SAR 10-K & 10-Q changes, risk factors and insider trading

The following is a summary of the principal risks that you should carefully consider before investing in our securities. These and other risk factors are described more fully in this Part “I. Item 1A. “Risk Factors.”

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 under Regulationsubchapter M of the Code. 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 28, 2025,2026, there were $32.5$37.5 million outstanding borrowings under the Encina Credit Facility. As of February 28, 2025, there were $20.0 million outstanding borrowings under the Live Oak Credit Facility. As of February 28, 2025,2026 there were $32.5 million outstanding borrowings under the Valley Credit Facility. As of February 28, 2026, we had issued $170.0$160.0 million in SBA-guaranteed debentures and our $20.0 million principal amount of 8.75% fixed-rate notes due 2025 (the “8.75% 2025 Notes”), $12.0 million principal amount of 7.00% fixed-rate notes due 2025 (the “7.00% 2025 Notes”), our $5.0 million principal amount of 7.75% fixed-rate notes due in 2025 (the “7.75% 2025 Notes”), our $175.0 million principal amount of 4.375% fixed-rate notes due in 2026 (the “4.375% 2026 Notes”), our $75.0 million principal amount of 4.35% fixed-rate notes due in 2027 (the “4.35% 2027 Notes”), our $105.5 million principal amount of 6.00% fixed-rate notes due in 2027 (the “6.00% 2027 Notes”), our $15.0 million principal amount of 6.25% fixed-rate notes due in 2027 (the “6.25% 2027 Notes”) our $46.0 million principal amount of 8.00% fixed-rate notes due 2027 (the “8.00% 2027 Notes”), our $60.4 million principal amount of 8.125% fixed-rate notes due 2027 (the “8.125% 2027 Notes”) and, our $57.5 million principal amount of 8.50% fixed-rate notes due 2028 (the “8.50% 2028 Notes”), our $50.0 million principal amount of 7.25% fixed-rate notes due 2030 (the “7.25% 2030 Notes”), and our $100.0 million principal amount of 7.50% fixed-rate notes due 2031 (the “7.50% 2031 Notes,” and together with the 6.00% 2027 Notes, the 8.00% 2027 Notes, and the 8.125% 2027 Notes, and the 8.50% 2028 Notes, the “Public Notes”). Together, the 8.75% 2025 Notes, 7.00% 2025 Notes, the 7.75% 2025 Notes, the 4.375% 2027 Notes, the 6.00% 2027 Notes, the 6.25% 2027 Notes, the 8.00% 2027 Notes, the 8.125% 2027 Notes, the 8.50% 2028 Notes, the 7.25% 2030 Notes, and the 8.50%7.50% 20282031 Notes are referred to as the “Notes”. We may incur additional indebtedness in the future, including, but not limited to, borrowings under the Encina Credit Facility, the Live Oak Credit Facility, the Valley Credit Facility, or the issuance of additional debt securities in one or more public or private offerings, although there can be no assurance that we 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.

Substantially all of the assets of SIF II and SIF III are subject to security interests under our EncinaValley Credit Facility and our Live Oak Facility, respectively, and all of each SBIC Subsidiary’s assets are subject to claims of the SBA with respect to SBA-guaranteed debentures we issue and if we default on our obligations thereunder, we may suffer adverse consequences, including the foreclosure on our assets.

Substantially all of the assets of SIF II and SIF III are pledged as collateral under the EncinaValley Credit Facility and the Live Oak Credit Facility, respectively, and all of each SBIC Subsidiary’s assets are subject to a superior claim by the SBA pursuant to the SBA-guaranteed debentures. If we default on our obligations under the Encina Valley Credit Facility, the Live Oak Credit Facility, or the SBA-guaranteed debentures, EncinaValley LenderNational Finance, LLC,Bank, Live Oak Banking Company, 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 Encina Lender Finance, LLC, the lender under the Encina Credit Facility, or the Live Oak Banking Company, the lender under the Live Oak Credit Facility, or Valley National Bank, the lender under the Valley Credit Facility exercise their right to sell the assets pledged under the EncinaLive Oak Credit Facility or the Live OakValley Credit Facility,Facility respectively, 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 Encina Credit Facility or the Live Oak Credit Facility or Valley Credit Facility.

