MassMutual
Participation Investors
Report for the
Three Months Ended March 31, 2008
[LOGO]
ADVISER
Babson Capital Management LLC
1500 Main Street, P.O. 15189
Springfield, Massachusetts 01115-5189
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Boston, Massachusetts 02110
COUNSEL TO THE TRUST
Ropes & Gray LLP
Boston, Massachusetts 02110
CUSTODIAN
Citibank, N.A.
New York, New York 10043
TRANSFER AGENT & REGISTRAR
Shareholder Financial Services, Inc.
P.O. Box 173673
Denver, Colorado 80217-3673
1-800-647-7374
INTERNET WEBSITE
www.babsoncapital.com/mpv
MassMutual Participation Investors
c/o Babson Capital Management LLC
[LOGO] 1500 Main Street, Suite 600
Springfield, Massachusetts 01115
(413) 226-1516
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INVESTMENT OBJECTIVE AND POLICY
MassMutual Participation Investors (the "Trust") is a closedend management
investment company, first offered to the public in 1988, whose shares are traded
on the New York Stock Exchange under the trading symbol "MPV". The Trust's share
price can be found in the financial section of most newspapers as "MassPrt" or
"MassMuPrt" under the New York Stock Exchange listings or Closed-End Fund
Listings.
The Trust's investment objective is to maximize total return by providing a high
level of current income, the potential for growth of income, and capital
appreciation. The Trust's principal investments are privately placed,
below-investment grade, long-term debt obligations purchased directly from their
issuers, which tend to be smaller companies. At least half of these investments
normally include equity features such as common stock, warrants, conversion
rights, or other equity features that provide the Trust with the opportunity to
realize capital gains. The Trust will also invest in publicly traded debt
securities (including high yield securities), again with an emphasis on those
with equity features, and in convertible preferred stocks and, subject to
certain limitations, readily marketable equity securities. Below investment
grade or high yield securities have predominantly speculative characteristics
with respect to the capacity of the issuer to pay interest and repay principal.
In addition, the Trust may temporarily invest in high quality, readily
marketable securities.
Babson Capital Management LLC ("Babson Capital") manages the Trust on a total
return basis. The Trust distributes substantially all of its net income to
shareholders each year. Accordingly, the Trust pays dividends to shareholders
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.
MPV
Listed
NYSE
TO OUR SHAREHOLDERS
April 30, 2008
We are pleased to present the March 31, 2008 Quarterly Report of MassMutual
Participation Investors (the "Trust").
The Board of Trustees declared a quarterly dividend of 25 cents per share,
payable on May 16, 2008 to shareholders of record on May 5, 2008. The Trust had
previously paid a 25 cent per share dividend for the preceding quarter (plus a
special year-end dividend of 25 cents per share).
U.S. equity markets, as approximated by the Russell 2000 Index, decreased 9.90%
for the quarter. U.S. fixed income markets, as approximated by the Lehman
Brothers U.S. Corporate High Yield Index decreased 3.02% for the quarter.
In the last several months, the mezzanine and private equity markets have been
affected by the credit dislocation that occurred in 2007. Overall, deal volumes
have decreased significantly as credit is generally less available to fund
transactions. However, some weaker participants have left the mezzanine market,
causing competition to be a bit less stringent. As a result, investments being
made in the current market are structured and priced more favorably than they
have been in some time.
During the quarter, the Trust made private placement investments in five new
issuers and one "follow-on" investment, totaling approximately $6.0 million. The
follow-on investment purchased by the Trust was Smart Source Holdings LLC. The
five new issuers were E S P Holdco, Inc., Power Services Holding Company, R E I
Delaware Holding, Inc., T H I Acquisition, Inc. and U M A Enterprises, Inc. The
weighted average coupon of these investments was 12.81%. (A brief description of
these investments can be found in the Consolidated Schedule of Investments.)
During the quarter ended March 31, 2008, net assets of the Trust increased to
$127,127,512 or $12.85 per share compared to $126,625,334 or $12.84 per share on
December 31, 2007, which translates into a 0.08% total return for the quarter,
based on the change in the Trust's net assets assuming the reinvestment of all
dividends. Long term, the Trust returned 7.37%, 18.66%, and 12.54% for the 1-,
5- and 10-year time periods, respectively, based on the change in the Trust's
net assets assuming the reinvestment of all dividends. The Trust earned 26 cents
per share of net investment income for the quarter, compared to 28 cents per
share in the previous quarter.
During the quarter ended March 31, 2008, the market price of the Trust increased
3.57% from $13.18 per share to $13.65 per share. The Trust's market price of
$13.65 per share equates to a 6.23% premium over the March 31, 2008 net asset
value per share. The Trust's average quarter-end premium for the 3, 5 and
10-year periods was 11.6%, 10.9% and 6.5%, respectively.
Thank you for your continued interest in and support of MassMutual Participation
Investors.
Sincerely,
/s/ Clifford M. Noreen
Clifford M. Noreen
President
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PORTFOLIO COMPOSITION AS OF 3/31/08 *
[PIE CHART APPEARS HERE]
Public Equity Private / Restricted Equity
0.8% 15.4%
Private / 144A High Yield Debt Cash & Short Term Investments
56.5% 6.8%
Private Investment Grade Debt Public High Yield Debt
0.7% 19.8%
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*Based on market value of total investments
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1
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
(UNAUDITED)
ASSETS:
Investments
(See Consolidated Schedule of Investments)
Corporate restricted securities at fair value
(Cost - $101,192,570) $ 99,255,482
Corporate public securities at market value
(Cost - $30,544,727) 28,156,312
Short-term securities at amortized cost 8,301,598
-------------
135,713,392
Cash 908,082
Interest and dividends receivable 3,161,588
Receivable for investments sold 33,430
Other assets 18,894
-------------
TOTAL ASSETS 139,835,386
-------------
LIABILITIES:
Payable for investments purchased 1,032
Investment advisory fee payable 286,037
Note payable 12,000,000
Interest payable 266,632
Accrued expenses 154,173
-------------
TOTAL LIABILITIES 12,707,874
-------------
TOTAL NET ASSETS $ 127,127,512
=============
NET ASSETS:
Common shares, par value $.01 per share; an unlimited
number authorized $ 98,949
Additional paid-in capital 92,175,020
Retained net realized gain on investments, prior years 33,342,946
Undistributed net investment income 3,588,865
Accumulated net realized gain on investments 2,247,235
Net unrealized depreciation of investments (4,325,503)
-------------
TOTAL NET ASSETS $ 127,127,512
=============
COMMON SHARES ISSUED AND OUTSTANDING 9,894,922
=============
NET ASSET VALUE PER SHARE $ 12.85
=============
See Notes to Consolidated Financial Statements
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2
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(UNAUDITED)
INVESTMENT INCOME:
Interest $ 3,171,224
Dividends 1,562
Other 28,112
-------------
TOTAL INVESTMENT INCOME 3,200,898
-------------
EXPENSES:
Investment advisory fees 286,037
Interest 177,740
Professional fees 45,300
Trustees' fees and expenses 42,000
Reports to shareholders 27,000
Custodian fees 7,350
Transfer agent/registrar's expenses 6,000
Other 11,802
-------------
TOTAL EXPENSES 603,229
-------------
INVESTMENT INCOME - NET 2,597,669
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments before taxes 2,340,618
Income tax expense (42,060)
-------------
Net realized gain on investments 2,298,558
Net change in unrealized appreciation of investments (4,827,423)
-------------
NET LOSS ON INVESTMENTS (2,528,865)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 68,804
=============
See Notes to Consolidated Financial Statements MassMutual Participation Investors
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3
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(UNAUDITED)
NET DECREASE IN CASH:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term
portfolio securities, net $ (723,032)
Purchases of portfolio securities (7,717,770)
Proceeds from disposition of portfolio securities 11,124,140
Interest, dividends and other received 2,874,162
Interest expense paid (3,863)
Operating expenses paid (379,545)
Income taxes paid (797,652)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,376,440
-------------
Cash flows from financing activities:
Cash dividends paid from net investment income (4,743,160)
Cash dividends paid from net realized gain on investments (187,646)
Receipts for shares issued on reinvestment of dividends 433,374
-------------
NET CASH USED FOR FINANCING ACTIVITIES (4,497,432)
-------------
NET DECREASE IN CASH (120,992)
Cash - beginning of year 1,029,074
-------------
CASH - END OF PERIOD $ 908,082
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 68,804
-------------
Decrease in investments 4,126,388
Increase in interest and dividends receivable (168,147)
Decrease in receivable for investments sold 921,922
Increase in other assets (18,894)
Increase in payable for investments purchased 1,032
Increase in investment advisory fee payable 1,130
Increase in interest payable 173,877
Increase in accrued expenses 29,058
Decrease in accrued taxes payable (755,592)
Decrease in other payables (3,138)
-------------
TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS 4,307,636
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,376,440
=============
See Notes to Consolidated Financial Statements
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4
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For the three
months ended For the
03/31/08 year ended
(Unaudited) 12/31/07
------------- -------------
INCREASE IN NET ASSETS:
Operations:
Investment income - net $ 2,597,669 $ 12,057,960
Net realized gain on investments 2,298,558 1,184,026
Net change in unrealized appreciation of investments (4,827,423) (1,644,141)
------------- -------------
Net increase in net assets resulting from operations 68,804 11,597,845
Increase from common shares issued on reinvestment of dividends
Common shares issued (2008 - 33,311; 2007 - 56,329) 433,374 828,061
Dividends to shareholders from:
Net investment income (2007 - $1.23 per share) -- (12,127,939)
Net realized gains on investments (2007 - $0.02 per share) -- (187,646)
------------- -------------
TOTAL INCREASE IN NET ASSETS 502,178 110,321
NET ASSETS, BEGINNING OF YEAR 126,625,334 126,515,013
------------- -------------
NET ASSETS, END OF PERIOD/YEAR (including undistributed net
investment income of $3,588,865 and $991,196, respectively) $ 127,127,512 $ 126,625,334
============= =============
See Notes to Consolidated Financial Statements MassMutual Participation Investors
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5
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING:
For the three months For the years ended December 31,
ended 03/31/2008 ---------------------------------------------------
(Unaudited) 2007 2006 2005 2004 2003
----------- ---- ---- ---- ---- ----
Net asset value:
Beginning of year $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84 $ 8.78
------- ------- ------- ------- ------- -------
Net investment income (a) 0.26 1.23 1.10 0.99 1.00 0.80
Net realized and unrealized
gain (loss) on investments (0.26) (0.05) 0.77 1.09(b) 1.36 1.21
------- ------- ------- ------- ------- -------
Total from investment operations 0.00 1.18 1.87 2.08 2.36 2.01
------- ------- ------- ------- ------- -------
Dividends from net investment
income to common shareholders -- (1.23) (1.18) (1.01) (1.10) (0.96)
Dividends from net realized gain
on investments to common shareholders -- (0.02) (0.01) -- -- --
Increase from dividends reinvested 0.01 0.01 0.01 0.01 0.03 0.01
------- ------- ------- ------- ------- -------
Total dividends 0.01 (1.24) (1.18) (1.00) (1.07) (0.95)
------- ------- ------- ------- ------- -------
Net asset value: End of period/year $ 12.85 $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84
------- ------- ------- ------- ------- -------
Per share market value:
End of period/year $ 13.65 $ 13.18 $ 14.70 $ 14.05 $ 13.31 $ 11.65
======= ======= ======= ======= ======= =======
Total investment return
Market value 3.57% (1.30%) 16.81% 17.25% 25.77% 35.50%
Net asset value (c) 0.08% 9.95% 18.64% 22.51% 25.14% 23.72%
Net assets (in millions):
End of period/year $127.13 $126.23 $126.52 $119.02 $107.61 $ 94.40
Ratio of operating expenses
to average net assets 1.35%(d) 1.36% 1.17% 1.45% 1.63% 1.65%
Ratio of interest expense
to average net assets 0.56%(d) 0.56% 0.57% 0.80% 0.89% 0.97%
Ratio of income tax expense
to average net assets (e) 0.13%(d) 0.48% 2.68% 2.83% 0.16% --
Ratio of total expenses before custodian
reduction to average net assets (e) 2.04%(d) 2.40% 4.46% 5.12% 2.68% 2.62%
Ratio of total expenses after custodian
reduction to average net assets (e) 2.04%(d) 2.40% 4.42% 5.08% 2.68% 2.62%
Ratio of net investment income
to average net assets 8.25%(d) 9.32% 8.43% 8.45% 9.60% 8.55%
Portfolio turnover 6% 33% 34% 32% 51% 55%
(a) Calculated using average shares.
