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, 2013
 
¨	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 or 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 July 30, 2013 was 45,040,613.

 

Table of Contents
SOLAR CAPITAL LTD.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2013
TABLE OF CONTENTS

 	  	PAGE	 	
PART I. FINANCIAL INFORMATION	  	 	 	 	
 	 	 	
Item 1.	  	Financial Statements	  	 	 	 	
 	  	Consolidated Statements of Assets and Liabilities as of June  30, 2013 (unaudited) and December 31, 2012	  	 	1	  	
 	 	 	
 	  	Consolidated Statements of Operations for the three and six months ended June 30, 2013 (unaudited) and the three and six months ended June 30, 2012 (unaudited)	  	 	2	  	
 	 	 	
 	  	Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2013 (unaudited) and the year ended December 31, 2012	  	 	3	  	
 	 	 	
 	  	Consolidated Statements of Cash Flows for the six months ended June 30, 2013 (unaudited) and the six months ended June 30, 2012 (unaudited)	  	 	4	  	
 	 	 	
 	  	Consolidated Schedule of Investments as of June 30, 2013 (unaudited)	  	 	5	  	
 	 	 	
 	  	Consolidated Schedule of Investments as of December 31, 2012	  	 	9	  	
 	 	 	
 	  	Notes to Consolidated Financial Statements (unaudited)	  	 	13	  	
 	 	 	
 	  	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	  	 	45	  	
Item 4.	  	Controls and Procedures	  	 	45	  	
 	 	
PART II. OTHER INFORMATION	  	 	 	 	
 	 	 	
Item 1.	  	Legal Proceedings	  	 	46	  	
Item 1A.	  	Risk Factors	  	 	46	  	
Item 2.	  	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	46	  	
Item 3.	  	Defaults upon Senior Securities	  	 	46	  	
Item 4.	  	Mine Safety Disclosures	  	 	46	  	
Item 5.	  	Other Information	  	 	46	  	
Item 6.	  	Exhibits	  	 	47	  	
 	  	Signatures	  	 	49	  	

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,
2013
(unaudited)	 	 	December 31,
2012	 	
Assets	  	 	 	 	 	 	 	 	
Investments at fair value:	  	 	 	 	 	 	 	 	
Companies less than 5% owned (cost: $850,659 and $856,134, respectively)	  	$	818,068	  	 	$	831,306	  	
Companies 5% to 25% owned (cost: $174,334 and $167,564, respectively)	  	 	157,829	  	 	 	165,406	  	
Companies more than 25% owned (cost: $437,850 and $408,373, respectively)	  	 	440,702	  	 	 	398,810	  	
 	  	 	 	 	 	 	 	 	
Total investments (cost: $1,462,843 and $1,432,071, respectively)	  	 	1,416,599	  	 	 	1,395,522	  	
 	 	 	
Cash	  	 	7,503	  	 	 	14,133	  	
Foreign currency (cost: $529 and $899, respectively)	  	 	524	  	 	 	906	  	
Interest and dividends receivable	  	 	19,747	  	 	 	15,147	  	
Deferred financing costs	  	 	4,040	  	 	 	4,228	  	
Derivatives	  	 	4	  	 	 	17	  	
Receivable for investments sold	  	 	2,862	  	 	 	—  	 	
Prepaid expenses and other assets	  	 	808	  	 	 	450	 	
 	  	 	 	 	 	 	 	 	
Total assets	  	$	1,452,087	  	 	$	1,430,403	  	
 	  	 	 	 	 	 	 	 	
Liabilities	  	 	 	 	 	 	 	 	
Revolving credit facilities (see note 6 and 8)	  	$	143,792	  	 	$	264,452	  	
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	  	
Dividends payable	  	 	27,004	  	 	 	23,217	  	
Payable for investments purchased	  	 	31,829	  	 	 	21,756	  	
Management fee payable	  	 	7,267	  	 	 	6,612	  	
Performance-based incentive fee payable	  	 	4,814	  	 	 	6,050	  	
Interest payable	  	 	2,207	  	 	 	2,406	  	
Administrative services expense payable	  	 	1,067	  	 	 	1,058	  	
Other liabilities and accrued expenses	  	 	804	  	 	 	1,579	  	
 	  	 	 	 	 	 	 	 	
Total liabilities	  	$	443,784	  	 	$	552,130	  	
 	  	 	 	 	 	 	 	 	
Net Assets	  	 	 	 	 	 	 	 	
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 45,006,497 and 38,694,060 shares issued and outstanding, respectively	  	$	450	  	 	$	387	  	
Paid-in capital in excess of par	  	 	1,126,441	  	 	 	978,279	  	
Distributions in excess of net investment income	  	 	(13,875	) 	 	 	(4,662	) 	
Accumulated net realized loss	  	 	(56,854	) 	 	 	(55,631	) 	
Net unrealized depreciation	  	 	(47,859	) 	 	 	(40,100	) 	
 	  	 	 	 	 	 	 	 	
Total net assets	  	$	1,008,303	  	 	$	878,273	  	
 	  	 	 	 	 	 	 	 	
Net Asset Value Per Share	  	$	22.40	  	 	$	22.70	  	
 	  	 	 	 	 	 	 	 	
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
June 30,
2013	 	 	Three months
ended
June 30,
2012	 	 	Six months
ended
June 30,
2013	 	 	Six months
ended
June 30,
2012	 	
INVESTMENT INCOME:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest and dividends:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	$	11,354	  	 	$	1,362	  	 	$	21,828	  	 	$	2,444	  	
Companies 5% to 25% owned	  	 	1,401	  	 	 	5,652	  	 	 	8,461	  	 	 	5,652	  	
Companies less than 5% owned	  	 	26,390	  	 	 	27,819	  	 	 	54,953	  	 	 	63,046	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investment income	  	 	39,145	  	 	 	34,833	  	 	 	85,242	  	 	 	71,142	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Management fees (see note 3)	  	$	7,267	  	 	$	5,673	  	 	$	14,401	  	 	$	10,951	  	
Performance-based incentive fees (see note 3)	  	 	4,814	  	 	 	3,591	  	 	 	11,194	  	 	 	8,866	  	
Interest and other credit facility expenses	  	 	4,819	  	 	 	9,051	  	 	 	9,642	  	 	 	11,746	  	
Administrative services expense	  	 	1,529	  	 	 	1,128	  	 	 	2,256	  	 	 	1,824	  	
Other general and administrative expenses	  	 	1,460	  	 	 	995	  	 	 	2,974	  	 	 	2,004	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	19,889	  	 	 	20,438	  	 	 	40,467	  	 	 	35,391	  	
Income tax expense	  	 	—  	  	 	 	26	  	 	 	—  	  	 	 	283	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	  	 	19,889	  	 	 	20,464	  	 	 	40,467	  	 	 	35,674	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	$	19,256	  	 	$	14,369	  	 	$	44,775	  	 	$	35,468	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCIES AND DERIVATIVES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss) on investments:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Companies more than 25% owned	  	$	—  	  	 	$	(687	) 	 	$	472	  	 	$	10,315	  	
Companies 5% to 25% owned	  	 	—  	 	 	 	—  	 	 	 	—  	  	 	 	—  	  	
Companies less than 5% owned	  	 	(1,619	) 	 	 	(19,635	) 	 	 	(1,391	) 	 	 	(20,360	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss on investments	  	 	(1,619	) 	 	 	(20,322	) 	 	 	(919	) 	 	 	(10,045	) 	
Net realized gain (loss) on foreign currencies and derivatives:	  	 	(293	) 	 	 	1,167	  	 	 	(304	) 	 	 	841	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net realized loss before income taxes	  	 	(1,912	) 	 	 	(19,155	) 	 	 	(1,223	) 	 	 	(9,204	) 	
Income tax expense	  	 	—  	 	 	 	—  	 	 	 	—  	  	 	 	785	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(1,912	) 	 	 	(19,155	) 	 	 	(1,223	) 	 	 	(9,989	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss) on investments	  	 	(18,263	) 	 	 	19,286	  	 	 	(9,695	) 	 	 	38,120	  	
Net change in unrealized gain (loss) on foreign currencies and derivatives	  	 	906	  	 	 	1,562	  	 	 	1,936	  	 	 	(1,379	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss)	  	 	(17,357	) 	 	 	20,848	  	 	 	(7,759	) 	 	 	36,741	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized and unrealized gain (loss) on investments, foreign currencies and derivatives	  	 	(19,269	) 	 	 	1,693	  	 	 	(8,982	) 	 	 	26,752	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	  	$	(13	) 	 	$	16,062	  	 	$	35,793	  	 	$	62,220	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS (LOSS) PER SHARE (see note 5)	  	$	(0.00	) 	 	$	0.44	  	 	$	0.80	  	 	$	1.70	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except shares)

 	  	Six months ended
June 30, 2013
(unaudited)	 	 	Year ended
December 31, 2012	 	
Increase in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net investment income	  	$	44,775	  	 	$	81,927	  	
Net realized loss	  	 	(1,223	) 	 	 	(32,537	) 	
Net change in unrealized gain (loss)	  	 	(7,759	) 	 	 	66,371	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	35,793	  	 	 	115,761	  	
 	  	 	 	 	 	 	 	 	
Dividends and distributions to stockholders	  	 	(53,988	) 	 	 	(90,366	) 	
 	  	 	 	 	 	 	 	 	
Capital share transactions:	  	 	 	 	 	 	 	 	
Net proceeds from shares sold	  	 	146,857	  	 	 	45,020	  	
Less offering costs	  	 	(45	) 	 	 	(24	) 	
Reinvestment of dividends	  	 	1,413	  	 	 	1,941	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets from capital transactions	  	 	148,225	  	 	 	46,937	  	
 	  	 	 	 	 	 	 	 	
Total increase in net assets	  	 	130,030	  	 	 	72,332	  	
Net assets at beginning of period	  	 	878,273	  	 	 	805,941	  	
 	  	 	 	 	 	 	 	 	
Net assets at end of period	  	$	1,008,303	  	 	$	878,273	  	
 	  	 	 	 	 	 	 	 	
Capital share activity:	  	 	 	 	 	 	 	 	
Shares sold	  	 	6,253,226	  	 	 	2,000,000	  	
Shares issued from reinvestment of dividends	  	 	59,211	  	 	 	86,022	  	
 	  	 	 	 	 	 	 	 	
Net increase from capital share activity	  	 	6,312,437	  	 	 	2,086,022	  	
 	  	 	 	 	 	 	 	 	
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, 2013	 	 	Six months ended
June 30, 2012	 	
Cash Flows from Operating Activities:	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	$	35,793	  	 	$	62,220	  	
 	 	 	
Adjustments to reconcile net increase in net assets resulting from operations:	  	 	 	 	 	 	 	 	
Net realized loss on investments	  	 	919	  	 	 	10,045	  	
Net realized (gain) loss on foreign currencies and derivatives	  	 	304	  	 	 	(841	) 	
Net change in unrealized (gain) loss on investments	  	 	9,695	  	 	 	(38,120	) 	
Net change in unrealized (gain) loss on foreign currencies and derivatives	  	 	(1,936	) 	 	 	1,379	  	
 	 	 	
(Increase) decrease in operating assets:	  	 	 	 	 	 	 	 	
Purchase of investments	  	 	(158,674	) 	 	 	(362,575	) 	
Proceeds from disposition of investments	  	 	137,846	  	 	 	252,560	  	
Capitalization of payment-in-kind interest	  	 	(9,231	) 	 	 	(16,776	) 	
Collections of payment-in-kind interest	  	 	—  	  	 	 	7,141	  	
Fee revenue receivable	  	 	—  	  	 	 	4,379	  	
Derivatives	  	 	13	  	 	 	—  	  	
Receivable for investments sold	  	 	(2,862	) 	 	 	2,595	  	
Interest and dividends receivable	  	 	(4,600	) 	 	 	(1,654	) 	
Prepaid expenses and other assets	  	 	(358	) 	 	 	191	  	
 	 	 	
Increase (decrease) in operating liabilities:	  	 	 	 	 	 	 	 	
Payable for investments purchased	  	 	10,073	  	 	 	102,210	  	
Management fee payable	  	 	655	  	 	 	396	  	
Performance-based incentive fees payable	  	 	(1,236	) 	 	 	(1,612	) 	
Deferred fee revenue	  	 	—  	  	 	 	(318	) 	
Administrative services expense payable	  	 	9	  	 	 	(47	) 	
Income taxes payable	  	 	—  	  	 	 	315	  	
Interest payable	  	 	(199	) 	 	 	260	  	
Other liabilities and accrued expenses	  	 	(775	) 	 	 	4,057	  	
 	  	 	 	 	 	 	 	 	
Net Cash Provided by Operating Activities	  	 	15,436	  	 	 	25,805	  	

Cash Flows from Financing Activities:	  	 	 	 	 	 	 	 	
Cash dividends paid	  	 	(48,788	) 	 	 	(21,965	) 	
Common stock offering costs	  	 	(45	) 	 	 	(190	) 	
Deferred financing costs	  	 	188	  	 	 	2,463	  	
Proceeds from shares sold	  	 	146,857	  	 	 	75,000	  	
Proceeds from borrowings	  	 	415,592	  	 	 	292,590	  	
Repayments of borrowings	  	 	(536,252	) 	 	 	(373,471	) 	
 	  	 	 	 	 	 	 	 	
Net Cash Used in Financing Activities	  	 	(22,448	) 	 	 	(25,573	) 	
 	  	 	 	 	 	 	 	 	
NET INCREASE( DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	(7,012	) 	 	 	232	  	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	  	 	15,039	  	 	 	11,787	  	
 	  	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	  	$	8,027	  	 	$	12,019	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	9,841	  	 	$	4,150	  	
 	  	 	 	 	 	 	 	 	
Cash paid for income taxes	  	$	356	  	 	$	727	  	
 	  	 	 	 	 	 	 	 	
Non-cash financing activities consist of the reinvestment of dividends of $1,413 and $711 for the six months ended June 30, 2013 and 2012, respectively.
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)
June 30, 2013
(in thousands)

