EXHIBIT 99.1

TABLE OF CONTENTS

PAGESUPPLEMENTAL FINANCIAL INFORMATIONNew Mountain Finance Holdings, L.L.C.Consolidated Statements of Operations from April 1, 2014 to May 7, 2014 and from January 1, 2014 to May 7, 2014
(unaudited) and for the three months and six months ended June 30, 2013 (unaudited)


2Consolidated Statements of Cash Flows from January 1, 2014 to May 7, 2014 (unaudited) and for the six months ended June 30,
2013 (unaudited)


3AUDITED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm


4New Mountain Finance Holdings, L.L.C.Consolidated Statements of Assets, Liabilities and Members' Capital as of December 31, 2013 and December 31, 2012


6Consolidated Statements of Operations for the years ended December 31, 2013, December 31, 2012 and December 31,
2011


7Consolidated Statements of Changes in Members' Capital for the years ended December 31, 2013, December 31, 2012 and
December 31, 2011


8Consolidated Statements of Cash Flows for the years ended December 31, 2013, December 31, 2012 and December 31,
2011


9Consolidated Schedule of Investments as of December 31, 2013


10Consolidated Schedule of Investments as of December 31, 2012


17New Mountain Finance CorporationStatements of Assets and Liabilities as of December 31, 2013 and December 31, 2012


22Statements of Operations for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011 (commencement of
operations) to December 31, 2011


23Statements of Changes in Net Assets for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011
(commencement of operations) to December 31, 2011


24Statements of Cash Flows for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011 (commencement of
operations) to December 31, 2011


25New Mountain Finance AIV Holdings CorporationStatements of Assets and Liabilities as of December 31, 2013 and December 31, 2012


26Statements of Operations for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011 (commencement of
operations) to December 31, 2011


27Statements of Changes in Net Assets for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011
(commencement of operations) to December 31, 2011


28Statements of Cash Flows for the years ended December 31, 2013, December 31, 2012 and from May 19, 2011 (commencement of
operations) to December 31, 2011


29Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C., the Financial Statements of New Mountain
Finance Corporation and the Financial Statements of New Mountain Finance AIV Holdings Corporation


30


1

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New Mountain Finance Holdings, L.L.C        Consolidated Statements of Operations        (in thousands)        (unaudited)

From
April 1, 2014
to May 7, 2014

Three months
ended
June 30, 2013

From
January 1, 2014
to May 7, 2014

Six months
ended
June 30, 2013Investment incomeInterest income

$
12,847

$
27,321

$
40,986

$
52,364Dividend income


279


6,436


2,374


6,433Other income


113


1,399


797


1,677​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income


13,239


35,156


44,157


60,474​
​
​
​
​
​
​
​
​
​
​
​
​
​ExpensesIncentive fee


1,882


5,407


6,325


8,865Capital gains incentive fee


523


(1,701
)

2,050


981​
​
​
​
​
​
​
​
​
​
​
​
​
​Total incentive fees


2,405


3,706


8,375


9,846Management fee


1,879


3,727


6,055


7,295Interest and other financing expenses


1,408


3,118


4,821


6,189Professional fees


393


563


1,255


1,135Administrative expenses


176


939


772


1,698Other general and administrative expenses


166


396


556


806​
​
​
​
​
​
​
​
​
​
​
​
​
​Total expenses


6,427


12,449


21,834


26,969Less: expenses waived and reimbursed (see Note 5)





(836
)

(774
)

(1,665
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net expenses


6,427


11,613


21,060


25,304​
​
​
​
​
​
​
​
​
​
​
​
​
​Net investment income


6,812


23,543


23,097


35,170Net realized gains on investments


5,860


3,312


8,640


4,356Net change in unrealized (depreciation) appreciation of investments


(3,742
)

(12,031
)

1,072


(141
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
8,930

$
14,824

$
32,809

$
39,385​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


2

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New Mountain Finance Holdings, L.L.C        Consolidated Statements of Cash Flows        (in thousands)        (unaudited)

From
January 1, 2014
to May 7, 2014

Six months
ended
June 30, 2013Cash flows from operating activitiesNet increase in members' capital resulting from operations

$
32,809

$
39,385Adjustments to reconcile net (increase) decrease in members' capital resulting from operations to net cash (used in) provided by operating
activities:Net realized gains on investments


(8,640
)

(4,356
)Net change in unrealized (appreciation) depreciation of investments


(1,072
)

141Amortization of purchase discount


(997
)

(1,923
)Amortization of deferred financing costs


591


735Non-cash investment income


(1,264
)

(2,177
)(Increase) decrease in operating assets:Purchase of investments


(188,042
)

(262,254
)Proceeds from sales and paydowns of investments


122,821


201,388Cash received for purchase of undrawn portion of revolving credit or delayed draw facilities


126


Cash paid for purchase of drawn portion of revolving credit or delayed draw facilities


(516
)

Cash paid on drawn revolvers


(380
)

Cash repayments on drawn revolvers


570


Interest and dividend receivable


(1,006
)

(4,862
)Receivable from unsettled securities sold





9,962Receivable from affiliate


75


(114
)Other assets


(660
)

(715
)Increase (decrease) in operating liabilities:Capital gains incentive fee payable


937


981Incentive fee payable


2,221


2,017Management fee payable


2,199


505Payable for unsettled securities purchased


5,716


9,900Interest payable


(721
)

45Payable to affiliate


153


46Other liabilities


113


166​
​
​
​
​
​
​
​Net cash flows used in operating activities


(34,967
)

(11,130
)​
​
​
​
​
​
​
​Cash flows from financing activitiesNet proceeds from shares sold


58,644


57,020Dividends paid


(15,247
)

(36,992
)Offering costs paid


(150
)

(542
)Proceeds from Holdings Credit Facility


114,482


171,818Repayment of Holdings Credit Facility


(137,100
)

(169,320
)Proceeds from SLF Credit Facility


332


3,238Repayment of SLF Credit Facility





(10,400
)Deferred financing costs paid


(18
)

(498
)​
​
​
​
​
​
​
​Net cash flows provided by financing activities


20,943


14,324​
​
​
​
​
​
​
​Net (decrease) increase in cash and cash equivalents


(14,024
)

3,194Cash and cash equivalents at the beginning of the period


14,981


12,752​
​
​
​
​
​
​
​Cash and cash equivalents at the end of the period

$
957

$
15,946​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Supplemental disclosure of cash flow informationCash interest paid

$
4,749

$
5,256Non-cash financing activities:Value of members' capital issued in connection with dividend reinvestment plan

$
1,038

$
2,496Accrual for offering costs


617


1,276Accrual for deferred financing costs


125


25


3

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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Boards of Directors and investors of
New Mountain Finance Holdings, L.L.C.,
New Mountain Finance Corporation and
New Mountain Finance AIV Holdings Corporation
New York, New York

We
have audited the accompanying consolidated statement of assets, liabilities and members' capital of New Mountain Finance Holdings, L.L.C., including the consolidated schedules of
investments as of December 31, 2013 and 2012, and the related consolidated statements of operations, consolidated statements of changes in members' capital, and cash flows for the three years
in the period ended
December 31, 2013 and the financial highlights for each of the five years in the period ended December 31, 2013. Also, we have audited the statements of assets and liabilities of New
Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation as of December 31, 2013 and 2012, and the related statements of operations, changes in net assets, cash flows and
the financial highlights for the period from May 19, 2011(commencement of operations) to December 31, 2011 and for the years ended December 31, 2013 and 2012. These financial
statements are the responsibility of the management of New Mountain Finance Holdings, L.L.C., New Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation. Our responsibility is
to express an opinion on these financial statements and financial highlights based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. New Mountain Finance Holdings, L.L.C. and New Mountain Finance AIV Holdings Corporation are not
required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits of New Mountain Finance Holdings, L.L.C. and New Mountain Finance AIV Holdings
Corporation included consideration of their internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of their internal control over financial reporting. Accordingly we express no such opinion for New Mountain Finance Holdings, L.L.C. and New Mountain Finance
AIV Holdings Corporation. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of investments as of
December 31, 2013 and 2012, by correspondence with the custodian, loan agent or borrower; where replies were not received, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.

As
discussed in Note 16, on February 3, 2014, New Mountain Finance AIV Holdings sold its remaining units in New Mountain Finance Holdings, L.L.C. (the "Operating Company") and no longer
owns any units of the Operating Company.

In
our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the consolidated financial position of New Mountain Finance
Holdings, L.L.C. as of December 31, 2013 and 2012, and the consolidated results of its operations, its consolidated changes in members' capital, and its consolidated cash flows for each of the
three years in the period ended December 31, 2013 and the financial highlights for the each of the five years in the period ended December 31,2013; and the financial positions of New
Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation as of December 31, 2013 and 2012 and the results of

4

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their
operations, changes in their net assets, their cash flows, and the financial highlights for the period from May 19, 2011(commencement of operations) to December 31, 2011 and for
the years ended December 31, 2013 and 2012, in conformity with accounting principles generally accepted in the United States of America.

/s/
DELOITTE & TOUCHE LLP

New
York, New York
March 5, 2014

5

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Assets, Liabilities and Members' Capital

(in thousands, except units and per unit data)

December 31,
2013

December 31,
2012AssetsInvestments at fair value (cost of $1,094,080 and $976,243, respectively)

$
1,115,651

$
989,820Cash and cash equivalents


14,981


12,752Interest and dividend receivable


10,531


6,340Deferred credit facility costs (net of accumulated amortization of $3,562 and $2,016, respectively)


4,727


5,490Receivable from affiliate


459


534Receivable from unsettled securities sold





9,962Other assets


1,492


666​
​
​
​
​
​
​
​Total assets

$
1,147,841

$
1,025,564​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​LiabilitiesHoldings Credit Facility


221,849


206,938SLF Credit Facility


214,668


214,262Capital gains incentive fee payable


7,636


4,407Incentive fee payable


4,104


3,390Management fee payable


3,856


3,222Payable for unsettled securities purchased


3,690


9,700Interest payable


814


712Payable to affiliate


80


Dividends payable





11,192Other liabilities


2,628


1,802​
​
​
​
​
​
​
​Total liabilities


459,325


455,625Members' Capital


688,516


569,939​
​
​
​
​
​
​
​Total liabilities and members' capital

$
1,147,841

$
1,025,564​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Outstanding common membership units


47,896,693


40,548,189Capital per unit

$
14.38

$
14.06




The accompanying notes are an integral part of these consolidated financial statements.

6

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Operations

(in thousands)

Years ended December 31,2013

2012

2011Investment incomeInterest income

$
107,027

$
83,646

$
55,809Dividend income


5,049


812


Other income


2,836


1,328


714​
​
​
​
​
​
​
​
​
​
​Total investment income


114,912


85,786


56,523​
​
​
​
​
​
​
​
​
​
​ExpensesIncentive fee


16,502


11,537


3,522Capital gains incentive fee


3,229


4,407


​
​
​
​
​
​
​
​
​
​
​Total incentive fees


19,731


15,944


3,522Management fee


14,905


11,109


4,938Interest and other credit facility expenses


12,470


10,085


7,086Administrative expenses


3,429


2,426


1,615Professional fees


2,349


2,091


2,037Other general and administrative expenses


1,584


1,374


986​
​
​
​
​
​
​
​
​
​
​Total expenses


54,468


43,029


20,184Less: expenses waived and reimbursed (see Note 5)


(3,233
)

(2,460
)

(2,186
)​
​
​
​
​
​
​
​
​
​
​Net expenses


51,235


40,569


17,998​
​
​
​
​
​
​
​
​
​
​Net investment income


63,677


45,217


38,525Net realized gains on investments


7,253


18,851


16,252Net change in unrealized appreciation (depreciation) of investments


7,994


9,928


(23,100
)​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
78,924

$
73,996

$
31,677​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these consolidated financial statements.

7

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Changes in Members' Capital

(in thousands)

Years ended December 31,2013

2012

2011Increase (decrease) in members' capital resulting from operations:Net investment income

$
63,677

$
45,217

$
38,525Net realized gains on investments


7,253


18,851


16,252Net change in unrealized appreciation (depreciation) of investments


7,994


9,928


(23,100
)​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations


78,924


73,996


31,677Contributions


100,040


133,428


195,295Distributions








(10,249
)Dividends declared


(65,140
)

(59,378
)

(26,591
)Offering costs


(331
)

(564
)

(11,557
)Reinvestment of dividends


5,084


1,955


​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital


118,577


149,437


178,575Members' capital at the beginning of the period


569,939


420,502


241,927​
​
​
​
​
​
​
​
​
​
​Members' capital at the end of the period

$
688,516

$
569,939

$
420,502​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these consolidated financial statements.

8

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Cash Flows

(in thousands)

Years ended December 31,2013

2012

2011Cash flows from operating activitiesNet increase in members' capital resulting from operations

$
78,924

$
73,996

$
31,677Adjustments to reconcile net (increase) decrease in members' capital resulting from operations to net cash (used in) provided by operating
activities:Net realized gains on investments


(7,253
)

(18,851
)

(16,252
)Net change in unrealized (appreciation) depreciation of investments


(7,994
)

(9,928
)

23,100Amortization of purchase discount


(3,365
)

(5,996
)

(5,862
)Amortization of deferred credit facility costs


1,546


1,160


786Non-cash investment income


(4,473
)

(2,187
)

(1,538
)(Increase) decrease in operating assets:Purchase of investments


(529,695
)

(673,355
)

(494,694
)Proceeds from sales and paydowns of investments


426,561


423,874


231,962Cash received for purchase of undrawn portion of revolving credit or delayed draw facilities


388


137


1,363Cash paid for drawn revolver





(12,705
)

(535
)Cash repayments on drawn revolvers





12,705


Interest and dividend receivable


(4,191
)

967


(4,299
)Receivable from affiliate


75


(165
)

(369
)Receivable from unsettled securities sold


9,962


(9,962
)

Other assets


(225
)

(50
)

(351
)Increase (decrease) in operating liabilities:Capital gains incentive fee payable


3,229


4,407


Incentive fee payable


714


1,073


2,317Management fee payable


634


1,021


2,200Payable for unsettled securities purchased


(6,010
)

2,095


(86,857
)Interest payable


102


(1,035
)

934Payable to affiliate


80





(394
)Other liabilities


639


151


534​
​
​
​
​
​
​
​
​
​
​Net cash flows used in operating activities


(40,352
)

(212,648
)

(316,278
)​
​
​
​
​
​
​
​
​
​
​Cash flows from financing activitiesContributions


100,040


133,428


195,295Distributions








(10,249
)Dividends paid


(71,248
)

(46,231
)

(26,591
)Offering costs paid


(720
)

(268
)

(11,557
)Proceeds from Holdings Credit Facility


457,978


523,099


336,508Repayment of Holdings Credit Facility


(443,067
)

(445,199
)

(267,168
)Proceeds from SLF Credit Facility


23,306


112,993


172,060Repayment of SLF Credit Facility


(22,900
)

(64,659
)

(63,068
)Deferred credit facility costs paid


(808
)

(3,082
)

(4,377
)​
​
​
​
​
​
​
​
​
​
​Net cash flows provided by financing activities


42,581


210,081


320,853​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in cash and cash equivalents


2,229


(2,567
)

4,575Cash and cash equivalents at the beginning of the period


12,752


15,319


10,744​
​
​
​
​
​
​
​
​
​
​Cash and cash equivalents at the end of the period

$
14,981

$
12,752

$
15,319​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Supplemental disclosure of cash flow informationCash interest paid

$
10,323

$
9,433

$
4,358Non-cash operating activities:Non-cash activity on investments

$
1,986

$


$
Non-cash financing activities:Dividends declared and payable

$


$
11,192

$
Value of members' capital issued in connection with dividend reinvestment plan


5,084


1,955


Accrual for offering costs


768


556


Accrual for deferred credit facility costs


21


46


192




The accompanying notes are an integral part of these consolidated financial statements.