(b) Amount includes $0.10 per share in litigation proceeds.
(c) Net asset value return represents portfolio returns based on change in the Trust's net asset value assuming the reinvestment of
all dividends and distributions which differs from the total investment return based on the Trust's market value due to the
difference between the Trust's net asset value and the market value of its shares outstanding; past performance is no guarantee
of future results.
(d) Annualized.
(e) As additional information, this ratio is included to reflect the taxes paid on retained long-term gains. These taxes paid are
netted against realized capital gains in the Statement of Operations. The taxes paid are treated as deemed distributions and a
credit for the taxes paid is passed on to shareholders.
Senior securities:
Total principal amount (in millions) $ 12 $ 12 $ 12 $ 12 $ 22.5 $ 22.5
Asset coverage per $1,000
of indebtedness $11,594 $11,552 $11,543 $10,918 $ 5,783 $ 5,195
See Notes to Consolidated Financial Statements
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6
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2008
(unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES - 78.07%:(A) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
PRIVATE PLACEMENT INVESTMENTS - 74.48%
A H C HOLDING COMPANY, INC.
A designer and manufacturer of boilers and water heaters for the commercial sector.
15% Senior Subordinated Note due 2015 $ 1,235,094 11/21/07 $ 1,210,449 $ 1,206,907
Limited Partnership Interest (B) 7.93% int. 11/21/07 119,009 113,060
------------ ------------
1,329,458 1,319,967
------------ ------------
A T I ACQUISITION COMPANY
A for-profit post-secondary school serving students in Texas, Florida and Arizona.
12% Senior Subordinated Note due 2012 $ 1,125,000 04/08/04 1,125,000 1,125,000
Warrant, exercisable until 2012, to purchase
preferred stock at $.01 per share (B) 7 shs. 11/16/07 -- 8,979
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 13,213
------------ ------------
1,125,000 1,147,192
------------ ------------
ADVANCED TECHNOLOGIES HOLDINGS
A provider of factory maintenance services to industrial companies.
15% Senior Subordinated Note due 2013 $ 1,080,000 12/27/07 1,058,400 1,065,084
Preferred Stock (B) 546 shs. 12/27/07 270,000 256,501
------------ ------------
1,328,400 1,321,585
------------ ------------
AERO HOLDINGS, INC.
A provider of geospatial services to corporate and government clients.
10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 913,667
14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 647,237 705,241
Common Stock (B) 150,000 shs. 03/09/07 150,000 350,780
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 88,350
------------ ------------
1,777,017 2,058,038
------------ ------------
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 1,051,148 1,063,349
Preferred Class A Unit (B) 1,706 uts. * 170,600 --
Common Class B Unit (B) 16,100 uts. 01/22/04 1 --
Common Class D Unit (B) 3,690 uts. 09/12/06 -- --
------------ ------------
1,221,749 1,063,349
------------ ------------
* 01/22/04 and 09/12/06. MassMutual Participation Investors
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7
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
ARROW TRU-LINE HOLDINGS, INC.
A manufacturer of hardware for residential and commercial overhead garage doors in North America.
12% Senior Subordinated Note due 2012 $ 861,702 05/18/05 $ 820,285 $ 815,793
Common Stock (B) 263 shs. 05/18/05 263,298 39,198
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 10,277
------------ ------------
1,142,945 865,268
------------ ------------
BRAVO SPORTS HOLDING CORPORATION
A designer and marketer of niche branded consumer products including canopies, trampolines, in-line skates, skateboards, and
urethane wheels.
12.5% Senior Subordinated Note due 2014 $ 1,207,902 06/30/06 1,141,724 1,228,695
Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 131,814
Common Stock (B) 1 sh. 06/30/06 152 12,720
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 164 shs. 06/30/06 48,760 46,325
------------ ------------
1,332,582 1,419,554
------------ ------------
CAPESUCCESS LLC
A provider of diversified staffing services.
Preferred Membership Interests (B) 806 uts. 04/29/00 3,598 180
Common Membership Interests (B) 10,421 uts. 04/29/00 46,706 2,332
------------ ------------
50,304 2,512
------------ ------------
CAPITAL SPECIALTY PLASTICS, INC.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B) 55 shs. * 252 279,466
------------ ------------
COEUR, INC.
A producer of proprietary, disposable power injection syringes.
8.75% Senior Secured Term Note due 2010 $ 202,899 04/30/03 202,899 203,792
11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 230,779 241,158
Common Stock (B) 72,464 shs. 04/30/03 72,463 208,588
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 144,210
------------ ------------
529,458 797,748
------------ ------------
*12/30/97 and 05/29/99.
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8
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
CONNECTICUT ELECTRIC, INC.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
12% Senior Subordinated Note due 2014 $ 1,267,387 01/12/07 $ 1,182,283 $ 1,144,176
Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 34,648
Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 25,062
------------ ------------
1,324,652 1,203,886
------------ ------------
CONNOR SPORT COURT INTERNATIONAL, INC.
A designer and manufacturer of outdoor and indoor synthetic sports flooring and other temporary flooring products.
Preferred Stock Series B-2 (B) 9,081 shs. 07/05/07 370,796 370,796
Preferred Stock Series C (B) 4,757 shs. 07/05/07 158,912 158,913
Common Stock (B) 380 shs. 07/05/07 4 4
Limited Partnership Interest (B) 4.43% int. * 103,135 --
------------ ------------
632,847 529,713
------------ ------------
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 1,116,719 1,163,311
Common Stock (B) 269 shs. ** 278,521 916,303
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 54 shs. 06/15/05 53,295 185,322
------------ ------------
1,448,535 2,264,936
------------ ------------
COREPHARMA LLC
A manufacturer of oral dose generic pharmaceuticals targeted at niche applications.
12% Senior Subordinated Note due 2013 $ 1,350,000 08/04/05 1,292,250 1,340,975
Warrant, exercisable until 2013, to purchase
common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 54,738
------------ ------------
1,364,867 1,395,713
------------ ------------
* 08/12/04 and 01/14/05.
** 06/15/05 and 05/22/06. MassMutual Participation Investors
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9
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
DAVIS-STANDARD LLC
A manufacturer, assembler, and installer of a broad range of capital equipment that is used in the extrusion, conversion, and
processing of plastic materials.
12% Senior Subordinated Note due 2014 $ 978,261 10/30/06 $ 919,695 $ 1,006,762
Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 609,670
Warrant, exercisable until 2014, to purchase
preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 29,018
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 58,884
------------ ------------
1,335,814 1,704,334
------------ ------------
DIRECTED ELECTRONICS, INC.
A designer and distributor of brand name automotive security systems, audio products and installation accessories.
Common Stock (B) (E) 195,118 shs. * 982,868 407,797
------------ ------------
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 1,392,067 389,263
Warrants, exercisable until 2011, to purchase
common stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. ** 201,655 --
------------ ------------
1,960,217 389,263
------------ ------------
DUNCAN SYSTEMS, INC.
A distributor of windshields and side glass for the recreational vehicle market.
10% Senior Secured Term Note due 2013 $ 308,571 11/01/06 303,942 303,345
13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 438,989 478,250
Common Stock (B) 102,857 shs. 11/01/06 102,857 135,800
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 42,637
------------ ------------
890,451 960,032
------------ ------------
* 12/19/05 and 06/17/06.
** 10/24/96 and 08/28/98.
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10
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
DWYER GROUP, INC.
A franchiser of a variety of home repair services.
Common Stock (B) 3,656 shs. * $ 365,600 $ 561,541
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 165,361
------------ ------------
464,319 726,902
------------ ------------
E S P HOLDCO, INC.
A manufacturer of power protection technology for commercial office equipment, primarily supplying the office equipment
dealer network.
14% Senior Subordinated Note due 2015 $ 1,175,299 01/08/08 1,154,731 1,167,153
Common Stock (B) 349 shs. 01/08/08 174,701 165,775
------------ ------------
1,329,432 1,332,928
------------ ------------
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 88,019
------------ ------------
ELECTRA BICYCLE COMPANY LLC
A designer and marketer of branded leisure bicycles.
10.5% Senior Secured Term Note A due 2009 $ 72,875 04/12/07 71,417 72,491
10.5% Senior Secured Term Note B due 2012 $ 393,522 04/12/07 387,195 389,156
12% Senior Secured Term Note C due 2012 $ 291,498 04/12/07 271,410 285,557
Limited Liability Company Unit Series F 36,913 uts. 04/12/07 36,913 35,068
Limited Liability Company Unit Series G (B) 2,852 uts. 04/12/07 2,852 2,709
------------ ------------
769,787 784,981
------------ ------------
ENZYMATIC THERAPY, INC.
A manufacturer and distributor of branded natural medicines and nutritional supplements.
Limited Partnership Interest (B) 0.70% int. 03/30/00 281,250 151,761
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 15,415 shs. 03/30/00 135,000 95,250
------------ ------------
416,250 247,011
------------ ------------
EVANS CONSOLES, INC.
A designer and manufacturer of consoles and control center systems.
Common Stock (B) 45,000 shs. 05/06/04 6 650,655
------------ ------------
* 10/30/03 and 01/02/04. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
11
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
F H S HOLDINGS LLC
A national provider of customized disease management services to large self-insured employers.
12% Senior Subordinated Note due 2014 $ 1,265,625 06/01/06 $ 1,185,793 $ 1,254,463
Preferred Unit (B) 84 uts. 06/01/06 84,368 91,812
Common Unit Class B (B) 734 shs. 06/01/06 64,779 59,340
------------ ------------
1,334,940 1,405,615
------------ ------------
FLUTES, INC.
