MPV Barings Participation Investors

 

 

 

 

 

 

 

 

 

Barings 

Participation Investors 

 

		Report for the Nine Months Ended September 30, 2020
	Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website http://www.barings.com/MPV, and you will be notified by mail each time a report is posted and provided with a website link to access the report.   If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank).   You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account.

 

 

 

 

 

Barings Participation Investors

 

 

TO OUR SHAREHOLDERS

October 31, 2020

We are pleased to present the September 30, 2020 Quarterly Report of Barings Participation Investors (the “Trust”).

The Board of Trustees declared a quarterly dividend of $0.20 per share, payable on November 13, 2020 to shareholders of record on November 2, 2020. The Trust paid a $0.20 per share dividend for the preceding quarter. The Trust earned $0.20 per share of net investment income for the third quarter of 2020, compared to $0.19 per share in the previous quarter.

During the third quarter, the net assets of the Trust increased to $141,525,877 or $13.35 per share compared to 137,787,791 or $13.00 per share on June 30, 2020. This translates to a 4.3% 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 2.8%, 5.5%, 7.6%, 9.8% and 11.5% 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 share price decreased 13.3% during the quarter, from $12.75 per share as of June 30, 2020 to $10.86 per share as of September 30, 2020. The Trust’s market price of $10.86 per share equates to an 18.7% discount to the September 30, 2020 net asset value per share of $13.35. The Trust’s average quarter-end premium for the 3, 5 and 10-year periods was 6.4%, 5.9% and 7.7%, respectively. U.S. fixed income markets, as approximated by the Bloomberg Barclays U.S. Corporate High Yield Index and the Credit Suisse Leverage Loan Index, increased 4.6% and 4.1% for the quarter, respectively.

The Trust closed three new private placement investments and five add-on investments to existing portfolio companies during the third quarter. The total amount invested by the Trust in these transactions was $2,678,395. Of note, the new platform investments were floating rate term loans and the add-on investments were three floating rate term loans, one subordinated note with an equity co-investment and one small equity co-investment.

Middle-market merger and acquisition activity improved during the third quarter of 2020, however, year-to-date sponsored lending volume is down 39% compared to 2019 (Refinitiv). M&A activity has improved as local, state, and federal governments across North America focused on working towards reopening their communities. There have been further positive developments with communities reopening and encouraging news regarding potential vaccines. However, there have been some disappointing developments with cases re-emerging and new restrictions being put in place in some communities. To be clear, navigating the effect of COVID-19 introduces levels of portfolio stress. During the third quarter, two mezzanine debt issuers deferred their quarterly interest payment and were placed on non-accrual. Yet, the new non-accrual investments represents less than $0.01 per share in quarterly income for the Trust and, on a go forward basis, we would expect to see improved credit performance based on our increasing mix of first lien senior secure loans.

To manage through this unique period of investment volatility, we continue to be selective in our investment choices and maintain our underwriting discipline throughout multiple cycles. First, the Trust has been investing in first lien senior secured loans in high-quality companies in defensive sectors and is well-diversified by industry. This was a strategy put in place over three years ago and has provided strong risk adjusted returns for the Trust given their senior position in the capital stack. As of September 30, 2020, 45.2% of the Trust’s investment portfolio is in first lien senior secured loans compared to 2.7% as of December 31, 2017. These investments have proven resilient to date and their management teams now have the benefit of having a wealth of knowledge to draw upon from working in such unique and challenging circumstances. Second, we hold meaningful investment liquidity based on the Trust’s combined available cash balance and short-term investments of $15.834.717 or 10.1%, and a low leverage profile at 0.11x as of September 30, 2020. Strong liquidity also provides ample support to our current portfolio companies to the extent the duration of COVID-19 related stress extends. Third, we continue to be selective in pruning our equity investments and reinvesting the proceeds into first lien senior secured investments further driving investment income. As always, the Trust continues to benefit from strong relationships with our financial sponsor partners which provides clear benefits including potential access to additional capital if needed, strategic thinking alongside their management teams and high-quality and timely information which is only available in a private market setting. This allows us to work constructively together and maximize the portfolio companies’ long-term health and value.

(Continued)

 

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, even when core earnings power is lower as a result of a higher quality asset mix’. The Trust’s recently announced dividend of $0.20 per share was in line with the most recently reported net investment income of $0.20 per share. That said, as we continue to both (1) deploy the Trust’s excess liquidity and (2) seek opportunities to shift the Trust’s non-yielding equity investments to senior secured loans, we expect long-term earnings power to meet the dividend distribution.

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

Sincerely,

 

Christina Emery

President

Portfolio Composition as of 09/30/20*

 

 

* Based on market value of total investments (including cash)

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

Barings Participation Investors

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

September 30, 2020

(Unaudited)

 

Assets:
Investments (See Consolidated Schedule of Investments)
Corporate restricted securities at fair value (Cost - $119,433,917)		$	114,171,616
Corporate restricted securities at market value (Cost - $17,014,760)			17,093,068
Corporate public securities at market value (Cost - $10,441,620)			9,147,024
Short-term securities at amortized cost			5,997,873
Total investments (Cost - $152,887,552)			146,409,581
Cash			9,836,844
Interest receivable			1,185,931
Receivable for investments sold			567,271
Other assets			46,097
Total assets			158,045,724
Liabilities:
Note payable			15,000,000
Payable for investments purchased			1,054,700
Investment advisory fee payable			318,433
Interest payable			27,267
Accrued expenses			119,447
Total liabilities			16,519,847
Commitments and Contingencies (See Note 8)
Total net assets		$	141,525,877
Net Assets:
Common shares, par value $.01 per share		$	106,017
Additional paid-in capital			142,250,117
Total distributable earnings			(830,257	)
Total net assets		$	141,525,877
Common shares issued and outstanding (14,787,750 authorized)			10,601,700
Net asset value per share		$	13.35

 

 

 

 

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENT OF OPERATIONS

For the nine months ended September 30, 2020

(Unaudited)

 

 

Investment Income:
Interest		$	8,625,726
Dividends			135,628
Other			103,297
Total investment income			8,864,651
Expenses:
Investment advisory fees			938,650
Interest			460,125
Trustees’ fees and expenses			273,500
Professional fees			220,694
Custodian fees			18,000
Other			18,587
Total expenses			1,929,556
Investment income - net			6,935,095
Net realized and unrealized loss on investments:
Net realized loss on investments before taxes			(476,316	)
Income tax expense			(348,194	)
Net realized loss on investments after taxes			(824,510	)
Net increase (decrease) in unrealized appreciation (depreciation) of investments before taxes			(6,653,701	)
Net increase (decrease) in unrealized appreciation (depreciation) of investments after taxes			(6,653,701	)
Net loss on investments			(7,478,211	)
Net decrease in net assets resulting from operations		$	(543,116	)

 

 

 

See Notes to Consolidated Financial Statements

Barings Participation Investors

CONSOLIDATED STATEMENT OF CASH FLOWS

For the nine months ended September 30, 2020

(Unaudited)

 

 

Net increase in cash:
Cash flows from operating activities:
Purchases/Proceeds/Maturities from short-term portfolio securities, net		$	(144,297	)
Purchases of portfolio securities			(26,364,212	)
Proceeds from disposition of portfolio securities			24,786,284
Interest, dividends and other income received			8,007,972
Interest expense paid			(460,125	)
Operating expenses paid			(1,476,868	)
Income taxes paid			(762,033	)
Net cash provided by operating activities			3,586,721
Cash flows from financing activities:
Cash dividends paid from net investment income			(7,099,232	)
Receipts for shares issued on reinvestment of dividends			227,533
Net cash used for financing activities			(6,871,699	)
Net decrease in cash			(3,284,978	)
Cash - beginning of period			13,121,822
Cash - end of period		$	9,836,844
Reconciliation of net decrease in net assets to net cash used for operating activities:
Net decrease in net assets resulting from operations		$	(543,116	)
Decrease in investments			4,217,491
Increase in interest receivable			(214,308	)
Increase in receivable for investments sold			(462,648	)
Increase in other assets			(44,122	)
Increase in payable for investments purchased			1,054,700
Decrease in investment advisory fee payable			(10,252	)
Decrease in tax payable			(413,839	)
Increase in accrued expenses			2,815
Total adjustments to net assets from operations			4,129,837
Net cash provided by operating activities		$	3,586,721

 

 

 

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

For the nine months ended September 30, 2020

(Unaudited)

 

 

			For the nine months ended 9/30/2020 (Unaudited)				For the year ended 12/31/2019
Increase / (decrease) in net assets:
Operations:
Investment income - net		$	6,935,095			$	10,575,402
Net realized loss on investments after taxes			(824,510	)			769,899
Net change in unrealized appreciation (depreciation) of investments after taxes			(6,653,701	)			6,464,660
Net (decrease) / increase in net assets resulting from operations			(543,116	)			17,809,961
Increase from common shares issued on reinvestment of dividends
Common shares issued (2020 - 14,472; 2019 - 60,330)			227,533				933,680
Dividends to shareholders from:
Distributable earnings to Common Stock Shareholders (2020 - $0.40 per share; 2019 - $1.08 per share)			(4,240,680	)			(11,410,602	)
Total (decrease) / increase in net assets			(4,556,263	)			7,333,039
Net assets, beginning of period			146,082,140				138,749,101
Net assets, end of period		$	141,525,877			$	146,082,140

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements

Barings Participation Investors

CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding:

 

 

		For the nine months ended 9/30/2020				For the years ended December 31,
		(Unaudited)				2019				2018				2017				2016
Net asset value:
Beginning of period / year		$	13.80			$	13.18			$	13.91			$	13.15			$	13.10
Net investment income (a)			0.65				1.00				1.03				1.09				1.00
Net realized and unrealized gain (loss) on investments			(0.71	)			0.69				(0.68	)			0.75				0.13
Total from investment operations			(0.06	)			1.69				0.35				1.84				1.13
Dividends from net investment income to common shareholders			(0.40	)			(1.08	)			(1.08	)			(1.08	)			(1.08	)
Increase / (Decrease) from dividends reinvested			0.01 (b	)			0.01 (b	)			(0.00) (b	)			(0.00) (b	)			(0.00) (b	)
Total dividends			(0.39	)			(1.07	)			(1.08	)			(1.08	)			(1.08	)
Net asset value: End of period / year		$	13.35			$	13.80			$	13.18			$	13.91			$	13.15
Per share market value: End of period /year		$	10.86			$	16.13			$	15.05			$	14.10			$	14.20
Total investment return
Net asset value (c)			(0.24%	)			13.21%				2.53%				14.29%				8.75%
Market value (c)			(30.28%	)			14.72%				15.02%				7.21%				11.45%
Net assets (in millions):
End of period / year		$	141.53			$	146.08			$	138.75			$	145.48			$	136.61
Ratio of total expenses to average net assets (d)			2.16% (e	)			2.26%				2.76%				3.23%				2.26%
Ratio of operating expenses to average net assets			1.39% (e	)			1.45%				1.56%				1.49%				1.35%
Ratio of interest expense to average net assets			0.44% (e	)			0.42%				0.42%				0.43%				0.44%
Ratio of income tax expense to average net assets			0.33% (e	)			0.39%				0.78%				1.31%				0.47%
Ratio of net investment income to average net assets			6.56% (e	)			7.30%				7.47%				7.92%				7.45%
Portfolio turnover			18%				22%				48%				24%				31%

(a)

Calculated using average shares.

