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 	  	Filed pursuant to Rule 497
Registration No. 333-172968	
 
PROSPECTUS SUPPLEMENT
(to Prospectus dated July 10, 2012)

 
2,000,000 Shares
 
Solar Capital Ltd.
 
Common Stock
$22.51 per share

 
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.
 
We are offering 2,000,000 shares of our common stock directly to certain institutional investors. We have not retained any underwriter or placement agent, and we will not pay any commission or underwriting discount in connection with this offering. See “Plan of Distribution” beginning on page S-34 of this prospectus supplement for more information regarding this offering.
 
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SLRC.” On August 21, 2012, the last reported sales price on the NASDAQ Global Select Market for our common stock was $23.05 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 17 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	 	
Public Offering Price	  	$	22.51	  	  	$	45,020,000	  	
Proceeds to Solar Capital Ltd. (before expenses)(1)	  	$	22.51	  	  	$	45,020,000	  	
 
(1)	 	We estimate that the expenses payable by us in connection with this offering will be immaterial.	

 
August 23, 2012

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TABLE OF CONTENTS
 
PROSPECTUS SUPPLEMENT

 	  	Page	 	
Prospectus Supplement Summary	  	 	S-2	  	
Offering	  	 	S-9	  	
Fees and Expenses	  	 	S-12	  	
Selected Financial and Other Data	  	 	S-15	  	
Cautionary Statement Regarding Forward-Looking Statements	  	 	S-18	  	
Capitalization	  	 	S-19	  	
Use of Proceeds	  	 	S-20	  	
Price Range of Common Stock and Distributions	  	 	S-21	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	S-23	  	
Plan of Distribution	  	 	S-34	  	
Available Information	  	 	S-35	  	
Index to Financial Statements	  	 	F-1	  	
 	
PROSPECTUS
 	  	
 	  	Page	 	
Summary	  	 	1	  	
Fees and Expenses	  	 	11	  	
Selected Financial and Other Data	  	 	14	  	
Risk Factors	  	 	17	  	
Cautionary Statement Regarding Forward-Looking Statements	  	 	36	  	
Use of Proceeds	  	 	37	  	
Price Range of Common Stock and Distributions	  	 	38	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	40	  	
Senior Securities	  	 	54	  	
Business	  	 	55	  	
Portfolio Companies	  	 	69	  	
Management	  	 	73	  	
Portfolio Management	  	 	82	  	
Investment Advisory and Management Agreement	  	 	83	  	
Administration Agreement	  	 	89	  	
License Agreement	  	 	89	  	
Certain Relationships and Transactions	  	 	90	  	
Control Persons and Principal Stockholders	  	 	91	  	
Regulation as a Business Development Company	  	 	92	  	
Determination of Net Asset Value	  	 	97	  	
Dividend Reinvestment Plan	  	 	99	  	
Material U.S. Federal Income Tax Considerations	  	 	101	  	
Sale of Our Common Stock Below Net Asset Value	  	 	108	  	
Issuance of Warrants or Securities to Subscribe For or Convertible Into Shares of Our Common Stock	  	 	114	  	
Description of Our Capital Stock	  	 	115	  	
Description of Our Preferred Stock	  	 	122	  	
Description of Our Warrants	  	 	123	  	
Description of Our Debt Securities	  	 	124	  	
Description of Our Units	  	 	137	  	
Shares Eligible for Future Sale	  	 	138	  	
Plan of Distribution	  	 	139	  	
Custodian, Transfer and Distribution Paying Agent and Registrar	  	 	141	  	

Table of Contents
 	 	 	 	 	
 	  	Page	 	
Brokerage Allocation and Other Practices	  	 	141	  	
Legal Matters	  	 	141	  	
Independent Registered Public Accounting Firm	  	 	141	  	
Available Information	  	 	142	  	
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. We have not 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 after conducting a private placement of units of membership interest (“units”). 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, leaving Solar Capital Ltd. as the surviving entity. 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, 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 Investment Company Act of 1940, as amended (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 of our common stock. Concurrent with our initial public offering, Michael S. Gross, our chairman and chief executive officer, and Bruce Spohler, our chief operating officer, collectively purchased an additional 0.6 million shares of our common stock through a private placement transaction exempt from registration under the Securities Act (the “Concurrent Private Placement”). 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. As of December 17, 2010, the Senior Unsecured Notes have been repaid from proceeds of a private placement transaction that we completed on November 30, 2010 and from borrowings under our credit facility established in December 2010.
 
We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. 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
 
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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 June 30, 2012, our long term investments totaled $1.19 billion and our net asset value was $824.9 million. Our portfolio was comprised of debt and equity investments in 41 portfolio companies and our income producing assets, which represented 94.0% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 13.9%.
 
About Solar Capital Partners
 
Solar Capital Partners, our investment adviser, is controlled and led by Michael S. Gross, our chairman and chief executive officer, and Bruce Spohler, our chief operating officer. They are supported by a team of dedicated investment professionals, including senior team members Brian Gerson, Cedric Henley, David Mait and Suhail Shaikh. We refer to Messrs. Gross, Spohler, Gerson, Henley, Mait and Shaikh 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.
 
In addition, Solar Capital Partners presently serves as the investment adviser for Solar Senior Capital Ltd., or “Solar Senior,” a publicly traded business development company with more than $300 million of investable capital that invests in the senior debt securities of leveraged middle-market companies similar to those we intend to target for investment. The investment team led by Messrs. Gross and Spohler has invested in approximately 100 different portfolio companies for Solar Capital and Solar Senior, which investments involved an aggregate of approximately 90 different financial sponsors, through June 30, 2012. Since Solar Capital’s inception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary community to generate deal flow. As of August 21, 2012, Mr. Gross and Mr. Spohler beneficially owned, either directly or indirectly, approximately 5.8% and 5.6%, respectively, of our outstanding common stock.
 
Mr. Gross has 25 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. We also rely on the 25 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since its inception. In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley, Mait and Shaikh, 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 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 middle-market leveraged companies. We believe that the size of this market, coupled with leveraged companies’ need for flexible sources of capital at attractive terms and rates, creates an attractive investment environment for us. See “Business — Market Opportunity.”
 
 	•	 	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 historically financed their lending and investing activities through securitization transactions have lost that source of funding and reduced lending significantly. Moreover, consolidation and the illiquid nature of investments have resulted in fewer middle-market lenders and market participants.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their investments. There is currently over $520 billion of uninvested private equity capital seeking debt financing to support acquisitions. We expect that middle-market private equity firms will continue to invest the approximately $185 billion raised since 2000 in middle-market companies and that those private equity firms will seek to support their investments with mezzanine loans from sources such as Solar Capital. Additionally, over $17.4 billion was raised by middle-market sponsors during 2011, which we believe demonstrates the continued appetite for middle-market acquisitions that require debt financing.	
 
 	•	 	The significant amount of debt maturing through 2018 should provide additional demand for capital. A high volume of financings were completed between the years 2004 and 2007, which are expected to mature over the next few years. We believe that this supply of prospective lending opportunities coupled with a lack of available credit in the middle-market lending space may offer attractive risk-adjusted returns to investors.	
 
 	•	 	Investing in private middle-market debt provides an attractive risk reward profile. In general, terms for illiquid, middle-market subordinated debt have been more attractive than those for larger corporations which are typically more liquid. We believe this is because fewer institutions are able to invest in illiquid asset classes. In 2011, on average, the total debt to EBITDA ratio for middle-market leveraged buyouts (“LBOs”) was 4.3x, versus 5.4x for large capitalization LBOs. This reduced leverage provides further cushion for borrowers to meet debt service obligations.	
 
Therefore, we believe that there is an attractive 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. See “Business — Competitive Advantages and Strategy.”
 
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 25 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 25 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.
 
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In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment team includes Messrs. Gerson, Henley, Mait and Shaikh, 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.
 
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 June 30, 2012, 98.2% of our total portfolio value of income producing assets, measured at fair value, was comprised of performing assets.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facilities, term loan and our $75 million of senior secured notes (the “Senior Notes”), 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.
 
Solar Capital’s Limited Leverage
 
As of June 30, 2012, we had outstanding borrowings of $229.9 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. 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.
 
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 team and their ability to draw upon their average of over 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.
 
Since its inception, Solar Capital Partners has sourced investments in approximately 100 different portfolio companies for both Solar Capital and Solar Senior, collectively, which investments involved an aggregate of approximately 90 different financial sponsors, through June 30, 2012.
 
Versatile Transaction Structuring and Flexibility of Capital
 
We believe Solar Capital Partners’ senior investment team’s broad expertise and ability to draw upon its 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 BDC, 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
 
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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.
 
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 the investment experience, industry expertise and network of contacts of our senior investment professionals, as well as the other members of our investment team.
 
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 senior 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.
 
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 shares of our common stock, 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 operate in a highly competitive market for investment opportunities;	
 
 	•	 	The lack of liquidity in our investments may adversely affect our business;	
 
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 	•	 	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 continue to qualify as a regulated investment company, or RIC, under Subchapter M of the Code, which would have a material adverse effect on our financial performance;	
 
 	•	 	We are dependent upon Solar Capital Partners’ key personnel for our future success;	
 
 	•	 	We cannot assure you that shares of our common stock will not trade at a market price below our net asset value per share;	
 
 	•	 	The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or securities convertible into shares of our common stock;	
 
 	•	 	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 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.	
 
See “Risk Factors” beginning on page 17 of the accompanying prospectus 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 BDC under the 1940 Act. As a BDC, 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 have elected to be treated for federal income tax purposes, and intend to continue to qualify annually, 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 (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
 
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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, New York, New York 10022, and our telephone number is (212) 993-1670.
 
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THE OFFERING
 
Common Stock Offered by Us	2,000,000 shares.	
 
Common Stock Outstanding Prior to This Offering	36,667,198 shares.	
 
Common Stock Outstanding After This Offering	38,667,198 shares.	
 
Use of Proceeds	We intend to use the net proceeds of this offering for general corporate purposes, which includes, among other things, (a) investing in portfolio companies in accordance with our investment objective and strategies and market conditions and (b) repaying indebtedness.	
See “Use of Proceeds.”
 
NASDAQ Global Select Market symbol	“SLRC”	
 
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. The specific tax characteristics of our dividends will be reported to shareholders after the end of each calendar year. We may issue preferred stock from time to time, although we have no immediate intention to do so. If we issue shares of preferred stock, holders of such preferred stock will be entitled to receive cash dividends at an annual rate that will be fixed or will vary for the successive dividend periods for each series. In general, the dividend periods for fixed rate preferred stock will be quarterly.	
 
Taxation	We have elected to be treated for federal income tax purposes, and intend to continue to qualify annually, 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 “Plan of Distribution” and “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus.	
 
Leverage	We have historically and will in the future borrow funds to make investments. As a result, we will be exposed to the risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for gain and loss on amounts invested and therefore increases the risks associated with investing in our securities. In addition, the costs associated with our borrowings,	
 
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 	including any increase in the management fee payable to our investment adviser, Solar Capital Partners, will be borne by our common stockholders.	
 
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. 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	
 
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 	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. 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 Our Capital Stock” 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, 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)	  	 	—	  	
Offering expenses borne by us (as a percentage of offering price)	  	 	—	(1) 	
Dividend reinvestment plan expenses	  	 	 	(2) 	
 	  	 	 	 	
Total stockholder transaction expenses (as a percentage of offering price)	  	 	—	(1) 	

Annual expenses (as a percentage of net assets attributable to common stock):	  	 	 	 	
Base management fee	  	 	2.66	%(3) 	
Incentive fees payable under our Investment Advisory and Management Agreement	  	 	2.15	%(4) 	
Interest payments on borrowed funds	  	 	2.85	%(5) 	
Other expenses (estimated)	  	 	0.93	%(6) 	
 	  	 	 	 	
Total annual expenses (estimated)	  	 	8.59	% 	
 
(1)	 	The offering expenses of this offering are estimated to be immaterial.	
(2)	 	The expenses of the dividend reinvestment plan are included in “other expenses.”	
(3)	 	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 fees incurred for the six months ended June 30, 2012. See “Investment Advisory and Management Agreement.”	
(4)	 	Assumes that annual incentive fees earned by our investment adviser, Solar Capital Partners, remain consistent with the incentive fees earned by Solar Capital Partners for the six months ended June 30, 2012. The incentive fee consists of two parts:	
 
The first part, which was 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%;	
 	•	 	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).	
 
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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.
 
(5)	 	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 for all borrowings during the six months ended June 30, 2012. We used the LIBOR rate on June 30, 2012 and the interest rate on our revolving credit facilities and the Senior Notes on June 30, 2012. We have also included the estimated amortization of fees incurred in establishing our revolving credit facilities and the Senior Notes. Additionally, we included the estimated cost of commitment fees for unused balances on our revolving credit facilities. As of June 30, 2012, we had $119.9 million outstanding and $430.1 million remaining available to us under our revolving credit facilities and had $75 million and $35 million outstanding under the Senior Notes and Term Loan, respectively. We may also issue preferred stock, subject to our compliance with applicable requirements under the 1940 Act.	
(6)	 	“Other expenses” are based on the amounts incurred for the year ended December 31, 2011 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.	
 
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 5 above for additional information regarding certain assumptions regarding our level of leverage. Sales load applicable to this offering has been included in our calculations, but other transaction expenses are not included in the following example.

 	  	1 Year	 	  	3 Years	 	  	5 Years	 	  	10 Years	 	
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	  	$	64	  	  	$	190	  	  	$	312	  	  	$	603	  	
 
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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 Advisory and 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. For example, if we assumed that we received our 5% annual return completely in the form of net realized capital gains on our investments, computed net of all cumulative unrealized depreciation on our investments, the projected dollar amount of total cumulative expenses set forth in the above illustration would be as follows:

 	  	1 Year	 	  	3 Years	 	  	5 Years	 	  	10 Years	 	
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	  	$	74	  	  	$	218	  	  	$	354	  	  	$	667	  	
 
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” 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 fiscal years ended December 31, 2011, 2010, 2009 and 2008 and for the period from March 13, 2007 (Solar Capital LLC inception) through December 31, 2007. Financial information for the periods ending December 31, 2011, 2010, 2009, 2008 and 2007 has been derived from our audited financial statements. The financial information at and for the six months ended June 30, 2012 was derived from our unaudited financial statements and related notes. 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 periods, have been included. Our results for the interim period may not be indicative of our results for the full year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Senior Securities” in the accompanying prospectus for more information.

($ in thousands, except per
share data)	 	Six Months ended
June 30,
2012	 	 	Year ended
December 31,
2011	 	 	Year ended
December 31,
2010	 	 	Year ended
December 31,
2009	 	 	Year ended
December 31,
2008	 	 	Period from March 13,
2007 (inception) through
December  31,
2007	 	
 	 	(unaudited)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income statement data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	 	$	71,142	  	 	$	138,900	  	 	$	124,641	  	 	$	109,670	  	 	$	133,959	  	 	$	78,455	  	
Total expenses	 	$	35,674	  	 	$	56,996	  	 	$	55,429	  	 	$	42,408	  	 	$	46,560	  	 	$	25,461	  	
Net investment income	 	$	35,468	  	 	$	81,904	  	 	$	69,212	  	 	$	67,262	  	 	$	87,399	  	 	$	52,994	  	
Net realized loss	 	$	(9,989	) 	 	$	(2,393	) 	 	$	(38,968	) 	 	$	(264,898	) 	 	$	(937	) 	 	$	(10,489	) 	
Net change in
unrealized gain (loss)	 	$	36,741	  	 	$	(18,196	) 	 	$	111,641	  	 	$	284,572	  	 	$	(492,290	) 	 	$	6,595	  	
Net increase (decrease) in net assets resulting from
operations	 	$	62,220	  	 	$	61,315	  	 	$	141,885	  	 	$	86,936	  	 	$	(405,828	) 	 	$	49,100	  	
 	 	 	 	 	 	 	
Other data (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average annualized yield on income producing investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
On fair value(1)(4)	 	 	13.9	% 	 	 	14.2	% 	 	 	14.3	% 	 	 	14.8	% 	 	 	17.1	% 	 	 	12.9	% 	
On cost(2)(4)	 	 	13.8	% 	 	 	13.2	% 	 	 	13.8	% 	 	 	13.7	% 	 	 	11.9	% 	 	 	12.7	% 	
Number of portfolio companies at period end(4)	 	 	41	  	 	 	40	  	 	 	36	  	 	 	36	  	 	 	44	  	 	 	38	  	
 	 	 	 	 	 	 	
 	 	As of
June 30,
2012	 	 	As of
December 31,
2011	 	 	As of
December 31,
2010	 	 	As of
December 31,
2009	 	 	As of
December 31,
2008	 	 	As of
December 31,
2007	 	
Balance sheet data:	 	(unaudited)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment portfolio	 	$	1,193,602	  	 	$	1,045,043	  	 	$	976,221	  	 	$	863,140	  	 	$	768,215	  	 	$	1,178,736	  	
Total cash and cash equivalents	 	$	12,019	  	 	$	11,787	  	 	$	288,732	  	 	$	5,675	  	 	$	65,841	  	 	$	169,692	  	
Total assets	 	$	1,219,883	  	 	$	1,079,431	  	 	$	1,291,791	  	 	$	885,421	  	 	$	873,026	  	 	$	1,396,545	  	
Revolving credit facilities	 	$	119,860	  	 	$	201,355	  	 	$	400,000	  	 	$	88,114	  	 	$	—  	  	 	$	—  	  	
Senior secured notes	 	$	75,000	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
Senior secured term loan	 	$	35,000	  	 	$	35,000	  	 	$	35,000	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
Net assets	 	$	824,923	  	 	$	805,941	  	 	$	826,994	  	 	$	697,903	  	 	$	852,673	  	 	$	1,258,501	  	
 	 	 	 	 	 	 	
Per share data:(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value per share	 	$	22.51	  	 	$	22.02	  	 	$	22.73	  	 	$	21.24	  	 	$	25.95	  	 	$	38.30	  	
Net investment income	 	$	0.96	  	 	$	2.25	  	 	$	2.08	  	 	$	2.05	  	 	$	2.66	  	 	$	1.62	  	
Net realized and unrealized
gain (loss)	 	$	0.73	  	 	$	(0.57	) 	 	$	2.19	  	 	$	0.60	  	 	$	(15.01	) 	 	$	(0.12	) 	
Dividends and distributions
declared	 	$	1.20	  	 	$	2.40	  	 	$	2.14	  	 	$	7.36	  	 	$	—  	  	 	$	—  	  	
 
(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	
 
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 	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 has 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 and for the years and period ended December 31, 2009, 2008, and 2007, 36,383,158 shares outstanding and 33,258,402 weighted average shares outstanding for the year ended December 31, 2010, and 36,608,038 shares outstanding and 36,470,384 weighted average shares outstanding for the year ended December 31, 2011.	
(4)	 	Unaudited.	
 
Selected Quarterly Financial Data (Unaudited)
(dollar amounts in thousands, except per share data)

 	  	2012	 	
 	  	Q2	 	  	Q1	 	
Total investment income	  	$	34,833	  	  	$	36,309	  	
Net investment income	  	$	14,369	  	  	$	21,099	  	
Net realized and unrealized gain (loss)	  	$	1,693	  	  	$	25,059	  	
Net increase (decrease) in net assets resulting from operations	  	$	16,062	  	  	$	46,158	  	
Earnings per share(1)	  	$	0.44	  	  	$	1.26	  	
Net asset value per share at the end of the quarter(2)	  	$	22.51	  	  	$	22.68	  	

 	  	2011	 	
 	  	Q4	 	  	Q3	 	 	Q2	 	 	Q1	 	
Total investment income	  	$	35,994	  	  	$	35,329	  	 	$	35,283	  	 	$	32,294	  	
Net investment income	  	$	20,675	  	  	$	20,711	  	 	$	21,368	  	 	$	19,150	  	
Net realized and unrealized gain (loss)	  	$	31,182	  	  	$	(72,655	) 	 	$	(8,984	) 	 	$	29,868	  	
Net increase (decrease)in net assets resulting from operations	  	$	51,857	  	  	$	(51,944	) 	 	$	12,384	  	 	$	49,018	  	
Earnings per share(3)	  	$	1.42	  	  	$	(1.42	) 	 	$	0.34	  	 	$	1.35	  	
Net asset value per share at the end of the quarter(4)	  	$	22.02	  	  	$	21.20	  	 	$	23.22	  	 	$	23.48	  	
 	 	
 	  	2010	 	
 	  	Q4	 	  	Q3	 	 	Q2	 	 	Q1	 	
Total investment income	  	$	31,644	  	  	$	29,403	  	 	$	28,284	  	 	$	35,310	  	
Net investment income (loss)	  	$	17,384	  	  	$	15,551	  	 	$	15,166	  	 	$	21,111	  	
Net realized and unrealized gain (loss)	  	$	24,974	  	  	$	5,458	  	 	$	1,348	  	 	$	40,893	  	
Net increase (decrease) in net assets resulting from operations	  	$	42,358	  	  	$	21,009	  	 	$	16,514	  	 	$	62,004	  	
Earnings per share(5)	  	$	1.24	  	  	$	0.63	  	 	$	0.50	  	 	$	1.90	  	
Net asset value per share at the end of the quarter(6)	  	$	22.73	  	  	$	22.09	  	 	$	22.07	  	 	$	22.18	  	
 
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 	  	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(7)	  	$	1.23	  	  	$	1.17	  	  	$	1.03	  	  	$	(0.78	)	
Net asset value per share at the end of the quarter(8)	  	$	21.24	  	  	$	22.30	  	  	$	23.61	  	  	$	22.57	  	
 
(1)	 	Based on 36,639,037 and 36,608,038 weighted average shares of Solar Capital Ltd. outstanding during the second and first quarters of 2012, respectively.	
(2)	 	Based on 36,640,094 and 36,608,038 shares of Solar Capital Ltd. outstanding as of the end of the second and first quarters of 2012, respectively.	
(3)	 	Based on 36,552,979, 36,498,451, 36,444,775 and 36,383,158 weighted average shares of Solar Capital Ltd. outstanding during the fourth, third, second and first quarters of 2011, respectively.	
(4)	 	Based on 36,608,038, 36,501,373, 36,447,607 and 36,383,158 shares of Solar Capital Ltd. outstanding as of the end of the fourth, third, second and first quarters of 2011, respectively.	
(5)	 	Based on 34,267,088, 33,165,867, 33,029,516 and 32,553,322 weighted average shares of Solar Capital Ltd. outstanding during each of the fourth, third, second and first quarters of 2010, respectively.	
(6)	 	Based on 36,383,158, 33,168,872, 33,030,641 and 32,928,257 shares of Solar Capital Ltd. outstanding as of the end of the fourth, third, second and first quarter of 2010, respectively.	
(7)	 	Based on 32,860,454 weighted average shares of Solar Capital Ltd. outstanding during each respective quarter.	
(8)	 	Based on 32,860,454 shares of Solar Capital Ltd. outstanding as of the end of the respective quarter.	
 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
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.
 
The forward-looking statements contained in this prospectus involve risks and uncertainties, including statements as to:
 
 	•	 	our future operating results;	
 
 	•	 	our business prospects and the prospects of our portfolio companies;	
 
 	•	 	the impact of investments that we expect to make;	
 
 	•	 	our contractual arrangements and relationships with third parties;	
 
 	•	 	the dependence of our future success on the general economy and its impact on the industries in which we invest;	
 
 	•	 	the ability of our portfolio companies to achieve their objectives;	
 
 	•	 	our expected financings and investments;	
 
 	•	 	our breach of any of the covenants or other provisions in our debt agreements;	
 
 	•	 	the adequacy of our cash resources and working capital; and	
 
 	•	 	the timing of cash flows, if any, from the operations of our portfolio companies.	
 
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. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. 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 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. However, we will update this prospectus supplement to reflect any material changes to the information contained herein. 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.
 
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CAPITALIZATION
 
The following table sets forth:
 
 	•	 	the actual capitalization of Solar Capital Ltd. at June 30, 2012; and	
 
 	•	 	the pro forma capitalization of Solar Capital Ltd. reflects the sale of 2,000,000 shares of our common stock in this offering at a public offering price of $22.51 per share and our receipt of the gross proceeds from that sale.	

 	  	As of June 30, 2012	 	
 	  	Solar Capital Ltd.	 	  	Solar Capital Ltd.	 	
 	  	Actual
(unaudited)	 	  	Pro  Forma
(unaudited)	 	
 	  	(in thousands)	 	  	(in thousands)	 	
Assets:	  	 	 	 	  	 	 	 	
Cash and cash equivalents	  	$	12,019	  	  	$	57,039	  	
Investments at fair value	  	$	1,193,602	  	  	$	1,193,602	  	
Other assets	  	$	14,262	  	  	$	14,262	  	
 	  	 	 	 	  	 	 	 	
Total assets	  	$	1,219,883	  	  	$	1,264,903	  	
 	  	 	 	 	  	 	 	 	
Liabilities:	  	 	 	 	  	 	 	 	
Revolving credit facilities	  	$	119,860	  	  	$	119,860	  	
Senior secured notes	  	$	75,000	  	  	$	75,000	  	
Term loan	  	$	35,000	  	  	$	35,000	  	
Other Liabilities	  	$	165,100	  	  	$	165,100	  	
 	  	 	 	 	  	 	 	 	
Total Liabilities	  	$	394,960	  	  	$	394,960	  	
 	  	 	 	 	  	 	 	 	
Stockholders’ equity:	  	 	 	 	  	 	 	 	
Common stock, par value $0.01 per share; 200,000,000 shares authorized, 36,640,094 shares issued and outstanding, 38,667,198 shares issued and outstanding, as adjusted, respectively	  	$	366	  	  	$	386	  	
 	 	 	
Capital in excess of par value	  	$	824,557	  	  	$	869,557	  	

Total stockholders’ equity	  	$	824,923	  	  	$	869,943	  	

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USE OF PROCEEDS
 
The gross proceeds from the sale of 2,000,000 shares of our common stock in this offering will be approximately $45 million. We estimate that the offering expenses payable by us will be immaterial.
 
We intend to use the net proceeds of this offering for general corporate purposes, which includes, among other things, (a) investing in portfolio companies in accordance with our investment objective and strategies and market conditions and (b) repaying indebtedness.
 
We estimate that it will take there to six months for us to substantially invest the net proceeds of this offering, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurance that we will be able to achieve this goal.
 
Pending these uses, we will invest such net proceeds primarily in cash, cash equivalents, and U.S. government securities and other high-quality debt investments that mature in one year or less. The management fee payable by us to our investment adviser will not be reduced while our assets are invested in such securities.
 
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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 intraday 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	 	 	Premium/Discount
of High Sales
Price to NAV(2)	 	 	Premium/Discount
of Low Sales
Price to NAV(2)	 	 	Cash
Distributions
Per Share(3)	 	 	

 	 	 	 	 	High	 	 	Low	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fiscal 2012	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Third Quarter (through August 21, 2012)	 	 	*	  	 	 	$23.35	  	 	 	$22.12	  	 	 	  	* 	 	 	  	* 	 	 	*	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	$	22.51	  	 	 	$22.60	  	 	 	$20.05	  	 	 	0.4	% 	 	 	(10.9	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	22.68	  	 	 	$23.89	  	 	 	$21.90	  	 	 	5.3	% 	 	 	(3.4	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Fiscal 2011	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fourth Quarter	 	$	22.02	  	 	 	$23.66	  	 	 	$18.90	  	 	 	7.4	% 	 	 	(14.2	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Third Quarter	 	$	21.20	  	 	 	$25.16	  	 	 	$19.17	  	 	 	18.7	% 	 	 	(9.6	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	$	23.22	  	 	 	$25.93	  	 	 	$23.92	  	 	 	11.7	% 	 	 	3.0	% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	23.48	  	 	 	$25.45	  	 	 	$21.87	  	 	 	8.4	% 	 	 	(6.9	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Fiscal 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fourth Quarter	 	$	22.73	  	 	 	$25.39	  	 	 	$21.32	  	 	 	11.7	% 	 	 	(6.2	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Third Quarter	 	$	22.09	  	 	 	$21.80	  	 	 	$18.75	  	 	 	(1.3	)% 	 	 	(15.1	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	$	22.07	  	 	 	$24.20	  	 	 	$18.77	  	 	 	9.7	% 	 	 	(15.0	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter(4)	 	$	22.18	  	 	 	$22.22	  	 	 	$17.29	  	 	 	0.2	% 	 	 	(22.0	)% 	 	$	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 intraday sales price divided by NAV.	
(3)	 	Represents the cash distribution declared in the specified quarter.	
(4)	 	The period from February 9, 2010 through March 31, 2010.	
*	 	Not determinable at the time of the offering.	
 
On August 21, 2012, the last reported sales price of our common stock was $23.05 per share. As of August 21, 2012, we had 12 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 August 21, 2012, our shares of common stock traded at a premium equal to approximately 2.4% of the net assets attributable to those shares based upon our net asset value as of June 30, 2012. It is not possible to predict whether our shares of common stocks 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.
 
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The following table reflects the cash distributions, including dividends and returns of capital, if any, per share that we have declared on our common stock since our initial public offering:

Date Declared	  	Record Date	  	Payment Date	  	Amount	 	
Fiscal 2012	  	 	  	 	  	 	 	 	
July 31, 2012	  	September 20, 2012	  	October 2, 2012	  	$	0.60	  	
May 1, 2012	  	June 19, 2012	  	July 3, 2012	  	 	0.60	  	
February 22, 2012	  	March 20, 2012	  	April 3, 2012	  	 	0.60	  	
 	  	 	  	 	  	 	 	 	
Total 2012	  	 	  	 	  	$	1.80	  	
 	  	 	  	 	  	 	 	 	
Fiscal 2011	  	 	  	 	  	 	 	 	
November 1, 2011	  	December 15, 2011	  	December 29, 2011	  	$	0.60	  	
August 2, 2011	  	September 20, 2011	  	October 4, 2011	  	 	0.60	  	
May 2, 2011	  	June 17, 2011	  	July 5, 2011	  	 	0.60	  	
March 1, 2011	  	March 17, 2011	  	April 4, 2011	  	 	0.60	  	
 	  	 	  	 	  	 	 	 	
Total 2011	  	 	  	 	  	$	2.40	  	
 	  	 	  	 	  	 	 	 	
Fiscal 2010	  	 	  	 	  	 	 	 	
November 2, 2010	  	December 17, 2010	  	December 30, 2010	  	$	0.60	  	
August 3, 2010	  	September 17, 2010	  	October 4, 2010	  	 	0.60	  	
May 4, 2010	  	June 17, 2010	  	July 2, 2010	  	 	0.60	  	
January 26, 2010	  	March 18, 2010	  	April 1, 2010	  	 	0.34	  	
 	  	 	  	 	  	 	 	 	
Total 2010	  	 	  	 	  	$	2.14	  	

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, 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 supplement.
 
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 has elected to be treated as a RIC under Subchapter M of the Code. In February 2010, we completed our initial public offering and a concurrent private offering of shares to management.
 
We invest primarily in U.S. middle market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. 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 June 30, 2012, our investments totaled $1.19 billion and our net asset value was $824.9 million. Our portfolio was comprised of debt and equity investments in 41 portfolio companies and our income producing assets, which represented 94.0% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 13.9%.
 
Recent Developments
 
Dividend
 
On July 31, 2012, our board of directors declared a quarterly dividend of $0.60 per share payable on October 2, 2012 to holders of record as of September 20, 2012. 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.
 
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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 reliable, 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 including credit risk;	
 
 	•	 	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; 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, exchange-traded derivatives, and most U.S. Government and agency securities).
 
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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).
 
Fair Value Measurements
As of June 30, 2012

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	 	—  	  	  	 	48,188	  	  	 	462,919	  	  	 	511,107	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	25,849	  	  	 	460,652	  	  	 	486,501	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	145,568	  	  	 	145,568	  	
Common Equity / Partnership Interests / Warrants	  	 	8,240	  	  	 	—  	  	  	 	42,186	  	  	 	50,426	  	
Derivative assets – interest rate caps and foreign exchange contracts	  	 	—  	  	  	 	94	  	  	 	—  	  	  	 	94	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities	  	 	—  	  	  	 	721	  	  	 	—  	  	  	 	721	  	
Credit Facilities	  	 	—  	  	  	 	—  	  	  	 	131,860	  	  	 	131,860	  	
 
At June 30, 2012, the fair value of investments classified as Level 3 was approximately $1,111 million or 91.1% of total assets. There were no investments transferred in or out of Level 3 during the 2nd quarter of 2012.
 
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.
 
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
 
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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.
 
Payment-in-Kind Interest
 
We have investments in our portfolio which contain a PIK interest provision. Over time, PIK interest increases the principal balance of the investment, but is recorded as interest income. 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 currently collected cash with respect to the PIK interest.
 
New Accounting Pronouncements and Accounting Standards Updates
 
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No. 13 (“IFRS 13”), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a significant impact on the Company’s financial statements or its disclosures.
 
Portfolio Investments
 
The total value of our investments was approximately $1.19 billion and $1.05 billion at June 30, 2012 and December 31, 2011, respectively. During the three months ended June 30, 2012, we invested approximately $164.5 million in five new portfolio companies and $27.8 million in one existing portfolio company. During the six months ended June 30, 2012, we originated approximately $164.5 million of new investments in five new portfolio companies and approximately $89.7 million was invested in five existing portfolio companies.
 
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 three months ended June 30, 2012, we had approximately $5.8 million in debt repayments. For the six month ended June 30, 2012, we had approximately $112.2 million in debt repayments and sales of securities of two portfolio companies for approximately $29.4 million.
 
At June 30, 2012, we had investments in debt and preferred securities of 37 portfolio companies, totaling approximately $1.14 billion, and equity investments in seven portfolio companies, totaling approximately $50.4 million. At December 31, 2011, we had investments in debt and preferred securities of 34 portfolio companies, totaling approximately $973.9 million, and equity investments in seven portfolio companies, totaling approximately $71.1 million.
 
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The following table shows the fair value of our portfolio of investments by asset class as of June 30, 2012 and December 31, 2011 (in thousands):

 	  	June 30, 2012	 	  	December 31, 2011	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	519,005	  	  	$	511,107	  	  	$	426,201	  	  	$	412,396	  	
Subordinated Debt/Corporate Notes	  	 	509,640	  	  	 	486,501	  	  	 	604,157	  	  	 	546,859	  	
Preferred Equity	  	 	143,512	  	  	 	145,568	  	  	 	15,107	  	  	 	14,664	  	
Common Equity/Partnership Interests/Warrants	  	 	90,854	  	  	 	50,426	  	  	 	107,108	  	  	 	71,124	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,263,011	  	  	$	1,193,602	  	  	$	1,152,573	  	  	$	1,045,043	  	

As of June 30, 2012 and December 31, 2011, the weighted average yield on income producing investments in our portfolio based on fair market value was approximately 13.9% and 14.2%, respectively. The weighted average yield on income producing investments in our portfolio based on cost was approximately 13.8% and 13.2%, respectively. We had two non-accrual assets with a total market value of $21.1 million and one asset with a market value of $5.9 million as of June 30, 2012 and December 31, 2011, respectively.
 
Results of Operations for the Quarter Ended June 30, 2012 compared to the Quarter Ended June 30, 2011
 
Revenue

 	  	For the Three Months June 30,	 	  	 	 	
 	  	        2012        	 	  	        2011        	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	34,833	  	  	$	35,283	  	  	 	(1	%) 	
 
Investment income for the second quarter of 2012 was comparable to the second quarter of 2011. For the second quarter of 2011 compared same period of 2012, interest income was earned on a larger earning asset balance, offset by a slightly lower weighted average yield.
 
Expenses

 	  	For the Three Months
June 30,	 	  	 	 	
 	  	2012	 	  	2011	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	5,673	  	  	$	5,096	  	  	 	11	% 	
Performance-based incentive fee	  	 	3,591	  	  	 	5,269	  	  	 	(32	%) 	
Interest and other credit facility expenses	  	 	9,051	  	  	 	1,895	  	  	 	378	% 	
Administrative service fee	  	 	1,128	  	  	 	279	  	  	 	304	% 	
Other general and administrative expenses	  	 	995	  	  	 	1,376	  	  	 	(28	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	20,438	  	  	$	13,915	  	  	 	47	% 	

Investment advisory and management fees, which are calculated based on average gross assets, were higher during the three months ended June 30, 2012 due to larger average gross assets. The performance-based incentive fee, which is calculated as a percentage of net investment income above certain hurdle rates, was lower for the three months June 30, 2012 to the comparable period in 2011 due to lower net investment income. Interest and other credit facility expenses for the three months ended June 30, 2012 were higher than during the comparable period in 2011 mainly due to costs associated with the establishment of a credit facility and private notes and for expenses to retire a predecessor credit facility and term loan. Administrative service fees are higher for the three
 
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months ended June 30, 2012 due to higher operating costs. Other general and administrative expenses for the three months ended June 30, 2012 were lower compared to the same period in 2011 due to tax expenses incurred in 2011, which was presented within this expense item.
 
Net Realized and Unrealized Gains and Losses

 	  	For the Three Months
June 30,	 	
 	  	2012	 	 	2011	 	
 	  	(in thousands)	 	
Net realized gain (loss) loss on investments	  	$	(20,322	) 	 	$	2,304	  	
Net realized gain (loss) on forward contracts	  	 	1,730	  	 	 	(4,872	) 	
Net realized loss on foreign currency exchange	  	 	(563	) 	 	 	(242	) 	
Net unrealized gain (loss) on investments	  	 	19,286	  	 	 	(7,430	) 	
Net unrealized gain on forward contracts	  	 	159	  	 	 	473	  	
Net unrealized gain on foreign currency exchange	  	 	1,403	  	 	 	783	  	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain (loss)	  	$	1,693	  	 	$	(8,984	) 	

The combined net gain during the second quarter of 2012 was primarily due to an increase in the fair value of our portfolio during the period due to improved market trends. During the second quarter of 2011, total realized and unrealized loss of approximately $9.0 million was attributable to worsening conditions in the credit markets and the widening of spreads. 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, which may have impacted income in prior periods.
 
Results of Operations for the Six Months Ended June 30, 2012 compared to the Six Months Ended June 30, 2011
 
Revenue

 	  	For the Six Months Ended June 30,	 	  	 	 	
 	  	        2012        	 	  	        2011        	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	71,142	  	  	$	67,577	  	  	 	5	% 	
 
Investment income was higher during the first six months of 2012 primarily due to higher interest income earned on a larger earning asset balance and higher prepayment premiums and accelerated amortization of upfront fees related to early repayment of assets compared to the same period in 2011.
 
Expenses

 	  	For the Six Months
Ended June 30,	 	  	 	 	
 	  	2012	 	  	2011	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	10,951	  	  	$	10,083	  	  	 	9	% 	
Performance-based incentive fee	  	 	8,866	  	  	 	10,057	  	  	 	(12	%) 	
Interest and other credit facility expenses	  	 	11,746	  	  	 	3,932	  	  	 	199	% 	
Administrative service fee	  	 	1,824	  	  	 	717	  	  	 	154	% 	
Other general and administrative expenses	  	 	2,004	  	  	 	2,270	  	  	 	(12	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	35,391	  	  	$	27,059	  	  	 	31	% 	

Investment advisory and management fees, which are calculated based on average gross assets, were higher during the six months ended June 30, 2012 due to larger average gross assets. The performance-based incentive
 
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fee, which is calculated as a percentage of net investment income above certain hurdle rates, was lower for the six months June 30, 2012 to the comparable period in 2011 due to lower net investment income. Interest and
other credit facility expenses for the six months ended June 30, 2012 were higher than during the comparable period in 2011 mainly due to costs associated with the establishment of a new credit facility and Private Notes and for expenses to retire a predecessor credit facility and term loan. Administrative service fees are higher for the six months ended June 30, 2012 due to higher operating costs. Other general and administrative expenses for the six months ended June 30, 2012 are lower compared to the same period in 2011 due to tax expenses incurred in 2011, which was presented within this expense item.
 
Net Realized and Unrealized Gains and Losses

 	  	For the Six Months Ended
June 30,	 	
 	  	       2012       	 	 	       2011       	 	
 	  	(in thousands)	 	
Net realized gain (loss) on investments	  	$	(10,045	) 	 	$	5,106	  	
Net realized gain (loss) on derivatives	  	 	786	  	 	 	(9,235	) 	
Net realized gain (loss) on foreign currency exchange	  	 	55	  	 	 	(314	) 	
Net unrealized gain on investments	  	 	38,120	  	 	 	24,802	  	
Net unrealized gain (loss) on derivatives	  	 	(1,276	) 	 	 	214	  	
Net unrealized gain (loss) on foreign currency exchange	  	 	(103	) 	 	 	311	  	
 	  	 	 	 	 	 	 	 	
Total net realized and unrealized gain	  	$	27,537	  	 	$	20,884	  	

The combined net gain during the six months ended June 30, 2012, was mostly attributable to an increase in the fair value of our portfolio during the period due to improved market trends and realization above prior period marks. The net gain during the first six months of 2011 was primarily due to general credit improvement in the portfolio. 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, which may have impacted income in prior periods.
 
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 first half of 2012, the total net change in realized and unrealized gain on forward contracts was a loss of approximately $0.4 million compared to a loss of $7.8 million in 2011.
 
To partially mitigate this risk of rising interest rates on our floating rate debt exposure, we purchased two interest rate derivative contracts during 2011, which effectively cap the London Interbank Borrowing Rate (LIBOR) at 1.00% on $100 million of notional amount through January 2014 and $50 million of notional amount through May 2014. The interest rate caps were purchased for $2.9 million and were valued at $0.1 million and $0.5 million on June 30, 2012 and December 31, 2011, respectively.
 
Liquidity and Capital Resources
 
The Company’s liquidity and capital resources are generated and generally available through its $485 million credit facility maturing in July 2016 (the “$485 Million Facility”) and a $100 million credit facility maturing in December 2015 (the “$100 Million Facility” and together with the $485 Million Facility, collectively the “Credit Facilities”), through cash flows from operations, investment sales, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and we expect through periodic follow-on equity and/or debt offerings. We may from time to time issue such securities in either public or private offerings. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.
 
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The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
 
At June 30, 2012 and December 31, 2011, we had cash and cash equivalents of approximately $12.0 million and $11.8 million, respectively. Cash provided by operating activities for the six months ended June 30, 2012 and 2011 was approximately $25.8 million and $104.9 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
 
Credit Facilities and Senior Secured Notes – On June 29, 2012, Solar Capital Ltd. entered into a $485 million Senior Secured Credit Facility comprised of $450 million of multi-currency revolving credit and a $35 million term loan. Borrowings bear interest at a rate per annum equal to the base rate plus 2.50% or the alternate base rate plus 1.50% and has no LIBOR floor requirement. The $485 Million Facility matures in July 2016 and includes a ratable amortization in the fourth year. With additional new lenders or the increase in commitments of current lenders, the $485 Million Facility may be increased up to $800 million. The $485 Million Facility contains certain customary affirmative and negative covenants and events of default. In addition, the $485 Million Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio. The Company will also pay the issuer of the term loan quarterly in arrears a commitment fee at the rate of 0.25% per annum on the average daily outstanding balance. In conjunction with the establishment of the $485 Million Facility, a predecessor facility and term loan were retired.
 
On May 10, 2012, the Company closed a private offering of $75,000 of Senior Secured Notes (“Private Notes”) with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Private Notes is due semi-annually on May 10 th  and November 10 th . The Private Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
 
On December 17, 2010, we established the $100 Million Facility with Wells Fargo Securities, LLC acting as administrative agent. In connection with the $100 Million Facility, our wholly-owned financing subsidiary, Solar Capital Funding II, LLC (“SC Funding”), as borrower, entered into a Loan and Servicing Agreement whereby we transferred certain loans we have originated or acquired or will originate or acquire from time to time to SC Funding via a Purchase and Sale Agreement. The $100 Million Facility, as amended, among other things, matures on December 17, 2015 and generally bears interest based on LIBOR plus 2.75%. The $100 Million Facility is secured by all of the assets held by SC Funding. Under the $100 Million Facility, Solar and SC Funding, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The $100 Million Facility includes usual and customary events of default for credit facilities of this nature.
 
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 is as follows as of June 30, 2012:

 	  	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 facilities(1)	  	$	119.9	  	  	$	—  	  	  	$	—  	  	  	$	119.9	  	  	$	—  	  	
Senior Secured Notes	  	$	75.0	  	  	$	—  	  	  	$	—  	  	  	$	75.0	  	  	$	—  	  	
Term Loan	  	$	35.0	  	  	$	—  	  	  	$	—  	  	  	$	35.0	  	  	$	—  	  	

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(1)	 	As of June 30, 2012, we had approximately $430.1 million of unused borrowing capacity under our credit facilities.	
 
We have certain commitments pursuant to our Investment Advisory and Management Agreement entered into with Solar Capital Partners, LLC. 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, LLC to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Solar Capital Management, LLC’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 Consolidated Statement of Assets and Liabilities.
 
Borrowings
 
We had borrowings of approximately $154.9 million outstanding as of June 30, 2012 under the Credit Facilities. As of June 30, 2012, we also had a $75 million borrowing under our Private Notes.
 
We had borrowings of approximately $201.4 million outstanding as of December 31, 2011 under credit facilities existing at that time. We also had $35 million outstanding under a retired term loan agreement.
 
See “Credit Facilities and Other Borrowings” for a further description of the Credit Facilities and the Private Notes.
 
Distributions and Dividends
 
The following table reflects the cash distributions, including dividends and returns of capital, if any, per share that we have declared on our common stock since our initial public offering:

Date Declared	  	Record Date	 	  	Payment Date	 	  	Amount	 	
Fiscal 2012	  	 	 	 	  	 	 	 	  	 	 	 	
July 31, 2012	  	 	September 20, 2012	  	  	 	October 2, 2012	  	  	$	0.60	  	
May 1, 2012	  	 	June 19, 2012	  	  	 	July 3, 2012	  	  	 	0.60	  	
February 22, 2012	  	 	March 20, 2012	  	  	 	April 3, 2012	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2012	  	 	 	 	  	 	 	 	  	$	1.80	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2011	  	 	 	 	  	 	 	 	  	 	 	 	
November 1, 2011	  	 	December 15, 2011	  	  	 	December 29, 2011	  	  	$	0.60	  	
August 2, 2011	  	 	September 20, 2011	  	  	 	October 4, 2011	  	  	 	0.60	  	
May 2, 2011	  	 	June 17, 2011	  	  	 	July 5, 2011	  	  	 	0.60	  	
March 1, 2011	  	 	March 17, 2011	  	  	 	April 4, 2011	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2011	  	 	 	 	  	 	 	 	  	$	2.40	  	

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Date Declared	  	Record Date	 	  	Payment Date	 	  	Amount	 	
Fiscal 2010	  	 	 	 	  	 	 	 	  	 	 	 	
November 2, 2010	  	 	December 17, 2010	  	  	 	December 30, 2010	  	  	$	0.60	  	
August 3, 2010	  	 	September 17, 2010	  	  	 	October 4, 2010	  	  	 	0.60	  	
May 4, 2010	  	 	June 17, 2010	  	  	 	July 2, 2010	  	  	 	0.60	  	
January 26, 2010	  	 	March 18, 2010	  	  	 	April 1, 2010	  	  	 	0.34	* 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2010	  	 	 	 	  	 	 	 	  	$	2.14	  	

*	 	Partial period dividend of $0.60 per share 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. Future quarterly dividends, if any, will be determined by our board of directors.
 
We have elected 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, LLC. 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, LLC. 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, LLC.	
 
 	•	 	Solar Capital Management, LLC 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, LLC 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, LLC, our Investment Adviser, is the sole member of and controls Solar Capital Management, LLC.	
 
 	•	 	We have entered into a license agreement with Solar Capital Partners, LLC, pursuant to which Solar Capital Partners, LLC has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
 
Solar Capital Partners, LLC 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. For example, Solar Capital Partners, LLC presently serves as investment adviser to Solar Senior Capital Ltd., a publicly traded BDC, which to focuses on investing primarily in senior secured loans, including first lien, unitranche and second lien debt instruments. In addition, Michael S. Gross, our chairman and chief executive officer, Bruce Spohler, our chief operating officer, and Richard Peteka, our chief financial officer, serve in similar capacities for Solar Senior Capital Ltd.
 
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Solar Capital Partners, LLC 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, LLC 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, LLC’s 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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PLAN OF DISTRIBUTION
 
We are selling the shares of our common stock under this prospectus supplement directly to certain institutional investors in a negotiated transaction in which no party is acting as an underwriter, dealer or agent. Subject to the terms of the subscription agreement with these investors, we have agreed to sell 2,000,000 shares of our common stock at a price of $22.51 per share in cash. We determined the per share price through negotiations with the investors.
 
We expect to have our transfer agent deliver the shares of our common stock after we receive the payment of the total purchase price therefor in immediately available funds.
 
Our common stock is listed on the Nasdaq Global Market under the symbol “SLRC.”
 
We will bear all of the expenses that we incur in connection with the offering of our shares of common stock under this prospectus supplement. We estimate the total expenses payable by us in connection with the offering will be immaterial.
 