An independent manufacturer of micro fluted corrugated sheet material for the food and consumer products
packaging industries.
10% Senior Secured Term Note due 2013 $ 524,791 04/13/06 516,919 516,713
14% Senior Subordinated Note due 2014 $ 317,177 04/13/06 287,294 312,542
Common Stock (B) 62,535 shs. 04/13/06 62,535 8,377
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 17,680 shs. 04/13/06 27,676 2,368
------------ ------------
894,424 840,000
------------ ------------
FOWLER HOLDING, INC.
A provider of site development services to residential homebuilders and developers in the Raleigh/Durham region of
North Carolina.
12% Senior Subordinated Note due 2013 $ 1,252,174 02/03/06 1,146,792 1,151,416
Common Stock (B) 98 shs. 02/03/06 97,826 26,045
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 35,829
------------ ------------
1,354,966 1,213,290
------------ ------------
FUEL SYSTEMS HOLDING CORPORATION
An independent North American supplier of fuel tanks for a wide variety of commercial vehicles.
12% Senior Subordinated Note due 2014 $ 1,237,500 01/31/06 1,160,650 1,131,803
Common Stock (B) 112,500 shs. 01/31/06 112,500 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 73,275 shs. 01/31/06 63,113 --
------------ ------------
1,336,263 1,131,803
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
12
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
GOLDEN COUNTY FOODS HOLDING, INC.
A manufacturer of frozen appetizers and snacks.
12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 $ 914,607 $ 987,174
8% Series A Convertible Preferred Stock, convertible into
4.25% of the fully diluted common shares (B) 77,643 shs. 11/01/07 77,643 73,761
------------ ------------
992,250 1,060,935
------------ ------------
H M HOLDING COMPANY
A designer, manufacturer, and importer of promotional and wood furniture.
12% Senior Subordinated Note due 2013 (D) $ 1,170,000 02/10/06 1,084,725 --
Preferred Stock (B) 11 shs. 09/18/07 10,714 --
Common Stock (B) 180 shs. 02/10/06 180,000 --
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 67 shs. 02/10/06 61,875 --
------------ ------------
1,337,314 --
------------ ------------
HIGHGATE CAPITAL LLC
An acquirer of controlling or substantial interests in manufacturing and marketing entities.
Series A Preferred Units (B) 0.30% int. 07/21/94 91,867 --
------------ ------------
HOME DeCOR HOLDING COMPANY
A designer, manufacturer and marketer of framed art and wall decor products.
12.5% Senior Subordinated Note due 2012 $ 1,081,731 * 1,005,349 1,073,055
Common Stock (B) 33 shs. * 33,216 43,147
Warrant, exercisable until 2012, to purchase
common stock at $.02 per share (B) 106 shs. * 105,618 137,181
------------ ------------
1,144,183 1,253,383
------------ ------------
INSURANCE CLAIMS MANAGEMENT, INC.
A third party administrator providing auto and property claim administration services for insurance companies.
Common Stock (B) 37 shs. 02/27/07 1,100 22,326
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 11 shs. 02/27/07 324 6,577
------------ ------------
1,424 28,903
------------ ------------
* 06/30/04 and 08/19/04. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
13
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
INTEGRATION TECHNOLOGY SYSTEMS, INC.
A manufacturer of steel protective computer and network systems for the industrial and office environments.
12% Senior Secured Note due on demand (D) $ 25,055 03/01/04 $ 1 $ --
Common Stock (B) 130 shs. 06/01/00 149,500 --
------------ ------------
149,501 --
------------ ------------
JASON, INC.
A diversified manufacturing company serving various industrial markets.
13% Senior Subordinated Note due 2010 $ 510,187 08/04/00 485,147 498,134
Limited Partnership Interest of
Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,245 313,272
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 62,914
------------ ------------
1,015,493 874,320
------------ ------------
JUSTRITE MANUFACTURING ACQUISITION CO.
A manufacturer of safety products such as storage cabinets and containers.
12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 808,166 843,999
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 138,371
------------ ------------
861,694 982,370
------------ ------------
K H O F HOLDINGS, INC.
A manufacturer of premium disposable tableware products serving both the foodservice and consumer channels.
14% Senior Subordinated Note due 2014 $ 1,238,380 10/15/07 1,213,720 1,220,755
Common Stock (B) 116,827 shs. 10/15/07 116,827 110,986
------------ ------------
1,330,547 1,331,741
------------ ------------
K N B HOLDINGS CORPORATION
A designer, manufacturer and marketer of products for the custom framing market.
13.5% Senior Subordinated Note due 2013 $ 1,309,956 05/25/06 1,253,267 1,304,737
Common Stock (B) 71,053 shs. 05/25/06 71,053 72,730
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 44,629
------------ ------------
1,362,191 1,422,096
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
14
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
K W P I HOLDINGS CORPORATION
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
12% Senior Subordinated Note due 2014 $ 1,227,000 03/14/07 $ 1,125,133 $ 1,185,936
Common Stock (B) 123 shs. 03/13/07 123,000 85,115
Warrant, exercisable until 2017, to purchase
common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 61,588
------------ ------------
1,334,023 1,332,639
------------ ------------
K-TEK HOLDING CORPORATION
A manufacturer of instrumentation for liquid and bulk solids level detection for process and storage tanks.
14% Senior Secured Note due 2015 $ 1,157,143 12/20/07 1,136,314 1,129,151
Preferred Stock (B) 192,314 shs. 12/20/07 192,314 182,698
Common Stock (B) 54,326 shs. 12/20/07 543 543
------------ ------------
1,329,171 1,312,392
------------ ------------
MAGNATECH INTERNATIONAL, INC.
A supplier of process equipment and related parts used in the manufacturing of medium and high-pressure reinforced hoses.
12% Senior Subordinated Note due 2014 $ 562,500 04/05/06 526,795 562,500
13% Preferred Stock (B) 299 shs. 04/05/06 299,295 382,206
Common Stock (B) 66 shs. 04/05/06 66,202 481,804
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 7 shs. 04/05/06 6,832 49,709
------------ ------------
899,124 1,476,219
------------ ------------
MAIL COMMUNICATIONS GROUP, INC.
A provider of mail processing and handling services, lettershop services, and commercial printing services.
12.5% Senior Subordinated Note due 2014 $ 516,177 05/04/07 483,072 500,525
Limited Liability Company Unit (B) 12,763 uts. * 166,481 158,157
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 18
------------ ------------
672,334 658,700
------------ ------------
* 05/04/07 and 01/02/08. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
15
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
MAVERICK ACQUISITION COMPANY
A manufacturer of capsules that cover the cork and neck of wine bottles.
9.2% Senior Secured Tranche A Note due 2010 (C) $ 262,074 09/03/04 $ 262,074 $ 258,133
12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 165,061 169,898
Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 19,246
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 13,906
------------ ------------
483,273 461,183
------------ ------------
MICROGROUP, INC.
A manufacturer of precision parts and assemblies, and a value-added supplier of metal tubing and bars.
12% Senior Subordinated Note due 2013 $ 1,421,795 * 1,347,701 1,400,834
Common Stock (B) 238 shs. * 238,000 224,365
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 87 shs. * 86,281 81,837
------------ ------------
1,671,982 1,707,036
------------ ------------
MOMENTUM HOLDING CO.
A designer and supplier of upholstery fabric to commercial furniture manufacturers and architectural and design firms.
12% Senior Subordinated Note due 2014 $ 618,802 08/04/06 556,766 624,499
Limited Partnership Interest (B) 11.24% int. 08/04/06 56,198 96,315
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 100,397
------------ ------------
669,669 821,211
------------ ------------
MONESSEN HOLDING CORPORATION
A designer and manufacturer of a broad line of gas, wood, and electric hearth products and accessories.
12% Senior Subordinated Note due 2014 $ 1,350,000 03/31/06 1,260,864 1,215,000
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 --
------------ ------------
1,333,989 1,215,000
------------ ------------
MORTON INDUSTRIAL GROUP, INC.
A manufacturer of highly engineered metal fabricated components.
12% Senior Subordinated Note due 2014 $ 1,292,246 08/25/06 1,196,501 1,163,021
30% Series A Preferred Stock (B) 9,027 shs. 03/03/08 9,027 --
Common Stock (B) 57,754 shs. 08/25/06 57,754 --
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 91,923 shs. 08/25/06 79,380 --
------------ ------------
1,342,662 1,163,021
------------ ------------
* 08/12/05 and 09/11/06.
--------------------------------------------------------------------------------------------------------------------------------
16
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
MOSS, INC.
A manufacturer and distributor of large display and exhibit structures.
Limited Partnership Interest of
Riverside Capital Appreciation Fund I, L.P. (B) 21.37% int. * $ 199,301 $ 394,731
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 122 shs. 12/21/05 20,941 24,166
------------ ------------
220,242 418,897
------------ ------------
NABCO, INC.
A producer of explosive containment vessels in the United States.
14% Senior Subordinated Note due 2014 $ 377,057 02/24/06 339,267 188,528
Limited Liability Company Unit (B) 437 uts. ** 436,984 --
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 26 shs. 02/24/06 19,687 --
------------ ------------
795,938 188,528
------------ ------------
NAVIS GLOBAL
A designer, manufacturer, seller and servicer of finishing machinery for the knit and woven segments of the global textile
industry.
12% Senior Subordinated Note due 2014 $ 705,457 05/28/04 651,796 673,322
8.75% Senior Secured Note due 2011 $ 327,478 05/28/04 327,478 321,849
Common Stock (B) 385,233 shs. 05/28/04 385,233 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 116,521 shs. 05/28/04 74,736 --
------------ ------------
1,439,243 995,171
------------ ------------
NESCO HOLDINGS CORPORATION
A sales and leasing company that provides equipment to the electric utility, telecommunications, and various other industries.
12% Senior Subordinated Note due 2015 $ 1,125,000 08/02/07 999,658 1,110,568
Common Stock (B) 225,000 shs. 08/02/07 225,000 213,750
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 63,191 shs. 08/02/07 102,842 632
------------ ------------
1,327,500 1,324,950
------------ ------------
* 09/20/00, 05/23/02 and 02/21/07.
** 02/24/06 and 06/22/07. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
17
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
NETSHAPE TECHNOLOGIES, INC.
A manufacturer of powder metal and metal injection molded precision components used in industrial, consumer, and other
applications.
12% Senior Subordinated Note due 2014 $ 810,000 02/02/07 $ 745,713 $ 744,663
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B) 540 uts. 02/01/07 540,000 78,754
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 7,013
------------ ------------
1,333,800 830,430
------------ ------------
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 03/29/04 982,661 986,538
10% Preferred Stock (B) 135 shs. 03/29/04 135,044 176,801
Common Stock (B) 3,418 shs. 03/29/04 3,418 260,400
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 4,565 shs. 03/29/04 3,877 347,759
------------ ------------
1,125,000 1,771,498
------------ ------------
NYLONCRAFT, INC.
