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Filed Pursuant to Rule 497
Registration Statement No. 333-147937
PROSPECTUS SUPPLEMENT
(to Prospectus dated May 12, 2010)

1,691,458 Shares
 
Solar Capital Ltd.
 
Common Stock

 
We are an externally managed finance company. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged companies, including middle-market companies, in the form of senior secured loans, mezzanine loans and equity securities.
 
We were formed in February 2007 as Solar Capital LLC, a Maryland limited liability company, and commenced operations in March 2007. On February 9, 2010, Solar Capital LLC was merged with and into Solar Capital Ltd., an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, or the 1940 Act. We are managed by Solar Capital Partners, LLC. Solar Capital Management, LLC provides the administrative services necessary for us to operate.
 
This is an offering of 1,691,458 shares of our common stock by the selling stockholders named in this prospectus supplement. See “Selling Stockholders.” We will not receive any proceeds from the sale of shares of common stock by the selling stockholders, including pursuant to any exercise by the underwriters of their option to purchase additional shares.
 
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SLRC.” On November 4, 2010, the last reported sales price on the NASDAQ Global Select Market for our common stock was $23.21 per share.
 
This prospectus supplement and the accompanying prospectus contains important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus supplement and the accompanying prospectus before investing and keep it for future reference. We are required to file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information is available free of charge by contacting us by mail at 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670 or on our website at  http://www.solarcapltd.com . The Securities and Exchange Commission also maintains a website at  http://www.sec.gov  that contains such information. Information contained on our website is not incorporated by reference into this prospectus supplement and the accompanying prospectus, and you should not consider that information to be part of this prospectus supplement and the accompanying prospectus.

 
An investment in our common stock is very risky and highly speculative. Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. In addition, the companies in which we invest are subject to special risks. See “Risk Factors” beginning on page S-17 of this prospectus supplement and page 16 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our common stock.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement and the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

  	  	Per Share	 	  	Total(1)	 	
Public Offering Price	  	$	22.200	  	  	$	37,550,368	  	
Sales Load (Underwriting Discounts and Commissions)	  	$	0.999	  	  	$	1,689,767	  	
Proceeds to Selling Stockholders (before expenses) (2)	  	$	21.201	  	  	$	35,860,601	  	

(1)	 	The selling stockholders have granted the underwriters a 30-day option, which we refer to as the over-allotment option, to purchase from the selling stockholders up to an additional 253,719 shares of our common stock at the public offering price, less underwriting discounts and commissions (sales load). If the over-allotment option is exercised in full, the total public offering price will be $43,182,929 and the total underwriting discounts and commissions (sales load) will be $1,943,232. We will not receive any proceeds from this offering. All underwriting discounts and commissions (sales load) will be borne by the selling stockholders identified in this prospectus supplement. See “Underwriting.”	
(2)	 	We estimate that we will incur approximately $120,000 in offering expenses in connection with this offering. Stockholders will indirectly bear such expenses as investors in Solar Capital Ltd.	
 
The underwriters expect to deliver the shares on or about November 10, 2010.
 
Joint Book-Running Managers

Citi	 	Morgan Stanley	 	Wells Fargo Securities	
 
Lead Managers

Deutsche Bank Securities	 	SunTrust Robinson Humphrey	
 
Co-Managers

BMO Capital Markets	 	BB&T Capital Markets	 	RBC Capital Markets	
A division of Scott & Stringfellow, LLC

 
November 5, 2010

Table of Contents
 
TABLE OF CONTENTS
 
PROSPECTUS SUPPLEMENT

  	  	Page	
Prospectus Supplement Summary	  	S-1	
Offering	  	S-9	
Fees and Expenses	  	S-12	
Selected Financial and Other Data	  	S-14	
Risk Factors	  	S-17	
Forward-Looking Statements and Projections	  	S-21	
Use of Proceeds	  	S-22	
Price Range of Common Stock and Distributions	  	S-23	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	S-25	
Senior Securities	  	S-35	
Additional Material U.S. Federal Income Tax Considerations	  	S-36	
Selling Stockholders	  	S-37	
Underwriting	  	S-38	
Legal Matters	  	S-41	
Independent Registered Public Accounting Firm	  	S-41	
Available Information	  	S-42	
Index to Consolidated Financial Statements	  	F-1	

 
PROSPECTUS

  	  	Page	 	
Summary	  	 	1	  	
Fees and Expenses	  	 	12	  	
Selected Financial and Other Data	  	 	14	  	
Risk Factors	  	 	16	  	
Forward-Looking Statements and Projections	  	 	30	  	
Use of Proceeds	  	 	31	  	
Distributions	  	 	31	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	32	  	
Senior Securities	  	 	47	  	
Business	  	 	48	  	
Portfolio Companies	  	 	62	  	
Management	  	 	66	  	
Portfolio Management	  	 	73	  	
Investment Advisory and Management Agreement	  	 	74	  	
Administration Agreement	  	 	80	  	
License Agreement	  	 	80	  	
Certain Relationships and Transactions	  	 	81	  	
Control Persons and Principal Stockholders	  	 	82	  	
Regulation as a Business Development Company	  	 	83	  	
Determination of Net Asset Value	  	 	88	  	
Dividend Reinvestment Plan	  	 	90	  	
Material U.S. Federal Income Tax Considerations	  	 	92	  	
Description of Securities	  	 	99	  	
Shares Eligible for Future Sale	  	 	106	  	
Selling Stockholders	  	 	108	  	
Plan of Distribution	  	 	112	  	
Custodian, Transfer and Dividend Paying Agent and Registrar	  	 	114	  	
Brokerage Allocation and Other Practices	  	 	114	  	
Legal Matters	  	 	114	  	
Independent Registered Public Accounting Firm	  	 	114	  	
Available Information	  	 	115	  	
Index to Financial Statements	  	 	F-1	  	

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ABOUT THIS PROSPECTUS SUPPLEMENT
 
You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any other person to provide you with different information from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any shares of our common stock by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our common stock. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.
 
This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading, “Available Information” before investing in our common stock.

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PROSPECTUS SUPPLEMENT SUMMARY
 
This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in the accompanying prospectus and the documents to which we have referred.
 
We were formed in February 2007 as Solar Capital LLC, a Maryland limited liability company, and commenced operations in March 2007. On February 9, 2010, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation, which we refer to as the “Solar Capital Merger,” concurrent with the pricing of our initial public offering. Except where the context suggests otherwise, the terms “we,” “us,” “our” and “Solar Capital” refer to Solar Capital LLC prior to the Solar Capital Merger, and Solar Capital Ltd. after the Solar Capital Merger. In addition, the terms “Solar Capital Partners” or “investment adviser” refer to Solar Capital Partners, LLC, and “Solar Capital Management” or the “administrator” refers to Solar Capital Management, LLC.
 
In this prospectus supplement and the accompanying prospectus, we use the term “leveraged” to refer to companies of any size with non-investment grade debt outstanding or, if not explicitly rated, those which we believe would be rated as non-investment grade based on their leverage levels and other terms. In addition, we use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion.
 
Solar Capital
 
Solar Capital Ltd., a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. In addition, for tax purposes we intend to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
 
On February 9, 2010 we priced our initial public offering, selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Concurrent with our initial public offering, Michael S. Gross, our Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, collectively purchased an additional 0.6 million shares through a private placement transaction exempt from registration under the Securities Act of 1933, as amended, or the Securities Act (the “Concurrent Private Placement”) also at $18.50 per share.
 
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in senior unsecured notes (the “Senior Unsecured Notes”) to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Solar Capital Merger and as a result, the books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
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Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units of membership interest (“units”) in March 2007, at such time a total of 81.70 million units were outstanding. Solar Capital Investors, LLC, an entity funded by the management of Solar Capital Partners, the Company’s investment adviser, acquired approximately 3.33 million units in connection with the initial private placement. In addition, in connection with the initial private placement, certain funds managed by Magnetar Financial LLC (“Magnetar”) and certain entities affiliated therewith (collectively, the “Magnetar entities”), acquired approximately 35.00 million units.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners. Solar Capital Management provides the administrative services necessary for us to operate. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
As of September 30, 2010, our long term investments totaled $906.0 million and our net asset value was $732.6 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represent 92.9% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 14.1%.
 
About Solar Capital Partners
 
Solar Capital Partners is controlled by Michael S. Gross, our chairman and chief executive officer, and is led by Mr. Gross and Bruce Spohler, our chief operating officer, and is supported by a team of 12 dedicated investment professionals, including Brian Gerson, Cedric Henley and David Mait. We refer to Messrs. Gross, Spohler, Gerson, Henley and Mait as Solar Capital Partners’ senior investment professionals. Solar Capital Partners’ investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. The investment team led by Messrs. Gross and Spohler has invested in 58 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 50 different financial sponsors, through September 30, 2010. Since Solar Capital’s inception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary community to originate direct investment opportunities.
 
Mr. Gross, the former chairman and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded, has over 20 years of experience in the private equity, distressed debt and mezzanine lending businesses and has been involved in originating, structuring, negotiating, consummating and managing private equity, distressed debt and mezzanine lending transactions.
 
Mr. Gross is also a founder and a former senior partner of Apollo Management, L.P., a leading private equity firm. During his tenure at Apollo Management, L.P., Mr. Gross was a member of the investment committee that was responsible for overseeing more than $13 billion of investments in over 150 companies. Between February 2004 and February 2006, Mr. Gross was the president and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded and on whose board of directors and investment committee he served as chairman from February 2004 to July 2006. Under his management, Apollo Investment Corporation raised approximately $930 million in gross proceeds in an initial
 
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public offering in April 2004, built a dedicated investment team and infrastructure and invested approximately $2.3 billion in over 65 companies in conjunction with 50 different private equity sponsors. Mr. Gross was also the managing partner of Apollo Distressed Investment Fund, L.P., an investment fund he founded in 2003 to invest principally in debt and other securities of leveraged companies.
 
Mr. Gross also currently serves on the boards of directors of three public companies, and in the past has served on the boards of directors of more than 20 public and private companies. As a result, Mr. Gross has developed an extensive network of private equity sponsor relationships as well as relationships with management teams of public and private companies, investment bankers, attorneys and accountants that we believe should provide us with significant business opportunities.
 
We also rely on the more than 20 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since inception. Previously, Mr. Spohler was a managing director and a former co-head of U.S. Leveraged Finance for CIBC World Markets. He held numerous senior roles at CIBC World Markets, including serving on the U.S. Management Committee, Global Executive Committee and the Deals Committee, which approves all of CIBC World Markets’ U.S. corporate finance debt capital decisions. During Mr. Spohler’s tenure, he was responsible for senior loan, high yield and mezzanine origination and execution, as well as CIBC World Markets’ below investment grade loan portfolio in the United States. As a co-head of U.S. Leveraged Finance, Mr. Spohler oversaw over 300 capital raising and merger and acquisition transactions, comprising over $40 billion in market capitalization.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.
 
Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
Market Opportunity
 
Solar Capital invests primarily in senior secured loans, mezzanine loans and equity securities of leveraged companies organized and located in the United States. We believe that the size of the leveraged company market, coupled with the demands of these companies for flexible sources of capital at attractive terms and rates, create an attractive investment environment for us.
 
 	•	 	Middle-market companies have faced increasing difficulty in accessing the capital markets.    While many middle-market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult in recent years as institutional investors have sought to invest in larger, more liquid offerings. In addition, many private finance companies that, until recently, financed their lending and investing activities through securitization transactions have lost that source of funding and cut back lending significantly.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their private investments.    We believe there is a large pool of uninvested private equity capital available to middle-market companies. While we expect the rate of investment to be slower than in prior periods, we expect that private equity firms will continue to be active investors in middle-market companies and that these private equity firms will seek to supplement their investments with senior and junior debt securities and loans and equity co-investments from other sources, such as Solar Capital.	

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 	•	 	Middle-market companies are increasingly seeking private sources for debt and equity capital.    We believe that many middle-market companies prefer to execute transactions with private capital providers such as Solar Capital, rather than execute high-yield bond or equity transactions in the public markets, which may necessitate increased financial and regulatory compliance and reporting obligations. We expect that the volume of domestic “public-to-private” transactions, as well as the number of companies selecting a “sale” alternative versus raising capital in the public equity markets as a means of increasing liquidity, will remain large.	
 
 	•	 	Consolidation among commercial banks has reduced the focus on middle-market business.    We believe that many senior lenders have de-emphasized their service and product offerings to middle-market companies in favor of lending to large corporate clients, managing capital markets transactions and providing other non-credit services to their customers. We believe this has resulted in fewer key players and the reduced availability of debt capital to the companies we target.	
 
 	•	 	Recent disruptions within the credit markets generally have brought a reduction in competition and a more lender-friendly environment.  Recent credit market dislocation has caused many of the alternative methods of obtaining middle-market debt financing to significantly decrease in scope and availability while demand for financings has remained robust. We believe the segment’s strong growth prospects, combined with the growing demand for the capital and corporate finance and advisory services we offer, creates an attractive investment environment for us.	
 
Furthermore, we believe that given the credit market uncertainty, Solar Capital has a greater opportunity to move beyond middle-market deals into larger transactions, as banks are less willing to commit capital. We believe these larger deals can be structured with more attractive terms such as lower leverage, higher yields, better covenants, and longer duration than was typical before the current market dislocation.
 
Therefore, we believe that there is an opportunity to invest in senior secured loans, mezzanine loans and equity securities of leveraged companies and that we are well positioned to serve this market.
 
Competitive Advantages and Strategy
 
We believe that we have the following competitive advantages over other providers of financing to leveraged companies:
 
Management Expertise
 
As managing partner, Mr. Gross has principal management responsibility for Solar Capital Partners, to which he currently dedicates substantially all of his time. Mr. Gross has over 20 years of experience in leveraged finance, private equity and distressed debt investing. Mr. Spohler, our chief operating officer and a partner of Solar Capital Partners, has over 20 years of experience in evaluating and executing leverage finance transactions. We believe that Messrs. Gross and Spohler have developed a strong reputation in the capital markets, and that this experience provides us with a competitive advantage in identifying and investing in leveraged companies with the potential to generate returns. We believe that our investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. We believe that our investment team has a proven track record of valuing companies and assets and negotiating transactions.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.

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Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
Investment Portfolio
 
Our portfolio investments consist of portfolio companies that have strong cash flows and have maintained financial and operating performance despite the recent economic climate. As of September 30, 2010, over 99% of our total portfolio value was comprised of performing assets. The majority of our assets have been seasoned, which has allowed us to gain a solid understanding of our borrowers and the industries in which they compete. Additionally, over time, we have established productive relationships with our portfolio companies.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facility and our $35 million senior secured term loan (the “Term Loan”), and the expected repayments of existing investments provide us with a substantial amount of capital available for deployment into new investment opportunities. We believe we are well positioned for the current marketplace. We believe that in the current economic environment financing needs of many companies will increase while funding options are limited, allowing us to capitalize on favorable investment opportunities.
 
Solar Capital’s Limited Leverage
 
As of November 2, 2010, we had borrowings of $160.0 million. We believe our relatively low level of leverage provides us with a competitive advantage, allowing us to anticipate providing a consistent dividend to our investors as proceeds from our investments are available for reinvestment as opposed to being consumed by debt repayment. To the extent borrowing conditions improve and leverage becomes available on more attractive terms, we may increase our relative level of debt in the future. However, we do not currently anticipate operating with a substantial amount of debt relative to our total assets. Furthermore, by maintaining prudent leverage levels, we believe we will be better positioned to weather future market downturns.
 
Proprietary Sourcing and Origination
 
We believe that Solar Capital Partners’ senior investment professionals’ longstanding relationships with financial sponsors, commercial and investment banks, management teams and other financial intermediaries provide us with a strong pipeline of proprietary origination opportunities. We believe the broad expertise of Solar Capital Partners’ senior investment professionals and their ability to draw upon their average of 20 years of investment experience enable us to identify, assess and structure investments successfully. We expect to continue leveraging the relationships Mr. Gross established while sourcing and originating investments at Apollo Investment Corporation as well as the financial sponsor relationships Mr. Spohler developed while he was a co-head of CIBC World Markets’ U.S. Leveraged Finance Group.
 
Our investment team’s strong relationship network is enhanced by the collaborative role Solar Capital plays in the private equity industry. We offer tailored solutions to our portfolio companies, and we believe that this role provides us with greater deal flow as opposed to being viewed as a competitor bidding for control stakes. Because Solar Capital is not associated with a private equity firm, we are not precluded from partnering with most of the top tier financial sponsors.
 
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These direct investments enable us to perform more in-depth due diligence and play an active role in structuring financings. We believe that effectuating the transaction terms and having greater insight into a portfolio company’s operations and financial picture assist Solar Capital in minimizing downside potential, while reinforcing Solar Capital as a trusted partner who delivers comprehensive financing solutions. Since our inception, Solar Capital Partners has sourced investments in 58 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 50 different financial sponsors, through September 30, 2010.
 
Versatile Transaction Structuring and Flexibility of Capital
 
We believe our senior investment professionals’ broad expertise and ability to draw upon their extensive experience enable us to identify, assess and structure investments successfully across all levels of a company’s capital structure and to manage potential risk and return at all stages of the economic cycle. While we are subject to significant regulation as a business development company, we are not subject to many of the regulatory limitations that govern traditional lending institutions such as banks. As a result, we believe that we can be more flexible than such lending institutions in selecting and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which we invest. We believe financial sponsors, management teams and investment banks see this flexibility as a benefit, making us an attractive financing partner. We believe that this approach enables us to procure attractive investment opportunities throughout the economic cycle so that we can make investments consistent with our stated investment objective even during turbulent periods in the capital markets.
 
Emphasis on Achieving Strong Risk-Adjusted Returns
 
Solar Capital Partners uses a disciplined investment and risk management process that emphasizes a rigorous fundamental research and analysis framework. Solar Capital Partners seeks to build our portfolio on a “bottom-up” basis, choosing and sizing individual positions based on their relative risk/reward profiles as a function of the associated downside risk, volatility, correlation with the existing portfolio and liquidity. At the same time, Solar Capital Partners takes into consideration a variety of factors in managing our portfolio and imposes portfolio-based risk constraints promoting a more diverse portfolio of investments and limiting issuer and industry concentration. Our value-oriented investment philosophy focuses on preserving capital and ensuring that our investments have an appropriate return profile in relation to risk. When market conditions make it difficult for us to invest according to our criteria, we are highly selective in deploying our capital. We do not pursue short-term origination targets. We believe this approach enables us to build an attractive investment portfolio that meets our return and value criteria over the long term.
 
We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through Solar Capital Partners, conduct a rigorous due diligence process that draws upon investment experience, industry expertise and network of contacts of our senior investment professionals, as well as the other members of our investment team. Among other things, our due diligence is designed to ensure that a prospective portfolio company will be able to meet its debt service obligations.
 
We have the ability to invest across an issuer’s capital structure, which we believe enables us to provide comprehensive financing solutions for our portfolio companies, as well as access the best risk-adjusted opportunities. The overall transaction size and product mix is based upon the needs of the customer, as well as our risk-return hurdles. We also focus on downside protection and preservation of capital throughout the structuring process.

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Deep Industry Focus with Substantial Information Flow
 
We concentrate our investing activities in industries characterized by strong cash flow and in which Solar Capital Partners’ investment professionals have deep investment experience. During his time with the Apollo entities, Mr. Gross oversaw investments in over 200 companies in 20 industries. As a result of their investment experience, Messrs. Gross and Spohler, together with Solar Capital Partners’ other investment professionals, have long-term relationships with management consultants and management teams in the industries we target, as well as substantial information concerning those industries. Solar Capital Partners’ investment team also has significant experience in evaluating and making investments in the industries we target. We believe that the in-depth experience of Solar Capital Partners’ investment team in investing throughout various stages of the economic cycle provides our investment adviser with access to ongoing market insights in addition to a powerful asset for investment sourcing. See “Business — Investments” in the accompanying prospectus.
 
Longer Investment Horizon
 
Unlike private equity and venture capital funds, we will not be subject to standard periodic capital return requirements. Such requirements typically stipulate that the capital of these funds, together with any capital gains on such invested funds, can only be invested once and must be returned to investors after a pre-agreed time period. We believe that our flexibility to make investments with a long-term view and without the capital return requirements of traditional private investment vehicles provides us with the opportunity to generate favorable returns on invested capital and enables us to be a better long-term partner for our portfolio companies.
 
Risk Factors
 
The value of our assets, as well as the market price of our shares, will fluctuate. Our investments may be risky, and you may lose all or part of your investment in us. Investing in Solar Capital involves other risks, including the following:
 
 	•	 	We have a limited operating history of only three and a half years;	
 
 	•	 	We are dependent upon Solar Capital Partners’ key personnel for our future success;	
 
 	•	 	We operate in a highly competitive market for investment opportunities;	
 
 	•	 	The lack of liquidity in our investments may adversely affect our business;	
 
 	•	 	We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us;	
 
 	•	 	To the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income;	
 
 	•	 	There will be uncertainty as to the value of our portfolio investments;	
 
 	•	 	We may experience fluctuations in our quarterly results;	
 
 	•	 	We will become subject to corporate-level income tax on all of our income if we are unable to qualify as a RIC, under Subchapter M of the Code, which would have a material adverse effect on our financial performance;	
 
 	•	 	We cannot assure you that shares of our common stock will not trade at a market price below our net asset value per share;	

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 	•	 	Our common stock price may be volatile and may decrease substantially;	
 
 	•	 	There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time;	
 
 	•	 	Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock; and	
 
 	•	 	Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.	
 
See “Risk Factors” beginning on page S-17 and the other information included in the accompanying prospectus, for additional discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
 
Operating and Regulatory Structure
 
Immediately prior to the pricing of our initial public offering, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation that is an externally managed, non-diversified closed-end management investment company which has elected to be treated as a business development company under the 1940 Act. As a business development company, we are required to meet regulatory tests, including the requirement to invest at least 70% of our total assets in “qualifying assets.” Qualifying assets generally include, among other things, securities of “eligible portfolio companies.” “Eligible portfolio companies” generally include U.S. companies that are not investment companies and that do not have securities listed on a national exchange. See “Regulation as a Business Development Company” in the accompanying prospectus. We may also borrow funds to make investments. In addition, we intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. See “Additional Material U.S. Federal Income Tax Considerations” in this prospectus supplement and “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus.
 
Our investment activities are managed by Solar Capital Partners and supervised by our board of directors. Solar Capital Partners is an investment adviser that is registered under the Investment Advisers Act of 1940, as amended, or the Advisers Act. Under our investment advisory and management agreement, which we refer to as the Investment Advisory and Management Agreement, we have agreed to pay Solar Capital Partners an annual base management fee based on our gross assets as well as an incentive fee based on our performance. See “Investment Advisory and Management Agreement” in the accompanying prospectus. We have also entered into an administration agreement, which we refer to as the Administration Agreement, under which we have agreed to reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. See “Administration Agreement” in the accompanying prospectus.
 
Our Corporate Information
 
Our offices are located at 500 Park Avenue, 5th Floor, New York, New York 10022, and our telephone number is (212) 993-1670.

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THE OFFERING
 
Common Stock Offered by the Selling Shareholders	1,691,458 shares plus 253,719 shares issuable pursuant to the over-allotment granted to the underwriters.	
 
Common Stock Currently Outstanding	Approximately 33,270,844 shares.	
 
Use of Proceeds	We will not receive any proceeds from the sale of the shares of common stock covered by this prospectus supplement.	
 
Distributions	To the extent that we have income available, we intend to distribute quarterly dividends to our stockholders. The amount of our dividends, if any, will be determined by our board of directors. Any dividends to our stockholders will be declared out of assets legally available for distribution. On November 2, 2010, the Board of Directors declared a dividend of $0.60 per share payable on December 30, 2010 to stockholders of record on December 17, 2010. Shares offered in this prospectus supplement will be entitled to receive this dividend payment. We anticipate that the dividend will be paid from post-offering taxable earnings, including interest and capital gains generated by our investment portfolio. However, if we do not generate sufficient taxable earnings during the year, the dividend may constitute a return of capital. The specific tax characteristics of our dividends will be reported to shareholders after the end of each calendar year.	
 
Taxation	We intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To obtain and maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Additional Material U.S. Federal Income Tax Considerations” in this prospectus supplement and “Distributions” and “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus.	
 
Investment Advisory Fees	We pay Solar Capital Partners a fee for its services under the Investment Advisory and Management Agreement consisting of two components — a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% of our gross assets, which includes any borrowings for investment purposes. The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20% of our “pre-incentive fee net investment income” for the immediately preceding quarter, subject to a preferred return, or “hurdle,” and a “catch up” feature.	

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 	The second part is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement) in an amount equal to 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, 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 fees. See “Investment Advisory and Management Agreement” in the accompanying prospectus.	
 
Administration Agreement	We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. In addition, we reimburse Solar Capital Management for the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of our chief financial officer and any administrative support staff. See “Administration Agreement” in the accompanying prospectus.	
 
Trading	Shares of closed-end investment companies frequently trade at a discount to their net asset value. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade above, at or below net asset value.	
 
License Agreement	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has agreed to grant us a non-exclusive license to use the name “Solar Capital.” See “License Agreement” in the accompanying prospectus.	
 
Dividend Reinvestment Plan	We have adopted an “opt out” dividend reinvestment plan. If your shares of common stock are registered in your own name, your distributions will automatically be reinvested under our dividend reinvestment plan in additional whole and fractional shares of common stock, unless you “opt out” of our dividend reinvestment plan so as to receive cash dividends by delivering a written notice to our plan administrator. If your shares are held in the name of a broker or other nominee, you should contact the broker or nominee for details regarding opting out of our dividend reinvestment plan. Stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan” in the accompanying prospectus.	
 
Certain Anti-Takeover Measures	Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us.	

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 	These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Description of Securities” in the accompanying prospectus.	
 
Available Information	We are required to file periodic reports, current reports, proxy statements and other information with the SEC. This information is available at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 and on the SEC’s website at  http://www.sec.gov.  The public may obtain information on the operation of the SEC’s public reference room by calling the SEC at (202) 551-8090. This information is also available free of charge by contacting us at Solar Capital Ltd., 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670 or on our website at  http://www.solarcapltd.com .	

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FEES AND EXPENSES
 
The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this prospectus supplement and the accompanying prospectus contains a reference to fees or expenses paid by “us” or “Solar Capital,” or that “we” will pay fees or expenses, you will indirectly bear such fees or expenses as an investor in Solar Capital Ltd.

Stockholder transaction expenses:	  	 	 	 	
Sales load borne by us (as a percentage of offering price)	  	 	None	   (1) 	
Offering expenses borne by us (as a percentage of offering price)	  	 	0.31	%(2) 	
Dividend reinvestment plan expenses	  	 	None	   (3) 	
 	  	 	 	 	
Total stockholder transaction expenses (as a percentage of offering price)	  	 	0.31	%(2) 	
 	 	
Annual expenses (as a percentage of net assets attributable to common stock):	  	 	 	 	
Base management fee	  	 	2.44	%(4) 	
Incentive fees payable under our Investment Advisory and Management Agreement	  	 	2.36	%(5) 	
Interest payments on borrowed funds	  	 	2.29	%(6) 	
Other expenses (estimated)	  	 	0.58	%(7) 	
 	  	 	 	 	
Total annual expenses (estimated)	  	 	7.67	% 	
 
Example
 
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above and have excluded performance-based incentive fees. See Note 6 below for additional information regarding certain assumptions regarding our level of leverage.

 	  	1 Year	 	  	3 Years	 	  	5 Years	 	  	10 Years	 	
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	  	$	56	  	  	$	161	  	  	$	266	  	  	$	525	  	
 
(1)	 	All underwriting discounts and commissions (sales load) will be borne by the selling stockholders.	
(2)	 	The offering expenses of this offering are estimated to be approximately $120,000. The offering expenses as a percentage of the offering price of shares to be sold in this offering is based on the last reported sales price of our common stock on the NASDAQ Global Select Market on November 3, 2010.	
(3)	 	The expenses of the dividend reinvestment plan are included in “other expenses.”	
(4)	 	Our base management fee under the Investment Advisory and Management Agreement is based on our gross assets, which is defined as all the assets of Solar Capital, including those acquired using borrowings for investment purposes, and assumes the base management fee remains consistent with the annualized fee incurred for the nine months ended September 30, 2010. See “Investment Advisory and Management Agreement” in the accompanying prospectus.	
(5)	 	Assumes that annual incentive fees earned by our investment adviser, Solar Capital Partners, remain consistent with the annualized incentive fees earned by Solar Capital Partners for the nine months ended September 30, 2010. The incentive fee consists of two parts:	
 
The first part, which is payable quarterly in arrears, equals 20% of the excess, if any, of our “Pre-Incentive Fee Net Investment Income” that exceeds a 1.75% quarterly (7.00% annualized) hurdle rate, which we refer to as the Hurdle, subject to a “catch-up” provision measured at the end of each calendar quarter. The first part of the incentive fee is computed and paid on income that may include interest that is accrued but not yet
received in cash. The operation of the first part of the incentive fee for each quarter is as follows:
 
 	•	 	no incentive fee is payable to our investment adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the Hurdle of 1.75%;	
 
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 	•	 	100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser. We refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the Hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide our investment adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a Hurdle did not apply when our Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter; and	
 	•	 	20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser (once the Hurdle is reached and the catch-up is achieved, 20% of all Pre-Incentive Fee Investment Income thereafter is allocated to our investment adviser).	
 
The second part of the incentive fee equals 20% of our “Incentive Fee Capital Gains,” if any, which equals our realized capital gains on a cumulative basis from inception through the end of each calendar year, 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 fees. The second part of the incentive fee is payable, in arrears, at the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date). For a more detailed discussion of the calculation of this fee, see “Investment Advisory and Management Agreement” in the accompanying prospectus.
 
(6)	 	We may borrow funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. The costs associated with our outstanding borrowings are indirectly born by our investors. For purposes of this section, we have computed interest expense using the average balance outstanding on our revolving credit facility balance during the nine months ended September 30, 2010, plus our $35 million dollar Term Loan. We used the LIBOR rate on, September 30, 2010 and the interest rate on our revolving credit facility and our Term Loan of LIBOR plus 3.25%. We have also included the estimated amortization of fees incurred in establishing our revolving credit facility, and our senior secured term loan. We also have approximately $125 million of the Senior Unsecured Notes outstanding. For purposes of this section we have included estimated annual interest expense as well as the amortization of any deferred costs associated with the Senior Unsecured Notes. As of September 30, 2010, we had $300 million outstanding and $55 million remaining available to us under our revolving credit facility and we had $35 million outstanding under our Term Loan. We may also issue preferred stock, subject to our compliance with applicable requirements under the 1940 Act.	
 
(7)	 	“Other expenses” are based on the annualized amounts for the nine months ended September 30, 2010 and include our overhead expenses, including payments under our Administration Agreement based on our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement. See “Administration Agreement” in the accompanying prospectus.	
 
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.  While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Management Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. In addition, the example assumes no sales load and estimated offering expenses of $120,000. Also, while the example assumes reinvestment of all dividends at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date, which may be at, above or below net asset value. See “Dividend Reinvestment Plan” in the accompanying prospectus for additional information regarding our dividend reinvestment plan.
 
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SELECTED FINANCIAL AND OTHER DATA
 
The selected financial and other data below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto. Financial information is presented for the period from March 13, 2007 (inception) through December 31, 2007, for the fiscal years ended December 31, 2008 and 2009, and for the nine months ended September 30, 2010. Financial information for the periods ending 2007, 2008 and 2009 has been derived from our financial statements that were audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus supplement and in the accompanying prospectus for more information.

 	 	Nine months ended
September 30, 2010
(unaudited)	 	 	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	Period from March 13,
2007 (inception) through
December 31,  2007	 	
 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	
Income statement data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	 	$	92,997	  	 	$	109,670	  	 	$	133,959	  	 	$	78,455	  	
Total expenses	 	 	41,169	  	 	 	42,408	  	 	 	46,560	  	 	 	25,461	  	
Net investment income	 	 	51,828	  	 	 	67,262	  	 	 	87,399	  	 	 	52,994	  	
Net realized gain (loss)	 	 	(23,389	) 	 	 	(264,898	) 	 	 	(937	) 	 	 	(10,489	) 	
Net change in unrealized gain (loss)	 	 	71,088	  	 	 	284,572	  	 	 	(492,290	) 	 	 	6,595	  	
Net increase (decrease) in net assets resulting from operations	 	 	99,527	  	 	 	86,936	  	 	 	(405,828	) 	 	 	49,100	  	
 	 	 	 	 	
Other data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average annualized yield on income producing investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
On fair value(1)(4)	 	 	14.1	%	 	 	14.8	% 	 	 	17.1	% 	 	 	12.9	% 	
On cost(2)(4)	 	 	13.5	%	 	 	13.7	% 	 	 	11.9	% 	 	 	12.7	% 	
Number of portfolio companies at period end(4)	 	 	34	  	 	 	36	  	 	 	44	  	 	 	38	  	
 	 	 	 	 	
 	 	As of
September 30, 2010
(unaudited)	 	 	As of
December 31, 2009	 	 	As of
December 31, 2008	 	 	As of
December 31, 2007	 	
 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	
Balance sheet data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment portfolio	 	$	905,979	  	 	$	863,140	  	 	$	768,215	  	 	$	1,178,736	  	
Total cash and cash equivalents	 	 	334,375	  	 	 	5,675	  	 	 	65,841	  	 	 	169,692	  	
Total assets	 	 	1,270,337	  	 	 	885,421	  	 	 	873,026	  	 	 	1,396,545	  	
Credit facility payable	 	 	300,000	  	 	 	88,114	  	 	 	—  	  	 	 	—  	  	
Senior secured term loan	 	 	35,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Senior unsecured notes	 	 	125,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Net assets	 	 	732,597	  	 	 	697,903	  	 	 	852,673	  	 	 	1,258,501	  	
 	 	 	 	 	
Per share data:(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value per share	 	 	22.09	  	 	 	21.24	  	 	 	25.95	  	 	 	38.30	  	
Net investment income	 	 	1.57	  	 	 	2.05	  	 	 	2.66	  	 	 	1.62	  	
Net realized and unrealized gain (loss)	 	 	1.45	  	 	 	0.60	  	 	 	(15.01	)	 	 	(0.12	)	
Dividends and distributions declared	 	 	1.54	  	 	 	(7.36	)	 	 	—  	  	 	 	—  	  	
Offering costs(5)	 	 	0.00	  	 	 	 	 	 	 	 	 	 	 	 	 	
 
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(1)	 	Throughout this prospectus supplement and the accompanying prospectus, the weighted average yield on income producing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities, plus the effective interest yield on preferred shares divided by (b) total income producing investments at fair value. The weighted average yield is computed as of the balance sheet date and excludes assets on non-accrual status or on a cost recovery basis as of such date.	
(2)	 	For this calculation, the weighted average yield on income producing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities, plus the effective interest yield on preferred shares divided by (b) total income producing investments at cost. The weighted average yield is computed as of the balance sheet date and excludes assets on non-accrual status or on a cost recovery basis as of such date.	
(3)	 	The number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Solar Capital Merger. The per share calculations are based on 32,860,454 weighted average shares outstanding as of December 31, 2009, 2008, and 2007 and 33,168,872 shares and 32,918,479 weighted average shares outstanding as of September 30, 2010.	
(4)	 	Unaudited.	
(5)	 	Rounds to less than $0.01.	
 
Selected Quarterly Financial Data (Unaudited)
(dollar amounts in thousands, except per share data)

 	  	 	 	 	2010	 	
 	  	 	 	 	Q3	 	 	Q2	 	  	Q1	 	
Total investment income	  	 	 	 	 	$	29,403	  	 	$	28,284	  	  	$	35,310	  	
Net investment income (loss)	  	 	 	 	 	$	15,551	  	 	$	15,220	  	  	$	21,111	  	
Net realized and unrealized gain (loss)	  	 	 	 	 	$	5,458	  	 	$	1,348	  	  	$	40,893	  	
Net increase (decrease) in net assets resulting from operations	  	 	 	 	 	$	21,009	  	 	$	16,514	  	  	$	62,004	  	
Earnings per share(1)	  	 	 	 	 	$	0.63	  	 	$	0.50	  	  	$	1.90	  	
Net asset value per share at the end of the quarter(2)	  	 	 	 	 	$	22.09	  	 	$	22.07	  	  	$	22.18	  	
 	 	
 	  	2009	 	
 	  	Q4	 	 	Q3	 	 	Q2	 	  	Q1	 	
Total investment income	  	$	28,456	  	 	$	27,785	  	 	$	25,252	  	  	$	28,177	  	
Net investment income (loss)	  	$	17,685	  	 	$	16,383	  	 	$	16,099	  	  	$	17,095	  	
Net realized and unrealized gain (loss)	  	$	22,271	  	 	$	22,181	  	 	$	17,899	  	  	$	(42,677	)	
Net increase (decrease) in net assets resulting from operations	  	$	39,956	  	 	$	38,564	  	 	$	33,998	  	  	$	(25,582	)	
Earnings per share(3)	  	$	1.22	  	 	$	1.17	  	 	$	1.04	  	  	$	(0.78	)	
Net asset value per share at the end of the quarter(4)	  	$	21.24	  	 	$	22.30	  	 	$	23.61	  	  	$	22.57	  	
 	 	
 	  	2008	 	
 	  	Q4	 	 	Q3	 	 	Q2	 	  	Q1	 	
Total investment income	  	$	38,035	  	 	$	32,464	  	 	$	32,367	  	  	$	31,093	  	
Net investment income (loss)	  	$	22,080	  	 	$	21,990	  	 	$	21,305	  	  	$	22,024	  	
Net realized and unrealized gain (loss)	  	$	(339,193	)	 	$	(108,641	)	 	$	17,680	  	  	$	(63,073	)	
Net increase (decrease) in net assets resulting from operations	  	$	(317,113	)	 	$	(86,651	)	 	$	38,985	  	  	$	(41,049	)	
Earnings per share(3)	  	$	(9.65	)	 	$	(2.64	)	 	$	1.19	  	  	$	(1.25	)	
Net asset value per share at the end of the quarter(4)	  	$	25.95	  	 	$	35.60	  	 	$	38.24	  	  	$	37.05	  	
 
(1)	 	Based on 33,165,867, 33,029,516 and 32,553,322 weighted average shares of Solar Capital Ltd. outstanding during each of the third, second and first quarter of 2010, respectively.	
 
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(2)	 	Based on 33,168,872, 33,030,641 and 32,928,257 shares of Solar Capital Ltd. outstanding as of the end of the third, second and first quarter of 2010, respectively.	
(3)	 	Based on 32,860,454 weighted average shares of Solar Capital Ltd. outstanding during each respective quarter.	
(4)	 	Based on 32,860,454 shares of Solar Capital Ltd. outstanding as of the end of the respective quarter.	
 
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RISK FACTORS
 
Before you invest in our common stock, you should be aware of various risks, including those described below and in the accompanying prospectus. You should carefully consider these risk factors, together with all of the other information included in this prospectus supplement and the accompanying prospectus, before you decide whether to make an investment in our common stock. The risks set out below and in the accompanying prospectus are not the only risks we face. If any of the adverse events or conditions described below or in the accompanying prospectus occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value could decline, and you may lose all or part of your investment.
 
We operate in a highly competitive market for investment opportunities.
 
A number of entities compete with us to make the types of investments that we target in leveraged companies. We compete with other BDCs, public and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we do, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
 
We do not seek to compete primarily based on the interest rates we will offer, and we believe that some of our competitors may make loans with interest rates that will be comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss.
 
Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
 
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The unprecedented declines in prices and liquidity in the corporate debt markets from 2008 through mid-2010 have resulted in significant net unrealized depreciation in our portfolio, reducing our net asset value. Depending on market conditions, we could continue to incur substantial losses in future periods, which could further reduce our net asset value and have a material adverse impact on our business, financial condition and results of operations.
 
Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
 
In connection with our initial public offering, each of Messrs. Gross and Spohler agreed not to dispose of or hedge any shares of our common stock or securities convertible or exchangeable for shares of our common stock, without the prior written consent of Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., for a period of 180 days from February 9, 2010, the date of our initial public offering, with respect to 50% of shares of our
 
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common stock they held immediately prior to completion of our initial public offering and for a period of 365 days from February 9, 2010 with respect to the remaining 50% of shares of our common stock they held immediately prior to our initial public offering. The 180-day lock-up period with respect to 50% of the shares of common stock held by Messrs. Gross and Spohler immediately prior to the completion of our initial public offering has expired and, hence, such shares are available for resale without restriction. The shares of our common stock beneficially owned by each of Messrs. Gross and Spohler that are subject to the foregoing 365-day lock-up restrictions, and any additional shares that are attributable to such shares issued to Messrs. Gross and Spohler pursuant to our dividend reinvestment plan, will generally be available for resale without restriction beginning on February 10, 2011, subject to the provisions of Rule 144 promulgated under the Securities Act.
 
In addition, the Magnetar entities have agreed that, until February 10, 2011, they will not, without our prior written consent, dispose of or hedge an aggregate of 3,931,875, after taking into account the shares sold in this offering, shares of our common stock or securities convertible or exchangeable for shares of our common stock. We may in our sole discretion release the Magnetar entities from this lock-up agreement at any time without notice. Of the 1,691,458 shares of our common stock being sold by the Magnetar entities in this offering (without giving effect to the overallotment option), 280,040 of such shares are not currently subject to lock-up restrictions. We have agreed to release the Magnetar entities from the lock-up restrictions on the remaining 1,411,418 shares of our common stock being sold in this offering. To the extent the underwriters exercise the overallotment option, we will release the Magnetar entities from the lock-up restrictions on any such shares to be sold under the overallotment option. The Magnetar entities will generally be able to resell their shares of our common stock without restriction beginning on February 10, 2011, subject to the provisions of Rule 144 promulgated under the Securities Act.
 
Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
 
Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
 
We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss.
 
As of November 2, 2010, we had no borrowings outstanding under our revolving credit facility, $35 million outstanding under our Term Loan and $125 million of Senior Unsecured Notes. If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
 
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price
 
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below the then-current net asset value per share of our common stock if our board of directors determines that such sale is in the best interests of Solar Capital and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution.
 
We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.
 
The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. We may borrow from and issue senior debt securities to banks, insurance companies and other lenders in the future. Lenders of these senior securities, including our revolving credit facility, our Term Loan and the outstanding Senior Unsecured Notes, will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to make dividend payments on our common stock. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Solar Capital Partners, will be payable based on our gross assets, including those assets acquired through the use of leverage, Solar Capital Partners will have a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to Solar Capital Partners.
 
As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. If this ratio declines below 200%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ will depend on our investment adviser’s and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.
 
In addition, our revolving credit facility, our Term Loan and the outstanding Senior Unsecured Notes impose, and any other debt facility into which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
 
As of November 2, 2010, we had no borrowings outstanding under our revolving credit facility, $35 million outstanding under our Term Loan and $125 million of Senior Unsecured Notes.
 
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Illustration.    The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on the portfolio, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

 	  	Assumed total return on our portfolio
(net of expenses)	 	
 	  	 	(10	)% 	  	 	(5	)% 	  	 	0	% 	  	 	5	% 	  	 	10	% 	
Corresponding return to stockholder(1)	  	 	(20.2	)%	  	 	(12.3	)%	  	 	(4.5	)%	  	 	3.4	%	  	 	11.2	%	
 
(1)	 	Assumes $1,270 million in total assets and $460 million in total debt outstanding, which reflects our total assets and total debt outstanding as of September 30, 2010, and a cost of funds of 7.9%. Excludes non-leverage related liabilities.	
 
To the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
 
To the extent we borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.
 
You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income.
 
As of November 2, 2010, we had no borrowings outstanding under our revolving credit facility, $35 million outstanding under our Term Loan and $125 million of Senior Unsecured Notes.
 
Our relationship with Magnetar may create conflicts of interest.
 
Certain funds managed by Magnetar, which we refer to as the Magnetar entities, own as of November 2, 2010, either directly or indirectly, 19.47% of our outstanding shares of common stock and will continue to own, either directly or indirectly, 13.63% of our outstanding shares of common stock after the completion of this offering, assuming the full exercise of the overallotment option. Magnetar also provides certain services to Solar Capital Partners and Solar Capital Management, and is reimbursed by Solar Capital Partners and Solar Capital Management for the expenses it incurs in connection with providing such services.
 
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FORWARD-LOOKING STATEMENTS AND PROJECTIONS
 
This prospectus supplement contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Solar Capital, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
 
 	•	 	an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;	
 
 	•	 	a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;	
 
 	•	 	interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;	
 
 	•	 	currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and	
 
 	•	 	the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus supplement, the accompanying prospectus and in our filings with the SEC.	
 
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this prospectus supplement and the accompanying prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus supplement. The forward-looking statements and projections contained in this prospectus supplement are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act.
 
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USE OF PROCEEDS
 
We will not receive any proceeds from the sale of the shares of common stock covered by this prospectus supplement.
 
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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
 
Our common stock is traded on the NASDAQ Global Select Market under the symbol “SLRC”. The following table sets forth, for each fiscal quarter since our initial public offering on February 9, 2010, the net asset value (“NAV”) per share of our common stock, the high and low sales prices for our common stock, such sales prices as a percentage of NAV per share and quarterly distributions per share.

 	  	NAV(1)	 	 	Price Range	 	  	High Sales
Price as a
Percentage
of NAV(2)	 	 	Low Sales
Price as a
Percentage
of NAV(2)	 	 	Cash
Distributions
Per Share(3)	 	 	

 	  	 	 	 	High	 	  	Low	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fiscal 2010	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fourth Quarter (through November 3, 2010)	  	 	  	* 	 	$	23.50	  	  	$	21.32	  	  	 	  	* 	 	 	  	* 	 	$	0.60	(4) 	 	 	 	 	 	 	 	 	 	
Third Quarter	  	$	22.09	  	 	 	21.80	  	  	 	18.75	  	  	 	98.7	%	 	 	81.4	%	 	 	0.60	  	 	 	 	 	 	 	 	 	 	
Second Quarter	  	 	22.07	  	 	 	24.14	  	  	 	18.77	  	  	 	109.4	%	 	 	85.1	%	 	 	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter (from February 9, 2010 through March 31, 2010)	  	 	22.18	  	 	 	22.22	  	  	 	17.29	  	  	 	100.2	%	 	 	78.0	%	 	 	0.34	  	 	 	 	 	 	 	 	 	 	
 
(1)	 	Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period.	
(2)	 	Calculated as the respective high or low sales price divided by NAV.	
(3)	 	Represents the cash distribution declared in the specified quarter.	
(4)	 	On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010.	
*	 	Not determinable at the time of filing.	
 
On November 4, 2010, the last reported sales price of our common stock was $23.21 per share. As of November 2, 2010, we had 22 shareholders of record.
 
Shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net asset value or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. Since our initial public offering on February 9, 2010, our shares of common stock have traded at both a discount and a premium to the net assets attributable to those shares. As of November 3, 2010, our shares of common stock traded at a premium equal to approximately 5% of the net assets attributable to those shares based upon our net asset value as of September 30, 2010. It is not possible to predict whether the shares offered hereby will trade at, above, or below net asset value.
 
We intend to distribute quarterly dividends to our stockholders. Our quarterly dividends, if any, will be determined by our board of directors.
 
On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010. For the three and nine months ended September 30, 2010, declared dividends to stockholders totaled $0.60 per share or $19.9 million and $1.54 per share or $50.9 million, respectively. The $0.34 dividend declared during the first quarter of 2010 was a $0.60 dividend prorated for the number of days that remained in the quarter after our initial public offering. Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Our quarterly dividends, if any, will be determined by our board of directors.
 
We intend to elect to be taxed as a RIC under Subchapter M of the Code. To obtain and maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition,
 
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although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
 
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
 
We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in current and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our RIC status. We cannot assure stockholders that they will receive any dividends and distributions or dividends and distributions at a particular level.
 
All dividends declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive dividends in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This section only contains information about our results of operation for the three- and nine-month periods ended September 30, 2010 and our financial condition as of September 30, 2010. The information contained in this section supplements, and should be read in conjunction with, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in the accompanying prospectus. The information contained in this section and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in the accompanying prospectus should be read in conjunction with “Selected Financial and Other Data” and our financial statements and notes thereto appearing elsewhere in this prospectus.
 
Overview
 
Solar Capital, a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for tax purposes the Company intends to elect to be treated as a RIC under Subchapter M of the Code.
 
On February 9, 2010, Solar Capital Ltd. priced its initial public offering (the “IPO”) selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Net of underwriting fees the Company raised a total of $97.7 million and its shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, Solar Capital Ltd. sold 0.60 million shares at $18.50 in a concurrent private placement to management.
 
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units in March 2007. Solar Capital Ltd. had no assets or operations prior to completion of the Solar Capital Merger and as a result, the historical books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners LLC. Solar Capital Management LLC provides the administrative services necessary for us to operate.
 
In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
As of September 30, 2010, our long term investments totaled $906.0 million and our net asset value was $732.6 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represent 92.9% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 14.1%.

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Recent Developments
 
Dividend
 
On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010. We expect the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the calendar year.
 
Critical Accounting Policies
 
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.
 
Valuation of Portfolio Investments
 
We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail below:
 
Securities for which market quotations are readily available on an exchange are valued at the closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or board of directors, does not represent fair value, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the board of directors will conduct independent appraisals and review management’s preliminary valuations and make their own assessment for all material assets; (iv) the board of directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.
 
The recommendation of fair value will generally be based on the following factors, as relevant:
 
 	•	 	the nature and realizable value of any collateral;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business; and	
 
 	•	 	comparisons to publicly traded securities.	
 
Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:
 
 	•	 	private placements and restricted securities that do not have an active trading market;	
 
 	•	 	securities whose trading has been suspended or for which market quotes are no longer available;	
 
 	•	 	debt securities that have recently gone into default and for which there is no current market;	
 
 	•	 	securities whose prices are stale;	
 
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 	•	 	securities affected by significant events; and	
 
 	•	 	securities that the investment adviser believes were priced incorrectly.	
 
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
 
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities and exchange-traded derivatives).
 
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
a) Quoted prices for similar assets or liabilities in active markets;
 
b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);
 
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and
 
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
 
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
 
At September 30, 2010 the fair value of investments classified as Level 3 was $745.5 million or 58.7% of total assets. There were no investments transferred into Level 3 during the first or second quarter or third quarter of 2010. During the second quarter of 2010, two investments with a then current total market value of $98.0 million were transferred from Level 3 to Level 2 due to the reliability of broker quotes for these assets resulting from increased market liquidity. During the third quarter of 2010, one investment with a current market value of $0.3 million was transferred from level 2 to level 1, when its listed common stock became freely tradable as restrictions expired, and one investment with a current market value of $12.3 million was transferred from level 3 to level 2, as it completed an initial public offering and its shares became listed on an exchange but were still restricted from sale.
 
Revenue Recognition
 
Our revenue recognition policies are as follows:
 
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
 
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. We have loans in our portfolio that contain a PIK
 
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provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates. For us to maintain our status as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends, even though we have not collected any cash with respect to PIK securities.
 
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment about ultimate collectability of principal. 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.
 
Portfolio Investments
 
At September 30, 2010, we had investments in securities of 34 portfolio companies with a total fair value of approximately $906.0 million compared to investments in securities of 36 portfolio companies with a total fair value of approximately $863.1 million at December 31, 2009. At September 30, 2010, we had investments in debt and preferred securities of 28 portfolio companies, totaling approximately $847.1 million, and equity investments in 9 portfolio companies, totaling approximately $58.9 million. At December 31, 2009, we had investments in debt and preferred securities of 31 portfolio companies, totaling approximately $805.5 million, and equity investments in 10 portfolio companies, totaling approximately $57.6 million.
 
During the three months ended September 30, 2010, we originated approximately $72.3 million of investments in one new and three existing portfolio companies. We also received principal repayments of approximately $6.6 million and sold securities in one portfolio company for approximately $2.9 million. During the three months ended September 30, 2009, we invested approximately $4.9 million in one existing portfolio company, had approximately $4.2 million in principal repayments in five portfolio companies, and sold securities in six portfolio companies for approximately $39.9 million.
 
During the nine months ended September 30, 2010, we originated approximately $178.9 million of investments in five new and one existing portfolio company. We also received principal repayments of approximately $187.4 million and sold securities in four portfolio companies for approximately $23.5 million. During the nine months ended September 30, 2009, we invested approximately $79.2 million in four existing and two new portfolio companies, had approximately $32.2 million in principal repayments in seven portfolio companies, and sold securities in eight portfolio companies for approximately $57.2 million.
 
For the three months ended September 30, 2010 we had net unrealized and realized gains on 15 portfolio company investments totaling approximately $21.0 million, which was offset by net unrealized and realized losses on 15 portfolio company investments totaling approximately $6.1 million. For the three months ended September 30, 2009 we had net unrealized and realized gains on 31 portfolio company investments totaling approximately $40.3 million, which was offset by net unrealized and realized losses on 10 portfolio company investments totaling approximately $15.7 million.
 
For the nine months ended September 30, 2010 we had net unrealized and realized gains on 28 portfolio company investments totaling approximately $58.7 million, which was offset by net unrealized and realized losses on 11 portfolio company investments totaling approximately $10.8 million. For the nine months ended September 30, 2009 we had net unrealized and realized gains on 28 portfolio company investments totaling approximately $122.9 million, which was offset by net unrealized and realized losses on 17 portfolio company investments totaling approximately $112.2 million.
 
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The following table shows the fair value of our portfolio of investments by asset class as of September 30, 2010 and December 31, 2009:

 	  	September 30, 2010
(unaudited)	 	  	December 31, 2009	 	
(in thousands)	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	189,852	  	  	$	185,689	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt/Corporate Notes	  	 	722,705	  	  	 	661,289	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	42	  	  	 	39	  	  	 	40	  	
Common Equity/Partnership Interests/Warrants	  	 	118,562	  	  	 	58,959	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,031,158	  	  	$	905,979	  	  	$	1,063,988	  	  	$	863,140	  	

As of September 30, 2010, the weighted average yield on income producing investments in our portfolio was approximately 14.1%, compared to 14.8% at December 31, 2009. The decrease in yield during the first nine months of 2010 was primarily due to an increase in fair value of portfolio assets and the repayment of certain assets since December 2009.
 
As of September 30, 2010, there were two investments on non-accrual status with a market value of $5.1 million compared to three assets with a market value of zero at December 31, 2009. At the end of 2009, there were three assets that were performing but interest payments were being applied as principal payments (“cost-recovery assets”), rather than being included in interest income because management believed, at that time, that it was unlikely there would be a full repayment of principal. As of September 30, 2010, there were no performing cost-recovery assets.
 
Results of Operations for the Quarter Ended September 30, 2010 compared to the Quarter Ended September 30, 2009
 
Revenue

 	  	Three Months Ended
September 30,
(unaudited)	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	29,403	  	  	$	27,785	  	  	 	6	%	
 
The increase in investment income for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 was primarily due to higher average interest rates on higher income producing invested balances during the third quarter of 2010.
 
Expenses

 	  	Three Months Ended
September 30,
(unaudited)	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	4,607	  	  	$	4,273	  	  	 	8	% 	
Performance-based incentive fee	  	 	3,887	  	  	 	4,096	  	  	 	(5	%) 	
Interest and other credit facility expenses	  	 	3,943	  	  	 	536	  	  	 	636	% 	
Administrative service fee	  	 	387	  	  	 	479	  	  	 	(19	%) 	
Other general and administrative expenses	  	 	972	  	  	 	1,947	  	  	 	(50	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	13,796	  	  	$	11,331	  	  	 	22	% 	

 
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Combined performance-based incentive fee, which is calculated as a percentage of net investment income above a certain hurdle rate, and investment advisory and management fees, which are calculated based on average gross assets, were comparable for the three months ended September 30, 2010 and 2009.
 
Interest and other credit facility expenses for the three months ended September 30, 2010 were higher than the comparable period in 2009 primarily due to higher average debt balances outstanding including the newly issued Term Loan, higher loan fee amortization expense, and higher unused facility fees.
 
Administrative service fees and other general and administrative fees were lower during the third quarter of 2010 because the third quarter of 2009 included costs related to pre-IPO private fund administration and reporting.
 
Net Realized and Unrealized Gains and Losses

 	  	Three Months Ended
September 30,
(unaudited)	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized (loss) on investments	  	$	(24	) 	 	$	(151,269	) 	
Net realized gain (loss) on forward contracts	  	 	(8,832	) 	 	 	(1,844	) 	
Net realized (loss) on foreign currency exchange	  	 	—  	  	 	 	(284	) 	
Net unrealized gain (loss) on investments	  	 	14,942	  	 	 	175,839	  	
Net unrealized gain (loss) on forward contracts	  	 	(669	) 	 	 	1,726	  	
Net unrealized gain (loss) on foreign currency exchange	  	 	41	  	 	 	(1,987	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain	  	$	5,458	  	 	$	22,181	  	

Total realized and unrealized gain was $5.5 million for the third quarter of 2010 compared to $22.2 million for the same period in 2009. The combined net gain during the third quarter of 2010 was primarily due to continued credit improvement in the portfolio. The net gain during the third quarter of 2009 was primarily due to certain asset valuations that were beginning to recover from technical recession lows. We analyze this section on a combined basis because offsets may exist in the individual line items due to foreign exchange fluctuations and movements from unrealized to realized.
 
Our investments denominated in Euro, British Pounds and Australian dollars are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in foreign currency exchange rates we enter into foreign exchange forward contracts or borrow in foreign currencies under our multi-currency revolving credit facility. For the third quarter of 2010 the total net realized and unrealized gain on forward contracts and foreign currency exchange was a loss of $9.5 million compared to a loss of $2.4 million for the same line items in the third quarter of 2009. This was due to the weakening of the U.S. dollar during the third quarter 2010.
 
Results of Operations for the Nine Months Ended September 30, 2010 compared to the Nine Months Ended September 30, 2009
 
Revenue

 	  	Nine Months Ended
September 30,
(unaudited)	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	92,997	  	  	$	81,214	  	  	 	15	%	

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The increase in investment income for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 was primarily due to prepayment premiums and the accelerated amortization of fees resulting from debt assets repaying during the first half of 2010. This was offset by lower average LIBOR rates during the nine months ended September 30, 2010 compared to the same period in 2009.
 
Expenses

 	  	Nine Months Ended
September 30,
(unaudited)	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	13,404	  	  	$	12,348	  	  	 	9	% 	
Performance-based incentive fee	  	 	12,958	  	  	 	12,395	  	  	 	5	% 	
Interest and other credit facility expenses	  	 	10,540	  	  	 	1,565	  	  	 	573	% 	
Administrative service fee	  	 	1,098	  	  	 	1,512	  	  	 	(27	%) 	
Other general and administrative expenses	  	 	2,978	  	  	 	3,590	  	  	 	(17	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	40,978	  	  	$	31,410	  	  	 	30	% 	

The performance-based incentive fee was higher for the nine months ended September 30, 2010 primarily due to higher investment income resulting from prepayment premiums received and accelerated amortization of fees as a result of debt assets repaying before maturity. Investment advisory and management fees, which are calculated based on average gross assets, were higher during the nine months ended September 30, 2010 compared to the same period in 2009 due to higher average gross assets during the nine months ended September 30, 2010 compared to the same period in 2009.
 
Interest and other credit facility expenses were higher for the nine months ended September 30, 2010 primarily due to higher average debt balances outstanding during the period, including the newly issued Senior Unsecured Notes and Term Loan, higher loan fee amortization expense, and higher unused facility fees.
 
Administrative service fees and other general and administrative expenses were lower during the first nine months of 2010 because the first nine months of 2009 included costs related to pre-IPO private fund administration and reporting.
 
