UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended ~~June~~September 30, 2019

☐	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 (or for such shorter period that the registrant was required to file such reports), 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 every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

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 Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading

Symbol(s)

Name of Each Exchange
on Which Registered

Common Stock, par value

$0.01 per share

SUNS

The NASDAQ Global

Select Market

The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of ~~July~~October 31, 2019 was ~~16,043,735.~~16,045,218.

SOLAR SENIOR CAPITAL LTD.

FORM10-Q FOR THE QUARTER ENDED ~~JUNE~~SEPTEMBER 30, 2019

TABLE OF CONTENTS


		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of ~~June~~September 30, 2019 (unaudited) and December 31, 2018		3

	Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2019 (unaudited) and the three and ~~six~~nine months ended ~~June~~September 30, 2018 (unaudited)		4

	Consolidated Statements of Changes in Net Assets for the three and ~~six~~nine months ended ~~June~~September 30, 2019 (unaudited) and the three and ~~six~~nine months ended ~~June~~September 30, 2018 (unaudited)		5

	Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2019 (unaudited) and the ~~six~~nine months ended ~~June~~September 30, 2018 (unaudited)		6

	Consolidated Schedule of Investments as of ~~June~~September 30, 2019 (unaudited)		7

	Consolidated Schedule of Investments as of December 31, 2018		10

	Notes to Consolidated Financial Statements (unaudited)		13

	Report of Independent Registered Public Accounting Firm		3132

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3233

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48

~~Item 4.~~	~~Controls and Procedures~~		49

~~PART II. OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~		49

Item ~~1A.~~4.	~~Risk Factors~~Controls and Procedures		4950

PART II. OTHER INFORMATION

Item 2.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~1.		49

~~Item 3.~~	~~Defaults Upon Senior Securities~~Legal Proceedings		49

~~Item 4.~~	~~Mine Safety Disclosures~~		49

~~Item 5.~~	~~Other Information~~		50

Item 6.1A.	~~Exhibits~~Risk Factors		50

Item 2.	~~Signatures~~Unregistered Sales of Equity Securities and Use of Proceeds		5251

Item 3.	Defaults Upon Senior Securities		51

Item 4.	Mine Safety Disclosures		51

Item 5.	Other Information		51

Item 6.	Exhibits		51

	Signatures		53

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

~~Financial~~ Statements

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share amounts)


	June 30, 2019 (unaudited)			December 31, 2018			September 30, 2019 (unaudited)			December 31, 2018
Assets
Investments at fair value:
Companies less than 5% owned (cost: $378,883 and $355,354, respectively)	$	368,069		$	348,211
Companies 5% to 25% owned (cost: $3,683 and $3,524, respectively)		4,729			2,350
Companies less than 5% owned (cost: $372,974 and $355,354, respectively)							$	369,763		$	348,211
Companies 5% to 25% owned (cost: $0 and $3,524, respectively)								—			2,350
Companies more than 25% owned (cost: $98,439 and $98,439, respectively)		101,450			99,550			99,400			99,550
Cash		6,495			4,875			12,646			4,875
Cash equivalents (cost: $174,552 and $0, respectively)		174,552			—
Cash equivalents (cost: $179,743 and $0, respectively)								179,743			—
Interest receivable		1,534			2,141			2,770			2,141
Dividends receivable		1,893			1,893			1,893			1,893
Receivable for investments sold		78			87			815			87
Prepaid expenses and other assets		293			188			244			188

Total assets	$	659,093		$	459,295		$	667,274		$	459,295

Liabilities
Payable for investments and cash equivalents purchased	$	174,552		$	22,805		$	179,743		$	22,805
Credit facility ($162,800 and $119,200 face amounts, respectively, reported net of unamortized debt issuance costs of $1,475 and $1,662, respectively. See note 7)		161,325			117,538
FLLP2015-1, LLC revolving credit facility (the “FLLP Facility”) ($56,452 and $51,371 face amounts, respectively, reported net of unamortized debt issuance costs of $732 and $0, respectively. See notes 6 and 7)		55,720			51,371
Credit facility ($167,000 and $119,200 face amounts, respectively, reported net of unamortized debt issuance costs of $1,381 and $1,662, respectively. See note 7)								165,619			117,538
FLLP2015-1, LLC revolving credit facility (the “FLLP Facility”) ($55,152 and $51,371 face amounts, respectively, reported net of unamortized debt issuance costs of $668 and $0, respectively. See notes 6 and 7)								54,484			51,371
Distributions payable		1,885			1,885			1,885			1,885
Management fee payable (see note 3)		744			1,189			1,156			1,189
Performance-based incentive fee payable (see note 3)		—			106			—			106
Interest payable (see note 7)		1,360			1,260			1,286			1,260
Administrative services expense payable (see note 3)		429			923
Administrative services payable (see note 3)								673			923
Other liabilities and accrued expenses		969			826			789			826

Total liabilities	$	396,984		$	197,903		$	405,635		$	197,903

Commitments and contingencies (see note 10)

Net Assets
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 16,043,735 and 16,040,485 issued and outstanding, respectively	$	160		$	160
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 16,044,727 and 16,040,485 issued and outstanding, respectively							$	160		$	160
Paid-in capital in excess of par		288,844			288,789			288,861			288,789
Accumulated distributable net loss		(26,895	)		(27,557	)		(27,382	)		(27,557	)

Total net assets	$	262,109		$	261,392		$	261,639		$	261,392

Net Asset Value Per Share	$	16.34		$	16.30		$	16.31		$	16.30

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share amounts)


	Three months ended						Six months ended						Three months ended						Nine months ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
INVESTMENT INCOME:
Interest:
Companies less than 5% owned	$	7,674		$	6,012		$	15,488		$	11,829		$	7,829		$	7,734		$	23,317		$	19,563
Companies 5% to 25% owned		20			90			105			141			281			117			386			258
Dividends:
Companies more than 25% owned		2,265			3,250			4,530			6,637			2,265			3,138			6,795			9,775
Other income:
Companies less than 5% owned		22			78			92			145			21			11			113			156
Companies 5% to 25% owned		27			23			27			23			—			—			27			23
Companies more than 25% owned		—			18			—			37			—			13			—			50

Total investment income		10,008			9,471			20,242			18,812			10,396			11,013			30,638			29,825

EXPENSES:
Management fees (see note 3)	$	1,203		$	1,145		$	2,359		$	2,193		$	1,223		$	1,222		$	3,582		$	3,415
Performance-based incentive fees (see note 3)		525			491			1,069			1,109			535			1,344			1,604			2,453
Interest and other credit facility expenses (see note 7)		2,789			1,806			5,474			3,168			2,764			2,034			8,238			5,202
Administrative services expense (see note 3)		400			387			796			769			405			390			1,201			1,159
Other general and administrative expenses		419			425			754			1,010			416			261			1,170			1,271

Total expenses		5,336			4,254			10,452			8,249			5,343			5,251			15,795			13,500

Management fees waived (see note 3)		(459	)		—			(459	)		—			(67	)		—			(526	)		—
Performance-based incentive fees waived (see note 3)		(525	)		(437	)		(1,061	)		(745	)		(535	)		—			(1,596	)		(745	)

Net expenses		4,352			3,817			8,932			7,504			4,741			5,251			13,673			12,755

Net investment income	$	5,656		$	5,654		$	11,310		$	11,308		$	5,655		$	5,762		$	16,965		$	17,070

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:
Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned)	$	108		$	(5,244	)	$	213		$	(5,251	)
Net realized gain (loss) on investments and cash equivalents:
Companies less than 5% owned													$	(6,973	)	$	(4	)	$	(6,760	)	$	(5,255	)
Companies 5% to 25% owned														1,979			—			1,979			—

Net realized loss on investments and cash equivalents														(4,994	)		(4	)		(4,781	)		(5,255	)

Net change in unrealized gain (loss) on investments and cash equivalents:
Companies less than 5% owned		(2,468	)		3,948			(3,671	)		2,506			7,603			(282	)		3,932			2,224
Companies 5% to 25% owned		1,940			166			2,220			274			(1,046	)		14			1,174			288
Companies more than 25% owned		(650	)		995			1,900			2,199			(2,050	)		(84	)		(150	)		2,115

Net change in unrealized gain (loss) on investments and cash equivalents		(1,178	)		5,109			449			4,979			4,507			(352	)		4,956			4,627

Net realized and unrealized gain (loss) on investments and cash equivalents		(1,070	)		(135	)		662			(272	)		(487	)		(356	)		175			(628	)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	4,586		$	5,519		$	11,972		$	11,036		$	5,168		$	5,406		$	17,140		$	16,442

EARNINGS PER SHARE (see note 5)	$	0.29		$	0.34		$	0.75		$	0.69		$	0.32		$	0.34		$	1.07		$	1.03

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

(in thousands, except share amounts)


		Three months ended						Six months ended						Three months ended						Nine months ended
		June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Increase in net assets resulting from operations:
Net investment income		$	5,656		$	5,654		$	11,310		$	11,308		$	5,655		$	5,762		$	16,965		$	17,070
Net realized gain (loss)			108			(5,244	)		213			(5,251	)
Net realized loss															(4,994	)		(4	)		(4,781	)		(5,255	)
Net change in unrealized gain (loss)			(1,178	)		5,109			449			4,979			4,507			(352	)		4,956			4,627

Net increase in net assets resulting from operations			4,586			5,519			11,972			11,036			5,168			5,406			17,140			16,442

Distributions to stockholders:	Distributions to stockholders:
From net investment income			(5,656	)		(5,654	)		(11,310	)		(11,308	)		(5,655	)		(5,134	)		(16,965	)		(16,442	)

Capital transactions(see note 12):
Reinvestment of distributions			36			22			55			65			17			—			72			65

Net increase in net assets resulting from capital transactions			36			22			55			65			17			—			72			65

Total increase (decrease) in net assets			(1,034	)		(113	)		717			(207	)		(470	)		(248	)		247			(455	)

Net assets at beginning of period			263,143			270,037			261,392			270,131			262,109			269,924			261,392			270,131

Net assets at end of period		$	262,109		$	269,924		$	262,109		$	269,924		$	261,639		$	269,676		$	261,639		$	269,676

Capital share activity(see note 12):
Common stock issued from reinvestment of distributions			2,131			1,279			3,250			3,755			992			—			4,242			3,755

Net increase from capital share activity			2,131			1,279			3,250			3,755			992			—			4,242			3,755

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Six months ended						Nine months ended
	June 30, 2019			June 30, 2018			September 30, 2019			September 30, 2018
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$	11,972		$	11,036		$	17,140		$	16,442
Adjustments 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		(213	)		5,251			4,781			5,255
Net change in unrealized (gain) loss on investments and cash equivalents		(449	)		(4,979	)		(4,956	)		(4,627	)
Effect of consolidation of First Lien Loan Program LLC								—			(3,210	)
(Increase) decrease in operating assets:
Purchase of investments		(50,069	)		(112,104	)		(72,199	)		(186,830	)
Proceeds from disposition of investments		27,624			50,602			54,069			134,263
Net accretion of discount on investments		(692	)		(693	)		(999	)		(1,232	)
Capitalization ofpayment-in-kind interest		(338	)		(231	)		(496	)		(771	)
Collection ofpayment-in-kind interest		—			34			748			34
Receivable for investments sold		9			508			(728	)		(9,134	)
Interest receivable		607			374			(629	)		(246	)
Dividends receivable		—			(154	)		—			796
Other receivable		—			2			—			(83	)
Prepaid expenses and other assets		(105	)		90			(56	)		48
Increase (decrease) in operating liabilities:
Payable for investments and cash equivalents purchased		151,747			(36,082	)		156,938			(107,500	)
Management fee payable		(445	)		146			(33	)		223
Performance-based incentive fees payable		(106	)		(320	)		(106	)		970
Administrative services expense payable		(494	)		(477	)
Administrative services payable								(250	)		(236	)
Interest payable		100			251			26			993
Other liabilities and accrued expenses		143			453			(37	)		363

Net Cash Provided by (Used in) Operating Activities		139,291			(86,293	)		153,213			(154,482	)

Cash Flows from Financing Activities:
Cash distributions paid		(11,255	)		(11,242	)		(16,893	)		(16,805	)
Deferred financing costs		209			29			367			123
Consolidation of FLLP Facility								—			49,796
Proceeds from borrowings		81,127			103,234			103,027			132,340
Repayments of borrowings		(33,200	)		(43,300	)		(52,200	)		(114,813	)

Net Cash Provided by Financing Activities		36,881			48,721			34,301			50,641

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		176,172			(37,572	)		187,514			(103,841	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,875			108,600			4,875			108,600

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	181,047		$	71,028		$	192,389		$	4,759

Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,374		$	2,917		$	8,212		$	4,209

Non-cash financing activities consist of the reinvestment of dividends of ~~$55~~$72 and $65 for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~June~~September 30, 2018, respectively.