(b)

Rounds to less than $0.01 per share.

(c)

Net asset value return represents portfolio returns based on change in the Trust’s net asset value assuming the reinvestment of all dividends and distributions which differs from the total investment return based on the Trust’s market value due to the difference between the Trust’s net asset value and the market value of its shares outstanding; past performance is no guarantee of future results.

(d)

Total expenses include income tax expense.

(e)

Annualized.

 

Senior borrowings:
Total principal amount (in millions)		$	15			$	15			$	15			$	15			$	15
Asset coverage per $1,000 of indebtedness		$	10,186			$	10,739			$	10,250			$	10,699			$	10,107

 

 

 

 

See Note to Consolidated Financial Statements

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities - 92.75%: (A)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Private Placement Investments - 80.67%: (C)
1 WorldSync, Inc.
A product information sharing platform that connects manufacturers/suppliers and key retailers via the Global Data Synchronizatoin Network.
6.98% Term Loan due 6/24/2025 (LIBOR + 5.750%)		$	1,707,916			07/01/19		$	1,680,515			$	1,673,757
Accelerate Learning
A provider of standards-based, digital science education content of K-12 schools.
4.77% Term Loan due 12/31/2024 (LIBOR + 4.500%)		$	974,753			12/19/18			961,048				926,778
Advanced Manufacturing Enterprises LLC
A designer and manufacturer of large, custom gearing products for a number of critical customer applications.
Limited Liability Company Unit (B)			1,945 uts.			*			207,911				—
* 12/07/12, 07/11/13 and 06/30/15.
AFC - Dell Holding Corporation
A distributor and provider of inventory management services for “C-Parts” used by OEMs in their manufacturing and production facilities.
13% (1% PIK) Senior Subordinated Note due 02/28/2022		$	1,921,207			**			1,911,227				1,921,207
12% Junior Subordinated Note due 02/28/2023		$	200,050			08/17/20			187,013				195,886
Preferred Stock (B)			73 shs.			**			—				7,639
Preferred Stock Series A (B)			1,155 shs.			***			115,512				191,160
Preferred Stock Series V (B)			53 shs.			12/31/19			5,251				6,139
Common Stock (B)			373 shs.			***			373				64,440
Common Stock Series B (B)			44 shs.			**			—				7,602
* 03/27/15, 11/16/18, 07/1/19, 08/21/19 and 12/05/19.									2,219,376				2,394,073
** 03/27/15, 11/15/18 and 12/31/19.
*** 03/27/15, 11/15/18, 12/31/19 and 08/14/20.
Aftermath, Inc.
A provider of crime scene cleanup and biohazard remediation services.
8.00% Term Loan due 04/10/2025 (LIBOR + 5.750%)		$	1,183,875			04/09/19			1,163,800				1,157,238
American Scaffold, Inc.
A provider of scaffolding and environmental containment solutions.
6.32% Term Loan due 09/06/2025 (LIBOR + 5.250%)		$	1,290,823			09/06/19			1,266,960				1,255,325

 

 

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
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)(F)			114 uts.			10/04/12		$	113,636			$	186,372
ASC Holdings, Inc.
A manufacturer of capital equipment used by corrugated box manufacturers.
13% (1% PIK) Senior Subordinated Note due 05/18/2021		$	891,618			11/19/15			889,340				863,108
Limited Liability Company Unit (B)			111,100 uts.			11/18/15			111,100				33,997
									1,000,440				897,105
ASPEQ Holdings
A manufacturer of highly-engineered electric heating parts and equipment for a range of industrial, commercial, transportation and marine applications.
6.25% Term Loan due 10/31/2025 (LIBOR + 5.250%)		$	1,202,537			11/08/19			1,187,198				1,184,499
Audio Precision
A provider of high-end audio test and measurement sensing instrumentation software and accessories.
6.22% Term Loan due 07/27/2024 (LIBOR + 6.000%)		$	1,768,500			10/30/18			1,744,441				1,728,709
Aurora Parts & Accessories LLC
A distributor of aftermarket over-the-road semi-trailer parts and accessories sold to customers across North America.
Preferred Stock (B)			210 shs.			08/17/15			209,390				209,390
Common Stock (B)			210 shs.			08/17/15			210				994
									209,600				210,384
BBB Industries LLC
A supplier of re-manufactured parts to the North American automotive aftermarket.
9.58% Second Lien Term Loan due 06/26/2026 (LIBOR + 8.500%)		$	1,725,000			08/02/18			1,687,191				1,515,240
BCC Software, Inc.
A provider of software and data solutions which enhance mail processing to help direct mail marketers realize discounts from the U.S. Postal Service, avoid penalties associated with mailing errors, and improve the accuracy and efficiency of marketing campaigns.
12% (1% PIK) Senior Subordinated Note due 04/11/2023		$	1,934,739			*			1,913,604				1,958,066
Preferred Stock Series A (B)			27 shs.			*			272,162				272,200
Common Stock Class A (B)			783 shs.			*			861				606,299
* 10/11/17 and 01/28/19.									2,186,627				2,836,565

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
BDP International, Inc.
A provider of transportation and related services to the chemical and life sciences industries.
5.75% Term Loan due 12/14/2024 (LIBOR + 4.750%)		$	2,421,863			12/18/18		$	2,387,866			$	2,421,862
Beacon Pointe Advisors, LLC
An integrated wealth management platform with comprehensive financial planning capabilities for high net worth clients with complex financial needs.
6.00% Term Loan due 03/31/2026 (LIBOR + 5.000%)		$	996,818			03/31/20			611,950				614,342
BEI Precision Systems & Space Company, Inc.
A provider of advanced design, manufacturing, and testing for custom optical encoder-based positioning systems, precision accelerometers, and micro scanners.
12% (1% PIK) Senior Subordinated Note due 04/28/2024		$	1,499,377			04/28/17			1,481,536				1,499,377
Limited Liability Company Unit (B)(F)			4,167 uts.			*			416,654				409,583
* 04/28/17 and 02/07/19.									1,898,190				1,908,960
Blue Wave Products, Inc.
A distributor of pool supplies.
13% (1% PIK) Senior Subordinated Note due 12/31/2020		$	65,329			10/12/12			65,322				65,006
Common Stock (B)			51,064 shs.			10/12/12			51,064				89,037
Warrant, exercisable until 2022, to purchase common stock at $.01 per share (B)			20,216 shs.			10/12/12			20,216				35,249
									136,602				189,292
BlueSpire Holding, Inc.
A marketing services firm that integrates strategy, technology, and content to deliver customized marketing solutions for clients in the senior living, financial services and healthcare end markets.
Common Stock (B)			2,956 shs.			06/30/15			937,438				38,664
Brown Machine LLC
A designer and manufacturer of thermoforming equipment used in the production of plastic packaging containers within the food and beverage industry.
6.25% Term Loan due 10/04/2024 (LIBOR + 5.250%)		$	680,840			10/03/18			675,156				663,819

 

 

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Cadence, Inc.
A full-service contract manufacturer (“CMO”) and supplier of advanced products, technologies, and services to medical device, life science, and industrial companies.
5.5% First Lien Term Loan due 04/30/2025 (LIBOR + 4.500%)		$	890,782			*		$	878,940			$	859,557
* 05/14/18 and 05/31/19.
Cadent, LLC
A provider of advertising solutions driven by data and technology.
6.50% Term Loan due 09/07/2023 (LIBOR + 5.500%)		$	970,231			09/04/18			964,500				952,766
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% (1.5% PIK) Senior Subordinated Note due 03/31/2023		$	825,578			01/19/11			825,471				825,578
14% (2% PIK) Senior Subordinated Note due 03/31/2023		$	221,167			08/03/12			221,077				221,167
Common Stock (B)			375 shs.			01/19/11			37,500				36,679
Warrant, exercisable until 2021, to purchase common stock at $.01 per share (B)			295 shs.			01/19/11			29,250				28,832
									1,113,298				1,112,256
Clarion Brands Holding Corp.
A portfolio of six over-the-counter (OTC) pharmaceutical brands whose products are used to treat tinnitus or ringing of the ear, excessive sweating, urinary tract infections, muscle pain, and skin conditions.
Limited Liability Company Unit (B)			1,853 uts.			07/18/16			189,267				346,830
Claritas Holdings, Inc.
A market research company that provides market segmentation insights to customers engaged in direct-to-consumer and business-to-business marketing activities.
7.00% Term Loan due 12/31/2023 (LIBOR + 6.000%)		$	1,585,123			12/20/18			1,559,601				1,538,203
Clubessential LLC
A leading SaaS platform for private clubs and resorts.
6.5% (1% PIK) Senior Subordinated Note due 11/30/2023 (LIBOR + 5.500%)		$	1,720,687			01/09/20			1,697,164				1,688,855

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Command Alkon
A vertical-market software and technology provider to the heavy building materials industry delivering purpose-built, mission critical products that serve as the core operating & production systems for ready-mix concrete producers, asphalt producers, and aggregate suppliers.
9.25% Term Loan due 04/17/2027 (LIBOR + 8.250%)		$	1,702,726			04/23/20		$	1,654,835			$	1,666,799
Limited Liability Company Unit			18 uts.			04/23/20			18,006				23,557
Class B Partnership Units			6,629 uts.			04/23/20			0				0
									1,672,841				1,690,356
Concept Machine Tool Sales, LLC
A full-service distributor of high-end machine tools and metrology equipment, exclusively representing a variety of global manufacturers in the Upper Midwest.
6.00% Term Loan due 01/31/2025 (LIBOR +5.000%)		$	625,265			01/30/20			614,430				575,869
Limited Liability Company Unit (F)			1,171 shs.			01/30/20			46,910				35,225
									661,340				611,094
CORA Health Services, Inc.
A provider of outpatient rehabilitation therapy services.
11.00% (1% PIK) Term Loan due 05/05/2025		$	1,552,034			*			1,465,434				1,345,946
Preferred Stock Series A (B)			758 shs.			06/30/16			2,647				116,633
Common Stock Class A (B)			3,791 shs.			06/30/16			3,791				18,257
* 05/01/18, 06/28/19 and 09/30/20									1,471,872				1,480,836
Dart Buyer, Inc.
A manufacturer of helicopter aftermarket equipment and OEM Replacement parts for rotorcraft operators, providers and OEMs.
5.75% Term Loan due 04/01/2025 (LIBOR + 5.250%)		$	1,710,398			04/01/19			1,399,282				1,395,015
Del Real LLC
A manufacturer and distributor of fully-prepared fresh refrigerated Hispanic entrees as well as side dishes that are typically sold on a heat-and-serve basis at retail grocers.
11% Senior Subordinated Note due 04/06/2023 (D)		$	1,420,588			10/07/16			1,403,759				1,278,529
Limited Liability Company Unit (B)(F)			368,799 uts.			*			368,928				98,066
* 10/07/16, 07/25/18, 03/13/19 and 06/17/19.									1,772,687				1,376,595
Discovery Education, Inc.
A provider of standards-based, digital education content for K-12 schools.
4.15% Term Loan due 04/30/2024 (LIBOR + 4.250%)		$	1,897,328			04/20/18			1,874,702				1,887,461

 

