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, Springfield, MA 01115
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(Address of principal executive offices) (Zip code)
Stephen L. Kuhn, Vice President and Secretary
1500 Main Street, Suite 2800, Springfield, MA 01115
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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: 6/30/05
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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 semi-annual shareholder report transmitted to
shareholders pursuant to Rule 30e-1 of the Investment Company Act of
1940, as amended.
MassMutual
PARTICIPATION
INVESTORS
REPORT for the SIX
MONTHS ENDED 6/30/05
MASSMUTUAL PARTICIPATION INVESTORS
c/o Babson Capital Management LLC
1500 Main Street, Suite 600
Springfield, Massachusetts 01115
(413) 226-1516
ADVISER
Babson Capital Management LLC
1500 Main Street
Springfield, Massachusetts 01115
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Boston, Massachusetts 02110
COUNSEL TO THE TRUST
Ropes & Gray LLP
Boston, Massachusetts 02110
CUSTODIAN
Citibank, N.A.
New York, New York 10043
TRANSFER AGENT & REGISTRAR
Shareholder Financial Services, Inc.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
Internet website: www.babsoncapital.com/mpv
INVESTMENT OBJECTIVE AND POLICY
MassMutual Participation Investors (the "Trust") is a closed-end management
investment company, first offered to the public in 1988, whose shares are traded
on the New York Stock Exchange under the trading symbol "MPV". The Trust's share
price can be found in the financial section of most newspapers as "MassPrt" or
"MassMuPrt" under the New York Stock Exchange listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term corporate debt obligations purchased directly
from their issuers, which tend to be smaller companies. At least half of these
investments normally include equity features such as warrants, conversion
rights, or other equity features that provide the Trust with the opportunity to
realize capital gains. The Trust will also invest in publicly traded debt
securities (including high yield securities), again with an emphasis on those
with equity features, and in convertible preferred stocks and, subject to
certain limitations, readily marketable equity securities. In addition, the
Trust may temporarily invest in high quality, readily marketable securities.
Babson Capital Management LLC manages the Trust on a total return basis. The
Trust distributes substantially all of its net income to shareholders each year.
Accordingly, the Trust pays dividends to shareholders quarterly in January, May,
August, and November. All registered shareholders are automatically enrolled in
the Dividend Reinvestment and Cash Purchase Plan unless cash distributions are
requested.
FORM N-Q
MassMutual Participation Investors files its complete schedule of portfolio
holdings with the U.S. Securities and Exchange Commission for the first and
third quarters of each fiscal year on Form N-Q. This information is available
(i) on the U.S. Securities and Exchange Commission's website at
http://www.sec.gov; and (ii) at the U.S. Securities and Exchange Commission's
Public Reference Room in Washington, DC (which information on their operation
may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio
holdings as of each quarter-end is available upon request by calling, toll-free,
866-399-1516.
PROXY VOTING POLICIES & PROCEDURES; PROXY VOTING RECORD
The Trustees of MassMutual Participation Investors have delegated proxy voting
responsibilities relating to the voting of securities held by the Trust to
Babson Capital Management LLC. A description of Babson Capital's proxy voting
policies and procedures is available (1) without charge, upon request, by
calling, toll-free 866-399-1516; (2) on MassMutual Participation Investors'
website: http://www.babsoncapital.com/mpv; and (3) on the U.S. Securities and
Exchange Commission ("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 is available (1) on MassMutual
Participation Investors' website: http://www.babsoncapital.com/mpv; and (2) on
the SEC's website at http://www.sec.gov.
TO OUR SHAREHOLDERS
August 9, 2005
We are pleased to present the June 30, 2005 Semi-Annual Report of MassMutual
Participation Investors (the "Trust"). At the Trust's Quarterly Board of
Trustees Meeting, which was held on July 15, 2005, the Trustees announced that
Stuart H. Reese had stepped down as Trustee and Chairman of the Board of
Trustees as a result of his new position as President and CEO of Massachusetts
Mutual Life Insurance Company ("MassMutual"). Subsequently, Roger W. Crandall,
former President of the Trust, was appointed as a Trustee and elected to succeed
Mr. Reese as Chairman of the Board of Trustees. Mr. Crandall currently serves as
Chairman of Babson Capital Management LLC ("Babson"), the Trust's investment
advisor, and Executive Vice President and Chief Investment Officer of
MassMutual, Babson's parent company. In addition, the Trustees appointed Michael
H. Brown as a Trustee, thereby increasing the size of the Board from seven to
eight. Mr. Brown recently retired from Morgan Stanley, where he held the role of
Managing Director in the Fixed Income Division. Mr. Brown has 24 years of
investment experience.
The Board of Trustees elected me, Clifford M. Noreen, to succeed Mr. Crandall as
President of the Trust at their July 15, 2005 meeting. I was previously a Vice
President of the Trust, and am currently the head of the Corporate Securities
Group at Babson, where I oversee all corporate credit related investments,
including public and private bonds, mezzanine, and private equity investments,
as well as structured credit products. Prior to this role, I was responsible for
all public corporate bond investments for Babson. I look forward to serving as
President of the Trust.
The Trust's Board of Trustees declared a quarterly dividend of 24 cents per
share, payable on August 12, 2005 to shareholders of record on July 29, 2005. A
dividend of 24 cents per share was paid in the previous quarter.
U.S. equity markets, as measured by several broad market indices, posted mixed
returns. During the quarter ended June 30, 2005, large stocks, as approximated
by the Dow Jones Industrial Average, decreased 1.63%, while smaller stocks, as
approximated by the Russell 2000 Index, increased 4.32%. For the six months
ended June 30, 2005, returns were -3.65% and -1.25%, respectively. U.S. fixed
income markets, as measured by selected indices, increased during the quarter.
The Lehman Brothers Government/Credit Index and the Lehman Brothers U.S.
Corporate High Yield Index increased 3.44% and 2.76%, respectively, for the
quarter. For the six months ended June 30, 2005, returns were 2.75% and 1.11%,
respectively.
For the quarter ended June 30, 2005, the Trust earned 23 cents per share. The
Trust earned 23 cents per share in the previous quarter. The Trust's net assets
as of June 30, 2005 totaled $115,868,406 or $11.93 per share compared to
$111,110,593 or $11.46 per share on March 31, 2005. This translated into a
portfolio return of 6.32% for the quarter, and 9.47% for the six months ended
June 30, 2005, based on the change in the Trust's net assets assuming the
reinvestment of all dividends. Long term, the Trust's portfolio had average
annualized returns of 24.53%, 11.81%, 13.77%, and 12.86% for the 1-, 5-, 10- and
15- year time periods ended June 30, 2005, respectively, based on change in net
assets with the reinvestment of all dividends.
During the quarter, the Trust made private placement investments in three new
issuers and closed one "follow on" investment, totaling approximately $3.6
million. The follow on investment purchased by the Trust was in Tomah Holdings,
Inc. The three new issuers the Trust invested in were AmerCable, Inc., Arrow
Tru-Line Holdings, Inc., and Consolidated Foundries Holdings. The weighted
average coupon of these investments was 12.00%. (A brief description of these
investments can be found in the Schedule of Investments.)
Thank you for your continued interest in and
support of MassMutual Participation Investors.
Sincerely,
/s/ Clifford M. Noreen
Clifford M. Noreen
President
PORTFOLIO COMPOSITION AS OF 06/30/05*
[PIE CHART APPEARS HERE]
Public High
Yield Debt 26%
Public Equity 3%
Cash & Short Term
Investments 12%
Private/Restricted
Equity 15%
Private Investment
Grade Debt 3%
Private High
Yield Debt 40%
Public
Investment
Grade Debt 1%
*Based on market value of total investments
CONSOLIDATED STATEMENT OF MASSMUTUAL PARTICIPATION INVESTORS
ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $87,789,987) $ 86,708,774
Corporate public securities at market value
(Cost - $30,955,304) 33,130,588
Short-term securities at cost plus earned discount which
approximates market value 14,220,400
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134,059,762
Cash 1,686,775
Interest receivable 2,467,361
Receivable for investments sold 1,634,057
Other assets 12,670
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TOTAL ASSETS $ 139,860,625
=============
LIABILITIES:
Payable for investments purchased $ 485,772
Management fee payable 260,704
Note payable 12,000,000
Revolving Credit Agreement 10,500,000
Interest payable 121,698
Accrued expenses 139,432
Accrued taxes payable (See Footnote 2.D) 484,613
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TOTAL LIABILITIES 23,992,219
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NET ASSETS:
Common shares, par value $.01 per share; an unlimited number
authorized 97,126
Additional paid-in capital 90,127,085
Retained net realized gain on investments, prior years 19,858,001
Undistributed net investment income 2,629,339
Undistributed net realized gain on investments 2,522,413
Net unrealized appreciation of investments 634,442
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TOTAL NET ASSETS 115,868,406
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TOTAL LIABILITIES AND NET ASSETS $ 139,860,625
=============
COMMON SHARES ISSUED AND OUTSTANDING 9,712,568
=============
NET ASSET VALUE PER SHARE $ 11.93
=============
See Notes to Consolidated Financial Statements.
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2
CONSOLIDATED STATEMENT OF OPERATIONS MASSMUTUAL PARTICIPATION INVESTORS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Interest $ 5,685,921
Dividends 119,135
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TOTAL INVESTMENT INCOME 5,805,056
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EXPENSES:
Management fees 510,160
Interest 524,135
Trustees' fees and expenses 61,200
Transfer agent/registrar's expenses 13,200
Reports to shareholders 60,000
Professional fees 115,200
Other 25,516
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TOTAL EXPENSES 1,309,411
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NET INVESTMENT INCOME ($0.46 PER SHARE) 4,495,645
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments before taxes 4,004,532
Net change in unrealized depreciation of investments before taxes 2,113,090
Provision for taxes (541,056)
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NET GAIN ON INVESTMENTS 5,576,566
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,072,211
=============
See Notes to Consolidated Financial Statements.
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3
CONSOLIDATED STATEMENT OF CASH FLOWS MASSMUTUAL PARTICIPATION INVESTORS
For the six months ended June 30, 2005
(Unaudited)
NET DECREASE IN CASH:
Cash flows from operating activities:
Interest and dividends received $ 4,825,065
Interest expense paid (516,261)
Operating expenses paid (800,227)
Income taxes paid (472,862)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 3,035,715
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Cash flows from investing activities:
Purchases/Proceeds/Maturities from short-term portfolio
securities, net (8,511,366)
Purchases of portfolio securities (18,141,169)
Proceeds from disposition of portfolio securities 28,229,477
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NET CASH PROVIDED BY INVESTING ACTIVITIES 1,576,942
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NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES 4,612,657
-------------
Cash flows from financing activities:
Cash dividends paid from net investment income (5,809,254)
Receipts for shares issued on reinvestment of dividends 513,321
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NET CASH USED FOR FINANCING ACTIVITIES (5,295,933)
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NET DECREASE IN CASH (683,276)
Cash - beginning of year 2,370,051
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CASH - END OF PERIOD $ 1,686,775
=============
Reconciliation of net increase in net assets to net
cash provided by operating and investing activities:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,072,211
-------------
Increase in investments (5,288,365)
Increase in interest and dividends receivable (600,026)
Increase in receivable for investments sold (105,382)
Increase in other assets (12,670)
Increase in payable for investments purchased 485,772
Increase in management fee payable 19,032
Increase in interest payable 7,874
Decrease in accrued expenses (33,983)
Increase in accrued taxes payable 68,194
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TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS (5,459,554)
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NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES $ 4,612,657
=============
See Notes to Consolidated Financial Statements.
