N-CSRS 1 form-ncsrs_16064.txt MASSMUTUAL PARTICIPATION INVESTORS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5531 --------------------------------------------- MassMutual Participation Investors -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1500 Main Street, Suite 600, Springfield, MA 01115-5189 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Rodney J. Dillman, Vice President and Secretary 1500 Main Street, Suite 2800, Springfield, MA 01115-5189 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 413-226-1000 ---------------------------- Date of fiscal year end: 12/31 ------------------ Date of reporting period: 6/30/08 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORT TO STOCKHOLDERS. Attached hereto is the semi-annual shareholder report transmitted to shareholders pursuant to Rule 30e-1 of the Investment Company Act of 1940, as amended. MASSMUTUAL PARTICIPATION INVESTORS REPORT FOR THE SIX MONTHS ENDED JUNE 30, 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. MassMutual Participation Investors P.O. Box 173673 c/o Babson Capital Management LLC Denver, Colorado 80217-3673 [LOGO] 1500 Main Street, Suite 600 1-800-647-7374 Springfield, Massachusetts 01115 (413) 226-1516 INTERNET WEBSITE www.babsoncapital.com/mpv -------------------------------------------------------------------------------- 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 MassMutual Participation Investors July 31, 2008 We are pleased to present the June 30, 2008 Quarterly Report of MassMutual Participation Investors (the "Trust"). The Board of Trustees declared a quarterly dividend of 25 cents per share, payable on August 15, 2008 to shareholders of record on August 1, 2008. The Trust had previously paid a 25 cent per share dividend for the preceding quarter. The mezzanine and private equity markets in which the Trust participates have begun to recover from the effects of the credit dislocation that occurred in 2007. Deal volume has rebounded over the past few months as credit continues to be available for middle market leveraged transactions. In the current market, new investments are being structured with lower leverage than they were in 2007, while pricing on these investments is more favorable than it has been for several years. During the quarter, the Trust made private placement investments in two new issuers and two "follow-on" investments, totaling approximately $2.6 million. The follow-on investments purchased by the Trust were American Hospice Management Holding LLC and Fuel Systems Holding Corporation. The two new issuers were A W X Holdings Corporation and GQ Holdings LLC. The weighted average coupon of these investments was 13.31%. (A brief description of these investments can be found in the Consolidated Schedule of Investments.) During the quarter ended June 30, 2008, net assets of the Trust decreased to $125,650,592 or $12.68 per share compared to $127,127,512 or $12.85 per share on March 31, 2008, which translates into a 0.61% total return for the quarter, based on the change in the Trust's net assets assuming the reinvestment of all dividends. Longer term, the Trust returned 6.01%, 17.69%, and 12.21% 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 23 cents per share of net investment income for the quarter, compared to 26 cents per share in the previous quarter. U.S. equity markets, as approximated by the Russell 2000 Index, increased 0.58% for the quarter. U.S. fixed income markets, as approximated by the Lehman Brothers U.S. Corporate High Yield Index increased 1.76% for the quarter. During the quarter ended June 30, 2008, the market price of the Trust decreased 3.4% from $13.65 per share to $13.19 per share. The Trust's market price of $13.19 per share equated to a 4.0% premium over the June 30, 2008 net asset value per share. The Trust's average quarter-end premium for the 3-, 5-, and 10-year periods was 11.1%, 10.6% and 6.4%, respectively. Thank you for your continued interest in and support of MassMutual Participation Investors. Sincerely, /s/ Clifford M. Noreen Clifford M. Noreen President Portfolio Composition as of 6/30/08 * [PIE CHART APPEARS HERE] Public High Yield Debt 18.6% Private Investment Grade Debt 0.8% Public Equity 0.8% Private / Restricted Equity 13.8% Private / 144A High Yield Debt 57.2% Cash & Short Term Investments 8.8% *Based on market value of total investments Cautionary Notice: Certain statements contained in this report may be "forward looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. These statements are subject to change at any time based upon economic, market or other conditions and may not be relied upon as investment advice or an indication of the Trust's trading intent. References to specific securities are not recommendations of such securities, and may not be representative of the Trust's current or future investments. We undertake no obligation to publicly update forward looking statements, whether as a result of new information, future events, or otherwise. -------------------------------------------------------------------------------- 1 CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) ASSETS: Investments (See Consolidated Schedule of Investments) Corporate restricted securities at fair value (Cost - $98,510,329) $ 93,969,644 Corporate public securities at market value (Cost - $28,489,599) 25,816,933 Short-term securities at amortized cost 10,676,366 ------------- 130,462,943 Cash 965,874 Interest receivable 2,799,003 Receivable for investments sold 3,898,548 Other assets 12,594 ------------- TOTAL ASSETS 138,138,962 ------------- LIABILITIES: Investment advisory fee payable 282,714 Note payable 12,000,000 Interest payable 88,933 Accrued expenses 116,723 ------------- TOTAL LIABILITIES 12,488,370 ------------- TOTAL NET ASSETS $ 125,650,592 ============= NET ASSETS: Common shares, par value $.01 per share; an unlimited number authorized $ 99,112 Additional paid-in capital 92,387,793 Retained net realized gain on investments, prior years 32,808,045 Undistributed net investment income 3,395,923 Accumulated net realized gain on investments 4,173,070 Net unrealized depreciation of investments (7,213,351) ------------- TOTAL NET ASSETS $ 125,650,592 ============= COMMON SHARES ISSUED AND OUTSTANDING 9,911,164 ============= NET ASSET VALUE PER SHARE $ 12.68 ============= See Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 2 CONSOLIDATED STATEMENT OF OPERATIONS MassMutual Participation Investors FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) INVESTMENT INCOME: Interest $ 5,917,602 Dividends 105,447 Other 39,136 ------------- Total investment income 6,062,185 ------------- EXPENSES: Investment advisory fees 568,751 Interest 354,229 Trustees' fees and expenses 84,000 Professional fees 78,200 Reports to shareholders 54,000 Custodian fees 13,957 Transfer agent/registrar's expenses 12,000 Other 18,590 ------------- TOTAL EXPENSES 1,183,727 ------------- INVESTMENT INCOME - NET 4,878,458 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments before taxes 3,776,610 Income tax expense (87,118) ------------- Net realized gain on investments 3,689,492 Net change in unrealized appreciation of investments (7,715,271) ------------- NET LOSS ON INVESTMENTS (4,025,779) ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 852,679 ============= See Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 3 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) NET DECREASE IN CASH: Cash flows from operating activities: Purchases/Proceeds/Maturities from short-term portfolio securities, net $ (3,007,925) Purchases of portfolio securities (12,517,455) Proceeds from disposition of portfolio securities 18,200,873 Interest, dividends and other received 6,050,920 Interest expense paid (358,051) Operating expenses paid (830,625) Income taxes paid (842,710) ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,695,027 ------------- Cash flows from financing activities: Cash dividends paid from net investment income (7,216,891) Cash dividends paid from net realized gain on investments (187,646) Receipts for shares issued on reinvestment of dividends 646,310 ------------- NET CASH USED FOR FINANCING ACTIVITIES (6,758,227) ------------- NET DECREASE IN CASH (63,200) Cash - beginning of year 1,029,074 ------------- CASH - END OF PERIOD $ 965,874 ============= RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 852,679 ------------- Decrease in investments 9,376,837 Decrease in interest receivable 194,438 Increase in receivable for investments sold (2,943,196) Increase in other assets (12,594) Decrease in investment advisory fee payable (2,193) Decrease in interest payable (3,822) Decrease in accrued expenses (8,392) Decrease in accrued taxes payable (755,592) Decrease in other payables (3,138) ------------- TOTAL ADJUSTMENTS TO NET ASSETS FROM OPERATIONS 5,842,348 ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,695,027 ============= See Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 4 CONSOLIDATED STATEMENTS OF CHANGES MassMutual Participation Investors IN NET ASSETS For the six months ended For the 06/30/08 year ended (Unaudited) 12/31/07 ----------- -------- (DECREASE) INCREASE IN NET ASSETS: Operations: Investment income - net $ 4,878,458 $ 12,057,960 Net realized gain on investments 3,689,492 1,184,026 Net change in unrealized appreciation of investments (7,715,271) (1,644,141) ------------- ------------- Net increase in net assets resulting from operations 852,679 11,597,845 Increase from common shares issued on reinvestment of dividends Common shares issued (2008 - 49,553; 2007 - 56,329) 646,310 828,061 Dividends to shareholders from: Net investment income (2008 - $0.25 per share; 2007 - $1.23 per share) (2,473,731) (12,127,939) Net realized gains on investments (2007 - $0.02 per share) -- (187,646) ------------- ------------- TOTAL (DECREASE) INCREASE IN NET ASSETS (974,742) 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 $3,395,923 and $991,196, respectively) $ 125,650,592 $ 126,625,334 ============= ============= See Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 5 CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING:

For the six months For the years ended December 31, ended 06/30/2008 -------------------------------------------------- (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) 0.49 1.23 1.10 0.99 1.00 0.80 Net realized and unrealized gain (loss) on investments (0.41) (0.05) 0.77 1.09(b) 1.36 1.21 ------- ------- ------- ------- ------- ------- Total from investment operations 0.08 1.18 1.87 2.08 2.36 2.01 ------- ------- ------- ------- ------- ------- Dividends from net investment income to common shareholders (0.25) (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 (0.24) (1.24) (1.18) (1.00) (1.07) (0.95) ------- ------- ------- ------- ------- ------- Net asset value: End of period/year $ 12.68 $ 12.84 $ 12.90 $ 12.21 $ 11.13 $ 9.84 ------- ------- ------- ------- ------- ------- Per share market value: End of period/year $ 13.19 $ 13.18 $ 14.70 $ 14.05 $ 13.31 $ 11.65 ======= ======= ======= ======= ======= ======= Total investment return Market value 1.97% (1.30%) 16.81% 17.25% 25.77% 35.50% Net asset value (c) 0.69% 9.95% 18.64% 22.51% 25.14% 23.72% Net assets (in millions): End of period/year $125.65 $126.23 $126.52 $119.02 $107.61 $ 94.40 Ratio of operating expenses to average net assets 1.32%(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) 0.14%(d) 0.48% 2.68% 2.83% 0.16% -- Ratio of total expenses before custodian fee reduction to average net assets (e) 2.02%(d) 2.40% 4.46% 5.12% 2.68% 2.62% Ratio of net expenses after custodian fee reduction to average net assets (e) 2.02%(d) 2.40% 4.42% 5.08% 2.68% 2.62% Ratio of net investment income to average net assets 7.76%(d) 9.32% 8.43% 8.45% 9.60% 8.55% Portfolio turnover 10% 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 $11,471 $11,552 $11,543 $10,918 $5,783 $ 5,195

See Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 6 CONSOLIDATED SCHEDULE OF INVESTMENTS MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES - 74.78%:(A) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- PRIVATE PLACEMENT INVESTMENTS - 71.22% 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 $ 1,244,460 11/21/07 $ 1,219,601 $ 1,208,697 Limited Partnership Interest (B) 7.93% int. 11/21/07 119,009 113,060 ------------- ------------- 1,338,610 1,321,757 ------------- ------------- 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 -- 9,158 Warrant, exercisable until 2012, to purchase common stock at $.02 per share (B) 1,230 shs. 04/08/04 -- 210,521 ------------- ------------- 1,125,000 1,344,679 ------------- ------------- A W X HOLDINGS CORPORATION A provider of aerial equipment rental, sales and repair services to non-residential construction and maintenance contractors operating in the State of Indiana. 10.5% Senior Secured Term Note due 2014 $ 420,000 05/15/08 411,600 418,272 13% Senior Subordinated Note due 2015 $ 420,000 05/15/08 376,282 416,983 Common Stock (B) 60,000 shs. 05/15/08 60,000 57,000 Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B) 21,099 shs. 05/15/08 35,654 211 ------------- ------------- 883,536 892,466 ------------- ------------- ADVANCED TECHNOLOGIES HOLDINGS A provider of factory maintenance services to industrial companies. 15% Senior Subordinated Note due 2013 $ 1,080,460 12/27/07 1,066,743 1,068,019 Preferred Stock (B) 546 shs. 12/27/07 270,000 256,501 ------------- ------------- 1,336,743 1,324,520 ------------- ------------- AERO HOLDINGS, INC. A provider of geospatial services to corporate and government clients. 10.5% Senior Secured Term Note due 2014 $ 930,000 03/09/07 916,050 895,014 14% Senior Subordinated Note due 2015 $ 720,000 03/09/07 648,598 687,474 Common Stock (B) 150,000 shs. 03/09/07 150,000 127,246 Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B) 37,780 shs. 03/09/07 63,730 32,049 ------------- ------------- 1,778,378 1,741,783 ------------- ------------- --------------------------------------------------------------------------------------------------------------------------------- 7

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- AMERICAN HOSPICE MANAGEMENT HOLDING LLC A for-profit hospice care provider in the United States. 12% Senior Subordinated Note due 2013 $ 1,125,000 01/22/04 $ 1,055,949 $ 1,075,960 12% Senior Subordinated Note due 2013 $ 562,503 06/09/08 551,253 559,629 Preferred Class A Unit (B) 1,706 uts. * 170,600 68,240 Preferred Class B Unit (B) 808 uts. 06/09/08 80,789 80,798 Common Class B Unit (B) 16,100 uts. 01/22/04 1 -- Common Class D Unit (B) 3,690 uts. 09/12/06 -- -- ------------- ------------- 1,858,592 1,784,627 ------------- ------------- 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 05/18/05 822,201 814,299 Common Stock (B) 263 shs. 05/18/05 263,298 45,497 Warrant, exercisable until 2012, to purchase common stock at $.01 per share (B) 69 shs. 05/18/05 59,362 11,928 ------------- ------------- 1,144,861 871,724 ------------- ------------- 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 1,142,813 1,219,981 Preferred Stock Class A (B) 465 shs. 06/30/06 141,946 141,377 Common Stock (B) 1 sh. 06/30/06 152 -- Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 164 shs. 06/30/06 48,760 49,685 ------------- ------------- 1,333,671 1,411,043 ------------- ------------- CAPESUCCESS LLC A provider of diversified staffing services. Preferred Membership Interests (B) 806 uts. 04/29/00 3,598 -- Common Membership Interests (B) 10,421 uts. 04/29/00 46,706 -- ------------- ------------- 50,304 -- ------------- ------------- CAPITAL SPECIALTY PLASTICS, INC. A producer of desiccant strips used for packaging pharmaceutical products. Common Stock (B) 55 shs. ** 252 279,466 ------------- ------------- * 01/22/04 and 09/12/06. ** 12/30/97 and 05/29/99. --------------------------------------------------------------------------------------------------------------------------------- 8

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- COEUR, INC. A producer of proprietary, disposable power injection syringes. 8.75% Senior Secured Term Note due 2010 $ 141,304 04/30/03 $ 141,304 $ 141,761 11.5% Senior Subordinated Note due 2011 $ 242,754 04/30/03 231,575 240,418 Common Stock (B) 72,464 shs. 04/30/03 72,463 172,102 Warrant, exercisable until 2010, to purchase common stock at $.01 per share (B) 50,099 shs. 04/30/03 23,317 118,985 ------------- ------------- 468,659 673,266 ------------- ------------- 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 1,115,744 Limited Liability Company Unit Class A (B) 82,613 uts. 01/12/07 82,613 11,999 Limited Liability Company Unit Class C (B) 59,756 uts. 01/12/07 59,756 8,680 ------------- ------------- 1,324,652 1,136,423 ------------- ------------- 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 ------------- ------------- 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 1,293,920 1,333,643 Warrant, exercisable until 2013, to purchase common stock at $.001 per share (B) 10 shs. 08/04/05 72,617 53,882 ------------- ------------- 1,366,537 1,387,525 ------------- ------------- 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 10/30/06 920,768 988,544 Limited Partnership Interest (B) 0.97% int. 10/30/06 371,739 690,164 Warrant, exercisable until 2014, to purchase preferred stock at $.01 per share (B) 26 shs. 10/30/06 26,380 30,487 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 18 shs. 10/30/06 18,000 68,904 ------------- ------------- 1,336,887 1,778,099 ------------- ------------- * 08/12/04 and 01/14/05. --------------------------------------------------------------------------------------------------------------------------------- 9

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 1,392,067 751,555 Warrants, exercisable until 2011, to purchase common stock of DHI Holdings, Inc. at $.01 per share (B) 6,676 shs. * 201,655 -- ------------- ------------- 1,960,217 751,555 ------------- ------------- DUNCAN SYSTEMS, INC. A distributor of windshields and side glass for the recreational vehicle market. 10% Senior Secured Term Note due 2013 $ 308,571 11/01/06 303,942 302,203 13% Senior Subordinated Note due 2014 $ 488,572 11/01/06 439,999 475,698 Common Stock (B) 102,857 shs. 11/01/06 102,857 120,230 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 32,294 shs. 11/01/06 44,663 37,749 ------------- ------------- 891,461 935,880 ------------- ------------- DWYER GROUP, INC. A franchiser of a variety of home repair services. Common Stock (B) 3,656 shs. ** 365,600 585,690 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 1,077 shs. 10/30/03 98,719 172,472 ------------- ------------- 464,319 758,162 ------------- ------------- 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 $ 1,180,784 01/08/08 1,160,178 1,151,716 Common Stock (B) 349 shs. 01/08/08 174,701 165,775 ------------- ------------- 1,334,879 1,317,491 ------------- ------------- E X C ACQUISITION CORPORATION A manufacturer of pre-filled syringes and pump systems used for intravenous drug delivery. Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 11 shs. 06/28/04 40,875 97,897 ------------- ------------- * 10/24/96 and 08/28/98. ** 10/30/03 and 01/02/04. --------------------------------------------------------------------------------------------------------------------------------- 10

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- ELECTRA BICYCLE COMPANY LLC A designer and marketer of branded leisure bicycles. 10.5% Senior Secured Term Note A due 2009 $ 36,437 04/12/07 $ 35,709 $ 36,317 10.5% Senior Secured Term Note B due 2012 $ 377,126 04/12/07 371,400 373,825 12% Senior Secured Term Note C due 2012 $ 291,498 04/12/07 271,410 286,699 Limited Liability Company Unit Series F 36,913 uts. 04/12/07 36,913 84,425 Limited Liability Company Unit Series G 2,852 uts. 04/12/07 2,852 6,523 ------------- ------------- 718,284 787,789 ------------- ------------- ENZYMATIC THERAPY, INC. A manufacturer and distributor of branded natural medicines and nutritional supplements. Limited Partnership Interest (B) 0.70% int. 03/30/00 281,250 168,622 Warrant, exercisable until 2009, to purchase common stock at $.01 per share (B) 15,415 shs. 03/30/00 135,000 105,833 ------------- ------------- 416,250 274,455 ------------- ------------- EVANS CONSOLES, INC. A designer and manufacturer of consoles and control center systems. Common Stock (B) 45,000 shs. 05/06/04 6 462,983 ------------- ------------- 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 1,187,405 1,265,625 Preferred Unit (B) 84 uts. 06/01/06 84,368 99,498 Common Unit Class B (B) 734 shs. 06/01/06 64,779 -- ------------- ------------- 1,336,552 1,365,123 ------------- ------------- 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 04/13/06 516,919 495,493 14% Senior Subordinated Note due 2014 $ 317,177 04/13/06 287,906 299,187 Common Stock (B) 62,535 shs. 04/13/06 62,535 -- Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 17,680 shs. 04/13/06 27,676 -- ------------- ------------- 895,036 794,680 ------------- ------------- 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 1,150,084 1,149,419 Common Stock (B) 98 shs. 02/03/06 97,826 23,193 Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 135 shs. 02/03/06 110,348 31,905 ------------- ------------- 1,358,258 1,204,517 ------------- ------------- --------------------------------------------------------------------------------------------------------------------------------- 11

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 $ 1,162,144 $ 928,125 Preferred Stock (B) 16,792 shs. 06/12/08 16,792 8,396 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 -- ------------- ------------- 1,354,549 936,521 ------------- ------------- GOLDEN COUNTY FOODS HOLDING, INC. A manufacturer of frozen appetizers and snacks. 12% Senior Subordinated Note due 2015 $ 1,012,500 11/01/07 914,607 980,700 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 1,054,461 ------------- ------------- GQ HOLDINGS LLC A developer and distributor of tools, equipment, and supplies to the natural and engineered stone industry. 15% Senior Subordinated Note due 2015 $ 1,217,159 06/27/08 1,192,816 1,219,227 Common Stock (B) 3,867 shs. 06/27/08 132,841 126,197 ------------- ------------- 1,325,657 1,345,424 ------------- ------------- 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) 21 shs. * 21,428 -- 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 -- ------------- ------------- 1,348,028 -- ------------- ------------- 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 ** 1,007,958 1,052,323 Common Stock (B) 33 shs. ** 33,216 35,232 Warrant, exercisable until 2012, to purchase common stock at $.02 per share (B) 106 shs. ** 105,618 112,018 ------------- ------------- 1,146,792 1,199,573 ------------- ------------- * 09/18/07 and 06/27/08. ** 06/30/04 and 08/19/04. --------------------------------------------------------------------------------------------------------------------------------- 12

