Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Price range of common stock
Our common stock is traded on the NYSE under the
symbol “SAR.” The following table lists the high and low closing sale price for our
common stock, and the closing sale price as a percentage of NAV for each fiscal quarter during the last two most recently completed fiscal
years and any subsequent interim period.
Price Range
Percentage of High Closing Sales
Price as a Premium (Discount)
Percentage of Low Closing Sales
Price as a Premium (Discount)
NAV(1)
High
Low
to NAV(2)
to NAV(2)
Fiscal Year Ending February 28, 2025
First Quarter through May 1, 2025
$
*
$
25.79
$
21.46
*
*
Fiscal Year Ended February 28, 2025
First Quarter
$ 26.85
$ 24.09
$ 22.52
(10.3 )%
(16.1 )%
Second Quarter
$ 27.07
$ 24.42
$ 21.91
(9.8 )%
(19.1 )%
Third Quarter
$ 26.95
$ 26.07
$ 22.95
(3.3 )%
(14.8 )%
Fourth Quarter
$ 25.86
$ 26.00
$ 23.52
0.5 %
(9.1 )%
Fiscal Year Ended February 29, 2024
First Quarter
$ 28.48
$ 28.10
$ 22.82
(1.3 )%
(19.9 )%
Second Quarter
$ 28.44
$ 28.64
$ 25.70
0.7 %
(9.6 )%
Third Quarter
$ 27.42
$ 26.60
$ 23.05
(3.0 )%
(15.9 )%
Fourth Quarter
$ 27.12
$ 26.73
$ 22.77
(1.4 )%
(16.0 )%
*
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.
Shares of BDCs may trade at a market price that is less than the NAV
of those shares. The possibilities that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable
over the long term are separate and distinct from the risk that our NAV will decrease. The last reported closing sale price of our common
stock on May 6, 2025 was $24.86 per share, which represents a discount of approximately 3.9%
to the NAV of $25.86 as of February 28, 2025.
57
Summarized Financial Highlights
The following table summarizes ten years of financial highlights:
For the year ended
Per share data
February 28,
2025
February 29,
2024
February 28,
2023
February 28,
2022
February 28,
2021
Net asset value at beginning of period
$ 27.12
$ 29.18
$ 29.33
$ 27.25
$ 27.13
Net investment income(1)
3.81
4.49
2.94
1.74
2.07
Net realized and unrealized gains (losses) on investments(1)
(1.73 )
(3.77 )
(0.75 )
2.46
(0.74 )
Realized losses on extinguishment of debt*
(0.06 )
(0.01 )
(0.13 )
(0.21 )
(0.01 )
Net increase in net assets resulting from operations
2.02
0.71
2.06
3.99
1.32
Distributions declared from net investment income
(3.30 )
(2.82 )
(2.28 )
(1.93 )
(1.23 )
Total distributions to stockholders
(3.30 )
(2.82 )
(2.28 )
(1.93 )
(1.23 )
Issuance of common stock at net asset value (2)
(0.16 )
(0.40 )
-
-
-
Capital contribution from Manager for the issuance of common stock (8)
0.26
0.48
-
-
-
Repurchases of common stock(3)
-
0.03
0.17
0.01
0.13
Dilution(4)
(0.08 )
(0.06 )
(0.10 )
-
(0.10 )
Net asset value at end of period
$ 25.86
$ 27.12
$ 29.18
$ 29.33
$ 27.25
Per share market value at end of period
$ 26.00
$ 23.61
$ 27.55
$ 27.47
$ 23.08
Total return based on market value(5)
27.17 %
-3.92 %
10.35 %
28.19 %
7.63 %
Total return based on net asset value(5)(6)
10.11 %
4.20 %
9.46 %
15.88 %
7.31 %
Shares outstanding at end of period
15,183,078
13,653,476
11,890,500
12,131,350
11,161,416
Ratio/Supplemental data:
Net assets at end of period
392,665,468
370,224,108
346,958,042
355,780,523
304,185,770
Ratio of total expenses to average net assets*
25.81 %
24.70 %
18.91 %
16.09 %
13.11 %
Ratio of net investment income to average net assets*
14.11 %
16.01 %
10.23 %
6.05 %
7.77 %
Portfolio turnover rate(7)
16.12 %
2.80 %
24.05 %
33.59 %
25.26 %
