##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q    ☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 2018  ☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 814-00849   SOLAR SENIOR CAPITAL LTD. (Exact name of registrant as specified in its charter)    Maryland

27-4288022(State of Incorporation)

(I.R.S. Employer
Identification No.)500 Park Avenue
New York, N.Y.

10022(Address of principal executive offices)

(Zip Code) (212) 993-1670 (Registrants telephone number, including area code)   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    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, a non-accelerated filer, or an emerging growth company. See definitions of large accelerated filer, accelerated filer,
smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer

☐

Accelerated filer

☒Non-accelerated filer

☐

Smaller Reporting Company

☐Emerging growth company

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes  ☐    No  ☒ The number of shares of the
registrants Common Stock, $.01 par value, outstanding as of August 2, 2018 was 16,040,485.




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2018 TABLE OF CONTENTS  PAGEPART I. FINANCIAL INFORMATIONItem 1.

Financial StatementsConsolidated Statements of Assets and Liabilities as of June 30, 2018 (unaudited) and December 31, 2017


3Consolidated Statements of Operations for the three and six months ended June 30, 2018 (unaudited) and the three and six months ended June 30, 2017 (unaudited)


4Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2018 (unaudited) and the year ended December 31, 2017


5Consolidated Statements of Cash Flows for the six months ended June 30, 2018 (unaudited) and the six months ended June 30, 2017 (unaudited)


6Consolidated Schedule of Investments as of June 30, 2018 (unaudited)


7Consolidated Schedule of Investments as of December 31, 2017


11Notes to Consolidated Financial Statements (unaudited)


15Report of Independent Registered Public Accounting Firm


37Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations


38Item 3.

Quantitative and Qualitative Disclosures About Market Risk


58Item 4.

Controls and Procedures


58PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


59Item 1A.

Risk Factors


59Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


59Item 3.

Defaults Upon Senior Securities


59Item 4.

Mine Safety Disclosures


59Item 5.

Other Information


59Item 6.

Exhibits


60Signatures


62  2




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##### Table of Contents

PART I. FINANCIAL INFORMATION In this Quarterly Report, Solar Senior, Company, Fund, we, us, and our refer to Solar
Senior Capital Ltd. unless the context states otherwise.  Item 1.
Financial Statements SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share amounts)  June 30, 2018(unaudited)


December 31,    2017AssetsInvestments at fair value:Companies less than 5% owned (cost: $345,598 and $289,848, respectively)

$
342,240


$
283,983Companies 5% to 25% owned (cost: $3,866 and $3,625, respectively)


2,727



2,213Companies more than 25% owned (cost: $122,448 and $121,298, respectively)


125,234



121,885Cash


11,096



3,726Cash equivalents (cost: $59,932 and $104,874, respectively)


59,932



104,874Dividends receivable


2,877



2,723Interest receivable


1,358



1,732Other receivable


18



20Receivable for investments sold






508Prepaid expenses and other assets


187



277Total assets

$
545,669


$
521,941LiabilitiesCredit facility ($185,900 and $124,200 face amounts, respectively, reported net of unamortized
debt issuance costs of $1,737 and $0, respectively. See notes 6 and 7)

$
184,163


$
124,200Payable for investments and cash equivalents purchased


86,028



122,110Distributions payable


1,885



1,884Management fee payable (see note 3)


1,145



999Performance-based incentive fee payable (see note 3)


54



374Interest payable (see note 7)


652



401Administrative services expense payable (see note 3)


467



944Other liabilities and accrued expenses


1,351



898Total liabilities

$
275,745


$
251,810Commitments and contingencies (see notes 10, 11 and 12)Net AssetsCommon stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized,
respectively, and 16,040,485 and 16,036,730 issued and outstanding, respectively

$
160


$
160Paid-in capital in excess of par


287,906



287,841Distributions in excess of net investment income


(5,336
)


(5,336
)Accumulated net realized loss


(11,095
)


(5,844
)Net unrealized depreciation


(1,711
)


(6,690
)Total net assets

$
269,924


$
270,131Net Asset Value Per Share

$
16.83


$
16.84 See notes to consolidated financial statements.  3




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except share amounts)  Three months ended


Six months endedJune 30, 2018


June 30, 2017


June 30, 2018


June 30, 2017INVESTMENT INCOME:Interest:Companies less than 5% owned

$
6,012


$
5,610


$
11,829


$
10,866Companies 5% to 25% owned


90



52



141



101Dividends:Companies more than 25% owned


3,250



1,923



6,637



3,847Other income:Companies less than 5% owned


78



54



145



301Companies 5% to 25% owned


23







23



Companies more than 25% owned


18



19



37



39Total investment income


9,471



7,658



18,812



15,154EXPENSES:Management fees (see note 3)

$
1,145


$
959


$
2,193


$
1,907Performance-based incentive fees (see note 3)


491



122



1,109



197Interest and other credit facility expenses (see note 7)


1,806



896



3,168



1,740Administrative services expense (see note 3)


387



367



769



735Other general and administrative expenses


425



477



1,010



953Total expenses


4,254



2,821



8,249



5,532Management fees waived (see note 3)






(692
)






(1,481
)Performance-based incentive fees waived (see note 3)


(437
)


(122
)


(745
)


(197
)Net expenses


3,817



2,007



7,504



3,854Net investment income

$
5,654


$
5,651


$
11,308


$
11,300REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:Net realized gain (loss) on investments and cash equivalents (companies less than 5%
owned)

$
(5,244
)

$
38


$
(5,251
)

$
141Net change in unrealized gain (loss) on investments and cash equivalents:Companies less than 5% owned


3,948



21



2,506



(21
)Companies 5% to 25% owned


166







274



70Companies more than 25% owned


995



(481
)


2,199



(350
)Net change in unrealized gain (loss) on investments and cash equivalents


5,109



(460
)


4,979



(301
)Net realized and unrealized loss on investments and cash equivalents


(135
)


(422
)


(272
)


(160
)NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
5,519


$
5,229


$
11,036


$
11,140EARNINGS PER SHARE (see note 5)

$
0.34


$
0.33


$
0.69


$
0.70 See notes to consolidated financial statements.  4




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (in thousands, except share amounts)  Six months endedJune 30, 2018(unaudited)


Year endedDecember 31, 2017Increase in net assets resulting from operations:Net investment income

$
11,308


$
22,604Net realized gain (loss)


(5,251
)


233Net change in unrealized gain (loss)


4,979



549Net increase in net assets resulting from operations


11,036



23,386Distributions to stockholders:From net investment income


(11,308
)


(22,604
)Capital transactions(see note 14):Reinvestment of distributions


65



204Net increase in net assets resulting from capital transactions


65



204Total increase (decrease) in net assets


(207
)


986Net assets at beginning of period


270,131



269,145Net assets at end of period(1)

$
269,924


$
270,131Capital share activity(see note 14):Common stock issued from reinvestment of distributions


3,755



11,719Net increase from capital share activity


3,755



11,719  (1)
Includes overdistributed net investment income of ($5,336) and ($5,336), respectively.  See notes to consolidated financial statements.  5




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)  Six months endedJune 30, 2018


June 30, 2017Cash Flows from Operating Activities:Net increase in net assets resulting from operations

$
11,036


$
11,140Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by (used in) operating activities:Net realized (gain) loss on investments and cash equivalents


5,251



(141
)Net change in unrealized (gain) loss on investments and cash equivalents


(4,979
)


301(Increase) decrease in operating assets:Purchase of investments


(112,797
)


(94,733
)Proceeds from disposition of investments


50,602



85,073Capitalization of
payment-in-kind interest


(231
)


(251
)Collection of
payment-in-kind interest


34



Receivable for investments sold


508



1,401Interest receivable


374



360Dividends receivable


(154
)


(129
)Other receivable


2



(1
)Prepaid expenses and other assets


90



(98
)Increase (decrease) in operating liabilities:Payable for investments and cash equivalents purchased


(36,082
)


(51,418
)Management fee payable


146



163Performance-based incentive fees payable


(320
)


Administrative services expense payable


(477
)


(95
)Interest payable


251



58Other liabilities and accrued expenses


453



131Net Cash Used in Operating Activities


(86,293
)


(48,239
)Cash Flows from Financing Activities:Cash distributions paid


(11,242
)


(11,193
)Deferred financing costs


29



Proceeds from borrowings


103,234



75,100Repayments of borrowings


(43,300
)


(64,100
)Net Cash Provided by (Used in) Financing Activities


48,721



(193
)NET DECREASE IN CASH AND CASH EQUIVALENTS


(37,572
)


(48,432
)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


108,600



151,828CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
71,028


$
103,396Supplemental disclosure of cash flow information:Cash paid for interest

$
2,917


$
1,682 Non-cash financing activities consist of the reinvestment of dividends of $65 and $106
for the six months ended June 30, 2018 and June 30, 2017, respectively. See notes to consolidated financial statements.  6




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) June 30, 2018 (in
thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex(3)


LiborFloor


InterestRate(1)


AcquisitionDate


MaturityDate


ParAmount


Cost


FairValueBank Debt/Senior Secured Loans  127.8%1A Smart Start LLC(2)(13)

Electrical Equipment, Instruments &
Components


L+450



1.00
%


6.59
%


12/21/2017



2/21/2022


$
6,086


$
6,072


$
6,086Acrisure, LLC(2)

Insurance


L+425



1.00
%


5.99
%


5/3/2017



11/22/2023



7,409



7,394



7,404Advantage Sales and Marketing,
Inc.(2)(13).

Professional Services


L+325



1.00
%


5.34
%


2/14/2018



7/25/2021



4,975



4,884



4,888Advantage Sales and Marketing,
Inc.(13)

Professional Services


L+650



1.00
%


8.59
%


2/14/2013



7/25/2022



8,000



7,965



7,706Aegis Toxicology Sciences
Corporation(2)(13)

Health Care Providers & Services


L+550



1.00
%


7.87
%


5/7/2018



5/9/2025



11,000



10,810



10,835Alera Group Intermediate Holdings,
Inc.(2)(13).

Insurance


L+550



1.00
%


7.48
%


11/28/2016



12/30/2022



7,949



7,881



7,949Alimera Sciences, Inc.(2)(13).

Pharmaceuticals


L+765







9.65
%


1/5/2018



7/1/2022



5,000



4,979



4,975Alteon Health, LLC (fka Island
Medical)(2)(13)

Health Care Providers & Services


L+650



1.00
%


8.59
%


3/31/2017



9/1/2022



4,007



3,974



3,807American Teleconferencing Services, Ltd.
(PGI)(2)(13)

Communications Equipment


L+650



1.00
%


8.86
%


5/5/2016



12/8/2021



14,523



13,957



14,233Capstone Logistics Acquisition,
Inc.(2)(13)

Professional Services


L+450



1.00
%


6.59
%


10/3/2014



10/7/2021



7,888



7,847



7,888Confie Seguros Holding II Co.(2)(13)

Insurance


L+525



1.00
%


7.56
%


10/13/2016



4/19/2022



9,850



9,778



9,782DISA Holdings Acquisition Subsidiary
Corp.(2)(13)

Professional Services


L+400



1.00
%


6.09
%


6/14/2018



6/30/2022



15,376



15,299



15,299Edgewood Partners Holdings,
LLC(2)(13)

Insurance


L+425



1.00
%


6.34
%


3/28/2018



9/8/2024



15,561



15,561



15,561Empower Payments Acquisition, Inc.
(RevSpring).(2)(13)

Professional Services


L+450



1.00
%


6.83
%


11/28/2016



11/30/2023



8,955



8,881



8,955Engineering Solutions & Products,
LLC(6)(13)

Aerospace & Defense


L+600



2.00
%


8.33
%


11/5/2013



5/5/2019



201



201



201Engineering Solutions & Products,
LLC(6)(13)

Aerospace & Defense


L+600



2.00
%


8.36
%


11/5/2013



11/5/2019



2,509



2,298



2,458Falmouth Group Holdings Corp.
(AMPAC)(2)(13)

Chemicals


L+675



1.00
%


8.92
%


12/15/2016



12/14/2021



8,668



8,668



8,668GenMark Diagnostics, Inc(2)(4)(13)

Health Care Providers & Services










6.90
%


4/22/2016



10/12/2019



7,633



8,230



8,230Global Holdings LLC & Payment Concepts
LLC(2)(13)

Consumer Finance


L+750



1.00
%


9.81
%


3/31/2017



5/5/2022



11,775



11,590



11,775Global Tel*Link Corporation(2)

Communications Equipment


L+400



1.25
%


6.33
%


11/6/2015



5/23/2020



3,324



3,129



3,342Global Tel*Link Corporation

Communications Equipment


L+825



1.25
%


10.58
%


5/21/2013



11/23/2020



3,000



2,976



3,011Hostway
Corporation(2)(13)

Internet Software & Services


L+575
(8)


1.25
%


7.84
%


6/27/2014



12/13/2019



7,811



7,800



7,655Kellermeyer Bergensons Services, LLC
(KBS)(2)(13)

Commercial Services & Supplies


L+500



1.00
%


7.32
%


10/31/2014



10/29/2021



4,825



4,800



4,825LegalZoom.com, Inc.(2)(13)

Internet Software & Services


L+450



1.00
%


6.59
%


11/17/2017



11/21/2024



4,975



4,928



5,006Logix Holding Company, LLC(2)(13)

Communications Equipment


L+575



1.00
%


7.84
%


8/11/2017



12/22/2024



10,744



10,642



10,744Lumeris Solutions Company, LLC(2)(13)


Health Care Technology


L+860



0.25
%


10.60
%


3/22/2017



2/1/2020



4,000



4,081



4,080Mavenir Systems, Inc.(2)(13)

Software


L+600



1.00
%


8.03
%


5/1/2018



5/8/2025



10,000



9,803



10,000MHE Intermediate Holdings, LLC (TFS-Miner)(2)(13)

Air Freight & Logistics


L+500



1.00
%


7.33
%


3/8/2017



3/10/2024



5,604



5,556



5,520Ministry Brands, LLC(2)(13)

Software


L+400



1.00
%


6.10
%


11/21/2016



12/2/2022



10,014



9,939



9,964MRI Software LLC(2)(13)

Software


L+550



1.00
%


7.56
%


6/7/2017



6/30/2023



8,183



8,112



8,101MYI Acquiror Corp. (McLarens
Young)(2)(13)

Insurance


L+450



1.25
%


6.81
%


5/21/2014



5/28/2019



3,330



3,323



3,330MYI Acquiror Ltd. (McLarens
Young)(2)(4)(13)

Insurance


L+450



1.25
%


6.81
%


5/21/2014



5/28/2019



4,249



4,241



4,249On Location Events, LLC & PrimeSport Holdings Inc.(2)(13)

Media


L+550



1.00
%


7.83
%


12/7/2017



9/29/2021



14,760



14,600



14,650  See notes to consolidated financial statements.  7




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex(3)


LiborFloor


InterestRate(1)


AcquisitionDate


MaturityDate


ParAmount


Cost


FairValuePolycom, Inc.(2)(13)

Communications Equipment


L+525



1.00
%


7.34
%


9/29/2016



9/27/2023


$
11,124


$
10,775


$
11,124PPT Management Holdings, LLC(2)(13)*

Health Care Providers & Services


L+600



1.00
%


12.00
%


12/15/2016



12/16/2022



7,900



7,835



7,110Pre-Paid Legal Services, Inc.(2)(13)

Diversified Consumer Services


L+325







5.23
%


4/13/2018



5/1/2025



3,000



2,985



3,026PSP Group, LLC (Pet Supplies
Plus)(2)(7)(13)

Specialty Retail


L+475



1.00
%


6.85
%


4/2/2015



4/6/2021



479



477



479QBS Holding Company, Inc.
(Quorum)(2)(13)

Software


L+475



1.00
%


7.11
%


8/1/2014



8/7/2021



9,309



9,279



9,309Radiology Partners, Inc.(2)(13)