Net Realized and Unrealized Gains and Losses

 	  	Nine Months Ended
September 30,
(unaudited)	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized (loss) on investments	  	$	(27,836	) 	 	$	(227,191	) 	
Net realized gain (loss) on forward contracts	  	 	916	  	 	 	(9,674	) 	
Net realized gain (loss) on foreign currency exchange	  	 	3,531	  	 	 	(751	) 	
Net unrealized gain on investments	  	 	75,750	  	 	 	237,940	  	
Net unrealized (loss) on forward contracts	  	 	(3,995	) 	 	 	(963	) 	
Net unrealized gain (loss) on foreign currency exchange	  	 	(667	) 	 	 	(1,958	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain (loss)	  	$	47,699	  	 	$	(2,597	) 	

The combination of the net realized and unrealized gains or losses resulted in a net gain of $47.7 million for the nine months ended September 30, 2010 compared to a net loss of $2.6 million for the same period in 2009. The net gain for the nine months ended September 30, 2010 was primarily due to increases in the fair value of our portfolio assets during the period as well as realizations in excess of prior valuations. The net increase in the fair value of our portfolio assets was primarily due to continued credit improvement in the portfolio, the tightening of credit spreads in the high yield market and portfolio realizations. The net loss during the nine
 
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months ended September 30, 2009 was primarily due to overall weakening in the economy during the period resulting in lower portfolio asset values. We analyze this section on a combined basis because offsets may exist in the individual line items due to foreign exchange fluctuations and movements from unrealized to realized.
 
Our investments denominated in Euro, British Pounds and Australian dollars are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in foreign currency exchange rates we enter into foreign exchange forward contracts or borrow in foreign currencies under our multi-currency revolving credit facility. For the nine months ended September 30, 2010 the total net realized and unrealized gain on forward contracts and foreign currency exchange was a loss of $0.2 million compared to a loss of $13.3 million for the same line items for the nine months ended September 30, 2009. This is due to a lower relative weakening of the U.S. dollar during the nine months ended September 30, 2010 compared to the same period in 2009.
 
Liquidity and Capital Resources
 
The Company’s liquidity is generated and generally available through its multi-currency $355 million revolving credit facility maturing in February 2013, its $35 million Term Loan, from cash flows from operations, investment sales of liquid assets, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and we expect through periodic follow-on equity offerings. On February 9, 2010, Solar Capital Ltd. priced its initial public offering selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Net of underwriting fees the Company raised a total of $97.7 million and its shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, Solar Capital Ltd. sold 0.60 million shares at $18.50 in a concurrent private placement to management. The primary use of our liquidity is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
 
At September 30, 2010 and December 31, 2009, we had cash and cash equivalents of approximately $344.4 million and $5.7 million, respectively. Cash provided by operating activities for the nine months ended September 30, 2010 and 2009 was approximately $73.4 million and $11.8 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
 
Credit Facility, Term Loan and Senior Unsecured Notes
 
Credit Facility. On February 12, 2010, Solar Capital Ltd. amended and restated Solar Capital LLC’s $250 million Senior Secured Revolving Credit Facility (the “Credit Facility”), extending the maturity to February 2013 and increasing the total commitments under the facility to $270 million. Per the amended agreement, borrowings bear interest at a rate per annum equal to the base rate plus 3.25% or the alternate base rate plus 2.25%. The commitment fee on unused balances is 0.375%. The amendment also reduced the advance rates permitted on certain asset types and placed limitations on the secured borrowing amount. On May 26, 2010, the Credit Facility was amended to remove the limitations on the secured borrowing and increase the advance rates permitted on certain asset types. Total commitments under the Credit Facility have been increased to $355 million as a result of the addition of two new lenders on May 12, 2010 and June 23, 2010. The facility size may be increased up to $600 million with additional new lenders or the increase in commitments of current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum debt to total assets ratio. As of November 2, 2010, no borrowings were outstanding under the Credit Facility.
 
Term Loan. On September 2, 2010, Solar Capital Ltd. entered into a fully funded $35 million Term Loan, which matures in September 2013, bears interest at a rate per annum equal to the base rate plus 3.25%, and has terms substantially similar to our revolving credit facility.
 
Senior Unsecured Notes. In February 2010, as a component of the Solar Capital Merger, Solar Capital Ltd. issued $125 million of Senior Unsecured Notes. The Senior Unsecured Notes mature in February 2014 and have a coupon of 8.75%, payable quarterly in cash beginning May 1, 2010. The Senior Unsecured Notes are
 
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redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, we must use the net cash proceeds from the issuance of any other senior notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject us to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of at least 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) we will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes have been issued contains customary events of default.
 
Certain covenants may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
 
Contractual Obligations
 
A summary of our significant contractual payment obligations as of September 30, 2010:

 	  	Payments Due by Period
(unaudited)	 	
(in millions)	  	Total	 	  	Less than
1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5 Years	 	
Senior secured revolving credit facility(1)	  	$	300.0	  	  	$	—  	  	  	$	300.0	  	  	$	—  	  	  	$	—  	  	
Senior secured term loan	  	$	35.0	  	  	$	—  	  	  	$	35.0	  	  	$	—  	  	  	$	—  	  	
Senior Unsecured Notes	  	$	125.0	  	  	$	—  	  	  	$	—  	  	  	$	125.0	  	  	$	—  	  	
 
(1)	 	As of September 30, 2010, we had $55.0 million of unused borrowing capacity under our credit facility. As of November 2, 2010, no borrowings were outstanding under the Credit Facility.	
 
We have certain commitments pursuant to our Investment Advisory and Management Agreement entered into with Solar Capital Partners. We have agreed to pay a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. Payments under the Investment Advisory and Management Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. We have also entered into a contract with Solar Capital Management to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Solar Capital Management’s overhead in performing its obligation under the agreement, including rent, fees, and other expenses inclusive of our allocable portion of the compensation of our chief financial officer and any administrative staff.
 
Off-Balance Sheet Arrangements
 
In the normal course of our business, we trade various financial instruments and may enter into various investment activities with off-balance sheet risk, which include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.
 
Borrowings
 
We had borrowings of $460.0 million and $88.1 million outstanding as of September 30, 2010 and December 31, 2009, respectively. As of November 2, 2010, we had borrowings of $160.0 million.
 
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Distributions and Dividends
 
On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010. For the three and nine months ended September 30, 2010, declared dividends to stockholders totaled $0.60 per share or $19.9 million and $1.54 per share or $50.9 million, respectively. The $0.34 dividend declared during the first quarter of 2010 was a $0.60 dividend prorated for the number of days that remained in the quarter after our initial public offering. Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Our quarterly dividends, if any, will be determined by our board of directors.
 
We intend to elect to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute net realized capital gains (net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
 
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
 
Related Parties
 
We have entered into a number of business relationships with affiliated or related parties, including the following:
 
 	•	 	We have entered into an Investment Advisory and Management Agreement with Solar Capital Partners. Mr. Gross, our chairman and chief executive officer, is the managing member and a senior investment professional of, and has financial and controlling interests in, Solar Capital Partners. In addition, Mr. Spohler, our chief operating officer is a partner and a senior investment professional of, and has financial interests in, Solar Capital Partners.	
 
 	•	 	Solar Capital Management provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and any administrative support staff. Solar Capital Partners, our investment adviser, is the sole member of and controls Solar Capital Management.	
 
 	•	 	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
 
 	•	 	Certain entities affiliated with Magnetar Financial LLC own as of November 2, 2010, approximately 19.47% of our outstanding shares of common stock, and will continue to own approximately 13.63% of our outstanding shares of common stock after the completion of this offering, assuming the full exercise of the overallotment option.	
 
Solar Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. Solar Capital Partners and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures. In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
 
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SENIOR SECURITIES
 
Information about our senior securities is shown in the following tables as of September 30, 2010, unaudited, and December 31, 2009, 2008 and 2007. The report of our independent registered public accounting firm on the senior securities table as of December 31, 2009 is attached as an exhibit to the registration statement of which this prospectus is a part.

Class and Year	  	Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)	 	  	Asset Coverage
Ratio Per
Unit(2)	 	  	Involuntary
Liquidation
Preference
Per
Unit(3)	 	  	Average Market
Value Per
Unit(4)	 	
Senior Secured Revolving Credit Facility	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2010 (as of September 30, 2010, unaudited)	  	$	300,000	  	  	$	2,593	  	  	 	—  	  	  	 	N/A	  	
2009	  	$	88,114	  	  	$	8,920	  	  	 	—  	  	  	 	N/A	  	
2008	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
2007	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
 	 	 	 	 	
Senior Secured Term Loan	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2010 (as of September 30, 2010, unaudited)	  	$	35,000	  	  	$	2,593	  	  	 	—  	  	  	 	N/A	  	
 	 	 	 	 	
Senior Unsecured Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2010 (as of September 30, 2010, unaudited)	  	$	125,000	  	  	$	2,593	  	  	 	—  	  	  	 	N/A	  	
 
(1)	 	Total amount of each class of senior securities outstanding at the end of the period presented.	
(2)	 	Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.	
(3)	 	The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the Securities and Exchange Commission expressly does not require this information to be disclosed for certain types of senior securities.	
(4)	 	Not applicable because senior securities are not registered for public trading.	
 
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ADDITIONAL MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
 
As described more fully in the accompanying prospectus, we intend to elect to be taxed as a RIC under Subchapter M of the Code and the applicable Treasury Regulations, which set forth the requirements for qualification as a RIC. The following discussion, which supplements and updates the discussion under the heading “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus, is a summary of certain additional material U.S. federal income tax considerations.  You are urged to consult your own tax advisor regarding the specific tax consequences of the purchase, ownership and sale of our common stock.
 
Sunset of Reduced Tax Rate Provisions
 
Several of the tax considerations described under the heading “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus are subject to sunset provisions. These sunset provisions generally provide that for taxable years beginning after December 31, 2010, certain provisions in the Code that are currently applicable will revert back to earlier versions of such provisions. As a result, the federal income tax rates applicable to ordinary income, long-term capital gain and qualified dividend income for taxpayers taxed at individual rates will increase beginning January 1, 2011, absent congressional action. Consequently, prospective investors should consult their own tax advisors regarding the effect of the sunset provisions on an investment in our common stock.
 
Recent Tax Legislation
 
Recently enacted legislation that becomes effective after December 31, 2012, generally imposes a 30% withholding tax on payments of certain types of income to foreign financial institutions that fail to enter into an agreement with the United States Treasury to report certain required information with respect to accounts held by United States persons (or held by foreign entities that have United States persons as substantial owners). The types of income subject to the tax include U.S. source interest and dividends and the gross proceeds from the sale of any property that could produce U.S.-source interest or dividends. The information required to be reported includes the identity and taxpayer identification number of each account holder that is a U.S. person and transaction activity within the holder’s account. In addition, subject to certain exceptions, this legislation also imposes a 30% withholding on payments to foreign entities that are not financial institutions unless the foreign entity certifies that it does not have a greater than 10% U.S. owner or provides the withholding agent with identifying information on each greater than 10% U.S. owner. When these provisions become effective, depending on the status of a non-U.S. stockholder and the status of the intermediaries through which they hold their common stock, non-U.S. stockholders could be subject to this 30% withholding tax with respect to distributions on their common stock and proceeds from the sale of their common stock. Under certain circumstances, a non-U.S. stockholder might be eligible for refunds or credits of such taxes.
 
For taxable years beginning after December 31, 2012, individuals with income in excess of $200,000 ($250,000 in the case of married individuals filing jointly or $125,000 in the case of married individuals filing separately) and certain estates and trusts are subject to an additional 3.8% tax on their “net investment income,” which generally includes net income from interest, dividends, annuities, royalties, and rents, and net capital gains (other than certain amounts earned from trades or businesses).
 
Prospective investors are encouraged to consult with their tax advisors regarding the possible implications of the recent legislation described herein on an investment in our common stock.
 
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SELLING STOCKHOLDERS
 
The following table sets forth:
 
 	•	 	The name of each selling stockholder;	
 
 	•	 	The number of shares of common stock and the percentage of the total shares of common stock outstanding that each selling stockholder beneficially owned as of November 2, 2010;	
 
 	•	 	The number of shares of common stock beneficially owned by each selling stockholder that are being offered under this prospectus supplement; and	
 
 	•	 	The number of shares of common stock and the percentage of total shares of common stock outstanding to be beneficially owned by each selling stockholder following the offering contemplated by this prospectus supplement.	
 
The information regarding the identity of the selling stockholders and their affiliations, including their beneficial ownership of shares of our common stock, is based solely on information provided by or on behalf of the selling stockholders.

 	 	Shares Beneficially  Owned
Prior to Offering(1)	 	 	Number  of
Shares
Being Offered	 	 	Number
of Shares
Subject
to Over-
Allotment
Option	 	 	Shares Beneficially  Owned
After Offering(2)	 	 	
Name	 	Number	 	 	Percent	 	 	 	 	 	 	 	 	Number	 	 	Percent	 	 	Number
with Over-
Allotment
Option	 	 	Percent
with Over-
Allotment
Option	 	 	 	 	 	 	 	
MAGNETAR CAPITAL FUND LP(3)	 	 	1,361,451	  	 	 	4.09	% 	 	 	258,034	  	 	 	38,705	  	 	 	1,103,417	  	 	 	3.32	% 	 	 	1,064,712	  	 	 	3.20	% 	 	 	 	 	 	 	
MAGNETAR CAPITAL MASTER FUND, LTD(3)	 	 	5,117,202	  	 	 	15.38	% 	 	 	1,433,424	  	 	 	215,014	  	 	 	3,683,778	  	 	 	11.07	% 	 	 	3,468,764	  	 	 	10.43	% 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	6,478,653	  	 	 	19.47	% 	 	 	1,691,458	  	 	 	253,719	  	 	 	4,787,195	  	 	 	14.39	% 	 	 	4,533,476	  	 	 	13.63	% 	 	 	 	 	 	 	
 
(1)	 	Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act.	
(2)	 	Applicable percentage of ownership is based on 33,270,844 shares of our common stock outstanding on November 2, 2010.	
(3)	 	This entity is controlled and/or managed by Magnetar Financial LLC or its affiliates.	
 
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UNDERWRITING
 
Citigroup Global Markets Inc., Morgan Stanley & Co. Incorporated and Wells Fargo Securities, LLC are acting as joint bookrunning managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus supplement, each underwriter named below has agreed to purchase, and the selling stockholders have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter’s name.

Underwriter	  	Number
of Shares	 	
Citigroup Global Markets Inc.	  	 	372,123	  	
Morgan Stanley & Co. Incorporated	  	 	372,123	  	
Wells Fargo Securities, LLC	  	 	242,439	  	
Deutsche Bank Securities Inc.	  	 	242,439	  	
SunTrust Robinson Humphrey, Inc.	  	 	242,439	  	
BMO Capital Markets Corp.	  	 	101,489	  	
BB&T Capital Markets, a division of Scott & Stringfellow, LLC	  	 	67,660	  	
RBC Capital Markets, LLC	  	 	50,746	  	
 	  	 	 	 	
Total	  	 	1,691,458	  	

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.
 
The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus supplement and some of the shares to dealers at the public offering price less a concession not to exceed $0.599 per share. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms. The representatives have advised us that the underwriters do not intend to confirm sales to discretionary accounts.
 
The selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus supplement, to purchase from the selling stockholders up to 253,719 additional shares of common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.
 
The Magnetar entities have agreed that, until February 10, 2011, they will not, without our prior written consent, dispose of or hedge an aggregate of 3,931,875 shares of our common stock or securities convertible or exchangeable for shares of our common stock. We may in our sole discretion release the Magnetar entities from this lock-up agreement at any time without notice. Of the 1,691,458 shares of our common stock being sold by the Magnetar entities in this offering (without giving effect to the overallotment option), 280,040 of such shares are not currently subject to lock-up restrictions. We have agreed to release the Magnetar entities from the lock-up restrictions on the remaining 1,411,418 shares of our common stock being sold in this offering. To the extent the underwriters exercise the overallotment option, we will release the Magnetar entities from the lock-up restrictions on any such shares to be sold under the overallotment option.
 
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SLRC”.
 
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The following table shows the underwriting discounts and commissions that the selling stockholders are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase from the selling stockholders additional shares of common stock. This offering will conform with the requirements set forth in Financial Industry Regulatory Authority Rule 2310. In compliance with such requirements, the underwriting discounts and commissions in connection with the sale of securities will not exceed 8% of gross proceeds of this offering.

 	  	Paid by the Selling Stockholders	 	
  	  	No Exercise	 	  	Full Exercise	 	
Per share	  	$	0.999	  	  	$	0.999	  	
Total	  	$	1,689,767	  	  	$	1,943,232	  	
 
In connection with the offering, one or more of the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of common stock in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. “Covered” short sales are sales of shares made in an amount up to the number of shares represented by the underwriters’ over-allotment option. In determining the source of shares to close out the covered syndicate short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. Transactions to close out the covered syndicate short involve either purchases of the common stock in the open market after the distribution has been completed or the exercise of the over-allotment option. The underwriters may also make “naked” short sales of shares in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of bids for or purchases of shares in the open market while the offering is in progress.
 
The underwriters may also impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the representatives repurchase shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases.
 
Any of these activities may have the effect of preventing or retarding a decline in the market price of the common stock. They may also cause the price of the common stock to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the NASDAQ Global Select Market or in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.
 
We estimate that our portion of the total expenses of this offering will be $120,000.
 
The underwriters have performed investment banking and advisory services for us and our affiliates from time to time for which they have received customary fees and expenses. The underwriters may, from time to time, engage in transactions with and perform services for us and our affiliates in the ordinary course of their business. Each of the underwriters acted as underwriters in our initial public offering.
 
Citibank, N.A., an affiliate of Citigroup Global Markets Inc., is a lender and administrative agent under our Credit Facility. In addition, Citigroup Global Markets Inc. acted as the sole lead bookrunner and the sole lead arranger for the amendment of our Credit Facility in February 2010. Citigroup Global Markets Inc. provided structuring services related to the distribution of our Senior Unsecured Notes to certain equity holders in connection with the Solar Capital Merger. Affiliates of Morgan Stanley & Co. Incorporated, SunTrust Robinson Humphrey, Inc., Deutsche Bank Securities Inc. and BMO Capital Markets Corp. are lenders under our Credit Facility.
 
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This prospectus supplement and the accompanying prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. Other than the prospectus supplement and the accompanying prospectus in electronic format, the information on any such underwriter’s website is not part of this prospectus supplement and the accompanying prospectus. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.
 
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.
 
In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of ours.
 
The principal business address of Citigroup Global Markets Inc. is 388 Greenwich Street, New York, NY 10013. The principal business address of Morgan Stanley & Co. Incorporated is 1585 Broadway, New York, NY 10036. The principal business address of Wells Fargo Securities, LLC is 375 Park Avenue, New York, NY 10152.
 
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LEGAL MATTERS
 
Certain legal matters in connection with the securities offered hereby will be passed upon for us by Sutherland Asbill & Brennan LLP, Washington, DC, and Venable LLP, Baltimore, Maryland. Certain legal matters in connection with the securities offered hereby will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York.
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
KPMG LLP, our independent registered public accounting firm located at 345 Park Avenue, New York, New York 10154, has audited our financial statements as of December 31, 2009 and 2008 and for the years ended December 31, 2009 and 2008 and the period March 13, 2007 (inception) through December 31, 2007, as set forth in their reports. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on such reports, given on their authority as experts in accounting and auditing.
 
With respect to the unaudited interim financial information for the periods ended March 31, 2010 and 2009 and September 30, 2010 and 2009, included herein, the independent registered public accounting firm has reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate report included in the Company’s quarterly reports on Form 10-Q for the quarters ended March 31, 2010 and September 30, 2010, and included herein, states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of Section 11 of the Securities Act for their report on the unaudited interim financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act.
 
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AVAILABLE INFORMATION
 
We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to our shares of common stock offered by this prospectus supplement. The registration statement contains additional information about us and our shares of common stock being offered by this prospectus supplement.
 
We are required to file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. You may inspect and copy these reports, proxy statements and other information, as well as the registration statement and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC’s website at  http://www.sec.gov.  Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC’s Public Reference Section, Washington, D.C. 20549. This information will also be available free of charge by contacting us at Solar Capital Ltd., 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670, or on our website at  http://www.solarcapltd.com .
 
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

  	  	Page	
Report of Independent Registered Public Accounting Firm	  	F-2	
Consolidated Statements of Assets and Liabilities as of September 30, 2010 (unaudited) and
December 31, 2009	  	F-3	
Consolidated Statements of Operations for the three months and nine months ended September 30, 2010 (unaudited) and 2009 (unaudited)	  	F-4	
Consolidated Statements of Changes in Net Assets for nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009	  	F-5	
Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 (unaudited) and 2009 (unaudited)	  	F-6	
Consolidated Schedules of Investments as of September 30, 2010 (unaudited) and December 31, 2009	  	F-7	
Notes to Consolidated Financial Statements	  	F-13	
Schedules of Investments in and Advances to Affiliates (unaudited)	  	F-28	
 
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Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Shareholders
Solar Capital Ltd.:
 
We have reviewed the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital Ltd. (the Company) as of September 30, 2010, and the related consolidated statements of operations for the three and nine-month periods ended September 30, 2010 and 2009, changes in net assets for the nine-month period ended September 30, 2010 and cash flows for the nine-month periods ended September 30, 2010 and 2009, and the financial highlights (included in Note 11) for the nine-month period ended September 30, 2010. These consolidated financial statements and financial highlights are the responsibility of the Company’s management.
 
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial accounting and reporting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with U.S. generally accepted accounting principles.
 
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital LLC as of December 31, 2009, and the related consolidated statement of changes in net assets for the year ended December 31, 2009 and we expressed an unqualified opinion on them in our report dated March 1, 2010.

/s/ KPMG LLP	
New York, New York
November 2, 2010	
 
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SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except shares)

 	  	September 30,
2010	 	 	December 31,
2009	 	
 	  	(unaudited)	 	 	 	 	
Assets	  	 	 	 	 	 	 	 	
Investments at value:	  	 	 	 	 	 	 	 	
Companies more than 25% owned (cost: $10,000 and $10,000, respectively)	  	$	10,000	  	 	$	9,000	  	
Companies 5% to 25% owned (cost: $34,806 and $85,102, respectively)	  	 	24,966	  	 	 	93,423	  	
Companies less than 5% owned (cost: $986,352 and $968,886, respectively)	  	 	871,013	  	 	 	760,717	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,031,158 and $1,063,988, respectively)	  	 	905,979	  	 	 	863,140	  	
Cash and cash equivalents	  	 	334,375	  	 	 	5,675	  	
Receivable for investments sold	  	 	10,204	  	 	 	—  	  	
Interest and dividends receivable	  	 	9,408	  	 	 	7,547	  	
Deferred borrowing costs	  	 	4,940	  	 	 	914	  	
Fee revenue receivable	  	 	4,573	  	 	 	5,824	  	
Deferred offering costs	  	 	—  	  	 	 	1,478	  	
Derivative assets	  	 	—  	  	 	 	294	  	
Prepaid expenses and other receivables	  	 	858	  	 	 	549	  	
 	  	 	 	 	 	 	 	 	
Total Assets	  	 	1,270,337	  	 	 	885,421	  	
 	  	 	 	 	 	 	 	 	
Liabilities	  	 	 	 	 	 	 	 	
Payable for investment purchased	  	 	38,490	  	 	 	—  	  	
Credit facility payable	  	 	300,000	  	 	 	88,114	  	
Term loan payable	  	 	35,000	  	 	 	—  	  	
Senior unsecured notes payable	  	 	125,000	  	 	 	—  	  	
Dividends payable	  	 	19,901	  	 	 	—  	  	
Distributions payable	  	 	—  	  	 	 	75,136	  	
Due to Solar Capital Partners LLC:	  	 	 	 	 	 	 	 	
Investment advisory and management fee payable	  	 	4,607	  	 	 	8,663	  	
Performance-based incentive fee payable	  	 	3,887	  	 	 	8,517	  	
Deferred fee revenue	  	 	1,790	  	 	 	3,532	  	
Interest payable	  	 	1,969	  	 	 	153	  	
Derivative liabilities	  	 	3,725	  	 	 	25	  	
Due to Solar Capital Management LLC	  	 	727	  	 	 	912	  	
Income taxes payable	  	 	801	  	 	 	535	  	
Other accrued expenses and payables	  	 	1,843	  	 	 	1,931	  	
 	  	 	 	 	 	 	 	 	
Total Liabilities	  	 	537,740	  	 	 	187,518	  	
 	  	 	 	 	 	 	 	 	
Net Assets	  	 	 	 	 	 	 	 	
Partners’ capital	  	 	—  	  	 	 	697,903	  	
Common stock, par value $0.01 per share 33,168,872 shares issued and outstanding	  	 	331	  	 	 	—  	  	
Paid in capital in excess of par	  	 	670,783	  	 	 	—  	  	
Distributions in excess of net investment income	  	 	(5,002	) 	 	 	—  	  	
Accumulated net realized gain	  	 	646	  	 	 	—  	  	
Net unrealized appreciation	  	 	65,839	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Total Net Assets	  	$	732,597	  	 	$	697,903	  	
 	  	 	 	 	 	 	 	 	
Number of shares outstanding	  	 	33,168,872	  	 	 	32,860,454	  	
Net Asset Value Per Share	  	$	22.09	  	 	$	21.24	  	
 
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares)

 	 	Three months ended
September 30, 2010	 	 	Three months ended
September 30, 2009	 	 	Nine months ended
September 30, 2010	 	 	Nine months ended
September 30, 2009	 	
 	 	(unaudited)	 	 	(unaudited)	 	 	(unaudited)	 	 	(unaudited)	 	
INVESTMENT INCOME:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest and dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	 	$	300	  	 	$	—  	  	 	$	300	  	 	$	—  	  	
Companies 5% to 25% owned	 	 	—  	  	 	 	2,320	  	 	 	7,619	  	 	 	6,877	  	
Other interest and dividend income	 	 	29,103	  	 	 	25,465	  	 	 	85,078	  	 	 	74,337	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest and dividends	 	 	29,403	  	 	 	27,785	  	 	 	92,997	  	 	 	81,214	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	 	 	29,403	  	 	 	27,785	  	 	 	92,997	  	 	 	81,214	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment advisory and management fees	 	 	4,607	  	 	 	4,273	  	 	 	13,404	  	 	 	12,348	  	
Performance-based incentive fee	 	 	3,887	  	 	 	4,096	  	 	 	12,958	  	 	 	12,395	  	
Interest and other credit facility expenses	 	 	3,943	  	 	 	536	  	 	 	10,540	  	 	 	1,565	  	
Administrative service fee	 	 	387	  	 	 	479	  	 	 	1,098	  	 	 	1,512	  	
Other general and administrative expenses	 	 	972	  	 	 	1,947	  	 	 	2,978	  	 	 	3,590	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	13,796	  	 	 	11,331	  	 	 	40,978	  	 	 	31,410	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income before income tax expense	 	 	15,607	  	 	 	16,454	  	 	 	52,019	  	 	 	49,804	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense (benefit)	 	 	56	  	 	 	71	  	 	 	191	  	 	 	227	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	 	 	15,551	  	 	 	16,383	  	 	 	51,828	  	 	 	49,577	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD CONTRACTS AND FOREIGN CURRENCIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	 	 	—  	  	 	 	(30	) 	 	 	—  	  	 	 	(30	) 	
Companies 5% to 25% owned	 	 	—  	  	 	 	—  	  	 	 	16,397	  	 	 	—  	  	
Companies less than 5% owned	 	 	(24	) 	 	 	(151,239	) 	 	 	(44,233	) 	 	 	(227,161	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss on investments	 	 	(24	) 	 	 	(151,269	) 	 	 	(27,836	) 	 	 	(227,191	) 	
Forward contracts	 	 	(8,832	) 	 	 	(1,844	) 	 	 	916	  	 	 	(9,674	) 	
Foreign currency exchange	 	 	—  	  	 	 	(284	) 	 	 	3,531	  	 	 	(751	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	 	 	(8,856	) 	 	 	(153,397	) 	 	 	(23,389	) 	 	 	(237,616	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	 	 	1,000	  	 	 	(800	) 	 	 	1,000	  	 	 	(3,900	) 	
Companies 5% to 25% owned	 	 	(81	) 	 	 	613	  	 	 	(18,161	) 	 	 	2,828	  	
Companies less than 5% owned	 	 	14,023	  	 	 	176,026	  	 	 	92,911	  	 	 	239,012	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change unrealized gain on investments	 	 	14,942	  	 	 	175,839	  	 	 	75,750	  	 	 	237,940	  	
Forward contracts	 	 	(669	) 	 	 	1,726	  	 	 	(3,995	) 	 	 	(963	) 	
Foreign currency exchange	 	 	41	  	 	 	(1,987	) 	 	 	(667	) 	 	 	(1,958	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain	 	 	14,314	  	 	 	175,578	  	 	 	71,088	  	 	 	235,019	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, forward contracts and foreign currencies	 	 	5,458	  	 	 	22,181	  	 	 	47,699	  	 	 	(2,597	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	 	$	21,009	  	 	$	38,564	  	 	$	99,527	  	 	$	46,980	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share (see note 10)	 	$	0.63	  	 	$	1.17	  	 	$	3.02	  	 	$	1.43	  	
 
See notes to consolidated financial statements.
 
F-4

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except shares)

 	  	Nine months ended
September 30, 2010	 	 	Year ended
December 31, 2009	 	
 	  	(unaudited)	 	 	 	 	
Increase (Decrease) in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	51,828	  	 	$	67,262	  	
Net realized loss	  	 	(23,389	) 	 	 	(264,898	) 	
Net change in unrealized gain	  	 	71,088	  	 	 	284,572	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	99,527	  	 	 	86,936	  	
 	  	 	 	 	 	 	 	 	
Dividends and distributions declared	  	 	(50,915	) 	 	 	(241,706	) 	
 	  	 	 	 	 	 	 	 	
Capital transactions:	  	 	 	 	 	 	 	 	
Proceeds from shares sold	  	 	116,198	  	 	 	—  	  	
Common stock offering costs	  	 	(10,047	) 	 	 	—  	  	
Senior notes issued in Solar Capital Merger	  	 	(125,000	) 	 	 	—  	  	
Reinvestment of dividends	  	 	4,931	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net decrease in net assets resulting from capital transactions	  	 	(13,918	) 	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net increase (decrease) in net assets	  	 	34,694	  	 	 	(154,770	) 	
Net assets at beginning of period	  	 	697,903	  	 	 	852,673	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period	  	$	732,597	  	 	$	697,903	  	

See notes to consolidated financial statements.
 
F-5

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except shares)

 	  	Nine months  ended
September 30, 2010	 	 	Nine months  ended
September 30, 2009	 	
 	  	(unaudited)	 	 	(unaudited)	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	
Net increase in net assets from operations	  	$	99,527	  	 	$	46,980	  	
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Net realized loss from investments	  	 	27,836	  	 	 	227,191	  	
Net realized gain from foreign currency exchange on borrowings	  	 	(3,536	) 	 	 	—  	  	
Net change in unrealized gain on investments	  	 	(75,750	) 	 	 	(237,940	) 	
Net change in forward contracts	  	 	3,995	  	 	 	964	  	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	
Purchase of investment securities	  	 	(217,663	) 	 	 	(124,675	) 	
Proceeds from disposition of investment securities	  	 	222,738	  	 	 	111,245	  	
Receivable for investments sold	  	 	(10,204	) 	 	 	(7,256	) 	
Interest and dividends receivable	  	 	(1,861	) 	 	 	1,625	  	
Deferred borrowing costs	  	 	(4,026	) 	 	 	321	  	
Fee revenue receivable	  	 	1,251	  	 	 	(294	) 	
Deferred offering costs	  	 	1,478	  	 	 	(266	) 	
Foreign tax receivable	  	 	—  	  	 	 	101	  	
Withholding tax receivable	  	 	—  	  	 	 	(3,106	) 	
Prepaid expenses and other receivables	  	 	(309	) 	 	 	(529	) 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	38,490	  	 	 	—  	  	
Investment advisory and management fee payable	  	 	(4,056	) 	 	 	(1,021	) 	
Performance-based incentive fee payable	  	 	(4,630	) 	 	 	(1,409	) 	
Deferred fee revenue	  	 	(1,742	) 	 	 	(652	) 	
Interest payable	  	 	1,816	  	 	 	346	  	
Due to Solar Capital Management LLC	  	 	(185	) 	 	 	(257	) 	
Income taxes payable	  	 	266	  	 	 	(953	) 	
Other accrued expenses and payables	  	 	(88	) 	 	 	1,370	  	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	  	 	73,347	  	 	 	11,785	  	
 	  	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	
Proceeds from shares sold	  	 	116,198	  	 	 	—  	  	
Common stock offering costs	  	 	(10,047	) 	 	 	—  	  	
Cash dividends paid	  	 	(26,083	) 	 	 	—  	  	
Cash distributions paid	  	 	(75,136	) 	 	 	(85,198	) 	
Proceeds from borrowings on the term loan	  	 	35,000	  	 	 	—  	  	
Proceeds from borrowings on credit facility	  	 	394,000	  	 	 	142,483	  	
Repayments of borrowings on credit facility	  	 	(178,579	) 	 	 	(116,900	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Used in Financing Activities	  	 	255,353	  	 	 	(59,615	) 	
 	  	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	328,700	  	 	 	(47,830	) 	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	  	 	5,675	  	 	 	65,841	  	
 	  	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	  	$	334,375	  	 	$	18,011	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	1,773	  	 	$	128	  	
Cash paid for income taxes	  	$	18	  	 	$	1,180	  	
Non-cash financing activity:	  	 	 	 	 	 	 	 	
Distributions payable	  	$	—  	  	 	$	81,508	  	
Dividends payable	  	$	19,901	  	 	$	—  	  	
Reinvestment of dividends	  	$	4,931	  	 	$	—  	  	
Issuance of Senior Notes	  	$	125,000	  	 	$	—  	  	
 
See notes to consolidated financial statements.
 
F-6

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
September 30, 2010
(in thousands, except shares)
(unaudited)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—20.5%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation	 	Insurance	 	 	6.76	  	 	 	7/3/2015	  	 	$	52,000	  	 	$	51,951	  	 	$	49,849	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures, Entertainment	 	 	10.11	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,446	  	 	 	22,750	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.26	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,093	  	 	 	14,595	  	
Fulton Holding Corp	 	Retail Stores	 	 	13.83	  	 	 	5/28/2016	  	 	 	35,000	  	 	 	33,916	  	 	 	35,000	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	13,098	  	 	 	13,055	  	 	 	12,312	  	
Roundy’s Supermarkets, Inc.	 	Grocery	 	 	10.00	  	 	 	4/16/2016	  	 	 	22,000	  	 	 	21,594	  	 	 	22,433	  	
ViaWest, Inc.	 	Personal, Food and Misc. Services	 	 	13.50	  	 	 	5/20/2016	  	 	 	29,639	  	 	 	28,797	  	 	 	28,750	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	192,737	  	 	$	189,852	  	 	$	185,689	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—73.0%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ares Capital Corporation	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	$	15,393	  	 	$	11,534	  	 	$	15,662	  	
Ares Capital Corporation	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	11,603	  	 	 	14,790	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,681	  	 	 	37,600	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	17,237	  	 	 	17,312	  	 	 	15,910	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures, Entertainment	 	 	5.29	  	 	 	6/13/2012	  	 	 	25,390	  	 	 	25,189	  	 	 	22,343	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	36,355	  	 	 	35,785	  	 	 	37,173	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	37,714	  	 	 	37,325	  	 	 	34,263	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	110,514	  	 	 	109,877	  	 	 	108,304	  	
Earthbound	 	Farming & Agriculture	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	39,000	  	 	 	40,400	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,126	  	 	 	40,528	  	
FreedomRoads	 	Automobile	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,346	  	 	 	26,758	  	
Grakon, LLC(12)	 	Machinery	 	 	14.00	  	 	 	6/19/2013	  	 	 	20,815	  	 	 	18,620	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	11.79	  	 	 	11/3/2016	  	 	 	5,073	  	 	 	5,001	  	 	 	5,050	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	11.32	  	 	 	11/3/2016	  	 	 	12,299	  	 	 	15,077	  	 	 	12,375	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,468	  	 	 	17,635	  	
Midcap Financial Intermediate Holdings, LLC(18)	 	Banking	 	 	14.25	  	 	 	7/9/2015	  	 	 	75,000	  	 	 	73,153	  	 	 	73,125	  	
ProSieben Sat.1 Media AG(3)(8)	 	Broadcasting & Entertainment	 	 	8.14	  	 	 	3/6/2017	  	 	 	21,484	  	 	 	19,383	  	 	 	13,037	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.95	  	 	 	10/31/2014	  	 	 	49,346	  	 	 	47,354	  	 	 	46,879	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	19,573	  	 	 	16,328	  	 	 	18,888	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	7,420	  	 	 	5,283	  	 	 	6,601	  	
Shoes for Crews, LLC	 	Textiles and Leather	 	 	13.75	  	 	 	7/23/2016	  	 	 	15,650	  	 	 	15,233	  	 	 	15,220	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,761	  	 	 	22,660	  	 	 	19,802	  	
Wastequip, Inc.(12)	 	Containers, Packaging and Glass	 	 	13.00	  	 	 	2/5/2015	  	 	 	16,475	  	 	 	14,401	  	 	 	—  	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.53	  	 	 	9/14/2016	  	 	 	14,697	  	 	 	17,088	  	 	 	11,390	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.96	  	 	 	5/7/2017	  	 	 	29,939	  	 	 	36,878	  	 	 	22,455	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	737,199	  	 	$	722,705	  	 	$	661,289	  	

See notes to consolidated financial statements.
 
F-7

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity—0.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	  	 	 	7/17/2015	  	 	$	387	  	 	$	39	  	 	$	42	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	387	  	 	$	39	  	 	$	42	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants—6.4%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	34,806,121	  	 	$	34,806	  	 	$	24,966	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	2,500	  	
Global Garden Products(3)(6)	 	Farming & Agriculture	 	 	 	 	 	 	 	 	 	 	146,983	  	 	 	—  	  	 	 	—  	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Great American Group Inc.(13)	 	Personal, Food and Misc. Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	258	  	
Great American Group Inc.(14)	 	Personal, Food and Misc. Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	84	  	
Great American Group Inc.(15)	 	Personal, Food and Misc. Services	 	 	 	 	 	 	 	 	 	 	125,000	  	 	 	—  	  	 	 	—  	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel, Iron, and Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	10,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	6,000	  	
NXP Semiconductors N.V.(16)	 	Electronics	 	 	 	 	 	 	 	 	 	 	1,139,081	  	 	 	31,057	  	 	 	12,251	  	
NXP Semiconductors N.V.(17)	 	Electronics	 	 	 	 	 	 	 	 	 	 	12,058	  	 	 	—  	  	 	 	—  	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	2,900	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	118,562	  	 	$	58,959	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,031,158	  	 	$	905,979	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of September 30, 2010.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in either Euro, British Pounds or Australian Dollars: Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital Ltd.’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital Ltd.’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital Ltd. has an unfunded commitment of $9,946.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investment is on non-accrual status	
(13)	Common Shares	
(14)	Founders Shares	
(15)	Contingent Founders Shares	
(16)	Common Stock	
(17)	Administrative agent to NXP management equity plan	
(18)	Includes an unfunded commitment of $35 million	
 
See notes to consolidated financial statements.
 
F-8

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
September 30, 2010
(unaudited)

 	 	 	 	 	
Industry Classification	  	Percentage of  Total
Investments (at fair
value) as of
September 30, 2010	 	
Beverage, Food, and Tobacco	  	 	18	% 	
Personal, Food and Misc. Services	  	 	8	% 	
Banking	  	 	8	% 	
Aerospace & Defense	  	 	6	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Leisure, Motion Pictures, Entertainment	  	 	5	% 	
Broadcasting & Entertainment	  	 	5	% 	
Cargo Transport	  	 	4	% 	
Farming & Agriculture	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Finance	  	 	4	% 	
Retail Stores	  	 	4	% 	
Automobile	  	 	3	% 	
Real Estate	  	 	3	% 	
Grocery	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Textiles and Leather	  	 	2	% 	
Healthcare, Education, and Childcare	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Electronics	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	

See notes to consolidated financial statements.
 
F-9

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2009
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—18.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Affinity 1st Lien	 	Printing, Publishing, Broadcasting	 	 	12.75	  	 	 	3/31/2010	  	 	$	18,771	  	 	$	18,372	  	 	$	18,489	  	
Asurion Corporation	 	Insurance	 	 	6.73	  	 	 	7/3/2015	  	 	 	55,000	  	 	 	54,939	  	 	 	51,700	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures,
Entertainment	 	 	10.02	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,350	  	 	 	20,800	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.29	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,112	  	 	 	14,400	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	25,182	  	 	 	24,740	  	 	 	26,152	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	12,827	  	 	 	12,769	  	 	 	12,058	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	15.00	  	 	 	1/17/2015	  	 	 	20,000	  	 	 	19,614	  	 	 	19,900	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	172,780	  	 	$	170,896	  	 	$	163,499	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—74.4%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allied Capital	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	$	15,393	  	 	$	9,362	  	 	$	14,392	  	
Allied Capital	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	8,880	  	 	 	13,920	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,445	  	 	 	35,360	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	18,237	  	 	 	18,345	  	 	 	15,538	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures,
Entertainment	 	 	5.25	  	 	 	6/13/2012	  	 	 	24,383	  	 	 	24,106	  	 	 	20,433	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,220	  	 	 	43,000	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.73	  	 	 	9/13/2016	  	 	 	7,860	  	 	 	7,542	  	 	 	7,565	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.69	  	 	 	9/13/2016	  	 	 	8,478	  	 	 	8,135	  	 	 	8,109	  	
Direct Buy Inc.	 	Home and Office Furnishing,
Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	36,593	  	 	 	36,092	  	 	 	31,104	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	99,565	  	 	 	98,664	  	 	 	95,085	  	
Earthbound	 	Beverage, Food, and Tobacco	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	38,875	  	 	 	39,800	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,145	  	 	 	38,754	  	
FreedomRoads	 	Automotive	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,076	  	 	 	25,603	  	
Global Garden Products(3)(6)(12)	 	Farming & Agriculture	 	 	12.72	  	 	 	10/31/2016	  	 	 	19,674	  	 	 	20,136	  	 	 	—  	  	
Grakon, LLC(13)	 	Machinery	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,403	  	 	 	19,306	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.99	  	 	 	11/3/2016	  	 	 	5,230	  	 	 	4,908	  	 	 	4,942	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.52	  	 	 	11/3/2016	  	 	 	12,200	  	 	 	14,701	  	 	 	11,527	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate
Manufacturing	 	 	16.50	  	 	 	6/29/2014	  	 	 	4,219	  	 	 	4,045	  	 	 	—  	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/
Conglomerate Manufacturing	 	 	13.00	  	 	 	6/29/2014	  	 	 	10,641	  	 	 	10,614	  	 	 	—  	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/28/2015	  	 	 	31,173	  	 	 	30,797	  	 	 	27,276	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,327	  	 	 	13,345	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	30,539	  	 	 	30,229	  	 	 	31,303	  	
Pacific Crane Maintenance Company, L.P. (12)	 	Machinery	 	 	13.00	  	 	 	2/15/2014	  	 	 	9,045	  	 	 	8,920	  	 	 	—  	  	
ProSieben Sat.1 Media AG(3)(8)(13)	 	Broadcasting & Entertainment	 	 	8.15	  	 	 	3/6/2017	  	 	 	21,437	  	 	 	19,804	  	 	 	5,505	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.94	  	 	 	10/31/2014	  	 	 	48,253	  	 	 	45,920	  	 	 	45,841	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	18,086	  	 	 	16,328	  	 	 	16,278	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	6,857	  	 	 	5,283	  	 	 	6,068	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,546	  	 	 	22,420	  	 	 	16,008	  	
Wastequip, Inc.(13)	 	Containers, Packaging and Glass	 	 	12.00	  	 	 	2/5/2015	  	 	 	15,745	  	 	 	14,953	  	 	 	3,149	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.62	  	 	 	9/14/2016	  	 	 	13,627	  	 	 	16,335	  	 	 	9,879	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.83	  	 	 	5/7/2017	  	 	 	29,211	  	 	 	34,948	  	 	 	20,447	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate
Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	39,000	  	 	 	38,302	  	 	 	36,660	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	795,459	  	 	$	778,163	  	 	$	641,992	  	

See notes to consolidated financial statements.
 
F-10

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009
(in thousands, except shares)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity—0.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	  	 	 	7/17/2015	  	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants—6.7%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	28,006,121	  	 	$	28,006	  	 	$	19,675	  	
Direct Buy Inc.	 	Home and Office Furnishing,
Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	1,040	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Great American Group Inc.(14)	 	Business Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	1,874	  	
Great American Group Inc.(15)	 	Business Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	614	  	
Great American Group Inc.(16)	 	Business Services	 	 	 	 	 	 	 	 	 	 	125,000	  	 	 	—  	  	 	 	—  	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	2,265,023	  	 	 	2,125	  	 	 	16,293	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel and
Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	9,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	6,000	  	
NXP Semiconductors Netherlands B.V.(3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	944,628	  	 	 	31,060	  	 	 	1,697	  	
Pacific Crane Maintenance Company, L.P.	 	Machinery	 	 	 	 	 	 	 	 	 	 	10,000	  	 	 	1,000	  	 	 	—  	  	
Seven Media Group Pty Limited(3)	 	Broadcasting &
Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	1,416	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	114,890	  	 	$	57,609	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,063,988	  	 	$	863,140	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2009.	
(3)	The following entities are domiciled outside the United States: Casema B.V. and NXP Semiconductors Netherlands B.V. in The Netherlands; Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital LLC’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital LLC’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital LLC’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital LLC’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital LLC’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital LLC has an unfunded commitment of $16,745.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investment is on non-accrual status.	
(13)	Investments are current on all obligations with interest payments being applied to principal.	
(14)	Common Shares	
(15)	Founders Shares	
(16)	Contingent Founders Shares	
 
See notes to consolidated financial statements.
 
F-11

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009

 	 	 	 	 	
Industry Classification	  	Percentage of  Total
Investments (at fair
value) as of
December 31, 2009	 	
Beverage, Food, and Tobacco	  	 	21	% 	
Aerospace & Defense	  	 	17	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Personal, Food and Misc. Services	  	 	5	% 	
Healthcare, Education, and Childcare	  	 	5	% 	
Leisure, Motion Pictures, Entertainment	  	 	4	% 	
Cargo Transport	  	 	4	% 	
Diversified / Conglomerate Manufacturing	  	 	4	% 	
Finance	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Broadcasting & Entertainment	  	 	3	% 	
Automotive	  	 	3	% 	
Real Estate	  	 	2	% 	
Telecommunications	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Printing, Publishing, Broadcasting	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
Containers, packaging and glass	  	 	1	% 	
Business Services	  	 	1	% 	
Electronics	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	

See notes to consolidated financial statements.
 
F-12

Table of Contents
 
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(in thousands, except shares)
(unaudited)
 
Note 1. Organization
 
Solar Capital Ltd. (“Solar Capital”, the “Company” or “we”), a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company intends to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
 
On February 9, 2010, Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.
 
Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity (the “Merger”). Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Merger and as a result, the historical books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties.
 
The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
 
Note 2. Significant Accounting Policies
 
Basis of Presentation—The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiary, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated.
 
Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2010.
 
F-13

Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Certain prior period amounts have been reclassified to conform to current period presentation. As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
 
Accounting Standards Codification—The FASB established the Accounting Standards CodificationTM (“ASC”) on July 2, 2009 as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting literature not included in the ASC is no longer authoritative.
 
Following the ASC, the FASB no longer issues new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it issues Accounting Standards Updates, which serve to update the ASC, provide background information about the guidance and provide the basis for conclusions on the changes to the ASC. GAAP was not changed as a result of the FASB’s codification project, but the codification project changes the way guidance is organized and presented. As a result, these changes have a significant impact on how we reference GAAP in our financial statements for interim and annual periods.
 
Investments—The Company applies fair value accounting in accordance with GAAP. Securities transactions are accounted for on trade date. Securities for which market quotations are readily available on an exchange are valued at such price as of the closing price on the valuation date. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s investment adviser (the “Adviser”) or Board of Directors (the “Board”), does not represent fair value, shall each be valued as follows:
 
 	1)	 	The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;	
 
 	2)	 	Preliminary valuation conclusions are then documented and discussed with senior management;	
 
 	3)	 	Third-party valuation firms are engaged by, or on behalf of, the Board to conduct independent appraisals and review management’s preliminary valuations and make their own independent assessment, for all material assets; and	
 
 	4)	 	The Board discusses valuations and determines the fair value of each investment in the portfolio in good faith based on the input of our investment adviser (note 4) and, where appropriate, the respective independent valuation firms.	
 
Valuation methods, among other measures and as applicable, may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
 
Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
 
Cash and Cash Equivalents—Cash and cash equivalents include investments in money market accounts or investments with original maturities of three months or less.
 
Revenue Recognition—The Company’s revenue recognition policies are as follows:
 
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
 
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. The Company has loans in its portfolio that contain a payment-in-kind (“PIK”) provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates.
 
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. 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.
 
U.S. Federal Income Taxes—The Company intends to elect to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.
 
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4% 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, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the nine months ended September 30, 2010, there was no U.S. Federal excise tax accrued.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

The Company is also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, the Company pays a corporate income tax and a municipal business tax on its subsidiary’s taxable income.
 
Capital Accounts—Certain capital accounts including undistributed net investment income, accumulated net realized gain or loss, net unrealized appreciation or depreciation, and paid in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.
 
Dividends—Dividends and distributions to common stockholders are recorded on the ex-dividend date. Quarterly dividend payments are determined by the Board and are generally based upon taxable earnings estimated by management. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital gains for investment.
 
We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. While we generally use newly issued shares to implement the plan (especially if our shares are trading at a premium to net asset value), we may purchase shares in the open market in connection with our obligations under the plan. In particular, if our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan.
 
Foreign Currency Translation—The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company’s investments in foreign securities may involve certain risks such as foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
 
Derivative Instruments and Hedging Activity—In accordance with GAAP, the Company recognizes derivatives as either assets or liabilities at their fair value on its Consolidated Statements of Assets and Liabilities. At this time, the Company does not document formal hedge relationships because the hedged items are recorded at fair value with realized and unrealized gains and losses recognized in current earnings. Realized and unrealized gains and losses from derivatives are also recorded in current earnings. Realized gains or losses from derivatives are recognized when contracts are settled. The Company primarily uses foreign exchange forward contracts to economically hedge its foreign currency risk. The fair value of foreign exchange forward contracts is determined by recognizing the difference between the contract exchange rate and the current market exchange rate. These fair values are recognized as either derivative assets or derivative liabilities in the Company’s Consolidated Statements of Assets and Liabilities. The Company may also borrow in foreign currencies on its multicurrency credit lines to reduce foreign currency exposure. Fluctuations in market values of assets and liabilities denominated in the same foreign currency offset in earnings providing a “natural” foreign currency hedge.
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Deferred Offering Costs—Offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in connection with offerings of our common stock.
 
Use of Estimates in the Preparation of Financial Statements—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.
 
Subsequent Events Evaluation—The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued and determined that none are required.
 
Note 3. Investments
 
Investments consisted of the following as of September 30, 2010 and December 31, 2009:

 	  	September 30 2010
(unaudited)	 	  	December 31, 2009	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt / Senior Secured Loans	  	$	189,852	  	  	$	185,689	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt / Corporate Notes	  	 	722,705	  	  	 	661,289	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	42	  	  	 	39	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	118,562	  	  	 	58,959	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,031,158	  	  	$	905,979	  	  	$	1,063,988	  	  	$	863,140	  	

As of September 30, 2010, the Company had two investments on non-accrual status with a total market value of $5.1 million. As of December 31, 2009, the Company had three investments on non-accrual status with total market value of zero.
 
Note 4. Agreements
 
Solar Capital has an Investment Advisory and Management Agreement with Solar Capital Partners LLC (the “Investment Adviser”), under which the Investment Adviser will manage the day-to-day operations of, and provide investment advisory services to, Solar Capital. For providing these services, the Investment Adviser receives a fee from Solar Capital, consisting of two components—a base management fee and an incentive fee. The base management fee is determined by taking the average value of Solar Capital’s gross assets at the end of the two most recently completed calendar quarters calculated at an annual rate of 2.00%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)
 
income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Solar Capital pays the Investment Adviser an incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on February 12, 2007, and will equal 20% of Solar Capital’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the advisor.
 
Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Capital. For providing these services, facilities and personnel, Solar Capital reimburses the Administrator for Solar Capital’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Capital’s behalf, managerial assistance to those portfolio companies to which Solar Capital is required to provide such assistance.
 
Note 5. Derivatives
 
The Company is exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company mitigates this risk through the use of foreign currency forward contracts. As an investment company, all changes in the fair value of assets, including changes caused by foreign currency fluctuation, flow through current earnings. The forward contracts serve as an economic hedge with their realized and unrealized gains and losses also recorded in current earnings. The Company has no derivatives designated as hedging instruments. During the nine months ended September 30, 2010, the Company entered into 59 foreign currency forward contracts with durations of 1 month and an average U.S. dollar value of $25,440. During the year ended December 31, 2009, the Company entered into 81 foreign currency forward contracts with durations of 1 to 3 months and an average U.S. dollar value of $29,757.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

As of September 30, 2010, there were three open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, all of which terminate on October 8, 2010. As of December 31, 2009, there were nine open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, six of which terminated on January 15, 2010 and three of which terminated on February 16, 2010. At September 30, 2010 and December 31, 2009, there was no fixed collateral held by counterparties for the open contracts and no credit-related contingent features associated with any of the open forward contracts. The contract details are as follows:

 	  	 	  	September 30, 2010	 	 	December 31, 2009	 	
 	  	 	  	(unaudited)	 	 	 	 	 	 	 	  	 	 	
Purchase:	  	Counterparty	  	Local
Currency	 	  	USD Value	 	  	Unrealized
appreciation
(depreciation)	 	 	Local
Currency	 	 	USD Value	 	  	Unrealized
appreciation
(depreciation)	 	
USD / AUD	  	SunTrust Bank	  	 	30,405	  	  	$	27,778	  	  	$	(1,618	) 	 	 	(734	) 	 	$	658	  	  	$	1	  	
USD / AUD	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	734	  	 	 	669	  	  	 	10	  	
USD / AUD	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	734	  	 	 	655	  	  	 	(1	) 	
USD / EURO	  	SunTrust Bank	  	 	12,611	  	  	 	16,048	  	  	 	(1,151	) 	 	 	(317	) 	 	 	461	  	  	 	(7	) 	
USD / EURO	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	317	  	 	 	463	  	  	 	10	  	
USD / EURO	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	6,317	  	 	 	9,185	  	  	 	135	  	
USD / GBP	  	SunTrust Bank	  	 	37,070	  	  	 	57,302	  	  	 	(956	) 	 	 	(825	) 	 	 	1,351	  	  	 	(17	) 	
USD / GBP	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	825	  	 	 	1,342	  	  	 	8	  	
USD / GBP	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	6,825	  	 	 	11,165	  	  	 	130	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Total	  	 	  	 	 	 	  	$	101,128	  	  	$	(3,725	) 	 	 	 	 	 	$	25,949	  	  	$	269	  	

The following tables show the fair value and effect of the derivative instruments on the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Operations:

Fair Values of Derivative Instruments	 	
 	  	Derivative Assets	 	
 	  	September 30, 2010
(unaudited)	 	  	December 31, 2009	 	
 	  	Balance Sheet Location	 	  	Fair Value	 	  	Balance Sheet Location	 	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative assets	  	  	 	—  	  	  	 	Derivative assets	  	  	$	294	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative assets	  	 	 	 	  	 	—  	  	  	 	 	 	  	$	294	  	

  	  	Derivative Liabilities	 	
 	  	September 30, 2010
(unaudited)	 	  	December 31, 2009	 	
 	  	Balance Sheet Location	 	  	Fair Value	 	  	Balance Sheet Location	 	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative liabilities	  	  	$	3,725	  	  	 	Derivative liabilities	  	  	$	25	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative liabilities	  	 	 	 	  	$	3,725	  	  	 	 	 	  	$	25	  	

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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of Derivative Instruments on the Consolidated Statements of Operations	 	
Derivatives not
designated as hedging
instruments (a)	 	Location of Gain or
(Loss) Recognized in
Income on Derivative	 	Amount of Gain or (Loss) Recognized in Income on Derivative	 	
 	 	 	 	Three months ended
September 30, 2010
(unaudited)	 	 	Three months ended
September 30, 2009
(unaudited)	 	 	Nine months ended
September 30, 2010
(unaudited)	 	 	Nine months ended
September 30, 2009
(unaudited)	 	
Foreign exchange contracts	 	Realized gain (loss): Forward contracts	 	$	(8,832	) 	 	$	(1,844	) 	 	$	916	  	 	$	(9,674	) 	
Foreign exchange contracts	 	Unrealized gain (loss): Forward contracts	 	 	(669	) 	 	 	1,726	  	 	 	(3,995	) 	 	 	(963	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	 	$	(9,501	) 	 	$	(118	) 	 	$	(3,079	) 	 	$	(10,637	) 	

(a)	 	See Note 2 for additional information on the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategy.	
 
Note 6. Borrowing Facility, Senior Unsecured Notes, and Term Loan
 
On February 12, 2010, Solar Capital Ltd. amended and restated Solar Capital LLC’s $250 million Senior Secured Revolving Credit Facility (the “Credit Facility”), extending the maturity to February 2013 and increasing the total commitments under the facility to $270 million. Per the amended agreement, borrowings bear interest at a rate per annum equal to the base rate plus 3.25% or the alternate base rate plus 2.25%. The commitment fee on unused balances is 0.375%. The amendment also reduced the advance rates permitted on certain asset types and placed limitations on the secured borrowing amount. On May 26, 2010, the Credit Facility was amended to remove the limitations on the secured borrowing amount and increase the advance rates permitted on certain asset types. Total commitments under the Credit Facility have been increased to $355 million as a result of the addition of two new lenders on May 12, 2010 and June 23, 2010. The facility size may be increased up to $600 million with additional new lenders or the increase in commitments of current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum debt to total assets ratio.
 
On September 2, 2010, Solar Capital Ltd. entered into a fully funded $35 million senior secured term loan (the “Term Loan”), which matures in September 2013, bears interest at a rate per annum equal to the base rate plus 3.25%, and has terms substantially similar to our existing revolving credit facility. The Term Loan contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Term Loan contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum debt to total assets ratio.
 
On February 9, 2010, through a series of transactions, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation, leaving Solar Capital Ltd. as the surviving entity. An aggregate of approximately 26.65 million shares of common stock and $125 million in senior unsecured notes (the “Senior
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)
 
Unsecured Notes”) of Solar Capital Ltd. were issued in connection with the merger. The Senior Unsecured Notes mature in February 2014 and have a coupon of 8.75%, payable quarterly in cash beginning May 1, 2010. The Senior Unsecured Notes are redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, Solar Capital Ltd. must use the net cash proceeds from the issuance of any other senior notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject Solar Capital Ltd. to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of at least 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) Solar Capital Ltd. will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes have been issued contains customary events of default.
 
The weighted average annualized interest cost for all borrowings for the nine months ended September 30, 2010 and 2009 was 7.90% and 2.56%, respectively. These costs are exclusive of commitment fees and for other prepaid expenses related to establishing the Credit Facility, Senior Unsecured Notes, and Term Loan. This weighted average annualized interest cost reflects the average interest cost for all outstanding borrowings. The average debt outstanding for the nine months ended September 30, 2010 and for the year ended December 31, 2009 were $136,296 and $29,035, respectively. The maximum amounts borrowed on the Credit Facility during the nine months ended September 30, 2010 and year ended December 31, 2009 were $300,000 and $122,065, respectively. There was $300,000 drawn on the Credit Facility as of September 30, 2010 and $88,114 outstanding as of December 31, 2009. At September 30, 2010 and December 31, 2009, the Company was in compliance with all financial and operational covenants required by the Credit Facility and Senior Unsecured Notes.
 
Note 7. Fair Value
 
Fair value is defined as 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. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
 
GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
 
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, and most U.S. Government and agency securities).
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);	
 
 	c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and	
 
 	d)	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.	
 
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
 
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Levels 1 and 2 financial instruments entered into by the Company that economically hedge certain exposures to the Level 3 positions.
 
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.
 
