GNV Q2 2016 10-Q

Saratoga Investment Corp (GNV) SEC Quarterly Report (10-Q) for Q3 2016

GNV Q4 2016 10-Q
GNV Q2 2016 10-Q GNV Q4 2016 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended August 31, 2016

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-33376

SARATOGA INVESTMENT CORP.

(Exact name of registrant as specified in its charter)

Maryland 20-8700615

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

535 Madison Avenue

New York, New York

10022
(Address of principal executive office) (Zip Code)

(212) 906-7800

(Registrant's telephone number, including area code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ¨     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer ¨ Accelerated Filer ¨
Non-Accelerated Filer x Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

The number of shares of the registrant's common stock, $0.001 par value, outstanding as of October 11, 2016 was 5,716,776.

Table of Contents

TABLE OF CONTENTS

Page

PART I.

FINANCIAL INFORMATION 3

Item 1.

Consolidated Financial Statements 3
Consolidated Statements of Assets and Liabilities as of August 31, 2016 (unaudited) and February 29, 2016 3
Consolidated Statements of Operations for the three and six months ended August 31, 2016 and August 31, 2015 (unaudited) 4
Consolidated Schedules of Investments as of August 31, 2016 (unaudited) and February 29, 2016 5
Consolidated Statements of Changes in Net Assets for the six months ended August 31, 2016 and August 31, 2015 (unaudited) 7
Consolidated Statements of Cash Flows for the six months ended August 31, 2016 and August 31, 2015 (unaudited) 8
Notes to Consolidated Financial Statements as of August 31, 2016 (unaudited) 9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations 33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk 56

Item 4.

Controls and Procedures 56

PART II.

OTHER INFORMATION 57

Item 1.

Legal Proceedings 57

Item 1A.

Risk Factors 57

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds 57

Item 3.

Defaults Upon Senior Securities 57

Item 4.

Mine Safety Disclosures 57

Item 5.

Other Information 57

Item 6.

Exhibits 58

Signatures

59

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

As of
August 31, 2016 February 29, 2016
(unaudited)

ASSETS

Investments at fair value

Non-control/Non-affiliate investments (amortized cost of $267,658,535 and $268,145,090, respectively)

$   260,887,373 $   271,168,186

Control investments (cost of $10,948,369 and $13,030,751, respectively)

11,917,076 12,827,980

Total investments at fair value (amortized cost of $278,606,904 and $281,175,841, respectively)

272,804,449 283,996,166

Cash and cash equivalents

12,707,273 2,440,277

Cash and cash equivalents, reserve accounts

10,173,549 4,594,506

Interest receivable (net of reserve of $0 and $728,519, respectively)

3,393,927 3,195,919

Management fee receivable

170,897 170,016

Other assets

312,184 350,368

Receivable from unsettled trades

284,903 300,000

Total assets

$ 299,847,182 $ 295,047,252

LIABILITIES

Revolving credit facility

$ -   $ -  

Deferred debt financing costs, revolving credit facility

(476,221 (515,906

SBA debentures payable

103,660,000 103,660,000

Deferred debt financing costs, SBA debentures payable

(2,527,859 (2,493,303

Notes payable

61,793,125 61,793,125

Deferred debt financing costs, notes payable

(1,484,265 (1,694,586

Dividend payable

1,151,061 875,599

Base management and incentive fees payable

6,283,519 5,593,956

Accounts payable and accrued expenses

631,840 855,873

Interest and debt fees payable

1,873,508 1,552,069

Payable for repurchases of common stock

-   20,957

Directors fees payable

45,000 31,500

Due to manager

333,852 218,093

Total liabilities

$ 171,283,560 $ 169,897,377

Commitments and contingencies (See Note 7)

NET ASSETS

Common stock, par value $.001, 100,000,000 common shares authorized, 5,740,810 and 5,672,227 common shares issued and outstanding, respectively

$ 5,741 $ 5,672

Capital in excess of par value

189,532,044 188,714,329

Distribution in excess of net investment income

(27,038,814 (26,217,902

Accumulated net realized loss from investments and derivatives

(28,132,894 (40,172,549

Accumulated net unrealized appreciation (depreciation) on investments and derivatives

(5,802,455 2,820,325

Total net assets

128,563,622 125,149,875

Total liabilities and net assets

$ 299,847,182 $ 295,047,252

NET ASSET VALUE PER SHARE

$ 22.39 $ 22.06

See accompanying notes to consolidated financial statements.

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Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Operations

(unaudited)

For the three months ended
August 31
For the six months ended
August 31
2016 2015 2016 2015

INVESTMENT INCOME

Interest from investments

Non-control/Non-affiliate investments

$ 6,561,838 $ 5,877,682 $ 13,181,951 $ 11,526,661

Payment-in-kind interest income from Non-control/Non-affiliate investments

184,265 262,991 313,355 954,143

Control investments

557,200 678,706 1,089,326 1,269,696

Total interest income

7,303,303 6,819,379 14,584,632 13,750,500

Interest from cash and cash equivalents

6,401 731 10,187 1,467

Management fee income

374,657 373,152 748,341 751,898

Other income

763,633 565,055 1,013,229 815,619

Total investment income

8,447,994 7,758,317 16,356,389 15,319,484

EXPENSES

Interest and debt financing expenses

2,369,705 2,147,976 4,737,761 4,111,841

Base management fees

1,202,794 1,151,236 2,429,951 2,275,334

Professional fees

302,227 349,533 661,526 682,977

Administrator expenses

325,000 275,000 650,000 525,000

Incentive management fees

1,208,452 (41,279 1,936,732 1,756,554

Insurance

70,658 87,316 141,316 174,633

Directors fees and expenses

60,422 51,000 126,422 102,000

General & administrative

304,955 203,449 517,164 386,369

Excise tax expense (credit)

-   (123,338 -   (123,338

Other expense

-   -   13,187 -  

Total expenses

5,844,213 4,100,893 11,214,059 9,891,370

NET INVESTMENT INCOME

2,603,781 3,657,424 5,142,330 5,428,114

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain from investments

5,936,750 3,709,947 12,039,655 3,783,193

Net unrealized depreciation on investments

(3,268,913 (6,124,708 (8,622,780 (583,739

Net gain (loss) on investments

2,667,837 (2,414,761 3,416,875 3,199,454

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$ 5,271,618 $ 1,242,663 $ 8,559,205 $ 8,627,568

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE

$ 0.92 $ 0.22 $ 1.49 $ 1.57

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED

5,740,816 5,583,795 5,739,157 5,492,491

See accompanying notes to consolidated financial statements.

4

Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

August 31, 2016

(unaudited)

Company

Industry

Investment Interest Rate /

Maturity

Principal /
Number of

Shares
Cost Fair Value (c) % of
Net Assets

Non-control/Non-affiliated investments - 202.9% (b)

CAMP International Systems (d)

Aerospace and Defense Second Lien Term Loan 8.25% Cash, 8/18/2024 $ 1,000,000 995,002 997,500 0.8

Total Aerospace and Defense 995,002 997,500 0.8

Polar Holding Company, Ltd. (a), (d), (i)

Building Products First Lien Term Loan 10.00% Cash, 9/30/2016 $ 2,000,000 2,000,000 2,000,000 1.6

Total Building Products 2,000,000 2,000,000 1.6

Avionte Holdings, LLC (g)

Business Services Common Stock 100,000 100,000 247,782 0.2

Avionte Holdings, LLC

Business Services First Lien Term Loan 9.75% Cash, 1/8/2019 $ 2,279,278 2,255,168 2,287,483 1.8

Avionte Holdings, LLC (j), (k)

Business Services Delayed Draw Term Loan A 9.75% Cash, 1/8/2019 $ -   -   -   0.0

BoardEffect, Inc.

Business Services First Lien Term Loan 10.00% Cash, 6/17/2021 $ 12,000,000 11,883,243 11,880,000 9.2

BoardEffect, Inc. (j), (k)

Business Services Delayed Draw Term Loan B 10.00% Cash, 6/17/2021 $ -   -   -   0.0

BMC Software, Inc. (d)

Business Services First Lien Term Loan 5.00% Cash, 9/10/2020 $ 5,641,667 5,607,859 5,379,329 4.2

Courion Corporation

Business Services Second Lien Term Loan 11.00% Cash, 6/1/2021 $ 15,000,000 14,866,381 14,529,000 11.3

Dispensing Dynamics International (d)

Business Services Senior Secured Note 12.50% Cash, 1/1/2018 $ 12,000,000 12,018,538 11,530,800 9.0

Easy Ice, LLC (d)

Business Services First Lien Term Loan 9.50% Cash, 1/15/2020 $ 16,000,000 15,868,493 16,057,493 12.5

Emily Street Enterprises, L.L.C.

Business Services Senior Secured Note 10.00% Cash, 1/23/2020 $ 3,300,000 3,272,264 3,355,372 2.6

Emily Street Enterprises, L.L.C. (g)

Business Services Warrant Membership Interests 49,318 400,000 459,791 0.3

Help/Systems Holdings, Inc. (Help/Systems, LLC)

Business Services First Lien Term Loan 6.25% Cash, 10/8/2021 $ 4,975,000 4,887,402 4,919,031 3.8

Help/Systems Holdings, Inc. (Help/Systems, LLC)

Business Services Second Lien Term Loan 10.50% Cash, 10/8/2022 $ 3,000,000 2,917,626 2,850,000 2.2

Identity Automation Systems

Business Services Convertible Promissory Note 13.50% (6.75% Cash/6.75% PIK), 8/18/2018 611,517 611,517 611,517 0.5

Identity Automation Systems (g)

Business Services Common Stock Class A Units 232,616 232,616 495,686 0.4

Identity Automation Systems

Business Services First Lien Term Loan 12.00% (10.25% Cash/1.75% PIK) 12/18/2020 $ 10,203,683 10,121,194 10,171,110 7.9

Knowland Technology Holdings, L.L.C.

Business Services First Lien Term Loan 9.75% Cash, 11/29/2017 $ 17,777,730 17,637,107 17,652,317 13.7

Microsystems Company

Business Services Second Lien Term Loan 11.00% Cash, 7/1/2022 $ 8,000,000 7,922,051 7,920,000 6.2

PCF Number 4, Inc.

Business Services Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021 $ 13,044,083 12,918,979 13,044,083 10.1

Vector Controls Holding Co., LLC (d)

Business Services First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018 $ 8,967,996 8,905,587 8,967,996 7.0

Vector Controls Holding Co., LLC (d), (g)

Business Services Warrants to Purchase Limited Liability Company Interests 343 -   350,212 0.3

Total Business Services 132,426,025 132,709,002 103.2

Targus Holdings, Inc. (d), (g)

Consumer Products Common Stock 210,456 1,791,242 1,847 0.0

Targus Holdings, Inc. (d)

Consumer Products Second Lien Term Loan A-2 15.00% PIK, 12/31/2019 $ 220,644 220,644 220,644 0.2

Targus Holdings, Inc. (d)

Consumer Products Second Lien Term Loan B 15.00% PIK, 12/31/2019 $ 661,932 661,932 661,932 0.5

Total Consumer Products 2,673,818 884,423 0.7

My Alarm Center, LLC

Consumer Services Second Lien Term Loan 12.00% Cash, 7/9/2019 $ 9,375,000 9,356,295 9,299,063 7.2

PrePaid Legal Services, Inc. (d)

Consumer Services First Lien Term Loan 6.50% Cash, 7/1/2019 $ 1,489,199 1,481,070 1,482,051 1.1

PrePaid Legal Services, Inc. (d)

Consumer Services Second Lien Term Loan 10.25% Cash, 7/1/2020 $ 10,000,000 9,966,163 9,846,000 7.7

Prime Security Services, LLC

Consumer Services Second Lien Term Loan 9.75% Cash, 7/1/2022 $ 6,230,769 6,138,694 6,268,416 4.9

Total Consumer Services 26,942,222 26,895,530 20.9

M/C Acquisition Corp., L.L.C. (d), (g)

Education Class A Common Stock 544,761 30,241 -   0.0

M/C Acquisition Corp., L.L.C. (d)

Education First Lien Term Loan 1.00% Cash, 3/31/2016 $ 2,321,073 1,193,791 8,087 0.0

Texas Teachers of Tomorrow, LLC (g), (h)

Education Common Stock 750,000 750,000 933,960 0.7

Texas Teachers of Tomorrow, LLC

Education Second Lien Term Loan 10.75% Cash, 6/2/2021 $ 10,000,000 9,910,300 10,000,000 7.8

Total Education 11,884,332 10,942,047 8.5

TM Restaurant Group L.L.C.

Food and Beverage First Lien Term Loan 9.75% Cash, 7/16/2017 $ 9,490,507 9,428,277 9,276,541 7.2

Total Food and Beverage 9,428,277 9,276,541 7.2

Censis Technologies, Inc.

Healthcare Services First Lien Term Loan B 11.00% Cash, 7/24/2019 $ 11,400,000 11,251,423 10,962,652 8.5

Censis Technologies, Inc. (g), (h)

Healthcare Services Limited Partner Interests 999 999,000 704,187 0.5

Roscoe Medical, Inc. (d), (g)

Healthcare Services Common Stock 5,081 508,077 598,710 0.5

Roscoe Medical, Inc.

Healthcare Services Second Lien Term Loan 11.25% Cash, 9/26/2019 $ 4,200,000 4,148,231 4,113,761 3.2

Ohio Medical, LLC (g)

Healthcare Services Common Stock 5,000 500,000 459,409 0.4

Ohio Medical, LLC

Healthcare Services Senior Subordinated Note 12.00%, 7/15/2021 $ 7,300,000 7,233,876 7,273,756 5.7

Zest Holdings, LLC (d)

Healthcare Services First Lien Term Loan 5.25% Cash, 8/16/2020 $ 4,136,911 4,078,941 4,136,911 3.2

Total Healthcare Services 28,719,548 28,249,386 22.0

HMN Holdco, LLC

Media First Lien Term Loan 10.00% Cash, 5/16/2019 $ 8,700,232 8,594,607 8,700,232 6.8

HMN Holdco, LLC

Media Delayed Draw First Lien Term Loan 10.00% Cash, 5/16/2019 $ 4,800,000 4,744,654 4,800,000 3.7

HMN Holdco, LLC

Media Class A Series 4,264 61,647 283,044 0.2

HMN Holdco, LLC

Media Class A Warrant 30,320 438,353 1,623,030 1.3

HMN Holdco, LLC (g)

Media Warrants to Purchase Limited Liability Company Interests (Common) 57,872 -   2,802,162 2.2

HMN Holdco, LLC (g)

Media Warrants to Purchase Limited Liability Company Interests (Preferred) 8,139 -   451,308 0.3

Total Media 13,839,261 18,659,776 14.5

Elyria Foundry Company, L.L.C. (d)

Metals Common Stock 35,000 9,217,564 314,300 0.2

Elyria Foundry Company, L.L.C. (d)

Metals Revolver 10.00% Cash, 3/31/2017 $ 8,500,000 8,500,000 8,500,000 6.6

Total Metals 17,717,564 8,814,300 6.8

Mercury Network, LLC

Real Estate First Lien Term Loan 10.50% Cash, 8/24/2021 $ 20,808,696 20,619,443 20,724,932 16.1

Mercury Network, LLC (g)

Real Estate Common Stock 413,043 413,043 733,936 0.6

Total Real Estate 21,032,486 21,458,868 16.7

Sub Total Non-control/Non-affiliated investments

267,658,535 260,887,373 202.9

Control investments - 9.3% (b)

Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (d), (e), (f)

Structured Finance Securities Other/Structured Finance Securities 21.13%, 10/17/2023 $ 30,000,000 10,948,369 11,917,076 9.3

Sub Total Control investments

10,948,369 11,917,076 9.3

TOTAL INVESTMENTS - 212.2% (b)

$   278,606,904 $   272,804,449 212.2

Principal Cost Fair Value % of
Net Assets

Cash and cash equivalents and cash and cash equivalents, reserve accounts - 17.8%

U.S. Bank Money Market (l)

$ 22,880,822 $ 22,880,822 $ 22,880,822 17.8

Total cash and cash equivalents and cash and cash equivalents, reserve accounts

$   22,880,822 $ 22,880,822 $ 22,880,822 17.8

(a) Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.1% of the Company's portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $128,563,622 as of August 31, 2016.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 21.13% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

Sales Interest Management Net Realized Net Unrealized

Company

Purchases Redemptions (Cost) Income Fee Income Gains (Losses) Appreciation

Saratoga Investment Corp. CLO 2013-1, Ltd.

$ -   $ -   $ -   $ 1,089,326 $ 748,341 $ -   $ 1,171,478

(g) Non-income producing at August 31, 2016.
(h) Includes securities issued by an affiliate of the company.
(i) Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada.
(j) The investment has an unfunded commitment as of August 31, 2016 (see Note 7 to the consolidated financial statements).
(k) The entire commitment was unfunded at August 31, 2016. As such, no interest is being earned on this investment.
(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company's Consolidated Statements of Assets and Liabilities as of August 31, 2016.

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Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 29, 2016

Company

Industry

Investment Interest Rate /

Maturity

Principal /
Number

of Shares
Cost Fair Value (c) % of
Net Assets

Non-control/Non-affiliated investments - 216.6% (b)

National Truck Protection Co., Inc. (d), (g)

Automotive Aftermarket Common Stock 1,116 $ 1,000,000 $ 1,695,303 1.4

National Truck Protection Co., Inc. (d)

Automotive Aftermarket First Lien Term Loan 15.50% Cash, 9/13/2018 $ 6,776,770 6,776,770 6,776,770 5.4

Take 5 Oil Change, L.L.C. (d), (g)

Automotive Aftermarket Common Stock 7,128 480,535 6,235,209 5.0

Total Automotive Aftermarket 8,257,305 14,707,282 11.8

Legacy Cabinets Holdings (d), (g)

Building Products Common Stock Voting A-1 2,535 220,900 2,676,909 2.1

Legacy Cabinets Holdings (d), (g)

Building Products Common Stock Voting B-1 1,600 139,424 1,689,568 1.3

Polar Holding Company, Ltd. (a), (d), (i)

Building Products First Lien Term Loan 10.00% Cash, 9/30/2016 $ 2,000,000 2,000,000 2,000,000 1.6

Total Building Products 2,360,324 6,366,477 5.0

Avionte Holdings, LLC (g)

Business Services Common Stock 100,000 100,000 169,850 0.1

Avionte Holdings, LLC

Business Services First Lien Term Loan 9.75% Cash, 1/8/2019 $ 2,406,342 2,376,045 2,382,844 1.9

Avionte Holdings, LLC (j), (k)

Business Services Delayed Draw Term Loan A 9.75% Cash, 1/8/2019 $ -   -   -   0.0

BMC Software, Inc. (d)

Business Services Syndicated Loan 5.00% Cash, 9/10/2020 $ 5,671,667 5,633,920 4,520,318 3.6

Courion Corporation

Business Services Second Lien Term Loan 11.00% Cash, 6/1/2021 $ 15,000,000 14,856,720 14,850,000 11.9

Dispensing Dynamics International (d)

Business Services Senior Secured Note 12.50% Cash, 1/1/2018 $ 12,000,000 12,025,101 10,950,000 8.8

Easy Ice, LLC (d)

Business Services First Lien Term Loan 9.50% Cash, 1/15/2020 $ 14,000,000 13,873,485 13,806,098 11.0

Emily Street Enterprises, L.L.C.

Business Services Senior Secured Note 10.00% Cash, 1/23/2020 $ 8,400,000 8,305,033 8,568,000 6.8

Emily Street Enterprises, L.L.C. (g)

Business Services Warrant Membership Interests 49,318 400,000 577,020 0.5

Finalsite Holdings, Inc.

Business Services Second Lien Term Loan 10.25% Cash, 5/21/2020 $ 7,500,000 7,440,729 7,500,000 6.0

Help/Systems Holdings, Inc. (Help/Systems, LLC)

Business Services First Lien Term Loan 6.25% Cash, 10/8/2021 $ 5,000,000 4,904,573 4,895,000 3.9

Help/Systems Holdings, Inc. (Help/Systems, LLC)

Business Services Second Lien Term Loan 10.50% Cash, 10/8/2022 $ 3,000,000 2,912,784 2,910,000 2.3

Identity Automation Systems (g)

Business Services Common Stock Class A Units 232,616 232,616 427,409 0.3

Identity Automation Systems

Business Services First Lien Term Loan 10.25% Cash, 12/18/2020 $ 6,900,000 6,842,573 6,900,000 5.5

Identity Automation Systems (j), (k)

Business Services Delayed Draw Term Loan 10.25% Cash, 12/18/2020 $ -   -   -   0.0

Knowland Technology Holdings, L.L.C.

Business Services First Lien Term Loan 8.00% Cash, 11/29/2017 $ 5,259,171 5,224,422 5,259,171 4.2

PCF Number 4, Inc.

