Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 
x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the Quarter Ended June 30, 2015
 
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
Commission File Number: 814-00754

SOLAR CAPITAL LTD.
(Exact name of registrant as specified in its charter)

 
 	 	 	
Maryland	 	26-1381340	
(State of Incorporation)	 	(I.R.S. Employer
Identification No.)	
 	 	
500 Park Avenue
New York, N.Y.	 	10022	
(Address of principal executive offices)	 	(Zip Code)	
(212) 993-1670
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ¨     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	 	x	  	Accelerated filer	 	¨	
 	 	 	 	
Non-accelerated filer	 	¨	  	Smaller Reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of August 3, 2015 was 42,465,162.

 

Table of Contents
SOLAR CAPITAL LTD.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2015
TABLE OF CONTENTS

 	  	PAGE	 	
PART I. FINANCIAL INFORMATION	  	
 	 	 	
Item 1.	 	Financial Statements
 Consolidated Statements of Assets and Liabilities as of June 30, 2015 (unaudited) and December 31, 2014	  	 	3	  	
 	 	 	
 	 	Consolidated Statements of Operations for the three and six months ended June 30, 2015 (unaudited) and the three and six months ended June 30, 2014 (unaudited)	  	 	4	  	
 	 	 	
 	 	Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2015 (unaudited) and the year ended December 31, 2014	  	 	5	  	
 	 	 	
 	 	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 (unaudited) and the six months ended June 30, 2014 (unaudited)	  	 	6	  	
 	 	 	
 	 	Consolidated Schedule of Investments as of June 30, 2015 (unaudited)	  	 	7	  	
 	 	 	
 	 	Consolidated Schedule of Investments as of December 31, 2014	  	 	10	  	
 	 	 	
 	 	Notes to Consolidated Financial Statements (unaudited)	  	 	14	  	
 	 	 	
 	 	Report of Independent Registered Public Accounting Firm	  	 	30	  	
 	 	 	
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	31	  	
 	 	 	
Item 3.	 	Quantitative and Qualitative Disclosures About Market Risk	  	 	46	  	
 	 	 	
Item 4.	 	Controls and Procedures	  	 	46	  	
 	 	
PART II. OTHER INFORMATION	  	 	 	 	
 	 	 	
Item 1.	 	Legal Proceedings	  	 	47	  	
 	 	 	
Item 1A.	 	Risk Factors	  	 	47	  	
 	 	 	
Item 2.	 	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	47	  	
 	 	 	
Item 3.	 	Defaults Upon Senior Securities	  	 	47	  	
 	 	 	
Item 4.	 	Mine Safety Disclosures	  	 	47	  	
 	 	 	
Item 5.	 	Other Information	  	 	47	  	
 	 	 	
Item 6.	 	Exhibits	  	 	48	  	
 	 	 	
 	 	Signatures	  	 	50	  	

Table of Contents
PART I. FINANCIAL INFORMATION
In this Quarterly Report, “Solar Capital”, “Company”, “Fund”, “we”, “us”, and “our” refer to Solar Capital Ltd. unless the context states otherwise.
 
Item 1.	Financial Statements	
SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)

 	  	June 30,
2015
(unaudited)	 	 	December 31,
2014	 	
Assets	  	 	 	 	 	 	 	 	
Investments at fair value:	  	 	 	 	 	 	 	 	
Companies less than 5% owned (cost: $812,673 and $659,552, respectively)	  	$	807,833	  	 	$	652,288	  	
Companies 5% to 25% owned (cost: $8,511 and $8,511, respectively)	  	 	1,860	  	 	 	4,646	  	
Companies more than 25% owned (cost: $333,205 and $339,380, respectively)	  	 	362,422	  	 	 	363,804	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,154,389 and $1,007,443, respectively)	  	 	1,172,115	  	 	 	1,020,738	  	
Cash	  	 	6,236	  	 	 	145,075	  	
Cash equivalents	  	 	490,003	  	 	 	490,000	  	
Foreign currency (cost: $612 and $275, respectively)	  	 	580	  	 	 	265	  	
Receivable for investments sold	  	 	41,070	  	 	 	13,138	  	
Interest receivable	  	 	5,933	  	 	 	4,549	  	
Dividends receivable	  	 	8,246	  	 	 	8,258	  	
Deferred financing costs	  	 	3,244	  	 	 	3,263	  	
Prepaid expenses and other assets	  	 	1,251	  	 	 	1,048	  	
 	  	 	 	 	 	 	 	 	
Total assets	  	$	1,728,678	  	 	$	1,686,334	  	
 	  	 	 	 	 	 	 	 	
Liabilities	  	 	 	 	 	 	 	 	
Revolving credit facilities (see note 6 and 8)	  	$	—  	 	 	$	—  	 	
Unsecured senior notes (see note 8)	  	 	100,000	  	 	 	100,000	  	
Senior secured notes (see note 6 and 8)	  	 	75,000	  	 	 	75,000	  	
Term loan (see note 6 and 8)	  	 	50,000	  	 	 	50,000	  	
Distributions payable	  	 	16,986	  	 	 	16,986	  	
Payable for investments and cash equivalents purchased	  	 	546,073	  	 	 	492,475	  	
Management fee payable (see note 3)	  	 	6,036	  	 	 	6,109	  	
Performance-based incentive fee payable (see note 3)	  	 	—  	  	 	 	4,198	  	
Administrative services expense payable (see note 3)	  	 	1,197	  	 	 	2,427	  	
Interest payable (see note 8)	  	 	1,493	  	 	 	1,504	  	
Other liabilities and accrued expenses	  	 	1,122	  	 	 	1,067	  	
 	  	 	 	 	 	 	 	 	
Total liabilities	  	$	797,907	  	 	$	749,766	  	
 	  	 	 	 	 	 	 	 	
Commitments and contingencies (see note 12 and 13)	  	 	 	 	 	 	 	 	
Net Assets	  	 	 	 	 	 	 	 	
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,465,162 and 42,465,162 shares issued and outstanding, respectively	  	$	425	  	 	$	425	  	
Paid-in capital in excess of par	  	 	991,963	  	 	 	991,963	  	
Distributions in excess of net investment income	  	 	(12,190	) 	 	 	(8,599	) 	
Accumulated net realized loss	  	 	(67,120	) 	 	 	(60,506	) 	
Net unrealized appreciation	  	 	17,693	  	 	 	13,285	  	
 	  	 	 	 	 	 	 	 	
Total net assets	  	$	930,771	  	 	$	936,568	  	
 	  	 	 	 	 	 	 	 	
Net Asset Value Per Share	  	$	21.92	  	 	$	22.05	  	
 	  	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)

 	  	Three months ended	 	 	Six months ended	 	
 	  	June 30,
2015	 	 	June 30,
2014	 	 	June 30,
2015	 	 	June 30,
2014	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies less than 5% owned	  	$	18,830	  	 	$	19,020	  	 	$	35,153	  	 	$	41,967	  	
Companies 5% to 25% owned	  	 	—  	  	 	 	245	  	 	 	—  	  	 	 	480	  	
Companies more than 25% owned	  	 	683	  	 	 	845	  	 	 	1,383	  	 	 	1,768	  	
Dividends:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies less than 5% owned	  	 	2	  	 	 	—  	  	 	 	2	  	 	 	—  	  	
Companies more than 25% owned	  	 	8,459	  	 	 	7,889	  	 	 	16,936	  	 	 	16,342	  	
Other income:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies less than 5% owned	  	 	—  	  	 	 	—  	  	 	 	125	  	 	 	68	  	
Companies more than 25% owned	  	 	4	  	 	 	5	  	 	 	9	  	 	 	9	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	  	 	27,978	  	 	 	28,004	  	 	 	53,608	  	 	 	60,634	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Management fees (see note 3)	  	$	6,036	  	 	$	6,173	  	 	$	11,901	  	 	$	12,383	  	
Performance-based incentive fees (see note 3)	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	3,213	  	
Interest and other credit facility expenses (see note 8)	  	 	3,629	  	 	 	3,621	  	 	 	7,230	  	 	 	7,213	  	
Administrative services expense (see note 3)	  	 	1,560	  	 	 	1,442	  	 	 	2,599	  	 	 	2,611	  	
Other general and administrative expenses	  	 	762	  	 	 	636	  	 	 	1,497	  	 	 	1,658	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	  	 	11,987	  	 	 	11,872	  	 	 	23,227	  	 	 	27,078	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	$	15,991	  	 	$	16,132	  	 	$	30,381	  	 	$	33,556	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, CASH EQUIVALENTS, FOREIGN CURRENCIES AND DERIVATIVES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss) on investments and cash equivalents:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies less than 5% owned	  	$	(452	) 	 	$	(2	) 	 	$	(5,231	) 	 	$	6	  	
Companies 5% to 25% owned	  	 	(350	) 	 	 	248	  	 	 	(1,400	) 	 	 	1,176	  	
Companies more than 25% owned	  	 	20	  	 	 	26	  	 	 	20	  	 	 	(25,284	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss) on investments and cash equivalents	  	 	(782	) 	 	 	272	  	 	 	(6,611	) 	 	 	(24,102	) 	
Net realized loss on foreign currencies and derivatives:	  	 	—  	  	 	 	(1,015	) 	 	 	(3	) 	 	 	(2,994	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(782	) 	 	 	(743	) 	 	 	(6,614	) 	 	 	(27,096	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss) on investments and cash equivalents	  	 	2,063	  	 	 	637	  	 	 	4,431	  	 	 	21,419	  	
Net change in unrealized gain (loss) on foreign currencies and derivatives	  	 	4	  	 	 	1,058	  	 	 	(23	) 	 	 	2,955	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss)	  	 	2,067	  	 	 	1,695	  	 	 	4,408	  	 	 	24,374	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, cash equivalents, foreign currencies and derivatives	  	 	1,285	  	 	 	952	  	 	 	(2,206	) 	 	 	(2,722	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	  	$	17,276	  	 	$	17,084	  	 	$	28,175	  	 	$	30,834	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS PER SHARE (see note 5)	  	$	0.41	  	 	$	0.40	  	 	$	0.66	  	 	$	0.71	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share amounts)

 	  	Six months ended
June 30, 2015
(unaudited)	 	 	Year ended
December 31, 2014	 	
Increase in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	30,381	  	 	$	66,707	  	
Net realized loss	  	 	(6,614	) 	 	 	(36,840	) 	
Net change in unrealized gain	  	 	4,408	  	 	 	18,585	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	28,175	  	 	 	48,452	  	
 	  	 	 	 	 	 	 	 	
Distributions to stockholders:	  	 	 	 	 	 	 	 	
From net investment income	  	 	(33,972	) 	 	 	(66,383	) 	
From other sources	  	 	—  	  	 	 	(2,060	) † 	
 	  	 	 	 	 	 	 	 	
Net distributions to stockholders	  	 	(33,972	) 	 	 	(68,443	) 	
 	  	 	 	 	 	 	 	 	
Capital transactions:	  	 	 	 	 	 	 	 	
Repurchases of common stock	  	 	—  	  	 	 	(39,078	) 	
 	  	 	 	 	 	 	 	 	
Net increase (decrease) in net assets resulting from capital transactions	  	 	—  	  	 	 	(39,078	) 	
 	  	 	 	 	 	 	 	 	
Total decrease in net assets	  	 	(5,797	) 	 	 	(59,069	) 	
Net assets at beginning of period	  	 	936,568	  	 	 	995,637	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period (1)	  	$	930,771	  	 	$	936,568	  	
 	  	 	 	 	 	 	 	 	
Capital stock activity:	  	 	 	 	 	 	 	 	
Common stock repurchased	  	 	—  	  	 	 	(1,779,033	) 	
 	  	 	 	 	 	 	 	 	
Net increase (decrease) from capital stock activity	  	 	—  	  	 	 	(1,779,033	) 	

†	Represents tax return of capital.	
(1)	Includes undistributed (overdistributed) net investment income of ($12,190) and ($8,599), respectively.	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

 	  	Six months ended	 	
 	  	June 30, 2015	 	 	June 30, 2014	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	$	28,175	  	 	$	30,834	  	
 	 	 	
Adjustments to reconcile net increase in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net realized loss on investments and cash equivalents	  	 	6,611	  	 	 	24,102	  	
Net realized loss on foreign currencies and derivatives	  	 	3	  	 	 	2,994	  	
Net change in unrealized (gain) loss on investments and cash equivalents	  	 	(4,431	) 	 	 	(21,419	) 	
Net change in unrealized (gain) loss on foreign currencies and derivatives	  	 	(23	) 	 	 	(2,955	) 	
 	 	 	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	
Purchase of investments	  	 	(237,051	) 	 	 	(370,584	) 	
Proceeds from disposition of investments	  	 	83,786	  	 	 	474,366	  	
Capitalization of payment-in-kind interest	  	 	(272	) 	 	 	(2,252	) 	
Receivable for investments sold	  	 	(27,932	) 	 	 	7,279	  	
Interest receivable	  	 	(1,384	) 	 	 	(1,781	) 	
Dividends receivable	  	 	12	  	 	 	4,333	  	
Prepaid expenses and other assets	  	 	(203	) 	 	 	(414	) 	
 	 	 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	
Payable for investments and cash equivalents purchased	  	 	53,598	  	 	 	46,348	  	
Management fee payable	  	 	(73	) 	 	 	393	  	
Performance-based incentive fees payable	  	 	(4,198	) 	 	 	(4,633	) 	
Administrative services expense payable	  	 	(1,230	) 	 	 	(1,117	) 	
Interest payable	  	 	(11	) 	 	 	(10	) 	
Other liabilities and accrued expenses	  	 	55	  	 	 	104	  	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by (Used in) Operating Activities	  	 	(104,568	) 	 	 	185,588	  	

Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	
Cash distributions paid	  	 	(33,972	) 	 	 	(35,182	) 	
Deferred financing costs	  	 	19	  	 	 	18	  	
Repurchase of common stock	  	 	—  	  	 	 	(39,078	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by (Used in) Financing Activities	  	 	(33,953	) 	 	 	(74,242	) 	
 	  	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	(138,521	) 	 	 	111,346	  	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	  	 	635,340	  	 	 	586,979	  	
 	  	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	  	$	496,819	  	 	$	698,325	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	7,241	  	 	$	7,223	  	
Non-cash financing activities consist of the reinvestment of distributions of $0 and $0 for the six months ended June 30, 2015 and 2014, respectively.
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)
June 30, 2015
(in thousands, except share/unit amounts)