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)

~~June~~September 30, 2019

(in thousands, except share/unit amounts)

Description
Industry Spread
above
Index⁽³⁾ Libor
Floor Interest
Rate⁽¹⁾ Acquisition
Date Maturity
Date Par
Amount Cost Fair
Value
Bank Debt/Senior Secured Loans—141.0%

1A Smart Start LLC^(2)(14)

Electrical Equipment, Instruments &
Components

L+450 1.00 % 6.83 % 12/21/2017 2/21/2022 $ 13,865 $ 13,820 $ 13,865
Acrisure, LLC^(2)(11)
Insurance L+425 1.00 % 6.77 % 5/3/2017 11/22/2023 7,334 7,322 7,315
Advantage Sales and Marketing, Inc.⁽²⁾.
Professional Services L+325 1.00 % 5.58 % 2/14/2018 7/23/2021 4,925 4,863 4,851
Advantage Sales and Marketing, Inc.
Professional Services L+650 1.00 % 8.83 % 2/14/2013 7/25/2022 8,000 7,973 7,840
Aegis Toxicology Sciences Corporation^(2)(14)
Health Care Providers & Services L+550 1.00 % 8.06 % 5/7/2018 5/9/2025 10,918 10,745 10,372
Alera Group Intermediate Holdings, Inc.⁽²⁾.
Insurance L+450 —   6.90 % 7/27/2018 8/1/2025 4,967 4,961 4,971
Alimera Sciences, Inc.⁽²⁾.
Pharmaceuticals L+765 —   10.08 % 1/5/2018 7/1/2022 5,000 5,039 5,150
Alteon Health, LLC (fka Island Medical)^(2)(14)
Health Care Providers & Services L+650 1.00 % 8.90 % 3/31/2017 9/1/2022 7,426 7,378 7,203
American Teleconferencing Services, Ltd. (PGI)⁽²⁾
Communications Equipment L+650 1.00 % 9.06 % 5/5/2016 12/8/2021 13,703 13,324 12,743
AQA Acquisition Holding, Inc.⁽²⁾
Software L+425 1.00 % 6.58 % 9/7/2018 5/24/2023 5,646 5,598 5,618
Capstone Logistics Acquisition, Inc.^(2)(14)
Professional Services L+450 1.00 % 6.90 % 10/3/2014 10/7/2021 12,073 12,028 12,043
Centria Healthcare LLC⁽²⁾.
Health Care Providers & Services L+400 1.00 % 6.33 % 11/19/2018 11/3/2021 3,411 3,386 3,411
Cerapedics, Inc.⁽²⁾
Health Care Equipment & Supplies L+695 2.50 % 9.45 % 3/22/2019 3/1/2024 2,885 2,880 2,880
Composite Technology Acquisition Corp. (ClockSpring)^(2)(14).
Building Products L+450 —   7.13 % 2/1/2019 2/1/2025 11,946 11,778 11,767
Confie Seguros Holding II Co.^(2)(14)
Insurance L+475 1.00 % 7.08 % 10/13/2016 4/19/2022 14,173 14,095 13,984
DISA Holdings Acquisition Subsidiary Corp.⁽²⁾
Professional Services L+400 1.00 % 6.61 % 6/14/2018 6/30/2022 9,756 9,716 9,756
Edgewood Partners Holdings, LLC^(2)(14)
Insurance L+425 1.00 % 6.65 % 3/28/2018 9/8/2024 15,787 15,748 15,787
Empower Payments Acquisition, Inc. (RevSpring).⁽²⁾
Professional Services L+425 1.00 % 6.65 % 11/28/2016 10/11/2025 4,975 4,963 4,970
Engineering Solutions & Products, LLC⁽⁶⁾
Aerospace & Defense L+600 2.00 % 8.52 % 11/5/2013 5/5/2020 201 201 201
Engineering Solutions & Products, LLC⁽⁶⁾
Aerospace & Defense L+600 2.00 % 8.56 % 11/5/2013 11/5/2020 2,402 2,157 2,402
Falmouth Group Holdings Corp. (AMPAC)^(2)(14)
Chemicals L+675 1.00 % 8.95 % 12/15/2016 12/14/2021 11,859 11,859 11,859
GenMark Diagnostics, Inc⁽²⁾⁽⁴⁾
Health Care Providers & Services L+590 2.51 % 8.41 % 2/1/2019 2/1/2023 5,427 5,445 5,454
Global Holdings LLC & Payment Concepts LLC⁽²⁾
Consumer Finance L+650 1.00 % 9.03 % 3/31/2017 5/5/2022 11,025 10,892 11,135
Kellermeyer Bergensons Services, LLC (KBS)^(2)(14)
Commercial Services & Supplies L+475 1.00 % 7.19 % 10/31/2014 10/29/2021 8,579 8,543 8,536
KORE Wireless Group, Inc.⁽²⁾

Wireless Telecommunication
Services
L+550 —   7.83 % 12/21/2018 12/21/2024 11,986 11,760 11,896
Logix Holding Company, LLC⁽²⁾
Communications Equipment L+575 1.00 % 8.15 % 8/11/2017 12/22/2024 10,631 10,543 10,631
Mavenir Systems, Inc.⁽²⁾
Software L+600 1.00 % 8.42 % 5/1/2018 5/8/2025 1,900 1,867 1,899
MHE Intermediate Holdings, LLC(TFS-Miner)^(2)(14)
Air Freight & Logistics L+500 1.00 % 7.33 % 3/8/2017 3/10/2024 5,950 5,905 5,950
Ministry Brands, LLC^(2)(14)
Software L+400 1.00 % 6.33 % 11/21/2016 12/2/2022 14,247 14,162 14,247
MRI Software LLC^(2)(14)
Software L+575 1.00 % 8.16 % 6/7/2017 6/30/2023 11,187 11,109 11,131
MSHC, Inc. (Service Logic)^(2)(14)
Commercial Services & Supplies L+425 1.00 % 6.56 % 7/12/2018 12/31/2024 6,661 6,630 6,628
National Spine and Pain Centers, LLC⁽¹⁴⁾
Health Care Providers & Services L+450 1.00 % 6.90 % 9/18/2018 6/2/2024 2,572 2,562 2,539
On Location Events, LLC & PrimeSport Holdings Inc.^(2)(14)
Media L+500 1.00 % 7.33 % 12/7/2017 9/29/2021 14,230 14,120 14,230
Pet Holdings ULC & Pet Supermarket, Inc.^(4)(14)
Specialty Retail L+550 1.00 % 8.09 % 9/18/2018 7/5/2022 4,570 4,531 4,536
PPT Management Holdings, LLC⁽²⁾ ††
Health Care Providers & Services L+750⁽¹⁵⁾ 1.00 % 9.94 % 12/15/2016 12/16/2022 8,792 8,740 7,517
Radiology Partners, Inc.⁽²⁾
Health Care Providers & Services L+475 —   7.34 % 6/28/2018 7/9/2025 7,463 7,398 7,461
Restoration Robotics, Inc.⁽²⁾
Health Care Equipment & Supplies L+795 —   10.38 % 5/10/2018 5/1/2022 2,000 2,126 2,126
Rubius Therapeutics, Inc.⁽²⁾⁽⁴⁾
Pharmaceuticals L+550 —   7.93 % 12/21/2018 12/21/2023 4,121 4,120 4,111
SHO Holding I Corporation (Shoes for Crews)⁽²⁾
Footwear L+500 1.00 % 7.58 % 11/20/2015 10/27/2022 5,790 5,762 5,689
Solara Medical Supplies, Inc.^(2)(14)
Health Care Providers & Services L+600 1.00 % 8.40 % 5/31/2018 2/27/2024 12,506 12,309 12,381
The Hilb Group, LLC & Gencorp Insurance Group, Inc.^(2)(14)
Insurance L+485 1.00 % 7.18 % 3/16/2016 6/24/2021 14,049 13,935 13,768
Trident USA Health Services⁽²⁾ ††*
Health Care Providers & Services L+600⁽¹³⁾ 1.25 % 8.74 % 7/29/2013 7/31/2022 7,164 7,028 72
TwentyEighty, Inc.
Professional Services L+800 1.00 % 10.33 % 1/31/2017 3/31/2020 61 60 61
TwentyEighty, Inc. ††
Professional Services —   —   8.00 %⁽⁷⁾ 1/31/2017 3/31/2020 2,108 2,076 2,108
TwentyEighty, Inc. ††
Professional Services —   —   9.00 %⁽⁸⁾ 1/31/2017 3/31/2020 2,069 2,039 2,069
Unified Physician Management, LLC⁽²⁾
Health Care Facilities L+425 1.00 % 6.65 % 4/18/2019 11/27/2023 4,720 4,674 4,685
U.S. Acute Care Solutions, LLC^(2)(14)
Health Care Providers & Services L+500 1.00 % 7.20 % 12/22/2016 5/15/2021 6,338 6,308 6,242
US Radiology Specialists, Inc.⁽²⁾
Health Care Providers & Services L+450 1.00 % 6.70 % 11/27/2018 1/1/2024 3,748 3,722 3,719
Web.com Group, Inc.⁽²⁾
Software L+375 —   6.16 % 9/17/2018 10/10/2025 8,178 8,159 8,078
WIRB-Copernicus Group, Inc.^(2)(14)
Professional Services L+425 1.00 % 6.58 % 3/27/2017 8/15/2022 11,722 11,675 11,722

Total Bank Debt/Senior Secured Loans

$ 378,034 $ 369,609

Common Equity/Equity Interests/Warrants—39.9%
Shares/Units
Engineering Solutions & Products, LLC⁽⁶⁾⁽⁹⁾†
Aerospace & Defense 11/5/2013 133,668 $ 1,325 $ 2,126
Essence Group Holdings Corporation (Lumeris) Warrants†
Health Care Technology 3/22/2017 52,000 16 74
Gemino Healthcare Finance, LLC⁽⁴⁾⁽⁵⁾
Diversified Financial Services 9/30/2013 32,839 31,439 34,150
North Mill Holdco LLC^(4)(5)(12)
Diversified Financial Services 10/20/2017 100 67,000 67,300
Restoration Robotics, Inc. Warrants†
Health Care Equipment & Supplies 5/10/2018 16,173 25 1
TwentyEighty Investors, LLC†.
Professional Services 1/31/2017 17,214 3,166 988

Total Common Equity/Equity Interests/Warrants

$ 102,971 $ 104,639

Total Investments⁽¹⁰⁾—180.9%

$ 481,005 $ 474,248
Cash Equivalents—66.6%
Par Amount
U.S. Treasury Bill
Government 6/28/2019 8/15/2019 $ 175,000 $ 174,552 $ 174,552

Total Investments & Cash Equivalents—247.5%

$ 655,557 $ 648,800
Liabilities in Excess of Other Assets—(147.5%)

(386,691)

Net Assets—100.0%

$ 262,109


Description	Industry	Spread above Index⁽³⁾			Libor Floor			Interest Rate⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value
Bank Debt/Senior Secured Loans — 140.5%
1A Smart Start LLC^(2)(11)	Electrical Equipment, Instruments & Components		L+450			1.00	%		6.54	%		12/21/2017		2/21/2022	$	13,830	$	13,789	$	13,830
Acrisure, LLC⁽²⁾⁽⁸⁾	Insurance		L+425			1.00	%		6.35	%		5/3/2017		11/22/2023		7,316		7,304		7,288
Advantage Sales and Marketing, Inc.⁽²⁾	Professional Services		L+325			1.00	%		5.29	%		2/14/2018		7/23/2021		4,912		4,857		4,838
Advantage Sales and Marketing, Inc.	Professional Services		L+650			1.00	%		8.54	%		2/14/2013		7/25/2022		8,000		7,975		7,840
Aegis Toxicology Sciences Corporation^(2)(11)	Health Care Providers & Services		L+550			1.00	%		7.68	%		5/7/2018		5/9/2025		10,890		10,724		10,128
Alera Group Intermediate Holdings, Inc.⁽²⁾	Insurance		L+450			—			6.54	%		7/27/2018		8/1/2025		4,955		4,949		4,999
Alimera Sciences, Inc.⁽²⁾	Pharmaceuticals		L+765			—			9.72	%		1/5/2018		7/1/2022		5,000		5,054		5,150
Alteon Health, LLC (fka Island Medical)^(2)(11)	Health Care Providers & Services		L+650			1.00	%		8.54	%		3/31/2017		9/1/2022		7,404		7,360		7,256
American Teleconferencing Services, Ltd. (PGI)⁽²⁾	Communications Equipment		L+650			1.00	%		8.69	%		5/5/2016		6/8/2023		13,697		13,354		12,875
AQA Acquisition Holding, Inc.⁽²⁾	Software		L+425			1.00	%		6.35	%		9/7/2018		5/24/2023		5,632		5,586		5,604
Capstone Logistics Acquisition, Inc.^(2)(11)	Professional Services		L+450			1.00	%		6.54	%		10/3/2014		10/7/2021		12,073		12,033		11,982
Centria Healthcare LLC⁽²⁾	Health Care Providers & Services		L+400			1.00	%		6.10	%		11/19/2018		11/3/2021		3,506		3,485		3,506
Cerapedics, Inc.⁽²⁾	Health Care Equipment & Supplies		L+695			2.50	%		9.45	%		3/22/2019		3/1/2024		2,885		2,890		2,885
Composite Technology Acquisition Corp. (ClockSpring)^(2)(11)	Building Products		L+475			—			7.07	%		2/1/2019		2/1/2025		11,849		11,685		11,730
Confie Seguros Holding II Co.^(2)(11)	Insurance		L+475			1.00	%		6.79	%		10/13/2016		4/19/2022		14,173		14,101		13,518
DISA Holdings Acquisition Subsidiary Corp.⁽²⁾	Professional Services		L+400			1.00	%		6.09	%		6/14/2018		6/30/2022		10,252		10,212		10,226
Edgewood Partners Holdings, LLC^(2)(11)	Insurance		L+425			1.00	%		6.29	%		3/28/2018		9/8/2024		15,887		15,848		15,887
Empower Payments Acquisition, Inc. (RevSpring).⁽²⁾	Professional Services		L+425			1.00	%		6.04	%		11/28/2016		10/11/2025		4,963		4,951		4,933
Falmouth Group Holdings Corp. (AMPAC)^(2)(11)	Chemicals		L+675			1.00	%		8.95	%		12/15/2016		12/14/2021		10,788		10,788		10,788
GenMark Diagnostics, Inc⁽²⁾⁽⁴⁾	Health Care Providers & Services		L+590			2.51	%		8.41	%		2/1/2019		2/1/2023		5,427		5,466		5,481
Kellermeyer Bergensons Services, LLC (KBS)^(2)(11)	Commercial Services & Supplies		L+475			1.00	%		6.79	%		10/31/2014		10/29/2021		8,558		8,526		8,558
Kindred Biosciences, Inc^(2)(4)(13)	Pharmaceuticals		L+675			2.17	%		8.92	%		9/30/2019		9/30/2024		1,408		1,401		1,401
KORE Wireless Group, Inc.⁽²⁾	Wireless Telecommunication Services		L+550			—			7.60	%		12/21/2018		12/21/2024		11,956		11,739		11,836
Logix Holding Company, LLC⁽²⁾	Communications Equipment		L+575			1.00	%		7.79	%		8/11/2017		12/22/2024		10,603		10,519		10,603
MHE Intermediate Holdings, LLC(TFS-Miner)^(2)(11)	Air Freight & Logistics		L+500			1.00	%		7.10	%		3/8/2017		3/10/2024		5,935		5,892		5,935
Ministry Brands, LLC^(2)(11)	Software		L+400			1.00	%		6.04	%		11/21/2016		12/2/2022		14,211		14,131		14,069
MRI Software LLC^(2)(11)	Software		L+575			1.00	%		7.80	%		6/7/2017		6/30/2023		10,782		10,711		10,728
MSHC, Inc. (Service Logic)^(2)(11)	Commercial Services & Supplies		L+425			1.00	%		6.29	%		7/12/2018		12/31/2024		7,359		7,326		7,322
National Spine and Pain Centers, LLC⁽¹¹⁾	Health Care Providers & Services		L+450			1.00	%		6.54	%		9/18/2018		6/2/2024		2,565		2,556		2,527
On Location Events, LLC & PrimeSport Holdings Inc.^(2)(11)	Media		L+500			1.00	%		7.04	%		12/7/2017		9/29/2021		13,939		13,842		13,939
Pet Holdings ULC & Pet Supermarket, Inc.^(4)(11)	Specialty Retail		L+550			1.00	%		7.82	%		9/18/2018		7/5/2022		4,558		4,522		4,524
PPT Management Holdings, LLC⁽²⁾ ††	Health Care Providers & Services		L+675	⁽¹²⁾		1.00	%		8.85	%		12/15/2016		12/16/2022		8,881		8,832		8,037
Radiology Partners, Inc.⁽²⁾	Health Care Providers & Services		L+475			—			7.06	%		6/28/2018		7/9/2025		7,425		7,363		7,339
Restoration Robotics, Inc.⁽²⁾	Health Care Equipment & Supplies		L+795			—			10.02	%		5/10/2018		5/1/2022		2,000		2,173		2,181
Rubius Therapeutics, Inc.⁽²⁾⁽⁴⁾	Pharmaceuticals		L+550			—			7.57	%		12/21/2018		12/21/2023		4,121		4,129		4,131
scPharmaceuticals, Inc.⁽²⁾	Pharmaceuticals		L+795			2.23	%		10.18	%		9/17/2019		9/17/2023		719		719		719
Senseonics Holdings, Inc.⁽²⁾	Health Care Equipment & Supplies		L+650			2.48	%		8.98	%		7/25/2019		7/1/2024		3,234		3,208		3,199
SHO Holding I Corporation (Shoes for Crews)⁽²⁾	Footwear		L+500			1.00	%		7.26	%		11/20/2015		10/27/2022		5,775		5,749		5,631
Solara Medical Supplies, Inc.^(2)(11)	Health Care Providers & Services		L+600			1.00	%		8.04	%		5/31/2018		2/27/2024		13,083		12,886		13,083
The Hilb Group, LLC & Gencorp Insurance Group, Inc.^(2)(11)	Insurance		L+485			1.00	%		6.95	%		3/16/2016		6/24/2021		14,000		13,902		14,000
Unified Physician Management, LLC⁽²⁾	Health Care Facilities		L+450			1.00	%		6.54	%		4/18/2019		11/27/2023		6,183		6,126		6,121
U.S. Acute Care Solutions, LLC^(2)(11) ††	Health Care Providers & Services		L+600	⁽¹⁰⁾		1.00	%		8.20	%		12/22/2016		5/15/2021		6,321		6,296		6,226
US Radiology Specialists, Inc.⁽²⁾	Health Care Providers & Services		L+450			1.00	%		6.54	%		11/27/2018		1/1/2024		9,046		8,969		8,956
Web.com Group, Inc.⁽²⁾	Software		L+375			—			5.78	%		9/17/2018		10/10/2025		8,178		8,160		8,059
WIRB-Copernicus Group, Inc.^(2)(11)	Professional Services		L+425			1.00	%		6.35	%		3/27/2017		8/15/2022		12,425		12,378		12,425
Worldwide Facilities, LLC.⁽²⁾	Insurance		L+450			—			6.57	%		9/13/2019		9/5/2026		5,391		5,283		5,283