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 $ 41,987 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 11 shs. 02/27/07 324 12,369 ------------- ------------- 1,424 54,356 ------------- ------------- 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 08/04/00 487,161 497,687 Limited Partnership Interest of Saw Mill Capital Fund II, L.P. (B) 1.30% int. 08/03/00 469,245 187,824 Warrant, exercisable until 2010, to purchase common stock at $.01 per share (B) 26,931 shs. 08/04/00 61,101 37,720 ------------- ------------- 1,017,507 723,231 ------------- ------------- JUSTRITE MANUFACTURING ACQUISITION CO. A manufacturer of safety products such as storage cabinets and containers. 12% Senior Subordinated Note due 2011 $ 843,750 12/15/04 809,870 840,461 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 594 shs. 12/15/04 53,528 134,214 ------------- ------------- 863,398 974,675 ------------- ------------- 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 $ 1,244,572 10/15/07 1,219,824 1,232,098 Common Stock (B) 116,827 shs. 10/15/07 116,827 110,986 ------------- ------------- 1,336,651 1,343,084 ------------- ------------- K N B HOLDINGS CORPORATION A designer, manufacturer and marketer of products for the custom framing market. 13.5% Senior Subordinated Note due 2013 $ 1,314,869 05/25/06 1,259,235 1,302,963 Common Stock (B) 71,053 shs. 05/25/06 71,053 66,449 Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 43,600 shs. 05/25/06 37,871 40,775 ------------- ------------- 1,368,159 1,410,187 ------------- ------------- --------------------------------------------------------------------------------------------------------------------------------- 13

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 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 $ 1,127,298 $ 1,134,002 Common Stock (B) 123 shs. 03/13/07 123,000 70,810 Warrant, exercisable until 2017, to purchase common stock at $.01 per share (B) 89 shs. 03/14/07 85,890 51,237 ------------- ------------- 1,336,188 1,256,049 ------------- ------------- 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 $ 1,163,636 12/20/07 1,142,650 1,128,363 Preferred Stock (B) 192,314 shs. 12/20/07 192,314 182,698 Common Stock (B) 54,326 shs. 12/20/07 543 543 ------------- ------------- 1,335,507 1,311,604 ------------- ------------- 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 05/04/07 483,072 508,085 Limited Liability Company Unit (B) 12,763 uts. * 166,481 174,214 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 1,787 shs. 05/04/07 22,781 25,675 ------------- ------------- 672,334 707,974 ------------- ------------- MAVERICK ACQUISITION COMPANY A manufacturer of capsules that cover the cork and neck of wine bottles. 7.19% Senior Secured Tranche A Note due 2010 (C) $ 232,695 09/03/04 232,695 229,334 12% Senior Secured Tranche B Note due 2011 $ 179,104 09/03/04 165,842 169,780 Limited Partnership Interest (B) 4.48% int. 09/03/04 33,582 21,704 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 243 shs. 09/03/04 22,556 15,682 ------------- ------------- 454,675 436,500 ------------- ------------- 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 ** 1,349,926 1,406,725 Common Stock (B) 238 shs. ** 238,000 292,372 Warrant, exercisable until 2013, to purchase common stock at $.02 per share (B) 87 shs. ** 86,281 106,642 ------------- ------------- 1,674,207 1,805,739 ------------- ------------- * 05/04/07 and 01/02/08. ** 08/12/05 and 09/11/06. --------------------------------------------------------------------------------------------------------------------------------- 14

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- MOMENTUM HOLDING CO. A designer and supplier of upholstery fabric to commercial furniture manufacturers and architectural and design firms. 12% Senior Subordinated Note due 2014 $ 618,802 08/04/06 $ 557,982 $ 620,378 Limited Partnership Interest (B) 11.24% int. 08/04/06 56,198 106,703 Warrant, exercisable until 2014, to purchase common stock at $.02 per share (B) 586 shs. 08/04/06 56,705 111,226 ------------- ------------- 670,885 838,307 ------------- ------------- 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 (D) $ 1,350,000 03/31/06 1,249,875 1,215,000 Warrant, exercisable until 2014, to purchase common stock at $.02 per share (B) 81 shs. 03/31/06 73,125 -- ------------- ------------- 1,323,000 1,215,000 ------------- ------------- MORTON INDUSTRIAL GROUP, INC. A manufacturer of highly engineered metal fabricated components. 12% Senior Subordinated Note due 2014 (D) $ 1,292,246 08/25/06 1,187,021 1,163,021 30% Series A Preferred Stock (B) 9,027 shs. 03/03/08 9,027 8,124 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 -- ------------- ------------- 1,333,182 1,171,145 ------------- ------------- 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. * 199,301 664,620 Warrant, exercisable until 2010, to purchase common stock at $.01 per share (B) 122 shs. 12/21/05 20,941 40,689 ------------- ------------- 220,242 705,309 ------------- ------------- NABCO, INC. A producer of explosive containment vessels in the United States. 14% Senior Subordinated Note due 2014 $ 377,057 02/24/06 339,804 188,528 Limited Liability Company Unit (B) 437 uts. ** 436,984 -- Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B) 68 shs. 02/24/06 19,687 -- ------------- ------------- 796,475 188,528 ------------- ------------- * 09/20/00, 05/23/02 and 02/21/07. ** 02/24/06 and 06/22/07. --------------------------------------------------------------------------------------------------------------------------------- 15

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 (D) $ 705,457 05/28/04 $ 630,721 $ 352,729 8.75% Senior Secured Note due 2011 $ 327,478 05/28/04 327,478 320,277 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 -- ------------- ------------- 1,418,168 673,006 ------------- ------------- 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 1,129,227 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 1,343,609 ------------- ------------- 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 02/02/07 745,713 749,479 Limited Partnership Interest of Saw Mill PCG Partners LLC (B) 540 uts. 02/01/07 540,000 182,464 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 48 shs. 02/02/07 48,087 16,249 ------------- ------------- 1,333,800 948,192 ------------- ------------- 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 01/28/02 814,200 642,857 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 -- ------------- ------------- 1,549,654 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 $ 298,260 01/03/06 293,786 286,597 13% Senior Subordinated Note due 2013 $ 392,709 01/03/06 356,620 371,602 Common Stock (B) 184,176 shs. 01/03/06 184,176 -- Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 43,073 shs. 01/03/06 35,900 -- ------------- ------------- 870,482 658,199 ------------- ------------- --------------------------------------------------------------------------------------------------------------------------------- 16

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 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 (D) $ 511,000 08/07/98 $ 511,000 $ 229,950 12% Senior Subordinated Note due 2008 (D) $ 244,154 02/09/00 213,313 109,869 Limited Partnership Interest of Riverside VIII, VIII-A and VIII-B Holding Company, L.P. 10.66% int. * 808,386 -- Warrants, exercisable until 2008, to purchase common stock at $.01 per share (B) 15,166 shs. ** 206,041 -- ------------- ------------- 1,738,740 339,819 ------------- ------------- 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. 01/17/06 302,885 570,665 Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 328 shs. 01/17/06 90,424 96,349 ------------- ------------- 393,309 667,014 ------------- ------------- 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 $ 1,188,263 07/03/06 1,134,521 1,177,942 Preferred Unit (B) 202 uts. 07/03/06 202,320 237,524 Preferred Unit (B) 36 uts. 07/03/06 36,420 42,757 Common Unit Class I (B) 78 uts. 07/03/06 -- -- Common Unit Class L (B) 17 uts. 07/03/06 -- -- ------------- ------------- 1,373,261 1,458,223 ------------- ------------- 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 1,145,787 1,220,182 Preferred Stock (B) 19 shs. 03/31/06 174,492 204,305 Common Stock (B) 12 shs. 03/31/06 13,500 36,060 Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 7 shs. 03/31/06 5,888 20,983 ------------- ------------- 1,339,667 1,481,530 ------------- ------------- 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 04/27/07 636,556 644,524 Limited Liability Company Unit (B) 928,962 uts. 04/27/07 33,477 -- ------------- ------------- 670,033 644,524 ------------- ------------- * 08/07/98, 02/23/99, 12/22/99 and 02/25/03. ** 08/07/98 and 02/29/00. --------------------------------------------------------------------------------------------------------------------------------- 17

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 $ 1,059,732 $ 1,091,346 Membership Interests of MM/Lincap PPI Investments, Inc., LLC (B) 1.28% int. 12/21/00 140,625 -- ------------- ------------- 1,200,357 1,091,346 ------------- ------------- POSTLE ALUMINUM COMPANY LLC A manufacturer and distributor of aluminum extruded products. 12% Senior Subordinated Note due 2014 $ 1,080,000 10/02/06 1,006,857 1,066,151 Limited Liability Company Unit 733 uts. 10/02/06 270,000 181,009 Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B) 182 shs. 10/02/06 65,988 45,020 ------------- ------------- 1,342,845 1,292,180 ------------- ------------- 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 1,144,254 1,230,314 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 ------------- ------------- 1,327,069 1,319,708 ------------- ------------- PROTEIN GENETICS, INC. A producer of bovine artificial insemination products, related breeding and healthcare products and specialty genetics sold to the dairy and beef industries. 9.8% Redeemable Exchangeable Preferred Stock (B) 332 shs. 08/12/94 33,217 -- Common Stock (B) 867 shs. * 42,365 -- ------------- ------------- 75,582 -- ------------- ------------- QUALIS AUTOMOTIVE LLC A distributor of aftermarket automotive brake and chassis products. 12% Senior Subordinated Note due 2012 $ 937,500 05/28/04 823,760 928,793 Common Stock 187,500 shs. 05/28/04 187,500 166,874 Warrant, exercisable until 2012, to purchase common stock at $.01 per share 199,969 shs. 05/28/04 199,969 177,971 ------------- ------------- 1,211,229 1,273,638 ------------- ------------- 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 -- ------------- ------------- * 08/12/94 and 11/14/01. --------------------------------------------------------------------------------------------------------------------------------- 18