 

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
DPL Holding Corporation
A distributor and manufacturer of aftermarket undercarriage parts for medium and heavy duty trucks and trailers.
Preferred Stock (B)			25 shs.			05/04/12		$	252,434			$	344,487
Common Stock (B)			25 shs.			05/04/12			28,048				—
									280,482				344,487
Dunn Paper
A provider of specialty paper for niche product applications.
9.75% Second Lien Term Loan due 08/26/2023 (LIBOR + 8.750%)		$	1,725,000			09/28/16			1,710,427				1,672,215
Electronic Power Systems
A provider of electrical testing services for apparatus equipment and protection & controls infrastructure.
4.97% Term Loan due 12/21/2024 (LIBOR + 4.750%)		$	1,587,751			12/21/18			1,570,943				1,582,670
Common Stock (B)			52 shs.			12/28/18			52,176				103,728
									1,623,119				1,686,398
Elite Sportswear Holding, LLC
A designer and manufacturer of gymnastics, competitive cheerleading and swimwear apparel in the U.S. and internationally.
11.5% (1% PIK) Senior Subordinated Note due 09/20/2022 (D)		$	1,588,640			10/14/16			1,568,694				—
Limited Liability Company Unit (B)(F)			101 uts.			10/14/16			159,722				—
									1,728,416				—
English Color & Supply LLC
A distributor of aftermarket automotive paint and related products to collision repair shops, auto dealerships and fleet customers through a network of stores in the Southern U.S.
11.5% (0.5% PIK) Senior Subordinated Note due 12/31/2023		$	1,349,036			06/30/17			1,334,158				1,333,239
Limited Liability Company Unit (B)(F)			397,695 uts.			06/30/17			397,695				372,241
									1,731,853				1,705,480
E.S.P. Associates, P.A.
A professional services firm providing engineering, surveying and planning services to infrastructure projects.
Limited Liability Company Unit (B)			229 uts.			04/04/18			228,955				219,025
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 Class B-1 (B)			65,789 uts.			12/15/10			56,457				755,904
Limited Liability Company Unit Class B-2 (B)			8,248 uts.			12/15/10			7,078				94,768
Limited Liability Company Unit Class B-3 (B)			6,522 uts.			08/30/12			13,844				76,629
Limited Liability Company Unit Class C (B)			1,575 uts.			12/20/10			8,832				105,644
									86,211				1,032,945

 

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Foundation Risk Partners, Corp.
A retail insurance brokerage firm focused on providing commercial P&C and employee benefits solutions to small and medium-sized clients.
5.75% First Lien Term Loan due 08/31/2026 (LIBOR + 4.750%)		$	666,667			09/30/20		$	68,333			$	68,333
9.50% Second Lien Term Loan due 11/10/2024 (LIBOR + 8.500%)		$	333,333			09/30/20			18,611				18,611
									86,944				86,944
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 Preferred (B)			76 uts.			10/05/12			75,920				—
Limited Liability Company Unit Common (B)			767 uts.			10/05/12			767				—
									76,687				—
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% (2% PIK) Senior Subordinated Note due 11/30/2021 (D)		$	1,380,135			03/27/13			989,505				1,173,115
Preferred Stock (B)			295 shs.			03/29/19			295,276				352,575
Common Stock (B)			1,181 shs.			03/27/13			118,110				13,117
									1,402,891				1,538,807
GraphPad Software, Inc.
A provider of data analysis, statistics and graphing software solution for scientific research applications, with a focus on the life sciences and academic end-markets.
7.00% Term Loan due 12/21/2023 (LIBOR + 6.000%)		$	2,421,666			*			2,395,680				2,421,666
* 12/19/17 and 04/16/19.
GTI Holding Company
A designer, developer, and marketer of precision specialty hand tools and handheld test instruments.
Common Stock (B)			1,046 shs.			*			104,636				218,364
Warrant, exercisable until 2027, to purchase common stock at $.01 per share (B)			397 shs.			02/05/14			36,816				82,878
* 02/05/14 and 11/22/17.									141,452				301,242
Handi Quilter Holding Company (Premier Needle Arts)
A designer and manufacturer of long-arm quilting machines and related components for the consumer quilting market.
Limited Liability Company Unit Preferred (B)			372 uts.			*			371,644				375,777
Limited Liability Company Unit Common Class A (B)			3,594 uts.			12/19/14			—				—
*12/19/14 and 04/29/16.									371,644				375,777

 

 

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Happy Floors Acquisition, Inc.
A wholesale importer and value-added distributor of premium European flooring tile to residential and commercial end markets.
12.5% (1% PIK) Senior Subordinated Note due 01/01/2023		$	392,908			07/01/16		$	390,302			$	392,908
Common Stock (B)			150 shs.			07/01/16			149,500				327,441
									539,802				720,349
Hartland Controls Holding Corporation
A manufacturer and distributor of electronic and electromechanical components.
14% (2% PIK) Senior Subordinated Note due 12/01/2023		$	1,192,332			02/14/14			1,191,459				1,192,332
14% Senior Subordinated Note due 12/01/2023		$	434,129			06/22/15			433,927				434,129
Common Stock (B)			821 shs.			02/14/14			822				288,947
									1,626,208				1,915,408
HHI Group, LLC
A developer, marketer, and distributor of hobby-grade radio control products.
14% (2% PIK) Senior Subordinated Note due 11/26/2020
Limited Liability Company Unit (B)(F)			102 uts.			01/17/14			101,563				325,637
Holley Performance Products
A provider of automotive aftermarket performance products.
5.26% Term Loan due 10/24/2025 (LIBOR + 5.000%)		$	2,428,025			10/24/18			2,401,554				2,422,683
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)(F)			47 uts.			10/14/11			—				—
Limited Liability Company Unit Class G (B)(F)			114 uts.			10/14/11			—				—
Limited Liability Company Unit Class H (B)(F)			47 uts.			10/14/11			—				—
Limited Liability Company Unit Class I (B)(F)			47 uts.			10/14/11			—				—
									—				—
Hyperion Materials & Technologies, Inc.
A producer of specialty hard materials and precision tool components that are used to make precision cutting, grinding and other machining tools used by tool manufacturers and final product manufacturers.
6.50% Term Loan due 08/14/2026 (LIBOR + 5.500%)		$	1,597,440			08/16/19			1,572,893				1,517,727

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

  

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
IM Analytics Holdings, LLC
A provider of test and measurement equipment used for vibration, noise, and shock testing.
7.22% Term Loan due 11/22/2023 (LIBOR + 6.000%)		$	1,060,579			11/21/19		$	1,052,230			$	929,703
Warrant, exercisable until 2026, to purchase common stock at $.01 per share (B)			8,885 shs.			11/25/19			—				—
									1,052,230				929,703
Industrial Service Solutions
A provider of maintenance, repair and overhaul services for process equipment within the industrial, energy and power end-markets.
5.77% Term Loan due 01/31/2026 (LIBOR + 4.500%)		$	903,489			02/05/20			887,389				858,314
LAC Acquisition LLC
A provider of center-based applied behavior analysis treatment centers for children diagnosed with autism spectrum disorder.
6.82% Term Loan due 10/01/2024 (LIBOR + 5.750%)		$	1,726,941			10/01/18			1,301,068				1,276,791
Limited Liability Company Unit Class A (F)			22,222 uts.			10/01/18			22,222				23,987
									1,323,290				1,300,778
Manhattan Beachwear Holding Company
A designer and distributor of women’s swimwear.
12.5% Senior Subordinated Note due 05/30/2022 (D)		$	419,971			01/15/10			404,121				—
15% (2.5% PIK) Senior Subordinated Note due 05/30/2022 (D)		$	115,253			10/05/10			114,604				—
Common Stock (B)			35 shs.			10/05/10			35,400				—
Common Stock Class B (B)			118 shs.			01/15/10			117,647				—
Warrant, exercisable until 2023, to purchase common stock at $.01 per share (B)			104 shs.			10/05/10			94,579				—
									766,351				—
Master Cutlery LLC
A designer and marketer of a wide assortment of knives and swords.
13% Senior Subordinated Note due 07/20/2022 (D)		$	868,102			04/17/15			867,529				—
Limited Liability Company Unit			5 uts.			04/17/15			678,329				—
									1,545,858				—
Media Recovery, Inc.
A global manufacturer and developer of shock, temperature, vibration and other condition indicators and monitors for in-transit and storage applications.
6.75% First Out Term Loan due 11/22/2025 (LIBOR + 5.750%)		$	370,880			11/25/19			364,515				355,588

 

 

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
MES Partners, Inc.
An industrial service business offering an array of cleaning and environmental services to the Gulf Coast region of the U.S.
Preferred Stock Series A (B)			30,926 shs.			07/25/19		$	12,412			$	—
Preferred Stock Series C (B)			1,275 shs.			09/22/20			457,365				457,365
Common Stock Class B (B)			259,252 shs.			*			244,163				—
Warrant, exercisable until 2021, to purchase common stock at $.01 per share (B)			351,890 shs.			09/22/20			—				—
* 09/30/14 and 02/28/18.									713,940				457,365
MeTEOR Education LLC
A leading provider of classroom and common area design services, furnishings, equipment and instructional support to K-12 schools.
12% Senior Subordinated Note due 06/20/2023		$	915,819			03/09/18			905,759				914,142
Limited Liability Company Unit (B)(F)			182 uts.			03/09/18			183,164				109,919
									1,088,923				1,024,061
Motion Controls Holdings
A manufacturer of high performance mechanical motion control and linkage products.
Limited Liability Company Unit Class B-1 (B)(F)			75,000 uts.			11/30/10			—				32,772
Limited Liability Company Unit Class B-2 (B)(F)			6,801 uts.			11/30/10			—				2,972
									—				35,744
Music Reports, Inc.
An administrator of comprehensive offering of rights and royalties solutions for music and cue sheet copyrights to music and entertainment customers.
6.40% Term Loan due 08/21/2026 (LIBOR + 5.250%)		$	605,170			08/25/20			590,290				590,041
Options Technology Ltd
A provider of vertically focused financial technology managed services and IT infrastructure products for the financial services industry.
5.50% Term Loan due 12/18/2025 (LIBOR + 4.500%)		$	1,604,606			12/23/19			1,240,125				1,236,893
PANOS Brands LLC
A marketer and distributor of branded consumer foods in the specialty, natural, better-for-you,“free from” healthy and gluten-free categories.
12% (1% PIK) Senior Subordinated Note due 08/17/2022		$	1,775,705			02/17/17			1,762,857				1,775,705
Common Stock Class B (B)			380,545 shs.			*			380,545				441,241
* 01/29/16 and 02/17/17.									2,143,402				2,216,946

 

 

 

17

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)  