GeneralIt interestis ratepossible fluctuationsthat andthe changesFederal Reserve’s tightening cycle could result in credita spreadsrecession on floatingin ratethe loansUnited mayStates, which could have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our ratebusiness, results of returnoperations onand investedfinancial capital. Following a period of elevated interest rates to address inflation concerns, in the third quarter of 2024, the Federal Reserve cut rates for the first time since March 2020 and, most recently, cut rates in the fourth quarter of 2024. The Federal Reserve has indicated that there may be additional rate cuts in the future; however, future reductions to the benchmark rates are not certain.condition. An increase in interest rates would make it more expensive to use debt to finance our investments. 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 if there is not a corresponding increase in interest income generated by our investment portfolio. Further, rising elevated interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum (or “floor”) interest rates, while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, rising interest rates may temporarily increase our interest expense, even though our interest income income from investments is not increasing in a corresponding manner if market rates remain lower than the existing floor rate. If general interest interest rates rise, there is also a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business business and operations and could, over time, lead to increased defaults. In addition, risingelevated interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.

The U.S. government periodically calls 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 and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding tariffs, interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. CongressCongress, regulatory agencies, or the current presidential 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 our 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 our 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.

We are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. For example, even though the current U.S. presidential administration has could supportsupported a regulatoryde-regulatory agenda, orit is possible that regulatory agencies could propose changes to existing regulations,regulations that imposesimpose greater costs on all sectors andor on financial services companies in particular. In addition, any change to the SBA’s current debenture program could have a significant impact on our ability to obtain low-cost leverage and, therefore, our competitive advantage over other funds.

Additionally, any changes to the laws and regulations governing our operations related to permitted investments may cause us to alter our investment strategy in order to meet our investment objectives. objectives. Such changes could result in material differences to the strategies and plans set forth in this Annual Report and may shift our investment focus from the areas of expertise of our Investment Adviser to other types of investments in which our Investment Adviser may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

The U.S. government has recently imposed, and may in the future increase, tariffs on specific countries and commodities. In response, certain foreign trading partners, and other in the future may, impose retaliatory tariffs on certain U.S. goods. The foregoing has created significant uncertainty about the future relationship between the United States and certain other countries with respect to trade policies, treaties and the imposition of new andor increased tariffs. These developments, or the continued uncertainty relating to U.S. trade policies, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce or re-route global trade and, in particular, trade between the impacted nations and the United States. The uncertainty relating to U.S. trade policies has also increased market volatility. Any of these factors could depress economic activity and restrict certain of our portfolio companies’ access to suppliers or customers, and increase costs, decrease margins, and reduce the competitiveness of products and services offered by our portfolio companies. The foregoing may adversely affect the revenues and profitability of such portfolio companies and, in turn, negatively affect our results of operations.operations, which could cause the fair value of our common stock to decline. The ultimate impact of these or similar future events on the United States and other economies, specific industries, our business, or our underlying portfolio companies cannot be predicted with certainty, but any such impact could be material and adverse to us.

In 2020, the SEC adopted Rule 18f-4 under the 1940 Act (“Rule 18f-4”), which relates to the use of derivatives and other transactions that create future payment or delivery obligations by BDCs (and other funds that are registered investment companies). Under Rule 18f-4, BDCs that use derivatives are subject to a value-at-risk (“VaR”) leverage limit, certain derivatives risk management program and testing requirements and requirements related to board reporting. These requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined in Rule 18f-4. A BDC that enters into reverse repurchase agreements or similar financing transactions could either (i) comply with the asset coverage requirements of Section 18, as modified by Section 61 of the 1940 Act when engaging in reverse repurchase agreements or (ii) choose to treat such agreements as derivatives transactions under Rule 18f-4. In addition, under Rule 18f-4, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due. If the BDC cannot meet this requirement, it is required to treat the unfunded commitment as a derivatives transaction subject to the aforementioned requirements of Rule 18f-4. Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts. We qualify as a “limited derivatives user,” and as a result the requirements applicable to us under Rule 18f-4 may limit our ability to use derivatives and enter into certain other financial contracts. However, if we fail to qualify as a limited derivatives user and become subject to the additional requirements under Rule 18f-4, compliance with such requirements may increase cost of doing business, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We, and others in our industry, are the targets of malicious cyber activity. A successful cyber-attack, whether perpetrated by criminal or state-sponsored actors, against us or our service providers, or an accidental disclosure of non-public information, could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data, especially personal and other confidential information. The rapid evolution and scale of artificial intelligence technologies also may increase the likelihood or effectiveness of a cyberattack against us, Saratoga Investment Advisors, or our third-party service providers. For example, artificial intelligence-enabled fraud can materially impact the effectiveness of our traditional cybersecurity controls by accelerating and scaling social engineering, creating realistic synthetic documents, and defeating common authentication methods.