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4
CONSOLIDATED STATEMENTS OF MASSMUTUAL PARTICIPATION INVESTORS
CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
For the six
months ended For the
06/30/2005 year ended
(Unaudited) 12/31/2004
----------- ----------
Increase in net assets:
Operations:
Net investment income $ 4,495,645 $ 9,713,437
Net realized gain on investments before taxes 4,004,532 1,196,570
Net change in unrealized depreciation of
investments before taxes 2,113,090 12,493,998
Provision for taxes (541,056) (504,437)
----------- -----------
Net increase in net assets resulting from
operations 10,072,211 22,899,568
Receipts for shares issued on reinvestment
of dividends
Common shares issued (2005 - 40,009;
2004 - 81,587) 513,321 927,073
Dividends to shareholders from:
Net investment income (2005 - $0.24 per share;
2004 - $1.10 per share) (2,327,133) (10,613,225)
----------- -----------
Total increase in net assets 8,258,399 13,213,416
Net Assets, beginning of year 107,610,007 94,396,591
------------ ------------
Net Assets, end of period/year $115,868,406 $107,610,007
============ ============
See Notes to Consolidated Financial Statements.
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5
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS MASSMUTUAL PARTICIPATION INVESTORS
Selected data for each common share outstanding:
For the
six months
ended For the years ended December 31,
06/30/2005 ----------------------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
---------- ------ ------ ------ ------ -------
Net asset value:
Beginning of year $ 11.13 $ 9.84 $ 8.78 $ 9.12 $ 9.75 $ 10.40
------- ------ ------ ------ ------ -------
Net investment income 0.46 1.00 0.80 0.87 0.93 1.00
Net realized and unrealized
gain (loss) on investments 0.57 1.36 1.21 (0.35) (0.61) (0.14)
------- ------ ------ ------ ------ -------
Total from investment operations 1.03 2.36 2.01 0.52 0.32 0.86
------- ------ ------ ------ ------ -------
Dividends from net investment
income to common shareholders (0.24) (1.10) (0.96) (0.86) (0.96) (0.96)
Dividends from net realized
gain on investments to common
shareholders -- -- -- -- -- (0.55)
Change from issuance of shares 0.01 0.03 0.01 -- 0.01 --
------- ------ ------ ------ ------ -------
Total distributions (0.23) (1.07) (0.95) (0.86) (0.95) (1.51)
Net asset value:
End of period/year $ 11.93 $ 11.13 $ 9.84 $ 8.78 $ 9.12 $ 9.75
------- ------- ------ ------ ------ ------
Per share market value:
End of period/year $ 14.05 $ 13.31 $ 11.65 $ 9.40 $ 9.10 $ 10.94
======= ======= ======= ====== ====== =======
Total investment return
Market value 7.53%* 25.77% 35.50% 12.58% (8.02)% 22.91%
Net asset value ** 9.47%* 25.14% 23.72% 5.70% 3.41% 8.11%
Net assets (in millions):
End of period/year $ 115.87 $ 107.61 $ 94.40 $ 83.59 $ 86.09 $ 90.95
Ratio of operating expenses to
average net assets 0.71%* 1.63% 1.65% 1.27% 1.22% 1.28%
Ratio of interest expense to
average net assets 0.47%* 0.89% 0.97% 1.08% 1.47% 1.54%
Ratio of total expenses to
average net assets 1.18%* 2.52% 2.62% 2.35% 2.69% 2.82%
Ratio of net investment income
to average net assets 4.06%* 9.60% 8.55% 9.42% 9.70% 9.20%
Portfolio turnover 15.34%* 51.25% 55.08% 35.32% 21.58% 55.97%
*Percentages represent results for the period and are not annualized.
**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 market
value due to the difference between the Trust's net asset value and the market
value of its shares outstanding; past performance in no guarantee of future
results.
See Notes to Consolidated Financial Statements.
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6
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES - 74.84%: (A) Principal Amount Date Cost Fair Value
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PRIVATE PLACEMENT INVESTMENTS - 68.05%
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 $ 1,062,659
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 12
------------ ------------
1,125,000 1,062,671
------------ ------------
A W C HOLDING COMPANY
A manufacturer and distributor of aluminum and vinyl
windows and doors in the Southwest and Southeast
regions of the U.S.
12% Senior Subordinated Note due 2012 $ 1,125,000 05/18/04 1,021,730 1,077,525
Limited Partnership Interest of
AWC Investment, LLC (B) 132 uts. 05/18/04 112,500 101,252
------------ ------------
1,134,230 1,178,777
------------ ------------
ADORN, INC.
A manufacturer of wall panels, cabinets, moldings and
countertops for houses and recreational vehicles.
12.5% Subordinated Note due 2010 $ 1,125,000 02/29/00 1,032,136 1,125,000
Warrant, exercisable until 2010, to purchase
common stock at $.02 per share (B) 192 shs. 02/29/00 162,931 182,067
------------ ------------
1,195,067 1,307,067
------------ ------------
AMERCABLE, INC.
A manufacturer of electric power, instrumentation and
control cables, primarily for the mining and oil and gas
industries.
12% Senior Subordinated Note due 2013 $ 1,083,333 04/08/05 1,019,524 1,082,786
Limited Partnership Interest (B) 42 uts. 04/07/05 41,667 37,503
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 66 shs. 04/08/05 64,833 1
------------ ------------
1,126,024 1,120,290
------------ ------------
AMERICA'S BODY COMPANY, INC./LCP HOLDING CO.
A designer and manufacturer of commercial work vehicles.
12% Preferred Stock Series C (B) 197 shs. 12/16/03 875,000 1,750,000
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 40 shs. * 256,667 --
------------ ------------
1,131,667 1,750,000
------------ ------------
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 1,008,192 1,158,750
Preferred Class A Unit (B) 1,337 uts. 01/22/04 133,700 120,330
Common Class B Unit (B) 1,610 uts. 01/22/04 -- 126,799
------------ ------------
1,141,892 1,405,879
------------ ------------
*11/02/98 and 12/24/03.
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7
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
ARROW TRU-LINE HOLDINGS, INC.
A manufacturer of hardware for residential and
commercial overhead garage doors in North America.
12% Senior Subordinated Note due 2012 $ 861,702 05/18/05 $ 802,938 $ 862,905
Common Stock (B) 263 shs 05/18/05 263,298 236,970
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 1
------------ ------------
1,125,598 1,099,876
------------ ------------
AUGUSTA SPORTSWEAR HOLDING CO.
A manufacturer and distributor of athletic apparel,
activewear and team uniforms.
12% Senior Subordinated Note due 2012 $ 893,000 12/31/04 832,052 903,736
Common Stock (B) 261 shs. * 261,000 234,900
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 73 shs. 12/31/04 63,254 1
------------ ------------
1,156,306 1,138,637
------------ ------------
BEACON MEDICAL PRODUCTS, INC.
A designer, manufacturer and marketer of medical air and
gas distribution systems.
Senior Secured Floating Rate Revolving Credit
Facility due 2007 $ 131,792 04/09/02 131,792 132,015
Senior Secured Tranche A Floating Rate Note due 2008 $ 412,464 04/09/02 412,464 412,464
12% Senior Secured Note due 2010 $ 412,112 04/09/02 358,511 428,596
Limited Partnership Interest of Riverside Capital
Appreciation Fund IV, L.P. (B) 6.38% int. 04/09/02 87,045 80,691
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 794 shs. 04/09/02 72,856 73,635
------------ ------------
1,062,668 1,127,401
------------ ------------
BETA BRANDS LTD
A manufacturer of hard candy and chocolate-coated
products sold primarily to the Canadian market.
5% Promissory Note due 2009 (B) $ 96,698 03/31/04 96,698 --
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 2,421 shs. 03/31/04 1 --
------------ ------------
96,699 --
------------ ------------
BETTER MINERALS & AGGREGATES
A producer of high grade industrial and specialty
silica sands.
14% Redeemable Preferred Stock (B) 499 shs. 09/30/99 272,912 54,525
Convertible Preferred Stock Series A and B, convertible
into common stock at $9.26 per share (B) 62,997 shs. 12/19/96 583,300 --
Common Stock (B) 10,013 shs. 09/30/99 399,505 --
Warrants, exercisable until 2005 and 2010, to
purchase common stock at $.01 per share (B) 5,700 shs. ** 64,247 --
------------ ------------
1,319,964 54,525
------------ ------------
*12/31/04 and 03/31/05.
**12/19/96 and 09/30/99.
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8
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
BRAMPTON FASTENER CO. LTD
A value-added national distributor of maintenance, repair
and operating supplies such as fasteners, electrical
components and tools.
Limited Partnership Interest of Brafasco Investors LLC (B) 44,000 uts. 12/31/04 $ 44,000 $ 39,600
------------ ------------
C & M CONVEYOR, INC.
A manufacturer and supplier of material handling systems
to the corrugated sheet and container industry.
9.5% Senior Secured Term Note due 2007 $ 569,277 09/13/02 569,277 577,175
11% Senior Subordinated Note due 2010 $ 478,916 09/13/02 457,434 492,362
Common Stock (B) 180,723 shs. 09/13/02 180,723 144,578
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 78,386 shs. 09/13/02 34,428 784
------------ ------------
1,241,862 1,214,899
------------ ------------
CAINS FOODS, L.P.
A producer of mayonnaise and sauce products for both the
retail and food service markets.
Limited Partnership Interest (B) 58 uts. 09/29/95 79,184 299,613
------------ ------------
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
pharmaceuticals products.
Common Stock (B) 55 shs. * 252 1,078
------------ ------------
CHEMED CORPORATION
An operator in the residential and commercial repair-andmaintenance
service industry through two wholly owned
subsidiaries, Roto-Rooter and Service America.
Common Stock 19,900 02/24/04 497,500 813,512
------------ ------------
COEUR, INC.
A producer of proprietary, disposable power injection
syringes.
Senior Secured Floating Rate Revolving Credit
Facility due 2010 $ 36,232 02/02/05 36,232 35,715
8.75% Senior Secured Term Note due 2010 $ 326,087 04/30/03 326,087 337,420
11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 223,540 251,444
Common Stock (B) 72,463 shs. 04/30/03 72,463 65,217
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 501
------------ ------------
681,639 690,297
------------ ------------
*12/30/97 and 05/29/99.
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9
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
COINING CORPORATION OF AMERICA LLC
A manufacturer of close tolerance parts and metal
stampings.
Senior Secured Floating Rate Revolving Credit
Facility due 2006 $ 80,247 01/07/02 $ 80,247 $ 78,259
Senior Secured Floating Rate Tranche A Note due 2007 $ 508,296 06/26/01 508,296 476,375
13% Senior Secured Tranche B Note due 2006 $ 370,370 06/26/01 370,370 362,320
Limited Partnership Interest (B) 3.65% int. 06/26/01 185,185 148,148
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 61,163 shs. 06/26/01 45,370 612
------------ ------------
1,189,468 1,065,714
------------ ------------
COLIBRI HOLDINGS CORPORATION
A manufacturer and distributor of wild bird feeders and
accessories.
12.5% Senior Subordinated Note due 2008 $ 843,750 09/22/00 765,313 843,750
28% Preferred Stock (B) 38 shs. 11/02/01 37,500 89,653
20% Preferred Stock (B) 35 shs. 03/09/04 35,156 42,184
Common Stock (B) 756 shs. 09/22/00 281,250 53,891
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 446 shs. 09/22/00 140,625 31,800
------------ ------------
1,259,844 1,061,278
------------ ------------
CONNOR SPORT COURT INTERNATIONAL, INC.
A designer and manufacturer of outdoor and indoor
synthetic sports flooring and other temporary flooring
products.
12% Senior Subordinated Note due 2012 $ 1,059,417 * 977,329 1,049,841
Limited Partnership Interest (B) 103,135 uts. ** 103,135 92,821
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 92 shs. * 84,829 1
------------ ------------
1,165,293 1,142,663
------------ ------------
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 1,103,944 1,151,316
Common Stock (B) 193 shs. 06/15/05 192,857 173,574
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 54 shs. 06/15/05 53,295 1
------------ ------------
1,350,096 1,324,891
------------ ------------
CORVEST GROUP, INC.