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
PB Holdings LLC
A designer, manufacturer and installer of maintenance and repair parts and equipment for industrial customers.
5.52% Term Loan due 03/06/2025 (LIBOR + 5.250%)		$	848,126			03/06/19		$	835,369			$	769,250
Pegasus Transtech Corporation
A provider of end-to-end document, driver and logistics management solutions, which enable its customers (carriers, brokers, and drivers) to operate more efficiently, reduce manual overhead, enhance compliance, and shorten cash conversion cycles.
8.75% Term Loan due 08/31/2026 (LIBOR + 6.500%)		$	387,642			09/29/20			374,075				374,075
7.25% Term Loan due 11/17/2024 (LIBOR + 6.250%)		$	1,894,364			11/14/17			1,866,426				1,847,005
									2,240,501				2,221,080
Petroplex Inv Holdings LLC
A leading provider of acidizing services to E&P customers in the Permian Basin.
Limited Liability Company Unit			0.40% int.			*			174,669				10,772
* 11/29/12 and 12/20/16.
Polytex Holdings LLC
A manufacturer of water based inks and related products serving primarily the wall covering market.
13.9% (7.9% PIK) Senior Subordinated Note due 12/31/2021 (D)		$	1,069,985			07/31/14			1,064,183				802,489
Limited Liability Company Unit			148,096 uts.			07/31/14			148,096				—
Limited Liability Company Unit Class F			36,976 uts.			*			24,802				—
* 09/28/17 and 02/15/18.									1,237,081				802,489
PPC Event Services
A special event equipment rental business.
Preferred Stock Series P-1 (B)			71 shs.			07/21/20			71,018				—
Common Stock (B)			170,927 shs.			07/21/20			—				—
16.00% Term Loan due 05/28/2023 (D)		$	896,513			07/21/20			619,923				—
8.00% Term Loan due 05/28/2023 (D)		$	667,000			07/21/20			620,376				—
Limited Liability Company Unit (B)			3,450 uts.			11/20/14			172,500				—
Limited Liability Company Unit Series A-1 (B)			339 uts.			03/16/16			42,419				—
									1,526,236				—
Recovery Point Systems, Inc.
A provider of IT infrastructure, colocation and cloud based resiliency services.
7.50% Term Loan due 7/31/2026 (LIBOR + 6.500%)		$	1,356,514			08/12/20			1,330,003				1,329,384

 

 

18

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

  

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
ReelCraft Industries, Inc.
A designer and manufacturer of heavy-duty reels for diversified industrial, mobile equipment OEM, auto aftermarket, government/military and other end markets.
Limited Liability Company Unit Class B			293,617 uts.			11/13/17		$	184,689			$	551,566
REVSpring, Inc.
A provider of accounts receivable management and revenue cycle management services to customers in the healthcare, financial and utility industries.
8.40% Second Lien Term Loan due 10/11/2026 (LIBOR + 8.250%)		$	1,725,000			10/11/18			1,686,019				1,666,523
Rock-it Cargo
A provider of specialized international logistics solutions to the music touring, performing arts, live events, fine art and specialty industries.
6.00% Term Loan due 06/22/2024 (G) (LIBOR + 5.000% Cash & 2.750% PIK)		$	2,479,244			*			2,440,502				1,991,081
* 07/30/18 and 09/30/20.
ROI Solutions
Call center outsourcing and end user engagement services provider.
6.00% Term Loan due 07/31/2024 (LIBOR + 5.000%)		$	1,621,240			07/31/18			632,022				627,255
Ruffalo Noel Levitz
A provider of enrollment management, student retention and career services, and fundraising management for colleges and universities.
7.00% Term Loan due 05/29/2022 (LIBOR + 6.000%)		$	1,241,787			01/08/19			1,232,677				1,223,161
Sandvine Corporation
A provider of active network intelligence solutions.
8.15% Second Lien Term Loan due 11/02/2026 (LIBOR + 8.000%)		$	1,725,000			11/01/18			1,692,191				1,672,388
Sara Lee Frozen Foods
A provider of frozen bakery products, desserts and sweet baked goods.
5.50% Lien Term Loan due 07/30/2025 (LIBOR + 4.500%)		$	1,506,455			07/27/18			1,483,085				1,394,375
Scaled Agile, Inc.
A provider of training and certifications for IT professionals focused on software development.
5.75% Term Loan due 06/28/2024 (LIBOR + 4.750%)		$	659,142			06/27/19			654,214				652,551

 

 

19

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)  

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Soliant Holdings, LLC
A healthcare staffing platform focused on placing highly skilled professionals in the education, nursing/allied health, life sciences and pharmacy end-markets.
6.50% Term Loan due 11/30/2026 (LIBOR + 5.500%)		$	1,013,339			12/27/19		$	995,252			$	993,073
Specified Air Solutions
A manufacturer and distributor of heating, dehumidification and other air quality solutions.
10.5% (0.5% PIK) Senior Subordinated Note due 06/19/2024		$	1,235,826			12/19/18			1,227,222				1,248,185
Limited Liability Company Unit			531,730 uts.			02/20/19			539,795				1,550,677
									1,767,017				2,798,862
Springbrook Software
A provider of vertical-market enterprise resource planning software and payments platforms focused on the local government end-market.
6.75% Term Loan due 12/20/2026 (LIBOR + 5.750%)		$	1,648,956			12/23/19			1,174,206				1,171,983
SR Smith LLC
A manufacturer of mine and tunneling ventilation products in the United States.
11% Senior Subordinated Note due 03/27/2022 (D)		$	1,084,565			*			1,047,502				1,030,337
Limited Liability Company Unit Series A			1,072 uts.			*			1,060,968				1,777,508
* 03/27/17 and 08/07/18.									2,108,470				2,807,845
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.
Preferred Stock Series A (B)			158,967 shs.			12/13/13			158,967				307,100
Preferred Stock Series A-2 (B)			26,543 shs.			09/10/15			29,994				51,277
									188,961				358,377
Sunrise Windows Holding Company
A manufacturer and marketer of premium vinyl windows exclusively selling to the residential remodeling and replacement market.
16% Senior Subordinated Note due 05/28/2021 (D)		$	2,211,310			*			1,358,229				1,769,048
Common Stock (B)			38 shs.			12/14/10			38,168				—
Warrant, exercisable until 2020, to purchase common stock at $.01 per share (B)			37 shs.			12/14/10			37,249				—
* 12/14/10, 08/17/12 and 03/31/16.									1,433,646				1,769,048

 

 

20

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Sunvair Aerospace Group Inc.
An aerospace maintenance, repair, and overhaul provider servicing landing gears on narrow body aircraft.
12% (1% PIK) Senior Subordinated Note due 08/01/2024 (D)		$	1,393,644			07/31/15		$	1,385,865			$	1,323,962
Common Stock (B)			68 shs.			*			104,986				86,116
* 07/31/15 and 11/08/17.									1,490,851				1,410,078
The Hilb Group, LLC
An insurance brokerage platform that offers insurance and benefits programs to middle-market companies throughout the Eastern seaboard.
6.75% Term Loan due 09/30/2026 (LIBOR + 5.750%)		$	1,515,828			12/02/19			1,232,084				1,228,570
Therma-Stor Holdings LLC
A designer and manufacturer of dehumidifiers and water damage restoration equipment for residential and commercial applications.
10.5% (0.5% PIK) Senior Subordinated Note due 11/30/2023		$	1,385,385			11/30/17			1,385,384				1,399,238
Limited Liability Company Unit (B)			19,696 uts.			11/30/17			3,172				7,153
									1,388,556				1,406,391
Transit Technologies LLC
A software platform for the transportation market that offers end-to-end software solutions focused on operations, fleet management and telematics services.
5.00% Term Loan due 02/10/2025 (LIBOR + 4.750%)		$	1,560,620			02/13/20			754,729				691,666
Trident Maritime Systems
A leading provider of turnkey marine vessel systems and solutions for government and commercial new ship construction as well as repair, refurbishment, and retrofit markets worldwide.
6.50% Term Loan due 06/04/2024 (LIBOR + 5.500%)		$	2,339,897			05/14/18			2,307,996				2,298,949
Tristar Global Energy Solutions, Inc.
A hydrocarbon and decontamination services provider serving refineries worldwide.
12.5% (1.5% PIK) Senior Subordinated Note due 03/31/2022 (D)		$	1,204,904			01/23/15			1,204,664				602,452
Truck-Lite
A leading provider of harsh environment LED safety lighting, electronics, filtration systems, and telematics for a wide range of commercial vehicles, specialty vehicles, final mile delivery vehicles, off-road/off-highway, marine, and other adjacent harsh environment markets.
7.25% Term Loan due 12/02/2026 (LIBOR + 6.250%)		$	1,717,481			12/13/19			1,465,405				1,389,671

 

 

21

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Trystar, Inc.
A niche manufacturer of temporary power distribution products for the power rental, industrial, commercial utility and back-up emergency markets.
5.82% Term Loan due 10/01/2023 (LIBOR + 4.750%)		$	2,014,150			09/28/18		$	1,993,047			$	1,976,486
Limited Liability Company Unit (B)(F)			47 uts.			09/28/18			46,562				47,078
									2,039,609				2,023,564
U.S. Legal Support, Inc.
A provider of court reporting, record retrieval and other legal supplemental services.
5.97% Term Loan due 11/12/2024 (LIBOR + 5.750%)		$	2,174,216			*			2,082,039				1,917,069
* 11/29/18 and 03/25/19.
U.S. Oral Surgery Management
An operator of oral surgery practices providing medically necessary treatments.
7.00% Term Loan due 12/31/2023 (LIBOR + 6.000%)		$	2,428,257			*			2,387,117				2,379,692
* 01/04/19 and 10/01/19.
U.S. Retirement and Benefit Partners, Inc.
A leading independent provider of outsourced benefit design and administration and retirement services, primarily to K-12 school districts, employee unions, and governmental agencies.
9.75% Second Lien Term Loan due 09/29/2025 (LIBOR + 8.750%)		$	1,607,700			03/05/18			1,584,780				1,527,797
UBEO, LLC
A dealer and servicer of printers and copiers to medium sized businesses.
11.00% Term Loan due 10/03/2024		$	1,558,661			11/05/18			1,536,317				1,527,488
Velocity Technology Solutions, Inc.
A provider of outsourced hosting services for enterprise resource planning software applications and information technology infrastructure to mid and large-sized enterprises.
7.00% Lien Term Loan due 12/07/2023 (LIBOR + 6.000%)		$	2,042,250			12/07/17			2,031,399				2,018,968
VP Holding Company
A provider of school transportation services for special-needs and homeless children in Massachusetts and Connecticut.
5.72% Lien Term Loan due 05/22/2024 (LIBOR + 5.500%)		$	2,421,015			05/17/18			2,384,866				2,336,522

 

 

22

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)		Principal Amount, Shares, Units or Ownership Percentage				Acquisition Date		Cost				Fair Value
Westminster Acquisition LLC
A manufacturer of premium, all-natural oyster cracker products sold under the Westminster and Olde Cape Cod brands.
12% (1% PIK) Senior Subordinated Note due 08/03/2021 (D)		$	383,062			08/03/15		$	382,196			$	95,765
Limited Liability Company Unit (B)(F)			370,241 uts.			08/03/15			370,241				—
									752,437				95,765
Whitebridge Pet Brands Holdings, LLC
A manufacturer and marketer of branded, all-natural treats and foods for dogs and cats.
Limited Liability Company Unit Class A (B)(F)			123 uts.			04/18/17			148,096				165,520
Limited Liability Company Unit Class B (B)(F)			123 uts.			04/18/17			—				81,179
									148,096				246,699
Wolf-Gordon, Inc.
A designer and specialty distributor of wallcoverings and related building products, including textiles, paint, and writeable surfaces.
Common Stock (B)			157 shs.			01/22/16			62,177				129,328
World 50, Inc.
A provider of exclusive peer-to-peer networks for C-suite executives at leading corporations.
6.25% Term Loan due 01/10/2026 (LIBOR + 5.250%)		$	381,972			09/21/20			370,566				370,513
5.75% Term Loan due 12/31/2025 (LIBOR + 4.750%)		$	1,221,706			01/09/20			1,194,852				1,186,032
									1,565,418				1,556,545
WP Supply Holding Corporation
A distributor of fresh fruits and vegetables to grocery wholesalers and foodservice distributors in the upper Midwest.
Common Stock (B)			1,500 shs.			11/03/11			150,000				130,014
York Wall Holding Company
A designer, manufacturer and marketer of wall covering products for both residential and commercial wall coverings.
Preferred Stock Series A (B)			2,936 shs.			02/05/19			293,616				293,600
Common Stock (B)			2,046 shs.			*			200,418				114,694
* 03/04/15 and 02/07/18.									494,034				408,294
Total Private Placement Investments (E)								$	119,433,917			$	114,171,616

