding the securities to (1) vote against ISS's recommendations or (2)
in cases where ISS has not provided Babson Capital with any
recommendations with respect to a proxy, vote against ISS's proxy
voting guidelines. Babson Capital may vote, in whole or part, against
ISS's recommendations or ISS's proxy voting guidelines, as applicable.
The procedures set forth in the Policy are designed to ensure that
votes against ISS's recommendations or proxy voting guidelines have
been made in the best interests of clients and are not the result of
any material conflict of interest (a "Material Conflict").
Summary of Babson Capital's Proxy Voting Procedures
---------------------------------------------------
Babson Capital has established a Proxy Committee that is responsible
for the implementation and governance of the Policy and designated
Proxy Administrators who will receive and post proxies for voting with
ISS. In accordance with the Policy, Babson Capital will generally vote
all client proxies in accordance with ISS's recommendation or proxy
voting guidelines, unless a person authorized by the Proxy Committee
(each a "Proxy Analyst"), the Proxy Committee or a designated member of
the Proxy Committee determines that it is in the clients' best interest
to vote against ISS's recommendation or proxy voting guidelines. In
these cases, Babson Capital will vote against ISS's recommendation or
proxy voting guidelines, so long as no other Proxy Analyst reviewing
such proxy disagrees with such recommendation, and no known Material
Conflict is identified by the Proxy Analyst(s) or the Proxy
Administrator. Otherwise, the proxy is to be submitted to a member of
the Proxy Committee, who shall determine how to vote the proxy unless
(i) the Proxy Analyst or Proxy Administrator has identified a Babson
Capital Material Conflict or (ii) said Proxy Committee member has
identified a Material Conflict pertinent to him or herself or a Babson
Capital material conflict. In such cases, the proxy shall be
submitted to the Proxy Committee, which may authorize a vote against
ISS's recommendation or proxy voting guidelines only if the Proxy
Committee determines that such vote is in the clients' best interests.
No employee, officer, director, or Board of Managers Member of Babson
Capital or its affiliates (other than those assigned such
responsibilities under the Policy) may influence how Babson Capital
votes any client proxy, unless such person has been requested to
provide such assistance by a Proxy Analyst or Proxy Committee member
and has disclosed any known Material Conflict. Any pre-vote
communications prohibited by the Policy shall be reported to the Proxy
Committee member prior to voting and to Babson Capital's General
Counsel.
Obtaining a Copy of the Policy
------------------------------
The full text of Babson Capital's Policy is available (1) without
charge, upon request, by calling 1-866-399-1516 or (2) on the
Registrant's website, www.babsoncapital.com/mpv.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The following disclosure item is made as of the date of this Form N-CSR
unless otherwise indicated.
PORTFOLIO MANAGER. Clifford M. Noreen serves as the President of the
Registrant (since 2005) and as its Portfolio Manager. Mr. Noreen began
his service to the Registrant in 1993 as a Vice President. With over 25
years of industry experience, Mr. Noreen is Vice Chairman, a Managing
Director and a Member of the Board of Managers of Babson Capital
Management LLC ("Babson Capital") and head of Babson Capital's
Corporate Securities Group, where he oversees public equities and
corporate credit related investments, including public and private
bonds, mezzanine, and private equity investments, and structured credit
products. Mr. Noreen joined Massachusetts Mutual Life Insurance Company
("MassMutual"), Babson Capital's parent company, in 1985 and began
leading its High Yield Team in 1992, where he was responsible for
oversight of all public high yield portfolios. In 2004, Mr. Noreen
assumed responsibility for Babson Capital's Public Corporate Credit
Group, which included the Investment Grade and High Yield Institutional
Fixed Income teams. Mr. Noreen also presently serves as President of
MassMutual Corporate Investors, another closed-end registered
investment company advised by Babson Capital. Mr. Noreen holds a B.A.
from the University of Massachusetts and an M.B.A from American
International College.
PORTFOLIO MANAGEMENT TEAM. Mr. Noreen has primary responsibility for
overseeing the investment of the Registrant's portfolio, with the
day-to-day investment management responsibility of the Registrant's
portfolio being shared with the following Babson Capital investment
professionals (together with the Portfolio Manager, the "Portfolio
Team").
Michael P. Hermsen, Michael L. Klofas, and Richard E. Spencer II are
each a Vice President of the Registrant and a Managing Director of
Babson Capital. Together they are responsible for managing Babson
Capital's Mezzanine Investment and Private Equity Investments Team
within the Corporate Securities Group, which is responsible for
finding, analyzing, negotiating and servicing mezzanine private
placement securities for the Registrant.