Description	 	Industry	 	Spread
Above
Index (12)	 	 	LIBOR
Floor	 	 	Interest
Rate (1)	 	 	Acquisition
Date	 	 	Maturity
Date	 	 	Par Amount	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans —   80.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Aegis Toxicology Sciences Corporation	 	Health Care Providers & Services	 	 	L+850	  	 	 	1.00	% 	 	 	9.50	% 	 	 	2/20/2014	  	 	 	8/24/2021	  	 	$	29,000	  	 	$	28,667	  	 	$	28,565	  	
AgaMatrix, Inc	 	Health Care Equipment & Supplies	 	 	L+835	  	 	 	—  	  	 	 	8.53	% 	 	 	2/6/2015	  	 	 	2/1/2019	  	 	 	6,667	  	 	 	6,545	  	 	 	6,600	  	
Argo Turboserve Corporation & Argo Tech, LLC	 	Air Freight & Logistics	 	 	L+825	  	 	 	—  	  	 	 	8.44	% 	 	 	5/2/2014	  	 	 	5/2/2018	  	 	 	14,733	  	 	 	14,733	  	 	 	14,585	  	
Asurion, LLC	 	Insurance	 	 	L+750	  	 	 	1.00	% 	 	 	8.50	% 	 	 	2/27/2014	  	 	 	3/3/2021	  	 	 	10,000	  	 	 	9,872	  	 	 	10,184	  	
AviatorCap SII, LLC I  (3)	 	Aerospace & Defense	 	 	—  	  	 	 	—  	  	 	 	12.00	% 	 	 	5/31/2011	  	 	 	12/31/2016	  	 	 	1,193	  	 	 	1,193	  	 	 	1,193	  	
AviatorCap SII, LLC II  (3)	 	Aerospace & Defense	 	 	—  	  	 	 	—  	  	 	 	11.00	% 	 	 	8/23/2011	  	 	 	12/31/2016	  	 	 	684	  	 	 	684	  	 	 	684	  	
Bishop Lifting Products, Inc. (9)	 	Trading Companies & Distributors	 	 	L+800	  	 	 	1.00	% 	 	 	9.00	% 	 	 	3/24/2014	  	 	 	3/27/2022	  	 	 	25,000	  	 	 	24,784	  	 	 	22,500	  	
CAMP International Holding Company	 	Aerospace & Defense	 	 	L+725	  	 	 	1.00	% 	 	 	8.25	% 	 	 	12/2/2013	  	 	 	11/30/2019	  	 	 	5,000	  	 	 	5,000	  	 	 	5,025	  	
CardioDx, Inc	 	Health Care Equipment & Supplies	 	 	P+670	  	 	 	—  	  	 	 	9.95	% 	 	 	6/18/2015	  	 	 	4/1/2019	  	 	 	7,500	  	 	 	7,338	  	 	 	7,333	  	
Concentra, Inc	 	Health Care Facilities	 	 	L+800	  	 	 	1.00	% 	 	 	9.00	% 	 	 	5/8/2015	  	 	 	6/1/2023	  	 	 	18,500	  	 	 	18,316	  	 	 	18,315	  	
Datapipe, Inc	 	IT Services	 	 	L+750	  	 	 	1.00	% 	 	 	8.50	% 	 	 	8/14/2014	  	 	 	9/15/2019	  	 	 	27,000	  	 	 	26,459	  	 	 	26,730	  	
Direct Buy Inc. (4) **	 	Multiline Retail	 	 	—  	  	 	 	—  	  	 	 	12.00% PI	K 	 	 	11/5/2012	  	 	 	10/31/2019	  	 	 	9,301	  	 	 	8,511	  	 	 	1,860	  	
DISA Holdings Acquisition Subsidiary Corp	 	Health Care Providers & Services	 	 	L+850	  	 	 	1.00	% 	 	 	9.50	% 	 	 	12/9/2014	  	 	 	6/9/2021	  	 	 	51,476	  	 	 	50,753	  	 	 	49,932	  	
Easyfinancial Services, Inc. (6)(7)	 	Consumer Finance	 	 	BA+722	  	 	 	1.00	% 	 	 	8.22	% 	 	 	9/27/2012	  	 	 	10/4/2018	  	 	C$	10,000	  	 	 	9,261	  	 	 	8,087	  	
Emerging Markets Communications, LLC	 	Wireless Telecommunication Services	 	 	L+962.5	  	 	 	1.00	% 	 	 	10.63	% 	 	 	6/29/2015	  	 	 	7/1/2022	  	 	$	27,000	  	 	 	26,595	  	 	 	26,595	  	
Filtration Group Corp	 	Industrial Conglomerates	 	 	L+725	  	 	 	1.00	% 	 	 	8.25	% 	 	 	11/15/2013	  	 	 	11/21/2021	  	 	 	1,571	  	 	 	1,558	  	 	 	1,580	  	
Genoa, A QoL Healthcare Company, LLC	 	Health Care Providers & Services	 	 	L+775	  	 	 	1.00	% 	 	 	8.75	% 	 	 	4/21/2015	  	 	 	4/30/2023	  	 	 	14,000	  	 	 	13,862	  	 	 	13,948	  	
Global Tel*Link Corporation	 	Communications Equipment	 	 	L+775	  	 	 	1.25	% 	 	 	9.00	% 	 	 	5/21/2013	  	 	 	11/23/2020	  	 	 	18,500	  	 	 	18,195	  	 	 	17,760	  	
Greystone Select Holdings LLC & Greystone & Co.,Inc	 	Thrifts & Mortgage Finance	 	 	L+800	  	 	 	1.00	% 	 	 	9.00	% 	 	 	3/25/2014	  	 	 	3/26/2021	  	 	 	9,876	  	 	 	9,827	  	 	 	9,876	  	
Hyland Software, Inc	 	Software	 	 	L+725	  	 	 	1.00	% 	 	 	8.25	% 	 	 	6/12/2015	  	 	 	6/30/2023	  	 	 	5,000	  	 	 	4,975	  	 	 	4,975	  	
IHS Intermediate, Inc	 	Health Care Providers & Services	 	 	L+825	  	 	 	1.00	% 	 	 	9.25	% 	 	 	6/19/2015	  	 	 	7/20/2022	  	 	 	25,000	  	 	 	24,500	  	 	 	24,500	  	
Infraredx, Inc	 	Health Care Equipment & Supplies	 	 	L+927	  	 	 	—  	  	 	 	9.55	% 	 	 	11/12/2014	  	 	 	10/1/2018	  	 	 	10,000	  	 	 	9,878	  	 	 	10,000	  	
Inmar Acquisition Sub, Inc	 	Professional Services	 	 	L+700	  	 	 	1.00	% 	 	 	8.00	% 	 	 	1/27/2014	  	 	 	1/27/2022	  	 	 	10,000	  	 	 	9,913	  	 	 	10,000	  	
K2 Pure Solutions NoCal, L.P	 	Chemicals	 	 	L+900	  	 	 	1.00	% 	 	 	11.00	% 	 	 	8/19/2013	  	 	 	8/19/2019	  	 	 	11,213	  	 	 	11,044	  	 	 	10,988	  	
Kore Wireless Group, Inc	 	Wireless Telecommunication Services	 	 	L+825	  	 	 	1.00	% 	 	 	9.25	% 	 	 	9/12/2014	  	 	 	3/12/2021	  	 	 	55,500	  	 	 	54,488	  	 	 	54,945	  	
Landslide Holdings, Inc	 	Software	 	 	L+725	  	 	 	1.00	% 	 	 	8.25	% 	 	 	2/25/2014	  	 	 	2/25/2021	  	 	 	16,300	  	 	 	16,278	  	 	 	16,300	  	
LegalZoom.com, Inc	 	Internet Software & Services	 	 	L+700	  	 	 	1.00	% 	 	 	8.00	% 	 	 	5/13/2015	  	 	 	5/13/2020	  	 	 	49,875	  	 	 	48,777	  	 	 	48,753	  	
Pharmedium Healthcare Corporation	 	Health Care Providers & Services	 	 	L+675	  	 	 	1.00	% 	 	 	7.75	% 	 	 	1/28/2014	  	 	 	1/28/2022	  	 	 	5,000	  	 	 	4,979	  	 	 	5,000	  	
Pronutria, Inc.	 	Pharmaceuticals	 	 	L+950	  	 	 	—  	  	 	 	9.69	% 	 	 	5/15/2014	  	 	 	5/15/2018	  	 	 	10,000	  	 	 	9,977	  	 	 	10,000	  	
Radius Health, Inc. (7)	 	Pharmaceuticals	 	 	L+985	  	 	 	—  	  	 	 	10.04	% 	 	 	5/30/2014	  	 	 	6/1/2018	  	 	 	12,500	  	 	 	12,456	  	 	 	12,625	  	
Rapid Micro Biosystems, Inc.	 	Life Sciences Tools & Services	 	 	L+880	  	 	 	—  	  	 	 	8.99	% 	 	 	6/30/2015	  	 	 	6/30/2019	  	 	 	16,000	  	 	 	15,911	  	 	 	15,910	  	
Rug Doctor LLC (3)	 	Diversified Consumer Services	 	 	L+975	  	 	 	1.50	% 	 	 	11.25	% 	 	 	12/23/2013	  	 	 	6/30/2017	  	 	 	9,111	  	 	 	8,760	  	 	 	9,020	  	
Salient Partners, L.P	 	Asset Management	 	 	L+650	  	 	 	1.00	% 	 	 	7.50	% 	 	 	6/10/2015	  	 	 	6/9/2021	  	 	 	16,000	  	 	 	15,681	  	 	 	15,680	  	
SOINT, LLC (3)	 	Aerospace & Defense	 	 	—  	  	 	 	—  	  	 	 	15.00	% 	 	 	6/8/2012	  	 	 	6/30/2016	  	 	 	7,949	  	 	 	7,900	  	 	 	7,949	  	
Southern Auto Finance Company  (7)	 	Consumer Finance	 	 	—  	  	 	 	—  	  	 	 	11.00	% 	 	 	10/19/2011	  	 	 	12/4/2018	  	 	 	25,000	  	 	 	24,699	  	 	 	24,875	  	
Syndax Pharmaceuticals, Inc	 	Pharmaceuticals	 	 	L+880	  	 	 	—  	  	 	 	8.98	% 	 	 	9/25/2014	  	 	 	6/13/2018	  	 	 	9,000	  	 	 	8,983	  	 	 	9,000	  	
T2 Biosystems, Inc.  (7)	 	Health Care Equipment & Supplies	 	 	L+705	  	 	 	—  	  	 	 	7.24	% 	 	 	7/11/2014	  	 	 	7/1/2019	  	 	 	16,667	  	 	 	16,709	  	 	 	16,750	  	
The Robbins Company TLA	 	Construction & Engineering	 	 	L+1150	  	 	 	—  	  	 	 	11.79	% 	 	 	5/31/2013	  	 	 	5/31/2017	  	 	 	11,293	  	 	 	12,585	  	 	 	11,975	  	
The Robbins Company TLB	 	Construction & Engineering	 	 	L+1150	  	 	 	—  	  	 	 	11.79	% 	 	 	5/31/2013	  	 	 	4/15/2016	  	 	 	2,749	  	 	 	2,714	  	 	 	2,804	  	
TierPoint, LLC	 	IT Services	 	 	L+775	  	 	 	1.00	% 	 	 	8.75	% 	 	 	12/2/2014	  	 	 	12/2/2022	  	 	 	25,000	  	 	 	24,765	  	 	 	25,000	  	
TMK Hawk Parent, Corp. (TriMark)	 	Trading Companies and Distributors	 	 	L+750	  	 	 	1.00	% 	 	 	8.50	% 	 	 	9/26/2014	  	 	 	10/1/2022	  	 	 	20,000	  	 	 	19,813	  	 	 	20,000	  	
TouchTunes Interactive Networks, Inc	 	Media	 	 	L+825	  	 	 	1.00	% 	 	 	9.25	% 	 	 	5/28/2015	  	 	 	5/27/2022	  	 	 	14,000	  	 	 	13,791	  	 	 	13,790	  	
Trevi Therapeutics, Inc	 	Pharmaceuticals	 	 	L+775	  	 	 	—  	  	 	 	7.93	% 	 	 	12/29/2014	  	 	 	6/29/2018	  	 	 	2,500	  	 	 	2,484	  	 	 	2,481	  	
U.S. Anesthesia Partners Inc	 	Health Care Providers & Services	 	 	L+500	  	 	 	1.00	% 	 	 	6.00	% 	 	 	9/24/2014	  	 	 	12/31/2019	  	 	 	19,857	  	 	 	19,771	  	 	 	19,857	  	
U.S. Anesthesia Partners Inc. TLB	 	Health Care Providers & Services	 	 	L+800	  	 	 	1.00	% 	 	 	9.00	% 	 	 	9/24/2014	  	 	 	9/24/2020	  	 	 	30,000	  	 	 	29,730	  	 	 	30,000	  	
Varilease Finance, Inc	 	Multi-Sector Holdings	 	 	L+825	  	 	 	1.00	% 	 	 	9.25	% 	 	 	8/22/2014	  	 	 	8/24/2020	  	 	 	38,000	  	 	 	37,400	  	 	 	38,000	  	
VetCor Professional Practices LLC	 	Health Care Facilities	 	 	L+600	  	 	 	1.00	% 	 	 	7.00	% 	 	 	5/8/2015	  	 	 	4/20/2021	  	 	 	10,000	  	 	 	9,902	  	 	 	10,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loan	  	 	$	761,016	  	 	$	752,529	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes —   7.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Alegeus Technologies Holdings Corp	 	Health Care Technology	 	 	 	 	 	 	 	 	 	 	12.00	% 	 	 	6/24/2012	  	 	 	2/15/2019	  	 	 	28,200	  	 	$	27,788	  	 	$	28,200	  	
WireCo. Worldgroup Inc.	 	Building Products	 	 	 	 	 	 	 	 	 	 	9.00	% 	 	 	6/28/2012	  	 	 	5/15/2017	  	 	 	48,000	  	 	 	47,783	  	 	 	45,600	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	  	 	$	75,571	  	 	$	73,800	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Shares/Units	  	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Equity —   2.0%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SOAGG LLC (3)(5)(7)(8)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	8.00	% 	 	 	12/14/2010	  	 	 	6/30/2018	  	 	 	8,310	  	 	$	8,310	  	 	$	9,193	  	
SOINT, LLC (3)(7)(8)	 	Aerospace & Defense	 	 	 	 	 	 	 	 	 	 	15.00	% 	 	 	6/8/2012	  	 	 	6/30/2018	  	 	 	86,667	  	 	 	8,667	  	 	 	9,533	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	  	 	$	16,977	  	 	$	18,726	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity/Equity Interests/Warrants —   35.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AgaMatrix Inc. Warrants*	 	Health Care Equipment & Supplies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2/6/2015	  	 	 	 	 	 	 	83,543	  	 	$	100	  	 	$	89	  	
Ark Real Estate Partners LP (2)(3) *	 	Diversified Real Estate Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3/12/2007	  	 	 	 	 	 	 	—  	  	 	 	1,389	  	 	 	871	  	
Ark Real Estate Partners LP (2)(3) *	 	Diversified Real Estate Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	10/23/2012	  	 	 	 	 	 	 	—  	  	 	 	22	  	 	 	20	  	
B Riley Financial Inc. (Great American)	 	Research & Consulting Services	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3/16/2007	  	 	 	 	 	 	 	38,015	  	 	 	2,684	  	 	 	376	  	
CardioDx, Inc. Warrants*	 	Health Care Equipment & Supplies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6/18/2015	  	 	 	 	 	 	 	39,863	  	 	 	129	  	 	 	127	  	
Crystal Financial LLC  (3)(7)(10)	 	Diversified Financial Services	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12/28/2012	  	 	 	 	 	 	 	275,000	  	 	 	275,000	  	 	 	305,000	  	
Direct Buy Inc. (4) *	 	Multiline Retail	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11/5/2012	  	 	 	 	 	 	 	76,999	  	 	 	—  	  	 	 	—  	  	
Infraredx, Inc. Warrants*	 	Health Care Equipment & Supplies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11/12/2014	  	 	 	 	 	 	 	749,925	  	 	 	113	  	 	 	—  	  	
Radius Health Inc. (7) *	 	Pharmaceuticals	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5/30/2014	  	 	 	 	 	 	 	23,892	  	 	 	108	  	 	 	1,618	  	
RD Holdco Inc. (Rug Doctor) (3) *	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	 	 	 	 	231,177	  	 	 	15,683	  	 	 	13,593	  	
RD Holdco Inc. (Rug Doctor) Class B  (3) *	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	 	 	 	 	522	  	 	 	5,216	  	 	 	5,216	  	
RD Holdco Inc. (Rug Doctor) Warrants  (3) *	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	 	 	 	 	30,370	  	 	 	381	  	 	 	150	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Equity Interests/Warrants	  	 	$	300,825	  	 	$	327,060	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments (11) —   125.9%	  	 	$	 1,154,389	  	 	$	 1,172,115	  	
See notes to consolidated financial statements.
 