Total Bank Debt/Senior Secured Loans																	$	369,749	$	367,576

Common Equity/Equity Interests/Warrants—38.8%																Shares/Units
Essence Group Holdings Corporation (Lumeris) Warrants †	Health Care Technology											3/22/2017				52,000	$	16	$	70
Gemino Healthcare Finance, LLC⁽⁴⁾⁽⁵⁾	Diversified Financial Services											9/30/2013				32,839		31,439		34,900
North Mill Holdco LLC^(4)(5)(9)	Diversified Financial Services											10/20/2017				100		67,000		64,500
Restoration Robotics, Inc. Warrants †	Health Care Equipment & Supplies											5/10/2018				16,173		25		—
Senseonics Holdings, Inc. Warrants †	Health Care Equipment & Supplies											7/25/2019				80,838		18		17
TwentyEighty Investors, LLC †	Professional Services											1/31/2017				17,214		3,166		2,100

Total Common Equity/Equity Interests/Warrants																	$	101,664	$	101,587

Total Investments⁽⁷⁾—179.3%																	$	471,413	$	469,163
Cash Equivalents—68.7%																Par Amount
U.S. Treasury Bill	Government											9/30/2019		10/29/2019	$	180,000	$	179,743	$	179,743

Total Investments & Cash Equivalents—248.0%																	$	651,156	$	648,906
Liabilities in Excess of Other Assets—(148.0%)																		(387,267)

Net Assets—100.0%																		$ 261,639

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

~~June~~September 30, 2019

(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~~September 30, 2019.

(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 “SUNS SPV”). Such investments are pledged as collateral under the Senior Secured Revolving Credit Facility (the “Credit Facility”) (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.

(3)	Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are often 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 makingfollow-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~~September 30, 2019, on a fair value basis,non-qualifying assets in the portfolio represented ~~17.5%~~17.2% 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~~nine months ended ~~June~~September 30, 2019 in these controlled investments are as follows:


Name of Issuer	Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain		Dividend /Other Income		Fair Value at June 30, 2019		Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)			Dividend /Other Income		Fair Value at September 30, 2019
Gemino Healthcare Finance, LLC	$	32,550	$	—	$	—	$	—	$	1,600	$	1,730	$	34,150	$	32,550	$	—	$	—	$	—	$	2,350		$	2,595	$	34,900
North Mill Holdco LLC		67,000		—		—		—		300		2,800		67,300		67,000		—		—		—		(2,500	)		4,200		64,500

	$	99,550	$	—	$	—	$	—	$	1,900	$	4,530	$	101,450	$	99,550	$	—	$	—	$	—	$	(150	)	$	6,795	$	99,400

(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~~nine months ended ~~June~~September 30, 2019 in these affiliated investments are as follows:


Name of Issuer	Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)		Interest/ Dividend/ Other Income		Fair Value at June 30, 2019		Fair Value at December 31, 2018		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)			Interest/ Dividend/ Other Income		Fair Value at September 30, 2019
Engineering Solutions & Products, LLC (1^st lien)	$	—	$	548	$	347	$	—	$	—	$	31	$	201	$	—	$	548	$	548	$	—	$	—		$	33	$	—
Engineering Solutions & Products, LLC (2^ndlien)	$	2,282		—		—		—		120		101		2,402	$	2,282		—		2,402		—		(125	)		380		—
Engineering Solutions & Products, LLC (equity interests)	$	68		—		42		—		2,100		—		2,126	$	68		—		3,245		1,979		1,299			—		—

	$	2,350	$	548	$	389	$	—	$	2,220	$	132	$	4,729	$	2,350	$	548	$	6,195	$	1,979	$	1,174		$	413	$	—

(7)	~~Coupon is 4.00% Cash / 4.00% PIK.~~

~~(8)~~

~~Coupon is 0.25% Cash / 8.75% PIK.~~

~~(9)~~

~~Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a taxable consolidated subsidiary.~~

~~(10)~~

Aggregate net unrealized depreciation for federal income tax purposes is ~~$9,407;~~$4,195; aggregate gross unrealized appreciation and depreciation for federal tax purposes is ~~$4,276~~$3,918 and ~~$13,683,~~$8,113, respectively, based on a tax cost of ~~$483,655.~~$473,358. 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. All investments are Level 3 unless otherwise indicated.

~~(11)~~(8)

Denotes a Level 2 investment.

~~(12)~~(9)

Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.

~~(13)~~(10)

Spread is ~~3.00%~~5.00% Cash / ~~3.00%~~1.00% PIK.

~~(14)~~(11)

Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary FLLP2015-1 LLC (the “FLLP SPV”). Such investments are pledged as collateral under the FLLP2015-1, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.

~~(15)~~(12)

Spread is ~~3.50%~~6.00% Cash / ~~4.00%~~0.75% PIK.

(13)	Kindred Biosciences, Inc., KindredBio Equine, Inc. and Centaur Biopharmaceutical Services, Inc. areco-borrowers.

†	Non-income producing security.

††	Investment contains apayment-in-kind (“PIK”) feature.

*	~~Investment is onnon-accrual~~ ~~status.~~

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) (continued)

~~June~~September 30, 2019


Industry Classification	Percentage of Total Investments (at fair value) as of ~~June~~September 30, 2019
Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Holdco LLC)			~~21.4~~21.2	%
Health Care Providers & Services			~~14.0~~15.4	%
Insurance		13.0	%
Professional Services			~~11.9~~11.6	%
~~Insurance~~			~~11.8~~	%
Software			~~8.6~~8.2	%
Communications Equipment			~~4.9~~5.0	%
Commercial Services & Supplies			~~3.2~~3.4	%
Media			3.0	%
Electronic Equipment, Instruments & Components			2.9	%
Wireless Telecommunication Services			2.5	%
~~Chemicals~~			~~2.5~~	%
Building Products			2.5	%
~~Consumer Finance~~			~~2.3~~	%
Pharmaceuticals			~~1.9~~2.4	%
~~Air Freight & Logistics~~Chemicals			~~1.3~~2.3	%
~~Footwear~~			~~1.2~~	%
Health Care Equipment & Supplies			~~1.1~~1.8	%
~~Aerospace & Defense~~			~~1.0~~	%
Health Care Facilities			~~1.0~~1.3	%
Air Freight & Logistics		1.3	%
Footwear		1.2	%
Specialty Retail			1.0	%
Health Care Technology			0.0	%
~~Diversified Consumer Services~~			~~0.0~~	%

Total Investments			100.0	%

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2018

(in thousands, except share/unit amounts)