9

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New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments

December 31, 2013

(in thousands, except shares)

Portfolio Company, Location and
Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalFunded Debt InvestmentsBermudaStratus Technologies Bermuda Holdings Ltd.(4)**Stratus Technologies Bermuda Ltd. / Stratus Technologies, Inc.Information Technology

First lien(2)(7)

12.00%

3/29/2015

$
6,497

$
6,335

$
6,529


0.95
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsBermuda







$
6,497

$
6,335

$
6,529


0.95
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsCayman IslandsPinnacle Holdco S.à r.l. / Pinnacle (US) Acquisition Co Limited**Software

Second lien(2)

10.50% (Base Rate + 9.25%)

7/30/2020

$
30,000

$
29,472

$
30,362


4.41
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsCayman Islands







$
30,000

$
29,472

$
30,362


4.41
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsUnited StatesMcGraw-Hill Global Education Holdings, LLCEducation

First lien(2)

9.75%

4/1/2021

$
24,500

$
24,348

$
27,195First lien(3)

9.00% (Base Rate + 7.75%)

3/22/2019


17,850


17,367


18,225​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​42,350


41,715


45,420


6.60
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Deltek, Inc.Software

Second lien(2)

10.00% (Base Rate + 8.75%)

10/10/2019


41,000


40,977


41,820


6.07
%Global Knowledge Training LLCEducation

Second lien(2)

11.00% (Base Rate + 9.75%)

10/21/2018


41,450


41,070


41,450


6.02
%UniTek Global Services, Inc.Business Services

First lien(2)

15.00% (Base Rate + 9.50% +
4.00% PIK)*

4/15/2018


26,382


25,508


26,382First lien(2)

15.00% (Base Rate + 9.50% +
4.00% PIK)*

4/15/2018


6,387


6,176


6,387First lien(2)

15.00% (Base Rate + 9.50% +
4.00% PIK)*

4/15/2018


5,309


5,133


5,309​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​38,078


36,817


38,078


5.53
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Edmentum, Inc.(fka Plato, Inc.)Education

First lien(3)

5.50% (Base Rate + 4.50%)

5/17/2018


6,433


6,240


6,465Second lien(2)

11.25% (Base Rate + 9.75%)

5/17/2019


31,150


30,685


31,578​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​37,583


36,925


38,043


5.52
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​SRA International, Inc.Federal Services

First lien(2)

6.50% (Base Rate + 5.25%)

7/20/2018


34,750


33,784


34,475


5.01
%Kronos IncorporatedSoftware

Second lien(2)

9.75% (Base Rate + 8.50%)

4/30/2020


31,341


31,055


32,542


4.73
%Rocket Software, Inc.Software

Second lien(2)

10.25% (Base Rate + 8.75%)

2/8/2019


30,875


30,731


31,029


4.51
%Novell, Inc. (fka Attachmate Corporation, NetIQ Corporation)Software

First lien(3)

7.25% (Base Rate + 5.75%)

11/22/2017


6,951


6,847


7,080Second lien(2)

11.00% (Base Rate + 9.50%)

11/22/2018


23,353


22,780


22,876​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​30,304


29,627


29,956


4.35
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these consolidated financial statements.

10

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)

Portfolio Company, Location and
Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalJHCI Acquisition, Inc.Distribution & Logistics

First lien(3)

7.00% (Base Rate + 5.75%)

7/11/2019

$
19,536

$
19,262

$
19,548Second lien(3)

11.00% (Base Rate + 9.75%)

7/11/2020


10,000


9,705


9,898​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​29,536


28,967


29,446


4.28
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​CompassLearning, Inc.(12)Education

First lien(2)

8.00% (Base Rate + 6.75%)

11/26/2018


30,000


29,261


29,250


4.25
%Transtar Holding CompanyDistribution & Logistics

Second lien(2)

9.75% (Base Rate + 8.50%)

10/9/2019


28,300


27,842


27,168


3.95
%KeyPoint Government Solutions, Inc.Federal Services

First lien(3)

7.25% (Base Rate + 6.00%)

11/13/2017


16,784


16,448


16,616First lien(2)

7.25% (Base Rate + 6.00%)

11/13/2017


10,116


9,953


10,015​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​26,900


26,401


26,631


3.87
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Meritas Schools Holdings, LLCEducation

First lien(3)

7.00% (Base Rate + 5.75%)

6/25/2019


19,950


19,763


20,087First lien(2)

7.00% (Base Rate + 5.75%)

6/25/2019


5,920


5,865


5,961​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​25,870


25,628


26,048


3.78
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Sierra Hamilton LLC / Sierra Hamilton Finance, Inc.Energy

First lien(2)

12.25%

12/15/2018


25,000


25,000


25,000


3.63
%Permian Tank & Manufacturing, Inc.Energy

First lien(2)

10.50%

1/15/2018


24,500


24,757


24,255


3.52
%Aderant North America, Inc.Software

Second lien(2)

10.00% (Base Rate + 8.75%)

6/20/2019


22,500


22,201


23,203


3.37
%YP Holdings LLC(8)YP LLCMedia

First lien(2)

8.04% (Base Rate + 6.71%)

6/4/2018


22,400


21,892


22,722


3.30
%McGraw-Hill School Education Holdings, LLCEducation

First lien(3)

6.25% (Base Rate + 5.00%)

12/18/2019


13,000


12,870


12,870First lien(2)

6.25% (Base Rate + 5.00%)

12/18/2019


9,000


8,910


8,910​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​22,000


21,780


21,780


3.16
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Aspen Dental Management, Inc.Healthcare Services

First lien(3)

7.00% (Base Rate + 5.50%)

10/6/2016


21,077


20,820


20,813


3.02
%LM U.S. Member LLC (and LM U.S. Corp Acquisition Inc.)Business Services

Second lien(3)

9.50% (Base Rate + 8.25%)

10/26/2020


20,000


19,731


20,308


2.95
%Envision Acquisition Company, LLCHealthcare Services

Second lien(2)

9.75% (Base Rate + 8.75%)

11/4/2021


20,000


19,605


20,075


2.91
%ARSloane Acquisition, LLCBusiness Services

First lien(3)

7.50% (Base Rate + 6.25%)

10/1/2019


19,950


19,754


19,992


2.90
%eResearchTechnology, Inc.Healthcare Services

First lien(3)

6.00% (Base Rate + 4.75%)

5/2/2018


19,750


19,047


19,874


2.89
%Distribution International, Inc.Distribution & Logistics

First lien(2)

7.50% (Base Rate + 6.50%)

7/16/2019


19,900


19,527


19,813


2.88
%




The accompanying notes are an integral part of these consolidated financial statements.

11

---





New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)

Portfolio Company, Location
and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalFirst American Payment Systems, L.P.Business Services

Second lien(3)

10.75% (Base Rate + 9.50%)

4/12/2019

$
20,000

$
19,654

$
19,800


2.88
%Merrill Communications LLCBusiness Services

First lien(3)

7.25% (Base Rate + 6.25%)

3/8/2018


19,425


19,246


19,759


2.87
%Insight Pharmaceuticals LLCHealthcare Products

Second lien(3)

13.25% (Base Rate + 11.75%)

8/25/2017


19,310


18,766


19,021


2.76
%St. George's University Scholastic Services LLCEducation

First lien(3)

8.50% (Base Rate + 7.00%)

12/20/2017


17,379


17,082


17,530


2.55
%Sotera Defense Solutions, Inc. (Global Defense Technology & Systems, Inc.)Federal Services

First lien(3)

7.50% (Base Rate + 6.00%)

4/21/2017


18,316


18,127


16,118


2.34
%Confie Seguros Holding II Co.Consumer Services

Second lien(3)

10.25% (Base Rate + 9.00%)

5/8/2019


14,886


14,762


15,034


2.18
%OpenLink International, Inc.Software

First lien(3)

7.75% (Base Rate + 6.25%)

10/30/2017


14,700


14,496


14,774


2.15
%Smile Brands Group Inc.Healthcare Services

First lien(3)

7.50% (Base Rate + 6.25%)

8/16/2019


14,464


14,261


14,307


2.08
%Brock Holdings III, Inc.Industrial Services

Second lien(2)

10.00% (Base Rate + 8.25%)

3/16/2018


14,000


13,858


14,263


2.07
%Vision Solutions, Inc.Software

Second lien(2)

9.50% (Base Rate + 8.00%)

7/23/2017


14,000


13,957


14,140


2.05
%Packaging Coordinators, Inc.(10)Healthcare Products

Second lien(2)

9.50% (Base Rate + 8.25%)

11/10/2020


14,000


13,868


14,088


2.05
%Lonestar Intermediate Super Holdings, LLCBusiness Services

Subordinated(2)

11.00% (Base Rate + 9.50%)

9/2/2019


12,000


11,701


12,419


1.80
%Van Wagner Communications, LLCMedia

First lien(2)

6.25% (Base Rate + 5.00%)

8/3/2018


11,761


11,583


11,997


1.74
%Vertafore, Inc.Software

Second lien(2)

9.75% (Base Rate + 8.25%)

10/29/2017


10,000


9,937


10,198


1.48
%TransFirst Holdings, Inc.Business Services

Second lien(3)

11.00% (Base Rate + 9.75%)

6/27/2018


10,000


9,741


10,138


1.47
%MailSouth, Inc.Media

First lien(3)

6.76% (Base Rate + 4.96%)

12/14/2016


9,410


9,333


9,269


1.35
%Vitera Healthcare Solutions, LLCSoftware

First lien(3)

6.00% (Base Rate + 5.00%)

11/4/2020


2,000


1,980


2,000Second lien(2)

9.25% (Base Rate + 8.25%)

11/4/2021


7,000


6,897


7,070​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​9,000


8,877


9,070


1.32
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Harley Marine Services, Inc.Distribution & Logistics

Second lien(2)

10.50% (Base Rate + 9.25%)

12/20/2019


9,000


8,820


8,820


1.28
%Consona Holdings, Inc.Software

First lien(3)

7.25% (Base Rate + 6.00%)

8/6/2018


8,394


8,326


8,457


1.23
%Physio-Control International, Inc.Healthcare Products

First lien(2)

9.88%

1/15/2019


6,651


6,651


7,482


1.09
%Virtual Radiologic CorporationHealthcare Information Technology

First lien(3)

7.25% (Base Rate + 5.50%)

12/22/2016


13,563


13,454


7,324


1.06
%




The accompanying notes are an integral part of these consolidated financial statements.

12

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)

Portfolio Company, Location
and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalAlion Science and Technology CorporationFederal Services

First lien(2)(7)

12.00% (10.00% + 2.00% PIK)*

11/1/2014

$
6,447

$
6,360

$
6,570


0.95
%Immucor, Inc.Healthcare Services

Subordinated(2)(7)

11.13%

8/15/2019


5,000


4,950


5,650


0.82
%Learning Care Group (US), Inc.Education

Subordinated(2)

15.00% PIK*

5/8/2020


4,371


4,253


4,371Subordinated(2)

15.00% PIK*

5/8/2020


800


746


800​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​5,171


4,999


5,171


0.75
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Education Management LLC**Education

First lien(3)

8.25% (Base Rate + 7.00%)

3/30/2018


5,003


4,888


5,028


0.73
%GCA Services Group, Inc.Business Services

Second lien(2)

9.25% (Base Rate + 8.00%)

11/1/2020


4,000


3,964


4,064


0.59
%Sophia Holding Finance LP / Sophia Holding Finance Inc.Software

Subordinated(2)

9.63%

12/1/2018


3,500


3,502


3,623


0.53
%ATI Acquisition Company (fka Ability Acquisition, Inc.)(11)Education

First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(5)*

6/30/2012
Past Due


1,665


1,434


233First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(5)*

6/30/2012
Past Due


103


94


103​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​1,768


1,528


336


0.05
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsUnited States







$
1,016,562

$
1,001,605

$
1,013,641


147.22
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt Investments







$
1,053,059

$
1,037,412

$
1,050,532


152.58
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​EquityBermudaStratus Technologies Bermuda Holdings Ltd.(4)**Information Technology

Ordinary shares(2)






156,247

$
65

$
46Preferred shares(2)






35,558


15


10​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​80


56


0.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total SharesBermuda










$
80

$
56


0.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​EquityUnited StatesCrowley Holdings Preferred, LLCDistribution & Logistics

Preferred shares(2)

12.00% (10.00% + 2.00% PIK)*




35,000

$
35,000

$
35,000


5.08
%Black Elk Energy Offshore Operations, LLCEnergy

Preferred shares(2)

17.00%




20,000,000


20,000


20,000


2.91
%Global Knowledge Training LLCEducation

Ordinary shares(2)






2





3Preferred shares(2)






2,423





3,006​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


3,009


0.44
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Packaging Coordinators, Inc.(10)Packaging Coordinators Holdings, LLCHealthcare Products

Ordinary shares(2)






19,427


1,000


1,181


0.17
%




The accompanying notes are an integral part of these consolidated financial statements.