 

 

 

23

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)			Interest Rate			Maturity Date		Principal Amount				Cost				Market Value
Rule 144A Securities - 12.08%:
Bonds - 12.08%
Acrisure, LLC			7.000	%		11/15/25		$	757,000			$	710,669			$	743,658
Altice Financing S.A.			7.500			05/15/26			308,000				308,000				326,027
American Airlines Inc			11.750			07/15/25			500,000				495,195				482,500
Boyne USA, Inc.			7.250			05/01/25			129,000				129,000				135,450
BWAY Holding Company			7.250			04/15/25			750,000				695,290				705,937
Calumet Specialty Products Partners, L.P.			11.000			04/15/25			500,000				500,000				452,500
Cleveland-Cliffs Inc.			6.750			03/15/26			500,000				451,572				508,750
Cleveland-Cliffs Inc.			9.875			10/17/25			500,000				546,695				558,125
CommScope Finance LLC			8.250			03/01/27			500,000				476,773				520,000
CVR Energy Inc.			5.750			02/15/28			500,000				453,586				425,000
CVR Partners, L.P.			9.250			06/15/23			268,000				264,887				247,900
Diebold Nixdorf			9.375			07/15/25			350,000				373,291				369,250
Dominion Diamond (D)			7.125			11/01/22			500,000				279,489				8,000
Financial & Risk US Holdings, Inc.			6.250			05/15/26			116,000				116,000				124,120
First Quantum Minerals Ltd.			7.500			04/01/25			500,000				479,664				494,555
First Quantum Minerals Ltd.			7.250			04/01/23			385,000				382,397				384,519
Gates Global LLC			6.250			01/15/26			600,000				535,542				618,474
Genesys Telecommunications Laboratories, Inc.			10.000			11/30/24			500,000				486,300				529,500
Golden Nugget, Inc.			8.750			10/01/25			250,000				222,227				197,188
GRD Holding III Corp.			8.750			09/01/25			375,000				378,399				391,643
Houghton Mifflin Harcourt			9.000			02/15/25			500,000				491,353				480,000
Jonah Energy LLC			7.250			10/15/25			385,000				341,326				42,831
LBC Tank Terminals Holding Netherlands B.V.			6.875			05/15/23			511,000				515,910				507,168
OPE KAG Finance Sub			7.875			07/31/23			385,000				392,783				373,450
Ortho Clinical Diagnostics, Inc.			7.250			02/01/28			245,000				224,002				254,800
Panther BF Aggregator 2 LP			8.500			05/15/27			100,000				92,783				103,250
Perenti Finance Pty Ltd			6.500			10/07/25			500,000				500,000				502,810
Prime Security Services, LLC			6.250			01/15/28			885,000				774,852				896,062
Suncoke Energy			7.500			06/15/25			385,000				381,031				347,278
Terrier Media Buyer, Inc.			8.875			12/15/27			530,000				508,032				533,975
The Manitowoc Company, Inc.			9.000			04/01/26			863,000				857,751				891,047
TransDigm Group, Inc.			6.250			03/15/26			500,000				494,200				522,147
Trident TPI Holdings Inc.			9.250			08/01/24			500,000				487,383				530,775
Univision Communications Inc.			6.625			06/01/27			253,000				253,000				246,991
Veritas US, Inc.			10.500			02/01/24			750,000				671,711				705,300
Verscend Holding Corp			9.750			08/15/26			482,000				511,138				524,074
VICI Properties, Inc.			4.625			12/01/29			750,000				623,737				763,125
VRX Escrow Corp.			6.125			04/15/25			140,000				140,000				143,325
Warrior Met Coal, Inc.			8.000			11/01/24			161,000				161,000				163,969

 

 

24

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Restricted Securities: (A) (Continued)			Interest Rate			Maturity Date		Principal Amount				Cost				Market Value
WESCO International, Inc.			7.125	%		06/15/25		$	152,000			$	152,000			$	165,574
WESCO International, Inc.			7.250			06/15/28			157,000				155,792				172,021
Total Bonds													17,014,760				17,093,068
Common Stock - 0.00%
TherOX, Inc. (B)									2				—				—
Touchstone Health Partnership (B)									292				—				—
Total Common Stock													—				—
Total Rule 144A Securities												$	17,014,760			$	17,093,068
Total Corporate Restricted Securities												$	136,448,677			$	131,264,684

 

 

 

Corporate Public Securities - 6.46%: (A)			LIBOR Spread				Interest Rate			Maturity Date		Principal Amount				Cost				Market Value
Bank Loans - 2.32%
Almonde, Inc.			3.500	%			4.500	%		06/13/24		$	355,215			$	311,413			$	331,326
BMC Software Finance, Inc.			4.250				4.428			06/26/25			491,250				487,736				475,731
Confie Seguros Holding II Co.			8.500				8.673			10/31/25			446,131				439,632				340,175
Edelman Financial Services			6.750				6.930			06/08/26			128,178				127,712				122,210
Envision Healthcare Corp			3.750				3.928			10/10/25			748,734				513,909				538,422
Fieldwood Energy LLC (D)			7.250				—			04/01/22			977,612				949,869				225
Golden Nugget, Inc.			2.500				3.250			10/04/23			436,770				364,977				388,263
ION Trading Technologies Sarl			4.000				5.072			11/21/24			270,640				266,127				265,113
PS Logistics LLC			4.750				5.750			03/01/25			490,000				493,156				457,386
STS Operating, Inc.			8.000				9.000			04/25/26			500,000				505,000				371,565
Total Bank Loans																	4,459,531				3,290,416
Bonds - 3.77%
Brunswick Corporation							7.125			08/01/27			500,000				502,877				616,851
Century Communities, Inc.							5.875			07/15/25			715,000				634,308				743,242
Clear Channel Worldwide Holdings, Inc.							9.250			02/15/24			137,000				131,065				132,808
Dish DBS Corporation							7.750			07/01/26			385,000				408,736				423,254
Genesis Energy LP							6.500			10/01/25			337,000				320,151				291,505
Hecla Mining Company							7.250			02/15/28			500,000				471,768				542,000
Hughes Satellite Systems Corporation							7.625			06/15/21			500,000				500,677				518,750
Jupiter Resources Inc.							13.000			02/05/24			50,428				50,428				49,344
Laredo Petroleum, Inc.							10.125			01/15/28			500,000				393,342				295,000
PBF Holding Company LLC							7.250			06/15/25			385,000				394,576				290,675
Targa Resources Partners LP							4.250			11/15/23			600,000				523,464				594,000
Triumph Group, Inc.							7.750			08/15/25			500,000				503,233				320,625
United Rentals (North America), Inc.							4.625			10/15/25			500,000				447,025				511,250
Total Bonds																	5,281,650				5,329,304

 

 

25

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Corporate Public Securities: (A) (Continued)								Principal Amount				Cost				Market Value
Common Stock - 0.02%
Jupiter Resources Inc.								$	41,472			$	200,439			$	31,104
Total Common Stock													200,439				31,104
Preferred Stock - 0.35%
B. Riley Financial Inc.									20,000				500,000				496,200
Total Preferred Stock													500,000				496,200
Total Corporate Public Securities												$	10,441,620			$	9,147,024
Short-Term Security:			Interest Rate/Yield^			Maturity Date		Principal Amount				Cost				Market Value
Commercial Paper - 4.24%
Avangrid, Inc.			0.253	%		11/09/20		$	1,000,000			$	999,729			$	999,729
Enbridge (U.S.) Inc.			0.203			10/20/20			2,000,000				1,999,789				1,999,789
NRW.Bank			0.183			12/08/20			1,000,000				999,660				999,707
Skandinaviska Enskilda Banken (SEB)			0.220			10/08/20			1,000,000				999,957				999,957
The Walt Disney Company			0.470			02/22/21			1,000,000				998,120				998,691
Total Short-Term Securities												$	5,997,255			$	5,997,873
Total Investments			103.45	%								$	152,887,552			$	146,409,581
Other Assets			8.22														11,636,143
Liabilities			(11.67	)													(16,519,847	)
Total Net Assets			100.00	%												$	141,525,877

(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)	Security valued at fair value using methods determined in good faith by or under the direction of the Board of Trustees.

(D)	Defaulted security; interest not accrued.

(E)	Illiquid security. As of September 30, 2020 the values of these securities amounted to $114,171,616 or 80.67% of net assets.

(F)	Held in PI Subsidiary Trust

(G)	PIK non-accrual

^ Effective yield at purchase

PIK - Payment-in-kind

 

 

26

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Industry Classification:		Fair Value/ Market Value
AEROSPACE & DEFENSE - 6.81%
American Scaffold, Inc.		$	1,255,325
BEI Precision Systems & Space Company, Inc.			1,908,960
Dart Buyer, Inc.			1,395,015
Sunvair Aerospace Group Inc.			1,410,078
TransDigm Group, Inc.			522,147
Trident Maritime Systems			2,298,949
Trident TPI Holdings Inc.			530,775
Triumph Group, Inc.			320,625
			9,641,874
AIRLINES - 0.34%
American Airlines Inc			482,500
AUTOMOTIVE - 5.43%
Aurora Parts & Accessories LLC			210,384
BBB Industries LLC			1,515,240
DPL Holding Corporation			344,487
English Color & Supply LLC			1,705,480
Holley Performance Products			2,422,683
Panther BF Aggregator 2 LP			103,250
Truck-Lite			1,389,671
			7,691,195
BANKING - 1.41%
NRW.Bank			999,707
Skandinaviska Enskilda Banken (SEB)			999,957
			1,999,664
BROKERAGE, ASSET MANAGERS & EXCHANGES - 0.87%
The Hilb Group, LLC			1,228,570
BUILDING MATERIALS - 1.85%
Happy Floors Acquisition, Inc.			720,349
Sunrise Windows Holding Company			1,769,048
Wolf-Gordon, Inc.			129,328
			2,618,725
CABLE & SATELLITE - 0.37%
Hughes Satellite Systems Corporation			518,750
CHEMICALS - 1.10%
CVR Partners, L.P.			247,900
LBC Tank Terminals Holding Netherlands B.V.			507,168
Polytex Holdings LLC			802,489
			1,557,557

 

 

 

 

 

