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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 September 30, 2010
 
¨	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, 5th Floor
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  ¨          Accelerated filer  ¨        Non-accelerated filer  x         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 November 2, 2010 was 33,270,844.

 

Table of Contents
 
SOLAR CAPITAL LTD.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2010
TABLE OF CONTENTS

 	  	 	  	PAGE	 	
PART I. FINANCIAL INFORMATION	  	 	 	 	
 	 	 	
Item 1.	  	Report of Independent Registered Public Accounting Firm	  	 	3	  	
 	 	 	
 	  	Financial Statements:	  	 	 	 	
 	  	Consolidated Statements of Assets and Liabilities as of September 30, 2010 and December 31, 2009	  	 	4	  	
 	  	Consolidated Statements of Operations for the three and nine months ended September  30, 2010 and September 30, 2009	  	 	5	  	
 	  	Consolidated Statements of Changes in Net Assets for the nine months ended September  30, 2010 and the year ended December 31, 2009	  	 	6	  	
 	  	Consolidated Statements of Cash Flows for the nine months ended September  30, 2010 and September 30, 2009	  	 	7	  	
 	  	Consolidated Schedule of Investments as of September 30, 2010	  	 	8	  	
 	  	Consolidated Schedule of Investments as of December 31, 2009	  	 	11	  	
 	  	Notes to Consolidated Financial Statements	  	 	14	  	
Item 2.	  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	25	  	
Item 3.	  	Quantitative and Qualitative Disclosures About Market Risk	  	 	33	  	
Item 4.	  	Controls and Procedures	  	 	34	  	
 	 	
PART II. OTHER INFORMATION	  	 	 	 	
 	 	 	
Item 1.	  	Legal Proceedings	  	 	35	  	
Item 1A.	  	Risk Factors	  	 	35	  	
Item 2.	  	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	35	  	
Item 3.	  	Defaults upon Senior Securities	  	 	35	  	
Item 4.	  	Reserved	  	 	35	  	
Item 5.	  	Other Information	  	 	35	  	
Item 6.	  	Exhibits	  	 	36	  	
 	  	Signatures	  	 	38	  	
 
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PART I. FINANCIAL INFORMATION
 
Item 1.	Financial Statements	
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Solar Capital Ltd.:
We have reviewed the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital Ltd. (the Company) as of September 30, 2010, and the related consolidated statements of operations for the three and nine-month periods ended September 30, 2010 and 2009, changes in net assets for the nine-month period ended September 30, 2010 and cash flows for the nine-month periods ended September 30, 2010 and 2009, and the financial highlights (included in Note 11) for the nine-month period ended September 30, 2010. These consolidated financial statements and financial highlights are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial accounting and reporting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Capital LLC as of December 31, 2009, and the related consolidated statement of changes in net assets for the year ended December 31, 2009 and we expressed an unqualified opinion on them in our report dated March 1, 2010.

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

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

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

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

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

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

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

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

(1)	We generally acquire our investments in private transactions exempt from registration under the Securities Act. Our investments are therefore generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.	
(2)	A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to LIBOR or EURIBOR, and which reset daily, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of September 30, 2010.	
(3)	The following entities are domiciled outside the United States and the investments are denominated in either Euro, British Pounds or Australian Dollars: Iglo Birds Eye Group Limited, Global Garden Products and Weetabix Group in the United Kingdom; ProSieben Sat.1 Media AG in Germany; and Seven Media Group Pty Limited in Australia. All other investments are domiciled in the United States.	
(4)	Solar Capital Ltd.’s investments in Iglo Birds Eye Group Limited are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(5)	Solar Capital Ltd.’s investments in Classic Cruises Holdings are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(6)	Solar Capital Ltd.’s investments in Global Garden Products are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(7)	Solar Capital Ltd.’s investments in Weetabix Group are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(8)	Solar Capital Ltd.’s investments in ProSieben Sat. 1 Media AG are held through its wholly-owned subsidiary Solar Capital Luxembourg I S.a.r.l.	
(9)	Solar Capital Ltd. has an unfunded commitment of $9,946.	
(10)	Denotes a Control Investment. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control.” Generally, under the 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board.	
(11)	Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not “Control Investments.” The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company.	
(12)	Investment is on non-accrual status	
(13)	Common Shares	
(14)	Founders Shares	
(15)	Contingent Founders Shares	
(16)	Common Stock	
(17)	Administrative agent to NXP management equity plan	
(18)	Includes an unfunded commitment of $35,000.	
See notes to consolidated financial statements.
 
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Table of Contents
 
SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
September 30, 2010
(unaudited)

Industry Classification	  	Percentage of  Total
Investments (at fair
value) as of
September 30, 2010	 	
Beverage, Food, and Tobacco	  	 	18	% 	
Personal, Food and Misc. Services	  	 	8	% 	
Banking	  	 	8	% 	
Aerospace & Defense	  	 	6	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Leisure, Motion Pictures, Entertainment	  	 	5	% 	
Broadcasting & Entertainment	  	 	5	% 	
Cargo Transport	  	 	4	% 	
Farming & Agriculture	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Finance	  	 	4	% 	
Retail Stores	  	 	4	% 	
Automobile	  	 	3	% 	
Real Estate	  	 	3	% 	
Grocery	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Textiles and Leather	  	 	2	% 	
Healthcare, Education, and Childcare	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Electronics	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
10