Business Services Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021 $ 13,000,000 12,870,023 12,870,000 10.3

Vector Controls Holding Co., LLC (d)

Business Services First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018 $ 9,035,515 8,952,442 9,035,515 7.2

Vector Controls Holding Co., LLC (d), (g)

Business Services Warrants to Purchase Limited Liability Company Interests 343 -   354,819 0.3

Total Business Services 106,950,466 105,976,044 84.6

Advanced Air & Heat of Florida, LLC

Consumer Products First Lien Term Loan 9.50% Cash, 7/17/2020 $ 6,800,000 6,733,661 6,800,000 5.4

Targus Holdings, Inc. (d), (g)

Consumer Products Common Stock 210,456 1,791,242 -   0.0

Targus Holdings, Inc. (d)

Consumer Products Second Lien Term Loan A-2 15.00% PIK, 12/31/2019 $ 210,456 210,456 210,456 0.2

Targus Holdings, Inc. (d)

Consumer Products Second Lien Term Loan B 15.00% PIK, 12/31/2019 $ 631,369 631,369 631,369 0.5

Total Consumer Products 9,366,728 7,641,825 6.1

Expedited Travel L.L.C. (g)

Consumer Services Common Stock 1,000,000 1,000,000 1,647,767 1.3

Expedited Travel L.L.C.

Consumer Services First Lien Term Loan 10.00% Cash, 10/10/2019 $ 11,475,490 11,401,380 11,647,623 9.3

My Alarm Center, LLC

Consumer Services Second Lien Term Loan 12.00% Cash, 7/9/2019 $ 7,500,000 7,500,000 7,450,500 6.0

PrePaid Legal Services, Inc. (d)

Consumer Services First Lien Term Loan 6.50% Cash, 7/1/2019 $ 1,572,921 1,562,787 1,556,248 1.2

PrePaid Legal Services, Inc. (d)

Consumer Services Second Lien Term Loan 10.25% Cash, 7/1/2020 $ 10,000,000 9,962,104 9,827,000 7.9

Prime Security Services, LLC

Consumer Services Second Lien Term Loan 9.75% Cash, 7/1/2022 $ 12,000,000 11,829,030 10,980,000 8.8

Total Consumer Services 43,255,301 43,109,138 34.5

M/C Acquisition Corp., L.L.C. (d), (g)

Education Class A Common Stock 544,761 30,241 -   0.0

M/C Acquisition Corp., L.L.C. (d)

Education First Lien Term Loan 1.00% Cash, 3/31/2016 $ 2,321,073 1,193,790 8,087 0.0

Texas Teachers of Tomorrow, LLC (g), (h)

Education Common Stock 750 750,000 785,475 0.6

Texas Teachers of Tomorrow, LLC

Education Second Lien Term Loan 10.75% Cash, 6/2/2021 $ 10,000,000 9,902,816 9,900,000 7.9

Total Education 11,876,847 10,693,562 8.5

TM Restaurant Group L.L.C.

Food and Beverage First Lien Term Loan 9.75% Cash, 7/16/2017 $ 9,622,319 9,527,041 9,131,048 7.3

Total Food and Beverage 9,527,041 9,131,048 7.3

Bristol Hospice, LLC

Healthcare Services Senior Secured Note 11.00% (10.00% Cash/1.00% PIK), 11/29/2018 $ 5,404,747 5,339,820 5,404,747 4.3

Censis Technologies, Inc.

Healthcare Services First Lien Term Loan B 11.00% Cash, 7/24/2019 $ 11,550,000 11,377,810 11,459,418 9.2

Censis Technologies, Inc. (g), (h)

Healthcare Services Limited Partner Interests 999 999,000 810,642 0.7

Roscoe Medical, Inc. (d), (g)

Healthcare Services Common Stock 5,000 500,000 334,000 0.3

Roscoe Medical, Inc.

Healthcare Services Second Lien Term Loan 11.25% Cash, 9/26/2019 $ 4,200,000 4,141,519 3,822,000 3.0

Ohio Medical, LLC (g)

Healthcare Services Common Stock 5,000 500,000 500,000 0.4

Ohio Medical, LLC

Healthcare Services Senior Subordinated Note 12.00%, 7/15/2021 $ 7,300,000 7,228,452 7,227,000 5.8

Smile Brands Group Inc. (d)

Healthcare Services Syndicated Loan 10.50% (9.00% Cash/1.50% PIK), 8/16/2019 $ 4,420,900 4,362,266 3,216,647 2.6

Zest Holdings, LLC (d)

Healthcare Services Syndicated Loan 5.25% Cash, 8/16/2020 $ 4,207,821 4,142,093 4,130,692 3.3

Total Healthcare Services 38,590,960 36,905,146 29.6

HMN Holdco, LLC

Media First Lien Term Loan 10.00% Cash, 5/16/2019 $ 8,937,982 8,812,479 8,937,983 7.1

HMN Holdco, LLC

Media First Lien Term Loan 10.00% Cash, 5/16/2019 $ 1,600,000 1,572,821 1,600,000 1.3

HMN Holdco, LLC

Media Class A Series 4,264 61,647 314,683 0.3

HMN Holdco, LLC

Media Class A Warrant 30,320 438,353 1,889,542 1.5

HMN Holdco, LLC (g)

Media Warrants to Purchase Limited Liability Company Interests (Common) 57,872 -   3,309,121 2.6

HMN Holdco, LLC (g)

Media Warrants to Purchase Limited Liability Company Interests 8,139 -   523,012 0.4

Total Media 10,885,300 16,574,341 13.2

Elyria Foundry Company, L.L.C. (d)

Metals Common Stock 35,000 9,217,564 2,026,150 1.6

Elyria Foundry Company, L.L.C. (d)

Metals Revolver 10.00% Cash, 3/31/2017 $ 8,500,000 8,500,000 8,500,000 6.8

Total Metals 17,717,564 10,526,150 8.4

Mercury Network, LLC

Real Estate First Lien Term Loan 9.75% Cash, 4/24/2020 $ 9,025,000 8,944,211 9,025,000 7.2

Mercury Network, LLC (g)

Real Estate Common Stock 413,043 413,043 512,173 0.4

Total Real Estate 9,357,254 9,537,173 7.6

Sub Total Non-control/Non-affiliated investments

268,145,090 271,168,186 216.6

Control investments - 10.3% (b)

Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (d), (e), (f)

Structured Finance Securities Other/Structured Finance Securities 16.14%, 10/17/2023 $ 30,000,000 13,030,751 12,827,980 10.3

Sub Total Control investments

13,030,751 12,827,980 10.3

TOTAL INVESTMENTS - 226.9% (b)

$   281,175,841 $ 283,996,166 226.9

Principal Cost Fair Value % of
Net Assets

Cash and cash equivalents and cash and cash equivalents, reserve accounts - 5.6%

U.S. Bank Money Market (l)

$ 7,034,783 $ 7,034,783 $ 7,034,783 5.6

Total cash and cash equivalents and cash and cash equivalents, reserve accounts

$ 7,034,783 $ 7,034,783 $ 7,034,783 5.6

(a) Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.2% of the Company's portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $125,149,875 as of February 29, 2016.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 16.14% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

Company

Purchases Redemptions Sales
(Cost)
Interest
Income
Management
Fee Income
Net Realized
Gains(Losses)
Net Unrealized
Depreciation

Saratoga Investment Corp. CLO 2013-1, Ltd.

$ -   $ -   $ -   $ 2,665,648 $ 1,494,779 $ -   $ (1,280,916

(g) Non-income producing at February 29, 2016.
(h) Includes securities issued by an affiliate of the company.
(i) Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada.
(j) The investment has an unfunded commitment as of February 29, 2016 (see Note 7 to the consolidated financial statements).
(k) The entire commitment was unfunded at February 29, 2016. As such, no interest is being earned on this investment.
(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company's Consolidated Statements of Assets and Liabilities as of February 29, 2016.

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Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)

For the six months ended
August 31, 2016
For the six months ended
August 31, 2015

INCREASE FROM OPERATIONS:

Net investment income

$ 5,142,330 $ 5,428,114

Net realized gain from investments

12,039,655 3,783,193

Net unrealized depreciation on investments

(8,622,780 (583,739

Net increase in net assets from operations

8,559,205 8,627,568

DECREASE FROM SHAREHOLDER DISTRIBUTIONS:

Distributions declared

(5,963,242 (8,738,812

Net decrease in net assets from shareholder distributions

(5,963,242 (8,738,812

CAPITAL SHARE TRANSACTIONS:

Stock dividend distribution

2,700,351 3,047,190

Repurchases of common stock

(1,882,567 (38,981

Offering costs

-   (237,287

Net increase in net assets from capital share transactions

817,784 2,770,922

Total increase in net assets

3,413,747 2,659,678

Net assets at beginning of period

125,149,875 122,598,742

Net assets at end of period

$ 128,563,622 $ 125,258,420

Net asset value per common share

$ 22.39 $ 22.42

Common shares outstanding at end of period

5,740,810 5,586,254

Distribution in excess of net investment income

$ (27,038,814 $ (27,216,301

See accompanying notes to consolidated financial statements.

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Saratoga Investment Corp.

Consolidated Statements of Cash Flows

(unaudited)

For the six months ended
August 31, 2016
For the six months ended
August 31, 2015

Operating activities

NET INCREASE IN NET ASSETS FROM OPERATIONS

$ 8,559,205 $ 8,627,568

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Payment-in-kind interest income

(276,597 (828,420

Net accretion of discount on investments

(254,323 (273,250

Amortization of deferred debt financing costs

528,850 442,921

Amortization of premium on notes

-   (1,040

Net realized gain from investments

(12,039,655 (3,783,193

Net unrealized depreciation on investments

8,622,780 583,739

Proceeds from sales and redemptions of investments

70,867,907 34,772,774

Purchase of investments

(55,728,395 (42,118,806

(Increase) decrease in operating assets:

Cash and cash equivalents, reserve accounts

(5,579,043 6,086,197

Interest receivable

(198,008 (220,056

Management fee receivable

(881 (2,519

Other assets

38,184 (228,717

Receivable from unsettled trades

15,097 (100,000

Increase (decrease) in operating liabilities:

Base management and incentive fees payable

689,563 201,285

Accounts payable and accrued expenses

(224,033 (260,729

Interest and debt fees payable

321,439 139,806

Payable for repurchases of common stock

(20,957 -  

Directors fees payable

13,500 (1,500

Due to manager

115,759 (13,141

NET CASH PROVIDED BY OPERATING ACTIVITIES

15,450,392 3,022,919

Financing activities

Borrowings on debt

-   10,600,000

Paydowns on debt

-   (18,200,000

Issuance of notes

-   8,945,175

Payments of deferred debt financing costs

(313,400 (350,607

Repurchases of common stock

(1,882,567 (38,981

Payments of cash dividends

(2,987,429 (5,362,381

NET CASH USED IN FINANCING ACTIVITIES

(5,183,396 (4,406,794

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

10,266,996 (1,383,875

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

2,440,277 1,888,158

CASH AND CASH EQUIVALENTS, END OF PERIOD

$ 12,707,273 $ 504,283

Supplemental information:

Interest paid during the period

$ 3,887,472 $ 3,529,114

Supplemental non-cash information:

Payment-in-kind interest income

$ 276,597 $ 828,420

Net accretion of discount on investments

$ 254,323 $ 273,250

Amortization of deferred debt financing costs

$ 528,850 $ 442,921

Stock dividend distribution

$ 2,700,351 $ 3,047,190

See accompanying notes to consolidated financial statements.

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SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2016

(unaudited)

Note 1. Organization

Saratoga Investment Corp. (the "Company", "we", "our" and "us") is a non-diversified closed-end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company ("BDC") under the Investment Company Act of 1940 (the "1940 Act"). The Company commenced operations on March 23, 2007 as GSC Investment Corp. and completed the initial public offering ("IPO") on March 28, 2007. The Company has elected to be treated as a regulated investment company ("RIC") under subchapter M of the Internal Revenue Code (the "Code"). The Company expects to continue to qualify and to elect to be treated, for tax purposes, as a RIC. The Company's investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments.

GSC Investment, LLC (the "LLC") was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.

On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC's limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.

On July 30, 2010, the Company changed its name from "GSC Investment Corp." to "Saratoga Investment Corp." in connection with the consummation of a recapitalization transaction.

The Company is externally managed and advised by the investment adviser, Saratoga Investment Advisors, LLC (the "Manager"), pursuant to a management agreement (the "Management Agreement"). Prior to July 30, 2010, the Company was managed and advised by GSCP (NJ), L.P.

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

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP ("SBIC LP"), received a Small Business Investment Company ("SBIC") license from the Small Business Administration ("SBA").

On April 2, 2015, the SBA issued a "green light" letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. On September 27, 2016, the SBA informed us that as part of their continued review of our application for a second license, and in order to ensure that they were reviewing the most current information available, we would need to update all previously submitted materials and invited us to reapply. As a result of this request, with which we are in the process of complying, the existing "green light" letter that the SBA issued to us will expire. If approved in the future, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"), are stated in U.S. Dollars and include the accounts of the Company and its special purpose financing subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC). All intercompany accounts and transactions have been eliminated in consolidation. All references made to the "Company," "we," and "us" herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

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The Company and SBIC LP are both considered to be investment companies for financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services - Investment Companies" ("ASC Topic 946"). There have been no changes to the Company or SBIC LP's status as investment companies during the six months ended August 31, 2016.

Use of Estimates in the Preparation of Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as a money market fund if such investment would cause the Company to exceed any of the following limitations:

we were to own more than 3.0% of the total outstanding voting stock of the money market fund;

we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets; or

we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.

As of August 31, 2016, the Company did not exceed any of these limitations.

Cash and Cash Equivalents, Reserve Accounts

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts, in the form of cash and short-term liquid investments in money market funds, representing payments received on secured investments or other reserved amounts associated with our $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.

In addition, cash and cash equivalents, reserve accounts also include amounts held in designated bank accounts, in the form of cash and short-term liquid investments in money market funds, within our wholly-owned subsidiary, SBIC LP.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, "Control Investments" are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, "Affiliated Investments" are defined as those non-control investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, "Non-affiliated Investments" are defined as investments that are neither Control Investments nor Affiliated Investments.

Investment Valuation

The Company accounts for its investments at fair value in accordance with the FASB ASC Topic 820, Fair Value 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 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.

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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 investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company's ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

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

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

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

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

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

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

Our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. ("Saratoga CLO") is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. 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.

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

Derivative Financial Instruments

We account for derivative financial instruments in accordance with ASC Topic 815, Derivatives and Hedging ("ASC 815"). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.

Investment Transactions and Income Recognition

Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized 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.

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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.

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.

Other Income

Other income includes dividends received, origination fees, structuring fees and advisory fees, and is recorded in the consolidated statements of operations when earned.

Payment-in-Kind Interest

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

Deferred Debt Financing Costs

Financing costs incurred in connection with our credit facility and notes are deferred and amortized using the straight line method over the life of the respective facility and debt securities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the effective yield method over the life of the debentures.

Accounting Standards Update ("ASU") 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company has adopted the provisions of ASU 2015-03 as of February 28, 2015, by reclassifying deferred debt financing costs from within total assets to within total liabilities as a contra-liability. Prior period amounts were reclassified to conform to the current period presentation.

Contingencies

In the ordinary course of business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote. Therefore, the Company has not accrued any liabilities in connection with such indemnifications.

In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.

Income Taxes

The Company has filed an election to be treated, for tax purposes, as a RIC under Subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes.

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

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Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

In accordance with certain applicable U.S. Treasury regulations and private letter rulings issued by the Internal Revenue Service ("IRS"), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

ASC 740,  Income Taxes , ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions deemed to meet a "more-likely-than-not" threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations. During the fiscal year ended February 29, 2016, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2013, 2014 and 2015 federal tax years for the Company remain subject to examination by the IRS. As of August 31, 2016 and February 29, 2016, there were no uncertain tax positions. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

Dividends

Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

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

Capital Gains Incentive Fee

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to its investment adviser when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company's investment adviser 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, net of realized and unrealized losses for the period.

New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Amendments to the Leases ("ASC Topic 842"), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance is effective for annual and interim periods beginning after December 15, 2018. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity's accounting related to (1) the

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classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact the adoption of this standard has on the Company's consolidated financial statements and disclosures.

In August 2014, the FASB issued new accounting guidance that requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments provide a definition of the term "substantial doubt" and include principles for considering the mitigating effect of management's plans. The amendments also require an evaluation every reporting period, including interim periods for a period of one year after the date that the financial statements are issued (or available to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are effective for reporting periods ending after December 15, 2016. Management does not believe these changes will have a material impact on the Company's consolidated financial statements and disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 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 to December 15, 2017. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.

Risk Management

In the ordinary course of its business, the Company manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment's carrying amount.

The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

The Company has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

Note 3. Investments

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

Level 1-Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2-Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such

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information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by a disclaimer would result in classification as a Level 3 asset, assuming no additional corroborating evidence.

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

The following table presents fair value measurements of investments, by major class, as of August 31, 2016 (dollars in thousands), according to the fair value hierarchy:

Fair Value Measurements
Level 1 Level 2 Level 3 Total

Syndicated loans

$ -   $ -   $ 9,516 $ 9,516

First lien term loans

-   -   153,276 153,276

Second lien term loans

-   -   87,024 87,024

Structured finance securities

-   -   11,917 11,917

Equity interests

-   -   11,071 11,071

Total

$ -   $ -   $ 272,804 $ 272,804

The following table presents fair value measurements of investments, by major class, as of February 29, 2016 (dollars in thousands), according to the fair value hierarchy:

Fair Value Measurements
Level 1 Level 2 Level 3 Total

Syndicated loans

$ -   $ -   $ 11,868 $ 11,868

First lien term loans

-   -   144,643 144,643

Second lien term loans

-   -   88,178 88,178

Structured finance securities

-   -   12,828 12,828

Equity interests

-   -   26,479 26,479

Total

$ -   $ -   $ 283,996 $ 283,996

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended August 31, 2016 (dollars in thousands):

Syndicated
loans
First lien
term loans
Second
lien
term loans
Structured
finance
securities
Equity
interests
Total

Balance as of February 29, 2016

$ 11,868 $ 144,643 $ 88,178 $ 12,828 $ 26,479 $ 283,996

Net unrealized appreciation (depreciation) on investments

2,100 217 1,076 1,171 (13,187 (8,623

Purchases and other adjustments to cost

51 44,689 10,899 -   620 56,259

Sales and redemptions

(4,556 (36,518 (13,269 (2,082 (14,443 (70,868

Net realized gain from investments

53 245 140 -   11,602 12,040

Balance as of August 31, 2016

$ 9,516 $ 153,276 $ 87,024 $ 11,917 $ 11,071 $ 272,804

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

Sales and redemptions represent net proceeds received from investments sold, and principal paydowns received, during the period.

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur.

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The net change in unrealized appreciation (depreciation) for the six months ended August 31, 2016 on investments still held as of August 31, 2016 was $1,772,281 and is included in net unrealized depreciation on investments in the consolidated statements of operations.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended August 31, 2015 (dollars in thousands):

Syndicated
loans
First lien
term loans
Second
lien
term loans
Unsecured
notes
Structured
finance
securities
Equity
interests
Total

Balance as of February 28, 2015

$ 18,302 $ 145,207 $ 35,603 $ 4,230 $ 17,031 $ 20,165 $ 240,538

Net unrealized appreciation (depreciation) on investments

(1,400 (726 76 656 1,372 (562 (584

Purchases and other adjustments to cost

20 25,217 16,901 668 -   413 43,219

Sales and redemptions

(356 (13,050 (10,673 (5,784 (1,649 (3,260 (34,772

Net realized gain from investments

5 94 164 261 -   3,260 3,784

Restructures in

-   -   -   101 -   -   101

Restructures out

-   -   -   -   -   (101 (101

Balance as of August 31, 2015

$ 16,571 $ 156,742 $ 42,071 $ 132 $ 16,754 $ 19,915 $ 252,185

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

Sales and redemptions represent net proceeds received from investments sold, and principal paydowns received, during the period.

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur.

The net change in unrealized appreciation (depreciation) for the six months ended August 31, 2015 on investments still held as of August 31, 2015 was $(955,584) and was included in net unrealized depreciation on investments in the consolidated statements of operations.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of August 31, 2016 were as follows (dollars in thousands):

Fair Value Valuation Technique Unobservable Input Range

Syndicated loans

9,516 Market Comparables Third-Party Bid (%) 0.0% - 100.0%

First lien term loans

153,276 Market Comparables Market Yield (%) 6.3% - 15.8%
EBITDA Multiples (x) 1.0x - 9.8x
Third-Party Bid (%) 95.0% - 99.9%

Second lien term loans

87,024 Market Comparables Market Yield (%) 8.3% - 15.0%
Third-Party Bid (%) 95.0% - 101.4%

Structured finance securities

11,917 Discounted Cash Flow Discount Rate (%) 18.0%

Equity interests

11,071 Market Comparables EBITDA Multiples (x)

Revenue Multiples (x)

2.5x - 11.4x

0.2x - 3.4x

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 29, 2016 were as follows (dollars in thousands):

Fair Value Valuation Technique Unobservable Input Range

Syndicated loans

11,868 Market Comparables Third-Party Bid (%) 72.5% - 98.2%

First lien term loans

144,643 Market Comparables Market Yield (%) 6.8% - 15.5%
EBITDA Multiples (x) 1.0x
Revenue Multiples

Third-Party Bid (%)

91.3% - 98.9%

Second lien term loans

88,178 Market Comparables Market Yield (%) 0.0% - 15.0%
Third-Party Bid (%) 91.5% - 98.6%

Structured finance securities

12,828 Discounted Cash Flow Discount Rate (%) 20.0%

Equity interests

26,479 Market Comparables EBITDA Multiples (x)

Revenue Multiples

6.8x - 16.4x

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For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the EBITDA or revenue valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing a market quote in deriving a value, a significant increase (decrease) in the market quote, in isolation, would result in a significantly higher (lower) fair value measurement.