		Fair Value/ Market Value
CONSTRUCTION MACHINERY - 0.36%
United Rentals (North America), Inc.		$	511,250
CONSUMER CYCLICAL SERVICES - 4.26%
Accelerate Learning			926,778
CHG Alternative Education Holding Company			1,112,256
MeTEOR Education LLC			1,024,061
PPC Event Services			—
Prime Security Services, LLC			896,062
PS Logistics LLC			457,386
ROI Solutions			627,255
Soliant Holdings, LLC			993,073
			6,036,871
CONSUMER PRODUCTS - 2.52%
AMS Holding LLC			186,372
Blue Wave Products, Inc.			189,292
Elite Sportwear Holding, LLC			—
gloProfessional Holdings, Inc.			1,538,807
GTI Holding Company			301,242
Handi Quilter Holding Company (Premier Needle Arts)			375,777
HHI Group, LLC			325,637
Manhattan Beachwear Holding Company			—
Master Cutlery LLC			—
Whitebridge Pet Brands Holdings, LLC			246,699
York Wall Holding Company			408,294
			3,572,120
DIVERSIFIED MANUFACTURING - 8.18%
Advanced Manufacturing Enterprises LLC			—
F G I Equity LLC			1,032,945
Gates Global LLC			618,474
Hyperion Materials & Technologies, Inc.			1,517,727
Motion Controls Holdings			35,744
Reelcraft Industries, Inc.			551,566
SR Smith LLC			2,807,845
Strahman Holdings Inc.			358,377
The Manitowoc Company, Inc.			891,047
Therma-Stor Holdings LLC			1,406,391
Trystar, Inc.			2,023,564
WESCO International, Inc.			337,595
			11,581,275

 

 

 

See Notes to Consolidated Financial Statements

27

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Industry Classification: (Continued)		Fair Value/ Market Value
ELECTRIC - 1.90%
Avangrid, Inc.		$	999,729
Electronic Power Systems			1,686,398
			2,686,127
FINANCIAL OTHER - 2.87%
Acrisure, LLC			743,658
Beacon Pointe Advisors, LLC			614,342
B. Riley Financial Inc.			496,200
Confie Seguros Holding II Co.			340,175
Edelman Financial Services			122,210
Financial & Risk US Holdings, Inc.			124,120
Foundation Risk Partners, Corp.			86,944
U.S. Retirement and Benefit Partners, Inc.			1,527,797
			4,055,446
FOOD & BEVERAGE - 3.68%
Del Real LLC			1,376,595
PANOS Brands LLC			2,216,946
Sara Lee Frozen Foods			1,394,375
Westminster Acquisition LLC			95,765
WP Supply Holding Corporation			130,014
			5,213,695
HEALTHCARE - 5.29%
Cadence, Inc.			859,557
CORA Health Services, Inc.			1,480,836
Envision Healthcare Corp			538,422
GD Dental Services LLC			—
LAC Acquisition LLC			1,300,778
Ortho Clinical Diagnostics, Inc.			254,800
TherOX, Inc.			—
Touchstone Health Partnership			—
U.S. Oral Surgery Management			2,379,692
Verscend Holding Corp			524,074
VRX Escrow Corp.			143,325
			7,481,484
HOME CONSTRUCTION - 0.53%
Century Communities, Inc.			743,242
INDEPENDENT - 0.30%
Fieldwood Energy LLC			—
Jonah Energy LLC			42,831

 

 

 

 

 

		Fair Value/ Market Value
Jupiter Resources Inc.		$	80,448
Laredo Petroleum, Inc.			295,000
			418,279
INDUSTRIAL OTHER - 12.20%
AFC - Dell Holding Corporation			2,394,073
Aftermath, Inc.			1,157,238
ASPEQ Holdings			1,184,499
Brunswick Corporation			616,851
Concept Machine Tool Sales, LLC			611,094
E.S.P. Associates, P.A.			219,025
Hartland Controls Holding Corporation			1,915,408
IM Analytics Holdings, LLC			929,703
Industrial Service Solutions			858,314
Media Recovery, Inc.			355,588
PB Holdings LLC			769,250
Specified Air Solutions			2,798,862
STS Operating, Inc.			371,565
UBEO, LLC			1,527,488
World 50, Inc.			1,556,545
			17,265,503
LODGING - 0.54%
VICI Properties, Inc.			763,125
MEDIA & ENTERTAINMENT - 4.54%
BlueSpire Holding, Inc.			38,664
Boyne USA, Inc.			135,450
Cadent, LLC			952,766
Clear Channel Worldwide Holdings, Inc.			132,808
Discovery Education, Inc.			1,887,461
Dish DBS Corporation			423,254
HOP Entertainment LLC			—
Houghton Mifflin Harcourt			480,000
Music Reports, Inc.			590,041
The Walt Disney Company			998,691
Terrier Media Buyer, Inc.			533,975
Univision Communications Inc.			246,991
			6,420,101
METALS & MINING - 2.47%
Cleveland-Cliffs Inc.			1,066,875
Dominion Diamond			—
First Quantum Minerals Ltd.			879,074

 

 

 

 

 

See Notes to Consolidated Financial Statements

28

Barings Participation Investors

CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)

September 30, 2020

(Unaudited)

 

Industry Classification: (Continued)		Fair Value/ Market Value
Hecla Mining Company		$	542,000
Perenti Finance Pty Ltd			502,810
Suncoke Energy			347,278
Warrior Met Coal, Inc.			163,969
			3,502,006
MIDSTREAM - 2.04%
Enbridge (U.S.) Inc.			1,999,789
Genesis Energy LP			291,505
Targa Resources Partners LP			594,000
			2,885,294
OIL FIELD SERVICES - 0.01%
Petroplex Inv Holdings LLC			10,772
PACKAGING - 1.60%
ASC Holdings, Inc.			897,105
Brown Machine LLC			663,819
BWAY Holding Company			705,937
			2,266,861
PAPER - 1.18%
Dunn Paper			1,672,215
PHARMACEUTICALS - 0.25%
Clarion Brands Holding Corp.			346,830
REFINING - 1.57%
Calumet Specialty Products Partners, L.P.			452,500
CVR Energy Inc.			425,000
MES Partners, Inc.			457,365
PBF Holding Company LLC			290,675
Tristar Global Energy Solutions, Inc.			602,452
			2,227,992
RETAILERS - 0.28%
GRD Holding III Corp.			391,643
RESTAURANTS - 0.41%
Golden Nugget, Inc.			388,263
Golden Nugget, Inc.			197,188
			585,451

 

 

 

 

		Fair Value/ Market Value
TECHNOLOGY - 21.45%
1WorldSync, Inc.		$	1,673,757
Almonde, Inc.			331,326
Audio Precision			1,728,709
BCC Software, Inc.			2,836,565
BMC Software Finance, Inc.			475,731
Claritas Holdings, Inc.			1,538,203
Clubessential LLC			1,688,855
Command Alkon			1,690,356
CommScope Finance LLC			520,000
Diebold Nixdorf			369,250
Genesys Telecommunications Laboratories, Inc.			529,500
GraphPad Software, Inc.			2,421,666
ION Trading Technologies Sarl			265,113
Options Technology Ltd			1,236,893
Recovery Point Systems, Inc.			1,329,384
REVSpring, Inc.			1,666,523
Ruffalo Noel Levitz			1,223,161
Sandvine Corporation			1,672,388
Scaled Agile, Inc.			652,551
Springbrook Software			1,171,983
Transit Technologies LLC			691,666
U.S. Legal Support, Inc.			1,917,069
Velocity Technology Solutions, Inc.			2,018,968
Veritas US, Inc.			705,300
			30,354,917
TELECOMMUNICATIONS - 0.23%
Altice Financing S.A.			326,027
TRANSPORTATION SERVICES - 6.60%
BDP International, Inc.			2,421,862
OPE KAG Finance Sub			373,450
Pegasus Transtech Corporation			2,221,080
Rock-it Cargo			1,991,081
VP Holding Company			2,336,522
			9,343,995
Total Investments - 103.44% (Cost - $152,887,552)		$	146,401,356

 

 

 

 

See Notes to Consolidated Financial Statements

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

1.

History

Barings Participation Investors (the “Trust”) was organized as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated April 7, 1988.

The Trust is a diversified closed-end management investment company. Barings LLC (“Barings”), a wholly-owned indirect subsidiary of Massachusetts Mutual Life Insurance Company (“MassMutual”), acts as its investment adviser. 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 direct 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 stock. Below investment grade or high yield securities have predominantly speculative characteristics with respect to the capacity of the issuer to pay interest and repay capital.

On January 27, 1998, the Board of Trustees authorized the formation of a wholly-owned subsidiary of the Trust (“PI Subsidiary Trust”) for the purpose of holding certain investments. The results of the PI Subsidiary Trust are consolidated in the accompanying financial statements. Footnote 2.D below discusses the Federal tax consequences of the PI Subsidiary Trust. 

2.	Significant Accounting Policies

The following is a summary of significant accounting policies followed consistently by the Trust in the preparation of its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The Trustees have determined that the Trust is an investment company in accordance with Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies, for the purpose of financial reporting.

A. Fair Value Measurements:

Under U.S. GAAP, fair value represents the price that should be received to sell an asset (exit price) in an orderly transaction between willing market participants at the measurement date.

Determination of Fair Value

The determination of the fair value of the Trust’s investments is the responsibility of the Trust’s Board of Trustees (the

 

 

 

“Trustees”). The Trustees have adopted procedures for the valuation of the Trust’s securities and have delegated responsibility for applying those procedures to Barings. Barings has established a Pricing Committee which is responsible for setting the guidelines used in following the procedures adopted by the Trustees ensuring that those guidelines are being followed. Barings considers all relevant factors that are reasonably available, through either public information or information available to Barings, when determining the fair value of a security. The Trustees meet at least once each quarter to approve the value of the Trust’s portfolio securities as of the close of business on the last business day of the preceding quarter. This valuation requires the approval of a majority of the Trustees of the Trust, including a majority of the Trustees who are not interested persons of the Trust or of Barings. In approving valuations, the Trustees will consider reports by Barings analyzing each portfolio security in accordance with the procedures and guidelines referred to above, which include the relevant factors referred to below. Barings has agreed to provide such reports to the Trust at least quarterly. The consolidated financial statements include private placement restricted securities valued at $114,171,616 (80.67% of net assets) as of September 30, 2020 the values of which have been estimated by the Trustees based on the process described above in the absence of readily ascertainable market values. Due to the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.

Independent Valuation Review

Barings has engaged an independent valuation firm to provide third-party valuation consulting services at the end of each fiscal quarter which consist of certain limited procedures that the Trust identified and requested the valuation firm to perform (hereinafter referred to as the “Procedures”). The Procedures generally consist of a review of the quarterly fair values of the Trust’s middle-market loan investments, and are generally performed with respect to each middle-market loan investment at least once in every calendar year and for new middle-market loan investments, at least once in the twelve-month period subsequent to the initial investment. In addition, the Procedures will generally be performed with respect to an investment where there has been a significant change in the fair value or performance of the investment. In certain instances, the Trust may determine that it is not cost-effective, and as a result is not in the shareholders’ best interests, to request the independent valuation firm to perform the Procedures on certain investments. Such instances include, but are not limited to, situations where the fair value of the investment in the portfolio company is determined to be insignificant relative to the total investment portfolio.