7

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)(continued)
June 30, 2015
(in thousands)

Description	  	Industry	 	  	Acquisition
Date	 	  	Maturity
Date	 	  	Par Amount	 	  	Cost	 	  	Fair
Value	 	
Cash Equivalents —   52.7%	  	  	 	 	 	  	 	 	 	  	 	 	 	
U.S. Treasury Bill	  	 	Government	  	  	 	6/30/2015	  	  	 	7/23/2015	  	  	$	490,000	  	  	$	490,003	  	  	$	490,003	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments & Cash Equivalents — 178.6%	  	  	$	 1,644,392	  	  	$	1,662,118	  	
Liabilities in Excess of Other Assets — (78.6%)	  	  	 	 	 	  	 	(731,347	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Net Assets — 100.0%	  	  	 	 	 	  	$	930,771	  	

(1)	Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank Offered Rate (“LIBOR”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of June 30, 2015.	
(2)	Ark Real Estate Partners is held through SLRC ADI Corp., a taxable subsidiary.	
(3)	Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the Investment Company Act of 1940 (“1940 Act”), due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the six months ended June 30, 2015 in these controlled investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2014	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Realized Gain
(Loss)	 	  	Interest/Dividend
/Other Income	 	  	Fair Value at
June 30, 2015	 	
ARK Real Estate Partners LP	  	$	885	  	  	$	—  	 	  	$	—  	 	  	$	19	 	  	$	—  	 	  	$	871	  	
ARK Real Estate Partners II LP	  	 	21	  	  	 	—  	 	  	 	—  	 	  	 	1	 	  	 	—  	 	  	 	20	  	
AviatorCap SII, LLC I	  	 	1,421	  	  	 	—  	 	  	 	228	  	  	 	—  	 	  	 	78	  	  	 	1,193	  	
AviatorCap SII, LLC II	  	 	1,358	  	  	 	—  	 	  	 	674	  	  	 	—  	 	  	 	53	  	  	 	684	  	
Crystal Financial LLC	  	 	297,500	  	  	 	—  	  	  	 	—  	 	  	 	—  	  	  	 	15,800	  	  	 	305,000	  	
RD Holdco Inc. (Rug Doctor, common equity)	  	 	16,263	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	13,593	  	
RD Holdco Inc. (Rug Doctor, class B)	  	 	5,216	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	  	  	 	5,216	  	
RD Holdco Inc. (Rug Doctor, warrants)	  	 	290	  	  	 	—  	  	  	 	—  	 	  	 	—  	  	  	 	—  	  	  	 	150	  	
Rug Doctor LLC	  	 	9,020	  	  	 	—  	  	  	 	—  	 	  	 	—  	  	  	 	599	  	  	 	9,020	  	
SOAGG LLC	  	 	13,564	  	  	 	272	 	  	 	4,865	  	  	 	—  	  	  	 	492	  	  	 	9,193	  	
SOINT, LLC	  	 	8,733	  	  	 	—  	  	  	 	784	  	  	 	—  	  	  	 	654	  	  	 	7,949	  	
SOINT, LLC (preferred equity)	  	 	9,533	  	  	 	—  	  	  	 	—  	 	  	 	—  	  	  	 	643	  	  	 	9,533	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	363,804	  	  	$	272	  	  	$	6,551	  	  	$	20	  	  	$	18,319	  	  	$	362,422	  	

(4)	Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the six months ended June 30, 2015 in these affiliated investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2014	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Realized Gain
(Loss)	 	 	Interest/Dividend
Income	 	  	Fair Value at
June 30, 2015	 	
Direct Buy Inc. (common equity)	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	 	$	—  	 	  	$	—  	 	
Direct Buy Inc. (senior secured loan)	  	 	4,646	  	  	 	534	  	  	 	—  	 	  	 	—  	 	 	 	—  	  	  	 	1,860	  	
DSW Group Holdings LLC	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	(1,400	)†	 	 	—  	 	  	 	—  	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
 	  	$	4,646	  	  	$	534	  	  	$	—  	  	  	$	(1,400	) 	 	$	—  	  	  	$	1,860	  	

(5)	A portion of the coupon may be payable in kind (PIK). Currently, 5,354 units pay in kind at a rate of 8.00%, but have the option to pay in cash at the same rate and 2,956 units pay cash at a rate of 8.00% but have the option to pay in kind at the same rate.	
(6)	The following entity is domiciled outside the United States and the investments are denominated in Canadian Dollars: Easyfinancial Services, Inc. in Canada.	
(7)	Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of June 30, 2015, on a fair value basis, non-qualifying assets in the portfolio represented 22.1% of the total assets of the Company.	
(8)	Solar Capital Ltd.’s investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common shares, respectively.	
(9)	Bishop Lifting Products, Inc., SEI Holding I Corporation, Singer Equities, Inc. & Hampton Rubber Company are co-borrowers.	
(10)	Investment represents the operating company after consolidation of the holding company Crystal Capital Financial Holdings LLC.	
(11)	Aggregate net unrealized appreciation for U.S. federal income tax purposes is $8,756; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $34,422 and $25,666, respectively, based on a tax cost of $1,163,359.	
(12)	Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.	
*	Non-income producing security.	
**	Investment is on non-accrual status.	
†	Represents estimated change in receivable balance.	
See notes to consolidated financial statements.
 
8

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)(continued)
June 30, 2015

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of June 30, 2015	 	
Diversified Financial Services	  	 	26.0	% 	
Health Care Providers & Services	  	 	14.7	% 	
Wireless Telecommunications Services	  	 	7.0	% 	
IT Services	  	 	4.4	% 	
Internet Software & Services	  	 	4.2	% 	
Building Products	  	 	3.9	% 	
Trading Companies & Distributors	  	 	3.6	% 	
Health Care Equipment & Supplies	  	 	3.5	% 	
Multi-Sector Holdings	  	 	3.2	% 	
Pharmaceuticals	  	 	3.0	% 	
Aerospace & Defense	  	 	2.9	% 	
Consumer Finance	  	 	2.8	% 	
Health Care Technology	  	 	2.4	% 	
Diversified Consumer Services	  	 	2.4	% 	
Health Care Facilities	  	 	2.4	% 	
Software	  	 	1.8	% 	
Communications Equipment	  	 	1.5	% 	
Life Sciences Tools & Services	  	 	1.4	% 	
Construction & Engineering	  	 	1.3	% 	
Asset Management	  	 	1.3	% 	
Air Freight & Logistics	  	 	1.2	% 	
Media	  	 	1.2	% 	
Chemicals	  	 	0.9	% 	
Insurance	  	 	0.9	% 	
Professional Services	  	 	0.9	% 	
Thrifts & Mortgage Finance	  	 	0.8	% 	
Multiline Retail	  	 	0.2	% 	
Industrial Conglomerates	  	 	0.1	% 	
Diversified Real Estate Activities	  	 	0.1	% 	
Research & Consulting Services	  	 	0.0	% 	
 	  	 	 	 	
Total Investments	  	 	100.0	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
9

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2014
(in thousands)

Description	 	Industry	 	Interest (1)	 	  	Maturity	 	 	Acquisition
Date	 	 	Par Amount	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans—64.1%	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Aegis Toxicology Sciences Corporation	 	Health Care Providers & Services	 	 	9.50	% 	  	 	8/24/2021	  	 	 	2/20/2014	  	 	$	25,000	  	 	$	24,710	  	 	$	25,000	  	
Argo Turboserve Corporation & Argo Tech, LLC	 	Air Freight & Logistics	 	 	8.49	% 	  	 	5/2/2018	  	 	 	5/2/2014	  	 	 	10,450	  	 	 	10,450	  	 	 	10,319	  	
Asurion, LLC	 	Insurance	 	 	8.50	% 	  	 	3/3/2021	  	 	 	2/27/2014	  	 	 	10,000	  	 	 	9,863	  	 	 	9,967	  	
AviatorCap SII, LLC I (3)	 	Aerospace & Defense	 	 	12.00	% 	  	 	12/31/2016	  	 	 	5/31/2011	  	 	 	1,421	  	 	 	1,421	  	 	 	1,421	  	
AviatorCap SII, LLC II (3)	 	Aerospace & Defense	 	 	11.00	% 	  	 	12/31/2016	  	 	 	8/23/2011	  	 	 	1,358	  	 	 	1,358	  	 	 	1,358	  	
Bishop Lifting Products, Inc. (10)	 	Trading Companies & Distributors	 	 	9.00	% 	  	 	3/27/2022	  	 	 	3/24/2014	  	 	 	25,000	  	 	 	24,770	  	 	 	23,500	  	
Blue Coat Systems, Inc.	 	Internet Software & Services	 	 	9.50	% 	  	 	6/28/2020	  	 	 	6/28/2013	  	 	 	20,500	  	 	 	20,327	  	 	 	20,193	  	
Body Central Stores, Inc	 	Specialty Retail	 	 	8.24	% 	  	 	2/6/2017	  	 	 	2/6/2014	  	 	 	1,140	  	 	 	1,140	  	 	 	1,140	  	
CAMP International Holding Company	 	Aerospace & Defense	 	 	8.25	% 	  	 	11/30/2019	  	 	 	12/2/2013	  	 	 	5,000	  	 	 	5,000	  	 	 	5,025	  	
Datapipe, Inc	 	IT Services	 	 	8.50	% 	  	 	9/15/2019	  	 	 	8/14/2014	  	 	 	22,000	  	 	 	21,584	  	 	 	21,450	  	
Direct Buy Inc. (4)**	 	Multiline Retail	 	 	12.00%PI	K 	  	 	10/31/2019	  	 	 	11/5/2012	  	 	 	8,767	  	 	 	8,511	  	 	 	4,646	  	
DISA Holdings Acquisition Subsidiary Corp	 	Health Care Providers & Services	 	 	9.50	% 	  	 	6/9/2021	  	 	 	12/9/2014	  	 	 	51,476	  	 	 	50,709	  	 	 	50,704	  	
Easyfinancial Services, Inc. (6)(7).	 	Consumer Finance	 	 	8.50	% 	  	 	10/4/2018	  	 	 	9/27/2012	  	 	C$	10,000	  	 	 	9,261	  	 	 	8,696	  	
Emerging Markets Communications, LLC	 	Wireless Telecommunication Services	 	 	9.50	% 	  	 	11/20/2020	  	 	 	5/20/2014	  	 	$	27,000	  	 	 	26,561	  	 	 	26,528	  	
Filtration Group Corp	 	Industrial Conglomerates	 	 	8.25	% 	  	 	11/21/2021	  	 	 	11/15/2013	  	 	 	6,000	  	 	 	5,946	  	 	 	6,008	  	
Global Tel*Link Corporation	 	Communications Equipment	 	 	9.00	% 	  	 	11/23/2020	  	 	 	5/21/2013	  	 	 	18,500	  	 	 	18,174	  	 	 	18,161	  	
Greystone Select Holdings LLC & Greystone & Co., Inc	 	Thrifts & Mortgage Finance	 	 	9.00	% 	  	 	3/26/2021	  	 	 	3/25/2014	  	 	 	9,925	  	 	 	9,873	  	 	 	9,925	  	
Ikaria, Inc	 	Health Care Technology	 	 	8.75	% 	  	 	2/12/2022	  	 	 	2/4/2014	  	 	 	19,000	  	 	 	18,869	  	 	 	18,762	  	
Infraredx, Inc	 	Health Care Equipment & Supplies	 	 	9.50	% 	  	 	10/1/2018	  	 	 	11/12/2014	  	 	 	10,000	  	 	 	9,817	  	 	 	9,925	  	
Inmar Acquisition Sub, Inc	 	Professional Services	 	 	8.00	% 	  	 	1/27/2022	  	 	 	1/27/2014	  	 	 	10,000	  	 	 	9,908	  	 	 	9,900	  	
K2 Pure Solutions NoCal, L.P	 	Chemicals	 	 	10.00	% 	  	 	8/19/2019	  	 	 	8/19/2013	  	 	 	11,356	  	 	 	11,169	  	 	 	11,356	  	
Kore Wireless Group Inc	 	Wireless Telecommunication
Services	 	 	9.25	% 	  	 	3/12/2021	  	 	 	9/12/2014	  	 	 	55,500	  	 	 	54,423	  	 	 	54,390	  	
Landslide Holdings, Inc	 	Software	 	 	8.25	% 	  	 	2/25/2021	  	 	 	2/25/2014	  	 	 	16,300	  	 	 	16,276	  	 	 	16,055	  	
Pharmedium Healthcare Corporation	 	Health Care Providers & Services	 	 	7.75	% 	  	 	1/28/2022	  	 	 	1/28/2014	  	 	 	5,000	  	 	 	4,978	  	 	 	5,000	  	
Pronutria, Inc.	 	Pharmaceuticals	 	 	9.66	% 	  	 	5/15/2018	  	 	 	5/15/2014	  	 	 	7,000	  	 	 	6,969	  	 	 	6,930	  	
Quantum Foods, LLC**	 	Food Products	 	 	14.73	% 	  	 	8/20/2014	  	 	 	2/20/2014	  	 	 	8,961	  	 	 	7,198	  	 	 	2,400	  	
Radius Health, Inc. (7)	 	Pharmaceuticals	 	 	10.01	% 	  	 	6/01/2018	  	 	 	5/30/2014	  	 	 	12,500	  	 	 	12,368	  	 	 	12,500	  	
Rug Doctor, LLC (3)	 	Diversified Consumer Services	 	 	11.25	% 	  	 	6/30/2017	  	 	 	12/23/2013	  	 	 	9,111	  	 	 	8,685	  	 	 	9,020	  	
SOINT, LLC (3)	 	Aerospace & Defense	 	 	15.00	% 	  	 	6/30/2016	  	 	 	6/8/2012	  	 	 	8,733	  	 	 	8,654	  	 	 	8,733	  	
Southern Auto Finance Company (7)(8)	 	Consumer Finance	 	 	11.00	% 	  	 	12/4/2018	  	 	 	10/19/2011	  	 	 	25,000	  	 	 	24,665	  	 	 	24,750	  	
Syndax Pharmaceuticals, Inc	 	Pharmaceuticals	 	 	8.96	% 	  	 	6/13/2018	  	 	 	9/25/2014	  	 	 	9,000	  	 	 	8,929	  	 	 	8,914	  	
T2 Biosystems, Inc. (7)	 	Health Care Equipment & Supplies	 	 	7.21	% 	  	 	7/1/2019	  	 	 	7/11/2014	  	 	 	16,667	  	 	 	16,625	  	 	 	16,667	  	
The Robbins Company TLA	 	Construction & Engineering	 	 	11.74	% 	  	 	5/31/2017	  	 	 	5/31/2013	  	 	 	12,234	  	 	 	12,973	  	 	 	12,973	  	
The Robbins Company TLB	 	Construction & Engineering	 	 	11.74	% 	  	 	4/25/2015	  	 	 	5/31/2013	  	 	 	3,528	  	 	 	3,502	  	 	 	3,598	  	
TierPoint, LLC	 	IT Services	 	 	8.75	% 	  	 	12/2/2022	  	 	 	12/2/2014	  	 	 	25,000	  	 	 	24,751	  	 	 	24,750	  	
TMK Hawk Parent, Corp. (TriMark)	 	Trading Companies and Distributors	 	 	8.50	% 	  	 	10/1/2022	  	 	 	9/26/2014	  	 	 	20,000	  	 	 	19,804	  	 	 	19,800	  	
Trevi Therapeutics, Inc	 	Pharmaceuticals	 	 	7.91	% 	  	 	6/29/2018	  	 	 	12/292014	  	 	 	2,500	  	 	 	2,481	  	 	 	2,481	  	
U.S. Anesthesia Partners, Inc TL	 	Health Care Providers & Services	 	 	6.00	% 	  	 	12/31/2019	  	 	 	9/24/2014	  	 	 	19,950	  	 	 	19,855	  	 	 	19,751	  	
U.S. Anesthesia Partners, Inc TLB	 	Health Care Providers & Services	 	 	9.00	% 	  	 	9/24/2020	  	 	 	9/24/2014	  	 	 	30,000	  	 	 	29,710	  	 	 	29,700	  	
Varilease Finance, Inc	 	Multi-Sector Holdings	 	 	9.25	% 	  	 	8/24/2020	  	 	 	8/22/2014	  	 	 	28,000	  	 	 	27,532	  	 	 	27,510	  	
 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	  	 	$	609,799	  	 	$	599,906	  	
 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
10