Health Care Providers & Services


L+425







6.59
%


6/28/2018



7/9/2025



7,500



7,425



7,425Restoration Robotics, Inc.(2)(13)

Health Care Equipment & Supplies


L+795







9.95
%


5/10/2018



5/1/2022



2,000



1,960



1,955Salient Partners, L.P(2)(13)

Asset Management


L+850



1.00
%


10.59
%


6/10/2015



6/9/2021



3,763



3,722



3,763SHO Holding I Corporation (Shoes for
Crews)(2)(13)

Footwear


L+500



1.00
%


7.36
%


11/20/2015



10/27/2022



5,850



5,813



5,675Solara Medical Supplies, Inc.(2)(13)

Health Care Providers & Services


L+600



1.00
%


8.31
%


5/31/2018



5/31/2023



8,851



8,720



8,718The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)(13)

Insurance


L+475



1.00
%


7.08
%


3/16/2016



6/24/2021



4,765



4,710



4,717Trident USA Health
Services(2)(13)

Health Care Providers & Services


L+600
(15)


1.25
%


8.09
%


7/29/2013



7/31/2019



7,045



7,032



6,235TwentyEighty, Inc.(13)

Professional Services


L+800



1.00
%


10.33
%


1/31/2017



3/31/2020



713



695



713TwentyEighty, Inc.(13)

Professional Services










8.00
%(9)


1/31/2017



3/31/2020



2,025



1,953



2,005TwentyEighty, Inc.(13)

Professional Services










9.00
%(10)


1/31/2017



3/31/2020



1,895



1,830



1,876U.S. Acute Care Solutions, LLC(2)(13)


Health Care Providers & Services


L+500



1.00
%


7.09
%


12/22/2016



5/15/2021



6,379



6,335



6,315VetCor Professional Practices
LLC(2)(13)

Health Care Facilities


L+625



1.00
%


10.25
%


3/30/2018



4/20/2021



1,475



1,451



1,475VT Buyer Acquisition Corp.
(Veritext)(2)(13)

Professional Services


L+475



1.00
%


7.08
%


2/17/2017



1/29/2022



5,501



5,479



5,501WIRB-Copernicus Group, Inc.(2)(13)

Professional Services


L+425



1.00
%


6.34
%


3/27/2017



8/15/2022



6,239



6,214



6,239Total Bank Debt/Senior Secured Loans


$
344,889


$
344,837Common Equity/Equity Interests/Warrants  46.4%
























Shares/UnitsEngineering Solutions & Products,
LLC(6)(11)(13)

Aerospace & Defense














11/5/2013







133,668


$
1,367


$
68Essence Group Holdings Corporation (Lumeris)
Warrants(13)

Health Care Technology














3/22/2017







52,000



16



44First Lien Loan Program LLC(4)(5)

Asset Management














2/13/2015











35,009



32,084Gemino Healthcare Finance,
LLC(4)(5)(13)

Diversified Financial Services














9/30/2013







32,839



31,439



34,050North Mill Capital LLC(4)(5)(13)(14)

Diversified Financial Services














10/20/2017







109



56,000



59,100Restoration Robotics, Inc.
Warrants(13)

Health Care Equipment & Supplies














5/10/2018







16,173



25



18TwentyEighty Investors,
LLC(13).

Professional Services














1/31/2017







17,214



3,167



Total Common Equity/Equity Interests/Warrants


$
127,023


$
125,364Total Investments(12)
174.2%


$
471,912


$
470,201Cash Equivalents  22.2%
























ParAmountU.S. Treasury Bill

Government














6/29/2018



7/26/2018



60,000


$
59,932


$
59,932Total Investments & Cash Equivalents 196.4%


$
531,844


$
530,133Liabilities in Excess of Other Assets  (96.4%)







(260,209
)Net Assets  100.0%






$
269,924 See notes to consolidated financial statements.  8




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued) June 30, 2018 (in
thousands)  (1)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of June 30, 2018. (2)
Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned
financing subsidiary SUNS SPV LLC (the SPV). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to
creditors, if any, of Solar Senior Capital Ltd. The respective par amount for the investment partially held through the SPV is $3,673 for Genmark Diagnostics, Inc. The par balance in excess of this stated amount is held directly by Solar Senior
Capital Ltd. (3)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or
PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (4)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of June 30, 2018, on a fair value
basis, non-qualifying assets in the portfolio represented 25.2% of the total assets of the Company. (5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the six months ended
June 30, 2018 in these controlled investments are as follows:  Name of Issuer

Fair Value atDecember 31, 2017


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain (Loss)


Dividend/OtherIncome


Fair Value atJune 30, 2018First Lien Loan Program LLC (FLLP)

$
35,835


$
1,313


$
3,763


$



$
(1,301
)

$
2,037


$
32,084Gemino Healthcare Finance, LLC


35,050







1,400







400



1,768



34,050North Mill Capital LLC


51,000



5,000











3,100



2,869



59,100$
121,885


$
6,313


$
5,163


$



$
2,199


$
6,674


$
125,234  (6)
Denotes investments in which we are an Affiliated Person but not exercising a controlling influence,
as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the six months ended
June 30, 2018 in these affiliated investments are as follows:  Name of Issuer

Fair Value atDecember 31, 2017


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain (Loss)


Interest/Dividend/Other Income


Fair Value atJune 30, 2018Engineering Solutions & Products, LLC
(1st lien)






602



401











27



201Engineering Solutions & Products, LLC
(2nd lien)


2,145



39











274



137



2,458Engineering Solutions & Products, LLC (equity interests)


68























68$
2,213


$
641


$
401


$



$
274


$
164


$
2,727  (7)
PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers. (8)
Spread is 5.25% Cash / 0.50% PIK. (9)
Coupon is 4.00% Cash / 4.00% PIK. (10)
Coupon is 0.25% Cash / 8.75% PIK. (11)
Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a
taxable consolidated subsidiary. (12)
Aggregate net unrealized depreciation for federal income tax purposes is $5,260; aggregate gross unrealized
appreciation and depreciation for federal tax purposes is $6,022 and $11,282, respectively, based on a tax cost of $475,461. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of
1933, as amended (the Securities Act). These investments are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act.  See notes to consolidated financial statements.  9




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued) June 30, 2018  (13)
Level 3 investment valued using significant unobservable inputs. (14)
Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable
consolidated subsidiary. (15)
Spread is 3.00% Cash / 3.00% PIK. *
Investment is on non-accrual status. 
Non-income producing security. 
Investment contains a
payment-in-kind (PIK) feature.  Industry Classification

Percentage of TotalInvestments (atfair value) as ofJune 30, 2018Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Capital
LLC)


19.8
%Professional Services


13.0
%Health Care Providers & Services


12.5
%Insurance


11.3
%Communications Equipment


9.0
%Software


8.0
%Asset Management (includes FLLP)


7.6
%Media


3.1
%Internet Software & Services


2.7
%Consumer Finance


2.5
%Chemicals


1.8
%Electronic Equipment, Instruments & Components


1.3
%Footwear


1.2
%Air Freight & Logistics


1.2
%Pharmaceuticals


1.1
%Commercial Services & Supplies


1.0
%Health Care Technology


0.9
%Diversified Consumer Services


0.6
%Aerospace & Defense


0.6
%Health Care Equipment & Supplies


0.4
%Health Care Facilities


0.3
%Specialty Retail


0.1
%Total Investments


100.0
%  See notes to consolidated financial
statements.  10




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS December 31, 2017 (in thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex(3)


LiborFloor


InterestRate(1)


AcquisitionDate


MaturityDate


ParAmount


Cost


FairValueBank Debt/Senior Secured Loans  105.9%1A Smart Start LLC(2)(14)

Electrical Equipment, Instruments &
Components


L+450



1.00
%


6.19
%


12/21/2017



2/21/2022


$
6,105


$
6,089


$
6,089Acrisure, LLC(2)

Insurance


L+425



1.00
%


5.65
%


5/3/2017



11/22/2023



7,446



7,429



7,531Advantage Sales and Marketing, Inc.

Professional Services


L+650



1.00
%


7.88
%


2/14/2013



7/25/2022



8,000



7,961



7,520Aegis Toxicology Sciences
Corporation(14)

Health Care Providers & Services


L+850



1.00
%


10.17
%


2/20/2014



8/24/2021



4,000



3,965



3,880Alera Group Intermediate Holdings,
Inc.(2)(14).

Insurance


L+550



1.00
%


6.85
%


11/28/2016



12/30/2022



4,279



4,241



4,257American Teleconferencing Services, Ltd.
(PGI)(2)(14)

Communications Equipment


L+650



1.00
%


7.90
%


5/5/2016



12/8/2021



14,933



14,269



14,710Anesthesia Consulting & Management,
LP(2)(14)

Health Care Providers & Services


L+625



1.00
%


7.94
%


10/20/2016



10/31/2022



4,530



4,492



4,258Capstone Logistics Acquisition,
Inc.(2)(14)

Professional Services


L+450



1.00
%


6.07
%


10/3/2014



10/7/2021



8,159



8,111



8,078Confie Seguros Holding II Co.(2)(14)

Insurance


L+525



1.00
%


6.73
%


10/13/2016



4/19/2022



9,900



9,820



9,909Empower Payments Acquisition, Inc.
(RevSpring).(2)(14)

Professional Services


L+550



1.00
%


7.19
%


11/28/2016



11/30/2023



4,579



4,499



4,579Engineering Solutions & Products,
LLC(6)(14)

Aerospace & Defense


L+600



2.00
%


8.00
%


11/5/2013



11/5/2018



2,258



2,258



2,145Falmouth Group Holdings Corp.
(AMPAC)(2)(14)

Chemicals


L+675



1.00
%


8.44
%


12/15/2016



12/14/2021



8,668



8,668



8,668GenMark Diagnostics, Inc(2)(4)(14)

Health Care Providers & Services










6.90
%


4/22/2016



10/12/2019



7,633



8,040



8,039Global Holdings LLC & Payment Concepts
LLC(2)(14)

Consumer Finance


L+650



1.00
%


7.99
%


3/31/2017



5/5/2022



9,341



9,173



9,341Global Tel*Link Corporation(2)

Communications Equipment


L+400



1.25
%


5.69
%


11/6/2015



5/23/2020



3,364



3,118



3,381Global Tel*Link Corporation

Communications Equipment


L+825



1.25
%


9.94
%


5/21/2013



11/23/2020



3,000



2,972



3,007Hostway Corporation(2)(14)

Internet Software & Services


L+475



1.25
%


8.44
%


6/27/2014



12/13/2019



8,526



8,511



8,185Island Medical Management Holdings,
LLC(2)(14)

Health Care Providers & Services


L+550



1.00
%


7.00
%


3/31/2017



9/1/2022



4,570



4,528



4,432Kellermeyer Bergensons Services, LLC
(KBS)(2)(14)

Commercial Services & Supplies


L+500



1.00
%


6.48
%


10/31/2014



10/29/2021



4,850



4,821



4,850LegalZoom.com, Inc.(2)(14)

Internet Software & Services


L+450



1.00
%


5.94
%


11/17/2017



11/21/2024



5,000



4,950



4,950Logix Holding Company, LLC(2)(14)

Communications Equipment


L+575



1.00
%


7.28
%


8/11/2017



12/22/2024



10,800



10,692



10,692Lumeris Solutions Company, LLC(2)(14)


Health Care Technology


L+860



0.25
%


9.98
%


3/22/2017



2/1/2020



4,000



4,037



4,040Metamorph US 3, LLC
(Metalogix)(2)(14)

Software


L+750
(7)


1.00
%


9.07
%


12/1/2014



12/1/2020



7,953



7,848



5,805Meter Readings Holding, LLC
(Aclara)(2)(14)

Electronic Equipment, Instruments & Components


L+575



1.00
%


7.23
%


6/15/2017



8/29/2023



7,940



7,921



7,940MHE Intermediate Holdings, LLC (TFS-Miner)(2)(14)

Air Freight & Logistics


L+500



1.00
%


6.69
%


3/8/2017



3/10/2024



5,460



5,410



5,405Ministry Brands, LLC(2)(14)

Software


L+500



1.00
%


6.38
%


11/21/2016



12/2/2022



9,636



9,557



9,636MRI Software LLC(2)(14)

Software


L+625



1.00
%


7.83
%


6/7/2017



6/30/2023



8,224



8,147



8,183MYI Acquiror Corp. (McLarens
Young)(2)(14)

Insurance


L+450



1.25
%


5.83
%


5/21/2014



5/28/2019



3,348



3,337



3,348MYI Acquiror Ltd. (McLarens
Young)(2)(4)(14)

Insurance


L+450



1.25
%


5.84
%


5/21/2014



5/28/2019



4,271



4,258



4,271On Location Events, LLC & PrimeSport Holdings Inc.(2)(14)

Media


L+550



1.00
%


7.04
%


12/7/2017



9/29/2021



15,000



14,815



14,812PetVet Care Centers, LLC(2)(14)

Health Care Facilities


L+600



1.00
%


7.35
%


6/1/2017



6/8/2023



10,332



10,235



10,435Polycom, Inc.(2)(14)

Communications Equipment


L+525



1.00
%


6.72
%


9/29/2016



9/27/2023



11,811



11,411



11,933  11 See notes to consolidated financial statements.




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2017 (in thousands, except share/unit amounts)  Description

Industry

SpreadaboveIndex(3)


LiborFloor


InterestRate(1)


AcquisitionDate


MaturityDate


ParAmount


Cost


FairValuePPT Management Holdings, LLC(2)(14)

Health Care Providers & Services


L+600



1.00
%


9.50
%


12/15/2016



12/16/2022


$
7,920


$
7,854


$
7,603PSP Group, LLC (Pet Supplies
Plus)(2)(8)(14)

Specialty Retail


L+475



1.00
%


6.32
%


4/2/2015



4/6/2021



482



479



482QBS Holding Company, Inc.
(Quorum)(2)(14)

Software


L+475



1.00
%


6.13
%


8/1/2014



8/7/2021



6,059



6,025



6,014Salient Partners, L.P.(2)(14)

Asset Management


L+850



1.00
%


9.85
%


6/10/2015



6/9/2021



3,932



3,882



3,932SHO Holding I Corporation (Shoes for
Crews)(2)(14)

Footwear


L+500



1.00
%


6.42
%


11/20/2015



10/27/2022



5,880



5,839



5,762Suburban Broadband, LLC (Jab Wireless,
Inc.)(2)(14)

Wireless Telecommunication Services


L+650
(15)


1.00
%


8.19
%


11/29/2016



3/26/2019



4,938



4,911



4,938The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)(14)

Insurance


L+475



1.00
%


6.44
%


3/16/2016



6/24/2021



4,436



4,377



4,436Trident USA Health Services (2)(14)

Health Care Providers & Services


L+575



1.25
%


7.44
%


7/29/2013



7/31/2019



8,693



8,670



7,389TwentyEighty, Inc.(14)

Professional Services


L+800
(9)


1.00
%


9.42
%


1/31/2017



3/31/2020



918



887



918TwentyEighty, Inc.(14)

Professional Services










8.00
%(10)


1/31/2017



3/31/2020



1,984



1,894



1,865TwentyEighty, Inc.(14)

Professional Services










9.00
%(11)


1/31/2017



3/31/2020



1,814



1,733



1,651U.S. Acute Care Solutions, LLC(2)(14)


Health Care Providers & Services


L+500



1.00
%


6.69
%


12/22/2016



5/15/2021



6,435



6,384



6,371VT Buyer Acquisition Corp.
(Veritext)(2)(14)

Professional Services


L+475



1.00
%


6.44
%


2/17/2017



1/29/2022



5,983



5,957



5,953WIRB-Copernicus Group, Inc.(2)(14)

Professional Services


L+500



1.00
%


6.69
%


3/27/2017



8/15/2022



4,466



4,447



4,466Total Bank Debt/Senior Secured Loans


$
288,923


$
286,089Common Equity/Equity Interests/Warrants  45.2%
























Shares/UnitsEngineering Solutions & Products,
LLC(6)(12)(14)

Aerospace & Defense














11/5/2013







133,668


$
1,367


$
68Essence Group Holdings Corporation (Lumeris)
Warrants(14).