Description (1)	 	Industry	 	Interest (2)	 	 	Maturity	 	 	Par Amount*	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans — 53.2%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
AREP Embassy Row LLC (5)	 	Building & Real Estate	 	 	9.50%	  	 	 	12/6/2013	  	 	$	37,820	  	 	$	37,493	  	 	$	37,442	  	
AREP Fifty Seventh LLC (3)(4)(5)	 	Building & Real Estate	 	 	14.33%	  	 	 	8/1/2013	  	 	 	24,710	  	 	 	24,710	  	 	 	24,709	  	
ARK Real Estate Partners II LP (3)(5)	 	Building & Real Estate	 	 	14.00%	  	 	 	8/1/2013	  	 	 	8,026	  	 	 	8,026	  	 	 	8,026	  	
AviatorCap SII, LLC I (5)	 	Aerospace & Defense	 	 	12.00%	  	 	 	12/31/2014	  	 	 	2,669	  	 	 	2,652	  	 	 	2,669	  	
AviatorCap SII, LLC II (5)	 	Aerospace & Defense	 	 	11.00%	  	 	 	12/31/2014	  	 	 	3,685	  	 	 	3,657	  	 	 	3,685	  	
AviatorCap SII, LLC III (5)	 	Aerospace & Defense	 	 	13.00%	  	 	 	12/31/2014	  	 	 	931	  	 	 	921	  	 	 	931	  	
Blue Coat Systems, Inc.	 	Internet Software & Services	 	 	9.5%	  	 	 	6/28/2020	  	 	 	20,500	  	 	 	20,295	  	 	 	20,295	  	
Direct Buy Inc. (6)	 	Home, Office Furnishing & Durable Consumer Products	 	 	12.00% PIK	  	 	 	10/31/2019	  	 	 	8,158	  	 	 	8,158	  	 	 	8,158	  	
DS Waters of America, Inc. (6)(7)	 	Beverage, Foods & Tobacco	 	 
 	15% (11% Cash
& 4% PIK)	 
(8)  	 	 	2/28/2018	  	 	 	31,630	  	 	 	30,753	  	 	 	32,896	  	
Easy Financial Services, Inc. (9)(10).	 	Consumer Finance	 	 	9.97%	  	 	 	10/4/2017	  	 	C$	10,000	  	 	 	9,737	  	 	 	9,511	  	
Global Tel*Link Corporation	 	Communications Equipment	 	 	9.00%	  	 	 	11/23/2020	  	 	$	13,500	  	 	 	13,232	  	 	 	13,230	  	
Good Sam Enterprise, LLC	 	Insurance	 	 	11.50%	  	 	 	12/1/2016	  	 	 	7,000	  	 	 	6,647	  	 	 	7,455	  	
Grakon, LLC (3)	 	Machinery	 	 	12.00%	  	 	 	12/31/2015	  	 	 	9,524	  	 	 	8,060	  	 	 	9,524	  	
Interactive Health Solutions, Inc. (12)	 	Healthcare, Education & Childcare	 	 	11.50%	  	 	 	10/4/2016	  	 	 	18,169	  	 	 	17,854	  	 	 	18,169	  	
Isotoner Corporation	 	Personal & Nondurable Consumer Products	 	 	10.75%	  	 	 	1/8/2018	  	 	 	39,000	  	 	 	38,118	  	 	 	38,805	  	
MYI Acquiror Corporation (10)(11)(13).	 	Insurance	 	 
 	13% (12% Cash
& 1% PIK)	 
(8)  	 	 	3/13/2017	  	 	 	25,904	  	 	 	25,528	  	 	 	26,292	  	
Quantum Foods, LLC	 	Beverage, Foods & Tobacco	 	 	10.78%	  	 	 	2/6/2018	  	 	 	37,500	  	 	 	37,500	  	 	 	37,500	  	
SMG	 	Healthcare, Education & Childcare	 	 	10.75%	  	 	 	12/7/2018	  	 	 	25,000	  	 	 	24,580	  	 	 	25,000	  	
Southern Auto Finance Company (10)(14)	 	Banking	 	 	13.50%	  	 	 	10/19/2017	  	 	 	35,000	  	 	 	34,339	  	 	 	35,000	  	
SOINT, LLC (5)	 	Aerospace & Defense	 	 	15.00%	  	 	 	6/30/2016	  	 	 	12,690	  	 	 	12,483	  	 	 	12,690	  	
Spencer Spirit Holdings, Inc.	 	Retail Stores	 	 	11.00%	  	 	 	5/1/2017	  	 	 	10,000	  	 	 	10,000	  	 	 	10,825	  	
The Endurance International Group, Inc.	 	Internet Software & Services	 	 	10.25%	  	 	 	5/9/2020	  	 	 	25,000	  	 	 	24,764	  	 	 	25,219	  	
The Robbins Company TLA (11)	 	Construction & Engineering	 	 	11.78%	  	 	 	5/31/2017	  	 	 	16,939	  	 	 	16,324	  	 	 	16,262	  	
The Robbins Company TLB (11)	 	Construction & Engineering	 	 	11.78%	  	 	 	4/25/2015	  	 	 	4,561	  	 	 	4,385	  	 	 	4,378	  	
TravelClick, Inc.	 	Hotels, Restaurants & Leisure	 	 	9.75%	  	 	 	3/26/2018	  	 	 	20,000	  	 	 	19,811	  	 	 	20,000	  	
Trident USA Health Services, LLC (11)	 	Healthcare, Education & Childcare	 	 	11.75%	  	 	 	10/30/2017	  	 	 	43,000	  	 	 	42,277	  	 	 	44,290	  	
USAW 767 (5)	 	Aerospace & Defense	 	 	14.50%	  	 	 	6/30/2014	  	 	 	2,102	  	 	 	2,095	  	 	 	2,102	  	
ViaWest Inc. (11)	 	Personal, Food & Misc. Services	 	 
 	13.5% (12% Cash
& 1.5% PIK)	 
(8)  	 	 	5/20/2018	  	 	 	41,156	  	 	 	40,248	  	 	 	41,568	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	524,647	  	 	$	536,631	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes — 39.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	 	Diversified/Conglomerate Service	 	 	17.00%	  	 	 	12/8/2015	  	 	$	42,500	  	 	$	42,080	  	 	$	45,050	  	
Alegeus Technologies Holdings Corp.	 	Healthcare Technology	 	 	12.00%	  	 	 	2/15/2019	  	 	 	28,200	  	 	 	27,625	  	 	 	28,200	  	
Asurion Holdco	 	Insurance	 	 	11.00%	  	 	 	3/2/2019	  	 	 	12,000	  	 	 	11,693	  	 	 	12,540	  	
Crosman Corporation	 	Leisure, Amusement, Entertainment	 	 	13.00%	  	 	 	10/15/2016	  	 	 	15,219	  	 	 	14,912	  	 	 	14,990	  	
Earthbound Farm (11)	 	Farming & Agriculture	 	 	14.25%	  	 	 	6/21/2017	  	 	 	58,947	  	 	 	58,048	  	 	 	58,947	  	
Grakon Holdings LLC Sr (3)	 	Machinery	 	 	14.00% PIK	  	 	 	12/31/2015	  	 	 	1,952	  	 	 	1,952	  	 	 	1,952	  	
Grakon Holdings LLC Jr (3)	 	Machinery	 	 	12.00% PIK	  	 	 	12/31/2015	  	 	 	12,907	  	 	 	11,490	  	 	 	10,713	  	
Granite Global Solutions Corp. (9)(10)	 	Insurance	 	 	13.50%	  	 	 	11/30/2016	  	 	C$	25,714	  	 	 	25,750	  	 	 	23,845	  	
Midcap Financial Intermediate Holdings, LLC (10)(11)	 	Banking	 	 	13.00%	  	 	 	7/9/2015	  	 	$	85,000	  	 	 	84,072	  	 	 	86,500	  	
ProSieben Sat.1 Media AG (9)(10)(15)	 	Broadcasting & Entertainment	 	 
 	7.70%(4.2% Cash
& 3.5%PIK)	 
(8)  	 	 	3/6/2017	  	 	€	17,214	  	 	 	21,433	  	 	 	21,979	  	
Richelieu Foods, Inc. (12)	 	Beverage, Food & Tobacco	 	 
 	13.75%(12% Cash
& 1.75%PIK)	 
(8)  	 	 	5/18/2016	  	 	$	23,172	  	 	 	22,796	  	 	 	22,941	  	
Rug Doctor Inc. (16)***	 	Personal, Food & Misc. Services	 	 	17.58%	(8) 	 	 	10/31/2014	  	 	 	55,614	  	 	 	52,200	  	 	 	25,026	  	
WireCo. Worldgroup Inc.	 	Building Products	 	 	11.75%	  	 	 	5/15/2017	  	 	 	48,000	  	 	 	47,596	  	 	 	48,480	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	421,647	  	 	$	401,163	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
5

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares/units)

Description (1)	 	Industry	 	Interest (2)	 	 	Maturity	 	 	Shares/
Units	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity — 14.2%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior Preferred 15% Units of DSW Group
Holdings LLC  (6)***	 	Beverage, Food & Tobacco	 	 	15.00% PIK	  	 	 	—  	 	 	 	161,604	  	 	$	135,422	  	 	$	116,775	  	
SOCAY Limited (5)(10)(17)	 	Aerospace & Defense	 	 	8.56%	(8) 	 	 	6/30/2018	  	 	 	14,218	  	 	 	14,218	  	 	 	14,490	  	
SODO Corp. (5)(17)	 	Aerospace & Defense	 	 	8.40%	(8) 	 	 	6/30/2018	  	 	 	2,196	  	 	 	2,196	  	 	 	2,371	  	
SOINT, LLC (5)(10)(17)	 	Aerospace & Defense	 	 	15.00%	  	 	 	6/30/2018	  	 	 	86,667	  	 	 	8,667	  	 	 	9,533	  	
Wyle Laboratories**	 	Aerospace & Defense	 	 	8.00%	  	 	 	7/17/2015	  	 	 	387	  	 	 	39	  	 	 	53	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	160,542	  	 	$	143,222	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants — 33.3%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP (3)(5)**	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	45,905,653	  	 	$	45,235	  	 	$	26,565	  	
Ark Real Estate Partners II LP (3)(5)**	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	1,070,679	  	 	 	498	  	 	 	620	  	
Crystal Capital Financial Holdings LLC (5)(10)	 	Diversified Financial Services	 	 	 	 	 	 	 	 	 	 	275,000	  	 	 	275,000	  	 	 	294,869	  	
Direct Buy Inc. (6)**	 	Home, Office Furnishing &
Durable Consumer Products	 	 	 	 	 	 	 	 	 	 	76,999	  	 	 	—  	 	 	 	—  	 	
Participating Preferred Units of DSW Group Holdings LLC  (6)**	 	Beverage, Food & Tobacco	 	 	 	 	 	 	 	 	 	 	1,292,964	  	 	 	—  	 	 	 	—  	 	
Grakon, LLC (3)**	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	 	
Grakon, LLC Warrants (3)**	 	Machinery	 	 	 	 	 	 	 	 	 	 	3,518,001	  	 	 	—  	 	 	 	—  	 	
Great American Group Inc. (10)**	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	212	  	
Great American Group Inc. (10)(18)**	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	69	  	
Nuveen Investments, Inc.**	 	Finance	 	 	 	 	 	 	 	 	 	 	3,486,444	  	 	 	30,876	  	 	 	13,248	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships
Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	356,007	  	 	$	335,583	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments — 140.5%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,462,843	  	 	$	1,416,599	  	
Liabilities in Excess of Other Assets — (40.5%)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(408,296	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Assets — 100.0%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,008,303	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR”) or the Euro Interbank Offered Rate (“EURIBOR”), and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of June 30, 2013.	
(3)	Investments are held in taxable subsidiaries. Ark Real Estate Partners LP is held through SLRC ADI Corp and our equity investment in Grakon LLC is held through Grakon TL Holding, Inc.	
(4)	Includes an unfunded commitment of $1,759.	
(5)	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, 2013 in these controlled investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2012	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Interest/Dividend
Income	 	  	Fair Value at
June 30, 2013	 	
AREP Embassy Row LLC	  	$	—  	  	  	$	37,442	  	  	$	—  	 	  	$	300	  	  	$	37,442	  	
AREP Fifty-Seventh LLC	  	 	24,215	  	  	 	—  	  	  	 	—  	 	  	 	1,571	  	  	 	24,709	  	
ARK Real Estate Partners II LP	  	 	7,866	  	  	 	—  	 	  	 	—  	 	  	 	562	  	  	 	8,026	  	
ARK Real Estate Partners LP	  	 	35,095	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	26,565	  	
ARK Real Estate Partners II LP	  	 	824	  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	620	  	
AviatorCap SII, LLC I	  	 	3,044	  	  	 	—  	 	  	 	374	  	  	 	178	  	  	 	2,669	  	
AviatorCap SII, LLC II	  	 	4,390	  	  	 	—  	 	  	 	706	  	  	 	236	  	  	 	3,685	  	
AviatorCap SII, LLC III	  	 	4,006	  	  	 	—  	 	  	 	3,075	  	  	 	250	  	  	 	931	  	
Crystal Capital Financial Holdings LLC	  	 	275,000	  	  	 	—  	  	  	 	—  	 	  	 	15,950	 	  	 	294,869	  	
SOCAY Limited	  	 	14,490	  	  	 	302	 	  	 	—  	 	  	 	595	  	  	 	14,490	  	
SODO Corp.	  	 	2,371	  	  	 	45	 	  	 	—  	 	  	 	90	  	  	 	2,371	  	
SOINT, LLC	  	 	15,766	  	  	 	—  	  	  	 	3,398	  	  	 	1,261	  	  	 	12,690	  	
SOINT, LLC (preferred equity)	  	 	8,667	  	  	 	—  	  	  	 	—  	 	  	 	641	  	  	 	9,533	  	
USAW 767	  	 	3,076	  	  	 	—  	 	  	 	974	  	  	 	194	  	  	 	2,102	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	398,810	  	  	$	37,789	  	  	$	8,527	  	  	$	21,828	  	  	$	440,702	  	

See notes to consolidated financial statements.
 
6

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2013
(in thousands)
 
(6)	Denotes investments in which we are an “Affiliated Person”, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% of the outstanding voting securities of the investment. Transactions during the six months ended June 30, 2013 in these affiliated investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2012	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Interest/Dividend/
Other Income	 	  	Fair Value at
June 30, 2013	 	
Direct Buy Inc. (common equity)	  	$	—  	 	  	$	—  	 	  	$	  —  	 	  	$	—  	 	  	$	—  	 	
Direct Buy Inc.	  	 	7,700	  	  	 	458	  	  	 	—  	 	  	 	478	  	  	 	8,158	  	
DS Waters of America, Inc.	  	 	32,095	  	  	 	621	  	  	 	—  	  	  	 	2,418	  	  	 	32,896	  	
Participating Preferred Units of DSW Group Holdings LLC	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	
Senior Preferred 15% Units of DSW Group Holdings LLC	  	 	125,611	  	  	 	5,628	  	  	 	—  	  	  	 	5,565	  	  	 	116,775	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	165,406	  	  	$	6,707	  	  	$	—  	  	  	$	8,461	  	  	$	157,829	  	

(7)	In March 2012, Solar Capital Ltd. purchased $36,991 par amount and sold $7,000 par amount to a third party through a participation with no recourse to the Company.	
(8)	A portion of the coupon may be payable in kind (PIK).	
(9)	The following entities are domiciled outside the United States and the investments are denominated in either Euro or Canadian Dollars; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp. and Easy Financials Services, Inc. in Canada. All other investments are domiciled in the United States.	
(10)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(11)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned financing subsidiary Solar Capital Funding II LLC (“SC Funding”). (See footnote 12 for further explanation.) Par amounts held through SC Funding include: Earthbound Farm $23,500; Midcap Financial Intermediate Holdings, LLC $23,500; MYI Acquiror Corporation $10,516; The Robbins Company TLA $14,510; The Robbins Company TLB $3,710; Trident USA Health Services, LLC $16,500; and ViaWest Inc. $15,589. Remaining par balances are held directly by Solar Capital Ltd.	
(12)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned financing subsidiary SC Funding. Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 8 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of June 30, 2013, all other investments were pledged as collateral for the Senior Secured Credit Facility, Term Loan and Senior Secured Notes (see Note 8 to the consolidated financial statements).	
(13)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(14)	Includes an unfunded commitment of $9,775.	
(15)	Solar Capital Ltd.’s investment in ProSieben Sat. 1 Media AG is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(16)	Includes PIK on $13,325 of par at 4.50% PIK, $15,574 of par at 5.25% PIK, $16,697 of par at 8.00% PIK, and $10,018 of par at 3.50% PIK.	
(17)	Solar Capital Ltd.’s investments in SODO Corp., SOCAY Corp. and SOINT, LLC each include a one dollar investment in common shares.	
(18)	Founders’ Shares.	
*	Denominated in USD unless otherwise noted.	
**	Non-income producing security.	
***	Investment is on non-accrual status.	
 