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2014
(in thousands except share/unit amounts)

Description	 	Industry	 	Interest (1)	 	 	Maturity	 	 	Acquisition Date	 	 	Par Amount	 	 	Cost	 	 	Fair
Value	 	
Subordinated Debt/Corporate Notes—8.1%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Alegeus Technologies Holdings Corp.	 	Health Care Technology	 	 	12.00	% 	 	 	2/15/2019	  	 	 	6/24/2012	  	 	$	28,200	  	 	$	27,744	  	 	$	28,200	  	
WireCo. Worldgroup Inc.	 	Building Products	 	 	9.00	% 	 	 	5/15/2017	  	 	 	6/28/2012	  	 	 	48,000	  	 	 	47,733	  	 	 	47,940	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	  	 	$	75,477	  	 	$	76,140	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	Shares/
Units	 	 	 	 	 	 	 	
Preferred Equity—2.5%	  	 	 	 	 	 	 	 	 	
SOAGG LLC (3)(7)(9)	 	Aerospace & Defense	 	 	8.27	%(5) 	 	 	6/30/2018	  	 	 	12/14/2010	  	 	 	12,904	  	 	$	12,904	  	 	$	13,564	  	
SOINT, LLC (3)(7)(9)	 	Aerospace & Defense	 	 	15.00	% 	 	 	6/30/2018	  	 	 	6/8/2012	  	 	 	86,667	  	 	 	8,667	  	 	 	9,533	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	  	 	$	21,571	  	 	$	23,097	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity/Equity Interests/Warrants—34.3%	  	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP (2)(3)†	 	Diversified Real Estate Activities	 	 	 	 	 	 	 	 	 	 	3/12/2007	  	 	 	—  	 	 	$	1,389	  	 	$	885	  	
Ark Real Estate Partners II LP (2)(3) †	 	Diversified Real Estate Activities	 	 	 	 	 	 	 	 	 	 	10/23/2012	  	 	 	—  	 	 	 	22	  	 	 	21	  	
B Riley Financial Inc. (fka Great American)	 	Research & Consulting Services	 	 	 	 	 	 	 	 	 	 	3/16/2007	  	 	 	38,015	  	 	 	2,684	  	 	 	376	  	
Crystal Financial LLC (3)(7)(11)	 	Diversified Financial Services	 	 	 	 	 	 	 	 	 	 	12/28/2012	  	 	 	275,000	  	 	 	275,000	  	 	 	297,500	  	
Direct Buy Inc. (4)†	 	Multiline Retail	 	 	 	 	 	 	 	 	 	 	11/5/2012	  	 	 	76,999	  	 	 	—  	 	 	 	—  	 	
Infraredx, Inc. Warrants†	 	Health Care Equipment & Supplies	 	 	 	 	 	 	 	 	 	 	11/12/2014	  	 	 	749,925	  	 	 	113	  	 	 	121	  	
Radius Health, Inc. (7)†	 	Pharmaceuticals	 	 	 	 	 	 	 	 	 	 	5/30/2014	  	 	 	20,435	  	 	 	98	  	 	 	795	  	
Radius Health, Inc. Warrants (7)†	 	Pharmaceuticals	 	 	 	 	 	 	 	 	 	 	7/10/2014	  	 	 	4,706	  	 	 	10	  	 	 	128	  	
RD Holdco Inc. (Rug Doctor) (3)†	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	231,177	  	 	 	15,683	  	 	 	16,263	  	
RD Holdco Inc. (Rug Doctor) Class B (3) †	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	522	  	 	 	5,216	  	 	 	5,216	  	
RD Holdco Inc. (Rug Doctor) Warrants (3) †	 	Diversified Consumer Services	 	 	 	 	 	 	 	 	 	 	12/23/2013	  	 	 	30,370	  	 	 	381	  	 	 	290	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Equity Interests/Warrants	  	 	$	300,596	  	 	$	321,595	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments (12) – 109.0%	  	 	$	1,007,443	  	 	$	1,020,738	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	Par Amount	 	 	 	 	 	 	 	
Cash Equivalents – 52.3%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Treasury Bill	 	Government	 	 	 	 	 	 	1/29/2015	  	 	 	12/29/2014	  	 	$	490,000	  	 	$	490,000	  	 	$	490,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments & Cash Equivalents 161.3%	  	 	$	1,497,443	  	 	$	1,510,738	  	
Liabilities in Excess of Other Assets – (61.3%)	  	 	 	 	 	 	 	(574,170	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Assets – 100.0%	  	 	 	 	 	 	$	936,568	  	

(1)	Floating rate debt investments typically bear interest at a rate determined by reference to the London Interbank Offered Rate (“LIBOR”), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2014.	
(2)	Ark Real Estate Partners is held through SLRC ADI Corp., a taxable subsidiary.	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2014
 
(3)	Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the Investment Company Act of 1940 (“1940 Act”), due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2014 in these controlled investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2013	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Realized
Gain
(Loss)	 	 	Interest/
Dividend
Income	 	  	Fair Value at
December 31, 2014	 	
ARK Real Estate Partners LP	  	$	19,565	  	  	$	—  	 	  	$	18,579	  	  	$	(25,294	) 	 	$	—  	 	  	$	885	  	
ARK Real Estate Partners II LP	  	 	456	  	  	 	—  	 	  	 	433	  	  	 	(43	) 	 	 	—  	 	  	 	21	  	
AviatorCap SII, LLC I	  	 	2,272	  	  	 	—  	 	  	 	851	  	  	 	—  	 	 	 	232	  	  	 	1,421	  	
AviatorCap SII, LLC II	  	 	2,945	  	  	 	—  	 	  	 	1,587	  	  	 	—  	 	 	 	252	  	  	 	1,358	  	
AviatorCap SII, LLC III	  	 	696	  	  	 	—  	 	  	 	696	  	  	 	—  	 	 	 	16	  	  	 	—  	 	
Crystal Financial LLC	  	 	305,000	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	30,800	  	  	 	297,500	  	
RD Holdco Inc. (Rug Doctor, common equity)	  	 	15,683	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	16,263	  	
RD Holdco Inc. (Rug Doctor, class B)	  	 	5,216	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	5,216	  	
RD Holdco Inc. (Rug Doctor, warrants)	  	 	381	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	  	 	290	  	
Rug Doctor LLC	  	 	8,747	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	1,198	  	  	 	9,020	  	
SOAGG LLC	  	 	16,719	  	  	 	517	  	  	 	4,272	  	  	 	—  	 	 	 	1,131	  	  	 	13,564	  	
SOINT, LLC	  	 	11,592	  	  	 	—  	 	  	 	2,859	  	  	 	—  	 	 	 	1,619	  	  	 	8,733	  	
SOINT, LLC (preferred equity)	  	 	9,533	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	 	 	1,301	  	  	 	9,533	  	
USAW 767	  	 	1,085	  	  	 	—  	 	  	 	1,085	  	  	 	—  	 	 	 	33	  	  	 	—  	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
 	  	$	399,890	  	  	$	517	  	  	$	30,362	  	  	$	(25,337	) 	 	$	36,582	  	  	$	363,804	  	

(4)	Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2014 in these affiliated investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2013	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Realized
Gain
(Loss)	 	  	Interest/
Dividend
Income	 	  	Fair Value at
December 31, 2014	 	
Direct Buy Inc. (common equity)	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	
Direct Buy Inc. (senior secured loan)	  	 	7,789	  	  	 	722	  	  	 	—  	 	  	 	—  	 	  	 	564	  	  	 	4,646	  	
DSW Group Holdings LLC	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	928	  	  	 	—  	 	  	 	—  	 	
National Interest Security Corporation	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	248	  	  	 	—  	 	  	 	—  	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	7,789	  	  	$	722	  	  	$	—  	 	  	$	1,176	  	  	$	564	  	  	$	4,646	  	

(5)	A portion of the coupon may be payable in kind (PIK).	
(6)	The following entity is domiciled outside the United States and the investments are denominated in Canadian Dollars: Easyfinancial Services, Inc. in Canada.	
(7)	Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended.	
(8)	Includes an unfunded commitment of $2,475.	
(9)	Solar Capital Ltd.’s investments in SOAGG, LLC and SOINT, LLC include a two and one dollar investment in common shares, respectively.	
(10)	Bishop Lifting Products, Inc., SEI Holding I Corporation, Singer Equities, Inc. & Hampton Rubber Company are co-borrowers.	
(11)	Investment represents the operating company after consolidation of the holding company Crystal Capital Financial Holdings LLC.	
(12)	Aggregate net unrealized appreciation for U.S. federal income tax purposes is $1,276; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $22,955 and $21,679, respectively, based on a tax cost of $1,019,462.	
†	Non-income producing security.	
**	Investment is on non-accrual status.	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2014

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of December 31, 2014	 	
Diversified Financial Services	  	 	29.1	% 	
Health Care Providers & Services	  	 	12.8	% 	
Wireless Telecommunications Services	  	 	7.9	% 	
Building Products	  	 	4.7	% 	
Health Care Technology	  	 	4.6	% 	
IT Services	  	 	4.5	% 	
Trading Companies & Distributors	  	 	4.2	% 	
Aerospace & Defense	  	 	3.9	% 	
Consumer Finance	  	 	3.3	% 	
Pharmaceuticals	  	 	3.1	% 	
Diversified Consumer Services	  	 	3.0	% 	
Multi-Sector Holdings	  	 	2.7	% 	
Health Care Equipment & Supplies	  	 	2.6	% 	
Internet Software & Services	  	 	2.0	% 	
Communications Equipment	  	 	1.8	% 	
Construction & Engineering	  	 	1.6	% 	
Software	  	 	1.6	% 	
Chemicals	  	 	1.1	% 	
Air Freight & Logistics	  	 	1.0	% 	
Insurance	  	 	1.0	% 	
Thrifts & Mortgage Finance	  	 	1.0	% 	
Professional Services	  	 	1.0	% 	
Industrial Conglomerates	  	 	0.6	% 	
Multiline Retail	  	 	0.5	% 	
Food Products	  	 	0.2	% 	
Specialty Retail	  	 	0.1	% 	
Diversified Real Estate Activities	  	 	0.1	% 	
Research & Consulting Services	  	 	0.0	% 	
 	  	 	 	 	
Total Investments	  	 	100.0	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2015
(in thousands, except share amounts)
Note 1. Organization
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1,200,000 of which 47.04% was funded by affiliated parties.
Immediately prior to our 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 $125,000 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. 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.
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”). Furthermore, as the Company is an investment company, it continues to apply the guidance in FASB Accounting Standards Codification (“ASC”) Topic 946. 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 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.
The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests 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.
Note 2. Significant Accounting Policies
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. 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 may have been reclassified to conform to the current period presentation.
Interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, they may not include all of the information and notes required by GAAP for annual consolidated financial statements. 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 periods. Changes in the economic environment, financial markets and any other
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
parameters used in determining these estimates could cause actual results to differ materially. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2015.
In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements, have been included.
The significant accounting policies consistently followed by the Company are:
 
 	(a)	Investment transactions are accounted for on the trade date;	
 
 	(b)	Under procedures established by our board of directors (the “Board”), we value investments, including certain senior secured debt, subordinated debt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we typically utilize independent third-party valuation firms to assist us in determining fair value. Accordingly, such investments go through our multi-step valuation process as described below. In each case, our independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the “Investment Adviser”), does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of our Board. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board. Such determination of fair values involves subjective judgments and estimates.	
With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:
 
 	(1)	our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;	
 
 	(2)	preliminary valuation conclusions are then documented and discussed with senior management of the Investment Adviser;	
 
 	(3)	independent valuation firms engaged by our Board conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their own independent assessment;	
 
 	(4)	the audit committee of the Board reviews the preliminary valuation of the Investment Adviser and that of the independent valuation firm and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and	
 
 	(5)	the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the audit committee.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the six months ended June 30, 2015, there has been no change to the Company’s valuation techniques and the nature of the related inputs considered in the valuation process.
ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.
 
 	(c)	Gains or losses on investments are calculated by using the specific identification method.	
 
 	(d)	The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the interest method or on a straight-line basis, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record call premiums received on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.	
 
 	(e)	The Company intends to comply with the applicable provisions of the Internal Revenue Code pertaining to regulated investment companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
 	(f)	Book and tax basis differences relating to stockholder distributions and other permanent book and tax differences are typically reclassified among the Company’s capital accounts annually. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.	
 
 	(g)	Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.	
 
 	(h)	In accordance with Regulation S-X and ASC Topic 810—Consolidation, the Company consolidates its interest in investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.	
 
 	(i)	The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Company’s investments in foreign securities, if any, may involve certain risks, including without limitation: 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 in terms of U.S. dollars and therefore the earnings of the Company.	
 