Health Care Technology














3/22/2017







52,000



16



39First Lien Loan Program LLC(4)(5)(14)


Asset Management














2/13/2015











37,459



35,835Gemino Healthcare Finance,
LLC(4)(5)(14)

Diversified Financial Services














9/30/2013







32,839



32,839



35,050NorthMill LLC(4)(5)(14)(16)

Diversified Financial Services














10/20/2017







100



51,000



51,000TwentyEighty Investors,
LLC(14).

Professional Services














1/31/2017







17,214



3,167



Total Common Equity/Equity Interests/Warrants


$
125,848


$
121,992Total Investments(13)
151.1%


$
414,771


$
408,081Cash Equivalents  38.8%
























ParAmountU.S. Treasury Bill

Government














12/28/2017



2/8/2018



105,000


$
104,874


$
104,874Total Investments & Cash Equivalents  189.9%


$
519,645


$
512,955Liabilities in Excess of Other Assets  (89.9%)







(242,824
)Net Assets  100.0%






$
270,131 See notes to consolidated financial statements.  12




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2017 (in thousands)  (1)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of December 31, 2017. (2)
Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned
financing subsidiary SUNS SPV LLC (the SPV). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to
creditors, if any, of Solar Senior Capital Ltd. The respective par amount for the investment partially held through the SPV is $3,673 for Genmark Diagnostics, Inc. The par balance in excess of this stated amount is held directly by Solar Senior
Capital Ltd. (3)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or
PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (4)
Indicates assets that the Company believes may not represent qualifying assets under
Section 55(a) of the Investment Company Act of 1940 (1940 Act), as amended. If we fail to invest a sufficient portion of our assets in qualifying assets, we could be prevented from making
follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order to comply with the 1940 Act. As of December 31, 2017, on a fair value
basis, non-qualifying assets in the portfolio represented 25.7% of the total assets of the Company. (5)
Denotes investments in which we are deemed to exercise a controlling influence over the management or policies
of a company, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2017 in these controlled investments are as follows:  Name of Issuer

Fair Value atDecember 31,2016


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain (Loss)


Dividend/OtherIncome


Fair Value atDecember 31,2017First Lien Loan Program LLC (FLLP)

$
38,810


$
2,835


$
6,563


$



$
753


$
4,129


$
35,835Gemino Healthcare Finance, LLC


35,500















(450
)


3,694



35,050NorthMill LLC






51,000















1,122



51,000$
74,310


$
53,835


$
6,563


$



$
303


$
8,945


$
121,885  (6)
Denotes investments in which we are an Affiliated Person but not exercising a controlling influence,
as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended
December 31, 2017 in these affiliated investments are as follows:  Name of Issuer

Fair Value atDecember 31,2016


GrossAdditions


GrossReductions


RealizedGain(Loss)


Change inUnrealizedGain (Loss)


Interest/DividendIncome


Fair Value atDecember 31,2017Engineering Solutions & Products, LLC
(1st lien)






2,257



2,257











11



Engineering Solutions & Products, LLC
(2nd lien)


1,757















473



190



2,145Engineering Solutions & Products, LLC (equity interests)


68























68$
1,825


$



$



$



$
473


$
201


$
2,213  (7)
Spread is 5.50% Cash / 2.00% PIK. (8)
PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers. (9)
Spread is 3.50% Cash / 4.50% PIK. (10)
Coupon is 1.00% Cash / 7.00% PIK. (11)
Coupon is 0.25% Cash / 8.75% PIK. (12)
Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a
taxable consolidated subsidiary. (13)
Aggregate net unrealized depreciation for federal income tax purposes is $9,267; aggregate gross unrealized
appreciation and depreciation for federal tax purposes is $3,219 and $12,486, respectively, based on a tax cost of $417,348.  13 See notes to consolidated financial statements.




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) December 31, 2017  (14)
Investment valued using significant unobservable inputs. (15)
Spread is 4.50% Cash / 2.00% PIK. (16)
Our equity investment in NorthMill LLC is partially held through ESP SSC Corporation, a taxable consolidated
subsidiary. 
Non-income producing security. 
Investment contains a
payment-in-kind (PIK) feature.  Industry Classification

Percentage of TotalInvestments (atfair value) as ofDecember 31, 2017Diversified Financial Services (includes Gemino Healthcare Finance, LLC and
NorthMill LLC)


21.1
%Communications Equipment


10.7
%Health Care Providers & Services


10.3
%Asset Management (includes FLLP)


9.8
%Professional Services


8.6
%Insurance


8.3
%Software


7.3
%Media


3.6
%Electronic Equipment, Instruments & Components


3.4
%Internet Software & Services


3.2
%Health Care Facilities


2.6
%Consumer Finance


2.3
%Chemicals


2.1
%Footwear


1.4
%Air Freight & Logistics


1.3
%Wireless Telecommunication Services


1.2
%Commercial Services & Supplies


1.2
%Health Care Technology


1.0
%Aerospace & Defense


0.5
%Specialty Retail


0.1
%Total Investments


100.0
%  See notes to consolidated financial
statements.  14




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) June 30, 2018 (in
thousands, except share amounts) Note 1. Organization Solar Senior Capital Ltd. (Solar Senior, the Company, SUNS, we, us, or
our), a Maryland corporation formed on December 16, 2010, is a closed-end, externally managed, non-diversified management investment company that has
elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940 Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in the
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946. In addition, for tax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company
(RIC), under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). On January 28, 2011,
Solar Senior was capitalized with initial equity of $2 and commenced operations. On February 24, 2011, Solar Senior priced its initial public offering, selling 9.0 million shares, including the underwriters over-allotment, raising
approximately $168,000 of net proceeds. Concurrent with this offering, our senior management team purchased an additional 500,000 shares through a private placement, raising another $10,000. The Companys investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve
our investment objective by investing directly or indirectly in senior secured loans, including first lien and second lien debt instruments, made primarily to leveraged private middle-market companies whose debt is rated below investment grade,
which the Company refers to collectively as senior loans. From time to time, we may also invest in public companies that are thinly traded. Under normal market conditions, at least 80% of the value of the Companys net assets
(including the amount of any borrowings for investment purposes) will be invested in senior loans. Note 2. Significant Accounting Policies The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally
accepted accounting principles (GAAP), and include the accounts of the Company and its wholly-owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management,
are necessary for the fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts may have been
reclassified to conform to current period presentation. Interim consolidated financial statements are prepared in accordance with GAAP
for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, they may not include all
of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements
and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. The
current periods results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending on December 31, 2018. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for the fair presentation of
financial statements, have been included.  15




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  The significant accounting policies consistently followed by the Company are:  (a)
Investment transactions are accounted for on the trade date;  (b)
The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company
generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the date of valuation. The Company may also obtain
quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine the fair value of
the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair
value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the Investment Adviser), does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under
the direction of the Companys board of directors (the Board). Investments for which reliable market
quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board 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 valuations are discussed with senior management of the Investment
Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Advisers preliminary valuations and make their own independent assessment for (a) each
portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each
portfolio investment that is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the 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 independent valuation firm. The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; 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,
among others. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will
consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may
differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income  16




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by
current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant
and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio companys ability to make
payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When
available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the six months ended June 30, 2018, there has been no change to the Companys valuation approaches or
techniques and the nature of the related inputs considered in the valuation process. ASC Topic 820 classifies the inputs used to measure
these fair values into the following hierarchy: Level1: Quoted prices in active markets for identical assets or
liabilities, accessible by the Company at the measurement date. Level2: Quoted prices for similar assets or
liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices. Level3: Unobservable inputs for the asset or liability. In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience.  (c)
Gains or losses on investments are calculated by using the specific identification method.  (d)
The Company records dividend income and interest, adjusted for amortization of premium and accretion of
discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the effective interest method or on a straight-line basis, as applicable. Upon the
prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record call premiums on loans repaid as interest income when we receive such amounts. Capital structuring fees, amendment fees, consent fees, and any
other non-recurring fee income as well as management fee and other fee income for services rendered, if any, are recorded as other income when earned.  (e)
The Company intends to comply with the applicable provisions of the Code pertaining to regulated investment
companies to make distributions of taxable income sufficient to relieve it of substantially all U.S. federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise
tax on this income. The Company will accrue excise tax on such estimated excess taxable income as appropriate.  (f)
Book and tax basis differences relating to stockholder distributions and other permanent book and tax
differences are typically reclassified among the Companys capital accounts annually. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.  17




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  (g)
Distributions to common stockholders are recorded as of the record date. The amount to be paid out as a
distribution is determined by the Board. Net realized capital gains, if any, are generally distributed or deemed distributed at least annually.  (h)
In accordance with Regulation S-X and ASC Topic
810Consolidation, the Company consolidates its interest in controlled investment company subsidiaries, financing subsidiaries and certain wholly-owned holding companies that serve to facilitate investment in portfolio companies. In
addition, the Company may also consolidate any controlled operating companies substantially all of whose business consists of providing services to the Company.  (i)
The accounting records of the Company are maintained in U.S. dollars. Any assets and liabilities denominated in
foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against the U.S. dollar on the date of valuation. The Company will not isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain or loss from investments. The Companys investments in
foreign securities, if any, may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the
investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments in terms of U.S. dollars and therefore the earnings of the Company.  (j)
At December 31, 2017, the Company had made an irrevocable election to apply the fair value option of
accounting to its senior secured revolving credit facility (the Credit Facility), in accordance with ASC 825-10. As of June 1, 2018, the Companys new Credit Facility did not make this
election.  (k)
In accordance with ASC 835-30, the Company records origination and
other expenses related to certain debt issuances, if any, as a direct deduction from the carrying amount of the debt liability. These expenses are deferred and amortized using either the effective interest method or the straight-line method over the
stated life. The straight-line method may be used on revolving facilities and when it approximates the effective yield method.  (l)
The Company records expenses related to shelf registration statements and applicable equity offering costs as
prepaid assets. These expenses are typically charged as a reduction of capital upon utilization, in accordance with ASC 946-20-25. Certain subsequent costs are expensed
per the AICPA Audit & Accounting Guide for Investment Companies.  (m)
Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in managements judgment, are likely to continue timely payment of their remaining principal and
interest obligations. Cash interest payments received on such investments may be recognized as income or applied to principal depending on managements judgment.  (n)
The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and
so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only securities with a maturity of three months or less would qualify, with limited exceptions. The Company believes
that certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents.  18




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Recent Accounting Pronouncements In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which amends FASB ASC 230. The
amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts
generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents
and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments were effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company
has adopted ASU 2016-18 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures. In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities,
which will amend FASB ASC 310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium, generally requiring the premium to be amortized to the
earliest call date. For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim
period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements and disclosures. In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business entities with annual
reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year.
ASC 606 provides accounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The
Company has adopted ASC 606 and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures. Note 3. Agreements Solar Senior has an
Advisory Agreement with the Investment Adviser, under which the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to,
Solar Senior. For providing these services, the Investment Adviser receives a fee from Solar Senior, consisting of two componentsa base management fee and a performance-based incentive fee. The base management fee is calculated at an annual
rate of 1.00% of gross assets. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two
most recently completed calendar quarters. Base management fees for any partial month or quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assets exclude
temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or
government agency securities, repurchase agreements or cash borrowings. The performance-based incentive fee has two parts, as follows:
one is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose,
pre-incentive fee net investment income means interest income, dividend income and any other  19




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  income (other than fees for providing managerial assistance) accrued during the calendar quarter, minus our operating expenses for the quarter (excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case of investments, if any, with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero-coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net
investment income does not include any realized capital gains or losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value
of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). The Company pays the Investment Adviser a performance-based incentive fee with respect to pre-incentive fee net investment income for each calendar quarter as follows:  

no performance-based incentive fee in any calendar quarter in which our
pre-incentive fee net investment income does not exceed the hurdle of 1.75%;  

50% of pre-incentive fee net investment income with respect to that
portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized); and  

20% of the amount of pre-incentive fee net investment income, if any,
that exceeds 2.9167% in any calendar quarter (11.67% annualized) will be payable to the Investment Adviser. The second
part of the performance-based incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of the Companys
cumulative realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment
basis at the end of each calendar year) and all net capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the Investment Adviser. For financial statement purposes, the second part of the
performance-based incentive fee is accrued based upon 20% of cumulative net realized gains and net unrealized capital appreciation. No accrual was required for the three and six months ended June 30, 2018 and 2017. For the three and six months ended June 30, 2018 the Company recognized $1,145 and $2,193, respectively, in gross base management fees
and $491 and $1,109, respectively, in gross performance-based incentive fees. For the three and six months ended June 30, 2018, no base management fees were waived. For the three and six months ended June 30, 2018, $437 and $745,
respectively, of such performance-based incentive fees were waived. For the three and six months ended June 30, 2017, the Company recognized $959 and $1,907, respectively, in gross base management fees and $122 and $197, respectively, in gross
performance-based incentive fees. For the three months and six ended June 30, 2017, $692 and $1,481, respectively, of such base management fees were waived. For the three and six months ended June 30, 2017, $122 and $197, respectively, of
such performance-based incentive fees were waived. For the three and six months ended June 30, 2018 and the three and six months ended June 30, 2017, there were no fees recaptured by the Investment Adviser. Any fee waivers prior to
July 1, 2017 are not subject to recapture. Subsequent voluntary fee waivers were made at the Investment Advisers discretion and are subject to recapture by the Investment Adviser and reimbursement by the company under the conditions noted
below. No fees will be recouped by the Investment Adviser if (i) for the period in which recoupment occurs, the ratio of operating expenses to average net assets, when considering the reimbursement, exceeds the same ratio for the period in
which the waiver occurred; (ii) for the period in which recoupment occurs, the annualized distribution rate cannot fall below the annualized distribution rate for the  20




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  period in which the waiver occurred; and (iii) recoupment can only occur within three years from the date of the waiver. The table below presents a summary of fees waived that may be subject
to recoupment:  Three Months Ended

Management andPerformance-Based IncentiveFees Waived


Management andPerformance-Based IncentiveFees Recouped


UnreimbursedManagement andPerformance-Based IncentiveFees


Ratio ofOperatingExpense toAverageNet Assetsforthe Period(1)


AnnualizedDistributionRate for thePeriod(2)


Eligible forRecoupment ThroughSeptember 30, 2017

$
712


$



$
712



0.32
%


8.40
%

June 30, 2019December 31, 2017


281







281



0.33
%


8.39
%

September 30, 2019March 31, 2018


308







308



0.28
%


8.37
%

December 31, 2019June 30, 2018


437







437



0.30
%


8.37
%

March 31, 2020Total

$
1,738


$



$
1,738  (1)
Operating expense includes all expenses borne by the Company, except for organizational and offering costs,
base management fees, performance-based incentive fees and interest expense. (2)
Annualized distribution rate equals the annualized rate of distributions paid to shareholders based on the
amount of the distributions declared prior to the date that the waivers of expenses related to management and performance-based incentive fees were incurred. Solar Senior has also entered into an Administration Agreement with Solar Capital Management, LLC (the Administrator) under which
the Administrator provides administrative services for Solar Senior. For providing these services, facilities and personnel, Solar Senior reimburses the Administrator for Solar Senior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 Seniors behalf, managerial assistance to those portfolio companies to which Solar Senior is
required to provide such assistance. The Company typically reimburses the Administrator on a quarterly basis. For the three and six
months ended June 30, 2018, the Company recognized expenses under the Administration Agreement of $387 and $769, respectively. For the three and six months ended June 30, 2017, the Company recognized expenses under the Administration
Agreement of $367 and $735, respectively. No managerial assistance fees were accrued or collected for the three and six months ended June 30, 2018 and 2017. Note 4. Net Asset Value Per Share At June 30, 2018, the Companys total net assets and net asset value per share were $269,924 and $16.83, respectively. This compares
to total net assets and net asset value per share at December 31, 2017 of $270,131 and $16.84, respectively.  21




