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Item 5. Market for Registrant’s Common Equity

2022-05-04 compared with 2021-05-05 · 2352 added, 2461 removed, 360 unchanged (93% of the section changed)

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

range of common stock

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.

Percentage of High Closing Sales Price as a Premium (Discount) to

of Low Closing Sales Price as a Premium (Discount) to

Ending February 28, 2022

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.

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)

Fiscal Year Ending February 28, 2023

First Quarter through May 3, 2022

Year Ended February 28, 2021

Fiscal Year Ended February 28, 2022

First Quarter

2 unchanged sentences

Fourth Quarter

Year Ended February 29, 2020

Fiscal Year Ended February 28, 2021

First Quarter

3 unchanged sentences

* 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.

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

(the “Share Repurchase Plan”).

On October 7, 2015, our board of directors extended the 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, our board of directors

extended the 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, our board of directors extended the 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, our board of directors increased the Share Repurchase Plan to 1.3 million shares

of common stock.

On January 5, 2021, our board of directors extended the Shares Repurchase Plan for another year to January 15, 2022,

leaving the number of shares unchanged at 1.3 million shares of common stock.

As of February 28, 2021, the Company purchased 408,812

shares of common stock, at the average price of $17.84 for approximately $7.3 million pursuant to the Share Repurchase Plan.

year ended February 28, 2021 the Company purchased 190,321 shares of common stock, at the average price $18.96 for approximately $3.6

million pursuant to the Share Repurchase Plan.

shown in the table below, as of February 28, 2021, we had purchased 408,812 shares of common stock pursuant to this repurchase plan.

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

December 1, 2015 through

December 31, 2015

January 1, 2016 through

January 31, 2016

February 1, 2016 through

February 29, 2016

March 1, 2016 through

March 31, 2016

April 1, 2016 through

April 30, 2016

May 1, 2016 through

June 1, 2016 through

June 30, 2016

July 1, 2016 through

July 31, 2016

August 1, 2016 through

August 31, 2016

September 1, 2016 through

September 30, 2016

October 1, 2016 through

October 31, 2016

November 1, 2016 through

November 30, 2016

December 1, 2016 through

December 31, 2016

January 1, 2017 through

February 29, 2020

March 1, 2020 through

February 28, 2021

last reported closing sale price of our common stock on May 4, 2021 was $25.51 per share, which represents a discount of

approximately 6.4% to the NAV reported as of February 28, 2021.

As of May 4, 2021, there were 11 holders of record of our

common stock.

following table summarizes our dividends or distributions declared during fiscal 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017,

2018, 2019, 2020 and 2021:

Date Declared

Fiscal Year Ended 2009:

June 13, 2008

August 19, 2008

August 29, 2008

September 15, 2008

December 8, 2008

December 18, 2008

December 29, 2008

Fiscal Year Ended 2010:

November 13, 2009

November 25, 2009

December 31, 2009

Fiscal Year Ended 2011:

November 12, 2010

November 19, 2010

December 29, 2010

Fiscal Year Ended 2012:

November 15, 2011

November 25, 2011

December 30, 2011

Fiscal Year Ended 2013:

November 9, 2012

November 20, 2012

December 31, 2012

Fiscal Year Ended 2014:

October 30, 2013

November 13, 2013

December 27, 2013

Fiscal Year Ended 2015:

September 24, 2014

November 3, 2014

November 28, 2014

September 24, 2014

February 2, 2015

February 27, 2015

Fiscal Year Ended 2016:

April 9, 2015

August 3, 2015

August 31, 2015

October 7, 2015

November 2, 2015

November 30, 2015

January 12, 2016

February 1, 2016

February 29, 2016

Fiscal Year Ended 2017:

March 31, 2016

April 15, 2016

April 27, 2016

July 29, 2016

August 9, 2016

August 8, 2016

August 24, 2016

September 5, 2016

October 5, 2016

October 31, 2016

November 9, 2016

January 12, 2017

January 31, 2017

February 9, 2017

Fiscal Year Ended 2018:

February 28, 2017

March 15, 2017

March 28, 2017

June 15, 2017

June 27, 2017

August 28, 2017

September 15, 2017

September 26, 2017

November 29, 2017

December 15, 2017

December 27, 2017

Fiscal Year Ended 2019:

February 26, 2018

March 14, 2018

March 26, 2018

June 15, 2018

June 27, 2018

August 28, 2018

September 17, 2018

September 27, 2018

November 27, 2018

December 17, 2018

January 2, 2019

Fiscal Year Ended 2020:

February 26, 2019

March 14, 2019

March 28, 2019

June 13, 2019

June 27, 2019

August 27, 2019

September 13, 2019

September 26, 2019

January 7, 2020

January 24, 2020

February 6, 2020

Fiscal Year Ended 2021:

January 24, 2020

August 12, 2020

October 7, 2020

October 26, 2020

November 10, 2020

January 5, 2021

January 26, 2021

February 10, 2021

(1) This dividend was paid by a combination of shares of common stock and cash.

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.

distributions, if any, will be determined by our board of directors and paid out of assets legally available for distribution.

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.

(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.

Summarized Financial Highlights

The following table summarizes ten years of financial highlights:

For the year ended

Per share data

Net asset value at beginning of period

Adoption of ASC 606

Net asset value at beginning of period, as adjusted

Net investment income(1)

Net realized and unrealized gains (losses) on investments(1)

Realized losses on extinguishment of debt*

Net increase in net assets resulting from operations

Distributions declared from net investment income

Total distributions to stockholders

Issuance of common stock above net asset value(2)

Repurchases of common stock(3)

Net asset value at end of period

Per share market value at end of period

Total return based on market value(5)(6)

Total return based on net asset value(6)(7)

Shares outstanding at end of period

Ratio/Supplemental data:

Net assets at end of period

Ratio of total expenses to average net assets(8)*

Ratio of net investment income to average net assets(8)*

Portfolio turnover rate(5)(9)

For the year ended

Per share data

Net asset value at beginning of period

Adoption of ASC 606

Net asset value at beginning of period, as adjusted

Net investment income(1)

Net realized and unrealized gains (losses) on investments(1)

Realized losses on extinguishment of debt*

Net increase in net assets resulting from operations

Distributions declared from net investment income

Total distributions to stockholders

Issuance of common stock above net asset value(2)

Repurchases of common stock(3)

Net asset value at end of period

Per share market value at end of period

Total return based on market value(5)(6)

Total return based on net asset value(6)(7)

Shares outstanding at end of period

Ratio/Supplemental data:

Net assets at end of period

Ratio of total expenses to average net assets(8)*

Ratio of net investment income to average net assets(8)*

Portfolio turnover rate(5)(9)

* Certain prior period amounts have been reclassified to conform

to current period presentation.

(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 anti-dilutive impact on the net asset value

per share (“NAV”) of the Company due to the repurchase of common shares.

See Note 11, Stockholders’

See Note 13, Dividend.

(4) 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.

(5) Ratios are not annualized.

(6) 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

Total investment return does not reflect brokerage commissions.

(7) 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

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) Ratios are annualized.

Incentive management fees included

within the ratio are not annualized.

(9) Portfolio turnover rate is calculated using the lesser of

year-to-date sales or year-to-date purchases over the average of the invested assets at fair value.

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 (the “Share Repurchase

Plan”).

On October 7, 2015, our board of directors extended the 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, our board of directors extended the 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.

10, 2017, January 8, 2019 and January 7, 2020, our board of directors extended the 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

On May 4, 2020, our board of directors increased the Share Repurchase Plan to 1.3 million shares of common stock.

On January 5,

2021, our board of directors extended the Share Repurchase Plan for another year to January 15, 2022, leaving the number of shares unchanged

at 1.3 million shares of common stock.

On January 4, 2022, our board of directors extended the Share Repurchase Plan for another year

to January 15, 2023, leaving the number of shares unchanged.

As of February 28, 2022, the Company purchased 508,435 shares of common stock,

at the average price of $19.35 for approximately $9.8 million pursuant to the Share Repurchase Plan.

During the three months ended February

28, 2022 the Company purchased 50,00 shares of common stock, at the average price $25.86 for approximately $1.3 million pursuant to the

Share Repurchase Plan.

During the year ended February 28, 2022 the Company purchased 99,623 shares of common stock, at the average price

$25.55 for approximately $2.5 million pursuant to the Share Repurchase Plan.

As shown in the table below,

as of February 28, 2022, we had purchased 508,435 shares of common stock pursuant to this repurchase plan.

Total Number of

Shares (or Units)

Average Price per

Share (or Unit)

Total Number of Shares

(or Units) Purchased as

Part of Publicly

Announced Plans or

Maximum Number

(or Approximate Dollar Value) of

Shares (or Units) that May Yet

Be Purchased Under the Plans

March 1, 2015 through November 30, 2015

December 1, 2015 through December 31, 2015

January 1, 2016 through January 31, 2016

February 1, 2016 through February 29, 2016

March 1, 2016 through March 31, 2016

April 1, 2016 through April 30, 2016

May 1, 2016 through May 31, 2016

June 1, 2016 through June 30, 2016

July 1, 2016 through July 31, 2016

August 1, 2016 through August 31, 2016

September 1, 2016 through September 30, 2016

October 1, 2016 through October 31, 2016

November 1, 2016 through November 30, 2016

December 1, 2016 through December 31, 2016

January 1, 2017 through February 29, 2020

March 1, 2020 through February 28, 2021

March 1, 2021 through February 28, 2022

The last reported closing sale

price of our common stock on May 3, 2022 was $ 25.61 per share, which represents a discount

of approximately 12.7 % to the NAV reported as of February 28, 2022.

As of May 3, 2022, there

were 11 holders of record of our common stock.

Dividend Policy

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.

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.

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.

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.

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 net short-term capital gains in excess of realized net long-term capital losses, if any, reduced by deductible

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 net ordinary income for the calendar year, (2) 98.2% of our capital gain net income for the one-year period ending on

October 31 of the calendar year and (3) any net ordinary income and capital gain net income that we recognized for preceding years, but

were not distributed during such years, and on which we paid no U.S.

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.

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 ratio 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 timely distribute 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 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 net ordinary

income for the calendar year, (2) 98.2% of our capital gain net income for the one-year period ending on October 31 of the calendar year

and (3) any net ordinary income and capital gain net income that we recognized for preceding years, but were not distributed during such

years, and on which we paid no U.S.

federal income tax.

For the 2019, 2018 and 2017 calendar year, the

Company made distributions sufficient such that we did not incur any U.S.

For the 2019, 2018 and 2017 calendar year, the Company made distributions sufficient

such that we did not incur any U.S.

federal excise taxes.

For the 2014, 2015 and 2016 calendar

years, our distributions were insufficient such that we incurred U.S.

For the 2014, 2015, 2016, 2020 and 2021 calendar years, our distributions were

insufficient such that we incurred U.S.

federal excise taxes.

We may elect to withhold from distribution

a portion of our ordinary income for the 2021 calendar year and/or portion of the capital gains in excess of capital losses realized

during the one-year period ending October 31, 2021, if any, and, if we do so, we would expect to incur U.S.

federal excise taxes as a

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.

We may elect to withhold from distribution a portion of our ordinary income

for the 2022 calendar year and/or portion of the capital gains in excess of capital losses realized during the one-year period ending

October 31, 2022, if any, and, if we do so, we would expect to incur U.S.

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.

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.

January 5, 2021, our board of directors declared a dividend of $0.42 per share, which was paid on February 10, 2021, to common stockholders

of record as of January 26, 2021.

Shareholders had the option to receive payment of the dividend in cash, or receive shares of common

stock, pursuant to the DRIP.

Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 41,388

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 $21.75 per share, which equaled 95% of the volume weighted average

trading price per share of the common stock on January 28, 29 and February 1, 2, 3, 4, 5, 8, 9 and 10, 2021.

October 7, 2020, our board of directors declared a dividend of $0.41 per share, which was paid on November 10, 2020, to common stockholders

of record as of October 26, 2020.

Shareholders had the option to receive payment of the dividend in cash, or receive shares of common

stock, pursuant to the DRIP.

Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 45,706

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 $17.63 per share, which equaled 95% of the volume weighted average

trading price per share of the common stock on October 28, 29, 30 and November 2, 3, 4, 5, 6, 9 and 10, 2020.

July 7, 2020, the Company declared a dividend of $0.40 per share payable on August 12, 2020, to common stockholders of record on July

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 $3.7 million in cash and 47,098 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 $16.45 per share, which equaled 95.0% of the volume weighted average trading price

per share of the common stock on July 30, 31 and August 3, 4, 5, 6, 7, 10, 11 and 12, 2020.

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.

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.

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.

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.

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 the 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.

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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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.

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 the 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 the 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.

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.

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.

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.

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.

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.

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.

following graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index, the NASDAQ

Financial 100 index and the Standard & Poor’s BDC Index, for the period from March 23, 2007, the date our common stock

began trading, through February 28, 2021.

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, the NASDAQ Financial 100 index and the Standard & Poor’s BDC

The graph measures total shareholder return, which takes into account both changes in stock price and dividends.

that dividends paid are reinvested in like securities.

Securities and Debt

following table shows our outstanding classes of securities and debt as of February 28, 2021.

Performance Graph

The following graph compares the

return on our common stock with that of the Standard & Poor’s 500 Stock Index, the NASDAQ Financial 100 index and the

Standard & Poor’s BDC Index, for the period from March 23, 2007, the date our common stock began trading, through February

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, the NASDAQ Financial 100 index and the Standard & Poor’s BDC 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 28, 2022.

Title of Class

2 unchanged sentences

Amount Outstanding Exclusive of Amounts Shown Under (c)

Credit Facility

Encina credit facility

SBA Debentures

1 unchanged sentence

$ 185,000,000

$ 141,000,000

7.25% 2025 Notes

1 unchanged sentence

4.375% 2026 Notes

$ 175,000,000

4.35% 2027 Notes

(1) For more information regarding our limitations as to SBA debenture issuances, see “Item

6.25% 2027 Notes

(1) For more information regarding our limitations as to SBA

debenture issuances, see “Item 1.

Business - Small Business Investment Company Regulations.”

FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly.

We caution you that some of the percentages indicated in the table below are estimates and may vary.

Moreover, the information set forth below does not include any transaction costs and expenses that investors will incur in connection with each offering of our securities pursuant to this prospectus.

As a result, investors are urged to read the “Fees and Expenses”

table contained in any corresponding prospectus supplement to fully understanding the actual transaction costs and expenses they will incur in connection with each such offering.

Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,”

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”

7 unchanged sentences

Total stockholder transaction expenses paid

Annual estimated expenses (as a percentage of average net assets attributable

to common stock):

Annual estimated expenses (as a percentage of average net assets attributable to common stock):

Management fees

3 unchanged sentences

Total annual expenses

(1) In the event that the shares of common stock to which this prospectus relates 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.