See notes to consolidated financial statements.
 
7

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)
June 30, 2013

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of June 30, 2013	 	
Diversified Financial Services	  	 	20.8%	  	
Beverage, Food & Tobacco	  	 	14.8%	  	
Banking	  	 	8.6%	  	
Buildings & Real Estate	  	 	6.9%	  	
Healthcare, Education & Childcare	  	 	6.2%	  	
Insurance	  	 	4.9%	  	
Personal, Food and Misc. Services	  	 	4.7%	  	
Farming & Agriculture	  	 	4.2%	  	
Aerospace & Defense	  	 	3.4%	  	
Building Products	  	 	3.4%	  	
Internet Software & Services	  	 	3.2%	  	
Diversified/Conglomerate Service	  	 	3.2%	  	
Personal & Nondurable Consumer Products	  	 	2.7%	  	
Healthcare Technology	  	 	2.0%	  	
Machinery	  	 	1.6%	  	
Broadcasting & Entertainment	  	 	1.5%	  	
Construction & Engineering	  	 	1.5%	  	
Hotels, Restaurants & Leisure	  	 	1.4%	  	
Leisure, Amusement, Entertainment	  	 	1.1%	  	
Finance	  	 	0.9%	  	
Communications Equipment	  	 	0.9%	  	
Retail Stores	  	 	0.8%	  	
Consumer Finance	  	 	0.7%	  	
Home, Office Furnishing & Durable Consumer Products	  	 	0.6%	  	
 	  	 	 	 	
Total Investments	  	 	100.0%	  	

See notes to consolidated financial statements.
 
8

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2012
(in thousands)

Description (1)	 	Industry	 	Interest (2)	 	 	Maturity	 	 	Par Amount*/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans — 53.6%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asurion Corporation (14)	 	Insurance	 	 	9.00%	  	 	 	5/24/2019	  	 	$	17,834	  	 	$	17,760	  	 	$	18,409	  	
AREP Fifty — Seventh LLC (8)(10)(19)(22)	 	Building & Real Estate	 	 	14.00%	  	 	 	8/1/2013	  	 	 	24,709	  	 	 	24,709	  	 	 	24,215	  	
ARK Real Estate Partners II LP (8)(10)(20)(22)	 	Building & Real Estate	 	 	14.00%	  	 	 	8/1/2013	  	 	 	8,026	  	 	 	8,026	  	 	 	7,866	  	
AviatorCap SII, LLC I (8)(22)	 	Aerospace & Defense	 	 	12.00%	  	 	 	12/31/2014	  	 	 	3,044	  	 	 	3,018	  	 	 	3,044	  	
AviatorCap SII, LLC II (8)(22)	 	Aerospace & Defense	 	 	11.00%	  	 	 	12/31/2014	  	 	 	4,390	  	 	 	4,347	  	 	 	4,390	  	
AviatorCap SII, LLC III (8)(22)	 	Aerospace & Defense	 	 	13.00%	  	 	 	12/31/2014	  	 	 	4,006	  	 	 	3,952	  	 	 	4,006	  	
Direct Buy Inc. (9)(23)	 	Home, Office Furnishing & Durable Consumer Products	 	 	12.00%	(6) 	 	 	10/31/2019	  	 	 	7,700	  	 	 	7,700	  	 	 	7,700	  	
DS Waters of America, Inc. (9)(18)(23)	 	Beverage, Foods & Tobacco	 	 
 	15% (11% Cash
& 4% PIK)	 
(6)  	 	 	2/28/2018	  	 	 	31,010	  	 	 	30,070	  	 	 	32,095	  	
Fulton Holding Corp (14)	 	Retail Stores	 	 	13.37%	  	 	 	5/28/2016	  	 	 	35,000	  	 	 	34,337	  	 	 	35,000	  	
Easy Financial Services, Inc. (3)(15).	 	Consumer Finance	 	 	11.80%	  	 	 	10/4/2017	  	 	C$	10,000	  	 	 	9,933	  	 	 	9,956	  	
Grakon, LLC (10)	 	Machinery	 	 	12.00%	  	 	 	12/31/2015	  	 	$	9,524	  	 	 	7,842	  	 	 	9,429	  	
Good Sam Enterprise, LLC	 	Insurance	 	 	11.50%	  	 	 	12/1/2016	  	 	 	7,000	  	 	 	6,607	  	 	 	7,490	  	
Isotoner Corporation	 	Personal & Nondurable Consumer Products	 	 	10.75%	  	 	 	1/8/2018	  	 	 	39,000	  	 	 	38,045	  	 	 	38,610	  	
Interactive Health Solutions, Inc. (13)	 	Healthcare, Education & Childcare	 	 	11.50%	  	 	 	10/4/2016	  	 	 	18,406	  	 	 	18,048	  	 	 	18,590	  	
MYI Acquiror Corporation (4)(7)(15).	 	Insurance	 	 
 	13% (12% Cash
& 1% PIK)	 
(6)  	 	 	3/13/2017	  	 	 	31,773	  	 	 	31,258	  	 	 	32,409	  	
SMG	 	Healthcare, Education & Childcare	 	 	10.75%	  	 	 	12/7/2018	  	 	 	25,000	  	 	 	24,536	  	 	 	24,875	  	
Southern Auto Finance Company (15)(21)	 	Banking	 	 	13.50%	  	 	 	10/19/2017	  	 	 	35,000	  	 	 	34,301	  	 	 	35,000	  	
SOINT, LLC (8)(22)	 	Aerospace & Defense	 	 	15.00%	  	 	 	6/30/2016	  	 	 	16,088	  	 	 	15,793	  	 	 	15,766	  	
Spencer Spirit Holdings, Inc.	 	Retail Stores	 	 	11.00%	  	 	 	5/1/2017	  	 	 	10,000	  	 	 	10,000	  	 	 	10,850	  	
The Endurance International Group, Inc.	 	Internet Software & Services	 	 	10.25%	  	 	 	5/9/2020	  	 	 	25,000	  	 	 	24,753	  	 	 	25,000	  	
Transplace Texas, LP (13)	 	Cargo Transport	 	 	11.00%	  	 	 	4/12/2017	  	 	 	20,000	  	 	 	19,615	  	 	 	19,700	  	
Trident USA Health Services, LLC	 	Healthcare, Education & Childcare	 	 	11.75%	  	 	 	10/30/2017	  	 	 	43,000	  	 	 	42,214	  	 	 	42,140	  	
USAW 767 (8)(22)	 	Aerospace & Defense	 	 	14.50%	  	 	 	6/30/2014	  	 	 	3,076	  	 	 	3,062	  	 	 	3,076	  	
ViaWest Inc. (14)	 	Personal, Food & Misc. Services	 	 
 	13.5% (12% Cash
& 1.5% PIK)	 
(6)  	 	 	5/20/2018	  	 	 	40,851	  	 	 	39,880	  	 	 	40,851	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	459,806	  	 	$	470,467	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes — 50.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adams Outdoor Advertising	 	Diversified/Conglomerate Service	 	 	18.00%	  	 	 	12/8/2015	  	 	$	42,500	  	 	$	42,014	  	 	$	43,350	  	
Alegeus Technologies Holdings Corp.	 	Healthcare Technology	 	 	12.00%	  	 	 	2/15/2019	  	 	 	28,200	  	 	 	27,591	  	 	 	28,200	  	
Asurion Holdco (17)	 	Insurance	 	 	11.00%	  	 	 	3/2/2019	  	 	 	12,000	  	 	 	11,675	  	 	 	12,800	  	
CIBT Solutions	 	Leisure, Amusement, Entertainment	 	 	13.50%	  	 	 	6/15/2018	  	 	 	36,200	  	 	 	35,483	  	 	 	36,200	  	
Crosman Corporation	 	Leisure, Amusement, Entertainment	 	 	13.00%	  	 	 	10/15/2016	  	 	 	15,219	  	 	 	14,876	  	 	 	14,914	  	
Earthbound Farm (14)	 	Farming & Agriculture	 	 	14.25%	  	 	 	6/21/2017	  	 	 	58,947	  	 	 	57,966	  	 	 	56,000	  	
Grakon Holdings LLC Sr (10)	 	Machinery	 	 	14.00%	(6) 	 	 	12/31/2015	  	 	 	1,822	  	 	 	1,822	  	 	 	1,804	  	
Grakon Holdings LLC Jr (10)	 	Machinery	 	 	12.00%	(6) 	 	 	12/31/2015	  	 	 	12,166	  	 	 	10,489	  	 	 	8,516	  	
Granite Global Solutions Corp. (3)(15)	 	Insurance	 	 	13.50%	  	 	 	11/30/2016	  	 	C$	25,714	  	 	 	25,668	  	 	 	24,954	  	
Midcap Financial Intermediate Holdings, LLC (14)(15)	 	Banking	 	 	13.00%	  	 	 	7/9/2015	  	 	$	85,000	  	 	 	83,878	  	 	 	85,000	  	
ProSieben Sat.1 Media AG (3)(5)(15)	 	Broadcasting & Entertainment	 	 
 	7.70%(4.2% Cash
& 3.5%PIK)	 
(6)  	 	 	3/6/2017	  	 	€	16,911	  	 	 	21,022	  	 	 	20,375	  	
Richelieu Foods, Inc. (13)	 	Beverage, Food & Tobacco	 	 
 	13.75%(12% Cash
& 1.75%PIK)	 
(6)  	 	 	5/8/2016	  	 	$	23,057	  	 	 	22,628	  	 	 	22,596	  	
Rug Doctor Inc. (14)(16)	 	Personal, Food & Misc. Services	 	 

 	15.50% to 20.00%

(wtd. avg. 17.55%)	  

(6) 	 	 	10/31/2014	  	 	 	54,072	  	 	 	51,941	  	 	 	43,258	  	
WireCo. Worldgroup Inc.	 	Building Products	 	 	11.75%	  	 	 	5/15/2017	  	 	 	48,000	  	 	 	47,556	  	 	 	48,960	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	454,609	  	 	$	446,927	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
9

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2012
(in thousands, except shares)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Description (1)	 	Industry	 	Interest (2)	 	 	Maturity	 	 	Par Amount*/
Shares/Units	 	 	Cost	 	 	Fair
Value	 	
Preferred Equity — 17.2%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior Preferred 15% Units of DSW
Group Holdings LLC  (9)(23)	 	Beverage, Food & Tobacco	 	 	15.00% PIK	(6) 	 	 	—  	 	 	 	1,500,725	  	 	$	129,794	  	 	$	125,611	  	
SODO Corp. (8)(11)(22)	 	Aerospace & Defense	 	 	8.41%	(6) 	 	 	6/30/2018	  	 	 	2,151	  	 	 	2,151	  	 	 	2,371	  	
SOCAY Limited (8)(11)(15)(22)	 	Aerospace & Defense	 	 	8.57%	(6) 	 	 	6/30/2018	  	 	 	13,915	  	 	 	13,915	  	 	 	14,490	  	
SOINT, LLC (8)(15)(22)	 	Aerospace & Defense	 	 	15.00%	  	 	 	6/30/2018	  	 	 	86,667	  	 	 	8,667	  	 	 	8,667	  	
Wyle Laboratories**	 	Aerospace & Defense	 	 	8.00%	  	 	 	7/17/2015	  	 	 	387	  	 	 	39	  	 	 	51	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Preferred Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	154,566	  	 	$	151,190	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Equity / Partnership Interests / Warrants — 37.2%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ark Real Estate Partners LP (8)(10)(11)(22)**	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	45,905,653	  	 	$	45,235	  	 	$	35,095	  	
Ark Real Estate Partners II LP (8)(9)(10)(22)**	 	Buildings & Real Estate	 	 	 	 	 	 	 	 	 	 	1,069,592	  	 	 	498	  	 	 	824	  	
Crystal Capital Financial Holdings LLC (8 )(15)(22)	 	Diversified Financial Services	 	 	 	 	 	 	 	 	 	 	275,000	  	 	 	275,000	  	 	 	275,000	  	
Direct Buy Inc. **(9)(23)	 	Home, Office Furnishing & Durable Consumer Products	 	 	 	 	 	 	 	 	 	 	76,999	  	 	 	—  	 	 	 	—  	 	
Participating Preferred Units of DSW
Group Holdings LLC  (9)(23)**	 	Beverage, Food & Tobacco	 	 	 	 	 	 	 	 	 	 	1,292,964	  	 	 	—  	 	 	 	—  	 	
Grakon, LLC (10)**	 	Machinery	 	 	 	 	 	 	 	 	 	 	1,714,286	  	 	 	1,714	  	 	 	—  	 	
Grakon, LLC Warrants (10)**	 	Machinery	 	 	 	 	 	 	 	 	 	 	3,518,001	  	 	 	—  	 	 	 	—  	 	
Great American Group Inc. (15)**	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	572,800	  	 	 	2,681	  	 	 	177	  	
Great American Group Inc. (12)(15)**	 	Personal, Food & Misc. Services	 	 	 	 	 	 	 	 	 	 	187,500	  	 	 	3	  	 	 	58	  	
Nuveen Investments, Inc.**	 	Finance	 	 	 	 	 	 	 	 	 	 	3,486,444	  	 	 	30,876	  	 	 	10,459	  	
NXP Semiconductors Netherlands B.V. (3)(15)**	 	Electronics	 	 	 	 	 	 	 	 	 	 	159,827	  	 	 	4,357	  	 	 	4,207	  	
Seven West Media Limited (3)(15)	 	Broadcasting & Entertainment	 	 	 	 	 	 	 	 	 	 	656,530	  	 	 	2,726	  	 	 	1,118	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Common Equity/Partnerships Interests / Warrants	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	363,090	  	 	$	326,938	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Investments — 158.9%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,432,071	  	 	$	1,395,522	  	
Liabilities in Excess of Other Assets — (58.9%)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(517,249	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Assets — 100.0%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	878,273	  	

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2012.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in either Euro, Canadian Dollars or Australian Dollars; ProSieben Sat.1 Media AG in Germany; Granite Global Solutions Corp., Easy Financials Services, Inc. in Canada; and Seven Media Group Limited in Australia. NXP Semiconductors Netherlands B.V. is domiciled in the Netherlands and is denominated in U.S. dollars. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s foreign domiciled portion of MYI Aquiror Corporation is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.ar.l.	
(5)	Solar Capital Ltd.’s investment in ProSieben Sat. 1 Media AG is held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	A portion of the coupon may be payable in kind (PIK).	
(7)	Includes an unfunded commitment of $5,880.	
(8)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the Investment Company Act of 1940, as amended (the “1940 Act”), the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(9)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(10)	Investments are held in taxable subsidiaries. Ark Real Estate Partners LP is held through SLRC ADI Corp and our equity investment in Grakon LLC is held through Grakon TL Holding, Inc.	
(11)	Solar Capital Ltd.’s investments in SODO Corp. and SOCAY Corp. each include a one dollar investment in common shares.	
(12)	Founders Shares.	
(13)	Indicates an investment held by Solar Capital Ltd. through its wholly-owned financing subsidiary Solar Capital Funding II LLC (“SC Funding”). Such investments are pledged as collateral under the Senior Secured Loan Facility (see Note 8 to the consolidated financial statements) and are not generally available to the creditors of Solar Capital Ltd. Unless otherwise noted, as of December 31, 2012, all other investments were pledged as collateral for the Senior Secured Credit Facility, Term Loan and Senior Secured Notes (see Note 8 to the consolidated financial statements).	
(14)	Indicates an investment partially held by Solar Capital Ltd. through its wholly-owned financing subsidiary SC Funding. (See footnote 13 above for further explanation.) Par amounts held through SC Funding include: Asurion Corp $9,017; Earthbound Farm $23,500; Fulton Holding Corp. $18,000; Midcap Financial Intermediate Holdings, LLC $23,500; Rug Doctor L.P. $9,842; and ViaWest Inc. $15,473. Remaining par balances are held directly by Solar Capital Ltd.	
See notes to consolidated financial statements.
 