A manufacturer and distributor of promotional products.
12% Senior Subordinated Note due 2007 $ 2,045,455 *** 1,997,779 1,840,910
Common Stock (B) 30 shs. *** 51,136 12,784
Limited Partnership Interest (B) 10.23% int. *** 150,810 37,955
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 171 shs. *** 157,343 73,721
------------ ------------
2,357,068 1,965,370
------------ ------------
*08/12/04 and 01/18/05.
**08/12/04 and 01/14/05.
***03/05/99 and 03/24/99.
--------------------------------------------------------------------------------
10
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
DELSTAR HOLDING CORPORATION
A manufacturer of plastic netting for a wide variety of
industries.
Convertible Preferred Stock, convertible into common
stock at $10 per share (B) 1,758 shs. 10/05/01 $ 213,691 $ 197,751
Convertible Preferred Stock, convertible into common
stock at $11.84 per share (B) 206 shs. 09/16/04 24,414 23,193
------------ ------------
238,105 220,944
------------ ------------
DEXTER MAGNETICS TECHNOLOGIES, INC.
A designer, fabricator, assembler and distributor of
industrial magnets and subassemblies in North America
and Europe.
Common Stock (B) 310 shs. 07/19/01 309,783 367,858
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 157 shs. 07/19/01 132,677 186,446
------------ ------------
442,460 554,304
------------ ------------
DIRECTED ELECTRONICS, INC.
A designer and distributor of brand name automotive
security systems, audio products and installation
accessories.
Class B Common Stock (B) 19,394 shs. 12/22/99 -- 296,723
Limited Partnership Interest (B) 4.61% int. 12/22/99 1 444,618
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 25,713 shs. 12/22/99 -- 393,407
------------ ------------
1 1,134,748
------------ ------------
DIVERSCO, INC./DHI HOLDINGS, INC.
A contract provider of janitorial and equipment
maintenance services and temporary production labor to
industrial customers.
Membership Interests of MM/Lincap
Diversco Investments Ltd. LLC (B) 13.57% int. 08/27/98 366,495 --
Preferred Stock (B) 1,639 shs. 12/14/01 1,392,067 1,044,048
Warrants, exercisable until 2011, to purchase
common stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 --
------------ ------------
1,960,217 1,044,048
------------ ------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
14% Senior Subordinated Note due 2011 $ 984,375 10/30/03 897,202 1,013,906
Common Stock (B) 3,656 shs. ** 365,600 268,365
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 79,018
------------ ------------
1,361,521 1,361,289
------------ ------------
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 --
------------ ------------
*10/24/96 and 08/28/98.
**10/30/03 and 01/02/04.
--------------------------------------------------------------------------------
11
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
EAGLE PACK PET FOODS, INC.
A manufacturer of premium pet food sold through
independent pet stores.
14% Senior Subordinated Note due 2011 $ 562,500 09/24/04 $ 542,990 $ 578,293
Warrant, exercisable until 2011, to purchase
common stock at $.02 per share (B) 2,163 shs. 09/24/04 20,893 22
------------ ------------
563,883 578,315
------------ ------------
EAST RIVER VENTURES I, L.P.
An acquirer of controlling or substantial interests in
other entities.
Limited Partnership Interest (B) 0.04% int. 01/01/01 7,175 5,668
------------ ------------
ENZYMATIC THERAPY, INC.
A manufacturer and distributor of branded natural
medicines and nutritional supplements.
13% Senior Subordinated Note due 2006 (B) $ 843,750 09/17/02 714,590 759,375
Limited Partnership Interest (B) 0.70% int. 03/30/00 281,250 2,813
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 253 shs. 03/30/00 135,000 3
------------ ------------
1,130,840 762,191
------------ ------------
EURO-PRO CORPORATION
A designer, marketer and distributor of floor care, steam
cleaning and small kitchen products and appliances.
13.25% Senior Subordinated Note due 2011 $ 1,125,000 09/09/03 1,108,779 900,000
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 2 3,229 shs 09/09/03 18,869 232
------------ ------------
1,127,648 900,232
------------ ------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control
center systems.
Limited Partnership Interest of CM
Equity Partners (B) 1.21% int. 02/11/98 64,535 --
Common Stock (B) 45,000 shs. 05/06/04 6 --
------------ ------------
64,541 --
------------ ------------
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 96,320 681
------------ ------------
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 * 982,147 1,120,268
Common Stock (B) 33 shs. * 33,216 29,898
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 106 shs. * 105,618 1
------------ ------------
1,120,981 1,150,167
------------ ------------
*06/30/04 and 08/19/04.
--------------------------------------------------------------------------------
12
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
HUSSEY SEATING CORPORATION
A manufacturer of spectator seating products.
Senior Secured Floating Rate Revolving Note due 2006 $ 1,054,767 06/12/96 $ 1,054,767 $ 527,384
Senior Secured Floating Rate Note due 2006 $ 216,563 * 216,563 108,281
12% Senior Subordinated Note due 2006 $ 675,000 03/31/03 675,000 6,750
Common Stock (B) 2,860 shs. 03/12/04 112,500 --
------------ ------------
2,058,830 642,415
------------ ------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A manufacturer of steel protective computer and network
systems for the industrial and office environments.
16.5% Senior Secured Note due 2006 $ 910,415 03/01/04 909,127 682,812
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------ ------------
1,058,627 682,812
------------ ------------
JASON, INC.
A diversified manufacturing company serving various
industrial markets.
13% Senior Subordinated Note due 2008 $ 510,187 08/04/00 476,114 520,802
14% Cumulative Redeemable Preferred Stock Series A (B) 153 shs. 08/04/00 153,119 153,866
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,250 351,995
Warrants, exercisable until 2008 and 2009, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 24,844
------------ ------------
1,159,584 1,051,507
------------ ------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets
and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 792,660 844,535
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 593 shs. 12/15/04 53,528 6
------------ ------------
846,188 844,541
------------ ------------
KEEPSAKE QUILTING, INC.
A seller of quilting fabrics, books, patterns, kits and
notions to consumers.
Senior Secured Floating Rate Revolving Note due 2005 $ 20,967 06/16/00 20,967 20,972
Senior Secured Floating Rate Tranche A Note due 2007 $ 314,509 06/16/00 314,509 315,234
12% Senior Secured Tranche B Note due 2008 $ 314,509 06/16/00 301,548 320,799
Limited Partnership Interest of
Riverside XVI Holding Company, L.P. (B) 3.02% int. 06/12/00 190,563 198,132
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 633 shs. 06/12/00 26,209 66,415
------------ ------------
853,796 921,552
------------ ------------
KELE AND ASSOCIATES, INC.
A distributor of building automation control products.
12% Senior Subordinated Note due 2012 $ 969,643 02/27/04 885,433 976,535
Common Stock (B) 18 shs. 02/27/04 244,608 220,119
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 6 shs. 02/27/04 4,124 --
------------ ------------
1,134,165 1,196,654
------------ ------------
*06/12/96 and 08/03/01.
--------------------------------------------------------------------------------
13
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
KENAN-ADVANTAGE TRANSPORT COMPANY
A transporter of light petroleum, petrochemicals, lubricants
and residual fuels.
12.5% Senior Subordinated Note due 2009 $ 962,170 04/30/01 $ 962,170 $ 971,792
Preferred Stock (B) 163 shs. 04/30/01 163,000 326,000
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 142 shs. 04/30/01 7 1
------------ ------------
1,125,177 1,297,793
------------ ------------
KEYSTONE NORTH AMERICA, INC.
An operator of funeral homes in North America.
Common Stock 28,577 shs. 02/08/05 137,444 225,187
------------ ------------
LANCASTER LABORATORIES, INC.
A laboratory testing operation in the United States.
Common Stock (B) 455,739 shs. 09/25/00 312,254 810,076
------------ ------------
LIH INVESTORS, L.P.
A manufacturer and marketer of a broad line of external
accessories for new and used sport utility vehicles, trucks
and vans.
12.5% Senior Subordinated Note due 2008 $ 2,036,000 * 1,857,395 2,036,000
Common Stock (B) 3,057 shs. * 213,998 149,793
Warrant, exercisable until 2006, to purchase
common stock at $.11 per share (B) 8,245 shs. * 318,838 404,005
------------ ------------
2,390,231 2,589,798
------------ ------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of
wine bottles.
Senior Secured Floating Rate Tranche A Note due 2010 $ 447,762 09/03/04 447,762 442,731
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 158,123 184,279
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 30,224
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 2
------------ ------------
662,023 657,236
------------ ------------
MAXON CORPORATION
A manufacturer of industrial combustion equipment and
related shut-off valves and control valves.
12% Senior Subordinated Note due 2012 $ 549,837 09/30/04 500,845 549,004
8.75% Senior Subordinated Note due 2012 $ 732,065 09/30/04 732,065 739,583
Common Stock (B) 218,099 shs. 09/30/04 218,099 196,289
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 87,755 shs. 09/30/04 51,941 878
------------ ------------
1,502,950 1,485,754
------------ ------------
*12/23/98 and 01/28/99.
--------------------------------------------------------------------------------
14
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
MEDASSIST, INC.
A provider of patient eligibility and accounts receivable
management services to hospitals and physician practices.
12% Senior Subordinated Note due 2011 $ 1,125,000 05/01/03 $ 1,107,445 $ 1,136,250
8% Preferred Stock (B) 44 shs. 10/28/04 44,289 44,577
Common Stock (B) 13,863 shs. 10/28/04 18,576 19,075
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 44,054 shs. 05/01/03 21,534 60,266
------------ ------------
1,191,844 1,260,168
------------ ------------
MOSS, INC.
A manufacturer and distributor of large display and exhibit
structures.
Senior Secured Floating Rate Revolving Note due 2005 $ 57,660 03/24/05 57,660 57,660
Senior Secured Floating Rate Tranche A Note due 2007 $ 452,720 09/21/00 452,720 452,720
12% Senior Secured Tranche B Note due 2008 $ 192,200 09/21/00 182,260 192,200
Limited Partnership Interest of
Riverside Capital Appreciation Fund I, L.P. (B) 21.37% int. * 178,069 222,576
Warrant, exercisable until 2008, to purchase
common stock at $100 per share (B) 264 shs. 09/21/00 23,064 10,997
------------ ------------
893,773 936,153
------------ ------------
MUSTANG VENTURES COMPANY
A natural gas gathering and processing operation located in
Oklahoma and Texas.
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 8,752 shs. 12/11/02 261,264 367,762
------------ ------------
NEFF MOTIVATION, INC.
A manufacturer and distributor of customized awards and
sportswear to schools.
12.5% Senior Subordinated Note due 2011 $ 562,500 01/31/03 483,622 579,375
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 112 shs. 01/31/03 95,625 46,025
------------ ------------
579,247 625,400
------------ ------------
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 1,026,000
10% Preferred Stock (B) 135 shs. 03/29/04 135,044 140,592
Common Stock (B) 3,418 shs. 03/29/04 3,418 25,430
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 4,565 shs. 03/29/04 3,877 33,925
------------ ------------
1,125,000 1,225,947
------------ ------------
*09/20/00 and 05/23/02.
--------------------------------------------------------------------------------
15
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
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 $ 503,506
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 785,697 930,998
Common Stock (B) 178,571 shs. 01/28/02 178,571 122,143
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 138,928 shs. 01/28/02 92,597 93,776
------------ ------------
1,521,151 1,650,423
------------ ------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon and California
and British Columbia.