The composition of our investments as of August 31, 2016, at amortized cost and fair value were as follows (dollars in thousands):

Investments at
Amortized Cost
Amortized Cost
Percentage of
Total Portfolio
Investments at
Fair Value
Fair Value
Percentage of
Total Portfolio

Syndicated loans

$ 9,687 3.5 $ 9,516 3.5

First lien term loans

154,662 55.5 153,276 56.2

Second lien term loans

87,256 31.3 87,024 31.9

Structured finance securities

10,948 3.9 11,917 4.4

Equity interests

16,054 5.8 11,071 4.0

Total

$ 278,607 100.0 $ 272,804 100.0

The composition of our investments as of February 29, 2016, at amortized cost and fair value were as follows (dollars in thousands):

Investments at
Amortized Cost
Amortized Cost
Percentage of
Total Portfolio
Investments at
Fair Value
Fair Value
Percentage of
Total Portfolio

Syndicated loans

$ 14,138 5.0 $ 11,868 4.2

First lien term loans

146,246 52.0 144,643 50.9

Second lien term loans

89,486 31.9 88,178 31.1

Structured finance securities

13,031 4.6 12,828 4.5

Equity interests

18,275 6.5 26,479 9.3

Total

$ 281,176 100.0 $ 283,996 100.0

For loans and debt securities for which market quotations are not available, we determine their fair value based on third party indicative broker quotes, where available, or the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield valuation methodology. In applying the market yield valuation methodology, we determine the fair value based on such factors as market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. If, in our judgment, the market yield methodology is not sufficient or appropriate, we may use additional methodologies such as an asset liquidation or expected recovery model.

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company's securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio

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company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company's assets and liabilities. We also take into account historical and anticipated financial results.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. For the quarter ended November 30, 2013, in connection with the refinancing of the Saratoga CLO liabilities, we ran Intex models based on assumptions about the refinanced Saratoga CLO's structure, including capital structure, cost of liabilities and reinvestment period. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at August 31, 2016. The significant inputs for the valuation model include:

Default rates: 2.0%

Recovery rates: 35-70%

Prepayment rate: 20.0%

Reinvestment rate / price: L+375bps / $99.50

Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. ("Saratoga CLO")

On January 22, 2008, we invested $30.0 million in all of the outstanding subordinated notes of GSC Investment Corp. CLO 2007, Ltd., a collateralized loan obligation fund managed by us that invests primarily in senior secured loans. Additionally, we entered into a collateral management agreement with GSC Investment Corp. CLO 2007, Ltd. pursuant to which we act as collateral manager to it. The Saratoga CLO was refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the fee basis amount at the beginning of the collection period, paid quarterly to the extent of available proceeds. We are also entitled to an incentive management fee equal to 20.0% of the remaining interest proceeds and principal proceeds, if any, after the subordinated notes have realized the incentive management fee target return of 12.0%, in accordance with the priority of payments after making the prior distributions on the relevant payment date. For the three months ended August 31, 2016 and August 31, 2015, we accrued $0.4 million and $0.4 million in management fee income, respectively, and $0.6 million and $0.7 million in interest income, respectively, from Saratoga CLO. For the six months ended August 31, 2016 and August 31, 2015, we accrued $0.7 million and $0.8 million in management fee income, respectively, and $1.1 million and $1.3 million in interest income, respectively, from Saratoga CLO. We did not accrue any amounts related to the incentive management fee from Saratoga CLO as the 12.0% hurdle rate has not yet been achieved.

At August 31, 2016, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $11.9 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. At August 31, 2016, Saratoga CLO had investments with a principal balance of $299.5 million and a weighted average spread over LIBOR of 4.41%, and had debt with a principal balance of $282.4 million with a weighted average spread over LIBOR of 1.84%. As a result, Saratoga CLO earns a "spread" between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. At August 31, 2016, the present value of the projected future cash flows of the subordinated notes was approximately $11.9 million, using an 18.0% discount rate. Saratoga Investment Corp. invested $32.8 million into the CLO since January 2008, and to date has since received distributions of $47.9 million and management fees of $15.7 million.

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Below is certain financial information from the separate financial statements of Saratoga CLO as of August 31, 2016 (unaudited) and February 29, 2016 and for the three and six months ended August 31, 2016 and August 31, 2015 (unaudited).

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

As of
August 31, 2016 February 29, 2016
(unaudited)

ASSETS

Investments

Fair Value Loans (amortized cost of $296,436,508 and $300,112,538, respectively)

$ 290,944,255 $ 284,652,926

Fair Value Other/Structured finance securities (amortized cost of $3,531,218 and $3,531,218, respectively)

12,901 191,863

Total investments at fair value (amortized cost of $299,967,726 and $303,643,756, respectively)

290,957,156 284,844,789

Cash and cash equivalents

5,172,517 2,349,633

Receivable from open trades

2,242,500 2,691,831

Interest receivable

1,782,055 1,698,562

Total assets

$ 300,154,228 $ 291,584,815

LIABILITIES

Interest payable

$ 836,806 $ 626,040

Payable from open trades

4,983,454 7,123,854

Accrued base management fee

85,448 85,008

Accrued subordinated management fee

85,448 85,008

Class A-1 Notes - SIC CLO 2013-1, Ltd.

170,000,000 170,000,000

Discount on Class A-1 Notes - SIC CLO 2013-1, Ltd.

(1,230,503 (1,319,258

Class A-2 Notes - SIC CLO 2013-1, Ltd.

20,000,000 20,000,000

Discount on Class A-2 Notes - SIC CLO 2013-1, Ltd.

(127,550 (136,750

Class B Notes - SIC CLO 2013-1, Ltd.

44,800,000 44,800,000

Discount on Class B Notes - SIC CLO 2013-1, Ltd.

(828,565 (888,328

Class C Notes - SIC CLO 2013-1, Ltd.

16,000,000 16,000,000

Discount on Class C Notes - SIC CLO 2013-1, Ltd.

(515,869 (553,078

Class D Notes - SIC CLO 2013-1, Ltd.

14,000,000 14,000,000

Discount on Class D Notes - SIC CLO 2013-1, Ltd.

(669,638 (717,938

Class E Notes - SIC CLO 2013-1, Ltd.

13,100,000 13,100,000

Discount on Class E Notes - SIC CLO 2013-1, Ltd.

(1,262,461 (1,353,521

Class F Notes - SIC CLO 2013-1, Ltd.

4,500,000 4,500,000

Discount on Class F Notes - SIC CLO 2013-1, Ltd.

(459,180 (492,300

Deferred debt financing costs, SIC CLO 2013-1, Ltd. Notes

(1,604,034 (1,716,554

Subordinated Notes

30,000,000 30,000,000

Total liabilities

$ 311,693,356 $ 313,142,183

Commitments and contingencies

NET ASSETS

Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively

$ 250 $ 250

Accumulated loss

(21,557,623 (5,803,406

Net gain (loss)

10,018,245 (15,754,212

Total net assets

(11,539,128 (21,557,368

Total liabilities and net assets

$   300,154,228 $  291,584,815

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Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

(unaudited)

For the three months ended
August 31
For the six months ended
August 31
2016 2015 2016 2015

INVESTMENT INCOME

Interest from investments

$ 4,028,665 $ 3,638,587 $ 7,817,001 $ 7,151,174

Interest from cash and cash equivalents

1,938 215 2,709 505

Other income

189,836 69,878 433,137 233,993

Total investment income

4,220,439 3,708,680 8,252,847 7,385,672

EXPENSES

Interest expense

3,608,788 3,013,007 6,889,803 5,859,643

Professional fees

20,944 53,177 39,426 112,399

Miscellaneous fee expense

14,147 5,763 22,391 10,688

Base management fee

187,329 186,576 374,171 375,949

Subordinated management fee

187,329 186,576 374,171 375,949

Trustee expenses

37,839 36,737 64,527 68,021

Amortization expense

239,963 239,963 479,926 479,926

Total expenses

4,296,339 3,721,799 8,244,415 7,282,575

NET INVESTMENT INCOME (LOSS)

(75,900 (13,119 8,432 103,097

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain on investments

165,854 89,084 221,416 131,645

Net unrealized appreciation (depreciation) on investments

467,724 (3,624,214 9,788,397 (3,710,046

Net gain (loss) on investments

633,578 (3,535,130 10,009,813 (3,578,401

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

$ 557,678 $ (3,548,249 $ 10,018,245 $ (3,475,304

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Saratoga Investment Corp. CLO 2013-1 Ltd.

Schedule of Investments

August 31, 2016

(unaudited)

Issuer Name

Industry

Asset Name

Asset
Type
Current
Rate
Maturity
Date
Principal/
Number
of Shares
Cost Fair Value

Education Management II, LLC

Leisure Goods/Activities/Movies A-1 Preferred Shares Equity 0.00 6,692 $ 669,214 $ 1,673

Education Management II, LLC

Leisure Goods/Activities/Movies A-2 Preferred Shares Equity 0.00 18,975 1,897,538 -  

New Millennium Holdco, Inc.

Healthcare & Pharmaceuticals Common Stock Equity 0.00 14,813 964,466 11,228

24 Hour Holdings III, LLC

Leisure Goods/Activities/Movies Term Loan Loan 4.75 5/28/2021 $ 490,000 486,449 475,912

ABB Con-Cise Optical Group, LLC

Healthcare & Pharmaceuticals Term Loan B Loan 6.00 5/28/2021 $ 2,000,000 1,987,793 2,006,260

Acosta Holdco, Inc.

Media Term Loan B1 Loan 4.25 9/26/2021 $ 1,965,125 1,953,132 1,910,259

Aspen Dental Management, Inc.

Healthcare & Pharmaceuticals Term Loan Initial Loan 5.50 4/29/2022 $ 1,492,481 1,488,165 1,502,749

Advantage Sales & Marketing, Inc.

Services: Business Delayed Draw Term Loan Loan 4.25 7/25/2021 $ 2,458,719 2,455,834 2,438,434

Aegis Toxicology Science Corporation

Healthcare & Pharmaceuticals Term B Loan Loan 5.50 2/24/2021 $ 2,476,183 2,336,688 2,228,565

Agrofresh, Inc.

Food Services Term Loan Loan 5.75 7/30/2021 $ 1,980,000 1,971,495 1,950,300

Akorn, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 5.25 4/16/2021 $ 398,056 396,816 401,539

Albertson's LLC

Retailers (Except Food and Drugs) Term Loan B-4 Loan 4.50 8/25/2021 $ 2,903,452 2,893,319 2,915,327

Alere Inc. (fka IM US Holdings, LLC)

Healthcare & Pharmaceuticals Term Loan B Loan 4.25 6/20/2022 $ 922,606 920,608 911,073

Alion Science and Technology Corporation

High Tech Industries Term Loan B (First Lien) Loan 5.50 8/19/2021 $ 2,970,000 2,957,287 2,821,500

Alliance Healthcare Services, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 4.25 6/3/2019 $ 989,713 985,285 942,701

APCO Holdings, Inc.

Automotive Term Loan Loan 7.00 1/31/2022 $ 1,987,500 1,934,566 1,937,813

American Beacon Advisors, Inc.

Financial Intermediaries Term Loan (First Lien) Loan 5.50 4/30/2022 $ 242,065 241,040 239,192

Aramark Corporation

Food Products U.S. Term F Loan Loan 3.25 2/24/2021 $ 3,134,390 3,134,390 3,143,198

Asurion, LLC (fka Asurion Corporation)

Insurance Incremental Tranche B-1 Term Loan Loan 5.00 5/24/2019 $ 2,583,471 2,563,499 2,585,487

Asurion, LLC (fka Asurion Corporation)

Insurance Term Loan B4 (First Lien) Loan 5.00 8/4/2022 $ 2,446,875 2,436,006 2,445,994

Auction.com, LLC

Banking, Finance, Insurance & Real Estate Term Loan Loan 6.00 5/13/2019 $ 2,732,469 2,732,115 2,725,638

Avantor Performance Materials Holdings, Inc.

Chemicals/Plastics Term Loan Loan 6.00 6/21/2022 $ 2,000,000 1,993,354 1,996,260

Bass Pro Group, LLC

Retailers (Except Food and Drugs) Term Loan Loan 4.00 6/5/2020 $ 1,481,250 1,478,758 1,473,222

Belmond Interfin Ltd.

Lodging & Casinos Term Loan Loan 4.00 3/19/2021 $ 488,750 487,005 484,781

BJ's Wholesale Club, Inc.

Food/Drug Retailers New 2013 (November) Replacement Loan (First Lien) Loan 4.50 9/26/2019 $ 1,435,957 1,435,270 1,434,564

BMC Software

Technology Term Loan Loan 5.00 9/10/2020 $ 1,969,697 1,921,390 1,874,501

Brickman Group Holdings, Inc.

Brokers/Dealers/Investment Houses Initial Term Loan (First Lien) Loan 4.00 12/18/2020 $ 1,468,699 1,457,999 1,459,667

Brock Holdings III, Inc.

Industrial Equipment Term Loan (First Lien) Loan 6.00 3/16/2017 $ 1,896,531 1,899,778 1,844,376

BWAY Holding Company

Leisure Goods/Activities/Movies Term Loan B Loan 5.50 8/14/2020 $ 953,811 946,297 956,797

Camp International Holding Company

Aerospace and Defense 2013 Replacement Term Loan (First Lien) Loan 4.75 5/31/2019 $ 1,930,151 1,930,675 1,915,675

Candy Intermediate Holdings, Inc.

Beverage, Food & Tobacco Term Loan Loan 5.50 6/15/2023 $ 500,000 497,577 499,065

Capital Automotive L.P.

Conglomerate Tranche B-1 Term Loan Facility Loan 4.00 4/10/2019 $ 1,495,079 1,497,110 1,498,503

Catalent Pharma Solutions, Inc

Drugs Initial Term B Loan Loan 4.25 5/20/2021 $ 490,001 488,239 492,540

Cengage Learning Acquisitions, Inc.

Publishing Term Loan Loan 5.25 6/7/2023 $ 1,500,000 1,485,661 1,497,195

Charter Communications Operating, LLC

Cable and Satellite Television Term F Loan Loan 3.00 12/31/2020 $ 1,617,873 1,613,777 1,618,989

CHS/Community Health Systems, Inc.

Healthcare & Pharmaceuticals Term G Loan Loan 3.75 12/31/2019 $ 1,017,431 993,225 976,520

CHS/Community Health Systems, Inc.

Healthcare & Pharmaceuticals Term H Loan Loan 4.00 1/27/2021 $ 1,872,045 1,824,244 1,793,813

Cinedigm Digital Funding I, LLC

Services: Business Term Loan Loan 3.75 2/28/2018 $ 160,337 159,733 159,536

CITGO Petroleum Corporation

Oil & Gas Term Loan B Loan 4.50 7/29/2021 $ 1,974,924 1,954,351 1,939,869

Communications Sales & Leasing, Inc.

Telecommunications Term Loan B (First Lien) Loan 5.00 10/24/2022 $ 1,980,000 1,969,384 1,980,000

Consolidated Aerospace Manufacturing, LLC

Aerospace and Defense Term Loan (First Lien) Loan 4.75 8/11/2022 $ 1,437,500 1,430,957 1,336,875

Concordia Healthcare Corporation

Healthcare & Pharmaceuticals Term Loan B Loan 5.25 10/21/2021 $ 1,990,000 1,892,925 1,881,485

CPI Acquisition Inc.

Technology Term Loan B (First Lien) Loan 5.50 8/17/2022 $ 1,436,782 1,417,341 1,396,667

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

Electronics/Electric Term B Loan Loan 4.25 11/17/2017 $ 1,556,222 1,556,222 1,536,769

Crosby US Acquisition Corporation

Industrial Equipment Initial Term Loan (First Lien) Loan 4.00 11/23/2020 $ 731,250 730,594 597,343

CT Technologies Intermediate Hldgs, Inc

Healthcare & Pharmaceuticals Term Loan Loan 5.25 12/1/2021 $ 1,477,575 1,465,276 1,448,024

Culligan International Company

Conglomerate Dollar Loan (First Lien) Loan 6.25 12/19/2017 $ 3,767,616 3,716,501 3,692,264

Culligan International Company

Conglomerate Dollar Loan (Second Lien) Loan 9.50 6/19/2018 $ 783,162 759,653 752,814

Cumulus Media Holdings Inc.

Broadcast Radio and Television Term Loan Loan 4.25 12/23/2020 $ 470,093 467,008 326,324

DAE Aviation (StandardAero)

Aerospace and Defense Term Loan Loan 5.25 7/7/2022 $ 1,985,000 1,976,439 1,990,459

DCS Business Services, Inc.

Financial Intermediaries Term B Loan Loan 8.75 3/19/2018 $ 2,393,304 2,383,863 2,393,304

Dell International, LLC

Technology Term Loan B2 Loan 4.00 4/29/2020 $ 2,880,793 2,869,784 2,889,435

Delta 2 (Lux) S.a.r.l.

Lodging & Casinos Term Loan B-3 Loan 4.75 7/30/2021 $ 1,000,000 996,178 994,250

Deluxe Entertainment Service Group, Inc.

Leisure Goods/Activities/Movies Term Loan (First Lien) Loan 6.50 2/28/2020 $ 1,882,982 1,884,133 1,835,908

Diamond Resorts International

Lodging & Casinos Term Loan Loan 5.50 5/7/2021 $ 926,971 923,536 925,210

Diamond Resorts International

Lodging & Casinos Term Loan (Add-On) Loan 5.50 5/7/2021 $ 1,000,000 982,323 996,250

Diebold, Inc.

High Tech Industries Term Loan B Loan 5.25 11/6/2023 $ 500,000 495,193 501,875

DJO Finance, LLC

Healthcare & Pharmaceuticals Term Loan Loan 4.25 6/8/2020 $ 495,000 493,182 477,056

DPX Holdings B.V.

Healthcare & Pharmaceuticals Term Loan 2015 Incr Dollar Loan 4.25 3/11/2021 $ 2,940,000 2,934,157 2,927,152

Drew Marine Group, Inc.

Chemicals/Plastics Term Loan (First Lien) Loan 4.25 11/19/2020 $ 2,456,135 2,432,203 2,400,872

DTZ U.S. Borrower, LLC

Construction & Building Term Loan B Add-on Loan 4.25 11/4/2021 $ 1,972,519 1,963,587 1,962,045

Edelman Financial Group, Inc.

Banking, Finance, Insurance & Real Estate Term Loan Loan 6.50 12/19/2022 $ 1,492,500 1,464,947 1,495,306

Education Management II, LLC

Leisure Goods/Activities/Movies Term Loan A Loan 5.50 7/2/2020 $ 501,970 487,043 126,331

Education Management II, LLC

Leisure Goods/Activities/Movies Term Loan B (2.00% Cash/6.50% PIK) Loan 8.50 7/2/2020 $ 923,048 900,098 38,463

Emerald Performance Materials, LLC

Chemicals/Plastics Term Loan (First Lien) Loan 4.50 8/1/2021 $ 482,159 480,366 482,964

Emerald Performance Materials, LLC

Chemicals/Plastics Term Loan (Second Lien) Loan 7.75 8/1/2022 $ 500,000 497,983 489,165

Emerald 2 Limited

Chemicals/Plastics Term Loan B1A Loan 5.00 5/14/2021 $ 1,000,000 992,962 906,670

Endo International plc

Healthcare & Pharmaceuticals Term Loan B Loan 3.75 9/26/2022 $ 995,000 992,780 989,090

EnergySolutions, LLC

Environmental Industries Term Loan B Loan 6.75 5/29/2020 $ 795,000 784,320 787,050

Engility Corporation

Aerospace and Defense Term Loan B-1 Loan 4.88 8/12/2020 $ 250,000 248,757 251,408

Evergreen Acqco 1 LP

Retailers (Except Food and Drugs) New Term Loan Loan 5.00 7/9/2019 $ 960,094 958,777 834,321

EWT Holdings III Corp. (fka WTG Holdings III Corp.)

Industrial Equipment Term Loan (First Lien) Loan 4.75 1/15/2021 $ 1,957,368 1,953,440 1,962,261

EWT Holdings III Corp.

Capital Equipment Term Loan Loan 5.50 1/15/2021 $ 997,500 988,228 1,002,488

Extreme Reach, Inc.

Media Term Loan B Loan 7.25 2/7/2020 $ 3,000,000 2,986,651 3,018,750

Federal-Mogul Corporation

Automotive Tranche C Term Loan Loan 4.75 4/15/2021 $ 2,940,000 2,929,732 2,799,527

First Data Corporation

Financial Intermediaries First Data T/L Ext (2021) Loan 4.52 3/24/2021 $ 2,021,537 1,954,630 2,030,149

First Eagle Investment Management

Banking, Finance, Insurance & Real Estate Term Loan Loan 4.75 12/1/2022 $ 1,492,500 1,465,494 1,481,306

Fitness International, LLC

Leisure Goods/Activities/Movies Term Loan B Loan 5.50 7/1/2020 $ 1,934,146 1,907,268 1,927,376

FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.)

Nonferrous Metals/Minerals Loan Loan 3.75 6/28/2019 $ 1,490,966 1,491,981 1,482,109

Garda World Security Corporation

Services: Business Term B Delayed Draw Loan Loan 4.00 11/6/2020 $ 198,102 197,448 194,883

Garda World Security Corporation

Services: Business Term B Loan Loan 4.00 11/6/2020 $ 774,398 771,902 761,814

Gardner Denver, Inc.