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- R A J MANUFACTURING HOLDINGS LLC A designer and manufacturer of women's swimwear sold under a variety of licensed brand names. 12.5% Senior Subordinated Note due 2014 $ 1,200,277 12/15/06 $ 1,106,663 $ 1,194,039 Limited Liability Company Unit (B) 1,497 uts. 12/15/06 149,723 91,702 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 2 shs. 12/15/06 69,609 43,274 ------------- ------------- 1,325,995 1,329,015 ------------- ------------- 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 1,327,160 Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B) 3 shs. 01/18/08 16,459 -- ------------- ------------- 1,323,000 1,327,160 ------------- ------------- 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 1,121,966 1,220,745 Common Stock (B) 153,191 shs. 02/10/06 153,191 199,860 Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B) 69,647 shs. 02/10/06 63,421 90,865 ------------- ------------- 1,338,578 1,511,470 ------------- ------------- ROYAL BATHS MANUFACTURING COMPANY A manufacturer and distributor of acrylic and cultured marble bathroom products. 12.5% Senior Subordinated Note due 2011 $ 562,500 11/14/03 526,444 548,795 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 74 shs. 11/14/03 65,089 49,768 ------------- ------------- 591,533 598,563 ------------- ------------- 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. 06/02/99 146,456 593,284 ------------- ------------- SAVAGE SPORTS HOLDING, INC. A manufacturer of sporting firearms. 12% Senior Subordinated Note due 2012 $ 814,655 09/10/04 774,260 808,126 Common Stock (B) 324 shs. * 340,378 371,511 Warrant, exercisable until 2012, to purchase common stock at $.01 per share (B) 71 shs. 09/10/04 60,129 81,113 ------------- ------------- 1,174,767 1,260,750 ------------- ------------- * 09/10/04 and 10/05/07. --------------------------------------------------------------------------------------------------------------------------------- 19

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- SMART SOURCE HOLDINGS LLC A short-term computer rental company. 12% Senior Subordinated Note due 2015 $ 1,176,924 * $ 1,071,129 $ 1,170,285 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 ------------- ------------- 1,496,156 1,481,839 ------------- ------------- 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 1,119,611 1,166,985 Common Stock (B) 165 shs. 08/01/06 164,634 243,416 Warrant, exercisable until 2014, to purchase common stock at $.02 per share (B) 55 shs. 08/01/06 49,390 81,070 ------------- ------------- 1,333,635 1,491,471 ------------- ------------- 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 1,325,958 Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B) 5 shs. 01/14/08 46,617 -- ------------- ------------- 1,323,000 1,325,958 ------------- ------------- TANGENT RAIL CORPORATION A manufacturer of rail ties and provider of specialty services to the North American railroad industry. 13% Senior Subordinated Note due 2013 $ 1,173,909 10/14/05 1,031,043 1,173,909 Common Stock (B) 1,167 shs. 10/14/05 1,167 493,699 Warrant, exercisable until 2013, to purchase common stock at $.01 per share (B) 618 shs. 10/14/05 155,860 261,445 ------------- ------------- 1,188,070 1,929,053 ------------- ------------- * 08/31/07 and 03/06/08. --------------------------------------------------------------------------------------------------------------------------------- 20

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- TERRA RENEWAL SERVICES, INC. A provider of wastewater residual management and required environmental reporting, permitting, nutrient management planning and record keeping to companies involved in poultry and food processing. 6.7% Senior Secured Tranche B Note due 2012 (C) $ 16,487 * $ 16,386 $ 16,037 6.97% Senior Secured Tranche B Note due 2012 (C) $ 851,552 * 848,436 828,287 12% Senior Subordinated Note due 2014 $ 664,062 ** 634,811 660,861 Limited Partnership Interest of Saw Mill Capital Fund V, L.P. (B) 2.27% int. 03/01/05 66,448 387,073 Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B) 41 shs. 04/28/06 33,738 67,292 ------------- ------------- 1,599,819 1,959,550 ------------- ------------- 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 1,163,971 Series A Preferred Stock (B) 219 shs. 10/26/07 219,203 208,240 ------------- ------------- 1,332,219 1,372,211 ------------- ------------- 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 03/02/07 479,190 485,333 13% Senior Subordinated Note due 2014 $ 341,971 03/02/07 280,347 340,715 Common Stock (B) 71,542 shs. 03/02/07 71,542 43,454 Warrant, exercisable until 2014 to purchase common stock at $.01 per share (B) 19,733 shs. 03/02/07 54,784 11,986 ------------- ------------- 885,863 881,488 ------------- ------------- 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 1,295,496 1,356,000 Common Stock (B) 315 shs. 02/04/98 315,000 423,192 Warrant, exercisable until 2009, to purchase common stock at $.01 per share (B) 222 shs. 02/05/98 184,416 298,250 ------------- ------------- 1,794,912 2,077,442 ------------- ------------- TRANSPAC HOLDING COMPANY A designer, importer, and wholesaler of home decor and seasonal gift products. 12% Senior Subordinated Note due 2015 $ 938,651 10/31/07 875,522 913,930 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 ------------- ------------- 1,032,332 1,018,840 ------------- ------------- * 04/28/06 and 12/21/06. ** 04/28/06 and 09/13/06. --------------------------------------------------------------------------------------------------------------------------------- 21

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- TRANSTAR HOLDING COMPANY A distributor of aftermarket automotive transmission parts. 12% Senior Subordinated Note due 2014 $ 918,000 08/31/05 $ 884,939 $ 934,631 Common Stock (B) 571 shs. * 570,944 723,238 Warrant, exercisable until 2013, to purchase common stock at $.02 per share (B) 46 shs. 08/31/05 41,021 57,637 ------------- ------------- 1,496,904 1,715,506 ------------- ------------- 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 (D) $ 1,222,698 ** 1,133,973 1,100,428 Common Stock (B) 393 shs. ** 423,985 -- Warrant, exercisable until 2013, to purchase common stock at $.02 per share (B) 81 shs. ** 84,650 -- ------------- ------------- 1,642,608 1,100,428 ------------- ------------- TRUSTILE DOORS, INC. A manufacturer and distributor of interior doors. Warrant, exercisable until 2010, to purchase common stock at $.01 per share (B) 3,060 shs. 04/11/03 40,283 101,253 ------------- ------------- U M A ENTERPRISES, INC. An importer and wholesaler of home decor products. 15% Senior Subordinated Note due 2015 $ 884,324 02/08/08 866,694 874,240 Convertible Preferred Stock (B) 470 shs. 02/08/08 469,565 446,082 ------------- ------------- 1,336,259 1,320,322 ------------- ------------- 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 04/30/04 925,417 976,270 Common Stock (B) 96 shs. 04/30/04 96,400 83,748 Warrant, exercisable until 2012, to purchase common stock at $.01 per share (B) 122 shs. 04/30/04 112,106 105,988 ------------- ------------- 1,133,923 1,166,006 ------------- ------------- VICTORY VENTURES LLC An acquirer of controlling or substantial interests in other entities. Series A Preferred Units (B) 1 ut. 12/02/96 236 -- ------------- ------------- * 08/31/05 and 04/30/07. ** 07/19/05 and 12/22/05. --------------------------------------------------------------------------------------------------------------------------------- 22

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 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 $ 451,940 $ 456,382 13% Senior Subordinated Note due 2014 $ 370,588 05/17/07 334,704 367,312 Common Stock (B) 70,588 shs. 05/17/07 70,588 37,240 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 20,003 shs. 05/17/07 31,460 10,553 ------------- ------------- 888,692 871,487 ------------- ------------- VITALITY FOODSERVICE, INC. A non-carbonated beverage dispensing company focused on the foodservice industry. 13% Senior Subordinated Note due 2011 $ 999,153 09/24/04 940,536 922,611 Common Stock (B) 14,006 shs. * 140,064 107,485 Warrant, exercisable until 2011, to purchase common stock at $.01 per share (B) 12,593 shs. 09/24/04 98,938 96,642 ------------- ------------- 1,179,538 1,126,738 ------------- ------------- 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 $ 1,134,767 11/15/07 1,112,092 1,102,606 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 ------------- ------------- 1,335,849 1,315,180 ------------- ------------- WALLS INDUSTRIES, INC. A provider of branded workwear and sporting goods apparel. Limited Partnership Interest (B) 0.20% int. 07/12/04 1,974 2,595 Common Stock (B) 2,133 shs. 12/21/07 -- 2,804 ------------- ------------- 1,974 5,399 ------------- ------------- WELLBORN FOREST HOLDING CO. A manufacturer of semi-custom kitchen and bath cabinetry. 12.13% Senior Subordinated Note due 2014 $ 911,250 11/30/06 852,816 876,872 Common Stock (B) 101 shs. 11/30/06 101,250 61,549 Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B) 51 shs. 11/30/06 45,790 30,729 ------------- ------------- 999,856 969,150 ------------- ------------- * 09/24/04 and 12/22/06. --------------------------------------------------------------------------------------------------------------------------------- 23

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Principal Amount Shares, Units or Ownership Acquisition CORPORATE RESTRICTED SECURITIES:(A)(Continued) Percentage Date Cost Fair Value ------------- -------- ------------- ------------- 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 $ 560,674 $ 552,323 Limited Partnership Interest (B) 12.26% int. 05/14/07 61,308 -- Warrant, exercisable until 2015, to purchase common stock at $.02 per share (B) 47 shs. 05/14/07 44,186 -- ------------- ------------- 666,168 552,323 ------------- ------------- TOTAL PRIVATE PLACEMENT INVESTMENTS (E) 93,555,444 89,493,343 ------------- ------------- --------------------------------------------------------------------------------------------------------------------------------- 24