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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 and the accompanying prospectus. The registration statement contains additional information about us and our shares of common stock being offered by this prospectus supplement and the accompanying 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, 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	 	
Consolidated Statements of Assets and Liabilities as of June 30, 2012 (unaudited) and December 31, 2011	  	 	F-2	  	
Consolidated Statements of Operations for the three and six months ended June 30, 2012 (unaudited) and June 30, 2011 (unaudited)	  	 	F-3	  	
Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2012 (unaudited) and the year ended December 31, 2011	  	 	F-4	  	
Consolidated Statements of Cash Flows for the six months ended June 30, 2012 (unaudited) and June 30, 2011 (unaudited)	  	 	F-5	  	
Consolidated Schedule of Investments as of June 30, 2012 (unaudited)	  	 	F-6	  	
Consolidated Schedule of Investments as of December 31, 2011	  	 	F-10	  	
Notes to Consolidated Financial Statements (unaudited)	  	 	F-14	  	
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except shares)

 	  	 

 	June 30,

2012
(unaudited)	  

  	 	 
 	December 31,
2011	  
  	
Assets	  	 	 	 	 	 	 	 	
Investments at value:	  	 	 	 	 	 	 	 	
Companies less than 5% owned (cost: $983,442 and $1,062,844 respectively)	  	$	920,580	  	 	$	955,769	  	
Companies 5% to 25% owned (cost: $220,411 and $41,819, respectively)	  	 	212,384	  	 	 	35,820	  	
Companies more than 25% owned (cost: $59,158 and $47,910, respectively)	  	 	60,638	  	 	 	53,454	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,263,011 and $1,152,573, respectively)	  	 	1,193,602	  	 	 	1,045,043	  	
 	 	 	
Cash and cash equivalents	  	 	12,019	  	 	 	11,787	  	
Interest and dividends receivable	  	 	11,417	  	 	 	9,763	  	
Deferred credit facility costs	  	 	1,172	  	 	 	3,635	  	
Deferred offering costs	  	 	659	  	 	 	469	  	
Receivable for investments sold	  	 	630	  	 	 	3,225	  	
Fee revenue receivable	  	 	—  	  	 	 	4,379	  	
Unrealized appreciation on interest rate caps and foreign exchange contracts	  	 	94	  	 	 	649	  	
Prepaid expenses and other receivables	  	 	290	  	 	 	481	  	
 	  	 	 	 	 	 	 	 	
Total Assets	  	 	1,219,883	  	 	 	1,079,431	  	
 	  	 	 	 	 	 	 	 	
Liabilities	  	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	124,653	  	 	 	22,443	  	
Revolving credit facilities	  	 	119,860	  	 	 	201,355	  	
Senior secured notes	  	 	75,000	  	 	 	—  	  	
Term loan	  	 	35,000	  	 	 	35,000	  	
Dividend payable	  	 	21,984	  	 	 	—  	  	
Investment advisory and management fee payable	  	 	5,673	  	 	 	5,277	  	
Performance-based incentive fee payable	  	 	3,591	  	 	 	5,203	  	
Interest payable	  	 	1,323	  	 	 	1,063	  	
Income taxes payable	  	 	1,035	  	 	 	720	  	
Administrative services fee payable	  	 	1,022	  	 	 	1,069	  	
Unrealized depreciation on foreign exchange contracts	  	 	721	  	 	 	—  	  	
Deferred fee revenue	  	 	—  	  	 	 	318	  	
Other accrued expenses and payables	  	 	5,098	  	 	 	1,042	  	
 	  	 	 	 	 	 	 	 	
Total Liabilities	  	 	394,960	  	 	 	273,490	  	
 	  	 	 	 	 	 	 	 	
Net Assets	  	 	 	 	 	 	 	 	
Common stock, par value $0.01 per share 36,640,094 and 36,608,038 shares issued and outstanding, 200,000,000 authorized	  	 	366	  	 	 	366	  	
Paid-in capital in excess of par	  	 	928,891	  	 	 	928,180	  	
Undistributed net investment income	  	 	—  	  	 	 	2,245	  	
Distributions in excess of net investment income	  	 	(6,236	) 	 	 	—  	  	
Accumulated net realized losses	  	 	(28,368	) 	 	 	(18,379	) 	
Net unrealized depreciation	  	 	(69,730	) 	 	 	(106,471	) 	
 	  	 	 	 	 	 	 	 	
Total Net Assets	  	$	824,923	  	 	$	805,941	  	
 	  	 	 	 	 	 	 	 	
Number of shares outstanding	  	 	36,640,094	  	 	 	36,608,038	  	
 	  	 	 	 	 	 	 	 	
Net Asset Value Per Share	  	$	22.51	  	 	$	22.02	  	
 	  	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except shares)

 	  	Three months
ended
June 30, 2012	 	 	Three months
ended
June 30, 2011	 	 	Six months
ended
June 30, 2012	 	 	Six months
ended
June 30, 2011	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest and dividends:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other interest and dividend income	  	$	27,819	  	 	$	34,530	  	 	$	63,046	  	 	$	66,129	  	
Companies 5% to 25% owned	  	 	5,652	  	 	 	—  	  	 	 	5,652	  	 	 	—  	  	
Companies more than 25% owned	  	 	1,362	  	 	 	753	  	 	 	2,444	  	 	 	1,448	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	  	 	34,833	  	 	 	35,283	  	 	 	71,142	  	 	 	67,577	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest and other credit facility expenses	  	 	9,051	  	 	 	1,895	  	 	 	11,746	  	 	 	3,932	  	
Investment advisory and management fees	  	 	5,673	  	 	 	5,096	  	 	 	10,951	  	 	 	10,083	  	
Performance-based incentive fees	  	 	3,591	  	 	 	5,269	  	 	 	8,866	  	 	 	10,057	  	
Other general and administrative expenses	  	 	995	  	 	 	1,376	  	 	 	2,004	  	 	 	2,270	  	
Administrative services fees	  	 	1,128	  	 	 	279	  	 	 	1,824	  	 	 	717	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	20,438	  	 	 	13,915	  	 	 	35,391	  	 	 	27,059	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income before income
tax expense	  	 	14,395	  	 	 	21,368	  	 	 	35,751	  	 	 	40,518	  	
Income tax expense	  	 	26	  	 	 	—  	  	 	 	283	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	 	14,369	  	 	 	21,368	  	 	 	35,468	  	 	 	40,518	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCIES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	(687	) 	 	 	—  	  	 	 	10,315	  	 	 	—  	  	
Companies less than 5% owned	  	 	(19,635	) 	 	 	2,304	  	 	 	(20,360	) 	 	 	5,106	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss) on investments	  	 	(20,322	) 	 	 	2,304	  	 	 	(10,045	) 	 	 	5,106	  	
Derivatives	  	 	1,730	  	 	 	(4,872	) 	 	 	786	  	 	 	(9,235	) 	
Foreign currencies	  	 	(563	) 	 	 	(242	) 	 	 	55	  	 	 	(314	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss before income taxes	  	 	(19,155	) 	 	 	(2,810	) 	 	 	(9,204	) 	 	 	(4,443	) 	
Income tax expense	  	 	—  	  	 	 	—  	  	 	 	785	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(19,155	) 	 	 	(2,810	) 	 	 	(9,989	) 	 	 	(4,443	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies less than 5% owned	  	 	17,646	  	 	 	(8,478	) 	 	 	44,210	  	 	 	22,389	  	
Companies more than 25% owned	  	 	1,508	  	 	 	1,478	  	 	 	(4,063	) 	 	 	3,103	  	
Companies 5% to 25% owned	  	 	132	  	 	 	(430	) 	 	 	(2,027	) 	 	 	(690	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss) on investments	  	 	19,286	  	 	 	(7,430	) 	 	 	38,120	  	 	 	24,802	  	
Derivatives	  	 	159	  	 	 	473	  	 	 	(1,276	) 	 	 	214	  	
Foreign currencies	  	 	1,403	  	 	 	783	  	 	 	(103	) 	 	 	311	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss) on investments	  	 	20,848	  	 	 	(6,174	) 	 	 	36,741	  	 	 	25,327	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, derivatives and foreign currencies	  	 	1,693	  	 	 	(8,984	) 	 	 	26,752	  	 	 	20,884	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Increase in Net Assets Resulting
From Operations	  	$	16,062	  	 	$	12,384	  	 	$	62,220	  	 	$	61,402	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS PER SHARE	  	$	0.44	  	 	$	0.34	  	 	$	1.70	  	 	$	1.69	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except shares)

 	  	Six months ended
June 30, 2012
(unaudited)	 	 	Year ended
December 31, 2011	 	
Increase in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	35,468	  	 	$	81,904	  	
Net realized loss	  	 	(9,989	) 	 	 	(2,393	) 	
Net change in unrealized gain (loss)	  	 	36,741	  	 	 	(18,196	) 	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	62,220	  	 	 	61,315	  	
 	  	 	 	 	 	 	 	 	
Dividends and distributions to shareholders:	  	 	(43,949	) 	 	 	(87,532	) 	
 	  	 	 	 	 	 	 	 	
Capital share transactions:	  	 	 	 	 	 	 	 	
Reinvestment of dividends	  	 	711	  	 	 	5,164	  	
 	  	 	 	 	 	 	 	 	
Net increase (decrease) in net assets	  	 	18,982	  	 	 	(21,053	) 	
 	  	 	 	 	 	 	 	 	
Net assets at beginning of period	  	 	805,941	  	 	 	826,994	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period	  	$	824,923	  	 	$	805,941	  	
 	  	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands except shares)

 	  	Six months ended
June 30, 2012	 	 	Six months ended
June 30, 2011	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	
Net increase in net assets from operations	  	$	62,220	  	 	$	61,402	  	
 	 	 	
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Net realized (gain) loss from investments	  	 	10,045	  	 	 	(5,106	) 	
Net realized (gain) loss from foreign currency exchange	  	 	(55	) 	 	 	314	  	
Net change in unrealized (gain) on investments	  	 	(38,120	) 	 	 	(24,802	) 	
Net change in (gain) loss on derivatives	  	 	1,276	  	 	 	(214	) 	
 	 	 	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	
Purchase of investment securities	  	 	(362,575	) 	 	 	(221,329	) 	
Proceeds from disposition of investment securities	  	 	251,877	  	 	 	232,757	  	
Capitalization of payment-in-kind interest	  	 	(16,776	) 	 	 	(13,710	) 	
Collections of payment-in-kind interest	  	 	7,141	  	 	 	3,602	  	
Interest and dividends receivable	  	 	(1,654	) 	 	 	(1,474	) 	
Purchase of interest rate cap	  	 	—  	  	 	 	(2,938	) 	
Fee revenue receivable	  	 	4,379	  	 	 	(126	) 	
Receivable for investments sold	  	 	2,595	  	 	 	8,119	  	
Prepaid expenses and other receivables	  	 	191	  	 	 	(94	) 	
 	 	 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	102,210	  	 	 	68,005	  	
Investment advisory and management fee payable	  	 	396	  	 	 	204	  	
Performance-based incentive fee payable	  	 	(1,612	) 	 	 	922	  	
Interest payable	  	 	260	  	 	 	421	  	
Administrative services fees	  	 	(47	) 	 	 	(323	) 	
Income taxes payable	  	 	315	  	 	 	142	  	
Deferred fee revenue	  	 	(318	) 	 	 	(504	) 	
Other accrued expenses and payables	  	 	4,057	  	 	 	(407	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	  	 	25,805	  	 	 	104,861	  	
 	  	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	
Cash dividends paid	  	 	(21,965	) 	 	 	(20,268	) 	
Deferred offering costs	  	 	(190	) 	 	 	(367	) 	
Deferred credit facility costs	  	 	2,463	  	 	 	1,136	  	
Proceeds from borrowings on senior secured notes	  	 	75,000	  	 	 	—  	  	
Proceeds from borrowings on revolving/term credit facilities	  	 	292,590	  	 	 	767,611	  	
Repayments of borrowings on revolving/term credit facilities	  	 	(373,471	) 	 	 	(767,255	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Used in Financing Activities	  	 	(25,573	) 	 	 	(19,143	) 	
 	  	 	 	 	 	 	 	 	
NET INCREASE IN CASH AND CASH EQUIVALENTS	  	 	232	  	 	 	85,718	  	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	  	 	11,787	  	 	 	288,732	  	
 	  	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	  	$	12,019	  	 	$	374,450	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	4,150	  	 	$	1,681	  	
 	  	 	 	 	 	 	 	 	
Cash paid for income taxes	  	$	727	  	 	$	312	  	
 	  	 	 	 	 	 	 	 	
Non-cash financing activity:	  	 	 	 	 	 	 	 	
Dividends reinvestment	  	$	711	  	 	$	1,562	  	
 	  	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)
June 30, 2012
(in thousands, except shares)

Description(1)	  	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans-62.0%	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Asurion Corporation	  	Insurance	 	 	9.00	% 	 	 	5/24/2019	  	 	$	40,000	  	 	$	39,821	  	 	$	40,900	  	
Airvana Network Solutions Inc.	  	Telecommunications	 	 	10.00	% 	 	 	3/25/2015	  	 	 	4,071	  	 	 	4,033	  	 	 	3,990	  	
AREP Fifty-Seventh LLC(10)(26)	  	Buildings & Real Estate	 	 	14.00	% 	 	 	8/1/2013	  	 	 	19,768	  	 	 	19,373	  	 	 	19,373	  	
ARK Real Estate Partners II LP(10)(26)	  	Buildings & Real Estate	 	 	14.00	% 	 	 	8/1/2013	  	 	 	8,027	  	 	 	7,866	  	 	 	7,866	  	
AviatorCap SII, LLC I(9)	  	Aerospace & Defense	 	 	12.00	% 	 	 	12/31/2014	  	 	 	3,402	  	 	 	3,365	  	 	 	3,400	  	
AviatorCap SII, LLC II(9)	  	Aerospace & Defense	 	 	11.00	% 	 	 	12/31/2014	  	 	 	5,070	  	 	 	5,008	  	 	 	5,070	  	
AviatorCap SII, LLC III(9)	  	Aerospace & Defense	 	 	13.00	% 	 	 	12/31/2014	  	 	 	6,320	  	 	 	6,214	  	 	 	6,320	  	
Direct Buy Inc.(18)	  	Home, Office Furnishing & Durable Consumer Prds	 	 	12.00	% 	 	 	2/1/2017	  	 	 	25,000	  	 	 	24,332	  	 	 	5,875	  	
DS Waters of America, Inc.(10)(22)	  	Beverage, Food & Tobacco	 	 

 	15% (11% Cash &

4% PIK)	  

(7) 	 	 	2/28/2018	  	 	 	30,292	  	 	 	29,278	  	 	 	30,292	  	
Fulton Holding Corp(17)	  	Retail Stores	 	 	13.37	% 	 	 	5/28/2016	  	 	 	35,000	  	 	 	34,251	  	 	 	35,000	  	
Grakon, LLC(11)	  	Machinery	 	 	12.00	% 	 	 	12/31/2015	  	 	 	9,524	  	 	 	7,616	  	 	 	9,429	  	
Good Sam Enterprise, LLC	  	Insurance	 	 	11.50	% 	 	 	12/1/2016	  	 	 	7,000	  	 	 	6,570	  	 	 	7,289	  	
Grocery Outlet Inc.(16)	  	Grocery	 	 	10.50	% 	 	 	12/15/2017	  	 	 	33,264	  	 	 	32,329	  	 	 	33,264	  	
Isotoner Corporation	  	Personal & Nondurable Consumer Products	 	 	10.75	% 	 	 	1/8/2018	  	 	 	39,000	  	 	 	37,963	  	 	 	38,610	  	
Interactive Health Solutions, Inc.(16)(17)	  	Healthcare, Education & Childcare	 	 	11.50	% 	 	 	10/4/2016	  	 	 	19,894	  	 	 	19,488	  	 	 	20,013	  	
MYI Acquiror Corporation(4)(8)(19)	  	Insurance	 	 

 	13% (12% Cash &

1% PIK)	  

(7) 	 	 	3/13/2017	  	 	 	31,643	  	 	 	31,073	  	 	 	31,801	  	
SMG	  	Personal, Food & Misc. Services	 	 	10.75	% 	 	 	12/7/2018	  	 	 	25,000	  	 	 	24,503	  	 	 	24,875	  	
Southern Auto Finance Company(19)	  	Banking	 	 	13.50	% 	 	 	10/19/2017	  	 	 	25,000	  	 	 	24,485	  	 	 	24,750	  	
SOINT, LLC(9)(23)	  	Aerospace & Defense	 	 	15.00	% 	 	 	6/30/2016	  	 	 	16,667	  	 	 	16,333	  	 	 	16,333	  	
Spencer Spirit Holdings, Inc.	  	Retail Stores	 	 	11.00	% 	 	 	5/1/2017	  	 	 	10,000	  	 	 	10,000	  	 	 	10,300	  	
Transplace Texas, LP(16)	  	Cargo Transport	 	 	11.00	% 	 	 	4/12/2017	  	 	 	20,000	  	 	 	19,576	  	 	 	19,700	  	
Trident USA Health Services, LLC	  	Healthcare, Education & Childcare	 	 	11.75	% 	 	 	10/30/2017	  	 	 	38,000	  	 	 	37,253	  	 	 	37,240	  	
USAW 767(9)	  	Aerospace & Defense	 	 	14.50	% 	 	 	6/30/2014	  	 	 	3,986	  	 	 	3,961	  	 	 	3,986	  	
ViaWest Inc(16)	  	Personal, Food & Misc. Services	 	 

 	13.5% (12% Cash &

1.5% PIK)	  

(7) 	 	 	5/20/2018	  	 	 	40,538	  	 	 	39,492	  	 	 	40,132	  	
Vision Holding Corp.(16)	  	Healthcare, Education & Childcare	 	 	12.00	% 	 	 	11/23/2016	  	 	 	35,300	  	 	 	34,822	  	 	 	35,300	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	  	 	 	 	 	 	 	 	 	 	 	$	531,766	  	 	$	519,005	  	 	$	511,107	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes – 59.0%	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	  	Diversified/Conglomerate Service	 	 	18.00	% 	 	 	12/8/2015	  	 	$	42,500	  	 	$	41,827	  	 	$	42,500	  	
Asurion Holdco(21)	  	Insurance	 	 	11.00	%(7) 	 	 	3/2/2019	  	 	 	12,000	  	 	 	11,652	  	 	 	12,480	  	
CIBT Solutions	  	Leisure, Amusement, Entertainment	 	 	13.50	% 	 	 	6/15/2018	  	 	 	36,200	  	 	 	35,429	  	 	 	36,200	  	
Crosman Corporation	  	Leisure, Amusement, Entertainment	 	 

 	13% (11% Cash &

2% PIK)	  

(7) 	 	 	10/15/2016	  	 	 	15,219	  	 	 	14,837	  	 	 	14,914	  	
Earthbound Farm(16)	  	Farming & Agriculture	 	 	14.25	% 	 	 	6/21/2017	  	 	 	58,947	  	 	 	57,874	  	 	 	57,474	  	
Grakon Holdings LLC Sr(11)	  	Machinery	 	 	14% PIK	(7) 	 	 	12/31/2015	  	 	 	1,701	  	 	 	1,701	  	 	 	1,684	  	
Grakon Holdings LLC Jr(11)	  	Machinery	 	 	12% PIK	(7) 	 	 	12/31/2015	  	 	 	16,039	  	 	 	13,273	  	 	 	11,227	  	
Granite Global Solutions Corp.(3)(18)(19)	  	Insurance	 	 	13.50	% 	 	 	5/31/2016	  	 	 	17,859	  	 	 	18,493	  	 	 	15,180	  	
Midcap Financial Intermediate
Holdings, LLC(16)(19)	  	Banking	 	 	13.00	% 	 	 	7/9/2015	  	 	 	85,000	  	 	 	83,676	  	 	 	85,000	  	
ProSieben Sat.1 Media AG(3)(6)(19)	  	Broadcasting & Entertainment	 	 

 	8.43% (4.93% Cash &

3.5% PIK)	  

(7) 	 	 	3/6/2017	  	 	 	21,029	  	 	 	20,657	  	 	 	13,368	  	
Richelieu Foods, Inc.(15)	  	Beverage, Food & Tobacco	 	 

 	14.25% (12% Cash &

2.25% PIK)	  

(7) 	 	 	5/18/2016	  	 	 	22,831	  	 	 	22,346	  	 	 	21,918	  	
Rug Doctor L.P.(20)	  	Personal, Food & Misc. Services	 	 

 	15.50% to 20.00%

(wtd. avg. 17.54%)	  

(7) 	 	 	10/31/2014	  	 	 	52,570	  	 	 	49,875	  	 	 	47,313	  	
Weetabix Group(3)(5)(19)	  	Beverage, Food & Tobacco	 	 	9.13% PIK	(7) 	 	 	9/14/2016	  	 	 	16,862	  	 	 	19,353	  	 	 	16,525	  	
Weetabix Group(3)(5)(19)	  	Beverage, Food & Tobacco	 	 	10.29% PIK	(7) 	 	 	5/3/2017	  	 	 	36,359	  	 	 	43,561	  	 	 	35,632	  	
WireCo. Worldgroup Inc.(24)	  	Building Products	 	 	11.75	% 	 	 	5/15/2017	  	 	 	48,000	  	 	 	47,520	  	 	 	47,520	  	
FIS Healthcare Holdings, LLC(25)	  	Healthcare Technology	 	 	12.00	% 	 	 	2/28/2019	  	 	 	28,200	  	 	 	27,566	  	 	 	27,566	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	  	 	 	 	 	 	 	 	 	 	 	$	511,316	  	 	$	509,640	  	 	$	486,501	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares)

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
Preferred Equity – 17.6%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Senior Preferred 15% Units of DSW Group
Holdings LLC(10)	  	Beverage, Food & Tobacco	  	 	15% PIK	(7) 	 	 	—  	  	  	 	1,395,230	  	  	$	119,196	  	  	$	119,990	  	
SODO Corp.(9)(12)	  	Aerospace & Defense	  	 	8.43% PIK	(7) 	 	 	6/30/2018	  	  	 	2,084	  	  	 	2,084	  	  	 	2,251	  	
SOCAY Limited(9)(12)(19)	  	Aerospace & Defense	  	 	8.59% PIK	(7) 	 	 	6/30/2018	  	  	 	13,526	  	  	 	13,526	  	  	 	14,611	  	
SOINT, LLC(9)(1)(19)(23)	  	Aerospace & Defense	  	 	15.00	%(7) 	 	 	6/30/2018	  	  	 	86,667	  	  	 	8,667	  	  	 	8,667	  	
Wyle Laboratories	  	Aerospace & Defense	  	 	8.00	% 	 	 	7/17/2015	  	  	 	387	  	  	 	39	  	  	 	49	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Preferred Equity	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	143,512	  	  	$	145,568	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Common Equity / Partnership Interests /
Warrants – 6.1%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ark Real Estate Partners LP(10)(11)	  	Buildings & Real Estate	  	 	 	 	 	 	 	 	  	 	44,697,684	  	  	$	44,698	  	  	$	34,864	  	
Participating Preferred Units of DSW Group
Holdings LLC(10)	  	Beverage, Food & Tobacco	  	 	 	 	 	 	 	 	  	 	1,296,078	  	  	 	—  	  	  	 	—  	  	
Grakon, LLC(11)	  	Machinery	  	 	 	 	 	 	 	 	  	 	1,714,286	  	  	 	1,714	  	  	 	—  	  	
Grakon, LLC Warrants(11)	  	Machinery	  	 	 	 	 	 	 	 	  	 	3,518,001	  	  	 	—  	  	  	 	—  	  	
Great American Group Inc.(13)(19)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	572,800	  	  	 	2,681	  	  	 	189	  	
Great American Group Inc.(14)(19)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	187,500	  	  	 	3	  	  	 	62	  	
Nuveen Investments, Inc.	  	Finance	  	 	 	 	 	 	 	 	  	 	3,486,444	  	  	 	30,876	  	  	 	7,322	  	
NXP Semiconductors Netherlands B.V.(3)(19)	  	Electronics	  	 	 	 	 	 	 	 	  	 	310,271	  	  	 	8,458	  	  	 	7,208	  	
Seven West Media Limited(3)(19)	  	Broadcasting & Entertainment	  	 	 	 	 	 	 	 	  	 	437,687	  	  	 	2,424	  	  	 	781	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Common Equity/Partnerships
Interests / Warrants	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	90,854	  	  	$	50,426	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments – (144.7%)	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	1,263,011	  	  	$	1,193,602	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities in Excess of Other Assets – (44.7%)	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	(368,679	) 	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Net Assets – 100.0%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	$	824,923	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (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 June 30, 2012.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in either Euro, British Pounds, Canadian Dollars or Australian Dollars: Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. in Canada; and Seven Media Group Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and is denominated in U.S. dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.ar.l.	
(5)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital Ltd.’s investment in ProSieben Sat. 1 Media AG is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Coupon is payable in cash and/or in kind (PIK).	
(8)	Includes an unfunded commitment of $6,000.	
(9)	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 Investment Company Act of 1940, as amended (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.	
(10)	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.	
(11)	Investments are held in taxable subsidiaries through Solar Capital Ltd. Investment in Ark Real Estate Partners LP is held through SLRC ADI Corp and equity investment in Grakon LLC are held through Grakon TL Holding, Inc.	
(12)	Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(13)	Founders Shares.	
(14)	Contingent Founders Shares.	
(15)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC (“SC Funding”). Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of June 30, 2012, all other investments were pledged as collateral for the Senior Secured Credit Facility, Term Loan and Senior Secured Notes (see Note 6 to the consolidated financial statements).	
(16)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary SC Funding. (See note 15 above for further explanation.) Par amounts held through SC Funding include: Asurion Corp $20,224; Earthbound Farm $23,500; Fulton Holding Corp. $19,800; Grocery Outlet Inc. $19,900; Interactive Health Solutions, Inc. $14,569; Midcap Financial Intermediate Holdings, LLC $23,500; Rug Doctor L.P. $9,669; Transplace Texas, LP $18,800; ViaWest Inc. $15,354; and Vision Holding Corp $20,569. Remaining par balances are held directly by Solar Capital Ltd.	
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares)
 
(17)	Includes an unfunded commitment of $1,250.	
(18)	Investments on non-accrual status.	
(19)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(20)	Includes PIK payable on $12,732 of par at 4.50% PIK, $14,769 of par at 5.25% PIK, $15,400 of par at 8.00% PIK, and $9,669 of par at 3.50% PIK.	
(21)	Asurion Holdco has the option to pay interest in kind at L+10.25% if certain specified conditions are met.	
(22)	In March 2012, Solar Capital Ltd. purchased $36,991 and participated $7,000 to a third party with no recourse to the Company.	
(23)	Includes an unfunded commitment of secured debt $14,979 and equity $7,789.	
(24)	Includes an unfunded commitment of $48,000	
(25)	Includes an unfunded commitment of $28,200	
(26)	Includes an unfunded commitment of $20,177	
See notes to consolidated financial statements.
 
F-8

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2012

Industry Classification	  	Pecentage of Total
Investments (at fair value) as
of June 30, 2012	 	
Beverage, Food & Tobacco	  	 	19	% 	
Insurance	  	 	9	% 	
Banking	  	 	9	% 	
Personal, Food & Misc. Services	  	 	9	% 	
Healthcare, Education & Childcare	  	 	8	% 	
Buildings & Real Estate	  	 	5	% 	
Farming & Agriculture	  	 	5	% 	
Aerospace & Defense	  	 	5	% 	
Building Products	  	 	4	% 	
Leisure, Amusement, Entertainment	  	 	4	% 	
Retail Stores	  	 	4	% 	
Diversified/Conglomerate Service	  	 	4	% 	
Personal & Nondurable Consumer Products	  	 	3	% 	
Grocery	  	 	3	% 	
Healthcare Technology	  	 	2	% 	
Machinery	  	 	2	% 	
Cargo Transport	  	 	2	% 	
Broadcasting & Entertainment	  	 	1	% 	
Finance	  	 	1	% 	
Electronics	  	 	1	% 	
Telecommunications	  	 	> 1	% 	
Home, Office Furnishing & Durable Consumer Prds	  	 	> 1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
F-9

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2011
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured
Loans – 39.46%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation(18)	 	Insurance	 	 	9.00	% 	 	 	5/24/2019	  	 	$	40,000	  	 	$	39,811	  	 	$	39,517	  	
Airvana Network
Solutions Inc.	 	Telecommunications	 	 	10.00	% 	 	 	3/25/2015	  	 	 	8,324	  	 	 	8,186	  	 	 	8,324	  	
AviatorCap SII, LLC I(10)	 	Aerospace & Defense	 	 	12.00	% 	 	 	12/31/2014	  	 	 	3,728	  	 	 	3,678	  	 	 	3,671	  	
AviatorCap SII, LLC II(10)	 	Aerospace & Defense	 	 	11.00	% 	 	 	12/31/2014	  	 	 	5,697	  	 	 	5,618	  	 	 	5,611	  	
AviatorCap SII, LLC III(10)	 	Aerospace & Defense	 	 	13.00	% 	 	 	12/31/2014	  	 	 	8,856	  	 	 	8,696	  	 	 	8,724	  	
Direct Buy Inc.(20)	 	Home, Office Furnishing & Durable Consumer Prds	 	 	12.00	% 	 	 	2/1/2017	  	 	 	25,000	  	 	 	24,332	  	 	 	5,875	  	
Fulton Holding Corp(18)	 	Retail Stores	 	 	13.74	% 	 	 	5/28/2016	  	 	 	35,000	  	 	 	34,155	  	 	 	35,000	  	
Grakon, LLC	 	Machinery	 	 	12.00	% 	 	 	12/31/2015	  	 	 	9,524	  	 	 	7,610	  	 	 	9,286	  	
Good Sam Enterprise, LLC	 	Insurance	 	 	11.50	% 	 	 	12/1/2016	  	 	 	7,000	  	 	 	6,523	  	 	 	6,860	  	
Grocery Outlet Inc.	 	Grocery	 	 	10.50	% 	 	 	12/15/2017	  	 	 	33,600	  	 	 	32,599	  	 	 	32,592	  	
Isotoner Corporation	 	Personal & Nondurable Consumer Products	 	 	10.75	% 	 	 	1/8/2018	  	 	 	39,000	  	 	 	37,895	  	 	 	37,830	  	
Interactive Health
Solutions, Inc.(18)(19)	 	Healthcare, Education & Childcare	 	 	11.50	% 	 	 	10/4/2016	  	 	 	20,131	  	 	 	19,691	  	 	 	19,930	  	
MYI Acquiror
Corporation(3)(4)(8)(21)	 	Insurance	 	 
 	13% (12% Cash &
1% PIK)	  
( 7) 	 	 	3/13/2017	  	 	 	31,500	  	 	 	30,899	  	 	 	31,500	  	
Roundy’s Supermarkets,
Inc. – 2nd Lien(18)	 	Grocery	 	 	10.00	% 	 	 	4/16/2016	  	 	 	22,000	  	 	 	21,685	  	 	 	22,069	  	
Southern Auto Finance
Company(21)	 	Banking	 	 	13.50	% 	 	 	10/19/2017	  	 	 	25,000	  	 	 	24,453	  	 	 	24,437	  	
Spencer Spirit Holdings, Inc.	 	Retail Stores	 	 	11.00	% 	 	 	5/1/2017	  	 	 	10,000	  	 	 	10,000	  	 	 	10,000	  	
Transplace Texas, LP(18)	 	Cargo Transport	 	 	11.00	% 	 	 	4/12/2017	  	 	 	20,000	  	 	 	19,533	  	 	 	19,500	  	
USAW 767(10)	 	Aerospace & Defense	 	 	14.50	% 	 	 	12/31/2012	  	 	 	4,904	  	 	 	4,850	  	 	 	4,831	  	
ViaWest Inc(18)	 	Personal, Food & Misc. Services	 	 
 	13.5% (12% Cash
& 1.5% PIK)	  
(7) 	 	 	5/20/2016	  	 	 	33,255	  	 	 	32,520	  	 	 	32,756	  	
Vision Holding Corp.(18)	 	Healthcare, Education & Childcare	 	 	12.00	% 	 	 	11/23/2016	  	 	 	37,500	  	 	 	36,869	  	 	 	37,125	  	
VPSI, Inc.(17)	 	Personal Transportation	 	 	12.00	% 	 	 	12/23/2015	  	 	 	16,958	  	 	 	16,598	  	 	 	16,958	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	436,977	  	 	$	426,201	  	 	$	412,396	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes – 52.33%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	 	Diversified/Conglomerate Service	 	 	18.00	% 	 	 	12/8/2015	  	 	$	42,500	  	 	$	41,878	  	 	$	42,075	  	
AMC Entertainment
Holdings, Inc.	 	Leisure, Amusement, Entertainment	 	 	5.55%PIK	  	 	 	6/13/2012	  	 	 	27,141	  	 	 	27,086	  	 	 	26,462	  	
CIBT Solutions	 	Leisure, Amusement, Entertainment	 	 	13.50	% 	 	 	6/15/2018	  	 	 	36,200	  	 	 	35,389	  	 	 	35,386	  	
Crosman Corporation	 	Leisure, Amusement, Entertainment	 	 

 	13% (11% Cash &

2% PIK)	  

(7) 	 	 	10/15/2016	  	 	 	15,219	  	 	 	14,808	  	 	 	14,762	  	
DSW Group, Inc.	 	Beverage, Food & Tobacco	 	 	15% PIK	  	 	 	4/24/2012	  	 	 	125,106	  	 	 	124,972	  	 	 	106,340	  	
Earthbound Farm(18)	 	Farming & Agriculture	 	 	14.25	% 	 	 	6/21/2017	  	 	 	58,947	  	 	 	57,739	  	 	 	56,590	  	
Grakon Holdings LLC Sr	 	Machinery	 	 	14% PIK	  	 	 	12/31/2015	  	 	 	1,588	  	 	 	1,588	  	 	 	1,469	  	
Grakon Holdings LLC Jr	 	Machinery	 	 	12% PIK	  	 	 	12/31/2015	  	 	 	15,118	  	 	 	12,344	  	 	 	7,710	  	
Granite Global Solutions
Corp.(3)(16)(21)	 	Insurance	 	 	13.50	% 	 	 	5/31/2016	  	 	 	29,983	  	 	 	30,234	  	 	 	29,121	  	
Magnolia River, LLC	 	Hotels, Motels, Inns and Gaming	 	 	14.00	% 	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,664	  	 	 	19,064	  	
Midcap Financial Intermediate
Holdings, LLC(18)	 	Banking	 	 	14.25	% 	 	 	7/9/2015	  	 	 	75,000	  	 	 	73,542	  	 	 	75,000	  	
ProSieben Sat.1
Media AG(3)(6)(21)	 	Broadcasting & Entertainment	 	 
 	8.83%(5.3% Cash
& 3.5% PIK)	  
(7) 	 	 	3/6/2017	  	 	 	21,125	  	 	 	20,261	  	 	 	10,508	  	
Richelieu Foods, Inc.(17)	 	Beverage, Food & Tobacco	 	 	13.75	% 	 	 	5/18/2016	  	 	 	22,500	  	 	 	21,972	  	 	 	21,150	  	
 	 	 	 	 	15.50% to 20.00%	(7) 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rug Doctor L.P.(18)(22)	 	Personal, Food & Misc. Services	 	 	(wtd. avg. 17.54	%) 	 	 	10/31/2014	  	 	 	51,225	  	 	 	48,034	  	 	 	47,383	  	
Shoes For Crews, LLC (17)	 	Textiles & Leather	 	 	13.75%	(7) 	 	 	7/23/2016	  	 	 	15,650	  	 	 	15,318	  	 	 	15,650	  	
Weetabix Group(3)(5)(21)	 	Beverage, Food & Tobacco	 	 	9.22% PIK	  	 	 	9/14/2016	  	 	 	15,986	  	 	 	18,589	  	 	 	12,469	  	
Weetabix Group(3)(5)(21)	 	Beverage, Food & Tobacco	 	 	10.03%PIK	  	 	 	5/3/2017	  	 	 	34,294	  	 	 	41,739	  	 	 	25,720	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	606,646	  	 	$	604,157	  	 	$	546,859	  	

F-10

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity – 1.40%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SODO Corp.(10)(13)	 	Aerospace & Defense	 	 	8.43% PIK	  	 	 	—  	  	 	 	1,912	  	 	$	2,009	  	 	$	1,949	  	
SOCAY Limited(10)(13)	 	Aerospace & Defense	 	 	8.59% PIK	  	 	 	—  	  	 	 	12,357	  	 	 	13,059	  	 	 	12,668	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00%       	  	 	 	7/17/2015	  	 	 	387	  	 	 	39	  	 	 	47	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	15,107	  	 	$	14,664	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants – 6.81%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)(12)	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	41,818,834	  	 	$	41,819	  	 	$	35,820	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Grakon, LLC Warrants	 	Machinery	 	 	 	 	 	 	 	 	 	 	3,518,001	  	 	 	—  	  	 	 	—  	  	
Great American Group Inc.(14)	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	69	  	
Great American Group Inc.(15)	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	23	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel, Iron & Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	16,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,486,444	  	 	 	30,875	  	 	 	7,844	  	
NXP Semiconductors Netherlands B.V.(3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	645,292	  	 	 	17,592	  	 	 	9,918	  	
Seven West Media Limited	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	437,687	  	 	 	2,424	  	 	 	1,450	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	107,108	  	 	$	71,124	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,152,573	  	 	$	1,045,043	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (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)	For each debt investment we have provided the current interest rate in effect as of December 31, 2011. Variable rate debt investments generally bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which may reset daily, quarterly or semi-annually.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in British Pounds, Euro, Canadian Dollars or Australian Dollars: Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. in Canada; and Seven West Media Group Pty Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and $14,750 of MYI Aquiror Corporation is domiciled in the United Kingdom, but these assets are denominated in US Dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	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.	
(7)	Coupon is payable in cash and/or in kind (PIK).	
(8)	Includes an unfunded commitment of $6,000.	
(9)	Solar Capital Ltd. has an unfunded commitment of $2,879.	
(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 Investment Company Act of 1940, as amended (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)	Solar Capital Ltd.’s investment in Ark Real Estate Partners LP is held through its taxable subsidiary SLRC ADI Corp.	
(13)	SODO Corp. and SOCAY Corp. own equity interests that represent a majority of the equity ownership in Aviator Cap SII, LLC and USAW 767. Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(14)	Founders Shares.	
(15)	Contingent Founders Shares.	
(16)	Includes an unfunded commitment of $15,600 Canadian Dollars or $15,313 U.S Dollars as of December 31, 2011.	
(17)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of December 31, 2011, all other investments were pledged as collateral for the Senior Secured Revolving Credit Facility and the Term Loan (see Note 6 to the consolidated financial statements).	
(18)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. (See note 17 above for further explanation.) Par amounts held through Solar Capital Funding II LLC include: Asurion $14,224; Fulton Holding Corp. $18,000; Interactive Health Solutions, Inc. $10,236; Roundy’s Supermarkets Inc. $10,000; Transplace Texas, LP $18,800; ViaWest Inc. $15,239; Vision Holding Corp $13,883; Earthbound $23,500; Midcap Financial Intermediate Holdings, LLC $23,500; and Rug Doctor L.P. $9,515. Remaining par balances are held directly by Solar Capital Ltd.	
(19)	Includes an unfunded commitment of $1,250.	
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011
(in thousands, except shares)
 
(20)	Investment is on non-accrual status.	
(21)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(22)	Includes PIK payable on $12,466 of par at 4.50% PIK, $14,405 of par at 5.25% PIK, $14,839 of par at 8.00% PIK, and $9,515 of par at 3.50% PIK.	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
December 31, 2011

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of December 31, 2011	 	
Beverage, Food & Tobacco	  	 	16	% 	
Insurance	  	 	10	% 	
Banking	  	 	10	% 	
Personal, Food & Misc. Services	  	 	8	% 	
Leisure, Amusement, Entertainment	  	 	7	% 	
Healthcare, Education & Childcare	  	 	5	% 	
Farming & Agriculture	  	 	5	% 	
Grocery	  	 	5	% 	
Retail Stores	  	 	4	% 	
Diversified/Conglomerate Service	  	 	4	% 	
Personal & Nondurable Consumer Products	  	 	4	% 	
Aerospace & Defense	  	 	4	% 	
Buildings & Real Estate	  	 	3	% 	
Cargo Transport	  	 	2	% 	
Hotels, Motels, Inns and Gaming	  	 	2	% 	
Machinery	  	 	2	% 	
Personal Transportation	  	 	2	% 	
Mining, Steel, Iron & Nonprecious Metals	  	 	1	% 	
Textiles & Leather	  	 	1	% 	
Broadcasting & Entertainment	  	 	1	% 	
Electronics	  	 	1	% 	
Telecommunications	  	 	1	% 	
Finance	  	 	1	% 	
Home, Office Furnishing & Durable Consumer Prds	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2012
(in thousands, except shares)
Note 1. Organization
Solar Capital Ltd. (“Solar Capital”, “we”, or the “Company”), 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 has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). In February 2010, Solar Capital Ltd. completed its initial public offering.
The Company’s 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. 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.
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 subsidiaries, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007, and Solar Capital Funding II LLC (“SC Funding”), a Delaware limited liability company formed on December 8, 2010. 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.
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, 2012.
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 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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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
 	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 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 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.
Credit Facilities – The Company has made an irrevocable election to apply the fair value option of accounting to the certain credit facilities and senior secured notes (see Note 6), in accordance with Accounting Standards Codification (“ASC”) 825-10. The Company uses an independent third-party valuation firm to measure their fair values.
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.
Dividend Income: Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
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.
Fee Revenue Receivable – Fee revenue receivable consists of premium payments owed to the Company at the maturity of certain loans. The premium payments are recorded as a receivable at the inception of the loan and are accreted into interest income over the respective terms of the applicable loans.
Deferred Fee Revenue – Deferred fee revenue represents the unearned portion of premium payments owed to the Company at the maturity of certain loans.
U.S. Federal Income Taxes – The Company has elected 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. Depending on the level of taxable income earned in a given 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 six months ended June 30, 2012, $985 was recorded for U.S. Federal excise tax. No Federal excise tax was recorded for the three months ended June 30, 2011.
Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s inception-to-date federal tax years remain subject to examination by the Internal Revenue Service. 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.
The Company has formed and used certain taxable subsidiaries to be taxed as a corporation for federal income tax purposes. These taxable subsidiaries allow the Company to hold portfolio companies organized as pass-through entities and still satisfy certain RIC income requirements. The Company does not consolidate the taxable subsidiaries for income tax purposes but recognizes the results of these subsidiaries for financial reporting purposes.
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 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. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did it have any unrecognized tax benefits as of the periods presented herein.
Capital Accounts – Certain capital accounts including under (over) distributed net investment income, accumulated net realized gain or loss, net unrealized depreciation, and paid-in capital in excess of par, are
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
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.
During 2011, as a result of permanent book-to-tax differences, the Company decreased under (over) distributed net investment income by $4,582, decreased accumulated net realized loss by $8,555, and decreased paid-in capital in excess of par value by $3,973. Aggregate stockholders’ equity was not affected by this reclassification.
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 typically 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. Foreign currency amounts are translated into U.S. dollars on the following basis:
 
 	(i)	Market value of investment securities, other assets and liabilities – at the current rates of exchange.	
 
 	(ii)	Purchase and sales of investment securities, income and expenses – at the rates of exchange prevailing on the respective date of such transactions.	
The Company does not isolate that portion of realized and unrealized gains or losses on investments that result from changes in market prices of investments from those that result from fluctuations in foreign exchange rates. Net realized foreign currency gains or losses arise from sales or repayments of foreign denominated investments (recorded in realized gain/loss on investments), maturities or terminations of foreign currency derivatives (recorded in realized gain/loss on derivatives), repayments of foreign denominated liabilities and other transactional gain or loss resulting from fluctuations in foreign exchange rates on amounts received or paid (recorded in realized gain/loss on foreign exchange). Net unrealized foreign exchange gains and losses arise from valuation changes in foreign denominated assets and liabilities, resulting from changes in exchange rates, including unrealized foreign exchange gains and losses on investments (recorded in unrealized gain/loss on investments), foreign currency derivatives (recorded in unrealized gain/loss on derivatives), and all other assets and liabilities (recorded in unrealized gain/loss on foreign exchange).
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Derivative Instruments and Hedging Activity – The Company recognizes derivatives as either assets or liabilities at fair value on its Consolidated Statements of Assets and Liabilities with valuation changes recorded as realized or unrealized gains and losses. The Company currently does not have any formally documented hedges that qualify for hedge accounting treatment.
The Company generally uses foreign exchange forward contracts and/or borrowings on its multicurrency revolving credit facility to minimize foreign currency exchange risks. Changes in the values of the Company’s foreign denominated assets are recorded in current earnings as realized and unrealized gains and losses (see above); likewise, realized and unrealized gains and losses from derivatives and foreign denominated debt are also recorded in current earnings. 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. Fluctuations in market values of assets and liabilities denominated in the same foreign currency offset in earnings, providing a “natural” foreign currency hedge.
The Company generally uses interest rate caps to create a synthetic “ceiling” on its borrowing rates. An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds an agreed cap rate. Interest payments on the Company’s credit facilities are primarily LIBOR based. By purchasing caps on LIBOR, if LIBOR exceeds the cap rate, the Company will pay a higher interest rate on its credit facilities but receive an offsetting payment from the cap counterparty on the notional amount above the cap rate. Caps have an initial cost. The fair value of interest rate caps is determined using option pricing models that use readily available market inputs.
Deferred Offering Costs – The Company records expenses related to shelf registration statement filings and other applicable offering costs as prepaid assets. These expenses are charged to capital upon utilization, in accordance with the ASC 946-20-25.
Receivable for Investments Sold – Receivable for investments sold represents a receivable for investments that have been sold but the proceeds have not been received.
Payable for Investments Purchased – Payable for investments purchased represents a liability for investments that have been purchased but the proceeds have not been paid and any unfunded loan commitments.
Deferred Credit Facility Costs – Deferred credit facility costs are amortized over the life of the related credit facility unless the fair value option was elected in accordance with ASC 825-10.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Note 3. Investments
Investments consisted of the following as of June 30, 2012 and December 31, 2011:

 	  	June 30, 2012	 	  	December 31, 2011	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	519,005	  	  	$	511,107	  	  	$	426,201	  	  	$	412,396	  	
Subordinated Debt/Corporate Notes	  	 	509,640	  	  	 	486,501	  	  	 	604,157	  	  	 	546,859	  	
Preferred Equity	  	 	143,512	  	  	 	145,568	  	  	 	15,107	  	  	 	14,664	  	
Common Equity/Partnership Interests/Warrants	  	 	90,854	  	  	 	50,426	  	  	 	107,108	  	  	 	71,124	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,263,011	  	  	$	1,193,602	  	  	$	1,152,573	  	  	$	1,045,043	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of June 30, 2012, the Company had two non-accrual assets with a total market value of $21,055. As of December 31, 2011, there was one non-accrual asset with a market value of $5,875.
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 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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
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 adviser. For financial statement presentation purposes, a fee is accrued to include unrealized capital appreciation. No accrual was required for the capital gains based incentive fee for the six months ended June 30, 2012 or for the year ended December 31, 2011.
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 interest rate risk both as a lender and a borrower. The Company’s borrowing facilities and term loan bear interest at a floating rate, which means that rising interest rates would increase our cost of borrowing. To partially mitigate this risk, in 2011, the Company purchased two interest rate cap contracts, which effectively limit the interest rate payable on $150 million of LIBOR based borrowings. The following table highlights the outstanding interest rate caps:

Index Rate	 	Cap Rate	 	 	Notional
Amount	 	 	Expiration	 	 	Cost	 	 	June 30, 2012	 	 	December 31, 2011	 	 	Counterparty	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fair Value	 	 	Unrealized
Depreciation	 	 	Fair Value	 	 	Unrealized
Depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
3 Month Libor	 	 	1.0	% 	 	$	100,000	  	 	 	1/13/2014	  	 	$	1,950	  	 	$	52	  	 	$	(1,898	) 	 	$	279	  	 	$	(1,671	) 	 	 	Wells Fargo	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
3 Month Libor	 	 	1.0	% 	 	 	50,000	  	 	 	5/4/2014	  	 	 	988	  	 	 	42	  	 	 	(946	) 	 	 	190	  	 	 	(798	) 	 	 	Wells Fargo	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	$	150,000	  	 	 	 	 	 	$	2,938	  	 	$	94	  	 	$	(2,844	) 	 	$	469	  	 	$	(2,469	) 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company is also exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company attempts to 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 may serve as an economic hedge with their realized and unrealized gains and losses also recorded in current earnings. During the quarter ended June 30, 2012, we entered into foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $19,305. During the year ended December 31, 2011, we entered into foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $30,697.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
As of June 30, 2012, there were three open forward foreign currency contracts denominated in Euro, British Pounds and Canadian Dollar, all of which terminated on July 13, 2012. As of December 31, 2011, there were two open forward foreign currency contracts denominated in Euro and British Pounds, both of which terminated on January 10, 2012. At June 30, 2012 and December 31, 2011, 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:

 	 	June 30, 2012	 	 	December 31, 2011	 	
SOLD	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	 	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	 	
EUR	 	 	17,250	  	 	$	21,830	  	 	$	(191	) 	 	 	SunTrust Bank	  	 	 	966	  	 	$	1,295	  	 	$	44	  	 	 	SunTrust Bank	  	
GBP	 	 	21,700	  	 	 	33,985	  	 	 	(347	) 	 	 	SunTrust Bank	  	 	 	12,989	  	 	 	20,308	  	 	 	136	  	 	 	SunTrust Bank	  	
CAD	 	 	18,900	  	 	 	18,564	  	 	 	(183	) 	 	 	SunTrust Bank	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Sold	 	 	 	 	 	$	74,379	  	 	$	(721	) 	 	 	 	 	 	 	 	 	 	$	21,602	  	 	$	180	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company had no derivatives designated as hedging instruments at June 30, 2012 and December 31, 2011.
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 Value of Derivative Instruments

 	  	Derivative Assets	 	
 	  	June 30, 2012	 	  	December 31, 2011	 	
 	  	Balance Sheet Location	 	  	Fair Value	 	  	Balance Sheet Location	 	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative assets	  	  	$	—  	  	  	 	Derivative assets	  	  	$	180	  	
Interest rate caps	  	 	Derivative assets	  	  	 	94	  	  	 	Derivative assets	  	  	 	469	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	 	 	  	$	94	  	  	 	 	 	  	$	649	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative assets	  	 	 	 	  	$	94	  	  	 	 	 	  	$	649	  	

 	  	Derivative Liabilities	 	
 	  	June 30, 2012	 	  	December 31, 2011	 	
 	  	Balance Sheet Location	 	  	Fair Value	 	  	Balance Sheet Location	 	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative liabilities	  	  	$	721	  	  	 	Derivative liabilities	  	  	$	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	 	 	  	$	721	  	  	 	 	 	  	$	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative liabilities	  	 	 	 	  	$	721	  	  	 	 	 	  	$	—  	  	

(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.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
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
Derivatives	 	                 Amount of Gain or (Loss) Recognized in Income on Derivatives                	 	
 	 	 	 	Three months ended
June 30, 2012	 	 	Three months ended
June 30, 2011	 	 	Six months ended
June 30, 2012	 	 	Six months ended
June 30, 2011	 	
Foreign exchange contracts	 	Realized gain (loss): Derivatives	 	$	1,730	  	 	$	(4,872	) 	 	$	786	  	 	$	(9,235	) 	
Foreign exchange contracts	 	Unrealized gain (loss): Derivatives	 	 	(277	) 	 	 	1,876	  	 	 	(901	) 	 	 	1,587	  	
Interest rate caps	 	Unrealized gain (loss): Derivatives	 	 	118	  	 	 	(1,403	) 	 	 	(375	) 	 	 	(1,373	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	 	$	1,571	  	 	$	(4,399	) 	 	$	(490	) 	 	$	(9,021	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Note 6. Borrowing Facilities and Senior Secured Notes
Senior Secured Credit Facility – On June 29, 2012, Solar Capital Ltd. entered into a $485 million Senior Secured Revolving Credit Facility (the “$485 Million Facility”) comprised of $450 million of revolving credit and a $35 million term loan. Borrowings bear interest at a rate per annum equal to the base rate plus 2.50% or the alternate base rate plus 1.50% and has no LIBOR floor requirement. For the $485 Million Facility, Citibank N.A. acted as Administrative Agent, JPMorgan Chase Bank, N.A. acted as Syndication Agent, and SunTrust Bank acted as Documentation Agent. The $485 Million Facility matures in July 2016 and includes a ratable amortization in the fourth year.
The $485 Million Facility may be increased up to $800 million with additional new lenders or the increase in commitments of current lenders. The $485 Million Facility contains certain customary affirmative and negative covenants and events of default. In addition, the $485 Million Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio.
In conjunction with the establishment of the $485 Million Facility, the predecessor facility and term loan was retired, resulting in $2,295 of non-recurring charges to expense unamortized costs. The Company will also pay the issuer of the term loan quarterly in arrears a commitment fee at the rate of 0.25% per annum on the average daily outstanding balance.
Senior Secured Notes – On May 10, 2012, the Company closed a private offering of $75,000 of Senior Secured Notes (“Private Notes”) with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Private Notes is due semi-annually on May 10 th and November 10 th . The Private Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
Senior Secured Loan Facility – On December 17, 2010, Solar Capital Ltd. entered into a $100 million senior secured credit facility (the “$100 Million Facility”) with Wells Fargo Securities LLC, as administrative agent. Solar Capital entered into (i) a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with SC Funding, pursuant to which Solar Capital will sell to SC Funding certain loans that it has originated or acquired, or will originate or acquire (the “Loans”) from time to time; (ii) a Loan and Servicing Agreement (the “Loan and
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Servicing Agreement” and, together with the Purchase and Sale Agreement, the “Agreements”) with SC Funding as borrower; and (iii) various supporting documentation. The $100 Million Facility is secured by all of the assets held by SC Funding. The $100 Million Facility, among other things, matures on December 17, 2015 and bears interest based on LIBOR plus 2.75%. Under the Agreements, Solar Capital and SC Funding, as applicable, are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The Purchase and Sale Agreement includes usual and customary events of default for credit facilities of this nature.
The Company has made an irrevocable election to apply the fair value option of accounting to the $485 Million Facility and the Private Notes in accordance with ASC 825-10. Accounting for the $485 Million Facility and the Private Notes at fair value will better align the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. As a result of this election, $3,681 and $1,128 of costs related to the establishment of the $485 Million Credit Facility and the Private Notes, respectively, were expensed during the three months ended June 30, 2012, rather than being deferred and amortized over the life of the obligation. ASC 825-10 requires entities to record the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the $485 Million Facility and the Private Notes are reported in the Consolidated Statements of Operations. For the three months ended June 30, 2012, the $485 Million Facility and the Private Notes had no net change in unrealized (appreciation) depreciation.
The weighted average annualized interest cost for all borrowings for the six months ended June 30, 2012 and 2011 was 4.40% and 3.53%, respectively. These costs are exclusive of commitment fees and for other prepaid expenses, if any, related to establishing the $485 Million Facility, the Private Notes, and the $100 Million Credit Facility (collectively the “Credit Facilities.”) This weighted average annualized interest cost reflects the average interest cost for all outstanding borrowings. For the six months ended June 30, 2012 and 2011, average debt outstanding was $170,251 and $117,092, respectively. The maximum amounts borrowed on the Credit Facilities during the six months ended June 30, 2012 and 2011 was $236,879 and $435,356, respectively. There was $229,860 drawn on the Credit Facilities as of June 30, 2012 and $236,355 as of December 31, 2011. At June 30, 2012 and December 31, 2011, the Company was in compliance with all financial and operational covenants required by the Credit Facilities.
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:
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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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
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.
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of June 30, 2012 and December 31, 2011:
Fair Value Measurements
As of June 30, 2012

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	 	—  	  	  	 	48,189	  	  	 	462,919	  	  	 	511,107	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	25,848	  	  	 	460,652	  	  	 	486,501	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	145,568	  	  	 	145,568	  	
Common Equity / Partnership Interests / Warrants	  	 	8,240	  	  	 	—  	  	  	 	42,186	  	  	 	50,426	  	
Derivative assets – interest rate caps and foreign exchange contracts	  	 	—  	  	  	 	94	  	  	 	—  	  	  	 	94	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities	  	 	—  	  	  	 	721	  	  	 	—  	  	  	 	721	  	
Credit Facilities	  	 	—  	  	  	 	—  	  	  	 	131,860	  	  	 	131,860	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Fair Value Measurements
As of December 31, 2011

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	46,377	  	  	$	366,019	  	  	$	412,396	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	10,508	  	  	 	536,351	  	  	 	546,859	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	14,664	  	  	 	14,664	  	
Common Equity / Partnership Interests / Warrants	  	 	11,460	  	  	 	—  	  	  	 	59,664	  	  	 	71,124	  	
Derivative assets – interest rate cap	  	 	—  	  	  	 	469	  	  	 	—  	  	  	 	469	  	
Derivative assets – forward contracts	  	 	—  	  	  	 	180	  	  	 	—  	  	  	 	180	  	
The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the six months ended June 30, 2012 and the year ended December 31, 2011, 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 June 30, 2012 and December 31, 2011:
Fair Value Measurements Using Level 3 Inputs
As of June 30, 2012

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	  	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, December 31, 2011	  	$	366,019	  	 	$	536,351	  	 	$	14,664	  	  	$	59,664	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Net realized gain (loss)	  	 	—  	  	 	 	(21,047	) 	 	 	—  	  	  	 	11,002	  	
Net change in unrealized gain (loss)	  	 	4,151	  	 	 	30,867	  	 	 	2,498	  	  	 	(10,358	) 	
 	 	 	 	 	
Purchase of investment securities	  	 	149,897	  	 	 	86,216	  	 	 	128,406	  	  	 	2,880	  	
Proceeds from dispositions of investment securities	  	 	(57,148	) 	 	 	(171,735	) 	 	 	—  	  	  	 	(21,002	) 	
 	 	 	 	 	
Transfers in/out of Level 3	  	 	—  	  	 	 	—  	  	 	 	—  	  	  	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Fair value, June 30, 2012	  	$	462,919	  	 	$	460,652	  	 	$	145,568	  	  	$	42,186	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
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):	  	$	4,895	  	 	$	30,975	  	 	$	2,498	  	  	$	(10,358	) 	
During the six months ended June 30, 2012, there were no transfers in and out of Levels 1 and 2.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2011