For more details about the plan, see

“Dividend Reinvestment 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.

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.

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

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 dividend reinvestment plan.

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

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.

The incentive fee consists of two parts.

The first part is calculated and payable quarterly

in arrears and equals 20% of our “pre-incentive fee net investment income”

for the immediately preceding quarter,

subject to a preferred return, or “hurdle,”

The first part is calculated and payable quarterly in arrears and equals 20% of our “pre-incentive fee net investment income”

for the immediately preceding quarter, subject to a preferred return, or “hurdle,”

and a “catch up”

For this purpose, “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,”

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.”

(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 4.5% 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.

For this purpose, “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.”

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 6.0% figure in the table includes all expected borrowing costs that we expect to incur over the next twelve months in connection Encina Credit Facility.

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, the 6.25%

2025 Notes, the 6.25% 2027 Notes, the 7.25% 2025 Notes and the 7.75% 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

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.

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 6.25% 2027 Notes, the 7.25% 2025 Notes, 7.75% 2025 Notes, the 4.375% 2026 Notes and the 4.35% 2027 Notes, 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 board of directors, including a majority of our independent 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.

“Regulation”

and “Risk Factors—Risks Related to Our Business and Structure—Recent legislation may allow

us to incur additional leverage.”

See “Business Development Company Regulations and “Risk Factors—Risks Related to Our Business and Structure—Effective April 16, 2019, our asset coverage requirement was reduced from 200% to 150%, which could increase the risk of investing in the Company.”

“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.

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 to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load and offering expenses.

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on portfolio

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.

See “Dividend Reinvestment Plan”

for additional information regarding our dividend reinvestment plan, which may be at, above or below net asset value.

of unregistered securities

July 9, 2020, the Company issued $5.0 million aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75%

2025 Notes”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million.

costs incurred were approximately $0.1 million.

Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31,

August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020.

The 7.75% Notes 2025 mature on July 9, 2025 and 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 $0.3 million related to the 7.75% Notes

2025 have been capitalized and are being amortized over the term of the Notes.

As of February 28, 2021, the total 7.25% 2025 Notes outstanding

was $5.0 million.

The 7.75% 2025 Notes are unlisted and have a par value of $25.00 per share.

December 29, 2020, the Company issued $5.0 million aggregate principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25%

Notes 2027”).

Offering costs incurred were approximately $0.1 million.

Interest on the 6.25% Notes 2027 is paid quarterly in arrears

on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The 6.25% Notes 2027 mature

on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option, on or after December 29,

The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies.

Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

The 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

January 28, 2021, the Company issued $10.0 million aggregate principal amount of our 6.25% fixed rate Notes due in 2027 (the “Second

6.25% Notes 2027”) for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million.

costs incurred were approximately $0.0 million.

Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on February 28,

May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The Second 6.25% Notes 2027 mature on January

28, 2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option.

proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies.

costs of $0.3 million related to the Second 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

The Second 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

purchases of equity securities

the year ended February 28, 2021, we purchased 190,321 of our common stock in the open market.

We did not make any purchases of our common

stock in the open market during the years ended February 29, 2020, February 28, 2019.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial and other data as of and for the years ended February 28, 2021, February 29, 2020, February 28, 2019, February 28, 2018 and February 28, 2017 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.

“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

Consolidated Statements of Operations Data:

Investment income:

Interest from investments

Management fee, incentive fee and other income

Total investment income

Operating expenses:

Interest and debt financing expenses

Base management and incentive management fees(1)

Administrator expenses

General and administrative and other expenses

Income/excise tax expense (benefit)

Excise tax expense (credit)

Total operating expenses

Net investment income*

Realized and unrealized gain (loss) on investments:

Net realized gain (loss) from investments

Income tax (provision) benefit from realized gain on investments

Net change in unrealized appreciation (depreciation) on investments

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

Total net gain on investments

Realized loss on extinguishment of debt*

Net increase in net assets resulting from operations

As of and for the

Adoption of ASC 606(2)

Earnings per common share—basic and diluted(3)

Net investment income per share—basic and diluted(3)*

Net realized and unrealized gain (loss) per share—basic and diluted(3)

Realized loss on extinguishment of debt*

Dividends declared per common share(4)

Issuance of common stock above net asset value(5)

Dilutive impact of dividends paid in stock on net asset value per share and other items(6)

Repurchases of common stock(7)

Net asset value per share

Total return based on market value(8)

Total return based on net asset value(9)

Consolidated Statements of Assets and Liabilities Data:

Investment assets at fair value

Total debt outstanding, net of discount and/or deferred financing costs

Total net assets

Net asset value per common share

Common shares outstanding at end of year

Investments funded

Principal collections related to investment repayments or sales

Number of investments at year end

Weighted average yield of income producing debt investments—Non-control/Non-affiliate(10)

Weighted average yield on income producing debt investments—Affiliate(10)

Weighted average yield on income producing debt investments—Control(10)

* Certain prior period amounts have been reclassified to conform to current period presentation.

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

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

For the years ended February 28, 2021, February 29, 2020, February 28, 2019, February 28, 2018 and February 28, 2017, amounts are calculated using weighted average commo n shares outstanding of 11,188,629, 9,319,192, 7,046,686, 6,024,040 and 5,582,453 respectively.

Calculated using the shares outstanding at the ex-dividend date.

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.

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.”

Represents the anti-dilutive impact on the net asset value per share

(“NAV”) of the Company due to the repurchase of common shares.

See Note 10, Stockholders’

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.

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.

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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 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 Part I.

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.”

This figure includes all of the fees and expenses of our wholly-owned subsidiaries, Saratoga Investment Corp SBIC LP, Saratoga Investment Corp SBIC II LP, Saratoga Investment Funding LLC and Saratoga Investment Funding II LLC, except SLF JV.

As SLF JV is structured as a private joint venture, with control and management shared equally between us and TJHA, no management fees are paid by SLF JV.

Furthermore, this table reflects all of the fees and expenses borne by us with respect to our investment in Saratoga CLO.

The following example demonstrates the

projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical $1,000 investment in our

common stock, assuming an asset coverage ratio of 209.3% (the Company’s actual asset coverage as of February 28, 2022) and

total annual expenses of 13.8% of net assets attributable to common stock as set forth in the fees and expenses table above, and

(x) a 5.0% annual return resulting entirely from net realized capital gains (none of which is subject to the incentive fee) and

(y) a 5.0% annual return resulting entirely from net realized capital gains (all of which is subject to the incentive fee based

on capital gains).

Transaction expenses are included in the following example.

This example and the expenses in the table above

should not be considered a representation of our future expenses, and actual expenses (including cost of debt, if any, and other

expenses) may be greater or less than those shown.

Assuming a 5% annual return on portfolio resulting entirely from net realized capital gains (none of which is subject to the capital gains incentive fee)(1)

Assuming a 5% annual return resulting entirely from net realized capital gains (all of which is subject to incentive fee based on capital gains)(2)

(1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.

(2) Assumes no unrealized capital depreciation and a 5% annual return resulting entirely from net realized capital gains and therefore

subject to the incentive fee based on capital gains.

Because our investment strategy involves investments that generate primarily current

income, we believe that a 5% annual return resulting entirely from net realized capital gains is unlikely.

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%.

examples assume that the 5% annual return will be generated entirely through net realized capital gains and, as a result, will trigger

the payment of the capital gains portion of the incentive fee under the investment advisory agreement.

Any potential income portion of

the incentive fee under the investment advisory agreement is not included in the example.

If we achieve sufficient returns on our investments,

including through net realized capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors,

would be higher.

In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, under certain

circumstances, reinvestment of dividends and other distributions under our dividend reinvestment plan may occur at a price per share that

differs from net asset value.

Sales of unregistered securities

On July 9, 2020, the

Company issued $5.0 million aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75% 2025 Notes”)

for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million.

Offering costs incurred were

approximately $0.1 million.

Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November

30, at a rate of 7.75% per year.

The 7.75% Notes 2025 mature on July 9, 2025 and 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 $0.3 million related to the 7.75% Notes 2025 have been capitalized and are being amortized

over the term of the Notes.

As of February 28, 2022, the total 7.25% 2025 Notes outstanding was $5.0 million.

The 7.75% 2025 Notes are

unlisted and have a par value of $25.00 per share.

At February 28, 2022,

the total 7.75% 2025 Notes outstanding was $5.0 million.

On December 29, 2020, the Company issued $5.0

million aggregate principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25% Notes 2027”).

Offering costs incurred

were approximately $0.1 million.

Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November

30, at a rate of 6.25% per year.

The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time

or from time to time at our option, on or after December 29, 2024.

The net proceeds from the offering were used for general corporate

purposes in accordance with our investment objective and strategies.

Financing costs of $0.1 million related to the 6.25% Notes 2027 have

been capitalized and are being amortized over the term of the Notes.

The 6.25% 2027 Notes are unlisted and have a par value of $25.00

On January 28, 2021, the Company issued $10.0

million aggregate principal amount of our 6.25% fixed rate Notes due in 2027 (the “Second 6.25% Notes 2027”) for net proceeds

of $9.7 million after deducting underwriting commissions of approximately $0.3 million.

Offering costs incurred were approximately $0.0

Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a

rate of 6.25% per year.

The Second 6.25% Notes 2027 mature on January 28, 2027 and commencing January 28, 2023, 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 $0.3 million related to the Second 6.25% Notes 2027 have

been capitalized and are being amortized over the term of the Notes.

The Second 6.25% 2027 Notes are unlisted and have a par value of

$25.00 per share.

At February 28, 2022, the total 6.25% 2027 Notes

outstanding was $15.0 million.

Issuer purchases of equity securities

During the year ended February 28, 2022 and February

28, 2021, we purchased 99,623 and 190,321 shares, respectfully of our common stock in the open market.

We did not make any purchases of

our common stock in the open market during the year ended February 29, 2020.

The following table summarizes the purchased common stock on a month

to month basis for the year ended February 28, 2022:

March 1, 2021 through March 31, 2021

April 1, 2021 through April 30, 2021

May 1, 2021 through May 31, 2021

June 1, 2021 through June 30, 2021

July 1, 2021 through July 31, 2021

August 1, 2021 through August 31, 2021

September 1, 2021 through September 31, 2021

November 1, 2021 through November 30, 2021

December 1, 2021 through December 31, 2021

January 1, 2022 through January 31, 2022

February 1, 2022 through February 28, 2022

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 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 Part I.

“Risk Factors”

1 unchanged sentence

appearing elsewhere herein.

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 our forward-looking statements.

forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties, including statements as to:

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

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

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;

or other serious public health events, such as the recent global outbreak of COVID-19;

relative and absolute investment performance and operations of our Manager;

impact of increased competition;

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

unfavorable resolution of any future legal proceedings;

business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives

vis a vie the current COVID-19 pandemic;

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

contractual arrangements and relationships with third parties;

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

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.

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 our forward-looking statements.

The forward-looking statements contained

in this Annual Report on Form 10-K involve risks and uncertainties, including statements as to:

future operating results and continued impact of the coronavirus (“COVID-19”)

pandemic thereon;

ability of our portfolio companies to achieve their objectives;

expected financings and investments;

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”);

adequacy of our cash resources and working capital;

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

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

impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating

to us or our Manager;

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

ability to access capital and any future financings by us;

ability of our Manager to attract and retain highly talented professionals;

ability of our Manager to locate suitable investments for us and to monitor and effectively administer our investments and the impacts

of the COVID-19 pandemic thereon.

forward-looking statements may include statements preceded by, followed by or that otherwise include terms such as “anticipate,”

● 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 of COVID-19;

● the relative and absolute investment performance and operations

of our Manager;

● 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 operational and financial performance of our portfolio companies, including their ability to achieve

our respective objectives as a result of the current COVID-19 pandemic and the effects of the disruptions caused by the COVID-19 pandemic

on our ability to continue to effectively manage our business;

● 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 treatment, 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, including the decommissioning

of LIBOR, 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 Manager;

● 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 Manager to attract and retain highly talented

professionals;

● the ability of our Manager to locate suitable investments for us and to monitor and effectively administer our investments and the

impacts of the COVID-19 pandemic thereon.

Such forward-looking statements may

include statements preceded by, followed by or that otherwise include terms such as “anticipate,”

“believe,”

10 unchanged sentences

and “would”

or the negative of these

terms or other comparable terminology.

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 Form 10-K, and we assume no obligation to update any such forward-looking statements.

Actual results could differ materially

from those anticipated in our forward-looking statements, and future results could differ materially from historical performance.

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.

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.

are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the “1940

Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital

appreciation from our investments.

We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private

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.

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”).

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 to replace GSCP (NJ), L.P.

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 Form 10-K, and we assume no obligation

to update any such forward-looking statements.

Actual results could differ materially from those anticipated in our forward-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.

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

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.

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.

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.

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 to replace

GSCP (NJ), L.P.

as our investment adviser and changed our name to Saratoga Investment Corp.

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

with a $40.0 million senior secured revolving credit facility, subject to the satisfaction of certain terms and conditions.

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.

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

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),

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.

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 Madison 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 Madison 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.

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.

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.

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.

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.

March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp.

SBIC, LP (“SBIC LP”), received an SBIC license from

the Small Business Administration (“SBA”).

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.

II LP (“SBIC II LP”), also received an SBIC license from the SBA.

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.

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 and are no longer

listed on the NYSE.

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 At-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).

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 $24.45 million, respectively, in aggregate principal amount of the $74.45 million in aggregate principal amount of

issued and outstanding 2023 Notes.

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

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’

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 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 At-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.

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 $24.45 million, respectively, in

aggregate principal amount of the $74.45 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 28, 2021, 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 28, 2021, there was no activity related to the

ATM offerings.

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 a 30-day option to purchase

up to an additional 172,500 shares of its common stock, which was not exercised.

August 7, 2018, we entered into an unsecured loan agreement (“CLO 2013-1 Warehouse Loan”) with Saratoga Investment Corp.

CLO 2013-1 Warehouse, Ltd (“CLO 2013-1 Warehouse”), a wholly-owned subsidiary of Saratoga Investment Corp.

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 28, 2021, 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 28, 2021, there was no activity related to the ATM offerings.

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 a 30-day option to purchase up to an additional 172,500 shares of its common

stock, which was not exercised.

On August 7, 2018, we entered into an unsecured

loan agreement (“CLO 2013-1 Warehouse Loan”) with Saratoga Investment Corp.

CLO 2013-1 Warehouse, Ltd (“CLO 2013-1 Warehouse”),

a wholly-owned subsidiary of Saratoga Investment Corp.

CLO 2013-1, Ltd.

(“Saratoga CLO”), pursuant to which CLO 2013-1 Warehouse may borrow from time to time up to $20 million from us in order

to provide capital necessary to support warehouse activities.