Description		Industry		Spread above Index⁽³⁾		Libor Floor			Interest Rate ⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value				Industry		Spread above Index⁽³⁾			Libor Floor			Interest Rate⁽¹⁾			Acquisition Date		Maturity Date		Par Amount		Cost		Fair Value
Bank Debt/Senior Secured Loans — 134.1%
Bank Debt/Senior Secured Loans—134.1%
1A Smart Start LLC^(2)(11)(14)			Electrical Equipment, Instruments & Components		L+450		1.00	%		7.02	%		12/21/2017		2/21/2022	$	13,936	$	13,883	$	13,902				Electrical Equipment, Instruments & Components		L+450			1.00	%		7.02	%		12/21/2017		2/21/2022	$	13,936	$	13,883	$	13,902
Acrisure, LLC⁽²⁾			Insurance		L+425		1.00	%		6.77	%		5/3/2017		11/22/2023		7,372		7,358		7,164				Insurance		L+425			1.00	%		6.77	%		5/3/2017		11/22/2023		7,372		7,358		7,164
Advantage Sales and Marketing, Inc.^(2)(11).			Professional Services		L+325		1.00	%		5.77	%		2/14/2018		7/23/2021		4,950		4,873		4,838
Advantage Sales and Marketing, Inc.^(2)(11)																									Professional Services		L+325			1.00	%		5.77	%		2/14/2018		7/23/2021		4,950		4,873		4,838
Advantage Sales and Marketing, Inc.⁽¹¹⁾			Professional Services		L+650		1.00	%		9.02	%		2/14/2013		7/25/2022		8,000		7,969		7,680				Professional Services		L+650			1.00	%		9.02	%		2/14/2013		7/25/2022		8,000		7,969		7,680
Aegis Toxicology Sciences Corporation^(2)(11)(14)			Health Care Providers & Services		L+550		1.00	%		8.10	%		5/7/2018		5/9/2025		10,973		10,788		10,973				Health Care Providers & Services		L+550			1.00	%		8.10	%		5/7/2018		5/9/2025		10,973		10,788		10,973
Alera Group Intermediate Holdings, Inc.^(2)(11).			Insurance		L+450		—			7.02	%		7/27/2018		8/1/2025		4,993		4,985		4,943
Alimera Sciences, Inc.^(2)(11).			Pharmaceuticals		L+765		—			10.03	%		1/5/2018		7/1/2022		5,000		5,009		5,025
Alera Group Intermediate Holdings, Inc.^(2)(11)																									Insurance		L+450			—			7.02	%		7/27/2018		8/1/2025		4,993		4,985		4,943
Alimera Sciences, Inc.^(2)(11)																									Pharmaceuticals		L+765			—			10.03	%		1/5/2018		7/1/2022		5,000		5,009		5,025
Alteon Health, LLC (fka Island Medical)^(2)(11)(14)			Health Care Providers & Services		L+650		1.00	%		9.02	%		3/31/2017		9/1/2022		7,469		7,414		7,095				Health Care Providers & Services		L+650			1.00	%		9.02	%		3/31/2017		9/1/2022		7,469		7,414		7,095
American Teleconferencing Services, Ltd. (PGI)^(2)(11)			Communications Equipment		L+650		1.00	%		9.09	%		5/5/2016		12/8/2021		14,113		13,643		13,937				Communications Equipment		L+650			1.00	%		9.09	%		5/5/2016		12/8/2021		14,113		13,643		13,937
AQA Acquisition Holding, Inc.^(2)(11)			Software		L+425		1.00	%		7.05	%		9/7/2018		5/24/2023		5,675		5,621		5,604				Software		L+425			1.00	%		7.05	%		9/7/2018		5/24/2023		5,675		5,621		5,604
Capstone Logistics Acquisition, Inc.^(2)(11)(14)			Professional Services		L+450		1.00	%		7.02	%		10/3/2014		10/7/2021		12,358		12,302		12,204				Professional Services		L+450			1.00	%		7.02	%		10/3/2014		10/7/2021		12,358		12,302		12,204
Centria Healthcare LLC^(2)(11).			Health Care Providers & Services		L+400		1.00	%		6.64	%		11/19/2018		11/3/2021		4,720		4,674		4,672
Centria Healthcare LLC^(2)(11)																									Health Care Providers & Services		L+400			1.00	%		6.64	%		11/19/2018		11/3/2021		4,720		4,674		4,672
Confie Seguros Holding II Co.^(2)(11)(14)			Insurance		L+475		1.00	%		7.46	%		10/13/2016		4/19/2022		14,173		14,082		14,014				Insurance		L+475			1.00	%		7.46	%		10/13/2016		4/19/2022		14,173		14,082		14,014
DISA Holdings Acquisition Subsidiary Corp.^(2)(11)			Professional Services		L+400		1.00	%		6.35	%		6/14/2018		6/30/2022		7,731		7,696		7,712				Professional Services		L+400			1.00	%		6.35	%		6/14/2018		6/30/2022		7,731		7,696		7,712
Edgewood Partners Holdings, LLC^(2)(11)(14)			Insurance		L+425		1.00	%		6.77	%		3/28/2018		9/8/2024		13,272		13,255		13,272				Insurance		L+425			1.00	%		6.77	%		3/28/2018		9/8/2024		13,272		13,255		13,272
Empower Payments Acquisition, Inc. (RevSpring).^(2)(11)			Professional Services		L+425		1.00	%		7.05	%		11/28/2016		10/11/2025		5,000		4,988		4,988				Professional Services		L+425			1.00	%		7.05	%		11/28/2016		10/11/2025		5,000		4,988		4,988
Engineering Solutions & Products, LLC^(6)(11)			Aerospace & Defense		L+600		2.00	%		8.59	%		11/5/2013		11/5/2019		2,282		2,157		2,282				Aerospace & Defense		L+600			2.00	%		8.59	%		11/5/2013		11/5/2019		2,282		2,157		2,282
Falmouth Group Holdings Corp. (AMPAC)^(2)(11)(14)			Chemicals		L+675		1.00	%		9.27	%		12/15/2016		12/14/2021		11,859		11,859		11,859				Chemicals		L+675			1.00	%		9.27	%		12/15/2016		12/14/2021		11,859		11,859		11,859
GenMark Diagnostics, Inc^(2)(4)(11)			Health Care Providers & Services		—		—			6.90	%		4/22/2016		1/1/2021		10,039		10,953		10,953				Health Care Providers & Services		—			—			6.90	%		4/22/2016		1/1/2021		10,039		10,953		10,953
Global Holdings LLC & Payment Concepts LLC^(2)(11)			Consumer Finance		L+750		1.00	%		10.24	%		3/31/2017		5/5/2022		11,400		11,241		11,400				Consumer Finance		L+750			1.00	%		10.24	%		3/31/2017		5/5/2022		11,400		11,241		11,400
Kellermeyer Bergensons Services, LLC (KBS)^(2)(11)(14)			Commercial Services & Supplies		L+475		1.00	%		7.27	%		10/31/2014		10/29/2021		8,623		8,579		8,623				Commercial Services & Supplies		L+475			1.00	%		7.27	%		10/31/2014		10/29/2021		8,623		8,579		8,623
Kore Wireless Group, Inc.^(2)(11)			Wireless Telecommunication Services		L+550		1.00	%		8.29	%		12/21/2018		12/21/2024		12,046		11,805		11,926				Wireless Telecommunication Services		L+550			1.00	%		8.29	%		12/21/2018		12/21/2024		12,046		11,805		11,926
Logix Holding Company, LLC^(2)(11)			Communications Equipment		L+575		1.00	%		8.27	%		8/11/2017		12/22/2024		10,688		10,593		10,688				Communications Equipment		L+575			1.00	%		8.27	%		8/11/2017		12/22/2024		10,688		10,593		10,688
Mavenir Systems, Inc.^(2)(11)			Software		L+600		1.00	%		8.39	%		5/1/2018		5/8/2025		9,950		9,765		9,920				Software		L+600			1.00	%		8.39	%		5/1/2018		5/8/2025		9,950		9,765		9,920
MHE Intermediate Holdings, LLC(TFS-Miner)^(2)(11)(14)			Air Freight & Logistics		L+500		1.00	%		7.74	%		3/8/2017		3/10/2024		5,951		5,902		5,891				Air Freight & Logistics		L+500			1.00	%		7.74	%		3/8/2017		3/10/2024		5,951		5,902		5,891
Ministry Brands, LLC^(2)(11)(14)			Software		L+400		1.00	%		6.52	%		11/21/2016		12/2/2022		14,320		14,223		14,320	��			Software		L+400			1.00	%		6.52	%		11/21/2016		12/2/2022		14,320		14,223		14,320
MRI Software LLC^(2)(11)(14)			Software		L+550		1.00	%		7.90	%		6/7/2017		6/30/2023		9,147		9,074		9,055				Software		L+550			1.00	%		7.90	%		6/7/2017		6/30/2023		9,147		9,074		9,055
MSHC, Inc. (Service Logic)^(2)(11)(14)			Commercial Services & Supplies		L+425		1.00	%		6.89	%		7/12/2018		7/31/2023		2,719		2,706		2,705				Commercial Services & Supplies		L+425			1.00	%		6.89	%		7/12/2018		7/31/2023		2,719		2,706		2,705
National Spine and Pain Centers, LLC^(11)(14)			Health Care Providers & Services		L+450		1.00	%		7.02	%		9/18/2018		6/2/2024		2,585		2,574		2,546				Health Care Providers & Services		L+450			1.00	%		7.02	%		9/18/2018		6/2/2024		2,585		2,574		2,546
On Location Events, LLC & PrimeSport Holdings Inc.^(2)(11)(14)			Media		L+550		1.00	%		7.90	%		12/7/2017		9/29/2021		14,375		14,242		14,267				Media		L+550			1.00	%		7.90	%		12/7/2017		9/29/2021		14,375		14,242		14,267
Pet Holdings ULC & Pet Supermarket, Inc.^(4)(11)(14)			Specialty Retail		L+550		1.00	%		7.90	%		9/18/2018		7/5/2022		4,593		4,548		4,570				Specialty Retail		L+550			1.00	%		7.90	%		9/18/2018		7/5/2022		4,593		4,548		4,570
PPT Management Holdings, LLC^(2)(11) ††			Health Care Providers & Services		L+750 PIK		1.00	%		9.85	%		12/15/2016		12/16/2022		8,583		8,523		7,295				Health Care Providers & Services		L+750	PIK		1.00	%		9.85	%		12/15/2016		12/16/2022		8,583		8,523		7,295
Pre-Paid Legal Services, Inc.⁽²⁾			Diversified Consumer Services		L+300		—			5.52	%		4/13/2018		5/1/2025		1,453		1,446		1,425				Diversified Consumer Services		L+300			—			5.52	%		4/13/2018		5/1/2025		1,453		1,446		1,425
Radiology Partners, Inc.^(2)(11)			Health Care Providers & Services		L+425		—			6.66	%		6/28/2018		7/9/2025		7,481		7,411		7,350				Health Care Providers & Services		L+425			—			6.66	%		6/28/2018		7/9/2025		7,481		7,411		7,350
Restoration Robotics, Inc.^(2)(11)			Health Care Equipment & Supplies		L+795		—			10.33	%		5/10/2018		5/1/2022		2,000		1,975		1,995				Health Care Equipment & Supplies		L+795			—			10.33	%		5/10/2018		5/1/2022		2,000		1,975		1,995
Rubius Therapeutics, Inc.^(2)(11)			Pharmaceuticals		L+550		—			7.97	%		12/21/2018		12/21/2023		2,061		2,056		2,055				Pharmaceuticals		L+550			—			7.97	%		12/21/2018		12/21/2023		2,061		2,056		2,055
SHO Holding I Corporation (Shoes for Crews)^(2)(11)			Footwear		L+500		1.00	%		7.53	%		11/20/2015		10/27/2022		5,820		5,788		5,674				Footwear		L+500			1.00	%		7.53	%		11/20/2015		10/27/2022		5,820		5,788		5,674
Solara Medical Supplies, Inc.^(2)(11)(14)			Health Care Providers & Services		L+600		1.00	%		8.52	%		5/31/2018		2/27/2024		5,933		5,853		5,933				Health Care Providers & Services		L+600			1.00	%		8.52	%		5/31/2018		2/27/2024		5,933		5,853		5,933
The Hilb Group, LLC & Gencorp Insurance Group, Inc.^(2)(11)(14)			Insurance		L+475		1.00	%		7.55	%		3/16/2016		6/24/2021		10,982		10,876		10,982				Insurance		L+475			1.00	%		7.55	%		3/16/2016		6/24/2021		10,982		10,876		10,982
Trident USA Health Services^(2)(11) ††			Health Care Providers & Services		L+600⁽¹³⁾		1.25	%		8.53	%		7/29/2013		7/31/2022		7,057		7,051		4,234				Health Care Providers & Services		L+600	⁽¹³⁾		1.25	%		8.53	%		7/29/2013		7/31/2022		7,057		7,051		4,234
TwentyEighty, Inc.⁽¹¹⁾			Professional Services		L+800		1.00	%		10.80	%		1/31/2017		3/31/2020		96		95		96				Professional Services		L+800			1.00	%		10.80	%		1/31/2017		3/31/2020		96		95		96
TwentyEighty, Inc.⁽¹¹⁾ ††			Professional Services		—		—			8.00	%⁽⁷⁾		1/31/2017		3/31/2020		2,067		2,014		2,067				Professional Services		—			—			8.00	%⁽⁷⁾		1/31/2017		3/31/2020		2,067		2,014		2,067
TwentyEighty, Inc.⁽¹¹⁾ ††			Professional Services		—		—			9.00	%⁽⁸⁾		1/31/2017		3/31/2020		1,981		1,934		1,952				Professional Services		—			—			9.00	%⁽⁸⁾		1/31/2017		3/31/2020		1,981		1,934		1,952
U.S. Acute Care Solutions, LLC^(2)(11)(14)			Health Care Providers & Services		L+500		1.00	%		7.52	%		12/22/2016		5/15/2021		6,370		6,333		6,370				Health Care Providers & Services		L+500			1.00	%		7.52	%		12/22/2016		5/15/2021		6,370		6,333		6,370
US Radiology Specialists, Inc.^(2)(11)			Health Care Providers & Services		L+450		1.00	%		7.12	%		11/27/2018		1/1/2024		3,766		3,738		3,738				Health Care Providers & Services		L+450			1.00	%		7.12	%		11/27/2018		1/1/2024		3,766		3,738		3,738
Web.com Group, Inc.^(2)(11)			Software		L+375		—			6.17	%		9/17/2018		10/10/2025		9,000		8,978		8,685				Software		L+375			—			6.17	%		9/17/2018		10/10/2025		9,000		8,978		8,685
WIRB-Copernicus Group, Inc.^(2)(11)(14)			Professional Services		L+425		1.00	%		6.77	%		3/27/2017		8/15/2022		11,524		11,471		11,524				Professional Services		L+425			1.00	%		6.77	%		3/27/2017		8/15/2022		11,524		11,471		11,524

Total Bank Debt/Senior Secured Loans	Total Bank Debt/Senior Secured Loans																	$	354,303	$	350,403		Total Bank Debt/Senior Secured Loans																		$	354,303	$	350,403

Common Equity/Equity Interests/Warrants—38.1%	Common Equity/Equity Interests/Warrants—38.1%																Shares/Units						Common Equity/Equity Interests/Warrants—38.1%																	Shares/Units
Engineering Solutions & Products, LLC^(6)(9)(11)†			Aerospace & Defense										11/5/2013				133,668	$	1,367	$	68				Aerospace & Defense											11/5/2013				133,668	$	1,367	$	68
Essence Group Holdings Corporation (Lumeris) Warrants⁽¹¹⁾†. ..			Health Care Technology										3/22/2017				52,000		16		89
Essence Group Holdings Corporation (Lumeris) Warrants⁽¹¹⁾†																									Health Care Technology											3/22/2017				52,000		16		89
Gemino Healthcare Finance, LLC^(4)(5)(11)			Diversified Financial Services										9/30/2013				32,839		31,439		32,550				Diversified Financial Services											9/30/2013				32,839		31,439		32,550
North Mill Capital LLC^{(4)(5)(11)(12)}			Diversified Financial Services										10/20/2017				131		67,000		67,000				Diversified Financial Services											10/20/2017				131		67,000		67,000
Restoration Robotics, Inc. Warrants⁽¹¹⁾†			Health Care Equipment & Supplies										5/10/2018				16,173		25		1				Health Care Equipment & Supplies											5/10/2018				16,173		25		1
TwentyEighty Investors, LLC⁽¹¹⁾†.			Professional Services										1/31/2017				17,214		3,167		—
TwentyEighty Investors, LLC⁽¹¹⁾†																									Professional Services											1/31/2017				17,214		3,167		—

Total Common Equity/Equity Interests/Warrants	Total Common Equity/Equity Interests/Warrants																	$	103,014	$	99,708		Total Common Equity/Equity Interests/Warrants																		$	103,014	$	99,708

Total Investments⁽¹⁰⁾—172.2%	Total Investments⁽¹⁰⁾—172.2%																	$	457,317	$	450,111		Total Investments⁽¹⁰⁾—172.2%																		$	457,317	$	450,111
Liabilities in Excess of Other Assets—(72.2%)																					(188,719	)
Liabilities in Excess of Other Assets—(72.2%)																							Liabilities in Excess of Other Assets—(72.2%)																					(188,719	)

Net Assets—100.0%	Net Assets—100.0%																			$	261,392		Net Assets—100.0%																				$	261,392

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2018

(in thousands)

(1)

(2)

(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 makingfollow-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, 2018, on a fair value basis,non-qualifying assets in the portfolio represented 25.5% 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, 2018 in these controlled investments are as follows:


Name of Issuer	Fair Value at December 31, 2017		Gross Additions		Gross Reductions		Realized Gain (Loss)			Change in Unrealized Gain (Loss)			Dividend /Other Income		Fair Value at December 31, 2018		Fair Value at December 31, 2017		Gross Additions		Gross Reductions		Realized Gain (Loss)			Change in Unrealized Gain (Loss)			Dividend /Other Income		Fair Value at December 31, 2018
First Lien Loan Program LLC (15)	$	35,835	$	5,521	$	42,980	$	(3,209	)	$	(1,585	)	$	2,889	$	—	$	35,835	$	5,521	$	42,980	$	(3,209	)	$	(1,585	)	$	2,889	$	—
Gemino Healthcare Finance, LLC		35,050		—		1,400		—			(1,100	)		3,498		32,550		35,050		—		1,400		—			(1,100	)		3,498		32,550
North Mill Capital LLC		51,000		16,000		—		—			—			5,703		67,000		51,000		16,000		—		—			—			5,703		67,000

	$	121,885	$	21,521	$	44,380	$	(3,209	)	$	(2,685	)	$	12,090	$	99,550	$	121,885	$	21,521	$	44,380	$	(3,209)		$	(2,685	)	$	12,090	$	99,550

(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, 2018 in these affiliated investments are as follows:


Name of Issuer	Fair Value at December 31, 2017		Gross Additions		Gross Reductions		Realized Gain (Loss)		Change in Unrealized Gain (Loss)		Interest/ Dividend/ Other Income		Fair Value at December 31, 2018
Engineering Solutions & Products, LLC (1^st lien)		—		602		602		—		—		54		—
Engineering Solutions & Products, LLC (2^nd lien)		2,145		76		226		—		238		329		2,282
Engineering Solutions & Products, LLC (equity interests)		68		—		—		—		—		—		68

	$	2,213	$	678	$	828	$	—	$	238	$	383	$	2,350

(7)	Coupon is 4.00% Cash / 4.00% PIK.

(8)	Coupon is 0.25% Cash / 8.75% PIK.

(9)	Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a taxable consolidated subsidiary.

(10)

Aggregate net unrealized depreciation for federal income tax purposes is $10,007; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $1,362 and $11,369, respectively, based on a tax cost of $460,118. 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.

(11)	Level 3 investment valued using significant unobservable inputs.

(12)	Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.

(13)	Spread is 3.00% Cash / 3.00% PIK.