During the third quarter of 2010, one investment with a current market value of $0.3 million was transferred from level 2 to level 1, when its listed common stock became freely tradable as restrictions expired.
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of September 30, 2010 and December 31, 2009:
 
Fair Value Measurements
As of September 30, 2010
(unaudited)

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	49,849	  	  	$	135,840	  	  	$	185,689	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	98,087	  	  	 	563,202	  	  	 	661,289	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	42	  	  	 	42	  	
Common Equity / Partnership Interests / Warrants	  	 	342	  	  	 	12,251	  	  	 	46,366	  	  	 	58,959	  	
Derivative assets—forward contracts	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	 	3,725	  	  	 	—  	  	  	 	3,725	  	
 
Fair Value Measurements
As of December 31, 2009

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	—  	  	  	$	163,499	  	  	$	163,499	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	65,961	  	  	 	576,031	  	  	 	641,992	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	40	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	—  	  	  	 	2,488	  	  	 	55,121	  	  	 	57,609	  	
Derivative assets—forward contracts	  	 	—  	  	  	 	294	  	  	 	—  	  	  	 	294	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	 	25	  	  	 	—  	  	  	 	25	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the nine months ended September 30, 2010 and the year ended December 31, 2009, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at September 30, 2010 and December 31, 2009:
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the period.
 
Fair Value Measurements Using Level 3 Inputs
As of September 30, 2010
(unaudited)

 	  	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred
Equity	 	  	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2010	  	$	163,499	  	 	$	576,031	  	 	$	40	  	  	$	55,121	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Net realized gain (loss)	  	 	487	  	 	 	(42,564	) 	 	 	—  	  	  	 	15,396	  	
Net change in unrealized gain (loss)	  	 	2,099	  	 	 	68,459	  	 	 	2	  	  	 	(10,732	) 	
Purchases, sales, issuances, and settlements (net)	  	 	21,455	  	 	 	4,276	  	 	 	—  	  	  	 	(11,722	) 	
Transfers out of Level 3	  	 	(51,700	) 	 	 	(43,000	) 	 	 	—  	  	  	 	(1,697	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Fair value, September 30, 2010	  	$	135,840	  	 	$	563,202	  	 	$	42	  	  	$	46,366	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Net change in unrealized gain:	  	$	3,913	  	 	$	20,653	  	 	$	—  	  	  	$	2,435	  	
 
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2009

 	  	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred
Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2009	  	$	97,665	  	 	$	509,416	  	 	$	6,145	  	 	$	67,752	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(50,032	) 	 	 	(75,837	) 	 	 	(61,101	) 	 	 	(61,081	) 	
Net change in unrealized gain (loss)	  	 	82,880	  	 	 	58,509	  	 	 	54,957	  	 	 	48,941	  	
Purchases, sales, issuances, and settlements (net)	  	 	(770	) 	 	 	83,943	  	 	 	39	  	 	 	(491	) 	
Transfers into Level 3	  	 	33,756	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2009	  	$	163,499	  	 	$	576,031	  	 	$	40	  	 	$	55,121	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	$	34,333	  	 	$	23,128	  	 	$	2	  	 	$	(9,480	) 	
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
Note 9. Stockholders’ Equity
 
The table below illustrates the effect of certain transactions on our capital accounts for the nine months ended September 30, 2010:

 	 	Common Stock	 	 	Partners
Capital	 	 	Paid in
Capital
in Excess of
Par	 	 	Distributions
in Excess of
Net Investment
Income	 	 	Accumulated
Net Realized
Gain	 	 	Net
Unrealized
Appreciation	 	 	Total
Stockholders
Equity	 	 	
 	 	Shares	 	 	Par
Amount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2009	 	 	—  	  	 	$	—  	  	 	$	697,903	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	697,903	  	 	 	 	 	
Solar Capital Merger(1)	 	 	26,647,312	  	 	 	266	  	 	 	(697,903	) 	 	 	572,637	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(125,000	) 	 	 	 	 	
Issuances of common
stock(2)	 	 	6,280,945	  	 	 	63	  	 	 	—  	  	 	 	106,088	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	106,151	  	 	 	 	 	
Reinvestment of dividends	 	 	240,615	  	 	 	2	  	 	 	—  	  	 	 	4,929	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	4,931	  	 	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	51,828	  	 	 	(23,389	) 	 	 	71,088	  	 	 	99,527	  	 	 	 	 	
Dividends declared ($1.54 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(50,915	) 	 	 	—  	  	 	 	—  	  	 	 	(50,915	) 	 	 	 	 	
Permanent tax differences	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(12,871	) 	 	 	(5,915	) 	 	 	24,035	  	 	 	(5,249	) 	 	 	—  	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at September 30, 2010	 	 	33,168,872	  	 	$	331	  	 	$	—  	  	 	$	670,783	  	 	$	(5,002	) 	 	$	646	  	 	$	65,839	  	 	$	732,597	  	 	 	 	 	

(1)	 	Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger.	
(2)	 	On February 9, 2010 Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.	
 
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Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Note 10. Earnings Per Share
 
The following information sets forth the computation of basic and diluted net increase (decrease) in shareholders’ capital per share resulting from operations for the three and nine months ended September 30, 2010 and 2009:

 	  	Three months ended
September 30, 2010	 	  	Three months ended
September 30, 2009	 	  	Nine months ended
September 30, 2010	 	  	Nine months ended
September 30, 2009	 	
Numerator for basic and diluted earnings per share:	  	$	21,009	  	  	$	38,564	  	  	$	99,527	  	  	$	46,980	  	
Denominator for basic and diluted weighted average share:	  	 	33,165,867	  	  	 	32,860,454	  	  	 	32,918,479	  	  	 	32,860,454	  	
Basic and diluted net increase in share holders’ equity resulting from operations per share:	  	$	0.63	  	  	$	1.17	  	  	$	3.02	  	  	$	1.43	  	
 
As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
 
Note 11. Financial Highlights
 
The following is a schedule of financial highlights for the nine months ended September 30, 2010:

 	  	Nine months ended
September 30, 2010
(unaudited)	 	
Per Share Data:(a)	  	 	 	 	
Net asset value, beginning of period	  	$	21.24	  	
Net investment income	  	 	1.57	  	
Net realized and unrealized gain (loss)	  	 	1.45	  	
 	  	 	 	 	
Net increase (decrease) in net assets resulting from operations	  	 	3.02	  	
Effect of dilution	  	 	(0.32	) 	
Offering costs	  	 	(0.31	) 	
Dividends to shareholders declared	  	 	(1.54	) 	
 	  	 	 	 	
Net asset value, end of period	  	$	22.09	  	
 	  	 	 	 	
Total return(c)	  	 	24.27	% 	
Net assets, end of period	  	$	732,597	  	
Per share market value at end of period	  	 	21.45	  	
Shares outstanding end of period	  	 	33,168,872	  	
Ratio to average net assets	  	 	 	 	
Expenses without incentive fees(b)	  	 	5.21	% 	
Incentive fees	  	 	1.79	% 	
 	  	 	 	 	
Total expenses	  	 	7.01	% 	
Net investment income without incentive fees(b)	  	 	9.58	% 	
 
F-26

Table of Contents
SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

(a)	 	Calculated using the weighted average shares outstanding method	
(b)	 	Annualized	
(c)	 	Total return = [(ending market price per share—IPO price per share + dividends declared per share) / IPO price per share]	
 
Note 12. New Accounting Pronouncements and Accounting Standards Updates
 
Fair Value Measurements and Disclosures
 
In January 2010, the FASB issued an update to ASC 820, Fair Value Measurements and Disclosures Topic, which will require additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
 
Note 13. Related Parties
 
From July 2006 through approximately the first quarter of 2009, Mr. Gross, the Company’s chairman and chief executive officer, was a partner in Magnetar Capital Partners LP. Mr. Spohler, our chief operating officer together with Solar Capital Partners LLC’s other investment professionals, advised Magnetar Financial LLC (“Magnetar”) on certain investments which coincide with those of Solar Capital. Certain entities affiliated with Magnetar own as of September 30, 2010 and December 31, 2009, either directly or indirectly, approximately 19.53% and 42.84%, respectively, of our outstanding equity.
 
F-27

Table of Contents
 
SOLAR CAPITAL LTD.
 
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
 
Schedule 12-14

Portfolio Company	 	Investment	 	 	As of
September 30,
2010 Number
of Shares/
Principal
Amount	 	 	Nine-Month Period ended
September 30, 2010	 	 	As of
September 30,
2010
Fair Value	 	 	
 	 	 	 	 	 	 	 	Amount of dividends
and interest included
in income	 	 	Amount of equity in
net profit and loss	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	 	 	Equity	  	 	 	1,000,000	  	 	$	300	 	 	$	—  	  	 	$	10,000	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	$	300	 	 	$	—  	  	 	$	10,000	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Senior Debt	  	 	$	—  	  	 	$	3,544	  	 	$	—  	  	 	$	—  	  	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Subordinated	  	 	$	—  	  	 	 	4,075	  	 	 	—  	  	 	 	—  	  	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Equity	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	 	Equity	  	 	 	34,806,121	  	 	 	—  	  	 	 	—  	  	 	 	24,966	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	$	7,619	  	 	$	—  	  	 	$	24,966	  	 	 	 	 	 	 	 	

The table below represents the balance at the beginning of the period, December 31, 2009 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of September 30, 2010.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair Value
December 31,
2009	 	  	Gross
additions	 	  	Gross
reductions	 	 	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
June 30,
2010	 	
National Specialty Alloys, LLC	  	$	9,000	  	  	$	—  	  	  	$	—  	  	 	$	1,000	 	 	$	10,000	  	
National Interest Security Corp.	  	 	26,152	  	  	 	—  	  	  	 	(24,740	)	 	 	(1,412	)	 	 	—  	  	
National Interest Security Corp.	  	 	31,303	  	  	 	—  	  	  	 	(30,230	)	 	 	(1,073	)	 	 	—  	  	
National Interest Security Corp.	  	 	16,293	  	  	 	—  	  	  	 	(2,126	)	 	 	(14,167	)	 	 	—  	  	
Ark Real Estate Partners LP	  	 	19,675	  	  	 	6,800	  	  	 	—  	  	 	 	(1,509	) 	 	 	24,966	  	
 
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Table of Contents
 
SOLAR CAPITAL LTD.
 
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
 
Schedule 12-14

Portfolio Company	  	Investment	 	  	As of December 31, 2009
Number of Shares
Principal Amount	 	  	Year ended
December 31, 2010	 	  	As of
December 31,
2009
Fair Value	 	 	
 	  	 	 	  	 	 	  	Amount of
dividends
and interest
included in
income	 	  	Amount of
equity in
net profit
and loss	 	  	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	  	 	Equity	  	  	 	1,000,000	  	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Investment Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Senior Debt	  	  	$	25,182	  	  	$	4,163	  	  	$	—  	  	  	$	26,152	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Subordinated	  	  	$	30,539	  	  	 	5,027	  	  	 	—  	  	  	 	31,303	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Equity	  	  	 	2,265,023	  	  	 	—  	  	  	 	—  	  	  	 	16,293	  	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	  	 	Equity	  	  	 	28,006,121	  	  	 	—  	  	  	 	—  	  	  	 	19,675	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	$	9,109	  	  	$	—  	  	  	$	93,423	  	 	 	 	 	 	 	 	

The table below represents the balance at the beginning of the period, December 31, 2008 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of December 31, 2009.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair  Value
December 31,
2008	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as  of
December 31,
2009	 	
National Specialty Alloys, LLC	  	$	12,900	  	  	$	—  	  	  	$	—  	  	  	$	(3,900	) 	 	$	9,000	  	
505 Capital Partners GP	  	 	30	  	  	 	—  	  	  	 	30	  	  	 	—  	  	 	 	—  	  	
National Interest Security Corp.	  	 	24,679	  	  	 	171	  	  	 	19	  	  	 	1,321	  	 	 	26,152	  	
National Interest Security Corp.	  	 	27,180	  	  	 	186	  	  	 	29	  	  	 	3,966	  	 	 	31,303	  	
National Interest Security Corp.	  	 	12,951	  	  	 	—  	  	  	 	—  	  	  	 	3,342	  	 	 	16,293	  	
Ark Real Estate Partners LP	  	 	24,619	  	  	 	—  	  	  	 	—  	  	  	 	(4,944	) 	 	 	19,675	  	
 
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PROSPECTUS

 
27,327,475 Shares
 
Solar Capital Ltd.
 
Common Stock

 
We are an externally managed finance company. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged companies, including middle-market companies, in the form of senior secured loans, mezzanine loans and equity securities.
 
We were formed in February 2007 as Solar Capital LLC, a Maryland limited liability company, and commenced operations in March 2007. On February 9, 2010, Solar Capital LLC was merged with and into Solar Capital Ltd., an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, or the 1940 Act. We are managed by Solar Capital Partners, LLC. Solar Capital Management, LLC provides the administrative services necessary for us to operate.
 
The selling stockholders named in this prospectus are subject to lock-up agreements. This registration statement has been filed to register the resale of the approximately 26.65 million shares of common stock issued to Solar Capital LLC unit holders prior to our initial public offering, the 0.60 million shares purchased by management in a private offering concurrent with our initial public offering, and shares distributed pursuant to our dividend reinvestment plan in relation to the aforementioned shares. We have committed to use our commercially reasonable efforts to obtain effectiveness of this registration statement within 120 days from the date of our initial public offering. Assuming effectiveness of this registration statement, approximately 17.5 million shares, 4.9 million shares, and 4.9 million shares of common stock will generally be free of resale restrictions upon the expiration of lock-up periods of 120 days, 180 days and 365 days from the date of our initial public offering, respectively.
 
Upon the expiration of these lock-up periods, the selling stockholders named in this prospectus may offer, from time to time, up to 27,327,475 shares of our common stock. The selling stockholders may sell the shares held for their own account or the shares may be sold by donees, transferees, pledgees or other successors in interest that receive such shares from the selling stockholders as a gift or other non-sale related transfer. The shares of common stock may be offered at prices and on terms to be described in one or more supplements to this prospectus.
 
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SLRC.” On May 7, 2010, the last reported sales price on the NASDAQ Global Select Market for our common stock was $21.74 per share.
 
This prospectus contains important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus before investing and keep it for future reference. We are required to file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information is available free of charge by contacting us by mail at 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670 or on our website at  http://www.solarcapltd.com . The Securities and Exchange Commission also maintains a website at  http://www.sec.gov  that contains such information. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.

 
An investment in our common stock is very risky and highly speculative. Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. In addition, the companies in which we invest are subject to special risks. See “Risk Factors” beginning on page 16 to read about factors you should consider, including the risk of leverage, before investing in our common stock.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
This prospectus may not be used to consummate sales of shares of common stock unless accompanied by a prospectus supplement.

 
May 12, 2010

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We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained in this prospectus or any prospectus supplement, if any, to this prospectus. You must not rely upon any information or representation not contained in this prospectus or any such supplements as if we had authorized it. This prospectus and any such supplements do not constitute an offer to sell or a solicitation of any offer to buy any security other than the registered securities to which they relate, nor do they constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The information contained in this prospectus and any such supplements is accurate as of the dates on their covers.

 
TABLE OF CONTENTS

  	  	Page	 	
Summary	  	 	1	  	
Fees and Expenses	  	 	12	  	
Selected Financial and Other Data	  	 	14	  	
Risk Factors	  	 	16	  	
Forward-Looking Statements and Projections	  	 	30	  	
Use of Proceeds	  	 	31	  	
Distributions	  	 	31	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	32	  	
Senior Securities	  	 	47	  	
Business	  	 	48	  	
Portfolio Companies	  	 	62	  	
Management	  	 	66	  	
Portfolio Management	  	 	73	  	
Investment Advisory and Management Agreement	  	 	74	  	
Administration Agreement	  	 	80	  	
License Agreement	  	 	80	  	
Certain Relationships and Transactions	  	 	81	  	
Control Persons and Principal Stockholders	  	 	82	  	
Regulation as a Business Development Company	  	 	83	  	
Determination of Net Asset Value	  	 	88	  	
Dividend Reinvestment Plan	  	 	90	  	
Material U.S. Federal Income Tax Considerations	  	 	92	  	
Description of Securities	  	 	99	  	
Shares Eligible for Future Sale	  	 	106	  	
Selling Stockholders	  	 	108	  	
Plan of Distribution	  	 	112	  	
Custodian, Transfer and Dividend Paying Agent and Registrar	  	 	114	  	
Brokerage Allocation and Other Practices	  	 	114	  	
Legal Matters	  	 	114	  	
Independent Registered Public Accounting Firm	  	 	114	  	
Available Information	  	 	115	  	
Index to Financial Statements	  	 	F-1	  	

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ABOUT THIS PROSPECTUS
 
This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission, or SEC, using the “shelf” registration process. Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act of 1933, as amended, or the Securities Act, the selling stockholders named herein may offer, from time to time, up to an aggregate of 27,327,475 shares of our common stock on the terms to be determined at the time of the offering. Shares of our common stock may be offered by the selling stockholders at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the shares of our common stock that the selling stockholders may offer. Each time a selling stockholder uses this prospectus to offer shares of our common stock, we will provide a prospectus supplement that will contain specific information about the terms of that offering. A prospectus supplement may also add, update or change information contained in this prospectus. Please carefully read this prospectus and any such supplements together with the additional information described under “Available Information” and in the “Summary” and “Risk Factors” sections before you make an investment decision. A prospectus supplement may also add to, update or change information contained in this prospectus.

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SUMMARY
 
This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this prospectus and the documents to which we have referred.
 
We were formed in February 2007 as Solar Capital LLC, a Maryland limited liability company, and commenced operations in March 2007. On February 9, 2010, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation, which we refer to as the “Solar Capital Merger,” concurrent with the pricing of our initial public offering. Except where the context suggests otherwise, the terms “we,” “us,” “our” and “Solar Capital” refer to Solar Capital LLC prior to the Solar Capital Merger, and Solar Capital Ltd. after the Solar Capital Merger. In addition, the terms “Solar Capital Partners” or “investment adviser” refer to Solar Capital Partners, LLC, and “Solar Capital Management” or the “administrator” refers to Solar Capital Management, LLC.
 
In this prospectus, we use the term “leveraged” to refer to companies of any size with non-investment grade debt outstanding or, if not explicitly rated, those which we believe would be rated as non-investment grade based on their leverage levels and other terms. In addition, we use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion.
 
As part of the Solar Capital Merger, approximately 26.65 million shares and $125 million in senior unsecured notes (the “Senior Unsecured Notes) were issued to the existing unitholders of Solar Capital LLC. Michael S. Gross, our Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, collectively purchased 600,000 shares of our common stock in connection with the consummation of our initial public offering. The shares were sold to Messrs. Gross and Spohler at the same offering price paid by investors in our initial public offering pursuant to a private placement transaction exempt from registration under the Securities Act of 1933, as amended, or the Securities Act (the “Concurrent Private Placement”). The shares being offered in this prospectus are the approximately 26.65 million shares issued in the Solar Capital Merger and the 600,000 shares issued in the Concurrent Private Placement, together with 80,163 shares issued thereon under our dividend reinvestment plan.
 
Solar Capital
 
Solar Capital Ltd., a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. In addition, for tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
 
On February 9, 2010 we priced our initial public offering, selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Concurrent with our initial public offering, management purchased an additional 0.6 million shares through the Concurrent Private Placement, also at $18.50 per share.
 
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital Ltd. had

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no assets or operations prior to completion of the Solar Capital Merger and as a result, the books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units of membership interest (“units”) in March 2007, at such time a total of 81.70 million units were outstanding. Solar Capital Investors, LLC, an entity funded by the management of Solar Capital Partners, the Company’s investment adviser, acquired approximately 3.33 million units in connection with the initial private placement. In addition, in connection with the initial private placement, certain funds managed by Magnetar Financial LLC (“Magnetar”) and certain entities affiliated therewith (collectively, the “Magnetar entities”), acquired approximately 35.00 million units.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners. Solar Capital Management provides the administrative services necessary for us to operate. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
As of March 31, 2010, our long term investments totaled $839.0 million and our net asset value was $730.4 million. Our portfolio was comprised of debt and equity investments in 33 portfolio companies and our income producing assets, which represent 92.2% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 13.9%.
 
During the three months ended March 31, 2010, we originated approximately $44.6 million of investments in one new and one existing portfolio company. We also received principal repayments of approximately $95.1 million and sold securities in 3 portfolio companies for approximately $20.5 million.
 
About Solar Capital Partners
 
Solar Capital Partners is controlled by Michael S. Gross, our chairman and chief executive officer, and is led by Mr. Gross and Bruce Spohler, our chief operating officer, and is supported by a team of 12 dedicated investment professionals, including Brian Gerson, Cedric Henley and David Mait. We refer to Messrs. Gross, Spohler, Gerson, Henley and Mait as Solar Capital Partners’ senior investment professionals. Solar Capital Partners’ investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. The investment team led by Messrs. Gross and Spohler has invested in 54 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 46 different financial sponsors, through March 31, 2010. Since Solar Capital’s inception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary community to originate direct investment opportunities.
 
Mr. Gross, the former chairman and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded, has over 20 years of experience in the private equity, distressed debt and mezzanine lending businesses and has been involved in originating, structuring, negotiating, consummating and managing private equity, distressed debt and mezzanine lending transactions.

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Mr. Gross is also a founder and a former senior partner of Apollo Management, L.P., a leading private equity firm. During his tenure at Apollo Management, L.P., Mr. Gross was a member of the investment committee that was responsible for overseeing more than $13 billion of investments in over 150 companies. Between February 2004 and February 2006, Mr. Gross was the president and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded and on whose board of directors and investment committee he served as chairman from February 2004 to July 2006. Under his management, Apollo Investment Corporation raised approximately $930 million in gross proceeds in an initial public offering in April 2004, built a dedicated investment team and infrastructure and invested approximately $2.3 billion in over 65 companies in conjunction with 50 different private equity sponsors. Mr. Gross was also the managing partner of Apollo Distressed Investment Fund, L.P., an investment fund he founded in 2003 to invest principally in debt and other securities of leveraged companies.
 
Mr. Gross also currently serves on the boards of directors of three public companies, and in the past has served on the boards of directors of more than 20 public and private companies. As a result, Mr. Gross has developed an extensive network of private equity sponsor relationships as well as relationships with management teams of public and private companies, investment bankers, attorneys and accountants that we believe should provide us with significant business opportunities.
 
We also rely on the more than 20 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since inception. Previously, Mr. Spohler was a managing director and a former co-head of U.S. Leveraged Finance for CIBC World Markets. He held numerous senior roles at CIBC World Markets, including serving on the U.S. Management Committee, Global Executive Committee and the Deals Committee, which approves all of CIBC World Markets’ U.S. corporate finance debt capital decisions. During Mr. Spohler’s tenure, he was responsible for senior loan, high yield and mezzanine origination and execution, as well as CIBC World Markets’ below investment grade loan portfolio in the United States. As a co-head of U.S. Leveraged Finance, Mr. Spohler oversaw over 300 capital raising and merger and acquisition transactions, comprising over $40 billion in market capitalization.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.
 
Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
Market Opportunity
 
Solar Capital invests primarily in senior secured loans, mezzanine loans and equity securities of leveraged companies organized and located in the United States. We believe that the size of the leveraged company market, coupled with the demands of these companies for flexible sources of capital at attractive terms and rates, create an attractive investment environment for us.
 
 	•	 	Middle-market companies have faced increasing difficulty in accessing the capital markets.    While many middle-market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult in recent years as institutional investors have sought to	

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 	invest in larger, more liquid offerings. In addition, many private finance companies that, until recently, financed their lending and investing activities through securitization transactions have lost that source of funding and cut back lending significantly.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their private investments.    We believe there is a large pool of uninvested private equity capital available to middle-market companies. While we expect the rate of investment to be slower than in prior periods, we expect that private equity firms will continue to be active investors in middle-market companies and that these private equity firms will seek to supplement their investments with senior and junior debt securities and loans and equity co-investments from other sources, such as Solar Capital.	
 
 	•	 	Middle-market companies are increasingly seeking private sources for debt and equity capital.    We believe that many middle-market companies prefer to execute transactions with private capital providers such as Solar Capital, rather than execute high-yield bond or equity transactions in the public markets, which may necessitate increased financial and regulatory compliance and reporting obligations. We expect that the volume of domestic “public-to-private” transactions, as well as the number of companies selecting a “sale” alternative versus raising capital in the public equity markets as a means of increasing liquidity, will remain large.	
 
 	•	 	Consolidation among commercial banks has reduced the focus on middle-market business.    We believe that many senior lenders have de-emphasized their service and product offerings to middle-market companies in favor of lending to large corporate clients, managing capital markets transactions and providing other non-credit services to their customers. We believe this has resulted in fewer key players and the reduced availability of debt capital to the companies we target.	
 
 	•	 	Current disruptions within the credit markets generally have brought a reduction in competition and a more lender-friendly environment.     Current credit market dislocation has caused many of the alternative methods of obtaining middle-market debt financing to significantly decrease in scope and availability while demand for financings has remained robust. We believe the segment’s strong growth prospects, combined with the growing demand for the capital and corporate finance and advisory services we offer, creates an attractive investment environment for us.	
 
Furthermore, we believe that given the credit market uncertainty, Solar Capital has a greater opportunity to move beyond middle-market deals into larger transactions, as banks are less willing to commit capital. We believe these larger deals can be structured with more attractive terms such as lower leverage, higher yields, better covenants, and longer duration than was typical before the current market dislocation.
 
Therefore, we believe that there is an opportunity to invest in senior secured loans, mezzanine loans and equity securities of leveraged companies and that we are well positioned to serve this market.
 
Competitive Advantages and Strategy
 
We believe that we have the following competitive advantages over other providers of financing to leveraged companies:
 
Management Expertise
 
As managing partner, Mr. Gross has principal management responsibility for Solar Capital Partners, to which he currently dedicates substantially all of his time. Mr. Gross has over 20 years of experience in leveraged finance, private equity and distressed debt investing. Mr. Spohler, our chief operating officer and a partner of Solar Capital Partners, has over 20 years of experience in evaluating and executing leverage finance transactions.

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We believe that Messrs. Gross and Spohler have developed a strong reputation in the capital markets, and that this experience provides us with a competitive advantage in identifying and investing in leveraged companies with the potential to generate returns. We believe that our investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. We believe that our investment team has a proven track record of valuing companies and assets and negotiating transactions.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.
 
Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
Investment Portfolio
 
Our portfolio investments consist of portfolio companies that have strong cash flows and have maintained financial and operating performance despite the recent economic climate. As of March 31, 2010, 100% of our total portfolio value was comprised of performing assets. The majority of our assets have been seasoned, which has allowed us to gain a solid understanding of our borrowers and the industries in which they compete. Additionally, over time, we have established productive relationships with our portfolio companies.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facility and the expected repayments of existing investments provide us with a substantial amount of capital available for deployment into new investment opportunities. We believe we are well positioned for the current marketplace. We believe that in the current economic environment financing needs of many companies will increase while funding options are limited, allowing us to capitalize on favorable investment opportunities.
 
Solar Capital’s Limited Leverage
 
As of March 31, 2010, our outstanding debt was approximately 13.5% of total assets, making us one of the least levered publicly traded business development companies. We believe our relatively low level of leverage provides us with a competitive advantage, allowing us to anticipate providing a consistent dividend to our investors as proceeds from our investments are available for reinvestment as opposed to being consumed by debt repayment. To the extent borrowing conditions improve and leverage becomes available on more attractive terms, we may increase our relative level of debt in the future. However, we do not currently anticipate operating with a substantial amount of debt relative to our total assets. Furthermore, by maintaining prudent leverage levels, we believe we will be better positioned to weather future market downturns.
 
Proprietary Sourcing and Origination
 
We believe that Solar Capital Partners’ senior investment professionals’ longstanding relationships with financial sponsors, commercial and investment banks, management teams and other financial intermediaries provide us with a strong pipeline of proprietary origination opportunities. We believe the broad expertise of Solar

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Capital Partners’ senior investment professionals and their ability to draw upon their average of 20 years of investment experience enable us to identify, assess and structure investments successfully. We expect to continue leveraging the relationships Mr. Gross established while sourcing and originating investments at Apollo Investment Corporation as well as the financial sponsor relationships Mr. Spohler developed while he was a co-head of CIBC World Markets’ U.S. Leveraged Finance Group.
 
Our investment team’s strong relationship network is enhanced by the collaborative role Solar Capital plays in the private equity industry. We offer tailored solutions to our portfolio companies, and we believe that this role provides us with greater deal flow as opposed to being viewed as a competitor bidding for control stakes. Because Solar Capital is not associated with a private equity firm, we are not precluded from partnering with most of the top tier financial sponsors.
 
These direct investments enable us to perform more in-depth due diligence and play an active role in structuring financings. We believe that effectuating the transaction terms and having greater insight into a portfolio company’s operations and financial picture assist Solar Capital in minimizing downside potential, while reinforcing Solar Capital as a trusted partner who delivers comprehensive financing solutions. Since our inception, Solar Capital Partners has sourced investments in 54 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 46 different financial sponsors, through March 31, 2010.
 
Versatile Transaction Structuring and Flexibility of Capital
 
We believe our senior investment professionals’ broad expertise and ability to draw upon their extensive experience enable us to identify, assess and structure investments successfully across all levels of a company’s capital structure and to manage potential risk and return at all stages of the economic cycle. While we will be subject to significant regulation as a business development company, we will not be subject to many of the regulatory limitations that govern traditional lending institutions such as banks. As a result, we believe that we can be more flexible than such lending institutions in selecting and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which we invest. We believe financial sponsors, management teams and investment banks see this flexibility as a benefit, making us an attractive financing partner. We believe that this approach enables us to procure attractive investment opportunities throughout the economic cycle so that we can make investments consistent with our stated investment objective even during turbulent periods in the capital markets.
 
Emphasis on Achieving Strong Risk-Adjusted Returns
 
Solar Capital Partners uses a disciplined investment and risk management process that emphasizes a rigorous fundamental research and analysis framework. Solar Capital Partners seeks to build our portfolio on a “bottom-up” basis, choosing and sizing individual positions based on their relative risk/reward profiles as a function of the associated downside risk, volatility, correlation with the existing portfolio and liquidity. At the same time, Solar Capital Partners takes into consideration a variety of factors in managing our portfolio and imposes portfolio-based risk constraints promoting a more diverse portfolio of investments and limiting issuer and industry concentration. Our value-oriented investment philosophy focuses on preserving capital and ensuring that our investments have an appropriate return profile in relation to risk. When market conditions make it difficult for us to invest according to our criteria, we are highly selective in deploying our capital. We do not pursue short-term origination targets. We believe this approach enables us to build an attractive investment portfolio that meets our return and value criteria over the long term.
 
We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through Solar Capital Partners, conduct a rigorous due diligence process that draws upon investment experience, industry expertise and network of contacts of our senior investment professionals, as well

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as the other members of our investment team. Among other things, our due diligence is designed to ensure that a prospective portfolio company will be able to meet its debt service obligations.
 
We have the ability to invest across an issuer’s capital structure, which we believe enables us to provide comprehensive financing solutions for our portfolio companies, as well as access the best risk-adjusted opportunities. The overall transaction size and product mix is based upon the needs of the customer, as well as our risk-return hurdles. We also focus on downside protection and preservation of capital throughout the structuring process.
 
Deep Industry Focus with Substantial Information Flow
 
We concentrate our investing activities in industries characterized by strong cash flow and in which Solar Capital Partners’ investment professionals have deep investment experience. During his time with the Apollo entities, Mr. Gross oversaw investments in over 200 companies in 20 industries. As a result of their investment experience, Messrs. Gross and Spohler, together with Solar Capital Partners’ other investment professionals, have long-term relationships with management consultants and management teams in the industries we target, as well as substantial information concerning those industries. Solar Capital Partners’ investment team also has significant experience in evaluating and making investments in the industries we target. We believe that the in-depth experience of Solar Capital Partners’ investment team in investing throughout various stages of the economic cycle provides our investment adviser with access to ongoing market insights in addition to a powerful asset for investment sourcing. See “Business — Investments.”
 
Longer Investment Horizon
 
Unlike private equity and venture capital funds, we will not be subject to standard periodic capital return requirements. Such requirements typically stipulate that the capital of these funds, together with any capital gains on such invested funds, can only be invested once and must be returned to investors after a pre-agreed time period. We believe that our flexibility to make investments with a long-term view and without the capital return requirements of traditional private investment vehicles provides us with the opportunity to generate favorable returns on invested capital and enables us to be a better long-term partner for our portfolio companies.
 
Risk Factors
 
The value of our assets, as well as the market price of our shares, will fluctuate. Our investments may be risky, and you may lose all or part of your investment in us. Investing in Solar Capital involves other risks, including the following:
 
 	•	 	We have a limited operating history of only three years;	
 
 	•	 	We are dependent upon Solar Capital Partners’ key personnel for our future success;	
 
 	•	 	We operate in a highly competitive market for investment opportunities;	
 
 	•	 	The lack of liquidity in our investments may adversely affect our business;	
 
 	•	 	We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us;	
 
 	•	 	To the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income;	
 
 	•	 	There will be uncertainty as to the value of our portfolio investments;	

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 	•	 	We may experience fluctuations in our quarterly results;	
 
 	•	 	We will become subject to corporate-level income tax on all of our income if we are unable to qualify as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, which would have a material adverse effect on our financial performance;	
 
 	•	 	We cannot assure you that the market price of shares of our common stock will not remain below our net asset value per share;	
 
 	•	 	Our common stock price may be volatile and may decrease substantially;	
 
 	•	 	There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time;	
 
 	•	 	Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock; and	
 
 	•	 	Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.	
 
See “Risk Factors” beginning on page 16, and the other information included in this prospectus and any accompanying prospectus supplement, for additional discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
 
Operating and Regulatory Structure
 
Immediately prior to the pricing of our initial public offering, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation that is an externally managed, non-diversified closed-end management investment company which has elected to be treated as a business development company under the 1940 Act. As a business development company, we are required to meet regulatory tests, including the requirement to invest at least 70% of our total assets in “qualifying assets.” Qualifying assets generally include, among other things, securities of “eligible portfolio companies.” “Eligible portfolio companies” generally include U.S. companies that are not investment companies and that do not have securities listed on a national exchange. See “Regulation as a Business Development Company.” We may also borrow funds to make investments. In addition, we intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. See “Material U.S. Federal Income Tax Considerations.”
 
Our investment activities are managed by Solar Capital Partners and supervised by our board of directors. Solar Capital Partners is an investment adviser that is registered under the Investment Advisers Act of 1940, as amended, or the Advisers Act. Under our investment advisory and management agreement, which we refer to as the Investment Advisory and Management Agreement, we have agreed to pay Solar Capital Partners an annual base management fee based on our gross assets as well as an incentive fee based on our performance. See “Investment Advisory and Management Agreement.” We have also entered into an administration agreement, which we refer to as the Administration Agreement, under which we have agreed to reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. See “Administration Agreement.”
 
Our Corporate Information
 
Our offices are located at 500 Park Avenue, 5th Floor, New York, New York 10022, and our telephone number is (212) 993-1670.

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THE OFFERING
 
Common Stock Offered by the Selling Shareholders	27,327,475 shares	
 
Common Stock Currently Outstanding	Approximately 33,030,641 shares.	
 
Use of Proceeds	We will not receive any proceeds from the sale of the shares of common stock covered by this prospectus.	
 
Distributions	To the extent that we have income available, we intend to distribute quarterly dividends to our stockholders. The amount of our dividends, if any, will be determined by our board of directors. Any dividends to our stockholders will be declared out of assets legally available for distribution. Our first quarterly dividend of $0.34 per share was paid on April 1, 2010 to holders of record as of March 18, 2010. On May 4, 2010, the Board of Directors declared a dividend of $0.60 per share payable on July 2, 2010 to stockholders of record on June 17, 2010. Shares offered in this prospectus will be entitled to receive this dividend payment. We anticipate that the dividend will be paid from post-offering taxable earnings, including interest and capital gains generated by our investment portfolio. However, if we do not generate sufficient taxable earnings during the year, the dividend may constitute a return of capital. The specific tax characteristics of our dividends will be reported to shareholders after the end of each calendar year.	
 
Taxation	We intend to elect to be treated for federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To obtain and maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Distributions” and “Material U.S. Federal Income Tax Considerations.”	
 
Investment Advisory Fees	We pay Solar Capital Partners a fee for its services under the Investment Advisory and Management Agreement consisting of two components — a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% of our gross assets, which includes any borrowings for investment purposes. The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20% of our “pre-incentive fee net investment income” for the immediately preceding quarter, subject to a preferred return, or “hurdle,” and a “catch up” feature.	

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 	The second part is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement) in an amount equal to 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, 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 fees. See “Investment Advisory and Management Agreement.”	
 
Administration Agreement	We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. In addition, we reimburse Solar Capital Management for the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of our chief financial officer and any administrative support staff. See “Administration Agreement.”	
 
Trading	Shares of closed-end investment companies frequently trade at a discount to their net asset value. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade above, at or below net asset value.	
 
License Agreement	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has agreed to grant us a non-exclusive license to use the name “Solar Capital.” See “License Agreement.”	
 
Dividend Reinvestment Plan	We have adopted an “opt out” dividend reinvestment plan. If your shares of common stock are registered in your own name, your distributions will automatically be reinvested under our dividend reinvestment plan in additional whole and fractional shares of common stock, unless you “opt out” of our dividend reinvestment plan so as to receive cash dividends by delivering a written notice to our plan administrator. If your shares are held in the name of a broker or other nominee, you should contact the broker or nominee for details regarding opting out of our dividend reinvestment plan. Stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan.”	
 
Certain Anti-Takeover Measures	Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us.	

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 	These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Description of Securities.”	
 
Available Information	We are required to file periodic reports, current reports, proxy statements and other information with the SEC. This information is available at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 and on the SEC’s website at  http://www.sec.gov.  The public may obtain information on the operation of the SEC’s public reference room by calling the SEC at (202) 551-8090. This information is also available free of charge by contacting us at Solar Capital Ltd., 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670 or on our website at  http://www.solarcapltd.com .	

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FEES AND EXPENSES
 
The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or “Solar Capital,” or that “we” will pay fees or expenses, you will indirectly bear such fees or expenses as an investor in Solar Capital Ltd.

Stockholder transaction expenses:	  	 	 	 	
Sales load (as a percentage of offering price)	  	 	    	%(1) 	
Offering expenses borne by us (as a percentage of offering price)	  	 	    	%(2) 	
Dividend reinvestment plan expenses	  	 	None	   (3) 	
 	  	 	 	 	
Total stockholder transaction expenses (as a percentage of offering price)	  	 	    	%(2) 	
 	 	
Annual expenses (as a percentage of net assets attributable to common stock):	  	 	 	 	
Base management fee	  	 	2.39	%(4) 	
Incentive fees payable under our Investment Advisory and Management Agreement	  	 	2.89	%(5) 	
Interest payments on borrowed funds	  	 	2.07	%(6) 	
Other expenses (estimated)	  	 	0.88	%(7) 	
 	  	 	 	 	
Total annual expenses (estimated)	  	 	8.23	% 	
 
Example
 
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above and have excluded performance-based incentive fees. See Note 6 below for additional information regarding certain assumptions regarding our level of leverage. In the event that shares to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load.

 	  	1 Year	 	  	3 Years	 	  	5 Years	 	  	10 Years	 	
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	  	$	53	  	  	$	160	  	  	$	265	  	  	$	526	  	
 
(1)	 	In the event that the shares of common stock to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load.	
(2)	 	The prospectus supplement corresponding to each offering will disclose the applicable offering expenses and total stockholder transaction expenses.	
(3)	 	The expenses of the dividend reinvestment plan are included in “other expenses.”	
(4)	 	Our base management fee under the Investment Advisory and Management Agreement is based on our gross assets, which is defined as all the assets of Solar Capital, including those acquired using borrowings for investment purposes, and assumes the base management fee remains consistent with the annualized fee incurred for the three months ended March 31, 2010. See “Investment Advisory and Management Agreement.”	
(5)	 	Assumes that annual incentive fees earned by our investment adviser, Solar Capital Partners, remain consistent with the annualized incentive fees earned by Solar Capital Partners for the three months ended March 31, 2010. The incentive fee consists of two parts:	
 
The first part, which is payable quarterly in arrears, equals 20% of the excess, if any, of our “Pre-Incentive Fee Net Investment Income” that exceeds a 1.75% quarterly (7.00% annualized) hurdle rate, which we refer to as the Hurdle, subject to a “catch-up” provision measured at the end of each calendar quarter. The first part of the incentive fee is computed and paid on income that may include interest that is accrued but not yet
received in cash. The operation of the first part of the incentive fee for each quarter is as follows:
 
 	•	 	no incentive fee is payable to our investment adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the Hurdle of 1.75%;	
 
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 	•	 	100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser. We refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the Hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide our investment adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a Hurdle did not apply when our Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter; and	
 	•	 	20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser (once the Hurdle is reached and the catch-up is achieved, 20% of all Pre-Incentive Fee Investment Income thereafter is allocated to our investment adviser).	
 
The second part of the incentive fee equals 20% of our “Incentive Fee Capital Gains,” if any, which equals our realized capital gains on a cumulative basis from inception through the end of each calendar year, 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 fees. The second part of the incentive fee is payable, in arrears, at the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date). For a more detailed discussion of the calculation of this fee, see “Investment Advisory and Management Agreement.”
 
(6)	 	We may borrow funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. The costs associated with our outstanding borrowings are indirectly born by our investors. For purposes of this section, we have computed interest expense using the average balance outstanding during the year ended, and the LIBOR rate on, March 31, 2010 and the interest rate on our amended and restated Senior Secured Revolving Credit Facility of LIBOR plus 3.25%. We have also included the estimated amortization of fees incurred in establishing our amended and restated Senior Secured Revolving Credit Facility. We also have approximately $125 million of the Senior Unsecured Notes outstanding. For purposes of this section we have included estimated annual interest expense as well as the amortization of any deferred costs associated with the Senior Unsecured Notes. As of March 31, 2010, we had no borrowings outstanding and $270 million remaining available to us under our revolving credit facility. We may also issue preferred stock, subject to our compliance with applicable requirements under the 1940 Act.	
 
(7)	 	“Other expenses” are based on the annualized amounts for the three months ended March 31, 2010 and include our overhead expenses, including payments under our Administration Agreement based on our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement. See “Administration Agreement.”	
 
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.  While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Management Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. In addition, the example assumes no sales load. Also, while the example assumes reinvestment of all dividends at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date, which may be at, above or below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.
 
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SELECTED FINANCIAL AND OTHER DATA
 
The selected financial and other data below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto. Financial information is presented for the period from March 13, 2007 (inception) through December 31, 2007, for the fiscal years ended December 31, 2008 and 2009, and for the three months ended March 31, 2010. Financial information for the periods ending 2007, 2008 and 2009 has been derived from our financial statements that were audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below for more information.

 	 	Three months ended
March 31, 2010
(unaudited)	 	 	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	Period from March 13,
2007 (inception) through
December 31, 2007	 	
 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	
Income statement data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	 	$	35,310	  	 	$	109,670	  	 	$	133,959	  	 	$	78,455	  	
Total expenses	 	 	14,199	  	 	 	42,408	  	 	 	46,560	  	 	 	25,461	  	
Net investment income	 	 	21,111	  	 	 	67,262	  	 	 	87,399	  	 	 	52,994	  	
Net realized loss	 	 	(22,243	) 	 	 	(264,898	)	 	 	(937	)	 	 	(10,489	)	
Net change in unrealized gain (loss)	 	 	63,136	  	 	 	284,572	  	 	 	(492,290	)	 	 	6,595	  	
Net increase (decrease) in net assets resulting from operations	 	 	62,004	  	 	 	86,936	  	 	 	(405,828	)	 	 	49,100	  	
Other data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average annualized yield on income producing investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
On fair value(1)(4)	 	 	13.9	% 	 	 	14.8	%	 	 	17.1	%	 	 	12.9	%	
On cost(2)(4)	 	 	13.3	% 	 	 	13.7	%	 	 	11.9	%	 	 	12.7	%	
Number of portfolio companies at period end(4)	 	 	33	  	 	 	36	  	 	 	44	  	 	 	38	  	

 	 	As of
March 31, 2010
(unaudited)	 	 	As of
December 31, 2009	 	 	As of
December 31, 2008	 	 	As of
December 31, 2007	 	
 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	 	(dollars in thousands)	 	
Balance sheet data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment portfolio	 	$	838,956	  	 	$	863,140	  	 	$	768,215	  	 	$	1,178,736	  	
Total cash and cash equivalents	 	 	60,363	  	 	 	5,675	  	 	 	65,841	  	 	 	169,692	  	
Total assets	 	 	928,743	  	 	 	885,421	  	 	 	873,026	  	 	 	1,396,545	  	
Credit facility payable	 	 	—  	  	 	 	88,114	  	 	 	—  	  	 	 	—  	  	
Senior unsecured notes	 	 	125,000	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Net assets	 	 	730,379	  	 	 	697,903	  	 	 	852,673	  	 	 	1,258,501	  	
Per share data:(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value per share	 	 	22.18	  	 	 	21.24	  	 	 	25.95	  	 	 	38.30	  	
Net investment income	 	 	0.64	  	 	 	2.05	  	 	 	2.66	  	 	 	1.62	  	
Net realized and unrealized gain (loss)	 	 	1.26	  	 	 	0.60	  	 	 	(15.01	) 	 	 	(0.12	) 	
Dividends and distributions declared	 	 	(0.34	) 	 	 	(7.36	) 	 	 	—  	  	 	 	—  	  	
Offering costs	 	 	(0.29	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of dilution	 	 	(0.33	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 
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(1)	 	Throughout this document, the weighted average yield on income producing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities, plus the effective interest yield on preferred shares divided by (b) total income producing investments at fair value. The weighted average yield is computed as of the balance sheet date and excludes assets on non-accrual status or on a cost recovery basis as of such date.	
(2)	 	For this calculation, the weighted average yield on income producing investments is computed as the (a) annual stated interest on accruing loans and debt securities plus the annual amortization of loan origination fees, original issue discount, and market discount on accruing loans and debt securities, plus the effective interest yield on preferred shares divided by (b) total income producing investments at cost. The weighted average yield is computed as of the balance sheet date and excludes assets on non-accrual status or on a cost recovery basis as of such date.	
(3)	 	The number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Solar Capital Merger. The per share calculations are based on 32,860,454 weighted average shares outstanding as of December 31, 2009, 2008, and 2007 and 32,928,257 shares and 32,553,322 weighted average shares outstanding as of March 31, 2010.	
(4)	 	Unaudited.	
 
Selected Quarterly Financial Data (Unaudited)
(dollar amounts in thousands, except per share data)

 	  	2009	 	
 	  	Q4	 	 	Q3	 	 	Q2	 	  	Q1	 	
Total investment income	  	$	28,456	  	 	$	27,785	  	 	$	25,252	  	  	$	28,177	  	
Net investment income (loss)	  	$	17,685	  	 	$	16,383	  	 	$	16,099	  	  	$	17,095	  	
Net realized and unrealized gain (loss)	  	$	22,271	  	 	$	22,181	  	 	$	17,899	  	  	$	(42,677	) 	
Net increase (decrease) in net assets resulting from operations	  	$	39,956	  	 	$	38,564	  	 	$	33,998	  	  	$	(25,582	) 	
Earnings per share(1)	  	$	1.22	  	 	$	1.17	  	 	$	1.04	  	  	$	(0.78	) 	
Net asset value per share at the end of the quarter(2)	  	$	21.24	  	 	$	22.30	  	 	$	23.61	  	  	$	22.57	  	
 	 	
 	  	2008	 	
 	  	Q4	 	 	Q3	 	 	Q2	 	  	Q1	 	
Total investment income	  	$	38,035	  	 	$	32,464	  	 	$	32,367	  	  	$	31,093	  	
Net investment income (loss)	  	$	22,080	  	 	$	21,990	  	 	$	21,305	  	  	$	22,024	  	
Net realized and unrealized gain (loss)	  	$	(339,193	) 	 	$	(108,641	) 	 	$	17,680	  	  	$	(63,073	) 	
Net increase (decrease) in net assets resulting from operations	  	$	(317,113	) 	 	$	(86,651	) 	 	$	38,985	  	  	$	(41,049	) 	
Earnings per share(1)	  	$	(9.65	) 	 	$	(2.64	) 	 	$	1.19	  	  	$	(1.25	) 	
Net asset value per share at the end of the quarter(2)	  	$	25.95	  	 	$	35.60	  	 	$	38.24	  	  	$	37.05	  	
 
(1)	 	Based on 32,860,454 weighted average shares of Solar Capital Ltd. outstanding during each respective quarter.	
(2)	 	Based on 32,860,454 shares of Solar Capital Ltd. outstanding as of the end of the respective quarter.	
 
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RISK FACTORS
 
Before you invest in our common stock, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to make an investment in our common stock. The risks set out below are not the only risks we face. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value could decline, and you may lose all or part of your investment.
 
Risks Related to Our Investments
 
We operate in a highly competitive market for investment opportunities.
 
A number of entities compete with us to make the types of investments that we target in leveraged companies. We compete with public and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Additionally, because competition for investment opportunities generally has increased during the past several years among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested in, including making investments in leveraged companies. As a result of these new entrants, competition for investment opportunities at leveraged companies has generally intensified during the past several years, and we expect the trend to continue after the current recession has ended. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we do, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
 
We do not seek to compete primarily based on the interest rates we will offer, and we believe that some of our competitors may make loans with interest rates that will be comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss.
 
Our investments are very risky and highly speculative.
 
We invest primarily in senior secured term loans, mezzanine debt and select equity investments issued by leveraged companies.
 
Senior Secured Loans. When we make a senior secured term loan investment in a portfolio company, we generally take a security interest in the available assets of the portfolio company, including the equity interests of its subsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may
be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.
 
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Mezzanine Loans. Our mezzanine debt investments are generally subordinated to senior loans and are generally unsecured. As such, other creditors may rank senior to us in the event of an insolvency. This may result in an above average amount of risk and loss of principal.
 
Equity Investments. When we invest in senior secured loans or mezzanine loans, we may acquire equity securities as well. In addition, we may invest directly in the equity securities of portfolio companies. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
 
In addition, investing in middle-market companies involves a number of significant risks, including:
 
 	•	 	these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;	
 
 	•	 	they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;	
 
 	•	 	they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;	
 
 	•	 	they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and	
 
 	•	 	they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.	
 
The lack of liquidity in our investments may adversely affect our business.
 
We generally make investments in private companies. Substantially all of these securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.
 
Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
 
Our portfolio may be concentrated in a limited number of portfolio companies and industries. Beyond the asset diversification requirements associated with our qualification as a RIC under Subchapter M of the Code, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries, our investments may be concentrated in relatively few industries. As a result, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the
 
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value of any one investment. Additionally, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize.
 
We are currently in a period of capital markets disruption and recession and we do not expect these conditions to improve in the near future.
 
The U.S. capital markets have been experiencing extreme volatility and disruption for more than 2 years and the U.S. economy is currently in a period of recession. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. We believe these conditions may continue for a prolonged period of time or worsen in the future. A prolonged period of market illiquidity may have an adverse effect on our business, financial condition and results of operations. Unfavorable economic conditions could also increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results.
 
The current economic recession could impair our portfolio companies and harm our operating results.
 
Certain of our portfolio companies may be susceptible to the current recession and may be unable to repay our loans during this period. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during this period. The current adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. The current recession could lead to financial losses in our portfolio and a decrease in revenues, net income and the value of our assets.
 
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
 
Price declines and illiquidity in the corporate debt markets have adversely affected, and may continue to adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
 
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The continuing unprecedented declines in prices and liquidity in the corporate debt markets have resulted in significant net unrealized depreciation in our portfolio, reducing our net asset value. Depending on market conditions, we could continue to incur substantial losses in future periods, which could further reduce our net asset value and have a material adverse impact on our business, financial condition and results of operations.
 
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
 
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to: (i) increase or maintain in whole or in part our equity ownership percentage; (ii) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. We will have the
 
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discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, either because we prefer other opportunities or because we are subject to BDC requirements that would prevent such follow-on investments or the desire to maintain our RIC tax status.
 
Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
 
Although we may do so in the future, we do not currently hold controlling equity positions in our portfolio companies. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.
 
An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.
 
We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of Solar Capital Partners’ investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.
 
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
 
We invest primarily in senior secured loans, mezzanine loans and equity securities issued by our portfolio companies. Our portfolio companies typically have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
 
Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
 
Our investment strategy contemplates potential investments in debt securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S.
 
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companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
 
Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.
 
We may expose ourselves to risks if we engage in hedging transactions.
 
If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transaction may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.
 
Our investment adviser may not be able to achieve the same or similar returns as those achieved by our senior investment professionals while they were employed at prior positions.
 
Although in the past Mr. Gross held senior positions at a number of investment firms, including Apollo Investment Corporation and Apollo Management, L.P., Mr. Gross’ track record and achievements are not necessarily indicative of future results that will be achieved by our investment adviser. In his role at such other firms, Mr. Gross was part of an investment team, and he was not solely responsible for generating investment ideas. In addition, such investment teams arrived at investment decisions by consensus.
 
Risks Relating to an Investment in Our Securities
 
Our shares may trade at a substantial discount from net asset value and may continue to do so over the long term.
 
Shares of closed-end investment companies have frequently traded at a market price that is less than the net asset value that is attributable to those shares. In part as a result of the current economic environment and increasing pressure within the financial sector of which we are a part, our common stock has traded below our net asset value per share since the pricing of our initial public offering on February 9, 2010. The possibility that our shares of common stock will trade at a substantial discount from net asset value over the long term is separate and distinct from the risk that our net asset value will decrease. We cannot predict whether shares of our common stock will trade above, at or below our net asset value. If our common stock trades below its net asset value, we will generally not be able to issue additional shares or sell our common stock at its market price without first obtaining the approval for such issuance from our stockholders and our independent directors. If additional funds are not available to us, we could be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted.
 
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Our common stock price may be volatile and may decrease substantially.
 
The trading price of our common stock may fluctuate substantially. The price of our common stock that will prevail in the market may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:
 
 	•	 	price and volume fluctuations in the overall stock market from time to time;	
 
 	•	 	investor demand for our shares;	
 
 	•	 	significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of these companies;	
 
 	•	 	changes in regulatory policies or tax guidelines with respect to RICs or business development companies;	
 
 	•	 	failure to qualify as a RIC, or the loss of RIC status;	
 
 	•	 	any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;	
 
 	•	 	changes, or perceived changes, in the value of our portfolio investments;	
 
 	•	 	departures of Solar Capital Partners’ key personnel;	
 
 	•	 	operating performance of companies comparable to us; or	
 
 	•	 	general economic conditions and trends and other external factors.	
 
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
 
There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time.
 
We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us as a business development company, we may be limited in our ability to make distributions.
 
Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
 
All of the approximately 26.65 million shares of our common stock that were issued to holders of equity interests of Solar Capital LLC in the Solar Capital Merger and the 600,000 shares that were issued to Messrs. Gross and Spohler in a private placement transaction concurrent with our initial public offering are subject to lock-up periods ranging from 120 to 365 days. Upon expiration of these lock-up periods, or earlier upon the consent of Citigroup Global Markets Inc. or J.P. Morgan Securities Inc., such shares will generally be freely tradable in the public market, subject to the provisions of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
 
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Risks Relating to Our Business and Structure
 
We have an operating history of only three years.
 
We were formed in February 2007 and commenced operations in March 2007. As a result of our relatively short operating history, we are subject to many of the business risks and uncertainties associated with more recently formed businesses, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially.
 
We are dependent upon Solar Capital Partners’ key personnel for our future success.
 
We depend on the diligence, skill and network of business contacts of Messrs. Gross and Spohler, who serve as the managing member and a partner of Solar Capital Partners, respectively, and who lead Solar Capital Partners’ investment team. Messrs. Gross and Spohler, together with the other dedicated investment professionals available to Solar Capital Partners, evaluate, negotiate, structure, close and monitor our investments. Our future success will depend on the continued service of Messrs. Gross and Spohler and the other investment professionals available to Solar Capital Partners. We cannot assure you that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his relationship with us. The loss of Mr. Gross or Mr. Spohler, or any of the other senior investment professionals who serve on Solar Capital Partners’ investment team, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we can offer no assurance that Solar Capital Partners will remain our investment adviser.
 
The senior investment professionals of Solar Capital Partners are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us, and may have conflicts of interest in allocating their time. We expect that Messrs. Gross and Spohler will dedicate a significant portion of their time to the activities of Solar Capital; however, they may be engaged in other business activities which could divert their time and attention in the future.
 
An extended continuation of the disruption in the capital markets and the credit markets could negatively affect our business.
 
As a BDC, we must maintain our ability to raise additional capital for investment purposes. Without sufficient access to the capital markets or credit markets, we may be forced to curtail our business operations or we may not be able to pursue new business opportunities. Since the middle of 2007, the capital markets and the credit markets have been experiencing extreme volatility and disruption and, accordingly, there has been and will continue to be uncertainty in the financial markets in general. Ongoing disruptive conditions in the financial industry and the impact of new legislation in response to those conditions could restrict our business operations and could adversely impact our results of operations and financial condition.
 
If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act. Any such failure would affect our ability to issue senior securities, including borrowings, and pay dividends, which could materially impair our business operations. Our liquidity could be impaired further by an inability to access the capital markets or to draw on our credit facilities. For example, we cannot be certain that we will be able to renew our credit facilities as they mature or to consummate new borrowing facilities to provide capital for normal operations, including new originations. Reflecting concern about the stability of the financial markets, many lenders and institutional investors have reduced or ceased providing funding to borrowers. This market turmoil and tightening of credit have led to increased market volatility and widespread reduction of business activity generally.
 
If we are unable to renew or replace such facilities and consummate new facilities on commercially reasonable terms, our liquidity will be reduced significantly. If we are unable to repay amounts outstanding under such facilities and are declared in default or are unable to renew or refinance these facilities, we would not be
 
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able to initiate significant originations or to operate our business in the normal course. These situations may arise due to circumstances that we may be unable to control, such as inaccessibility to the credit markets, a severe decline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or us, and could materially damage our business. Moreover, we are unable to predict when economic and market conditions may become more favorable. Even if such conditions improve broadly and significantly over the long term, adverse conditions in particular sectors of the financial markets could adversely impact our business.
 
Our financial condition and results of operations will depend on our ability to manage future growth effectively.
 
Our ability to achieve our investment objective and to grow depends on Solar Capital Partners’ ability to identify, invest in and monitor companies that meet our investment criteria.
 
Accomplishing this result on a cost-effective basis is largely a function of Solar Capital Partners’ structuring of the investment process, its ability to provide competent, attentive and efficient services to us and its ability to access financing for us on acceptable terms. The investment team of Solar Capital Partners has substantial responsibilities under the Investment Advisory and Management Agreement, and they may also be called upon to provide managerial assistance to our portfolio companies as the principals of our administrator. Such demands on their time may distract them or slow our rate of investment. In order to grow, we and Solar Capital Partners will need to retain, train, supervise and manage new investment professionals. However, we can offer no assurance that any such investment professionals will contribute effectively to the work of the investment adviser. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
 
Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.
 
The 1940 Act imposes numerous constraints on the operations of BDC’s. For example, BDC’s are required to invest at least 70% of their total assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed on BDC’s by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, upon approval of a majority of our stockholders, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we may be subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly decrease our operating flexibility, and could significantly increase our costs of doing business.
 
Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
 
We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss.
 
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As of March 31, 2010, we had no borrowings outstanding under our revolving credit facility and approximately $125 million of Senior Unsecured Notes. If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
 
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our board of directors determines that such sale is in the best interests of Solar Capital and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution.
 
We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.
 
The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. As of March 31, 2010, we had no borrowings outstanding under our revolving credit facility and approximately $125 million of Senior Unsecured Notes. We may borrow from and issue senior debt securities to banks, insurance companies and other lenders in the future. Lenders of these senior securities, including our revolving credit facility and our outstanding senior unsecured notes, will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to make dividend payments on our common stock. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Solar Capital Partners, will be payable based on our gross assets, including those assets acquired through the use of leverage, Solar Capital Partners will have a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to Solar Capital Partners.
 
As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. If this ratio declines below 200%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ will depend on our investment adviser’s and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.
 