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

SHARES OR INTEREST DUE PRINCIPAL CORPORATE RESTRICTED SECURITIES:(A) CONTINUED RATE DATE AMOUNT COST FAIR VALUE ------ -------- ------------ ------------ ------------ RULE 144A SECURITIES - 3.56%: BONDS - 3.56% Cenveo Corporation 10.500% 08/15/16 $ 45,000 $ 45,000 $ 44,438 Charter Communications Op LLC 8.000 04/30/12 750,000 736,875 708,750 Compucom Systems, Inc. 12.500 10/01/15 670,000 648,405 619,750 Douglas Dynamics LLC 7.750 01/15/12 485,000 462,190 415,888 G F S I, Inc. (C) 10.500 06/01/11 375,000 360,505 356,250 Intergen NV 9.000 06/30/17 375,000 371,959 388,125 Nortek, Inc. 10.000 12/01/13 100,000 98,957 95,000 Packaging Dynamics Corporation of America 10.000 05/01/16 975,000 969,845 648,375 Ryerson, Inc. 12.000 11/01/15 30,000 30,000 29,775 SandRidge Energy, Inc. 8.000 06/01/18 180,000 182,423 180,900 Tenneco, Inc. 8.125 11/15/15 50,000 50,000 45,250 TRW Automotive, Inc. 7.250 03/15/17 500,000 440,000 420,000 Tunica-Biloxi Gaming Authority 9.000 11/15/15 540,000 556,453 523,800 ------------ ------------ TOTAL BONDS 4,952,612 4,476,301 ------------ ------------ 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 COMMON STOCK 1,062 -- ------------ ------------ TOTAL RULE 144A SECURITIES 4,954,885 4,476,301 ------------ ------------ TOTAL CORPORATE RESTRICTED SECURITIES $ 98,510,329 $ 93,969,644 ------------ ------------ --------------------------------------------------------------------------------------------------------------------------------- 25

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

INTEREST DUE PRINCIPAL MARKET CORPORATE PUBLIC SECURITIES - 20.55%:(A) RATE DATE AMOUNT COST VALUE ------ -------- ------------ ------------ ------------ BONDS - 19.31% Appleton Papers, Inc. 8.125% 06/15/11 $ 250,000 $ 250,000 $ 236,250 Aramark Corporation (C) 6.373 02/01/15 100,000 100,000 93,500 Boyd Gaming Corporation 7.125 02/01/16 150,000 146,625 110,625 Bristow Group, Inc. 7.500 09/15/17 75,000 75,000 75,188 Cablevision Systems Corporation 8.000 04/15/12 500,000 505,183 472,500 Cincinnati Bell, Inc. 8.375 01/15/14 550,000 503,750 532,125 Clayton Williams Energy, Inc. 7.750 08/01/13 575,000 557,000 552,000 Countrywide Alternative Loan Trust (C) 2.802 11/20/35 1,003,048 735,498 757,261 Dynegy Holdings, Inc. 8.375 05/01/16 665,000 675,379 645,050 Dynegy Holdings, Inc. 7.500 06/01/15 250,000 223,274 230,625 Edison Mission Energy 7.750 06/15/16 35,000 35,000 34,825 Electronic Data Systems Corporation 7.125 10/15/09 500,000 501,892 515,633 Esterline Technologies 7.750 06/15/13 175,000 175,000 175,875 Ford Motor Credit Co. 7.375 10/28/09 750,000 748,125 683,084 Gencorp, Inc. 9.500 08/15/13 130,000 130,000 128,050 General Motors Acceptance Corporation 5.850 01/14/09 750,000 740,858 712,185 Goodyear Tire & Rubber Co. 7.857 08/15/11 350,000 327,250 347,813 Goodyear Tire & Rubber Co. 9.000 07/01/15 64,000 65,209 63,840 Goodyear Tire & Rubber Co. 8.625 12/01/11 250,000 261,072 252,500 H C A, Inc. 9.250 11/15/16 500,000 508,539 515,000 Hughes Network Systems 9.500 04/15/14 525,000 535,216 530,906 Indymac INDX Mortgage Loan Trust 2.693 11/25/36 1,022,830 734,229 715,375 Inergy LP 8.250 03/01/16 75,000 75,000 73,875 Intelsat Bermuda Ltd. 9.250 06/15/16 690,000 716,153 695,175 Interline Brands, Inc. 8.125 06/15/14 830,000 824,237 800,950 Iron Mountain, Inc. 8.750 07/15/18 500,000 514,354 515,000 Kansas City Southern Railway 8.000 06/01/15 50,000 50,000 50,625 Koppers, Inc. 9.875 10/15/13 170,000 170,000 178,500 Leucadia National Corporation 7.000 08/15/13 628,000 632,461 609,160 Majestic Star Casino LLC 9.500 10/15/10 250,000 250,000 207,500 Manitowoc Company, Inc. 7.125 11/01/13 100,000 100,000 95,000 Mariner Energy, Inc. 8.000 05/15/17 400,000 402,544 387,000 Markwest Energy Operating Co. 6.875 11/01/14 550,000 532,750 518,375 Mediacom Broadband LLC 8.500 10/15/15 750,000 765,431 670,312 N T L Cable PLC 9.125 08/15/16 790,000 813,154 740,625 Neiman Marcus Group, Inc. 10.375 10/15/15 600,000 600,000 600,000 --------------------------------------------------------------------------------------------------------------------------------- 26

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

INTEREST DUE PRINCIPAL MARKET CORPORATE PUBLIC SECURITIES:(A)(Continued) RATE DATE AMOUNT COST VALUE ------ -------- ------------ ------------ ------------ North American Energy Partners 8.750% 12/01/11 $ 200,000 $ 200,000 $ 202,000 NOVA Chemicals Corporation (C) 5.953 11/15/13 515,000 511,538 437,750 O E D Corp/Diamond Jo Company Guarantee 8.750 04/15/12 500,000 492,980 455,000 Offshore Logistics, Inc. 6.125 06/15/13 350,000 350,000 336,875 Petrohawk Energy Corporation 9.125 07/15/13 750,000 761,747 768,750 Pliant Corporation (C) 11.850 06/15/09 809,482 820,658 813,528 Quebecor Media, Inc. 7.750 03/15/16 575,000 551,385 534,750 Quicksilver Resources, Inc. 7.125 04/01/16 600,000 583,125 558,750 Range Resources Corporation 7.250 05/01/18 25,000 25,000 24,813 Rental Service Corporation 9.500 12/01/14 500,000 506,499 417,500 Rogers Wireless, Inc. 7.500 03/15/15 560,000 592,883 592,812 Sheridan Acquisition Corporation 10.250 08/15/11 225,000 222,001 207,000 Steel Dynamics, Inc. 6.750 04/01/15 100,000 100,000 95,750 Stewart & Stevenson LLC 10.000 07/15/14 750,000 770,837 740,625 Tenet Healthcare Corporation 6.375 12/01/11 250,000 241,250 239,375 Tenneco, Inc. 8.625 11/15/14 500,000 501,126 441,250 Tesoro Petroleum Corporation 6.500 06/01/17 250,000 250,000 224,375 Texas Industries, Inc. 7.250 07/15/13 35,000 35,000 34,825 Titan International, Inc. 8.000 01/15/12 70,000 70,000 68,600 Transdigm, Inc. 7.750 07/15/14 150,000 151,303 148,125 Tube City IMS Corporation 9.750 02/01/15 1,000,000 991,526 922,500 United Components, Inc. 9.375 06/15/13 535,000 535,842 500,225 United Rentals, Inc. 7.750 11/15/13 325,000 325,000 260,000 Vought Aircraft Industries 8.000 07/15/11 650,000 648,100 604,500 Warner Music Group Corporation 7.375 04/15/14 125,000 125,000 103,905 ------------ ------------ TOTAL BONDS 25,342,983 24,255,890 ------------ ------------ COMMON STOCK - 1.09% Comcast Corporation 16,800 310,632 318,696 Directed Electronics, Inc. (B) 195,118 982,868 331,701 Distributed Energy Systems Corporation (B) 14,000 177,078 700 EnerNOC, Inc. (B) 23,500 648,410 421,825 ITC^DeltaCom, Inc. (B) 94,588 827,645 283,764 Intrepid Potash, Inc. (B) 185 5,920 12,169 ------------ ------------ TOTAL COMMON STOCK 2,952,553 1,368,855 ------------ ------------ --------------------------------------------------------------------------------------------------------------------------------- 27

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

INTEREST DUE PRINCIPAL MARKET CORPORATE PUBLIC SECURITIES:(A)(Continued) RATE DATE AMOUNT COST VALUE ------ -------- ------------ ------------ ------------ CONVERTIBLE BONDS - 0.15% Citadel Broadcasting Corporation 4.000% 02/15/11 $ 250,000 $ 194,063 $ 192,188 ------------ ------------ TOTAL CONVERTIBLE BONDS 194,063 192,188 ------------ ------------ TOTAL CORPORATE PUBLIC SECURITIES $ 28,489,599 $ 25,816,933 ------------ ------------ INTEREST DUE PRINCIPAL MARKET SHORT TERM SECURITIES RATE/YIELD* DATE AMOUNT COST VALUE --------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER - 8.51% Duke Energy Corporation 2.902% 07/02/08 2,460,000 2,459,802 2,459,802 Gannett Company, Inc. 3.253 07/07/08 1,937,000 1,935,951 1,935,951 I T T Industries, Inc. 2.903 07/08/08 1,277,000 1,276,280 1,276,280 O G E Energy Corporation 2.852 07/01/08 2,506,000 2,506,000 2,506,000 Oneok, Inc. 2.802 07/09/08 2,500,000 2,498,333 2,498,333 ------------ ------------ TOTAL SHORT-TERM SECURITIES $ 10,676,366 $ 10,676,366 ------------ ------------ TOTAL INVESTMENTS 103.84% $137,676,294 $130,462,943 ------------ ------------ Other Assets 6.12 7,676,019 Liabilities (9.96) (12,488,370) ------ ------------ TOTAL NET ASSETS 100.00% $125,650,592 ====== ============ (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 06/30/08. (D) Defaulted security; interest not accrued. (E) Illiquid security. At June 30, 2008, the values of these securities amounted to $89,493,343 or 71.22% of net assets. * Effective yield at purchase PIK - Payment-in-kind --------------------------------------------------------------------------------------------------------------------------------- 28