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Note 5. Earnings Per Share The following table sets forth the computation of basic and diluted net increase in net assets per share resulting from operations, pursuant to
ASC 260-10, for the three and six months ended June 30, 2018 and 2017:  Three months ended June 30,


Six months ended June 30,2018


2017


2018


2017Earnings per share (basic & diluted)Numerator  net increase in net assets resulting from operations:

$
5,519


$
5,229


$
11,036


$
11,140Denominator  weighted average shares:


16,040,457



16,029,874



16,039,628



16,028,103Earnings per share:

$
0.34


$
0.33


$
0.69


$
0.70 Note 6. Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used
to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair
value hierarchy are as follows: Level1. 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. Level2. Financial assets and liabilities whose values are based on quoted prices in markets that are not
active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:  a)
Quoted prices for similar assets or liabilities in active markets;  b)
Quoted prices for identical or similar assets or liabilities in
non-active markets;  c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability; and  d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through
correlation or other means for substantially the full term of the asset or liability. Level3.Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements and, if
applicable, an independent third-party valuation firms own assumptions about the assumptions a market participant would use in pricing the asset or liability. When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is
categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable
(Level 3). Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair
value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).  22




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes
in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of the appropriate category as of the end of the quarter in which the
reclassifications occur. The following tables present the balances of assets and liabilities measured at fair value on a recurring basis,
as of June 30, 2018 and December 31, 2017: Fair Value Measurements As of June 30, 2018  Level 1


Level 2


Level 3


Measuredat NetAssetValue*


TotalAssets:Bank Debt/Senior Secured Loans

$



$
13,757


$
331,080


$



$
344,837Common Equity/Equity Interests/Warrants










93,280



32,084



125,364Total Investments

$



$
13,757


$
424,360


$
32,084


$
470,201  *
In accordance with ASC 820-10, certain investments that are measured
using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair
value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. The portfolio investment in this category is FLLP. See Note 11 for more information on this investment, including its investment strategy and the
Companys unfunded equity commitment to FLLP. This investment is not redeemable by the Company absent an election by the members of the entity to liquidate all investments and distribute the proceeds to the members. Fair Value Measurements As of December 31, 2017  Level 1


Level 2


Level 3


Measuredat NetAssetValue*


TotalAssets:Bank Debt/Senior Secured Loans

$



$
21,439


$
264,650


$



$
286,089Common Equity/Equity Interests/Warrants










86,157



35,835



121,992Total Investments

$



$
21,439


$
350,807


$
35,835


$
408,081Liabilities:Credit Facility

$



$



$
124,200


$



$
124,200  *
In accordance with ASC 820-10, certain investments that are measured
using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The  23




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. The
portfolio investment in this category is FLLP. See Note 11 for more information on this investment, including its investment strategy and the Companys unfunded equity commitment to FLLP. This investment is not redeemable by the Company absent
an election by the members of the entity to liquidate all investments and distribute the proceeds to the members. The
following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the six months ended June 30, 2018, as well as the portion of gains or losses included in income attributable to unrealized gains or
losses related to those assets and liabilities still held at June 30, 2018: Fair Value Measurements Using Level 3 Inputs  BankDebt/SeniorSecuredLoans


CommonEquity/EquityInterests/Warrants


TotalFair value, December 31, 2017

$
264,650


$
86,157


$
350,807Total gains or losses included in earnings:Net realized gain (loss)


(5,235
)






(5,235
)Net change in unrealized gain (loss)


2,480



3,498



5,978Purchase of investment securities


106,635



5,025



111,660Proceeds from dispositions of investment securities


(45,411
)


(1,400
)


(46,811
)Transfers in/out of Level 3


7,961







7,961Fair value, June 30, 2018

$
331,080


$
93,280


$
424,360Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:Net change in unrealized gain (loss):

$
2,739


$
3,498


$
6,237 During the six months ended June 30, 2018, Advantage Sales and Marketing Inc. was transferred from
Level 2 to Level 3. At June 30, 2018, the Investment Adviser believed that the available quote for Advantage Sales and Marketing Inc. was no longer representative of fair value.    However, the quote was still
considered as an input to the fair value determination. As such, Advantage Sales and Marketing Inc. was transferred from Level 2 to Level 3 as the Investment Adviser could no longer rely on the available quote from a third-party source and
was using its own assumptions in fair valuing the investment. The Company did not elect to apply the fair value option of accounting to
the Credit Facility, which was refinanced by way of amendment on June 1, 2018. As this refinancing was deemed to be a significant modification of debt, per ASC
825-10-25, a new election date was triggered.  24




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SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  The following table provides a summary of the changes in fair value of Level 3 assets
and liabilities for the year ended December 31, 2017, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2017: Fair Value Measurements Using Level 3 Inputs  Bank Debt/SeniorSecuredLoans


CommonEquity/EquityInterests/WarrantsFair value, December 31, 2016

$
250,268


$
35,568Total gains or losses included in earnings:Net realized gain (loss)


129



Net change in unrealized gain (loss)


3,436



(3,593
)Purchase of investment securities


132,045



54,182Proceeds from dispositions of investment securities


(137,054
)


Transfers in/out of Level 3


15,826



Fair value, December 31, 2017

$
264,650


$
86,157Unrealized gains (losses) for the period relating to those Level 3 assets that were still
held by the Company at the end of the period:Net change in unrealized gain (loss):

$
3,436


$
(3,593
) During the fiscal year ended December 31, 2017, Securus Technologies, Inc. and nThrive, Inc. were
transferred from Level 2 to Level 3. At June 30, 2017, the Investment Adviser believed that Securus Technologies, Inc. was likely going to be prepaid at par in the near future. As such, the Investment Adviser, in its recommendation to the
Board, provided that it was more representative of fair value to price the position at par, matching the price we would receive if the investment was prepaid. Securus Technologies, Inc. was repaid at par in the quarter ended December 31, 2017.
At March 31, 2017, the Investment Adviser also believed that nThrive, Inc. was likely going to be prepaid in the near future. As such, the Investment Adviser, in its recommendation to the Board, provided that it was more representative of fair
value to price the position at par, matching the price we would receive if the investment was prepaid. nThrive, Inc. was repaid in the quarter ended June 30, 2017. The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant
unobservable inputs (Level 3) for the year ended December 31, 2017:  Beginning fair value at December 31, 2016

$
98,300Borrowings


162,000Repayments


(136,100
)Transfers in/out of Level 3


Ending fair value at December 31, 2017

$
124,200 The Company has made an irrevocable election to apply the fair value option of accounting to the Credit
Facility, in accordance with ASC 825-10. On December 31, 2017, there were borrowings of $124,200 on the  25




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Credit Facility. For the year ended December 31, 2017, the Credit Facility had no net change in unrealized (appreciation) depreciation. The Company used an independent third-party valuation
firm to assist in measuring the fair value of the Credit Facility. Quantitative Information about Level 3 Fair Value
Measurements The Company typically determines the fair value of its performing debt investments utilizing a yield analysis. In a
yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to current contractual interest rates, relative
maturities and other key terms and risks associated with an investment. Among other factors, a significant determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the
rights and remedies of our investment within each portfolio company. Significant unobservable quantitative inputs typically used in the
fair value measurement of the Companys Level 3 assets and liabilities primarily reflect current market yields, including indices, and readily available quotes from brokers, dealers, and pricing services as indicated by comparable assets
and liabilities, as well as enterprise values, returns on equity and earnings before income taxes, depreciation and amortization (EBITDA) multiples of similar companies, and comparable market transactions for equity securities. Quantitative information about the Companys Level 3 asset fair value measurements as of June 30, 2018 is summarized in the
table below:  Asset orLiability


Fair Value atJune 30,2018


PrincipalValuationTechnique/Methodology


UnobservableInput

Range (WeightedAverage)Bank Debt / Senior Secured Loans


Asset


$
331,080



Income Approach


Market Yield

5.5% 14.4% (8.3%)$
130



Market Approach


EBITDA Multiple

5.8x-14.4x (14.4x)Common Equity/Equity Interests/Warrants


Asset


$
93,150



Market Approach


Return on Equity

6.1% 26.3% (13.3%) Significant increases or decreases in any of the above unobservable inputs in isolation, including
unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.  26




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Quantitative information about the Companys Level 3 asset and liability fair value
measurements as of December 31, 2017 is summarized in the table below:  Asset orLiability

Fair Value atDecember 31,2017


PrincipalValuationTechnique/Methodology

UnobservableInput

Range (WeightedAverage)Bank Debt / Senior Secured Loans

Asset

$
264,650


Yield Analysis

Market Yield

6.1%  21.6% (8.6%)$
107


Enterprise Value

EBITDA Multiple

5.5x  16.0x (16.0x)Common Equity/Equity Interests/Warrants

Asset

$
86,050


Enterprise Value

Return on Equity

5.9%  24.4% (13.4%)Credit Facility

Liability

$
124,200


Yield Analysis

Market Yield

L+1.4% L+4.8% (L+2.0%) Significant increases or decreases in any of the above unobservable inputs in isolation, including
unobservable inputs used in deriving bid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities. Note 7. Debt Senior Secured
Revolving Credit FacilityOn August 26, 2011, the Company established the SPV which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit
Facility, as amended, were increased from $175,000 to $200,000 by utilizing the accordion feature. The commitment can also be expanded up to $600,000. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor
requirement and the current final maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by the SPV. Under the terms of the Credit Facility, Solar Senior and the SPV, as applicable, have made certain customary
representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and
customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014, May 29, 2015 to extend maturities and add greater investment flexibility, among other changes. On
June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. The average annualized interest cost for all borrowings for the six months ended June 30, 2018 and the year ended December 31, 2017
was 3.90% and 3.16%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the back-up servicer, if any. The maximum amount borrowed on the Credit
Facility during the six months ended June 30, 2018 and the year ended December 31, 2017, was $187,700 and $136,000, respectively.  27




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Note 8. Financial Highlights and Senior Securities Table The following is a schedule of financial highlights for the six months ended June 30, 2018 and for the year ended December 31, 2017:  Six monthsendedJune 30, 2018(unaudited)


Year endedDecember 31,2017Per Share Data: (a)Net asset value, beginning of year

$
16.84


$
16.80Net investment income


0.71



1.41Net realized and unrealized gain (loss)


(0.01
)


0.04Net increase in net assets resulting from operations


0.70



1.45Distributions to stockholders:From net investment income


(0.71
)


(1.41
)Net asset value, end of period

$
16.83


$
16.84Per share market value, end of period

$
16.31


$
17.76Total Return (b)


(4.24
)%


17.11
%Net assets, end of period

$
269,924


$
270,131Shares outstanding, end of period


16,040,485



16,036,730Ratios to average net assets (c):Net investment income


4.19
%


8.39
%Operating expenses


1.61
%*


2.12
%*Interest and other credit facility expenses


1.17
%


1.43
%Total expenses


2.78
%*


3.55
%*Average debt outstanding

$
152,870


$
100,700Portfolio turnover ratio


11.9
%


41.4
%  (a)
Calculated using the average shares outstanding method. (b)
Total return is based on the change in market price per share during the period and takes into account
distributions, if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load. (c)
Not annualized for periods less than one year. *
The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is
shown net of voluntary management and incentive fee waivers (see note 3). For the six months ended June 30, 2018, the ratios of operating expenses to average net assets and total expenses to average net assets would be 1.89% and 3.06%,
respectively, without the voluntary incentive fee waiver. For the year ended December 31, 2017, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.11% and 4.54%, respectively, without the
voluntary management and incentive fee waivers.  28




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Information about our senior securities is shown in the following table as of each year ended
December 31 since the Company commenced operations, unless otherwise noted. The  indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.  Class and Year

Total AmountOutstanding(1)


AssetCoveragePer Unit(2)


InvoluntaryLiquidatingPreferencePer Unit(3)


AverageMarket ValuePer Unit(4)Revolving Credit FacilityFiscal 2018 (through June 30, 2018)

$
185,900


$
2,452


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/A  (1)
Total amount of each class of senior securities outstanding at the end of the period presented. (2)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our
consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage
Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of June 30, 2018, asset coverage
was 245.2%. (3)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the
issuer in preference to any security junior to it. (4)
Not applicable, we do not have senior securities that are registered for public trading. Note 9. Gemino Healthcare Finance, LLC We acquired Gemino Healthcare Finance, LLC (d/b/a Gemino Senior Secured Healthcare Finance) (Gemino) on September 30, 2013.
Gemino is a commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial
investment in Gemino was $32,839. The management team of Gemino co-invested in the transaction and continues to lead Gemino. Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse,
$100,000 credit facility with non-affiliates, which was expandable to $150,000 under its accordion feature. Effective March 31, 2014, the credit facility was expanded to $105,000 and again on
June 27, 2014 to $110,000. On May 27, 2016, Gemino entered into a new $125,000 credit facility which replaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an
accordion feature increase to $200,000 and has a maturity date of May 27, 2020. On December 31, 2013, we contributed our 32,839
units in Gemino to Gemino Senior Secured Healthcare LLC (Gemino Senior Secured Healthcare). In exchange for this contribution, we received 19,839 units of equity interests and $13,000 in floating rate secured notes of Gemino Senior
Secured Healthcare bearing interest at LIBOR plus 7.50%, maturing on December 31, 2018. However, our financial statements, including our  29




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  schedule of investments, reflected our investments in Gemino Senior Secured Healthcare on a consolidated basis. On October 28, 2016, Gemino Senior Secured Healthcare was dissolved. As of
June 30, 2018, Geminos management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively. Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of June 30,
2018, the portfolio totaled approximately $173,588 of commitments, of which $111,334 were funded, on total assets of $106,357. As of December 31, 2017, the portfolio totaled approximately $176,332 of commitments, of which $106,620
were funded, on total assets of $110,584. At June 30, 2018, the portfolio consisted of 29 issuers with an average balance of approximately $3,839 versus 29 issuers with an average balance of approximately $3,677 at December 31, 2017. All
of the commitments in Geminos portfolio are floating-rate, senior-secured, cash-pay loans. Geminos credit facility, which is non-recourse to us, had
approximately $73,000 and $75,000 of borrowings outstanding at June 30, 2018 and December 31, 2017, respectively. For the three months ended June 30, 2018 and 2017, Gemino had net income of $668 and $655, respectively, on gross income
of $2,745 and $2,760, respectively. For the six months ended June 30, 2018 and 2017, Gemino had net income of $1,380 and $1,423, respectively, on gross income of $5,464 and $5,611, respectively. Due to timing and
non-cash items, there may be material differences between GAAP net income and cash available for distributions. Note 10. Commitments and Contingencies The Company had unfunded debt and equity commitments to delayed draw and revolving loans. The total amount of these unfunded commitments as of
June 30, 2018 and December 31, 2017 is $60,868 and $27,472, respectively, comprised of the following:  June 30,2018


December 31,2017DISA Holdings Acquisition Corp

$
16,623


$
The Hilb Group, LLC & Gencorp Insurance Group, Inc.


12,262



332MSHC, Inc.


10,972



VetCor Professional Practices LLC


5,242



6,721Solara Medical Supplies, Inc.


2,990



MRI Software LLC


2,951



2,361WIRB-Copernicus Group, Inc.