Saratoga Investment Advisors and third-party service providers with which we do business depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems, networks, and data, like those of other companies, could be subject to unauthorized access, acquisition, use, alteration, or destruction, such as from the insertion of malware (including ransomware) physical and electronic break-ins or unauthorized tampering, unauthorized access, or system failures and disruptions of our computer systems, networks and date. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, personal and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause interruptions or malfunctions in our operations, which could result in financial losses, misappropriation of assets, loss of personal information, litigation, regulatory enforcement action and penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation. We may have to make a significant investment to fix or replace any inoperable or compromised systems or to modify or enhance our cybersecurity controls, procedures and measures. Similarly, the public perception that we or our affiliates may have been the target of a cybersecurity threat, whether successful or not, also could have a material adverse effect on our reputation and lead to financial losses from loss of business, depending on the nature and severity of the threat. Additionally, if a significant number of the members of our management were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.

In addition, cybersecurity has become a top priority for regulators around the world. Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. InFor addition,example, wethe SEC adopted rules mayrequiring bedisclosure requiredof tomaterial expendcybersecurity significant additional resources to modify our protective measuresincidents and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. We currently maintain insurance coveragedisclosure relating to cybersecurity risks;risk management, and amendments to however,Regulation S-P governing policies and procedures designed to address unauthorized access to customer information. We may face increased costs to comply with any new or changing regulations. 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 currently maintain insurance coverage relating to cybersecurity risks; however, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are not fully insured.

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 NAV 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 NAV 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. Increased leverage may also cause a downgrade of our credit rating. Leverage is generally considered a speculative investment technique. See Part I. Item 1A. “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 agreements governing our EncinaLive Oak Credit Facility and our Live OakValley Credit Facility contain various covenants that, among other things, limit our discretion in operating our business and provide for for certain minimum financial covenants.

The agreements governing the EncinaLive Oak Credit Facility and the LiveValley Oak Credit Facility contain 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 EncinaLive Oak Credit Facility or the Live OakValley Credit Facility would result, among other things, in termination of the availability of further funds under the EncinaLive Oak Credit Facility or the Live OakValley Credit Facility and an accelerated maturity date for all amounts outstanding under the EncinaLive Oak Credit Facility or the Live OakValley Credit Facility, which would likely disrupt our business and, potentially, the portfolio companies whose loans we financed through the Encina Credit Facility or the Live Oak Credit Facility or the Valley Credit Facility. This could reduce our revenues and, by delaying any cash payment allowed to us under the EncinaLive Oak Credit Facility or the Live OakValley Credit 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 respective facility is subject to the satisfaction of certain conditions. We cannot assure you that we will be able to borrow funds under the EncinaLive Oak Credit Facility or Live Oakthe Valley Credit Facility at any particular time or at all.

We have elected to be treated and intend to maintain our qualification annually as a RIC under Subchaptersubchapter M of the Code; however, no assurance can be given that we will be able to maintain our RIC tax treatment. As a RIC, we are not subject to U.S. federal income tax on our income (including realized gains) that is timely distributed (or deemed distributed) to our stockholders, provided that we satisfy certain source-of-income, annual distribution and asset– diversification requirements. While we are not subject to U.S. federal income tax on the income and gains we timely distribute to our stockholders, our stockholders will be required to include the amounts of such distributions in income and may be subject to U.S. federal income tax on such amounts.

The annual distribution requirement generally is satisfied if we timely distribute to our stockholders on an annual basis an amount equal to at least 90% of investment company taxable income, which is generally our ordinary net taxable income and realized net short-term capital gains in excess of realized net long-term capital losses, if any,any. reducedBecause bywe deductibleincur expenses.debt, Wewe 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 to U.S. federal income tax at corporate rates.

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% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other regulated investment companies,RICs, and other securities if such other securities of any one issuer that do not (a) represent more than 5% of the value of our assets or (b) represent more than 10% of the outstanding voting securities of the issuer; and (ii) no more than 25% of the value of our assets is invested in (a) the securities, other than U.S. government securities or securities of other regulated investment companies, of one issuer, (b) the securities, other than securities of other RICs, 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 (c) the securities of one or more “qualified” publicly traded partnerships.

Failure to meet these tests may result in our having to (i) dispose of certain investments 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 the asset-asset 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 U.S. federal income tax imposed at regular corporate rates. The resulting tax liability could substantially reduce our net assets, the amount of income available for distribution to our common stockholders or payment of our outstanding indebtedness including including the Notes. Such a failure would have a material adverse effect on our results of operations and financial condition.

In order to qualify for the tax benefits available to RICs and to minimize U.S. federal income taxes at corporate rates, 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 tax taxesimposed at the corporate rate rates 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.

Because any original issue discount accrued will be included in theour Company’s “investment company taxable income” for the year of the accrual, we may be requestedrequired 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 U.S federal income tax imposed at corporate rates. 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.