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Fair Value/ Fair Value/ Industry Classification Market Value Industry Classification Market Value ------------ ------------ AEROSPACE - 3.12% BUILDINGS & REAL ESTATE - 1.11% Esterline Technologies $ 175,875 K W P I Holdings Corporation $ 1,256,049 Gencorp, Inc. 128,050 Texas Industries, Inc. 34,825 Hughes Network Systems 530,906 TruStile Doors, Inc. 101,253 P A S Holdco LLC 1,458,223 ------------ Transdigm, Inc. 148,125 1,392,127 Visioneering, Inc. 871,487 ------------ Vought Aircraft Industries 604,500 CHEMICAL, PLASTICS & RUBBER - 0.71% ------------ Capital Specialty Plastics, Inc. 279,466 3,917,166 Koppers, Inc. 178,500 ------------ NOVA Chemicals Corporation 437,750 AUTOMOBILE - 7.90% ------------ Ford Motor Credit Co. 683,084 895,716 Fuel Systems Holding Corporation 936,521 ------------ General Motors Acceptance Corporation 712,185 CONSUMER PRODUCTS - 8.83% Goodyear Tire & Rubber Co. 664,153 Aero Holdings, Inc. 1,741,783 Jason, Inc. 723,231 Bravo Sports Holding Corporation 1,411,043 Nyloncraft, Inc. 1,083,929 G F S I, Inc. 356,250 Ontario Drive & Gear Ltd. 667,014 K N B Holdings Corporation 1,410,187 Qualis Automotive LLC 1,273,638 Momentum Holding Co. 838,307 Tenneco, Inc. 486,500 R A J Manufacturing Holdings LLC 1,329,015 Titan International, Inc. 68,600 R E I Delaware Holding, Inc. 1,327,160 Transtar Holding Company 1,715,506 Royal Baths Manufacturing Company 598,563 TRW Automotive, Inc. 420,000 The Tranzonic Companies 2,077,442 United Components, Inc. 500,225 Walls Industries, Inc. 5,399 ------------ ------------ 9,934,586 11,095,149 ------------ ------------ BEVERAGE, DRUG & FOOD - 1.81% CONTAINERS, PACKAGING & GLASS - 4.92% Aramark Corporation 93,500 Flutes, Inc. 794,680 Golden County Foods Holding, Inc. 1,054,461 Maverick Acquisition Company 436,500 Specialty Foods Group, Inc. -- P I I Holding Corporation 1,481,530 Vitality Foodservice, Inc. 1,126,738 Packaging Dynamics Corporation of America 648,375 ------------ Paradigm Packaging, Inc. 1,091,346 2,274,699 Pliant Corporation 813,528 ------------ Vitex Packaging Group, Inc. 911,250 BROADCASTING & ENTERTAINMENT- 2.32% ------------ Cablevision Systems Corporation 472,500 6,177,209 Charter Communications Op LLC 708,750 ------------ Citadel Broadcasting Corporation 192,188 DISTRIBUTION - 0.74% Comcast Corporation 318,696 Duncan Systems, Inc. 935,880 Mediacom Broadband LLC 670,312 QualServ Corporation -- Workplace Media Holdings Co. 552,323 ------------ ------------ 935,880 2,914,769 ------------ ------------ ---------------------------------------------------------------------------------------------------------------------------------- 29

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED) June 30, 2008 (Unaudited)

Fair Value/ Fair Value/ Industry Classification Market Value Industry Classification Market Value ------------ ------------ DIVERSIFIED/CONGLOMERATE, FINANCIAL SERVICES - 2.26% MANUFACTURING - 5.63% A W X Holdings Corporation $ 892,466 A H C Holding Company, Inc. $ 1,321,757 Highgate Capital LLC -- Arrow Tru-Line Holdings, Inc. 871,724 Leucadia National Corporation 609,160 Douglas Dynamics LLC 415,888 Nesco Holdings Corporation 1,343,609 Evans Consoles, Inc. 462,983 Victory Ventures LLC -- Nortek, Inc. 95,000 ------------ Postle Aluminum Company LLC 1,292,180 2,845,235 Radiac Abrasives, Inc. 1,511,470 ------------ Truck Bodies & Equipment International 1,100,428 HEALTHCARE, EDUCATION & CHILDCARE - 4.18% ------------ A T I Acquisition Company 1,344,679 7,071,430 American Hospice Management Holding LLC 1,784,627 ------------ F H S Holdings LLC 1,365,123 DIVERSIFIED/CONGLOMERATE, SERVICE - 6.50% H C A, Inc. 515,000 Advanced Technologies Holdings 1,324,520 Tenet Healthcare Corporation 239,375 CapeSuccess LLC -- Touchstone Health Partnership -- Diversco, Inc./DHI Holdings, Inc. 751,555 ------------ Dwyer Group, Inc. 758,162 5,248,804 Fowler Holding, Inc. 1,204,517 ------------ GQ Holdings LLC 1,345,424 HOME & OFFICE FURNISHINGS, HOUSEWARES, Insurance Claims Management, Inc. 54,356 AND DURABLE CONSUMER PRODUCTS - 8.93% Interline Brands, Inc. 800,950 Connor Sport Court International, Inc. 529,713 Iron Mountain, Inc. 515,000 H M Holding Company -- Mail Communications Group, Inc. 707,974 Home Decor Holding Company 1,199,573 Moss, Inc. 705,309 Justrite Manufacturing Acquisition Co. 974,675 ------------ K H O F Holdings, Inc. 1,343,084 8,167,767 Monessen Holding Corporation 1,215,000 ------------ Stanton Carpet Holding Co. 1,491,471 ELECTRONICS - 1.58% Transpac Holdings Company 1,018,840 Connecticut Electric, Inc. 1,136,423 U M A Enterprises, Inc. 1,320,322 Directed Electronics, Inc. 331,701 U-Line Corporation 1,166,006 Distributed Energy Systems Corporation 700 Wellborn Forest Holding Co. 969,150 Electronic Data Systems Corporation 515,633 ------------ ------------ 11,227,834 1,984,457 ------------ ------------ LEISURE, AMUSEMENT, ENTERTAINMENT - 2.75% FARMING & AGRICULTURE - 1.05% Boyd Gaming Corporation 110,625 Protein Genetics, Inc. -- Electra Bicycle Company LLC 787,789 Waggin' Train Holdings LLC 1,315,180 Majestic Star Casino LLC 207,500 ------------ O E D Corp/Diamond Jo Company Guarantee 455,000 1,315,180 Savage Sports Holding, Inc. 1,260,750 ------------ Tunica-Biloxi Gaming Authority 523,800 Warner Music Group Corporation 103,905 ------------ 3,449,369 ------------ ---------------------------------------------------------------------------------------------------------------------------------- 30

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Fair Value/ Fair Value/ Industry Classification Market Value Industry Classification Market Value ------------ ------------ MACHINERY - 8.43% NATURAL RESOURCES - 0.40% Davis-Standard LLC $ 1,778,099 Appleton Papers, Inc. $ 236,250 E S P Holdco, Inc. 1,317,491 Cenveo Corporation 44,438 Integration Technology Systems, Inc. -- Intrepid Potash, Inc. 12,169 K-Tek Holdings Corporation 1,311,604 Range Resources Corporation 24,813 Manitowoc Company, Inc. 95,000 SandRidge Energy, Inc. 180,900 Morton Industrial Group, Inc. 1,171,145 ------------ Navis Global 673,006 498,570 NetShape Technologies, Inc. 948,192 ------------ Pacific Consolidated Holdings LLC 644,524 OIL & GAS - 2.56% Power Services Holding Company 1,319,708 Bristow Group, Inc. 75,188 Safety Speed Cut Manufacturing Company, Inc. 593,284 Clayton Williams Energy, Inc. 552,000 Stewart & Stevenson LLC 740,625 Mariner Energy, Inc. 387,000 ------------ North American Energy Partners 202,000 10,592,678 Offshore Logistics, Inc. 336,875 ------------ Quicksilver Resources, Inc. 558,750 MEDICAL DEVICES/BIOTECH - 2.57% Tesoro Petroleum Corporation 224,375 Coeur, Inc. 673,266 Total E & S, Inc. 881,488 E X C Acquisition Corporation 97,897 ------------ ETEX Corporation -- 3,217,676 MicroGroup, Inc. 1,805,739 ------------ OakRiver Technology, Inc. 658,199 PHARMACEUTICALS - 1.32% TherOX, Inc. -- CorePharma LLC 1,387,525 ------------ Enzymatic Therapy, Inc. 274,455 3,235,101 ------------ ------------ 1,661,980 MINING, STEEL, IRON & NON PRECIOUS ------------ METALS - 1.89% PUBLISHING/PRINTING - 0.59% Ryerson, Inc. 29,775 Quebecor Media, Inc. 534,750 Steel Dynamics, Inc. 95,750 Sheridan Acquisition Corporation 207,000 T H I Acquisition, Inc. 1,325,958 ------------ Tube City IMS Corporation 922,500 741,750 ------------ ------------ 2,373,983 RETAIL STORES - 1.29% ------------ Neiman Marcus Group, Inc. 600,000 MORTGAGE-BACKED SECURITIES - 1.17% Olympic Sales, Inc. 339,819 Countrywide Alternative Loan Trust 757,261 Rental Service Corporation 417,500 Indymac INDX Mortgage Loan Trust 715,375 United Rentals, Inc. 260,000 ------------ ------------ 1,472,636 1,617,319 ------------ ------------ TECHNOLOGY - 2.01% Compucom Systems, Inc. 619,750 EnerNOC, Inc. 421,825 Smart Source Holdings LLC 1,481,839 ------------ 2,523,414 ------------ ---------------------------------------------------------------------------------------------------------------------------------- 31

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)MassMutual Paticipation Investors June 30, 2008 (Unaudited)

