Edgar Filing: BABSON CAPITAL PARTICIPATION INVESTORS

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-Q

Quarterly Schedule of Portfolio Holdings of

Registered Management Investment Company

Investment Company Act file number 811-05531

Babson Capital Participation Investors

(Exact name of registrant as specified in charter)

1500 Main Street, Springfield, MA 01115

(Address of principal executive offices) (Zip code)

Christopher A. DeFrancis, Vice President, Secretary and Chief Legal Officer

1500 Main Street, Suite 2800, Springfield, MA 01115

(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: 09/30/14

___________________

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities - 72.49%: (A)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

Private Placement Investments - 59.60%

1492 Acquisition LLC

A leading producer of premium Italian cured meats and deli meats in the U.S.

14% Senior Subordinated Note due 2019

674,119

10/17/12

663,287

656,110

Limited Liability Company Unit Class A Common (B)

11,364 uts.

10/17/12

11,364

23,351

Limited Liability Company Unit Class A Preferred (B)

102 uts.

10/17/12

102,270

114,802

776,921

794,263

A H C Holding Company, Inc.

A designer and manufacturer of boilers and water heaters for the commercial sector.

Limited Partnership Interest (B)

12.26% int.

11/21/07

96,028

268,077

A S C Group, Inc.

A designer and manufacturer of high reliability encryption equipment, communications products, computing systems and electronic components primarily for the military and aerospace sectors.

14% Senior Subordinated Note due 2020	$	1,038,842	12/20/13	1,019,796	1,059,619
Limited Liability Company Unit Class A (B)		3,094 uts.	*	153,704	252,387
Limited Liability Company Unit Class B (B)		1,479 uts.	10/09/09	52,999	120,646
* 10/09/09 and 12/20/13.				1,226,499	1,432,652

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 2015 (D)	$	420,000	05/15/08	413,944	210,000
13% Senior Subordinated Note due 2015 (D)	$	420,000	05/15/08	384,627	-
Common Stock (B)		60,000 shs.	05/15/08	60,000	-
Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B)		21,099 shs.	05/15/08	35,654	-
				894,225	210,000
ABC Industries, Inc.
A manufacturer of mine and tunneling ventilation products in the U.S.
13% Senior Subordinated Note due 2019	$	500,000	08/01/12	458,357	505,000
Preferred Stock Series A (B)		125,000 shs.	08/01/12	125,000	205,601
Warrant, exercisable until 2022, to purchase common stock at $.02 per share (B)		22,414 shs.	08/01/12	42,446	34,743
				625,803	745,344
ACP Cascade Holdings LLC
A manufacturer and distributor of vinyl windows and patio doors throughout the northwestern United States.
Limited Liability Company Unit Class B (B)		32 uts.	11/09/12	-	-

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS(CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

Advanced Manufacturing Enterprises LLC
A designer and manufacturer of large, custom gearing products for a number of critical customer applications.
14% Senior Subordinated Note due 2018	$	1,134,615		12/07/12	$	1,121,321	$	1,128,253
Limited Liability Company Unit (B)	1,431 uts.			*		143,077		135,637
* 12/07/12 and 07/11/13.						1,264,398		1,263,890

Advanced Technologies Holdings
A provider of factory maintenance services to industrial companies.
Preferred Stock Series A (B)	332 shs.			12/27/07		164,016		569,025
Convertible Preferred Stock Series B (B)	28 shs.			01/04/11		21,600		47,709
						185,616		616,734
All Current Holding Company
A specialty re-seller of essential electrical parts and components primarily serving wholesale distributors.
Common Stock (B)	713 shs.			09/26/08		71,303		143,369
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	507 shs.			09/26/08		46,584		101,947
						117,887		245,316
American Hospice Management Holding LLC
A for-profit hospice care provider in the United States.
12% Senior Subordinated Note due 2014	$	1,237,502		*		1,237,097		1,175,627
Preferred Class A Unit (B)	1,706 uts.			**		170,600		-
Preferred Class B Unit (B)	808 uts.			06/09/08		80,789		99,345
Common Class B Unit (B)	16,100 uts.			01/22/04		1		-
Common Class D Unit (B)	3,690 uts.			09/12/06		-		-
* 01/22/04 and 06/09/08.						1,488,487		1,274,972
** 01/22/04 and 09/16/06.

AMS Holding LLC
A leading multi-channel direct marketer of high-value collectible coins and proprietary-branded jewelry and watches.
Limited Liability Company Unit Class A Preferred (B)	114 uts.			10/04/12		113,636		259,206

Arch Global Precision LLC
A leading manufacturer of high tolerance precision components and consumable tools.
14.75% Senior Subordinated Note due 2018	$	809,261		12/21/11		795,148		825,447
Limited Liability Company Unit Class B (B)	26 uts.			12/21/11		28,418		82,769
Limited Liability Company Unit Class C (B)	224 uts.			12/21/11		221,582		666,604
						1,045,148		1,574,820

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

ARI Holding Corporation
A leading national supplier of products used primarily by specialty contractors.
11.5% Senior Subordinated Note due 2020	$	1,693,960		*	$	1,667,715	$	1,689,953
Limited Partnership Interest	524 uts.			08/01/14		523,950		373,869
* 05/21/13 and 08/01/14.						2,191,665		2,063,822

Arrow Tru-Line Holdings, Inc.
A manufacturer of hardware for residential and commercial overhead garage doors in North America.
12% Senior Subordinated Note due 2016	$	157,795		10/16/09		140,234		157,795
Preferred Stock (B)	33 shs.			10/16/09		33,224		118,313
Common Stock (B)	263 shs.			05/18/05		263,298		19,947
Warrant, exercisable until 2014, to purchase common stock at $.01 per share (B)	69 shs.			05/18/05		59,362		5,230
						496,118		301,285
Avantech Testing Services LLC

A manufacturer of custom Non-Destructive Testing (“NDT”) systems and provider of NDT and inspections services primarily to the oil country tubular goods market.

15% Senior Subordinated Note due 2020	$	495,937	07/31/14	486,278	495,099
Limited Liability Company Unit	36,964 uts.		07/31/14	369,643	351,161
				855,921	846,260
Baby Jogger Holdings LLC
A designer and marketer of premium baby strollers and stroller accessories.
14% Senior Subordinated Note due 2019	$	942,213	04/20/12	928,315	951,635
Common Stock (B)	754 shs.		04/20/12	75,376	132,805
				1,003,691	1,084,440
Blue Wave Products, Inc.
A distributor of pool supplies.
10% Senior Secured Term Note due 2018	$	317,730	10/12/12	313,067	317,730
13% Senior Subordinated Note due 2019	$	324,051	10/12/12	305,018	326,573
Common Stock (B)	51,064 shs.		10/12/12	51,064	85,982
Warrant, exercisable until 2022, to purchase common stock at $.01 per share (B)	20,216 shs.		10/12/12	20,216	34,040
				689,365	764,325
BP SCI LLC
A leading value-added distributor of branded pipes, valves, and fittings (PVF) to diversified end markets.
14% Senior Subordinated Note due 2018	$	1,083,231	10/17/12	1,067,363	1,094,064
Limited Liability Company Unit Class A (B)	417 uts.		10/17/12	41,667	135,136
Limited Liability Company Unit Class B (B)	167 uts.		10/17/12	166,666	204,384
				1,275,696	1,433,584

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

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 2015	$	1,207,902		06/30/06	$	1,205,503	$	1,181,543
Preferred Stock Class A (B)	465 shs.			06/30/06		141,946		110,914
Common Stock (B)	1 sh.			06/30/06		152		-
Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B)	164 shs.			06/30/06		48,760		38,980
						1,396,361		1,331,437
C D N T, Inc.
A value-added converter and distributor of specialty pressure sensitive adhesives, foams, films, and foils.
12.5% Senior Subordinated Note due 2015	$	429,070		08/07/08		421,725		429,070
Common Stock (B)	41,860 shs.			08/07/08		41,860		98,784
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	32,914 shs.			08/07/08		32,965		77,673
						496,550		605,527
Capital Specialty Plastics, Inc.
A producer of desiccant strips used for packaging pharmaceutical products.
Common Stock (B)	55 shs.			*		252		787,507
*12/30/97, 05/29/99 and 02/28/01.

CG Holdings Manufacturing Company
A coating provider serving the automotive, agricultural, heavy truck and other end markets.
13% Senior Subordinated Note due 2019	$	1,412,605		*		1,340,747		1,443,693
Preferred Stock (B)	1,350 shs.			*		134,972		140,472
Preferred Stock (B)	489 shs.			*		48,721		50,913
Common Stock (B)	140 shs.			*		14,864		-
Warrant, exercisable until 2023, to purchase common stock at $.01 per share (B)	58 shs.			05/09/13		5,430		-
*05/09/13 and 11/01/13.						1,544,734		1,635,078

CHG Alternative Education Holding Company

A leading provider of publicly-funded, for profit pre-K-12 education services targeting special needs children at therapeutic day schools and “at risk” youth through alternative education programs.