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, December 31, 2010	  	$	200,532	  	 	$	566,308	  	 	$	3,934	  	 	$	53,092	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	(87	) 	 	 	6,218	  	 	 	—  	  	 	 	(4,500	) 	
Net change in unrealized gain (loss)	  	 	(13,392	) 	 	 	(6,991	) 	 	 	(448	) 	 	 	6,931	  	
Purchase of investment securities	  	 	247,421	  	 	 	115,852	  	 	 	11,178	  	 	 	7,942	  	
Proceeds from dispositions of investment securities	  	 	(68,455	) 	 	 	(103,971	) 	 	 	—  	  	 	 	(3,801	) 	
Transfers in/out of Level 3	  	 	—  	  	 	 	(41,065	) 	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2011	  	$	366,019	  	 	$	536,351	  	 	$	14,664	  	 	$	59,664	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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):	  	$	(15,535	) 	 	$	(17,844	) 	 	$	(448	) 	 	$	4,988	  	
During 2011, one investment with a fair value of $41,065 was transferred from Level 3 to Level 2 as a result of an increase in the availability and reliability of third party market quotes for this investment. During 2011, one asset with a fair value of $9,900 was transferred from Level 2 to Level 1 when trading restrictions expired on a publicly traded equity investment.
The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

 	  	For the six
months ended
June 30, 2012	 	
$485 Million Facility and Private Notes	  	 	 	 	
Beginning fair value	  	$	—  	  	
Total unrealized appreciation	  	 	—  	  	
Borrowings	  	 	131,860	  	
Repayments	  	 	—  	  	
Transfers in/out of Level 3	  	 	—  	  	
 	  	 	 	 	
Ending fair value	  	$	131,860	  	
 	  	 	 	 	
The Company has made an irrevocable election to apply the fair value option of accounting to the $485 Million Facility and the Private Notes, in accordance with ASC 825-10. On June 30, 2012, there were borrowings of $56,860 and $75,000, respectively, on the $485 Million Facility and the Private Notes. For the six months ended June 30, 2012, the $485 Million Facility and the Private Notes had no net change in unrealized (appreciation) depreciation. The Company used an independent third-party valuation firm to measure the fair value of the Private Notes.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.
Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values and EBITDA multiples of similar companies, and comparable market transactions for equity securities. Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of June 30, 2012 is summarized in the table below:
Quantitative Information about Level 3 Fair Value Measurements

 	 	Asset or
Liability	 	Fair Value at
June 30, 2012	 	 	Valuation
Techniques/Methodology	 	Unobservable Input	 	Range (Weighted
Average)	
Senior Secured / Bank Debt	 	Asset	 	$	462,919	  	 	Yield Analysis/Market
Approach/Broker quoted	 	Market Yields /
Bid-Ask Spreads	 	10.00% – 17.00%
(12.9%)	
Subordinated Debt / Corporate Note	 	Asset	 	$	460,652	  	 	Yield Analysis/Market
Approach/Broker quoted	 	Market Yields /
Bid-Ask Spreads	 	12.00% – 20.33%
(15.1%)	
Preferred Equity	 	Asset	 	$	145,568	  	 	Yield Analysis	 	Market Yields	 	1.04% – 15.00%
(13.4%)	
Common Equity	 	Asset	 	$	42,186	  	 	Market Approach	 	Enterprise Value	 	4.99x – 11.36x	
$485 Million Facility	 	Liability	 	$	56,860	  	 	Yield Analysis/Market
Approach	 	Market Yields	 	L+0.5% – L+5.5%
(L+2.7%)	
Private Notes	 	Liability	 	$	75,000	  	 	Yield Analysis/Market
Approach	 	Market Yields	 	4.47% – 7.32%
(6.7%)	
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.
Note 10. Earnings Per Share
The following information sets forth the computation of basic and diluted earnings per share, pursuant to ASC 260-10, for the three and six months ended June 30, 2012 and 2011, respectively:

 	 	Three months ended
June 30, 2012	 	 	Three months ended
June 30, 2011	 	 	Six months ended
June 30, 2012	 	 	Six months ended
June 30, 2011	 	
Numerator for basic and diluted increase in net assets per share:	 	$	16,062	  	 	$	12,384	  	 	$	62,220	  	 	$	61,402	  	
Denominator for basic and diluted weighted average share:	 	 	36,639,037	  	 	 	36,444,775	  	 	 	36,623,538	  	 	 	36,414,137	  	
Basic and diluted earnings per share:	 	$	0.44	  	 	$	0.34	  	 	$	1.70	  	 	$	1.69	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2012
(in thousands, except shares
 
Note 11. Taxation
We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file federal and state tax returns, our major tax jurisdiction is federal. Our inception-to-date federal tax years remain subject to examination by the Internal Revenue Service.
There were no deferred tax assets or liabilities as of June 30, 2012 or December 31, 2011.
Note 12. Financial Highlights
The following is a schedule of financial highlights for the six months ended June 30, 2012 and for the year ended December 31, 2011:

 	  	Six months ended
June 30, 2012	 	 	Year ended
December 31, 2011	 	
Per Share Data:(a)	  	 	 	 	 	 	 	 	
Net asset value, beginning of year	  	$	22.02	  	 	$	22.73	  	
Net investment income	  	 	0.96	  	 	 	2.25	  	
Net realized and unrealized gain (loss)	  	 	0.73	  	 	 	(0.57	) 	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	1.69	  	 	 	1.68	  	
 	 	 	
Dividends to shareholders	  	 	(1.20	) 	 	 	(2.40	) 	
 	  	 	 	 	 	 	 	 	
Net asset value, end of period	  	$	22.51	  	 	$	22.02	  	
 	  	 	 	 	 	 	 	 	
Total return(b)	  	 	6.29	% 	 	 	(1.07	)% 	
 	  	 	 	 	 	 	 	 	
Net assets, end of period	  	$	824,923	  	 	$	805,941	  	
 	  	 	 	 	 	 	 	 	
Per share market value at end of period	  	$	22.26	  	 	$	22.09	  	
 	  	 	 	 	 	 	 	 	
Shares outstanding end of period	  	 	36,640,094	  	 	 	36,608,038	  	
 	  	 	 	 	 	 	 	 	
Ratio to average net assets:(c)	  	 	 	 	 	 	 	 	
Expenses without incentive fees	  	 	3.23	% 	 	 	4.45	% 	
Incentive fees	  	 	1.08	% 	 	 	2.49	% 	
 	  	 	 	 	 	 	 	 	
Total expenses	  	 	4.31	% 	 	 	6.94	% 	
 	  	 	 	 	 	 	 	 	
Net investment income	  	 	4.32	% 	 	 	9.97	% 	
 	  	 	 	 	 	 	 	 	
Portfolio turnover ratio	  	 	30.75	% 	 	 	34.54	% 	

(a)	Calculated using the average shares outstanding method	
(b)	Total return is based on the change in market price per share during the period and takes into account dividends reinvested with the dividend reinvestment plan. Not annualized for periods less than one year.	
(c)	Not annualized for six months ended June 30, 2012	
 
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SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES (unaudited)
(in thousands, except shares)
Schedule 12-14

 	 	 	 	 	 	 	Six months  ended
June 30, 2012	 	 	 	 	
Portfolio Company	 	Investment	 	As of
June 30,  2012
Number of
Shares/Principal
Amount	 	 	Amount of
dividends  and
interest included
in income	 	 	Amount of
equity in
net profit
and loss	 	 	As of
June 30, 2012
Fair Value	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AviatorCap SII, LLC I	 	Senior Secured Debt	 	 	3,400	  	 	$	226	  	 	$	—  	  	 	$	3,400	  	
AviatorCap SII, LLC II	 	Senior Secured Debt	 	 	5,070	  	 	 	316	  	 	 	—  	  	 	 	5,070	  	
AviatorCap SII, LLC III	 	Senior Secured Debt	 	 	6,320	  	 	 	552	  	 	 	—  	  	 	 	6,320	  	
USAW 767	 	Senior Secured Debt	 	 	3,986	  	 	 	349	  	 	 	—  	  	 	 	3,986	  	
SODO Corp.	 	Preferred Equity/Common	 	 	2,084	  	 	 	85	  	 	 	—  	  	 	 	2,251	  	
SOCAY Corp.	 	Preferred Equity/Common	 	 	13,526	  	 	 	566	  	 	 	—  	  	 	 	14,611	  	
SOINT, LLC	 	Senior Secured Debt	 	 	16,667	  	 	 	—  	  	 	 	—  	  	 	 	16,333	  	
SOINT, LLC	 	Preferred Equity/Common	 	 	87	  	 	 	—  	  	 	 	—  	  	 	 	8,667	  	
National Specialty Alloys, LLC	 	Equity	 	 	—  	  	 	 	350	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	$	2,444	  	 	$	—  	  	 	$	60,638	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	Equity	 	 	44,697,684	  	 	$	—  	  	 	$	—  	  	 	$	34,864	  	
AREP Fifty-Seventh LLC	 	Senior Debt	 	 	19,768	  	 	 	128	  	 	 	—  	  	 	 	19,373	  	
ARK Real Estate Partners II LP	 	Senior Debt	 	 	8,027	  	 	 	—  	  	 	 	—  	  	 	 	7,866	  	
DS Waters of America, Inc.	 	Senior Debt	 	 	30,292	  	 	 	1,515	  	 	 	—  	  	 	 	30,292	  	
Senior Preferred 15% Units of DSW Group Holdings LLC	 	Preferred Equity	 	 	13,952	  	 	 	4,009	  	 	 	—  	  	 	 	119,990	  	
Participating Preferred Units of DSW Group Holdings LLC	 	Common Equity	 	 	12,961	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	$	5,652	  	 	$	—  	  	 	$	212,384	  	

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Table of Contents
SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES (unaudited) (continued)
(in thousands, except shares)
 
The table below represents the balance at the beginning of the year, December 31, 2011 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of June 30, 2012.
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.

 	  	 	 	  	Six months  ended
June 30, 2012	 	 	 	 	
 	  	Beginning
Fair Value
December 31,
2011	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
June 30,
2012	 	
AviatorCap SII, LLC I	  	$	3,671	  	  	$	12	  	  	$	326	  	  	$	43	  	 	$	3,400	  	
AviatorCap SII, LLC II	  	 	5,611	  	  	 	19	  	  	 	628	  	  	 	68	  	 	 	5,070	  	
AviatorCap SII, LLC III	  	 	8,724	  	  	 	54	  	  	 	2,536	  	  	 	78	  	 	 	6,320	  	
USAW 767	  	 	4,831	  	  	 	30	  	  	 	918	  	  	 	43	  	 	 	3,986	  	
SODO Corp.	  	 	1,949	  	  	 	75	  	  	 	—  	  	  	 	227	  	 	 	2,251	  	
SOCAY Corp.	  	 	12,668	  	  	 	465	  	  	 	—  	  	  	 	1,478	  	 	 	14,611	  	
SOINT, LLC	  	 	—  	  	  	 	16,333	  	  	 	—  	  	  	 	—  	  	 	 	16,333	  	
SOINT, LLC	  	 	—  	  	  	 	8,667	  	  	 	—  	  	  	 	—  	  	 	 	8,667	  	
Ark Real Estate Partners LP	  	 	35,820	  	  	 	2,879	  	  	 	—  	  	  	 	(3,835	) 	 	 	34,864	  	
AREP Fifty-Seventh LLC	  	 	—  	  	  	 	19,373	  	  	 	—  	  	  	 	—  	  	 	 	19,373	  	
ARK Real Estate Partners II LP	  	 	—  	  	  	 	7,866	  	  	 	—  	  	  	 	—  	  	 	 	7,866	  	
DS Waters of America, Inc.	  	 	—  	  	  	 	36,033	  	  	 	6,755	  	  	 	1,014	  	 	 	30,292	  	
Senior Preferred 15% Units of DSW Group Holdings LLC	  	 	—  	  	  	 	119,196	  	  	 	—  	  	  	 	794	  	 	 	119,990	  	
Schedule 12-14

 	 	 	 	 	 	 	Year ended December 31, 2011	 	 	 	 	
Portfolio Company	 	Investment	 	As of
December 31, 2011
Number of
Shares/Principal
Amount	 	 	Amount of
dividends and
interest included
in income	 	 	Amount of
equity in
net profit
and loss	 	 	As of
December 31,
2011
Fair Value	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AviatorCap SII, LLC I	 	Senior Debt	 	 	3,678	  	 	$	288	  	 	$	—  	  	 	$	3,671	  	
AviatorCap SII, LLC II	 	Senior Debt	 	 	5,618	  	 	 	243	  	 	 	—  	  	 	 	5,611	  	
AviatorCap SII, LLC III	 	Senior Debt	 	 	8,696	  	 	 	628	  	 	 	—  	  	 	 	8,724	  	
USAW 767	 	Senior Debt	 	 	4,850	  	 	 	920	  	 	 	—  	  	 	 	4,831	  	
SODO Corp.	 	Preferred Equity/Common	 	 	2,009	  	 	 	96	  	 	 	—  	  	 	 	1,949	  	
SOCAY Corp.	 	Preferred Equity/Common	 	 	13,059	  	 	 	686	  	 	 	—  	  	 	 	12,668	  	
National Specialty Alloys, LLC	 	Equity	 	 	10,000	  	 	 	4,102	  	 	 	—  	  	 	 	16,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	$	6,963	  	 	$	—  	  	 	$	53,454	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	Equity	 	 	41,818,834	  	 	 	—  	  	 	 	—  	  	 	 	35,820	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	$	—  	  	 	$	—  	  	 	$	35,820	  	

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Table of Contents
SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES (unaudited) (continued)
(in thousands, except shares)
 
The table below represents the balance at the beginning of the year, December 31, 2010 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, 2011.
Gross additions represent increases in the investment from additional investments, amortization and 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,
2010	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2011	 	
AviatorCap SII, LLC I	  	$	—  	  	  	$	4,047	  	  	$	369	  	  	 	(7	) 	 	$	3,671	  	
AviatorCap SII, LLC II	  	 	—  	  	  	 	6,094	  	  	 	476	  	  	 	(7	) 	 	 	5,611	  	
AviatorCap SII, LLC III	  	 	—  	  	  	 	10,062	  	  	 	1,366	  	  	 	28	  	 	 	8,724	  	
USAW 767	  	 	6,618	  	  	 	76	  	  	 	1,848	  	  	 	(15	) 	 	 	4,831	  	
SODO Corp.	  	 	390	  	  	 	1,619	  	  	 	—  	  	  	 	(60	) 	 	 	1,949	  	
SOCAY Corp.	  	 	3,500	  	  	 	9,559	  	  	 	—  	  	  	 	(391	) 	 	 	12,668	  	
National Specialty Alloys, LLC	  	 	10,000	  	  	 	—  	  	  	 	—  	  	  	 	6,000	  	 	 	16,000	  	
Ark Real Estate Partners LP	  	 	29,235	  	  	 	7,066	  	  	 	53	  	  	 	(428	) 	 	 	35,820	  	
 
F-31

Table of Contents
PROSPECTUS

 
$1,000,000,000
 
Solar Capital Ltd.
 
Common Stock
Preferred Stock
Debt Securities
Warrants
Units

 
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.
 
We may offer, from time to time, in one or more offerings or series, up to $1,000,000,000 of our common stock, preferred stock, debt securities, warrants or units representing rights to purchase shares of our common stock, preferred stock or debt securities, which we refer to, collectively, as the “securities.” The preferred stock and warrants offered hereby may be convertible or exchangeable into shares of our common stock. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus.
 
In the event we offer common stock, the offering price per share of our common stock less any underwriting commissions or discounts will generally not be less than the net asset value per share of our common stock at the time we make the offering. However, we may issue shares of our common stock pursuant to this prospectus at a price per share that is less than our net asset value per share (a) with the prior approval of the majority of our common stockholders or (b) under such other circumstances as the SEC may permit.
 
The securities may be offered directly to one or more purchasers, or through agents designated from time to time by us, or to or through underwriters or dealers. The prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of the securities, and will disclose any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We may not sell any of the securities through agents, underwriters or dealers without delivery of this prospectus and a prospectus supplement describing the method and terms of the offering of such securities.
 
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SLRC.” On July 3, 2012, the last reported sales price on the NASDAQ Global Select Market for our common stock was $22.79 per share.
 
This prospectus, and the accompanying prospectus supplement, contains important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus, and the accompanying prospectus supplement, 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, 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 or the accompanying prospectus supplement.

 
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 17 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.

 
July 10, 2012

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You should rely only on the information contained in this prospectus and the accompanying prospectus supplement. 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 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. Our business, financial condition, results of operations and prospects may have changed since then.

 
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  	  	Page	 	
Summary	  	 	1	  	
Fees and Expenses	  	 	11	  	
Selected Financial and Other Data	  	 	14	  	
Risk Factors	  	 	17	  	
Cautionary Statement Regarding Forward-Looking Statements	  	 	36	  	
Use of Proceeds	  	 	37	  	
Price Range of Common Stock and Distributions	  	 	38	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	40	  	
Senior Securities	  	 	54	  	
Business	  	 	55	  	
Portfolio Companies	  	 	69	  	
Management	  	 	73	  	
Portfolio Management	  	 	82	  	
Investment Advisory and Management Agreement	  	 	83	  	
Administration Agreement	  	 	89	  	
License Agreement	  	 	89	  	
Certain Relationships and Transactions	  	 	90	  	
Control Persons and Principal Stockholders	  	 	91	  	
Regulation as a Business Development Company	  	 	92	  	
Determination of Net Asset Value	  	 	97	  	
Dividend Reinvestment Plan	  	 	99	  	
Material U.S. Federal Income Tax Considerations	  	 	101	  	
Sale of Common Stock Below Net Asset Value	  	 	108	  	
Issuance of Warrants or Securities to Subscribe for or Convertible into Shares of Our Common Stock	  	 	114	  	
Description of Our Capital Stock	  	 	115	  	
Description of Our Preferred Stock	  	 	122	  	
Description of Our Warrants	  	 	123	  	
Description of Our Debt Securities	  	 	124	  	
Description of Our Units	  	 	137	  	
Shares Eligible for Future Sale	  	 	138	  	
Plan of Distribution	  	 	139	  	
Custodian, Transfer and Distribution Paying Agent and Registrar	  	 	141	  	
Brokerage Allocation and Other Practices	  	 	141	  	
Legal Matters	  	 	141	  	
Independent Registered Public Accounting Firm	  	 	141	  	
Available Information	  	 	142	  	
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, we may offer, from time to time, in one or more offerings or series, up to $1,000,000,000 of our common stock, preferred stock, debt securities, units or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities on the terms to be determined at the time of the offering. The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, 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 any exhibits and the additional information described under “Available Information” and in the “Summary” and “Risk Factors” sections before you make an investment decision.

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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 after conducting a private placement of units of membership interest (“units”). 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, leaving Solar Capital Ltd. as the surviving entity. 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 the “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.
 
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 Investment Company Act of 1940, as amended (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 of our common stock. Concurrent with our initial public offering, Michael S. Gross, our chairman and chief executive officer, and Bruce Spohler, our chief operating officer, collectively purchased an additional 0.6 million shares of our common stock through a private placement transaction exempt from registration under the Securities Act of 1933, as amended, or the Securities Act (the “Concurrent Private Placement”). 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. As of December 17, 2010, the Senior Unsecured Notes have been repaid from proceeds of a private placement transaction that we completed on November 30, 2010 and from borrowings under our credit facility established in December 2010.
 
We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. 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. 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

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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, 2012, our long-term investments totaled $1.0 billion and our net asset value was $830.1 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represented 92.4% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 14.3%.
 
About Solar Capital Partners
 
Solar Capital Partners, our investment adviser, is controlled and led by Michael S. Gross, our chairman and chief executive officer, and Bruce Spohler, our chief operating officer. They are supported by a team of dedicated investment professionals, including senior team members Brian Gerson, Cedric Henley, David Mait and Suhail Shaikh. We refer to Messrs. Gross, Spohler, Gerson, Henley, Mait and Shaikh 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.
 
In addition, Solar Capital Partners presently serves as the investment adviser for Solar Senior Capital Ltd., or “Solar Senior,” a publicly traded business development company with more than $300 million of investable capital that invests in the senior debt securities of leveraged middle-market companies similar to those we intend to target for investment. The investment team led by Messrs. Gross and Spohler has invested in approximately 95 different portfolio companies for Solar Capital and Solar Senior, which investments involved an aggregate of approximately 80 different financial sponsors, through March 31, 2012. Since Solar Capital’s inception, these investment professionals have used their relationships in the middle-market financial sponsor and financial intermediary community to generate deal flow. As of July 3, 2012, Mr. Gross and Mr. Spohler beneficially owned, either directly or indirectly, approximately 5.79% and 5.61%, respectively, of our outstanding common stock.
 
Mr. Gross has 25 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. We also rely on the 25 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since its inception. In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment professionals include Messrs. Gerson, Henley, Mait and Shaikh, 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 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 middle-market leveraged companies. We believe that the size of this market, coupled with leveraged companies’ need for flexible sources of capital at attractive terms and rates, creates an attractive investment environment for us. See “Business — Market Opportunity.”
 
 	•	 	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 historically financed their lending and investing activities through securitization transactions have lost that source of funding and reduced lending significantly. Moreover, consolidation and the illiquid nature of investments have resulted in fewer middle-market lenders and market participants.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their investments. There is currently over $520 billion of uninvested private equity capital seeking debt financing to support acquisitions. We expect that middle-market private equity firms will continue to invest the approximately $185 billion raised since 2000 in middle-market companies and that those private equity firms will seek to support their investments with mezzanine loans from sources such as Solar Capital. Additionally, over $17.4 billion was raised by middle-market sponsors during 2011, which we believe demonstrates the continued appetite for middle-market acquisitions that require debt financing.	
 
 	•	 	The significant amount of debt maturing through 2018 should provide additional demand for capital. A high volume of financings were completed between the years 2004 and 2007, which are expected to mature over the next few years. We believe that this supply of prospective lending opportunities coupled with a lack of available credit in the middle-market lending space may offer attractive risk-adjusted returns to investors.	
 
 	•	 	Investing in private middle-market debt provides an attractive risk reward profile. In general, terms for illiquid, middle-market subordinated debt have been more attractive than those for larger corporations which are typically more liquid. We believe this is because fewer institutions are able to invest in illiquid asset classes. In 2011, on average, the total debt to EBITDA ratio for middle-market leveraged buyouts (“LBOs”) was 4.3x, versus 5.4x for large capitalization LBOs. This reduced leverage provides further cushion for borrowers to meet debt service obligations.	
 
Therefore, we believe that there is an attractive 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. See “Business — Competitive Advantages and Strategy.”
 
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 25 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 25 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.

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In addition to Messrs. Gross and Spohler, Solar Capital Partners’ senior investment team includes Messrs. Gerson, Henley, Mait and Shaikh, 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.
 
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, 2012, 99.5% of our total portfolio value of income producing assets, measured at fair value, was comprised of performing assets.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facilities and our $75 million senior secured notes (the “Notes”), 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.
 
Solar Capital’s Limited Leverage
 
As of March 31, 2012, we had total outstanding borrowings of $163.6 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. 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.
 
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 team and their ability to draw upon their average of over 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.
 
Since its inception, Solar Capital Partners has sourced investments in approximately 95 different portfolio companies for both Solar Capital and Solar Senior, collectively, which investments involved an aggregate of approximately 80 different financial sponsors, through March 31, 2012.
 
Versatile Transaction Structuring and Flexibility of Capital
 
We believe Solar Capital Partners’ senior investment team’s broad expertise and ability to draw upon its 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 BDC, 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

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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.
 
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 the investment experience, industry expertise and network of contacts of our senior investment professionals, as well as the other members of our investment team.
 
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 senior 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.
 
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.

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Risk Factors
 
The value of our assets, as well as the market price of shares of our common stock, 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 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 continue to qualify as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance;	
 
 	•	 	We are dependent upon Solar Capital Partners’ key personnel for our future success;	
 
 	•	 	We cannot assure you that shares of our common stock will not trade at a market price below our net asset value per share;	
 
 	•	 	The net asset value per share of our common stock may be diluted if we sell or issue shares of our common stock at prices below the then current 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 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.	
 
See “Risk Factors” beginning on page 17 and the other information included in this prospectus, for additional discussion of factors you should carefully consider before deciding to invest in our securities.

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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 BDC under the 1940 Act. As a BDC, 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 have elected to be treated for federal income tax purposes, and intend to continue to qualify annually, 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 (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, New York, New York 10022, and our telephone number is (212) 993-1670.

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OFFERINGS
 
We may offer, from time to time, in one or more offerings or series, up to $1,000,000,000 of our common stock, preferred stock, debt securities, units or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, on terms to be determined at the time of the offering. We will offer our securities at prices and on terms to be set forth in one or more supplements to this prospectus.
 
At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2013 Annual Stockholders Meeting, which is expected to be held in May 2013. However, notwithstanding such stockholder approval, since our initial public offering on February 9, 2010, we have not sold any shares of our common stock at a price below our then current net asset value per share. Any such issuance of shares of our common stock below net asset value will be dilutive to the net asset value of our common stock. See “Risk Factors—Risks Relating to an Investment in Our Securities” and “Sales of Common Stock Below Net Asset Value.”
 
The securities may be offered directly to one or more purchasers, or through agents designated from time to time by us, or to or through underwriters or dealers. The prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of the securities, and will disclose any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We may not sell any of the securities through agents, underwriters or dealers without delivery of this prospectus and a prospectus supplement describing the method and terms of the offering of such securities.
 
Set forth below is additional information regarding offerings of our common stock:
 
Use of Proceeds	Unless otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of our securities for general corporate purposes, which includes, among other things, (a) investing in portfolio companies in accordance with our investment objective and strategies and market conditions and (b) repaying indebtedness. Each supplement to this prospectus relating to an offering will more fully identify the use of the proceeds from such offering. See “Use of Proceeds.”	
 
NASDAQ Global Select Market symbol	“SLRC”	
 
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. The specific tax characteristics of our dividends will be reported to shareholders after the end of each calendar year. We may issue preferred stock from time to time, although we have no immediate intention to do so. If we issue shares of preferred stock, holders of such preferred stock will be entitled to receive cash dividends at an annual rate that will be fixed or will vary for the successive dividend periods for each series. In general, the dividend periods for fixed rate preferred stock will be quarterly.	

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Taxation	We have elected to be treated for federal income tax purposes, and intend to continue to qualify annually, 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 “Plan of Distribution” and “Material U.S. Federal Income Tax Considerations” in this prospectus.	
 
Leverage	We have historically and will in the future borrow funds to make investments. As a result, we will be exposed to the risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for gain and loss on amounts invested and therefore increases the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to our investment adviser, Solar Capital Partners, will be borne by our common stockholders.	
 
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. 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 this 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	

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 	portion of the compensation of our chief financial officer and any administrative support staff. See “Administration Agreement” in this 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 this 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 this 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. 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 Our Capital Stock” in this 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, 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 borne by us (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	  	2.54%(4)	
Incentive fees payable under our Investment Advisory and Management Agreement	  	2.54%(5)	
Interest payments on borrowed funds	  	1.30%(6)	
Other expenses (estimated)	  	0.82%(7)	
 	  	 	
Total annual expenses	  	7.20%     	
 
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	  	$	47	  	  	$	140	  	  	$	235	  	  	$	473	  	
 
(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 and the “Example” will be updated accordingly.	
(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 fees incurred for the three months ended March 31, 2012. See “Investment Advisory and Management Agreement.”	
(5)	 	Assumes that annual incentive fees earned by our investment adviser, Solar Capital Partners, remain consistent with the incentive fees earned by Solar Capital Partners for the three months ended March 31, 2012. 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 for all borrowings during the three months ended March 31, 2012. We used the LIBOR rate on March 31, 2012 and the interest rate on our revolving credit facilities and our $35 million senior secured term loan (the “Term Loan”) on March 31, 2012. We have also included the estimated amortization of fees incurred in establishing our revolving credit facilities and our Term Loan as of March 31, 2012. Additionally, we included the estimated cost of commitment fees for unused balances on our revolving credit facilities. As of March 31, 2012, we had $128.6 million outstanding and $376.4 million remaining available to us under our revolving credit facilities 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 amounts incurred for the three months ended March 31, 2012 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 Advisory and 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. For example, if we assumed that we received our 5% annual return completely in the form of net realized capital gains on our investments, computed net of all cumulative unrealized depreciation on our investments, the projected dollar amount of total cumulative expenses set forth in the above illustration would be as follows:

 	  	1 Year	 	  	3 Years	 	  	5 Years	 	  	10 Years	 	
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	  	$	57	  	  	$	169	  	  	$	279	  	  	$	550	  	
 
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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 unless the company makes open market purchases and the shares received will be determined based on the average price paid by our agent, plus commissions. 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 fiscal years ended December 31, 2011, 2010, 2009 and 2008 and for the period from March 13, 2007 (Solar Capital LLC inception) through December 31, 2007. Financial information for the periods ending December 31, 2011, 2010, 2009, 2008 and 2007 has been derived from our financial statements that were audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. The financial information at and for the three months ended March 31, 2012 was derived from our unaudited financial statements and related notes. 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 periods, have been included. Our results for the interim period may not be indicative of our results for the full year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Senior Securities” below for more information.

($ in thousands, except per share data)	 	Three
months
ended
March 31,
2012(4)	 	 	Year ended
December 31,
2011	 	 	Year ended
December 31,
2010	 	 	Year ended
December 31,
2009	 	 	Year ended
December 31,
2008	 	 	Period from
March  13,
2007 (inception)
through
December 31,
2007	 	
 	 	(unaudited)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income statement data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	 	$	36,309	  	 	$	138,900	  	 	$	124,641	  	 	$	109,670	  	 	$	133,959	  	 	$	78,455	  	
Total expenses	 	$	15,210	  	 	$	56,996	  	 	$	55,429	  	 	$	42,408	  	 	$	46,560	  	 	$	25,461	  	
Net investment income	 	$	21,099	  	 	$	81,904	  	 	$	69,212	  	 	$	67,262	  	 	$	87,399	  	 	$	52,994	  	
Net realized gain (loss)	 	$	9,166	  	 	$	(2,393	) 	 	$	(38,968	) 	 	$	(264,898	) 	 	$	(937	) 	 	$	(10,489	) 	
Net change in unrealized gain (loss)	 	$	15,893	  	 	$	(18,196	) 	 	$	111,641	  	 	$	284,572	  	 	$	(492,290	) 	 	$	6,595	  	
Net increase (decrease) in net assets resulting from operations	 	$	46,158	  	 	$	61,315	  	 	$	141,885	  	 	$	86,936	  	 	$	(405,828	) 	 	$	49,100	  	
 	 	 	 	 	 	 	
Other data (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average annualized yield on income producing investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
On fair value(1)(4)	 	 	14.3	% 	 	 	14.2	% 	 	 	14.3	% 	 	 	14.8	% 	 	 	17.1	% 	 	 	12.9	% 	
On cost(2)(4)	 	 	13.5	% 	 	 	13.2	% 	 	 	13.8	% 	 	 	13.7	% 	 	 	11.9	% 	 	 	12.7	% 	
Number of portfolio companies at period end(4)	 	 	34	  	 	 	40	  	 	 	36	  	 	 	36	  	 	 	44	  	 	 	38	  	
 	 	 	 	 	 	 	
($ in thousands, except per share data)	 	As of
March 31,
2012(4)	 	 	As of
December 31,
2011	 	 	As of
December 31,
2010	 	 	As of
December 31,
2009	 	 	As of
December 31,
2008	 	 	As of
December 31,
2007	 	
 	 	(unaudited)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance sheet data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment portfolio	 	$	1,008,515	  	 	$	1,045,043	  	 	$	976,221	  	 	$	863,140	  	 	$	768,215	  	 	$	1,178,736	  	
Total cash and cash equivalents	 	$	10,363	  	 	$	11,787	  	 	$	288,732	  	 	$	5,675	  	 	$	65,841	  	 	$	169,692	  	
Total assets	 	$	1,059,807	  	 	$	1,079,431	  	 	$	1,291,791	  	 	$	885,421	  	 	$	873,026	  	 	$	1,396,545	  	
Credit facilities payable	 	$	128,643	  	 	$	201,355	  	 	$	400,000	  	 	$	88,114	  	 	$	—  	  	 	$	—  	  	
Senior secured term loan	 	$	35,000	  	 	$	35,000	  	 	$	35,000	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
Net assets	 	$	830,134	  	 	$	805,941	  	 	$	826,994	  	 	$	697,903	  	 	$	852,673	  	 	$	1,258,501	  	
 	 	 	 	 	 	 	
Per share data:(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value per share	 	$	22.68	  	 	$	22.02	  	 	$	22.73	  	 	$	21.24	  	 	$	25.95	  	 	$	38.30	  	
Net investment income	 	$	0.58	  	 	$	2.25	  	 	$	2.08	  	 	$	2.05	  	 	$	2.66	  	 	$	1.62	  	
Net realized and unrealized gain (loss)	 	$	0.68	  	 	$	(0.57	) 	 	$	2.19	  	 	$	0.60	  	 	$	(15.01	) 	 	$	(0.12	) 	
Dividends and distributions declared	 	$	0.60	  	 	$	2.40	  	 	$	2.14	  	 	$	7.36	  	 	$	—  	  	 	$	—  	  	
 
(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	
 
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 	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, 36,383,158 shares outstanding and 33,258,402 weighted average shares outstanding for the year ended December 31, 2010, and 36,608,038 shares outstanding and 36,470,384 weighted average shares outstanding for the year ended December 31, 2011.	
(4)	 	Unaudited.	
 
Selected Quarterly Financial Data (Unaudited)
(dollar amounts in thousands, except per share data)

  	  	2012	 	
  	  	Q1	 	
Total investment income	  	$	36,309	  	
Net investment income	  	$	21,099	  	
Net realized and unrealized gain	  	$	25,059	  	
Net increase (decrease) in net assets resulting from operations	  	$	46,158	  	
Earnings per share(1)	  	$	1.26	  	
Net asset value per share at the end of the quarter(2)	  	$	22.68	  	

 	  	2011	 	
 	  	Q4	 	  	Q3	 	 	Q2	 	 	Q1	 	
Total investment income	  	$	35,994	  	  	$	35,329	  	 	$	35,283	  	 	$	32,294	  	
Net investment income	  	$	20,675	  	  	$	20,711	  	 	$	21,368	  	 	$	19,150	  	
Net realized and unrealized gain (loss)	  	$	31,182	  	  	$	(72,655	) 	 	$	(8,984	) 	 	$	29,868	  	
Net increase (decrease) in net assets resulting from operations	  	$	51,857	  	  	$	(51,994	) 	 	$	12,384	  	 	$	49,018	  	
Earnings per share(3)	  	$	1.42	  	  	$	(1.42	) 	 	$	0.34	  	 	$	1.35	  	
Net asset value per share at the end of the quarter(4)	  	$	22.02	  	  	$	21.20	  	 	$	23.22	  	 	$	23.48	  	
 	  	2010	 	
 	  	Q4	 	  	Q3	 	 	Q2	 	 	Q1	 	
Total investment income	  	$	31,644	  	  	$	29,403	  	 	$	28,284	  	 	$	35,310	  	
Net investment income	  	$	17,384	  	  	$	15,551	  	 	$	15,166	  	 	$	21,111	  	
Net realized and unrealized gain	  	$	24,974	  	  	$	5,458	  	 	$	1,348	  	 	$	40,893	  	
Net increase in net assets resulting from operations	  	$	42,358	  	  	$	21,009	  	 	$	16,514	  	 	$	62,004	  	
Earnings per share(5)	  	$	1.24	  	  	$	0.63	  	 	$	0.50	  	 	$	1.90	  	
Net asset value per share at the end of the quarter(6)	  	$	22.73	  	  	$	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(7)	  	$	1.23	  	  	$	1.17	  	 	$	1.03	  	 	$	(0.78	)	
Net asset value per share at the end of the quarter(8)	  	$	21.24	  	  	$	22.30	  	 	$	23.61	  	 	$	22.57	  	
 
(1)	 	Based on 36,608,038 weighted average shares of Solar Capital Ltd. outstanding during the first quarter of 2012.	
(2)	 	Based on 36,608,038 shares of Solar Capital Ltd. outstanding as of the end of the first quarter of 2012.	
 
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(3)	 	Based on 36,552,979, 36,498,451, 36,444,775 and 36,383,158 weighted average shares of Solar Capital Ltd. outstanding during the fourth, third, second and first quarters of 2011, respectively.	
(4)	 	Based on 36,608,038, 36,501,373, 36,447,607 and 36,383,158 shares of Solar Capital Ltd. outstanding as of the end of the fourth, third, second and first quarters of 2011, respectively.	
(5)	 	Based on 34,267,088, 33,165,867, 33,029,516 and 32,553,322 weighted average shares of Solar Capital Ltd. outstanding during each of the fourth, third, second and first quarters of 2010, respectively.	
(6)	 	Based on 36,383,158, 33,168,872, 33,030,641 and 32,928,257 shares of Solar Capital Ltd. outstanding as of the end of the fourth, third, second and first quarter of 2010, respectively.	
(7)	 	Based on 32,860,454 weighted average shares of Solar Capital Ltd. outstanding during each respective quarter.	
(8)	 	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 securities, 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 securities. 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 and the trading price of our common stock could decline or the value of our preferred stock, debt securities, units or warrants may 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 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.
 
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.
 
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.
 
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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 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.
 
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Capital markets were recently in a period of disruption and instability. These market conditions materially and adversely affected debt and equity capital markets in the United States and abroad, which had, and may in the future have, a negative impact on our business and operations.
 
The global capital markets were recently in 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 United States federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. These conditions may return in the future. If these conditions return, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. In such situations, equity capital may be difficult to raise because, subject to some limited exceptions which as of the date of this prospectus apply to us, as a BDC we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2012 Annual Stockholders Meeting, which is expected to be held in May 2013. However, notwithstanding such stockholder approval, since our initial public offering on February 9, 2010, we have not sold any shares of our common stock at a price below our then current net asset value per share. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 200% immediately after each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.
 
The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including the recent extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations.
 
The downgrade of the U.S. credit rating and the economic crisis in Europe could negatively impact our business, financial condition and results of operations.
 
Recent U.S. debt ceiling and budget deficit concerns, together with signs of deteriorating sovereign debt conditions in Europe, have increased the possibility of additional credit-rating downgrades and economic slowdowns. Although U.S. lawmakers passed legislation to raise the federal debt ceiling, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the United States from “AAA” to “AA+” in August 2011. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, and the impact of the current crisis in Europe with respect to the ability of certain European Union countries to continue to service their sovereign debt obligations is inherently unpredictable and could adversely effect the U.S. and global financial markets and economic conditions. There can be no assurance that governmental or other measures to aid economic recovery will be effective. These developments, and the government’s credit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the capital markets on favorable terms. In addition, the decreased credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our stock price. Continued adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.
 
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Economic recessions or downturns could impair our portfolio companies and harm our operating results.
 
Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments at fair value. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could 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 prevent us from increasing investments and harm our operating results.
 
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional 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, depending on the facts and circumstances, including the extent to which we actually provided significant 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.
 
The effect of global climate change may impact the operations of our portfolio companies.
 
There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.
 
Price declines and illiquidity in the corporate debt markets may adversely affect, 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 incur substantial losses in future periods, which could 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 discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make
 
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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 because of the desire to maintain our RIC tax status.
 
When we 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.
 
We usually do not 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. Any such limitations on the ability of our portfolio companies to make principal or interest payments to us, if at all, may reduce our net asset value and have a negative material adverse impact to our business, financial condition and results of operation.
 
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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. 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 transactions 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. To the extent we engage in hedging transactions, we also face the risk that counterparties to the derivative instruments we hold may default, which may expose us to unexpected losses from positions where we believed that our risk had been appropriately hedged.
 
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 our senior investment professionals held senior positions at a number of investment firms, their track record and achievements are not necessarily indicative of future results that will be achieved by our investment adviser. In their roles at such other firms, our senior investment professionals were part of investment teams, and they were not solely responsible for generating investment ideas. In addition, such investment teams arrived at investment decisions by consensus.
 
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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. 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. At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2013 Annual Stockholders Meeting, which is expected to be held in May 2013. However, notwithstanding such stockholder approval, since our initial public offering on February 9, 2010, we have not sold any shares of our common stock at a price below our then current net asset value per share. 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.
 
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;	
 
 	•	 	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, 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.
 
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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 BDC, we may be limited in our ability to make distributions.
 
We may choose to pay dividends in our own common stock, in which case our stockholders may be required to pay federal income taxes in excess of the cash dividends they receive.
 
In order to satisfy the Annual Distribution Requirement (as described under “Material U.S. Federal Income Tax Considerations”), we may distribute taxable dividends that are payable in cash or shares of our common stock at the election of each stockholder. Under certain applicable provisions of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of stockholders are treated as taxable dividends. The Internal Revenue Service has issued private rulings indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under these rulings, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock. If we decide to make any distributions consistent with these rulings that are payable in part in our stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock. For a more detailed discussion, see “Material U.S. Federal Income Tax Considerations.”
 
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.
 
The shares of our common stock beneficially owned by each of Messrs. Gross and Spohler immediately prior to completion of our initial public offering, including any shares that are attributable to such shares issued pursuant to our dividend reinvestment plan, are no longer subject to lock-up restrictions that each of Messrs. Gross and Spohler agreed to in connection with our initial public offering, and are generally available for resale without restriction, subject to the provisions of Rule 144 promulgated under the Securities Act. In addition, on November 30, 2010, Messrs. Gross and Spohler jointly acquired 115,000 shares of our common stock in a private placement transaction conducted in accordance with Regulation D under the Securities Act. Such shares have been registered with the SEC and are generally available for resale. 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.
 
We will have broad discretion over the use of proceeds of any offering made pursuant to this prospectus, to the extent it is successful.
 
We will have significant flexibility in applying the proceeds of any offering made pursuant to this prospectus. We will also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from net proceeds. Our ability to achieve our investment objective may be limited to
 
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the extent that the net proceeds of the offering, pending full investment, are used to pay operating expenses. In addition, we can provide you no assurance that the current offering will be successful, or that by increasing the size of our available equity capital our aggregate expenses, and correspondingly, our expense ratio, will be lowered.
 
The net asset value per share of our common stock may be diluted if we issue or sell shares of our common stock at prices below the then current net asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock.
 
At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2013 Annual Stockholders Meeting, which is expected to be held in May 2013. However, notwithstanding such stockholder approval, since our initial public offering on February 9, 2010, we have not sold any shares of our common stock at a price below our then current net asset value per share.
 
In addition, at our 2011 Annual Stockholders Meeting, our stockholders authorized us to sell or otherwise issue warrants or securities to subscribe for or convertible into shares of our common stock subject to certain limitations (including, without limitation, that the number of shares issuable does not exceed 25% of our then outstanding common stock and that the exercise or conversion price thereof is not, at the date of issuance, less than the market value per share of our common stock). Such authorization has no expiration.
 
We may also use newly issued shares to implement our dividend reinvestment plan, whether our shares are trading at a premium or at a discount to our then current net asset value per share. Any decision to issue or sell shares of our common stock below our then current net asset value per share or securities to subscribe for or convertible into shares of our common stock would be subject to the determination by our board of directors that such issuance or sale is in our and our stockholders’ best interests.
 
If we were to issue or sell shares of our common stock below our then current net asset value per share, such issuances or sales would result in an immediate dilution to the net asset value per share of our common stock. This dilution would occur as a result of the issuance or sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance or sale. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.
 
In addition, if we issue warrants or securities to subscribe for or convertible into shares of our common stock, subject to certain limitations, the exercise or conversion price per share could be less than net asset value per share at the time of exercise or conversion (including through the operation of anti-dilution protections). Because we would incur expenses in connection with any issuance of such securities, such issuance could result in a dilution of the net asset value per share at the time of exercise or conversion. This dilution would include reduction in net asset value per share as a result of the proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest than the increase in our assets resulting from such issuance.
 
Further, if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value per share, their voting power will be diluted. For example, if we sell an additional 10% of our common shares at a 5% discount from net asset value, a stockholder who does not participate in that offering for its proportionate interest will suffer net asset value dilution of up to 0.5% or $5 per $1000 of net asset value. For additional information and hypothetical
 
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examples of these risks, see “Sale of Common Stock Below Net Asset Value” and the prospectus supplement pursuant to which such sale is made. Similarly, 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.
 
If we issue preferred stock, the net asset value and market value of our common stock may become more volatile.
 
We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. The issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence over our affairs.
 
Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.
 
Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of the board of directors at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities, might impair our ability to maintain our qualification as a RIC for federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.
 
Risks Relating to Our Business and Structure
 
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
 
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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. Specifically each of Messrs. Gross and Spohler serve as chief executive officer and chief operating officer, respectively, of Solar Senior.
 
Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
 
We expect that the principals of our investment adviser will maintain and develop their relationships with financial sponsors, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the senior investment professionals of our investment adviser fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the senior investment professionals of our investment adviser have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
 
A 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. 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 and our revolving credit facilities. Any such failure could result in an event of default and all of our debt being declared immediately due and payable and 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 able to initiate significant originations or to operate our business in the normal course. These situations may arise due
 
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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 BDCs. For example, BDCs 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 BDCs 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.
 
As of March 31, 2012, we had $128.6 million outstanding under our credit facilities and $35 million outstanding under our Term Loan. If we issue preferred stock, the preferred stock would rank “senior” to
 
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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.
 
At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2013 Annual Stockholders Meeting, which is expected to be held in May 2013.
 
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 facilities 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%. Additionally, our revolving credit facilities require us to comply with certain financial and other restriction covenant including maintaining an asset coverage ratio of less than 200% at any time. Failure to maintain compliance with these covenants could result in an event of default and all of our debt being declared immediately due and payable. 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.
 
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In addition, our revolving credit facilities 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 March 31, 2012, we had $128.6 million outstanding under our credit facilities and $35 million outstanding under our Term Loan.
 
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)	  	 	(13.53	)%	  	 	(7.14	)%	  	 	(0.76	)%	  	 	5.62	%	  	 	12.01	%	
 
(1)	 	Assumes $1.06 billion in total assets and $163.6 million in total debt outstanding, which reflects our total assets and total debt outstanding as of March 31, 2012, and a cost of funds of 3.85%. Excludes non-leverage related liabilities.	
 
To the extent we use debt or preferred stock to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
 
To the extent we borrow money, or issue preferred stock, to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay dividends on preferred stock 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, except to the extent we issue fixed rate debt or preferred stock, 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, 2012, we had $128.6 million outstanding under our credit facilities and $35 million outstanding under our Term Loan.
 
We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for gain or loss and the risks of investing in us in the same way as our borrowings.
 
Preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common stockholders, and preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference.
 
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
 
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value these securities on a quarterly basis in accordance with our valuation policy, which is at all times consistent with U.S. generally accepted accounting policies (“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.
 
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. For example, Solar Capital Partners presently serves as investment adviser to Solar Senior, a publicly-traded BDC which focuses on investing primarily in senior secured loans, including first lien, unitranche and second lien debt instruments. In addition, Michael S. Gross, our chairman and chief executive officer, Bruce Spohler, our chief operating officer, and Richard Peteka, our chief financial officer, serve in similar capacities for Solar Senior. 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.
 
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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.
 
We may be obligated to pay our investment adviser incentive compensation even if we incur a loss.
 
Our investment adviser will be entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our pre-incentive fee net investment income for that quarter (before deducting incentive compensation) above a performance threshold for that quarter. Accordingly, since the performance threshold is based on a percentage of our net asset value, decreases in our net asset value make it easier to achieve the performance threshold. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay Solar Capital Partners incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter.
 
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
 
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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 RIC under Subchapter M of the Code.
 
Although we have elected to be treated as a RIC under Subchapter M of the Code, no assurance can be given that we will be able to qualify for and maintain RIC status. To 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 “investment company taxable income,” which generally is our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses. 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 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 become subject to corporate-level income tax, the resulting corporate-level 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 U.S. 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, for example, if we receive warrants in connection with the making of a loan, or “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. See “Material U.S. Federal Income Tax Considerations.”
 
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
 
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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 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.
 
The impact of recent financial reform legislation on us is uncertain.
 
In light of recent conditions in the U.S. and global financial markets, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry. The
 
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Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Reform Act”) became effective on July 21, 2010; although many provisions of the Dodd-Frank Reform Act have delayed effectiveness or will not become effective until the relevant federal agencies issue new rules to implement the Dodd-Frank Reform Act. Nevertheless, the Dodd-Frank Reform Act may have a material adverse impact on the financial services industry as a whole and on our business, results of operations and financial condition. Accordingly, we cannot predict the effect the Dodd-Frank Act or its implementing regulations will have on our business, results of operations or financial condition.
 
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 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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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
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.
 
The forward-looking statements contained in this prospectus involve risks and uncertainties, including statements as to:
 
 	•	 	our future operating results;	
 
 	•	 	our business prospects and the prospects of our portfolio companies;	
 
 	•	 	the impact of investments that we expect to make;	
 
 	•	 	our contractual arrangements and relationships with third parties;	
 
 	•	 	the dependence of our future success on the general economy and its impact on the industries in which we invest;	
 
 	•	 	the ability of our portfolio companies to achieve their objectives;	
 
 	•	 	our expected financings and investments;	
 
 	•	 	our breach of any of the covenants or other provisions in our debt agreements;	
 
 	•	 	the adequacy of our cash resources and working capital; and	
 
 	•	 	the timing of cash flows, if any, from the operations of our portfolio companies.	
 
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. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. 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. However, we will update this prospectus to reflect any material changes to the information contained herein. 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.
 
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USE OF PROCEEDS
 
We intend to use the net proceeds from the sale of our securities pursuant to this prospectus for general corporate purposes, which may include investing in debt or equity securities consistent with our investment objective, repayment of outstanding indebtedness, acquisitions and other general corporate purposes. We are continuously identifying, reviewing and, to the extent consistent with our investment objective, funding new investments. As a result, we typically raise capital as we deem appropriate to fund such new investments. The supplement to this prospectus relating to an offering will more fully identify the use of the proceeds from such offering.
 
We estimate that it will take three to six months for us to substantially invest the net proceeds of any offering made pursuant to this prospectus, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurance that we will be able to achieve this goal. We expect that it may take more than three months to invest all of the proceeds of this offering, in part because investments in private companies often require substantial prior research and due diligence.
 
Pending these uses, we will invest such net proceeds primarily in cash, cash equivalents, and U.S. government securities and other high-quality debt investments that mature in one year or less. The management fee payable by us to our investment adviser will not be reduced while our assets are invested in such securities.
 
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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 intraday 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	 	 	Premium/Discount
of High Sales
Price to NAV(2)	 	 	Premium/Discount
of Low Sales
Price to NAV(2)	 	 	Cash
Distributions
Per Share(3)	 	 	

 	 	 	 	 	High	 	 	Low	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fiscal 2012	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Third Quarter (through July 3, 2012)	 	 	*	  	 	 	$22.26	  	 	 	$22.84	  	 	 	  	* 	 	 	  	* 	 	 	*	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	 	*	  	 	 	$22.60	  	 	 	$20.05	  	 	 	  	* 	 	 	  	* 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	22.68	  	 	 	$23.89	  	 	 	$21.90	  	 	 	5.3	% 	 	 	(3.4	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Fiscal 2011	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fourth Quarter	 	$	22.02	  	 	 	$23.66	  	 	 	$18.90	  	 	 	7.4	% 	 	 	(14.2	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Third Quarter	 	$	21.20	  	 	 	$25.16	  	 	 	$19.17	  	 	 	18.7	% 	 	 	(9.6	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	$	23.22	  	 	 	$25.93	  	 	 	$23.92	  	 	 	11.7	% 	 	 	3.0	% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	23.48	  	 	 	$25.45	  	 	 	$21.87	  	 	 	8.4	% 	 	 	(6.9	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Fiscal 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fourth Quarter	 	$	22.73	  	 	 	$25.39	  	 	 	$21.32	  	 	 	11.7	% 	 	 	(6.2	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Third Quarter	 	$	22.09	  	 	 	$21.80	  	 	 	$18.75	  	 	 	(1.3	)% 	 	 	(15.1	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
Second Quarter	 	$	22.07	  	 	 	$24.20	  	 	 	$18.77	  	 	 	9.7	% 	 	 	(15.0	)% 	 	$	0.60	  	 	 	 	 	 	 	 	 	 	
First Quarter(4)	 	$	22.18	  	 	 	$22.22	  	 	 	$17.29	  	 	 	0.2	% 	 	 	(22.0	)% 	 	$	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 intraday sales price divided by NAV.	
(3)	 	Represents the cash distribution declared in the specified quarter.	
(4)	 	The period from February 9, 2010 through March 31, 2010.	
*	 	Not determinable at the time of filing.	
 
On July 3, 2012, the last reported sales price of our common stock was $22.79 per share. As of July 3, 2012, we had 15 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 July 3, 2012, our shares of common stock traded at a premium equal to approximately 0.5% of the net assets attributable to those shares based upon our net asset value as of March 31, 2012. 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.