Fair Value/ Fair Value/ Industry Classification Market Value Industry Classification Market Value ------------ ------------ TELECOMMUNICATIONS - 2.26% WASTE MANAGEMENT / POLLUTION - 2.65% Cincinnati Bell, Inc. $ 532,125 Terra Renewal Services, Inc. $ 1,959,550 Intelsat Bermuda Ltd. 695,175 Torrent Group Holdings, Inc. 1,372,211 ITC^DeltaCom, Inc. 283,764 ------------ N T L Cable PLC 740,625 3,331,761 Rogers Wireless, Inc. 592,812 ------------ ------------ Total Corporate Restricted and 2,844,501 Public Securities - 95.33% $119,786,577 ------------ ============ TRANSPORTATION - 1.73% Kansas City Southern Railway 50,625 NABCO, Inc. 188,528 Tangent Rail Corporation 1,929,053 ------------ 2,168,206 ------------ UTILITIES - 2.12% Dynegy Holdings, Inc. 875,675 Edison Mission Energy 34,825 Inergy LP 73,875 Intergen NV 388,125 Markwest Energy Operating Co. 518,375 Petrohawk Energy Corporation 768,750 ------------ 2,659,625 ------------ See Notes to Consolidated Financial Statements ---------------------------------------------------------------------------------------------------------------------------------- 32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors (UNAUDITED) 1. HISTORY MassMutual Participation Investors (the "Trust") was organized as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated April 7, 1988. The Trust is a diversified closed-end management investment company. Babson Capital Management LLC ("Babson Capital"), a wholly-owned indirect subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual"), acts as its investment adviser. The Trust's investment objective is to maximize total return by providing a high level of current income, the potential for growth of 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. On January 27, 1998, the Board of Trustees authorized the formation of a wholly-owned subsidiary of the Trust ("MMPI Subsidiary Trust") for the purpose of holding certain investments. The results of the MMPI Subsidiary Trust are consolidated in the accompanying financial statements. Footnote 2.D below discusses the federal tax consequences of the MMPI Subsidiary Trust. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed consistently by the Trust in the preparation of its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. A. VALUATION OF INVESTMENTS: Valuation of a security in the Trust's portfolio is made on the basis of the market price whenever market quotations are readily available and all securities of the same class held by the Trust can be readily sold in such market. Nearly all securities which are acquired by the Trust directly from the issuers and shares into which such securities may be converted or which may be purchased on the exercise of warrants attached to such securities will be subject to legal or contractual delays in, or restrictions on, resale and will therefore be "restricted securities." Generally speaking, as contrasted with open-market sales of unrestricted securities, which may be effected immediately if the market is adequate, restricted securities can be sold only in a public offering for which a registration statement is in effect under the Securities Act of 1933, as amended (the "1933 Act") or pursuant to a transaction that is exempt from registration under the 1933 Act. The value of restricted securities, and of any other assets for which there are no reliable market quotations, is the fair value as determined in good faith by the Trust's Board of Trustees (the "Trustees"). Each restricted security is valued by the Trustees at the time of its acquisition and at least quarterly thereafter. The Trustees have established guidelines to aid in the valuation of each security. Generally, restricted securities are initially valued at cost or less at the time of acquisition by the Trust. Values greater or less than cost are used thereafter for restricted securities in appropriate circumstances. Among the factors ordinarily considered are the existence of restrictions upon the sale of a security held by the Trust; an estimate of the existence and the extent of a market for the security; the extent of any discount at which the security was acquired; the estimated period of time during which the security will not be freely marketable; the estimated expenses of registering or otherwise qualifying the security for public sale; estimated underwriting commissions if underwriting would be required to effect a sale; in the case of a convertible security, whether or not it would trade on the basis of its stock equivalent; in the case of a debt obligation which would trade independently of any equity equivalent, the current yields on comparable securities; the estimated amount of the floating supply of such securities available for purchase; the proportion of the issue held by the Trust; changes in the financial condition and prospects of the issuer; the existence of merger proposals or tender offers affecting the issuer; and any other factors affecting fair value, all in accordance with the Investment Company Act of 1940, as amended (the "1940 Act"). In making valuations, opinions of counsel may be relied upon as to whether or not securities are restricted securities and as to the legal requirements for public sale. When market quotations are readily available for unrestricted securities of an issuer, restricted securities of the same class are generally valued at a discount from the market price of such unrestricted securities. The Trustees, however, consider all factors in fixing any discount, including the filing of a registration statement for such securities under the 1933 Act and any other developments which are likely to increase the probability that the securities may be publicly sold by the Trust without restriction. The Trustees meet at least once in each quarter to approve the value of the Trus t'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, -------------------------------------------------------------------------------- 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) the Trustees will consider reports by Babson Capital analyzing each portfolio security in accordance with the relevant factors referred to above. Babson Capital has agreed to provide such reports to the Trust at least quarterly. The consolidated financial statements include private placement restricted securities valued at $89,493,343 (71.22% of net assets) as of June 30, 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 June 30, 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 longterm gains as undistributed and pay the federal capital gains taxes thereon, or distribute all or a portion of such net gains. The Trust is taxed as a regulated investment company and is therefore limited as to the amount of non-qualified income that it may receive as the result of operating a trade or business, e.g. the Trust's pro rata share of income allocable to the Trust by a partnership operating company. The Trust's violation of this limitation could result in the loss of its status as a regulated investment company, thereby subjecting all of its net income and capital gains to corporate taxes prior to distribution to its shareholders. The Trust, from time-to-time, identifies investment opportunities in the securities of entities that could cause such trade or business income to be allocable to the Trust. The MMPI Subsidiary Trust (described in Footnote 1, above) was formed in order to allow investment in such securities without adversely affecting the Trust's status as a regulated investment company. The MMPI Subsidiary Trust is not taxed as a regulated investment company. Accordingly, prior to the Trust's receiving any distributions from the MMPI Subsidiary Trust, all of the MMPI Subsidiary Trust's taxable income and realized gains, including non-qualified income and realized gains, is subject to taxation at prevailing corporate tax rates. For the six months ended June 30, 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 June 30, 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 ex-dividend date. The Trust's net investment income dividend is declared four times per year, in April, July, October, and December. The Trust's net realized capital gain distribution, if any, is declared in December. 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 six months ended June 30, 2008, there were no credit balances used to reduce custodian fees. -------------------------------------------------------------------------------- 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MassMutual Participation Investors (CONTINUED)(UNAUDITED) 3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES CONTRACT A. SERVICES: Under an Investment Advisory and Administrative Services Contract (the "Contract") with the Trust, Babson Capital has agreed to use its best efforts to present to the Trust a continuing and suitable investment program consistent with the investment objectives and policies of the Trust. Babson Capital 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. C. BASIS FOR BOARD RENEWAL OF CONTRACT At a meeting of the Board of Trustees held on April 25, 2008, the Trustees (including a majority of the Trustees who are not "interested persons" of the Trust or Babson Capital) unanimously approved a one year continuance of the Contract. Prior to the meeting, the Board of Trustees requested and received from Ropes & Gray LLP, counsel to the Trust, a memorandum describing the Board of Trustees' legal responsibilities in connection with its review and reapproval of the Contract. The Board of Trustees also requested and received from Babson Capital extensive written and oral information regarding among other matters: the principal terms of the Contract; the reasons why Babson Capital was proposing the continuance of the Contract; Babson Capital and its personnel; the Trust's investment performance, including comparative performance information; the nature and quality of the services provided by Babson Capital to the Trust; financial strength of Babson Capital; the fee arrangement between Babson Capital and the Trust; fee and expense information, including comparative fee and expense information; profitability of the advisory arrangement to Babson Capital; and "fallout" benefits to Babson Capital resulting from the Contract. Among other things, the Trustees discussed and considered with management (i) the aforementioned guidance provided by Ropes & Gray LLP and the information provided by Babson Capital prior to the meeting and (ii) the reasons Babson Capital put forth in support of the continuance of the Contract. These considerations are summarized below. NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY BABSON CAPITAL TO THE TRUST In evaluating the scope and quality of the services provided by Babson Capital to the Trust, the Trustees considered, among other factors: (i) the scope of services required to be provided by Babson Capital to the Trust under the Contract; (ii) Babson Capital's ability to find and negotiate private placement securities having equity features that are consistent with the stated investment objectives of the Trust; (iii) the experience and quality of Babson Capital's staff; (iv) the strength of Babson Capital's financial condition; (v) the nature of the private placement market compared to public markets (including the fact that finding, analyzing, negotiating and servicing private placement securities is more labor-intensive than buying and selling public securities and the administration of private placement securities is more extensive, expensive, and requires greater time and expertise than a portfolio of only public securities); (vi) the potential advantages afforded to the Trust by its ability to co-invest in negotiated private placements with MassMutual and its affiliates; and (vii) the expansion of the scope of services provided by Babson Capital as a result of recent regulatory and legislative initiatives that have required increased legal, compliance and business attention and diligence. Based on such considerations, the Board of Trustees concluded that, overall, it is satisfied with the nature, extent and quality of services provided by Babson Capital, and expected to be provided in the future, under the renewed Contract. INVESTMENT PERFORMANCE The Board also examined the Trust's short-term, intermediateterm, and long-term performance as compared against various benchmark indices presented at the meeting. In addition, the Trustees considered comparisons of the Trust's performance with the performance of (i) selected closed-end investment companies and funds that may invest in private placement securities and/or bank loans; (ii) selected business development companies with comparable types of investments; and (iii) investment companies included in the Lipper closed-end bond universe. It was acknowledged that, while such comparisons are helpful in judging performance, they are not directly comparable in terms of types of investments due to the fact that business development companies often report returns based on market value, which is affected by factors other than the performance of the underlying portfolio investments. Based on these considerations and the detailed performance information provided to the Trustees at the regular Board meetings each quarter, the Trustees concluded that the Trust's absolute and relative performance over time have been sufficient to warrant renewal of the Contract. -------------------------------------------------------------------------------- 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)(UNAUDITED) ADVISORY FEE/COST OF SERVICES PROVIDED AND PROFITABILITY/ MANAGER'S "FALL-OUT" BENEFITS In connection with the Trustees' consideration of the advisory fee paid by the Trust to Babson Capital under the Contract, Babson Capital noted that it was unaware of any registered closed-end investment companies that are directly comparable to the Trust in terms of the types of investments and percentages invested in private placement securities (which require