2,833



Edgewood Partners Holdings, LLC


2,400



Gemino Healthcare Finance, LLC*


1,400



5,000Alera Group Intermediate Holdings, Inc


1,000



4,695VT Buyer Acquisition Corp. (Veritext)


910



3,450MHE Intermediate Holdings, LLC


811



983Engineering Solutions & Products, LLC


334



1,736TwentyEighty, Inc


140



140PetVet Care Centers, LLC






1,627Ministry Brands, LLC






427Total Commitments

$
60,868


$
27,472  *
The Company controls the funding of the Gemino commitment and may cancel it at its discretion.  30




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  As of June 30, 2018 and December 31, 2017, the Company had sufficient cash
available and/or liquid securities available to fund its commitments as well as the commitments to FLLP disclosed in Note 11 and Solar Life Science Program LLC (LSJV) disclosed in Note 12. Note 11. First Lien Loan Program LLC On
September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment Management LLC (Voya). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of
Voya Financial, Inc. (NYSE: VOYA). The joint venture vehicle, structured as an unconsolidated Delaware limited liability company, is expected to invest primarily in senior secured floating rate term loans to middle market companies predominantly
owned by private equity sponsors or entrepreneurs. Solar Senior and Voya have committed to provide $50,750 and $7,250, respectively, of capital to the joint venture. All portfolio decisions and generally all other decisions in respect of the FLLP
must be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from a representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015,
FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly owned subsidiary of FLLP, as borrower entered into a $75,000 senior secured revolving credit facility (the FLLP Facility) with Wells
Fargo Securities, LLC acting as administrative agent. Solar Senior Capital Ltd. acts as servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a
rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to
comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of
this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to $100,000 and extending the maturity date to August 16, 2021. There were $65,699 and $78,644 of borrowings outstanding as of June 30, 2018 and
December 31, 2017, respectively. As of June 30, 2018 and December 31, 2017, Solar Senior and Voya contributed combined equity capital in the amount of $40,011 and $42,811, respectively. Of the $40,011 of contributed equity capital at
June 30, 2018, the Company contributed $29,584 in the form of investments and $5,426 in the form of cash and Voya contributed $5,001 in the form of cash. As of June 30, 2018, Solar Senior and Voyas remaining commitments totaled
$15,740 and $2,249, respectively. The Company, along with Voya, controls the funding of FLLP and FLLP may not call the unfunded commitments without approval of both the Company and Voya. As of June 30, 2018 and December 31, 2017, FLLP had total assets of $106,312 and $121,791, respectively. For the same periods,
FLLPs portfolio consisted of first lien floating rate senior secured loans to 19 and 23 different borrowers, respectively. For the three months ended June 30, 2018, FLLP invested $2,685 across 3 portfolio companies. For the three months
ended June 30, 2017, FLLP invested $3,744 across 6 portfolio companies.    Investments sold or prepaid totaled $19,870 for the three months ended June 30, 2018 and $8,626 for the three months ended June 30, 2017.
At June 30, 2018 and December 31, 2017, the weighted average yield of FLLPs portfolio was 7.4% and 7.3%, respectively, measured at fair value and 7.5% and 7.2%, respectively, measured at cost.  31




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  FLLP Portfolio as of June 30, 2018  Description

Industry

SpreadAboveIndex(1)


LIBORFloor


InterestRate(2)


MaturityDate


ParAmount


Cost


FairValue(3)1A Smart Start LLC

Electronic Equipment, Instruments & Components


L+475



1.00
%


6.84
%


2/21/22


$
7,800


$
7,753


$
7,800Alera Group Intermediate Holdings,
Inc.(4)

Insurance


L+550



1.00
%


7.48
%


12/30/22



5,700



5,653



5,700Alteon Health, LLC (fka Island
Medical)(4)

Health Care Providers &
Services


L+650



1.00
%


8.59
%


9/1/22



4,007



3,974



3,807Capstone Logistics Acquisition,
Inc.(4)

Professional Services


L+450



1.00
%


6.59
%


10/7/21



5,109



5,081



5,109Confie Seguros Holding II Co.(4)

Insurance


L+525



1.00
%


7.56
%


4/19/22



5,418



5,378



5,380Edgewood Partners Holdings, LLC (Epic)

Insurance


L+425



1.00
%


6.34
%


9/8/24



4,444



4,426



4,444Empower Payments Acquisition, Inc.
(RevSpring)(4)

Professional Services


L+450



1.00
%


6.83
%


11/30/23



5,970



5,896



5,970Falmouth Group Holdings Corp.
(AMPAC)(4)

Chemicals


L+675



1.00
%


8.92
%


12/14/21



5,018



5,018



5,018Kellermeyer Bergensons Services, LLC
(KBS)(4)

Commercial Services & Supplies


L+500



1.00
%


7.32
%


10/29/21



4,392



4,363



4,392Ministry Brands, LLC(4)

Software


L+400



1.00
%


6.10
%


12/2/22



5,007



4,968



4,982National Spine and Pain Centers, LLC

Health Care Providers & Services


L+450



1.00
%


6.59
%


6/2/24



2,970



2,957



2,940Pet Holdings ULC & Pet Supermarket, Inc.

Specialty Retail


L+550



1.00
%


7.80
%


7/5/22



5,257



5,199



5,257PSP Group, LLC (Pet Supplies Plus)(4)


Specialty Retail


L+475



1.00
%


6.85
%


4/6/21



5,271



5,246



5,271QBS Holding Company, Inc. (Quorum)(4)


Software


L+475



1.00
%


7.11
%


8/7/21



5,013



4,995



5,013Salient Partners, L.P.(4)

Asset Management


L+850



1.00
%


10.59
%


6/9/21



4,599



4,549



4,599Telular Corporation

Wireless Telecommunication Services


L+425



1.25
%


6.58
%


6/24/19



5,567



5,558



5,567The Hilb Group, LLC & Gencorp Insurance Group, Inc.(4)

Insurance


L+475



1.00
%


7.08
%


6/24/21



4,783



4,729



4,736VT Buyer Acquisition Corp.
(Veritext)(4)

Professional Services


L+475



1.00
%


7.08
%


1/29/22



5,899



5,877



5,899Wirb-Copernicus Group, Inc.(4)

Professional Services


L+425



1.00
%


6.34
%


8/15/22



5,898



5,859



5,898$
97,479


$
97,782  (1)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.  (2)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of June 30, 2018.  (3)
Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not
included in the Boards valuation process described elsewhere herein.  (4)
The Company also holds this security on its Consolidated Statements of Assets and Liabilities.  32




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##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  FLLP Portfolio as of December 31, 2017 (audited)  Description

Industry

SpreadAboveIndex(1)


LIBORFloor


InterestRate(2)


MaturityDate


ParAmount


Cost


FairValue(3)1A Smart Start LLC(4)

Electronic Equipment, Instruments & Components


L+475



1.00
%


6.44
%


2/21/22


$
7,840


$
7,787


$
7,820Alera Group Intermediate Holdings,
Inc.(4)

Insurance


L+550



1.00
%


6.85
%


12/30/22



4,279



4,241



4,257Anesthesia Consulting & Management,
LP(4)

Health Care Providers & Services


L+625



1.00
%


7.94
%


10/31/22



4,530



4,493



4,258Capstone Logistics Acquisition,
Inc.(4)

Professional Services


L+450



1.00
%


6.07
%


10/7/21



5,284



5,252



5,231Confie Seguros Holding II Co.(4)

Insurance


L+525



1.00
%


6.73
%


4/19/22



5,445



5,401



5,450Edgewood Partners Holdings, LLC (Epic)

Insurance


L+475



1.00
%


6.14
%


9/8/24



4,467



4,447



4,444Empower Payments Acquisition, Inc.
(RevSpring)(4)

Professional Services


L+550



1.00
%


7.19
%


11/30/23



4,579



4,499



4,579Falmouth Group Holdings Corp.
(AMPAC)(4)

Chemicals


L+675



1.00
%


8.44
%


12/14/21



5,018



5,018



5,018Island Medical Management Holdings,
LLC(4)

Health Care Providers & Services


L+550



1.00
%


7.00
%


9/1/22



4,570



4,528



4,432Kellermeyer Bergensons Services, LLC
(KBS)(4)

Commercial Services & Supplies


L+500



1.00
%


6.48
%


10/29/21



4,415



4,381



4,415Metamorph US 3, LLC (Metalogix)(4)

Software


L+750
(5)


1.00
%


9.07
%


12/1/20



3,976



3,922



2,903Ministry Brands, LLC(4)

Software


L+500



1.00
%


6.38
%


12/2/22



4,818



4,777



4,818National Spine and Pain Centers, LLC

Health Care Providers & Services


L+450



1.00
%


6.19
%


6/2/24



2,985



2,971



2,963Pet Holdings ULC & Pet Supermarket, Inc.

Specialty Retail


L+550



1.00
%


6.84
%


7/5/22



5,111



5,050



5,086PSP Group, LLC (Pet Supplies Plus)(4)


Specialty Retail


L+475



1.00
%


6.32
%


4/6/21



5,298



5,269



5,298QBS Holding Company, Inc. (Quorum)(4)


Software


L+475



1.00
%


6.13
%


8/7/21



3,263



3,243



3,238Salient Partners, L.P.(4)

Asset Management


L+850



1.00
%


9.85
%


6/9/21



4,806



4,745



4,806Sarnova HC, LLC

Trading Companies and Distributors


L+475



1.00
%


6.32
%


1/28/22



4,913



4,877



4,913Suburban Broadband, LLC (Jab Wireless, Inc.)(4)

Wireless Telecommunication Services


L+650
(6)


1.00
%


8.19
%


3/26/19



8,067



8,007



8,067Telular Corporation

Wireless Telecommunication Services


L+425



1.25
%


5.94
%


6/24/19



5,743



5,729



5,728The Hilb Group, LLC & Gencorp Insurance Group, Inc.(4)

Insurance


L+475



1.00
%


6.44
%


6/24/21



4,519



4,459



4,519VT Buyer Acquisition Corp.
(Veritext)(4)

Professional Services


L+475



1.00
%


6.44
%


1/29/22



5,926



5,901



5,897Wirb-Copernicus Group, Inc.(4)

Professional Services


L+500



1.00
%


6.69
%


8/15/22



5,928



5,882



5,928$
114,879


$
114,068  (1)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR
or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.  33




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  (2)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of December 31, 2017. (3)
Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not
included in the Boards valuation process described elsewhere herein. (4)
The Company also holds this security on its Consolidated Statements of Assets and Liabilities. (5)
Spread is 5.50% Cash / 2.0% PIK. (6)
Spread is 4.50% Cash / 2.0% PIK. Below is certain summarized financial information for FLLP as of June 30, 2018 and December 31, 2017 and for the three and six
months ended June 30, 2018 and 2017:  June 30,2018


December 31,2017Selected Balance Sheet Information for FLLP:Investments at fair value (cost $97,479 and $114,879, respectively)

$
97,782


$
114,068Cash and other assets


8,530



7,723Total assets

$
106,312


$
121,791Debt outstanding

$
65,699


$
78,644Payable for investments purchased


1,750



Distributions payable


1,068



1,180Interest payable and other credit facility related expenses


967



843Accrued expenses and other payables


161



170Total liabilities

$
69,645


$
80,837Members equity

$
36,667


$
40,954Total liabilities and members equity

$
106,312


$
121,791  34




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) June 30, 2018 (in
thousands, except share amounts)  Three monthsendedJune 30, 2018


Three monthsendedJune 30, 2017


Six monthsendedJune 30, 2018


Six monthsendedJune 30, 2017Selected Income Statement Information for FLLP:Interest income

$
2,094


$
2,093


$
4,183


$
4,100Service fees*

$
18


$
19


$
37


$
39Interest and other credit facility expenses


914



751



1,788



1,443Other general and administrative expenses


45



48



90



40Total expenses


977



818



1,915



1,522Net investment income

$
1,117


$
1,275


$
2,268


$
2,578Realized gain (loss) on investments


(2,619
)


69



(2,619
)


69Net change in unrealized gain (loss) on investments


1,993



(314
)


1,113



(516
)Net realized and unrealized gain (loss) on investments


(626
)


(245
)


(1,506
)


(447
)Net income

$
491


$
1,030


$
762


$
2,131  *
Service fees are included within the Companys Consolidated Statements of Operations as other income. Note 12. Solar Life Science Program LLC On February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management. The Company committed
$75,000 to LSJV. As of June 30, 2018, LSJV has not commenced operations. Note 13. North Mill Capital LLC We acquired 100% of the equity interests of North Mill Capital LLC (NMC) on October 20, 2017. NMC is a leading asset-backed
lending commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized
businesses primarily in the manufacturing, services and distribution industries. We invested approximately $51,000 to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately
thereafter, the Company and ESP SSC Corporation contributed their equity interests to NorthMill LLC (NorthMill). On May 1, 2018, NorthMill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC
Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. NMC currently
manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of June 30, 2018, the portfolio totaled approximately $322,813 of commitments, of which $162,983 were funded, on total assets of
$188,189. As of December 31, 2017, the portfolio totaled approximately $283,461 of commitments, of which $151,604 were funded, on total assets of $176,354. At June 30, 2018, the portfolio consisted of 91 issuers with an average balance of
approximately $1,791 versus 92 issuers with an  35




---

##### Table of Contents

SOLAR SENIOR CAPITAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)  (continued) June 30, 2018 (in
thousands, except share amounts)  average balance of approximately $1,600 at December 31, 2017. NMC has a senior credit facility with a bank lending group for $160,000 which expires on October 20, 2020. Borrowings are
secured by substantially all of NMCs assets. NMCs credit facility, which is non-recourse to us, had approximately $125,293 and $116,574 of borrowings outstanding at June 30, 2018 and
December 31, 2017, respectively. For the three months ended June 30, 2018, NMC had net income of $591 on gross income of $5,361. For the six months ended June 30, 2018, NMC had net income of $1,531 on gross income of $10,253. Due to
timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NMCs funded commitments, the timing of
originations, and the repayments of financings, the Company cannot guarantee that NMC will be able to maintain consistent dividend payments to us. Note 14. Capital Share Transactions As
of June 30, 2018 and December 31, 2017, 200,000,000 shares of $0.01 par value capital stock were authorized. Transactions in
capital stock were as follows:  Shares


AmountSix monthsendedJune 30, 2018


Year endedDecember 31, 2017


Six monthsendedJune 30, 2018


Year endedDecember 31, 2017Shares issued in reinvestment of distributions


3,755



11,719


$
65


$
204Net increase


3,755



11,719


$
65


$
204 Note 15. Subsequent Events The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated
financial statements were issued. On July 3, 2018, the Board declared a monthly distribution of $0.1175 per share payable on
July 31, 2018 to holders of record as of July 19, 2018. On July 13, 2018, the revolving credit commitments under the
Companys Credit Facility were expanded by $25,000 from $200,000 to $225,000. On August 2, 2018, the Board declared a monthly
distribution of $0.1175 per share payable on August 31, 2018 to holders of record as of August 23, 2018. On August 2, 2018,
our Board approved a reduction in the minimum asset coverage ratio from 200% to 150%. This reduction will automatically apply to the Company effective as of August 2, 2019, unless approved earlier by the Companys stockholders.  36




---

##### Table of Contents

Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Solar Senior Capital
Ltd.: Results of Review of Interim Financial Information We have reviewed the consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Solar Senior Capital Ltd. (the
Company) as of June 30, 2018, the related consolidated statements of operations for the three-month and six-month periods ended June 30, 2018 and 2017, the related consolidated statement of changes
in net assets for the six-month period ended June 30, 2018, the related consolidated statements of cash flows for the six-month periods ended June 30, 2018 and
2017, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it 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) (PCAOB), the consolidated statement of assets and liabilities, including the consolidated schedule of investments, of the Company as of December 31, 2017, and the related consolidated statements of
operations, changes in net assets, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2018, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, as of December 31, 2017, is fairly stated, in all material respects, in relation to the consolidated
statement of assets and liabilities, including the consolidated schedule of investments, from which it has been derived. Basis for Review Results This consolidated interim financial information is the responsibility of the Companys management. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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. /s/ KPMG LLP New York, New York August 6, 2018  37