12% Senior Subordinated Note due 2006 $ 1,387,000 08/07/98 1,387,000 1,341,009
12% Senior Subordinated Note due 2008 $ 244,154 02/09/00 231,769 227,536
Limited Partnership Interest of Riverside VIII, VIII-A
and VIII-B Holding Company, L.P. (B) 795,964 uts. * 808,300 575,272
Warrants, exercisable until 2007 and 2008, to purchase
common stock at $.01 per share (B) 15,166 shs. ** 206,041 46,955
------------ ------------
2,633,110 2,190,772
------------ ------------
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 1,044,148 1,125,000
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 253,125
------------ ------------
1,184,773 1,378,125
------------ ------------
PRECISION DYNAMICS, INC.
A manufacturer of custom-designed solenoid valves
and controls.
Senior Secured Floating Rate Revolving Credit
Facility due 2005 $ 309,700 07/22/96 309,700 309,700
Senior Secured Floating Rate Term Note due 2005 $ 4,075 07/22/96 4,075 4,075
12% Senior Secured Term Note due 2005 $ 163,000 07/22/96 161,907 163,000
8% Preferred Stock 228 shs. 07/22/96 116,023 115,944
Common Stock (B) 299 shs. 07/22/96 14,489 14,489
Warrant, exercisable until 2005, to purchase
common stock at $.01 per share (B) 162 shs. 07/22/96 49,000 2
------------ ------------
655,194 607,210
------------ ------------
PROCESS CHEMICALS LLC
A specialty chemical company that manufactures processed
chemicals for the fertilizer, asphalt and concrete industries.
Common Membership Interests 1 uts. *** 4 144,000
------------ ------------
*08/07/98, 02/23/99, 12/22/99 and 02/25/03.
**08/07/98 and 02/29/00.
***07/31/97 and 01/04/99.
--------------------------------------------------------------------------------
16
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
PROTEIN GENETICS, INC.
A producer of bovine artificial insemination products,
related breeding and healthcare products and specialty
genetics sold to the dairy and beef industries.
9.8% Redeemable Exchangeable Preferred Stock (B) 332 shs. 08/12/94 $ 33,217 $ --
Common Stock (B) 867 shs. * 42,365 --
------------ ------------
75,582 --
------------ ------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and
chassis products.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 755,290 975,460
Common Stock (B) 187,500 shs. 05/28/04 187,500 168,750
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 199,969 shs. 05/28/04 199,969 2,000
------------ ------------
1,142,759 1,146,210
------------ ------------
QUALSERV CORPORATION
A provider of foodservice equipment and supplies, to
major restaurant chains and their franchisees.
14% Senior Subordinated Note due 2012 $ 1,002,475 07/09/04 978,060 902,227
Limited Partnership Interest (B) 4.90% int. 07/09/04 137,195 96,037
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 280 shs. 07/09/04 25,973 3
------------ ------------
1,141,228 998,267
------------ ------------
RIVER RANCH FRESH FOODS LLC
A supplier of fresh produce to the retail and foodservice
channels.
13% Senior Subordinated Note due 2011 $ 975,000 09/29/04 896,780 969,781
Limited Partnership Interest (B) 21,499 uts. 09/29/04 150,000 134,997
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,481 shs. 09/29/04 83,596 125
------------ ------------
1,130,376 1,104,903
------------ ------------
ROYAL BATHS MANUFACTURING COMPANY
A manufacturer and distributor of acrylic and cultured
marble bathroom products.
12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 505,349 554,476
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 1
------------ ------------
570,438 554,477
------------ ------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A manufacturer of vertical panel saws and routers for the
wood working industry.
Senior Secured Floating Rate Tranche A Note due 2007 $ 592,248 06/02/99 592,248 592,248
12% Senior Secured Tranche B Note due 2007 $ 646,089 06/02/99 646,089 646,089
Class B Common Stock (B) 846 shs. 06/02/99 146,456 290,455
------------ ------------
1,384,793 1,528,792
------------ ------------
*11/14/01 and 08/12/94.
--------------------------------------------------------------------------------
17
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 $ 757,731 $ 831,772
Common Stock (B) 310 shs. 09/10/04 310,345 279,315
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 1
------------ ------------
1,128,205 1,111,088
------------ ------------
SHELTER ACQUISITION, INC.
A distributor of roofing supplies and products throughout
the Midwest.
12.5% Senior Subordinated Note due 2008 $ 803,571 08/01/02 731,756 803,571
Common Stock (B) 477,411 shs. * 477,411 716,117
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 139,470 shs. 08/01/02 114,589 209,205
------------ ------------
1,323,756 1,728,893
------------ ------------
SNYDER INDUSTRIES, INC.
A manufacturer of proprietary rotationally molded
polyethylene containers.
12.25% Senior Subordinated Note due 2008 $ 2,250,000 12/06/99 2,096,959 2,250,000
Warrant, exercisable until 2007, to purchase
common stock at $.01 per share (B) 369 shs. 12/06/99 306,818 199,422
------------ ------------
2,403,777 2,449,422
------------ ------------
SPECIALTY FOODS GROUP, INC.
A manufacturer and distributor of branded meat products.
Limited Partnership Interest of MHD Holdings LLC (B) 0.76% int. 08/29/00 307,860 74,436
------------ ------------
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.
12% Senior Subordinated Note due 2007 $ 975,000 08/21/03 946,045 994,500
Limited Partnership Interest (B) 1.05% int. 08/20/03 150,000 744,000
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 45,942 shs. 08/21/03 45,000 227,872
------------ ------------
1,141,045 1,966,372
------------ ------------
*08/01/02, 01/17/03 and 12/31/04.
--------------------------------------------------------------------------------
18
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount 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.
Senior Secured Floating Rate Term A Note due 2010 $ 170,704 03/01/05 $ 170,704 $ 170,274
Senior Secured Floating Rate Term B Note due 2012 $ 210,937 03/01/05 210,435 209,749
12% Senior Subordinated Note due 2013 $ 585,937 03/01/05 554,725 582,986
Limited Partnership Interest of
Saw Mill Capital Fund V, L.P. (B) 236 uts. 03/01/05 235,547 211,995
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37 shs. 03/01/05 32,098 --
------------ ------------
1,203,509 1,175,004
------------ ------------
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 1,254,715 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 174,353
Warrant, exercisable until 2006, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 122,877
------------ ------------
1,754,131 1,653,230
------------ ------------
TIDEWATER HOLDINGS, INC.
An operator of a barge transportation line on the
Columbia/Snake River system.
17% Preferred Stock (B) 280 shs. 12/23/02 280,000 378,000
Convertible Preferred Stock, convertible into
common stock at $1,000 per share (B) 560 shs. 07/25/96 560,000 756,000
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 237 shs. 07/25/96 24,103 319,788
------------ ------------
864,103 1,453,788
------------ ------------
TOMAH HOLDINGS, INC.
A manufacturer of specialty chemicals.
16% Senior Subordinated Note due 2011 $ 773,875 12/08/03 748,974 804,830
16% Preferred Stock Series A (B) 20 shs. 12/08/03 334,393 349,999
Common Stock (B) 8,368 shs. 12/08/03 69,603 108,524
------------ ------------
1,152,970 1,263,353
------------ ------------
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 $ 676,983 01/20/00 676,983 683,124
12% Senior Subordinated Note due 2010 $ 758,100 01/20/00 725,642 771,805
Common Stock (B) 129,960 shs. 01/20/00 129,960 103,968
Warrant, exercisable until 2010, to purchase
common stock at $1 per share (B) 148,912 shs. 01/20/00 56,316 1,489
------------ ------------
1,588,901 1,560,386
------------ ------------
--------------------------------------------------------------------------------
19
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
TRUSTILE DOORS, INC.
A manufacturer and distributor of interior doors.
12.5% Senior Subordinated Note due 2010 $ 562,500 04/11/03 $ 522,923 $ 561,472
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 50,625 31
------------ ------------
573,548 561,503
------------ ------------
TUBULAR TEXTILE MACHINERY
A designer, manufacturer, sale and servicer of finishing
machinery for the knit and woven segments of the global
textile industry.
12% Senior Subordinated Note due 2014 $ 705,457 05/28/04 635,734 686,798
8.75% Senior Secured Note due 2011 $ 409,310 05/28/04 409,310 402,424
Common Stock (B) 385,233 shs. 05/28/04 385,233 288,925
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 1,165
------------ ------------
1,505,013 1,379,312
------------ ------------
TVI, INC.
A retailer of used clothing in the United States, Canada
and Australia.
Common Stock (B) 187,500 shs. 05/02/00 187,500 202,500
------------ ------------
U S M HOLDINGS CORPORATION
A provider of facility maintenance services to retail and
corporate clients with multiple locations.
12% Senior Subordinated Note due 2011 $ 473,684 08/06/03 405,913 486,128
Preferred Stock 1,361 shs. 08/06/03 136,089 136,098
Common Stock (B) 546 shs. 08/06/03 546 546
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share 502 shs. 08/06/03 157,869 502
------------ ------------
700,417 623,274
------------ ------------
U-LINE CORPORATION
A manufacturer of high-end, built-in, undercounter
icemaking, wine storage and refrigeration appliances.
12.5% Senior Subordinated Note due 2012 $ 996,500 04/30/04 893,331 1,046,139
10% Junior Subordinated Note due 2012 $ 35,390 04/30/04 35,414 36,705
Common Stock (B) 96 shs. 04/30/04 96,400 86,760
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 1
------------ ------------
1,137,251 1,169,605
------------ ------------
VICTORY VENTURES LLC
An acquirer of controlling or substantial interests in
other entities.
Series A Preferred Units (B) 0.03% int. 12/02/96 1 2
------------ ------------
--------------------------------------------------------------------------------
20
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares, Units,
Warrants,
Ownership or Acquisition
CORPORATE RESTRICTED SECURITIES(A)(Continued) Principal Amount Date Cost Fair Value
----------------------------------------------------------------------------------------------------------------------------------
VITALITY FOODSERVICE, INC.
A non-carbonated beverage dispensing company focused
on the foodservice industry.
13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 $ 906,757 $ 1,017,935
Common Stock (B) 12,585 shs. 09/24/04 125,850 113,265
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 126
------------ ------------
1,131,545 1,131,326
------------ ------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily envelopes
and tags used on tea bags and medical and food products.
12.5% Senior Subordinated Note due 2012 $ 900,000 07/19/04 785,152 909,908
Limited Partnership Interest Class A (B) 219,375 uts. 07/19/04 219,375 197,438
Limited Partnership Interest Class B (B) 96,848 uts. 07/19/04 96,848 87,163
------------ ------------
1,101,375 1,194,509
------------ ------------
WALLS INDUSTRIES, INC.
A provider of branded workwear and sporting goods apparel.
10% Senior Subordinated Lien Note due 2009 $ 532,895 07/12/04 532,895 534,337
14% Senior Subordinated Note due 2012 $ 563,346 07/12/04 561,865 566,551
Limited Partnership Interest (B) 0.20% int. 07/12/04 19,737 17,763
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2,133 shs. 07/12/04 1,500 21
------------ ------------
1,115,997 1,118,672
------------ ------------
WEASLER HOLDINGS LLC
A manufacturer of mechanical power transmission
components for the agricultural, lawn and turf industries.