more extensive advisory and administrative services than a portfolio of publicly traded securities, as previously discussed) other than MassMutual Corporate Investors ("MMCI"), which also is advised by Babson Capital. Under the terms of MMCI's Investment Services Contract with Babson Capital, MMCI is charged a quarterly investment advisory fee of 0.3125% of net asset value as of the end of each quarter, which is approximately equal to 1.25% annually. In considering the fee rate provided in the Contract, the Trustees also noted the higher fees charged by Babson Capital to Tower Square Capital Partners, L.P. and Tower Square Capital Partners II, L.P., both private mezzanine funds also managed by Babson Capital. At the request of the Trustees, Babson Capital provided information concerning the profitability of Babson Capital's advisory relationship with the Trust. The Board also considered the non-economic benefits Babson Capital and its affiliates derived from its relationship with the Trust, including the reputational benefits derived from having the Trust listed on the New York Stock Exchange, and the de minimis amount of commissions resulting from the Trust's portfolio transactions used by Babson Capital for third-party soft dollar arrangements The Trustees recognized that Babson Capital should be entitled to earn a reasonable level of profit for services provided to the Trust and, based on their review, concluded that they were satisfied that Babson Capital's historical level of profitability from its relationship with the Trust was not excessive and that the advisory fee structure under the Contract is reasonable. ECONOMIES OF SCALE Finally, the Trustees considered the concept of economies of scale and possible advisory fee reductions if the Trust were to grow in assets. Given that the Trust is not continuously offering shares, such growth comes principally from retained net realized gain on investments and dividend reinvestment. The Trustees also examined the breakpoint features of selected competitive funds. The Trustees concluded that the absence of breakpoints in the fee schedule under the Contract was currently acceptable given the Trust's current size and closed-end fund structure. 4. SENIOR SECURED INDEBTEDNESS A. NOTE PAYABLE: MassMutual holds the Trust's $12,000,000 Senior Fixed Rate Convertible Note (the "Note") issued by the Trust in 1995. The Note, as amended, is due December 13, 2011 and accrues interest at 5.80% per annum. MassMutual, at its option, can convert the principal amount of the Note into common shares. The dollar amount of principal would be converted into an equivalent dollar amount of common shares based upon the average price of the common shares for ten business days prior to the notice of conversion. For the six months ended June 30, 2008, the Trust incurred total interest expense on the Note of $348,000. The Trust may redeem the Note, in whole or in part, at the principal amount proposed to be redeemed together with the 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's $15,000,000 revolving credit agreement (the "Revolver") with Bank of America N.A. matured on May 30, 2008. For the six-month period ended June 30, 2008, the Trust incurred a total expense on the Revolver of $6,229. The expense was incurred on the undrawn portion of the Revolver from January 1, 2008 to the maturity date on May 30, 2008. 5. PURCHASES AND SALES OF INVESTMENTS For the six months ended 6/30/2008 Cost of Proceeds from Investments Sales or Acquired Maturities -------- ---------- Corporate restricted securities $ 10,285,383 $ 13,434,014 Corporate public securities 2,232,071 7,710,055 The aggregate cost of investments is substantially the same for financial reporting and federal income tax purposes as of June 30, 2008. The net unrealized depreciation of investments for financial reporting and federal tax purposes as of June 30, 2008 is $7,213,351 and consists of $8,020,766 appreciation and $15,234,117 depreciation. -------------------------------------------------------------------------------- 36 MassMutual Participation Investors 6. QUARTERLY RESULTS OF INVESTMENT OPERATIONS March 31, 2008 Amount Per Share ------ --------- Investment income $ 3,200,898 Net investment income 2,597,669 $ 0.26 Net realized and unrealized loss on investments (net of taxes) (2,528,865) (0.26) June 30, 2008 Amount Per Share ------ --------- Investment income $ 2,861,287 Net investment income 2,280,789 $ 0.23 Net realized and unrealized loss on investments (net of taxes) (1,496,914) (0.15) 7. AGGREGATE REMUNERATION PAID TO OFFICERS, TRUSTEES AND THEIR AFFILIATED PERSONS For the six months ended June 30, 2008, the Trust paid its Trustees aggregate remuneration of $77,000. During the year the Trust did not pay any compensation to any of its Trustees who are "interested persons" (as defined by the 1940 Act) of the Trust. The Trust classifies Messrs. Crandall and Joyal as "interested persons" of the Trust. All of the Trust's officers are employees of Babson Capital or MassMutual. Pursuant to the Contract, the Trust does not compensate its officers who are employees of Babson Capital or MassMutual. Mr. Crandall, one of the Trust's Trustees, is an "affiliated person" (as defined by the 1940 Act) of MassMutual and Babson Capital. The Trust did not make any payments to Babson Capital for the six months ended June 30 2008, other than amounts payable to Babson Capital pursuant to the Contract. For the six months ended June 30, 2008, the Trust paid the following amounts to MassMutual, exclusive of interest expense on the Note explained in Footnote 4.A: Preparation of Certain of the Trust's Shareholder Communications $ 1,042 8. RESULTS OF SHAREHOLDER MEETING The Annual Meeting of Shareholders was held on Friday, April 25, 2008. The Shareholders were asked to vote to elect as trustees Michael H. Brown, Corine T. Norgaard, and Maleyne M. Syracuse for three year terms. The Shareholders approved the proposals. The Trust's other trustees, William J. Barrett, Donald E. Benson, Roger W. Crandall, Martin T. Hart, Donald Glickman, and Robert E. Joyal, continued to serve their respective terms following the April 25, 2008 Annual Shareholders Meeting. The results of Shareholders voting are set forth below. % of Shares Shares for Withheld Total Voted for ----------------------------------------------------------------------------- Michael H. Brown 8,450,536 211,114 8,661,650 97.56% Corine T. Norgaard 8,426,215 235,435 8,661,650 97.28% Maleyne M. Syracuse 8,435,070 226,580 8,661,650 97.38% 9. 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) 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 June 30, 2008: ASSETS TOTAL LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------------------------------- Private Securities $ 93,969,644 $ -- $ 4,476,301 $ 89,493,343 Public Securities 25,816,933 1,368,855 24,448,078 -- Short-term Securities 10,676,366 -- 10,676,366 -- ----------------------------------------------------------------------------- TOTAL $130,462,943 $1,368,855 $39,600,745 $ 89,493,343 -------------------------------------------------------------------------------- 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 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* (1,947,008) -- -- (1,947,008) Purchases, sales, issuances & settlements (net) (2,642,787) -- -- ((2,642,787) ----------------------------------------------------------------------------- Ending balance at 6/30/08 $89,493,343 $ -- $ -- $89,493,343 *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 6/30/08 is ($3,212,241). -------------------------------------------------------------------------------- 38 THIS PAGE IS INTENTIONALLY LEFT BLANK THIS PAGE IS INTENTIONALLY LEFT BLANK MASSMUTUAL PARTICIPATION INVESTORS MEMBERS OF THE BOARD OF OFFICERS TRUSTEES Roger W. Crandall Donald Glickman Chairman Robert E. Joyal Clifford M. Noreen President William J. Barrett James M. Roy Michael H. Brown Vice President & Chief Financial Officer Donald E. Benson* Rodney J. Dillman Dr. Corine T. Norgaard* Vice President, Secretary & Chief Legal Officer Roger W. Crandall Jill A. Fields Martin T. Hart* Vice President Maleyne M. Syracuse Michael P. Hermsen Vice President *Member of the Audit committee Mary Wilson Kibbe Vice President Michael L. Klofas Vice President Richard E. Spencer, II Vice President Daniel J. Florence Treasurer John T. Davitt, Jr. Comptroller Melissa M. Lagrant Chief Compliance Officer -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN MassMutual Participation Investors offers a Dividend Reinvestment and Cash Purchase Plan. The Plan provides a simple and automatic way for shareholders to add to their holdings in the Trust through the receipt of dividend shares issued by the Trust or through the reinvestment of cash dividends in Trust shares purchased in the open market. The dividends of each shareholder will be automatically reinvested in the Trust by Shareholder Financial Services Inc., the Transfer Agent, in accordance with the Plan, unless such shareholder elects not to participate by providing written notice to the Transfer Agent. A shareholder may terminate his or her participation by notifying the Transfer Agent in writing. Participating shareholders may also make additional contributions to the Plan from their own funds. Such contributions may be made by personal check or other means in an amount not less than $100 nor more than $5,000 per quarter. Cash contributions must be received by the Transfer Agent at least five days (but no more then 30 days) before the payment date of a dividend or distributions. Whenever the Trust declares a dividend payable in cash or shares, the Transfer Agent, acting on behalf of each participating shareholder, will take the dividend in shares only if the net asset value is lower than the market price plus an estimated brokerage commission as of the close of business on the valuation day. The valuation day is the last day preceding the day of dividend payment. When the dividend is to be taken in shares, the number of shares to be received is determined by dividing the cash dividend by the net asset value as of the close of business on the valuation date or, if greater than net asset value, 95% of the closing share price. If the net asset value of the shares is higher than the market value plus an estimated commission, the Transfer Agent, consistent with obtaining the best price and execution, will buy shares on the open market at current prices promptly after the dividend payment date. The reinvestment of dividends does not, in anyway, relieve participating shareholders of any federal, state or local tax. For federal income tax purposes, the amount reportable in respect of a dividend received in newly-issued shares of the Trust will be the fair market value of the shares received, which will be reportable as ordinary income and/or capital gains. As compensation for its services, the Transfer Agent receives a fee of 5% of any dividend and cash contribution (in no event in excess of $2.50 per distribution per shareholder.) Any questions regarding the Plan should be addressed to Shareholder Financial Services, Inc., Agent for MassMutual Participation Investors' Dividend Reinvestment and Cash Purchase Plan, P.O. Box 173673, Denver, CO 80217-3673. 41 [LOGO] MASSMUTUAL PARTICIPATION INVESTORS PI3344 ITEM 2. CODE OF ETHICS. Not applicable for this filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for this filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for this filing. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for this filing. ITEM 6. SCHEDULE OF INVESTMENTS A schedule of investments for the Registrant is included as part of this report to shareholders under item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES. Not applicable for this filing. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable for this filing. There have been no changes in any of the Portfolio Managers identified in the Registrant's most recent annual report on Form N-CSR. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable for this filing. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable for this filing. ITEM 11. CONTROLS AND PROCEDURES. (a) The principal executive officer and principal financial officer of the Registrant evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing date of this report and based on that evaluation have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that material information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the Registrant's second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) ANY CODE OF ETHICS, OR AMENDMENTS THERETO, THAT IS THE SUBJECT OF DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT INTENDS TO SATISFY THE ITEM 2 REQUIREMENTS THROUGH THE FILING OF AN EXHIBIT. None. (a)(2) A SEPARATE CERTIFICATION FOR EACH PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT AS REQUIRED BY RULE 30a-2 UNDER THE ACT. Attached hereto as EX-99.31.1 Attached hereto as EX-99.31.2 (a)(3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23c-1 UNDER THE ACT (17 CFR 270.23c-1) SENT OR GIVEN DURING THE PERIOD COVERED BY THE REPORT BY OR ON BEHALF OF THE REGISTRANT TO 10 OR MORE PERSONS. Not Applicable for this filing. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Attached hereto as EX-99.32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): MassMutual Participation Investors ---------------------------------- By: /s/ Clifford M Noreen ---------------------------------- Clifford M Noreen, President ---------------------------------- Date: August 27, 2008 ---------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Clifford M Noreen ---------------------------------- Clifford M Noreen, President ---------------------------------- Date: August 27, 2008 ---------------------------------- By: /s/ James M. Roy ---------------------------------- James M. Roy, Vice President, and Chief Financial Officer ---------------------------------- Date: August 27, 2008 ----------------------------------