13

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)

Portfolio Company, Location
and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalAncora Acquisition LLC(11)Education

Preferred shares(2)







372

$
83

$
83


0.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total SharesUnited States











$
56,083

$
59,273


8.61
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Shares











$
56,163

$
59,329


8.62
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​WarrantsUnited StatesLearning Care Group (US), Inc.Education

Warrants(2)







844

$
194

$
503Warrants(2)







3,589


61


2,136​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​255


2,639


0.38
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​YP Holdings LLC(8)YP Equity Investors LLCMedia

Warrants(2)







5





1,944


0.28
%UniTek Global Services, Inc.Business Services

Warrants(2)







1,014,451
(6)

1,449


1,694


0.25
%Storapod Holding Company, Inc.Consumer Services

Warrants(2)







360,129


156


594


0.09
%Alion Science and Technology CorporationFederal Services

Warrants(2)







6,000


293


94


0.01
%Ancora Acquisition LLC(11)Education

Warrants(2)







20









%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total WarrantsUnited States











$
2,153

$
6,965


1.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Investments











$
1,095,728

$
1,116,826


162.21
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unfunded Debt InvestmentsUnited StatesAspen Dental Management, Inc.Healthcare Services

First lien(2)(9)Undrawn




4/6/2016

$
5,000

$
(388
)
$
(388
)

(0.06
)%Advantage Sales & Marketing Inc.Business Services

First lien(2)(9)Undrawn




12/17/2015


10,500


(1,260
)

(787
)

(0.11
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Unfunded Debt Investments








$
15,500

$
(1,648
)
$
(1,175
)

(0.17
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Investments











$
1,094,080

$
1,115,651


162.04
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)New
Mountain Finance Holdings, L.L.C. (the "Operating 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.(2)Investment
is pledged as collateral for the Holdings Credit Facility, a revolving credit facility among the Operating Company as the Borrower and Collateral
Administrator, Wells Fargo Securities, L.L.C. as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral Custodian. See Note 7,Borrowing
Facilities, for details.(3)Investment
is pledged as collateral for the SLF Credit Facility, a revolving credit facility among New Mountain Finance SPV Funding, L.L.C. as the Borrower,
the Operating Company as the Collateral Administrator, Wells Fargo Securities, L.L.C. as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral Custodian. See
Note 7,Borrowing Facilities, for details.(4)The
Operating Company holds investments in two related entities of Stratus Technologies Bermuda Holdings, Ltd. ("Stratus Holdings"). The Operating
Company directly holds ordinary and preferred equity in Stratus Holdings and has a credit investment in the joint issuers of Stratus Technologies Bermuda Ltd. ("Stratus Bermuda") and Stratus
Technologies, Inc. ("Stratus U.S."), collectively, the "Stratus Notes". Stratus U.S. is a wholly-owned subsidiary of Stratus Bermuda, which in turn is a wholly-owned subsidiary of Stratus
Holdings. Stratus Holdings is the parent guarantor of the credit investment of the Stratus Notes.(5)Investment
is on non-accrual status.






The accompanying notes are an integral part of these consolidated financial statements.

14

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)

(6)The
Operating Company holds 1,014,451 warrants in UniTek Global Services, Inc., which represents a 4.46% equity ownership on a fully diluted basis.(7)Securities
are registered under the Securities Act.(8)The
Operating Company holds investments in two related entities of YP Holdings LLC. The Operating Company directly holds warrants to purchase a 4.96%
membership interest of YP Equity Investors, LLC (which at closing represented an indirect 1.0% equity interest in YP Holdings LLC) and holds an investment in the Term Loan B loans issued
by YP LLC, a subsidiary of YP Holdings LLC.(9)Par
Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities. Cost amounts represent the
cash received at settlement date net the impact of paydowns and cash paid for drawn revolvers.(10)The
Operating Company holds investments in Packaging Coordinators, Inc. and one related entity of Packaging Coordinators, Inc. The Operating
Company has a credit investment in Packaging Coordinators, Inc. and holds ordinary equity in Packaging Coordinators Holdings, LLC, a wholly-owned subsidiary of Packaging
Coordinators, Inc.(11)The
Operating Company holds investments in ATI Acquisition Company and Ancora Acquisition LLC. The Operating Company has credit investments in ATI
Acquisition Company and preferred equity and warrants to purchase units of common membership interests of Ancora Acquisition LLC. The Operating Company received its investments in Ancora
Acquisition LLC as a result of its investments in ATI Acquisition Company.(12)The
Operating Company holds an investment in CompassLearning, Inc. that is structured as a first lien last out term loan.*All
or a portion of interest contains payments-in-kind ("PIK").**Indicates
assets that the Operating Company deems to be "non-qualifying assets" under Section 55(a) of the Investment Company Act of 1940, as amended.
Qualifying assets must represent at least 70.00% of the Operating Company's total assets at the time of acquisition of any additional non-qualifying assets.




The accompanying notes are an integral part of these consolidated financial statements.

15

---





New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

December 31, 2013Investment Type

Percent of
Total Investments
at Fair ValueFirst lien


49.62
%Second lien


42.03
%Subordinated


2.41
%Equity and other


5.94
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




December 31, 2013Industry Type

Percent of
Total Investments
at Fair ValueSoftware


22.33
%Education


21.13
%Business Services


13.04
%Distribution & Logistics


10.78
%Federal Services


7.52
%Healthcare Services


7.20
%Energy


6.21
%Media


4.12
%Healthcare Products


3.74
%Consumer Services


1.40
%Industrial Services


1.28
%Healthcare Information Technology


0.66
%Information Technology


0.59
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




December 31, 2013Interest Rate Type

Percent of
Total Investments
at Fair ValueFloating rates


85.08
%Fixed rates


14.92
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




The accompanying notes are an integral part of these consolidated financial statements.

16

---





New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2012

(in thousands, except shares)

Portfolio Company, Location and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalFunded Debt InvestmentsBermudaStratus Technologies Bermuda Holdings Ltd.(4)**Stratus Technologies Bermuda Ltd. / Stratus Technologies, Inc.Information Technology

First lien(2)(7)

12.00%

3/29/2015

$
6,664

$
6,396

$
6,631


1.16
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsBermuda







$
6,664

$
6,396

$
6,631


1.16
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsCayman IslandsPinnacle Holdco S.à r.l. / Pinnacle (US) Acquisition Co Limited**Software

First lien(3)

6.50% (Base Rate + 5.25%)

7/30/2019

$
2,992

$
2,971

$
2,999Second lien(2)

10.50% (Base Rate + 9.25%)

7/30/2020


30,000


29,420


30,488​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​32,992


32,391


33,487


5.88
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsCayman Islands







$
32,992

$
32,391

$
33,487


5.88
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsUnited KingdomMagic Newco, LLC**Software

First lien(3)

7.25% (Base Rate + 6.00%)

12/12/2018

$
14,963

$
14,543

$
15,105


2.65
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsUnited Kingdom







$
14,963

$
14,543

$
15,105


2.65
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsUnited StatesEdmentum, Inc.(fka Plato, Inc.)Education

First lien(3)

7.50% (Base Rate + 6.00%)

5/17/2018

$
11,700

$
11,378

$
11,744Second lien(2)

11.25% (Base Rate + 9.75%)

5/17/2019


29,150


28,604


28,567​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​40,850


39,982


40,311


7.07
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Novell, Inc. (fka Attachmate Corporation, NetIQ Corporation)Software

First lien(3)

7.25% (Base Rate + 5.75%)

11/22/2017


7,700


7,560


7,785Second lien(2)

11.00% (Base Rate + 9.50%)

11/22/2018


24,000


23,326


23,560​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​31,700


30,886


31,345


5.50
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Rocket Software, Inc.Software

Second lien(2)

10.25% (Base Rate + 8.75%)

2/8/2019


30,875


30,711


30,933


5.43
%Pharmaceutical Research Associates, Inc.Healthcare Services

Second lien(2)

10.50% (Base Rate + 9.25%)

6/10/2019


30,000


29,402


30,319


5.32
%UniTek Global Services, Inc.Business Services

First lien(2)

9.00% (Base Rate + 7.50%)

4/16/2018


19,650


19,202


19,331First lien(2)

9.00% (Base Rate + 7.50%)

4/16/2018


5,970


5,798


5,873First lien(2)

9.00% (Base Rate + 7.50%)

4/16/2018


4,963


4,781


4,882​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​30,583


29,781


30,086


5.28
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​KeyPoint Government Solutions, Inc.Federal Services

First lien(3)

7.25% (Base Rate + 6.00%)

11/13/2017


20,000


19,608


19,900First lien(2)

7.25% (Base Rate + 6.00%)

11/13/2017


10,000


9,703


9,950​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​30,000


29,311


29,850


5.24
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Global Knowledge Training LLCEducation

First lien(3)

6.50% (Base Rate + 4.99%)

4/21/2017


4,776


4,718


4,705First lien(3)

7.25% (Base Rate + 4.00%)

4/21/2017


1,174


1,159


1,156Second lien(2)

11.50% (Base Rate + 9.75%)

10/21/2018


24,250


23,814


23,755​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​30,200


29,691


29,616


5.20
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Managed Health Care Associates, Inc.Healthcare Services

First lien(2)

3.47% (Base Rate + 3.25%)

8/1/2014


14,756


13,240


14,276Second lien(2)

6.72% (Base Rate + 6.50%)

2/1/2015


15,000


12,790


14,475​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​29,756


26,030


28,751


5.05
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Transtar Holding CompanyDistribution & Logistics(10)

Second lien(2)

9.75% (Base Rate + 8.50%)

10/9/2019


28,300


27,787


28,654


5.03
%Meritas Schools Holdings, LLCEducation

First lien(3)

7.50% (Base Rate + 6.00%)

7/29/2017


8,150


8,084


8,171Second lien(2)

11.50% (Base Rate + 10.00%)

1/29/2018


20,000


19,747


20,000​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​28,150


27,831


28,171


4.94
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Kronos IncorporatedSoftware

Second lien(2)

9.75% (Base Rate + 8.50%)

4/30/2020


25,000


24,753


25,125


4.41
%




The accompanying notes are an integral part of these consolidated financial statements.

17

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2012

(in thousands, except shares)

Portfolio Company, Location and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalSt. George's University Scholastic Services LLCEducation

First lien(2)

8.50% (Base Rate + 7.00%)

12/20/2017

$
25,000

$
24,501

$
24,500


4.30
%SRA International, Inc.Federal Services

First lien(3)

6.50% (Base Rate + 5.25%)

7/20/2018


20,436


19,741


19,542First lien(2)

6.50% (Base Rate + 5.25%)

7/20/2018


4,315


4,225


4,126​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​24,751


23,966


23,668


4.15
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Aderant North America, Inc.Software

Second lien(2)

11.00% (Base Rate + 7.75%)

6/20/2019


22,500


22,163


23,062


4.05
%LM U.S. Member LLC (and LM U.S. Corp Acquisition Inc.)Business Services

Second lien(2)

9.50% (Base Rate + 8.25%)

10/26/2020


20,000


19,704


20,150


3.54
%Learning Care Group (US), Inc.Education

First lien(2)

12.00%

4/27/2016


17,369


17,174


16,696Subordinated(2)

15.00% PIK*

6/30/2016


3,782


3,639


3,434​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​21,151


20,813


20,130


3.53
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Six3 Systems, Inc.Federal Services

First lien(2)

7.00% (Base Rate + 5.75%)

10/4/2019


20,000


19,805


20,025


3.51
%First American Payment Systems, L.P.Business Services

Second lien(2)

10.75% (Base Rate + 9.50%)

4/12/2019


20,000


19,609


19,900


3.49
%eResearchTechnology, Inc.Healthcare Services

First lien(3)

8.00% (Base Rate + 6.50%)

5/2/2018


19,950


19,202


19,850


3.48
%Insight Pharmaceuticals LLCHealthcare Products

Second lien(2)

13.25% (Base Rate + 11.75%)

8/25/2017


19,310


18,659


19,503


3.42
%Transplace Texas, L.P.Distribution & Logistics(10)

Second lien(2)

11.00% (Base Rate + 9.00%)

4/12/2017


20,000


19,586


19,500


3.42
%PODS, Inc.(6)Consumer ServicesPODS Funding Corp. II

First lien(3)

7.25% (Base Rate + 6.00%)

11/29/2016


14,007


13,668


13,972Storapod Holding Company, Inc.

Subordinated(2)

21.00% PIK*

11/29/2017


5,296


5,156


5,113​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​19,303


18,824


19,085


3.35
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Smile Brands Group Inc.Healthcare Services

First lien(3)

7.00% (Base Rate + 5.25%)

12/21/2017


19,859


19,598


18,767


3.29
%Ascensus, Inc.Business Services

First lien(2)

8.00% (Base Rate + 6.75%)

12/21/2018


8,500


8,330


8,330First lien(3)

8.00% (Base Rate + 6.75%)

12/21/2018


8,500


8,330


8,330​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​17,000


16,660


16,660


2.92
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Sotera Defense Solutions, Inc. (Global Defense Technology & Systems, Inc.)Federal Services

First lien(3)

7.50% (Base Rate + 6.00%)

4/21/2017


15,758


15,644


15,600


2.74
%IG Investments Holdings, LLCBusiness Services

Second lien(2)

10.25% (Base Rate + 9.00%)

10/31/2020


15,000


14,852


14,925


2.62
%OpenLink International, Inc.Software

First lien(3)

7.75% (Base Rate + 6.25%)

10/30/2017


14,850


14,600


14,850


2.61
%Landslide Holdings, Inc. (Crimson Acquisition Corp.)Software

First lien(3)

7.00% (Base Rate + 5.75%)

6/19/2018


14,625


14,353


14,671


2.57
%KPLT Holdings, Inc. (Centerplate, Inc., et al.)Consumer Services

Subordinated(2)

11.75% (10.25% + 1.50% PIK)*

4/16/2019


14,637


14,351


14,344


2.52
%Sabre Inc.Software

First lien(3)

7.25% (Base Rate + 6.00%)

12/29/2017


13,965


13,918


14,186


2.49
%Brock Holdings III, Inc.Industrial Services

Second lien(2)

10.00% (Base Rate + 8.25%)

3/16/2018


14,000


13,825


14,105


2.48
%Triple Point Technology, Inc.Software

First lien(3)

6.25% (Base Rate + 5.00%)

10/27/2017


12,968


12,549


13,021


2.28
%Lonestar Intermediate Super Holdings, LLCBusiness Services

Subordinated(2)

11.00% (Base Rate + 9.50%)

9/2/2019


12,000


11,666


12,765


2.24
%Aspen Dental Management, IncHealthcare Services

First lien(3)

7.00% (Base Rate + 5.50%)

10/6/2016


12,870


12,652


12,210


2.14
%




The accompanying notes are an integral part of these consolidated financial statements.