In addition, our revolving credit facility and our outstanding senior unsecured notes impose, and any other debt facility into which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
 
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As of March 31, 2010, we had no borrowings outstanding under our revolving credit facility and approximately $125 million of Senior Unsecured Notes.
 
Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on the portfolio, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

 	  	Assumed total return on our portfolio
(net of expenses)	 	
 	  	(10)%	 	 	(5)%	 	 	0%	 	 	5%	 	 	10%	 	
Corresponding return to stockholder(1)	  	 	(12.92	)% 	 	 	(7.14	)% 	 	 	(1.36	)% 	 	 	4.42	% 	 	 	10.19	% 	
 
(1)	 	Assumes $928.7 million in total assets and $125 million in total debt outstanding, which reflects our total assets and total debt outstanding as of March 31, 2010, and a cost of funds of 8.75%. Excludes non-leverage related liabilities.	
 
To the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
 
To the extent we borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.
 
You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income.
 
As of March 31, 2010, we had no borrowings outstanding under our revolving credit facility and approximately $125 million of Senior Unsecured Notes.
 
There will be uncertainty as to the value of our portfolio investments.
 
A large percentage of our portfolio investments are in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We value these securities on a quarterly basis in accordance with our valuation policy, which is at all times consistent with GAAP. Our board of directors utilizes the services of third-party valuation firms to aid it in determining the fair value of these securities. The board of directors discusses valuations and determines the fair value in good faith based on the input of our investment adviser and the respective third-party valuation firms. The factors that may be considered in fair value pricing our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparisons to publicly traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.
 
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We may experience fluctuations in our quarterly results.
 
We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt securities we acquire, the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
 
There are significant potential conflicts of interest which could impact our investment returns.
 
Our executive officers and directors, as well as the current and future partners of our investment adviser, Solar Capital Partners, may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do. Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations might not be in the best interests of us or our stockholders. In addition, we note that any affiliated investment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, Solar Capital Partners may face conflicts in allocating investment opportunities between us and such other entities. Although Solar Capital Partners will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by our investment adviser or an investment manager affiliated with our investment adviser. In any such case, when Solar Capital Partners identifies an investment, it will be forced to choose which investment fund should make the investment.
 
If our investment adviser forms other affiliates in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with applicable regulations and regulatory guidance and our allocation procedures.
 
In the course of our investing activities, we pay management and incentive fees to Solar Capital Partners and reimburse Solar Capital Partners for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of Solar Capital Partners has interests that differ from those of our stockholders, giving rise to a conflict.
 
We have entered into a royalty-free license agreement with our investment adviser, pursuant to which our investment adviser has granted us a non-exclusive license to use the name “Solar Capital.” Under the license agreement, we have the right to use the “Solar Capital” name for so long as Solar Capital Partners or one of its affiliates remains our investment adviser. In addition, we pay Solar Capital Management, an affiliate of Solar Capital Partners, our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of our chief financial officer and any administrative support staff. These arrangements create conflicts of interest that our board of directors must monitor.
 
Our relationship with Magnetar may create conflicts of interest.
 
Certain funds managed by Magnetar, which we refer to as the Magnetar entities, own as of May 10, 2010, either directly or indirectly, 23.81% of our outstanding shares of common stock. Magnetar also provides certain services to Solar Capital Partners and Solar Capital Management, and is reimbursed by Solar Capital Partners and Solar Capital Management for the expenses it incurs in connection with providing such services.
 
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Our incentive fee may induce Solar Capital Partners to pursue speculative investments.
 
The incentive fee payable by us to Solar Capital Partners may create an incentive for Solar Capital Partners to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to our investment adviser is calculated based on a percentage of our return on invested capital. This may encourage our investment adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock. In addition, the investment adviser receives the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, the investment adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.
 
The incentive fee payable by us to our investment adviser also may induce Solar Capital Partners to invest on our behalf in instruments that have a deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current distributions to our shareholders. Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest. Thus, a portion of this incentive fee would be based on income that we have not yet received in cash. In addition, the “catch-up” portion of the incentive fee may encourage Solar Capital Partners to accelerate or defer interest payable by portfolio companies from one calendar quarter to another, potentially resulting in fluctuations in timing and dividend amounts.
 
We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to Solar Capital Partners with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our stockholders will bear his or her share of the management and incentive fee of Solar Capital Partners as well as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.
 
We will become subject to corporate-level income tax if we are unable to qualify and maintain our qualification as a regulated investment company under Subchapter M of the Code.
 
Although we intend to elect to be treated as a RIC under Subchapter M of the Code for 2010 and succeeding tax years, no assurance can be given that we will be able to qualify for and maintain RIC status. To obtain and maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.
 
 	•	 	The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we may use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.	
 
 	•	 	The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of stock or securities or similar sources.	
 
 	•	 	The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet those requirements may result in our having	
 
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 	to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.	
 
If we fail to qualify for RIC tax treatment for any reason and remain or become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.
 
We may have difficulty satisfying the annual distribution requirement in order to qualify and maintain RIC status if we recognize income before or without receiving cash representing such income.
 
For federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, or contracted “payment in kind,” or PIK, interest, which represents contractual interest added to the loan balance and due at the end of the loan term. We also may be required to include in income certain other amounts that we will not receive in cash.
 
Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the annual distribution requirement applicable to RICs. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investments to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus be subject to corporate-level income tax.
 
Our board of directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
 
Under Maryland General Corporation Law and our charter, our board of directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. The cost of any such reclassification would be borne by our existing common stockholders. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. We currently have no plans to issue preferred stock. The issuance of preferred shares convertible into shares of common stock might also reduce the net income and net asset value per share of our common stock upon conversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act, including obtaining common stockholder approval. These effects, among others, could have an adverse effect on your investment in our common stock.
 
Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
 
The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of Solar Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our board of
 
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directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.
 
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our board of directors in three classes serving staggered three-year terms, and authorizing our board of directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our charter without stockholder approval and to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.
 
Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
 
Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the 1940 Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.
 
Changes in laws or regulations governing our operations may adversely affect our business.
 
We and our portfolio companies are subject to regulation by laws at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations could have a material adverse affect on our business.
 
Our investment adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
 
Our investment adviser has the right, under the Investment Advisory and Management Agreement, to resign at any time upon not less than 60 days’ written notice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.
 
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FORWARD-LOOKING STATEMENTS AND PROJECTIONS
 
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Solar Capital, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
 
 	•	 	an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;	
 
 	•	 	a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;	
 
 	•	 	interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;	
 
 	•	 	currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and	
 
 	•	 	the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus and in our filings with the SEC.	
 
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. The forward-looking statements and projections contained in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act.
 
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USE OF PROCEEDS
 
We will not receive any proceeds from the sale of the shares of common stock covered by this prospectus.
 
DISTRIBUTIONS
 
We intend to distribute quarterly dividends to our stockholders. Our quarterly dividends, if any, will be determined by our board of directors.
 
On May 4, 2010, our Board of Directors declared a second quarter dividend of $0.60 per share, payable on July 2, 2010 to stockholders of record on June 17, 2010.
 
We intend to elect to be taxed as a RIC under Subchapter M of the Code. To obtain and maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (  i.e. , net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
 
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
 
We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in current and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our RIC status. We cannot assure stockholders that they will receive any dividends and distributions or dividends and distributions at a particular level.
 
All dividends declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive dividends in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The information contained in this section should be read in conjunction with the Selected Financial and Other Data and our Financial Statements and notes thereto appearing elsewhere in this prospectus.
 
Overview
 
Solar Capital Ltd., a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for tax purposes the Company intends to elect to be treated as a RIC under Subchapter M of the Code.
 
On February 9, 2010, we priced our initial public offering selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Net of underwriting fees we raised a total of $97.7 million and our shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, we sold 0.60 million shares at $18.50 in the Concurrent Private Placement.
 
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Solar Capital Merger and as a result, the books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units in March 2007, at such time a total of 81.70 million units were outstanding. Solar Capital Investors, LLC, an entity funded by the management of Solar Capital Partners, the Company’s investment adviser, acquired approximately 3.33 million units in connection with the initial private placement. In addition, in connection with the initial private placement, certain funds managed by Magnetar and certain entities affiliated therewith, acquired approximately 35.00 million units.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners. Solar Capital Management provides the administrative services necessary for us to operate.
 
In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
As of March 31, 2010, our long term investments totaled $839.0 million and our net asset value was $730.4 million. Our portfolio was comprised of debt and equity investments in 33 portfolio companies and our income producing assets, which represent 92.2% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 13.9%.
 
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Recent Developments
 
Dividend
 
On May 4, 2010, our Board of Directors declared a second quarter dividend of $0.60 per share, payable on July 2, 2010 to stockholders of record on June 17, 2010.
 
Current Market Environment
 
There have been significant developments in the worldwide capital markets recently. We have entered into a period of disruption as evidenced by a lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of certain major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events have contributed to worsening general economic conditions that are materially and adversely impacting the broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole.
 
These recent events have temporarily, and in some cases permanently, forced a number of capital providers to reduce or even eliminate their exposure to leveraged loans and bonds. As a result, the market has experienced significant contraction in liquidity over the last year and lenders that remain active in the market have, to date, benefited from a broad re-pricing of risk, rationalization of leverage levels, and generally favorable deal terms.
 
As a result of the continuing credit crisis, the spread between the yields realized on risk-free and higher risk securities has increased, resulting in illiquidity in parts of the capital markets. These conditions, as well as the current recession, may continue for a prolonged period of time or worsen in the future. A prolonged period of market illiquidity may have an adverse effect on our business, financial condition, and results of operations. Unfavorable economic conditions could also increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results.
 
Critical Accounting Policies
 
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.
 
Valuation of Portfolio Investments
 
We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail below:
 
Securities for which market quotations are readily available on an exchange are valued at the closing price on the day of valuation. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or board of directors, does not represent fair value, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio
 
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investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the board of directors will conduct independent appraisals and review management’s preliminary valuations and make their own assessment for all material assets; (iv) the board of directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.
 
The recommendation of fair value will generally be based on the following factors, as relevant:
 
 	•	 	the nature and realizable value of any collateral;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business; and	
 
 	•	 	comparisons to publicly traded securities.	
 
Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:
 
 	•	 	private placements and restricted securities that do not have an active trading market;	
 
 	•	 	securities whose trading has been suspended or for which market quotes are no longer available;	
 
 	•	 	debt securities that have recently gone into default and for which there is no current market;	
 
 	•	 	securities whose prices are stale;	
 
 	•	 	securities affected by significant events; and	
 
 	•	 	securities that the investment adviser believes were priced incorrectly.	
 
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
 
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities and exchange-traded derivatives).
 
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	 	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	 	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);	
 
 	c)	 	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and	
 
 	d)	 	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.	
 
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Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
 
At March 31, 2010 the fair value of investments classified as Level 3 was $768.2 million or 83% of total assets. No assets were transferred into Level 3 during the three months ended March 31, 2010.
 
At December 31, 2009 the fair value of investments classified as Level 3 was $794.7 million or 90% of total assets. One investment with a fair value of $33.8 million was transferred into Level 3 from Level 2 during 2009 because there were no longer third party market quotes available for use in its valuation.
 
Revenue Recognition
 
Our revenue recognition policies are as follows:
 
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
 
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. We have loans in our portfolio that contain a PIK provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates. For us to maintain our status as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends, even though we have not collected any cash with respect to PIK securities.
 
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment about ultimate collectability of principal. 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.
 
New Accounting Pronouncements and Accounting Standards Updates
 
Fair Value Measurements and Disclosures
 
We adopted the accounting updates to ASC 820, Fair Value Measurements and Disclosures Topic, which clarify how to estimate fair value when the volume and level of activity for the asset or liability have significantly decreased, circumstances that indicate a transaction is not orderly, and how to determine the fair value of a liability. It emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique used, the objective of a fair value measurement remains the same that the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. The adoption of these updates did not have a material impact on our financial statements.
 
In January 2010, the FASB issued an update to ASC 820, which will require additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the
 
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disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
 
Derivatives and Hedging
 
We adopted the accounting update to ASC 815, Derivative and Hedging Topic, which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and
amounts of gains and losses on derivative contracts and disclosures about credit-risk-related contingent features in derivative agreements. The adoption did not have a material impact on our financial statements.
 
Subsequent Events
 
We adopted ASC 855, Subsequent EventsTopic, which requires that management evaluate events and transactions that may occur for potential recognition or disclosure in the financial statements after the balance sheet date through the date the financial statements are issued and clarifies the circumstances under which such events or transactions must be recognized in the financial statements. The adoption did not have a material impact on our financial statements.
 
Per Share Computations
 
For periods prior to February 9, 2010, the share count used in all share-based computations, including NAV per share and earnings per share, has been decreased retroactively by a factor of approximately 0.4022, representing the rate at which shares of Solar Capital Ltd common stock were exchanged for units of Solar Capital LLC prior to the initial public offering.
 
Portfolio Investments — at March 31, 2010
 
At March 31, 2010, we had investments in securities of 33 portfolio companies with a total fair value of approximately $839.0 million. During the quarter ended March 31, 2010, we originated approximately $44.6 million of investments in one new and one existing portfolio company. We also received principal repayments of approximately $95.1 million and sold securities in 3 portfolio companies for approximately $20.5 million. At December 31, 2009 we had investments in securities of 36 portfolio companies with a total fair value of approximately $863.1 million. During the quarter ended March 31, 2009, we invested approximately $2.5 million in one existing portfolio company, had approximately $0.2 million in debt repayments in 3 portfolio companies, and a sale of securities in 1 portfolio company for approximately $8.9 million.
 
In addition, for the three months ended March 31, 2010 we had net unrealized and realized gains on 27 portfolio company investments totaling approximately $43.7 million, which was offset by net unrealized and realized losses on 8 portfolio company investments totaling approximately $6.5 million. For the three months ended March 31, 2009 we had net unrealized and realized gains on 13 portfolio company investments totaling approximately $28.2 million, which was offset by net unrealized and realized losses on 29 portfolio company investments totaling approximately $73.6 million. At March 31, 2010, we had investments in debt and preferred securities of 27 portfolio companies, totaling approximately $788.1 million, and equity investments in 9 portfolio companies, totaling approximately $50.9 million. At December 31, 2009, we had investments in debt and preferred securities of 31 portfolio companies, totaling approximately $805.5 million, and equity investments in 10 portfolio companies, totaling approximately $57.6 million.
 
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The following table shows the fair value of our portfolio of investments by asset class as of March 31, 2010 and December 31, 2009:

 	  	March 31, 2010
(unaudited)	 	  	December 31, 2009	 	
(in thousands)	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	151,942	  	  	$	146,007	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt/Corporate Notes	  	 	710,616	  	  	 	641,999	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	40	  	  	 	39	  	  	 	40	  	
Common Equity/Partnership Interests/Warrants	  	 	112,696	  	  	 	50,910	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	975,293	  	  	$	838,956	  	  	$	1,063,988	  	  	$	863,140	  	

As of March 31, 2010, the weighted average yield on income producing investments in our portfolio was approximately 13.9%, compared to 14.8% at December 31, 2009. The decrease in yield this quarter was primarily due to the increase in fair value of assets since December 2009.
 
As of March 31, 2010, there were no investments on non-accrual status. Of the non-accrual assets at December 31, 2009, assets of two portfolio companies were sold prior to the IPO and the third was exchanged for equity of the portfolio company in a restructuring. In addition we had 3 assets, with a total market value of $14.2 million, that were performing but cash interest payments have been applied as principal payments (“cost-recovery assets”), rather than being included in interest income because management believes, at this time, it is unlikely there will be full repayment of principal.
 
Portfolio Investments — 2009 Annual
 
The total value of our investments was approximately $863.1 million at December 31, 2009, $768.2 million at December 31, 2008, and $1.2 billion at December 31, 2007. During the year ended December 31, 2009, we originated approximately $134.2 million of investments in 3 new portfolio companies and approximately $29.6 million in 4 existing portfolio companies. For the year ended December 31, 2008, we originated approximately $157.7 million of investments in 6 new portfolio companies and approximately $35.6 million in existing portfolio companies. From March 13, 2007 (inception) through December 31, 2007, referred to as our 2007 operating period, we originated approximately $846 million all from new investments in 27 portfolio companies. The foregoing amounts are in addition to the approximately $478 million of portfolio investments, originated by certain investment professionals at Magnetar who are currently a part of Solar Capital Partners’ investment team, that we acquired from the Magnetar entities prior to and immediately following the initial private placement.
 
In certain instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of certain debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. Our portfolio activity also reflects sales of securities. For the year ended December 31, 2009, we received proceeds of approximately $38.6 million from principal repayments and approximately $78.3 million in sales of securities in 12 portfolio companies. For the year ended December 31, 2008, we had approximately $92.2 million of debt repayments in 7 portfolio companies and sales of securities in 5 portfolio companies of approximately $35.6 million.
 
In addition, for the year ended December 31, 2009 we had net unrealized and realized gains on 31 portfolio company investments totaling approximately $140.8 million, which was offset by net unrealized and realized losses on 16 portfolio company investments totaling approximately $106.6 million. During the year ended December 31, 2008, we had unrealized appreciation on 1 portfolio company investment totaling approximately $7.1 million, which was more than offset by unrealized depreciation on 43 portfolio company investments totaling approximately $503.4 million. During the year ended December 31, 2008 we also had a realized loss of $16.9 million, a majority of which was from 1 portfolio company.
 
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At December 31, 2009, we had investments in debt and preferred securities of 31 portfolio companies, totaling approximately $805.5 million, and equity investments in 10 portfolio companies, totaling approximately $57.6 million. At December 31, 2008, we had investments in debt and preferred securities of 36 portfolio companies, totaling approximately $685 million, and equity investments, including options, in 17 portfolio companies, totaling approximately $83.2 million.
 
The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2009, 2008 and 2007:

 	  	December 31, 2009	 	  	December 31, 2008	 	  	December 31, 2007	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	170,896	  	  	$	163,499	  	  	$	250,473	  	  	$	146,907	  	  	$	312,077	  	  	$	302,628	  	
Subordinated Debt/Corporate Notes	  	 	778,163	  	  	 	641,992	  	  	 	751,116	  	  	 	531,949	  	  	 	619,203	  	  	 	617,738	  	
Preferred Equity	  	 	39	  	  	 	40	  	  	 	61,101	  	  	 	6,145	  	  	 	55,299	  	  	 	55,299	  	
Common Equity/Partnership Interests/Warrants	  	 	114,890	  	  	 	57,609	  	  	 	194,044	  	  	 	76,016	  	  	 	184,336	  	  	 	203,071	  	
Put/Call Options Purchased or Written	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	7,198	  	  	 	—  	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,063,988	  	  	$	863,140	  	  	$	1,256,734	  	  	$	768,215	  	  	$	1,170,915	  	  	$	1,178,736	  	

As of December 31, 2009, and December 31, 2008, the weighted average yield on income producing investments in our portfolio was approximately 14.8% and 17.1%, respectively. The weighted average yield on income producing investments was lower as of December 31, 2009 due to the increase in fair value of these assets since December 2008 and a decline in the average LIBOR rates applicable to our LIBOR-based income producing assets.
 
As of December 31, 2009 we had 3 portfolio companies on non-accrual status that all had a fair value of zero. In addition we had 3 assets that were performing but interest payments are being applied as principal payments, rather than being included in interest income because management believes, at this time, it is unlikely there will be full repayment of principal.
 
Results of Operations for the Quarter Ended March 31, 2010 compared to the Quarter Ended March 31, 2009
 
Revenue

 	  	Three Months Ended
March 31,	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	35,310	  	  	$	28,177	  	  	 	25	% 	
 
The increase in investment income for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 was primarily due to prepayment premiums received and accelerated amortization of fees as a result of debt assets repaying before maturity. This increase was partially offset by lower average LIBOR rates, a lower average invested balance and interest not recognized on the cost-recovery assets. Three month LIBOR rates fell below 0.25% preceding the first quarter of 2010 compared to comparable rates near 1.5% heading into the first quarter of 2009.
 
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Expenses

 	  	Three Months Ended
March 31,	 	  	% Change	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Performance-based incentive fee	  	$	5,279	  	  	$	4,274	  	  	 	24	% 	
Investment advisory and management fees	  	 	4,366	  	  	 	4,073	  	  	 	7	% 	
Interest and other credit facility expenses	  	 	2,951	  	  	 	731	  	  	 	304	% 	
Administrative service fee	  	 	453	  	  	 	604	  	  	 	(25	%) 	
Other general and administrative expenses	  	 	1,069	  	  	 	921	  	  	 	16	% 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	14,118	  	  	$	10,603	  	  	 	33	% 	

The performance-based incentive fee was higher for the three months ended March 31, 2010 primarily due higher investment income resulting from prepayment premiums received and accelerated amortization of fees as a result of debt assets repaying before maturity. Investment advisory and management fees, which are calculated based on average gross assets, were comparable period over period.
 
Interest and other credit facility expenses were higher for the three months ended March 31, 2010 primarily due to higher average debt balances outstanding during the period, including the newly issued Senior Unsecured Notes, and higher fee amortization expense related to the establishment of the Senior Unsecured Notes and the amended and restated credit facility during the quarter. In addition, the amendment to our credit facility on February 12, 2010 increased the base rate spread by 1.00% during the first quarter of 2009.
 
The combination of administrative service fees and other general and administrative expenses was comparable period over period.
 
Net Realized and Unrealized Gains and Losses

 	  	Three Months Ended
March 31,	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized (loss) investments	  	$	(27,331	) 	 	$	(22,656	) 	
Net realized gain forward contracts	  	 	1,552	  	 	 	8,948	  	
Net realized gain (loss) foreign currency exchange	  	 	3,536	  	 	 	(29	) 	
Net unrealized gain (loss) investments	  	 	64,511	  	 	 	(22,832	) 	
Net unrealized (loss) forward contracts	  	 	(771	) 	 	 	(5,700	) 	
Net unrealized (loss) foreign currency exchange	  	 	(604	) 	 	 	(408	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain (loss)	  	$	40,893	  	 	$	(42,677	) 	

The combination of the net realized and unrealized gains or losses on investments resulted in a net gain of $37.1 million for the first quarter of 2010 compared to a net loss of $45.5 million for the same period in 2009. The net gain during the first quarter of 2010 was primarily due to increases in the fair value of our portfolio assets during the period as well as realizations in excess of prior valuations. The net increase in the fair value of our portfolio assets was primarily due to continued credit improvement in the portfolio, the tightening of credit spreads in the high yield market and anticipated near-term realizations. The net loss during the first quarter of 2009 was primarily due to overall weakening in the economy during period resulting in lower portfolio asset values.
 
The realization of gains or losses previously recognized as unrealized gains or losses has no impact on current period earnings. During the three months ended March 31, 2010, losses were realized on the sale or exchange of three debt assets and were partially offset by gains on the sale of one equity investment. During the three months ended March 31, 2009, losses were realized upon the bankruptcy of one portfolio company.
 
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We have exposure to foreign currencies (Euro, British Pounds and Australian dollars) through various investments. Those investments are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in exchange rates we enter into foreign exchange forward contracts or borrow under our multi-currency revolving credit facility in those currencies. For the first quarter of 2010 the total net realized and unrealized gain on forward contracts and foreign currency exchange was $3.7 million compared to $2.8 million for the same line items in the first quarter of 2009. This is due to a greater relative strengthening of the U.S. dollar during the first quarter 2010 compared to the same period in 2009.
 
Results of Operations for the Year Ended December 31, 2009 compared to the Year Ended December 31, 2008
 
Revenue

 	  	For the Year Ended
December 31,	 	  	%
Change	 	
 	  	2009	 	  	2008	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	109,670	  	  	$	133,959	  	  	 	(18	)%	
 
The decrease in investment income for the year ended December 31, 2009 compared to the year ended December 31, 2008 was primarily due to the placement of certain assets on nonaccrual status and lower average LIBOR rates. In addition, call premiums paid as a result of debt assets repaying before maturity were $0.8 million in 2009 compared to $5.6 million in 2008. This was partially offset by an increase in income from the amortization of market and original issues discounts to $6.5 million in 2009 compared to $1.7 million in 2008.
 
Expenses

 	  	Year Ended
December 31,	 	  	%
Change	 	
 	  	2009	 	  	2008	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Performance-based incentive fee	  	$	16,815	  	  	$	9,008	  	  	 	87	%	
Investment advisory and management fees	  	 	16,738	  	  	 	24,297	  	  	 	(31	)%	
Interest and other credit facility expenses	  	 	2,636	  	  	 	3,343	  	  	 	(21	)%	
Administrative service fee	  	 	2,020	  	  	 	3,430	  	  	 	(41	)%	
Other general and administrative expenses	  	 	3,971	  	  	 	4,853	  	  	 	(18	)%	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	42,180	  	  	$	44,931	  	  	 	(6	)%	

Investment advisory and management fees, which are calculated based on average gross assets, were lower in 2009 primarily due to the reduced average fair value of our investment portfolio. The performance-based incentive fee was higher in 2009 primarily because the return on the fair value of net assets exceeded the 8.75% annualized hurdle rate for the entire year, rather than a part of the year. (See “Investment Advisory Fees” in Item 1. Business, for the details on these calculations.) Total expenses decreased by approximately $2.8 million for the year ended December 31, 2009 compared to the same period in 2008.
 
Interest and other credit facility expenses were lower in 2009 compared to 2008 due to lower average LIBOR rates and because a large portion of the amortization of set-up costs associated with the facilities ended in the first quarter of 2009 as the Company’s other credit facility (the Warehouse Facility) expired. This was partially offset by an increase in the average debt outstanding on the Credit Facility to $29.0 million in 2009 compared to $10.3 million in 2008 and an increase in the margin on the Credit Facility to BR plus 2.50% and ABR plus 1.50% from BR plus 1.375% and ABR plus 0.00% in an amendment to the Credit Facility on September 25, 2009.
 
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The decrease in administrative service fees and other general and administrative expenses in 2009 compared to 2008 is primarily due to a reduction in corporate overhead and a decrease in unincorporated business tax.
 
Net Realized and Unrealized Gains and Losses

 	  	Year Ended December 31,	 	
 	  	2009	 	 	2008	 	
 	  	(in thousands)	 	
Net realized gain (loss) investments	  	$	(253,394	)	 	$	(16,878	) 	
Net realized gain (loss) forward contracts	  	 	(12,608	)	 	 	13,086	  	
Net realized loss foreign currency exchange	  	 	1,104	  	 	 	2,915	  	
Net unrealized gain (loss) investments	  	 	287,671	  	 	 	(496,340	)	
Net unrealized gain forward contracts	  	 	(2,583	)	 	 	4,087	  	
Net unrealized gain (loss) foreign currency exchange	  	 	(516	)	 	 	(37	)	
 	  	 	 	 	 	 	 	 	
Total net realized and unrealized gain (loss) before taxes	  	$	19,674	  	 	$	(493,167	)	

The net realized loss on investments during 2009 was primarily due to the realization of losses reflected in the mark-to-market of the portfolio during 2008. Four common and preferred equity positions that had a combined fair value of $8.2 million at December 31, 2008 resulted in a realized loss of $121.6 million in 2009. Six debt investments that had a combined fair value of $55.3 million at December 31, 2008 also resulted in a realized loss of $123.7 million during 2009.
 
The increase in unrealized gains on investments for 2009 was primarily due to the recognition of realized losses previously recorded as unrealized losses and an increase in the fair value of our assets during 2009 compared to an overall weakening in the economy during the same period in 2008.
 
The combination of the net realized loss and net unrealized gain on investments in 2009 resulted in a net gain of $34.3 million due to the increase in the fair value of our portfolio. The combination of the same line items in 2008 resulted in a net loss of $513.2 million in 2008 due to the decrease in the fair value of our portfolio.
 
Additionally, we have exposure to foreign currencies (Euro, British Pounds and Australian dollars) through various investments. Those investments are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in exchange rates we enter into foreign exchange forward contracts or borrow under our multi-currency revolving credit facility in those currencies. For 2009 the relative weakening of the U.S. dollar resulted in net realized/unrealized losses on forward contracts compared to a relative strengthening of the U.S. dollar in the same period in 2008 which resulted in net realized/unrealized gains on forward contracts.
 
Income Tax

 	  	Year Ended
December 31,	 	  	 	 	
 	  	2009	 	  	2008	 	  	%
Change	 	
 	  	(in thousands)	 	  	 	 	
Income tax expense on net investment income	  	$	228	  	  	$	1,692	  	  	 	(87	)%	
Income tax expense (benefit) on realized gain (loss)	  	 	—  	  	  	 	60	  	  	 	(100	)%	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total income tax expense (benefit)	  	$	228	  	  	$	2,242	  	  	 	 	 	

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Solar Capital LLC was subject to New York City unincorporated business tax (UBT), which is imposed on the business income of every unincorporated business that is carried on in New York City. The UBT is imposed for each taxable year at a rate of 4 percent of taxable income that is allocable to New York City. There was no UBT for 2009 and the estimated 2008 UBT was approximately $1.6 million.
 
We are also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, we pay a corporate income tax and a municipal business tax on our subsidiary’s taxable income.
 
As a U.S. corporation, Solar Capital Ltd., is not subject to unincorporated business tax.
 
Results of Operations for the Year Ended December 31, 2008 compared to the Period from March 13, 2007 (inception) to December 31, 2007
 
Revenue

 	  	Year Ended
December 31, 2008	 	  	Period From
March 13
inception) to
December 31,
2007	 	  	%
Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	133,959	  	  	$	78,455	  	  	 	71	%	
 
The increase in interest income for the year ended December 31, 2008 compared to the period ended December 31, 2007 was primarily due to twelve months of income during 2008 versus a partial year in 2007 and a higher average invested balance versus outstanding cash during 2008. The average cash balance during the period ended December 31, 2007 was $530.3 million compared to $40.3 million in 2008.
 
Operating Expenses

 	  	Year Ended
December 31,
2008	 	  	Period From
March 13
(inception) to
December 31,
2007	 	  	%
Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	24,297	  	  	$	19,719	  	  	 	23	%	
Performance-based incentive fee	  	 	9,008	  	  	 	—  	  	  	 	—  	  	
Interest and other credit facility expenses	  	 	3,343	  	  	 	—  	  	  	 	—  	  	
Administrative service fee	  	 	3,430	  	  	 	1,474	  	  	 	133	%	
Other general and administrative expenses	  	 	4,853	  	  	 	3,579	  	  	 	36	%	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	44,931	  	  	$	24,772	  	  	 	81	%	

Almost two-thirds of the $20.2 million increase in total operating expenses during 2008 was attributable to the recognition of the performance-based incentive fee, as the respective hurdle rates were surpassed, and increased interest and other credit facility expenses related to credit facilities established during 2008. Investment advisory and management fees were higher in 2008 primarily because 2008 included a full year of expense versus a partial year in 2007. Other general and administrative expenses and administrative service fees also increased during 2008 due to the partial year comparison and the build out of our corporate infrastructure.
 
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Net Realized and Unrealized Gains and Losses

 	  	Year Ended
December 31,
2008	 	 	Period From
March 13
(inception) to
December 31,
2007	 	
 	  	(in thousands)	 	
Net realized gain (loss) investments	  	$	(16,878	)	 	$	(3,557	)	
Net realized gain (loss) forward contracts	  	 	13,086	  	 	 	(7,125	)	
Net realized gain (loss) foreign currency exchange	  	 	2,915	  	 	 	12	  	
Net unrealized gain (loss) investments	  	 	(496,340	)	 	 	7,821	  	
Net unrealized gain (loss) forward contracts	  	 	4,087	  	 	 	(1,235	)	
Net unrealized gain (loss) foreign currency exchange	  	 	(37	)	 	 	9	  	
 	  	 	 	 	 	 	 	 	
Total net realized and unrealized gain (loss) before taxes	  	$	(493,167	)	 	$	(4,075	)	

The increase in unrealized losses on investments for the year ended December 31, 2008 was primarily due to significantly lower fair value determinations on many of our investments. Lower fair values were driven primarily by the general market dislocation, illiquidity in the capital markets, and lower market prices for comparable publicly traded debt. Fair values were lower across all investment types.
 
We have exposure to foreign currencies (Euro, British Pounds and Australian dollars) through various investments. These investments are converted into U.S. dollars at the balance sheet date, exposing us to movements in exchange rates. To limit our exposure to fluctuations in exchange rates, we enter into foreign exchange forward contracts or borrow in those currencies under our multi-currency revolving credit facility. For the year ended December 31, 2008, the strengthening of the U.S. dollar resulted in net realized and unrealized gains from forward contracts of $13.1 million and $4.1 million, respectively, and a $2.9 million gain on the repayment of foreign denominated borrowings. For the period ended December 31, 2007, the relative weakening of the U.S. dollar resulted in net realized and unrealized losses.
 
Income Tax

 	  	Year Ended
December 31,
2008	 	  	Period From
March 13
(inception) to
December 31,
2007	 	 	%
Change	 	
 	  	(in thousands)	 	 	 	 	
Income tax expense on net investment income	  	$	1,629	  	  	$	689	  	 	 	136	%	
Income tax expense (benefit) on realized gain (loss)	  	 	60	  	  	 	(181	)	 	 	133	%	
 	  	 	 	 	  	 	 	 	 	 	 	 	
Total income tax expense (benefit)	  	$	1,689	  	  	$	508	  	 	 	 	 	

Solar Capital LLC was subject to New York City unincorporated business tax (UBT), which is imposed on the business income of every unincorporated business that is carried on in New York City. The UBT is imposed for each taxable year at a rate of 4 percent of taxable income that is allocable to New York City. Estimated UBT for the years ended December 31, 2008 and 2007 was approximately $1.6 million and $0.4 million, respectively.
 
We are also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, we pay a corporate income tax and a municipal business tax on our subsidiary’s taxable income.
 
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Liquidity and Capital Resources
 
Our liquidity is generated and generally available through our multi-currency $270 million revolving credit facility maturing in February 2013, from cash flows from operations, investment sales of liquid assets, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and we expect through periodic follow-on equity offerings. On February 9, 2010, we priced our initial public offering selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Net of underwriting fees we raised a total of $97.7 million and our shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, we sold 0.60 million shares at $18.50 in the Concurrent Private Placement to management. The primary use of our liquidity is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
 
At March 31, 2010 and December 31, 2009, we had cash and cash equivalents of approximately $60.4 million and $5.7 million, respectively. Cash provided by operating activities for the quarters ended March 31, 2010 and 2009 was approximately $107.7 million and $19.6 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
 
Credit Facility and Senior Unsecured Notes
 
Credit Facility. In February 2010, Solar Capital Ltd. amended and restated its Senior Secured Revolving Credit Facility (the “Credit Facility”) with Citibank, N.A. and various lenders. Citibank, N.A. also serves as administrative agent for the lenders. Citigroup Global Markets Inc. acted as the sole lead bookrunner and the sole lead arranger for the Credit Facility. Under the terms of the Credit Facility, the lenders agreed to extend credit to Solar Capital in an aggregate principal or face amount not exceeding $270 million at any one time outstanding. The Credit Facility also allows the Company and the lenders to provide for a commitment increase to an amount not greater than $600 million. The Credit Facility is a three-year multi-currency revolving facility (with a stated maturity date in February 2013) and is secured by substantially all of the assets of Solar Capital’s investment portfolio. Interest rate options include Base Rate (“BR”) loans, indexed to currency specific LIBOR, and Alternate Base Rate (“ABR”) loans, indexed to the Prime or Fed Funds rates. Borrowings bear interest at a rate per annum equal to the BR plus 3.25% and ABR plus 2.25%. The Credit Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity, a minimum leverage ratio and a minimum debt to total assets ratio. The Credit Facility will be used to supplement Solar Capital’s equity capital to make additional investments and for other general corporate purposes.
 
Senior Unsecured Notes. In February 2010, Solar Capital Ltd. issued $125 million of Senior Unsecured Notes. The Senior Unsecured Notes bear interest at a rate of 8.75% per annum, are payable quarterly in cash, and will mature in February 2014. The Senior Unsecured Notes are redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, we must use the net cash proceeds from the issuance of any other senior unsecured notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject us to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) we will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes were issued contains customary events of default.
 
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Certain covenants may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
 
Contractual Obligations
The table below presents a summary of our significant contractual payment obligations as of March 31, 2010:

 	  	Payments due by period	 	
(in millions)	  	Total	 	  	Less than
1 Year	 	  	1-3
Years	 	  	3-5
Years	 	  	More Than
5 Years	 	
Senior secured revolving credit facility(1)	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	
Senior Unsecured Notes	  	$	125.0	  	  	$	—  	  	  	$	—  	  	  	$	125.0	  	  	$	—  	  	
 
(1)	 	As of March 31, 2010, we had $270.0 million of unused borrowing capacity under our credit facility.	
 
The table below presents a summary of our significant contractual payment obligations as of December 31, 2009:

 	  	Payments due by period	 	
(in millions)	  	Total	 	  	Less than
1 year	 	  	1-3
years	 	  	3-5
years	 	  	More than
5 years	 	
Senior secured revolving credit facility(1)	  	$	88.1	  	  	 	—  	 	  	$	88.1	  	  	 	—  	  	  	 	—  	 	
 
(1)	 	As of December 31, 2009, we had $111.9 million of unused borrowing capacity under our credit facility.	
 
We have certain commitments pursuant to our Investment Advisory and Management Agreement entered into with Solar Capital Partners. We have agreed to pay a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. Payments under the Investment Advisory and Management Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. See Item 1. Business—Investment Advisory and Management Agreement. We have also entered into a contract with Solar Capital Management to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Solar Capital Management’s overhead in performing its obligation under the agreement, including rent, fees, and other expenses inclusive of our allocable portion of the compensation of our chief financial officer and any administrative staff.
 
Off-Balance Sheet Arrangements
 
In the normal course of its business, we trade various financial instruments and may enter into various investment activities with off-balance sheet risk, which include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Statement of Assets and Liabilities.
 
Borrowings
 
We had borrowings of $88.1 million and $0 outstanding as of December 31, 2009 and 2008, respectively, under the Credit Facility. See “Credit Facility” for a description of the Credit Facility. Since completion of our initial public offering we also have approximately $125 million of the Senior Unsecured Notes outstanding.
 
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Distributions and Dividends
 
On May 4, 2010, our Board of Directors declared a second quarter dividend of $0.60 per share, payable on July 2, 2010 to stockholders of record on June 17, 2010.
 
On January 26, 2010, our board of directors declared a quarterly dividend of $0.60 per share, prorated for the number of days remaining in the first quarter after our initial public offering. As a result, the first quarterly dividend was $0.34 per share, on a pro-rated basis, and was paid on April 1, 2010 to holders of record as of March 18, 2010.
 
During the first quarter of 2009, we agreed to make certain specified distributions to the Solar Capital LLC unit holders on a periodic basis to the extent we had not yet completed our initial public offering. In accordance therewith, on March 17, 2009, we made a pro rata distribution to the then existing Solar Capital LLC unit holders. This distribution was equal to 10% of our December 31, 2008 net asset value and totaled approximately $85.3 million, or $1.04 per outstanding unit. On October 28, 2009 we made another pro rata distribution, declared in September 2009, to the then existing Solar Capital LLC unit holders. This distribution was equal to 10% of our September 30, 2009 net asset value and totaled approximately $81.4 million, or $1.00 per outstanding unit. In December 2009, Solar Capital LLC declared a $75 million cash distribution, which was paid to the then existing Solar Capital LLC unit holders on a pro-rata basis on January 29, 2010.
 
Related Parties
 
We have entered into a number of business relationships with affiliated or related parties, including the following:
 
 	•	 	We have entered into an Investment Advisory and Management Agreement with Solar Capital Partners. Mr. Gross, our chairman and chief executive officer, is the managing member and a senior investment professional of, and has financial and controlling interests in, Solar Capital Partners. In addition, Mr. Spohler, our chief operating officer is a partner and a senior investment professional of, and has financial interests in, Solar Capital Partners.	
 
 	•	 	Solar Capital Management provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and any administrative support staff. Solar Capital Partners, our investment adviser, is the sole member of and controls Solar Capital Management.	
 
 	•	 	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
 
 	•	 	Magnetar entities own as of May 10, 2010, approximately 23.81% of our outstanding shares of common stock.	
 
Solar Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. Solar Capital Partners and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures.
 
In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
 
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SENIOR SECURITIES
 
Information about our senior securities is shown in the following tables as of December 31, 2009, 2008 and 2007. The report of our independent registered public accounting firm on the senior securities table as of December 31, 2009 is attached as an exhibit to the registration statement of which this prospectus is a part.

Class and Year	  	Total Amount
Outstanding
Exclusive of
Treasury
Securities (1)	 	  	Asset Coverage
Ratio Per Unit (2)	 	  	Involuntary
Liquidation
Preference Per
Unit (3)	 	  	Average Market
Value Per
Unit (4)	 	
Revolving Credit Facility	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2009	  	$	88,114	  	  	$	8,920	  	  	 	—  	  	  	 	N/A	  	
2008	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
2007	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
 
(1)	 	Total amount of each class of senior securities outstanding at the end of the period presented.	
(2)	 	Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.	
(3)	 	The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the Securities and Exchange Commission expressly does not require this information to be disclosed for certain types of senior securities.	
(4)	 	Not applicable because senior securities are not registered for public trading.	

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BUSINESS
 
Solar Capital
 
Solar Capital Ltd. a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for tax purposes the Company intends to elect to be treated as a RIC under Subchapter M of the Code.
 
On February 9, 2010 we priced our initial public offering, selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 0.6 million shares through the Concurrent Private Placement, also at $18.50 per share.
 
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Solar Capital Merger and as a result, the books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units in March 2007, at such time a total of 81.70 million units were outstanding. Solar Capital Investors, LLC, an entity funded by the management of Solar Capital Partners, the Company’s investment adviser, acquired approximately 3.33 million units in connection with the initial private placement. In addition, in connection with the initial private placement, certain funds managed by Magnetar and certain entities affiliated therewith, acquired approximately 35.00 million units.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners. Solar Capital Management provides the administrative services necessary for us to operate. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
As of March 31, 2010, our long term investments totaled $839.0 million and our net asset value was $730.3 million. Our portfolio was comprised of debt and equity investments in 33 portfolio companies and our income producing assets, which represent 92.2% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 13.9%.
 
During the three months ended March 31, 2010, we originated approximately $44.6 million of investments in one new and one existing portfolio company. We also received principal repayments of approximately $95.1 million and sold securities in 3 portfolio companies for approximately $20.5 million.
 
About Solar Capital Partners
 
Solar Capital Partners is controlled by Michael S. Gross, our chairman and chief executive officer, and is led by Mr. Gross and Bruce Spohler, our chief operating officer, and is supported by a team of 12 dedicated investment professionals, including Brian Gerson, Cedric Henley and David Mait. We refer to Messrs. Gross,
 
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Spohler, Gerson, Henley and Mait as Solar Capital Partners’ senior investment professionals. Solar Capital Partners’ investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. The investment team led by Messrs. Gross and Spohler has invested in 54 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 46 different financial sponsors, through March 31, 2010. Since Solar Capital’s inception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary community to originate direct investment opportunities.
 
Mr. Gross, the former chairman and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded, has over 20 years of experience in the private equity, distressed debt and mezzanine lending businesses and has been involved in originating, structuring, negotiating, consummating and managing private equity, distressed debt and mezzanine lending transactions.
 
Mr. Gross is also a founder and a former senior partner of Apollo Management, L.P., a leading private equity firm. During his tenure at Apollo Management, L.P., Mr. Gross was a member of the investment committee that was responsible for overseeing more than $13 billion of investments in over 150 companies. Between February 2004 and February 2006, Mr. Gross was the president and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded and on whose board of directors and investment committee he served as chairman from February 2004 to July 2006. Under his management, Apollo Investment Corporation raised approximately $930 million in gross proceeds in an initial public offering in April 2004, built a dedicated investment team and infrastructure and invested approximately $2.3 billion in over 65 companies in conjunction with 50 different private equity sponsors. Mr. Gross was also the managing partner of Apollo Distressed Investment Fund, L.P., an investment fund he founded in 2003 to invest principally in debt and other securities of leveraged companies.
 
Mr. Gross also currently serves on the boards of directors of three public companies, and in the past has served on the boards of directors of more than 20 public and private companies. As a result, Mr. Gross has developed an extensive network of private equity sponsor relationships as well as relationships with management teams of public and private companies, investment bankers, attorneys and accountants that we believe should provide us with significant business opportunities.
 
We also rely on the more than 20 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since inception. Previously, Mr. Spohler was a managing director and a former co-head of U.S. Leveraged Finance for CIBC World Markets. He held numerous senior roles at CIBC World Markets, including serving on the U.S. Management Committee, Global Executive Committee and the Deals Committee, which approves all of CIBC World Markets’ U.S. corporate finance debt capital decisions. During Mr. Spohler’s tenure, he was responsible for senior loan, high yield and mezzanine origination and execution, as well as CIBC World Markets’ below investment grade loan portfolio in the United States. As a co-head of U.S. Leveraged Finance, Mr. Spohler oversaw over 300 capital raising and merger and acquisition transactions, comprising over $40 billion in market capitalization.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.
 
Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
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Market Opportunity
 
Solar Capital invests primarily in senior secured loans, mezzanine loans and equity securities of leveraged companies organized and located in the United States. We believe that the size of the leveraged company market, coupled with the demands of these companies for flexible sources of capital at attractive terms and rates, create an attractive investment environment for us.
 
 	•	 	Middle-market companies have faced increasing difficulty in accessing the capital markets.    While many middle-market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult in recent years as institutional investors have sought to invest in larger, more liquid offerings. In addition, many private finance companies that, until recently, financed their lending and investing activities through securitization transactions have lost that source of funding and cut back lending significantly.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their private investments.    We believe there is a large pool of uninvested private equity capital available to middle-market companies. While we expect the rate of investment to be slower than in prior periods, we expect that private equity firms will continue to be active investors in middle-market companies and that these private equity firms will seek to supplement their investments with senior and junior debt securities and loans and equity co-investments from other sources, such as Solar Capital.	
 
 	•	 	Middle-market companies are increasingly seeking private sources for debt and equity capital.    We believe that many middle-market companies prefer to execute transactions with private capital providers such as Solar Capital, rather than execute high-yield bond or equity transactions in the public markets, which may necessitate increased financial and regulatory compliance and reporting obligations. We expect that the volume of domestic “public-to-private” transactions, as well as the number of companies selecting a “sale” alternative versus raising capital in the public equity markets as a means of increasing liquidity, will remain large.	
 
 	•	 	Consolidation among commercial banks has reduced the focus on middle-market business.    We believe that many senior lenders have de-emphasized their service and product offerings to middle-market companies in favor of lending to large corporate clients, managing capital markets transactions and providing other non-credit services to their customers. We believe this has resulted in fewer key players and the reduced availability of debt capital to the companies we target.	
 
 	•	 	Current disruptions within the credit markets generally have brought a reduction in competition and a more lender-friendly environment.     Current credit market dislocation has caused many of the alternative methods of obtaining middle-market debt financing to significantly decrease in scope and availability while demand for financings has remained robust. We believe the segment’s strong growth prospects, combined with the growing demand for the capital and corporate finance and advisory services we offer, creates an attractive investment environment for us.	
 
Furthermore, we believe that given the credit market uncertainty, Solar Capital has a greater opportunity to move beyond middle-market deals into larger transactions, as banks are less willing to commit capital. We believe these larger deals can be structured with more attractive terms such as lower leverage, higher yields, better covenants, and longer duration than was typical before the current market dislocation.
 
Therefore, we believe that there is an opportunity to invest in senior secured loans, mezzanine loans and equity securities of leveraged companies and that we are well positioned to serve this market.
 
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Competitive Advantages and Strategy
 
We believe that we have the following competitive advantages over other providers of financing to leveraged companies:
 
Management Expertise
 
As managing partner, Mr. Gross has principal management responsibility for Solar Capital Partners, to which he currently dedicates substantially all of his time. Mr. Gross has over 20 years of experience in leveraged finance, private equity and distressed debt investing. Mr. Spohler, our chief operating officer and a partner of Solar Capital Partners, has over 20 years of experience in evaluating and executing leverage finance transactions. We believe that Messrs. Gross and Spohler have developed a strong reputation in the capital markets, and that this experience provides us with a competitive advantage in identifying and investing in leveraged companies with the potential to generate returns. We believe that our investment team has extensive experience in the private equity and leveraged lending industries, as well as significant contacts with financial sponsors operating in those industries. We believe that our investment team has a proven track record of valuing companies and assets and negotiating transactions.
 
In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley and Mait, each of whom has extensive experience in originating, evaluating and structuring investments in the types of middle-market companies we currently target. Solar Capital Partners’ senior investment professionals have an average of over 20 years of experience in the private equity and leveraged lending industries.
 
Solar Capital Partners’ senior investment professionals have been active participants in the primary and secondary leveraged credit markets throughout their careers. They have effectively managed portfolios of distressed and mezzanine debt as well as other investment types. The depth of their experience and credit market expertise has led them through various stages of the economic cycle as well as several market disruptions.
 
Investment Portfolio
 
Our portfolio investments consist of portfolio companies that have strong cash flows and have maintained financial and operating performance despite the recent economic climate. As of March 31, 2010, 100% of our portfolio was performing. The majority of our assets have been seasoned, which has allowed us to gain a solid understanding of our borrowers and the industries in which they compete. Additionally, over time, we have established productive relationships with our portfolio companies.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facility and the expected repayments of existing investments provide us with a substantial amount of capital available for deployment into new investment opportunities. We believe we are well positioned for the current marketplace. We believe that in the current economic environment financing needs of many companies will increase while funding options are limited, allowing us to capitalize on favorable investment opportunities.
 
Solar Capital’s Limited Leverage
 
As of March 31, 2010, our outstanding debt was approximately 13.5% of total assets, making us one of the least levered publicly traded business development companies. We believe our relatively low level of leverage provides us with a competitive advantage, allowing us to anticipate providing a consistent dividend to our investors as proceeds from our investments are available for reinvestment as opposed to being consumed by debt repayment. To the extent borrowing conditions improve and leverage becomes available on more attractive
 
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terms, we may increase our relative level of debt in the future. However, we do not currently anticipate operating with a substantial amount of debt relative to our total assets. Furthermore, by maintaining prudent leverage levels, we believe we will be better positioned to weather future market downturns.
 
Proprietary Sourcing and Origination
 
We believe that Solar Capital Partners’ senior investment professionals’ longstanding relationships with financial sponsors, commercial and investment banks, management teams and other financial intermediaries provide us with a strong pipeline of proprietary origination opportunities. We believe the broad expertise of Solar Capital Partners’ senior investment professionals and their ability to draw upon their average of 20 years of investment experience enable us to identify, assess and structure investments successfully. We expect to continue leveraging the relationships Mr. Gross established while sourcing and originating investments at Apollo Investment Corporation as well as the financial sponsor relationships Mr. Spohler developed while he was a co-head of CIBC World Markets’ U.S. Leveraged Finance Group.
 
Our investment team’s strong relationship network is enhanced by the collaborative role Solar Capital plays in the private equity industry. We offer tailored solutions to our portfolio companies, and we believe that this role provides us with greater deal flow as opposed to being viewed as a competitor bidding for control stakes. Because Solar Capital is not associated with a private equity firm, we are not precluded from partnering with most of the top tier financial sponsors.
 
These direct investments enable us to perform more in-depth due diligence and play an active role in structuring financings. We believe that effectuating the transaction terms and having greater insight into a portfolio company’s operations and financial picture assist Solar Capital in minimizing downside potential, while reinforcing Solar Capital as a trusted partner who delivers comprehensive financing solutions. Since our inception, Solar Capital Partners has sourced investments in 54 different portfolio companies for Solar Capital, which investments involved an aggregate of more than 46 different financial sponsors, through March 31, 2010.
 
Versatile Transaction Structuring and Flexibility of Capital
 
We believe our senior investment professionals’ broad expertise and ability to draw upon their extensive experience enable us to identify, assess and structure investments successfully across all levels of a company’s capital structure and to manage potential risk and return at all stages of the economic cycle. While we will be subject to significant regulation as a business development company, we will not be subject to many of the regulatory limitations that govern traditional lending institutions such as banks. As a result, we believe that we can be more flexible than such lending institutions in selecting and structuring investments, adjusting investment criteria, transaction structures and, in some cases, the types of securities in which we invest. We believe financial sponsors, management teams and investment banks see this flexibility as a benefit, making us an attractive financing partner. We believe that this approach enables us to procure attractive investment opportunities throughout the economic cycle so that we can make investments consistent with our stated investment objective even during turbulent periods in the capital markets.
 
Emphasis on Achieving Strong Risk-Adjusted Returns
 
Solar Capital Partners uses a disciplined investment and risk management process that emphasizes a rigorous fundamental research and analysis framework. Solar Capital Partners seeks to build our portfolio on a “bottom-up” basis, choosing and sizing individual positions based on their relative risk/reward profiles as a function of the associated downside risk, volatility, correlation with the existing portfolio and liquidity. At the same time, Solar Capital Partners takes into consideration a variety of factors in managing our portfolio and imposes portfolio-based risk constraints promoting a more diverse portfolio of investments and limiting issuer and industry concentration. Our value-oriented investment philosophy focuses on preserving capital and ensuring that our investments have an appropriate return profile in relation to risk. When market conditions make it
 
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difficult for us to invest according to our criteria, we are highly selective in deploying our capital. We do not pursue short-term origination targets. We believe this approach enables us to build an attractive investment portfolio that meets our return and value criteria over the long term.
 
We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through Solar Capital Partners, conduct a rigorous due diligence process that draws upon investment experience, industry expertise and network of contacts of our senior investment professionals, as well as the other members of our investment team. Among other things, our due diligence is designed to ensure that a prospective portfolio company will be able to meet its debt service obligations.
 
We have the ability to invest across an issuer’s capital structure, which we believe enables us to provide comprehensive financing solutions for our portfolio companies, as well as access the best risk-adjusted opportunities. The overall transaction size and product mix is based upon the needs of the customer, as well as our risk-return hurdles. We also focus on downside protection and preservation of capital throughout the structuring process.
 
Deep Industry Focus with Substantial Information Flow
 
We concentrate our investing activities in industries characterized by strong cash flow and in which Solar Capital Partners’ investment professionals have deep investment experience. During his time with the Apollo entities, Mr. Gross oversaw investments in over 200 companies in 20 industries. As a result of their investment experience, Messrs. Gross and Spohler, together with Solar Capital Partners’ other investment professionals, have long-term relationships with management consultants and management teams in the industries we target, as well as substantial information concerning those industries. Solar Capital Partners’ investment team also has significant experience in evaluating and making investments in the industries we target. We believe that the in-depth experience of Solar Capital Partners’ investment team in investing throughout various stages of the economic cycle provides our investment adviser with access to ongoing market insights in addition to a powerful asset for investment sourcing. See “Business — Investments.”
 
Longer Investment Horizon
 
Unlike private equity and venture capital funds, we will not be subject to standard periodic capital return requirements. Such requirements typically stipulate that the capital of these funds, together with any capital gains on such invested funds, can only be invested once and must be returned to investors after a pre-agreed time period. We believe that our flexibility to make investments with a long-term view and without the capital return requirements of traditional private investment vehicles provides us with the opportunity to generate favorable returns on invested capital and enables us to be a better long-term partner for our portfolio companies.
 
Investments
 
Solar Capital seeks to create a diverse portfolio that includes senior secured loans, mezzanine loans and equity securities by investing approximately $20 to $100 million of capital, on average, in the securities of leveraged companies, including middle-market companies. Our portfolio includes both senior secured loans and mezzanine loans. Structurally, mezzanine loans usually rank subordinate in priority of payment to senior debt, such as senior bank debt, and are often unsecured. As such, other creditors may rank senior to us in the event of an insolvency. However, mezzanine loans rank senior to common and preferred equity in a borrowers’ capital structure. Typically, mezzanine loans have elements of both debt and equity instruments, offering the fixed returns in the form of interest payments associated with senior debt, while providing lenders an opportunity to participate in the capital appreciation of a borrower, if any, through an equity interest. This equity interest typically takes the form of warrants. Due to its higher risk profile and often less restrictive covenants as compared to senior loans, mezzanine loans generally earn a higher return than senior secured loans. The warrants associated with mezzanine loans are typically detachable, which allows lenders to receive repayment of their
 
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principal on an agreed amortization schedule while retaining their equity interest in the borrower. Mezzanine loans also may include a “put” feature, which permits the holder to sell its equity interest back to the borrower at a price determined through an agreed formula. We believe that mezzanine loans offer an attractive investment opportunity based upon their historic returns and resilience during economic downturns.
 
In addition to senior secured loans and mezzanine loans, we may invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but are intended to enhance our returns to our investors. These investments may include similar direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
 
Additionally, we may in the future seek to securitize our loans to generate cash for funding new investments. To securitize loans, we may create a wholly owned subsidiary and contribute a pool of loans to the subsidiary. This could include the sale of interests in the subsidiary on a non-recourse basis to purchasers who we would expect to be willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain a portion of the equity in the securitized pool of loans.
 
Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ the same analytical process as we use for our primary investments.
 
Our principal focus is to provide senior secured loans and mezzanine loans to leveraged companies in a variety of industries. We generally seek to target companies that generate positive cash flows. We generally seek to invest in companies from the broad variety of industries in which our investment adviser has direct expertise. The following is a representative list of the industries in which we may invest.

•Aerospace and defense
•Automotive
•Beverage, food and tobacco
•Broadcasting and entertainment
•Business services
•Cable television
•Cargo transport
•Chemicals, plastics and rubber
•Consumer finance
•Consumer services
•Containers, packaging and glass
•Direct marketing
•Distribution
•Diversified/conglomerate manufacturing
•Diversified/conglomerate services
•Education
•Electronics
•Energy/utilities
•Equipment rental
•Farming and agriculture
•Finance	  	•Healthcare, education and childcare
•Home and office furnishing, consumer products
•Hotels, motels, inns and gaming
•Industrial
•Infrastructure
•Insurance
•Leisure, motion pictures and entertainment
•Logistics
•Machinery
•Media
•Mining, steel and nonprecious metals
•Oil and gas
•Personal, food and misc. services
•Printing, publishing and broadcasting
•Real estate
•Retail stores
•Specialty finance
•Technology
•Telecommunications
•Utilities	
 
We may invest in other industries if we are presented with attractive opportunities.
 
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Set forth below is a list of our ten largest portfolio company investments as of March 31, 2010, as well as the top ten industries in which we were invested as of March 31, 2010, in each case calculated as a percentage of our total assets as of such date.

Portfolio Company	  	% of
Total Assets	 	
DS Waters	  	 	11.25%	  	
Asurion Corporation	  	 	5.80%	  	
Adams Outdoor Advertising	  	 	5.72%	  	
Rug Doctor L.P.	  	 	5.08%	  	
Fulton Holding Corporation	  	 	4.70%	  	
Booz Allen Hamilton, Inc.	  	 	4.63%	  	
Earthbound Farm	  	 	4.31%	  	
Fleetpride Corporation	  	 	4.24%	  	
Wire Rope Corporation	  	 	4.12%	  	
Direct Buy Inc.	  	 	3.88%	  	

Industry	  	% of
Total Assets	 	
Beverage, food, and tobacco	  	 	20.56	% 	
Aerospace and defense	  	 	6.58	% 	
Insurance	  	 	5.80	% 	
Diversified/conglomerate services	  	 	5.72	% 	
Personal, food and misc. services	  	 	5.08	% 	
Healthcare, education, and childcare	  	 	4.95	% 	
Retail stores	  	 	4.70	% 	
Leisure, motion pictures, entertainment	  	 	4.60	% 	
Cargo transport	  	 	4.24	% 	
Diversified/conglomerate manufacturing	  	 	4.12	% 	
 
Investment Selection Process
 
Solar Capital Partners utilizes a value-oriented investment philosophy with a focus on the preservation of capital and a commitment to managing downside exposure.
 
Portfolio Company Characteristics
 
We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment decisions; however, not all of these criteria will be met by each prospective portfolio company in which we choose to invest.
 