13.5% Senior Subordinated Note due 2018	$	753,647	01/19/11	728,089	761,184
14% Senior Subordinated Note due 2019	$	195,870	08/03/12	192,916	197,828
Common Stock (B)	375 shs.		01/19/11	37,500	57,107
Warrant, exercisable until 2021, to purchase common stock at $.01 per share (B)	295 shs.		01/19/11	29,250	44,889
				987,755	1,061,008

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

Church Services Holding Company
A provider of diversified residential services to homeowners in the Houston, Dallas, and Austin markets.
14.5% Senior Subordinated Note due 2018	$	420,549		03/26/12	$	411,172	$	420,663
10% Senior Subordinated Note due 2015	$	6,025		09/15/14		6,025		6,027
Common Stock (B)	1,327 shs.			*		132,700		66,862
Warrant, exercisable until 2022, to purchase common stock at $.01 per share (B)	57 shs.			03/26/12		5,740		2,872
* 03/26/12, 05/25/12 and 06/19/12.						555,637		496,424

Clough, Harbour and Associates
An engineering service firm that is located in Albany, NY.
Preferred Stock (B)	147 shs.			12/02/08		146,594		211,819

Connecticut Electric, Inc.
A supplier and distributor of electrical products sold into the retail and wholesale markets.
Limited Liability Company Unit Class A (B)	82,613 uts.			01/12/07		82,613		59,984
Limited Liability Company Unit Class C (B)	59,756 uts.			01/12/07		59,756		46,496
Limited Liability Company Unit Class D (B)	671,525 uts.			05/03/10		-		749,628
Limited Liability Company Unit Class E (B)	1,102 uts.			05/03/10		-		-
						142,369		856,108
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		302,691
Preferred Stock Series C (B)	3,748 shs.			07/05/07		125,207		980,238
Common Stock (B)	380 shs.			07/05/07		4		174
Limited Partnership Interest (B)	6.88% int.			*		103,135		-
*08/12/04 and 01/14/05.						599,142		1,283,103

CorePharma LLC
A manufacturer of oral dose generic pharmaceuticals targeted at niche applications.
Warrant, exercisable until 2015, to purchase common stock at $.001 per share (B)	10 shs.			08/04/05		72,617		232,303

Crane Rental Corporation
A crane rental company since 1960, headquartered in Florida.
13% Senior Subordinated Note due 2015	$	1,032,750		08/21/08		1,009,377		1,032,750
Common Stock (B)	135,000 shs.			08/21/08		135,000		70,263
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	72,037 shs.			08/21/08		103,143		37,493
						1,247,520		1,140,506

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

CTM Holding, Inc.
A leading owner and operator of coin-operated children’s rides, penny presses and candy kiosks in the U.S.
15% Senior Subordinated Note due 2019	$	1,212,537		11/22/13	$	1,191,121	$	1,242,637
Common Stock (B)	31,044 shs.			11/22/13		443,182		372,508
						1,634,303		1,615,145
Custom Engineered Wheels, Inc.

A manufacturer of custom engineered, non-pneumatic plastic wheels and plastic tread cap tires used primarily for lawn and garden products and wheelchairs.

Preferred Stock PIK (B)	156 shs.		10/26/09	156,468	228,842
Preferred Stock Series A (B)	114 shs.		10/27/09	104,374	167,196
Common Stock (B)	38 shs.		10/26/09	38,244	25,120
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	28 shs.		10/27/09	25,735	18,354
				324,821	439,512
DPL Holding Corporation
A distributor and manufacturer of aftermarket undercarriage parts for medium and heavy duty trucks and trailers.
14% Senior Subordinated Note due 2019	$	1,342,333	05/04/12	1,322,822	1,334,277
Preferred Stock (B)	25 shs.		05/04/12	252,434	288,094
Common Stock (B)	25 shs.		05/04/12	28,048	71,226
				1,603,304	1,693,597
E S P Holdco, Inc.
A manufacturer of power protection technology for commercial office equipment, primarily supplying the office equipment dealer network.
Common Stock (B)		349 shs.	01/08/08	174,701	247,931

Eatem Holding Company

A developer and manufacturer of savory flavor systems for soups, sauces, gravies, and other products produced by food manufacturers for retail and foodservice end products.

12.5% Senior Subordinated Note due 2018	$	950,000	02/01/10	878,917	959,500
Common Stock (B)	50 shs.		02/01/10	50,000	74,031
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	119 shs.		02/01/10	107,100	176,520
				1,036,017	1,210,051
ELT Holding Company
A provider of web-based ethics and compliance training solutions for companies in the United States.
Common Stock (B)	41 shs.		03/01/12	90,909	216,563

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

EPM Holding Company
A provider of non-discretionary regulatory driven engineering services that support mission critical safety and operational aspects of nuclear power plants.
14.5% Senior Subordinated Note due 2019	$	592,713		07/26/13	$	582,748	$	604,567
Common Stock (B)	1,535 shs.			07/26/13		153,474		99,755
						736,222		704,322
ERG Holding Company LLC
A provider of inpatient and outpatient clinical trial services to pharmaceutical companies and contract research organizations.
13.5% Senior Subordinated Note due 2019	$	937,235		04/04/14		919,777		943,673
Common Stock (B)	31 shs.			04/04/14		77,533		77,525
						997,310		1,021,198
F F C Holding Corporation
A leading U.S. manufacturer of private label frozen novelty and ice cream products.
Limited Liability Company Unit Preferred (B)	171 uts.			09/27/10		58,345		207,629
Limited Liability Company Unit (B)	171 uts.			09/27/10		17,073		29,308
						75,418		236,937

F G I Equity LLC
A manufacturer of a broad range of filters and related products that are used in commercial, light industrial, healthcare, gas turbine, nuclear, laboratory, clean room, hotel, educational system, and food processing settings.
Limited Liability Company Unit (B)	80,559 uts.	04/15/14	-	80,559
Limited Liability Company Unit Class B-1 (B)	65,789 uts.	12/15/10	65,789	109,214
Limited Liability Company Unit Class B-2 (B)	8,248 uts.	12/15/10	8,248	13,692
Limited Liability Company Unit Class B-3 (B)	6,522 uts.	08/30/12	15,000	12,438
Limited Liability Company Unit Class C (B)	1,575 uts.	12/20/10	16,009	23,221
			105,046	239,124
G C Holdings
A leading manufacturer of gaming tickets, industrial recording charts, security-enabled point-of sale receipts, and medical charts and supplies.
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	198 shs.	10/19/10	46,958	110,776

GD Dental Services LLC
A provider of convenient “onestop” general, specialty, and cosmetic dental services with 21 offices located throughout South and Central Florida.
Limited Liability Company Unit Common (B)	767 uts.	10/05/12	767	38,719
Limited Liability Company Unit Preferred (B)	76 uts.	10/05/12	75,920	84,330
			76,687	123,049

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

GenNx Novel Holding, Inc.
A manufacturer and distributor of nutraceutical ingredients.
13% Senior Subordinated Note due 2020	$	1,574,145		03/27/14	$	1,544,635	$	1,582,730
Common Stock (B)	155 shs.			03/27/14		155,000		138,817
						1,699,635		1,721,547

gloProfessional Holdings, Inc.

A marketer and distributor of premium mineral-based cosmetics, cosmeceuticals and professional hair care products to the professional spa and physician’s office channels.

14% Senior Subordinated Note due 2019	$	1,166,467	03/27/13	1,147,861	1,170,317
Common Stock (B)	1,181 shs.		03/27/13	118,110	151,188
				1,265,971	1,321,505
Golden County Foods Holding, Inc.
A manufacturer of frozen appetizers and snacks.
14% Senior Subordinated Note due 2019 (D)	$	38,950	11/13/13	231,183	-
Preferred Stock (B)	151,643 shs.		11/13/13	77,643	-
Preferred Stock Series F (B)	77,900 shs.		11/13/13	924,731	-
				1,233,557	-
GTI Holding Company
A designer, developer, and marketer of precision specialty hand tools and handheld test instruments.
12% Senior Subordinated Note due 2020	$	727,865	02/05/14	680,264	731,286
Common Stock (B)	846 shs.		02/05/14	84,636	73,172
Warrant, exercisable until 2024, to purchase common stock at $.01 per share (B)	397 shs.		02/05/14	36,816	34,337
				801,716	838,795
Handi Quilter Holding Company
A designer and manufacturer of long-arm quilting machines and related components for the consumer quilting market.
Common Stock (B)	38 shs.		11/14/11	38,461	131,232
Warrant, exercisable until 2021, to purchase common stock at $.01 per share (B)	28 shs.		11/14/11	25,596	93,971
				64,057	225,203
Hartland Controls Holding Corporation
A manufacturer and distributor of electronic and electromechanical components.
14% Senior Subordinated Note due 2019	$	1,089,948	02/14/14	1,069,856	1,122,497
Common Stock (B)	821 shs.		02/14/14	822	63,584
Preferred Stock Series A (B)	2,547 shs.		02/14/14	254,734	264,304
				1,325,412	1,450,385

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

Healthcare Direct Holding Company
A direct-to-customer marketer of discount dental plans.
14% Senior Subordinated Note due 2019 (D)	$	735,452		03/09/12	$	723,238	$	723,327
16% Senior Subordinated PIK Note due 2019	$	46,370		03/31/14		46,370		45,564
Common Stock (B)	517 shs.			03/09/12		51,724		58,902
						821,332		827,793
HHI Group, LLC
A developer, marketer, and distributor of hobby-grade radio control products.
14% Senior Subordinated Note due 2020	$	1,545,035		01/17/14		1,516,945		1,552,484
Limited Liability Company Unit (B)	102 uts.			01/17/14		101,563		84,037
						1,618,508		1,636,521
Hi-Rel Group LLC

A manufacturer and distributor of precision metal piece parts for the microelectronic packaging industry, serving the aerospace/ defense, telecommunications, and medical end markets.