18

---





New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2012

(in thousands, except shares)

Portfolio Company, Location and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalVan Wagner Communications, LLCMedia

First lien(2)

8.25% (Base Rate + 7.00%)

8/3/2018

$
12,000

$
11,772

$
12,160


2.13
%Supervalu Inc.**Retail

First lien(2)

8.00% (Base Rate + 6.75%)

8/30/2018


11,940


11,597


12,146


2.13
%Vision Solutions, Inc.Software

Second lien(2)

9.50% (Base Rate + 8.00%)

7/23/2017


12,000


11,913


11,700


2.05
%Merrill Communications LLCBusiness Services

First lien(2)

10.75% (Base Rate + 7.50%)

3/10/2013


11,422


11,421


11,279


1.98
%MailSouth, Inc.Media

First lien(3)

6.75% (Base Rate + 5.00%)

12/14/2016


11,136


11,018


11,025


1.94
%Immucor, Inc.Healthcare Services

First lien(3)

5.75% (Base Rate + 4.50%)

8/19/2018


4,938


4,772


5,006Subordinated(2)(7)

11.13%

8/15/2019


5,000


4,943


5,650​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​9,938


9,715


10,656


1.87
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Virtual Radiologic CorporationHealthcare Information Technology

First lien(3)

7.75% (Base Rate + 4.50%)

12/22/2016


14,702


14,550


10,291


1.81
%Permian Tank & Manufacturing, Inc.Energy

First lien(3)

9.00% (Base Rate + 7.25%)

3/15/2017


10,072


9,852


10,072


1.77
%Vertafore, Inc.Software

Second lien(2)

9.75% (Base Rate + 8.25%)

10/29/2017


10,000


9,924


10,050


1.76
%Merge Healthcare Inc.**Healthcare Services

First lien(2)(7)

11.75%

5/1/2015


9,000


8,916


9,709


1.70
%TransFirst Holdings, Inc.Business Services

Second lien(2)

11.00% (Base Rate + 9.75%)

6/27/2018


10,000


9,700


9,700


1.70
%Consona Holdings, Inc.Software

First lien(3)

7.25% (Base Rate + 6.00%)

8/6/2018


8,479


8,398


8,511


1.49
%Confie Seguros Holding II Co.Consumer Services

Second lien(2)

10.25% (Base Rate + 9.00%)

5/8/2019


8,000


7,842


8,040


1.41
%Physio-Control International, Inc.Healthcare Products

First lien(2)

9.88%

1/15/2019


7,000


7,000


7,717


1.35
%Surgery Center Holdings, Inc.Healthcare Services

First lien(3)

6.50% (Base Rate + 5.00%)

2/6/2017


6,834


6,809


6,800


1.19
%Research Pharmaceutical Services, Inc.Healthcare Services

First lien(3)

6.75% (Base Rate + 5.25%)

2/18/2017


7,125


7,046


6,662


1.17
%Alion Science and Technology CorporationFederal Services

First lien(2)(7)

12.00% (10.00% + 2.00% PIK)*

11/1/2014


6,320


6,131


6,093


1.07
%GCA Services Group, Inc.Business Services

Second lien(2)

9.25% (Base Rate + 8.00%)

11/1/2020


5,000


4,951


4,900


0.86
%Education Management LLC**Education

First lien(3)

8.25% (Base Rate + 7.00%)

3/30/2018


5,058


4,921


4,232


0.74
%Brickman Group Holdings, Inc.Business Services

Subordinated(2)

9.13%

11/1/2018


3,650


3,342


3,842


0.68
%Ozburn-Hessey Holding Company LLCDistribution & Logistics(10)

Second lien(2)

11.50% (Base Rate + 9.50%)

10/10/2016


4,000


3,947


3,680


0.65
%YP Holdings LLC(8)YP Intermediate Holdings Corp. / YP Intermediate Holdings II LLCMedia

Second lien(2)

15.00% (12.00% + 3.00% PIK)*

5/18/2017


3,559


3,326


3,586


0.63
%Mach Gen, LLCPower Generation

Second lien(2)

7.82% PIK (Base Rate + 7.50%)*

2/22/2015


3,676


3,474


2,396


0.42
%ATI Acquisition Company (fka Ability Acquisition, Inc.)Education

First lien(2)

12.25% (Base Rate + 5.00% + 4.00% PIK)(5)*

12/30/2014


4,432


4,306


First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(5)*

6/30/2012
Past Due


1,665


1,517


649First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(5)*

6/30/2012
Past Due


103


94


103​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​6,200


5,917


752


0.13
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Airvana Network Solutions Inc.Software

First lien(2)

10.00% (Base Rate + 8.00%)

3/25/2015


648


640


650


0.11
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsUnited States







$
942,670

$
921,787

$
925,287


162.35
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt Investments







$
997,289

$
975,117

$
980,510


172.04
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these consolidated financial statements.

19

---



New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2012

(in thousands, except shares)

Portfolio Company, Location and Industry(1)

Type of
Investment

Interest Rate

Maturity
Date

Principal
Amount,
Par Value
or Shares

Cost

Fair Value

Percent of
Members'
CapitalEquityBermudaStratus Technologies Bermuda Holdings Ltd.(4)**Information Technology

Ordinary shares(2)






144,270

$
65

$
65Preferred shares(2)






32,830


15


15​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​80


80


0.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total SharesBermuda










$
80

$
80


0.01
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​EquityUnited StatesGlobal Knowledge Training LLCEducation

Ordinary shares(2)






2

$
2

$
2Preferred shares(2)






2,423


1,195


2,423​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​1,197


2,425


0.43
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total SharesUnited States










$
1,197

$
2,425


0.43
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Shares










$
1,277

$
2,505


0.44
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​WarrantsUnited StatesYP Holdings LLC(8)YP Equity Investors LLCMedia

Warrants(2)






5

$
466

$
7,230


1.27
%Alion Science and Technology CorporationFederal Services

Warrants(2)






6,000


293


192


0.03
%PODS, Inc.(6)Storapod Holding Company, Inc.Consumer Services

Warrants(2)






360,129


156


156


0.03
%Learning Care Group (US), Inc.Education

Warrants(2)






844


194


14


0.00
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total WarrantsUnited States










$
1,109

$
7,592


1.33
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Investments










$
977,503

$
990,607


173.81
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unfunded Debt InvestmentsUnited StatesAdvantage Sales & Marketing Inc.Business Services

First lien(2)(9)Undrawn



12/17/2015

$
10,500

$
(1,260
)
$
(787
)

(0.14
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Unfunded Debt Investments







$
10,500

$
(1,260
)
$
(787
)

(0.14
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Investments










$
976,243

$
989,820


173.67
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)New
Mountain Finance Holdings, L.L.C. (the "Operating 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.(2)The
Holdings Credit Facility is collateralized by the indicated investments.(3)The
SLF Credit Facility is collateralized by the indicated investments.(4)The
Operating Company holds investments in two related entities of Stratus Technologies Bermuda Holdings, Ltd. ("Stratus Holdings"). The Operating
Company directly holds ordinary and preferred equity in Stratus Holdings and has a credit investment in the joint issuers of Stratus Technologies Bermuda Ltd. ("Stratus Bermuda") and Stratus
Technologies, Inc. ("Stratus U.S."), collectively, the "Stratus Notes". Stratus U.S. is a wholly-owned subsidiary of Stratus Bermuda, which in turn is a wholly-owned subsidiary of Stratus
Holdings. Stratus Holdings is the parent guarantor of the credit investment of the Stratus Notes.(5)Investment
is on non-accrual status.(6)The
Operating Company holds investments in two related entities of PODS, Inc. The Operating Company directly holds warrants in Storapod Holding
Company, Inc. ("Storapod") and has a credit investment in Storapod through Storapod WCF II Limited ("Storapod WCF II"). Storapod WCF II is a special purpose entity used to enter into a
Shari'ah-compliant financing arrangement with Storapod. Additionally, the Operating Company has a credit investment in PODS Funding Corp. II ("PODS II"). PODS, Inc. is a wholly-owned subsidiary
of PODS Holding, Inc., which in turn is a majority-owned subsidiary of Storapod. PODS II is a special purpose entity used to enter into a Shari'ah-compliant financing arrangement with
PODS, Inc. and its subsidiary, PODS Enterprises, Inc.(7)Securities
are registered under the Securities Act.(8)The
Operating Company holds investments in two related entities of YP Holdings LLC. The Operating Company directly holds warrants to purchase a 4.96%
membership interest of YP Equity Investors, LLC (which at closing represented an indirect 1.0% equity interest in YP Holdings LLC) and holds an investment in the Term Loan B loans issued
by YP Intermediate Holdings Corp. and YP Intermediate Holdings II LLC (together "YP Intermediate"), a subsidiary of YP Holdings LLC.(9)Par
Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities. Cost amounts represent the
cash received at settlement date net the impact of paydowns and cash paid for drawn revolvers.(10)Industries
were disclosed separately in previously issued financial statements.*All
or a portion of interest contains payments-in-kind ("PIK").**Indicates
assets that the Operating Company deems to be "non-qualifying assets" under Section 55(a) of the Investment Company Act of 1940, as amended.
Qualifying assets must represent at least 70.00% of the Operating Company's total assets at the time of acquisition of any additional non-qualifying assets.




The accompanying notes are an integral part of these consolidated financial statements.

20

---





New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2012

December 31, 2012Investment Type

Percent of
Total Investments
at Fair ValueFirst lien


49.86
%Second lien


44.56
%Subordinated


4.56
%Equity and other


1.02
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




December 31, 2012Industry Type

Percent of
Total Investments
at Fair ValueSoftware


24.92
%Education


15.17
%Healthcare Services


14.52
%Business Services


14.49
%Federal Services


9.64
%Distribution & Logistics(1)


5.23
%Consumer Services


4.21
%Media


3.44
%Healthcare Products


2.75
%Industrial Services


1.42
%Retail


1.23
%Healthcare Information Technology


1.04
%Energy


1.02
%Information Technology


0.68
%Power Generation


0.24
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​


(1)Industries
were disclosed separately in previously issued financial statements.




The accompanying notes are an integral part of these consolidated financial statements.

21

---





New Mountain Finance Corporation

Statements of Assets and Liabilities

(in thousands, except shares and per share data)

December 31, 2013

December 31, 2012AssetsInvestment in New Mountain Finance Holdings, L.L.C., at fair value (cost of $633,835 and $335,730, respectively)

$
650,107

$
341,926Distribution receivable from New Mountain Finance Holdings, L.L.C.





3,405​
​
​
​
​
​
​
​Total assets

$
650,107

$
345,331​
​
​
​
​
​
​
​LiabilitiesDividends payable





3,405​
​
​
​
​
​
​
​Total liabilities





3,405​
​
​
​
​
​
​
​Net assetsPreferred stock, par value $0.01 per share, 2,000,000 shares authorized, none issued





Common stock, par value $0.01 per share 100,000,000 shares authorized, and 45,224,755 and 24,326,251 shares issued and outstanding,
respectively


452


243Paid in capital in excess of par


633,383


335,487Accumulated undistributed net realized gains


5,056


952Net unrealized appreciation


11,216


5,244​
​
​
​
​
​
​
​Total net assets

$
650,107

$
341,926​
​
​
​
​
​
​
​Total liabilities and net assets

$
650,107

$
345,331​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Number of shares outstanding


45,224,755


24,326,251Net asset value per share

$
14.38

$
14.06




The accompanying notes are an integral part of these financial statements.

22

---





New Mountain Finance Corporation

Statements of Operations

(in thousands, except shares and per share data)

Years ended December 31,

From May 19, 2011
(commencement of
operations) to
December 31, 20112013

2012Net investment income allocated from New Mountain Finance Holdings, L.L.C.Interest income

$
84,925

$
36,439

$
13,437Dividend income


3,567


455


Other income


2,384


617


232Total expenses


(40,355
)

(17,719
)

(5,324
)​
​
​
​
​
​
​
​
​
​
​Net investment income allocated from New Mountain Finance Holdings, L.L.C.


50,521


19,792


8,345Net realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.Net realized gains on investment


5,427


7,593


1,141Net change in unrealized appreciation (depreciation) of investments


6,016


4,494


(5,376
)​
​
​
​
​
​
​
​
​
​
​Net realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.


11,443


12,087


(4,235
)​
​
​
​
​
​
​
​
​
​
​Total net increase in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.


61,964


31,879


4,110​
​
​
​
​
​
​
​
​
​
​Net change in unrealized (depreciation) appreciation of investment in New Mountain Finance Holdings, L.L.C.


(44
)

(95
)

6,221​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations

$
61,920

$
31,784

$
10,331​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Basic earnings per share

$
1.76

$
2.14

$
0.97Weighted average shares of common stock outstandingbasic (See Note 12)


35,092,722


14,860,838


10,697,691Diluted earnings per share

$
1.79

$
2.18

$
0.38Weighted average shares of common stock outstandingdiluted (See Note 12)


44,021,920


34,011,738


30,919,629




The accompanying notes are an integral part of these financial statements.

23

---





New Mountain Finance Corporation

Statements of Changes in Net Assets

(in thousands)

Years ended December 31,

From May 19, 2011
(commencement of
operations) to
December 31, 20112013

2012Increase (decrease) in net assets resulting from operations:Net investment income allocated from New Mountain Finance Holdings, L.L.C.

$
50,521

$
19,792

$
8,345Net realized gains on investments allocated from New Mountain Finance Holdings, L.L.C.


5,427


7,593


1,141Net change in unrealized appreciation (depreciation) of investments allocated from New Mountain Finance Holdings, L.L.C.


6,016


4,494


(5,376
)Net change in unrealized (depreciation) appreciation of investment in New Mountain Finance Holdings, L.L.C.


(44
)

(95
)

6,221​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations


61,920


31,784


10,331​
​
​
​
​
​
​
​
​
​
​Capital transactionsNet proceeds from shares sold


100,040


133,428


129,865Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.


(281
)

(323
)

(3,998
)Value of shares issued for exchanged units


193,262


56,314


18,489Dividends declared


(51,844
)

(26,719
)

(9,200
)Reinvestment of dividends


5,084


1,955


​
​
​
​
​
​
​
​
​
​
​Total net increase in net assets resulting from capital transactions


246,261


164,655


135,156​
​
​
​
​
​
​
​
​
​
​Net increase in net assets


308,181


196,439


145,487Net assets at the beginning of the period


341,926


145,487


​
​
​
​
​
​
​
​
​
​
​Net assets at the end of the period


650,107

$
341,926

$
145,487​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these financial statements.

24

---





New Mountain Finance Corporation

Statements of Cash Flows

(in thousands)

Years ended December 31,

From May 19, 2011
(commencement of
operations) to
December 31, 20112013

2012Cash flows from operating activities:Net increase in net assets resulting from operations

$
61,920

$
31,784

$
10,331Adjustments to reconcile net (increase) decrease in net assets resulting from operations to net cash (used in) provided by operating
activities:Net investment income allocated from New Mountain Finance Holdings, L.L.C.


(50,521
)

(19,792
)

(8,345
)Net realized and unrealized (gains) losses allocated from New Mountain Finance Holdings, L.L.C.


(11,443
)

(12,087
)

4,235Net change in unrealized depreciation (appreciation) in New Mountain Finance Holdings,
L.L.C.


44


95


(6,221
)(Increase) decrease in operating assets:Purchase of investment


(100,040
)

(133,428
)

(129,865
)Distributions from New Mountain Finance Holdings, L.L.C.