Limited Partnership Interest (B) 0.82% int. 02/03/03 53,570 93,373
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 136 shs. 02/04/03 111,086 236,473
------------ ------------
164,656 329,846
------------ ------------
TOTAL PRIVATE PLACEMENT INVESTMENTS 79,296,058 78,849,592
------------ ------------
--------------------------------------------------------------------------------
21
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares or
Interest Due Principal
CORPORATE RESTRICTED SECURITIES(A)(Continued) Rate Date Amount Cost Fair Value
---------------------------------------------------------------------------------------------------------------------------------
RULE 144A SECURITIES - 6.79%:
BONDS - 6.42%
A E P Industries, Inc. 7.875% 03/15/13 $ 75,000 $ 75,000 $ 75,166
A E S Corporation 8.750 05/15/13 425,000 476,001 474,938
A E S Corporation 9.000 05/15/15 175,000 175,000 196,438
Activant Solutions, Inc. 9.090 04/01/10 400,000 400,000 414,000
Blockbuster, Inc. 9.000 09/01/12 275,000 277,096 257,125
Bombardier Capital, Inc. 6.125 06/29/06 500,000 507,548 502,500
Bombardier, Inc. 6.300 05/01/14 500,000 440,315 452,500
Charter Communications Op LLC 8.000 04/30/12 500,000 498,750 497,500
Compression Polymers Holding 10.460 07/01/12 65,000 64,675 64,675
Douglas Dynamics, LLC 7.750 01/15/12 325,000 326,981 318,500
Intelsat Bermuda Ltd. 7.805 01/15/12 225,000 225,000 228,938
Intelsat Bermuda Ltd. 8.250 01/15/13 250,000 250,000 258,125
Interactive Health LLC 7.250 04/01/11 500,000 414,680 445,000
Lazard LLC 7.125 05/15/15 375,000 374,704 378,276
Magnachip Semiconductor 8.000 12/15/14 50,000 50,000 48,000
Markwest Energy 6.875 11/01/14 250,000 250,000 248,750
Metaldyne Corporation 10.000 11/01/13 340,000 342,092 278,800
P Q Corporation 7.500 02/15/13 685,000 677,350 673,013
Service Corporation International 7.000 06/15/17 500,000 495,015 513,750
Siebe PLC 6.500 01/15/10 350,000 308,000 301,875
T C W Lev Income Trust LP (B) 8.410 11/30/05 855,715 855,715 213,929
Tenaska Alabama Partners LP 7.000 06/30/21 185,000 185,000 187,310
Texas Genco LLC 6.875 12/15/14 350,000 350,000 368,375
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 35,875
------------ ------------ ------------
TOTAL BONDS $ 8,190,715 8,053,922 7,433,358
============ ------------ ------------
CONVERTIBLE BONDS - 0.37%
Cymer, Inc. 3.500% 02/15/09 $ 450,000 $ 450,000 $ 425,813
------------ ------------ ------------
TOTAL CONVERTIBLE BONDS $ 450,000 450,000 425,813
============ ------------ ------------
WARRANTS - 0.00%
Winsloew Furniture, Inc. (B) 700 $ 7 $ 11
------------ ------------ ------------
TOTAL WARRANTS 7 11
------------ ------------
TOTAL RULE 144A SECURITIES 8,503,929 7,859,182
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $ 87,789,987 $ 86,708,774
------------ ------------
--------------------------------------------------------------------------------
22
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Interest Due Principal
CORPORATE PUBLIC SECURITIES -- 28.59%: (A) Rate Date Amount Cost Market Value
---------------------------------------------------------------------------------------------------------------------------------
BONDS - 24.23%
Abitibi-Consolidated, Inc. 7.750% 06/15/11 $ 500,000 $ 517,194 $ 502,500
Activant Solutions, Inc. 10.500 06/15/11 325,000 325,953 352,625
Aearo Co. 8.250 04/15/12 225,000 225,000 225,000
Allied Waste NA 7.875 04/15/13 500,000 513,722 511,250
American Media Operation, Inc. 8.875 01/15/11 475,000 475,673 450,063
Appleton Papers, Inc. 8.125 06/15/11 250,000 250,000 243,750
Argo Tech Corporation 9.250 06/01/11 425,000 425,000 461,125
Arrow Electronics, Inc. 7.000 01/15/07 500,000 520,035 515,584
BCP Crystal US Holdings Corporation 9.625 06/15/14 355,000 355,000 397,600
C S C Holdings, Inc. 7.625 04/01/11 250,000 251,018 246,875
Cablevision Systems Corporation 7.890 04/01/09 450,000 450,000 451,125
Cadmus Communications Corporation 8.375 06/15/14 350,000 350,000 360,063
Chemed Corporation 8.750 02/24/11 600,000 600,000 649,500
Chesapeake Energy Corporation 7.000 08/15/14 650,000 677,457 689,000
Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 563,750
Collins & Aikman Products Co. (B) 10.750 12/31/11 450,000 461,918 101,250
Del Monte Corporation 8.625 12/15/12 200,000 200,000 220,000
Dollar Financial Group 9.750 11/15/11 325,000 325,000 335,156
Dominos, Inc. 8.250 07/01/11 109,000 108,213 116,085
Electronic Data Systems Corporation 7.125 10/15/09 500,000 505,717 538,160
Esterline Technologies 7.750 06/15/13 175,000 175,000 185,500
Ford Motor Credit Co. 5.800 01/12/09 500,000 499,070 474,648
Ford Motor Credit Co. 7.375 10/28/09 500,000 498,750 488,594
G F S I, Inc. 9.625 03/01/07 375,000 338,450 341,250
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 140,400
General Motors Accept Corporation 5.850 01/14/09 500,000 503,321 468,706
Goodyear Tire & Rubber Company 7.857 08/15/11 350,000 327,250 340,375
GulfMark Offshore, Inc. 7.750 07/15/14 300,000 298,725 315,750
Houghton Mifflin Co. 9.875 02/01/13 500,000 527,808 533,750
Huntsman LLC 11.625 10/15/10 163,000 161,068 190,914
Intrawest Corporation 7.500 10/15/13 250,000 250,000 256,563
Jostens I H Corporation 7.625 10/01/12 325,000 325,000 320,938
K 2, Inc. 7.375 07/01/14 150,000 150,603 157,875
Koppers Inc. 9.875 10/15/13 250,000 250,000 270,000
Leucadia National Corporation 7.000 08/15/13 350,000 356,958 350,000
Liberty Media Corporation 5.700 05/15/13 500,000 475,805 465,052
Lodgenet Entertainment Corporation 9.500 06/15/13 375,000 375,000 408,750
Lyondell Chemical Co. 9.500 12/15/08 450,000 458,376 478,688
M G M Mirage, Inc. 6.000 10/01/09 225,000 227,928 226,125
M S X International, Inc. 11.000 10/15/07 175,000 173,502 172,375
Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 257,500
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 104,500
Mediacom LLC 9.500 01/15/13 750,000 746,041 748,125
Moog, Inc. 6.250 01/15/15 60,000 60,000 59,850
Nalco Co. 7.750 11/15/11 250,000 250,000 266,250
National Wine & Spirits, Inc. 10.125 01/15/09 25,000 25,375 25,250
Neff Corporation 10.250 06/01/08 90,000 89,000 91,537
Nextel Communications Corporation 7.375 08/01/15 400,000 410,095 432,000
North America Energy Partners 8.750 12/01/11 200,000 200,000 172,000
--------------------------------------------------------------------------------
23
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Interest Due Principal
CORPORATE PUBLIC SECURITIES(A)(Continued) Rate Date Amount Cost Market Value
---------------------------------------------------------------------------------------------------------------------------------
Northwest Airlines Corporation 8.970% 01/02/15 $ 643,112 $ 643,112 $ 393,540
Numatics, Inc. 9.625 04/01/08 375,000 376,526 375,938
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 466,250
Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 337,750
Pacific Energy Partners 7.125 06/15/14 250,000 252,131 260,313
Pinnacle Foods Group 8.250 12/01/13 225,000 225,000 201,375
Pliant Corporation 11.625 06/15/09 574,414 587,172 614,623
Primedia, Inc. 8.000 05/15/13 500,000 513,750 501,250
Quintiles Transnational Corporation 10.000 10/01/13 250,000 250,000 273,750
Rayovac Corporation 8.500 10/01/13 175,000 175,000 182,875
Rent-A-Center, Inc. 7.500 05/01/10 250,000 250,000 250,000
Rent-Way, Inc. 11.875 06/15/10 450,000 470,592 504,000
Rhodia SA 8.875 06/01/11 250,000 249,834 240,625
Rhodia SA 10.250 06/01/10 250,000 252,560 268,125
Rogers Wireless, Inc. 7.250 12/15/12 90,000 90,000 97,200
Rogers Wireless, Inc. 7.500 03/15/15 560,000 603,660 609,000
Rogers Wireless, Inc. 8.000 12/15/12 90,000 90,000 96,975
Samsonite Corporation 8.875 06/01/11 500,000 523,715 531,250
Service Corporation International 6.000 12/15/05 21,000 21,046 21,131
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 233,718
Sports Club Co. 11.375 03/15/06 100,000 97,000 99,000
Tekni-Plex, Inc. 12.750 06/15/10 500,000 483,500 342,500
Telex Communications, Inc. 11.500 10/15/08 250,000 250,000 266,874
Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 238,124
Tenet Healthcare Corporation 9.875 07/01/14 350,000 341,859 375,374
Triton P C S, Inc. 8.500 06/01/13 500,000 500,000 461,250
Tyco International Group SA 6.375 10/15/11 150,000 148,500 164,745
United Rentals, Inc. 7.750 11/15/13 325,000 325,000 319,312
Universal City Florida 7.960 05/01/10 100,000 100,000 103,750
Universal City Florida 8.375 05/01/10 100,000 100,000 104,250
Utilicorp United, Inc. 9.950 02/01/11 500,000 550,091 542,500
Vicorp Restaurants, Inc. 10.500 04/15/11 300,000 296,374 303,000
Vought Aircraft Industries 8.000 07/15/11 650,000 649,245 643,500
Warner Music Group 7.375 04/15/14 125,000 125,000 126,250
Williams Scotsman, Inc. 9.875 06/01/07 500,000 493,750 502,500
Wornick Co. 10.875 07/15/11 350,000 350,000 355,250
------------ ------------ ------------
TOTAL BONDS $ 28,235,526 28,364,423 28,081,593
============ ------------ ------------
--------------------------------------------------------------------------------
24
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONT.)
June 30, 2005
(Unaudited)
Shares or
Interest Due Principal
CORPORATE PUBLIC SECURITIES(A)(Continued) Rate Date Amount Cost Market Value
---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 3.92%
D S W, Inc. (B) 100 $ 1,900 $ 2,495
Distributed Energy Systems Corporation 14,000 177,078 58,940
H C I Direct, Inc. (B) 500 -- --
Lazard Ltd (B) 20,300 507,500 471,975
NeuStar, Inc. (B) 1,500 33,000 38,400
P W Eagle, Inc. (B) 101,236 1 592,231
Rent-Way, Inc. (B) 46,432 458,123 456,891
Transmontaigne, Inc. (B) 277,771 909,179 2,916,596
Volcom, Inc. (B) 100 1,900 2,677
Western Alliance Bancorp (B) 100 2,200 2,540
------------ ------------
TOTAL COMMON STOCK 2,090,881 4,542,745
------------ ------------
CONVERTIBLE BONDS - 0.44%
Leucadia National Corporation 3.750% 04/15/14 $ 500,000 $ 500,000 $ 506,250
------------ ------------ ------------
TOTAL CONVERTIBLE BONDS $ 500,000 500,000 506,250
============ ------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 30,955,304 $ 33,130,588
------------ ------------
Interest Due Principal
SHORT-TERM SECURITIES: Rate/Yield Date Amount Cost Market Value
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 12.27%
Baxter International, Inc. 3.354 07/14/05 $ 1,462,000 $ 1,460,231 $ 1,460,231
C V S Corporation 3.122 07/01/05 2,159,000 2,159,000 2,159,000
Cendant Corporation 3.305 07/11/05 1,436,000 1,434,684 1,434,684
Centex Corporation 3.303 07/06/05 2,195,000 2,193,994 2,193,994
D T E Energy Company 3.354 07/12/05 2,000,000 1,997,953 1,997,953
DaimlerChrysler NA Holding Corporation 3.313 07/08/05 1,640,000 1,638,944 1,638,944
Deluxe Corporation 3.303 07/07/05 1,037,000 1,036,430 1,036,430
Wellpoint, Inc. 3.273 07/05/05 2,300,000 2,299,164 2,299,164
------------ ------------ ------------
TOTAL SHORT-TERM SECURITIES $ 14,229,000 $ 14,220,400 $ 14,220,400
============ ------------ ------------
TOTAL INVESTMENTS 115.70% $132,965,691 $134,059,762
============ ------------
Other Assets 5.01 5,800,863
Liabilities (20.71) (23,992,219)
------ ------------
Total Net Assets 100.00% $115,868,406
====== ============
(A) In each of the convertible note, warrant, convertible preferred and common
stock investments, the issuer has agreed to provide certain registration
rights.