10

Table of Contents
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2012
(in thousands)
 
(15)	Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.	
(16)	Includes PIK on $13,026 of par at 4.50% PIK, $15,167 of par at 5.25% PIK, $16,037 of par at 8.00% PIK, and $9,842 of par at 3.50% PIK.	
(17)	Asurion Holdco has the option to pay interest in kind at L+10.25% if certain specified conditions are met.	
(18)	In March 2012, Solar Capital Ltd. purchased $36,991 par amount and sold $7,000 par amount to a third party through a participation with no recourse to the Company.	
(19)	Includes an unfunded commitment of $5,695.	
(20)	Includes an unfunded commitment of $406.	
(21)	Includes an unfunded commitment of $9,775.	
(22)	Denotes investments in which we are an “Affiliated Person”, as defined in the Investment Company Act of 1940 (“1940 Act”), due to owning, controlling, or holding the power to vote, more than 25% of the outstanding voting securities of the investment. Transactions during the fiscal year ended December 31, 2012 in these controlled investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2011	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Interest/
Dividend
Income	 	  	Fair Value at
December 31, 2012	 	
AviatorCap SII, LLC I	  	$	3,671	  	  	 	—  	 	  	 	684	  	  	$	434	  	  	$	3,044	  	
AviatorCap SII, LLC II	  	 	5,611	  	  	 	—  	 	  	 	1,306	  	  	 	596	  	  	 	4,390	  	
AviatorCap SII, LLC III	  	 	8,724	  	  	 	—  	 	  	 	4,850	  	  	 	944	  	  	 	4,006	  	
AREP Fifty-Seventh LLC	  	 	—  	 	  	 	24,709	  	  	 	—  	 	  	 	520	  	  	 	24,215	  	
ARK Real Estate Partners II LP	  	 	—  	 	  	 	8,026	  	  	 	—  	 	  	 	157	  	  	 	7,866	  	
ARK Real Estate Partners LP	  	 	—  	 	  	 	45,235	  	  	 	—  	 	  	 	—  	 	  	 	35,095	  	
ARK Real Estate Partners II LP	  	 	—  	 	  	 	498	  	  	 	—  	 	  	 	—  	 	  	 	824	  	
USAW 767	  	 	4,831	  	  	 	—  	 	  	 	1,828	  	  	 	619	  	  	 	3,076	  	
SODO Corp.	  	 	1,949	  	  	 	—  	 	  	 	—  	 	  	 	175	  	  	 	2,371	  	
SOCAY Limited	  	 	12,668	  	  	 	—  	 	  	 	—  	 	  	 	1,158	  	  	 	14,490	  	
National Specialty Alloys LLC	  	 	16,000	  	  	 	—  	 	  	 	21,299	  	  	 	—  	 	  	 	—  	 	
SOINT, LLC	  	 	—  	 	  	 	16,335	  	  	 	579	  	  	 	1,044	  	  	 	15,766	  	
SOINT, LLC	  	 	—  	 	  	 	8,675	  	  	 	—  	 	  	 	527	  	  	 	8,667	  	
Crystal Capital Financial Holdings LLC	  	 	—  	 	  	 	275,000	  	  	 	—  	 	  	 	—  	 	  	 	275,000	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	53,454	  	  	 	378,478	  	  	 	30,546	  	  	$	6,174	  	  	$	398,810	  	

(23)	Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, between 5% and 25% of the outstanding voting securities of the investment. Transactions during the fiscal year ended December 31, 2012 in these affiliated investments are as follows:	

Name of Issuer	  	Fair Value at
December 31, 2011	 	  	Gross
Additions	 	  	Gross
Reductions	 	  	Interest/
Dividend/
Other
Income	 	  	Fair Value at
December 31,
2012	 	
AREP Fifty-Seventh LLC	  	$	—  	 	  	 	19,768	  	  	 	19,768	  	  	$	1,019	  	  	$	—  	 	
ARK Real Estate Partners II LP	  	 	—  	 	  	 	8,026	  	  	 	8,026	  	  	 	122	  	  	 	—  	 	
ARK Real Estate Partners LP	  	 	35,820	  	  	 	2,879	  	  	 	44,650	  	  	 	—  	 	  	 	—  	 	
Direct Buy Inc. (common equity)	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	
Direct Buy Inc.	  	 	—  	 	  	 	7,700	  	  	 	—  	 	  	 	143	  	  	 	7,700	  	
DS Waters of America, Inc.	  	 	—  	 	  	 	35,696	  	  	 	6,755	  	  	 	3,944	  	  	 	32,095	  	
Senior Preferred 15% Units of DSW Group Holdings LLC	  	 	—  	 	  	 	115,187	  	  	 	278	  	  	 	14,948	  	  	 	125,611	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	$	35,820	  	  	 	189,256	  	  	 	79,477	  	  	$	20,176	  	  	$	165,406	  	

*	Denominated in USD unless otherwise noted.	
**	Non-income producing security	
 
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2012

Industry Classification	  	Percentage of Total
Investments (at fair value) as
of December 31, 2012	 	
Diversified Financial Services	  	 	19.7%	  	
Beverage, Food & Tobacco	  	 	12.9%	  	
Banking	  	 	8.6%	  	
Personal, Food & Misc. Services	  	 	7.8%	  	
Insurance	  	 	6.9%	  	
Buildings & Real Estate	  	 	4.9%	  	
Healthcare, Education & Childcare	  	 	4.4%	  	
Farming & Agriculture	  	 	4.0%	  	
Aerospace & Defense	  	 	4.0%	  	
Leisure, Amusement, Entertainment	  	 	3.7%	  	
Building Products	  	 	3.5%	  	
Retail Stores	  	 	3.3%	  	
Diversified/Conglomerate Service	  	 	3.1%	  	
Personal & Nondurable Consumer Products	  	 	2.8%	  	
Healthcare Technology	  	 	2.0%	  	
Internet Software & Services	  	 	1.8%	  	
Broadcasting & Entertainment	  	 	1.5%	  	
Machinery	  	 	1.4%	  	
Cargo Transport	  	 	1.4%	  	
Finance	  	 	0.7%	  	
Consumer Finance	  	 	0.7%	  	
Home, Office Furnishing & Durable Consumer Products	  	 	0.6%	  	
Electronics	  	 	0.3%	  	
 	  	 	 	 	
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, 2013
(in thousands, except shares)
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”). 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 middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
Note 2. Significant Accounting Policies
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiaries, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007, and Solar Capital Funding II LLC (“SC Funding”), a Delaware limited liability company formed on December 8, 2010. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been reclassified to conform to the current period presentation.
Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 and 12 of Regulation S-X, as appropriate. GAAP also 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. Accordingly, they do not include all of the information and notes required by GAAP
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
for annual financial statements. Changes in the economic environment, financial markets and any other 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, 2013.
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, 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 remaining maturities of 60 days or less shall each be valued at cost with interest accrued or discount amortized to the date of maturity, 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 involve 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, 2013
(in thousands, except shares)
 
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, 2013, 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”) 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.
 
 	(c)	Gains or losses on investments are calculated by using the specific identification method.	
 
 	(d)	The Company records 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 prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring and other fees for services rendered are recorded as 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 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.	
 
 	(f)	Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are typically reclassified among the Company’s capital accounts annually. In	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
 	addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.	
 
 	(g)	Dividends and distributions to common stockholders are recorded as of the record date. The amount to be paid out as a dividend 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 Article 6.03 and ASC 810 — Consolidation, the Company generally will not consolidate its interest in any operating company other than in investment company subsidiaries, certain financing subsidiaries, and 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 realized and 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 US 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 $525,000 senior secured credit facility (the “$525 Million Credit Facility”) and its senior secured notes (the “Senior Secured Notes”), in accordance with ASC 825-10. The Company uses an independent third-party valuation firm to measure their fair value. (see Note 8)	
 
 	(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 charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25.	
 
 	(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 management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on non-accrual designated investments may be recognized as income or applied to principal depending on management’s judgment.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
 	(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 deems that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.	
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%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Solar Capital pays the Investment Adviser an incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of less than three months.
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 six months ended June 30, 2013 and 2012.
For the three and six months ended June 30, 2013, the Company recognized $7,267 and $14,401, respectively, in base management fees and $4,814 and $11,194, respectively, in performance-based incentive
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
fees. For the three and six months ended June 30, 2012, the Company recognized $5,673 and $10,951, respectively, in base management fees and $3,591 and $8,866, 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, 2013, the Company recognized expenses under the Administration Agreement of $1,529, and $2,256, respectively. For the three and six months ended June 30, 2012, the Company recognized expenses under the Administration Agreement of $1,128, and $1,824, respectively. No managerial assistance fees were accrued or collected for the three and six months ended June 30, 2013 and 2012.
Note 4. Net Asset Value Per Share
At June 30, 2013, the Company’s total net assets and net asset value per share were $1,008,303 and $22.40, respectively. This compares to total net assets and net asset value per share at December 31, 2012 of $878,273 and $22.70, respectively.
Note 5. Earnings Per Share
The following table sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations, pursuant to ASC 260-10, for the three and six months ended June 30, 2013 and June 30, 2012:

 	  	Three months ended June 30,	 	  	Six months ended June 30,	 	
 	  	2013	 	 	2012	 	  	2013	 	  	2012	 	
Earnings per share (basic & diluted)	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Numerator — net increase (decrease) in net assets resulting from operations:	  	$	(13	) 	 	$	16,062	  	  	$	35,793	  	  	$	62,220	  	
Denominator — weighted average shares:	  	 	45,006,135	  	 	 	36,639,037	  	  	 	44,644,151	  	  	 	36,623,538	  	
Earnings (loss) per share:	  	 	($0.00	) 	 	$	0.44	  	  	$	0.80	  	  	$	1.70	  	
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.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	Quoted prices for identical or similar assets or liabilities in non-active markets;	
 
 	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 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).
Therefore gains and losses for such assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of June 30, 2013 and December 31, 2012:
Fair Value Measurements
As of June 30, 2013

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	  —  	 	  	$	20,685	  	  	$	515,946	  	  	$	536,631	  	
Subordinated Debt / Corporate Notes	  	 	—  	 	  	 	34,519	  	  	 	366,644	  	  	 	401,163	  	
Preferred Equity	  	 	—  	 	  	 	—  	 	  	 	143,222	  	  	 	143,222	  	
Common Equity / Partnership Interests / Warrants	  	 	281	  	  	 	—  	 	  	 	335,302	  	  	 	335,583	  	
Derivative assets — interest rate caps and foreign exchange contracts	  	 	—  	 	  	 	4	  	  	 	—  	 	  	 	4	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
$525 Million Facility and Senior Secured Notes	  	 	—  	 	  	 	—  	 	  	 	218,792	  	  	 	218,792	  	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
Fair Value Measurements
As of December 31, 2012

 	  	Level 1	 	  	Level 2	 	  	Level 3	 	  	Total	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Bank Debt/Senior Secured Loans	  	$	—  	 	  	$	25,899	  	  	$	444,568	  	  	$	470,467	  	
Subordinated Debt / Corporate Notes	  	 	—  	 	  	 	33,175	  	  	 	413,752	  	  	 	446,927	  	
Preferred Equity	  	 	—  	 	  	 	—  	 	  	 	151,190	  	  	 	151,190	  	
Common Equity / Partnership Interests / Warrants	  	 	5,560	  	  	 	—  	 	  	 	321,378	  	  	 	326,938	  	
Derivative assets — interest rate caps and foreign exchange contracts	  	 	—  	 	  	 	17	  	  	 	—  	 	  	 	17	  	
Liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
$525 Million Facility and Senior Secured Notes	  	 	—  	 	  	 	—  	 	  	 	389,452	  	  	 	389,452	  	
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, 2013 and the year ended December 31, 2012 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, 2013 and December 31, 2012:
Fair Value Measurements Using Level 3 Inputs
As of June 30, 2013

 	  	Bank Debt/
Senior Secured
Loans	 	 	Subordinated
Debt/
Corporate
Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, December 31, 2012	  	$	444,568	  	 	$	413,752	  	 	$	151,190	  	 	$	321,378	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	  	 	1,491	  	 	 	2,149	  	 	 	—  	 	 	 	—  	  	
Net change in unrealized gain (loss)	  	 	2,049	  	 	 	(13,717	) 	 	 	(13,943	) 	 	 	13,924	  	
Purchase of investment securities	  	 	147,971	  	 	 	2,193	  	 	 	5,975	  	 	 	—  	  	
Proceeds from dispositions of investment securities	  	 	(80,133	) 	 	 	(37,733	) 	 	 	—  	  	 	 	—  	 	
Transfers in/out of Level 3	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, June 30, 2013	  	$	515,946	  	 	$	366,644	  	 	$	143,222	  	 	$	335,302	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	$	4,439	  	 	$	(12,390	) 	 	$	(13,709	) 	 	$	13,923	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
During the six months ended June 30, 2013, there were no transfers in and out of Levels 1 and 2.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
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, 2013:

The $525 Million Facility and Senior Secured Notes	  	For the six
months ended
June 30, 2013	 	
Beginning fair value	  	$	389,452	 	
Net realized (gain) loss	  	 	4	  	
Net change in unrealized (gain) loss	  	 	(1,988	) 	
Borrowings	  	 	292,592	  	
Repayments	  	 	(461,268	) 	
Transfers in/out of Level 3	  	 	—  	 	
 	  	 	 	 	
Ending fair value	  	$	218,792	  	
 	  	 	 	 	
The Company has made an irrevocable election to apply the fair value option of accounting to the $525 Million Facility and the Senior Secured Notes, in accordance with ASC 825-10. On June 30, 2013, there were borrowings of $143,792 and $75,000, respectively, on the $525 Million Facility and the Senior Secured Notes. The Company used an independent third-party valuation firm to measure the fair value of the $525 Million Facility and Senior Secured Notes.
Fair Value Measurements Using Level 3 Inputs
As of December 31, 2012

 	 	Bank Debt/
Senior Secured
Loans	 	 	Subordinated
Debt/
Corporate
Notes	 	 	Preferred Equity	 	 	Common Equity/
Partnership
Interests/
Warrants	 	
Fair value, December 31, 2011	 	$	366,019	  	 	$	536,351	  	 	$	14,664	  	 	$	59,664	  	
Total gains or losses included in earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized gain (loss)	 	 	—  	  	 	 	(36,049	) 	 	 	—  	  	 	 	11,299	  	
Net change in unrealized gain (loss)	 	 	22,976	  	 	 	39,384	  	 	 	(2,932	) 	 	 	(7,201	) 	
Purchase of investment securities	 	 	223,710	  	 	 	101,858	  	 	 	139,736	  	 	 	278,962	  	
Proceeds from dispositions of investment securities	 	 	(168,137	) 	 	 	(227,792	) 	 	 	(278	) 	 	 	(21,346	) 	
Transfers in/out of Level 3	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2012	 	$	444,568	  	 	$	413,752	  	 	$	151,190	  	 	$	321,378	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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):	 	$	9,129	  	 	$	(8,161	) 	 	$	(3,376	) 	 	$	(31,945	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
During the fiscal year December 31, 2012, there were no transfers in and out of Levels 1 and 2.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
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, 2012:

The $525 Million Facility and Senior Secured Notes	  	For the year ended
December 31, 2012	 	
Beginning fair value	  	$	—  	  	
Total unrealized appreciation	  	 	—  	  	
Borrowings	  	 	489,957	  	
Repayments	  	 	(100,505	) 	
Transfers in/out of Level 3	  	 	—  	  	
 	  	 	 	 	
Ending fair value	  	$	389,452	  	
 	  	 	 	 	
The Company has made an irrevocable election to apply the fair value option of accounting to the $525 Million Facility and the Senior Secured Notes, in accordance with ASC 825-10. On December 31, 2012, there were borrowings of $314,452 and $75,000, respectively, on the $525 Million Facility and the Senior Secured Notes. The Company used an independent third-party valuation firm to measure the fair value of the $525 Million 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 contractual interest rates, relative maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company.
Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets and liabilities, as well as enterprise values and earnings before income taxes, depreciation and amortization (“EBITDA”) multiples of similar companies, and comparable market transactions for equity securities.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of June 30, 2013 is summarized in the table below:

 	 	Asset or
Liability	  	Fair Value at
June 30, 2013	 	  	Valuation
Techniques/
Methodology	  	Unobservable
Input	  	Range (Weighted
Average)	
Senior Secured / Bank Debt	 	Asset	  	$	515,946	  	  	Yield Analysis/Market

Approach/Broker quoted	  	Market Yields /

Bid-Ask Spreads	  	8.5% – 19.9%

(12.9%)	
Subordinated Debt/Corporate Note	 	Asset	  	$	366,644	  	  	Yield Analysis/Market

Approach/Broker quoted
Enterprise value	  	Market Yields /

Bid-Ask Spreads
EBITDA Multiples	  	12.0% – 15.5%

(13.9%)
5.5x – 7.5x (6.5x)	
Preferred Equity	 	Asset	  	$	143,222	  	  	Yield Analysis

Enterprise Value	  	Market Yields

EBITDA Multiples	  	8.0% – 15.0% (10.9%)

5.5x – 5.8x (5.7x)	
Common Equity	 	Asset	  	$	335,302	  	  	Enterprise Value

Book Value
Yield Analysis/Market
Approach	  	Enterprise Value

Multiple of BV
Market Yields	  	8.6x – 13.5x (11.1x)

1.0x – 1.1x (1.0x)
6.9% – 11.2% (11.2%)	
The $525 Million Facility	 	Liability	  	$	143,792	  	  	Yield Analysis/Market

Approach	  	Market Yields	  	L+0.5% – L+5.5%

(L+2.7%)	
Senior Secured Notes	 	Liability	  	$	75,000	  	  	Yield Analysis/Market

Approach	  	Market Yields	  	4.2% – 7.4%

(5.9%)	
Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2012 is summarized in the table below:

 	 	Asset or
Liability	 	Fair Value at
December 31, 2012	 	 	Valuation
Techniques/
Methodology	 	Unobservable
Input	 	Range (Weighted
Average)	
Senior Secured / Bank Debt	 	Asset	 	$	444,568	  	 	Yield Analysis/Market

Approach/Broker quoted	 	Market Yields /

Bid-Ask Spreads	 	10.3% – 19.0%

(13.3%)	
Subordinated Debt/Corporate Note	 	Asset	 	$	413,752	  	 	Yield Analysis/Market

Approach/Broker quoted
Enterprise value	 	Market Yields /

Bid-Ask Spreads
EBITDA Multiples	 	12.0% – 17.1%

(14.7%)
3.8x – 7.8x (5.8x)	
Preferred Equity	 	Asset	 	$	151,190	  	 	Yield Analysis	 	Market Yields	 	8.0% – 15.0% (14.3%)	
Common Equity	 	Asset	 	$	321,378	  	 	Market Approach	 	Enterprise Value

Multiple of BV	 	6.8x – 10.0x (8.4x)

1.0x – 1.5x (1.2x)	
The $525 Million Facility	 	Liability	 	$	314,452	  	 	Yield Analysis/Market

Approach	 	Market Yields	 	L+0.5% – L+5.5%

(L+2.7%)	
Senior Secured Notes	 	Liability	 	$	75,000	  	 	Yield Analysis/Market

Approach	 	Market Yields	 	4.2% – 7.2%

(5.7%)	
Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-ask spreads, if applicable, could result in a significantly lower or higher fair value measurement for such assets and liabilities.
Note 7. Derivatives
The Company is exposed to interest rate risk both as a lender and a borrower. The Company’s borrowing facilities and term loan bear interest at a floating rate, which means that rising interest rates would increase our cost of borrowing. To partially mitigate this risk, in 2011, the Company purchased two interest rate cap contracts with Wells Fargo as the counterparty, which effectively limit the interest rate payable on $150 million of LIBOR based borrowings. The Company had no interest rate derivatives prior to 2011.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
The following tables highlight the interest rate caps outstanding as of June 30, 2013 and December 31, 2012:

As of June 30, 2013:	  	 	 	 	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Index Rate	  	Cap Rate	 	 	Notional
Amount	 	  	Expiration	 	  	Cost	 	  	Fair Value	 	  	Unrealized
Depreciation	 	
3 Month Libor	  	 	1.0	% 	 	$	100,000	  	  	 	1/13/2014	  	  	$	1,950	  	  	$	1	  	  	$	(1,949	) 	
3 Month Libor	  	 	1.0	% 	 	 	50,000	  	  	 	5/4/2014	  	  	 	988	  	  	 	3	  	  	 	(985	) 	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	 	$	150,000	  	  	 	 	 	  	$	2,938	  	  	$	4	  	  	$	(2,934	) 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As of December 31, 2012:	  	 	 	 	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Index Rate	  	Cap Rate	 	 	Notional
Amount	 	  	Expiration	 	  	Cost	 	  	Fair Value	 	  	Unrealized
Depreciation	 	
3 Month Libor	  	 	1.0	% 	 	$	100,000	  	  	 	1/13/2014	  	  	$	1,950	  	  	$	7	  	  	$	(1,943	) 	
3 Month Libor	  	 	1.0	% 	 	 	50,000	  	  	 	5/4/2014	  	  	 	988	  	  	 	10	  	  	 	(978	) 	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	 	$	150,000	  	  	 	 	 	  	$	2,938	  	  	$	17	  	  	$	(2,921	) 	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The Company is also 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 $525 Million 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.
As of June 30, 2013 and December 31, 2012, there were no open forward foreign currency contracts outstanding. The Company had no derivatives designated as hedging instruments at June 30, 2013 and December 31, 2012.
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, commencing on February 15, 2013. The Unsecured Notes are direct senior unsecured obligations of the Company.
$525 Million Revolving and Term Loan Facility
In June 2012, the Company entered into a $485,000 senior secured credit facility (the “$525 Million Facility”) comprised of $450,000 of multi-currency revolving credit and a $35,000 term loan. In August 2012, the Company added $40,000 under the $525 Million Facility’s accordion feature split $25,000 in U.S. revolving credit commitments and $15,000 in a term loan. All borrowings bear interest at a rate per annum equal to the base rate plus 2.50% or the alternate base rate plus 1.50%. The $525 Million Facility has no LIBOR floor requirement. The $525 Million Facility matures in July 2016 and includes ratable amortization in the fourth year.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
The $525 Million Facility may be increased up to $800,000 with additional new lenders or an increase in commitments from current lenders. The $525 Million Facility contains certain customary affirmative and negative covenants and events of default. In addition, the $525 Million Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio. The Company 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 Facility, the predecessor facility and a term loan were retired, resulting in $2,295 of non-recurring charges to expense unamortized costs. At June 30, 2013, total outstanding USD equivalent borrowings under the $525 Million Facility were $143,792.
At June 30, 2013, the Company had outstanding non-USD borrowings on the revolving portion of the $525 Million Facility. Unrealized appreciation (depreciation) on these outstanding borrowings is indicated in the table below:

Foreign Currency	  	Local
Currency
Amount	 	  	Reset Date	 	  	US$ Basis
of
Borrowing	 	  	Current
Value	 	  	Unrealized
Appreciation
(Depreciation)	 	
Euro	  	€	11,000	  	  	 	07/22/2013	  	  	$	13,590	  	  	$	14,316	  	  	$	(726	) 	
Euro	  	 	6,500	  	  	 	07/3/2013	  	  	 	8,491	  	  	 	8,460	  	  	 	31	  	
Canadian Dollar	  	C$	15,000	  	  	 	07/18/2013	  	  	 	15,205	  	  	 	14,267	  	  	 	938	  	
Canadian Dollar	  	 	9,750	  	  	 	07/10/2013	  	  	 	9,963	  	  	 	9,273	  	  	 	690	  	
Canadian Dollar	  	 	7,439	  	  	 	07/03/2013	  	  	 	7,479	  	  	 	7,075	  	  	 	404	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	  	$	54,728	  	  	$	53,391	  	  	$	1,337	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
At December 31, 2012, the Company had outstanding non-USD borrowings on the revolving portion of the $525 Million Facility. Unrealized appreciation (depreciation) on these outstanding borrowings is indicated in the table below:

Foreign Currency	  	Local
Currency
Amount	 	  	Reset Date	 	  	US$ Basis
of
Borrowing	 	  	Current
Value	 	  	Unrealized
Appreciation
(Depreciation)	 	
Euro	  	€	11,000	  	  	 	01/17/2013	  	  	$	13,590	  	  	$	14,518	  	  	$	(928	) 	
Canadian Dollar	  	C$	15,000	  	  	 	03/18/2013	  	  	 	15,205	  	  	 	15,084	  	  	 	121	  	
Canadian Dollar	  	 	9,750	  	  	 	01/10/2013	  	  	 	9,963	  	  	 	9,805	  	  	 	158	  	
Canadian Dollar	  	 	8,000	  	  	 	01/04/2013	  	  	 	8,043	  	  	 	8,045	  	  	 	(2	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	  	$	46,801	  	  	$	47,452	  	  	$	(651	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Senior Secured Notes
On May 10, 2012, the Company closed a private offering of $75,000 of Senior Secured Notes (the “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.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
$100 Million Revolving Facility
On December 17, 2010, we established the $100,000 revolving credit facility (the “$100 Million Facility”) with Wells Fargo Securities, LLC acting as administrative agent. In connection with the $100 Million Facility, our wholly-owned financing subsidiary, SC Funding, as borrower, entered into a Loan and Servicing Agreement whereby we transferred certain loans we have originated or acquired or will originate or acquire from time to time to SC Funding via a Purchase and Sale Agreement. The $100 Million Facility, as amended, among other things, matures on December 17, 2015 and generally bears interest based on LIBOR plus 2.75%. The $100 Million Facility is secured by all of the assets held by SC Funding. Under the $100 Million Facility, Solar and SC Funding, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The $100 Million Facility includes usual and customary events of default for credit facilities of this nature. At June 30, 2013, total outstanding USD equivalent borrowings under the $100 Million Facility were $50,000.
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 $525 Million Credit Facility and Senior Secured Notes, in accordance with ASC 825-10. We believe accounting for the $525 Million Credit Facility and Senior Secured Notes at fair value will better align the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. As a result of this election, approximately $5,008 of costs related to the establishment of the $525 Million Credit Facility and the Senior Secured Notes was expensed during the year ended December 31, 2012, rather than being deferred and amortized over their stated or expected life.
The average annualized interest cost for all borrowings for the six months ended June 30, 2013 and the year ended December 31, 2012 was 4.58% and 4.81%, respectively. These costs are exclusive of commitment fees and for other prepaid expenses related to establishing the $525 Million Facility, the $100 Million Facility, the Unsecured Notes, and the Senior Secured Notes (collectively the “Credit Facilities”). This average annualized interest cost reflects the average interest cost across all borrowings. The maximum amounts borrowed on the Credit Facilities during the six months ended June 30, 2013 and the year ended December 31, 2012 were $503,888 and $497,491, respectively.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2013
(in thousands, except shares)
 
Note 9. Financial Highlights
The following is a schedule of financial highlights for the six months ended June 30, 2013 and for the year ended December 31, 2012:

 	  	Six months ended
June 30, 2013
(unaudited)	 	 	Year ended
December 31, 2012	 	
Per Share Data (a):	  	 	 	 	 	 	 	 	
Net asset value, beginning of period	  	$	22.70	  	 	$	22.02	  	
 	  	 	 	 	 	 	 	 	
Net investment income	  	 	1.00	  	 	 	2.20	  	
Net realized and unrealized gain (loss)	  	 	(0.20	) 	 	 	0.91	  	
 	  	 	 	 	 	 	 	 	
Net increase in net assets resulting from operations	  	 	0.80	  	 	 	3.11	  	
 	  	 	 	 	 	 	 	 	
Anti-dilution from issuance of common stock	  	 	0.11	  	 	 	—  	  	
Offering costs	  	 	—  	  	 	 	—  	  	
Dividends and distributions to shareholders	  	 	(1.21	) 	 	 	(2.43	) 	
 	  	 	 	 	 	 	 	 	
Net asset value, end of period	  	$	22.40	  	 	$	22.70	  	
 	  	 	 	 	 	 	 	 	
Total Return (b,c)	  	 	1.64	% 	 	 	20.03	% 	
 	  	 	 	 	 	 	 	 	
Net assets, end of period	  	$	1,008,303	  	 	$	878,273	  	
 	  	 	 	 	 	 	 	 	
Per share market value, end of period	  	$	23.09	  	 	$	23.91	  	
 	  	 	 	 	 	 	 	 	
Shares outstanding, end of period	  	 	45,006,497	  	 	 	38,694,060	  	
 	  	 	 	 	 	 	 	 	
Ratio to average net assets (c):	  	 	 	 	 	 	 	 	
Net investment income	  	 	4.38	% 	 	 	9.79	% 	
 	  	 	 	 	 	 	 	 	
Operating expenses	  	 	3.02	% 	 	 	6.25	% 	
Interest and related expenses	  	 	0.94	% 	 	 	2.28	% 	
 	  	 	 	 	 	 	 	 	