A supplier of engineered plastic components for the automotive industry.
9% Senior Secured Note due 2009 $ 464,286 01/28/02 464,286 441,072
11.5% Senior Subordinated Note due 2012 $ 857,143 01/28/02 811,366 642,857
Common Stock (B) 178,571 shs. 01/28/02 178,571 --
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 138,928 shs. 01/28/02 92,597 --
------------ ------------
1,546,820 1,083,929
------------ ------------
OAKRIVER TECHNOLOGY, INC.
Designs, engineers and assembles high precision automated process equipment for the medical device industry,
with a focus on defibrillators and stents.
10% Senior Secured Note due 2012 $ 323,115 01/03/06 318,268 310,827
13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 355,704 372,902
Common Stock (B) 184,176 shs. 01/03/06 184,176 11,763
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 2,751
------------ ------------
894,048 698,243
------------ ------------
--------------------------------------------------------------------------------------------------------------------------------
18
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
OLYMPIC SALES, INC.
A boat retailer in Washington state, Oregon, California and British Columbia.
12% Senior Subordinated Note due 2008 $ 511,000 08/07/98 $ 511,000 $ 503,308
12% Senior Subordinated Note due 2008 $ 244,154 02/09/00 241,154 240,442
Limited Partnership Interest of Riverside VIII, VIII-A and
VIII-B Holding Company, L.P. (B) 10.66% int. * 808,386 --
Warrants, exercisable until 2008, to purchase
common stock at $.01 per share (B) 15,166 shs. ** 206,041 --
------------ ------------
1,766,581 743,750
------------ ------------
ONTARIO DRIVE & GEAR LTD.
A manufacturer of all-wheel drive, off-road amphibious vehicles and related accessories.
Limited Liability Company Unit (B) 1,942 uts. 01/17/06 302,885 539,056
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 91,012
------------ ------------
393,309 630,068
------------ ------------
P A S HOLDCO LLC
An independent provider of maintenance, repair and overhaul services to the aerospace gas turbine engine and
airframe markets.
14% Senior Subordinated Note due 2014 $ 1,182,352 07/03/06 1,127,884 1,178,982
Preferred Unit (B) 202 uts. 07/03/06 202,320 209,604
Preferred Unit (B) 36 uts. 07/03/06 36,420 37,731
Common Unit Class I (B) 78 uts. 07/03/06 -- --
Common Unit Class L (B) 17 uts. 07/03/06 -- --
------------ ------------
1,366,624 1,426,317
------------ ------------
P I I HOLDING CORPORATION
A manufacturer of plastic film and bags for the general industrial, medical, and food industries.
12% Senior Subordinated Note due 2013 $ 1,215,000 03/31/06 1,144,036 1,227,150
Preferred Stock (B) 19 shs. 03/31/06 174,492 201,294
Common Stock (B) 12 shs. 03/31/06 13,500 29,487
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 17,158
------------ ------------
1,337,916 1,475,089
------------ ------------
* 08/07/98, 02/23/99, 12/22/99 and 02/25/03.
** 08/07/98 and 02/29/00. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
19
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
PACIFIC CONSOLIDATED HOLDINGS LLC
A manufacturer of rugged, mobile liquid and gaseous oxygen and nitrogen generating systems used in the global defense,
oil & gas and medical sectors.
12% Senior Subordinated Note due 2012 $ 690,683 04/27/07 $ 634,621 $ 645,216
Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 31,771
------------ ------------
668,098 676,987
------------ ------------
PARADIGM PACKAGING, INC.
A manufacturer of plastic bottles and closures for the nutritional, pharmaceutical, personal care
and food packaging markets.
12% Senior Subordinated Note due 2011 $ 1,125,000 12/19/00 1,104,324 1,117,039
Membership Interests of MM/Lincap
PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 85,916
------------ ------------
1,244,949 1,202,955
------------ ------------
POSTLE ALUMINUM COMPANY LLC
A manufacturer and distributor of aluminum extruded products.
12% Senior Subordinated Note due 2014 $ 1,080,000 10/02/06 1,005,435 1,084,797
Limited Liability Company Unit (B) 733 uts. 10/02/06 270,000 223,919
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 182 shs. 10/02/06 65,988 55,693
------------ ------------
1,341,423 1,364,409
------------ ------------
POWER SERVICES HOLDING COMPANY
A provider of industrial motor repair services, predictive and preventative maintenance, and performance improvement
consulting, serving the petrochemical, mining, power generation, metals, and paper industries.
12% Senior Subordinated Note due 2016 $ 1,255,814 02/11/08 1,142,668 1,239,006
Limited Partnership Interest 94,092 uts. 02/11/08 94,092 89,387
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 700 shs. 02/11/08 88,723 7
------------ ------------
1,325,483 1,328,400
------------ ------------
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 --
------------ ------------
* 08/12/94 and 11/14/01.
--------------------------------------------------------------------------------------------------------------------------------
20
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
QUALIS AUTOMOTIVE LLC
A distributor of aftermarket automotive brake and chassis products.
12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 $ 816,650 $ 919,712
Common Stock (B) 187,500 shs. 05/28/04 187,500 104,832
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 199,969 shs. 05/28/04 199,969 111,803
------------ ------------
1,204,119 1,136,347
------------ ------------
QUALSERV CORPORATION
A provider of foodservice equipment and supplies to major restaurant chains and their franchisees.
Limited Partnership Interest (B) 4.90% int. 07/09/04 1 --
------------ ------------
1 --
------------ ------------
R A J MANUFACTURING HOLDINGS LLC
A designer and manufacturer of women's swimwear sold under a variety of licensed brand names.
12.5% Senior Subordinated Note due 2014 $ 1,200,277 12/15/06 1,106,663 1,201,884
Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 82,032
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 38,711
------------ ------------
1,325,995 1,322,627
------------ ------------
R E I DELAWARE HOLDING, INC.
An engineer and manufacturer of highly complex, close tolerance components, assemblies, tooling
and custom automation equipment primarily for aerospace, medical and defense/radar markets.
12% Senior Subordinated Note due 2016 $ 1,350,000 01/18/08 1,306,541 1,336,613
Warrant, exercisable until 2018, to purchase
common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 --
------------ ------------
1,323,000 1,336,613
------------ ------------
RADIAC ABRASIVES, INC.
A manufacturer of bonded abrasive and super abrasive grinding wheels in the United States.
12% Senior Subordinated Note due 2014 $ 1,196,809 02/10/06 1,120,542 1,220,745
Common Stock (B) 153,191 shs. 02/10/06 153,191 197,132
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 89,624
------------ ------------
1,337,154 1,507,501
------------ ------------
MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
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 $ 524,285 $ 557,850
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 69,677
------------ ------------
589,374 627,527
------------ ------------
SAFETY SPEED CUT MANUFACTURING COMPANY, INC.
A manufacturer of vertical panel saws and routers for the wood working industry.
Class B Common Stock (B) 846 shs. 06/02/99 146,456 728,566
------------ ------------
SAVAGE SPORTS HOLDING, INC.
A manufacturer of sporting firearms.
12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 772,625 825,739
Common Stock (B) 324 shs. * 340,378 580,741
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 126,795
------------ ------------
1,173,132 1,533,275
------------ ------------
SMART SOURCE HOLDINGS LLC
A short-term computer rental company.
12% Senior Subordinated Note due 2015 $ 1,176,924 ** 1,069,539 1,150,633
Limited Liability Company Unit (B) 328 uts. ** 337,796 311,553
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 83 shs. ** 87,231 1
------------ ------------
1,494,566 1,462,187
------------ ------------
SPECIALTY FOODS GROUP, INC.
A manufacturer and distributor of branded meat products.
Limited Partnership Interest of MHD Holdings LLC (B) 0.76% int. 08/29/00 363,576 --
------------ ------------
STANTON CARPET HOLDING CO.
A designer and marketer of high and mid-priced decorative carpets and rugs.
12.13% Senior Subordinated Note due 2014 $ 1,185,366 08/01/06 1,118,525 1,173,975
Common Stock (B) 165 shs. 08/01/06 164,634 194,793
Warrant, exercisable until 2014, to purchase
common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 64,876
------------ ------------
1,332,549 1,433,644
------------ ------------
* 09/10/04 and 10/05/07.
** 08/31/07 and 03/06/08.
--------------------------------------------------------------------------------------------------------------------------------
22
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
STRATEGIC EQUIPMENT & SUPPLY CORPORATION, INC.
A provider of kitchen and restaurant design, equipment fabrication and installation services.
Warrant, exercisable until 2008, to purchase
common stock at $.01 per share (B) 61,862 shs. 01/14/00 $ 382,501 $ --
------------ ------------
T H I ACQUISITION, INC.
A machine servicing company providing value-added steel services to long steel products.
12% Senior Subordinated Note due 2016 $ 1,350,000 01/14/08 1,276,383 1,335,338
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 --
------------ ------------
1,323,000 1,335,338
------------ ------------
TANGENT RAIL CORPORATION
A manufacturer of rail ties and provides specialty services to the North American railroad industry.
13% Senior Subordinated Note due 2013 $ 1,173,909 10/14/05 1,026,986 1,173,909
Common Stock (B) 1,167 shs. 10/14/05 1,167 858,655
Warrant, exercisable until 2013, to purchase
common stock at $.01 per share (B) 618 shs. 10/14/05 155,860 454,712
------------ ------------
1,184,013 2,487,276
------------ ------------
TERRA RENEWAL SERVICES, INC.
A provider of wastewater residual management and required environmental reporting, permitting,
nutrient management planning and record keeping to companies involved in poultry and food processing.
8.7% Senior Secured Tranche B Note due 2012 (C) $ 868,863 * 865,646 835,740
12% Senior Subordinated Note due 2014 $ 664,062 ** 634,325 658,027
Limited Partnership Interest of
Saw Mill Capital Fund V, L.P. (B) 2.30% int. 03/01/05 66,448 416,008
Warrant, exercisable until 2016, to purchase
common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 72,323
------------ ------------
1,600,157 1,982,098
------------ ------------
TORRENT GROUP HOLDINGS, INC.
A contractor specializing in the sales and installation of engineered drywells for the retention and filtration of stormwater and
nuisance water flow.
12.5% Senior Subordinated Note due 2013 $ 1,185,366 10/26/07 1,113,016 1,170,115
Series A Preferred Stock (B) 219 shs. 10/26/07 219,203 208,240
------------ ------------
1,332,219 1,378,355
------------ ------------
* 04/28/06 and 12/21/06.
** 04/28/06 and 09/13/06. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
23
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
TOTAL E & S, INC.
A manufacturer of a wide variety of equipment used in the oil and gas industry.
10.5% Senior Secured Term Note due 2013 $ 486,487 03/02/07 $ 479,190 $ 480,502
13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 336,174
Common Stock (B) 71,542 shs. 03/02/07 71,542 28,992
Warrant, exercisable until 2014 to purchase
common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 7,997
------------ ------------
885,863 853,665
------------ ------------
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 2010 $ 1,356,000 02/05/98 1,289,882 1,356,000
Common Stock (B) 315 shs. 02/04/98 315,000 345,548
Warrant, exercisable until 2009, to purchase
common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 243,529
------------ ------------
1,789,298 1,945,077
------------ ------------
TRANSPAC HOLDING COMPANY
A designer, importer, and wholesaler of home decor and seasonal gift products.