The CLO 2013-1 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

CLO 2013-1 Warehouse Loan amounted to $20.0 million.

August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “6.25%

2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million.

costs incurred were approximately $0.3 million.

(“Saratoga CLO”), pursuant to which CLO 2013-1 Warehouse

may borrow from time to time up to $20 million from us in order to provide capital necessary to support warehouse activities.

2013-1 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 CLO 2013-1 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 “6.25% 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.

included the full exercise of the underwriters’

option to purchase an additional $5.0 million aggregate principal amount of 6.25%

2025 Notes within 30 days.

Interest on the 6.25% 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 6.25% 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 6.25% 2025 Notes have been capitalized and are being amortized over the term of the 6.25% 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.

A non-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 the Class F-R-2 Notes

tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par.

Concurrently, the existing $4.5 million

of Class F notes and $20.0 million CLO 2013-1 Warehouse Loan were repaid.

On February 5, 2019, the Company completed a re-opening

and up-sizing of its existing 6.25% 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 $5.0 million aggregate principal amount of 6.25% 2025 Notes within 30 days.

Interest on the 6.25% 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 6.25% 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

option to purchase an additional $2.5

million aggregate principal amount of 6.25% 2025 Notes within 30 days.

Interest rate, interest payment dates and maturity remain unchanged

from the existing 6.25% 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 6.25% 2025

Notes have been capitalized and are being amortized over the term of the 6.25% 2025 Notes.

On August 31, 2021, the Company redeemed $60.0

million in aggregate principal amount of issued and outstanding 6.25% 2025 Notes at par ($25 per note), plus the accrued and unpaid interest

thereon, through, but excluding, the redemption date of August 31, 2021.

The 6.25% 2025 Notes were listed on the NYSE under the trading

symbol of “SAF”

and have been delisted effective as of August 31, 2021, following the full redemption.

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 June 24, 2020, the Company issued $37.5 million

in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25% 2025 Notes”) for net proceeds of $36.3 million

after deducting underwriting commissions of approximately $1.2 million.

Offering costs incurred were approximately $0.2 million.

6, 2020, the underwriters exercised their option in full to purchase an additional $5.625 million in aggregate principal amount of its

7.25% unsecured notes due 2025.

Net proceeds to the Company were $5.4 million after deducting underwriting commissions of approximately

$0.2 million.

Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate

of 7.25% per year, beginning August 31, 2020.

The 7.25% 2025 Notes mature on June 30, 2025 and commencing June 24, 2022, 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 7.25% 2025 Notes have

been capitalized and are being amortized over the term of the 7.25% 2025 Notes.

The Company has received an investment grade private rating

of “BBB”

from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.

As of February 28, 2022, the total 7.25%

2025 Notes outstanding was $43.1 million.

The 7.25% 2025 Notes are listed on the NYSE under the trading symbol “SAK”

a par value of $25.00 per share.

On July 9, 2020, the Company issued $5.0 million

aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75% 2025 Notes”) for net proceeds of $4.8 million

after deducting underwriting commissions of approximately $0.2 million.

Offering costs incurred were approximately $0.1 million.

on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.75% per year, beginning

August 31, 2020.

The 7.75% Notes 2025 mature on July 9, 2025 and may be redeemed in whole or in part at any time or from time to time

at our option.

3 unchanged sentences

term of the Notes.

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.

A non-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 the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at

Concurrently, the existing $4.5 million of Class F notes and $20.0 million CLO 2013-1 Warehouse Loan were repaid.

February 5, 2019, the Company completed a re-opening and up-sizing of its existing 6.25% 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 6.25% 2025 Notes within 30 days.

rate, interest payment dates and maturity remain unchanged from the existing 6.25% 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 6.25% 2025 Notes have been capitalized and are being amortized over the term of the

6.25% 2025 Notes.

At February 28, 2021, the total 6.25% 2025 Notes outstanding was $60.0 million.

The 6.25% 2025 Notes are listed on

the NYSE under the trading symbol “SAF”

with a par value of $25.00 per share.

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

June 24, 2020, the Company issued $37.5 million in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25%

2025 Notes”) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million.

costs incurred were approximately $0.3 million.

On July 6, 2020, the underwriters exercised their option in full to purchase an additional

$5.625 million in aggregate principal amount of its 7.25% unsecured notes due 2025.

Net proceeds to the Company were $5.4 million after

deducting underwriting commissions of approximately $0.2 million.

Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February

28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020.

The 7.25% 2025 Notes mature on June 30,

2025 and commencing June 24, 2022, 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 7.25% 2025 Notes have been capitalized and are being amortized over the term of the 7.25% 2025 Notes.

The Company has received an investment grade private rating of “BBB”

from Egan-Jones Ratings Company, an independent, unaffiliated

rating agency.

As of February 28, 2022, the total 7.25% 2025 Notes outstanding was $5.0 million.

The 7.25% 2025 Notes are listed on

the NYSE under the trading symbol “SAK”

with a par value of $25.00 per share.

July 9, 2020, the Company issued $5.0 million aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75%

2025 Notes”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million.

costs incurred were approximately $0.1 million.

Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31,

August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020.

The 7.75% Notes 2025 mature on July 9, 2025 and 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.

The 7.75% 2025 Notes are unlisted

and have a par value of $25.00 per share.

On December 29, 2020, the Company issued $5.0

million aggregate principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25% Notes 2027”).

Offering costs

incurred were approximately $0.1 million.

Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28,

May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The 6.25% Notes 2027 mature on

December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option, on or after December 29, 2024.

The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies.

Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the

The 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

On January 28, 2021, the Company issued $10.0

million aggregate principal amount of our 6.25% fixed rate Notes due in 2027 (the “Second 6.25% Notes 2027”) for net proceeds

of $9.7 million after deducting underwriting commissions of approximately $0.3 million.

Offering costs incurred were approximately $0.0

Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a

rate of 6.25% per year, beginning February 28, 2021.

The Second 6.25% Notes 2027 mature on January 28, 2027 and commencing January 28,

2023, 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 $0.3 million related to

the Second 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

The Second 6.25% 2027 Notes are

unlisted and have a par value of $25.00 per share.

On February 26, 2021, the Company completed the

fourth refinancing of the Saratoga CLO.

This refinancing, among other things, extended the Saratoga CLO reinvestment period to April 2024,

and extended its legal maturity to April 2033.

A non-call period ending February 2022 was also added.

In addition, and as part of the

refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million.

As part of this refinancing

and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of the Saratoga CLO, and

purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par.

Concurrently, the existing $2.5 million

of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse 2 Loan were repaid.

The Company also paid

$2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future

equity distributions.

At August 31, 2021, the outstanding receivable of $2.6 million was repaid.

On March 10, 2021, the Company issued $50.0 million

aggregate principal amount of our 4.375% fixed-rate Notes due in 2026 (the “4.375% Notes 2026”) for net proceeds of $49.0

million after deducting underwriting commissions of approximately $1.0 million.

Offering costs incurred were approximately $0.2 million.

on the 4.375% Notes 2026 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.375% per year, beginning August

The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed in whole or in part at any time on or after November 28,

2025 at par plus a “make-whole”

premium, and thereafter at par.

The net proceeds from the offering were used for general corporate

purposes in accordance with our investment objective and strategies.

Financing costs of $1.2 million related to the 4.375% Notes

2026 have been capitalized and are being amortized over the term of the Notes.

As of February 28, 2021, the total 7.25% 2025 Notes outstanding

was $5.0 million.

The 7.75% 2025 Notes are unlisted and have a par value of $25.00 per share.

December 29, 2020, the Company issued $5.0 million aggregate principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25%

Notes 2027”).

At August 31, 2021, the outstanding receivable of $2.6

million was paid in full.

On July 15, 2021, the Company issued an additional

$125.0 million aggregate principal amount of the Company’s 4.375% Notes 2026 (the “Additional 4.375% 2026 Notes”) for

net proceeds for approximately $123.5 million, based on the public offering price of 101.00% of the aggregate principal amount of the

Additional 4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and the estimated offering expenses of approximately

$0.2 million payable by the Company.

The net proceeds from the offering were used redeem all of the outstanding 6.25% 2025 Notes (as described

above), and for general corporate purposes in accordance with our investment objective and strategies.

The Additional 4.375% 2026 Notes

were treated as a single series with the existing 4.375% 2026 Notes under the indenture and had the same terms as the existing 4.375%

On July 30, 2021, we entered into an equity distribution

agreement with Ladenburg Thalmann & Co.

and Compass Point Research and Trading, LLC (the “Agents”), through which

we may offer for sale, from time to time, up to $150.0 million of our common stock through the Agents, or to them, as principal for their

As February 28, 2022, the Company sold 4,840,361 shares for gross proceeds of $123.9 million at an average price of $25.61 for

aggregate net proceeds of $122.4 million (net of transaction costs).

During the three months ended February 28, 2022, the Company sold

392,826 shares for gross proceeds of $11.5 million at an average price of $29.31 for aggregate net proceeds of $11.4 million (net of transaction

During the year ended February 28, 2022, the Company sold 918,343 shares for gross proceeds of $26.8 million at an average price

of $29.22 for aggregate net proceeds of $26.6 million (net of transaction cost).

On January 19, 2022, the Company issued $75.0

million aggregate principal amount of our 4.35% fixed-rate Notes due in 2027 (the “4.35% Notes 2027”) for net proceeds of

$73.0 million, based on the public offering price of 99.317% of the aggregate principal amount of the 4.35% Notes 2027, after deducting

the underwriting commissions of approximately $1.5 million.

Offering costs incurred were approximately $0.2 million.

Interest on the 6.25% Notes 2027 is paid

quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February

The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at

our option, on or after December 29, 2024.

The net proceeds from the offering were used for general corporate purposes in accordance

with our investment objective and strategies.

Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized

and are being amortized over the term of the Notes.

The 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

January 28, 2021, the Company issued $10.0 million aggregate principal amount of our 6.25% fixed rate Notes due in 2027 (the “Second

6.25% Notes 2027”) for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million.

costs incurred were approximately $0.0 million.

Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on February 28,

May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The Second 6.25% Notes 2027 mature on January

28, 2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option.

proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies.

costs of $0.3 million related to the Second 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

The Second 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO.

This refinancing, among other things, extended the

Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033.

A non-call period ending February 2022

was also added.

In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately

$650 million.

As part of this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated

notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par.

Concurrently,

the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse 2 Loan were

The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO,

to be reimbursed from future equity distributions.

As of February 28, 2021, there remained an outstanding receivable of $2.6 million

for such transaction costs which is presented as due from affiliate on the Company’s consolidated statement of assets and liabilities.

March 11, 2020, the World Health Organization declared the novel coronavirus, or 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, restricting

travel and hospitality, and temporarily closing our limiting operations at many corporate offices, retail stores, restaurants, fitness

clubs and manufacturing facilities and factories in affected jurisdictions.

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.

have evaluated subsequent events from February 28, 2021 through May 5, 2021.

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 28, 2021, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic.

In that regard, for example, as of February 28, 2021, the Company valued its portfolio investments in conformity with U.S.

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 28, 2021 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 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.

Accounting Policies

of Presentation

preparation of financial statements in accordance with U.S.

on the 4.35% Notes 2027 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per year, beginning August

The 4.35% Notes 2027 mature on February 28, 2027 and may be redeemed in whole or in part at the Company’s option at any

time prior to November 28, 2026, at par plus a “make-whole”

premium, and thereafter at par.

The net proceeds from the offering

were used for general corporate purposes in accordance with our investment objective and strategies.

Financing costs of $1.7 million

related to the 4.35% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

On August 9, 2021, the Company exchanged its existing

$17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Note at par.

On August 11, 2021, the

Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 million.

The Company has formed a wholly owned special

purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering

into a $50.0 million senior secured revolving credit facility with Encina Lender Finance, LLC (the “Lender”), supported by

loans held by SIF II and pledged to the Lender under the credit facility (the “Encina Credit Facility).

The Encina Credit Facility

closed on October 4, 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.

The terms of the Encina Credit Facility require a minimum drawn amount of $12.5

million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of

the commitment amount in effect at any time thereafter.

The term of the Encina Credit Facility is three years.

Advances under the Encina

Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary

provisions related to the selection by the Lender and the Company of a replacement benchmark rate.

Concurrently with the closing of the

Encina Credit Facility, all remaining amounts outstanding on the Company’s existing revolving credit facility with Madison Capital

Funding, LLC were repaid and the facility terminated.

On October 26, 2021, the Company and TJHA JV I

LLC (“TJHA”) entered into a Limited Liability Company Agreement (the “LLC Agreement”) to co-manage Saratoga Senior

Loan Fund I JV 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 lien term loans or bonds in the primary and secondary markets.

The Company and TJHA have equal voting interest

on all material decisions with respect to SLF JV, including those involving its investment portfolio, and equal control of corporate governance.

No management fee is charged to SLF JV as control and management of SLF JV is shared equally.

The Company and TJHA have committed to provide

up to a combined $50.0 million of financing to SLF JV through cash contributions, with the Company providing $43.75 million and TJHA providing

$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 June 15, 2023.

As of February

28, 2022, the Company and TJHA’s investment in SLF JV consisted of an unsecured note of $13.1 million and $1.9 million, respectively;

and membership interest of $13.1 million and $1.9 million, respectively.

For the period from October 26, 2021, through

February 28, 2022, the Company earned approximately $0.1 million of interest income related to SLF JV, which is included in interest

As of February 28, 2022, approximately $0.1 million of interest income related to SLF JV was included in interest receivable.

SLF JV’s investment in SLF 2021 is in the

form of an unsecured loan.

The unsecured note will pay a floating rate of SOFR plus 7.00% per annum and is due and payable in full on

June 9, 2023.

As of February 28, 2022, SLF JV’s investment in SLF 2021 had an aggregate fair value of approximately $28.7 million.

The Company has determined that SLF JV is an investment

company under ASC 946;

however, in accordance with such guidance the Company will generally not consolidate its investment in a company

other than a wholly-owned investment company subsidiary.

SLF JV is not a wholly-owned investment company subsidiary as the Company and

TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest.

Furthermore, ASC 810

concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate

the joint venture since neither has control.

Accordingly, the Company does not consolidate SLF JV.

We have been closely monitoring, and will continue

to monitor, the impact of the COVID-19 pandemic (including new variants of COVID-19) and its impact on all aspects of our business, including

how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets.

Given the fluidity

of the pandemic, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position

or cash flows at this 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.

We believe our portfolio companies

have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related

orders imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, and shareholder

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause,

business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services,

reductions in business activity and financial transactions, supply chain disruptions, labor difficulties and shortages, commodity inflation

and elements of economic and financial market instability in the United States and globally.

Such effects will likely continue for the

duration of the pandemic, which is uncertain, and for some period thereafter.

Critical Accounting Policies and Estimates

Basis of Presentation

The preparation of financial statements in accordance

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.

of our critical accounting policies follows.

