Barings Participation Investors : Quarter Ended June 2023 – Barings Participation Investors

Barings Participation Investors

Report for the Six Months Ended June 30, 2023

Adviser

Barings LLC

300 S Tryon St., Suite 2500

Charlotte, NC 28202

Independent Registered Public Accounting Firm

KPMG LLP

Boston, Massachusetts 02110

Counsel to the Trust

Ropes & Gray LLP

Boston, Massachusetts 02111

Custodian

State Street Bank and Trust Company

Boston, Massachusetts 02110

Transfer Agent & Registrar

SS&C Global Investor & Distribution Solution, Inc., formerly known as DST System, Inc. ("SS&C GIDS")

P.O. Box 219086

Kansas City, Missouri 64121-90861-800-647-7374

Internet Website

https://www.barings.com/mpv

Barings Participation Investors c/o Barings LLC

300 S Tryon St., Suite 2500 Charlotte, NC 28202 1-866-399-1516

Investment Objective and Policy

Barings Participation Investors (the "Trust") is a closed-end management investment company, first offered to the public in 1988, whose shares are traded on the New York Stock Exchange under the trading symbol "MPV". The Trust's share price can be found in the financial section of most newspapers under either the New York Stock Exchange listings or Closed-End Fund Listings.

The Trust's investment objective is to maintain a portfolio of securities providing a current yield and, when available, an opportunity for capital gains. The Trust's principal investments are privately placed, below- investment grade, long-term debt obligations including bank loans and mezzanine debt instruments. Such private placement securities may, in some cases, be accompanied by equity features such as common stock, preferred stock, warrants, conversion rights, or other equity features. The Trust typically purchases these investments, which are not publicly tradable, directly from their issuers in private placement transactions. These investments are typically made to small or middle market companies. In addition, the Trust may invest, subject to certain limitations, in marketable debt securities (including high yield and/or investment grade securities) and marketable common stocks. 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.

The Trust distributes substantially all of its net income to shareholders each year. Accordingly, the Trust pays dividends to shareholders four times per year. The Trust pays dividends to its shareholders in cash, unless the shareholder elects to participate in the Dividend Reinvestment and Share Purchase Plan.

Form N-PORT

The Trust files its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on part F of Form N-PORT. This information is available (i) on the SEC's website at http://www.sec.gov; and (ii) at the SEC's Public Reference Room in Washington, DC (which information on their operation may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio holdings as of each quarter-end is available upon request by calling, toll-free,866-399-1516.

Proxy Voting Policies & Procedures; Proxy Voting Record

The Trustees of the Trust have delegated proxy voting responsibilities relating to the voting of securities held by the Trust to Barings LLC ("Barings"). A description of Barings' proxy voting policies and procedures is available (1) without charge, upon request, by calling, toll- free 866-399-1516; (2) on the Trust's website at https:// www.barings.com/mpv; and (3) on the SEC's 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 the Trust's website at https:// www.barings.com/mpv; and (2) on the SEC's website at http:// www.sec.gov.

Legal Matters

The Trust has entered into contractual arrangements with an investment adviser, transfer agent and custodian (collectively "service providers") who each provide services to the Trust. Shareholders are not parties to, or intended beneficiaries of, these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Trust.

Under the Trust's Bylaws, any claims asserted against or on behalf of the Trust, including claims against Trustees and officers must be brought in courts located within the Commonwealth of Massachusetts.

The Trust's registration statement and this shareholder report are not contracts between the Trust and its shareholders and do not give rise to any contractual rights or obligations or any shareholder rights other than any rights conferred explicitly by federal or state securities laws that may not be waived.

Barings Participation Investors

TO OUR SHAREHOLDERS

July 31, 2023

We are pleased to present the June 30, 2023 Quarterly Report of Barings Participation Investors (the "Trust").

PORTFOLIO PERFORMANCE

The Board of Trustees declared a quarterly dividend of $0.32 per share, payable on September 8, 2023, to shareholders of record on August 28, 2023. This represents an increase of $0.04 per share or 14.3% over the previous dividend of $0.28 per share and the fourth consecutive quarterly increase. The Trust earned $0.35 per share of net investment income, net of taxes, for the second quarter of 2023, compared to $0.40 per share in the previous quarter. The decrease in net investment income was predominantly related to $0.06 per share of non-recurring income (repayment of past due income) received in the first quarter, while core earnings increased $0.02 per share due to higher base rates.