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

Description(1)	 	Industry	 	Interest(2)	 	 	Maturity	 	 	Par Amount/
Shares	 	 	Cost	 	 	Fair
Value	 	
Bank Debt/Senior Secured Loans – 18.8%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Affinity 1st Lien	 	Printing, Publishing, Broadcasting	 	 	12.75	  	 	 	3/31/2010	  	 	$	18,771	  	 	$	18,372	  	 	$	18,489	  	
Asurion Corporation	 	Insurance	 	 	6.73	  	 	 	7/3/2015	  	 	 	55,000	  	 	 	54,939	  	 	 	51,700	  	
Classic Cruises Holdings(5)	 	Leisure, Motion Pictures,
Entertainment	 	 	10.02	  	 	 	1/31/2015	  	 	 	26,000	  	 	 	25,350	  	 	 	20,800	  	
Emdeon Business Services LLC	 	Healthcare, Education, and Childcare	 	 	5.29	  	 	 	5/16/2014	  	 	 	15,000	  	 	 	15,112	  	 	 	14,400	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	25,182	  	 	 	24,740	  	 	 	26,152	  	
Ram Energy Resources, Inc.	 	Oil & Gas	 	 	12.75	  	 	 	11/29/2012	  	 	 	12,827	  	 	 	12,769	  	 	 	12,058	  	
Wyle Laboratories	 	Aerospace & Defense	 	 	15.00	  	 	 	1/17/2015	  	 	 	20,000	  	 	 	19,614	  	 	 	19,900	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Bank Debt/Senior Secured Loans	 	 	 	 	 	 	 	 	 	 	 	$	172,780	  	 	$	170,896	  	 	$	163,499	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subordinated Debt/Corporate Notes – 74.4%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allied Capital	 	Finance	 	 	6.00	  	 	 	4/1/2012	  	 	$	15,393	  	 	$	9,362	  	 	$	14,392	  	
Allied Capital	 	Finance	 	 	6.63	  	 	 	7/15/2011	  	 	 	14,500	  	 	 	8,880	  	 	 	13,920	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	13.50	  	 	 	6/20/2011	  	 	 	40,000	  	 	 	39,445	  	 	 	35,360	  	
Adams Outdoor Advertising	 	Diversified / Conglomerate Service	 	 	10.88	  	 	 	6/20/2011	  	 	 	18,237	  	 	 	18,345	  	 	 	15,538	  	
AMC Entertainment Holdings, Inc.	 	Leisure, Motion Pictures,
Entertainment	 	 	5.25	  	 	 	6/13/2012	  	 	 	24,383	  	 	 	24,106	  	 	 	20,433	  	
Booz Allen	 	Aerospace & Defense	 	 	13.00	  	 	 	7/31/2016	  	 	 	43,000	  	 	 	42,220	  	 	 	43,000	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.73	  	 	 	9/13/2016	  	 	 	7,860	  	 	 	7,542	  	 	 	7,565	  	
Casema B.V.(3)	 	Telecommunications	 	 	9.69	  	 	 	9/13/2016	  	 	 	8,478	  	 	 	8,135	  	 	 	8,109	  	
Direct Buy Inc.	 	Home and Office Furnishing,
Consumer Products	 	 	16.00	  	 	 	5/30/2013	  	 	 	36,593	  	 	 	36,092	  	 	 	31,104	  	
DS Waters	 	Beverage, Food, and Tobacco	 	 	14.00	  	 	 	4/24/2012	  	 	 	99,565	  	 	 	98,664	  	 	 	95,085	  	
Earthbound	 	Beverage, Food, and Tobacco	 	 	15.25	  	 	 	7/20/2016	  	 	 	40,000	  	 	 	38,875	  	 	 	39,800	  	
Fleetpride Corporation	 	Cargo Transport	 	 	11.50	  	 	 	10/1/2014	  	 	 	43,000	  	 	 	43,145	  	 	 	38,754	  	
FreedomRoads	 	Automotive	 	 	16.00	  	 	 	6/20/2011	  	 	 	27,500	  	 	 	27,076	  	 	 	25,603	  	
Global Garden Products(3)(6)(12)	 	Farming & Agriculture	 	 	12.72	  	 	 	10/31/2016	  	 	 	19,674	  	 	 	20,136	  	 	 	—  	  	
Grakon, LLC(13)	 	Machinery	 	 	12.00	  	 	 	6/19/2013	  	 	 	20,403	  	 	 	19,306	  	 	 	5,101	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.99	  	 	 	11/3/2016	  	 	 	5,230	  	 	 	4,908	  	 	 	4,942	  	
Iglo Birds Eye Group Limited(3)(4)	 	Beverage, Food, and Tobacco	 	 	8.52	  	 	 	11/3/2016	  	 	 	12,200	  	 	 	14,701	  	 	 	11,527	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/Conglomerate
Manufacturing	 	 	16.50	  	 	 	6/29/2014	  	 	 	4,219	  	 	 	4,045	  	 	 	—  	  	
Jonathan Engineering Solutions Corp.(12)	 	Diversified/
Conglomerate Manufacturing	 	 	13.00	  	 	 	6/29/2014	  	 	 	10,641	  	 	 	10,614	  	 	 	—  	  	
Learning Care Group No.2, Inc	 	Healthcare, Education, and Childcare	 	 	13.50	  	 	 	12/28/2015	  	 	 	31,173	  	 	 	30,797	  	 	 	27,276	  	
Magnolia River, LLC	 	Hotels, Motels, Inns & Gaming	 	 	14.00	  	 	 	4/28/2014	  	 	 	19,064	  	 	 	18,327	  	 	 	13,345	  	
National Interest Security Corporation(11)	 	Aerospace & Defense	 	 	15.00	  	 	 	6/11/2013	  	 	 	30,539	  	 	 	30,229	  	 	 	31,303	  	
Pacific Crane Maintenance Company, L.P. (12)	 	Machinery	 	 	13.00	  	 	 	2/15/2014	  	 	 	9,045	  	 	 	8,920	  	 	 	—  	  	
ProSieben Sat.1 Media AG(3)(8)(13)	 	Broadcasting & Entertainment	 	 	8.15	  	 	 	3/6/2017	  	 	 	21,437	  	 	 	19,804	  	 	 	5,505	  	
Rug Doctor L.P.	 	Personal, Food and Misc. Services	 	 	14.94	  	 	 	10/31/2014	  	 	 	48,253	  	 	 	45,920	  	 	 	45,841	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	11.18	  	 	 	12/29/2013	  	 	 	18,086	  	 	 	16,328	  	 	 	16,278	  	
Seven Media Group Pty Limited(3)	 	Broadcasting & Entertainment	 	 	12.00	  	 	 	12/29/2013	  	 	 	6,857	  	 	 	5,283	  	 	 	6,068	  	
Tri-Star Electronics International, Inc.	 	Aerospace & Defense	 	 	15.25	  	 	 	8/2/2013	  	 	 	22,546	  	 	 	22,420	  	 	 	16,008	  	
Wastequip, Inc.(13)	 	Containers, Packaging and Glass	 	 	12.00	  	 	 	2/5/2015	  	 	 	15,745	  	 	 	14,953	  	 	 	3,149	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	10.62	  	 	 	9/14/2016	  	 	 	13,627	  	 	 	16,335	  	 	 	9,879	  	
Weetabix Group(3)(7)	 	Beverage, Food, and Tobacco	 	 	9.83	  	 	 	5/7/2017	  	 	 	29,211	  	 	 	34,948	  	 	 	20,447	  	
Wire Rope Corporation (nka WireCo World Group)	 	Diversified/Conglomerate
Manufacturing	 	 	11.00	  	 	 	2/8/2015	  	 	 	39,000	  	 	 	38,302	  	 	 	36,660	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Subordinated Debt/Corporate Notes	 	 	 	 	 	 	 	 	 	 	 	$	795,459	  	 	$	778,163	  	 	$	641,992	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)
December 31, 2009
(in thousands, except shares)

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

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

Industry Classification	  	Percentage of  Total
Investments (at fair
value) as of
December 31, 2009	 	
Beverage, Food, and Tobacco	  	 	21	% 	
Aerospace & Defense	  	 	17	% 	
Diversified / Conglomerate Service	  	 	6	% 	
Insurance	  	 	6	% 	
Personal, Food and Misc. Services	  	 	5	% 	
Healthcare, Education, and Childcare	  	 	5	% 	
Leisure, Motion Pictures, Entertainment	  	 	4	% 	
Cargo Transport	  	 	4	% 	
Diversified / Conglomerate Manufacturing	  	 	4	% 	
Finance	  	 	4	% 	
Home and Office Furnishing, Consumer Products	  	 	4	% 	
Broadcasting & Entertainment	  	 	3	% 	
Automotive	  	 	3	% 	
Real Estate	  	 	2	% 	
Telecommunications	  	 	2	% 	
Hotels, Motels, Inns & Gaming	  	 	2	% 	
Printing, Publishing, Broadcasting	  	 	2	% 	
Oil & Gas	  	 	1	% 	
Mining, Steel, Iron, and Nonprecious Metals	  	 	1	% 	
Machinery	  	 	1	% 	
Containers, packaging and glass	  	 	1	% 	
Business Services	  	 	1	% 	
Electronics	  	 	1	% 	
 	  	 	 	 	
 	  	 	100	% 	
 	  	 	 	 	
See notes to consolidated financial statements.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(in thousands, except shares)
(unaudited)
Note 1. Organization
Solar Capital Ltd. (“Solar Capital”, the “Company” or “we”), a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company intends to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
On February 9, 2010, Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.
Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity (the “Merger”). Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger. Solar Capital Ltd. had no assets or operations prior to completion of the Merger and as a result, the historical books and records of Solar Capital LLC have become the books and records of the surviving entity.
Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties.
The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company invests primarily in middle-market companies in the form of mezzanine and senior secured loans, each of which may include an equity component, and, to a lesser extent, by making direct equity investments in such companies.
Note 2. Significant Accounting Policies
Basis of Presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and its wholly-owned subsidiary, Solar Capital Luxembourg I S.a.r.l., which was incorporated under the laws of the Grand Duchy of Luxembourg on April 26, 2007. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated.
Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2010.
Certain prior period amounts have been reclassified to conform to current period presentation. As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
Accounting Standards Codification – The FASB established the Accounting Standards CodificationTM (“ASC”) on July 2, 2009 as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting literature not included in the ASC is no longer authoritative.
Following the ASC, the FASB no longer issues new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it issues Accounting Standards Updates, which serve to update the ASC, provide background information about the guidance and provide the basis for conclusions on the changes to the ASC. GAAP was not changed as a result of the FASB’s codification project, but the codification project changes the way guidance is organized and presented. As a result, these changes have a significant impact on how we reference GAAP in our financial statements for interim and annual periods.
Investments – The Company applies fair value accounting in accordance with GAAP. Securities transactions are accounted for on trade date. Securities for which market quotations are readily available on an exchange are valued at such price as of the closing price on the valuation date. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s investment adviser (the “Adviser”) or Board of Directors (the “Board”), does not represent fair value, shall each be valued as follows:
 