High Tech Industries Initial Dollar Term Loan Loan 4.25 7/30/2020 $ 2,438,599 2,433,122 2,312,475

Gates Global LLC

Leisure Goods/Activities/Movies Term Loan (First Lien) Loan 4.25 7/5/2021 $ 484,156 479,314 476,288

General Nutrition Centers, Inc.

Retailers (Except Food and Drugs) Amended Tranche B Term Loan Loan 3.25 3/4/2019 $ 2,125,219 2,120,837 2,100,417

Global Tel*Link Corporation

Services: Business Term Loan (First Lien) Loan 5.00 5/26/2020 $ 2,682,732 2,675,684 2,557,529

Goodyear Tire & Rubber Company, The

Chemicals/Plastics Loan (Second Lien) Loan 3.75 4/30/2019 $ 2,000,000 1,976,471 2,001,500

Grosvenor Capital Management Holdings, LP

Brokers/Dealers/Investment Houses Initial Term Loan Loan 3.75 1/4/2021 $ 1,014,560 1,011,209 1,003,572

GTCR Valor Companies, Inc.

Services: Business Term Loan B Loan 7.00 5/17/2023 $ 1,500,000 1,440,274 1,423,125

Harland Clarke Holdings Corp. (fka Clarke American Corp.)

Publishing Tranche B-4 Term Loan Loan 6.99 8/2/2019 $ 2,468,750 2,378,555 2,414,758

Headwaters Incorporated

Building & Development Term Loan Loan 4.50 3/24/2022 $ 247,500 246,448 247,500

Help/Systems Holdings, Inc.

High Tech Industries Term Loan Loan 6.25 10/8/2021 $ 1,492,500 1,436,471 1,475,709

Hemisphere Media Holdings, LLC

Media Term Loan B Loan 5.00 7/30/2020 $ 2,500,000 2,506,310 2,493,750

Hercules Achievement Holdings, Inc.

Retailers (Except Food and Drugs) Term Loan B Loan 5.00 12/10/2021 $ 248,111 245,876 248,731

Hoffmaster Group, Inc.

Containers/Glass Products Term Loan Loan 5.25 5/8/2020 $ 1,960,000 1,947,036 1,953,885

Hostess Brand, LLC

Beverage, Food & Tobacco Term Loan B (First Lien) Loan 4.50 8/3/2022 $ 992,500 990,343 997,214

Huntsman International LLC

Chemicals/Plastics Term Loan B (First Lien) Loan 3.52 4/19/2019 $ 3,305,591 3,286,001 3,308,334

Husky Injection Molding Systems Ltd.

Services: Business Term Loan B Loan 4.25 6/30/2021 $ 488,709 486,969 486,646

Imagine! Print Solutions, Inc.

Media Term Loan B Loan 7.00 3/30/2022 $ 498,750 491,671 500,620

Infor (US), Inc. (fka Lawson Software Inc.)

Services: Business Tranche B-5 Term Loan Loan 3.75 6/3/2020 $ 2,139,810 2,127,549 2,114,667

Insight Global

Services: Business Term Loan Loan 6.00 10/29/2021 $ 2,468,096 2,456,476 2,471,798

Informatica Corporation

High Tech Industries Term Loan B Loan 4.50 8/5/2022 $ 496,250 495,133 478,881

J. Crew Group, Inc.

Retailers (Except Food and Drugs) Term B-1 Loan Retired 03/05/2014 Loan 4.00 3/5/2021 $ 950,619 950,619 749,563

Jazz Acquisition, Inc

Aerospace and Defense First Lien 6/14 Loan 4.50 6/19/2021 $ 490,303 489,370 442,253

J.Jill Group, Inc.

Retailers (Except Food and Drugs) Term Loan (First Lien) Loan 6.00 5/9/2022 $ 990,003 985,698 970,203

Kinetic Concepts, Inc.

Healthcare & Pharmaceuticals Term Loan F-1 Loan 5.00 11/4/2020 $ 2,440,214 2,432,629 2,449,365

Koosharem, LLC

Services: Business Term Loan Loan 7.50 5/15/2020 $ 2,950,075 2,930,014 2,522,314

Kraton Polymers, LLC

Chemicals/Plastics Term Loan (Initial) Loan 6.00 1/6/2022 $ 2,500,000 2,268,983 2,501,575

Lannett Company, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 6.38 11/25/2022 $ 1,950,000 1,887,295 1,908,563

LPL Holdings

Banking, Finance, Insurance & Real Estate Term Loan B (2022) Loan 4.75 11/21/2022 $ 1,990,000 1,971,963 2,001,204

McGraw-Hill Global Education Holdings, LLC

Publishing Term Loan Loan 5.00 5/4/2022 $ 1,000,000 995,280 1,004,380

Mauser Holdings, Inc.

Containers/Glass Products Term Loan Loan 4.50 7/31/2021 $ 491,250 489,428 489,201

Michaels Stores, Inc.

Retailers (Except Food and Drugs) Term B Loan Loan 3.75 1/28/2020 $ 483,750 483,750 485,496

Michaels Stores, Inc.

Retailers (Except Food and Drugs) Term Loan B-2 Loan 4.00 1/28/2020 $ 1,205,294 1,201,088 1,212,610

Micro Holding Corporation

High Tech Industries Term Loan Loan 4.75 7/8/2021 $ 987,411 983,240 983,708

Microsemi Corporation

Electronics/Electric Term Loan B Loan 3.75 1/17/2023 $ 979,015 951,794 985,026

Midas Intermediate Holdco II, LLC

Automotive Term Loan (Initial) Loan 4.50 8/18/2021 $ 245,625 244,644 246,239

Milk Specialties Company

Beverage, Food & Tobacco Term Loan Loan 6.00 8/16/2023 $ 1,000,000 990,047 1,001,250

MSC Software Corporation

Services: Business Term Loan Loan 5.00 5/29/2020 $ 1,980,000 1,937,888 1,960,200

MWI Holdings, Inc.

Capital Equipment Term Loan (First Lien) Loan 6.50 6/29/2020 $ 3,000,000 2,976,771 2,992,500

National Veterinary Associates, Inc

Healthcare & Pharmaceuticals Term Loan B Loan 4.75 8/14/2021 $ 982,534 979,601 980,893

National Vision, Inc.

Retailers (Except Food and Drugs) Term Loan (Second Lien) Loan 6.75 3/11/2022 $ 250,000 249,761 232,033

Neptune Finco (CSC Holdings)

Cable and Satellite Television Term Loan Loan 5.00 10/7/2022 $ 997,500 984,211 1,005,191

New Millennium Holdco, Inc.

Healthcare & Pharmaceuticals Term Loan Loan 7.50 12/21/2020 $ 1,997,007 1,822,451 948,578

NorthStar Asset Management Group, Inc.

Banking, Finance, Insurance & Real Estate Term Loan B Loan 4.63 1/30/2023 $ 1,995,000 1,929,403 1,986,681

Novelis, Inc.

Conglomerate Term Loan B Loan 4.00 6/2/2022 $ 4,747,083 4,726,799 4,755,248

Novetta Solutions

Aerospace and Defense Term Loan (200MM) Loan 6.00 10/16/2022 $ 1,990,000 1,971,971 1,885,525

Novetta Solutions

Aerospace and Defense Term Loan (2nd Lien) Loan 9.50 9/29/2023 $ 1,000,000 990,712 920,000

NPC International, Inc.

Food Services Term Loan (2013) Loan 4.75 12/28/2018 $ 477,298 477,298 477,097

Numericable U.S., LLC

Broadcast Radio and Television Term Loan B-5 Loan 4.56 7/31/2022 $ 992,500 990,344 992,679

NuSil Technology, LLC

Chemicals/Plastics Term Loan Loan 6.00 4/5/2019 $ 2,782,343 2,767,725 2,776,556

NVA Holdings, Inc.

Services: Consumer Term Loan B1 Loan 4.75 8/14/2021 $ 249,375 248,759 249,375

Om Group

Banking, Finance, Insurance & Real Estate Term Loan Loan 7.00 10/28/2021 $ 997,494 901,636 980,038

ON Semiconductor Corporation

High Tech Industries Term Loan B Loan 5.25 3/31/2023 $ 500,000 492,859 506,160

Onex Carestream Finance LP

Healthcare & Pharmaceuticals Term Loan (First Lien 2013) Loan 5.00 6/7/2019 $ 3,723,057 3,713,318 3,534,596

OnexYork Acquisition Co

Healthcare & Pharmaceuticals Term Loan B Loan 4.75 10/1/2021 $ 491,250 488,417 435,984

OpenLink International, LLC

Services: Business Term B Loan Loan 7.75 7/29/2019 $ 2,929,160 2,928,277 2,912,083

P.F. Chang's China Bistro, Inc. (Wok Acquisition Corp.)

Food/Drug Retailers Term Borrowing Loan 4.25 6/24/2019 $ 1,425,174 1,420,371 1,389,545

P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC)

Services: Business Term Loan (First Lien) Loan 5.00 10/30/2020 $ 975,000 971,514 909,188

Petsmart, Inc. (Argos Merger Sub, Inc.)

Retailers (Except Food and Drugs) Term Loan B1 Loan 4.25 3/11/2022 $ 987,500 983,257 988,734

PGX Holdings, Inc.

Financial Intermediaries Term Loan Loan 5.75 9/29/2020 $ 949,643 942,884 946,481

Phillips-Medisize Corporation

Healthcare & Pharmaceuticals Term Loan Loan 4.75 6/16/2021 $ 490,000 488,213 489,182

Planet Fitness Holdings LLC

Leisure Goods/Activities/Movies Term Loan Loan 4.50 3/31/2021 $ 2,404,597 2,396,951 2,419,626

PrePaid Legal Services, Inc.

Services: Business Term Loan B Loan 6.50 7/1/2019 $ 3,393,480 3,397,685 3,389,239

Presidio, Inc.

Services: Business Term Loan Loan 5.25 2/2/2022 $ 2,391,444 2,335,704 2,384,605

Prime Security Services (Protection One)

Services: Business Term Loan Loan 4.75 7/1/2021 $ 1,990,000 1,981,620 2,006,915

Ranpak Holdings, Inc.

Services: Business Term Loan Loan 4.25 10/1/2021 $ 933,627 931,293 920,398

Ranpak Holdings, Inc.

Services: Business Term Loan (Second Lien) Loan 8.25 10/3/2022 $ 500,000 497,992 460,000

Redtop Acquisitions Limited

Electronics/Electric Initial Dollar Term Loan (First Lien) Loan 4.50 12/3/2020 $ 487,500 485,218 486,891

Regal Cinemas Corporation

Services: Consumer Term Loan Loan 3.50 4/1/2022 $ 496,250 495,132 497,987

Research Now Group, Inc

Media Term Loan B Loan 5.50 3/18/2021 $ 2,048,075 2,039,131 1,986,633

Rexnord LLC/RBS Global, Inc.

Industrial Equipment Term B Loan Loan 4.00 8/21/2020 $ 1,540,540 1,541,679 1,539,970

Reynolds Group Holdings Inc.

Industrial Equipment Incremental U.S. Term Loan Loan 4.25 2/6/2023 $ 1,765,548 1,765,548 1,767,208

Rocket Software, Inc.

Services: Business Term Loan (First Lien) Loan 5.75 2/8/2018 $ 1,891,942 1,883,013 1,894,307

Rovi Solutions Corporation / Rovi Guides, Inc.

Electronics/Electric Tranche B-3 Term Loan Loan 3.75 7/2/2021 $ 1,470,000 1,464,686 1,460,195

Royal Adhesives and Sealants

Chemicals/Plastics Term Loan (First Lien) Loan 4.50 6/20/2022 $ 495,000 492,827 496,084

Royal Adhesives and Sealants

Chemicals/Plastics Term Loan (Second Lien) Loan 8.50 6/19/2023 $ 500,000 496,533 492,500

RPI Finance Trust

Financial Intermediaries Term B-4 Term Loan Loan 3.50 11/9/2020 $ 3,134,220 3,134,220 3,151,207

Russell Investment Management T/L B

Banking, Finance, Insurance & Real Estate Term Loan B Loan 6.75 6/1/2023 $ 2,000,000 1,880,801 1,883,340

Sable International Finance Ltd

Telecommunications Term Loan B1 Loan 5.50 12/2/2022 $ 825,000 809,076 829,472

Sable International Finance Ltd

Telecommunications Term Loan B2 Loan 5.50 12/2/2022 $ 675,000 661,971 678,659

SBP Holdings LP

Industrial Equipment Term Loan (First Lien) Loan 5.00 3/27/2021 $ 977,500 974,042 762,450

Scientific Games International, Inc.

Electronics/Electric Term Loan B2 Loan 6.00 10/1/2021 $ 985,000 975,913 984,320

SCS Holdings (Sirius Computer)

High Tech Industries Term Loan (First Lien) Loan 6.00 10/30/2022 $ 1,977,528 1,941,664 1,988,246

Seadrill Operating LP

Oil & Gas Term Loan B Loan 4.00 2/21/2021 $ 982,368 921,146 470,721

Sensus USA Inc.

Utilities Term Loan Loan 6.50 4/5/2023 $ 1,900,135 1,894,785 1,904,885

ServiceMaster Company, The

Conglomerate Tranche B Term Loan Loan 4.25 7/1/2021 $ 1,965,000 1,950,684 1,976,790

Shearers Foods LLC

Food Services Term Loan (First Lien) Loan 4.94 6/30/2021 $ 982,500 980,621 976,359

Sitel Worldwide

Telecommunications Term Loan Loan 6.50 9/18/2021 $ 1,985,000 1,967,812 1,971,760

Sonneborn, LLC

Chemicals/Plastics Term Loan (First Lien) Loan 4.75 12/10/2020 $ 209,075 208,675 209,075

Sonneborn, LLC

Chemicals/Plastics Initial US Term Loan Loan 4.75 12/10/2020 $ 1,184,756 1,182,493 1,184,757

Sophia, L.P.

Electronics/Electric Term Loan (Closing Date) Loan 4.75 9/30/2022 $ 1,985,000 1,976,164 1,984,166

SourceHOV LLC

Services: Business Term Loan B (First Lien) Loan 7.75 10/31/2019 $ 1,887,500 1,848,187 1,506,848

SRAM, LLC

Industrial Equipment Term Loan (First Lien) Loan 4.00 4/10/2020 $ 2,833,435 2,826,700 2,713,014

Steak ‘n Shake Operations, Inc.

Food Services Term Loan Loan 4.75 3/19/2021 $ 928,173 921,737 914,250

SuperMedia Inc. (fka Idearc Inc.)

Publishing Loan Loan 11.60 12/30/2016 $ 200,478 200,451 77,812

Survey Sampling International

Services: Business Term Loan B Loan 6.00 12/16/2020 $ 2,735,604 2,719,614 2,715,087

Sybil Finance BV

High Tech Industries Term Loan B Loan 5.00 8/3/2022 $ 1,000,000 995,000 1,000,940

Sybil Finance BV

High Tech Industries Term Loan Loan 4.25 3/20/2020 $ 1,239,524 1,238,443 1,241,073

Syniverse Holdings, Inc.

Telecommunications Initial Term Loan Loan 4.00 4/23/2019 $ 468,977 466,513 415,927

TaxACT, Inc.

Services: Business Term Loan B Loan 7.00 1/3/2023 $ 1,475,000 1,433,967 1,482,375

Tectum Holdings, Inc.

Transportation Delayed Draw Term Loan (Initial) Loan 5.75 8/24/2023 $ 780,952 770,952 779,702

Texas Competitive Electric Holdings Company, LLC

Utilities Term Loan B Loan 5.00 10/31/2017 $ 814,286 806,539 817,543

Texas Competitive Electric Holdings Company, LLC

Utilities Term Loan C Loan 5.00 10/31/2017 $ 185,714 183,948 186,528

TGI Friday's, Inc.

Food Services Term Loan B Loan 5.25 7/15/2020 $ 1,651,816 1,648,391 1,643,557

Townsquare Media, Inc.

Media Term Loan B Loan 4.25 4/1/2022 $ 932,522 928,672 932,522

TPF II Power LLC and TPF II Covert Midco LLC

Utilities Term Loan B Loan 5.00 10/2/2021 $ 1,423,645 1,369,789 1,429,581

TransDigm, Inc.

Aerospace and Defense Tranche C Term Loan Loan 3.75 2/28/2020 $ 4,255,246 4,265,475 4,245,076

Travel Leaders Group, LLC

Hotel, Gaming and Leisure Term Loan B Loan 7.00 12/7/2020 $ 2,667,187 2,652,367 2,647,183

Tricorbraun, Inc. (fka Kranson Industries, Inc.)

Containers/Glass Products Term Loan Loan 4.00 5/3/2018 $ 2,831,864 2,830,158 2,826,569

Trugreen Limited Partnership

Services: Business Term Loan B Loan 6.50 4/13/2023 $ 500,000 492,927 503,125

Twin River Management Group, Inc.

Lodging & Casinos Term Loan B Loan 5.25 7/10/2020 $ 866,521 867,991 869,233

Univar Inc.

Chemicals/Plastics Term B Loan Loan 4.25 7/1/2022 $ 2,977,500 2,964,666 2,972,170

Univision Communications Inc.

Telecommunications Replacement First-Lien Term Loan Loan 4.00 3/1/2020 $ 2,901,111 2,890,101 2,899,806

Valeant Pharmaceuticals International, Inc.

Drugs Series D2 Term Loan B Loan 5.00 2/13/2019 $ 2,468,720 2,459,768 2,464,598

Verint Systems Inc.

Services: Business Term Loan Loan 3.50 9/6/2019 $ 1,011,464 1,009,003 1,011,717

Vizient Inc.

Healthcare & Pharmaceuticals Term Loan Loan 6.25 2/13/2023 $ 997,500 969,696 1,008,103

Vouvray US Finance

Industrial Equipment Term Loan Loan 4.75 6/27/2021 $ 490,000 488,186 488,368

Washington Inventory Service

Services: Business U.S. Term Loan (First Lien) Loan 5.75 12/20/2018 $ 1,736,393 1,747,098 1,085,246

Western Digital Corporation

High Tech Industries Term Loan B (USD) Loan 4.50 5/1/2023 $ 1,600,000 1,568,172 1,608,288

Windstream Services, LLC

Telecommunications Term Loan B6 Loan 5.75 3/29/2021 $ 249,375 243,569 250,856

ZEP, Inc.

Chemicals/Plastics Term Loan B Loan 5.50 6/27/2022 $ 2,970,000 2,957,142 2,971,871

$ 299,967,726 $ 290,957,156

Principal Cost Fair Value

Cash and cash equivalents

U.S. Bank Money Market (a)

$ 5,172,517 $ 5,172,517 $ 5,172,517

Total cash and cash equivalents

$ 5,172,517 $ 5,172,517 $ 5,172,517

(a) Included within cash and cash equivalents in Saratoga CLO's Statements of Assets and Liabilities as of August 31, 2016.

21

Table of Contents

Saratoga Investment Corp. CLO 2013-1 Ltd.

Schedule of Investments

February 29, 2016

Issuer Name

Industry

Asset

Name

Asset
Type
Current
Rate
Maturity
Date
Principal /
Number
of Shares
Cost Fair Value

Education Management II, LLC

Leisure Goods/Activities/Movies A-1 Preferred Shares Equity 0.00 6,692 $ 669,214 $ 1,673

Education Management II, LLC

Leisure Goods/Activities/Movies A-2 Preferred Shares Equity 0.00 18,975 1,897,538 95

New Millennium Holdco, Inc.

Healthcare & Pharmaceuticals Common Stock Equity 0.00 14,813 964,466 190,095

24 Hour Holdings III, LLC

Leisure Goods/Activities/Movies Term Loan Loan 4.75 5/28/2021 $ 492,500 488,586 455,154

Acosta Holdco, Inc.

Media Term Loan B1 Loan 4.25 9/26/2021 $ 1,972,936 1,959,834 1,855,389

Aspen Dental Management, Inc.

Healthcare & Pharmaceuticals Term Loan Initial Loan 5.50 4/29/2022 $ 497,500 495,228 495,221

Advantage Sales & Marketing, Inc.

Services: Business Delayed Draw Term Loan Loan 4.25 7/25/2021 $ 2,471,231 2,468,039 2,342,826

Agrofresh, Inc.

Food Services Term Loan Loan 5.75 7/30/2021 $ 1,990,000 1,980,704 1,935,275

Aegis Toxicology Science Corporation

Healthcare & Pharmaceuticals Term B Loan Loan 5.50 2/24/2021 $ 985,000 985,000 797,850

Akorn, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 6.00 4/16/2021 $ 398,056 396,681 396,066

Albertson's LLC

Retailers (Except Food and Drugs) Term Loan B-4 Loan 5.50 8/25/2021 $ 3,384,425 3,367,410 3,302,623

Alere Inc. (fka IM US Holdings, LLC)

Healthcare & Pharmaceuticals Term Loan B Loan 4.25 6/20/2022 $ 927,265 925,091 925,365

Alion Science and Technology Corporation

High Tech Industries Term Loan B (First Lien) Loan 5.50 8/19/2021 $ 2,985,000 2,971,074 2,824,555

Alliance Healthcare Services, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 4.25 6/3/2019 $ 994,856 990,161 906,981

Alliant Holdings I, LLC

Banking, Finance, Insurance & Real Estate Term Loan B (First Lien) Loan 4.50 8/12/2022 $ 995,000 992,679 960,921

Alvogen Pharma US, Inc

Healthcare & Pharmaceuticals Term Loan Loan 6.00 4/4/2022 $ 480,447 478,240 456,425

American Beacon Advisors, Inc.