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The following table reflects the cash distributions, including dividends and returns of capital, if any, per share that we have declared on our common stock since our initial public offering.:

Date Declared	  	Record Date	  	Payment Date	  	Amount	 	
Fiscal 2012	  	 	  	 	  	 	 	 	
May 1, 2012	  	June 19, 2012	  	July 3, 2012	  	$	0.60	  	
February 22, 2012	  	March 20, 2012	  	April 3, 2012	  	 	0.60	  	
 	  	 	  	 	  	 	 	 	
Total 2012	  	 	  	 	  	$	1.20	  	
 	  	 	  	 	  	 	 	 	
Fiscal 2011	  	 	  	 	  	 	 	 	
November 1, 2011	  	December 15, 2011	  	December 29, 2011	  	$	0.60	  	
August 2, 2011	  	September 20, 2011	  	October 4, 2011	  	 	0.60	  	
May 2, 2011	  	June 17, 2011	  	July 5, 2011	  	 	0.60	  	
March 1, 2011	  	March 17, 2011	  	April 4, 2011	  	 	0.60	  	
 	  	 	  	 	  	 	 	 	
Total 2011	  	 	  	 	  	$	2.40	  	
 	  	 	  	 	  	 	 	 	
Fiscal 2010	  	 	  	 	  	 	 	 	
November 2, 2010	  	December 17, 2010	  	December 30, 2010	  	$	0.60	  	
August 3, 2010	  	September 17, 2010	  	October 4, 2010	  	 	0.60	  	
May 4, 2010	  	June 17, 2010	  	July 2, 2010	  	 	0.60	  	
January 26, 2010	  	March 18, 2010	  	April 1, 2010	  	 	0.34	  	
 	  	 	  	 	  	 	 	 	
Total 2010	  	 	  	 	  	$	2.14	  	

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 have elected 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 we have elected to be treated as a RIC under Subchapter M of the Code. In February 2010, we completed our initial public offering and a concurrent private offering of shares to management.
 
We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. 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. 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 March 31, 2012, our long term investments totaled $1.0 billion and our net asset value was $830.1 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represented 92.4% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 14.3%.
 
Recent Developments
 
New Credit Facility
 
On June 29, 2012, we entered into a new four-year $485 million senior secured credit facility (the “New Facility”). The New Facility includes a $450 million senior secured revolving loan tranche and a $35 million senior secured term loan tranche, and replaces both our $405 million senior secured revolving credit facility with Citibank, N.A. as administrative agent, and our Term Loan. The New Facility contains an accordion feature whereby it can be expanded up to $800 million with additional new lenders or increases in the commitments of current lenders. The New Facility, among other things, matures in July 2016, includes a ratable amortization in the fourth year, generally bears interest based on LIBOR plus 2.50% and has no LIBOR floor requirement. The New Facility includes customary covenants, including minimum asset coverage and minimum equity requirements, as well as customary events of default. Citibank N.A. acted as administrative agent, JPMorgan Chase Bank, N.A. acted as syndication agent, and SunTrust Bank acted as documentation agent for the New Facility. With the inclusion of the New Facility, our total borrowing capacity totals $660 million.
 
Notes Issuance
 
On May 11, 2012, we issued $75 million of five-year, senior secured notes in a private placement with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Notes will be due semi-annually on
 
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May 10th and November 10th. We may prepay the Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a “make-whole” prepayment premium. The proceeds from the issuance of the Notes were used to fund new portfolio investments, reduce outstanding borrowings and/or commitments on our credit facilities and for general corporate purposes.
 
Dividend
 
On May 1, 2012, our board of directors declared a quarterly dividend of $0.60 per share, which was paid on July 3, 2012 to holders of record as of June 19, 2012. We expect the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the calendar year.
 
DSW Group Inc.
 
Subsequent to March 31, 2012, DSW Group Inc. (“DSW”), our largest investment, completed its recapitalization. In April 2012, Solar and other Holdco note holders exchanged their PIK notes for preferred and common equity of DSW. The preferred equity has a dividend rate and liquidation preference consistent with the notes. In addition, Holdco note holders received a majority of the DSW’s common equity, control of the board, and will have control over significant corporate actions including refinancing and exit alternatives. We do not believe that the valuation of the new assets would have differed materially from the valuation of the asset held at March 31, 2012, had this event occurred prior to the end of the quarter.
 
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 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 including credit risk;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
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 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business and; 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, 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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Fair Value Measurements
As of March 31, 2012
(in thousands)

 	  	 	 	  	 	 	  	 	 	
 	 	 	 	 	
 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	 	—  	  	  	$	47,810	  	  	$	360,112	  	  	$	407,922	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	$	27,731	  	  	$	500,610	  	  	$	528,341	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	$	15,133	  	  	$	15,133	  	
Common Equity / Partnership Interests / Warrants	  	$	10,120	  	  	 	—  	  	  	$	46,999	  	  	$	57,119	  	
Derivative assets—interest rate cap	  	 	—  	  	  	$	212	  	  	 	—  	  	  	$	212	  	
Derivative assets—forward contracts	  	 	—  	  	  	$	82	  	  	 	—  	  	  	$	82	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	$	1,080	  	  	 	—  	  	  	$	1,080	  	
 
At March 31, 2012, the fair value of investments classified as Level 3 was approximately $922.9 million or 87.1% of total assets. There were no investments transferred into or out of Level 3 during the first quarter of 2012.
 
The significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 investments include current market yields as indicated by comparable publicly traded investments and loan indices and EBITDA multiples as indicated by current, comparable market transactions (see table below). However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral, and not presented in the table below.
 
The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of March 31, 2012 were as follows:

EBITDA Multiples (Enterprise Value)	  	 	3.6x to 12.0x	  	
Market Yields	  	 	10.2% to 20.5	% 	
 
Significant increases or decreases in any of the above inputs in isolation would result in a significantly lower or higher fair value measurement.
 
Fair Value Measurements
As of December 31, 2011
(in thousands)

 	  	 	 	  	 	 	  	 	 	  	 	 	
 	 	 	 	 	
 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	 	—  	 	  	$	46,377	  	  	$	366,019	  	  	$	412,396	  	
Subordinated Debt / Corporate Notes	  	 	—  	 	  	$	10,508	  	  	$	536,351	  	  	$	546,859	  	
Preferred Equity	  	 	—  	 	  	 	—  	 	  	$	14,664	  	  	$	14,664	  	
Common Equity / Partnership Interests / Warrants	  	$	11,460	  	  	 	—  	 	  	$	59,664	  	  	$	71,124	  	
Derivative assets—interest rate cap	  	 	—  	 	  	$	469	  	  	 	—  	 	  	$	469	  	
Derivative assets—forward contracts	  	 	—  	 	  	$	180	  	  	 	—  	 	  	$	180	  	
 
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At December 31, 2011 the fair value of investments classified as Level 3 was $976.7 million or 93.5% of total investments. One asset with a fair value of $41.1 million was transferred out of Level 3 to Level 2 during 2011 because of the increase in availability and reliability of third party market quotes for this investments. Subsequently, prior to end of 2011, this asset was repaid at par.
 
Additionally, during 2011, one asset with a December 31, 2011 fair value of $9.9 million was transferred from Level 2 to Level 1 as trading restrictions expired on this publicly traded equity investment.
 
At December 31, 2010 the fair value of investments classified as Level 3 was $823.9 million or 84% of total investments. Two assets with a combined fair value of $94.7 million were transferred out of Level 3 to Level 2 during 2010 because of the increase in availability and reliability of third party market quotes for these investments.
 
Additionally, during 2010, one asset with a fair value of $0.4 million was transferred from Level 2 to Level 1 when trading restrictions expired on a publicly traded equity investment.
 
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.
 
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.
 
Payment-in-Kind Interest
 
We have investments in our portfolio which contain a PIK interest provision. Over time, PIK interest increases the principal balance of the investment, but is recorded as interest income. 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 currently collected cash with respect to the PIK interest.
 
New Accounting Pronouncements and Accounting Standards Updates
 
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No. 13 (“IFRS 13”), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to
 
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align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a significant impact on the Company’s financial statements or its disclosures.
 
Portfolio Investments
 
The total value of our investments was approximately $1.01 billion and $1.05 billion at March 31, 2012 and December 31, 2011, respectively. During the three months ended March 31, 2012, we invested approximately $61.9 million in five existing portfolio companies. During the year ended December 31, 2011, we originated approximately $318.8 million of new investments in 13 portfolio companies and approximately $76.8 million was invested in six existing portfolio companies.
 
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 three months ended March 31, 2012, we had approximately $106.4 million in debt repayments and sales of securities of two portfolio companies for approximately $29.4 million. For the year ended December 31, 2011, we had approximately $308.7 million in debt repayments and sales of securities of four portfolio companies for approximately $29.4 million.
 
At March 31, 2012, we had investments in debt and preferred securities of 30 portfolio companies, totaling approximately $951.4 million, and equity investments in six portfolio companies, totaling approximately $57.1 million. At December 31, 2011, we had investments in debt and preferred securities of 34 portfolio companies, totaling approximately $973.9 million, and equity investments in seven portfolio companies, totaling approximately $71.1 million.
 
The following table shows the fair value of our portfolio of investments by asset class as of March 31, 2012 and December 31, 2011:

 	  	March 31, 2012	 	  	December 31, 2011	 	
 	  	(unaudited)	 	  	 	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
 	  	(in thousands)	 	  	(in thousands)	 	
Bank Debt/Senior Secured Loans	  	$	418,536	  	  	$	407,922	  	  	$	426,201	  	  	$	412,396	  	
Subordinated Debt/Corporate Notes	  	 	572,388	  	  	 	528,341	  	  	 	604,157	  	  	 	546,859	  	
Preferred Equity	  	 	15,433	  	  	 	15,133	  	  	 	15,107	  	  	 	14,664	  	
Common Equity/Partnership Interests/Warrants	  	 	90,854	  	  	 	57,119	  	  	 	107,108	  	  	 	71,124	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,097,211	  	  	$	1,008,515	  	  	$	1,152,573	  	  	$	1,045,043	  	

As of March 31, 2012 and December 31, 2011, the weighted average yield on income producing investments in our portfolio was approximately 14.3% and 14.2%, respectively. We had one non-accrual asset with a total market value of $4.4 million and $5.9 million as of March 31, 2012 and December 31, 2011, respectively.
 
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Results of Operations for the Quarter Ended March 31, 2012 compared to the Quarter Ended March 31, 2011
 
Revenue

 	  	For the Three Months Ended
March 31,	 	  	 	 	
 	  	(unaudited)	 	  	 	 	
 	  	    2012    	 	  	    2011    	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	36,309	  	  	$	32,294	  	  	 	12	% 	
 
Investment income was higher during the first quarter of 2012 primarily due to higher interest income earned on a larger earning asset balance and higher prepayment premiums and accelerated amortization of upfront fees related to early repayment of assets compared to the same period in 2011.
 
Expenses

 	  	For the Three Months Ended
March 31,	 	  	 	 	
 	  	(unaudited)	 	  	 	 	
 	  	    2012    	 	  	    2011    	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	5,278	  	  	$	4,987	  	  	 	6	% 	
Performance-based incentive fee	  	 	5,275	  	  	 	4,788	  	  	 	10	% 	
Interest and other credit facility expenses	  	 	2,695	  	  	 	2,037	  	  	 	32	% 	
Administrative service fee	  	 	696	  	  	 	438	  	  	 	59	% 	
Other general and administrative expenses	  	 	1,009	  	  	 	894	  	  	 	13	% 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	14,953	  	  	$	13,144	  	  	 	14	% 	

Both the performance-based incentive fee, which is calculated as a percentage of net investment income above certain hurdle rates, and investment advisory and management fees, which are calculated based on average gross assets, were higher during the first three months of 2012 due to higher investment income earned on larger average gross assets. Interest and other credit facility expenses for the three months ended March 31, 2012 were higher than during the comparable period in 2011 primarily due to higher average debt balances outstanding and higher LIBOR rates during 2012. Administrative service fees and other general and administrative expenses were higher for the first quarter of 2012 than for 2011 primarily due to increases in overhead expenses.
 
Net Realized and Unrealized Gains and Losses

 	  	For the Three Months
Ended March 31,	 	
 	  	(unaudited)	 	
 	  	2012	 	 	2011	 	
 	  	(in thousands)	 	
Net realized gain on investments	  	$	10,277	  	 	$	2,802	  	
Net realized loss on derivatives	  	 	(944	) 	 	 	(4,363	) 	
Net realized gain (loss) on foreign currency exchange	  	 	618	  	 	 	(72	) 	
Net unrealized gain on investments	  	 	18,834	  	 	 	32,232	  	
Net unrealized loss on derivatives	  	 	(1,435	) 	 	 	(259	) 	
Net unrealized loss on foreign currency exchange	  	 	(1,506	) 	 	 	(472	) 	

Total net realized and unrealized gain	  	$	25,844	  	 	$	29,868	  	

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Total realized and unrealized gain was approximately $25.8 million for the first quarter of 2012 compared to approximately $29.9 million for the same period in 2011. The combined net gain during the first quarter of 2012 was primarily due to an increase in the fair value of our portfolio during the period due to improved market trends and realizations above prior period marks. The net gain during the first quarter of 2011 was primarily due to continued credit improvement in the portfolio. 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, which may have impacted income in prior periods.
 
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 three months ended March 31, 2012, the total net change in realized and unrealized gain on forward contracts was a loss of approximately $2.1 million compared to a loss of $4.6 million in 2011.
 
To partially mitigate this risk of rising interest rates on our floating rate debt exposure, we purchased two interest rate derivative contracts during 2011, which effectively cap the London Interbank Borrowing Rate (LIBOR) at 1.00% on $100 million of notional amount through January 2014 and $50 million of notional amount through May 2014. The interest rate caps were purchased for $2.9 million and were valued at $0.2 million on March 31, 2012. One interest rate cap was purchased for $2.0 million and was valued at $2.0 million on March 31, 2011.
 
Results of Operations for the Year Ended December 31, 2011 compared to the Year Ended December 31, 2010
 
Revenue

 	  	For the Year Ended
December 31,	 	  	 	 	
 	  	2011	 	  	2010	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	138,900	  	  	$	124,641	  	  	 	11	% 	
 
The increase in investment income for the year ended December 31, 2011 compared to the year ended December 31, 2010 was primarily due to an increase of approximately $18.3 million in interest and dividend income on a higher average invested balance during 2011. Increases were partially offset by decreases of approximately $4.6 million in repayment related income (call premiums, accelerated fee amortization on prepaid loans, and other fees).
 
Expenses

 	  	For the Year Ended
December 31,	 	  	 	 	
 	  	2011	 	  	2010	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	20,596	  	  	$	18,296	  	  	 	13	% 	
Performance-based incentive fee	  	 	20,476	  	  	 	17,305	  	  	 	18	% 	
Interest and other credit facility expenses	  	 	9,212	  	  	 	14,276	  	  	 	(35	%) 	
Administrative service fee	  	 	1,638	  	  	 	1,294	  	  	 	27	% 	
Other general and administrative expenses	  	 	4,326	  	  	 	3,930	  	  	 	10	% 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	56,248	  	  	$	55,101	  	  	 	2	% 	

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Total operating expenses were relatively flat from 2010 to 2011. Both the performance-based incentive fee, which is calculated as a percentage of net investment income above certain hurdle rates, and investment advisory and management fees, which are calculated based on average gross assets, were higher during 2011 due to higher investment income earned on larger average gross assets. Interest and other credit facility expenses for 2011 were lower than 2010 primarily due to lower borrowing rates in 2011 subsequent to the repayment of higher priced fixed rate notes in late 2010. Administrative service fees and other general and administrative expenses were higher for 2011 than for 2010 primarily due to increases in overhead expenses.
 
Net Realized and Unrealized Gains and Losses

 	  	For the Year Ended
December 31,	 	
 	  	2011	 	 	2010	 	
 	  	(in thousands)	 	
Net realized gain (loss) on investments (net of taxes)	  	$	3,645	  	 	$	(39,365	) 	
Net realized loss on derivatives	  	 	(5,620	) 	 	 	(3,124	) 	
Net realized gain (loss) on foreign currency exchange	  	 	(418	) 	 	 	3,521	  	
Net unrealized gain (loss) on investments	  	 	(20,190	) 	 	 	113,508	  	
Net unrealized loss on derivatives	  	 	(1,354	) 	 	 	(1,204	) 	
Net unrealized gain (loss) on foreign currency exchange	  	 	3,348	  	 	 	(663	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain (loss)	  	$	(20,589	) 	 	$	72,673	  	

The combination of the net realized and unrealized gains or losses resulted in a net loss of $20.6 million for 2011 compared to a net gain of $72.7 million for 2010. Unrealized losses on investments were primarily due to technical valuation reductions due to overall market weakness during the second half of the year. Whereas, the net gain for 2010 was primarily due to increases in the fair value of our portfolio assets during the year as well as realizations in excess of prior valuations, following recession valuation 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 year ended December 31, 2011, the total net realized and unrealized gain on forward contracts was a loss of $4.5 million compared to a loss of $4.3 million for the same line items for the year ended December 31, 2010.
 
To partially mitigate this risk of rising interest rates on our floating rate debt exposure, we purchased two interest rate derivative contracts during 2011, which effectively cap the London Interbank Borrowing Rate (LIBOR) at 1.00% on $100 million of notional amount through January 2014 and $50 million of notional amount through May 2014. The interest rate caps were purchased for $2.94 million and were valued at $0.47 million on December 31, 2011.
 
Results of Operations for the Year Ended December 31, 2010 compared to the Year Ended December 31, 2009
 
Revenue

 	  	For the Year Ended
December 31,	 	  	 	 	
 	  	2010	 	  	2009	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	124,641	  	  	$	109,670	  	  	 	14	%	
 
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The increase in investment income for the year ended December 31, 2010 compared to the year ended December 31, 2009 was primarily due to increased fee income resulting from the early repayment of assets and higher amortization income during 2010. Call premiums, accelerated fee amortization on prepaid loans, and other fee income was $12.4 million in 2010 compared to $1.6 million in 2009. Additionally, amortization of upfront fees was $2.6 million higher during 2010.
 
Expenses

 	  	For the Year Ended
December 31,	 	  	 	 	
 	  	2010	 	  	2009	 	  	% Change	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	18,296	  	  	$	16,738	  	  	 	9	%	
Performance-based incentive fee	  	 	17,305	  	  	 	16,815	  	  	 	3	%	
Interest and other credit facility expenses	  	 	14,276	  	  	 	2,636	  	  	 	442	%	
Administrative service fee	  	 	1,294	  	  	 	2,020	  	  	 	(36	%)	
Other general and administrative expenses	  	 	3,930	  	  	 	3,971	  	  	 	(1	%)	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	55,101	  	  	$	42,180	  	  	 	31	%	

Investment advisory and management fees, which are calculated based on average gross assets, were higher in 2010 compared to 2009 primarily due to the increased average fair value of our investment portfolio. Total expenses increased by approximately $13.0 million for the year ended December 31, 2010 compared to the same period in 2009.
 
Interest and other credit facility expenses were higher in 2010 compared to 2009 primarily due to higher average debt balances outstanding during 2010, including the Senior Unsecured Notes (outstanding from February 2010 through December 2010), Term Loan, and our credit facilities, higher loan fee amortization expense and higher unused credit facility fees.
 
Administrative service fees and other general and administrative expenses were lower during the 2010 because 2009 included costs related to pre-IPO private fund administration and reporting.
 
Net Realized and Unrealized Gains and Losses

 	  	For the Year Ended
December 31,	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized loss on investments	  	$	(39,365	) 	 	$	(253,394	) 	
Net realized loss on derivatives	  	 	(3,124	) 	 	 	(12,608	) 	
Net realized gain on foreign currency exchange	  	 	3,521	  	 	 	1,104	  	
Net unrealized gain on investments	  	 	113,508	  	 	 	287,671	  	
Net unrealized loss on derivatives	  	 	(1,204	) 	 	 	(2,583	) 	
Net unrealized loss on foreign currency exchange	  	 	(663	) 	 	 	(516	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain	  	$	72,673	  	 	$	19,674	  	

The combination of the net realized and unrealized gains or losses resulted in a net gain of $72.7 million for 2010 compared to $19.7 million for 2009. The net gain for 2010 was primarily due to increases in the fair value of our portfolio assets during the year 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. We analyze this section on a
 
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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 year ended December 31, 2010, the total net realized and unrealized gain on forward contracts was a loss of $4.3 million compared to a loss of $15.2 million for the same line items for the year ended December 31, 2009. This is due to a higher relative weakening of the U.S. dollar during 2009 compared to the same period in 2010.
 
Income Taxes
 
Solar Capital Ltd., a U.S. corporation, has elected to be treated as a RIC under Subchapter M of the Code, as amended (See “Taxation as a Regulated Investment Company” in “Material U.S. Federal Income Tax Considerations”). 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. Depending on the level of taxable income earned in a given 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 years ended December 31, 2011 and 2010, U.S. federal excise tax of $0.7 million and $0.1 million was accrued, 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.
 
Prior to our initial public offering in February 2010, 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 or 2010.
 
Liquidity and Capital Resources
 
As of March 31, 2012, the Company’s liquidity and capital resources were generated and generally available through its $405 million multi-currency credit facility maturing in February 2013 (the “$405 Million Facility”), $100 million credit facility maturing in December 2015 (the “$100 Million Facility” and together with the $405 Million Facility, “Credit Facilities”), $35 million Term Loan maturing in September 2013, from cash flows from operations, investment sales, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and we expected periodic follow-on equity and/or debt offerings. We may from time to time issue such securities in either public or private offerings. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.
 
The primary use of existing funds and any funds raised in the future 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, 2012 and 2011, we had cash and cash equivalents of approximately $10.4 million and $339.2 million, respectively. Cash provided by operating activities for the three months ended March 31, 2012 and 2011 was approximately $70.2 million and $50.4 million, respectively. At December 31, 2011, 2010 and
 
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2009, we had cash and cash equivalents of approximately $11.8 million, $288.7 million and $5.7 million, respectively. Cash provided by and (used in) operating activities for the years ended December 31, 2011, 2010 and 2009 was approximately $4.1 million, $20.6 million and $17.2 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
 
Credit Facilities. On February 12, 2010, Solar Capital Ltd. amended and restated Solar Capital LLC’s $250 million credit facility, extending the maturity to February 2013 and increasing the total commitments under the facility to $270 million. Total commitments under the $405 Million Facility have since been increased to $405 million as a result of the addition of three new lenders on May 12, 2010, June 23, 2010 and December 19, 2011. The $405 Million Facility generally bears interest at LIBOR plus 3.25%. The $405 Million Facility size may be increased up to $600 million with additional new lenders or increases in the commitments of current lenders. The $405 Million Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the $405 Million Facility contains certain financial covenants that among other things, require the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio.
 
On December 17, 2010, we established the $100 Million Facility with Wells Fargo Securities, LLC acting as administrative agent. In connection with the $100 Million Facility, our wholly-owned financing subsidiary, Solar Capital Funding II, LLC (“SC Funding”), as borrower, entered into a Loan and Servicing Agreement whereby we transferred certain loans we have originated or acquired or will originate or acquire from time to time to SC Funding via a Purchase and Sale Agreement. The $100 Million Facility, as amended, among other things, matures on December 17, 2015 and generally bears interest based on LIBOR plus 2.75%. The $100 Million Facility is secured by all of the assets held by SC Funding. Under the $100 Million Facility, Solar and SC Funding, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The $100 Million Facility includes usual and customary events of default for credit facilities of this nature.
 
Term Loan. On September 2, 2010, Solar Capital Ltd. entered into the 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 facilities.
 
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 is as follows as of March 31, 2012:

 	  	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 facilities(1)	  	$	128.6	  	  	$	—  	  	  	$	49.3	 	  	$	79.3	  	  	$	—  	  	
Term loan	  	$	35.0	  	  	$	—  	  	  	$	35.0	 	  	$	—  	  	  	$	—  	  	
 
(1)	 	As of March 31, 2012, we had approximately $376.4 million of unused borrowing capacity under our credit facilities.	
 
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 “Investment Advisory and Management Agreement.” We have also entered into
 
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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. See “Administration Agreement.”
 
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 Consolidated Statement of Assets and Liabilities.
 
Borrowings
 
We had borrowings of approximately $128.6 million and $201.4 million outstanding as of March 31, 2012 and 2011, respectively, under the $405 Million Facility and the $100 Million Facility. See “-Credit Facilities” for a description of the $405 Million Facility and the $100 Million Facility. We also had $35 million outstanding on the Term Loan as of March 31, 2012 and 2011.
 
Distributions and Dividends
 
The following table reflects the cash distributions, including dividends and returns of capital, if any, per share that we have declared on our common stock since our initial public offering:

Date Declared	  	Record Date	 	  	Payment Date	 	  	Amount	 	
Fiscal 2012	  	 	 	 	  	 	 	 	  	 	 	 	
May 1, 2012	  	 	June 19, 2012	  	  	 	July 3, 2012	  	  	$	0.60	  	
February 22, 2012	  	 	March 20, 2012	  	  	 	April 3, 2012	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2012	  	 	 	 	  	 	 	 	  	$	1.20	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2011	  	 	 	 	  	 	 	 	  	 	 	 	
November 1, 2011	  	 	December 15, 2011	  	  	 	December 29, 2011	  	  	$	0.60	  	
August 2, 2011	  	 	September 20, 2011	  	  	 	October 4, 2011	  	  	 	0.60	  	
May 2, 2011	  	 	June 17, 2011	  	  	 	July 5, 2011	  	  	 	0.60	  	
March 1, 2011	  	 	March 17, 2011	  	  	 	April 4, 2011	  	  	 	0.60	  	

Total 2011	  	 	 	 	  	 	 	 	  	$	2.40	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2010	  	 	 	 	  	 	 	 	  	 	 	 	
November 2, 2010	  	 	December 17, 2010	  	  	 	December 30, 2010	  	  	$	0.60	  	
August 3, 2010	  	 	September 17, 2010	  	  	 	October 4, 2010	  	  	 	0.60	  	
May 4, 2010	  	 	June 17, 2010	  	  	 	July 2, 2010	  	  	 	0.60	  	
January 26, 2010	  	 	March 18, 2010	  	  	 	April 1, 2010	  	  	 	0.34	* 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2010	  	 	 	 	  	 	 	 	  	$	2.14	  	

*	 	Partial period dividend of $0.60 per share prorated for the number of days that remained in the quarter after our initial public offering.	
 
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Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Future quarterly dividends, if any, will be determined by our board of directors.
 
We have elected 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.”	
 
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, to ours. For example, Solar Capital Partners presently serves as investment adviser to Solar Senior, a publicly traded BDC, which focuses on investing primarily in senior secured loans, including first lien, unitranche and second lien debt instruments. In addition, Michael S. Gross, our chairman and chief executive officer, Bruce Spohler, our chief operating officer, and Richard Peteka, our chief financial officer, serve in similar capacities for Solar Senior.
 
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, 2011, 2010, 2009, 2008 and 2007. The report of our independent registered public accounting firm on the senior securities table as of December 31, 2011, 2010 and 2009 is attached as an exhibit to the registration statement of which this prospectus is a part.

(in thousands)
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 Facilities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2011	  	$	201,355	  	  	$	4,410	  	  	 	—  	  	  	 	N/A	  	
2010	  	$	400,000	  	  	$	2,901	  	  	 	—  	  	  	 	N/A	  	
2009	  	$	88,114	  	  	$	8,920	  	  	 	—  	  	  	 	N/A	  	
2008	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
2007	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
 	 	 	 	 	
Senior Secured Term Loan	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
2011	  	$	35,000	  	  	$	4,410	  	  	 	—  	  	  	 	N/A	  	
2010	  	$	35,000	  	  	$	2,901	  	  	 	—  	  	  	 	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 we have elected 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 of our common stock. Concurrent with our initial public offering, management purchased an additional 0.6 million shares of our common stock through the Concurrent Private Placement. 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. As of December 17, 2010, the Senior Unsecured Notes have been repaid from proceeds of a private placement transaction that we completed on November 30, 2010 and from borrowings under our credit facility established in December 2010.
 
We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. 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. 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, 2012, our long-term investments totaled $1.0 billion and our net asset value was $830.1 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represented 92.4% of our total portfolio, had a weighted average annualized yield on a fair value basis of approximately 14.3%.
 
About Solar Capital Partners
 
Solar Capital Partners, our investment adviser, is controlled and led by Michael S. Gross, our chairman and chief executive officer, and Bruce Spohler, our chief operating officer. They are supported by a team of dedicated investment professionals, including senior team members Brian Gerson, Cedric Henley, David Mait and Suhail Shaikh. We refer to Messrs. Gross, Spohler, Gerson, Henley, Mait and Shaikh 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.
 
In addition, Solar Capital Partners presently serves as the investment adviser for Solar Senior, a publicly traded business development company with more than $300 million of investable capital that invests in the senior debt securities of leveraged middle-market companies similar to those we intend to target for investment. The investment team led by Messrs. Gross and Spohler has invested in approximately 95 different portfolio companies for Solar Capital and Solar Senior, which investments involved an aggregate of approximately 80 different financial sponsors, through March 31, 2012. Since Solar Capital’s inception, these investment professionals have used their
 
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relationships in the middle-market financial sponsor and financial intermediary community to generate deal flow. As of July 3, 2012, Mr. Gross and Mr. Spohler beneficially owned, either directly or indirectly, approximately 5.79% and 5.61%, respectively, of our outstanding common stock.
 
Mr. Gross has 25 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. Prior to his current role as our chairman, chief executive officer and president, Mr. Gross founded Apollo Investment Corporation, a publicly traded BDC. He served as its chairman from February 2004 to July 2006 and its chief executive officer from February 2004 to February 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 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.
 
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 25 years of experience of Mr. Spohler, who has served as our chief operating officer and a partner of Solar Capital Partners since its 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, Mait and Shaikh 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 middle-market leveraged companies. We believe that the size of this market, coupled with leveraged companies’ need for flexible sources of capital at attractive terms and rates, creates 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 historically financed their lending and investing activities through securitization transactions have lost that source of funding and reduced lending significantly. Moreover, consolidation and the illiquid nature of investments have resulted in fewer middle-market lenders and market participants.	
 
 	•	 	There is a large pool of uninvested private equity capital likely to seek additional capital to support their investments. There is currently over $520 billion of uninvested private equity capital seeking debt financing to support acquisitions. We expect that middle-market private equity firms will continue to invest the approximately $185 billion raised since 2000 in middle-market companies and that those private equity firms will seek to support their investments with mezzanine loans from sources such as Solar Capital. Additionally, over $17.4 billion was raised by middle-market sponsors during 2011, which we believe demonstrates the continued appetite for middle-market acquisitions that require debt financing.	
 
 	•	 	The significant amount of debt maturing through 2018 should provide additional demand for capital. A high volume of financings were completed between the years 2004 and 2007, which are expected to mature over the next few years. We believe that this supply of prospective lending opportunities coupled with a lack of available credit in the middle-market lending space may offer attractive risk-adjusted returns to investors.	
 
 	•	 	Investing in private middle-market debt provides an attractive risk reward profile. In general, terms for illiquid, middle-market subordinated debt have been more attractive than those for larger corporations which are typically more liquid. We believe this is because fewer institutions are able to invest in illiquid asset classes. In 2011, on average, the total debt to EBITDA ratio for middle-market LBOs was 4.3x, versus 5.4x for large capitalization LBOs. This reduced leverage provides further cushion for borrowers to meet debt service obligations.	
 
Therefore, we believe that there is an attractive 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 25 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 25 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 team includes Messrs. Gerson, Henley, Mait and Shaikh, 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
 
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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, 2012, 99.5% of our total portfolio value of income producing assets, measured at fair value, was comprised of performing assets.
 
Investment Capacity
 
The proceeds from our initial public offering and the Concurrent Private Placement, the borrowing capacity under our credit facilities and our Notes, 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, 2012, we had total outstanding borrowings of $163.6 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 team and their ability to draw upon their average of over 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 senior 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 its inception, Solar Capital Partners has sourced investments in approximately 95 different portfolio companies for both Solar Capital and Solar Senior, collectively, which investments involved an aggregate of approximately 80 different financial sponsors, through March 31, 2012.
 
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Versatile Transaction Structuring and Flexibility of Capital
 
We believe Solar Capital Partners’ senior investment team’s broad expertise and ability to draw upon its 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 BDC, 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 the 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 senior 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.”
 
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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 insolvency. However, mezzanine loans rank senior to common and preferred equity in a borrowers’ capital structure. Mezzanine loans may have elements of both debt and equity instruments, offering 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 may take 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, if any, associated with mezzanine loans are typically detachable, which allows lenders to receive repayment of their 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 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.
 
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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 & Defense
• Automobile
• Banking
• Beverage, Food & Tobacco
• Buildings & Real Estate
• Broadcasting & Entertainment
• Cargo Transport
• Chemicals, Plastics & Rubber
• Containers, Packaging & Glass
• Diversified/Conglomerate Manufacturing
• Diversified/Conglomerate Service
• Electronics	  	• Home, Office Furnishings & Durable Consumer Prds
• Hotels, Motels, Inns and Gaming
• Insurance
• Leisure, Amusement, Entertainment
• Machinery
• Mining, Steel, Iron & Nonprecious Metals
• Oil & Gas
• Personal, Food & Misc. Services
• Personal & Nondurable Consumer Products
• Personal Transportation
• Printing & Publishing	
• Farming & Agriculture
• Finance
• Grocery
• Healthcare, Education & Childcare	  	• Retail Stores
• Telecommunications
• Textiles & Leather
• Utilities	
 
We may invest in other industries if we are presented with attractive opportunities.
 
Set forth below is a list of our ten largest portfolio company investments as of March 31, 2012, as well as the top ten industries in which we were invested as of March 31, 2012, in each case calculated as a percentage of our total assets as of such date.

 	 	 	 	 	
Portfolio Company	  	% of Total Assets	 	
DSW Group, Inc.	  	 	13.2	% 	
Midcap Financial Intermediate Holdings, LLC	  	 	8.0	% 	
Earthbound Farm	  	 	5.4	% 	
Asurion Corporation	  	 	5.0	% 	
Rug Doctor L.P.	  	 	4.7	% 	
Adams Outdoor Advertising	  	 	4.0	% 	
Weetabix Group	  	 	4.1	% 	
Isotoner Corporation	  	 	3.6	% 	
Ark Real Estate Partners LP	  	 	3.4	% 	
Vision Holdings Corp.	  	 	3.3	% 	
Industry	  	% of Total Assets	 	
Beverage, Food & Tobacco	  	 	19.4	% 	
Insurance	  	 	11.4	% 	
Banking	  	 	10.3	% 	
Personal, Food & Misc. Services	  	 	8.4	% 	
Farming & Agriculture	  	 	5.4	% 	
Healthcare, Education & Childcare	  	 	5.2	% 	
Leisure, Amusement, Entertainment	  	 	4.8	% 	
Retail Stores	  	 	4.3	% 	
Diversified/Conglomerate Service	  	 	4.0	% 	
Personal & Nondurable Consumer Products	  	 	3.6	% 	
 
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.
 
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Stable Earnings and Strong Free Cash Flow.    We seek to invest in companies who have demonstrated stable earnings through economic cycles. We target companies that can de-lever through consistent generation of cash flows rather than relying solely on growth to service and repay our loans.
 
Value Orientation.    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.
 
Value of Assets.    The prospective 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. In some of our transactions the company’s fundings may be derived from a borrowing base determined by the value of the company’s assets.
 
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. We seek companies that demonstrate significant competitive advantages versus their competitors, which we believe should help to protect their market position and profitability. Typically, we would not invest in start-up companies or companies having speculative business plans.
 
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. We underwrite our investments on a held-to-maturity basis, but expensive capital is often repaid prior to stated maturity.
 
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.
 
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The illustration below depicts Solar Capital’s typical target portfolio companies and the targeted position of its investment in a company’s capital structure.

 
(1)	 	Investment size may vary proportionally as the size of the capital base changes.	
 
Solar Capital’s investment team works in concert with sponsors to proactively manage investment opportunities by acting as a partner throughout the investment process. We actively focus on the middle-market financial sponsor community, with a particular focus on the upper-end of the middle-market (sponsors with equity funds of $800 million to $3 billion). We favor such sponsors because they typically:
 
 	•	 	buy larger companies with strong business franchises;	
 
 	•	 	invest significant amounts of equity in their portfolio companies;	
 
 	•	 	value flexibility and creativity in structuring their transactions;	
 
 	•	 	possess longer track records over multiple investment funds;	
 
 	•	 	have a deeper management bench;	
 
 	•	 	have better ability to withstand downturns; and	
 
 	•	 	possess the ability to support portfolio companies with additional capital.	
 
We divide our coverage of these sponsors among our more senior investment professionals, who are responsible for day-to-day interaction with financial sponsors. Our coverage approach aims to act proactively, consider all investments in the capital structure, provide quick feedback, deliver on commitments, and be constructive throughout the life cycle of an investment.
 
Due Diligence
 
Our “private equity” approach to credit investing incorporates extensive in-depth due diligence often alongside the private equity sponsor. In conducting due diligence, we use publicly available information as well as information from relationships with former and current management teams, consultants, competitors and
 
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investment bankers. Our due diligence methodology allows us to screen a high volume of potential investment opportunities on a consistent and thorough basis and typically can last two to three months.
 
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.	
 
We also evaluate the private equity sponsor making the investment. Further, due to Solar Capital Partners’ considerable repeat business with sponsors, we have direct experience with the management teams of many sponsors. 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.	
 
Throughout the diligence process, a deal team is in constant dialogue with the investment team to ensure that any concerns are addressed as early as possible through the process and that unsuitable investments are filtered out before considerable time has been invested. In total, due to our thorough diligence process, we only complete under 5% of all opportunities that we review annually.
 
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, if any, deferred to the later years.
 
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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 principal amortization 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 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 may sell our investments earlier if we have fundamental credit concerns or 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;	
 
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 	•	 	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.
 
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, 2012, the weighted average investment rating on the fair market value of our portfolio was 2.1. In connection with our valuation process, Solar Capital Partners reviews these investment ratings on a quarterly basis.
 
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 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.
 
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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.
 
Competition
 
Our primary competitors provide financing to middle-market companies and include other BDCs, 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 Messrs. Gross and Spohler and other senior 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 Messrs. Gross and Spohler 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 partners of our investment adviser, Solar Capital Partners. Richard Peteka, our chief financial officer, is employed by 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
 
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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, Mait and Shaikh, 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 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, 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, 2012 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 LP, SOCAY Corp., SODAY Corp., and USAW 767, 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	  	18.00%	 	 	12/8/2015	  	 	 	 	 	 	$	42,500	  	
 	 	 	 	 	 	 	
Airvana Network Solutions Inc.
19 Alpha Road
Chelmsford, MA 01824	 	Telecommunications	 	Senior secured loan	  	10.00%

(L+800/Q)	 	 	3/25/2015	  	 	 	 	 	 	 	7,133	(4) 	
 	 	 	 	 	 	 	
Ark Real Estate Partners LP
LP 505 Park Ave., 21st Floor
New York, NY 10022	 	Real estate	 	Partnership Interest	  	 	 	 	 	 	 	 	24.80	% 	 	 	36,540	  	
 	 	 	 	 	 	 	
Asurion Corporation
648 Grassmere Park,
Suite 300
Nashville, TN 37211	 	Insurance	 	Senior secured loan Subordinated notes	  	9.00% (L+650/Q or M)

9.50% (L+150/Q)	 	 
 	5/24/2019
3/2/2019	  

 	40,600

12,189	(4) 

(2) 	
 	 	 	 	 	 	 	
AviatorCap SII, LLC I
18851 Northeast 29th Avenue,
Suite 518 Aventure, FL 33180	 	Aerospace &     defense	 	Senior secured loan	  	12.00%	 	 	12/31/2014	  	 	 	 	 	 	 	3,569	  	
 	 	 	 	 	 	 	
AviatorCap SII, LLC II
18851 Northeast 29th Avenue, Suite 518 Aventure, FL 33180	 	Aerospace &     defense	 	Senior secured loan	  	11.00%	 	 	12/31/2014	  	 	 	 	 	 	 	5,394	  	
 	 	 	 	 	 	 	
AviatorCap SII, LLC III
18851 Northeast 29th Avenue, Suite 518 Aventure, FL 33180	 	Aerospace &     defense	 	Senior secured loan	  	13.00%	 	 	12/31/2014	  	 	 	 	 	 	 	7,601	  	
 	 	 	 	 	 	 	
CIBT Solutions
1650 Tysons Blvd
Suite 1350
McLean, VA 22102	 	Leisure,     amusement,     entertainment	 	Subordinated notes	  	13.50%	 	 	6/15/2018	  	 	 	 	 	 	 	35,838	  	
 	 	 	 	 	 	 	
Crosman Corporation
7629 Route 5 & 20
East Bloomfield, NY 14443	 	Leisure,     amusement,     entertainment	 	Subordinated notes	  	13.00%

(11.00% Cash/2.00% PIK)	 	 	10/15/2016	  	 	 	 	 	 	 	14,913	(2) 	
 	 	 	 	 	 	 	
Direct Buy Inc.
18851 Northeast 29th Avenue, Suite 518 Merrillville, IN 46410	 	Home, Office     Furnishing, &     Durable     Consumer     products	 	Senior secured loan	  	12.00%	 	 	2/1/2017	  	 	 	 	 	 	 	4,375	  	
 	 	 	 	 	 	 	
DSW Group, Inc. (“DS Waters”)
4170 Tanners Creek Drive Flowery Branch, GA 30542	 	Beverage, Food &     Tobacco	 	Subordinated notes Senior secured loan	  	15.00% (PIK)

15% (11% Cash & 4% PIK)	 	 
 	4/24/2012
2/28/2018	  

 	110,372

29,691	(2) 

(2) 	
 	 	 	 	 	 	 	
Earthbound Farm
1721 San Juan Highway
San Juan Bautista, CA 95045	 	Farming &     Agriculture	 	Subordinated notes	  	14.25%	 	 	6/21/2017	  	 	 	 	 	 	 	57,474	  	
 
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Name and Address of
Portfolio Company:	 	Industry	 	Type of Investment	 	Interest (1)	 	Maturity	 	 	% of
Class
Held	 	 	Fair Value
(in thousands)	 	
 	 	 	 	 	 	 	
Fulton Holding Corp
299 Park Avenue, 20th Floor New York, NY 10171	 	Retail stores	 	Senior secured loan	 	13.57%	 	 	5/28/2016	  	 	 	 	 	 	$	35,000	  	
 	 	 	 	 	 	 	
Good Sam Enterprise, LLC
2575 Vista Del Mar Venture, CA 93001	 	Insurance	 	Senior secured loan	 	11.50%	 	 	12/1/2016	  	 	 	 	 	 	 	7,210	  	
 	 	 	 	 	 	 	
Grakon, LLC
1911 S. 218th St. P.O. Box 98984 Seattle, WA 98198	 	Machinery	 	Senior secured loan Subordinated notes Subordinated notes Common Stock Warrants	 	12.00%

14.00% (PIK)
12.00% (PIK)	 	 
 
 	12/31/2015
12/31/2015
12/31/2015	  
  
  	 	 	2.48	% 	 	 

 
 	9,429
1,627
9,343
—  
—  	  
(2) 
(2) 

 	 	 	 	 	 	 	
Granite Global Solutions
Corp.
113 King Street East, 3rd Floor Toronto, Ontario M5C1G6 Canada	 	Insurance	 	Subordinated notes	 	13.50%

(12.00% Cash/1.50% PIK)	 	 	5/31/2016	  	 	 	 	 	 	 	29,092	(2)(5)(7) 	
 	 	 	 	 	 	 	
Great American Group Inc.
21860 Burbank Blvd.
Suite 300 South
Woodland Hills, CA 91367	 	Personal, food &     misc. services	 	Common stock	 	 	 	 	 	 	 	 	2.54	% 	 	 	92	(7) 	
 	 	 	 	 	 	 	
Grocery Outlet Inc.
2000 Fifth Street Berkeley, CA 94710	 	Grocery	 	Senior secured loan	 	10.50%

(L+900/Q)	 	 	12/15/2017	  	 	 	 	 	 	 	33,432	(4) 	
 	 	 	 	 	 	 	
Interactive Health Solutions,
Inc.
3800 North Wilke Road, Suite 155 Arlington Heights, IL 6004	 	Healthcare,     education &     childcare	 	Senior secured loan	 	11.50%

(L+950/Q)	 	 	10/4/2016	  	 	 	 	 	 	 	20,013	(4)(6) 	
 	 	 	 	 	 	 	
Isotoner Corporation
9655 International Blvd. Cincinnati, OH 45246	 	Personal &     nondurable     consumer     products	 	Senior secured loan	 	10.75%

(L+925/Q)	 	 	1/8/2018	  	 	 	 	 	 	 	38,610	(4) 	
 	 	 	 	 	 	 	
Midcap Financial
Intermediate Holdings, LLC.
7735 Old Georgetown Road Suite 400 Bethesda, Maryland 20814	 	Banking	 	Subordinated notes	 	14.25%

13.00%	 	 
 	7/9/2015
7/9/2015	  

 	75,000

10,000	(7) 

(7)(8) 	
 	 	 	 	 	 	 	
MYI Acquiror Corporation
5555 Triangle Parkway Suite 200 Norcross GA 30092	 	Insurance	 	Senior secured loan	 	13.00%

(12.00% Cash/1.00% PIK)	 	 	3/13/2017	  	 	 	 	 	 	 	31,578	(2)(3)(7) 	
 	 	 	 	 	 	 	
Nuveen Investments, Inc.
333 W. Wacker Dr. Chicago, IL 60606	 	Finance	 	Common stock	 	 	 	 	 	 	 	 	1.08	% 	 	 	10,459	  	
 	 	 	 	 	 	 	
NXP Semiconductors N.V.
Netherlands B.V.
High Tech Campus 60
AG Eindhoven 5656
The Netherlands	 	Electronics	 	Common stock	 	 	 	 	 	 	 	 	<1	% 	 	 	8,256	(7) 	
 	 	 	 	 	 	 	
ProSieben Sat.1 Media AG .
Medienallee 7
85774 Unterfoöhring Germany	 	Broadcasting &     entertainment	 	Subordinated notes	 	8.83%

(E+350/S Cash/3.50% PIK)	 	 	3/6/2017	  	 	 	 	 	 	 	15,543	(2)(7) 	
 	 	 	 	 	 	 	
Richelieu Foods, Inc.
15 Pacella Park Drive
Suite 210
Randolph, MA 02368	 	Beverage, food &     tobacco	 	Subordinated notes	 	13.75%

(12.00% Cash/1.75% PIK)	 	 	5/18/2016	  	 	 	 	 	 	 	21,786	(2) 	
 
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Name and Address of
Portfolio Company:	 	Industry	 	Type of Investment	 	Interest (1)	 	Maturity	 	 	% of
Class
Held	 	 	Fair Value
(in thousands)	 	
 	 	 	 	 	 	 	
Rug Doctor L.P.
4701 Old Shepard Place Plano, TX 75093	 	Personal, food &     misc. services	 	Subordinated notes	 	15.50% to 20.00%	 	 	10/31/2014	  	 	 	 	 	 	$	49,240	(2)(9) 	
 	 	 	 	 	 	 	
Seven Media Group Pty Limited
38-42 Pirrama Road
Pyrmont, New South Wales 2009 Australia	 	Broadcasting &     entertainment	 	Common stock	 	 	 	 	 	 	 	 	<1	% 	 	 	1,772	(7) 	
 	 	 	 	 	 	 	
SOCAY Corp.
500 Park Avenue
New York, NY 10022	 	Aerospace &     defense	 	Preferred/Common stock	 	8.59% (PIK)	 	 	 	 	 	 	100	% 	 	 	13,075	(2)(7) 	
 	 	 	 	 	 	 	
SODAY Corp.
500 Park Avenue
New York, NY 10022	 	Aerospace &     defense	 	Preferred/Common stock	 	8.43% (PIK)	 	 	 	 	 	 	100	% 	 	 	2,011	(2) 	
 	 	 	 	 	 	 	
Southern Auto Finance Company
6700 North Andrews Avenue Suite 500
Fort Lauderdale, FL 33309	 	Banking	 	Senior secured loan	 	13.50%	 	 	10/19/2017	  	 	 	 	 	 	 	24,625	(7) 	
 	 	 	 	 	 	 	
Spencer Spirit Holdings, Inc.
6826 Black Horse Pike
Egg Harbor Township, NJ 08234	 	Retail stores	 	Senior secured loan	 	11.00%	 	 	5/1/2017	  	 	 	 	 	 	 	10,300	  	
 	 	 	 	 	 	 	
Transplace Texas, LP
3010 Gaylord Parkaway,
Suite 200
Suite 200 Frisco, TX 75034	 	Cargo transport	 	Senior secured loan	 	11.00% (L+900/Q)	 	 	4/12/2017	  	 	 	 	 	 	 	19,700	(4) 	
 	 	 	 	 	 	 	
USAW 767
18851 Northeast 29th
Avenue, Suite 518
Aventure, FL 33180	 	Aerospace &     defense	 	Senior secured loan	 	14.50%	 	 	12/31/2012	  	 	 	 	 	 	 	4,381	  	
 	 	 	 	 	 	 	
ViaWest, Inc.
1200 Seventeenth St.
Suite 1150
Denver, CO 80202	 	Personal, food &     misc. services	 	Senior secured loan	 	13.50%
(12.00% Cash/1.50% PIK)	 	 	5/20/2016	  	 	 	 	 	 	 	39,981	(2) 	
 	 	 	 	 	 	 	
Vision Holding Corp.
296 Grayson Highway Lawrenceville, GA 30046	 	Healthcare,     education &     childcare	 	Senior secured loan	 	12.00% (L+1,000/M)	 	 	11/23/2016	  	 	 	 	 	 	 	35,300	(4) 	
 	 	 	 	 	 	 	
Weetabix Group
Burton Latimer
Kettering Northants NN 15 5JR
United Kingdom	 	Beverage, food &     tobacco	 	Subordinated notes Subordinated notes	 	9.13% (L+950/S/PIK)
10.03% (L(UK)+900/S/
PIK)	 	 
 	9/14/2016
5/3/2017	  

 	14,638

28,786	(2)(7) 

(2)(7) 	
 	 	 	 	 	 	 	
Wyle Laboratories
1960 East Grand Ave. El Segundo, CA 90245-5023	 	Aerospace &     defense	 	Preferred stock	 	8.00%	 	 	7/17/2015	  	 	 	 	 	 	 	47	  	

 	 	 	 	 	 	 	
Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,008,515	  	

(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, 2012.	
(2)	 	All or a portion of interest may be deferred through a payment-in-kind interest option.	
(3)	 	Includes an unfunded par commitment of $6.0 million.	
(4)	 	Pays on a variable rate, subject to a base rate floor.	
(5)	 	Includes an unfunded par commitment of $12.2 million.	
(6)	 	Includes an unfunded par commitment of $1.3 million.	
(7)	 	Denotes an investment that we believe does not meet the requirements to be considered a “qualifying asset” under Section 55(a) of the 1940 Act. Under the 1940 Act, we 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 our total assets.	
 
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(8)	 	Unfunded par commitment of $10.0 million.	
(9)	 	Includes PIK payable on $12,586 of par at 4.50% PIK, $14,572 of par at 5.25% PIK, $15,090 of par at 8.00% PIK, and $9,583 of par at 3.50% PIK.	
 
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, 2012.
 
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.
 
Earthbound Farm
 
Earthbound is a provider of organic value-added produce in the United States, with a market share in the organic packaged salad category. This company sells organic packaged salads, fruits and vegetables under the “Earthbound Farm” brand name and also sells under private label to select customers. Earthbound’s customer base includes retail grocers, natural food retailers, club stores, mass merchants, and food service distributors.
 
Midcap Financial Intermediate Holdings, LLC
 
Midcap Financial is a commercial finance firm that focuses exclusively on providing debt solutions to middle market health care companies. Midcap Financial provides a broad array of products intended to finance the growth and manage the working capital of companies spanning the breadth of the healthcare industry.
 
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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	  	 	50	  	  	Chief Executive Officer, President and Chairman of the Board of Directors	  	 	2007	  	  	 	2015	  	
Bruce Spohler	  	 	51	  	  	Chief Operating Officer and Director	  	 	2009	  	  	 	2014	  	
 	 	 	 	 	
Independent Directors	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Steven Hochberg	  	 	50	  	  	Director	  	 	2007	  	  	 	2014	  	
David S. Wachter	  	 	48	  	  	Director	  	 	2007	  	  	 	2013	  	
Leonard A. Potter	  	 	50	  	  	Director	  	 	2009	  	  	 	2015	  	
 
The address for each of our directors is 500 Park Avenue, New York, New York 10022.
 
Executive Officers Who Are Not Directors

Name	  	Age	 	  	Position	
Richard L. Peteka	  	 	51	  	  	Chief Financial Officer, Treasurer and Secretary	
Guy Talarico	  	 	56	  	  	Chief Compliance Officer	
 
The address for each of our executive officers is 500 Park Avenue, 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, including a discussion of such director’s particular experience, qualifications, attributes or skills that lead us to
 
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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. In addition, Mr. Gross has served as chairman of the board of directors, chief executive officer and president of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners, since its inception in December 2010. 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 BDC 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. From January 1999 to June 2008, Mr.Gross served on the board of directors of United Rentals, Inc., 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. In addition, Mr. Spohler has served as chief operating officer and a member of the board of directors of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners, since its inception in December 2010. 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
 
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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 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 and SpineView, Inc. 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. In addition, Mr. Hochberg presently serves as a member of the board of directors of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners. 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 has served as the President of Wildcat Capital Management, LLC, a private family investment office, since September 2011. From August 2009 through August 2011, Mr. Potter served as 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 is currently a member of the board of directors of GSV Capital Corp., a publicly-traded BDC, Crumbs Bake Shop Inc., a neighborhood bakery and a retailer of cup cakes, and Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners; and 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.
 
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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 has been a founding partner, managing director and president of W Capital Partners since 2001. 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. In addition, Mr. Wachter presently serves as a member of the board of directors of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners. 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. from New York University Graduate School of Business. Mr. Wachter’s extensive knowledge of private equity and investment banking provides the board of directors with the valuable insight of an experienced financial manager.
 
