Saratoga Investment (SAR) 10-K 2020 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission File No.814-00732

SARATOGA INVESTMENT CORP.

(Exact name of registrant as specified in its charter)

Maryland	20-8700615
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

535 Madison Avenue New

York, New York 10022

(Address of principal executive offices)

(212) 906 -7800

( Registrant ’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SAR	The New York Stock Exchange
6.25% Notes due 2025	SAF	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of the voting andnon-voting common stock held bynon-affiliates of the registrant as of August 30, 2019 was approximately $175.9 million based upon a closing price of $25.16 reported for such date by the New York Stock Exchange.

The number of outstanding common shares of the registrant as of May 6, 2020 was 11,217,545.

DOCUMENTS INCORPORATED BY REFERENCE

None.

NOTE ABOUT REFERENCES

In this Annual Report on Form 10-K (the “Annual Report”), the “Company,” “we,” “us” and “our” refer to Saratoga Investment Corp. and itswholly-owned subsidiaries, Saratoga Investment Funding LLC, Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, unless the context otherwise requires. We refer to Saratoga Investment Advisors, LLC, our investment adviser, as “Saratoga Investment Advisors,” the “Investment Adviser” or the “Manager.”

NOTE ABOUT FORWARD-LOOKING STATEMENTS

Some of the statements in this Annual Report constituteforward-looking statements.Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report on Form10-K, and we assume no obligation to update any suchforward-looking statements. Actual results could differ materially from those anticipated in ourforward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements occurring after the date of this Annual Report, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The forward-looking statements contained in this Annual Report involve risks and uncertainties, including statements as to:

• our future operating results and the impact of the coronavirus (“COVID-19”) pandemic thereon;

• the introduction, withdrawal, success and timing of business initiatives and strategies;

• changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

• pandemics or other serious public health events, such as the recent global outbreak ofCOVID-19;

• the relative and absolute investment performance and operations of our Investment Adviser;

• the impact of increased competition;

• our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

• the unfavorable resolution of any future legal proceedings;

• our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

• the impact of investments that we expect to make and future acquisitions and divestitures;

• our contractual arrangements and relationships with third parties;

• the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

• the ability of our portfolio companies to achieve their objectives;

• our expected financings and investments;

• our regulatory structure and tax status, including our ability to operate as a business development company (“BDC”), or to operate our small business investment company (“SBIC”) subsidiaries, and to continue to qualify to be taxed as a regulated investment company (“RIC”);

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• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon;

• the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;

• the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;

• the impact of changes to tax legislation and, generally, our tax position;

• our ability to access capital and any future financings by us;

• the ability of our Investment Adviser to attract and retain highly talented professionals; and

• the ability of our Investment Adviser to locate suitable investments for us and to monitor and effectively administer our investments.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, borrowing costs and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report onForm 10-K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described in “Risk Factors” in this annual report on Form10-K under Part 1A. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report onForm 10-K.

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PART I
Item 1. Business	5
Item 1A. Risk Factors	29
Item 1B. Unresolved Staff Comments	55
Item 2. Properties	55
Item 3. Legal Proceedings	55
Item 4. Mine Safety Disclosures	55
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	56
Item 6. Selected Consolidated Financial Data	67
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	68
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	100
Item 8. Consolidated Financial Statements and Supplementary Data	101
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	102
Item 9A. Controls and Procedures	102
Item 9B. Other Information	102
PART III
Item 10. Directors, Executive Officers and Corporate Governance	103
Item 11. Executive Compensation	105
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	106
Item 13. Certain Relationships and Related Transactions, and Director Independence	108
Item 14. Principal Accounting Fees and Services	108
PART IV
Item 15. Exhibits, Consolidated Financial Statement Schedules	110
Item 16. Form10-K Summary	113
Signatures	114

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PART I

ITEM 1. BUSINESS

General

We are a specialty finance company that provides customized financing solutions to U.S middle-market businesses. We primarily invest in senior and unitranche leveraged loans and mezzanine debt and, to a lesser extent, equity issued by private U.S.middle-market companies, which we define as companies having annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. Our investments generally provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Our investment activities are externally managed and advised by Saratoga Investment Advisors, LLC, a New York-based investment firm affiliated with Saratoga Partners, a middle market private equity investment firm.

Our portfolio is comprised primarily of investments in leveraged loans issued by middle market companies. Leveraged loans are generally senior debt instruments that rank ahead of subordinated debt with below investment grade or “junk” ratings or, if not rated, would be rated below investment grade or “junk” and, as a result, carry a higher risk of default. Leveraged loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of, or be junior to, other security interests. Term loans are loans that do not allow the borrowers to repay all or a portion of the loans prior to maturity and then re-borrow such repaid amounts under the loan again. We also invest in mezzanine debt and make equity investments in middle market companies. Mezzanine debt is typically unsecured and subordinated to senior debt of the portfolio company.

While our primary focus is to generate current income and capital appreciation from our debt and equity investments in middle market companies, we may invest up to 30.0% of our portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, including securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of Investment Company Act of 1940, as amended (“1940 Act”), which includes private equity funds, to no more than 15% of its net assets.

As of February 29, 2020, we had total assets of $530.9 million and investments in 35 portfolio companies, including an investment in the subordinated notes of one collateralized loan obligation fund, Saratoga Investment Corp. CLO2013-1, Ltd. (“Saratoga CLO”), which had a fair value of $22.6 million as of February 29, 2020 and investments in theClass F-R-2 Notes andClass G-R-2 Notes tranches of the Saratoga CLO and an investment in Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd, which as of February 29, 2020 had fair values of $2.5 million, $7.4 million and $2.2 million, respectively. The overall portfolio composition as of February 29, 2020 consisted of 71.3% of first lien term loans, 15.1% of second lien term loans, 0.9% of unsecured term loans, 6.7% of structured finance securities and 6.0% of equity interests. As of February 29, 2020, the weighted average yield on all of our investments, including our investment in the subordinated notes of Saratoga CLO,Class F-R-2 Notes andClass G-R-2 Notes tranches of the Saratoga CLO and Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd was approximately 9.3%. The weighted average yield of our investments is not the same as a return on investment for our stockholders and, among other things, is calculated before the payment of our fees and expenses. As of February 29, 2020, our total return based on market value was 9.28% and our total return based on net asset value per share was 26.22%. As of February 28, 2019, our total return based on market value was 16.11% and our total return based on net asset value was 13.33%. Total return based on market value is the change in the ending market value of the Company’s common stock plus dividends distributed during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning market value of the Company’s common stock. Total return based on NAV is the change in ending NAV per share plus dividends distributed per share paid during the period assuming participation in the Company’s dividend reinvestment plan divided by the beginning NAV per share. While total return based on NAV and total return based on market value reflect fund expenses, they do not reflect any sales load that may be paid by investors. As of February 29, 2020, approximately 100.0% of our first lien debt investments were fully collateralized in the sense that the portfolio companies in which we held such investments had an enterprise value or our investment had an asset coverage equal to or greater than the principal amount of the related debt investment. The Company uses enterprise value to assess the level of collateralization of its portfolio companies. The enterprise value of a portfolio company is determined by analyzing various factors, including EBITDA, cash flows from operations less capital expenditures and other pertinent factors, such as recent offers to purchase a portfolio company’s securities or other liquidation events. As a result, while we consider a portfolio company to be collateralized if its enterprise value exceeds the amount of our loan, we do not hold tangible assets as collateral in our portfolio companies that we would obtain in the event of a default. Our investment in the subordinated notes of Saratoga CLO represents a first loss position in a portfolio that, at February 29, 2020, was composed of $528.4 million in aggregate principal amount of predominantly senior secured first lien term loans. A first loss position means that we will suffer the first economic losses if losses are incurred on loans held by the Saratoga CLO. As a result, this investment is subject to unique risks. See Part I. Item 1A. “Risk Factors—Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of predominantly senior secured first lien term loans and is subject to additional risks and volatility.”

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We are an externally managed,closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the 1940 Act. As a BDC, we are required to comply with various regulatory requirements, including limitations on our use of debt. We finance our investments through borrowings. However, as a BDC, we are only generally allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after such borrowing, or, if we obtain the required approvals from our independent directors and/or stockholders, 150.0%. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested Board of Directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150.0% asset coverage ratio became effective on April 16, 2019.

We have elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). As a RIC, we generally will not have to paycorporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders if we meet certainsource-of-income, annual distribution and asset-diversification requirements.

In addition, we have twowholly-owned subsidiaries that are licensed as a small business investment company (“SBIC”) and regulated by the Small Business Administration (“SBA”). On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC LP (“SBIC LP”), received an SBIC license from the SBA. On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form ofSBA-guaranteed debentures. The SBIC LP and SBIC II LP are regulated by the SBA. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount ofSBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million. Our wholly-owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA. With this license approval, Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital. See “Item 1. Business—Small Business Investment Company Regulations.”

We received exemptive relief from the U.S. Securities and Exchange Commission (“SEC”) to permit us to exclude the debt of SBIC LP and SBIC II LP guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows the Company increased flexibility under the asset coverage test by permitting it to borrow up to $325.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.

The Company has established wholly-owned subsidiaries, SIA-Avionte, Inc., SIA-GH, Inc.,SIA-HT, Inc.,SIA-MAC, Inc.,SIA-TG, Inc., SIA-TT, Inc.,SIA-Vector, Inc. andSIA-VR, Inc., which are structured as Delaware entities, or tax blockers, to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass through entities). Tax blockers are consolidated for accounting purposes but are not consolidated for income tax purposes and may incur income tax expense as a result of their ownership of portfolio companies.

During the fiscal year ended February 29, 2020, the Company sold its interest inSIA-Easy Ice, LLC. See Management’s Discussion and Analysis for additional discussion.

Corporate History and Information

We commenced operations, at the time known as GSC Investment Corp., on March 23, 2007 and completed an initial public offering of shares of common stock on March 28, 2007. Prior to July 30, 2010, we were externally managed and advised by GSCP (NJ), L.P., an entity affiliated with GSC Group, Inc. In connection with the consummation of a recapitalization transaction on July 30, 2010, we engaged Saratoga Investment Advisors (“SIA”) to replace GSCP (NJ), L.P. as our investment adviser and changed our name to Saratoga Investment Corp.

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The recapitalization transaction consisted of (i) the private sale of 986,842 shares of our common stock for $15.0 million in aggregate purchase price to Saratoga Investment Advisors and certain of its affiliates and (ii) the entry into a $40.0 million senior secured revolving credit facility with Madison Capital Funding LLC (the “Credit Facility”). We used the net proceeds from the private sale of shares of our common stock and a portion of the funds available to us under the Credit Facility to pay the full amount of principal and accrued interest, including default interest, outstanding under our revolving securitized credit facility with Deutsche Bank AG, New York Branch. Specifically, in July 2009, we had exceeded permissible borrowing limits under the revolving securitized credit facility with Deutsche Bank, which resulted in an event of default under the revolving securitized credit facility. As a result of the event of default, Deutsche Bank had the right to accelerate repayment of the outstanding indebtedness under the revolving securitized credit facility and to foreclose and liquidate the collateral pledged under the revolving securitized credit facility. The revolving securitized credit facility with Deutsche Bank was terminated in connection with our payment of all amounts outstanding thereunder on July 30, 2010. In January 2011, we registered for public resale by Saratoga Investment Advisors and certain of its affiliates the 986,842 shares of our common stock issued to them in the recapitalization.

As noted above, on March 28, 2012, our wholly-owned subsidiary, SBIC LP, received an SBIC license from the SBA and on August 14, 2019, our wholly-owned subsidiary, SBIC II LP, also received an SBIC license from the SBA.

Our corporate offices are located at 535 Madison Avenue, New York, New York 10022. Our telephone number is (212)906-7800. We maintain a website on the Internet at www.saratogainvestmentcorp.com. Information contained on our website is not incorporated by reference into this Annual Report, and you should not consider that information to be part of this Annual Report.

Saratoga Investment Advisors

General

Our Investment Adviser was formed in 2010 as a Delaware limited liability company and became our investment adviser in July 2010. Our Investment Adviser is led by four principals, Christian L. Oberbeck, Michael J. Grisius, Thomas V. Inglesby, and Charles G. Phillips, with 32, 30, 33 and 23 years of experience in leveraged finance, respectively. Our Investment Adviser is affiliated with Saratoga Partners, a middle market private equity investment firm. Saratoga Partners was established in 1984 to be the middle market private investment arm of Dillon Read & Co. Inc. and has been independent of Dillon Read and its successor entity, SBC Warburg Dillon Read, since 1998. Saratoga Partners has a30-year history of private investments in middle market companies and focuses on public and private equity, preferred stock, and senior and mezzanine debt investments.

Our Relationship with Saratoga Investment Advisors

We utilize the personnel, infrastructure, relationships and experience of Saratoga Investment Advisors to enhance the growth of our business. We currently have no employees and each of our executive officers is also an officer of Saratoga Investment Advisors.

We have entered into an investment advisory and management agreement (the “Management Agreement”) with Saratoga Investment Advisors. Pursuant to the 1940 Act, the initial term of the Management Agreement was for two years from its effective date of July 30, 2010, with automatic,one-year renewals, subject to approval by our board of directors, a majority of whom must be our independent directors. On July 9, 2019, our board of directors approved the renewal of the Management Agreement for an additional one-year term at an in-person meeting. Pursuant to the Management Agreement, Saratoga Investment Advisors implements our business strategy on aday-to-day basis and performs certain services for us under the direction of our board of directors. Saratoga Investment Advisors is responsible for, among other duties, performing all of ourday-to-day functions, determining investment criteria, sourcing, analyzing and executing investment transactions, asset sales, financings and performing asset management duties.

Saratoga Investment Advisors has formed an investment committee to advise and consult with its senior management team with respect to our investment policies, investment portfolio holdings, financing and leveraging strategies and investment guidelines. We believe that the collective experience of the investment committee members across a variety of fixed income asset classes will benefit us. The investment committee must unanimously approve all investments in excess of $1.0 million made by us. In addition, all sales of our investments must be approved by all four of our investment committee members. The current members of the investment committee are Messrs. Oberbeck, Grisius, Inglesby, and Phillips.

We pay Saratoga Investment Advisors a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% of our average gross assets, which includes assets purchased with borrowed funds but excludes cash and cash equivalents. As a result, Saratoga Investment Advisors will benefit as we incur debt or use leverage to purchase assets. Our board of directors will monitor the conflicts presented by this compensation structure by approving the amount of leverage that we may incur.

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In addition to the base management fee, we pay Saratoga Investment Advisors an incentive fee, which consists of two parts. First, we pay Saratoga Investment Advisors an incentive fee with respect to ourpre-incentive fee net investment income in each calendar quarter as follows:

• no incentive fee in any calendar quarter in which, ourpre-incentive fee income does not exceed a fixed “hurdle rate” of 1.875% per quarter; and

• 100.0% of ourpre-incentive fee net investment income with respect to that portion of suchpre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter is payable to the Investment Adviser. We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle rate but is less than or equal to 2.344%) as the “catch-up.” The “catch-up” provision is intended to provide our Investment Adviser with an incentive fee of 20.0% on all of our pre-incentive fee net investment income as if a hurdle rate did not apply when ourpre-incentive fee net investment income exceeds 2.344% in any fiscal quarter. Notwithstanding the foregoing, with respect to any period ending on or prior to December 31, 2010, our Investment Adviser was only entitled to 20.0% of the amount of ourpre-incentive fee net investment income, if any, that exceeded 1.875% in any fiscal quarter without any catch-up provision; and

• 20.0% of the amount of ourpre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter is payable to the Investment Adviser (once the hurdle is reached and thecatch-up is achieved, 20.0% of allpre-incentive fee net investment income thereafter is allocated to the Investment Adviser).

There is no accumulation of amounts from quarter to quarter on either the hurdle rate or the parameters set by the“catch-up” mechanism or any claw back of amounts previously paid to Saratoga Investment Advisors if subsequent quarters are below the quarterly hurdle or the“catch-up” parameters. Furthermore, there is no delay of payment to Saratoga Investment Advisors if prior quarters are below the quarterly hurdle or“catch-up.”

Pre-incentive fee net investment income means interest income, dividend income and other income (including any other fees, such as commitment, origination, structuring, diligence, managerial and consulting fees or other fees that we receive from portfolio companies) earned during the calendar quarter, minus our operating expenses for the quarter.Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation or depreciation, or realized gains or losses resulting from the extinguishment of our own debt.

The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Importantly, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the “incentive fee capital gains” calculations, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.

We have also entered into a separate Administration Agreement (the “Administration Agreement”) with Saratoga Investment Advisors pursuant to which Saratoga Investment Advisors furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services. The Administration Agreement has an initial term of two years from its effective date of July 30, 2010, with automatic one-year renewals, subject to approval by our board of directors, a majority of whom must be our independent directors. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by us thereunder to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016.On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019. Under the Administration Agreement, Saratoga Investment Advisors also performs, or oversees the performance of our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain, preparing reports for our stockholders and reports required to be filed with the SEC. Payments under the Administration Agreement will be equal to an amount based upon the allocable portion of Saratoga Investment Advisors’ overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our officers and their respective staffs relating to the performance of services under the Administration Agreement.

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Investments

Our portfolio is comprised primarily of investments in leveraged loans (both first and second lien term loans) issued by middle market companies. Investments in middle market companies are generally less liquid than equivalent investments in companies with larger capitalizations. These investments are sourced in both the primary and secondary markets through a network of relationships with commercial and investment banks, commercial finance companies and financial sponsors. The leveraged loans that we purchase are generally used to finance buyouts, strategic acquisitions, growth initiatives, recapitalizations and other types of transactions. Leveraged loans are generally senior debt instruments that rank ahead of subordinated debt which are invested by companies with below investment grade or “junk” ratings or, if not rated, would be rated below investment grade or “junk” and, as a result, carry a higher risk of default. Leveraged loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of, or be junior to, other security interests. For a discussion of the risks pertaining to our secured investments, see Part I. Item 1A. “Risk Factors—Our investments may be risky, and you could lose all or part of your investment.”

As part of our long-term strategy, we also invest in mezzanine debt and make equity investments in middle market companies. Mezzanine debt is typically unsecured and subordinated to senior debt of the portfolio company. See Part I. Item 1A. “Risk Factors—If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event our portfolio companies default on their indebtedness.”

Substantially all of the debt investments held in our portfolio hold anon-investment grade rating by one or more rating agencies or, if not rated, would be rated below investment grade if rated, which are often referred to as “junk.” As of February 29, 2020, 81.3% of our debt portfolio at fair value consisted of debt securities for which issuers were not required to make principal payments until the maturity of such debt securities, which could result in a substantial loss to us if such issuers are unable to refinance or repay their debt at maturity. Such“interest-only” loans are structured such that the borrower makes only interest payments throughout the life of the loan and makes a large, “balloon payment” at the end of the loan term. The ability of a borrower to make or refinance a balloon payment may be affected by a number of factors, including the financial condition of the borrower, prevailing economic conditions, higher interest rates, and collateral values. If theinterest-only loan borrower is unable to make or refinance a balloon payment, we may experience greater losses than if the loan were structured as amortizing. As of February 29, 2020, 25.0% of ourinterest-only loans provided for contractual PIK interest, which represents contractual interest added to a loan balance and due at the end of such loan’s term, and 77.9% of such investments elected to pay a portion of interest due in PIK. In addition, 93.2% of our debt investments at February 29, 2020, had variable interest rates that reset periodically based on benchmarks such as LIBOR and the prime rate. As a result, significant increases in such benchmarks in the future may make it more difficult for these borrowers to service their obligations under the debt investments that we hold.

As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Business—Business Development Company Regulations – Qualifying Assets.”

While our primary focus is to generate current income and capital appreciation from our debt and equity investments in middle market companies, we may invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15% of its net assets.

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Leveraged loans

Our leveraged loan portfolio is comprised primarily of first lien and second lien term loans. First lien term loans are secured by a first priority perfected security interest on all or substantially all of the assets of the borrower and typically include a first priority pledge of the capital stock of the borrower. First lien term loans hold a first priority with regard to right of payment. Generally, first lien term loans offer floating rate interest payments, have a stated maturity of five to seven years, and have a fixed amortization schedule. First lien term loans generally have restrictive financial and negative covenants. Second lien term loans are secured by a second priority perfected security interest on all or substantially all of the assets of the borrower and typically include a second priority pledge of the capital stock of the borrower. Second lien term loans hold a second priority with regard to right of payment. Second lien term loans offer either floating rate or fixed rate interest payments, generally have a stated maturity of five to eight years and may or may not have a fixed amortization schedule. Second lien term loans that do not have fixed amortization schedules require payment of the principal amount of the loan upon the maturity date of the loan. Second lien term loans have less restrictive financial and negative covenants than those that govern first lien term loans.

Mezzanine debt

Mezzanine debt usually ranks subordinate in priority of payment to senior debt and is often unsecured. However, mezzanine debt ranks senior to common and preferred equity in a borrowers’ capital structure. Mezzanine debt typically has fixed rate interest payments and a stated maturity of six to eight years and does not have fixed amortization schedules.

In some cases, our debt investments may provide for a portion of the interest payable to be payment-in-kind interest (“PIK”). To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on thethen-outstanding aggregate principal amount of such obligation.

Equity Investments

Equity investments may consist of preferred equity that is expected to pay dividends on a current basis or preferred equity that does not pay current dividends. Preferred equity at times may also have PIK interest payable. Preferred equity generally has a preference over common equity as to distributions on liquidation and dividends. In some cases, we may acquire common equity. In general, our equity investments are not control-oriented investments and we expect that in many cases we will acquire equity securities as part of a group of private equity investors in which we are not the lead investor.

Opportunistic Investments

Opportunistic investments may include investments in distressed debt, which may include securities of companies in bankruptcy, debt and equity securities of public companies that are not thinly traded, emerging market debt, structured finance vehicles such as collateralized loan obligation funds and debt of middle market companies located outside the United States.

On January 22, 2008, GSC Group, Inc., as asset manager, with Lehman Brothers raising the financing, entered into a collateral management agreement with Saratoga CLO. Saratoga CLO was structured with five tranches of debt, plus residual notes. Saratoga CLO’s five tranches of debt were purchased by a wide variety of CLO debt market participants. In addition, we purchased for $30.0 million all of the outstanding subordinated notes of Saratoga CLO.

Pursuant to its terms, the investment period for Saratoga CLO ended in January 2013, and certain restrictions in such terms limited portfolio reinvestment. As a result, the Company determined that it was in its best interest to refinance Saratoga CLO given its investment attractiveness. The Company did not originate any of the loan assets included in the formation of Saratoga CLO, nor has it done so since the subsequent refinancing transaction. Moreover, the Company does not expect to originate any of the loans in the Saratoga CLO portfolio prospectively. The Company has from time to timeco-invested in loans with the Saratoga CLO. The Company currently has noco-investments between it and Saratoga CLO.

With respect to our advisory services to Saratoga CLO, and in particular the underwriting standards used when determining which investments qualify for inclusion in the Saratoga CLO, they are substantially similar to the process employed in selecting the Company’s investments. All of the credit metrics for a Saratoga CLO investment are reviewed and documented in the same manner as they would be for an investment for the Company, with some minor differences. For example, the Saratoga CLO investment process also includes multiple rating agency review and analysis of the loan investment and the assigned corporate ratings, which typically does not apply to a prospective investment of the Company. Lastly, a Saratoga CLO investment also considers the likely secondary liquidity of the loan in considering the investment, whereas the Company’s investments are generally illiquid.

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The Saratoga CLO investment period was initially refinanced in October 2013 and its reinvestment period extended to October 2016. On November 15, 2016, we completed a second refinancing of the Saratoga CLO with its reinvestment period extended to October 2018. On December 14, 2018, we completed a third refinancing and upsize of the Saratoga CLO(the “2013-1 Reset CLO Notes”). This refinancing, among other things, extended thenon-call period and reinvestment period to January 20, 2020 and January 20, 2021, respectively, and extended its legal final date to January 20, 2030. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. As part of the refinancing of its liabilities, we also purchased $2.5 million in aggregate principal amount of theClass F-R-2 and $7.5 million aggregate principal amount of theClass G-R-2 notes tranches of the Saratoga CLO at par, with a coupon of LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. We also redeemed our existing $4.5 million aggregate principal amount of the Class F Notes tranche of the Saratoga CLO at par. TheClass F-R-2 Notes andClass G-R-2 Notes tranches are the seventh and eighth tranches in the capital structure of Saratoga CLO and are subordinated to the other debt classes of Saratoga CLO, respectively. TheClass F-R-2 andClass G-R-2 tranches are senior to the subordinated notes, which is effectively the equity position in Saratoga CLO. As a result, the other tranches of debt in Saratoga CLO rank ahead of the $2.5 millionClass F-R-2 tranche and $7.5 millionClass G-R-2 tranche and ahead of the aggregate principal amount of our position in the subordinated notes, with respect to priority of payments in the event of a default or a liquidation. We also purchased an aggregate principal amount of $39.5 million of subordinated notes, which is in addition to the $30.0 million of subordinated notes issued in 2013 that were reset with an extended legal final date to January 20, 2030. Following the refinancing, Saratoga Investment Corp. owns 100% of theClass F-R-2,Class G-R-2 and the subordinated notes of the Saratoga CLO. After the reinvestment period ends in January 2021, the Company will consider refinancing the Saratoga CLO, subject to market conditions. A refinancing transaction entails finding existing and new investors that are willing to provide debt financing to Saratoga CLO which extends the investment period of the CLO on terms that are acceptable to it and in an amount sufficient to allow it to repay all of its existing debt holders. If Saratoga CLO is unable to refinance its indebtedness by January 2021, then Saratoga CLO will be required to use investment repayments by portfolio companies received thereafter to repay its outstanding indebtedness. On February 11, 2020, we entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) with Saratoga Investment Corp.CLO 2013-1 Warehouse 2, Ltd(“CLO 2013-1 Warehouse 2”), a wholly-owned subsidiary of Saratoga CLO, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. At February 29, 2020, the aggregate fair value of our investments in Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd,Class F-R-2,Class G-R-2 Notes and subordinated notes of the Saratoga CLO was $2.2 million, $2.5 million, $7.4 million and $22.6 million, respectively.

The terms of the subordinated notes of Saratoga CLO entitles the Company to the residual net interest income in Saratoga CLO, which is paid on a quarterly basis after payment of all expenses, assuming that the Saratoga CLO remains in compliance with its various debt and rating agency compliance tests. The Company’s investment in the subordinated notes of Saratoga CLO can be sold or transferred at any time. The Company has held 100% of the subordinated notes of Saratoga CLO since the inception of Saratoga CLO.

Generally, the interests of the holders of the various classes of securities issued by the Saratoga CLO are aligned with the interests of the Company as holder of the subordinated notes. The investors in the various debt tranches of the securities issued by the Saratoga CLO are interested in the regular payment of interest income from the Saratoga CLO and the overcollateralization of the underlying loan assets relative to the Saratoga CLO debt issued. On the other hand, the subordinated note holders might prefer purchasing higher yielding riskier assets that could increase returns while the returns of the holders of the debt securities remain unchanged.

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With respect to the collateral management agreement that the Company has entered into with Saratoga CLO, while the agreement is similar to the investment advisory and management agreement between the Company and Saratoga Investment Advisors in that it is an asset management agreement, there are material differences between the two. For example, pursuant to Section 15 of the 1940 Act, the Management Agreement with Saratoga Investment Advisors has an initial term of two years, with annual renewals to be approved by the Company’s board of directors. The contract can be terminated by the Company’s board of directors or stockholders with 60 days’ notice, with no penalty for termination. The collateral management agreement that the Company has entered into with Saratoga CLO, on the other hand, has no renewal requirement, and can be terminated without cause with the approval oftwo-thirds of each of the class of CLO securities, excluding votes from interested noteholders (“Investment Manager Securities”). Furthermore, the Saratoga CLO collateral management agreement may be terminated with cause at the direction of a majority of the most senior class of the Saratoga CLO securities then outstanding, excluding votes from the Investment Manager Securities. If the Saratoga CLO collateral management agreement is terminated, the manager remains in place until a new manager is appointed by the issuer at the direction of either (i) a majority of the Saratoga CLO subordinated notes, and not rejected by a majority of the most senior class of CLO securities then outstanding, or (ii) a majority of the most senior class of CLO securities then outstanding, and not rejected by a majority of the Saratoga CLO subordinated notes, in each case within 20 days of notice of a vote regarding the successor manager. If no successor investment manager shall have been appointed within 120 days after the date of notice of resignation by the investment manager, the resigning investment manager, a majority of the controlling class or a majority of the subordinated notes may petition any court of competent jurisdiction for the appointment of a successor investment manager without the approval of the holders of the notes. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the2013-1 Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Following the third refinancing and the issuance of the2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.

The securities issued by the Saratoga CLO do not have any external credit enhancement features that would minimize the potential losses to the subordinated notes. Saratoga CLO recognized losses on extinguishment of debt of approximately $1.2 million, $6.1 million and $3.4 million in the fiscal years ended February 28, 2019, February 28, 2017 and February 28, 2014, respectively, related to the December 2018, November 2016 and October 2013 refinancing, primarily as a result of the legal and accounting costs associated with the refinancing and the divestiture of certain Saratoga CLO loans not eligible for the refinanced Saratoga CLO. The cost of the refinancing was effectively borne by the Company as the holder of the subordinated notes in Saratoga CLO. The indenture for the Saratoga CLO does not contemplate the issuance of additional securities while the existing Saratoga CLO securities remain outstanding. The indenture could be amended to allow the issuance of additional securities, which would require consents of the holders of the Saratoga CLO debt securities and the approval of the rating agencies. The Saratoga CLO could issue additional securities pursuant to a refinancing of the existing securities. The costs of any such future refinancing would effectively be borne by us as the holder of the subordinated notes in Saratoga CLO.

The securities issued by the Saratoga CLO do not have any external credit enhancement features that would minimize the potential losses to the subordinated notes.

The Company does not believe that any representations or warranties made by the Company as manager of Saratoga CLO or investor in the subordinated notes could materially affect the Company. However, because the Company acts as the collateral manager to Saratoga CLO, it may be subject to claims by third-party investors in Saratoga CLO for alleged or actual negligent acts, errors or omissions or breach of fiduciary duties committed in the scope of performing its services as the collateral manager.

As of February 29, 2020, the Saratoga CLO portfolio consisted of $528.4 million in aggregate principal amount of primarily senior secured first lien term loans. At February 29, 2020, 99.2% of the Saratoga CLO portfolio consisted of such loans to 254 borrowers with an average exposure to each borrower of $2.0 million. The weighted average maturity of the portfolio is 4.96 years. In addition, Saratoga CLO held $9.1 million in cash at February 29, 2020. Our investments in the Saratoga CLO falls into our 30% “bucket” ofnon-qualifying assets under the 1940 Act and currently has an aggregate cost basis of approximately $23.5 million, which is net of all principal payments made by Saratoga CLO on the Company’s total investment in Saratoga CLO of $43.8 million, which is comprised of the initial investment of $30.0 million in January 2008 plus the additional investment of $13.8 million in December 2018.

Prospective portfolio company characteristics

Our Investment Adviser generally selects portfolio companies with one or more of the following characteristics:

• a history of generating stable earnings and strong free cash flow;

• well-constructed balance sheets with the ability to withstand industry cycles, supported by sustainable enterprise values;

• reasonabledebt-to-cash flow multiples;

• exceptional management with meaningful stake;

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• industry leadership with competitive advantages and sustainable market shares and growth prospects in attractive and healthy sectors; and

• capital structures that provide appropriate terms and reasonable covenants.

Investment selection

In managing us, Saratoga Investment Advisors employs the same investment philosophy and portfolio management methodologies used by Saratoga Partners. Through this investment selection process, based on quantitative and qualitative analysis, Saratoga Investment Advisors seeks to identify portfolio companies with superior fundamental risk-reward profiles and strong, defensible business franchises with the goal of minimizing principal losses while maximizingrisk-adjusted returns. Saratoga Investment Advisors’ investment process emphasizes the following:

• bottoms-up, company-specific research and analysis;

• capital preservation, low volatility and minimization of downside risk; and

• investing with experienced management teams that hold meaningful equity ownership in their businesses.

Our Investment Adviser’s investment process generally includes the following steps:

• Initial screening. A brief analysis identifies the investment opportunity and reviews the merits of the transaction. The initial screening memorandum provides a brief description of the company, its industry, competitive position, capital structure, financials, equity sponsor and deal economics. If the deal is determined to be attractive by the senior members of the deal team, the opportunity is fully analyzed.

• Full analysis. A full analysis includes:

• Business and Industry analysis—a review of the company’s business position, competitive dynamics within its industry, cost and growth drivers and technological and geographic factors. Business and industry research often includes meetings with industry experts, consultants, other investors, customers and competitors.

• Company analysis—a review of the company’s historical financial performance, future projections, cash flow characteristics, balance sheet strength, liquidation value, legal, financial and accounting risks, contingent liabilities, market share analysis and growth prospects.

• Structural/security analysis—a thorough legal document analysis including but not limited to an assessment of financial and negative covenants, events of default, enforceability of liens and voting rights.

• Approval of the investment committee. The investment is then presented to the investment committee for approval. The investment committee must unanimously approve all investments in excess of $1 million made by us. In addition, all sales of our investments must be approved by all four of our investment committee members. The members of our investment committee are Christian L. Oberbeck, Michael J. Grisius, Thomas V. Inglesby, and Charles G. Phillips.

Investment structure

In general, our Investment Adviser intends to select investments with financial covenants and terms that reduce leverage over time, thereby enhancing credit quality. These methods include:

• maintenance leverage covenants requiring a decreasing ratio of debt to cash flow;

• maintenance cash flow covenants requiring an increasing ratio of cash flow to the sum of interest expense and capital expenditures; and

• debt incurrence prohibitions, limiting a company’s ability tore-lever.

In addition, limitations on asset sales and capital expenditures should prevent a company from changing the nature of its business or capitalization without our consent.

Our Investment Adviser seeks, where appropriate, to limit the downside potential of our investments by:

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• requiring a total return on our investments (including both interest and potential equity appreciation) that compensates us for credit risk;

• requiring companies to use a portion of their excess cash flow to repay debt;

• selecting investments with covenants that incorporate call protection as part of the investment structure; and

• selecting investments with affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or participation rights.

Valuation process

We account for our investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820,Fair Value Measurements and Disclosures(“ASC 820”), as approved in good faith using written policies and procedures adopted by our board of directors. Investments for which market quotations are readily available are recorded in our consolidated financial statements at such market quotations subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved in good faith by our board of directors based on input from Saratoga Investment Advisors, our audit committee and an independent valuation firm engaged by our board of directors. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, the markets in which the portfolio company does business, market yield trend analysis, comparison to publicly traded companies, discounted cash flow and other relevant factors.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment,re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by SIA and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

• Each investment is initially valued by the responsible investment professionals of Saratoga Investment Advisors and preliminary valuation conclusions are documented and discussed with the senior management; and

• An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year.

In addition, all our investments are subject to the following valuation process:

• The audit committee of our board of directors reviews and approves each preliminary valuation and our Investment Adviser and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

• Our board of directors discusses the valuations and approves the fair value of each investment in good faith based on the input of our Investment Adviser, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

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Ongoing relationships with and monitoring of portfolio companies

Saratoga Investment Advisors will closely monitor each investment we make and, when appropriate, will conduct a regular dialogue with both the management team and other debtholders and seek specifically tailored financial reporting. In addition, in certain circumstances, senior investment professionals of Saratoga Investment Advisors may take board seats or board observation seats.

Distributions

Our distributions, if any, will be determined by our board of directors and paid out of assets legally available for distribution. Any such distributions generally will be taxable to our stockholders, including to those stockholders who receive additional shares of our common stock pursuant to our dividend reinvestment plan. Prior to January 2009, we paid quarterly dividends to our stockholders. However, in January 2009, we suspended the practice of paying quarterly dividends to our stockholders and thereafter paid five annual dividend distributions (December 2013, 2012, 2011, 2010 and 2009) to our stockholders since such time, which distributions were made with a combination of cash and the issuance of shares of our common stock as discussed more fully below.

On September 24, 2014, we announced the recommencement of quarterly dividends to our stockholders and have subsequently made distributions under this new policy. We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of the DRIP by the dividend record date will have their cash dividends automatically reinvested into additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

In order to maintain our qualification as a RIC, we must, for each fiscal year, timely distribute an amount equal to at least 90.0% of our ordinary net taxable income and realized netshort-term capital gains in excess of realized netlong-term capital losses, if any, reduced by deductible expenses. In addition, we will be subject to anon-deductible 4% U.S. federal excise tax to the extent we do not distribute during the calendar year at least (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains that we recognized for preceding years, but were not distributed during such years and on which we paid no federal income tax. For the 2019 calendar year, the Company made distributions sufficient such that we did not incur any federal excise taxes. We may elect to withhold from distribution a portion of our ordinary income for the 2020 calendar year and/or portion of the capital gains in excess of capital losses realized during theone-year period ending October 31, 2020, if any, and, if we do so, we would expect to incur U.S. federal excise taxes as a result. For the 2019 calendar year, our distributions were sufficient requiring no excise taxes.

We may distribute taxable dividends that are payable in cash or shares of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the Treasury regulations and a revenue procedure issued by the Internal Revenue Service (“IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC, subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. If too many stockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive the lesser of (a) the portion of the distribution such shareholder has elected to receive in cash or (b) an amount equal to his or her entire distribution times the percentage limitation on cash available for distribution. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. Taxable stockholders receiving such distributions will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain or qualified dividend income to the extent such distribution is properly reported as such) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result of receiving distributions in the form of our common stock, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock he or she receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock.

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Competition

Our primary competitors in providing financing to private middle market companies include public and private investment funds (including private equity funds, mezzanine funds, BDCs and SBICs), commercial and investment banks and commercial financing companies. Additionally, alternative investment vehicles, such as hedge funds, frequently invest inmiddle-market companies. As a result, competition for investment opportunities at middle-market companies can be intense, and in the past couple of years we believe there has been an increase in the amount of debt capital available on average. This has resulted in a somewhat more competitive environment for making new investments. Many middle-market companies are still unable to raise senior debt financing through traditional large financial institutions, and we believe this approach to financing remains difficult as implementation of U.S. and international financial reforms, such as Basel 3, limits the capacity of large financial institutions to holdnon-investment grade leveraged loans on their balance sheets. We believe that many of these financial institutions havede-emphasized their service and product offerings tomiddle-market companies in particular.

Many of our competitors are substantially larger and have considerably greater financial and marketing resources than us. For example, some competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which may allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or that the Code imposes on us as a RIC. We use the industry information available to the investment professionals of Saratoga Investment Advisors to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the investment professionals of our Investment Adviser enable us to learn about, and compete effectively for, financing opportunities with attractive leveraged companies in the industries in which we seek to invest.

For additional information concerning the competitive risks we face, please see Part I. Item 1A. “Risk Factors—We operate in a highly competitive market for investment opportunities.”

Staffing

We do not currently have any employees and do not expect to have any employees in the future. Services necessary for our business are provided by individuals who are employees of Saratoga Investment Advisors, pursuant to the terms of the Management Agreement and the Administration Agreement. For a discussion of the Management Agreement, see “Business—Investment Advisory and Management Agreement” below. We reimburse Saratoga Investment Advisors for our allocable portion of expenses incurred by it in performing its obligations under the Administration Agreement, including rent and our allocable portion of the cost of our officers and their respective staffs, subject to certain limitations. For a discussion of the Administration Agreement, see “Business—Administration Agreement” below.

Investment Advisory and Management Agreement

Saratoga Investment Advisors serves as our investment adviser. Our Investment Adviser was formed in 2010 as a Delaware limited liability company and became our investment advisor in July 2010. Subject to the overall supervision of our board of directors, Saratoga Investment Advisors manages ourday-to-day operations and provides investment advisory and management services to us. Under the terms of the Management Agreement, Saratoga Investment Advisors:

• determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

• identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies);

• closes and monitors the investments we make; and

• determines the securities and other assets that we purchase, retain or sell.

Saratoga Investment Advisors services under the Management Agreement are not exclusive, and it is free to furnish similar services to other entities.

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Management Fee and Incentive Fee

Pursuant to the Management Agreement with Saratoga Investment Advisors, we pay Saratoga Investment Advisors a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee.

The base management fee is paid quarterly in arrears, and equals 1.75% per annum of our gross assets (other than cash or cash equivalents but including assets purchased with borrowed funds) and calculated at the end of each fiscal quarter based on the average value of our gross assets (other than cash or cash equivalents but including assets purchased with borrowed funds) as of the end of such fiscal quarter and the end of the immediate prior fiscal quarter. Base management fees for any partial month or quarter are appropriately pro-rated.

The incentive fee has the following two parts:

The first part is calculated and payable quarterly in arrears based on ourpre-incentive fee net investment income for the immediately preceding fiscal quarter.Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence, managerial and consulting fees or other fees that we receive from portfolio companies) accrued during the fiscal quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock or debt security, but excluding the incentive fee).Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends andzero-coupon securities), accrued income that we have not yet received in cash.Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation or depreciation or realized gains or losses resulting from the extinguishment of our own debt.Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less liabilities) at the end of the immediately preceding fiscal quarter, is compared to a “hurdle rate” of 1.875% per quarter, subject to a “catch up” provision. The base management fee is calculated prior to giving effect to the payment of any incentive fees.

We pay Saratoga Investment Advisors an incentive fee with respect to ourpre-incentive fee net investment income in each fiscal quarter as follows: (A) no incentive fee in any fiscal quarter in which ourpre-incentive fee net investment income does not exceed the hurdle rate; (B) 100.0% of ourpre-incentive fee net investment income with respect to that portion of suchpre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter is payable to Saratoga Investment Advisors; and (C) 20.0% of the amount of ourpre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter. We refer to the amount specified in clause (B) as the“catch-up.” The“catch-up” provision is intended to provide Saratoga Investment Advisors with an incentive fee of 20.0% on all of ourpre-incentive fee net investment income as if a hurdle rate did not apply when ourpre-incentive fee net investment income exceeds 2.344% in any fiscal quarter. Notwithstanding the foregoing, with respect to any period ending on or prior to December 31, 2010, Saratoga Investment Advisors was only entitled to 20.0% of the amount of ourpre-incentive fee net investment income, if any, that exceeded 1.875% in any fiscal quarter without any catch-up provision. These calculations are appropriatelypro-rated when such calculations are applicable for any period of less than three months.

The following is a graphical representation of the calculation of the income-related portion of the incentive fee subsequent to any period ending after December 31, 2010:

Quarterly Incentive Fee Based on“Pre-Incentive Fee Net Investment Income”

Pre-Incentive Fee Net Investment Income

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment

Income allocated to income-related portion of incentive fee

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The second part of the incentive fee, the capital gains fee, is determined and payable in arrears as of the end of each fiscal year (or, upon termination of the Management Agreement), and is calculated at the end of each applicable fiscal year by subtracting (1) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) our cumulative aggregate realized capital gains, in each case calculated from May 31, 2010 on each investment in the Company’s portfolio. If such amount is positive at the end of such year, then the capital gains fee for such year is equal to 20.0% of such amount, less the cumulative aggregate amount of capital gains fees paid in all prior years. If such amount is negative, then there is no capital gains fee for such year.

Under the Management Agreement, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and Saratoga Investment Advisors will be entitled to 20.0% of net capital gains that arise after May 31, 2010. In addition, the cost basis for computing our realized gains and losses on investments held by us as of May 31, 2010 equals the fair value of such investments as of such date.

Examples of Quarterly Incentive Fee Calculation

Example 1: Income Related Portion of Incentive Fee(1):

Assumptions

• Hurdle rate(2) = 1.875%

• Management fee(3) = 0.4375%

• Other expenses (legal, accounting, custodian, transfer agent, etc.)(4) = 0.33%

Alternative 1

Additional Assumptions

• Investment income (including interest, dividends, fees, etc.) = 1.25%

• Pre-incentive fee net investment income (investment income–(management fee + other expenses)) = 0.4825%Pre-incentive fee net investment income does not exceed hurdle rate, therefore there is no incentive fee.

Alternative 2

Additional Assumptions

• Investment income (including interest, dividends, fees, etc.) = 3.0%

• Pre-incentive fee net investment income (investment income–(management fee + other expenses)) = 2.2325%

Pre-incentive fee net investment income exceeds hurdle rate, but does not fully satisfy the“catch-up” provision, therefore the income related portion of the incentive fee is 0.3575%.

Incentive Fee	=	(100.0% × (pre-incentive fee net investment income–1.875%)
	=	100.0%(2.2325%–1.875%)
	=	100.0%(0.3575%)
	=	0.3575%

(1) The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets.

(2) Represents 7.5% hurdle rate.

(3) Represents 1.75% annualized management fee. For the purposes of this example, we have assumed that we have not incurred any indebtedness and that we maintain no cash or cash equivalents.

(4) The “catch-up” provision is intended to provide our Investment Adviser with an incentive fee of 20.0% on allpre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.344% in any fiscal quarter.

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Alternative 3

Additional Assumptions

• Investment income (including interest, dividends, fees, etc.) = 3.5%

• Pre-Incentive Fee Net Investment Income (investment income–(management fee + other expenses) = 2.7325%

Pre-incentive fee net investment income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the income related portion of the incentive fee is 0.5467%.

Incentive fee	=	100.0% × pre-incentive fee net investment income (subject to “catch-up”)(4)
Incentive fee	=	100.0% דcatch-up” + (20.0% × (Pre-incentive fee net investment income–2.344%))
Catch up	=	2.344%–1.875%
	=	0.469%
Incentive fee	=	(100.0% × 0.469%) +(20.0% ×(2.7325%–2.344%))
	=	0.469% +(20.0% × 0.3885%)
	=	0.469% + 0.0777%
	=	0.5467%

Example 2: Capital Gains Portion of Incentive Fee:

Alternative 1

Assumptions(1)

• Year 1: $20.0 million investment made in Company A (“Investment A”), and $30.0 million investment made in Company B (“Investment B”)

• Year 2: Investment A is sold for $50.0 million and fair market value (“FMV”) of Investment B determined to be $32.0 million

• Year 3: FMV of Investment B determined to be $25.0 million

• Year 4: Investment B sold for $31.0 million

The capital gains portion of the incentive fee, if any, calculated under the cumulative method would be:

• Year 1: None

• Year 2: $6 million (20.0% multiplied by $30.0 million realized capital gains on sale of Investment A)

• Year 3: None; $5 million (20.0% multiplied by ($30.0 million realized cumulative capital gains less $5.0 million cumulative capital depreciation)) less $6.0 million (capital gains incentive fee paid in Year 2)

• Year 4: $200,000; $6.2 million (20.0% multiplied by $31.0 million cumulative realized capital gains) less $6.0 million (capital gains incentive fee paid in Year 2)

Alternative 2

Assumptions(1)

(1) The examples assume that Investment A and Investment B were acquired by us subsequent to May 31, 2010. If Investment A and B were acquired by us prior to May 31, 2010, then the cost basis for computing our realized gains and losses on such investments would equal the fair value of such investments as of May 31, 2010.

• Year 1: $20.0 million investment made in Company A (“Investment A”), $30.0 million investment made in Company B (“Investment B”) and $25.0 million investment made in Company C (“Investment C”)

• Year 2: Investment A sold for $50.0 million, FMV of Investment B determined to be $25.0 million and FMV of Investment C determined to be $25.0 million

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• Year 3: FMV of Investment B determined to be $27.0 million and Investment C sold for $30.0 million

• Year 4: FMV of Investment B determined to be $35.0 million

• Year 5: Investment B sold for $20.0 million

The capital gains portion of the incentive fee, if any, calculated under the cumulative method would be:

• Year 1: None

• Year 2: $5.0 million (20.0% multiplied by $25.0 million ($30.0 million realized capital gains on Investment A less $5.0 million unrealized capital depreciation on Investment B))

• Year 3: $1.4 million ($6.4 million (20.0% multiplied by $32.0 million ($35.0 million cumulative realized capital gains less $3.0 million unrealized capital depreciation)) less $5.0 million (capital gains incentive fee paid in Year 2))

• Year 4: None

• Year 5: None ($5.0 million (20.0% multiplied by $25.0 million (cumulative realized capital gains of $35.0 million less realized capital losses of $10.0 million)) less $6.4 million (cumulative capital gains incentive fee paid in Year 2 and Year 3))

The Management Agreement with Saratoga Investment Advisors was approved by our board of directors at an in-person meeting of the directors, including a majority of our independent directors, and was approved by our stockholders at the special meeting of stockholders held on July 30, 2010. Subsequent to then, our board of directors approved the renewal of the Management Agreement annually for an additionalone-year term at an in-person meeting, with the last approval granted on July 9, 2019.

In approving this Management Agreement, the directors considered, among other things, (i) the nature, extent and quality of the advisory and other services to be provided to us by Saratoga Investment Advisors; (ii) our investment performance and the investment performance of Saratoga Investment Advisors; (iii) the expected costs of the services to be provided by Saratoga Investment Advisors (including management fees, advisory fees and expense ratios) as compared to other companies within the industry, and the profits expected to be realized by Saratoga Investment Advisors; (iv) the limited potential for economies of scale in investment management associated with managing us; and (v) Saratoga Investment Advisors estimated pro forma profitability with respect to managing us.

Payment of our expenses

The Management Agreement provides that all investment professionals of Saratoga Investment Advisors and its staff, when and to the extent engaged in providing investment advisory services required to be provided by Saratoga Investment Advisors, and the compensation and routine overhead expenses of such personnel allocable to such services, will be provided and paid for by Saratoga Investment Advisors and not by us.

We bear all costs and expenses of our operations and transactions, including those relating to:

• organization;

• calculating our net asset value (including the cost and expenses of any independent valuation firm);

• expenses incurred by our Investment Adviser payable to third parties, including agents, consultants or other advisers, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies;

• expenses incurred by our Investment Adviser payable for travel and due diligence on our prospective portfolio companies;

• interest payable on debt, if any, incurred to finance our investments;

• offerings of our common stock and other securities;

• investment advisory and management fees;

• fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with, evaluating and making investments;

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• transfer agent and custodial fees;

• federal and state registration fees;

• all costs of registration and listing our common stock on any securities exchange;

• federal, state and local taxes;

• independent directors’ fees and expenses;

• costs of preparing and filing reports or other documents required by governmental bodies (including the SEC and the SBA);

• costs of any reports, proxy statements or other notices to common stockholders including printing costs;

• our fidelity bond, directors and officers errors and omissions liability insurance, and any other insurance premiums;

• direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs; and

• administration fees and all other expenses incurred by us or, if applicable, the administrator in connection with administering our business (including payments under the Administration Agreement based upon our allocable portion of the administrator’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our officers and their respective staffs (including travel expenses)).

Duration and Termination

The Management Agreement will remain in effect continuously, unless terminated under the termination provisions of the agreement. The Management Agreement provides that it may be terminated at any time, without the payment of any penalty, upon 60 days written notice, by the vote of stockholders holding a majority of our outstanding voting securities, or by the vote of our directors or by Saratoga Investment Advisors.

The Management Agreement will, unless terminated as described above, continue in effect from year to year so long as it is approved at least annually by (i) the vote of the board of directors, or by the vote of stockholders holding a majority of our outstanding voting securities, and (ii) the vote of a majority of our directors who are not parties to the Management Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any party to such agreement, in accordance with the requirements of the 1940 Act.

Indemnification

Under the Management Agreement, Saratoga Investment Advisors and certain of its affiliates are not liable to us for any action taken or omitted to be taken by Saratoga Investment Advisors in connection with the performance of any of its duties or obligations under the agreement or otherwise as an investment adviser to us, except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the receipt of compensation for services and except to the extent such action or omission constitutes gross negligence, willful misfeasance, bad faith or reckless disregard of its duties and obligations under the agreement.

We also provide indemnification to Saratoga Investment Advisors and certain of its affiliates for damages, liabilities, costs and expenses incurred by them in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding arising out of or otherwise based upon the performance of any of its duties or obligations under the agreement or otherwise as an investment adviser to us. However, we would not provide indemnification against any liability to us or our security holders to which Saratoga Investment Advisors or such affiliates would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of any such person’s duties or by reason of the reckless disregard of its duties and obligations under the agreement.

Organization of the Investment Adviser

Saratoga Investment Advisors is registered as an investment adviser under the Investment Advisers Act of 1940. The principal executive offices of Saratoga Investment Advisors are located at 535 Madison Avenue, New York, New York 10022.

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Administration Agreement

Pursuant to a separate Administration Agreement, Saratoga Investment Advisors, who also serves as our administrator, furnishes us with office facilities, equipment and clerical,book-keeping and record keeping services. Under the Administration Agreement, our administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain, preparing reports for our stockholders and reports required to be filed with the SEC. In addition, our administrator assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement equal an amount based upon our allocable portion of our administrator’s overhead in performing its obligations under the Administration Agreement, including rent and our allocable portion of the cost of our officers and their respective staffs relating to the performance of services under this agreement (including travel expenses). Our allocable portion is based on the proportion that our total assets bears to the total assets administered or managed by our administrator. Under the Administration Agreement, our administrator also provides managerial assistance, on our behalf, to those portfolio companies who accept our offer of assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days written notice to the other party. Our board of directors, including a majority of independent directors, will annually review the compensation we pay to the Adviser to determine that the provisions of the Administrative Agreement are carried out satisfactorily and to determine, among other things, whether the fees payable under such agreement are reasonable in light of the services provided. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and any proposed allocation of administrative expenses among us and any affiliates of the Adviser. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of the administrative services as compared to the estimated cost to us of obtaining similar services fromthird-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Adviser for such services as a percentage of our net assets to the same ratio as reported by other comparable funds. The amount payable by us under the Administration Agreement was initially capped at $1.0 million for each annual term of the agreement. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016. On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019.

Indemnification

Under the Administration Agreement, Saratoga Investment Advisors and certain of its affiliates are not liable to us for any action taken or omitted to be taken by Saratoga Investment Advisors in connection with the performance of any of its duties or obligations under the agreement.

We also provide indemnification to Saratoga Investment Advisors and certain of its affiliates for damages, liabilities, costs and expenses incurred by them in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding arising out of or otherwise based upon the performance of any of its duties or obligations under the agreement or otherwise as an administrator to us. However, we do not provide indemnification against any liability to us or our security holders to which Saratoga Investment Advisors or such affiliates would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of any such person’s duties or by reason of the reckless disregard of its duties and obligations under the agreement.

License Agreement

We entered into a trademark license agreement with Saratoga Investment Advisors, pursuant to which Saratoga Investment Advisors grants us anon-exclusive,royalty-free license to use the name “Saratoga.” Under this agreement, we have a right to use the “Saratoga” name, for so long as Saratoga Investment Advisors or one of its affiliates remains our Investment Adviser. Other than with respect to this limited license, we have no legal right to the “Saratoga” name. Saratoga Investment Advisors has the right to terminate the license agreement if it is no longer acting as our investment adviser. In the event the Management Agreement is terminated, we would be required to change our name to eliminate the use of the name “Saratoga.”

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Business Development Company Regulations

We have elected to be treated as a BDC under the 1940 Act. As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters, and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC, unless approved by “a majority of our outstanding voting securities,” as defined in the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67.0% or more of such company’s stock present at a meeting if more than 50.0% of the outstanding stock of such company is present and represented by proxy or (ii) more than 50.0% of the outstanding stock of such company.

We do not intend to acquire securities issued by any investment company (i.e., mutual fund, registeredclosed-end fund or BDC) that exceed the limits imposed by the 1940 Act. Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

We expect to be periodically examined by the SEC for compliance with the 1940 Act.

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws and review these policies and procedures annually for their adequacy and the effectiveness of their implementation. We and our investment adviser have designated a chief compliance officer to be responsible for administering these policies and procedures.

Qualifying assets

A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) below. Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70.0% of the company’s total assets. The principal categories of qualifying assets relevant to our business are the following:

(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

(a) is organized under the laws of, and has its principal place of business in, the United States;

(b) is not an investment company (other than a small business investment companywholly-owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

(c) satisfies either of the following:

(i) does not have any class of securities listed on a national securities exchange;

(ii) has a class of securities listed on a national securities exchange but has an aggregate market value of outstanding voting and non-voting common equity of less than $250.0 million;

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(iii) is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company;

(iv) is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million; or

(v) meets such other criteria as may established by the SEC.

(2) Securities of any eligible portfolio company which we control.

(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own at least 60.0% of the outstanding equity of the eligible portfolio company.

(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of options, warrants or rights relating to such securities.

(6) Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.

The regulations defining qualifying assets may change over time. We may adjust our investment focus as needed to comply with and/or take advantage of any regulatory, legislative, administrative or judicial actions in this area.

Significant managerial assistance to portfolio companies

A BDC generally must offer to make available to the issuer of the securities in which it invests significant managerial assistance, except in circumstances where either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other persons in the group makes available such managerial assistance. As a BDC we offer, and must provide upon request, managerial assistance to our portfolio companies. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees or those of its investment adviser, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Pursuant to a separate Administration Agreement, our Investment Adviser provides such managerial assistance on our behalf to portfolio companies that request this assistance, recognizing that our involvement with each investment will vary based on factors including the size of the company, the nature of our investment, the company’s overall stage of development and our relative position in the capital structure. We may receive fees for these services.

Temporary investments

As a BDC, pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70.0% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. Government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects anagreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25.0% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the asset-diversification requirements in order to qualify as a regulated investment company (“RIC”) for U.S. federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Investment Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

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Indebtedness and senior securities

As a BDC, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares of stock, senior to our common stock, if our asset coverage, as defined in the 1940 Act, is at least equal to 200.0% immediately after each such issuance. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, ournon-interested Board of Directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150.0% asset coverage ratio became effective on April 16, 2019. “See Risk Factors – Recent legislation allows us to incur additional leverage.” We may also borrow amounts up to 5.0% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.

The 1940 Act also limits the amount of warrants, options and rights to common stock that we may issue and the terms of such securities.

Common stock

We are generally not able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below the current net asset value of the common stock if our board of directors determines that such sale is in our best interests and that of our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to applicable requirements of the 1940 Act.

Code of ethics

As a BDC, we and Saratoga Investment Advisors have each adopted a code of ethics pursuant to Rule17j-1 under the 1940 Act and Rule204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. In addition, each code of ethics is available on the EDGAR database on the SEC’s website athttp://www.sec.gov. You may also obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the followinge-mail address:publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102. Our code of ethics is also available on our corporate governance webpage at http://ir.saratogainvestmentcorp.com/corporate-governance.

Proxy voting policies and procedures

SEC registered investment advisers that have the authority to vote (client) proxies (which authority may be implied from a general grant of investment discretion) are required to adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of its clients. Registered investment advisers also must maintain certain records on proxy voting. In most cases, we will invest in securities that do not generally entitle us to voting rights in our portfolio companies. When we do have voting rights, we will delegate the exercise of such rights to our Investment Adviser.

Saratoga Investment Advisors has particular proxy voting policies and procedures in place. In determining how to vote, officers of Saratoga Investment Advisors will consult with each other, taking into account our interests and the interests of our investors, as well as any potential conflicts of interest. Saratoga Investment Advisors will consult with legal counsel to identify potential conflicts of interest. Where a potential conflict of interest exists, Saratoga Investment Advisors may, if it so elects, resolve it by following the recommendation of a disinterested third party, by seeking the direction of our independent directors or, in extreme cases, by abstaining from voting. While Saratoga Investment Advisors may retain an outside service to provide voting recommendations and to assist in analyzing votes, it will not delegate its voting authority to any third party.

An officer of Saratoga Investment Advisors will keep a written record of how all such proxies are voted. It will retain records of (1) proxy voting policies and procedures, (2) all proxy statements received (or it may rely on proxy statements filed on the SEC’s EDGAR system in lieu thereof), (3) all votes cast, (4) investor requests for voting information, and (5) any specific documents prepared or received in connection with a decision on a proxy vote. If it uses an outside service, Saratoga Investment Advisors may rely on such service to maintain copies of proxy statements and records, so long as such service will provide a copy of such documents promptly upon request.

Saratoga Investment Advisors’ proxy voting policies are not exhaustive and are designed to be responsive to the wide range of issues that may be subject to a proxy vote. In general, Saratoga Investment Advisors will vote our proxies in accordance with these guidelines unless: (1) it has determined otherwise due to the specific and unusual facts and circumstances with respect to a particular vote, (2) the subject matter of the vote is not covered by these guidelines, (3) a material conflict of interest is present, or (4) it finds it necessary to vote contrary to its general guidelines to maximize stockholder value or our best interests.

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In reviewing proxy issues, Saratoga Investment Advisors generally will use the following guidelines:

Elections of Directors:In general, Saratoga Investment Advisors will vote in favor of the management-proposed slate of directors. If there is a proxy fight for seats on a portfolio company’s board of directors, or Saratoga Investment Advisors determines that there are other compelling reasons for withholding our vote, it will determine the appropriate vote on the matter. It may withhold votes for directors that fail to act on key issues, such as failure to: (1) implement proposals to declassify a board, (2) implement a majority vote requirement, (3) submit a rights plan to a stockholder vote or (4) act on tender offers where a majority of stockholders have tendered their shares. Finally, Saratoga Investment Advisors may withhold votes for directors ofnon-U.S. issuers where there is insufficient information about the nominees disclosed in the proxy statement.

Appointment of Auditors:We believe that a portfolio company remains in the best position to choose its independent auditors and Saratoga Investment Advisors will generally support management’s recommendation in this regard.

Changes in Capital Structure:Changes in a portfolio company’s organizational documents may be required by state or federal regulation. In general, Saratoga Investment Advisors will cast our votes in accordance with the management on such proposals. However, Saratoga Investment Advisors will consider carefully any proposal regarding a change in corporate structure that is not required by state or federal regulation.

Corporate Restructurings, Mergers and Acquisitions:We believe proxy votes dealing with corporate reorganizations are an extension of the investment decision. Accordingly, Saratoga Investment Advisors will analyze such proposals on a case-by-case basis and vote in accordance with its perception of our interests.

Proposals Affecting Stockholder Rights:We will generally vote in favor of proposals that give stockholders a greater voice in the affairs of a portfolio company and oppose any measure that seeks to limit such rights. However, when analyzing such proposals, Saratoga Investment Advisors will balance the financial impact of the proposal against any impairment of stockholder rights as well as of our investment in the portfolio company.

Corporate Governance:We recognize the importance of good corporate governance. Accordingly, Saratoga Investment Advisors will generally favor proposals that promote transparency and accountability within a portfolio company.

Anti-Takeover Measures:Saratoga Investment Advisors will evaluate, on a case-by-case basis, any proposals regardinganti- takeover measures to determine the likely effect on stockholder value dilution.

Share Splits:Saratoga Investment Advisors will generally vote with management on share split matters.

Limited Liability of Directors:Saratoga Investment Advisors will generally vote with management on matters that could adversely affect the limited liability of directors.

Social and Corporate Responsibility:Saratoga Investment Advisors will review proposals related to social, political and environmental issues to determine whether they may adversely affect stockholder value. It may abstain from voting on such proposals where they do not have a readily determinable financial impact on stockholder value.

Privacy principles

We are committed to protecting the privacy of our stockholders. The following explains the privacy policies of Saratoga Investment Corp., Saratoga Investment Advisors and their affiliated companies.

We will safeguard, according to strict standards of security and confidentiality, all information we receive about our stockholders.

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Generally, we do not receive anynon-public personal information relating to our stockholders, although certainnon-public personal information of our stockholders may become available to us. The only information we collect from stockholders is the holder’s name, address, number of shares and social security number. This information is used only so that we can send annual reports and other information about us to the stockholder and send the stockholder proxy statements or other information required by law. We restrict access tonon-public personal information about our stockholders to our Investment Adviser’s and Administrator’s employees with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.

We do not share this information with anynon-affiliated third party except as described below:

• Authorized Employees of Saratoga Investment Advisors. It is our policy that only authorized employees of Saratoga Investment Advisors who need to know a stockholder’s personal information will have access to it.

• Service Providers.We may disclose your personal information to companies that provide services on our behalf, such as recordkeeping, processing a stockholder’s trades, and mailing stockholder information. These companies are required to protect our stockholders’ information and use it solely for the purpose for which they received it.

• Courts and Government Officials.If required by law, we may disclose a stockholder’s personal information in accordance with a court order or at the request of government regulators. Only that information required by law, subpoena, or court order will be disclosed.

Compliance with applicable laws

As a BDC, we are periodically examined by the SEC for compliance with the 1940 Act.

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We and Saratoga Investment Advisors are each required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a chief compliance officer to be responsible for administering the policies and procedures.

The New York Stock Exchange (“NYSE”) Corporate Governance Regulations

The NYSE has adopted corporate governance regulations that listed companies must comply with. We are in compliance with such corporate governance listing standards applicable to BDCs.

Co-investment

We may be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors who are not interested persons and, in some cases, prior approval by the SEC. Thus, based on current SEC interpretations,co-investment transactions involving a BDC like us and an entity that is advised by Saratoga Investment Advisors or an affiliated adviser generally could not be effected without SEC relief. The staff of the SEC has, however, grantedno-action relief to third parties permitting purchases of a single class of privately-placed securities provided that the adviser negotiates no term other than price and certain other conditions are met. As a result, currently we only expect toco-invest on a concurrent basis with affiliates of Saratoga Investment Advisors when each of us will own the same securities of the issuer and when no term is negotiated other than price. Any such investment would be made, subject to compliance with existing regulatory guidance, applicable regulations and our allocation procedures.

We may in the future submit an application for exemptive relief to the SEC to permit greater flexibility to negotiate the terms ofco-investments because we believe that it will be advantageous for us toco-invest with affiliates of Saratoga Investment Advisors where such investment is consistent with the investment objective, investment positions, investment policies, investment strategies, investment restrictions, regulatory requirements and other pertinent factors applicable to us. However, there is no assurance that any application for exemptive relief, if made, would be granted by the SEC.

Small Business Investment Company Regulations

On March 28, 2012, our wholly-owned subsidiary, SBIC LP, received an SBIC license from the SBA. On August 14, 2019, our wholly-owned subsidiary, SBIC II LP, also received an SBIC license from the SBA.