Value Orientation/Positive Cash Flow. Our investment philosophy places a premium on fundamental analysis from an investor’s perspective and has a distinct value orientation. We focus on companies in which we can invest at relatively low multiples of operating cash flow and that are profitable at the time of investment on an operating cash flow basis. Additionally, we look for companies with a demonstrated ability to de-lever. Typically, we would not invest in start-up companies or companies having speculative business plans.
 
Growth. We invest primarily in companies with strong prospects for growth. These companies are usually in high-growth industries or have a competitive advantage that creates the potential to increase market share.
 
Strong Competitive Position in Industry. We seek to invest in target companies that have developed leading market positions within their respective markets and are well positioned to capitalize on growth opportunities.
 
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We seek companies that demonstrate significant competitive advantages versus their competitors, which we believe should help to protect their market position and profitability.
 
Diversified Customer and Supplier Base. We seek to acquire businesses that have a diversified customer and supplier base. We believe that companies with a diversified customer and supplier base are generally better able to endure economic downturns, industry consolidation, changing business preferences and other factors that may negatively impact their customers, suppliers and competitors.
 
Exit Strategy. We predominantly invest in companies which provide multiple alternatives for an eventual exit. We look for opportunities that provide an exit typically within three years of the initial capital commitment.
 
We seek companies that we believe will provide a steady stream of cash flow to repay our loans and reinvest in their respective businesses. We believe that such internally generated cash flow, leading to the payment of interest on, and the repayment of the principal of, our investments in portfolio companies represents a key means by which we will be able to exit from our investments over time.
 
In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction.
 
Liquidation Value of Assets. The prospective liquidation value of the assets, if any, that collateralizes the loans in which we invest, is an important factor in our credit analysis. Our analysis emphasizes both tangible assets, such as accounts receivable, inventory, equipment and real estate, and intangible assets, such as intellectual property, customer lists, networks and databases.
 
Experienced and Committed Management. We generally require that portfolio companies have an experienced management team. We also require portfolio companies have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests.
 
Strong Sponsorship. We aim to invest alongside other sophisticated investors. We seek to partner with successful financial sponsors who have historically generated high returns. We believe that investing in these sponsors’ portfolio companies enables us to benefit from their direct involvement and due diligence.
 
Due Diligence
 
In conducting due diligence, we use publicly available information as well as information from relationships with former and current management teams, consultants, competitors and investment bankers. Our due diligence methodology allows us to screen a high volume of potential investment opportunities on a consistent and thorough basis.
 
Our due diligence typically includes:
 
 	•	 	review of historical and prospective financial information;	
 
 	•	 	research relating to the company’s management, industry, markets, products and services and competitors;	
 
 	•	 	on-site visits;	
 
 	•	 	discussions with management, employees, customers or vendors of the potential portfolio company;	
 
 	•	 	review of senior loan documents; and	
 
 	•	 	background investigations.	
 
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We also evaluate the private equity sponsor making the investment. A private equity sponsor is typically the controlling shareholder upon completion of an investment and as such is considered critical to the success of the investment. The equity sponsor is evaluated along several key criteria, including:
 
 	•	 	Investment track record;	
 
 	•	 	Industry experience;	
 
 	•	 	Capacity and willingness to provide additional financial support to the company through additional capital contributions, if necessary; and	
 
 	•	 	Reference checks.	
 
Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading the investment present the investment opportunity to Solar Capital Partners’ investment committee, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside advisers, as appropriate.
 
The Investment Committee
 
All new investments are required to be approved by a consensus of the investment committee of Solar Capital Partners, which is led by Messrs. Gross and Spohler. The members of Solar Capital Partners’ investment committee receive no compensation from us. Such members may be employees or partners of Solar Capital Partners and may receive compensation or profit distributions from Solar Capital Partners.
 
Investment Structure
 
Once we determine that a prospective portfolio company is suitable for investment, we work with the management of that company and its other capital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the portfolio company’s capital structure.
 
We structure our mezzanine investments primarily as unsecured, subordinated loans that provide for relatively high, fixed interest rates that provide us with significant current interest income. These loans typically have interest-only payments in the early years, with amortization of principal deferred to the later years of the mezzanine loans. In some cases, we may enter into loans that, by their terms, convert into equity or additional debt securities or defer payments of interest for the first few years after our investment. Also, in some cases our mezzanine loans may be collateralized by a subordinated lien on some or all of the assets of the borrower. Typically, our mezzanine loans have maturities of five to ten years.
 
We also invest in portfolio companies in the form of senior secured loans. These senior secured loans typically provide for deferred interest payments in the first few years of the term of the loan. We generally obtain security interests in the assets of our portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfolio company.
 
Typically, our mezzanine and senior secured loans have final maturities of five to ten years. However, we expect that our portfolio companies often may repay these loans early, generally within three years from the date of initial investment. To preserve an acceptable return on investment, we seek to structure these loans with prepayment premiums.
 
In the case of our mezzanine loan and senior secured loan investments, we tailor the terms of the investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure
 
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that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its profitability. For example, in addition to seeking a senior position in the capital structure of our portfolio companies, we will seek to limit the downside potential of our investments by:
 
 	•	 	requiring a total return on our investments (including both interest and potential capital appreciation) that compensates us for credit risk;	
 
 	•	 	incorporating “put” rights and call protection into the investment structure; and	
 
 	•	 	negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing their businesses as possible, consistent with preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or participation rights.	
 
Our investments may include equity features, such as warrants or options to buy a minority interest in the portfolio company. Any warrants we receive with our debt securities generally require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We may structure the warrants to provide provisions protecting our rights as a minority interest holder, as well as puts, or rights to sell such securities back to the company, upon the occurrence of specified events. In many cases, we also obtain registration rights in connection with these equity securities, which may include demand and “piggyback” registration rights. In addition, we may from time to time make direct equity investments in portfolio companies.
 
We seek to hold most of our investments to maturity or repayment, but will sell our investments earlier if a liquidity event takes place, such as the sale or recapitalization of a portfolio company.
 
Ongoing Relationships with Portfolio Companies
 
Monitoring. Solar Capital Partners monitors our portfolio companies on an ongoing basis. Solar Capital Partners monitors the financial trends of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.
 
Solar Capital Partners has several methods of evaluating and monitoring the performance and fair value of our investments, which include the following:
 
 	•	 	Assessment of success in adhering to each portfolio company’s business plan and compliance with covenants;	
 
 	•	 	Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;	
 
 	•	 	Comparisons to other Solar Capital portfolio companies in the industry, if any;	
 
 	•	 	Attendance at and participation in board meetings; and	
 
 	•	 	Review of monthly and quarterly financial statements and financial projections for portfolio companies.	
 
In addition to various risk management and monitoring tools, Solar Capital Partners also uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio.
 
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We use an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:

Investment
Rating	  	Summary Description	
1	  	Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk factors are generally favorable (including a potential exit)	
 	 	
2	  	Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk factors are neutral to favorable; all new investments are initially assessed a grade of 2	
 	 	
3	  	The portfolio company is performing below expectations, may be out of compliance with debt covenants, and requires procedures for closer monitoring	
 	 	
4	  	The investment is performing well below expectations and is not anticipated to be repaid in full	
 
Solar Capital Partners monitors and, when appropriate, changes the investment ratings assigned to each investment in our portfolio. As of March 31, 2010, the weighted average investment rating on the fair market value of our portfolio was 1.9. In connection with our valuation process, Solar Capital Partners reviews these investment ratings on a quarterly basis, and our board of directors affirms such ratings.
 
Valuation Procedures
 
We will conduct the valuation of our assets, pursuant to which our net asset value shall be determined, at all times consistent with U.S. generally accepted accounting principles (“GAAP”) and the 1940 Act. Our valuation procedures are set forth in more detail below:
 
Securities for which market quotations are readily available on an exchange shall be valued at the closing price on the day of valuation. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or board of directors, does not represent fair value, shall each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the board of directors will conduct independent appraisals and review management’s preliminary valuations and make their own assessment for all material assets; (iv) the board of directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.
 
The recommendation of fair value will generally be based on the following factors, as relevant:
 
 	•	 	the nature and realizable value of any collateral;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business; and	
 
 	•	 	comparisons to publicly traded securities.	
 
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Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:
 
 	•	 	private placements and restricted securities that do not have an active trading market;	
 
 	•	 	securities whose trading has been suspended or for which market quotes are no longer available;	
 
 	•	 	debt securities that have recently gone into default and for which there is no current market;	
 
 	•	 	securities whose prices are stale;	
 
 	•	 	securities affected by significant events; and	
 
 	•	 	securities that the investment adviser believes were priced incorrectly.	
 
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
Competition
 
Our primary competitors provide financing to middle-market companies and include other BDC’s, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity funds. Additionally, alternative investment vehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition for investment opportunities at middle-market companies can be intense. However, we believe that there has been a reduction in the amount of debt capital available since the downturn in the credit markets, which began in mid-2007, and that this has resulted in a less competitive environment for making new investments. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. We use the industry information available to Mr. Gross and the other investment professionals of Solar Capital Partners to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships of Mr. Gross and the other investment professionals of our investment adviser enable us to learn about, and compete effectively for, financing opportunities with attractive leveraged companies in the industries in which we seek to invest.
 
Staffing
 
We do not currently have any employees. Mr. Gross, our chief executive officer, and Mr. Spohler, our chief operating officer, currently serve as the managing member and a partner, respectively, of our investment adviser, Solar Capital Partners. Nicholas Radesca, our chief financial officer and secretary, is an employee of Solar Capital Management, and performs his functions as chief financial officer under the terms of our Administration Agreement. Guy Talarico, our chief compliance officer, is the chief executive officer of Alaric Compliance Services, LLC, and performs his functions as our chief compliance officer under the terms of an agreement between Solar Capital Management and Alaric Compliance Services, LLC. Solar Capital Management has retained Mr. Talarico and Alaric Compliance Services, LLC pursuant to its obligations under our Administration Agreement.
 
Our day-to-day investment operations are managed by Solar Capital Partners. Solar Capital Partners’ investment personnel currently consists of its senior investment professionals, Messrs. Gross, Spohler, Gerson, Henley and Mait, and a team of additional experienced investment professionals. Based upon its needs, Solar Capital Partners may hire additional investment professionals. In addition, we will reimburse Solar Capital
 
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Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief financial officer and any administrative support staff.
 
Properties
 
Our executive offices are located at 500 Park Avenue, 5th Floor, New York, New York 10022, and are provided by Solar Capital Management in accordance with the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.
 
Legal Proceedings
 
None of us, our investment adviser or administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our investment adviser or administrator. From time to time, we, our investment adviser or administrator, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
 
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PORTFOLIO COMPANIES
 
The following table sets forth certain information as of March 31, 2010 for each portfolio company in which we had a debt or equity investment. The general terms of our debt and equity investments are described in “Business–Investments.” Other than these investments, our only formal relationships with our portfolio companies are the managerial assistance we may provide upon request and the board observer or participation rights we may receive in connection with our investment. Other than Ark Real Estate Partners, National Interest Security Corporation, and National Specialty Alloys, LLC, we do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would “control” a portfolio company if we owned more than 25% of its voting securities and would be an “affiliate” of a portfolio company if we owned more than 5% of its voting securities.

Name and Address of
Portfolio Company	 	Industry	 	Type of Investment	 	Interest(1)	 	Maturity	 	 	% of
Class
Held	 	 	Fair Value
(in
thousands)	 	
AOA Top Tier Holding Co., L.P. (“Adams Outdoor Advertising”)
2808 Ferry Road
Atlanta, GA 30339	 	Diversified/conglomerate services	 	 
 
Subordinated notes
Subordinated notes	 	 
 
13.50%
10.88%	 	 

6/20/2011
6/20/2011	  

 
37,200
15,936	  

Allied Capital Corporation
1919 Pennsylvania Avenue, N.W.
Washington, DC 20006	 	Finance	 	Subordinated notes
Subordinated notes	 	6.00%

6.63%	 	 

 	4/01/2012

7/15/2011	  

  	 	 	—  	  	 	 

 	14,777

14,428	  

 	 	 	 	 	 	 	
AMC Entertainment Holdings, Inc.
920 Main Street
Kansas City, MO 64105	 	Leisure, motion pictures and entertainment	 	Subordinated notes	 	5.26% (L+500/Q)	 	 	6/13/2012	  	 	 	—  	  	 	 	21,295	(3) 	
 	 	 	 	 	 	 	
Ark Real Estate Partners
LP 505 Park Ave.,
21st Floor
New York, NY 10022	 	Real estate	 	Partnership interests	 	 	 	 	 	 	 	 	24.80	% 	 	 	20,583	  	
 	 	 	 	 	 	 	
Asurion Corporation
648 Grassmere Park,
Suite 300
Nashville, TN 37211	 	Insurance	 	Senior secured loan	 	6.73% (L+650/Q or M)	 	 	7/03/2015	  	 	 	—  	  	 	 	53,900	(3) 	
 	 	 	 	 	 	 	
Booz Allen Hamilton, Inc.
8283 Greensboro Drive
McLean, VA 22102	 	Aerospace and defense	 	Subordinated notes	 	13.00%	 	 	7/31/2016	  	 	 	—  	  	 	 	43,000	(3) 	
 	 	 	 	 	 	 	
Casema Holding B.V.
Spaarneplein 2
Postbus 16192
2500 BD Den Haag
The Netherlands	 	Telecommunications	 	Subordinated notes Subordinated notes	 	9.66% (E+925/S)

9.67% (E+925/S)	 	 
 	9/13/2016
9/13/2016	  

 	—  

—  	  

 	7,510

8,059	(3) 

(3) 	
 	 	 	 	 	 	 	
Classic Cruises Holdings S.DER.L.
1000 Corporate Drive,
Suite 500
Fort Lauderdale, Florida 33334	 	Leisure, motion pictures and entertainment	 	Senior secured loan	 	10.14% (L+975/Q)	 	 	1/31/2015	  	 	 	—  	  	 	 	21,450	  	
 	 	 	 	 	 	 	
Direct Buy Inc.
8450 Broadway
Merrillville, IN 46410	 	Home and Office Furnishing, Consumer products	 	Subordinated notes Common stock	 	16.00%	 	 	5/30/2013	  	 	 

 	—  

3.00%	  

 	33,577

2,500	(3) 

 	 	 	 	 	 	 	
DSW Group, Inc. (“DS Waters”)
4170 Tanners Creek Drive
Flowery Branch,
GA 30542	 	Beverage, food and tobacco	 	Subordinated notes	 	14.00%	 	 	4/24/2012	  	 	 	—  	  	 	 	104,493	(3) 	
 	 	 	 	 	 	 	
Earthbound Farm
1721 San Juan Highway
San Juan Bautista,
CA 95045	 	Beverage, food and tobacco	 	Subordinated notes	 	15.25%	 	 	7/20/2016	  	 	 	—  	  	 	 
	40,000
	(3) 

Emdeon Business Services LLC
26 Century Blvd.
Nashville, TN 37214	 	Healthcare, education and childcare	 	Senior secured loan	 	5.26% (L+500/Q)	 	 	5/16/2014	  	 	 	—  	  	 	 	14,610	  	
 
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Name and Address of
Portfolio Company	 	Industry	 	Type of Investment	 	Interest(1)	 	Maturity	 	 	% of
Class
Held	 	 	Fair Value
(in
thousands)	 	
Fleetpride Corporation
8709 Technology Forest Place
Suite 125
The Woodlands, TX 77381	 	Cargo transport	 	Subordinated notes	 	11.50%	 	 	10/01/2014	  	 	 	—  	  	 	 	39,399	  	
 	 	 	 	 	 	 	
Freedom Roads, LLC
2 Marriott Drive
Lincolnshire, Illinois 60069	 	Automotive	 	Subordinated notes	 	16.00%	 	 	6/20/2011	  	 	 	—  	  	 	 	26,730	  	
 	 	 	 	 	 	 	
Fulton Holding Corporation
5950 Fulton Industrial Blvd.
Atlanta, GA 30336	 	Retail stores	 	Senior secured loan	 	12.50%	 	 	—  	  	 	 	—  	(4) 	 	 	43,650	  	
 	 	 	 	 	 	 	
Global Garden Products
Via del lavoro, 6
I-31033 Castelfranco Veneto
(Treviso)–Italy	 	Farming and agriculture	 	Common stock	 	 	 	 	 	 	 	 	<1	% 	 	 	—  	(3) 	
 	 	 	 	 	 	 	
Grakon, LLC
1911 S. 218th St.
P.O. Box 98984
Seattle, WA 98198	 	Machinery	 	Subordinated notes
LLC interests	 	12.00%	 	 	6/19/2013	  	 	 
 	—  
2.48	  
% 	 	 

 	5,101

—  	(3) 

 	 	 	 	 	 	 	
Great American Group Inc.
21860 Burbank Blvd.
Suite 300 South
Woodland Hills, CA 91367	 	Business Services	 	Common stock Warrants to purchase common stock	 	 	 	 	 	 	 	 

 	2.54

1.55	% 

% 	 	 

 	1,177

385	  

(2) 	
 	 	 	 	 	 	 	
Iglo Birds Eye Group Limited
No. 5, New Square
Bedfont Lakes Business Park
Feltham, Middlesex
TW 14 8HA
United Kingdom	 	Beverage, food and tobacco	 	Subordinated notes Subordinated notes	 	8.99% (E+800 /S)
8.54% (L(UK)+800 /S)	 	 
 	11/03/2016
11/03/2016	  
  	 	 
 	—  
—  	  

 	4,522

10,799	(3) 

(3) 	
 	 	 	 	 	 	 	
Learning Care Group
21333 Haggerty Rd.,
Suite 300
Novi, MI 48375	 	Healthcare, education and childcare	 	Subordinated notes	 	13.50%	 	 	12/28/2015	  	 	 	 	 	 	 	31,368	(3) 	
 	 	 	 	 	 	 	
Magnolia River, LLC
601 9th Street Greeley
Colorado 80631	 	Hotels, motels, inns and gaming	 	Subordinated notes	 	14.00%	 	 	4/28/2014	  	 	 
	—  
	  
	 	 	16,205	  	
 	 	 	 	 	 	 	
National Specialty Alloys, LLC
18250 Kieth Harrow Blvd.
Houston, TX 77084	 	Mining, steel and nonprecious metals	 	LLC interests	 	 	 	 	 	 	 	 	40.02	% 	 	 	9,000	  	
 	 	 	 	 	 	 	
Nuveen Investments, Inc.
333 W. Wacker Dr.
Chicago, IL 60606	 	Finance	 	Common stock	 	 	 	 	 	 	 	 	1.08	% 	 	 	7,500	  	
 	 	 	 	 	 	 	
NXP Semiconductors
Netherlands B.V.
High Tech Campus 60
5656 AG Eindhoven
The Netherlands	 	Electronics	 	Common stock	 	 	 	 	 	 	 	 	<1	% 	 	 	7,995	  	
 	 	 	 	 	 	 	
ProSieben Sat.1 Media AG
Medienallee 7
85774 Unterfoöhring
Germany	 	Broadcasting and entertainment	 	Subordinated notes	 	7.96% (E+350+3.50%/
Q)	 	 	3/06/2017	  	 	 	—  	  	 	 	9,078	(3) 	
 	 	 	 	 	 	 	
Ram Energy Resources, Inc.
5100 E Skelly Drive
Meridian Tower,
Suite 650
Tulsa, OK 74135	 	Oil and Gas	 	Senior secured loan	 	12.75% (L+850/S)	 	 	11/29/2012	  	 	 	—  	  	 	 	12,397	(3) 	
 	 	 	 	 	 	 	
Rug Doctor L.P.
4701 Old Shepard Place
Plaxo, TX 75093	 	Personal, food and misc. services	 	Subordinated notes	 	14.95%	 	 	10/31/2014	  	 	 	—  	  	 	 	47,151	(3) 	
 
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Name and Address of
Portfolio Company	 	Industry	 	Type of Investment	 	Interest(1)	 	Maturity	 	 	% of
Class
Held	 	 	Fair Value
(in
thousands)	 	
Seven Media Group Pty
Limited
38-42 Pirrama Road
Pyrmont, New South Wales 2009 Australia	 	Broadcasting and entertainment	 	Subordinated notes Subordinated notes Common stock	 	11.18%

12.00%	 	 
 	12/29/2013
12/29/2013	  

 	—  
—  
<1	  
  
% 	 	 

 	17,653

6,270
1,770	  

(3) 

Tri-Star Electronics
International, Inc.
2201 Rosencrans Ave.
El Segundo, CA 90245	 	Aerospace and defense	 	Subordinated notes	 	15.25%	 	 	8/02/2013	  	 	 	—  	  	 	 	18,094	(3) 	
 	 	 	 	 	 	 	
Wastequip, Inc.
25800 Science Park Dr.,
Suite 140
Beachwood, OH 44122	 	Containers, packaging and glass	 	Subordinated notes	 	12.50%	 	 	2/05/2015	  	 	 	—  	  	 	 	—  	(3) 	
 	 	 	 	 	 	 	
Weetabix Group
Burton Latimer
Kettering
Northants NN 15 5JR
United Kingdom	 	Beverage, food and tobacco	 	Subordinated notes Subordinated notes	 	9.83% (L+900/S)

10.37% (L(UK)+950/S)	 	 
 	5/07/2017
9/14/2016	  

 	—  

—  	  

 	20,683

10,451	(3) 

(3) 	
 	 	 	 	 	 	 	
Wire Rope Corporation
12200 NW Ambassador Drive
Kansas City, MO 64163	 	Diversified/ conglomerate manufacturing	 	Subordinated notes	 	11.00%	 	 	2/08/2015	  	 	 	—  	  	 	 	38,220	  	
 	 	 	 	 	 	 	
Wyle Laboratories Inc.
1960 East Grand Ave.
El Segundo, CA 90245-5023	 	Aerospace and defense	 	Preferred stock	 	8.00%	 	 	7/17/2015	  	 	 	—  	  	 	 	40	  	

Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	838,956	  	

(1)	 	All interest is payable in cash unless otherwise indicated. A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily quarterly (Q), monthly (M), or semi-annually (S). For each debt investment we have provided the current interest rate in effect as of March 31, 2010.	
(2)	 	Percentages shown for warrants or convertible preferred stock represent the percentages of outstanding common stock, assuming we exercise our warrants or convert our preferred stock into common stock.	
(3)	 	All or a portion of interest may be deferred through a payment-in-kind interest option.	
(4)	 	Maturity will be six years from the date of closing, which has not yet been determined.	
 
Set forth below is a brief description of each portfolio company in which we have made an investment that represents greater than 5% of our total assets as of March 31, 2010.
 
DS Waters
 
DS Waters produces and distributes bottled water products in the U.S. DS Waters commands a leading market presence in the HOD (home and office delivery) space, particularly in the 3 gallon, 5 gallon and ½ liter bottled water segments. Water is bottled at DS Waters’ manufacturing facilities and then delivered by its fleet of delivery trucks to homes and offices across the country. DS Waters operates in most major markets in the U.S. based on population, and the company maintains a significant market share position in most of the markets in which it operates.
 
Asurion Corporation
 
Asurion Corporation is the leading provider of value-added subscriber services to the wireless industry through its handset protection and wireless roadside assistance services. Additionally, Asurion Corporation provides service contract administration for residential telecommunications equipment and consumer electronics and appliances.
 
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Adams Outdoor Advertising
 
Adams Outdoor Advertising provides outdoor advertising services to over 15 markets and surrounding areas in the Midwest, Southeast and mid-Atlantic states. Adams Outdoor Advertising utilizes bulletins, poster panels, and transit displays.
 
Rug Doctor L.P.
 
Rug Doctor L.P. services both the professional and the Do-It-Yourself carpet cleaning market through the manufacture, sale, and service of carpet cleaning products and machines.
 
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MANAGEMENT
 
Our board of directors oversees our management. The board of directors currently consists of five members, three of whom are not “interested persons” of Solar Capital Ltd. as defined in Section 2(a)(19) of the 1940 Act. We refer to these individuals as our independent directors. Our board of directors elects our officers, who serve at the discretion of the board of directors. The responsibilities of each director will include, among other things, the oversight of our investment activity, the quarterly valuation of our assets, and oversight of our financing arrangements. The board of directors has also established an audit committee and a nominating and corporate governance committee and may establish additional committees in the future.
 
Board of Directors and Executive Officers
 
Directors
 
Information regarding the board of directors is as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Name	  	Age	 	  	Position	 	Director
Since	 	 	Expiration
of Term	 	
Interested Director	  	 	 	 	  	 	 	 	 	 	 	 	 	 	
Michael S. Gross	  	 	48	  	  	Chief Executive Officer, President and Chairman of the Board of Directors	 	 	2007	  	 	 	2012	  	
Bruce Spohler	  	 	49	  	  	Chief Operating Officer and Director	 	 	2009	  	 	 	2011	  	
 	 	 	 	 	
Independent Directors	  	 	 	 	  	 	 	 	 	 	 	 	 	 	
Steven Hochberg	  	 	48	  	  	Director	 	 	2007	  	 	 	2011	  	
David S. Wachter	  	 	46	  	  	Director	 	 	2007	  	 	 	2010	  	
Leonard A. Potter	  	 	48	  	  	Director	 	 	2009	  	 	 	2012	  	
 
The address for each of our directors is 500 Park Avenue, 5th Floor, New York, New York 10022.
 
Executive Officers Who Are Not Directors

Name	  	Age	 	  	Position	
Nicholas Radesca	  	 	44	  	  	Chief Financial Officer and Secretary	
Guy Talarico	  	 	54	  	  	Chief Compliance Officer	
 
The address for each of our executive officers is 500 Park Avenue, 5th Floor, New York, New York 10022.
 
Biographical Information
 
Directors
 
Our directors have been divided into two groups — interested directors and independent directors. An interested director is an “interested person” as defined in Section 2(a)(19) of the 1940 Act. As described below under “Committees of the Board of Directors — Nominating and Corporate Governance Committee,” the board of directors has identified certain desired attributes for director nominees. Each of our directors has demonstrated high character and integrity, superior credentials and recognition in his respective field and the relevant expertise and experience upon which to be able to offer advice and guidance to our management. Each of our directors also has sufficient time available to devote to the affairs of Solar Capital, is able to work with the other members of the board of directors and contribute to the success of Solar Capital and can represent the long-term interests of Solar Capital’s stockholders as a whole. Our directors have been selected such that the board of directors represents a range of backgrounds and experience. Set forth below is biographical information of each director,
 
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including a discussion of such director’s particular experience, qualifications, attributes or skills that lead us to conclude, as of the date of this prospectus, that such individual should serve as a director of Solar Capital, in light of Solar Capital’s business and structure.
 
Interested Directors
 
Michael S. Gross was the managing member, the chairman of the board of directors and the chief executive officer of Solar Capital LLC since its inception in February 2007, and has been the chairman of the board of directors since December 2007, and chief executive officer and president since November 2007, of Solar Capital Ltd. Mr. Gross also currently serves as the managing member of our investment adviser, Solar Capital Partners. From July 2006 through approximately the first quarter of 2009, Mr. Gross was a partner in Magnetar Capital Partners, LP. Between February 2004 and February 2006, Mr. Gross was the president and chief executive officer of Apollo Investment Corporation, a publicly traded business development company that he founded and on whose board of directors and investment committee he served as chairman from February 2004 to July 2006, and was the managing partner of Apollo Investment Management, L.P., the investment adviser to Apollo Investment Corporation. Apollo Investment Corporation invests primarily in middle-market companies in the form of senior secured and mezzanine loans as well as by making direct equity investments in such companies. Under his management, Apollo Investment Corporation raised approximately $930 million in gross proceeds in an initial public offering in April 2004 and invested approximately $2.3 billion in over 65 companies in conjunction with 50 different private equity sponsors. From 1990 to February 2006, Mr. Gross was a senior partner at Apollo Management, L.P., a leading private equity firm which he founded in 1990 with five other persons. Since its inception, Apollo Management, L.P. has invested more than $13 billion in over 150 companies in the United States and Western Europe. During his tenure at Apollo Management, L.P., Mr. Gross was a member of an investment committee that was responsible for overseeing such investments. In addition, from 2003 to February 2006, Mr. Gross was the managing partner of Apollo Distressed Investment Fund, an investment fund he founded to invest principally in non-control oriented distressed debt and other investment securities of leveraged companies. Prior to his time at Apollo Management, L.P., Mr. Gross was employed by Drexel Burnham Lambert Incorporated. From June 2006 to August 2008, Mr. Gross served as the chief executive officer, chairman of the board of directors and secretary of Marathon Acquisition Corp., a publicly traded special purpose acquisition company. Mr. Gross currently serves on the boards of directors of Saks, Inc., Global Ship Lease Inc. and Jarden Corporation, and in the past has served on the boards of directors, including in certain cases, in the capacity as a lead director, of more than 20 public and private companies. He is a founding member, and serves on the executive committee, of the Youth Renewal Fund, is the chairman of the board of Mt. Sinai Children’s Center Foundation, and serves on the Board of Trustees of The Trinity School and the Board of Directors of New York Road Runners. Mr. Gross holds a B.B.A. in accounting from the University of Michigan and an M.M. from the J.L. Kellogg Graduate School of Management at Northwestern University. Mr. Gross’ intimate knowledge of the business and operations of Solar Capital Partners, extensive familiarity with the financial industry and the investment management process in particular, and experience as a director of other public and private companies not only gives the board of directors valuable insight but also positions him well to continue to serve as the chairman of our board of directors.
 
Bruce Spohler was a senior vice president of Solar Capital LLC from its inception in February 2007, and has been a director since September 2009, and the chief operating officer since December 2007, of Solar Capital Ltd. Mr. Spohler also currently serves as a partner of our investment adviser, Solar Capital Partners. Previously, Mr. Spohler was a managing director and a former co-head of U.S. Leveraged Finance for CIBC World Markets. He held numerous senior roles at CIBC World Markets, including serving on the U.S. Management Committee, Global Executive Committee and the Deals Committee, which approves all of CIBC World Markets’ U.S. corporate finance debt capital decisions. During his tenure, he was responsible for senior loan, high yield and mezzanine origination and execution, as well as CIBC World Markets’ below investment grade loan portfolio in the U.S. As a co-head of U.S. Leveraged Finance, he oversaw over 300 capital raising and merger and acquisition transactions, comprising over $40 billion in market capitalization. He joined CIBC World Markets in 1995 when it acquired The Argosy Group, of which Mr. Spohler was a founding member and managing director. Founded in
 
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1990, The Argosy Group was a middle-market financing business, in which Mr. Spohler and other principals of The Argosy Group raised third party capital as well as invested alongside their financial sponsor clients. Prior to The Argosy Group, Mr. Spohler was employed by Drexel Burnham Lambert Incorporated. Mr. Spohler earned a B.S. from Syracuse University and an M.M. from the J.L. Kellogg Graduate School of Management at Northwestern University. Mr. Spohler’s depth of experience in managerial positions in investment management, leveraged finance and financial services, as well as his intimate knowledge of Solar Capital’s business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these and other matters.
 
Independent Directors
 
Steven Hochberg was a director of Solar Capital LLC from its inception in February 2007, and has been a director of Solar Capital Ltd. since November 2007. Mr. Hochberg is the founder of Ascent Biomedical Ventures, a New York based venture investor in biomedical technology companies including medical devices and drugs. Since 1992, Mr. Hochberg has also been an active founder of early-stage medical technology companies, including Biomerix Corporation, Eminent Research Systems Inc., Clinsights, Inc., Med-E-Systems/AHT Corporation, and Physicians Online. Mr. Hochberg is the chairman of the board of directors of Biomerix Corporation, Crosstrees Medical, Inc. and Ouroboros, Inc., and serves on the board of directors of Synecor, LLC. Previously, Mr. Hochberg was an investment banker with Alex. Brown & Sons and a strategy consultant with Bain & Company in the technology and healthcare areas. Currently, Mr. Hochberg is a member of the Board of Trustees and Vice Chairman of Continuum Health Partners, one of the largest non-profit hospital systems in New York City. Mr. Hochberg is also a member of the Board of Governors of the New York Academy of Sciences. Mr. Hochberg holds a B.B.A. from the University of Michigan and an M.B.A. from Harvard Business School. Mr. Hochberg’s varied experience in investing in medical technology companies provides the board of directors with particular knowledge of this field, and his role as chairman of other companies’ board of directors brings the perspective of a knowledgeable corporate leader.
 
Leonard A. Potter has been a director of Solar Capital Ltd. since September 2009. Mr. Potter is currently the Chief Investment Officer of Salt Creek Hospitality, a private acquirer and owner of hospitality related assets. From December 2002 through July 2009, Mr. Potter was a Managing Director — Soros Private Equity at Soros Fund Management LLC (“SFM”) where, from May 2005 through July 2009, Mr. Potter served as co-head of the Private Equity group and a member of the Private Equity Investment Committee. From September 1998 until joining SFM in 2002, Mr. Potter was a Managing Director of Alpine Consolidated LLC, a private merchant bank, and from April 1996 through September 1998, Mr. Potter founded and served as a Managing Director of Capstone Partners LLC, a private merchant bank. Prior to founding Capstone Partners, Mr. Potter was an attorney specializing in mergers, acquisitions and corporate finance at Morgan, Lewis & Bockius and Willkie Farr & Gallagher. Mr. Potter has previously served as a board member of several public companies and currently serves on the boards of several private companies. Mr. Potter has a B.A. from Brandeis University and a J.D. from the Fordham University School of Law. Mr. Potter’s experience practicing as a corporate lawyer provides valuable insight to the board of directors on regulatory and risk management issues. In addition, his tenure in private equity investments and service as a director of both public and private companies provide industry-specific knowledge and expertise to the board of directors.
 
David S. Wachter was a director of Solar Capital LLC from its inception in February 2007, and has been a director of Solar Capital Ltd. since November 2007. Mr. Wachter is a founding partner, managing director and president of W Capital Partners. W Capital Partners is a private equity fund manager that acquires direct private equity portfolios in the secondary market. W Capital Partners manages over $1 billion of capital and is a leading participant in providing private equity firms, financial institutions and corporations with a liquidity alternative for their private equity investments. Prior to founding W Capital Partners, Mr. Wachter was a managing director at Jefferies & Co. from 1999 to 2001, a founding partner and managing director at C.E. Unterberg, Towbin from 1990 to 1999 and an investment banker at Lehman Brothers from 1986 to 1990. Mr. Wachter has a B.S. in Engineering, with a major in Computer Science and Applied Mathematics, from Tufts University and an M.B.A.
 
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from New York University Graduate School of Business. Mr. Wachter’s extensive knowledge of private equity and investment banking provide the board of directors with the valuable insight of an experienced financial manager.
 
Executive Officers Who Are Not Directors
 
Nicholas Radesca CPA was the Chief Financial Officer of Solar Capital LLC from March 2008 and has been the Chief Financial Officer and Secretary of Solar Capital Ltd. since March 2008 and October 2009, respectively. Mr. Radesca joined Solar Capital from iStar Financial Inc. where he served from 2006 to 2008 as the Chief Accounting Officer. His responsibilities at iStar Financial Inc., a publicly traded, diversified commercial real estate company, encompassed all aspects of accounting, tax and SEC reporting. Prior to iStar Financial Inc., Mr. Radesca was the Vice President of Financial Reporting at Fannie Mae from 2005 to 2006 where he oversaw SEC, regulatory and internal reporting. From 2002 to 2005, he served as Director of External Reporting at Del Monte Foods Company, where he managed both the corporate accounting policy and the SEC reporting functions. Mr. Radesca also previously served as the Vice President of Financial Reporting at Providian Financial from 1999 to 2002, where he was responsible for SEC reporting and accounting for securitizations and derivatives. He began his financial services career at Bank of America working in the mortgage and capital markets accounting groups. Mr. Radesca has more than 15 years of experience in accounting, tax and SEC reporting and is a licensed Certified Public Accountant. Mr. Radesca has a B.S. in Accounting from New York Institute of Technology and an M.B.A. from The California State University, East Bay.
 
Guy Talarico has been the Chief Compliance Officer of Solar Capital Ltd. since July 2008. Mr. Talarico founded and has served as chief executive officer of Alaric Compliance Services, LLC, (successor to EOS Compliance Services LLC) since June 2004. Mr. Talarico currently serves as chief compliance officer for a number of funds and investment advisers, including Keeley Funds Inc., The FBR Funds and PennantPark Investment Corporation. Prior to founding EOS Compliance Services LLC, Mr. Talarico served as the Senior Director of the Institutional Custody Division at Investors Bank & Trust Company from 2001 to 2004. Immediately prior to that, Mr. Talarico worked at JPMorgan Chase Bank where he was a Division Executive for Commercial Investment and Retirement Services in its Investment Services Group from 1995 to 2001. Mr. Talarico holds a B.S. ChE from Lehigh University, an M.B.A. from Fairleigh Dickinson University and a J.D. from New York Law School.
 
Board Leadership Structure
 
Our board of directors monitors and performs an oversight role with respect to the business and affairs of Solar Capital, including with respect to investment practices and performance, compliance with regulatory requirements and the services, expenses and performance of service providers to Solar Capital. Among other things, our board of directors approves the appointment of our investment adviser and officers, reviews and monitors the services and activities performed by our investment adviser and executive officers and approves the engagement, and reviews the performance of, our independent public accounting firm.
 
Under Solar Capital’s bylaws, our board of directors may designate a chairman to preside over the meetings of the board of directors and meetings of the stockholders and to perform such other duties as may be assigned to him by the board. We do not have a fixed policy as to whether the chairman of the board should be an independent director and believe that we should maintain the flexibility to select the chairman and reorganize the leadership structure, from time to time, based on the criteria that is in the best interests of Solar Capital and its stockholders at such times.
 
Presently, Mr. Gross serves as the chairman of our board of directors. Mr. Gross is an “interested person” of Solar Capital as defined in Section 2(a)(19) of the 1940 Act because he is the president and chief executive officer of Solar Capital, serves on the investment committee of our investment adviser and is the managing member of our investment adviser. We believe that Mr. Gross’ history with Solar Capital, familiarity with its
 
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investment platform, and extensive knowledge of the financial services industry and the investment valuation process in particular qualify him to serve as the chairman of our board of directors. We believe that Solar Capital is best served through this existing leadership structure, as Mr. Gross’ relationship with Solar Capital’s investment adviser provides an effective bridge and encourages an open dialogue between management and the board of directors, ensuring that both groups act with a common purpose.
 
Our board of directors does not currently have a designated lead independent director. We are aware of the potential conflicts that may arise when a non-independent director is chairman of the board, but believe these potential conflicts are offset by our strong corporate governance policies. Our corporate governance policies include regular meetings of the independent directors in executive session without the presence of interested directors and management, the establishment of audit and nominating and corporate governance committees comprised solely of independent directors and the appointment of a chief compliance officer, with whom the independent directors meet regularly without the presence of interested directors and other members of management, for administering our compliance policies and procedures.
 
We recognize that different board leadership structures are appropriate for companies in different situations. We re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet Solar Capital’s needs.
 
Board’s Role In Risk Oversight
 
Our board of directors performs its risk oversight function primarily through (a) its two standing committees, which report to the entire board of directors and are comprised solely of independent directors, and (2) active monitoring of our chief compliance officer and our compliance policies and procedures.
 
As described below in more detail under “Committees of the Board of Directors,” the audit committee and the nominating and corporate governance committee assist the board of directors in fulfilling its risk oversight responsibilities. The audit committee’s risk oversight responsibilities include overseeing Solar Capital’s accounting and financial reporting processes, Solar Capital’s systems of internal controls regarding finance and accounting, and audits of Solar Capital’s financial statements. The nominating and corporate governance committee’s risk oversight responsibilities include selecting, researching and nominating directors for election by our stockholders, developing and recommending to the board a set of corporate governance principles and overseeing the evaluation of the board and our management.
 
Our board of directors also performs its risk oversight responsibilities with the assistance of the chief compliance officer. The board of directors annually reviews a written report from the chief compliance officer discussing the adequacy and effectiveness of the compliance policies and procedures of Solar Capital and its service providers. The chief compliance officer’s annual report addresses at a minimum (a) the operation of the compliance policies and procedures of Solar Capital and its service providers since the last report; (b) any material changes to such policies and procedures since the last report; (c) any recommendations for material changes to such policies and procedures as a result of the chief compliance officer’s annual review; and (d) any compliance matter that has occurred since the date of the last report about which the board of directors would reasonably need to know to oversee our compliance activities and risks. In addition, the chief compliance officer meets separately in executive session with the independent directors at least once each year.
 
We believe that our board’s role in risk oversight is effective, and appropriate given the extensive regulation to which we are already subject as a BDC. As a BDC, we are required to comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, our ability to incur indebtedness is limited such that our asset coverage must equal at least 200% immediately after each time we incur indebtedness, we generally have to invest at least 70% of our total assets in “qualifying assets” and we are
 
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not generally permitted to invest in any portfolio company in which one of our affiliates currently has an investment. See “Regulation as a Business Development Company.”
 
We recognize that different board roles in risk oversight are appropriate for companies in different situations. We re-examine the manners in which the board administers its oversight function on an ongoing basis to ensure that they continue to meet Solar Capital’s needs.
 
Committees of the Board of Directors
 
An audit committee and a nominating and corporate governance committee have been established by our board of directors. All directors are expected to attend at least 75% of the aggregate number of meetings of the board of directors and of the respective committees on which they serve. We require each director to make a diligent effort to attend all board and committee meetings as well as each annual meeting of our stockholders.
 
Audit Committee
 
The audit committee operates pursuant to a charter approved by our board of directors. The charter sets forth the responsibilities of the audit committee. The audit committee’s responsibilities include selecting the independent registered public accounting firm for Solar Capital, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of Solar Capital’s financial statements, pre-approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing Solar Capital’s annual financial statements and periodic filings and receiving Solar Capital’s audit reports and financial statements. The audit committee also establishes guidelines and makes recommendations to our board of directors regarding the valuation of our investments. The audit committee is responsible for aiding our board of directors in determining the fair value of debt and equity securities that are not publicly traded or for which current market values are not readily available. The board of directors and audit committee utilize the services of nationally recognized third-party valuation firms to help determine the fair value of these securities. The audit committee is currently composed of Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Global Select Market and are not “interested persons” of Solar Capital as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Hochberg serves as chairman of the audit committee. Our board of directors has determined that Mr. Hochberg is an “audit committee financial expert” as that term is defined under Item 407 of Regulation S-K, as promulgated under the Exchange Act. Mr. Hochberg meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act.
 
Nominating and Corporate Governance Committee
 
The nominating and corporate governance committee operates pursuant to a charter approved by our board of directors. The members of the nominating and corporate governance committee are Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Global Select Market and are not “interested persons” of Solar Capital as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Wachter serves as chairman of the nominating and corporate governance committee. The nominating and corporate governance committee is responsible for selecting, researching and nominating directors for election by our stockholders, selecting nominees to fill vacancies on the board of directors or a committee thereof, developing and recommending to the board of directors a set of corporate governance principles and overseeing the evaluation of the board of directors and our management. The nominating and corporate governance committee currently does not consider nominees recommended by our stockholders.
 
The nominating and corporate governance committee seeks candidates who possess the background, skills and expertise to make a significant contribution to the board of directors, Solar Capital and its stockholders. In
 
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considering possible candidates for election as a director, the nominating committee takes into account, in addition to such other factors as it deems relevant, the desirability of selecting directors who:
 
 	•	 	are of high character and integrity;	
 
 	•	 	are accomplished in their respective fields, with superior credentials and recognition;	
 
 	•	 	have relevant expertise and experience upon which to be able to offer advice and guidance to management;	
 
 	•	 	have sufficient time available to devote to the affairs of Solar Capital;	
 
 	•	 	are able to work with the other members of the board of directors and contribute to the success of Solar Capital;	
 
 	•	 	can represent the long-term interests of Solar Capital’s stockholders as a whole; and	
 
 	•	 	are selected such that the board of directors represents a range of backgrounds and experience.	
 
The nominating and corporate governance committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, the nominating and corporate governance committee considers and discusses diversity, among other factors, with a view toward the needs of the board of directors as a whole. The nominating and corporate governance committee generally conceptualizes diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to the board of directors, when identifying and recommending director nominees. The nominating and corporate governance committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the nominating and corporate governance committee’s goal of creating a board of directors that best serves the needs of Solar Capital and the interest of its shareholders.
 
Compensation of Directors
 
Our independent directors receive an annual fee of $100,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting attended in person and $1,000 for each telephonic 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 $7,500 and each chairman of any other committee receives an annual fee of $2,500 for their additional services, if any, in these capacities. No compensation is expected to be paid to directors who are “interested persons” of Solar Capital, as such term is defined in Section 2(a)(19) of the 1940 Act.
 
Compensation of Executive Officers
 
None of our officers receives direct compensation from Solar Capital. Mr. Radesca, our chief financial officer and secretary and, through Alaric Compliance Services, LLC, Guy Talarico, our chief compliance officer, are paid by Solar Capital Management, subject to reimbursement by us of an allocable portion of such compensation for services rendered by such persons to Solar Capital. To the extent that Solar Capital Management outsources any of its functions we will pay the fees associated with such functions on a direct basis without profit to Solar Capital Management.
 
Indemnification Agreements
 
We have entered into indemnification agreements with our directors. The indemnification agreements are intended to provide our directors the maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that Solar Capital shall indemnify the director who is a party to the agreement (an “Indemnitee”), including the advancement of legal expenses, if, by reason of his or her corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, to the maximum extent permitted by Maryland law and the 1940 Act.
 
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PORTFOLIO MANAGEMENT
 
The management of our investment portfolio is the responsibility of our investment adviser, Solar Capital Partners, and its investment committee, which is led by Messrs. Gross and Spohler. For more information regarding the business experience of Messrs. Gross and Spohler, see “Management — Board of Directors and Executive Officers — Interested Directors.” Solar Capital Partners’ investment committee must approve each new investment that we make. The members of Solar Capital Partners’ investment committee are not employed by us, and receive no compensation from us in connection with their portfolio management activities. However, Messrs. Gross and Spohler, through their financial interests in Solar Capital Partners, will be entitled to a portion of any investment advisory fees paid by Solar Capital to Solar Capital Partners.
 
Investment Personnel
 
Solar Capital Partners’ investment team currently consists of its senior investment professionals, Messrs. Gross, Spohler, Gerson, Henley and Mait, and team of 9 additional experienced investment professionals. We consider Messrs. Gross and Spohler, who lead Solar Capital Partners’ investment committee, to be our portfolio managers.
 
The table below shows the dollar range of shares of common stock to be beneficially owned by each of our portfolio managers.

Name of Portfolio Manager	  	Dollar Range of Equity
Securities in Solar Capital(1)	 	
Michael S. Gross	  	 	Over $1 million	  	
Bruce Spohler	  	 	Over $1 million	  	
 
(1)	 	The dollar range of Solar Capital Ltd. equity securities beneficially owned is based on the initial offering price per share of our common stock of $18.50.	
 
Compensation
 
None of Solar Capital Partners’ investment professionals receive any direct compensation from us in connection with the management of our portfolio. Messrs. Gross and Spohler, through their financial interests in Solar Capital Partners, are entitled to a portion of any profits earned by Solar Capital Partners, which includes any fees payable to Solar Capital Partners under the terms of our Investment Advisory and Management Agreement, less expenses incurred by Solar Capital Partners in performing its services under our Investment Advisory and Management Agreement.
 
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INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
 
Management Services
 
Solar Capital Partners serves as our investment adviser. Solar Capital Partners is an investment adviser that is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our board of directors, our investment adviser manages the day-to-day operations of, and provides investment advisory and management services to, Solar Capital. Under the terms of our Investment Advisory and Management Agreement, Solar Capital Partners:
 
 	•	 	determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;	
 
 	•	 	identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies);	
 
 	•	 	closes and monitors the investments we make; and	
 
 	•	 	provides us with other investment advisory, research and related services as we may from time to time require.	
 
Solar Capital Partners’ services under the Investment Advisory and Management Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.
 
Management Fee
 
Pursuant to the Investment Advisory and Management Agreement, we have agreed to pay Solar Capital Partners a fee for investment advisory and management services consisting of two components — a base management fee and an incentive fee.
 
The base management fee is calculated at an annual rate of 2.00% of our gross assets. For services rendered under the Investment Advisory and Management Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately pro-rated.
 
The incentive fee has two parts, as follows: one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Solar Capital Management, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. 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 calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2.00% base management fee. We pay Solar Capital Partners an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:
 
 	•	 	no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%;	
 
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 	•	 	100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide our investment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.1875% in any calendar quarter; and	
 
 	•	 	20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to Solar Capital Partners (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to Solar Capital Partners).	
 
The following is a graphical representation of the calculation of the income-related portion of the incentive fee:
 
Quarterly Incentive Fee Based on Net Investment Income
 
Pre-incentive fee net investment income
(expressed as a percentage of the value of net assets)

 
Percentage of pre-incentive fee net investment income
allocated to Solar Capital Partners
 
These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. You should be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to pre-incentive fee net investment income.
 
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, 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 fees with respect to each of the investments in our portfolio.
 
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Examples of Quarterly Incentive Fee Calculation
 
Example 1: Income Related Portion of Incentive Fee (*):
 
Alternative 1:
 
Assumptions
 
Investment income (including interest, dividends, fees, etc.) = 1.25%
Hurdle rate (1) = 1.75%
Management fee (2) = 0.50%
Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 0.55%
Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee.
 
Alternative 2:
 
Assumptions
 
Investment income (including interest, dividends, fees, etc.) = 2.70%
Hurdle rate (1) = 1.75%
Management fee (2) = 0.50%
Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.00%
Incentive fee = 100% × pre-incentive fee net investment income, subject to the “catch-up” (4)
= 100% × (2.00% – 1.75%)
= 0.25%
 
Alternative 3:
 
Assumptions
 
Investment income (including interest, dividends, fees, etc.) = 3.00%
Hurdle rate (1) = 1.75%
Management fee (2) = 0.50%
Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.30%
Incentive fee = 20% × pre-incentive fee net investment income, subject to “catch-up” (4)
Incentive fee = 100% × “catch-up” + (20% × (pre-incentive fee net investment income – 2.1875%))
 
Catch-up = 2.1875% – 1.75%
= 0.4375%
Incentive fee = (100% × 0.4375%) + (20% × (2.3% – 2.1875%))
= 0.4375% + (20% × 0.1125%)
= 0.4375% + 0.0225%
= 0.46%
 
(*)	 	The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets.	
(1)	 	Represents 7% annualized hurdle rate.	
(2)	 	Represents 2% annualized management fee.	
(3)	 	Excludes organizational and offering expenses.	
 
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(4)	 	The “catch-up” provision is intended to provide our investment adviser with an incentive fee of 20% on all of our pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.1875% in any calendar quarter.	
 
Example 2: Capital Gains Portion of Incentive Fee:
 
Alternative 1:
 
Assumptions
 
 	•	 	Year 1: $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)	
 
 	•	 	Year 2: Investment A sold for $50 million and fair market value (“FMV”) of Investment B determined to be $32 million	
 
 	•	 	Year 3: FMV of Investment B determined to be $25 million	
 
 	•	 	Year 4: Investment B sold for $31 million	
 
The capital gains portion of the incentive fee would be:
 
 	•	 	Year 1: None	
 
 	•	 	Year 2: Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%)	
 
 	•	 	Year 3: None	
 
$5 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previous capital gains fee paid in Year 2)
 
 	•	 	Year 4: Capital gains incentive fee of $200,000	
 
$6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains fee taken in Year 2)
 
Alternative 2:
 
Assumptions
 
 	•	 	Year 1: $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)	
 
 	•	 	Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million	
 
 	•	 	Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million	
 
 	•	 	Year 4: FMV of Investment B determined to be $35 million	
 
 	•	 	Year 5: Investment B sold for $20 million	
 
The capital gains incentive fee, if any, would be:
 
 	•	 	Year 1: None	
 
 	•	 	Year 2: $5 million capital gains incentive fee	
 
20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B)
 
 	•	 	Year 3: $1.4 million capital gains incentive fee(1)	
 
$6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million capital gains fee received in Year 2
 
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(1)	 	As illustrated in Year 3 of Alternative 1 above, if Solar Capital were to be wound up on a date other than December 31 of any year, Solar Capital may have paid aggregate capital gain incentive fees that are more than the amount of such fees that would be payable if Solar Capital had been wound up on December 31 of such year.	
 
 	•	 	Year 4: None	
 
 	•	 	Year 5: None	
 
$5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $6.4 million cumulative capital gains fee paid in Year 2 and Year 3
 
Payment of Our Expenses
 
All investment professionals of the investment adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation):
 
 	•	 	the cost of our organization and this offering;	
 
 	•	 	the cost of calculating our net asset value, including the cost of any third-party valuation services;	
 
 	•	 	the cost of effecting sales and repurchases of our shares and other securities;	
 
 	•	 	interest payable on debt, if any, to finance our investments;	
 
 	•	 	fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees;	
 
 	•	 	transfer agent and custodial fees;	
 
 	•	 	fees and expenses associated with marketing efforts;	
 
 	•	 	federal and state registration fees, any stock exchange listing fees;	
 
 	•	 	federal, state and local taxes;	
 
 	•	 	independent directors’ fees and expenses;	
 
 	•	 	brokerage commissions;	
 
 	•	 	fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;	
 
 	•	 	direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;	
 
 	•	 	fees and expenses associated with independent audits and outside legal costs;	
 
 	•	 	costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and	
 
 	•	 	all other expenses incurred by either Solar Capital Management or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and any administrative support staff.	
 
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Duration and Termination
 
The Investment Advisory and Management Agreement was initially approved by the board of directors of Solar Capital LLC on March 6, 2007 and subsequently approved in its current form by our board of directors and sole initial stockholder on September 29, 2009. Unless earlier terminated as described below, the Investment Advisory and Management Agreement will remain in effect for a period of two years from the date it was approved by our board of directors and will remain in effect from year to year thereafter if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not parties to such agreement or who are not “interested persons” of Solar Capital, as such term is defined in Section 2(a)(19) of the 1940 Act. The Investment Advisory and Management Agreement will automatically terminate in the event of its assignment. The Investment Advisory and Management Agreement may also be terminated by either party without penalty upon not more than 60 days’ written notice to the other. See “Risk Factors — Risks Relating to Our Business and Structure — Our investment adviser can resign on 60 days’ notice.”
 
Indemnification
 
The Investment Advisory and Management Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Solar Capital Partners and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Solar Capital for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Solar Capital Partners’ services under the Investment Advisory and Management Agreement or otherwise as an investment adviser of Solar Capital.
 
Organization of the Investment Adviser
 
Solar Capital Partners is a Delaware limited liability company. The principal executive offices of Solar Capital Partners are located at 500 Park Avenue, 5 th  Floor, New York, New York 10022.
 
Board Approval of the Investment Advisory and Management Agreement
 
A discussion regarding the basis for our board of director’s approval of our Investment Advisory and Management Agreement will be included in our first annual report on Form 10-K filed subsequent to any such board approval, or incorporated by reference therein.
 
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ADMINISTRATION AGREEMENT
 
Solar Capital Management, LLC, a Delaware limited liability company, serves as our administrator. The principal executive offices of Solar Capital Management are located at 500 Park Avenue, 5 th  Floor, New York, New York 10022. Pursuant to an Administration Agreement, Solar Capital Management furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, Solar Capital Management also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, Solar Capital Management assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholder, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Solar Capital Management’s overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the compensation of our chief financial officer and any administrative support staff. Under the Administration Agreement, Solar Capital Management will also provide on our behalf managerial assistance to those portfolio companies that request such assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.
 
The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Solar Capital Management and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Solar Capital for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Solar Capital Management’s services under the Administration Agreement or otherwise as administrator for Solar Capital.
 
LICENSE AGREEMENT
 
We have entered into a license agreement with Solar Capital Partners pursuant to which Solar Capital Partners has agreed to grant us a non-exclusive, royalty-free license to use the name “Solar Capital.” Under this agreement, we have a right to use the Solar Capital name for so long as the Investment Advisory and Management Agreement with our investment adviser is in effect. Other than with respect to this limited license, we will have no legal right to the “Solar Capital” name.
 
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
 
We have entered into the Investment Advisory and Management Agreement with Solar Capital Partners. Mr. Gross, our chairman, chief executive officer and president, is the managing member and a senior investment professional of, and has financial and controlling interests in, Solar Capital Partners. In addition, Mr. Spohler, our chief operating officer and board member and Mr. Radesca, our chief financial officer and secretary, serve as a partner and chief financial officer, respectively, for Solar Capital Partners. Mr. Spohler also has financial interests in Solar Capital Partners.
 
As a result of transactions in connection with our initial private placement, the Magnetar entities owned as of December 31, 2009, either directly or indirectly, approximately 42.84% of our outstanding equity, and currently own, either directly or indirectly, approximately 23.81% of our outstanding shares of common stock after the completion of our initial public offering. Magnetar also provides certain services to Solar Capital Partners and Solar Capital Management, and is reimbursed by Solar Capital Partners and Solar Capital Management for the expenses it incurs in connection with providing such services.
 
Solar Capital Partners and it affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. Solar Capital Partners and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures.
 
We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has agreed to grant us a non-exclusive, royalty-free license to use the name “Solar Capital.” In addition, pursuant to the terms of the Administration Agreement, Solar Capital Management provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. Solar Capital Partners is the sole member of and controls Solar Capital Management.
 
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CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS
 
The following table sets forth certain ownership information as of May 10, 2010 with respect to Solar Capital Ltd.’s common stock for those persons who, directly or indirectly, own, control or hold with the power to vote, 5% or more of Solar Capital Ltd.’s common stock, and all officers and directors as a group.

Name	  	Type of Ownership	  	Shares
Owned	 	  	Percentage	 	
Magnetar Financial LLC(1)	  	Indirect	  	 	7,863,750	  	  	 	23.81	% 	
Silver Creek Capital Management LLC(2)	  	Indirect	  	 	2,681,294	  	  	 	8.12	% 	
Baupost Group Securities, LLC(3)	  	Indirect	  	 	2,010,973	  	  	 	6.09	% 	
All officers and directors as a group (7 persons)(4)	  	Direct and Indirect	  	 	1,971,449	  	  	 	5.97	% 	
 
(1)	Such securities are held by certain funds and other entities controlled and/or managed by Magnetar Financial LLC or its affiliates. The address for Magnetar Financial LLC is 1603 Orrington Avenue, Evanston, IL 60201.	
(2)	Such securities are held by certain investment vehicles controlled by Silver Creek Capital Management LLC. The address for Silver Creek Capital Management LLC is 1301 Fifth Avenue, 40 th  Floor Seattle, WA 98101.	
(3)	Such securities are held by certain investment vehicles controlled by Baupost Group Securities, LLC. The address for Baupost Group Securities, LLC is 10 St. James Avenue Suite 2000 Boston, MA 02116.	
(4)	The address for all officers and directors is 500 Park Avenue, 5th Floor, New York, NY 10022.	
 
The following table sets forth the dollar range of our equity securities beneficially owned by each of our directors as of May 6, 2010.

Name of Director	  	Dollar Range of Equity
Securities in Solar Capital (1)(2)	
Interested Directors	  	 	
Michael S. Gross	  	Over $100,000	
Bruce Spohler	  	Over $100,000	
 	 	
Independent Directors	  	 	
Steven Hochberg	  	Over $100,000	
David S. Wachter	  	Over $100,000	
Leonard A. Potter	  	Over $100,000	
 
(1)	 	The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or Over $100,000.	
(2)	 	The dollar range of equity securities beneficially owned in us is based on the closing price for our common stock of $21.74 on May 7, 2010 on the NASDAQ Global Select Market. Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934.	
 
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REGULATION AS A BUSINESS DEVELOPMENT COMPANY
 
General
 
A business development company is regulated by the 1940 Act. A business development company must be organized in the United States for the purpose of investing in or lending to primarily private companies and making significant managerial assistance available to them. A business development company may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses. A business development company provides stockholders the ability to retain the liquidity of a publicly-traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned companies.
 
We may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.
 
As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the business development company. Furthermore, as a business development company, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
 
As a business development company, we are required to meet a coverage ratio of the value of total assets to total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 200%. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.
 
We are generally not be able to issue and sell our common stock at a price below net asset value per share. See “Risk factors — Risks Relating to Our Business and Structure — Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital.” We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
 
As a business development company, we are generally limited in our ability to invest in any portfolio company in which our investment adviser or any of its affiliates currently have an investment or to make any co-investments with our investment adviser or its affiliates without an exemptive order from the SEC, subject to certain exceptions. We intend to seek an order from the SEC to permit us to co-invest with certain of the Magnetar entities under certain circumstances. There can be no assurance when, or if, such an order may be obtained.
 