 	(j)	The Company has made an irrevocable election to apply the fair value option of accounting to its senior secured credit facility (the “Credit Facility”) and its senior secured notes (the “Senior Secured Notes”) (see note 6 and 8), in accordance with ASC 825-10. The Company uses an independent third-party valuation firm to assist in measuring their fair value.	
 
 	(k)	The Company records origination and other expenses related to its other debt issuances as prepaid assets. These expenses are deferred and amortized using either the effective interest method or the straight-line method over the stated life. The straight-line method may be used on revolving facilities and when it approximates the effective yield method.	
 
 	(l)	The Company may enter into forward exchange contracts in order to hedge against foreign currency risk. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled.	
 
 	(m)	The Company records expenses related to shelf filings and applicable equity offering costs as prepaid assets. These expenses are typically charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25 or expensed per the AICPA Audit & Accounting Guide for Investment Companies.	
 
 	(n)	Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
 	management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on investments may be recognized as income or applied to principal depending on management’s judgment.	
 
 	(o)	The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less from the date of issue would qualify, with limited exceptions. The Company believes that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.	
Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. The update changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Public companies are required to apply ASU 2015-02 for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company is currently evaluating the impact of the adoption of ASU 2015-02 on its consolidated financial statements and disclosures.
In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Public companies are required to apply ASU 2015-03 retrospectively for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company is currently evaluating the impact of the adoption of ASU 2015-03 on its consolidated financial statements and disclosures.
Note 3. Agreements
Solar Capital has an Investment Advisory and Management Agreement with 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%. From time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined.
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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
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 distributions 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). 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.
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 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 net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the incentive fee is accrued based upon 20% of cumulative net realized gains and net unrealized capital appreciation. No accrual was required for the three and six months ended June 30, 2015 and 2014.
For the three and six months ended June 30, 2015, the Company recognized $6,036 and $11,901, respectively, in base management fees and $0 and $0, respectively, in performance-based incentive fees. For the three and six months ended June 30, 2014, the Company recognized $6,173 and $12,383, respectively, in base management fees and $0 and $3,213, respectively, in performance-based incentive fees.
Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services to 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.
For the three and six months ended June 30, 2015, the Company recognized expenses under the Administration Agreement of $1,560 and $2,599, respectively. For the three and six months ended June 30, 2014, the Company recognized expenses under the Administration Agreement of $1,442 and $2,611, respectively. No managerial assistance fees were accrued or collected for the three and six months ended June 30, 2015 and 2014.
Note 4. Net Asset Value Per Share
At June 30, 2015, the Company’s total net assets and net asset value per share were $930,771 and $21.92, respectively. This compares to total net assets and net asset value per share at December 31, 2014 of $936,568 and $22.05, respectively.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
Note 5. Earnings Per Share
The following table sets forth the computation of basic and diluted net increase in net assets per share resulting from operations, pursuant to ASC 260-10, for the three and six months ended June 30, 2015 and 2014:

 	  	Three months ended June 30,	 	  	Six months ended June 30,	 	
 	  	2015	 	  	2014	 	  	2015	 	  	2014	 	
Earnings per share (basic & diluted)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Numerator — net increase in net assets resulting from operations:	  	$	17,276	  	  	$	17,084	  	  	$	28,175	  	  	$	30,834	  	
Denominator — weighted average shares:	  	 	42,465,162	  	  	 	42,661,013	  	  	 	42,465,162	  	  	 	43,318,315	  	
Earnings per share:	  	$	0.41	  	  	$	0.40	  	  	$	0.66	  	  	$	0.71	  	
Note 6. 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.
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;	
 
 	c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability; 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 and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
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).
Gains and losses for 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).
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
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. Such reclassifications are reported as transfers in/out of the appropriate category as of the end of the quarter in which the reclassifications occur.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of June 30, 2015 and December 31, 2014:
Fair Value Measurements
As of June 30, 2015

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	 	  	$	34,549	  	  	$	717,980	  	  	$	752,529	  	
Subordinated Debt/Corporate Notes	  	 	—  	 	  	 	—  	  	  	 	73,800	  	  	 	73,800	  	
Preferred Equity	  	 	—  	 	  	 	—  	 	  	 	18,726	  	  	 	18,726	  	
Common Equity/Equity Interests/Warrants	  	 	1,994	  	  	 	—  	 	  	 	325,066	  	  	 	327,060	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments	  	 
 
$	 
 
1,994	 

 
$	 
 
34,549	 

 
$	 
 
1,135,572	 

 
$	 
 
1,172,115	 

 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Credit Facility and Senior Secured Notes	  	$	—  	 	  	$	—  	 	  	$	125,000	  	  	$	125,000	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fair Value Measurements
As of December 31, 2014

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	 	  	$	78,115	  	  	$	521,791	  	  	$	599,906	  	
Subordinated Debt/Corporate Notes	  	 	—  	 	  	 	—  	 	  	 	76,140	  	  	 	76,140	  	
Preferred Equity	  	 	—  	 	  	 	—  	 	  	 	23,097	  	  	 	23,097	  	
Common Equity/Equity Interests/Warrants	  	 	1,171	  	  	 	—  	 	  	 	320,424	  	  	 	321,595	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Investments	  	$	1,171	  	  	$	78,115	  	  	$	941,452	  	  	$	1,020,738	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Credit Facility and Senior Secured Notes	  	$	—  	 	  	$	—  	 	  	$	125,000	  	  	$	125,000	  	

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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
The following tables provide a summary of the changes in fair value of Level 3 assets and liabilities for the six months ended June 30, 2015 and the year ended December 31, 2014 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, 2015 and December 31, 2014:
Fair Value Measurements Using Level 3 Inputs

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Equity
Interests/
Warrants	 	
Fair value, December 31, 2014	  	$	521,791	  	 	$	76,140	  	 	$	23,097	  	 	$	320,424	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	(4,798	) 	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Net change in unrealized gain (loss)	  	 	1,419	  	 	 	(2,434	) 	 	 	221	  	 	 	4,424	  	
Purchase of investment securities	  	 	234,231	  	 	 	94	  	 	 	272	  	 	 	228	  	
Proceeds from dispositions of investment securities	  	 	(34,663	) 	 	 	—  	  	 	 	(4,864	) 	 	 	(10	) 	
Transfers in/out of Level 3	  	 	—  	  	 	 	—  	 	 	 	—  	 	 	 	—  	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, June 30, 2015	  	$	717,980	  	 	$	73,800	  	 	$	18,726	  	 	$	325,066	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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):	  	$	2,286	  	 	$	(2,434	) 	 	$	(645	) 	 	$	1,638	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
During the six months ended June 30, 2015, there were no transfers in and out of Levels 1 and 2.
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, 2015:

Credit Facility and Senior Secured Notes	  	For the six months  ended
June 30, 2015	 	
Beginning fair value	  	$	125,000	  	
Net realized (gain) loss	  	 	—  	  	
Net change in unrealized (gain) loss	  	 	—  	  	
Borrowings	  	 	—  	  	
Repayments	  	 	—  	  	
Transfers in/out of Level 3	  	 	—  	 	
 	  	 	 	 	
Ending fair value	  	$	125,000	  	
 	  	 	 	 	
The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility and the Senior Secured Notes, in accordance with ASC 825-10. On June 30, 2015, there were borrowings of $50,000 and $75,000, respectively, on the Credit Facility and the Senior Secured Notes. The Company used an independent third-party valuation firm to assist in measuring the fair value of the Credit Facility and Senior Secured Notes.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
Fair Value Measurements Using Level 3 Inputs

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred Equity	 	 	Common Equity/
Equity
Interests/
Warrants	 	
Fair value, December 31, 2013	  	$	356,462	  	 	$	241,702	  	 	$	26,307	  	 	$	363,385	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	(469	) 	 	 	—	 	 	 	21	  	 	 	(32,021	) 	
Net change in unrealized gain (loss)	  	 	(15,763	) 	 	 	(4,319	) 	 	 	584	  	 	 	33,827	  	
Purchase of investment securities	  	 	531,265	  	 	 	2,813	  	 	 	517	  	 	 	132	  	
Proceeds from dispositions of investment securities	  	 	(367,364	) 	 	 	(164,056	) 	 	 	(4,332	) 	 	 	(44,899	) 	
Transfers in/out of Level 3	  	 	17,660	  	 	 	—	 	 	 	—	 	 	 	—	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2014	  	$	521,791	  	 	$	76,140	  	 	$	23,097	  	 	$	320,424	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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):	  	$	(10,623	) 	 	$	(234	) 	 	$	601	  	 	$	14,455	  	
During the fiscal year ended December 31, 2014, our investments in CT Technologies Intermediate Holdings and Renaissance Learning, Inc., with a combined fair value of $17,660, were transferred from Level 2 to Level 3. These transfers were a result of changes in the quantity and quality of information used as valuation inputs by the Investment Adviser. There were no other transfers between levels.
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 year ended December 31, 2014:

Beginning fair value at December 31, 2013	  	$	 125,000	  	
Net realized (gain) loss	  	 	—  	 	
Net change in unrealized (gain) loss	  	 	—  	 	
Borrowings	  	 	—  	 	
Repayments	  	 	—  	 	
Transfers in/out of Level 3	  	 	—  	 	
 	  	 	 	 	
Ending fair value at December 31, 2014	  	$	125,000	  	
 	  	 	 	 	
The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility and the Senior Secured Notes, in accordance with ASC 825-10. On December 31, 2014, there were borrowings of $50,000 and $75,000, respectively, on the Credit Facility and the Senior Secured Notes. The Company used an independent third-party valuation firm to measure the fair value of the Credit Facility and Senior Secured Notes.
Quantitative Information about Level 3 Fair Value Measurements
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
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
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, returns on equity and earnings before income taxes, depreciation and amortization (“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, 2015 is summarized in the table below:

 	  	Asset or
Liability	  	Fair Value at
June 30, 2015	 	  	Principal Valuation
Technique/Methodology	  	Unobservable Input	  	Range (Weighted
Average)	
Bank Debt/Senior Secured Loans	  	Asset	  	$

$	716,120

1,860	  

  	  	Yield Analysis

Enterprise Value	  	Market Yield

EBITDA Multiple	  	7.0% – 16.1% (10.1%)

4.5x – 5.0x (4.7x)	
Subordinated Debt/Corporate Note	  	Asset	  	$	73,800	  	  	Yield Analysis	  	Market Yield	  	12.5% – 12.7% (12.6%)	
Preferred Equity	  	Asset	  	$	18,726	  	  	Yield Analysis	  	Market Yield	  	8.0% –15.0% (11.6%)	
Common Equity/Equity Interests/Warrants	  	Asset	  	$

$	20,066

305,000	  

  	  	Enterprise Value

Enterprise Value	  	EBITDA Multiple

Return on Equity	  	6.0x –7.5x (6.5x)

6.2% –12.8% (11.5%)	
Credit Facility	  	Liability	  	$	50,000	  	  	Yield Analysis	  	Market Yield	  	L+0.5% –L+4.8%

(L+2.3%)	
Senior Secured Notes	  	Liability	  	$	75,000	  	  	Yield Analysis	  	Market Yield	  	5.6% –6.0% (5.9%)	
Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2014 is summarized in the table below:

 	  	Asset or
Liability	  	Fair Value at
December 31, 2014	 	  	Principal Valuation
Technique/Methodology	  	Unobservable Input	  	Range (Weighted
Average)	
Bank Debt/Senior Secured Loans	  	Asset	  	$

$	519,391

2,400	  

  	  	Yield Analysis

Collateral Analysis	  	Market Yield

Collateral Value	  	7.0% – 25.0% (10.3%)

NA	
Subordinated Debt/Corporate Note	  	Asset	  	$	76,140	  	  	Yield Analysis	  	Market Yield	  	9.5% – 12.5% (10.6%)	
Preferred Equity	  	Asset	  	$	23,097	  	  	Yield Analysis	  	Market Yield	  	8.0% – 15.0% (11.2%)	
Common Equity/Equity Interests/Warrants	  	Asset	  	$

$	22,924

297,500	  

  	  	Enterprise Value

Enterprise Value	  	EBITDA Multiple

Return on Equity	  	6.0x – 7.5x (6.1x)

2.4% – 10.8% (11.5%)	
Credit Facility	  	Liability	  	$	50,000	  	  	Yield Analysis	  	Market Yield	  	L+0.5% – L+4.8%

(L+2.3%)	
Senior Secured Notes	  	Liability	  	$	75,000	  	  	Yield Analysis	  	Market Yield	  	5.8% – 6.0% (5.9%)	
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, could result in significantly lower or higher fair value measurements for such assets and liabilities.
Note 7. Derivatives
The Company is exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company may mitigate this risk through the use of foreign currency forward contracts, borrowing in local currency under its Credit Facility, or similar. As an investment company, all changes in the fair value of assets, including changes caused by foreign currency fluctuation, flow through current earnings.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
At of June 30, 2015 and December 31, 2014, there were no open forward foreign currency contracts outstanding. The Company also had no derivatives designated as hedging instruments at June 30, 2015 and December 31, 2014.
Note 8. Debt
Unsecured Senior Notes
On November 16, 2012, the Company and U.S. Bank National Association entered into an Indenture and a First Supplemental Indenture relating to the Company’s issuance, offer and sale of $100,000 aggregate principal amount of its 6.75% Unsecured Senior Notes due 2042 (the “Unsecured Notes”). The Unsecured Notes will mature on November 15, 2042 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after November 15, 2017 at a redemption price of $25 per security plus accrued and unpaid interest. The Unsecured Notes bear interest at a rate of 6.75% per year payable quarterly on February 15, May 15, August 15 and November 15 of each year. The Unsecured Notes are direct senior unsecured obligations of the Company.
Revolving and Term Loan Facility
In July 2013, the Company amended its Credit Facility, composed of $440,000 of revolving credit and $50,000 in term loans. Subsequently, in December 2013, a commitment increase was executed providing an additional $50,000 of revolving credit, bringing the total revolving credit capacity to $490,000. Borrowings generally bear interest at a rate per annum equal to the base rate plus 2.25% or the alternate base rate plus 1.25%. The Credit Facility has no LIBOR floor requirement. The Credit Facility matures in June 2018 and includes ratable amortization in the final year. The Credit Facility may be increased up to $800,000 with additional new lenders or an increase in commitments from current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default. 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. The Company also pays issuers of funded term loans quarterly in arrears a commitment fee at the rate of 0.25% per annum on the average daily outstanding balance. At June 30, 2015, outstanding USD equivalent borrowings under the Credit Facility totaled $50,000 in term loans.
Senior Secured Notes
On May 10, 2012, the Company closed a private offering of $75,000 of Senior Secured Notes with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Senior Secured Notes is due semi-annually on May 10 and November 10. The Senior Secured Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
Certain covenants on our issued debt 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.
The Company has made an irrevocable election to apply the fair value option of accounting to its Credit Facility and Senior Secured Notes, in accordance with ASC 825-10. We believe accounting for the Credit Facility and Senior Secured Notes at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
The average annualized interest cost for all borrowings for the six months ended June 30, 2015 and the year ended December 31, 2014 was 5.57% and 5.52%, respectively. These costs are exclusive of other credit facility expenses such as unused fees, agency fees and other prepaid expenses related to establishing and/or amending the Credit Facility, the Unsecured Notes, and the Senior Secured Notes (collectively the “Credit Facilities”), if any. The maximum amounts borrowed on the Credit Facilities during the six months ended June 30, 2015 and the year ended December 31, 2014 were $225,000 and $225,000, respectively.
Note 9. Financial Highlights and Senior Securities Table
The following is a schedule of financial highlights for the six months ended June 30, 2015 and for the year ended December 31, 2014:

 	  	Six months ended
June 30, 2015
(unaudited)	 	 	Year ended
December 31,
2014	 	
Per Share Data:(a)	  	 	 	 	 	 	 	 	
Net asset value, beginning of year	  	$	22.05	  	 	$	22.50	  	
 	  	 	 	 	 	 	 	 	
Net investment income	  	 	0.72	  	 	 	1.56	  	
Net realized and unrealized gain (loss)	  	 	(0.05	) 	 	 	(0.43	) 	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	0.67	  	 	 	1.13	  	
Distributions to stockholders:	  	 	 	 	 	 	 	 	
From net investment income	  	 	(0.80	) 	 	 	(1.55	) 	
From other sources	  	 	—  	  	 	 	(0.05	)(d) 	
Anti-dilution (dilution)	  	 	—  	  	 	 	0.02	  	
 	  	 	 	 	 	 	 	 	
Net asset value, end of period	  	$	21.92	  	 	$	22.05	  	
 	  	 	 	 	 	 	 	 	
Per share market value, end of period	  	$	18.00	  	 	$	18.01	  	
Total Return(b)	  	 	4.14	% 	 	 	(13.58	)% 	
Net assets, end of period	  	$	930,771	  	 	$	936,568	  	
Shares outstanding, end of period	  	 	42,465,162	  	 	 	42,465,162	  	
Ratios to average net assets(c):	  	 	 	 	 	 	 	 	
Net investment income	  	 	3.25	% 	 	 	6.93	% 	
 	  	 	 	 	 	 	 	 	
Operating expenses	  	 	1.72	% 	 	 	4.24	% 	
Interest and other credit facility expenses	  	 	0.77	% 	 	 	1.50	% 	
 	  	 	 	 	 	 	 	 	
Total expenses	  	 	2.49	% 	 	 	5.74	% 	
 	  	 	 	 	 	 	 	 	
Average debt outstanding	  	$	225,000	  	 	$	225,000	  	
Portfolio turnover ratio	  	 	7.0	% 	 	 	53.7	% 	
 
(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 distributions, if any, reinvested in accordance with the dividend reinvestment plan.	
(c)	Not annualized for periods less than one year.	
(d)	Represents tax return of capital.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
Information about our senior securities is shown in the following table as of each year ended December 31 since the Company commenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.

Class and Year	  	Total Amount
Outstanding(1)	 	  	Asset
Coverage
Per Unit(2)	 	  	Involuntary
Liquidating
Preference
Per Unit(3)	 	  	Average
Market Value
Per Unit(4)	 	
Revolving Credit Facilities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	—  	  	  	$	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	264,452	  	  	 	1,510	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	201,355	  	  	 	3,757	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	400,000	  	  	 	2,668	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2009	  	 	88,114	  	  	 	8,920	  	  	 	—  	  	  	 	N/A	  	
Unsecured Senior Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	100,000	  	  	$	2,283	  	  	 	—  	 	  	$	985	  	
Fiscal 2014	  	 	100,000	  	  	 	2,294	  	  	 	—  	 	  	 	943	  	
Fiscal 2013	  	 	100,000	  	  	 	2,411	  	  	 	—  	 	  	 	934	  	
Fiscal 2012	  	 	100,000	  	  	 	571	  	  	 	—  	 	  	 	923	  	
Senior Secured Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	75,000	  	  	$	1,712	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	75,000	  	  	 	1,721	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	75,000	  	  	 	1,808	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	75,000	  	  	 	428	  	  	 	—  	  	  	 	N/A	  	
Term Loans	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	50,000	  	  	$	1,142	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	50,000	  	  	 	1,147	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	50,000	  	  	 	1,206	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	50,000	  	  	 	285	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	35,000	  	  	 	653	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	35,000	  	  	 	233	  	  	 	—  	  	  	 	N/A	  	
Total Senior Securities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	225,000	  	  	$	5,137	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	225,000	  	  	 	5,162	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	225,000	  	  	 	5,425	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	489,452	  	  	 	2,794	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	236,355	  	  	 	4,410	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	435,000	  	  	 	2,901	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2009	  	 	88,114	  	  	 	8,920	  	  	 	—  	  	  	 	N/A	  	
 
(1)	Total amount of each class of senior securities outstanding at the end of the period presented.	
(2)	The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by all senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to	
 	determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit is allocated based on the amount outstanding in each class of debt at the end of the period. As of June 30, 2015, asset coverage was 513.7%.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
(3)	The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.	
(4)	Not applicable except for the Unsecured Senior Notes which are publicly traded. The Average Market Value Per Unit is calculated by taking the daily average closing price during the period and dividing it by twenty-five dollars per share and multiplying the result by one thousand to determine a unit price per thousand consistent with Asset Coverage Per Unit. The average market value for the fiscal 2015, 2014, 2013 and 2012 periods was $98,535, $94,301, $93,392, and $92,302, respectively.	
Note 10. Crystal Financial LLC
On December 28, 2012, we completed the acquisition of Crystal Capital Financial Holdings LLC (“Crystal Financial”), a commercial finance company focused on providing asset-based and other secured financing solutions (the “Crystal Acquisition”). We invested $275,000 in cash to effect the Crystal Acquisition. Crystal Financial owns approximately 98% of the outstanding ownership interest in Crystal Financial LLC. The remaining financial interest is held by various employees of Crystal Financial LLC, through their investment in Crystal Management LP. Crystal Financial LLC had a diversified portfolio of 23 loans having a total par value of approximately $400,000 at November 30, 2012 and a $275,000 committed revolving credit facility. On January 27, 2014 the revolving credit facility was expanded to $300,000. On March 31, 2014, we exchanged $137,500 of our equity interest in Crystal Financial in exchange for $137,500 in floating rate senior secured notes in Crystal Financial bearing interest at LIBOR plus 9.50%, maturing on March 31, 2019. Our financial statements, including our schedule of investments, reflect our investments in Crystal Financial on a consolidated basis.
As of June 30, 2015 Crystal Financial LLC had 27 funded commitments to 24 different issuers with a total par value of approximately $455,304 on total assets of $531,017. As of December 31, 2014, Crystal Financial LLC had 29 funded commitments to 27 different issuers with a total par value of approximately $477,945 on total assets of $542,252. As of June 30, 2015 and December 31, 2014, all loans were floating rate with the largest loan outstanding totaling $33,000 and $33,000, respectively. For the same periods, the average exposure per issuer was $18,971 and $17,702, respectively. Crystal Financial LLC’s credit facility, which is non-recourse to Solar Capital, had approximately $242,223 and $259,658 of borrowings outstanding at June 30, 2015 and December 31, 2014, respectively. For the three months ended June 30, 2015 and June 30, 2014, Crystal Financial LLC had net income of $9,376 and $5,194 on gross income of $15,431 and $12,625, respectively. For the six months ended June 30, 2015 and June 30, 2014, Crystal Financial LLC had net income of $17,327 and $12,788 on gross income of $28,370 and $26,828, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions.
Note 11. Stock Repurchase Program
On July 31, 2013, the Company’s board of directors authorized a program for the purpose of repurchasing up to $100,000 of the Company’s common stock. Under the repurchase program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 and 10b-5 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. On December 5, 2013, the Company’s board of directors extended the repurchase program to be in place until the earlier of July 31, 2014 or until $100,000 of the Company’s outstanding shares of common stock had been repurchased. On July 31, 2014, the Company’s stock repurchase program expired. There have been no purchases during the six months ended June 30, 2015. During the fiscal year through July 31, 2014, the Company repurchased 1,779,033 shares at an average price of approximately
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2015
(in thousands, except share amounts)
 
$21.97 per share, inclusive of commissions. The total dollar amount of shares repurchased in that period was $39,078. During the year ended December 31, 2013, the Company repurchased 796,418 shares at an average price of approximately $21.98 per share, inclusive of commissions, for a total dollar amount of $17,508.
Note 12. Commitments and Contingencies
The Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Crystal Financial LLC. The total amount of these unfunded commitments as of June 30, 2015 and December 31, 2014 is $84,166 and $103,693, respectively, comprised of the following:

 	  	June 30,
2015	 	  	December 31,
2014	 	
Crystal Financial LLC	  	$	50,000	  	  	$	50,000	  	
Varilease Finance, Inc. .	  	 	10,000	  	  	 	20,000	  	
T2 Biosystems, Inc.	  	 	8,333	  	  	 	8,333	  	
Trevi Therapeutics, Inc.	  	 	5,000	  	  	 	5,000	  	
VetCor Professional Practices LLC.	  	 	5,000	  	  	 	—  	  	
AgaMatrix, Inc.	  	 	3,333	  	  	 	—  	  	
CardioDx, Inc.	  	 	2,500	  	  	 	—  	  	
Syndax Pharmaceuticals, Inc.	  	 	—  	  	  	 	6,000	  	
Pronutria, Inc.	  	 	—  	  	  	 	3,000	  	
Southern Auto Finance Company	  	 	—  	  	  	 	2,500	  	
Body Central Stores, Inc.	  	 	—  	  	  	 	8,860	  	
 	  	 	 	 	  	 	 	 	
Total Commitments*	  	$	84,166	  	  	$	103,693	  	

*	The Company controls the funding of the Crystal Financial LLC commitment and may cancel it at its discretion.	
As of June 30, 2015 and December 31, 2014, the Company had sufficient cash available and/or liquid securities available to fund these commitments.
Note 13. Senior Secured Unitranche Loan Program
On September 2, 2014, the Company entered into a limited liability company agreement with an affiliate (the “Investor”) of a fund managed by Pacific Investment Management Company LLC (“PIMCO”) to co-invest in middle market senior secured unitranche loans sourced by the same origination platform used by the Company. Initial funding commitments to the unitranche strategy total $600,000, consisting of direct equity investments and co-investment commitments as described below. The joint venture vehicle known as the Senior Secured Unitranche Loan Program (“SSLP”) is structured as an unconsolidated Delaware limited liability company. The Company and the Investor have initially made equity commitments to the SSLP of $300,000 and $43,250, respectively. All portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and PIMCO (with approval from a representative of each required). As of June 30, 2015, SSLP has not commenced operations.
Note 14. Subsequent Events
The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated financial statements were issued.
On August 4, 2015, our Board declared a quarterly distribution of $0.40 per share payable on October 2, 2015 to holders of record as of September 24, 2015.
 
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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 June 30, 2015, the related consolidated statements of operations for the three-month and six-month periods ended June 30, 2015 and 2014, the consolidated statement of changes in net assets for the six-month period ended June 30, 2015, and the related consolidated statements of cash flows for the six-month periods ended June 30, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management.
We conducted our review 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 and accounting 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 review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above 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 consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital Ltd., as of December 31, 2014 and the related consolidated statements of operations, changes in net assets, and cash flows for the year ended December 31, 2014, and in our report dated February 25, 2015, we expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
New York, New York
August 4, 2015
 
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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein 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;	
 
 	•	 	the adequacy of our cash resources and working capital; and	
 
 	•	 	the timing of cash flows, if any, from the operations of our portfolio companies.	
We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report.
We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
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.
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 (the “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. 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. 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 a credit facility established in December 2010.
 
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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”). Furthermore, as the Company is an investment company, it continues to apply the guidance in FASB Accounting Standards Codification (“ASC”) Topic 946. 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, 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”).
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 is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $5 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or with strategic initiatives. We are managed by Solar Capital Partners, LLC (the “Investment Adviser”). Solar Capital Management, LLC (the “Administrator”) 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, 2015, the Investment Adviser has invested approximately $5.0 billion in more than 200 different portfolio companies since it was founded in 2006. Over the same period, the Investment Adviser completed transactions with more than 125 different financial sponsors.
Recent Developments
On August 4, 2015, our Board declared a quarterly distribution of $0.40 per share payable on October 2, 2015 to holders of record as of September 24, 2015.
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” The definition of “eligible portfolio company” includes certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.
 
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Revenue
We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark London interbank offered rate (“LIBOR”), commercial paper rate, or the prime rate. Interest on our debt investments is generally payable quarterly but may be monthly or semi-annually. In addition, our investments may provide payment-in-kind (“PIK”) interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc.
Expenses
All investment professionals of the Investment Adviser and its staff, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses of that personnel which is allocable to those services are provided and paid for by the Investment Adviser. We bear all other costs and expenses of our operations and transactions, including those relating to:
 
 	•	 	investment advisory and management fees;	
 
 	•	 	expenses incurred by the Investment Adviser payable to third parties, including agents, consultants or other advisors, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;	
 
 	•	 	calculation of our net asset value (including the cost and expenses of any independent valuation firm utilized);	
 
 	•	 	direct costs and expenses of administration, including independent registered public accounting and legal costs;	
 
 	•	 	costs of preparing and filing reports or other documents with the SEC;	
 
 	•	 	interest payable on debt, if any, incurred to finance our investments;	
 
 	•	 	offerings of our common stock and other securities;	
 
 	•	 	registration and listing fees;	
 
 	•	 	fees payable to third parties, including agents, consultants or other advisors, relating to, or associated with, evaluating and making investments;	
 
 	•	 	transfer agent and custodial fees;	
 
 	•	 	taxes;	
 
 	•	 	independent directors’ fees and expenses;	
 
 	•	 	marketing and distribution-related expenses;	
 
 	•	 	the costs of any reports, proxy statements or other notices to stockholders, including printing and postage costs;	
 
 	•	 	our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;	
 
 	•	 	organizational costs; and	
 
 	•	 	all other expenses incurred by us or the Administrator in connection with administering our business, such as our allocable portion of overhead under the administration agreement, including rent and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs.	
 