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The SBIC licenses allows our SBIC LP and SBIC II LP to obtain leverage by issuing SBA-guaranteed debentures, subject to the satisfaction of certain customary procedures.SBA-guaranteed debentures arenon-recourse, interest only debentures with interest payable semi- annually and have aten-year maturity. The principal amount ofSBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate ofSBA-guaranteed debentures is fixed at the time of issuance at a market-driven spread over U.S. Treasury Notes with 10-year maturities.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to “smaller” concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

SBIC LP and SBIC II LP are subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC LP or SBIC II LP will receiveSBA-guaranteed debenture funding, which is dependent upon SBIC LP and SBIC II LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP and SBIC II LP’s assets over our stockholders and debtholders in the event we liquidate SBIC LP or SBIC II LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP or SBIC II LP upon an event of default.

We received exemptive relief from the SEC to permit it to exclude the debt of SBIC LP and SBIC II LP guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows us increased flexibility under the asset coverage test by permitting it to borrow up to $325.0 million more than it would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150.0% asset coverage ratio became effective on April 16, 2019.

In December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million, subject to SBA approval. Our wholly-owned SBIC subsidiaries may borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA. With this license approval, Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital. SBA regulations currently limit the amount ofSBA-guaranteed debentures that an SBIC may issue to $150.0 million when it has at least $75.0 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum amount of $350.0 million inSBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.

As of February 29, 2020, we have funded SBIC LP with an aggregate total of $75.0 million of equity capital and have $150.0 million of SBA guaranteed debentures outstanding and have funded SBIC II LP with an aggregate total of $50.0 million of equity capital and do not have anySBA-guaranteed debentures outstanding. SBA debentures arenon-recourse to us, have a10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP and SBIC II LP may borrow to a maximum of $150.0 million and $175.0 million, respectively, which is up to twice its potential regulatory capital.

Available Information

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange of 1934, as amended (the “Exchange Act”). You may inspect and copy these reports, proxy statements and other information at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the followinge-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C.20549-0102. In addition, the SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at http://www.sec.gov.

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Our Internet address ishttp://www.saratogainvestmentcorp.com. We make available free of charge on our Internet website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on our website is not incorporated by reference into this Annual Report, and you should not consider that information to be part of this Annual Report.

ITEM 1A. RISK FACTORS

Investing in our securities involves a number of significant risks. In addition to other information contained in this Annual Report on Form10-K, you should consider carefully the following information before making an investment in our securities. The risks set forth below are the principal risks with respect to the Company generally and with respect to business development companies, they may not be the only risks we face. This section nonetheless describes the principal risk factors associated with investment in the Company specifically, as well as those factors generally associated with investment in a company with investment objectives, investment policies, capital structure or trading markets similar to the Company’s. If any of the risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the trading price of our securities could decline and you may lose all or part of your investment.

Risks Related to Our Business and Structure

Market volatility and the condition of the debt and equity capital markets could negatively impact our financial condition and stock price.

From time to time, capital markets may experience periods of disruption and instability. For example, between 2008 and 2009, the U.S. and global capital markets were unstable as evidenced by periodic disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, there-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have largely recovered from the events of 2008 and 2009, there have been continuing periods of volatility, some lasting longer than others. For example, the referendum by U.K. voters to exit the European Union in June 2016 led to further disruption and instability in the global markets (see “Risk Factors—Risks Related to Our Business and Structure—Uncertainty about the financial stability of the United States, China and several countries in Europe could have a significant adverse effect on our business, financial condition and results of operations.”). There can be no assurance these market conditions will not repeat themselves or worsen in the future.

Equity capital may be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. For information about risks related to the potential impact that volatile market conditions may have on our 6.25% Notes due 2025 (the “2025 Notes”), see “Risks Relating to Our 2025 Notes—Public health threats may affect the market for the 2025 Notes, impact the businesses in which we invest and affect our business, operating results and financial condition.”

Volatility and dislocation in the capital markets can also create a challenging environment in which to raise or access debt capital. The reappearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience including being at a higher cost due to a rising rate environment. If we are unable to raise or refinance debt, then our equity investors may not benefit from the potential for increased returns on equity resulting from leverage and we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies.

Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital could have a material adverse effect on our business, financial condition or results of operations.

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The U.S. Presidential Administration may make substantial changes to financial regulation, as well as fiscal and tax policies that may adversely affect our business.

The Republican Party currently controls the executive branch and the Senate portion of the legislative branch of government, which we believe increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Act and the authority of the Federal Reserve and the Financial Stability Oversight Council. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a significant adverse effect on our business, financial condition and results of operations. We cannot predict the duration of the effects related to these or similar events in the future on the U.S. economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

The current U.S. presidential administration has called for significant changes to U.S. trade, healthcare, immigration, foreign and government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and introduced new anddifficult-to-quantify macroeconomic and political risks with potentiallyfar-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. Congress or the current administration implements changes to U.S. policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to business, they could adversely affect our business, financial condition, operating results and cash flows. Until we know what policy changes are made and how those changes impact business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.

Uncertainty about the financial stability of the United States, China and several countries in Europe could have a significant adverse effect on our business, financial condition and results of operations.

Downgrades by rating agencies to the U.S. government’s credit and deficit levels in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock.

Deterioration in the economic conditions in the Eurozone and globally, including instability in financial markets, may pose a risk to our business. In recent years, financial markets have been affected at times by a number of global macroeconomic and political events, including the following: large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets jurisdictions, levels ofnon-performing loans on the balance sheets of European banks, the potential effect of any European country leaving the Eurozone, the potential effect of the United Kingdom leaving the European Union, the potential effect of Scotland leaving the United Kingdom, and market volatility and loss of investor confidence driven by political events. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. We cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis. To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected.

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In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union (“Brexit”), and, subsequently, on March 29, 2017, the U.K. government began the formal process of leaving the European Union. The United Kingdom formally left the European Union on January 31, 2020 and immediately entered a transition period set to expire on December 31, 2020. Brexit has created political and economic uncertainty and instability in the global markets (including currency and credit markets), and especially in the United Kingdom and the European Union, and this uncertainty and instability may last indefinitely. The implications of the United Kingdom’s withdrawal from the European Union are unclear at present. There is also continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. These market conditions have historically and could again have a material adverse effect on debt and equity capital markets in the United States and Europe, which could have a materially negative impact on our business, financial condition and results of operations. We and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital.

The Chinese capital markets have also experienced periods of instability over the past several years. The current political climate has also intensified concerns about a potential trade war between the U.S. and China in connection with each country’s recent or proposed tariffs on the other country’s products. These market and economic disruptions, the potential trade war with China and the impact of public health epidemics like the coronavirus currently affecting China and the wider global community may have a material adverse impact on the ability of our portfolio companies to fulfill their end customers’ orders due to supply chain delays, limited access to key commodities or technologies or other events that impact their manufacturers or their suppliers. Such events have affected, and may in the future affect, the global and U.S. capital markets, and our business, financial condition or results of operations.

These developments, along with the United States government’s credit and deficit concerns, the European sovereign debt crisis and the economic slowdown in China, could cause interest rates to be volatile, which may negatively impact our ability to access the debt markets on favorable terms.

We may be obligated to pay Saratoga Investment Advisors incentive fees even if we incur a net loss, or there is a decline in the value of our portfolio.

Saratoga Investment Advisors is entitled to incentive fees for each fiscal quarter in an amount equal to a percentage of the excess of our investment income for that quarter (before deducting incentive compensation, but net of operating expenses and certain other items) above a threshold return for that quarter. Ourpre-incentive fee net investment income, for incentive compensation purposes, excludes realized and unrealized capital gains or losses that we may incur in the fiscal quarter, even if such capital gains or losses result in a net gain or loss on our consolidated statements of operations for that quarter. Thus, we may be required to pay Saratoga Investment Advisors incentive fees for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter.

Under the terms of the Management Agreement, we may have to pay incentive fees to Saratoga Investment Advisors in connection with the sale of an investment that is sold at a price higher than the fair value of such investment on May 31, 2010, even if we incur a loss on the sale of such investment.

Incentive fees on capital gains paid to Saratoga Investment Advisors under the Management Agreement equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Under the Management Agreement, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and Saratoga Investment Advisors will be entitled to 20.0% of the incentive fee capital gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date. See our Form10-Q for the quarter ended May 31, 2010 that was filed with the SEC on July 15, 2010 for the fair value and other information related to our investments as of such date. As a result, we may be required to pay incentive fees to Saratoga Investment Advisors on the sale of an investment even if we incur a realized loss on such investment, so long as the investment is sold for an amount greater than its fair value as of May 31, 2010.

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The way in which the base management and incentive fees under the Management Agreement is determined may encourage Saratoga Investment Advisors to take actions that may not be in our best interests.

The incentive fee payable by us to our Investment Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement, which could result in higher investment losses, particularly during cyclical economic downturns. The way in which the incentive fee payable to our Investment Adviser is determined, which is calculated separately in two components as a percentage of the income (subject to a hurdle rate) and as a percentage of the realized gain on invested capital, may encourage our Investment Adviser to use leverage to increase the return on our investments or otherwise manipulate our income so as to recognize income in quarters where the hurdle rate is exceeded. Moreover, we pay Saratoga Investment Advisors a base management fee based on our total assets, including any investments made with borrowings, which may create an incentive for it to cause us to incur more leverage than is prudent, or not to repay our outstanding indebtedness when it may be advantageous for us to do so, in order to maximize its compensation. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our securities.

The incentive fee payable by us to our Investment Adviser also may create an incentive for our Investment Adviser to invest on our behalf in instruments that have a deferred interest feature. Under these investments, we would accrue the interest over the life of the investment but would not receive the cash income from the investment until the end of the investment’s term, if at all. Our net investment income used to calculate the income portion of our incentive fee, however, includes accrued interest. Thus, a portion of the incentive fee would be based on income that we have not yet received in cash and may never receive in cash if the portfolio company is unable to satisfy such interest payment obligation to us. Consequently, while we may make incentive fee payments on income accruals that we may not collect in the future and with respect to which we do not have a “claw back” right against our Investment Adviser per se, the amount of accrued income written off in any period will reduce the income in the period in which suchwrite-off was taken and may thereby reduce such period’s incentive fee payment.

In addition, Saratoga Investment Advisors receives a quarterly income incentive fee based, in part, on ourpre-incentive fee net investment income, if any, for the immediately preceding calendar quarter. This income incentive fee is subject to a fixed quarterly hurdle rate before providing an income incentive fee return to Saratoga Investment Advisors. This fixed hurdle rate was determined when then current interest rates were relatively low on a historical basis. Thus, if interest rates rise, it would become easier for our investment income to exceed the hurdle rate and, as a result, more likely that Saratoga Investment Advisors will receive an income incentive fee than if interest rates on our investments remained constant or decreased. However, if we repurchase our outstanding debt securities, including the 2025 Notes and such repurchase results in our recording a net gain or loss on the extinguishment of debt for financial reporting and tax purposes, such net gain or loss will not be included in ourpre-incentive fee net investment income for purposes of determining the income incentive fee payable to our Investment Adviser under the Management Agreement.

Moreover, our Investment Adviser receives the incentive fee based, in part, upon net capital gains realized on our investments. Unlike the portion of the incentive fee based on income, there is no performance threshold applicable to the portion of the incentive fee based on net capital gains. As a result, our Investment Adviser may have a tendency to invest more in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

Our board of directors will seek to ensure that Saratoga Investment Advisors is acting in our best interests and that any conflict of interest faced by Saratoga Investment Advisors in its capacity as our Investment Adviser does not negatively impact us.

The base management fee we pay to Saratoga Investment Advisors may induce it to influence our leverage, which may be contrary to our interest.

We pay Saratoga Investment Advisors a quarterly base management fee based on the value of our total assets (including any assets acquired with leverage). Accordingly, Saratoga Investment Advisors has an economic incentive to increase our leverage. Our board of directors monitors the conflicts presented by this compensation structure by approving the amount of leverage that we incur. If our leverage is increased, we will be exposed to increased risk of loss, bear the increase cost of issuing and servicing such senior indebtedness, and will be subject to any additional covenant restrictions imposed on us in an indenture or other instrument or by the applicable lender.

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We employ leverage, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in us. We borrow from and issue senior debt securities to banks and other lenders that is secured by a lien on our assets. Holders of these senior securities have fixed dollar claims on our assets that are superior to the claims of the holders of our securities. Leverage is generally considered a speculative investment technique. Any increase in our income in excess of interest payable on our outstanding indebtedness would cause our net income to increase more than it would have had we not incurred leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not incurred leverage. Such a decline could negatively affect our ability to make common stock distributions or scheduled debt payments, including with respect to the 2025 Notes. There can be no assurance that our leveraging strategy will be successful.

Our outstanding indebtedness imposes, and additional debt we may incur in the future will likely impose, financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC. A failure to add new debt facilities or issue additional debt securities or other evidences of indebtedness in lieu of or in addition to existing indebtedness could have a material adverse effect on our business, financial condition or results of operations.

As of February 29, 2020, there were no outstanding borrowings under the Credit Facility. As of February 29, 2020, we had issued $150.0 million in SBA-guaranteed debentures and $60.0 million in aggregate principal amount of 2025 Notes. On January 13, 2017, we redeemed the $61.8 million of outstanding 2020 Notes using the proceeds from the issuance of the 2023 Notes, leaving $9.8 million in net proceeds from the 2023 Notes offering. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes. We may incur additional indebtedness in the future, including, but not limited to, borrowings under the Credit Facility or the issuance of additional debt securities in one or more public or private offerings, although there can be no assurance that will be successful in doing so. Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. The amount of leverage that we employ at any particular time will depend on our management’s and our board of directors’ assessment of market and other factors at the time of any proposed borrowing.

Saratoga Investment Advisors’ liability is limited under the Management Agreement and we will indemnify Saratoga Investments Advisors against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.

Saratoga Investment Advisors has not assumed any responsibility to us other than to render the services described in the Management Agreement. Pursuant to the Management Agreement, Saratoga Investment Advisors and its officers and employees are not liable to us for their acts under the Management Agreement absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect Saratoga Investment Advisors and its officers and employees with respect to all damages, liabilities, costs and expenses resulting from acts of Saratoga Investment Advisors not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the Management Agreement. These protections may lead Saratoga Investment Advisors to act in a riskier manner when acting on our behalf than it would when acting for its own account.

Substantially all of our assets are subject to security interests under our Credit Facility or claims of the SBA with respect toSBA-guaranteed debentures we may issue and if we default on our obligations thereunder, we may suffer adverse consequences, including the foreclosure on our assets.

Substantially all of our assets are pledged as collateral under the Credit Facility or are subject to a superior claim over the holders of our common stock or the 2025 Notes by the SBA pursuant to theSBA-guaranteed debentures. If we default on our obligations under the Credit Facility or theSBA-guaranteed debentures, Madison Capital Funding and/or the SBA may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or superior claim. In such event, we may be forced to sell our investments to raise funds to repay our outstanding borrowings in order to avoid foreclosure and these forced sales may be at times and at prices we would not consider advantageous. Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated.

In addition, if Madison Capital Funding exercises its right to sell the assets pledged under the Credit Facility, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under the Credit Facility.

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We are exposed to risks associated with changes in interest rates including potential effects on our cost of capital and net investment income.

General interest rate fluctuations and changes in credit spreads on floating rate loans may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital. In addition, an increase in interest rates would make it more expensive to use debt to finance our investments. Decreases in credit spreads on debt that pays a floating rate of return would have an impact on the income generation of our floating rate assets. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed rate securities that have longer maturities. Although we have no policy governing the maturities of our investments, under current market conditions we expect that we will invest in a portfolio of debt generally having maturities of up to ten years. This means that we will be subject to greater risk (other things being equal) than an entity investing solely in shorter-term securities.

Because we may borrow to fund our investments, a portion of our net investment income may be dependent upon the difference between the interest rate at which we borrow funds and the interest rate at which we invest these funds. A portion of our investments will have fixed interest rates, while a portion of our borrowings will likely have floating interest rates. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income. We may hedge against such interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts, subject to applicable legal requirements, including without limitation, all necessary registrations (or exemptions from registration) with the Commodity Futures Trading Commission. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.

Changes relating to the LIBOR calculation process may adversely affect the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in floating-rate loans we extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR. Further, the borrowings of the senior secured revolving credit facility entered into with Madison Capital Funding LLC (the “Credit Facility”) typically use LIBOR as a reference rate.

In the recent past, concerns have been publicized that some of the member banks surveyed by the British Bankers’ Association (“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivative positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.

Actions by the ICE Benchmark Administration, regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined. Potential changes, or uncertainty related to such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities, loans, and other financial obligations or extensions of credit held by or due to us.

On July 27, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. We have exposure to LIBOR, including in financial instruments that mature after 2021. Our exposure arises from the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

In the United States, the Federal Reserve Board and the Federal Reserve Bank of New York, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York began publishing SOFR in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain.

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The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-indexed, floating-rate debt securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established. In the event that the LIBOR Rate is no longer available or published on a current basis or no longer made available or used for determining the interest rate of loans, our administrative agent that manages our loans will generally select a comparable successor rate; provided that (i) to the extent a comparable or successor rate is approved by the administrative agent, the approved rate shall be applied in a manner consistent with market practice; and (ii) to the extent such market practice is not administratively feasible for the administrative agent, such approved rate shall be applied as otherwise reasonably determined by the administrative agent.

There are significant potential conflicts of interest which could adversely impact our investment returns.

Our executive officers and directors, and the members of our Investment Adviser, serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. For example, Christian L. Oberbeck, our chief executive officer and managing member of our Investment Adviser, is the managing partner of Saratoga Partners, a middle market private equity investment firm. In addition, the principals of our Investment Adviser may manage other funds which may from time to time have overlapping investment objectives with those of us and accordingly invest in, whether principally or secondarily, asset classes similar to those targeted by us. If this should occur, the principals of our Investment Adviser will face conflicts of interest in the allocation of investment opportunities to us and such other funds. Although our investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, we and our common stockholders could be adversely affected in the event investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and Investment Adviser, and the members of our Investment Adviser.

Changes in laws or regulations governing our operations, or changes in the interpretation thereof, and any failure by us to comply with laws or regulations governing our operations may adversely affect our business.

We are subject to regulation at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Any change in these laws or regulations, or their interpretation, or any failure by us to comply with these laws or regulations may adversely affect our business.

Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.

There has been on-going discussion and commentary regarding potential significant changes to United States trade policies, treaties and tariffs. The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to the trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.

We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.

Our business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with anythird-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:

• sudden electrical or telecommunications outages;

• natural disasters such as earthquakes, tornadoes and hurricanes;

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• disease pandemics or other serious public health events, such as the recent global outbreak ofCOVID-19 (more commonly known as the Coronavirus);

• events arising from local or larger scale political or social matters, including terrorist acts; and

• cyber-attacks.

These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.

Events outside of our control, including public health crises such as the ongoingCOVID-19 pandemic, may negatively affect our results of operations and financial performance.

The continuing spread of an infectious respiratory illness caused by a novel strain of coronavirus (known asCOVID-19) has caused volatility, severe market dislocations and liquidity constraints in many markets, including securities the Company holds, and may adversely affect the Company’s investments and operations. The outbreak was first detected in December 2019 and subsequently spread globally. On March 11, 2020, the World Health Organization declaredCOVID-19 as a pandemic, and on March 13, 2020 the United States declared a national emergency with respectto COVID-19. The transmission ofCOVID-19 and efforts to contain its spread have resulted in travel restrictions and disruptions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the economic environment. These disruptions have led to instability in the market place, including stock market losses and overall volatility. The impact ofCOVID-19, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways. In addition, the impact of infectious illnesses, such asCOVID-19, in emerging market countries may be greater due to generally less established healthcare systems. This crisis or other public health crises may exacerbate otherpre-existing political, social and economic risks in certain countries or globally.

The foregoing could lead to a significant economic downturn or recession, increased market volatility, a greater number of market closures, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the Company’s investments, the Company and your investment in the Company. In certain cases, an exchange or market may close or issue trading halts on either specific securities or even the entire market, which may result in the Company being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.

The Company and the Investment Adviser have in place business continuity plans reasonably designed to ensure that they maintain normal business operations, and that the Company, its portfolio and assets are protected. As a result, the transition of the Investment Adviser’s whole team to remote work took place smoothly and enables the team to maintain normal functionality to complete operational requirements in supporting the Company. However, in the event of a pandemic or an outbreak, such asCOVID-19, there can be no assurance that the Company, the Investment Adviser and service providers, or the Company’s portfolio companies, will be able to maintain normal business operations for an extended period of time or will not lose the services of key personnel on a temporary or long-term basis due to illness or other reasons. A pandemic or disease could also impair the information technology and other operational systems upon which the Investment Adviser relies and could otherwise disrupt the ability of the Company’s service providers to perform essential tasks.

Governmental authorities and regulators throughout the world, such as the U.S. Federal Reserve, have in the past responded to major economic disruptions with changes to fiscal and monetary policy, including but not limited to, direct capital infusions, new monetary programs and dramatically lower interest rates. Certain of those policy changes, such as the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, are being implemented in response to theCOVID-19 pandemic. Such policy changes may adversely affect the value, volatility and liquidity of dividend and interest paying securities. The effect of recent efforts undertaken by the U.S. Federal Reserve to address the economic impact of theCOVID-19 pandemic, such as the reduction of the federal funds target rate, and other monetary and fiscal actions that may be taken by the U.S. federal government to stimulate the U.S. economy, are not yet fully known. The duration of theCOVID-19 outbreak and its full impacts are unknown, resulting in a high degree of uncertainty for potentially extended periods of time.

Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. As of February 29, 2020, the Company valued its portfolio investments in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. As a result, any impairment to the financial condition of our portfolio companies caused by the global disruptions related to COVID-19 that ensued after February 29, 2020, such as widespread quarantines and disruptions to business operations, were not able to be accounted for in the Company’s portfolio valuations as of February 29, 2020. Due to the overall volatility that the COVID-19 pandemic has caused during the months that followed our February 29, 2020 fair value determination, any current and future fair value analysis conducted in conformity with U.S. GAAP could result in a lower fair value of our portfolio.

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IfCOVID-19 continues to spread in the United States, we expect to experience disruptions that could adversely impact our business. It is unknown how long these disruptions could continue, were they to occur. The outbreak ofCOVID-19 may also have a material adverse impact on the ability of our portfolio companies to fulfill their end customers’ orders due to supply chain delays, limited access to key commodities or technologies or other events that impact their manufacturers or their suppliers. Such events have affected, and may in the future affect our business, financial condition or results of operations. As the global outbreak ofCOVID-19 continues to rapidly evolve, the extent to whichCOVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted.

We are currently operating in a period of capital markets disruption and economic uncertainty.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak ofCOVID-19 that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a world-wide economic downturn. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition.

Our business operations rely upon secure information technology systems for data processing, storage and reporting. Despite careful security and controls design, implementation and updating, our information technology systems could become subject to cyber- attacks and cyber incidents. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen information, misappropriation of assets, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships. Any such attack could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. We face risks posed to our information systems, both internal and those provided to us by third-party service providers. We, our Adviser and its affiliates have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, may be ineffective and do not guarantee that a cyber-incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.

Third parties with which we do business (including those that provide services to us) may also be sources or targets of cybersecurity or other technological risks. We outsource certain functions and these relationships allow for the storage and processing of our information and assets, as well as certain investor, counterparty, employee and borrower information. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. Privacy and information security laws and regulation changes, and compliance with those changes, may also result in cost increases due to system changes and the development of new administrative processes. We and our service providers are currently impacted by quarantines and similar measures being enacted by governments in response to COVID-19, which are obstructing the regular functioning of business workforces (including requiring employees to work from external locations and their homes). Accordingly, the risks described above are heightened under current conditions.

Regulations governing our operation as a BDC will affect our ability to raise additional capital.

Our business requires a substantial amount of additional capital. We may acquire additional capital from the issuance of senior securities or other indebtedness or the issuance of additional shares of our common stock. However, we may not be able to raise additional capital in the future on favorable terms or at all. We may issue debt securities or preferred securities, which we refer to collectively as “senior securities,” and we may borrow money from banks or other financial institutions, up to the maximum amount permitted by the 1940 Act.

We are generally permitted to incur indebtedness or issue senior securities in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after each issuance of senior securities. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a business development company, therefore, we may need to issue equity more frequently than ourprivately-owned competitors, which may lead to greater stockholder dilution. With respect to stock that is a senior security, we must make provisions to prohibit any dividend distribution to our stockholders or the repurchase of certain of our securities, unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales may be disadvantageous in order to make dividend distributions or repurchase certain of our securities.

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We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or issue warrants, options or rights to acquire our common stock, at a price below the current net asset value of the common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and the holders of a majority of our outstanding voting securities have approved such issuances within the prior year. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the market value of such securities (less any commission or discount). If our common stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital. We do not currently have stockholder approval of issuances below net asset value.

Legislation that took effect in 2018 would allow us to incur additional leverage.

The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, the Small Business Credit Availability Act, which was signed into law on March 23, 2018, has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation, we were allowed to increase our leverage capacity once the majority of our independent directors approved an increase in our leverage capacity, with such approval becoming effective after one year. On April 16, 2018, ournon-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150% asset coverage ratio became effective on April 16, 2019. We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.

Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, our stockholders will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. See “Risk Factors—Risks Related to Our Business and Structure—We employ leverage, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.”

The agreement governing our Credit Facility contains various covenants that, among other things, limits our discretion in operating our business and provides for certain minimum financial covenants.

The agreement governing the Credit Facility contains customary default provisions such as the termination or departure of certain “key persons” of Saratoga Investment Advisors, a material adverse change in our business and the failure to maintain certain minimum loan quality and performance standards. An event of default under the facility would result, among other things, in termination of the availability of further funds under the facility and an accelerated maturity date for all amounts outstanding under the facility, which would likely disrupt our business and, potentially, the portfolio companies whose loans we financed through the facility. This could reduce our revenues and, by delaying any cash payment allowed to us under the facility until the lender has been paid in full, reduce our liquidity and cash flow and impair our ability to grow our business and maintain our status as a RIC.

Each loan origination under the facility is subject to the satisfaction of certain conditions. We cannot assure you that we will be able to borrow funds under the facility at any particular time or at all.

We will be subject tocorporate-level U.S. federal income tax if we fail to qualify as a RIC.

We intend to maintain our qualification as a RIC under the Code. As a RIC, we do not pay U.S. federal income taxes on our income (including realized gains) that is timely distributed to our stockholders, provided that we satisfy certainsource-of-income, annual distribution and asset–diversification requirements.

Thesource-of-income requirement is satisfied if we derive at least 90.0% of our annual gross income from interest, dividends, payments with respect to certain securities loans, gains from the sale or other disposition of securities or options thereon or foreign currencies, or other income derived with respect to our business of investing in such securities or currencies, and net income from interests in “qualified publicly traded partnerships,” as defined in the Code.

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The annual distribution requirement is satisfied if we timely distribute to our stockholders on an annual basis an amount equal to at least 90.0% of our ordinary net taxable income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, reduced by deductible expenses. We are subject to certain asset coverage ratio requirements under the 1940 Act and covenants under our borrowing agreements that could, under certain circumstances, restrict us from making the required distributions. In such case, if we are unable to obtain cash from other sources or are prohibited from making distributions, we may be subject tocorporate-level U.S. federal income tax.

The asset-diversification requirements will be satisfied if we diversify our holdings so that at the end of each quarter of the taxable year: (i) at least 50.0% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other regulated investment companies, and other securities if such other securities of any one issuer do not represent more than 5.0% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and (ii) no more than 25.0% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other regulated investment companies, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in certain publicly traded partnerships.

Failure to meet these tests may result in our having to (i) dispose of certain investments quickly or (ii) raise additional capital to prevent the loss of our RIC qualification. Because most of our investments will be in private companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we raise additional capital to satisfy theasset-diversification requirements, it could take us time to invest such capital. During this period, we will invest the additional capital in temporary investments, such as cash and cash equivalents, which we expect will earn yields substantially lower than the interest income that we anticipate receiving in respect of investments in leveraged loans and mezzanine debt.

If we fail to qualify as a RIC for any reason, all of our taxable income will be subject to corporate-level U.S. federal income tax at regular corporate rates. The resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution to our common stockholders or payment of our outstanding indebtedness including the 2025 Notes. Such a failure would have a material adverse effect on our results of operations and financial condition.

Because we intend to distribute between 90% and 100% of our income to our stockholders in connection with our election to be treated as a RIC, we will continue to need additional capital to finance our growth. If additional funds are unavailable or not available on favorable terms, our ability to grow will be impaired.

In order to qualify for the tax benefits available to RICs and to minimize corporate-level U.S. federal income taxes, we intend to distribute to our stockholders between 90% and 100% of our annual taxable income and capital gains, except that we may retain certain net capital gains for investment and treat such amounts as deemed distributions to our stockholders. If we elect to treat any amounts as deemed distributions, we must pay U.S. federal income taxes at the corporate rate on such deemed distributions on behalf of our stockholders. As a result of these requirements, we will likely need to raise capital from other sources to grow our business. As a BDC, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which includes all of our borrowings and any outstanding preferred stock, of at least 150% as of April 16, 2019; These requirements limit the amount that we may borrow. Because we will continue to need capital to grow our investment portfolio, these limitations may prevent us from incurring debt and require us to raise additional equity at a time when it may be disadvantageous to do so.

While we expect to be able to borrow and to issue additional debt and equity securities, we cannot assure you that debt and equity financing will be available to us on favorable terms, or at all. Also, as a BDC, we generally are not permitted to issue equity securities priced below net asset value without stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease new investment activities, and our net asset value and share price could decline.

We may have difficulty paying our required distributions if we recognize income before or without receiving cash in respect of such income.

For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, we may on occasion hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK or, in certain cases, increasing interest rates or issued with warrants) and we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid innon-cash compensation such as warrants or stock. In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in Saratoga CLO, a collateralized loan obligation fund, that may differ from the distributions paid in respect of our investment in the subordinated notes of such collateralized loan obligation fund because of the factors set forth above or because distributions on the subordinated notes are contractually required to be diverted for reinvestment or to pay down outstanding indebtedness.

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Because original issue discount will be included in the Company’s “investment company taxable income” for the year of the accrual, we may be requested to make distributions to shareholders to satisfy the annual distribution requirement applicable to RICs, even where we have not received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to maintain favorable tax treatment. If we are not able to obtain cash from other sources, and choose not to make a qualifying share distribution, we may become subject to corporate-level income tax. Additionally, because investments with a deferred payment feature may have the effect of deferring a portion of the borrower’s payment obligation until maturity of the debt investment, it may be difficult for us to identify and address developing problems with borrowers in terms of their ability to repay us.

Our ability to enter into transactions with our affiliates is restricted.

Because we have elected to be treated as a BDC, we are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of our independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5.0% or more of our outstanding voting securities is our affiliate for purposes of the 1940 Act and we are generally prohibited from buying or selling any securities (other than any security of which we are the issuer) from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company, without prior approval of our independent directors and, in some cases, the SEC. If a person acquires more than 25.0% of our voting securities, we are prohibited from buying or selling any security (other than any security of which we are the issuer) from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such person, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers, directors or Investment Adviser or their affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to any portfolio company of a private equity fund managed by our Investment Adviser without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.

We operate in a highly competitive market for investment opportunities.

A number of entities compete with us to make the types of investments that we make in private middle market companies. We compete with other BDCs, public and private funds (including SBICs), commercial and investment banks, commercial financing companies, insurance companies,high-yield investors, hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than us. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments that could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we cannot assure you that we will be able to identify and make investments that meet our investment objective.

We do not seek to compete primarily based on the interest rates we offer and we believe that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer.

We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on better terms to our portfolio companies than we originally anticipated, which may impact our return on these investments.

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Economic recessions or downturns could impair the ability of our portfolio companies to repay loans and harm our operating results.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions also may decrease the value of collateral securing some of our debt investments and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from adding to our investment portfolio, cause us to receive a reduced level of interest income from our portfolio companies and/or reduce the fair market value of our investments. Any of the foregoing events could adversely affect our distributable income and have a material adverse effect on our operating results.

We are anon-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

We are classified as anon-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Although we seek to maintain a diversified portfolio in accordance with our business strategies, to the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our RICasset-diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.

Our financial condition and results of operations depend on our ability to manage future investments effectively.

Our ability to achieve our investment objective depends on our ability to acquire suitable investments and monitor and administer those investments, which depends, in turn, on Saratoga Investment Advisors’ ability to identify, invest in and monitor companies that meet our investment criteria.

Accomplishing this result on a cost-effective basis is largely a function of Saratoga Investment Advisors’ structuring of the investment process and its ability to provide competent, attentive and efficient service to us. Our executive officers and the officers and employees of Saratoga Investment Advisors have substantial responsibilities in connection with their roles at Saratoga Partners as well as responsibilities under the Management Agreement. They may also be called upon to provide managerial assistance to our portfolio companies. These demands on their time, which will increase as the number of investments grow, may distract them or slow the rate of investment. In order to grow, Saratoga Investment Advisors may need to hire, train, supervise and manage new employees. However, we cannot assure you that any such employees will contribute to the work of Saratoga Investment Advisors. Any failure to manage our future growth effectively could have a material adverse effect on our business and financial condition.

We may experience fluctuations in our quarterly and annual results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt investments we make, the default rate on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, changes in our portfolio composition, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. In addition, any of these factors could negatively impact our ability to achieve our investment objectives, which may cause the net asset value of our common stock to decline.

Substantially all of our portfolio investments are recorded at fair value as approved in good faith by our board of directors; such valuations are inherently uncertain and may be materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

Substantially all of our portfolio is, and we expect will continue to be, comprised of investments that are not publicly traded. The value of investments that are not publicly traded may not be readily determinable. We value these investments quarterly at fair value as approved in good faith by our board of directors. Saratoga Investment Advisors may utilize the services of an independent valuation firm to aid it in determining fair value of investments for which market quotations are not readily available. The types of factors that may be considered in valuing our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, market yield trend analysis, comparison to publicly traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

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If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event our portfolio companies default on their indebtedness.

We make unsecured debt investments in portfolio companies. Unsecured debt investments are unsecured and junior to other indebtedness of the portfolio company. As a consequence, the holder of an unsecured debt investment may lack adequate protection in the event the portfolio company becomes distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event the portfolio company defaults on its indebtedness. In addition, unsecured debt investments of middle-market companies are often highly illiquid and in adverse market conditions may experience steep declines in valuation even if they are fully performing.

If we invest in the securities and other obligations of distressed or bankrupt companies, such investments may be subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than expected investment values or income potentials and resale restrictions.

We are authorized to invest in the securities and other obligations of distressed or bankrupt companies. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, to the extent we invest in distressed debt, our ability to achieve current income may be diminished which may affect our ability to make distributions on our common stock or make interest and principal payments of the 2025 Notes.

We also will be subject to significant uncertainty as to when and in what manner and for what value the distressed debt we invest in will eventually be satisfied (e.g., through a liquidation of the obligor’s assets, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.

Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities if we are in possession of material non-public information relating to the issuer.

Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.

Certain loans that we make to portfolio companies will be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken with respect to the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

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A majority of our debt investments are not required to make principal payments until the maturity of such debt securities and are generally riskier than other types of loans.

As of February 29, 2020, 81.3% of our debt portfolio consisted of“interest-only” loans, which are structured such that the borrower makes only interest payments throughout the life of the loan and makes a large, “balloon payment” at the end of the loan term. The ability of a borrower to make or refinance a balloon payment may be affected by a number of factors, including the financial condition of the borrower, prevailing economic conditions, interest rates, and collateral values. If theinterest-only loan borrower is unable to make or refinance a balloon payment, we may experience greater losses than if the loan were structured as amortizing.

We may be exposed to higher risks with respect to our investments that include PIK interest, particularly our investments in interest- only loans.

To the extent our portfolio investments permit PIK interest and our portfolio companies elect to pay PIK interest, we will be exposed to higher risks, including the following:

• Because PIK interest results in an increase in the size of the loan balance of the underlying loan, our exposure to potential loss increases when we receive PIK interest;

• PIK instruments may have higher yields, which reflect the payment deferral and credit risk associated with these instruments;

• PIK accruals may create uncertainty about the source of our distributions to stockholders;

• PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of the collateral.

To the extent our investments are structured as interest-only loans, PIK interest will increase the size of the balloon payment due at the end of the loan term. PIK interest payments on such loans may increase the probability and magnitude of a loss on our investment, particularly with respect to ourinterest-only loans. As of February 29, 2020, 25.0% of our interest-only loans provided for contractual PIK interest, which represents contractual interest added to a loan balance and due at the end of such loan’s term, and 77.9% of such investments elected to pay a portion of interest due in PIK. As of February 29, 2020, 19.4% of the Company’s interest-only loans are loans that pay contractual PIK interest only.

The lack of liquidity in our investments may adversely affect our business.

We primarily make investments in private companies. A portion of these securities may be subject to legal and other restrictions on resale, transfer, pledge or other disposition or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a business entity to the extent that we or our Investment Adviser has or could be deemed to have material non-public information regarding such business entity.

The debt securities in which we invest are subject to credit risk and prepayment risk.

An issuer of a debt security may be unable to make interest payments and repay principal. We could lose money if the issuer of a debt obligation is, or is perceived to be, unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Substantially all of the debt investments held in our portfolio hold a non-investment grade rating by one or more rating agencies or, if not rated, would be rated below investment grade if rated, which are often referred to as “junk.”

Certain debt instruments may contain call or redemption provisions which would allow the issuer thereof to prepay principal prior to the debt instrument’s stated maturity. This is known as prepayment risk. Prepayment risk is greater during a falling interest rate environment as issuers can reduce their cost of capital by refinancing higher interest debt instruments with lower interest debt instruments. An issuer may also elect to refinance their debt instruments with lower interest debt instruments if the credit standing of the issuer improves. To the extent debt securities in our portfolio are called or redeemed, we may receive less than we paid for such security and we may be forced to reinvest in lower yielding securities or debt securities of issuers of lower credit quality.

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Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of subordinated notes representing the lowest-rated securities issued by a pool of predominantly senior secured first lien term loans and is subject to additional risks and volatility. All losses in the pool of loans will be borne by our subordinated notes and only after the value of our subordinated notes is reduced to zero will the higher-rated notes issued by the pool bear any losses.

At February 29, 2020, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $22.6 million and constituted 4.6% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of February 29, 2020, was composed of $528.4 million in aggregate principal amount of primarily senior secured first lien term loans and $9.1 million in uninvested cash. In addition, as of February 29, 2020, we also own $2.5 million in aggregate principal of theF-R-2 Notes with a fair value of $2.5 million and $7.5 million in aggregate principal of theG-R-2 Notes with a fair value of $7.4 million in the Saratoga CLO, that only rank senior to the subordinated notes. As of February 29, 2020, our investment inCLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, had a fair value of $2.2 million. A first loss position means that we will suffer the first economic losses if the value of Saratoga CLO decreases. First loss positions typically carry a higher risk and earn a higher yield. Interest payments generated from this portfolio will be used to pay the administrative expenses of Saratoga CLO and interest on the debt issued by Saratoga CLO before paying a return on the subordinated notes. Principal payments will be similarly applied to pay administrative expenses of Saratoga CLO and for reinvestment or repayment of Saratoga CLO debt before paying a return on, or repayment of, the subordinated notes. In addition, 80.0% of our fixed management fee and 100.0% our incentive management fee for acting as the collateral manager of Saratoga CLO is subordinated to the payment of interest and principal on Saratoga CLO debt. Any losses on the portfolio will accordingly reduce the cash flow available to pay these management fees and provide a return on, or repayment of, our investment. Depending on the amount and timing of such losses, we may experience smaller than expected returns and, potentially, the loss of our entire investment.

As the manager of the portfolio of Saratoga CLO, we will have some ability to direct the composition of the portfolio, but our discretion is limited by the terms of the debt issued by Saratoga CLO which may limit our ability to make investments that we feel are in the best interests of the subordinated notes, and the availability of suitable investments. The performance of Saratoga CLO’s portfolio is also subject to many of the same risks sets forth in this Annual Report with respect to portfolio investments in leveraged loans.

Saratoga CLO’s investments are exposed to leveraged credit risk.

Generally, Saratoga CLO is in a subordinated position with respect to realized losses on the senior secured loans underlying its investments. The leveraged nature of collateralized loan obligation funds, in particular, magnifies the adverse impact of senior secured loan defaults. A collateralized loan obligation fund’s investments represent a leveraged investment with respect to the underlying senior secured loans. Therefore, changes in the market value of such fund’s investments could be greater than the change in the market value of the underlying senior secured loans, which are subject to credit, liquidity and interest rate risk. As a result, there is the potential for interruption and deferral of cash flow from Saratoga CLO’s investments. If certain minimum collateral value ratios and/or interest coverage ratios are not met by Saratoga CLO, primarily due to senior secured loan defaults, then cash flow that otherwise would have been available to pay distributions to Saratoga CLO on its investments may instead be used to redeem any senior notes or to purchase additional senior secured loans, until the ratios again exceed the minimum required levels or any senior notes are repaid in full. This could result in an elimination, reduction or deferral in the distribution and/or principal paid to the senior debtholders of Saratoga CLO, which would adversely impact its returns.

In the event that a bankruptcy court orders the substantive consolidation of us with Saratoga CLO, the creditors of Saratoga CLO, including the holders of $528.4 million aggregate principal amount of debt, as of February 29, 2020 issued by Saratoga CLO, would have claims against the consolidated bankruptcy estate, which would include our assets.

We believe that we have observed and will observe certain formalities and operating procedures that are generally recognized requirements for maintaining our separate existence and that our assets and liabilities can be readily identified as distinct from those of Saratoga CLO. However, we cannot assure you that a bankruptcy court would agree in the event that we or Saratoga CLO became a debtor in connection with a bankruptcy proceeding. If a bankruptcy court concludes that substantive consolidation of us with Saratoga CLO is warranted, the creditors of Saratoga CLO would have claims against the consolidated bankruptcy estate. Substantive consolidation means that our assets are placed in a single bankruptcy estate with those of Saratoga CLO, rather than kept separate, and that the creditors of Saratoga CLO have a claim against that single estate (including our assets), as opposed to retaining their claims against only Saratoga CLO.

Our investments in Saratoga CLO have a different risk profile than would direct investments made by us, including less information available and fewer rights regarding repayment compared to companies we invest in directly as well as complicated accounting and tax implications.

Due to our investments in the Saratoga CLO being primarily broadly syndicated loans, there may be less information available to us on those companies as compared to most investments that we make directly. For example, we will typically have fewer rights relating to how such companies manage their cash flow to repay debt, the inclusion of protective covenants, default penalties, lien protection, change of control provisions and board observation rights in deal terms, and our general ability to oversee the company’s operations. Our investment in Saratoga CLO is also subject to the risk of leverage associated with the debt issued by Saratoga CLO and the repayment priority of senior debt holders in Saratoga CLO.

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The accounting and tax implications of such investments are complicated. In particular, reported earnings from the equity tranche investment of Saratoga CLO are recorded under U.S. GAAP based upon an effective yield calculation. Current taxable earnings on these investments, however, will generally not be determinable until after the end of the fiscal year of Saratoga CLO that ends within the Company’s fiscal year, even though the investment is generating cash flow. In general, the U.S. federal income tax treatment of investment in Saratoga CLO may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity.

The senior loan portfolio of Saratoga CLO may be concentrated in a limited number of industries or borrowers, which may subject Saratoga CLO, and in turn us, to a risk of significant loss if there is a downturn in a particular industry in which Saratoga CLO is concentrated.

Saratoga CLO has senior loan portfolios that may be concentrated in a limited number of industries or borrowers. A downturn in any particular industry or borrower in which Saratoga CLO is heavily invested may subject Saratoga CLO, and in turn us, to a risk of significant loss and could significantly impact the aggregate returns we realize. If an industry in which Saratoga CLO is heavily invested suffers from adverse business or economic conditions, a material portion of our investment in Saratoga CLO could be affected adversely, which, in turn, could adversely affect our financial position and results of operations. For example, as of February 29, 2020, Saratoga CLO’s investments in the banking, finance, insurance & real estate industry represented approximately 17.6% of the fair value of Saratoga CLO’s portfolio. Companies in the banking, finance, insurance & real estate industry are subject to general economic downturns and business cycles and will often suffer reduced revenues and rate pressures during periods of economic uncertainty. In addition, investments in business service represented approximately 9.1% of the fair value of Saratoga CLO’s portfolio. Changes in healthcare or other laws and regulations applicable to the businesses of some of the companies in which Saratoga CLO invests may occur that could increase their compliance and other costs of doing business, require significant systems enhancements, or render their products or services less profitable or obsolete, any of which could have a material adverse effect on their results of operations. There has also been an increased political and regulatory focus on healthcare laws in recent years, and new legislation could have a material effect on the business and operations of companies in which Saratoga CLO invests.

Failure by Saratoga CLO to satisfy certain debt compliance ratios may entitle senior debtholders to additional payments, which may harm our operating results by reducing payments we would otherwise be entitled to receive from Saratoga CLO.

The failure by Saratoga CLO to satisfy certain debt compliance ratios, specifically those with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that Saratoga CLO failed these certain tests, senior debt holders may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with Saratoga CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

Downgrades by rating agencies of broadly syndicated loans could adversely impact the financial performance of Saratoga CLO and its ability to pay equity distributions and subordinated management fees to the Company in the future.

Ratings agencies have recently undergone reviews of CLO tranches and their broadly syndicated loans in light of the COVID-19 pandemic’s adverse impact on the economic market. Such reviews have, in some cases, resulted in downgrades of broadly syndicated loans. Such downgrades of broadly syndicated loans, as well as downgrades of broadly syndicated loans in the future, could adversely impact the financial performance of Saratoga CLO, thereby limiting Saratoga CLO’s ability to pay equity distributions and subordinated management fees to the Company in the future. The full extent of downgrades by ratings agencies of broadly syndicated loans is currently unknown, thereby resulting in a high degree of uncertainty with respect to Saratoga CLO’s financial performance and ability to pay equity distributions and subordinated management fees to the Company in the future.

Available information about privately held companies is limited.

We invest primarily in privately-held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of our Investment Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. These companies and their financial information are not subject to the Sarbanes-Oxley Act of 2002 and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.

When we are a debt or minority equity investor in a portfolio company, we may not be in a position to control the entity, and its management may make decisions that could decrease the value of our investment.

We make both debt and minority equity investments; therefore, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

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Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.

Our portfolio companies usually will have, or may be permitted to incur, other debt, or issue other equity securities that rank equally with, or senior to, our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments will usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debtor ranking equally with our investments, we would have to share on an equal basis any distributions with other holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

If one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court mightre-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors. In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we actually render significant managerial assistance.

Investments in equity securities involve a substantial degree of risk.

We purchase common stock and other equity securities. Although equity securities have historically generated higher average total returns thanfixed-income securities over thelong-term, equity securities also have experienced significantly more volatility in those returns and in recent years have significantly underperformed relative tofixed-income securities. The equity securities we acquire may fail to appreciate and may decline in value or become worthless and our ability to recover our investment will depend on our portfolio company’s success. Investments in equity securities involve a number of significant risks, including:

• any equity investment we make in a portfolio company could be subject to further dilution as a result of the issuance of additional equity interests and to serious risks as a junior security that will be subordinate to all indebtedness or senior securities in the event that the issuer is unable to meet its obligations or becomes subject to a bankruptcy process;

• to the extent that the portfolio company requires additional capital and is unable to obtain it, we may not recover our investment in equity securities; and

• in some cases, equity securities in which we invest will not pay current dividends, and our ability to realize a return on our investment, as well as to recover our investment, will be dependent on the success of our portfolio companies. Even if the portfolio companies are successful, our ability to realize the value of our investment may be dependent on the occurrence of a liquidity event, such as a public offering or the sale of the portfolio company. It is likely to take a significant amount of time before a liquidity event occurs or we can sell our equity investments. In addition, the equity securities we receive or invest in may be subject to restrictions on resale during periods in which it could be advantageous to sell.

There are special risks associated with investing in preferred securities, including:

• preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If we own a preferred security that is deferring its distributions, we may be required to report income for U.S. federal income tax purposes even though we have not received any cash payments in respect of such income;

• preferred securities are subordinated with respect to corporate income and liquidation payments, and are therefore subject to greater risk than debt;

• preferred securities may be substantially less liquid than many other securities, such as common securities or U.S. government securities; and

• preferred security holders generally have no voting rights with respect to the issuing company, subject to limited exceptions.

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Our investments in foreign debt, including that of emerging market issuers, may involve significant risks in addition to the risks inherent in U.S. investments.

Although there are limitations on our ability to invest in foreign debt, we may, from time to time, invest in debt of foreign companies, including the debt of emerging market issuers. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

Investments in the debt of emerging market issuers may subject us to additional risks such as inflation, wage and price controls, and the imposition of trade barriers. Furthermore, economic conditions in emerging market countries are, to some extent, influenced by economic and securities market conditions in other emerging market countries. Although economic conditions are different in each country, investors’ reaction to developments in one country can have effects on the debt of issuers in other countries.

Although most of our investments will be U.S. dollar-denominated, our investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we cannot assure you that we will fully hedge against these risks or that such strategies will be effective. As a result, a change in currency exchange rates may adversely affect our profitability.

We may expose ourselves to risks if we engage in hedging transactions.

We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Use of these hedging instruments may expose us tocounter-party credit risk. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is generally anticipated at an acceptable price.

The success of our hedging transactions will depend on our ability to correctly predict movements in currencies and interest rates.

Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not entirely related to currency fluctuations. To the extent we engage in hedging transactions, we also face the risk that counterparties to the derivative instruments we hold may default, which may expose us to unexpected losses from positions where we believed that our risk had been appropriately hedged.

Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our board of directors has the authority to modify or waive our current investment objective, operating policies and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, financial condition, and value of our common stock. However, the effects might be adverse, which could negatively impact our ability to pay dividends and cause you to lose all or part of your investment.

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We have limited experience in managing a SBIC and any failure to comply with SBA regulations, resulting from our lack of experience or otherwise, could have an adverse effect on our operations.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP, received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958 and is regulated by the SBA. On August 14, 2019, our wholly-owned subsidiary, SBIC II LP, also received an SBIC license from the SBA.

The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBIC requirements may cause our SBIC subsidiaries to forego attractive investment opportunities that are not permitted under SBA regulations.

Further, SBA regulations require that an SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10% or more of a class of capital stock of an SBIC. If our SBIC subsidiaries fail to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit its use of debentures, declare outstanding debentures immediately due and payable, and/or limit it from making new investments. In addition, the SBA can revoke or suspend a license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the Small Business Investment Act of 1958 or any rule or regulation promulgated thereunder. These actions by the SBA would, in turn, negatively affect us because our SBIC subsidiaries are our wholly-owned subsidiaries. We do not have any prior experience managing a SBIC. Our lack of experience in complying with SBA regulations may hinder our ability to take advantage of our SBIC subsidiaries’ access toSBA-guaranteed debentures.

Any failure to comply with SBA regulations could have an adverse effect on our operations.

Our investments may be risky, and you could lose all or part of your investment.

Substantially all of our debt investments hold anon-investment grade rating by one or more rating agencies (which non-investment grade debt is commonly referred to as “high yield” and “junk” debt) or, where not rated by any rating agency, would be below investment grade or “junk”, if rated. A below investment grade or “junk” rating means that, in the rating agency’s view, there is an increased risk that the obligor on such debt will be unable to pay interest and repay principal on its debt in full. We also invest in debt that defers or pays PIK interest. To the extent interest payments associated with such debt are deferred, such debt will be subject to greater fluctuations in value based on changes in interest rates, such debt could produce taxable income without a corresponding cash payment to us, and since we generally do not receive any cash prior to maturity of the debt, the investment will be of greater risk.

In addition, private middle market companies in which we invest are exposed to a number of significant risks, including:

• limited financial resources and an inability to meet their obligations, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;

• shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

• dependence on the management talents and efforts of a small group of persons; the death, disability, resignation or termination of one or more of which could have a material adverse impact on the company and, in turn, on us;

• less predictable operating results and, possibly, substantial additional capital requirements to support their operations, finance expansion or maintain their competitive position; and

• difficulty accessing the capital markets to meet future capital needs.

In addition, our executive officers, directors and our Investment Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies.

Our portfolio may continue to be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated.

Our portfolio may continue to be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize.

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As of February 29, 2020, our investments in the business services industry represented approximately 58.8% of the fair value of our portfolio and our investments in the education industry represented approximately 15.9% of the fair value of our portfolio. In addition, we may from time to time invest a relatively significant percentage of our portfolio in industries we do not necessarily target. If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

A number of our portfolio companies are inthe Software-as-a-Service industry and such companies are subject to additional risks that are unique to that industry, and the financial results of our portfolio companies inthe Software-as-a-Service industry could materially adversely affect our financial results.

A number of our portfolio companies are in the Software-as-a-Service (“SAAS”) industry and such companies are subject to additional risks that are unique to the SAAS industry. For example, such portfolio companies may be subject to consumer protection laws that are enforced by regulators such as the Federal Trade Commission (“FTC”) and private parties, and include statutes that regulate the collection and use of information for marketing purposes. Any new legislation or regulations regarding the Internet, mobile devices, software sales or export and/or the cloud or SAAS industry, and/or the application of existing laws and regulations to the Internet, mobile devices, software sales or export and/or the cloud or SAAS industry, could create new legal or regulatory burdens on our portfolio companies that could have a material adverse effect on their respective operations. As a result, our SAAS portfolio companies may incur significant operating losses and negative cash flows because of their respective life cycles, resulting in an adverse impact on their operations and on their ability to repay their debt. Because our SAAS portfolio companies are generally investments that are underwritten and valued on “recurring revenue” rather than EBITDA, the fair value determinations of such companies are inherently uncertain and may fluctuate over short periods of time. They are also subject to the risks that their customers have financial difficulties that make them unable or unwilling to pay for the software and services that drive a portfolio company’s recurring revenue projections. There is often less collateral securing our loans to these companies as compared to our other portfolio companies, which could impair our ability to be repaid if the portfolio companies default on their obligations or otherwise encounter financial difficulties. For these reasons, our financial results could be materially adversely affected if our portfolio companies in the SAAS industry encounter financial difficulty and fail to repay their obligations. As of February 29, 2020, our current total investments in SAAS companies were $256.0 million, or 52.7% of total investments.

We cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Legislative or other actions relating to taxes could have a negative effect on the Company. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. In 2017, the U.S. House of Representatives and U.S. Senate passed tax reform legislation, which the President signed into law. Such legislation makes many changes to the Code, including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax treatment of capital investment. We cannot predict with certainty how these changes in the tax laws might affect the Company, investors, or the Company’s portfolio investments. New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect the Company’s ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to the Company and its investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in the Company’s securities.

Risks Related to Our Common Stock

Investing in our common stock may involve an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.

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We may choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

We have in the past, and may in the future, distribute taxable dividends that are payable to our stockholders in part through the issuance of shares of our common stock. For example, on October 30, 2013, our board of directors declared a dividend of $2.65 per share to shareholders payable in cash or shares of our common stock. Under certain applicable provisions of the Code and the Treasury regulations and a revenue procedure issued by the IRS, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC, subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% (which has been temporarily reduced to 10% for distributions declared on or after April 1, 2020, and on or before December 31, 2020) of the aggregate declared distribution. If too many stockholders elect to receive their distributions in cash, we must allocate the cash available for distribution among the shareholders electing to receive cash (with the balance of the distribution paid in shares of our common stock). If we decide to make any distributions consistent with this revenue procedure that are payable in part in our stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.

Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. If a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock.

Due to the COVID-19 pandemic or other disruptions in the economy, we may reduce or defer our dividends and choose to incur US federalincome or excise tax in order preserve cash and maintain flexibility.

As a BDC, we are not required to make any distributions to shareholders other than in connection with our election to be taxed as a RIC under subchapter M of the Code. In order to maintain our tax treatment as a RIC, we must distribute to shareholders for each taxable year at least 90% of our investment company taxable income (i.e., net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses). We also have the option to keep net long-term capital gains as undistributed by classifying the net long-term capital gain as a deemed dividend and incurring federal income tax. If we qualify for taxation as a RIC, we generally will not be subject to corporate-level US federal income tax on our investment company taxable income and net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) that we timely distribute to shareholders. We will be subject to a 4% US federal excise tax on undistributed earnings of a RIC unless we distribute each calendar year at least the sum of (i) 98.0% of our ordinary income for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year, and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which we paid no federal income tax.

Under the Code, we may satisfy certain of our RIC distributions with dividends paid after the end of the current calendar year. In particular, if we pay a distribution in January of the following year that was declared in October, November, or December of the current year and is payable to shareholders of record in the current year, the dividend will be treated for all US federal tax purposes as if it were paid on December 31 of the current year. In addition, under the Code, we may pay dividends, referred to as “spillover dividends,” that are paid during the following taxable year that will allow us to maintain our qualification for taxation as a RIC and eliminate our liability for corporate-level U.S. federal income tax. Under these spillover dividend procedures, because our taxable year ends on February 28 or 29, we may defer distribution of income earned during the current taxable year until February of the following taxable year. For example, we may defer distributions of income earned during the year ended February 28, 2021 until as late as February 28, 2022. If we choose to carry-over this distribution of income in the form of a spillover dividend, we will incur the 4% U.S. federal excise tax on some or all of the distribution.

Due to the COVID-19 pandemic or other disruptions in the economy, we anticipate that we may take certain actions with respect to the timing and amounts of our distributions in order to preserve cash and maintain flexibility. For example, we anticipate that we may not be able to increase our dividends. In addition, we may reduce our dividends and/or defer our dividends to the following taxable year. If we defer our dividends, we may choose to utilize the spillover dividend rules discussed above and incur the 4% U.S. federal excise tax on such amounts. To further preserve cash, we may combine these reductions or deferrals of dividends with one or more distributions that are payable partially in our stock as discussed above under “We may choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.” In addition, if any of these spillover dividends are in the form of long-term capital gains, we may elect to not distribute these gains by classifying them as deemed dividends and paying federal income tax on them.

The market price of our common stock may fluctuate significantly.

The market price and liquidity of the market for our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:

• significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;

• changes in regulatory policies, accounting pronouncements or tax rules, particularly with respect to RICs, BDCs or SBICs;

• loss of RIC qualification;

• changes in the value of our portfolio of investments;

• any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

• departure of any of Saratoga Investment Advisors’ key personnel;

• operating performance of companies comparable to us;

• general economic trends and other external factors; or

• loss of a major funding source.

Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any securities litigation or shareholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.

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There is a risk that you may not receive distributions or that our distributions may not grow over time.

As a BDC for 1940 Act purposes and a RIC for U.S. federal income tax purposes, we intend to make distributions out of assets legally available for distribution to our stockholders once such distributions are authorized by our board of directors and declared by us. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or periodically increase our dividend rate. In addition, due to the asset coverage test that is applicable to us as a BDC, and provisions contained in the agreements governing our borrowings, we may be limited in our ability to make distributions. Further, if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount available for distribution.

Provisions of our governing documents and the Maryland General Corporation Law could deter future takeover attempts and have an adverse impact on the price of our common stock.

We are governed by our charter and bylaws, which we refer to as our “governing documents.”

Our governing documents and the Maryland General Corporation Law contain provisions that may have the effect of delaying, deferring or preventing a future transaction or change in control of us that might involve a premium price for our stockholders or otherwise be in their best interest.

Our charter provides for the classification of our board of directors into three classes of directors, serving staggered three-year terms, which may render a change of control of us or removal of our incumbent management more difficult. Furthermore, any and all vacancies on our board of directors will be filled generally only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term until a successor is elected and qualifies.

Our board of directors is authorized to create and issue new series of shares, to classify or reclassify any unissued shares of stock into one or more classes or series, including preferred stock and, without stockholder approval, to amend our charter to increase or decrease the number of shares of stock that we have authority to issue, which could have the effect of diluting a stockholder’s ownership interest. Prior to the issuance of shares of stock of each class or series, including any reclassified series, our board of directors is required by our governing documents to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of shares of stock.

Our governing documents also provide that our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws, and to make new bylaws. The Maryland General Corporation Law also contains certain provisions that may limit the ability of a third party to acquire control of us, such as:

• The Maryland Business Combination Act, which, subject to certain limitations, prohibits certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of the common stock or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, imposes special minimum price provisions and special stockholder voting requirements on these combinations; and

• The Maryland Control Share Acquisition Act, which provides that “control shares” of a Maryland corporation (defined as shares of common stock which, when aggregated with other shares of common stock controlled by the stockholder, entitles the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares of common stock.

In addition, the provisions of the Maryland Business Combination Act will not apply, however, if our board of directors adopts a resolution that any business combination between us and any other person will be exempt from the provisions of the Maryland Business Combination Act. Although our board of directors has adopted such a resolution, there can be no assurance that this resolution will not be altered or repealed in whole or in part at any time. If the resolution is altered or repealed, the provisions of the Maryland Business Combination Act may discourage others from trying to acquire control of us.

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As permitted by Maryland law, our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our common stock. Although our bylaws include such a provision, such a provision may also be amended or eliminated by our board of directors at any time in the future, subject to obtaining confirmation from the SEC that it does not object to us being subject to the Maryland Control Share Acquisition Act.

Our common stock may trade at a discount to our net asset value per share.

Common stock of BDCs, as closed-end investment companies, frequently trade at a discount to net asset value. Our common stock has traded at a discount to our net asset value since shortly after our initial public offering. The risk that our common stock may continue to trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline.

Stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock.

The 1940 Act prohibits us from selling shares of our common stock at a price below the current net asset value per share of such stock, with certain exceptions. One such exception is prior stockholder approval of issuances below net asset value provided that our board of directors makes certain determinations. We do not currently have stockholder approval of issuances below net asset value.

If we were to sell shares of our common stock below net asset value per share, such sales would result in an immediate dilution to the net asset value per share. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance.

Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.

The issuance of subscription rights, warrants or convertible debt that are exchangeable for our common stock, will cause your economic interest and voting power in us to be diluted as a result of our offering of any such securities.

Stockholders who do not fully exercise rights, warrants or convertible debt issued to them in any offering of subscription rights, warrants or convertible debt to purchase our common stock should expect that they will, at the completion of the offering, own a smaller proportional economic interest and have diminished voting power in us than would otherwise be the case if they fully exercised their rights, warrants or convertible debt. We cannot state precisely the amount of any such dilution in share ownership or voting power because we do not know what proportion of the common stock would be purchased as a result of any such offering.

In addition, if the subscription price, warrant price or convertible debt price is less than our net asset value per share of common stock at the time of such offering, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any such decrease in net asset value is not predictable because it is not known at this time what the subscription price, warrant price, convertible debt price or net asset value per share will be on the expiration date of such offering or what proportion of our common stock will be purchased as a result of any such offering. The risk of dilution is greater if there are multiple rights offerings. However, our board of directors will make a good faith determination that any offering of subscription rights, warrants or convertible debt would result in a net benefit to existing stockholders.

Finally, our common stockholders will bear all costs and expenses incurred by us in connection with any proposed offering of subscription rights, warrants or convertible debt that are exchangeable for our common stock, whether or not such offering is actually completed by us.

Risks Related to Our 2025 Notes

The 2025 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.

The 2025 Notes are not secured by any of our assets or any of the assets of our subsidiaries, including our wholly-owned subsidiaries. As a result, the 2025 Notes are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2025 Notes.

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The 2025 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The 2025 Notes are obligations exclusively of Saratoga Investment Corp., and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the 2025 Notes and the 2025 Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future, including indebtedness under the Credit Facility. Any assets of our subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the 2025 Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such entities (and therefore the claims of our creditors, including holders of the 2025 Notes) with respect to the assets of such entities. Even if we are recognized as a creditor of one or more of these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims. Consequently, the 2025 Notes are structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and portfolio companies with respect to which we hold equity investments. In addition, our subsidiaries and these entities may incur substantial indebtedness in the future, all of which would be structurally senior to the 2025 Notes. As of February 29, 2020, there were no outstanding borrowings under the Credit Facility and we had the ability to borrow up to $45.0 million under the Credit Facility, subject to certain conditions. As of February 29, 2020, we had $150.0 million inSBA-guaranteed debentures outstanding. The indebtedness under the Credit Facility and to SBA-guaranteed debentures is structurally senior to the 2025 Notes.

The indenture under which the 2025 Notes are issued contains limited protection for holders of the 2025 Notes.

The indenture under which the 2025 Notes are issued offers limited protection to holders of the 2025 Notes. The terms of the indenture and the 2025 Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on your investment in the 2025 Notes. In particular, the terms of the indenture and the 2025 Notes do not place any restrictions on our or our subsidiaries’ ability to:

• issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the 2025 Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the 2025 Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the 2025 Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries or the portfolio companies with respect to which we hold an equity investment that would be senior to our equity interests in those entities and therefore rank structurally senior to the 2025 Notes with respect to the assets of these entities, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions (whether or not we are subject thereto), but giving effect, in each case, to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings, or, once the approval we received from our independent directors becomes effective on April 16, 2019, 150% (after deducting the amount of such dividend, distribution or purchase price, as the case may be);

• sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

• enter into transactions with affiliates;

• create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

• make investments; or

• create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

In addition, the indenture does not require us to offer to purchase the 2025 Notes in connection with a change of control or any other event.

Furthermore, the terms of the indenture and the 2025 Notes do not protect holders of the 2025 Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that we adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

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Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the 2025 Notes may have important consequences for you as a holder of the 2025 Notes, including making it more difficult for us to satisfy our obligations with respect to the 2025 Notes or negatively affecting the trading value of the 2025 Notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the 2025 Notes, including additional covenants and events of default. For example, the indenture under which the 2025 Notes are issued does not containcross-default provisions that are contained in the Credit Facility. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the 2025 Notes.

An active trading market for the 2025 Notes may not develop or be sustained, which could limit the market price of the 2025 Notes or the ability to sell them.