Mr. Hermsen joined MassMutual in 1990 and has been an officer of the
Registrant since 1992. Previously, he worked at Teachers Insurance and
Annuity Association where he was a generalist private placement
analyst. At MassMutual and then Babson Capital, Mr. Hermsen has
analyzed and invested in traditional private placements, high yield
public and private bonds, and leveraged bank loans. He has also been
responsible for managing a small portfolio of distressed investments.
Since 1993, he has focused on originating, analyzing, structuring and
documenting mezzanine and private equity investments. He holds a B.A.
from Bowdoin College and an M.B.A. from Columbia University.
Mr. Klofas joined MassMutual in 1988 and has been an officer of the
Registrant since 1989. Prior to joining MassMutual, he spent two years
at a small venture capital firm and two years at a national public
accounting firm. At MassMutual and then Babson Capital, Mr. Klofas has
analyzed and invested in traditional private placements and high yield
public bonds. He also spent four years leading Babson Capital's workout
and restructuring activities. Since 1993, he has focused on
originating, analyzing, structuring and documenting mezzanine and
private equity investments. Mr. Klofas holds a B.A. from Brandeis
University and an M.B.A. from Babson College as well as a Certified
Public Accountant designation.
Mr. Spencer joined MassMutual in 1989 after three years as a corporate
loan analyst at a major New England bank. He has been an officer of
Registrant since 1990. At MassMutual and then Babson Capital, Mr.
Spencer has analyzed and invested in traditional private placements,
high yield public and private bonds, leveraged bank loans, mezzanine
debt and private equity. From 1993 to 1999, he was the lead
restructuring professional at Babson Capital. Since 1999, Mr. Spencer
has been focused on the origination, analysis, structuring and
documentation of mezzanine and private equity investments. He holds a
B.A. from Bucknell University and an M.B.A. from the State University
of New York at Buffalo.
Jill A. Fields is responsible for the day-to-day management of the
Registrant's public high yield and investment grade fixed income
portfolio. Ms. Fields has been a Vice President of the Registrant since
2006. Ms. Fields is a Managing Director of Babson Capital with over 20
years of industry experience in high yield total return, structured
credit, leveraged loans and private placemet investing. Prior to
joining Babson Capital in 1997, she was a credit analyst at Shawmut
National Bank, and the Director of Corporate Bond Research at Hartford
Life Insurance Group. Ms. Fields holds a B.S. from Pennsylvania State
University and an M.B.A. from the University of Connecticut.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO TEAM. The members of the
Registrant's Portfolio Team also have primary responsibility for the
day-to-day management of other Babson Capital advisory accounts,
including, among others, closed-end and open-end investment companies,
private investment funds, MassMutual-affiliated accounts, as well as
separate accounts for institutional clients. These advisory accounts
are identified below.
NUMBER OF
ACCOUNTS APPROXIMATE
TOTAL WITH ASSET SIZE OF
NUMBER APPROXIMATE PERFORMANCE- PERFORMANCE-
PORTFOLIO ACCOUNT OF TOTAL ASSET BASED BASED ADVISORY
TEAM CATEGORY ACCOUNTS SIZE(A) ADVISORY FEE FEE ACCOUNTS(A)
------------ --------------------- -------- ------------ ------------ --------------
Clifford M. Registered Investment
Noreen(B) Companies 1 $251.2 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 1 $42.2 million 1 $42.2 million
-----------------------------------------------------------------------------------------
Other Accounts 0 N/A 0 N/A
-----------------------------------------------------------------------------------------
Jill A. Registered Investment
Fields Companies 3 $879.1 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 1 $55.6 million 1 $55.6 million
-----------------------------------------------------------------------------------------
Other Accounts 5(C) $1.8 billion 0 N/A
-----------------------------------------------------------------------------------------
Michael P. Registered Investment
Hermsen Companies 1 $251.2 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 5 $403.5 million 5 $403.5 million
-----------------------------------------------------------------------------------------
Other Accounts 1(D) $1.5 billion N/A N/A
-----------------------------------------------------------------------------------------
Michael L. Registered Investment
Klofas Companies 1 $251.2 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 5 $403.5 million 5 $403.5 million
-----------------------------------------------------------------------------------------
Other Accounts 1(D) $1.5 billion N/A N/A
-----------------------------------------------------------------------------------------
Richard E. Registered Investment
Spencer II Companies 1 $251.2 million 0 N/A
-----------------------------------------------------------------------------------------
Other Pooled Investment
Vehicles 5 $403.5 million 5 $403.5 million
-----------------------------------------------------------------------------------------
Other Accounts 1(D) $1.5 billion N/A N/A
(A) Account asset size has been calculated as of December 31, 2007.