Executive Officers Who Are Not Directors
 
Richard L. Peteka has been the chief financial officer, treasurer and secretary of Solar Capital Ltd. since May 2012. In addition, Mr. Peteka has served as chief financial officer, treasurer and secretary of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners, since May 2012. Mr. Peteka joined Solar Capital from Apollo Investment Corporation, a publicly-traded BDC, where he served from 2004 to 2012 as the Chief Financial Officer and Treasurer. Prior to that, Mr. Peteka was Chief Financial Officer and Treasurer of various closed-end and open-end registered investment companies for Citigroup Asset Management. He joined Citigroup Asset Management as a Director in July 1999. Mr. Peteka holds a B.S. in Finance from The College at Old Westbury and an MBA in International Finance from St. John’s University.
 
Guy Talarico has been the chief compliance officer of Solar Capital Ltd. since July 2008. In addition, Mr. Talarico has served as chief compliance officer of Solar Senior Capital Ltd., a BDC managed by Solar Capital Partners, since its inception in December 2010. 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.
 
Director Independence
 
In accordance with rules of the NASDAQ Stock Market, our board of directors annually determines each director’s independence. We do not consider a director independent unless the board of directors has determined that he has no material relationship with us. We monitor the relationships of our directors and officers through a questionnaire each director completes no less frequently than annually and updates periodically as information provided in the most recent questionnaire changes.
 
Our governance guidelines require any director who has previously been determined to be independent to inform the Chairman of the board of directors, the Chairman of the Nominating and Corporate Governance committee and our secretary of any change in circumstance that may cause his or her status as an independent director to change. The board of directors limits membership on the audit committee and the nominating and corporate governance committee to independent directors.
 
In order to evaluate the materiality of any such relationship, the board of directors uses the definition of director independence set forth in the rules promulgated by the NASDAQ Stock Market. Rule 5605(a)(2)
 
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provides that a director of a BDC shall be considered to be independent if he or she is not an “interested person” of such BDC, as defined in Section 2(a)(19) of the 1940 Act.
 
The board of directors has determined that each of the directors is independent and has no relationship with us, except as a director and stockholder, with the exception of Michael S. Gross, as a result of his positions as the chief executive officer and president of Solar Capital and the managing member of Solar Capital Partners, Solar Capital’s investment adviser, and Bruce Spohler, as a result of his position as chief operating officer of Solar Capital and a partner of Solar Capital Partners.
 
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 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 (b) active monitoring of our chief compliance officer and our compliance policies and procedures.
 
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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 not generally permitted to invest in any portfolio company in which one of our affiliates currently has an investment.
 
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. During 2011, our board of directors held six board meetings and four audit committee meetings. All directors attended 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, a copy of which is available on our website at http://www.solarcapltd.com . 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
 
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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 Stock 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, a copy of which is available on our website at  http://www.solarcapltd.com . 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 Stock 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 considering possible candidates for election as a director, the nominating and corporate governance 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.
 
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Compensation Committee
 
Solar Capital does not have a compensation committee because our executive officers do not receive any direct compensation from Solar Capital.
 
Compensation of Directors
 
The following table sets forth compensation of Solar Capital’s directors, for the year ended December 31, 2011.

Name	  	Fees Earned  or
Paid in Cash(1)	 	  	Stock
Awards(2)	 	  	All Other
Compensation	 	  	Total	 	
Interested Directors	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Michel S. Gross	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Bruce Spohler	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
 	 	 	 	 	
Independent Directors	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Steven Hochberg	  	$	122,000	  	  	 	—  	  	  	 	—  	  	  	$	122,000	  	
David S. Wachter	  	$	115,500	  	  	 	—  	  	  	 	—  	  	  	$	115,500	  	
Leonard A. Potter	  	$	114,500	  	  	 	—  	  	  	 	—  	  	  	$	114,500	  	
 
(1)	 	For a discussion of the independent directors’ compensation, see below.	
(2)	 	We do not maintain a stock or option plan, non-equity incentive plan or pension plan for our directors. However, our independent directors have the option to receive all or a portion of the directors’ fees to which they would otherwise be entitled in the form of shares of our common stock issued at a price per share equal to the greater of our then-current net asset value per share or the market price at the time of payment. No shares were issued to any of our independent directors in lieu of cash during 2011.	
 
Our independent directors’ annual fee is $100,000. The independent directors also receive $2,500 ($1,500 if participate telephonically) plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee meeting attended. In addition, the chairman of the audit committee receives an annual fee of $7,500 and the chairman of the nominating and corporate governance committee receives an annual fee of $2,500. Further, we purchase directors’ and officers’ liability insurance on behalf of our directors and officers. Our independent directors also have the option to receive all or a portion of the directors’ fees to which they would otherwise be entitled in the form of shares of our common stock issued at a price per share equal to the greater of our then-current net asset value per share or the market price at the time of payment. No shares were issued to any of our independent directors in lieu of cash during 2011. In addition, no compensation was paid to directors who are interested persons of Solar Capital as defined in the 1940 Act.
 
Compensation of Executive Officers
 
None of our officers receives direct compensation from Solar Capital. Mr. Gross, our chief executive officer and president, and Mr. Spohler, our chief operating officer, through their ownership interest in Solar Capital Partners, our investment adviser, 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 the Investment Advisory and Management Agreement. Messrs. Gross and Spohler do not receive any additional compensation from Solar Capital Partners in connection with the management of our portfolio.
 
Mr. Peteka, our chief financial officer and, through Alaric Compliance Services, LLC, Guy Talarico, our chief compliance officer, are paid by Solar Capital Management, our administrator, 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.
 
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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’ senior investment team currently consists of its senior investment professionals, Messrs. Gross, Spohler, Gerson, Henley, Mait and Shaikh, and a team of additional experienced investment professionals. We consider Messrs. Gross and Spohler, who lead Solar Capital Partners’ investment committee, to be our portfolio managers.
 
In addition to managing our investments, our portfolio managers also currently manage the following entity:

Name	  	Entity	  	Investment Focus	  	Gross Assets	 	
Solar Senior Capital Ltd.	  	BDC	  	Senior secured loans and other senior debt instruments	  	$	218.7 million	(1) 	
 
(1)	 	As of March 31, 2012.	
 
The table below shows the dollar range of shares of our 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)(2)	 	
Michael S. Gross	  	 	Over $1 million	  	
Bruce Spohler	  	 	Over $1 million	  	
 
(1)	 	Dollar ranges are as follows: None, $1 — $10,000, $10,001 — $50,000, $50,001 — $100,000, $100,001 — $500,000; $500,001 — $1,000,000 or Over $1,000,000.	
(2)	 	The dollar range of equity securities beneficially owned in us is based on the closing price for our common stock of $22.79 on July 3, 2012 on the NASDAQ Global Select Market.	
 
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. For example, Solar Capital Partners presently serves as investment adviser to Solar Senior Capital Ltd., a publicly-traded BDC which focuses on investing primarily in senior secured loans, including first lien, unitranche and second lien debt instruments.
 
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.
 
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
 
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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%;	
 
 	•	 	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.	
(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.	
 
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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 $24 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 2 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 public offerings;	
 
 	•	 	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 on September 29, 2009. Unless earlier terminated as described below, the Investment Advisory and Management Agreement will remain in effect from year to year 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 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, 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.”
 
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, 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, 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 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 and board member and Mr. Peteka, our chief financial officer, serve as a partner and chief financial officer, respectively, for Solar Capital Partners. Mr. Spohler also has financial interests in Solar Capital Partners.
 
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. For example, Solar Capital Partners presently serves as investment adviser to Solar Senior Capital Ltd., a publicly-traded BDC which focuses on investing primarily in senior secured loans, including first lien, unitranche and second lien debt instruments. In addition, Michael S. Gross, our chairman and chief executive officer, Bruce Spohler, our chief operating officer, and Richard Peteka, our chief financial officer, serve in similar capacities for Solar Senior Capital Ltd. 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 July 3, 2012 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(1)	  	Percentage(2)	
 	 	 	 	
Thornburg Investment Management Inc.(3)	  	Indirect	  	3,750,000	  	10.23%	
 	 	 	 	
Clough Capital Partners L.P.(4)	  	Indirect	  	1,845,264	  	  5.03%	
 	 	 	 	
Michael S. Gross(5)	  	Direct and Indirect	  	2,121,844	  	  5.79%	
 	 	 	 	
Bruce J. Spohler(5)	  	Indirect	  	2,055,649	  	  5.61%	
 	 	 	 	
All officers and directors as a group (7 persons)(6)	  	Direct and Indirect	  	2,154,844	  	  5.88%	
 
(1)	 	Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Assumes no other purchases or sales of our common stock since the most recently available SEC filings. 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 the beneficial owners of our common stock listed in this table.	
(2)	 	Percentages are based on 36,667,197 shares of common stock outstanding as of July 3, 2012.	
(3)	 	Such securities are held by certain investment vehicles controlled and/or managed by Thornburg Investment Management Inc. or its affiliates. The address for Thornburg Investment Management Inc. is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506.	
(4)	 	Such securities are held by certain investment vehicles controlled and/or managed by Clough Capital Partners L.P. or its affiliates. The address for Clough Capital Partners L.P. is One Post Office Square, 40 th Floor, Boston, MA, 02109.	
(5)	 	Includes 1,340,649 shares held by Solar Capital Investors, LLC and 715,000 shares held by Solar Capital Investors II, LLC, both of which may be deemed to be beneficially owned by Michael S. Gross and by Bruce J. Spohler by virtue of their collective ownership interest therein. The address for each of Solar Capital Investors, LLC and Solar Capital Investors II, LLC is 500 Park Avenue, New York, NY 10022.	
(6)	 	The address for all officers and directors is 500 Park Avenue, 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 July 3, 2012.

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 $22.79 on July 3, 2012 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 BDC is regulated by the 1940 Act. A BDC 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 BDC 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 BDC 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 BDC 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 BDC. Furthermore, as a BDC, 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 BDC, 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 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, 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 BDC, 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 may seek an order from the SEC to permit us to co-invest with certain of our affiliates 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 BDC, 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 BDC 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 BDC’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 BDC); 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 BDC or a group of companies including a BDC and the BDC 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 BDC 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 BDC 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 BDC purchases such 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
 
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assistance means, among other things, any arrangement whereby the BDC, 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 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.
 
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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, our management is required to prepare an annual report regarding its assessment of our internal control over financial reporting and to 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.
 
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
 
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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, 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; and (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, to the extent we do not have stockholder approval to sell below NAV, 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 may use newly issued shares to implement the plan, whether our shares are trading at a premium or at a discount to our net asset value per share. 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 amount of cash they would have received if they had elected to receive the distribution in cash, or the fair market value of the distributed shares if such shares have a fair market value equal to or greater than net asset value. Any stock
 
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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.
 
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 6201 15 th  Avenue, Brooklyn, NY 11219 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.
 
This summary does not discuss the consequences of an investment in shares of our preferred stock, debt securities or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities. The U.S. federal income tax consequences of such an investment will be discussed in a relevant prospectus supplement.
 
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.
 
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As a BDC, we have elected 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 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) 98.2% 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”).
 
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 BDC 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
 
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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.
 
Because we may use debt financing, we will be 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 Annual Distribution Requirement. If we are unable to obtain cash from other sources or are otherwise limited in our ability to make distributions, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
 
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 below 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 reported 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, 2012, distributions of investment company taxable income that are reported 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
 
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through the plan equal to the amount of cash they would have received if they had elected to receive the distribution in cash, or the fair market value of the distributed shares if such shares have a fair market value equal to or greater than net asset value. 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 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
 
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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% (20% for years beginning after December 31, 2012) 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. In addition, 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). 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 report detailing 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-exempt 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.
 
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In addition, for taxable years beginning prior to January 1, 2012, U.S. source withholding taxes were not imposed on dividends paid by us to the extent the dividends were reported as “interest-related dividends” or “short-term capital gain dividends.” Under this exemption, interest-related dividends and short-term capital gain dividends generally represented 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 satisfied certain other requirements. No assurance can be given, however, as to whether this exemption will be extended for tax years beginning on or after January 1, 2012 or whether any of our distributions will be reported as eligible for this exemption (if extended) 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 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 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 reported 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 of cash that they would have received if they had elected to receive the distribution in cash, or the fair market value of the distributed shares if such shares have a fair market value equal to or greater than net asset value. 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.
 
Recently enacted legislation 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 U.S. persons as substantial owners). The types of income subject to the tax include U.S. source
 
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interest and dividends paid after December 31, 2013, and the gross proceeds from the sale of any property that could produce U.S. source interest or dividends received after December 31, 2014. 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. Holder and the status of the intermediaries through which they hold their units, Non-U.S. Holders could be subject to this 30% withholding tax with respect to distributions on their units and proceeds from the sale of their units. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes.
 
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.
 
You are urged to consult your own tax advisor regarding the specific tax consequences of the purchase, ownership and sale of 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, 2012 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 current 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 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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SALES OF COMMON STOCK BELOW NET ASSET VALUE
 
At our 2012 Annual Stockholders Meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price below the then current net asset value per share during a period beginning on May 3, 2012 and expiring on the earlier of the one-year anniversary of the date of the 2012 Annual Stockholders Meeting and the date of our 2013 Annual Stockholders Meeting, which is expected to be held in May 2013 (the “Stockholder Approval”). However, notwithstanding Stockholder Approval, since our initial public offering on February 9, 2010, we have not sold any shares of our common stock at a price below our then current net asset value per share.
 
In order to sell shares of common stock pursuant to this authorization, no further authorization from our stockholders will need to be solicited, but a majority of our directors who have no financial interest in the sale and a majority of our independent directors will have to (a) find that the sale is in our best interests and in the best interests of our stockholders and (b) in consultation with any underwriter or underwriters of the offering, make a good faith determination as of a time either immediately prior to the first solicitation by us or on our behalf of firm commitments to purchase such shares of common stock, or immediately prior to the issuance of such common stock, that the price at which such shares of common stock are to be sold is not less than a price which closely approximates the market value of those shares of common stock, less any distributing commission or discount.
 
Any offering of common stock below its net asset value per share will be designed to raise capital for investment in accordance with our investment objective.
 
In making a determination that an offering of common stock below its net asset value per share is in our and our stockholders’ best interests, our board of directors will consider a variety of factors including:
 
 	•	 	the effect that an offering below net asset value per share would have on our stockholders, including the potential dilution to the net asset value per share of our common stock our stockholders would experience as a result of the offering;	
 
 	•	 	the amount per share by which the offering price per share and the net proceeds per share are less than our most recently determined net asset value per share;	
 
 	•	 	the relationship of recent market prices of par common stock to net asset value per share and the potential impact of the offering on the market price per share of our common stock;	
 
 	•	 	whether the estimated offering price would closely approximate the market value of shares of our common stock;	
 
 	•	 	the potential market impact of being able to raise capital during the current financial market difficulties;	
 
 	•	 	the nature of any new investors anticipated to acquire shares of our common stock in the offering;	
 
 	•	 	the anticipated rate of return on and quality, type and availability of investments; and	
 
 	•	 	the leverage available to us.	
 
Our board of directors will also consider the fact that sales of shares of common stock at a discount will benefit our investment adviser as the investment adviser will earn additional investment management fees on the proceeds of such offerings, as it would from the offering of any other of our securities or from the offering of common stock at a premium to net asset value per share.
 
We will not sell shares of our common stock under this prospectus or an accompanying prospectus supplement pursuant to the Stockholder Approval without first filing a new post-effective amendment to the registration statement if the cumulative dilution to our net asset value per share from offerings under the registration statement, as amended by any post-effective amendments, exceeds 15%. This would be measured separately for each offering pursuant to the registration statement, as amended by any post-effective
 
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amendments, by calculating the percentage dilution or accretion to aggregate net asset value from that offering and then summing the percentage from each offering. For example, if our most recently determined NAV per share at the time of the first offering is $23.00 and we have 37 million shares outstanding, the sale of 9.25 million shares at net proceeds to us of $11.50 per share (a 50% discount) would produce dilution of 10.0%. If we subsequently determined that our NAV per share increased to $24.00 on the then 46.25 million shares outstanding and then made an additional offering, we could, for example, sell approximately an additional 5.15 million shares at net proceeds to us of $12.00 per share, which would produce dilution of 5.0%, before we would reach the aggregate 15% limit. If we file a new post-effective amendment, the threshold would reset.
 
In addition, it should be noted that under the Stockholder Approval the maximum number of shares issuable below NAV per share that could result in such dilution is limited to 25% of our then outstanding common stock. As a result, the maximum amount of dilution to existing stockholders under the Stockholder Approval will be limited to no more than 20% of our then current NAV per share, assuming we were to issue the maximum number of shares at no more than par value, or $0.01 per share.
 
Sales by us of our common stock at a discount from net asset value per share pose potential risks for our existing stockholders whether or not they participate in the offering, as well as for new investors who participate in the offering. Any sale of common stock at a price below net asset value per share would result in an immediate dilution to existing common stockholders who do not participate in such sale on at least a pro-rata basis. See “Risk Factors — Risks Relating to an Investment in Our Securities — The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock.”
 
The following three headings and accompanying tables explain and provide hypothetical examples on the impact of an offering of our common stock at a price less than net asset value per share on three different types of investors:
 
 	•	 	existing stockholders who do not purchase any shares in the offering;	
 
 	•	 	existing stockholders who purchase a relatively small amount of shares in the offering or a relatively large amount of shares in the offering; and	
 
 	•	 	new investors who become stockholders by purchasing shares in the offering.	
 
Impact On Existing Stockholders Who Do Not Participate in the Offering
 
Our current stockholders who do not participate in an offering below net asset value per share or who do not buy additional shares in the secondary market at the same or lower price as we obtain in the offering (after expenses and commissions) face the greatest potential risks. These stockholders will experience an immediate dilution in the net asset value of the shares of common stock they hold and their net asset value per share. These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we will experience in our assets, potential earning power and voting interests due to such offering. These stockholders may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases. Further, if current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value, their voting power will be diluted.
 
The following chart illustrates the level of net asset value dilution that would be experienced by a nonparticipating stockholder in three different hypothetical offerings of different sizes and levels of discount from net asset value per share. It is not possible to predict the level of market price decline that may occur.
 
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The examples assume that the issuer has 30 million shares outstanding, $600 million in total assets and $150 million in total liabilities. The current net asset value and net asset value per share are thus $450 million and $15.00. The chart illustrates the dilutive effect on Stockholder A of (a) an offering of 1.5 million shares of common stock (5% of the outstanding shares) at $14.25 per share after offering expenses and commissions (a 5% discount from net asset value), (b) an offering of 3 million shares of common stock (10% of the outstanding shares) at $13.50 per share after offering expenses and commissions (a 10% discount from net asset value), (c) an offering of 6 million shares of common stock (20% of the outstanding shares) at $12.00 per share after offering expenses and commissions (a 20% discount from net asset value), and (d) an offering of 7.5 million shares of common stock (25% of the outstanding shares) at $0.01 per share, the par value of our common stock (a 100% discount from net asset value). The prospectus supplement pursuant to which any discounted offering is made will include a chart based on the actual number of shares of common stock in such offering and the actual discount to the most recently determined net asset value. For example, if we issue 9,152,010 shares of our common stock (25% of our currently outstanding shares) at $0.01 per share, the par value of our common stock (a 100% discount from net asset value), then our net asset value per share following such offering will be $18.14, which will reflect a 20.00% decrease in net asset value per share to those stockholders who do not participate in this offering. It is not possible to predict the level of market price decline that may occur.

 	 	 	 	 	Example 1	 	 	Example 2	 	 	Example 3	 	 	Example 4	 	
 	 	 	 	 	5% Offering at
5% Discount	 	 	10% Offering at
10% Discount	 	 	20% Offering at
20% Discount	 	 	25% Offering at
100% Discount	 	
 	 	Prior to Sale	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	
Offering Price	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Price per Share to Public	 	 	 	 	 	$	22.68	  	 	 	 	 	 	$	21.49	  	 	 	 	 	 	$	19.10	  	 	 	 	 	 	$	0.01	  	 	 	 	 	
Net Proceeds per Share to Issuer	 	 	 	 	 	$	21.55	  	 	 	 	 	 	$	20.41	  	 	 	 	 	 	$	18.14	  	 	 	 	 	 	$	0.01	  	 	 	 	 	
Decrease to Net Asset Value	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Shares Outstanding	 	 	36,608,038	  	 	 	38,438,440	  	 	 	5.00	% 	 	 	40,268,842	  	 	 	10.00	% 	 	 	43,929,646	  	 	 	20.00	% 	 	 	45,760,048	  	 	 	25.00	% 	
Net Asset Value per Share	 	$	22.68	  	 	$	22.63	  	 	 	(0.24	)% 	 	$	22.47	  	 	 	(0.91	)% 	 	$	21.92	  	 	 	(3.33	)% 	 	$	18.15	  	 	 	(19.99	)% 	
Dilution to Nonparticipating Stockholder	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares Held by Stockholder A	 	 	36,608	  	 	 	36,608	  	 	 	—  	% 	 	 	36,608	  	 	 	—  	% 	 	 	36,608	  	 	 	—  	% 	 	 	36,608	  	 	 	—  	% 	
Percentage Held by Stockholder A	 	 	0.10	% 	 	 	0.10	% 	 	 	(4.76	)% 	 	 	0.09	% 	 	 	(9.09	)% 	 	 	0.08	% 	 	 	(16.67	)% 	 	 	0.08	% 	 	 	(20.00	)% 	
Total Net Asset Value Held by Stockholder A	 	$	830,270	  	 	$	828,293	  	 	 	(0.24	)% 	 	$	822,722	  	 	 	(0.91	)% 	 	$	802,595	  	 	 	(3.33	)% 	 	$	664,289	  	 	 	(19.99	)% 	
Total Investment by Stockholder A (Assumed to be Current NAV per Share)	 	$	830,270	  	 	$	830,270	  	 	 	 	 	 	$	830,270	  	 	 	 	 	 	$	830,270	  	 	 	 	 	 	$	830,270	  	 	 	 	 	
Total Dilution to Stockholder A (Total Net Asset Value Less Total Investment)	 	 	 	 	 	$	(1,977	) 	 	 	 	 	 	$	(7,548	) 	 	 	 	 	 	$	(27,676	) 	 	 	 	 	 	$	(165,981	) 	 	 	 	 	
Investment per Share Held by Stockholder A (Assumed to be NAV per Share on Shares Held Prior to Sale)	 	$	22.68	  	 	$	22.68	  	 	 	 	 	 	$	22.68	  	 	 	 	 	 	$	22.68	  	 	 	 	 	 	$	22.68	  	 	 	 	 	
Net Asset Value per Share Held by Stockholder A	 	 	 	 	 	$	22.63	  	 	 	 	 	 	$	22.47	  	 	 	 	 	 	$	21.92	  	 	 	 	 	 	$	18.15	  	 	 	 	 	
Dilution per Share Held by Stockholder A (Net Asset Value per Share Less Investment per Share)	 	 	 	 	 	$	(0.05	) 	 	 	 	 	 	$	(0.21	) 	 	 	 	 	 	$	(0.76	) 	 	 	 	 	 	$	(4.53	) 	 	 	 	 	
Percentage Dilution to Stockholder A (Dilution per Share Divided by Investment per Share)	 	 	 	 	 	 	 	 	 	 	(0.24	)% 	 	 	 	 	 	 	(0.91	)% 	 	 	 	 	 	 	(3.33	)% 	 	 	 	 	 	 	(19.99	)% 	
 
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Impact On Existing Stockholders Who Do Participate in the Offering
 
Our existing stockholders who participate in an offering below net asset value per share or who buy additional shares in the secondary market at the same or lower price as we obtain in the offering (after expenses and commissions) will experience the same types of net asset value dilution as the nonparticipating stockholders, although at a lower level, to the extent they purchase less than the same percentage of the discounted offering as their interest in shares of our common stock immediately prior to the offering. The level of net asset value dilution will decrease as the number of shares such stockholders purchase increases. Existing stockholders who buy more than such percentage will experience net asset value dilution but will, in contrast to existing stockholders who purchase less than their proportionate share of the offering, experience accretion in net asset value per share over their investment per share and will also experience a disproportionately greater increase in their participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests due to such offering. The level of accretion will increase as the excess number of shares such stockholder purchases increases. Even a stockholder who over-participates will, however, be subject to the risk that we may make additional discounted offerings in which such stockholder does not participate, in which case such a stockholder will experience net asset value dilution as described above in such subsequent offerings. These stockholders may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.
 
The following chart illustrates the level of dilution and accretion in the hypothetical 20% discount offering from the prior chart (Example 3) for a stockholder that acquires shares equal to (a) 50% of its proportionate share of the offering ( i.e. , 3,000 shares, which is 0.05% of an offering of 6 million shares) rather than its 0.10% proportionate share and (b) 150% of such percentage (i.e. 9,000 shares, which is 0.15% of an offering of 6 million shares rather than its 0.10% proportionate share). The prospectus supplement pursuant to which any discounted offering is made will include a chart for these examples based on the actual number of shares in such offering and the actual discount from the most recently determined net asset value per share. It is not possible to predict the level of market price decline that may occur.

 	  	Prior to Sale	 	 	50% Participation	 	 	150% Participation	 	 	
 	  	 	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	 	 	 	
Offering Price	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Price per Share to Public	  	 	 	 	 	$	19.10	  	 	 	 	 	 	$	19.10	  	 	 	 	 	 	 	 	
Net Proceeds per Share to Issuer	  	 	 	 	 	$	18.14	  	 	 	 	 	 	$	18.14	  	 	 	 	 	 	 	 	
Decrease/Increase to Net Asset Value	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Shares Outstanding	  	 	36,608,038	  	 	 	43,929,646	  	 	 	20.00	% 	 	 	43,929,646	  	 	 	20.00	% 	 	 	 	
Net Asset Value per Share	  	$	22.68	  	 	$	21.92	  	 	 	(3.33	)% 	 	$	21.92	  	 	 	(3.33	)% 	 	 	 	
Dilution/Accretion to Participating Stockholder	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares Held by Stockholder A	  	 	36,608	  	 	 	40,269	  	 	 	10.00	% 	 	 	47,590	  	 	 	30.00	% 	 	 	 	
Percentage Held by Stockholder A	  	 	0.10	% 	 	 	0.09	% 	 	 	(8.33	)% 	 	 	0.11	% 	 	 	8.33	% 	 	 	 	
Total Net Asset Value Held by Stockholder A	  	$	830,270	  	 	$	882,854	  	 	 	6.33	% 	 	$	1,043,373	  	 	 	25.67	% 	 	 	 	
Total Investment by Stockholder A (Assumed to be Current NAV per Share on Shares Held Prior to Sale)	  	 	 	 	 	$	900,188	  	 	 	 	 	 	$	1,040,023	  	 	 	 	 	 	 	 	
Total Dilution/Accretion to Stockholder A (Total Net Asset Value Less Total Investment)	  	 	 	 	 	$	(17,334	) 	 	 	 	 	 	$	3,350	  	 	 	 	 	 	 	 	
Investment per Share Held by Stockholder A (Assumed to be Net Asset Value on Shares Held Prior to Sale)	  	$	22.68	  	 	$	22.35	  	 	 	(1.44	)% 	 	$	21.85	  	 	 	(3.64	)% 	 	 	 	
Net Asset Value per Share Held by Stockholder A	  	 	 	 	 	$	21.92	  	 	 	 	 	 	$	21.92	  	 	 	 	 	 	 	 	
Dilution/Accretion per Share Held by Stockholder A (Net Asset Value per Shares Less Investment per Share)	  	 	 	 	 	$	(0.43	) 	 	 	 	 	 	$	0.07	  	 	 	 	 	 	 	 	
Percentage Dilution/Accretion to Stockholder A (Dilution per Share Divided by Investment per Share)	  	 	 	 	 	 	 	 	 	 	(1.96	)% 	 	 	 	 	 	 	0.32	% 	 	 	 	
 
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Impact On New Investors
 
Investors who are not currently stockholders and who participate in an offering of shares of our common stock below net asset value, but whose investment per share is greater than the resulting net asset value per share due to selling compensation and expenses paid by the Company, will experience an immediate decrease, although small, in the net asset value of their shares and their net asset value per share compared to the price they pay for their shares. Investors who are not currently stockholders and who participate in an offering of shares of our common stock below net asset value per share and whose investment per share is also less than the resulting net asset value per share due to selling compensation and expenses paid by the Company being significantly less than the discount per share, will experience an immediate increase in the net asset value of their shares and their net asset value per share compared to the price they pay for their shares. These investors will experience a disproportionately greater participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests due to such offering. These investors will, however, be subject to the risk that we may make additional discounted offerings in which such new stockholder does not participate, in which case such new stockholder will experience dilution as described above in such subsequent offerings. These investors may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.
 
The following chart illustrates the level of dilution or accretion for new investors that would be experienced by a new investor in the same hypothetical 5%, 10%, 20% and 25% discounted offerings as described in the first chart above. The illustration is for a new investor who purchases the same percentage (0.10%) of the shares in the offering as Stockholder A in the prior examples held immediately prior to the offering. The prospectus supplement pursuant to which any discounted offering is made will include a chart for these examples based on the actual number of shares in such offering and the actual discount from the most recently determined net asset value per share. It is not possible to predict the level of market price decline that may occur.
 
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 	 	 	 	 	Example 1	 	 	Example 2	 	 	Example 3	 	 	Example 4	 	
 	 	 	 	 	5% Offering at
5% Discount	 	 	10% Offering at
10% Discount	 	 	20% Offering at
20% Discount	 	 	25% Offering at
100% Discount	 	
 	 	Prior to Sale	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	 	Following
Sale	 	 	%
Change	 	
Price per Share to Public	 	 	 	 	 	$	22.68	  	 	 	 	 	 	$	21.49	  	 	 	 	 	 	$	19.10	  	 	 	 	 	 	$	0.01	  	 	 	 	 	
Net Proceeds per Share to Issuer	 	 	 	 	 	$	21.55	  	 	 	 	 	 	$	20.41	  	 	 	 	 	 	$	18.14	  	 	 	 	 	 	$	0.01	  	 	 	 	 	
Total Shares Outstanding	 	 	36,608,038	  	 	 	38,438,440	  	 	 	5.00	% 	 	 	40,268,842	  	 	 	10.00	% 	 	 	43,929,646	  	 	 	20.00	% 	 	 	45,760,048	  	 	 	25.00	% 	
Net Asset Value per Share	 	$	22.68	  	 	$	22.63	  	 	 	(0.24	)% 	 	$	22.47	  	 	 	(0.91	)% 	 	$	21.92	  	 	 	(3.33	)% 	 	$	18.15	  	 	 	(19.99	)% 	
Dilution/Accretion to New Investor A	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares Held by Investor A	 	 	 	 	 	 	1,830	  	 	 	 	 	 	 	3,661	  	 	 	 	 	 	 	7,322	  	 	 	 	 	 	 	9,152	  	 	 	 	 	
Percentage Held by Stockholder A	 	 	 	 	 	 	0.00	% 	 	 	 	 	 	 	0.01	% 	 	 	 	 	 	 	0.02	% 	 	 	 	 	 	 	0.02	% 	 	 	 	 	
Total Net Asset Value Held by Investor A	 	 	 	 	 	$	41,415	  	 	 	 	 	 	$	82,272	  	 	 	 	 	 	$	160,519	  	 	 	 	 	 	$	166,072	  	 	 	 	 	
Total Investment by Investor A (At Price to Public)	 	$	—  	  	 	$	41,514	  	 	 	 	 	 	$	78,657	  	 	 	 	 	 	$	139,835	  	 	 	 	 	 	$	92	  	 	 	 	 	
Total Dilution/Accretion to Investor A (Total Net Asset Value Less Total Investment)	 	 	 	 	 	$	(99	) 	 	 	 	 	 	$	3,615	  	 	 	 	 	 	$	20,684	  	 	 	 	 	 	$	165,981	  	 	 	 	 	
Investment per Share Held by Investor A	 	$	—  	  	 	$	22.68	  	 	 	 	 	 	$	21.49	  	 	 	 	 	 	$	19.10	  	 	 	 	 	 	$	0.01	  	 	 	 	 	
Net Asset Value per Share Held by Investor A	 	 	 	 	 	$	22.63	  	 	 	 	 	 	$	22.47	  	 	 	 	 	 	$	21.92	  	 	 	 	 	 	$	18.15	  	 	 	 	 	
Dilution/Accretion per Share Held by Investor A (Net Asset Value per Share Less Investment per Share)	 	 	 	 	 	$	(0.05	) 	 	 	 	 	 	$	0.99	  	 	 	 	 	 	$	2.83	  	 	 	 	 	 	$	18.14	  	 	 	 	 	
Percentage Dilution/Accretion to Investor A (Dilution per Share Divided by Investment per Share)	 	 	 	 	 	 	 	 	 	 	(0.24	)% 	 	 	 	 	 	 	4.60	% 	 	 	 	 	 	 	14.79	% 	 	 	 	 	 	 	181,360	% 	
 
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ISSUANCE OF WARRANTS OR SECURITIES TO SUBSCRIBE FOR OR CONVERTIBLE INTO SHARES OF OUR COMMON STOCK
 
At our 2011 Annual Stockholders Meeting, our stockholders authorized us to sell or otherwise issue warrants or securities to subscribe for or convertible into shares of our common stock, not exceeding 25% of our then outstanding common stock, at an exercise or conversion price that, at the date of issuance, will not be less than the market value per share of our common stock. Such authorization has no expiration. Any exercise of warrants or securities to subscribe for or convertible into shares of our common stock at an exercise or conversion price that is below net asset value at the time of such exercise or conversion would result in an immediate dilution to existing common stockholders. This dilution would include reduction in net asset value as a result of the proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest than the increase in our assets resulting from such offering.
 
In order to sell or issue warrants or securities to subscribe for or convertible into shares of our common stock, (a) the exercise, conversion or subscription rights in such securities must expire by their terms within 10 years, (b) with respect to any warrants, options or rights to subscribe or convert to our common stock that are issued along with other securities, such warrants, options or rights must not be separately transferable, (c) the exercise or conversion price of such securities must not be less than the greater of the market value per share of our common stock and the net asset value per share of our common stock at the date of issuance of such securities, (d) the issuance of such securities must be approved by a majority of the board of directors who have no financial interest in the transaction and a majority of the non-interested directors on the basis that such issuance is in the best interests of the Company and its stockholders and (e) the number of shares of our common stock that would result from the exercise or conversion of such securities and all other securities convertible, exercisable or exchangeable into shares of our common stock outstanding at the time of issuance of such securities must not exceed 25% of our outstanding common stock at such time.
 
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DESCRIPTION OF OUR CAPITAL STOCK
 
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 our 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 July 3, 2012:

        (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	  	  	 	—  	  	  	 	36,667,197	  	
 
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 powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of
 
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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 BDC. 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.
 
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 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
 
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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.
 
Classified Board of Directors
 
Our board of directors is divided into three classes of directors serving staggered three-year terms. The current terms of the first, second and third classes expire in 2013, 2014 and 2015, respectively, and in each case, those directors will serve until their successors are elected and qualify. 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.
 
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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 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.
 
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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.
 
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.	
 
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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.
 
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.
 
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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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DESCRIPTION OF OUR PREFERRED STOCK
 
In addition to shares of common stock, our charter authorizes the issuance of preferred stock. We may issue preferred stock from time to time, although we have no immediate intention to do so. If we offer preferred stock under this prospectus, we will issue an appropriate prospectus supplement. We may issue preferred stock from time to time in one or more classes or series, without stockholder approval. Prior to issuance of shares of each class or series, our board of directors is required by Maryland law and by 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. Any such an issuance must adhere to the requirements of the 1940 Act, Maryland law and any other limitations imposed by law.
 
The following is a general description of the terms of the preferred stock we may issue from time to time. Particular terms of any preferred stock we offer will be described in the prospectus supplement relating to such preferred stock.
 
If we issue preferred stock, it will pay dividends to the holders of the preferred stock at either a fixed rate or a rate that will be reset frequently based on short-term interest rates, as described in a prospectus supplement accompanying each preferred share offering.
 
The 1940 Act requires, among other things, that (1) immediately after issuance and before any distribution is made with respect to common stock, the liquidation preference of the preferred stock, together with all other senior securities, must not exceed an amount equal to 50% of our total assets (taking into account such distribution), (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 the preferred stock are in arrears by two years or more and (3) such shares be cumulative as to dividends and have a complete preference over our common stock to payment of their liquidation preference in the event of a dissolution.
 
For any series of preferred stock that we may issue, our board of directors or a committee thereof will determine and the articles supplementary and prospectus supplement relating to such series will describe:
 
 	•	 	the designation and number of shares of such series;	
 
 	•	 	the rate, whether fixed or variable, and time at which any dividends will be paid on shares of such series, as well as whether such dividends are participating or non-participating;	
 
 	•	 	any provisions relating to convertibility or exchangeability of the shares of such series;	
 
 	•	 	the rights and preferences, if any, of holders of shares of such series upon our liquidation, dissolution or winding up of our affairs;	
 
 	•	 	the voting powers, if any, of the holders of shares of such series;	
 
 	•	 	any provisions relating to the redemption of the shares of such series;	
 
 	•	 	any limitations on our ability to pay dividends or make distributions on, or acquire or redeem, other securities while shares of such series are outstanding;	
 
 	•	 	any conditions or restrictions on our ability to issue additional shares of such series or other securities;	
 
 	•	 	if applicable, a discussion of certain U.S. federal income tax considerations; and	
 
 	•	 	any other relative powers, preferences and participating, optional or special rights of shares of such series, and the qualifications, limitations or restrictions thereof.	
 
All shares of preferred stock that we may issue will be identical and of equal rank except as to the particular terms thereof that may be fixed by our board of directors, and all shares of each series of preferred stock will be identical and of equal rank except as to the dates from which dividends, if any, thereon will be cumulative.
 
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DESCRIPTION OF OUR WARRANTS
 
The following is a general description of the terms of the warrants we may issue from time to time. Particular terms of any warrants we offer will be described in the prospectus supplement relating to such warrants.
 
We may issue warrants to purchase shares of our common stock. Such warrants may be issued independently or together with shares of common stock and may be attached or separate from such shares of common stock. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders or beneficial owners of warrants.
 
A prospectus supplement will describe the particular terms of any series of warrants we may issue, including the following:
 
 	•	 	the title of such warrants;	
 
 	•	 	the aggregate number of such warrants;	
 
 	•	 	the price or prices at which such warrants will be issued;	
 
 	•	 	the currency or currencies, including composite currencies, in which the price of such warrants may be payable;	
 
 	•	 	the number of shares of common stock issuable upon exercise of such warrants;	
 
 	•	 	the price at which and the currency or currencies, including composite currencies, in which the shares of common stock purchasable upon exercise of such warrants may be purchased;	
 
 	•	 	the date on which the right to exercise such warrants shall commence and the date on which such right will expire;	
 
 	•	 	whether such warrants will be issued in registered form or bearer form;	
 
 	•	 	if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;	
 
 	•	 	if applicable, the number of such warrants issued with each share of common stock;	
 
 	•	 	if applicable, the date on and after which such warrants and the related shares of common stock will be separately transferable;	
 
 	•	 	information with respect to book-entry procedures, if any;	
 
 	•	 	if applicable, a discussion of certain U.S. federal income tax considerations; and	
 
 	•	 	any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants.	
 
We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the warrants issued thereunder to effect changes that are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.
 
Under the 1940 Act, we may generally only offer warrants provided that (1) the warrants expire by their terms within ten years; (2) the exercise or conversion price is not less than the current market value at the date of issuance; (3) our stockholders authorize the proposal to issue such warrants, and our board of directors approves such issuance on the basis that the issuance is in the best interests of Solar Capital and its stockholders; and (4) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed. The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants at the time of issuance may not exceed 25% of our outstanding voting securities.
 
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DESCRIPTION OF OUR DEBT SECURITIES
 
We may issue debt securities in one or more series. The specific terms of each series of debt securities will be described in the particular prospectus supplement relating to that series. The prospectus supplement may or may not modify the general terms found in this prospectus and will be filed with the SEC. For a complete description of the terms of a particular series of debt securities, you should read both this prospectus and the prospectus supplement relating to that particular series.
 
As required by federal law for all bonds and notes of companies that are publicly offered, the debt securities are governed by a document called an “indenture.” An indenture is a contract between us and a financial institution acting as trustee on your behalf, and is subject to and governed by the Trust Indenture Act of 1939, as amended. The trustee has two main roles. First, the trustee can enforce your rights against us if we default. There are some limitations on the extent to which the trustee acts on your behalf, described in the second paragraph under “Events of Default — Remedies if an Event of Default Occurs.” Second, the trustee performs certain administrative duties for us.
 
Because this section is a summary, it does not describe every aspect of the debt securities and the indenture. We urge you to read the indenture because it, and not this description, defines your rights as a holder of debt securities. A copy of the form of indenture is attached as an exhibit to the registration statement of which this prospectus is a part. We will file a supplemental indenture with the SEC prior to the commencement of any debt offering, at which time the supplemental indenture would be publicly available. See “Available Information” for information on how to obtain a copy of the indenture.
 
The prospectus supplement, which will accompany this prospectus, will describe the particular series of debt securities being offered by including:
 
 	•	 	the designation or title of the series of debt securities;	
 
 	•	 	the total principal amount of the series of debt securities;	
 
 	•	 	the percentage of the principal amount at which the series of debt securities will be offered;	
 
 	•	 	the date or dates on which principal will be payable;	
 
 	•	 	the rate or rates (which may be either fixed or variable) and/or the method of determining such rate or rates of interest, if any;	
 
 	•	 	the date or dates from which any interest will accrue, or the method of determining such date or dates, and the date or dates on which any interest will be payable;	
 
 	•	 	whether any interest may be paid by issuing additional securities of the same series in lieu of cash (and the terms upon which any such interest may be paid by issuing additional securities);	
 
 	•	 	the terms for redemption, extension or early repayment, if any;	
 
 	•	 	the currencies in which the series of debt securities are issued and payable;	
 
 	•	 	whether the amount of payments of principal, premium or interest, if any, on a series of debt securities will be determined with reference to an index, formula or other method (which could be based on one or more currencies, commodities, equity indices or other indices) and how these amounts will be determined;	
 
 	•	 	the place or places, if any, other than or in addition to the Borough of Manhattan in the City of New York, of payment, transfer, conversion and/or exchange of the debt securities;	
 
 	•	 	the denominations in which the offered debt securities will be issued (if other than $1,000 and any integral multiple thereof for registered securities or $500 for bearer securities);	
 
 	•	 	the provision for any sinking fund;	
 
 	•	 	any restrictive covenants;	
 
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 	•	 	any Events of Default;	
 
 	•	 	whether the series of debt securities are issuable in certificated form;	
 
 	•	 	any provisions for defeasance or covenant defeasance;	
 
 	•	 	any special federal income tax implications, including, if applicable, federal income tax considerations relating to original issue discount;	
 
 	•	 	whether and under what circumstances we will pay additional amounts in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem the debt securities rather than pay the additional amounts (and the terms of this option);	
 
 	•	 	any provisions for convertibility or exchangeability of the debt securities into or for any other securities;	
 
 	•	 	whether the debt securities are subject to subordination and the terms of such subordination;	
 
 	•	 	whether the debt securities are secured and the terms of any security interests;	
 
 	•	 	the listing, if any, on a securities exchange; and	
 
 	•	 	any other terms.	
 
The debt securities may be secured or unsecured obligations. Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue debt only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of debt. Unless the prospectus supplement states otherwise, principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds.
 
General
 
The indenture provides that any debt securities proposed to be sold under this prospectus and the accompanying prospectus supplement (“offered debt securities”) and any debt securities issuable upon the exercise of warrants or upon conversion or exchange of other offered securities (“underlying debt securities”), may be issued under the indenture in one or more series.
 
For purposes of this prospectus, any reference to the payment of principal of or premium or interest, if any, on debt securities will include additional amounts if required by the terms of the debt securities.
 
The indenture does not limit the amount of debt securities that may be issued thereunder from time to time. Debt securities issued under the indenture, when a single trustee is acting for all debt securities issued under the indenture, are called the “indenture securities”. The indenture also provides that there may be more than one trustee thereunder, each with respect to one or more different series of indenture securities. See “Resignation of Trustee” below. At a time when two or more trustees are acting under the indenture, each with respect to only certain series, the term “indenture securities” means the one or more series of debt securities with respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee described in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then the indenture securities for which each trustee is acting would be treated as if issued under separate indentures.
 
The indenture does not contain any provisions that give you protection in the event we issue a large amount of debt or we are acquired by another entity.
 
We refer you to the prospectus supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection.
 
We have the ability to issue indenture securities with terms different from those of indenture securities previously issued and, without the consent of the holders thereof, to reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.
 
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Conversion and Exchange
 
If any debt securities are convertible into or exchangeable for other securities, the prospectus supplement will explain the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio (or the calculation method), the conversion or exchange period (or how the period will be determined), if conversion or exchange will be mandatory or at the option of the holder or us, provisions for adjusting the conversion price or the exchange ratio and provisions affecting conversion or exchange in the event of the redemption of the underlying debt securities. These terms may also include provisions under which the number or amount of other securities to be received by the holders of the debt securities upon conversion or exchange would be calculated according to the market price of the other securities as of a time stated in the prospectus supplement.
 
Issuance of Securities in Registered Form
 
We may issue the debt securities in registered form, in which case we may issue them either in book-entry form only or in “certificated” form. Debt securities issued in book-entry form will be represented by global securities. We expect that we will usually issue debt securities in book-entry only form represented by global securities.
 
We also will have the option of issuing debt securities in non-registered form as bearer securities if we issue the securities outside the United States to non-U.S. persons. In that case, the prospectus supplement will set forth the mechanics for holding the bearer securities, including the procedures for receiving payments, for exchanging the bearer securities, including the procedures for receiving payments, for exchanging the bearer securities for registered securities of the same series, and for receiving notices. The prospectus supplement will also describe the requirements with respect to our maintenance of offices or agencies outside the United States and the applicable U.S. federal tax law requirements.
 
Book-Entry Holders
 
We will issue registered debt securities in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. This means debt securities will be represented by one or more global securities registered in the name of a depositary that will hold them on behalf of financial institutions that participate in the depositary’s book-entry system. These participating institutions, in turn, hold beneficial interests in the debt securities held by the depositary or its nominee. These institutions may hold these interests on behalf of themselves or customers.
 
Under the indenture, only the person in whose name a debt security is registered is recognized as the holder of that debt security. Consequently, for debt securities issued in book-entry form, we will recognize only the depositary as the holder of the debt securities and we will make all payments on the debt securities to the depositary. The depositary will then pass along the payments it receives to its participants, which in turn will pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the debt securities.
 
As a result, investors will not own debt securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest through a participant. As long as the debt securities are represented by one or more global securities, investors will be indirect holders, and not holders, of the debt securities.
 
Street Name Holders
 
In the future, we may issue debt securities in certificated form or terminate a global security. In these cases, investors may choose to hold their debt securities in their own names or in “street name.” Debt securities held in
 
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street name are registered in the name of a bank, broker or other financial institution chosen by the investor, and the investor would hold a beneficial interest in those debt securities through the account he or she maintains at that institution.
 
For debt securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the debt securities are registered as the holders of those debt securities and we will make all payments on those debt securities to them. These institutions will pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. Investors who hold debt securities in street name will be indirect holders, and not holders, of the debt securities.
 
Legal Holders
 
Our obligations, as well as the obligations of the applicable trustee and those of any third parties employed by us or the applicable trustee, run only to the legal holders of the debt securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a debt security or has no choice because we are issuing the debt securities only in book-entry form.
 
For example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend an indenture or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture), we would seek the approval only from the holders, and not the indirect holders, of the debt securities. Whether and how the holders contact the indirect holders is up to the holders.
 
When we refer to you, we mean those who invest in the debt securities being offered by this prospectus, whether they are the holders or only indirect holders of those debt securities. When we refer to your debt securities, we mean the debt securities in which you hold a direct or indirect interest.
 
Special Considerations for Indirect Holders
 
If you hold debt securities through a bank, broker or other financial institution, either in book-entry form or in street name, we urge you to check with that institution to find out:
 
 	•	 	how it handles securities payments and notices,	
 
 	•	 	whether it imposes fees or charges,	
 
 	•	 	how it would handle a request for the holders’ consent, if ever required,	
 
 	•	 	whether and how you can instruct it to send you debt securities registered in your own name so you can be a holder, if that is permitted in the future for a particular series of debt securities,	
 
 	•	 	how it would exercise rights under the debt securities if there were a default or other event triggering the need for holders to act to protect their interests, and	
 
 	•	 	if the debt securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.	
 
Global Securities
 
As noted above, we usually will issue debt securities as registered securities in book-entry form only. A global security represents one or any other number of individual debt securities. Generally, all debt securities represented by the same global securities will have the same terms.
 
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Each debt security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as DTC, will be the depositary for all debt securities issued in book-entry form.
 
A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under “Special Situations when a Global Security Will Be Terminated”. As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all debt securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that has an account with the depositary. Thus, an investor whose security is represented by a global security will not be a holder of the debt security, but only an indirect holder of a beneficial interest in the global security.
 
Special Considerations for Global Securities
 
As an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial institution and of the depositary, as well as general laws relating to securities transfers. The depositary that holds the global security will be considered the holder of the debt securities represented by the global security.
 
If debt securities are issued only in the form of a global security, an investor should be aware of the following:
 
 	•	 	An investor cannot cause the debt securities to be registered in his or her name, and cannot obtain certificates for his or her interest in the debt securities, except in the special situations we describe below.	
 
 	•	 	An investor will be an indirect holder and must look to his or her own bank or broker for payments on the debt securities and protection of his or her legal rights relating to the debt securities, as we describe under “Issuance of Securities in Registered Form” above.	
 
 	•	 	An investor may not be able to sell interests in the debt securities to some insurance companies and other institutions that are required by law to own their securities in non-book-entry form.	
 
 	•	 	An investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the debt securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective.	
 
 	•	 	The depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s interest in a global security. We and the trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in a global security. We and the trustee also do not supervise the depositary in any way.	
 
 	•	 	If we redeem less than all the debt securities of a particular series being redeemed, DTC’s practice is to determine by lot the amount to be redeemed from each of its participants holding that series.	
 
 	•	 	An investor is required to give notice of exercise of any option to elect repayment of its debt securities, through its participant, to the applicable trustee and to deliver the related debt securities by causing its participant to transfer its interest in those debt securities, on DTC’s records, to the applicable trustee.	
 
 	•	 	DTC requires that those who purchase and sell interests in a global security deposited in its book-entry system use immediately available funds. Your broker or bank may also require you to use immediately available funds when purchasing or selling interests in a global security.	
 
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 	•	 	Financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt securities. There may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries.	
 
Special Situations when a Global Security will be Terminated
 
In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-book-entry form (certificated securities). After that exchange, the choice of whether to hold the certificated debt securities directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described the rights of legal holders and street name investors under “Issuance of Securities in Registered Form” above.
 
The prospectus supplement may list situations for terminating a global security that would apply only to the particular series of debt securities covered by the prospectus supplement. If a global security is terminated, only the depositary, and not we or the applicable trustee, is responsible for deciding the names of the institutions in whose names the debt securities represented by the global security will be registered and, therefore, who will be the holders of those debt securities.
 
Payment and Paying Agents
 
We will pay interest (either in cash or by delivery of additional indenture securities, as applicable) to the person listed in the applicable trustee’s records as the owner of the debt security at the close of business on a particular day in advance of each due date for interest, even if that person no longer owns the debt security on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the “record date.” Because we will pay all the interest for an interest period to the holders on the record date, holders buying and selling debt securities must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the debt securities to prorate interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called “accrued interest.”
 
Payments on Global Securities
 
We will make payments on a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder’s right to those payments will be governed by the rules and practices of the depositary and its participants, as described under “ — Special Considerations for Global Securities.”
 
Payments on Certificated Securities
 
We will make payments on a certificated debt security as follows. We will pay interest that is due on an interest payment date by check mailed (or additional securities issued) on the interest payment date to the holder at his or her address shown on the trustee’s records as of the close of business on the regular record date. We will make all payments of principal and premium, if any, by check at the office of the applicable trustee in New York, NY and/or at other offices that may be specified in the prospectus supplement or in a notice to holders against surrender of the debt security.
 
Alternatively, if the holder asks us to do so, we will pay any cash amount that becomes due on the debt security by wire transfer of immediately available funds to an account at a bank in the United States, on the due date.
 
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Payment When Offices Are Closed
 
If any payment is due on a debt security on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date, except as otherwise indicated in the attached prospectus supplement. Such payment will not result in a default under any debt security or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.
 
Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on their debt securities.
 
Events of Default
 
You will have rights if an Event of Default occurs in respect of the debt securities of your series and is not cured, as described later in this subsection.
 
The term “Event of Default” in respect of the debt securities of your series means any of the following:
 
 	•	 	We do not pay the principal of, or any premium on, a debt security of the series on its due date.	
 
 	•	 	We do not pay interest on a debt security of the series within 30 days of its due date.	
 
 	•	 	We do not deposit any sinking fund payment in respect of debt securities of the series within 2 business days of its due date.	
 
 	•	 	We remain in breach of a covenant in respect of debt securities of the series for 60 days after we receive a written notice of default stating we are in breach. The notice must be sent by either the trustee or holders of at least 25% of the principal amount of debt securities of the series.	
 
 	•	 	We file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur.	
 
 	•	 	Any class of securities has an asset coverage of less than 100 per centum on the last business day of each twenty-four consecutive calendar months.	
 
 	•	 	Any other Event of Default in respect of debt securities of the series described in the prospectus supplement occurs.	
 
An Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other series of debt securities issued under the same or any other indenture. The trustee may withhold notice to the holders of debt securities of any default, except in the payment of principal, premium or interest, if it in good faith considers the withholding of notice to be in the best interests of the holders.
 