 	1)	The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;	
 
 	2)	Preliminary valuation conclusions are then documented and discussed with senior management;	
 
 	3)	Third-party valuation firms are engaged by, or on behalf of, the Board to conduct independent appraisals and review management’s preliminary valuations and make their own independent assessment, for all material assets; and	
 
 	4)	The Board discusses valuations and determines the fair value of each investment in the portfolio in good faith based on the input of our investment adviser (note 4) and, where appropriate, the respective independent valuation firms.	
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Valuation methods, among other measures and as applicable, may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
Cash and Cash Equivalents – Cash and cash equivalents include investments in money market accounts or investments with original maturities of three months or less.
Revenue Recognition – The Company’s revenue recognition policies are as follows:
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. The Company has loans in its portfolio that contain a payment-in-kind (“PIK”) provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates.
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.
U.S. Federal Income Taxes – The Company intends to elect to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the nine months ended September 30, 2010, there was no U.S. Federal excise tax accrued.
The Company is also subject to taxes in Luxembourg, through Solar Capital Luxembourg I S.a.r.l., a wholly-owned subsidiary. Under the laws of Luxembourg, the Company pays a corporate income tax and a municipal business tax on its subsidiary’s taxable income.
Capital Accounts – Certain capital accounts including undistributed net investment income, accumulated net realized gain or loss, net unrealized appreciation or depreciation, and paid in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.
Dividends – Dividends and distributions to common stockholders are recorded on the ex-dividend date. Quarterly dividend payments are determined by the Board and are generally based upon taxable earnings estimated by management. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital gains for investment.
We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. While we generally use newly issued shares to implement the plan (especially if our shares are trading at a premium to net asset value), we may purchase shares in the open market in connection with our obligations under the plan. In particular, if our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan.
Foreign Currency Translation – The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. The Company’s investments in foreign securities may involve certain risks such as foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments and Hedging Activity – In accordance with GAAP, the Company recognizes derivatives as either assets or liabilities at their fair value on its Consolidated Statements of Assets and Liabilities. At this time, the Company does not document formal hedge relationships because the hedged items are recorded at fair value with realized and unrealized gains and losses recognized in current earnings. Realized and unrealized gains and losses from derivatives are also
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)
 
recorded in current earnings. Realized gains or losses from derivatives are recognized when contracts are settled. The Company primarily uses foreign exchange forward contracts to economically hedge its foreign currency risk. The fair value of foreign exchange forward contracts is determined by recognizing the difference between the contract exchange rate and the current market exchange rate. These fair values are recognized as either derivative assets or derivative liabilities in the Company’s Consolidated Statements of Assets and Liabilities. The Company may also borrow in foreign currencies on its multicurrency credit lines to reduce foreign currency exposure. Fluctuations in market values of assets and liabilities denominated in the same foreign currency offset in earnings providing a “natural” foreign currency hedge.
Deferred Offering Costs – Offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in connection with offerings of our common stock.
Use of Estimates in the Preparation of Financial Statements – The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.
Subsequent Events Evaluation – The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued and determined that none are required.
Note 3. Investments
Investments consisted of the following as of September 30, 2010 and December 31, 2009:

 	  	September 30 2010
(unaudited)	 	  	December 31, 2009	 	
 	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt / Senior Secured Loans	  	$	189,852	  	  	$	185,689	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt / Corporate Notes	  	 	722,705	  	  	 	661,289	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	42	  	  	 	39	  	  	 	40	  	
Common Equity / Partnership Interests / Warrants	  	 	118,562	  	  	 	58,959	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,031,158	  	  	$	905,979	  	  	$	1,063,988	  	  	$	863,140	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of September 30, 2010, the Company had two investments on non-accrual status with a total market value of $5.1 million.
As of December 31, 2009, the Company had three investments on non-accrual status with a total market value of zero.
Note 4. Agreements
Solar Capital has an Investment Advisory and Management Agreement with Solar Capital Partners LLC (the “Investment Adviser”), under which the Investment Adviser will manage the day-to-day operations of, and provide investment advisory services to, Solar Capital. For providing these services, the Investment Adviser receives a fee from Solar Capital, consisting of two components—a base management fee and an incentive fee. The base management fee is determined by taking the average value of Solar Capital’s gross assets at the end of the two most recently completed calendar quarters calculated at an annual rate of 2.00%. The incentive fee has two parts, as follows: one part is calculated and payable quarterly in arrears based on Solar Capital’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus Solar Capital’s operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income does not include any realized capital gains computed net of all realized capital losses and unrealized capital depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of Solar Capital’s net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2% base management fee. Solar Capital pays the Investment Adviser an incentive fee with respect to Solar Capital’s pre-incentive fee net investment income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which Solar Capital’s pre-incentive fee net investment income does not exceed the hurdle rate; (2) 100% of Solar Capital’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter; and (3) 20% of the amount of Solar Capital’s pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date), commencing on February 12, 2007, and will equal 20% of Solar Capital’s cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the advisor.
Solar Capital has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which the Administrator provides administrative services for Solar Capital. For providing these services, facilities and personnel, Solar Capital reimburses the Administrator for Solar Capital’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent. The Administrator will also provide, on Solar Capital’s behalf, managerial assistance to those portfolio companies to which Solar Capital is required to provide such assistance.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Note 5. Derivatives
The Company is exposed to foreign exchange risk through its investments denominated in foreign currencies. The Company mitigates this risk through the use of foreign currency forward contracts. As an investment company, all changes in the fair value of assets, including changes caused by foreign currency fluctuation, flow through current earnings. The forward contracts serve as an economic hedge with their realized and unrealized gains and losses also recorded in current earnings. The Company has no derivatives designated as hedging instruments. During the nine months ended September 30, 2010, the Company entered into 59 foreign currency forward contracts with durations of 1 month and an average U.S. dollar value of $25,440. During the year ended December 31, 2009, the Company entered into 81 foreign currency forward contracts with durations of 1 to 3 months and an average U.S. dollar value of $29,757.
As of September 30, 2010, there were three open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, all of which terminate on October 8, 2010. As of December 31, 2009, there were nine open forward foreign currency contracts denominated in Euro, Australian Dollar and British Pounds, six of which terminated on January 15, 2010 and three of which terminated on February 16, 2010. At September 30, 2010 and December 31, 2009, there was no fixed collateral held by counterparties for the open contracts and no credit-related contingent features associated with any of the open forward contracts. The contract details are as follows:

 	  	 	  	September 30, 2010	 	 	December 31, 2009	 	
 	  	 	  	(unaudited)	 	 	 	 	 	 	 	  	 	 	
Purchase:	  	Counterparty	  	Local
Currency	 	  	USD Value	 	  	Unrealized
appreciation
(depreciation)	 	 	Local
Currency	 	 	USD Value	 	  	Unrealized
appreciation
(depreciation)	 	
USD / AUD	  	SunTrust Bank	  	 	30,405	  	  	$	27,778	  	  	$	(1,618	) 	 	 	(734	) 	 	$	658	  	  	$	1	  	
USD / AUD	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	734	  	 	 	669	  	  	 	10	  	
USD / AUD	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	734	  	 	 	655	  	  	 	(1	) 	
USD / EURO	  	SunTrust Bank	  	 	12,611	  	  	 	16,048	  	  	 	(1,151	) 	 	 	(317	) 	 	 	461	  	  	 	(7	) 	
USD / EURO	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	317	  	 	 	463	  	  	 	10	  	
USD / EURO	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	6,317	  	 	 	9,185	  	  	 	135	  	
USD / GBP	  	SunTrust Bank	  	 	37,070	  	  	 	57,302	  	  	 	(956	) 	 	 	(825	) 	 	 	1,351	  	  	 	(17	) 	
USD / GBP	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	825	  	 	 	1,342	  	  	 	8	  	
USD / GBP	  	SunTrust Bank	  	 	 	 	  	 	 	 	  	 	 	 	 	 	6,825	  	 	 	11,165	  	  	 	130	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Total	  	 	  	 	 	 	  	$	101,128	  	  	$	(3,725	) 	 	 	 	 	 	$	25,949	  	  	$	269	  	
 	  	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
The following tables show the fair value and effect of the derivative instruments on the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Operations:

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

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

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

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

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

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
 
 	a)	Quoted prices for similar assets or liabilities in active markets;	
 
 	b)	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);	
 
 	c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and	
 
 	d)	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.	
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Levels 1 and 2 financial instruments entered into by the Company that economically hedge certain exposures to the Level 3 positions.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.
During the third quarter of 2010, one investment with a current market value of $0.3 million was transferred from Level 2 to Level 1, when its listed common stock became freely tradable as restrictions expired.
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis, as of September 30, 2010 and December 31, 2009:
Fair Value Measurements
As of September 30, 2010
(unaudited)

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

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

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

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

 	  	Bank Debt/Senior
Secured Loans	 	 	Subordinated Debt/
Corporate Notes	 	 	Preferred
Equity	 	 	Common Equity/
Partnership
Interests/Warrants	 	
Fair value, January 1, 2009	  	$	97,665	  	 	$	509,416	  	 	$	6,145	  	 	$	67,752	  	
Total gains or losses included in earnings:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net realized loss	  	 	(50,032	) 	 	 	(75,837	) 	 	 	(61,101	) 	 	 	(61,081	) 	
Net change in unrealized gain (loss)	  	 	82,880	  	 	 	58,509	  	 	 	54,957	  	 	 	48,941	  	
Purchases, sales, issuances, and settlements (net)	  	 	(770	) 	 	 	83,943	  	 	 	39	  	 	 	(491	) 	
Transfers into Level 3	  	 	33,756	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value, December 31, 2009	  	$	163,499	  	 	$	576,031	  	 	$	40	  	 	$	55,121	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in unrealized gain (loss):	  	$	34,333	  	 	$	23,128	  	 	$	2	  	 	$	(9,480	) 	
The Company had no assets or liabilities measured at fair value on a nonrecurring basis during the year.
 
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Table of Contents
SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Note 9. Stockholders’ Equity
The table below illustrates the effect of certain transactions on our capital accounts for the nine months ended September 30, 2010:

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

(1)	Immediately prior to the initial public offering, through a series of transactions Solar Capital Ltd. merged with Solar Capital LLC, leaving Solar Capital Ltd. as the surviving entity. Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in Senior Unsecured Notes to the existing Solar Capital LLC unit holders in connection with the Merger.	
(2)	On February 9, 2010 Solar Capital Ltd. priced its initial public offering, selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Concurrent with this offering, management purchased an additional 600,000 shares through a private placement, also at $18.50 per share.	
Note 10. Earnings Per Share
The following information sets forth the computation of basic and diluted net increase (decrease) in shareholders’ capital per share resulting from operations for the three and nine months ended September 30, 2010 and 2009:

 	  	Three months ended
September 30, 2010	 	  	Three months ended
September 30, 2009	 	  	Nine months ended
September 30, 2010	 	  	Nine months ended
September 30, 2009	 	
Numerator for basic and diluted earnings per share:	  	$	21,009	  	  	$	38,564	  	  	$	99,527	  	  	$	46,980	  	
Denominator for basic and diluted weighted average share:	  	 	33,165,867	  	  	 	32,860,454	  	  	 	32,918,479	  	  	 	32,860,454	  	
Basic and diluted net increase in share holders’ equity resulting from operations per share:	  	$	0.63	  	  	$	1.17	  	  	$	3.02	  	  	$	1.43	  	
As required by ASC 260-10, the number of shares used to calculate weighted average shares for use in computations on a per share basis have been decreased retroactively by a factor of approximately 0.4022 for all periods prior to February 9, 2010. This factor represents the effective impact of the reduction in shares resulting from the Merger.
 
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SOLAR CAPITAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in thousands, except shares)
(unaudited)

Note 11. Financial Highlights
The following is a schedule of financial highlights for the nine months ended September 30, 2010:

 	  	Nine months ended
September 30, 2010
(unaudited)	 	
Per Share Data:(a)	  	 	 	 	
Net asset value, beginning of period	  	$	21.24	  	
Net investment income	  	 	1.57	  	
Net realized and unrealized gain (loss)	  	 	1.45	  	
 	  	 	 	 	
Net increase (decrease) in net assets resulting from operations	  	 	3.02	  	
Effect of dilution	  	 	(0.32	) 	
Offering costs	  	 	(0.31	) 	
Dividends to shareholders declared	  	 	(1.54	) 	
 	  	 	 	 	
Net asset value, end of period	  	$	22.09	  	
 	  	 	 	 	
Total return(c)	  	 	24.27	% 	
Net assets, end of period	  	$	732,597	  	
Per share market value at end of period	  	 	21.45	  	
Shares outstanding end of period	  	 	33,168,872	  	
Ratio to average net assets	  	 	 	 	
Expenses without incentive fees(b)	  	 	5.21	% 	
Incentive fees	  	 	1.79	% 	
 	  	 	 	 	
Total expenses	  	 	7.01	% 	
Net investment income without incentive fees(b)	  	 	9.58	% 	
 
(a)	Calculated using the weighted average shares outstanding method	
(b)	Annualized	
(c)	Total return = [(ending market price per share – IPO price per share + dividends declared per share) / IPO price per share]	
Note 12. New Accounting Pronouncements and Accounting Standards Updates
Fair Value Measurements and Disclosures
In January 2010, the FASB issued an update to ASC 820, Fair Value Measurements and Disclosures Topic, which will require additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
Note 13. Related Parties
From July 2006 through approximately the first quarter of 2009, Mr. Gross, the Company’s chairman and chief executive officer, was a partner in Magnetar Capital Partners LP. Mr. Spohler, our chief operating officer together with Solar Capital Partners LLC’s other investment professionals, advised Magnetar Financial LLC (“Magnetar”) on certain investments which coincide with those of Solar Capital. Certain entities affiliated with Magnetar own as of September 30, 2010 and December 31, 2009, either directly or indirectly, approximately 19.53% and 42.84%, respectively, of our outstanding equity.
 
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SOLAR CAPITAL LTD.
SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
(unaudited)
(in thousands, except shares)
Schedule 12-14

Portfolio Company	  	Investment	 	  	As of September 30, 2010
Number of Shares/
Principal Amount	 	  	Nine-Month  Period
ended
September 30, 2010	 	  	As of
September 30,
2010
Fair Value	 	 	
 	  	 	 	  	 	 	  	Amount of
dividends
and interest
included in
income	 	  	Amount of
equity in
net profit
and loss	 	  	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	  	 	Equity	  	  	 	1,000,000	  	  	$	300	 	  	$	—  	  	  	$	10,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	$	300	 	  	$	—  	  	  	$	10,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Senior Debt	  	  	$	—  	  	  	$	3,544	  	  	$	—  	  	  	$	—  	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Subordinated	  	  	$	—  	  	  	 	4,075	  	  	 	—  	  	  	 	—  	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Equity	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	  	 	Equity	  	  	 	34,806,121	  	  	 	—  	  	  	 	—  	  	  	 	24,966	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	$	7,619	  	  	$	—  	  	  	$	24,966	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
The table below represents the balance at the beginning of the period, December 31, 2009 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of September 30, 2010.
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
Gross reductions represent decreases in the investment from sales of investments or repayments.