50,165


23,314


9,200​
​
​
​
​
​
​
​
​
​
​Net cash flows used in by operating activities


(49,875
)

(110,114
)

(120,665
)​
​
​
​
​
​
​
​
​
​
​Cash flows from financing activities:Net proceeds from shares sold


100,040


133,428


129,865Dividends declared


(50,165
)

(23,314
)

(9,200
)​
​
​
​
​
​
​
​
​
​
​Net cash flows provided by financing activities


49,875


110,114


120,665​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in cash and cash equivalents








Cash and cash equivalents at the beginning of the period








​
​
​
​
​
​
​
​
​
​
​Cash and cash equivalents at the end of the period

$


$


$
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Non-cash operating activities:Distribution receivable from New Mountain Finance Holdings, L.L.C.

$


$
3,405

$
Non-cash financing activities:Dividends declared and payable

$


$
(3,405
)
$
New Mountain Guardian Partners, L.P. exchange of New Mountain Finance Holdings, L.L.C. units for shares








18,489New Mountain Finance AIV Holdings Corporation exchange of New Mountain Finance Holdings, L.L.C. units for shares


193,262


56,314


Value of shares issued in connection with dividend reinvestment plan


5,084


1,955


Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.


(281
)

(323
)

(3,998
)




The accompanying notes are an integral part of these financial statements.

25

---





New Mountain Finance AIV Holdings Corporation

Statements of Assets and Liabilities

(in thousands, except shares)

December 31, 2013

December 31, 2012AssetsInvestment in New Mountain Finance Holdings, L.L.C., at fair value (cost of $61,993 and $244,015, respectively)

$
38,409

$
228,013Distributions receivable from New Mountain Finance Holdings, L.L.C.





7,786​
​
​
​
​
​
​
​Total assets

$
38,409

$
235,799​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​LiabilitiesDividends payable





7,786​
​
​
​
​
​
​
​Total liabilities





7,786​
​
​
​
​
​
​
​Net assetsCommon stock, par value $0.01 per share 100 shares issued and outstanding



(1)


(1)Paid in capital in excess of par


61,993


244,015Distributions in excess of net realized gains


(26,812
)

(6,676
)Net unrealized appreciation (depreciation)


3,228


(9,326
)​
​
​
​
​
​
​
​Total net assets


38,409


228,013​
​
​
​
​
​
​
​Total liabilities and net assets

$
38,409

$
235,799​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)As
of December 31, 2013 and December 31, 2012, the par value of the total common stock was $1.




The accompanying notes are an integral part of these financial statements.

26

---





New Mountain Finance AIV Holdings Corporation

Statements of Operations

(in thousands)

From May 19, 2011
(commencement of
operations) to
December 31,
2011Years ended December 31,2013

2012Net investment income allocated from New Mountain Finance Holdings, L.L.C.Interest income

$
22,102

$
47,207

$
25,399Dividend income


1,482


357


Other income


452


712


439Total expenses


(10,881
)

(22,850
)

(10,063
)​
​
​
​
​
​
​
​
​
​
​Net investment income allocated from New Mountain Finance Holdings, L.L.C.


13,155


25,426


15,775Net realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.Net realized gains on investments


1,826


11,259


2,158Net change in unrealized appreciation (depreciation) of investments


1,978


5,433


(10,163
)​
​
​
​
​
​
​
​
​
​
​Net realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.


3,804


16,692


(8,005
)​
​
​
​
​
​
​
​
​
​
​Total net increase in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.


16,959


42,118


7,770​
​
​
​
​
​
​
​
​
​
​Net realized (losses) gains on investment in New Mountain Finance Holdings, L.L.C.


(14,925
)

381


Net change in unrealized appreciation (depreciation) on investment in New Mountain Finance Holdings, L.L.C.


10,576


1,616


(6,212
)​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations

$
12,610

$
44,115

$
1,558​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these financial statements.

27

---





New Mountain Finance AIV Holdings Corporation

Statements of Changes in Net Assets

(in thousands)

From May 19, 2011
(commencement of
operations) to
December 31,
2011Years ended December 31,2013

2012Increase (decrease) in net assets resulting from operations:Net investment income allocated from New Mountain Finance Holdings, L.L.C.

$
13,155

$
25,426

$
15,775Net realized gains on investments allocated from New Mountain Finance Holdings, L.L.C.


1,826


11,259


2,158Net change in unrealized appreciation (depreciation) of investments allocated from New Mountain Finance Holdings, L.L.C.


1,978


5,433


(10,163
)Net realized (losses) gains on investment in New Mountain Finance Holdings, L.L.C.


(14,925
)

381


Net change in unrealized appreciation (depreciation) on investment in New Mountain Finance Holdings, L.L.C.


10,576


1,616


(6,212
)​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations


12,610


44,115


1,558​
​
​
​
​
​
​
​
​
​
​Capital transactionsDistribution to New Mountain Guardian AIV, L.P.


(188,868
)

(58,216
)

Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.


(50
)

(241
)

(7,559
)Contributions from exchanged shares








298,407Dividends declared


(13,296
)

(32,660
)

(17,391
)​
​
​
​
​
​
​
​
​
​
​Total net (decrease) increase in net assets resulting from capital transactions


(202,214
)

(91,117
)

273,457​
​
​
​
​
​
​
​
​
​
​Net (decrease) increase in net assets


(189,604
)

(47,002
)

275,015Net assets at the beginning of the period


228,013


275,015


​
​
​
​
​
​
​
​
​
​
​Net assets at the end of the period

$
38,409

$
228,013

$
275,015​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​




The accompanying notes are an integral part of these financial statements.

28

---





New Mountain Finance AIV Holdings Corporation

Statements of Cash Flows

(in thousands)

Years ended December 31,

From May 19, 2011
(commencement of
operations) to
December 31, 20112013

2012Cash flows from operating activities:Net increase in net assets resulting from operations

$
12,610

$
44,115

$
1,558Adjustments to reconcile net (increase) decrease in net assets resulting from operations to net cash (used in) provided by operating
activities:Net investment income allocated from New Mountain Finance Holdings, L.L.C.


(13,155
)

(25,426
)

(15,775
)Net realized and unrealized (gains) losses allocated from New Mountain Finance Holdings, L.L.C.


(3,804
)

(16,692
)

8,005Net realized losses (gains) on investment in New Mountain Finance Holdings, L.L.C.


14,925


(381
)

Net change in unrealized (appreciation) depreciation in New Mountain Finance Holdings, L.L.C.


(10,576
)

(1,616
)

6,212(Increase) decrease in operating assets:Distributions from New Mountain Finance Holdings, L.L.C.


21,082


24,874


17,391​
​
​
​
​
​
​
​
​
​
​Net cash flows provided by operating activities


21,082


24,874


17,391​
​
​
​
​
​
​
​
​
​
​Cash flows from financing activities:Net proceeds from shares sold


188,868


58,216


Distribution to New Mountain Guardian AIV, L.P.


(188,868
)

(58,216
)

Dividends declared


(21,082
)

(24,874
)

(17,391
)​
​
​
​
​
​
​
​
​
​
​Net cash flows used in financing activities


(21,082
)

(24,874
)

(17,391
)​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in cash and cash equivalents








Cash and cash equivalents at the beginning of the period








​
​
​
​
​
​
​
​
​
​
​Cash and cash equivalents at the end of the period

$


$


$
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Non-cash operating activities:Distribution receivable from New Mountain Finance Holdings, L.L.C.

$


$
7,786

$
Non-cash financing activities:Dividends declared and payable

$


$
(7,786
)
$
New Mountain Guardian AIV, L.P. contribution of New Mountain Finance Holdings, L.L.C units for shares of New Mountain Finance AIV Holdings,
L.L.C.








298,407Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.


(50
)

(241
)

(7,559
)




The accompanying notes are an integral part of these financial statements.

29

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation

December 31, 2013

(in thousands, except units/shares and per unit/share data)

The information in these combined notes to the financial statements relates to each of the three separate registrants: New Mountain
Finance Holdings, L.L.C., New Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation (collectively, the "Companies"). Information that relates to an individual registrant will
be specifically referenced by the respective company. None of the Companies makes any representation as to the information related solely to the other registrants other than
itself.

Note 1. Formation and Business Purpose

New Mountain Finance Holdings, L.L.C. (the "Operating Company" or the "Master Fund") is a Delaware limited liability company. The Operating Company is externally managed and has elected
to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). As such, the Operating Company is obligated to comply with certain
regulatory requirements. The Operating Company intends to be treated as a partnership for federal income tax purposes for so long as it has at least two members.

The
Operating Company is externally managed by New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser"). New Mountain Finance Administration, L.L.C. (the "Administrator")
provides the administrative services necessary for operations. The Investment Adviser and Administrator are wholly-owned subsidiaries of New Mountain Capital (defined as New Mountain Capital Group,
L.L.C. and its affiliates). New Mountain Capital is a firm with a track record of investing in the middle market and with assets under management (which includes amounts committed, not all of which
have been drawn down and invested to date) totaling more than $12.0 billion as of December 31, 2013, which includes total assets held by the Operating Company. New Mountain Capital
focuses on investing in defensive growth companies across its private equity, public equity, and credit investment vehicles. The Operating Company, formerly known as New Mountain Guardian (Leveraged),
L.L.C., was originally formed as a subsidiary of New Mountain Guardian AIV, L.P. ("Guardian AIV") by New Mountain Capital in October 2008. Guardian AIV was formed through an allocation of
approximately $300.0 million of the $5.1 billion of commitments supporting New Mountain Partners III, L.P., a private equity fund managed by New Mountain Capital. In February
2009, New Mountain Capital formed a co-investment vehicle, New Mountain Guardian Partners, L.P., comprising $20.4 million of commitments. New Mountain Guardian (Leveraged), L.L.C. and
New Mountain Guardian Partners, L.P., together with their respective direct and indirect wholly-owned subsidiaries, are defined as the "Predecessor Entities".

New
Mountain Finance Corporation ("NMFC") is a Delaware corporation that was originally incorporated on June 29, 2010. NMFC is a closed-end, non-diversified management investment
company that has elected to be treated as a BDC under the 1940 Act. As such, NMFC is obligated to comply with certain regulatory requirements. NMFC has elected to be treated, and intends to comply
with the requirements to continue to qualify annually, as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code").

New
Mountain Finance AIV Holdings Corporation ("AIV Holdings") is a Delaware corporation that was originally incorporated on March 11, 2011. Guardian AIV, a Delaware limited
partnership, is AIV Holdings' sole stockholder. AIV Holdings is a closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. As such, AIV
Holdings is

30

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 1. Formation and Business Purpose (Continued)

obligated
to comply with certain regulatory requirements. AIV Holdings has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a RIC under the Code.

On
May 19, 2011, NMFC priced its initial public offering (the "IPO") of 7,272,727 shares of common stock at a public offering price of $13.75 per share. Concurrently with the
closing of the IPO and at the public offering price of $13.75 per share, NMFC sold an additional 2,172,000 shares of its common stock to certain executives and employees of, and other individuals
affiliated with, New Mountain Capital in a concurrent private placement (the "Concurrent Private Placement"). Additionally, 1,252,964 shares were issued to the partners of New Mountain Guardian
Partners, L.P. at that time for their ownership interest in the Predecessor Entities. In connection with NMFC's IPO and through a series of transactions, the Operating Company owns all of the
operations of the Predecessor Entities, including all of the assets and liabilities related to such operations.

NMFC
and AIV Holdings are holding companies with no direct operations of their own, and their sole asset is their ownership in the Operating Company. NMFC and AIV Holdings each entered
into a joinder agreement with respect to the Limited Liability Company Agreement, as amended and restated, of the Operating Company, pursuant to which NMFC and AIV Holdings were admitted as members of
the Operating Company. NMFC acquired from the Operating Company, with the gross proceeds of the IPO and the Concurrent Private Placement, common membership units ("units") of the Operating Company
(the number of units are equal to the number of shares of NMFC's common stock sold in the IPO and the Concurrent Private Placement). Additionally, NMFC received units of the Operating Company equal to
the number of shares of common stock of NMFC issued to the partners of New Mountain Guardian Partners, L.P. Guardian AIV was the parent of the Operating Company prior to the IPO and, as a
result of the transactions completed in connection with the IPO, obtained units in the Operating Company. Guardian AIV contributed its units in the Operating Company to its newly formed subsidiary,
AIV Holdings, in exchange for common stock of AIV Holdings. AIV Holdings has the right to exchange all or any portion of its units in the Operating Company for shares of NMFC's common stock on a
one-for-one basis at any time.

Since
NMFC's IPO, and through December 31, 2013, NMFC raised approximately $233,468 in net proceeds from additional offerings of common stock and issued shares of its common stock
valued at approximately $249,576 on behalf of AIV Holdings for exchanged units. NMFC acquired from the Operating Company units of the Operating Company equal to the number of shares of NMFC's
common stock sold in the additional offerings. As of December 31, 2013, NMFC and AIV Holdings owned approximately 94.4% and 5.6%, respectively, of the units of the Operating Company.

The
current structure was designed to generally prevent NMFC from being allocated taxable income with respect to unrecognized gains that existed at the time of the IPO in the Predecessor
Entities' assets, and rather such amounts would be allocated generally to AIV Holdings. The result is that any distributions made to NMFC's stockholders that are attributable to such gains generally
will not be treated as taxable dividends but rather as return of capital.

31

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 1. Formation and Business Purpose (Continued)

The
diagram below depicts the Companies' organizational structure as of December 31, 2013.

GRAPHIC

---

32

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 1. Formation and Business Purpose (Continued)

The
Operating Company's investment objective is to generate current income and capital appreciation through the sourcing and origination of debt securities at all levels of the capital
structure, including first and second lien debt, notes, bonds and mezzanine securities. In some cases, the Operating Company's investments may also include equity interests. The primary focus is in
the debt of defensive growth companies, which are defined as generally exhibiting the following characteristics: (i) sustainable secular growth drivers, (ii) high barriers to competitive
entry, (iii) high free cash flow after capital expenditure and working capital needs, (iv) high returns on assets and (v) niche market dominance.

Note 2. Summary of Significant Accounting Policies

Basis of accountingThe Companies' financial statements have been prepared in conformity with accounting principles generally accepted in the
United
States of America ("GAAP"). The Operating Company consolidates its wholly-owned subsidiary, NMF SLF. NMFC and AIV Holdings do not consolidate the Operating Company. NMFC and AIV Holdings apply
investment company master-feeder financial statement presentation, as described in Accounting Standards Codification 946,Financial ServicesInvestment
Companies, ("ASC 946") to their interest in the Operating Company. NMFC and AIV Holdings observe that it is industry practice to follow the presentation prescribed for a master
fund-feeder fund structure in ASC 946 in instances in which a
master fund is owned by more than one feeder fund and that such presentation provides stockholders of NMFC and AIV Holdings with a clearer depiction of their investment in the master fund.