12% Senior Subordinated Note due 2015 $ 938,651 10/31/07 874,613 920,072
Common Stock (B) 110 shs. 10/31/07 110,430 104,909
Warrant, exercisable until 2015, to purchase
common stock at $.01 per share (B) 50 shs. 10/31/07 46,380 1
------------ ------------
1,031,423 1,024,982
------------ ------------
TRANSTAR HOLDING COMPANY
A distributor of aftermarket automotive transmission parts.
12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 884,095 941,099
Common Stock (B) 571 shs. * 570,944 48,267
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 59,632
------------ ------------
1,496,060 1,748,998
------------ ------------
* 08/31/05 and 04/30/07.
--------------------------------------------------------------------------------------------------------------------------------
24
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
TRUCK BODIES & EQUIPMENT INTERNATIONAL
A designer and manufacturer of accessories for heavy and medium duty trucks, primarily dump bodies, hoists,
various forms of flat-bed bodies, landscape bodies and other accessories.
12% Senior Subordinated Note due 2013 $ 1,222,698 * $ 1,150,566 $ 1,100,428
Common Stock (B) 393 shs. * 423,985 74,654
Warrant, exercisable until 2013, to purchase
common stock at $.02 per share (B) 81 shs. * 84,650 15,417
------------ ------------
1,659,201 1,190,499
------------ ------------
TRUSTILE DOORS, INC.
A manufacturer and distributor of interior doors.
12.5% Senior Subordinated Note due 2010 $ 450,000 04/11/03 434,035 453,519
Warrant, exercisable until 2010, to purchase
common stock at $.01 per share (B) 3,060 shs. 04/11/03 44,432 114,534
------------ ------------
478,467 568,053
------------ ------------
U M A ENTERPRISES, INC.
An importer and wholesaler of home decor products.
15% Senior Subordinated Note due 2015 $ 880,435 02/08/08 862,826 875,651
Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 446,082
------------ ------------
1,332,391 1,321,733
------------ ------------
U-LINE CORPORATION
A manufacturer of high-end, built-in, undercounter ice making, wine storage and refrigeration appliances.
12.5% Senior Subordinated Note due 2012 $ 996,500 04/30/04 922,146 979,896
Common Stock (B) 96 shs. 04/30/04 96,400 72,578
Warrant, exercisable until 2012, to purchase
common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 91,852
------------ ------------
1,130,652 1,144,326
------------ ------------
VICTORY VENTURES LLC
An acquirer of controlling or substantial interests in other entities.
Series A Preferred Units (B) 1 ut. 12/02/96 236 --
------------ ------------
* 09/24/04 and 12/22/06. MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
25
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
VISIONEERING, INC.
A designer and manufacturer of tooling and fixtures for the aerospace industry.
10.5% Senior Secured Term Loan due 2013 $ 458,824 05/17/07 $ 451,942 $ 458,277
13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 334,006 369,511
Common Stock (B) 70,588 shs. 05/17/07 70,588 67,059
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 200
------------ ------------
887,996 895,047
------------ ------------
VITALITY FOODSERVICE, INC.
A non-carbonated beverage dispensing company focused on the foodservice industry.
13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 937,103 903,373
Common Stock (B) 14,006 shs. * 140,064 104,563
Warrant, exercisable until 2011, to purchase
common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 94,014
------------ ------------
1,176,105 1,101,950
------------ ------------
VITEX PACKAGING GROUP, INC.
A manufacturer of specialty packaging, primarily envelopes and tags used on tea bags.
12.5% Senior Subordinated Note due 2012 $ 900,000 07/19/04 785,152 810,000
14.5% PIK Note due 2010 $ 112,500 06/30/07 102,027 101,250
Limited Liability Company Unit Class A (B) 219,375 uts. 07/19/04 219,375 --
Limited Liability Company Unit Class B (B) 96,848 uts. 07/19/04 96,848 --
------------ ------------
1,203,402 911,250
------------ ------------
WAGGIN' TRAIN HOLDINGS LLC
A producer of premium quality meat dog treats.
14% Senior Subordinated Note due 2014 $ 1,129,121 11/15/07 1,106,575 1,103,258
Limited Liability Company Unit Class B (B) 224 uts. 11/15/07 223,757 212,572
Limited Liability Company Unit Class C (B) 224 uts. 11/15/07 -- 2
------------ ------------
1,330,332 1,315,832
------------ ------------
WALLS INDUSTRIES, INC.
A provider of branded workwear and sporting goods apparel.
Limited Partnership Interest (B) 0.20% int. 07/12/04 1,974 3,584
Common Stock (B) 2,133 shs. 12/21/07 -- 3,873
------------ ------------
1,974 7,457
------------ ------------
* 07/19/05 and 12/22/05.
--------------------------------------------------------------------------------------------------------------------------------
26
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Principal Amount
Shares, Units
or Ownership Acquisition
CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value
------------ -------- ------------ ------------
WELLBORN FOREST HOLDING CO.
A manufacturer of semi-custom kitchen and bath cabinetry.
12.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 $ 851,833 $ 862,557
Common Stock (B) 101 shs. 11/30/06 101,250 59,797
Warrant, exercisable until 2014, to purchase
common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 29,854
------------ ------------
998,873 952,208
------------ ------------
WORKPLACE MEDIA HOLDING CO.
A direct marketer specializing in providing advertisers with access to consumers in the workplace.
13% Senior Subordinated Note due 2015 $ 613,692 05/14/07 559,850 571,062
Limited Partnership Interest (B) 12.26% int. 05/14/07 61,308 52,112
Warrant, exercisable until 2015, to purchase
common stock at $.02 per share (B) 47 shs. 05/14/07 44,186 --
------------ ------------
665,344 623,174
------------ ------------
TOTAL PRIVATE PLACEMENT INVESTMENTS (F) 96,123,354 94,687,932
------------ ------------
MassMutual Participation Investors
--------------------------------------------------------------------------------------------------------------------------------
27
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Shares or
Interest Due Principal
CORPORATE RESTRICTED SECURITIES: (A) (Continued) Rate Date Amount Cost Fair Value
------- -------- ------------ ------------ ------------
RULE 144A SECURITIES - 3.59%:
BONDS - 3.59%
Charter Communications Op LLC 8.000% 04/30/12 $ 750,000 $ 736,875 $ 688,125
Compucom Systems, Inc. 12.500 10/01/15 670,000 647,962 624,775
Douglas Dynamics LLC 7.750 01/15/12 325,000 326,263 243,750
G F S I, Inc. (C) 10.500 06/01/11 375,000 360,505 348,750
Intergen NV 9.000 06/30/17 375,000 371,959 391,875
Packaging Dynamics Corporation of America 10.000 05/01/16 975,000 969,875 726,375
Penhall International 12.000 08/01/14 325,000 332,912 274,625
Ryerson, Inc. 12.000 11/01/15 30,000 30,000 28,350
Snoqualmie Entertainment Authority 9.125 02/01/15 250,000 244,063 212,500
Tenneco, Inc. 8.125 11/15/15 50,000 50,000 49,625
TRW Automotive, Inc. 7.250 03/15/17 500,000 440,000 455,000
Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,529 523,800
------------ ------------
TOTAL BONDS 5,066,943 4,567,550
------------ ------------
CONVERTIBLE PREFERRED STOCK - 0.00%
ETEX Corporation (B) 194 179 --
------------ ------------
TOTAL CONVERTIBLE PREFERRED STOCK 179 --
------------ ------------
PREFERRED STOCK - 0.00%
TherOX, Inc. (B) 26 1,032 --
------------ ------------
TOTAL PREFERRED STOCK 1,032 --
------------ ------------
COMMON STOCK - 0.00%
Touchstone Health Partnership (B) 292 1,062 --
------------ ------------
TOTAL PREFERRED STOCK 1,062 --
------------ ------------
TOTAL RULE 144A SECURITIES 5,069,216 4,567,550
------------ ------------
TOTAL CORPORATE RESTRICTED SECURITIES $101,192,570 $ 99,255,482
------------ ------------
----------------------------------------------------------------------------------------------------------------
28
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES - 22.15%: (A) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
BONDS - 21.12%
Allied Waste NA 7.375% 04/15/14 $ 140,000 $ 141,530 $ 137,725
Appleton Papers, Inc. 8.125 06/15/11 250,000 250,000 240,625
Aramark Corporation (C) 6.739 02/01/15 100,000 100,000 88,250
Atlas Pipeline Partners 8.125 12/15/15 600,000 611,429 610,500
Basic Energy Services 7.125 04/15/16 625,000 610,043 595,313
Blockbuster, Inc. (C) 9.000 09/01/12 275,000 276,035 224,125
Boyd Gaming Corporation 7.125 02/01/16 150,000 146,625 120,750
Bristow Group, Inc. 7.500 09/15/17 75,000 75,000 75,375
Cablevision Systems Corporation 8.000 04/15/12 500,000 505,476 486,250
Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 515,625
Clayton Williams Energy, Inc. 7.750 08/01/13 575,000 557,000 497,375
Community Health Systems, Inc. 8.875 07/15/15 475,000 464,276 476,781
Countrywide Alternative Loan Trust (C) 2.856 11/20/35 1,021,438 746,926 738,050
Del Monte Corporation 8.625 12/15/12 200,000 200,000 203,500
Dynegy Holdings, Inc. 7.500 06/01/15 250,000 223,274 234,375
Dynegy Holdings, Inc. 8.375 05/01/16 665,000 675,615 658,350
Edison Mission Energy 7.750 06/15/16 35,000 35,000 36,050
Electronic Data Systems Corporation 7.125 10/15/09 500,000 502,241 509,957
Esterline Technologies 7.750 06/15/13 175,000 175,000 177,625
Ford Motor Credit Co. 7.375 10/28/09 750,000 748,125 683,350
Gencorp, Inc. 9.500 08/15/13 130,000 130,000 129,025
General Motors Acceptance Corporation 5.850 01/14/09 750,000 741,106 699,371
Goodyear Tire & Rubber Co. 7.857 08/15/11 350,000 327,250 358,313
Goodyear Tire & Rubber Co. 8.625 12/01/11 250,000 261,777 262,188
Goodyear Tire & Rubber Co. 9.000 07/01/15 64,000 65,222 67,680
GulfMark Offshore, Inc. 7.750 07/15/14 300,000 298,725 304,500
H C A, Inc. 9.250 11/15/16 500,000 508,573 518,750
Hughes Network Systems 9.500 04/15/14 525,000 535,551 522,375
Inergy LP 8.250 03/01/16 75,000 75,000 76,688
Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 716,406 695,175
Interline Brands, Inc. 8.125 06/15/14 830,000 824,237 792,650
Iron Mountain, Inc. 8.750 07/15/18 500,000 514,582 518,750
Koppers, Inc. 9.875 10/15/13 170,000 170,000 178,500
Leucadia National Corporation 7.000 08/15/13 350,000 355,004 347,375
Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 220,625
Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 99,000
MassMutual Participation Investors
----------------------------------------------------------------------------------------------------------------
29
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES:(A)(Continued) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
Mariner Energy, Inc. 8.000% 05/15/17 $ 400,000 $ 402,594 $ 382,000
Markwest Energy Operating Co. 6.875 11/01/14 550,000 532,750 519,750
Mediacom Broadband LLC 8.500 10/15/15 750,000 765,664 630,000