---

##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations The information contained in this section should be read in conjunction with our consolidated financial
statements and notes thereto appearing elsewhere in this report. Some of the statements in this report constitute forward-looking
statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to:  

our future operating results;  

our business prospects and the prospects of our portfolio companies;  

the impact of investments that we expect to make;  

our contractual arrangements and relationships with third parties;  

the dependence of our future success on the general economy and its impact on the industries in which we invest;  

the ability of our portfolio companies to achieve their objectives;  

our expected financings and investments;  

the adequacy of our cash resources and working capital; and  

the timing of cash flows, if any, from the operations of our portfolio companies. We generally use words such as anticipates, believes, expects, intends and similar expressions
to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in Risk Factors and elsewhere in this report. We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume
no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any
additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Overview Solar Senior Capital Ltd. (Solar Senior, the Company, we or our), a Maryland corporation formed
in December 2010, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company
(BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 946. In addition, for tax purposes, the Company has elected to be treated, and intend to qualify annually, as a regulated investment company (RIC) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). On February 24, 2011, we priced our initial
public offering, selling 9.0 million shares, including the underwriters over-allotment, raising approximately $168 million in net proceeds. Concurrent with this offering, Solar Senior Capital Investors LLC, an entity controlled by
Michael S. Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, purchased an additional 500,000 shares through a concurrent private placement, raising another $10 million.  38




---

##### Table of Contents

On August 26, 2011, we established a $200 million senior secured revolving credit
facility (the Credit Facility) with Citigroup Global Markets Inc. acting as administrative agent. In connection with the Credit Facility, our wholly-owned subsidiary, SUNS SPV LLC (the SPV) was formed. The Credit Facility, as
amended, currently has an aggregate of $200 million of commitments available. It can also be expanded up to $600 million. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current
final maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by the SPV. Under the terms of the Credit Facility, Solar Senior Capital and the SPV, as applicable, have made certain customary representations and
warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of
default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add greater investment flexibility, among other changes. On June 1, 2018,
the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and the
investment opportunities are most attractive. We define middle market to refer to companies with annual revenues between $50 million and $1 billion. Our investment objective is to seek to maximize current income consistent with
the preservation of capital. We seek to achieve our investment objective by directly and indirectly investing in senior loans, including first lien, stretch first lien, and second lien debt instruments, made to private middle-market companies whose
debt is rated below investment grade, which we refer to collectively as senior loans. We may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the
value of our net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. Senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate,
primarily LIBOR, plus a premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various
industries and geographical regions. Senior loans typically are rated below investment grade. Securities rated below investment grade are often referred to as leveraged loans, high yield or junk securities, and
may be considered high risk compared to debt instruments that are rated investment grade. In addition, some of our debt investments are not scheduled to fully amortize over their stated terms, which could cause us to suffer losses if the
respective issuer of such debt investment is unable to refinance or repay their remaining indebtedness at maturity. While the Company does not typically seek to invest in traditional equity securities as part of its investment objective, the Company
may occasionally acquire some equity securities in connection with senior loan investments and in certain other unique circumstances, such as the Companys equity investments in Gemino Healthcare Finance, LLC (Gemino), First Lien
Loan Program LLC (FLLP) and North Mill Capital LLC (NMC). We invest in senior loans made primarily to private,
leveraged middle-market companies with approximately $20 million to $100 million of earnings before income taxes, depreciation and amortization (EBITDA). Our business model is focused primarily on the direct origination of
investments through portfolio companies or their financial sponsors. Our direct investments in individual securities will generally range between $5 million and $30 million each, although we expect that this investment size will vary
proportionately with the size of our capital base and/or strategic initiatives. 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 opportunistic 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. We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as
a BDC under the 1940 Act. Our investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or Investment Adviser) and supervised by our board of directors, a majority of whom are non-interested, as such term is defined in the 1940 Act. Solar Capital Management, LLC (Solar Capital Management or Administrator) provides the administrative services necessary for us to
operate.  39




---

##### Table of Contents

As of June 30, 2018, the Investment Adviser has directly invested over
$7.2 billion in more than 335 different portfolio companies since 2006. Over the same period, the Investment Adviser completed transactions with more than 185 different financial sponsors. Recent Developments On July 3,
2018, the Board declared a monthly distribution of $0.1175 per share payable on July 31, 2018 to holders of record as of July 19, 2018. On July 13, 2018, the revolving credit commitments under the Companys Credit Facility were expanded by $25 million from
$200 million to $225 million. On August 2, 2018, the Board declared a monthly distribution of $0.1175 per share payable on
August 31, 2018 to holders of record as of August 23, 2018. On August 2, 2018, our Board approved a reduction in the
minimum asset coverage ratio from 200% to 150%. This reduction will automatically apply to the Company effective as of August 2, 2019, unless approved earlier by the Companys stockholders. Investments Our level of investment
activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the
general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than qualifying assets specified in the 1940 Act unless, at the time the acquisition is
made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in eligible portfolio companies. The definition of eligible portfolio company includes
certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million. Revenue We generate revenue primarily in
the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a
floating rate usually determined on the basis of a benchmark London interbank offered rate (LIBOR), commercial paper rate, or the prime rate. Interest on our debt investments is generally payable quarterly but may be monthly or
semi-annually. In addition, our investments may provide payment-in-kind (PIK) interest. Such amounts of accrued PIK interest are added to the cost of the
investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees
for providing managerial assistance and, if applicable, consulting fees, etc. Expenses All investment professionals of the Investment Adviser and their respective staffs, when and to the extent engaged in providing investment advisory and
management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Solar Capital Partners. We bear all other costs and expenses of our operations and transactions,
including (without limitation):  

the cost of our organization and public offerings;  

the cost of calculating our net asset value, including the cost of any third-party valuation services;  40




---

##### Table of Contents



the cost of effecting sales and repurchases of our shares and other securities;  

interest payable on debt, if any, to finance our investments;  

fees payable to third parties relating to, or associated with, making investments, including fees and expenses
associated with performing due diligence reviews of prospective investments and advisory fees;  

transfer agent and custodial fees;  

fees and expenses associated with marketing efforts;  

federal and state registration fees, any stock exchange listing fees;  

federal, state and local taxes;  

independent directors fees and expenses;  

brokerage commissions;  

fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;  

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;  

fees and expenses associated with independent audits and outside legal costs;  

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and
state securities laws; and  

all other expenses incurred by either Solar Capital Management or us in connection with administering our
business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Solar Capital Management in performing its obligations under the Administration Agreement,
including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and their respective
staffs. We expect our general and administrative operating expenses related to our ongoing operations to increase
moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest
expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative
periods, among other factors. Portfolio and Investment Activity During the three months ended June 30, 2018, we invested $70.5 million across 15 portfolio companies. This compares to investing
$31.5 million in 11 portfolio companies for the three months ended June 30, 2017. Investments sold or prepaid during the three months ended June 30, 2018 totaled $24.9 million versus $29.6 million for the three months ended
June 30, 2017. At June 30, 2018, our portfolio consisted of 49 portfolio companies and was invested 73.3% directly in senior
secured loans and 26.7% in common equity/equity interests/warrants (of which 7.2% is Gemino, 6.8% is FLLP and 12.6% is NMC, through which the Company indirectly invests in senior secured loans) measured at fair value versus 48 portfolio companies
invested 80.3% in senior secured loans and 19.7% in common equity/equity interests (of which 9.4% is Gemino and 10.3% is FLLP) at June 30, 2017. As of June 30, 2018 and December 31, 2017, we have one and zero issuers, respectively, on
non-accrual status.  41




---

##### Table of Contents

At June 30, 2018, 95.0% or $446.7 million of our income producing investment
portfolio* was floating rate and 5.0% or $23.3 million was fixed rate, measured at fair value. At June 30, 2017, 96.5% or $362.1 million of our income producing investment portfolio* was floating rate and 3.5% or $13.1 million
was fixed rate, measured at fair value. Since the initial public offering of Solar Senior on February 24, 2011 and through
June 30, 2018, invested capital totaled approximately $1.4 billion in over 125 portfolio companies. Over the same period, Solar Senior completed transactions with more than 75 different financial sponsors. * We have included First Lien Loan Program LLC, Gemino Healthcare Finance, LLC and North
Mill Capital LLC as 100%, 100% and 81% floating rate, respectively, within our income producing investment portfolio. Gemino Healthcare Finance, LLC We acquired Gemino (d/b/a Gemino Senior Secured Healthcare Finance) on September 30, 2013. Gemino is a commercial finance company
that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Our initial investment in Gemino was $32.8 million.
The management team of Gemino co-invested in the transaction and continues to lead Gemino. Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse,
$100.0 million credit facility with non-affiliates, which was expandable to $150.0 million under its accordion feature. Effective March 31, 2014, the credit facility was expanded to
$105.0 million and again on June 27, 2014 to $110.0 million. On May 27, 2016, Gemino entered into a new $125.0 million credit facility which replaced the previously existing facility. The new facility has similar terms as
compared to the previous facility and includes an accordion feature increase to $200.0 million and has a maturity date of May 27, 2020. On December 31, 2013, we contributed our 32,839 units in Gemino to Gemino Senior Secured Healthcare LLC (Gemino Senior Secured
Healthcare). In exchange for this contribution, we received 19,839 units of equity interests and $13.0 million in floating rate secured notes of Gemino Senior Secured Healthcare bearing interest at LIBOR plus 7.50%, maturing on
December 31, 2018. However, our financial statements, including our schedule of investments, reflected our investments in Gemino Senior Secured Healthcare on a consolidated basis. On October 28, 2016, Gemino Senior Secured Healthcare was
dissolved. As of June 30, 2018, Geminos management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively. Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of June 30,
2018, the portfolio totaled approximately $173.6 million of commitments, of which $111.3 million were funded, on total assets of $106.4 million. As of December 31, 2017, the portfolio totaled
approximately $176.3 million of commitments, of which $106.6 million were funded, on total assets of $110.6 million. At June 30, 2018, the portfolio consisted of 29 issuers with an average balance of approximately
$3.8 million versus 29 issuers with an average balance of approximately $3.7 million at December 31, 2017. All of the commitments in Geminos portfolio are floating-rate, senior-secured,
cash-pay loans. Geminos credit facility, which is non-recourse to us, had approximately $73.0 million and $75.0 million of borrowings outstanding at
June 30, 2018 and December 31, 2017, respectively. For the three months ended June 30, 2018 and 2017, Gemino had net income of $0.7 million and $0.7 million, respectively, on gross income of $2.7 million and
$2.8 million, respectively. For the six months ended June 30, 2018 and 2017, Gemino had net income of $1.4 million and $1.4 million, respectively, on gross income of $5.5 million and $5.6 million, respectively. Due to
timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in Geminos funded commitments, the timing
of originations, and the repayments of financings, the Company cannot guarantee that Gemino will be able to maintain consistent dividend payments to us.  42




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##### Table of Contents

First Lien Loan Program LLC On September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment Management LLC
(Voya). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of Voya Financial, Inc. (NYSE: VOYA). The joint venture vehicle, structured as an unconsolidated Delaware limited liability company, is expected
to invest primarily in senior secured floating rate term loans to middle market companies predominantly owned by private equity sponsors or entrepreneurs. Solar Senior and Voya have committed to provide $50.75 million and $7.25 million,
respectively, of capital to the joint venture. All portfolio decisions and generally all other decisions in respect of the FLLP must be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with
approval from a representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly owned
subsidiary of FLLP, as borrower entered into a $75.0 million senior secured revolving credit facility (the FLLP Facility) with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior acts as servicer under the
FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary
requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to
$100.0 million and extending the maturity date to August 16, 2021. There were $65.7 million and $78.6 million of borrowings outstanding as of June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018
and December 31, 2017, Solar Senior and Voya contributed combined equity capital in the amount of $40.0 million and $42.8 million, respectively. Of the $40.0 million of contributed equity capital at June 30, 2018, the
Company contributed $29.6 million in the form of investments and $5.4 million in the form of cash and Voya contributed $5.0 million in the form of cash. As of June 30, 2018, Solar Senior and Voyas remaining commitments
totaled $15.7 million and $2.3 million, respectively. The Company, along with Voya, controls the funding of FLLP and FLLP may not call the unfunded commitments without approval of both the Company and Voya. As of June 30, 2018 and December 31, 2017, FLLP had total assets of $106.3 million and $121.8 million, respectively. For
the same periods, FLLPs portfolio consisted of first lien floating rate senior secured loans to 19 and 23 different borrowers, respectively. For the three months ended June 30, 2018 and 2017, FLLP invested $2.7 million across 3
portfolio companies and $3.7 million across 6 portfolio companies, respectively. Investments prepaid totaled $19.9 million and $8.6 million, respectively, for the three months ended June 30, 2018 and 2017. At June 30, 2018
and December 31, 2017, the weighted average yield of FLLPs portfolio was 7.4% and 7.3%, respectively, measured at fair value and 7.5% and 7.2%, respectively, measured at cost.  43




---

##### Table of Contents

FLLP Portfolio as of June 30, 2018 (in thousands)  Description

Industry

SpreadAboveIndex(1)


LIBORFloor


InterestRate(2)


MaturityDate


ParAmount


Cost


FairValue(3)1A Smart Start LLC

Electronic Equipment, Instruments & Components


L+475



1.00
%


6.84
%


2/21/22


$
7,800


$
7,753


$
7,800Alera Group Intermediate Holdings,
Inc.(4)

Insurance


L+550



1.00
%


7.48
%


12/30/22



5,700



5,653



5,700Alteon Health, LLC (fka Island
Medical)(4)

Health Care Providers & Services


L+650



1.00
%


8.59
%


9/1/22



4,007



3,974



3,807Capstone Logistics Acquisition,
Inc.(4)

Professional Services


L+450



1.00
%


6.59
%


10/7/21



5,109



5,081



5,109Confie Seguros Holding II Co.(4)


Insurance


L+525



1.00
%


7.56
%


4/19/22



5,418



5,378



5,380Edgewood Partners Holdings, LLC (Epic)

Insurance


L+425



1.00
%


6.34
%


9/8/24



4,444



4,426



4,444Empower Payments Acquisition, Inc.
(RevSpring)(4)

Professional Services


L+450



1.00
%


6.83
%


11/30/23



5,970



5,896



5,970Falmouth Group Holdings Corp.
(AMPAC)(4)

Chemicals


L+675



1.00
%


8.92
%


12/14/21



5,018



5,018



5,018Kellermeyer Bergensons Services, LLC
(KBS)(4)

Commercial Services & Supplies


L+500



1.00
%


7.32
%


10/29/21



4,392



4,363



4,392Ministry Brands, LLC(4)

Software


L+400



1.00
%


6.10
%


12/2/22



5,007



4,968



4,982National Spine and Pain Centers, LLC

Health Care Providers & Services


L+450



1.00
%


6.59
%


6/2/24



2,970



2,957



2,940Pet Holdings ULC & Pet Supermarket, Inc.

