Barings Participation Investors : Quarter Ended September 2022 – Barings Participation Investors

Barings Participation Investors

Report for the Nine Months Ended September 30, 2022

Adviser	Transfer Agent & Registrar
Barings LLC	DST Systems, Inc.
300 S Tryon St., Suite 2500	P.O. Box 219086
Charlotte, NC 28202	Kansas City, Missouri 64121-9086
Independent Registered Public Accounting Firm	1-800-647-7374
Internet Website
KPMG LLP
Boston, Massachusetts 02110	https://www.barings.com/mpv
Counsel to the Trust	Barings Participation Investors
Ropes & Gray LLP	c/o Barings LLC
300 S Tryon St., Suite 2500
Boston, Massachusetts 02111	Charlotte, NC 28202
Custodian	1-866-399-1516
State Street Bank and Trust Company
Boston, Massachusetts 02110

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

October 31, 2022

We are pleased to present the September 30, 2022 Quarterly Report of Barings Participation Investors (the "Trust").

PORTFOLIO PERFORMANCE

The Board of Trustees declared a quarterly dividend of $0.22 per share, payable on November 18, 2022 to shareholders of record on November 7, 2022. This represents an increase of $0.02 per share or 10.0% over the previous dividend of $0.20 per share. The Trust earned $0.27 per share of net investment income, net of taxes, for the third quarter of 2022, an increase of $0.05 per share or 23% over net investment income of $0.22 per share in the previous quarter. The increase in net investment income is a function of both the sound credit quality of the portfolio and, with 72% of the portfolio in floating rate loans, higher interest rates.

During the third quarter, the net assets of the Trust increased to $160,500,541 or $15.14 per share compared to $159,167,463 or $15.01 per share on June 30, 2022. This translates to a 2.21% 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 4.10%, 9.16%, 8.25%, 9.85%, and 10.78% 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 market price decreased 7.6% during the quarter, from $12.26 per share as of June 30, 2022 to $11.33 per share as of September 30, 2022. The Trust's market price of $11.33 per share equates to a 25.2% discount to the September 30, 2022 net asset value per share of $15.14. The Trust's average quarter-end discount/premium for the 3, 5 and 10-year periods was -9.2%,-0.9% and 0.9%, 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, decreased 0.7% and increased 1.2% for the quarter, respectively.

PORTFOLIO ACTIVITY

Consistent with the stated Investment Objective of the Trust, we continue to search for relative value, identifying investments that provide current yield as well as those with opportunities for capital gains. The Trust closed six new private placement investments and 15 add-on investments to existing portfolio companies during the third quarter. The total amount invested by the Trust in these transactions was $4,527,221. Of note, the new platform investments consisted of all floating rate term loans, two of which included equity co-investments, and the add-on investments consisted of all floating rate term loans, one of which included an equity co- investment.

A number of macroeconomic risks intensified during the quarter amid an uncertain environment for investors across the broader capital markets. Concerns, previously focused on Covid-19 and disrupted supply chains, swiftly shifted to inflation, the hiking of interest rates by central banks and the likelihood of a recession. While there continues to be levels of uncertainty and volatility we have not seen for some time, we take comfort that as bottom-uplong-term investors we invest in high quality companies, in defensive sectors which we believe will perform through economic cycles (and volatile periods such as these). Both credit quality and capital structure of portfolio companies are key factors in our analysis, along with the quality of the ownership and management groups. As fundamental long-term investors, we believe it is imperative to remain disciplined and underwrite capital structures which will remain sound through economic cycles (and varying interest rate environments). We also seek to maintain a high level of portfolio diversification overall, looking at both industry and individual credit concentration. From a return perspective, the floating rate loans that constitute a majority of the portfolio provide some protection and higher returns in an inflationary environment. The North American Private Finance team continues to see good investment opportunities, and while the activity, by number of investments and volume, was lower than the prior corresponding period, the quality of the investment opportunities remains high.

As market conventions have largely migrated to all senior capital structures, the Trust's flexible Investment Objective has allowed for continued investing in small to middle market companies. As of September 30, 2022, 65.0% of the Trust's investment portfolio is in first lien senior secured loans which provides strong risk adjusted returns for the Trust given the senior position in the capital stack. These investments have proven resilient to date. Junior debt comprised 17% of the Trust's portfolio and we will continue to invest in junior debt when the capital structure and risk adjusted return is deemed appropriate. Equity co-investments alongside the debt investments (12% of the Trust's portfolio) provide an opportunity for the Trust to realize capital gains in the future. Realized capital gains are typically retained to increase the earnings capacity of the Trust.

The Trust maintains liquidity based on the Trust's combined available cash balance and short-term investments of $3,852,266 or 2.1% of total assets, and low leverage profile at 0.14x as of September 30, 2022. 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 liquidity to support our current portfolio companies as well as invest in new

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portfolio companies. As always, the Trust continues to benefit from strong relationships with our carefully chosen financial sponsor partners. These relationships provide clear benefits including potential access for portfolio companies to additional capital if needed and strategic thinking to compliment a company's management team. High-quality and timely information about portfolio companies which is only available in a private market setting allows us to work constructively with financial sponsors and maximize the portfolio companies' long-term health and value.

In closing, we believe it is always appropriate to provide views on the Trust's long-term dividend policy which is to say, 'we believe that long-term dividends should be a reflection of long-term core earnings power'. The Trust's recently announced dividend of $0.22 per share is slightly below our most recently reported net investment income of $0.27 per share, net of taxes. Over the long term, we do anticipate further increases in the earnings power of the portfolio as a result of rising base rates. That said, our dividend strategy remains cautious due to (1) the uncertain impacts of significantly higher base rates on our portfolio companies and (2) a general desire to keep sufficient earnings margin on hand in the event the coming recession is more severe than our expectations.

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

Sincerely,

Christina Emery

President

Portfolio Composition as of 09/30/22*

Public Bank Loans	Public Debt	Cash & Short-Term
Cash & Short-Term 1.6%	0.6%	Investments
Investments	Public Equity	2.1%
2.1%
0.1%	Fixed Rate
Private Debts
	11.6%
9.7%
Private / Restricted		Equity
	13.3%
Equity
11.5%

Private Bank Loans	Floating Rate
73.0%
74.4%

* 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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Barings Participation Investors

Hypothetical growth of $10,000 Investment (unaudited)

$25,000

$20,000

$15,000

$10,000

$5,000

$15,478

$14,720

		12				3		14		15	16			7			8	19	20	21	22
				1				1		1
	0			20			20		20	20		0		0		/20	20	/20	20
	2								2			2
	/		3	/		3	/	3	/	/		/			/			30/	30/
	/1						30		30			30			30
0		0		0	0	/		/								/30
	/			/		/					9/			9/	9/		9/
1			9			9		9		9		9					9
							Barings Participation Investors		Bloomberg Barclays U.S. Corporate High Yield Index

Average Annual Returns September 30, 2022	1 Year	5 Year	10 Year
Barings Participation Investors	-12.79%	1.99%	4.46%
Bloomberg Barclays U.S. Corporate High Yield Index	-14.14%	1.57%	3.94%

Data for Barings Participation Investors (the "Trust") represents returns based on the change in the Trust's market price assuming the reinvestment of all dividends and distributions. Past performance is no guarantee of future results.

The graph and table do not reflect the deduction of taxes that a shareholder would pay on distributions from the Trust or the sale of shares.

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