12% Senior Subordinated Note due 2018	$	703,125	04/15/13	667,202	698,815
Limited Liability Company Unit (B)	234 uts.		04/15/13	234,375	96,328
Warrant, exercisable until 2020, to purchase common stock at $.01 per share (B)	37,177 shs.		04/15/13	32,344	14,551
				933,921	809,694
HOP Entertainment LLC
A provider of post production equipment and services to producers of television shows and motion pictures.
Limited Liability Company Unit Class F (B)	47 uts.		10/14/11	-	-
Limited Liability Company Unit Class G (B)	114 uts.		10/14/11	-	-
Limited Liability Company Unit Class H (B)	47 uts.		10/14/11	-	-
Limited Liability Company Unit Class I (B)	47 uts.		10/14/11	-	-
				-	-
Hospitality Mints Holding Company
A manufacturer of individually-wrapped imprinted promotional mints.
12% Senior Subordinated Note due 2016	$	1,098,837	08/19/08	1,069,741	1,092,999
Common Stock (B)	251 shs.		08/19/08	251,163	85,737
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	65 shs.		08/19/08	60,233	22,161
				1,381,137	1,200,897
HVAC Holdings, Inc.
A provider of integrated energy efficiency services and maintenance programs for HVAC systems.
14% Senior Subordinated Note due 2019	$	1,182,884	09/27/12	1,164,576	1,189,202
Preferred Stock Series A (B)	1,127 shs.		09/27/12	112,726	139,257
Common Stock (B)	910 shs.		09/27/12	910	2,147
				1,278,212	1,330,606

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

Ideal Tridon Holdings, Inc.
A designer and manufacturer of clamps and couplings used in automotive and industrial end markets.
Common Stock (B)	93 shs.			10/27/11	$	92,854	$	197,968

Insurance Claims Management, Inc.
A third party administrator providing auto and property claim administration services for insurance companies.
Common Stock (B)	47 shs.			02/27/07		1,424		325,945

J A C Holding Enterprises, Inc.
A supplier of luggage racks and accessories to the original equipment manufacturers.
Preferred Stock A (B)	165 shs.			12/20/10		165,000		-
Preferred Stock B (B)	0.06 shs.			12/20/10		-		-
Common Stock (B)	33 shs.			12/20/10		1,667		-
Warrant, exercisable until 2020, to purchase common stock at $.01 per share (B)	12 shs.			12/20/10		105,643		-
						272,310		-
Janus Group Holdings LLC
A manufacturer of roll-up doors and hallway systems that are primarily used in self-storage facilities.
13.5% Senior Subordinated Note due 2019	$	1,342,391		12/11/13		1,318,315		1,382,663
Limited Liability Company Unit Class A (B)	283 uts.			12/11/13		232,837		567,229
						1,551,152		1,949,892
JMH Investors LLC
A developer and manufacturer of custom formulations for a wide variety of foods.
14.25% Senior Subordinated Note due 2019	$	1,075,706		12/05/12		1,058,602		1,011,322
Limited Liability Company Unit (B)	217,391 uts.			12/05/12		217,391		98,234
						1,275,993		1,109,556
K & N Parent, Inc.
A manufacturer and supplier of automotive aftermarket performance air filters and intake systems.
Preferred Stock Series A (B)	102 shs.			12/23/11		-		-
Preferred Stock Series B (B)	29 shs.			12/23/11		-		-
Common Stock (B)	163 shs.			*		6,522		132,624
* 12/23/11 and 06/30/14.						6,522		132,624

K N B Holdings Corporation
A designer, manufacturer and marketer of products for the custom framing market.
Common Stock (B)	71,053 shs.			05/24/06		71,053		68,148
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	43,600 shs.			05/25/06		37,871		41,817
						108,924		109,965

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

K P I Holdings, Inc.

The largest player in the U.S. non-automotive, non-ferrous die casting segment.

Convertible Preferred Stock Series C (B)

29 shs.

06/30/09

29,348

88,547

Convertible Preferred Stock Series D (B)

13 shs.

09/17/09

12,958

38,880

Common Stock (B)

235 shs.

07/15/08

234,783

168,560

Warrant, exercisable until 2018, to purchase

common stock at $.01 per share (B)

51 shs.

07/16/08

50,836

36,501

Warrant, exercisable until 2018, to purchase

common stock at $.01 per share (B)

67 shs.

09/17/09

48,390

327,925

380,878

LPC Holding Company

A designer and manufacturer of precision-molded silicone rubber components that are utilized in the medical and automotive end markets.

Common Stock (B)

105 shs.

08/15/11

105,019

147,625

M V I Holding, Inc.

A manufacturer of large precision machined metal components used in equipment which services a variety of industries, including the oil and gas, mining, and defense markets.

Common Stock (B)	32 shs.		09/12/08	32,143	-
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	35 shs.		09/12/08	34,714	-
				66,857	-
Mail Communications Group, Inc.
A provider of mail processing and handling services, lettershop services, and commercial printing services.
Limited Liability Company Unit (B)	12,764 uts.		*	166,481	177,028
Warrant, exercisable until 2017, to purchase common stock at $.01 per share (B)	1,787 shs.		05/04/07	22,781	24,785
* 05/04/07 and 01/02/08.				189,262	201,813

Manhattan Beachwear Holding Company
A designer and distributor of women’s swimwear.
12.5% Senior Subordinated Note due 2018	$	419,971	01/15/10	390,193	419,971
15% Senior Subordinated Note due 2018	$	113,118	10/05/10	111,884	112,569
Common Stock (B)	35 shs.		10/05/10	35,400	82,998
Common Stock (B)	118 shs.		01/15/10	117,647	275,841
Warrant, exercisable until 2019, to purchase common stock at $.01 per share (B)	104 shs.		10/05/10	94,579	244,118
				749,703	1,135,497

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

MedSystems Holdings LLC

A manufacturer of enteral feeding products, such as feeding tubes and other products related to assisted feeding.

Preferred Unit (B)

66 uts.

08/29/08

66,451

83,821

Common Unit Class A (B)

671 uts.

08/29/08

671

96,410

Common Unit Class B (B)

263 uts.

08/29/08

63,564

37,821

130,686

218,052

Merex Holding Corporation

A provider of after-market spare parts and components, as well as Maintenance, Repair and Overhaul services for “out of production” or “legacy” aerospace and defense systems that are no longer effectively supported by the original equipment manufacturers.

14% Senior Subordinated Note due 2019	$	454,295	09/22/11	448,144	454,295
Limited Liability Company Unit Series A	228 uts.		05/07/14	14,760	11,341
Limited Liability Company Unit Series B (B)	155,945 uts.		09/22/11	155,945	149,873
				618,849	615,509
MicroGroup, Inc.
A manufacturer of precision parts and assemblies, and a value-added supplier of metal tubing and bars.
7% Senior Subordinated Note due 2014 (D)	$	902,727	*	865,676	-
Preferred Stock Series A (B)	519 shs.		10/10/12	498,734	-
Common Stock (B)	238 shs.		*	238,000	-
Common Stock Series B (B)	597 shs.		10/10/12	6	-
Warrant, exercisable until 2014, to purchase common stock at $.02 per share (B)	87 shs.		*	86,281	-
*08/12/05 and 09/11/06.				1,688,697	-

MES Partners, Inc.
An industrial service business offering an array of cleaning and environmental services to the Gulf Coast region of the U.S.
12% Senior Subordinated Note due 2021	$	1,082,045	09/30/14	1,060,410	1,079,511
Common Stock Class B (B)	219,545 shs.		09/30/14	219,545	208,568
				1,279,955	1,288,079
MNX Holding Company
An international third party logistics company providing customized logistics services to customers across the globe.
14% Senior Subordinated Note due 2019	$	1,252,274	11/02/12	1,232,608	1,155,158
Common Stock (B)	45 shs.		11/02/12	44,643	-
				1,277,251	1,155,158
Motion Controls Holdings
A manufacturer of high performance mechanical motion control and linkage products.
14.25% Senior Subordinated Note due 2020	$	969,976	11/30/10	959,792	969,976
Limited Liability Company Unit Class B-1 (B)	75,000 uts.		11/30/10	-	79,918
Limited Liability Company Unit Class B-2 (B)	6,801 uts.		11/30/10	-	7,247
				959,792	1,057,141

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

NABCO, Inc.

A producer of explosive containment vessels in the United States.

Common Stock (B)

429 shs.

12/20/12

306,091

NetShape Technologies, Inc.