Remedies if an Event of Default Occurs
 
If an Event of Default has occurred and has not been cured, the trustee or the holders of at least 25% in principal amount of the debt securities of the affected series may declare the entire principal amount of all the debt securities of that series to be due and immediately payable. This is called a declaration of acceleration of maturity. A declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the debt securities of the affected series if (1) we have deposited with the trustee all amounts due and owing with respect to the securities, and (2) no other Events of Default are continuing.
 
Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and liability (called an “indemnity”). If reasonable indemnity is provided, the holders of a majority in principal amount of the outstanding debt securities of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.
 
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Before you are allowed to bypass your trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to the debt securities, the following must occur:
 
 	•	 	You must give your trustee written notice that an Event of Default has occurred and remains uncured.	
 
 	•	 	The holders of at least 25% in principal amount of all outstanding debt securities of the relevant series must make a written request that the trustee take action because of the default and must offer reasonable indemnity to the trustee against the cost and other liabilities of taking that action.	
 
 	•	 	The trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity.	
 
 	•	 	The holders of a majority in principal amount of the debt securities must not have given the trustee a direction inconsistent with the above notice during that 60-day period.	
 
However, you are entitled at any time to bring a lawsuit for the payment of money due on your debt securities on or after the due date.
 
Holders of a majority in principal amount of the debt securities of the affected series may waive any past defaults other than
 
 	•	 	the payment of principal, any premium or interest or	
 
 	•	 	in respect of a covenant that cannot be modified or amended without the consent of each holder.	
 
Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of maturity.
 
Each year, we will furnish to each trustee a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the debt securities or else specifying any default.
 
Merger or Consolidation
 
Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or substantially all of our assets to another entity. However, we may not take any of these actions unless all the following conditions are met:
 
 	•	 	Where we merge out of existence or sell our assets, the resulting entity must agree to be legally responsible for our obligations under the debt securities.	
 
 	•	 	The merger or sale of assets must not cause a default on the debt securities and we must not already be in default (unless the merger or sale would cure the default). For purposes of this no-default test, a default would include an Event of Default that has occurred and has not been cured, as described under “Events of Default” above. A default for this purpose would also include any event that would be an Event of Default if the requirements for giving us a notice of default or our default having to exist for a specific period of time were disregarded.	
 
 	•	 	We must deliver certain certificates and documents to the trustee.	
 
 	•	 	We must satisfy any other requirements specified in the prospectus supplement relating to a particular series of debt securities.	
 
Modification or Waiver
 
There are three types of changes we can make to the indenture and the debt securities issued thereunder.
 
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Changes Requiring Your Approval
 
First, there are changes that we cannot make to your debt securities without your specific approval. The following is a list of those types of changes:
 
 	•	 	change the stated maturity of the principal of, or interest on, a debt security;	
 
 	•	 	reduce any amounts due on a debt security;	
 
 	•	 	reduce the amount of principal payable upon acceleration of the maturity of a security following a default;	
 
 	•	 	adversely affect any right of repayment at the holder’s option;	
 
 	•	 	change the place (except as otherwise described in the prospectus or prospectus supplement) or currency of payment on a debt security;	
 
 	•	 	impair your right to sue for payment;	
 
 	•	 	adversely affect any right to convert or exchange a debt security in accordance with its terms;	
 
 	•	 	modify the subordination provisions in the indenture in a manner that is adverse to holders of the debt securities;	
 
 	•	 	reduce the percentage of holders of debt securities whose consent is needed to modify or amend the indenture;	
 
 	•	 	reduce the percentage of holders of debt securities whose consent is needed to waive compliance with certain provisions of the indenture or to waive certain defaults;	
 
 	•	 	modify any other aspect of the provisions of the indenture dealing with supplemental indentures, modification and waiver of past defaults, changes to the quorum or voting requirements or the waiver of certain covenants; and	
 
 	•	 	change any obligation we have to pay additional amounts.	
 
Changes Not Requiring Approval
 
The second type of change does not require any vote by the holders of the debt securities. This type is limited to clarifications and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. We also do not need any approval to make any change that affects only debt securities to be issued under the indenture after the change takes effect.
 
Changes Requiring Majority Approval
 
Any other change to the indenture and the debt securities would require the following approval:
 
 	•	 	If the change affects only one series of debt securities, it must be approved by the holders of a majority in principal amount of that series.	
 
 	•	 	If the change affects more than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose.	
 
In each case, the required approval must be given by written consent.
 
The holders of a majority in principal amount of all of the series of debt securities issued under an indenture, voting together as one class for this purpose, may waive our compliance with some of our covenants in that indenture. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under “ — Changes Requiring Your Approval.”
 
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Further Details Concerning Voting
 
When taking a vote, we will use the following rules to decide how much principal to attribute to a debt security:
 
 	•	 	For original issue discount securities, we will use the principal amount that would be due and payable on the voting date if the maturity of these debt securities were accelerated to that date because of a default.	
 
 	•	 	For debt securities whose principal amount is not known (for example, because it is based on an index), we will use the principal face amount at original issuance or a special rule for that debt security described in the prospectus supplement.	
 
 	•	 	For debt securities denominated in one or more foreign currencies, we will use the U.S. dollar equivalent.	
 
Debt securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption or if we, any other obligor, or any affiliate of us or any obligor own such debt securities. Debt securities will also not be eligible to vote if they have been fully defeased as described later under “Defeasance — Full Defeasance.”
 
We will generally be entitled to set any day as a record date for the purpose of determining the holders of outstanding indenture securities that are entitled to vote or take other action under the indenture. However, the record date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If we set a record date for a vote or other action to be taken by holders of one or more series, that vote or action may be taken only by persons who are holders of outstanding indenture securities of those series on the record date and must be taken within eleven months following the record date.
 
Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the indenture or the debt securities or request a waiver.
 
Defeasance
 
The following provisions will be applicable to each series of debt securities unless we state in the applicable prospectus supplement that the provisions of covenant defeasance and full defeasance will not be applicable to that series.
 
Covenant Defeasance
 
Under current United States federal tax law and the indenture, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the particular series was issued. This is called “covenant defeasance”. In that event, you would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay your debt securities. If applicable, you also would be released from the subordination provisions described under “Indenture Provisions — Subordination” below. In order to achieve covenant defeasance, we must do the following:
 
 	•	 	If the debt securities of the particular series are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of such debt securities a combination of money and United States government or United States government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates and any mandatory sinking fund payments or analogous payments.	
 
 	•	 	We must deliver to the trustee a legal opinion of our counsel confirming that, under current United States federal income tax law, we may make the above deposit without causing you to be taxed on the debt securities any differently than if we did not make the deposit and just repaid the debt securities ourselves at maturity.	
 
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 	•	 	We must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, as amended, and a legal opinion and officers’ certificate stating that all conditions precedent to covenant defeasance have been complied with.	
 
 	•	 	Defeasance must not result in a breach of the indenture or any of our other material agreements.	
 
 	•	 	Satisfy the conditions for covenant defeasance contained in any supplemental indentures.	
 
If we accomplish covenant defeasance, you can still look to us for repayment of the debt securities if there were a shortfall in the trust deposit or the trustee is prevented from making payment. In fact, if one of the remaining Events of Default occurred (such as our bankruptcy) and the debt securities became immediately due and payable, there might be a shortfall. Depending on the event causing the default, you may not be able to obtain payment of the shortfall.
 
Full Defeasance
 
If there is a change in United States federal tax law, as described below, we can legally release ourselves from all payment and other obligations on the debt securities of a particular series (called “full defeasance”) if we put in place the following other arrangements for you to be repaid:
 
 	•	 	If the debt securities of the particular series are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of such debt securities a combination of money and United States government or United States government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates and any mandatory sinking fund payments or analogous payments.	
 
 	•	 	We must deliver to the trustee a legal opinion confirming that there has been a change in current United States federal tax law or an IRS ruling that allows us to make the above deposit without causing you to be taxed on the debt securities any differently than if we did not make the deposit and just repaid the debt securities ourselves at maturity. Under current United States federal tax law, the deposit and our legal release from the debt securities would be treated as though we paid you your share of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for your debt securities and you would recognize gain or loss on the debt securities at the time of the deposit.	
 
 	•	 	We must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, as amended, and a legal opinion and officers’ certificate stating that all conditions precedent to defeasance have been complied with.	
 
 	•	 	Defeasance must not result in a breach of the indenture or any of our other material agreements.	
 
 	•	 	Satisfy the conditions for covenant defeasance contained in any supplemental indentures.	
If we ever did accomplish full defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the debt securities. You could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors if we ever became bankrupt or insolvent. If applicable, you would also be released from the subordination provisions described later under “Indenture Provisions — Subordination”.
 
Form, Exchange and Transfer of Certificated Registered Securities
 
If registered debt securities cease to be issued in book-entry form, they will be issued:
 
 	•	 	only in fully registered certificated form,	
 
 	•	 	without interest coupons, and	
 
 	•	 	unless we indicate otherwise in the prospectus supplement, in denominations of $1,000 and amounts that are multiples of $1,000.	
 
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Holders may exchange their certificated securities for debt securities of smaller denominations or combined into fewer debt securities of larger denominations, as long as the total principal amount is not changed and as long as the denomination is greater than the minimum denomination for such securities.
 
Holders may exchange or transfer their certificated securities at the office of their trustee. We have appointed the trustee to act as our agent for registering debt securities in the names of holders transferring debt securities. We may appoint another entity to perform these functions or perform them ourselves.
 
Holders will not be required to pay a service charge to transfer or exchange their certificated securities, but they may be required to pay any tax or other governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder’s proof of legal ownership.
 
If we have designated additional transfer agents for your debt security, they will be named in your prospectus supplement. We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.
 
If any certificated securities of a particular series are redeemable and we redeem less than all the debt securities of that series, we may block the transfer or exchange of those debt securities during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.
 
If a registered debt security is issued in book-entry form, only the depositary will be entitled to transfer and exchange the debt security as described in this subsection, since it will be the sole holder of the debt security.
 
Resignation of Trustee
 
Each trustee may resign or be removed with respect to one or more series of indenture securities provided that a successor trustee is appointed to act with respect to these series and has accepted such appointment. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a trust separate and apart from the trust administered by any other trustee.
 
Indenture Provisions — Subordination
 
Upon any distribution of our assets upon our dissolution, winding up, liquidation or reorganization, the payment of the principal of (and premium, if any) and interest, if any, on any indenture securities denominated as subordinated debt securities is to be subordinated to the extent provided in the indenture in right of payment to the prior payment in full of all Designated Senior Indebtedness (as defined below), but our obligation to you to make payment of the principal of (and premium, if any) and interest, if any, on such subordinated debt securities will not otherwise be affected. In addition, no payment on account of principal (or premium, if any), sinking fund or interest, if any, may be made on such subordinated debt securities at any time unless full payment of all amounts due in respect of the principal (and premium, if any), sinking fund and interest on Designated Senior Indebtedness has been made or duly provided for in money or money’s worth.
 
In the event that, notwithstanding the foregoing, any payment by us is received by the trustee in respect of subordinated debt securities or by the holders of any of such subordinated debt securities before all Designated Senior Indebtedness is paid in full, the payment or distribution must be paid over to the holders of the Designated Senior Indebtedness or on their behalf for application to the payment of all the Designated Senior Indebtedness remaining unpaid until all the Designated Senior Indebtedness has been paid in full, after giving effect to any
 
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concurrent payment or distribution to the holders of the Designated Senior Indebtedness. Subject to the payment in full of all Designated Senior Indebtedness upon this distribution by us, the holders of such subordinated debt securities will be subrogated to the rights of the holders of the Designated Senior Indebtedness to the extent of payments made to the holders of the Designated Senior Indebtedness out of the distributive share of such subordinated debt securities.
 
By reason of this subordination, in the event of a distribution of our assets upon our insolvency, certain of our senior creditors may recover more, ratably, than holders of any subordinated debt securities or the holders of any indenture securities that are not Designated Senior Indebtedness or subordinated debt securities. The indenture provides that these subordination provisions will not apply to money and securities held in trust under the defeasance provisions of the indenture.
 
Designated Senior Indebtedness is defined in the indenture as the principal of (and premium, if any) and unpaid interest on:
 
 	•	 	our indebtedness (including indebtedness of others guaranteed by us), whenever created, incurred, assumed or guaranteed, for money borrowed, that we have designated as “Designated Senior Indebtedness” for purposes of the indenture and in accordance with the terms of the indenture (including any indenture securities designated as Designated Senior Indebtedness), and	
 
 	•	 	renewals, extensions, modifications and refinancings of any of this indebtedness.	
 
If this prospectus is being delivered in connection with the offering of a series of indenture securities denominated as subordinated debt securities, the accompanying prospectus supplement will set forth the approximate amount of our Designated Senior Indebtedness and of our other indebtedness outstanding as of a recent date.
 
Secured Indebtedness
 
Certain of our indebtedness, including certain series of indenture securities, may be secured. The prospectus supplement for each series of indenture securities will describe the terms of any security interest for such series and will indicate the approximate amount of our secured indebtedness as of a recent date. In the event of a distribution of our assets upon our insolvency, the holders of unsecured indenture securities may recover less, ratably, than holders of any of our secured indebtedness.
 
The Trustee under the Indenture
 
U.S. Bank National Association will serve as the trustee under the indenture.
 
Certain Considerations Relating to Foreign Currencies
 
Debt securities denominated or payable in foreign currencies may entail significant risks. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved and will be more fully described in the applicable prospectus supplement.
 
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DESCRIPTION OF OUR UNITS
 
As may be specified in a prospectus supplement, we may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The applicable prospectus supplement will describe:
 
 	•	 	the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances the securities comprising the units may be held or transferred separately;	
 
 	•	 	a description of the terms of any unit agreement governing the units;	
 
 	•	 	a description of the provisions for the payment, settlement, transfer or exchange of the units; and	
 
 	•	 	whether the units will be issued in fully registered or global form.	
 
The descriptions of the units and any applicable underlying security or pledge or depositary arrangements in this prospectus and in any prospectus supplement are summaries of the material provisions of the applicable agreements and are subject to, and qualified in their entirety by reference to, the terms and provisions of the applicable agreements, forms of which have been or will be filed as exhibits to the registration statement of which this prospectus forms a part.
 
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SHARES ELIGIBLE FOR FUTURE SALE
 
The shares of our common stock beneficially owned by each of Messrs. Gross and Spohler immediately prior to completion of our initial public offering, including any shares that are attributable to such shares issued pursuant to our dividend reinvestment plan, are no longer subject to lock-up restrictions that each of Messrs. Gross and Spohler agreed to in connection with our initial public offering, and are generally available for resale without restriction, subject to the provisions of Rule 144 promulgated under the Securities Act. In addition, on November 30, 2010, Messrs. Gross and Spohler jointly acquired 115,000 shares of our common stock in a private placement transaction conducted in accordance with Regulation D under the Securities Act. Such shares have been registered with the SEC and are generally available for resale.
 
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PLAN OF DISTRIBUTION
 
We may offer, from time to time, in one or more offerings or series, up to $1,000,000,000 of our common stock, preferred stock, debt securities, units or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, in one or more underwritten public offerings, at-the-market offerings, negotiated transactions, block trades, best efforts or a combination of these methods. We may sell the securities through underwriters or dealers, directly to one or more purchasers through agents or through a combination of any such methods of sale. Any underwriter or agent involved in the offer and sale of the securities will be named in the applicable prospectus supplement. A prospectus supplement or supplements will also describe the terms of the offering of the securities, including: the purchase price of the securities and the proceeds we will receive from the sale; any over-allotment options under which underwriters may purchase additional securities from us; any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation; the public offering price; any discounts or concessions allowed or re-allowed or paid to dealers; and any securities exchange or market on which the securities may be listed. Only underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
 
The distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at prevailing market prices at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. The price at which securities may be distributed may represent a discount from prevailing market prices.
 
In connection with the sale of the securities, underwriters or agents may receive compensation from us or from purchasers of the securities, for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of the securities may be deemed to be underwriters under the Securities Act, and any discounts and commissions they receive from us and any profit realized by them on the resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified and any such compensation received from us will be described in the applicable prospectus supplement. The maximum aggregate commission or discount to be received by any member of FINRA or independent broker-dealer will not be greater than 10% of the gross proceeds of the sale of securities offered pursuant to this prospectus and any applicable prospectus supplement. We may also reimburse the underwriter or agent for certain fees and legal expenses incurred by it.
 
Any underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
 
Any underwriters that are qualified market makers on the NASDAQ Global Select Market may engage in passive market making transactions in our common stock on the NASDAQ Global Select Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of our common stock. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all
 
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independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.
 
We may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
 
Unless otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no trading market, other than our common stock, which is traded on the NASDAQ Global Select Market. We may elect to list any other class or series of securities on any exchanges, but we are not obligated to do so. We cannot guarantee the liquidity of the trading markets for any securities.
 
Under agreements that we may enter, underwriters, dealers and agents who participate in the distribution of shares of our securities may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Underwriters, dealers and agents may engage in transactions with, or perform services for, us in the ordinary course of business.
 
If so indicated in the applicable prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by certain institutions to purchase our securities from us pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by us. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of our securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. Such contracts will be subject only to those conditions set forth in the prospectus supplement, and the prospectus supplement will set forth the commission payable for solicitation of such contracts.
 
We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third parties in such sale transactions will be underwriters and, if not identified in this prospectus, will be identified in the applicable prospectus supplement.
 
In order to comply with the securities laws of certain states, if applicable, our securities offered hereby will be sold in such jurisdictions only through registered or licensed brokers or dealers.
 
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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 6201 15 th  Avenue, Brooklyn, NY 11219, 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. Certain legal matters in connection with the offering will be passed upon for the underwriters, if any, by the counsel named in the applicable prospectus supplement.
 
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, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009, 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, 2012 and 2011, 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 our quarterly report on Form 10-Q for the quarter ended March 31, 2012, 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 the securities offered by this prospectus. The registration statement contains additional information about us and the securities 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, 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	  	
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting	  	 	F-3	  	
Consolidated Statements of Assets and Liabilities as of December 31, 2011 and 2010	  	 	F-4	  	
Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009	  	 	F-5	  	
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2011, 2010 and 2009	  	 	F-6	  	
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009	  	 	F-7	  	
Consolidated Schedules of Investments as of December 31, 2011 and 2010	  	 	F-8	  	
Notes to Consolidated Financial Statements	  	 	F-16	  	
Schedules of Investments in and Advances to Affiliates (unaudited)	  	 	F-35	  	
Report of Independent Registered Public Accounting Firm	  	 	F-37	  	
Consolidated Statements of Assets and Liabilities as of March 31, 2012 (unaudited) and December 31, 2011	  	 	F-38	  	
Consolidated Statements of Operations for the three months ended March 31, 2012 (unaudited) and March 31, 2011 (unaudited)	  	 	F-39	  	
Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011	  	 	F-40	  	
Consolidated Statements of Cash Flows for the three months ended March 31, 2012 (unaudited) and March 31, 2011 (unaudited)	  	 	F-41	  	
Consolidated Schedule of Investments as of March 31, 2012 (unaudited)	  	 	F-42	  	
Consolidated Schedule of Investments as of December 31, 2011	  	 	F-45	  	
Notes to Consolidated Financial Statements (unaudited)	  	 	F-48	  	
 
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Solar Capital Ltd.:
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Solar Capital Ltd. (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in net assets and cash flows for each of the years in the three-year period ended December 31, 2011. 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 disclosure in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2011, 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 Ltd. as of December 31, 2011 and 2010, and the results of its operations, the changes in its net assets and cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Solar Capital Ltd.’s internal control over financial reporting as of December 31, 2011, based on criteria established in  Internal Control — Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 22, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
New York, New York
February 22, 2012
 
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Report of Independent Registered Public Accounting Firm
On Internal Control Over Financial Reporting
The Board of Directors and Shareholders
Solar Capital Ltd.:
We have audited Solar Capital Ltd.’s (the Company) internal control over financial reporting as of December 31, 2011, based on criteria established in  Internal Control — Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management of the Company is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Annual Report on Form 10-K, and Item 9A, Controls and Procedures — Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Solar Capital Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in  Internal Control — Integrated Framework  issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of assets and liabilities of Solar Capital Ltd. as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in net assets and cash flows for each of the years in the three-year period ended December 31, 2011, and our report dated February 22, 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
New York, New York
February 22, 2012
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share amounts)

 	  	December 31,
2011	 	 	December 31,
2010	 	
Assets	  	 	 	 	 	 	 	 	
Investments at fair value:	  	 	 	 	 	 	 	 	
Companies more than 25% owned (cost: $47,910 and $20,511, respectively)	  	$	53,454	  	 	$	20,508	  	
Companies 5% to 25% owned (cost: $41,819 and $34,806, respectively)	  	 	35,820	  	 	 	29,235	  	
Companies less than 5% owned (cost: $1,062,844 and $1,008,244, respectively)	  	 	955,769	  	 	 	926,478	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,152,573 and $1,063,561, respectively)	  	 	1,045,043	  	 	 	976,221	  	
Cash and cash equivalents	  	 	11,787	  	 	 	288,732	  	
Interest and dividends receivable	  	 	9,763	  	 	 	5,592	  	
Deferred credit facility costs	  	 	3,635	  	 	 	5,904	  	
Fee revenue receivable	  	 	4,379	  	 	 	3,935	  	
Derivative assets (cost $2,938 and $0, respectively)	  	 	649	  	 	 	604	  	
Receivable for investments sold	  	 	3,225	  	 	 	10,560	  	
Deferred offering costs	  	 	469	  	 	 	—  	  	
Prepaid expenses and other receivables	  	 	481	  	 	 	243	  	
 	  	 	 	 	 	 	 	 	
Total Assets	  	 	1,079,431	  	 	 	1,291,791	  	
 	  	 	 	 	 	 	 	 	
Liabilities	  	 	 	 	 	 	 	 	
Credit facilities payable	  	 	201,355	  	 	 	400,000	  	
Term loan	  	 	35,000	  	 	 	35,000	  	
Payable for investments purchased	  	 	22,443	  	 	 	14,625	  	
Due to Solar Capital Partners LLC:	  	 	 	 	 	 	 	 	
Investment advisory and management fee payable	  	 	5,277	  	 	 	4,892	  	
Performance-based incentive fee payable	  	 	5,203	  	 	 	4,347	  	
Interest payable	  	 	1,063	  	 	 	597	  	
Deferred fee revenue	  	 	318	  	 	 	1,242	  	
Due to Solar Capital Management LLC	  	 	1,069	  	 	 	773	  	
Derivative liabilities	  	 	—  	  	 	 	1,539	  	
Income taxes payable	  	 	720	  	 	 	329	  	
Other accrued expenses and payables	  	 	1,042	  	 	 	1,453	  	
 	  	 	 	 	 	 	 	 	
Total Liabilities	  	 	273,490	  	 	 	464,797	  	
 	  	 	 	 	 	 	 	 	
Net Assets	  	 	 	 	 	 	 	 	
Common stock, par value $0.01 per share 36,608,038 and 36,383,158 shares issued and outstanding, respectively, 200,000,000 shares authorized	  	 	366	  	 	 	364	  	
Paid-in capital in excess of par	  	 	928,180	  	 	 	926,991	  	
Under (over) distributed net investment income	  	 	2,245	  	 	 	(1,545	) 	
Accumulated net realized losses	  	 	(18,379	) 	 	 	(10,541	) 	
Net unrealized depreciation	  	 	(106,471	) 	 	 	(88,275	) 	
 	  	 	 	 	 	 	 	 	
Total Net Assets	  	$	805,941	  	 	$	826,994	  	
 	  	 	 	 	 	 	 	 	
Number of shares outstanding	  	 	36,608,038	  	 	 	36,383,158	  	
Net Asset Value Per Share	  	$	22.02	  	 	$	22.73	  	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares)

 	  	Year ended
December 31, 2011	 	 	Year ended
December 31, 2010	 	 	Year ended
December 31, 2009	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	 	 	 	 	
Interest and dividends:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	$	6,963	  	 	$	670	  	 	$	—  	  	
Companies 5% to 25% owned	  	 	—  	  	 	 	7,673	  	 	 	9,190	  	
Other interest and dividend income	  	 	131,937	  	 	 	116,298	  	 	 	100,480	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	  	 	138,900	  	 	 	124,641	  	 	 	109,670	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	
Investment advisory and management fees	  	 	20,596	  	 	 	18,296	  	 	 	16,738	  	
Performance-based incentive fee	  	 	20,476	  	 	 	17,305	  	 	 	16,815	  	
Interest and other credit facility expenses	  	 	9,212	  	 	 	14,276	  	 	 	2,636	  	
Administrative service fee	  	 	1,638	  	 	 	1,294	  	 	 	2,020	  	
Other general and administrative expenses	  	 	4,326	  	 	 	3,930	  	 	 	3,971	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	56,248	  	 	 	55,101	  	 	 	42,180	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income before income tax expense	  	 	82,652	  	 	 	69,540	  	 	 	67,490	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	  	 	748	  	 	 	328	  	 	 	228	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	 	81,904	  	 	 	69,212	  	 	 	67,262	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCIES:	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	—  	  	 	 	—  	  	 	 	(30	) 	
Companies 5% to 25% owned	  	 	784	  	 	 	16,397	  	 	 	—  	  	
Companies less than 5% owned	  	 	3,092	  	 	 	(55,762	) 	 	 	(253,364	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss) on investments	  	 	3,876	  	 	 	(39,365	) 	 	 	(253,394	) 	
Derivatives	  	 	(5,620	) 	 	 	(3,124	) 	 	 	(12,608	) 	
Foreign currency exchange	  	 	(418	) 	 	 	3,521	  	 	 	1,104	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss before income taxes	  	 	(2,162	) 	 	 	(38,968	) 	 	 	(264,898	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	  	 	231	  	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(2,393	) 	 	 	(38,968	) 	 	 	(264,898	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	5,547	  	 	 	997	  	 	 	(3,900	) 	
Companies 5% to 25% owned	  	 	(428	) 	 	 	(13,892	) 	 	 	3,823	  	
Companies less than 5% owned	  	 	(25,309	) 	 	 	126,403	  	 	 	287,748	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net unrealized gain (loss) on investments	  	 	(20,190	) 	 	 	113,508	  	 	 	287,671	  	
Derivatives	  	 	(1,354	) 	 	 	(1,204	) 	 	 	(2,583	) 	
Foreign currency exchange	  	 	3,348	  	 	 	(663	) 	 	 	(516	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss)	  	 	(18,196	) 	 	 	111,641	  	 	 	284,572	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, derivatives and foreign currencies	  	 	(20,589	) 	 	 	72,673	  	 	 	19,674	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	$	61,315	  	 	$	141,885	  	 	$	86,936	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share	  	$	1.68	  	 	$	4.27	  	 	$	2.65	  	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands except shares)

 	  	Year ended
December 31, 2011	 	 	Year ended
December 31, 2010	 	 	Year ended
December 31, 2009	 	
Increase (decrease) in net assets resulting from operations:	  	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	$	81,904	  	 	$	69,212	  	 	$	67,262	  	
Net realized loss	  	 	(2,393	) 	 	 	(38,968	) 	 	 	(264,898	) 	
Net change in unrealized gain (loss)	  	 	(18,196	) 	 	 	111,641	  	 	 	284,572	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	61,315	  	 	 	141,885	  	 	 	86,936	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Dividends to shareholders declared(1)	  	 	(87,532	) 	 	 	(72,657	) 	 	 	(241,706	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Capital transactions:	  	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from shares sold	  	 	—  	  	 	 	184,215	  	 	 	—  	  	
Common stock offering costs	  	 	—  	  	 	 	(10,198	) 	 	 	—  	  	
Senior notes issued in Solar Capital Merger	  	 	—  	  	 	 	(125,000	) 	 	 	—  	  	
Reinvestment of dividends	  	 	5,164	  	 	 	10,846	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets resulting from capital transactions	  	 	5,164	  	 	 	59,863	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in net assets	  	 	(21,053	) 	 	 	129,091	  	 	 	(154,770	) 	
Net assets at beginning of year	  	 	826,994	  	 	 	697,903	  	 	 	852,673	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net assets at end of year	  	$	805,941	  	 	$	826,994	  	 	$	697,903	  	

(1)	For the year ended December 31, 2009, represents distributions to Solar Capital LLC unit holders declared.	
See notes to consolidated financial statements
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except shares)

 	  	Year ended
December 31, 2011	 	 	Year ended
December 31,  2010	 	 	Year ended
December 31,  2009	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets from operations	  	$	61,315	  	 	$	141,885	  	 	$	86,936	  	
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Net realized (gain) loss from investments	  	 	(3,876	) 	 	 	39,365	  	 	 	253,394	  	
Net realized (gain) loss from foreign currency exchange	  	 	418	  	 	 	(3,521	) 	 	 	(1,104	) 	
Net change in unrealized (gain) loss on investments	  	 	20,190	  	 	 	(113,508	) 	 	 	(287,671	) 	
Net change in unrealized loss on derivatives	  	 	1,354	  	 	 	1,204	  	 	 	2,583	  	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	 	 	 	 	
Purchase of investment securities	  	 	(433,637	) 	 	 	(381,521	) 	 	 	(214,109	) 	
Proceeds from disposition of investment securities	  	 	348,083	  	 	 	342,582	  	 	 	153,461	  	
Receivable for investments sold	  	 	7,335	  	 	 	(10,560	) 	 	 	—  	  	
Interest and dividends receivable	  	 	(4,171	) 	 	 	1,955	  	 	 	3,194	  	
Purchase of interest rate caps	  	 	(2,938	) 	 	 	—  	  	 	 	—  	  	
Fee revenue receivable	  	 	(444	) 	 	 	1,889	  	 	 	(829	) 	
Deferred offering costs	  	 	(469	) 	 	 	1,478	  	 	 	(772	) 	
Deferred credit facility costs	  	 	2,269	  	 	 	(4,990	) 	 	 	549	  	
Foreign tax receivable	  	 	—  	  	 	 	—  	  	 	 	101	  	
Withholding tax receivable	  	 	—  	  	 	 	—  	  	 	 	16,505	  	
Prepaid expenses and other receivables	  	 	(238	) 	 	 	306	  	 	 	(308	) 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	7,818	  	 	 	14,625	  	 	 	—  	  	
Investment advisory and management fee payable	  	 	385	  	 	 	(3,771	) 	 	 	3,369	  	
Performance-based incentive fee payable	  	 	856	  	 	 	(4,170	) 	 	 	3,012	  	
Deferred fee revenue	  	 	(924	) 	 	 	(2,290	) 	 	 	(460	) 	
Due to Solar Capital Management LLC	  	 	296	  	 	 	(139	) 	 	 	(173	) 	
Income taxes payable	  	 	391	  	 	 	(206	) 	 	 	(1,200	) 	
Interest payable	  	 	466	  	 	 	444	  	 	 	153	  	
Other accrued expenses and payables	  	 	(411	) 	 	 	(478	) 	 	 	555	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	  	 	4,068	  	 	 	20,579	  	 	 	17,186	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from shares sold	  	 	—  	  	 	 	184,215	  	 	 	—  	  	
Common stock offering costs	  	 	—  	  	 	 	(10,198	) 	 	 	—  	  	
Cash dividends paid	  	 	(82,368	) 	 	 	(61,811	) 	 	 	—  	  	
Distributions to Solar Capital LLC unit holders paid in cash	  	 	—  	  	 	 	(75,136	) 	 	 	(166,570	) 	
Proceeds from borrowings on term loan	  	 	—  	  	 	 	35,000	  	 	 	—  	  	
Repayments of borrowings on senior notes	  	 	—  	  	 	 	(125,000	) 	 	 	—  	  	
Proceeds from borrowings on credit facilities	  	 	1,316,760	  	 	 	845,000	  	 	 	383,034	  	
Repayments of borrowings on credit facilities	  	 	(1,515,405	) 	 	 	(529,592	) 	 	 	(293,816	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided by (Used in) Financing Activities	  	 	(281,013	) 	 	 	262,478	  	 	 	(77,352	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	(276,945	) 	 	 	283,057	  	 	 	(60,166	) 	
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	  	 	288,732	  	 	 	5,675	  	 	 	65,841	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF YEAR	  	$	11,787	  	 	$	288,732	  	 	$	5,675	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	 	 	 	 	
Cash paid for interest	  	$	6,038	  	 	$	11,454	  	 	$	1,410	  	
Cash paid for income taxes	  	$	588	  	 	$	534	  	 	$	1,428	  	
Non-cash financing activity:	  	 	 	 	 	 	 	 	 	 	 	 	
Reinvestment of dividends	  	$	5,164	  	 	$	10,846	  	 	$	—  	  	
Issuance of Senior Notes	  	$	—  	  	 	$	125,000	  	 	$	—  	  	
Distributions payable	  	$	—  	  	 	$	—  	  	 	$	75,136	  	
See notes to consolidated financial statements.
 
F-7

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2011
(in thousands, except shares)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—39.46%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation(18)	 	Insurance	 	 	9.00	% 	 	 	5/24/2019	  	 	$	40,000	  	 	$	39,811	  	 	$	39,517	  	
Airvana Network Solutions Inc.	 	Telecommunications	 	 	10.00	% 	 	 	3/25/2015	  	 	 	8,324	  	 	 	8,186	  	 	 	8,324	  	
AviatorCap SII, LLC I(10)	 	Aerospace & Defense	 	 	12.00	% 	 	 	12/31/2014	  	 	 	3,728	  	 	 	3,678	  	 	 	3,671	  	
AviatorCap SII, LLC II(10)	 	Aerospace & Defense	 	 	11.00	% 	 	 	12/31/2014	  	 	 	5,697	  	 	 	5,618	  	 	 	5,611	  	
AviatorCap SII, LLC III(10)	 	Aerospace & Defense	 	 	13.00	% 	 	 	12/31/2014	  	 	 	8,856	  	 	 	8,696	  	 	 	8,724	  	
Direct Buy Inc.(20)	 	Home, Office Furnishing & Durable Consumer Prds	 	 	12.00	% 	 	 	2/1/2017	  	 	 	25,000	  	 	 	24,332	  	 	 	5,875	  	
Fulton Holding Corp(18)	 	Retail Stores	 	 	13.74	% 	 	 	5/28/2016	  	 	 	35,000	  	 	 	34,155	  	 	 	35,000	  	
Grakon, LLC	 	Machinery	 	 	12.00	% 	 	 	12/31/2015	  	 	 	9,524	  	 	 	7,610	  	 	 	9,286	  	
Good Sam Enterprise, LLC	 	Insurance	 	 	11.50	% 	 	 	12/1/2016	  	 	 	7,000	  	 	 	6,523	  	 	 	6,860	  	
Grocery Outlet Inc.	 	Grocery	 	 	10.50	% 	 	 	12/15/2017	  	 	 	33,600	  	 	 	32,599	  	 	 	32,592	  	
Isotoner Corporation	 	Personal & Nondurable Consumer Products	 	 	10.75	% 	 	 	1/8/2018	  	 	 	39,000	  	 	 	37,895	  	 	 	37,830	  	
Interactive Health Solutions, Inc.(18)(19)	 	Healthcare, Education & Childcare	 	 	11.50	% 	 	 	10/4/2016	  	 	 	20,131	  	 	 	19,691	  	 	 	19,930	  	
MYI Acquiror Corporation(3)(4)(8)	 	Insurance	 	 	13.00	%(7) 	 	 	3/13/2017	  	 	 	31,500	  	 	 	30,899	  	 	 	31,500	  	
Roundy’s Supermarkets, Inc.—2nd Lien(18)	 	Grocery	 	 	10.00	% 	 	 	4/16/2016	  	 	 	22,000	  	 	 	21,685	  	 	 	22,069	  	
Southern Auto Finance Company	 	Banking	 	 	13.50	% 	 	 	10/19/2017	  	 	 	25,000	  	 	 	24,453	  	 	 	24,437	  	
Spencer Spirit Holdings, Inc.	 	Retail Stores	 	 	11.00	% 	 	 	5/1/2017	  	 	 	10,000	  	 	 	10,000	  	 	 	10,000	  	
Transplace Texas, LP(18)	 	Cargo Transport	 	 	11.00	% 	 	 	4/12/2017	  	 	 	20,000	  	 	 	19,533	  	 	 	19,500	  	
USAW 767(10)	 	Aerospace & Defense	 	 	14.50	% 	 	 	12/31/2012	  	 	 	4,904	  	 	 	4,850	  	 	 	4,831	  	
ViaWest Inc(18)	 	Personal, Food & Misc. Services	 	 	13.50	%(7) 	 	 	5/20/2016	  	 	 	33,255	  	 	 	32,520	  	 	 	32,756	  	
Vision Holding Corp.(18)	 	Healthcare, Education & Childcare	 	 	12.00	% 	 	 	11/23/2016	  	 	 	37,500	  	 	 	36,869	  	 	 	37,125	  	
VPSI, Inc.(17)	 	Personal Transportation	 	 	12.00	% 	 	 	12/23/2015	  	 	 	16,958	  	 	 	16,598	  	 	 	16,958	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	436,977	  	 	$	426,201	  	 	$	412,396	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—52.33%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	 	Diversified/Conglomerate Service	 	 	18.00	% 	 	 	12/8/2015	  	 	$	42,500	  	 	$	41,878	  	 	$	42,075	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Amusement, Entertainment	 	 	5.55	%(7) 	 	 	6/13/2012	  	 	 	27,141	  	 	 	27,086	  	 	 	26,462	  	
CIBT Solutions	 	Leisure, Amusement, Entertainment	 	 	13.50	% 	 	 	6/15/2018	  	 	 	36,200	  	 	 	35,389	  	 	 	35,386	  	
Crosman Corporation	 	Leisure, Amusement, Entertainment	 	 	13.00	%(7) 	 	 	10/15/2016	  	 	 	15,219	  	 	 	14,808	  	 	 	14,762	  	
DSW Group, Inc.	 	Beverage, Food & Tobacco	 	 	15.00	%(7) 	 	 	4/24/2012	  	 	 	125,106	  	 	 	124,972	  	 	 	106,340	  	
Earthbound Farm(18)	 	Farming & Agriculture	 	 	14.25	% 	 	 	6/21/2017	  	 	 	58,947	  	 	 	57,739	  	 	 	56,590	  	
Grakon Holdings LLC Sr	 	Machinery	 	 	14.00	%(7) 	 	 	12/31/2015	  	 	 	1,588	  	 	 	1,588	  	 	 	1,469	  	
Grakon Holdings LLC Jr	 	Machinery	 	 	12.00	%(7) 	 	 	12/31/2015	  	 	 	15,118	  	 	 	12,344	  	 	 	7,710	  	
Granite Global Solutions Corp.(3)(16)	 	Insurance	 	 	13.50	% 	 	 	5/31/2016	  	 	 	29,983	  	 	 	30,234	  	 	 	29,121	  	
Magnolia River, LLC	 	Hotels, Motels, Inns and Gaming	 	 	14.00	% 	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,664	  	 	 	19,064	  	
Midcap Financial Intermediate Holdings, LLC(18)	 	Banking	 	 	14.25	% 	 	 	7/9/2015	  	 	 	75,000	  	 	 	73,542	  	 	 	75,000	  	
ProSieben Sat.1 Media AG(3)(6)	 	Broadcasting & Entertainment	 	 	8.83	%(7) 	 	 	3/6/2017	  	 	 	21,125	  	 	 	20,261	  	 	 	10,508	  	
Richelieu Foods, Inc.(17)	 	Beverage, Food & Tobacco	 	 	13.75	% 	 	 	5/18/2016	  	 	 	22,500	  	 	 	21,972	  	 	 	21,150	  	
Rug Doctor L.P.(18)	 	Personal, Food & Misc. Services	 	 

 	15.50% to 20.00

(wtd. avg. 17.54	%(7) 

%) 	 	 	10/31/2014	  	 	 	51,225	  	 	 	48,034	  	 	 	47,383	  	
Shoes For Crews, LLC(17)	 	Textiles & Leather	 	 	13.75	%(7) 	 	 	7/23/2016	  	 	 	15,650	  	 	 	15,318	  	 	 	15,650	  	
Weetabix Group(3)(5)	 	Beverage, Food & Tobacco	 	 	9.22	%(7) 	 	 	9/14/2016	  	 	 	15,986	  	 	 	18,589	  	 	 	12,469	  	
Weetabix Group(3)(5)	 	Beverage, Food & Tobacco	 	 	10.03	%(7) 	 	 	5/3/2017	  	 	 	34,294	  	 	 	41,739	  	 	 	25,720	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	606,646	  	 	$	604,157	  	 	$	546,859	  	

F-8

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011
(in thousands, except shares)

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity—1.40%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SODO Corp.(10)(13)	 	Aerospace & Defense	 	 	8.43	%(7) 	 	 	—  	  	 	 	1,912	  	 	$	2,009	  	 	$	1,949	  	
SOCAY Corp.(10)(13)	 	Aerospace & Defense	 	 	8.59	%(7) 	 	 	—  	  	 	 	12,357	  	 	 	13,059	  	 	 	12,668	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	8.00	% 	 	 	7/17/2015	  	 	 	387	  	 	 	39	  	 	 	47	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	15,107	  	 	$	14,664	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants—6.81%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP(9)(11)(12)	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	41,818,834	  	 	$	41,819	  	 	$	35,820	  	
Grakon, LLC	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	  	
Grakon, LLC Warrants	 	Machinery	 	 	 	 	 	 	 	 	 	 	3,518,001	  	 	 	—  	  	 	 	—  	  	
Great American Group Inc.(14)	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	69	  	
Great American Group Inc.(15)	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	23	  	
National Specialty Alloys, LLC(10)	 	Mining, Steel, Iron & Nonprecious Metals	 	 	 	 	 	 	 	 	 	 	1,000,000	  	 	 	10,000	  	 	 	16,000	  	
Nuveen Investments, Inc.	 	Finance	 	 	 	 	 	 	 	 	 	 	3,486,444	  	 	 	30,875	  	 	 	7,844	  	
NXP Semiconductors Netherlands B.V.(3)	 	Electronics	 	 	 	 	 	 	 	 	 	 	645,292	  	 	 	17,592	  	 	 	9,918	  	
Seven West Media Limited	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	437,687	  	 	 	2,424	  	 	 	1,450	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	107,108	  	 	$	71,124	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,152,573	  	 	$	1,045,043	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (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)	For each debt investment we have provided the current interest rate in effect as of December 31, 2011. Variable rate debt investments generally bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which may reset daily, quarterly or semi-annually.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in British Pounds, Euro, Canadian Dollars or Australian Dollars: Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. in Canada; and Seven West Media Group Pty Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and $14,750 of MYI Aquiror Corporation is domiciled in the United Kingdom, but these assets are denominated in US Dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	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.	
(7)	Coupon is payable in cash and/or in kind (PIK).	
(8)	Includes an unfunded commitment of $6,000.	
(9)	Solar Capital Ltd. has an unfunded commitment of $2,879.	
(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 Investment Company Act of 1940, as amended (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)	Solar Capital Ltd.’s investment in Ark Real Estate Partners LP is held through its taxable subsidiary SLRC ADI Corp.	
(13)	SODO Corp. and SOCAY Corp. own equity interests that represent a majority of the equity ownership in Aviator Cap SII, LLC and USAW 767. Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(14)	Founders Shares.	
(15)	Contingent Founders Shares.	
(16)	Includes an unfunded commitment of $15,600 Canadian Dollars or $15,313 U.S Dollars as of December 31, 2011.	
 
F-9

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011
(in thousands, except shares)
 
(17)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of December 31, 2011, all other investments were pledged as collateral for the Senior Secured Revolving Credit Facility and the Term Loan (see Note 6 to the consolidated financial statements).	
(18)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. (See note 17 above for further explanation.) Par amounts held through Solar Capital Funding II LLC include: Asurion $14,224; Fulton Holding Corp. $18,000; Interactive Health Solutions, Inc. $10,236; Roundy’s Supermarkets Inc. $10,000; Transplace Texas, LP $18,800; ViaWest Inc. $15,239; Vision Holding Corp $13,883; Earthbound $23,500; Midcap Financial Intermediate Holdings, LLC $23,500; and Rug Doctor L.P. $9,515. Remaining par balances are held directly by Solar Capital Ltd.	
(19)	Includes an unfunded commitment of $1,250.	
(20)	Investment is on non-accrual status.	
See notes to consolidated financial statements.
 
F-10

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011

Industry Classification	  	Percentage of  Total
Investments (at fair
value) as of
December 31, 2011	 	
Beverage, Food & Tobacco	  	 	16	% 	
Insurance	  	 	10	% 	
Banking	  	 	10	% 	
Personal, Food & Misc. Services	  	 	8	% 	
Leisure, Amusement, Entertainment	  	 	7	% 	
Healthcare, Education & Childcare	  	 	5	% 	
Farming & Agriculture	  	 	5	% 	
Grocery	  	 	5	% 	
Retail Stores	  	 	4	% 	
Diversified/Conglomerate Service	  	 	4	% 	
Personal & Nondurable Consumer Products	  	 	4	% 	
Aerospace & Defense	  	 	4	% 	
Buildings & Real Estate	  	 	3	% 	
Cargo Transport	  	 	2	% 	
Hotels, Motels, Inns and Gaming	  	 	2	% 	
Machinery	  	 	2	% 	
Personal Transportation	  	 	2	% 	
Mining, Steel, Iron & Nonprecious Metals	  	 	1	% 	
Textiles & Leather	  	 	1	% 	
Broadcasting & Entertainment	  	 	1	% 	
Electronics	  	 	1	% 	
Telecommunications	  	 	1	% 	
Finance	  	 	1	% 	
Home, Office Furnishing & Durable Consumer Prds	  	 	1	% 	
 	  	 	 	 	
 	  	 	100.00	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
F-11

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

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—25.3%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation(18)	 	Insurance	 	 	6.76	% 	 	 	7/3/2015	  	 	$	49,310	  	 	$	49,266	  	 	$	46,609	  	
Classic Cruises Holdings(5)	 	Leisure, Amusement, Entertainment	 	 	10.11	% 	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,478	  	 	 	23,920	  	
Emdeon Business Services LLC	 	Healthcare, Education & Childcare	 	 	5.26	% 	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,087	  	 	 	14,850	  	
Fulton Holding Corp(18)	 	Retail Stores	 	 	13.82	% 	 	 	5/28/2016	  	 	 	35,000	  	 	 	33,964	  	 	 	35,000	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	% 	 	 	11/29/2012	  	 	 	9,270	  	 	 	9,247	  	 	 	8,899	  	
Roundy’s Supermarkets, Inc.(18)	 	Grocery	 	 	10.00	% 	 	 	4/16/2016	  	 	 	22,000	  	 	 	21,612	  	 	 	22,371	  	
USAW 767(10)	 	Aerospace & Defense	 	 	14.50	% 	 	 	12/31/2012	  	 	 	6,753	  	 	 	6,621	  	 	 	6,618	  	
ViaWest Inc(18)	 	Personal, Food & Misc. Services	 	 	13.50	%(21) 	 	 	5/20/2016	  	 	 	32,757	  	 	 	31,863	  	 	 	31,774	  	
Vision Holding Corp.	 	Healthcare, Education & Childcare	 	 	12.00	% 	 	 	11/23/2016	  	 	 	40,000	  	 	 	39,238	  	 	 	39,225	  	
VPSI, Inc.	 	Personal Transportation	 	 	12.00	% 	 	 	12/23/2015	  	 	 	18,333	  	 	 	17,877	  	 	 	17,875	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	254,423	  	 	$	250,253	  	 	$	247,141	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes—66.6%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ares Capital Corporation(17)	 	Finance	 	 	6.00	% 	 	 	4/1/2012	  	 	$	15,393	  	 	$	12,046	  	 	$	15,947	  	
Ares Capital Corporation(18)	 	Finance	 	 	6.63	% 	 	 	7/15/2011	  	 	 	14,500	  	 	 	12,552	  	 	 	14,784	  	
Adams Outdoor Advertising	 	Diversified/Conglomerate Service	 	 	18.00	% 	 	 	12/8/2015	  	 	 	42,500	  	 	 	41,784	  	 	 	41,775	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Amusement, Entertainment	 	 	5.30	%(21) 	 	 	6/13/2012	  	 	 	25,729	  	 	 	25,564	  	 	 	23,414	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	% 	 	 	7/31/2016	  	 	 	17,362	  	 	 	17,103	  	 	 	17,927	  	
Direct Buy Inc.(18)	 	Home, Office Furnishing & Durable Consumer Prds	 	 	16.00	% 	 	 	5/30/2013	  	 	 	38,100	  	 	 	37,724	  	 	 	34,614	  	
DS Waters	 	Beverage, Food & Tobacco	 	 	15.00	%(21) 	 	 	4/24/2012	  	 	 	107,759	  	 	 	107,158	  	 	 	100,216	  	
Earthbound(18)	 	Farming & Agriculture	 	 	14.25	% 	 	 	6/21/2017	  	 	 	58,947	  	 	 	57,475	  	 	 	58,358	  	
Fleetpride Corporation(18)	 	Cargo Transport	 	 	11.50	% 	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,119	  	 	 	41,065	  	
Grakon, LLC(12)	 	Machinery	 	 	14.00	%(21) 	 	 	6/19/2013	  	 	 	22,084	  	 	 	18,620	  	 	 	6,625	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food & Tobacco	 	 	11.79	%(21) 	 	 	11/3/2016	  	 	 	5,100	  	 	 	5,131	  	 	 	5,144	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food & Tobacco	 	 	11.33	%(21) 	 	 	11/3/2016	  	 	 	12,378	  	 	 	15,257	  	 	 	12,427	  	
Magnolia River, LLC	 	Hotels, Motels, Inns and Gaming	 	 	14.00	% 	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,492	  	 	 	18,111	  	
Midcap Financial Intermediate Holdings, LLC(16) (18)	 	Banking	 	 	14.25	% 	 	 	7/9/2015	  	 	 	75,000	  	 	 	73,205	  	 	 	73,125	  	
ProSieben Sat.1 Media AG(3)(8)	 	Broadcasting & Entertainment	 	 	8.14	%(21) 	 	 	3/6/2017	  	 	 	21,059	  	 	 	19,813	  	 	 	17,247	  	
Richelieu Foods, Inc.(17)	 	Beverage, Food & Tobacco	 	 	13.75	% 	 	 	5/18/2016	  	 	 	22,500	  	 	 	21,901	  	 	 	21,881	  	
Rug Doctor L.P.(18)	 	Personal, Food & Misc. Services	 	 	13.50% to 16.00	%(21) 	 	 	10/31/2014	  	 	 	49,715	  	 	 	47,828	  	 	 	47,229	  	
 	 	 	 	 	(avg. 14.95	%) 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	% 	 	 	12/29/2013	  	 	 	20,712	  	 	 	16,328	  	 	 	20,297	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	%(21) 	 	 	12/29/2013	  	 	 	8,794	  	 	 	6,212	  	 	 	8,003	  	
Shoes For Crews, LLC(17)	 	Textiles & Leather	 	 	13.75	% 	 	 	7/23/2016	  	 	 	15,650	  	 	 	15,249	  	 	 	15,650	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	% 	 	 	8/2/2013	  	 	 	22,834	  	 	 	22,743	  	 	 	21,236	  	
Weetabix Group(3)(7)	 	Beverage, Food & Tobacco	 	 	10.53	%(21) 	 	 	9/14/2016	  	 	 	14,586	  	 	 	17,092	  	 	 	11,304	  	
Weetabix Group(3)(7)	 	Beverage, Food & Tobacco	 	 	10.03	%(21) 	 	 	5/7/2017	  	 	 	31,206	  	 	 	38,421	  	 	 	23,405	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	703,972	  	 	$	690,817	  	 	$	649,784	  	

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

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
Preferred Equity—0.4%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
SODO Corp.(10)(20)	  	Aerospace & Defense	  	 	10.00	% (21) 	 	 	—  	  	  	 	388	  	  	$	390	  	  	$	390	  	
SOCAY Corp.(10)(20)	  	Aerospace & Defense	  	 	10.00	% (21) 	 	 	—  	  	  	 	3,484	  	  	 	3,500	  	  	 	3,500	  	
Wyle Laboratories	  	Aerospace & Defense	  	 	8.00	% 	 	 	7/17/2015	  	  	 	387	  	  	 	39	  	  	 	44	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Preferred Equity	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	3,929	  	  	$	3,934	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Common Equity / Partnership Interests / Warrants—7.7%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ark Real Estate Partners LP(9)(11)(19)	  	Buildings & Real Estate	  	 	 	 	 	 	 	 	  	 	34,806,121	  	  	$	34,806	  	  	$	29,235	  	
Direct Buy Inc.	  	Home, Office Furnishing & Durable Consumer	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	Prds	  	 	 	 	 	 	 	 	  	 	5,000,000	  	  	 	5,000	  	  	 	2,500	  	
Global Garden Products(3)(6)	  	Farming & Agriculture	  	 	 	 	 	 	 	 	  	 	88,483	  	  	 	—  	  	  	 	—  	  	
Grakon, LLC	  	Machinery	  	 	 	 	 	 	 	 	  	 	1,714,286	  	  	 	1,714	  	  	 	—  	  	
Great American Group Inc.(13)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	572,800	  	  	 	2,681	  	  	 	281	  	
Great American Group Inc.(14)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	187,500	  	  	 	3	  	  	 	92	  	
National Specialty Alloys, LLC(10)	  	Mining, Steel, Iron & Nonprecious Metals	  	 	 	 	 	 	 	 	  	 	1,000,000	  	  	 	10,000	  	  	 	10,000	  	
Nuveen Investments, Inc.	  	Finance	  	 	 	 	 	 	 	 	  	 	3,000,000	  	  	 	30,000	  	  	 	7,500	  	
NXP Semiconductors Netherlands B.V.(3)(15)	  	Electronics	  	 	 	 	 	 	 	 	  	 	1,139,081	  	  	 	31,057	  	  	 	21,897	  	
Seven Media Group Pty Limited(3)	  	Broadcasting & Entertainment	  	 	 	 	 	 	 	 	  	 	4,285,714	  	  	 	3,301	  	  	 	3,857	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Common Equity/Partnerships Interests /	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Warrants	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	118,562	  	  	$	75,362	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	1,063,561	  	  	$	976,221	  	