Total Expenses	  	 	3.96	% 	 	 	8.53	% 	
 	  	 	 	 	 	 	 	 	
Average debt outstanding	  	$	372,161	  	 	$	237,859	  	
 	  	 	 	 	 	 	 	 	
Portfolio turnover ratio	  	 	9.8	% 	 	 	54.7	% 	

(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 any dividends, if any, reinvested in accordance with the dividend reinvestment plan.	
(c)	Not annualized for periods less than one year.	
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
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
(dollars in
thousands)  (1)	 	  	Asset
Coverage
Per Unit  (2)	 	  	Involuntary
Liquidating
Preference
Per Unit  (3)	 	  	Average
Market Value
Per Unit  (4)	 	
Revolving Credit Facilities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	143,792	  	  	$	1,456	  	  	 	—  	  	  	 	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 2013 (through June 30, 2013)	  	$	100,000	  	  	$	1,013	  	  	 	—  	  	  	$	989	  	
Fiscal 2012	  	 	100,000	  	  	 	571	  	  	 	—  	  	  	 	923	  	
Senior Secured Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	75,000	  	  	$	759	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	75,000	  	  	 	428	  	  	 	—  	  	  	 	N/A	  	
Term Loans	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	50,000	  	  	$	506	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2012	  	 	50,000	  	  	 	285	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2011	  	 	35,000	  	  	 	653	  	  	 	—  	  	  	 	N/A	  	
Fiscal 2010	  	 	35,000	  	  	 	233	  	  	 	—  	  	  	 	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.	
(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 of $24.73 for the six months ended June 30, 2013 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.	
Note 10. Crystal Capital Financial Holdings 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, from SSP Energy Ltd., Quartz Managers LLC and Quantum Strategic Partners Ltd. (the “Crystal Acquisition”) pursuant to a definitive agreement entered into on December 17, 2012. We invested $275,000 in cash to effect the Crystal Acquisition using our available liquidity, including operating cash and borrowings
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
June 30, 2013
(in thousands, except shares)
 
under our existing credit facilities. Crystal Financial had a diversified portfolio of 23 loans having a total par value of approximately $400,000 at November 30, 2012 and a $275,000 revolving credit facility.
As of June 30, 2013, Crystal Financial had 22 funded commitments to 19 different borrowers with a total par value of approximately $364,084. All loans were floating rate with the largest loan outstanding totaling $38,000. The average exposure per issuer was $19,162 and none of the loans were on non-accrual status. Crystal Financial’s credit facility, which is non-recourse to Solar Capital, had approximately $142,750 of borrowings outstanding.
Note 11. 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 July 24, 2013, our Board declared a quarterly dividend of $0.40 per share payable on October 2, 2013 to holders of record as of September 19, 2013.
On July 24, 2013, the Company announced that DSW Group, Inc. has entered into a definitive sale agreement. The Company expects to receive approximately $150,000 in gross proceeds for its second lien loan to DS Waters of America, Inc. and its preferred investments in DSW Holding Company, LLC. Additionally, the Company has received notice that its investment in Midcap Financial Intermediate Holdings, LLC will be redeemed at a premium to par for gross proceeds of approximately $87,000. Solar Capital expects estimated total proceeds received from these monetizations to be approximately $237,000, which it intends to use to reduce outstanding revolving indebtedness, pending prudent reinvestment.
On July 31, 2013, the Company announced that it has amended its $525 Million Facility to reduce the borrowing rate from LIBOR + 2.50% to LIBOR + 2.25% and extend the final maturity by two years to June, 2018. The size of the amended facility is $490,000 and is expandable up to $800,000 under its accordion feature. In addition, the Company has extinguished its $100 Million Facility maturing 2015, which carried a borrowing rate of LIBOR +2.75%.
On July 31, 2013, the Company announced a share repurchase plan to purchase common stock in the open market in an amount up to $100,000.
 
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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, 2013, and the consolidated statements of operations for the three and six month periods ended June 30, 2013 and 2012, the consolidated statement of changes in net assets for the six month period ended June 30, 2013, and the statements of cash flows for the six month periods ended June 30, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial accounting and reporting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital Ltd., as of December 31, 2012 and the related consolidated statement of changes in net assets for the year ended December 31, 2012, and we expressed an unqualified opinion on them in our report dated February 25, 2013.
/s/ KPMG LLP
New York, New York
July 31, 2013
 
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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 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”). 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 model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners. Solar Capital Management provides the administrative services necessary for us to operate.
In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
As of June 30, 2013, our adviser Solar Capital Partners has invested approximately $3.6 billion in more than 125 different portfolio companies since it was founded in 2006. Over the same period, Solar Capital Partners completed transactions with more than 90 different financial sponsors.
Recent Developments
On July 24, 2013, our board of directors declared a quarterly dividend of $0.40 per share payable on October 2, 2013 to holders of record as of September 19, 2013.
On July 24, 2013, the Company announced that DSW Group, Inc. has entered into a definitive sale agreement. The Company expects to receive approximately $150 million in gross proceeds for its second lien loan to DS Waters of America, Inc. and its preferred investments in DSW Holding Company, LLC. Additionally, the Company has received notice that its investment in Midcap Financial Intermediate Holdings, LLC will be redeemed at a premium to par for gross proceeds of approximately $87 million. Solar Capital expects estimated total proceeds received from these monetizations to be approximately $237 million, which it intends to use to reduce outstanding revolving indebtedness, pending prudent reinvestment.
On July 31, 2013, the Company announced that it has amended its $525 Million Facility to reduce the borrowing rate from LIBOR + 2.50% to LIBOR + 2.25% and extend the final maturity by two years to June, 2018. The size of the amended facility is $490 million and is expandable up to $800 million under its accordion feature. In addition, the Company has extinguished its $100 Million Facility maturing 2015, which carried a borrowing rate of LIBOR +2.75%.
On July 31, 2013, the Company announced a share repurchase plan to purchase common stock in the open market in an amount up to $100 million.
 
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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.
Revenue
We generate revenue primarily in the form of interest 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 Solar Capital Partners, LLC (the “Investment Adviser”) and their 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 Solar Capital Partners. We bear all other costs and expenses of our operations and transactions, including those relating to:
 
 	•	 	investment advisory and management fees;	
 
 	•	 	expenses incurred by Solar Capital Partners 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;	
 
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 	•	 	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.	
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, 2013, we invested $101.3 million across 5 portfolio companies. This compares to investing $192.3 million in 6 portfolio companies for the three months ended June 30, 2012. Investment sales and prepayments during the three months ended June 30, 2013 totaled $72.8 million versus $5.8 million for the three months ended June 30, 2012.
At June 30, 2013, our portfolio consisted of 41 portfolio companies and was invested 37.9% in senior secured loans, 28.3% in subordinated debt, 10.1% in preferred equity and 23.7% in common equity and warrants measured at fair value versus 37 portfolio companies invested 42.8% in senior secured loans, 40.8% in subordinated debt, 12.2% in preferred equity and 4.2% in common equity and warrants measured at fair value at June 30, 2012.
The weighted average yields on our portfolio of income producing investments were 12.1% and 13.9%, respectively, at June 30, 2013 and June 30, 2012 measured at fair value.
At June 30, 2013, 51.5% or $634.9 million of our income-producing investment portfolio* is floating rate debt and 48.5% or $599.1 million is fixed rate debt, measured at fair value. At June 30, 2012, 29.6% or $331.9 million of our income-producing investment portfolio was floating rate debt and 70.4% or $790.2 million was fixed rate debt, measured at fair value. As of June 30, 2013, we had two investments on non-accrual status.
Solar Capital Ltd. and its predecessor companies have invested approximately $3.1 billion in 90 portfolio companies. Over the same period, Solar Capital Ltd. has completed transactions with more than 70 different financial sponsors.
Crystal Capital Financial Holdings 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, from SSP Energy Ltd., Quartz Managers LLC and Quantum Strategic Partners Ltd. (the “Crystal Acquisition”) pursuant to a definitive agreement entered into on December 17, 2012. We invested $275 million in cash to effect the Crystal Acquisition using our available liquidity, including operating cash and borrowings under our existing credit facilities. Crystal Financial had a diversified portfolio of 23 loans having a total par value of approximately $400 million at November 30, 2012 and a $275 million revolving credit facility.
 
* 	We have included Crystal Capital Financial Holdings LLC as 100% floating rate exposure at June 30, 2013.	
 
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As of June 30, 2013, Crystal Financial had 22 funded commitments to 19 different borrowers with a total par value of approximately $364.1 million. All loans were floating rate with the largest loan outstanding totaling $38.0 million. The average exposure per issuer was $19.2 million and none of the loans were on non-accrual status. Crystal Financial’s credit facility, which is non-recourse to Solar Capital, had approximately $142.8 million of borrowings outstanding.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with U.S. 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.
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 remaining maturities of 60 days or less shall each be valued at cost with interest accrued or discount amortized to the date of maturity, 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 involve 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;
 
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(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 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, 2013, 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”) 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.
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 $525 Million Credit Facility and Senior Secured Notes
The Company has made an irrevocable election to apply the fair value option of accounting to its $525 Million Credit Facility led by Citibank (the “$525 Million Credit Facility”) and its senior secured notes (the “Senior Secured Notes”), in accordance with ASC 825-10. We believe accounting for the $525 Million Credit Facility and Senior Secured Notes at fair value will better align the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. As a result of this election, approximately $7.3 million of costs related to the establishment of the $525 Million Credit Facility and Senior Secured Notes were expensed during the year ended December 31, 2012, rather than being deferred and amortized over their stated or expected life.
 
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Revenue Recognition
The Company records interest and dividend income, 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 non-accrual designated 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 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.
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.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
RESULTS OF OPERATIONS
Results comparisons are for three and six months ended June 30, 2013 and June 30, 2012:
Investment Income
For the three and six months ended June 30, 2013, gross investment income totaled $39.1 million and $85.2 million, respectively. For the three and six months ended June 30, 2012, gross investment income totaled $34.8 million and $71.1 million, respectively. The increase in gross investment income from the three and six months ended June 30, 2012 to the three and six months ended June 30, 2013 was primarily due to an increase in the size of the income-producing portfolio as compared to the previous comparative periods.
 
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Expenses
Operating expenses totaled $19.9 million and $40.5 million, respectively, for the three and six months ended June 30, 2013, of which $12.1 million and $25.6 million, respectively, were base management fees and performance-based incentive fees and $4.8 million and $9.6 million, respectively, were interest and other debt related expenses. Administrative services, insurance and other general and administrative expenses totaled $3.0 million and $5.2 million, respectively, for the three and six months ended June 30, 2013. Operating expenses totaled $20.4 million and $35.4 million, respectively, for the three and six months ended June 30, 2012, of which $9.3 million and $19.8 million, respectively, were base management fees and performance-based incentive fees and $9.1 million and $11.7 million, respectively, were interest and other debt related expenses. Administrative services, insurance and other general and administrative expenses totaled $2.1 million and $3.8 million, respectively, for the three and six months ended June 30, 2012. In addition, income tax expense totaled $0.0 and $0.3 million, respectively, for the three and six months ended June 30, 2012. Operating expenses consist of base management and incentive fees, administrative services fees, insurance expenses, legal fees, directors’ fees, audit and tax expenses, transfer agent fees, and other general and administrative expenses. Operating expenses were generally flat from the three months ended June 30, 2012 to the three months ended June 30, 2013. For the comparative six month periods, the increase in operating expenses was primarily due to significant growth in our portfolio of assets and our business in general.
Net Investment Income
The Company’s net investment income totaled $19.3 million and $44.8 million or $0.43 and $1.00 per average share, for the three and six months ended June 30, 2013, respectively. The Company’s net investment income totaled $14.4 million and $35.5 million or $0.38 and $0.96 per average share, for the three and six months ended June 30, 2012, respectively.
Net Realized Loss
The Company had investment sales and prepayments totaling $72.8 million and $142.1 million, for the three and six months ended June 30, 2013, respectively. Net realized loss for the three and six months ended June 30, 2013 totaled $1.9 million and $1.2 million, respectively. The Company had investment sales and prepayments totaling $5.8 million and $141.6 million, for the three and six months ended June 30, 2012, respectively. Net realized loss for the three and six months ended June 30, 2012 totaled $19.2 million and $10.0 million, respectively. Net realized loss for the three and six months ended June 30, 2013 was primarily related to sales of selected assets. Net realized loss for the three and six months ended June 30, 2012 was primarily related to the restructuring of our investment in DSW Group, Inc. partially offset by sales of selected other assets.
Net Change in Unrealized Gain (Loss)
For the three and six months ended June 30, 2013, net change in unrealized loss on the Company’s assets and liabilities totaled $17.4 million and $7.8 million, respectively. For the three and six months ended June 30, 2012, net change in unrealized gain on the Company’s assets and liabilities totaled $20.8 million and $36.7 million, respectively. Net unrealized loss for the three and six months ended June 30, 2013 was primarily attributable to the decline in value of two of our investments, DS Waters and Rug Doctor, along with modest yield widening in the overall portfolio. During the three and six months ended June 30, 2012, unrealized gain was primarily attributable to general market improvements, modest yield tightening and overall positive net changes in general portfolio company fundamentals.
Net Increase (Decrease) in Net Assets from Operations
For the three months ended June 30, 2013, the Company had a net decrease in net assets resulting from operations of $0.0 million. For the six months ended June 30, 2013, the Company had a net increase in net assets resulting from operations of $35.8 million. For the three and six months ended June 30, 2012, the Company had a net increase in net assets resulting from operations of $16.1 million and $62.2 million, respectively. For the three
 
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months ended June 30, 2013, basic and diluted loss per average share were $0.00. For the six months ended June 30, 2013, basic and diluted earnings per average share were $0.80. For the three and six months ended June 30, 2012, basic and diluted earnings per average share were $0.44 and $1.70, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s liquidity and capital resources are generated and generally available through its $525 million credit facility maturing in July 2016, a $100 million credit facility maturing in December 2015, 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, 2013, we had a total of $431.2 million of unused borrowing capacity under our revolving credit facilities, 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 use 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 use 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 6.75% unsecured senior notes due 2042 (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 August 23, 2012, the Company closed a follow-on public equity offering of 2.0 million shares of common stock at $22.51 per share raising approximately $45 million in proceeds. In the future, the Company may raise additional equity or debt capital, among other considerations.
On May 10, 2012, the Company closed a private offering of $75 million of Senior Secured Notes (the “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 use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
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 the end of each fiscal quarter, we consider using various treasury strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents with the objective of enhancing our investment flexibility during the following quarter pursuant to Section 55 of the 1940 Act. More specifically, we may purchase U.S. Treasury bills from time-to-time on the last business day of the quarter and typically close out that position on the following business day, settling the sale
 
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transaction on a net cash basis with the purchase, 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. There were no cash equivalents held as of June 30, 2013.
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 million aggregate principal amount of its 6.75% Unsecured Senior Notes due 2042. 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, commencing on February 15, 2013. The Unsecured Notes are direct senior unsecured obligations of the Company.
$525 Million Revolving and Term Loan Facility
In June 2012, the Company entered into a $485 million senior secured credit facility (the “$525 Million Facility”) comprised of $450 million of multi-currency revolving credit and a $35 million term loan. In August 2012, the Company added $40 million under the $525 Million Facility’s accordion feature split $25 million in revolving credit commitments and $15 million in a term loan. All borrowings bear interest at a rate per annum equal to the base rate plus 2.50% or the alternate base rate plus 1.50%. The $525 Million Facility has no LIBOR floor requirement. The $525 Million Facility matures in July 2016 and includes ratable amortization in the fourth year. The $525 Million Facility may be increased up to $800 million with additional new lenders or an increase in commitments from current lenders. The $525 Million Facility contains certain customary affirmative and negative covenants and events of default. In addition, the $525 Million Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio. The Company 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.
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.
$100 Million Revolving Facility
On December 17, 2010, we established the $100 million revolving credit facility (the “$100 Million Facility”) with Wells Fargo Securities, LLC acting as administrative agent. In connection with the $100 Million Facility, our wholly-owned financing subsidiary, Solar Capital Funding II, LLC (“SC Funding”), as borrower, entered into a Loan and Servicing Agreement whereby we transferred certain loans we have originated or acquired or will originate or acquire from time to time to SC Funding via a Purchase and Sale Agreement. The $100 Million Facility, as amended, among other things, matures on December 17, 2015 and generally bears interest based on LIBOR plus 2.75%. The $100 Million Facility is secured by all of the assets held by SC Funding. Under the $100 Million Facility, Solar and SC Funding, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. The $100 Million Facility includes usual and customary events of default for credit facilities of this nature.
 