A manufacturer of powder metal and metal injection molded precision components used in industrial, consumer, and other applications.

14% Senior Subordinated Note due 2015	$	1,061,463	02/02/07	1,048,639	1,013,273
Limited Partnership Interest of
Saw Mill PCG Partners LLC (B)	1.38% int.		02/01/07	588,077	-
Limited Liability Company Unit Class D of
Saw Mill PCG Partners LLC (B)	9 uts.		*	8,873	-
Limited Liability Company Unit Class D-1 of
Saw Mill PCG Partners LLC (B)	121 uts.		09/30/09	121,160	14,435
Limited Liability Company Unit Class D-2 of
Saw Mill PCG Partners LLC (B)	68 uts.		04/29/11	34,547	140,038
* 12/18/08 and 09/30/09.				1,801,296	1,167,746

Nicoat Acquisitions LLC

A manufacturer of water-based and ultraviolet coatings for high-performance graphic arts, packaging and other specialty coating applications.

14% Senior Subordinated Note due 2018	$	486,792	11/05/10	461,436	486,792
Limited Liability Company Unit Series B (B)	17,241 uts.		11/05/10	17,241	34,741
Limited Liability Company Unit Series B (B)	34,931 uts.		11/05/10	34,931	70,386
Limited Liability Company Unit Series F (B)	34,931 uts.		11/05/10	-	8,698
				513,608	600,617

Northwest Mailing Services, Inc.

A producer of promotional materials for companies that use direct mail as part of their customer retention and loyalty programs.

Limited Partnership Interest (B)	1,740 uts.		*	174,006	143,941
Warrant, exercisable until 2019, to purchase common stock at $.01 per share (B)	2,605 shs.		*	260,479	215,474
*07/09/09 and 08/09/10.				434,485	359,415

O E C Holding Corporation
A provider of elevator maintenance, repair and modernization services.
13% Senior Subordinated Note due 2018	$	444,445	06/04/10	423,174	444,445
Preferred Stock Series A (B)	554 shs.		06/04/10	55,354	24,804
Preferred Stock Series B (B)	311 shs.		06/04/10	31,125	-
Common Stock (B)	344 shs.		06/04/10	344	-
				509,997	469,249

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

P K C Holding Corporation

A manufacturer of plastic film and badges for the general industrial, medical, and food industries.

Preferred Stock Class A (B)

29 shs.

12/21/10

180,380

351,657

Common Stock (B)

29 shs.

12/21/10

13,500

181,324

193,880

532,981

P P T Holdings LLC

A high-end packaging solutions provider that targets customers who have multiple packaging needs, require a high number of low volume SKUs, short lead times, technical expertise, and overall supply chain management.

15% Senior Subordinated Note due 2017	$	1,001,150	12/20/10	990,702	1,001,150
Limited Liability Company Unit Class A (B)	33 uts.		12/20/10	106,071	139,255
Limited Liability Company Unit Class B (B)	33 uts.		12/20/10	1,072	40,883
				1,097,845	1,181,288

Pearlman Enterprises, Inc.

A developer and distributor of tools, equipment and supplies to the natural and engineered stone industry.

Preferred Stock Series A (B)	1,236 shs.		05/22/09	59,034	456,990
Preferred Stock Series B (B)	7,059 shs.		05/22/09	290,050	-
Common Stock (B)	21,462 shs.		05/22/09	993,816	-
				1,342,900	456,990
Petroplex Inv Holdings LLC
A leading provider of acidizing services to E&P customers in the Permian Basin.
16% Senior Subordinated Note due 2018	$	1,177,984	11/29/12	1,157,234	1,228,178
Limited Liability Company Unit (B)	156,250 uts.		11/29/12	156,250	229,503
				1,313,484	1,457,681

Polytex Holdings LLC

A manufacturer of water based inks and related products serving primarily the wall covering market.

13% Senior Subordinated Note due 2020	$	1,038,401	07/31/14	1,018,109	1,035,640
Limited Liability Company Unit	148,096 uts.		07/31/14	148,096	140,691
				1,166,205	1,176,331

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

Precision Wire Holding Company

A manufacturer of specialty medical wires that are used in non-elective minimally invasive surgical procedures.

Warrant, exercisable until 2019, to purchase

common stock at $.01 per share (B)

109 shs.

11/12/09

107,970

210,035

R A J Manufacturing Holdings LLC

A designer and manufacturer of women’s swimwear sold under a variety of licensed brand names.

8% Senior Subordinated Note due 2017

49,908

01/02/14

217,411

49,908

Limited Liability Company Unit (B)

1,497 uts.

12/15/06

149,723

37,324

Limited Liability Company Unit Class B Common (B)

6 uts.

01/02/14

219,593

54,742

Limited Liability Company Unit Class B-1 Preferred (B)

9 uts.

01/02/14

374,307

374,308

Warrant, exercisable until 2017, to purchase

common stock at $.01 per share (B)

2 shs.

12/15/06

69,609

17,613

1,030,643

533,895

REVSpring, Inc.

A provider of accounts receivable management and revenue cycle management services to customers in the healthcare, financial and utility industries.

14% Senior Subordinated Note due 2018	$	1,178,233	*	1,164,395	1,197,078
Limited Liability Company Unit Class A (B)	13,548 uts.		*	135,477	169,020
* 10/21/11 and 08/03/12.				1,299,872	1,366,098

Rose City Holding Company
A designer and printer of folding cartons and packaging for food and beverage manufacturers on the West Coast.
Preferred Stock (B)	39,062 shs.		12/11/12	39,062	45,626
Common Stock (B)	39 shs.		12/11/12	4	43,687
				39,066	89,313
Safety Infrastructure Solutions

A provider of trench safety equipment to a diverse customer base across multiple end markets in Texas and the Southwestern United States.

15% Senior Subordinated Note due 2018	$	843,750	*	834,773	852,188
Preferred Stock (B)	2,098 shs.		03/30/12	83,920	102,964
Common Stock (B)	983 shs.		03/30/12	9,830	46,154
* 03/30/12 and 05/16/13.				928,523	1,001,306

Sencore Holding Company

A designer, manufacturer, and marketer of decoders, receivers and modulators sold to broadcasters, satellite, cable and telecom operators for encoding/decoding analog and digital transmission video signals.

7% Senior Subordinated Note due 2015 (D)	$	1,404,092	01/15/09	826,004	280,818

Signature Systems Holding Company
A seller and installer of a variety of modular surfaces, industrial matting and related products used for ground protection.
12.5% Senior Subordinated Note due 2021	$	755,088	03/15/13	716,861	770,190
Common Stock (B)	76 shs.		03/15/13	75,509	165,494
Warrant, exercisable until 2023, to purchase common stock A at $.01 per share (B)	31 shs.		03/15/13	28,316	67,613
				820,686	1,003,297

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date		Cost		Fair Value

Smart Source Holdings LLC
A short-term computer rental company.
Limited Liability Company Unit (B)	328 uts.			*	$	261,262	$	460,993
Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B)	83 shs.			*		67,467		116,770
* 08/31/07 and 03/06/08.						328,729		577,763

SMB Machinery Holdings, Inc.
A reseller of used, rebuilt and refurbished packaging and processing equipment, primarily serving the bottling and food manufacturing industries.
14% Senior Subordinated Note due 2019	$	742,387		10/18/13		729,393		716,422
Common Stock (B)	841 shs.			10/18/13		84,100		-
						813,493		716,422
Spartan Foods Holding Company
A manufacturer of branded pizza crusts and pancakes.
14.25% Senior Subordinated Note due 2017	$	605,299		12/15/09		551,342		605,299
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	136 shs.			12/15/09		120,234		85,327
						671,576		690,626
Specialty Commodities, Inc.
A distributor of specialty food ingredients.
Common Stock (B)	16 shs.			10/23/08		158,824		415,436
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	6 shs.			10/23/08		53,285		156,946
						212,109		572,382
Stag Parkway Holding Company
A distributor of RV parts and accessories in the United States.
13% Senior Subordinated Note due 2018	$	1,152,104		12/19/12		1,110,920		1,152,104
Common Stock (B)	118 shs.			12/19/12		118,203		152,651
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	35 shs.			12/19/12		31,848		44,827
						1,260,971		1,349,582
Strahman Holdings Inc
A manufacturer of industrial valves and wash down equipment for a variety of industries, including chemical, petrochemical, polymer, pharmaceutical, food processing, beverage and mining.
14% Senior Subordinated Note due 2019	$	1,059,783		12/13/13		1,040,079		1,082,446
Preferred Stock Series A (B)		158,967 shs.		12/13/13		158,967		123,594
						1,199,046		1,206,040

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Principal Amount,

Shares, Units or

Corporate Restricted Securities: (A) (Continued)

Ownership

Percentage

Acquisition

Date

Cost

Fair Value

Strata/WLA Holding Corporation

A leading independent anatomic pathology laboratory that conducts over 320,000 tests annually to customers in 40 U.S. states and in Canada and Venezuela.