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We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.
Portfolio and Investment Activity
During the three months ended June 30, 2015, we invested approximately $202.8 million across 12 portfolio companies. This compares to investing approximately $89.4 million in 9 portfolio companies for the three months ended June 30, 2014. Investments sold or prepaid during the three months ended June 30, 2015 totaled approximately $78.5 million versus approximately $137.8 million for the three months ended June 30, 2014.
At June 30, 2015, our portfolio consisted of 50 portfolio companies and was invested 64.2% in senior secured loans, 6.3% in subordinated debt, 1.6% in preferred equity and 27.9% in common equity/equity interests and warrants measured at fair value versus 43 portfolio companies invested 57.9% in senior secured loans, 18.3% in subordinated debt, 2.3% in preferred equity and 21.5% in common equity/equity interests and warrants measured at fair value at June 30, 2014.
The weighted average yields on our portfolio of income producing investments were 9.9% and 10.5%, respectively, at June 30, 2015 and June 30, 2014, measured at fair value.
At June 30, 2015, 88.9% or $1,021.0 million of our income producing investment portfolio* is floating rate and 11.1% or $127.2 million is fixed rate, measured at fair value. At June 30, 2014, 71.0% or $663.1 million of our income producing investment portfolio *  was floating rate and 29.0% or $271.1 million was fixed rate, measured at fair value. As of June 30, 2015 and 2014, we had one and one issuers on non-accrual status, respectively.
Since inception, Solar Capital and its predecessor companies have invested approximately $4.1 billion in 133 portfolio companies. Over the same period, Solar Capital has completed transactions with more than 95 different financial sponsors.
Crystal Financial LLC
On December 28, 2012, we completed the acquisition of Crystal Capital Financial Holdings LLC (“Crystal Financial”), a commercial finance company focused on providing asset-based and other secured financing solutions (the “Crystal Acquisition”). We invested $275 million in cash to effect the Crystal Acquisition. Crystal Financial owns approximately 98% of the outstanding ownership interest in Crystal Financial LLC. The remaining financial interest is held by various employees of Crystal Financial LLC, through their investment in Crystal Management LP. Crystal Financial LLC had a diversified portfolio of 23 loans having a total par value of approximately $400 million at November 30, 2012 and a $275 million committed revolving credit facility. On January 27, 2014 the revolving credit facility was expanded to $300 million. On March 31, 2014, we exchanged $137.5 million of our equity interest in Crystal Financial in exchange for $137.5 million in floating rate senior secured notes in Crystal Financial bearing interest at LIBOR plus 9.50%, maturing on March 31, 2019. Our financial statements, including our schedule of investments, reflect our investments in Crystal Financial on a consolidated basis.
 
* 	We have included Crystal Financial LLC as 100% floating rate within our income producing investment portfolio.	
 
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As of June 30, 2015, Crystal Financial LLC had 27 funded commitments to 24 different issuers with a total par value of approximately $455.3 million on total assets of $531.0 million. As of December 31, 2014, Crystal Financial LLC had 29 funded commitments to 27 different issuers with a total par value of approximately $477.9 million on total assets of $542.3 million. As of June 30, 2015 and December 31, 2014, all loans were floating rate with the largest loan outstanding totaling $33.0 million and $33.0 million, respectively. For the same periods, the average exposure per issuer was $19.0 million and $17.7 million, respectively. Crystal Financial LLC’s credit facility, which is non-recourse to Solar Capital, had approximately $242.2 million and $259.7 million of borrowings outstanding at June 30, 2015 and December 31, 2014, respectively. For the three months ended June 30, 2015 and June 30, 2014, Crystal Financial LLC had net income of $9.4 million and $5.2 million on gross income of $15.4 million and $12.6 million, respectively. For the six months ended June 30, 2015 and June 30, 2014, Crystal Financial LLC had net income of $17.3 million and $12.8 million on gross income of $28.4 million and $26.8 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions.
Stock Repurchase Program
On July 31, 2013, the Company’s board of directors authorized a program for the purpose of repurchasing up to $100 million of the Company’s common stock. Under the repurchase program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its Insider Trading Policies and Procedures and the guidelines specified in Rule 10b-18 and 10b-5 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. On December 5, 2013, the Company’s board of directors extended the repurchase program to be in place until the earlier of July 31, 2014 or until $100 million of the Company’s outstanding shares of common stock had been repurchased. On July 31, 2014, the Company’s stock repurchase program expired. There have been no purchases during the six months ended June 30, 2015. During the fiscal year through July 31, 2014, the Company repurchased 1,779,033 shares at an average price of approximately $21.97 per share, inclusive of commissions. The total dollar amount of shares repurchased in that period was $39.1 million. During the year ended December 31, 2013, the Company repurchased 796,418 shares at an average price of approximately $21.98 per share, inclusive of commissions, for a total dollar amount of $17.5 million.
Senior Secured Unitranche Loan Program
On September 2, 2014, the Company entered into a limited liability company agreement with an affiliate (the “Investor”) of a fund managed by Pacific Investment Management Company LLC (“PIMCO”) to co-invest in middle market senior secured unitranche loans sourced by the same origination platform used by the Company. Initial funding commitments to the unitranche strategy total $600 million, consisting of direct equity investments and co-investment commitments as described below. The joint venture vehicle known as the Senior Secured Unitranche Loan Program (“SSLP”) is structured as an unconsolidated Delaware limited liability company. The Company and the Investor have initially made equity commitments to the SSLP of $300 million and $43.25 million, respectively. All portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and PIMCO (with approval from a representative of each required). As of June 30, 2015, SSLP has not commenced operations.
Critical Accounting Policies
The preparation of consolidated 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 consolidated 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. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported.
 
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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:
Under procedures established by our board of directors (the “Board”), we value investments, including certain senior secured debt, subordinated debt and other debt securities with maturities greater than 60 days, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers or dealers (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). We utilize mid-market pricing as a practical expedient for fair value unless a different point within the range is more representative. If and when market quotations are deemed not to represent fair value, we typically utilize independent third-party valuation firms to assist us in determining fair value. Accordingly, such investments go through our multi-step valuation process as described below. In each case, our independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the direction of our Board. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board. Such determination of fair values involves subjective judgments and estimates.
With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:
 
 	(1)	our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;	
 
 	(2)	preliminary valuation conclusions are then documented and discussed with senior management of the Investment Adviser;	
 
 	(3)	independent valuation firms engaged by our Board conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their own independent assessment;	
 
 	(4)	the audit committee of the Board reviews the preliminary valuation of the Investment Adviser and that of the independent valuation firm and responds to the valuation recommendation of the independent valuation firm to reflect any comments; and	
 
 	(5)	the Board discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the audit committee.	
Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company
 
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does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the six months ended June 30, 2015, there has been no change to the Company’s valuation techniques and the nature of the related inputs considered in the valuation process.
Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.
Valuation of Senior Secured Credit Facility and Senior Secured Notes
The Company has made an irrevocable election to apply the fair value option of accounting to its Credit Facility and its Senior Secured Notes, in accordance with ASC 825-10. We believe accounting for the Credit Facility and Senior Secured Notes at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility.
Revenue Recognition
The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or applied to principal depending upon management’s judgment. Some of our investments may have contractual PIK interest or dividends. PIK interest and dividends computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously
 
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capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are capitalized and amortized into income using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned.
The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for these fees. For the three and six months ended June 30, 2015, capitalized PIK income totaled $0.1 million and $0.3 million, respectively.
Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss
We generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized.
Income Taxes
Solar Capital, a U.S. corporation, has elected to be treated as a RIC under Subchapter M of the Code, as amended. 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 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 distributions, the Company accrues an estimated excise tax, if any, on estimated excess taxable income.
Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. The update changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Public companies are required to apply ASU 2015-02 for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company is currently evaluating the impact of the adoption of ASU 2015-02 on its consolidated financial statements and disclosures.
In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Public companies are required to apply ASU 2015-03 retrospectively for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company is currently evaluating the impact of the adoption of ASU 2015-03 on its consolidated financial statements and disclosures.
 
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RESULTS OF OPERATIONS
Results comparisons are for the three and six months ended June 30, 2015 and 2014:
Investment Income
For the three and six months ended June 30, 2015, gross investment income totaled $28.0 million and $53.6 million, respectively. For the three and six months ended June 30, 2014, gross investment income totaled $28.0 million and $60.6 million, respectively. The decrease in gross investment income year over year was primarily due to a reduction in income from call premiums received as well as portfolio yield compression.
Expenses
Expenses totaled $12.0 million and $23.2 million, respectively, for the three and six months ended June 30, 2015, of which $6.0 million and $11.9 million, respectively, were management fees and performance-based incentive fees and $3.6 million and $7.2 million, respectively, were interest and other credit facility expenses. Administrative services and other general and administrative expenses totaled $2.3 million and $4.1 million, respectively, for the three and six months ended June 30, 2015. Expenses totaled $11.9 million and $27.1 million, respectively, for the three and six months ended June 30, 2014, of which $6.2 million and $15.6 million, respectively, were management fees and performance-based incentive fees and $3.6 million and $7.2 million, respectively, were interest and other credit facility expenses. Administrative services and other general and administrative expenses totaled $2.1 million and $4.3 million, respectively, for the three and six months ended June 30, 2014. Expenses generally consist of management and performance-based incentive fees, administrative services fees, insurance expenses, legal fees, directors’ fees, transfer agency fees, printing and proxy expenses, audit and tax services expenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The decrease in expenses year over year was primarily due to a decrease in performance-based incentive fees on lower net investment income.
Net Investment Income
The Company’s net investment income totaled $16.0 million and $30.4 million, or $0.38 and $0.72, per average share, respectively, for the three and six months ended June 30, 2015. The Company’s net investment income totaled $16.1 million and $33.6 million, or $0.38 and $0.77, per average share, respectively, for the three and six months ended June 30, 2014.
Net Realized Loss
The Company had investment sales and prepayments totaling approximately $79 million and $85 million, respectively, for the three and six months ended June 30, 2015. Net realized losses over the same periods were $0.8 million and $6.6 million, respectively. The Company had investment sales and prepayments totaling approximately $138 million and $346 million, respectively, for the three and six months ended June 30, 2014. Net realized losses over the same periods were $0.7 million and $27.1 million, respectively. Net realized losses for the three and six months ended June 30, 2015 were primarily related to DS Waters and Quantum Foods, LLC. Net realized losses for the three months ended June 30, 2014 were primarily related to the expiration of an interest rate cap. Net realized losses for the six months ended June 30, 2014 were primarily related to the partial realization of previously recognized unrealized losses on our investment in ARK Real Estate, L.P.
Net Change in Unrealized Gain
For the three and six months ended June 30, 2015, net change in unrealized gain on the Company’s assets and liabilities totaled $2.1 million and $4.4 million, respectively. For the three and six months ended June 30, 2014, net change in unrealized gain on the Company’s assets and liabilities totaled $1.7 million and $24.4 million, respectively. Net unrealized gain for the three months ended June 30, 2015 is primarily due to
 
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appreciation in the value of our investments in Bishop Lifting Products, Inc., Crystal Financial LLC, and Radius Health, Inc., among others. Partially offsetting the net change in unrealized gain was depreciation in the value of our investments in Direct Buy Inc. and Rug Doctor, among others. Net unrealized gain for the six months ended June 30, 2015 is primarily due to the reversal of unrealized depreciation on our investment in Quantum Foods, LLC, as well as appreciation in the value of our investments in Crystal Financial LLC, Radius Health, Inc. and Varilease Finance, Inc., among others. Partially offsetting the net change in unrealized gain was depreciation in the value of our investments in Direct Buy Inc., Rug Doctor and WireCo. Worldgroup Inc., among others. Net unrealized gain for the three months ended June 30, 2014 is primarily due to the reversal of unrealized depreciation on an expired interest rate cap. Net unrealized gain for the six months ended June 30, 2014 is primarily due to the reversal of unrealized depreciation on our investment in Ark Real Estate, L.P.
Net Increase in Net Assets From Operations
For the three and six months ended June 30, 2015, the Company had a net increase in net assets resulting from operations of $17.3 million and $28.2 million, respectively. For the same periods, earnings per average share were $0.41 and $0.66, respectively. For the three and six months ended June 30, 2014, the Company had a net increase in net assets resulting from operations of $17.1 million and $30.8 million, respectively. For the same periods, earnings per average share were $0.40 and $0.71, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s liquidity and capital resources are generated and generally available through its Credit Facility maturing in June 2018, through cash flows from operations, investment sales, prepayments of senior and subordinated loans, income earned on investments and cash equivalents, and periodic follow-on equity and/or debt offerings. As of June 30, 2015, we had a total of $490.0 million of unused borrowing capacity under the Credit Facility, subject to borrowing base limits.
We may from time to time issue equity and/or debt securities in either public or private offerings. The issuance of such 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 uses of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our shareholders, or for other general corporate purposes.
On January 11, 2013, the Company closed its most recent follow-on public equity offering of 6.3 million shares of common stock at $24.40 per share raising approximately $146.9 million in net proceeds. The primary uses of the funds raised were for investments in portfolio companies, reductions in revolving debt outstanding and for other general corporate purposes.
On November 16, 2012, we issued $100 million in aggregate principal amount of the Unsecured Notes for net proceeds of $96.9 million. Interest on the Unsecured Notes is paid quarterly on February 15, May 15, August 15 and November 15, at a rate of 6.75% per year, commencing on February 15, 2013. The Unsecured Notes mature on November 15, 2042. The Company may redeem the Unsecured Notes in whole or in part at any time or from time to time on or after November 15, 2017.
On May 10, 2012, the Company closed a private offering of $75 million of Senior Secured Notes with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Senior Secured Notes is due semi-annually on May 10 and November 10. The Senior Secured Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
The primary uses 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.
 
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Cash Equivalents
We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. From time to time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held approximately $490 million in cash equivalents as of June 30, 2015.
Debt
Unsecured Notes
On November 16, 2012, the Company and U.S. Bank National Association entered into an Indenture and a First Supplemental Indenture relating to the Company’s issuance, offer and sale of $100 million aggregate principal amount of its Unsecured Notes. The Unsecured Notes will mature on November 15, 2042 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after November 15, 2017 at a redemption price of $25 per security plus accrued and unpaid interest. The Unsecured Notes bear interest at a rate of 6.75% per year payable quarterly on February 15, May 15, August 15 and November 15 of each year. The Unsecured Notes are direct senior unsecured obligations of the Company.
Revolving & Term Loan Facility
In July 2013, the Company amended its Credit Facility, composed of $440 million of revolving credit and $50 million in term loans. Subsequently, in December 2013, a commitment increase was executed providing an additional $50 million of revolving credit, bringing the total revolving credit capacity to $490 million. Borrowings generally bear interest at a rate per annum equal to the base rate plus 2.25% or the alternate base rate plus 1.25%. The Credit Facility has no LIBOR floor requirement. The Credit Facility matures in June 2018 and includes ratable amortization in the final year. The Credit Facility may be increased up to $800 million with additional new lenders or an increase in commitments from current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default. 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. The Company also pays issuers of funded term loans 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 Credit Facility, the predecessor facility and a term loan were retired, resulting in $2.3 million of non-recurring charges to expense unamortized costs in the year ended December 31, 2012. Expenses associated with the July 2013 amendment of the Credit Facility, the retirement of our $100 million revolving credit facility with Wells Fargo Securities, LLC as well as the subsequent December 2013 commitment increase totaled $2.5 million. At June 30, 2015, outstanding USD equivalent borrowings under the Credit Facility totaled $50 million in term loans.
Senior Secured Notes
On May 10, 2012, the Company closed a private offering of $75 million of Senior Secured Notes with a fixed interest rate of 5.875% and a maturity date of May 10, 2017. Interest on the Senior Secured Notes is due semi-annually on May 10 and November 10. The Senior Secured Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
Certain covenants on our issued debt 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. At June 30 2015, the Company was in compliance with all financial and operational covenants required by the Credit Facilities.
 