N R G Energy, Inc. 7.375 02/01/16 600,000 598,750 588,000
N T L Cable PLC 9.125 08/15/16 790,000 813,296 707,050
Neiman Marcus Group, Inc. 10.375 10/15/15 600,000 600,000 600,000
Nextel Communications, Inc. 7.375 08/01/15 400,000 407,382 308,000
North American Energy Partners 8.750 12/01/11 200,000 200,000 198,000
NOVA Chemicals Corporation (C) 7.863 11/15/13 515,000 511,538 431,313
O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 440,000
Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 336,000
Petrohawk Energy Corporation 9.125 07/15/13 750,000 762,024 770,625
Pliant Corporation (C) 11.850 06/15/09 764,203 773,442 748,917
Quebecor Media, Inc. 7.750 03/15/16 575,000 551,385 524,687
Quicksilver Resources, Inc. 7.125 04/01/16 600,000 583,125 579,000
Rental Service Corporation 9.500 12/01/14 500,000 506,683 417,500
Rock-Tenn Co. 8.200 08/15/11 430,000 440,516 440,750
Rogers Wireless, Inc. 7.500 03/15/15 560,000 593,857 588,340
Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 198,280
Steel Dynamics, Inc. 6.750 04/01/15 100,000 100,000 98,000
Stewart & Stevenson LLC 10.000 07/15/14 750,000 770,907 720,000
Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 225,625
Tenneco, Inc. 8.625 11/15/14 500,000 501,159 491,250
Tesoro Petroleum Corporation 6.500 06/01/17 250,000 250,000 223,750
Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 34,037
Titan International, Inc. 8.000 01/15/12 70,000 70,000 68,600
Transdigm, Inc. 7.750 07/15/14 150,000 151,345 150,000
Tube City IMS Corporation 9.750 02/01/15 1,000,000 991,796 880,000
United Components, Inc. 9.375 06/15/13 535,000 535,916 490,194
United Rentals, Inc. 7.750 11/15/13 325,000 325,000 264,875
Vought Aircraft Industries 8.000 07/15/11 650,000 648,205 596,375
Warner Music Group Corporation 7.375 04/15/14 125,000 125,000 96,250
------------ ------------
TOTAL BONDS 28,274,343 26,848,084
------------ ------------
----------------------------------------------------------------------------------------------------------------
30
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Share or
Interest Due Principal Market
CORPORATE PUBLIC SECURITIES:(A)(Continued) Rate Date Amount Cost Value
------- -------- ------------ ------------ ------------
COMMON STOCK - 0.83%
Comcast Corporation $ 16,800 $ 310,632 $ 324,912
Distributed Energy Systems Corporation (B) 14,000 177,078 6,300
EnerNOC, Inc. (B) 23,500 648,410 267,900
ITC^DeltaCom, Inc. (B) 94,588 827,645 349,976
Visa, Inc. (B) 1,676 73,744 104,515
------------ ------------
TOTAL COMMON STOCK 2,037,509 1,053,603
------------ ------------
CONVERTIBLE BONDS - 0.20%
Citadel Broadcasting Corporation 1.875% 02/15/11 $ 300,000 232,875 254,625
------------ ------------
TOTAL CONVERTIBLE BONDS 232,875 254,625
------------ ------------
TOTAL CORPORATE PUBLIC SECURITIES $ 30,544,727 $ 28,156,312
------------ ------------
Interest Due Principal
SHORT-TERM SECURITIES: Rate/Yield* Date Amount Cost Market Value
------- -------- ------------ ------------ ------------
COMMERCIAL PAPER - 6.53%
Dominion Resources, Inc. 3.072% 04/02/08 $ 2,056,000 $ 2,055,815 $ 2,055,815
Dow Chemical Co. 3.304 04/11/08 1,868,000 1,866,288 1,866,288
P P G Industries, Inc. 3.101 04/04/08 1,953,000 1,952,495 1,952,495
UnitedHealth Group, Inc. 3.102 04/01/08 2,427,000 2,427,000 2,427,000
------------ ------------
TOTAL SHORT-TERM SECURITIES $ 8,301,598 $ 8,301,598
------------ ------------
TOTAL INVESTMENTS 106.75% $140,038,895 $135,713,392
------------ ------------
Other Assets 3.24 4,121,994
Liabilities (9.99) (12,707,874)
------ ------------
TOTAL NET ASSETS 100.00% $127,127,512
====== ============
(A) In each of the convertible note, warrant, and common stock investments, the issuer has agreed to provide
certain registration rights.
(B) Non-income producing security.
(C) Variable rate security; rate indicated is as of 03/31/08.
(D) Defaulted security; interest not accrued.
(E) Security publicly priced.
(F) Illiquid security. At March 31, 2008, the values of these securities amounted to $94,687,932 or 74.48% of
net assets.
* Effective yield at purchase
PIK - Payment-in-kind
MassMutual Participation Investors
----------------------------------------------------------------------------------------------------------------
31
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2008
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION:(Continued) Market Value Market Value
-------------- --------------
AEROSPACE - 4.85% BROADCASTING & ENTERTAINMENT- 2.36%
Consolidated Foundries Holdings $ 2,264,936 Cablevision Systems Corporation $ 486,250
Esterline Technologies 177,625 Charter Communications Op LLC 688,125
Gencorp, Inc. 129,025 Citadel Broadcasting Corporation 254,625
Hughes Network Systems 522,375 Comcast Corporation 324,912
P A S Holdco LLC 1,426,317 Mediacom Broadband LLC 630,000
Transdigm, Inc. 150,000 Workplace Media Holdings Co. 623,174
Visioneering, Inc. 895,047 --------------
Vought Aircraft Industries 596,375 3,007,086
-------------- --------------
6,161,700 BUILDINGS & REAL ESTATE - 1.52%
-------------- K W P I Holdings Corporation 1,332,639
AUTOMOBILE - 8.05% Texas Industries, Inc. 34,037
Ford Motor Credit Co. 683,350 TruStile Doors, Inc. 568,053
Fuel Systems Holding Corporation 1,131,803 --------------
General Motors Acceptance Corporation 699,371 1,934,729
Goodyear Tire & Rubber Co. 688,181 --------------
Jason, Inc. 874,320 CHEMICAL, PLASTICS & RUBBER - 0.70%
Nyloncraft, Inc. 1,083,929 Capital Specialty Plastics, Inc. 279,466
Ontario Drive & Gear Ltd. 630,068 Koppers, Inc. 178,500
Qualis Automotive LLC 1,136,347 NOVA Chemicals Corporation 431,313
Tenneco, Inc. 540,875 --------------
Titan International, Inc. 68,600 889,279
Transtar Holding Company 1,748,998 --------------
TRW Automotive, Inc. 455,000 CONSUMER PRODUCTS - 8.90%
United Components, Inc. 490,194 Aero Holdings, Inc. 2,058,038
-------------- Bravo Sports Holding Corporation 1,419,554
10,231,036 G F S I, Inc. 348,750
-------------- K N B Holdings Corporation 1,422,096
BEVERAGE, DRUG & FOOD - 3.32% Momentum Holding Co. 821,211
Aramark Corporation 88,250 R A J Manufacturing Holdings LLC 1,322,627
Del Monte Corporation 203,500 R E I Delaware Holding, Inc. 1,336,613
Golden County Foods Holding, Inc. 1,060,935 Royal Baths Manufacturing Company 627,527
Nonni's Food Company 1,771,498 The Tranzonic Companies 1,945,077
Specialty Foods Group, Inc. -- Walls Industries, Inc. 7,457
Vitality Foodservice, Inc. 1,101,950 --------------
-------------- 11,308,950
4,226,133 --------------
-------------- CONTAINERS, PACKAGING & GLASS - 5.01%
Flutes, Inc. 840,000
Maverick Acquisition Company 461,183
P I I Holding Corporation 1,475,089
Packaging Dynamics Corporation of America 726,375
Paradigm Packaging, Inc. 1,202,955
Pliant Corporation 748,917
Vitex Packaging Group, Inc. 911,250
--------------
6,365,769
--------------
------------------------------------------------------------------------------------------------------------------------------------
32
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION: Market Value Market Value
-------------- --------------
DISTRIBUTION - 1.92% FINANCIAL SERVICES - 1.53%
Duncan Systems, Inc. $ 960,032 Highgate Capital LLC $ --
Magnatech International, Inc. 1,476,219 Leucadia National Corporation 347,375
QualServ Corporation -- Nesco Holdings Corporation 1,324,950
Strategic Equipment & Supply Corporation, Inc. -- Penhall International 274,625
-------------- Victory Ventures LLC --
2,436,251 --------------
-------------- 1,946,950
DIVERSIFIED/CONGLOMERATE, --------------
MANUFACTURING - 5.62% HEALTHCARE, EDUCATION &
A H C Holdings Company, Inc. 1,319,967 CHILDCARE - 3.81%
Arrow Tru-Line Holdings, Inc. 865,268 A T I Acquisition Company 1,147,192
Douglas Dynamics LLC 243,750 American Hospice Management Holding LLC 1,063,349
Evans Consoles, Inc. 650,655 Community Health Systems, Inc. 476,781
Postle Aluminum Company LLC 1,364,409 F H S Holdings LLC 1,405,615
Radiac Abrasives, Inc. 1,507,501 H C A, Inc. 518,750
Truck Bodies & Equipment International 1,190,499 Tenet Healthcare Corporation 225,625
-------------- Touchstone Health Partnership --
7,142,049 --------------
-------------- 4,837,312
DIVERSIFIED/CONGLOMERATE, SERVICE - 4.88% --------------
Advanced Technologies Holdings 1,321,585 HOME & OFFICE FURNISHINGS,
Allied Waste NA 137,725 HOUSEWARES, AND DURABLE
CapeSuccess LLC 2,512 CONSUMER PRODUCTS - 8.80%
Diversco, Inc./DHI Holdings, Inc. 389,263 Connor Sport Court International, Inc. 529,713
Dwyer Group, Inc. 726,902 H M Holding Company --
Fowler Holding, Inc. 1,213,290 Home Decor Holding Company 1,253,383
Insurance Claims Management, Inc. 28,903 Justrite Manufacturing Acquisition Co. 982,370
Interline Brands, Inc. 792,650 K H O F Holdings, Inc. 1,331,741
Iron Mountain, Inc. 518,750 Monessen Holding Corporation 1,215,000
Mail Communications Group, Inc. 658,700 Stanton Carpet Holding Co. 1,433,644
Moss, Inc. 418,897 Transpac Holdings Company 1,024,982
-------------- U M A Enterprises, Inc. 1,321,733
6,209,177 U-Line Corporation 1,144,326
-------------- Wellborn Forest Holding Co. 952,208
ELECTRONICS - 1.67% --------------
Connecticut Electric, Inc. 1,203,886 11,189,100
Directed Electronics, Inc. 407,797 --------------
Distributed Energy Systems Corporation 6,300
Electronic Data Systems Corporation 509,957
--------------
2,127,940
--------------
FARMING & AGRICULTURE - 1.04%
Protein Genetics, Inc. --
Waggin' Train Holdings LLC 1,315,832
--------------
1,315,832
--------------
MassMutual Participation Investors
------------------------------------------------------------------------------------------------------------------------------------
33
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2008
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION:(Continued) Market Value Market Value
-------------- --------------
LEISURE, AMUSEMENT, ENTERTAINMENT - 3.09% MORTGAGE-BACKED SECURITIES - 0.58%
Boyd Gaming Corporation $ 120,750 Countrywide Alternative Loan Trust $ 738,050
Electra Bicycle Company LLC 784,981 --------------
Majestic Star Casino LLC 220,625 NATURAL RESOURCES - 0.54%
O E D Corp/Diamond Jo Company Guarantee 440,000 Appleton Papers, Inc. 240,625
Savage Sports Holding, Inc. 1,533,275 Rock-Tenn Co. 440,750
Snoqualmie Entertainment Authority 212,500 --------------
Tunica-Biloxi Gaming Authority 523,800 681,375
Warner Music Group Corporation 96,250 --------------
-------------- OIL & GAS - 3.66%
3,932,181 Atlas Pipeline Partners 610,500
-------------- Basic Energy Services 595,313
MACHINERY - 8.57% Bristow Group, Inc. 75,375
Davis-Standard LLC 1,704,334 Clayton Williams Energy, Inc. 497,375
E S P Holdco, Inc. 1,332,928 GulfMark Offshore, Inc. 304,500
Integration Technology Systems, Inc. -- Mariner Energy, Inc. 382,000
K-Tek Holdings Corporation 1,312,392 North American Energy Partners 198,000