Upon completion of the Procedures, the valuation firm concluded that, with respect to each investment reviewed by the valuation firm, the fair value of those investments subjected to the Procedures appeared reasonable. Finally,

 

 

 

 

30

Barings Participation Investors

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

the Trustees determined in good faith that the Trust’s investments were valued at fair value in accordance with the Trust’s valuation policies and procedures and the 1940 Act based on, among other things, the input of Barings, the Trust’s Audit Committee and the independent valuation firm.

Following is a description of valuation methodologies used for assets recorded at fair value.

Corporate Public Securities at Market Value – Bank Loans, Corporate Bonds, Preferred Stocks and Common Stocks

The Trust uses external independent third-party pricing services to determine the fair values of its Corporate Public Securities. At September 30, 2020, 100% of the carrying value of these investments was from external pricing services. In the event that the primary pricing service does not provide a price, the Trust utilizes the pricing provided by a secondary pricing service.

Public debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Trust’s pricing services use multiple valuation techniques to determine fair value. In instances where significant market activity exists, the pricing services may utilize a market based approach through which quotes from market makers are used to determine fair value. In instances where significant market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal underlying prepayments, collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

The Trust’s investments in bank loans are normally valued at the bid quotation obtained from dealers in loans by an independent pricing service in accordance with the Trust’s valuation policies and procedures approved by the Trustees.

Public equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sales price of that day.

At least annually, Barings conducts reviews of the primary pricing vendors to validate that the inputs used in that vendors’ pricing process are deemed to be market observable as defined in the standard. While Barings is not provided access to proprietary models of the vendors, the reviews have included on-site walk-throughs of the pricing process, methodologies and control procedures for each asset class and level for which prices are provided. The reviews also include an examination of the underlying inputs and assumptions for a sample of individual securities across asset classes, credit rating levels and various durations. In

 

 

addition, the pricing vendors have an established challenge process in place for all security valuations, which facilitates identification and resolution of prices that fall outside expected ranges. Barings believes that the prices received from the pricing vendors are representative of prices that would be received to sell the assets at the measurement date (exit prices) and are classified appropriately in the hierarchy.

Corporate Restricted Securities at Fair Value – Bank Loans, Corporate Bonds

The fair value of certain notes is determined using an internal model that discounts the anticipated cash flows of those notes using a specific discount rate. Changes to that discount rate are driven by changes in general interest rates, probabilities of default and credit adjustments. The discount rate used within the models to discount the future anticipated cash flows is considered a significant unobservable input. Increases/(decreases) in the discount rate would result in a (decrease)/increase to the notes’ fair value.

The fair value of certain distressed notes is based on an enterprise waterfall methodology which is discussed in the equity security valuation section below.

Corporate Restricted Securities at Fair Value – Common Stock, Preferred Stock and Partnerships & LLC’s

The fair value of equity securities is determined using an enterprise waterfall methodology. Under this methodology, the enterprise value of the company is first estimated and that value is then allocated to the company’s outstanding debt and equity securities based on the documented priority of each class of securities in the capital structure. Generally, the waterfall proceeds from senior debt, to senior and junior subordinated debt, to preferred stock, then finally common stock.

To estimate a company’s enterprise value, the company’s trailing twelve months earnings before interest, taxes, depreciation and amortization (“EBITDA”) is multiplied by a valuation multiple.

Both the company’s EBITDA and valuation multiple are considered significant unobservable inputs. Increases/(decreases) to the company’s EBITDA and/or valuation multiple would result in increases/(decreases) to the equity value.

Short-Term Securities

Short-term securities with more than sixty days to maturity are valued at fair value, using external independent third-party services. Short-term securities, of sufficient credit quality, having a maturity of sixty days or less are valued at amortized cost, which approximates fair value.

 

 

 

 

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

Fair Value 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 table summarizes the levels in the fair value hierarchy into which the Trust’s financial instruments are categorized as of September 30, 2020.

The fair values of the Trust’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of September 30, 2020 are as follows:

 

Assets:		Total				Level 1				Level 2				Level 3
Restricted Securities
Corporate Bonds		$	41,408,038			$	—			$	17,093,068			$	24,314,970
Bank Loans			76,564,800				—				461,019				76,103,781
Common Stock - U.S.			2,861,924				—				—				2,861,924
Preferred Stock			2,985,342				—				—				2,985,342
Partnerships and LLCs			7,444,580				—				—				7,444,580
Public Securities
Loans			3,290,416				—				3,290,416				—
Corporate Bonds			5,329,304				—				5,279,960				49,344
Common Stock - U.S.			31,104				—				31,104				—
Preferred Stock			496,200				—				496,200				—
Short-term Securities			5,997,873				—				5,997,873				—
Total		$	146,409,581			$	—			$	32,649,640			$	113,759,941
See information disaggregated by security type and industry classification in the Consolidated Schedule of Investments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

Barings Participation Investors

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

Quantitative Information about Level 3 Fair Value Measurements*

The following table represents quantitative information about Level 3 fair value measurements as of September 30, 2020.

 

	Fair Value	Valuation Technique	Unobservable Inputs	Range	Weighted**
Bank Loans	$76,103,781	Income Approach	Implied Spread	4.2% to 14.5%	7.1%
Corporate Bonds	$16,239,273	Income Approach	Implied Spread	8.4% to 20.5%	11.5%
	$8,075,697	Enterprise Value Waterfall Approach	Valuation Multiple	5.0x to 10.7x	8.1x
			EBITDA	$0.1 million to $21.7 million	$8.9 million
Equity Securities**	$13,291,846	Enterprise Value Waterfall Approach	Valuation Multiple	5.0x to 17.3x	10.0x
			EBITDA	$0.0 million to $289.5 million	$37.9 million

*	Excludes Level 3 assets of $49,344 which are valued based upon unadjusted prices from independent pricing services and independent indicative broker quotes where pricing inputs are not readily available.

**	The weighted averages disclosed in the table above were weighted by relative fair value

***	Including partnerships and LLC’s

  

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

 

Assets:		Beginning balance at 12/31/2019				Included in earnings				Purchases				Sales				Prepayments				Transfers into Level 3				Transfers out of Level 3				Ending balance at 09/30/2020
Restricted Securities
Corporate Bonds		$	42,798,389			$	(3,685,834	)		$	(324,321	)		$	(7,779,864	)		$	(6,693,400	)		$	—			$	—			$	24,314,970
Bank Loans			70,255,151				(2,348,609	)			12,626,114				(200	)			(5,042,539	)			613,864				—				76,103,781
Common Stock - U.S.			3,993,481				422,114				10				(1,553,681	)			—				—				—				2,861,924
Preferred Stock			2,836,867				(212,151	)			531,743				(171,117	)			—				—				—				2,985,342
Partnerships and LLCs			7,510,960				(85,141	)			64,916				(46,155	)			—				—				—				7,444,580
Public Securities
Bank Loans			1,168,841				(5,000	)			—				—				(489,999	)			—				(673,842	)			—
Common Stock - U.S.			—				—				—				—				—				—				—				—
Corporate Bonds			—				(1,084	)			50,428				—				—				—				—				49,344
		$	128,563,689			$	(5,915,705	)		$	12,948,890			$	(9,551,017	)		$	(12,225,938	)		$	613,864			$	(673,842	)		$	113,759,941

 

 

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

 

 

Income, Gains and Losses on Level 3 assets included in Net Increase in Net Assets resulting from Operations for the year are presented in the following accounts on the Statement of Operations:

 

		Net Increase in Net Assets Resulting from Operations				Change in Unrealized Gains & (Losses) in Net Assets from assets still held
Interest (Amortization)		$	238,166				—
Net realized gain on investments before taxes		$	(378,510	)			—
Net change in unrealized appreciation of investments before taxes		$	(5,775,361	)			(6,750,514	)

 

B. Accounting for Investments:

Investment Income

Investment transactions are accounted for on the trade date. Interest income, including the amortization of premiums and accretion of discounts on bonds held using the yield-to-maturity method, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Trust otherwise does not expect the borrower to be able to service its debt and other obligations, the Trust will place the investment on non-accrual status and will cease recognizing interest income on that investment for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Trust writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. As of September 30, 2020, the fair value of the Trust’s non-accrual assets was $8,083,922, or 5.5% of the total fair value of the Trust’s portfolio, and the cost of the Trust’s non-accrual assets was $14,260,508, or 9.3% of the total cost of the Trust’s portfolio.

Payment-in-Kind Interest

The Trust currently holds, and expects to hold in the future, some investments in its portfolio that contain Payment-in-Kind (“PIK”) interest provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the investment, rather than being paid to the Trust in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment. PIK interest, which is a non-cash source of income at the time of recognition, is included in the Trust’s taxable income and therefore affects the amount the Trust is required to distribute

 

to its stockholders to maintain its qualification as a “regulated investment company” for federal income tax purposes, even though the Trust has not yet collected the cash.

Generally, when current cash interest and/or principal payments on an investment become past due, or if the Trust otherwise does not expect the borrower to be able to service its debt and other obligations, the Trust will place the investment on PIK non-accrual status and will cease recognizing PIK interest income on that investment for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Trust writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible. As of September 30, 2020, the fair value of the Trust’s PIK non-accrual assets was $1,991,081, or 1.4% of the total fair value of the Trust’s portfolio, and the cost of the Trust’s PIK non-accrual assets was $2,440,502, or 1.6% of the total cost of the Trust’s portfolio.

Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments

Realized gains and losses on investment transactions and unrealized appreciation and depreciation of investments are reported for financial statement and Federal income tax purposes on the identified cost method.

C. Use of Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.

D. Federal Income Taxes:

The Trust has elected to be taxed as a “regulated investment company” under the Internal Revenue Code, and intends to maintain this qualification and to distribute substantially all of its net taxable income to its shareholders. In any year when net long-term capital gains are realized by the Trust, management, after evaluating the prevailing economic conditions, will recommend that Trustees either designate the net realized long-term gains as undistributed and pay the federal capital gains taxes thereon, or distribute all or a portion of such net gains.

The Trust is taxed as a regulated investment company and is therefore limited as to the amount of non-qualified income that it may receive as the result of operating a trade or business, e.g. the Trust’s pro rata share of income allocable to the Trust by a partnership operating company. The Trust’s violation of this limitation could result in the loss of its status as a regulated investment company, thereby subjecting all of its net income and capital gains to corporate taxes prior to distribution to its shareholders. The Trust, from time-to-time,

 

 

 

34

Barings Participation Investors

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

identifies investment opportunities in the securities of entities that could cause such trade or business income to be allocable to the Trust. The PI Subsidiary Trust (described in Footnote 1, above) was formed in order to allow investment in such securities without adversely affecting the Trust’s status as a regulated investment company.

The PI Subsidiary Trust is not taxed as a regulated investment company. Accordingly, prior to the Trust receiving any distributions from the PI Subsidiary Trust, all of the PI Subsidiary Trust’s taxable income and realized gains, including non-qualified income and realized gains, is subject to taxation at prevailing corporate tax rates. As of September 30, 2020, the PI Subsidiary Trust has incurred income tax expense of $348,194.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities and their respective tax basis. As of September 30, 2020, the PI Subsidiary Trust has no deferred tax liability.

E. Distributions to Shareholders:

The Trust records distributions to shareholders from distributable earnings and net realized gains, if any, on the ex-dividend date. The Trust’s dividend is declared four times per year, in April, July, October, and December. The Trust’s net realized capital gain distribution, if any, is declared in December.