Portfolio investments may be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, including, without limitation, acts of God, fire, flood, earthquakes, war, terrorism and labor strikes). Some force majeure events may adversely affect the ability of a party (including a portfolio company or a counterparty to us or a portfolio company) to perform its obligations until it is able to remedy the force majeure event. In addition, the cost to a portfolio company of repairing or replacing damaged assets resulting from such force majeure event could be considerable. Additionally, a major governmental intervention into industry, including the nationalization of an industry or the assertion of control over one or more companies or its assets, could result in a loss to us, including if itsour investment in such issuer is cancelled, unwound or acquired (which could be without what we consider to be adequate compensation). To the extent we are exposed to investments in portfolio companies that as a group are exposed to such force majeure events, the risks and potential losses to us are enhanced.

The continued threat of global terrorism and the impact of military and other action will likely continue to cause volatility in the economies of certain countries, contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide and various aspects thereof, including in prices of commodities. Our portfolio investments may involve significant strategic assets having a national or regional profile. The nature of these assets could expose them to a greater risk of being the subject of a terrorist attack than other assets or businesses. Acts of war could similarly lead to such volatility. For example, in response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. In addition, the ongoing hostilitiesturmoil in Europe and the Middle East and escalating tensions in the region may create volatility and disruption of global markets. In particular, U.S. involvement and escalating hostilities in the Middle East may lead to global market instability of oil prices and shipping costs due to the impact of such conflict. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our business, financial condition, cash flows, and results of operations, and could cause the market value of our common stock to decline.

The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world (including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), mayhave contribute contributed to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide.

The United Kingdom has ended its membership in the European Union and entered into certain agreements with the European Union to govern the future relationship between the parties. Such agreements implement significant regulation around trade, transport of goods and travel restrictions between the United Kingdom and the European Union. Notwithstanding the foregoing, the longer term economic, legal, political and social implications of Brexit are unclear at this stage and are likely to continue to lead to ongoing political and economic uncertainty and periods of increased volatility in both the United Kingdom and in wider European markets for some time. In particular, Brexit could lead to calls for similar referendums in other European Union jurisdictions, which could cause increased economic volatility in the European and global markets. This mid- to long-term uncertainty could have adverse effects on the economy generally and on our ability to earn attractive returns. In particular, currency volatility could mean that our returns are adversely affected by market movements and could make it more difficult, or more expensive, for us to execute prudent currency hedging policies.

We are currently operating in a period of significantcapital marketmarkets disruption disruption and economic uncertainty, which may have a negative impact on our business, financial condition and results of operations. An extended disruption in the capital markets and the credit markets could negatively affect our business.

From time to time, capital markets may experience periods of disruption and instability. TheUncertainty U.S.with capitalrespect marketsto, haveamong experiencedother extremethings, volatilityinflationary pressures, elevated interest rates, new tariffs and disruptiontrade followingbarriers, geopolitical conditions, including the global outbreak of COVID-19 that began in December 2019, theongoing conflict between Russia and UkraineUkraine, that beganturmoil in lateEurope and Februarythe 2022,Middle East and the ongoingfailure warof major financial institutions introduced significant volatility in the Middlefinancial markets, and the Easteffect (seeof “Riskthis Factors—Risksvolatility Relatedhas materially impacted and could continue to Ourmaterially Businessimpact and Structure—Terrorist attacks, acts of war, or natural disasters may affect anyour market forrisks. our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition” for more information). Even after the COVID-19 pandemic subsided, theThe U.S. economy, as well as most other major economies, have continued to experience unpredictable economic conditions, and we anticipate our businesses would be materially and adversely affected by any prolonged economic downturn or recession in the United States and other major markets. In addition, 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 types of events have adversely affected and could continue to adversely affect operating results for us and for our portfolio companies.

The current economic conditions have resulted in an adverse impact on the ability of lenders to originate loans, the volumevolume, type, and typequality of loans originated, the ability of borrowers to make payments and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by the Company and returns to the Company, among other things. The U.S. credit markets (in particular for middle-market loans) have experienced the following among other things: (i) increased draws by borrowers on revolving lines of credit and other financing instruments; (ii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans and increased uses of PIK features; and (iii) greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues.

These conditions and future market disruptions and/or illiquidity could have an adverse effect on our (and our portfolio companies’) business, financial condition, results of operations and cash flows. Ongoing unfavorable economic conditions may increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to our portfolio companies and/or 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. We may have to access, if available, alternative markets for debt and equity capital, and a severe disruption in the global financial markets, deterioration in credit and financing conditions, continued increasesfluctuations in interest rates, or uncertainty regarding U.S. government spending and deficit levels or other global economic conditions could have a material adverse effect on our business, financial condition and results of operations.

We will also be negatively affected if our operations and effectiveness or the operations and effectiveness of a portfolio company (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted. In consideration of these and related factors, we may downgrade our internal ratings with respect to othercertain portfolio companies in the future as conditions warrant and new information becomes available.