(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, 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. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and is denominated in U.S. dollars. 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)	Founders Shares	
(14)	Contingent Founders Shares	
(15)	Administrative agent to NXP management equity plan	
(16)	Includes an unfunded par commitment of $15,000	
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2010
(in thousands, except shares)
 
(17)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of December 31, 2010, all other investments were pledged as collateral for the Senior Secured Revolving Credit Facility and the Term Loan (see Note 6 to the consolidated financial statements).	
(18)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. (See note 17 above for further explanation.) Par amounts held through Solar Capital Funding II LLC include: Asurion $14,224; Fulton Holding Corp. $18,000; Roundy’s Supermarkets Inc. $10,000; ViaWest Inc. $15,054; Ares Capital Corporation $12,000; Direct Buy Inc. $15,000; Earthbound $23,500; Fleetpride Corporation $23,500; Midcap Financial Intermediate Holdings, LLC $23,500; and Rug Doctor L.P. $9,371. Remaining par balances are held directly by Solar Capital Ltd.	
(19)	Solar Capital Ltd.’s investments in Ark Real Estate Partners LP are held though it wholly-owned subsidiary SLRC ADI Corp.	
(20)	Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares	
(21)	Coupon is payable in cash and/or in kind (PIK).	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2010

Industry Classification	  	Pecentage of Total
Investments (at fair
value) as of
December 31, 2010	 	
Beverage, Food & Tobacco	  	 	18	% 	
Personal, Food & Misc. Services	  	 	8	% 	
Banking	  	 	7	% 	
Farming & Agriculture	  	 	6	% 	
Healthcare, Education & Childcare	  	 	5	% 	
Aerospace & Defense	  	 	5	% 	
Broadcasting & Entertainment	  	 	5	% 	
Leisure, Amusement, Entertainment	  	 	5	% 	
Insurance	  	 	5	% 	
Diversified/Conglomerate Service	  	 	4	% 	
Cargo Transport	  	 	4	% 	
Finance	  	 	4	% 	
Home, Office Furnishing & Durable Consumer Prds	  	 	4	% 	
Retail Stores	  	 	4	% 	
Buildings & Real Estate	  	 	3	% 	
Grocery	  	 	2	% 	
Electronics	  	 	2	% 	
Hotels, Motels, Inns and Gaming	  	 	2	% 	
Personal Transportation	  	 	2	% 	
Textiles & Leather	  	 	2	% 	
Mining, Steel, Iron & Nonprecious Metals	  	 	1	% 	
Oil & Gas	  	 	1	% 	
Machinery	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011
(in thousands, except shares)
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 has 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, 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 subsidiaries, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007, and Solar Capital Funding II LLC (“SC Funding”), a Delaware limited liability company formed on December 8, 2010. 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 years presented. All significant intercompany balances and transactions have been eliminated.
As required by ASC 260-10, Earnings Per Share, 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.
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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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 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.
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.
Dividend Income: Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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.
Fee Revenue Receivable—Fee revenue receivable consists of premium payments owed to the Company at the maturity of certain loans. The premium payments are recorded as a receivable at the inception of the loan and are accreted into interest income over the respective terms of the applicable loans.
Deferred Fee Revenue—Deferred fee revenue represents the unearned portion of premium payments owed to the Company at the maturity of certain loans.
U.S. Federal Income Taxes—The Company has elected 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. Depending on the level of taxable income earned in a given 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 years ended December 31, 2011 and 2010, $697 and $120 was recorded for U.S. Federal excise tax, respectively.
Although we file federal and state tax returns, our major tax jurisdiction is federal. Our inception-to-date federal tax years remain subject to examination by the Internal Revenue Service. 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.
We have formed and used certain taxable subsidiaries to be taxed as a corporation for federal income tax purposes. These taxable subsidiaries allow us to hold portfolio companies organized as pass-through entities and still satisfy certain RIC income requirements. We do not consolidate the taxable subsidiaries for income tax purposes but we do recognize the results of these subsidiaries for financial reporting purposes.
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 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. We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein.
Capital Accounts—Certain capital accounts including under (over) distributed net investment income, accumulated net realized gain or loss, net unrealized 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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) Market value of investment securities, other assets and liabilities – at the current rates of exchange.
(ii) Purchase and sales of investment securities, income and expenses – at the rates of exchange prevailing on the respective date of such transactions.
The Company does not isolate that portion of realized and unrealized gains or losses on investments that result from changes in market prices of investments from those that result from fluctuations in foreign exchange rates. Net realized foreign currency gains or losses arise from sales or repayments of foreign denominated investments (recorded in realized gain/loss on investments), maturities or terminations of foreign currency derivatives (recorded in realized gain/loss on derivatives), repayments of foreign denominated liabilities and other transactional gain or loss resulting from fluctuations in foreign exchange rates on amounts received or paid (recorded in realized gain/loss on foreign exchange). Net unrealized foreign exchange gains and losses arise from valuation changes in foreign denominated assets and liabilities, resulting from changes in exchange rates, including unrealized foreign exchange gains and losses on investments (recorded in unrealized gain/loss on investments), foreign currency derivatives (recorded in unrealized gain/loss on derivatives), and all other assets and liabilities (recorded in unrealized gain/loss on foreign exchange).
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—The Company recognizes derivatives as either assets or liabilities at fair value on its Consolidated Statements of Assets and Liabilities with valuation changes recorded as realized or unrealized gains and losses. The Company currently does not have any formally documented hedges that qualify for hedge accounting treatment.
The Company uses foreign exchange forward contracts and/or borrowings on its multicurrency revolving credit facility to economically hedge its foreign currency risks. Changes in the values of the Company’s foreign denominated assets are recorded in current earnings as realized and unrealized gains and losses (see above); likewise, realized and unrealized gains and losses from derivatives and foreign denominated debt are also recorded in current earnings. The fair value of foreign exchange forward contracts is determined by recognizing
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
the difference between the contract exchange rate and the current market exchange rate. Fluctuations in market values of assets and liabilities denominated in the same foreign currency offset in earnings providing a “natural” foreign currency hedge.
The Company uses interest rate caps to create a synthetic “ceiling” on its borrowing rates. An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds an agreed strike price. Interest payments on the Company’s credit facilities are primarily LIBOR based. By purchasing caps on LIBOR, if LIBOR exceeds the strike price, the Company will pay a higher interest rate on its credit facilities but receive an offsetting payment from the cap counterparty on the notional amount above the strike price. Caps have an initial cost. The fair value of interest rate caps is determined using option pricing models that use readily available market inputs.
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 or debt.
Receivable for Investments Sold—Receivable for investments sold represents a receivable for investments that have sold but the proceeds have not been received.
Payable for Investments Purchased—Payable for investments purchased represents a liability for investments that have been purchased but the proceeds have not been paid and any unfunded loan commitments.
Deferred Credit Facility Costs—Deferred credit facility costs are being amortized over the life of the related credit facility.
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, except for the following.
Subsequent to December 31, 2011, DSW Group, Inc., the Company’s largest investment, announced it is seeking to refinance its capital structure. Until the terms of the recapitalization have been finalized, the Company cannot fully assess the impact on its portfolio; however, at this time the Company does not believe the impact will be material.
Note 3. Investments
Investments consisted of the following as of December 31, 2011 and 2010:

 	  	December 31, 2011	 	  	December 31, 2010	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	426,201	  	  	$	412,396	  	  	$	250,253	  	  	$	247,141	  	
Subordinated Debt/Corporate Notes	  	 	604,157	  	  	 	546,859	  	  	 	690,817	  	  	 	649,784	  	
Preferred Equity	  	 	15,107	  	  	 	14,664	  	  	 	3,929	  	  	 	3,934	  	
Common Equity/Partnership Interests/Warrants	  	 	107,108	  	  	 	71,124	  	  	 	118,562	  	  	 	75,362	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,152,573	  	  	$	1,045,043	  	  	$	1,063,561	  	  	$	976,221	  	

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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
There was one asset on non-accrual status as of December 31, 2011 with a total fair value of $5,875. As of December 31, 2010, the Company had one investment on non-accrual status with a total fair value of $6,625.
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 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 adviser. For financial statement purposes, the second part of the incentive fee is accrued based upon 20% of cumulative net realized and unrealized capital appreciation. No accrual was required for the years ended December 31, 2011, 2010 or 2009.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
Note 5. Derivatives
The Company is exposed to interest rate risk both as a lender and a borrower. The Company’s borrowing facilities and term loan bear interest at a floating rate, which means that rising interest rates would increase our cost of borrowing. To partially mitigate this risk, in 2011, the Company purchased two interest rate cap contracts, which effectively limit the interest rate payable on $150 million of LIBOR based borrowings. The Company had no interest rate derivatives prior to 2011.
The following table highlights the outstanding interest rate caps:

 	  	 	 	 	 	 	  	 	 	  	December 31, 2011	 	  	 	 	  	 	 	 	 	 	
Index Rate	  	Cap Rate	 	 	Notional
Amount	 	  	Expiration	 	  	Cost	 	  	Fair Value	 	  	Unrealized
Depreciation	 	 	Counterparty	 	
3 Month Libor	  	 	1.0	% 	 	$	100,000	  	  	 	1/13/2014	  	  	$	1,950	  	  	$	279	  	  	$	(1,671	) 	 	 	Wells Fargo	  	
3 Month Libor	  	 	1.0	% 	 	 	50,000	  	  	 	5/4/2014	  	  	 	988	  	  	 	190	  	  	 	(798	) 	 	 	Wells Fargo	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
 	  	 	 	 	 	$	150,000	  	  	 	 	 	  	$	2,938	  	  	$	469	  	  	$	(2,469	) 	 	 	 	 	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
The Company is also 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 year ended December 31, 2011, we entered into 80 foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $30,697. During the year ended December 31, 2010, we entered into 77 foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $28,181.
As of December 31, 2011, there were two open forward foreign currency contracts denominated in Euro and British Pounds, both of which terminate on January 10, 2012. As of December 31, 2010, there were three open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, all of which terminated on January 7, 2011. At December 31, 2011 and 2010, 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:

  	 	December 31, 2011	 	 	December 31, 2010	
SOLD	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	 	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	
EUR	 	 	966	  	 	$	1,295	  	 	$	44	  	 	 	SunTrust Bank	  	 	 	18,307	  	 	$	24,464	  	 	$	(191	) 	 	SunTrust Bank	
GBP	 	 	12,989	  	 	 	20,308	  	 	 	136	  	 	 	SunTrust Bank	  	 	 	37,942	  	 	 	59,155	  	 	 	604	  	 	SunTrust Bank	
AUD	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	30,639	  	 	 	31,337	  	 	 	(1,348	) 	 	SunTrust Bank	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Sold	 	 	 	 	 	$	21,602	  	 	$	180	  	 	 	 	 	 	 	 	 	 	$	114,956	  	 	$	(935	) 	 	 	

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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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 Value of Derivative Instruments

 	  	Derivative Assets	 	
 	  	December 31, 2011	 	  	December 31, 2010	 	
 	  	Balance Sheet Location	  	Fair Value	 	  	Balance Sheet Location	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	  	 	 	 	  	 	  	 	 	 	
Foreign exchange contracts	  	Derivative assets	  	$	180	  	  	Derivative assets	  	$	604	  	
Interest rate caps	  	Derivative assets	  	 	469	  	  	Derivative assets	  	 	—  	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	  	$	649	  	  	 	  	$	604	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivative assets	  	 	  	$	649	  	  	 	  	$	604	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
 	  	Derivative Liabilities	 	
 	  	December 31, 2011	 	  	December 31, 2010	 	
 	  	Balance Sheet Location	  	Fair Value	 	  	Balance Sheet Location	  	Fair Value	 	
Derivatives not designated as hedging instruments(a)	  	 	  	 	 	 	  	 	  	 	 	 	
Foreign exchange contracts	  	Derivative liabilities	  	$	—  	  	  	Derivative liabilities	  	$	1,539	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivatives not designated as hedging instruments(a)	  	 	  	$	—  	  	  	 	  	$	1,539	  	
 	  	 	  	 	 	 	  	 	  	 	 	 	
Total derivative liabilities	  	 	  	$	—  	  	  	 	  	$	1,539	  	

(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.	
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
Derivatives	  	Amount of Gain or (Loss) Recognized in Income on  Derivatives	 	 	
 	  	 	  	Year ended
December 31, 2011	 	 	Year ended
December 31, 2010	 	 	Year ended
December 31, 2009	 	 	
 	  	 	  	 	 	 	 	 	 	 	 	 	 	
Foreign exchange contracts	  	Realized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	Derivatives	  	$	(5,620	) 	 	$	(3,124	) 	 	$	(12,608	) 	 	 	
Foreign exchange contracts	  	Unrealized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	Derivatives	  	 	1,115	  	 	 	(1,204	) 	 	 	(2,583	) 	 	 	
Interest rate caps	  	Unrealized gain (loss):	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	Derivatives	  	 	(2,469	) 	 	 	—  	  	 	 	—  	  	 	 	
 	  	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	  	$	(6,974	) 	 	$	(4,328	) 	 	$	(15,191	) 	 	 	

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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
Note 6. Borrowing Facilities, Senior Unsecured Notes, and Term Loan
Senior Secured Revolving Credit Facility—On January 11, 2008, Solar Capital LLC entered into a $200 million Senior Secured Revolving Credit Facility (the “$405 Million 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 $405 Million Facility.
On February 12, 2010, Solar Capital Ltd. amended and restated the $405 Million 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%. Total commitments under the $405 Million Facility have been increased to $405 million as a result of the addition of three new lenders on May 12, 2010, June 23, 2010 and December 19, 2011. 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 asset coverage ratio.
Term Loan—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 shareholders’ equity and a minimum asset coverage ratio.
Senior Secured Loan Facility—On December 17, 2010, Solar Capital Ltd. entered into a $100 million senior secured credit facility (the “$100 Million Facility”) with Wells Fargo Securities LLC, as administrative agent. Solar Capital entered into (i) a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with SC Funding, pursuant to which Solar Capital will sell to SC Funding certain loans that it has originated or acquired, or will originate or acquire (the “Loans”) from time to time; (ii) a Loan and Servicing Agreement (the “Loan and Servicing Agreement” and, together with the Purchase and Sale Agreement, the “Agreements”) with SC Funding as borrower; and (iii) various supporting documentation. The $100 Million Facility is secured by all of the assets held by SC Funding. The $100 Million Facility, among other things, matures on December 17, 2015 and bears interest based on LIBOR plus 3.00%. Under the Agreements, Solar Capital and SC Funding, as applicable, are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The Purchase and Sale Agreement includes usual and customary events of default for credit facilities of this nature.
Senior Unsecured Notes—On February 9, 2010, in connection with the Merger, senior unsecured notes (the “Senior Unsecured Notes”) of Solar Capital Ltd. were issued to certain equity holders. The Senior Unsecured Notes were scheduled to mature in February 2014 and had a coupon of 8.75%, payable quarterly in cash beginning May 1, 2010. The Senior Unsecured Notes were 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, net cash proceeds from the issuance of any other senior notes had to be used 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 subjected Solar Capital Ltd. to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of at least 2.00
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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 contained customary events of default. The Senior Unsecured Notes were repaid in full in December 2010 at par plus accrued interest.
The weighted average annualized interest cost for all borrowings for the year ended December 31, 2011 and 2010 was 3.66% and 7.71%, respectively. These costs are exclusive of commitment fees and for other prepaid expenses related to establishing the $405 Million Facility, the $100 Million Facility, the Senior Unsecured Notes, and the Term Loan (collectively the “Credit Facilities”). This weighted average annualized interest cost reflects the average interest cost for all outstanding borrowings. The average debt outstanding for the year ended December 31, 2011 and 2010 was $152,047 and $140,301, respectively. The maximum amounts borrowed on the Credit Facilities during the year ended December 31, 2011 and 2010 were $435,356 and $460,000, respectively. There was $236,355 drawn on the Credit Facilities as of December 31, 2011 and $435,000 as of December 31, 2010. At December 31, 2011 and 2010, the Company was in compliance with all financial and operational covenants required by the Credit Facilities.
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.
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.	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
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.
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2011 and 2010:
Fair Value Measurements
As of December 31, 2011

  	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	46,377	  	  	$	366,019	  	  	$	412,396	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	10,508	  	  	 	536,351	  	  	 	546,859	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	14,664	  	  	 	14,664	  	
Common Equity / Partnership Interests / Warrants	  	 	11,460	  	  	 	—  	  	  	 	59,664	  	  	 	71,124	  	
Derivative assets - interest rate cap	  	 	—  	  	  	 	469	  	  	 	—  	  	  	 	469	  	
Derivative assets - forward contracts	  	 	—  	  	  	 	180	  	  	 	—  	  	  	 	180	  	
Fair Value Measurements
As of December 31, 2010

  	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	46,609	  	  	$	200,532	  	  	$	247,141	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	83,476	  	  	 	566,308	  	  	 	649,784	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	3,934	  	  	 	3,934	  	
Common Equity / Partnership Interests	  	 	373	  	  	 	21,897	  	  	 	53,092	  	  	 	75,362	  	
Derivative assets—forward contracts	  	 	—  	  	  	 	604	  	  	 	—  	  	  	 	604	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities—forward contracts	  	 	—  	  	  	 	1,539	  	  	 	—  	  	  	 	1,539	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the years ended December 31, 2011 and 2010, 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, 2011 and 2010:
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, 2011

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, January 1, 2011	  	$	200,532	  	 	$	566,308	  	 	$	3,934	  	 	$	53,092	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	(87	) 	 	 	6,218	  	 	 	—  	  	 	 	(4,500	) 	
Net change in unrealized gain (loss)	  	 	(13,392	) 	 	 	(6,991	) 	 	 	(448	) 	 	 	6,931	  	
Purchase of investment securities	  	 	247,421	  	 	 	115,852	  	 	 	11,178	  	 	 	7,942	  	
Proceeds from dispositions of investment securities	  	 	(68,455	) 	 	 	(103,971	) 	 	 	—  	  	 	 	(3,801	) 	
Transfers in/out of Level 3	  	 	—  	  	 	 	(41,065	) 	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2011	  	$	366,019	  	 	$	536,351	  	 	$	14,664	  	 	$	59,664	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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):	  	$	(15,535	) 	 	$	(17,844	) 	 	$	(448	) 	 	$	4,988	  	
During 2011, one investment with a fair value of $41,065 was transferred from Level 3 to Level 2 as a result of an increase in the availability and reliability of third party market quotes for this investment. During 2011, one asset with a fair value of $9,900 was transferred from Level 2 to Level 1 when trading restrictions expired on a publicly traded equity investment.
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2010

 	  	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)	  	 	463	  	 	 	(54,012	)	 	 	—  	  	  	 	15,316	  	
Net change in unrealized gain (loss)	  	 	3,704	  	 	 	86,974	  	 	 	4	  	  	 	(4,006	)	
Purchases, sales, issuances, and settlements (net)	  	 	84,566	  	 	 	315	  	 	 	3,890	  	  	 	(11,642	)	
Transfers out of Level 3	  	 	(51,700	)	 	 	(43,000	)	 	 	—  	  	  	 	(1,697	)	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Fair value, December 31, 2010	  	$	200,532	  	 	$	566,308	  	 	$	3,934	  	  	$	53,092	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
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:	  	$	5,522	  	 	$	18,999	  	 	$	4	  	  	$	9,161	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
During 2010, two debt investments with fair values of $51,700 and $43,000 were transferred from Level 3 to Level 2 as a result of increases in the availability and reliability of third party market quotes for these investments. In addition, one equity investment with a fair value of $1,697 was transferred from Level 3 to Level 2 as a result of the company’s initial public offering. During 2010, one asset with a fair value of $400 was transferred from Level 2 to Level 1 when trading restrictions expired on a publicly traded equity investment.
Note 9. Stockholders’ Equity
The table below illustrates the effect of certain transactions on our capital accounts for the years ended December 31, 2011 and 2010:

 	 	Common Stock	 	 	Partners’
Capital	 	 	Paid in Capital
in Excess of
Par	 	 	Under  (Over)
Distributed  Net
Investment
Income	 	 	Accumulated
Net Realized
Gain/(Loss)	 	 	Net
Unrealized
Depreciation	 	 	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	) 	 	 	772,553	  	 	 	—  	  	 	 	—  	  	 	 	(199,916	) 	 	 	(125,000	) 	 	 	 	 	
Issuances of common stock in IPO(2)	 	 	6,280,945	  	 	 	63	  	 	 	—  	  	 	 	106,088	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	106,151	  	 	 	 	 	
Issuances of common stock in private placement(3)	 	 	2,965,000	  	 	 	30	  	 	 	 	 	 	 	67,836	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	67,866	  	 	 	 	 	
Reinvestment of dividends	 	 	489,901	  	 	 	5	  	 	 	—  	  	 	 	10,841	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	10,846	  	 	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	69,212	  	 	 	(38,968	) 	 	 	111,641	  	 	 	141,885	  	 	 	 	 	
Dividends declared ($2.14 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(65,457	) 	 	 	(7,200	) 	 	 	—  	  	 	 	(72,657	) 	 	 	 	 	
Permanent tax differences	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(30,327	) 	 	 	(5,300	) 	 	 	35,627	  	 	 	—  	  	 	 	—  	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2010	 	 	36,383,158	  	 	$	364	  	 	$	—  	  	 	$	926,991	  	 	$	(1,545	) 	 	$	(10,541	) 	 	$	(88,275	) 	 	$	826,994	  	 	 	 	 	
Reinvestment of dividends	 	 	224,880	  	 	 	2	  	 	 	—  	  	 	 	5,162	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	5,164	  	 	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	81,904	  	 	 	(2,393	) 	 	 	(18,196	) 	 	 	61,315	  	 	 	 	 	
Dividends declared ($2.40 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(73,532	) 	 	 	(14,000	) 	 	 	—  	  	 	 	(87,532	) 	 	 	 	 	
Permanent tax differences	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(3,973	) 	 	 	(4,582	) 	 	 	8,555	  	 	 	—  	  	 	 	—  	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2011	 	 	36,608,038	  	 	$	366	  	 	$	—  	  	 	$	928,180	  	 	$	2,245	  	 	$	(18,379	) 	 	$	(106,471	) 	 	$	805,941	  	 	 	 	 	

(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.	
(3)	On November 30, 2010 Solar Capital Ltd. priced a private offering, selling 2.85 million shares, at a price of $22.94 per share. Concurrent with this offering, management purchased an additional 115,000 shares, also at $22.94 per share.	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
Note 10. Earnings Per Share
The following information sets forth the computation of basic and diluted net increase (decrease) in shareholders’ equity per share resulting from operations for the years ended December 31, 2011, 2010 and 2009:

 	  	Year ended
December 31, 2011	 	  	Year ended
December 31, 2010	 	  	Year ended
December 31, 2009	 	
Numerator for basic and diluted earnings per share:	  	$	61,315	  	  	$	141,885	  	  	$	86,936	  	
Denominator for basic and diluted weighted average share:	  	 	36,470,384	  	  	 	33,258,402	  	  	 	32,860,454	  	
Basic and diluted net increase in share holders’ equity resulting from operations per share:	  	$	1.68	  	  	$	4.27	  	  	$	2.65	  	
As required by ASC 260-10, Earnings Per Share, 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. Income Tax Information and Distributions to Stockholders
The tax character of dividends for the fiscal years ended December 31, 2011 and 2010 were as follows:

 	  	2011	 	 	2010	 	
Ordinary income	  	$	73,532	  	  	 	84.0	% 	 	$	65,457	  	  	 	90.1	% 	
Capital gains	  	 	14,000	  	  	 	16.0	% 	 	 	7,200	  	  	 	9.9	% 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Total dividends	  	$	87,532	  	  	 	100.0	% 	 	$	72,657	  	  	 	100.0	% 	
For the years ended December 31, 2011 and 2010, the reconciliation of net increase in net assets resulting from operations to taxable income is as follows:

 	  	2011	 	 	2010	 	
Net increase in net assets resulting from operations	  	$	61,315	  	 	$	141,885	  	
Net unrealized (gain)/loss on investments	  	 	17,654	  	 	 	(113,508	) 	
Pre IPO earnings adjustment	  	 	—  	  	 	 	15,164	  	
Consolidated subsidiaries adjustment	  	 	(2,021	) 	 	 	9,994	  	
Post-October capital (gains)/losses	  	 	(3,232	) 	 	 	3,006	  	
Market discount and OID adjustments	  	 	23,844	  	 	 	—  	  	
Other book-to-tax differences	  	 	7,840	  	 	 	20,821	  	
 	  	 	 	 	 	 	 	 	
Taxable income before deductions for dividends	  	$	105,400	  	 	$	77,362	  	
 	  	 	 	 	 	 	 	 	
During 2011, as a result of permanent book-to-tax differences, the Company decreased under (over) distributed net investment income by $4,582, decreased accumulated net realized loss by $8,555, and decreased paid-in capital in excess of par value by $3,973. Aggregate stockholders’ equity was not affected by this reclassification.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
As of December 31, 2011 and 2010, the components of accumulated gain and losses on a tax basis were as follows:

 	  	2011	 	 	2010	 	
Undistributed ordinary income	  	$	21,586	  	 	$	1,917	  	
Undistributed long-term net capital gains	  	 	—  	  	 	 	2,788	  	
 	  	 	 	 	 	 	 	 	
Total undistributed net earnings	  	 	21,586	  	 	 	4,705	  	
Post-October capital gains/(losses)	  	 	—  	  	 	 	(3,006	) 	
Net unrealized appreciation on investments	  	 	(133,468	) 	 	 	32,795	  	
 	  	 	 	 	 	 	 	 	
Total undistributed (undistributable) taxable income	  	$	(111,882	) 	 	$	34,494	  	
 	  	 	 	 	 	 	 	 	
Tax information for the fiscal year ended December 31, 2011 is an estimate and will not be finally determined until the Company files its 2011 tax return in September 2012.
We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file federal and state tax returns, our major tax jurisdiction is federal. Our inception-to-date federal tax years remain subject to examination by the Internal Revenue Service.
There were no deferred tax assets or liabilities as of December 31, 2011 or 2010.
Pre-Merger Taxation
Prior to the February 9, 2010, the Company was classified as a partnership for U.S. tax purposes, and therefore was generally not subject to federal and state income taxes. Each partner took 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 were made in the accompanying financial statements for federal and state income tax. The Company was also 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.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
Note 12. Financial Highlights
The following is a schedule of financial highlights for the respective periods:

  	 	Year ended
December 31,  2011	 	 	Year ended
December 31,  2010	 	 	Year ended
December 31,  2009	 	 	Year ended
December 31, 2008	 	 	March 13, 2007
(inception) through
December 31, 2007	 	
Per Share Data: (a)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value, beginning of year	 	$	22.73	  	 	$	21.24	  	 	$	25.95	  	 	$	38.30	  	 	$	37.30	  	
Net investment income	 	 	2.25	  	 	 	2.08	  	 	 	2.05	  	 	 	2.66	  	 	 	1.62	  	
Net realized and unrealized gain (loss)	 	 	(0.57	) 	 	 	2.19	  	 	 	0.60	  	 	 	(15.01	) 	 	 	(0.12	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	 	 	1.68	  	 	 	4.27	  	 	 	2.65	  	 	 	(12.35	) 	 	 	1.50	  	
Dividends to shareholders declared	 	 	(2.40	) 	 	 	(2.14	) 	 	 	—  	  	 	 	—  	 	 	 	—  	 	
Distributions to unit holders declared	 	 	—  	  	 	 	—  	  	 	 	(7.36	) 	 	 	—  	 	 	 	—  	 	
Effect of dilution	 	 	0.01	  	 	 	(0.33	) 	 	 	—  	  	 	 	—  	 	 	 	—  	 	
Offering costs	 	 	—  	  	 	 	(0.31	) 	 	 	—  	  	 	 	—  	 	 	 	(0.50	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net asset value, end of period	 	$	22.02	  	 	$	22.73	  	 	$	21.24	  	 	$	25.95	  	 	$	38.30	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total return(b)	 	 	(1.07	)% 	 	 	45.51	% 	 	 	10.16	% 	 	 	(32.25	)% 	 	 	4.00	% 	
Net assets, end of period	 	$	805,941	  	 	$	826,994	  	 	$	697,903	  	 	$	852,673	  	 	$	1,258,501	  	
Per share market value at end of period	 	$	22.09	  	 	$	24.78	  	 	 	N/A	  	 	 	N/A	  	 	 	N/A	  	
Shares outstanding end of period	 	 	36,608,038	  	 	 	36,383,158	  	 	 	32,860,454	  	 	 	32,860,454	  	 	 	32,860,454	  	
Ratio to average net assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses without incentive fees	 	 	4.45	% 	 	 	5.13	% 	 	 	3.35	% 	 	 	3.27	% 	 	 	2.55	% 	
Incentive fees	 	 	2.49	% 	 	 	2.33	% 	 	 	2.20	% 	 	 	0.78	% 	 	 	—  	% 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	6.94	% 	 	 	7.46	% 	 	 	5.55	% 	 	 	4.05	% 	 	 	2.55	% 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	 	 	9.97	% 	 	 	9.31	% 	 	 	8.85	% 	 	 	7.59	% 	 	 	5.36	% 	
Portfolio turnover ratio	 	 	34.54	% 	 	 	38.90	% 	 	 	19.36	% 	 	 	11.55	% 	 	 	20.67	% 	
 
(a)	Calculated using the average shares outstanding method. The number of shares used to calculate weighted average shares 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.	
(b)	Total return for 2011 is based on the change in market price per share during the period and takes into account dividends reinvested with the dividend reinvestment plan. For 2010, the public offering price is used as the beginning market price and does not assume dividend reinvestment. Total return for 2009, 2008 and 2007 is equal to the net increase in net assets resulting from operations divided by the net asset value at beginning of year.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2011
(in thousands, except shares)
 
Note 13. New Accounting Pronouncements and Accounting Standards Updates
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No. 13 (“IFRS 13”), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. Upon adoption of ASU 2011-04, it is not expected that it will have a significant impact on the Company’s financial statements and the Company is currently evaluating the impact on its disclosures.
Note 14. Selected Quarterly Financial Data (unaudited)

For the Quarter Ended	  	Investment
Income	 	  	Net Investment
Income	 	  	Net Realized And
Unrealized Gain
(Loss) on Assets	 	 	Increase
(Decrease)
In Net Assets
From Operations	 	
 	  	Total	 	  	Per
Share	 	  	Total	 	  	Per
Share	 	  	Total	 	 	Per
Share	 	 	Total	 	 	Per
Share	 	
December 31, 2011	  	$	35,994	  	  	 	0.98	  	  	$	20,675	  	  	 	0.57	  	  	$	31,182	  	 	 	0.85	  	 	$	51,857	  	 	 	1.42	  	
September 30, 2011	  	 	35,329	  	  	 	0.97	  	  	 	20,711	  	  	 	0.57	  	  	 	(72,655	) 	 	 	(1.99	) 	 	 	(51,944	) 	 	 	(1.42	) 	
June 30, 2011	  	 	35,283	  	  	 	0.97	  	  	 	21,368	  	  	 	0.59	  	  	 	(8,984	) 	 	 	(0.25	) 	 	 	12,384	  	 	 	0.34	  	
March 31, 2011	  	 	32,294	  	  	 	0.89	  	  	 	19,150	  	  	 	0.53	  	  	 	29,868	  	 	 	0.82	  	 	 	49,018	  	 	 	1.35	  	
 	 	 	 	 	 	 	 	 	
December 31, 2010	  	 	31,644	  	  	 	0.92	  	  	 	17,384	  	  	 	0.51	  	  	 	24,974	  	 	 	0.73	  	 	 	42,358	  	 	 	1.24	  	
September 30, 2010	  	 	29,403	  	  	 	0.89	  	  	 	15,551	  	  	 	0.47	  	  	 	5,458	  	 	 	0.16	  	 	 	21,009	  	 	 	0.63	  	
June 30, 2010	  	 	28,284	  	  	 	0.86	  	  	 	15,166	  	  	 	0.46	  	  	 	1,348	  	 	 	0.04	  	 	 	16,514	  	 	 	0.50	  	
March 31, 2010	  	 	35,310	  	  	 	1.08	  	  	 	21,111	  	  	 	0.65	  	  	 	40,893	  	 	 	1.26	  	 	 	62,004	  	 	 	1.90	  	
 	 	 	 	 	 	 	 	 	
December 31, 2009	  	 	28,456	  	  	 	0.87	  	  	 	17,685	  	  	 	0.54	  	  	 	22,271	  	 	 	0.68	  	 	 	39,956	  	 	 	1.23	  	
September 30, 2009	  	 	27,785	  	  	 	0.85	  	  	 	16,383	  	  	 	0.50	  	  	 	22,181	  	 	 	0.68	  	 	 	38,564	  	 	 	1.17	  	
June 30, 2009	  	 	25,252	  	  	 	0.77	  	  	 	16,099	  	  	 	0.49	  	  	 	17,899	  	 	 	0.54	  	 	 	33,998	  	 	 	1.03	  	
March 31, 2009	  	 	28,177	  	  	 	0.86	  	  	 	17,095	  	  	 	0.52	  	  	 	(42,677	) 	 	 	(1.30	) 	 	 	(25,582	) 	 	 	(0.78	) 	
See notes to consolidated financial statements.
 
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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, 2011
Number of
Shares/Principal
Amount	 	 	Year ended December 31, 2011	 	 	As of
December 31,
2011
Fair
Value	 	 	
 	 	 	 	 	 	 	Amount of
dividends  and
interest
included in
income	 	 	Amount of
equity  in
net profit and
loss	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AviatorCap SII, LLC I	 	Senior Debt	 	 	3,728	  	 	$	288	  	 	$	—  	  	 	$	3,671	  	 	 	 	 	 	
AviatorCap SII, LLC II	 	Senior Debt	 	 	5,697	  	 	 	243	  	 	 	—  	  	 	 	5,611	  	 	 	 	 	 	
AviatorCap SII, LLC III	 	Senior Debt	 	 	8,856	  	 	 	628	  	 	 	—  	  	 	 	8,724	  	 	 	 	 	 	
USAW 767	 	Senior Debt	 	 	4,904	  	 	 	920	  	 	 	—  	  	 	 	4,831	  	 	 	 	 	 	
SODO Corp.	 	Preferred Equity/Common	 	 	1,912	  	 	 	96	  	 	 	—  	  	 	 	1,949	  	 	 	 	 	 	
SOCAY Corp.	 	Preferred Equity/Common	 	 	12,357	  	 	 	686	  	 	 	—  	  	 	 	12,668	  	 	 	 	 	 	
National Specialty Alloys, LLC	 	Equity	 	 	1,000,000	  	 	 	4,102	  	 	 	—  	  	 	 	16,000	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	$	6,963	  	 	$	—  	  	 	$	53,454	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	Equity	 	 	41,818,834	  	 	 	—  	  	 	 	—  	  	 	 	35,820	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	$	—  	  	 	$	—  	  	 	$	35,820	  	 	 	 	 	 	

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The table below represents the balance at the beginning of the year, December 31, 2010 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, 2011.
Gross additions represent increases in the investment from additional investments, amortization and 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,
2010	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2011	 	
AviatorCap SII, LLC I	  	$	—  	  	  	$	4,047	  	  	$	369	  	  	 	(7	) 	 	$	3,671	  	
AviatorCap SII, LLC II	  	 	—  	  	  	 	6,094	  	  	 	476	  	  	 	(7	) 	 	 	5,611	  	
AviatorCap SII, LLC III	  	 	—  	  	  	 	10,062	  	  	 	1,366	  	  	 	28	  	 	 	8,724	  	
USAW 767	  	 	6,618	  	  	 	76	  	  	 	1,848	  	  	 	(15	) 	 	 	4,831	  	
SODO Corp.	  	 	390	  	  	 	1,619	  	  	 	—  	  	  	 	(60	) 	 	 	1,949	  	
SOCAY Corp.	  	 	3,500	  	  	 	9,559	  	  	 	—  	  	  	 	(391	) 	 	 	12,668	  	
National Specialty Alloys, LLC	  	 	10,000	  	  	 	—  	  	  	 	—  	  	  	 	6,000	  	 	 	16,000	  	
Ark Real Estate Partners LP	  	 	29,235	  	  	 	7,066	  	  	 	53	  	  	 	(428	) 	 	 	35,820	  	
 
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SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except units)
Schedule 12-14

 	  	 	  	 	 	  	Year ended December 31, 2010	 	  	 	 	
Portfolio Company	  	Investment	  	As of
December 31, 2010
Number of
Shares/Principal
Amount	 	  	Amount of
dividends and
interest
included in
income	 	  	Amount of
equity in
net
profit and
loss	 	  	As of
December 31,
2010
Fair
Value	 	
Investments Owned Greater than 25%	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
USAW 767	  	Senior Debt	  	 	6,753	  	  	$	52	  	  	$	 	  	  	$	6,618	  	
SODO Corp.	  	Preferred Equity/Common	  	 	388	  	  	 	2	  	  	 	 	 	  	 	390	  	
SOCAY Corp.	  	Preferred Equity/Common	  	 	3,484	  	  	 	16	  	  	 	 	 	  	 	3,500	  	
National Specialty Alloys, LLC	  	Equity	  	 	1,000,000	  	  	 	600	  	  	 	—  	  	  	 	10,000	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments Owned Greater than 25%	  	 	  	 	 	 	  	$	670	  	  	$	—  	  	  	$	20,508	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Investments Owned Greater than 5% and Less than 25%	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
National Interest Security Corp.	  	Senior Debt	  	 	—  	  	  	$	3,544	  	  	$	—  	  	  	$	—  	  	
National Interest Security Corp.	  	Subordinated	  	 	—  	  	  	 	4,075	  	  	 	—  	  	  	 	—  	  	
Ark Real Estate Partners LP	  	Equity	  	 	34,806,121	  	  	 	—  	  	  	 	—  	  	  	 	29,235	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	  	 	 	 	  	$	7,619	  	  	$	—  	  	  	$	29,235	  	

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The table below represents the balance at the beginning of the year, 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 December 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
December 31,
2010	 	
USAW 767	  	$	—  	  	  	$	7,297	  	  	$	676	  	  	$	(3	)	 	$	6,618	  	
SODO Corp.	  	 	—  	  	  	 	390	  	  	 	—  	  	  	 	—  	  	 	 	390	  	
SOCAY Corp.	  	 	—  	  	  	 	3,500	  	  	 	—  	  	  	 	—  	  	 	 	3,500	  	
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	  	  	 	—  	  	  	 	2,760	  	 	 	29,235	  	
Federal Income Tax Information (unaudited)
The Company designates the maximum amount available but not less than $600 of the Company’s ordinary income dividends paid from 2011 earnings as qualified dividend income in accordance with section 854 of the Internal Revenue Code. The Company designates the maximum amount available but not less than $7,200 of the Company’s dividends paid from 2011 net realized securities gains as capital gain dividends in accordance with section 852(b)(3)(C) of the Internal Revenue Code.
 
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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 March 31, 2012, and the related consolidated statements of operations for the three-month periods ended March 31, 2012 and 2011, the consolidated statement of changes in net assets for the three-month period ended March 31, 2012 and consolidated statements of cash flows for the three-month periods ended March 31, 2012 and 2011. 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 Ltd. as of December 31, 2011, and the related consolidated statement of net assets for the year ended December 31, 2011 and we expressed an unqualified opinion on them in our report dated February 22, 2012.
/s/ KPMG LLP
New York, New York
May 1, 2012
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except shares)

 	  	March 31,
2012	 	 	December 31,
2011	 	
 	  	(unaudited)	 	 	 	 	
Assets	  	 	 	 	 	 	 	 	
Investments at value:	  	 	 	 	 	 	 	 	
Companies more than 25% owned (cost: $36,058 and $47,910, respectively)	  	$	36,031	  	 	$	53,454	  	
Companies 5% to 25% owned (cost: $44,698 and $41,819, respectively)	  	 	36,540	  	 	 	35,820	  	
Companies less than 5% owned (cost: $1,016,455 and $1,062,844 respectively)	  	 	935,944	  	 	 	955,769	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,097,211 and $1,152,573, respectively)	  	 	1,008,515	  	 	 	1,045,043	  	
Cash and cash equivalents	  	 	10,363	  	 	 	11,787	  	
Interest and dividends receivable	  	 	11,542	  	 	 	9,763	  	
Receivable for investments sold	  	 	21,099	  	 	 	3,225	  	
Fee revenue receivable	  	 	3,948	  	 	 	4,379	  	
Deferred credit facility costs	  	 	3,060	  	 	 	3,635	  	
Derivative assets	  	 	294	  	 	 	649	  	
Deferred offering costs	  	 	575	  	 	 	469	  	
Prepaid expenses and other receivables	  	 	411	  	 	 	481	  	
 	  	 	 	 	 	 	 	 	
Total Assets	  	 	1,059,807	  	 	 	1,079,431	  	

Liabilities	  	 	 	 	 	 	 	 	
Credit facilities payable	  	 	128,643	  	 	 	201,355	  	
Term Loan	  	 	35,000	  	 	 	35,000	  	
Payable for investments purchased	  	 	29,273	  	 	 	22,443	  	
Dividend payable	  	 	21,965	  	 	 	—  	  	
Due to Solar Capital Partners LLC:	  	 	 	 	 	 	 	 	
Investment advisory and management fee payable	  	 	5,278	  	 	 	5,277	  	
Performance-based incentive fee payable	  	 	5,275	  	 	 	5,203	  	
Interest payable	  	 	961	  	 	 	1,063	  	
Derivative liabilities	  	 	1,080	  	 	 	—  	  	
Due to Solar Capital Management LLC	  	 	638	  	 	 	1,069	  	
Income taxes payable	  	 	1,035	  	 	 	720	  	
Deferred fee revenue	  	 	83	  	 	 	318	  	
Other accrued expenses and payables	  	 	442	  	 	 	1,042	  	
 	  	 	 	 	 	 	 	 	
Total Liabilities	  	 	229,673	  	 	 	273,490	  	

Net Assets	  	 	 	 	 	 	 	 	
Common stock, par value $0.01 per share 36,608,038 shares issued and outstanding, 200,000,000 authorized	  	 	366	  	 	 	366	  	
Paid-in capital in excess of par	  	 	928,180	  	 	 	928,180	  	
Underdistributed net investment income	  	 	1,379	  	 	 	2,245	  	
Accumulated net realized losses	  	 	(9,213	) 	 	 	(18,379	) 	
Net unrealized depreciation	  	 	(90,578	) 	 	 	(106,471	) 	
 	  	 	 	 	 	 	 	 	
Total Net Assets	  	$	830,134	  	 	$	805,941	  	

Number of shares outstanding	  	 	36,608,038	  	 	 	36,608,038	  	
Net Asset Value Per Share	  	$	22.68	  	 	$	22.02	  	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares)

 	  	Three months ended
March  31, 2012	 	 	Three months ended
March 31, 2011	 	
 	  	(unaudited)	 	 	(unaudited)	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	
Interest and dividends:	  	 	 	 	 	 	 	 	
Companies more than 25% owned	  	$	1,082	  	 	$	695	  	
Other interest and dividend income	  	 	35,227	  	 	 	31,599	  	
 	  	 	 	 	 	 	 	 	
Total interest and dividends	  	 	36,309	  	 	 	32,294	  	
 	  	 	 	 	 	 	 	 	
Total investment income	  	 	36,309	  	 	 	32,294	  	

EXPENSES:	  	 	 	 	 	 	 	 	
Investment advisory and management fees	  	 	5,278	  	 	 	4,987	  	
Performance-based incentive fee	  	 	5,275	  	 	 	4,788	  	
Interest and other credit facility expenses	  	 	2,695	  	 	 	2,037	  	
Administrative service fee	  	 	696	  	 	 	438	  	
Other general and administrative expenses	  	 	1,009	  	 	 	894	  	
 	  	 	 	 	 	 	 	 	
Total operating expenses	  	 	14,953	  	 	 	13,144	  	
 	  	 	 	 	 	 	 	 	
Net investment income before income tax expense	  	 	21,356	  	 	 	19,150	  	
 	  	 	 	 	 	 	 	 	
Income tax expense	  	 	257	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net investment income	  	 	21,099	  	 	 	19,150	  	

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCIES:	  	 	 	 	 	 	 	 	
Net realized gain (loss):	  	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	11,002	  	 	 	—  	  	
Companies less than 5% owned	  	 	(725	) 	 	 	2,802	  	
 	  	 	 	 	 	 	 	 	
Net realized gain on investments	  	 	10,277	  	 	 	2,802	  	
Derivatives	  	 	(944	) 	 	 	(4,363	) 	
Foreign currency exchange	  	 	618	  	 	 	(72	) 	
 	  	 	 	 	 	 	 	 	
Net realized gain (loss) before income taxes	  	 	9,951	  	 	 	(1,633	) 	
 	  	 	 	 	 	 	 	 	
Income tax expense	  	 	785	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	9,166	  	 	 	(1,633	) 	

Net change in unrealized gain:	  	 	 	 	 	 	 	 	
Investments:	  	 	 	 	 	 	 	 	
Companies more than 25% owned	  	 	(5,571	) 	 	 	1,625	  	
Companies 5% to 25% owned	  	 	(2,159	) 	 	 	(260	) 	
Companies less than 5% owned	  	 	26,564	  	 	 	30,867	  	
 	  	 	 	 	 	 	 	 	
Net change in unrealized gain on investments	  	 	18,834	  	 	 	32,232	  	
Derivatives	  	 	(1,435	) 	 	 	(259	) 	
Foreign currency exchange	  	 	(1,506	) 	 	 	(472	) 	
 	  	 	 	 	 	 	 	 	
Net change in unrealized gain	  	 	15,893	  	 	 	31,501	  	

Net realized and unrealized gain on investments, derivatives and foreign currencies	  	 	25,059	  	 	 	29,868	  	

Net increase in net assets resulting from operations	  	$	46,158	  	 	$	49,018	  	

Earnings per share	  	$	1.26	  	 	$	1.35	  	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except shares)

 	  	Three months ended
March 31, 2012	 	 	Year ended
December 31,  2011	 	
 	  	(unaudited)	 	 	 	 	
Increase (decrease) in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	21,099	  	 	$	81,904	  	
Net realized gain (loss)	  	 	9,166	  	 	 	(2,393	) 	
Net change in unrealized gain (loss)	  	 	15,893	  	 	 	(18,196	) 	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	46,158	  	 	 	61,315	  	

Dividends and distributions declared	  	 	(21,965	) 	 	 	(87,532	) 	

Capital share transactions:	  	 	 	 	 	 	 	 	
Reinvestment of dividends	  	 	—  	  	 	 	5,164	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from capital share transactions	  	 	—  	  	 	 	5,164	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets	  	 	24,193	  	 	 	(21,053	) 	
Net assets at beginning of period	  	 	805,941	  	 	 	826,994	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period	  	$	830,134	  	 	$	805,941	  	
 	  	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except shares)

 	  	Three months ended
March 31, 2012	 	 	Three months ended
March 31, 2011	 	
 	  	(unaudited)	 	 	(unaudited)	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	
Net increase in net assets from operations	  	$	46,158	  	 	$	49,018	  	
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Net realized gain from investments	  	 	(10,277	) 	 	 	(2,802	) 	
Net realized (gain) loss from foreign currency exchange	  	 	(618	) 	 	 	72	  	
Net change in unrealized gain on investments	  	 	(18,834	) 	 	 	(32,232	) 	
Net change in unrealized loss on derivatives	  	 	1,435	  	 	 	259	  	
 	 	 	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	
Purchase of investment securities	  	 	(69,197	) 	 	 	(80,985	) 	
Proceeds from disposition of investment securities	  	 	135,469	  	 	 	109,568	  	
Increase in accrued payment-in-kind interest	  	 	(7,724	) 	 	 	(6,005	) 	
Collections of payment-in-kind interest	  	 	7,094	  	 	 	—  	  	
Interest and dividends receivable	  	 	(1,779	) 	 	 	(4,543	) 	
Purchase of interest rate cap	  	 	—  	  	 	 	(1,950	) 	
Fee revenue receivable	  	 	431	  	 	 	22	  	
Receivable for investments sold	  	 	(17,874	) 	 	 	4,467	  	
Prepaid expenses and other receivables	  	 	70	  	 	 	(54	) 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	6,830	  	 	 	16,094	  	
Investment advisory and management fee payable	  	 	1	  	 	 	95	  	
Performance-based incentive fee payable	  	 	72	  	 	 	441	  	
Interest payable	  	 	(102	) 	 	 	299	  	
Due to Solar Capital Management LLC	  	 	(431	) 	 	 	(391	) 	
Income taxes payable	  	 	315	  	 	 	(260	) 	
Deferred fee revenue	  	 	(235	) 	 	 	(317	) 	
Other accrued expenses and payables	  	 	(599	) 	 	 	(722	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	  	 	70,205	  	 	 	50,074	  	

Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	
Deferred offering costs	  	 	(106	) 	 	 	(193	) 	
Deferred credit facility costs	  	 	575	  	 	 	565	  	
Proceeds from borrowings on credit facilities	  	 	160,212	  	 	 	357,253	  	
Repayments of borrowings on credit facilities	  	 	(232,310	) 	 	 	(357,253	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Used in Financing Activities	  	 	(71,629	) 	 	 	372	  	

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	(1,424	) 	 	 	50,446	  	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	  	 	11,787	  	 	 	288,732	  	

CASH AND CASH EQUIVALENTS AT END OF PERIOD	  	$	10,363	  	 	$	339,178	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	2,175	  	 	$	818	  	
Cash paid for income taxes	  	$	727	  	 	$	257	  	
 	 	 	
Non-cash financing activity:	  	 	 	 	 	 	 	 	
Dividends payable	  	$	21,965	  	 	$	21,830	  	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
Bank Debt/Senior Secured Loans - 40.45%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Asurion Corporation (17)	  	Insurance	  	 	9.00	% 	 	 	5/24/2019	  	  	 	$40,000	  	  	 	$39,816	  	  	 	$40,600	  	
Airvana Network Solutions Inc.	  	Telecommunications	  	 	10.00	% 	 	 	3/25/2015	  	  	 	7,464	  	  	 	7,344	  	  	 	7,133	  	
AviatorCap SII, LLC I (9)	  	Aerospace & Defense	  	 	12.00	% 	 	 	12/31/2014	  	  	 	3,571	  	  	 	3,529	  	  	 	3,569	  	
AviatorCap SII, LLC II (9)	  	Aerospace & Defense	  	 	11.00	% 	 	 	12/31/2014	  	  	 	5,394	  	  	 	5,324	  	  	 	5,394	  	
AviatorCap SII, LLC III(9)	  	Aerospace & Defense	  	 	13.00	% 	 	 	12/31/2014	  	  	 	7,601	  	  	 	7,465	  	  	 	7,601	  	
Direct Buy Inc. (19)	  	Home, Office Furnishing & Durable Consumer Prds	  	 	12.00	% 	 	 	2/1/2017	  	  	 	25,000	  	  	 	24,347	  	  	 	4,375	  	
DSW Group, Inc. (24)	  	Beverage, Food & Tobacco	  	 	15% (11% Cash & 4% PIK)(	7) 	 	 	2/28/2018	  	  	 	29,991	  	  	 	28,941	  	  	 	29,691	  	
Fulton Holding Corp (18)	  	Retail Stores	  	 	13.57	% 	 	 	5/28/2016	  	  	 	35,000	  	  	 	34,203	  	  	 	35,000	  	
Grakon, LLC	  	Machinery	  	 	12.00	% 	 	 	12/31/2015	  	  	 	9,524	  	  	 	7,613	  	  	 	9,429	  	
Good Sam Enterprise, LLC	  	Insurance	  	 	11.50	% 	 	 	12/1/2016	  	  	 	7,000	  	  	 	6,534	  	  	 	7,210	  	
Grocery Outlet Inc. (17)	  	Grocery	  	 	10.50	% 	 	 	12/15/2017	  	  	 	33,432	  	  	 	32,463	  	  	 	33,432	  	
Isotoner Corporation	  	Personal & Nondurable Consumer Products	  	 	10.75	% 	 	 	1/8/2018	  	  	 	39,000	  	  	 	37,927	  	  	 	38,610	  	
Interactive Health Solutions, Inc. (17)(18)	  	Healthcare, Education & Childcare	  	 	11.50	% 	 	 	10/4/2016	  	  	 	20,013	  	  	 	19,588	  	  	 	20,013	  	
MYI Acquiror Corporation (3)(4)(8)(20)	  	Insurance	  	 	13% (12% Cash & 1% PIK)(	7) 	 	 	3/13/2017	  	  	 	31,578	  	  	 	30,993	  	  	 	31,578	  	
Southern Auto Finance Company (20)	  	Banking	  	 	13.50	% 	 	 	10/19/2017	  	  	 	25,000	  	  	 	24,469	  	  	 	24,625	  	
Spencer Spirit Holdings, Inc.	  	Retail Stores	  	 	11.00	% 	 	 	5/1/2017	  	  	 	10,000	  	  	 	10,000	  	  	 	10,300	  	
Transplace Texas, LP (17)	  	Cargo Transport	  	 	11.00	% 	 	 	4/12/2017	  	  	 	20,000	  	  	 	19,554	  	  	 	19,700	  	
USAW 767 (10)	  	Aerospace & Defense	  	 	14.50	% 	 	 	12/31/2012	  	  	 	4,381	  	  	 	4,346	  	  	 	4,381	  	
ViaWest Inc (17)	  	Personal, Food & Misc. Services	  	 	13.5% (12% Cash & 1.5% PIK)(	7) 	 	 	5/20/2016	  	  	 	40,385	  	  	 	39,288	  	  	 	39,981	  	
Vision Holding Corp. (17)	  	Healthcare, Education & Childcare	  	 	12.00	% 	 	 	11/23/2016	  	  	 	35,300	  	  	 	34,792	  	  	 	35,300	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Bank Debt/Senior Secured Loans	  	 	  	 	 	 	 	 	 	 	  	 	$429,634	  	  	 	$418,536	  	  	 	$407,922	  	