(B) Non-income producing security.
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
25
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.)
June 30, 2005
(Unaudited)
Fair Value/ Fair Value/
Industry Classification: Market Value Industry Classification: (Cont.) Market Value
------------ ------------
AEROSPACE - 2.65% BUILDINGS & REAL ESTATE - 4.21%
Argo Tech Corporation $ 461,125 A W C Holding Company $ 1,178,777
Bombardier, Inc. 452,500 Adorn, Inc. 1,307,067
Consolidated Foundries Holdings 1,324,891 Compression Polymers Holding 64,675
Esterline Technologies 185,500 Shelter Acquisition, Inc. 1,728,893
Vought Aircraft Industries 643,500 Texas Industries, Inc. 35,875
------------ TruStile Doors, Inc. 561,503
3,067,516 ------------
------------ 4,876,790
AIRLINES - 0.34% ------------
Northwest Airlines Corporation 393,540 CARGO TRANSPORT - 2.37%
------------ Kenan-Advantage Transport Company 1,297,793
AUTOMOBILE - 7.81% Tidewater Holdings, Inc. 1,453,788
America's Body Company, Inc./LCP Holding Co. 1,750,000 ------------
Collins & Aikman Products Co. 101,250 2,751,581
Gencorp, Inc. 140,400 ------------
Goodyear Tire & Rubber Co. 340,375 CHEMICAL, PLASTICS
Jason, Inc. 1,051,507 & RUBBER - 3.05%
LIH Investors, L.P. 2,589,798 Capital Specialty Plastics, Inc. 1,078
Metaldyne Corporation 278,800 Huntsman LLC 190,914
Nyloncraft, Inc. 1,650,423 Koppers, Inc. 270,000
Qualis Automotive LLC 1,146,210 Lyondell Chemical Co. 478,688
------------ P Q Corporation 673,013
9,048,763 Process Chemicals LLC 144,000
------------ Rhodia SA 508,750
BEVERAGE, DRUG & FOOD - 4.86% Tomah Holdings, Inc. 1,263,353
Beta Brands Ltd -- ------------
Cains Foods, L.P. 299,613 3,529,796
Del Monte Corporation 220,000 ------------
Dominos, Inc. 116,085 CONSUMER PRODUCTS - 7.95%
Eagle Pack Pet Foods, Inc. 578,315 Appleton Papers, Inc. 243,750
National Wine & Spirits, Inc. 25,250 Augusta Sportswear Holding Co. 1,138,637
Nonni's Food Company 1,225,947 Colibri Holdings Corporation 1,061,278
Pinnacle Foods Group 201,375 Euro-Pro Corporation 900,232
River Ranch Fresh Foods LLC 1,104,903 G F S I, Inc. 341,250
Specialty Foods Group, Inc. 74,436 H C I Direct, Inc. --
Vicorp Restaurants, Inc. 303,000 K 2, Inc. 157,875
Vitality Foodservice, Inc. 1,131,326 Maverick Acquisition Company 657,236
Wornick Co. 355,250 Neff Motivation, Inc. 91,537
------------ Rayovac Corporation 182,875
5,635,500 Royal Baths Manufacturing Company 554,477
------------ Savage Sports Holding, Inc. 1,111,088
BROADCASTING - 2.43% The Tranzonic Companies 1,653,230
C S C Holdings, Inc. 246,875 Volcom, Inc. 2,677
Cablevision Systems Corporation 451,125 Walls Industries, Inc. 1,118,672
Charter Communications Op LLC 497,500 Winsloew Furniture, Inc. 11
Liberty Media Corporation 465,052 ------------
Lodgenet Entertainment Corporation 408,750 9,214,825
Mediacom LLC 748,125 ------------
------------ CONTAINERS, PACKAGING
2,817,427 & GLASS - 5.23%
------------ A E P Industries, Inc. 75,166
Paradigm Packaging, Inc. 1,378,125
Pliant Corporation 614,623
Snyder Industries, Inc. 2,449,422
Tekni-Plex, Inc. 342,500
Vitex Packaging, Inc. 1,194,509
------------
6,054,345
------------
--------------------------------------------------------------------------------
26
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.)
June 30, 2005
(Unaudited)
Fair Value/ Fair Value/
Industry Classification:(Cont.) Market Value Industry Classification: (Cont.) Market Value
------------ ------------
DISTRIBUTION - 3.62% FARMING & AGRICULTURE - 0.00%
Brampton Fastener Co. Ltd $ 39,600 Protein Genetics, Inc. $ --
Corvest Group, Inc. 1,965,370 ------------
Kele and Associates, Inc. 1,196,654 FINANCIAL SERVICES - 4.40%
QualServ Corporation 998,267 BCP Caylux Holding Lux SCA 397,600
Strategic Equipment & Supply Corporation, Inc. -- Bombardier Capital, Inc. 502,500
------------ Dollar Financial Group 335,156
4,199,891 East River Ventures I, L.P. 5,668
------------ Ford Motor Credit Co. 963,242
DIVERSIFIED/CONGLOMERATE, General Motors Acceptance Corporation 468,706
MANUFACTURING - 5.12% Highgate Capital LLC 681
Activant Solutions, Inc. 766,625 Lazard LLC 850,251
AmerCable, Inc. 1,120,290 Leucadia National Corporation 856,250
Arrow Tru-Line Holdings, Inc. 1,099,876 T C W Leveraged Income Trust, L.P. 213,929
Coining Corporation of America LLC 1,065,714 Victory Ventures LLC 2
Dexter Magnetics Technologies, Inc. 554,304 Western Alliance Bancorp 2,540
Douglas Dynamics LLC 318,500 Williams Scotsman, Inc. 502,500
Evans Consoles, Inc. -- ------------
Justrite Manufacturing Acquisition Co. 844,541 5,099,025
Tyco International Group SA 164,745 ------------
------------ HEALTHCARE, EDUCATION &
5,934,595 CHILDCARE - 4.37%
------------ A T I Acquisition Company 1,062,671
DIVERSIFIED/CONGLOMERATE, American Hospice Management Holding LLC 1,405,879
SERVICE - 7.25% Interactive Health LLC 445,000
Abitibi-Consolidated, Inc. 502,500 MedAssist, Inc. 1,260,168
Allied Waste NA 511,250 Quintiles Transnational Corporation 273,750
CapeSuccess LLC 2,512 Tenet Healthcare Corporation 613,498
Chemed Corporation 1,463,012 ------------
Diversco, Inc./DHI Holdings, Inc. 1,044,048 5,060,966
Dwyer Group, Inc. 1,361,289 ------------
Keystone North America, Inc. 225,187 HOME & OFFICE FURNISHINGS,
Lancaster Laboratories, Inc. 810,076 HOUSEWARES,AND DURABLE
Moss, Inc. 936,153 CONSUMER PRODUCTS - 4.00%
M S X International, Inc. 172,375 Connor Sport Court International, Inc. 1,142,663
Service Corporation International 534,881 Home Decor Holding Company 1,150,167
U S M Holdings Corporation 623,274 Hussey Seating Corporation 642,415
Universal City Florida 208,000 Samsonite Corporation 531,250
------------ U-Line Corporation 1,169,605
8,394,557 ------------
------------ 4,636,100
ELECTRONICS - 3.62% ------------
A E S Corporation 671,376 LEISURE, AMUSEMENT,
Arrow Electronics, Inc. 515,584 ENTERTAINMENT - 1.95%
Directed Electronics, Inc. 1,134,748 Intrawest Corporation 256,563
Distributed Energy Systems 58,940 Keepsake Quilting, Inc. 921,552
Electronic Data Systems Corporation 538,160 M G M Mirage, Inc. 226,125
Precision Dynamics, Inc. 607,210 Majestic Star Casino LLC 257,500
Siebe PLC 301,875 O E D Corp/Diamond Jo Company Guarantee 466,250
Texas Genco LLC 368,375 Warner Music Group 126,250
------------ ------------
4,196,268 2,254,240
------------ ------------
--------------------------------------------------------------------------------
27
MASSMUTUAL PARTICIPATION INVESTORS
CONSOLIDATED SCHEDULE OF INVESTMENTS (CONT.)
June 30, 2005
(Unaudited)
Fair Value/ Fair Value/
Industry Classification:(Cont.) Market Value Industry Classification: (Cont.) Market Value
------------ ------------
MACHINERY - 9.88% RETAIL STORES - 4.23%
Aearo Co. $ 225,000 Blockbuster, Inc. $ 257,125
C & M Conveyor, Inc. 1,214,899 D S W, Inc. 2,495
Integration Technology Systems, Inc. 682,812 Neff Corporation 625,400
Manitowoc Company, Inc. 104,500 Olympic Sales, Inc. 2,190,772
Maxon Corporation 1,485,754 Rent-A-Center, Inc. 250,000
Numatics, Inc. 375,938 Rent-Way, Inc. 960,891
P W Eagle, Inc. 592,231 Sports Club Co. 99,000
Safety Speed Cut Manufacturing Company, Inc. 1,528,792 TVI, Inc. 202,500
Synventive Equity LLC 1,966,372 United Rentals, Inc. 319,312
Tronair, Inc. 1,560,386 ------------
Tubular Textile Machinery 1,379,312 4,907,495
Weasler Holdings LLC 329,846 ------------
------------ TECHNOLOGY - 0.63%
11,445,842 Convera Corporation
------------ Cymer, Inc. 425,813
MEDICAL DEVICES/BIOTECH - 1.57% Delstar Holding Corporation 220,944
Beacon Medical Products, Inc. 1,127,401 Magnachip Semiconductor 48,000
Coeur, Inc. 690,297 NeuStar, Inc. 38,400
E X C Acquisition Corporation -- ------------
------------ 733,157
1,817,698 ------------
------------ TELECOMMUNICATIONS - 2.60%
MINING, STEEL, IRON Cincinnati Bell, Inc. 563,750
& NON PRECIOUS METALS - 0.05% Intelsat Bermuda, Ltd. 487,063
Better Minerals & Aggregates 54,525 Nextel Communications Corporation 432,000
------------ Rogers Wireless, Inc. 803,175
OIL AND GAS - 4.37% Telex Communications, Inc. 266,874
Chesapeake Energy Corporation 689,000 Triton P C S, Inc. 461,250
GulfMark Offshore, Inc. 315,750 ------------
Mustang Ventures Company 367,762 3,014,112
North American Energy Partners 172,000 ------------
Offshore Logistics, Inc. 337,750 UTILITIES - 1.13%
Pacific Energy Partners 260,313 Bill Barrett Corporation
Transmontaigne, Inc. 2,916,596 Markwest Energy 248,750
------------ Moog, Inc. 59,850
5,059,171 Nalco Co. 266,250
------------ Tenaska Alabama Partners LP 187,310
PHARMACEUTICALS - 0.66% Utilicorp United, Inc. 542,500
Enzymatic Therapy, Inc. 762,191 ------------
------------ 1,304,660
PUBLISHING/PRINTING - 2.07% ------------
American Media Operation, Inc. 450,063 WASTE MANAGEMENT/
Cadmus Communications Corporation 360,063 POLLUTION - 1.01%
Houghton Mifflin Co. 533,750 Terra Renewal Services, Inc. 1,175,004
Jostens I H Corporation 320,938 ------------
Primedia, Inc. 501,250 TOTAL CORPORATE RESTRICTED
Sheridan Acquisition Corporation 233,718 AND PUBLIC SECURITIES - 103.43% $119,839,362
------------ ============
2,399,782
------------
See Notes to Consolidated Financial Statements.