Although the 2025 Notes are listed on the NYSE under the symbol “SAF”, we cannot provide any assurances that an active trading market will develop or be maintained for the 2025 Notes or that the 2025 Notes will be able to be sold. At various times, the 2025 Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. Accordingly, we cannot provide any assurance that a liquid trading market will develop for the 2025 Notes, or that the 2025 Notes will be able to be sold at a particular time or at a favorable price. To the extent an active trading market does not develop, the liquidity and trading price for the 2025 Notes may be harmed.

At the same time, the trading market for the 2025 Notes may also be very volatile, and many of the risk factors related to our common stock and outlined in “Risks related to common stock” could also be applicable to the 2025 Notes.

Public health threats may affect the market for the 2025 Notes, impact the businesses in which we invest and affect our business, operating results and financial condition.

Public health threats, such as COVID-19 or any other illness, may disrupt the operations of the businesses in which we invest. Such threats can create economic and political uncertainties and can contribute to global economic instability. A public health threat poses the risk that our portfolio companies may have significantly reduced or be prevented from conducting business activities for an unknown period of time, including shutdowns that may be requested or mandated by governmental authorities. We cannot estimate the impact that a public health threat could have on our portfolio companies, but it could disrupt their businesses and their ability to make interest or dividend payments and decrease the overall value of our investments which adversely impact our business, financial condition or results of operations. Additionally, as a result of the volatile market conditions that may result from public health threats, such as COVID-19 or any other illness, we cannot provide any assurance that the 2025 Notes will trade at a favorable price.

We may choose to redeem the 2025 Notes when prevailing interest rates are relatively low.

On or after August 31, 2021, we may choose to redeem the 2025 Notes, from time to time, especially when prevailing interest rates are lower than the rate borne by the 2025 Notes. If prevailing rates are lower at the time of redemption, you would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the 2025 Notes being redeemed. Our redemption right also may adversely impact your ability to sell the 2025 Notes as the optional redemption date or period approaches.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2025 Notes.

Any default under the agreements governing our indebtedness, including a default under the Credit Facility or other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the 2025 Notes and substantially decrease the market value of the 2025 Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness, including the 2025 Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lender under the Credit Facility or other debt we may incur in the future could elect to terminate its commitment, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. In addition, any such default may constitute a default under the 2025 Notes, which could further limit our ability to repay our debt, including the 2025 Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from the lender under the Credit Facility or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Credit Facility or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the Credit Facility or other debt, the lender could exercise its rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt.

Because the Credit Facility has, and any future credit facilities will likely have, customarycross-default provisions, if the indebtedness under the 2025 Notes, the Credit Facility or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We do not own any real estate or other physical properties important to our operations, however, an affiliate of our Investment Adviser leases office space for our executive offices at 535 Madison Avenue, New York, New York 10022.

ITEM 3. LEGAL PROCEEDINGS

Neither we nor our wholly-owned subsidiaries, Saratoga Investment Funding LLC and Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, are currently subject to any material legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price range of common stock

Our common stock is traded on the New York Stock Exchange under the symbol “SAR.” The following table lists the high and low closing sales prices for the Company’s common stock and such closing sales prices’ percentage of premium or discount to the net asset value (“NAV”) for the two most recent fiscal years and the current fiscal year to date.

			Price Range
Fiscal Year Ending February 28, 2021	NAV(1)		High		Low		Percentage of High Closing Sales Price as a Premium (Discount) to NAV(2)			Percentage of Low Closing Sales Price as a Premium (Discount) to NAV(2)
First Quarter through May 5, 2020	$	*	$	24.97	$	8.40		*			*
Fiscal Year Ended February 29, 2020
First Quarter	$	24.06	$	25.60	$	22.27		6.4	%		(7.4	)%
Second Quarter	$	24.47	$	25.50	$	23.31		4.2	%		(4.7	)%
Third Quarter	$	25.30	$	26.23	$	24.00		3.7	%		(5.1	)%
Fourth Quarter	$	27.13	$	28.35	$	22.91		4.5	%		(15.5	)%
Fiscal Year Ended February 28, 2019
First Quarter	$	23.06	$	22.94	$	20.02		(0.5	)%		(13.2	)%
Second Quarter	$	23.16	$	27.74	$	23.05		19.8	%		(0.5	)%
Third Quarter	$	23.13	$	24.70	$	20.50		6.8	%		(11.4	)%
Fourth Quarter	$	23.62	$	23.40	$	18.96		(0.9	)%		(19.7	)%

* Net asset value has not yet been calculated for this period.

(1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices.

(2) Calculated as the respective high or low closing sales price divided by the quarter end net asset value and subtracting 1.

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements. On October 7, 2015, the Company’s board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On May 4, 2020, the Board of Directors increased the share repurchase plan to 1.3 million shares of common stock. As of February 29, 2020, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

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As shown in the table below, as of February 29, 2020, we had purchased 218,491 shares of common stock pursuant to this repurchase plan.

Period	Total Number of Shares (or Units) Purchased		Average Price per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
March 1, 2015 through November 30, 2015		2,500	$	15.59		2,500		397,500
December 1, 2015 through December 31, 2015		—	$	—		2,500		397,500
January 1, 2016 through January 31, 2016		4,200	$	13.86		6,700		393,300
February 1, 2016 through February 29, 2016		18,717	$	13.86		25,417		374,583
March 1, 2016 through March 31, 2016		16,282	$	14.57		41,699		358,301
April 1, 2016 through April 30, 2016		7,858	$	16.22		49,557		350,443
May 1, 2016 through May 31, 2016		21,357	$	16.29		70,914		329,086
June 1, 2016 through June 30, 2016		8,310	$	16.50		79,224		320,776
July 1, 2016 through July 31, 2016		19,212	$	17.31		98,436		301,564
August 1, 2016 through August 31, 2016		40,058	$	17.44		138,494		261,506
September 1, 2016 through September 30, 2016		40,221	$	18.04		178,715		221,285
October 1, 2016 through October 31, 2016		27,076	$	18.10		205,791		394,209
November 1, 2016 through November 30, 2016		8,600	$	18.24		214,391		385,609
December 1, 2016 through December 31, 2016		4,100	$	18.57		218,491		381,509
January 1, 2017 through February 29, 2020		—		—		218,491		381,509
Total		218,491	$	16.87

Holders

The last reported closing sale price of our common stock on May 5, 2020 was $14.45 per share, which represents a discount of approximately 46.7% to the NAV reported as of February 29, 2020. As of May 5, 2020, there were 11 holders of record of our common stock.

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Dividend Policy

The following table summarizes our dividends or distributions declared during fiscal 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2020:

Date Declared	Record Date		Payment Date		Amount per Share(2)			Percentage Paid in Cash
Fiscal Year Ended 2009:
May 22, 2008		May 30, 2008		June 13, 2008	$	3.90			20.0	%
August 19, 2008		August 29, 2008		September 15, 2008		3.90			20.0	%
December 8, 2008		December 18, 2008		December 29, 2008		2.50			20.0	%
Total					$	10.30
Fiscal Year Ended 2010:
November 13, 2009		November 25, 2009		December 31, 2009	$	18.25	(1)		20.0	%
Total					$	18.25
Fiscal Year Ended 2011:
November 12, 2010		November 19, 2010		December 29, 2010	$	4.40	(1)		20.0	%
Total					$	4.40
Fiscal Year Ended 2012:
November 15, 2011		November 25, 2011		December 30, 2011	$	3.00	(1)		20.0	%
Total					$	3.00
Fiscal Year Ended 2013:
November 9, 2012		November 20, 2012		December 31, 2012	$	4.25	(1)		20.0	%
Total					$	4.25
Fiscal Year Ended 2014:
October 30, 2013		November 13, 2013		December 27, 2013	$	2.65	(1)		20.0	%
Total					$	2.65
Fiscal Year Ended 2015:
September 24, 2014		November 3, 2014		November 28, 2014	$	0.18	(1)		66.9	%
September 24, 2014		February 2, 2015		February 27, 2015		0.22	(1)		66.2	%
Total					$	0.40
Fiscal Year Ended 2016:
April 9, 2015		May 4, 2015		May 29, 2015	$	0.27	(1)		61.3	%
May 14, 2015		May 26, 2015		June 5, 2015		1.00	(1)		61.7	%
July 8, 2015		August 3, 2015		August 31, 2015		0.33	(1)		65.7	%
October 7, 2015		November 2, 2015		November 30, 2015		0.36	(1)		56.3	%
January 12, 2016		February 1, 2016		February 29, 2016		0.40	(1)		61.6	%
Total					$	2.36
Fiscal Year Ended 2017:
March 31, 2016		April 15, 2016		April 27, 2016	$	0.41	(1)		62.7	%
July 7, 2016		July 29, 2016		August 9, 2016		0.43	(1)		61.5	%
August 8, 2016		August 24, 2016		September 5, 2016		0.20	(1)		63.3	%
October 5, 2016		October 31, 2016		November 9, 2016		0.44	(1)		60.0	%
January 12, 2017		January 31, 2017		February 9, 2017		0.45	(1)		60.5	%
Total					$	1.93
Fiscal Year Ended 2018:
February 28, 2017		March 15, 2017		March 28, 2017	$	0.46	(1)		76.7	%
May 30, 2017		June 15, 2017		June 27, 2017		0.47	(1)		81.2	%
August 28, 2017		September 15, 2017		September 26, 2017		0.48	(1)		76.4	%
November 29, 2017		December 15, 2017		December 27, 2017		0.49	(1)		82.4	%
Total					$	1.90
Fiscal Year Ended 2019:
February 26, 2018		March 14, 2018		March 26, 2018	$	0.50	(1)		83.9	%
May 30, 2018		June 15, 2018		June 27, 2018		0.51	(1)		84.0	%
August 28, 2018		September 17, 2018		September 27, 2018		0.52	(1)		85.1	%
November 27, 2018		December 17, 2018		January 2, 2019		0.53	(1)		85.4	%
Total					$	2.06
Fiscal Year Ended 2020:
February 26, 2019		March 14, 2019		March 28, 2019	$	0.54	(1)		84.0	%
May 28, 2019		June 13, 2019		June 27, 2019		0.55	(1)		83.5	%
August 27, 2019		September 13, 2019		September 26, 2019		0.56	(1)		84.8	%
January 7, 2020		January 24, 2020		February 6, 2020		0.56	(1)		85.5	%
Total					$	2.21

(1) This dividend was paid by a combination of shares of common stock and cash. Please see the discussion immediately following this table for more detail about the composition of this dividend.

(2) In each case, all of our distributions have been paid from our earnings and there has not been any return of capital to investors.

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Our distributions, if any, will be determined by our board of directors and paid out of assets legally available for distribution. Any such distributions generally will be taxable to our stockholders, including to those stockholders who receive additional shares of our common stock pursuant to our dividend reinvestment plan. Prior to January 2009, we paid quarterly dividends to our stockholders. However, in January 2009, we suspended the practice of paying quarterly dividends to our stockholders and thereafter, paid five annual dividend distributions (December 2013, 2012, 2011, 2010 and 2009) to our stockholders since such time, which distributions were made with a combination of cash and the issuance of shares of our common stock as discussed more fully below.

On September 24, 2014, we announced the recommencement of quarterly dividends to our stockholders. We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of the DRIP by the dividend record date will have their cash dividends automatically reinvested into additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

We are prohibited from making distributions that cause us to fail to maintain the asset coverage ratios stipulated by the 1940 Act, subject to certain exceptions, or that violate our debt covenants.

In order to maintain tax treatment as a RIC, we must for each fiscal year distribute an amount equal to at least 90.0% of our ordinary net taxable income and realized netshort-term capital gains in excess of realized netlong-term capital losses, if any, reduced by deductible expenses. In addition, we will be subject to federal excise taxes to the extent we do not distribute during the calendar year at least (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for theone-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which we paid no federal income tax. For the 2019, 2018 and 2017 calendar year, the Company made distributions sufficient such that we did not incur any federal excise taxes. For the 2014, 2015 and 2016 calendar years, our distributions were insufficient such that we incurred federal excise taxes. We may elect to withhold from distribution a portion of our ordinary income for the 2020 calendar year and/or portion of the capital gains in excess of capital losses realized during theone-year period ending October 31, 2020, if any, and, if we do so, we would expect to incur federal excise taxes as a result.

In accordance with certain applicable provisions of the Code and the Treasury regulations and a revenue procedure issued by the IRS, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. If too many stockholders elect to receive cash, the cash available for distribution must be allocated among the shareholders electing to receive cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive the lesser of (a) the portion of the distribution such shareholder has elected to receive in cash or (b) an amount equal to his or her entire distribution times the percentage limitation on cash available for distribution. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. Taxable stockholders receiving such distributions (whether received in cash, our stock, or a combination thereof) will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain or qualified dividend income to the extent such distribution is properly reported as such) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes.

On January 8, 2020, the Company declared a dividend of $0.56 per share, which was paid on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.4 million in cash and 35,682 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.44 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 24, 27, 28, 29, 30, 31 and February 3, 4, 5 and 6, 2020.

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

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On May 28, 2019, the Company declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record on June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

On November 27, 2018, the Company declared a dividend of $0.53 per share, which was paid on January 2, 2019, to common stockholders of record on December 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 30,796 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $18.88 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28, 31, 2018 and January 2, 2019.

On August 28, 2018, our board of directors declared a dividend of $0.52 per share, which was paid on September 27, 2018, to common stockholders of record as of September 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 25,862 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.35 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2018.

On May 30, 2018, our board of directors declared a dividend of $0.51 per share, which was paid on June 27, 2018, to common stockholders of record as of June 15, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.7 million in cash and 21,562 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.72 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2018.

On February 26, 2018, our board of directors declared a dividend of $0.50 per share, which was paid on March 26, 2018, to common stockholders of record as of March 14, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.6 million in cash and 25,354 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $19.91 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.

On November 29, 2017, our board of directors declared a dividend of $0.49 per share, which was paid on December 27, 2017, to common stockholders of record on December 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 25,435 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.14 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and 27, 2017.

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On August 28, 2017, our board of directors declared a dividend of $0.48 per share, which was paid on September 26, 2017, to common stockholders of record on September 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.2 million in cash and 33,551 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.19 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22, 25 and 26, 2017.

On May 30, 2017, our board of directors declared a dividend of $0.47 per share, which was paid on June 27, 2017, to common stockholders of record on June 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.3 million in cash and 26,222 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.04 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.

On February 28, 2017, our board of directors declared a dividend of $0.46 per share, which was paid on March 28, 2017, to common stockholders of record as of March 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.38 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.

On January 12, 2017, our board of directors declared a dividend of $0.45 per share, which was paid on February 9, 2017, to common stockholders of record as of January 31, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.6 million in cash and 50,453 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.25 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7, 8 and 9, 2017.

On October 5, 2016, our board of directors declared a dividend of $0.44 per share, which was paid on November 9, 2016, to common stockholders of record as of October 31, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,548 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.12 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7, 8 and 9, 2016.

On August 8, 2016, our board of directors declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

On July 7, 2016, our board of directors declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

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On March 31, 2016, our board of directors declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record on April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.

On January 12, 2016, our board of directors declared a dividend of $0.40 per share, which was paid on February 29, 2016, to all stockholders of record on February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock, or 1.2% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.11 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and 29, 2016.

On October 7, 2015, our board of directors declared a dividend of $0.36 per share, which was paid on November 30, 2015, to common stockholders of record on November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock, or 1.1% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.53 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and 30, 2015.

On July 8, 2015, our board of directors declared a dividend of $0.33 per share, which was paid on August 31, 2015, to common stockholders of record on August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.28 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.

On May 14, 2015, our board of directors declared a special dividend of $1.00 per share, which was paid on June 5, 2015, to common stockholders of record on May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock, or 2.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.47 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4 and 5, 2015.

On April 9, 2015, our board of directors declared a dividend of $0.27 per share, which was paid on May 29, 2015, to common stockholders of record on May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.78 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.

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On September 24, 2014, our board of directors declared a dividend of $0.22 per share, which was paid on February 27, 2015, to common stockholders of record on February 2, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.97 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and 27, 2015.

On September 24, 2014, our board of directors declared a dividend of $0.18 per share, which was paid on November 28, 2014, to common stockholders of record on November 3, 2014. Shareholders had the option to receive payment of the dividend in cash or receive shares of common stock pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.37 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and 28, 2014.

On October 30, 2013, our board of directors declared a dividend of $2.65 per share, which was paid on December 27, 2013, to common stockholders of record on November 13, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which equaled the volume weighted average trading price per share of the common stock on December 11, 13, and 16, 2013.

On November 9, 2012, our board of directors declared a dividend of $4.25 per share, which was paid on December 31, 2012, to common stockholders of record on November 20, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17 and 19, 2012.

On November 15, 2011, our board of directors declared a dividend of $3.00 per share, which was paid on December 30, 2011, to common stockholders of record on November 25, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.12 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

On November 12, 2010, we declared a dividend of $4.40 per share, which was paid on December 29, 2010. Stockholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $1.2 million or $0.44 per share. Based on shareholder elections, the dividend consisted of $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010.

On November 13, 2009, we declared a dividend of $18.25 per share, which was paid on December 31, 2009. Stockholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all stockholders was limited to $2.1 million or $0.25 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock, or 104.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 13.7% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to stockholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $1.5099 per share, which equaled the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.

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Performance Graph

The following graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index, for the period from March 23, 2007, the date our common stock began trading, through February 29, 2020. The graph assumes that, on March 23, 2007, a person invested $100 in each of our common stock, the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index. The graph measures total shareholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are reinvested in like securities.

Outstanding Securities and Debt

The following table shows our outstanding classes of securities and debt as of February 29, 2020.

(a)	(b)			(c)		(d)
Title of Class	Amount Authorized			Amount Held by us or for Our Account		Amount Outstanding Exclusive of Amounts Shown Under (c)
Securities:
Common Stock		100,000,000			11,217,545		88,782,455
Debt:
Credit Facility	$	45,000,000		$	—	$	45,000,000
SBA Debentures	$	325,000,000	(1)	$	150,000,000	$	175,000,000
2025 Notes	$	60,000,000		$	60,000,000	$	—

(1) For more information regarding our limitations as to SBA debenture issuances, see “Item 1. Business—Small Business Investment Company Regulations.”

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Fees and Expenses

The following table is intended to assist you in understanding the costs and expenses that an investor will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this report contains a reference to fees or expenses paid by “you,” “us” or “Saratoga Investment Corp.,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Saratoga Investment Corp.    

Stockholder transaction expenses (as a percentage of offering price):
Sales load paid		%(1)
Offering expenses borne by us		%(2)
Dividend reinvestment plan expenses		(3)
Total stockholder transaction expenses paid		%
Annual estimated expenses (as a percentage of average net assets attributable to common stock):
Management fees	3.0	%(4)
Incentive fees payable under the Management Agreement	1.9	%(5)
Interest payments on borrowed funds	4.9	%(6)
Other expenses	2.1	%(7)
Total annual expenses	11.9	%(8)

(1) In the event that the shares of common stock are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load.

(2) The prospectus supplement corresponding to each offering will disclose the applicable offering expenses and total stockholder transaction expenses.

(3) The expenses associated with the administration of our dividend reinvestment plan are included in “Other expenses.” The participants in the dividend reinvestment plan will pay a pro rata share of brokerage commissions incurred with respect to open market purchases, if any, made by the administrator under the plan.

(4) Our base management fee under the Management Agreement with Saratoga Investment Advisors is based on our gross assets, which is defined as our total assets, including those acquired using borrowings for investment purposes, but excluding cash and cash equivalents. See “Investment Advisory and Management Agreement.” The fact that our base management fee is payable based upon our gross assets, rather than our net assets (i.e., total assets after deduction of any liabilities, including borrowings) means that our base management fee as a percentage of net assets attributable to common stock will increase when we utilize leverage.

(5) The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20% ofour “pre-incentive fee net investment income” for the immediately preceding quarter, subject to a preferred return, or “hurdle,” and a “catch up” feature. For thispurpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial and consulting fees or other fees that we receive from portfolio companies) accrued by us during the fiscal quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement described below, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee. Under the Management Agreement, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and Saratoga Investment Advisors will be entitled to 20% of incentive fee capital gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date. We estimate this as zero for purposes of this table as these fees are hard to predict, as they are based on capital gains and losses. See “Investment Advisory and Management Agreement.”

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(6) We may borrow funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. The 4.9% figure in the table includes all expected borrowing costs that we expect to incur over the next twelve months in connection with the secured revolving credit facility we have with Madison Capital Funding LLC. The costs associated with our outstanding borrowings are indirectly borne by our stockholders. We do not expect to issue any preferred stock during the next twelve months and, therefore, have not included the cost of issuing and servicing preferred stock in the table. In addition, all of the commitment fees, interest expense, amortized financing costs of our Credit Facility, SBA debentures and the 2025 Notes, and the fees and expenses of issuing and servicing any other borrowings or leverage that we expect to incur during the next twelve months are included in the table and expense example presentation below. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018,our non-interested board of directors approved of the Company becoming subject to a minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150% asset coverage ratio became effective on April 16, 2019. See “Business Development Company Regulations” and “Risk Factors—Risks Related to Our Business and Structure—Recent legislation allows us to incur additional leverage.”

(7) “Other expenses” are based on estimated amounts for the current fiscal year and include our overhead expenses, including payments under our administration agreement based on our allocable portion of overhead and other expenses incurred by Saratoga Investment Advisors in performing its obligations under the administration agreement. See “Administration Agreement.”

(8) This figure includes all of the fees and expenses of our wholly-owned subsidiaries, Saratoga Investment Corp SBIC, LP and Saratoga Investment Funding LLC. Furthermore, this table reflects all of the fees and expenses borne by us with respect to our investment in Saratoga CLO.

Example

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that we would have no additional leverage and our annual operating expenses would remain at the levels set forth in the table above. In the event that shares are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load and offering expenses.    

	1 Year		3 Years		5 years		10 years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on portfolio	$	132	$	416	$	730	$	1,661

This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The example assumes that the 5% annual return is generated entirely through the realization of capital gains on our assets and, as a result, triggers the payment of an incentive fee on such capital gains under the Management Agreement. The“pre-incentive fee net investment income” under the Management Agreement, which, assuming a 5% annual return, would either not be payable or have an insignificant impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher.

While the example assumes reinvestment of all dividends and distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by either (i) the greater of (x) the net asset value of our common stock or (y) 95% of the market price per share of our common stock at the close of trading on the payment date fixed by our board of directors in the event that we use newly issued shares to satisfy the share requirements of the dividend reinvestment plan or (ii) the average purchase price, including any brokerage charges or other charges, of all shares of common stock purchased by the administrator of the dividend reinvestment plan in the event that shares are purchased in the open market to satisfy the share requirements of the dividend reinvestment plan, which may be at, above or below net asset value.

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Sales of unregistered securities

Not applicable.

Issuer purchases of equity securities

We did not make any purchases of our common stock in the open market during the years ended February 29, 2020, February 28, 2019 and February 28, 2018. During the year ended February 28, 2017, we purchased 193,074 shares of our common stock in the open market.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial and other data as of and for the years ended February 29, 2020, February 28, 2019, February 28, 2018, February 28, 2017 and February 29, 2016 are derived from our consolidated financial statements which have been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report thereon is included within this Annual Report. The data should be read in conjunction with our consolidated financial statements and notes thereto, which are included elsewhere in this Annual Report, and Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

SARATOGA INVESTMENT CORP.

SELECTED CONSOLIDATED FINANCIAL DATA

(dollar amounts in thousands, except share and per share numbers)

	As of and for the Year Ended February 29, 2020			As of and for the Year Ended February 28, 2019			As of and for the Year Ended February 28, 2018			As of and for the Year Ended February 28, 2017			As of and for the Year Ended February 29, 2016
Consolidated Statements of Operations Data:
Investment income:
Interest from investments	$	48,047		$	43,297		$	35,110		$	29,348		$	26,871
Management fee, incentive fee and other income		10,401			4,411			3,505			3,809			3,179
Total investment income		58,448			47,708			38,615			33,157			30,050
Operating expenses:
Interest and debt financing expenses		14,683			13,126			10,939			9,888			8,456
Base management and incentive management fees(1)		22,263			11,770			10,180			7,846			6,761
Administrator expenses		2,131			1,896			1,646			1,367			1,175
General and administrative and other expenses		3,548			3,641			3,133			2,896			2,866
Income/excise tax expense (benefit)		962			(1,027	)		(15	)		45			114
Total operating expenses		43,587			29,406			25,883			22,042			19,372
Loss on extinguishment of debt		1,583			—			—			1,455			—
Net investment income		13,278			18,302			12,732			9,660			10,678
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from investments		42,877			4,874			(5,878	)		12,368			226
Net change in unrealized appreciation (depreciation) on investments		(771	)		(2,900	)		10,825			(10,641	)		741
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		355			(1,767	)		—			—			—
Total net gain on investments		42,461			207			4,947			1,727			967
Net increase in net assets resulting from operations	$	55,739		$	18,509		$	17,679		$	11,387		$	11,645
	As of and for the Year Ended February 29, 2020			As of and for the Year Ended February 28, 2019			As of and for the Year Ended February 28, 2018			As of and for the Year Ended February 28, 2017			As of and for the Year Ended February 29, 2016
Per Share:
Adoption of ASC 606(2)	$	—		$	(0.01	)	$	—		$	—		$	—
Earnings per common share—basic and diluted(3)		5.98			2.63			2.93			1.98			2.09
Net investment income per share—basic and diluted(3)		1.42			2.60			2.11			1.68			1.91
Net realized and unrealized gain (loss) per share—basic and diluted(3)		4.56			0.03			0.82			0.30			0.18
Dividends declared per common share(4)		2.21			2.06			1.90			1.93			2.36
Issuance of common stock above net asset value(5)		—			0.15			—			—			—
Dilutive impact of dividends paid in stock on net asset value per share and other items(6)		(0.26	)		(0.05	)		(0.04	)		(0.14	)		(0.37	)
Net asset value per share	$	27.13		$	23.62		$	22.96		$	21.97		$	22.06
Total return based on market value(7)		9.28	%		16.11	%		5.28	%		80.83	%		4.27	%
Total return based on net asset value(8)		26.22	%		13.33	%		14.45	%		12.62	%		11.10	%
Consolidated Statements of Assets and Liabilities Data:
Investment assets at fair value	$	485,632		$	402,020		$	342,694		$	292,661		$	283,996
Total assets		530,866			470,672			360,336			318,651			295,047
Total debt outstanding, net of discount and/or deferred financing costs		204,879			277,151			206,486			181,476			160,749
Total net assets		304,287			180,875			143,691			127,295			125,150
Net asset value per common share	$	27.13		$	23.62		$	22.96		$	21.97		$	22.06
Common shares outstanding at end of year		11,217,545			7,657,156			6,257,029			5,794,600			5,672,227
Other Data:
Investments funded	$	204,643		$	187,708		$	107,697		$	126,935		$	109,191
Principal collections related to investment repayments or sales	$	167,253		$	135,728		$	66,312		$	121,159		$	68,174
Number of investments at year end		74			58			56			53			59
Weighted average yield of income producing debtinvestments—Non-control/Non-affiliate(9)		9.72	%		10.93	%		11.11	%		10.66	%		10.82	%
Weighted average yield on income producing debt investments—Affiliate(9)		11.55	%		13.56	%		13.06	%		12.17	%		—
Weighted average yield on income producing debt investments—Control(9)		11.23	%		13.67	%		16.97	%		11.64	%		16.40	%

(1) See Note 6 to the consolidated financial statements contained elsewhere herein.

(2) See Note 2 to the consolidated financial statements contained elsewhere herein.

(3) For the years ended February 29, 2020, February 28, 2019, February 28, 2018, February 28, 2017 and February 29, 2016, amounts are calculated using weighted average common shares outstanding of 9,319,192, 7,046,686, 6,024,040, 5,740,450, and 5,582,453, respectively.

(4) Calculated using the shares outstanding at theex-dividend date.

(5) The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share data was derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date multiplied by (B) the differences between the net proceeds per share and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding during the period.

(6) Represents the dilutive effect of issuing common stock below net asset value per share during the period in connection with the satisfaction of the Company’s annual RIC distribution requirement and may include the impact of the different share amounts used for different items (weighted average basic common shares outstanding for the corresponding year and actual common shares outstanding at the end of the year) in the per common share data calculation and rounding impacts. See “Price Range of Common Stock—Dividend Policy.”

(7) Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(8) Total investment return is calculated assuming a purchase of common shares at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(9) The weighted average yield on income producing investments is higher than what investors in the Company will realize because it does not reflect the Company’s expenses and any sales load paid by investors.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion and other parts of this Annual Report containforward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by suchforward-looking information due to the factors discussed under Part I. Item 1A. “Risk Factors” and “Note about Forward-Looking Statements” appearing elsewhere herein.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in ourforward-looking statements.

The forward-looking statements contained in this Annual Report on Form10-K involve risks and uncertainties, including statements as to:

• our future operating results and the impact of the COVID-19 pandemic thereon;

• the introduction, withdrawal, success and timing of business initiatives and strategies;

• changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

• pandemics or other serious public health events, such as the recent global outbreak ofCOVID-19;

• the relative and absolute investment performance and operations of our Investment Adviser;

• the impact of increased competition;

• our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

• the unfavorable resolution of any future legal proceedings;

• our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

• the impact of investments that we expect to make and future acquisitions and divestitures;

• our contractual arrangements and relationships with third parties;

• the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

• the ability of our portfolio companies to achieve their objectives;

• our expected financings and investments;

• our regulatory structure and tax status, including our ability to operate as a business development company (“BDC”), or to operate our small business investment company (“SBIC”) subsidiaries, and to continue to qualify to be taxed as a regulated investment company (“RIC”);

• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon;

• the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;

• the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;

• the impact of changes to tax legislation and, generally, our tax position;

• our ability to access capital and any future financings by us;

• the ability of our Investment Adviser to attract and retain highly talented professionals; and

• the ability of our Investment Adviser to locate suitable investments for us and to monitor and effectively administer our investments.

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Such forward-looking statements may include statements preceded by, followed by or that otherwise include terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report on Form10-K, and we assume no obligation to update any suchforward-looking statements. Actual results could differ materially from those anticipated in ourforward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the U.S. Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this annual report on Form 10-K.

OVERVIEW

We are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). 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, which we define as companies having earnings before interest, tax, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, which may include securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of its net assets. We have elected and qualified to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

Corporate History

We commenced operations, at the time known as GSC Investment Corp., on March 23, 2007 and completed an initial public offering of shares of common stock on March 28, 2007. Prior to July 30, 2010, we were externally managed and advised by GSCP (NJ), L.P., an entity affiliated with GSC Group, Inc. In connection with the consummation of a recapitalization transaction on July 30, 2010, as described below we engaged Saratoga Investment Advisors (“SIA”) to replace GSCP (NJ), L.P. as our investment adviser and changed our name to Saratoga Investment Corp.

As a result of the event of default under a revolving securitized credit facility with Deutsche Bank we previously had in place, in December 2008 we engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate strategic transaction opportunities and consider alternatives for us. On April 14, 2010, GSC Investment Corp. entered into a stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates and an assignment, assumption and novation agreement with Saratoga Investment Advisors, pursuant to which GSC Investment Corp. assumed certain rights and obligations of Saratoga Investment Advisors under a debt commitment letter Saratoga Investment Advisors received from Madison Capital Funding LLC, which indicated Madison Capital Funding’s willingness to provide GSC Investment Corp. with a $40.0 million senior secured revolving credit facility, subject to the satisfaction of certain terms and conditions. In addition, GSC Investment Corp. and GSCP (NJ), L.P. entered into a termination and release agreement, to be effective as of the closing of the transaction contemplated by the stock purchase agreement, pursuant to which GSCP (NJ), L.P., among other things, agreed to waive any and all accrued and unpaid deferred incentive management fees up to and as of the closing of the transaction contemplated by the stock purchase agreement but continued to be entitled to receive the base management fees earned through the date of the closing of the transaction contemplated by the stock purchase agreement.

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On July 30, 2010, the transactions contemplated by the stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates were completed, the private sale of 986,842 shares of our common stock for $15.0 million in aggregate purchase price to Saratoga Investment Advisors and certain of its affiliates closed, the Company entered into the Credit Facility, and the Company began doing business as Saratoga Investment Corp.

We used the net proceeds from the private sale transaction and a portion of the funds available to us under the Credit Facility to pay the full amount of principal and accrued interest, including default interest, outstanding under our revolving securitized credit facility with Deutsche Bank. The revolving securitized credit facility with Deutsche Bank was terminated in connection with our payment of all amounts outstanding thereunder on July 30, 2010.

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse

stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

In January 2011, we registered for public resale of the 986,842 shares of our common stock issued to Saratoga Investment

Advisors and certain of its affiliates.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received an SBIC license from the Small Business Administration (“SBA”). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA.

In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% fixed-rate unsecured notes due 2020 (the “2020 Notes”) for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters’ full exercise of their overallotment option. The 2020 Notes were listed on the NYSE under the trading symbol “SAQ” with a par value of $25.00 per share. The 2020 Notes were redeemed in full on January 13, 2017.

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through anAt-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate unsecured notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. The 2023 Notes were listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were also added to the agreement. On July 9, 2019, the amount of the common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. As of February 29, 2020, the Company sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs). For the year ended February 29, 2020, the Company sold 3,427,346 shares for gross proceeds of $85.9 million at an average price of $25.06 for aggregate net proceeds of $84.7 million (net of transaction costs).

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

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On August 7, 2018, we entered into an unsecured loan agreement (“CLO2013-1 Warehouse Loan”) with Saratoga Investment Corp. CLO2013-1 Warehouse, Ltd (“CLO2013-1 Warehouse”), a wholly-owned subsidiary of Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”), pursuant to which CLO2013-1 Warehouse may borrow from time to time up to $20 million from us in order to provide capital necessary to support warehouse activities. The CLO2013-1 Warehouse Loan, which expired on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%. During the year ended February 28, 2019, the maximum amount invested by us in the CLO2013-1 Warehouse Loan amounted to $20.0 million.

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025 and commencing August 31, 2021, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

On December 14, 2018, the Company completed the third refinancing of the Saratoga CLO(the “2013-1 Reset CLO Notes”). This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. Anon-call period of January 2020 was also added. In addition to and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of theClass F-R-2 Notes tranche and $7.5 million in aggregate principal amount of theClass G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes and $20.0 million CLO2013-1 Warehouse Loan were repaid.

On February 5, 2019, the Company completed are-opening andup-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes. At February 29, 2020, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form of SBA debentures.

On February 11, 2020, the Company entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) with Saratoga Investment Corp.CLO 2013-1 Warehouse 2, Ltd(“CLO 2013-1 Warehouse 2”), a wholly-owned subsidiary of Saratoga CLO, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%.

COVID-19

On March 11, 2020, the World Health Organization declared the novel coronavirus(“COVID-19”) as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect toCOVID-19. The outbreak ofCOVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions are creating disruption in global supply chains and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact ofCOVID-19. Nevertheless,COVID-19 presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

We have evaluated subsequent events from February 29, 2020 through May 6, 2020. However, as the discussion in this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Company’s financial statements for the fiscal year end February 29, 2020, the analysis contained herein may not fully account for impacts relating to theCOVID-19 pandemic. In that regard, for example, as of February 29, 2020, the Company valued its portfolio investments in conformity with U.S. GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. Due to the overall volatility that theCOVID-19 pandemic has caused during the months that followed our February 29, 2020 valuation, any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio. The potential impact to our results going forward will depend to a large extent on future developments and new information that may emerge regarding the duration and severity ofCOVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

Critical Accounting Policies

Basis of Presentation

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make certain estimates and assumptions affecting amounts reported in the Company’s consolidated financial statements. We have identified investment valuation, revenue recognition and the recognition of capital gains incentive fee expense as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

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Investment Valuation

The Company accounts for its investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820,FairValueMeasurementsand Disclosures(“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be transferred at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independentthird-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from Saratoga Investment Advisors, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

• Each investment is initially valued by the responsible investment professionals of Saratoga Investment Advisors and preliminary valuation conclusions are documented and discussed with our senior management; and

• An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year. We use a third-party independent valuation firm to value our investment in the subordinated notes of Saratoga CLO and theClass F-R-2 Notes andClass G-R-2 Notes tranches of the Saratoga CLOs every quarter.

In addition, all our investments are subject to the following valuation process:

• The audit committee of our board of directors reviews and approves each preliminary valuation and Saratoga Investment Advisors and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

• Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of Saratoga Investment Advisors, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment,re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by SIA and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

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Revenue Recognition

Income Recognition

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums on investments.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed onnon-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability.Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

Payment-in-Kind Interest

The Company holds debt and preferred equity investments in its portfolio that contain apayment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

Revenues

We generate revenue in the form of interest income and capital gains on the debt investments that we hold and capital gains, if any, on equity interests that we may acquire. We expect our debt investments, whether in the form of leveraged loans or mezzanine debt, to have terms of up to ten years, and to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either quarterly or semi-annually. In some cases, our debt or preferred equity investments may provide for a portion or all of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on thethen-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned. We may also invest in preferred equity or common equity securities that pay dividends on a current basis.

On January 22, 2008, we entered into a collateral management agreement with Saratoga CLO, pursuant to which we act as its collateral manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, we completed a second refinancing of the Saratoga CLO with its reinvestment period extended to October 2018.

On August 7, 2018, we entered into an unsecured loan agreement, CLO2013-1 Warehouse Loan, with Saratoga Investment Corp. CLO2013-1 Warehouse, Ltd, a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO2013-1 Warehouse may borrow from time to time up to $20 million from us in order to provide capital necessary to support warehouse activities. The CLO2013-1 Warehouse Loan, which expires on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%. During the year ended February 28, 2019, the maximum amount invested by us in the CLO2013-1 Warehouse Loan amounted to $20.0 million.

On December 14, 2018, we completed a third refinancing and upsize of the Saratoga CLO. The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. Anon-call period of January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, we invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of theClass F-R-2 and $7.5 million aggregate principal amount of theClass G-R-2 notes tranches at par, with a coupon of LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. As part of this refinancing, we also redeemed our existing $4.5 million aggregate amount of the Class F notes tranche at par and the $20.0 million CLO2013-1 Warehouse Loan was repaid.

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On February 11, 2020, the Company entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) with Saratoga Investment Corp.CLO 2013-1 Warehouse 2, Ltd(“CLO 2013-1 Warehouse 2”), a wholly-owned subsidiary of Saratoga CLO, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. During the year ended February 29, 2020, the maximum amount invested by us in CLO2013-1 Warehouse 2 amounted to $2.5 million. As of February 29, 2020, the fair value of our investment inCLO 2013-1 Warehouse 2 was $2.2 million.

The Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the2013-1 Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds.

Following the third refinancing and the issuance of the2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic325-40,Investments-Other, Beneficial Interests in Securitized Financial Assets(“ASC325-40”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

ASC 606

In May 2014, the FASB issued ASU2014-09,Revenue from Contractswith Customers(“ASC 606”), which supersedes the revenue recognition requirements in Revenue Recognition (ASC 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In May 2016, ASU2016-12 amended ASU 2014-09 and deferred the effective period for annual periods beginning after December 15, 2017. Management has concluded that the majority of its revenues associated with financial instruments are scoped out of ASC 606, and has concluded that the only significant impact relates to the timing of the recognition of the CLO incentive fee income. We adopted ASC 606 under the modified retrospective approach using the practical expedient provided for, therefore the presentation of prior periods has not been adjusted.

Expenses

Our primary operating expenses include the payment of investment advisory and management fees, professional fees, directors and officers insurance, fees paid to independent directors and administrator expenses, including our allocable portion of our administrator’s overhead. Our investment advisory and management fees compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions, including those relating to:

• organization;

• calculating our net asset value (including the cost and expenses of any independent valuation firm);

• expenses incurred by our Investment Adviser payable to third parties, including agents, consultants or other advisers, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

• expenses incurred by our Investment Adviser payable for travel and due diligence on our prospective portfolio companies;

• interest payable on debt, if any, incurred to finance our investments;

• offerings of our common stock and other securities;

• investment advisory and management fees;

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• fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with, evaluating and making investments;

• transfer agent and custodial fees;

• federal and state registration fees;

• all costs of registration and listing our common stock on any securities exchange;

• federal, state and local taxes;

• independent directors’ fees and expenses;

• costs of preparing and filing reports or other documents required by governmental bodies (including the U.S. Securities and Exchange Commission (“SEC”) and the SBA);

• costs of any reports, proxy statements or other notices to common stockholders including printing costs;

• our fidelity bond, directors and officers errors and omissions liability insurance, and any other insurance premiums;

• direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs; and

• administration fees and all other expenses incurred by us or, if applicable, the administrator in connection with administering our business (including payments under the Administration Agreement based upon our allocable portion of the administrator’s overhead in performing its obligations under an Administration Agreement, including rent and the allocable portion of the cost of our officers and their respective staffs (including travel expenses)).

Pursuant to the investment advisory and management agreement that we had with GSCP (NJ), L.P., our former investment adviser and administrator, we had agreed to pay GSCP (NJ), L.P. as investment adviser a quarterly base management fee of 1.75% of the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters and an incentive fee.

The incentive fee had two parts:

• A fee, payable quarterly in arrears, equal to 20.0% of ourpre-incentive fee net investment income, expressed as a rate of return on the value of the net assets at the end of the immediately preceding quarter, that exceeded a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter. Under this provision, in any fiscal quarter, our investment adviser received no incentive fee unless ourpre-incentive fee net investment income exceeded the hurdle rate of 1.875%. Amounts received as a return of capital were not included in calculating this portion of the incentive fee. Since the hurdle rate was based on net assets, a return of less than the hurdle rate on total assets could still have resulted in an incentive fee.

• A fee, payable at the end of each fiscal year, equal to 20.0% of our net realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation, in each case on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of capital gains incentive fees paid to the investment adviser through such date.

We deferred cash payment of any incentive fee otherwise earned by our former investment adviser if, during the then most recent four full fiscal quarters ending on or prior to the date such payment was to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less liabilities) (before taking into account any incentive fees payable during that period) was less than 7.5% of our net assets at the beginning of such period. These calculations were appropriately pro-rated for the first three fiscal quarters of operation and adjusted for any share issuances or repurchases during the applicable period. Such incentive fee would become payable on the next date on which such test had been satisfied for the most recent four full fiscal quarters or upon certain terminations of the investment advisory and management agreement. We commenced deferring cash payment of incentive fees during the quarterly period ended August 31, 2007 and continued to defer such payments through the quarterly period ended May 31, 2010. As of July 30, 2010, the date on which GSCP (NJ), L.P. ceased to be our investment adviser and administrator, we owed GSCP (NJ), L.P. $2.9 million in fees for services previously provided to us; of which $0.3 million has been paid by us. GSCP (NJ), L.P. agreed to waive payment by us of the remaining $2.6 million in connection with the consummation of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates described elsewhere in this Annual Report.

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The terms of the investment advisory and management agreement with Saratoga Investment Advisors, our current investment adviser, are substantially similar to the terms of the investment advisory and management agreement we had entered into with GSCP (NJ), L.P., our former investment adviser, except for the following material distinctions in the fee terms:

• The capital gains portion of the incentive fee was reset with respect to gains and losses from May 31, 2010, and therefore losses and gains incurred prior to such time will not be taken into account when calculating the capital gains fee payable to Saratoga Investment Advisors and, as a result, Saratoga Investment Advisors will be entitled to 20.0% of net gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 equal the fair value of such investment as of such date. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P., the capital gains fee was calculated from March 21, 2007, and the gains were substantially outweighed by losses.

• Under the “catch up” provision, 100.0% of ourpre-incentive fee net investment income with respect to that portion of suchpre-incentive fee net investment income that exceeds 1.875% but is less than or equal to 2.344% in any fiscal quarter is payable to Saratoga Investment Advisors. This will enable Saratoga Investment Advisors to receive 20.0% of all net investment income as such amount approaches 2.344% in any quarter, and Saratoga Investment Advisors will receive 20.0% of any additional net investment income. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P. only received 20.0% of the excess net investment income over 1.875%.

• We will no longer have deferral rights regarding incentive fees in the event that the distributions to stockholders and change in net assets is less than 7.5% for the preceding four fiscal quarters.

Capital Gains Incentive Fee

The Company records an expense accrual relating to the capital gains incentive fee payable by the Company to its Manager when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.

New Accounting Pronouncements

In August 2018, FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”). The primary focus of ASU2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has assessed these changes and does not believe they would have a material impact on the Company’s consolidated financial statement and disclosures.

SEC Disclosure Update and Simplification

In March 2019, the SEC adopted the final rule under SEC ReleaseNo. 33-10618, Fast Act Modernization and Simplification of RegulationS-K, amending certain disclosure requirements. The amendments are intended to simplify certain disclosure requirements and to provide for a consistent set of rules to govern incorporating information by reference and hyperlinking, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The Company has adopted the final rule, as applicable under SEC ReleaseNo. 33-10618 and determined the effect of the adoption of the simplification rules on financial statements will be limited to the modification and removal of certain disclosures.

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Portfolio and investment activity

Investment Portfolio Overview

	February 29, 2020			February 28, 2019			February 28, 2018
				($ in millions)
Number of investments(1)		74			58			55
Number of portfolio companies(2)		35			31			30
Average investment per portfolio company(2)	$	12.9		$	11.8		$	10.9
Average investment size(1)	$	6.3		$	6.5		$	6.0
Weighted average maturity(3)		3.1 yrs			3.6yrs			3.5yrs
Number of industries		9			8			10
Non-performing or delinquent investments (fair value)	$	2.1		$	5.7		$	9.5
Fixed rate debt (% of interest earning portfolio)(3)	$	29.7(6.8	%)	$	55.7(16.3	%)	$	82.5(26.5	%)
Fixed rate debt (weighted average current coupon)(3)		9.3	%		10.4	%		12.2	%
Floating rate debt (% of interest earning portfolio)(3)	$	404.4(93.2	%)	$	285.0(83.7	%)	$	229.3(73.5	%)
Floating rate debt (weighted average current spread over LIBOR)(3)(4)		8.0	%		8.6	%		8.8	%

(1) Excludes our investment in the subordinated notes of Saratoga CLO.

(2) At February 29, 2020, excludes our investment in the subordinated notes of Saratoga CLO,Class F-R-2 Notes andClass G-R-2 Notes tranches of Saratoga CLO and loan to Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd. At February 28, 2019, excludes our investment in the subordinated notes of Saratoga CLO,Class F-R-2 Notes andClass G-R-2 Notes tranches of Saratoga CLO. At February 28, 2018, excludes our investment in the subordinated notes of Saratoga CLO and Class F Notes tranche of Saratoga CLO.

(3) Excludes our investment in the subordinated notes of Saratoga CLO and equity interests.

(4) Calculation uses either1-month or3-month LIBOR, depending on the contractual terms, and after factoring in any existing LIBOR floors.

During the fiscal year ended February 29, 2020, we invested $204.6 million in new or existing portfolio companies and had $167.3 million in aggregate amount of exits and repayments resulting in net investments of $37.3 million for the year.

During the fiscal year ended February 28, 2019, we invested $187.7 million in new or existing portfolio companies and had $135.7 million in aggregate amount of exits and repayments resulting in net investments of $52.0 million for the year.

During the fiscal year ended February 28, 2018, we invested $107.7 million in new or existing portfolio companies and had $66.3 million in aggregate amount of exits and repayments resulting in net investments of $41.4 million for the year.

Portfolio Composition

Our portfolio composition at February 29, 2020, February 28, 2019 and February 28, 2018 at fair value was as follows:

	February 29, 2020						February 28, 2019						February 28, 2018
	Percentage of Total Portfolio			Weighted Average Current Yield			Percentage of Total Portfolio			Weighted Average Current Yield			Percentage of Total Portfolio			Weighted Average Current Yield
Syndicated loans		—	%		—	%		—	%		—	%		1.2	%		5.9	%
First lien term loans		71.3			9.6			50.5			10.9			57.6			11.1
Second lien term loans		15.1			10.7			31.3			11.7			27.7			11.9
Unsecured term loans		0.9			9.3			0.5			0.0			—			—
Structured finance securities		6.7			11.4			8.8			14.6			4.8			21.2
Equity interests		6.0			—			8.9			3.1			8.7			3.6
Total		100.0	%		9.3	%		100.0	%		10.7	%		100.0	%		11.1	%

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At February 29, 2020, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $22.6 million and constituted 4.6% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of February 29, 2020 and February 28, 2019, was composed of $528.4 million and $510.3 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of February 29, 2020, we also own $2.5 million in aggregate principal of theF-R-2 Notes and $7.5 million in aggregate principal of theG-R-2 Notes in the Saratoga CLO, that only rank senior to the subordinated notes. At February 29, 2020, our investment inCLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, had a fair value of $2.2 million and constituted 0.5% of our portfolio.

This investment is subject to unique risks. (See “Part 1. Item 1A. Risk Factors—Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of predominantly senior secured first lien term loans and is subject to additional risks and volatility”). We do not consolidate the Saratoga CLO portfolio in our consolidated financial statements. Accordingly, the metrics below do not include the underlying Saratoga CLO portfolio investments. However, at February 29, 2020, $494.2 million or 98.6% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and two Saratoga CLO portfolio investments were in default with a fair value of $1.4 million. At February 28, 2019, $491.0 million or 98.5% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and two Saratoga CLO portfolio investment were in default with a fair value of $0.01 million. For more information relating to Saratoga CLO, see the audited financial statements for Saratoga CLO included elsewhere herein.

Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system (“CMR”). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)—performing credit; (Yellow)—underperforming credit; (Red)—in principal payment default and/or expected loss of principal.

Portfolio CMR distribution

The CMR distribution of our investments at February 29, 2020 and February 28, 2019 was as follows:

Saratoga Investment Corp.

	February 29, 2020					February 28, 2019
Color Score	Investments at Fair Value		Percentage of Total   Portfolio			Investments at Fair Value		Percentage of Total   Portfolio
	($ in thousands)
Green	$	429,784		88.5	%	$	336,061		83.6	%
Yellow		2,141		0.5			4,600		1.1
Red		2,137		0.4			6		0.0
N/A(1)		51,570		10.6			61,353		15.3
Total	$	485,632		100.0	%	$	402,020		100.0	%

(1) Comprised of our investment in the subordinated notes of Saratoga CLO and equity interests.

The change in reserve from $0.6 million as of February 28, 2019 to $1.2 million as of February 29, 2020 primarily related to the increase in reserve for the year for our investment in Roscoe Medical, Inc. and My Alarm Center, LLC, offset by the decrease in reserve for the year from the sale of M/C Acquisition, L.L.C.

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The CMR distribution of Saratoga CLO investments at February 29, 2020 and February 28, 2019 was as follows:

Saratoga CLO

	February 29, 2020					February 28, 2019
Color Score	Investments at Fair Value		Percentage of Total   Portfolio			Investments at Fair Value		Percentage of Total   Portfolio
	($ in thousands)
Green	$	456,767		91.1	%	$	462,171		92.7	%
Yellow		37,446		7.5			28,839		5.8
Red		6,787		1.4			7,379		1.5
N/A(1)		0		0.0			16		0.0
Total	$	501,000		100.0	%	$	498,405		100.0	%

(1) Comprised of Saratoga CLO’s equity interests.

Portfolio composition by industry grouping at fair value

The following table shows our portfolio composition by industry grouping at fair value at February 29, 2020 and February 28, 2019:

Saratoga Investment Corp.

	February 29, 2020					February 28, 2019
	Investments At Fair Value		Percentage of Total Portfolio			Investments At Fair Value		Percentage of Total Portfolio
	($ in thousands)
Business Services	$	285,356		58.8	%	$	252,676		62.8	%
Education		77,341		15.9			48,076		12.0
Healthcare Services		69,072		14.2			57,342		14.3
Structured Finance Securities(1)		34,675		7.1			35,328		8.8
Property Management		11,503		2.4			—		—
Metals		3,130		0.7			2,827		0.7
Food and Beverage		2,141		0.4			2,100		0.5
Consumer Services		1,997		0.4			3,166		0.8
Consumer Products		417		0.1			505		0.1
Total	$	485,632		100.0	%	$	402,020		100.0	%

(1) At February 29, 2020, comprised of our investment in the subordinated notes,Class F-R-2 Notes andClass G-R-2 Notes of Saratoga CLO and Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd. At February 28, 2019, comprised of our investment in the subordinated notes,Class F-R-2 Notes andClass G-R-2 Notes of Saratoga CLO.

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The following table shows Saratoga CLO’s portfolio composition by industry grouping at fair value at February 29, 2020 and February 28, 2019:

Saratoga CLO

	February 29, 2020					February 28, 2019
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
	($ in thousands)
Banking Finance Insurance & Real Estate	$	87,957		17.6	%	$	74,638		15.0	%
Services: Business		45,735		9.1			36,575		7.3
Healthcare & Pharmaceuticals		39,978		8.0			39,242		7.9
High Tech Industries		32,897		6.6			38,886		7.8
Services: Consumer		28,327		5.6			24,712		5.0
Telecommunications		28,317		5.6			28,156		5.6
Aerospace & Defense		25,093		5.0			16,836		3.4
Beverage Food & Tobacco		21,637		4.3			23,436		4.7
Media: Advertising Printing & Publishing		19,808		4.0			31,799		6.4
Hotel Gaming & Leisure		16,883		3.4			15,373		3.1
Containers Packaging & Glass		15,753		3.1			10,033		2.0
Consumer goods:Non-durable		15,700		3.1			15,528		3.1
Chemicals Plastics & Rubber		14,689		2.9			15,841		3.2
Retail		14,538		2.9			23,018		4.6
Automotive		13,820		2.8			13,373		2.7
Consumer goods: Durable		11,674		2.3			6,324		1.3
Capital Equipment		9,551		1.9			9,638		1.9
Media: Broadcasting & Subscription		7,959		1.6			10,410		2.1
Construction & Building		7,617		1.5			13,293		2.7
Utilities: Oil & Gas		7,306		1.5			2,953		0.6
Transportation: Cargo		7,054		1.4			11,137		2.2
Forest Products & Paper		5,385		1.1			4,555		0.9
Utilities: Electric		4,752		1.0			2,941		0.6
Metals & Mining		4,112		0.8			5,048		1.0
Energy: Oil & Gas		3,559		0.7			763		0.1
Energy: Electricity		3,357		0.7			5,059		1.0
Media: Diversified & Production		2,711		0.5			13,086		2.6
Wholesale		1,928		0.4			—		—
Transportation: Consumer		1,914		0.4			4,773		1.0
Environmental Industries		989		0.2			979		0.2
Total	$	501,000		100.0	%	$	498,405		100.0	%

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Portfolio composition by geographic location at fair value

The following table shows our portfolio composition by geographic location at fair value at February 29, 2020 and February 28, 2019. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

	February 29, 2020					February 28, 2019
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
			($ in thousands)
Southeast	$	165,353		34.0	%	$	130,604		32.5	%
West		99,390		20.5			10,777		2.7
Midwest		75,528		15.5			116,388		29.0
Southwest		61,456		12.7			50,236		12.5
Northeast		18,047		3.7			19,061		4.7
Northwest		9,981		2.1			8,636		2.1
Other(1)		55,877		11.5			66,318		16.5
Total	$	485,632		100.0	%	$	402,020		100.0	%

(1) At February 29, 2020, comprised of our investment in the subordinated notes,Class F-R-2 Notes andClass G-R-2 Notes of Saratoga CLO, Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd and foreign investments. At February 28, 2019, comprised of our investment in the subordinated notes,Class F-R-2 Notes andClass G-R-2 Notes of Saratoga CLO and foreign investments.

Results of operations

Operating results for the fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018 were as follows:

	For the Year Ended
	February 29, 2020			February 28, 2019			February 28, 2018
	($ in thousands)
Total investment income	$	58,448		$	47,708		$	38,615
Total operating expenses		43,587			29,406			25,883
Loss on extinguishment of debt		1,583			—			—
Net investment income		13,278			18,302			12,732
Net realized gains (losses) from investments		42,877			4,874			(5,878	)
Net change in unrealized appreciation (depreciation) on investments		(771	)		(2,900	)		10,825
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		355			(1,767	)		—
Net increase in net assets resulting from operations	$	55,739		$	18,509		$	17,679

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Investment income

The composition of our investment income for the fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018 were as follows:

	For the Year Ended
	February 29, 2020		February 28, 2019		February 28, 2018
	($ in thousands)
Interest from investments	$	48,047	$	43,297	$	35,110
Interest from cash and cash equivalents		536		65		28
Management fee income		2,504		1,722		1,509
Incentive fee income		—		633		591
Structuring and advisory fee income		5,286		1,355		825
Other income		2,075		636		552
Total investment income	$	58,448	$	47,708	$	38,615

For the fiscal year ended February 29, 2020, total investment income increased $10.7 million, or 22.5% compared to the fiscal year ended February 28, 2019. Interest income from investments increased $4.7 million, or 11.0%, to $48.0 million for the year ended February 29, 2020 from $43.3 million for the fiscal year ended February 28, 2019. This reflects an increase of 20.8% in total investments to $485.6 million at February 29, 2020 from $402.0 million at February 28, 2019. At February 29, 2020, the weighted average current yield on investments was 9.3% compared to 10.7% at February 28, 2019, which offset some of the interest income increase.

For the fiscal year ended February 28, 2019, total investment income increased $9.1 million, or 23.5% compared to the fiscal year ended February 28, 2018. Interest income from investments increased $8.2 million, or 23.3%, to $43.3 million for the year ended February 28, 2019 from $35.1 million for the fiscal year ended February 28, 2018. This reflects an increase of 17.3% in total investments to $402.0 million at February 28, 2019 from $342.7 million at February 28, 2018. At February 28, 2019, the weighted average current yield on investments was 10.7% compared to 11.1% at February 28, 2018, which offset some of the increase.

For the fiscal year ended February 29, 2020 and February 28, 2019, total PIK income was $4.4 million and $4.2 million, respectively. This increase was primarily due to the increase in investment in Easy Ice, LLC, which primarily generated PIK interest income. The Company sold its interest in Easy Ice, LLC during the year ended February 29, 2020.

For the fiscal year ended February 28, 2019 and February 28, 2018, total PIK income was $4.2 million, and $2.8 million, respectively. This increase was primarily due to the increase in investment in Easy Ice, LLC, which primarily generates PIK interest income.

Following the third refinancing of the CLO on December 14, 2018, the Company is no longer entitled to receive the incentive fee. For the years ended February 28, 2019 and February 28, 2018 incentive fee income of $0.6 million and $0.6 million, respectively, was recognized related to the Saratoga CLO, reflecting the 12.0% hurdle rate that has been achieved.

For the fiscal year ended February 29, 2020, February 28, 2019 and February 28, 2018, total structuring and advisory fee income was $5.3 million, $1.4 million and $0.8 million, respectively. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.

For the fiscal year ended February 29, 2020, February 28, 2019 and February 28, 2018, other income was $2.1 million, $0.6 million and $0.6 million, respectively. Other income includes dividends received, origination fees and prepayment income fees and is recorded in the consolidated statements of operations when earned.

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Operating expenses

The composition of our operating expenses for the years ended February 29, 2020, February 28, 2019 and February 28, 2018 were as follows:

	For the Year Ended
	February 29, 2020		February 28, 2019			February 28, 2018
			($ in thousands)
Interest and debt financing expenses	$	14,683	$	13,126		$	10,939
Base management fees		8,099		6,879			5,846
Incentive management fees		14,164		4,891			4,334
Professional fees		1,684		1,849			1,591
Administrator expenses		2,131		1,896			1,646
Insurance		260		253			260
Directors fees and expenses		278		291			197
General and administrative and other expenses		1,326		1,248			1,085
Income tax benefit		962		(1,027	)		—
Excise tax expense (credit)		—		—			(15	)
Total operating expenses	$	43,587	$	29,406		$	25,883

For the year ended February 29, 2020, total operating expenses increased $14.2 million, or 48.2% compared to the year ended February 28, 2019. For the year ended February 28, 2019, total operating expenses increased $3.5 million, or 13.6% compared to the year ended February 28, 2018.

For the year ended February 29, 2020, the increase in interest and debt financing expenses is primarily attributable to an increase in the average outstanding borrowings of the 2025 Notes, partially offset by a decrease in the average outstanding borrowings of the 2023 Notes, which were redeemed during the fiscal year. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes.

Total average outstanding debt increased from $249.3 million for the year ended February 28, 2019 to $273.8 million for the year ended February 29, 2020. For the year ended February 29, 2020, the weighted average interest rate on our outstanding indebtedness was 4.71% compared to the 4.62% for the year ended February 28, 2019. The increase in weighted average interest rate was primarily driven by an increase of $34.5 million in the average outstanding borrowings from the issuance of the 2025 Notes, which carry a fixed rate 6.25% interest rate. The average outstanding borrowings of the 2023 Notes decreased $11.3 million from $74.5 million for the year ended February 28, 2019 to $63.2 million for the year ended February 29, 2020. As noted above, the 2023 Notes were redeemed during the fiscal year ended February 29, 2020. At February 29, 2020 and February 28, 2019, the SBA debentures represented 71.4% and 52.7% of overall debt, respectively.

For the years ended February 28, 2019 and February 28, 2018, the increase in interest and debt financing expenses is primarily attributable to an increase in total outstanding debt. The increase is primarily attributable to an increase in average outstanding debt from $212.1 million for the year ended February 28, 2018 to $249.3 million for the year ended February 28, 2019. For the year ended February 28, 2019, the weighted average interest rate on our outstanding indebtedness was 4.62% compared to the 4.50% for the year ended February 28, 2018. The increase in weighted average interest rate was primarily driven by the issuance of the 2025 Notes which carry a fixed rate of 6.25%, versus the SBA debentures that carry a lower interest rate. At February 28, 2019 and February 28, 2018, the SBA debentures represented 52.7% and 64.9% of overall debt, respectively.

For the year ended February 29, 2020, base management fees increased $1.2 million, or 17.7% compared to the fiscal year ended February 28, 2019. The increase in base management fees results from the 17.7% increase in the average value of our total assets, less cash and cash equivalents, from $393.1 million as of February 28, 2019 to $462.8 million as of February 29, 2020.

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For the year ended February 28, 2019, base management fees increased $1.0 million, or 17.7% compared to the fiscal year ended February 28, 2018. The increase in base management fees results from the 17.7% increase in the average value of our total assets, less cash and cash equivalents, from $334.1 million as of February 28, 2018 to $393.1 million as of February 28, 2019.

For the year ended February 29, 2020, incentive management fees increased $9.3 million, or 189.6% compared to the fiscal year ended February 28, 2019. The first part of the incentive management fees increased this year from $4.6 million for the year ended February 28, 2019 to $5.8 million for the year ended February 29, 2020, as higher average total assets of 17.7% has led to increased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. The incentive management fees related to capital gains increased from $0.3 million for the fiscal year ended February 28, 2019 to $8.4 million for the fiscal year ended February 29, 2020, reflecting the net realized and unrealized gain on investments this year, primarily related to our Censis Technologies, Inc. and Easy Ice, LLC investments and also including the impact of the deferred taxes on unrealized appreciation.

For the year ended February 28, 2019, incentive management fees increased $0.6 million, or 12.9% compared to the fiscal year ended February 28, 2018. The first part of the incentive management fees increased this year from $3.4 million for the year ended February 28, 2018 to $4.6 million for the year ended February 28, 2019, as higher average total assets of 17.7% has led to increased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. The incentive management fees related to capital gains decreased from $0.9 million for the fiscal year ended February 28, 2018 to $0.3 million for the fiscal year ended February 28, 2019, reflecting the net realized and unrealized gain on investments this year, including the impact of the deferred taxes on unrealized appreciation.

For the year ended February 29, 2020, professional fees decreased $0.2 million, or 8.9% compared to the fiscal year ended February 28, 2019. This decrease primarily relates to decreased legal and accounting fees this year, as the shelf registration statement last year led to higher fees.

For the year ended February 28, 2019, professional fees increased $0.3 million, or 16.3% compared to the fiscal year ended February 28, 2018. This increase primarily relates to increased legal, valuation and accounting fees, including additional cost related to the Sarbanes-Oxley Act implementation.

For the year ended February 29, 2020, administrator expenses increased $0.2 million, or 12.4% compared to the fiscal year ended February 28, 2019, which reflects an increase to the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million, effective August 1, 2019.

For the year ended February 28, 2019, administrator expenses increased $0.3 million, or 15.2% compared to the fiscal year ended February 28, 2018, which reflects an increase to the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018.

As discussed above, the increase in interest and debt financing expenses for the years ended February 29, 2020, February 28, 2019 and February 28, 2018 is primarily attributable to an increase in the average amount of outstanding debt as compared to the prior years.

For the fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018, the average borrowings outstanding under the Credit Facility was approximately $0.6 million, $3.4 million and $7.1 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Credit Facility was 6.66%, 7.10% and 6.02%, respectively.

For the fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018, the average borrowings outstanding of SBA debentures was $150.0 million, $146.0 million and $130.1 million, respectively. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.23%, 3.20% and 3.14%, respectively.

During the year ended February 29, 2020 and February 28, 2019, the average dollar amount of our 6.25%fixed-rate 2025 Notes outstanding was $60.0 million and $25.5 million, respectively.

As discussed above, during the fourth quarter of 2020 fiscal year, the Company redeemed $74.45 million in aggregate principal amount of issued and outstanding 2023 Notes. During the years ended February 29, 2020, 2019 and 2018, the average dollar amount of our 6.75%fixed-rate 2023 Notes outstanding was $63.2 million, $74.5 million and $74.5 million, respectively.

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For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recognized income tax expense (benefit) of $1.0 million, $(1.0) million and $0.0 million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in the taxable blockers.

Net realized gains (losses) on sales of investments

For the fiscal year ended February 29, 2020, the Company had $167.3 million of sales, repayments, exits or restructurings resulting in $42.9 million of net realized gains. The most significant realized gains and losses during the year ended February 29, 2020 were as follows (dollars in thousands):

Fiscal year ended February 29, 2020

Issuer	Asset Type	Gross         Proceeds		Cost		Net Realized             Gain
Easy Ice, LLC	Equity Interests	$	41,928	$	10,703	$	31,225
Censis Technologies, Inc.	Equity Interests		12,280		999		11,281

The $31.2 million and $11.3 million of net realized gains was from the sales of the equity positions in Easy Ice, LLC and Censis Technologies, Inc., respectively.