Further downgradesDowngrades of the U.S. credit rating, automatic spending cuts, cuts, or another government shutdown could negatively impact our liquidity, financial condition and earnings.

U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States. U.S. lawmakers have passed legislation to raiseaddress the federal debt ceiling on multiple occasions, including,but mostthere recently,is no guarantee that any such legislation will be passed in Junethe 2023,future. which suspendedAdditionally, concerns over the debtUnited ceilingStates’ throughbudget earlydeficit 2025have unless Congress takes legislative action to further extend or defer it. Despite taking action to suspend the debt ceiling,led ratings agencies to havelower threatenedor threaten to lower the long-term sovereign credit rating onof the United States, including downgrades by Fitch downgrading the U.S. government’s credit rating from AAA to AA+ in August 2023 and by Moody’s lowering the U.S. government’s credit rating outlook from “stable”AAA to “negative”AA1 in NovemberMay 2023.2025. There is no guarantee that there will not be a further downgrade in the future.

The impact of thethis increased debt ceiling and/or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets markets and economic conditions. TheseChanges developmentsin Federal Reserve monetary policy, including interest rate adjustments, could cause interest rates and borrowing costs to rise,fluctuate, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time and may lead to additional shutdowns in the future.time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

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 increased 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.

At February 28, 2025,2026, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $0.2$0.0 million and constituted 0.02%0.0% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of February 28, 2025,2026, was composed of $527.1$391.0 million in aggregate principal amount of primarily senior secured first lien term loans and $21.3$22.3 million in uninvested cash. In addition, as of February 28, 2025,2026, we also own $9.4 million and $11.4$8.8 million in aggregate principal of the F-2-R-3 Notes and Class EE-R Notes with a fair value of $2.3$0.0 million and $12.3$8.4 million, respectively, in Saratoga CLO and Saratoga Investment Corp. Senior Loan Fund 2022-1, Ltd., that only rank senior to the subordinated notes of each collateralized loan obligation fund. 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.

We are a Maryland corporation that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies, which we define 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 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 not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, towe the extent wemay invest in private equity funds,funds wein willthe limitfuture. Private equity funds are not limited in how they invest their assets, and the underlying investments held by private equity funds may impact our investmentsstrategies, inrisks, entitiesand thatcosts. areShareholders excludedmay fromhave limited information about the definitionunderlying of “investment company” under Section 3(c)(1) or Section 3(c)(7)investments of the 1940 Act, which includes private equity funds,funds in which we invest, including with respect to nosuch funds’ moreholdings, thanliquidity, 15.0%and of our net assets.valuation. We have elected and qualified to be treated as a RIC under Subchaptersubchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

We have formedutilized a wholly owned special purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering into into a $50.0$85.0 million senior secured revolving credit facility with EncinaValley LenderNational Finance, LLCBank (“EncinaValley”), supported by loans held by SIF II and pledged to EncinaValley under the credit facility (the “EncinaValley Credit Facility). The EncinaValley Credit Facility closed on OctoberNovember 4,6, 2021. During the first two years following the closing date, SIF II may request an increase in the commitment amount under the Encina Credit Facility to up to $75.0 million.2025. The terms of the EncinaValley Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increasesequal to the greater of $25.0 million or 50% 38% of the commitment facility amount in effect at anysuch time thereafter.time. The term of the EncinaValley Credit Facility is three years. Advances under the EncinaValley Credit Facility Facility bear interest at a floating rate per annum equal to LIBORTerm SOFR plus 4.0%,an applicable margin of 2.85%, with LIBOR having a floorSOFR Floor of 0.75%, with customary provisions related1.00%. to our and Encina’s selection of a replacement benchmark rate. Concurrently with the closing of the EncinaValley Credit Facility, all remaining amounts outstanding on our existing revolving credit facility with MadisonEncina CapitalLender Funding,Finance, LLC were repaid and the facility was terminated. On January 27, 2023, among other things, the borrowings available under the Encina Credit Facility was increased from up to $50.0 million to up to $65.0 million, the underlying benchmark rate used to compute interest changed from LIBOR to Term SOFR for one-month tenor plus a 0.10% credit spread adjustment; the applicable effective margin rate on borrowings increased from 4.00% to 4.25% and the maturity date was extended from October 4, 2024 to January 27, 2026.