--------------------------------------------------------------------------------
28
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC, formerly David L. Babson & Company Inc. ("Babson
Capital"), a whollyowned indirect subsidiary of Massachusetts Mutual Life
Insurance Company ("MassMutual"), acts as its investment adviser. The
Trust's investment objective is to maximize total return by providing a
high level of current income, the potential for growth of such income, and
capital appreciation, by investing primarily in a portfolio of privately
placed below investment grade, long-term corporate debt obligations
purchased directly from their issuers, at least half of which normally will
include equity features.
On January 27, 1998, the Board of Trustees authorized the formation of a
wholly owned subsidiary of the Trust ("MMPI Subsidiary Trust") for the
purpose of holding certain investments. The results of the MMPI Subsidiary
Trust are consolidated in the accompanying financial statements. Footnote
2.D below discusses the Federal tax consequences of the MMPI Subsidiary
Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of its consolidated financial
statements in conformity with accounting principles generally accepted in
the United States of America.
A. VALUATION OF INVESTMENTS:
Valuation of a security in the Trust's portfolio is made on the basis of
market price whenever market quotations are readily available and all
securities of the same class held by the Trust can be readily sold in such
market.
Nearly all securities which are acquired by the Trust directly from the
issuers and shares into which such securities may be converted or which may
be purchased on the exercise of warrants will be subject to legal or
contractual delays in, or restrictions on, resale and will therefore be
"restricted securities." Generally speaking, as contrasted with open-market
sales of unrestricted securities, which may be effected immediately if the
market is adequate, absent an exemption from registration, restricted
securities can be sold only in a public offering for which a registration
statement is in effect under the Securities Act of 1933.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Trust's Board of Trustees the ("Trustees"). Each restricted
security is valued by the Trustees as of the time of its acquisition and at
least quarterly thereafter. The Trustees have established guidelines to aid
in the valuation of each security. Generally, restricted securities are
initially valued at cost or less at the time of acquisition by the Trust.
Values greater or less than cost are thereafter used for restricted
securities in appropriate circumstances. Among the factors ordinarily
considered are the existence of restrictions upon the sale of a security
held by the Trust; an estimate of the existence and the extent of a market
for the security; the extent of any discount at which the security was
acquired; the estimated period of time during which the security will not
be freely marketable; the estimated expenses of registering or otherwise
qualifying the security for public sale; estimated underwriting commissions
if underwriting would be required to effect a sale; in the case of a
convertible security, whether or not it would trade on the basis of its
stock equivalent; in the case of a debt obligation which would trade
independently of any equity equivalent, the current yields on comparable
securities; the estimated amount of the floating supply of such securities
available for purchase; the proportion of the issue held by the Trust;
changes in the financial condition and prospects of the issuer; the
existence of merger proposals or tender offers affecting the issuer; and
any other factors affecting fair value, all in accordance with the
Investment Company Act of 1940, as amended. In making valuations, opinions
of counsel may be relied upon as to whether or not securities are
restricted securities and as to the legal requirements for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at
a discount from the market price of such unrestricted securities. The
Trustees, however, consider all factors in fixing any discount, including
the filing of a registration statement for such securities under the
Securities Act of 1933 and any other developments which are likely to
increase the probability that the securities may be publicly sold by the
Trust without restriction.
The Trust's Board of Trustees meets at least once in each quarter to value
the Trust's portfolio securities as of the close of business on the last
business day of the preceding quarter. This valuation requires the approval
of a majority of the Trustees of the Trust, including a majority of the
Trustees
29
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
who are not interested persons of the Trust or of Babson Capital, the
Trust's investment adviser. In making valuations, the Trustees will
consider Babson Capital's reports analyzing each portfolio security in
accordance with the relevant factors referred to above. Babson Capital has
agreed to provide such reports to the Trust at least quarterly.
The consolidated financial statements include private placement restricted
securities valued at $78,849,592 (68.05% of net assets) as of June 30, 2005
whose values have been determined by the Board of Trustees in the absence
of readily ascertainable market values. Due to the inherent uncertainty of
valuation, those 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 corporate public securities are stated at the last reported
sales price or at prices based upon quotations obtained from brokers and
dealers as of June 30, 2005, 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. The Trust does not accrue income when payment is
delinquent and when management believes payment is questionable.
Discounts and premiums on securities purchased are amortized, over the
lives of the respective securities.
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:
No provision for federal income taxes on net investment income and
short-term capital gains is considered necessary for the Trust because it
is a "regulated investment company" under the Internal Revenue Code, and
intends to maintain this qualification by, among other things, distributing
substantially all of its net taxable income to its shareholders. In any
year when net long-term capital gains are realized by the Trust,
management, after evaluating the prevailing economic conditions, will
recommend that Trustees either designate the net realized long-term gains
as undistributed and pay the federal capital gains taxes thereon, or
distribute all or a portion of such net gains.
The Trust is taxed as a regulated investment company and is therefore
limited as to the amount of non-qualified income that it may receive as the
result of operating a trade or business, e.g. the Trust's pro rata share of
income allocable to the Trust by a partnership operating company. The
Trust's violation of this limitation could result in the loss of its status
as a regulated investment company, thereby subjecting all of its net income
and capital gains to corporate taxes prior to distribution to its
shareholders. The Trust, from time-to-time, identifies investment
opportunities in the securities of entities that could cause such trade or
business income to be allocable to the Trust. The MMPI Subsidiary Trust
(described in Footnote 1, above) was formed in order to allow investment in
such securities without adversely affecting the Trust's status as a
regulated investment company.
The MMPI Subsidiary Trust is not taxed as a regulated investment company.
Accordingly, prior to the Trust's receiving any distributions from the MMPI
Subsidiary Trust, all of the MMPI Subsidiary Trust's taxable income and
realized gains, including non-qualified income and realized gains, is
subject to taxation at prevailing corporate tax rates. For the six months
ended June 30, 2005 the MMPI Subsidiary Trust has accrued tax expense on
net realized and unrealized gains of $81,427 and $459,629, respectively.
E. DISTRIBUTIONS TO SHAREHOLDERS:
The Trust records distributions to shareholders from net investment income
and net realized gains, if any, on the exdividend date. The Trust's net
investment income dividend is declared four times per year, in April, July,
October and December. The Trust's net realized capital gain distribution,
if any, is declared in December.
30
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES CONTRACT
A. SERVICES:
Under an Investment Advisory and Administrative Services Contract (the
"Contract") with the Trust, Babson Capital has agreed to use its best
efforts to present to the Trust a continuing and suitable investment
program consistent with the investment objectives and policies of the
Trust. Babson Capital has further agreed that it will request each issuer
of securities which MassMutual is prepared to purchase in a negotiated
private placement, and which would be consistent with the investment
objectives and policies of the Trust, to also offer such securities to the
Trust. Babson Capital will use its best efforts to insure that issuers
accede to such requests. MassMutual has agreed that, subject to such orders
of the Securities and Exchange Commission as may apply, it will invest
concurrently with the Trust in any such investment. Babson Capital
represents the Trust in any negotiations with issuers, investment banking
firms, securities brokers or dealers and other institutions or investors
relating to the Trust's investments. Under the Contract, Babson Capital
provides administration of the day-to-day operations of the Trust and
provides the Trust with office space and office equipment, accounting and
bookkeeping services, and necessary executive, clerical and secretarial
personnel for the performance of the foregoing services.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly 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.
C. BASIS FOR BOARD RENEWAL OF THE CONTRACT:
At a meeting of the Board of Trustees of the Trust held on April 22, 2005,
the Board of Trustees (including a majority of the Trustees who are not
"interested persons" of the Trust or Babson Capital) unanimously approved
the continuance of the Contract.
Prior to the meeting, the Board of Trustees requested and received from
Ropes & Gray LLP ("Ropes & Gray"), counsel to the Trust, a memorandum
describing the Board of Trustees' legal responsibilities in connection with
its review and reapproval of the Contract. The Board of Trustees also
requested and received from Babson Capital extensive written and oral
information regarding: the principal terms of the Contract; the reasons why
Babson Capital was proposing the continuance of the Contract; Babson
Capital and its personnel; the Trust's investment performance, including
comparative performance information; the nature and quality of the services
provided by Babson Capital to the Trust; financial strength of Babson
Capital; the fee arrangements; fee and expense information, including
comparative fee and expense information; profitability of the advisory
arrangement to Babson Capital; and "fallout" benefits to Babson Capital
resulting from the Contract.
Among other things, the Trustees discussed and considered with management
(i) the aforementioned guidance provided by Ropes & Gray and the
information provided by Babson Capital prior to the meeting and (ii) the
reasons Babson Capital put forth in support of its recommendation that the
Trustees approve the continuance of the Contract. These reasons are
summarized below.
NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY BABSON CAPITAL
In evaluating the scope and quality of the services provided by Babson
Capital, the Trustees considered, among other factors: (i) the scope of
services required to be provided by Babson Capital under the Contract; (ii)
Babson Capital's ability to find and negotiate private placement securities
having equity features; (iii) the experience and quality of Babson
Capital's staff; (iv) the financial strength of Babson Capital's financial
condition; (v) the nature of the private placement market compared to
public markets (including the fact that finding, analyzing, negotiating and
servicing private placement securities is more labor-intensive than buying
and selling public securities and the administration of private placement
securities is more extensive, expensive, and requires greater time and
expertise than a portfolio of only public securities); (vi) the Trust's
ability to co-invest in negotiated private placements with MassMutual; and
(vii) the expansion of the scope of services provided by Babson Capital as
result of regulatory and legislative initiatives that have required
increased legal, compliance and business attention and diligence. Based on
such considerations, the Board of Trustees concluded that, overall, they
are satisfied with the nature, extent and quality of services provided, and
expected to be provided in the future, under the renewed Contract.
INVESTMENT PERFORMANCE
The Board also examined the Trust's short-term, intermediate- term, and
long-term performance as compared against
31
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
appropriate benchmark indices presented at the meeting, which showed that
the Trust had outperformed such indices for the 1, 3, 5, and 10-year
periods. In addition, the Trustees considered comparisons of the Trust's
performance with the performance of (i) selected closed-end investment
companies and funds that may invest in private placement securities and/or
bank loans; (ii) selected business development companies with comparable
types of investments; and (iii) investment companies included in the Lipper
closed-end bond universe. It was acknowledged that, while such comparisons
are helpful in judging performance, they are not directly comparable in
terms of types of investments and due to the fact that the business
development companies often reported returns based on market value, which
is affected by factors other than the performance of the underlying
portfolio investments. Based on these considerations and the detailed
performance information provided to the Trustees at the regular Board
meetings each quarter, the Trustees concluded that the Trust's absolute and
relative performance over time have been sufficient to warrant re-approval
of the Contract.