Company accounts for its 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”).

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.

participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and

willing and able to transact.

for which market quotations are readily available are fair valued at such market quotations obtained from independent third-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.

We use multiple techniques for determining fair value based on the nature

of the investment and experience with those types of investments and specific portfolio companies.

The selections of the valuation techniques

and the inputs and assumptions used within those techniques often require subjective judgements and estimates.

These techniques include

market comparables, discounted cash flows and enterprise value waterfalls.

Fair value is best expressed as a range of values from which

the Company determines a single best estimate.

The types of inputs and assumptions that may be considered in determining the range of

values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments,

market yield trend analysis and volatility in future interest rates, call and put features, the markets in which the portfolio company

does business, comparison to publicly traded companies, discounted cash flows and other relevant factors.

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

as described below:

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;

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 the Class F-R-3 Notes tranche of the Saratoga CLO every quarter.

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

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;

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.

investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flows 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 market comparables for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available,

as determined by Saratoga Investment Advisors and recommended to our board of directors.

Specifically, we use Intex cash flows, or an

appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO.

The cash flows use a set of inputs including

projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations.

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.

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

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.

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 on non-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

Company holds debt and preferred equity 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.

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.

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 and estimates

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, Fair Value Measurements and 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 independent third-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

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.

We use multiple techniques for determining fair value based on the nature of the investment and experience with those

types of investments and specific portfolio companies.

The selections of the valuation techniques and the inputs and assumptions used

within those techniques often require subjective judgements and estimates.

These techniques include market comparables, discounted cash

flows and enterprise value waterfalls.

Fair value is best expressed as a range of values from which the Company determines a single best

The types of inputs and assumptions that may be considered in determining the range of values of our investments include the

nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis and

volatility in future interest rates, call and put features, the markets in which the portfolio company does business, comparison to publicly

traded companies, discounted cash flows 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;

● 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 the Class F-2-R-3 Note tranche of the Saratoga CLO

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;

● 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 flows 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 market comparables for equity interests

in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by Saratoga Investment Advisors and recommended

to our board of directors.

Specifically, we use Intex cash flows, or an appropriate substitute, to form the basis for the valuation of

our investment in Saratoga CLO.

The cash flows use a set of inputs including projected default rates, recovery rates, reinvestment rate

and prepayment rates in order to arrive at estimated valuations.

The inputs 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.

The SEC has adopted new Rule 2a-5 under the 1940

This rule establishes requirements for determining fair value in good faith for purposes of the 1940 Act.

We will comply with the

new rule’s valuation requirements on or before the SEC’s compliance date in September 2022.

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.

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

on non-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 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.

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 the then-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.

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 the then-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.

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.

August 7, 2018, we entered into an unsecured loan agreement, CLO 2013-1 Warehouse Loan, with Saratoga Investment Corp.

CLO 2013-1 Warehouse,

Ltd, a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse may borrow from time to time up to $20 million

from us in order to provide capital necessary to support warehouse activities.

The CLO 2013-1 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 CLO 2013-1 Warehouse Loan amounted to $20.0 million.

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.

A non-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 the Class F-R-2 and $7.5 million aggregate principal amount of the Class 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 CLO 2013-1 Warehouse Loan was repaid.

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 which CLO 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.

On October 23, 2020, the CLO 2013-1 Warehouse 2 Loan was increased to $25.0 million availability, which was immediately fully drawn and,

which expires on August 20, 2021.

The interest rate was also amended to be based on a pricing grid, starting at an annual rate of 3M

USD LIBOR + 4.46%.

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, CLO 2013-1 Warehouse Loan, with Saratoga Investment Corp.

CLO 2013-1 Warehouse, Ltd, a wholly-owned subsidiary

of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse may borrow from time to time up to $20 million from us in order to provide capital

necessary to support warehouse activities.

The CLO 2013-1 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 CLO 2013-1 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.

A non-call period of January 2020 was also added.

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 the Class F-R-2 and $7.5 million aggregate principal amount of the Class 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 CLO 2013-1 Warehouse Loan was repaid.

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 which CLO 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.

23, 2020, the CLO 2013-1 Warehouse 2 Loan was increased to $25.0 million availability, which was immediately fully drawn and, which expires

on August 20, 2021.

The interest rate was also amended to be based on a pricing grid, starting at an annual rate of 3M USD LIBOR + 4.46%.

During the fourth quarter ended February 28, 2021, the CLO 2013-1 Warehouse 2 Ltd was repaid in full.

February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO.

This refinancing, among other things, extended the

Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033.

A non-call period ending February

2022 was also added.

In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets

to approximately $650 million.

As part of this refinancing and upsizing, the Company invested an additional $14.0 million in

all of the newly issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes

tranche at par.

Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million

CLO 2013-1 Warehouse 2 Loan were repaid.

The Company also paid $2.6 million of transaction costs related to the refinancing

and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions.

As of February 28, 2021, there remained

an outstanding receivable of $2.6 million for such transaction costs which is presented as due from affiliate on the Company’s

consolidated statement of assets and liabilities.

Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp.

We receive a base management fee of 0.10% per annum

On February 26, 2021, the Company completed the

fourth refinancing of the Saratoga CLO.

This refinancing, among other things, extended the Saratoga CLO reinvestment period to April 2024,

and extended its legal maturity to April 2033.

A non-call period ending February 2022 was also added.

In addition, and as part of

the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million.

this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of

the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par.

Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse

2 Loan were repaid.

The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of

the Saratoga CLO, to be reimbursed from future equity distributions.

At August 31, 2021, the outstanding receivable of $2.6 million was

repaid in full.

On August 9, 2021, the Company exchanged its existing

$17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Note at par.

On August 11, 2021, the

Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 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 the 2013-1 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.

Prior to the second refinancing and the issuance of the 2013-1 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.

the third refinancing and the issuance of the 2013-1 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%.

income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic

325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”), 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

May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with 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, ASU 2016-12 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

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.

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 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:

Following the third refinancing and

the issuance of the 2013-1 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 Topic 325-40, Investments-Other,

Beneficial Interests in Securitized Financial Assets (“ASC 325-40”), 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.

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 Manager for its work in identifying, evaluating, negotiating, closing and monitoring our investments.

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);

incurred by our Manager 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;

incurred by our Manager payable for travel and due diligence on our prospective portfolio companies;

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

of our common stock and other securities;

advisory and management fees;

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

agent and custodial fees;

and state registration fees;

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

state and local taxes;

● independent

directors’

● calculating our net asset value (including the cost and expenses

of any independent valuation firm);

● expenses incurred by our Manager 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 Manager 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;

● 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;

of preparing and filing reports or other documents required by governmental bodies (including the U.S.

Securities and Exchange

Commission (“SEC”) and the SBA);

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

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

costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent

auditors and outside legal costs;

● 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)).

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.

incentive fee had two parts:

fee, payable quarterly in arrears, equal to 20.0% of our pre-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

our pre-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.

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.

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.

July 30, 2010, the date on which GSCP (NJ), L.P.

● 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;

● 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

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 our pre-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 our pre-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.

million in fees for services previously provided to us;

$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.

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:

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.

the “catch up”

provision, 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-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

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

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.

Gains Incentive Fee

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.

Accounting Pronouncements

March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”).

The amendments in ASU 2020-04 provide

optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference

rate reform if certain criteria are met.

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.

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 our pre-incentive

fee net investment income with respect to that portion of such pre-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 March 2020, the FASB issued ASU

2020-04, Reference Rate Reform (“ASU 2020-04”).

The amendments in ASU 2020-04 provide optional expedients and exceptions for

applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and under the Encina Credit Facility.

Many of these agreements (including the credit agreements relating to the Encina Credit Facility) include an alternative successor rate

or language for choosing an alternative successor rate when LIBOR reference is no longer considered to be appropriate.

With respect to

other agreements, the Company intends to work with its portfolio companies to modify agreements to choose an alternative successor rate.

Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts

or the continuation of existing contracts.

The standard is effective as of March 12, 2020 through December 31, 2022.

1 unchanged sentence

believe this optional guidance has a material impact on the Company’s consolidated financial statements and disclosures.

Disclosure Update and Simplification

March 2019, the SEC adopted the final rule under SEC Release No.

33-10618, Fast Act Modernization and Simplification of Regulation

S-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 Release No.

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.

Rule 12b-2 Update

March 2020, the SEC adopted a final rule under SEC Release No.

34-88365 (the “Final Rule”), amending the accelerated filer

and large accelerated filer definitions in Exchange Act Rule 12b-2.

The amendments include a provision under which a BDC will be excluded

from the “accelerated filer”

and “large accelerated filer”

definitions if the BDC has (1) a public float of $75

million or more, but less than $700 million, and (2) has annual investment income of less than $100 million.

In addition, BDCs are subject

to the same transition provisions for accelerated filer and large accelerated filer status as other issuers, but instead substituting

investment income for revenue.

The amendments will reduce the number of issuers required to comply with the auditor attestation on the

internal control over financial reporting requirement provided under Section 404(b) of the Sarbanes-Oxley Act of 2002.

The Final Rule

applies to annual report filings due on or after April 27, 2020.

The Company has assessed the Final Rule, and concluded that effective

February 28, 2021, it is no longer an accelerated filer.

As a result, the Company has filed this Annual Report on Form 10-K for the fiscal

year ending February 28, 2021 as a non-accelerated filer.

and investment activity

Portfolio and investment activity

Investment Portfolio Overview

February 28, 2022

February 28, 2021

February 29, 2020

($ in millions)

16 unchanged sentences

Floating rate debt (weighted average current spread over LIBOR)(3)(4)

Excludes our investment in the subordinated notes of Saratoga CLO.

February 28, 2021, excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-3 Notes tranches of Saratoga

At February 29, 2020, excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-2 Notes and Class

G-R-2 Notes tranches of Saratoga CLO and loan to Saratoga Investment Corp.

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

(2) At February 28, 2022, excludes our investment in the subordinated

notes of Saratoga CLO and Class F-2-R-3 Notes tranche, as well as the unsecured notes and equity interests in the SLF JV.

28, 2021, excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-3 Notes tranches of Saratoga CLO.

29, 2020, excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-2 Notes and Class G-R-2 Notes tranches of Saratoga

CLO and loan to Saratoga Investment Corp.

CLO 2013-1 Warehouse 2, Ltd.

At February 28, 2019,

excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-2 Notes and Class G-R-2 Notes tranches of

Saratoga CLO.

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

Calculation uses either 1-month or 3-month LIBOR, depending on the contractual terms, and after factoring in any existing LIBOR floors.

the fiscal year ended February 28, 2021, we invested $202.3 million in new or existing portfolio companies and had $130.3 million in

aggregate amount of exits and repayments resulting in net investments of $72.0 million for the year.

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.

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.

(3) Excludes our investment in the subordinated notes of Saratoga

CLO and equity interests, as well as the unsecured notes and equity interests in Saratoga JV.

(4) Calculation uses either 1-month or 3-month LIBOR, depending

on the contractual terms, and after factoring in any existing LIBOR floors.

During the fiscal year ended February

28, 2022, we invested $458.1 million in new or existing portfolio companies and had

$226.9 million in aggregate amount of exits and

repayments resulting in net investments of $231.1 million for the year.

During the fiscal year ended February

28, 2021, we invested $202.3 million in new or existing portfolio companies and had

$130.3 million in aggregate amount of exits and

repayments resulting in net investments of $72.0 million for the year.

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.

Portfolio Composition

Our portfolio composition at February 28, 2021, February 29, 2020 and February 28, 2019 at fair value was as follows:

Our portfolio composition at February 28, 2022, February 28, 2021

and February 29, 2020 at fair value was as follows:

February 28, 2022

1 unchanged sentence

February 29, 2020

Syndicated loans

Percentage of Total Portfolio

Weighted Average Current Yield

Percentage of Total Portfolio

Weighted Average Current Yield

Percentage of Total Portfolio

Weighted Average Current Yield

First lien term loans

Second lien term loans

Unsecured term loans

Unsecured loans

Structured finance securities

Equity interests

February 28, 2021, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value

of $31.4 million and constituted 5.7% of our portfolio.

This investment constitutes a first loss position in a portfolio that, as of

February 28, 2021 and February 29, 2020, was composed of $603.7 million and $528.4 million, respectively, in aggregate principal amount

of primarily senior secured first lien term loans.

In addition, as of February 28, 2021, we also own $17.9 million in aggregate principal

of the F-R-3 Notes in the Saratoga CLO, that only rank senior to the subordinated notes.

investment is subject to unique risks.

At February 28, 2022, our investment

in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $28.7 million and constituted 3.5%

of our portfolio.

This investment constitutes a first loss position in a portfolio that, as of February 28, 2022 and February 28, 2021,

was composed of $660.2 million and $603.7 million, respectively, in aggregate principal amount of primarily senior secured first lien

In addition, as of February 28, 2022, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga

CLO, that only rank senior to the subordinated notes.

This investment is subject to unique

(See “Part 1.

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 28, 2021, $584.6 million or 98.7% of the Saratoga CLO portfolio

investments in terms of market value had a CMR (as defined below) color rating of green or yellow and four Saratoga CLO portfolio investments

were in default with a fair value of $0.8 million.

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 investment were

in default with a fair value of $1.4 million.

For more information relating to Saratoga CLO, see the audited financial statements for

Saratoga CLO included elsewhere herein.

Investment Advisors normally grades all of our investments using a credit and monitoring rating system (“CMR”).

The CMR consists

of a single component:

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 28, 2022, $630.3 million or 98.7% 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 $2.8 million.

At February 28, 2021, $584.6 million or 98.7% of the Saratoga CLO portfolio investments in terms of market

value had a CMR (as defined below) color rating of green or yellow and four Saratoga CLO portfolio investment were in default with a fair

value of $0.8 million.

For more information relating to Saratoga CLO, see the audited financial statements for Saratoga CLO included elsewhere

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 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

(Yellow)—underperforming credit;

(Red)—in principal payment default and/or expected loss of principal.

5 unchanged sentences

February 28, 2021

Investments at

($ in thousands)

1 unchanged sentence

CLO and equity interests.

change in reserve from $1.2 million as of February 29, 2020 to $1.2 million as of February 28, 2021 primarily related to the increase

in reserve for the year for our investments in My Alarm Center, LLC and Taco Mac, offset by the reversal of the full reserve for our

investment in Roscoe Medical Inc.

The CMR distribution of Saratoga

CLO investments at February 28, 2021 and February 29, 2020 was as follows:

The change in reserve from $1.2 million

as of February 28, 2021 to $0.0 million as of February 28, 2022 was primarily related to the write-off of the interest accruals related

to My Alarm Center, LLC, that we deemed non-recoverable, as well as the release of the reserve for our Taco Mac investment that has gone

back on accrual.