Manitowoc Company, Inc. 99,000 Offshore Logistics, Inc. 336,000
Morton Industrial Group, Inc. 1,163,021 Quicksilver Resources, Inc. 579,000
Navis Global 995,171 Tesoro Petroleum Corporation 223,750
NetShape Technologies, Inc. 830,430 Total E & S, Inc. 853,665
Pacific Consolidated Holdings LLC 676,987 --------------
Power Services Holding Company 1,328,400 4,655,478
Safety Speed Cut Manufacturing Company, Inc. 728,566 --------------
Stewart & Stevenson LLC 720,000 PHARMACEUTICALS - 1.29%
-------------- CorePharma LLC 1,395,713
10,891,229 Enzymatic Therapy, Inc. 247,011
-------------- --------------
MEDICAL DEVICES/BIOTECH - 2.59% 1,642,724
Coeur, Inc. 797,748 --------------
ETEX Corporation -- PUBLISHING/PRINTING - 0.57%
E X C Acquisition Corporation 88,019 Quebecor Media, Inc. 524,687
MicroGroup, Inc. 1,707,036 Sheridan Acquisition Corporation 198,280
OakRiver Technology, Inc. 698,243 --------------
TherOX, Inc. -- 722,967
-------------- --------------
3,291,046 RETAIL STORES - 1.77%
-------------- Blockbuster, Inc. 224,125
MINING, STEEL, IRON & NON Neiman Marcus Group, Inc. 600,000
PRECIOUS METALS - 1.84% Olympic Sales, Inc. 743,750
Ryerson, Inc. 28,350 Rental Service Corporation 417,500
Steel Dynamics, Inc. 98,000 United Rentals, Inc. 264,875
T H I Acquisition, Inc. 1,335,338 --------------
Tube City IMS Corporation 880,000 2,250,250
-------------- --------------
2,341,688
--------------
------------------------------------------------------------------------------------------------------------------------------------
34
CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)
March 31, 2008
(Unaudited)
Fair Value/ Fair Value/
INDUSTRY CLASSIFICATION:(Continued) Market Value Market Value
-------------- --------------
TECHNOLOGY - 1.93% UTILITIES - 2.58%
Compucom Systems, Inc. $ 624,775 Dynegy Holdings, Inc. $ 892,725
EnerNOC, Inc. 267,900 Edison Mission Energy 36,050
Smart Source Holdings, Inc. 1,462,187 Inergy LP 76,688
Visa, inc. 104,515 Intergen NV 391,875
-------------- Markwest Energy Operating Co. 519,750
2,459,377 N R G Energy, Inc. 588,000
-------------- Petrohawk Energy Corporation 770,625
TELECOMMUNICATIONS - 2.49% --------------
Cincinnati Bell, Inc. 515,625 3,275,713
Intelsat Bermuda Ltd. 695,175 --------------
ITC^DeltaCom, Inc. 349,976 WASTE MANAGEMENT / POLLUTION - 2.64%
Nextel Communications, Inc. 308,000 Terra Renewal Services, Inc. 1,982,098
N T L Cable PLC 707,050 Torrent Group Holdings, Inc. 1,378,355
Rogers Wireless, Inc. 588,340 --------------
-------------- 3,360,453
3,164,166 --------------
-------------- Total Corporate Restricted and
TRANSPORTATION - 2.10% Public Securities - 100.22% $ 127,411,794
NABCO, Inc. 188,528 ==============
Tangent Rail Corporation 2,487,276
--------------
2,675,804
--------------
See Notes to Consolidated Financial Statements MassMutual Participation Investors
------------------------------------------------------------------------------------------------------------------------------------
35
1. HISTORY
MassMutual Participation Investors (the "Trust") was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.
The Trust is a diversified closed-end management investment company. Babson
Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary
of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its
investment adviser. The Trust's investment objective is to maximize total
return by providing a high level of current income, the potential for growth
of income, and capital appreciation. The Trust's principal investments are
privately placed, belowinvestment grade, long-term debt obligations purchased
directly from their issuers, which tend to be smaller companies. At least
half of these investments normally include equity features such as common
stock, warrants, conversion rights, or other equity features that provide the
Trust with the opportunity to realize capital gains. The Trust will also
invest in publicly traded debt securities (including high yield securities),
again with an emphasis on those with equity features, and in convertible
preferred stocks and, subject to certain limitations, readily marketable
equity securities. Below investment grade or high yield securities have
predominantly speculative characteristics with respect to the capacity of the
issuer to pay interest and repay principal. In addition, the Trust may
temporarily invest in high quality, readily marketable securities.
On January 27, 1998, the Board of Trustees authorized the formation of a
wholly-owned subsidiary of the Trust ("MMPI Subsidiary Trust") for the
purpose of holding certain investments. The results of the MMPI Subsidiary
Trust are consolidated in the accompanying financial statements. Footnote 2.D
below discusses the federal tax consequences of the MMPI Subsidiary Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Trust in the preparation of its consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America.
A. VALUATION OF INVESTMENTS:
Valuation of a security in the Trust's portfolio is made on the basis of the
market price whenever market quotations are readily available and all
securities of the same class held by the Trust can be readily sold in such
market.
Nearly all securities which are acquired by the Trust directly from the
issuers and shares into which such securities may be converted or which may
be purchased on the exercise of warrants attached to such securities will be
subject to legal or contractual delays in, or restrictions on, resale and
will therefore be "restricted securities." Generally speaking, as contrasted
with open-market sales of unrestricted securities, which may be effected
immediately if the market is adequate, restricted securities can be sold only
in a public offering for which a registration statement is in effect under
the Securities Act of 1933, as amended (the "1933 Act") or pursuant to a
transaction that is exempt from registration under the 1933 Act.
The value of restricted securities, and of any other assets for which there
are no reliable market quotations, is the fair value as determined in good
faith by the Trust's Board of Trustees (the "Trustees"). Each restricted
security is valued by the Trustees at the time of its acquisition and at
least quarterly thereafter. The Trustees have established guidelines to aid
in the valuation of each security. Generally, restricted securities are
initially valued at cost or less at the time of acquisition by the Trust.
Values greater or less than cost are used thereafter for restricted
securities in appropriate circumstances. Among the factors ordinarily
considered are the existence of restrictions upon the sale of a security held
by the Trust; an estimate of the existence and the extent of a market for the
security; the extent of any discount at which the security was acquired; the
estimated period of time during which the security will not be freely
marketable; the estimated expenses of registering or otherwise qualifying the
security for public sale; estimated underwriting commissions if underwriting
would be required to effect a sale; in the case of a convertible security,
whether or not it would trade on the basis of its stock equivalent; in the
case of a debt obligation which would trade independently of any equity
equivalent, the current yields on comparable securities; the estimated amount
of the floating supply of such securities available for purchase; the
proportion of the issue held by the Trust;
--------------------------------------------------------------------------------
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
changes in the financial condition and prospects of the issuer; the existence
of merger proposals or tender offers affecting the issuer; and any other
factors affecting fair value, all in accordance with the Investment Company
Act of 1940, as amended (the "1940 Act"). In making valuations, opinions of
counsel may be relied upon as to whether or not securities are restricted
securities and as to the legal requirements for public sale.
When market quotations are readily available for unrestricted securities of
an issuer, restricted securities of the same class are generally valued at a
discount from the market price of such unrestricted securities. The Trustees,
however, consider all factors in fixing any discount, including the filing of
a registration statement for such securities under the 1933 Act and any other
developments which are likely to increase the probability that the securities
may be publicly sold by the Trust without restriction.
The Trustees meet at least once in each quarter to approve the value of the
Trust's portfolio securities as of the close of business on the last business
day of the preceding quarter. This valuation requires the approval of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not interested persons of the Trust or of Babson Capital. In making
valuations, the Trustees will consider reports by Babson Capital analyzing
each portfolio security in accordance with the relevant factors referred to
above. Babson Capital has agreed to provide such reports to the Trust at
least quarterly.
The consolidated financial statements include private placement restricted
securities valued at $94,280,135 (74.16% of net assets) as of March 31, 2008
whose values have been estimated by the Trustees in the absence of readily
ascertainable market values. Due to the inherent uncertainty of valuation,
those estimated values may differ significantly from the values that would
have been used had a ready market for the securities existed, and the
differences could be material.
The values for Rule 144A restricted securities and corporate public
securities are stated at the last reported sales price or at prices based
upon quotations obtained from brokers and dealers as of March 31, 2008,
subject to discount where appropriate, and are approved by the Trustees.
Short-term securities with more than sixty days to maturity are valued at
fair value and short-term securities having a maturity of sixty days or less
are valued at amortized cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS:
Investment transactions are accounted for on the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis, including the amortization of premiums and accretion of
discounts on bonds held using the yield-to-maturity method. The Trust does
not accrue income when payment is delinquent and when management believes
payment is questionable.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
C. USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
D. FEDERAL INCOME TAXES:
The Trust has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code, and intends to maintain this qualification and to
distribute substantially all of its net taxable income to its shareholders.