For the year ended
Per share data
February 29,
2020
February 28,
2019
February 28,
2018
February 28,
2017
February 29,
2016
Net asset value at beginning of period
$ 23.62
$ 22.96
$ 21.97
$ 22.06
$ 22.70
Adoption of ASC 606
-
(0.01 )
-
-
-
Net asset value at beginning of period, as adjusted
23.62
22.95
21.97
22.06
22.70
Net investment income(1)
1.59
2.60
2.11
1.94
1.91
Net realized and unrealized gains (losses) on investments(1)
4.56
0.03
0.82
0.30
0.18
Realized losses on extinguishment of debt*
(0.17 )
-
-
(0.26 )
-
Net increase in net assets resulting from operations
5.98
2.63
2.93
2.24
2.09
Distributions declared from net investment income
(2.21 )
(2.06 )
(1.90 )
(1.93 )
(2.36 )
Total distributions to stockholders
(2.21 )
(2.06 )
(1.90 )
(1.93 )
(2.36 )
Issuance of common stock above net asset value(2)
-
0.15
-
-
-
Repurchases of common stock(3)
-
-
-
-
-
Dilution(4)
(0.26
)
(0.05 )
(0.04 )
(0.14 )
(0.37 )
Net asset value at end of period
$ 27.13
$ 23.62
$ 22.96
$ 21.97
$ 22.06
Per share market value at end of period
$ 22.91
$ 23.04
$ 21.86
$ 22.74
$ 14.22
Total return based on market value(5)
9.28 %
16.11 %
5.28 %
80.83 %
4.27 %
Total return based on net asset value(5)(6)
26.22 %
13.33 %
14.45 %
12.62 %
11.10 %
Shares outstanding at end of period
11,217,545
7,657,156
6,257,029
5,794,600
5,672,227
Ratio/Supplemental data:
Net assets at end of period
304,286,853
180,875,187
143,691,367
127,294,777
125,149,875
Ratio of total expenses to average net assets*
18.34 %
19.12 %
19.05 %
17.27 %
15.46 %
Ratio of net investment income to average net assets*
6.31 %
11.22 %
9.37 %
8.71 %
8.52 %
Portfolio turnover rate(7)
36.82 %
35.26 %
19.73 %
43.76 %
26.22 %
*
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.
58
(2)
The continuous issuance of common stock may cause an incremental decrease in NAV 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 less than NAV 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 NAV 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 NAV per share of the Company due to the repurchase of common shares. See Note 11, Stockholders’ Equity.
(4)
Represents the dilutive effect of issuing common stock below NAV 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 13, Dividend.
(5)
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.
(6)
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.
(7)
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.
(8)
The Manager agreed to reimburse the Company to the extent the per share price of the shares to the public, less underwriting fees, was less than net asset value per share.
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”). Since
September 24, 2014, the Share Repurchase Plan has been extended annually, and the Company has periodically increased the amount of shares
of common stock that may be purchased under the Share Repurchase Plan, which, most recently, was increased to 1.7 million shares of common
stock. Most recently, on January 7, 2025, the Company’s board of directors extended the Share Repurchase Plan for another year to
January 15, 2026. As shown in the table below, as of February 28, 2025, the Company purchased an aggregate of 1,035,203 shares of common
stock, at the average price of $22.05 for approximately $22.8 million pursuant to the Share Repurchase Plan. During the year and quarter
ended February 28, 2025, the Company did not purchase any shares of common stock pursuant to the Share Repurchase Plan.