As of February 28, 2022, there are no non-accrual investments.

The CMR distribution of Saratoga CLO investments at February

28, 2022 and February 29, 2021 was as follows:

February 28, 2022

February 28, 2021

Investments at

($ in thousands)

(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 28, 2021 and February 29, 2020:

Portfolio composition by industry

grouping at fair value

The following table shows our portfolio composition by industry

grouping at fair value at February 28, 2022 and February 28, 2021:

Saratoga Investment Corp.

1 unchanged sentence

February 28, 2021

Investments At

($ in thousands)

Education Software

Healthcare Software

Structured Finance Securities(1)

Real Estate Services

Healthcare Services

Consumer Services

Education Services

Healthcare Software

Sports Management

Dental Practice Management Software

Payroll Services

Real Estate Services

Marketing Services

Hospitality/Hotel

Specialty Food Retailer

Education Software

HVAC Services and Sales

Property Management

Corporate Governance

Cyber Security

Industrial Products

Marketing Orchestration Software

Sports Management

Investment Fund

Financial Services

Hospitality/Hotel

Talent Acquisition Software

Mentoring Software

Marketing Services

Payroll Services

Insurance Software

Non-profit Services

Employee Collaboration Software

Waste Services

Industrial Products

Dental Practice Management

Facilities Maintenance

Non-profit Services

Healthcare Supply

Legal Software

Field Service Management

Financial Services Software

Healthcare Supply

Office Supplies

1 unchanged sentence

Staffing Services

Cyber Security

Healthcare Products Manufacturing

Consumer Products

Financial Services

Consumer Services

Construction Management Services

Facilities Maintenance

Corporate Governance

Property Management

* Certain reclassifications have been made to previously reported

1 unchanged sentence

(1) As of February 28, 2022, comprised of our investment in the

subordinated notes and Class F-R-3 Notes of Saratoga CLO.

As of February 29, 2020, comprised of our investment in the subordinated notes,

Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO and Saratoga Investment Corp.

CLO 2013-1 Warehouse 2, Ltd.

The following table shows

Saratoga CLO’s portfolio composition by industry grouping at fair value at February 28, 2021 and February 29, 2020:

subordinated notes and F-2-R-3 Notes of Saratoga CLO, as well as the unsecured notes and equity interests in the SLF JV.

As of February

28, 2021, comprised of our investment in the subordinated notes and Class F-R-3 Notes of Saratoga CLO.

The following table shows Saratoga CLO’s portfolio

composition by industry grouping at fair value at February 28, 2022 and February 28, 2021:

February 28, 2022

5 unchanged sentences

Telecommunications

Aerospace & Defense

Chemicals, Plastics, & Rubber

Hotel, Gaming & Leisure

Advertising, Printing & Publishing

Beverage, Food & Tobacco

Consumer goods:

Advertising, Printing & Publishing

Hotel, Gaming & Leisure

Containers, Packaging & Glass

Beverage, Food & Tobacco

Aerospace & Defense

Consumer goods:

Capital Equipment

Broadcasting & Subscription

Construction & Building

Capital Equipment

Forest Products & Paper

Transportation:

Metals & Mining

Diversified & Production

Metals & Mining

Transportation:

Construction & Building

Transportation:

Environmental Industries

Portfolio composition by geographic location at fair value

The following table shows our portfolio composition by geographic location at fair value at February 28, 2021 and February 29, 2020.

The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Portfolio composition by geographic

location at fair value

The following table shows our portfolio composition by geographic

location at fair value at February 28, 2022 and February 28, 2021.

The geographic composition is determined by the location of the corporate

headquarters of the portfolio company.

February 28, 2022

February 28, 2021

Investments at

($ in thousands)

(1) As of February 28, 2022, comprised of our investments in the

subordinated notes, F-R-3 Notes of Saratoga CLO and foreign investments.

As of February 29, 2020, comprised of our investment in the

subordinated notes, Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO, Saratoga Investment Corp.

CLO 2013-1 Warehouse 2, Ltd and

foreign investments.

subordinated notes, F-2-R-3 Notes of Saratoga CLO, as well as the unsecured notes and equity interests in the SLF JV and foreign investments.

As of February 28, 2021, comprised of our investments in the subordinated notes, F-R-3 Notes of Saratoga CLO and foreign investments.

Results of operations

Operating results for the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019 were as follows:

Operating results for the fiscal years ended February 28, 2022, February

28, 2021 and February 29, 2020 were as follows:

For the Year Ended

February 28, 2022

February 28, 2021

February 29, 2020

($ in thousands)

11 unchanged sentences

Investment income

The composition of our

investment income for the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019 were as follows:

The composition of our investment income for the fiscal years

ended February 28, 2022, February 28, 2021 and February 29,

2020 were as follows:

For the Year Ended

7 unchanged sentences

Incentive fee income

Dividend Income*

Structuring and advisory fee income

Other income*

Total investment income

the fiscal year ended February 28, 2021, total investment income decreased $0.8 million, or 1.4% compared to the fiscal year ended February

Interest income from investments increased $3.7 million, or 7.6%, to $51.7 million for the year ended February 28, 2021 from

$48.0 million for the fiscal year ended February 29, 2020.

This reflects an increase of 14.1% in total investments to $554.3 million

at February 28, 2021 from $485.6 million at February 29, 2020, offset by the reduction in LIBOR during this same period.

28, 2021, the weighted average current yield on investments was 9.1% compared to 9.3% at February 29, 2020, which offset some of the

interest income increase.

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.

the fiscal year ended February 28, 2021 and February 29, 2020, total PIK income was $2.6 million and $4.5 million, respectively.

decrease was primarily due to our sale in Easy Ice, LLC, which primarily generated PIK interest income.

The Company sold its interest

in Easy Ice, LLC during the end of the year ended February 29, 2020.

the fiscal year ended February 29, 2020 and February 28, 2019, total PIK income was $4.5 million and $4.2 million, respectively.

increase was primarily due to the increase in investment in Easy Ice, LLC, which primarily generated PIK interest income.

sold its interest in Easy Ice, LLC during the year ended February 29, 2020.

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 incentive fee income of $0.6 million, was recognized related to the Saratoga CLO, reflecting the 12.0% hurdle

rate that has been achieved.

the fiscal year ended February 28, 2021, February 29, 2020 and February 28, 2019, total structuring and advisory fee income was $2.2

million, $5.3 million and $1.4 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.

the fiscal year ended February 28, 2021, February 29, 2020 and February 28, 2019, other income was $1.3 million, $2.1 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.

* Certain prior period amounts have been reclassified to conform

to current period presentation.

For the fiscal year ended February

28, 2022, total investment income increased $13.1 million, or 22.7%, to $70.7 million for the fiscal year ended February 28, 2022 compared

to $57.7 million for the fiscal year ended February 28, 2021.

Interest income from investments increased $6.8 million, or 13.1%, to $58.5

million for the year ended February 28, 2022 from $51.7 million for the fiscal year ended February 28, 2021.

This reflects an increase

of 47.5% in total investments to $817.6 million at February 28, 2022 from $554.3 million at February 28, 2021, offset by (i) the reduction

in LIBOR and interest spreads during the same period and (ii) the increase in equity positions that are not interest-bearing.

28, 2022, the weighted average current yield on investments was 7.7% compared to 9.1% at February 28, 2021, which offset some of the impact

of the increased investments.

For the fiscal year ended February

28, 2021, total investment income decreased $0.8 million, or 1.4% compared to the fiscal year ended February 29, 2020.

Interest income

from investments increased $3.7 million, or 7.7%, to $51.7 million for the year ended February 28, 2021 from $48.0 million for the fiscal

year ended February 29, 2020.

This reflects an increase of 14.1% in total investments to $554.3 million at February 28, 2021 from $485.6

million at February 29, 2020.

At February 28, 2021, the weighted average current yield on investments was 9.1% compared to 9.3% at February

29, 2020, which offset some of the interest income increase.

For the fiscal year ended February

28, 2022 and February 28, 2021, total PIK income was $1.5 million and $2.6 million, respectively.

This decrease was primarily due to the

repayment of debt securities which elected to pay a portion of their interest in PIK and the change in PIK interest of investments that

were restored from non-accrual to accrual status over the past two years.

For the fiscal year ended February

28, 2021 and February 29, 2020, total PIK income was $2.6 million and $4.5 million, respectively.

This decrease was primarily due to our

sale in Easy Ice, LLC, which primarily generated PIK interest income.

The Company sold its interest in Easy Ice, LLC during the end of

the year ended February 29, 2020.

For the fiscal year ended February

28, 2022, February 28, 2021 and February 29, 2020, total dividend income was $1.9 million, $0.1 million and $0.2 million, respectively.

Dividends received is recorded in the consolidated statements of operations when earned, and the increase primarily reflects dividend

income received on various preferred equity investments.

For the fiscal year ended February

28, 2022, February 28, 2021 and February 29, 2020, total structuring and advisory fee income was $4.3 million, $2.2 million and $5.3 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, with the increase primarily reflecting the increased originations during the period.

For the fiscal year ended February

28, 2022, February 28, 2021 and February 29, 2020, other income was $2.7 million, $1.1 million and $1.9 million, respectively.

primarily includes prepayment income fees and is recorded in the consolidated statements of operations when earned.

Operating expenses

The composition of our operating expenses for the years ended February 28, 2021, February 29, 2020 and February 28, 2019 were as follows:

The composition of our operating expenses for the years ended February

28, 2022, February 28, 2021 and February 29, 2020 were as follows:

For the Year Ended

February 28, 2022

February 28, 2021

February 29, 2020

($ in thousands)

9 unchanged sentences

Total operating expenses

the year ended February 28, 2021, total operating expenses decreased $9.0 million, or 20.8% compared to the year ended February 29, 2020.

For the year ended February 29, 2020, total operating expenses increased $14.2 million, or 48.2% compared to the year ended February

the year ended February 28, 2021, the decrease in interest and debt financing expenses is primarily attributable to a lower

blended cost of borrowings, with the higher-yield 2023 Notes being replaced with the lower-cost 2025 Notes and increased lower-cost SBA

average outstanding debt decreased from $273.8 million for the year ended February 29, 2020 to $264.2 million for the

year ended February 28, 2021.

For the year ended February 28, 2021, the weighted average interest rate on our outstanding indebtedness

was 4.46% compared to 4.71% for the year ended February 29, 2020.

The decrease in weighted average interest rate and average

outstanding debt was primarily due to the issuance of the lower-cost 2025 Notes and the repayment of the higher-cost 2023 Notes,

and the issuance of new SBA debentures that carry a lower interest rate.

The average outstanding borrowings of the 2023 Notes decreased

$63.2 million from $63.2 for the year ended February 29, 2020 to $0 million for the year ended February 28, 2021.

On December 21, 2019

and February 7, 2020, the Company redeemed $50.0 million and $24.45 million, respectively, in aggregate principal amounts of $74.45 million

in aggregate principal amounts issued and outstanding 2023 Notes.

At February 28, 2021 and February 29, 2020, the SBA debentures

represented 56.2% and 71.4% of overall debt, respectively.

the years ended February 29, 2020 and February 28, 2019, 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 $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

For the year ended February 28, 2022,

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 29,

2020 and February 28, 2019, the SBA debentures represented 71.4% and 52.7% of overall debt, respectively.

the year ended February 28, 2021, base management fees increased $1.0 million, or 12.3% compared to the fiscal year ended February 29,

The increase in base management fees results from the 12.3% increase in the average value of our total assets, less cash and cash

equivalents, from $462.8 million as of February 29, 2020 to $519.9 million as of February 28, 2021.

the year ended February 29, 2020, base management fees increased $1.2 million, or 17.7% compared to the fiscal year ended February 28,

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.

the year ended February 28, 2021, incentive management fees decreased $9.3 million, or 65.4% compared to the fiscal year ended February

The first part of the incentive management fees decreased this year from $5.8 million for the year ended February 29, 2020

to $5.4 million for the year ended February 28, 2021,as higher average net equity during this period resulted in an increase to the net

investment income hurdle rate pursuant to the Management Agreement.

The incentive management fees related to capital gains decreased

from $8.4 million expense for the fiscal year ended February 29, 2020 to $(0.5) million benefit for the fiscal year ended February 28,

2021, reflecting a reversal of incentive fee accrual due to an increase in unrealized depreciation on investments during the year ended

February 28, 2021.

the year ended February 29, 2020, incentive management fees increased $9.3 million, or 189.6% compared to the fiscal year ended February

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.

total operating expenses increased $16.3 million, or 47.2%, to $50.8 million for the year ended February 28, 2022 compared to $34.5 million

for the year ended February 28, 2021.

For the year ended February 28, 2021, total operating expenses decreased $9.0 million, or 20.8%,

to $34.5 million for the year ended February 28, 2021 compared to $43.6 million for the year ended February 29, 2020.

For the year ended February 28,

2022, interest and debt financing expenses increased $16.3 million, or 47.2% compared to the year ended February 28, 2021.

is primarily attributable to total average outstanding debt increasing from $264.2 million for the year ended February 28, 2021

to $417.4 million for the year ended February 28, 2022.

For the year ended February 28, 2022, the weighted average interest rate

on our outstanding indebtedness was 4.15% compared to 4.46% for the year ended February 28, 2021.

The decrease in weighted average

interest rate and increase in average outstanding debt was primarily due to the issuance of the lower-cost 2026 and 2027 Notes

and the repayment of the higher-cost 2025 Notes, and the issuance of new SBA debentures that carry a lower interest rate.

outstanding borrowings of the 2025 Notes decreased $30.7 million from $60.0 for the year ended February 28, 2021 to $29.6 million for

the year ended February 28, 2022.

At February 28, 2022 and February 28, 2021, the SBA debentures represented 36.2% and 56.2% of overall

debt, respectively.

For the years ended February 28,

2021 and February 29, 2020, the decrease in interest and debt financing expenses is primarily attributable to a decrease in total

outstanding debt.

The decrease is primarily attributable to a decrease in average outstanding debt from $273.8 million for the year

ended February 29, 2020 to $264.2 million for the year ended February 28, 2021.

For the year ended February 28, 2021,

the weighted average interest rate on our outstanding indebtedness was 4.46% compared to the 4.71% for the year ended February 29,

The decrease in weighted average interest rate was primarily driven by the issuance of new SBA debentures that carry a lower interest

At February 28, 2021 and February 29, 2020, the SBA debentures represented 56.2% and 71.4% of overall debt, respectively.

For the year ended February 28, 2022,

base management fees increased $2.8 million, or 30.8% compared to the fiscal year ended February 28, 2021.

The increase in base management

fees results from the 30.8% increase in the average value of our total assets, less cash and cash equivalents, from $519.9 million as

of February 28, 2021 to $680.1 million as of February 28, 2022.