For the fiscal year ended February 28, 2019, the Company had $135.7 million of sales, repayments, exits or restructurings resulting in $4.9 million of net realized gains. The most significant realized gains and losses during the year ended February 28, 2019 were as follows (dollars in thousands):

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Fiscal year ended February 28, 2019
Issuer	Asset Type		Gross           Proceeds		Cost		Net Realized             Gain
HMN Holdco, LLC		Equity Interests	$	642	$	62	$	580
HMN Holdco, LLC		Equity Interests		4,539		438		4,101

For the year ended February 28, 2019, the $4.7 million of net realized gains on our investments in HMN Holdco, LLC was due to a refinancing transaction that included the sale of our equity position.

For the fiscal year ended February 28, 2018, the Company had $66.3 million of sales, repayments, exits or restructurings resulting in $5.9 million of net realized losses. The most significant realized gains and losses during the year ended February 28, 2018 were as follows (dollars in thousands):

Fiscal year ended February 28, 2018

Issuer	Asset Type	Gross             Proceeds		Cost		Net Realized Gain             (Loss)
My Alarm Center, LLC	Second Lien Term Loan	$	2,617	$	10,330	$	(7,713	)
Mercury Funding, LLC	Equity Interests		2,631		858		1,773

The $7.7 million net realized loss on our investment in My Alarm Center, LLC was due to the completion of a sales transaction, following increasing leverage levels combined with declining market conditions in the sector.

The $1.8 million of net realized gain on our investment in Mercury Funding, LLC was driven by the completion of a sales transaction with a strategic acquirer.

Net change in unrealized appreciation (depreciation) on investments

For the year ended February 29, 2020, our investments had a net change in unrealized depreciation of $0.8 million versus a net change in unrealized depreciation of $2.9 million for the year ended February 28, 2019. The most significant cumulative changes in unrealized appreciation (depreciation) for the year ended February 29, 2020, were the following (dollars in thousands):

Fiscal year ended February 29, 2020

Issuer	Asset Type	Cost		Fair Value		Total Unrealized Appreciation (Depreciation)		YTD Change in Unrealized Appreciation (Depreciation)
Easy Ice, LLC	Second Term Lien Loan & Equity Interests	$	—	$	—	$	—	$	(3,817	)
GreyHeller LLC	First Term Lien Loan & Equity Interests		7,821		9,982		2,161		1,331
Netreo Holdings, LLC	First Term Lien Loan & Equity Interests		8,273		12,029		3,756		1,655

The $3.8 million net change in unrealized depreciation in our investment in Easy Ice, LLC was driven by the completion of a sales transaction. In recognizing a realized gain as a result of the sale, unrealized appreciation was adjusted to zero, which resulted in a $3.8 million change in unrealized depreciation for the year.

The $1.3 million net change in unrealized appreciation in our investment GreyHeller LLC was driven by increased operating margins and an increase in overall financial performance.

The $1.7 million net change in unrealized appreciation in our investment in Netreo Holdings, LLC was driven by growth and improved financial performance.

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For the year ended February 28, 2019, our investments had a net change in unrealized depreciation of $2.9 million versus a net change in unrealized appreciation of $10.8 million for the year ended February 28, 2018. The most significant cumulative net change in unrealized appreciation (depreciation) for the year ended February 28, 2019, were the following (dollars in thousands):

Fiscal year ended February 28, 2019

Issuer	Asset Type	Cost		Fair Value		Total Unrealized Appreciation (Depreciation)			YTD Change in Unrealized Appreciation (Depreciation)
Elyria Foundry, L.L.C.	Equity Interests	$	9,685	$	1,804	$	(7,881	)	$	(1,630	)
Roscoe Medical, Inc.	Second Lien Term Loan		4,189		2,499		(1,690	)		(1,419	)
Netreo Holdings, LLC	Equity Interests		3,150		5,179		2,029			2,029
My Alarm Center, LLC	Equity Interests		2,358		1,113		(1,245	)		(1,274	)

The $1.6 million net change in unrealized depreciation in our investment in Elyria Foundry, L.L.C. was driven by changes in oil and gas end markets sinceyear-end and increased labor costs, negatively impacting the Company’s performance.

The $1.4 million net change in unrealized depreciation in our investment in Roscoe Medical, Inc. was driven by decreased operating margins and reduced overall financial performance.

The $2.0 million net change in unrealized appreciation in our investment in Netreo Holdings, LLC was driven by growth and improved financial performance.

The $1.3 million net change in unrealized depreciation in our investment in My Alarm Center, LLC was driven by the issuance of new securities senior to existing investments.

For the year ended February 28, 2018, our investments had a net change in unrealized appreciation of $10.8 million versus a net change in unrealized depreciation of $10.6 million for the year ended February 28, 2017. The most significant cumulative changes in unrealized appreciation for the year ended February 28, 2018, were the following (dollars in thousands):

Fiscal year ended February 28, 2018

Issuer	Asset Type	Cost		Fair Value		Total Unrealized Appreciation (Depreciation)			YTD Change in Unrealized Appreciation
Elyria Foundry Company, L.L.C.	Equity Interests	$	9,685	$	3,434	$	(6,251	)	$	2,553
My Alarm Center, LLC	Second Lien Term Loan		—		—		—			2,298
Easy Ice, LLC	Equity Interests		8,761		10,760		1,999			1,999
Saratoga Investment Corp. CLO2013-1 Ltd.	Structured Finance Securities		9,296		11,875		2,579			1,948

The $2.6 million of net change in unrealized appreciation in our investment in Elyria Foundry Company, L.L.C. was driven by a continued increase in oil and gas markets, positively impacting the company’s performance.

The $2.3 million of net change in unrealized appreciation in our investment in My Alarm Center, LLC was driven by the completion of a sales transaction. In recognizing this loss as a result of the sale, unrealized depreciation was adjusted to zero, which resulted in a $2.3 million change in unrealized appreciation for the year.

The $2.0 million of net change in unrealized appreciation in our investment in Easy Ice, LLC was driven by the completion of a strategic acquisition that increased the scale and earnings of the business.

The $1.9 million of net change in unrealized appreciation in our investment in Saratoga CLO was driven by continued improved performance of the Saratoga CLO.

Changes in net assets resulting from operations

For the fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recorded a net increase in net assets resulting from operations of $55.7 million, $18.5 million and $17.7 million, respectively. Based on 9,319,192 weighted average common shares outstanding as of February 29, 2020, our per share net increase in net assets resulting from operations was $5.98 for the fiscal year ended February 29, 2020. This compares to a per share net increase in net assets resulting from operations of $2.63 for the fiscal year ended February 28, 2019 (based on 7,046,686 weighted average common shares outstanding as of February 28, 2019), and a per share net increase in net assets resulting from operations of $2.93 for the fiscal year ended February 28, 2018 (based on 6,024,040 weighted average common shares outstanding as of February 28, 2018).

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We intend to continue to generate cash primarily from cash flows from operations, including interest earned from our investments in debt in middle market companies, interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less, future borrowings and future offerings of securities.

Although we expect to fund the growth of our investment portfolio through the net proceeds from future equity offerings, including our dividend reinvestment plan (“DRIP”), and issuances of senior securities or future borrowings, to the extent permitted by the 1940 Act, we cannot assure you that our plans to raise capital will be successful. In this regard, because our common stock has historically traded at a price below our current net asset value per share and we are limited in our ability to sell our common stock at a price below net asset value per share, we have been and may continue to be limited in our ability to raise equity capital.

In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the distribution requirement applicable to RICs under the Code. In satisfying this distribution requirement, in accordance with certain applicable provisions of the Code and the Treasury regulations and a revenue procedure issued by the Internal Revenue Service (“IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. We may rely on the revenue procedure in future periods to satisfy our RIC distribution requirement.

Also, as a BDC, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200.0%, reduced to 150.0% effective April 16, 2019 following the approval received from thenon-interested board of directors on April 16, 2018. This requirement limits the amount that we may borrow. Our asset coverage ratio, as defined in the 1940 Act, was 607.1% as of February 29, 2020 and 234.5% as of February 28, 2019. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources, including the equity markets and other debt-related markets, which may or may not be available on favorable terms, if at all.

Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies or to repay borrowings. Also, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

Madison revolving credit facility

Below is a summary of the terms of the senior secured revolving credit facility we entered into with Madison Capital Funding LLC (the “Credit Facility”) on June 30, 2010, which was most recently amended on April 24, 2020.

Availability.The Company can draw up to the lesser of (i) $40.0 million (the “Facility Amount”) and (ii) the product of the applicable advance rate (which varies from 50.0% to 75.0% depending on the type of loan asset) and the value, determined in accordance with the Credit Facility (the “Adjusted Borrowing Value”), of certain “eligible” loan assets pledged as security for the loan (the “Borrowing Base”), in each case less (a) the amount of any undrawn funding commitments the Company has under any loan asset and which are not covered by amounts in the Unfunded Exposure Account referred to below (the “Unfunded Exposure Amount”) and outstanding borrowings. Each loan asset held by the Company as of the date on which the Credit Facility was closed was valued as of that date and each loan asset that the Company acquires after such date will be valued at the lowest of its fair value, its face value (excluding accrued interest) and the purchase price paid for such loan asset. Adjustments to the value of a loan asset will be made to reflect, among other things, changes in its fair value, a default by the obligor on the loan asset, insolvency of the obligor, acceleration of the loan asset, and certain modifications to the terms of the loan asset.

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The Credit Facility contains limitations on the type of loan assets that are “eligible” to be included in the Borrowing Base and as to the concentration level of certain categories of loan assets in the Borrowing Base such as restrictions on geographic and industry concentrations, asset size and quality, payment frequency, status and terms, average life, and collateral interests. In addition, if an asset is to remain an “eligible” loan asset, the Company may not make changes to the payment, amortization, collateral and certain other terms of the loan assets without the consent of the administrative agent that will either result in subordination of the loan asset or be materially adverse to the lenders.

Collateral.The Credit Facility is secured by substantially all of the assets of the Company (other than assets held by our SBIC subsidiaries) and includes the subordinated notes (“CLO Notes”) issued by Saratoga CLO and the Company’s rights under the CLO Management Agreement (as defined below).

Interest Rate and Fees.Under the Credit Facility, funds are borrowed from or through certain lenders at the greater of the prevailing LIBOR rate and 1.00%, plus an applicable margin of 4.75%. At the Company’s option, funds may be borrowed based on an alternative base rate, which in no event will be less than 2.00%, and the applicable margin over such alternative base rate is 3.75%. In addition, the Company pays the lenders a commitment fee of 0.75% per year on the unused amount of the Credit Facility for the duration of the Revolving Period (defined below). Accrued interest and commitment fees are payable monthly. The Company was also obligated to pay certain other fees to the lenders in connection with the closing of the Credit Facility.

Revolving Period and Maturity Date.The Company may make and repay borrowings under the Credit Facility for a period of three years following the closing of the Credit Facility (the “Revolving Period”). The Revolving Period may be terminated at an earlier time by the Company or, upon the occurrence of an event of default, by action of the lenders or automatically. All borrowings and other amounts payable under the Credit Facility are due and payable in full five years after the end of the Revolving Period.

Collateral Tests.It is a condition precedent to any borrowing under the Credit Facility that the principal amount outstanding under the Credit Facility, after giving effect to the proposed borrowings, not exceed the lesser of the Borrowing Base or the Facility Amount (the “Borrowing Base Test”). In addition to satisfying the Borrowing Base Test, the following tests must also be satisfied (together with Borrowing Base Test, the “Collateral Tests”):

• Interest Coverage Ratio.The ratio (expressed as a percentage) of interest collections with respect to pledged loan assets, less certain fees and expenses relating to the Credit Facility, to accrued interest and commitment fees and any breakage costs payable to the lenders under the Credit Facility for the last 6 payment periods must equal at least 175.0%.

• Overcollateralization Ratio.The ratio (expressed as a percentage) of the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets plus the fair value of certain ineligible pledged loan assets and the CLO Notes (in each case, subject to certain adjustments) to outstanding borrowings under the Credit Facility plus the Unfunded Exposure Amount must equal at least 200.0%.

• Weighted Average FMV Test.The aggregate adjusted or weighted value of “eligible” pledged loan assets as a percentage of the aggregate outstanding principal balance of “eligible” pledged loan assets must be equal to or greater than 72.0% and 80.0% during the one-year periods prior to the first and second anniversary of the closing date, respectively, and 85.0% at all times thereafter.

The Credit Facility also requires payment of outstanding borrowings or replacement of pledged loan assets upon the Company’s breach of its representation and warranty that pledged loan assets included in the Borrowing Base are “eligible” loan assets. Such payments or replacements must equal the lower of the amount by which the Borrowing Base is overstated as a result of such breach or any deficiency under the Collateral Tests at the time of repayment or replacement. Compliance with the Collateral Tests is also a condition to the discretionary sale of pledged loan assets by the Company.

Priority of Payments.During the Revolving Period, the priority of payments provisions of the Credit Facility require, after payment of specified fees and expenses and any necessary funding of the Unfunded Exposure Account, that collections of principal from the loan assets and, to the extent that these are insufficient, collections of interest from the loan assets, be applied on each payment date to payment of outstanding borrowings if the Borrowing Base Test, the Overcollateralization Ratio and the Interest Coverage Ratio would not otherwise be met. Similarly, following termination of the Revolving Period, collections of interest are required to be applied, after payment of certain fees and expenses, to cure any deficiencies in the Borrowing Base Test, the Interest Coverage Ratio and the Overcollateralization Ratio as of the relevant payment date.

Reserve Account.The Credit Facility requires the Company to set aside an amount equal to the sum of accrued interest, commitment fees and administrative agent fees due and payable on the next succeeding three payment dates (or corresponding to three payment periods). If for any monthly period during which fees and other payments accrue, the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets which do not pay cash interest at least quarterly exceeds 15.0% of the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets, the Company is required to set aside such interest and fees due and payable on the next succeeding six payment dates. Amounts in the reserve account can be applied solely to the payment of administrative agent fees, commitment fees, accrued and unpaid interest and any breakage costs payable to the lenders.

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Unfunded Exposure Account.With respect to revolver or delayed draw loan assets, the Company is required to set aside in a designated account (the “Unfunded Exposure Account”) 100.0% of its outstanding and undrawn funding commitments with respect to such loan assets. The Unfunded Exposure Account is funded at the time the Company acquires a revolver or delayed draw loan asset and requests a related borrowing under the Credit Facility. The Unfunded Exposure Account is funded through a combination of proceeds of the requested borrowing and other Company funds, and if for any reason such amounts are insufficient, through application of the priority of payment provisions described above.

Operating Expenses.The priority of payments provision of the Credit Facility provides for the payment of certain operating expenses of the Company out of collections on principal and interest during the Revolving Period and out of collections on interest following the termination of the Revolving Period in accordance with the priority established in such provision. The operating expenses payable pursuant to the priority of payment provisions is limited to $350,000 for each monthly payment date or $2.5 million for the immediately preceding period of twelve consecutive monthly payment dates. This ceiling can be increased by the lesser of 5.0% or the percentage increase in the fair market value of all the Company’s assets only on the first monthly payment date to occur after eachone-year anniversary following the closing of the Credit Facility. Upon the occurrence of a Manager Event (described below), the consent of the administrative agent is required in order to pay operating expenses through the priority of payments provision.

Events of Default.The Credit Facility contains certain negative covenants, customary representations and warranties and affirmative covenants and events of default. The Credit Facility does not contain grace periods for breach by the Company of certain covenants, including, without limitation, preservation of existence, negative pledge, change of name or jurisdiction and separate legal entity status of the Company covenants and certain other customary covenants. Other events of default under the Credit Facility include, among other things, the following:

• an Interest Coverage Ratio of less than 150.0%;

• an Overcollateralization Ratio of less than 175.0%;

• the filing of certain ERISA or tax liens;

• the occurrence of certain “Manager Events” such as:

• failure by Saratoga Investment Advisors and its affiliates to maintain collectively, directly or indirectly, a cash equity investment in the Company in an amount equal to at least $5.0 million at any time prior to the third anniversary of the closing date;

• failure of the Management Agreement between Saratoga Investment Advisors and the Company to be in full force and effect;

• indictment or conviction of Saratoga Investment Advisors or any “key person” for a felony offense, or any fraud, embezzlement or misappropriation of funds by Saratoga Investment Advisors or any “key person” and, in the case of “key persons,” without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed to replace such key person within 30 days;

• resignation, termination, disability or death of a “key person” or failure of any “key person” to provide active participation in Saratoga Investment Advisors’ daily activities, all without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed within 30 days; or

• occurrence of any event constituting “cause” under the Collateral Management Agreement between the Company and Saratoga CLO (the “CLO Management Agreement”), delivery of a notice under Section 12(c) of the CLO Management Agreement with respect to the removal of the Company as collateral manager or the Company ceases to act as collateral manager under the CLO Management Agreement.

Conditions to Acquisitions and Pledges of Loan Assets.The Credit Facility imposes certain additional conditions to the acquisition and pledge of additional loan assets. Among other things, the Company may not acquire additional loan assets without the prior written consent of the administrative agent until such time that the administrative agent indicates in writing its satisfaction with Saratoga Investment Advisors’ policies, personnel and processes relating to the loan assets.

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Fees and Expenses.The Company paid certain fees and reimbursed Madison Capital Funding LLC for the aggregate amount of all documented,out-of-pocket costs and expenses, including the reasonable fees and expenses of lawyers, incurred by Madison Capital Funding LLC in connection with the Credit Facility and the carrying out of any and all acts contemplated thereunder up to and as of the date of closing of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates. These amounts totaled $2.0 million.

On February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

• expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

• extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

• remove the condition that we may not acquire additional loan assets without the prior written consent of the administrative agent.

On September 17, 2014, we entered into a second amendment to the Revolving Facility with Madison Capital Funding LLC to, among other things:

• extend the commitment termination date from February 24, 2015 to September 17, 2017;

• extend the maturity date of the Revolving Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

• reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

• reduce the floor on base rate borrowings from 3.00% to 2.25%; and on LIBOR borrowings from 2.00% to 1.25%.

On May 18, 2017, we entered into a third amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

• extend the commitment termination date from September 17, 2017 to September 17, 2020;

• extend the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025;

• reduce the floor on base rate borrowings from 2.25% to 2.00%;

• reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and

• reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.

On April 24, 2020, we entered into a fourth amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

• permit certain amendments related to the Paycheck Protection Program (“Permitted PPP Amendment”) to Loan Asset Documents;

• exclude certain debt and interest amounts allowed by the Permitted PPP Amendments from certain calculations related to Net Leverage Ratio, Interest Coverage Ratio and EBITDA; and

• exclude such Permitted PPP Amendments from constituting a Material Modification.

As of February 29, 2020, we had no outstanding borrowings under the Credit Facility and $150.0 million of SBA-guaranteed debentures outstanding (which are discussed below). As of February 28, 2019, we had no outstanding borrowings under the Credit Facility and $150.0 million ofSBA-guaranteed debentures outstanding. Our borrowing base under the Credit Facility at February 29, 2020 and February 28, 2019 was $35.6 million and $30.6 million, respectively.

Our asset coverage ratio, as defined in the 1940 Act, was 607.1% as of February 29, 2020 and 234.5% as of February 28, 2019.

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SBA-guaranteed debentures

In addition, we, through two wholly-owned subsidiaries, sought and obtained licenses from the SBA to operate an SBIC. In this regard, on March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC LP, received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958 and on August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP, also received a license. SBICs are designated to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses.

The SBIC license allows our SBIC subsidiaries to obtain leverage by issuingSBA-guaranteed debentures. SBA-guaranteed debentures arenon-recourse, interest only debentures with interest payable semi-annually and have aten-year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with10-year maturities.

SBA regulations previously limited the amount that our SBIC subsidiary may borrow to a maximum of $150.0 million when it has at least $75.0 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. This maximum has been increased by SBA regulators for new licenses to $175.0 million of SBA debentures when it has at least $87.5 million in regulatory capital. The new license will provide up to $175.0 million in additional long-term capital in the form ofSBA-guaranteed debentures. The SBIC LP and SBIC II LP are regulated by the SBA. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount ofSBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million. Our wholly-owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA. With this license approval, Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital.

We received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiaries guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows us increased flexibility under the asset coverage test by permitting us to borrow up to $325.0 million more than we would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.

As of February 29, 2020, our SBIC LP subsidiary had $75.0 million in regulatory capital and $150.0 millionSBA-guaranteed debentures outstanding and our SBIC II LP subsidiary had $50.0 million in regulatory capital and did not have anySBA-guaranteed debentures outstanding.

Unsecured notes

In May 2013, we issued $48.3 million in aggregate principal amount of our 2020 Notes for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters’ full exercise of their overallotment option. Interest on these 2020 Notes is paid quarterly in arrears on February 15, May 15, August 15 and November 15, at a rate of 7.50% per year, beginning August 15, 2013. The 2020 Notes mature on May 31, 2020 and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at our option. In connection with the issuance of the 2020 Notes, we agreed to the following covenants for the period of time during which the 2020 Notes are outstanding:

• we will not violate (whether or not we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200.0% after such borrowings.

• we will not violate (regardless of whether we are subject to) Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to (i) any exemptive relief granted to us by the SEC and(ii) no-action relief granted by the SEC to another BDC (or to the Company if it determines to seek such similar no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a) (1)(B) as modified by Section 61(a)(1) of the 1940 Act in order to maintain the BDC’s status as a regulated investment company under the Code. Currently these provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, is below 200.0% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase.

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The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the NYSE.

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an ATM offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 2023 Notes for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 30, 2023, and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes on January 13, 2017, which amounted to $61.8 million, and for general corporate purposes in accordance with our investment objective and strategies. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes and are no longer listed on the NYSE.

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025 and commencing August 31, 2021, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

On February 5, 2019, the Company completed are-opening andup-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

At February 29, 2020, the total 2025 Notes outstanding was $60.0 million.

In connection with the issuance of the 2025 Notes, we agreed to the following covenants for the period of time during which the notes are outstanding:

• we will not violate (whether or not we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC. These provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings, or, if we obtain the required approvals from our independent directors and/or stockholders, 150% (after deducting the amount of such dividend, distribution or purchase price, as the case may be).

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• we will not declare any dividend (except a dividend payable in our stock), or declare any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least 150.0%, as such obligation may be amended or superseded, after deducting the amount of such dividend, distribution or purchase price, as the case may be, and in each case giving effect to (i) any exemptive relief granted to us by the SEC, and (ii) any SECno-action relief granted by the SEC to another BDC (or to us if we determine to seek such similarno-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time, as such obligation may be amended or superseded, in order to maintain such BDC’s status as a regulated investment company under Subchapter M of the Code.

• if, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to holders of the 2025 Notes and the Trustee, for the period of time during which the 2025 Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

At February 29, 2020 and February 28, 2019, the fair value of total cash and cash equivalents, cash and cash equivalents in reserve accounts and total investments by major category are as follows:

	February 29, 2020					February 28, 2019
	Fair Value		Percentage of Total			Fair Value		Percentage of Total
	($ in thousands)
Cash and cash equivalents	$	24,599		4.7	%	$	30,799		6.6	%
Cash and cash equivalents, reserve accounts		14,851		2.8			31,295		6.7
First lien term loans		346,233		66.0			202,846		43.7
Second lien term loans		73,570		14.0			125,786		27.1
Unsecured term loans		4,346		0.8			2,100		0.5
Structured finance securities		32,470		6.2			35,328		7.6
Equity interests		29,013		5.5			35,960		7.8
Total	$	525,082		100.0	%	$	464,114		100.0	%

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were also added to the agreement. On July 11, 2019, the amount of the common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. For the year ended February 29, 2020, the Company sold 3,427,346 shares for gross proceeds of $85.9 million at an average price of $25.06 for aggregate net proceeds of $84.7 million (net of transaction costs) and as of February 29, 2020, the Company sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).

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On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements. On October 7, 2015, the Company’s board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On May 4, 2020, the Board of Directors increased the share repurchase plan to 1.3 million shares of common stock. As of February 29, 2020, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

On January 7, 2020, the Company declared a dividend of $0.56 per share, which was paid on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.4 million in cash and 35,682 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.44 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 24, 27, 28, 29, 30, 31 and February 3, 4, 5 and 6, 2020.

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

On May 28, 2019, our board of directors declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record as of June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

On November 27, 2018, our board declared a dividend of $0.53 per share payable on January 2, 2019, to common stockholders of record on December 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 30,796 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $18.88 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28, 31, 2018 and January 2, 2019.

On August 28, 2018, our board of directors declared a dividend of $0.52 per share, which was paid on September 27, 2018, to common stockholders of record as of September 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 25,862 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.35 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2018.

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On May 30, 2018, our board of directors declared a dividend of $0.51 per share, which was paid on June 27, 2018, to common stockholders of record as of June 15, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.7 million in cash and 21,562 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.72 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2018.

On February 26, 2018, our board of directors declared a dividend of $0.50 per share, which was paid on March 26, 2018, to common stockholders of record as of March 14, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.6 million in cash and 25,354 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $19.91 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.

On November 29, 2017, our board of directors declared a dividend of $0.49 per share payable on December 27, 2017, to common stockholders of record on December 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 25,435 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.14 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and 27, 2017.

On August 28, 2017, our board of directors declared a dividend of $0.48 per share payable on September 26, 2017, to common stockholders of record on September 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.2 million in cash and 33,551 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.19 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22, 25 and 26, 2017.

On May 30, 2017, our board of directors declared a dividend of $0.47 per share which was paid on June 27, 2017, to common stockholders of record on June 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.3 million in cash and 26,222 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.04 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.

On February 28, 2017, our board of directors declared a dividend of $0.46 per share, which was paid on March 28, 2017, to common stockholders of record as of March 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.38 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.

On January 12, 2017, our board of directors declared a dividend of $0.45 per share, which was paid on February 9, 2017, to common stockholders of record as of January 31, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.6 million in cash and 50,453 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.25 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7, 8 and 9, 2017.

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On October 5, 2016, our board of directors declared a dividend of $0.44 per share, which was paid on November 9, 2016, to common stockholders of record as of October 31, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,548 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.12 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7, 8 and 9, 2016.

On August 8, 2016, our board of directors declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

On July 7, 2016, our board of directors declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

On March 31, 2016, our board of directors declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record as of April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.

On January 12, 2016, our board of directors declared a dividend of $0.40 per share, which was paid on February 29, 2016, to common stockholders of record as of February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock, or 1.2% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.11 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and 29, 2016.

On October 7, 2015, our board of directors declared a dividend of $0.36 per share, which was paid on November 30, 2015, to common stockholders of record as of November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock, or 1.1% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.53 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and 30, 2015.

On July 8, 2015, our board of directors declared a dividend of $0.33 per share, which was paid on August 31, 2015, to common stockholders of record as of August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.28 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.

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On May 14, 2015, our board of directors declared a special dividend of $1.00 per share, which was paid on June 5, 2015, to common stockholders of record on as of May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock, or 2.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.47 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4, and 5, 2015.

On April 9, 2015, our board of directors declared a dividend of $0.27 per share, which was paid on May 29, 2015, to common stockholders of record as of May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.78 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.

On September 24, 2014, our board of directors declared a dividend of $0.22 per share, which was paid on February 27, 2015, to common stockholders of record on February 2, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.97 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and 27, 2015.

Also, on September 24, 2014, our board of directors declared a dividend of $0.18 per share, which was paid on November 28, 2014, to common stockholders of record on November 3, 2014. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.37 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and 28, 2014.

On October 30, 2013, our board of directors declared a dividend of $2.65 per share, which was paid on December 27, 2013, to common stockholders of record as of November 13, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. This dividend was declared in reliance on certain private letter rulings issued by the IRS concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which equaled the volume weighted average trading price per share of the common stock on December 11, 13 and 16, 2013.

On November 9, 2012, our board of directors declared a dividend of $4.25 per share, which was paid on December 31, 2012, to common stockholders of record as of November 20, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17 and 19, 2012.

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On November 15, 2011, our board of directors declared a dividend of $3.00 per share, which was paid on December 30, 2011, to common stockholders of record as of November 25, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.117067 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

On November 12, 2010, our board of directors declared a dividend of $4.40 per share to shareholders payable in cash or shares of our common stock, in accordance with the provisions of the IRS Revenue Procedure2010-12, which allows a publicly-traded regulated investment company to satisfy its distribution requirements with a distribution paid partly in common stock provided that at least 10.0% of the distribution is payable in cash. The dividend was paid on December 29, 2010 to common shareholders of record on November 19, 2010. Based on shareholder elections, the dividend consisted of $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010.

On November 13, 2009, our board of directors declared a dividend of $18.25 per share, which was paid on December 31, 2009, to common stockholders of record as of November 25, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $0.25 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock, or 104.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 13.7% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $1.5099 per share, which equaled the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.

We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.

Contractual obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at February 29, 2020:

			Payment Due by Period
Long-Term Debt Obligations	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
	($ in thousands)
Revolving credit facility	$	—	$	—	$	—	$	—	$	—
SBA debentures		150,000		—		—		79,000		71,000
2025 Notes		60,000		—		—		—		60,000
Total Long-Term Debt Obligations	$	210,000	$	—	$	—	$	79,000	$	131,000

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Off-balance sheet arrangements

At February 29, 2020 and February 28, 2019, the Company’soff-balance sheet arrangements consisted of $64.1 million and $4.5 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

A summary of the unfunded commitments outstanding as of February 29, 2020 and February 28, 2019 is shown in the table below (dollars in thousands):

	February 29, 2020		February 28, 2019
At Company’s discretion
inMotionNow, Inc.	$	3,000	$	—
Omatic Software, LLC		1,000		1,000
Passageways, Inc.		5,000		—
PDDS Buyer, LLC		5,000		—
Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd		17,500		—
Top Gun Pressure Washing, LLC		5,000		—
Village Realty Holdings LLC		10,000		—
Total		46,500		1,000
At portfolio company’s discretion—satisfaction of certain financial and nonfinancial covenants required
ArbiterSports, LLC	$	1,000	$	—
Axiom Purchaser, Inc.		1,000		1,000
CoConstruct, LLC		3,500		—
Davisware, LLC		2,000		—
Destiny Solutions Inc.		—		1,500
GDS Holdings US, Inc.		—		1,000
GoReact		2,000		—
HemaTerra Holding Company, LLC		4,000		—
Passageways, Inc.		3,000		—
Village Realty Holdings LLC		1,124		—
		17,624		3,500
Total	$	64,124	$	4,500

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business activities contain elements of market risk. We consider our principal market risk to be the fluctuation in interest rates. Managing this risk is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor this risk and thresholds by means of administrative and information technology systems and other policies and processes. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us.

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, including relative changes in different interest rates, variability of spread relationships, the difference inre-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio.

Our investment income is affected by fluctuations in various interest rates, including LIBOR and the prime rate. A large portion of our portfolio is, and we expect will continue to be, comprised of floating rate investments that utilize LIBOR. Our interest expense is affected by fluctuations in LIBOR only on our revolving credit facility. At February 29, 2020, we had $210.0 million of borrowings outstanding. There were no borrowings outstanding under the revolving credit facility as of February 29, 2020. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR.

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We have analyzed the potential impact of changes in interest rates on interest income from investments. Assuming that our investments as of February 29, 2020 were to remain constant for a full fiscal year and no actions were taken to alter the existing interest rate terms, a hypothetical change of a 1.0% increase in interest rates would cause a corresponding increase of approximately $2.7 million to our interest income. Conversely, a hypothetical change of a 1.0% decrease in interest rates would cause a corresponding decrease of approximately $0.8 million to our interest income.

Changes in interest rates would have no impact to our current interest and debt financing expense, as all our borrowings except for our credit facility are fixed rate, and our credit facility is currently undrawn.

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the statements of assets and liabilities and other business developments that could magnify or diminish our sensitivity to interest rate changes, nor does it account for divergences in LIBOR and the commercial paper rate, which have historically moved in tandem but, in times of unusual credit dislocations, have experienced periods of divergence. Accordingly, no assurances can be given that actual results would not materially differ from the potential outcome simulated by this estimate.

For further information, the following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of February 29, 2020.

Basis          Point         Change	Increase (Decrease) in Interest         Income			(Increase) Decrease in Interest         Expense		Increase (Decrease) in Net Investment Income			Increase (Decrease) in Net Investment Income per Share
($ in thousands)
-100	$	(815	)	$	—	$	(815	)	$	(0.09	)
-50		(746	)		—		(746	)		(0.08	)
-25		(408	)		—		(408	)		(0.04	)
25		467			—		467			0.05
50		1,086			—		1,086			0.12
100		2,672			—		2,672			0.29
200		6,672			—		6,672			0.72
300		10,713			—		10,713			1.15
400		14,754			—		14,754			1.58

The table above assumes no defaults or prepayments by portfolio companies over the next twelve months. The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are annexed to this Annual Report beginning on pageF-1. In addition, the Financial Statements of Saratoga Investment Corp. CLO 2013-1, Ltd. are annexed to this Annual Report beginning on pageS-1.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, our chief executive officer and our chief financial officer have concluded that our current disclosure controls and procedures are effective in facilitating timely decisions regarding required disclosure of any material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s annual report on internal control over financial reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with polices or procedures may deteriorate.

Under the supervision and with participation of our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the Company’s evaluation under the framework in Internal Control—Integrated Framework (2013), management concluded that the Company’s internal control over financial reporting was effective as of February 29, 2020.

Attestation Report of the Registered Public Accounting Firm

Our internal control over financial reporting as of February 29, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included in the consolidated financial statements of the Company in this Annual Report under the heading Report of Independent Registered Public Accounting Firm.

Changes in internal controls over financial reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule13a-15(f) of Exchange Act) that occurred during our most recently completed fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Director and Executive Officer Information

Directors

The following table sets forth the names, ages and positions held by each of our directors, followed by a brief biography of each individual, including the business experience of each individual during the past five years and the specific qualifications that led to the conclusion that each individual should serve as a director.

Name	Age		Position	Director Since		Term Expires
Interested Directors
Christian L. Oberbeck		60	Chairman of the Board and Chief Executive Officer		2010		2021
Michael J. Grisius		56	President and Director		2011		2020
Independent Directors
Steven M. Looney		70	Director		2007		2022
Charles S. Whitman III		78	Director		2007		2022
G. Cabell Williams		66	Director		2007		2020

Christian L. Oberbeck—Mr. Oberbeck has over 35 years of experience in leveraged finance, from distressed debt to private equity, and has been involved in originating, structuring, negotiating, consummating, managing and monitoring investments in these businesses. Mr. Oberbeck is the Managing Member of Saratoga Investment Advisors, LLC, the Company’s investment adviser, and the Chairman of the Board and Chief Executive Officer of the Company. Mr. Oberbeck also served as President of the Company until February 2014. Mr. Oberbeck is also the Managing Partner of Saratoga Partners, a middle market private equity investment firm.

Prior to assuming full management responsibility for Saratoga Partners in 2008, Mr. Oberbeck had co-managed Saratoga Partners since 1995. Mr. Oberbeck joined Dillon Read and Saratoga Partners from Castle Harlan, Inc., a corporate buyout firm which he had joined at its founding in 1987 and was a Managing Director, leading successful investments in manufacturing and financial services companies. Prior to that, he worked in the Corporate Development Group of Arthur Young and in corporate finance at Blyth Eastman Paine Webber. Mr. Oberbeck has been a director of numerous middle market companies.

Mr. Oberbeck graduated from Brown University in 1982 with a BS in Physics and a BA in Mathematics. In 1985, he earned an MBA from Columbia University. Mr. Oberbeck’s qualifications as a director include his extensive experience in the investment and finance industry, as well as his intimate knowledge of the Company’s operations, gained through his service as an executive officer.

Michael J. Grisius—Mr. Grisius has over 29 years of experience in leveraged finance, investment management and financial services. He has originated, structured, negotiated, consummated, managed and monitored numerous successful investments in mezzanine debt, private equity, senior debt, structured products and commercial real estate debt. Mr. Grisius is Chief Investment Officer and a Managing Director of Saratoga Investment Advisors, LLC, the Company’s investment adviser, and was appointed President of the Company in February 2013. Mr. Grisius joined Saratoga Investment Advisors, LLC in July 2011.

Prior to joining Saratoga Investment Advisors, Mr. Grisius served as Managing Director at Allied Capital Corporation, where he was an investment professional for 16 years. At Allied Capital Corporation, Mr. Grisius held several senior positions includingco-head of Mezzanine Finance and member of its Management Committee and its Investment Committee. In 2008, Mr. Grisius was appointed co-chairman of the Allied Capital Corporation’s Investment Committee. He also had responsibility for structuring and managing Unitranche Fund, LLC. During his tenure at Allied, Mr. Grisius built and led teams that made investments in subordinated debt, control equity and real estate mortgage debt. Mr. Grisius has served on the board of directors of numerous middle market companies. Prior to joining Allied Capital Corp., Mr. Grisius worked in leveraged finance at Chemical Bank from 1989 to 1992 and held senior accountant and consultant positions with KPMG LLP from 1985 to 1988.

Mr. Grisius graduated with a BS from Georgetown University in 1985 and earned an MBA from Cornell University’s Johnson Graduate School of Management in 1990. Mr. Grisius’ qualifications as a director include his broad experience in leverage finance, investment management, private equity and financial services.

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Steven M. Looney—Mr. Looney is a Managing Director of Peale Davies & Co. Inc., a strategic advisory firm specializing in change management, revenue enhancement and business process improvement for middle market enterprises and is a CPA and an attorney. Mr. Looney has served as a consultant and director to numerous companies in the healthcare, manufacturing and services industries. Between 2000 and 2005, he served as Senior Vice President and Chief Financial Officer of PCCI, Inc., a private IT staffing and outsourcing firm. Between 1992 and 2000, Mr. Looney worked at WH Industries as Chief Financial and Administrative Officer. Mr. Looney is a trustee of Excellent Education for Everyone, a nonprofit organization. Mr. Looney graduated summa cum laude from the University of Washington with a B.A. degree in accounting and received a J.D. from the University of Washington School of Law where he was a member of the law review. He began his career at the United States Securities and Exchange Commission. Mr. Looney’s qualifications as director include his experience as a Managing Director of Peale Davies & Co. and as Chief Financial and Administrative Officer of WH Industries, as well as his financial, accounting and legal expertise.

Charles S. Whitman III—Mr. Whitman is senior counsel (retired) at Davis Polk & Wardwell LLP. Mr. Whitman was a partner in Davis Polk’s Corporate Department for 28 years, representing clients in a broad range of corporate finance matters, including shelf registrations, securities compliance for financial institutions, foreign asset privatizations, and mergers and acquisitions. From 1971 to 1973, Mr. Whitman served as Executive Assistant to three successive Chairmen of the SEC. Mr. Whitman graduated from Harvard College and graduated magna cum laude from Harvard Law School with a LL.B. Mr. Whitman also received an LL.M. from Cambridge University in England. Mr. Whitman’s qualifications as director include his 28 years of experience representing clients, including AT&T, Exxon Mobil, General Motors and BP, in securities matters as a partner in Davis Polk’s corporate department.

G. Cabell Williams—Mr. Williams has served as the Managing General Partner of Williams and Gallagher, a private equity partnership located in Chevy Chase, Maryland since 2004. Mr. Williams is a Partner, Senior Manager and Director of Farragut Capital Partners, which is a Mezzanine Fund based out of Chevy Chase, Maryland. In 2004, Mr. Williams concluded a 23-year career at Allied Capital Corporation, a business development company based in Washington, DC, which was acquired by Ares Capital Corporation in 2010. While at Allied, Mr. Williams held a variety of positions, including President, CIO and finally Managing Director following Allied’s merger with its affiliates in 1998. From 1991 to 2004, Mr. Williams either led orco-managed the firm’s Private Equity Group. For the nine years prior to 1999, Mr. Williams led Allied’s Mezzanine investment activities. For 15 years, Mr. Williams served on Allied’s Investment Committee where he was responsible for reviewing and approving all of the firm’s investments. Prior to 1991, Mr. Williams ran Allied’s Minority Small Business Investment Company. He also founded Allied Capital Commercial Corporation, a real estate investment vehicle. Mr. Williams has served on the board of directors of various public and private companies. Mr. Williams attended The Landon School, and graduated from Mercersburg Academy and Rollins College, receiving a B.S. in Business Administration from the latter. Mr. Williams’ qualifications as director include his 28 years of experience managing investment activities at Allied Capital, where he served in a variety of positions, including President, CIO and Managing Director.

Executive Officer Who Is Not Also a Director

The following table sets forth the name, age and position held by our executive officer who is not also a director, followed by a brief biography, including the business experience during the past five years.

Name	Age		Position
Executive Officer
Henri J. Steenkamp		44	Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary

Henri J. Steenkamp—Mr. Steenkamp, 44 years old, had served as the Chief Financial Officer of MF Global Holdings Ltd., a broker in commodities and derivatives, from April 2011. Prior to that, Mr. Steenkamp held the position of Chief Accounting Officer and Global Controller at MF Global for four years. He joined MF Global, then Man Financial, in 2006 as Vice President of External Reporting and Accounting Policy. After MF Global filed for bankruptcy protection in October 2011, he continued to serve as Chief Financial Officer of the holding company through January 2013.

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Before joining MF Global, Mr. Steenkamp spent eight years with PricewaterhouseCoopers (“PwC”), including four years in Transaction Services in its New York office, managing a variety of capital-raising transactions on a global basis. His focus was also on the SEC registration and public company filing process, including technical accounting. He spent four years with PwC in South Africa, where he served as an auditor primarily for SEC registrants and assisted South African companies as they went public in the U.S. Mr. Steenkamp is a chartered accountant and holds an honors degree in Finance.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics which applies to, among others, our executive officers, including our principal executive officer and principal financial officer, as well as every officer, director and employee of the Company. Requests for copies should be sent in writing to Saratoga Investment Corp., 535 Madison Avenue, New York, New York 10022. The Company’s Code of Business Conduct and Ethics is also available on our website atwww.saratogainvestmentcorp.com.

If we make any substantive amendment to, or grant a waiver from, a provision of our Code of Business Conduct and Ethics, we will promptly disclose the nature of the amendment or waiver on our website atwww.saratogainvestmentcorp.com.

Practices and Policies Regarding Hedging, Speculative Trading and Pledging of Securities

Our insider trading policy generally prohibits the Company’s and our Investment Adviser’s directors, officers and employees from engaging in any short-term trading, short sales and other speculative transactions involving our securities, including buying or selling puts or calls or other derivative securities based on our securities. In addition, such persons are generally prohibited under our insider trading policy from entering into hedging or monetization transactions or similar arrangements, as well as pledging our securities in a margin account or as collateral for a loan, except in limited circumstances that are pre-approved by our chief compliance officer.

Nomination of Directors

There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors implemented since the filing of our Proxy Statement for our 2018 Annual Meeting of Stockholders.

Audit Committee

The current members of the audit committee are Steven M. Looney (Chairman), Charles S. Whitman III and G. Cabell Williams. The board of directors has determined that Mr. Looney is an “audit committee financial expert” as defined under Item 407 of RegulationS-K of the Securities Exchange Act of 1934 and that each of Messrs. Whitman and Williams are “financially literate” as required by NYSE corporate governance standards. All of these members are independent directors.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

Currently, none of our executive officers are compensated by us. We currently have no employees, and each of our executive officers is also an employee of Saratoga Investment Advisors. Services necessary for our business are provided by individuals who are employees of Saratoga Investment Advisors, pursuant to the terms of the Management Agreement and the Administration Agreement.

Director Compensation

Our independent directors receive an annual fee of $60,000. They also receive $2,500 plus reimbursement of reasonableout-of-pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonableout-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the audit committee receives an annual fee of $10,000 and the chairman of each other committee receives an annual fee of $5,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors’ fees in the form of our common stock issued at a price per share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are “interested persons.”

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The following table sets forth information concerning total compensation earned by or paid to each of our directors during the fiscal year ended February 29, 2020:

	Fees Earned or Paid in Cash		Total
Interested Directors
Christian L. Oberbeck(1)	$	—	$	—
Michael J. Grisius(1)		—		—
Independent Directors
Steven M. Looney	$	96,000	$	96,000
Charles S. Whitman III		91,000		91,000
G. Cabell Williams		91,000		91,000

(1) No compensation was paid to directors who are interested persons of us as defined in the 1940 Act.

Compensation Committee Interlocks and Insider Participation

The current members of the compensation committee are G. Cabell Williams (Chairman), Steven M. Looney and Charles S. Whitman III. All of these members are independent directors. The compensation committee is responsible for overseeing the Company’s compensation policies generally and making recommendations to the board of directors with respect to incentive compensation and equity-based plans of the Company that are subject to board of directors approval, evaluating executive officer performance and reviewing the Company’s management succession plan, overseeing and setting compensation for the Company’s directors and, as applicable, its executive officers and, as applicable, preparing the report on executive officer compensation that SEC rules require to be included in our Annual Report on Form10-K. Currently, none of our executive officers are compensated by the Company and as such the compensation committee is not required to produce a report on executive officer compensation for inclusion in our Annual Report on Form10-K.

During fiscal year 2020, none of the Company’s executive officers served on the board of directors (or a compensation committee thereof or other board committee performing equivalent functions) of any entities that had one or more executive officers serve on the compensation committee or on the board of directors. No current or past executive officers or employees of the Company or its affiliates serve on the compensation committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of May 5, 2020, the beneficial ownership of each current director, the nominees for director, the Company’s executive officers, each person known to us to beneficially own 5.0% or more of the outstanding shares of our common stock, and the executive officers and directors as a group.

The percentage ownership is based on 11,217,545 shares of common stock outstanding as of May 5, 2020. Shares of common stock that are subject to warrants or other convertible securities currently exercisable or exercisable within 60 days thereof, are deemed outstanding for the purposes of computing the percentage ownership of the person holding these options or convertible securities, but are not deemed outstanding for computing the percentage ownership of any other person. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. To our knowledge, unless otherwise indicated in the footnotes to this table, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned. Unless otherwise indicated by footnote, the address for each listed individual is Saratoga Investment Corp., 535 Madison Avenue, New York, New York 10022.

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Name of Beneficial Owners	Number of Shares of Common Stock Beneficially Owned			Percent of         Class
Interested Directors
Christian L. Oberbeck		1,525,246	(1)		13.6	%
Michael J. Grisius		153,725			1.4	%
Executive Officer
Henri J. Steenkamp		11,048			*
Independent Directors
Steven M. Looney		2,508			*
Charles S. Whitman III		3,183			*
G. Cabell Williams		52,193			*
All Directors and Executive Officers as a Group		1,747,903			15.6	%
Owners of 5% or more of our common stock
Black Diamond Capital Management, L.L.C.(2)		848,800			7.6	%
Elizabeth Oberbeck(3)		549,183			4.9	%
Thomas V. Inglesby		354,236			3.2	%

* Less than 1.0%

Mr. Oberbeck and Inglesby are affiliates who make up 16.8% of the ownership of SAR.

(1) Includes 725,435 shares of common stock directly held by Mr. Oberbeck, 217,774 shares of common stock held by CLO Partners LLC, an entity wholly owned by Mr. Oberbeck, 31,843 shares of common stock directly held by Mr. Oberbeck’s children, for which Mr. Oberbeck retains the voting rights, 1,011 shares of common stock directly held by Mr. Oberbeck’s wife, for which Mr. Oberbeck retains the voting rights, and 549,183 shares of common stock directly held by Elizabeth Oberbeck. See footnote 3 below.

(2) Based on information included in Amendment No. 9 to Schedule 13G filed by Black Diamond Capital Management, L.L.C. with the SEC on February 14, 2020. The address of Black Diamond Capital Management, L.L.C. is One Sound Shore Drive, Suite 200, Greenwich, CT 06830.

(3) Based on information included in Amendment No. 3 to Schedule 13D filed jointly by Christian L. Oberbeck, Elizabeth Oberbeck, Saratoga Investment Advisors and CLO Partners LLC on November 4, 2014. Pursuant to an Agreement Relating to Shares of Common Stock of Saratoga Investment Corp. (the “Transfer Agreement”), Christian L. Oberbeck transferred 744,183 shares of common stock beneficially owned by him to Elizabeth Oberbeck. Elizabeth Oberbeck has full ownership rights with respect to the shares, including without limitation, the right to (A) receive any cash and/or stock dividends and distributions paid on or with respect to the shares and (B) sell the shares in accordance with the provisions of the Transfer Agreement and receive all proceeds therefrom. However, pursuant to the terms of the Transfer Agreement, Christian L. Oberbeck has retained the right to vote the shares, except that Elizabeth Oberbeck has retained the right to vote the shares on all matters submitted to shareholders with respect to any matter that could give rise to dissenters or other rights of an objecting shareholder under Maryland General Corporation Law. The Transfer Agreement also contains a right of first refusal that requires Elizabeth Oberbeck to offer Christian L. Oberbeck the opportunity to purchase any shares of Common Stock owned by her prior to her intended sale of the shares. Any such purchases may be made either directly by Mr. Oberbeck or through entities affiliated with him.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

We have entered into a Management Agreement with Saratoga Investment Advisors, LLC. We have also entered into a license agreement with Saratoga Investment Advisors, LLC, pursuant to which Saratoga Investment Advisors has agreed to grant us anon-exclusive, royalty-free license to use the name “Saratoga.” In addition, pursuant to the terms of the Administration Agreement, Saratoga Investment Advisors, LLC provides us with the office facilities and administrative services necessary to conduct ourday-to-day operations. Mr. Oberbeck, our chief executive officer, is the primary investor in and controls Saratoga Investment Advisors, LLC.

Review, Approval or Ratification of Transactions with Related Persons

The Audit Committee of our board is required to review and approve any transactions with related persons (as such term is defined in Item 404 of RegulationS-K).

Director Independence

In accordance with rules of the NYSE, the board of directors annually determines the independence of each director. No director is considered independent unless the board of directors has determined that he or she has no material relationship with the Company. The Company monitors the status of its directors and officers through the activities of the Company’s Nominating and Corporate Governance Committee and through a questionnaire to be completed by each director no less frequently than annually, with updates periodically if information provided in the most recent questionnaire has changed.

In order to evaluate the materiality of any such relationship, the board of directors uses the definition of director independence set forth in the NYSE Listed Company Manual. Section 303A.00 of the NYSE Listed Company Manual provides that business development companies, or BDCs, such as the Company, are required to comply with all of the provisions of Section 303A applicable to domestic issuers other than Sections 303A.02, the section that defines director independence.

Section 303A.00 provides that a director of a BDC shall be considered to be independent if he or she is not an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act. Section 2(a)(19) of the 1940 Act defines an “interested person” to include, among other things, any person who has, or within the last two years had, a material business or professional relationship with the Company.

The board of directors has determined that each of the directors is independent and has no relationship with the Company, except as a director and stockholder of the Company, with the exception of Messrs. Oberbeck and Grisius who are interested persons of the Company due to their positions as officers of the Company and its Investment Adviser.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Independent Registered Public Accounting Firm

For the years ended February 29, 2020 and February 28, 2019, the Company incurred the following fees for services provided by Ernst & Young LLP, including expenses:

	Fiscal Year Ended		Fiscal Year Ended
	February 29, 2020		February 28, 2019
Audit Fees	$	647,000	$	725,000
Tax Fees		42,000		41,200
Total Fees	$	689,000	$	766,200

In addition to the services listed above, Ernst & Young LLP provided audit services to the Company’s subsidiaries. The following are the related fees:

	Fiscal Year Ended		Fiscal Year Ended
	February 29, 2020		February 28, 2019
CLO Audit Fees	$	65,000	$	65,000
Tax Services for Company’s Subsidiaries		—		—
All Other Fees		28,000		26,000
Total Fees	$	93,000	$	91,000

108

Audit Fees. Audit fees include fees for services that normally would be provided by the accountant in connection with statutory and regulatory filings or engagements and that generally only the independent accountant can provide. In addition to fees for the audit of our annual consolidated financial statements, the audit of the effectiveness of our internal control over financial reporting and the review of our quarterly consolidated financial statements in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC.

Audit Related Fees. Audit related fees are assurance related services that traditionally are performed by the independent accountant, such as attest services that are not required by statute or regulation.

Tax Fees. Tax fees include services in conjunction with preparation of the Company’s tax return.

All Other Fees. Fees for other services would include fees for products and services other than the services reported above.

It is the policy of the audit committee topre-approve all audit, review or attest engagements and permissiblenon-audit services to be performed by our independent registered public accounting firm.

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PART IV

ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

The following documents are filed or incorporated by reference as part of this Annual Report:

1. Consolidated Financial Statements

The following consolidated financial statements of the Company are filed herewith:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Assets and Liabilities as of February 29, 2020 and February 28, 2019

Consolidated Statements of Operations for the years ended February 29, 2020, February 28, 2019 and February 28, 2018

Consolidated Schedules of Investments as of February 29, 2020 and February 28, 2019

Consolidated Statements of Changes in Net Assets for the years ended February 29, 2020, February 28, 2019 and February 28, 2018

Consolidated Statements of Cash Flows for the years ended February 29, 2020, February 28, 2019 and February 28, 2018

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Reference is made to the Index to Other Financial Statements on pageS-1.

3. Exhibits required to be filed by Item 601 of RegulationS-K

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

110

EXHIBIT INDEX

Exhibit Number	Description
3.1(a)	Articles of Incorporation of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Form10-Q for the quarterly period ended May 31, 2007).
3.1(b)	Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed August 3, 2010).
3.1(c)	Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed August 13, 2010).
3.2	Second Amended and Restated Bylaws of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on June 14, 2011).
4.1	Specimen certificate of Saratoga Investment Corp.’s common stock, par value $0.001 per share. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-169135, filed on September 1, 2010).
4.2	Registration Rights Agreement dated July  30, 2010 between GSC Investment Corp., GSC CDO III L.L.C., and the investors party thereto (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on August  3, 2010).
4.3	Dividend Reinvestment Plan (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on September 24, 2014).
4.4	Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Saratoga Investment Corp.’sPre-Effective Amendment No. 2 to the Registration Statement on FormN-2, FileNo. 333-186323 filed April 30, 2013).
4.5	Form of Second Supplemental Indenture between the Company and U.S. Bank National Association (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-214182, filed on December 12, 2016).
4.6	Form of Global Note (incorporated by reference to Exhibit 4.5 hereto, and Exhibit A therein).
4.7	Form of Third Supplemental Indenture between the Company and U.S. Bank National Association (incorporated by reference to Post-Effective Amendment No. 9 to the Registrant’s Registration Statement on FormN-2, FileNo. 333-216344, filed on August 28, 2018).
4.8	Form of Global Note (incorporated by reference to Exhibit 4.7 hereto, and Exhibit A therein).
4.9	Form of Articles Supplementary Establishing and Fixing the Rights and Preferences of Preferred Stock (incorporated by reference to Saratoga Investment Corp.’s registration statement on FormN-2Pre-Effective Amendment No. 1, FileNo. 333-196526, filed on December 5, 2014).
4.10	Description of Securities.
10.1	Investment Advisory and Management Agreement dated July  30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on August 3, 2010).
10.2	Custodian Agreement dated March  21, 2007 between GSC Investment LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Form10-Q for the quarterly period ended May 31, 2007).
10.3	Administration Agreement dated July  30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on August 3, 2010).
10.4	Trademark License Agreement dated July  30, 2010 between Saratoga Investment Advisors, LLC and GSC Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on August 3, 2010).

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10.5	Credit, Security and Management Agreement dated July  30, 2010 by and among GSC Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on August 3, 2010).
10.6	Form of Indemnification Agreement between Saratoga Investment Corp. and each officer and director of Saratoga Investment Corp. (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on FormN-2 filed on January 12, 2007).
10.7	Amendment No. 1 to Credit, Security and Management Agreement dated February  24, 2012 by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on February 29, 2012).
10.8	Amended and Restated Indenture, dated as of November  15, 2016, among Saratoga Investment Corp. CLO2013-1, Ltd., Saratoga Investment Corp. CLO2013-1, Inc. and U.S. Bank National Association. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-216344, filed on February 28, 2017).
10.9	Amended and Restated Collateral Management Agreement, dated October  17, 2013, by and between Saratoga Investment Corp. and Saratoga Investment Corp. CLO2013-1, Ltd. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-196526, filed on December 5, 2014).
10.10	Amendment No. 2 to Credit, Security and Management Agreement dated September  17, 2014 by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on September 18, 2014).
10.11	Amendment No. 3 to Credit, Security and Management Agreement, dated May  18, 2017, by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report onForm 8-K filed on May 18, 2017).
10.12	Equity Distribution Agreement dated March  16, 2017, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc. and BB&T Capital Markets, a division of BB&T Securities, LLC (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 1 to the Registration Statement on FormN-2, FileNo. 333-216344, filed on March 16, 2017).
10.13	Amendment No. 1 to the Equity Distribution Agreement dated October  12, 2017, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and FBR Capital Markets  & Co. (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 2 to the Registration Statement on FormN-2, FileNo.  333-216344, filed on October 12, 2017).
10.14	Amendment No. 2 to the Equity Distribution Agreement dated January  11, 2018, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and FBR Capital Markets  & Co. (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 3 to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-216344, filed on January 11, 2018).
10.15	Amendment No. 3 to the Equity Distribution Agreement dated October  16, 2018, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Post-Effective Amendment No. 1 to the registrant’s Registration Statement on FormN-2, FileNo. 333-227116, filed on October 16, 2018).
10.16	Amendment No. 4 to the Equity Distribution Agreement dated July  11, 2019, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Post-Effective Amendment No. 5 to the registrant’s Registration Statement on FormN-2, FileNo. 333-227116, filed on July 12, 2019).
10.17	Amendment No. 5 to the Equity Distribution Agreement dated October  10, 2019, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form8-K filed on October 10, 2019).
10.18	Amendment No. 4 to Credit, Security and Management Agreement, dated April 24, 2020, by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on April 29, 2020).

112

11	Computation of Per Share Earnings (included in Note 11 to the consolidated financial statements contained in this report).
14	Code of Ethics of the Company adopted under Rule17j-1 (incorporated by reference to Amendment No.7 to Saratoga Investment Corp.’s Registration Statement on FormN-2, FileNo. 333-138051, filed on March 22, 2007).
21.1*	List of Subsidiaries
23.1*	Consent of Ernst & Young LLP for Saratoga Investment Corp.
23.2*	Consent of Ernst & Young Ltd. for Saratoga Investment Corp. CLO 2013-1, Ltd.
23.3*	Consent of Ernst & Young LLP for Saratoga Investment Corp. CLO2013-1, Ltd.
31.1*	Certification of Chief Executive Officer Pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934
31.2*	Certification of Chief Financial Officer Pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

* Filed herewith

ITEM 16. FORM 10-K SUMMARY

None.

113

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SARATOGA INVESTMENT CORP.
Date: May 6, 2020	By:	/s/ CHRISTIAN L. OBERBECK
		Christian L. Oberbeck
		Chief Executive Officer
	By:	/s/ HENRI J. STEENKAMP
		Henri J. Steenkamp
		Chief Financial Officer and Chief Compliance Officer

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below hereby constitutes and appoints Christian L. Oberbeck and Henri J. Steenkamp, and each of them (with full power to each of them to act alone), his true and lawfulattorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign this report and any and all amendments thereto, and to file the same, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ CHRISTIAN L. OBERBECK	Chairman of the Board of Directors, Chief Executive	May 6, 2020
Christian L. Oberbeck	Officer (Principal Executive Officer)
/s/ MICHAEL J. GRISIUS	Member of the Board of Directors	May 6, 2020
Michael J. Grisius
/s/ HENRI J. STEENKAMP	Chief Financial Officer (Principal Accounting Officer and	May 6, 2020
Henri J. Steenkamp	Principal Financial Officer)
/s/ STEVEN M. LOONEY	Member of the Board of Directors	May 6, 2020
Steven M. Looney
/s/ CHARLES S. WHITMAN III	Member of the Board of Directors	May 6, 2020
Charles S. Whitman III
/s/ G. CABELL WILLIAMS	Member of the Board of Directors	May 6, 2020
Cabell Williams

114

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE
Reports of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Assets and Liabilities as of February 29, 2020 and February 28, 2019		F-4
Consolidated Statements of Operations for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		F-5
Consolidated Statements of Changes in Net Assets for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		F-6
Consolidated Statements of Cash Flows for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		F-7
Consolidated Schedules of Investments as of February 29, 2020 and February 28, 2019		F-8
Notes to Consolidated Financial Statements		F-15

F-1

Report of Independent Registered Public Accounting Firm

The Shareholders and the Board of Directors of Saratoga Investment Corp.

Opinion on the financial statements

We have audited the accompanying consolidated statements of assets and liabilities of Saratoga Investment Corp. (the “Company”), including the consolidated schedules of investments, as of February 29, 2020 and February 28, 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended February 29, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 29, 2020 and February 28, 2019, and the results of its operations, changes in its net assets and its cash flows for each of the three years in the period ended February 29, 2020, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 29, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 6, 2020 expressed an unqualified opinion thereon.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of February 29, 2020 and February 28, 2019 by correspondence with the portfolio companies, custodians and debt agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2006.

New York, New York

May 6, 2020

F-2

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Saratoga Investment Corp.

Opinion on Internal Control over Financial Reporting

We have audited Saratoga Investment Corp.’s internal control over financial reporting as of February 29, 2020, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(the COSO criteria). In our opinion, Saratoga Investment Corp. (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of February 29, 2020, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated May 6, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

New York, New York

May 6, 2020

F-3

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

	February 29, 2020			February 28, 2019
ASSETS
Investments at fair value
Non-control/Non-affiliate investments (amortized cost of $418,006,725 and $307,136,188, respectively)	$	420,442,928		$	306,511,427
Affiliate investments (amortized cost of $23,998,917 and $18,514,716, respectively)		18,485,854			11,463,081
Control investments (amortized cost of $44,293,619 and $76,265,189, respectively)		46,703,192			84,045,212
Total investments at fair value (amortized cost of $486,299,261 and $401,916,093, respectively)		485,631,974			402,019,720
Cash and cash equivalents		24,598,905			30,799,068
Cash and cash equivalents, reserve accounts		14,851,447			31,295,326
Interest receivable (net of reserve of $1,238,049 and $647,210, respectively)		4,810,456			3,746,604
Due from affiliate (See Note 6)		—			1,673,747
Management fee receivable		272,207			542,094
Other assets		701,007			595,543
Total assets	$	530,865,996		$	470,672,102
LIABILITIES
Revolving credit facility	$	—		$	—
Deferred debt financing costs, revolving credit facility		(512,628	)		(605,189	)
SBA debentures payable		150,000,000			150,000,000
Deferred debt financing costs, SBA debentures payable		(2,561,495	)		(2,396,931	)
2023 Notes payable		—			74,450,500
Deferred debt financing costs, 2023 notes payable		—			(1,919,620	)
2025 Notes payable		60,000,000			60,000,000
Deferred debt financing costs, 2025 notes payable		(2,046,735	)		(2,377,551	)
Base management and incentive fees payable		15,800,097			6,684,785
Deferred tax liability		1,347,363			739,716
Accounts payable and accrued expenses		1,713,157			1,615,443
Interest and debt fees payable		2,234,042			3,224,671
Directors fees payable		61,500			62,000
Due to manager		543,842			319,091
Total liabilities	$	226,579,143		$	289,796,915
Commitments and contingencies (See Note 8)
NET ASSETS
Common stock, par value $.001, 100,000,000 common shares authorized, 11,217,545 and 7,657,156 common shares issued and outstanding, respectively	$	11,218		$	7,657
Capital in excess of par value		289,476,991			203,552,800
Total distributable earnings (loss)		14,798,644			(22,685,270	)
Total net assets		304,286,853			180,875,187
Total liabilities and net assets	$	530,865,996		$	470,672,102
NET ASSET VALUE PER SHARE	$	27.13		$	23.62

See accompanying notes to consolidated financial statements.

F-4

Saratoga Investment Corp.

Consolidated Statements of Operations

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
INVESTMENT INCOME
Interest from investments
Interest income:
Non-control/Non-affiliate investments	$	36,252,113		$	33,329,539		$	26,648,380
Affiliate investments		1,230,578			963,289			886,948
Control investments		6,175,120			4,785,044			4,768,534
Payment-in-kind interest income:
Non-control/Non-affiliate investments		816,041			780,112			984,305
Affiliate investments		167,836			150,284			80,460
Control investments		3,405,307			3,288,902			1,741,334
Total interest from investments		48,046,995			43,297,170			35,109,961
Interest from cash and cash equivalents		536,053			64,024			27,495
Management fee income		2,503,804			1,722,180			1,509,317
Incentive fee income		—			633,232			591,368
Structuring and advisory fee income*		5,286,475			1,355,393			824,795
Other income*		2,074,864			635,964			552,042
Total investment income		58,448,191			47,707,963			38,614,978
OPERATING EXPENSES
Interest and debt financing expenses		14,682,611			13,125,718			10,938,654
Base management fees		8,098,995			6,879,324			5,846,400
Incentive management fees		14,163,776			4,891,004			4,333,983
Professional fees		1,684,089			1,849,424			1,590,798
Administrator expenses		2,131,250			1,895,833			1,645,833
Insurance		259,981			253,141			259,571
Directors fees and expenses		277,500			290,500			197,500
General & administrative		1,326,457			1,224,462			1,058,009
Income tax expense (benefit)		961,995			(1,027,118	)		—
Excise tax credit		—			—			(14,738	)
Other expense		—			23,466			27,310
Total operating expenses		43,586,654			29,405,754			25,883,320
Loss on extinguishment of debt		1,583,266			—			—
NET INVESTMENT INCOME		13,278,271			18,302,209			12,731,658
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments:
Non-control/Non-affiliate investments		11,651,990			4,874,305			(5,877,734	)
Control investments		31,225,165			—			166
Net realized gain (loss) from investments		42,877,155			4,874,305			(5,877,568	)
Net change in unrealized appreciation (depreciation) on investments:
Non-control/Non-affiliate investments		3,060,964			(5,152,206	)		6,178,457
Affiliate investments		1,538,572			(853,588	)		818,323
Control investments		(5,370,450	)		3,105,485			3,828,275
Net change in unrealized appreciation (depreciation) on investments		(770,914	)		(2,900,309	)		10,825,055
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		354,349			(1,766,835	)		—
Net realized and unrealized gain on investments		42,460,590			207,161			4,947,487
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	55,738,861		$	18,509,370		$	17,679,145
WEIGHTED AVERAGE—BASIC AND DILUTED EARNINGS PER COMMON SHARE	$	5.98		$	2.63		$	2.93
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC AND DILUTED		9,319,192			7,046,686			6,024,040

* Certain prior year amounts have been reclassified to conform to current year presentation.