(B) Mr. Noreen, as the head of Babson Capital's Corporate Securities
Group, has overall responsibility for all corporate credit related
investments, including public and private bonds, mezzanine, and
private equity investments, as well as structured credit products
managed by Babson Capital. Except for the accounts noted in the table
above, Mr. Noreen is not primarily responsible for the day-to-day
management of the other accounts managed by Babson Capital's Corporate
Securities Group.
(C) Ms. Fields manages approximately $960 million of the general investment
account of Massachusetts Mutual Life Insurance Company. These assets
are represented as one account in the table above.
(D) The listed account and managed assets represent that portion of the
general investment account of MassMutual and C.M. Life Insurance
Company for which an individual Portfolio Team member has primary
day-to-day responsibility. As of December 31, 2007, Babson Capital's
total general investment account assets under management were $57.7
billion dollars.
MATERIAL CONFLICTS OF INTEREST. The potential for material conflicts of
interest may exist as the members of the Portfolio Team have
responsibilities for the day-to-day management of multiple accounts.
These conflicts may be heightened to the extent the individual, Babson
Capital and/or an affiliate has an investment in one or much of such
accounts or an interest in the performance of such accounts. Babson
Capital has identified (and summarized below) areas where material
conflicts of interest are most likely to arise, and has adopted
policies and procedures that it believes are reasonably designed to
address such conflicts.
It is possible that an investment opportunity may be suitable for both
the Registrant and other accounts managed by a member of the Portfolio
Team, but may not be available in sufficient quantities for both the
Registrant and the other accounts to participate fully. Similarly,
there may be limited opportunity to sell an investment held by the
Registrant and another account. A conflict may arise where a member of
the Portfolio Team may have an incentive to treat an account
preferentially as compared to the Registrant because the account pays
Babson Capital a performance-based fee or a member of the Portfolio
Team, Babson Capital, or an affiliate has an interest in the account.
Babson Capital has adopted an investment allocation policy and trade
allocation procedures to address allocation of portfolio transactions
and investment opportunities across multiple clients. These policies
are designed to achieve fair and equitable treatment of all clients
over time, and specifically prohibit allocations based on performance
of an account, the amount or structure of the management fee,
performance fee or profit sharing allocations, participation or
investment by an employee, Babson Capital or an affiliate, whether the
account is public, private, proprietary or third party. Additionally,
the Registrant, MassMutual, Babson Capital, MassMutual Corporate
Investors, and any private investment company advised or sub-advised by
Babson Capital have obtained a blanket order from the Securities and
Exchange Commission pursuant to Section 17(d), and Rule 17(d)-1
thereunder, of the Investment Company Act of 1940, as amended, which
sets forth the conditions by which the entities can engage in private
placement co-investment activities.
Potential material conflicts of interest may also arise related to the
knowledge and timing of the Registrant's trades, investment
opportunities and broker selection. A member of the Portfolio Team will
have information about the size, timing and possible market impact of
the Registrant's trades. It is theoretically possible that a member of
the Portfolio Team could use this information for his or her personal
advantage or the advantage of other accounts he manages or the possible
detriment of the Registrant. For example, a member of the Portfolio
Team could front run a fund's trade or short sell a security for an
account immediately prior to the Registrant's sale of that security. To
address these conflicts, Babson Capital has adopted policies and
procedures governing employees' personal securities transactions, the
use of short sales, and trading between the Registrant and other
accounts managed by members of the Portfolio Team or accounts owned by
Babson Capital or its affiliates.
With respect to securities transactions for the Registrant, Babson
Capital determines which broker to use to execute each order,
consistent with its duty to seek best execution of the transaction.
Babson Capital manages certain other accounts, however, where Babson
Capital may be limited by the client with respect to the selection of
brokers or directed to trade such client's transactions through a
particular broker. In these cases, trades for a fund in a particular
security may be placed separately from, rather than aggregated with,
such other accounts. Placing separate transaction orders for a security
may temporarily affect the market price of the security or otherwise
affect the execution of the transaction to the possible detriment of a
fund or the other account(s) involved. Babson Capital has policies and
procedures that address best execution and directed brokerage.
Members of the Portfolio Team may also face other potential conflicts
of interest in managing the Registrant, and the above is not a complete
description of every conflict of interest that could be deemed to exist
in managing both the Registrant and the other accounts listed above.