In any year when net long-term capital gains are realized by the Trust,
management, after evaluating the prevailing economic conditions, will
recommend that Trustees either designate the net realized long-term gains as
undistributed and pay the federal capital gains taxes thereon, or distribute
all or a portion of such net gains.
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.
MassMutual Participation Investors
--------------------------------------------------------------------------------
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 three months ended
March 31, 2008, the MMPI Subsidiary Trust has not accrued any income tax
expense.
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An
interpretation of FASB Statement No. 109 ("FIN 48"). Management has analyzed
the Trust's tax positions taken on federal income tax returns for all open
tax years and has concluded that as of March 31, 2008, no provision for
income tax would be required in the Trust's financial statements. The Trust's
federal and state income and federal excise tax returns for tax years for
which the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
E. DISTRIBUTIONS TO SHAREHOLDERS:
The Trust records distributions to shareholders from net investment income
and net realized gains, if any, on the exdividend date. The Trust's net
investment income dividend is declared four times per year, in April, July,
October, and December. The Trust's net realized capital gain distribution, if
any, is declared in December.
F. EXPENSE REDUCTION:
Citibank, N.A. ("Citibank") serves as custodian to the Trust. Pursuant to the
custodian agreement, Citibank receives a fee reduced by credits on cash
balances the Trust maintains with Citibank. All credit balances, if any, used
to reduce the Trust's custodian fees are reported as fees paid indirectly on
the Statement of Operations. For the three months ended March 31, 2008, there
were no credit balances used to reduce custodian fees.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEE
A. SERVICES:
Under an Investment Advisory and Administrative Services Contract (the
"Contract") with the Trust, Babson Capital has agreed to use its best efforts
to present to the Trust a continuing and suitable investment program
consistent with the investment objectives and policies of the Trust. Babson
Capital represents the Trust in any negotiations with issuers, investment
banking firms, securities brokers or dealers and other institutions or
investors relating to the Trust's investments. Under the Contract, Babson
Capital also provides administration of the day-to-day operations of the
Trust and provides the Trust with office space and office equipment,
accounting and bookkeeping services, and necessary executive, clerical and
secretarial personnel for the performance of the foregoing services.
B. FEE:
For its services under the Contract, Babson Capital is paid a quarterly
investment advisory fee equal to .225% of the value of the Trust's net assets
as of the last business day of each fiscal quarter, an amount approximately
equivalent to .90% on an annual basis. A majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or of
Babson Capital, approve the valuation of the Trust's net assets as of such
day.
4. SENIOR SECURED INDEBTEDNESS
A. NOTE PAYABLE:
MassMutual holds the Trust's $12,000,000 Senior Fixed Rate Convertible Note
(the "Note") issued by the Trust in 1995. The Note, as amended, is due
December 13, 2011 and accrues interest at 5.80% per annum. MassMutual, at its
option, can convert the principal amount of the Note into common shares. The
dollar amount of principal would be converted into an equivalent dollar
amount of common shares based upon the average price of the common shares for
ten business days prior to the notice of conversion. For the three months
ended March 31, 2008, the Trust incurred total interest expense on the Note
of $174,000.
--------------------------------------------------------------------------------
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Trust may redeem the Note, in whole or in part, at the principal amount
proposed to be redeemed together with the accrued and unpaid interest thereon
through the redemption date plus a Make Whole Premium. The Make Whole Premium
equals the excess of (i) the present value of the scheduled payments of
principal and interest which the Trust would have paid but for the proposed
redemption, discounted at the rate of interest of U.S. Treasury obligations
whose maturity approximates that of the Note plus 0.50% over (ii) the
principal of the Note proposed to be redeemed.
B. REVOLVING CREDIT AGREEMENT:
The Trust entered into a $15,000,000 Revolving Credit Agreement with Bank of
America N.A. (the "Agent Bank") dated May 29, 1997, which had a stated
maturity date of May 31, 2004, (the maturity date was later extended to May
31, 2007 pursuant to the First Amended and Restated Revolving Credit
Agreement). On May 31, 2007, the maturity date of this loan was extended to
May 30, 2008, and its terms were amended and restated pursuant to the First
Amendment to the First Amended and Restated Revolving Credit Agreement (the
"Revolver"), between the Trust and the Agent Bank.
The Revolver bears interest payable quarterly in arrears at a per annum rate
that varies depending upon whether the Trust requests a Base Rate Loan or
Eurodollar Base Rate Loan. Interest on Base Rate loans equals the higher of:
(i) the annual "Base Rate" as set periodically by the Agent Bank and (ii) the
most recent Federal Funds Effective Rate plus .50% per annum. Per annum
interest on Eurodollar Base Rate Loans equals .35% plus the British Bankers
Association LIBOR rate, divided by 1 minus the Eurodollar Reserve Percentage.
The Trust also incurs expense on the undrawn portion of the total Revolver at
the amended rate of .10% per annum.
As of March 31, 2008, there were no outstanding loans against the Revolver.
For the three months ended March 31, 2008, the Trust incurred expense on the
Revolver of $3,740 related to the undrawn portion.
5. PURCHASES AND SALES OF INVESTMENTS
FOR THE THREE
MONTHS ENDED
3/31/2008
COST OF PROCEEDS FROM
INVESTMENTS SALES OR
ACQUIRED MATURITIES
-------- ----------
Corporate restricted securities $ 6,898,997 $ 6,844,331
Corporate public securities 819,805 3,357,887
The aggregate cost of investments is substantially the same for financial
reporting and federal income tax purposes as of March 31, 2008. The net
unrealized depreciation of investments for financial reporting and federal
tax purposes as of March 31, 2008 is $4,325,503 and consists of $10,885,400
appreciation and $15,210,903 depreciation.
6. FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Trust adopted FASB Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157
clarifies the definition of fair value, establishes a framework for measuring
fair values and requires additional disclosures about the use of fair value
measurements. FAS 157 requires companies to provide expanded information
about the assets and liabilities measured at fair value and the potential
effect of these fair valuations of an entity's financial performance.
Various inputs are used in determining the value of the Trust's investments.
Using the hierarchy established under FAS 157, these inputs are summarized in
the three broad levels listed below:
Level 1: quoted prices in active markets for identical securities
Level 2: other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayments speeds, credit
risk, etc.)
Level 3: significant unobservable inputs (including the Trust's own
assumptions in determining the fair value of investments)
MassMutual Participation Investors
--------------------------------------------------------------------------------
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The inputs and methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Trust's net assets
as of March 31, 2008:
ASSETS TOTAL LEVEL 1 LEVEL 2 LEVEL 3
-----------------------------------------------------------------------------
Private Securities $ 99,255,482 $ 407,797 $ 4,567,550 $94,280,135
Public Securities 28,156,312 1,053,603 27,102,709 --
Short-term Securities 8,301,598 -- 8,301,598 --
-----------------------------------------------------------------------------
TOTAL $135,713,392 $1,461,400 $39,971,857 $94,280,135
Following is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value:
PRIVATE PUBLIC SHORT-TERM
ASSETS SECURITIES SECURITIES SECURITIES TOTAL
-----------------------------------------------------------------------------
Beginning balance
at 12/31/2007 $ 94,083,138 $ -- $ -- $ 94,083,138
Total Gains or Losses
(realized/unrealized)
included in earnings* (242,584) -- -- (242,584)
Purchases, sales,
issuances & settlements
(net) 439,581 -- -- 439,581
-----------------------------------------------------------------------------
ENDING BALANCE
AT 3/31/08 $ 94,280,135 $ -- $ -- $ 94,280,135
* The amount of total gains or losses for the period included in earnings
attributable to the change in unrealized gains or losses relating to level 3
assets still held at 3/31/08 is $(638,981).
--------------------------------------------------------------------------------
40
MEMBERS OF THE BOARD OF
TRUSTEES
Donald Glickman
Robert E. Joyal
William J. Barrett
Michael H. Brown
Donald E. Benson*
Dr. Corine T. Norgaard*
Roger W. Crandall
Martin T. Hart*
Maleyne M. Syracuse
*Member of the Audit Committee
OFFICERS
Roger W. Crandall
Chairman
Clifford M. Noreen
President
James M. Roy
Vice President & Chief
Financial Officer
Rodney J. Dillman
Vice President, Secretary
& Chief Legal Officer
Jill A. Fields
Vice President
Michael P. Hermsen
Vice President
Mary Wilson Kibbe
Vice President
Michael L. Klofas
Vice President
Richard E. Spencer, II
Vice President
Ronald S. Talaia
Treasurer
John T. Davitt, Jr.
Comptroller
Melissa M. LaGrant
Chief Compliance Officer
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MassMutual Participation Investors offers a Dividend Reinvestment and Cash
Purchase Plan. The Plan provides a simple and automatic way for shareholders to
add to their holdings in the Trust through the receipt of dividend shares issued
by the Trust or through the reinvestment of cash dividends in Trust shares
purchased in the open market. The dividends of each shareholder will be
automatically reinvested in the Trust by Shareholder Financial Services Inc.,
the Transfer Agent, in accordance with the Plan, unless such shareholder elects
not to participate by providing written notice to the Transfer Agent. A
shareholder may terminate his or her participation by notifying the Transfer
Agent in writing.
Participating shareholders may also make additional contributions to the Plan
from their own funds. Such contributions may be made by personal check or other
means in an amount not less than $100 nor more than $5,000 per quarter. Cash
contributions must be received by the Transfer Agent at least five days (but no
more then 30 days) before the payment date of a dividend or distributions. Cash
contributions must be received by the Transfer Agent at least five days (but no
more then 30 days) before the payment date of a dividend or distributions.
Whenever the Trust declares a dividend payable in cash or shares, the Transfer
Agent, acting on behalf of each participating shareholder, will take the
dividend in shares only if the net asset value is lower than the market price
plus an estimated brokerage commission as of the close of business on the
valuation day. The valuation day is the last day preceding the day of dividend
payment. When the dividend is to be taken in shares, the number of shares to be
received is determined by dividing the cash dividend by the net asset value as
of the close of business on the valuation date or, if greater than net asset
value, 95% of the closing share price. If the net asset value of the shares is
higher than the market value plus an estimated commission, the Transfer Agent,
consistent with obtaining the best price and execution, will buy shares on the
open market at current prices promptly after the dividend payment date.
The reinvestment of dividends does not, in anyway, relieve participating
shareholders of any federal, state or local tax. For federal income tax
purposes, the amount reportable in respect of a dividend received in
newly-issued shares of the Trust will be the fair market value of the shares
received, which will be reportable as ordinary income and/or capital gains.
As compensation for its services, the Transfer Agent receives a fee of 5% of any
dividend and cash contribution (in no event in excess of $2.50 per distribution
per shareholder.)
Any questions regarding the Plan should be addressed to Shareholder Financial
Services, Inc., Agent for MassMutual Participation Investors' Dividend
Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver, CO 80217-3673.
MassMutual Participation Investors
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