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Contractual Obligations
A summary of our significant contractual payment obligations is as follows as of June 30, 2015:
Payments Due by Period (in millions)

 	  	Total	 	  	Less than
1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5 Years	 	
Revolving credit facility (1)	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	
Unsecured senior notes	  	 	100.0	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	100.0	  	
Senior secured notes	  	 	75.0	  	  	 	—  	 	  	 	75.0	  	  	 	—  	 	  	 	—  	 	
Term Loans	  	 	50.0	  	  	 	—  	 	  	 	50.0	 	  	 	—  	  	  	 	—  	 	
 
(1)	As of June 30, 2015, we had a total of $490 million of unused borrowing capacity under our revolving credit facilities, subject to borrowing base limits.	
Information about our senior securities is shown in the following table as of each year ended December 31 since the Company commenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.

Class and Year	  	Total Amount
Outstanding(1)	 	  	Asset
Coverage
Per Unit(2)	 	  	Involuntary
Liquidating
Preference
Per Unit(3)	 	  	Average
Market Value
Per Unit(4)	 	
Revolving Credit Facilities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	—  	  	  	$	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	264,452	  	  	 	1,510	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	201,355	  	  	 	3,757	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	400,000	  	  	 	2,668	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2009	  	 	88,114	  	  	 	8,920	  	  	 	—  	  	  	 	N/A	  	
Unsecured Senior Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	100,000	  	  	$	2,283	  	  	 	—  	 	  	$	985	  	
Fiscal 2014	  	 	100,000	  	  	 	2,294	  	  	 	—  	 	  	 	943	  	
Fiscal 2013	  	 	100,000	  	  	 	2,411	  	  	 	—  	 	  	 	934	  	
Fiscal 2012	  	 	100,000	  	  	 	571	  	  	 	—  	 	  	 	923	  	
Senior Secured Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	75,000	  	  	$	1,712	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	75,000	  	  	 	1,721	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	75,000	  	  	 	1,808	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	75,000	  	  	 	428	  	  	 	—  	  	  	 	N/A	  	
Term Loans	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	50,000	  	  	$	1,142	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	50,000	  	  	 	1,147	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	50,000	  	  	 	1,206	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	50,000	  	  	 	285	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	35,000	  	  	 	653	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	35,000	  	  	 	233	  	  	 	—  	  	  	 	N/A	  	
Total Senior Securities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2015 (through June 30, 2015)	  	$	225,000	  	  	$	5,137	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2014	  	 	225,000	  	  	 	5,162	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2013	  	 	225,000	  	  	 	5,425	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	489,452	  	  	 	2,794	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	236,355	  	  	 	4,410	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	435,000	  	  	 	2,901	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2009	  	 	88,114	  	  	 	8,920	  	  	 	—  	  	  	 	N/A	  	
 
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(1)	Total amount of each class of senior securities outstanding at the end of the period presented.	
(2)	The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by all senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit is allocated based on the amount outstanding in each class of debt at the end of the period. As of June 30, 2015, asset coverage was 513.7%.	
(3)	The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.	
(4)	Not applicable except for the Unsecured Senior Notes which are publicly traded. The Average Market Value Per Unit is calculated by taking the daily average closing price during the period and dividing it by twenty-five dollars per share and multiplying the result by one thousand to determine a unit price per thousand consistent with Asset Coverage Per Unit. The average market value for the fiscal 2015, 2014, 2013 and 2012 periods was $98,535, $94,301, $93,392, and $92,302, respectively.	
We have also entered into two contracts under which we have future commitments: the Investment Advisory and Management Agreement, pursuant to which Solar Capital Partners, LLC has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which the Administrator has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. 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. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Either party may terminate each of the investment advisory and management agreement and administration agreement without penalty upon 60 days’ written notice to the other. See note 3 to our Consolidated Financial Statements.
Off-Balance Sheet Arrangements
The Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Crystal Financial. The total amount of these unfunded commitments as of June 30, 2015 and December 31, 2014 is $84.2 million and $103.7 million, respectively, comprised of the following:

 	  	June 30, 2015	 	  	December 31,
2014	 	
(in millions)	  	 	 	  	 	 	
Crystal Financial LLC	  	$	50.0	  	  	$	50.0	  	
Varilease Finance, Inc	  	 	10.0	  	  	 	20.0	  	
T2 Biosystems, Inc.	  	 	8.3	  	  	 	8.3	  	
Trevi Therapeutics, Inc	  	 	5.0	  	  	 	5.0	  	
VetCor Professional Practices LLC.	  	 	5.0	  	  	 	—  	  	
AgaMatrix, Inc.	  	 	3.3	  	  	 	—  	  	
CardioDx, Inc.	  	 	2.5	  	  	 	—  	  	
Syndax Pharmaceuticals, Inc.	  	 	—  	  	  	 	6.0	  	
Pronutria, Inc.	  	 	—  	  	  	 	3.0	  	
Southern Auto Finance Company	  	 	—  	  	  	 	2.5	  	
Body Central Stores, Inc.	  	 	—  	  	  	 	8.9	  	
 	  	 	 	 	  	 	 	 	
Total Commitments*	  	$	84.2	  	  	$	103.7	  	

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*	The Company controls the funding of the Crystal Financial LLC commitment and may cancel it at its discretion (also see Senior Secured Unitranche Loan Program section in Item 2).	
As of June 30, 2015 and December 31, 2014, the Company had sufficient cash available and/or liquid securities available to fund these commitments.
In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may 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.
Distributions
The following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal year to date:

Date Declared	  	Record Date	 	  	Payment Date	 	  	Amount	 	
Fiscal 2015	  	 	 	 	  	 	 	 	  	 	 	 	
August 4, 2015	  	 	September 24, 2015	  	  	 	October 2, 2015	  	  	$	0.40	  	
May 5, 2015	  	 	June 25, 2015	  	  	 	July 1, 2015	  	  	 	0.40	  	
February 25, 2015	  	 	March 19, 2015	  	  	 	April 2, 2015	  	  	 	0.40	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2015	  	 	 	 	  	 	 	 	  	$	1.20	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2014	  	 	 	 	  	 	 	 	  	 	 	 	
November 4, 2014	  	 	December 18, 2014	  	  	 	January 5, 2015	  	  	$	0.40	  	
August 4, 2014	  	 	September 18, 2014	  	  	 	October 1, 2014	  	  	 	0.40	  	
May 5, 2014	  	 	June 19, 2014	  	  	 	July 1, 2014	  	  	 	0.40	  	
February 25, 2014	  	 	March 20, 2014	  	  	 	April 1, 2014	  	  	 	0.40	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2014	  	 	 	 	  	 	 	 	  	$	1.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013	  	 	 	 	  	 	 	 	  	 	 	 	
October 30, 2013	  	 	December 19, 2013	  	  	 	January 3, 2014	  	  	$	0.40	  	
July 24, 2013	  	 	September 19, 2013	  	  	 	October 2, 2013	  	  	 	0.40	  	
May 7, 2013	  	 	June 20, 2013	  	  	 	July 1, 2013	  	  	 	0.60	  	
February 25, 2013	  	 	March 21, 2013	  	  	 	April 2, 2013	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2013	  	 	 	 	  	 	 	 	  	$	2.00	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.
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 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.
 
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We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions 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 distributions.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a regulated investment company.
With respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders.
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 the Investment Adviser. Mr. Gross, our chairman and chief executive officer, is a managing member and a senior investment professional of, and has financial and controlling interests in, the Investment Adviser. In addition, Mr. Spohler, our chief operating officer is a partner and a senior investment professional of, and has financial interests in, the Investment Adviser.	
 
 	•	 	The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse the Administrator 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.	
 
 	•	 	We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
The Investment Adviser 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, the Investment Adviser 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 and second lien debt instruments. In addition, Michael S. Gross, our chairman and chief executive officer, Bruce Spohler, our chief operating officer, and Richard L. Peteka, our chief financial officer, serve in similar capacities for Solar Senior Capital Ltd. The Investment Adviser and certain investment advisory 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, the Investment Adviser 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 the Investment Adviser’s allocation procedures.
 
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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.
 
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	
We are subject to financial market risks, including changes in interest rates. During the six months ended June 30, 2015, certain of the investments in our portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR and typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these investments have LIBOR floors. The Company also has revolving credit facilities that are generally based on floating LIBOR. Assuming no changes to our balance sheet as of June 30, 2015, a hypothetical one-quarter of one percent decrease in LIBOR on our floating rate assets and liabilities would approximately have no effect on our net investment income per average share over the next twelve months. Assuming no changes to our balance sheet as of June 30, 2015, a hypothetical one percent increase in LIBOR on our floating rate assets and liabilities would increase our net investment income by approximately five cents per average share over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At June 30, 2015, we have no interest rate hedging instruments outstanding.

Increase (Decrease) in LIBOR	  	(0.25%)	  	 	1.00%	  	
Increase (Decrease) in Net Investment Income Per Share Per Year	  	$0.00	  	 	$0.05	  	
We may also have exposure to foreign currencies (e.g., Canadian Dollars) through various investments. These investments are converted into U.S. dollars at the balance sheet date, exposing us to movements in foreign exchange rates. In order to reduce our exposure to fluctuations in foreign exchange rates, we may borrow from time-to-time in such currencies (e.g., Canadian Dollars) under our multi-currency revolving credit facility or enter into forward currency contracts.
 
Item 4.	Controls and Procedures	
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2015 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
(b) Changes in Internal Controls Over Financial Reporting
Management has not identified any change in the Company’s internal control over financial reporting that occurred during the second quarter of 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
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PART II. OTHER INFORMATION
 
Item 1.	Legal Proceedings	
We, Solar Capital Management, LLC and Solar Capital Partners, LLC are not currently subject to any material pending legal proceedings threatened against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including 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 business, financial condition or results of operations beyond what has been disclosed within these financial statements.
 
Item 1A.	Risk Factors	
In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in the March 5, 2015 filing of our Registration Statement on Form N-2, which could materially affect our business, financial condition and/or operating results. The risks described in our Registration Statement on Form N-2 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
 
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	
We did not engage in unregistered sales of securities during the quarter ended June 30, 2015.
 
Item 3.	Defaults Upon Senior Securities	
None.
 
Item 4.	Mine Safety Disclosures	
Not applicable.
 
Item 5.	Other Information	
None.
 
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Item 6.	Exhibits	
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

Exhibit
Number	  	Description	
 	 	
  3.1	  	Articles of Amendment and Restatement(1)	
 	 	
  3.2	  	Amended and Restated Bylaws(1)	
 	 	
  4.1	  	Form of Common Stock Certificate(2)	
 	 	
  4.2	  	Indenture, dated as of November 16, 2012, between the Registrant and U.S. Bank National Association as trustee(3)	
 	 	
  4.3	  	First Supplemental Indenture, dated November 16, 2012, relating to the 6.75% Senior Notes due 2042, between the Registrant and U.S. Bank National Association as trustee(3)	
 	 	
10.1	  	Dividend Reinvestment Plan(1)	
 	 	
10.2	  	Form of Amended and Restated Senior Secured Revolving Credit Agreement by and between the Registrant, the Lenders and Citibank, N.A., as administrative agent(2)	
 	 	
10.3	  	Amendment No. 1 to the Senior Secured Revolving Credit Agreement by and between the Registrant, the Lenders and Citibank, N.A., as administrative agent(6)	
 	 	
10.4	  	Investment Advisory and Management Agreement by and between the Registrant and Solar Capital Partners, LLC(4)	
 	 	
10.5	  	Form of Custodian Agreement(8)	
 	 	
10.6	  	Amended and Restated Administration Agreement by and between Registrant and Solar Capital Management, LLC(7)	
 	 	
10.7	  	Form of Indemnification Agreement by and between Registrant and each of its directors(1)	
 	 	
10.8	  	Registration Rights Agreement by and between Registrant, Solar Cayman Limited, Solar Offshore Limited, Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and purchasers in the initial private placement(4)	
 	 	
10.9	  	First Amendment to the Registration Rights Agreement by and between Registrant, Solar Cayman Limited, Solar Offshore Limited, Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and purchasers in the initial private placement(1)	
 	 	
10.10	  	Registration Rights Agreement by and between Registrant, Magnetar Capital Fund, LP and Solar Offshore Limited(4)	
 	 	
10.11	  	Trademark License Agreement by and between Registrant and Solar Capital Partners, LLC(1)	
 	 	
10.12	  	Form of Share Purchase Agreement by and between Registrant and Solar Capital Investors II, LLC(2)	
 	 	
10.13	  	Form of Registration Rights Agreement(5)	
 	 	
10.14	  	Form of Subscription Agreement(5)	
 	 	
10.15	  	Form of Limited Liability Company Agreement, dated as of September 2, 2014, between Solar Capital Ltd. and Senior Secured Unitranche LLC, a Delaware limited liability company(9)	
 	 	
11.1	  	Computation of Per Share Earnings (included in the notes to the financial statements contained in this report)	
 
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Exhibit
Number	  	Description	
 	 	
31.1	  	Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*	
 	 	
31.2	  	Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*	
 	 	
32.1	  	Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*	
 	 	
32.2	  	Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*	
 
(1)	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Pre-Effective Amendment No. 7 (File No. 333-148734) filed on January 7, 2010.	
(2)	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No 333-148734) filed on February 9, 2010.	
(3)	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Post-Effective Amendment No. 6 (File No. 333-172968) filed on November 16, 2012.	
(4)	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No. 333-148734) filed on January 18, 2008.	
(5)	Previously filed in connection with Solar Capital Ltd.’s report on Form 8-K filed on November 29, 2010.	
(6)	Previously filed in connection with Solar Capital Ltd.’s report on Form 10-Q filed on July 31, 2013.	
(7)	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Post-Effective Amendment No. 10 (File No. 333-172968) filed on November 12, 2013.	
(8)	Previously filed in connection with Solar Capital Ltd.’s report on Form 10-K filed on February 25, 2014.	
(9)	Previously filed in connection with Solar Capital Ltd.’s report on Form 10-Q filed on November 4, 2014.	
*	Filed herewith.	
 
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 4, 2015.

SOLAR CAPITAL LTD.	
 	 	
By:	 	/s/    MICHAEL S. GROSS        	
 	 	Michael S. Gross
Chief Executive Officer
(Principal Executive Officer)	
 	 	
By:	 	/s/    RICHARD L. PETEKA        	
 	 	Richard L. Peteka
Chief Financial Officer
(Principal Financial and Accounting Officer)	
 
50

EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael S. Gross, Chief Executive Officer of Solar Capital Ltd., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Solar Capital Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 4th day of August, 2015

/s/    MICHAEL S. GROSS	
Michael S. Gross	

EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard L. Peteka, Chief Financial Officer of Solar Capital Ltd., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Solar Capital Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 4th day of August, 2015

/s/    RICHARD L. PETEKA	
Richard L. Peteka	

EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report on Form 10-Q for the period ended June 30, 2015 (the “Report”) of Solar Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, MICHAEL S. GROSS, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 	 	 	 	/S/    MICHAEL S. GROSS	
 	 	Name:	 	Michael S. Gross	
 	 	Date:	 	August 4, 2015	

EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report on Form 10-Q for the period ended June 30, 2015 (the “Report”) of Solar Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, RICHARD L. PETEKA, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 	 	 	 	/s/    RICHARD L. PETEKA	
 	 	Name:	 	Richard L. Peteka	
 	 	Date:	 	August 4, 2015