For the year ended February 28, 2021, base management

fees increased $1.0 million, or 12.3% compared to the fiscal year ended February 29, 2020.

The increase in base management fees results

from the 12.3% increase in the average value of our total assets, less cash and cash equivalents, from $462.8 million as of February 29,

2020 to $519.9 million as of February 28, 2021.

For the year ended February 28, 2022,

incentive management fees increased $6.9 million, or 141.7% compared to the fiscal year ended February 28, 2021.

The first part of the

incentive management fees increased this year from $5.4 million for the year ended February 28, 2021 to $6.4 million for the year ended

February 28, 2022, reflecting the increased operating performance during this period.

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.

the year ended February 28, 2021, professional fees increased $0.02 million, or 1.3% compared to the fiscal year ended February 29, 2020.

This increase primarily relates to increased legal and accounting fees this year, as investment activities continue to grow.

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

the year ended February 28, 2021, administrator expenses increased $0.4 million, or 19.5% compared to the fiscal year ended February

29, 2020, which reflects an increase to the cap on the payment or reimbursement of expenses by the Company from $2.225 million to

$2.775 million, effective August 1, 2020.

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.

discussed above, the decrease in interest and debt financing expenses for the years ended February 28, 2021, versus February 29, 2020,

is primarily attributable to the change in mix in lower-yield borrowings outstanding, while the increase versus, the year ended February

28, 2019 is primarily attributable to an increase in the average amount of outstanding debt as compared to the prior years.

the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019, the average borrowings outstanding under the Credit

Facility was approximately $1.8 million, $0.6 million and $3.4 million, respectively, and the average weighted average interest rate

on the outstanding borrowing under the Credit Facility was 0.17%, 6.66% and 7.10%, respectively.

the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019, the average borrowings outstanding of SBA debentures

was $169.3 million, $150.0 million and $146.0 million, respectively.

For the years ended February 28, 2021, February 29, 2020 and February

28, 2019, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.25%, 3.23% and 3.20%, respectively.

the year ended February 28, 2021 and February 29, 2020, the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was

$60.0 million and $60.0 million, respectively.

the year ended February 28, 2021 and February 29, 2020, the average dollar amount of our 7.25% fixed-rate 2025 Notes outstanding was

$43.1 million and $0.0 million, respectively.

the year ended February 28, 2021 and February 29, 2020, the average dollar amount of our 7.75% fixed-rate 2025 Notes outstanding was

$5.0 million and $0.0 million, respectively.

the year ended February 28, 2021 and February 29, 2020, the average dollar amount of our 6.25% fixed-rate 2027 Notes outstanding was

$7.0 million and $0.0 million, respectively.

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 28, 2021, February 29, 2020 and February 28, 2019, the average dollar

amount of our 6.75% fixed-rate 2023 Notes outstanding was $0.0 million, $63.2 million and $74.5 million, respectively.

the years ended February 28, 2021, February 29, 2020 and February 28, 2019, we recognized income tax expense (benefit) of $0.0 million,

$1.0 million and $(1.0) 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.

the year ended February 28, 2021, we accrued excise taxes of $0.7 million on undistributed taxable income as of December 31, 2020.

realized gains (losses) on sales of investments

the fiscal year ended February 28, 2021, the Company had $130.3 million of sales, repayments, exits or restructurings resulting in $8.7

million of net realized loss.

The most significant realized gains and losses during the year ended February 28, 2021 were as follows

(dollars in thousands):

gains increased from $(0.5) million benefit for the fiscal year ended February 28, 2021 to $5.5 million expense for the fiscal year ended

February 28, 2022, reflecting the incentive fee expense on net realized gains and net unrealized appreciation this quarter across numerous

For the year ended February 28, 2021,

incentive management fees decreased $9.3 million, or 65.4% compared to the fiscal year ended February 29, 2020.

The first part of the

incentive management fees decreased this year from $5.8 million for the year ended February 29, 2020 to $5.4 million for the year ended

February 28, 2021, as higher average net equity during this period resulted in an increase to the net investment income hurdle rate pursuant

to the Management Agreement.

The incentive management fees related to capital gains decreased from $8.4 million expense for the fiscal

year ended February 29, 2020 to $(0.5) million benefit for the fiscal year ended February 28, 2021, reflecting a reversal of incentive

fee accrual due to an increase in unrealized depreciation on investments during the year ended February 28, 2021.

For the year ended February 28, 2022,

professional fees decreased $0.3 million, or 19.2% compared to the fiscal year ended February 28, 2021.

This decrease primarily reflects

optimization across accounting, legal and consulting fees in connection with an increase in our assets and the Company bringing certain

services in-house.

For the year ended February 28, 2021,

professional fees increased $0.02 million, or 1.3% compared to the fiscal year ended February 29, 2020.

This increase primarily relates

to increased legal and accounting fees this year, as investment activities continue to grow.

For the year ended February 28, 2022,

administrator expenses increased $0.4 million, or 14.2% compared to the fiscal year ended February 28, 2021, which reflects an increase

to the cap on the payment or reimbursement of expenses by the Company from

$2.775 million to $3.0 million, effective August 1, 2021.

For the year ended February 28,

2021, administrator expenses increased $0.4 million, or 19.5% compared to the fiscal year ended February 29, 2020, which reflects an

increase to the cap on the payment or reimbursement of expenses by the Company from $2.225 million to $2.775 million, effective

August 1, 2020.

For the fiscal years ended February

28, 2022, February 28, 2021 and February 29, 2020, the average borrowings outstanding under the Credit Facilities was approximately $8.7

million, $1.8 million and $0.6 million, respectively, and the average weighted average interest rate on the outstanding borrowing under

the Credit Facilities was 5.22%, 0.17% and 6.66%, respectively.

For the fiscal years ended February

28, 2022, February 28, 2021 and February 29, 2020, the average borrowings outstanding of SBA debentures was $180.4 million, $169.3 million

and $150.0 million, respectively.

For the years ended February 28, 2022, February 28, 2021 and February 29, 2020, the weighted average

interest rate on the outstanding borrowings of the SBA debentures was 2.60%, 3.25% and 3.23%, respectively.

During the year ended February 28,

2021, the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was 60.0 million.

On August 31, 2021, the Company redeemed

$60.0 million in aggregate principal amount of issued and outstanding 6.25% 2025 Notes.

During the year ended February 28,

2022 and February 28, 2021, the average dollar amount of our 7.25% fixed-rate 2025 Notes outstanding was $43.1 million and $43.1 million,

respectively.

During the year ended February 28,

2022 and February 28, 2021, the average dollar amount of our 7.75% fixed-rate 2025 Notes outstanding was $5.0 million and $5.0 million,

respectively.

During the year ended February 28,

2022 and February 28, 2021, the average dollar amount of our 6.25% fixed-rate 2027 Notes outstanding was $15.0 million and $7.0 million,

respectively.

During the year ended February 28,

2022 and February 28, 2021, the average dollar amount of our 4.375% fixed-rate 2026 Notes outstanding was $130.4 million and $0.0 million,

respectively.

During the year ended February 28,

2022 and February 28, 2021, the average dollar amount of our 4.35% fixed-rate 2027 Notes outstanding was $8.4 million and $0.0 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.

the years ended February 28, 2021, February 29, 2020 and February 28, 2019, the average dollar amount of our 6.75% fixed-rate 2023 Notes

outstanding was $0.0 million, $0.0 million and $63.2 million, respectively.

As discussed above, during the first

quarter of 2022 fiscal year, the Company redeemed $60.0 million in aggregate principal amount of issued and outstanding 2025 Notes.

the years ended February 28, 2022, February 28, 2021 and February 29, 2020, the average dollar amount of our 6.25% fixed-rate 2025 Notes

outstanding was $29.6 million, $60.0 million and $60.0 million, respectively.

For the years ended February 28, 2022,

February 28, 2021 and February 29, 2020, we recognized income tax expense (benefit) of ($0.04) million, $0.0 million and $1.0 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.

For the year ended February 28, 2022,

we accrued excise taxes of $0.6 million on undistributed taxable income as of December 31, 2021.

For the year ended February 28, 2021,

we accrued excise taxes of $0.7 million on undistributed taxable income as of December 31, 2020.

Net realized gains (losses) on sales of investments

For the fiscal year ended February

28, 2022, the Company had $226.9 million of sales, repayments, exits or restructurings resulting in $13.4 million of net realized loss.

The most significant realized gains and losses during the year ended February 28, 2022 were as follows (dollars in thousands):

Fiscal year ended February

Gross Proceeds

GreyHeller LLC

Equity Interests

My Alarm Center, LLC

Equity Interests

Passageways, Inc.

Equity Interests

Saratoga Investment Corp.

CLO 2013-1, Ltd.

Class F-1-R-3 Note

Structured Finance Securities

Texas Teachers of Tomorrow, LLC

Equity Interests

V Rental Holdings LLC

Equity Interests

The $7.3 million of net realized gains

was from the sales of the equity position in the Company’s GreyHeller LLC investment.

The $0.1 million of net realized loss

was from the sales of the equity position in Lexipol, LLC.

The $4.9 million of net realized loss

was from the Company’s My Alarm Center, LLC investment that was deemed worthless during this period.

The $6.4 million of net realized gains

was from the sales of the equity position in the Company’s Passageways Inc.

The $0.1 million of net realized loss

was from the repayment of the structured finance securities in the Saratoga Investment Corp.

CLO 2013-1, Ltd.

Class F-1-R-3 Note.

The $2.6 million of net realized gains

was from the sales of the equity position in the Company’s Texas Teachers of Tomorrow, LLC investment.

The $1.9 million of net realized gains was from

the sales of the equity position in the Company’s V Rental Holdings LLC investment.

For the fiscal year ended February

28, 2021, the Company had $130.3 million of sales, repayments, exits or restructurings resulting in $8.7 million of net realized loss.

The most significant realized gains and losses during the year ended February 28, 2021 were as follows (dollars in thousands):

Fiscal year ended February 28, 2021

Elyria Foundry Company, L.L.C

Equity Interests

$8.7 million of net realized losses was from the sales of the equity positions in Elyria Foundry Company, L.L.C.

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)

The $8.7 million of net realized losses

was from the sales of the equity positions in Elyria Foundry Company, L.L.C.

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

Gross Proceeds

Easy Ice, LLC

2 unchanged sentences

Equity Interests

$31.2 million and $11.3 million of net realized gains was from the sales of the equity position in Easy Ice, LLC and Censis Technologies,

Inc., respectively.

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):

The $31.2 million and $11.3 million

of net realized gains was from the sales of the equity position in Easy Ice, LLC and Censis Technologies, Inc., respectively.

Net change in unrealized appreciation (depreciation)

on investments

For the year ended

February 28, 2022, our investments had a net change in unrealized appreciation of $17.0 million versus a net change in unrealized appreciation

of $5.0 million for the year ended February 28, 2021.

The most significant cumulative changes in unrealized appreciation (depreciation)

for the year ended February 28, 2022, were the following (dollars in thousands):

Fiscal year ended February

Gross Proceeds

HMN Holdco, LLC

(Depreciation)

in Unrealized

(Depreciation)

ArbiterSports, LLC

First Term Lien Loan

First Term Lien Loan & Equity Interests

C2 Educational Systems

First Term Lien Loan & Equity Interests

Destiny Solutions Inc.

First Term Lien Loan & Equity Interests

GreyHeller LLC

First Term Lien Loan & Equity Interests

My Alarm Center, LLC

Equity Interests

HMN Holdco, LLC

Netreo Holdings, LLC

First Term Lien Loan & Equity Interests

Passageways, Inc.

First Term Lien Loan & Equity Interests

Saratoga Investment Corp.

CLO 2013-1, Ltd.

Structured Finance Securities

Saratoga Senior Loan Fund I JV, LLC

Unsecured & Equity Interest

SCHOOX INVESTMENTS LLC

Equity Interests

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.

change in unrealized appreciation (depreciation) on investments

the year ended February 28, 2021, our investments had a net change in unrealized appreciation of $5.0 million versus a net change in

unrealized depreciation of $0.8 million for the year ended February 29, 2020.

TG Pressure Washing Holdings

First Term Lien Loan & Equity Interests

Village Realty Holdings LLC

First Term Lien Loan & Equity Interests

Vector Controls

First Term Lien Loan & Equity Interests

The $1.1 million net change in unrealized appreciation

in our investment in ArbiterSports, LLC was driven by improved financial performance.

The $1.5 million net change in unrealized appreciation

in our investment in Artemis Wax was driven by improved financial performance.

The $2.3 million net change in unrealized appreciation

in our investment in C2 Education Systems was driven by improved financial performance.

The $2.6 million net change in unrealized appreciation

in our investment in Destiny Solutions Inc.

was driven by growth and overall strong financial performance.

The $3.1 million net change in unrealized depreciation

in our investment in GreyHeller LLC.

was driven by the sale of that investment, resulting in a reversal of previously recognized unrealized

appreciation reclassified to realized gains.

The $4.7 million net change in unrealized appreciation

in our investment in My Alarm Center, LLC was driven by the reversal of previously recognized unrealized depreciation reclassified to

realized losses.

The $5.1 million net change in unrealized appreciation

in our investment in Netreo Holdings, LLC was driven by growth and improved financial performance.

The $2.3 million net change in unrealized depreciation

in our investment in Passageways, Inc.

was driven by the sale of that investment, resulting in a reversal of previously recognized unrealized

appreciation reclassified to realized gains.

The $4.3 million net change in unrealized appreciation

in our investment in PDDS Buyer, LLC was driven by overall strong company performance.

The $1.7 million net change in unrealized depreciation

in our investment in Saratoga Investment Corp.

CLO 2013-1 Ltd.

was driven by the increase in discount rates, impact of LIBOR changes and

overall market conditions.

The $1.1 million net change in unrealized depreciation

in our investment in Saratoga Senior Loan Fund I JV, LLC was driven by market volatility of the underlying investments of the fund.

The $2.8 million net change in unrealized appreciation

in our investment in Schoox, Inc.

was driven by overall strong company performance.

The $1.1 million net change in unrealized appreciation

in our investment in Top Gun Pressure Washing, LLC was driven by growth, improved financial performance, and a reduced leverage profile.

The $2.2 million net change in unrealized depreciation

in our investment in Village Realty Holdings, LLC was driven by the sale of that investment, resulting in a reversal of previously recognized

unrealized appreciation reclassified to realized gains.

The $1.4 million net change in unrealized appreciation

in our investment in Vector Controls.

was driven by growth and overall strong financial performance.

ended February 28, 2021, our investments had a net change in unrealized appreciation of $5.0 million versus a net change in unrealized

depreciation of $0.8 million for the year ended February 29, 2020.