The
Companies' financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of
operations and financial condition for all periods presented. All intercompany transactions have been eliminated. Revenues are recognized when earned and expenses when incurred. The financial results
of the Operating Company's portfolio investments are not consolidated in the financial statements. Prior to the IPO, an affiliate of the Predecessor Entities paid a majority of the management and
incentive fees. Historical operating expenses do not reflect the allocation of certain professional fees, administrative and other expenses that have been incurred following the completion of the IPO.
Accordingly, the Operating Company's historical operating expenses are not comparable to its operating expenses after the completion of the IPO.

The
Companies' financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-K and Article 6 of Regulation S-X.
In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements have been included.

InvestmentsThe Operating Company applies fair value accounting in accordance with GAAP. Fair value is the amount 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. Investments are reflected on the Operating Company's Consolidated Statements of
Assets, Liabilities and Members' Capital at fair value, with changes in unrealized gains and losses resulting from changes in fair value reflected in the Operating Company's Consolidated Statements of
Operations as "Net change in unrealized

33

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)

appreciation
(depreciation) of investments" and realizations on portfolio investments reflected in the Operating Company's Consolidated Statements of Operations as "Net realized gains (losses) on
investments".

The
Operating Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, the Operating Company's board of directors is ultimately
and solely responsible for determining the fair value of the portfolio investments on a quarterly basis in good faith, including investments that are not publicly traded, those whose market prices are
not readily available and any other situation where its portfolio investments require a fair value determination. Security transactions
are accounted for on a trade date basis. The Operating Company's quarterly valuation procedures are set forth in more detail below:



34

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)



For
investments in revolving credit facilities and delayed draw commitments, the cost basis of the funded investments purchased is offset by any netbacks received for any unfunded
portion on the total balance committed. The fair value is also adjusted for the price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely
funded may result in a negative fair value until it is called and funded.

The
values assigned to investments are based upon available information and do not necessarily represent amounts which might ultimately be realized, since such amounts depend on future
circumstances and cannot be reasonably determined until the individual positions are liquidated. 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 Operating Company's investments may fluctuate from period to period and the fluctuations could be material.

NMFC
and AIV Holdings are holding companies with no direct operations of their own, and their sole asset is their ownership in the Operating Company. NMFC's and AIV Holdings' investments
in the Operating Company are carried at fair value and represent the respective pro-rata interest in the net assets of the Operating Company as of the applicable reporting date. NMFC and AIV Holdings
value their ownership interest on a quarterly basis, or more frequently if required under the 1940 Act.

See
Note 3,Investments, for further discussion relating to investments.

Cash and cash equivalentsCash and cash equivalents include cash and short-term, highly liquid investments. The Companies define cash equivalents
as
securities that are readily convertible into known amounts of cash and so near maturity that there is insignificant risk of changes in value. Generally, these securities have original maturities of
three months or less.

35

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)

Revenue recognition

The Operating Company's revenue recognition policies are as follows:



NMFC's
and AIV Holdings' revenue recognition policies are as follows:



36

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)



Interest and other credit facility expensesInterest and other credit facility fees are recorded on an accrual basis by the Operating Company. See
Note 7,Borrowing Facilities, for details.

Deferred credit facility costsThe deferred credit facility costs of the Operating Company consist of capitalized expenses related to the
origination
and amending of the Operating Company's existing credit facilities. The Operating Company amortizes these costs into expense using the straight-line method over the stated life of the related credit
facility. See Note 7,Borrowing Facilities, for details.

Income taxesThe Operating Company is treated as a partnership for federal income tax purposes and as such is generally not subject to federal or
state and local income taxes except with respect to state source income received from underlying investments. The partners are individually responsible for reporting income or loss based on their
respective share of the revenues and expenses. The Operating Company files United States ("U.S.") federal, state, and local income tax returns.

NMFC
and AIV Holdings have elected to be treated, and intend to comply with the requirements to qualify annually, as RICs under subchapter M of the Code. As RICs, NMFC and AIV
Holdings are not subject to federal income tax on the portion of taxable income and gains timely distributed to stockholders; therefore, no provision for income taxes has been recorded.

To
continue to qualify as RICs, NMFC and AIV Holdings are required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of their respective
investment

37

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)

company
taxable income, as defined by the Code. Since federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and
realized gains recognized for financial reporting purposes.

Differences
between taxable income and the results of operations for financial reporting purposes may be permanent or temporary in nature. Permanent differences are reclassified among
capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For
federal income tax purposes, distributions paid to stockholders of NMFC and AIV Holdings are reported as ordinary income, return of capital, long term capital gains or a combination
thereof.

NMFC
and AIV Holdings will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless NMFC and AIV Holdings distribute, in a timely manner as required
by the Code, an amount at least equal to the sum of (1) 98.0% of their respective net ordinary income earned for the calendar year and (2) 98.2% of their respective capital gain net
income for the one-year period ending October 31 in the calendar year.

The
Companies have adopted the Income Taxes topic of the Codification ("ASC 740"). ASC 740 provides guidance for income taxes, including how uncertain income tax positions should be
recognized, measured, and disclosed in the financial statements. Based on their analyses, the Companies have determined that there were no material uncertain income tax positions through
December 31, 2013. The 2011, 2012 and 2013 tax years remain subject to examination by the U.S. federal, state, and local tax authorities.

DividendsDistributions to common unit holders of the Operating Company and common stockholders of NMFC and AIV Holdings are recorded on the record
date as set by the respective board of directors. In order for NMFC and AIV Holdings to pay a dividend or other distribution to holders of their common stock, it must be accompanied by a prior
distribution by the Operating Company to all of its unit holders. The Operating Company intends to make distributions to its unit holders that will be sufficient to enable NMFC and AIV Holdings to pay
quarterly distributions to their stockholders and to maintain their status as RICs. NMFC and AIV Holdings intend to distribute approximately all of their portion of the Operating Company's adjusted
net investment income (see Note 5,Agreements) on a quarterly basis and substantially all of their portion of the Operating Company's taxable
income on an annual basis, except that NMFC may retain certain net capital gains for reinvestment.

Under
certain circumstances, the distributions that the Operating Company makes to its members may not be sufficient for AIV Holdings to satisfy the annual distribution requirement
necessary for AIV Holdings to continue to qualify as a RIC. In that case, it is expected that Guardian AIV would consent to be treated as if it received distributions from AIV Holdings sufficient to
satisfy the annual distribution requirement. Guardian AIV would be required to include the consent dividend in its taxable income as a dividend from AIV Holdings, which would result in phantom
(i.e., non-cash) taxable income to Guardian AIV. AIV Holdings intends to make quarterly distributions to Guardian AIV, its sole stockholder, out of assets legally available for distribution
each quarter.

38

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)

The
Operating Company and NMFC are required to take certain actions in order to maintain, at all times, a one-to-one ratio between the number of units held by NMFC and the number of
shares of NMFC's common stock outstanding. NMFC has adopted a dividend reinvestment plan that provides on
behalf of its stockholders for reinvestment of any distributions declared, unless a stockholder elects to receive cash. Cash distributions reinvested in additional shares of NMFC's common stock will
be automatically reinvested by NMFC into additional units of the Operating Company. In addition, AIV Holdings does not intend to reinvest any distributions received from the Operating Company in
additional units of the Operating Company.

NMFC
applies the following in implementing the dividend reinvestment plan. If the price at which newly issued shares are to be credited to stockholders' accounts is greater than 110.0%
of the last determined net asset value of the shares, NMFC will use only newly issued shares to implement its dividend reinvestment plan. Under such circumstances, the number of shares to be issued to
a stockholder is determined by dividing the total dollar amount of the distribution payable to such stockholder by the market price per share of NMFC's common stock on the New York Stock Exchange
("NYSE") on the distribution payment date. Market price per share on that date will be the closing price for such shares on the NYSE or, if no sale is reported for such day, the average of their
electronically reported bid and asked prices. If NMFC uses newly issued shares to implement the plan, NMFC will receive, on a one-for-one basis, additional units of the Operating Company in exchange
for cash distributions that are reinvested in shares of NMFC's common stock under the dividend reinvestment plan.

If
the price at which newly issued shares are to be credited to stockholders' accounts is less than 110.0% of the last determined net asset value of the shares, NMFC will either issue
new shares or instruct the plan administrator to purchase shares in the open market to satisfy the additional shares required. Shares purchased in open market transactions by the plan administrator
will be allocated to a stockholder based on the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased in the open market. The number of
shares of NMFC's common stock to be outstanding after giving effect to payment of the distribution cannot be established until the value per share at which additional shares will be issued has been
determined and elections of NMFC's stockholders have been tabulated.

Foreign securitiesThe accounting records of the Operating Company are maintained in U.S. dollars. Investment securities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of such currencies on the date of valuation. Purchases and sales of investment securities and income and expense items
denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies on the respective dates of the transactions. The Operating Company does 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 are included with "Net change in unrealized appreciation (depreciation) of investments" and "Net realized gains (losses) on investments" in the Operating Company's Consolidated Statements
of Operations.

39

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 2. Summary of Significant Accounting Policies (Continued)

Investments denominated in foreign currencies may be negatively affected by movements in the rate of exchange between the U.S. dollar and such foreign currencies. This movement is beyond
the control of the Operating Company and cannot be predicted.

Use of estimatesThe preparation of the Companies' financial statements in conformity with GAAP requires management to make estimates and
assumptions
that affect the reported amounts of assets and liabilities at the date of the Companies' financial statements and the reported amounts of revenues and expenses during the reporting periods. Changes in
the economic environment, financial markets, and other metrics used in determining these estimates could cause actual results to differ from the estimates used, and the differences could be material.

Dividend
income recorded related to distributions received from flow-through investments is an accounting estimate based on the most recent estimate of the tax treatment of the
distribution. During the quarter ended September 30, 2013, the Operating Company changed an accounting estimate related to the classification of dividend income for a distribution recorded in
the prior quarter from one of the Operating Company's warrant investments. Based on tax projections received during the quarter ended September 30, 2013, the Operating Company reduced the
warrant cost basis by $466 and corresponding dividend income previously recorded by $1,799, and recorded a realized gain of $1,333 to agree to the tax treatment on the investment. This resulted in a
reclass of $360 from incentive fee to capital gains incentive fee. Based on updated tax projections received during the quarter ended December 31, 2013, the Operating Company increased dividend
income previously recorded by $224 and reduced the realized gain previously recorded by $224 to agree to the tax treatment on the investment. This resulted in a reclass of $45 from capital gains
incentive fee to incentive fee.

Note 3. Investments

At December 31, 2013 the Operating Company's investments consisted of the following:



Cost

Fair ValueFirst lien

$
550,534

$
553,549Second lien


460,078


468,945Subordinated


25,152


26,863Equity and other


58,316


66,294​
​
​
​
​
​
​
​Total investments

$
1,094,080

$
1,115,651​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


40

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 3. Investments (Continued)



Cost

Fair ValueSoftware

$
243,158

$
249,174Education


225,214


235,787Business Services


140,797


145,465Distribution & Logistics


120,156


120,247Federal Services


84,965


83,888Healthcare Services


78,295


80,331Energy


69,757


69,255Media


42,808


45,932Healthcare Products


40,285


41,772Consumer Services


14,918


15,628Industrial Services


13,858


14,263Healthcare Information Technology


13,454


7,324Information Technology


6,415


6,585​
​
​
​
​
​
​
​Total investments

$
1,094,080

$
1,115,651​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


At
December 31, 2012 the Operating Company's investments consisted of the following:



Cost

Fair ValueFirst lien

$
496,931

$
493,502Second lien


433,829


441,073Subordinated


43,097


45,148Equity and other


2,386


10,097​
​
​
​
​
​
​
​Total investments

$
976,243

$
989,820​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


41

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 3. Investments (Continued)



Cost

Fair ValueSoftware

$
241,742

$
246,696Education


155,047


150,151Healthcare Services


139,370


143,724Business Services


140,426


143,420Federal Services


95,150


95,428Distribution & Logistics(1)


51,320


51,834Consumer Services


41,173


41,625Media


26,582


34,001Healthcare Products


25,659


27,220Industrial Services


13,825


14,105Retail


11,597


12,146Healthcare Information Technology


14,550


10,291Energy


9,852


10,072Information Technology


6,476


6,711Power Generation


3,474


2,396​
​
​
​
​
​
​
​Total investments

$
976,243

$
989,820​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)Industries
were disclosed separately in previously issued financial statements.


During
the quarter ended December 31, 2013, the Operating Company sold its first lien position in ATI Acquisition Company, resulting in a realized loss of $4,306. Prior to the
sale, this investment had a cost basis of $4,306, a zero fair value and total unearned interest income of $611 for the year ended. As of December 31, 2013, the Operating Company's two super
priority first lien positions in ATI Acquisition Company remained on non-accrual status due to the inability of the portfolio company to service its interest payment for the year then ended and
uncertainty about its ability to pay such amounts in the future. During the third quarter of 2013, the Operating Company received preferred shares and warrants in Ancora Acquisition LLC, in
relation to the two super priority first lien positions in ATI Acquisition Company. As of December 31, 2013, the Operating Company's investment in ATI Acquisition Company and Ancora Acquisition
LLC had an aggregate cost basis of $1,611, an aggregate fair value of $419 and total unearned interest income of $316 for the year then ended. As of December 31, 2012, the Operating Company's
original first lien position in ATI Acquisition Company was put on non-accrual status, with a cost basis of $4,306, a fair value of zero and total unearned interest income of $653 for the year then
ended. The Operating Company's two super priority first lien debt investments in ATI Acquisition Company had a combined cost basis of $1,611 and a combined fair value of $752 as of December 31,
2012. During the third quarter of 2012, the Operating Company placed the super priority first lien positions on non-accrual status as well, resulting in total unearned interest income of $310 for the
year ended December 31, 2012. As of December 31, 2012, the Operating Company's total investment in ATI Acquisition Company had an aggregate cost basis of

42

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 3. Investments (Continued)

$5,917
and an aggregate fair value of $752. As of December 31, 2013 and December 31, 2012, unrealized gains (losses) include a fee that the Operating Company would receive upon maturity
of the two super priority first lien debt investments.

As
of December 31, 2013, the Operating Company had unfunded commitments on revolving credit facilities and bridge facilities of $15,500 and $0, respectively. The Operating Company
did not have any unfunded commitments in the form of a delayed draw or other future funding commitments as of December 31, 2013. The unfunded commitments on revolving credit facilities are
disclosed on the Operating Company's Consolidated Schedule of Investments as of December 31, 2013.