14.5% Senior Subordinated Note due 2018 (D)	$	959,148	07/01/11	$	943,703	$	-
Preferred Stock Series A (B)	76 shs.		07/01/11		76,046		-
					1,019,749		-
Sundance Investco LLC
A provider of post-production services to producers of movies and television shows.
Limited Liability Company Unit Class A (B)	3,405 uts.		03/31/10		-		-

Sunrise Windows Holding Company

A manufacturer and marketer of premium vinyl windows exclusively selling to the residential remodeling and replacement market.

14% Senior Subordinated Note due 2017	$	1,038,557	12/14/10	1,005,216	1,038,027
14% Senior Subordinated PIK Note due 2017	$	95,902	08/17/12	93,467	95,853
Common Stock (B)	38 shs.		12/14/10	38,168	30,254
Warrant, exercisable until 2020, to purchase common stock at $.01 per share (B)	37 shs.		12/14/10	37,249	29,525
				1,174,100	1,193,659
Synteract Holdings Corporation
A provider of outsourced clinical trial management services to pharmaceutical and biotechnology companies.
14% Senior Subordinated Note due 2019	$	2,028,477	09/02/08	1,972,019	1,829,477
Preferred Stock Series D (B)	257 shs.		02/27/13	25,678	-
Redeemable Preferred Stock Series A (B)	678 shs.		10/03/08	6,630	-
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	6,778 shs.		09/02/08	59,661	-
				2,063,988	1,829,477

Terra Renewal LLC

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.

10% Senior Subordinated Note due 2016 (D)	$	350,860	*	9,345	350,860
Common Stock Class B	32 shs.		*	-	-
Limited Partnership Interest of
Saw Mill Capital Fund V, LLC (B)	2.27% int.		**	65,387	-
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	41 shs.		04/28/06	33,738	-
* 04/28/06 and 09/13/06.				108,470	350,860

**03/01/05 and 10/10/08.

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

Corporate Restricted Securities: (A) (Continued)	Principal Amount, Shares, Units or Ownership Percentage		Acquisition Date	Cost		Fair Value

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.
3% Senior Subordinated Note due 2018 (D)	$	1,062,258	12/05/13	$	-	$	1,009,145
15% Senior Subordinated Note due 2020 (D)	$	46,798	12/05/13		219,203		-
Warrant, exercisable until 2023, to purchase common stock at $.01 per share (B)		28,079	12/05/13		-		-
					219,203		1,009,145
Transpac Holding Company
A designer, importer, and wholesaler of home décor and seasonal gift products.
12% Senior Subordinated Note due 2015 (D)	$	938,651	10/31/07		909,276		-
Common Stock (B)	110 shs.		10/31/07		110,430		-
Warrant, exercisable until 2015, to purchase common stock at $.01 per share (B)	50 shs.		10/31/07		46,380		-
					1,066,086		-
Tranzonic Holdings LLC
A producer of commercial and industrial supplies, such as safety products, janitorial supplies, work apparel, washroom and restroom supplies and sanitary care products.
14% Senior Subordinated Note due 2019	$	1,514,157	07/05/13		1,488,841		1,525,643
Limited Liability Company Unit Class A (B)	147,727 shs.		07/05/13		147,727		167,189
					1,636,568		1,692,832
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 2016	$	727,062	*		716,260		727,062
Preferred Stock Series B (B)	128 shs.		10/20/08		127,677		454,860
Common Stock (B)	393 shs.		*		423,985		24,154
Warrant, exercisable until 2017, to purchase common stock at $.02 per share (B)	81 shs.		*		84,650		4,988
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	558 shs.		10/20/08		-		34,304
* 07/19/05 and 12/22/05.					1,352,572		1,245,368

TruStile Doors, Inc.
A manufacturer and distributor of interior doors.
Limited Liability Company Unit (B)	5,888 uts.		02/28/11		78,125		219,025
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	3,060 shs.		04/11/03		36,032		31,747
					114,157		250,772

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date	Cost		Fair Value

U-Line Corporation
A manufacturer of high-end, built-in, undercounter ice making, wine storage and refrigeration appliances.
Common Stock (B)	96 shs.		04/30/04	$	96,400	$	234,588
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	122 shs.		04/30/04		112,106		296,885
					208,506		531,473
U M A Enterprises, Inc.
An importer and wholesaler of home décor products.
15% Senior Subordinated Note 2021	$	1,236,665	06/06/14		338,374		1,259,667
Warrant, exercisable until 2024, to purchase common stock at $.01 per share (B)	791 shs.		06/06/14		-		41,071
					338,374		1,300,738
Vitex Packaging Group, Inc.
A manufacturer of specialty packaging, primarily envelopes and tags used on tea bags.
Class B Unit (B)	406,525 uts.		10/29/09		184,266		-
Class C Unit (B)	450,000 uts.		10/29/09		413,244		78,922
Limited Liability Company Unit Class A (B)	383,011 uts.		*		229,353		-
Limited Liability Company Unit Class B (B)	96,848 uts.		07/19/04		96,848		-
* 07/19/04 and 10/29/09.					923,711		78,922

VP Holding Company
A provider of school transportation services for special-needs and homeless children in Massachusetts.
13% Senior Subordinated Note due 2020	$	501,842	03/31/14		492,420		515,330
Common Stock (B)	3,632 shs.		03/31/14		363,158		318,330
					855,578		833,660
Wellborn Forest Holding Company
A manufacturer of semi-custom kitchen and bath cabinetry.
8% Senior Subordinated Note due 2017 (D)	$	1,680,931	11/30/06		867,531		-
Common Stock (B)	101 shs.		11/30/06		101,250		-
Warrant, exercisable until 2016, to purchase common stock at $.01 per share (B)	51 shs.		11/30/06		45,790		-
					1,014,571		-
Wheaton Holding Corporation
A distributor and manufacturer of laboratory supply products and packaging.
Preferred Stock Series B (B)	703 shs.		06/08/10		70,308		103,791
Common Stock (B)	353 shs.		06/08/10		353		50,883
					70,661		154,674

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Principal Amount,
	Shares, Units or
Corporate Restricted Securities: (A) (Continued)	Ownership Percentage		Acquisition Date	Cost		Fair Value

Whitcraft Holdings, Inc.
A leading independent manufacturer of precision formed, machined, and fabricated flight-critical aerospace components.
12% Senior Subordinated Note due 2018	$	794,521	12/16/10	$	752,050	$	789,863
Common Stock (B)	205 shs.		12/16/10		205,480		80,162
Warrant, exercisable until 2018, to purchase common stock at $.01 per share (B)	55 shs.		12/16/10		49,334		21,542
					1,006,864		891,567
WP Supply Holding Corporation
A distributor of fresh fruits and vegetables to grocery wholesalers and foodservice distributors in the upper Midwest.
14.5% Senior Subordinated Note due 2018	$	913,965	11/03/11		901,995		932,243
Common Stock (B)	1,500 shs.		11/03/11		150,000		200,866
					1,051,995		1,133,109

Total Private Placement Investments (E)				$	84,008,596	$	83,562,794

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Interest			Due	Principal				Market
Corporate Restricted Securities: (A) (Continued)	Rate			Date	Amount		Cost		Value

Rule 144A Securities - 12.89%:

Bonds - 12.89%
Alliant Techsystems Inc.		5.250	%	10/01/21	$	500,000	$	500,000	$	501,250
Amsted Industries		5.375		09/15/24		240,000		240,000		232,800
ArcelorMittal		6.125		06/01/18		500,000		510,135		530,000
Belden Inc.		5.250		07/15/24		210,000		210,000		201,075
California Resources Corporation		6.000		11/15/24		480,000		480,000		493,200
CITGO Petroleum Corporation		6.250		08/15/22		425,000		425,000		442,000
Cornerstone Chemical Company		9.375		03/15/18		375,000		382,618		393,750
CTP Transportation Products, LLC		8.250		12/15/19		310,000		310,000		330,925
Endo Finance LLC		5.375		01/31/23		500,000		490,131		477,500
First Data Corporation		7.375		06/15/19		250,000		250,000		263,150
Forest Laboratories, Inc.		5.000		12/15/21		370,000		370,000		395,486
Forest Laboratories, Inc.		4.875		02/15/21		500,000		500,000		533,390
Hercules Offshore, Inc.		7.500		10/01/21		750,000		750,000		603,750
Hilcorp Energy Company		7.625		04/15/21		325,000		313,798		342,062
Hilcorp Energy Company		5.000		12/01/24		335,000		335,000		322,438
Hilton Worldwide Holdings, Inc.		5.625		10/15/21		750,000		750,000		772,500
J.B. Poindexter Co., Inc.		9.000		04/01/22		500,000		500,000		536,875
JBS USA Holdings, Inc.		7.750		10/28/20		375,000		393,858		398,437
Jupiter Resources Inc.		8.500		10/01/22		500,000		476,206		443,750
Lamar Media Corporation		5.375		01/15/24		160,000		160,000		160,400
LBC Tank Terminals Holding Netherlands B.V.		6.875		05/15/23		663,000		682,849		706,095
Mallinckrodt PLC		5.750		08/01/22		500,000		500,000		503,750
MEG Energy Corporation		6.375		01/30/23		500,000		500,000		504,375
MEG Energy Corporation		7.000		03/31/24		500,000		500,000		517,500
Niska Gas Storage Partners LLC		6.500		04/01/19		500,000		500,000		437,500
NRG Energy, Inc.		6.250		07/15/22		500,000		500,000		512,813
Numericable Group SA		4.875		05/15/19		240,000		240,000		237,000
NXP BV/NXP Funding LLC		3.750		06/01/18		750,000		750,000		736,875
Paperworks Industries, Inc.		9.500		08/15/19		500,000		511,612		508,750
Penske Corporation		4.875		07/11/22		500,000		498,226		537,322
RKI Inc.		8.500		08/01/21		500,000		502,232		516,250
Prestige Brands Holdings, Inc.		5.375		12/15/21		650,000		650,000		611,000