		June 30, 2023(1)(2)			March 31, 2023(1)(2)	% Change
Quarterly Dividend per share		0.32(3)	$	0.28	14.3 %
Net Investment Income(4)	$	3,762,195	$	4,241,315	(11.3)%
Net Assets	$	164,786,110	$	163,760,443	0.6 %
Net Assets per share(5)	$	15.54	$	15.45	0.6 %
Share Price	$	12.91	$	12.82	0.7 %
Dividend Yield at Share Price		9.9 %			8.7 %	13.8 %
(Discount) / Premium		(16.9)%			(17.0)%

• 1. Past performance is no guarantee of future results
  2. Figures are unaudited
  3. Payable on September 8, 2023
  4. Figures are shown net of excise tax
  5. Based on shares outstanding at the end of the period of 10,601,700
• Quarterly total returns at June 30, 2023 and March 31, 2023 were 2.4% and 3.1%, respectively. Longer term, the Trust returned 9.9%, 12.5%, 9.6%, 10.1%, and 11.0% for the 1, 3, 5, 10, and 25-year periods, respectively, based on the change in the Trust's net assets assuming the reinvestment of all dividends
• The Trust's average quarter-end discount for the 1, 3, 5 and 10-year periods was 19.2%, 13.9%, 4.2% and 1.2%, respectively
• U.S. fixed income markets, as approximated by the Bloomberg Barclays U.S. Corporate High Yield Index and the Credit Suisse Leveraged Loan Index, returned 1.8% and 3.1% for the quarter, respectively

PORTFOLIO BENEFITS

• We believe the Trust benefits from being part of the larger Barings North American Private Finance ("NAPF") platform, which as of June 30, 2023, employed more than 60 professionals and had commitments of over $25 billion to private credit.
• The NAPF platform has provided two primary benefits to the Trust: Direct deal origination and credit underwriting. In the third quarter of 2022, Pitchbook ranked NAPF the #2 most active lender to private equity-owned U.S. companies. Additionally, NAPF has served as the Lead or Co-Lead on over 80% of its originated transactions and has a senior loan loss rate of 0.04% since inception.
• The Trust has continued to benefit from NAPF's strong origination relationships with private equity sponsors. Every private placement investment in the portfolio was directly originated by Barings via a sponsor (without a financial intermediary), where one hundred percent of the economics are passed through to investors.
• The Trust has consistently generated a stable dividend yield for investors, which to date has been paid exclusively from investment income and capital gains - no return of capital, all while employing a limited amount of leverage 0.12x.
• The Trust continues to invest in what we believe are high-quality companies in defensive sectors and remains well diversified with 30 different industries across 178 assets, where over 65% of those investments are first lien senior secured loans that we believe provide strong risk adjusted returns. The Trust continues to invest in senior subordinated debt when we believe the risk adjusted return is appropriate. Approximately 16% of the market value of the Trust was equity, generating ~$9.4 million ($0.88 per share) in unrealized appreciation as of June 30, 2023.

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(Continued)

PORTFOLIO ACTIVITY

Consistent with the stated investment objective of the Trust, we continued to search for relative value across the capital structure of potential investments that provide current yield with an opportunity for capital gains. The Trust closed two new private placement investments and 16 add-on investments to existing portfolio companies during the second quarter of 2023. The total amount invested by the Trust in these transactions was $3.3 million.

PORTFOLIO LIQUIDITY

The Trust maintained a liquidity position comprised of a combination of its available cash balance and short-term investments of $8.6 million or 4.6% of total assets, in addition to a low leverage profile at 0.12x as of June 30, 2023. Given the migration of the portfolio towards more senior secured investments, the Trust arranged for a $15.0 million committed revolving credit facility with MassMutual (See Note 4). This facility, coupled with the current cash balance provides nearly $19.0 million of liquidity to support our current portfolio companies as well as invest in new portfolio companies.

The Trust's recently announced dividend of $0.32 per share is the fourth consecutive quarterly dividend increase. With more than 65% of the Trust in first lien floating rate loans, the Trust's net investment income has increased as interest rates have risen. We believe the increase in interest rates coupled with the overall strong credit quality of the Trusts supports the increase in the quarterly dividend. In determining the quarterly dividend, the Board of Trustees seeks to ensure that the Trust will be able to pay sustainable dividends over the long term.

Thank you for your continued interest in and support of Barings Participation Investors.

Sincerely,

Christina Emery

President

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Portfolio Composition as of 06/30/23*

	Public Bank Loans	Public Debt	Cash & Short-Term
Cash & Short-Term	1.1%	0.4%	Investments
Investments		Public Equity	4.7%
4.7%
	-%	Equity
Private Debts
		12.5%
7.4%
Private / Restricted
Equity
12.5%			Fixed Rate
			15.6%

Floating Rate 67.2%

Private Bank Loans 73.9%

* 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.

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