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

Portfolio Company	  	Investment	 	  	As of December 31, 2009
Number of Shares
Principal Amount	 	  	Year ended
December 31, 2010	 	  	As of
December 31,
2009
Fair Value	 	 	
 	  	 	 	  	 	 	  	Amount  of
dividends
and interest
included in
income	 	  	Amount of
equity in
net profit
and loss	 	  	 	 	 	 	 	 	 	 	 	
Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Specialty Alloys, LLC	  	 	Equity	  	  	 	1,000,000	  	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 25%	  	 	 	 	  	 	 	 	  	$	—  	  	  	$	—  	  	  	$	9,000	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Investment Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Senior Debt	  	  	$	25,182	  	  	$	4,163	  	  	$	—  	  	  	$	26,152	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Subordinated	  	  	$	30,539	  	  	 	5,027	  	  	 	—  	  	  	 	31,303	  	 	 	 	 	 	 	 	
National Interest Security Corp.	  	 	Equity	  	  	 	2,265,023	  	  	 	—  	  	  	 	—  	  	  	 	16,293	  	 	 	 	 	 	 	 	
Ark Real Estate Partners LP	  	 	Equity	  	  	 	28,006,121	  	  	 	—  	  	  	 	—  	  	  	 	19,675	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total Investments Owned Greater than 5% and Less than 25%	  	 	 	 	  	 	 	 	  	$	9,109	  	  	$	—  	  	  	$	93,423	  	 	 	 	 	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
The table below represents the balance at the beginning of the period, December 31, 2008 and any gross additions and reductions and net unrealized gain (loss) made to such investments as well as the ending fair value as of December 31, 2009.
Gross additions represent increases in the investment from additional investments, payments in kind of interest or dividends.
Gross reductions represent decreases in the investment from sales of investments or repayments.

 	  	Beginning
Fair  Value
December 31,
2008	 	  	Gross
additions	 	  	Gross
reductions	 	  	Change in
Unrealized
Gain
(Loss)	 	 	Fair Value
as  of
December 31,
2009	 	
National Specialty Alloys, LLC	  	$	12,900	  	  	$	—  	  	  	$	—  	  	  	$	(3,900	) 	 	$	9,000	  	
505 Capital Partners GP	  	 	30	  	  	 	—  	  	  	 	30	  	  	 	—  	  	 	 	—  	  	
National Interest Security Corp.	  	 	24,679	  	  	 	171	  	  	 	19	  	  	 	1,321	  	 	 	26,152	  	
National Interest Security Corp.	  	 	27,180	  	  	 	186	  	  	 	29	  	  	 	3,966	  	 	 	31,303	  	
National Interest Security Corp.	  	 	12,951	  	  	 	—  	  	  	 	—  	  	  	 	3,342	  	 	 	16,293	  	
Ark Real Estate Partners LP	  	 	24,619	  	  	 	—  	  	  	 	—  	  	  	 	(4,944	) 	 	 	19,675	  	
 
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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this report.
Overview
Solar Capital Ltd. (“Solar Capital”, the “Company” or “we”), a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes the Company intends to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
On February 9, 2010, Solar Capital Ltd. priced its initial public offering (the “IPO”) selling 5.68 million shares, including the underwriters’ over-allotment, at a price of $18.50 per share. Net of underwriting fees the Company raised a total of $97.7 million and its shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, Solar Capital Ltd. sold 0.60 million shares at $18.50 in a concurrent private placement to management.
Immediately prior to our initial public offering, through a series of transactions Solar Capital LLC merged with and into Solar Capital Ltd., leaving Solar Capital Ltd. as the surviving entity (the “Solar Capital Merger”). Solar Capital Ltd. issued an aggregate of approximately 26.65 million shares of common stock and $125 million in senior unsecured notes (“Senior Unsecured Notes”) to the existing Solar Capital LLC unit holders in connection with the Solar Capital Merger. Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and conducted a private placement of units of membership interest (“units”) in March 2007. Solar Capital Ltd. had no assets or operations prior to completion of the Solar Capital Merger and as a result, the historical books and records of Solar Capital LLC have become the books and records of the surviving entity.
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle market companies in the form of senior secured loans, mezzanine loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $20 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We are managed by Solar Capital Partners LLC. Solar Capital Management LLC provides the administrative services necessary for us to operate.
In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States.
As of September 30, 2010, our long term investments totaled $906.0 million and our net asset value was $732.7 million. Our portfolio was comprised of debt and equity investments in 34 portfolio companies and our income producing assets, which represented 92.9% of our total portfolio, had a weighted average annualized yield on fair value of approximately 14.1%.
Recent Developments
Dividend
On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010. We expect the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the calendar year.
 
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting policies (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.
Valuation of Portfolio Investments
We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail below:
Securities for which market quotations are readily available on an exchange are valued at the closing price on the valuation date. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or board of directors, does not represent fair value, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the board of directors will conduct independent appraisals and review management’s preliminary valuations and make their own assessment for all material assets; (iv) the board of directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.
The recommendation of fair value will generally be based on the following factors, as relevant:
 
 	•	 	the nature and realizable value of any collateral;	
 
 	•	 	the portfolio company’s ability to make payments;	
 
 	•	 	the portfolio company’s earnings and discounted cash flow;	
 
 	•	 	the markets in which the issuer does business; and	
 
 	•	 	comparisons to publicly traded securities.	
Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:
 
 	•	 	private placements and restricted securities that do not have an active trading market;	
 
 	•	 	securities whose trading has been suspended or for which market quotes are no longer available;	
 
 	•	 	debt securities that have recently gone into default and for which there is no current market;	
 
 	•	 	securities whose prices are stale;	
 
 	•	 	securities affected by significant events; and	
 
 	•	 	securities that the investment adviser believes were priced incorrectly.	
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
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GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities and exchange-traded derivatives).
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private debt and equity investments) and long-dated or complex derivatives (including certain equity and currency derivatives).
At September 30, 2010 the fair value of investments classified as Level 3 was $745.5 million or 58.7% of total assets. There were no investments transferred into Level 3 during the first, second, or third quarter of 2010. During the second quarter of 2010, two investments with a then current total market value of $98.0 million were transferred from Level 3 to Level 2 due to the reliability of broker quotes for these assets resulting from increased market liquidity. During the third quarter of 2010, one investment with a current market value of $0.3 million was transferred from Level 2 to Level 1, when its listed common stock became freely tradable as restrictions expired, and one investment with a current market value of $12.3 million was transferred from Level 3 to Level 2, as it completed an initial public offering and its shares became listed on an exchange but were still restricted from sale.
Revenue Recognition
Our revenue recognition policies are as follows:
Sales: Gains or losses on the sale of investments are calculated by using the specific identification method.
Interest Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of interest income. We have loans in our portfolio that contain a PIK provision. PIK interest is accrued at the contractual rates and added to the loan principal on the reset dates. For us to maintain our status as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends, even though we have not collected any cash with respect to PIK securities.
Non-accrual: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment about ultimate collectability of principal. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.
 
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Portfolio Investments
At September 30, 2010, we had investments in securities of 34 portfolio companies with a total fair value of approximately $906.0 million compared to investments in securities of 36 portfolio companies with a total fair value of approximately $863.1 million at December 31, 2009. At September 30, 2010, we had investments in debt and preferred securities of 28 portfolio companies, totaling approximately $847.1 million, and equity investments in 9 portfolio companies, totaling approximately $58.9 million. At December 31, 2009, we had investments in debt and preferred securities of 31 portfolio companies, totaling approximately $805.5 million, and equity investments in 10 portfolio companies, totaling approximately $57.6 million.
During the three months ended September 30, 2010, we originated approximately $72.3 million of investments in one new and three existing portfolio companies. We also received principal repayments of approximately $6.6 million and sold securities in one portfolio company for approximately $2.9 million. During the three months ended September 30, 2009, we invested approximately $4.9 million in one existing portfolio company, had approximately $4.2 million in principal repayments in five portfolio companies, and sold securities in six portfolio companies for approximately $39.9 million.
During the nine months ended September 30, 2010, we originated approximately $178.9 million of investments in five new and one existing portfolio company. We also received principal repayments of approximately $187.4 million and sold securities in four portfolio companies for approximately $23.5 million. During the nine months ended September 30, 2009, we invested approximately $79.2 million in four existing and two new portfolio companies, had approximately $32.2 million in principal repayments in seven portfolio companies, and sold securities in eight portfolio companies for approximately $57.2 million.
For the three months ended September 30, 2010 we had net unrealized and realized gains on 15 portfolio company investments totaling approximately $21.0 million, which was offset by net unrealized and realized losses on 15 portfolio company investments totaling approximately $6.1 million. For the three months ended September 30, 2009 we had net unrealized and realized gains on 31 portfolio company investments totaling approximately $40.3 million, which was offset by net unrealized and realized losses on 10 portfolio company investments totaling approximately $15.7 million.
For the nine months ended September 30, 2010 we had net unrealized and realized gains on 28 portfolio company investments totaling approximately $58.7 million, which was offset by net unrealized and realized losses on 11 portfolio company investments totaling approximately $10.8 million. For the nine months ended September 30, 2009 we had net unrealized and realized gains on 28 portfolio company investments totaling approximately $122.9 million, which was offset by net unrealized and realized losses on 17 portfolio company investments totaling approximately $112.2 million.
The following table shows the fair value of our portfolio of investments by asset class as of September 30, 2010 and December 31, 2009:

 	  	September 30, 2010	 	  	December 31, 2009	 	
 	  	(unaudited)	 	  	 	 	
(in thousands)	  	Cost	 	  	Fair Value	 	  	Cost	 	  	Fair Value	 	
Bank Debt/Senior Secured Loans	  	$	189,852	  	  	$	185,689	  	  	$	170,896	  	  	$	163,499	  	
Subordinated Debt/Corporate Notes	  	 	722,705	  	  	 	661,289	  	  	 	778,163	  	  	 	641,992	  	
Preferred Equity	  	 	39	  	  	 	42	  	  	 	39	  	  	 	40	  	
Common Equity/Partnership Interests/Warrants	  	 	118,562	  	  	 	58,959	  	  	 	114,890	  	  	 	57,609	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,031,158	  	  	$	905,979	  	  	$	1,063,988	  	  	$	863,140	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of September 30, 2010, the weighted average yield on income producing investments in our portfolio was approximately 14.1%, compared to 14.8% at December 31, 2009. The decrease in yield during the first nine months of 2010 was primarily due to an increase in fair value of portfolio assets and the repayment of certain assets since December 2009.
As of September 30, 2010, there were two investments on non-accrual status with a market value of $5.1 million compared to three assets with a market value of zero at December 31, 2009. At the end of 2009, there were three assets that were performing but interest payments were being applied as principal payments (“cost-recovery assets”), rather than being included in interest income because management believed, at that time, that it was unlikely there would be a full repayment of principal. As of September 30, 2010, there were no performing cost-recovery assets.
 
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Results of Operations for the Quarter Ended September 30, 2010 compared to the Quarter Ended September 30, 2009
Revenue

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

 	  	Three Months Ended
September 30,	 	  	% Change	 	
 	  	(unaudited)	 	  	 	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	4,607	  	  	$	4,273	  	  	 	8	% 	
Performance-based incentive fee	  	 	3,887	  	  	 	4,096	  	  	 	(5	%) 	
Interest and other credit facility expenses	  	 	3,943	  	  	 	536	  	  	 	636	% 	
Administrative service fee	  	 	387	  	  	 	479	  	  	 	(19	%) 	
Other general and administrative expenses	  	 	972	  	  	 	1,947	  	  	 	(50	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	13,796	  	  	$	11,331	  	  	 	22	% 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Combined performance-based incentive fee, which is calculated as a percentage of net investment income above a certain hurdle rate, and investment advisory and management fees, which are calculated based on average gross assets, were comparable for the three months ended September 30, 2010 and 2009.
Interest and other credit facility expenses for the three months ended September 30, 2010 were higher than the comparable period in 2009 primarily due to higher average debt balances outstanding, including the newly issued $35 million senior secured term loan (the “Term Loan”), higher loan fee amortization expense, and higher unused facility fees.
Administrative service fees and other general and administrative fees were lower during the third quarter of 2010 because the third quarter of 2009 included costs related to pre-IPO private fund administration and reporting.
Net Realized and Unrealized Gains and Losses

 	  	Three Months Ended
September 30,	 	
 	  	(unaudited)	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized (loss) on investments	  	$	(24	) 	 	$	(151,269	) 	
Net realized gain (loss) on forward contracts	  	 	(8,832	) 	 	 	(1,844	) 	
Net realized (loss) on foreign currency exchange	  	 	—  	  	 	 	(284	) 	
Net unrealized gain (loss) on investments	  	 	14,942	  	 	 	175,839	  	
Net unrealized gain (loss) on forward contracts	  	 	(669	) 	 	 	1,726	  	
Net unrealized gain (loss) on foreign currency exchange	  	 	41	  	 	 	(1,987	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain	  	$	5,458	  	 	$	22,181	  	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain was $5.5 million for the third quarter of 2010 compared to $22.2 million for the same period in 2009. The combined net gain during the third quarter of 2010 was primarily due to continued credit improvement in the portfolio. The net gain during the third quarter of 2009 was primarily due to certain asset valuations that were beginning to recover from technical recession lows. We analyze this section on a combined basis because offsets may exist in the individual line items due to foreign exchange fluctuations and movements from unrealized to realized.
Our investments denominated in Euro, British Pounds and Australian dollars are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in foreign currency exchange rates we enter into foreign exchange forward contracts or borrow in foreign currencies under our multi-currency revolving credit facility. For the third quarter of 2010 the total net realized and unrealized gain on forward contracts and foreign currency exchange was $9.5 million compared to a loss of $2.4 million for the same line items in the third quarter of 2009. This was due to the weakening of the U.S. dollar during the third quarter 2010.
 
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Results of Operations for the Nine Months Ended September 30, 2010 compared to the Nine Months Ended September 30, 2009
Revenue

 	  	Nine Months Ended
September 30,	 	  	% Change	 	
 	  	(unaudited)	 	  	 	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment income	  	$	92,997	  	  	$	81,214	  	  	 	15	%	
The increase in investment income for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 was primarily due to prepayment premiums and the accelerated amortization of fees resulting from debt assets repaying during the first half of 2010. This was offset by lower average LIBOR rates during the nine months ended September 30, 2010 compared to the same period in 2009.
Expenses

 	  	Nine Months Ended
September 30,	 	  	% Change	 	
 	  	(unaudited)	 	  	 	 	
 	  	2010	 	  	2009	 	  	 	 	
 	  	(in thousands)	 	  	 	 	
Investment advisory and management fees	  	$	13,404	  	  	$	12,348	  	  	 	9	% 	
Performance-based incentive fee	  	 	12,958	  	  	 	12,395	  	  	 	5	% 	
Interest and other credit facility expenses	  	 	10,540	  	  	 	1,565	  	  	 	573	% 	
Administrative service fee	  	 	1,098	  	  	 	1,512	  	  	 	(27	%) 	
Other general and administrative expenses	  	 	2,978	  	  	 	3,590	  	  	 	(17	%) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	$	40,978	  	  	$	31,410	  	  	 	30	% 	
 	  	 	 	 	  	 	 	 	  	 	 	 	
The performance-based incentive fee was higher for the nine months ended September 30, 2010 primarily due to higher investment income resulting from prepayment premiums received and accelerated amortization of fees as a result of debt assets repaying before maturity. Investment advisory and management fees, which are calculated based on average gross assets, were higher during the nine months ended September 30, 2010 compared to the same period in 2009 due to higher average gross assets during the nine months ended September 30, 2010 compared to the same period in 2009.
Interest and other credit facility expenses were higher for the nine months ended September 30, 2010 primarily due to higher average debt balances outstanding during the period, including the newly issued Senior Unsecured Notes and Term Loan, higher loan fee amortization expense, and higher unused facility fees.
Administrative service fees and other general and administrative expenses were lower during the first nine months of 2010 because the first nine months of 2009 included costs related to pre-IPO private fund administration and reporting.
Net Realized and Unrealized Gains and Losses