3.	Investment Advisory and Administrative Services Contract

A. Services:

Under an Investment Advisory and Administrative Services Contract (the “Contract”) with the Trust, Barings has agreed to use its best efforts to present to the Trust a continuing and suitable investment program consistent with the investment objectives and policies of the Trust. Barings represents the Trust in any negotiations with issuers, investment banking firms, securities brokers or dealers and other institutions or investors relating to the Trust’s investments. Under the Contract, Barings also provides administration of the day-to-day operations of the Trust and provides the Trust with office space and office equipment, accounting and bookkeeping services, and necessary executive, clerical and secretarial personnel for the performance of the foregoing services.

B. Fee:

For its services under the Contract, Barings is paid a quarterly investment advisory fee equal to 0.225% of the value of the Trust’s net assets as of the last business day of each fiscal quarter, an amount approximately equivalent to 0.90% on an annual basis. A majority of the Trustees, including a majority of the Trustees who are not interested persons of the Trust or of Barings, approve the valuation of the Trust’s net assets as of such day.

 

 

4.	Senior Indebtedness

MassMutual holds the Trust’s $15,000,000 Senior Fixed Rate Convertible Note (the “Note”) issued by the Trust on December 13, 2011. The Note is due December 13, 2023 and accrues interest at 4.09% per annum. MassMutual, at its option, can convert the principal amount of the Note into common shares. The dollar amount of principal would be converted into an equivalent dollar amount of common shares based upon the average price of the common shares for ten business days prior to the notice of conversion. For the nine months ended September 30, 2020, the Trust incurred total interest expense on the Note of $460,125.

The Trust may redeem the Note, in whole or in part, at the principal amount proposed to be redeemed together with the accrued and unpaid interest thereon through the redemption date plus the Make Whole Premium. The Make Whole Premium equals the excess of (i) the present value of the scheduled payments of principal and interest which the Trust would have paid but for the proposed redemption, discounted at the rate of interest of U.S. Treasury obligations whose maturity approximates that of the Note plus 0.50% over (ii) the principal of the Note proposed to be redeemed.

5.	Purchases and Sales of Investments

		For the nine months ended 9/30/2020
		Cost of Investments Acquired				Proceeds from Sales or Maturities
Corporate restricted securities		$	22,933,179			$	23,556,126
Corporate public securities			4,485,733				1,692,806

The aggregate cost of investments is substantially the same for financial reporting and Federal income tax purposes as of September 30, 2020. The net unrealized depreciation of investments for financial reporting and Federal tax purposes as of September, 2020 is $(6,477,971) and consists of $7,961,644 appreciation and $14,439,615 depreciation.

Net unrealized depreciation of investments on the Statement of Assets and Liabilities reflects the balance net of a deferred tax liability of $nil on net unrealized losses on the PI Subsidiary Trust.

 

 

 

 

 

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

 

 

 

 

6.	Quarterly Results of Investment Operations (unaudited)

		March 31, 2020
		Amount				Per Share
Investment income		$	3,518,403
Net investment income			2,788,295			$	0.26
Net realized and unrealized loss on investments (net of taxes)			(11,233,880	)			(1.06	)
		June 30, 2020
		Amount				Per Share
Investment income		$	2,711,944
Net investment income			2,023,305			$	0.19
Net realized and unrealized loss on investments (net of taxes)			20,738				0.00
		September 30, 2020
		Amount				Per Share
Investment income		$	2,634,304
Net investment income			2,123,495			$	0.20
Net realized and unrealized loss on investments (net of taxes)			3,734,931				0.35

 

7.	Investment Risks

In the normal course of its business, the Trust trades various financial instruments and enters into certain investment activities with investment risks. These risks include: (i) market risk, (ii) volatility risk and (iii) credit, counterparty and liquidity risk. It is the Trust’s policy to identify, measure and monitor risk through various mechanisms including risk management strategies and credit policies. These include monitoring risk guidelines and diversifying exposures across a variety of instruments, markets and counterparties. There can be no assurance that the Trust will be able to implement its credit guidelines or that its risk monitoring strategies will be successful.

The pandemic related to the global spread of novel coronavirus disease (COVID-19), which was first detected in December 2019, has resulted in significant disruptions to global business activity and the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the securities and commodities markets in general. This pandemic, the full effects of which are still unknown, has resulted in substantial market volatility and may continue to adversely impact the prices and liquidity of the Trust’s investments and the Trust’s performance.

8.	Commitments and Contingencies

During the normal course of business, the Trust may enter into contracts and agreements that contain a variety of representations and warranties. The exposure, if any, to the Trust under these arrangements is unknown as this would involve future claims that may or may not be made against the Trust and which have not yet occurred. The Trust has no history of prior claims related to such contracts and agreements.

 

 

At September 30, 2020, the Trust had the following unfunded commitments:

 

	Investment			Unfunded Amount
	ROI Solutions, LLC		$	961,561
	Transit Technologies LLC			780,310
	Foundation Risk Partners, Corp. (1st Lien)			583,333
	Springbrook Software			448,116
	Lighthouse Autism Center			393,333
	Beacon Pointe Advisors, LLC			363,636
	Options Technology Ltd			335,621
	Foundation Risk Partners, Corp. (2nd Lien)			305,556
	Dart Buyer, Inc			281,175
	The Hilb Group, LLC			249,363
	Peterson Party Center, Inc.			230,000
	Truck-Lite Co., LLC			221,154
	CORA Health Services, Inc.			80,301
	US Legal Support Inc.			58,020

 

 

 

 

 

36

This privacy notice is being provided on behalf of Barings LLC and its affiliates: Barings Securities LLC; Barings Australia Pty Ltd; Barings Japan Limited; Barings Investment Advisers (Hong Kong) Limited; Barings Funds Trust; Barings Global Short Duration High Yield Fund; Barings BDC, Inc.; Barings Corporate Investors and Barings Participation Investors (together, for purposes of this privacy notice, “Barings”).

When you use Barings you entrust us not only with your hard-earned assets but also with your personal and financial data. We consider your data to be private and confidential, and protecting its confidentiality is important to us. Our policies and procedures regarding your personal information are summarized below.

We may collect non-public personal information about you from:

•

Applications or other forms, interviews, or by other means;

•

Consumer or other reporting agencies, government agencies, employers or others;

•

Your transactions with us, our affiliates, or others; and

•

Our Internet website.

We may share the financial information we collect with our financial service affiliates, such as insurance companies, investment companies and securities broker-dealers. Additionally, so that we may continue to offer you products and services that best meet your investment needs and to effect transactions that you request or authorize, we may disclose the information we collect, as described above, to companies that perform administrative or marketing services on our behalf, such as transfer agents, custodian banks, service providers or printers and mailers that assist us in the distribution of investor materials or that provide operational support to Barings. These companies are required to protect this information and will use this information only for the services for which we hire them, and are not permitted to use or share this information for any other purpose. Some of these companies may perform such services in jurisdictions other than the United States. We may share some or all of the information we collect with other financial institutions with whom we jointly market products. This may be done only if it is permitted by the state in which you live. Some disclosures may be limited to your name, contact and transaction information with us or our affiliates.

Any disclosures will be only to the extent permitted by federal and state law. Certain disclosures may require us to get an “opt-in” or “opt-out” from you. If this is required, we will do so before information is shared. Otherwise, we do not share any personal information about our customers or former customers unless authorized by the customer or as permitted by law.

We restrict access to personal information about you to those employees who need to know that information to provide products and services to you. We maintain physical, electronic and procedural safeguards that comply with legal standards to guard your personal information. As an added measure, we do not include personal or account information in non-secure e-mails that we send you via the Internet without your prior consent. We advise you not to send such information to us in non-secure e-mails.

This joint notice describes the privacy policies of Barings, the Funds and Barings Securities LLC. It applies to all Barings and the Funds accounts you presently have, or may open in the future, using your social security number or federal taxpayer identification number - whether or not you remain a shareholder of our Funds or as an advisory client of Barings. As mandated by rules issued by the Securities and Exchange Commission, we will be sending you this notice annually, as long as you own shares in the Funds or have an account with Barings.

Barings Securities LLC is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). Investors may obtain information about SIPC including the SIPC brochure by contacting SIPC online at www.sipc.org or calling (202)-371-8300. Investors may obtain information about FINRA including the FINRA Investor Brochure by contacting FINRA online at www.finra.org or by calling (800) 289-9999.

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Barings Participation Investors

 

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Members of the Board of Trustees   Clifford M. Noreen Chairman   Michael H. Brown*   Barbara M. Ginader*   Edward P. Grace III*   Robert E. Joyal   Susan B. Sweeney*   Maleyne M. Syracuse*     *Member of the Audit Committee       Officers   Christina Emery President   Jonathan Bock Vice President & Chief Financial Officer   Jill Dinerman Secretary & Chief Legal Officer   Sean Feeley Vice President   Elizabeth Murray Principal Accounting Officer   Christopher D. Hanscom Treasurer   Michael Cowart Chief Compliance Officer   Jonathan Landsberg Vice President

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN Barings Participation Investors (the “Trust”) offers a Dividend Reinvestment and Cash Purchase Plan (the “Plan”). The Plan provides a simple and automatic way for shareholders to add to their holdings in the Trust through the receipt of dividend shares issued by the Trust or through the reinvestment of cash dividends in Trust shares purchased in the open market. The dividends of each shareholder will be automatically reinvested in the Trust by DST Systems, Inc., the Transfer Agent, in accordance with the Plan, unless such shareholder elects not to participate by providing written notice to the Transfer Agent. A shareholder may terminate his or her participation by notifying the Transfer Agent in writing. Participating shareholders may also make additional contributions to the Plan from their own funds. Such contributions may be made by personal check or other means in an amount not less than $100 nor more than $5,000 per quarter. Cash contributions must be received by the Transfer Agent at least five days (but no more then 30 days) before the payment date of a dividend or distribution. Whenever the Trust declares a dividend payable in cash or shares, the Transfer Agent, acting on behalf of each participating shareholder, will take the dividend in shares only if the net asset value is lower than the market price plus an estimated brokerage commission as of the close of business on the valuation day. The valuation day is the last day preceding the day of dividend payment. When the dividend is to be taken in shares, the number of shares to be received is determined by dividing the cash dividend by the net asset value as of the close of business on the valuation date or, if greater than net asset value, 95% of the closing share price. If the net asset value of the shares is higher than the market value plus an estimated commission, the Transfer Agent, consistent with obtaining the best price and execution, will buy shares on the open market at current prices promptly after the dividend payment date. The reinvestment of dividends does not, in any way, relieve participating shareholders of any federal, state or local tax. For federal income tax purposes, the amount reportable in respect of a dividend received in newly-issued shares of the Trust will be the fair market value of the shares received, which will be reportable as ordinary income and/or capital gains. As compensation for its services, the Transfer Agent receives a fee of 5% of any dividend and cash contribution (in no event in excess of $2.50 per distribution per shareholder.) Any questions regarding the Plan should be addressed to DST Systems, Inc., Transfer Agent for Barings Participation Investors’ Dividend Reinvestment and Cash Purchase Plan, P.O. Box 219086, Kansas City, MO 64121-9086.

 

 

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