Specialty Retail


L+550



1.00
%


7.80
%


7/5/22



5,257



5,199



5,257PSP Group, LLC (Pet Supplies
Plus)(4)

Specialty Retail


L+475



1.00
%


6.85
%


4/6/21



5,271



5,246



5,271QBS Holding Company, Inc.
(Quorum)(4)

Software


L+475



1.00
%


7.11
%


8/7/21



5,013



4,995



5,013Salient Partners, L.P.(4)

Asset Management


L+850



1.00
%


10.59
%


6/9/21



4,599



4,549



4,599Telular Corporation

Wireless Telecommunication Services


L+425



1.25
%


6.58
%


6/24/19



5,567



5,558



5,567The Hilb Group, LLC & Gencorp Insurance Group, Inc.(4)

Insurance


L+475



1.00
%


7.08
%


6/24/21



4,783



4,729



4,736VT Buyer Acquisition Corp.
(Veritext)(4)

Professional Services


L+475



1.00
%


7.08
%


1/29/22



5,899



5,877



5,899Wirb-Copernicus Group, Inc.(4)

Professional Services


L+425



1.00
%


6.34
%


8/15/22



5,898



5,859



5,898$
97,479


$
97,782  (1)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or
PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (2)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of June 30, 2018. (3)
Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included
in the Boards valuation process described elsewhere herein. (4)
The Company also holds this security on its Consolidated Statements of Assets and Liabilities.  44




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##### Table of Contents

FLLP Portfolio as of December 31, 2017 (audited) (in thousands)  Description

Industry

SpreadAboveIndex(1)


LIBORFloor


InterestRate(2)


MaturityDate


ParAmount


Cost


FairValue(3)1A Smart Start LLC(4)

Electronic Equipment, Instruments & Components


L+475



1.00
%


6.44
%


2/21/22


$
7,840


$
7,787


$
7,820Alera Group Intermediate Holdings,
Inc.(4)

Insurance


L+550



1.00
%


6.85
%


12/30/22



4,279



4,241



4,257Anesthesia Consulting & Management,
LP(4)

Health Care Providers & Services


L+625



1.00
%


7.94
%


10/31/22



4,530



4,493



4,258Capstone Logistics Acquisition,
Inc.(4)

Professional Services


L+450



1.00
%


6.07
%


10/7/21



5,284



5,252



5,231Confie Seguros Holding II Co.(4)


Insurance


L+525



1.00
%


6.73
%


4/19/22



5,445



5,401



5,450Edgewood Partners Holdings, LLC (Epic)

Insurance


L+475



1.00
%


6.14
%


9/8/24



4,467



4,447



4,444Empower Payments Acquisition, Inc.
(RevSpring)(4)

Professional Services


L+550



1.00
%


7.19
%


11/30/23



4,579



4,499



4,579Falmouth Group Holdings Corp.
(AMPAC)(4)

Chemicals


L+675



1.00
%


8.44
%


12/14/21



5,018



5,018



5,018Island Medical Management Holdings,
LLC(4)

Health Care Providers & Services


L+550



1.00
%


7.00
%


9/1/22



4,570



4,528



4,432Kellermeyer Bergensons Services, LLC
(KBS)(4)

Commercial Services & Supplies


L+500



1.00
%


6.48
%


10/29/21



4,415



4,381



4,415Metamorph US 3, LLC
(Metalogix)(4)

Software


L+750
(5)


1.00
%


9.07
%


12/1/20



3,976



3,922



2,903Ministry Brands, LLC(4)

Software


L+500



1.00
%


6.38
%


12/2/22



4,818



4,777



4,818National Spine and Pain Centers, LLC

Health Care Providers & Services


L+450



1.00
%


6.19
%


6/2/24



2,985



2,971



2,963Pet Holdings ULC & Pet Supermarket, Inc.

Specialty Retail


L+550



1.00
%


6.84
%


7/5/22



5,111



5,050



5,086PSP Group, LLC (Pet Supplies
Plus)(4)

Specialty Retail


L+475



1.00
%


6.32
%


4/6/21



5,298



5,269



5,298QBS Holding Company, Inc.
(Quorum)(4)

Software


L+475



1.00
%


6.13
%


8/7/21



3,263



3,243



3,238Salient Partners, L.P.(4)

Asset Management


L+850



1.00
%


9.85
%


6/9/21



4,806



4,745



4,806Sarnova HC, LLC

Trading Companies and Distributors


L+475



1.00
%


6.32
%


1/28/22



4,913



4,877



4,913Suburban Broadband, LLC (Jab Wireless, Inc.)(4)

Wireless Telecommunication Services


L+650
(6)


1.00
%


8.19
%


3/26/19



8,067



8,007



8,067Telular Corporation

Wireless Telecommunication Services


L+425



1.25
%


5.94
%


6/24/19



5,743



5,729



5,728The Hilb Group, LLC & Gencorp Insurance Group, Inc.(4)

Insurance


L+475



1.00
%


6.44
%


6/24/21



4,519



4,459



4,519VT Buyer Acquisition Corp.
(Veritext)(4)

Professional Services


L+475



1.00
%


6.44
%


1/29/22



5,926



5,901



5,897Wirb-Copernicus Group, Inc.(4)

Professional Services


L+500



1.00
%


6.69
%


8/15/22



5,928



5,882



5,928$
114,879


$
114,068  (1)
Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or
PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor. (2)
Floating rate debt investments typically bear interest at a rate determined by reference to either the London
Interbank Offered Rate (LIBOR or L) index rate or the prime index rate (PRIME or P), and which typically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest
rate in effect as of December 31, 2017.  45




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##### Table of Contents

(3)
Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included
in the Boards valuation process described elsewhere herein. (4)
The Company also holds this security on its Consolidated Statements of Assets and Liabilities. (5)
Spread is 5.50% Cash / 2.0% PIK. (6)
Spread is 4.50% Cash / 2.0% PIK. Below is certain summarized financial information for FLLP as of June 30, 2018 and December 31, 2017 and for the three and six
months ended June 30, 2018 and 2017:  June 30,2018


December 31,2017Selected Balance Sheet Information for FLLP (in thousands):Investments at fair value (cost $97,479 and $114,879, respectively)

$
97,782


$
114,068Cash and other assets


8,530



7,723Total assets

$
106,312


$
121,791Debt outstanding

$
65,699


$
78,644Payable for investments purchased


1,750



Distributions payable


1,068



1,180Interest payable and other credit facility related expenses


967



843Accrued expenses and other payables


161



170Total liabilities

$
69,645


$
80,837Members equity

$
36,667


$
40,954Total liabilities and members equity

$
106,312


$
121,791  Three monthsendedJune 30, 2018


Three monthsendedJune 30, 2017


Six monthsendedJune 30, 2018


Six monthsendedJune 30, 2017Selected Income Statement Information for FLLP (in thousands):Interest income

$
2,094


$
2,093


$
4,183


$
4,100Service fees*

$
18


$
19


$
37


$
39Interest and other credit facility expenses


914



751



1,788



1,443Other general and administrative expenses


45



48



90



40Total expenses


977



818



1,915



1,522Net investment income

$
1,117


$
1,275


$
2,268


$
2,578Realized gain (loss) on investments


(2,619
)


69



(2,619
)


69Net change in unrealized gain (loss) on investments


1,993



(314
)


1,113



(516
)Net realized and unrealized gain (loss) on investments


(626
)


(245
)


(1,506
)


(447
)Net income

$
491


$
1,030


$
762


$
2,131  *
Service fees are included within the Companys Consolidated Statements of Operations as other income.  46




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##### Table of Contents

North Mill Capital LLC We acquired 100% of the equity interests of North Mill Capital LLC (NMC) on October 20, 2017. NMC is a leading asset-backed
lending commercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized
businesses primarily in the manufacturing, services and distribution industries. We invested approximately $51 million to effect the transaction. Subsequently, the Company contributed 1% of its equity interest in NMC to ESP SSC Corporation.
Immediately thereafter, the Company and ESP SSC Corporation contributed their equity interests to NorthMill. On May 1, 2018, NorthMill merged with and into NMC, with NMC being the surviving company. The Company and ESP SSC Corporation own 99%
and 1% of the equity interests of NMC, respectively. The management team of NMC continues to lead NMC. NMC currently manages a highly
diverse portfolio of directly-originated and underwritten senior-secured commitments. As of June 30, 2018, the portfolio totaled approximately $322.8 million of commitments, of which $163.0 million were funded, on total assets of
$188.2 million. As of December 31, 2017, the portfolio totaled approximately $283.5 million of commitments, of which $151.6 million were funded, on total assets of $176.4 million. At June 30, 2018, the portfolio
consisted of 91 issuers with an average balance of approximately $1.8 million versus 92 issuers with an average balance of approximately $1.6 million at December 31, 2017. NMC has a senior credit facility with a bank lending group for
$160.0 million which expires on October 20, 2020. Borrowings are secured by substantially all of NMCs assets. NMCs credit facility, which is non-recourse to us, had approximately
$125.3 million and $116.6 million of borrowings outstanding at June 30, 2018 and December 31, 2017, respectively. For the three months ended June 30, 2018, NMC had net income of $0.6 million on gross income of
$5.4 million. For the six months ended June 30, 2018, NMC had net income of $1.5 million on gross income of $10.3 million. Due to timing and non-cash items, there may be material
differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NMCs funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NMC will
be able to maintain consistent dividend payments to us. Solar Life Science Program LLC On February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management. The Company committed
$75.0 million to LSJV. As of June 30, 2018, LSJV has not commenced operations. Critical Accounting Policies The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other
reasonably likely events or circumstances that would result in materially different amounts being reported. 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: The Company conducts the valuation of its assets in
accordance with GAAP and the 1940 Act. The Company generally values its assets on a quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closing price on the
date of valuation.  47




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##### Table of Contents

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, management determines whether
the quote obtained is sufficient according to GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shall each be valued at cost plus
accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of the Investment Adviser, does not represent fair value, in which case such investments shall be valued at fair value
as determined in good faith by or under the direction of the Companys board of directors (the Board). Investments for
which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation or methodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not
represent fair value, each 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 valuations are discussed with
senior management of the Investment Adviser; (iii) independent valuation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Advisers preliminary valuations and make their own
independent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of the most recently
completed fiscal quarter, and (b) each portfolio investment that is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will
discuss the 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 independent valuation firm. The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; 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,
among others. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will
consider the pricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may
differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practical expedient for fair value. The market approach uses prices and other
relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cash flows or earnings) to a
single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing
our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, the nature and
realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are
public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For the six months ended June 30,
2018, there has been no change to the Companys valuation approaches or techniques and the nature of the related inputs considered in the valuation process.  48




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##### Table of Contents

Accounting Standards Codification (ASC) Topic 820 classifies the inputs used to
measure these fair values into the following hierarchy: Level1: Quoted prices in active markets for identical
assets or liabilities, accessible by the Company at the measurement date. Level2: Quoted prices for similar
assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices. Level3: Unobservable inputs for the asset or liability. In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The
exercise of judgment is based in part on our knowledge of the asset class and our prior experience. Determination of fair value involves
subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial
statements. Revenue Recognition The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis.
Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or
more and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or
dividends are paid in cash, and in managements judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or
applied to principal depending upon managements judgment. Some of our investments may have contractual PIK interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected as receivable
up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity
dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally
becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on
non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable
through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK
investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are
capitalized and amortized into income using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other
investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned. The
typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit
risk than coupon loans. PIK securities may have unreliable valuations  49




---

##### Table of Contents

because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK interest has the effect of
generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases the loan-to-value
ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser
will be under no obligation to reimburse the Company for these fees. For the three and six months ended June 30, 2018, capitalized PIK income totaled $0.1 million and $0.2 million, respectively. For the three and six months ended
June 30, 2017, capitalized PIK income totaled $0.1 million and $0.3 million, respectively. Net Realized Gain or Loss and Net Change
in Unrealized Gain or Loss We generally measure realized gain or loss by the difference between the net proceeds from the
repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in
unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investments are
calculated by using the specific identification method. Income Taxes Solar Senior Capital, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code.
In order to qualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. Depending on the level of
taxable income earned in a given tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines
that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues an estimated excise tax, if any, on estimated excess taxable income. Recent Accounting Pronouncements In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which amends FASB ASC 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the
total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash
equivalents when reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities,
the amendments were effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adopted ASU 2016-18 and determined that the adoption has
not had a material impact on its consolidated financial statements and disclosures. In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which will amend FASB ASC 310-20. The amendments in this Update shorten the amortization period for
certain callable debt securities held at a premium, generally requiring the premium to be amortized to the earliest call date. For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements
and disclosures. In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business
entities with annual reporting periods beginning after December 15, 2016. On August 12, 2015,  50




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##### Table of Contents

the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 provides accounting
guidance related to revenue from contracts with customers. For public business entities, ASC 606 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has adopted ASC 606
and determined that the adoption has not had a material impact on its consolidated financial statements and disclosures. RESULTS OF OPERATIONS Results comparisons are for the three and six months ended June 30, 2018 and 2017: Investment Income For the three and six
months ended June 30, 2018, gross investment income totaled $9.5 million and $18.8 million, respectively. For the three and six months ended June 30, 2017, gross investment income totaled $7.7 million and $15.2 million,
respectively. The increase in gross investment income for the year over year three and six month periods was primarily due to portfolio growth, including from our investment in NMC, as well as our portfolio yield increasing year over year. Expenses Net expenses totaled
$3.8 million and $7.5 million, respectively, for the three and six months ended June 30, 2018, of which $1.6 million and $3.3 million, respectively, were gross base management fees and gross performance-based incentive fees
and $1.8 million and $3.2 million, respectively, were interest and other credit facility expenses. Over the same periods, $0.4 million and $0.7 million, respectively, of performance-based incentive fees were waived.
Administrative services and other general and administrative expenses totaled $0.8 million and $1.8 million, respectively, for the three and six months ended June 30, 2018. Net expenses totaled $2.0 million and $3.9 million,
respectively, for the three and six months ended June 30, 2017, of which $1.1 million and $2.1 million, respectively, were gross base management fees and gross performance-based incentive fees and $0.9 million and
$1.7 million, respectively, were interest and other credit facility expenses. Over the same periods, $0.7 million and $1.5 million, respectively, of base management fees were waived and $0.1 million and $0.2 million,
respectively, of performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled $0.8 million and $1.7 million, respectively, for the three and six months ended June 30,
2017. Expenses generally consist of management fees, performance-based incentive fees, administrative services expenses, insurance, legal expenses, directors expenses, audit and tax expenses, transfer agent fees and expenses, and other general
and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. For the three and six month periods, the increase in net expenses year
over year is primarily due to higher interest, incentive and management fee expense on a larger, higher yielding portfolio as compared to the year ago periods. Net Investment Income The Companys
net investment income totaled $5.7 million and $11.3 million, or $0.35 and $0.71, per average share, respectively, for the three and six months ended June 30, 2018. The Companys net investment income totaled $5.7 million
and $11.3 million, or $0.35 and $0.71, per average share, respectively, for the three and six months ended June 30, 2017. Net Realized Gain The Company had investment sales and prepayments totaling approximately $24.9 million and $50.9 million, respectively, for
the three and six months ended June 30, 2018. Net realized losses over the same  51