Our primary operating expenses include the payment of investment advisory and management fees, professional fees, directorsdirectors’ and officersofficers’ insurance, fees paid to directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company (“independent directors”) and administrator expenses, including our allocable portion of our administrator’s overhead. Our investment advisory and management fees compensate our Manager 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:

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The amendments in this update require more disaggregated information on income taxes paid. ASU 2023-09 is effective for yearsannual reporting periods beginning after December 15, 2024. EarlyWe adoptionhave isadopted permitted,ASU however2023-09 the Company has not elected to early adopt this provisioneffective as of February 28, 2026, and concluded that the dateapplication of thethis guidance did not have a material impact on our consolidated financial statementsstatements. containedSee Note 6 in thisItem report.8, TheFinancial CompanyStatements isand stillSupplementary assessingData, thefor impactfurther of the new guidance.information.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires additional disclosure of the nature of expenses included in the income income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosures.

At February 28, 2025,2026, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $0.2$0.0 million and constituted 0.02%0.0% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of February 28, 20252026 and February 29,28, 2024, 2025, was composed of $527.1 $391.0 million and $640.8$527.1 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of February 28, 2025,2026, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.notes, and had a fair value of $0.0 million.

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 subordinated notes representing the lowest-rated securities issued by a pool of predominantly senior secured first lien term loans and is subject to 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”). 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 28, 2025, $484.3 million or 98.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and eight of the Saratoga CLO portfolio investments were in default with a fair value of $4.4 million. At February 29, 2024, $603.0 million or 99.2% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and two of the Saratoga CLO portfolio investments were in default with a fair value of $0.3 million. For more information relating to Saratoga CLO, see the audited financial statements for Saratoga CLO included elsewhere herein.

The change in reserve from $9.5$0.2 million as of February 29,28, 20242025 to $0.2$0.5 million as of February 28, 20252026 was primarily related to the reversal and receipt of the non-accrual of interest income related to our investment in Knowland Group, and the write-down of all reserved interest income related to our investments in Pepper Palace Palace, Inc. and ZollegeClass asF-2-R-3 partNotes of theirthe restructuringsSaratoga this year.CLO.

For the fiscal year ended February 28, 20252026 and February 29,28, 2024,2025, total PIK income was $4.0$2.9 million and $2.5$4.0 million, respectively. This increasedecrease was primarily due to the recognition of reserved Knowland PIK interest previouslyrecognized on non-accrual and fully repaid during thislast year.

Management fee income reflects the fee income received for managing the Saratoga CLO. For the years ended February 28, 2025,2026, February 28, 2025 and February 29, 2024 and February 28, 2023,2024, total management fee income was $3.1$2.6 million, $3.3$3.1 million and $3.3 million, respectively. The reduction reflects the reduction of the asset levels in the Saratoga CLO as it is currently in winddown mode.

For the fiscal year ended February 28, 2025,2026, February 29,28, 20242025 and February 28,29, 2023,2024, othertotal dividend income was $2.0$4.5 million, $1.5$4.6 million and $2.9$6.5 million, respectively. OtherDividends income primarily includesreceived prepayment, amendment and redemption fees and is recorded in the consolidated statements of operations when earned.

For the year ended February 28, 2025,2026, interest and debt financing expenses increaseddecreased $2.9$2.8 million, or 5.9%5.2% compared to the year ended February 29,28, 2024.2025. The increasedecrease is primarily attributable to both the total average outstanding debt increasingdecreasing from $798.9$836.2 million for the year ended February 29,28, 20242025 to $836.2$791.3 million for the the year ended February 28, 2025,2026. as well as theThe weighted average interest rate on our outstanding indebtedness increasingalso decreased slightly from 5.46%5.56% to to 5.56%5.55% for the same periods.

For the year ended February 29,28, 2024,2026, incentive fees increaseddecreased $3.0$4.0 million, or 58.7%30.4% compared to the fiscal year ended February 28, 2023.2025. The incentive fee on income increaseddecreased this year from $6.8$13.2 million for the year ended February 28, 20232025 to $13.0$9.2 million for the year ended February 29,28, 2024,2026, reflecting the increaseddecrease operatingin performancenet ofinvestment our debt investmentsincome during this period. The incentive fees on capital gains decreasedremained fromunchanged ($1.8)at $0.0 million benefit for both the fiscal yeartwelve months ended February 28, 20232026 toand ($8.3) million benefit for the fiscal year ended February 29, 2024, both2025, reflecting the no incentive fee income and expense on net unrealized appreciationrealized and unrealized depreciation recognized during both these periods.periods, with the liability floor capped at zero.

For the year ended February 29,28, 2024,2026, professional fees decreasedincreased $0.05$0.8 million, or 2.5%36.9% compared to the fiscal year ended February 28, 2023.2025. This decreaseincrease primarily reflects the benefitgrowth of scale and optimization of costs and vendors across accounting, legal and consulting fees in connection with an increase in our assets and legal entities, as well as inflationary increases across thethese Company.vendors.