See accompanying notes to consolidated financial statements.

F-5

Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
INCREASE FROM OPERATIONS:
Net investment income	$	13,278,271		$	18,302,209		$	12,731,658
Net realized gain (loss) from investments		42,877,155			4,874,305			(5,877,568	)
Net change in unrealized appreciation (depreciation) on investments		(770,914	)		(2,900,309	)		10,825,055
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		354,349			(1,766,835	)		—
Net increase in net assets resulting from operations		55,738,861			18,509,370			17,679,145
DECREASE FROM SHAREHOLDER DISTRIBUTIONS:
Total distributions to shareholders(a)		(20,097,580	)		(14,188,588	)		(11,375,577	)
Net decrease in net assets from shareholder distributions		(20,097,580	)		(14,188,588	)		(11,375,577	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from issuance of common stock		85,904,441			32,150,157			7,838,351
Stock dividend distribution		3,096,492			2,175,893			2,362,814
Offering costs		(1,230,548	)		(1,397,712	)		(108,143	)
Net increase in net assets from capital share transactions		87,770,385			32,928,338			10,093,022
Total increase in net assets		123,411,666			37,249,120			16,396,590
Net assets at beginning of period, as previously reported		180,875,187			143,691,367			127,294,777
Cumulative effect of the adoption of ASC 606 (See Note 2)		—			(65,300	)		—
Net assets at beginning of period, as adjusted		180,875,187			143,626,067			127,294,777
Net assets at end of period(b)	$	304,286,853		$	180,875,187		$	143,691,367

(a) Distributions from net investment income and from net realized gains are no longer required to be separately disclosed. For the year ended February 28, 2018, total distributions represented distributions from net investment income of $11,375,577.

(b) Parenthetical disclosure of accumulated undistributed net investment income is no longer required. For the year ended February 28, 2018, end of period net assets included accumulated distributions in excess of net investment income of $27,862,543.

See accompanying notes to consolidated financial statements.

F-6

Saratoga Investment Corp.

Consolidated Statements of Cash Flows

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
Operating activities
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	55,738,861		$	18,509,370		$	17,679,145
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES:
Payment-in-kind and other adjustments to cost		(3,045,533	)		(4,149,105	)		(2,664,627	)
Net accretion of discount on investments		(1,069,710	)		(1,222,735	)		(1,035,501	)
Amortization of deferred debt financing costs		1,340,299			1,187,613			990,035
Loss on extinguishment of debt		1,583,266			—			—
Income tax expense (benefit)		961,995			(1,027,118	)		—
Net realized (gain) loss from investments		(42,877,155	)		(4,874,305	)		5,877,568
Net change in unrealized (appreciation) depreciation on investments		770,914			2,900,309			(10,825,055	)
Net change in provision for deferred taxes on unrealized appreciation (depreciation) on investments		(354,349	)		1,766,835			—
Proceeds from sales and repayments of investments		167,252,601			135,727,976			66,312,032
Purchases of investments		(204,643,371	)		(187,707,807	)		(107,697,157	)
(Increase) decrease in operating assets:
Interest receivable		(1,063,852	)		(699,479	)		247,325
Due from affiliate		1,673,747			(1,673,747	)		—
Management and incentive fee receivable		269,887			(309,070	)		(61,918	)
Cumulative effect of the adoption of ASC 606 (See Note 2)		—			(65,300	)		—
Other assets		(128,982	)		(89,865	)		(273,897	)
Receivable from unsettled trades		—			—			253,041
Increase (decrease) in operating liabilities:
Base management and incentive fees payable		9,115,312			907,841			(37,748	)
Accounts payable and accrued expenses		97,714			691,131			215,458
Interest and debt fees payable		(990,629	)		220,317			240,117
Directors fees payable		(500	)		18,500			(8,000	)
Due to manager		224,751			(91,280	)		12,866
NET CASH USED IN OPERATING ACTIVITIES		(15,144,734	)		(39,979,919	)		(30,776,316	)
Financing activities
Borrowings on debt		20,200,000			45,590,000			59,800,000
Paydowns on debt		(20,200,000	)		(33,250,000	)		(34,800,000	)
Issuance of notes		—			60,000,000			—
Repayments of notes		(74,450,500	)		—			—
Payments of deferred debt financing costs		(755,136	)		(2,878,120	)		(1,277,266	)
Proceeds from issuance of common stock		85,897,846			32,150,157			7,838,351
Payments of cash dividends		(17,001,088	)		(12,012,695	)		(9,012,763	)
Payments of offering costs		(1,190,430	)		(1,302,520	)		(82,483	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(7,499,308	)		88,296,822			22,465,839
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS		(22,644,042	)		48,316,903			(8,310,477	)
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, BEGINNING OF PERIOD		62,094,394			13,777,491			22,087,968
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, END OF PERIOD	$	39,450,352		$	62,094,394		$	13,777,491
Supplemental information:
Interest paid during the period	$	14,332,943		$	11,717,786		$	9,708,503
Cash paid for taxes		18,390			66,295			208,164
Supplementalnon-cash information:
Payment-in-kind interest income	$	3,045,533		$	4,149,105		$	2,664,627
Net accretion of discount on investments		1,069,710			1,222,735			1,035,501
Amortization of deferred debt financing costs		1,340,299			1,187,613			990,035
Stock dividend distribution		3,096,492			2,175,893			2,362,814

See accompanying notes to consolidated financial statements.

F-7

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 29, 2020

Company	Industry	Investment Interest Rate/ Maturity	Original Acquisition Date	Principal/ Number of Shares		Cost		Fair Value (c)		% of Net Assets
Non-control/Non-affiliate investments—138.2% (b)
Apex Holdings Software Technologies, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 9.46% Cash, 9/21/2021	9/21/2016	$	18,000,000	$	17,951,463	$	17,589,600		5.8%
Apex Holdings Software Technologies, LLC	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.46% Cash, 9/21/2021	10/1/2018	$	1,500,000		1,491,938		1,465,800		0.5%
ArbiterSports, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025	2/21/2020	$	26,000,000		25,765,288		25,740,000		8.6%
Arbiter Sports, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025	2/21/2020	$	—		—		—		0.0%
Avionte Holdings, LLC (h)	Business Services	Class A Units	1/8/2014		100,000		100,000		922,337		0.3%
CLEO Communications Holding, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 9.46% Cash/2.00% PIK, 3/31/2022	3/31/2017	$	13,791,686		13,773,206		14,048,211		4.6%
CLEO Communications Holding, LLC	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.46% Cash/2.00% PIK, 3/31/2022	3/31/2017	$	20,041,560		19,919,746		20,414,333		6.7%
CoConstruct, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+7.50%), 10.00% Cash, 7/5/2024	7/5/2019	$	4,200,000		4,161,917		4,284,000		1.4%
CoConstruct, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.50%), 10.00% Cash, 7/5/2024	7/5/2019	$	—		—		—		0.0%
Davisware, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024	9/6/2019	$	3,000,000		2,971,896		2,970,000		1.0%
Davisware, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024	9/6/2019	$	—		—		—		0.0%
Destiny Solutions Inc. (d)	Business Services	First Lien Term Loan (3M USD LIBOR+7.25%), 9.25% Cash, 10/23/2024	5/16/2018	$	36,000,000		35,686,318		35,888,400		11.8%
Destiny Solutions Inc. (h), (i)	Business Services	Limited Partner Interests	5/16/2018		2,342		2,468,464		2,805,839		0.9%
Emily Street Enterprises, L.L.C.	Business Services	Senior Secured Note (3M USD LIBOR+8.50%), 10.00% Cash, 4/22/2020	12/28/2012	$	3,300,000		3,299,987		3,300,000		1.1%
Emily Street Enterprises, L.L.C. (h)	Business Services	Warrant Membership Interests Expires 12/28/2022	12/28/2012		49,318		400,000		499,464		0.2%
Erwin, Inc. (d)	Business Services	Second Lien Term Loan (3M USD LIBOR+11.50%), 12.96% Cash/1.00% PIK, 8/28/2021	2/29/2016	$	16,049,804		15,990,286		16,049,804		5.3%
FMG Suite Holdings, LLC (d)	Business Services	Second Lien Term Loan (1M USD LIBOR+8.00%), 9.52% Cash, 11/16/2023	5/16/2018	$	23,000,000		22,863,835		23,000,000		7.6%
GDS Holdings US, Inc. (d)	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 8.50% Cash, 8/23/2023	8/23/2018	$	7,500,000		7,444,170		7,650,000		2.5%
GDS Holdings US, Inc. (d)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 8.50% Cash, 8/23/2023	8/23/2018	$	1,000,000		990,526		1,020,000		0.3%
GDS Software Holdings, LLC (h)	Business Services	Common Stock Class A Units	8/23/2018		250,000		250,000		421,291		0.1%
Identity Automation Systems (h)	Business Services	Common Stock Class A Units	8/25/2014		232,616		232,616		860,269		0.4%
Identity Automation Systems (d)	Business Services	First Lien Term Loan (3M USD LIBOR+9.24%), 10.99% Cash, 5/8/2024	8/25/2014	$	15,422,500		15,389,090		15,524,289		5.1%
inMotionNow, Inc.	Business Services	First Lien Term Loan (3M USD LIBOR+7.25), 9.75% Cash, 5/15/2024	5/15/2019	$	12,200,000		12,094,364		12,200,000		4.1%
inMotionNow, Inc. (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.25) 9.75% Cash, 5/15/2024	5/15/2019	$	2,000,000		1,981,329		2,000,000		0.0%
Knowland Group, LLC	Business Services	Second Lien Term Loan (3M USD LIBOR+8.00%), 10.00% Cash, 5/9/2024	11/9/2018	$	15,000,000		15,000,000		14,893,500		4.9%
National Waste Partners (d)	Business Services	Second Lien Term Loan 10.00% Cash, 2/13/2022	2/13/2017	$	9,000,000		8,959,602		9,000,000		3.0%
Omatic Software, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 9.75% Cash, 5/29/2023	5/29/2018	$	5,500,000		5,459,192		5,554,999		1.9%
Omatic Software, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.75% Cash, 5/29/2023	5/29/2018	$	—		—		—		0.0%
Passageways, Inc.	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 8.75% Cash, 7/5/2023	7/5/2018	$	5,000,000		4,961,214		5,034,500		1.7%
Passageways, Inc. (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 8.75% Cash, 7/5/2023	1/3/2020	$	2,000,000		1,991,001		2,013,800		0.7%
Passageways, Inc. (h)	Business Services	Series A Preferred Stock	7/5/2018		2,027,205		1,000,000		2,042,180		0.8%
Vector Controls Holding Co., LLC (d)	Business Services	First Lien Term Loan 10.50% (9.00% Cash/1.50% PIK), 3/6/2022	3/6/2013	$	7,849,846		7,849,846		7,928,345		2.6%
Vector Controls Holding Co., LLC (h)	Business Services	Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027	5/31/2015		343		—		2,850,231		0.9%
		Total Business Services					250,447,294		257,971,192		84.8%
Targus Holdings, Inc. (h)	Consumer Products	Common Stock	12/31/2009		210,456		1,589,630		417,619		0.1%
		Total Consumer Products					1,589,630		417,619		0.1%
My Alarm Center, LLC (k)	Consumer Services	Preferred Equity Class A Units 8.00% PIK	7/14/2017		2,227		2,357,879		—		0.0%
My Alarm Center, LLC (h)	Consumer Services	Preferred Equity Class B Units	7/14/2017		1,797		1,796,880		—		0.0%
My Alarm Center, LLC (h)	Consumer Services	Preferred Equity Class Z Units	9/12/2018		676		712,343		1,997,158		0.6%
My Alarm Center, LLC (h)	Consumer Services	Common Stock	7/14/2017		96,224		—		—		0.0%
		Total Consumer Services					4,867,102		1,997,158		0.6%

See accompanying notes to consolidated financial statements.

F-8

Company	Industry	Investment Interest Rate/ Maturity	Original Acquisition Date	Principal/ Number of Shares		Cost		Fair Value (c)		% of Net Assets
C2 Educational Systems (d)	Education	First Lien Term Loan (3M USD LIBOR+7.00%), 8.50% Cash, 5/31/2020	5/31/2017	$	16,000,000		15,981,853		16,000,000		5.3%
EMS LINQ, Inc.	Education	First Lien Term Loan (1M USD LIBOR+8.50%), 10.02% Cash, 8/9/2024	8/9/2019	$	14,925,000		14,780,293		14,823,510		4.8%
GoReact	Education	First Lien Term Loan (3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025	1/17/2020	$	5,000,000		4,930,819		4,950,000		1.6%
GoReact (j)	Education	Delayed Draw Term Loan (3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025	1/17/2020	$	—		—		—		0.0%
Kev Software Inc. (a)	Education	First Lien Term Loan (1M USD LIBOR+8.63%), 10.15% Cash, 9/13/2023	9/13/2018	$	21,231,923		21,086,573		21,202,198		7.0%
Texas Teachers of Tomorrow, LLC (h), (i)	Education	Common Stock	12/2/2015		750,000		750,000		703,910		0.2%
Texas Teachers of Tomorrow, LLC (d)	Education	First Lien Term Loan (3M USD LIBOR+7.25%), 9.75% Cash, 6/28/2024	6/28/2019	$	19,661,200		19,483,213		19,661,200		6.5%
		Total Education					77,012,751		77,340,818		25.4%
TMAC Acquisition Co., LLC	Food and Beverage	Unsecured Term Loan 8.00% PIK, 9/01/2023	3/1/2018	$	2,261,017		2,261,017		2,140,880		0.7%
		Total Food and Beverage					2,261,017		2,140,880		0.7%
Axiom Parent Holdings, LLC (h)	Healthcare Services	Common Stock Class A Units	6/19/2018		400,000		400,000		428,706		0.1%
Axiom Purchaser, Inc. (d)	Healthcare Services	First Lien Term Loan (3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023	6/19/2018	$	10,000,000		9,936,612		9,944,000		3.3%
Axiom Purchaser, Inc. (d), (j)	Healthcare Services	Delayed Draw Term Loan (3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023	6/19/2018	$	3,000,000		2,977,619		2,983,200		1.0%
ComForCare Health Care	Healthcare Services	First Lien Term Loan (3M USD LIBOR+7.50%), 8.96% Cash, 1/31/2022	1/31/2017	$	15,000,000		14,929,216		15,099,000		5.0%
HemaTerra Holding Company, LLC	Healthcare Services	First Lien Term Loan (3M USD LIBOR+6.75%), 9.25% Cash, 4/15/2024	4/15/2019	$	6,000,000		5,944,473		6,120,000		2.0%
HemaTerra Holding Company, LLC (j)	Healthcare Services	Delayed Draw Term Loan (3M USD LIBOR+6.75%), 9.25% Cash, 4/15/2024	4/15/2019	$	10,000,000		9,912,295		10,200,000		3.4%
TRC HemaTerra, LLC (h)	Healthcare Services	Class D Membership Interests	4/15/2019		2,000,000		2,000,000		2,259,190		0.7%
Ohio Medical, LLC (h)	Healthcare Services	Common Stock	1/15/2016		5,000		500,000		416,550		0.1%
Ohio Medical, LLC	Healthcare Services	Senior Subordinated Note 12.00% Cash, 7/15/2021	1/15/2016	$	7,300,000		7,274,482		7,300,000		2.4%
PDDS Buyer, LLC	Healthcare Services	First Lien Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024	7/15/2019	$	12,000,000		11,888,585		12,184,800		4.0%
PDDS Buyer, LLC (j)	Healthcare Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024	7/15/2019	$	—		—		—		0.0%
Roscoe Medical, Inc. (h)	Healthcare Services	Common Stock	3/26/2014		5,081		508,077		—		0.0%
Roscoe Medical, Inc. (k)	Healthcare Services	Second Lien Term Loan 11.25% Cash, 3/28/2021	3/26/2014	$	4,200,000		4,200,000		2,136,960		0.7%
		Total Healthcare Services					70,471,359		69,072,406		22.7%

See accompanying notes to consolidated financial statements.

F-9

Village Realty Holdings LLC	Property Management	First Lien Term Loan (3M USD LIBOR+6.50%), 8.75% Cash, 10/8/2024	10/8/2019	$	7,250,000		7,180,560		7,264,500		2.4	%
Village Realty Holdings LLC (j)	Property Management	Delayed Draw Term Loan (3M USD LIBOR+6.50%), 8.75% Cash, 10/8/2024	10/8/2019	$	3,876,322		3,838,783		3,884,075		1.4	%
V Rental Holdings LLC (h)	Property Management	Class A-1 Membership Units	10/8/2019		116,700		338,229		354,280		0.1	%
		Total Property Management					11,357,572		11,502,855		3.9	%
Sub TotalNon-control/Non-affiliate investments							418,006,725		420,442,928		138.2	%
Affiliate investments—6.0% (b)
Top Gun Pressure Washing, LLC (f)	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024	8/12/2019	$	5,000,000		4,952,729		5,024,500		1.7	%
Top Gun Pressure Washing, LLC (f), (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024	8/12/2019	$	—		—		—		0.0	%
TG Pressure Washing Holdings, LLC (f), (h)	Business Services	Preferred Equity	8//12/2019		350,000		350,000		350,000		0.1	%
GreyHeller LLC (f)	Business Services	First Lien Term Loan (3M USD LIBOR+11.00%), 12.46% Cash, 11/16/2021	11/17/2016	$	7,000,000		6,971,109		7,000,000		2.2	%
GreyHeller LLC (f), (h)	Business Services	Series A Preferred Units	11/17/2016		850,000		850,000		2,981,503		1.0	%
		Total Business Services					13,123,838		15,356,003		5.0	%
Elyria Foundry Company, L.L.C. (f), (h)	Metals	Common Stock	7/30/2010		60,000		9,685,028		1,939,800		0.6	%
Elyria Foundry Company, L.L.C. (d), (f)	Metals	Second Lien Term Loan 15.00% PIK, 8/10/2022	7/30/2010	$	1,190,051		1,190,051		1,190,051		0.4	%
		Total Metals					10,875,079		3,129,851		1.0	%
Sub Total Affiliate investments							23,998,917		18,485,854		6.0	%
Control investments—15.4% (b)
Netreo Holdings, LLC (g)	Business Services	First Lien Term Loan (3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK, 7/3/2023	7/3/2018	$	5,162,734		5,123,191		5,265,989		1.7	%
Netreo Holdings, LLC (g), (h)	Business Services	Common Stock Class A Unit	7/3/2018		3,150,000		3,150,000		6,762,672		2.3	%
		Total Business Services					8,273,191		12,028,661		4.0	%
Saratoga Investment Corp. CLO2013-1, Ltd. (a), (e), (g)	Structured Finance Securities	Other/Structured Finance Securities 10.97%, 1/20/2030	1/22/2008	$	69,500,000		23,520,428		22,557,240		7.4	%
Saratoga Investment Corp. CLO2013-1, Ltd.Class F-R-2 Note (a), (g)	Structured Finance Securities	Other/Structured Finance Securities (3M USD LIBOR+8.75%), 10.21%, 1/20/2030	12/14/2018	$	2,500,000		2,500,000		2,478,000		0.8	%
Saratoga Investment Corp. CLO2013-1, Ltd.Class G-R-2 Note (a), (g)	Structured Finance Securities	Other/Structured Finance Securities (3M USD LIBOR+10.00%), 11.46%, 1/20/2030	12/14/2018	$	7,500,000		7,500,000		7,434,750		2.4	%
Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd. (a), (g), (j)	Structured Finance Securities	Unsecured Loan (3M USD LIBOR+7.50%), 8.96%, 8/20/2021	2/18/2020	$	2,500,000		2,500,000		2,204,541		0.8	%
		Total Structured Finance Securities					36,020,428		34,674,531		11.4	%
Sub Total Control investments							44,293,619		46,703,192		15.4	%
TOTAL INVESTMENTS—159.6% (b)						$	486,299,261	$	485,631,974		159.6	%
				Number of Shares		Cost		Fair Value		% of     Net Assets
Cash and cash equivalents and cash and cash equivalents, reserve accounts—13.0% (b)
U.S. Bank Money Market (l)					39,450,352	$	39,450,352	$	39,450,352		13.0	%
Total cash and cash equivalents and cash and cash equivalents, reserve accounts					39,450,352	$	39,450,352	$	39,450,352		13.0	%

(a) Represents anon-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of February 29, 2020,non-qualifying assets represent 11.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio innon-qualifying assets.

(b) Percentages are based on net assets of $304,286,853 as of February 29, 2020.

(c) Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements).

(d) These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 7 to the consolidated financial statements).

(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 10.97% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.

(f) As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the year ended February 29, 2020 in which the issuer was an Affiliate are as follows:

Company	Purchases		Sales		Total Interest from Investments		Management Fee Income		Net Realized Gain (Loss) from Investments		Net Change in Unrealized Appreciation (Depreciation)
GreyHeller LLC	$	—	$	—	$	961,322	$	—	$	—	$	1,331,201
Elyria Foundry Company, L.L.C.		—		—		167,835		—		—		135,600
Top Gun Pressure Washing, LLC		4,950,000		—		269,257		—		—		71,771
TG Pressure Washing Holdings, LLC		350,000		—		—		—		—		—
Total	$	5,300,000	$	—	$	1,398,414	$	—	$	—	$	1,538,572

(g) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended February 29, 2020 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

Company	Purchases		Sales			Total Interest from Investments		Management Fee Income		Net Realized Gain (Loss) from Investments		Net Change in Unrealized Appreciation (Depreciation)
Easy Ice, LLC	$	—	$	(65,219,080	)	$	3,335,320	$	—	$	31,225,165	$	(3,816,610	)
Easy Ice Masters, LLC		—��		(4,169,121	)		382,066		—		—		(51,436	)
Netreo Holdings, LLC		—		—			578,617		—		—		1,654,603
Saratoga Investment Corp. CLO2013-1, Ltd.		—		—			4,058,715		2,503,804		—		(2,840,298	)
Saratoga Investment Corp. CLO2013-1, Ltd.Class F-R-2 Notes		—		—			280,689		—		—		(5,500	)
Saratoga Investment Corp. CLO2013-1, Ltd.Class G-R-2 Notes		—		—			937,378		—		—		(15,750	)
Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd (j)		2,500,000		—			7,642		—		—		(295,459	)
Total	$	2,500,000	$	(69,388,201	)	$	9,580,427	$	2,503,804	$	31,225,165	$	(5,370,450	)

(h) Non-income producing at February 29, 2020.

(i) Includes securities issued by an affiliate of the Company.

(j) All or a portion of this investment has an unfunded commitment as of February 29, 2020. (see Note 8 to the consolidated financial statements).

(k) As of February 29, 2020, the investment was onnon-accrual status. The fair value of these investments was approximately $2.1 million, which represented 0.4% of the Company’s portfolio (see Note 2 to the consolidated financial statements).

(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s consolidated statements of assets and liabilities as of February 29, 2020.

LIBOR—London Interbank Offered Rate

1M USD LIBOR—The 1 month USD LIBOR rate as of February 29, 2020 was 1.52%.

3M USD LIBOR—The 3 month USD LIBOR rate as of February 29, 2020 was 1.46%.

PIK—Payment-in-Kind (see Note 2 to the consolidated financial statements).

See accompanying notes to consolidated financial statements.

F-10

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2019

Company	Industry	Investment Interest Rate/ Maturity	Original Acquisition Date		Principal/ Number of Shares		Cost		Fair Value (c)		% of Net Assets
Non-control/Non-affiliate investments—169.5% (b)
Apex Holdings Software Technologies, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021		9/21/2016	$	18,000,000	$	17,922,851	$	18,000,000		10.0	%
Apex Holdings Software Technologies, LLC	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021		10/1/2018	$	1,000,000		992,183		1,000,000		0.6	%
Avionte Holdings, LLC (h)	Business Services	Class A Units		1/8/2014		100,000		100,000		635,781		0.4	%
CLEO Communications Holding, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022		3/31/2017	$	13,514,320		13,437,153		13,514,320		7.5	%
CLEO Communications Holding, LLC	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022		3/31/2017	$	12,142,015		12,040,280		12,142,015		6.7	%
Destiny Solutions Inc. (a)	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023		5/16/2018	$	8,500,000		8,426,441		8,489,800		4.7	%
Destiny Solutions Inc. (a), (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023		5/16/2018	$	—		—		—		0.0	%
Destiny Solutions Inc. (a), (h), (i)	Business Services	Limited Partner Interests		5/16/2018		999,000		999,000		1,062,440		0.6	%
Emily Street Enterprises, L.L.C.	Business Services	Senior Secured Note (3M USD LIBOR+8.50%), 11.12% Cash, 1/23/2020		12/28/2012	$	3,300,000		3,299,122		3,314,520		1.8	%
Emily Street Enterprises, L.L.C. (h)	Business Services	Warrant Membership Interests Expires 12/28/2022		12/28/2012		49,318		400,000		505,509		0.3	%
Erwin, Inc. (d)	Business Services	Second Lien Term Loan (3M USD LIBOR+11.50%), 14.12% Cash/1.00% PIK, 8/28/2021		2/29/2016	$	15,888,102		15,796,316		15,888,102		8.8	%
FMG Suite Holdings, LLC (d)	Business Services	Second Lien Term Loan (1M USD LIBOR+8.00%), 10.49% Cash, 11/16/2023		5/16/2018	$	23,000,000		22,844,123		23,000,000		12.7	%
GDS Holdings US, LLC (d)	Business Services	First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023		8/23/2018	$	7,500,000		7,430,649		7,495,500		4.0	%
GDS Holdings US, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023		8/23/2018	$	—		—		—		0.0	%
GDS Software Holdings, LLC (h)	Business Services	Common Stock Class A Units		8/23/2018		250,000		250,000		277,139		0.2	%
Identity Automation Systems (h)	Business Services	Common Stock Class A Units		8/25/2014		232,616		232,616		629,555		0.3	%
Identity Automation Systems (d)	Business Services	First Lien Term Loan (3M USD LIBOR+9.00%), 11.62% Cash, 3/31/2021		8/25/2014	$	24,100,000		23,991,294		24,100,000		13.3	%
Knowland Group, LLC	Business Services	Second Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/9/2024		11/9/2018	$	15,000,000		15,000,000		15,000,000		8.3	%
Microsystems Company	Business Services	Second Lien Term Loan (3M USD LIBOR+8.25%), 10.87% Cash, 7/1/2022		7/1/2016	$	18,000,000		17,889,554		17,881,200		9.9	%

See accompanying notes to consolidated financial statements.

F-11

Company	Industry	Investment Interest Rate/ Maturity	Original Acquisition Date		Principal/ Number of Shares		Cost		Fair Value (c)		% of Net Assets
National Waste Partners (d)	Business Services	Second Lien Term Loan 10.00% Cash, 2/13/2022		2/13/2017	$	9,000,000		8,942,155		8,864,100		4.9	%
Omatic Software, LLC	Business Services	First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023		5/29/2018	$	5,500,000		5,451,758		5,537,400		3.1	%
Omatic Software, LLC (j)	Business Services	Delayed Draw Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023		5/29/2018	$	—		—		—		0.0	%
Passageways, Inc.	Business Services	First Lien Term Loan (3M USD LIBOR+7.75%), 10.37% Cash, 7/5/2023		7/5/2018	$	5,000,000		4,955,204		5,063,500		2.8	%
Passageways, Inc. (h)	Business Services	Series A Preferred Stock		7/5/2018		2,027,205		1,000,000		1,339,705		0.7	%
Vector Controls Holding Co., LLC (d)	Business Services	First Lien Term Loan 11.50% (9.75% Cash/1.75% PIK), 3/6/2022		3/6/2013	$	9,311,956		9,310,703		9,371,929		5.2	%
Vector Controls Holding Co., LLC (h)	Business Services	Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027		5/31/2015		343		—		2,210,149		1.2	%
		Total Business Services						190,711,402		195,322,664		108.0	%
Targus Holdings, Inc. (h)	Consumer Products	Common Stock		12/31/2009		210,456		1,713,605		505,094		0.3	%
		Total Consumer Products						1,713,605		505,094		0.3	%
My Alarm Center, LLC (k)	Consumer Services	Preferred Equity Class A Units 8.00% PIK		7/14/2017		2,227		2,357,879		1,112,543		0.6	%
My Alarm Center, LLC (h)	Consumer Services	Preferred Equity Class B Units		7/14/2017		1,797		1,796,880		—		0.0	%
My Alarm Center, LLC	Consumer Services	Preferred Equity Class Z Units 25.00% PIK		9/12/2018		676		655,987		2,053,514		1.1	%
My Alarm Center, LLC (h)	Consumer Services	Common Stock		7/14/2017		96,224		—		—		0.0	%
		Total Consumer Services						4,810,746		3,166,057		1.7	%
C2 Educational Systems (d)	Education	First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/31/2020		5/31/2017	$	16,000,000		15,929,485		16,032,000		8.9	%
Kev Software Inc. (a)	Education	First Lien Term Loan (1M USD LIBOR+8.63%), 11.12% Cash, 9/13/2023		9/13/2018	$	21,446,929		21,273,211		21,438,351		11.9	%
M/C Acquisition Corp., L.L.C. (h)	Education	Class A Common Stock		6/22/2009		544,761		30,241		—		0.0	%
M/C Acquisition Corp., L.L.C. (k)	Education	First Lien Term Loan 1.00% Cash, 3/31/2020		8/10/2004	$	2,315,090		1,189,177		6,260		0.0	%
Texas Teachers of Tomorrow, LLC (h), (i)	Education	Common Stock		12/2/2015		750,000		750,000		792,165		0.4	%
Texas Teachers of Tomorrow, LLC	Education	Second Lien Term Loan (3M USD LIBOR+9.75%), 12.37% Cash, 6/2/2021		12/2/2015	$	10,000,000		9,952,251		9,807,000		5.4	%
		Total Education						49,124,365		48,075,776		26.6	%
TMAC Acquisition Co., LLC (k)	Food and Beverage	Unsecured Term Loan 8.00% PIK, 9/01/2023		3/1/2018	$	2,216,427		2,216,427		2,100,286		1.2	%
		Total Food and Beverage						2,216,427		2,100,286		1.2	%
Axiom Parent Holdings, LLC (h)	Healthcare Services	Common Stock Class A Units		6/19/2018		400,000		400,000		402,990		0.2	%
Axiom Purchaser, Inc. (d)	Healthcare Services	First Lien Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023		6/19/2018	$	10,000,000		9,923,962		10,020,000		5.5	%
Axiom Purchaser, Inc. (j)	Healthcare Services	Delayed Draw Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023		6/19/2018	$	—		—		—		0.0	%
Censis Technologies, Inc.	Healthcare Services	First Lien Term Loan B (1M USD LIBOR+8.30%), 10.79% Cash, 9/27/2023		7/25/2014	$	19,950,000		19,877,861		19,991,895		11.1	%
Censis Technologies, Inc. (h), (i)	Healthcare Services	Limited Partner Interests		7/25/2014		999		999,000		2,387,705		1.3	%
ComForCare Health Care	Healthcare Services	First Lien Term Loan (3M USD LIBOR+7.50%), 10.12% Cash, 1/31/2022		1/31/2017	$	15,000,000		14,898,535		15,096,000		8.3	%
Ohio Medical, LLC (h)	Healthcare Services	Common Stock		1/15/2016		5,000		500,000		208,250		0.1	%
Ohio Medical, LLC	Healthcare Services	Senior Subordinated Note 12.00% Cash, 7/15/2021		1/15/2016	$	7,300,000		7,263,114		6,735,710		3.8	%
Roscoe Medical, Inc. (h)	Healthcare Services	Common Stock		3/26/2014		5,081		508,077		—		0.0	%
Roscoe Medical, Inc. (k)	Healthcare Services	Second Lien Term Loan 11.25% Cash, 3/28/2021		3/26/2014	$	4,200,000		4,189,094		2,499,000		1.4	%
		Total Healthcare Services						58,559,643		57,341,550		31.7	%
Sub TotalNon-control/Non-affiliate investments								307,136,188		306,511,427		169.5	%
Affiliate investments—6.3% (b)
GreyHeller LLC (f)	Business Services	First Lien Term Loan (3M USD LIBOR+11.00%), 13.62% Cash, 11/16/2021		11/17/2016	$	7,000,000		6,956,976		7,140,000		4.0	%
GreyHeller LLC (f), (h)	Business Services	Series A Preferred Units		11/17/2016		850,000		850,000		1,496,169		0.8	%
		Total Business Services						7,806,976		8,636,169		4.8	%
Elyria Foundry Company, L.L.C. (f), (h)	Metals	Common Stock		7/30/2010		60,000		9,685,028		1,804,200		1.0	%
Elyria Foundry Company, L.L.C. (d), (f)	Metals	Second Lien Term Loan 15.00% PIK, 8/10/2022		7/30/2010	$	1,022,712		1,022,712		1,022,712		0.5	%
		Total Metals						10,707,740		2,826,912		1.5	%
Sub Total Affiliate investments								18,514,716		11,463,081		6.3	%

See accompanying notes to consolidated financial statements.

F-12

Company	Industry	Investment Interest Rate/ Maturity	Original Acquisition Date		Principal/ Number of Shares		Cost		Fair Value (c)		% of Net Assets
Control investments—46.5% (b)
Easy Ice, LLC (g)	Business Services	Preferred Equity 10.00% PIK		2/3/2017		5,080,000		9,683,612		13,357,444		7.4	%
Easy Ice, LLC (d), (g)	Business Services	Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023		3/29/2013	$	21,184,063		21,126,021		21,268,799		11.8	%
Easy Ice Masters, LLC (d), (g)	Business Services	Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023		10/31/2018	$	3,804,244		3,768,025		3,819,461		2.1	%
Netreo Holdings, LLC (g)	Business Services	First Lien Term Loan (3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK, 7/3/2023		7/3/2018	$	5,067,057		5,021,133		5,092,899		2.8	%
Netreo Holdings, LLC (g), (h)	Business Services	Common Stock Class A Unit		7/3/2018		3,150,000		3,150,000		5,179,101		2.9	%
		Total Business Services						42,748,791		48,717,704		27.0	%
Saratoga Investment Corp. CLO2013-1, Ltd. (a), (e), (g)	Structured Finance Securities	Other/Structured Finance Securities 16.67%, 1/20/2030		1/22/2008	$	69,500,000		23,516,398		25,393,508		14.0	%
Saratoga Investment Corp. CLO2013-1, Ltd.Class F-R-2 Note (a), (g)	Structured Finance Securities	Other/Structured Finance Securities (3M USD LIBOR+8.75%), 11.37%, 1/20/2030		12/14/2018	$	2,500,000		2,500,000		2,483,500		1.4	%
Saratoga Investment Corp. CLO2013-1, Ltd.Class G-R-2 Note (a), (g)	Structured Finance Securities	Other/Structured Finance Securities (3M USD LIBOR+10.00%), 12.62%, 1/20/2030		12/14/2018	$	7,500,000		7,500,000		7,450,500		4.1	%
		Total Structured Finance Securities						33,516,398		35,327,508		19.5	%
Sub Total Control investments								76,265,189		84,045,212		46.5	%
TOTAL INVESTMENTS—222.3% (b)							$	401,916,093	$	402,019,720		222.3	%
					Number of Shares		Cost		Fair Value		% of Net Assets
Cash and cash equivalents and cash and cash equivalents, reserve accounts—34.3% (b)
U.S. Bank Money Market (l)						62,094,394	$	62,094,394	$	62,094,394		34.3	%
Total cash and cash equivalents and cash and cash equivalents, reserve accounts						62,094,394	$	62,094,394	$	62,094,394		34.3	%

(a) Represents anon-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of February 28, 2019,non-qualifying assets represent 16.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio innon-qualifying assets.

(b) Percentages are based on net assets of $180,875,187 as of February 28, 2019.

(c) Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements).

(d) These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 7 to the consolidated financial statements).

(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 16.67% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.

(f) As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the year ended February 28, 2019 in which the issuer was an Affiliate are as follows:

Company	Purchases		Sales		Total Interest from Investments		Management and Incentive Fee Income		Net Realized Gain (Loss) from Investments		Net Change in Unrealized Appreciation (Depreciation)
GreyHeller LLC	$	—	$	—	$	963,289	$	—	$	—	$	776,012
Elyria Foundry Company, L.L.C.		—		—		150,284		—		—		(1,629,600	)
Total	$	—	$	—	$	1,113,573	$	—	$	—	$	(853,588	)

(g) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended February 28, 2019 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

See accompanying notes to consolidated financial statements.

F-13

Company	Purchases		Sales			Total Interest from Investments		Management and Incentive Fee Income		Net Realized Gain (Loss) from Investments		Net Change in Unrealized Appreciation (Depreciation)
Easy Ice, LLC	$	1,684,448	$	—		$	3,424,369	$	—	$	—	$	1,720,004
Easy Ice Masters, LLC		3,629,682		—			161,468		—		—		51,436
Netreo Holdings, LLC		8,100,000		—			374,843		—		—		2,100,867
Saratoga Investment Corp. CLO2013-1, Ltd.		14,268,609		(48,083	)		2,922,372		2,355,412		—		(701,722	)
Saratoga Investment Corp. CLO2013-1, Ltd. Class F Note		—		(4,500,000)			412,069		—		—		900
Saratoga Investment Corp. CLO2013-1, Ltd.Class F-R-2 Notes		2,500,000		—			61,761		—		—		(16,500	)
Saratoga Investment Corp. CLO2013-1, Ltd.Class G-R-2 Notes		7,500,000		—			205,333		—		—		(49,500)
Saratoga Investment Corp. CLO2013-1 Warehouse, Ltd.		20,000,000		(20,000,000	)		511,731		—		—		—
Total	$	57,682,739	$	(24,548,083	)	$	8,073,946	$	2,355,412	$	—	$	3,105,485

(h) Non-income producing at February 28, 2019.

(i) Includes securities issued by an affiliate of the Company.

(j) All or a portion of this investment has an unfunded commitment as of February 28, 2019. (see Note 8 to the consolidated financial statements).

(k) As of February 28, 2019, the investment was onnon-accrual status. The fair value of these investments was approximately $5.7 million, which represented 1.4% of the Company’s portfolio (see Note 2 to the consolidated financial statements).

(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s consolidated statements of assets and liabilities as of February 28, 2019.

LIBOR—London Interbank Offered Rate

1M USD LIBOR—The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.

3M USD LIBOR—The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.

PIK—Payment-in-Kind (see Note 2 to the consolidated financial statements).

See accompanying notes to consolidated financial statements.

F-14

SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 29, 2020

Note 1. Organization

Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). The Company commenced operations on March 23, 2007 as GSC Investment Corp. and completed the initial public offering (“IPO”) on March 28, 2007. The Company has elected to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code”). The Company expects to continue to qualify and to elect to be treated, for tax purposes, as a RIC. The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments.

GSC Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.

On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC’s limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.

On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.” in connection with the consummation of a recapitalization transaction.

The Company is externally managed and advised by the investment adviser, Saratoga Investment Advisors, LLC (the “Manager”), pursuant to a management agreement (the “Management Agreement”). Prior to July 30, 2010, the Company was managed and advised by GSCP (NJ), L.P.

The Company has established wholly-owned subsidiaries, SIA-Avionte, Inc., SIA-Easy Ice, LLC, SIA-GH, Inc.,SIA-HT, Inc.,SIA-MAC, Inc.,SIA-TG, Inc., SIA-TT, Inc.,SIA-Vector, Inc. andSIA-VR, Inc., which are structured as Delaware entities, or tax blockers (“Taxable Blockers”), to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass through entities). Tax Blockers are consolidated for accounting purposes, but are not consolidated for U.S. federal income tax purposes and may incur U.S. federal income tax expenses as a result of their ownership of portfolio companies.

On December 31, 2019, the Company’s second lien term loans in Easy Ice, LLC and Easy Ice Masters, LLC were repaid at par, and its preferred equity was sold in a change of control transaction. In addition to the second lien term loans of $27.9 million and the preferred equity of $10.7 million being repaid in full including all accrued interest, the Company also received approximately $35.6 million of additional proceeds, interest and fees. The Company recognized a gain of $31.2 million, which is included in the net realized gain (loss) from investments in the Company’s consolidated statement of operations from the sale. TheSIA-Easy Ice, LLC Taxable Blocker was sold as part of this transaction.

On February 11, 2020, the Company entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) with Saratoga Investment Corp.CLO 2013-1 Warehouse 2, Ltd.(“CLO 2013-1 Warehouse 2”), a wholly-owned subsidiary of Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”), pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. As of February 29, 2020, the Company’s investment in the CLO 2013-1 Warehouse 2 had a fair value of $2.2 million.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form of SBA debentures.

F-15

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), are stated in U.S. Dollars and include the accounts of the Company and its special purpose financing subsidiaries, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC), SBIC LP, SBIC II LP, SIA-Avionte, Inc.,SIA-Easy Ice, LLC, SIA-GH, Inc.,SIA-HT, Inc.,SIA-MAC, Inc.,SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. andSIA-VR, Inc. All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

The Company, SBIC LP and SBIC II LP are all considered to be investment companies for financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services — Investment Companies” (“ASC 946”). There have been no changes to the Company, SBIC LP or SBIC II LP’s status as investment companies during the year ended February 29, 2020.

Use of Estimates in the Preparation of Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as, a money market fund if such investment would cause the Company to exceed any of the following limitations:

• we were to own more than 3.0% of the total outstanding voting stock of the money market fund;

• we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets, except as allowed pursuant to Rule 12d1-1 of Section 12(d)(1) of the 1940 Act which is designed to permit “cash sweep” arrangements rather than investments directly in short-term instruments; or

• we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.

As of February 29, 2020, the Company did not exceed any of these limitations.

Cash and Cash Equivalents, Reserve Accounts

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash andshort-term liquid investments in money market funds, representing payments received on secured investments or other reserved amounts associated with the Company’s $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.

In addition, cash and cash equivalents, reserve accounts also include amounts held in designated bank accounts, in the form of cash and short-term liquid investments in money market funds, within our wholly-owned subsidiaries, SBIC LP and SBIC II LP.

The statements of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts.

F-16

The following table provides a reconciliation of cash and cash equivalents and cash and cash equivalents, reserve accounts reported within the consolidated statements of assets and liabilities that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

	February 29, 2020		February 28, 2019		February 28, 2018
Cash and cash equivalents	$	24,598,905	$	30,799,068	$	3,927,579
Cash and cash equivalents, reserve accounts		14,851,447		31,295,326		9,849,912
Total cash and cash equivalents and cash and cash equivalents, reserve accounts	$	39,450,352	$	62,094,394	$	13,777,491

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, “Affiliated Investments” are defined as thosenon-control investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

Investment Valuation

The Company accounts for its investments at fair value in accordance with the FASB ASC Topic 820,Fair Value Measurement(“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be transferred at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independentthird-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and athird-party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

The Company undertakes a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

• Each investment is initially valued by the responsible investment professionals of the Manager and preliminary valuation conclusions are documented, reviewed and discussed with our senior management; and

• An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year.

In addition, all our investments are subject to the following valuation process:

• The audit committee of our board of directors reviews and approves each preliminary valuation and our Manager and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

F-17

• Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

The Company’s investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. The Company uses the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine the valuation for our investment in Saratoga CLO.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. The Company’s net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

Derivative Financial Instruments

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815,Derivatives and Hedging (“ASC 815”). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.

Investment Transactions and Income Recognition

Purchases and sales of investments and the related realized gains or losses are recorded on atrade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts over the life of the investment and amortization of premiums on investments up to the earliest call date.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed onnon-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability.Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At February 29, 2020, certain investments in two portfolio companies, including preferred equity interests, were on non-accrual status with a fair value of approximately $2.1 million, or 0.4% of the fair value of our portfolio. At February 28, 2019, certain investments in four portfolio companies, including preferred equity interests, wereon non-accrual status with a fair value of approximately $5.7 million, or 1.4% of the fair value of our portfolio.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325,Investments-Other, Beneficial Interests in Securitized Financial Assets, (“ASC 325”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/orre-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

F-18

Adoption of ASC 606

In May 2014, the FASB issued ASU2014-09,Revenue from Contracts with Customers (“ASC 606”), which supersedes the revenue recognition requirements in Revenue Recognition (“ASC 605”). In May 2016, ASU2016-12 amended ASU2014-09 and deferred the effective period for annual periods beginning after December 15, 2017.

Under the new guidance, the Company recognizes revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Under this standard, revenue is based on a contract with a determinable transaction price and distinct performance obligations with probable collectability. Revenues cannot be recognized until the performance obligation(s) are satisfied and control is transferred to the customer. Management has concluded that the majority of its revenues associated with financial instruments are scoped out of ASC 606, and has concluded that the only significant impact relates to the timing of the recognition of the CLO incentive fee income. The adoption of ASC 606 did not have an impact on the Company’s management fee income or investment income.

The Company adopted ASC 606 to all applicable contracts under the modified retrospective approach using the practical expedient provided for within paragraph606-10-65-1(f)(4); therefore, the presentation of prior year periods has not been adjusted. The Company recognized the cumulative effect of initially adopting ASC 606 as an adjustment to the opening balance of components of equity as of March 1, 2018.

Incentive Fee Income

Incentive fee income is recognized based on the performance of Saratoga CLO during the period, subject to the achievement of minimum return levels in accordance with the terms set out in the investment management agreement between the Company and Saratoga CLO. Incentive fee income is realized in cash on a quarterly basis. Once realized, such fees are no longer subject to reversal.

Upon the adoption of ASC 606, the Company recognizes incentive fee income only when the amount is realized and no longer subject to reversal. Therefore, the Company no longer recognizes unrealized incentive fee income in the consolidated financial statements. The adoption of ASC 606 results in the delayed recognition of unrealized incentive fee income in the consolidated financial statements until it becomes realized at the end of the measurement period and all uncertainties are eliminated, which is typically quarterly.

The Company adopted ASC 606 for incentive fee income using the modified retrospective approach with an effective date of March 1, 2018. The cumulative effect of the adoption resulted in the reversal of $0.07 million of unrealized incentive fee income and is presented as a reduction to the opening balances of components of equity as of March 1, 2018.

In conjunction with the third refinancing and issuance of the SaratogaCLO’s 2013-1 Reset CLONotes (the “2013-1 Reset CLO Notes”) on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information. Prior to the refinancing, the Company received $0.6 million in incentive fees from the Saratoga CLO and is reported as incentive fee income on the Company’s consolidated statement of operations for the year ended February 28, 2019.

F-19

The following table presents the impact of incentive fee income on the consolidated statement of assets and liabilities upon the adoption of ASC 606 effective March 1, 2018:

Consolidated Statement of Assets and Liabilities

	February 28, 2018
	As Reported		Adjustments(1)			As Adjusted for Adoption of ASC 606
Management and incentive fee receivable	$	233,024	$	(65,300	)	$	167,724
Total assets		360,336,361		(65,300	)		360,271,061
Cumulative effect adjustment for Adoption of ASC 606		—		(65,300	)		(65,300	)
Total net assets		143,691,367		(65,300	)		143,626,067
NET ASSET VALUE PER SHARE	$	22.96	$	(0.01	)	$	22.95

⁽¹⁾  Unrealized incentive fee receivable balance as of February 28, 2018.

For the year ended February 28, 2019, the impact on the consolidated statement of operations without the adoption of ASC 606 is shown in the table below:

Consolidated Statements of Operations

	For the Year Ended February 28, 2019
	As Reported		Adjustments			Without Adoption of ASC 606
Incentive fee income	$	633,232	$	(65,300	)	$	567,932
Total investment income		47,707,963		(65,300	)		47,642,663
NET INVESTMENT INCOME		18,302,209		(65,300	)		18,236,909
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		18,509,370		(65,300	)		18,444,070
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE	$	2.63	$	(0.01	)	$	2.62

Payment-in-Kind Interest

The Company holds debt and preferred equity investments in its portfolio that contain apayment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company stops accruing PIK interest if it is expected that the issuer will not be able to pay all principal and interest when due.

Structuring and Advisory Fee Income

Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.

Other Income

Other income includes dividends received, origination fees and prepayment income fees and is recorded in the consolidated statements of operations when earned.

F-20

Deferred Debt Financing Costs

Financing costs incurred in connection with our credit facility and notes are deferred and amortized using the straight-line method over the life of the respective facility and debt securities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the straight-line method over the life of the debentures.

The Company presents deferred debt financing costs on the balance sheet as a contra-liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

Contingencies

In the ordinary course of business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote. Therefore, the Company has not accrued any liabilities in connection with such indemnifications.

In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.

Income Taxes

The Company has elected to be treated for tax purposes as a RIC under the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes, except as related to the Taxable Blockers when applicable.

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

In accordance with certain applicable U.S. Treasury regulations and private letter rulings issued by the Internal Revenue Service (“IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

The Company may utilize wholly-owned holding companies taxed under Subchapter C of the Code or tax blockers, when making equity investments in portfolio companies taxed as pass-through entities to meet itssource-of-income requirements as a RIC. Taxable Blockers are consolidated in the Company’s U.S. GAAP financial statements and may result in current and deferred federal and state income tax expense with respect to income derived from those investments. Such income, net of applicable income taxes, is not included in the Company’stax-basis net investment income until distributed by the Taxable Blocker, which may result in timing and character differences between the Company’s U.S. GAAP andtax-basis net investment income and realized gains and losses. Income tax expense or benefit from Taxable Blockers related to net investment income are included in total operating expenses, while any expense or benefit related to federal or state income tax originated for capital gains and losses are included together with the applicable net realized or unrealized gain or loss line item. Deferred tax assets of the Taxable Blockers are reduced by a valuation allowance when, in the opinion of management, it is more-likelythan-not that some portion or all of the deferred tax assets will not be realized.

F-21

FASB ASC Topic 740,Income Taxes, (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are“more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a“more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations. During the fiscal year ended February 29, 2020, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2017, 2018 and 2019 federal tax years for the Company remain subject to examination by the IRS. At February 29, 2020 and February 28, 2019, there were no uncertain tax positions. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

Dividends

Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of the DRIP by the dividend record date will have their cash dividends automatically reinvested into additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

Capital Gains Incentive Fee

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to the Manager when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time.

The actual incentive fee payable to the Company’s Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and only reflected those realized capital gains net of realized and unrealized losses for the period.

New Accounting Pronouncements

In August 2018, FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”). The primary focus of ASU2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management is currently evaluating the impact these changes will have on the Company’s financial statements and disclosures.

SEC Disclosure Update and Simplification

In March 2019, the U.S. Securities Exchange Commission (the “SEC”) adopted the final rule under SEC ReleaseNo. 33-10618, Fast Act Modernization and Simplification of RegulationS-K, amending certain disclosure requirements. The amendments are intended to simplify certain disclosure requirements and to provide for a consistent set of rules to govern incorporating information by reference and hyperlinking, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The Company has adopted the final rule, as applicable under SEC ReleaseNo. 33-10618 and determined the effect of the adoption of the simplification rules on financial statements will be limited to the modification and removal of certain disclosures.

F-22

Risk Management

In the ordinary course of its business, the Company manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

Credit risk is the risk of default ornon-performance by portfolio companies, equivalent to the investment’s carrying amount. The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

The Company has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

Note 3. Investments

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

• Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2— Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities, for which some level of recent trading activity has been observed.

• Level 3— Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level 2 inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level 3 if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation methodology.

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

F-23

The following table presents fair value measurements of investments, by major class, as of February 29, 2020 (dollars in thousands), according to the fair value hierarchy:

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
First lien term loans	$	—	$	—	$	346,233	$	346,233
Second lien term loans		—		—		73,570		73,570
Unsecured term loans		—		—		4,346		4,346
Structured finance securities		—		—		32,470		32,470
Equity interests		—		—		29,013		29,013
Total	$	—	$	—	$	485,632	$	485,632

The following table presents fair value measurements of investments, by major class, as of February 28, 2019 (dollars in thousands), according to the fair value hierarchy:

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
First lien term loans	$	—	$	—	$	202,846	$	202,846
Second lien term loans		—		—		125,786		125,786
Unsecured term loans		—		—		2,100		2,100
Structured finance securities		—		—		35,328		35,328
Equity interests		—		—		35,960		35,960
Total	$	—	$	—	$	402,020	$	402,020

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 29, 2020 (dollars in thousands):

	First lien term loans			Second lien term loans			Unsecured term loans			Structured finance securities			Equity     interests			Total
Balance as of February 28, 2019	$	202,846		$	125,786		$	2,100		$	35,328		$	35,960		$	402,020
Payment-in-kind and other adjustments to cost		673			2,874			45			4			(550	)		3,046
Net accretion of discount on investments		799			271			—			—			—			1,070
Net change in unrealized appreciation (depreciation) on investments		2,614			99			(299	)		(2,862	)		(323	)		(771	)
Purchases		197,059			—			2,500			—			5,084			204,643
Sales and repayments		(56,890	)		(55,460	)		—			—			(54,903	)		(167,253	)
Net realized gain (loss) from investments		(868	)		—			—			—			43,745			42,877
Balance as of February 29, 2020	$	346,233		$	73,570		$	4,346		$	32,470		$	29,013		$	485,632
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets that were still held by the Company at the end of the year	$	1,546		$	140		$	(299	)	$	(2,863)		$	4,069		$	2,593

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK interests.

Sales and repayments represent net proceeds received from investments sold, and principal paydowns received, during the year.

F-24

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There were no transfers or restructures in or out of Levels 1, 2, or 3 during the year ended February 29, 2020.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 28, 2019 (dollars in thousands):

	Syndicated loans			First lien term loans			Second lien term loans			Unsecured term loans			Structured finance securities			Equity     interests			Total
Balance as of February 28, 2018	$	4,106		$	197,359		$	95,075		$	—		$	16,374		$	29,780		$	342,694
Payment-in-kind and other adjustments to cost		—			611			2,570			—			—			969			4,150
Net accretion of discount on investments		73			851			298			—			—			—			1,222
Net change in unrealized appreciation (depreciation) on investments		(73	)		412			(1,690	)		(116	)		(767	)		(666	)		(2,900	)
Purchases		—			89,218			47,844			20,000			24,269			6,377			187,708
Sales and repayments		(4,106	)		(85,431	)		(18,311	)		(17,784	)		(4,548	)		(5,548	)		(135,728	)
Net realized gain (loss) from investments		—			(174	)		—			—			—			5,048			4,874
Balance as of February 28, 2019	$	—		$	202,846		$	125,786		$	2,100		$	35,328		$	35,960		$	402,020
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets that were still held by the Company at the end of the year	$	—		$	905		$	(1,599	)	$	(116	)	$	(768)		$	3,805		$	2,227

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There were no transfers or restructures in or out of Levels 1, 2, or 3 during the year ended February 29, 2019.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 29, 2020 were as follows (dollars in thousands):

	Fair Value		Valuation Technique		Unobservable Input		Range	Weighted Average*
First lien term loans	$	346,233		Market Comparables		Market Yield (%)	7.8% - 12.5%		9.7%
						EBITDA Multiples (x)	0.0x		0.0x
Second lien term loans		73,570		Market Comparables		Market Yield (%)	9.5% - 85.1%		13.0%
						EBITDA Multiples (x)	5.0x		5.0x
Unsecured term loans		4,346		Market Comparables		Market Yield (%)	18.3% - 21.3%		19.8%
						EBITDA Multiples (x)	5.2x		5.2x
Structured finance securities		32,470		Discounted Cash Flow		Discount Rate (%)	9.25% - 16.00%		14.2%
						Recovery Rate (%)	35.0% - 70.0%		70.0%
						Prepayment Rate (%)	20.0%		20.0%
Equity interests		29,013		Market Comparables		EBITDA Multiples (x)	4.0x - 14.0x		6.5x
						Revenue Multiples (x)	1.0x - 40.7x		7.3x
Total	$	485,632

* The weighted average in the table above is calculated based on each investment’s fair value weighting, using the applicable unobservable input.

F-25

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2019 were as follows (dollars in thousands):

	Fair Value		Valuation Technique		Unobservable Input		Range	Weighted Average*
First lien term loans	$	202,846		Market Comparables		Market Yield (%)	8.6% - 13.2%		11.0%
						EBITDA Multiples (x)	3.0x		3.0x
Second lien term loans		125,786		Market Comparables		Market Yield (%)	10.5% - 41.1%		12.8%
						EBITDA Multiples (x)	5.0x		5.0x
Unsecured term loans		2,100		Market Comparables		Market Yield (%)	15.0%		15.0%
						EBITDA Multiples (x)	4.8x		4.8x
Structured finance securities		35,328		Discounted Cash Flow		Discount Rate (%)	9.0% - 15.0%		13.6%
						Recovery Rate (%)	35.0% - 70.0%		70.0%
						Prepayment Rate (%)	20.0%		20.0%
Equity interests		35,960		Market Comparables		EBITDA Multiples (x)	4.0x - 14.7x		6.7x
						Revenue Multiples (x)	0.6x - 39.6x		10.1x
Total	$	402,020

* The weighted average in the table above is calculated based on each investment’s fair value weighting, using the applicable unobservable input.

For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the earnings before interest, tax, depreciation and amortization (“EBITDA”) or revenue valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, and prepayment rate, in isolation, would result in a significantly lower (higher) fair value measurement while a significant increase (decrease) in recovery rate, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a market quote in deriving a value, a significant increase (decrease) in the market quote, in isolation, would result in a significantly higher (lower) fair value measurement.

The composition of our investments as of February 29, 2020 at amortized cost and fair value was as follows (dollars in thousands):

	Investments at Amortized Cost		Amortized Cost Percentage of Total Portfolio			Investments at Fair Value		Fair Value Percentage of Total Portfolio
First lien term loans	$	343,100		70.5	%	$	346,233		71.3	%
Second lien term loans		75,478		15.5			73,570		15.1
Unsecured term loans		4,761		1.0			4,346		0.9
Structured finance securities		33,521		6.9			32,470		6.7
Equity interests		29,439		6.1			29,013		6.0
Total	$	486,299		100.0	%	$	485,632		100.0	%

F-26

The composition of our investments as of February 28, 2019 at amortized cost and fair value was as follows (dollars in thousands):

	Investments at Amortized Cost		Amortized Cost Percentage of Total Portfolio			Investments at Fair Value		Fair Value Percentage of Total Portfolio
First lien term loans	$	202,328		50.3	%	$	202,846		50.5	%
Second lien term loans		127,793		31.8			125,786		31.3
Unsecured term loans		2,217		0.6			2,100		0.5
Structured finance securities		33,516		8.3			35,328		8.8
Equity interests		36,062		9.0			35,960		8.9
Total	$	401,916		100.0	%	$	402,020		100.0	%

For loans and debt securities for which market quotations are not available, we determine their fair value based on third party indicative broker quotes, where available, or the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield valuation methodology. In applying the market yield valuation methodology, we determine the fair value based on such factors as market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. If, in our judgment, the market yield methodology is not sufficient or appropriate, we may use additional methodologies such as an asset liquidation or expected recovery model.

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. Fornon-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. In connection with the refinancing of the Saratoga CLO liabilities, we ran Intex models based on assumptions about the refinanced Saratoga CLO’s structure, including capital structure, cost of liabilities and reinvestment period. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at February 29, 2020. The inputs at February 29, 2020 for the valuation model include:

• Default rate: 2.0%

• Recovery rate: 35-70%

• Discount rate: 16.0%

F-27

• Prepayment rate: 20.0%

• Reinvestment rate / price: L+360bps / $99.75

Investment Concentration

Set forth is a brief description of each portfolio company in which the fair value of our investment represents greater than 5% of our total assets as of February 29, 2020.

CLEO Communications Holding, LLC

CLEO Communications Holding, LLC (“Cleo”) is a provider of technology enabled data communication and integration platform for daily business transactions. Cleo’s platform allows for the automation ofbusiness-to-business transaction information for customers operating in the retail, manufacturing, logistics and the healthcare verticals. The platform also allows for internalapplication-to-application communication, allowing customers’ core enterprise software applications to easily share and transfer data.

Destiny Solutions Inc.

Destiny Solutions provides a SaaS-based student lifecycle management (“SLM”) software solution used by higher education institutions to manage their continuing education (“CE”) andnon-degree educational programs for“non-traditional” students who fall outside of the “traditional” student profile. Traditional students are full-time students working toward an undergraduate, graduate, or doctorate degree. Destiny’s software acts as the ERP, CRM,e-commerce platform, and student information management systemfor non-traditional student programs.

Saratoga Investment Corp. CLO2013-1, Ltd.

The Company has a collateral management agreement with Saratoga CLO, pursuant to which the Company acts as its collateral manager. The Saratoga CLO invests primarily in senior secured first lien term loans. The Company also holds an investment in the subordinated note and ClassF-R-2 andG-R-2 notes of the Saratoga CLO. In addition, the Company entered into an unsecured loan agreement with CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, in order to provide capital necessary to support warehouse activities.

Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”)

On January 22, 2008, the Company entered into a collateral management agreement with Saratoga CLO, pursuant to which the Company acts as its collateral manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, the Company completed a second refinancing of the Saratoga CLO with its reinvestment period extended to October 2018.

On August 7, 2018, the Company entered into an unsecured loan agreement (“CLO2013-1 Warehouse Loan”) with Saratoga Investment Corp. CLO2013-1 Warehouse, Ltd. (“CLO2013-1 Warehouse”), a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO2013-1 Warehouse may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support warehouse activities. The CLO2013-1 Warehouse Loan, which expired on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%. Interest accrued on the investment in the CLO2013-1 Warehouse Loan is included in interest income on the Company’s consolidated statement of operations. During the year ended February 28, 2019, the maximum amount invested by the Company in the CLO2013-1 Warehouse Loan amounted to $20.0 million and at February 28, 2019, the Company no longer held an investment in the CLO 2013-1 Warehouse Loan.

On December 14, 2018, the Company completed a third refinancing and upsize of the Saratoga CLO (the“2013-1 Reset CLO Notes”). The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. Anon-call period ending January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of theClass F-R-2 and $7.5 million aggregate principal amount of theClass G-R-2 notes tranches at par, with a coupon of 3M USD LIBOR plus 8.75% and 3M USD LIBOR plus 10.00%, respectively. As part of this refinancing, the Company also redeemed our existing $4.5 million aggregate amount of the Class F notes tranche at par and the $20.0 million CLO 2013-Warehouse loan was repaid.

F-28

On February 11, 2020, the Company entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) withCLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. During the year ended February 29, 2020, the Company invested $2.5 million in aggregate principal amount of the CLO 2013-1 Warehouse 2 Loan and as of February 29, 2020, the fair value of this investment was $2.2 million.

The Saratoga CLO remains 100.0% owned and managed by the Company. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we accrued management fee income of $2.5 million, $1.7 million and $1.5 million, respectively, and interest income of $4.1 million, $2.9 million and $2.4 million, respectively, from the Saratoga CLO. In conjunction with the third refinancing and issuance of the SaratogaCLO’s 2013-1 Reset CLONotes (the “2013-1 Reset CLO Notes”) on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional. Prior to the refinancing, incentive fee income of $0.6 million and $0.6 million for the years ended February 28, 2019 and February 28, 2018, respectively, was recognized related to the Saratoga CLO, reflecting the 12.0% hurdle rate that has been achieved. The incentive fee income from the Saratoga CLO is reported as incentive fee income on the Company’s consolidated statement of operations. See Note 4 for additional information.

As of February 29, 2020, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $22.6 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of February 29, 2020, the fair value of its investment in theClass F-R-2 Notes andG-R-2 Notes of Saratoga CLO was $2.5 million and $7.4 million, respectively. As of February 29, 2020, Saratoga CLO had investments with a principal balance of $528.4 million and a weighted average spread over LIBOR of 4.0% and had debt with a principal balance of $475.1 million with a weighted average spread over LIBOR of 2.2%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. As of February 29, 2020, the present value of the projected future cash flows of the subordinated notes was approximately $22.9 million, using a 16.0% discount rate. The Company’s total investment in the subordinate notes of Saratoga CLO is $43.8 million, which is comprised of the initial investment of $30.0 million in January 2008 plus the additional investment of $13.8 million in December 2018, and to date the Company has since received distributions of $60.5 million, management fees of $22.1 million and incentive fees of $1.2 million. In conjunction with the third refinancing of the2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO.

As of February 28, 2019, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $25.4 million. As of February 28, 2019, the fair value of its investment in theClass F-R-2 Notes andG-R-2 Notes of Saratoga CLO was $2.5 million and $7.5 million, respectively. As of February 28, 2019, Saratoga CLO had investments with a principal balance of $510.3 million and a weighted average spread over LIBOR of 4.0% and had debt with a principal balance of $470.0 million with a weighted average spread over LIBOR of 2.3%. As of February 28, 2019, the present value of the projected future cash flows of the subordinated notes, was approximately $26.6 million, using a 15.0% discount rate.

The separate audited financial statements of the Saratoga CLO as of February 29, 2020 and February 28, 2019, pursuant to Rule 3-09 of SEC rules RegulationS-X, and for the years ended February 29, 2020, February 28, 2019 and February 28, 2018, are presented on pageS-1.

F-29

Note 5. Income Taxes

The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, will not be subject to federal income tax on the portion of taxable income and gains distributed to stockholders.