(14)

(15)	On September 18, 2018, the Company acquired 100% of the equity of FLLP and as such consolidated this investment as of this date. On December 19, 2018, FLLP was merged into the Company.

†	Non-income producing security.

††	Investment contains apayment-in-kind (“PIK”) feature.

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)

December 31, 2018


Industry Classification	Percentage of Total Investments (at fair value) as of December 31, 2018
Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Capital LLC)		22.1	%
Health Care Providers & Services		15.8	%
Professional Services		11.8	%
Insurance		11.2	%
Software		10.6	%
Communications Equipment		5.5	%
Media		3.2	%
Electronic Equipment, Instruments & Components		3.1	%
Wireless Telecommunication Services		2.6	%
Chemicals		2.6	%
Consumer Finance		2.5	%
Commercial Services & Supplies		2.5	%
Pharmaceuticals		1.6	%
Air Freight & Logistics		1.3	%
Footwear		1.3	%
Specialty Retail		1.0	%
Aerospace & Defense		0.5	%
Health Care Equipment & Supplies		0.5	%
Diversified Consumer Services		0.3	%
Health Care Technology		0.0	%

Total Investments		100.0	%

See notes to consolidated financial statements.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~June~~September 30, 2019

(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 aclosed-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, stretch-senior, unitrache, 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 certain 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 Form10-Q and RegulationS-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, 2019.

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.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(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.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(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~~nine months ended ~~June~~September 30, 2019, 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:

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable inputs for the asset or liability.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The exercise of judgment is based in part on our knowledge of the asset class and our prior experience.

(c)

Gains or losses on investments are calculated by using the specific identification method.

(d)

The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and we amortize such amounts into income using the effective interest method. 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 othernon-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.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(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 RegulationS-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)

In accordance with ASC835-30, the Company reports origination and other expenses related to certain debt issuances, if any, as a direct deduction from the carrying amount of the debt liability. Applicable 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/or when it approximates the effective yield method.

(k)

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 ASC946-20-25. Certain subsequent costs are expensed per the AICPA Audit & Accounting Guide for Investment Companies.

(l)

Investments that are expected to pay regularly scheduled interest in cash are generally placed onnon-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. Suchnon-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.

(m)

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.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(in thousands, except share amounts)

in this Update modify and eliminate certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the impact of ASU2018-13 on its consolidated financial statements and disclosures.

In March 2017, the FASB issued ASU2017-08, Premium Amortization on Purchased Callable Debt Securities, which will amend FASB ASC310-20. 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 has adopted ASU2017-08 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 theday-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 appropriatelypro-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 ourpre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose,pre-incentive fee net investment income means interest income, dividend income and any other income (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 withpay-in-kind interest andzero-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 topre-incentive fee net investment income for each calendar quarter as follows:

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

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

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(in thousands, except share amounts)

and

20% of the amount ofpre-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 grossinvestment-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~~nine months ended ~~June~~September 30, 2019 and 2018.

For the three and ~~six~~nine months ended ~~June~~September 30, 2019 the Company recognized ~~$1,203~~$1,223 and ~~$2,359,~~$3,582, respectively, in gross base management fees and ~~$525~~$535 and ~~$1,069,~~$1,604, respectively, in gross performance-based incentive fees. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, ~~$459~~$67 and ~~$459,~~$526, respectively, of such base management fees were waived. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, ~~$525~~$535 and ~~$1,061,~~$1,596, respectively, of such performance-based incentive fees were waived. For the three and ~~six~~nine months ended ~~June~~September 30, 2018 the Company recognized ~~$1,145~~$1,222 and ~~$2,193,~~$3,415, respectively, in gross base management fees and ~~$491~~$1,344 and ~~$1,109,~~$2,453, respectively, in gross performance-based incentive fees. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, no base management fees were waived. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, ~~$437~~$0 and $745, respectively, of such performance-based incentive fees were waived. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, ~~and 2018, there were~~ no fees were recaptured by the Investment Adviser. For the three and nine months ended September 30, 2018, $153 and $153, respectively, of performance-based incentive fees were recaptured by the Investment Adviser. The below 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 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 and Performance- Based Incentive Fees Waived		Management and Performance- Based Incentive Fees Recouped		Unreimbursed Management and Performance- Based Incentive Fees		Ratio of Operating Expense to Average Net Assets for the Period⁽¹⁾			Annualized Distribution Rate for the Period⁽²⁾			Eligible for Recoupment Through		Management and Performance- Based Incentive Fees Waived		Management and Performance- Based Incentive Fees Recouped		Unreimbursed Management and Performance- Based Incentive Fees		Ratio of Operating Expense to Average Net Assets for the Period⁽¹⁾			Annualized Distribution Rate for the Period⁽²⁾			Eligible for Recoupment Through
December 31, 2017	$	281	$	—	$	281		0.33	%		8.39	%		September 30, 2019
March 31, 2018		308		—		308		0.28	%		8.37	%		December 31, 2019	$	308	$	—	$	308		0.28	%		8.37	%		December 31, 2019
June 30, 2018		437		153		284		0.30	%		8.37	%		March 31, 2020		437		153		284		0.30	%		8.37	%		March 31, 2020
December 31, 2018		362		—		362		0.20	%		8.38	%		September 30, 2020		362		—		362		0.20	%		8.38	%		September 30, 2020
March 31, 2019		536		—		536		0.28	%		8.65	%		December 31, 2020		536		—		536		0.28	%		8.65	%		December 31, 2020
June 30, 2019		984		—		984		0.31	%		8.60	%		March 31, 2021		984		—		984		0.31	%		8.60	%		March 31, 2021
September 30, 2019																602		—		602		0.31	%		8.63	%		June 30, 2021

Total	$	2,908	$	153	$	2,755									$	3,229	$	153	$	3,076

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

(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. The ratios presented are not annualized.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

(2)	Annualized distribution rate equals the annualized rate of distributions paid to stockholders 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~~nine months ended ~~June~~September 30, 2019, the Company recognized expenses under the Administration Agreement of ~~$400~~$405 and ~~$796,~~$1,201, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company recognized expenses under the Administration Agreement of ~~$387~~$390 and ~~$769,~~$1,159, respectively. No managerial assistance fees were accrued or collected for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.

Note 4. Net Asset Value Per Share

At ~~June~~September 30, 2019, the Company’s total net assets and net asset value per share were ~~$262,109~~$261,639 and ~~$16.34,~~$16.31, respectively. This compares to total net assets and net asset value per share at December 31, 2018 of $261,392 and $16.30, respectively.

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 ASC260-10, for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Earnings per share (basic & diluted)
Numerator—net increase in net assets resulting from operations:	$	4,586	$	5,519	$	11,972	$	11,036	$	5,168	$	5,406	$	17,140	$	16,442
Denominator—weighted average shares:		16,043,288		16,040,457		16,042,086		16,039,628		16,044,226		16,040,485		16,042,807		16,039,917
Earnings per share:	$	0.29	$	0.34	$	0.75	$	0.69	$	0.32	$	0.34	$	1.07	$	1.03

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

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities innon-active markets;

Pricing models whose inputs are observable for substantially the full term of the asset or liability; and

Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3.Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).

Gains and losses for assets and liabilities categorized within the Level 3 table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

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~~September 30, 2019 and December 31, 2018:

Fair Value Measurements

As of ~~June~~September 30, 2019


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Bank Debt/Senior Secured Loans	$	—	$	7,315	$	362,294	$	369,609	$	—	$	7,288	$	360,288	$	367,576
Common Equity/Equity Interests/Warrants		—		—		104,639		104,639		—		—		101,587		101,587

Total Investments	$	—	$	7,315	$	466,933	$	474,248	$	—	$	7,288	$	461,875	$	469,163

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(in thousands, except share amounts)

Fair Value Measurements

As of December 31, 2018


	Level 1		Level 2		Level 3		Total
Assets:
Bank Debt/Senior Secured Loans	$	—	$	8,589	$	341,814	$	350,403
Common Equity/Equity Interests/Warrants		—		—		99,708		99,708

Total Investments	$	—	$	8,589	$	441,522	$	450,111

Liabilities:
FLLP Facility	$	—	$	—	$	51,371	$	51,371

The following tables provides a summary of the changes in fair value of Level 3 assets and liabilities for the ~~six~~three and nine months ended ~~June~~September 30, 2019 and the year ended December 31, 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~~September 30, 2019 and December 31, 2018:

Fair Value Measurements Using Level 3 Inputs


	Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total			Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total
Fair value, December 31, 2018	$	341,814		$	99,708		$	441,522
Fair value, June 30, 2019										$	362,294		$	104,639		$	466,933
Total gains or losses included in earnings:
Net realized gain (loss)		212			—			212			(6,965	)		1,920			(5,045	)
Net change in unrealized gain (loss)		(4,731	)		4,973			242			6,261			(1,745	)		4,516
Purchase of investment securities		51,097			—			51,097			22,577			18			22,595
Proceeds from dispositions of investment securities		(26,098	)		(42	)		(26,140	)		(23,879	)		(3,245	)		(27,124	)
Transfers into Level 3		—			—			—			—			—			—
Transfers out of Level 3		—			—			—			—			—			—

Fair value, June 30, 2019	$	362,294		$	104,639		$	466,933
Fair value, September 30, 2019										$	360,288		$	101,587		$	461,875

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
Net change in unrealized gain (loss):	$	(4,731	)	$	4,973		$	242		$	6,261		$	(1,745	)	$	4,516

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)


	Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total
Fair value, December 31, 2018	$	341,814		$	99,708		$	441,522
Total gains or losses included in earnings:
Net realized gain (loss)		(6,753	)		1,920			(4,833	)
Net change in unrealized gain (loss)		1,530			3,228			4,758
Purchase of investment securities		73,674			18			73,692
Proceeds from dispositions of investment securities		(49,977	)		(3,287	)		(53,264	)
Transfers into Level 3		—			—			—
Transfers out of Level 3		—			—			—

Fair value, September 30, 2019	$	360,288		$	101,587		$	461,875

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
Net change in unrealized gain (loss):	$	1,530		$	3,228		$	4,758

The following table shows a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the ~~six~~nine months ended ~~June~~September 30, 2019:


Beginning fair value at December 31, 2018	$	51,371		$	51,371
Borrowings		5,082			5,082
Repayments		—			—
Transfers in/out of Level 3		(56,453	)		(56,453	)

Ending fair value at June 30, 2019	$	—
Ending fair value at September 30, 2019				$	—

The Company did not elect to apply the fair value option of accounting to the FLLP Facility, which was refinanced by way of amendment on May 31, 2019. As this refinancing was deemed to be a significant

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

modification of debt, per ASC825-10-25, a new election ~~date~~ was triggered. As such the FLLP Facility is shown as a transfer out of Level 3.

Fair Value Measurements Using Level 3 Inputs


	Bank Debt/Senior Secured Loans			Common Equity/Equity Interests/ Warrants			Total
Fair value, December 31, 2017	$	264,650		$	86,157		$	350,807
Total gains or losses included in earnings:
Net realized gain (loss)		(5,218	)		—			(5,218	)
Net change in unrealized gain (loss)		(1,052	)		(1,073	)		(2,125	)
Purchase of investment securities		168,768			16,024			184,792
Proceeds from dispositions of investment securities		(176,482	)		(1,400	)		(177,882	)
Transfers in/out of Level 3		91,148			—			91,148

Fair value, December 31, 2018	$	341,814		$	99,708		$	441,522

Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period:
Net change in unrealized gain (loss):	$	(1,053	)	$	(1,073	)	$	(2,126	)

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

During the quarter 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 additional assumptions in fair valuing the investment. During the quarter ended September 30, 2018, the Company’s investment in FLLP was consolidated, and as such the Level 3 assets held by FLLP are reflected as transfers into Level 3. During the quarter ended December 31, 2018,Pre-Paid Legal Services, Inc. was transferred from Level 3 to Level 2 as the Investment Adviser believed that there was ample liquidity in the available quote given known transactions and thus believed the quote to be representative of fair value.

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, 2018:


Beginning fair value at December 31, 2017	$	124,200
Borrowings		30,950
Repayments		(29,376	)
Transfers in/out of Level 3		(74,403	)

Ending fair value at December 31, 2018	$	51,371

The Company made an election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC825-10. On December 31, 2018, there were borrowings of $51,371 on the FLLP Facility. For the year ended December 31, 2018, the FLLP Facility had no net change in unrealized (appreciation) depreciation. As a result of the consolidation of FLLP, the FLLP Facility is shown as a transfer into Level 3.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

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 ASC825-10-25, a new election ~~date~~ was triggered. As such the Credit Facility is shown as a transfer out of Level 3.

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.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of ~~June~~September 30, 2019 is summarized in the table below:

Asset or
Liability

Fair Value at
June 30,
2019

Principal
Valuation
Technique/
Methodology

Unobservable Input

Range (Weighted
Average)

Asset or
Liability

Fair Value at
September 30,
2019

Principal
Valuation
Technique/
Methodology

Unobservable Input

Range (Weighted
Average)

Bank Debt / Senior Secured Loans

Asset

362,222

Income Approach

Market Yield

6.4% – 15.5% (8.2%)

Asset

360,288

Income Approach

Market Yield

6.2% – 13.4% (7.8%)

Asset

Market Approach

EBITDA Multiple

7.0x – 10.0x (8.5x)

Common Equity/Equity Interests/Warrants

Asset

3,189

101,450

Market Approach

EBITDA Multiple

Return on Equity

5.8x – 14.4x (14.4x)

3.5% – 28.9% (6.5%)

Asset

101,587

Market Approach

Return on Equity

8.2% – 30.2% (13.1%)

Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2018 is summarized in the table below:

Asset or
Liability Fair Value at
December 31,
2018 Principal
Valuation
Technique/
Methodology Unobservable Input Range (Weighted
Average)
Bank Debt / Senior Secured Loans
Asset $ 341,814 Income Approach Market Yield 6.9% – 25.5% (8.7%)
Common Equity/Equity Interests/Warrants

Asset
$
$
158
99,550

Market Approach
Market Approach
EBITDA Multiple
Return on Equity
5.8x – 14.4x (14.4x)
7.5% – 25.2% (10.1%)
FLLP Facility
Liability $ 51,371 Income Approach Market Yield L+1.4% – L+4.8%
(L+2.3%)

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

Asset or
Liability

Fair Value at
December 31,
2018

Principal
Valuation
Technique/
Methodology

Unobservable Input

Range (Weighted
Average)

Bank Debt / Senior Secured Loans

Asset

341,814

Income Approach

Market Yield

6.9% – 25.5% (8.7%)

Common Equity/Equity Interests/Warrants

Asset

158

99,550

Market Approach

EBITDA Multiple

Return on Equity

5.8x – 14.4x (14.4x)
7.5% – 25.2% (10.1%)

FLLP Facility

Liability

51,371

Income Approach

Market Yield

L+1.4% – L+4.8%

(L+2.3%)

Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in derivingbid-ask spreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities. Generally, an increase in market yields or decrease in EBITDA multiples may result in a decrease in the fair value of certain of the Company’s investments.

