NEW YORK, May 14, 2018 – Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2018 fiscal year end and fourth quarter.

Summary Financial Information

The Company’s summarized financial information is as follows:

“Saratoga Investment Corp completed a very strong fiscal year 2018. We successfully expanded our assets under management, maintained our strong investment quality, broadened our investor base, maintained our diversified sources of low-cost and fixed rate liquidity and made our pipeline of available deal sources more robust,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “These important achievements were in keeping with the overall long-term objectives of growing the size and improving the quality of our asset base that has guided us since taking over management of the BDC in 2010. These milestones led to us recently increasing our quarterly dividend for the 14^th consecutive quarter to $0.50 per share, reflecting a 9% year-over-year increase while still overearning the dividend by 14%, with an annual fiscal year 2018 total dividend paid of $1.90 per share. Our talented business development and origination team put $108 million of new capital to work this year, enabling us to stay ahead of ongoing redemptions. Year-over-year, NAV grew by 13% and NAV per share by 4.5%. In addition, we are well structured for a potential higher interest rate environment, with almost 80% of our investments having floating interest rates and all of our currently outstanding debt fixed-rate and long-term. Our LTM ROE for the year was 13.2%, which puts near the top of all BDCs for the past year. We are extremely pleased with the strong and leading risk-adjusted investment performance we have delivered for our shareholders this year.”

Michael J. Grisius, President and Chief Investment Officer, added, “During fiscal year 2018, the steady expansion of our asset base continued, with a year-on-year increase in our investments at fair value of 17%, and a 261% increase since 2012. Despite a difficult market environment, our deal pipeline remained robust and continued to grow. Furthermore, market headwinds did not impair our consistent ability to deploy capital in high quality credits at multiples lower than the market average. We continue to see demand for financing in the lower end of the market and believe that our ongoing investments in new business development and origination capabilities will result in continued pipeline improvement, and overall growth. Our belief remains that successful investing rests on sound judgment and steady, continuous discipline, taken one decision at a time.”

As of February 28, 2018, Saratoga Investment increased its assets under management (“AUM”) to $342.7 million, an increase of 17.1% from $292.7 million as of February 28, 2017, and an increase of 1.2% from $338.8 million as of November 30, 2017. This increase reflects originations of $107.7 million new investments during the year ended February 28, 2018, offset by repayments of $66.3 million during fiscal year 2018. These investments and repayments for the year are inclusive of the $20.8 million in originations and $20.8 million in repayments during the quarter ended February 28, 2018. Since Saratoga management has taken over the management of the BDC, $249.4 million of repayments and sales of investments originated by Saratoga have generated a gross unlevered IRR of 16.2%. Saratoga Investment’s portfolio has remained strong, with a continued high level of investment quality in loan investments with 96.8% of our loans at our highest internal rating for this quarter.

As a result, both the year and quarter ended February 28, 2018 benefitted from higher investment income as compared to the prior period – investment income increased to $38.6 million for the year ended February 28, 2018, up 16.5% from $33.2 million for the year ended February 28, 2017, and up to $10.1 million from $8.4 million for the same quarterly periods, a 21.2% increase. This increased investment income was generated from an investment base that has grown by 17.1% since last year, with the weighted average current yield increasing from 10.9% to 11.1%, both resulting in higher interest income. In addition, this quarter’s investment income was also up 6.3% from $9.5 million for the quarter ended November 30, 2017.

As compared to the year ended February 28, 2017, the investment income increase was offset by (i) increased debt and financing expenses from higher outstanding Notes payable and SBA debentures this year reflective of the growing investment and asset base, (ii) increased base and incentive management fees generated from the management of this larger pool of investments, and (iii) increased total expenses, excluding interest and debt financing expenses, base management fees and incentive fees, reflecting primarily higher administrator expenses and higher professional fees due to increased Sarbanes-Oxley (“SOX”) activities now that the Company qualifies as an accelerated filer next year.

Net investment income on a weighted average per share basis was $2.11 and $0.53 for the year and quarter ended February 28, 2018, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $2.27 and $0.60, respectively. This compares to adjusted net investment income per share of $2.01 and $0.49 for the year and quarter ended February 28, 2017, reflecting an increase of 12.9% and 22.4%, respectively. This also compares to adjusted net investment income per share of $0.54 per share for the quarter ended November 30, 2017, an increase of 11.1%. In addition to the incentive fee accrual related to net unrealized capital gains, the year and quarter ended February 28, 2017 amounts are also adjusted for (i) the loss on extinguishment of our 2020 notes, and (ii) the interest on the 2020 notes during the call notice period while the 2023 notes were already issued and outstanding.

Net investment income yield as percentage of average net asset value (“Net Investment Income Yield”) was 9.5% and 9.4% for the year and quarter ended February 28, 2018, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 10.2% and 10.7%, respectively. In comparison, adjusted Net Investment Income Yield was 9.1% for the year ended February 28, 2017, and 9.6% and 8.8% for the quarters ended November 30, 2017 and February 28, 2017, respectively.

Net Asset Value (“NAV”) increased $16.4 million from $127.3 million as of February 28, 2017 to $143.7 million as of February 28, 2018.

• For the year ended February 28, 2018, $12.7 million of net investment income and $4.9 million of net realized and unrealized gains were earned, offset by $11.4 million of dividends declared. In addition, $2.4 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”) and $7.7 million of net shares sold through the Company’s At-the-Market (“ATM”) equity offering.

NAV per share was $22.96 as of February 28, 2018, compared to $21.97 as of February 28, 2017 and $22.58 as of November 30, 2017.

• During the past twelve months, NAV per share increased by $0.99 per share, primarily reflecting the $6.3 million, or $1.01 per share increase in net assets (net of the $1.90 dividend paid during fiscal year 2018). This was slightly offset by the $0.02 dilutive impact of the quarter’s share issuances, with the dilutive impact of the 114,306 shares issued during the year pursuant to the DRIP, representing four quarters’ dividend payments, mostly offset by the 348,123 shares issued under the Company’s ATM offering above net asset value. The Company made no purchases of common stock in the open market during the year.

Return on equity for the year ended February 28, 2018 was 13.2%, compared to 9.0% for the comparable period last year.

Earnings per share for the year and quarter ended February 28, 2018 was $2.93 per share and $0.89 per share, respectively, compared to earnings per share of $1.98 per share and $0.22 per share for the year and quarter ended February 28, 2017, respectively, and $0.71 per share for the quarter ended November 30, 2017.

Investment portfolio activity for the year ended February 28, 2018:

• Cost of investments made during the period: $107.7 million
• Principal repayments during the period: $66.3 million

Investment portfolio activity for the quarter ended February 28, 2018:

• Cost of investments made during the period: $20.8 million
• Principal repayments during the period: $20.8 million

Additional Financial Information

For the fiscal year ended February 28, 2018, Saratoga Investment reported net investment income of $12.7 million, or $2.11 on a weighted average per share basis, and a net gain on investments of $4.9 million, or $0.82 on a weighted average per share basis, resulting in a net increase in net assets from operations of $17.7 million, or $2.93 on a weighted average per share basis. The $4.9 million net gain on investments was comprised of $5.9 million in net realized loss on investments offset by $10.8 million in net unrealized appreciation on investments. The net realized loss primarily relates to the $7.7 million loss on Saratoga Investment’s My Alarm Center Investment, partially offset by $1.8 million in other realized gains, mainly from the sale of Saratoga Investment’s Mercury Network investment. The net unrealized appreciation was due primarily to (i) $1.9 million unrealized appreciation on Saratoga Investment’s CLO equity investment, (ii) $1.9 million unrealized appreciation on Saratoga Investment’s Easy Ice preferred equity investment, (iii) $2.6 million unrealized appreciation on Saratoga Investment’s Elyria equity investment, and (iv) net unrealized depreciation being adjusted to zero to reflect the recognition of the net realized loss on the two realizations above. This compared to the fiscal year ended February 28, 2017 with net investment income of $9.7 million, or $1.68 on a weighted average per share basis, and a net gain on investments of $1.7 million, or $0.30 on a weighted average per share basis, resulting in a net increase in net assets from operations of $11.4 million, or $1.98 on a weighted average per share basis. The $1.7 million net gain on investments consisted of $12.4 million in net realized gains on investments offset by $10.6 million unrealized depreciation.

Adjusted for the incentive fee accrual related to net unrealized capital gains, and for the comparable period, also (i) the loss on extinguishment of our 2020 notes, and (ii) the interest on the 2020 notes during the call notice period while the 2023 notes were already issued and outstanding, the net investment income was $13.7 million and $9.8 million for the years ended February 28, 2018 and February 28, 2017, respectively – this is an increase of $3.9 million year-over-year, or 39.4%.

For the quarter ended February 28, 2018, Saratoga Investment reported net investment income of $3.3 million, or $0.53 on a weighted average per share basis, and a net gain on investments of $2.2 million, or $0.35 on a weighted average per share basis, resulting in a net increase in net assets from operations of $5.5 million, or $0.89 on a weighted average per share basis. The $2.2 million net gain on investments was largely comprised of $2.4 million in net unrealized appreciation on investments offset by $0.2 million in net realized losses. The unrealized appreciation included $1.3 million related to Saratoga Investment’s TM Restaurant Group investment that was restructured subsequent to year-end. This compared to the quarter ended February 28, 2017 with net investment income of $1.1 million, or $0.19 on a weighted average per share basis, and a net gain on investments of $0.2 million, or $0.03 on a weighted average per share basis, resulting in a net increase in net assets from operations of $1.3 million, or $0.22 on a weighted average per share basis. The $0.2 million net gain on investments consisted of $0.07 million in net realized gains and $0.09 million in net unrealized appreciation on investments.

Adjusted for the incentive fee accrual related to net unrealized capital gains, and for the comparable period, also (i) the loss on extinguishment of our 2020 notes, and (ii) the interest on the 2020 notes during the call notice period while the 2023 notes were already issued and outstanding, the net investment income was $3.8 million and $2.8 million for the quarters ended February 28, 2018 and February 28, 2017, respectively – this is an increase of $1.0 million year-over-year, or 37.1%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, increased from $4.3 million for the year ended February 28, 2017 to $4.8 million for the year ended February 28, 2018, remaining consistent at 1.4% of average total assets for both years. For the quarters ended February 28, 2018 and February 28, 2017, these total expenses remained relatively unchanged at $1.2 million.

Portfolio and Investment Activity

As of February 28, 2018, the fair value of Saratoga Investment’s portfolio was $342.7 million (excluding $13.8 million in cash and cash equivalents), principally invested in 30 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 57.6% of first lien term loans, 27.7% of second lien term loans, 4.8% of CLO subordinated notes, 1.2% of syndicated loans, and 8.7% of common equity.

For the fiscal year ended February 28, 2018, Saratoga Investment invested $107.7 million in new or existing portfolio companies and had $66.3 million in aggregate amount of exits and repayments, resulting in net investments of $41.4 million for the year. For the quarter ended February 28, 2018, Saratoga Investment invested $20.8 million in new or existing portfolio companies, and had $20.8 million in aggregate amount of exits and repayments, resulting in zero net investments for the quarter.

As of February 28, 2018, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 11.1%, which was comprised of a weighted average current yield of 11.1% on first lien term loans, 11.9% on second lien term loans, 21.2% on CLO subordinated notes, 5.9% on syndicated loans and 3.6% on equity interests.

As of February 28, 2018, 79% of Saratoga Investment’s portfolio is in floating rate debt, with many of these investments having floors. For all of these investments, the relevant 1-month or 3-month LIBOR rate is currently above the floors. Saratoga Investment has analyzed the potential impact of changes in interest rates on interest income from investments, and assuming that the investments as of February 28, 2018 were to remain constant for a full fiscal year and no actions were taken to alter the existing interest rate terms, a hypothetical change of 1.0% in interest rates would cause a corresponding increase of approximately $2.3 million to interest income.

Portfolio Update:

Shortly after year-end, Saratoga Investment’s first lien and revolver investment in TM Restaurant Group was restructured in a change of control transaction, with Saratoga Investment receiving $7.3 million in cash and a $2.2 million subordinated term loan. This transaction resulted in $1.3 million unrealized appreciation for the quarter ended February 28, 2018, with the investment being fair valued at year-end to reflect the value of the transaction shortly after year-end. A $0.2 million loss is to be realized for the three months ended May 31, 2018. This realized loss will be accounted for as a reclassification from unrealized to realized, resulting in no net impact to the financial statements in the first quarter.

Liquidity and Capital Resources

As of February 28, 2018, Saratoga Investment had $0.0 million in outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $137.7 million outstanding of SBA debentures, $74.5 million of Baby Bonds (fair value of $76.5 million) and an aggregate of $13.8 million in cash and cash equivalents.

With the $45.0 million credit facility and the $12.3 million additional borrowing capacity at the SBIC subsidiary, as well as the $13.8 million of cash and cash equivalents, Saratoga Investment has a total of $71.1 million of undrawn borrowing capacity and cash and cash equivalents available as of February 28, 2018. The proceeds from the DRIP and ATM equity program totaled $2.3 million of equity issuances in the fourth fiscal quarter of 2018, for a total of $10.1 million for the year ended February 28, 2018. Saratoga Investment also has the ability to issue additional Baby Bonds through the existing shelf registration statement.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time to time, up to $30.0 million of its common stock through an ATM offering. As of February 28, 2018, the Company sold 348,123 shares for gross proceeds of $7.8 million at an average price of $22.52 for aggregate net proceeds of $7.8 million (net of transaction costs).

On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, the non-interested Board of Directors of the Company approved of the Company becoming subject to a minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150% asset coverage ratio will become effective on April 16, 2019, providing Saratoga Investment access to more than $100m of additional borrowing capacity, based on NAV at the end of fiscal 2018. When combined with our existing available borrowing capacity, that could increase our current AUM by almost 50%.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows 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 financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal year 2018, this share repurchase plan was extended for another year, through October 2018, at the same level of approval. As of February 28, 2018, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

We made no purchases of common stock in the open market during the year ended February 28, 2018.

Dividend

During fiscal year 2018, Saratoga Investment declared and paid dividends of $1.90 per share, composed of $0.46 for the quarter ended February 28, 2017, $0.47 per share for the quarter ended May 31, 2017, $0.48 per share for the quarter ended August 31, 2017, and $0.49 per share for the quarter ended November 30, 2017. In addition, on February 26, 2018, Saratoga Investment announced a dividend of $0.50 per share for the fiscal quarter ended February 28, 2018, paid on March 26, 2018 to all stockholders of record at the close of business on March 14, 2018.

2018 Fiscal Year End and Fourth Quarter Conference Call/Webcast Information

When:           Tuesday, May 15, 2018, 10:00 a.m. Eastern Time (ET)

Call:                Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada).

A replay of the call will be available from 1:00 p.m. ET on Tuesday, May 15, 2018 through 1:00 p.m. ET on Tuesday, May 22, 2018 by dialing (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada), passcode for both replay numbers: 6099629.

Webcast:        Interested parties may access a simultaneous webcast of the call and find the FY2018 presentation by going to the “Events & Presentations” section of Saratoga Investment’s investor relations website, http://www.saratogainvestmentcorp.com/investor.html

About Saratoga Investment Corp.

Saratoga Investment Corp. is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses.  The Company invests primarily in senior and unitranche leveraged loans, mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment Corp.’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment Corp. has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment Corp. owns an SBIC-licensed subsidiary and manages a $300 million Collateralized Loan Obligation (CLO) fund. It also owns 100% of the subordinated notes of the CLO.  These diverse funding sources, combined with a permanent capital base, enable Saratoga Investment Corp. to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment Corp. makes with the SEC. Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financials

Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, we provide information relating to adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income, adjusted net investment income yield and adjusted net income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. In addition, for fiscal 2017, adjusted net investment income also excludes the loss on extinguishment of our 2020 notes, and the interest expense related to the 2020 notes during the call notice period while the 2023 notes were already issued and outstanding. Both these expenses are directly attributable to the issuance of the 2023 notes and the subsequent repayment of the 2020 notes, and are deemed to be non-recurring in nature and not representative of the operations of Saratoga Investment. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield and net investment income per share to adjusted net investment income per share for the year and quarter ended February 28, 2018 and February 28, 2017.

(1)  Adjusted net investment income is calculated as adjusted net investment income divided by average net asset value.

(2)  Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.

(3)  Interest on 2020 notes during call period is presented net of the incentive fee accrual