The Company owns 100.0% of Saratoga CLO, an exempted company incorporated in the Cayman Islands. For financial reporting purposes, the Saratoga CLO is not included as part of the consolidated financial statements. For federal income tax purposes, the Company has requested and received approval from the IRS to treat the Saratoga CLO as a disregarded entity. As such, for federal income tax purposes and for purposes of meeting the RIC qualification and diversification tests, the results of operations of the Saratoga CLO are included with those of the Company to qualify as a RIC. The Company is required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of its investment company taxable income, as defined by the Code. Because federal income tax regulations differ from U.S. GAAP, distributions as required in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences between these distributions and U.S. GAAP financial results may be permanent or temporary in nature. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Differences in classification may also result from the treatment ofshort-term gains as ordinary income for tax purposes. As of February 29, 2020 and February 28, 2019, the Company reclassified for book purposes amounts arising from permanent book/tax differences primarily related to expired capital losses, nondeductible excise tax, reversal of blocker income earned, the sale of a blocker corporation, market discount and interest income with respect to the Saratoga CLO which is consolidated for tax purposes as follows (dollars in thousands):

	February 29, 2020			February 28, 2019
Capital in excess of par value	$	(1,843	)	$	(18,350	)
Total distributable earnings (loss)		1,843			18,350

For income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions paid for the years ended February 29, 2020, February 28, 2019 and February 28, 2018 was as follows (dollars in thousands):

	February 29, 2020		February 28, 2019		February 28, 2018
Ordinary income	$	15,292	$	14,189	$	11,376
Capital gains		4,806		—		—
Total	$	20,098	$	14,189	$	11,376

For federal income tax purposes, as of February 29, 2020, the aggregate net unrealized depreciation for all securities was $17.5 million. The aggregate cost of securities for federal income tax purposes was $969.4 million.

For federal income tax purposes, as of February 28, 2019, the aggregate net unrealized depreciation for all securities was $9.3 million. The aggregate cost of securities for federal income tax purposes was $874.4 million.

As of February 29, 2020 and February 28, 2019, the components of accumulated losses on a tax basis as detailed below differ from the amounts reflected per the Company’s consolidated statements of assets and liabilities by temporary book/tax differences primarily arising from the consolidation of the Saratoga CLO for tax purposes, market discount and original issue discount income, interest income accrual on defaulted loan,write-off of investments, and amortization of organizational expenditures and partnership interests (dollars in thousands).

	February 29, 2020			February 28, 2019
Post October loss deferred	$	—		$	—
Accumulated capital losses		—			(14,982	)
Other temporary differences		174			991
Undistributed ordinary income		—			751
Unrealized appreciation (depreciation)		(17,453	)		(9,257	)
Total components of accumulated losses	$	(17,279	)	$	(22,497	)

F-30

The Company had incurred capital losses of $9.3 million for year ended February 28, 2011 that expired on February 28, 2019 and incurred capital losses of $13.0 million for the year ended February 28, 2010 that expired as of February 28, 2018.

As of February 29, 2020, the Company had net capital gains of $25.9 million. The Company utilized $10.7 million of short-term capital loss carryovers and $4.3 million of long-term capital loss carryovers during the fiscal year ended February 29, 2020. These prior year losses were deemed to arise on the first day of the Company’s fiscal year. As of February 29, 2020, the Company has no remaining capital loss carryovers.

The Company is subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98% of its ordinary income in any calendar year and 98.2% of its capital gain net income for eachone-year period ending on October 31 of such calendar year. Depending on the level of Investment Company Taxable Income (“ICTI”) earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Management has analyzed the Company’s tax positions taken on federal income tax returns for all open years (fiscal years 2017—2020) and has concluded that no provision for uncertain income tax positions is required in the Company’s consolidated financial statements.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”) was enacted, and the provisions with the Modernization were are effective for the Company for the year ended February 29, 2012. The Modernization Act was the first major piece of legislation affecting RICs since 1986 and it modernized several of the federal income and excise tax provisions related to RICs. Some highlights of the enacted provisions are as follows:

New capital losses may now be carried forward indefinitely and retain the character of the original loss. Underpre-enactment law, capital losses could be carried forward for eight years, and carried forward asshort-term capital, irrespective of the character of the original loss.

The Modernization Act contains simplification provisions, which are aimed at preventing disqualification of a RIC for “inadvertent” failures of the asset diversification and/or qualifying income tests. Additionally, the Modernization Act exempts RICs from the preferential dividend rule and repealed the60-day designation requirement for certain types of pay-through income and gains.

Finally, the Modernization Act contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions.

SIA-Avionte, Inc.,SIA-Easy Ice, LLC,SIA-GH Inc.,SIA-HT, Inc.,SIA-MAC, Inc.,SIA-TG, Inc.,SIA-TT, Inc.,SIA-Vector, Inc., andSIA-VR, Inc., each 100% owned by the Company, are each filing standalone C Corporation tax returns for federal and state purposes. As separately regarded entities for tax purposes, these entities are taxed at normal corporate rates. For tax purposes, any distributions by the entities to the parent company would generally need to be distributed to the Company’s shareholders. Generally, such distributions of the entities’ income to the Company’s shareholders will be considered as qualified dividends for tax purposes. The entities taxable net income will differ from U.S. GAAP net income because of deferred tax temporary differences adjustments arising from net operating losses and unrealized appreciation and deprecation of securities held. Deferred tax assets and liabilities are measured using enacted corporate federal and state tax rates expected to apply to taxable income in the years in which those net operating losses are utilized and the unrealized gains and losses are realized. Deferred tax assets and deferred tax liabilities are netted off by entity, as allowed. The recoverability of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized on the basis of a history of operating losses combined with insufficient projected taxable income or other taxable events in the taxable blockers. SIA-Easy Ice, LLC was sold during the year ended February 29, 2020 and as part of this transaction, the actual legal entity (“Tax Blocker”) that owned the preferred equity was sold. This Tax Blocker was a wholly-owned subsidiary of the Company. For purposes of tax accounting, the Company had an $8.0 million tax basis in the Tax Blocker.

F-31

Deferred tax assets and liabilities, and related valuation allowances, as of February 29, 2020, February 28, 2019 and February 28, 2018, were as follows:

	February 29, 2020			February 28, 2019			February 28, 2018
Total deferred tax assets	$	1,744,879		$	2,533,426		$	—
Total deferred tax liabilities		(1,412,486	)		(1,766,835	)		—
Valuation allowance on net deferred tax assets		(1,679,756	)		(1,506,307	)		—
Net deferrred tax liability	$	(1,347,363	)	$	(739,716	)	$	—

As of February 29, 2020, the valuation allowance on deferred tax assets was $1.7 million, which represents the federal and state tax effect of net operating losses and unrealized losses that we do not believe we will realize through future taxable income. Any adjustments to the Company’s valuation allowance will depend on estimates of future taxable income and will be made in the period such determination is made.

Net deferred tax (benefit) expense for the year ended February 29, 2020 includes $(0.4) million net change in unrealized appreciation (depreciation) on investments and $1.0 million net change in total operating expense, in the consolidated statement of operations, respectively.

Net deferred tax (benefit) expense for the year ended February 28, 2019 includes $1.8 million change in unrealized appreciation (depreciation) on investments and $(1.1) million net change in total operating expense, in the consolidated statement of operations, respectively.

Net deferred tax (benefit) expense for the year ended February 28, 2018 includes $0.0 million change in unrealized appreciation (depreciation) on investments and $0.0 million net change in total operating expense, in the consolidated statement of operations, respectively.

Deferred tax temporary differences may include differences for state taxes and joint venture interests.

Federal and state income tax provisions (benefits) on investments are as follows:

	February 29, 2020		February 28, 2019		February 28, 2018
Current
Federal	$	—	$	—	$	—
State		—		—		—
Net current expense		—		—		—
Deferred
Federal		480,415		686,445		—
State		127,232		53,271		—
Net deferred expense		607,647		739,716		—
Net tax provision	$	607,647	$	739,716	$	—

F-32

The Company has federal net operating loss carryforwards of $0.1 million which will expire starting in 2037, with the remaining net operating loss carryforwards of $3.5 million having an indefinite life. In addition, the Company has state net operating loss carryforwards of $1.7 million, which begin to expire in fiscal year 2028.

Income tax expense was computed by applying the U.S. federal statutory rate of 21% combined with the weighted average state tax rate applicable to each taxable blocker based on the states they operate in.

Note 6. Agreements and Related Party Transactions

Investment Advisory and Management Agreement

On July 30, 2010, the Company entered into the Management Agreement with our Manager. The initial term of the Management Agreement was two years, with automatic,one-year renewals at the end of each year, subject to certain approvals by our board of directors and/or the Company’s stockholders. On July 9, 2019, our board of directors approved the renewal of the Management Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive management fee.

Base Management Fee and Incentive Management Fee

The base management fee of 1.75% per year is calculated based on the average value of our gross assets (other than cash or cash equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters. The base management fee is paid quarterly following the filing of the most recent10-Q.

The incentive management fee consists of the following two parts:

The first, payable quarterly in arrears, equals 20.0% of ourpre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter, subject to a“catch-up” provision. Under this provision, in any fiscal quarter, our Manager receives no incentive fee unless ourpre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter; and 20.0% of the amount of ourpre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter. There is no accumulation of amounts on the hurdle rate from quarter to quarter, and accordingly there is no claw back of amounts previously paid if subsequent quarters are below the quarterly hurdle rate, and there is no delay of payment if prior quarters are below the quarterly hurdle rate.

The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Importantly, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the “incentive fee capital gains” calculations, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the Company incurred $8.1 million, $6.9 million and $5.8 million in base management fees, respectively. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the Company incurred $5.8 million, $4.6 million and $3.4 million in incentive fees related topre-incentive fee net investment income. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we accrued $8.4 million, $0.3 million and $0.9 million, respectively, in incentive fees related to capital gains.

The accrual is calculated using both realized and unrealized capital gains for the period. The actual incentive fee related to capital gains will be determined and payable in arrears at the end of the fiscal year and will include only realized capital gains for the period. As of February 29, 2020, the base management fees accrual was $2.1 million and the incentive fees accrual was $13.7 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 28, 2019, the base management fees accrual was $1.9 million and the incentive fees accrual was $4.8 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.

F-33

Administration Agreement

On July 30, 2010, the Company entered into a separate administration agreement (the “Administration Agreement”) with our Manager, pursuant to which our Manager, as our administrator, has agreed to furnish us with the facilities and administrative services necessary to conduct ourday-to-day operations and provide managerial assistance on our behalf to those portfolio companies to which we are required to provide such assistance. The initial term of the Administration Agreement was two years, with automatic,one-year renewals at the end of each year subject to certain approvals by our board of directors and/or our stockholders. The amount of expenses payable or reimbursable thereunder by the Company was capped at $1.0 million for the initialtwo-year term of the Administration Agreement and subsequent renewals. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016. On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additionalone-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019.

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recognized $2.1 million, $1.9 million and $1.6 million in administrator expenses, respectively, pertaining to bookkeeping, recordkeeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of February 29, 2020, $0.5 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 28, 2019, $0.3 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities.

Saratoga CLO

On August 7, 2018, the Company entered into an unsecured loan agreement with CLO2013-1 Warehouse, a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO2013-1 Warehouse may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support warehouse activities. The CLO2013-1 Warehouse Loan, which expired on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%.

On December 14, 2018, the Company completed the third refinancing and issuance of the2013-1 Reset CLO Notes. This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. Anon-call period ending January 2020 was also added. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of theClass F-R-2 Notes tranche and $7.5 million in aggregate principal amount of theClass G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes and $20.0 million CLO2013-1 Warehouse Loan were repaid. The Company also paid $2.0 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. During the year ended February 29, 2020, the Company received full payment of $1.7 million from the Saratoga CLO for such transaction costs.

During the year ended February 28, 2019, the maximum amount invested by the Company in the CLO2013-1 Warehouse Loan amounted to $20.0 million, with interest income of $0.5 million recognized related to the CLO2013-1 Warehouse Loan and is included in interest from investments on the Company’s consolidated statement of operations for the year ended February 28, 2019.

F-34

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recognized $2.5 million, $1.7 million and $1.5 million in management fee income, respectively, related to the Saratoga CLO.

In conjunction with the third refinancing and issuance of the2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information. For the years ended February 28, 2019 and February 28, 2018, we recognized incentive fee income of $0.6 million and $0.6 million, respectively, related to the Saratoga CLO.

On February 11, 2020, the Company entered into an unsecured loan agreementCLO 2013-1 Warehouse 2 Loan withCLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. During the year ended February 29, 2020, the Company invested $2.5 million in aggregate principal amount of the CLO 2013-1 Warehouse 2 Loan and as of February 29, 2020, the fair value of this investment was $2.2 million.

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the Company neither bought nor sold any investments from the Saratoga CLO.

Note 7. Borrowings

Credit Facility

As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after giving effect to such leverage, or, if we obtain the required approvals from our independent directors and/or stockholders, 150.0%. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing. Our asset coverage ratio, as defined in the 1940 Act, was 607.1% as of February 29, 2020 and 234.5% as of February 28, 2019. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, ournon-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.

On April 11, 2007, we entered into a $100.0 million revolving securitized credit facility (the “Revolving Facility”). On May 1, 2007, we entered into a $25.7 million term securitized credit facility (the “Term Facility” and, together with the Revolving Facility, the “Facilities”), which was fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively affected the value of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced atwo-year amortization period during which all principal proceeds from the collateral were used to repay outstanding borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable monthly at the greater of the commercial paper rate and our lender’s prime rate plus 4.00% plus a default rate of 2.00% or, if the commercial paper market was unavailable, the greater of the prevailing LIBOR rates and our lender’s prime rate plus 6.00% plus a default rate of 3.00%.

On July 30, 2010, we used the net proceeds from (i) a stock purchase transaction and (ii) a portion of the funds available to us under the $40.0 million senior secured revolving credit facility (the “Credit Facility”) with Madison Capital Funding LLC, in each case, to pay the full amount of principal and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets, other than those held by SBIC LP, have been pledged under the Credit Facility to secure our obligations thereunder.

On February 24, 2012, we amended the Credit Facility to, among other things:

• expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

• extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

• remove the condition that we may not acquire additional loan assets without the prior written consent of Madison Capital Funding LLC.

F-35

On September 17, 2014, we entered into a second amendment to the Credit Facility to, among other things:

• extend the commitment termination date from February 24, 2015 to September 17, 2017;

• extend the maturity date of the Credit Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

• reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

• reduce the floor on base rate borrowings from 3.00% to 2.25%; and on LIBOR borrowings from 2.00% to 1.25%.

On May 18, 2017, we entered into a third amendment to the Credit Facility to, among other things:

• extend the commitment termination date from September 17, 2017 to September 17, 2020;

• extend the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025 (unless terminated sooner upon certain events);

• reduce the floor on base rate borrowings from 2.25% to 2.00%;

• reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and

• reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.

In addition to any fees or other amounts payable under the terms of the Credit Facility agreement with Madison Capital Funding LLC, an administrative agent fee per annum equal to $0.1 million is payable in equal monthly installments in arrears.

As of February 29, 2020 and February 28, 2019, there were no outstanding borrowings under the Credit Facility. During the applicable periods, the Company was in compliance with all of the limitations and requirements of the Credit Facility. Financing costs of $3.1 million related to the Credit Facility have been capitalized and are being amortized over the term of the facility. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recorded $0.6 million, $0.7 million and $0.8 million of interest expense, respectively, which includes commitment and administrative agent fees.

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recorded $0.09 million, $0.1 million and $0.1 million of amortization of deferred financing costs related to the Credit Facility and Revolving Facility, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. For the fiscal year ended February 29, 2020, the average borrowings outstanding and the weighted average interest rate on outstanding borrowings under the Credit Facility was approximately $0.6 million and 6.66%, respectively. For the fiscal year ended February 28, 2019, the average borrowings outstanding and the weighted average interest rate on outstanding borrowings under the Credit Facility was approximately $3.4 million and 7.10%, respectively. For the fiscal year ended February 28, 2018, the average borrowings outstanding and the weighted average interest rate on outstanding borrowings under the Credit Facility was approximately $7.1 million and 6.02%, respectively.

The Credit Facility contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Credit Facility also includes certain requirements relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. The Credit Facility has aneight-year term, consisting of athree-year period (the “Revolving Period”), under which the Company may make and repay borrowings, and a final maturity five years from the end of the Revolving Period. Availability on the Credit Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain “eligible” loan assets included as part of the Borrowing Base. Funds may be borrowed at the greater of the prevailingone-month LIBOR rate and 1.00%, plus an applicable margin of 4.75%. At the Company’s option, funds may be borrowed based on an alternative base rate, which in no event will be less than 2.00%, and the applicable margin over such alternative base rate is 3.75%. In addition, the Company will pay the lenders a commitment fee of 0.75% per year (or 0.50% if the ratio of advances outstanding to aggregate commitments is greater than or equal to 50%) on the unused amount of the Credit Facility for the duration of the Revolving Period.

F-36

Our borrowing base under the Credit Facility was $35.6 million, subject to the Credit Facility cap of $45.0 million at February 29, 2020. For purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent Annual Report on Form10-K or Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the February 29, 2020 borrowing base relies upon the valuations set forth in the Quarterly Report on Form 10-Q for the period ended November 30, 2019, as filed with the SEC on January 8, 2020. The valuations presented in this Annual Report on Form 10-K will not be incorporated into the borrowing base until after this Annual Report on Form 10-K is filed with the SEC.

SBA Debentures

Our wholly-owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA.

On August 14, 2019, the Company’s wholly-owned subsidiary, SBIC II LP, received an SBIC license from the SBA. The new license provides up to $175.0 million in additional long-term capital in the form of SBA debentures. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount ofSBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million. With this license approval, Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital.

As of February 29, 2020, we have funded SBIC LP with an aggregate total of $75.0 million of equity capital and have $150.0 million ofSBA-guaranteed debentures outstanding and have funded SBIC II LP with an aggregate total of $50.0 million of equity capital and do not have anySBA-guaranteed debentures outstanding. SBA debentures arenon-recourse to us, have a10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP and SBIC II LP may borrow to a maximum of $150.0 million and $175.0 million, respectively, which is up to twice its potential regulatory capital.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to ‘‘smaller’’ concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

SBIC LP and SBIC II LP are subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC II LP will receiveSBA-guaranteed debenture funding, which is dependent upon SBIC II LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP and SBIC II LP assets over our stockholders and debtholders in the event we liquidate SBIC LP and SBIC II LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP and SBIC II LP upon an event of default.

The Company received exemptive relief from the SEC to permit it to exclude the debt of our SBIC subsidiaries guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows the Company increased flexibility under the asset coverage test by permitting it to borrow up to $325.0 million more than it would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, the non-interested board of directors of the Company approved of the Company becoming subject to a minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.

At February 29, 2020 and February 28, 2019, there was $150.0 million and $150.0 million outstanding of SBA debentures, respectively. The carrying amount of the amount outstanding of SBA debentures approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy. Financing costs of $5.0 million and $0.7 million related to the SBA debentures issued by SBIC LP and SBIC II LP, respectively, have been capitalized and are being amortized over the term of the commitment and drawdown.

F-37

For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recorded $4.8 million, $4.7 million and $4.1 million of interest expense related to the SBA debentures, respectively. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we recorded $0.5 million, $0.5 million and $0.5 million of amortization of deferred financing costs related to the SBA debentures, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. The weighted average interest rate during the years ended February 29, 2020, February 28, 2019 and February 28, 2018 on the outstanding borrowings of the SBA debentures was 3.23%, 3.20% and 3.14%, respectively. During the years ended February 29, 2020 and February 28, 2019, the average dollar amount of SBA debentures outstanding was $150.0 million and $146.0 million, respectively.

In December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million, subject to SBA approval. SBA regulations previously limited the amount ofSBA-guaranteed debentures that an SBIC may issue to $150.0 million when it has at least $75.0 million in regulatory capital but this has increased to $175.0 million for new licenses when it has at least $87.5 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum amount of $350.0 million inSBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.

Notes

On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”). The 2020 Notes will mature on May 31, 2020, and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at the Company’s option. Interest will be payable quarterly beginning August 15, 2013. On May 17, 2013, the Company closed an additional $6.3 million in aggregate principal amount of the 2020 Notes, pursuant to the full exercise of the underwriters’ option to purchase additional 2020 Notes. The 2020 Notes were redeemed in full on January 13, 2017.

On May 29, 2015, the Company entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through anAt-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, the Company issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 30, 2023, and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes, which amounted to $61.8 million, and for general corporate purposes in accordance with our investment objective and strategies. As of February 28, 2019, the carrying amount and fair value of the 2023 Notes was $74.5 million and $76.4 million, respectively.

On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes. Upon the extinguishment of the 2023 Notes, the remaining unamortized deferred debt financing costs of $1.6 million (including underwriting commissions and net of issuance premiums), was recorded within loss on debt extinguishment in the consolidated statements of operations for the year ended February 29, 2020 when the related 2023 Notes were extinguished. The 2023 Notes were listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share, and have been delisted following the redemption.

For the years ended February 28, 2019 and February 28, 2018, we recorded $5.0 million and $5.0 million, respectively, of interest expense and $0.4 million and $0.4 million, respectively, of amortization of deferred financing cost related to the 2023 Notes. Interest expense and amortization of deferred financing cost are reported as interest and debt financing expense on the consolidated statements of operations. During the years ended February 28, 2019 and February 28, 2018, the average dollar amount of 2023 Notes outstanding was $74.5 million and $74.5 million, respectively.

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025 and commencing August 31, 2021, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

F-38

On February 5, 2019, the Company completed are-opening andup-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

As of February 29, 2020, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share. As of February 29, 2020, the carrying amount and fair value of the 2025 Notes was $60.0 million and $60.6 million, respectively. The fair value of the 2025 Notes, which are publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy.

For the year ended February 29, 2020 and February 28, 2019, we recorded $3.7 million and $1.6 million, respectively, of interest expense and $0.4 million and $0.2 million, respectively, of amortization of deferred financing costs related to the 2025 Notes. Interest expense and amortization of deferred financing cost are reported as interest and debt financing expense on the consolidated statements of operations. For the year ended February 29, 2020 and February 28, 2019, the average dollar amount of 2025 Notes outstanding was $60 million and $25 million, respectively.

As noted above, on December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes. As of February 28, 2019, the carrying amount and fair value of the 2023 Notes was $74.5 million and $76.4 million, respectively.

Senior Securities

Information about our senior securities is shown in the following table as of February 28/29 for the fiscal years indicated in the table, unless otherwise noted. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial condition, liquidity and capital resources” for more detailed information regarding the senior securities.

F-39

SENIOR SECURITIES

(dollar amounts in thousands, except per share data)

Class and Year(1)(2)	Total Amount Outstanding Exclusive of Treasury Securities(3)		Asset Coverage per Unit(4)		Involuntary Liquidating Preference per Share(5)		Average Market Value per Share(6)
	(in thousands)
Credit Facility with Madison Capital Funding
Fiscal year 2020 (as of February 29, 2020)	$	—	$	6,071		—		N/A
Fiscal year 2019 (as of February 28, 2019)	$	—	$	2,345		—		N/A
Fiscal year 2018 (as of February 28, 2018)	$	—	$	2,930		—		N/A
Fiscal year 2017 (as of February 28, 2017)	$	—	$	2,710		—		N/A
Fiscal year 2016 (as of February 29, 2016)	$	—	$	3,025		—		N/A
Fiscal year 2015 (as of February 28, 2015)	$	9,600	$	3,117		—		N/A
Fiscal year 2014 (as of February 28, 2014)	$	—	$	3,348		—		N/A
Fiscal year 2013 (as of February 28, 2013)	$	24,300	$	5,421		—		N/A
Fiscal year 2012 (as of February 29, 2012)	$	20,000	$	5,834		—		N/A
Fiscal year 2011 (as of February 28, 2011)	$	4,500	$	20,077		—		N/A
Fiscal year 2010 (as of February 28, 2010)	$	—	$	—		—		N/A
Fiscal year 2009 (as of February 28, 2009)	$	—	$	—		—		N/A
Fiscal year 2008 (as of February 29, 2008)	$	—	$	—		—		N/A
Fiscal year 2007 (as of February 28, 2007)	$	—	$	—		—		N/A
7.50% Notes due 2020(7)
Fiscal year 2017 (as of February 28, 2017)	$	—	$	—		—		N/A
Fiscal year 2016 (as of February 29, 2016)	$	61,793	$	3,025		—	$	25.24	(8)
Fiscal year 2015 (as of February 28, 2015)	$	48,300	$	3,117		—	$	25.46	(8)
Fiscal year 2014 (as of February 28, 2014)	$	48,300	$	3,348		—	$	25.18	(8)
Fiscal year 2013 (as of February 28, 2013)	$	—	$	—		—		N/A
Fiscal year 2012 (as of February 29, 2012)	$	—	$	—		—		N/A
Fiscal year 2011 (as of February 28, 2011)	$	—	$	—		—		N/A
Fiscal year 2010 (as of February 28, 2010)	$	—	$	—		—		N/A
Fiscal year 2009 (as of February 28, 2009)	$	—	$	—		—		N/A
Fiscal year 2008 (as of February 29, 2008)	$	—	$	—		—		N/A
Fiscal year 2007 (as of February 28, 2007)	$	—	$	—		—		N/A
6.75% Notes due 2023(9)
Fiscal year 2020 (as of February 29, 2020)	$	—	$	—		—		N/A
Fiscal year 2019 (as of February 28, 2019)	$	74,451	$	2,345		—	$	25.74	(10)
Fiscal year 2018 (as of February 28, 2018)	$	74,451	$	2,930		—	$	26.05	(10)
Fiscal year 2017 (as of February 28, 2017)	$	74,451	$	2,710		—	$	25.89	(10)
6.25% Notes due 2025
Fiscal year 2020 (as of February 29, 2020)	$	60,000	$	6,071		—	$	25.75	(11)
Fiscal year 2019 (as of February 28, 2019)	$	60,000	$	2,345		—	$	24.97	(11)

(1) We have excludedour SBA-guaranteed debentures from this table because the SEC has granted us exemptive relief that permits us to exclude such debentures from the definition of senior securities in the 200% asset coverage ratio we are required to maintain under the 1940 Act. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources.”

(2) This table does not include the senior securities of our predecessor entity, GSC Investment Corp., relating to a revolving securitized credit facility with Deutsche Bank, in light of the fact that the Company was under different management during the time that such credit facility was outstanding.

(3) Total amount of senior securities outstanding at the end of the period presented.

(4) Asset coverage per unit is the ratio of our total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness, calculated on a total basis.

(5) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “—” indicates information which the Securities and Exchange Commission expressly does not require to be disclosed for certain types of senior securities.

(6) Not applicable for credit facility because not registered for public trading.

(7) On January 13, 2017, the Company redeemed in full its 2020 Notes. The Company used a portion of the net proceeds from the 2023 Notes offering, which was completed in December 2016, to redeem the 2020 Notes in full.

(8) Based on the average daily trading price of the 2020 Notes on the NYSE.

(9) On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes.

(10) Based on the average daily trading price of the 2023 Notes on the NYSE.

(11) Based on the average daily trading price of the 2025 Notes on the NYSE.

F-40

Note 8. Commitments and Contingencies

Contractual Obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at February 29, 2020:

			Payment Due by Period
Long-Term Debt Obligations	Total		Less Than   1 Year		1 - 3     Years		3 - 5 Years		More Than 5 Years
	($ in thousands)
Revolving credit facility	$	—	$	—	$	—	$	—	$	—
SBA debentures		150,000		—		—		79,000		71,000
2025 Notes		60,000		—		—		—		60,000
Total Long-Term Debt Obligations	$	210,000	$	—	$	—	$	79,000	$	131,000

Off-Balance Sheet Arrangements

At February 29, 2020 and February 28, 2019, the Company’soff-balance sheet arrangements consisted of $64.1 million and $4.5 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

A summary of the unfunded commitments outstanding as of February 29, 2020 and February 28, 2019 is shown in the table below (dollars in thousands):

	February 29, 2020		February 28, 2019
At Company’s discretion
inMotionNow, Inc.	$	3,000	$	—
Omatic Software, LLC		1,000		1,000
Passageways, Inc.		5,000		—
PDDS Buyer, LLC		5,000		—
Saratoga Investment Corp. CLO2013-1 Warehouse 2, Ltd		17,500		—
Top Gun Pressure Washing, LLC		5,000		—
Village Realty Holdings LLC		10,000		—
Total		46,500		1,000
At portfolio company’s discretion - satisfaction of certain financial and nonfinancial covenants required
ArbiterSports, LLC		1,000		—
Axiom Purchaser, Inc.		1,000		1,000
CoConstruct, LLC		3,500		—
Davisware, LLC		2,000		—
Destiny Solutions Inc.		—		1,500
GDS Holdings US, Inc.		—		1,000
GoReact		2,000		—
HemaTerra Holding Company, LLC		4,000		—
Passageways, Inc.		3,000		—
Village Realty Holdings LLC		1,124		—
		17,624		3,500
Total	$	64,124	$	4,500

F-41

Note 9. Directors Fees

The independent directors each receive an annual fee of $60,000. They also receive $2,500 plus reimbursement of reasonableout-of- pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonableout-of- pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $10,000 and the chairman of each other committee receives an annual fee of $5,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors’ fees in the form of our common stock issued at a price per share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are “interested persons” of the Company (as such term is defined in the 1940 Act). For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, we incurred $0.3 million, $0.3 million and $0.2 million for directors’ fees and expenses, respectively. As of February 29, 2020 and February 28, 2019, $0.06 million and $0.06 million in directors’ fees and expenses were accrued and unpaid, respectively. As of February 29, 2020, we had not issued any common stock to our directors as compensation for their services.

Note 10. Stockholders’ Equity

On May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.

On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC Group in the LLC were exchanged for 6.7 shares of the Company.

On March 28, 2007, the Company completed its IPO of 725,000 shares of common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriter’s discount and commissions, and $1.0 million in offering costs, were $100.7 million.

On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total proceeds received from this sale were $15.0 million.

On August 12, 2010, we effected aone-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements. On October 7, 2015, the Company’s board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On May 4, 2020, the Board of Directors increased the share repurchase plan to 1.3 million shares of common stock. As of February 29, 2020, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

F-42

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were also added to the agreement. On July 11, 2019, the amount of the common stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. As of February 29, 2020, the Company sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs). For the year ended February 29, 2020, the Company sold 3,427,346 shares for gross proceeds of $85.9 million at an average price of $25.06 for aggregate net proceeds of $84.7 million (net of transaction costs).

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

F-43

The Company elected early adoption of Rule3-04/Rule8-03(a)(5) under RegulationS-X (Note 2). Pursuant to the regulation, the Company has presented a reconciliation of the changes in each significant caption of stockholders’ equity for each of the three fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018, as shown in the tables below:

	For the Year Ended February 29, 2020
	Common Stock				Capital in Excess			Total Distributable
	Shares		Amount		of Par Value			Earnings (Loss)			Net Assets
Balance at February 28, 2019		7,657,156	$	7,657	$	203,552,800		$	(22,685,270	)	$	180,875,187
Increase (Decrease) from Operations:
Net investment income		—		—		—			3,680,788			3,680,788
Net realized gain (loss) from investments		—		—		—			—			—
Net change in unrealized appreciation (depreciation) on investments		—		—		—			3,989,130			3,989,130
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		—		—		—			(20,930	)		(20,930	)
Decrease from Shareholder Distributions:
Distributions of investment income – net		—		—		—			(4,176,132	)		(4,176,132	)
Capital Share Transactions:
Proceeds from issuance of common stock		76,448		77		1,772,557			—			1,772,634
Stock dividend distribution		31,240		31		667,358			—			667,389
Repurchases of common stock		—		—		—			—			—
Offering costs		—		—		(4,365	)		—			(4,365	)
Balance at May 31, 2019		7,764,844	$	7,765	$	205,988,350		$	(19,212,414	)	$	186,783,701
Increase (Decrease) from Operations:
Net investment income		—		—		—			4,956,074			4,956,074
Net realized gain (loss) from investments		—		—		—			1,870,089			1,870,089
Net change in unrealized appreciation (depreciation) on investments		—		—		—			1,457,872			1,457,872
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		—		—		—			(704,263	)		(704,263	)
Decrease from Shareholder Distributions:
Distributions of investment income – net		—		—		—			(4,336,226	)		(4,336,226	)
Capital Share Transactions:
Proceeds from issuance of common stock		1,371,667		1,371		34,101,012			—			34,102,383
Stock dividend distribution		31,545		32		714,497			—			714,529
Repurchases of common stock		—		—		—			—			—
Offering costs		—		—		(507,592	)		—			(507,592	)
Balance at August 31, 2019		9,168,056	$	9,168	$	240,296,267		$	(15,968,868	)	$	224,336,567
Increase (Decrease) from Operations:
Net investment income		—		—		—			4,575,303			4,575,303
Net realized gain (loss) from investments		—		—		—			10,739,678			10,739,678
Net change in unrealized appreciation (depreciation) on investments		—		—		—			(536,151	)		(536,151	)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		—		—		—			(1,061,608	)		(1,061,608	)
Decrease from Shareholder Distributions:
Distributions of investment income – net		—		—		—			(5,323,383	)		(5,323,383	)
Capital Share Transactions:
Proceeds from issuance of common stock		1,952,367		1,951		49,351,357			—			49,353,308
Stock dividend distribution		34,575		36		806,857			—			806,893
Repurchases of common stock		—		—		—			—			—
Offering costs		—		—		(710,257	)		—			(710,257	)
Balance at November 30, 2019		11,154,998	$	11,155	$	289,744,224		$	(7,575,029	)	$	282,180,350
Increase (Decrease) from Operations:
Net investment income		—		—		—			66,106			66,106
Net realized gain (loss) from investments		—		—		—			30,267,388			30,267,388
Net change in unrealized appreciation (depreciation) on investments		—		—		—			(5,681,765	)		(5,681,765	)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments		—		—		—			2,141,150			2,141,150
Decrease from Shareholder Distributions:
Distributions of investment income – net		—		—		—			(6,261,839	)		(6,261,839	)
Capital Share Transactions:
Proceeds from issuance of common stock		26,865		27		676,089			—			676,116
Stock dividend distribution		35,682		36		907,645			—			907,681
Repurchases of common stock		—		—		—			—			—
Offering costs		—		—		(8,334	)		—			(8,334	)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles		—		—		(1,842,633	)		1,842,633			—
Balance at February 29, 2020		11,217,545	$	11,218	$	289,476,991		$	14,798,644		$	304,286,853

F-44

Note 11. Earnings Per Share

In accordance with the provisions of FASB ASC 260, “Earnings per Share” (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The following information sets forth the computation of the weighted average basic and diluted net increase in net assets resulting from operations per share for the years ended February 29, 2020, February 28, 2019 and February 28, 2018 (dollars in thousands except share and per share amounts):

Basic and Diluted	February 29, 2020		February 28, 2019		February 28, 2018
Net increase in net assets resulting from operations	$	55,739	$	18,509	$	17,679
Weighted average common shares outstanding		9,319,192		7,046,686		6,024,040
Weighted average earnings per common share	$	5.98	$	2.63	$	2.93

Note 12. Dividend

On January 7, 2020, the Company declared a dividend of $0.56 per share, which was paid on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.4 million in cash and 35,682 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.44 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 24, 27, 28, 29, 30, 31 and February 3, 4, 5 and 6, 2020.

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

On May 28, 2019, the Company declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record on June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

On November 27, 2018, the Company declared a dividend of $0.53 per share, which was paid on January 2, 2019, to common stockholders of record on December 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 30,797 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $18.88 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28, 31, 2018 and January 2, 2019.

F-45

On August 28, 2018, the Company declared a dividend of $0.52 per share, which was paid on September 27, 2018, to common stockholders of record as of September 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 25,863 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.35 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2018.

On May 30, 2018, the Company declared a dividend of $0.51 per share, which was paid on June 27, 2018, to common stockholders of record as of June 15, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.7 million in cash and 21,563 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.72 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2018.

On February 26, 2018, the Company declared a dividend of $0.50 per share, which was paid on March 26, 2018, to common stockholders of record as of March 14, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.6 million in cash and 25,355 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $19.91 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.

On November 29, 2017, the Company declared a dividend of $0.49 per share, which was paid on December 27, 2017, to common stockholders of record on December 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 25,435 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.14 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and 27, 2017.

On August 28, 2017, the Company declared a dividend of $0.48 per share, which was paid on September 26, 2017, to common stockholders of record as of September 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.2 million in cash and 33,551 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.19 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22, 25 and 26, 2017.

On May 30, 2017, the Company declared a dividend of $0.47 per share, which was paid on June 27, 2017, to common stockholders of record as of June 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.3 million in cash and 26,222 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.04 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.

On February 28, 2017, the Company declared a dividend of $0.46 per share, which was paid on March 28, 2017, to common stockholders of record as of March 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.38 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.

F-46

On January 12, 2017, the Company declared a dividend of $0.45 per share, which was paid on February 9, 2017, to common stockholders of record as of January 31, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.6 million in cash and 50,453 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.25 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7, 8 and 9, 2017.

On October 5, 2016, the Company declared a dividend of $0.44 per share, which was paid on November 9, 2016, to common stockholders of record as of October 31, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,548 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.12 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7, 8 and 9, 2016.

On August 8, 2016, the Company declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

On July 7, 2016, the Company declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

On March 31, 2016, the Company declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record as of April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.

On January 12, 2016, the Company declared a dividend of $0.40 per share, which was paid on February 29, 2016, to common stockholders of record on February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock, or 1.2% of the Company’s outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.11 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and 29, 2016.

On October 7, 2015, the Company declared a dividend of $0.36 per share, which was paid on November 30, 2015, to common stockholders of record on November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock, or 1.1% of the Company’s outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.53 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and 30, 2015.

F-47

On July 8, 2015, the Company declared a dividend of $0.33 per share, which was paid on August 31, 2015, to common stockholders of record on August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock, or 0.9% of the Company’s outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.28 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.

On May 14, 2015, the Company declared a special dividend of $1.00 per share, which was paid on June 5, 2015, to common stockholders of record on May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock, or 2.3% of the Company’s outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.47 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4, and 5, 2015.

On April 9, 2015, the Company declared a dividend of $0.27 per share, which was paid on May 29, 2015, to common stockholders of record on May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock, or 0.6% of the Company’s outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.78 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.

On September 24, 2014, the Company declared a dividend of $0.22 per share, which was paid on February 27, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.97 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and 27, 2015.

On September 24, 2014, the Company declared a dividend of $0.18 per share, which was paid on November 28, 2014. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.37 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and 28, 2014.

On October 30, 2013, the Company declared a dividend of $2.65 per share, which was paid on December 27, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. This dividend was declared in reliance on certain private letter rulings issued by the IRS concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which equaled the volume weighted average trading price per share of the common stock on December 11, 13, and 16, 2013.

F-48

On November 9, 2012, the Company declared a dividend of $4.25 per share, which was paid on December 31, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17, and 19, 2012.

On November 15, 2011, the Company declared a dividend of $3.00 per share, which was paid on December 30, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.1171 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

On November 12, 2010, the Company declared a dividend of $4.40 per share, which was paid on December 29, 2010. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $1.2 million or $0.44 per share. Based on shareholder elections, the dividend consisted of approximately $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010. The consolidated financial statements for the period ended November 30, 2010 have been retroactively adjusted to reflect the increase in common stock as a result of the dividend in accordance with the provisions of ASC505-20-S50 regarding disclosure of a capital structure change after the interim balance sheet but before the release of the financial statements.

On November 13, 2009, we declared a dividend of $18.25 per share payable on December 31, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $2.50 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 of newly issued shares of common stock.

F-49

The following tables summarize dividends declared for the years ended February 29, 2020, February 28, 2019, February 28, 2018, February 28, 2017 and February 29, 2016 (dollars in thousands except for share amounts):

Date Declared	Record Date		Payment Date		Amount     per Share		Total     Amount*
January 7, 2020		January 24, 2020		February 6, 2020	$	0.56	$	6,262
August 27, 2019		September 13, 2019		September 26, 2019		0.56		5,323
May 28, 2019		June 13, 2019		June 27, 2019		0.55		4,336
February 26, 2019		March 14, 2019		March 28, 2019		0.54		4,176
Total dividends declared					$	2.21	$	20,097

Date Declared	Record Date		Payment Date		Amount     per Share		Total     Amount*
November 27, 2018		December 17, 2018		January 2, 2019	$	0.53	$	3,980
August 28, 2018		September 17, 2018		September 27, 2018		0.52		3,876
May 30, 2018		June 15, 2018		June 27, 2018		0.51		3,204
February 26, 2018		March 14, 2018		March 26, 2018		0.50		3,129
Total dividends declared					$	2.06	$	14,189
Date Declared	Record Date		Payment Date		Amount     per Share		Total     Amount*
November 29, 2017		December 15, 2017		December 27, 2017	$	0.49	$	3,052
August 28, 2017		September 15, 2017		September 26, 2017		0.48		2,866
May 30, 2017		June 15, 2017		June 27, 2017		0.47		2,792
February 28, 2017		March 15, 2017		March 28, 2017		0.46		2,666
Total dividends declared					$	1.90	$	11,376
Date Declared	Record Date		Payment Date		Amount     per Share		Total     Amount*
January 12, 2017		January 31, 2017		February 9, 2017	$	0.45	$	2,585
October 5, 2016		October 31, 2016		November 9, 2016		0.44		2,509
August 8, 2016		August 24, 2016		September 5, 2016		0.20		1,151
July 7, 2016		July 29, 2016		August 9, 2016		0.43		2,466
March 31, 2016		April 15, 2016		April 27, 2016		0.41		2,346
Total dividends declared					$	1.93	$	11,057
Date Declared	Record Date		Payment Date		Amount     per Share		Total     Amount*
January 12, 2016		February 1, 2016		February 29, 2016	$	0.40	$	2,278
October 7, 2015		November 2, 2015		November 30, 2015		0.36		2,028
July 8, 2015		August 3, 2015		August 31, 2015		0.33		1,844
May 14, 2015		May 26, 2015		June 5, 2015		1.00		5,429
April 9, 2015		May 4, 2015		May 29, 2015		0.27		1,466
Total dividends declared					$	2.36	$	13,045

* Total amount is calculated based on the number of shares outstanding at the date of record.

F-50

Note 13. Financial Highlights

The following is a schedule of financial highlights as of and for the years ended February 29, 2020, February 28, 2019, February 28, 2018, February 28, 2017 and February 29, 2016:

Per share data	February 29, 2020			February 28, 2019			February 28, 2018			February 28, 2017			February 29, 2016
Net asset value at beginning of period	$	23.62		$	22.96		$	21.97		$	22.06		$	22.70
Adoption of ASC 606		—			(0.01	)		—			—			—
Net asset value at beginning of period, as adjusted		23.62			22.95			21.97			22.06			22.70
Net investment income(1)		1.42			2.60			2.11			1.68			1.91
Net realized and unrealized gains (losses) on investments(1)		4.56			0.03			0.82			0.30			0.18
Net increase in net assets resulting from operations		5.98			2.63			2.93			1.98			2.09
Distributions declared from net investment income		(2.21	)		(2.06	)		(1.90	)		(1.93	)		(2.36	)
Total distributions to stockholders		(2.21	)		(2.06	)		(1.90	)		(1.93	)		(2.36	)
Issuance of common stock above net asset value(2)		—			0.15			—			—			—
Dilution(3)		(0.26	)		(0.05	)		(0.04	)		(0.14	)		(0.37	)
Net asset value at end of period	$	27.13		$	23.62		$	22.96		$	21.97		$	22.06
Net assets at end of period	$	304,286,853		$	180,875,187		$	143,691,367		$	127,294,777		$	125,149,875
Shares outstanding at end of period		11,217,545			7,657,156			6,257,029			5,794,600			5,672,227
Per share market value at end of period	$	22.91		$	23.04		$	21.86		$	22.74		$	14.22
Total return based on market value(4)		9.28	%		16.11	%		5.28	%		80.83	%		4.27	%
Total return based on net asset value(5)		26.22	%		13.33	%		14.45	%		12.62	%		11.10	%
Ratio/Supplemental data:
Ratio of net investment income to average net assets		5.63	%		11.22	%		9.37	%		7.57	%		8.52	%
Expenses:
Ratio of operating expenses to average net assets		6.25	%		6.98	%		7.81	%		7.21	%		6.93	%
Ratio of loss on extinguishment of debt to average net assets		0.67	%		—			—			1.14	%		—
Ratio of incentive management fees to average net assets		6.01	%		3.00	%		3.19	%		2.31	%		1.78	%
Ratio of interest and debt financing expenses to average net assets		6.23	%		8.05	%		8.05	%		7.75	%		6.75	%
Ratio of total expenses to average net assets		19.16	%		18.03	%		19.05	%		18.41	%		15.46	%
Portfolio turnover rate(6)		36.82	%		35.26	%		19.73	%		43.76	%		26.22	%
Asset coverage ratio per unit(7)		6,071			2,345			2,930			2,710			3,025
Average market value per unit
Credit Facility(8)		N/A			N/A			N/A			N/A			N/A
SBA Debentures(8)		N/A			N/A			N/A			N/A			N/A
2020 Notes		N/A			N/A			N/A			N/A		$	25.24
2023 Notes		N/A		$	25.74		$	26.05		$	25.89			N/A
2025 Notes	$	25.75		$	24.97			N/A			N/A			N/A

(1) Per share amounts are calculated using the weighted average shares outstanding during the period.

(2) The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share data was derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date multiplied by (B) the differences between the net proceeds per share and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding during the period.

(3) Represents the dilutive effect of issuing common stock below net asset value per share during the period in connection with the satisfaction of the Company’s annual RIC distribution requirement and may include the impact of the different share amounts used for different items (weighted average basic common shares outstanding for the corresponding year and actual common shares outstanding at the end of the year) in the per common share data calculation and rounding impacts. See Note 12, Dividend.

(4) Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(5) Total investment return is calculated assuming a purchase of common shares at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(6) Portfolio turnover rate is calculated using the lesser ofyear-to-date sales oryear-to-date purchases over the average of the invested assets at fair value.

(7) Asset coverage ratio per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage ratio per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. Asset coverage ratio per unit does not include unfunded commitments. The inclusion of unfunded commitments in the calculation of the asset coverage ratio per unit would not cause us to be below the required amount of regulatory coverage.

(8) The Credit Facility and SBA Debentures are not registered for public trading.

F-51

Note 14. Selected Quarterly Data (Unaudited)

	2020
($ in thousands, except per share numbers)	Qtr 4		Qtr 3		Qtr 2		Qtr 1
Total investment income	$	17,613	$	14,196	$	13,888	$	12,751
Net investment income		66		4,575		4,956		3,681
Net realized and unrealized gain (loss)		26,727		9,142		2,624		3,968
Net increase in net assets resulting from operations		26,793		13,717		7,580		7,649
Net investment income per common share	$	0.01	$	0.46	$	0.59	$	0.48
Net realized and unrealized gain (loss) per common share	$	2.39	$	0.91	$	0.32	$	0.51
Dividends declared per common share	$	0.56	$	0.56	$	0.55	$	0.54
Net asset value per common share	$	27.13	$	25.30	$	24.47	$	24.06
	2019
($ in thousands, except per share numbers)	Qtr 4		Qtr 3		Qtr 2		Qtr 1
Total investment income	$	12,984	$	12,833	$	11,403	$	10,488
Net investment income		4,091		5,139		5,145		3,927
Net realized and unrealized gain (loss)		3,764		(1,470)		(2,002)		(85)
Net increase in net assets resulting from operations		7,855		3,669		3,143		3,842
Net investment income per common share	$	0.54	$	0.69	$	0.74	$	0.63
Net realized and unrealized gain (loss) per common share	$	0.50	$	(0.20)	$	(0.29)	$	(0.01)
Dividends declared per common share	$	0.53	$	0.52	$	0.51	$	0.50
Net asset value per common share	$	23.62	$	23.13	$	23.16	$	23.06
	2018
($ in thousands, except per share numbers)	Qtr 4		Qtr 3		Qtr 2		Qtr 1
Total investment income	$	10,128	$	9,526	$	10,254	$	8,707
Net investment income		3,321		3,016		2,891		3,504
Net realized and unrealized gain (loss)		2,211		1,247		3,979		(2,490)
Net increase in net assets resulting from operations		5,532		4,263		6,870		1,014
Net investment income per common share	$	0.53	$	0.50	$	0.49	$	0.60
Net realized and unrealized gain (loss) per common share	$	0.35	$	0.21	$	0.67	$	(0.42)
Dividends declared per common share	$	0.49	$	0.48	$	0.47	$	0.46
Net asset value per common share	$	22.96	$	22.58	$	22.37	$	21.69

F-52

Note 15. Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-K and determined that there have been no events that have occurred that would require adjustments to the Company’s consolidated financial statements and disclosures in the consolidated financial statements except for the following:

COVID-19

We evaluated subsequent events from February 29, 2020 through May 6, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions are creating disruption in global supply chains and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

As of February 29, 2020, the Company valued its portfolio investments in conformity with U.S. GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused during the months that followed our February 29, 2020 valuation, any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio.

The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

Credit Facility

On April 24, 2020, we entered into a fourth amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

• permit certain amendments related to the Paycheck Protection Program (“Permitted PPP Amendment”) to Loan Asset Documents;

• exclude certain debt and interest amounts allowed by the Permitted PPP Amendments from certain calculations related to Net Leverage Ratio, Interest Coverage Ratio and EBITDA; and

• exclude such Permitted PPP Amendments from constituting a Material Modification.

F-53

INDEX TO OTHER FINANCIAL STATEMENTS

Saratoga Investment Corp. CLO2013-1, Ltd.

	PAGE
Report of Independent Auditors		S-2
Statements of Assets and Liabilities as of February 29, 2020 and February 28, 2019		S-3
Statements of Operations for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		S-4
Statements of Changes in Net Assets for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		S-5
Statements of Cash Flows for the years ended February 29, 2020, February 28, 2019 and February 28, 2018		S-6
Schedules of Investments as of February 29, 2020 and February 28, 2019		S-7
Notes to Financial Statements		S-16

IMPORTANT NOTE

In accordance with certain SEC rules, Saratoga Investment Corp. (the “Company”) is providing additional information regarding one of its portfolio companies, Saratoga Investment Corp. CLO2013-1, Ltd. (“Saratoga CLO”). The Company owns 100% of the subordinated notes of the Saratoga CLO. The additional financial information regarding the Saratoga CLO does not directly impact the Company’s financial position, results of operations or cash flows.

S-1

Report of Independent Auditors

The Board of Directors

Saratoga Investment Corp. CLO2013-1, Ltd.

We have audited the accompanying financial statements of Saratoga Investment Corp. CLO2013-1, Ltd., which comprise the statements of assets and liabilities, including the schedule of investments, as of February 29, 2020 and February 28, 2019, and the related statements of operations, changes in net assets and cash flows for the years ended February 29, 2020 and February 28, 2019, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Saratoga Investment Corp. CLO2013-1, Ltd. at February 29, 2020 and February 28, 2019, and the results of its operations, changes in its net assets and its cash flows for the years ended February 29, 2020 and February 28, 2019 in conformity with U.S. generally accepted accounting principles.

Report of Other Auditors on February 28, 2018 Financial Statements

The financial statements of Saratoga Investment Corp. CLO2013-1, Ltd. for the year ended February 28, 2018 was audited by other auditors who expressed an unmodified opinion on those statements on May 14, 2018.

/s/ Ernst & Young Ltd.

Grand Cayman, Cayman Islands

May 6, 2020

S-2

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

	February 29, 2020			February 28, 2019
ASSETS
Investments at fair value
Loans at fair value (amortized cost of $523,438,207 and $506,145,483, respectively)	$	500,999,677		$	498,389,369
Equities at fair value (amortized cost of $2,566,752 and $3,531,218, respectively)		257			15,691
Total investments at fair value (amortized cost of $526,004,959 and $509,676,701, respectively)		500,999,934			498,405,060
Cash and cash equivalents		9,081,041			18,495,653
Receivable from open trades		10,419,700			7,855,309
Interest receivable (net of reserve of $307,705 and $168,443, respectively)		1,294,523			2,104,495
Prepaid expenses and other assets		84,526			—
Total assets	$	521,879,724		$	526,860,517
LIABILITIES
Interest payable	$	2,090,188		$	4,963,472
Payable from open trades		36,673,471			26,232,247
Accrued base management fee		54,441			108,419
Accrued subordinated management fee		217,766			433,675
Due to affiliate		—			1,673,747
Accounts payable and accrued expenses		81,822			1,221,110
Loan payable, related party (See Note 7)		2,500,000			—
Loan payable, third party		2,600,000			—
Saratoga Investment Corp. CLO2013-1, Ltd. Notes:
Class  A-1FL-R-2 Senior Secured Floating Rate Notes		255,000,000			255,000,000
Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes		25,000,000			25,000,000
Class-A-2-R-2 Senior Secured Floating Rate Notes		40,000,000			40,000,000
Class B-R-2 Senior Secured Floating Rate Notes		59,500,000			59,500,000
Class C-R-2 Deferrable Mezzanine Floating Rate Notes		22,500,000			22,500,000
Discount onClass C-R-2 Notes		(530,448	)		(585,059	)
Class D-R-2 Deferrable Mezzanine Floating Rate Notes		31,000,000			31,000,000
Discount onClass D-R-2 Notes		(965,259	)		(1,064,636	)
Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes		27,000,000			27,000,000
Class E-2-R-2 Deferrable Mezzanine Fixed Rate Notes		—			—
Class F-R-2 Deferrable Junior Floating Rate Notes		2,500,000			2,500,000
Class G-R-2 Deferrable Junior Floating Rate Notes		7,500,000			7,500,000
Deferred debt financing costs		(2,340,764	)		(2,465,897	)
Subordinated Notes		69,500,000			69,500,000
Discount on Subordinated Notes		(22,899,324	)		(25,256,892	)
Total liabilities	$	556,981,893		$	544,760,186
Commitments and contingencies (See Note 6)
NET ASSETS
Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively	$	250		$	250
Total distributable earnings (loss)		(35,102,419	)		(17,899,919	)
Total net assets (deficit)		(35,102,169	)		(17,899,669	)
Total liabilities and net assets	$	521,879,724		$	526,860,517

See accompanying notes to financial statements.

S-3

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
INVESTMENT INCOME
Interest from investments	$	32,413,402		$	23,413,966		$	17,435,371
Interest from cash and cash equivalents		98,964			25,848			14,644
Other income		416,089			623,032			415,428
Total investment income		32,928,455			24,062,846			17,865,443
EXPENSES
Interest and debt financing expenses		28,511,147			19,612,756			13,896,547
Base management fee		500,761			344,436			301,863
Subordinated management fee		2,003,043			1,377,744			1,207,454
Incentive fees		—			567,932			591,368
Professional fees		322,170			345,407			216,672
Trustee expenses		194,169			181,492			160,883
Miscellaneous fee expense		71,096			98,496			95,314
Loss on extinguishment of debt		—			1,199,851			—
Total expenses		31,602,386			23,728,114			16,470,101
NET INVESTMENT INCOME		1,326,069			334,732			1,395,342
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments		(4,795,185	)		(1,344,711	)		619,531
Net change in unrealized appreciation (depreciation) on investments		(13,733,384	)		(5,644,371	)		(286,416	)
Net realized and unrealized gain (loss) on investments		(18,528,569	)		(6,989,082	)		333,115
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(17,202,500	)	$	(6,654,350	)	$	1,728,457

See accompanying notes to financial statements.

S-4

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Changes in Net Assets

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
INCREASE (DECREASE) FROM OPERATIONS:
Net investment income	$	1,326,069		$	334,732		$	1,395,342
Net realized gain (loss) from investments		(4,795,185	)		(1,344,711	)		619,531
Net change in unrealized appreciation (depreciation) on investments		(13,733,384	)		(5,644,371	)		(286,416	)
Net increase (decrease) in net assets resulting from operations		(17,202,500	)		(6,654,350	)		1,728,457
Total increase (decrease) in net assets		(17,202,500	)		(6,654,350	)		1,728,457
Net assets at beginning of period		(17,899,669	)		(11,245,319	)		(12,973,776	)
Net assets at end of period	$	(35,102,169	)	$	(17,899,669	)	$	(11,245,319	)

See accompanying notes to financial statements.

S-5

Saratoga Investment Corp. CLO2013-1, Ltd.

Statements of Cash Flows

	For the year ended
	February 29, 2020			February 28, 2019			February 28, 2018
Operating activities
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(17,202,500	)	$	(6,654,350	)	$	1,728,457
ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES:
Paid-in-kind interest income and other adjustments to cost		386,212			(178,424	)		(350,309	)
Net accretion of discount on investments		(1,623,059	)		(725,719	)		(1,294,300	)
Amortization of discount and deferred financing costs on debt		2,751,310			1,140,966			177,011
Loss on extinguishment of debt		—			1,199,851			—
Net realized (gain) loss from investments		4,795,185			1,344,711			(619,531	)
Net change in unrealized (appreciation) depreciation on investments		13,733,384			5,644,371			286,416
Proceeds from sale and redemption of investments		210,110,101			179,863,573			150,035,021
Purchase of investments		(229,996,697	)		(378,523,269	)		(161,426,952	)
(Increase) decrease in operating assets:
Interest receivable		809,972			(450,567	)		(210,063	)
Receivable from open trades		(2,564,391	)		4,540,262			(10,890,571	)
Prepaid expenses and other assets		(84,526	)		—			6,049
Increase (decrease) in operating liabilities:
Interest payable		(2,873,284	)		3,773,044			158,971
Payable for open trades		10,441,224			1,760,889			15,039,806
Accrued base management fee		(53,978	)		74,874			(676	)
Accrued subordinated management fee		(215,909	)		299,496			(2,706	)
Accrued incentive fee		—			(65,300	)		65,300
Due to affiliate		(1,673,747	)		1,673,747			—
Accounts payable and accrued expenses		(1,139,288	)		1,221,110			—
NET CASH USED IN OPERATING ACTIVITIES		(14,399,991	)		(184,060,735	)		(7,298,077	)
Financing activities
Borrowings on debt		5,100,000			482,078,750			—
Paydowns on debt		—			(282,400,000	)		—
Deferred debt financing costs		(114,621	)		(2,892,182	)		21,342
NET CASH PROVIDED BY FINANCING ACTIVITIES		4,985,379			196,786,568			21,342
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(9,414,612	)		12,725,833			(7,276,735	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		18,495,653			5,769,820			13,046,555
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	9,081,041		$	18,495,653		$	5,769,820
Supplemental Information:
Interest paid during the period	$	28,633,121		$	14,698,746		$	13,560,565
Supplementalnon-cash information:
Paid-in-kind interest income and other adjustments to cost	$	(386,212	)	$	178,424		$	350,309
Net accretion of discount on investments		1,623,059			725,719			1,294,300
Amortization of deferred debt financing costs		2,751,310			1,140,966			177,011

See accompanying notes to financial statements.

S-6

Saratoga Investment Corp. CLO2013-1 Ltd.

Schedule of Investments

February 29, 2020

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
Education Management II LLC	Services: Consumer	Education Management IIA-2 Preferred Shares	Equity	—   0.00%		0.00	%		0.00	%		—		18,975	$	1,897,538	$	190
Education Management II LLC	Services: Consumer	Education Management IIA-1 Preferred Shares	Equity	—   0.00%		0.00	%		0.00	%		—		6,692		669,214		67
1011778 B.C. Unlimited Liability Company	Beverage Food & Tobacco	Term Loan B4	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		11/19/2026	$	500,000.00		498,790		491,665
24 Hour Fitness Worldwide Inc.	Services: Consumer	Term Loan (5/18)	Loan	1M USD LIBOR +  3.50%		0.00	%		5.02	%		5/30/2025		2,959,950		2,949,872		1,943,710
ABBCon-Cise Optical Group LLC	Consumer goods:Non-durable	Term Loan B	Loan	1M USD LIBOR +  5.00%		1.00	%		6.52	%		6/15/2023		2,081,927		2,062,239		1,969,149
ADMI Corp.	Services: Consumer	Term Loan B	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		4/30/2025		1,970,000		1,962,286		1,924,848
Advantage Sales & Marketing Inc.	Services: Business	First Lien Term Loan	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		7/23/2021		2,371,131		2,370,010		2,286,173
Advantage Sales & Marketing Inc.	Services: Business	Term Loan B Incremental	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		7/23/2021		489,950		485,523		470,352
Advisor Group Holdings Inc	Banking Finance Insurance & Real Estate	Term Loan (7/19)	Loan	1M USD LIBOR +  5.00%		0.00	%		6.52	%		7/31/2026		500,000		498,753		486,875
Aegis Toxicology Sciences Corporation	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR +  5.50%		1.00	%		6.96	%		5/9/2025		3,950,000		3,919,494		3,695,225
Agiliti Health Inc.	Healthcare & Pharmaceuticals	Term Loan (1/19)	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		1/5/2026		496,250		496,250		486,325
Agrofresh Inc.	Beverage Food & Tobacco	Term Loan	Loan	1M USD LIBOR +  4.75%		1.00	%		6.27	%		7/30/2021		2,889,487		2,886,790		2,677,601
AI Convoy Bidco Limited	Aerospace & Defense	AI Convoy Bidco T/L B (USD)	Loan	3M USD LIBOR +  3.50%		1.00	%		4.96	%		1/29/2027		1,500,000		1,492,500		1,483,125
AI Mistral (Luxembourg) Subco Sarl	High Tech Industries	Term Loan	Loan	1M USD LIBOR +  3.00%		1.00	%		4.52	%		3/11/2024		486,250		486,250		384,138
AIS Holdco LLC	Services: Business	Term Loan	Loan	3M USD LIBOR +  5.00%		0.00	%		6.46	%		8/15/2025		2,421,875		2,411,617		2,228,125
Alchemy US Holdco 1 LLC	Metals & Mining	Term Loan	Loan	1M USD LIBOR +  5.50%		0.00	%		7.02	%		10/10/2025		1,950,000		1,925,236		1,945,125
Alion Science and Technology Corporation	Aerospace & Defense	Term Loan B (1st Lien)	Loan	1M USD LIBOR +  4.50%		1.00	%		6.02	%		8/19/2021		3,377,293		3,373,263		3,373,071
Allen Media LLC	Media: Advertising Printing & Publishing	Allen Media T/L B (1/20)	Loan	3M USD LIBOR +  5.50%		0.00	%		6.96	%		2/10/2027		3,000,000		2,985,000		2,936,250
Altisource S.a r.l.	Banking Finance Insurance & Real Estate	Term Loan B (03/18)	Loan	3M USD LIBOR +  4.00%		1.00	%		5.46	%		4/3/2024		1,454,005		1,446,493		1,353,141
Altra Industrial Motion Corp.	Capital Equipment	Term Loan	Loan	1M USD LIBOR +  2.00%		0.00	%		3.52	%		10/1/2025		1,767,163		1,763,366		1,748,943
American Dental Partners Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	3M USD LIBOR +  4.25%		1.00	%		5.71	%		3/24/2023		990,000		982,019		982,575
American Greetings Corporation	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR +  4.50%		1.00	%		6.02	%		4/5/2024		4,889,524		4,886,331		4,788,702
American Residential Services LLC	Services: Consumer	Term Loan B	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		6/30/2022		3,925,767		3,916,564		3,896,324
AmeriLife Group LLC	Banking Finance Insurance & Real Estate	AmeriLife T/L	Loan	3M USD LIBOR +  4.00%		0.00	%		5.46	%		2/5/2027		838,710		836,613		832,419
AmeriLife Group LLC(a)	Banking Finance Insurance & Real Estate	Unfunded Commitment	Loan	3M USD LIBOR +  4.00%		0.00	%		4.00	%		2/5/2027		—		—		—
Amex GBT (2/20) T/L	Banking Finance Insurance & Real Estate	Term Loan	Loan	3M USD LIBOR +  4.00%		0.00	%		5.46	%		2/26/2027		2,993,363		2,933,496		2,926,012
Amex GBT 2/20 D/T/L(a)	Banking Finance Insurance & Real Estate	Unfunded Commitment	Loan	3M USD LIBOR +  4.00%		0.00	%		5.46	%		2/26/2027		—		—		—
Amynta Agency Borrower Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		2/28/2025		3,462,357		3,425,731		3,224,320
Anastasia Parent LLC	Consumer goods:Non-durable	Term Loan	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		8/11/2025		987,500		983,508		759,141
Anchor Glass Container Corporation	Containers Packaging & Glass	Term Loan (07/17)	Loan	3M USD LIBOR +  2.75%		1.00	%		4.21	%		12/7/2023		485,063		483,537		354,789
Api Group DE Inc	Services: Business	Term Loan B	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		10/1/2026		1,000,000		995,123		990,000
APLP Holdings Limited Partnership	Utilities	APLP Holdings T/L B (Atlantic Power)	Loan	1M USD LIBOR +  2.75%		1.00	%		4.27	%		4/13/2023		2,000,000		2,000,000		1,977,500
Aramark Services Inc.	Services: Consumer	Term Loan	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		1/15/2027		1,500,000		1,498,209		1,484,070
Arctic Glacier U.S.A. Inc.	Beverage Food & Tobacco	Term Loan (3/18)	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		3/20/2024		3,350,967		3,332,339		3,225,306
Aretec Group Inc.	Banking Finance Insurance & Real Estate	Term Loan (10/18)	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		10/1/2025		1,980,000		1,975,743		1,937,093
ASG Technologies Group Inc.	High Tech Industries	Term Loan	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		7/31/2024		488,775		487,107		476,556
AssetMark Financial Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	3M USD LIBOR +  3.00%		0.00	%		4.46	%		11/14/2025		1,237,500		1,235,582		1,228,219
Astoria Energy LLC	Energy: Electricity	Term Loan	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		12/24/2021		1,391,552		1,385,662		1,384,595
Asurion LLC	Banking Finance Insurance & Real Estate	Term LoanB-4 (Replacement)	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		8/4/2022		1,876,925		1,872,057		1,853,069
Asurion LLC	Banking Finance Insurance & Real Estate	Term Loan B6	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		11/3/2023		492,773		489,808		485,381
Athenahealth Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		2/11/2026		1,985,000		1,950,006		1,970,113
Avaya Inc.	Telecommunications	Term Loan B	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		12/16/2024		3,169,156		3,138,355		3,010,698
Avison Young (Canada) Inc.	Services: Business	Term Loan	Loan	3M USD LIBOR +  5.00%		0.00	%		6.46	%		1/30/2026		3,476,222		3,418,777		3,406,697
B&G Foods Inc.	Beverage Food & Tobacco	Term Loan	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		10/10/2026		249,375		248,169		246,881
Ball Metalpack Finco LLC	Containers Packaging & Glass	Term Loan	Loan	3M USD LIBOR +  4.50%		0.00	%		5.96	%		7/31/2025		3,944,937		3,928,266		3,432,096
Bausch Health Companies Inc.	Healthcare & Pharmaceuticals	Term Loan B (05/18)	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		6/2/2025		25,355		25,274		25,161
Berry Global Inc.	Chemicals Plastics & Rubber	Term Loan Y	Loan	1M USD LIBOR +  2.00%		0.00	%		3.52	%		7/1/2026		4,987,500		4,981,754		4,897,974
Blount International Inc.	Forest Products & Paper	Term Loan B (09/18)	Loan	1M USD LIBOR +  3.75%		1.00	%		5.27	%		4/12/2023		3,453,781		3,450,952		3,432,195
Blucora Inc.	Services: Consumer	Term Loan (11/17)	Loan	2M USD LIBOR +  3.00%		1.00	%		4.50	%		5/22/2024		955,900		953,639		946,341
Bombardier Recreational Products Inc.	Consumer goods: Durable	Term Loan (1/20)	Loan	1M USD LIBOR +  2.00%		0.00	%		3.52	%		5/24/2027		995,000		985,847		978,214
Boxer Parent Company Inc.	Services: Business	Term Loan	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		10/2/2025		2,475,000		2,454,363		2,374,070
Bracket Intermediate Holding Corp.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR +  4.25%		0.00	%		5.71	%		9/5/2025		987,500		983,437		987,500
Broadstreet Partners Inc.	Banking Finance Insurance & Real Estate	Term Loan B3	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		1/27/2027		2,024,614		2,022,736		2,002,687
Brookfield WEC Holdings Inc.	Energy: Electricity	Term Loan 1/20	Loan	1M USD LIBOR +  3.00%		0.75	%		4.52	%		8/1/2025		497,487		496,370		488,627
Buckeye Partners L.P.	Utilities: Oil & Gas	Term Loan	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		11/2/2026		1,000,000		995,334		989,170
BW Gas & Convenience Holdings LLC	Beverage Food & Tobacco	Term Loan	Loan	1M USD LIBOR +  6.25%		0.00	%		7.77	%		11/18/2024		3,000,000		2,884,283		2,992,500
Calceus Acquisition Inc.	Consumer goods:Non-durable	Term Loan B	Loan	1M USD LIBOR +  5.50%		0.00	%		7.02	%		2/12/2025		975,000		964,353		964,031
Callaway Golf Company	Retail	Term Loan B	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		1/2/2026		697,500		684,758		696,196
CareerBuilder LLC	Services: Business	Term Loan	Loan	1M USD LIBOR +  6.75%		1.00	%		8.27	%		7/31/2023		2,266,211		2,232,341		2,223,720
CareStream Health Inc.	High Tech Industries	Term Loan	Loan	1M USD LIBOR +  6.25%		1.00	%		7.77	%		2/28/2021		2,362,278		2,356,691		2,263,062
Casa Systems Inc.	Telecommunications	Term Loan	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		12/20/2023		1,455,000		1,446,052		1,236,750
Castle US Holding Corporation	High Tech Industries	Term Loan B (USD)	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		1/27/2027		500,000		497,509		475,000
CCS-CMGC Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR +  5.50%		0.00	%		6.96	%		10/1/2025		2,475,000		2,453,876		2,338,875
Cengage Learning Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR +  4.25%		1.00	%		5.77	%		6/7/2023		1,447,458		1,435,195		1,329,447

See accompanying notes to financial statements.