As
of December 31, 2012, the Operating Company had unfunded commitments on revolving credit facilities and bridge facilities of $10,500 and $0, respectively. The Operating Company
did not have any unfunded commitments in the form of a delayed draw or other future funding commitments as of December 31, 2012. The unfunded commitments on revolving credit facilities are
disclosed on the Operating Company's Consolidated Schedule of Investments as of December 31, 2012.

Investment risk factorsFirst and second lien debt that the Operating Company invests in is entirely, or almost entirely, rated below investment
grade
or may be unrated. These loans are considered speculative because of the credit risk of the issuers. Such issuers are considered more likely than investment grade issuers to default on their payments
of interest and principal and such defaults could reduce the net asset value and income distributions of the Operating Company. First and second lien debt may also lose significant market value before
a default occurs. Furthermore, an active trading market may not exist for these first and second lien loans. This illiquidity may make it more difficult to value the debt.

Subordinated
debt is generally subject to similar risks as those associated with first and second lien debt, except that such debt is subordinated in payment and /or lower in lien
priority. Subordinated debt is subject to the additional risk that the cash flow of the borrower and the property securing the debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured and unsecured obligations of the borrower.

Note 4. Fair Value

Fair value is the amount 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. Accounting
Standards Codification 820,Fair Value Measurements and Disclosures("ASC 820"), establishes a fair value hierarchy that prioritizes and ranks the
inputs to valuation techniques used in measuring investments at fair value. The hierarchy classifies the inputs used in measuring fair value into three levels as follows:



43

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)



The
inputs used to measure fair value may fall into different levels. In all instances when the inputs fall within different levels of the hierarchy, the level within which the fair
value measurement is categorized is based on the lowest level of input that is significant to the fair value measurement in its entirety. As such, a Level III fair value measurement may include
inputs that are both observable (Levels I and II) and unobservable (Level III). Gains and losses for such assets categorized within the Level III table below may include
changes in fair value that are attributable to both observable inputs (Levels II and III) and unobservable inputs (Level III).

The
inputs into the determination of fair value require significant judgment or estimation by management and consideration of factors specific to each investment. A review of the fair
value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in the transfer of certain investments within the fair value hierarchy
from period to period. Reclassifications impacting the fair value hierarchy are reported as transfers in/out of the respective leveling categories as of the beginning of the quarter in which the
reclassifications occur.

44

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)

The
following table summarizes the levels in the fair value hierarchy that the Operating Company's portfolio investments fall into as of December 31, 2013:

Total

Level I

Level II

Level IIIFirst lien

$
553,549

$


$
525,138

$
28,411Second lien


468,945





413,407


55,538Subordinated


26,863





21,692


5,171Equity and other


66,294


1,694





64,600​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investments

$
1,115,651

$
1,694

$
960,237

$
153,720​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


The
following table summarizes the levels in the fair value hierarchy that the Operating Company's portfolio investments fall into as of December 31, 2012:

Total

Level I

Level II

Level IIIFirst lien

$
493,502

$


$
450,617

$
42,885Second lien


441,073





397,818


43,255Subordinated


45,148





22,257


22,891Equity and other


10,097








10,097​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investments

$
989,820

$


$
870,692

$
119,128​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


45

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)

The
following table summarizes the changes in fair value of Level III portfolio investments for the year ended December 31, 2013, as well as the portion of appreciation
(depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Operating Company at December 31, 2013:

Total

First Lien

Second Lien

Subordinated

Equity and
other(3)Fair value, December 31, 2012

$
119,128

$
42,885

$
43,255

$
22,891

$
10,097Total gains or losses included in earnings:Net realized (losses) gains on investments


(1,623
)

(3,986
)

380


380


1,603Net change in unrealized appreciation (depreciation)


5,251


4,319


843


506


(417
)Purchases, including capitalized PIK and revolver fundings


120,147


28,874


31,060


2,620


57,593Proceeds from sales and paydowns of investments


(85,910
)

(41,417
)

(20,000
)

(21,226
)

(3,267
)Transfers into Level III


6,574


6,574
(1)







Transfers out of Level III


(9,847
)

(8,838
)(1)







(1,009
)(2)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fair value, December 31, 2013

$
153,720

$
28,411

$
55,538

$
5,171

$
64,600​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unrealized appreciation (depreciation) for the period relating to those Level III assets that were still held by the Operating Company at the end of
the period:

$
821

$
(333
)
$
722

$
409

$
23​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)As
of December 31, 2013, the portfolio investments were transferred into Level III from Level II and out of Level III into
Level II at fair value as of the beginning of the quarter in which the reclassifications occurred.(2)As
of December 31, 2013, the portfolio investments were transferred out of Level III into Level I at fair value as of the beginning of
the quarter in which the reclassifications occurred.(3)During
the year ended December 31, 2013, the Operating Company received dividends of $5,049 from its equity and other investments, which were
recorded as dividend income. Estimates related to the tax characterization of these distributions were provided as of December 31, 2013.


46

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)

The
following table summarizes the changes in fair value of Level III portfolio investments for the year ended December 31, 2012, as well as the portion of appreciation
(depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Operating Company at December 31, 2012:

Total

First Lien

Second Lien

Subordinated

Equity and
otherFair value, December 31, 2011

$
90,967

$
33,141

$
48,405

$
6,571

$
2,850Total gains or losses included in earnings:Net realized gains (losses) on investments


4,950


4,927


23





Net change in unrealized (depreciation) appreciation


(185
)

(7,918
)

(173
)

(75
)

7,981Purchases, including capitalized PIK and revolver fundings


75,647


49,205


10,020


16,395


27Proceeds from sales and paydowns of investments


(36,555
)

(30,328
)

(5,000
)




(1,227
)Transfers into Level III(1)


20,347


19,881








466
(2)Transfers out of Level III(1)


(36,043
)

(26,023
)

(10,020
)




​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fair value, December 31, 2012

$
119,128

$
42,885

$
43,255

$
22,891

$
10,097​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unrealized appreciation (depreciation) for the period relating to those Level III assets that were still held by the Operating Company at the end of
the period:

$
3,689

$
(4,216
)
$
(1
)
$
(75
)
$
7,981​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)As
of December 31, 2012, the portfolio investments were transferred into Level III from Level II and out of Level III into
Level II at fair value as of the beginning of the quarter in which the reclassifications occurred.(2)This
Level III transfer relates to the Operating Company's investment in warrants of YP Equity Investors LLC, which was valued with YP
Holdings LLC's second lien debt as of June 30, 2012.


Except
as noted in the tables above, there were no other transfers in or out of Level I, II, or III during the years ended December 31, 2013 and December 31, 2012.
Transfers into Level III occurred as quotations obtained through pricing services were not deemed representative of fair value as of the balance sheet date and such assets were internally
valued. As quotations obtained through pricing services were substantiated through additional market sources, investments were transferred out of Level III. The Operating Company invests in
revolving credit facilities. These investments are categorized as Level III investments as these assets are not actively traded and their fair values are often implied by the term loans of the
respective portfolio companies.

47

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)

The
Operating Company generally uses the following framework when determining the fair value of investments where there are little, if any, market activity or observable pricing inputs.

Company Performance, Financial Review, and Analysis:Prior to investment, as part of its due diligence process, the Operating
Company evaluates the
overall performance and financial stability of the portfolio company. Post investment, the Operating Company analyzes each portfolio company's current operating performance and relevant financial
trends versus prior year and budgeted results, including, but not limited to, factors affecting its revenue and earnings before interest, taxes, depreciation, and amortization ("EBITDA") growth,
margin trends, liquidity position, covenant compliance and changes to its capital structure. The Operating Company also attempts to identify and subsequently track any developments at the portfolio
company, within its customer or vendor base or within the industry or the macroeconomic environment, generally, that may alter any material element of its original investment thesis. This analysis is
specific to each portfolio company. The Operating Company leverages the knowledge gained from its original due diligence process, augmented by this subsequent monitoring, to continually refine its
outlook for each of its portfolio companies and ultimately form the valuation of its investment in each portfolio company. When an external event such as a purchase transaction, public offering or
subsequent sale occurs, the Operating Company will consider the pricing indicated by the external event to corroborate the private valuation.

Market Based Approach:The Operating Company typically estimates the total enterprise value of each portfolio company by
utilizing market value cash
flow (EBITDA) multiples of publicly traded comparable companies. The Operating Company considers numerous factors when selecting the appropriate companies whose trading multiples are used to value its
portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth
expectations. The Operating Company generally applies an average of various relevant comparable company EBITDA multiples to the portfolio company's latest twelve month ("LTM") EBITDA or projected
EBITDA to calculate portfolio company enterprise value. In applying the market based approach as of December 31, 2013, the Operating Company used the relevant EBITDA ranges set forth in the
table below to determine the enterprise value of investments in six of its portfolio companies. The Operating Company believes this was a reasonable range in light of current comparable company
trading levels and the specific companies involved.

Income Based Approach:The Operating Company also typically uses a discounted cash flow analysis to estimate the fair value of
the investment.
Projected cash flows represent the relevant security's contractual interest, fee and principal payments plus the assumption of full principal recovery at the investment's expected maturity date. These
cash flows are discounted at a rate established utilizing a yield calibration approach, which incorporates changes in the credit quality (as measured by relevant statistics) of the portfolio company,
as compared to changes in the yield associated with comparable credit quality market indices, between the date of origination and the valuation date. In

48

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 4. Fair Value (Continued)

applying
the income based approach as of December 31, 2013, the Operating Company used the discount ranges set forth in the table below to value investments in eight of its portfolio companies.

RangeType

Fair Value

Approach

Unobservable Input

Low

High

Weighted
AverageFirst lien

$
28,411

Market approach

EBITDA multiple


7.0
x

10.0
x

8.5
xIncome approach

Discount rate


9.2
%

10.2
%

9.7
%Second lien


55,538

Market approach

EBITDA multiple


5.0
x

7.5
x

6.2
xIncome approach

Discount rate


10.1
%

11.7
%

11.1
%Subordinated


5,171

Market approach

EBITDA multiple


7.0
x

9.0
x

8.0
xIncome approach

Discount rate


13.0
%

15.0
%

14.0
%Equity and other


64,600

Market approach

EBITDA multiple


1.3
x

7.5
x

4.7
xIncome approach

Discount rate


8.0
%

20.0
%

13.6
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​$
153,720

Black Scholes analysis

Expected life in years


2.0


4.0


2.6​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Volatility


21.0
%

36.6
%

27.9
%Discount rate


0.3
%

3.0
%

0.8
%


Based
on a comparison to similar BDC credit facilities, the terms and conditions of the Holdings Credit Facility and the SLF Credit Facility (as defined in Note 7, Borrowing Facilities) are
representative of market. The carrying values of the Holdings Credit Facility and SLF Credit Facility approximate fair value
as of December 31, 2013, as both facilities are continually monitored and examined by both the borrower and the lender. Both facilities were amended and restated during the year ended
December 31, 2012 to lower the applicable interest rate spread by 0.25% and to increase the maximum amount of revolving borrowings available under the respective facilities. Additionally for
the year ended December 31, 2013, the Holdings Credit Facility was amended and restated to further increase the maximum amount of revolving borrowings available. See Note 7, Borrowing Facilities, for details. The fair value of other financial assets and liabilities approximates their carrying value based on the short term
nature of these items. The fair value disclosures discussed in this paragraph are considered Level III.

Fair value risk factorsThe Operating Company seeks investment opportunities that offer the possibility of attaining substantial capital
appreciation.
Certain events particular to each industry in which the Operating Company's portfolio companies conduct their operations, as well as general economic and political conditions, may have a significant
negative impact on the operations and
profitability of the Operating Company's investments and/or on the fair value of the Operating Company's investments. The Operating Company's investments are subject to the risk of non-payment of
scheduled interest or principal, resulting in a reduction in income to the Operating Company and thus the income of NMFC and AIV Holdings, and their corresponding fair valuations. Also, there may be
risk associated with the concentration of investments in one geographic region or in certain industries. These events are beyond the control of the Operating Company and cannot be predicted.
Furthermore, the ability to liquidate investments and realize value is subject to uncertainties.

49

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements

On May 19, 2011, NMFC entered into a joinder agreement with respect to the Limited Liability Company Agreement, as amended and restated, of the Operating Company pursuant to which
NMFC was admitted as a member of the Operating Company and agreed to acquire from the Operating Company a number of units of the Operating Company equal to the number of shares of common stock
outstanding of NMFC. Additionally on May 19, 2011, in connection with the contribution by Guardian AIV of its units to AIV Holdings, AIV Holdings entered into a joinder agreement with respect
to the Limited Liability Company Agreement, as amended and restated, of the Operating Company pursuant to which AIV Holdings was also admitted as a member of the Operating Company.

The
Operating Company entered into an investment advisory and management agreement, as amended and restated (the "Investment Management Agreement") with the Investment Adviser. Under the
Investment Management Agreement, the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, the Operating Company. For providing these services, the
Investment Adviser receives a fee from the Operating Company, consisting of two componentsa base management fee and an incentive fee.

The
base management fee is calculated at an annual rate of 1.75% of the Operating Company's gross assets less (i) the borrowings under the SLF Credit Facility (as defined in
Note 7,Borrowing Facilities) and (ii) cash and cash equivalents. The base management fee is payable quarterly in arrears, and is
calculated based on the average value of the Operating Company's gross assets, borrowings under the SLF Credit Facility, and cash and cash equivalents at the end of each of the two most recently
completed calendar quarters, and appropriately adjusted on a pro rata basis for any equity capital raises or repurchases during the current calendar quarter.

The
incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20.0% of the Operating Company's "Pre-Incentive Fee Adjusted Net
Investment Income" for the immediately preceding quarter, subject to a "preferred return", or "hurdle", and a "catch-up" feature. "Pre-Incentive Fee Net Investment Income" means interest income,
dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as
commitment, origination, structuring, diligence and consulting fees or other fees that the Operating Company receives from portfolio companies) accrued during the calendar quarter, minus the Operating
Company's operating expenses for the quarter (including the base management fee, expenses payable under an administration agreement, as amended and restated (the "Administration Agreement"), with the
Administrator, and any interest expense and distributions paid on any issued and outstanding preferred membership units (of which there are none as of December 31, 2013), but excluding the
incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and
zero coupon securities), accrued income that the Operating Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital
losses or unrealized capital appreciation or depreciation.