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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, 2013, the Company was in compliance with all financial and operational covenants required by the Credit Facilities.
Contractual Obligations
A summary of our significant contractual payment obligations is as follows as of June 30, 2013:
Payments Due by Period

(in millions)	  	Total	 	  	Less than
1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5 Years	 	
Revolving credit facilities (1)	  	$	143.8	  	  	$	  —  	 	  	$	50.0	 	  	$	93.8	  	  	$	—  	 	
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, 2013, we had a total of $431.2 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
(dollars in
thousands)  (1)	 	  	Asset
Coverage
Per  Unit  (2)	 	  	Involuntary
Liquidating
Preference
Per Unit  (3)	 	  	Average
Market Value
Per Unit  (4)	 	
Revolving Credit Facilities	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	143,792	  	  	$	1,456	  	  	 	—  	 	  	 	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 2013 (through June 30, 2013)	  	$	100,000	  	  	$	1,013	  	  	 	—  	 	  	$	989	  	
Fiscal 2012	  	 	100,000	  	  	 	571	  	  	 	—  	 	  	 	923	  	
Senior Secured Notes	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	75,000	  	  	$	759	  	  	 	—  	 	  	 	N/A	  	
Fiscal 2012	  	 	75,000	  	  	 	428	  	  	 	—  	 	  	 	N/A	  	
Term Loans	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2013 (through June 30, 2013)	  	$	50,000	  	  	$	506	  	  	 	—  	 	  	 	N/A	  	
Fiscal 2012	  	 	50,000	  	  	 	285	  	  	 	—  	 	  	 	N/A	  	
Fiscal 2011	  	 	35,000	  	  	 	653	  	  	 	—  	 	  	 	N/A	  	
Fiscal 2010	  	 	35,000	  	  	 	233	  	  	 	—  	 	  	 	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 $1,000 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.	
 
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(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 of $24.73 for the six months ended June 30, 2013 and dividing it by $25 per share and multiplying the result by $1,000 to determine a unit price per thousand consistent with Asset Coverage Per Unit.	
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 has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which Solar Capital Management 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 Solar Capital Management’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
In the normal course of its business, we trade various financial instruments and may enter into various investment activities with off-balance sheet risk, which include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Statement of Assets and Liabilities.
 
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Dividends and Distributions
The following table reflects the cash dividends and distributions per share on our common stock since our initial public offering:

Date Declared	  	Record Date	 	  	Payment Date	 	  	Amount	 	
Fiscal 2013	  	 	 	 	  	 	 	 	  	 	 	 	
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	  	 	 	 	  	 	 	 	  	$	1.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2012	  	 	 	 	  	 	 	 	  	 	 	 	
November 1, 2012	  	 	December 20, 2012	  	  	 	January 3, 2013	  	  	$	0.60	  	
July 31, 2012	  	 	September 20,2012	  	  	 	October 2, 2012	  	  	 	0.60	  	
May 1, 2012	  	 	June 19, 2012	  	  	 	July 3, 2012	  	  	 	0.60	  	
February 22, 2012	  	 	March 20, 2012	  	  	 	April 3, 2012	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2012	  	 	 	 	  	 	 	 	  	$	2.40	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2011	  	 	 	 	  	 	 	 	  	 	 	 	
November 1, 2011	  	 	December 15, 2011	  	  	 	December 29, 2011	  	  	$	0.60	  	
August 2, 2011	  	 	September 20, 2011	  	  	 	October 4, 2011	  	  	 	0.60	  	
May 2, 2011	  	 	June 17, 2011	  	  	 	July 5, 2011	  	  	 	0.60	  	
March 1, 2011	  	 	March 17, 2011	  	  	 	April 4, 2011	  	  	 	0.60	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2011	  	 	 	 	  	 	 	 	  	$	2.40	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Fiscal 2010	  	 	 	 	  	 	 	 	  	 	 	 	
November 2, 2010	  	 	December 17, 2010	  	  	 	December 30, 2010	  	  	$	0.60	  	
August 3, 2010	  	 	September 17, 2010	  	  	 	October 4, 2010	  	  	 	0.60	  	
May 4, 2010	  	 	June 17, 2010	  	  	 	July 2, 2010	  	  	 	0.60	  	
January 26, 2010	  	 	March 18, 2010	  	  	 	April 1, 2010	  	  	 	0.34	* 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total 2010	  	 	 	 	  	 	 	 	  	$	2.14	  	

*	Partial period dividend of $0.60 per share pro-rated for the number of days that remained in the quarter after our initial public offering.	
Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Future quarterly dividends, if any, will be determined by our Board. We expect that our dividends and distributions to stockholders will generally be from accumulated net investment income and from net realized capital gains, 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.
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
 
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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 dividends 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 U.S. generally accepted accounting principles 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 dividends to stockholders, income from origination, structuring, closing, commitment 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 Solar Capital Partners. Mr. Gross, our chairman and chief executive officer, is the managing member and a senior investment professional of, and has financial and controlling interests in, Solar Capital Partners. In addition, Mr. Spohler, our chief operating officer is a partner and a senior investment professional of, and has financial interests in, Solar Capital Partners.	
 
 	•	 	Solar Capital Management provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and any administrative support staff. Solar Capital Partners, our investment adviser, is the sole member of and controls Solar Capital Management.	
 
 	•	 	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
Solar Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, Solar Capital Partners presently serves as investment adviser to Solar Senior Capital Ltd., a publicly traded BDC, which focuses on investing primarily in senior secured loans, including first lien, uni-tranche 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. Solar Capital Partners and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures.
In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
 
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Item 3.	Quantitative and Qualitative Disclosure about Market Risk	
We are subject to financial market risks, including changes in interest rates. During the six months ended June 30, 2013, 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 based on floating LIBOR. Assuming no changes to our balance sheet as of June 30, 2013, a hypothetical one percent increase in LIBOR on our floating rate assets and liabilities would decrease our net investment income by approximately two cents per average share over the next twelve months. Assuming no changes to our balance sheet as of June 30, 2013, a hypothetical one-quarter of one percent decrease in LIBOR on our floating rate assets and liabilities would increase our net investment income by approximately one cent 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 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 the benefits of lower interest rates with respect to our portfolio of investments. During the year ended December 31, 2011, we purchased two 1.00% LIBOR caps on a total of $150 million of notional for 3 years. If during the three year contract period LIBOR exceeds 1.00%, we will receive payments from the counterparty equal to the difference between LIBOR and 1.00% on $150 million. The cost of the caps was $2.9 million.

Increase (Decrease) in LIBOR	  	(0.25%)	  	1.00%	
Increase (Decrease) in Net Investment Income Per Share Per Year	  	$0.01	  	$(0.02)	
We also have exposure to foreign currencies (Canadian Dollar and Euro) through various investments. These investments are converted into U.S. dollars at the balance sheet date, exposing us to movements in exchange rates. In order to reduce our exposure to fluctuations in exchange rates, we have outstanding borrowings in Canadian Dollars and Euros under our multi-currency revolving credit facility at June 30, 2013. See Note 8 to our consolidated financial statements.
 
Item 4.	Controls and Procedures	
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2013 (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 2013 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.
 
Item 1A.	Risk Factors	
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K 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. There have been no material changes to the risk factors during the six months ended June 30, 2013 discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012.
 
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, 2013.
 
Item 3.	Defaults Upon Senior Securities	
None.
 
Item 4.	Mine Safety Disclosures	
Not applicable.
 
Item 5.	Other Information	
On July 31, 2013, the Company announced that it has amended its $525 Million Facility to reduce the borrowing rate from LIBOR +2.50% to LIBOR +2.25% and extend the final maturity by two years to June, 2018. The size of the amended facility is $490 million and is expandable up to $800 million under its accordion feature. In addition, the Company has extinguished its $100 Million Facility maturing 2015, which carried a borrowing rate of LIBOR+2.75%.
 
46

Table of Contents
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*	
 	 	
10.4	  	Investment Advisory and Management Agreement by and between the Registrant and Solar Capital Partners, LLC(4)	
 	 	
10.5	  	Form of Custodian Agreement(2)	
 	 	
10.6	  	Administration Agreement by and between Registrant and Solar Capital Management, LLC(4)	
 	 	
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)	
 
47

Table of Contents
 	 	 	
Exhibit
Number	  	Description	
 	 	
10.14	  	Form of Subscription Agreement(5)	
 	 	
11.1	  	Computation of Per Share Earnings (included in the notes to the financial statements contained in this report).	
 	 	
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.	
*	Filed herewith.	
 
48

Table of Contents
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 July 31, 2013.

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)	
 
49

Exhibit 10.3
AMENDMENT NO. 1 TO SENIOR SECURED CREDIT AGREEMENT AND
SECOND AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT
AMENDMENT NO. 1 dated as of July 24, 2013 (this “Amendment No. 1”) between SOLAR CAPITAL LTD., a Maryland corporation (the “ Borrower ”), SOLAR CAPITAL LUXEMBOURG I, a Luxembourg  société à responsabilité limitée , with a share capital of USD 190,000., having its registered office at 6C, rue Gabriel Lippmann, L-5365 Luxembourg, Grand-Duchy of Luxembourg, and registered with the  Registre de Commerce et des Sociétés, Luxembourg , under number B 127.949 (“ Solar LuxCo ”), the LENDERS and CITIBANK, N.A., as administrative agent for the lenders party to the Credit Agreement referenced below (in such capacity, together with its successors in such capacity, the “ Administrative Agent ”) and as collateral agent for such lenders (in such capacity, together with its successors in such capacity, the “ Collateral Agent ”).
WHEREAS, the Borrower, the lenders party thereto and the Administrative Agent are parties to a Senior Secured Credit Agreement dated as of June 29, 2012 (as amended, modified and supplemented and in effect immediately prior to the effectiveness of this Amendment No. 1, the “ Credit Agreement ”);
WHEREAS, the Borrower, Solar LuxCo, the Collateral Agent and the Administrative Agent are parties to the Second Amended and Restated Guarantee and Security Agreement dated as of July 3, 2012 (as amended, modified and supplemented and in effect immediately prior to the effectiveness of this Amendment No. 1, the “ Guarantee and Security Agreement ”);
WHEREAS, the Borrower, Solar LuxCo, each of the Lenders, the Administrative Agent and the Collateral Agent desire to amend the Credit Agreement and the Guarantee and Security Agreement in order to effect the changes described below;
NOW THEREFORE, in consideration of the promises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Borrower, each of the Lenders, the Administrative Agent and the Collateral Agent hereby agrees as follows:
 
 	Section 1.	Definitions.	
(a) Except as otherwise defined in this Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein.
(b) References in the Credit Agreement (including references to the Credit Agreement as amended hereby) and the Guarantee and Security Agreement (including references to the Guarantee and Security Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the Credit Agreement or the Guarantee and Security Agreement, as the case may be, in each case as amended hereby.

 	Section 2.	Amendments to Credit Agreement and other Loan Documents.	
(a) The defined term “Applicable Margin” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
“Applicable Margin” means for Loans outstanding at any time (a) 1.25% per annum in the case of ABR Loans and (b) 2.25% per annum in the case of Eurocurrency Loans.
(b) The defined term “Commitment Termination Date” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
“Commitment Termination Date” means June 29, 2017.
(c) The defined term “Maturity Date” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
“Maturity Date” means June 29, 2018.
(d) Clause (g)(iii) of the defined term “Permitted Liens” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
“(iii) assets held by a custodian in favor of such custodian in the ordinary course of business, including without limitation, securing payment of fees, indemnities and other similar obligations;”
(e) Section 1.01 of the Credit Agreement is hereby amended by inserting the following new defined terms in the correct alphabetical order:
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor (determined after giving effect to Section 3.11 of the Guarantee and Security Agreement and any other “Keepwell, support or other agreement” for the benefit of such Guarantor) or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.
 
2

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any Hedging Agreement that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
(f) Section 5.01 of the Credit Agreement is hereby amended by inserting new clauses (k), (l), (m) and (n) as follows:
(k) within forty-five (45) days after the end of the first three (3) fiscal quarters of each fiscal year of the Borrower and ninety (90) days after the end of each fiscal year of the Borrower, a schedule prepared in accordance with GAAP setting forth in reasonable detail with respect to each Portfolio Investment where there has been a realized gain or loss in the most recently completed fiscal quarter, (i) the cost basis of such Portfolio Investment, (ii) the proceeds received with respect to such Portfolio Investment representing repayments of principal, and (iii) any other amounts received with respect to such Portfolio Investment representing exit fees or prepayment penalties;
(l) within forty-five (45) days after the end of the first three (3) fiscal quarters of each fiscal year of the Borrower and ninety (90) days after the end of each fiscal year of the Borrower, a schedule prepared in accordance with GAAP setting forth in reasonable detail with respect to each Portfolio Investment, (i) the aggregate amount of all capitalized paid-in-kind interest for such Portfolio Investment during the most recently ended fiscal quarter and (ii) the aggregate amount of all paid-in-kind interest collected during the most recently ended fiscal quarter;
(m) within forty-five (45) days after the end of the first three (3) fiscal quarters of each fiscal year of the Borrower and ninety (90) days after the end of each fiscal year of the Borrower, a schedule prepared in accordance with GAAP setting forth in reasonable detail with respect to each Portfolio Investment, (i) the amortized cost of each Portfolio Investment as of the end of such fiscal quarter, (ii) the fair market value of each Portfolio Investment as of the end of such fiscal quarter, and (iii) the unrealized gains or losses as of the end of such fiscal quarter; and
(n) within forty-five (45) days after the end of the first three (3) fiscal quarters of each fiscal year of the Borrower and ninety (90) days after the end of each fiscal year of the Borrower, a schedule prepared in accordance with GAAP setting forth in reasonable detail with respect to each Portfolio Investment the change in unrealized gains and losses for such quarter. Such schedule will report the change in unrealized gains and losses by Portfolio Investment by showing the unrealized gain or loss for each Portfolio Investment as of the last day of the preceding fiscal quarter compared to the unrealized gain or loss for such Portfolio Investment as of the last day of the most recently ended fiscal quarter.
 