S-7

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
CenturyLink Inc.	Telecommunications	Term Loan B (1/20)	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		3/15/2027		3,000,000		2,996,438		2,922,180
Citadel Securities LP	Banking Finance Insurance & Real Estate	Term Loan (2/20)	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		2/27/2026		992,500		991,371		983,816
Clarios Global LP	Automotive	Term Loan B	Loan	1M USD LIBOR +  3.50%		0.00	%		5.02	%		4/30/2026		1,496,250		1,482,216		1,451,991
Compass Power Generation L.L.C.	Utilities: Electric	Term Loan B (08/18)	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		12/20/2024		1,891,221		1,886,758		1,855,761
Compuware Corporation	High Tech Industries	Term Loan (08/18)	Loan	1M USD LIBOR +  4.00%		0.00	%		5.52	%		8/22/2025		495,000		493,979		493,763
Concordia International Corp.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR +  5.50%		1.00	%		6.96	%		9/6/2024		1,183,650		1,131,380		1,088,224
Connect U.S. Finco LLC	Telecommunications	Delayed Draw Term Loan B	Loan	1M USD LIBOR +  4.50%		1.00	%		6.02	%		12/11/2026		2,000,000		1,984,055		1,980,000
Consolidated Communications Inc.	Telecommunications	Term Loan B	Loan	1M USD LIBOR +  3.00%		1.00	%		4.52	%		10/5/2023		1,475,404		1,464,720		1,395,481
Coral-USCo-Borrower LLC	Telecommunications	Term LoanB-5	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		1/31/2028		2,000,000		2,000,000		1,976,660
Covia Holdings Corporation	Metals & Mining	Term Loan	Loan	3M USD LIBOR +  4.00%		1.00	%		5.46	%		6/2/2025		985,000		985,000		711,663
CPI Acquisition Inc	Banking Finance Insurance & Real Estate	Term Loan B (1st Lien)	Loan	6M USD LIBOR +  4.50%		1.00	%		5.90	%		8/17/2022		1,436,782		1,427,762		1,089,957
Crown Subsea Communications Holding Inc	Construction & Building	Term Loan	Loan	1M USD LIBOR +  6.00%		0.00	%		7.52	%		11/3/2025		1,655,837		1,640,398		1,649,627
CSC Holdings LLC	Media: Broadcasting & Subscription	Term Loan B (03/17)	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		7/17/2025		1,974,620		1,952,260		1,941,308
CSC Holdings LLC	Media: Broadcasting & Subscription	Term LoanB-5	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		4/15/2027		500,000		500,000		492,500
CSC Holdings LLC	Media: Broadcasting & Subscription	Term Loan B	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		1/15/2026		495,000		493,968		486,031
Cushman & Wakefield U.S. Borrower LLC	Construction & Building	Term Loan	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		8/21/2025		3,945,050		3,928,487		3,874,789
Daseke Companies Inc.	Transportation: Cargo	Replacement Term Loan	Loan	1M USD LIBOR +  5.00%		1.00	%		6.52	%		2/27/2024		1,955,694		1,946,628		1,867,688
DaVita Inc.	High Tech Industries	Term LoanB-1	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		8/12/2026		997,500		995,133		985,859
Dealer Tire LLC	Automotive	Dealer Tire T/LB-1	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		12/12/2025		3,000,000		2,992,500		2,977,500
Delek US Holdings Inc.	Utilities: Oil & Gas	Term Loan B	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		3/31/2025		6,446,003		6,379,073		6,317,083
Dell International L.L.C.	High Tech Industries	Term LoanB-1	Loan	1M USD LIBOR +  2.00%		0.75	%		3.52	%		9/19/2025		3,814,430		3,809,967		3,766,292
Delta 2 (Lux) SARL	Hotel Gaming & Leisure	Term Loan B	Loan	1M USD LIBOR +  2.50%		1.00	%		4.02	%		2/1/2024		1,318,289		1,315,922		1,275,445
DHX Media Ltd.	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR +  4.25%		1.00	%		5.77	%		12/29/2023		279,282		278,012		267,413
Diamond Sports Group LLC	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		8/24/2026		997,500		992,773		907,725
Digital Room Holdings Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR +  5.00%		0.00	%		6.52	%		5/21/2026		2,985,000		2,944,957		2,790,975
Dole Food Company Inc.	Beverage Food & Tobacco	Term Loan B	Loan	1M USD LIBOR +  2.75%		1.00	%		4.27	%		4/8/2024		468,750		467,304		461,522
DRW Holdings LLC	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		11/27/2026		5,000,000		4,950,804		4,962,500
DynCorp International Inc.	Aerospace & Defense	Term Loan B	Loan	1M USD LIBOR +  6.00%		1.00	%		7.52	%		8/18/2025		2,962,500		2,879,096		2,925,469
Eagletree-Carbide Acquisition Corp.	Consumer goods: Durable	Term Loan	Loan	3M USD LIBOR +  4.25%		1.00	%		5.71	%		8/28/2024		4,927,385		4,901,606		4,804,200
EIG Investors Corp.	High Tech Industries	Term Loan (06/18)	Loan	3M USD LIBOR +  3.75%		1.00	%		5.21	%		2/9/2023		2,199,416		2,186,449		2,160,926
Encapsys LLC	Chemicals Plastics & Rubber	Term Loan B2	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		11/7/2024		497,428		492,831		491,832
Endo Luxembourg Finance Company I S.a.r.l.	Healthcare & Pharmaceuticals	Term Loan B (4/17)	Loan	1M USD LIBOR +  4.25%		0.75	%		5.77	%		4/29/2024		3,937,025		3,914,795		3,766,985
Energy Acquisition LP	Capital Equipment	Term Loan (6/18)	Loan	3M USD LIBOR +  4.25%		0.00	%		5.71	%		6/26/2025		1,970,000		1,957,901		1,811,179
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Term Loan B (06/18)	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		10/10/2025		4,950,000		4,939,709		3,966,188
EyeCare Partners LLC	Healthcare & Pharmaceuticals	EyeCare Partners T/L B	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		2/5/2027		1,621,622		1,619,618		1,583,789
EyeCare Partners LLC(a)	Healthcare & Pharmaceuticals	EyeCare Partners Delayed Draw Term Loan	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		2/5/2027		—		—		—
FinCo I LLC	Banking Finance Insurance & Real Estate	2018 Term Loan B	Loan	1M USD LIBOR +  2.00%		0.00	%		3.52	%		12/27/2022		360,538		359,905		356,752
First Eagle Holdings Inc.	Banking Finance Insurance & Real Estate	Refinancing Term Loan	Loan	3M USD LIBOR +  2.50%		0.00	%		3.96	%		2/1/2027		5,450,000		5,426,720		5,338,275
Fitness International LLC	Services: Consumer	Term Loan B (4/18)	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		4/18/2025		1,330,058		1,322,900		1,312,103
Franklin Square Holdings L.P.	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		8/1/2025		4,443,748		4,414,007		4,421,530
Froneri International Ltd	Beverage Food & Tobacco	Term LoanB-2	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		1/29/2027		2,000,000		1,995,162		1,962,500
Fusion Connect Inc.	Telecommunications	Exit Term Loan (1/20)	Loan	3M USD LIBOR +  9.50%		2.00	%		11.50	%		1/14/2025		1,500,000		1,470,716		1,495,005
Fusion Connect Inc.	Telecommunications	Take Back 2nd Out Term Loan	Loan	6M USD LIBOR +  8.00%		2.00	%		10.00	%		7/14/2025		757,724		737,560		527,883
GBT Group Services B.V.	Hotel Gaming & Leisure	Term Loan	Loan	3M USD LIBOR +  2.50%		0.00	%		3.96	%		8/13/2025		4,443,750		4,442,729		4,410,422
GC EOS Buyer Inc.	Automotive	Term Loan B (06/18)	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		8/1/2025		2,962,500		2,940,820		2,888,438
General Nutrition Centers Inc.	Retail	Term Loan B2	Loan	3M USD LIBOR +  8.75%		0.75	%		10.21	%		3/4/2021		930,446		929,986		856,010
General Nutrition Centers Inc.	Retail	FILO Term Loan	Loan	1M USD LIBOR +  7.00%		0.00	%		8.52	%		1/3/2023		585,849		584,748		583,505
Genesee & Wyoming Inc.	Transportation: Cargo	Term Loan (11/19)	Loan	3M USD LIBOR +  2.00%		0.00	%		3.46	%		12/30/2026		1,500,000		1,492,771		1,489,380
GEO Group Inc. The	Banking Finance Insurance & Real Estate	Term Loan Refinance	Loan	1M USD LIBOR +  2.00%		0.75	%		3.52	%		3/25/2024		2,000,000		1,911,214		1,846,260
GI Chill Acquisition LLC	Services: Business	Term Loan	Loan	3M USD LIBOR +  4.00%		0.00	%		5.46	%		8/6/2025		2,468,750		2,458,492		2,450,234
GI Revelation Acquisition LLC	Services: Business	Term Loan	Loan	1M USD LIBOR +  5.00%		0.00	%		6.52	%		4/16/2025		1,231,867		1,226,730		1,155,652
Gigamon Inc.	Services: Business	Term Loan B	Loan	1M USD LIBOR +  4.25%		1.00	%		5.77	%		12/27/2024		2,960,000		2,937,550		2,952,600
Global Tel*Link Corporation	Telecommunications	Term Loan B	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		11/28/2025		3,039,750		3,039,750		2,886,668
Go Wireless Inc.	Telecommunications	Term Loan	Loan	1M USD LIBOR +  6.50%		1.00	%		8.02	%		12/22/2024		3,202,597		3,161,265		3,005,093
Goodyear Tire & Rubber Company The	Chemicals Plastics & Rubber	Second Lien Term Loan	Loan	1M USD LIBOR +  2.00%		0.00	%		3.52	%		3/7/2025		2,000,000		2,000,000		1,950,000
Greenhill & Co. Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		4/12/2024		3,661,538		3,624,459		3,644,769
Grosvenor Capital Management Holdings LLLP	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR +  2.75%		1.00	%		4.27	%		3/28/2025		898,530		894,831		898,530
Guidehouse LLP	Aerospace & Defense	Term Loan	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		5/1/2025		3,964,937		3,941,954		3,895,550
Harland Clarke Holdings Corp.	Media: Advertising Printing & Publishing	Term Loan	Loan	3M USD LIBOR +  4.75%		1.00	%		6.21	%		11/3/2023		1,723,072		1,715,720		1,356,919
HD Supply Waterworks Ltd.	Construction & Building	Term Loan	Loan	3M USD LIBOR +  2.75%		1.00	%		4.21	%		8/1/2024		488,750		487,883		481,419
Helix Acquisition Holdings Inc.	Capital Equipment	Term Loan (2019 Incremental)	Loan	3M USD LIBOR +  3.75%		0.00	%		5.21	%		9/30/2024		2,977,500		2,925,219		2,754,188
Helix Gen Funding LLC	Energy: Electricity	Term Loan B (02/17)	Loan	1M USD LIBOR +  3.75%		1.00	%		5.27	%		6/3/2024		264,030		263,694		253,799
HLF Financing SaRL LLC	Consumer goods:Non-durable	Term Loan B (08/18)	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		8/18/2025		3,950,000		3,935,111		3,883,364
Holley Purchaser Inc.	Automotive	Term Loan B	Loan	3M USD LIBOR +  5.00%		0.00	%		6.46	%		10/24/2025		2,475,000		2,454,070		2,301,750
Hudson River Trading LLC	Banking Finance Insurance & Real Estate	Term Loan B (01/20)	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		2/18/2027		6,000,000		5,975,621		5,955,000
Hyperion Refinance S.a.r.l.	Banking Finance Insurance & Real Estate	Tem Loan (12/17)	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		12/20/2024		1,709,781		1,701,824		1,691,623
ICH US Intermediate Holdings II Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	3M USD LIBOR +  5.75%		1.00	%		7.21	%		12/24/2026		5,000,000		4,803,288		4,875,000
Idera Inc.	High Tech Industries	Term Loan B	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		6/28/2024		2,939,742		2,919,274		2,917,694
Informatica LLC	High Tech Industries	Term Loan B (02/20)	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		2/25/2027		500,000		497,500		489,375
Inmar Inc.	Services: Business	Term Loan B	Loan	3M USD LIBOR +  4.00%		1.00	%		5.46	%		5/1/2024		3,457,043		3,377,774		3,320,939
Innophos Holdings Inc	Chemicals Plastics & Rubber	Term Loan B	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		2/4/2027		500,000		497,521		496,250

See accompanying notes to financial statements.

S-8

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
ION Media Networks Inc.	Media: Broadcasting & Subscription	Term Loan B	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		12/18/2024		997,500		992,818		982,538
Isagenix International LLC	Beverage Food & Tobacco	Term Loan	Loan	3M USD LIBOR +  5.75%		1.00	%		7.21	%		6/16/2025		2,796,876		2,750,718		1,118,750
Jefferies Finance LLC / JFINCo-Issuer Corp	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		6/3/2026		3,229,359		3,211,489		3,172,846
Jill Holdings LLC	Retail	Term Loan (1st Lien)	Loan	3M USD LIBOR +  5.00%		1.00	%		6.46	%		5/9/2022		1,800,290		1,796,697		1,458,235
JP Intermediate B LLC	Consumer goods:Non-durable	Term Loan	Loan	3M USD LIBOR +  5.50%		1.00	%		6.96	%		11/20/2025		4,687,500		4,640,380		2,499,984
KAR Auction Services Inc.	Automotive	Term Loan B (09/19)	Loan	1M USD LIBOR +  2.25%		0.00	%		3.77	%		9/19/2026		249,375		248,789		247,505
Kindred Healthcare Inc.	Healthcare & Pharmaceuticals	Kindred Healthcare T/L (6/18)	Loan	1M USD LIBOR +  5.00%		0.00	%		6.52	%		7/2/2025		2,000,000		1,980,000		1,975,000
Lakeland Tours LLC	Hotel Gaming & Leisure	Term Loan B	Loan	3M USD LIBOR +  4.25%		1.00	%		5.71	%		12/16/2024		2,457,482		2,450,618		2,248,596
Lannett Company Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR +  5.38%		1.00	%		6.89	%		11/25/2022		2,379,293		2,356,101		2,343,175
Learfield Communications LLC	Media: Advertising Printing & Publishing	Initial Term Loan(A-L Parent)	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		12/1/2023		485,000		483,577		439,531
Lifetime Brands Inc.	Consumer goods:Non-durable	Term Loan B	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		2/28/2025		2,992,386		2,955,090		2,857,728
Lighthouse Network LLC	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR +  4.50%		1.00	%		6.02	%		12/2/2024		4,129,092		4,115,428		4,123,930
Lightstone Holdco LLC	Energy: Electricity	Term Loan B	Loan	1M USD LIBOR +  3.75%		1.00	%		5.27	%		1/30/2024		1,322,520		1,320,692		1,164,651
Lightstone Holdco LLC	Energy: Electricity	Term Loan C	Loan	1M USD LIBOR +  3.75%		1.00	%		5.27	%		1/30/2024		74,592		74,493		65,688
Lindblad Expeditions Inc.	Hotel Gaming & Leisure	US 2018 Term Loan	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		3/27/2025		394,000		393,227		390,060
Lindblad Expeditions Inc.	Hotel Gaming & Leisure	Cayman Term Loan	Loan	1M USD LIBOR +  3.25%		0.00	%		4.77	%		3/27/2025		98,500		98,307		97,515
Liquidnet Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		7/15/2024		2,131,268		2,126,212		2,093,970
LPL Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B1	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		11/11/2026		1,245,213		1,242,233		1,243,133
Marriott Ownership Resorts Inc.	Hotel Gaming & Leisure	Term Loan (11/19)	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		3/12/2026		1,500,000		1,500,000		1,432,500
Match Group Inc.	Services: Consumer	Term Loan (1/20)	Loan	3M USD LIBOR +  1.75%		0.00	%		3.21	%		2/5/2027		250,000		249,377		248,438
McAfee LLC	Services: Business	Term Loan B	Loan	1M USD LIBOR +  3.75%		0.00	%		5.27	%		9/30/2024		3,159,418		3,131,317		3,136,165
McDermott International (Americas) Inc.(b)	Construction & Building	Term Loan B	Loan	3M USD LIBOR +  5.00%		1.00	%		6.46	%		5/12/2025		1,965,000		1,933,938		1,126,928
McGraw-Hill Global Education Holdings LLC	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		5/4/2022		956,813		954,867		897,807
Meredith Corporation	Media: Advertising Printing & Publishing	Term Loan B2	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		1/31/2025		578,738		577,724		572,227
Messer Industries GMBH	Chemicals Plastics & Rubber	Term Loan B	Loan	3M USD LIBOR +  2.50%		0.00	%		3.96	%		3/2/2026		2,977,500		2,970,753		2,917,950
Michaels Stores Inc.	Retail	Term Loan B	Loan	1M USD LIBOR +  2.50%		1.00	%		4.02	%		1/30/2023		2,599,163		2,590,493		2,393,387
Midwest Physician Administrative Services LLC	Healthcare & Pharmaceuticals	Term Loan (2/18)	Loan	1M USD LIBOR +  2.75%		0.75	%		4.27	%		8/15/2024		970,910		967,282		951,492
Milk Specialties Company	Beverage Food & Tobacco	Term Loan (2/17)	Loan	1M USD LIBOR +  4.00%		1.00	%		5.52	%		8/16/2023		3,899,905		3,848,164		3,696,798
MKS Instruments Inc.	High Tech Industries	Term Loan B6	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		2/2/2026		887,425		879,526		875,001
MLN US HoldCo LLC	Telecommunications	Term Loan	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		11/28/2025		990,000		988,165		932,144
MRC Global (US) Inc.	Metals & Mining	Term Loan B2	Loan	1M USD LIBOR +  3.00%		0.00	%		4.52	%		9/20/2024		490,000		489,047		477,750
NAI Entertainment Holdings LLC	Hotel Gaming & Leisure	Term Loan B	Loan	1M USD LIBOR +  2.50%		1.00	%		4.02	%		5/8/2025		870,833		869,104		855,594
Natgasoline LLC	Chemicals Plastics & Rubber	Term Loan	Loan	6M USD LIBOR +  3.50%		0.00	%		4.90	%		11/14/2025		495,000		492,907		491,288
National Mentor Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	1M USD LIBOR +  4.00%		0.00	%		5.52	%		3/9/2026		1,881,215		1,864,059		1,871,809
National Mentor Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan C	Loan	1M USD LIBOR +  4.00%		0.00	%		5.52	%		3/9/2026		104,662		103,730		104,139
NeuStar Inc.	Telecommunications	Term Loan B4 (03/18)	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		8/8/2024		2,962,121		2,918,947		2,688,125
NeuStar Inc.	Telecommunications	Term LoanB-5	Loan	1M USD LIBOR +  4.50%		1.00	%		6.02	%		8/8/2024		992,500		975,477		959,311
Nexstar Broadcasting Inc.	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR +  2.75%		0.00	%		4.27	%		9/18/2026		249,375		248,222		247,298
NMI Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR +  4.75%		1.00	%		6.27	%		5/23/2023		3,454,906		3,457,271		3,420,357
NorthPole Newco S.a r.l	Aerospace & Defense	Term Loan	Loan	3M USD LIBOR +  7.00%		0.00	%		8.46	%		3/3/2025		4,812,500		4,371,041		4,162,813
Novetta Solutions LLC	Aerospace & Defense	Term Loan	Loan	1M USD LIBOR +  5.00%		1.00	%		6.52	%		10/17/2022		1,919,870		1,911,097		1,878,478
Novetta Solutions LLC	Aerospace & Defense	Second Lien Term Loan	Loan	1M USD LIBOR +  8.50%		1.00	%		10.02	%		10/16/2023		1,000,000		994,137		973,750
NPC International Inc.(b)	Beverage Food & Tobacco	Term Loan	Loan	3M USD LIBOR +  3.50%		1.00	%		4.96	%		4/19/2024		487,500		487,124		237,544
Octave Music Group Inc. The	Services: Business	Term Loan B	Loan	2M USD LIBOR +  5.25%		1.00	%		6.75	%		5/29/2025		5,000,000		4,950,000		4,937,500
Office Depot Inc.	Retail	Term Loan B	Loan	1M USD LIBOR +  5.25%		1.00	%		6.77	%		11/8/2022		2,456,367		2,445,611		2,464,547
Owens & Minor Distribution Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR +  4.50%		0.00	%		6.02	%		4/30/2025		492,500		484,678		413,700
Patriot Container Corp.	Environmental Industries	Term Loan (3/18)	Loan	1M USD LIBOR +  3.50%		1.00	%		5.02	%		3/20/2025		500,000		497,500		492,500
PCI Gaming Authority	Hotel Gaming & Leisure	Term Loan	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		5/29/2026		878,269		874,086		871,682
Peraton Corp.	Aerospace & Defense	Term Loan	Loan	2M USD LIBOR +  5.25%		1.00	%		6.75	%		4/29/2024		2,447,449		2,437,345		2,386,263
PGX Holdings Inc.	Services: Consumer	Term Loan	Loan	1M USD LIBOR +  5.25%		1.00	%		6.77	%		9/29/2020		3,564,650		3,555,767		1,782,325
PI UK Holdco II Limited	Services: Business	Term Loan B1 (PI UK Holdco II)	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		1/3/2025		1,473,750		1,467,204		1,449,802
Pixelle Specialty Solutions LLC	Forest Products & Paper	Term Loan	Loan	1M USD LIBOR +  6.50%		1.00	%		8.02	%		10/31/2024		2,000,000		1,960,340		1,953,120
Plastipak Packaging Inc	Containers Packaging & Glass	Plastipak Packaging T/L B (04/18)	Loan	1M USD LIBOR +  2.50%		0.00	%		4.02	%		10/15/2024		2,944,583		2,921,203		2,885,691
Playtika Holding Corp.	High Tech Industries	Trm Loan B (12/19)	Loan	1M USD LIBOR +  6.00%		1.00	%		7.52	%		12/10/2024		4,000,000		3,922,736		3,988,760
Polymer Process Holdings Inc	Containers Packaging & Glass	Term Loan	Loan	1M USD LIBOR +  6.00%		0.00	%		7.52	%		4/30/2026		2,985,000		2,930,303		2,921,569
Presidio Inc.	Services: Business	Term Loan B (1/20)	Loan	3M USD LIBOR +  3.50%		0.00	%		4.96	%		1/22/2027		500,000		498,787		495,000
Prime Security Services Borrower LLC	Services: Consumer	Term Loan (Protection One/ADT)	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		9/23/2026		2,992,500		2,975,658		2,905,717
Priority Payment Systems Holdings LLC	High Tech Industries	Term Loan	Loan	1M USD LIBOR +  5.00%		1.00	%		6.52	%		1/3/2023		2,472,719		2,462,039		2,404,720
Project Accelerate Parent LLC	Services: Business	Term Loan	Loan	1M USD LIBOR +  4.25%		1.00	%		5.77	%		1/2/2025		1,965,000		1,957,491		1,940,438
Prometric Holdings Inc.	Services: Consumer	Term Loan	Loan	1M USD LIBOR +  3.00%		1.00	%		4.52	%		1/29/2025		491,288		489,418		473,478
Pug LLC	Services: Consumer	Pug T/L B (02/20)	Loan	1M USD LIBOR +  3.50%		0.00	%		5.02	%		2/12/2027		1,500,000		1,492,500		1,395,000
Rackspace Hosting Inc.	High Tech Industries	Term Loan B	Loan	3M USD LIBOR +  3.00%		1.00	%		4.46	%		11/3/2023		1,476,064		1,467,715		1,403,486
Radio Systems Corporation	Consumer goods: Durable	Term Loan	Loan	2M USD LIBOR +  2.75%		1.00	%		4.25	%		5/2/2024		1,462,500		1,462,500		1,449,703
Radiology Partners Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	2M USD LIBOR +  4.25%		0.00	%		5.75	%		7/9/2025		1,432,727		1,426,403		1,413,386
Research Now Group Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	3M USD LIBOR +  5.50%		1.00	%		6.96	%		12/20/2024		3,927,406		3,816,352		3,868,494
Resolute Investment Managers Inc.	Banking Finance Insurance & Real Estate	Term Loan (10/17)	Loan	3M USD LIBOR +  3.25%		1.00	%		4.71	%		4/29/2022		2,680,466		2,681,757		2,673,765
Rexnord LLC	Capital Equipment	Term Loan (11/19)	Loan	1M USD LIBOR +  1.75%		0.00	%		3.27	%		8/21/2024		862,069		862,069		858,431
Reynolds Consumer Products Inc.	Containers Packaging & Glass	Reynolds Consumer Products T/L	Loan	3M USD LIBOR +  1.75%		0.00	%		3.21	%		2/4/2027		1,500,000		1,498,128		1,483,875
RGIS Services LLC	Services: Business	Term Loan	Loan	3M USD LIBOR +  7.50%		1.00	%		8.96	%		3/31/2023		482,554		477,839		421,994
Robertshaw US Holding Corp.	Consumer goods: Durable	Term Loan B	Loan	1M USD LIBOR +  3.25%		1.00	%		4.77	%		2/28/2025		982,500		980,484		884,250
Rocket Software Inc.	High Tech Industries	Term Loan (11/18)	Loan	1M USD LIBOR +  4.25%		0.00	%		5.77	%		11/28/2025		3,970,000		3,953,381		3,817,393

See accompanying notes to financial statements.

S-9

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
Russell Investments US Institutional Holdco Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 2.75%		1.00	%		4.27	%		6/1/2023		5,637,965		5,554,276		5,553,396
Sahara Parent Inc.	High Tech Industries	Term Loan B (11/18)	Loan	3M USD LIBOR + 6.25%		0.00	%		7.71	%		8/16/2024		1,955,250		1,938,956		1,877,040
Sally Holdings LLC	Retail	Term Loan (Fixed)	Loan	1M USD LIBOR + 0.00%		0.00	%		0.00	%		7/5/2024		1,000,000		996,778		980,000
Sally Holdings LLC	Retail	Term Loan B	Loan	1M USD LIBOR + 2.25%		0.00	%		3.77	%		7/5/2024		768,409		765,606		753,041
Savage Enterprises LLC	Energy: Oil & Gas	Term Loan	Loan	1M USD LIBOR + 4.00%		0.00	%		5.52	%		8/1/2025		3,284,831		3,247,280		3,270,049
SCS Holdings I Inc.	High Tech Industries	Term Loan 1/20	Loan	1M USD LIBOR + 3.50%		0.00	%		5.02	%		7/1/2026		1,990,000		1,985,537		1,976,329
Seadrill Operating LP	Energy: Oil & Gas	Term Loan B	Loan	3M USD LIBOR + 6.00%		1.00	%		7.46	%		2/21/2021		905,168		891,491		288,359
Shutterfly Inc.	Media: Advertising Printing & Publishing	Term Loan B	Loan	3M USD LIBOR + 6.00%		1.00	%		7.46	%		9/25/2026		870,968		829,352		827,968
SMB Shipping Logistics LLC	Transportation: Consumer	Term Loan B	Loan	3M USD LIBOR + 4.00%		1.00	%		5.46	%		2/2/2024		1,947,873		1,946,123		1,913,785
SMG US Midco 2 Inc.	Services: Business	Term Loan (01/20)	Loan	1M USD LIBOR + 2.50%		0.00	%		4.02	%		1/23/2025		500,000		500,000		495,000
Snacking Investment BidCo Pty Limited	Beverage Food & Tobacco	Term Loan	Loan	1M USD LIBOR + 4.00%		1.00	%		5.52	%		12/18/2026		1,000,000		990,193		987,500
Sotheby’s	Services: Business	Term Loan	Loan	1M USD LIBOR + 5.50%		1.00	%		7.02	%		1/15/2027		3,324,994		3,258,223		3,315,285
SP PF Buyer LLC	Consumer goods: Durable	Term Loan B	Loan	1M USD LIBOR + 4.50%		0.00	%		6.02	%		12/19/2025		1,985,000		1,911,678		1,801,388
SRAM LLC	Consumer goods: Durable	Term Loan	Loan	1M USD LIBOR + 2.75%		1.00	%		4.27	%		3/15/2024		1,769,661		1,762,426		1,756,388
SS&C European Holdings S.A.R.L.	Services: Business	Term Loan B4	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		4/16/2025		199,839		199,466		196,841
SS&C Technologies Inc.	Services: Business	Term LoanB-5	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		4/16/2025		493,682		492,653		486,000
SS&C Technologies Inc.	Services: Business	Term Loan B3	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		4/16/2025		280,056		279,525		275,855
Staples Inc.	Wholesale	Term Loan (03/19)	Loan	1M USD LIBOR + 5.00%		0.00	%		6.52	%		4/16/2026		1,960,188		1,960,188		1,928,334
Stats Intermediate Holdings LLC	Hotel Gaming & Leisure	Term Loan	Loan	6M USD LIBOR + 5.25%		0.00	%		6.65	%		7/10/2026		2,000,000		1,953,068		1,920,000
Steak N Shake Operations Inc.	Beverage Food & Tobacco	Term Loan	Loan	1M USD LIBOR + 3.75%		1.00	%		5.27	%		3/19/2021		824,991		823,352		662,740
STG-Fairway Holdings LLC	Services: Business	STG Fairway T/L (First Advantage) (Fastball Merger	Loan	1M USD LIBOR + 3.50%		0.00	%		5.02	%		1/29/2027		500,000		497,500		496,040
Sybil Software LLC	High Tech Industries	Term Loan B (4/18)	Loan	3M USD LIBOR + 2.25%		1.00	%		3.71	%		9/29/2023		263,565		262,651		261,918
Teneo Holdings LLC	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR + 5.25%		1.00	%		6.77	%		7/11/2025		2,493,750		2,401,489		2,381,531
Tenneco Inc	Capital Equipment	Term Loan B	Loan	1M USD LIBOR + 3.00%		0.00	%		4.52	%		10/1/2025		1,485,000		1,472,625		1,386,619
Ten-X LLC	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR + 4.00%		1.00	%		5.52	%		9/30/2024		1,960,000		1,958,142		1,927,327
Terex Corporation	Capital Equipment	Term Loan	Loan	1M USD LIBOR + 2.75%		0.75	%		4.27	%		1/31/2024		992,500		988,635		991,567
TGG TS Acquisition Company	Media: Diversified & Production	Term Loan (12/18)	Loan	1M USD LIBOR + 6.50%		0.00	%		8.02	%		12/15/2025		2,766,667		2,639,073		2,711,333
The Edelman Financial Center LLC	Banking Finance Insurance & Real Estate	Term Loan B (06/18)	Loan	1M USD LIBOR + 3.25%		0.00	%		4.77	%		7/21/2025		1,237,500		1,232,467		1,211,203
The Knot Worldwide Inc	Services: Consumer	Term Loan	Loan	1M USD LIBOR + 4.50%		0.00	%		6.02	%		12/19/2025		3,960,000		3,952,856		3,890,700
Thor Industries Inc.	Automotive	Term Loan (USD)	Loan	2M USD LIBOR + 3.75%		0.00	%		5.25	%		2/2/2026		2,031,203		2,018,102		2,000,735
Tivity Health Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 5.25%		0.00	%		6.77	%		3/6/2026		2,334,338		2,281,664		2,209,288
Tivity Health Inc.	Healthcare & Pharmaceuticals	Term Loan A	Loan	1M USD LIBOR + 4.25%		0.00	%		5.77	%		3/8/2024		1,600,000		1,586,231		1,504,000
Transdigm Inc.	Aerospace & Defense	Term Loan G (02/20)	Loan	1M USD LIBOR + 2.25%		0.00	%		3.77	%		8/22/2024		4,106,293		4,111,126		4,013,901
Travel Leaders Group LLC	Hotel Gaming & Leisure	Term Loan B (08/18)	Loan	1M USD LIBOR + 4.00%		0.00	%		5.52	%		1/25/2024		2,462,500		2,458,773		2,410,172
TRC Companies Inc.	Services: Business	Term Loan	Loan	1M USD LIBOR + 3.50%		1.00	%		5.02	%		6/21/2024		3,376,818		3,366,553		3,250,188
TRC Companies Inc.	Services: Business	Term Loan B	Loan	1M USD LIBOR + 5.00%		1.00	%		6.52	%		6/21/2024		997,500		982,926		980,044
Trico Group LLC	Containers Packaging & Glass	Incremental Term Loan	Loan	3M USD LIBOR + 7.00%		1.00	%		8.46	%		2/2/2024		4,758,359		4,645,140		4,675,088
Truck Hero Inc.	Transportation: Cargo	First Lien Term Loan	Loan	1M USD LIBOR + 3.75%		0.00	%		5.27	%		4/22/2024		2,927,444		2,910,795		2,874,984
Trugreen Limited Partnership	Services: Consumer	Term Loan (03/19)	Loan	1M USD LIBOR + 3.75%		1.00	%		5.27	%		3/19/2026		981,396		972,628		981,396
Twin River Worldwide Holdings Inc.	Hotel Gaming & Leisure	Term Loan B	Loan	1M USD LIBOR + 2.75%		0.00	%		4.27	%		5/11/2026		995,000		990,418		971,060
United Natural Foods Inc.	Beverage Food & Tobacco	Term Loan B	Loan	1M USD LIBOR + 4.25%		0.00	%		5.77	%		10/22/2025		3,465,000		3,270,106		2,875,950
Univar Solutions Inc.	Chemicals Plastics & Rubber	Term Loan B3 (11/17)	Loan	1M USD LIBOR + 2.25%		0.00	%		3.77	%		7/1/2024		1,627,723		1,621,989		1,603,307
Univision Communications Inc.	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR + 2.75%		1.00	%		4.27	%		3/15/2024		2,746,369		2,735,251		2,634,565
URS Holdco Inc.	Transportation: Cargo	Term Loan (10/17)	Loan	1M USD LIBOR + 5.75%		1.00	%		7.27	%		8/30/2024		984,169		973,856		821,778
US Ecology Inc.	Environmental Industries	Term Loan B	Loan	1M USD LIBOR + 2.50%		0.00	%		4.02	%		11/2/2026		500,000		498,859		496,250
VeriFone Systems Inc.	Banking Finance Insurance & Real Estate	Term Loan (7/18)	Loan	3M USD LIBOR + 4.00%		0.00	%		5.46	%		8/20/2025		5,431,250		5,403,194		5,214,000
Verra Mobility Corp.	Construction & Building	Term Loan B1 (02/20)	Loan	1M USD LIBOR + 3.25%		0.00	%		4.77	%		2/28/2025		491,250		489,331		483,881
VFH Parent LLC	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 3.50%		0.00	%		5.02	%		3/2/2026		3,801,266		3,787,581		3,793,663
Victory Capital Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B (01/20)	Loan	1M USD LIBOR + 2.50%		0.00	%		4.02	%		7/1/2026		422,273		418,485		415,939
Virtus Investment Partners Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 2.25%		0.75	%		3.77	%		6/3/2024		3,218,500		3,217,979		3,213,479
Vistra Operations Company LLC	Utilities: Electric	2018 Incremental Term Loan	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		12/31/2025		927,500		926,595		919,094
Vizient Inc.	Healthcare & Pharmaceuticals	Term LoanB-6	Loan	1M USD LIBOR + 2.00%		0.00	%		3.52	%		5/6/2026		496,250		495,208		491,600
VS Buyer T/L (Veeam Software)	High Tech Industries	Term Loan	Loan	3M USD LIBOR + 3.25%		0.00	%		4.71	%		2/28/2027		1,000,000		1,000,000		986,250
Weight Watchers International Inc.	Services: Consumer	Term Loan B	Loan	3M USD LIBOR + 4.75%		0.75	%		6.21	%		11/29/2024		1,670,130		1,645,266		1,665,955
West Corporation	Telecommunications	Term Loan B	Loan	1M USD LIBOR + 3.50%		1.00	%		5.02	%		10/10/2024		2,961,172		2,889,546		2,319,573
West Corporation	Telecommunications	Term Loan B (Olympus Merger)	Loan	1M USD LIBOR + 4.00%		1.00	%		5.52	%		10/10/2024		1,237,374		1,164,156		981,002
Western Dental Services Inc.	Retail	Term Loan (12/18)	Loan	1M USD LIBOR + 5.25%		1.00	%		6.77	%		6/30/2023		2,438,722		2,424,403		2,444,819
Western Digital Corporation	High Tech Industries	Term LoanB-4	Loan	1M USD LIBOR + 1.75%		0.00	%		3.27	%		4/29/2023		903,135		885,248		892,975
Winter Park Intermediate Inc.	Automotive	Term Loan	Loan	1M USD LIBOR + 4.75%		0.00	%		6.27	%		4/4/2025		1,984,953		1,966,855		1,951,864
Wirepath LLC	Consumer goods:Non-durable	Term Loan	Loan	3M USD LIBOR + 4.00%		1.00	%		5.46	%		8/5/2024		2,955,118		2,931,790		2,766,730
WP CityMD Bidco LLC	Services: Consumer	Term Loan B	Loan	3M USD LIBOR + 4.50%		1.00	%		5.96	%		8/13/2026		3,500,000		3,467,362		3,476,375
YS Garments LLC	Retail	Term Loan	Loan	1W USD LIBOR + 6.00%		1.00	%		7.57	%		8/9/2024		1,937,500		1,921,365		1,908,438
Zekelman Industries Inc	Metals & Mining	Term Loan (01/20)	Loan	1M USD LIBOR + 2.25%		0.00	%		3.77	%		1/19/2027		1,000,000		1,000,000		977,500
Zep Inc.	Chemicals Plastics & Rubber	Term Loan	Loan	3M USD LIBOR + 4.00%		1.00	%		5.46	%		8/12/2024		2,443,750		2,434,999		1,840,461
Zest Acquisition Corp.	Healthcare & Pharmaceuticals	Term Loan	Loan	1M USD LIBOR + 3.50%		0.00	%		5.02	%		3/14/2025		982,500		978,750		934,603
															$	526,004,959	$	500,999,934
													Number of Shares		Cost		Fair Value
Cash and cash equivalents
U.S. Bank Money Market (c)														9,081,041	$	9,081,041	$	9,081,041
Total cash and cash equivalents														9,081,041	$	9,081,041	$	9,081,041

See accompanying notes to financial statements.

S-4

(a) All or a portion of this investment has an unfunded commitment as of February 29, 2020 (see Note 6 in Notes to financial statements).

(b) As of February 29, 2020, the investment was in default and onnon-accrual status.

(c) Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of February 29, 2020.

LIBOR—London Interbank Offered Rate

1W USD LIBOR—The 1 week USD LIBOR rate as of February 29, 2020 was 1.57%.

1M USD LIBOR—The 1 month USD LIBOR rate as of February 29, 2020 was 1.52%.

2M USD LIBOR—The 2 month USD LIBOR rate as of February 29, 2020 was 1.50%.

3M USD LIBOR—The 3 month USD LIBOR rate as of February 29, 2020 was 1.46%.

6M USD LIBOR—The 6 month USD LIBOR rate as of February 29, 2020 was 1.40%.

Prime—The Prime Rate as of February 29, 2020 was 4.75%.

See accompanying notes to financial statements.

S-11

Saratoga Investment Corp. CLO2013-1, Ltd.

Schedule of Investments

February 28, 2019

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
Education Management II LLC	Services: Consumer	A-1 Preferred Shares	Equity											6,692	$	669,214	$	13,384
Education Management II LLC	Services: Consumer	A-2 Preferred Shares	Equity											18,975		1,897,538		1,670
New Millennium Holdco, Inc.	Healthcare & Pharmaceuticals	Common Stock	Equity											14,813		964,466		637
24 Hour Fitness Worldwide Inc.	Services: Consumer	Term Loan (5/18)	Loan	1M USD LIBOR + 3.50%		0.00	%		5.99	%		5/30/2025	$	2,990,000		2,978,426		2,987,518
ABBCon-Cise Optical Group LLC	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		6/15/2023		2,103,445		2,080,167		2,037,712
Achilles Acquisition LLC	Banking Finance Insurance & Real Estate	Term Loan (09/18)	Loan	1M USD LIBOR + 4.00%		0.00	%		6.49	%		10/13/2025		6,000,000		5,985,885		5,962,500
Acosta Inc.	Media: Advertising Printing & Publishing	Term Loan B (1st Lien)	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		9/27/2021		1,915,375		1,909,171		957,687
ADMI Corp.	Services: Consumer	Term Loan B	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		4/30/2025		1,990,000		1,981,204		1,968,607
Advantage Sales & Marketing Inc.	Services: Business	First Lien Term Loan	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		7/23/2021		2,396,156		2,394,791		2,098,889
Advantage Sales & Marketing Inc.	Services: Business	Term Loan B Incremental	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		7/23/2021		494,975		487,610		431,247
Aegis Toxicology Sciences Corporation	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR + 5.50%		1.00	%		8.11	%		5/9/2025		3,990,000		3,954,925		3,850,350
Agiliti Health Inc.	Healthcare & Pharmaceuticals	Delayed Draw Term Loan	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		1/5/2026		500,000		500,000		499,375
Agrofresh Inc.	Beverage Food & Tobacco	Term Loan	Loan	3M USD LIBOR + 4.75%		1.00	%		7.36	%		7/30/2021		2,919,744		2,915,422		2,883,247
AI Mistral (Luxembourg) Subco Sarl	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		3/11/2024		491,250		491,250		455,020
AIS Holdco LLC	Services: Business	Term Loan	Loan	3M USD LIBOR + 5.00%		0.00	%		7.61	%		8/15/2025		2,484,375		2,472,344		2,422,266
Akorn Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 5.50%		1.00	%		7.99	%		4/16/2021		398,056		397,485		316,455
Albertson’s LLC	Retail	Term Loan B7	Loan	1M USD LIBOR + 3.00%		0.75	%		5.49	%		11/17/2025		4,151,511		4,140,731		4,124,733
Alchemy US Holdco 1 LLC	Metals & Mining	Term Loan	Loan	6M USD LIBOR + 5.50%		0.00	%		8.19	%		10/10/2025		2,000,000		1,971,432		1,990,000
Alera Group Intermediate Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		8/1/2025		498,750		497,585		499,997
Alion Science and Technology Corporation	Aerospace & Defense	Term Loan B (1st Lien)	Loan	1M USD LIBOR + 4.50%		1.00	%		6.99	%		8/19/2021		3,626,521		3,620,261		3,614,445
Allen Media LLC	Media: Diversified & Production	Term Loan B	Loan	3M USD LIBOR + 6.50%		1.00	%		7.50	%		8/30/2023		3,000,000		2,931,901		2,872,500
Altisource S.a r.l.	Banking Finance Insurance & Real Estate	Term Loan B (03/18)	Loan	3M USD LIBOR + 4.00%		1.00	%		6.61	%		4/3/2024		1,677,030		1,666,628		1,639,296
Altra Industrial Motion Corp.	Capital Equipment	Term Loan	Loan	1M USD LIBOR + 2.00%		0.00	%		4.49	%		10/1/2025		1,955,223		1,950,844		1,930,783
American Greetings Corporation	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 4.50%		1.00	%		6.99	%		4/5/2024		4,982,450		4,979,868		4,929,536
American Residential Services LLC	Services: Consumer	Term Loan B	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		6/30/2022		3,966,883		3,954,749		3,907,380
Amynta Agency Borrower Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR + 4.00%		0.00	%		6.49	%		2/28/2025		3,497,500		3,455,778		3,410,063
Anastasia Parent LLC	Consumer goods:Non-durable	Term Loan	Loan	1M USD LIBOR + 3.75%		0.00	%		6.24	%		8/11/2025		997,500		992,909		944,732
Anchor Glass Container Corporation	Containers Packaging & Glass	Term Loan (07/17)	Loan	1M USD LIBOR + 2.75%		1.00	%		5.24	%		12/7/2023		490,038		488,206		392,520
AqGen Ascensus Inc.	Services: Consumer	Term Loan	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		12/5/2022		408,906		408,242		405,839
Aramark Services Inc.	Services: Consumer	Term LoanB-2	Loan	1M USD LIBOR + 1.75%		0.00	%		4.24	%		3/28/2024		1,294,904		1,294,904		1,287,212
Arctic Glacier U.S.A. Inc.	Beverage Food & Tobacco	Term Loan (3/18)	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		3/20/2024		3,350,967		3,329,140		3,283,948
Aretec Group Inc.	Banking Finance Insurance & Real Estate	Term Loan (10/18)	Loan	1M USD LIBOR + 4.25%		0.00	%		6.74	%		10/1/2025		2,000,000		1,995,758		1,975,000
ASG Technologies Group Inc.	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		7/31/2024		493,763		491,798		485,739
AssetMark Financial Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	3M USD LIBOR + 3.50%		0.00	%		6.11	%		11/14/2025		2,500,000		2,496,120		2,490,625
Astoria Energy LLC	Energy: Electricity	Term Loan	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		12/24/2021		1,406,149		1,397,673		1,407,612
Asurion LLC	Banking Finance Insurance & Real Estate	Term LoanB-4 (Replacement)	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		8/4/2022		2,084,268		2,077,055		2,082,788
Asurion LLC	Banking Finance Insurance & Real Estate	Term Loan B6	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		11/3/2023		497,955		494,277		497,512
Athenahealth Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	3M USD LIBOR + 4.50%		0.00	%		7.11	%		2/11/2026		2,000,000		1,960,211		1,988,760
Avaya Inc.	Telecommunications	Term Loan B	Loan	2M USD LIBOR + 4.25%		0.00	%		6.82	%		12/16/2024		1,990,000		1,974,743		1,987,015
Avolon TLB Borrower 1 US LLC	Capital Equipment	Term Loan B3	Loan	1M USD LIBOR + 2.00%		0.75	%		4.49	%		1/15/2025		913,731		909,648		912,763
Ball Metalpack Finco LLC	Containers Packaging & Glass	Term Loan	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		7/31/2025		3,984,987		3,966,751		3,970,044
Bausch Health Companies Inc.	Healthcare & Pharmaceuticals	Term Loan B (05/18)	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		6/2/2025		1,752,582		1,745,304		1,752,144
Bausch Health Companies Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	1M USD LIBOR + 2.75%		0.00	%		5.24	%		11/27/2025		481,250		476,571		479,310
Blackboard Inc.	High Tech Industries	Term Loan B4	Loan	3M USD LIBOR + 5.00%		1.00	%		7.61	%		6/30/2021		2,932,500		2,919,562		2,818,866
Blount International Inc.	Forest Products & Paper	Term Loan B (09/18)	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		4/12/2023		3,488,756		3,485,266		3,484,395
Blucora Inc.	High Tech Industries	Term Loan (11/17)	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		5/22/2024		706,667		703,725		704,900
Boxer Parent Company Inc.	Services: Business	Term Loan	Loan	3M USD LIBOR + 4.25%		0.00	%		6.86	%		10/2/2025		2,500,000		2,476,591		2,484,150
Bracket Intermediate Holding Corp.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR + 4.25%		0.00	%		6.86	%		9/5/2025		997,500		992,812		985,031
Broadstreet Partners Inc.	Banking Finance Insurance & Real Estate	Term Loan B2	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		11/8/2023		1,035,177		1,032,997		1,032,589
Brookfield WEC Holdings Inc.	Energy: Electricity	Term Loan	Loan	1M USD LIBOR + 3.75%		0.75	%		6.24	%		8/1/2025		2,000,000		1,990,924		2,001,880
Cable & Wireless Communications Limited	Telecommunications	Term Loan B4	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		1/30/2026		2,500,000		2,497,271		2,488,200
Cable One Inc.	Media: Broadcasting & Subscription	Term Loan B	Loan	1M USD LIBOR + 1.75%		0.00	%		4.24	%		5/1/2024		492,500		492,049		490,348
Calceus Acquisition Inc.	Consumer goods:Non-durable	Term Loan B	Loan	1M USD LIBOR + 5.50%		0.00	%		7.99	%		2/12/2025		1,000,000		987,601		995,420
Callaway Golf Company	Retail	Term Loan B	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		1/2/2026		750,000		735,504		753,127
Canyon Valor Companies Inc.	Media: Advertising Printing & Publishing	Term Loan B	Loan	3M USD LIBOR + 2.75%		0.00	%		5.36	%		6/16/2023		939,191		936,843		929,019
Capital Automotive L.P.	Banking Finance Insurance & Real Estate	First Lien Term Loan	Loan	1M USD LIBOR + 2.50%		1.00	%		4.99	%		3/25/2024		478,053		476,166		470,284
CareerBuilder LLC	Services: Business	Term Loan	Loan	3M USD LIBOR + 6.75%		1.00	%		9.36	%		7/31/2023		2,266,211		2,224,216		2,257,713
Casa Systems Inc.	Telecommunications	Term Loan	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		12/20/2023		1,470,000		1,459,340		1,451,625
CCS-CMGC Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	1M USD LIBOR + 5.50%		0.00	%		7.99	%		10/1/2025		2,500,000		2,476,183		2,393,750
Cengage Learning Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 4.25%		1.00	%		6.74	%		6/7/2023		1,462,458		1,450,545		1,343,999
CenturyLink Inc.	Telecommunications	Term Loan B	Loan	1M USD LIBOR + 2.75%		0.00	%		5.24	%		1/31/2025		3,970,000		3,946,810		3,904,813
CEOC LLC	Hotel Gaming & Leisure	Term Loan	Loan	1M USD LIBOR + 2.00%		0.00	%		4.49	%		10/4/2024		990,000		990,000		980,734
Charter Communications Operating LLC.	Media: Broadcasting & Subscription	Term Loan (12/17)	Loan	1M USD LIBOR + 2.00%		0.00	%		4.49	%		4/30/2025		1,584,000		1,582,488		1,578,773
Compass Power Generation L.L.C.	Utilities: Electric	Term Loan B (08/18)	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		12/20/2024		1,953,052		1,948,283		1,948,775

See accompanying notes to financial statements.

S-12

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
Compuware Corporation	High Tech Industries	Term Loan (08/18)	Loan	1M USD LIBOR + 3.50%		0.00	%		5.99	%		8/22/2025		500,000		498,788		501,250
Concordia International Corp.	Healthcare & Pharmaceuticals	Term Loan	Loan	1M USD LIBOR + 5.50%		1.00	%		7.99	%		9/6/2024		1,207,930		1,145,627		1,145,190
Consolidated Aerospace Manufacturing LLC	Aerospace & Defense	Term Loan (1st Lien)	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		8/11/2022		2,418,750		2,412,445		2,409,680
Consolidated Communications Inc.	Telecommunications	Term Loan B	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		10/5/2023		1,490,574		1,477,850		1,451,133
Covia Holdings Corporation	Metals & Mining	Term Loan	Loan	3M USD LIBOR + 3.75%		1.00	%		6.36	%		6/2/2025		995,000		995,000		844,685
CPI Acquisition Inc	Banking Finance Insurance & Real Estate	Term Loan B (1st Lien)	Loan	6M USD LIBOR + 4.50%		1.00	%		7.19	%		8/17/2022		1,436,782		1,424,775		894,396
Crown Subsea Communications Holding Inc	Construction & Building	Term Loan	Loan	1M USD LIBOR + 6.00%		0.00	%		8.49	%		11/3/2025		4,000,000		3,957,810		3,975,000
CSC Holdings LLC	Media: Broadcasting & Subscription	Term Loan B (03/17)	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		7/17/2025		1,994,924		1,970,647		1,967,853
CSC Holdings LLC	Media: Broadcasting & Subscription	Term Loan B	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		1/15/2026		500,000		498,804		493,250
CT Technologies Intermediate Hldgs Inc	Healthcare & Pharmaceuticals	New Term Loan	Loan	1M USD LIBOR + 4.25%		1.00	%		6.74	%		12/1/2021		1,440,263		1,433,574		1,229,984
Cumulus Media New Holdings Inc.	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR + 4.50%		1.00	%		6.99	%		5/13/2022		335,864		333,061		329,006
Daseke Companies Inc.	Transportation: Cargo	Replacement Term Loan	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		2/27/2024		1,975,651		1,965,011		1,965,772
Dealer Tire LLC	Automotive	Term Loan B	Loan	1M USD LIBOR + 5.50%		0.00	%		7.99	%		12/12/2025		3,000,000		2,892,107		3,000,000
Delek US Holdings Inc.	Utilities: Oil & Gas	Term Loan B	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		3/31/2025		2,992,462		2,956,032		2,952,572
Dell International L.L.C.	High Tech Industries	Term Loan B	Loan	1M USD LIBOR + 2.00%		0.75	%		4.49	%		9/7/2023		3,974,937		3,922,161		3,960,031
Delta 2 (Lux) SARL	Hotel Gaming & Leisure	Term Loan B	Loan	1M USD LIBOR + 2.50%		1.00	%		4.99	%		2/1/2024		1,318,289		1,315,251		1,289,036
DHX Media Ltd.	Media: Broadcasting & Subscription	Term Loan	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		12/29/2023		332,042		330,546		320,005
Digital Room Holdings Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		12/29/2023		3,101,339		3,074,510		3,070,325
Dole Food Company Inc.	Beverage Food & Tobacco	Term Loan B	Loan	Prime + 2.75%		1.00	%		3.75	%		4/8/2024		481,250		479,436		473,733
Drew Marine Group Inc.	Transportation: Consumer	First Lien Term Loan	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		11/19/2020		2,841,040		2,828,735		2,819,732
DTZ U.S. Borrower LLC	Construction & Building	Term Loan B	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		8/21/2025		5,985,000		5,957,110		5,936,402
Dynatrace LLC	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		8/22/2025		1,000,000		1,000,000		994,580
Eagletree-Carbide Acquisition Corp.	High Tech Industries	Term Loan	Loan	3M USD LIBOR + 4.25%		1.00	%		6.86	%		8/28/2024		3,967,480		3,948,716		3,927,805
Education Management II LLC (a)	Services: Consumer	Term Loan A	Loan	Prime + 5.50%		1.00	%		6.50	%		7/2/2020		423,861		419,105		8,477
Education Management II LLC (a)	Services: Consumer	Term Loan B	Loan	Prime + 8.50%		1.00	%		9.50	%		7/2/2020		954,307		945,813		840
EIG Investors Corp.	High Tech Industries	Term Loan (06/18)	Loan	3M USD LIBOR + 3.75%		1.00	%		6.36	%		2/9/2023		2,410,685		2,394,658		2,397,282
Emerald 2 Ltd. (Eagle US / Emerald Newco / ERM Canada / ERM US)	Environmental Industries	Term Loan	Loan	3M USD LIBOR + 4.00%		1.00	%		6.61	%		5/14/2021		988,553		985,300		978,745
Emerald Performance Materials LLC	Chemicals Plastics & Rubber	Term Loan	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		7/30/2021		475,777		474,869		469,682
Endo Luxembourg Finance Company I S.a.r.l.	Healthcare & Pharmaceuticals	Term Loan B (4/17)	Loan	1M USD LIBOR + 4.25%		0.75	%		6.74	%		4/29/2024		3,977,405		3,952,044		3,978,240
Energy Acquisition LP	Capital Equipment	Term Loan (6/18)	Loan	3M USD LIBOR + 4.25%		0.00	%		6.86	%		6/26/2025		1,990,000		1,971,730		1,910,400
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Term Loan B (06/18)	Loan	1M USD LIBOR + 3.75%		0.00	%		6.24	%		10/10/2025		5,000,000		4,988,764		4,807,800
Evergreen AcqCo 1 LP	Retail	Term Loan C	Loan	3M USD LIBOR + 3.75%		1.25	%		6.36	%		7/9/2019		935,156		934,453		883,723
EWT Holdings III Corp.	Capital Equipment	Term Loan	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		12/20/2024		2,809,641		2,798,064		2,806,129
Extreme Reach Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 6.25%		1.00	%		8.74	%		2/7/2020		5,492,555		5,432,541		5,351,836
Fastener Acquisition Inc.	Construction & Building	Term Loan B	Loan	3M USD LIBOR + 4.25%		1.00	%		6.86	%		3/28/2025		496,250		493,979		486,325
FinCo I LLC	Banking Finance Insurance & Real Estate	2018 Term Loan B	Loan	1M USD LIBOR + 2.00%		0.00	%		4.49	%		12/27/2022		415,611		414,701		412,236
First Eagle Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B (10/18)	Loan	3M USD LIBOR + 2.75%		0.00	%		5.36	%		12/2/2024		5,000,000		4,973,959		4,987,500
Fitness International LLC	Services: Consumer	Term Loan B (4/18)	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		4/18/2025		2,776,214		2,759,824		2,755,392
Franklin Square Holdings L.P.	Banking Finance Insurance & Real Estate	Term Loan	Loan	2M USD LIBOR + 2.50%		0.00	%		5.07	%		8/1/2025		4,488,750		4,457,527		4,474,745
Fusion Connect Inc.	Telecommunications	Term Loan B	Loan	3M USD LIBOR + 7.50%		1.00	%		10.11	%		5/4/2023		1,925,000		1,857,064		1,732,500
GBT Group Services B.V.	Hotel Gaming & Leisure	Term Loan	Loan	3M USD LIBOR + 2.50%		0.00	%		5.11	%		8/13/2025		4,488,750		4,487,571		4,466,306
GC EOS Buyer Inc.	Automotive	Term Loan B (06/18)	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		8/1/2025		2,992,500		2,964,056		2,955,094
General Nutrition Centers Inc.	Retail	FILO Term Loan	Loan	1M USD LIBOR + 7.00%		0.00	%		9.49	%		1/3/2023		585,849		585,849		593,172
General Nutrition Centers Inc.	Retail	Term Loan B2	Loan	Prime + 9.16%		0.75	%		9.91	%		3/4/2021		1,035,789		1,035,789		1,008,341
GI Chill Acquisition LLC	Services: Business	Term Loan	Loan	3M USD LIBOR + 4.00%		0.00	%		6.61	%		8/6/2025		2,493,750		2,482,280		2,487,516
GI Revelation Acquisition LLC	Services: Business	Term Loan	Loan	1M USD LIBOR + 5.00%		0.00	%		7.49	%		4/16/2025		1,244,373		1,238,702		1,231,930
Gigamon Inc.	Services: Business	Term Loan B	Loan	3M USD LIBOR + 4.25%		1.00	%		6.86	%		12/27/2024		1,980,000		1,962,889		1,952,775
Global Tel*Link Corporation	Telecommunications	Term Loan B	Loan	1M USD LIBOR + 4.25%		0.00	%		6.74	%		11/28/2025		3,070,455		3,070,455		3,070,455
Go Wireless Inc.	Telecommunications	Term Loan	Loan	1M USD LIBOR + 6.50%		1.00	%		8.99	%		12/22/2024		3,380,519		3,331,962		3,250,944
GoodRX Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		10/10/2025		3,000,000		2,992,953		2,976,570
Goodyear Tire & Rubber Company The	Chemicals Plastics & Rubber	Second Lien Term Loan	Loan	1M USD LIBOR + 2.00%		0.00	%		4.49	%		3/7/2025		2,000,000		2,000,000		1,956,660
Grosvenor Capital Management Holdings LLLP	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 2.75%		1.00	%		5.24	%		3/28/2025		920,941		916,777		916,337
Guidehouse LLP	Aerospace & Defense	Term Loan	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		5/1/2025		1,990,000		1,985,566		1,965,125
Hargray Communications Group Inc.	Media: Broadcasting & Subscription	Term Loan B	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		5/16/2024		985,000		983,012		973,308
Harland Clarke Holdings Corp.	Media: Advertising Printing & Publishing	Term Loan	Loan	3M USD LIBOR + 4.75%		1.00	%		7.36	%		11/3/2023		1,833,245		1,824,008		1,741,583
HD Supply Waterworks Ltd.	Construction & Building	Term Loan	Loan	6M USD LIBOR + 3.00%		1.00	%		5.69	%		8/1/2024		493,750		492,687		489,430
Helix Gen Funding LLC	Energy: Electricity	Term Loan B (02/17)	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		6/3/2024		264,030		263,460		256,204
HLF Financing SaRL LLC	Consumer goods:Non-durable	Term Loan B (08/18)	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		8/18/2025		3,990,000		3,973,021		3,990,000
Hoffmaster Group Inc.	Forest Products & Paper	Term Loan B1	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		11/21/2023		1,074,390		1,077,199		1,070,361
Holley Purchaser Inc.	Automotive	Term Loan B	Loan	3M USD LIBOR + 5.00%		0.00	%		7.61	%		10/24/2025		2,500,000		2,475,886		2,450,000
Hostess Brands LLC	Beverage Food & Tobacco	Cov-Lite Term Loan B	Loan	3M USD LIBOR + 2.25%		0.75	%		4.86	%		8/3/2022		1,467,734		1,464,418		1,448,169
Hudson River Trading LLC	Banking Finance Insurance & Real Estate	Term Loan B (10/18)	Loan	1M USD LIBOR + 3.50%		0.00	%		5.99	%		4/3/2025		3,980,025		3,958,223		3,960,125
Hyland Software Inc.	High Tech Industries	Term Loan 3	Loan	1M USD LIBOR + 3.50%		0.75	%		5.99	%		7/1/2024		1,586,222		1,584,204		1,588,205
Hyperion Refinance S.a.r.l.	Banking Finance Insurance & Real Estate	Tem Loan (12/17)	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		12/20/2024		2,229,370		2,219,751		2,225,647
Idera Inc.	High Tech Industries	Term Loan B	Loan	1M USD LIBOR + 4.50%		1.00	%		6.99	%		6/28/2024		1,964,786		1,947,430		1,962,330
IG Investments Holdings LLC	Services: Business	Term Loan	Loan	3M USD LIBOR + 3.50%		1.00	%		6.11	%		5/23/2025		3,398,256		3,380,175		3,382,115
Inmar Inc.	Services: Business	Term Loan B	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		5/1/2024		3,492,500		3,398,589		3,389,471
Isagenix International LLC	Beverage Food & Tobacco	Term Loan	Loan	3M USD LIBOR + 5.75%		1.00	%		8.36	%		6/16/2025		2,950,000		2,895,451		2,787,750
Jill Holdings LLC	Retail	Term Loan (1st Lien)	Loan	3M USD LIBOR + 5.00%		1.00	%		7.61	%		5/9/2022		1,859,387		1,854,837		1,830,343
JP Intermediate B LLC	Consumer goods:Non-durable	Term Loan	Loan	3M USD LIBOR + 5.50%		1.00	%		8.11	%		11/20/2025		4,937,500		4,883,059		4,702,969
Kinetic Concepts Inc.	Healthcare & Pharmaceuticals	1/17 USD Term Loan	Loan	3M USD LIBOR + 3.25%		1.00	%		5.86	%		2/2/2024		2,364,000		2,355,394		2,357,499

See accompanying notes to financial statements.