COMPENSATION. The current Babson Capital compensation and incentive
program for investment professionals is designed to attract, motivate
and retain high-performing individuals.
To help Babson Capital make informed decisions, the Company
participates in annual compensation surveys of investment management
firms using McLagan Partners, in addition to other industry specific
resources. The firms selected for periodic peer-group comparisons
typically have similar asset size or business mix. Annually, a review
is conducted of total compensation versus market, to ensure that
individual pay is competitive with the defined overall market.
The compensation package for the members of the Portfolio Team is
comprised of a market-driven base salary, a performance-driven annual
bonus, and discretionary long-term incentives. The performance-driven
bonus is based on the performance of the accounts managed by the
members of the Portfolio Team relative to appropriate benchmarks,
including with respect to the Registrant, to the Russell 2000 Index and
Lehman Brothers U.S. Corporate High Yield Index. Performance of the
Registrant, like other accounts Portfolio Team members manage, are
evaluated on a pre-tax basis, and are reviewed over one and three-year
periods, with greater emphasis given to the latter. There are other
factors that affect bonus awards to a lesser extent, such as client
satisfaction, teamwork, the assets under management, and the overall
success of Babson Capital. Such factors are considered as a part of the
overall annual bonus evaluation process by the management of Babson
Capital.
Long-Term incentives are designed to share with participants the
longer-term value created in Babson Capital. Long-term incentives may
take the form of deferred cash awards (including deferred cash awards
that provide a portfolio manager with the economic equivalent of a
"shareholder" interest in the firm by linking the value of the award to
a formula which ties to the value of the business), and/or, in the case
of a portfolio manager who manages a private investment fund with a
performance fee, a deferred cash award or a direct profit sharing
interest that results in the manager receiving amounts based on the
amount of the performance fee paid by such fund. These long-term
incentives vest over time and are granted annually, based upon the same
criteria used to determine the performance-driven annual bonus detailed
above. Because the Portfolio Team members are generally responsible for
multiple accounts (including the Registrant), they are compensated on
the overall performance of the accounts that they manage, rather than a
specific account, except for the portion of compensation relating to
any performance fee award.
BENEFICIAL OWNERSHIP. As of December 31, 2007, members of the Portfolio
Team beneficially owned the following dollar range of equity securities
in the Registrant:
DOLLAR RANGE OF BENEFICIALLY OWNED*
PORTFOLIO TEAM EQUITY SECURITIES OF THE REGISTRANT
---------------------- -----------------------------------
Clifford M. Noreen None
Jill A. Fields None
Michael P. Hermsen $10,001-$50,000
Michael L. Klofas None
Richard E. Spencer II None
* Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934, as amended.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable for this filing.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable for this filing.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The principal executive officer and principal financial officer
of the Registrant evaluated the effectiveness of the Registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) as of a
date within 90 days of the filing date of this report and based
on that evaluation have concluded that such disclosure controls
and procedures are effective to provide reasonable assurance that
material information required to be disclosed by the Registrant
on Form N-CSR is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act)
during the Registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially
affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) ANY CODE OF ETHICS, OR AMENDMENTS THERETO, THAT IS THE SUBJECT OF
DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT
INTENDS TO SATISFY THE ITEM 2 REQUIREMENTS THROUGH THE FILING OF
AN EXHIBIT.
None.
(a)(2) A SEPARATE CERTIFICATION FOR EACH PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT AS REQUIRED BY RULE
30a-2 UNDER THE ACT.
Attached hereto as EX-99.31.1
Attached hereto as EX-99.31.2
(a)(3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23c-1
UNDER THE ACT (17 CFR 270.23c-1) SENT OR GIVEN DURING THE PERIOD
COVERED BY THE REPORT BY OR ON BEHALF OF THE REGISTRANT TO 10 OR
MORE PERSONS.
Not Applicable for this filing.
(b) CERTIFICATIONS PURSUANT TO RULE 302-2(b) UNDER THE ACT.
Attached hereto as EX-99.32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): MassMutual Participation Investors
----------------------------------
By: /s/ Clifford M Noreen
----------------------------------
Clifford M Noreen, President
----------------------------------
Date: March 7, 2008
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Clifford M Noreen
----------------------------------
Clifford M Noreen, President
----------------------------------
Date: March 7, 2008
----------------------------------
By: /s/ James M. Roy
----------------------------------
James M. Roy, Vice President, and
Chief Financial Officer
----------------------------------
Date: March 7, 2008
----------------------------------