Note 7. Debt

Credit Facility—On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS 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 SUNS SPV. Under the terms of the Credit Facility, Solar Senior and SUNS 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. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200,000 to $225,000 by utilizing the accordion feature. There were ~~$162,800~~$167,000 of borrowings outstanding as of ~~June~~September 30, 2019 under the Credit Facility.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

FLLP Facility—On May 31, 2019, the Company as transferor and FLLP2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75,000 FLLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of2.15-2.25%. The Company and FLLP2015-1, 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. There were ~~$56,452~~$55,152 of borrowings outstanding as of ~~June~~September 30, 2019.

The average annualized interest cost for all borrowings for the ~~six~~nine months ended ~~June~~September 30, 2019 and the year ended December 31, 2018 was ~~4.79%~~4.67% and 4.30%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to theback-up servicer, if any. The maximum amount borrowed on the revolving credit facilities during the ~~six~~nine months ended ~~June~~September 30, 2019 and the year ended December 31, 2018, was ~~$223,453~~$224,553 and $214,296, respectively.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

Note 8. Financial Highlights and Senior Securities Table

The following is a schedule of financial highlights for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Six months ended June 30, 2019			Six months ended June 30, 2018			Nine months ended September 30, 2019			Nine months ended September 30, 2018
Per Share Data:^(a)
Net asset value, beginning of year	$	16.30		$	16.84		$	16.30		$	16.84

Net investment income		0.70			0.71			1.06			1.06
Net realized and unrealized gain		0.04			(0.01	)		0.01			(0.03	)

Net increase in net assets resulting from operations		0.74			0.70			1.07			1.03
Distributions to stockholders:
From net investment income		(0.70	)		(0.71	)		(1.06	)		(1.06	)

Net asset value, end of period	$	16.34		$	16.83		$	16.31		$	16.81

Per share market value, end of period	$	15.91		$	16.31		$	17.76		$	16.71
Total Return^(b)		9.77	%		(4.24	)%		25.90	%		0.18	%
Net assets, end of period	$	262,109		$	269,924		$	261,639		$	269,676
Shares outstanding, end of period		16,043,735			16,040,485			16,044,727			16,040,485

Ratios to average net assets^(c):
Net investment income		4.31	%		4.19	%		6.47	%		6.32	%

Operating expenses		1.32	%*		1.61	%*		2.07	%*		2.80	%*
Interest and other credit facility expenses		2.09	%		1.17	%		3.14	%		1.92	%

Total expenses		3.41	%*		2.78	%*		5.21	%*		4.72	%*

Average debt outstanding	$	207,500		$	152,870		$	212,092		$	162,208
Portfolio turnover ratio		5.9	%		11.9	%		11.8	%		34.4	%

(a)	Calculated using the average shares outstanding method.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

(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. The market price per share as of December 31, 2018 and December 31, 2017 was $15.12 and $17.76, respectively. 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/or incentive fee waivers (see note 3). For the ~~six~~nine months ended ~~June~~September 30, 2019, the ratios of operating expenses to average net assets and total expenses to average net assets would be ~~1.90%~~2.88% and ~~3.99%~~6.02%, respectively, without the voluntary management and incentive fee waivers. For the ~~six~~nine months ended ~~June~~September 30, 2018, the ratios of operating expenses to average net assets and total expenses to average net assets would be ~~1.89%~~3.07% and ~~3.06%~~5.00%, respectively, without the voluntary incentive fee waiver.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. Our stockholders approved being subject to a 150% asset coverage ratio effective October 12, 2018.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

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


Class and Year	Total Amount Outstanding⁽¹⁾		Asset Coverage Per Unit⁽²⁾			Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit⁽⁴⁾			Total Amount Outstanding⁽¹⁾		Asset Coverage Per Unit⁽²⁾		Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit⁽⁴⁾
Credit Facility
Fiscal 2019 (through June 30, 2019)	$	162,800	$	1,630		$	—		N/A
Fiscal 2019 (through September 30, 2019)											$	167,000	$	1,637	$	—		N/A
Fiscal 2018		119,200		1,770	��		—		N/A			119,200		1,770		—		N/A
Fiscal 2017		124,200		3,175			—		N/A			124,200		3,175		—		N/A
Fiscal 2016		98,300		3,738			—		N/A			98,300		3,738		—		N/A
Fiscal 2015		116,200		2,621			—		N/A			116,200		2,621		—		N/A
Fiscal 2014		143,200		2,421			—		N/A			143,200		2,421		—		N/A
Fiscal 2013		61,400		4,388			—		N/A			61,400		4,388		—		N/A
Fiscal 2012		39,100		5,453			—		N/A			39,100		5,453		—		N/A
Fiscal 2011		8,600		21,051			—		N/A			8,600		21,051		—		N/A
FLLP Facility
Fiscal 2019 (through June 30, 2019)		56,452		565			—		N/A
Fiscal 2019 (through September 30, 2019)												55,152		541		—		N/A
Fiscal 2018		51,371		762			—		N/A			51,371		762		—		N/A
Total Senior Securities										Total Senior Securities
Fiscal 2019 (through June 30, 2019)	$	219,252	$	2,195		$	—		N/A
Fiscal 2019 (through September 30, 2019)											$	222,152	$	2,178	$	—		N/A
Fiscal 2018		170,571		2,532			—		N/A			170,571		2,532		—		N/A
Fiscal 2017		124,200		3,175			—		N/A			124,200		3,175		—		N/A
Fiscal 2016		98,300		3,738			—		N/A			98,300		3,738		—		N/A
Fiscal 2015		116,200		2,621			—		N/A			116,200		2,621		—		N/A
Fiscal 2014		143,200		2,421			—		N/A			143,200		2,421		—		N/A
Fiscal 2013		61,400		4,388			—		N/A			61,400		4,388		—		N/A
Fiscal 2012		39,100		5,453			—		N/A			39,100		5,453		—		N/A
Fiscal 2011		8,600		21,051			—		N/A			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~~September 30, 2019, asset coverage was ~~219.5%~~217.8%.

(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.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

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 andmid-sized companies operating in the healthcare

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

industry. Our initial investment in Gemino was $32,839. The management team of Geminoco-invested in the transaction and continues to lead Gemino. As of ~~June~~September 30, 2019, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively.

Concurrent with the closing of the transaction, Gemino entered into a new, four-year,non-recourse, $100,000 credit facility withnon-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 had a maturity date of May 27, 2020. On June 28, 2019, this $125,000 facility was amended, extending the maturity date to June 28, 2023.

Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of ~~June~~September 30, 2019, the portfolio totaled approximately ~~$187,252~~$175,752 of commitments, of which ~~$119,065~~$115,870 were funded, on total assets of ~~$107,012.~~$107,291. As of December 31, 2018, the portfolio totaled approximately $174,083 of commitments, of which $108,643 were funded, on total assets of $108,640. At ~~June~~September 30, 2019, the portfolio consisted of 3332 issuers with an average balance of approximately ~~$3,608~~$3,621 versus 34 issuers with an average balance of approximately $3,195 at December 31, 2018. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured,cash-pay loans. Gemino’s credit facility, which isnon-recourse to us, had approximately $73,000 and $75,000 of borrowings outstanding at ~~June~~September 30, 2019 and December 31, 2018, respectively. For the three months ended ~~June~~September 30, 2019 and 2018, Gemino had net income of ~~$948~~$1,074 and ~~$668,~~$1,129, respectively, on gross income of ~~$3,382~~$3,162 and ~~$2,745,~~$2,950, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, Gemino had net income of ~~$1,879~~$2,953 and ~~$1,380,~~$2,509, respectively, on gross income of ~~$6,537~~$9,699 and ~~$5,464,~~$8,414, respectively. Due to timing andnon-cash items, there may be material differences between GAAP net income and cash available for distributions.

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

~~June~~September 30, 2019

(in thousands, except share amounts)

Note 10. Commitments and Contingencies

The Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Gemino Healthcare Finance, LLC. The total amount of these unfunded commitments as of ~~June~~September 30, 2019 and December 31, 2018 is ~~$34,674~~$38,514 and $23,619, respectively, comprised of the following:


	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Unified Physician Management, LLC	$	10,030	$	—	$	8,555	$	—
MSHC, Inc.		8,322		3,326		7,606		3,326
Solara Medical Supplies, Inc.		3,930		2,056		3,321		2,056
US Radiology Specialists, Inc.						3,053		—
Worldwide Facilities, LLC						3,047		—
Kindred Biosciences, Inc.						2,112		—
Rubius Therapeutics, Inc.						2,061		4,121
WIRB-Copernicus Group, Inc.		2,393		2,649		1,660		2,649
Rubius Therapeutics, Inc.		2,061		4,121
GenMark Diagnostics, Inc.		1,628		700		1,628		700
Gemino Healthcare Finance, LLC*		1,400		1,400		1,400		1,400
MRI Software LLC						1,181		2,446
Composite Technology Acquisition Corp.						1,049		—
Edgewood Partners Holdings, LLC		1,008		—		868		—
Composite Technology Acquisition Corp.		1,000		—
Cerapedics, Inc.		824		—		824		—
MRI Software LLC		803		2,446
AQA Acquisition Holding, Inc.						142		142
Centria Healthcare LLC.						7		333
The Hilb Group, LLC & Gencorp Insurance Group, Inc.						—		3,156
DISA Holdings Acquisition Corp.		520		2,586		—		2,586
Engineering Solutions & Products, LLC		334		535		—		535
AQA Acquisition Holding, Inc.		142		142
TwentyEighty, Inc.		140		140		—		140
Centria Healthcare LLC		139		333
The Hilb Group, LLC & Gencorp Insurance Group, Inc.		—		3,156
MHE Intermediate Holdings, LLC		—		29		—		29

Total Commitments	$	34,674	$	23,619	$	38,514	$	23,619

*	The Company controls the funding of the Gemino commitment and may cancel it at its discretion.

The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of ~~June~~September 30, 2019 and December 31, 2018, the Company had sufficient cash available and/or liquid securities available to fund its commitments.

Note 11. North Mill Holdco LLC

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)

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 (“North Mill”). On May 1, 2018, North Mill 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

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

continues to lead NMC. On June 28, 2019, North Mill Holdco LLC (“NM Holdco”), a newly formed entity and ESP SSC Corporation acquired Summit Financial Resources, a Salt Lake City-based provider of asset-backed financing to small andmedium-sized businesses. As part of this transaction, the Company’s 99% interest in the equity of NMC was contributed to NM Holdco. This approximately $15,500 transaction was financed with borrowings on NMC’s credit facility.

NM Holdco currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of ~~June~~September 30, 2019, the portfolio totaled approximately ~~$363,904~~$370,685 of commitments, of which ~~$173,889~~$175,941 were funded, on total assets of ~~$209,021.~~$208,036. As of December 31, 2018, the portfolio totaled approximately $247,259 of commitments, of which $122,323 were funded, on total assets of $155,568. At ~~June~~September 30, 2019, the portfolio consisted of ~~151~~148 issuers with an average balance of approximately ~~$1,152~~$1,189 versus 80 issuers with an average balance of approximately $1,529 at December 31, 2018. 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 isnon-recourse to us, had approximately ~~$135,462~~$132,822 and $88,892 of borrowings outstanding at ~~June~~September 30, 2019 and December 31, 2018, respectively. For the three months ended ~~June~~September 30, 2019 and 2018, NMC had net income of ~~$495~~$1,192 and ~~$591,~~$895, respectively, on gross income of ~~$4,207~~$6,274 and ~~$5,361,~~$5,649, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, NMC had net income of ~~$865~~$2,057 and ~~$1,531,~~$2,425, respectively, on gross income of ~~$8,094~~$14,368 and ~~$10,253,~~$15,902, respectively. Due to timing andnon-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NM Holdco’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NM Holdco will be able to maintain consistent dividend payments to us.

Note 12. Capital Share Transactions

As of ~~June~~September 30, 2019 and ~~June~~September 30, 2018, 200,000,000 shares of $0.01 par value capital stock were authorized.

Transactions in capital stock were as follows:


	Shares				Amount				Shares				Amount
	Three months ended June 30, 2019		Three months ended June 30, 2018		Three months ended June 30, 2019		Three months ended June 30, 2018		Three months ended September 30, 2019		Three months ended September 30, 2018		Three months ended September 30, 2019		Three months ended September 30, 2018
Shares issued in reinvestment of distributions		2,131		1,279	$	36	$	22		992		—	$	17	$	—

Net increase		2,131		1,279	$	36	$	22		992		—	$	17	$	—


	Shares				Amount
	Six months ended June 30, 2019		Six months ended June 30, 2018		Six months ended June 30, 2019		Six months ended June 30, 2018
Shares issued in reinvestment of distributions		3,250		3,755	$	55	$	65

Net increase		3,250		3,755	$	55	$	65

SOLAR SENIOR CAPITAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

September 30, 2019

(in thousands, except share amounts)


	Shares				Amount
	Nine months ended September 30, 2019		Nine months ended September 30, 2018		Nine months ended September 30, 2019		Nine months ended September 30, 2018
Shares issued in reinvestment of distributions		4,242		3,755	$	72	$	65

Net increase		4,242		3,755	$	72	$	65

Note 13. 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.

~~SOLAR SENIOR CAPITAL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)~~

~~June 30, 2019~~

~~(in thousands, except share amounts)~~

On ~~July 2,~~October 3, 2019, the Board declared a monthly distribution of $0.1175 per share payable on ~~August~~November 1, 2019 to ~~holders~~stockholders of record as of ~~July 25,~~October 17, 2019.

On ~~August 5,~~November 4, 2019, the Board declared a monthly distribution of $0.1175 per share payable on ~~August 30,~~December 3, 2019 to ~~holders~~stockholders of record as of ~~August 22,~~November 21, 2019.

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 of Solar Senior Capital Ltd. (and consolidated subsidiaries) (the Company), including the consolidated schedule of investments, as of ~~June~~September 30, 2019, the related consolidated statements of operations for the three-month and~~six-month~~ nine-month periods ended ~~June~~September 30, 2019 and 2018, the related consolidated statements of changes in net assets for the three-month and~~six-month~~ nine-month periods ended ~~June~~September 30, 2019 and 2018, the related consolidated statements of cash flows for the~~six-month~~ nine-month periods ended ~~June~~September 30, 2019 and 2018, 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, 2018, 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 21, 2019, 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, 2018, 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 5,~~November 4, 2019

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 Form10-K, quarterly reports on Form10-Q and current reports on Form8-K.