 	  	Nine Months Ended
September 30,	 	
 	  	(unaudited)	 	
 	  	2010	 	 	2009	 	
 	  	(in thousands)	 	
Net realized (loss) on investments	  	$	(27,836	) 	 	$	(227,191	) 	
Net realized gain (loss) on forward contracts	  	 	916	  	 	 	(9,674	) 	
Net realized gain (loss) on foreign currency exchange	  	 	3,531	  	 	 	(751	) 	
Net unrealized gain on investments	  	 	75,750	  	 	 	237,940	  	
Net unrealized (loss) on forward contracts	  	 	(3,995	) 	 	 	(963	) 	
Net unrealized gain (loss) on foreign currency exchange	  	 	(667	) 	 	 	(1,958	) 	
 	  	 	 	 	 	 	 	 	
Total realized and unrealized gain (loss)	  	$	47,699	  	 	$	(2,597	) 	
 	  	 	 	 	 	 	 	 	
The combination of the net realized and unrealized gains or losses resulted in a net gain of $47.7 million for the nine months ended September 30, 2010 compared to a net loss of $2.6 million for the same period in 2009. The net gain for the nine months ended September 30, 2010 was primarily due to increases in the fair value of our portfolio assets during the period as well as realizations in excess of prior valuations. The net increase in the fair value of our portfolio assets was primarily due to continued credit improvement in the portfolio, the tightening of credit spreads in the high yield market and portfolio realizations. The net loss during the nine months ended September 30, 2009 was primarily due to overall weakening in the economy during the period resulting in lower portfolio asset values. We analyze this section on a combined basis because offsets may exist in the individual line items due to foreign exchange fluctuations and movements from unrealized to realized.
Our investments denominated in Euro, British Pounds and Australian dollars are converted into U.S. dollars at the balance sheet date, and as such, we are exposed to movements in exchange rates. To limit our exposure to movements in foreign currency exchange rates we enter into foreign exchange forward contracts or borrow in foreign currencies under our multi-currency revolving credit facility. For the nine months ended September 30, 2010 the total net realized and unrealized loss on forward contracts and foreign currency exchange was $0.2 million compared to a loss of $13.3 million for the same line items for the nine months ended September 30, 2009. This is due to a lower relative weakening of the U.S. dollar during the nine months ended September 30, 2010 compared to the same period in 2009.
 
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Liquidity and Capital Resources
The Company’s liquidity is generated and generally available through its multi-currency $355 million revolving credit facility maturing in February 2013, its $35 million Term Loan maturing in September 2013, from cash flows from operations, investment sales of liquid assets, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and we expect through periodic follow-on equity offerings. On February 9, 2010, Solar Capital Ltd. priced its initial public offering selling 5.68 million shares, including the underwriters over-allotment, at a price of $18.50 per share. Net of underwriting fees the Company raised a total of $97.7 million and its shares began to trade on the NASDAQ Global Select Market under the ticker “SLRC”. In addition, Solar Capital Ltd. sold 0.60 million shares at $18.50 in a concurrent private placement to management. The primary use of our liquidity is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
At September 30, 2010 and December 31, 2009, we had cash and cash equivalents of approximately $334.4 million and $5.7 million, respectively. Cash provided by operating activities for the nine months ended September 30, 2010 and 2009 was approximately $73.4 million and $11.8 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
Credit Facility, Term Loan, and Senior Unsecured Notes
Credit Facility. On February 12, 2010, Solar Capital Ltd. amended and restated Solar Capital LLC’s $250 million Senior Secured Revolving Credit Facility (the “Credit Facility”), extending the maturity to February 2013 and increasing the total commitments under the facility to $270 million. Per the amended agreement, borrowings bear interest at a rate per annum equal to the base rate plus 3.25% or the alternate base rate plus 2.25%. The commitment fee on unused balances is 0.375%. The amendment also reduced the advance rates permitted on certain asset types and placed limitations on the secured borrowing amount. On May 26, 2010, the Credit Facility was amended to remove the limitations on the secured borrowing and increase the advance rates permitted on certain asset types. Total commitments under the Credit Facility have been increased to $355 million as a result of the addition of two new lenders on May 12, 2010 and June 23, 2010. The facility size may be increased up to $600 million with additional new lenders or the increase in commitments of current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum debt to total assets ratio. As of November 2, 2010, no borrowings were outstanding under the Credit Facility.
Term Loan. On September 2, 2010, Solar Capital Ltd. entered into a fully funded $35 million senior secured term loan, which matures in September 2013, bears interest at a rate per annum equal to the base rate plus 3.25%, and has terms substantially similar to the Credit Facility. The Term Loan contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change of control. In addition, the Term Loan contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum debt to total assets ratio.
Senior Unsecured Notes. In February 2010, as a component of the Solar Capital Merger, Solar Capital Ltd. issued $125 million of Senior Unsecured Notes. The Senior Unsecured Notes mature in February 2014 and have a coupon of 8.75%, payable quarterly in cash beginning May 1, 2010. The Senior Unsecured Notes are redeemable at any time, in whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. Further, we must use the net cash proceeds from the issuance of any other senior notes either to redeem or make an offer to purchase the outstanding Senior Unsecured Notes at a price of 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Senior Unsecured Notes subject us to customary covenants, including, among other things, (i) a requirement to maintain an “asset coverage ratio” of at least 2.00 to 1.00; (ii) a requirement that in the event of a “change of control” (as defined in the agreement governing the Senior Unsecured Notes) we will be required to offer to repurchase the Senior Unsecured Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase; and (iii) a restriction on incurring any debt on a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated to the Senior Unsecured Notes on substantially identical terms. The agreement under which the Senior Unsecured Notes have been issued contains customary events of default.
Certain covenants may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
Contractual Obligations
A summary of our significant contractual payment obligations as of September 30, 2010:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	Payments Due by Period	 	
 	  	(unaudited)	 	
(in millions)	  	Total	 	  	Less than
1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5 Years	 	
Senior secured revolving credit facility(1)	  	$	300.0	  	  	$	—  	  	  	$	300.0	  	  	$	—  	  	  	$	—  	  	
Senior secured term loan	  	$	35.0	  	  	$	—  	  	  	$	35.0	  	  	$	—  	  	  	$	—  	  	
Senior Unsecured Notes	  	$	125.0	  	  	$	—  	  	  	$	—  	  	  	$	125.0	  	  	$	—  	  	
 
(1)	As of September 30, 2010, we had $55.0 million of unused borrowing capacity under our credit facility. As of November 2, 2010, no borrowings were outstanding under the Credit Facility.	
We have certain commitments pursuant to our Investment Advisory and Management Agreement entered into with Solar Capital Partners, LLC (“Solar Capital Partners”). We have agreed to pay a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. Payments under the Investment Advisory and Management Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. We have also entered into a contract with Solar Capital Management LLC, (“Solar Capital Management”) to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Solar Capital Management’s overhead in performing its obligation under the agreement, including rent, fees, and other expenses inclusive of our allocable portion of the compensation of our chief financial officer and any administrative staff.
Off-Balance Sheet Arrangements
In the normal course of our business, we trade various financial instruments and may enter into various investment activities with off-balance sheet risk, which include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.
 
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Borrowings
We had borrowings of $460.0 million and $88.1 million outstanding as of September 30, 2010 and December 31, 2009, respectively.
Distributions and Dividends
On November 2, 2010, our board of directors declared a quarterly dividend of $0.60 per share payable on December 30, 2010 to holders of record as of December 17, 2010. For the three and nine months ended September 30, 2010, declared dividends to stockholders totaled $0.60 per share or $19.9 million and $1.54 per share or $50.9 million, respectively. The $0.34 dividend declared during the first quarter of 2010 was a $0.60 dividend prorated for the number of days that remained in the quarter after our initial public offering. Tax characteristics of all dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Our quarterly dividends, if any, will be determined by our board of directors.
We intend to elect to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute net realized capital gains (net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders’ cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash dividends.
Related Parties
We have entered into a number of business relationships with affiliated or related parties, including the following:
 
 	•	 	We have entered into an Investment Advisory and Management Agreement with Solar Capital Partners. Mr. Gross, our chairman and chief executive officer, is the managing member and a senior investment professional of, and has financial and controlling interests in, Solar Capital Partners. In addition, Mr. Spohler, our chief operating officer is a partner and a senior investment professional of, and has financial interests in, Solar Capital Partners.	
 