3

(g) Section 9.02(c) of the Credit Agreement is hereby amended by adding the following parenthetical at the end of clause (1) therein:
“(and each Lender hereby consents to and authorizes the Administrative Agent and/or the Collateral Agent, as applicable, to enter into, any agreement, instrument or document acceptable to the Administrative Agent and/or the Collateral Agent, as applicable, that is necessary to terminate any Security Document that (x) exclusively covers property which is released from a Lien in accordance with the foregoing, (y) exclusively covers property which property has become subject to the Lien of the Lenders pursuant to another Security Document acceptable to the Administrative Agent or (z) no longer covers any Collateral)”
(h) The defined term “Custodian” set forth in Section 1 of the Guarantee and Security Agreement is hereby amended and restated in its entirety to read as follows:
“Custodian” means The Bank of New York, as custodian holding Portfolio Investments on behalf of the Obligors, or any successor or replacement entity (as permitted by the terms herein and in accordance with Section 10.13) in such capacity; provided  that, in connection with Amendment No. 1 to Senior Secured Credit Agreement and Second Amended and Restated Guarantee and Security Agreement dated as of July 24, 2013, among the Borrower, the Administrative Agent, the Collateral Agent and the Lenders, it is anticipated that The Bank of New York will be replaced as Custodian by Citibank, N.A. and from and after such time as the transition contemplated with respect thereto is completed, Custodian shall mean Citibank, N.A. The term “Custodian” includes any agent or sub-custodian acting on behalf of the Custodian.
(i) The defined term “Guaranteed Obligations” set forth in Section 1.02 of the Guarantee and Security Agreement is hereby amended by inserting the following sentence immediately at the end thereof: “The Guaranteed Obligations shall in no event include Excluded Swap Obligations.”
(j) The defined term “Secured Obligations” set forth in Section 1.02 of the Guarantee and Security Agreement is hereby amended by inserting the following sentence immediately at the end thereof: “The Secured Obligations shall in no event include Excluded Swap Obligations.”
(k) Section 1.02 of the Guarantee and Security Agreement is hereby amended by inserting the following new defined terms in the correct alphabetical order:
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
 
4

“Qualified ECP Guarantor” shall mean, at any time, each Guarantor with total assets exceeding $10,000,000 at such time or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under §1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Specified Loan Party” means any Guarantor that is not an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder (determined prior to giving effect to Section 3.11 of this Agreement).
(l) Section 3 of the Guarantee and Security Agreement is hereby amended by inserting the following new Section 3.11 at the end thereof:
3.11. Keepwell. Each of the Guarantors that is a Qualified ECP Guarantor at the time the Guarantee or the grant of the security interest under the Loan Documents, in each case, by any Specified Loan Party, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under this Guarantee and the other Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under this Section 3.11 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full. Each Qualified ECP Guarantor intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of §1a(18)(A)(v)(II) the Commodity Exchange Act.”
(m) Section 10 of the Guarantee and Security Agreement is hereby amended by inserting a new Section 10.13 at the end thereof to read as follows:
Section 10.13 Replacement Custodian. Notwithstanding anything herein or in any other Loan Document to the contrary, from time to time, the Borrower may replace the existing financial institution serving as Custodian with an alternative financial institution reasonably acceptable to the Administrative Agent. The Borrower shall deliver written notice of any such proposed replacement to the Administrative Agent at least sixty (60) days prior to the proposed date of replacement, specifying the name of the financial institution proposed to act as the Custodian;  provided  that, in respect of the anticipated
 
5

replacement of The Bank of New York as Custodian with Citibank, N.A. contemplated in Amendment No. 1 to Senior Secured Credit Agreement and Second Amended and Restated Guarantee and Security Agreement dated as of July 24, 2013, among the Borrower, the Administrative Agent, the Collateral Agent and the Lenders, such written notice shall be at least one (1) day prior to the proposed date of replacement. In connection with any such replacement, the Borrower shall deliver, or cause to be delivered, to the Administrative Agent, any amendments, agreements, documents, instruments and legal opinions, and shall take all other actions, reasonably determined by the Administrative Agent to be necessary to comply (and to ensure compliance) with the terms and provisions of this Guarantee and Security Agreement. From and after such time as the replacement contemplated by this Section 10.13 is completed, the Custodian shall mean the applicable replacement financial institution.
(n) Annex 3 of the Guaranteed and Security Agreement is hereby deleted and replaced with the Annex 3 attached hereto as Exhibit A.
 
 	Section 3.	Change in Custodian.	
In connection with this Amendment No. 1, it is anticipated that the Borrower will replace The Bank of New York as Custodian with Citibank, N.A. as contemplated by the amended definition of “Custodian” and the new Section 10.13 of the Guarantee and Security Agreement. By execution of this Amendment No. 1, the Administrative Agent, the Collateral Agent and each of the Lenders hereby consent to such replacement and all such actions (and hereby authorize the Administrative Agent to take any such actions) required to terminate or modify any existing Security Documents or any other agreements with The Bank of New York in its capacity as Custodian.
 
 	Section 4.	Commitment Termination.	
(a) On the Amendment Effective Date (as defined below), the Borrower shall request, and the Lenders party hereto and listed on Exhibit B hereto agree to fund, subject to satisfaction of the conditions precedent in Section 4.02 of the Credit Agreement, Loans in the aggregate principal amounts set forth for such Lenders on such Exhibit B hereto. The proceeds of such funded Loans shall be used, and the Borrower hereby instructs the Administrative Agent to apply such proceeds, to prepay certain outstanding Loans advanced to the Borrower under the Credit Agreement, together with all interest accrued and unpaid thereon through the Amendment Effective Date.
(b) Immediately upon and after giving effect to the prepayment described in the preceding clause (a), the Commitments of the Lenders shall be as set forth on Exhibit C.
(c) With respect to the prepayment of the Loans and the reduction of Commitments as described in paragraphs (a) and (b) above, (i) the Administrative Agent hereby waives the provisions regarding notice requirements and minimum amounts in respect of any termination or reduction of Commitments provided for in Sections 2.08(b) and (c) of the Credit
 
6

Agreement and (ii) each Lender hereby waives (w) the provision regarding ratable funding of Loans set forth in Section 2.02(a) of the Credit Agreement, (x) the provisions regarding notice requirements and minimum amounts in respect of any termination or reduction of Commitments set forth in Sections 2.08(b) and (c) of the Credit Agreement, (y) the provision requiring ratable application amongst all Lenders of any Commitment reduction or termination set forth in Section 2.08(d) of the Credit Agreement and (z) the provisions requiring ratable application amongst all Lenders of all principal or interest prepaid by the Borrower set forth in Section 2.17(c) of the Credit Agreement.
 
 	Section 5.	Representations and Warranties.	
The Borrower represents and warrants to the Lenders and the Administrative Agent, as of the date of this Amendment No. 1 and on and as of the Amendment Effective Date (as defined below) and immediately after giving effect to this Amendment No. 1, as follows:
(a) Authorization; Enforceability. This Amendment No. 1 has been duly authorized, executed and delivered by the Borrower and each of this Amendment No. 1 and the Credit Agreement, as amended by this Amendment No. 1, constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b) No Conflict. Neither the execution, delivery and performance of this Amendment No. 1 nor the transactions contemplated herein will (i) violate any applicable law or regulation or the limited liability company operating agreement, charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority or (ii) violate or result in a default in any material respect under any Loan Document or any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person.
(c) Continued Security Interest. On the date of this Amendment No. 1 and after giving effect to this Amendment No. 1 and the transactions contemplated herein , the security interest created by and provided for in the Security Documents, shall constitute a valid first and prior perfected Lien on the Collateral (except that any such security interest in a Special Equity Interest may be subject to a Lien in favor of a creditor of the issuer of such Special Equity Interest as contemplated by the definition of such term in Section 1.02 of the Guarantee and Security Agreement).
(d) Representations in Loan Documents. The representations and warranties of the Borrower set forth in Article III of the Credit Agreement and in the other Loan Documents are true and correct in all material respects (except to the extent any such representation or warranty is itself qualified by materiality or reference to a Material Adverse Effect, in which case it is true and correct in all respects, subject to such qualification) on and as of the date of this Amendment No. 1 and on the Amendment Effective Date (as defined below), or, as to any such representation or warranty that refers to a specific date, as of such specific date.
 
7

(e) No Default. No Default has occurred and is continuing.
 
 	Section 6.	Conditions Precedent.	
This Amendment No. 1 shall become effective as of the date (the “Amendment Effective Date”) when, and only when, each of the following conditions precedent shall have been satisfied:
(a) the Administrative Agent shall have received one or more counterparts of this Amendment No. 1 executed by the Borrower, each other Obligor and each of the Lenders;
(b) all corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Amendment No. 1 shall be reasonably satisfactory in all respects to the Administrative Agent;
(c) a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Amendment Effective Date) of (i) Latham and Watkins LLP, New York counsel for the Obligors and (ii) Venable LLP, Maryland counsel for the Borrower, in each case, in form and substance reasonably acceptable to the Administrative Agent;
(d) the Borrower shall have paid to each Lender who has delivered to the Administrative Agent an executed counterpart of this Amendment No. 1 the fees set forth in the Fee Letter dated as of June 28, 2013 between the Borrower and the Administrative Agent;
(e) the Borrower shall have paid to each Lender all unpaid and outstanding interest and commitment fees accrued through the Amendment Effective Date;
(f) as consideration for (i) the extension of the Maturity Date and the Commitment Termination Date and (ii) the reduction in the Applicable Margin, each as set forth in this Amendment No. 1, the Borrower shall have paid all reasonable and documented costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and expenses of counsel) and all other costs, expenses and fees then due under any Loan Document;
(g) the representations and warranties of the Borrower set forth in this Amendment No. 1 and in the other Loan Documents shall be true and correct in all material respects (except to the extent any such representation or warranty is itself qualified by materiality or reference to a Material Adverse Effect, in which case it shall be true and correct in all respects, subject to such qualification) on and as of the date of the Amendment Effective Date or, as to any such representation or warranty that refers to a specific date, as of such specific date; and
(h) on and as of the Amendment Effective Date, no Default shall have occurred and be continuing.
 
8

 	Section 7.	Miscellaneous.	
Except as herein provided, the Credit Agreement and the Guarantee and Security Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment No. 1 by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment No. 1. This Amendment No. 1 shall be construed in accordance with and governed by the law of the State of New York.
[Remainder of page intentionally left blank; signatures follow]
 
9

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first above written.

SOLAR CAPITAL LTD.	
 	 	
By:	 	/s/ Richard Peteka	
 	 	Name: Richard Peteka
Title: CFO	
 	
SOLAR CAPITAL LUXEMBOURG I S.À.R.L	
 	 	
By:	 	/s/ Richard Peteka	
 	 	Name: Richard Peteka	
 	 	Title: CFO	
[Signature Page to Amendment No. 1]

 	 	 	
CITIBANK, N.A., as Administrative Agent, as
Collateral Agent and as a Lender	
 	 	
By:	 	/s/ Alexander Duka	
 	 	Name: Alexander Duka
Title: Managing Director	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS:	
 	
BANK OF MONTREAL	
 	 	
By:	 	/s/ Catherine Blaesing	
 	 	Name: Catherine Blaesing
Title: Vice President	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
DEUTSCHE BANK AG, NEW YORK BRANCH	
 	 	
By:	 	/s/ Dusan Lazarov	
 	 	Name: Dusan Lazarov
Title: Director	
 	 	
By:	 	/s/ Mary Kay Coyle	
 	 	Name: Mary Kay Coyle
Title: Managing Director	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
JPMORGAN CHASE BANK, N.A.	
 	 	 	
By:	 	/s/ Matthew Griffith	
 	 	Name: Matthew Griffith
Title: Executive Director	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
MORGAN STANLEY BANK, N.A.	
 	 	
By:	 	/s/ Kelly Chin	
 	 	Name: Kelly Chin
Title: Authorized Signatory	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
Executed solely with respect to Section 4:	
 	
ROYAL BANK OF CANADA	
 	 	
By:	 	/s/ Rahul D. Shah	
 	 	Name: Rahul D. Shah	
 	 	Title: Authorized Signatory	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
SUNTRUST BANK	
 	 	
By:	 	/s/ Doug Kennedy	
 	 	Name: Doug Kennedy	
 	 	Title: Vice President	
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
GOLDMAN SACHS BANK USA	
 	 	
By:	 	/s/ Mark Walton	
 	 	Name: Mark Walton
Title: Authorized Signatory	
 
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
ING CAPITAL LLC	
 	 	
By:	 	/s/ Patrick Frisch	
 	 	Name: Patrick Frisch
Title: Managing Director	
 
[Signature Page to Amendment No. 1]

 	 	 	
LENDERS (continued):	
 	
EVERBANK COMMERCIAL FINANCIAL, INC.	
 	 	
By:	 	/s/ John Dale	
 	 	Name: John Dale
Title: Managing Director	
 
[Signature Page to Amendment No. 1]

EXHIBIT A
ANNEX 3
LIST OF CASH AND SECURITIES ACCOUNTS AND COMMODITY ACCOUNTS
Cash & Securities Accounts

Intermediary	  	Name of Account	  	Account Number	
The Bank of New York	  	Solar Capital Ltd.	  	350954	
The Bank of New York	  	Solar Capital Ltd.	  	3509548400	
The Bank of New York	  	Solar Capital Ltd.	  	3509549780	
The Bank of New York	  	Solar Capital Ltd.	  	3509548260	
The Bank of New York	  	Solar Capital Ltd.	  	3509540360	
The Bank of New York	  	Solar Capital Ltd.	  	3509541240	
 	 	 	
The Bank of New York	  	Solar Capital Luxembourg I S.à.r.l.	  	350959	
The Bank of New York	  	Solar Capital Luxembourg I S.à.r.l.	  	3509598400	
The Bank of New York	  	Solar Capital Luxembourg I S.à.r.l.	  	3509599780	
The Bank of New York	  	Solar Capital Luxembourg I S.à.r.l.	  	3509598260	

Commodity Accounts	
 	
None	

EXHIBIT B

Lender	  	Euro Syndicated Loans	 	  	Canadian Dollar
Syndicated Loans	 	  	US Dollar
Syndicated Loans	 	
Citibank, N.A.	  	€	245,983.94	  	  	CA$	452,452.81	  	  	$	816,387.56	  	
JPMorgan Chase Bank, N.A.	  	€	245,983.94	  	  	CA$	452,452.81	  	  	$	816,387.56	  	
SunTrust Bank	  	€	245,983.94	  	  	CA$	452,452.81	  	  	$	816,387.56	  	
Goldman Sachs Bank USA	  	€	163,989.29	  	  	CA$	301,635.21	  	  	$	544,258.38	  	
ING Capital LLC	  	€	49,196.79	  	  	CA$	90,490.56	  	  	$	163,277.51	  	
Morgan Stanley Bank, NA	  	€	163,989.29	  	  	CA$	301,635.21	  	  	$	544,258.38	  	
Deutsche Bank, AG	  	€	131,191.43	  	  	CA$	241,308.16	  	  	$	435,406.70	  	
EverBank Commercial Financial Inc.	  	 	—  	  	  	 	—  	  	  	$	272,129.17	  	
Bank of Montreal	  	€	114,792.50	  	  	CA$	211,144.64	  	  	$	380,980.86	  	
TOTAL	  	€	1,361,111.11	  	  	CA$	2,503,572.21	  	  	$	4,789,473.68	  	

EXHIBIT C

Lender	  	Multicurrency
Commitment	 	  	Dollar
Commitment	 	  	Term
Commitment	 	
Citibank, N.A.	  	$	75,000,000	  	  	 	—  	  	  	 	—  	  	
JPMorgan Chase Bank, N.A.	  	$	75,000,000	  	  	 	—  	  	  	 	—  	  	
SunTrust Bank	  	$	75,000,000	  	  	 	—  	  	  	 	—  	  	
Goldman Sachs Bank USA	  	$	50,000,000	  	  	 	—  	  	  	 	—  	  	
ING Capital LLC	  	$	15,000,000	  	  	 	—  	  	  	$	35,000,000	  	
Morgan Stanley Bank, NA	  	$	50,000,000	  	  	 	—  	  	  	 	—  	  	
Deutsche Bank, AG	  	$	40,000,000	  	  	 	—  	  	  	 	—  	  	
EverBank Commercial Financial Inc.	  	$	0.00	  	  	$	25,000,000	  	  	$	15,000,000	  	
Bank of Montreal	  	$	35,000,000	  	  	 	—  	  	  	 	—  	  	
TOTAL	  	$	415,000,000	  	  	$	25,000,000	  	  	$	50,000,000	  	

EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
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 31st day of July, 2013

/S/    MICHAEL S. GROSS	
Michael S. Gross	

EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
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 31st day of July, 2013

/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, 2013 (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:	 	July 31, 2013	

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, 2013 (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:	 	July 31, 2013