Financial Intermediaries Term Loan (First Lien) Loan 5.50 4/30/2022 $ 248,749 247,612 244,190

Aramark Corporation

Food Products LC-2 Facility Loan 0.29 7/26/2016 $ 9,447 9,445 9,305

Aramark Corporation

Food Products LC-3 Facility Loan 0.29 7/26/2016 $ 5,244 5,244 5,166

Aramark Corporation

Food Products U.S. Term F Loan Loan 3.25 2/24/2021 $ 3,150,423 3,150,423 3,126,133

Asurion, LLC (fka Asurion Corporation)

Insurance Incremental Tranche B-1 Term Loan Loan 5.00 5/24/2019 $ 2,596,480 2,573,245 2,441,237

Asurion, LLC (fka Asurion Corporation)

Insurance Term Loan B4 (First Lien) Loan 5.00 8/4/2022 $ 2,478,125 2,466,303 2,270,582

Auction.com, LLC

Banking, Finance, Insurance & Real Estate Term Loan Loan 6.00 5/13/2019 $ 2,522,992 2,522,722 2,491,455

Avantor Performance Materials Holdings, Inc.

Chemicals/Plastics Term Loan Loan 5.25 6/24/2017 $ 2,156,953 2,153,896 2,135,384

Bass Pro Group, LLC

Retailers (Except Food and Drugs) Term Loan Loan 4.00 6/5/2020 $ 1,488,750 1,485,895 1,397,564

Belmond Interfin Ltd.

Lodging & Casinos Term Loan Loan 4.00 3/19/2021 $ 491,249 489,361 477,127

Berry Plastics Corporation

Chemicals/Plastics Term E Loan Loan 3.75 1/6/2021 $ 1,314,499 1,305,069 1,291,903

BJ's Wholesale Club, Inc.

Food/Drug Retailers New 2013 (November) Replacement Loan (First Lien) Loan 4.50 9/26/2019 $ 1,476,196 1,475,409 1,401,161

Blue Coat Systems

Technology Term Loan B Loan 4.50 5/20/2022 $ 997,500 995,159 945,131

BMC Software

Technology Term Loan Loan 5.00 9/10/2020 $ 1,979,798 1,926,080 1,571,821

Brickman Group Holdings, Inc.

Brokers/Dealers/Investment Houses Initial Term Loan (First Lien) Loan 4.00 12/18/2020 $ 1,476,212 1,464,327 1,426,390

Brock Holdings III, Inc.

Industrial Equipment Term Loan (First Lien) Loan 6.00 3/16/2017 $ 1,917,168 1,924,101 1,802,138

Burlington Coat Factory Warehouse Corporation

Retailers (Except Food and Drugs) Term B-2 Loan Loan 4.25 8/13/2021 $ 1,861,667 1,853,426 1,845,843

BWAY Holding Company

Leisure Goods/Activities/Movies Term Loan B Loan 5.50 8/14/2020 $ 985,000 976,335 930,826

Caesars Entertainment Corp.

Lodging & Casinos Term B-7 Loan Loan 13.25 3/1/2017 $ 995,000 991,037 814,656

Camp International Holding Company

Aerospace and Defense 2013 Replacement Term Loan (First Lien) Loan 4.75 5/31/2019 $ 1,940,113 1,940,984 1,806,730

Capital Automotive L.P.

Conglomerate Tranche B-1 Term Loan Facility Loan 4.00 4/10/2019 $ 2,051,828 2,055,060 2,044,564

Catalent Pharma Solutions, Inc

Drugs Initial Term B Loan Loan 4.25 5/20/2021 $ 492,501 490,549 487,271

Cengage Learning Acquisitions, Inc.

Publishing Term Loan Loan 7.00 3/31/2020 $ 2,647,871 2,670,807 2,539,758

Charter Communications Operating, LLC

Cable and Satellite Television Term F Loan Loan 3.00 12/31/2020 $ 2,628,783 2,621,343 2,566,823

CHS/Community Health Systems, Inc.

Healthcare & Pharmaceuticals Term G Loan Loan 3.75 12/31/2019 $ 1,022,569 994,876 974,212

CHS/Community Health Systems, Inc.

Healthcare & Pharmaceuticals Term H Loan Loan 4.00 1/27/2021 $ 1,881,500 1,828,566 1,785,920

Cinedigm Digital Funding I, LLC

Services: Business Term Loan Loan 3.75 2/28/2018 $ 298,828 297,362 295,840

CITGO Petroleum Corporation

Oil & Gas Term Loan B Loan 4.50 7/29/2021 $ 1,984,975 1,962,423 1,865,876

Communications Sales & Leasing, Inc.

Telecommunications Term Loan B (First Lien) Loan 5.00 10/24/2022 $ 1,990,000 1,978,594 1,847,596

CommScope, Inc.

Telecommunications Term Loan B Loan 3.75 12/29/2022 $ 498,750 497,568 494,176

Consolidated Aerospace Manufacturing, LLC

Aerospace and Defense Term Loan (First Lien) Loan 4.75 8/11/2022 $ 1,437,500 1,430,556 1,329,688

Concordia Healthcare Corp

Healthcare & Pharmaceuticals Term Loan B Loan 5.25 10/21/2021 $ 2,000,000 1,894,483 1,920,000

CPI Acquisition Inc.

Technology Term Loan B (First Lien) Loan 5.50 8/17/2022 $ 1,436,782 1,415,977 1,396,667

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

Electronics/Electric Term B Loan Loan 4.25 11/17/2017 $ 1,564,182 1,564,182 1,501,615

Crosby US Acquisition Corp.

Industrial Equipment Initial Term Loan (First Lien) Loan 4.00 11/23/2020 $ 735,000 734,245 536,550

CT Technologies Intermediate Hldgs, Inc

Healthcare & Pharmaceuticals Term Loan Loan 5.25 12/1/2021 $ 1,485,038 1,471,665 1,433,061

Culligan International Company

Conglomerate Dollar Loan (First Lien) Loan 6.25 12/19/2017 $ 771,625 742,910 721,469

Culligan International Company

Conglomerate Dollar Loan (Second Lien) Loan 9.50 6/19/2018 $ 783,162 754,065 734,214

Cumulus Media Holdings Inc.

Broadcast Radio and Television Term Loan Loan 4.25 12/23/2020 $ 470,093 466,690 304,973

DAE Aviation (StandardAero)

Aerospace and Defense Term Loan Loan 5.25 7/7/2022 $ 1,995,000 1,985,759 1,970,063

DCS Business Services, Inc.

Financial Intermediaries Term B Loan Loan 8.75 3/19/2018 $ 2,409,739 2,397,948 2,409,739

Dell International LLC

Technology Term Loan B2 Loan 4.00 4/29/2020 $ 2,904,989 2,892,348 2,889,854

Delta 2 (Lux) S.a.r.l.

Lodging & Casinos Term Loan B-3 Loan 4.75 7/30/2021 $ 1,000,000 995,870 925,000

Deluxe Entertainment Service Group, Inc.

Leisure Goods/Activities/Movies Term Loan (First Lien) Loan 6.50 2/28/2020 $ 1,882,983 1,884,279 1,751,174

Diamond Resorts International

Lodging & Casinos Term Loan Loan 5.50 5/7/2021 $ 926,971 923,222 897,614

Diamond Resorts International

Lodging & Casinos Term Loan (Add-On) Loan 5.50 5/7/2021 $ 1,000,000 980,687 968,330

DJO Finance, LLC

Healthcare & Pharmaceuticals Term Loan Loan 4.25 6/8/2020 $ 497,500 495,435 478,222

DPX Holdings B.V.

Healthcare & Pharmaceuticals Term Loan 2015 Incr Dollar Loan 4.25 3/11/2021 $ 2,955,000 2,948,456 2,799,863

Drew Marine Group, Inc.

Chemicals/Plastics Term Loan (First Lien) Loan 4.25 11/19/2020 $ 2,472,161 2,445,601 2,299,110

DTZ U.S. Borrower, LLC

Construction & Building Term Loan B Add-on Loan 4.25 11/4/2021 $ 2,985,000 2,970,317 2,869,331

Edelman Financial Group, Inc.

Banking, Finance, Insurance & Real Estate Term Loan Loan 6.50 12/19/2022 $ 1,500,000 1,470,617 1,459,695

Education Management II, LLC

Leisure Goods/Activities/Movies Term Loan A Loan 5.50 7/2/2020 $ 501,970 485,313 160,630

Education Management II, LLC

Leisure Goods/Activities/Movies Term Loan B (2.00% Cash/6.50% PIK) Loan 8.50 7/2/2020 $ 893,447 867,647 56,582

Emerald Performance Materials, LLC

Chemicals/Plastics Term Loan (First Lien) Loan 4.50 8/1/2021 $ 484,659 482,690 473,148

Emerald Performance Materials, LLC

Chemicals/Plastics Term Loan (Second Lien) Loan 7.75 8/1/2022 $ 500,000 497,844 468,750

Emerald 2 Limited

Chemicals/Plastics Term Loan B1A Loan 5.00 5/14/2021 $ 1,000,000 991,762 866,670

Endo International plc

Healthcare & Pharmaceuticals Term Loan B Loan 3.75 9/26/2022 $ 1,000,000 997,602 987,780

EnergySolutions, LLC

Environmental Industries Term Loan B Loan 6.75 5/29/2020 $ 937,857 923,660 731,528

Evergreen Acqco 1 LP

Retailers (Except Food and Drugs) New Term Loan Loan 5.00 7/9/2019 $ 965,081 963,406 719,951

EWT Holdings III Corp. (fka WTG Holdings III Corp.)

Industrial Equipment Term Loan (First Lien) Loan 4.75 1/15/2021 $ 1,967,406 1,962,950 1,908,383

Federal-Mogul Corporation

Automotive Tranche C Term Loan Loan 4.75 4/15/2021 $ 2,955,000 2,943,580 2,345,530

First Data Corporation

Financial Intermediaries First Data Corp T/L (2018 New Dollar) Loan 3.93 3/23/2018 $ 2,790,451 2,748,229 2,752,780

First Data Corporation

Financial Intermediaries First Data T/L Ext (2021) Loan 4.43 3/24/2021 $ 2,111,028 2,034,284 2,077,779

First Eagle Investment Management

Banking, Finance, Insurance & Real Estate Term Loan Loan 4.75 12/1/2022 $ 1,500,000 1,470,946 1,412,504

Fitness International, LLC

Leisure Goods/Activities/Movies Term Loan B Loan 5.50 7/1/2020 $ 1,976,234 1,945,935 1,850,249

FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.)

Nonferrous Metals/Minerals Loan Loan 4.25 6/28/2019 $ 1,962,387 1,962,515 1,504,738

Garda World Security Corporation

Services: Business Term B Delayed Draw Loan Loan 4.00 11/6/2020 $ 199,120 198,391 187,344

Garda World Security Corporation

Services: Business Term B Loan Loan 4.00 11/6/2020 $ 778,380 775,586 732,346

Gardner Denver, Inc.

High Tech Industries Initial Dollar Term Loan Loan 4.25 7/30/2020 $ 2,451,137 2,445,005 2,016,452

Gates Global LLC

Leisure Goods/Activities/Movies Term Loan (First Lien) Loan 4.25 7/5/2021 $ 493,750 488,813 433,883

Generac Power Systems, Inc.

Industrial Equipment Term Loan B Loan 3.50 5/31/2020 $ 693,858 684,537 676,511

General Nutrition Centers, Inc.

Retailers (Except Food and Drugs) Amended Tranche B Term Loan Loan 3.25 3/4/2019 $ 4,131,271 4,121,165 4,012,497

Global Tel*Link Corporation

Services: Business Term Loan (First Lien) Loan 5.00 5/26/2020 $ 2,725,318 2,717,647 2,237,023

Goodyear Tire & Rubber Company, The

Chemicals/Plastics Loan (Second Lien) Loan 3.75 4/30/2019 $ 2,000,000 1,974,077 2,005,000

Grosvenor Capital Management Holdings, LP

Brokers/Dealers/Investment Houses Initial Term Loan Loan 3.75 1/4/2021 $ 1,264,036 1,259,418 1,191,354

GTCR Valor Companies, Inc.

Services: Business Term Loan (First Lien) Loan 6.00 6/1/2021 $ 1,974,982 1,941,456 1,959,340

Harland Clarke Holdings Corp. (fka Clarke American Corp.)

Publishing Tranche B-4 Term Loan Loan 6.00 8/2/2019 $ 475,000 473,378 421,561

HCA Inc.

Healthcare & Pharmaceuticals Tranche B-4 Term Loan Loan 3.36 5/1/2018 $ 2,119,664 2,053,127 2,116,294

Headwaters Incorporated

Building & Development Term Loan Loan 4.50 3/24/2022 $ 248,750 247,628 248,285

Hercules Achievement Holdings, Inc.

Retailers (Except Food and Drugs) Term Loan B Loan 5.00 12/10/2021 $ 249,370 246,940 244,929

Hertz Corporation, The

Automotive Tranche B-1 Term Loan Loan 3.75 3/12/2018 $ 2,910,000 2,933,230 2,879,998

Hoffmaster Group, Inc.

Containers/Glass Products Term Loan Loan 5.25 5/8/2020 $ 1,970,000 1,955,325 1,915,825

Hostess Brand, LLC

Beverage, Food & Tobacco Term Loan B (First Lien) Loan 4.50 8/3/2022 $ 997,500 995,241 983,784

Huntsman International LLC

Chemicals/Plastics Term Loan B (First Lien) Loan 3.52 4/19/2019 $ 3,840,541 3,814,577 3,727,245

Husky Injection Molding Systems Ltd.

Services: Business Term Loan B Loan 4.25 6/30/2021 $ 491,196 489,277 465,757

Infor (US), Inc. (fka Lawson Software Inc.)

Services: Business Tranche B-5 Term Loan Loan 3.75 6/3/2020 $ 2,188,296 2,174,333 2,015,049

Insight Global

Services: Business Term Loan Loan 6.00 10/29/2021 $ 1,979,592 1,971,967 1,961,439

Informatica Corporation

High Tech Industries Term Loan B Loan 4.50 8/5/2022 $ 498,750 497,554 468,411

J. Crew Group, Inc.

Retailers (Except Food and Drugs) Term B-1 Loan Retired 03/05/2014 Loan 4.00 3/5/2021 $ 955,481 955,481 639,379

Jazz Acquisition, Inc

Aerospace and Defense First Lien 6/14 Loan 4.50 6/19/2021 $ 492,727 491,745 434,832

J.Jill Group, Inc.

Retailers (Except Food and Drugs) Term Loan (First Lien) Loan 6.00 5/9/2022 $ 995,000 990,362 925,350

Kinetic Concepts, Inc.

Healthcare & Pharmaceuticals Dollar Term D-1 Loan Loan 4.50 5/4/2018 $ 2,452,586 2,436,004 2,392,645

Koosharem, LLC

Services: Business Term Loan Loan 7.50 5/15/2020 $ 2,965,050 2,942,458 2,683,370

Kraton Polymers, LLC

Chemicals/Plastics Term Loan (Initial) Loan 6.00 1/6/2022 $ 2,500,000 2,252,500 2,250,000

LPL Holdings

Banking, Finance, Insurance & Real Estate Term Loan B (2022) Loan 4.75 11/21/2022 $ 2,000,000 1,980,543 1,900,000

Mauser Holdings, Inc.

Containers/Glass Products Term Loan Loan 4.50 7/31/2021 $ 493,750 491,750 475,234

Michaels Stores, Inc.

Retailers (Except Food and Drugs) Term B Loan Loan 3.75 1/28/2020 $ 486,250 486,250 479,792

Michaels Stores, Inc.

Retailers (Except Food and Drugs) Term Loan B-2 Loan 4.00 1/28/2020 $ 1,212,794 1,208,220 1,201,042

Micro Holding Corp.

High Tech Industries Term Loan Loan 4.75 7/8/2021 $ 992,447 987,851 950,268

Microsemi Corporation

Electronics/Electric Term Loan B Loan 5.25 1/15/2023 $ 2,183,824 2,119,162 2,180,177

Midas Intermediate Holdco II, LLC

Automotive Term Loan (Initial) Loan 4.50 8/18/2021 $ 246,875 245,802 244,098

MPH Acquisition Holdings, LLC

Healthcare & Pharmaceuticals Term Loan Loan 3.75 3/31/2021 $ 376,136 375,400 366,500

MSC Software Corporation

Services: Business Term Loan Loan 5.00 5/29/2020 $ 985,000 977,601 886,500

National Veterinary Associates, Inc

Healthcare & Pharmaceuticals Term Loan B Loan 4.75 8/14/2021 $ 987,526 984,296 959,549

National Vision, Inc.

Retailers (Except Food and Drugs) Term Loan (Second Lien) Loan 6.75 3/11/2022 $ 250,000 249,729 218,750

Neptune Finco (CSC Holdings)

Cable and Satellite Television Term Loan Loan 5.00 10/7/2022 $ 1,000,000 985,784 989,750

New Millennium Holdco

Healthcare & Pharmaceuticals Term Loan Loan 7.50 12/21/2020 $ 2,007,042 1,811,375 1,822,655

Nortek, Inc.

Electronics/Electric Term Loan B Loan 3.50 10/30/2020 $ 985,022 974,747 939,464

NorthStar Asset Management Group Inc.

Banking, Finance, Insurance & Real Estate Term Loan B Loan 4.63 1/30/2023 $ 2,000,000 1,930,000 1,950,000

Novelis, Inc.

Conglomerate Term Loan B Loan 4.00 6/2/2022 $ 4,771,058 4,749,389 4,440,090

Novetta Solutions

Aerospace and Defense Term Loan (200MM) Loan 6.00 10/16/2022 $ 2,000,000 1,980,636 1,940,000

Novetta Solutions

Aerospace and Defense Term Loan (2nd Lien) Loan 9.50 9/29/2023 $ 1,000,000 990,269 950,000

NPC International, Inc.

Food Services Term Loan (2013) Loan 4.75 12/28/2018 $ 481,250 481,250 472,829

NRG Energy, Inc.

Utilities Term Loan (2013) Loan 2.75 7/2/2018 $ 3,821,925 3,808,282 3,751,449

Numericable

Broadcast Radio and Television Term Loan B-5 Loan 4.56 7/31/2022 $ 997,500 995,164 953,171

NuSil Technology LLC.

Chemicals/Plastics Term Loan Loan 5.25 4/7/2017 $ 789,045 789,045 774,645

Onex Carestream Finance LP

Healthcare & Pharmaceuticals Term Loan (First Lien 2013) Loan 5.00 6/7/2019 $ 3,832,558 3,821,232 3,244,912

OnexYork Acquisition Co

Healthcare & Pharmaceuticals Term Loan B Loan 4.75 10/1/2021 $ 493,749 490,644 459,435

OpenLink International, LLC

Services: Business Term B Loan Loan 6.25 10/30/2017 $ 2,944,496 2,943,282 2,811,994

P.F. Chang's China Bistro, Inc. (Wok Acquisition Corp.)

Food/Drug Retailers Term Borrowing Loan 4.25 6/24/2019 $ 1,432,750 1,427,110 1,336,039

P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC)

Services: Business Term Loan (First Lien) Loan 5.00 10/30/2020 $ 980,000 976,133 774,200

Penn Products Terminal, LLC

Chemicals/Plastics Term Loan B Loan 4.75 4/13/2022 $ 248,125 246,994 218,350

PetCo Animal Supplies Stores, Inc.

Retailers (Except Food and Drugs) Term Loan B-1 Loan 5.75 1/15/2023 $ 1,000,000 980,217 978,590

PetCo Animal Supplies Stores, Inc.

Retailers (Except Food and Drugs) Term Loan B-2 Loan 5.62 1/15/2023 $ 1,000,000 980,216 978,960

Petsmart, Inc. (Argos Merger Sub, Inc.)

Retailers (Except Food and Drugs) Term Loan B1 Loan 4.25 3/11/2022 $ 992,500 987,862 961,176

PGX Holdings, Inc.

Financial Intermediaries Term Loan Loan 5.75 9/29/2020 $ 954,643 947,123 941,917

Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)

Conglomerate Term Loan Loan 4.25 8/18/2022 $ 1,920,848 1,911,850 1,872,346

Phillips-Medisize Corporation

Healthcare & Pharmaceuticals Term Loan Loan 4.75 6/16/2021 $ 492,500 490,535 458,025

Physio-Control International, Inc.

Healthcare & Pharmaceuticals Term Loan B Loan 5.50 6/6/2022 $ 498,750 496,371 498,127

Pinnacle Foods Finance LLC

Food Products New Term Loan G Loan 3.00 4/29/2020 $ 2,581,332 2,577,286 2,553,737

Planet Fitness Holdings LLC

Leisure Goods/Activities/Movies Term Loan Loan 4.75 3/31/2021 $ 2,417,118 2,410,079 2,368,776

PrePaid Legal Services, Inc.

Services: Business Term Loan B Loan 6.50 7/1/2019 $ 724,167 721,080 716,020

Presidio, Inc.