Overview

Solar Senior Capital Ltd. (“Solar Senior”, the “Company”, “we” or “our”), a Maryland corporation formed in December 2010, is aclosed-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,Co-Chief Executive Officer and President, and Bruce Spohler, ourCo-Chief Executive Officer and Chief Operating Officer, purchased an additional 500,000 shares through a concurrent private placement, raising another $10 million.

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-senior, 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”) and North Mill Holdco LLC (“NM Holdco”).

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 bynon-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 arenon-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.

As of ~~June~~September 30, 2019, the Investment Adviser has directly invested approximately ~~$8.5~~$8.7 billion in more than ~~375~~385 different portfolio companies since 2006. Over the same period, the Investment Adviser completed transactions with approximately 200 different financial sponsors.

Recent Developments

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 monthly or quarterly but may bebi-monthly or semi-annually. In addition, our investments may providepayment-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;

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~~September 30, 2019, we invested ~~$18.8~~$22.1 million across 1215 portfolio companies. This compares to investing ~~$70.5~~$28.3 million in 158 portfolio companies for the three months ended ~~June~~September 30, 2018. Investments sold or prepaid during the three months ended ~~June~~September 30, 2019 totaled ~~$11.8~~$27.7 million versus ~~$24.9~~$84.2 million for the three months ended ~~June~~September 30, 2018.

At ~~June~~September 30, 2019, our portfolio consisted of 50 portfolio companies and was invested ~~78.0%~~78.4% directly in senior secured loans and ~~22.0%~~21.6% in common equity/equity interests/warrants (of which ~~7.2%~~7.4% is Gemino and ~~14.2%~~13.7% is NM Holdco, through which the Company indirectly invests in senior secured loans), in each case, measured at fair value versus 49 portfolio companies invested ~~73.3%~~79.9% directly in senior secured loans and ~~26.7%~~20.1% in common equity (of which ~~7.2%~~7.3% is Gemino ~~6.8% is FLLP~~ and ~~12.6%~~12.7% is NMC) at ~~June~~September 30, 2018.

At ~~June~~September 30, 2019, ~~97.1%~~98.1% or ~~$457.1~~$458.0 million of our income producing investment portfolio^* was floating rate and ~~2.9%~~1.9% or ~~$13.5~~$9.0 million was fixed rate, measured at fair value. At ~~June~~September 30, 2018, ~~95.0%~~94.3% or ~~$446.7~~$438.4 million of our income producing investment portfolio* was floating rate and ~~5.0%~~5.7% or ~~$23.3~~$26.6 million was fixed rate, measured at fair value.

Since the initial public offering of Solar Senior on February 24, 2011 and through ~~June~~September 30, 2019, invested capital totaled approximately $1.6 billion in over ~~160~~165 portfolio companies. Over the same period, Solar Senior completed transactions with more than 100 different financial sponsors.

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 andmid-sized companies operating in the healthcare industry. Our initial investment in Gemino was

^*	We have included Gemino Healthcare Finance, LLC and North Mill Holdco LLC within our income producing investment portfolio.

$32.8 million. The management team of Geminoco-invested in the transaction and continues to lead Gemino. As of ~~June~~September 30, 2019, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively.

Concurrent with the closing of the transaction, Gemino entered into a new, four-year,non-recourse, $100.0 million credit facility withnon-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 had a maturity date of May 27, 2020. On June 28, 2019, this $125.0 million facility was amended, extending the maturity date to June 28, 2023.

Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of ~~June~~September 30, 2019, the portfolio totaled approximately ~~$187.3~~$175.8 million of commitments, of which ~~$119.1~~$115.9 million were funded, on total assets of ~~$107.0~~$107.3 million. As of December 31, 2018, the portfolio totaled approximately $174.1 million of commitments, of which $108.6 million were funded, on total assets of $108.6 million. At ~~June~~September 30, 2019, the portfolio consisted of 3332 issuers with an average balance of approximately $3.6 million versus 34 issuers with an average balance of approximately $3.2 million at December 31, 2018. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured,cash-pay loans. Gemino’s credit facility, which isnon-recourse to us, had approximately $73.0 million and $75.0 million of borrowings outstanding at ~~June~~September 30, 2019 and December 31, 2018, respectively. For the three months ended ~~June~~September 30, 2019 and 2018, Gemino had net income of ~~$0.9~~$1.1 million and ~~$0.7~~$1.1 million, respectively, on gross income of ~~$3.4~~$3.2 million and ~~$2.7~~$3.0 million, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, Gemino had net income of ~~$1.9~~$3.0 million and ~~$1.4~~$2.5 million, respectively, on gross income of ~~$6.5~~$9.7 million and ~~$5.5~~$8.4 million, respectively. Due to timing andnon-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.

North Mill Holdco 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. basedsmall-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 North Mill. On May 1, 2018, North Mill 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. On June 28, 2019, NM Holdco, a newly formed entity and ESP SSC Corporation acquired Summit Financial Resources, a Salt Lake City-based provider of asset-backed financing to small andmedium-sized businesses. As part of this transaction, the Company’s 99% interest in the equity of NMC was contributed to NM Holdco. This approximately $15.5 million transaction was financed with borrowings on NMC’s credit facility.

isnon-recourseto us, had approximately ~~$135.5~~$132.8 million and $88.9 million of borrowings outstanding at ~~June~~September 30, 2019 and December 31, 2018, respectively. For the three months ended ~~June~~September 30, 2019 and 2018, NMC had net income of ~~$0.5~~$1.2 million and ~~$0.6~~$0.9 million, respectively on gross income of ~~$4.2~~$6.3 million and ~~$5.4~~$5.6 million, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, NMC had net income of ~~$0.9~~$2.1 million and ~~$1.5~~$2.4 million, respectively on gross income of ~~$8.1~~$14.4 million and ~~$10.3~~$15.9 million, respectively. Due to timing andnon-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NM Holdco’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NM Holdco will be able to maintain consistent dividend payments to us.

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. 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.

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.

Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC820-10, 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~~nine months ended ~~June~~September 30, 2019, 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.

Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

Level 3: Unobservable inputs for the asset or liability.

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 onnon-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. Suchnon-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 onnon-accrual status. When a PIK investment is placed onnon-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 onnon-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 effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned.

The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK interest also increases theloan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based onnon-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~~nine months ended ~~June~~September 30, 2019, capitalized PIK income totaled $0.2 million and ~~$0.3~~$0.5 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, capitalized PIK income totaled ~~$0.1~~$0.5 million and ~~$0.2~~$0.8 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 August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify and eliminate certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the impact of ASU2018-13 on its consolidated financial statements and disclosures.

RESULTS OF OPERATIONS

Results comparisons are for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:

Investment Income

For the three and ~~six~~nine months ended ~~June~~September 30, 2019, gross investment income totaled ~~$10.0~~$10.4 million and ~~$20.2~~$30.6 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, gross investment income totaled ~~$9.5~~$11.0 million and ~~$18.8~~$29.8 million, respectively. The ~~increase~~slight decrease in gross investment income for the year over year three month periods was primarily due to ~~average portfolio growth.~~yield compression.

Expenses

Net expenses totaled ~~$4.4~~$4.7 million and ~~$8.9~~$13.7 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019, of which ~~$1.7~~$1.8 million and ~~$3.4~~$5.2 million, respectively, were gross base management fees and gross performance-based incentive fees and $2.8 million and ~~$5.5~~$8.2 million, respectively, were interest and other credit facility expenses. Over the same periods, ~~$0.5~~$0.1 and $0.5 million, respectively, of base management fees were waived and $0.5 million and ~~$1.1~~$1.6 million, respectively, of performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled $0.8 million and ~~$1.6~~$2.4 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019. Net expenses totaled ~~$3.8~~$5.3 million and ~~$7.5~~$12.8 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018, of which ~~$1.6~~$2.6 million and ~~$3.3~~$5.9 million, respectively, were gross base management fees and gross performance-based incentive fees and ~~$1.8~~$2.0 million and ~~$3.2~~$5.2 million, respectively, were interest and other credit facility expenses. Over the same periods, ~~$0.4~~$0.0 million and $0.7 million, respectively, of performance-based incentive fees were waived. Administrative services and other general and administrative expenses totaled ~~$0.8~~$0.7 million and ~~$1.8~~$2.4 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018. 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. The increase in ~~net~~gross expenses year over year is primarily due to higher interest expense on a larger portfolio as compared to the year ago three and ~~six~~nine month periods.

Net Investment Income

The Company’s net investment income totaled $5.7 million and ~~$11.3~~$17.0 million, or $0.35 and ~~$0.70,~~$1.06, per average share, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019. The Company’s net investment income totaled ~~$5.7~~$5.8 million and ~~$11.3~~$17.1 million, or ~~$0.35~~$0.36 and ~~$0.71,~~$1.06, per average share, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018.

Net Realized Gain

The Company had investment sales and prepayments totaling approximately ~~$11.8~~$27.7 million and ~~$27.4~~$55.1 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019. Net realized ~~gains~~losses over the same periods were ~~$0.1~~$5.0 million and ~~$0.2~~$4.8 million, respectively. The Company had investment sales and prepayments totaling approximately ~~$24.9~~$84.2 million and ~~$50.9~~$135.2 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018. Net realized losses over the same periods were ~~$5.2~~$0.0 million and $5.3 million, respectively. Net realized ~~gains~~losses for the three and nine months ended ~~June 30, 2019 were primarily related to the Company’s sales of Mavenir Systems, Inc. Net realized gains for the six months ended June~~September 30, 2019 were primarily related to the Company’s exit ~~from its investment in Genmark Diagnostics, Inc. and~~of Trident USA Health Services partially offset by gains on the ~~sales~~exit of ~~Mavenir Systems, Inc.~~Engineering Solutions & Products, LLC. Net realized losses for the ~~three and six~~nine months ended ~~June~~September 30, 2018 were primarily related to the Company’s exit from its investment in Metamorph US 3, LLC.

Net Change in Unrealized Gain (Loss)

For the three and ~~six~~nine months ended ~~June~~September 30, 2019, net change in unrealized gain ~~(loss)~~ on the Company’s assets and liabilities totaled ~~($1.1)~~4.5 million and ~~$0.4~~$5.0 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, net change in unrealized gain (loss) on the Company’s assets and liabilities totaled ~~$5.1~~($0.4) million and ~~$5.0~~$4.6 million, respectively. Net unrealized gain for the three months ended September 30, 2019 is primarily due to the reversal of previously recorded unrealized loss on Trident USA Health Services as well as appreciation on our investments in TwentyEighty, Inc. and Gemino Healthcare Finance, LLC, among others, partially offset by depreciation in NM Holdco and Confie Seguros Holding II Co., among others. Net unrealized gain for the nine months ended September 30, 2019 is primarily due to the reversal of previously recorded unrealized loss on Trident USA Health Services as well as appreciation on our investments in TwentyEighty, Inc. and Gemino Healthcare Finance, LLC, among others, partially offset by depreciation in NM Holdco, Aegis Toxicology Sciences Corporation and American Teleconferencing Services, Ltd., among others. Net unrealized loss for the three months ended ~~June~~September 30, ~~2019~~2018 is primarily due to depreciation on our investments in North Mill Holdco LLC, American Teleconferencing Services, Ltd. and Trident USA Health Services, among others, partially offset by appreciation in Engineering Solutions & Products, LLC and Gemino Healthcare Finance, LLC, among others. Net unrealized gain for the six months ended June 30, 2019 is primarily due tosome appreciation on our investments in ~~Engineering Solutions & Products, LLC, Gemino Healthcare Finance, LLC~~Advantage Sales and ~~TwentyEighty,~~Marketing, Inc., ~~among others, partially offset by depreciation on our investments in Trident USA Health Services,~~ American Teleconferencing Services, Ltd. and Aegis Toxicology Sciences Corporation, among others, offset by a greater amount of depreciation in Trident USA Health Services and PPT Management Holdings, LLC, among others. Net unrealized gain for the ~~three~~nine months ended ~~June~~September 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, Polycom Inc. and ~~Alteon Health, LLC,~~Confie Seguros Holding II Co., among others.

Net Increase in Net Assets From Operations

For the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company had a net increase in net assets resulting from operations of ~~$4.6~~$5.2 million and ~~$12.0~~$17.1 million, respectively. For the same periods, earnings per average share were ~~$0.29~~$0.32 and ~~$0.75,~~$1.07, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company had a net increase in net assets resulting from operations of ~~$5.5~~$5.4 million and ~~$11.0~~$16.4 million, respectively. For the same periods, earnings per average share were $0.34 and ~~$0.69,~~$1.03, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s liquidity and capital resources are generally available through its revolving credit facilities, through periodicfollow-on equity offerings, as well as from cash flows from operations, investment sales and

pre-payments of investments. At ~~June~~September 30, 2019, the Company had ~~$219.3~~$222.2 million in borrowings outstanding on its credit facilities and ~~$80.7~~$77.8 million of unused capacity, subject to borrowing base limits.

On May 31, 2019, the Company as transferor and FLLP2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75 million FLLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of2.15-2.25%.

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. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature.

In September 2016, the Company closed afollow-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 $225 million senior secured revolving credit facility (the “Credit Facility”), including its accordion feature, the FLLP Facility as well as from other available financing activities.

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, fromtime-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 ~~$175~~$180 million of cash equivalents as of ~~June~~September 30, 2019.

Debt

Credit Facility—On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS 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 SUNS SPV. Under the terms of the Credit Facility, Solar Senior Capital and SUNS 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. On July 13, 2018, commitments to the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature. There were ~~$162.8~~$167.0 million of borrowings outstanding under the Credit Facility as of ~~June~~September 30, 2019.

FLLP Facility—On May 31, 2019, the Company as transferor and FLLP2015-1, LLC, a wholly-owned subsidiary of the Company, as borrower entered into amendment number five to the $75 million FLLP Facility with Wells Fargo Bank, NA acting as administrative agent. The Company acts as servicer under the FLLP Facility. The FLLP Facility is scheduled to mature on May 31, 2024. The FLLP Facility generally bears interest

at a rate of LIBOR plus a range of2.15-2.25%. The Company and FLLP2015-1, 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. There were ~~$56.5~~$55.2 million of borrowings outstanding as of ~~June~~September 30, 2019. At ~~June~~September 30, 2019, the Company was in compliance with all financial and operational covenants required by the Credit Facility and FLLP Facility.

Contractual Obligations

   Payments due by Period as of June 30, 2019
(dollars in millions)
   Total    Less than
1 year    1-3 years    3-5 years    More than
5 years
Revolving credit facilities⁽¹⁾
   $ 219.3    $ —      $ —      $ 219.3    $ —


	Payments due by Period as of September 30, 2019 (dollars in millions)
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Revolving credit facilities⁽¹⁾	$	222.2	$	—	$	—	$	222.2	$	—

(1)	At ~~June~~September 30, 2019, we had a total of ~~$80.7~~$77.8 million of unused borrowing capacity under our revolving credit facilities, subject to borrowing base limits.

Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. Our stockholders approved being subject to a 150% asset coverage ratio effective October 12, 2018.

Information about our senior securities is shown in the following table ~~(in thousands)~~ as of each year ended December 31 since the Company commenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.


Class and Year		Total Amount Outstanding⁽¹⁾		Asset Coverage Per Unit⁽²⁾		Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit⁽⁴⁾			Total Amount Outstanding⁽¹⁾		Asset Coverage Per Unit⁽²⁾		Involuntary Liquidating Preference Per Unit⁽³⁾		Average Market Value Per Unit⁽⁴⁾
Credit Facility
Fiscal 2019 (through June 30, 2019)		$	162,800	$	1,630	$	—		N/A
Fiscal 2019 (through September 30, 2019)											$	167,000	$	1,637	$	—		N/A
Fiscal 2018			119,200		1,770		—		N/A			119,200		1,770		—		N/A
Fiscal 2017			124,200		3,175		—		N/A			124,200		3,175		—		N/A
Fiscal 2016			98,300		3,738		—		N/A			98,300		3,738		—		N/A
Fiscal 2015			116,200		2,621		—		N/A			116,200		2,621		—		N/A
Fiscal 2014			143,200		2,421		—		N/A			143,200		2,421		—		N/A
Fiscal 2013			61,400		4,388		—		N/A			61,400		4,388		—		N/A
Fiscal 2012			39,100		5,453		—		N/A			39,100		5,453		—		N/A
Fiscal 2011			8,600		21,051		—		N/A			8,600		21,051		—		N/A
FLLP Facility
Fiscal 2019 (through June 30, 2019)			56,452		565		—		N/A
Fiscal 2019 (through September 30, 2019)												55,152		541		—		N/A
Fiscal 2018			51,371		762		—		N/A			51,371		762		—		N/A
Total Senior Securities	Total Senior Securities									Total Senior Securities
Fiscal 2019 (through June 30, 2019)		$	219,252	$	2,195	$	—		N/A
Fiscal 2019 (through September 30, 2019)											$	222,152	$	2,178	$	—		N/A
Fiscal 2018			170,571		2,532		—		N/A			170,571		2,532		—		N/A
Fiscal 2017			124,200		3,175		—		N/A			124,200		3,175		—		N/A
Fiscal 2016			98,300		3,738		—		N/A			98,300		3,738		—		N/A
Fiscal 2015			116,200		2,621		—		N/A			116,200		2,621		—		N/A
Fiscal 2014			143,200		2,421		—		N/A			143,200		2,421		—		N/A
Fiscal 2013			61,400		4,388		—		N/A			61,400		4,388		—		N/A
Fiscal 2012			39,100		5,453		—		N/A			39,100		5,453		—		N/A
Fiscal 2011			8,600		21,051		—		N/A			8,600		21,051		—		N/A

(1)	Total amount of each class of senior securities outstanding (in thousands) at the end of the period presented.

(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 ourday-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) atwo-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.

Off-Balance Sheet Arrangements

Fromtime-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 issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at ~~June~~September 30, 2019 and December 31, 2018, respectively:


	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
*(in millions)*
Unified Physician Management, LLC	$	10.0	$	—	$	8.6	$	—
MSHC, Inc.		8.3		3.3		7.6		3.3
Solara Medical Supplies, Inc.		3.9		2.1		3.3		2.1
US Radiology Specialists, Inc.						3.1		—
Worldwide Facilities, LLC						3.0		—
Kindred Biosciences, Inc.						2.1		—
Rubius Therapeutics, Inc.						2.1		4.1
WIRB-Copernicus Group, Inc.		2.4		2.7		1.7		2.7
Rubius Therapeutics, Inc.		2.1		4.1
GenMark Diagnostics, Inc.		1.6		0.7		1.6		0.7
Gemino Healthcare Finance, LLC*		1.4		1.4		1.4		1.4
MRI Software LLC						1.2		2.5
Composite Technology Acquisition Corp.						1.0		—
Edgewood Partners Holdings, LLC		1.0		—		0.9		—
Composite Technology Acquisition Corp.		1.0		—
Cerapedics, Inc.		0.8		—		0.8		—
MRI Software LLC		0.8		2.5
AQA Acquisition Holding, Inc.						0.1		0.1
Centria Healthcare LLC						0.0		0.3
The Hilb Group, LLC & Gencorp Insurance Group, Inc.						—		3.2
DISA Holdings Acquisition Corp.		0.5		2.6		—		2.6
Engineering Solutions & Products, LLC		0.3		0.5		—		0.5
AQA Acquisition Holding, Inc.		0.2		0.1
TwentyEighty, Inc.		0.2		0.1		—		0.1
Centria Healthcare LLC		0.2		0.3
The Hilb Group, LLC & Gencorp Insurance Group, Inc.		—		3.2
MHE Intermediate Holdings, LLC		—		—		—		—

Total Commitments	$	34.7	$	23.6	$	38.5	$	23.6

*	The Company controls the funding of the Gemino commitment and may cancel it at its discretion.

In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities withoff-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 ofoff-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.

Distributions

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

Date Declared

Record Date

Payment Date

Amount

Record Date

Payment Date

Amount

Fiscal 2019

November 4, 2019

November 21, 2019

December 3, 2019

0.1175

October 3, 2019

October 17, 2019

November 1, 2019

0.1175

September 3, 2019

September 20, 2019

October 2, 2019

0.1175

August 5, 2019

August 22, 2019

August 30, 2019

0.1175

August 22, 2019

August 30, 2019

0.1175

July 2, 2019

July 25, 2019

August 1, 2019

0.1175

July 25, 2019

August 1, 2019

0.1175

June 5, 2019

June 20, 2019

July 2, 2019

0.1175

June 20, 2019

July 2, 2019

0.1175

May 6, 2019

May 23, 2019

June 4, 2019

0.1175

May 23, 2019

June 4, 2019

0.1175

April 4, 2019

April 18, 2019

May 1, 2019

0.1175

April 18, 2019

May 1, 2019

0.1175

February 21, 2019

March 21, 2019

April 3, 2019

0.1175

March 21, 2019

April 3, 2019

0.1175

February 6, 2019

February 21, 2019

March 1, 2019

0.1175

February 21, 2019

March 1, 2019

0.1175

January 8, 2019

January 24, 2019

February 1, 2019

0.1175

January 24, 2019

February 1, 2019

0.1175

YTD Total (2019)

0.94

1.2925

Fiscal 2018

December 6, 2018

December 20, 2018

January 4, 2019

$0.1175

December 20, 2018

January 4, 2019

0.1175

November 5, 2018

November 21, 2018

December 4, 2018

0.1175

November 21, 2018

December 4, 2018

0.1175

October 4, 2018

October 24, 2018

November 1, 2018

0.1175

October 24, 2018

November 1, 2018

0.1175

September 6, 2018

September 25, 2018

October 2, 2018

0.1175

September 25, 2018

October 2, 2018

0.1175

August 2, 2018

August 23, 2018

August 31, 2018

0.1175

August 23, 2018

August 31, 2018

0.1175

July 3, 2018

July 19, 2018

July 31, 2018

0.1175

July 19, 2018

July 31, 2018

0.1175

June 6, 2018

June 21, 2018

July 3, 2018

0.1175

June 21, 2018

July 3, 2018

0.1175

May 7, 2018

May 23, 2018

June 1, 2018

0.1175

May 23, 2018

June 1, 2018

0.1175

April 3, 2018

April 19, 2018

May 2, 2018

0.1175

April 19, 2018

May 2, 2018

0.1175

February 22, 2018

March 22, 2018

April 3, 2018

0.1175

March 22, 2018

April 3, 2018

0.1175

February 7, 2018

February 22, 2018

March 1, 2018

0.1175

February 22, 2018

March 1, 2018

0.1175

January 5, 2018

January 18, 2018

January 31, 2018

0.1175

January 18, 2018

January 31, 2018

0.1175

Fiscal YTD Total (2018)

1.41

Total (2018)

1.41

Fiscal 2017

December 7, 2017

December 21, 2017

January 4, 2018

$0.1175

December 21, 2017

January 4, 2018

0.1175

November 2, 2017

November 22, 2017

December 1, 2017

0.1175

November 22, 2017

December 1, 2017

0.1175

October 5, 2017

October 19, 2017

November 1, 2017

0.1175

October 19, 2017

November 1, 2017

0.1175

September 14, 2017

September 22, 2017

October 3, 2017

0.1175

September 22, 2017

October 3, 2017

0.1175

August 1, 2017

August 17, 2017

August 31, 2017

0.1175

August 17, 2017

August 31, 2017

0.1175

July 6, 2017

July 20, 2017

August 1, 2017

0.1175

July 20, 2017

August 1, 2017

0.1175

June 7, 2017

June 22, 2017

July 6, 2017

0.1175

June 22, 2017

July 6, 2017

0.1175

May 2, 2017

May 18, 2017

June 2, 2017

0.1175

May 18, 2017

June 2, 2017

0.1175

April 6, 2017

April 20, 2017

May 2, 2017

0.1175

April 20, 2017

May 2, 2017

0.1175

February 22, 2017

March 23, 2017

April 4, 2017

0.1175

March 23, 2017

April 4, 2017

0.1175

February 7, 2017

February 23, 2017

March 1, 2017

0.1175

February 23, 2017

March 1, 2017

0.1175

January 5, 2017

January 19, 2017

February 1, 2017

0.1175

January 19, 2017

February 1, 2017

0.1175

Total (2017)

1.41

Tax characteristics of all distributions will be reported to stockholders 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 ornon-taxable return of capital, if any, as applicable.

We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

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 contractualpayment-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~~nine months ended ~~June~~September 30, 2019 and the year ended December 31, 2018, ~~13.4%~~12.5% and 4.9% 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,Co-Chief Executive Officer and President and Mr. Spohler, ourCo-Chief Executive Office, 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 Secretary serves as the Chief Financial Officer for Solar Capital Partners.

The Administrator provides us with the office facilities and administrative services necessary to conductday-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 anon-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 adviser to Solar Capital Ltd., a publicly traded BDC, which focuses on investing in senior secured loans, including stretch-senior and unitranche loans and to a lesser extent mezzanine loans and equity securities. In addition, Michael S. Gross, our Chairman,Co-Chief Executive Officer and President, Bruce Spohler, ourCo-Chief Executive Officer and Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. and SCP Private Credit Income BDC LLC. 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 investside-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. On June 13, 2017, the Adviser received an exemptive order that permits the Company to participate innegotiated co-investment transactions with certain affiliates, in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to various conditions (the “Order”). If the Company is unable to rely on the Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on an alternating basis. Although the Adviser’s investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, the Company and its Unitholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of the Adviser.

Related party transactions may occur among Solar Senior Capital Ltd., Gemino and NM Holdco. These transactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Gemino or NM Holdco.

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~~nine months ended ~~June~~September 30, 2019, 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 revolving credit facilities that are generally based on floating LIBOR. Assuming no changes to our balance sheet as of ~~June~~September 30, 2019 and no new defaults by portfolio companies, a hypothetical one percent decrease in LIBOR on our comprehensive floating rate assets and liabilities would reduce our net investment income by ~~ten~~four cents per average share over the next twelve months. Assuming no changes to our balance sheet as of ~~June~~September 30, 2019 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 ~~ten~~eight cents per average share over the next twelve months. However, we may hedge against interest rate fluctuations fromtime-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~~September 30, 2019, we have no interest rate hedging instruments outstanding on our balance sheet.

Increase (Decrease) in LIBOR
(1.00 %) 1.00 %
Increase (Decrease) in Net Investment Income Per Share Per Year
$ (0.10 ) $ 0.10


Increase (Decrease) in LIBOR		(1.00	%)		1.00	%
Increase (Decrease) in Net Investment Income Per Share Per Year	$	(0.04	)	$	0.08

Item 4.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of ~~June~~September 30, 2019 (the end of the period covered by this report), we, including ourCo-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-15(e) of the 1934 Act). Based on that evaluation, our management, including theCo-Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including ourCo-Chief Executive Officers 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~~third quarter of 2019 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 February 21, 2019 filing of our Annual Report onForm 10-K, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. There have been no material changes during the period ended ~~June~~September 30, 2019 to the risk factors discussed in “Risk Factors” in the February 21, 2019 filing of our Annual Report on Form10-K. In addition, please see our risk factors within our FormN-2 filed on June 21, 2019.

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~~September 30, 2019.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:


Exhibit Number		Description

3.1		Articles of Amendment and Restatement⁽¹⁾

3.2		Amended and Restated Bylaws⁽¹⁾

4.1		Form of Common Stock Certificate⁽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⁽⁵⁾

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⁽⁶⁾

10.11		Consent and Omnibus Amendment to Transaction Documents by and among the Registrant, FLLP2015-1, LLC, each of the Conduit Lenders and Institutional Lenders and Wells Fargo Bank, N.A., as administrative agent and collateral agent⁽⁷⁾


Exhibit Number		Description

14.1		Code of Ethics⁽⁸⁾

31.1		Certification ofCo-Chief Executive Officer pursuant to Rule13a-14 of the Securities Exchange Act of 1934, as amended.*

31.2		Certification ofCo-Chief Executive Officer pursuant to Rule13a-14 of the Securities Exchange Act of 1934, as amended.*

31.3		Certification of Chief Financial Officer pursuant to Rule13a-14 of the Securities Exchange Act of 1934, as amended.*


~~Exhibit~~ ~~Number~~		~~Description~~

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

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

32.3		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 FormN-2 (FileNo. 333-171330) filed on February 14, 2011.

(2)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-K filed on February 22, 2012.

(3)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form8-K filed on August 31, 2011.

(4)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-K filed on February 25, 2014.

(5)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-Q filed on August 2, 2016.

(6)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-Q filed on August 6, 2018.

(7)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-K filed on February 21, 2019.

(8)	Previously filed in connection with Solar Senior Capital Ltd.’s report on Form10-Q filed on May 6, 2019.

*	Filed herewith.

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 5,~~November 4, 2019.


SOLAR SENIOR CAPITAL LTD.

By:		/s/ MICHAEL S. GROSS
		Michael S. Gross Co-Chief Executive Officer (Principal Executive Officer)

By:		/s/ BRUCE J. SPOHLER
		Bruce J. Spohler Co-Chief Executive Officer (Principal Executive Officer)

By:

/s/ RICHARD L. PETEKA

Richard L. Peteka

Chief Financial Officer

(Principal Financial and Accounting Officer)

5253

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting company

Emerging growth company