We are periodically examined by the SEC for compliance with the 1940 Act.
 
As a business development company, we are subject to certain risks and uncertainties. See “Risk factors —Risks Relating to Our Business and Structure.”
 
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Qualifying Assets
 
Under the 1940 Act, a business development company may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development company’s total assets. The principal categories of qualifying assets relevant to our proposed business are the following:
 
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
 
(a) is organized under the laws of, and has its principal place of business in, the United States;
 
(b) is not an investment company (other than a small business investment company wholly owned by the business development company) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
 
(c) satisfies any of the following:
 
i. does not have any class of securities that is traded on a national securities exchange;
 
ii. has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less then $250 million;
 
iii. is controlled by a business development company or a group of companies including a business development company and the business development company has an affiliated person who is a director of the eligible portfolio company; or
 
iv. is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.
 
(2) Securities of any eligible portfolio company which we control.
 
(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
 
(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
 
(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
 
(6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
 
Managerial Assistance to Portfolio Companies
 
In addition, a business development company must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the business development company must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the business development company purchases such
 
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securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the business development company, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
 
Temporary Investments
 
Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our investment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.
 
Senior Securities
 
We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — We may borrow money, which would magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.”
 
Code of Ethics
 
We and Solar Capital Partners have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain transactions by our personnel. Our codes of ethics generally do not permit investments by our employees in securities that may be purchased or held by us. You may read and copy these codes of ethics at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. In addition, each code of ethics is attached as an exhibit to the registration statement of which this prospectus is a part, and is available on the EDGAR Database on the SEC’s Internet site at  http://www.sec.gov.  You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following Email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.
 
Compliance Policies and Procedures
 
We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and are required to review these
 
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compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures. Guy Talarico currently serves as our chief compliance officer.
 
Sarbanes-Oxley Act of 2002
 
The Sarbanes-Oxley Act of 2002 imposes a wide variety of new regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:
 
 	•	 	pursuant to Rule 13a-14 of the Exchange Act, our chief executive officer and chief financial officer must certify the accuracy of the financial statements contained in our periodic reports;	
 
 	•	 	pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;	
 
 	•	 	pursuant to Rule 13a-15 of the Exchange Act, beginning with our 2010 fiscal year our management will be required to prepare an annual report regarding its assessment of our internal control over financial reporting and, beginning with our 2011 fiscal year, obtain an audit of the effectiveness of internal control over financial reporting performed by our independent registered public accounting firm; and	
 
 	•	 	pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.	
 
The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.
 
Proxy Voting Policies and Procedures
 
We have delegated our proxy voting responsibility to our investment adviser. The Proxy Voting Policies and Procedures of our investment adviser are set forth below. The guidelines will be reviewed periodically by our investment adviser and our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, “we,” “our” and “us” refers to our investment adviser.
 
Introduction
 
An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients.
 
These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
 
Proxy Policies
 
We will vote proxies relating to our portfolio securities in what we perceive to be the best interest of our clients’ stockholders. We will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by our clients. Although we will generally vote against proposals that may have a negative impact on our clients’ portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so.
 
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Our proxy voting decisions will be made by the senior officers who are responsible for monitoring each of the clients’ investments. To ensure that our vote is not the product of a conflict of interest, we will require that: (1) anyone involved in the decision making process disclose to our managing member any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.
 
Proxy Voting Records
 
You may obtain information about how we voted proxies by making a written request for proxy voting information to: Solar Capital Partners at 500 Park Avenue, 5 th  Floor, New York, New York 10022.
 
Privacy Principles
 
We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.
 
Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available to us. We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).
 
We restrict access to non-public personal information about our stockholders to employees of our investment adviser and its affiliates with a legitimate business need for the information. We will maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.
 
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DETERMINATION OF NET ASSET VALUE
 
We determine the net asset value of our investment portfolio each quarter by subtracting our total liabilities from the fair value of our total assets.
 
We conduct the valuation of our assets, pursuant to which our net asset value shall be determined, at all times consistent with GAAP and the 1940 Act. Our valuation procedures are set forth in more detail below:
 
Securities for which market quotations are readily available on an exchange shall be valued at such price as of the closing price on the day of valuation. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or board of directors, does not represent fair value, shall each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the board of directors will conduct independent appraisals and review management’s preliminary valuations and make their own assessment for all material assets; (iv) the board of directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.
 
The recommendation of fair value will generally be based on the following factors, as relevant:
 
 	•	 	the nature and realizable value of any collateral;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business; and	
 
 	•	 	comparisons to publicly traded securities.	
 
Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:
 
 	•	 	private placements and restricted securities that do not have an active trading market;	
 
 	•	 	securities whose trading has been suspended or for which market quotes are no longer available;	
 
 	•	 	debt securities that have recently gone into default and for which there is no current market;	
 
 	•	 	securities whose prices are stale;	
 
 	•	 	securities affected by significant events; and	
 
 	•	 	securities that the investment adviser believes were priced incorrectly.	
 
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
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Determinations in Connection with Offerings
 
In connection with future offering of shares of our common stock, our board of directors or a committee thereof will be required to make the determination that we are not selling shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made. Our board of directors will consider the following factors, among others, in making such determination:
 
 	•	 	the net asset value of our common stock disclosed in the most recent periodic report that we filed with the SEC;	
 
 	•	 	our management’s assessment of whether any material change in the net asset value of our common stock has occurred (including through the realization of gains on the sale of our portfolio securities) during the period beginning on the date of the most recently disclosed net asset value of our common stock and ending two days prior to the date of the sale of our common stock; and	
 
 	•	 	the magnitude of the difference between (i) the net asset value of our common stock disclosed in the most recent periodic report that we filed with the SEC and our management’s assessment of any material change in the net asset value of our common stock since the date of the most recently disclosed net asset value of our common stock, and (ii) the offering price of the shares of our common stock in the proposed offering.	
 
Importantly, this determination will not require that we calculate the net asset value of our common stock in connection with each offering of shares of our common stock, but instead it will involve the determination by our board of directors or a committee thereof that we are not selling shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made.
 
Moreover, to the extent that there is even a remote possibility that we may (i) issue shares of our common stock at a price below the then current net asset value of our common stock at the time at which the sale is made or (ii) trigger the undertaking (which we provide in certain registration statements we file with the SEC) to suspend the offering of shares of our common stock pursuant to this prospectus if the net asset value of our common stock fluctuates by certain amounts in certain circumstances until the prospectus is amended, our board of directors will elect, in the case of clause (i) above, either to postpone the offering until such time that there is no longer the possibility of the occurrence of such event or to undertake to determine the net asset value of our common stock within two days prior to any such sale to ensure that such sale will not be below our then current net asset value, and, in the case of clause (ii) above, to comply with such undertaking or to undertake to determine the net asset value of our common stock to ensure that such undertaking has not been triggered.
 
These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records that we are required to maintain under the 1940 Act.
 
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DIVIDEND REINVESTMENT PLAN
 
We have adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash as provided below. As a result, if our board of directors authorizes, and we declare, a cash distribution, then our stockholders who have not opted out of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions.
 
No action will be required on the part of a registered stockholder to have his cash distribution reinvested in shares of our common stock. A registered stockholder may elect to receive an entire distribution in cash by notifying American Stock Transfer & Trust Company, the plan administrator and our transfer agent and registrar, in writing so that such notice is received by the plan administrator no later than the record date for distributions to stockholders. The plan administrator will set up an account for shares acquired through the plan for each stockholder who has not elected to receive distributions in cash and hold such shares in non-certificated form. Upon request by a stockholder participating in the plan, received in writing not less than 10 days prior to the record date, the plan administrator will, instead of crediting shares to the participant’s account, issue a certificate registered in the participant’s name for the number of whole shares of our common stock and a check for any fractional share.
 
Those stockholders whose shares are held by a broker or other financial intermediary may receive distributions in cash by notifying their broker or other financial intermediary of their election.
 
We intend to use primarily newly issued shares to implement the plan, whether our shares are trading at a premium or at a discount to net asset value. However, we reserve the right to purchase shares in the open market in connection with our implementation of the plan. If we declare a distribution to stockholders, the plan administrator may be instructed not to credit accounts with newly-issued shares and instead to buy shares in the market if (i) the price at which newly-issued shares are to be credited does not exceed 110% of the last determined net asset value of the shares; or (ii) we have advised the plan administrator that since such net asset value was last determined, we have become aware of events that indicate the possibility of a material change in per share net asset value as a result of which the net asset value of the shares on the payment date might be higher than the price at which the plan administrator would credit newly-issued shares to stockholders. The number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the distribution payable to such stockholder by the market price per share of our common stock at the close of regular trading on the valuation date for such distribution. Market price per share on that date will be the closing price for such shares on the national securities exchange on which our shares are then listed or, if no sale is reported for such day, at the average of their reported bid and asked prices. The number of shares of our common stock to be outstanding after giving effect to payment of the distribution cannot be established until the value per share at which additional shares will be issued has been determined and elections of our stockholders have been tabulated.
 
There will be no brokerage charges or other charges to stockholders who participate in the plan. The plan administrator’s fees under the plan will be paid by us. If a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of $15 plus a per share brokerage commissions from the proceeds.
 
Stockholders who receive distributions in the form of stock are subject to the same federal, state and local tax consequences as are stockholders who elect to receive their distributions in cash. A stockholder’s basis for determining gain or loss upon the sale of stock received in a distribution from us will be equal to the total dollar amount of the distribution payable to the stockholder. Any stock received in a distribution will have a new holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.
 
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The plan may be terminated by us upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any distribution by us. All correspondence concerning the plan should be directed to the plan administrator by mail at 59 Maiden Lane, New York, New York 10038 or by phone at (800) 937-5449.
 
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
 
The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and to an investment in our common stock. This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. For example, we have not described tax consequences that we assume to be generally known by investors or certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, pension plans and trusts, and financial institutions. This summary assumes that investors hold our common stock as capital assets (within the meaning of the Code). The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as in effect as of the date of this registration statement and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought and will not seek any ruling from the Internal Revenue Service regarding this offering. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets in which we do not currently intend to invest.
 
A “U.S. stockholder” generally is a beneficial owner of shares of our common stock who is for U.S. federal income tax purposes:
 
 	•	 	a citizen or individual resident of the United States including an alien individual who is a lawful permanent resident of the United States or meets the “substantial presence” test under Section 7701(b) of the Code;	
 
 	•	 	a corporation or other entity taxable as a corporation, for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof;	
 
 	•	 	a trust, if a court in the United States has primary supervision over its administration and one or more U.S. persons have the authority to control all decisions of the trust, or the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or	
 
 	•	 	an estate, the income of which is subject to U.S. federal income taxation regardless of its source.	
 
A “non-U.S. stockholder” is a beneficial owner of shares of our common stock that is an individual, corporation, trust or estate and is not a U.S. stockholder.
 
If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective stockholder who is a partner of a partnership holding shares of our common stock should consult its tax advisors with respect to the purchase, ownership and disposition of shares of our common stock.
 
Tax matters are very complicated and the tax consequences to an investor of an investment in our shares will depend on the facts of its particular situation. We encourage investors to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws.
 
As a business development company, we intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code, beginning with our 2010 taxable year. As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify
 
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for RIC tax treatment we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the “Annual Distribution Requirement”).
 
Taxation as a Regulated Investment Company
 
If we:
 
 	•	 	qualify as a RIC; and	
 
 	•	 	satisfy the Annual Distribution Requirement;	
 
then we will not be subject to federal income tax on the portion of our investment company taxable income and net capital gain (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) we distribute to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.
 
We will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, and on which we paid no federal income tax, in preceding years (the “Excise Tax Avoidance Requirement”). We currently intend to make sufficient distributions each taxable year to satisfy the Excise Tax Avoidance Requirement.
 
In order to qualify as a RIC for federal income tax purposes, we must, among other things:
 
 	•	 	at all times during each taxable year, have in effect an election to be treated as a business development company under the 1940 Act;	
 
 	•	 	derive in each taxable year at least 90% of our gross income from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or currencies, or other income derived with respect to our business of investing in such stock, securities or currencies and (b) net income derived from an interest in a “qualified publicly traded partnership;” and	
 
 	•	 	diversify our holdings so that at the end of each quarter of the taxable year:	
 
 	•	 	at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and	
 
 	•	 	no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer, (ii) the securities of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) the securities of one or more “qualified publicly traded partnerships.”	
 
We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any original issue discount accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.
 
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Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above. We will monitor our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.
 
Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. The treatment of such gain or loss as long-term or short-term will depend on how long we held a particular warrant. Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant. Except as set forth in “Failure to Qualify as a Regulated Investment Company,” the remainder of this discussion assumes we will qualify as a RIC for each taxable year.
 
Taxation of U.S. Stockholders
 
Distributions by us generally will be taxable to U.S. stockholders as ordinary income or capital gains. Distributions of our investment company taxable income will be taxable as ordinary income to U.S. stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional common stock. Distributions of our net capital gains (that is, the excess of our realized net long-term capital gains in excess of realized net short-term capital losses) properly designated by us as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains, regardless of the U.S. stockholder’s holding period for its common stock and regardless of whether paid in cash or reinvested in additional common stock. For taxable years beginning on or before December 31, 2010, distributions of investment company taxable income that are designated by us as being derived from “qualified dividend income” will be taxed in the hands of non-corporate stockholders at the rates applicable to long-term capital gain, provided that holding period and other requirements are met by both the stockholders and us. Dividends distributed by us will generally not be attributable to qualified dividend income. Distributions in excess of our current and accumulated earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such U.S. stockholder’s common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. stockholder. For a summary of the tax rates applicable to capital gains, including capital gain dividends, see the discussion below.
 
Under the dividend reinvestment plan, if a U.S. stockholder owns shares of common stock registered in its own name, the U.S. stockholder will have all cash distributions automatically reinvested in additional shares of common stock unless the U.S. stockholder opts out of our dividend reinvestment plan by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution. See “Dividend Reinvestment Plan.” Any distributions reinvested under the plan will nevertheless remain taxable to the U.S. stockholder. The U.S. stockholder will have an adjusted basis in the additional common shares purchased through the plan equal to the amount of the reinvested distribution. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.
 
Although we currently intend to distribute realized net capital gains (i.e., net realized long-term capital gains in excess of net realized short-term capital losses), if any, at least annually, we may in the future decide to retain some or all of our net capital gains, but to designate the retained amount as a “deemed distribution.” In that case, among other consequences, we will pay corporate-level tax on the retained amount, each U.S. stockholder will be required to include its share of the deemed distribution in income as if it had been actually distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit or refund equal to its allocable share
 
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of the corporate-level tax we pay on the retained capital gain. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s cost basis for its common stock. Since we expect to pay tax on any retained capital gains at our regular corporate capital gain tax rate, and since that rate is in excess of the maximum rate currently payable by non-corporate U.S. stockholders on long-term capital gains, the amount of tax that non-corporate U.S. stockholders will be treated as having paid will exceed the tax they owe on the capital gain dividend. Such excess generally may be claimed as a credit or refund against the U.S. stockholder’s other U.S. federal income tax obligations. A U.S. stockholder that is not subject to U.S. federal income tax or otherwise required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant tax year.
 
As a RIC, we will be subject to the alternative minimum tax (“AMT”), but any items that are treated differently for AMT purposes must be apportioned between us and our stockholders and this may affect the stockholders’ AMT liabilities. Although regulations explaining the precise method of apportionment have not yet been issued by the Internal Revenue Service, we intend in general to apportion these items in the same proportion that dividends paid to each stockholder bear to our taxable income (determined without regard to the dividends paid deduction), unless we determine that a different method for a particular item is warranted under the circumstances.
 
For purposes of determining (i) whether the Annual Distribution Requirement is satisfied for any year and (ii) the amount of dividends paid for that year, we may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If we make such an election, the U.S. stockholder generally will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by us in October, November, or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by our U.S. stockholders on December 31 of the year in which the dividend was declared.
 
You should consider the tax implications of buying common stock just prior to a distribution. Even if the price of the common stock includes the amount of the forthcoming distribution, and the distribution economically represents a return of your investment, you will be taxed upon receipt of the distribution and will not be entitled to offset the distribution against the tax basis in your common stock.
 
You may recognize taxable gain or loss if you sell or exchange your common stock. The amount of the gain or loss will be measured by the difference between your adjusted tax basis in your common stock and the amount of the proceeds you receive in exchange for such stock. Any gain or loss arising from the sale or exchange of our common stock (or, in the case of distributions in excess of the sum of our current and accumulated earnings and profits and your tax basis in the stock, treated as arising from the sale or exchange of our common stock) generally will be a capital gain or loss if the common stock is held as a capital asset. This capital gain or loss normally will be treated as a long-term capital gain or loss if you have held your common stock for more than one year. Otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or exchange of common stock held for six months or less generally will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received, or treated as deemed distributed, with respect to such stock. For this purpose, certain special rules, including rules relating to periods when your risk of loss with respect to your common stock has been diminished, generally apply in determining the holding period of such stock. The ability to deduct capital losses may be subject to other limitations under the Code.
 
In addition, all or a portion of any loss recognized upon a disposition of shares of our common stock may be disallowed if other shares of our common stock are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. In general, individual U.S. stockholders currently are subject to a maximum U.S. federal income tax rate of 15% (with lower rates applying to taxpayers in the 10% and 15% tax
 
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rate brackets) for years beginning on or before December 31, 2010 on their net capital gain, i.e., the excess of net long-term capital gain over net short-term capital loss for a taxable year, including a long-term capital gain derived from an investment in our common stock. Corporate U.S. stockholders currently are subject to U.S. federal income tax on net capital gain at the maximum 35% rate also applied to ordinary income. Dividends distributed by us to corporate stockholders generally will not be eligible for the dividends-received deduction. Tax rates imposed by states and local jurisdictions on capital gain and ordinary income may differ.
 
We will send to each of our U.S. stockholders, as promptly as possible after the end of each calendar year, a notice detailing, on a per share and per distribution basis, the amounts includible in such U.S. stockholder’s taxable income for such year as ordinary income, long-term capital gain and “qualified dividend income,” if any. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the Internal Revenue Service. Distributions may also be subject to additional state, local, and foreign taxes depending on a U.S. stockholder’s particular situation.
 
Backup withholding may apply to distributions on the common stock with respect to certain non-corporate U.S. stockholders. Such U.S. stockholders generally will be subject to backup withholding unless the U.S. stockholder provides its correct taxpayer identification number and certain other information, certified under penalties of perjury, to the dividend paying agent, or otherwise establishes an exemption from backup withholding. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholder’s U.S. federal income tax liability, provided the proper information is provided to the Internal Revenue Service.
 
Taxation of Non-U.S. Stockholders
 
Whether an investment in our common stock is appropriate for a non-U.S. stockholder will depend upon that stockholder’s particular circumstances. Non-U.S. stockholders should consult their tax advisors before investing in our common stock.
 
Distributions of our investment company taxable income to stockholders that are non-U.S. stockholders will currently be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable treaty) to the extent of our current and accumulated earnings and profits unless the distributions are effectively connected with a U.S. trade or business of the non-U.S. stockholders, and, if an income tax treaty applies, attributable to a permanent establishment in the United States. In that case, the distributions will be subject to U.S. federal income tax at the ordinary income rates applicable to U.S. stockholders and we will not have to withhold U.S. federal withholding tax if the non-U.S. stockholder complies with applicable certification and disclosure requirements. Special certification requirements apply to a non-U.S. stockholder that is a foreign partnership or a foreign trust and such entities are urged to consult their own tax advisors. In addition, for taxable years beginning prior to January 1, 2010, U.S. source withholding taxes were not imposed on dividends paid by RICs to the extent the dividends are designated as “interest-related dividends” or “short-term capital gain dividends.” Under this exemption, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gains that would not have been subject to U.S. withholding tax at the source if they had been received directly by a foreign person, and that satisfy certain other requirements. Although the exemption applies to dividends with respect to taxable years of RICs beginning before January 1, 2010, both Chambers of the U.S. Congress have passed versions of a bill that would extend this exemption to tax years beginning before January 1, 2011. No assurance can be given, however, as to whether this exemption will be extended for tax years beginning on or after January 1, 2010 or whether any of our distributions will be designated as eligible for this exemption from withholding tax.
 
Actual or deemed distributions of our net capital gains to a stockholder that is a non-U.S. stockholder, and gains realized by a non-U.S. stockholder upon the sale or redemption of our common stock, will not be subject to U.S. federal income tax unless the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, are attributable to a
 
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permanent establishment maintained by the non-U.S. stockholder in the United States, or, in the case of an individual, the non-U.S. stockholder was present in the United States for 183 days or more during the taxable year and certain other conditions are met.
 
If we distribute our net capital gains in the form of deemed rather than actual distributions, a stockholder that is a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the stockholder’s allocable share of the corporate-level tax we pay on the capital gains deemed to have been distributed; however, in order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return. For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains realized upon the sale or redemption of our common stock that are effectively connected to a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate (or at a lower rate if provided for by an applicable treaty). Accordingly, investment in our stock may not be appropriate for a non-U.S. stockholder.
 
Under our dividend reinvestment plan, if a non-U.S. stockholder owns shares of common stock registered in its own name, the non-U.S. stockholder will have all cash distributions automatically reinvested in additional shares of common stock unless it opts out of our dividend reinvestment plan by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution. See “Dividend Reinvestment Plan.” If the distribution is a distribution of our investment company taxable income, is not designated by us as a short-term capital gains dividend or interest-related dividend and it is not effectively connected with a U.S. trade or business of the non-U.S. stockholder (or, if a treaty applies, is not attributable to a permanent establishment), the amount distributed (to the extent of our current and accumulated earnings and profits) will be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable treaty) and only the net after-tax amount will be reinvested in common shares. If the distribution is effectively connected with a U.S. trade or business of the non-U.S. stockholder, generally the full amount of the distribution will be reinvested in the plan and will nevertheless be subject to U.S. federal income tax at the ordinary income rates applicable to U.S. persons. The non-U.S. stockholder will have an adjusted basis in the additional common shares purchased through the plan equal to the amount reinvested. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the non-U.S. stockholder’s account.
 
A non-U.S. stockholder who is a nonresident alien individual, and who is otherwise subject to withholding of U.S. federal income tax, may be subject to information reporting and backup withholding of U.S. federal income tax on dividends unless the non-U.S. stockholder provides us or the dividend paying agent with an Internal Revenue Service Form W-8BEN (or an acceptable substitute form) or otherwise meets documentary evidence requirements for establishing that it is a non-U.S. stockholder or the non-U.S. stockholder otherwise establishes an exemption from backup withholding.
 
Non-U.S. stockholders should consult their own tax advisors with respect to the U.S. federal income tax and withholding tax, and state, local, and foreign tax, consequences of an investment in our common stock.
 
Failure to Qualify as a Regulated Investment Company
 
If we were unable to qualify for treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Such distributions would be taxable to our stockholders as dividends and, if made in a taxable year beginning on or before December 31, 2010 and provided certain holding period and other requirements were met, could qualify for treatment as “qualified dividend income” in the hands of non-corporate stockholders (and thus, eligible for the 15% maximum rate) to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the
 
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dividends received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable year, we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC. Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject to tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 10 years, unless we made a special election to pay corporate-level tax on such built-in gain at the time of our requalification as a RIC.
 
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DESCRIPTION OF SECURITIES
 
The following description is based on relevant portions of the Maryland General Corporation Law and on our charter and bylaws. This summary is not necessarily complete, and we refer you to the Maryland General Corporation Law and charter and bylaws for a more detailed description of the provisions summarized below.
 
Stock
 
The authorized stock of Solar Capital Ltd. consists of 200,000,000 shares of stock, par value $0.01 per share, all of which are initially designated as common stock. Our common stock is listed on the NASDAQ Global Select Market under the ticker symbol “SLRC.” There are no outstanding options or warrants to purchase our stock. No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, our stockholders generally are not personally liable for our debts or obligations.
 
The following are our outstanding classes of securities as of May 10, 2010:

        (1)
Title of Class	  	(2)
Amount
Authorized	 	  	(3)
Amount Held  by
Us or for Our
Account	 	  	(4)
Amount
Outstanding
Exclusive of
Amounts Shown
Under(3)	 	
Common stock	  	 	200,000,000	  	  	 	—  	  	  	 	33,030,641	  	
 
Under our charter our board of directors is authorized to classify and reclassify any unissued shares of stock into other classes or series of stock without obtaining stockholder approval. As permitted by the Maryland General Corporation Law, our charter provides that the board of directors, without any action by our stockholders, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue.
 
Common Stock
 
All shares of our common stock have equal rights as to earnings, assets, voting, and dividends and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Distributions may be paid to the holders of our common stock if, as and when authorized by our board of directors and declared by us out of assets legally available therefor. Shares of our common stock have no preemptive, conversion or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other class or series of stock, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common stock can elect all of our directors, and holders of less than a majority of such shares will be unable to elect any director.
 
Preferred Stock
 
Our charter authorizes our board of directors to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock. The cost of any such reclassification would be borne by our existing common stockholders. Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting
 
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powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. You should note, however, that any issuance of preferred stock must comply with the requirements of the 1940 Act. The 1940 Act requires, among other things, that (1) immediately after issuance and before any dividend or other distribution is made with respect to our common stock and before any purchase of common stock is made, such preferred stock together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be, and (2) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred stock are in arrears by two full years or more. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a business development company. We believe that the availability for issuance of preferred stock will provide us with increased flexibility in structuring future financings and acquisitions. However, we do not currently have any plans to issue preferred stock.
 
Debt
 
Senior Unsecured Notes
 
The Senior Unsecured Notes consist of $125 million in senior unsecured notes, which bear interest at a rate of 8.75% per annum, payable quarterly in cash, and will mature in February 2014. The Senior Unsecured Notes are redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, Solar Capital Ltd. must use the net cash proceeds from the issuance of any other senior unsecured notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject Solar Capital Ltd. to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) Solar Capital Ltd. will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes were issued contains customary events of default.
 
Limitation on Liability of Directors and Officers; Indemnification and Advance of Expenses
 
Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains such a provision which eliminates directors’ and officers’ liability to the maximum extent permitted by Maryland law, subject to the requirements of the 1940 Act.
 
Our charter authorizes us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual who, while serving as our director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee, from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her service in any such capacity and to pay or reimburse their reasonable
 
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expenses in advance of final disposition of a proceeding. Our bylaws obligate us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual who, while serving as our director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee and who is made, or threatened to be made, a party to the proceeding by reason of his or her service in that capacity from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her service in any such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. The charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of us in any of the capacities described above and any of our employees or agents or any employees or agents of our predecessor. In accordance with the 1940 Act, we will not indemnify any person for any liability to which such person would be subject by reason of such person’s willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
 
Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made, or threatened to be made, a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received unless, in either, case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer in advance of final disposition of a proceeding upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.
 
We have entered into indemnification agreements with our directors. The indemnification agreements provide our directors the maximum indemnification permitted under Maryland law and the 1940 Act.
 
Our insurance policy does not currently provide coverage for claims, liabilities and expenses that may arise out of activities that our present or former directors or officers have performed for another entity at our request. There is no assurance that such entities will in fact carry such insurance. However, we note that we do not expect to request our present or former directors or officers to serve another entity as a director, officer, partner or trustee unless we can obtain insurance providing coverage for such persons for any claims, liabilities or expenses that may arise out of their activities while serving in such capacities.
 
Certain Provisions of the Maryland General Corporation Law and Our Charter and Bylaws
 
The Maryland General Corporation Law and our charter and bylaws contain provisions that could make it more difficult for a potential acquiror to acquire us by means of a tender offer, proxy contest or otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.
 
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Classified Board of Directors
 
Our board of directors will be divided into three classes of directors serving staggered three-year terms. The initial terms of the first, second and third classes will expire in 2010, 2011 and 2012, respectively, and in each case, those directors will serve until their successors are elected and qualify. Beginning in 2010, upon expiration of their current terms, directors of each class will be elected to serve for three-year terms and until their successors are duly elected and qualify and each year one class of directors will be elected by the stockholders. A classified board may render a change in control of us or removal of our incumbent management more difficult. We believe, however, that the longer time required to elect a majority of a classified board of directors will help to ensure the continuity and stability of our management and policies.
 
Election of Directors
 
Our charter and bylaws provide that the affirmative vote of the holders of a plurality of the outstanding shares of stock entitled to vote in the election of directors cast at a meeting of stockholders duly called and at which a quorum is present will be required to elect a director. Pursuant to our charter our board of directors may amend the bylaws to alter the vote required to elect directors.
 
Number of Directors; Vacancies; Removal
 
Our charter provides that the number of directors will be set only by the board of directors in accordance with our bylaws. Our bylaws provide that a majority of our entire board of directors may at any time increase or decrease the number of directors. However, unless our bylaws are amended, the number of directors may never be less than one nor more than twelve. Our charter provides that, at such time as we have at least three independent directors and our common stock is registered under the Securities Exchange Act of 1934, as amended, we elect to be subject to the provision of Subtitle 8 of Title 3 of the Maryland General Corporation Law regarding the filling of vacancies on the board of directors. Accordingly, at such time, except as may be provided by the board of directors in setting the terms of any class or series of preferred stock, any and all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements of the 1940 Act.
 
Our charter provides that a director may be removed only for cause, as defined in our charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast in the election of directors.
 
Action by Stockholders
 
Under the Maryland General Corporation Law, stockholder action can be taken only at an annual or special meeting of stockholders or (unless the charter provides for stockholder action by less than unanimous written consent, which our charter does not) by unanimous written consent in lieu of a meeting. These provisions, combined with the requirements of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.
 
Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals
 
Our bylaws provide that with respect to an annual meeting of stockholders, nominations of persons for election to the board of directors and the proposal of business to be considered by stockholders may be made only (1) pursuant to our notice of the meeting, (2) by the board of directors or (3) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures of our bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before
 
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the meeting. Nominations of persons for election to the board of directors at a special meeting may be made only (1) pursuant to our notice of the meeting, (2) by the board of directors or (3) provided that the board of directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.
 
The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.
 
Calling of Special Meetings of Stockholders
 
Our bylaws provide that special meetings of stockholders may be called by our board of directors and certain of our officers. Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by the secretary of the corporation upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
 
Approval of Extraordinary Corporate Action; Amendment of Charter and Bylaws
 
Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Our charter generally provides for approval of charter amendments and extraordinary transactions by the stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter. Our charter also provides that certain charter amendments, any proposal for our conversion, whether by charter amendment, merger or otherwise, from a closed-end company to an open-end company and any proposal for our liquidation or dissolution requires the approval of the stockholders entitled to cast at least 80% of the votes entitled to be cast on such matter. However, if such amendment or proposal is approved by a majority of our continuing directors (in addition to approval by our board of directors), such amendment or proposal may be approved by a majority of the votes entitled to be cast on such a matter. The “continuing directors” are defined in our charter as (1) our current directors, (2) those directors whose nomination for election by the stockholders or whose election by the directors to fill vacancies is approved by a majority of our current directors then on the board of directors or (3) any successor directors whose nomination for election by the stockholders or whose election by the directors to fill vacancies is approved by a majority of continuing directors or the successor continuing directors then in office.
 
Our charter and bylaws provide that the board of directors will have the exclusive power to make, alter, amend or repeal any provision of our bylaws.
 
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No Appraisal Rights
 
Except with respect to appraisal rights arising in connection with the Control Share Act discussed below, as permitted by the Maryland General Corporation Law, our charter provides that stockholders will not be entitled to exercise appraisal rights unless a majority of the board of directors shall determine such rights apply.
 
Control Share Acquisitions
 
The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter (the “Control Share Act”). Shares owned by the acquiror, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:
 
 	•	 	one-tenth or more but less than one-third;	
 
 	•	 	one-third or more but less than a majority; or	
 
 	•	 	a majority or more of all voting power.	
 
The requisite stockholder approval must be obtained each time an acquiror crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of control shares, subject to certain exceptions.
 
A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.
 
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations, including, as provided in our bylaws compliance with the 1940 Act. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.
 
The Control Share Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Control Share Act any and all acquisitions by any person of our shares of stock. There can be no assurance that such provision will not be amended or eliminated at any time in the future. However, we will amend our bylaws to be subject to the Control Share Act only if the board of directors determines that it would be in our best interests and if the SEC staff does not object to our determination that our being subject to the Control Share Act does not conflict with the 1940 Act.
 
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Business Combinations
 
Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder (the “Business Combination Act”). These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
 
 	•	 	any person who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock; or	
 
 	•	 	an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.	
 
A person is not an interested stockholder under this statute if the board of directors approved in advance the transaction by which the stockholder otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.
 
After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:
 
 	•	 	80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and	
 
 	•	 	two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.	
 
These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
 
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Our board of directors has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the Business Combination Act, provided that the business combination is first approved by the board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act. This resolution may be altered or repealed in whole or in part at any time; however, our board of directors will adopt resolutions so as to make us subject to the provisions of the Business Combination Act only if the board of directors determines that it would be in our best interests and if the SEC staff does not object to our determination that our being subject to the Business Combination Act does not conflict with the 1940 Act. If this resolution is repealed, or the board of directors does not otherwise approve a business combination, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
 
Conflict with 1940 Act
 
Our bylaws provide that, if and to the extent that any provision of the Maryland General Corporation Law, including the Control Share Act (if we amend our bylaws to be subject to such Act) and the Business Combination Act, or any provision of our charter or bylaws conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act will control.
 
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SHARES ELIGIBLE FOR FUTURE SALE
 
Approximately 26.65 million shares of our common stock were issued to the LLC Holders in connection with the Solar Capital Merger. All of these shares of our common stock, as well as the 600,000 shares issued in the Concurrent Private Placement, are “restricted” securities under the meaning of Rule 144 promulgated under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including exemptions contained in Rule 144.
 
In addition, each of the LLC Holders, other than Magnetar Capital Fund, LP and Solar Offshore Limited, has agreed that for a period of 120 days from the date of our initial public offering, they will not, without the prior written consent of Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., dispose of or hedge any shares of our common stock or securities convertible or exchangeable for shares of our common stock. Each of our officers and directors, including Messrs. Gross and Spohler, has agreed to similar lock-up restrictions for a period of 180 days from the date of our initial public offering. In connection with the issuance of the Senior Unsecured Notes, Magnetar Capital Fund, LP and Solar Offshore Limited, which elected to receive such Senior Unsecured Notes, were required to agree to similar lock-up restrictions for a period of 180 days from the date of our initial public offering with respect to 50% of shares of common stock they held immediately prior to completion of our initial public offering and for a period of 365 days from the date of our initial public offering with respect to the remaining 50% of shares of common stock they held immediately prior to our initial public offering. Messrs. Gross and Spohler, through Solar Capital Investors, LLC (an entity controlled by Mr. Gross), also agreed to extend their lock-up period until 365 days from the date of our initial public offering with respect to 50% of the shares of common stock they held immediately prior to completion of our initial public offering.
 
This registration statement has been filed to register the resale of the shares of common stock held by the LLC Holders. We have committed to use our commercially reasonable efforts to obtain effectiveness of this registration statement within 120 days from the date of our initial public offering. Assuming effectiveness of this registration statement, the LLC Holders will generally be able to resell their shares of common stock without restriction upon expiration of their 120 day lock-up period, unless they elected to receive Senior Unsecured Notes in the Solar Capital Merger. We granted substantially similar registration rights with respect to the 600,000 shares that were in the Concurrent Private Placement.
 
In general, under Rule 144, if six months has elapsed since the date of acquisition of restricted securities from us or any of our affiliates, and we have made certain information about us available publicly, the holder of such restricted securities can sell such securities. However, in the case of a holder that has been our affiliate at any time during the three months preceding the proposed sale, the number of securities sold by such affiliate holder within any three-month period cannot exceed the greater of:
 
 	•	 	1% of the total number of securities then outstanding; or	
 
 	•	 	the average weekly trading volume of our securities during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.	
 
Sales under Rule 144 by holders that have been our affiliates at any time during the three months preceding the proposed sale also are subject to certain manner of sale provisions and notice requirements. If one year has elapsed since the date of acquisition of restricted securities from us or any of our affiliates, and the holder is not one of our affiliates at any time during the three months preceding the proposed sale, such person can sell such securities in the public market under Rule 144 without regard to the public information requirements, manner of sale provisions and notice requirements.
 
No assurance can be given as to (1) the likelihood that an active market for our shares will develop; (2) the liquidity of any such market; (3) the ability of our stockholders to sell our securities; or (4) the prices that stockholders may obtain for any of our securities. No prediction can be made as to the effect, if any, that future
 
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sales of securities, or the availability of securities for future sale, will have on the market price prevailing from time to time. Sales of substantial amounts of our securities, or the perception that such sales could occur, may affect adversely prevailing market prices for our shares.
 
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SELLING STOCKHOLDERS
 
Approximately 26.65 million of the shares of common stock being offered by the selling stockholders were issued to the selling stockholders in exchange for the units of Solar Capital LLC held by such selling stockholders in connection with the merger of Solar Capital LLC with and into Solar Capital Ltd. The units were issued to the selling stockholders at a price of $15.00 per unit in the initial private placement. We are registering such shares of common stock pursuant to a registration rights agreement we entered into in connection with the initial private placement in order to permit the selling stockholders to offer the shares for resale from time to time. We are also registering the 600,000 shares issued in the Concurrent Private Placement pursuant to similar registration rights that were granted to the purchasers and any shares issued to these holders under our dividend reinvestment plan.
 
The following table sets forth, as of May 10, 2010:
 
 	•	 	The name of each selling stockholder;	
 
 	•	 	The number of shares of common stock and the percentage of the total shares of common stock outstanding that each selling stockholder beneficially owned;	
 
 	•	 	The number of shares of common stock beneficially owned by each selling stockholder that may be offered under this registration statement, some or all of which shares may be sold pursuant to this prospectus; and	
 
 	•	 	The number of shares of common stock and the percentage of total shares of common stock outstanding to be beneficially owned by each selling stockholder following this offering, assuming the sale pursuant to this offering of all shares that are beneficially owned by such selling stockholder and registered under this registration statement.	
 
The information included in the table under “Shares Beneficially Owned After Offering” assumes that each stockholder below will elect to sell all of the shares set forth under “Number of Shares That May Be Offered.” The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.” The information regarding the identity of the selling stockholders and their affiliations, including their beneficial ownership of shares of our common stock, is based solely on information provided by or on behalf of the selling stockholders.

 	 	Shares Beneficially Owned
Prior to Offering (1)	 	 	Number of
Shares that
May Be Offered	 	 	Shares Beneficially  Owned
After Offering (2)(3)	 	 	
Name	 	    Number    	 	 	    Percent    	 	 	 	 	 	    Number    	 	 	    Percent    	 	 	 	 	
MAGNETAR CAPITAL FUND LP (4)	 	 	1,572,750	  	 	 	4.76	% 	 	 	1,572,750	  	 	 	1,572,750	  	 	 	4.76	% 	 	 	 	
MAGNETAR CAPITAL MASTER FUND, LTD (4)	 	 	6,291,000	  	 	 	19.06	% 	 	 	6,291,000	  	 	 	6,291,000	  	 	 	19.06	% 	 	 	 	
CHARLES FREDERIC & CO FOR SILVER CREEK SPECIAL OPP FUND II LP (5)	 	 	589,885	  	 	 	1.79	% 	 	 	589,885	  	 	 	589,885	  	 	 	1.79	% 	 	 	 	
CHARLES FREDERIC & CO SILVER CREEK LOW VOL STRATEGIES HOLDINGS LLC (5)	 	 	410,479	  	 	 	1.24	% 	 	 	410,479	  	 	 	410,479	  	 	 	1.24	% 	 	 	 	
CHARLES FREDERIC & CO AS NOMINEE FOR THE BANK OF NEW YORK MELLON AS CUSTODIAN F/B/O SILVER CREEK LOW VOL CONTINUATION FUND L.P. (5)	 	 	152,592	  	 	 	0.46	% 	 	 	152,592	  	 	 	152,592	  	 	 	0.46	% 	 	 	 	
CHARLES FREDERIC & CO FOR SILVER CREEK SPECIAL OPP FUND CAYMAN II LP (5)	 	 	750,763	  	 	 	2.27	% 	 	 	750,763	  	 	 	750,763	  	 	 	2.27	% 	 	 	 	
 
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 	 	Shares Beneficially Owned
Prior to Offering (1)	 	 	Number of
Shares that
May Be Offered	 	 	Shares Beneficially  Owned
After Offering (2)(3)	 	 	
Name	 	    Number    	 	 	    Percent    	 	 	 	 	 	    Number    	 	 	    Percent    	 	 	 	 	
CHARLES FREDERIC & CO SILVER CREEK LOW VOL FUND A LLC (5)	 	 	478,246	  	 	 	1.45	% 	 	 	478,246	  	 	 	478,246	  	 	 	1.45	% 	 	 	 	
CHARLES FREDERIC & CO SILVER CREEK LOW VOL CO HOLDINGS, LTD (5)	 	 	128,199	  	 	 	0.39	% 	 	 	128,199	  	 	 	128,199	  	 	 	0.39	% 	 	 	 	
CHARLES FREDERIC & CO AS NOMINEE FOR THE BANK OF NEW YORK MELLON AS CUSTODIAN F/B/O SILVER CREEK LOW VOL CONTINUATION HOLDINGS LTD	 	 	171,130	  	 	 	0.52	% 	 	 	171,130	  	 	 	171,130	  	 	 	0.52	% 	 	 	 	
BAUPOST GROUP SECURITIES, LLC	 	 	2,010,973	  	 	 	6.09	% 	 	 	2,010,973	  	 	 	2,010,973	  	 	 	6.09	% 	 	 	 	
SOROS STRATEGIC PARTNERS LP (6)	 	 	1,361,052	  	 	 	4.12	% 	 	 	1,361,052	  	 	 	1,361,052	  	 	 	4.12	% 	 	 	 	
SOLAR CAPITAL INVESTORS, LLC (7)	 	 	1,340,649	  	 	 	4.06	% 	 	 	1,340,649	  	 	 	1,340,649	  	 	 	4.06	% 	 	 	 	
GOLDMAN SACHS INVESTMENT PARTNERS AGGREGATING FUND HOLDINGS LP	 	 	1,072,519	  	 	 	3.25	% 	 	 	1,072,519	  	 	 	1,072,519	  	 	 	3.25	% 	 	 	 	
ATTALUS MULTI-STRATEGY FUND LTD	 	 	804,389	  	 	 	2.44	% 	 	 	804,389	  	 	 	804,389	  	 	 	2.44	% 	 	 	 	
UBS FUND SERVICES (CAYMAN) LTD AS SECURITIES INTERMEDIARY QIP LTD	 	 	804,389	  	 	 	2.44	% 	 	 	804,389	  	 	 	804,389	  	 	 	2.44	% 	 	 	 	
SATELLITE OVERSEAS FUND LTD	 	 	655,176	  	 	 	1.98	% 	 	 	655,176	  	 	 	655,176	  	 	 	1.98	% 	 	 	 	
SOLAR CAPITAL INVESTORS, II LLC (7)	 	 	600,000	  	 	 	1.82	% 	 	 	600,000	  	 	 	600,000	  	 	 	1.82	% 	 	 	 	
LIGHTHOUSE CREDIT OPPORTUNITIES FUND LTD	 	 	536,259	  	 	 	1.62	% 	 	 	536,259	  	 	 	536,259	  	 	 	1.62	% 	 	 	 	
LIGHTHOUSE DIVERSIFIED FUND LTD	 	 	469,226	  	 	 	1.42	% 	 	 	469,226	  	 	 	469,226	  	 	 	1.42	% 	 	 	 	
CITIGROUP GLOBAL MARKETS INC	 	 	449,147	  	 	 	1.36	% 	 	 	449,147	  	 	 	449,147	  	 	 	1.36	% 	 	 	 	
JP MORGAN	 	 	449,147	  	 	 	1.36	% 	 	 	449,147	  	 	 	449,147	  	 	 	1.36	% 	 	 	 	
UBS FUND SERVICES (CAYMAN) LTD REF Q-BLK ARS III—INSTITUTIONAL LTD	 	 	429,007	  	 	 	1.30	% 	 	 	429,007	  	 	 	429,007	  	 	 	1.30	% 	 	 	 	
CONE & CO	 	 	359,342	  	 	 	1.09	% 	 	 	359,342	  	 	 	359,342	  	 	 	1.09	% 	 	 	 	
LIGHTHOUSE CREDIT OPPORTUNITIES FUND LP	 	 	335,162	  	 	 	*	  	 	 	335,162	  	 	 	335,162	  	 	 	*	  	 	 	 	
CASPIAN PRIVATE EQUITY FUND LP SERIES 1J	 	 	268,129	  	 	 	*	  	 	 	268,129	  	 	 	268,129	  	 	 	*	  	 	 	 	
DIACO INVESTMENTS, L.P.	 	 	272,210	  	 	 	*	  	 	 	272,210	  	 	 	272,210	  	 	 	*	  	 	 	 	
KARSCH CAPITAL MANAGEMENT LP	 	 	268,129	  	 	 	*	  	 	 	268,129	  	 	 	268,129	  	 	 	*	  	 	 	 	
MB CHILDRENS LLC	 	 	272,210	  	 	 	*	  	 	 	272,210	  	 	 	272,210	  	 	 	*	  	 	 	 	
SATELLITE FUND II LP	 	 	251,858	  	 	 	*	  	 	 	251,858	  	 	 	251,858	  	 	 	*	  	 	 	 	
KAYNE ANDERSON CAPITAL INCOME PARTNERS (QP) LP	 	 	195,991	  	 	 	*	  	 	 	195,991	  	 	 	195,991	  	 	 	*	  	 	 	 	
CLEARPOND & CO	 	 	189,811	  	 	 	*	  	 	 	189,811	  	 	 	189,811	  	 	 	*	  	 	 	 	
HARTFORD MIDCAP VALUE HLS FUND; A SERIES OF HARTFORD SERIES FUND INC	 	 	184,517	  	 	 	*	  	 	 	184,517	  	 	 	184,517	  	 	 	*	  	 	 	 	
VANGUARD CAPITAL VALUE FUND; A SERIES OF VANGUARD MALVERN FUNDS	 	 	151,403	  	 	 	*	  	 	 	151,403	  	 	 	151,403	  	 	 	*	  	 	 	 	
PRUDENTIAL RETIREMENT MIDCAP VALUE FUND	 	 	140,256	  	 	 	*	  	 	 	140,256	  	 	 	140,256	  	 	 	*	  	 	 	 	
COVA CAPITAL LLC	 	 	136,104	  	 	 	*	  	 	 	136,104	  	 	 	136,104	  	 	 	*	  	 	 	 	
HARTZ CAPITAL INVESTMENTS LLC	 	 	134,064	  	 	 	*	  	 	 	134,064	  	 	 	134,064	  	 	 	*	  	 	 	 	
APOGEE FUND LTD (Satellite)	 	 	132,237	  	 	 	*	  	 	 	132,237	  	 	 	132,237	  	 	 	*	  	 	 	 	
 
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 	 	Shares Beneficially Owned
Prior to Offering (1)	 	 	Number of
Shares that
May Be Offered	 	 	Shares Beneficially  Owned
After Offering (2)(3)	 	 	
Name	 	    Number    	 	 	    Percent    	 	 	 	 	 	    Number    	 	 	    Percent    	 	 	 	 	
MARTIN E FRANKLIN	 	 	107,252	  	 	 	*	  	 	 	107,252	  	 	 	107,252	  	 	 	*	  	 	 	 	
HARTFORD VALUE OPPORTUNITIES HLS FUND; A SERIES OF HARTFORD SERIES INC	 	 	93,994	  	 	 	*	  	 	 	93,994	  	 	 	93,994	  	 	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO VERIZON	 	 	91,459	  	 	 	*	  	 	 	91,459	  	 	 	91,459	  	 	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO MINNESOTA MINING & MANUFACTURING CO	 	 	90,614	  	 	 	*	  	 	 	90,614	  	 	 	90,614	  	 	 	*	  	 	 	 	
WOLF CREEK INVESTORS (BERMUDA) LP	 	 	84,235	  	 	 	*	  	 	 	84,235	  	 	 	84,235	  	 	 	*	  	 	 	 	
REGASOLAR INVESTMENTS LLC.	 	 	81,662	  	 	 	*	  	 	 	81,662	  	 	 	81,662	  	 	 	*	  	 	 	 	
RSSJ ASSOCIATED LLC	 	 	81,662	  	 	 	*	  	 	 	81,662	  	 	 	81,662	  	 	 	*	  	 	 	 	
SATELLITE OVERSEAS FUND VIII LTD	 	 	80,016	  	 	 	*	  	 	 	80,016	  	 	 	80,016	  	 	 	*	  	 	 	 	
WOLF CREEK PARTNERS LP	 	 	79,008	  	 	 	*	  	 	 	79,008	  	 	 	79,008	  	 	 	*	  	 	 	 	
HARTFORD MIDCAP VALUE FUND; A SERIES OF HARTFORD MUTUAL FUNDS INC	 	 	74,394	  	 	 	*	  	 	 	74,394	  	 	 	74,394	  	 	 	*	  	 	 	 	
PUBLIC EMPLOYEES RETIREMENT SYSTEM OF MISSISSIPPI	 	 	72,475	  	 	 	*	  	 	 	72,475	  	 	 	72,475	  	 	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO ROBECO US PREMIUM EQUITIES FUND USD	 	 	66,979	  	 	 	*	  	 	 	66,979	  	 	 	66,979	  	 	 	*	  	 	 	 	
SATELLITE OVERSEAS FUND IX LTD	 	 	63,562	  	 	 	*	  	 	 	63,562	  	 	 	63,562	  	 	 	*	  	 	 	 	
SATELLITE OVERSEAS FUND V LTD	 	 	57,320	  	 	 	*	  	 	 	57,320	  	 	 	57,320	  	 	 	*	  	 	 	 	
WELLS FARGO BANK NA FBO JMB PRIVATE EQUITY LLC	 	 	54,442	  	 	 	*	  	 	 	54,442	  	 	 	54,442	  	 	 	*	  	 	 	 	
GRANDPRIX LIMITED Peisach	 	 	54,196	  	 	 	*	  	 	 	54,196	  	 	 	54,196	  	 	 	*	  	 	 	 	
YOUR NIECE LTD	 	 	54,319	  	 	 	*	  	 	 	54,319	  	 	 	54,319	  	 	 	*	  	 	 	 	
SATELLITE FUND IV LP	 	 	51,959	  	 	 	*	  	 	 	51,959	  	 	 	51,959	  	 	 	*	  	 	 	 	
APOSHERM INC.	 	 	40,831	  	 	 	*	  	 	 	40,831	  	 	 	40,831	  	 	 	*	  	 	 	 	
LTAM TITAN FUND LLC	 	 	40,219	  	 	 	*	  	 	 	40,219	  	 	 	40,219	  	 	 	*	  	 	 	 	
US BANK NA FBO CHARTWELL DIVIDEND & INCOME FUND	 	 	32,665	  	 	 	*	  	 	 	32,665	  	 	 	32,665	  	 	 	*	  	 	 	 	
HARTFORD CAPITAL APPRECIATION HLS FUND; A SERIES OF HARTFORD SERIES FUND INC	 	 	30,500	  	 	 	*	  	 	 	30,500	  	 	 	30,500	  	 	 	*	  	 	 	 	
HARTFORD VALUE OPPORTUNITIES FUND; A SERIES OF HARTFORD MUTUAL FUNDS INC	 	 	30,011	  	 	 	*	  	 	 	30,011	  	 	 	30,011	  	 	 	*	  	 	 	 	
SATELLITE OVERSEAS FUND VII LTD	 	 	29,549	  	 	 	*	  	 	 	29,549	  	 	 	29,549	  	 	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO GMI RETIREMENT TRUST	 	 	28,475	  	 	 	*	  	 	 	28,475	  	 	 	28,475	  	 	 	*	  	 	 	 	
EIGHTEEN PARTNERS LLC	 	 	27,221	  	 	 	*	  	 	 	27,221	  	 	 	27,221	  	 	 	*	  	 	 	 	
END OF THE RAINBOW LLP	 	 	27,221	  	 	 	*	  	 	 	27,221	  	 	 	27,221	  	 	 	*	  	 	 	 	
IAN ASHKEN	 	 	26,813	  	 	 	*	  	 	 	26,813	  	 	 	26,813	  	 	 	*	  	 	 	 	
SIMCHA HOLDINGS LIMITED Peisach	 	 	27,099	  	 	 	*	  	 	 	27,099	  	 	 	27,099	  	 	 	*	  	 	 	 	
WELLS FARGO BANK NA FBO CHARLES K BLANDIN RESIDUARY TRUST	 	 	27,221	  	 	 	*	  	 	 	27,221	  	 	 	27,221	  	 	 	*	  	 	 	 	
BLUEWOOD ASSOCIATES LLC	 	 	27,220	  	 	 	*	  	 	 	27,220	  	 	 	27,220	  	 	 	*	  	 	 	 	
GREENWOOD PARTNERS LP	 	 	27,220	  	 	 	*	  	 	 	27,220	  	 	 	27,220	  	 	 	*	  	 	 	 	
LAKESIDE LP	 	 	27,220	  	 	 	*	  	 	 	27,220	  	 	 	27,220	  	 	 	*	  	 	 	 	
GERALD D HOSIER TRUST	 	 	26,948	  	 	 	*	  	 	 	26,948	  	 	 	26,948	  	 	 	*	  	 	 	 	
 
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 	  	Shares Beneficially Owned
Prior to Offering (1)	 	 	Number of
Shares that
May Be Offered	 	  	Shares Beneficially  Owned
After Offering (2)(3)	 	 	
Name	  	Number	 	  	Percent	 	 	 	 	  	Number	 	  	Percent	 	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO EMERSON ELECTRIC CO	  	 	25,780	  	  	 	*	  	 	 	25,780	  	  	 	25,780	  	  	 	*	  	 	 	 	
HARTFORD CAPITAL APPRECIATION II FUND; A SERIES OF HARTFORD MUTUAL FUNDS INC	  	 	23,886	  	  	 	*	  	 	 	23,886	  	  	 	23,886	  	  	 	*	  	 	 	 	
KAYNE ANDERSON INCOME PARTNERS LP	  	 	21,776	  	  	 	*	  	 	 	21,776	  	  	 	21,776	  	  	 	*	  	 	 	 	
SATELLITE OVERSEAS FUND VI LTD	  	 	18,967	  	  	 	*	  	 	 	18,967	  	  	 	18,967	  	  	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO UNIVERSITY OF SOUTHERN CALIFORNIA	  	 	18,460	  	  	 	*	  	 	 	18,460	  	  	 	18,460	  	  	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO VERIZON VEBA	  	 	18,219	  	  	 	*	  	 	 	18,219	  	  	 	18,219	  	  	 	*	  	 	 	 	
ROBECO INVESTMENT MANAGEMENT INC FBO BRUNSWICK PENSION TRUST	  	 	16,610	  	  	 	*	  	 	 	16,610	  	  	 	16,610	  	  	 	*	  	 	 	 	
LESTER L. WEINDLING 2007 REVOCABLE TRUST	  	 	16,332	  	  	 	*	  	 	 	16,332	  	  	 	16,332	  	  	 	*	  	 	 	 	
HILPROPS INVESTMENTS LLC	  	 	13,406	  	  	 	*	  	 	 	13,406	  	  	 	13,406	  	  	 	*	  	 	 	 	
WELLS FARGO BANK NA FBO JAMES R CAMPBELL TRUST	  	 	13,610	  	  	 	*	  	 	 	13,610	  	  	 	13,610	  	  	 	*	  	 	 	 	
ROBERT & HARIETT DRUSKIN	  	 	13,393	  	  	 	*	  	 	 	13,393	  	  	 	13,393	  	  	 	*	  	 	 	 	
ANDREW LACK	  	 	13,474	  	  	 	*	  	 	 	13,474	  	  	 	13,474	  	  	 	*	  	 	 	 	
LOTMAN HOLDINGS INC	  	 	13,272	  	  	 	*	  	 	 	13,272	  	  	 	13,272	  	  	 	*	  	 	 	 	
C. MICHAEL ARMSTRONG	  	 	13,272	  	  	 	*	  	 	 	13,272	  	  	 	13,272	  	  	 	*	  	 	 	 	
DONALD DRAPKIN	  	 	13,272	  	  	 	*	  	 	 	13,272	  	  	 	13,272	  	  	 	*	  	 	 	 	
HEINEMAN BENJAMIN JR	  	 	13,272	  	  	 	*	  	 	 	13,272	  	  	 	13,272	  	  	 	*	  	 	 	 	
BRUSH CREEK CAPITAL LLC	  	 	13,474	  	  	 	*	  	 	 	13,474	  	  	 	13,474	  	  	 	*	  	 	 	 	
AURORA CAPITAL ASSOCIATES LLC	  	 	12,065	  	  	 	*	  	 	 	12,065	  	  	 	12,065	  	  	 	*	  	 	 	 	
MCDERMOTT INCORPORATED MASTER TRUST	  	 	10,779	  	  	 	*	  	 	 	10,779	  	  	 	10,779	  	  	 	*	  	 	 	 	
SUSAN & NADER MOTAMEDY	  	 	10,207	  	  	 	*	  	 	 	10,207	  	  	 	10,207	  	  	 	*	  	 	 	 	
KINGSPOINT MARKETING LLC	  	 	10,207	  	  	 	*	  	 	 	10,207	  	  	 	10,207	  	  	 	*	  	 	 	 	
ABITIBI CONSOLIDATED CO OF CANADA MASTER TRUST FUND	  	 	10,144	  	  	 	*	  	 	 	10,144	  	  	 	10,144	  	  	 	*	  	 	 	 	
RISE SUNNESS & ALEX GLASENBERG	  	 	9,527	  	  	 	*	  	 	 	9,527	  	  	 	9,527	  	  	 	*	  	 	 	 	
ISIMO CAPITAL LIMITED Peisach	  	 	8,129	  	  	 	*	  	 	 	8,129	  	  	 	8,129	  	  	 	*	  	 	 	 	
STERNWAVE & CO	  	 	8,003	  	  	 	*	  	 	 	8,003	  	  	 	8,003	  	  	 	*	  	 	 	 	
FELICE ZAMBETTI	  	 	6,818	  	  	 	*	  	 	 	6,818	  	  	 	6,818	  	  	 	*	  	 	 	 	
RALPH & JENNIFER WATTS	  	 	6,716	  	  	 	*	  	 	 	6,716	  	  	 	6,716	  	  	 	*	  	 	 	 	
OTHER(8)	  	 	320,024	  	  	 	*	  	 	 	320,024	  	  	 	320,024	  	  	 	*	  	 	 	 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	 	 	 	
TOTAL	  	 	27,327,475	  	  	 	100	% 	 	 	27,327,475	  	  	 	27,327,475	  	  	 	100	% 	 	 	 	
 
 *	 	Less than 1%.	
(1)	 	Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act.	
(2)	 	Assumes the sale of all shares eligible for sale in this prospectus and no other purchases or sales of our common stock. This assumption has been made under the rules and regulations of the SEC and does not reflect any knowledge that we have with respect to the present intent of persons listed as selling stockholders.	
(3)	 	Applicable percentage of ownership is based on 33,030,641 shares of our common stock outstanding on May 10, 2010.	
(4)	 	This entity is controlled and/or managed by Magnetar Financial LLC or its affiliates.	
(5)	 	This entity is controlled by Silver Creek Capital Management LLC.	
(6)	 	Soros Strategic Partners LP (“SSP”) is a Delaware limited partnership. SFM Participation II LLC, a Nevis limited liability company (“SFMP II”), serves as general partner of SSP. SFM AH LLC, a Delaware limited liability company (“SFM AH”), serves as manager of SFMP II. Soros Fund Management LLC, a Delaware limited liability company (“SFM LLC”), serves as manager of SFM AH. Mr. George Soros serves as Chairman of SFM LLC, Mr. Robert Soros serves as Deputy Chairman of SFM LLC and Mr. Jonathan Soros serves as President and Deputy Chairman of SFM LLC. Each has their principal office at 888 Seventh Avenue, 33rd Floor, New York, New York 10106. The foregoing information was derived, in part, from certain publicly available reports, statements and schedules filed with the SEC.	
(7)	 	Shares of the Company held by Solar Capital Investors, LLC and Solar Capital Investors II, LLC may be deemed to be beneficially owned by Michael S. Gross and by Bruce J. Spohler by virtue of their collective ownership interest therein.	
(8)	 	Represents selling stockholders who, collectively, own less than 1% of total shares outstanding.	
 