For the year ended February 28, 2025, administratorprofessional expensesfees increased $0.8$0.3 million, or 21.6%16.5% compared to the fiscal year ended February 29, 2024,2024. which reflects anThis increase is primarily due to inflationary increases from vendors across accounting, legal and consulting fees across the cap on the payment or reimbursement of expenses by the Company from $4.3 million last year to $5.0 million, effective August 1, 2024.Company.

For the year ended February 29,28, 2024,2026, administrator expenses increased $0.7 $0.5 million, or 22.5%11.2% compared to the fiscal year ended February 28, 2023,2025, which reflects an increase to the cap on the payment or reimbursement of expenses by the Company from $5.0 million last year to $5.4 million, effective August 1, 2025 For the year ended February 28, 2025, administrator expenses increased $0.8 million, or 21.6% compared to the fiscal year ended February 29, 2024, which reflects an increase to the cap on the payment or reimbursement of expenses by the Company from $3.275$4.3 million last year to $ 4.3$5.0 million, effective August 1, 2023.2024.

For the years ended February 28, 2025,2026, February 29,28, 20242025 and February 28,29, 2023,2024, we recognized income tax expense (benefit) of $0.41$(0.14) million, $0.04$0.41 million and ($0.15)$0.04 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 entities that are treated as corporations for U.S. federal income tax purposes, as well as current U.S. federal and state income taxes on those operating gains and losses when realized.

In addition to information set forth in this report, you should carefully consider the “Risk Factors” discussed in our most recent Annual Report on Form 10-K filed with the SEC, which could materially affect our business, financial condition and/or operating results. ThereExcept as set forth below, there have been no material changes during during the threesix months ended MayAugust 31, 2026 to the risk factors discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 28, 2026. Additional risks or uncertainties not currently known to us or that we currently deem deem to be immaterial also may materially affect our business, financial condition and/or operating results.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Note About Forward-Looking Statements” and Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.2026 and Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.

We are a Maryland corporation that has elected to be regulated 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, we may invest in private equity funds in the future. Private equity funds are not limited in how they invest their assets, and the underlying investments held by private equity funds may impact our strategies, risks, and costs. Shareholders may have limited information about the underlying investments of the private equity funds in which we invest, including with respect to such funds’ holdings, liquidity, and valuationvaluation. We have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On October 26, 2021, we entered into a Limited Liability Company Agreement with TJHA JV I LLC (“TJHA”) to co-manage Saratoga Senior Loan Fund I JVJV, LLC (“SLF JV”). SLF JV is invested in Saratoga Investment Corp Senior Loan Fund 2021-1 Ltd (“SLF 2021”), which is a wholly owned subsidiary of SLF JV. SLF 2021 was formed for the purpose of making investments in a diversified portfolio of broadly syndicated first lien and second second lien term loans or bonds in the primary and secondary markets.

We and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, where we provided $43.75 million and TJHA provided $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed-rate of 10.0% per annum and is due and payable in full on October 20, 2033. As of MayAugust 31, 2026, our our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $19.2 million and $2.7 million, respectively. As of February 28, 2026, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $19.2 million and $2.7 million, respectively. As of MayAugust 31, 2026 and February 28, 2026, our investment in the unsecured note of SLF JV had a fair value of $15.7$15.5 million and $16.1 million, respectively, and our investment in the membership interests of SLF JV had a fair value of $5.0$4.1 million and $1.5 million, respectively.

On September 24, 2025, we completed the first refinancing of SLF 2022. This refinancing, among other things, extended SLF 2022’s investment period to October 2028. As part of this refinancing, we purchased $8.8 million of the SLF 2022-1 Class E-R Notes tranche at par. Concurrently, the existing $12.3 million of the SLF 2022-1 Class E Notes were repaid. We also paid $1.6 million of additional equity investment related to the refinancing of SLF JV. As of MayAugust 31, 2026 and February 28, 2026, the fair value of these Class E-R Notes was $8.3 million and $8.4 million, respectively.

During the threesix months ended MayAugust 31, 2026, we invested $79.2$155.3 million in new and existing portfolio companies and had $48.4$87.5 million in aggregate amount of exits and repayments, including $47.8 $86.9 million of proceeds from sales and repayments of debt and equity investments in the current period and $0.6 million of additional proceeds from sales of equity investments realized in a prior period, resulting in net investments of $30.8$67.8 million for the period. During the threesix months ended MayAugust 31, 2025, we invested $50.1$102.3 million in new and existing portfolio companies and had $64.3$94.9 million in aggregate amount of exits and repayments resulting in net repaymentsinvestments of $(14.2)$7.4 million for the period.

Our portfolio composition at MayAugust 31, 2026: and February 28, 2026: at fair value was as follows:

At MayAugust 31, 2026, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $0.0 million and constituted 0.0% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of MayAugust 31, 2026 and February 28, 2026, was composed of $361.1$337.5 million and $391.0 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of MayAugust 31, 2026, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes, and had a fair value of $0.0 million.