ADVISORY FEE/COST OF SERVICES PROVIDED AND PROFITABILITY/ MANAGER'S
"FALL-OUT" BENEFITS
In connection with the Trustees' consideration of the advisory fee paid by
the Trust to Babson Capital under the Contract, Babson Capital noted that
it was unaware of any closed-end investment companies that are directly
comparable to the Trust in terms of the types of investments and
percentages invested in private placement securities (which require more
extensive advisory and administrative services than a portfolio of publicly
traded securities, as previously discussed) other than MassMutual Corporate
Investors ("Corporate Investors"), which also is advised by Babson Capital
and pays a quarterly advisory fee equal to 5/16 of 1% of the fund's NAV (an
amount equivalent to 1.25% on an annual basis) subject to a quarterly
performance adjustment of 1/16 of 1% (approximately equal to .25% on an
annual basis). It was also noted that the shareholders of Corporate
Investors would be voting on a proposal to eliminate the performance fee
component of Babson Capital's advisory fee in August of 2005. In
considering the fee rate recommended under the Contract, the Trustees noted
the Trust's different investment objectives between the Trust and Corporate
Investors and the advisory fee charged by Tower Square Capital Partners,
L.P. ("Tower Square"), a more recent private mezzanine fund managed by
Babson Capital that commenced operations in 2002. Tower Square has an
advisory fee of 1.5% of committed capital during the 5-year investment
period and 1.25% of net invested capital thereafter plus an incentive
allocation of 20% of net realized gains after investors have received a
cumulative 8% internal rate of return.
At the request of the Trustees, Babson Capital also provided information
concerning the profitability of Babson Capital's advisory relationship with
the Trust. The Board also considered the non-economic benefits Babson
Capital and its affiliates derived from its relationship with the Trust,
including the reputational benefits derived from having the Trust listed on
the New York Stock Exchange, and the de minimis amount of commissions
resulting from the Trust's portfolio transactions used by Babson Capital
for third-party soft dollar arrangements (less than $1,000). The Trustees
recognized that Babson Capital should be entitled to earn a reasonable
level of profits for services provided to the Trust and, based on their
review, concluded that they were satisfied that Babson Capital's level of
profitability from its relationship with the Trust was not excessive and
that the advisory fee structure under the Contract was reasonable.
ECONOMIES OF SCALE
The Trustees considered the concept of economies of scale and possible
advisory fee reductions if the Trust were to grow in assets. Given that the
Trust is not continuously offering shares, such growth seemed unlikely. The
Trustees also examined the scale down features of selected competitive
funds and noted that the minimum starting point for fee reductions in those
funds was at least $200 million whereas the Trust current net assets are
near $100 million. The Trustees further noted that the Trust is a
relatively small, closed-end registered investment company that has not
grown significantly in the past and is not likely to grow significantly in
the future. The Trustees concluded that the absence of breakpoints in the
fee schedule under the Contract was acceptable given the Trust's size and
circumstances.
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 six months ended June 30, 2005, the Trust incurred total interest
expense on the Note of $348,000.
The Trust may redeem the Note, in whole or in part, at the principal amount
proposed to be redeemed together with the
32
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Notes proposed to be
redeemed.
B. REVOLVING CREDIT AGREEMENT
The Trust entered into a $15,000,000 Revolving Credit Agreement with Fleet
National Bank (the "Agent Bank") dated May 29, 1997, which had a stated
matured on May 31, 2004. The maturity date of this loan was extended to May
31, 2007, and its terms amended and restated pursuant to the First Amended
and Restated Revolving Credit Agreement (the "Revolver") dated May 27,
2004, between the Trust and the Agent Bank.
The Revolver bears interest payable quarterly in arrears at a per annum
rate that varies depending upon whether the Trust requests a Base Rate Loan
or LIBOR Rate Loan. Interest on Base Rate loans equals the higher of: (i)
the annual "Base Rate" as set periodically by the Agent Bank and (ii) the
most recent Federal Funds Effective Rate plus .50% per annum. Per annum
interest on LIBOR Rate Loans equals .60% plus the London Inter Bank Offered
Rate ("LIBOR") rate, divided by 1 minus LIBOR Reserve Rate. The Trust also
incurs expense on the undrawn portion of the total Revolver at a rate of
.25% per annum.
As of June 30, 2005, there was $10,500,000 in outstanding loans against the
Revolver and the average blended rate of interest attributable to the
Revolver was 3.22%. For the six months ended June 30, 2005, the Trust
incurred total interest expense on the Revolver of $167,608, plus $8,527
related to the undrawn portion.
5. PURCHASES AND SALES OF INVESTMENTS
FOR THE SIX MONTHS
ENDED 6/30/2005
COST OF PROCEEDS FROM
INVESTMENTS SALES OR
ACQUIRED MATURITIES
-------- ----------
Corporate restricted securities $ 13,365,703 $ 24,431,574
Corporate public securities 5,261,238 3,903,285
Short-term securities 226,311,365 217,800,000
The aggregate cost of investments was substantially the same for financial
reporting and federal income tax purposes as of June 30, 2005. The net
unrealized appreciation of investments for financial reporting and federal
tax purposes as of June 30, 2005 is $634,442 and consists of $13,467,586
appreciation and $12,833,144 depreciation.
6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS
MARCH 31, 2005
AMOUNT PER SHARE
Investment income $2,833,525
Net investment income 2,192,726 $0.23
Net realized and unrealized gain
on investments (net of taxes) 1,002,116 0.10
JUNE 30, 2005
AMOUNT PER SHARE
Investment income $2,971,531
Net investment income 2,302,919 0.23
Net realized and unrealized gain
on investments (net of taxes) 4,574,450 0.47
7. AGGREGATE REMUNERATION PAID TO OFFICERS, TRUSTEES AND THEIR AFFILIATED
PERSONS
For the six months ended June 30, 2005, the Trust has paid its Trustees
aggregate remuneration of $54,375. The Trust does not pay any compensation
to any of its Trustees who are "interested persons" (as defined by the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Trust.
Messers. Reese and Joyal were each classified as "interested persons" of
the Trust.
All of the Trust's officers are employees of Babson Capital or MassMutual.
Pursuant to the Investment Advisory and Administrative Services Contract,
the Trust does not compensate its officers who are employees of Babson
Capital or MassMutual.
For the six months ended June 30, 2005, Mr. Reese, one of the Trust's
Trustees, was 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 six months ended June 30, 2005, other than amounts
payable to Babson Capital pursuant to the Investment Advisory and
Administrative Services Contract. For the six months ended June 30, 2005,
the Trust paid the following amounts to
33
MASSMUTUAL PARTICIPATION INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MassMutual, exclusive of interest expense on the Note explained in
Footnote 4A:
Preparation of the Trust's Quarterly
and Annual Reports to Shareholders 11,868
Preparation of Certain of the Trust's
Shareholder communications 526
Preparation of the Trust's Annual Proxy
Statements 1,084
-------
$13,478
=======
8. CONTINGENCIES
The Trust, together with other investors, including MassMutual, is a
plaintiff in litigation connected with private placement investments made
by the Trust in Sharp International Corporation ("Sharp"). Three managing
shareholders of Sharp, which is currently being liquidated in Chapter 11
liquidation proceedings, have pleaded guilty to criminal fraud charges.
Initially, two separate civil lawsuits were brought in New York State Court
in an attempt to recover damages for lost investment funds from Sharp's
working capital lender and auditors. The first lawsuit involving Sharp's
working capital lender was dismissed prior to trial. An appeal of this
dismissal was unsuccessful. The second lawsuit against Sharp's auditors was
settled in the Spring of 2005. Under the terms of the settlement agreement,
the Trust recovered all legal fees it incurred to prosecute the lawsuit, as
well as additional amounts. A related lawsuit brought by the Trustee of the
Sharp bankruptcy estate against Sharp's auditors on behalf of unsecured
creditors, including the Trust, was also settled at the same time. Total
net proceeds to be distributed to the Trust as a result of the settlement
of these two lawsuits against Sharp's auditors are expected to be
approximately $750,000, of which $458,619 has already been received by the
Trust.
9. RESULTS OF SHAREHOLDER MEETING
The Annual Meeting of Shareholders was held on Friday, April 22, 2005.
Prior to the Annual Meeting, Steve Kandarian resigned from the Board of
Trustees. Mr. Kandarian also withdrew his agreement to stand for
re-election. As a result, the size of the Board of Trustees was reduced
from 8 to 7 members and only two Trustees stood for re-election at the
Annual Meeting.
At the Annual Meeting, Shareholders were asked to vote to re-elect, and
they did vote to re-elect Jack A. Laughery and Corine T. Norgaard as
trustees each for a three-year term. The Trust's other trustees (Donald E.
Benson, Donald Glickman, Martin T. Hart, Robert E. Joyal and Stuart H.
Reese) continued to serve their respective terms following the April 22,
2005 Annual Shareholders Meeting. The results of the Shareholders votes are
set forth below.
JACK A. CORINE T.
TRUSTEE: LAUGHERY NORGAARD
---------------------------------------------------------
SHARES FOR: 8,602,281 8,607,228
WITHHELD 86,888 81,941
TOTAL 8,689,169 8,689,169
% OF SHARES
VOTED FOR 99.00% 99.06%
10. SUBSEQUENT EVENTS
Prior to the Board of Trustees' July 15, 2005 quarterly meeting, Stuart H.
Reese stepped down as a Trustee and Chairman of the Board of Trustees as a
result of his new position as President and CEO of MassMutual. At the
quarterly meeting the Board appointed Roger W. Crandall as Trustee to
complete the unexpired term of the Board seat vacated by Mr. Reese. The
Board also elected Mr. Crandall to the office of Chairman of the Board. Mr.
Crandall is an "interested person" of the Trust as defined in the 1940 Act,
as amended. In addition, the Board of Trustees voted to expand the Board
from seven to eight Trustees and appointed Michael H. Brown as a Trustee
for three-year term of office.
34
TRUSTEES OFFICERS
Donald E. Benson* Roger W. Crandall Chairman
Michael H. Brown Clifford M. Noreen President
Roger W. Crandall James M. Roy Vice President &
Donald Glickman Chief Financial
Martin T. Hart* Officer
Robert E. Joyal Stephen L. Kuhn Vice President &
Jack A. Laughery Secretary
Corine T. Norgaard* Michael P. Hermsen Vice President
Mary Wilson Kibbe Vice President
Michael L. Klofas Vice President
Richard E. Spencer, II Vice President
Laura L. Grant Treasurer
John T. Davitt, Jr. Comptroller
Mary Ellen Wesneski Chief Compliance
Officer
*Member of the Audit Committee
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan. The Plan provides a simple and automatic way for shareholders to
add to their holdings in the Trust through the receipt of dividend shares issued
by the Trust or through the reinvestment of cash dividends in Trust shares
purchased in the open market. The dividends of each shareholder will be
automatically reinvested in the Trust by Shareholder Financial Services Inc.,
the Transfer Agent, in accordance with the Plan, unless such shareholder elects
not to participate by providing written notice to the Transfer Agent. A
shareholder may terminate his or her participation by notifying the Transfer
Agent in writing.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $100 nor more than $5,000 per quarter.
Whenever the Trust declares a dividend payable in cash or shares, the Transfer
Agent, acting on behalf of each participating shareholder, will take the
dividend in shares only if the net asset value is lower than the market price
plus an estimated brokerage commission as of the close of business on the
valuation day. The valuation day is the last day preceding the day of dividend
payment. When the dividend is to be taken in shares, the number of shares to be
received is determined by dividing the cash dividend by the net asset value as
of the close of business on the valuation date or, if greater than net asset
value, 95% of the closing share price. If the net asset value of the shares is
higher than the market value plus an estimated commission, the Transfer Agent,
consistent with obtaining the best price and execution, will buy shares on the
open market at current prices promptly after the dividend payment date.
The reinvestment of dividends does not, in any way, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in newlyissued
shares of the Trust will be the fair market value of the shares received, which
will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder.)
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver CO 80217-3673.
[LOGO]
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D8 1040 805
ITEM 2. CODE OF ETHICS.
Not Applicable for this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable for this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable for this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable for this filing.
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.
Not Applicable for this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable for this filing.
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 second fiscal quarter of the period covered by this
report 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.
Not Applicable for this filing.
(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: September 6, 2005
----------------------------------
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: September 6, 2005
----------------------------------
By: /s/ James M. Roy
----------------------------------
James M. Roy, Vice President, and
Chief Financial Officer
----------------------------------
Date: September 6, 2005
----------------------------------