 	•	 	Solar Capital Management provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse Solar Capital Management for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and any administrative support staff. Solar Capital Partners, our investment adviser, is the sole member of and controls Solar Capital Management.	
 
 	•	 	We have entered into a license agreement with Solar Capital Partners, pursuant to which Solar Capital Partners has granted us a non-exclusive, royalty-free license to use the name “Solar Capital.”	
 
 	•	 	Certain entities affiliated with Magnetar Financial LLC own as of November 2, 2010, approximately 19.47% of our outstanding shares of common stock.	
Solar Capital Partners and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. Solar Capital Partners and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Solar Capital Partners or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Solar Capital Partners’ allocation procedures. In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.
 
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Item 3.	Quantitative and Qualitative Disclosure about Market Risk	
We are subject to financial market risks, including changes in interest rates. During the three months ended September 30, 2010, certain of the loans in our portfolio had floating interest rates. Interest rates on these loans are typically based on floating LIBOR and reset to current market rates every one to six months. As we increase our investments in mezzanine and other subordinated loans we expect that our portfolio will have an increased percentage of fixed rate assets. A change in interest rates would not have a material effect on our net investment income. 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 higher interest rates with respect to our portfolio of investments. During the three months ended September 30, 2010, we did not engage in interest rate hedging activities.
The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 100 or 200 basis points or decrease by 25 basis points. Investment income is calculated as revenue from loans and other lending investments held at September 30, 2010. Interest expense is calculated separately for each of our borrowings. For our fixed rate $125 million Senior Unsecured Notes we use the balance as of September 30, 2010 and the stated rate of interest and do not adjust for hypothetical changes in interest rates. For our floating rate $35 million Term Loan we use the balance and interest rate as of September 30, 2010 and adjust the interest rate based on the hypothetical changes below. For our floating rate Credit Facility we use the average balance for the nine months ended September 30, 2010 as it fluctuates with our periodic cash requirements and we calculate interest expense using the interest rate as of September 30, 2010, adjusted for the hypothetical changes in rates below. The base interest rate case assumes the rates on our portfolio investments remain as they were on September 30, 2010. All of the hypothetical calculations are based on a model of our portfolio for the twelve months subsequent to September 30, 2010 and assume no change to any input other than the underlying base interest rates.
Actual results could differ significantly from those estimated in the table.

Change in Interest Rates	  	Estimated Percentage
Change in Interest
Income Net of
Interest Expense
(unaudited)	 	
-25 Basis Points	  	 	(0.26	)% 	
Base Interest Rate	  	 	0.00	% 	
+100 Basis Points	  	 	0.91	% 	
+200 Basis Points	  	 	1.99	% 	
We have exposure to foreign currencies (Euro, British Pounds and Australian dollars) through various investments. These investments are converted into U.S. dollars at the balance sheet date, exposing us to movements in exchange rates. To limit our exposure to fluctuations in exchange rates, we enter into foreign exchange forward contracts or borrow in those currencies under our multi-currency revolving credit facility. Our foreign currency exchange contracts are short term contracts that are continuously rolled forward to hedge the longer term portfolio investments. The table below presents our exchange rate sensitive assets and liabilities as of September 30, 2010:

 	  	Australian
Dollar	 	 	Euro	 	 	Pounds
Sterling	 	
Portfolio Investments (Long) (unaudited)	  	 	 	 	 	 	 	 	 	 	 	 	
Par Amount, Fair Value for Equity (in Currency in millions)	  	 	30.9	  	 	 	19.5	  	 	 	36.2	  	
Par Amount, Fair Value for Equity ($ in millions)	  	$	29.9	  	 	$	26.6	  	 	$	56.9	  	
Fair Value ($ in millions)	  	$	28.4	  	 	$	18.1	  	 	$	46.2	  	
Forward Contracts (Short) (unaudited)	  	 	 	 	 	 	 	 	 	 	 	 	
Notional Amount (in Currency in millions)	  	 	30.4	  	 	 	12.6	  	 	 	37.1	  	
Contractual Exchange Rate	  	 	0.914	  	 	 	1.273	  	 	 	1.546	  	
Contract Amount ($ in millions)	  	$	27.7	  	 	$	16.0	  	 	$	57.3	  	
Fair Value ($ in millions)	  	$	(1.6	)	 	$	(1.2	) 	 	$	(1.0	) 	
 
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Item 4.	Controls and Procedures	
(a) Evaluation of Disclosure Controls and Procedures
As of September 30, 2010 (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 financing reporting that occurred during the third quarter of 2010 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, 2009, 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 during the nine months ended September 30, 2010 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009.
 
Item  2.	Unregistered Sales of Equity Securities and Use of Proceeds	
While we did not engage in unregistered sales of equity securities during the three months ended September 30, 2010, we issued a total of 138,231 shares of common stock under the dividend reinvestment plan. This issuance was not subject to the registration requirements under the Securities Act of 1933. The aggregate valuation price for the shares of common stock issued under the dividend reinvestment plan was approximately $18.91 per share.
 
Item  3.	Defaults Upon Senior Securities	
None.
 
Item  4.	Reserved	
[Intentionally left blank]
 
Item  5.	Other Information	
None.
 
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Item  6.	Exhibits	
(a) 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**	
 	 	
  3.2  	  	Amended and Restated Bylaws**	
 	 	
  4.1  	  	Form of Common Stock Certificate****	
 	 	
  4.2  	  	Form of Note Agreement for Senior Unsecured Notes****	
 	 	
  4.3  	  	Form of Senior Unsecured Notes****	
 	 	
10.1  	  	Dividend Reinvestment Plan**	
 	 	
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****	
 	 	
10.3  	  	Form of Senior Secured Term Loan Agreement by and between the Registrant and ING Capital LLC, as lender and administrative agent, dated as of September 2, 2010*****	
 	 	
10.4  	  	Investment Advisory and Management Agreement by and between Registrant and Solar Capital Partners, LLC*	
 	 	
10.5  	  	Form of Custodian Agreement****	
 	 	
10.6  	  	Administration Agreement by and between Registrant and Solar Capital Management, LLC*	
 	 	
10.7  	  	Form of Indemnification Agreement by and between Registrant and each of its directors**	
 	 	
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*	
 	 	
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**	
 	 	
10.10	  	Registration Rights Agreement by and between Registrant, Magnetar Capital Fund, LP and Solar Offshore Limited*	
 	 	
10.11	  	Trademark License Agreement by and between Registrant and Solar Capital Partners, LLC**	
 	 	
10.12	  	Form of Share Purchase Agreement by and between Registrant and Solar Capital Investors II, LLC****	
 	 	
11     	  	Computation of Per Share Earnings (included in the notes to the audited 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.	

*	  	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No. 333-148734) filed on January 18, 2008.	
 
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**	 	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.	
***	 	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 Pre-Effective Amendment No. 8 (File No. 333-148734) filed on January 27, 2010.	
****	 	Previously filed in connection with Solar Capital Ltd.’s registration statement on Form N-2 (File No. 333-148734) filed on February 9, 2010.	
*****	 	Previously filed in connection with Solar Capital Ltd.’s current report on Form 8-K (File No. 814-00754) filed on September 7, 2010.	
 
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 2, 2010.

SOLAR CAPITAL LTD.	
 	 	
By:	 	/s/    MICHAEL S. GROSS        	
 	 	Michael S. Gross
Chief Executive Officer
(Principal Executive Officer)	
 	 	
By:	 	/s/    NICHOLAS RADESCA        	
 	 	Nicholas Radesca
Chief Financial Officer
(Principal Financial and Accounting Officer)	
 
38

EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
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) 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
c) 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 day of November 2, 2010

/s/    MICHAEL S. GROSS        	
Michael S. Gross	

EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Nicholas Radesca, 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) 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
c) 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 day of November 2, 2010

/s/    NICHOLAS RADESCA        	
Nicholas Radesca	

EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
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 September 30, 2010 (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:	 	November 2, 2010	

EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906
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 September 30, 2010 (the “Report”) of Solar Capital Ltd. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, NICHOLAS RADESCA, 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/    NICHOLAS RADESCA        	
Name:	 	Nicholas Radesca	
Date:	 	November 2, 2010