Subordinated Debt/Corporate Notes - 52.39%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Adams Outdoor Advertising	  	Diversified/Conglomerate Service	  	 	18.00	% 	 	 	12/8/2015	  	  	 	$42,500	  	  	 	$41,798	  	  	 	$42,500	  	
Asurion Holdco (22)	  	Insurance	  	 	11.00%(	7) 	 	 	3/2/2019	  	  	 	12,000	  	  	 	11,644	  	  	 	12,189	  	
CIBT Solutions	  	Leisure, Amusement, Entertainment	  	 	13.50	% 	 	 	6/15/2018	  	  	 	36,200	  	  	 	35,409	  	  	 	35,838	  	
Crosman Corporation	  	Leisure, Amusement, Entertainment	  	 	13% (11% Cash & 2% PIK)(	7) 	 	 	10/15/2016	  	  	 	15,219	  	  	 	14,822	  	  	 	14,913	  	
DSW Group, Inc.	  	Beverage, Food & Tobacco	  	 	15% PIK	  	 	 	4/24/2012	  	  	 	129,849	  	  	 	129,821	  	  	 	110,372	  	
Earthbound Farm (17)	  	Farming & Agriculture	  	 	14.25	% 	 	 	6/21/2017	  	  	 	58,947	  	  	 	57,806	  	  	 	57,474	  	
Grakon Holdings LLC Sr	  	Machinery	  	 	14% PIK	  	 	 	12/31/2015	  	  	 	1,644	  	  	 	1,644	  	  	 	1,627	  	
Grakon Holdings LLC Jr	  	Machinery	  	 	12% PIK	  	 	 	12/31/2015	  	  	 	15,572	  	  	 	12,802	  	  	 	9,343	  	
Granite Global Solutions Corp. (3)(15)(20)	  	Insurance	  	 	13.50	% 	 	 	5/31/2016	  	  	 	30,624	  	  	 	30,249	  	  	 	29,092	  	
Midcap Financial Intermediate Holdings, LLC (23)	  	Banking	  	 	13.00% to 14.25	% 	 	 	7/9/2015	  	  	 	85,000	  	  	 	83,583	  	  	 	85,000	  	
ProSieben Sat.1 Media AG (3)(6)(20)	  	Broadcasting & Entertainment	  	 
 	8.43% (4.93% Cash & 3.5%
PIK)(	  
7) 	 	 	3/6/2017	  	  	 	22,162	  	  	 	20,652	  	  	 	15,543	  	
Richelieu Foods, Inc. (16)	  	Beverage, Food & Tobacco	  	 
 	14.25% (12% Cash & 2.25%
PIK)(	  
7) 	 	 	5/18/2016	  	  	 	22,693	  	  	 	22,186	  	  	 	21,786	  	
Rug Doctor L.P. (17)(21)	  	Personal, Food & Misc. Services	  	 
 	15.50% to 20.00%
(wtd. avg. 17.54%)(	  
7) 	 	 	10/31/2014	  	  	 	51,831	  	  	 	48,885	  	  	 	49,240	  	
Weetabix Group (3)(5)(20)	  	Beverage, Food & Tobacco	  	 	9.13% PIK	  	 	 	9/14/2016	  	  	 	17,221	  	  	 	19,348	  	  	 	14,638	  	
Weetabix Group (3)(5)(20)	  	Beverage, Food & Tobacco	  	 	10.29% PIK	  	 	 	5/3/2017	  	  	 	35,321	  	  	 	41,739	  	  	 	28,786	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Subordinated Debt/Corporate	  	 	  	 	 	 	 	 	 	 	  	 	$576,783	  	  	 	$572,388	  	  	 	$528,341	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
March 31, 2012
(in thousands, except shares)
(unaudited)

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
 	 	 	 	 	 	 	
Preferred Equity - 1.50%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
SODO Corp. (9)(12)	  	Aerospace & Defense	  	 	8.43% PIK	  	 	 	—  	  	  	 	2,052	  	  	$	2,052	  	  	$	2,011	  	
SOCAY Limited (9)(12)(20)	  	Aerospace & Defense	  	 	8.59% PIK	  	 	 	—  	  	  	 	13,342	  	  	 	13,342	  	  	 	13,075	  	
Wyle Laboratories	  	Aerospace & Defense	  	 	8.00%	  	 	 	7/17/2015	  	  	 	387	  	  	 	39	  	  	 	47	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Preferred Equity	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	15,433	  	  	$	15,133	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Common Equity / Partnership Interests / Warrants - 5.66%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ark Real Estate Partners LP (9)(10)(11)	  	Buildings & Real Estate	  	 	 	 	 	 	 	 	  	 	44,697,684	  	  	$	44,698	  	  	$	36,540	  	
Grakon, LLC	  	Machinery	  	 	 	 	 	 	 	 	  	 	1,714,286	  	  	 	1,714	  	  	 	—  	  	
Grakon, LLC Warrants	  	Machinery	  	 	 	 	 	 	 	 	  	 	3,518,001	  	  	 	—  	  	  	 	—  	  	
Great American Group Inc. (13)(20)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	572,800	  	  	 	2,681	  	  	 	69	  	
Great American Group Inc. (14)(20)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	187,500	  	  	 	3	  	  	 	23	  	
Nuveen Investments, Inc.	  	Finance	  	 	 	 	 	 	 	 	  	 	3,486,444	  	  	 	30,876	  	  	 	10,459	  	
NXP Semiconductors Netherlands B.V.(3)(20)	  	Electronics	  	 	 	 	 	 	 	 	  	 	310,271	  	  	 	8,458	  	  	 	8,256	  	
Seven West Media Limited (20)	  	Broadcasting & Entertainment	  	 	 	 	 	 	 	 	  	 	437,687	  	  	 	2,424	  	  	 	1,772	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	90,854	  	  	$	57,119	  	

Total Investments	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	1,097,211	  	  	$	1,008,515	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (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, 2012.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in either Euro, British Pounds, Canadian Dollars or Australian Dollars: Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. in Canada; and Seven Media Group Pty Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and is denominated in U.S. dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.ar.l.	
(5)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital Ltd.’s investment in ProSieben Sat. 1 Media AG is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Coupon is payable in cash and/or in kind (PIK).	
(8)	Includes an unfunded commitment of $6,000.	
(9)	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 Investment Company Act of 1940, as amended (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.	
(10)	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.	
(11)	Investments are held in taxable subsidiaries through Solar Capital Ltd Investment in Ark Real Estate Partners LP is held through SLRC ADI Corp and equity investment in Grakon LLC are held through Grakon TL Holding, Inc.	
(12)	Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(13)	Founders Shares.	
(14)	Contingent Founders Shares.	
(15)	Includes an unfunded commitment of $12,054 Canadian Dollars or $12,225 U.S. Dollars as of March 31, 2012.	
(16)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of March 31, 2012, all other investments were pledged as collateral for the Senior Secured Revolving Credit Facility and the Term Loan (see Note 6 to the consolidated financial statements).	
(17)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. (See note 18 above for further explanation.) Par amounts held through Solar Capital Funding II LLC include: Asurion Corp $14,438; Earthbound Farm $22,913; Fulton Holding Corp. $18,000; Grocery Outlet Inc. $19,900; Interactive Health Solutions, Inc. $11,662; Midcap Financial Intermediate Holdings, LLC $23,500; Rug Doctor L.P. $9,104; Transplace Texas, LP $18,518; ViaWest Inc. $15,143; and Vision Holding Corp $17,569. Remaining par balances are held directly by Solar Capital Ltd.	
(18)	Includes an unfunded commitment of $1,250.	
(19)	Investment is on non-accrual status.	
(20)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(21)	Includes PIK payable on $12,586 of par at 4.50% PIK, $14,572 of par at 5.25% PIK, $15,090 of par at 8.00% PIK, and $9,583 of par at 3.50% PIK.	
(22)	Asurion Holdco has the option to pay interest in kind at L+10.25 if certain specified conditions are met.	
(23)	Includes an unfunded commitment of $10,000.	
(24)	In March 2012, Solar Capital Ltd. purchased $36,991 and participated $7,000 to a third party with no recourse to the Company.	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
March 31, 2012
(unaudited)

Industry Classification	  	Pecentage of Total
Investments  (at fair
value) as of
March 31, 2012	 	
 	 	
Beverage, Food & Tobacco	  	 	20	% 	
Insurance	  	 	12	% 	
Banking	  	 	11	% 	
Personal, Food & Misc. Services	  	 	9	% 	
Farming & Agriculture	  	 	6	% 	
Healthcare, Education & Childcare	  	 	6	% 	
Leisure, Amusement, Entertainment	  	 	5	% 	
Retail Stores	  	 	4	% 	
Diversified/Conglomerate Service	  	 	4	% 	
Buildings & Real Estate	  	 	4	% 	
Personal & Nondurable Consumer Products	  	 	4	% 	
Aerospace & Defense	  	 	3	% 	
Grocery	  	 	3	% 	
Machinery	  	 	2	% 	
Cargo Transport	  	 	2	% 	
Broadcasting & Entertainment	  	 	1	% 	
Finance	  	 	1	% 	
Electronics	  	 	1	% 	
Telecommunications	  	 	1	% 	
Home, Office Furnishing & Durable Consumer Prds	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
F-44

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2011
(in thousands, except shares)

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
Bank Debt/Senior Secured Loans—39.46%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Asurion Corporation (18)	  	Insurance	  	 	9.00	%	 	 	5/24/2019	  	  	 	$40,000	  	  	 	$39,811	  	  	 	$39,517	  	
Airvana Network Solutions Inc.	  	Telecommunications	  	 	10.00	%	 	 	3/25/2015	  	  	 	8,324	  	  	 	8,186	  	  	 	8,324	  	
AviatorCap SII, LLC I (10)	  	Aerospace & Defense	  	 	12.00	%	 	 	12/31/2014	  	  	 	3,728	  	  	 	3,678	  	  	 	3,671	  	
AviatorCap SII, LLC II (10)	  	Aerospace & Defense	  	 	11.00	%	 	 	12/31/2014	  	  	 	5,697	  	  	 	5,618	  	  	 	5,611	  	
AviatorCap SII, LLC III(10)	  	Aerospace & Defense	  	 	13.00	%	 	 	12/31/2014	  	  	 	8,856	  	  	 	8,696	  	  	 	8,724	  	
Direct Buy Inc. (20)	  	Home, Office Furnishing & Durable Consumer Prds	  	 	12.00	%	 	 	2/1/2017	  	  	 	25,000	  	  	 	24,332	  	  	 	5,875	  	
Fulton Holding Corp (18)	  	Retail Stores	  	 	13.74	%	 	 	5/28/2016	  	  	 	35,000	  	  	 	34,155	  	  	 	35,000	  	
Grakon, LLC	  	Machinery	  	 	12.00	%	 	 	12/31/2015	  	  	 	9,524	  	  	 	7,610	  	  	 	9,286	  	
Good Sam Enterprise, LLC	  	Insurance	  	 	11.50	%	 	 	12/1/2016	  	  	 	7,000	  	  	 	6,523	  	  	 	6,860	  	
Grocery Outlet Inc.	  	Grocery	  	 	10.50	%	 	 	12/15/2017	  	  	 	33,600	  	  	 	32,599	  	  	 	32,592	  	
Isotoner Corporation	  	Personal & Nondurable Consumer Products	  	 	10.75	%	 	 	1/8/2018	  	  	 	39,000	  	  	 	37,895	  	  	 	37,830	  	
Interactive Health Solutions, Inc. (18)(19)	  	Healthcare, Education & Childcare	  	 	11.50	%	 	 	10/4/2016	  	  	 	20,131	  	  	 	19,691	  	  	 	19,930	  	
MYI Acquiror Corporation (3)(4)(8)(21)	  	Insurance	  	 
 	13% (12% Cash &
1% PIK)(	  
7)	 	 	3/13/2017	  	  	 	31,500	  	  	 	30,899	  	  	 	31,500	  	
Roundy’s Supermarkets, Inc.—2nd Lien (18)	  	Grocery	  	 	10.00	%	 	 	4/16/2016	  	  	 	22,000	  	  	 	21,685	  	  	 	22,069	  	
Southern Auto Finance Company (21)	  	Banking	  	 	13.50	%	 	 	10/19/2017	  	  	 	25,000	  	  	 	24,453	  	  	 	24,437	  	
Spencer Spirit Holdings, Inc.	  	Retail Stores	  	 	11.00	%	 	 	5/1/2017	  	  	 	10,000	  	  	 	10,000	  	  	 	10,000	  	
Transplace Texas, LP (18)	  	Cargo Transport	  	 	11.00	%	 	 	4/12/2017	  	  	 	20,000	  	  	 	19,533	  	  	 	19,500	  	
USAW 767 (10)	  	Aerospace & Defense	  	 	14.50	%	 	 	12/31/2012	  	  	 	4,904	  	  	 	4,850	  	  	 	4,831	  	
ViaWest Inc (18)	  	Personal, Food & Misc. Services	  	 
 	13.5% (12% Cash
& 1.5% PIK)(	  
7)	 	 	5/20/2016	  	  	 	33,255	  	  	 	32,520	  	  	 	32,756	  	
Vision Holding Corp. (18)	  	Healthcare, Education & Childcare	  	 	12.00	%	 	 	11/23/2016	  	  	 	37,500	  	  	 	36,869	  	  	 	37,125	  	
VPSI, Inc. (17)	  	Personal Transportation	  	 	12.00	%	 	 	12/23/2015	  	  	 	16,958	  	  	 	16,598	  	  	 	16,958	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Bank Debt/Senior Secured Loans	  	 	  	 	 	 	 	 	 	 	  	 	$436,977	  	  	 	$426,201	  	  	 	$412,396	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Subordinated Debt/Corporate Notes—52.33%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Adams Outdoor Advertising	  	Diversified/Conglomerate Service	  	 	18.00	%	 	 	12/8/2015	  	  	 	$42,500	  	  	 	$41,878	  	  	 	$42,075	  	
AMC Entertainment Holdings, Inc.	  	Leisure, Amusement, Entertainment	  	 	5.55%PIK	 	 	 	6/13/2012	  	  	 	27,141	  	  	 	27,086	  	  	 	26,462	  	
CIBT Solutions	  	Leisure, Amusement, Entertainment	  	 	13.50	%	 	 	6/15/2018	  	  	 	36,200	  	  	 	35,389	  	  	 	35,386	  	
Crosman Corporation	  	Leisure, Amusement, Entertainment	  	 
 	13% (11% Cash &
2% PIK)(	  
7)	 	 	10/15/2016	  	  	 	15,219	  	  	 	14,808	  	  	 	14,762	  	
DSW Group, Inc.	  	Beverage, Food & Tobacco	  	 	15% PIK	 	 	 	4/24/2012	  	  	 	125,106	  	  	 	124,972	  	  	 	106,340	  	
Earthbound Farm (18)	  	Farming & Agriculture	  	 	14.25	%	 	 	6/21/2017	  	  	 	58,947	  	  	 	57,739	  	  	 	56,590	  	
Grakon Holdings LLC Sr	  	Machinery	  	 	14% PIK	 	 	 	12/31/2015	  	  	 	1,588	  	  	 	1,588	  	  	 	1,469	  	
Grakon Holdings LLC Jr	  	Machinery	  	 	12% PIK	 	 	 	12/31/2015	  	  	 	15,118	  	  	 	12,344	  	  	 	7,710	  	
Granite Global Solutions Corp. (3)(16)(21)	  	Insurance	  	 	13.50	%	 	 	5/31/2016	  	  	 	29,983	  	  	 	30,234	  	  	 	29,121	  	
Magnolia River, LLC	  	Hotels, Motels, Inns and Gaming	  	 	14.00	%	 	 	4/28/2014	  	  	 	19,064	  	  	 	18,664	  	  	 	19,064	  	
Midcap Financial Intermediate Holdings, LLC (18)	  	Banking	  	 	14.25	%	 	 	7/9/2015	  	  	 	75,000	  	  	 	73,542	  	  	 	75,000	  	
ProSieben Sat.1 Media AG (3)(6)(21)	  	Broadcasting & Entertainment	  	 
 	8.83%(5.3% Cash
& 3.5% PIK)(	  
7)	 	 	3/6/2017	  	  	 	21,125	  	  	 	20,261	  	  	 	10,508	  	
Richelieu Foods, Inc. (17)	  	Beverage, Food & Tobacco	  	 	13.75	%	 	 	5/18/2016	  	  	 	22,500	  	  	 	21,972	  	  	 	21,150	  	
 	  	 	  	 	15.50% to 20.00%(	7) 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Rug Doctor L.P. (18)(22)	  	Personal, Food & Misc. Services	  	 	(wtd. avg. 17.54	%) 	 	 	10/31/2014	  	  	 	51,225	  	  	 	48,034	  	  	 	47,383	  	
Shoes For Crews, LLC (17)	  	Textiles & Leather	  	 	13.75%(	7)	 	 	7/23/2016	  	  	 	15,650	  	  	 	15,318	  	  	 	15,650	  	
Weetabix Group (3)(5)(21)	  	Beverage, Food & Tobacco	  	 	9.22% PIK	 	 	 	9/14/2016	  	  	 	15,986	  	  	 	18,589	  	  	 	12,469	  	
Weetabix Group (3)(5)(21)	  	Beverage, Food & Tobacco	  	 	10.03%PIK	 	 	 	5/3/2017	  	  	 	34,294	  	  	 	41,739	  	  	 	25,720	  	
 	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Subordinated Debt/Corporate Notes	  	 	  	 	 	 	 	 	 	 	  	 	$606,646	  	  	 	$604,157	  	  	 	$546,859	  	

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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011
(in thousands, except shares)

Description(1)	  	Industry	  	Interest(2)	 	 	Maturity	 	  	Par Amount/
Shares	 	  	Cost	 	  	Fair
Value	 	
Preferred Equity - 1.40%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
SODO Corp. (10)(13)	  	Aerospace & Defense	  	 	8.43	% PIK 	 	 	—  	  	  	 	1,912	  	  	$	2,009	  	  	$	1,949	  	
SOCAY Limited (10)(13)	  	Aerospace & Defense	  	 	8.59	% PIK 	 	 	—  	  	  	 	12,357	  	  	 	13,059	  	  	 	12,668	  	
Wyle Laboratories	  	Aerospace & Defense	  	 	8.00	%	 	 	7/17/2015	  	  	 	387	  	  	 	39	  	  	 	47	  	

Total Preferred Equity	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	15,107	  	  	$	14,664	  	

Common Equity / Partnership Interests / Warrants - 6.81%	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ark Real Estate Partners LP (9)(11)(12)	  	Buildings & Real Estate	  	 	 	 	 	 	 	 	  	 	41,818,834	  	  	$	41,819	  	  	$	35,820	  	
Grakon, LLC	  	Machinery	  	 	 	 	 	 	 	 	  	 	1,714,286	  	  	 	1,714	  	  	 	—  	  	
Grakon, LLC Warrants	  	Machinery	  	 	 	 	 	 	 	 	  	 	3,518,001	  	  	 	—  	  	  	 	—  	  	
Great American Group Inc. (14)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	572,800	  	  	 	2,681	  	  	 	69	  	
Great American Group Inc. (15)	  	Personal, Food & Misc. Services	  	 	 	 	 	 	 	 	  	 	187,500	  	  	 	3	  	  	 	23	  	
National Specialty Alloys, LLC(10)	  	Mining, Steel, Iron & Nonprecious Metals	  	 	 	 	 	 	 	 	  	 	1,000,000	  	  	 	10,000	  	  	 	16,000	  	
Nuveen Investments, Inc.	  	Finance	  	 	 	 	 	 	 	 	  	 	3,486,444	  	  	 	30,875	  	  	 	7,844	  	
NXP Semiconductors Netherlands B.V.(3)	  	Electronics	  	 	 	 	 	 	 	 	  	 	645,292	  	  	 	17,592	  	  	 	9,918	  	
Seven West Media Limited	  	Broadcasting & Entertainment	  	 	 	 	 	 	 	 	  	 	437,687	  	  	 	2,424	  	  	 	1,450	  	
Total Common Equity/Partnerships Interests / Warrants	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	107,108	  	  	$	71,124	  	

Total Investments	  	 	  	 	 	 	 	 	 	 	  	 	 	 	  	$	1,152,573	  	  	$	1,045,043	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (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)	For each debt investment we have provided the current interest rate in effect as of December 31, 2011. Variable rate debt investments generally bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which may reset daily, quarterly or semi-annually.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in British Pounds, Euro, Canadian Dollars or Australian Dollars: Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. in Canada; and Seven West Media Group Pty Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and $14,750 of MYI Aquiror Corporation is domiciled in the United Kingdom, but these assets are denominated in US Dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	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.	
(7)	Coupon is payable in cash and/or in kind (PIK).	
(8)	Includes an unfunded commitment of $6,000.	
(9)	Solar Capital Ltd. has an unfunded commitment of $2,879.	
(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 Investment Company Act of 1940, as amended (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)	Solar Capital Ltd.’s investment in Ark Real Estate Partners LP is held through its taxable subsidiary SLRC ADI Corp.	
(13)	SODO Corp. and SOCAY Corp. own equity interests that represent a majority of the equity ownership in Aviator Cap SII, LLC and USAW 767. Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(14)	Founders Shares.	
(15)	Contingent Founders Shares.	
(16)	Includes an unfunded commitment of $15,600 Canadian Dollars or $15,313 U.S Dollars as of December 31, 2011.	
(17)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 6 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of December 31, 2011, all other investments were pledged as collateral for the Senior Secured Revolving Credit Facility and the Term Loan (see Note 6 to the consolidated financial statements).	
(18)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned subsidiary Solar Capital Funding II LLC. (See note 17 above for further explanation.) Par amounts held through Solar Capital Funding II LLC include: Asurion $14,224; Fulton Holding Corp. $18,000; Interactive Health Solutions, Inc. $10,236; Roundy’s Supermarkets Inc. $10,000; Transplace Texas, LP $18,800; ViaWest Inc. $15,239; Vision Holding Corp $13,883; Earthbound $23,500; Midcap Financial Intermediate Holdings, LLC $23,500; and Rug Doctor L.P. $9,515. Remaining par balances are held directly by Solar Capital Ltd.	
(19)	Includes an unfunded commitment of $1,250.	
(20)	Investment is on non-accrual status.	
(21)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(22)	Includes PIK payable on $12,466 of par at 4.50% PIK, $14,405 of par at 5.25% PIK, $14,839 of par at 8.00% PIK, and $9,515 of par at 3.50% PIK.	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2011

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of December 31, 2011	 	
Beverage, Food & Tobacco	  	 	16	%	
Insurance	  	 	10	%	
Banking	  	 	10	%	
Personal, Food & Misc. Services	  	 	8	%	
Leisure, Amusement, Entertainment	  	 	7	%	
Healthcare, Education & Childcare	  	 	5	%	
Farming & Agriculture	  	 	5	%	
Grocery	  	 	5	%	
Retail Stores	  	 	4	%	
Diversified/Conglomerate Service	  	 	4	%	
Personal & Nondurable Consumer Products	  	 	4	%	
Aerospace & Defense	  	 	4	%	
Buildings & Real Estate	  	 	3	%	
Cargo Transport	  	 	2	%	
Hotels, Motels, Inns and Gaming	  	 	2	%	
Machinery	  	 	2	%	
Personal Transportation	  	 	2	%	
Mining, Steel, Iron & Nonprecious Metals	  	 	1	%	
Textiles & Leather	  	 	1	%	
Broadcasting & Entertainment	  	 	1	%	
Electronics	  	 	1	%	
Telecommunications	  	 	1	%	
Finance	  	 	1	%	
Home, Office Furnishing & Durable Consumer Prds	  	 	1	%	
 	  	 	 	 	
 	  	 	100	%	
 	  	 	 	 	
See notes to consolidated financial statements.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
Note 1. Organization
Solar Capital Ltd. (“Solar Capital” or the “Company”), 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 has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). In February 2010, Solar Capital Ltd. completed its initial public offering.
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 subsidiaries, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007, and Solar Capital Funding II LLC (“SC Funding”), a Delaware limited liability company formed on December 8, 2010. 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 years 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, 2012.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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 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.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Dividend Income: Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
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.
Fee Revenue Receivable – Fee revenue receivable consists of premium payments owed to the Company at the maturity of certain loans. The premium payments are recorded as a receivable at the inception of the loan and are accreted into interest income over the respective terms of the applicable loans.
Deferred Fee Revenue – Deferred fee revenue represents the unearned portion of premium payments owed to the Company at the maturity of certain loans.
U.S. Federal Income Taxes – The Company has elected 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. Depending on the level of taxable income earned in a given 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, 2012, $985 was recorded for U.S. Federal excise tax. No Federal excise tax was recorded for the three months ended March 31, 2011.
Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s inception-to-date federal tax years remain subject to examination by the Internal Revenue Service. 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.
The Company has formed and used certain taxable subsidiaries to be taxed as a corporation for federal income tax purposes. These taxable subsidiaries allow the Company to hold portfolio companies organized as pass-through entities and still satisfy certain RIC income requirements. The Company does not consolidate the taxable subsidiaries for income tax purposes but recognizes the results of these subsidiaries for financial reporting purposes.
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 not deemed to meet the “more-likely-than-not” threshold are reversed and recorded
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did it have any unrecognized tax benefits as of the periods presented herein.
Capital Accounts – Certain capital accounts including under (over) distributed net investment income, accumulated net realized gain or loss, net unrealized 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. Foreign currency amounts are translated into U.S. dollars on the following basis:
 
 	(i)	Market value of investment securities, other assets and liabilities – at the current rates of exchange.	
 
 	(ii)	Purchase and sales of investment securities, income and expenses – at the rates of exchange prevailing on the respective date of such transactions.	
The Company does not isolate that portion of realized and unrealized gains or losses on investments that result from changes in market prices of investments from those that result from fluctuations in foreign exchange rates. Net realized foreign currency gains or losses arise from sales or repayments of foreign denominated investments (recorded in realized gain/loss on investments), maturities or terminations of foreign currency derivatives (recorded in realized gain/loss on derivatives), repayments of foreign denominated liabilities and other transactional gain or loss resulting from fluctuations in foreign exchange rates on amounts received or paid (recorded in realized gain/loss on foreign exchange). Net unrealized foreign exchange gains and losses arise from valuation changes in foreign denominated assets and liabilities, resulting from changes in exchange rates, including unrealized foreign exchange gains and losses on investments (recorded in unrealized gain/loss on investments), foreign currency derivatives (recorded in unrealized gain/loss on derivatives), and all other assets and liabilities (recorded in unrealized gain/loss on foreign exchange).
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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 – The Company recognizes derivatives as either assets or liabilities at fair value on its Consolidated Statements of Assets and Liabilities with valuation changes recorded as realized or unrealized gains and losses. The Company currently does not have any formally documented hedges that qualify for hedge accounting treatment.
The Company uses foreign exchange forward contracts and/or borrowings on its multicurrency revolving credit facility to economically hedge its foreign currency risks. Changes in the values of the Company’s foreign denominated assets are recorded in current earnings as realized and unrealized gains and losses (see above); likewise, realized and unrealized gains and losses from derivatives and foreign denominated debt are also recorded in current earnings. 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. Fluctuations in market values of assets and liabilities denominated in the same foreign currency offset in earnings, providing a “natural” foreign currency hedge.
The Company uses interest rate caps to create a synthetic “ceiling” on its borrowing rates. An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds an agreed strike price. Interest payments on the Company’s credit facilities are primarily LIBOR based. By purchasing caps on LIBOR, if LIBOR exceeds the strike price, the Company will pay a higher interest rate on its credit facilities but receive an offsetting payment from the cap counterparty on the notional amount above the strike price. Caps have an initial cost. The fair value of interest rate caps is determined using option pricing models that use readily available market inputs.
Deferred Offering Costs – Offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in connection with offerings of the Company’s common stock or debt.
Receivable for Investments Sold – Receivable for investments sold represents a receivable for investments that have been sold but the proceeds have not been received.
Payable for Investments Purchased – Payable for investments purchased represents a liability for investments that have been purchased but the proceeds have not been paid and any unfunded loan commitments.
Deferred Credit Facility Costs – Deferred credit facility costs are amortized over the life of the related credit facility.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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, except for the following.
Subsequent to March 31, 2012, DSW Group Inc. (“DSW”), the Company’s largest investment, completed its recapitalization. In April 2012, Solar Capital and other Holdco note holders exchanged their PIK notes for preferred and common equity of DSW. The preferred equity has a dividend rate and liquidation preference consistent with the notes. In addition, Holdco note holders received a majority of DSW’s common equity, control of the board, and will have control over significant corporate actions including refinancing and exit alternatives. The Company does not believe that the valuation of the new assets would have differed materially from the valuation of the asset held at March 31, 2012, had this event occurred prior to the end of the quarter.
Note 3. Investments
Investments consisted of the following as of March 31, 2012 and December 31, 2011:

 	  	March 31, 2012	 	  	December 31, 2011	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	418,536	  	  	$	407,922	  	  	$	426,201	  	  	$	412,396	  	
Subordinated Debt/Corporate Notes	  	 	572,388	  	  	 	528,341	  	  	 	604,157	  	  	 	546,859	  	
Preferred Equity	  	 	15,433	  	  	 	15,133	  	  	 	15,107	  	  	 	14,664	  	
Common Equity/Partnership Interests/Warrants	  	 	90,854	  	  	 	57,119	  	  	 	107,108	  	  	 	71,124	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,097,211	  	  	$	1,008,515	  	  	$	1,152,573	  	  	$	1,045,043	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of March 31, 2012 and December 31, 2011, the Company had one non-accrual asset with a total market value of $4,375 and $5,875, respectively.
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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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 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 adviser. For financial statement purposes, the second part of the incentive fee is accrued based upon 20% of cumulative net realized and unrealized capital appreciation. No accrual was required for the three months ended March 31, 2012 or for the year ended December 31, 2011.
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.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Note 5. Derivatives
The Company is exposed to interest rate risk both as a lender and a borrower. The Company’s borrowing facilities and term loan bear interest at a floating rate, which means that rising interest rates would increase our cost of borrowing. To partially mitigate this risk, in 2011, the Company purchased two interest rate cap contracts, which effectively limit the interest rate payable on $150 million of LIBOR based borrowings. The following table highlights the outstanding interest rate caps:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	March 31, 2012	 	 	December 31, 2011	 	 	 	 	
Index Rate	 	Cap Rate	 	 	Notional
Amount	 	 	Expiration	 	 	Cost	 	 	Fair Value	 	 	Unrealized
Depreciation	 	 	Fair Value	 	 	Unrealized
Depreciation	 	 	Counterparty	 	
3 Month Libor	 	 	1.0	% 	 	$	100,000	  	 	 	1/13/2014	  	 	$	1,950	  	 	$	117	  	 	$	(1,833	) 	 	$	279	  	 	$	(1,671	) 	 	 	Wells Fargo	  	
 	 	 	 	 	 	 	 	 	 	
3 Month Libor	 	 	1.0	% 	 	 	50,000	  	 	 	5/4/2014	  	 	 	988	  	 	 	95	  	 	 	(893	) 	 	 	190	  	 	 	(798	) 	 	 	Wells Fargo	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	$	150,000	  	 	 	 	 	 	$	2,938	  	 	$	212	  	 	$	(2,726	) 	 	$	469	  	 	$	(2,469	) 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company is also 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. During the quarter ended March 31, 2012, we entered into 28 foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $15,774. During the year ended December 31, 2011, we entered into 80 foreign currency forward contracts with durations of 1 month with average U.S. dollar notional amounts of $30,697.
As of March 31, 2012, there were three open forward foreign currency contracts denominated in Euro, British Pounds and Canadian Dollar, all of which terminated on April 11, 2012. As of December 31, 2011, there were two open forward foreign currency contracts denominated in Euro and British Pounds, both of which terminated on January 10, 2012. At March 31, 2012 and December 31, 2011, 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, 2012	 	 	December 31, 2011	 	
SOLD	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	 	 	Foreign
Currency	 	 	USD Value	 	 	Unrealized
appreciation
(depreciation)	 	 	Counterparty	 	
EUR	 	 	16,893	  	 	$	22,531	  	 	$	(455	) 	 	 	Wells Fargo	  	 	 	966	  	 	$	1,295	  	 	$	44	  	 	 	SunTrust Bank	  	
 	 	 	 	 	 	 	 	 	
GBP	 	 	20,837	  	 	 	33,329	  	 	 	(625	) 	 	 	SunTrust Bank	  	 	 	12,989	  	 	 	20,307	  	 	 	136	  	 	 	SunTrust Bank	  	
 	 	 	 	 	 	 	 	 	
CAD	 	 	18,826	  	 	 	18,874	  	 	 	82	  	 	 	SunTrust Bank	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	

Total Sold	 	 	 	 	 	$	74,734	  	 	$	(998	) 	 	 	 	 	 	 	 	 	 	$	21,602	  	 	$	180	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company had no derivatives designated as hedging instruments at March 31, 2012 or December 31, 2011.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
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 Value of Derivative Instruments

 	 	
 	  	Derivative Assets	 	
 	  	March 31, 2012	 	  	December 31, 2011	 	
 	  	Balance Sheet Location	 	  	Fair
Value	 	  	Balance Sheet Location	 	  	Fair
Value	 	
Derivatives not designated as hedging instruments (a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative assets	  	  	$	82	  	  	 	Derivative assets	  	  	$	180	  	
Interest rate caps	  	 	Derivative assets	  	  	 	212	  	  	 	Derivative assets	  	  	 	469	  	

Total derivatives not designated as hedging instruments (a)	  	 	 	 	  	$	294	  	  	 	 	 	  	$	649	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative assets	  	 	 	 	  	$	294	  	  	 	 	 	  	$	649	  	

 	  	Derivative Liabilities	 	
 	  	March 31, 2012	 	  	December 31, 2011	 	
 	  	Balance Sheet Location	 	  	Fair
Value	 	  	Balance Sheet Location	 	  	Fair
Value	 	
Derivatives not designated as hedging instruments (a)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	  	 	Derivative liabilities	  	  	$	1,080	  	  	 	Derivative liabilities	  	  	$	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivatives not designated as hedging instruments (a)	  	 	 	 	  	$	1,080	  	  	 	 	 	  	$	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivative liabilities	  	 	 	 	  	$	1,080	  	  	 	 	 	  	$	—  	  	

(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.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(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, 2012
(unaudited)	 	 	Three months ended
March 31, 2011
(unaudited)	 	
Foreign exchange contracts	  	Realized gain (loss):	 	 	 	 	 	 	 	 	
 	  	Derivatives	 	$	(944	) 	 	$	(4,363	) 	
Foreign exchange contracts	  	Unrealized gain (loss):	 	 	 	 	 	 	 	 	
 	  	Derivatives	 	 	(1,178	) 	 	 	(289	) 	
Interest rate caps	  	Unrealized gain (loss):	 	 	 	 	 	 	 	 	
 	  	Derivatives	 	 	(257	) 	 	 	30	  	
 	  	 	 	 	 	 	 	 	 	 	
Total	  	 	 	$	(2,379	) 	 	$	(4,622	) 	
 	  	 	 	 	 	 	 	 	 	 	
Note 6. Borrowing Facilities, Senior Unsecured Notes, and Term Loan
Senior Secured Revolving Credit Facility—On January 11, 2008, Solar Capital LLC entered into a $200 million Senior Secured Revolving Credit Facility (the “$405 Million 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 $405 Million Facility.
On February 12, 2010, Solar Capital Ltd. amended and restated the $405 Million 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%. Total commitments under the $405 Million Facility have been increased to $405 million as a result of the addition of three new lenders on May 12, 2010, June 23, 2010 and December 19, 2011. The $405 Million Facility may be increased up to $600 million with additional new lenders or the increase in commitments of current lenders. The $405 Million Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the $405 Million Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio.
Term Loan—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 shareholders’ equity and a minimum asset coverage ratio.
Senior Secured Loan Facility—On December 17, 2010, Solar Capital Ltd. entered into a $100 million senior secured credit facility (the “$100 Million Facility”) with Wells Fargo Securities LLC, as administrative agent. Solar Capital entered into (i) a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with SC
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Funding, pursuant to which Solar Capital will sell to SC Funding certain loans that it has originated or acquired, or will originate or acquire (the “Loans”) from time to time; (ii) a Loan and Servicing Agreement (the “Loan and Servicing Agreement” and, together with the Purchase and Sale Agreement, the “Agreements”) with SC Funding as borrower; and (iii) various supporting documentation. The $100 Million Facility is secured by all of the assets held by SC Funding. The $100 Million Facility, among other things, matures on December 17, 2015 and bears interest based on LIBOR plus 2.75%. Under the Agreements, Solar Capital and SC Funding, as applicable, are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The Purchase and Sale Agreement includes usual and customary events of default for credit facilities of this nature.
The weighted average annualized interest cost for all borrowings for the three months ended March 31, 2012 and 2011 was 3.85% and 3.58%, respectively. These costs are exclusive of commitment fees and for other prepaid expenses related to establishing the $405 million Credit Facility, the $100 million Credit Facility and the Term Loan (collectively the “Credit Facilities.”) This weighted average annualized interest cost reflects the average interest cost for all outstanding borrowings. For the three months ended March 31, 2012 and 2011, average debt outstanding was $183,958 and $126,318, respectively. The maximum amounts borrowed on the Credit Facilities during the three months ended March 31, 2012 and 2011 was $236,879 and $435,000, respectively. There was $163,643 drawn on the Credit Facilities as of March 31, 2012 and $236,355 as of December 31, 2011. At March 31, 2012 and December 31, 2011, the Company was in compliance with all financial and operational covenants required by the Credit Facilities.
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);	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
 	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.
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of March 31, 2012 and December 31, 2011:
Fair Value Measurements
As of March 31, 2012

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	 	—  	  	  	 	47,810	  	  	 	360,112	  	  	 	407,922	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	27,731	  	  	 	500,610	  	  	 	528,341	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	15,133	  	  	 	15,133	  	
Common Equity / Partnership Interests / Warrants	  	 	10,120	  	  	 	—  	  	  	 	46,999	  	  	 	57,119	  	
Derivative assets - interest rate cap	  	 	—  	  	  	 	212	  	  	 	—  	  	  	 	212	  	
Derivative assets - forward contracts	  	 	—  	  	  	 	82	  	  	 	—  	  	  	 	82	  	
 	 	 	 	 	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Derivative liabilities - forward contracts	  	 	—  	  	  	 	1,080	  	  	 	—  	  	  	 	1,080	  	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Fair Value Measurements
As of December 31, 2011

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	  	  	$	46,377	  	  	$	366,019	  	  	$	412,396	  	
Subordinated Debt / Corporate Notes	  	 	—  	  	  	 	10,508	  	  	 	536,351	  	  	 	546,859	  	
Preferred Equity	  	 	—  	  	  	 	—  	  	  	 	14,664	  	  	 	14,664	  	
Common Equity / Partnership Interests / Warrants	  	 	11,460	  	  	 	—  	  	  	 	59,664	  	  	 	71,124	  	
Derivative assets - interest rate cap	  	 	—  	  	  	 	469	  	  	 	—  	  	  	 	469	  	
Derivative assets - forward contracts	  	 	—  	  	  	 	180	  	  	 	—  	  	  	 	180	  	
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, 2012 and the year ended December 31, 2011, 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, 2012 and December 31, 2011:
Fair Value Measurements Using Level 3 Inputs
As of March 31, 2012

 	 	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, January 1, 2012	 	$	366,019	  	 	$	536,351	  	 	$	14,664	  	 	$	59,664	  	
 	 	 	 	 	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	10,277	  	
Net change in unrealized gain (loss)	 	 	1,773	  	 	 	8,062	  	 	 	148	  	 	 	(5,544	) 	
 	 	 	 	 	
Purchase of investment securities	 	 	43,618	  	 	 	18,052	  	 	 	321	  	 	 	2,879	  	
Proceeds from dispositions of investment securities	 	 	(51,298	) 	 	 	(61,855	) 	 	 	—  	  	 	 	(20,277	) 	
 	 	 	 	 	
Transfers in/out of Level 3	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, March 31, 2012	 	$	360,112	  	 	$	500,610	  	 	$	15,133	  	 	$	46,999	  	

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):	 	$	2,517	  	 	$	8,170	  	 	$	148	  	 	$	(5,544	) 	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the period. During the three months ended March 31, 2012, there were no transfers in and out of Levels 1 and 2.
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2011

 	 	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, January 1, 2011	 	$	200,532	  	 	$	566,308	  	 	$	3,934	  	 	$	53,092	  	
 	 	 	 	 	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	 	 	(87	)	 	 	6,218	  	 	 	—  	  	 	 	(4,500	)	
Net change in unrealized gain (loss)	 	 	(13,392	)	 	 	(6,991	)	 	 	(448	)	 	 	6,931	  	
 	 	 	 	 	
Purchase of investment securities	 	 	247,421	  	 	 	115,852	  	 	 	11,178	  	 	 	7,942	  	
Proceeds from dispositions of investment securities	 	 	(68,455	)	 	 	(103,971	)	 	 	—  	  	 	 	(3,801	)	
 	 	 	 	 	
Transfers in/out of Level 3	 	 	—  	  	 	 	(41,065	)	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2011	 	$	366,019	  	 	$	536,351	  	 	$	14,664	  	 	$	59,664	  	

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):	 	$	(15,535	)	 	$	(17,844	)	 	$	(448	)	 	$	4,988	  	
During 2011, one investment with a fair value of $41,065 was transferred from Level 3 to Level 2 as a result of an increase in the availability and reliability of third party market quotes for this investment. During 2011, one asset with a fair value of $9,900 was transferred from Level 2 to Level 1 when trading restrictions expired on a publicly traded equity investment.
The significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 investments include current market yields as indicated by comparable publicly traded investments and loan indices and EBITDA multiples as indicated by current, comparable market transactions (see table below). However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral, and not presented in the table below.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of March 31, 2012 were as follows:

EBITDA Multiples (Enterprise Value)	  	3.6x to 12.0x	
Market Yields	  	10.2% to 20.5%	
Significant increases or decreases in any of the above inputs in isolation would result in a significantly lower or higher fair value measurement.
Note 9. Stockholders’ Equity
The table below illustrates the effect of certain transactions on our capital accounts for the year ended December 31, 2011 and the three months ended March 31, 2012:

 	 	Common Stock	 	 	Paid in
Capital in
Excess of Par	 	 	Under (Over)
Distributed Net
Investment
Income	 	 	Accumulated
Net Realized
Gain/(Loss)	 	 	Net
Unrealized
Depreciation	 	 	Total
Stockholders
Equity	 	 	
 	 	Shares	 	 	Par Amount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2010	 	 	36,383,158	  	 	$	364	  	 	$	926,991	  	 	$	(1,545	) 	 	$	(10,541	) 	 	$	(88,275	) 	 	$	826,994	  	 	 	 	
Reinvestment of dividends	 	 	224,880	  	 	 	2	  	 	 	5,162	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	5,164	  	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	81,904	  	 	 	(2,393	) 	 	 	(18,196	) 	 	 	61,315	  	 	 	 	
Dividends declared ($2.40 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(73,532	) 	 	 	(14,000	) 	 	 	—  	  	 	 	(87,532	) 	 	 	 	
Permanent tax differences	 	 	—  	  	 	 	—  	  	 	 	(3,973	) 	 	 	(4,582	) 	 	 	8,555	  	 	 	—  	  	 	 	—  	  	 	 	 	

Balance at December 31, 2011	 	 	36,608,038	  	 	$	366	  	 	$	928,180	  	 	$	2,245	  	 	$	(18,379	) 	 	$	(106,471	) 	 	$	805,941	  	 	 	 	
Net increase in stockholders’ equity resulting from operations	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	21,099	  	 	 	9,166	  	 	 	15,893	  	 	 	46,158	  	 	 	 	
Dividends declared ($0.60 per share)	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(21,965	) 	 	 	—  	  	 	 	—  	  	 	 	(21,965	) 	 	 	 	

Balance at March 31, 2012	 	 	36,608,038	  	 	$	366	  	 	$	928,180	  	 	$	1,379	  	 	$	(9,213	) 	 	$	(90,578	) 	 	$	830,134	  	 	 	 	

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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Note 10. Earnings Per Share
The following information sets forth the computation of basic and diluted net increase in shareholders’ equity per share resulting from operations for the three months ended March 31, 2012 and 2011:

 	 	Three months ended
March 31, 2012	 	 	Three months ended
March 31, 2011	 	
 	 	(unaudited)	 	 	(unaudited)	 	
Numerator for basic and diluted earnings per share:	 	$	46,158	  	 	$	49,018	  	
 	 	 	
Denominator for basic and diluted weighted average share:	 	 	36,608,038	  	 	 	36,383,158	  	
Basic and diluted net increase in shareholders’ equity resulting from operations per share:	 	$	1.26	  	 	$	1.35	  	
Note 11. Taxation
We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file federal and state tax returns, our major tax jurisdiction is federal. Our inception-to-date federal tax years remain subject to examination by the Internal Revenue Service.
There were no deferred tax assets or liabilities as of March 31, 2012 or December 31, 2011.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
Note 12. Financial Highlights
The following is a schedule of financial highlights for the three months ended March 31, 2012 and 2011:

 	  	Three months ended
March 31, 2012	 	 	Three months ended
March 31, 2011	 	
Per Share Data:(a)	  	 	 	 	 	 	 	 	
Net asset value, beginning of year	  	$	22.02	  	 	$	22.73	  	
Net investment income	  	 	0.58	  	 	 	0.53	  	
Net realized and unrealized gain	  	 	0.68	  	 	 	0.82	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	1.26	  	 	 	1.35	  	
Dividends to shareholders declared	  	 	(0.60	) 	 	 	(0.60	) 	
 	  	 	 	 	 	 	 	 	
Net asset value, end of period	  	$	22.68	  	 	$	23.48	  	

Total return (b)	  	 	2.63	% 	 	 	(1.21	)% 	
Net assets, end of period	  	$	830,134	  	 	$	854,182	  	
Per share market value at end of period	  	$	22.07	  	 	$	23.88	  	
Shares outstanding end of period	  	 	36,608,038	  	 	 	36,383,158	  	
 	 	 	
Ratio to average net assets:	  	 	 	 	 	 	 	 	
Expenses without incentive
fees (c)	  	 	4.75	% 	 	 	4.03	% 	
Incentive fees	  	 	0.64	% 	 	 	0.57	% 	
 	  	 	 	 	 	 	 	 	
Total expenses	  	 	5.39	% 	 	 	4.60	% 	
 	  	 	 	 	 	 	 	 	
Net investment income(c)	  	 	10.35	% 	 	 	9.24	% 	
Portfolio turnover ratio	  	 	7.38	% 	 	 	9.36	% 	
 
(a)	Calculated using the average shares outstanding method	
(b)	Total return is based on the change in market price per share during the period and takes into account dividends reinvested with the dividend reinvestment plan. Not annualized for periods less than one year.	
(c)	Annualized.	
Note 13. New Accounting Pronouncements and Accounting Standards Updates
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No. 13 (“IFRS 13”), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(in thousands, except shares)
(unaudited)
 
required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a significant impact on the Company’s financial statements or its disclosures.
 
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SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
Schedule 12-14

 	 	 	 	 	 	 	Three months ended March 31, 2012	 	 	 	 	
Portfolio Company	 	Investment	 	As of March 31, 2012
Number of
Shares/Principal Amount	 	 	Amount of dividends
and interest
included in income	 	 	Amount of equity in
net profit and loss	 	 	As of
March 31,
2012
Fair Value	 	
 	 	 	 	 	 	
Investments Owned Greater than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AviatorCap SII, LLC I	 	Senior Debt	 	 	3,571	  	 	$	117	  	 	$	—  	  	 	$	3,569	  	
AviatorCap SII, LLC II	 	Senior Debt	 	 	5,394	  	 	 	160	  	 	 	—  	  	 	 	5,394	  	
AviatorCap SII, LLC III	 	Senior Debt	 	 	7,601	  	 	 	294	  	 	 	—  	  	 	 	7,601	  	
USAW 767	 	Senior Debt	 	 	4,381	  	 	 	189	  	 	 	—  	  	 	 	4,381	  	
SODO Corp.	 	Preferred Equity/Common	 	 	2,052	  	 	 	42	  	 	 	—  	  	 	 	2,011	  	
SOCAY Corp.	 	Preferred Equity/Common	 	 	13,342	  	 	 	280	  	 	 	—  	  	 	 	13,075	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	 	 	 	 	 	 	 	$	1,082	  	 	$	—  	  	 	$	36,031	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	 	Equity	 	 	44,697,684	  	 	 	—  	  	 	 	—  	  	 	 	36,540	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	 	 	 	 	 	 	 	$	—  	  	 	$	—  	  	 	$	36,540	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The table below represents the balance at the beginning of the year, December 31, 2011 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, 2012.
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,
2011	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
March 31,
2012	 	
AviatorCap SII, LLC I	  	$	3,671	  	  	$	8	  	  	$	157	  	  	$	47	  	 	$	3,569	  	
AviatorCap SII, LLC II	  	 	5,611	  	  	 	8	  	  	 	302	  	  	 	77	  	 	 	5,394	  	
AviatorCap SII, LLC III	  	 	8,724	  	  	 	25	  	  	 	1,256	  	  	 	108	  	 	 	7,601	  	
USAW 767	  	 	4,831	  	  	 	20	  	  	 	523	  	  	 	53	  	 	 	4,381	  	
SODO Corp.	  	 	1,949	  	  	 	42	  	  	 	—  	  	  	 	20	  	 	 	2,011	  	
SOCAY Corp.	  	 	12,668	  	  	 	280	  	  	 	—  	  	  	 	127	  	 	 	13,075	  	
Ark Real Estate Partners LP	  	 	35,820	  	  	 	2,879	  	  	 	—  	  	  	 	(2,159	) 	 	 	36,540	  	
 
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SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
Schedule 12-14

 	  	 	  	 	 	  	Year ended December 31, 2011	 	  	 	 	
Portfolio Company	  	Investment	  	As of December 31, 2011
Number of
Shares/Principal Amount	 	  	Amount of dividends
and interest
included in income	 	  	Amount of equity in
net profit and loss	 	  	As of
December 31,
2011
Fair Value	 	
 	 	 	 	 	 	
Investments Owned Greater than 25%	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
AviatorCap SII, LLC I	  	Senior Debt	  	 	3,678	  	  	$	288	  	  	$	—  	  	  	$	3,671	  	
AviatorCap SII, LLC II	  	Senior Debt	  	 	5,618	  	  	 	243	  	  	 	—  	  	  	 	5,611	  	
AviatorCap SII, LLC III	  	Senior Debt	  	 	8,696	  	  	 	628	  	  	 	—  	  	  	 	8,724	  	
USAW 767	  	Senior Debt	  	 	4,850	  	  	 	920	  	  	 	—  	  	  	 	4,831	  	
SODO Corp.	  	Preferred
Equity/Common	  	 	2,009	  	  	 	96	  	  	 	—  	  	  	 	1,949	  	
SOCAY Corp.	  	Preferred
Equity/Common	  	 	13,059	  	  	 	686	  	  	 	—  	  	  	 	12,668	  	
National Specialty Alloys, LLC	  	Equity	  	 	10,000	  	  	 	4,102	  	  	 	—  	  	  	 	16,000	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments Owned Greater than 25%	  	 	  	 	 	 	  	$	6,963	  	  	$	—  	  	  	$	53,454	  	

Investments Owned Greater than 5% and Less than 25%	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ark Real Estate Partners LP	  	Equity	  	 	41,818,834	  	  	 	—  	  	  	 	—  	  	  	 	35,820	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	  	 	 	 	  	$	—  	  	  	$	—  	  	  	$	35,820	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The table below represents the balance at the beginning of the year, December 31, 2010 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, 2011.
Gross additions represent increases in the investment from additional investments, amortization and 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,
2010	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as of
December 31,
2011	 	
AviatorCap SII, LLC I	  	$	—  	  	  	$	4,047	  	  	$	369	  	  	 	(7	)	 	$	3,671	  	
AviatorCap SII, LLC II	  	 	—  	  	  	 	6,094	  	  	 	476	  	  	 	(7	)	 	 	5,611	  	
AviatorCap SII, LLC III	  	 	—  	  	  	 	10,062	  	  	 	1,366	  	  	 	28	  	 	 	8,724	  	
USAW 767	  	 	6,618	  	  	 	76	  	  	 	1,848	  	  	 	(15	)	 	 	4,831	  	
SODO Corp.	  	 	390	  	  	 	1,619	  	  	 	—  	  	  	 	(60	)	 	 	1,949	  	
SOCAY Corp.	  	 	3,500	  	  	 	9,559	  	  	 	—  	  	  	 	(391	)	 	 	12,668	  	
National Specialty Alloys, LLC	  	 	10,000	  	  	 	—  	  	  	 	—  	  	  	 	6,000	  	 	 	16,000	  	
Ark Real Estate Partners LP	  	 	29,235	  	  	 	7,066	  	  	 	53	  	  	 	(428	)	 	 	35,820	  	
 
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2,000,000 shares

 
Solar Capital Ltd.
 
Common Stock

 
P R O S P E C T U S  S U P P L E M E N T
 
August 23, 2012

 

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