SARATOGA INVESTMENT CORP. Annual Report Summary

I’ve put together this guide to help you understand Saratoga Investment Corp.’s performance. My goal is to cut through the corporate jargon and explain what matters if you are considering an investment.

1. What does this company do?

Saratoga lends money to "middle-market" companies—businesses too big to be small shops but not quite massive corporations. They provide the loans these companies need to grow. In return, Saratoga collects interest and occasionally takes a small ownership stake in those businesses.

As a Business Development Company (BDC), Saratoga must pay out at least 90% of its taxable profit to shareholders as dividends. This makes it primarily an income-focused investment.

2. Financial performance: The numbers that matter

As of February 2026, Saratoga managed about $1.14 billion in assets across 49 companies.

The most important takeaway is the difference between the stock's market price and the actual value of the company's assets (Net Asset Value, or NAV):

• Total Return (NAV): The value of their underlying investments grew by 7.50% this year. This includes the change in assets plus dividends paid.
• Total Return (Market Price): The stock price performance was 1.54%.
• Comparison: While the company’s internal portfolio is growing, investor enthusiasm has cooled compared to the previous year, where the stock price return was 27.17% and the NAV return was 10.11%.

In short: the stock price has lagged behind the actual growth of the underlying assets.

3. Major wins and challenges

Saratoga focuses on "first lien" loans, which make up 82.1% of their portfolio. These are the safest loans because Saratoga is first in line to be paid back if a company fails. They report that 100% of these loans are fully backed by collateral. However, the portfolio is concentrated. The top 10 investments account for a large portion of the total value, meaning a few specific companies can significantly impact Saratoga's overall health.

4. Financial health: Cash, debt, and stability

Saratoga uses a mix of its own money and borrowed funds. They aim to keep their "asset coverage" at 150%, meaning for every $1 they borrow, they hold at least $1.50 in assets. They also use special subsidiaries (SBICs) to access low-cost, long-term capital. These licenses allow them to borrow at favorable rates, which they use to fund their lending and boost potential returns for shareholders.

5. Key risks: What could hurt the stock price?

• "Junk" Status: Most of their borrowers are considered "below investment grade." If the economy struggles, these companies may fail to pay their bills, reducing Saratoga's interest income.
• First Loss Position: Saratoga invests in its own pool of loans (a CLO) and holds the "first loss" position. If those loans go bad, Saratoga loses money before anyone else.
• Interest Rate Sensitivity: Their profit depends on the gap between their borrowing costs and the interest they earn. If borrowing costs rise faster than the interest they charge, their profit margins shrink.

6. Competitive positioning

Saratoga Investment Advisors manages the firm with decades of experience in "leveraged finance." They actively manage a portfolio of private loans, using industry relationships to find businesses to fund. Their edge is performing deep research on private companies that Wall Street ignores, allowing them to find lending opportunities that larger banks often overlook.

Final Thought for Investors: When considering Saratoga, look closely at the gap between the stock price and the Net Asset Value (NAV). Because this is an income-focused BDC, your primary goal is likely the dividend yield, but you should weigh that against the risks of their concentrated portfolio and the potential for economic shifts to impact their "below investment grade" borrowers. If you are comfortable with the risks of private lending, the firm's focus on first-lien, collateralized loans is their primary defensive mechanism.