Services: Business Term Loan Loan 5.25 2/2/2022 $ 1,902,292 1,846,615 1,816,688

Prime Security Services (Protection One)

Services: Business Term Loan Loan 5.00 7/1/2021 $ 1,995,000 1,985,640 1,924,178

Ranpak Holdings, Inc.

Services: Business Term Loan Loan 4.25 10/1/2021 $ 938,354 936,008 886,745

Ranpak Holdings, Inc.

Services: Business Term Loan (Second Lien) Loan 8.25 10/3/2022 $ 500,000 497,866 400,000

Redtop Acquisitions Limited

Electronics/Electric Initial Dollar Term Loan (First Lien) Loan 4.50 12/3/2020 $ 490,000 487,461 482,444

Regal Cinemas Corporation

Services: Consumer Term Loan Loan 3.75 4/1/2022 $ 497,500 496,320 496,256

Research Now Group, Inc

Media Term Loan B Loan 5.50 3/18/2021 $ 2,058,445 2,048,627 1,996,692

Rexnord LLC/RBS Global, Inc.

Industrial Equipment Term B Loan Loan 4.00 8/21/2020 $ 1,630,123 1,631,387 1,557,647

Reynolds Group Holdings Inc.

Industrial Equipment Incremental U.S. Term Loan Loan 4.50 12/1/2018 $ 1,910,551 1,910,551 1,902,946

Riverbed Technology, Inc.

Technology Term Loan B Loan 6.00 2/25/2022 $ 992,500 988,224 970,873

Rocket Software, Inc.

Services: Business Term Loan (First Lien) Loan 5.75 2/8/2018 $ 1,901,835 1,889,759 1,889,150

Rovi Solutions Corporation / Rovi Guides, Inc.

Electronics/Electric Tranche B-3 Term Loan Loan 3.75 7/2/2021 $ 1,477,500 1,471,640 1,422,094

Royal Adhesives and Sealants

Chemicals/Plastics Term Loan (First Lien) Loan 4.50 6/20/2022 $ 497,500 495,187 479,675

Royal Adhesives and Sealants

Chemicals/Plastics Term Loan (Second Lien) Loan 8.50 6/19/2023 $ 500,000 496,388 478,335

RPI Finance Trust

Financial Intermediaries Term B-4 Term Loan Loan 3.50 11/9/2020 $ 5,155,193 5,155,193 5,132,665

Sable International Finance Ltd

Telecommunications Term Loan B1 Loan 5.50 12/2/2022 $ 825,000 808,500 800,770

Sable International Finance Ltd

Telecommunications Term Loan B2 Loan 5.50 12/2/2022 $ 675,000 661,500 655,175

SBP Holdings LP

Industrial Equipment Term Loan (First Lien) Loan 5.00 3/27/2021 $ 982,500 978,645 707,400

Scientific Games International, Inc.

Electronics/Electric Term Loan B2 Loan 6.00 10/1/2021 $ 990,000 981,872 904,613

SCS Holdings (Sirius Computer)

High Tech Industries Term Loan (First Lien) Loan 6.00 10/30/2022 $ 1,977,528 1,939,305 1,937,978

Seadrill Operating LP

Oil & Gas Term Loan B Loan 4.00 2/21/2021 $ 987,406 919,799 407,305

Sensus USA Inc. (fka Sensus Metering Systems)

Utilities Term Loan (First Lien) Loan 4.50 5/9/2017 $ 1,905,121 1,902,477 1,826,534

ServiceMaster Company, The

Conglomerate Tranche B Term Loan Loan 4.25 7/1/2021 $ 1,975,000 1,959,254 1,956,889

Shearers Foods LLC

Food Services Term Loan (First Lien) Loan 4.94 6/30/2021 $ 987,500 985,421 952,938

Sitel Worldwide

Telecommunications Term Loan Loan 6.50 9/18/2021 $ 1,995,000 1,976,131 1,931,160

Sonneborn, LLC

Chemicals/Plastics Term Loan (First Lien) Loan 4.75 12/10/2020 $ 222,750 222,282 220,801

Sonneborn, LLC

Chemicals/Plastics Initial US Term Loan Loan 4.75 12/10/2020 $ 1,262,250 1,259,600 1,251,205

Sophia, L.P.

Electronics/Electric Term Loan (Closing Date) Loan 4.75 9/30/2022 $ 1,995,000 1,985,507 1,911,469

SourceHOV LLC

Services: Business Term Loan B (First Lien) Loan 7.75 10/31/2019 $ 1,937,500 1,891,680 1,541,281

SRAM, LLC

Industrial Equipment Term Loan (First Lien) Loan 4.00 4/10/2020 $ 2,904,577 2,896,630 2,207,479

Staples, Inc.

Retailers (Except Food and Drugs) Term Loan 1/16 Loan 4.75 4/23/2021 $ 1,000,000 990,308 992,130

Steak ‘n Shake Operations, Inc.

Food Services Term Loan Loan 4.75 3/19/2021 $ 965,341 957,952 946,034

SuperMedia Inc. (fka Idearc Inc.)

Publishing Loan Loan 11.60 12/30/2016 $ 222,900 220,105 67,520

Survey Sampling International

Services: Business Term Loan B Loan 6.00 12/16/2020 $ 992,500 990,554 970,169

Sybil Finance BV

High Tech Industries Term Loan Loan 4.25 3/20/2020 $ 1,272,143 1,270,803 1,253,061

Syniverse Holdings, Inc.

Telecommunications Initial Term Loan Loan 4.00 4/23/2019 $ 479,913 476,927 311,944

TaxACT, Inc.

Services: Business Term Loan B Loan 7.00 1/3/2023 $ 1,860,000 1,805,035 1,804,200

TGI Friday's, Inc.

Food Services Term Loan B Loan 5.25 7/15/2020 $ 1,651,816 1,647,936 1,636,669

Townsquare Media, Inc.

Media Term Loan B Loan 4.25 4/1/2022 $ 932,522 928,333 915,624

TPF II Power LLC and TPF II Covert Midco LLC

Utilities Term Loan B Loan 5.50 10/2/2021 $ 1,491,826 1,433,943 1,396,722

TransDigm, Inc.

Aerospace and Defense Tranche C Term Loan Loan 3.75 2/28/2020 $ 4,277,294 4,283,815 4,148,975

Travel Leaders Group, LLC

Hotel, Gaming and Leisure Term Loan B Loan 7.00 12/7/2020 $ 1,946,300 1,939,729 1,917,107

Tricorbraun, Inc. (fka Kranson Industries, Inc.)

Containers/Glass Products Term Loan Loan 4.00 5/3/2018 $ 1,836,625 1,831,636 1,776,935

Truven Health Analytics Inc. (fka Thomson Reuters (Healthcare) Inc.)

Healthcare & Pharmaceuticals New Tranche B Term Loan Loan 4.50 6/6/2019 $ 482,603 476,598 480,494

Twin River Management Group, Inc.

Lodging & Casinos Term Loan B Loan 5.25 7/10/2020 $ 886,192 887,853 875,673

U.S. Security Associates Holdings, Inc.

Services: Business Delayed Draw Loan Loan 6.25 7/28/2017 $ 156,888 156,328 155,973

U.S. Security Associates Holdings, Inc.

Services: Business Term B Loan Loan 6.25 7/28/2017 $ 921,426 918,393 916,054

Univar Inc.

Chemicals/Plastics Term B Loan Loan 4.25 7/1/2022 $ 2,992,500 2,978,573 2,840,810

Univision Communications Inc.

Telecommunications Replacement First-Lien Term Loan Loan 4.00 3/1/2020 $ 2,916,556 2,903,859 2,832,705

Valeant Pharmaceuticals International, Inc.

Drugs Series D2 Term Loan B Loan 3.50 2/13/2019 $ 2,545,588 2,539,315 2,385,700

Verint Systems Inc.

Services: Business Term Loan Loan 3.50 9/6/2019 $ 1,014,058 1,011,203 1,005,692

Vertafore, Inc.

Services: Business Term Loan (2013) Loan 4.25 10/3/2019 $ 2,484,603 2,484,603 2,452,775

Vizient Inc.

Healthcare & Pharmaceuticals Term Loan Loan 6.25 2/13/2023 $ 1,000,000 970,144 993,750

Vouvray US Finance

Industrial Equipment Term Loan Loan 4.75 6/27/2021 $ 492,500 490,508 478,134

Washington Inventory Service

Services: Business U.S. Term Loan (First Lien) Loan 5.75 12/20/2018 $ 1,736,392 1,749,291 1,475,934

West Corporation

Telecommunications Term B-10 Loan Loan 3.25 6/30/2018 $ 2,534,892 2,558,782 2,490,861

ZEP Inc.

Chemicals/Plastics Term Loan B Loan 5.50 6/27/2022 $ 2,985,000 2,971,139 2,932,763

$ 303,643,756 $ 284,844,789

Principal Cost Fair Value

Cash and cash equivalents

U.S. Bank Money Market (a)

$ 2,349,633 $ 2,349,633 $ 2,349,633

Total cash and cash equivalents

$ 2,349,633 $ 2,349,633 $ 2,349,633

(a) Included within cash and cash equivalents in Saratoga CLO's Statements of Assets and Liabilities as of February 29, 2016.

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Note 5. Agreements and Related Party Transactions

On July 30, 2010, the Company entered into the Management Agreement with our Manager. The initial term of the Management Agreement was two years, with automatic, one-year renewals at the end of each year, subject to certain approvals by our board of directors and/or the Company's stockholders. On July 7, 2016, our board of directors approved the renewal of the Management Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive fee.

The base management fee of 1.75% is calculated based on the average value of our gross assets (other than cash or cash equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters.

The incentive fee consists of the following two parts:

The first, payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly (7.5% annualized) hurdle rate measured as of the end of each fiscal quarter, subject to a "catch-up" provision. Under this provision, in any fiscal quarter, our Manager receives no incentive fee unless our pre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter (9.376% annualized); and 20.0% of the amount of the our pre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter (9.376% annualized).

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

For the three months ended August 31, 2016 and August 31, 2015, the Company incurred $1.2 million and $1.2 million in base management fees, respectively. For the three months ended August 31, 2016 and August 31, 2015, the Company incurred $0.8 million and $0.7 million in incentive fees related to pre-incentive fee net investment income, respectively. For the three months ended August 31, 2016, we accrued $0.4 million in incentive fees related to capital gains. For the three months ended August 31, 2015, we reduced the incentive fees related to capital gains by $0.8 million. For the six months ended August 31, 2016 and August 31, 2015, the Company incurred $2.4 million and $2.3 million in base management fees, respectively. For the six months ended August 31, 2016 and August 31, 2015, the Company incurred $1.4 million and $1.4 million in incentive fees related to pre-incentive fee net investment income, respectively. For the six months ended August 31, 2016 and August 31, 2015, we accrued $0.5 million and $0.3 million in incentive fees related to capital gains, respectively. The accrual is calculated using both realized and unrealized capital gains for the period. The actual incentive fee related to capital gains will be determined and payable in arrears at the end of the fiscal year and will include only realized capital gains for the period. As of August 31, 2016, the base management fees accrual was $1.2 million and the incentive fees accrual was $5.1 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 29, 2016, the base management fees accrual was $1.2 million and the incentive fees accrual was $4.4 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.

On July 30, 2010, the Company entered into a separate administration agreement (the "Administration Agreement") with our Manager, pursuant to which our Manager, as our administrator, has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide managerial assistance on our behalf to those portfolio companies to which we are required to provide such assistance. The initial term of the Administration Agreement was two years, with automatic, one-year renewals at the end of each year subject to certain approvals by our board of directors and/or our stockholders. The amount of expenses payable or reimbursable thereunder by the Company was capped at $1.0 million for the initial two year term of the Administration Agreement and subsequent renewals. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to keep the cap on the

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payment or reimbursement of expenses by the Company thereunder, unchanged at $1.3 million. In addition, our board of directors intends to review the cap in the next three to six months to determine whether it should be further adjusted in light of differences between our projected and actual expenses and other similar factors.

For the three months ended August 31, 2016 and August 31, 2015, we recognized $0.3 million and $0.3 million, in administrator expenses for the periods, respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. For the six months ended August 31, 2016 and August 31, 2015, we recognized $0.7 million and $0.5 million, in administrator expenses for the periods, respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of August 31, 2016, $0.3 million of administrator expenses and other expenses payable to the Manager were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 29, 2016, $0.2 million of administrator expenses and other expenses payable to the Manager were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. For the six months ended August 31, 2016 and August 31, 2015, the Company neither bought nor sold any investments from the Saratoga CLO.

Note 6. Borrowings

Credit Facility

As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after giving effect to such leverage. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing.

On April 11, 2007, we entered into a $100.0 million revolving securitized credit facility (the "Revolving Facility"). On May 1, 2007, we entered into a $25.7 million term securitized credit facility (the "Term Facility" and, together with the Revolving Facility, the "Facilities"), which was fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively affected the value of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced a two-year amortization period during which all principal proceeds from the collateral was used to repay outstanding borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable monthly at the greater of the commercial paper rate and our lender's prime rate plus 4.00% plus a default rate of 2.00% or, if the commercial paper market was unavailable, the greater of the prevailing LIBOR rates and our lender's prime rate plus 6.00% plus a default rate of 3.00%.

In March 2009, we amended the Revolving Facility to increase the portion of the portfolio that could be invested in "CCC" rated investments in return for an increased interest rate and expedited amortization. As a result of these transactions, we expected to have additional cushion under our borrowing base under the Revolving Facility that would allow us to better manage our capital in times of declining asset prices and market dislocation.

On July 30, 2009, we exceeded the permissible borrowing limit under the Revolving Facility for 30 consecutive days, resulting in an event of default under the Revolving Facility. As a result of this event of default, our lender had the right to accelerate repayment of the outstanding indebtedness under the Revolving Facility and to foreclose and liquidate the collateral pledged thereunder. Acceleration of the outstanding indebtedness and/or liquidation of the collateral could have had a material adverse effect on our liquidity, financial condition and operations.

On July 30, 2010, we used the net proceeds from (i) the stock purchase transaction and (ii) a portion of the funds available to us under the $45.0 million senior secured revolving credit facility (the "Credit Facility") with Madison Capital Funding LLC, in each case, to pay the full amount of principal and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets, other than those held by SBIC LP, have been pledged under the Credit Facility to secure our obligations thereunder.

On February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the "Revolving Period"). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

remove the condition that we may not acquire additional loan assets without the prior written consent of Madison Capital Funding LLC.

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On September 17, 2014, we entered into a second amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

extend the commitment termination date from February 24, 2015 to September 17, 2017;

extend the maturity date of the Credit Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

reduce the floor on base rate borrowings from 3.00% to 2.25%; and on LIBOR borrowings from 2.00% to 1.25%.

As of August 31, 2016 and February 29, 2016, there were no outstanding borrowings under the Credit Facility and the Company was in compliance with all of the limitations and requirements of the Credit Facility. Financing costs of $2.7 million related to the Credit Facility have been capitalized and are being amortized over the term of the facility. For the three months ended August 31, 2016 and August 31, 2015, we recorded $0.1 million and $0.2 million of interest expense, respectively. For the six months ended August 31, 2016 and August 31, 2015, we recorded $0.2 million and $0.4 million of interest expense, respectively. For the three months ended August 31, 2016 and August 31, 2015, we recorded $0.02 million and $0.02 million of amortization of deferred financing costs related to the Credit Facility and Revolving Facility, respectively. For the six months ended August 31, 2016 and August 31, 2015, we recorded $0.04 million and $0.04 million of amortization of deferred financing costs related to the Credit Facility and Revolving Facility, respectively. During the three and six months ended August 31, 2016, there were no outstanding borrowings under the Credit Facility. The interest rates during the three and six months ended August 31, 2015 on the outstanding borrowings under the Credit Facility were 6.00%. During the three and six months ended August 31, 2015, the average dollar amount of outstanding borrowings under the Credit Facility was $6.8 million and $8.2 million, respectively.

The Credit Facility contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Credit Facility also includes certain requirements relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. The Credit Facility has an eight year term, consisting of a three year period (the "Revolving Period"), under which the Company may make and repay borrowings, and a final maturity five years from the end of the Revolving Period. Availability on the Credit Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain "eligible" loan assets included as part of the Borrowing Base. Funds may be borrowed at the greater of the prevailing LIBOR rate and 2.00%, plus an applicable margin of 5.50%. At the Company's option, funds may be borrowed based on an alternative base rate, which in no event will be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%. In addition, the Company will pay 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.

Our borrowing base under the Credit Facility was $24.0 million subject to the Credit Facility cap of $45.0 million at August 31, 2016. For purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC"). Accordingly, the August 31, 2016 borrowing base relies upon the valuations set forth in the Quarterly Report on Form 10-Q for the period ended May 31, 2016, as filed with the SEC on July 13, 2016. The valuations presented in this Quarterly Report on Form 10-Q will not be incorporated into the borrowing base until after this Quarterly Report on Form 10-Q is filed with the SEC.

SBA Debentures

SBIC LP is 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. As of August 31, 2016, we have funded SBIC LP with $75.0 million of equity capital, and have $103.7 million of SBA-guaranteed debentures outstanding. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP may borrow to a maximum of $150.0 million, which is up to twice its potential regulatory capital.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully

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

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

The Company received exemptive relief from the SEC to permit it to exclude the debt of SBIC LP guaranteed by the SBA from the definition of senior securities in the 200.0% asset coverage test under the 1940 Act. This allows the Company increased flexibility under the 200.0% asset coverage test by permitting it to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief.

As of August 31, 2016 and February 29, 2016, there was $103.7 million and $103.7 million outstanding of SBA debentures, respectively. The carrying amount of the amount outstanding of SBA debentures approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage. $3.9 million of financing costs related to the SBA debentures have been capitalized and are being amortized over the term of the commitment and drawdown.

For the three months ended August 31, 2016 and August 31, 2015, we recorded $0.8 million and $0.6 million of interest expense related to the SBA debentures, respectively. For the three months ended August 31, 2016 and August 31, 2015, we recorded $0.1 million and $0.1 million of amortization of deferred financing costs related to the SBA debentures, respectively. The weighted average interest rate during the three months ended August 31, 2016 and August 31, 2015 on the outstanding borrowings of the SBA debentures was 3.19% and 3.25%, respectively.

For the six months ended August 31, 2016 and August 31, 2015, we recorded $1.7 million and $1.2 million of interest expense related to the SBA debentures, respectively. For the six months ended August 31, 2016 and August 31, 2015, we recorded $0.3 million and $0.2 million of amortization of deferred financing costs related to the SBA debentures, respectively. The weighted average interest rate during the six months ended August 31, 2016 and August 31, 2015 on the outstanding borrowings of the SBA debentures was 3.14% and 3.20%, respectively. During the three and six months ended August 31, 2016, the average dollar amount of SBA debentures outstanding was $103.7 million. During the three and six months ended August 31, 2015, the average dollar amount of SBA debentures outstanding was $79.0 million.

In December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million, subject to SBA approval. SBA regulations currently limit the amount of SBA-guaranteed debentures that an SBIC may issue to $150.0 million when it has at least $75.0 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum amount of $350.0 million in SBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.

On April 2, 2015, the SBA issued a "green light" letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. On September 27, 2016, the SBA informed us that as part of their continued review of our application for a second license, and in order to ensure that they were reviewing the most current information available, we would need to update all previously submitted materials and invited us to reapply. As a result of this request, with which we are in the process of complying, the existing "green light" letter that the SBA issued to us will expire. If approved in the future, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license.

Notes

On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the "Notes"). The Notes will mature on May 31, 2020, and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at the Company's option. Interest will be payable quarterly beginning August 15, 2013.

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On May 17, 2013, the Company closed an additional $6.3 million in aggregate principal amount of the Notes, pursuant to the full exercise of the underwriters' option to purchase additional Notes. On May 29, 2015, the Company entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the Notes through an At-the-Market ("ATM") offering. As of August 31, 2016, the Company sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).

As of August 31, 2016, the carrying amount and fair value of the Notes was $61.8 million and $63.3 million, respectively. The fair value of the Notes, which are publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy. As of August 31, 2016, $2.7 million of financing costs related to the Notes (including underwriting commissions and net of issuance premiums) have been capitalized and are being amortized over the term of the Notes. For the three and six months ended August 31, 2016, we recorded $1.2 million and $2.3 million, respectively, of interest expense and $0.1 million and $0.2 million, respectively, of amortization of deferred financing costs related to the Notes. For the three and six months ended August 31, 2015, we recorded $1.1 million and $2.0 million, respectively, of interest expense and $0.1 million and $0.2 million, respectively, of amortization of deferred financing costs related to the Notes. During the three and six months ended August 31, 2016, the average dollar amount of Notes outstanding was $61.8 million. During the three and six months ended August 31, 2015, the average dollar amount of Notes outstanding was $54.4 million and $51.3 million, respectively.

Note 7. Commitments and contingencies

Contractual obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at August 31, 2016:

Payment Due by Period
Total Less Than
1 Year
1 - 3
Years
3 - 5
Years
More Than
5 Years
($ in thousands)

Long-Term Debt Obligations

$ 165,453 $ -   $ -   $ 61,793 $ 103,660

Off-balance sheet arrangements

The Company's off-balance sheet arrangements consisted of $8.0 million and $2.0 million of unfunded commitments to provide debt financing to its portfolio companies or to fund limited partnership interests as of August 31, 2016 and February 29, 2016, respectively. Such commitments are generally up to the Company's discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company's consolidated statements of assets and liabilities and are not reflected in the Company's consolidated statements of assets and liabilities.