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

					Shares or
Corporate Restricted Securities: (A) (Continued)	Interest			Due	Principal				Market
Corporate Restricted Securities: (A) (Continued)	Rate			Date	Amount		Cost		Value

Safway Group Holding LLC/Finance Corporation		7.000	%	05/15/18	$	250,000	$	250,000	$	254,375
Sirius XM Radio Inc.		5.875		10/01/20		445,000		445,000		450,563
Sprint Corporation		7.125		06/15/24		155,000		155,000		156,163
Topaz Marine S.A.		8.625		11/01/18		500,000		500,000		517,600
Univision Communications		5.125		05/15/23		160,000		160,000		162,000
Valeant Pharmaceuticals International		7.000		10/01/20		250,000		250,656		261,250
Welltec A/S		8.000		02/01/19		375,000		369,673		388,125
West Corporation		5.375		07/15/22		500,000		490,171		461,250
William Lyon Homes		7.000		08/15/22		500,000		500,000		506,250
XPO Logistics, Inc.		7.875		09/01/19		210,000		210,000		216,825
Total Bonds								18,012,165		18,078,369

Convertible Preferred Stock - 0.00%
ETEX Corporation (B)						194		-		-
Total Convertible Preferred Stock								-		-

Preferred Stock - 0.00%
TherOX, Inc. (B)						26		-		-
Total Preferred Stock								-		-

Common Stock - 0.00%
Touchstone Health Partnership (B)						292		-		-
Total Common Stock								-		-

Total Rule 144A Securities								18,012,165		18,078,369

Total Corporate Restricted Securities							$	102,020,761	$	101,641,163

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Interest			Due	Principal				Market
Corporate Public Securities - 30.74%: (A)	Rate			Date	Amount		Cost		Value

Bank Loans - 0.22%
American Energy - Marcellus, LLC		5.250	%	07/09/21	$	139,318		138,639		137,968
Aquilex Holdings LLC		5.250		12/31/20		170,119		169,736		168,134
Total Bank Loans								308,375		306,102

Bonds - 30.51%
AAR Corporation		7.250	%	01/15/22	$	1,000,000	$	1,054,036	$	1,075,000
Access Midstream Partners, L.P.		4.875		03/15/24		500,000		500,000		511,250
Accuride Corp		9.500		08/01/18		500,000		486,764		521,250
ADT Corporation		6.250		10/15/21		500,000		517,213		517,500
Alcoa, Inc.		6.150		08/15/20		600,000		623,917		661,296
Alliant Techsystems Inc.		6.875		09/15/20		500,000		530,057		537,500
Ally Financial, Inc.		5.500		02/15/17		750,000		759,121		780,000
Alta Mesa Financial Services		9.625		10/15/18		750,000		732,692		776,250
Anixter, Inc.		5.125		10/01/21		165,000		165,000		162,938
Antero Resources Corporation		5.375		11/01/21		395,000		395,000		393,025
American Axle & Manufacturing, Inc.		5.125		02/15/19		120,000		120,000		119,400
Anglogold Holdings PLC		5.375		04/15/20		600,000		604,178		602,466
Avis Budget Car Rental		9.750		03/15/20		375,000		375,000		412,500
B E Aerospace, Inc.		6.875		10/01/20		250,000		255,446		266,875
B&G Foods, Inc.		4.625		06/01/21		440,000		440,000		419,100
Bank of America Corporation		4.000		04/01/24		500,000		498,202		505,211
Bill Barrett Corporation		7.000		10/15/22		500,000		482,088		496,250
Bonanza Creek Energy, Inc.		5.750		02/01/23		500,000		500,000		480,000
Braskem Finance Ltd.		6.450		02/03/24		375,000		375,000		390,000
Brunswick Corporation		7.125		08/01/27		500,000		504,558		540,000
Calumet Specialty Products Partners L.P.		7.625		01/15/22		500,000		502,492		507,500
Calpine Corporation		5.750		01/15/25		340,000		340,000		330,225
CCO Holdings Capital Corporation		5.250		09/30/22		500,000		495,804		489,375
CCO Holdings Capital Corporation		5.750		01/15/24		500,000		483,396		497,500
Centurytel, Inc.		5.000		02/15/15		500,000		501,358		503,750
CHC Helicopter SA		9.250		10/15/20		900,000		845,060		958,500
Chrysler Group, LLC		8.000		06/15/19		210,000		225,503		222,863
Chrysler Group, LLC		8.250		06/15/21		210,000		230,482		228,900
Cimarex Energy Co.		5.875		05/01/22		500,000		535,098		537,500
CIT Group, Inc.		5.000		08/15/22		500,000		500,000		501,250
CIT Group, Inc.		3.875		02/19/19		500,000		500,000		491,250
Clearwater Paper Corporation		4.500		02/01/23		500,000		495,621		477,500
Coeur d’Alene Mines Corporation		7.875		02/01/21		500,000		501,648		468,750

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Interest			Due	Principal				Market
Corporate Public Securities: (A) (Continued)	Rate			Date	Amount		Cost		Value

Commercial Metals Company		4.875	%	05/15/23	$	750,000	$	751,402	$	720,000
Continental Resources, Inc.		5.000		09/15/22		500,000		509,802		527,500
CVR Refining LLC		6.500		11/01/22		350,000		338,819		357,000
DaVita, Inc.		5.750		08/15/22		500,000		500,000		518,125
Duke Realty Limited Partnership		3.875		10/15/22		500,000		505,672		505,619
Ensco PLC		3.250		03/15/16		600,000		599,223		618,040
Equifax, Inc.		4.450		12/01/14		500,000		500,693		500,734
Forum Energy Technologies		6.250		10/01/21		160,000		160,000		164,400
GATX Corporation		4.750		05/15/15		500,000		502,065		512,517
General Electric Capital Corporation		5.500		01/08/20		500,000		498,818		572,989
HCA Holdings, Inc.		3.750		03/15/19		500,000		500,000		488,750
Headwaters, Inc.		7.625		04/01/19		305,000		305,104		317,963
HealthSouth Corporation		7.750		09/15/22		405,000		405,797		431,831
Hertz Corporation		6.750		04/15/19		220,000		217,666		226,875
Hornbeck Offshore Services, Inc.		5.000		03/01/21		500,000		500,000		475,000
Icahn Enterprises L.P.		4.875		03/15/19		475,000		475,000		467,875
Icahn Enterprises L.P.		6.000		08/01/20		600,000		610,908		616,500
International Game Technology		7.500		06/15/19		500,000		499,841		565,619
Jabil Circuit, Inc.		4.700		09/15/22		500,000		499,972		503,125
Johnson Controls, Inc.		5.500		01/15/16		500,000		476,038		529,966
Kraft Foods, Inc.		5.375		02/10/20		500,000		510,428		566,877
Lazard Group LLC		4.250		11/14/20		500,000		498,535		522,710
Lear Corporation		4.750		01/15/23		375,000		368,409		370,313
Lennar Corporation		4.750		11/15/22		375,000		369,919		362,813
Lifepoint Hospitals, Inc.		5.500		12/01/21		350,000		360,032		354,375
Linn Energy, LLC		8.625		04/15/20		500,000		504,334		516,875
Masco Corporation		7.125		03/15/20		350,000		349,999		402,500
MasTec, Inc.		4.875		03/15/23		500,000		490,504		467,500
Meritor, Inc.		6.750		06/15/21		1,000,000		1,000,000		1,040,000
Morgan Stanley		5.500		01/26/20		500,000		498,376		560,626
NBC Universal Media LLC		5.150		04/30/20		500,000		499,542		567,688
Nexeo Solutions LLC		8.375		03/01/18		20,000		20,000		19,800
Omnova Solutions, Inc.		7.875		11/01/18		750,000		760,416		763,125
Peabody Energy Corporation		6.000		11/15/18		500,000		500,424		490,000
Perry Ellis International, Inc.		7.875		04/01/19		375,000		372,268		378,750
Precision Drilling Corporation		6.625		11/15/20		250,000		256,106		259,375
Qwest Diagnostic, Inc.		4.750		01/30/20		500,000		499,208		539,908
Regency Energy Partners LP		5.875		03/01/22		425,000		418,425		442,000
Rosetta Resources Inc.		5.875		06/01/22		500,000		500,000		498,125

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Interest			Due	Principal				Market
Corporate Public Securities (A)	Rate			Date	Amount		Cost		Value