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PLAN OF DISTRIBUTION
 
We are registering shares of our common stock to permit the resale of these shares by the selling stockholders from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.
 
The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions:
 
 	•	 	on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;	
 
 	•	 	in the over-the-counter market;	
 
 	•	 	in transactions otherwise than on these exchanges or systems or in the over-the-counter market;	
 
 	•	 	through the writing of options, whether such options are listed on an options exchange or otherwise;	
 
 	•	 	in ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;	
 
 	•	 	in block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;	
 
 	•	 	through purchases by a broker-dealer as principal and resale by the broker-dealer for its account;	
 
 	•	 	via an exchange distribution in accordance with the rules of the applicable exchange;	
 
 	•	 	through privately negotiated transactions;	
 
 	•	 	through short sales;	
 
 	•	 	in sales pursuant to Rule 144;	
 
 	•	 	through broker-dealers who may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;	
 
 	•	 	via a combination of any such methods of sale; or	
 
 	•	 	in any other method permitted pursuant to applicable law.	
 
If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares. This offering will conform with the requirements set forth in Financial Industry Regulatory Authority Rule 2310. In compliance with such requirements, the underwriting discounts and commissions in connection with the sale of securities will not exceed 8% of gross proceeds of this offering.
 
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The selling stockholders may pledge or grant a security interest in some or all of the common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment or supplement to this prospectus under Rule 497 or other applicable provision of the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
 
The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
 
Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
 
There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.
 
The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
 
We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreement, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.
 
Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.
 
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CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR
 
Our securities are held under a custody agreement by The Bank of New York Mellon Corporation. The address of the custodian is One Wall Street, New York, New York 10286. American Stock Transfer & Trust Company will act as our transfer agent, distribution paying agent and registrar. The principal business address of our transfer agent is 59 Maiden Lane, New York, New York 10038, telephone number: (800) 937-5449.
 
BROKERAGE ALLOCATION AND OTHER PRACTICES
 
Since we will generally acquire and dispose of our investments in privately negotiated transactions, we will infrequently use brokers in the normal course of our business. Subject to policies established by our board of directors, our investment adviser will be primarily responsible for the execution of the publicly traded securities portion of our portfolio transactions and the allocation of brokerage commissions. Our investment adviser does not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for Solar Capital, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While our investment adviser generally will seek reasonably competitive trade execution costs, Solar Capital will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, our investment adviser may select a broker based partly upon brokerage or research services provided to the investment adviser and Solar Capital and any other clients. In return for such services, we may pay a higher commission than other brokers would charge if the investment adviser determines in good faith that such commission is reasonable in relation to the services provided.
 
LEGAL MATTERS
 
Certain legal matters in connection with the securities offered hereby will be passed upon for us by Sutherland Asbill & Brennan LLP, Washington, DC, and Venable LLP, Baltimore, Maryland.
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
KPMG LLP, our independent registered public accounting firm located at 345 Park Avenue, New York, New York 10154, has audited our financial statements as of December 31, 2009 and 2008 and for the years ended December 31, 2009 and 2008 and the period March 13, 2007 (inception) through December 31, 2007, as set forth in their reports. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on such reports, given on their authority as experts in accounting and auditing.
 
With respect to the unaudited interim financial information for the periods ended March 31, 2010 and 2009, included herein, the independent registered public accounting firm has reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate report included in the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2010, and included herein, states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of Section 11 of the Securities Act of 1933 (the “1933 Act”) for their report on the unaudited interim financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the 1933 Act.
 
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AVAILABLE INFORMATION
 
We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information about us and our shares of common stock being offered by this prospectus.
 
We are required to file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. You may inspect and copy these reports, proxy statements and other information, as well as the registration statement and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC’s website at  http://www.sec.gov.  Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC’s Public Reference Section, Washington, D.C. 20549. This information will also be available free of charge by contacting us at Solar Capital Ltd., 500 Park Avenue, 5 th  Floor, New York, NY 10022, by telephone at (212) 993-1670, or on our website at  http://www.solarcapltd.com .
 
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 	  	Page	
Report of Independent Registered Public Accounting Firm	  	F-2	
Consolidated Statements of Assets and Liabilities as of December 31, 2009 and 2008	  	F-3	
Consolidated Statements of Operations for the years ended December  31, 2009 and 2008 and the period March 13, 2007 (inception) through December 31, 2007	  	F-4	
Consolidated Statements of Changes in Net Assets for the years ended December  31, 2009 and 2008 and the period March 13, 2007 (inception) through December 31, 2007	  	F-5	
Consolidated Statements of Cash Flows for the years ended December  31, 2009 and 2008 and the period March 13, 2007 (inception) through December 31, 2007	  	F-6	
Consolidated Schedules of Investments as of December 31, 2009 and 2008	  	F-7	
Notes to Consolidated Financial Statements	  	F-13	
Schedules of Investments in and Advances to Affiliates (unaudited)	  	F-28	
Report of Independent Registered Public Accounting Firm	  	F-30	
Consolidated Statements of Assets and Liabilities as of March 31, 2010 and December 31, 2009	  	F-31	
Consolidated Statements of Operations for the three months ended March 31, 2010 and
March 31, 2009	  	F-32	
Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2010 and the year ended December 31, 2009	  	F-33	
Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and
March 31, 2009	  	F-34	
Consolidated Schedule of Investments as of March 31, 2010	  	F-35	
Consolidated Schedule of Investments as of December 31, 2009	  	F-38	
Notes to Consolidated Financial Statements	  	F-41	
 
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Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Shareholders
Solar Capital LLC:
 
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Solar Capital LLC as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in net assets and cash flows for each of the years in the two year period ended December 31, 2009 and the period March 13, 2007 (inception) through December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Solar Capital LLC as of December 31, 2009 and 2008, and the results of its operations, the changes in its net assets and cash flows for the periods described in the first paragraph above, in conformity with U.S. generally accepted accounting principles.
 
/s/ KPMG LLP
New York, New York
March 1, 2010
 
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SOLAR CAPITAL LLC
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except units)

 	  	December 31,
2009	 	  	December 31,
2008	 	
Assets	  	 	 	 	  	 	 	 	
Investments at value:	  	 	 	 	  	 	 	 	
Companies more than 25% owned (cost: $10,000 and $10,030, respectively)	  	$	9,000	  	  	$	12,930	  	
Companies 5% to 25% owned (cost: $85,102 and $84,931, respectively)	  	 	93,423	  	  	 	89,429	  	
Companies less than 5% owned (cost: $968,886 and $1,161,773, respectively)	  	 	760,717	  	  	 	665,856	  	
 	  	 	 	 	  	 	 	 	
Total investments (cost: $1,063,988 and $1,256,734, respectively)	  	 	863,140	  	  	 	768,215	  	
Cash and cash equivalents	  	 	5,675	  	  	 	65,841	  	
Interest and dividends receivable	  	 	7,547	  	  	 	10,741	  	
Fee revenue receivable	  	 	5,824	  	  	 	4,995	  	
Deferred offering costs	  	 	1,478	  	  	 	706	  	
Deferred credit facility costs	  	 	914	  	  	 	1,463	  	
Derivative assets	  	 	294	  	  	 	4,218	  	
Foreign tax receivable	  	 	—  	  	  	 	101	  	
Withholding tax receivable	  	 	—  	  	  	 	16,505	  	
Prepaid expenses and other receivables	  	 	549	  	  	 	241	  	
 	  	 	 	 	  	 	 	 	
Total Assets	  	 	885,421	  	  	 	873,026	  	
 	  	 	 	 	  	 	 	 	
Liabilities	  	 	 	 	  	 	 	 	
Credit facility payable	  	 	88,114	  	  	 	—  	  	
Distributions payable	  	 	75,136	  	  	 	—  	  	
Due to Solar Capital Partners LLC:	  	 	 	 	  	 	 	 	
Investment advisory and management fee payable	  	 	8,663	  	  	 	5,294	  	
Performance-based incentive fee payable	  	 	8,517	  	  	 	5,505	  	
Deferred fee revenue	  	 	3,532	  	  	 	3,992	  	
Due to Solar Capital Management LLC	  	 	912	  	  	 	1,085	  	
Income taxes payable	  	 	535	  	  	 	1,735	  	
Interest payable	  	 	153	  	  	 	—  	  	
Derivative liabilities	  	 	25	  	  	 	1,366	  	
Other accrued expenses and payables	  	 	1,931	  	  	 	1,376	  	
 	  	 	 	 	  	 	 	 	
Total Liabilities	  	 	187,518	  	  	 	20,353	  	
 	  	 	 	 	  	 	 	 	
Net Assets	  	$	697,903	  	  	$	852,673	  	
 	  	 	 	 	  	 	 	 	
Number of units outstanding	  	 	81,702,847	  	  	 	81,702,847	  	
Net Asset Value Per Unit	  	$	8.54	  	  	$	10.44	  	
 
See notes to consolidated financial statements.
 
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Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except units)

 	  	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	March 13, 2007
(inception) through
December 31, 2007	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	 	 	 	 	
Interest and dividends:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	$	—  	  	 	$	2,652	  	 	$	295	  	
Companies 5% to 25% owned	  	 	9,190	  	 	 	7,175	  	 	 	1,471	  	
Other interest and dividend income	  	 	100,480	  	 	 	124,132	  	 	 	76,689	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total interest and dividends	  	 	109,670	  	 	 	133,959	  	 	 	78,455	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	  	 	109,670	  	 	 	133,959	  	 	 	78,455	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	
Performance-based incentive fee	  	 	16,815	  	 	 	9,008	  	 	 	—  	  	
Investment advisory and management fees	  	 	16,738	  	 	 	24,297	  	 	 	19,719	  	
Interest and other credit facility expenses	  	 	2,636	  	 	 	3,343	  	 	 	—  	  	
Administrative service fee	  	 	2,020	  	 	 	3,430	  	 	 	1,474	  	
Other general and administrative expenses	  	 	3,971	  	 	 	4,853	  	 	 	3,579	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	42,180	  	 	 	44,931	  	 	 	24,772	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income before income tax expense	  	 	67,490	  	 	 	89,028	  	 	 	53,683	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	  	 	228	  	 	 	1,629	  	 	 	689	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	 	67,262	  	 	 	87,399	  	 	 	52,994	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD CONTRACTS AND FOREIGN CURRENCIES:	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	(30	) 	 	 	—  	  	 	 	—  	  	
Companies 5% to 25% owned	  	 	—  	  	 	 	—  	  	 	 	15	  	
Companies less than 5% owned	  	 	(253,364	) 	 	 	(16,878	) 	 	 	(3,572	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss on investments	  	 	(253,394	) 	 	 	(16,878	) 	 	 	(3,557	) 	
Forward contracts	  	 	(12,608	) 	 	 	13,086	  	 	 	(7,125	) 	
Foreign currency exchange	  	 	1,104	  	 	 	2,915	  	 	 	12	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss before income taxes	  	 	(264,898	) 	 	 	(877	) 	 	 	(10,670	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense (benefit) on realized gain (loss)	  	 	—  	  	 	 	60	  	 	 	(181	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(264,898	) 	 	 	(937	) 	 	 	(10,489	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	(3,900	) 	 	 	(300	) 	 	 	3,201	  	
Companies 5% to 25% owned	  	 	3,823	  	 	 	2,117	  	 	 	2,380	  	
Companies less than 5% owned	  	 	287,748	  	 	 	(498,157	) 	 	 	2,240	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net unrealized gain (loss) on investments	  	 	287,671	  	 	 	(496,340	) 	 	 	7,821	  	
Forward contracts	  	 	(2,583	) 	 	 	4,087	  	 	 	(1,235	) 	
Foreign currency exchange	  	 	(516	) 	 	 	(37	) 	 	 	9	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss)	  	 	284,572	  	 	 	(492,290	) 	 	 	6,595	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, forward contracts and foreign currencies	  	 	19,674	  	 	 	(493,227	) 	 	 	(3,894	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	  	$	86,936	  	 	$	(405,828	) 	 	$	49,100	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per unit (see note 9)	  	$	1.06	  	 	$	(4.96	) 	 	$	0.60	  	
 
See notes to consolidated financial statements.
 
F-4

Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands except units)

  	  	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	March 13, 2007
(inception) through
December 31, 2007	 	
Increase (Decrease) in net assets resulting from operations:	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	$	67,262	  	 	$	87,399	  	 	$	52,994	  	
Net realized loss	  	 	(264,898	) 	 	 	(937	) 	 	 	(10,489	) 	
Net change in unrealized gain (loss)	  	 	284,572	  	 	 	(492,290	) 	 	 	6,595	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets resulting from operations	  	 	86,936	  	 	 	(405,828	) 	 	 	49,100	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Distributions to unit holders declared	  	 	(241,706	) 	 	 	—  	  	 	 	—  	  	

Capital unit transactions:	  	 	 	 	 	 	 	 	 	 	 	 	
Net proceeds from unit sold	  	 	—  	  	 	 	—  	  	 	 	1,209,401	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets resulting from capital unit transactions	  	 	—  	  	 	 	—  	  	 	 	1,209,401	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets	  	 	(154,770	) 	 	 	(405,828	) 	 	 	1,258,501	  	
Net assets at beginning of year (period)	  	 	852,673	  	 	 	1,258,501	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net assets at end of year (period)	  	$	697,903	  	 	$	852,673	  	 	$	1,258,501	  	

See notes to consolidated financial statements
 
F-5

Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except units)

 	 	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	March 13,  2007
(inception) through
December 31, 2007	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets from operations	 	$	86,936	  	 	$	(405,828	) 	 	$	49,100	  	
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss from investments	 	 	253,394	  	 	 	16,878	  	 	 	3,557	  	
Net realized (gain) loss from foreign currency exchange	 	 	(1,104	) 	 	 	(2,915	) 	 	 	—  	  	
Net change in unrealized (gain) loss on investments	 	 	(287,671	) 	 	 	496,340	  	 	 	(7,821	) 	
Net change in forward contracts	 	 	2,583	  	 	 	(4,087	) 	 	 	1,235	  	
 	 	 	 	
(Increase) decrease in operating assets:	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of investment securities	 	 	(214,109	) 	 	 	(231,137	) 	 	 	(960,767	) 	
Proceeds from disposition of investment securities	 	 	153,461	  	 	 	128,440	  	 	 	150,750	  	
Interest and dividends receivable	 	 	3,194	  	 	 	1,579	  	 	 	(12,320	) 	
Fee revenue receivable	 	 	(829	) 	 	 	(2,128	) 	 	 	(2,867	) 	
Deferred offering costs	 	 	(772	) 	 	 	(706	) 	 	 	—  	  	
Deferred credit facility costs	 	 	549	  	 	 	(1,463	) 	 	 	—  	  	
Foreign tax receivable	 	 	101	  	 	 	4	  	 	 	(105	) 	
Withholding tax receivable	 	 	16,505	  	 	 	(16,505	) 	 	 	—  	  	
Prepaid expenses and other receivables	 	 	(308	) 	 	 	(239	) 	 	 	(2	) 	
Receivable for investments sold	 	 	—  	  	 	 	31,985	  	 	 	(31,985	) 	
 	 	 	 	
Increase (decrease) in operating liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Investment advisory and management fee payable	 	 	3,369	  	 	 	(953	) 	 	 	6,247	  	
Performance-based incentive fee payable	 	 	3,012	  	 	 	5,505	  	 	 	—  	  	
Deferred fee revenue	 	 	(460	) 	 	 	1,306	  	 	 	2,686	  	
Due to Solar Capital Management LLC	 	 	(173	) 	 	 	518	  	 	 	567	  	
Income taxes payable	 	 	(1,200	) 	 	 	1,227	  	 	 	508	  	
Interest payable	 	 	153	  	 	 	—  	  	 	 	—  	  	
Other accrued expenses and payables	 	 	555	  	 	 	413	  	 	 	963	  	
Payable for investments purchased	 	 	—  	  	 	 	(125,000	) 	 	 	125,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided by (Used in) Operating Activities	 	 	17,186	  	 	 	(106,766	) 	 	 	(675,254	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net proceeds from units sold	 	 	—  	  	 	 	—  	  	 	 	844,946	  	
Distributions to unit holders paid in cash	 	 	(166,570	) 	 	 	—  	  	 	 	—  	  	
Proceeds from borrowings on credit facility	 	 	383,034	  	 	 	61,320	  	 	 	—  	  	
Repayments of borrowings on credit facility	 	 	(293,816	) 	 	 	(58,405	) 	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided by (Used in) Financing Activities	 	 	(77,352	) 	 	 	2,915	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	 	 	(60,166	) 	 	 	(103,851	) 	 	 	169,692	  	
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (PERIOD)	 	 	65,841	  	 	 	169,692	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF YEAR (PERIOD)	 	$	5,675	  	 	$	65,841	  	 	$	169,692	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-cash financing activity:	 	 	 	 	 	 	 	 	 	 	 	 	
Investments exchanged for capital units	 	$	—  	  	 	$	—  	  	 	$	364,455	  	
 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash paid for interest	 	$	1,410	  	 	$	530	  	 	$	—  	  	
Cash paid for income taxes	 	$	1,428	  	 	$	1,015	  	 	$	—  	  	
 	 	 	 	
Non-cash financing activity:	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions payable	 	$	75,136	  	 	$	—  	  	 	$	—  	  	
 
See notes to consolidated financial statements.
 
F-6

Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2009
(in thousands, except units)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—18.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Affinity 1st Lien	 	Printing, Publishing, Broadcasting	 	 	12.75	  	 	 	3/31/2010	  	 	$	18,771	  	 	$	18,372	  	 	$	18,489	  	
Asurion Corporation	 	Insurance	 	 	6.73	  	 	 	7/3/2015	  	 	 	55,000	  	 	 	54,939	  	 	 	51,700	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures, Entertainment	 	 	10.02	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,350	  	 	 	20,800	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.29	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,112	  	 	 	14,400	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	25,182	  	 	 	24,740	  	 	 	26,152	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	12,827	  	 	 	12,769	  	 	 	12,058	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	15.00	  	 	 	1/17/2015	  	 	 	20,000	  	 	 	19,614	  	 	 	19,900	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	172,780	  	 	$	170,896	  	 	$	163,499	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—74.4%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allied Capital	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	 	15,393	  	 	 	9,362	  	 	 	14,392	  	
Allied Capital	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	8,880	  	 	 	13,920	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,445	  	 	 	35,360	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	18,237	  	 	 	18,345	  	 	 	15,538	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures, Entertainment	 	 	5.25	  	 	 	6/13/2012	  	 	 	24,383	  	 	 	24,106	  	 	 	20,433	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,220	  	 	 	43,000	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.73	  	 	 	9/13/2016	  	 	 	7,860	  	 	 	7,542	  	 	 	7,565	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.69	  	 	 	9/13/2016	  	 	 	8,478	  	 	 	8,135	  	 	 	8,109	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	36,593	  	 	 	36,092	  	 	 	31,104	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	99,565	  	 	 	98,664	  	 	 	95,085	  	
Earthbound	 	Beverage, Food, and Tobacco	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	38,875	  	 	 	39,800	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,145	  	 	 	38,754	  	
FreedomRoads	 	Automotive	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,076	  	 	 	25,603	  	
Global Garden Products(3)(6)(12)	 	Farming & Agriculture	 	 	12.72	  	 	 	10/31/2016	  	 	 	19,674	  	 	 	20,136	  	 	 	—  	  	
Grakon, LLC(13)	 	Machinery	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,403	  	 	 	19,306	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.99	  	 	 	11/3/2016	  	 	 	5,230	  	 	 	4,908	  	 	 	4,942	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.52	  	 	 	11/3/2016	  	 	 	12,200	  	 	 	14,701	  	 	 	11,527	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate Manufacturing	 	 	16.50	  	 	 	6/29/2014	  	 	 	4,219	  	 	 	4,045	  	 	 	—  	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate Manufacturing	 	 	13.00	  	 	 	6/29/2014	  	 	 	10,641	  	 	 	10,614	  	 	 	—  	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/28/2015	  	 	 	31,173	  	 	 	30,797	  	 	 	27,276	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,327	  	 	 	13,345	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	30,539	  	 	 	30,229	  	 	 	31,303	  	
Pacific Crane Maintenance Company, L.P.(12)	 	Machinery	 	 	13.00	  	 	 	2/15/2014	  	 	 	9,045	  	 	 	8,920	  	 	 	—  	  	
ProSieben Sat.1 Media AG(3)(8)(13)	 	Broadcasting & Entertainment	 	 	8.15	  	 	 	3/6/2017	  	 	 	21,437	  	 	 	19,804	  	 	 	5,505	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.94	  	 	 	10/31/2014	  	 	 	48,253	  	 	 	45,920	  	 	 	45,841	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	18,086	  	 	 	16,328	  	 	 	16,278	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	6,857	  	 	 	5,283	  	 	 	6,068	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,546	  	 	 	22,420	  	 	 	16,008	  	
Wastequip, Inc.(13)	 	Containers, Packaging and Glass	 	 	12.00	  	 	 	2/5/2015	  	 	 	15,745	  	 	 	14,953	  	 	 	3,149	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.62	  	 	 	9/14/2016	  	 	 	13,627	  	 	 	16,335	  	 	 	9,879	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.83	  	 	 	5/7/2017	  	 	 	29,211	  	 	 	34,948	  	 	 	20,447	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	39,000	  	 	 	38,302	  	 	 	36,660	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	795,459	  	 	$	778,163	  	 	$	641,992	  	

See notes to consolidated financial statements.
 
F-7

Table of Contents
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009
(in thousands, except units)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity—0.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	  	 	 	7/17/2015	  	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity/Partnership Interests/Warrants—6.7%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	28,006,121	  	 	 	28,006	  	 	 	19,675	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	1,040	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Great American Group Inc.(14)	 	Business Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	1,874	  	
Great American Group Inc.(15)	 	Business Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	614	  	
Great American Group Inc.(16)	 	Business Services	 	 	 	 	 	 	 	 	 	 	125,000	  	 	 	—  	  	 	 	—  	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	2,265,023	  	 	 	2,125	  	 	 	16,293	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel and Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	9,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	6,000	  	
NXP Semiconductors Netherlands B.V.(3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	944,628	  	 	 	31,060	  	 	 	1,697	  	
Pacific Crane Maintenance Company, L.P.	 	Machinery	 	 	 	 	 	 	 	 	 	 	10,000	  	 	 	1,000	  	 	 	—  	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	1,416	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests/Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	114,890	  	 	$	57,609	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,063,988	  	 	$	863,140	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2009.	
(3)	The following entities are domiciled outside the United States: Casema B.V. and NXP Semiconductors Netherlands B.V. in The Netherlands; Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital LLC’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital LLC’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital LLC’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital LLC’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital LLC’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital LLC has an unfunded commitment of $16,745.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investment is on non-accrual status.	
(13)	Investments are current on all obligations with interest payments being applied to principal.	
(14)	Common Shares	
(15)	Founders Shares	
(16)	Contingent Founders Shares	
 
See notes to consolidated financial statements.
 
F-8

Table of Contents
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009

 	 	 	 	 	
Industry Classification	  	Percentage of Total
Investments (at fair
value) as of
December 31, 2009	 	
Beverage, Food, and Tobacco	  	 	21	% 	
Aerospace & Defense	  	 	17	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Personal, Food and Misc. Services	  	 	5	% 	
Healthcare, Education, and Childcare	  	 	5	% 	
Leisure, Motion Pictures, Entertainment	  	 	4	% 	
Cargo Transport	  	 	4	% 	
Diversified / Conglomerate Manufacturing	  	 	4	% 	
Finance	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Broadcasting & Entertainment	  	 	3	% 	
Automotive	  	 	3	% 	
Real Estate	  	 	2	% 	
Telecommunications	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Printing, Publishing, Broadcasting	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
Containers, packaging and glass	  	 	1	% 	
Business Services	  	 	1	% 	
Electronics	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	

See notes to consolidated financial statements.
 
F-9

Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
(in thousands, except units)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—19.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Advanstar Communications Inc.	 	Diversified Services	 	 	8.76	  	 	 	12/1/2015	  	 	$	15,000	  	 	$	15,000	  	 	$	4,500	  	
Asurion Corporation	 	Insurance	 	 	8.01	  	 	 	7/3/2015	  	 	 	55,000	  	 	 	54,928	  	 	 	33,756	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures, Entertainment	 	 	9.88	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,775	  	 	 	17,420	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	8.76	  	 	 	5/19/2014	  	 	 	15,000	  	 	 	15,138	  	 	 	9,900	  	
Greatwide Logistics Services, Inc.(13)	 	Logistics Distribution	 	 	10.75	  	 	 	6/19/2014	  	 	 	26,000	  	 	 	25,870	  	 	 	—  	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/7/2013	  	 	 	25,182	  	 	 	24,588	  	 	 	24,679	  	
Nuveen Investments, Inc.	 	Finance	 	 	4.44	  	 	 	11/14/2014	  	 	 	14,888	  	 	 	14,848	  	 	 	5,881	  	
Questex Media Group	 	Diversified Services	 	 	8.71	  	 	 	11/4/2014	  	 	 	10,000	  	 	 	10,000	  	 	 	6,000	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	9.38	  	 	 	11/15/2011	  	 	 	14,173	  	 	 	14,173	  	 	 	10,630	  	
Texas Competitive Electric Holdings Company LLC	 	Utilities	 	 	5.37	  	 	 	10/10/2014	  	 	 	13,805	  	 	 	13,928	  	 	 	9,606	  	
Univar Inc.	 	Chemicals, Plastics, & Rubber	 	 	6.76	  	 	 	10/15/2014	  	 	 	21,780	  	 	 	21,462	  	 	 	13,285	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	11.26	  	 	 	1/17/2015	  	 	 	15,000	  	 	 	14,763	  	 	 	11,250	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	251,828	  	 	$	250,473	  	 	$	146,907	  	

Subordinated Debt/Corporate Notes—69.3%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	 	Broadcasting & Entertainment	 	 	13.50	  	 	 	8/14/2011	  	 	$	40,000	  	 	$	39,145	  	 	$	34,800	  	
Advanstar Communications Inc.	 	Diversified Services	 	 	10.76	  	 	 	12/1/2015	  	 	 	21,492	  	 	 	21,492	  	 	 	2,149	  	
Affinity Group, Inc.	 	Printing, Publishing, Broadcasting	 	 	10.88	  	 	 	10/15/2012	  	 	 	18,979	  	 	 	19,117	  	 	 	8,540	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures, Entertainment	 	 	7.00	  	 	 	6/13/2012	  	 	 	22,941	  	 	 	22,589	  	 	 	11,370	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,592	  	 	 	36,550	  	
Casema B.V.(3)	 	Telecommunications	 	 	12.31	  	 	 	11/17/2016	  	 	 	7,264	  	 	 	7,187	  	 	 	5,988	  	
Casema B.V.(3)	 	Telecommunications	 	 	12.64	  	 	 	11/17/2016	  	 	 	7,837	  	 	 	7,760	  	 	 	6,415	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	14.50	  	 	 	5/30/2013	  	 	 	35,424	  	 	 	34,880	  	 	 	26,568	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	13.00	  	 	 	4/15/2012	  	 	 	87,082	  	 	 	85,928	  	 	 	77,503	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,170	  	 	 	37,625	  	
FreedomRoads	 	Automotive	 	 	12.00	  	 	 	5/30/2013	  	 	 	27,500	  	 	 	27,079	  	 	 	23,650	  	
Global Garden Products(3)(6)	 	Farming & Agriculture	 	 	15.28	  	 	 	10/31/2016	  	 	 	32,913	  	 	 	34,187	  	 	 	18,760	  	
Grakon, LLC	 	Cargo Transport	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,100	  	 	 	19,803	  	 	 	12,362	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	11.04	  	 	 	12/8/2016	  	 	 	4,871	  	 	 	4,702	  	 	 	2,953	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	11.27	  	 	 	12/8/2016	  	 	 	10,486	  	 	 	14,223	  	 	 	6,357	  	
Jonathan Engineering Solutions Corp.	 	Diversified/Conglomerate Manufacturing	 	 	16.50	  	 	 	6/29/2014	  	 	 	3,888	  	 	 	3,713	  	 	 	2,722	  	
Jonathan Engineering Solutions Corp.	 	Diversified/Conglomerate Manufacturing	 	 	13.00	  	 	 	6/29/2014	  	 	 	10,480	  	 	 	10,448	  	 	 	7,336	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/31/2015	  	 	 	30,395	  	 	 	29,962	  	 	 	24,316	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	20,500	  	 	 	19,487	  	 	 	17,425	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	1/20/2013	  	 	 	30,539	  	 	 	30,072	  	 	 	27,180	  	
Pacific Crane Maintenance Company, L.P.	 	Machinery	 	 	13.00	  	 	 	2/15/2014	  	 	 	9,000	  	 	 	8,862	  	 	 	6,300	  	
ProSieben Sat.1 Media AG(3)(8)	 	Broadcasting & Entertainment	 	 	12.37	  	 	 	3/6/2017	  	 	 	20,420	  	 	 	20,517	  	 	 	819	  	
Questex Media Group	 	Diversified Services	 	 	14.50	  	 	 	11/4/2014	  	 	 	36,798	  	 	 	36,296	  	 	 	23,919	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	10.49	  	 	 	12/12/2013	  	 	 	14,118	  	 	 	15,599	  	 	 	10,518	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/12/2013	  	 	 	4,779	  	 	 	5,283	  	 	 	3,685	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	13.25	  	 	 	8/2/2013	  	 	 	22,500	  	 	 	22,500	  	 	 	18,450	  	
Valley National Gases LLC	 	Industrial Gas Distribution	 	 	13.50	  	 	 	2/28/2015	  	 	 	27,000	  	 	 	26,612	  	 	 	22,950	  	
Wastequip, Inc.	 	Containers	 	 	12.00	  	 	 	2/5/2015	  	 	 	15,431	  	 	 	15,431	  	 	 	3,858	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	14.38	  	 	 	9/14/2016	  	 	 	10,835	  	 	 	14,898	  	 	 	6,230	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	13.52	  	 	 	5/7/2017	  	 	 	23,234	  	 	 	31,771	  	 	 	13,011	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	35,000	  	 	 	35,811	  	 	 	31,640	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	737,806	  	 	$	751,116	  	 	$	531,949	  	

See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2008
(in thousands, except units)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity—0.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Reader’s Digest Association, Inc.(13)	 	Printing, Publishing, Broadcasting	 	 	13.50	  	 	 	3/2/2019	  	 	$	61,450	  	 	$	61,101	  	 	$	6,145	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	61,450	  	 	$	61,101	  	 	$	6,145	  	

Common Equity/Partnership Interests/Warrants—9.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Advanstar Communications Inc.	 	Media	 	 	 	 	 	 	 	 	 	 	3,400,000	  	 	 	3,400	  	 	 	68	  	
Ark Real Estate Partners LP (9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	28,006,121	  	 	 	28,006	  	 	 	24,619	  	
Alternative Asset Management Acquisition Corp.	 	Finance	 	 	 	 	 	 	 	 	 	 	712,000	  	 	 	712	  	 	 	50	  	
Alternative Asset Management Acquisition Corp.	 	Finance	 	 	 	 	 	 	 	 	 	 	286,400	  	 	 	2,681	  	 	 	2,646	  	
Alternative Asset Management Acquisition Corp.	 	Finance	 	 	 	 	 	 	 	 	 	 	1,293,750	  	 	 	3	  	 	 	3	  	
505 Capital Partners GP (CIT JV)(10)	 	Finance	 	 	 	 	 	 	 	 	 	 	30,000	  	 	 	30	  	 	 	30	  	
505 Capital Partners LP (CIT JV)(10)(14)	 	Finance	 	 	 	 	 	 	 	 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	2,500	  	
Grakon, LLC	 	Cargo Transport	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	343	  	
Dufry	 	Retail Stores	 	 	 	 	 	 	 	 	 	 	39,056	  	 	 	2,842	  	 	 	1,013	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	2,265,023	  	 	 	2,265	  	 	 	12,951	  	
National Specialty Alloys, LLC(10)	 	Industrial	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	12,900	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	4,500	  	
NXP Semiconductors Netherlands B.V.(3)	 	Technology	 	 	 	 	 	 	 	 	 	 	944,628	  	 	 	31,057	  	 	 	4,936	  	
Pacific Crane Maintenance Company, L.P.	 	Machinery	 	 	 	 	 	 	 	 	 	 	10,000	  	 	 	1,000	  	 	 	359	  	
The Reader’s Digest Association, Inc	 	Printing, Publishing, Broadcasting	 	 	 	 	 	 	 	 	 	 	16,606,060	  	 	 	16,606	  	 	 	—  	  	
Seven Media Group Pty Limited (3)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	1,494	  	
Sandridge Energy, Inc. (12)	 	Oil & Gas	 	 	 	 	 	 	 	 	 	 	740,556	  	 	 	13,891	  	 	 	4,554	  	
Station Casino, Inc.	 	Hotels, Motels, Inns & Gaming	 	 	 	 	 	 	 	 	 	 	40,000,000	  	 	 	40,486	  	 	 	2,000	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	123,140	  	 	 	1,050	  	 	 	1,050	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests/Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	194,044	  	 	$	76,016	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Put/Call Options Purchased or Written—0.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sandridge Energy, Inc.(12)	 	Oil & Gas	 	 	 	 	 	 	 	 	 	 	(285,000	) 	 	$	—  	  	 	$	(3	) 	
 	 	 	 	 	 	 	
Sandridge Energy, Inc.(12)	 	Oil & Gas	 	 	 	 	 	 	 	 	 	 	285,000	  	 	 	—  	  	 	 	7,201	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Put/Call Options Purchased or Written	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	—  	  	 	$	7,198	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,256,734	  	 	$	768,215	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2008.	
 
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Table of Contents
(3)	The following entities are domiciled outside the United States: Casema B.V. and NXP Semiconductors Netherlands B.V. in The Netherlands; Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital LLC’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital LLC’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital LLC’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital LLC’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital LLC’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital LLC is committed to fund capital of $48,845 of which $28,006 has already been funded.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	In the third quarter of 2008 Solar Capital LLC entered into a costless collar transaction creating a partial economic hedge of the Sandridge Energy, Inc. equity investment.	
(13)	Investment is on non-accrual status.	
(14)	Investment had capital returned and has an unfunded commitment of $75 million at December 31, 2008.	
 
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2008

 	 	 	 	 	
Industry Classification	  	Percentage of Total
Investments (at fair
value) as of
December 31, 2008	 	
Beverage, Food, and Tobacco	  	 	14%	  	
Aerospace & Defense	  	 	12%	  	
Printing, Publishing, Broadcasting	  	 	6%	  	
Oil & Gas	  	 	6%	  	
Diversified/Conglomerate Manufacturing	  	 	5%	  	
Cargo Transport	  	 	5%	  	
Diversified/Conglomerate Service	  	 	5%	  	
Business Services	  	 	5%	  	
Insurance	  	 	4%	  	
Broadcasting & Entertainment	  	 	4%	  	
Healthcare, Education, and Childcare	  	 	4%	  	
Home and Office Furnishing, Consumer Products	  	 	4%	  	
Real Estate	  	 	3%	  	
Automotive	  	 	3%	  	
Hotels, Motels, Inns & Gaming	  	 	3%	  	
Machinery	  	 	3%	  	
Farming & Agriculture	  	 	2%	  	
Leisure, Motion Pictures, Entertainment	  	 	2%	  	
Electronics	  	 	2%	  	
Chemicals, Plastics and Rubber	  	 	2%	  	
Finance	  	 	2%	  	
Mining, Steel, Iron, and Nonprecious Metals	  	 	2%	  	
Utilities	  	 	1%	  	
Containers, packaging and glass	  	 	1%	  	
 	  	 	 	 	
 	  	 	100%	  	

See notes to consolidated financial statements.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Organization
 
Solar Capital LLC (“Solar Capital”, the “Company”, or “We”), a Maryland limited liability company organized on February 12, 2007, is a closed-end, management investment company. We commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties.
 
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
 
Note 2. Significant Accounting Policies
 
Basis of Presentation—The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiary, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated.
 
Certain prior period amounts have been reclassified to conform to current year presentation.
 
Accounting Standards Codification—The FASB established the Accounting Standards CodificationTM (“ASC”) on July 2, 2009 as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting literature not included in the ASC is no longer authoritative.
 
Following the ASC, the FASB no longer issues new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it issues Accounting Standards Updates, which serve to update the ASC, provide background information about the guidance and provide the basis for conclusions on the changes to the ASC. GAAP was not changed as a result of the FASB’s codification project, but the codification project changes the way guidance is organized and presented. As a result, these changes have a significant impact on how we reference GAAP in our financial statements for interim and annual periods.
 
Investments—The Company applies fair value accounting in accordance with GAAP. Security transactions are accounted for on trade date. Securities for which market quotations are readily available on an exchange shall be valued at such price as of the closing price on the day of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s investment adviser (the “Adviser”) or Board of Directors (the “Board”), does not represent fair value, shall each be valued as follows:
 
 	1)	 	The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;	
 
 	2)	 	Preliminary valuation conclusions are then documented and discussed with senior management;	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

 	3)	 	Third-party valuation firms are engaged by, or on behalf of, the Board to conduct independent appraisals and review management’s preliminary valuations and make their own independent assessment, for all material assets; and	
 
 	4)	 	The Board discusses valuations and determines the fair value of each investment in the portfolio in good faith based on the input of our investment adviser (note 4) and, where appropriate, the respective independent valuation firms.	
 
Valuation methods, among other measures and as applicable, may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
 
Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
 
Cash and Cash Equivalents—Cash and cash equivalents include investments in money market accounts or investments with original maturities of three months or less.
 
Revenue Recognition—The Company’s revenue recognition policies are as follows:
 
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
 
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. The Company has loans in its portfolio that contain a payment-in-kind (“PIK”) provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates.
 
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. 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.
 
Income Taxes—The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions with respect to tax at the partnership level not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

The major tax jurisdiction of the Company and the earliest tax year subject to examination is as follows: United States 2007.
 
Foreign Currency Translation—The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company’s investments in foreign securities may involve certain risks such as foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
 
Derivative Instruments and Hedging Activity—In accordance with GAAP, the Company recognizes derivatives as either assets or liabilities at their fair value on its Consolidated Statements of Assets and Liabilities. At this time, the Company does not document formal hedge relationships because the hedged items are recorded at fair value with realized and unrealized gains and losses recognized in current earnings. Realized and unrealized gains and losses from derivatives are also recorded in current earnings. Realized gains or losses from derivatives are recognized when contracts are settled. The Company primarily uses foreign exchange forward contracts in order to economically hedge its foreign currency risk. Foreign exchange forward contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market exchange rate. The fair values of foreign exchange forward contracts are recognized in either derivative assets or derivative liabilities in the Company’s Consolidated Statements of Assets and Liabilities. The Company may also borrow in foreign currencies on its multicurrency credit lines to reduce foreign currency exposure. The changes in market values of assets and liabilities denominated in the same foreign currency offset in earnings providing a “natural” foreign currency hedge.
 
Deferred Offering Costs—Offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in preparation of the initial public offering.
 
Use of Estimates in the Preparation of Financial Statements—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.
 
Subsequent Events Evaluation—The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through March 1, 2010, the date the financial statements were issued. This evaluation resulted in subsequent events that necessitated disclosures but not adjustments (see Note14).
 
Note 3. Investments
 
Investments consisted of the following as of December 31, 2009 and 2008:

 	  	December 31, 2009	 	  	December 31, 2008	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	170,896	  	  	$	163,499	  	  	$	250,473	  	  	$	146,907	  	
Subordinated Debt/Corporate Notes	  	 	778,163	  	  	 	641,992	  	  	 	751,116	  	  	 	531,949	  	
Preferred Equity	  	 	39	  	  	 	40	  	  	 	61,101	  	  	 	6,145	  	
Common Equity/Partnership Interests/Warrants	  	 	114,890	  	  	 	57,609	  	  	 	194,044	  	  	 	76,016	  	
Put/Call Options Purchased or Written	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	7,198	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,063,988	  	  	$	863,140	  	  	$	1,256,734	  	  	$	768,215	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

Note 4. Agreements
 
Solar Capital has an Investment Advisory and Management Agreement with Solar Capital Partners LLC (the “Investment Adviser”), under which the Investment Adviser will manage the day-to-day operations of, and provide investment advisory services to, Solar Capital. For providing these services, the Investment Adviser receives a fee from Solar Capital, consisting of two components—a base management fee and an incentive fee. The base management fee is determined by taking the average value of Solar Capital’s gross assets at the end of the two most recently completed calendar quarters calculated at an annual rate of 2.00%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Solar Capital pays the Investment Adviser an incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of less than three months and adjusted for any unit issuances or repurchases during the relevant quarter. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on February 12, 2007, and will equal 20% of Solar Capital’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the advisor.
 
Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Capital. For providing these services, facilities and personnel, Solar Capital reimburses the Administrator for Solar Capital’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Capital’s behalf, managerial assistance to those portfolio companies to which Solar Capital is required to provide such assistance.
 
Note 5. Derivatives
 
The Company is exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company mitigates this risk through the use of foreign currency forward contracts. As an investment company, all changes in the fair value of assets, including changes caused by foreign currency fluctuation, flow through current earnings. The forward contracts serve as an economic hedge with their realized and unrealized gains and losses also recorded in current earnings. The Company has no derivatives designated as
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)
 
hedging instruments. During the year ended December 31, 2009 we entered into 81 foreign currency forward contracts with durations of 1 to 3 months and the average U.S. dollar value of foreign currency forward contracts was $29,757.
 
As of December 31, 2009, there were nine open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, six of which terminate on January 15, 2010 and three of which terminate on February 16, 2010. As of December 31, 2008, there were four open foreign currency contracts denominated in Euro, Australian Dollar, and British Pounds, all of which terminated on January 15, 2009. At December 31, 2009, there was no fixed collateral held by SunTrust Bank for the open contracts and no credit-related contingent features associated with any of the open forward contracts. As of December 31, 2008, there were no collateral requirements or credit-related contingent features associated with any of the open forward contracts. The contract details are as follows:

 	  	 	 	  	December 31, 2009	 	 	December 31, 2008	 	
Purchase:	  	Counterparty	 	  	Local
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Local
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	
USD/AUD	  	 	SunTrust Bank	  	  	 	(734	) 	 	$	658	  	 	$	1	  	 	 	—  	  	 	$	—  	  	 	$	—  	  	
USD/AUD	  	 	SunTrust Bank	  	  	 	734	  	 	 	669	  	 	 	10	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/AUD	  	 	SunTrust Bank	  	  	 	734	  	 	 	655	  	 	 	(1	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/EURO	  	 	SunTrust Bank	  	  	 	(317	) 	 	 	461	  	 	 	(7	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/EURO	  	 	SunTrust Bank	  	  	 	317	  	 	 	463	  	 	 	10	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/EURO	  	 	SunTrust Bank	  	  	 	6,317	  	 	 	9,185	  	 	 	135	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/GBP	  	 	SunTrust Bank	  	  	 	(825	) 	 	 	1,351	  	 	 	(17	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/GBP	  	 	SunTrust Bank	  	  	 	825	  	 	 	1,342	  	 	 	8	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/GBP	  	 	SunTrust Bank	  	  	 	6,825	  	 	 	11,165	  	 	 	130	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
USD/EURO	  	 	Citibank N.A., NY	  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	22,765	  	 	 	33,335	  	 	 	1,668	  	
USD/EURO	  	 	Citibank N.A., NY	  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	25,000	  	 	 	33,410	  	 	 	(1,366	) 	
USD/GBP	  	 	Citibank N.A., NY	  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	31,830	  	 	 	48,957	  	 	 	2,470	  	
USD/AUD	  	 	Citibank N.A., NY	  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	30,507	  	 	 	20,995	  	 	 	80	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	 	 	  	 	 	 	 	$	25,949	  	 	$	269	  	 	 	 	 	 	$	136,697	  	 	$	2,852	  	

The following tables show the fair value and effect of the derivative instruments on the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Operations:

  	  	December 31, 2009	 	  	December 31, 2008	 	
  	  	Balance Sheet Location	  	Fair Value	 	  	Balance Sheet Location	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	  	 	 	 	  	 	  	 	 	 	
Foreign exchange contracts	  	Derivative assets	  	$	294	  	  	Derivative assets	  	$	4,218	  	
Call Options	  	Investments	  	 	—  	  	  	Investments	  	 	7,201	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	  	$	294	  	  	 	  	$	11,419	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives	  	 	  	$	294	  	  	 	  	$	11,419	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

  	  	Derivative Liabilities	 	
 	  	December 31, 2009	 	  	December 31, 2008	 	
 	  	Balance Sheet Location	  	Fair
Value	 	  	Balance Sheet Location	  	Fair
Value	 	
Derivatives not designated as hedging instruments(a)	  	 	  	 	 	 	  	 	  	 	 	 	
Foreign exchange contracts	  	Derivative liabilities	  	$	25	  	  	Derivative liabilities	  	$	1,366	  	
Put Options	  	Investments	  	 	—  	  	  	Investments	  	 	3	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	  	$	25	  	  	 	  	$	1,369	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives	  	 	  	$	25	  	  	 	  	$	1,369	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of Derivative Instruments on the Consolidated Statements of Operations	 	
Derivatives not designated as
hedging instruments(a)	  	Location of Gain or (Loss)
Recognized in Income on
Derivative	  	Amount of Gain or (Loss) Recognized in Income on Derivative	 	
 	  	 	  	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	March 13, 2007
(inception)
through
December 31, 2007	 	
Foreign exchange contracts	  	Realized gain (loss): Forward contracts	  	$	(12,608	) 	 	$	13,086	  	 	$	(7,125	) 	
Foreign exchange contracts	  	Unrealized gain (loss): Forward contracts	  	 	(2,583	) 	 	 	4,087	  	 	 	(1,235	) 	
Put Options	  	Realized gain (loss): Investments	  	 	7,359	  	 	 	—  	  	 	 	—  	  	
Put Options	  	Unrealized gain (loss): Investments	  	 	(7,201	) 	 	 	—  	  	 	 	—  	  	
Call Options	  	Realized gain (loss): Investments	  	 	(9	) 	 	 	—  	  	 	 	—  	  	
Call Options	  	Unrealized gain (loss): Investments	  	 	3	  	 	 	(3	) 	 	 	—  	  	
 	  	 	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	  	$	(15,039	) 	 	$	17,170	  	 	$	(8,360	) 	

(a)	 	See Note 2 for additional information on the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategy.	
 
Note 6. Borrowing Facilities
 
On January 11, 2008, Solar Capital LLC entered into a $200 million Senior Secured Revolving Credit Facility (the “Credit Facility”) with Citigroup Global Markets, Inc., (“CGMI”) various lenders and Citibank, N.A., as administrative agent for the lenders. CGMI acted as the sole lead bookrunner and the sole lead arranger for the Credit Facility. Under the terms of the Credit Facility, the lenders agreed to extend credit to Solar Capital (the “Borrower”) in an aggregate principal or face amount not exceeding $200 million at any one time outstanding. The Credit Facility also allows the Borrower and the lenders to provide for a commitment increase to an amount not greater than $600 million. The Credit Facility is a three-year multi-currency revolving facility (with a stated maturity date of January 11, 2011) and is secured by substantially all of the assets of Solar Capital’s investment portfolio. Interest rate options include Base Rate (“BR”) loans, indexed to currency specific London Interbank Offered Rates (LIBOR), and Alternate Base Rate (“ABR”) loans, indexed to the Prime or Fed
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)
 
Funds rates, under two different borrowing options. Under Option I terms, borrowings bear interest at a rate per annum equal to the BR plus 1.375% and ABR plus 0.00% and under Option II terms at BR plus 2.00% and ABR plus 0.00%. However, Option II terms expired in January 2009. The facility allows for Swingline, or short notice, loans, which when denominated in foreign currencies bear interest at a rate per annum agreed between the Borrower and lender at the time the loans are made. The Credit Facility contains affirmative and negative covenants, including: (a) periodic financial reporting requirements; (b) notices of material events; (c) the Borrower will not, nor will it permit any of its subsidiaries to, create, incur, assume or permit to exist any indebtedness, except (i) indebtedness created under the Credit Facility; (ii) secured longer-term indebtedness and unsecured longer-term indebtedness in an aggregate amount required to comply with the provisions of the Credit Facility; (iii) other permitted indebtedness, (iv) indebtedness of financing subsidiaries, (v) repurchase obligations arising in the normal course of business with respect to U.S. Government Securities, (vi) obligations payable to clearing agencies, brokers or dealers in connection with the purchase or sale of securities in the ordinary course of business, (vii) secured shorter-term indebtedness and unsecured shorter-term indebtedness in an aggregate amount not exceeding 5% of Shareholders’ Equity and (viii) obligations (including guarantees) in respect of standard securitization undertakings; (d) maintaining minimum shareholders’ equity at the last day of any fiscal quarter not to be less than the greater of (A) 40% of the total assets of the Borrower and its subsidiaries as at the last day of such fiscal quarter or (B) $700 million plus 25% of the net proceeds of the sale of equity interests by the Borrower and its subsidiaries; (e) asset coverage ratio will not be less than 2.00 to 1 at any time; (f) maintaining minimum liquidity requirements; (g) the Borrower will not, and will not permit any of its subsidiaries to, enter into any material transactions with any of its affiliates or to engage in any material extent in any business other than in accordance with its investment policies and (h) no further negative pledge. The Credit Facility will be used to supplement Solar Capital’s equity capital to make additional investments and for other general corporate purposes.
 
On September 25, 2009, the Credit Facility was amended, lowering the minimum shareholder’s equity covenant to $475 million from $700 million and allowing for the transfer of assets free and clear of Credit Facility liens. Per the newly amended agreement, borrowings shall bear interest at a rate per annum equal to the BR plus 2.50% and ABR plus 1.50%, with a 1.00% increase when the aggregate principal loan balance exceeds $100 million. In addition, prior to a Solar Capital initial public offering, the Credit Facility will be reduced the earlier of May 1, 2010 or the date of the distribution to unit holders based on the December 31, 2009 net asset value by the greater of (i) $25 million or (ii) 50% of the aggregate available and unused commitments at that time; and thereafter by 50% of net cash proceeds from the sale or repayment of portfolio investments.
 
The weighted average annual interest cost for the years ended December 31, 2009 and 2008 was less than 1%. These costs are exclusive of the 0.25% for commitment fees and for other prepaid expenses related to establishing the credit facility. This weighted average annual interest cost reflects the average interest cost for all borrowings.
 
The average debt outstanding on the Credit Facility was $29,035 and $10,255 for the years ended December 31, 2009 and, 2008, respectively. The maximum amounts borrowed during years ended December 31, 2009 and 2008 were $122,065 and $61,320, respectively. The debt outstanding as of December 31, 2009 was $88,114 and there were no outstanding borrowings as of December 31, 2008. At December 31, 2009 and 2008, the Company was in compliance with all financial and operational covenants required by the Credit Facility.
 
On January 11, 2009, the Company’s other credit facility (previously referred to as the Warehouse Facility) expired unused upon its maturity.
 
Note 7. Fair Value
 
Fair value is defined as 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. GAAP establishes a framework for
 
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)
 
measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
 
GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
 
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, and most U.S. Government and agency securities).
 
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	 	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	 	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);	
 
 	c)	 	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and	
 
 	d)	 	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.	
 
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
 
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Levels 1 and 2 financial instruments entered into by the Company that economically hedge certain exposures to the Level 3 positions.
 
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.
 
F-21

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2009 and 2008:
 
Fair Value Measurements
As of December 31, 2009

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	—  	  	  	$	163,499	  	  	$	163,499	  	
Subordinated Debt/Corporate Notes	  	 	—  	  	  	 	65,961	  	  	 	576,031	  	  	 	641,992	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	40	  	  	 	40	  	
Common Equity/Partnership Interests/Warrants	  	 	—  	  	  	 	2,488	  	  	 	55,121	  	  	 	57,609	  	
Derivative assets—forward contracts	  	 	—  	  	  	 	294	  	  	 	—  	  	  	 	294	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	 	25	  	  	 	—  	  	  	 	25	  	
 
Fair Value Measurements
As of December 31, 2008

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	49,242	  	  	$	97,665	  	  	$	146,907	  	
Subordinated Debt/Corporate Notes	  	 	—  	  	  	 	22,533	  	  	 	509,416	  	  	 	531,949	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	6,145	  	  	 	6,145	  	
Common Equity/Partnership Interests/Warrants	  	 	8,121	  	  	 	143	  	  	 	67,752	  	  	 	76,016	  	
Put/Call Options	  	 	 	 	  	 	7,198	  	  	 	 	 	  	 	7,198	  	
Derivative assets—forward contracts	  	 	—  	  	  	 	4,218	  	  	 	—  	  	  	 	4,218	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	 	1,366	  	  	 	—  	  	  	 	1,366	  	
 
F-22

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the years ended December 31, 2009 and 2008, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2009 and 2008:
 
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2009

 	 	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2009	 	$	97,665	  	 	$	509,416	  	 	$	6,145	  	 	$	67,752	  	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	 	 	(50,032	) 	 	 	(75,837	) 	 	 	(61,101	) 	 	 	(61,081	) 	
Net change in unrealized gain (loss)	 	 	82,880	  	 	 	58,509	  	 	 	54,957	  	 	 	48,941	  	
Purchases, sales, issuances, and settlements (net)	 	 	(770	) 	 	 	83,943	  	 	 	39	  	 	 	(491	) 	
Transfers into Level 3	 	 	33,756	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2009	 	$	163,499	  	 	$	576,031	  	 	$	40	  	 	$	55,121	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	$	34,333	  	 	$	23,128	  	 	$	2	  	 	$	(9,480	) 	
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2008

 	 	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2008	 	$	192,794	  	 	$	564,615	  	 	$	55,299	  	 	$	203,071	  	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	 	 	11	  	 	 	(16,529	) 	 	 	—  	  	 	 	(158	) 	
Net change in unrealized gain (loss)	 	 	(61,369	) 	 	 	(186,822	) 	 	 	(54,956	) 	 	 	(113,160	) 	
Purchases, sales, issuances, and settlements (net)	 	 	(53,661	) 	 	 	148,152	  	 	 	5,802	  	 	 	4,344	  	
Transfers into (out of) Level 3	 	 	19,890	  	 	 	—  	  	 	 	—  	  	 	 	(26,345	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2008	 	$	97,665	  	 	$	509,416	  	 	$	6,145	  	 	$	67,752	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	$	(61,337	) 	 	$	(192,773	) 	 	$	(54,956	) 	 	$	(113,160	) 	
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

Note 8. Taxes
 
Withholding Tax
 
The Company is engaged in activities that for tax purposes have been deemed effectively connected with a U.S. trade or business. We generally are required to withhold and remit to the U.S. government a percentage of our net income and gains that are both effectively connected with that trade or business and allocated to non-U.S. unit holders, and we will be liable for interest and penalties with respect to amounts that are not so withheld. The relevant withholding percentage generally is the maximum applicable U.S. federal income tax rate, currently 35%. Non-U.S. unit holders that are corporations might also be subject to a “branch profits” tax on certain earnings deemed to have been repatriated to those persons. Similar withholding is required in various state and local jurisdictions.
 
The Company’s entire withholding tax receivable of $16,505 at December 31, 2008 benefited our non-U.S. unit holders. All withholding tax receivable was repaid by the non-U.S. unit holders to the Company during 2009.
 
Income Tax
 
The Company is classified as a partnership for U.S. tax purposes, and therefore is generally not subject to federal and state income taxes. Each partner takes into account separately on their tax return their share of the taxable income, gains, losses, deductions or credits for the partnership’s taxable year. Accordingly, no provisions have been made in the accompanying financial statements for federal and state income tax.
 
The Company is subject to New York City unincorporated business tax (UBT), which is imposed on the business income of every unincorporated business that is carried on in New York City. The UBT is imposed for each taxable year at a rate of approximately 4 percent of taxable income that is allocable to New York City.
 
As of December 31, 2009 the Company has determined that a deferred tax asset of $2,354 may be realized in future periods due to realized and unrealized losses on originated assets associated with the Company’s unincorporated business activities in New York City as of such date. The realization of this deferred tax asset has been deemed not likely to occur and accordingly, the Company has a set up a valuation allowance for the full amount.
 
The Company is also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, the Company pays a corporate income tax and a municipal business tax on its subsidiary’s taxable income.
 
Note 9. Earnings (Loss) Per Unit
 
The following information sets forth the computation of basic and diluted net increase (decrease) in unit holders’ capital per unit resulting from operations for the years ended December 31, 2009 and 2008 and the period ended December 31, 2007:

 	  	Year ended
December 31, 2009	 	  	Year ended
December 31, 2008	 	 	March 13, 2007
(inception) through
December 31, 2007	 	
Numerator for basic and diluted earnings per unit:	  	$	86,936	  	  	$	(405,828	) 	 	$	49,100	  	
Denominator for basic and diluted weighted average units:	  	 	81,702,847	  	  	 	81,702,847	  	 	 	81,702,847	  	
Basic and diluted net increase (decrease) in unit holders’ capital per unit resulting from operations:	  	$	1.06	  	  	$	(4.96	) 	 	$	0.60	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

On March 17, 2009, the Company made a pro rata distribution to the unit holders. This distribution was equal to 10% of the December 31, 2008 net asset value and totaled approximately $85.3 million, or $1.04 per outstanding unit. On October 30, 2009, the Company made another pro rata distribution to the unit holders. This distribution was equal to 10% of the September 30, 2009 net asset value and totaled approximately $81.4 million, or $1.00 per outstanding unit. On December 31, 2009 the board of directors declared another pro rata distribution payable to unit holders. This distribution totaled approximately $75 million, or $0.92 per outstanding unit and was payable as of December 31, 2009. This distribution was paid in January 2010.
 
Note 10. Financial Highlights
 
The following is a schedule of financial highlights for the years ended December 31, 2009 and 2008 and the period ended December 31, 2007:

 	  	Year ended
December 31, 2009	 	 	Year ended
December 31, 2008	 	 	March 13, 2007
(inception) through
December 31, 2007	 	
Per Unit Data:	  	 	 	 	 	 	 	 	 	 	 	 	
Net asset value, beginning of period	  	$	10.44	  	 	$	15.40	  	 	$	15.00	  	
Offering Costs	  	 	—  	  	 	 	—  	  	 	 	(0.20	) 	
Net investment income	  	 	0.82	  	 	 	1.07	  	 	 	0.65	  	
Net realized and unrealized gain (loss)	  	 	0.24	  	 	 	(6.03	) 	 	 	(0.05	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets resulting from operations	  	 	1.06	  	 	 	(4.96	) 	 	 	0.60	  	
Distributions to unit holders declared	  	 	(2.96	) 	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net asset value end of period	  	$	8.54	  	 	$	10.44	  	 	$	15.40	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total return	  	 	10.15	% 	 	 	(32.21	)% 	 	 	4.00	% 	
Net assets, end of period	  	$	697,903	  	 	$	852,673	  	 	$	1,258,501	  	
 	 	 	 	
Ratio to average net assets	  	 	 	 	 	 	 	 	 	 	 	 	
Expenses	  	 	3.35	% 	 	 	3.27	% 	 	 	2.55	% 	
Incentive fees	  	 	2.20	% 	 	 	0.78	% 	 	 	—  	% 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	  	 	5.55	% 	 	 	4.05	% 	 	 	2.55	% 	
Net investment income without incentive fees	  	 	11.06	% 	 	 	7.59	% 	 	 	5.36	% 	
 
Note 11. New Accounting Pronouncements and Accounting Standards Updates
 
Fair Value Measurements and Disclosures
 
We adopted the accounting updates to ASC 820, Fair Value Measurements and Disclosures Topic, which clarify how to estimate fair value when the volume and level of activity for the asset or liability have significantly decreased, circumstances that indicate a transaction is not orderly, and how to determine the fair value of a liability. It emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique used, the objective of a fair value measurement remains the same that the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. The adoption of these updates did not have a material impact on our financial statements.
 