A summary of the composition of the unfunded commitments as of August 31, 2016 and February 29, 2016 is shown in the table below (dollars in thousands):

As of
August 31, 2016 February 29, 2016

Avionte Holdings, LLC

$ 1,000 $ 1,000

BoardEffect, Inc.

7,000 -  

Identity Automation Systems

-   1,000

Total

$ 8,000 $ 2,000

Note 8. Directors Fees

The independent directors receive an annual fee of $40,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $5,000 and the chairman of each other committee receives an annual fee of $2,000 for their additional services in these capacities. In addition, we have purchased directors' and officers' liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors' fees in the form of our common stock issued at a price per

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share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are "interested persons" of the Company (as such term is defined in the 1940 Act). For the three months ended August 31, 2016 and August 31, 2015, we incurred $0.06 million and $0.05 million for directors' fees and expenses, respectively. For the six months ended August 31, 2016 and August 31, 2015, we incurred $0.1 million and $0.1 million for directors' fees and expenses, respectively. As of August 31, 2016 and February 29, 2016, $0.05 million and $0.03 million in directors' fees and expenses were accrued and unpaid, respectively. As of August 31, 2016, we had not issued any common stock to our directors as compensation for their services.

Note 9. Stockholders' Equity

On May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.

On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC Group in the LLC were exchanged for 6.7 shares of the Company.

On March 28, 2007, the Company completed its IPO of 725,000 shares of common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriter's discount and commissions, and $1.0 million in offering costs, were $100.7 million.

On November 13, 2009, we declared a dividend of $18.25 per share payable on December 31, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $2.50 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 of newly issued shares of common stock.

On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total proceeds received from this sale were $15.0 million.

On August 12, 2010, we effected 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.

On November 12, 2010, we declared a dividend of $4.40 per share payable on December 29, 2010. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $1.2 million or $0.44 per share. Based on shareholder elections, the dividend consisted of approximately $1.2 million in cash and 596,235 shares of common stock.

On November 15, 2011, we declared a dividend of $3.00 per share payable on December 30, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 599,584 shares of common stock.

On November 9, 2012, the Company declared a dividend of $4.25 per share payable on December 31, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 853,455 shares of common stock.

On October 30, 2013, the Company declared a dividend of $2.65 per share payable on December 27, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock.

On September 24, 2014, the Company declared a dividend of $0.18 per share payable on November 28, 2014. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to the Company's DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock.

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On September 24, 2014, the Company declared a dividend of $0.22 per share payable on February 27, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock.

On April 9, 2015, the Company declared a dividend of $0.27 per share payable on May 29, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock.

On May 14, 2015, the Company declared a special dividend of $1.00 per share payable on June 5, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock.

On July 8, 2015, the Company declared a dividend of $0.33 per share payable on August 31, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock.

On October 7, 2015, the Company declared a dividend of $0.36 per share payable on November 30, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock.

On January 12, 2016, the Company declared a dividend of $0.40 per share payable on February 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock.

On March 31, 2016, the Company declared a dividend of $0.41 per share payable on April 27, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock.

On July 7, 2016, the Company declared a dividend of $0.43 per share payable on August 9, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock.

On August 8, 2016, the Company declared a special dividend of $0.20 per share payable on September 5, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock.

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements. On October 7, 2015, the Company's board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. As of August 31, 2016, the Company purchased 138,494 shares of common stock, at the average price of $16.16 for approximately $2.2 million pursuant to this repurchase plan. On October 5, 2016, the Company's board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock.

Note 10. Earnings Per Share

In accordance with the provisions of FASB ASC 260, Earnings per Share ("ASC 260"), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

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The following information sets forth the computation of the weighted average basic and diluted net increase in net assets per share from operations for the three and six months ended August 31, 2016 and August 31, 2015 (dollars in thousands except share and per share amounts):

For the three months ended For the six months ended

Basic and diluted

August 31,
2016
August 31,
2015
August 31,
2016
August 31,
2015

Net increase in net assets from operations

$ 5,272 $ 1,243 $ 8,559 $ 8,628

Weighted average common shares outstanding

5,740,816 5,583,795 5,739,157 5,492,491

Weighted average earnings per common share-basic and diluted

$ 0.92 $ 0.22 $ 1.49 $ 1.57

Note 11. Dividend

On August 8, 2016, the Company declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP.

Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

On July 7, 2016, the Company declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP.

Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

On March 31, 2016, the Company declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record as of April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP.

Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled 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.

The following table summarizes dividends declared during the six months ended August 31, 2016 (dollars in thousands except per share amounts):

Date Declared

Record Date Payment Date Amount
Per Share*
Total
Amount

August 8, 2016

August 24, 2016 September 5, 2016 $ 0.20 $ 1,151

July 7, 2016

July 29, 2016 August 9, 2016 $ 0.43 $ 2,466

March 31, 2016

April 15, 2016 April 27, 2016 $ 0.41 $ 2,346

Total dividends declared

$ 1.04 $ 5,963

* Amount per share is calculated based on the number of shares outstanding at the date of declaration.

The following table summarizes dividends declared during the six months ended August 31, 2015 (dollars in thousands except per share amounts):

Date Declared

Record Date Payment Date Amount
Per Share*
Total
Amount

July 8, 2015

August 3, 2015 August 31, 2015 $ 0.33 $ 1,844

May 14, 2015

May 26, 2015 June 5, 2015 $ 1.00 $ 5,429

April 9, 2015

May 4, 2015 May 29, 2015 $ 0.27 $ 1,466

Total dividends declared

$ 1.60 $ 8,739

* Amount per share is calculated based on the number of shares outstanding at the date of declaration.

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Note 12. Financial Highlights

The following is a schedule of financial highlights for the six months ended August 31, 2016 and August 31, 2015:

August 31, 2016 August 31, 2015

Per share data:

Net asset value at beginning of period

$ 22.06 $ 22.70

Net investment income(1)

0.90 0.99

Net realized and unrealized gains and losses on investments

0.59 0.58

Net increase in net assets from operations

1.49 1.57

Distributions declared from net investment income

(1.04 (1.60

Total distributions to stockholders

(1.04 (1.60

Dilution(4)

(0.12 (0.25

Net asset value at end of period

$ 22.39 $ 22.42

Net assets at end of period

$ 128,563,622 $ 125,258,420

Shares outstanding at end of period

5,740,810 5,586,254

Per share market value at end of period

$ 17.93 $ 16.32

Total return based on market value(2)

34.41 13.63

Total return based on net asset value(3)

8.19 8.38

Ratio/Supplemental data:

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

9.53 10.19

Ratio of operating expenses to average net assets(7)

7.09 6.50

Ratio of incentive management fees to average net assets(6)

1.52 1.43

Ratio of interest and debt financing expenses to average net assets(7)

7.40 6.65

Ratio of total expenses to average net assets(8)

16.01 14.58

Portfolio turnover rate(5)

20.98 13.96

(1) Net investment income per share is calculated using the weighted average shares outstanding during the period.
(2) 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 returns covering less than a full period are not annualized.
(3) 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.
(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. See Note 11, Dividend.
(5) 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.
(6) Ratios are not annualized.
(7) Ratios are annualized.
(8) Ratios are annualized. Incentive management fees included within the ratio are not annualized.

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Note 13. Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company's disclosures in the consolidated financial statements except for the following:

On October 5, 2016, the Company declared a dividend of $0.44 per share payable for the fiscal quarter ended August 31, 2016 to all stockholders of record at the close of business on October 31, 2016, with a payment date on November 9, 2016. Shareholders will have the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to the Company's DRIP.

On October 5, 2016, the Company's board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016.

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ITEM 2. 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 Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended February 29, 2016.

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

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

our future operating results;

our business prospects and the prospects of our portfolio companies;

the impact of investments that we expect to make;

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;

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") subsidiary, 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 ability of our investment adviser to locate suitable investments for us and to monitor and effectively administer our investments.

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

OVERVIEW

We are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940 (the "1940 Act"). Our investment objective is to generate current income and, to a lesser extent, capital appreciation from our investments. We invest primarily in leveraged loans and mezzanine debt issued by private U.S. middle market companies, which we define as companies having 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. 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").

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Corporate History and Recent Developments

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

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

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

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

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

In January 2011, we registered for public resale of the 986,842 shares of our common stock issued to Saratoga Investment Advisors and certain of its affiliates.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP ("SBIC LP"), received an SBIC license from the Small Business Administration ("SBA").

In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% unsecured notes due 2020 for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters' full exercise of their overallotment option. Interest on these notes is paid quarterly in arrears on February 15, May 15, August 15 and November 15, at a rate of 7.50% per year, beginning August 15, 2013. The notes mature on May 31, 2020 and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at our option. The notes are listed on the NYSE under the trading symbol "SAQ" with a par value of $25.00 per share.

On April 2, 2015, the SBA issued a "green light" letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. On September 27, 2016, the SBA informed us that as part of their continued review of our application for a second license, and in order to ensure that they were reviewing the most current information available, we would need to update all previously submitted materials and invited us to reapply. As a result of this request, with which we are in the process of complying, the existing "green light" letter that the SBA issued to us will expire. If approved in the future, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license.

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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 Notes through an At-the-Market ("ATM") offering. As of August 31, 2016, the Company sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).

Critical Accounting Policies

Basis of Presentation

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

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 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 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 Advisers, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company's ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

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

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

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

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

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

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

Our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. ("Saratoga CLO") is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by SIA and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our

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investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

Revenue Recognition

Income Recognition

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

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed 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.

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 , 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.

Payment-in-Kind Interest

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

Capital Gains Incentive Fee

The Company records an expense accrual relating to the capital gains incentive fee payable by the Company to its investment adviser 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 investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company's investment adviser 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.

Revenues

We generate revenue in the form of interest income and capital gains on the debt investments that we hold and capital gains, if any, on equity interests that we may acquire. We expect our debt investments, whether in the form of leveraged loans or mezzanine debt, to have terms of up to ten years, and to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either quarterly or semi-annually. In some cases, our debt investments may provide for a portion of the interest to be PIK. To the extent interest is paid-in-kind, 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 securities that pay dividends on a current basis.

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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 refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the fee basis amount at the beginning of the collection period, paid quarterly to the extent of available proceeds. We are also 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 equal to or greater than 12.0%.

We recognize interest income on our investment in the subordinated notes of Saratoga CLO using the effective interest method, 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.

Expenses

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

organization;

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

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

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;

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

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

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

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

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

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

The incentive fee had two parts:

A fee, payable quarterly in arrears, equal to 20.0% of 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 (7.5% annualized) 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, less the aggregate amount of capital gains incentive fees paid to the investment adviser through such date.

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

To the extent that any of our leveraged loans are denominated in a currency other than U.S. Dollars, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of interest rate caps, futures, options and forward contracts. Costs incurred in entering into or settling such contracts will be borne by us.

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New Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Amendments to the Leases ("ASC Topic 842"), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance is effective for annual and interim periods beginning after December 15, 2018. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact the adoption of this standard has on our consolidated financial statements and disclosures.

In August 2014, the FASB issued new accounting guidance that requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments provide a definition of the term "substantial doubt" and include principles for considering the mitigating effect of management's plans. The amendments also require an evaluation every reporting period, including interim periods for a period of one year after the date that the financial statements are issued (or available to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are effective for reporting periods ending after December 15, 2016. Management does not believe these changes will have a material impact on the Company's consolidated financial statements and disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 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 to December 15, 2017. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.

Portfolio and investment activity

Corporate Debt Portfolio Overview

At August 31,
2016
At February 29,
2016
($ in millions) ($ in millions)

Number of investments(1)

50 59

Number of portfolio companies(1)

29 34

Average investment size(1)

$ 5.2 $ 4.6

Weighted average maturity(1)

3.5yrs 3.8yrs

Number of industries(1)

11 11

Average investment per portfolio company(1)

$ 9.0 $ 8.0

Non-performing or delinquent investments(1)

$ 0.0 $ 0.0

Fixed rate debt (% of interest bearing portfolio)(2)

$ 46.3(18.5)% $ 97.9(40.0)%

Weighted average current coupon(2)

11.9% 11.5%

Floating rate debt (% of interest bearing portfolio)(2)

$   203.5(81.5)% $   146.8(60.0)%

Weighted average current spread over LIBOR(2)

10.0% 9.1%

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

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During the three months ended August 31, 2016, we invested $55.7 million in new or existing portfolio companies and had $50.3 million in aggregate amount of exits and repayments resulting in net investments of $5.4 million for the period. During the three months ended August 31, 2015, we invested $18.9 million in new or existing portfolio companies and had $27.4 million in aggregate amount of exits and repayments resulting in net repayments of $8.5 million for the period.

During the six months ended August 31, 2016, we invested $55.7 million in new or existing portfolio companies and had $70.9 million in aggregate amount of exits and repayments resulting in net repayments of $15.2 million for the period. During the six months ended August 31, 2015, we invested $42.1 million in new or existing portfolio companies and had $34.8 million in aggregate amount of exits and repayments resulting in net investments of $7.3 million for the period.

Our portfolio composition at August 31, 2016 and February 29, 2016 at fair value was as follows:

Portfolio composition

At August 31, 2016 At February 29, 2016
Percentage
of Total
Portfolio
Weighted
Average
Current
Yield
Percentage
of Total
Portfolio
Weighted
Average
Current
Yield

Syndicated loans

3.5 5.3 4.2 8.2

First lien term loans

56.2 10.6 50.9 10.6

Second lien term loans

31.9 11.5 31.1 11.5

Structured finance securities

4.4 19.4 4.5 16.4

Equity interests

4.0 N/A 9.3 N/A

Total

100.0 11.1 100.0 11.1

Our investment in the subordinated notes of Saratoga CLO represents a first loss position in a portfolio that, at August 31, 2016 and February 29, 2016 was composed of $299.5 million and $302.7 million, respectively, in aggregate principal amount of predominantly senior secured first lien term loans. This investment is subject to unique risks. (See "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" in our Annual Report on Form 10-K for the fiscal year ended February 29, 2016). 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 August 31, 2016, $289.5 million or 99.5% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and there were no Saratoga CLO portfolio investments in default. At February 29, 2016, $283.3 million or 99.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and one Saratoga CLO portfolio investment was in default with a fair value of $0.8 million.

Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system ("CMR"). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)-strong credit; (Yellow)-satisfactory credit; (Red)-payment default risk, in payment default and/or significant restructuring activity.

The CMR distribution of our investments at August 31, 2016 and February 29, 2016 was as follows:

Portfolio CMR distribution

At August 31, 2016 At February 29, 2016

Color Score

Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)

Green

$ 249,808 91.6 $ 240,623 84.7

Yellow

-   -   4,058 1.4

Red

8 0.0 8 0.0

N/A(1)

22,988 8.4 39,307 13.9

Total

$ 272,804 100.0 $ 283,996 100.0

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

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The CMR distribution of Saratoga CLO investments at August 31, 2016 and February 29, 2016 was as follows:

Portfolio CMR distribution

At August 31, 2016 At February 29, 2016

Color Score

Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)

Green

$ 256,542 88.2 $ 251,570 88.3

Yellow

32,939 11.3 31,752 11.1

Red

1,463 0.5 1,331 0.5

N/A(1)

13 0.0 192 0.1

Total

$ 290,957 100.0 $ 284,845 100.0

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

Portfolio composition by industry grouping at fair value

The following table shows our portfolio composition by industry grouping at fair value at August 31, 2016 and February 29, 2016:

At August 31, 2016 At February 29, 2016
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)

Business Services

$ 132,709 48.6 $ 105,976 37.3

Healthcare Services

28,249 10.4 36,905 13.0

Consumer Services

26,896 9.9 43,109 15.2

Real Estate

21,459 7.9 9,537 3.4

Media

18,660 6.8 16,574 5.8

Structured Finance Securities (1)

11,917 4.4 12,828 4.5

Education

10,942 4.0 10,694 3.8

Food and Beverage

9,277 3.4 9,131 3.2

Metals

8,814 3.2 10,526 3.7

Building Products

2,000 0.7 6,367 2.2

Aerospace and Defense

997 0.4 -   -  

Consumer Products

884 0.3 7,642 2.7

Automotive Aftermarket

-   -   14,707 5.2

Total

$ 272,804 100.0 $ 283,996 100.0

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

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The following table shows Saratoga CLO's portfolio composition by industry grouping at fair value at August 31, 2016 and February 29, 2016:

At August 31, 2016 At February 29, 2016
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)

Services: Business

$ 40,272 13.7 $ 37,308 13.1

Healthcare & Pharmaceuticals

30,252 10.4 28,339 9.9

Chemicals/Plastics

25,190 8.7 24,714 8.7

High Tech Industries

14,919 5.1 9,451 3.3

Aerospace and Defense

12,987 4.5 12,580 4.4

Conglomerate

12,676 4.4 11,770 4.1

Banking, Finance, Insurance & Real Estate

12,553 4.3 10,175 3.6

Retailers (Except Food and Drugs)

12,211 4.2 18,898 6.6

Industrial Equipment

11,675 4.0 11,777 4.1

Media

10,843 3.7 4,768 1.7

Telecommunications

9,026 3.1 11,364 4.0

Financial Intermediaries

8,760 3.0 13,559 4.8

Leisure Goods/Activities/Movies

8,258 2.8 8,009 2.8

Electronics/Electric

7,437 2.6 9,342 3.3

Technology

6,161 2.1 7,774 2.7

Food Services

5,962 2.0 5,944 2.1

Containers/Glass Products

5,270 1.8 4,168 1.5

Insurance

5,031 1.7 4,712 1.7

Publishing

4,994 1.7 3,029 1.1

Automotive

4,984 1.7 5,470 1.9

Utilities

4,339 1.5 6,975 2.4

Lodging and Casinos

4,270 1.5 4,958 1.8

Capital Equipment

3,995 1.4 -   -  

Food Products

3,143 1.1 5,694 2.0

Drugs

2,957 1.0 2,873 1.0

Food/Drug Retailers

2,824 1.0 2,737 1.0

Hotel, Gaming and Leisure

2,647 0.9 1,917 0.7

Cable and Satellite Television

2,624 0.9 3,557 1.2

Beverage, Food & Tobacco

2,498 0.9 984 0.3

Brokers/Dealers/Investment Houses

2,463 0.8 2,618 0.9

Oil & Gas

2,411 0.8 2,273 0.8

Construction & Building

1,962 0.7 2,869 1.0

Nonferrous Metals/Minerals

1,482 0.5 1,505 0.5

Broadcast Radio and Television

1,319 0.5 1,258 0.4

Environmental Industries

787 0.3 732 0.3

Transportation

780 0.3 -   -  

Services: Consumer

747 0.3 496 0.2

Building and Development

248 0.1 248 0.1

Total

$ 290,957 100.0 $ 284,845 100.0

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Portfolio composition by geographic location at fair value

The following table shows our portfolio composition by geographic location at fair value at August 31, 2016 and February 29, 2016. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

At August 31, 2016 At February 29, 2016
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)

Southeast

$ 101,174 37.1 $ 108,661 38.3

Midwest

61,810 22.7 57,553 20.3

Northeast

53,888 19.7 52,875 18.6

Southwest

25,463 9.3 25,535 9.0

West

16,552 6.1 24,544 8.6

Other(1)

11,917 4.4 12,828 4.5

International

2,000 0.7 2,000 0.7

Total

$ 272,804 100.0 $ 283,996 100.0

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

Results of operations

Operating results for the three and six months ended August 31, 2016 and August 31, 2015 were as follows:

For the three months ended
August 31,
2016
August 31,
2015
($ in thousands)

Total investment income

$ 8,448 $ 7,758

Total expenses

5,844 4,101

Net investment income

2,604 3,657

Net realized gains from investments

5,937 3,710

Net unrealized depreciation on investments

(3,269 (6,124

Net increase in net assets resulting from operations

$ 5,272 $ 1,243

For the six months ended
August 31,
2016
August 31,
2015
($ in thousands)

Total investment income

$ 16,356 $ 15,319

Total expenses

11,214 9,891

Net investment income

5,142 5,428

Net realized gains from investments

12,040 3,784

Net unrealized depreciation on investments

(8,623 (584

Net increase in net assets resulting from operations

$ 8,559 $ 8,628

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Investment income

The composition of our investment income for the three and six months ended August 31, 2016 and August 31, 2015 were as follows:

For the three months ended
August 31,
2016
August 31,
2015
($ in thousands)

Interest from investments

$ 7,303 $ 6,819

Management fee income

375 373

Interest from cash and cash equivalents and other income

770 566

Total

$ 8,448 $ 7,758

For the six months ended
August 31,
2016
August 31,
2015
($ in thousands)

Interest from investments

$ 14,585 $ 13,750

Management fee income

748 752

Interest from cash and cash equivalents and other income

1,023 817

Total

$ 16,356 $ 15,319

For the three months ended August 31, 2016, total investment income increased $0.7 million, or 8.9% compared to the three months ended August 31, 2015. Interest income from investments increased $0.5 million, or 7.1%, to $7.3 million for the three months ended August 31, 2016 from $6.8 million for the three months ended August 31, 2015. This reflects an increase of 8.2% in total investments to $272.8 million at August 31, 2016 from $252.2 million at August 31, 2015, with the weighted average current coupon increasing from 11.7% to 11.9%.

