OVERVIEW

We are a Maryland corporation that has elected to be regulated as a BDC under the Investment Company Act of 1940. Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies, and may also invest in opportunistic investments such as distressed debt, foreign debt, private equity, and structured finance vehicles.

Corporate History

We commenced operations in 2007 and completed an initial public offering. In 2010, we engaged Saratoga Investment Advisors to replace our former investment adviser and changed our name to Saratoga Investment Corp. We have formed wholly owned subsidiaries, Saratoga Investment Corp. SBIC II LP and Saratoga Investment Corp. SBIC III LP, which have received SBIC licenses from the SBA. We have also formed special purpose entities, Saratoga Investment Funding II LLC and Saratoga Investment Funding III LLC, to enter into credit facilities. Additionally, we have formed a joint venture, Saratoga Senior Loan Fund I JV LLC, to invest in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds.

Critical Accounting Policies and Estimates

Our critical accounting policies include investment valuation, revenue recognition, and the recognition of capital gains incentive fee expense. We account for investments at fair value and use multiple techniques to determine fair value, including market comparables, discounted cash flows, and enterprise value waterfalls. We recognize interest income, including PIK interest, on an accrual basis to the extent it is expected to be collected. We record an expense accrual relating to the capital gains incentive fee payable to the Manager when our unrealized gains exceed all realized capital losses.

Portfolio and Investment Activity

As of August 31, 2025, we had 101 investments across 44 portfolio companies, with an average investment size of $9.2 million and a weighted average maturity of 2.4 years. Our portfolio was primarily composed of first lien term loans (84.3% of the total portfolio), with the remainder in second lien term loans, unsecured term loans, structured finance securities, and equity interests. The weighted average current yield on our interest-earning portfolio was 10.4%.

Our investments are diversified across 39 different industries, with the largest exposures in Healthcare Services, Structured Finance Securities, and Consumer Services. Geographically, 36.2% of our portfolio was invested in the Midwest, 20.7% in the Southeast, and 12.8% in the Northeast.

Results of Operations

For the three months ended August 31, 2025, we recorded total investment income of $30.6 million, a decrease of 28.8% from the prior year period, primarily due to lower interest income from investments. Total operating expenses decreased 13.2% to $21.5 million, driven by lower interest and debt financing costs and incentive management fees. Net investment income was $9.1 million, and we had net realized and unrealized gains of $4.2 million, resulting in a net increase in net assets of $13.3 million.

For the six months ended August 31, 2025, we recorded total investment income of $62.9 million, a decrease of 22.9% from the prior year period, again due to lower interest income. Total operating expenses decreased 11.0% to $43.7 million. Net investment income was $19.2 million, and we had net realized and unrealized gains of $8.0 million, resulting in a net increase in net assets of $27.2 million.

Financial Condition, Liquidity and Capital Resources

We intend to continue generating cash primarily from operations, the Encina and Live Oak credit facilities, our SBIC subsidiaries, and future debt and equity offerings. As of August 31, 2025, we had $105.7 million in cash and cash equivalents and $95.1 million in cash and cash equivalents, reserve accounts.

Our Encina Credit Facility provides up to $65.0 million in borrowings, and our Live Oak Credit Facility provides up to $75.0 million, both subject to borrowing base requirements. As of August 31, 2025, we had $32.5 million and $37.5 million outstanding under these facilities, respectively.

Through our SBIC subsidiaries, we have access to up to $350.0 million in SBA-guaranteed debentures. As of August 31, 2025, our SBIC subsidiaries had a combined $170.0 million in SBA debentures outstanding.

We have also issued various unsecured notes, totaling $546.4 million as of August 31, 2025, with interest rates ranging from 4.35% to 8.125%.

Our asset coverage ratio, a measure of leverage, was 166.6% as of August 31, 2025, providing us with significant flexibility to fund our operations and growth.

Outlook

We believe we have adequate liquidity to support our near-term capital requirements through our diverse capital sources. However, to fund future growth, we may need to raise additional capital from the equity and debt markets, which may or may not be available on favorable terms. We will continue to focus on generating current income and long-term capital appreciation through our middle-market lending strategy.