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##### Table of Contents

periods were $5.2 million and $5.3 million, respectively. The Company had investment sales and prepayments totaling approximately $29.6 million and $85.5 million,
respectively, for the three and six months ended June 30, 2017. Net realized gains over the same periods were $0.04 million and $0.1 million, respectively. Net realized losses for the three and six months ended June 30, 2018 were
primarily related to the Companys exit from its investment in Metamorph US 3, LLC. Net realized gains for the three and six months ended June 30, 2017 were related to the sale of select assets. Net Change in Unrealized Gain (Loss) For
the three and six months ended June 30, 2018, net change in unrealized gain (loss) on the Companys assets and liabilities totaled $5.1 million and $5.0 million, respectively. For the three and six months ended June 30,
2017, net change in unrealized gain (loss) on the Companys assets and liabilities totaled ($0.5) million and ($0.3) million, respectively. Net unrealized gain for the three months ended June 30, 2018 is primarily due to the reversal of
previously recorded unrealized loss on our investment in Metamorph US 3, LLC, as well as appreciation on our investments in North Mill Capital LLC and Gemino Healthcare Finance, LLC, among others, partially offset by depreciation in First Lien Loan
Program LLC, American Teleconferencing Services, Ltd. and Polycom, Inc., among others. Net unrealized gain for the six months ended June 30, 2018 is primarily due to the reversal of previously recorded unrealized loss on our investment in
Metamorph US 3, LLC, as well as appreciation on our investments in North Mill Capital LLC and Gemino Healthcare Finance, LLC, among others, partially offset by depreciation in First Lien Loan Program LLC, PPT Management Holdings, LLC and Alteon
Health, LLC, among others. Net unrealized loss for the three months ended June 30, 2017 is primarily due to depreciation in the value of our investments in Gemino Healthcare Finance, LLC, Metamorph US 3, LLC, and Anesthesia
Consulting & Management, LP, among others, partially offset by appreciation in Hostway Corporation, Aegis Toxicology Sciences Corporation and QBS Holding Company, Inc., among others. Net unrealized loss for the six months ended
June 30, 2017 is primarily due to depreciation in the value of our investments in Metamorph US 3, LLC, Gemino Healthcare Finance, LLC and Anesthesia Consulting & Management, LP, among others, partially offset by appreciation in Hostway
Corporation, Securus Technologies, Inc. and American Teleconferencing Services, Ltd., among others. Net Increase in Net Assets From Operations For the three and six months ended June 30, 2018, the Company had a net increase in net assets resulting from operations of
$5.5 million and $11.0 million, respectively. For the same periods, earnings per average share were $0.34 and $0.69, respectively. For the three and six months ended June 30, 2017, the Company had a net increase in net assets
resulting from operations of $5.2 million and $11.1 million, respectively. For the same periods, earnings per average share were $0.33 and $0.70, respectively. LIQUIDITY AND CAPITAL RESOURCES The
Companys liquidity and capital resources are generally available through its Credit Facility, through periodic follow-on equity offerings, as well as from cash flows from operations, investment sales and
pre-payments of investments. At June 30, 2018, the Company had $185.9 million in borrowings outstanding on its Credit Facility and $14.1 million of unused capacity, subject to borrowing base
limits. In September 2016, the Company closed a follow-on public equity offering of
4.5 million shares of common stock at $16.76 per share raising approximately $75.0 million in net proceeds. In the future, the Company may raise additional equity or debt capital, among other considerations. The primary uses of funds will
be investments in portfolio companies, reductions in debt outstanding and other general corporate purposes. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no
assurance that any such issuance will occur or be successful. We currently expect that our liquidity needs will be met with cash flows
from operations, borrowings under our Credit Facility, including its accordion feature, as well as from other available financing activities.  52




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Cash Equivalents We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company
makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we consider
using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of
the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the
quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on our credit facilities, as deemed appropriate. The
amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held approximately $60 million in cash equivalents as of
June 30, 2018. Debt Senior
Secured Revolving Credit Facility  On August 26, 2011, the Company established the SPV which entered into the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017,
commitments to the Credit Facility, as amended, were increased from $175 million to $200 million by utilizing the accordion feature. The commitments can also be expanded up to $600 million. The stated interest rate on the Credit
Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current maturity date is June 1, 2023. The Credit Facility is secured by all of the assets held by the SPV. Under the terms of the Credit Facility, Solar Senior Capital and
the SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit
facilities. The Credit Facility also includes usual and customary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015 to extend maturities and add
greater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. At
June 30, 2018, the Company was in compliance with all financial and operational covenants required by the Credit Facility. Contractual Obligations  Payments due by Period as of June 30, 2018(dollars in millions)Total


Less than1 year


1-3 years


3-5 years


More than5 yearsSenior Secured Revolving Credit
Facility(1)

$
185.9


$



$



$
185.9


$
  (1)
At June 30, 2018, $14.1 million of capacity remained unused.  53




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##### Table of Contents

Information about our senior securities is shown in the following table as of each year
ended December 31 since the Company commenced operations, unless otherwise noted. The  indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.  Class and Year

Total AmountOutstanding(1)


AssetCoveragePer Unit(2)


InvoluntaryLiquidatingPreferencePer Unit(3)


AverageMarket ValuePer Unit(4)Revolving Credit FacilityFiscal 2018 (through June 30, 2018)

$
185,900


$
2,452


$




N/AFiscal 2017


124,200



3,175







N/AFiscal 2016


98,300



3,738







N/AFiscal 2015


116,200



2,621







N/AFiscal 2014


143,200



2,421







N/AFiscal 2013


61,400



4,388







N/AFiscal 2012


39,100



5,453







N/AFiscal 2011


8,600



21,051







N/A  (1)
Total amount of each class of senior securities outstanding at the end of the period presented. (2)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our
consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage
Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit was divided based on the amount outstanding at the end of the period for each. As of June 30, 2018, asset coverage
was 245.2%. (3)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the
issuer in preference to any security junior to it. (4)
Not applicable, we do not have senior securities that are registered for public trading. We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which Solar Capital
Partners has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which Solar Capital Management has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. Payments under the
Advisory Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based
upon our allocable portion of the Administrators overhead in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial
officer and chief compliance officer and their respective staffs. Either party may terminate each of the Advisory Agreement and Administration Agreement without penalty upon 60 days written notice to the other. See note 3 to our
Consolidated Financial Statements. On September 10, 2014, FLLP entered into a servicing agreement with the Company. FLLP engaged and
retained the Company to provide certain administrative services relating to the facilities, supplies and necessary ongoing overhead support services for the operation of FLLPs ongoing business affairs in exchange for a fee. Either party may
terminate this agreement upon 30 days written notice to the other. Off-Balance Sheet
Arrangements From time-to-time and in the normal
course of business, the Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments.
These unfunded capital commitments always take into account the Companys liquidity and cash available for investment, portfolio and  54




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##### Table of Contents

issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at June 30, 2018 and December 31, 2017, respectively:  June 30,2018


December 31,2017(in millions)DISA Holdings Acquisition Corp

$
16.6


$
The Hilb Group, LLC & Gencorp Insurance Group, Inc.


12.3



0.4MSHC, Inc


11.0



VetCor Professional Practices LLC


5.3



6.7Solara Medical Supplies, Inc.


3.0



MRI Software LLC


3.0



2.4WIRB-Copernicus Group, Inc


2.8



Edgewood Partners Holdings, LLC


2.4



Gemino Healthcare Finance, LLC*


1.4



5.0Alera Group Intermediate Holdings, Inc


1.0



4.7VT Buyer Acquisition Corp. (Veritext)


0.9



3.5MHE Intermediate Holdings, LLC


0.8



1.0Engineering Solutions & Products, LLC


0.3



1.7TwentyEighty, Inc


0.1



0.1PetVet Care Centers, LLC






1.6Ministry Brands, LLC






0.4Total Commitments

$
60.9


$
27.5  *
The Company controls the funding of the Gemino commitment and may cancel it at its discretion. As of June 30, 2018 and December 31, 2017, the Company had sufficient cash available and/or liquid securities
available to fund its commitments as well as the commitments to FLLP and LSJV disclosed earlier. In the normal course of its business, we
invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial
instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby
changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.  55




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##### Table of Contents

Distributions The following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal
year to date:  Date Declared

Record Date


Payment Date


AmountFiscal 2018August 2, 2018


August 23, 2018



August 31, 2018


$
0.1175July 3, 2018


July 19, 2018



July 31, 2018



0.1175June 6, 2018


June 21, 2018



July 3, 2018



0.1175May 7, 2018


May 23, 2018



June 1, 2018



0.1175April 3, 2018


April 19, 2018



May 2, 2018



0.1175February 22, 2018


March 22, 2018



April 3, 2018



0.1175February 7, 2018


February 22, 2018



March 1, 2018



0.1175January 5, 2018


January 18, 2018



January 31, 2018



0.1175YTD Total (2018)









$
0.94Fiscal 2017December 7, 2017


December 21, 2017



January 4, 2018


$
0.1175November 2, 2017


November 22, 2017



December 1, 2017



0.1175October 5, 2017


October 19, 2017



November 1, 2017



0.1175September 14, 2017


September 22, 2017



October 3, 2017



0.1175August 1, 2017


August 17, 2017



August 31, 2017



0.1175July 6, 2017


July 20, 2017



August 1, 2017



0.1175June 7, 2017


June 22, 2017



July 6, 2017



0.1175May 2, 2017


May 18, 2017



June 2, 2017



0.1175April 6, 2017


April 20, 2017



May 2, 2017



0.1175February 22, 2017


March 23, 2017



April 4, 2017



0.1175February 7, 2017


February 23, 2017



March 1, 2017



0.1175January 5, 2017


January 19, 2017



February 1, 2017



0.1175Total (2017)









$
1.41Fiscal 2016December 8, 2016


December 22, 2016



January 4, 2017


$
0.1175November 2, 2016


November 23, 2016



December 1, 2016



0.1175October 5, 2016


October 20, 2016



November 1, 2016



0.1175September 12, 2016


September 22, 2016



October 4, 2016



0.1175August 2, 2016


August 18, 2016



September 1, 2016



0.1175July 7, 2016


July 21, 2016



August 2, 2016



0.1175June 7, 2016


June 23, 2016



July 1, 2016



0.1175May 3, 2016


May 19, 2016



June 2, 2016



0.1175April 7, 2016


April 21, 2016



May 3, 2016



0.1175February 24, 2016


March 24, 2016



April 1, 2016



0.1175February 4, 2016


February 18, 2016



March 2, 2016



0.1175January 7, 2016


January 21, 2016



February 2, 2016



0.1175Total (2016)









$
1.41 Tax characteristics of all distributions will be reported to shareholders on Form 1099 after the end of the
calendar year. Future distributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable.  56




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##### Table of Contents

We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC
status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we
currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future
decide to retain such capital gains for investment. We maintain an opt out dividend reinvestment plan for our common
stockholders. As a result, if we declare a distribution, then stockholders cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment
plan so as to receive cash distributions. We may not be able to achieve operating results that will allow us to make distributions at a
specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions.
Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including
possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or
market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a
regulated investment company. With respect to the distributions to stockholders, income from origination, structuring, closing and
certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. For the six months ended June 30, 2018 and the year ended December 31, 2017, 6.6% and
11.8% of distributions were funded from the waiver of management and/or incentive fees. Related Parties We have entered into a number of business relationships with affiliated or related parties, including the following:  

We have entered into the Advisory Agreement with Solar Capital Partners. Mr. Gross, our Chairman and Chief
Executive Officer and Mr. Spohler, our Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, the Investment Adviser. In addition, Mr. Peteka,
our Chief Financial Officer, Treasurer and Corporate Secretary serves as the Chief Financial Officer for Solar Capital Partners.  

The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in
performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and their
respective staffs.  

We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser
has granted us a non-exclusive, royalty-free license to use the name Solar Capital. The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part,
with ours. For example, the Investment Adviser presently serves as investment  57




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##### Table of Contents

adviser to Solar Capital Ltd., a publicly traded BDC, which focuses on investing in senior secured loans, including unitranche loans, mezzanine loans and equity securities. In addition, Michael
S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler, our Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. The Investment Adviser and certain investment
advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its
affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable
law and interpretive positions of the SEC and its staff, and consistent with the Investment Advisers allocation procedures. Related
party transactions may occur among Solar Senior Capital Ltd. and Gemino, FLLP, NMC and FLLP 2015-1, LLC. These transactions may occur in the normal course of business. No administrative fees are paid to Solar
Capital Partners by Gemino, NMC or FLLP. In addition, we have adopted a formal code of ethics that governs the conduct of our officers
and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including
changes in interest rates. During the six months ended June 30, 2018, certain of the investments in our comprehensive investment portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR and
typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these investments have LIBOR floors. The Company also has a revolving credit facility that is generally based on floating
LIBOR. Assuming no changes to our balance sheet as of June 30, 2018 and no new defaults by portfolio companies, a hypothetical one-quarter of one percent decrease in LIBOR on our comprehensive floating
rate assets and liabilities would reduce our net investment income by three cents per average share over the next twelve months. Assuming no changes to our balance sheet as of June 30, 2018 and no new defaults by portfolio companies, a
hypothetical one percent increase in LIBOR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately eleven cents per average share over the next twelve months. However, we may hedge against
interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of
the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At
June 30, 2018, we have no interest rate hedging instruments outstanding on our balance sheet.  Increase (Decrease) in LIBOR


(0.25
%)


1.00
%Increase (Decrease) in Net Investment Income Per Share Per Year

$
(0.03
)

$
0.11 Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures As of June 30, 2018 (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  58




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##### Table of Contents

management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure
controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures. (b) Changes in Internal Controls Over
Financial Reporting Management has not identified any change in the Companys internal control over financial reporting that
occurred during the second quarter of 2018 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings We, Solar Capital Management, LLC and Solar Capital Partners, LLC are not currently subject to any material pending legal proceedings
threatened against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these
legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations beyond what has been disclosed with these financial statements. Item 1A. Risk Factors In addition to the other information set forth in this report, you should carefully consider the factors discussed in Risk Factors
in the May 24, 2018 filing of our Registration Statement on Form N-2, which could materially affect our business, financial condition and/or operating results. The risks described in our Registration
Statement on Form N-2 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect
our business, financial condition and/or operating results. Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds We did not engage in unregistered sales of securities during the quarter ended June 30, 2018. Item 3. Defaults Upon Senior Securities None. Item 4.
Mine Safety Disclosures Not applicable. Item 5. Other Information None.  59




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##### Table of Contents

Item 6. Exhibits The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:  Exhibit
Number

Description3.1

Articles of Amendment and Restatement(1)3.2

Amended and Restated Bylaws(1)4.1

Form of Common Stock Certificate(1)10.1

Dividend Reinvestment Plan(1)10.2

First Amended and Restated Investment Advisory and Management Agreement by and between Registrant and Solar Capital Partners, LLC(6)10.3

Form of Custody Agreement(4)10.4

Amended and Restated Administration Agreement by and between Registrant and Solar Capital Management, LLC(4)10.5

Form of Indemnification Agreement by and between Registrant and each of its
directors(1)10.6

Trademark License Agreement by and between Registrant and Solar Capital Partners,
LLC(1)10.7

Form of Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(1)10.8

Form of Amendment No. 1 to Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(2)10.9

Form of Contribution Agreement, dated as of August 
26, 2011, by and between SUNS SPV LLC, as the contributee, and Solar Senior Capital Ltd., as the contributor(3)10.10

Form of Loan and Servicing Agreement, dated as of August 
26, 2011 (as amended through the Sixth Amendment, dated as of June 1, 2018), by and among the Registrant, as the servicer and the transferor, SUNS SPV LLC, as the borrower, each of the conduit lenders from time to time party thereto, each of the
 liquidity banks from time to time party thereto, each of the lender agents from time to time party thereto, Citibank, N.A., as the administrative agent and collateral agent, and Wells Fargo Bank, N.A., as the account bank, the backup servicer and
the collateral custodian*10.11

Form of Limited Liability Company Agreement, dated as of September 
10, 2014, by and among the Registrant, Voya Retirement Insurance and Annuity Company, ReliaStar Life Insurance Company, and Voya Insurance and Annuity Company, by and through Voya Investment Management LLC, as agent and investment manager(5)10.12

Form of Solar Life Science Program LLC Limited Liability Company Agreement, dated as of February 
22, 2017, by and between Solar Capital Ltd., Solar Senior Capital Ltd. and Deerfield Solar Holdings LLC(7)11.1

Computation of Per Share Earnings (included in the notes to the financial statements contained in this report)  60




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##### Table of Contents

Exhibit
Number

Description31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*32.1

Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*32.2

Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*  (1)
Previously filed in connection with Solar Senior Capital Ltd.s registration statement on Form N-2 (File No. 333-171330) filed on February 14, 2011. (2)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-K filed on February 22, 2012. (3)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 8-K filed on August 31, 2011. (4)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-K filed on February 25, 2014. (5)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-Q filed on November 4, 2014. (6)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-Q filed on August 2, 2016. (7)
Previously filed in connection with Solar Senior Capital Ltd.s report on Form 10-Q filed on May 2, 2017. *
Filed herewith.  61




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##### Table of Contents

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized on August 6, 2018.  SOLAR SENIOR CAPITAL LTD.By:

/S/ MICHAEL S. GROSSMichael S. Gross
Chief Executive Officer
(Principal Executive Officer)By:

/S/ RICHARD L. PETEKARichard L. Peteka
Chief Financial Officer
(Principal Financial and Accounting Officer)  62