For the six months ended August 31, 2016, total investment income increased $1.0 million, or 6.8% compared to the six months ended August 31, 2015. Interest income from investments increased $0.8 million, or 6.1%, to $14.6 million for the six months ended August 31, 2016 from $13.8 million for the six months ended August 31, 2015. This reflects an increase of 8.2% in total investments to $272.8 million at August 31, 2016 from $252.2 million at August 31, 2015, with the weighted average current coupon increasing from 11.7% to 11.9%.

For the three months ended August 31, 2016 and August 31, 2015, total PIK income was $0.2 million and $0.3 million, respectively. For the six months ended August 31, 2016 and August 31, 2015, total PIK income was $0.3 million and $1.0 million, respectively.

Operating expenses

The composition of our operating expenses for the three and six months ended August 31, 2016 and August 31, 2015 were as follows:

Operating Expenses

For the three months ended
August 31,
2016
August 31,
2015
($ in thousands)

Interest and debt financing expenses

$ 2,370 $ 2,148

Base management fees

1,203 1,151

Professional fees

302 350

Administrator expenses

325 275

Incentive management fees

1,208 (41

Insurance

71 87

Directors fees and expenses

60 51

General and administrative and other expenses

305 203

Excise tax expense (credit)

-   (123

Total expenses

$ 5,844 $ 4,101

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For the six months ended
August 31,
2016
August 31,
2015
($ in thousands)

Interest and debt financing expenses

$ 4,738 $ 4,112

Base management fees

2,430 2,275

Professional fees

662 683

Administrator expenses

650 525

Incentive management fees

1,937 1,756

Insurance

141 175

Directors fees and expenses

126 102

General and administrative and other expenses

530 386

Excise tax expense (credit)

-   (123

Total expenses

$ 11,214 $ 9,891

For the three months ended August 31, 2016, total operating expenses increased $1.7 million, or 42.5% compared to the three months ended August 31, 2015. For the six months ended August 31, 2016, total operating expenses increased $1.3 million, or 13.4% compared to the six months ended August 31, 2015.

For the three and six months ended August 31, 2016 and August 31, 2015, the increase in interest and debt financing expenses is primarily attributable to an increase in outstanding debt as compared to the prior year, with increased levels of outstanding SBA debentures, as well as additional notes being issued. Although the Credit Facility decreased from $2.0 million outstanding at August 31, 2015 to $0.0 million at August 31, 2016, this was more than offset by our SBA debentures increasing from $79.0 million to $103.7 million, and the notes payable increasing from $57.2 million outstanding to $61.8 million outstanding for these same periods. For the three months ended August 31, 2016, the weighted average interest rate on our outstanding indebtedness was 4.80% compared to 5.03% for the three months ended August 31, 2015. For the six months ended August 31, 2016, the weighted average interest rate on our outstanding indebtedness was 4.77% compared to 4.96% for the six months ended August 31, 2015. For both periods, the decrease was primarily driven by an increase in SBA debentures that carry a lower interest rate and makes up a higher proportion of our overall debt this year partially offset by the increase in notes payable that carry a higher interest rate. SBA debentures increased from 57.1% of overall debt as of August 31, 2015 to 62.7% as of August 31, 2016.

For the three months ended August 31, 2016, base management fees increased $0.1 million, or 4.5% compared to the three months ended August 31, 2015. For the six months ended August 31, 2016, base management fees increased $0.2 million, or 6.8% compared to the six months ended August 31, 2015. The increase in base management fees results from the increase in the average value of our total assets, less cash and cash equivalents, from $261.0 million as of August 31, 2015 to $272.7 million as of August 31, 2016.

For the three and six months ended August 31, 2016, professional fees decreased $0.05 million, or 13.5%, and decreased $0.02 million, or 3.1%, respectively, compared to the three and six months ended August 31, 2015.

For the three months ended August 31, 2016, incentive management fees increased $1.2 million as compared to the three months ended August 31, 2015. The first part of the incentive management fees increased this year from $0.7 million to $0.8 million reflecting higher pre-incentive fee net investment income for the three months ended August 31, 2016. For the three months ended August 31, 2016, incentive management fees related to capital gains changed from a $0.8 million reduction of expense to a $0.4 million increase in expense as compared to the three months ended August 31, 2015, reflecting the $2.4 million net loss on investments for the three months ended August 31, 2015, as compared to the $2.7 million net gain on investments for the three months ended August 31, 2016.

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For the six months ended August 31, 2016, incentive management fees increased $0.2 million, or 10.3% compared to the six months ended August 31, 2015. The first part of the incentive management fees remained relatively unchanged this year at $1.4 million as a higher pre-incentive fee net investment income increase was offset by higher net assets that has led to decreased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. However, for the six months ended August 31, 2016, incentive management fees in total increased $0.2 million as the incentive management fees related to capital gains increased from $0.3 million to $0.5 million compared to the six months ended August 31, 2015, reflecting the $3.2 million net gain on investments for the six months ended August 31, 2015, as compared to the $3.4 million net gain on investments for the six months ended August 31, 2016.

As discussed above, the increase in interest and debt financing expenses for the three and six months ended August 31, 2016 as compared to the three and six months ended August 31, 2015 is primarily attributable to an increase in the amount of outstanding debt. For the three and six months ended August 31, 2016, there were no outstanding borrowings under the Credit Facility. For the three and six months ended August 31, 2015, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 6.00%. For the three months ended August 31, 2016 and August 31, 2015, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.19% and 3.25%, respectively. For the six months ended August 31, 2016 and August 31, 2015, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.14% and 3.20%, respectively.

Net realized gains/(losses) on sales of investments

For the three months ended August 31, 2016, the Company had $50.3 million of sales, repayments, exits or restructurings resulting in $5.9 million of net realized gains. For the six months ended August 31, 2016, the Company had $70.9 million of sales, repayments, exits or restructurings resulting in $12.0 million of net realized gains. The most significant realized gains during the six months ended August 31, 2016 were as follows (dollars in thousands):

Six Months ended August 31, 2016

Issuer

Asset Type Gross
Proceeds
Cost Net
Realized
Gain

Take 5 Oil Change, L.L.C

Common Stock $ 6,457 $ 481 $ 5,976

Legacy Cabinets, Inc.

Common Stock Voting A-1 2,320 221 2,099

Legacy Cabinets, Inc.

Common Stock Voting B-1 1,464 139 1,325

The $6.0 million of realized gain on our investment in Take 5 Oil Change, L.L.C. was due to the completion of a sales transaction with a strategic acquirer.

The $3.4 million of realized gains on our investments in Legacy Cabinets, Inc. were due to a period of steadily improving performance, leading up to our sale of shares in Legacy Cabinets, Inc.

For the three months ended August 31, 2015, the Company had $27.4 million of sales, repayments, exits or restructurings resulting in $3.7 million of net realized gains. For the six months ended August 31, 2015, the Company had $34.8 million of sales, repayments, exits or restructurings resulting in $3.8 million of net realized gains. The most significant realized gains during the six months ended August 31, 2015 were as follows (dollars in thousands):

Six Months ended August 31, 2015

Issuer

Asset Type Gross
Proceeds
Cost Net
Realized
Gain

Network Communications, Inc.

Common Stock $ 3,206 $  -   $ 3,206

Network Communications, Inc

Unsecured Notes 914 686 228

The $3.2 million and $0.2 million of realized gains in our investments in Network Communications, Inc. were due to the sale of the company to a third party and reflects the realization value pursuant to that transaction.

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Net unrealized appreciation/(depreciation) on investments

For the three months ended August 31, 2016, our investments had net unrealized depreciation of $3.3 million versus net unrealized depreciation of $6.1 million for the three months ended August 31, 2015. For the six months ended August 31, 2016, our investments had net unrealized depreciation of $8.6 million versus net unrealized depreciation of $0.6 million for the six months ended August 31, 2015. The most significant cumulative changes in unrealized appreciation and depreciation for the six months ended August 31, 2016, were the following (dollars in thousands):

Six Months ended August 31, 2016

Issuer

Asset Type Cost Fair
Value
Total
Unrealized
Depreciation
YTD Change
in Unrealized
Depreciation

Take 5 Oil Change, L.L.C

Common Stock $ -   $ -   $ -   $ (5,755

Legacy Cabinets, Inc.

Common Stock Voting A-1 -   -   -   (2,456

Legacy Cabinets, Inc.

Common Stock Voting B-1 -   -   -   (1,550

Elyria Foundry Company, L.L.C.

Common Stock 9,217 314 (8,903 (1,712

The $5.8 million of change in unrealized depreciation in our investment in Take 5 Oil Change, L.L.C. was driven by the completion of a sales transaction with a strategic acquirer. In realizing this gain as a result of the sale, unrealized appreciation was adjusted to zero, which resulted in a $5.8 million change in unrealized depreciation for the period.

The $4.0 million of change in unrealized depreciation in our investments in Legacy Cabinets, Inc. were driven by the completion of a sales transaction. In realizing these gains as a result of the sale, unrealized appreciation was adjusted to zero, which resulted in a $4.0 million change in unrealized depreciation for the period.

The $1.7 million of change in unrealized depreciation in our investment in Elyria Foundry Company, L.L.C. was driven by a continued decline in oil and gas end markets since year-end, negatively impacting the company's performance.

The most significant cumulative changes in unrealized appreciation and depreciation for the six months ended August 31, 2015, were the following (dollars in thousands):

Six Months ended August 31, 2015

Issuer

Asset Type Cost Fair
Value
Total
Unrealized
Appreciation/
(Depreciation)
YTD Change
in Unrealized
Appreciation/
(Depreciation)

Saratoga CLO

Other/Structured Finance Securities $ 14,304 $ 16,754 $ 2,450 $ 1,372

Elyria Foundry Company, LLC.

Common Stock 9,218 3,678 (5,540 (3,084

Smile Brands Group, Inc.

Syndicated Loan 4,358 2,941 (1,417 (1,203

The $1.4 million unrealized appreciation in our investment in the Saratoga CLO was primarily due to a decline in the discount rate based on prevailing market conditions.

The $3.1 million unrealized depreciation in our investment in Elyria Foundry Company, LLC was primarily due to a decline in oil and gas end markets since year-end, negatively impacting the company's performance.

The $1.2 million unrealized depreciation in our investment in Smile Brands Group, Inc. was primarily due to declining profitability driven by increased spending.

Changes in net assets resulting from operations

For the three months ended August 31, 2016 and August 31, 2015, we recorded a net increase in net assets resulting from operations of $5.3 million and $1.2 million, respectively. Based on 5,740,816 weighted average common shares outstanding as of August 31, 2016, our per share net increase in net assets resulting from operations was $0.92 for the three months ended August 31, 2016. This compares to a per share net increase in net assets resulting from operations of $0.22 for the three months ended August 31, 2015 based on 5,583,795 weighted average common shares outstanding as of August 31, 2015.

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For the six months ended August 31, 2016 and August 31, 2015, we recorded a net increase in net assets resulting from operations of $8.6 million and $8.6 million, respectively. Based on 5,739,157 weighted average common shares outstanding as of August 31, 2016, our per share net increase in net assets resulting from operations was $1.49 for the six months ended August 31, 2016. This compares to a per share net increase in net assets resulting from operations of $1.57 for the six months ended August 31, 2015 based on 5,492,491 weighted average common shares outstanding as of August 31, 2015.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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

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

In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the distribution requirement applicable to RICs under Subchapter M of the Code. In satisfying this distribution requirement, we have in the past relied on IRS issued private letter rulings concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20% of the aggregate declared distribution. We may rely on these IRS private letter rulings 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%. This requirement limits the amount that we may borrow. Our asset coverage ratio, as defined in the 1940 Act, was 308.1% as of August 31, 2016 and 302.5% as of February 29, 2016. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources, including the equity markets and other debt-related markets, which may or may not be available on favorable terms, if at all.

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

Madison revolving credit facility

Below is a summary of the terms of the senior secured revolving credit facility we entered into with Madison Capital Funding LLC (the "Credit Facility") on June 30, 2010.

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 (b) 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.

The Credit Facility contains limitations on the type of loan assets that are "eligible" to be included in the Borrowing Base and as to the concentration level of certain categories of loan assets in the Borrowing Base such as restrictions on geographic and industry concentrations, asset size and quality, payment frequency, status and terms, average life, and collateral interests. In addition, if an

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asset is to remain an "eligible" loan asset, the Company may not make changes to the payment, amortization, collateral and certain other terms of the loan assets without the consent of the administrative agent that will either result in subordination of the loan asset or be materially adverse to the lenders.

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

Interest Rate and Fees. Under the Credit Facility, funds are borrowed from or through certain lenders at the greater of the prevailing LIBOR rate and 2.00%, plus an applicable margin of 5.50%. At the Company's option, funds may be borrowed based on an alternative base rate, which in no event will be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%. In addition, the Company pays the lenders a commitment fee of 0.75% per year on the unused amount of the Credit Facility for the duration of the Revolving Period (defined below). Accrued interest and commitment fees are payable monthly. The Company was also obligated to pay certain other fees to the lenders in connection with the closing of the Credit Facility.

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

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

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

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

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

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

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

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

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

Operating Expenses. The priority of payments provision of the Credit Facility provides for the payment of certain operating expenses of the Company out of collections on principal and interest during the Revolving Period and out of collections on interest following the termination of the Revolving Period in accordance with the priority established in such provision. The operating expenses payable pursuant to the priority of payment provisions is limited to $350,000 for each monthly payment date or $2.5 million for the immediately preceding period of twelve consecutive monthly payment dates. This ceiling can be increased by the lesser of 5.0% or the percentage increase in the fair market value of all the Company's assets only on the first monthly payment date to occur after 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.

Events of Default. The Credit Facility contains certain negative covenants, customary representations and warranties and affirmative covenants and events of default. The Credit Facility does not contain grace periods for breach by the Company of certain covenants, including, without limitation, preservation of existence, negative pledge, change of name or jurisdiction and separate legal entity status of the Company covenants and certain other customary covenants. Other events of default under the Credit Facility include, among other things, the following:

an Interest Coverage Ratio of less than 150.0%;

an Overcollateralization Ratio of less than 175.0%;

the filing of certain ERISA or tax liens;

the occurrence of certain "Manager Events" such as:

failure by Saratoga Investment Advisors and its affiliates to maintain collectively, directly or indirectly, a cash equity investment in the Company in an amount equal to at least $5,000,000 at any time prior to the third anniversary of the closing date;

failure of the Management Agreement between Saratoga Investment Advisors and the Company to be in full force and effect;

indictment or conviction of Saratoga Investment Advisors or any "key person" for a felony offense, or any fraud, embezzlement or misappropriation of funds by Saratoga Investment Advisors or any "key person" and, in the case of "key persons," without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed to replace such key person within 30 days;

resignation, termination, disability or death of a "key person" or failure of any "key person" to provide active participation in Saratoga Investment Advisors' daily activities, all without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed within 30 days; or

occurrence of any event constituting "cause" under the Collateral Management Agreement between the Company and Saratoga CLO (the "CLO Management Agreement"), delivery of a notice under Section 12(c) of the CLO Management Agreement with respect to the removal of the Company as collateral manager or the Company ceases to act as collateral manager under the CLO Management Agreement.

Conditions to Acquisitions and Pledges of Loan Assets. The Credit Facility imposes certain additional conditions to the acquisition and pledge of additional loan assets. Among other things, the Company may not acquire additional loan assets without the prior written consent of the administrative agent until such time that the administrative agent indicates in writing its satisfaction with Saratoga Investment Advisors' policies, personnel and processes relating to the loan assets.

Fees and Expenses. The Company paid certain fees and reimbursed Madison Capital Funding LLC for the aggregate amount of all documented, out-of-pocket costs and expenses, including the reasonable fees and expenses of lawyers, incurred by Madison Capital Funding LLC in connection with the Credit Facility and the carrying out of any and all acts contemplated thereunder up to and as of the date of closing of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates. These amounts totaled $2.0 million.

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On February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the "Revolving Period"). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

remove the condition that we may not acquire additional loan assets without the prior written consent of the administrative agent.

On September 17, 2014, we entered into a second amendment to the Revolving Facility with Madison Capital Funding LLC to, among other things:

extend the commitment termination date from February 24, 2015 to September 17, 2017;

extend the maturity date of the Revolving Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

reduce the floor on base rate borrowings from 3.00% to 2.25%; and on LIBOR borrowings from 2.00% to 1.25%.

As of August 31, 2016, we had no outstanding borrowings under the Credit Facility and $103.7 million SBA-guaranteed debentures outstanding (which are discussed below). As of February 29, 2016, we had no outstanding borrowings under the Credit Facility and $103.7 million SBA-guaranteed debentures outstanding. Our borrowing base under the Credit Facility at August 31, 2016 and February 29, 2016 was $24.0 million and $21.8 million, respectively.

Our asset coverage ratio, as defined in the 1940 Act, was 308.1% as of August 31, 2016 and 302.5% as of February 29, 2016.

SBA-guaranteed debentures

In addition, we, through a wholly-owned subsidiary, sought and obtained a license 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. 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 subsidiary 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.

SBA regulations currently limit 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. As of August 31, 2016, our SBIC subsidiary had $75.0 million in regulatory capital and $103.7 million SBA-guaranteed debentures outstanding.

We received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities in the 200% asset coverage test under the 1940 Act. This allows us increased flexibility under the 200% asset coverage test by permitting us to borrow up to $150.0 million more than we would otherwise be able to absent the receipt of this exemptive relief.

On April 2, 2015, the SBA issued a "green light" letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. On September 27, 2016, the SBA informed us that as part of their continued review of our application for a second license, and in order to ensure that they were reviewing the most current information available, we would need to update all previously submitted materials and invited us to reapply. As a result of this request, with which we are in the process of complying, the existing "green light" letter that the SBA issued to us will expire. If approved in the future, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license.

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Unsecured notes

In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% unsecured notes due 2020 for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters' full exercise of their overallotment option. Interest on these notes is paid quarterly in arrears on February 15, May 15, August 15 and November 15, at a rate of 7.50% per year, beginning August 15, 2013. The notes mature on May 31, 2020 and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at our option. In connection with the issuance of the notes, we agreed to the following covenants for the period of time during which the notes are outstanding:

we will not violate (whether or not we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings.

we will not violate (regardless of whether we are subject to) Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to (i) any exemptive relief granted to us by the SEC and (ii) no-action relief granted by the SEC to another BDC (or to the Company if it determines to seek such similar no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act in order to maintain the BDC's status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986. Currently these provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, is below 200% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase.

The Notes are listed on the NYSE under the trading symbol "SAQ" with a par value of $25.00 per share.

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 Notes through an ATM offering. As of August 31, 2016, we sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).

At August 31, 2016 and February 29, 2016, the fair value of investments, cash and cash equivalents and cash and cash equivalents, reserve accounts were as follows:

At August 31, 2016 At February 29, 2016
Fair Value Percentage
of
Total
Fair Value Percentage
of
Total
($ in thousands)

Cash and cash equivalents

$ 12,707 4.3 $ 2,440 0.8

Cash and cash equivalents, reserve accounts

10,174 3.4 4,595 1.6

Syndicated loans

9,516 3.2 11,868 4.1

First lien term loans

153,276 51.9 144,643 49.7

Second lien term loans

87,024 29.4 88,178 30.3

Structured finance securities

11,917 4.0 12,828 4.4

Equity interests

11,071 3.8 26,479 9.1

Total

$ 295,685 100.0 $ 291,031 100.0

On September 24, 2014, we announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of our common stock at prices below our NAV as reported in its then most recently published consolidated financial statements, which was subsequently increased to 400,000 shares of our common stock. As of August 31, 2016, we purchased 138,494 shares of common stock, at the average price of $16.16 for approximately $2.2 million pursuant to this repurchase plan. On October 5, 2016, our board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares we are permitted to repurchase at prices below our NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of our common stock.

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On October 5, 2016, our board of directors declared a dividend of $0.44 per share payable 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 our DRIP.

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

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

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

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

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

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

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

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

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

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

On October 30, 2013, our board of directors declared a dividend of $2.65 per share, which was paid on December 27, 2013, to common stockholders of record as of November 13, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. This dividend was declared in reliance on certain private letter rulings issued by the IRS concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution.

Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which equaled the volume weighted average trading price per share of the common stock on December 11, 13 and 16, 2013.

On November 9, 2012, our board of directors declared a dividend of $4.25 per share, which was paid on December 31, 2012, to common stockholders of record as of November 20, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share.

Based on shareholder elections, the dividend consisted of $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17 and 19, 2012.

On November 15, 2011, our board of directors declared a dividend of $3.00 per share, which was paid on December 30, 2011, to common stockholders of record as of November 25, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.0 million or $0.60 per share.

Based on shareholder elections, the dividend consisted of $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.117067 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

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On November 12, 2010, our board of directors declared a dividend of $4.40 per share to shareholders payable in cash or shares of our common stock, in accordance with the provisions of the IRS Revenue Procedure 2010-12, which allows a publicly-traded regulated investment company to satisfy its distribution requirements with a distribution paid partly in common stock provided that at least 10.0% of the distribution is payable in cash. The dividend was paid on December 29, 2010 to common shareholders of record on November 19, 2010.

Based on shareholder elections, the dividend consisted of $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010.

On November 13, 2009, our board of directors declared a dividend of $18.25 per share, which was paid on December 31, 2009, to common stockholders of record as of November 25, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $0.25 per share.

Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock, or 104.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 13.7% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $1.5099 per share, which equaled the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.

We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.

Contractual obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at August 31, 2016: