SARATOGA INVESTMENT CORP.

Previous wording

Our wholly owned subsidiaries, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”) and Saratoga Investment Corp. SBIC III LP (“SBIC III LP”, and together with SBIC II LP, the “SBIC Subsidiaries”), received SBIC licenses from the SBA on August 14, 2019 and September 29, 2022, respectively. Each of the SBIC Subsidiaries provides up to $175.0 million in long-term capital in the form of debentures guaranteed by the SBA. With all debentures repaid to the SBA, SBIC LP’s license was surrendered on January 3, 2024, providing the Company access to all undistributed capital of SBIC LP, and SBIC LP subsequently merged with and into the Company. Under current SBIC regulations, for two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million with at least $175.0 million in combined regulatory capital.

Current wording

Our wholly owned subsidiaries, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”) and Saratoga Investment Corp. SBIC III LP (“SBIC III LP”, and together with SBIC II LP, the “SBIC Subsidiaries”), received SBIC licenses from the SBA on August 14, 2019 and September 29, 2022, respectively. Each of the SBIC Subsidiaries provides up to $175.0 million in long-term capital in the form of debentures guaranteed by the SBA. With all debentures repaid to the SBA, SBIC LP’s (“SBIC LP”) license was surrendered on January 3, 2024, providing the Company access to all undistributed capital of SBIC LP, and SBIC LP subsequently merged with and into the Company. Under current SBIC regulations, for two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million with at least $175.0 million in combined regulatory capital.

Previous wording

We and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, where we provided $43.75 million and TJHA provided $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed-rate of 10.0% per annum and is due and payable in full on October 20, 2033. As of May 31, 2025 our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of February 28, 2025, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of May 31, 2025 and February 28, 2025, our investment in the unsecured note of SLF JV had a fair value of $16.6 million and $16.5 million, respectively, and our investment in the membership interests of SLF JV had a fair value of $3.1 million and $3.1 million, respectively.

Current wording

We and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, where we provided $43.75 million and TJHA provided $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed-rate of 10.0% per annum and is due and payable in full on October 20, 2033. As of August 31, 2025, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of February 28, 2025, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of August 31, 2025 and February 28, 2025, our investment in the unsecured note of SLF JV had a fair value of $16.8 million and $16.5 million, respectively, and our investment in the membership interests of SLF JV had a fair value of $2.9 million and $3.1 million, respectively.

Previous wording

We have determined that SLF JV is an investment company under (“FASB”) Accounting Standards Codification (“ASC”) Topic 946,Financial Services—Investment Companies; however, in accordance with such guidance we will generally not consolidate our investment in a company other than a wholly owned investment company subsidiary. SLF JV is not a wholly owned investment company subsidiary as we and TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest. Furthermore, FASB ASC Topic 810,Consolidation, concludes that in a joint venture where both members have equal decision-making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, we do not consolidate SLF JV.

Current wording

We have determined that SLF JV is an investment company under (“FASB”) Accounting Standards Codification (“ASC”) Topic 946,Financial Services—Investment Companies (“ASC 946”); however, in accordance with such guidance we will generally not consolidate our investment in a company other than a wholly owned investment company subsidiary. SLF JV is not a wholly owned investment company subsidiary as we and TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest. Furthermore, FASB ASC Topic 810,Consolidation (“ASC 810”), concludes that in a joint venture where both members have equal decision-making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, we do not consolidate SLF JV.

Previous wording

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 Advisors, the audit committee of our board of directors and a third-party independent valuation firm. We use multiple techniques for determining fair value based on the nature of the investment and experience with those types of investments and specific portfolio companies. The selections of the valuation techniques and the inputs and assumptions used within those techniques often require subjective judgements and estimates. These techniques include market comparables, discounted cash flows and enterprise value waterfalls. Fair value is best expressed as a range of values from which we determine a single best estimate. The types of inputs and assumptions that may be considered in determining the range of values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis and volatility in future interest rates, call and put features, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flows and other relevant factors.

Current wording

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 Advisors (the “Manager” or “Saratoga Investment Advisors”), the audit committee of our board of directors and a third-party independent valuation firm. We use multiple techniques for determining fair value based on the nature of the investment and experience with those types of investments and specific portfolio companies. The selections of the valuation techniques and the inputs and assumptions used within those techniques often require subjective judgements and estimates. These techniques include market comparables, discounted cash flows and enterprise value waterfalls. Fair value is best expressed as a range of values from which we determine a single best estimate. The types of inputs and assumptions that may be considered in determining the range of values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis and volatility in future interest rates, call and put features, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flows and other relevant factors.

Previous wording

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. We stop accruing interest on our 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.

Current wording

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. We stop accruing interest on our 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.

Previous wording

In December 2023, the FASB issued ASU 2023-09,* Improvements to Income Tax Disclosures*. The amendments in this update require more disaggregated information on income taxes paid. ASU 2023-09 is effective for years beginning after December 15, 2024. Early adoption is permitted, however we have not elected to adopt this provision as of the date of the financial statements contained in this report. We are still assessing the impact of the new guidance.

Current wording

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires additional disaggregated information on income taxes paid. This amended guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, however the Company has not elected to early adopt this provision as of the date of the financial statements contained in this report. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and related disclosures.

Previous wording

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2027. We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures and do not believe it will have a material impact on its consolidated financial statements or its disclosures.

Current wording

In November 2024, the FASB issued ASU 2024-03,Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within the annual reporting periods beginning after December 15, 2027. Early adoption permitted. We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures and do not believe it will have a material impact on its consolidated financial statements or its disclosures.

Previous wording

During the three months ended May 31, 2025, we invested $50.1 million in new and existing portfolio companies and had $64.3 million in aggregate amount of exits and repayments resulting in net investments of $(14.2) million for the period. During the three months ended May 31, 2024, we invested $39.3 million in new and existing portfolio companies and had $75.7 million in aggregate amount of exits and repayments resulting in net repayments of $(36.4) million for the period.

Current wording

During the three months ended August 31, 2025, we invested $52.2 million in new and existing portfolio companies and had $29.8 million in aggregate amount of exits and repayments resulting in net investments of $22.4 million for the period. During the three months ended August 31, 2024, we invested $2.6 million in new and existing portfolio companies and had $60.1 million in aggregate amount of exits and repayments resulting in net repayments of $(57.5) million for the period.

Previous wording

At May 31, 2025, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $0.2 million and constituted 0.02% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of May 31, 2025 and February 28, 2025, was composed of $495.7 million and $527.1 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of May 31, 2025, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.

Current wording

At August 31, 2025, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $0.1 million and constituted 0.01% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of August 31, 2025 and February 28, 2025, was composed of$462.9 million and $527.1 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of August 31, 2025, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.

Previous wording

This investment is subject to unique risks. (See Part 1. Item 1A. Risk Factors— “Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of subordinated notes representing the lowest-rated securities issued by a pool of predominantly senior secured first lien term loans and is subject to additional risks and volatility. All losses in the pool of loans will be borne by our subordinated notes and only after the value of our subordinated notes is reduced to zero will the higher-rated notes issued by the pool bear any losses” 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 28, 2025).

Current wording

This investment is subject to unique risks. (See Part 1. Item 1A. Risk Factors—“Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of subordinated notes representing the lowest-rated securities issued by a pool of predominantly senior secured first lien term loans and is subject to additional risks and volatility. All losses in the pool of loans will be borne by our subordinated notes and only after the value of our subordinated notes is reduced to zero will the higher-rated notes issued by the pool bear any losses.” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025).

Previous wording

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 May 31, 2025, $438.1 million or 98.5% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and 10 Saratoga CLO portfolio investments were in default with a fair value of $4.6 million. At February 28, 2025, $484.3 million or 98.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and eight of the Saratoga CLO portfolio investments were in default with a fair value of $4.4 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025.

Current wording

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, 2025, $415.4 million or 96.7% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and 10 Saratoga CLO portfolio investments were in default with a fair value of $11.5 million. At February 28, 2025, $484.3 million or 98.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and eight of the Saratoga CLO portfolio investments were in default with a fair value of $4.4 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025.

Previous wording

Operating results for the three months ended May 31, 2025 and May 31, 2024 was as follows:

Current wording

Operating results for the three and six months ended August 31, 2025 and August 31, 2024 was as follows:

Previous wording

The composition of our investment income for three months ended May 31, 2025 and May 31, 2024 was as follows:

Current wording

The composition of our investment income for three and six months ended August 31, 2025 and August 31, 2024 was as follows:

Previous wording

For the three months ended May 31, 2025, total investment income decreased $6.4 million, or 16.4%, to $32.3 million from $38.7 million for the three months ended May 31, 2024. Interest income from investments decreased $6.3 million, or 18.4%, to $28.0 million for the three months ended May 31, 2025 from $34.3 million for the three months ended May 31, 2024. Interest income from investments decreased due to the decrease of $127.3 million, or 11.6%, in total investments at May 31, 2025 from $1,095.6 million at May 31, 2024 to $968.3 million as of May 31, 2025, combined with the decrease in the weighted average current yield on investments to 10.6%, down from 11.5% at May 31, 2024, primarily due to the reduction in SOFR base rates during this period.

Current wording

For the three months ended August 31, 2025, total investment income decreased $12.4 million, or 28.8%, to $30.6 million from $43.0 million for the three months ended August 31, 2024. Interest income from investments decreased $13.0 million, or 33.0%, to $26.4 million for the three months ended August 31, 2025 from $39.4 million for the three months ended August 31, 2024. Interest income from investments decreased due to the (i) non-recurrence of $7.9 million interest income related to our Knowland investment recognized last year that was previously on non-accrual, and (ii) decrease of $45.4 million, or 4.4%, in total investments at August 31, 2025 from $1,040.7 million at August 31, 2024 to $995.3 million as of August 31, 2025, combined with the decrease in the weighted average current yield on investments to 10.4%, down from 11.5% at August 31, 2024, primarily due to the reduction in SOFR base rates during this period.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, total PIK income was $0.8 million and $0.6 million, respectively.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, total PIK income was $0.8 million and $1.6 million, respectively and $1.9 million and $2.5 million, respectively.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, interest from cash and cash equivalents was $2.0 million and $0.6 million, respectively. The increase of $1.4 million was due to increased cash and cash equivalents balances during this period as compared to last year, reflecting the significant levels of repayments experienced during this period.

Current wording

For the three months ended August 31, 2025 and August 31, 2024, interest from cash and cash equivalents was $2.4 million and $1.7 million, respectively. The increase of $0.7 million was due to increased cash and cash equivalents balances during this period as compared to last year, reflecting the significant levels of repayments experienced during this period.

Previous wording

Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended May 31, 2025 and May 31, 2024, total management fee income was $0.7 million and $0.8 million, respectively.

Current wording

Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended August 31, 2025 and August 31, 2024, total management fee income was $0.7 million and $0.8 million, respectively. For the six months ended August 31, 2025 and 2024, total management fee income was $1.4 million and $1.6 million, respectively.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, total dividend income was $1.0 million and $1.5 million, respectively. Dividends received is recorded in the consolidated statements of operations when earned, and the decrease primarily reflects lower dividend income of $0.4 million received on our membership interest in SLF JV during the three months ended May 31, 2025 as compared to last year.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, total dividend income was $1.0 million and $1.1 million, respectively and $2.0 million and $2.6 million. Dividends received are recorded in the consolidated statements of operations when earned, and the decrease primarily reflects lower dividend income of $0.9 million and $1.3 million, respectively, received on our membership interest in SLF JV during the three and six months ended August 31, 2025 as compared to the three and six months ended August 31, 2024.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, total structuring and advisory fee income was $0.3 million and $0.4 million, respectively. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, total structuring and advisory fee income was $0.2 million and $0.0 million, respectively and $0.5 million and $0.4 million. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, other income was $0.3 million and $1.0 million, respectively. Other income includes origination fees, monitoring and amendment fees and prepayment fees and is recorded in the consolidated statements of operations when earned.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, other income was $0.0 million and $0.1 million, respectively and $0.3 million and $1.0 million, respectively. Other income includes origination fees, monitoring and amendment fees and prepayment fees and is recorded in the consolidated statements of operations when earned.

Previous wording

The composition of our operating expenses for the three months ended May 31, 2025 and May 31, 2024 was as follows:

Current wording

The composition of our operating expenses for the three and six months ended August 31, 2025 and August 31, 2024 was as follows:

Previous wording

For the three months ended May 31, 2025, total operating expenses decreased $2.2 million, or 8.9%, compared to the three months ended May 31, 2024.

Current wording

For the three months ended August 31, 2025, total operating expenses decreased $3.3 million, or 13.2%, compared to the three months ended August 31, 2024. For the six months ended August 31, 2025, total operating expenses decreased $5.4, or 11.0%, compared to the six months ended August 31, 2024.

Previous wording

For the three months ended May 31, 2025, interest and debt financing expenses decreased $0.5 million, or 3.9%, compared to the three months ended May 31, 2024. The decrease is primarily attributable to a decrease of 4.8% in average outstanding debt from $833.0 million for the three months ended May 31, 2024 to $792.8 million for the three months ended May 31, 2025.

Current wording

For the three months ended August 31, 2025, interest and debt financing expenses decreased $0.8 million, or 5.8%, compared to the three months ended August 31, 2024. The decrease is primarily attributable to a decrease of 5.8% in average outstanding debt from $836.9 million for the three months ended August 31, 2024 to $788.4 million for the three months ended August 31, 2025. For the six months ended August 31, 2025, interest and debt financing expenses decreased $1.3 million, or 3.9% compared to the six months ended August 31, 2024. The decrease is primarily attributable to a decrease of 5.3% in average outstanding debt from $835.0 million for the six months ended August 31, 2024 to $790.6 million for the six months ended August 31, 2025.

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, the weighted average interest rate on our outstanding indebtedness was relatively unchanged at 5.58% and 5.58%, respectively.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, the weighted average interest rate on our outstanding indebtedness was 5.57% and 6.06%, respectively and 5.58% and 6.06%, respectively.

Previous wording

As of May 31, 2025 and February 28, 2025, the SBA debentures represented 21.4% and 21.4% of overall debt, respectively.

Current wording

As of August 31, 2025 and February 28, 2025, the SBA debentures represented 21.6% and 21.4% of overall debt, respectively.

Previous wording

For the three months ended May 31, 2025, base management fees decreased $0.7 million, or 13.0%, from $5.0 million to $4.3 million compared to the three months ended May 31, 2024. The decrease in base management fees results from the 13.0% decrease in the average value of our total assets, less cash and cash equivalents, from $1,129.6 million for the three months ended May 31, 2024 to $982.4 million for the three months ended May 31, 2025.

Current wording

For the three months ended August 31, 2025, base management fees decreased $0.4 million, or 8.2%, from $4.8 million to $4.4 million compared to the three months ended August 31, 2024. The decrease in base management fees results from the 8.2 % decrease in the average value of our total assets, less cash and cash equivalents, from $1,080.6 million for the three months ended August 31, 2024 to $991.7 million for the three months ended August 31, 2025.

Previous wording

For the three months ended May 31, 2025, incentive management fees decreased $1.1 million to $2.5 million, or 29.2%, compared to $3.6 million the three months ended May 31, 2024. The incentive fee on income decreased from $3.6 million to $2.5 million for the three months ended May 31, 2024 and 2025, respectively, reflecting the decrease in net investment income during the three months ended May 31, 2025 as compared to the three months ended May 31, 2024. The incentive fee on capital gains decreased from a $0.0 million expense for the three months ended May 31, 2024 to a $0.0 million benefit for the three months ended May 31, 2025, reflecting the incentive fee on net realized and unrealized depreciation recognized during both these periods, with the liability floor capped at zero.

Current wording

For the three months ended August 31, 2025, incentive management fees decreased $2.3 million to $2.3 million, or 50.4%, compared to $4.6 million the three months ended August 31, 2024. The incentive fee on income decreased from $4.6 million to $2.3 million for the three months ended August 31, 2024 and 2025, respectively, reflecting the decrease in net investment income during the three months ended August 31, 2025 as compared to the three months ended August 31, 2024. The incentive fee on capital gains remained unchanged at $0.8 million for both the three months ended August 31, 2024 and August 31, 2025, reflecting no incentive fee on net realized and unrealized depreciation recognized during both these periods, with the liability floor capped at zero.

Previous wording

For the three months ended May 31, 2025, professional fees decreased $0.3 million, or 30.0% compared to the three months ended May 31, 2024.

Current wording

For the three months ended August 31, 2025, professional fees increased $0.5 million, or 416.3% compared to the three months ended August 31, 2024.

Previous wording

For the three months ended May 31, 2025, administrator expenses increased $0.2 million, or 16.3% compared to the three months ended May 31, 2024, reflecting the contractual changes to the administrator agreement cap.

Current wording

For the three months ended August 31, 2025, administrator expenses increased $0.2 million, or 13.2% compared to the three months ended August 31, 2024, reflecting the contractual changes to the administrator agreement cap.

Previous wording

For the three months ended May 31, 2025, general and other expenses increased $0.04 million, or 6.0% compared to the three months ended May 31, 2024.

Current wording

For the three months ended August 31, 2025, general and administrative expenses decreased $0.4 million, or 49.8% compared to the three months ended August 31, 2024.

Previous wording

As discussed above, the decrease in interest and debt financing expenses for the three months ended May 31, 2025 compared to the three months ended May 31, 2024 is primarily attributable to an decrease in the average dollar amount of outstanding debt. For the three months ended May 31, 2025 and May 31, 2024, the average borrowings outstanding under the Encina Credit Facility was $32.5 million and $34.8 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Encina Credit Facility was 8.86% and 9.89%, respectively. For the three months ended May 31, 2025 and May 31, 2024, the average borrowings outstanding under the Live Oak Credit Facility was $32.4 million and $12.9 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Live Oak Credit Facility was 8.50% and 9.53%, respectively. For the three months ended May 31, 2025 and May 31, 2024, the average borrowings outstanding of SBA debentures was $170.0 million and $214.0 million, respectively. For the three months ended May 31, 2025 and May 31, 2024, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.04% and 3.36%, respectively. For the three months ended May 31, 2025 and May 31, 2024, the average borrowings outstanding of our Notes Payable was $557.9 million and $571.4 million, respectively. For the three months ended May 31, 2025 and May 31, 2024, the weighted average interest rate on the Notes Payable was 6.00% and 6.06%, respectively.

Current wording

As discussed above, the decrease in interest and debt financing expenses for the three months ended August 31, 2025 compared to the three months ended August 31, 2024 is primarily attributable to a decrease in the overall average dollar amount of outstanding debt. For the three months ended August 31, 2025 and August 31, 2024, the average borrowings outstanding under the Encina Credit Facility was $32.5 million and $32.5 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Encina Credit Facility was 8.9% and 9.9%, respectively. For the three months ended August 31, 2025 and August 31, 2024, the average borrowings outstanding under the Live Oak Credit Facility was $37.5 million and $19.0 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Live Oak Credit Facility was 8.5% and 9.6%, respectively. For the three months ended August 31, 2025 and August 31, 2024, the average borrowings outstanding of SBA debentures was $170.0 million and $214.0 million, respectively. For the three months ended August 31, 2025 and August 31, 2024, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.0% and 3.3%, respectively. For the three months ended August 31, 2025 and August 31, 2024, the average borrowings outstanding of our Notes Payable was $546.4 million and $571.4 million, respectively. For the three months ended August 31, 2025 and August 31, 2024, the weighted average interest rate on the Notes Payable was 5.96% and 6.06%, respectively.

Previous wording

The weighted average dollar amount of our unsecured notes for the three months ended May 31, 2025 and May 31, 2024 was as follows:

Current wording

The weighted average dollar amount of our unsecured notes for the three and six months ended August 31, 2025 and August 31, 2024 was as follows:

Previous wording

For the three months ended May 31, 2025 and May 31, 2024, there were income tax expense (benefits) of $0.05 million and $(0.06) million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in entities that are treated as corporations for U.S. federal income tax purposes, as well as current U.S. federal and state income taxes on those operating gains and losses when realized.

Current wording

For the three and six months ended August 31, 2025 and August 31, 2024, there were income tax expense (benefits) of ($.01) million and $0.1 million, respectively and $.04 million and $0.1 million This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in entities that are treated as corporations for U.S. federal income tax purposes, as well as current U.S. federal and state income taxes on those operating gains and losses when realized.

Previous wording

For the three months ended May 31, 2025, we had $64.3 million of sales, repayments, exits or restructurings resulting in $2.9 million of net realized gains.

Current wording

For the three months ended August 31, 2025, we had $29.8 million of sales, repayments, exits or restructurings resulting in $0.05 million of net realized gains. For the six months ended August 31, 2025, we had $94.9 million of sales, repayments, exits or restructurings resulting in $3.0 million of net realized gains.

Previous wording

The $2.2 million of net realized gains was from the sale of the equity positions in our Identity Automation Systems.

Current wording

The $2.2 million of net realized gains was from the sale of the equity positions in our Identity Automation Systems investment.

Previous wording

For the three months ended May 31, 2025, our investments had a net change in unrealized appreciation of $0.9 million compared to a net change in unrealized depreciation of $13.9 million for the three months ended May 31, 2024.

Current wording

For the six months ended August 31, 2025, our investments had a net change in unrealized appreciation of $4.7 million compared to a net change in unrealized depreciation of $42.7 million for the six months ended August 31, 2024.

Previous wording

The most significant cumulative net change in unrealized appreciation (depreciation) for the three months ended May 31, 2025 were the following (dollars in thousands):

Current wording

The most significant cumulative net change in unrealized appreciation (depreciation) for the six months ended August 31, 2025 were the following (dollars in thousands):

Previous wording

The $1.1 million net change in unrealized appreciation in our investment in Zollege PBC was driven by improved Company performance.

Current wording

The $4.6 million net change in unrealized appreciation in our investment in Zollege PBC was driven by improved Company performance.

Previous wording

The most significant cumulative net change in unrealized appreciation (depreciation) for the three months ended May 31, 2024 were the following (dollars in thousands):

Current wording

The most significant cumulative net change in unrealized appreciation (depreciation) for the six months ended August 31, 2024 were the following (dollars in thousands):

Previous wording

The $14.5 million net change in unrealized appreciation in our investment Zollege PBC was driven by the restructuring of the investment, resulting in a reversal of previously recognized unrealized depreciation reclassified to realized loss.

Current wording

The $14.3 million net change in unrealized appreciation in our investment in Zollege PBC was driven by the restructuring of the investment, resulting in a reversal of previously recognized unrealized depreciation reclassified to realized loss.