R.R. Donnelley & Sons Company		6.000	%	04/01/24	$	500,000	$	500,000	$	493,750
Samson Investment Company		9.750		02/15/20		350,000		342,356		317,625
ServiceMaster Company		7.000		08/15/20		325,000		325,000		338,000
Sprint Nextel Corporation		6.000		12/01/16		500,000		506,697		525,937
Steelcase, Inc.		6.375		02/15/21		500,000		506,161		578,656
Stone Energy Corporation		7.500		11/15/22		500,000		513,950		515,150
Tech Data Corporation		3.750		09/21/17		500,000		504,599		517,850
Tesoro Logistics LP		5.875		10/01/20		391,000		398,923		404,684
Time Warner Cable, Inc.		5.000		02/01/20		500,000		493,895		555,623
T-Mobile USA Inc.		6.464		04/28/19		340,000		344,632		353,175
T-Mobile USA Inc.		6.731		04/28/22		210,000		207,550		214,725
T-Mobile USA Inc.		6.836		04/28/23		65,000		63,640		66,788
Tronox Finance LLC		6.375		08/15/20		375,000		367,178		376,406
Tyson Foods, Inc.		4.500		06/15/22		500,000		513,598		529,917
Unit Corporation		6.625		05/15/21		500,000		494,960		501,250
Weatherford International Limited		4.500		04/15/22		500,000		517,722		520,557
WPX Energy, Inc.		5.250		09/15/24		425,000		425,000		412,250
Xerium Technologies, Inc.		8.875		06/15/18		416,000		433,096		438,880
Total Bonds								41,667,436		42,787,685

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

									Market
Corporate Public Securities (A)					Shares		Cost		Value

Common Stock - 0.01%
Nortek, Inc. (B)						100	$	1	$	7,450
Total Common Stock								1		7,450

Total Corporate Public Securities							$	41,975,812	$	43,101,237

	Interest			Due	Principal				Market
Short-Term Securities:	Rate/Yield			Date	Amount		Cost		Value
Commercial Paper - 4.14%
Ameren Corporation		0.260	%	10/10/14	$	2,300,000	$	2,299,839	$	2,299,839
Enbridge Inc.		0.284		10/18/14		2,000,000		1,999,891		1,999,891
Equifax, Inc.		0.220		10/03/14		1,500,000		1,499,982		1,499,982
Total Short-Term Securities							$	5,799,712	$	5,799,712

Total Investments		107.37	%				$	149,796,285	$	150,542,112
Other Assets		4.44								6,218,931
Liabilities		(11.81	)							(16,554,031	)
Total Net Assets		100.00	%						$	140,207,012

(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 September 30, 2014.

(D)	Defaulted security; interest not accrued.

(E)	Illiquid security. As of September 30, 2014, the values of these securities amounted to $83,562,794 or 59.6% of net assets.

^	Effective yield at purchase

PIK -

Payment-in-kind

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Fair Value/			Fair Value/
Industry Classification:	Market Value			Market Value

AEROSPACE - 2.77%			BROADCASTING & ENTERTAINMENT - 1.08%
AAR Corporation	$	1,075,000	Lamar Media Corporation		$	160,400
Alliant Techsystems Inc.		1,038,750	HOP Entertainment LLC			-
B E Aerospace, Inc.		266,875	NBC Universal Media LLC			567,688
Merex Holding Corporation		615,509	Numericable Group SA			237,000
Whitcraft Holdings, Inc.		891,567	Time Warner Cable, Inc.			555,623
		3,887,701	Sundance Investco LLC			-
AUTOMOBILE - 5.45%						1,520,711
Accuride Corp		521,250	BUILDINGS & REAL ESTATE - 2.81%
American Axle & Manufacturing, Inc.		119,400	ACP Cascade Holdings LLC			-
Avis Budget Car Rental		412,500	Duke Realty Limited Partnership			505,619
CG Holdings Manufacturing Company		1,635,078	Lennar Corporation			362,813
Chrysler Group, LLC		451,763	Masco Corporation			402,500
DPL Holding Corporation		1,693,597	MasTec, Inc.			467,500
Ideal Tridon Holdings, Inc.		197,968	Safway Group Holding LLC/Finance Corporation			254,375
J A C Holding Enterprises, Inc.		-	Sunrise Windows Holding Company			1,193,659
Johnson Controls, Inc.		529,966	TruStile Doors, Inc.			250,772
K & N Parent, Inc.		132,624	William Lyon Homes			506,250
Lear Corporation		370,313				3,943,488
Meritor, Inc.		1,040,000	CHEMICAL, PLASTICS & RUBBER - 2.92%
Penske Corporation		537,322	Capital Specialty Plastics, Inc.			787,507
		7,641,781	Cornerstone Chemical Company			393,750
BEVERAGE, DRUG & FOOD - 6.74%			Nicoat Acquisitions LLC			600,617
1492 Acquisition LLC		794,263	Omnova Solutions, Inc.			763,125
B&G Foods, Inc.		419,100	Polytex Holdings LLC			1,176,331
Eatem Holding Company		1,210,051	Tronox Finance LLC			376,406
JBS USA Holdings, Inc.		398,437				4,097,736
F F C Holding Corporation		236,937	CONSUMER PRODUCTS - 9.80%
Gennx Novel Holding, Inc.		1,721,547	AMS Holding LLC			259,206
Golden County Foods Holding, Inc.		-	Baby Jogger Holdings LLC			1,084,440
Hospitality Mints Holding Company		1,200,897	Bravo Sports Holding Corporation			1,331,437
JMH Investors LLC		1,109,556	Clearwater Paper Corporation			477,500
Kraft Foods, Inc.		566,877	Custom Engineered Wheels, Inc.			439,512
Spartan Foods Holding Company		690,626	gloProfessional Holdings, Inc.			1,321,505
Specialty Commodities, Inc.		572,382	GTI Holding Company			838,795
Tyson Foods, Inc.		529,917	Handi Quilter Holding Company			225,203
		9,450,590	HHI Group, LLC			1,636,521
			K N B Holdings Corporation			109,965
			Manhattan Beachwear Holding Company			1,135,497

See Notes to Consolidated Financial Statements

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Fair Value/			Fair Value/
Industry Classification: (Continued)	Market Value			Market Value

NXP BV/NXP Funding LLC	$	736,875	K P I Holdings, Inc.	$	380,878
Perry Ellis International, Inc.		378,750	LPC Holding Company		147,625
Prestige Brands Holdings, Inc.		611,000	Nortek, Inc.		7,450
R A J Manufacturing Holdings LLC		533,895	O E C Holding Corporation		469,249
R.R. Donnelley & Sons Company		493,750	Strahman Holdings Inc		1,206,040
Tranzonic Holdings LLC		1,692,832	Truck Bodies & Equipment International		1,245,368
Xerium Technologies, Inc.		438,880			11,555,860
		13,745,563	DIVERSIFIED/CONGLOMERATE, SERVICE - 9.92%
CONTAINERS, PACKAGING & GLASS - 2.22%			ADT Corporation		517,500
Paperworks Industries, Inc.		508,750	A S C Group, Inc.		1,432,652
P K C Holding Corporation		532,981	A W X Holdings Corporation		210,000
P P T Holdings LLC		1,181,288	Advanced Technologies Holdings		616,734
Rose City Holding Company		89,313	Anglogold Holdings PLC		602,466
SMB Machinery Holdings, Inc.		716,422	Bank of America Corporation		505,211
Vitex Packaging Group, Inc.		78,922	Church Services Holding Company		496,424
		3,107,676	Clough, Harbour and Associates		211,819
DISTRIBUTION - 5.53%			Crane Rental Corporation		1,140,506
ARI Holding Corporation		2,063,822	ELT Holding Company		216,563
Blue Wave Products, Inc.		764,325	EPM Holding Company		704,322
BP SCI LLC		1,433,584	Equifax, Inc.		2,000,716
Signature Systems Holding Company		1,003,297	Hilton Worldwide Holdings, Inc.		772,500
Stag Parkway Holding Company		1,349,582	HVAC Holdings, Inc.		1,330,606
WP Supply Holding Corporation		1,133,109	Insurance Claims Management, Inc.		325,945
		7,747,719	Mail Communications Group, Inc.		201,813
DIVERSIFIED/CONGLOMERATE,			Nexeo Solutions LLC		19,800
MANUFACTURING - 8.24%			Northwest Mailing Services, Inc.		359,415
A H C Holding Company, Inc.		268,077	Pearlman Enterprises, Inc.		456,990
Advanced Manufacturing Enterprises LLC		1,263,890	Safety Infrastructure Solutions		1,001,306
Amsted Industries		232,800	ServiceMaster Company		338,000
Arrow Tru-Line Holdings, Inc.		301,285	Sirius XM Radio Inc.		450,563
C D N T, Inc.		605,527			13,911,851
CTP Transportation Products, LLC		330,925	ELECTRONICS - 1.60%
F G I Equity LLC		239,124	Anixter, Inc.		162,938
G C Holdings		110,776	Belden Inc.		201,075
Hartland Controls Holding Corporation		1,450,385	Connecticut Electric, Inc.		856,108
Hi-Rel Group LLC		809,694	Jabil Circuit, Inc.		503,125
Janus Group Holdings LLC		1,949,892	Tech Data Corporation		517,850
J.B. Poindexter Co., Inc.		536,875			2,241,096

See Notes to Consolidated Financial Statements

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Fair Value/			Fair Value/
Industry Classification: (Continued)	Market Value			Market Value

FINANCIAL SERVICES - 5.89%			LEISURE, AMUSEMENT, ENTERTAINMENT - 1.94%
Ally Financial, Inc.	$	780,000	Brunswick Corporation	$	540,000
Alta Mesa Financial Services		776,250	CTM Holding, Inc.		1,615,145
Braskem Finance Ltd.		390,000	International Game Technology		565,619
CIT Group, Inc.		992,500			2,720,764
GATX Corporation		512,517	MACHINERY - 3.70%
General Electric Capital Corporation		572,989	ABC Industries, Inc.		745,344
Icahn Enterprises L.P.		1,084,375	Arch Global Precision LLC		1,574,820
Lazard Group LLC		522,710	E S P Holdco, Inc.		247,931
LBC Tank Terminals Holding Netherlands B.V.		706,095	Motion Controls Holdings		1,057,141
Morgan Stanley		560,626	M V I Holding, Inc.		-
REVSpring, Inc.		1,366,098	NetShape Technologies, Inc.		1,167,746
		8,264,160	Welltec A/S		388,125
HEALTHCARE, EDUCATION & CHILDCARE - 6.15%					5,181,107
American Hospice Management Holding LLC		1,274,972	MEDICAL DEVICES/BIOTECH - 0.67%
CHG Alternative Education Holding Company		1,061,008	ETEX Corporation		-
DaVita, Inc.		518,125	Mallinckrodt PLC		503,750
GD Dental Services LLC		123,049	MedSystems Holdings LLC		218,052
ERG Holding Company LLC		1,021,198	MicroGroup, Inc.		-
HCA Holdings, Inc.		488,750	Precision Wire Holding Company		210,035
Healthcare Direct Holding Company		827,793	TherOX, Inc.		-
HealthSouth Corporation		431,831			931,837
Lifepoint Hospitals, Inc.		354,375	MINING, STEEL, IRON
Qwest Diagnostic, Inc.		539,908	& NON-PRECIOUS METALS - 1.67%
Strata/WLA Holding Corporation		-	Alcoa, Inc.		661,296
Synteract Holdings Corporation		1,829,477	Coeurd’ Alene Mines Corporation		468,750
Touchstone Health Partnership		-	Commercial Metals Company		720,000
Wheaton Holding Corporation		154,674	Peabody Energy Corporation		490,000
		8,625,160			2,340,046
HOME & OFFICE FURNISHINGS, HOUSEWARES,			NATURAL RESOURCES - 0.60%
AND DURABLE CONSUMER PRODUCTS - 2.64%			ArcelorMittal		530,000
Connor Sport Court International, Inc.		1,283,103	Headwaters, Inc.		317,963
Steelcase, Inc.		578,656			847,963
Transpac Holding Company		-	OIL & GAS - 13.21%
U-Line Corporation		531,473	Access Midstream Partners, L.P.		511,250
U M A Enterprises, Inc.		1,300,738	American Energy - Marcellus, LLC		137,968
Wellborn Forest Holding Company		-	Antero Resources Corporation		393,025
		3,693,970	Avantech Testing Services LLC		846,260
			Bill Barrett Corporation		496,250
			Bonanza Creek Energy, Inc.		480,000

See Notes to Consolidated Financial Statements

Babson Capital Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2014

(Unaudited)

	Fair Value/			Fair Value/
Industry Classification: (Continued)	Market Value			Market Value

California Resources Corporation	$	493,200	TELECOMMUNICATIONS - 2.62%
Calumet Specialty Products Partners L.P.		507,500	All Current Holding Company	$	245,316
Cimarex Energy Co.		537,500	CCO Holdings Capital Corporation		986,875
CITGO Petroleum Corporation		442,000	Centurytel, Inc.		503,750
Continental Resources, Inc.		527,500	Sprint Corporation		156,163
CVR Refining LLC		357,000	Sprint Nextel Corporation		525,937
Enbridge Inc.		1,999,891	T-Mobile USA Inc.		634,688
Ensco PLC		618,040	Univision Communications		162,000
Forum Energy Technologies		164,400	West Corporation		461,250
Hercules Offshore, Inc.		603,750			3,675,979
Hilcorp Energy Company		664,500	TRANSPORTATION - 2.79%
Hornbeck Offshore Services, Inc.		475,000	CHC Helicopter SA		958,500
Jupiter Resources Inc.		443,750	Hertz Corporation		226,875
Linn Energy, LLC		516,875	MNX Holding Company		1,155,158
MEG Energy Corporation		1,021,875	NABCO, Inc.		-
Niska Gas Storage Partners LLC		437,500	Topaz Marine S.A.		517,600
Petroplex Inv Holdings LLC		1,457,681	VP Holding Company		833,660
Precision Drilling Corporation		259,375	XPO Logistics, Inc.		216,825
Regency Energy Partners LP		442,000			3,908,618
RKI Inc.		516,250	UTILITIES - 2.24%
Rosetta Resources Inc.		498,125	Ameren Corporation		2,299,839
Samson Investment Company		317,625	Calpine Corporation		330,225
Stone Energy Corporation		515,150	NRG Energy, Inc.		512,813
Tesoro Logistics LP		404,684			3,142,877
Unit Corporation		501,250	WASTE MANAGEMENT / POLLUTION - 2.01%
Weatherford International Limited		520,557	Aquilex Holdings LLC		168,134
WPX Energy, Inc.		412,250	MES Partners, Inc.		1,288,079
		18,519,981	Terra Renewal LLC		350,860
PHARMACEUTICALS - 1.36%			Torrent Group Holdings, Inc.		1,009,145
CorePharma LLC		232,303			2,816,218
Endo Finance LLC		477,500
Forest Laboratories, Inc.		928,876	Total Investments - 107.37%	$	150,542,112
Valeant Pharmaceuticals International		261,250
		1,899,929
TECHNOLOGY - 0.80%
First Data Corporation		263,150
Sencore Holding Company		280,818
Smart Source Holdings LLC		577,763
		1,121,731

See Notes to Consolidated Financial Statements

Fair Values Hierarchy

The Trust categorizes its investments measured at fair value in three levels, based on the inputs and assumptions used to determine fair value. These levels are as follows:

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Trust’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used to value the Trust's net assets as of September 30, 2014:

Assets	Total		Level 1		Level 2		Level 3
Restricted Securities
Corporate Bonds		77,712,473		-		18,078,369		59,634,104
Common Stock - U.S.		9,755,616		-		-		9,755,616
Preferred Stock		5,617,101		-		-		5,617,101
Partnerships and LLCs		8,555,973		-		-		8,555,973
Public Securities
Bank Loans		306,102		-		306,102		-
Corporate Bonds		42,787,685		-		42,787,685		-
Common Stock - U.S.		7,450		7,450		-		-
Short-term Securities		5,799,712		-		5,799,712		-
Total	$	150,542,112	$	7,450	$	66,971,868	$	83,562,794

See information disaggregated by security type and industry classification in the Consolidated Schedule of Investments.

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:

														Transfers
	Beginning													in and /		Ending
	balance at		Included											or out of		balance at
Assets	12/31/2013		in earnings		Purchases			Sales			Prepayments			Level 3		09/30/2014
Restricted Securities
Corporate Bonds	$	56,939,587	$	2,829,912	$	10,875,152		$	(3,318,338	)	$	(7,692,209	)	$	-	$	59,634,104
Common Stock - U.S.		9,668,741		1,918,502		717,965			(957,463	)		-			-		11,347,745
Preferred Stock		6,926,282		489,628		(123,526	)		(1,675,283	)		-			-		5,617,101
Partnerships and LLCs		9,491,997		46,456		1,637,511			(2,619,991	)		-			-		8,555,973
Public Securities
Common Stock		-		-		-			-			-			-		-
	$	83,026,607	$	5,436,662	$	13,371,633		$	(10,579,899	)	$	(7,692,209	)	$	-	$	83,562,794

ITEM 2. 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-Q is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

(b) There have been changes in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act)("internal controls") that occurred during the Registrant's last fiscal quarter. The Registrant's investment adviser, Babson Capital Management LLC, who maintains the Registrant's internal controls, revised its internal controls to oversee State Street Bank & Trust who now provides certain administrative and accounting services to the Registrant.

ITEM 3. EXHIBITS.

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) are attached hereto as an exhibit.

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) Babson Capital Participation Investors

By (Signature and Title)*

/s/ Michael L. Klofas

Michael L. Klofas, President

Date November 25, 2014

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 (Signature and Title)*

/s/ Michael L. Klofas

Michael L. Klofas, President

Date November 25, 2014

By (Signature and Title)*

/s/ James M. Roy

James M. Roy, Vice President and

Chief Financial Officer

Date November 25, 2014

* PRINT THE NAME AND TITLE OF EACH SIGNING OFFICER UNDER HIS OR HER SIGNATURE.