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

In January 2010, the FASB issued an update to ASC 820, which will require additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
 
Derivatives and Hedging
 
We adopted the accounting update to ASC 815, Derivative and Hedging Topic, which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts and disclosures about credit-risk-related contingent features in derivative agreements. The adoption did not have a material impact on our financial statements.
 
Subsequent Events
 
We adopted ASC 855, Subsequent Events Topic, which requires that management evaluate events and transactions that may occur for potential recognition or disclosure in the financial statements after the balance sheet date through the date the financial statements are issued and clarifies the circumstances under which such events or transactions must be recognized in the financial statements. The adoption did not have a material impact on our financial statements.
 
Note 12. Related Parties
 
From July 2006 through approximately the first quarter of 2009, Mr. Gross, our chairman and chief executive officer, was a partner in Magnetar Capital Partners LP. Mr. Spohler, our chief operating officer together with Solar Capital Partners LLC’s other investment professionals, advised Magnetar Financial LLC (“Magnetar”) on certain investments which coincide with those of Solar Capital. Certain entities affiliated with Magnetar own as of December 31, 2009, either directly or indirectly, approximately 42.84% of our outstanding equity.
 
Note 13. Selected Quarterly Financial Data (unaudited)

For the Quarter Ended	  	Investment
Income	 	  	Net Investment
Income	 	  	Net Realized And
Unrealized Gain
(Loss) on Assets	 	 	Net Increase
(Decrease) In
Net Assets From
Operations	 	
 	  	Total	 	  	Per
Unit	 	  	Total	 	  	Per
Unit	 	  	Total	 	 	Per
Unit	 	 	Total	 	 	Per
Unit	 	
December 31, 2009	  	$	28,456	  	  	$	0.35	  	  	$	17,686	  	  	$	0.22	  	  	$	22,129	  	 	$	0.27	  	 	$	39,815	  	 	$	0.49	  	
September 30, 2009	  	 	27,785	  	  	 	0.34	  	  	 	16,383	  	  	 	0.20	  	  	 	22,181	  	 	 	0.27	  	 	 	38,564	  	 	 	0.47	  	
June 30, 2009	  	 	25,252	  	  	 	0.31	  	  	 	16,099	  	  	 	0.20	  	  	 	17,899	  	 	 	0.22	  	 	 	33,998	  	 	 	0.42	  	
March 31, 2009	  	 	28,177	  	  	 	0.34	  	  	 	17,095	  	  	 	0.21	  	  	 	(42,677	) 	 	 	(0.52	) 	 	 	(25,582	) 	 	 	(0.31	) 	
December 31, 2008	  	 	38,035	  	  	 	0.47	  	  	 	22,080	  	  	 	0.27	  	  	 	(339,193	) 	 	 	(4.15	) 	 	 	(317,113	) 	 	 	(3.88	) 	
September 30, 2008	  	 	32,464	  	  	 	0.40	  	  	 	21,990	  	  	 	0.27	  	  	 	(108,641	) 	 	 	(1.33	) 	 	 	(86,651	) 	 	 	(1.06	) 	
June 30, 2008	  	 	32,367	  	  	 	0.40	  	  	 	21,305	  	  	 	0.26	  	  	 	17,679	  	 	 	0.22	  	 	 	38,985	  	 	 	0.48	  	
March 31, 2008	  	 	31,093	  	  	 	0.38	  	  	 	22,024	  	  	 	0.27	  	  	 	(63,072	) 	 	 	(0.77	) 	 	 	(41,049	) 	 	 	(0.50	) 	
December 31, 2007	  	 	28,703	  	  	 	0.35	  	  	 	20,225	  	  	 	0.25	  	  	 	4,543	  	 	 	0.06	  	 	 	24,769	  	 	 	0.31	  	
September 30, 2007	  	 	23,654	  	  	 	0.29	  	  	 	15,918	  	  	 	0.19	  	  	 	(11,569	) 	 	 	(0.14	) 	 	 	4,349	  	 	 	0.05	  	
June 30, 2007	  	 	21,620	  	  	 	0.26	  	  	 	14,219	  	  	 	0.17	  	  	 	50	  	 	 	0.00	  	 	 	14,268	  	 	 	0.17	  	
March 31, 2007	  	 	4,478	  	  	 	0.05	  	  	 	2,632	  	  	 	0.03	  	  	 	3,082	  	 	 	0.04	  	 	 	5,714	  	 	 	0.07	  	
 
F-26

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

Note 14. Subsequent Events
 
Solar Capital Merger and Senior Notes—On February 9, 2010, through a series of transactions, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation, leaving Solar Capital Ltd. as the surviving entity. An aggregate of approximately 26.65 million shares of common stock and $125 million in senior notes of Solar Capital Ltd. were issued in connection with the merger. The senior notes will be due in February 2014 and have a coupon of 8.75%, payable quarterly beginning May 1, 2010. The senior notes are pre-payable at par at any time and are subject to customary terms and conditions.
 
Solar Capital Ltd is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a BDC (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). In addition, for tax purposes the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended.
 
Initial Public Offering and Private Placement—On February 9, 2010 Solar Capital Ltd. priced its initial public offering and sold 5 million shares at a price of $18.50. Net of underwriting fees the company raised a total of $86 million and its shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, Solar Capital Ltd. sold 600,000 shares at $18.50 in a concurrent private placement.
 
New Revolving Credit Facility—On February 12, 2010, Solar Capital Ltd. amended the Credit Facility, extending the maturity to February 2013 and increasing the total facility size to $270 million with the ability to raise the total commitments to $600 million. Per the newly amended agreement, borrowings shall bear interest at a rate per annum equal to the BR plus 3.25% and ABR plus 2.25%, with a 1.00% increase when the aggregate principal loan balance exceeds $100 million. In addition, the commitment fee on unused balances was increased to 0.375%. The amendment reduced the advance rates permitted on certain asset types and added a covenant that limited the borrowed amount to be no more than 30% of total assets. The amendment also removed the provisions reducing the Credit Facility the earlier of May 1, 2010 or the date of the distribution to shareholders based on the December 31, 2009 net asset value by the greater of (i) $25 million or (ii) 50% of the aggregate available and unused commitments at that time; and thereafter by 50% of net cash proceeds from the sale or repayment of portfolio investments.
 
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Table of Contents
SOLAR CAPITAL LLC
 
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except units)
 
Schedule 12-14

 	 	 	 	 	 	 	 	Year ended December 31, 2009	 	 	As of
December 31,
2009
Fair Value	 	
Portfolio Company	 	Investment	 	 	As of December 31, 2009
Number of
Shares/Principal
Amount	 	 	Amount of dividends
and interest
included in income	 	 	Amount of equity
in net profit and
loss	 	 	 	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	 	 	Equity	  	 	 	1,000,000	  	 	$	—  	  	 	$	—  	  	 	$	9,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	$	—  	  	 	$	—  	  	 	$	9,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Senior Debt	  	 	$	25,182	  	 	$	4,163	  	 	$	—  	  	 	$	26,152	  	
National Interest Security Corp.	 	 	Subordinated	  	 	$	30,539	  	 	 	5,027	  	 	 	—  	  	 	 	31,303	  	
National Interest Security Corp.	 	 	Equity	  	 	 	2,265,023	  	 	 	—  	  	 	 	—  	  	 	 	16,293	  	
Ark Real Estate Partners LP	 	 	Equity	  	 	 	28,006,121	  	 	 	—  	  	 	 	—  	  	 	 	19,675	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	$	9,190	  	 	$	—  	  	 	$	93,423	  	

The table below represents the balance at the beginning of the period, December 31, 2008 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of December 31, 2009.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair Value
December 31,
2008	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2009	 	
National Specialty Alloys, LLC	  	$	12,900	  	  	$	—  	  	  	$	—  	  	  	$	(3,900	) 	 	$	9,000	  	
505 Capital Partners GP	  	 	30	 	  	 	—  	  	  	 	30	 	  	 	—  	  	 	 	—  	  	
National Interest Security Corp.	  	 	24,679	  	  	 	171	  	  	 	19	 	  	 	1,321	  	 	 	26,152	  	
National Interest Security Corp.	  	 	27,180	  	  	 	186	  	  	 	29	 	  	 	3,966	  	 	 	31,303	  	
National Interest Security Corp.	  	 	12,951	  	  	 	—  	  	  	 	—  	  	  	 	3,342	  	 	 	16,293	  	
Ark Real Estate Partners LP	  	 	24,619	  	  	 	—  	  	  	 	—  	  	  	 	(4,944	) 	 	 	19,675	  	
 
F-28

Table of Contents
SOLAR CAPITAL LLC
 
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except units)
 
Schedule 12-14

 	 	 	 	 	 	 	 	Year ended December 31, 2008	 	 	As of
December 31,
2008
Fair Value	 	
Portfolio Company	 	Investment	 	 	As of December 31, 2008
Number of
Shares/Principal
Amount	 	 	Amount of dividends
and interest
included in income	 	 	Amount of equity
in net profit and
loss	 	 	 	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	 	 	Equity	  	 	 	1,000,000	  	 	$	1,901	  	 	$	—  	  	 	$	12,900	  	
505 Capital Partners GP	 	 	Equity	  	 	 	30,000	  	 	 	—  	  	 	 	—  	  	 	 	30	  	
505 Capital Partners LP	 	 	Equity	  	 	 	—  	  	 	 	751	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	$	2,652	  	 	$	—  	  	 	$	12,930	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Senior Debt	  	 	$	25,182	  	 	$	2,381	  	 	$	—  	  	 	$	24,679	  	
National Interest Security Corp.	 	 	Subordinated	  	 	$	30,539	  	 	 	4,794	  	 	 	—  	  	 	 	27,180	  	
National Interest Security Corp.	 	 	Equity	  	 	 	2,265,023	  	 	 	—  	  	 	 	—  	  	 	 	12,951	  	
Ark Real Estate Partners LP	 	 	Equity	  	 	 	28,006,121	  	 	 	—  	  	 	 	—  	  	 	 	24,619	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	$	7,175	  	 	$	—  	  	 	$	89,429	  	

The table below represents the balance at the beginning of the period, December 31, 2007 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of December 31, 2008.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair Value
December 31,
2007	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2008	 	
National Specialty Alloys, LLC	  	$	13,200	  	  	$	—  	  	  	$	—  	  	  	$	(300	) 	 	$	12,900	  	
505 Capital Partners GP	  	 	—  	  	  	 	30	  	  	 	—  	  	  	 	—  	  	 	 	30	  	
505 Capital Partners LP	  	 	—  	  	  	 	5,025	  	  	 	5,025	 	  	 	—  	  	 	 	—  	  	
National Interest Security Corp.	  	 	10,000	  	  	 	14,963	  	  	 	175	  	  	 	(109	) 	 	 	24,679	  	
National Interest Security Corp.	  	 	30,000	  	  	 	666	  	  	 	—  	  	  	 	(3,486	) 	 	 	27,180	  	
National Interest Security Corp.	  	 	1,765	  	  	 	500	  	  	 	—  	  	  	 	10,686	 	 	 	12,951	  	
Ark Real Estate Partners LP	  	 	26,987	  	  	 	2,605	  	  	 	—  	  	  	 	(4,973	) 	 	 	24,619	  	
 
F-29

Table of Contents
 
Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Shareholders
Solar Capital Ltd.:
 
We have reviewed the accompanying consolidated statement of assets and liabilities, including the consolidated schedules of investments, of Solar Capital Ltd. (the Company) as of March 31, 2010, and the related consolidated statements of operations, changes in net assets and cash flows for the three month periods ended March 31, 2010 and 2009, and the financial highlights (included in Note 11) for the three month period ended March 31, 2010. These consolidated financial statements and financial highlights are the responsibility of the Company’s management.
 
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial accounting and reporting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with U.S. generally accepted accounting principles.
 
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital LLC. as of December 31, 2009, and the related consolidated statement of net assets for the year ended December 31, 2009 and we expressed an unqualified opinion on them in our report dated March 1, 2010.
 
/s/ KPMG LLP
New York, New York
May 4, 2010
 
F-30

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except shares)

 	 	March 31,
2010	 	 	December 31,
2009	 	
 	 	(unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	
Investments at value:	 	 	 	 	 	 	 	 	
Companies more than 25% owned (cost: $10,000 and $10,000, respectively)	 	$	9,000	  	 	$	9,000	  	
Companies 5% to 25% owned (cost: $28,939 and $85,102, respectively)	 	 	20,583	  	 	 	93,423	  	
Companies less than 5% owned (cost: $936,354 and $968,886, respectively)	 	 	809,373	  	 	 	760,717	  	
 	 	 	 	 	 	 	 	 	
Total investments (cost: $975,293 and $1,063,988, respectively)	 	 	838,956	  	 	 	863,140	  	
 	 	 	
Cash and cash equivalents	 	 	60,363	  	 	 	5,675	  	
Receivable for investments sold	 	 	10,123	  	 	 	—  	  	
Interest and dividends receivable	 	 	8,771	  	 	 	7,547	  	
Deferred borrowing costs	 	 	4,593	  	 	 	914	  	
Fee revenue receivable	 	 	4,260	  	 	 	5,824	  	
Deferred offering costs	 	 	294	  	 	 	1,478	  	
Derivative assets	 	 	276	  	 	 	294	  	
Prepaid expenses and other receivables	 	 	1,107	  	 	 	549	  	
 	 	 	 	 	 	 	 	 	
Total Assets	 	 	928,743	  	 	 	885,421	  	
 	 	 	 	 	 	 	 	 	
Liabilities	 	 	 	 	 	 	 	 	
Senior unsecured notes payable	 	 	125,000	  	 	 	—  	  	
Payable for investments purchased	 	 	43,650	  	 	 	—  	  	
Dividends payable	 	 	11,196	  	 	 	—  	  	
Credit facility payable	 	 	—  	  	 	 	88,114	  	
Distributions payable	 	 	—  	  	 	 	75,136	  	
Due to Solar Capital Partners LLC:	 	 	 	 	 	 	 	 	
Performance-based incentive fee payable	 	 	5,279	  	 	 	8,517	  	
Investment advisory and management fee payable	 	 	4,366	  	 	 	8,663	  	
Deferred fee revenue	 	 	2,136	  	 	 	3,532	  	
Interest payable	 	 	1,692	  	 	 	153	  	
Derivative liabilities	 	 	778	  	 	 	25	  	
Due to Solar Capital Management LLC	 	 	745	  	 	 	912	  	
Income taxes payable	 	 	688	  	 	 	535	  	
Other accrued expenses and payables	 	 	2,834	  	 	 	1,931	  	
 	 	 	 	 	 	 	 	 	
Total Liabilities	 	 	198,364	  	 	 	187,518	  	
 	 	 	
Net Assets	 	 	 	 	 	 	 	 	
Partners’ capital	 	 	—  	  	 	 	697,903	  	
Common stock, par value $0.01 per share 32,928,257 shares issued and outstanding	 	 	329	  	 	 	—  	  	
Paid in capital in excess of par	 	 	666,371	  	 	 	—  	  	
Undistributed net investment income	 	 	4,000	  	 	 	—  	  	
Accumulated net realized gain	 	 	1,792	  	 	 	—  	  	
Net unrealized appreciation	 	 	57,887	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	
Total Net Assets	 	$	730,379	  	 	$	697,903	  	
 	 	 	 	 	 	 	 	 	
Number of shares outstanding	 	 	32,928,257	  	 	 	32,860,454	  	
Net Asset Value Per Share	 	$	22.18	  	 	$	21.24	  	
 
See notes to consolidated financial statements.
 
F-31

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares)

 	 	Three months ended
March 31, 2010	 	 	Three months ended
March 31, 2009	 	
 	 	(unaudited)	 	 	(unaudited)	 	
INVESTMENT INCOME:	 	 	 	 	 	 	 	 	
Interest and dividends:	 	 	 	 	 	 	 	 	
Companies 5% to 25% owned	 	$	7,619	  	 	$	2,265	  	
Other interest and dividend income	 	 	27,691	  	 	 	25,912	  	
 	 	 	 	 	 	 	 	 	
Total interest and dividends	 	 	35,310	  	 	 	28,177	  	
 	 	 	 	 	 	 	 	 	
Total investment income	 	 	35,310	  	 	 	28,177	  	
 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	
Performance-based incentive fee	 	 	5,279	  	 	 	4,274	  	
Investment advisory and management fees	 	 	4,366	  	 	 	4,073	  	
Interest and other credit facility expenses	 	 	2,951	  	 	 	731	  	
Administrative service fee	 	 	453	  	 	 	604	  	
Other general and administrative expenses	 	 	1,069	  	 	 	921	  	
 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	14,118	  	 	 	10,603	  	
 	 	 	 	 	 	 	 	 	
Net investment income before income tax expense	 	 	21,192	  	 	 	17,574	  	
 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	81	  	 	 	479	  	
 	 	 	 	 	 	 	 	 	
Net investment income	 	 	21,111	  	 	 	17,095	  	
 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD CONTRACTS AND FOREIGN CURRENCIES:	 	 	 	 	 	 	 	 	
Net realized gain (loss):	 	 	 	 	 	 	 	 	
Investments:	 	 	 	 	 	 	 	 	
Companies 5% to 25% owned	 	 	16,397	  	 	 	—  	  	
Companies less than 5% owned	 	 	(43,728	) 	 	 	(22,656	) 	
 	 	 	 	 	 	 	 	 	
Net realized loss on investments	 	 	(27,331	) 	 	 	(22,656	) 	
Forward contracts	 	 	1,552	  	 	 	8,948	  	
Foreign currency exchange	 	 	3,536	  	 	 	(29	) 	
 	 	 	 	 	 	 	 	 	
Net realized loss	 	 	(22,243	) 	 	 	(13,737	) 	
 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	 	 	 	 	 	 	 	
Investments:	 	 	 	 	 	 	 	 	
Companies more than 25% owned	 	 	—  	  	 	 	(2,900	) 	
Companies 5% to 25% owned	 	 	(16,677	) 	 	 	(498	) 	
Companies less than 5% owned	 	 	81,188	  	 	 	(19,434	) 	
 	 	 	 	 	 	 	 	 	
Net unrealized gain (loss) on investments	 	 	64,511	  	 	 	(22,832	) 	
Forward contracts	 	 	(771	) 	 	 	(5,700	) 	
Foreign currency exchange	 	 	(604	) 	 	 	(408	) 	
 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss)	 	 	63,136	  	 	 	(28,940	) 	
 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, forward contracts and foreign currencies	 	 	40,893	  	 	 	(42,677	) 	
 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	 	$	62,004	  	 	$	(25,582	) 	
 	 	 	 	 	 	 	 	 	
Earnings (loss) per share (see note 10)	 	$	1.90	  	 	$	(0.78	) 	
 
See notes to consolidated financial statements.
 
F-32

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands)

 	  	Three months ended
March 31, 2010	 	 	Year ended
December 31, 2009	 	
 	  	(unaudited)	 	 	 	 	
Increase (Decrease) in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	21,111	  	 	$	67,262	  	
Net realized loss	  	 	(22,243	) 	 	 	(264,898	) 	
Net change in unrealized gain	  	 	63,136	  	 	 	284,572	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	62,004	  	 	 	86,936	  	
 	  	 	 	 	 	 	 	 	
Dividends and distributions declared	  	 	(11,196	) 	 	 	(241,706	) 	
 	  	 	 	 	 	 	 	 	
Capital transactions:	  	 	 	 	 	 	 	 	
Proceeds from shares sold	  	 	116,198	  	 	 	—  	  	
Common stock offering costs	  	 	(9,530	) 	 	 	—  	  	
Senior notes issued in Solar Capital Merger	  	 	(125,000	) 	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from capital transactions	  	 	(18,332	) 	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net increase (decrease) in net assets	  	 	32,476	  	 	 	(154,770	) 	
Net assets at beginning of period	  	 	697,903	  	 	 	852,673	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period	  	$	730,379	  	 	$	697,903	  	

See notes to consolidated financial statements.
 
F-33

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except shares)

 	 	Three months ended
March 31, 2010	 	 	Three Months Ended
March 31, 2009	 	
 	 	(unaudited)	 	 	(unaudited)	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets from operations	 	$	62,004	  	 	$	(25,582	) 	
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Net realized (gain) loss from investments	 	 	27,331	  	 	 	22,627	  	
Net realized loss from foreign currency exchange	 	 	(3,536	) 	 	 	29	  	
Net change in unrealized (gain) loss on investments	 	 	(64,511	) 	 	 	22,832	  	
Net change in forward contracts	 	 	771	  	 	 	5,700	  	
(Increase) decrease in operating assets:	 	 	 	 	 	 	 	 	
Purchase of investment securities	 	 	(53,170	) 	 	 	(8,526	) 	
Proceeds from disposition of investment securities	 	 	114,534	  	 	 	5,865	  	
Receivable for investments sold	 	 	(10,123	) 	 	 	—  	  	
Interest and dividends receivable	 	 	(1,224	) 	 	 	1,576	  	
Deferred borrowing costs	 	 	(3,679	) 	 	 	565	  	
Fee revenue receivable	 	 	1,564	  	 	 	(95	) 	
Deferred offering costs	 	 	1,184	  	 	 	(93	) 	
Foreign tax receivable	 	 	—  	  	 	 	101	  	
Withholding tax receivable	 	 	—  	  	 	 	(3,140	) 	
Prepaid expenses and other receivables	 	 	(558	) 	 	 	(186	) 	
Increase (decrease) in operating liabilities:	 	 	 	 	 	 	 	 	
Payable for investments purchased	 	 	43,650	  	 	 	2,480	  	
Performance-based incentive fee payable	 	 	(3,238	) 	 	 	(1,221	) 	
Investment advisory and management fee payable	 	 	(4,297	) 	 	 	(1,231	) 	
Deferred fee revenue	 	 	(1,396	) 	 	 	(209	) 	
Interest payable	 	 	1,539	  	 	 	134	  	
Due to Solar Capital Management LLC	 	 	(167	) 	 	 	(919	) 	
Income taxes payable	 	 	153	  	 	 	(1,155	) 	
Other accrued expenses and payables	 	 	903	  	 	 	36	  	
 	 	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	 	 	107,734	  	 	 	19,588	  	
 	 	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	
Proceeds from shares sold	 	 	116,198	  	 	 	—  	  	
Common stock offering costs	 	 	(9,530	) 	 	 	—  	  	
Cash distributions paid	 	 	(75,136	) 	 	 	(85,267	) 	
Proceeds from borrowings on credit facility	 	 	88,000	  	 	 	13,000	  	
Repayments of borrowings on credit facility	 	 	(172,578	) 	 	 	—  	  	
 	 	 	 	 	 	 	 	 	
Net Cash Used in Financing Activities	 	 	(53,046	) 	 	 	(72,267	) 	
 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	 	 	54,688	  	 	 	(52,679	) 	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	 	 	5,675	  	 	 	65,841	  	
 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	 	$	60,363	  	 	$	13,162	  	
 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	 	 	 	
Cash paid for interest	 	$	1,011	  	 	$	—  	  	
Cash paid for income taxes	 	$	21	  	 	$	1,632	  	
Non-cash financing activity:	 	 	 	 	 	 	 	 	
Dividends payable	 	$	11,196	  	 	$	—  	  	
 
See notes to consolidated financial statements.
 
F-34

Table of Contents
 
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2010
(in thousands, except shares)
(unaudited)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans – 17.3%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation	 	Insurance	 	 	6.73	  	 	 	7/3/2015	  	 	$	55,000	  	 	$	54,942	  	 	$	53,900	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures, Entertainment	 	 	10.14	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,382	  	 	 	21,450	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.26	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,106	  	 	 	14,610	  	
Fulton Holding Corp(16)	 	Retail Stores	 	 	12.50	  	 	 	—  	  	 	 	45,000	  	 	 	43,650	  	 	 	43,650	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	12,916	  	 	 	12,862	  	 	 	12,397	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	153,916	  	 	$	151,942	  	 	$	146,007	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes – 76.5%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allied Capital	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	$	15,393	  	 	$	10,086	  	 	$	14,777	  	
Allied Capital	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	9,788	  	 	 	14,428	  	
Adams Outdoor Advertising	 	Diversified/ Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,523	  	 	 	37,200	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	17,668	  	 	 	17,763	  	 	 	15,936	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures, Entertainment	 	 	5.26	  	 	 	6/13/2012	  	 	 	24,704	  	 	 	24,451	  	 	 	21,295	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,249	  	 	 	43,000	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.66	  	 	 	9/13/2016	  	 	 	7,579	  	 	 	7,720	  	 	 	7,510	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.67	  	 	 	9/13/2016	  	 	 	8,178	  	 	 	8,331	  	 	 	8,059	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	36,959	  	 	 	36,495	  	 	 	33,577	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	103,050	  	 	 	102,233	  	 	 	104,493	  	
Earthbound	 	Beverage, Food, and Tobacco	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	38,917	  	 	 	40,000	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,138	  	 	 	39,399	  	
FreedomRoads	 	Automotive	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,165	  	 	 	26,730	  	
Grakon, LLC(12)	 	Machinery	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,403	  	 	 	18,791	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.99	  	 	 	11/3/2016	  	 	 	4,927	  	 	 	4,909	  	 	 	4,522	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.54	  	 	 	11/3/2016	  	 	 	11,633	  	 	 	14,821	  	 	 	10,799	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/28/2015	  	 	 	31,368	  	 	 	31,005	  	 	 	31,368	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,373	  	 	 	16,205	  	
ProSieben Sat.1 Media AG(3)(8)(12)	 	Broadcasting & Entertainment	 	 	7.96	  	 	 	3/6/2017	  	 	 	21,306	  	 	 	19,576	  	 	 	9,078	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.95	  	 	 	10/31/2014	  	 	 	48,609	  	 	 	46,385	  	 	 	47,151	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	18,582	  	 	 	16,328	  	 	 	17,653	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	7,045	  	 	 	5,283	  	 	 	6,270	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,617	  	 	 	22,499	  	 	 	18,094	  	
Wastequip, Inc.(12)	 	Containers, Packaging and Glass	 	 	12.50	  	 	 	2/5/2015	  	 	 	15,745	  	 	 	14,559	  	 	 	—  	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.37	  	 	 	9/14/2016	  	 	 	13,485	  	 	 	16,338	  	 	 	10,451	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.83	  	 	 	5/7/2017	  	 	 	27,577	  	 	 	35,554	  	 	 	20,683	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	39,000	  	 	 	38,336	  	 	 	38,220	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	722,892	  	 	$	710,616	  	 	$	641,999	  	

See notes to consolidated financial statements.
 
F-35

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity – 0.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	  	 	 	7/17/2015	  	 	$	387	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	387	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants – 6.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	28,939,454	  	 	$	28,939	  	 	$	20,583	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	2,500	  	
Global Garden Products(3)(6)	 	Farming & Agriculture	 	 	 	 	 	 	 	 	 	 	146,983	  	 	 	—  	  	 	 	—  	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Great American Group Inc.(13)	 	Business Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	1,177	  	
Great American Group Inc.(14)	 	Business Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	385	  	
Great American Group Inc.(15)	 	Business Services	 	 	 	 	 	 	 	 	 	 	125,000	  	 	 	—  	  	 	 	—  	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel and Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	9,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	7,500	  	
NXP Semiconductors Netherlands B.V. (3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	944,628	  	 	 	31,058	  	 	 	7,995	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	1,770	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	112,696	  	 	$	50,910	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	975,293	  	 	$	838,956	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of March 31, 2010.	
(3)	The following entities are domiciled outside the United States: Casema B.V. and NXP Semiconductors Netherlands B.V. in The Netherlands; Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital Ltd.’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital Ltd.’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital Ltd. has an unfunded commitment of $15,812.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investments are current on all obligations with cash interest payments being applied to principal.	
(13)	Common Shares	
(14)	Founders Shares	
(15)	Contingent Founders Shares	
(16)	Maturity will be 6 years from the closing date that is yet to be determined.	
 
See notes to consolidated financial statements.
 
F-36

Table of Contents
SOLAR CAPITAL LTD.
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
March 31, 2010
(unaudited)

 	 	 	 	 	
Industry Classification	  	Percentage of Total
Investments (at fair
value) as of
March 31, 2010	 	
Beverage, Food, and Tobacco	  	 	23	% 	
Aerospace & Defense	  	 	7	% 	
Insurance	  	 	6	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Personal, Food and Misc. Services	  	 	6	% 	
Healthcare, Education, and Childcare	  	 	5	% 	
Retail Stores	  	 	5	% 	
Leisure, Motion Pictures, Entertainment	  	 	5	% 	
Cargo Transport	  	 	5	% 	
Diversified / Conglomerate Manufacturing	  	 	5	% 	
Finance	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Broadcasting & Entertainment	  	 	4	% 	
Automotive	  	 	3	% 	
Real Estate	  	 	3	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Telecommunications	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Electronics	  	 	1	% 	
Machinery	  	 	1	% 	
Business Services	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	

See notes to consolidated financial statements.
 
F-37

Table of Contents
 
SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2009
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—18.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Affinity 1st Lien	 	Printing, Publishing, Broadcasting	 	 	12.75	  	 	 	3/31/2010	  	 	$	18,771	  	 	$	18,372	  	 	$	18,489	  	
Asurion Corporation	 	Insurance	 	 	6.73	  	 	 	7/3/2015	  	 	 	55,000	  	 	 	54,939	  	 	 	51,700	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures, Entertainment	 	 	10.02	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,350	  	 	 	20,800	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.29	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,112	  	 	 	14,400	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	25,182	  	 	 	24,740	  	 	 	26,152	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	12,827	  	 	 	12,769	  	 	 	12,058	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	15.00	  	 	 	1/17/2015	  	 	 	20,000	  	 	 	19,614	  	 	 	19,900	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	172,780	  	 	$	170,896	  	 	$	163,499	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—74.4%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allied Capital	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	$	15,393	  	 	$	9,362	  	 	$	14,392	  	
Allied Capital	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	8,880	  	 	 	13,920	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,445	  	 	 	35,360	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	18,237	  	 	 	18,345	  	 	 	15,538	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures, Entertainment	 	 	5.25	  	 	 	6/13/2012	  	 	 	24,383	  	 	 	24,106	  	 	 	20,433	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,220	  	 	 	43,000	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.73	  	 	 	9/13/2016	  	 	 	7,860	  	 	 	7,542	  	 	 	7,565	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.69	  	 	 	9/13/2016	  	 	 	8,478	  	 	 	8,135	  	 	 	8,109	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	36,593	  	 	 	36,092	  	 	 	31,104	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	99,565	  	 	 	98,664	  	 	 	95,085	  	
Earthbound	 	Beverage, Food, and Tobacco	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	38,875	  	 	 	39,800	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,145	  	 	 	38,754	  	
FreedomRoads	 	Automotive	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,076	  	 	 	25,603	  	
Global Garden Products(3)(6)(12)	 	Farming & Agriculture	 	 	12.72	  	 	 	10/31/2016	  	 	 	19,674	  	 	 	20,136	  	 	 	—  	  	
Grakon, LLC(13)	 	Machinery	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,403	  	 	 	19,306	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.99	  	 	 	11/3/2016	  	 	 	5,230	  	 	 	4,908	  	 	 	4,942	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.52	  	 	 	11/3/2016	  	 	 	12,200	  	 	 	14,701	  	 	 	11,527	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate Manufacturing	 	 	16.50	  	 	 	6/29/2014	  	 	 	4,219	  	 	 	4,045	  	 	 	—  	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate Manufacturing	 	 	13.00	  	 	 	6/29/2014	  	 	 	10,641	  	 	 	10,614	  	 	 	—  	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/28/2015	  	 	 	31,173	  	 	 	30,797	  	 	 	27,276	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,327	  	 	 	13,345	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	30,539	  	 	 	30,229	  	 	 	31,303	  	
Pacific Crane Maintenance Company, L.P. (12)	 	Machinery	 	 	13.00	  	 	 	2/15/2014	  	 	 	9,045	  	 	 	8,920	  	 	 	—  	  	
ProSieben Sat.1 Media AG(3)(8)(13)	 	Broadcasting & Entertainment	 	 	8.15	  	 	 	3/6/2017	  	 	 	21,437	  	 	 	19,804	  	 	 	5,505	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.94	  	 	 	10/31/2014	  	 	 	48,253	  	 	 	45,920	  	 	 	45,841	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	18,086	  	 	 	16,328	  	 	 	16,278	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	6,857	  	 	 	5,283	  	 	 	6,068	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,546	  	 	 	22,420	  	 	 	16,008	  	
Wastequip, Inc.(13)	 	Containers, Packaging and Glass	 	 	12.00	  	 	 	2/5/2015	  	 	 	15,745	  	 	 	14,953	  	 	 	3,149	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.62	  	 	 	9/14/2016	  	 	 	13,627	  	 	 	16,335	  	 	 	9,879	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.83	  	 	 	5/7/2017	  	 	 	29,211	  	 	 	34,948	  	 	 	20,447	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	39,000	  	 	 	38,302	  	 	 	36,660	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	795,459	  	 	$	778,163	  	 	$	641,992	  	

See notes to consolidated financial statements.
 
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SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity – 0.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	  	 	 	7/17/2015	  	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	$	39	  	 	$	39	  	 	$	40	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants – 6.7%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)	 	Real Estate	 	 	 	 	 	 	 	 	 	 	28,006,121	  	 	$	28,006	  	 	$	19,675	  	
Direct Buy Inc.	 	Home and Office Furnishing, Consumer Products	 	 	 	 	 	 	 	 	 	 	5,000,000	  	 	 	5,000	  	 	 	1,040	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Great American Group Inc.(14)	 	Business Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	1,874	  	
Great American Group Inc.(15)	 	Business Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	614	  	
Great American Group Inc.(16)	 	Business Services	 	 	 	 	 	 	 	 	 	 	125,000	  	 	 	—  	  	 	 	—  	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	2,265,023	  	 	 	2,125	  	 	 	16,293	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel and Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	9,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,000,000	  	 	 	30,000	  	 	 	6,000	  	
NXP Semiconductors Netherlands B.V.(3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	944,628	  	 	 	31,060	  	 	 	1,697	  	
Pacific Crane Maintenance Company, L.P.	 	Machinery	 	 	 	 	 	 	 	 	 	 	10,000	  	 	 	1,000	  	 	 	—  	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	4,285,714	  	 	 	3,301	  	 	 	1,416	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	114,890	  	 	$	57,609	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,063,988	  	 	$	863,140	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2009.	
(3)	The following entities are domiciled outside the United States: Casema B.V. and NXP Semiconductors Netherlands B.V. in The Netherlands; Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital LLC’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital LLC’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital LLC’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital LLC’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital LLC’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital LLC has an unfunded commitment of $16,745.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investment is on non-accrual status.	
(13)	Investments are current on all obligations with interest payments being applied to principal.	
(14)	Common Shares	
(15)	Founders Shares	
(16)	Contingent Founders Shares	
 
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LLC
 
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009

 	 	 	 	 	
Industry Classification	  	Percentage of Total
Investments (at fair
value) as of
December 31, 2009	 	
Beverage, Food, and Tobacco	  	 	21	% 	
Aerospace & Defense	  	 	17	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Personal, Food and Misc. Services	  	 	5	% 	
Healthcare, Education, and Childcare	  	 	5	% 	
Leisure, Motion Pictures, Entertainment	  	 	4	% 	
Cargo Transport	  	 	4	% 	
Diversified / Conglomerate Manufacturing	  	 	4	% 	
Finance	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Broadcasting & Entertainment	  	 	3	% 	
Automotive	  	 	3	% 	
Real Estate	  	 	2	% 	
Telecommunications	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Printing, Publishing, Broadcasting	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
Containers, packaging and glass	  	 	1	% 	
Business Services	  	 	1	% 	
Electronics	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	

See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(in thousands, except shares)
(unaudited)
 
Note 1. Organization
 
Solar Capital Ltd. (“Solar Capital”, the “Company” or “we”), a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company intends to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended.
 
On February 9, 2010 Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.
 
Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity (the “Merger”). Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Merger and as a result, the books and records of Solar Capital LLC have become the books and records of the surviving entity.
 
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties.
 
The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
 
Note 2. Significant Accounting Policies
 
Basis of Presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiary, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated.
 
Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2010.
 
Certain prior period amounts have been reclassified to conform to current period presentation.
 
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SOLAR CAPITAL LLC
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 2010
(in thousands, except shares)
(unaudited)
 
As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
 
Accounting Standards Codification – The FASB established the Accounting Standards CodificationTM (“ASC”) on July 2, 2009 as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting literature not included in the ASC is no longer authoritative.
 
Following the ASC, the FASB no longer issues new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it issues Accounting Standards Updates, which serve to update the ASC, provide background information about the guidance and provide the basis for conclusions on the changes to the ASC. GAAP was not changed as a result of the FASB’s codification project, but the codification project changes the way guidance is organized and presented. As a result, these changes have a significant impact on how we reference GAAP in our financial statements for interim and annual periods.
 
Investments – The Company applies fair value accounting in accordance with GAAP. Securities transactions are accounted for on trade date. Securities for which market quotations are readily available on an exchange are valued at such price as of the closing price on the valuation date. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.
 
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s investment adviser (the “Adviser”) or Board of Directors (the “Board”), does not represent fair value, shall each be valued as follows:
 
 	1)	 	The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;	
 
 	2)	 	Preliminary valuation conclusions are then documented and discussed with senior management;	
 
 	3)	 	Third-party valuation firms are engaged by, or on behalf of, the Board to conduct independent appraisals and review management’s preliminary valuations and make their own independent assessment, for all material assets; and	
 
 	4)	 	The Board discusses valuations and determines the fair value of each investment in the portfolio in good faith based on the input of our investment adviser (note 4) and, where appropriate, the respective independent valuation firms.	
 
Valuation methods, among other measures and as applicable, may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)
 
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
 
Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
 
Cash and Cash Equivalents – Cash and cash equivalents include investments in money market accounts or investments with original maturities of three months or less.
 
Revenue Recognition – The Company’s revenue recognition policies are as follows:
 
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
 
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. The Company has loans in its portfolio that contain a payment-in-kind (“PIK”) provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates.
 
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. 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.
 
U.S. Federal Income Taxes – The Company intends to elect to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.
 
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4% 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, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the three months ended March 31, 2010, no amount was recorded for U.S. Federal excise tax.
 
The Company is also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, the Company pays a corporate income tax and a municipal business tax on its subsidiary’s taxable income.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

Capital Accounts – Certain capital accounts including undistributed net investment income, accumulated net realized gain or loss, net unrealized appreciation or depreciation, and paid in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America.
 
Dividends – Dividends and distributions 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 each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital gains for investment.
 
We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash 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 our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. While we generally use newly issued shares to implement the plan (especially if our shares are trading at a premium to net asset value), we may purchase shares in the open market in connection with our obligations under the plan. In particular, if our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan.
 
Foreign Currency Translation – The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company’s investments in foreign securities may involve certain risks such as foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
 
Derivative Instruments and Hedging Activity – In accordance with GAAP, the Company recognizes derivatives as either assets or liabilities at their fair value on its Consolidated Statements of Assets and Liabilities. At this time, the Company does not document formal hedge relationships because the hedged items are recorded at fair value with realized and unrealized gains and losses recognized in current earnings. Realized and unrealized gains and losses from derivatives are also recorded in current earnings. Realized gains or losses from derivatives are recognized when contracts are settled. The Company primarily uses foreign exchange forward contracts in order to economically hedge its foreign currency risk. Foreign exchange forward contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market exchange rate. The fair values of foreign exchange forward contracts are recognized in either derivative assets or derivative liabilities in the Company’s Consolidated Statements of Assets and Liabilities. The Company may also borrow in foreign currencies on its multicurrency credit lines to reduce foreign currency exposure. The changes in market values of assets and liabilities denominated in the same foreign currency offset in earnings providing a “natural” foreign currency hedge.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

Deferred Offering Costs – Offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in connection with offerings of our common stock.
 
Use of Estimates in the Preparation of Financial Statements – The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.
 
Subsequent Events Evaluation – The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued and determined that none are required.
 
Note 3. Investments
 
Investments consisted of the following as of March 31, 2010 and December 31, 2009:

 	  	March 31, 2010
(unaudited)	 	  	December 31, 2009	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt / Senior Secured Loans	  	$	151,942	  	  	$	146,007	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt / Corporate Notes	  	 	710,616	  	  	 	641,999	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	40	  	  	 	39	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	112,696	  	  	 	50,910	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	975,293	  	  	$	838,956	  	  	$	1,063,988	  	  	$	863,140	  	

Note 4. Agreements
 
Solar Capital has an Investment Advisory and Management Agreement with Solar Capital Partners LLC (the “Investment Adviser”), under which the Investment Adviser will manage the day-to-day operations of, and provide investment advisory services to, Solar Capital. For providing these services, the Investment Adviser receives a fee from Solar Capital, consisting of two components—a base management fee and an incentive fee. The base management fee is determined by taking the average value of Solar Capital’s gross assets at the end of the two most recently completed calendar quarters calculated at an annual rate of 2.00%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Solar Capital pays
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)
 
the Investment Adviser an incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on February 12, 2007, and will equal 20% of Solar Capital’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the advisor.
 
Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Capital. For providing these services, facilities and personnel, Solar Capital reimburses the Administrator for Solar Capital’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Capital’s behalf, managerial assistance to those portfolio companies to which Solar Capital is required to provide such assistance.
 
Note 5. Derivatives
 
The Company is exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company mitigates this risk through the use of foreign currency forward contracts. As an investment company, all changes in the fair value of assets, including changes caused by foreign currency fluctuation, flow through current earnings. The forward contracts serve as an economic hedge with their realized and unrealized gains and losses also recorded in current earnings. The Company has no derivatives designated as hedging instruments. During the three months ended March 31, 2010 we entered into 21 foreign currency forward contracts with durations of 1 month and the average U.S. dollar value of foreign currency forward contracts was $11,192. During the year ended December 31, 2009, we entered into 81 foreign currency forward contracts with durations of 1 to 3 months and the average U.S. dollar value of foreign currency forward contracts was $29,757.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

As of March 31, 2010, there were three open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, all of which terminate on April 8, 2010. As of December 31, 2009, there were nine open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, six of which terminated on January 15, 2010 and three of which terminated on February 16, 2010. At March 31, 2010 and December 31, 2009, there was no fixed collateral held by counterparties for the open contracts and no credit-related contingent features associated with any of the open forward contracts. The contract details are as follows:

 	  	 	 	 	 	 	 	March 31, 2010	 	 	 	 	 	 	 	 	December 31, 2009	 	 	 	 	
 	  	 	 	 	 	 	 	(unaudited)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase:	  	Counterparty	 	 	Local
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Local
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	
USD /AUD	  	 	SunTrust Bank	  	 	 	29,945	  	 	$	27,124	  	 	$	(347	) 	 	 	(734	) 	 	$	658	  	 	$	1	  	
USD / AUD	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	734	  	 	 	669	  	 	 	10	  	
USD / AUD	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	734	  	 	 	655	  	 	 	(1	) 	
USD / EURO	  	 	SunTrust Bank	  	 	 	26,518	  	 	 	36,096	  	 	 	276	  	 	 	(317	) 	 	 	461	  	 	 	(7	) 	
USD / EURO	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	317	  	 	 	463	  	 	 	10	  	
USD / EURO	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,317	  	 	 	9,185	  	 	 	135	  	
USD / GBP	  	 	SunTrust Bank	  	 	 	35,620	  	 	 	53,627	  	 	 	(431	) 	 	 	(825	) 	 	 	1,351	  	 	 	(17	) 	
USD / GBP	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	825	  	 	 	1,342	  	 	 	8	  	
USD / GBP	  	 	SunTrust Bank	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,825	  	 	 	11,165	  	 	 	130	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	 	 	 	 	 	 	 	$	116,847	  	 	$	(502	) 	 	 	 	 	 	$	25,949	  	 	$	269	  	

The following tables show the fair value and effect of the derivative instruments on the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Operations:

Fair Values of Derivative Instruments	 	
 	 	Derivative Assets	 	
 	 	March 31, 2010
(unaudited)	 	 	December 31, 2009	 	
 	 	Balance Sheet Location	 	 	Fair Value	 	 	Balance Sheet Location	 	 	Fair Value	 	
Derivatives not designated as hedging instruments(a)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange contracts	 	 	Derivative assets	  	 	$	276	  	 	 	Derivative assets	  	 	$	294	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative assets	 	 	 	 	 	$	276	  	 	 	 	 	 	$	294	  	

 	 	Derivative Liabilities	 	
 	 	March 31, 2010
(unaudited)	 	 	 	 	 	December 31, 2009	 	
 	 	Balance Sheet Location	 	 	Fair Value	 	 	Balance Sheet Location	 	 	Fair Value	 	
Derivatives not designated as hedging instruments(a)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange contracts	 	 	Derivative liabilities	  	 	$	778	  	 	 	Derivative liabilities	  	 	$	25	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative liabilities	 	 	 	 	 	$	778	  	 	 	 	 	 	$	25	  	

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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

 	 	 	 	 	 	 	 	 	 	 	
Effect of Derivative Instruments on the Consolidated Statements of Operations	 	
Derivatives not designated as
hedging instruments(a)	  	Location of Gain or (Loss)
Recognized in Income on
Derivative	  	Amount of Gain or (Loss) Recognized in
Income on Derivative	 	
 	  	 	  	Three months ended
March 31, 2010
(unaudited)	 	 	Three months ended
March 31, 2009
(unaudited)	 	
Foreign exchange contracts	  	Realized gain (loss): Forward contracts	  	$	1,552	  	 	$	8,948	  	
Foreign exchange contracts	  	Unrealized gain (loss): Forward contracts	  	 	(771	) 	 	 	(5,700	) 	
 	  	 	  	 	 	 	 	 	 	 	
Total	  	 	  	$	781	  	 	$	3,248	  	

(a)	 	See Note 2 for additional information on the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategy.	
 
Note 6. Borrowing Facility and Senior Unsecured Notes
 
On February 12, 2010, Solar Capital Ltd. amended and restated Solar Capital LLC’s Senior Secured Revolving Credit Facility (the “Credit Facility’), extending the maturity to February 2013 and increasing the total facility size to $270 million. The facility size may be increased up to $600 million with the addition of new lenders or the increase in commitments of current lenders. Per the newly amended agreement, borrowings shall bear interest at a rate per annum equal to the base rate plus 3.25% and alternate base rate plus 2.25%. The commitment fee on unused balances is 0.375%. The amendment reduced the advance rates permitted on certain asset types and added a covenant that limited the secured borrowing amount to no more than 30% of total assets.
 
On February 9, 2010, through a series of transactions, Solar Capital LLC was merged with and into Solar Capital Ltd., a Maryland corporation, leaving Solar Capital Ltd. as the surviving entity. An aggregate of approximately 26.65 million shares of common stock and $125 million in senior unsecured notes (the “Senior Unsecured Notes”) of Solar Capital Ltd. were issued in connection with the merger. The Senior Unsecured Notes mature in February 2014 and have a coupon of 8.75%, payable quarterly in cash beginning May 1, 2010. The Senior Unsecured Notes are redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, Solar Capital Ltd. must use the net cash proceeds from the issuance of any other senior notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject Solar Capital Ltd. to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) Solar Capital Ltd. will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes will be issued will contain customary events of default.
 
The weighted average annualized interest cost for all borrowings for the three months ended March 31, 2010 and 2009 was 6.59% and 1.82%, respectively. These costs are exclusive of commitment fees and for other
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)
 
prepaid expenses related to establishing the Credit Facility and Senior Unsecured Notes. This weighted average annualized interest cost reflects the average interest cost for all borrowings. The average debt outstanding for the three months ended March 31, 2010 and for the year ended December 31, 2009 were $142,854 and $29,035, respectively. The maximum amounts borrowed on the Credit Facility during the three months ended March 31, 2010 and year ended December 31, 2009 were $172,882 and $122,065, respectively. There was nothing drawn on the Credit Facility as of March 31, 2010 and $81,114 outstanding as of December 31, 2009. At March 31, 2010 and December 31, 2009, the Company was in compliance with all financial and operational covenants required by the Credit Facility and Senior Unsecured Notes.
 
Note 7. Fair Value
 
Fair value is defined as 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. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
 
GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
 
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, and most U.S. Government and agency securities).
 
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	 	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	 	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);	
 
 	c)	 	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and	
 
 	d)	 	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.	
 
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Levels 1 and 2 financial instruments entered into by the Company that economically hedge certain exposures to the Level 3 positions.
 
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.
 
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of March 31, 2010 and December 31, 2009:
 
Fair Value Measurements
As of March 31, 2010
(unaudited)

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	—  	  	  	$	146,007	  	  	$	146,007	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	69,176	  	  	 	572,823	  	  	 	641,999	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	40	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	—  	  	  	 	1,562	  	  	 	49,348	  	  	 	50,910	  	
Derivative assets – forward contracts	  	 	—  	  	  	 	276	  	  	 	—  	  	  	 	276	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities – forward contracts	  	 	—  	  	  	 	778	  	  	 	—  	  	  	 	778	  	
 
Fair Value Measurements
As of December 31, 2009

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	—  	  	  	$	163,499	  	  	$	163,499	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	65,961	  	  	 	576,031	  	  	 	641,992	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	40	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	—  	  	  	 	2,488	  	  	 	55,121	  	  	 	57,609	  	
Derivative assets – forward contracts	  	 	—  	  	  	 	294	  	  	 	—  	  	  	 	294	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities – forward contracts	  	 	—  	  	  	 	25	  	  	 	—  	  	  	 	25	  	
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the three months ended March 31, 2010 and the year ended December 31, 2009, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at March 31, 2010 and December 31, 2009:
 
Fair Value Measurements Using Level 3 Inputs
As of March 31, 2010
(unaudited)

 	 	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred
Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2010	 	$	163,499	  	 	$	576,031	  	 	$	40	  	 	$	55,121	  	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	 	 	487	  	 	 	(43,215	) 	 	 	—  	  	 	 	15,442	  	
Net change in unrealized gain (loss)	 	 	1,462	  	 	 	66,236	  	 	 	—  	  	 	 	(3,581	) 	
Purchases, sales, issuances, and settlements (net)	 	 	(19,441	) 	 	 	(26,229	) 	 	 	—  	  	 	 	(17,634	) 	
Transfers into Level 3	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, March 31, 2010	 	$	146,007	  	 	$	572,823	  	 	$	40	  	 	$	49,348	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	$	3,279	  	 	$	26,349	  	 	$	—  	  	 	$	8,660	  	
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2009

 	 	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred
Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2009	 	$	97,665	  	 	$	509,416	  	 	$	6,145	  	 	$	67,752	  	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	 	 	(50,032	) 	 	 	(75,837	) 	 	 	(61,101	) 	 	 	(61,081	) 	
Net change in unrealized gain (loss)	 	 	82,880	  	 	 	58,509	  	 	 	54,957	  	 	 	48,941	  	
Purchases, sales, issuances, and settlements (net)	 	 	(770	) 	 	 	83,943	  	 	 	39	  	 	 	(491	) 	
Transfers into Level 3	 	 	33,756	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2009	 	$	163,499	  	 	$	576,031	  	 	$	40	  	 	$	55,121	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	 	$	34,333	  	 	$	23,128	  	 	$	2	  	 	$	(9,480	) 	
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

Note 9. Stockholders’ Equity
 
The table below illustrates the effect of certain transactions on our capital accounts for the three months ended March 31, 2010:

 	 	Common Stock	 	 	Partners
Capital	 	 	Paid  in
Capital
in Excess of
Par	 	 	Undistributed
Net Investment
Income	 	 	Accumulated
Net Realized
Gain	 	 	Net
Unrealized
Appreciation	 	 	Total
Stockholders
Equity	 	 	
 	 	Shares	 	 	Par
Amount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2009	 	 	—  	  	 	$	—  	  	 	$	697,903	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	697,903	  	 	 	 	 	
Solar Capital
Merger (1)	 	 	26,647	  	 	 	266	  	 	 	(697,903	) 	 	 	572,637	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(125,000	) 	 	 	 	 	
Issuances of common stock (2)	 	 	6,281	  	 	 	63	  	 	 	—  	  	 	 	106,605	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	106,668	  	 	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	21,111	  	 	 	(22,243	) 	 	 	63,136	  	 	 	62,004	  	 	 	 	 	
Dividends declared ($0.34 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(11,196	) 	 	 	 	 	 	 	 	 	 	 	(11,196	) 	 	 	 	 	
Permanent tax differences	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(12,871	) 	 	 	(5,915	) 	 	 	24,035	  	 	 	(5,249	) 	 	 	—  	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at March 31, 2010	 	 	32,928	  	 	$	329	  	 	$	—  	  	 	$	666,371	  	 	$	4,000	  	 	$	1,792	  	 	$	57,887	  	 	$	730,379	  	 	 	 	 	

(1)	Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger.	
(2)	On February 9, 2010 Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.	
 
Note 10. Earnings Per Share
 
The following information sets forth the computation of basic and diluted net increase (decrease) in shareholders’ capital per share resulting from operations for the three months ended March 31, 2010 and 2009:

 	  	Three months ended
March 31, 2010
(unaudited)	 	  	Three months ended
March 31, 2009
(unaudited)	 	
Numerator for basic and diluted earnings per share:	  	$	62,004	  	  	$	(25,582	) 	
Denominator for basic and diluted weighted average share:	  	 	32,553,322	  	  	 	32,860,454	  	
Basic and diluted net increase (decrease) in share holders’ equity resulting from operations per share:	  	$	1.90	  	  	$	(0.78	) 	
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
 
Note 11. Financial Highlights
 
The following is a schedule of financial highlights for the three months ended March 31, 2010:

 	  	Three months ended
March 31, 2010
(unaudited)	 	
Per Share Data:(a)	  	 	 	 	
Net asset value, beginning of period	  	$	21.24	  	
Net investment income	  	 	0.64	  	
Net realized and unrealized gain (loss)	  	 	1.26	  	
 	  	 	 	 	
Net increase (decrease) in net assets resulting from operations	  	 	1.90	  	
Effect of dilution	  	 	(0.33	) 	
Offering costs	  	 	(0.29	) 	
Dividends to shareholders declared	  	 	(0.34	) 	
 	  	 	 	 	
Net asset value, end of period	  	$	22.18	  	
 	  	 	 	 	
Total return, market value	  	 	14.27	% 	
Net assets, end of period	  	$	730,379	  	
Per share market value at end of period	  	 	21.14	  	
Shares outstanding end of period	  	 	32,928,257	  	
Ratio to average net assets	  	 	 	 	
Expenses without incentive fees(b)	  	 	5.07	% 	
Incentive fees	  	 	0.74	% 	
 	  	 	 	 	
Total expenses	  	 	5.81	% 	
Net investment income without incentive fees(b)	  	 	14.99	% 	
 
(a)	 	Calculated using the average shares outstanding method	
(b)	 	Annualized	
 
Note 12. New Accounting Pronouncements and Accounting Standards Updates
 
Fair Value Measurements and Disclosures
 
In January 2010, the FASB issued an update to ASC 820, Fair Value Measurements and Disclosures Topic, which will require additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
 
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SOLAR CAPITAL LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2010
(in thousands, except shares)
(unaudited)

Note 13. Related Parties
 
From July 2006 through approximately the first quarter of 2009, Mr. Gross, the Company’s chairman and chief executive officer, was a partner in Magnetar Capital Partners LP. Mr. Spohler, our chief operating officer together with Solar Capital Partners LLC’s other investment professionals, advised Magnetar Financial LLC (“Magnetar”) on certain investments which coincide with those of Solar Capital. Certain entities affiliated with Magnetar own as of March 31, 2010 and December 31, 2009, either directly or indirectly, approximately 23.88% and 42.84%, respectively, of our outstanding equity.
 
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SOLAR CAPITAL LTD.
 
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
 
Schedule 12-14

 	 	Investment	 	 	As of
March 31,
2010 Number
of Shares/
Principal
Amount	 	 	Period ended March 31, 2010	 	 	As of
March 31,
2010
Fair Value	 	 	
Portfolio Company	 	 	 	 	 	 	 	Amount of dividends
and interest included
in income	 	 	Amount of equity in
net profit and loss	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater
than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	 	 	Equity	  	 	 	1,000,000	  	 	$	—  	  	 	$	—  	  	 	$	9,000	  	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	$	—  	  	 	$	—  	  	 	$	9,000	  	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Senior Debt	  	 	$	—  	  	 	$	3,544	  	 	$	—  	  	 	$	—  	  	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Subordinated	  	 	$	—  	  	 	 	4,075	  	 	 	—  	  	 	 	—  	  	 	 	 	 	 	 	
National Interest Security Corp.	 	 	Equity	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	 	Equity	  	 	 	28,939,454	  	 	 	—  	  	 	 	—  	  	 	 	20,583	  	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	$	7,619	  	 	$	—  	  	 	$	20,583	  	 	 	 	 	 	 	

The table below represents the balance at the beginning of the period, December 31, 2009 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of March 31, 2010.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair Value
December 31,
2009	 	  	Gross
additions	 	  	Gross
reductions	 	 	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
March 31,
2010	 	
National Specialty Alloys, LLC	  	$	9,000	  	  	$	—  	  	  	$	—  	  	 	$	—  	  	 	$	9,000	  	
National Interest Security Corp.	  	 	26,152	  	  	 	—  	  	  	 	(24,740	)	 	 	(1,412	)	 	 	—  	  	
National Interest Security Corp.	  	 	31,303	  	  	 	—  	  	  	 	(30,230	)	 	 	(1,073	)	 	 	—  	  	
National Interest Security Corp.	  	 	16,293	  	  	 	—  	  	  	 	(2,126	)	 	 	(14,167	)	 	 	—  	  	
Ark Real Estate Partners LP	  	 	19,675	  	  	 	933	  	  	 	—  	  	 	 	(25	) 	 	 	20,583	  	
 
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Schedule 12-14

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Portfolio Company	  	Investment	 	  	As of December 31, 2009
Number of Shares
Principal Amount	 	  	Year ended
December 31, 2010	 	  	As of
December 31,
2009
Fair  Value	 	 	
 	  	 	 	  	 	 	  	Amount of
dividends
and interest
included in
income	 	  	Amount of
equity in
net profit
and loss	 	  	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	  	 	Equity	  	  	 	1,000,000	  	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Investment Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Senior Debt	  	  	$	25,182	  	  	$	4,163	  	  	$	—  	  	  	 	26,152	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Subordinated	  	  	$	30,539	  	  	 	5,027	  	  	 	—  	  	  	 	31,303	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Equity	  	  	 	2,265,029	  	  	 	—  	  	  	 	—  	  	  	 	16,293	  	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	  	 	Equity	  	  	 	28,006,121	  	  	 	—  	  	  	 	—  	  	  	 	19,675	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	$	9,109	  	  	$	—  	  	  	$	93,423	  	 	 	 	 	 	 	 	

The table below represents the balance at the beginning of the period, December 31, 2008 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of December 31, 2009.
 
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
 
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair Value
December 31,
2008	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2009	 	
National Specialty Alloys, LLC	  	$	12,900	  	  	$	—  	  	  	$	—  	  	  	$	(3,900	) 	 	$	9,000	  	
505 Capital Partners GP	  	 	30	 	  	 	—  	  	  	 	30	 	  	 	—  	  	 	 	—  	  	
National Interest Security Corp.	  	 	24,679	  	  	 	171	  	  	 	19	 	  	 	1,321	  	 	 	26,152	  	
National Interest Security Corp.	  	 	27,180	  	  	 	186	  	  	 	29	 	  	 	3,966	  	 	 	31,303	  	
National Interest Security Corp.	  	 	12,951	  	  	 	—  	  	  	 	—  	  	  	 	3,342	  	 	 	16,293	  	
Ark Real Estate Partners LP	  	 	24,619	  	  	 	—  	  	  	 	—  	  	  	 	(4,944	) 	 	 	19,675	  	
 
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1,691,458 Shares
 
Solar Capital Ltd.
 
Common Stock

 

PROSPECTUS SUPPLEMENT

 
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