S-13

Issuer Name	Industry	Asset Name	Asset Type	Reference Rate/Spread	LIBOR Floor			Current Rate (All In)			Maturity Date		Principal/ Number of Shares		Cost		Fair Value
KUEHG Corp.	Services: Consumer	Term LoanB-3	Loan	3M USD LIBOR + 3.75%		1.00	%		6.36	%		2/21/2025		497,500		496,313		493,023
Lakeland Tours LLC	Hotel Gaming & Leisure	Term Loan B	Loan	3M USD LIBOR + 4.00%		1.00	%		6.61	%		12/16/2024		2,482,494		2,474,016		2,458,836
Lannett Company Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 5.38%		1.00	%		7.87	%		11/25/2022		2,546,382		2,513,728		2,338,419
Learfield Communications LLC	Media: Advertising Printing & Publishing	Initial Term Loan(A-L Parent)	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		12/1/2023		490,000		488,374		488,775
Lighthouse Network LLC	Banking Finance Insurance & Real Estate	Term Loan B	Loan	3M USD LIBOR + 4.50%		1.00	%		7.11	%		12/2/2024		3,415,500		3,402,695		3,402,692
Lightstone Holdco LLC	Energy: Electricity	Term Loan B	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		1/30/2024		1,353,009		1,350,840		1,320,199
Lightstone Holdco LLC	Energy: Electricity	Term Loan C	Loan	1M USD LIBOR + 3.75%		1.00	%		6.24	%		1/30/2024		74,592		74,478		72,783
Lindblad Expeditions Inc.	Hotel Gaming & Leisure	US 2018 Term Loan	Loan	1M USD LIBOR + 3.50%		0.00	%		5.99	%		3/27/2025		398,000		397,117		397,005
Lindblad Expeditions Inc.	Hotel Gaming & Leisure	Cayman Term Loan	Loan	1M USD LIBOR + 3.50%		0.00	%		5.99	%		3/27/2025		99,500		99,279		99,251
Liquidnet Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		7/15/2024		3,154,276		3,144,386		3,150,333
LPL Holdings Inc.	Banking Finance Insurance & Real Estate	Incremental Term Loan B	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		9/23/2024		1,723,805		1,720,511		1,708,721
McAfee LLC	Services: Business	Term Loan B	Loan	1M USD LIBOR + 3.75%		0.00	%		6.24	%		9/30/2024		2,690,156		2,661,137		2,694,810
McDermott International Inc.	Construction & Building	Term Loan B	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		5/12/2025		1,985,000		1,948,934		1,907,625
McGraw-Hill Global Education Holdings LLC	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		5/4/2022		974,920		972,268		897,229
MedPlast Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan (06/18)	Loan	3M USD LIBOR + 3.75%		0.00	%		6.36	%		7/2/2025		498,750		496,426		500,620
Meredith Corporation	Media: Advertising Printing & Publishing	Term Loan B (10/18)	Loan	1M USD LIBOR + 2.75%		0.00	%		5.24	%		1/31/2025		681,944		680,552		681,563
Messer Industries LLC	Chemicals Plastics & Rubber	Term Loan	Loan	3M USD LIBOR + 2.50%		0.00	%		5.11	%		2/5/2026		3,000,000		2,992,500		2,977,500
Michaels Stores Inc.	Retail	Term Loan B	Loan	1M USD LIBOR + 2.50%		1.00	%		4.99	%		1/30/2023		2,628,816		2,617,545		2,600,898
Midwest Physician Administrative Services LLC	Healthcare & Pharmaceuticals	Term Loan (2/18)	Loan	1M USD LIBOR + 2.75%		0.75	%		5.24	%		8/15/2024		977,985		973,790		958,836
Milk Specialties Company	Beverage Food & Tobacco	Term Loan (2/17)	Loan	1M USD LIBOR + 4.00%		1.00	%		6.49	%		8/16/2023		3,969,672		3,905,366		3,946,529
MKS Instruments Inc.	High Tech Industries	Term LoanB-5	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		2/2/2026		1,000,000		990,327		998,750
MLN US HoldCo LLC	Telecommunications	Term Loan	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		11/28/2025		1,000,000		997,824		992,500
MRC Global (US) Inc.	Metals & Mining	Term Loan B2	Loan	1M USD LIBOR + 3.00%		0.00	%		5.49	%		9/20/2024		495,000		493,864		495,000
NAI Entertainment Holdings LLC	Hotel Gaming & Leisure	Term Loan B	Loan	1M USD LIBOR + 2.50%		1.00	%		4.99	%		5/8/2025		997,500		995,282		989,600
Natgasoline LLC	Chemicals Plastics & Rubber	Term Loan	Loan	3M USD LIBOR + 3.50%		0.00	%		6.11	%		11/14/2025		500,000		497,720		500,625
National Mentor Holdings Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR + 4.25%		0.00	%		6.86	%		2/5/2026		2,000,000		1,980,000		2,005,840
Navistar Financial Corporation	Automotive	Term Loan	Loan	1M USD LIBOR + 3.75%		0.00	%		6.24	%		7/30/2025		1,990,000		1,980,604		1,982,538
NeuStar Inc.	Telecommunications	Term Loan B4 (03/18)	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		8/8/2024		3,992,424		3,925,243		3,822,746
New Media Holdings II LLC	Media: Diversified & Production	Term Loan	Loan	1M USD LIBOR + 6.25%		1.00	%		8.74	%		7/14/2022		5,973,699		5,959,159		5,921,430
NMI Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	1M USD LIBOR + 4.75%		1.00	%		7.24	%		5/23/2023		3,489,981		3,494,699		3,489,981
Novetta Solutions LLC	Aerospace & Defense	Term Loan	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		10/17/2022		1,939,870		1,928,782		1,898,648
Novetta Solutions LLC	Aerospace & Defense	Second Lien Term Loan	Loan	1M USD LIBOR + 8.50%		1.00	%		10.99	%		10/16/2023		1,000,000		993,349		945,000
NPC International Inc.	Beverage Food & Tobacco	Term Loan	Loan	2M USD LIBOR + 3.50%		1.00	%		6.07	%		4/19/2024		492,500		492,068		461,719
Ocean Bidco Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	2M USD LIBOR + 4.75%		1.00	%		7.32	%		3/21/2025		473,186		470,976		464,115
OCI Partners LP	Chemicals Plastics & Rubber	Term Loan B (2/18)	Loan	3M USD LIBOR + 4.00%		0.00	%		6.61	%		3/13/2025		3,067,196		3,045,069		3,059,528
Office Depot Inc.	Retail	Term Loan B	Loan	1M USD LIBOR + 5.25%		1.00	%		7.74	%		11/8/2022		2,909,851		2,888,913		2,971,685
Onex Carestream Finance LP	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 5.75%		1.00	%		8.24	%		2/28/2021		2,834,110		2,822,053		2,780,970
Outcomes Group Holdings Inc.	Banking Finance Insurance & Real Estate	Term Loan	Loan	3M USD LIBOR + 3.50%		0.00	%		6.11	%		10/24/2025		500,000		498,833		493,125
Owens & Minor Distribution Inc.	Healthcare & Pharmaceuticals	Term Loan B	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		4/30/2025		497,500		488,393		420,800
P2 Upstream Acquisition Co.	High Tech Industries	Term Loan	Loan	3M USD LIBOR + 4.00%		1.00	%		6.61	%		10/30/2020		945,558		943,988		929,011
Peraton Corp.	Aerospace & Defense	Term Loan	Loan	3M USD LIBOR + 5.25%		1.00	%		7.86	%		4/29/2024		1,970,000		1,962,137		1,915,825
PGX Holdings Inc.	Services: Consumer	Term Loan	Loan	1M USD LIBOR + 5.25%		1.00	%		7.74	%		9/29/2020		2,674,370		2,667,939		2,614,197
PI UK Holdco II Limited	Services: Business	Term Loan B1 (PI UK Holdco II)	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		1/3/2025		1,488,750		1,481,083		1,473,237
Plastipak Packaging Inc	Containers Packaging & Glass	Term Loan B (04/18)	Loan	1M USD LIBOR + 2.50%		0.00	%		4.99	%		10/15/2024		987,500		983,130		974,100
Presidio Inc.	Services: Business	Term Loan B 2017	Loan	3M USD LIBOR + 2.75%		1.00	%		5.36	%		2/2/2024		1,697,600		1,663,332		1,678,078
Prime Security Services Borrower LLC	Services: Consumer	Refi Term LoanB-1	Loan	1M USD LIBOR + 2.75%		1.00	%		5.24	%		5/2/2022		1,950,361		1,943,928		1,943,925
Priority Payment Systems Holdings LLC	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 5.00%		1.00	%		7.49	%		1/3/2023		1,150,910		1,145,156		1,145,881
Priority Payment Systems Holdings LLC	High Tech Industries	Delayed Draw Term Loan	Loan	3M USD LIBOR + 5.00%		1.00	%		7.61	%		1/3/2023		—		—		—
Project Accelerate Parent LLC	Services: Business	Term Loan	Loan	1M USD LIBOR + 4.25%		1.00	%		6.74	%		1/2/2025		1,985,000		1,976,356		1,985,000
Prometric Holdings Inc.	Services: Business	Term Loan	Loan	1M USD LIBOR + 3.00%		1.00	%		5.49	%		1/29/2025		496,250		494,124		492,528
Quad/Graphics Inc.	Media: Advertising Printing & Publishing	Term Loan B (12/18)	Loan	1M USD LIBOR + 5.00%		0.00	%		7.49	%		2/2/2026		4,500,000		4,434,606		4,483,125
Rackspace Hosting Inc.	High Tech Industries	Term Loan B	Loan	3M USD LIBOR + 3.00%		1.00	%		5.61	%		11/3/2023		1,491,203		1,480,810		1,418,969
Radio Systems Corporation	Consumer goods: Durable	Term Loan	Loan	1M USD LIBOR + 2.75%		1.00	%		5.24	%		5/2/2024		1,477,500		1,477,500		1,457,184
Radiology Partners Inc.	Healthcare & Pharmaceuticals	Term Loan	Loan	3M USD LIBOR + 4.75%		0.00	%		7.36	%		7/9/2025		1,000,000		995,568		1,005,000
Research Now Group Inc.	Media: Advertising Printing & Publishing	Term Loan	Loan	1M USD LIBOR + 5.50%		1.00	%		7.99	%		12/20/2024		3,967,481		3,836,608		3,942,684
Resolute Investment Managers Inc.	Banking Finance Insurance & Real Estate	Term Loan (10/17)	Loan	3M USD LIBOR + 3.25%		1.00	%		5.86	%		4/29/2022		2,709,661		2,712,126		2,713,049
Restaurant Technologies Inc.	Beverage Food & Tobacco	Term Loan (9/18)	Loan	1M USD LIBOR + 3.25%		0.00	%		5.74	%		10/1/2025		1,000,000		997,720		999,380
Revspring Inc.	Services: Business	Term Loan B	Loan	3M USD LIBOR + 4.25%		0.00	%		6.86	%		10/10/2025		1,000,000		997,767		985,000
Reynolds Group Holdings Inc.	Metals & Mining	Term Loan (01/17)	Loan	1M USD LIBOR + 2.75%		0.00	%		5.24	%		2/6/2023		1,725,912		1,725,912		1,718,369
RGIS Services LLC	Services: Business	Term Loan	Loan	3M USD LIBOR + 7.50%		1.00	%		10.11	%		3/31/2023		486,033		480,179		415,558
Robertshaw US Holding Corp.	Consumer goods: Durable	Term Loan B	Loan	1M USD LIBOR + 3.50%		1.00	%		5.99	%		2/28/2025		992,500		990,321		929,228
Rocket Software Inc.	High Tech Industries	Term Loan (11/18)	Loan	1M USD LIBOR + 4.25%		0.00	%		6.74	%		11/28/2025		4,000,000		3,982,916		4,000,000
Rovi Solutions Corporation	Media: Diversified & Production	Term Loan B	Loan	1M USD LIBOR + 2.50%		0.75	%		4.99	%		7/2/2021		1,332,669		1,330,256		1,311,013
Russell Investments US Institutional Holdco Inc.	Banking Finance Insurance & Real Estate	Term Loan B	Loan	1M USD LIBOR + 3.25%		1.00	%		5.74	%		6/1/2023		4,184,784		4,064,980		4,142,936
Sahara Parent Inc.	High Tech Industries	Term Loan B (11/18)	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		8/16/2024		1,975,050		1,956,153		1,967,031
Sally Holdings LLC	Retail	Term Loan B	Loan	1M USD LIBOR + 2.25%		0.00	%		4.74	%		7/5/2024		987,455		983,210		973,877
Sally Holdings LLC	Retail	Term Loan (Fixed)	Loan	Fixed 4.50%		0.00	%		4.50	%		7/5/2024		1,000,000		996,030		963,750
Savage Enterprises LLC	Transportation: Cargo	Term Loan	Loan	1M USD LIBOR + 4.50%		0.00	%		6.99	%		8/1/2025		3,823,951		3,774,062		3,836,684
SCS Holdings I Inc.	High Tech Industries	Term Loan	Loan	1M USD LIBOR + 4.25%		1.00	%		6.74	%		10/31/2022		3,393,482		3,378,749		3,401,966
Seadrill Operating LP	Energy: Oil & Gas	Term Loan B	Loan	3M USD LIBOR + 6.00%		1.00	%		8.61	%		2/21/2021		915,243		888,341		763,084
SG Acquisition Inc.	Banking Finance Insurance & Real Estate	Term Loan (Safe-Guard)	Loan	3M USD LIBOR + 5.00%		1.00	%		7.61	%		3/29/2024		1,660,000		1,647,194		1,647,550

See accompanying notes to financial statements.

S-14

Issuer Name	Industry	Asset Name		Asset Type		Reference Rate/Spread	LIBOR Floor		Current Rate (All In)		Maturity Date		Principal/ Number of Shares		Cost		Fair Value
Shearer’s Foods LLC	Beverage Food & Tobacco		Term Loan		Loan	1M USD LIBOR  +  4.25%		1.00%		6.74%		6/30/2021		2,925,531		2,916,771		2,898,704
Shutterfly Inc.	Media: Advertising Printing & Publishing		Term Loan B2		Loan	1M USD LIBOR  +  2.75%		0.00%		5.24%		8/19/2024		3,017,873		2,966,805		2,981,417
Sirva Worldwide Inc.	Transportation: Cargo		Term Loan B		Loan	3M USD LIBOR + 5.50%		0.00%		8.11%		8/4/2025		2,500,000		2,471,352		2,443,750
SMB Shipping Logistics LLC	Transportation: Consumer		Term Loan B		Loan	6M USD LIBOR + 4.00%		1.00%		6.69%		2/2/2024		1,969,937		1,968,013		1,953,528
SP PF Buyer LLC	Consumer goods: Durable		Term Loan B		Loan	3M USD LIBOR + 4.50%		0.00%		7.11%		12/19/2025		2,000,000		1,921,772		1,970,000
SRAM LLC	Consumer goods: Durable		Term Loan		Loan	Prime + 2.73%		1.00%		3.73%		3/15/2024		1,984,685		1,970,345		1,967,319
SS&C Technologies Inc.	Services: Business		Term Loan B3		Loan	1M USD LIBOR + 2.25%		0.00%		4.74%		4/16/2025		616,068		614,712		612,815
SS&C Technologies Inc.	Services: Business		Term Loan B4		Loan	1M USD LIBOR + 2.25%		0.00%		4.74%		4/16/2025		235,988		235,469		234,742
SS&C Technologies Inc.	Services: Business		Term Loan B-5		Loan	1M USD LIBOR + 2.25%		0.00%		4.74%		4/16/2025		498,743		497,588		496,189
SSH Group Holdings Inc.	Consumer goods:Non-durable		Term Loan		Loan	2M USD LIBOR + 4.25%		0.00%		6.82%		7/30/2025		1,995,000		1,990,196		1,970,063
Staples Inc.	Retail		Term Loan B (07/17)		Loan	1M USD LIBOR + 4.00%		1.00%		6.49%		9/12/2024		1,975,000		1,970,996		1,959,240
Starfruit US Holdco LLC	Chemicals Plastics & Rubber		Term Loan B		Loan	1M USD LIBOR + 3.25%		0.00%		5.74%		10/1/2025		500,000		497,640		496,375
Steak N Shake Operations Inc.	Beverage Food & Tobacco		Term Loan		Loan	1M USD LIBOR + 3.75%		1.00%		6.24%		3/19/2021		834,991		832,242		638,768
Sybil Software LLC	High Tech Industries		Term Loan B (4/18)		Loan	3M USD LIBOR + 2.50%		1.00%		5.11%		9/29/2023		677,351		674,400		676,220
Tenneco Inc	Capital Equipment		Term Loan B		Loan	1M USD LIBOR + 2.75%		0.00%		5.24%		10/1/2025		1,500,000		1,485,848		1,484,070
Ten-X LLC	Banking Finance Insurance & Real Estate		Term Loan		Loan	1M USD LIBOR + 4.00%		1.00%		6.49%		9/30/2024		1,980,000		1,978,059		1,955,250
TGG TS Acquisition Company	Media: Diversified & Production		Term Loan (12/18)		Loan	3M USD LIBOR + 6.50%		0.00%		9.11%		12/15/2025		3,000,000		2,854,156		2,981,250
The Edelman Financial Center LLC	Banking Finance Insurance & Real Estate		Term Loan B (06/18)		Loan	3M USD LIBOR + 3.25%		0.00%		5.86%		7/21/2025		1,250,000		1,244,166		1,247,138
Thor Industries Inc.	Automotive		Term Loan (USD)		Loan	1M USD LIBOR + 3.75%		0.00%		6.24%		2/2/2026		2,830,276		2,797,635		2,734,754
Topgolf International Inc.	Hotel Gaming & Leisure		Term Loan (02/19)		Loan	1M USD LIBOR + 5.50%		0.00%		7.99%		2/6/2026		500,000		495,177		499,375
Townsquare Media Inc.	Media: Broadcasting & Subscription		Term Loan B (02/17)		Loan	1M USD LIBOR + 3.00%		1.00%		5.49%		4/1/2022		881,975		879,219		868,745
Transdigm Inc.	Aerospace & Defense		Term Loan G		Loan	1M USD LIBOR + 2.50%		0.00%		4.99%		8/22/2024		4,148,194		4,154,661		4,087,381
Travel Leaders Group LLC	Hotel Gaming & Leisure		Term Loan B (08/18)		Loan	1M USD LIBOR + 4.00%		0.00%		6.49%		1/25/2024		2,487,500		2,482,802		2,493,719
TRC Companies Inc.	Services: Business		Term Loan		Loan	1M USD LIBOR + 3.50%		1.00%		5.99%		6/21/2024		3,411,364		3,399,559		3,368,722
Trico Group LLC	Containers Packaging & Glass		Incremental Term Loan		Loan	Prime + 6.00%		1.00%		7.00%		2/2/2024		4,943,750		4,804,906		4,696,562
Truck Hero Inc.	Transportation: Cargo		First Lien Term Loan		Loan	1M USD LIBOR + 3.75%		1.00%		6.24%		4/22/2024		2,957,469		2,937,874		2,890,926
Trugreen Limited Partnership	Services: Consumer		Term Loan B (07/17)		Loan	1M USD LIBOR + 4.00%		1.00%		6.49%		4/13/2023		488,813		483,230		490,034
Twin River Management Group Inc.	Hotel Gaming & Leisure		Term Loan		Loan	3M USD LIBOR + 3.50%		1.00%		6.11%		7/10/2020		713,415		713,888		712,223
United Natural Foods Inc.	Beverage Food & Tobacco		Term Loan B		Loan	1M USD LIBOR + 4.25%		0.00%		6.74%		10/22/2025		3,500,000		3,278,105		3,119,375
Univar USA Inc.	Chemicals Plastics & Rubber		Term Loan B3 (11/17)		Loan	1M USD LIBOR + 2.25%		0.00%		4.74%		7/1/2024		4,250,492		4,231,419		4,241,183
Univision Communications Inc.	Media: Broadcasting & Subscription		Term Loan		Loan	1M USD LIBOR + 2.75%		1.00%		5.24%		3/15/2024		2,746,369		2,733,489		2,557,556
UOS LLC	Capital Equipment		Term Loan B		Loan	1M USD LIBOR + 5.50%		1.00%		7.99%		4/18/2023		591,247		593,692		594,203
UPC Financing Partnership	Media: Broadcasting & Subscription		Term Loan (10/17)		Loan	1M USD LIBOR + 2.50%		0.00%		4.99%		1/15/2026		832,911		832,042		831,687
VeriFone Systems Inc.	Banking Finance Insurance & Real Estate		Term Loan (7/18)		Loan	3M USD LIBOR + 4.00%		0.00%		6.61%		8/20/2025		5,486,250		5,456,319		5,464,689
Verra Mobility Corp.	Construction & Building		Term Loan		Loan	1M USD LIBOR + 3.75%		0.00%		6.24%		3/3/2025		496,250		494,043		497,903
VFH Parent LLC	Banking Finance Insurance & Real Estate		Term Loan B		Loan	3M USD LIBOR + 3.50%		0.00%		6.11%		1/30/2026		3,000,000		2,985,000		3,006,570
Virtus Investment Partners Inc.	Banking Finance Insurance & Real Estate		Term Loan B		Loan	1M USD LIBOR + 2.25%		0.75%		4.74%		6/3/2024		3,836,368		3,834,675		3,820,371
Vistra Operations Company LLC	Utilities: Electric		2018 Incremental Term Loan		Loan	1M USD LIBOR + 2.00%		0.00%		4.49%		12/31/2025		995,000		993,884		992,095
Vizient Inc.	Healthcare & Pharmaceuticals		Term Loan B		Loan	1M USD LIBOR + 2.75%		1.00%		5.24%		2/13/2023		296,814		291,350		295,923
Wand NewCo 3 Inc.	Automotive		Term Loan B		Loan	1M USD LIBOR + 3.50%		0.00%		5.99%		2/5/2026		250,000		247,562		250,625
Web.Com Group Inc.	High Tech Industries		Term Loan B (08/18)		Loan	1M USD LIBOR + 3.75%		0.00%		6.24%		10/10/2025		500,000		498,856		496,250
WeddingWire Inc.	Services: Consumer		Term Loan		Loan	3M USD LIBOR + 4.50%		0.00%		7.11%		12/19/2025		4,000,000		3,993,119		3,995,000
WEI Sales LLC	Beverage Food & Tobacco		Term Loan B		Loan	1M USD LIBOR + 2.75%		0.00%		5.24%		3/31/2025		496,250		495,108		495,009
Weight Watchers International Inc.	Services: Consumer		Term Loan B		Loan	3M USD LIBOR + 4.75%		0.75%		7.36%		11/29/2024		1,900,000		1,867,434		1,839,827
West Corporation	Telecommunications		Term Loan B		Loan	3M USD LIBOR + 3.50%		1.00%		6.11%		10/10/2024		4,241,234		4,068,929		4,003,830
Western Dental Services Inc.	Retail		Term Loan (12/18)		Loan	1M USD LIBOR + 5.25%		1.00%		7.74%		6/30/2023		2,463,734		2,446,863		2,402,141
Western Digital Corporation	High Tech Industries		Term LoanB-4		Loan	1M USD LIBOR + 1.75%		0.00%		4.24%		4/29/2023		1,299,622		1,266,499		1,274,605
Wirepath LLC	Consumer goods:Non-durable		Term Loan		Loan	3M USD LIBOR + 4.00%		1.00%		6.61%		8/5/2024		2,985,044		2,957,351		2,925,343
Wynn Resorts Limited	Hotel Gaming & Leisure		Term Loan B		Loan	1M USD LIBOR + 2.25%		0.00%		4.74%		10/30/2024		1,000,000		997,579		986,500
YS Garments LLC	Retail		Term Loan		Loan	1W USD LIBOR + 6.00%		1.00%		8.41%		8/9/2024		1,987,500		1,969,194		1,952,719
Zep Inc.	Chemicals Plastics & Rubber		Term Loan		Loan	3M USD LIBOR + 4.00%		1.00%		6.61%		8/12/2024		2,468,750		2,458,786		2,139,592
Zest Acquisition Corp.	Healthcare & Pharmaceuticals		Term Loan		Loan	1M USD LIBOR + 3.50%		0.00%		5.99%		3/14/2025		992,500		988,123		918,062
																$  509,676,701		$  498,405,060
													Number of Shares		Cost		Fair Value
Cash and cash equivalents
U.S. Bank Money Market (b)														18,495,653	$	18,495,653	$	18,495,653
Total cash and cash equivalents														18,495,653	$	18,495,653	$	18,495,653

(a) Security is in default as of February 28, 2019.    

(b) Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of February 28, 2019.    

LIBOR—London Interbank Offered Rate    

1W USD LIBOR—The 1 week USD LIBOR rate as of February 28, 2019 was 2.41%.    

1M USD LIBOR—The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.    

2M USD LIBOR—The 2 month USD LIBOR rate as of February 28, 2019 was 2.57%.    

3M USD LIBOR—The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.    

6M USD LIBOR—The 6 month USD LIBOR rate as of February 28, 2019 was 2.69%.    

Prime—The Prime Rate as of February 28, 2019 was 5.50%.    

See accompanying notes to financial statements.

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SARATOGA INVESTMENT CORP. CLO 2013-1, LTD.

NOTES TO FINANCIAL STATEMENTS

1. Organization and Purpose

Saratoga Investment Corp. CLO2013-1, Ltd. (the “Issuer”, “we”, “our”, “us”, “CLO” and “Saratoga CLO”), an exempted company with limited liability incorporated under the laws of the Cayman Islands was formed on November 28, 2007 and commenced operations on January 22, 2008. The Issuer was established to acquire or participate in U.S. dollar-denominated corporate debt obligations.

On January 22, 2008, the Issuer issued $400.0 million of notes, consisting of Class A Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes (collectively the “Secured Notes”), and Subordinated Notes. The notes were issued pursuant to an indenture, dated January 22, 2008 (the “Indenture”), with U.S. Bank National Association (the “Trustee”) servicing as the Trustee there under.

On October 17, 2013, in a refinancing transaction, the Issuer issued $284.9 million of notes (the “2013-1 CLO Notes”), consisting of Class X Floating Rate Senior Notes,Class A-1 Floating Rate Senior Notes, Class A-2 Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes, and Class F Deferrable Floating Rate Notes. The 2013-1 CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance of the2013-1 CLO Notes were used, along with existing assets held by the Trustee, to redeem all of the Secured Notes issued in 2008.

On November 15, 2016, the Issuer completed the second refinancing and the Issuer issued $282.4 million of notes (the“2013-1 Amended CLO Notes”), consisting ofClass A-1 Floating Rate Senior Notes,Class A-2 Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes, and Class F Deferrable Floating Rate Notes. The2013-1 Amended CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance of the2013-1 Amended CLO Notes were used, along with existing assets held by the Trustee, to redeem all of the2013-1 CLO Notes issued in 2013.

On December 14, 2018, in a refinancing transaction, the Issuer issued $509.5 million of notes (the“2013-1 Reset CLO Notes”), consisting ofClass A-1FL-R-2 Floating Rate Senior Notes,Class A-1FXD-R-2 Fixed Rate Senior Notes,Class A-2-R-2 Floating Rate Senior Notes,Class B-R-2 Floating Rate Senior Notes,Class C-R-2 Deferrable Mezzanine Floating Rate Notes,Class D-R-2 Deferrable Mezzanine Floating Rate Notes,Class E-1-R-2 Deferrable Mezzanine Floating Rate Notes,Class F-R-2 Deferrable Junior Floating Rate Notes,Class G-R-2 Deferrable Junior Floating Rate Notes, and Subordinated Notes. The2013-1 Reset CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance of the2013-1 Reset CLO Notes were used along with existing assets held by the Trustee to redeem all of the Secured Notes issued in 2016. As of February 29, 2020, Saratoga Investment Corp. owned 100% of theClass F-R-2 Notes,Class G-R-2 Notes and the Subordinated Notes of the CLO.

On February 11, 2020, Saratoga Investment Corp.CLO 2013-1 Warehouse 2, Ltd(“CLO 2013-1 Warehouse 2”), a wholly-owned subsidiary of Saratoga CLO entered into an unsecured loan agreement(“CLO 2013-1 Warehouse 2 Loan”) with Saratoga Investment Corp. (“the Company”), pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%.

Pursuant to an investment management agreement (the “Investment Management Agreement”), Saratoga Investment Corp. (the “Investment Manager”), provides investment management services to the Issuer, and makesday-to-day investment decisions concerning the assets of the Issuer. The Investment Manager also performs certain administrative services on behalf of the Issuer under the Investment Management Agreement. The CLO remains 100.0% owned and managed by Saratoga Investment Corp.

S-16

2. Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are stated in U.S. dollars. The following is a summary of the significant accounting policies followed by the Issuer in the preparation of its financial statements.

The Issuer is considered to be an investment company for financial reporting purposes and has applied the guidance in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946,“Financial Services—Investment Companies.”There has been no change to the Issuer’s status as an investment company during the year ended February 29, 2020.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires the Investment Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including the fair value of investments, and the amounts of income and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material.

Cash and Cash Equivalents

The Issuer defines cash and cash equivalents as highly liquid financial instruments with original maturities of three months or less. Cash and cash equivalents may include investments in money market mutual funds, which are carried at fair value. At February 29, 2020 and February 28, 2019, cash and cash equivalents amounted to $9.1 million and $18.5 million, respectively, and are swept on an overnight basis into a U.S. Bank money market deposit account held at the Trustee.

Valuation of Investments

The Issuer accounts for its investments at fair value in accordance with the FASB ASC Topic 820,Fair Value Measurement(“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Issuer to assume that its investments are to be sold at the statement of assets and liabilities date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independentthird-party pricing services and market makers subject to any decision by the Investment Manager to approve a fair value determination to reflect significant events affecting the value of these investments. The Investment Manager values investments for which market quotations are not readily available at fair value. Determinations of fair value may involve significant judgments and estimates. The types of factors that may be considered in determining the fair value of investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that are ultimately realized upon the disposal of such investments.

Investment Transactions and Income Recognition

Purchases and sales of investments and the related realized gains or losses are recorded on atrade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Issuer stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.

S-17

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed onnon-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon the Investment Manager’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

Payment-in-Kind Interest

The Issuer holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

Deferred Debt Financing Costs, net

The Issuer presents deferred debt financing costs on the balance sheet as a contra-liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

As of February 29, 2020 and February 28, 2019, included in deferred debt financing costs of $2.3 million and $2.5 million, respectively, are structuring fees of the investment bank, rating agency and legal fees, and other various closing costs associated with the issuance of the2013-1 Reset CLO Notes on December 14, 2018. Such costs have been capitalized and amortized using an effective yield method as appropriate, over the life of the related notes.

Deferred debt financing costs of $1.2 million incurred in connection with the issuance of the2013-1 Amended CLO Notes, were expensed when the2013-1 Amended CLO Notes were extinguished on December 14, 2018.

Management Fees

The Issuer is externally managed by the Investment Manager pursuant to the Investment Management Agreement. As compensation for the performance of its obligations under the Investment Management Agreement, the Investment Manager is entitled to receive from the Issuer a base management fee (the “Base Management Fee”), a subordinated management fee (the “Subordinated Management Fee”) and an incentive management fee (the “Incentive Management Fee”). The Base Management Fee is payable in arrears quarterly (subject to availability of funds and to the satisfaction of payment obligations on the debt obligations of the Issuer (the “Priority of Payments”)) and prior to the second refinancing and the issuance of the2013-1 Amended CLO Notes, was payable in an amount equal to 0.25% per annum of the fee basis amount at the beginning of the Collection period. The Subordinated Management Fee is payable in arrears quarterly (subject to availability of funds and to the Priority of Payments) and prior to the second refinancing and the issuance of the2013-1 Amended CLO Notes, was payable in an amount equal to 0.25% per annum of the fee basis amount at the beginning of the Collection Period. Subsequent to the second refinancing and the issuance of the2013-1 Amended CLO Notes, the Base Management Fee was changed to be payable in an amount equal to 0.10% per annum of the fee basis amount at the beginning of the Collection period, and the Subordinated Management Fees was changed to be payable in an amount equal to 0.40% per annum of the fee basis amount at the beginning of the Collection period. This remained unchanged during the third refinancing and the issuance of the2013-1 Reset CLO Notes. Prior to the third refinancing of the CLO, the Incentive Management Fee equaled 20.0% of the remaining interest proceeds and principal proceeds, if any, after the Subordinated Notes have realized the incentive management fee target return of 12.0%, in accordance with the Priority of Payments after making the prior distributions on the relevant payment date. The investment manager is no longer eligible to receive the incentive fee following the third refinancing of the CLO on December 14, 2018. For the years ended February 28, 2019 and February 28, 2018, Incentive Management Fees of $0.6 million and $0.6 million, respectively were accrued.

Expenses

The Issuer bears its own organizational and offering expenses, all expenses related to its investment program and expenses incurred in connection with its operations including, but not limited to, external legal, administrative, trustee, accounting, tax and audit expenses, costs related to trading, acquiring, monitoring or disposing of investments of the Issuer, and interest and other borrowing expenses, expenses of preparing and distributing reports, financial statements, and litigation or other extraordinary expenses. The Issuer has retained the Trustee to provide trustee services. Additionally, the Trustee performs loan administration, debt covenant compliance calculations, and monitoring and reporting services. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the Issuer paid $0.2 million, $0.2 million and $0.2 million, respectively, for trustee services provided and is included on the statements of operations.

S-18

Interest Expense

The Issuer has issued rated and unrated notes to finance its operations. Interest on debt is calculated by the Trustee for the Issuer. Interest is accrued and generally paid quarterly. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, $4.6 million, $2.0 million and $3.3 million of payments to the Subordinated Notes were included in interest and debt financing expenses on the statements of operations, respectively. For the years ended February 29, 2020 and February 28, 2019, $2.4 million and $0.5 million, respectively, in discount amortization related to the Subordinated Notes is also included in interest and debt financing expenses on the Issuer’s statement of operations.

Risk Management

In the ordinary course of its business, the Issuer manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

Credit risk is the risk of default ornon-performance by portfolio companies, equivalent to the investment’s carrying amount.

The Issuer is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution.

The Issuer has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

New Accounting Pronouncements

In August 2018, FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”). The primary focus of ASU2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management is currently evaluating the impact these changes will have on the Issuer’s financial statements and disclosures.

SEC Disclosure Update and Simplification

In March 2019, the U.S. Securities Exchange Commission (the “SEC”) adopted the final rule under SEC ReleaseNo. 33-10618, Fast Act Modernization and Simplification of RegulationS-K, amending certain disclosure requirements. The amendments are intended to simplify certain disclosure requirements and to provide for a consistent set of rules to govern incorporating information by reference and hyperlinking, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The Company has adopted the final rule, as applicable under SEC ReleaseNo. 33-10618 and determined the effect of the adoption of the simplification rules on financial statements will be limited to the modification and removal of certain disclosures.

3. Fair Value Measurements

As noted above, the Issuer values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

S-19

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Based on the observability of the inputs used in the valuation techniques, the Issuer is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

• Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Issuer has the ability to access.

• Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities, for which some level of recent trading activity has been observed.

• Level 3—Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level 2 inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level 3 if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation methodology.

In addition to using the above inputs in investment valuations, the Issuer continues to employ the valuation policy that is consistent with ASC 820 and the Investment Company Act of 1940 (“1940 Act”).

The following table presents fair value measurements of investments, by major class, as of February 29, 2020, according to the fair value hierarchy:

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Term loans	$	—	$	386,695,515	$	114,304,162	$	500,999,677
Equity interests		—		257		—		257
Total	$	—	$	386,695,772	$	114,304,162	$	500,999,934

S-20

The following table presents fair value measurements of investments, by major class, as of February 28, 2019, according to the fair value hierarchy:

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Term loans	$	—	$	401,397,704	$	96,991,665	$	498,389,369
Equity interests		—		15,691		—		15,691
Total	$	—	$	401,413,395	$	96,991,665	$	498,405,060

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended February 29, 2020:

	Term Loans			Equity Interests		Total
Balance as of February 28, 2019	$	96,991,665		$	—	$	96,991,665
Payment-in-kind and other adjustments to cost		(1,283,130	)		—		(1,283,130	)
Net accretion of discount on investments		181,304			—		181,304
Net change in unrealized appreciation (depreciation) on investments		(3,066,649	)		—		(3,066,649	)
Purchases		47,743,825			—		47,743,825
Sales and repayments		(32,647,696	)		—		(32,647,696	)
Net realized gain (loss) from investments		200,062			—		200,062
Transfers in (1)		36,803,366			—		36,803,366
Transfers out (2)		(30,618,585	)		—		(30,618,585	)
Balance as of February 29, 2020	$	114,304,162		$	—	$	114,304,162
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets that were still held by the Issuer at the end of the year	$	(3,263,424	)	$	—	$	(3,263,424	)

(1) The Issuer’s investment in Level 3 investments were classified as such during the year ended February 29, 2020, as market quotes for these investments are only provided by one trading desk.

(2) The Issuer’s investment in Level 2 investments were classified as such during the year ended February 29, 2020, as the number of observable market quotes for these investments increased.

S-21

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year February 28, 2019:

	Term Loans			Equity Interests			Total
Balance as of February 28, 2018	$	45,361,411		$	4,364		$	45,365,775
Payment-in-kind and other adjustments to cost		—			—			—
Net accretion of discount on investments		122,911			—			122,911
Net change in unrealized appreciation (depreciation) on investments		(847,562	)		1,893,174			1,045,612
Purchases		51,664,346			—			51,664,346
Sales and repayments		(18,867,427	)		—			(18,867,427	)
Net realized gain (loss) from investments		6,845			—			6,845
Transfers in (1)		34,492,314			—			34,492,314
Transfers out (2)		(14,941,173	)		(1,897,538	)		(16,838,711	)
Balance as of February 28, 2019	$	96,991,665		$	—		$	96,991,665
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets that were still held by the Issuer at the end of the year	$	(720,845	)	$	—		$	(720,845	)

(1) The Issuer’s investment in Level 3 investments were classified as such during the year ended February 28, 2019, as market quotes for these investments are only provided by one trading desk.

(2) The Issuer’s investment in Level 2 investments were classified as such during the year ended February 28, 2019, as the number of observable market quotes for these investments increased.

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

Sales and repayments represent net proceeds received from investments sold and principal paydowns received, during the period.

Significant unobservable inputs used in the fair value measurement of the Level 3 term loans and equity include market quotations available from multiple dealers. A significant increase (decrease) in the market quote, in isolation, would result in a significantly lower (higher) fair value measurement.

The valuation techniques and significant unobservable unputs used in recurring Level 3 fair value measurements of assets as of February 29, 2020 were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average*
Term loans	$	114,304,162	Market Comparables	Third-Party Bid		40.00% - 100.25%
Total	$	114,304,162

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2019 were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Weighted Average*
Term loans	$	96,991,665	Market Comparables	Third-Party Bid		94.50% - 100.50%
Total	$	96,991,665

* The weighted average in the tables above is calculated based on each investment’s fair value weighting, using the applicable unobservable input.

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4. Financing

On January 22, 2008, the Issuer issued $400.0 million of notes, consisting of Class A Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes (collectively the “Secured Notes”), and Subordinated Notes. The notes were issued pursuant to the Indenture.

The Secured Notes are limited recourse obligations of the Issuer. The Subordinated Notes are unsecured, limited recourse debt obligations of the Issuer.

On October 17, 2013, the Issuer issued $284.9 million of notes, consisting of Class X Floating Rate SeniorNotes, Class A-1 Floating Rate SeniorNotes, Class A-2 Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes, and Class F Deferrable Floating Rate Notes.The 2013-1 CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance ofthe 2013-1 CLO Notes were used along with existing assets held by the Trustee to redeem all of the Secured Notes issued in 2008. The Subordinated Notes were not included in the refinancing transaction.

On November 15, 2016, the Issuer issued $282.4 million ofthe 2013-1 Amended CLO Notes, consistingof Class A-1 Floating Rate SeniorNotes, Class A-2 Floating Rate Senior Notes, Class B Floating Rate Senior Notes, Class C Deferrable Floating Rate Notes, Class D Deferrable Floating Rate Notes, Class E Deferrable Floating Rate Notes, and Class F Deferrable Floating Rate Notes.The 2013-1 CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance ofthe 2013-1 Amended CLO Notes were used along with existing assets held by the Trustee to redeem all ofthe 2013-1 CLO Notes issued in 2013. The Subordinated Notes were not included in the refinancing transaction.

On December 14, 2018, in a refinancing transaction, the Issuer issued $509.5 million of notes consisting ofClass A-1FL-R-2 Floating Rate Senior Notes,Class A-1FXD-R-2 Fixed Rate Senior Notes,Class A-2-R-2 Floating Rate Senior Notes,Class B-R-2 Floating Rate Senior Notes,Class C-R-2 Deferrable Mezzanine Floating Rate Notes,Class D-R-2 Deferrable Mezzanine Floating Rate Notes,Class E-1-R-2 Deferrable Mezzanine Floating Rate Notes,Class F-R-2 Deferrable Junior Floating Rate Notes,Class G-R-2 Deferrable Junior Floating Rate Notes, and Subordinated Notes. Proceeds net of issue discounts were used along with existing trust assets to redeem all of the rated note classes of the2013-1 Amended CLO Notes. $30.0 million of Subordinated Notes issued in connection with the 2008 CLO Notes and2013-1 CLO Notes were not redeemed and remained outstanding.

The 2013-1 Reset CLO Notes are limited recourse obligations of the Issuer. The Subordinated Notes are unsecured, limited recourse debt obligations of the Issuer.

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The relative order of seniority of payment of each class of securities is, as follows:first, Class A-1FL-R-2 Notes, second,Class A-1FXD-R-2 Notes, thirdClass A-2-R-2 Notes, fourth, ClassB-R-2 Notes, fifth,Class C-R-2 Notes, sixth,Class D-R-2 Notes, seventh,Class E-1-R-2 Notes, eighth,Class F-R-2 Notes, ninth,Class G-R-2, and tenth the Subordinated Notes, with (a) each class of securities (other than the Subordinated Notes) in such list being senior to each other class of securities that follows such class of securities in such list and (b) each class of securities in such list being subordinate to each other class of securities that precedes such class of securities in such list. The Subordinated Notes are subordinated tothe 2013-1 Reset CLO Notes and are entitled to periodic payments from interest proceeds available in accordance with the Priority of Payments.

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The table below sets forth certain information for each outstanding class of loans and notes issued, pursuant to the loan agreements and Indenture at February 29, 2020.

Description	Interest Rate		Maturity		Principal Amount			Amount Outstanding		Weighted Average Interest Rate
Loan payable, related party		LIBOR + 7.50%		August 20, 2021	$	20,000,000	(1)	$	2,500,000		9.17	%
Loan payable, third party		LIBOR + 1.25%		August 11, 2021		80,000,000	(1)		2,600,000		2.89	%
Saratoga Investment Corp. CLO2013-1, Ltd. Notes:
Class  A-1FL-R-2 Senior Secured Floating Rate Notes		LIBOR + 1.25%		January 20, 2030		255,000,000			255,000,000		3.60	%
Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes		4.19%		January 20, 2030		25,000,000			25,000,000		4.19	%
Class  A-2-R-2 Senior Secured Floating Rate Notes		LIBOR + 1.75%		January 20, 2030		40,000,000			40,000,000		4.11	%
Class B-R-2 Senior Secured Floating Rate Notes		LIBOR + 2.30%		January 20, 2030		59,500,000			59,500,000		4.66	%
Class C-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 2.75%		January 20, 2030		22,500,000			22,500,000		5.12	%
Class D-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 3.75%		January 20, 2030		31,000,000			31,000,000		6.13	%
Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 5.87% (2)		January 20, 2030		27,000,000			27,000,000		8.27	%
Class F-R-2 Deferrable Junior Floating Rate Notes		LIBOR + 8.75%		January 20, 2030		2,500,000			2,500,000		11.16	%
Class G-R-2 Deferrable Junior Floating Rate Notes		LIBOR + 10.00%		January 20, 2030		7,500,000			7,500,000		12.42	%
Subordinated Notes		N/A		January 20, 2030		69,500,000			69,500,000		N/A
					$	639,500,000		$	544,600,000

Description	Interest Rate		Maturity		Notional Amount		Amount Outstanding		Weighted Average Interest Rate
Saratoga Investment Corp. CLO2013-1, Ltd. Notes:
Class  E-2-R-2 Deferrable Mezzanine Fixed Rate Notes(3)		0.00%		January 20, 2030		$27,000,000	$	27,000,000		0.00	%

⁽¹⁾  Represents total loan commitment.

⁽²⁾  The spread in respect of theClass E-1-R-2 Notes will initially be 5.87%, and will step up to 8.00% in January 2022.

⁽³⁾  There will be no return of principal on theClass E-2-R-2 Notes. The notional amount of theClass E-2-R-2 Notes will at all times be equal to the sum of the notional amount of theClass E-1-R-2 Notes and the amount of deferred interest, if any, on theClass E-2-R-2 Notes. The interest rate in respect of theClass E-2-R-2 Notes will initially be 0.00%, and will step up to 2.00% in January 2022.

The table below sets forth certain information for each outstanding class of notes issued, pursuant to the Indenture on December 14, 2018, at February 28, 2019:

Description	Interest Rate		Maturity		Principal Amount		Amount Outstanding		Weighted Average Interest Rate
Class  A-1FL-R-2 Senior Secured Floating Rate Notes		LIBOR + 1.25%		January 20, 2030	$	255,000,000	$	255,000,000		4.07	%
Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes		4.19%		January 20, 2030		25,000,000		25,000,000		4.19	%
Class  A-2-R-2 Senior Secured Floating Rate Notes		LIBOR + 1.75%		January 20, 2030		40,000,000		40,000,000		4.57	%
Class B-R-2 Senior Secured Floating Rate Notes		LIBOR + 2.30%		January 20, 2030		59,500,000		59,500,000		5.12	%
Class C-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 2.75%		January 20, 2030		22,500,000		22,500,000		5.57	%
Class D-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 3.75%		January 20, 2030		31,000,000		31,000,000		6.57	%
Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes		LIBOR + 5.87%*		January 20, 2030		27,000,000		27,000,000		8.69	%
Class F-R-2 Deferrable Junior Floating Rate Notes		LIBOR + 8.75%		January 20, 2030		2,500,000		2,500,000		11.55	%
Class G-R-2 Deferrable Junior Floating Rate Notes		LIBOR + 10.00%		January 20, 2030		7,500,000		7,500,000		12.80	%
Subordinated Notes		N/A		January 20, 2030		69,500,000		69,500,000		N/A
					$	539,500,000	$	539,500,000

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Description	Interest Rate			Maturity		Notional Amount		Amount Outstanding		Weighted Average Interest Rate
Class  E-2-R-2 Deferrable Mezzanine Fixed Rate Notes **		0.00	%		January 20, 2030	$	27,000,000	$	27,000,000		0.00	%

* The spread in respect of theClass E-1-R-2 Notes will initially be 5.87%, and will step up to 8.00% in January 2022.

** There will be no return of principal on theClass E-2-R-2 Notes. The notional amount of theClass E-2-R-2 Notes will at all times be equal to the sum of the notional amount of theClass E-1-R-2 Notes and the amount of deferred interest, if any, on theClass E-2-R-2 Notes. The interest rate in respect of theClass E-2-R-2 Notes will initially be 0.00%, and will step up to 2.00% in January 2022.

The table below sets forth certain information for each outstanding class of notes issued, pursuant to the Indenture on November 15, 2016, at February 28, 2018:

Description	Interest Rate			Maturity		Principal Amount		Amount Outstanding		Weighted Average Interest Rate
Class A-1 Floating Rate Senior Notes		LIBOR + 1.55	%		October 20, 2025	$	170,000,000	$	170,000,000		2.87	%
Class A-2 Floating Rate Senior Notes		LIBOR + 1.75	%		October 20, 2025		20,000,000		20,000,000		3.08	%
Class B Floating Rate Senior Notes		LIBOR + 2.70	%		October 20, 2025		44,800,000		44,800,000		4.04	%
Class C Deferrable Floating Rate Notes		LIBOR + 3.36	%		October 20, 2025		16,000,000		16,000,000		4.81	%
Class D Deferrable Floating Rate Notes		LIBOR + 4.70	%		October 20, 2025		14,000,000		14,000,000		6.08	%
Class E Deferrable Floating Rate Notes		LIBOR + 6.65	%		October 20, 2025		13,100,000		13,100,000		8.06	%
Class F Deferrable Floating Rate Notes		LIBOR + 8.50	%		October 20, 2025		4,500,000		4,500,000		9.94	%
Subordinated Notes		N/A			October 20, 2025		30,000,000		30,000,000		N/A
						$	312,400,000	$	312,400,000

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The following table shows the fair value of the Issuer’s debt outstanding as of February 29, 2020:

Debt Security	February 29, 2020
Loan payable, related party	$	2,204,541
Loan payable, third party		2,600,000
Saratoga Investment Corp. CLO2013-1, Ltd. Notes:
Class  A-1FL-R-2 Senior Secured Floating Rate Notes		254,996,329
Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes		25,011,552
Class  A-2-R-2 Senior Secured Floating Rate Notes		39,999,222
Class B-R-2 Senior Secured Floating Rate Notes		59,498,460
Class C-R-2 Deferrable Mezzanine Floating Rate Notes		22,499,284
Class D-R-2 Deferrable Mezzanine Floating Rate Notes		30,998,536
Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes		27,126,547
Class F-R-2 Deferrable Junior Floating Rate Notes		2,478,000
Class G-R-2 Deferrable Junior Floating Rate Notes		7,434,750
Subordinated Notes		22,557,240
	$	497,404,461

The following table shows each outstanding class of notes issued, pursuant to the Indenture, at fair value at February 28, 2019:

Debt Security	February 28, 2019
Class  A-1FL-R-2 Senior Secured Floating Rate Notes	$	254,987,128
Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes		25,018,718
Class  A-2-R-2 Senior Secured Floating Rate Notes		39,997,452
Class B-R-2 Senior Secured Floating Rate Notes		59,495,241
Class C-R-2 Deferrable Mezzanine Floating Rate Notes		22,497,870
Class D-R-2 Deferrable Mezzanine Floating Rate Notes		30,995,916
Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes		27,109,023
Class F-R-2 Deferrable Junior Floating Rate Notes		2,483,500
Class G-R-2 Deferrable Junior Floating Rate Notes		7,450,500
Subordinated Notes		25,393,508
	$	495,428,856

These notes are fair valued based on a discounted cash flow model, specifically using Intex cash flow models, to form the basis for the valuation and would be classified as Level 3 liabilities within the fair value hierarchy.

The Indenture provides that payments on the Subordinated Notes shall rank subordinate in priority of payment to payments due on all classesof 2013-1 Reset CLO Notes and subordinate in priority of payment to the payment of fees and expenses. Distributions on the Subordinated Notes are limited to the assets of the Issuer remaining after payment of all of the liabilities of the Issuer that rank senior in priority of payment to the Subordinated Notes. To the extent that the proceeds from the collateral are not sufficient to make distributions on the Subordinated Notes the Issuer will have no further obligation in respect of the Subordinated Notes.

Interest proceeds and, afterthe 2013-1 Reset CLO Notes have been paid in full, principal proceeds, in each case will be distributed to the holders of the Subordinated Notes in accordance with the Indenture.

Distributions, if any, on the Subordinated Notes will be payable quarterly on the 20th day of each January, April, July and October of each calendar year or, if any such day is not a business day, on the next succeeding business day (each, a “Payment Date”), commencing on the first Payment Date, and on April January 20, 2030 (or if any such day is not a business day, the next succeeding business day) (the “Stated Redemption Date”) (if not redeemed prior to such date) sequentially in order of seniority. At the Stated Redemption Date, the Subordinated Notes will be redeemed after payment in full of all ofthe 2013-1 Reset CLO Notes and the payment of all administrative and other fees and expenses. The failure to pay interest proceeds or principal proceeds to the holders of the Subordinated Notes will not be an event of default under the Indenture.

As of February 29, 2020, the remaining unamortized discount onthe Class A-1FL-R-21 Notes, ClassA-1FXD-R-2 Notes,Class A-2-R-2 Notes,Class B-R-2 Notes,Class C-R-2 Notes,Class D-R-2 Notes,Class E-1-R-2 Notes,Class F-R-2 Notes andClass G-R-2 Notes were $0.0 million, $0.0 million, $0.0 million, $0.0 million, $0.5 million, $1.0 million, $0.0 million, $0.0 million and $0.0 million, respectively.

As of February 28, 2019, the remaining unamortized discount onthe Class A-1FL-R-21 Notes, ClassA-1FXD-R-2 Notes,Class A-2-R-2 Notes,Class B-R-2 Notes,Class C-R-2 Notes,Class D-R-2 Notes,Class E-1-R-2 Notes,Class F-R-2 Notes andClass G-R-2 Notes were $0.0 million, $0.0 million, $0.0 million, $0.0 million, $0.6 million, $1.1 million, $0.0 million, $0.0 million and $0.0 million, respectively.

For the year ended February 28, 2019, costs associated with the2013-1 Amended CLO Notes of $0.9 million in remaining unamortized deferred debt financing costs and $0.3 million in unamortized discount, were recognized as additional amortization expense when the related notes were extinguished and recorded within loss on extinguishment of debt in the statement of operations.

As of February 29, 2020, remaining capitalized financing costs of $2.3 million related tothe 2013-1 Reset CLO Notes are being amortized over the term ofthe 2013-1 Reset CLO Notes.

On February 11, 2020,CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO entered intoCLO 2013-1 Warehouse 2 Loan with the Company, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%.

On February 11, 2020,CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO entered into a loan payable with a third party, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $80 million in order to provide capital necessary to support warehouse activities. The loan payable, which expires on August 11, 2021, bears interest at an annual rate of 3M USD LIBOR + 1.25% through November 11, 2020 and 3M USD LIBOR + 1.75% thereafter. For the year ended February 29, 2020, the Saratoga CLO recognized interest expense of $0.001 million related to the loan payable, with a loan payable balance of $2.6 million as of February 29, 2020.

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5. Income Tax

Under the current laws, the Issuer is not subject to net income taxation in the United States or the Cayman Islands. Accordingly, no provision for income taxes has been made in the accompanying financial statements.

Pursuant to ASC Topic 740,Accounting for Uncertainty in Income Taxes, the Issuer adopted the provisions of the FASB relating to accounting for uncertainty in income taxes which clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements and applies to all open tax years as of the effective date. The Investment Manager has analyzed such tax positions for uncertain tax positions for tax years that may be open (2016—2019). The Issuer identifies its major tax jurisdictions as U.S. Federal, state and foreign jurisdictions where the Issuer makes investments. As of February 29, 2020 and February 28, 2019, there was no impact to the financial statements as a result of the Issuer’s accounting for uncertainty in income taxes. The Issuer does not have any unrecognized tax benefits or liabilities for the years ended February 29, 2020, February 28, 2019 and February 28, 2018. Also, the Issuer recognizes interest and, if applicable, penalties for any uncertain tax positions, as a component of income tax expense. No interest or penalty expense was recorded by the Issuer for the years ended February 29, 2020, February 28, 2019 and February 28, 2018.

6. Commitments and Contingencies

In the ordinary course of its business, the Issuer may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Issuer. Based on its history and experience, the Investment Manager feels that the likelihood of such an event is remote. Therefore, the Issuer has not accrued any liabilities in connection with such indemnifications.

In the ordinary course of business, the Issuer may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Issuer. As of February 29, 2020 and February 28, 2019, the Issuer is not subject to any material legal proceedings. Therefore, the Issuer has not accrued any liabilities in connection with such indemnifications.

The terms of Collateralized Debt Investments may require the Issuer to provide funding for any unfunded portion of a Collateralized Debt Investment at the request of the borrower. At February 29, 2020 and February 28, 2019, the Issuer had $1.0 million and $1.3 million of unfunded commitments outstanding, respectively.

7. Related-Party Transactions

In the ordinary course of business and as permitted per the terms of the Indenture, the Issuer may acquire or sell investments to or from related parties at the fair value at such time. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, the Issuer neither bought nor sold investments from related parties.

On August 7, 2018, the Company entered into an unsecured loan agreement with CLO2013-1 Warehouse, a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO2013-1 Warehouse may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support warehouse activities. The CLO2013-1 Warehouse Loan, which expires on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%. As of February 28, 2019, the CLO2013-1 Warehouse Loan was repaid in full, with interest expense of $0.5 million recognized and included in the interest and debt financing expenses in the Issuer’s statement of operations.

On February 11, 2020,CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO entered intoCLO 2013-1 Warehouse 2 Loan with the Company, pursuant to whichCLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. TheCLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. For the year ended February 29, 2020, the Saratoga CLO recognized interest expense of $0.01 million related to theCLO 2013-1 Warehouse 2 Loan, with an unsecured loan balance of $2.5 million as of February 29, 2020.

The Subordinated Notes are wholly-owned by the Investment Manager. The Subordinated Notes do not have a stated coupon rate but are entitled to residual cash flows from the CLO’s investments after all of the other tranches of debt and certain other fees and expenses are paid. For the years ended February 29, 2020, February 28, 2019 and February 28, 2018, $4.6 million, $2.0 million and $3.3 million of payments to the Subordinated Notes were included in interest and debt financing expenses in the statements of operations, respectively. For the years ended February 29, 2020 and February 28, 2019, $2.4 million and $0.5 million, respectively, in discount amortization related to the Subordinated Notes is also included in interest and debt financing expenses on the Issuer’s statement of operations. In addition to refinancing its liabilities, at February 29, 2020, the Investment Manager holds aggregate principal amounts of $2.5 million inClass F-R-2 Notes and $7.5 million inClass G-R-2 Notes of the CLO tranches with a coupon of LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. For the years ended February 29, 2020 and February 28, 2019, payments for theClass F-R-2 Notes andClass G-R-2 Notes totaling $1.2 million and $0.3 million, respectively, are included in interest and debt financing expenses in the Issuer’s statement of operations.

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8. Shareholders’ Capital

Capital contributions and distributions shall be made at such time and in such amounts as determined by the Investment Manager and the Indenture.

The majority holder of the Subordinated Notes has various control rights over the CLO, including the ability to call the CLO prior to its legal maturity, replace the Investment Manager under certain circumstances, and refinance any of the outstanding debt tranches. The voting structure of the Subordinated Notes may require either majority or unanimous approval depending upon the issue.

The authorized share capital of the Issuer consists of 50,000 ordinary shares, 250 of which are owned by Maples Finance Limited and are held under the terms of a declaration of trust.

As of February 29, 2020 and February 28, 2019, net assets (deficit) were $(35.1) million and $(17.9) million, respectively. These amounts include accumulated losses of $17.9 million and $11.2 million, respectively, which includes cumulative net investment income or loss, cumulative amounts of gains and losses realized from investment transactions, net unrealized appreciation or depreciation of investments, as well as the cumulative effect of accounting mismatches between investments accounted for at fair value and amortized cost or accrual-basis assets and liabilities as discussed in Significant Accounting Policies, above. The Issuer’s investments continue to generate sufficient liquidity to satisfy its obligations on periodic payment dates as well as comply with all performance criteria as of the statements of assets and liabilities date.

S-29

The Issuer elected early adoption of Rule3-04/Rule8-03(a)(5) underRegulation S-X. Pursuant to the regulation, the Issuer has presented a reconciliation of the changes in each significant caption of stockholders’ equity for each of the three fiscal years ended February 29, 2020, February 28, 2019 and February 28, 2018, as shown in the tables below:

	For the Year Ended February 29, 2020
	Common Stock				Capital in Excess		Total Distributable			Net Assets
	Shares		Amount		of Par Value		Earnings (Loss)			(Deficit)
Balance at February 28, 2019		250	$	250	$	—	$	(17,899,919	)	$	(17,899,669	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		1,125,944			1,125,944
Net realized gain (loss) from investments		—		—		—		(943,934	)		(943,934	)
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(2,205,995	)		(2,205,995	)
Balance at May 31, 2019		250		250		—		(19,923,904	)		(19,923,654	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		775,988			775,988
Net realized gain (loss) from investments		—		—		—		(1,218,364	)		(1,218,364	)
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(2,174,060	)		(2,174,060	)
Balance at August 31, 2019		250		250		—		(22,540,340	)		(22,540,090	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		(712,398	)		(712,398	)
Net realized gain (loss) from investments		—		—		—		—			—
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(7,516,752	)		(7,516,752	)
Balance at November 30, 2019		250		250		—		(30,769,490	)		(30,769,240	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		136,535			136,535
Net realized gain (loss) from investments		—		—		—		(2,632,887	)		(2,632,887	)
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(1,836,577	)		(1,836,577	)
Balance at February 29, 2020		250	$	250	$	—	$	(35,102,419	)	$	(35,102,169	)

S-30

	For the Year Ended February 28, 2019
	Common Stock					Capital in Excess		Total Distributable			Net Assets
	Shares			Amount		of Par Value		Earnings (Loss)			(Deficit)
Balance at February 28, 2018		250		$	250	$	—	$	(11,245,569	)	$	(11,245,319	)
Increase (Decrease) from Operations:
Net investment income (loss)		—			—		—		474,449			474,449
Net realized gain (loss) from investments		—			—		—		(1,157,929	)		(1,157,929	)
Net change in unrealized appreciation (depreciation) on investments		—			—		—		(110,177	)		(110,177	)
Balance at May 31, 2018		250			250		—		(12,039,226	)		(12,038,976	)
Increase (Decrease) from Operations:
Net investment income (loss)		—			—		—		191,126			191,126
Net realized gain (loss) from investments		—			—		—		2,237			2,237
Net change in unrealized appreciation (depreciation) on investments		—			—		—		(440,254	)		(440,254	)
Balance at August 31, 2018		250			250		—		(12,286,117	)		(12,285,867	)
Increase (Decrease) from Operations:
Net investment income (loss)		—			—		—		472,125			472,125
Net realized gain (loss) from investments		—			—		—		11,948			11,948
Net change in unrealized appreciation (depreciation) on investments		—			—		—		(4,467,273	)		(4,467,273	)
Balance at November 30, 2018		250			250		—		(16,269,317	)		(16,269,067	)
Increase (Decrease) from Operations:			��
Net investment income (loss)		—			—		—		(802,968	)		(802,968	)
Net realized gain (loss) from investments		—			—		—		(200,967	)		(200,967	)
Net change in unrealized appreciation (depreciation) on investments		—			—		—		(626,667	)		(626,667	)
Balance at February 28, 2019		250		$	250	$	—	$	(17,899,919	)	$	(17,899,669	)

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	For the Year Ended February 28, 2018
	Common Stock				Capital in Excess		Total Distributable			Net Assets
	Shares		Amount		of Par Value		Earnings (Loss)			(Deficit)
Balance at February 28, 2017		250	$	250	$	—	$	(12,974,026	)	$	(12,973,776	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		(86,168	)		(86,168	)
Net realized gain (loss) from investments		—		—		—		293,858			293,858
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(47,767	)		(47,767	)
Balance at May 31, 2017		250		250		—		(12,814,103	)		(12,813,853	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		267,831			267,831
Net realized gain (loss) from investments		—		—		—		475,486			475,486
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(1,311,081	)		(1,311,081	)
Balance at August 31, 2017		250		250		—		(13,381,867	)		(13,381,617	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		52,984			52,984
Net realized gain (loss) from investments		—		—		—		260,872			260,872
Net change in unrealized appreciation (depreciation) on investments		—		—		—		(202,856	)		(202,856	)
Balance at November 30, 2017		250		250		—		(13,270,867	)		(13,270,617	)
Increase (Decrease) from Operations:
Net investment income (loss)		—		—		—		1,160,695			1,160,695
Net realized gain (loss) from investments		—		—		—		(410,685	)		(410,685	)
Net change in unrealized appreciation (depreciation) on investments		—		—		—		1,275,288			1,275,288
Balance at February 28, 2018		250	$	250	$	—	$	(11,245,569	)	$	(11,245,319	)

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9. Financial Highlights

The following is a schedule of financial highlights for the years ended February 29, 2020, February 28, 2019, February 28, 2018, February 28, 2017 and February 29, 2016:

	February 29, 2020			February 28, 2019			February 28, 2018			February 28, 2017			February 29, 2016
Average subordinated notes’ capital balance(1)	$	20,177,254		$	18,900,592		$	17,262,714		$	15,113,353		$	18,382,072
Ratio and supplemental data:
Total return(2)		(46.85	)%		(22.41	)%		32.73	%		162.55	%		(49.59	)%
Net investment income (loss)(3)		6.57	%		1.77	%		8.08	%		(34.62	)%		0.57	%
Total expenses(3)		156.62	%		125.54	%		95.41	%		141.14	%		79.34	%
Base management fee(3)		2.48	%		1.82	%		1.75	%		3.87	%		4.07	%
Subordinated management fee(3)		9.93	%		7.29	%		6.99	%		6.04	%		4.07	%

(1) Subordinated notes’ capital balance is calculated based on the sum of the subordinated notes outstanding amount and total net assets, net of ordinary equity.

(2) Total return is calculated based on a time-weighted rate of return methodology. Quarterly rates of return are compounded to derive the total return reflected above. Total return is calculated for the subordinated notes’ capital taken as a whole and assumes the purchase of the subordinated notes’ capital on the first day of the period and the sale of the last day of the period.

(3) Calculated based on the average subordinated notes’ capital balance.

10. Subsequent Events

The Investment Manager has evaluated events or transactions that have occurred since February 29, 2020 through May 6, 2020, the date the financial statements were available for issuance. The Investment Manager has determined that there are no material events that would require the disclosure in the financial statements, other than the following:

COVID-19

We evaluated subsequent events from February 29, 2020 through May 6, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions are creating disruption in global supply chains and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty and risks with respect to the underlying value of the Issuer’s portfolio companies, the Issuer’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

As of February 29, 2020, the Issuer valued its portfolio investments in conformity with U.S. GAAP based on the facts and circumstances known by the Issuer at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused during the months that followed our February 29, 2020 valuation, any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio.

The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. Accordingly, the Issuer cannot predict the extent to which its financial condition and results of operations will be affected at this time.

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