Period
Total Number of Shares
(or Units)
Purchased
Average Price
per Share
(or Unit)
Total Number of Shares
(or Units)
Purchased as Part of Publicly
Announced Plans or
Programs
Maximum Number
(or Approximate Dollar Value) of Shares
(or Units)
that May Yet Be Purchased
Under the Plans or Programs
March 1, 2015 through November 30, 2015
2,500
$ 15.59
2,500
397,500
December 1, 2015 through December 31, 2015
-
$ -
2,500
397,500
January 1, 2016 through January 31, 2016
4,200
$ 13.86
6,700
393,300
February 1, 2016 through February 29, 2016
18,717
$ 13.86
25,417
374,583
March 1, 2016 through March 31, 2016
16,282
$ 14.57
41,699
358,301
April 1, 2016 through April 30, 2016
7,858
$ 16.22
49,557
350,443
May 1, 2016 through May 31, 2016
21,357
$ 16.29
70,914
329,086
June 1, 2016 through June 30, 2016
8,310
$ 16.50
79,224
320,776
July 1, 2016 through July 31, 2016
19,212
$ 17.31
98,436
301,564
August 1, 2016 through August 31, 2016
40,058
$ 17.44
138,494
261,506
September 1, 2016 through September 30, 2016
40,221
$ 18.04
178,715
221,285
October 1, 2016 through October 31, 2016
27,076
$ 18.10
205,791
394,209
November 1, 2016 through November 30, 2016
8,600
$ 18.24
214,391
385,609
December 1, 2016 through December 31, 2016
4,100
$ 18.57
218,491
381,509
January 1, 2017 through February 29, 2020
-
-
218,491
381,509
March 1, 2020 through February 28, 2021
190,321
$ 18.96
408,812
891,188
March 1, 2021 through February 28, 2022
99,623
$ 25.55
508,435
791,565
March 1, 2022 through February 28, 2023
438,192
$ 24.70
946,627
353,373
March 1, 2023 through February 29, 2024
88,576
$ 24.36
1,035,203
664,797
March 1, 2024 through February 28, 2025
-
-
1,035,203
664,797
Total
1,035,203
$ 22.05
59
Holders
As of May 6, 2025, there were 11 holders of
record of our common stock.
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 28, 2025. 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, 2025.
(a)
(b)
Amount
(c)
Amount Held by us or for
Our
(d)
Amount Outstanding Exclusive of
Amounts Shown
Title of Class
Authorized
Account
Under (c)
Securities:
Common Stock
100,000,000
11,890,500
$ 88,109,500
Debt:
Encina credit facility
$ 65,000,000
$ 32,500,000
$ 32,500,000
Live Oak credit facility
$ 75,000,000
$ 20,000,000
$ 55,000,000
SBA Debentures
$ 325,000,000
$ 170,000,000
$ 91,000,000
7.00% 2025 Notes
$ 12,000,000
$ 12,000,000
$ -
7.75% 2025 Notes
$ 5,000,000
$ 5,000,000
$ -
8.75% 2025 Notes
$ 20,000,000
$ 20,000,000
$ -
4.375% 2026 Notes
$ 175,000,000
$ 175,000,000
$ -
4.35% 2027 Notes
$ 75,000,000
$ 75,000,000
$ -
6.00% 2027 Notes
$ 105,500,000
$ 105,500,000
$ -
6.25% 2027 Notes
$ 15,000,000
$ 15,000,000
$ -
8.00% 2027 Notes
$ 46,000,000
$ 46,000,000
$ -
8.125% 2027 Notes
$ 60,375,000
$ 60,375,000
$ -
8.50% 2028 Notes
$ 57,500,000
$ 57,500,000
$ -
FEES AND EXPENSES
The following table is intended to assist you
in understanding the costs and expenses that an investor will bear directly or indirectly. We caution you that some of the percentages
indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this report contains a
reference to fees or expenses paid by “you,” “us” or “Saratoga Investment Corp.,” or that “we”
will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Saratoga Investment Corp.
60
Stockholder transaction expenses (as a percentage of offering price):
Sales load paid
-
%(1)
Offering expenses borne by us
-
%(2)
Dividend reinvestment plan expenses
None
(3)
Total stockholder transaction expenses paid
-
%
Annual estimated expenses (as a percentage of average net assets attributable to common stock):
Base Management fees
5.2
%(4)
Incentive fees payable under the Management Agreement
3.5
%(5)
Interest payments on borrowed funds
13.9
%(6)
Other expenses
3.5
%(7)
Total annual expenses
26.1
%(8)
(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. See “Investment Advisory and
Management Agreement.” The fact that our base management fee is payable based upon our gross assets, rather than our net assets
(i.e., total assets after deduction of any liabilities, including borrowings) means that our base management fee as a percentage of net
assets attributable to common stock will increase when we utilize leverage.
(5) The
incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20% of our “pre-incentive fee
net investment income” for the immediately preceding quarter, subject to a preferred return, or “hurdle,” and a “catch
up” feature. 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.”
(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 13.9% figure in the table includes all expected borrowing costs
that we expect to incur over the next twelve months in connection with the secured revolving credit facility we have with Madison Capital
Funding LLC. The costs associated with our outstanding borrowings are indirectly borne by our stockholders. We do not expect to issue
any preferred stock during the next twelve months and, therefore, have not included the cost of issuing and servicing preferred stock
in the table. In addition, all of the commitment fees, interest expense, amortized financing costs of our Credit Facility, SBA debentures,
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
below. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23,
2018, our non-interested board of directors approved of the Company becoming subject to a minimum asset coverage ratio of 150%
under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150% asset coverage ratio became effective on April 16, 2019. See
“Regulation” and “Risk Factors—Risks Related to Our Business and Structure—Recent legislation may allow
us to incur additional leverage.”
(7) “Other expenses” are
based on estimated amounts for the current fiscal year and include our overhead expenses, including payments under our administration
agreement based on our allocable portion of overhead and other expenses incurred by Saratoga Investment Advisors in performing its obligations
under the administration agreement. See “Administration Agreement.”
(8) This figure includes all of the fees and expenses of our wholly-owned subsidiaries,
Saratoga Investment Corp SBIC II, LP, Saratoga Investment Corp SBIC III, LP, Saratoga Investment Funding II, LLC and Saratoga Investment
Funding III, LLC. Furthermore, this table reflects all of the fees and expenses borne by us with respect to our investment in Saratoga
CLO.
61
Example
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 162.9% (the Company’s actual asset coverage as of February 28, 2025) and total annual expenses
of 26.1% 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.
1 Year
3 Years
5 years
10 years
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)
$ 267
$ 843
$ 1,477
$ 3,361
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)
$ 277
$ 874
$ 1,532
$ 3,487
(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%. Both 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 NAV, under certain circumstances, reinvestment
of dividends and other distributions under our dividend reinvestment plan may occur at a price per share that differs from NAV.
Sales of unregistered securities
We did not
sell any securities during the year ended February 28, 2025 that were not registered under the Securities Act of 1933, as amended.
Issuer purchases of equity securities
During the year ended February 28, 2025, February
29, 2024 and February 28, 2023, we purchased 0, 88,576 and 438,192 shares, respectfully of our common stock in the open market.
The following table summarizes the purchased common
stock on a month to month basis for the year ended February 28, 2025:
Period
Quantity
March 1, 2024 through March 31, 2024
-
April 1, 2024 through April 30, 2024
-
May 1, 2024 through May 31, 2024
-
June 1, 2024 through June 30, 2024
-
July 1, 2024 through July 31, 2024
-
August 1, 2024 through August 31, 2024
-
September 1, 2024 through September 30, 2024
-
October 1, 2024 through October 31, 2024
-
November 1, 2024 through November 30, 2024
-
December 1, 2024 through December 31, 2024
-
January 1, 2025 through January 31, 2025
-
February 1, 2025 through February 28, 2025
-
Total
-
62
ITEM 6. - Reserved