The most significant cumulative changes in unrealized appreciation

1 unchanged sentence

Fiscal year ended February 28, 2021

Total Unrealized Appreciation (Depreciation)

in Unrealized Appreciation

(Depreciation)

YTD Change in

(Depreciation)

ArbiterSports, LLC

19 unchanged sentences

First Term Lien Loan & Equity Interests

$1.3 million net change in unrealized depreciation in our investment in ArbiterSports, LLC was driven by disruptions to its business

due to COVID-related shutdowns.

$2.5 million net change in unrealized depreciation in our investment C2 Education Systems was driven by disruptions to its business due

to COVID-related shutdowns.

$7.7 million net unrealized loss reversal in our investment in Elyria Foundry Company, L.L.C.

was due to the realization of this investment,

which resulted in a net unrealized appreciation during FY21.

$4.9 million net change in unrealized depreciation in our investment in Knowland Group, LLC was driven by disruptions to its business

due to COVID-related shutdowns.

$1.8 million net change in unrealized depreciation in our investment in My Alarm Center, LLC was driven by increasing leverage levels

combined with declining market conditions in the sector.

$1.8 million net change in unrealized appreciation in our investment in Netreo Holdings, LLC was driven by growth and improved financial

$1.2 million net change in unrealized appreciation in our investment in Passageways, Inc.

was driven by growth and improved financial

$2.3 million net change in unrealized appreciation in our investment in Roscoe Medical, Inc.

was driven by continued improvement in the

company’s performance.

$1.4 million of unrealized depreciation in our investment in Saratoga Investment Corp.

The $1.3 million net change in unrealized depreciation

in our investment in ArbiterSports, LLC was driven by disruptions to its business due to COVID-related shutdowns.

The $2.5 million net change in unrealized depreciation

in our investment C2 Education Systems was driven by disruptions to its business due to COVID-related shutdowns.

The $7.7 million net unrealized loss reversal in

our investment in Elyria Foundry Company, L.L.C.

was due to the realization of this investment, which resulted in a net unrealized appreciation

The $4.9 million net change in unrealized depreciation

in our investment in Knowland Group, LLC was driven by disruptions to its business due to COVID-related shutdowns.

The $1.8 million net change in unrealized depreciation

in our investment in My Alarm Center, LLC was driven by increasing leverage levels combined with declining market conditions in the sector.

The $1.8 million net change in unrealized appreciation

in our investment in Netreo Holdings, LLC was driven by growth and improved financial performance.

The $1.2 million net change in unrealized appreciation

in our investment in Passageways, Inc.

was driven by growth and improved financial performance.

The $2.3 million net change in unrealized appreciation

in our investment in Roscoe Medical, Inc.

was driven by continued improvement in the company’s performance.

The $1.4 million of unrealized depreciation in

our investment in Saratoga Investment Corp.

CLO 2013-1, Ltd.

was driven by a reduction in

base interest rates during FY 2021, along with expenses resulting from the recapitalization of the CLO.

$2.0 million net change in unrealized appreciation in our investment in Village Realty Holdings, LLC was driven by increased customer

demand during its peak season this year.

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.

was driven by a reduction in base interest rates during FY 2021, along with

expenses resulting from the recapitalization of the CLO.

The $2.0 million net change in unrealized appreciation

in our investment in Village Realty Holdings, LLC was driven by increased customer demand during its peak season this 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

1 unchanged sentence

Fiscal year ended February 29, 2020

Total Unrealized Appreciation (Depreciation)

in Unrealized

(Depreciation)

YTD Change in Unrealized Appreciation (Depreciation)

Easy Ice, LLC

4 unchanged sentences

First Term Lien Loan & Equity Interests

$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.

$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.

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

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

Total Unrealized Appreciation (Depreciation)

YTD Change in Unrealized Appreciation

Elyria Foundry Company, L.L.C.

Equity Interests

Roscoe Medical, Inc.

Second Lien Term Loan Interests

Netreo Holdings, LLC

Equity Interests

My Alarm Center, LLC

Equity Interests

$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 since year-end and increased labor costs, negatively impacting the Company’s performance.

$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.

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

$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.

in net assets resulting from operations

the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019, we recorded a net increase in net assets resulting

from operations of $14.8 million, $55.7 million and $18.5 million, respectively.

Based on 11,188,629 weighted average common shares outstanding

as of February 28, 2021, our per share net increase in net assets resulting from operations was $1.32 for the fiscal year ended February

This compares to a per share net increase in net assets resulting from operations of $5.98 for the fiscal year ended February

29, 2020 (based on 9,319,192 weighted average common shares outstanding as of February 29, 2020), and 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).

CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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.

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.

addition, we intend to distribute to our stockholders substantially all of our operating 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.

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 the non-interested board of directors on April 16, 2018.

This requirement limits the amount that we may borrow.

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.

Changes in net assets resulting from operations

For the fiscal years ended February

28, 2022, February 28, 2021 and February 29, 2020, we recorded a net increase in net assets resulting from operations of $45.7 million,

$14.8 million and $55.7 million, respectively.

Based on 11,456,631 weighted average common shares outstanding as of February 28, 2022,

our per share net increase in net assets resulting from operations was $3.99 for the fiscal year ended February 28, 2022.

This compares

to a per share net increase in net assets resulting from operations of $1.32 for the fiscal year ended February 28, 2021 (based on 11,188,629

weighted average common shares outstanding as of February 28, 2021), and a per share net increase in net assets resulting from operations

of $5.98 for the fiscal year ended February 29, 2020 (based on 9,319,192 weighted average common shares outstanding as of February 29,

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, the Encina Credit Facility 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 operating 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 the board of directors, including a majority of our independent directors, on April 16, 2018.

requirement limits the amount that we may borrow.

Our asset coverage ratio, as defined in the 1940 Act, was 209.2% as of February 28,

2022 and 347.1% as of February 28, 2021.

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, to pay dividends 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.

revolving credit facility

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 September 14, 2020.

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, to pay dividends 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

The senior secured revolving credit facility we

entered into with Madison Capital Funding LLC (the “Madison Credit Facility”) on June 30, 2010, which was most recently amended

on September 3, 2021 and then fully repaid and terminated on October 4, 2021.

As of February 28, 2021, we had no outstanding

borrowings under the Madison Credit Facility.

Our borrowing base under the Madison Credit Facility at February 28, 2021 was $38.9 million.

Encina Credit Facility

Below is a summary of the terms of the senior

secured revolving credit facility we entered into with Encina Lender Finance, LLC on October 4, 2021.

The Company entered into a

senior secured revolving credit facility in the initial facility amount of $50.0 million (the “Facility Amount”).

has the ability to request an increase in the Facility Amount during the first two years following the closing date to up to $75.0 million.

The commitment termination date is October 4, 2024.

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.

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.

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).

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).

The Company can draw up to

the lesser of (i) the Facility Amount and (ii) the Borrowing Base.

The Borrowing Base is an amount equal to (i) the difference of (A)

the product of the applicable advance rate which varies from 50.0% to 75.0% depending on the type of loan asset (Defaulted Loans being

excluded in that they carry an advance rate of 0%) and the value, determined in accordance with the Encina Credit Facility (the “Adjusted

Borrowing Value”), of certain “eligible”

loan assets pledged as security for the loan (the “Borrowing Base Value”)

and (B) the Excess Concentration Amount, as calculated in accordance with the Encina Credit Facility, plus (ii) any amounts held in the

Prefunding Account and, without duplication, Excess Cash held in the Collection Account, less (iii) the product of (a) the amount of any

undrawn funding commitments the Company has under any loan asset and (b) the Unfunded Exposure Haircut Percentage, and less (iv) $100,000.

Each loan asset held by the Company as of the date on which the Encina 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 and under certain circumstances, 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.

The Encina 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.

The Encina Credit Facility requires certain minimum

drawn amounts.

For the period beginning on the closing date and ending April 4, 2022, the minimum funding amount is $12.5 million.

the period beginning on April 5, 2022 through maturity, the minimum funding amount is the greater of $25.0 million and 50% of the Facility

Amount in effect from time to time.

The Encina Credit Facility

is secured by assets of Saratoga Investment Funding II LLC (“SIF II”) and pledged to the lender under the credit facility.

SIF II is a wholly owned special purpose entity formed by the Company for the purpose of entering into the Encina Credit Facility.

Interest Rate and Fees.

Under the Encina

Credit Facility, funds are borrowed from or through certain lenders at the greater of the prevailing LIBOR rate and 0.75%, plus an applicable

margin of 4.00%.

The Encina Credit Facility includes benchmark replacement provisions which permit the Administrative Agent and the Borrower

to select a replacement rate upon the unavailability of LIBOR.

In addition, the Company pays 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 Encina Credit Facility for the duration of the term of the credit facility.

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.

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.

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”):

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

The Company was also obligated to pay certain other fees to the lenders in connection with the closing of the Encina Credit

Collateral Tests .

It is a condition precedent

to any borrowing under the Encina Credit Facility that the principal amount outstanding under the Encina Credit Facility, after giving

effect to the proposed borrowings, not exceed the Borrowing Base (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 Encina Credit Facility, to accrued interest and commitment fees payable to the lenders under the Encina 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%.

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.

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”

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.

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

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.

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).

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.

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.

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 each one-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.

The Credit Facility contains certain negative covenants, customary representations and warranties and affirmative covenants

pledged loan assets plus the fair value of certain ineligible pledged loan assets (in each case, subject to certain adjustments) to outstanding borrowings under the Encina Credit Facility plus the Unfunded Exposure Amount must equal at least 200.0%.

The Encina Credit Facility also may require 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”

Such ineligible collateral loans will be excluded

from the calculation of the Borrowing Base and may lead to a Borrowing Base Deficiency, which may be cured by effecting one or more (or

any combination thereof) of the following actions:

(A) deposit into or credit to the collection account cash and eligible investments,

(B) repay outstanding borrowings (together with certain costs and expenses), (C) sell or substitute loan assets in accordance with the

Encina Credit Facility, or (D) pledge additional loan assets as collateral.

Compliance with the Collateral Tests is also a condition to

the discretionary sale of pledged loan assets by the Company.

Priority of Payments .

The priority of payments

provisions of the Encina Credit Facility require, after payment of specified fees and expenses, that collections of interest from the

loan assets and, to the extent that these are insufficient, collections of principal 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.

Operating Expenses .

The priority of payments

provision of the Encina Credit Facility provides for the payment of certain operating expenses of the Company out of collections on interest

and principal in accordance with the priority established in such provision.

The operating expenses payable pursuant to the priority of

payment provisions is limited to $200,000 per annum.

Representations and Warranties;

Events of Default .

The Encina Credit Facility contains customary representations and warranties, affirmative covenants, negative 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:

Interest Coverage Ratio of less than 150.0%;

Overcollateralization Ratio of less than 175.0%;

filing of certain ERISA or tax liens;

occurrence of certain “Manager Events”

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;

of the Management Agreement between Saratoga Investment Advisors and the Company to be in

full force and effect;

or conviction of Saratoga Investment Advisors or any “key person”

offense, or any fraud, embezzlement or misappropriation of funds by Saratoga Investment Advisors

or any “key person”

The Encina Credit Facility does not contain grace periods for breach by the Company of any negative covenants or

of certain of the affirmative covenants, including, without limitation, those related to preservation of the existence and separateness

of the Company.

Other events of default under the Encina Credit Facility include, among other things, the following:

Failure of the Company to maintain an Interest Coverage Ratio of less than 175.0%;

Failure of the Company to maintain an Overcollateralization Ratio of less than 200.0%;

the filing of certain ERISA or tax liens on assets of the Company or the Equityholder;

failure by Specified Holders to collectively, directly or indirectly, own and control at least 51% of the outstanding equity interests of Saratoga Investment Advisor, or (y) possess the right to elect (through contract, ownership of voting securities or otherwise) at all times a majority of the board of directors (or similar governing body) of Saratoga Investment Advisor and to direct the management policies and decisions of Saratoga Investment Advisor, or (ii) the dissolution, termination or liquidation in whole or in part, transfer or other disposition, in each case, of all or substantially all of the assets of, Saratoga Investment Advisor;

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,”

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”

without a reputable, experienced individual reasonably satisfactory to Encina Lender Finance 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’

activities, all without a reputable, experienced individual reasonably satisfactory to Madison

Capital Funding appointed within 30 days;

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.

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.

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.

daily activities, all without a reputable, experienced individual reasonably satisfactory to Encina Lender Finance appointed within 30 days.

Fees and Expenses .

The Company paid certain

fees and reimbursed Encina Lender Finance, LLC for the aggregate amount of all documented, out-of-pocket costs and expenses, including

the reasonable fees and expenses of lawyers, incurred by Encina Lender Finance, LLC in connection with the Encina Credit Facility and

the carrying out of any and all acts contemplated thereunder up to and as of the date of closing.

These amounts totaled $1.4 million.

February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

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;

the condition that we may not acquire additional loan assets without the prior written consent of the administrative agent.

September 17, 2014, we entered into a second amendment to the Revolving Facility with Madison Capital Funding LLC to, among other things:

the commitment termination date from February 24, 2015 to September 17, 2017;

the maturity date of the Revolving Facility from February 24, 2020 to September 17, 2022

(unless terminated sooner upon certain events);

the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%;

the floor on base rate borrowings from 3.00% to 2.25%;

and on LIBOR borrowings from 2.00% to 1.25%.

May 18, 2017, we entered into a third amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

the commitment termination date from September 17, 2017 to September 17, 2020;

the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025;

the floor on base rate borrowings from 2.25% to 2.00%;

the floor on LIBOR borrowings from 1.25% to 1.00%;

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

April 24, 2020, we entered into a fourth amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

certain amendments related to the Paycheck Protection Program (“Permitted PPP Amendment”)

to Loan Asset Documents;

certain debt and interest amounts allowed by the Permitted PPP Amendments from certain calculations

related to Net Leverage Ratio, Interest Coverage Ratio and EBITDA;

such Permitted PPP Amendments from constituting a Material Modification.

September 14, 2020, we entered into a fifth amendment to the Credit Facility to, among other things:

the commitment termination date of the Credit Facility from September 17, 2020 to September

17, 2021, with no change to the maturity date of September 17, 2025.

for the transition away from the LIBOR Rate in the market, and

the definition of “Eligible Loan Asset”

to allow investments with certain recurring

revenue features to qualify as Collateral and be included in the borrowing base.

of February 28, 2021, we had no outstanding borrowings under the Credit Facility and $158.0 million of SBA-guaranteed debentures

outstanding (which are discussed below).

As of February 29, 2020, we had no outstanding borrowings under the Credit Facility and

$150.0 million of SBA-guaranteed debentures outstanding.

Our borrowing base under the Credit Facility at February 28, 2021 and

February 29, 2020 was $38.9 million and $35.6 million, respectively.

asset coverage ratio, as defined in the 1940 Act, was 347.1% as of February 28, 2021 and 607.1% as of February 29, 2020.