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 May August 31, 2026, $323.3$301.6 million or 98.2%98.3% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and threeone Saratoga CLO portfolio investments were in default with a fair value of $5.9$0.2 million. At February 28, 2026, $348.3 million or 98.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and one of the Saratoga CLO portfolio investments were in default with a fair value of $0.9 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.

The CMR distribution for our investments at May August 31, 2026 and February 28, 2026 was as follows:

The CMR distribution of Saratoga CLO investments at MayAugust 31, 2026 and February 28, 2026 was as follows:

The following table shows our portfolio composition by industry grouping at fair value at MayAugust 31, 2026 and February 28, 2026:

The following table shows Saratoga CLO’s portfolio composition by industry grouping at fair value at MayAugust 31, 2026 and February 28, 2026:

The following table shows our portfolio composition by geographic location at fair value at MayAugust 31, 2026 and February 28, 2026. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Operating results for the three and six months ended MayAugust 31, 2026 and MayAugust 31, 2025 was as follows:

The composition of our investment income for three threeand six months ended MayAugust 31, 2026 and MayAugust 31, 2025 was as follows:

For the three months ended MayAugust 31, 2026, total investment income decreased $1.5increased $0.5 million, or 4.8%,1.8%, to $30.8$31.2 million from $32.3$30.6 million for the three months ended MayAugust 31, 2025. Interest income from investments increased $0.1 $2.4 million, or 0.4%,9.2%, to $28.1$28.8 million for the three months ended MayAugust 31, 2026 from $28.0$26.4 million for the three months ended MayAugust 31, 2025. Interest income from investments increased primarily due to an increase of $158.0$154.9 million, or 16.3%,15.6%, in total investments,investments from $968.3 $995.3 million at MayAugust 31, 2025 to $1,126.3$1,150.2 million as of MayAugust 31, 2026, partially offset by a decrease in the weighted average current yield on investments to 9.8%,9.9%, down from 10.6%10.4% at MayAugust 31, 2025, primarily due to the reduction in SOFR base rates during this period, as well as the tightening of spreads in the middle market resulting in new originations being done market.at lower rates than assets repaid.

For the three and six months ended MayAugust 31, 2026 and May August 31, 2025, total PIK income was $0.7 million and $1.4 million, respectively and $0.8 million and $0.8$1.6 million, respectively.

For the three months ended MayAugust 31, 2026 and May August 31, 2025, interest from cash and cash equivalents was $0.5$0.4 million and $2.0$2.4 million, respectively. The decrease of $1.5$2.0 million was due to decreaseddecrease cash and cash equivalents balances during thethis three months ended May 31, 2026period as compared to thelast three months ended May 31, 2025,year, reflecting the significant levels of originationspurchases experienced during thethis three months ended May 31, 2026 and prior to that.period.

Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended MayAugust 31, 2026 and MayAugust 31, 2025, total management fee income was $0.1 $0.5 million and $0.7 million, respectively. For the six months ended August 31, 2026 and August 31, 2025, total management fee income was $0.6 million and $1.4 million, respectively. The reduction reflects the reduction of the asset levels in the Saratoga CLO as it is currently currently in winddown mode.mode, as well as subordinated management fees not earned for part of the period as the CLO went into non-compliance.

For the three and six months ended MayAugust 31, 2026 and May August 31, 2025, othertotal dividend income was $0.1$1.1 million and $0.3$1.0 million, respectively. Other income primarily includes prepayment, monitoringrespectively and amendment fees$1.9 million and $2.0 million. Dividends received is recorded in the consolidated statements of operations when earned.

The composition of our operating expenses for the three and six months ended MayAugust 31, 2026 and MayAugust 31, 2025 was as follows:

For the three months ended MayAugust 31, 2026, total operating expenses increased $1.0$2.3 million, or 4.5%,10.8%, compared to the three months ended MayAugust 31, 2025. For the six months ended August 31, 2026, total operating expenses increased $3.3 million, or 7.6%, compared to the six months ended August 31, 2025.

As of MayAugust 31, 2026 and February 28, 2026, the the SBA debentures represented 26.1%23.6% and 21.6% of overall debt, respectively.

For the three months ended MayAugust 31, 2026, base management fees increased $0.6 $0.7 million, or 14.7%,15.8%, from $4.3$4.4 million to $5.0$5.1 million compared to the three months ended MayAugust 31, 2025. The increase in base management fees results from the 14.7%15.8% increase in the average value of our total assets, less cash and cash equivalents, from $982.4 million for the three months ended May 31, 2025 to $1,126.8$991.7 million for the three months ended MayAugust 31, 2025 to $1,148.5 million for the three months ended August 31, 2026.