SBA-guaranteed

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,

As of February 28, 2022, we had $12.5

million outstanding borrowings under the Credit Facility and $185.0 million of SBA-guaranteed debentures outstanding (which are discussed

As of February 28, 2021, we had no outstanding borrowings under the Credit Facility and $158.0 million of SBA-guaranteed debentures

Our borrowing base under the Credit Facility at February 28,2022 and February 28, 2021 was $50.0 million and $38.9 million,

respectively.

Our asset coverage ratio, as defined in the 1940 Act, was

209.2% as of February 28, 2022 and 347.1% as of February 28, 2021.

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 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.

SBIC license allows our SBIC subsidiaries to obtain leverage by issuing SBA-guaranteed debentures.

SBA-guaranteed debentures are non-recourse,

interest only debentures with interest payable semi-annually and have a ten-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.

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

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 issuing SBA-guaranteed debentures.

SBA-guaranteed debentures are non-recourse, interest only debentures with interest

payable semi-annually and have a ten-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 with 10-year maturities.

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 of SBA-guaranteed debentures.

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.

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 of SBA-guaranteed

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 of SBA-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.

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.

As a result of the 2016 omnibus spending bill signed into law in December

2015, the maximum amount of SBA-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

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 board of directors, including a majority

of our independent 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.

of February 28, 2021, our SBIC LP subsidiary had $75.0 million in regulatory capital and $124.0 million SBA-guaranteed

debentures outstanding and our SBIC II LP subsidiary had $69.0 million in regulatory capital and $34.0 million SBA-guaranteed debentures

May 2013, the Company issued $48.3 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”).

The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the NYSE.

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).

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 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

As of February 28, 2022, our

SBIC LP subsidiary had $75.0 million in regulatory capital and $86.0 million SBA-guaranteed debentures outstanding and our SBIC

II LP subsidiary had $87.5 million in regulatory capital and $99.0 million SBA-guaranteed debentures outstanding.

Unsecured notes

In May 2013, the Company issued $48.3 million in

aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”).

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 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 “6.25% 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.

included the full exercise of the underwriters’

option to purchase an additional $5.0 million aggregate principal amount of 6.25%

2025 Notes within 30 days.

Interest on the 6.25% 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 6.25% 2025 Notes mature on August 31, 2025 and commencing August 28,

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.

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.

August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “6.25%

2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million.

costs incurred were approximately $0.3 million.

Financing costs of $1.6 million related to

the 6.25% 2025 Notes have been capitalized and are being amortized over the term of the 6.25% 2025 Notes.

The 6.25% 2025 Notes are no

longer 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 a re-opening and up-sizing of its existing 6.25% 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 $5.0 million aggregate principal amount of 6.25% 2025 Notes within 30 days.

Interest on the 6.25% 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 6.25% 2025

Notes mature on August 31, 2025 and commencing August 28, 2021, may be redeemed in whole or in part at any time or from time to time

purchase an additional $2.5 million aggregate principal amount of 6.25% 2025 Notes within 30 days.

Interest rate, interest payment dates

and maturity remain unchanged from the existing 6.25% 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 6.25% 2025 Notes have been capitalized and are being amortized over the term of the 6.25% 2025 Notes.

On August 31, 2021, the Company

redeemed $60.0 million in aggregate principal amount of the issued and outstanding 6.25% 2025 Notes at par, plus the accrued and unpaid

interest thereon, through, but excluding, the redemption date of August 31, 2021.

The 6.25% 2025 Notes were listed on the NYSE under the

trading symbol of “SAF”

with a par value of $25.00 per share and effective as of August 31, 2021, have been delisted following

the redemption.

On June 24, 2020, the Company issued $37.5 million

in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25% 2025 Notes”) for net proceeds of $36.3 million

after deducting underwriting commissions of approximately $1.2 million.

Offering costs incurred were approximately $0.2 million.

6, 2020, the underwriters exercised their option in full to purchase an additional $5.625 million in aggregate principal amount of its

7.25% unsecured notes due 2025.

Net proceeds to the Company were $5.4 million after deducting underwriting commissions of approximately

$0.2 million.

Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate

of 7.25% per year, beginning August 31, 2020.

The 7.25% 2025 Notes mature on June 30, 2025 and commencing June 24, 2022, 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 7.25% 2025 Notes have

been capitalized and are being amortized over the term of the 7.25% 2025 Notes.

The Company has received an investment grade private rating

of “BBB+”

from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.

The 7.25% 2025 Notes are listed on

the NYSE under the trading symbol “SAK”

with a par value of $25.00 per share.

At February 28, 2022, the total 7.25% 2025 Notes

outstanding was $43.1 million.

On July 9, 2020, the Company issued $5.0 million

aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75% 2025 Notes”) for net proceeds of $4.8 million

after deducting underwriting commissions of approximately $0.2 million.

Offering costs incurred were approximately $0.1 million.

on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.75% per year, beginning

August 31, 2020.

The 7.75% Notes 2025 mature on July 9, 2025 and may be redeemed in whole or in part at any time or from time to time

at our option.

3 unchanged sentences

term of the Notes.

The 6.25% 2025 Notes are listed on the NYSE under the trading symbol “SAF”

with a par value

of $25.00 per share.

February 5, 2019, the Company completed a re-opening and up-sizing of its existing 6.25% 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 6.25% 2025 Notes within 30 days.

rate, interest payment dates and maturity remain unchanged from the existing 6.25% 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 6.25% 2025 Notes have been capitalized and are being amortized over the term of the

6.25% 2025 Notes.

February 28, 2021, the total 6.25% 2025 Notes outstanding was $60.0 million.

connection with the issuance of the 6.25% 2025 Notes, we agreed to the following covenants for the period of time during which the notes

are outstanding:

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).

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 SEC

no-action relief granted by the SEC to another BDC (or to us if we determine 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 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 6.25% 2025 Notes and the Trustee,

for the period of time during which the 6.25% 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.

June 24, 2020, the Company issued $37.5 million in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25%

2025 Notes”) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million.

costs incurred were approximately $0.3 million.

On July 6, 2020, the underwriters exercised their option in full to purchase an additional

$5.625 million in aggregate principal amount of its 7.25% unsecured notes due 2025.

Net proceeds to the Company were $5.4 million after

deducting underwriting commissions of approximately $0.2 million.

Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February

28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020.

The 7.25% 2025 Notes mature on June 30,

2025 and commencing June 24, 2022, 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 7.25% 2025 Notes have been capitalized and are being amortized over the term of the 7.25% 2025 Notes.

The Company has received an investment grade private rating of “BBB+”

from Egan-Jones Ratings Company, an independent, unaffiliated

rating agency.

The 7.25% 2025 Notes are listed on the NYSE under the trading symbol “SAK”

with a par value of $25.00 per

At February 28, 2021, the total 7.25% 2025 Notes outstanding was $43.1 million.

July 9, 2020, the Company issued $5.0 million aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75%

2025 Notes”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million.

costs incurred were approximately $0.1 million.

Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31,

August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020.

The 7.75% Notes 2025 mature on July 9, 2025 and 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 $0.3 million related to the 7.75% Notes

2025 have been capitalized and are being amortized over the term of the Notes.

The 7.75% 2025 Notes are unlisted and have a par value

of $25.00 per share.

February 28, 2021, the total 7.75% 2025 Notes outstanding was $5.0 million.

December 29, 2020, the Company issued $5.0 aggregate principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25% Notes

2027”).

The 7.75% 2025 Notes are unlisted and have a par value of $25.00 per share.

At February 28, 2022, the total 7.75% 2025 Notes

outstanding was $5.0 million.

On December 29, 2020, the Company issued $5.0 aggregate

principal amount of our 6.25% fixed-rate Notes due in 2027 (the “6.25% Notes 2027”).

Offering costs incurred were approximately

$0.1 million.

Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and

November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The 6.25% Notes 2027 mature on December 29, 2027 and may be

redeemed in whole or in part at any time or from time to time at our option, on or after December 29, 2024.

The net proceeds from the

offering were used for general corporate purposes in accordance with our investment objective and strategies.

Financing costs of $0.1 million

related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

On January 28, 2021, the Company issued $10.0

million aggregate principal amount of the Second 6.25% Notes 2027 for net proceeds of $9.7 million after deducting underwriting commissions

of approximately $0.3 million.

Offering costs incurred were approximately $0.0 million.

Interest on the 6.25% Notes 2027 is paid quarterly

in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option,

on or after December 29, 2024.

The net proceeds from the offering were used for general corporate purposes in accordance with our investment

objective and strategies.

Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized

over the term of the Notes.

January 28, 2021, the Company issued $10.0m aggregate principal amount of our 6.25% fixed rate Notes due in 2027 (the “Second

6.25% Notes 2027”) for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million.

costs incurred were approximately $0.0 million.

Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31,

August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021.

in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year.

The 6.25% Notes 2027 mature on January 28,

and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option.

2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option on or after December

The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and

Financing costs of $0.3 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term

of the Notes.

At February 28, 2022, the total 6.25% 2025 Notes outstanding was $15.0

On March 10, 2021, the Company issued $50.0 million

aggregate principal amount of the 4.375% Notes 2026 for net proceeds of $49.0 million after deducting underwriting commissions of approximately

$1.0 million.

Offering costs incurred were approximately $0.2 million.

Interest on the 4.375% Notes 2026 is paid semi-annually

in arrears on February 28 and August 28, at a rate of 4.375% per year.

The 4.375% Notes 2026 mature on February 28, 2026 and may

be redeemed in whole or in part at any time on or after November 28, 2025 at par plus a “make-whole”

premium, or thereafter

The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies.

Financing costs of $1.2 million related to the 4.375% Notes 2026 have been capitalized and are being amortized over the term of the

On July 15, 2021, the Company issued an additional

$125.0 million aggregate principal amount of the Company’s 4.375% Notes 2026 (the “Additional 4.375% 2026 Notes”) for

net proceeds for approximately $123.5 million, based on the public offering price of 101.00% of the aggregate principal amount of the

Additional 4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and the estimated offering expenses of approximately

$0.2 million payable by the Company.

The net proceeds from the offering were used to redeem all of the outstanding 6.25% 2025 Notes (as

described above), and for general corporate purposes in accordance with our investment objective and strategies.

The Additional 4.375%

2026 Notes were treated as a single series with the existing 4.375% 2026 Notes under the indenture and had the same terms as the existing

4.375% 2026 Notes.

At February 28, 2022 the total 4.375% Notes outstanding

was $175.0 million.

January 19, 2022, the Company issued $75.0 million aggregate principal amount of our 4.35%

fixed-rate Notes due in 2027 (the “4.35% Notes 2027”) for net proceeds of $73.0 million, based on the public offering price

of 99.317% of the aggregate principal amount of the 4.35% Notes 2027, after deducting the underwriting commissions of approximately $1.5

Offering costs incurred were approximately $0.2 million.

Interest on the 4.35%

Notes 2027 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per year, beginning August 28, 2022.

The 4.35% Notes 2027 mature on February 28, 2027 and may be redeemed in

whole or in part at the Company’s option at any time prior to November 28, 2026, at par plus a “make-whole”

and thereafter at par .

The net proceeds

2 unchanged sentences

of $1.7 million related to the 4.35% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

February 28, 2021, the total 6.25% 2025 Notes outstanding was $15.0 million.

February 28, 2021 and February 29, 2020, 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:

At February 28, 2022 the total 4.35% Notes outstanding

was $75.0 million.

At February 28, 2022 and February 28, 2021, the

fair value of total cash and cash equivalents, cash and cash equivalents in reserve accounts and total investments by major category are

February 28, 2022

February 28, 2021

Percentage of Total

($ in thousands)

3 unchanged sentences

Second lien term loans

Unsecured term loans

Structured finance securities

Unsecured loan

Equity interests

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 a 30-day option

to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

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

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 a 30-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 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 28, 2021, 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 28, 2021, there was no activity related to the

ATM offerings.

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

(the “Share Repurchase Plan”).

On October 7, 2015, our board of directors extended the 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, our board of directors

extended the 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, our board of directors extended the 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, our board of directors increased the Share Repurchase Plan to 1.3 million shares

of common stock.

On January 5, 2021, our board of directors extended the Shares Repurchase Plan for another year to January 15, 2022,

leaving the number of shares unchanged at 1.3 million shares of common stock.

As of February 28, 2021, the Company purchased 408,812

shares of common stock, at the average price of $17.84 for approximately $7.3 million pursuant to the Share Repurchase Plan.

year ended February 28, 2021 the Company purchased 190,321 shares of common stock, at the average price $18.96 for approximately $3.6

million pursuant to the Share Repurchase Plan.

January 5, 2021, our board of directors declared a dividend of $0.42 per share, which was paid on February 10, 2021, to common stockholders

of record as of January 26, 2021.

Shareholders had the option to receive payment of the dividend in cash, or receive shares of common

stock, pursuant to the DRIP.

Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 41,388

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 $21.75 per share, which equaled 95% of the volume weighted average

trading price per share of the common stock on January 28, 29 and February 1, 2, 3, 4, 5, 8, 9 and 10, 2021.

October 7, 2020, our board of directors declared a dividend of $0.41 per share, which was paid on November 10, 2020, to common stockholders

of record as of October 26, 2020.

Shareholders had the option to receive payment of the dividend in cash, or receive shares of common

stock, pursuant to the DRIP.

Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 45,706

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 $17.63 per share, which equaled 95% of the volume weighted average

trading price per share of the common stock on October 28, 29, 30 and November 2, 3, 4, 5, 6, 9 and 10, 2020.

July 7, 2020, the Company declared a dividend of $0.40 per share payable on August 12, 2020, to common stockholders of record on

July 27, 2020.

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 $3.7 million in cash and 47,098 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 $16.45 per share, which equaled 95.0% of the volume weighted average

trading price per share of the common stock on July 30, 31 and August 3, 4, 5, 6, 7, 10, 11 and 12, 2020.

the three months ended May 31, 2020, there were no dividends declared.

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

were added to the equity ATM program.

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.

This agreement was terminated as of July 29, 2021, and as of that date, the

Company had 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).

On July 30, 2021, we entered into an equity distribution

agreement with Ladenburg Thalmann & Co.

and Compass Point Research and Trading, LLC (the “Agents”), through which

we may offer for sale, from time to time, up to $150.0 million of our common stock through the Agents, or to them, as principal for their

As of February 28, 2022, the Company sold 4,840,361 shares for gross proceeds of $123.9 million at an average price of $25.61

for aggregate net proceeds of $122.4 million (net of transaction costs).

During the three months ended February 28, 2022, the Company

sold 392,826 shares for gross proceeds of $11.5 million at an average price of $29.31 for aggregate net proceeds of $11.4 million (net

of transaction cost).

During the year ended February 28, 2022, the Company sold 918,343 shares for gross proceeds of $26.8 million at

an average price of $29.22 for aggregate net proceeds of $26.6 million (net of transaction cost).