Under
GAAP, NMFC's IPO did not step-up the cost basis of the Operating Company's existing investments to fair market value at the IPO date. Since the total value of the Operating
Company's investments at the time of the IPO was greater than the investments' cost basis, a larger amount of

50

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

amortization
of purchase or original issue discount, as well as different amounts in realized gain and unrealized appreciation, may be recognized under GAAP in each period than if the step-up had
occurred. This will remain until such predecessor investments are sold or mature in the future. The Operating Company tracks the transferred (or fair market) value of each of its investments as of the
time of the IPO and, for purposes of the incentive fee calculation, adjusts Pre-Incentive Fee Net Investment Income to reflect the amortization of purchase or original issue discount on the Operating
Company's investments as if each investment was purchased at the date of the IPO, or stepped up to fair market value. This is defined as "Pre-Incentive Fee Adjusted Net Investment Income". The
Operating Company also uses the transferred (or fair market) value of each of its investments as of the time of the IPO to adjust capital gains ("Adjusted Realized Capital Gains") or losses ("Adjusted
Realized Capital Losses") and unrealized capital appreciation ("Adjusted Unrealized Capital Appreciation") and unrealized capital depreciation ("Adjusted Unrealized Capital Depreciation").

Pre-Incentive
Fee Adjusted Net Investment Income, expressed as a rate of return on the value of the Operating Company's net assets at the end of the immediately preceding calendar
quarter, will be compared to a "hurdle rate" of 2.0% per quarter (8.0% annualized), subject to a "catch-up" provision measured as of the end of each calendar quarter. The hurdle rate is appropriately
pro-rated for any partial periods. The calculation of the Operating Company's incentive fee with respect to the Pre-Incentive Fee Adjusted Net Investment Income for each quarter is as
follows:



The
second part will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement) and will equal 20.0% of the
Operating Company's Adjusted Realized Capital Gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all Adjusted Realized Capital Losses and
Adjusted

51

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

Unrealized
Capital Depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee.

In
accordance with GAAP, the Operating Company accrues a hypothetical capital gains incentive fee based upon the cumulative net Adjusted Realized Capital Gains and Adjusted Realized
Capital Losses and the cumulative net Adjusted Unrealized Capital Appreciation and Adjusted Unrealized Capital Depreciation on investments held at the end of each period. Actual amounts paid to the
Investment
Adviser are consistent with the Investment Management Agreement and are based only on actual Adjusted Realized Capital Gains computed net of all Adjusted Realized Capital Losses and Adjusted
Unrealized Capital Depreciation on a cumulative basis from inception through the end of each calendar year as if the entire portfolio was sold at fair value.

The
Operating Company has revised its presentation of incentive fees on the Consolidated Statements of Assets, Liabilities and Members' Capital and the Consolidated Statements of
Operations to disclose the two parts of the incentive fee incurred by the Operating Company for net investment income related incentive fees and capital gains related incentive fees.

The
following table summarizes the management fees and incentive fees incurred by the Operating Company for the years ended December 31, 2013, December 31, 2012 and
December 31, 2011.

Years ended December 31,2013

2012

2011(1)Management fee

$
14,905

$
11,109

$
4,938Incentive fee, excluding accrued capital gains incentive fees


16,502


11,537


3,522Accrued capital gains incentive fees(2)


3,229


4,407





(1)For
the period from May 19, 2011 (effective date of the Investment Management Agreement) to December 31, 2011.(2)As
of December 31, 2013, approximately $1,113 of capital gains incentive fees was owed under the Investment Management Agreement, as cumulative net
Adjusted Realized Capital Gains exceeded cumulative Adjusted Unrealized Capital Depreciation. As of December 31, 2012 and December 31, 2011, no actual capital gains incentive fee was
owed under the Investment Management Agreement, as cumulative net Adjusted Realized Capital Gains did not exceed cumulative Adjusted Unrealized Capital Depreciation. As of December 31, 2013,
December 31, 2012 and December 31, 2011, no payments have been made relating to the capital gains incentive fee.


The
Operating Company's Consolidated Statements of Operations below are adjusted as if the step-up in cost basis to fair market value had occurred at the IPO date, May 19, 2011.

52

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

The
following Statement of Operations for the year ended December 31, 2013 is adjusted to reflect this step-up to fair market value.

Year ended
December 31,
2013

Stepped-up
Cost Basis
Adjustments

Adjusted
year ended
December 31,
2013Investment incomeInterest income(1)

$
107,027

$
(896
)
$
106,131Dividend income


5,049





5,049Other income


2,836





2,836​
​
​
​
​
​
​
​
​
​
​Total investment income


114,912


(896
)

114,016​
​
​
​
​
​
​
​
​
​
​Total net expenses pre-incentive fee(2)


31,504





31,504​
​
​
​
​
​
​
​
​
​
​Pre-Incentive Fee Net Investment Income


83,408


(896
)

82,512​
​
​
​
​
​
​
​
​
​
​Incentive fee(3)


19,731





19,731​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


63,677


(896
)

62,781​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


7,253
(4)

(3,158
)

4,095Net change in unrealized appreciation of investments


7,994


4,054


12,048​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
78,924




$
78,924​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Includes
$3,428 in payment-in-kind interest from investments.(2)Includes
expense waivers and reimbursements of $3,233.(3)For
the year ended December 31, 2013, the Operating Company incurred total incentive fees of $19,731, of which $3,229 related to capital gains
incentive fees on a hypothetical liquidation basis.(4)Includes
$1,722 of realized gains on investments resulting from the modification of terms on one debt investment that was accounted for as an
extinguishment.


53

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

The
following Statement of Operations for the year ended December 31, 2012 is adjusted to reflect this step-up to fair market value.

Year ended
December 31,
2012

Stepped-up
Cost Basis
Adjustments

Adjusted
year ended
December 31,
2012Investment incomeInterest income

$
83,646

$
(3,476
)
$
80,170Dividend income


812





812Other income


1,328





1,328​
​
​
​
​
​
​
​
​
​
​Total investment income


85,786


(3,476
)

82,310​
​
​
​
​
​
​
​
​
​
​Total expenses pre-incentive fee(1)


24,625





24,625​
​
​
​
​
​
​
​
​
​
​Pre-Incentive Fee Net Investment Income


61,161


(3,476
)

57,685​
​
​
​
​
​
​
​
​
​
​Incentive fee(2)


15,944





15,944​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


45,217


(3,476
)

41,741​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


18,851


(6,958
)

11,893Net change in unrealized appreciation of investments


9,928


10,434


20,362​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
73,996




$
73,996​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Includes
expense waivers and reimbursements of $2,460.(2)For
the year ended December 31, 2012, the Operating Company incurred total incentive fees of $15,944, of which $4,407 related to capital gains
incentive fees on a hypothetical liquidation basis.


54

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

The
following Statement of Operations for the Operating Company for the period May 19, 2011 (effective date of the Investment Management Agreement) to December 31, 2011 is
adjusted to reflect this step-up to fair market value.

Period from
May 19, 2011
to December 31,
2011

Stepped-up
Cost Basis
Adjustments

Adjusted
period from
May 19, 2011
to December 31,
2011Investment incomeInterest income

$
38,836

$
(2,019
)
$
36,817Other income


670





670​
​
​
​
​
​
​
​
​
​
​Total investment income


39,506


(2,019
)

37,487​
​
​
​
​
​
​
​
​
​
​Total expenses pre-incentive fee(1)


11,863





11,863​
​
​
​
​
​
​
​
​
​
​Pre-Incentive Fee Net Investment Income


27,643


(2,019
)

25,624​
​
​
​
​
​
​
​
​
​
​Incentive fee(2)


3,522





3,522​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


24,121


(2,019
)

22,102​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


3,298


(2,422
)

876Net change in unrealized (depreciation) appreciation of investments


(15,538
)

4,441


(11,097
)​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
11,881




$
11,881​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Includes
expense waivers and reimbursements of $2,186.(2)For
the year ended December 31, 2011, the Operating Company had no incentive fees related to capital gains incentive fees on a hypothetical
liquidation basis.


The
Companies have entered into an Administration Agreement with the Administrator under which the Administrator provides administrative services. The Administrator performs, or oversees
the performance of, the Companies' financial records, prepares reports filed with the Securities and Exchange Commission, generally monitors the payment of the Companies' expenses, and watches the
performance of administrative and professional services rendered by others. The Operating Company will reimburse the Administrator for the Companies' allocable portion of overhead and other expenses
incurred by the Administrator in performing its obligations to the Companies under the Administration Agreement. Pursuant to the Administration Agreement and further restricted by the Operating
Company, expenses payable to the Administrator by the Operating Company as well as other direct and indirect expenses (excluding interest, other credit facility expenses, trading expenses and
management and incentive fees) have been capped at $3,500 for the time period from April 1, 2012 to March 31, 2013 and capped at $4,250 for the time period from April 1, 2013 to
March 31, 2014.

55

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

The
Operating Company has revised its presentation of expenses and expense waivers and reimbursements for the years ended December 31, 2012 and December 31, 2011. Expenses
were previously presented net of waivers and reimbursements, which had been included parenthetically. The revised presentation shows total gross expenses with a separate reduction for expense waivers
and reimbursements.

The
Operating Company incurred the following expenses in excess of the expense cap for the years ended December 31, 2013, December 31, 2012 and December 31, 2011:

Years ended December 31,2013

2012

2011Professional fees

$
1,773

$
1,070

$
1,315Administrative expenses


1,460


1,390


871Other general and administrative expenses








​
​
​
​
​
​
​
​
​
​
​Total expense waivers and reimbursements

$
3,233

$
2,460

$
2,186​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


As
of December 31, 2013 and December 31, 2012, $459 and $534, respectively, of the expense waivers and reimbursements was receivable from an affiliate.

The
Companies, the Investment Adviser and the Administrator have also entered into a Trademark License Agreement, as amended, with New Mountain Capital, L.L.C., pursuant to which New
Mountain Capital, L.L.C. has agreed to grant the Companies, the Investment Adviser and the Administrator, a non-exclusive, royalty-free license to use the "New Mountain" and the "New Mountain Finance"
names. Under the Trademark License Agreement, as amended, subject to certain conditions, the Companies, the Investment Adviser and the Administrator will have a right to use the "New Mountain" and
"New Mountain Finance" names, for so long as the Investment Adviser or one of its affiliates remains the investment adviser of the Operating Company. Other than with respect to this limited license,
the Companies, the Investment Adviser and the Administrator will have no legal right to the "New Mountain" or the "New Mountain Finance" names.

NMFC
entered into a Registration Rights Agreement with AIV Holdings, Steven B. Klinsky (the Chairman of the Companies' board of directors), an entity related to Steven B. Klinsky and the
Investment Adviser. Subject to several exceptions, AIV Holdings and the Investment Adviser have the right to require NMFC to register for public resale under the Securities Act of 1933, as amended
(the "Securities Act of 1933"), all registerable securities that are held by any of them and that they request to be registered. Registerable securities subject to the Registration Rights Agreement
are shares of NMFC's common stock issued or issuable in exchange for units and any other shares of NMFC's common stock held by AIV Holdings, the Investment Adviser and any of their transferees. The
rights under the Registration Rights Agreement can be conditionally exercised by AIV Holdings or the Investment Adviser, meaning that prior to the effectiveness of the registration statement related
to the shares, AIV Holdings or the Investment Adviser can withdraw their request to have the shares
registered. AIV Holdings and the Investment Adviser may each assign their rights to any person that acquires registerable securities subject to the Registration Rights Agreement and who agrees to be

56

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 5. Agreements (Continued)

bound
by the terms of the Registration Rights Agreement. Steven B. Klinsky and a related entity will have the right to "piggyback", or include their own registerable securities in such a registration.
Shares held by AIV Holdings and Steven B. Klinsky were registered on a shelf registration statement on Form N-2.

AIV
Holdings and the Investment Adviser may require NMFC to use its reasonable best efforts to register under the Securities Act of 1933 all or any portion of these registerable
securities upon a "demand request". The demand registration rights are subject to certain limitations.

The
Registration Rights Agreement includes limited blackout and suspension periods. In addition, AIV Holdings and the Investment Adviser may also require NMFC to file a shelf
registration statement on Form N-2 for the resale of their registerable securities if NMFC is eligible to use Form N-2 at that time.

Holders
of registerable securities have "piggyback" registration rights, including AIV Holdings, which means that these holders may include their respective shares in any future
registrations of NMFC's equity securities, whether or not that registration relates to a primary offering by NMFC or a secondary offering by or on behalf of any of NMFC's stockholders. AIV Holdings,
the Investment Adviser and Steven B. Klinsky (and a related entity) have priority over NMFC in any registration that is an underwritten offering.

AIV
Holdings, the Investment Adviser and Steven B. Klinsky (and a related entity) will be responsible for the expenses of any demand registration (including underwriters' discounts or
commissions) and their pro-rata share of any "piggyback" registration. NMFC has agreed to indemnify AIV Holdings, the Investment Adviser and Steven B. Klinsky (and a related entity) with respect to
liabilities resulting from untrue statements or omissions in any registration statement filed pursuant to the Registration Rights Agreement, other than untrue statements or omissions resulting from
information furnished to NMFC by such parties. AIV Holdings, the Investment Adviser and Steven B. Klinsky (and a related entity) have also agreed to indemnify NMFC with respect to liabilities
resulting from untrue statements or omissions furnished by them to NMFC relating to them in any registration statement.

Note 6. Related Parties

The Companies have entered into a number of business relationships with affiliated or related parties. NMFC and AIV Holdings own all the outstanding units of the Operating Company. As of
December 31, 2013, NMFC and AIV Holdings own approximately 94.4% and 5.6%, respectively, of the units of the Operating Company.

The
Operating Company has entered into the Investment Management Agreement with the Investment Adviser, a wholly-owned subsidiary of New Mountain Capital. Therefore, New Mountain Capital
is entitled to any profits earned by the Investment Adviser, which includes any fees payable to the Investment Adviser under the terms of the Investment Management Agreement, less expenses incurred by
the Investment Adviser in performing its services under the Investment Management Agreement.

57

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 6. Related Parties (Continued)

The
Companies have entered into an Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Administrator arranges office space for the
Companies and provides office equipment and administrative services necessary to conduct their respective day-to-day operations pursuant to the Administration Agreement. The Operating Company
reimburses the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to the Companies under the Administration Agreement including rent,
the fees and expenses associated with performing administrative, finance and compliance functions, and the compensation of the Companies' chief financial officer and chief compliance officer and their
respective staffs. Pursuant to the Administration Agreement and further restricted by the Operating Company, expenses payable to the Administrator by the Operating Company as well as other direct and
indirect expenses (excluding interest, other credit facility expenses, trading expenses and management and incentive fees) have been capped at $3,500 for the time period from April 1, 2012 to
March 31, 2013 and capped at $4,250 for the time period from April 1, 2013 to March 31, 2014. The expense cap will expire
on March 31, 2014. Thereafter, the Administrator may, in its own discretion, submit to the Operating Company for reimbursement some or all of the expenses that the Administrator has incurred on behalf
of the Operating Company during any quarterly period. As a result, the amount of expenses for which the Operating Company will have to reimburse the Administrator may fluctuate in future quarterly
periods and there can be no assurance given as to when, or if, the Administrator may determine to limit the expenses that the Administrator submits to the Operating Company for reimbursement in the
future. However, it is expected that the Administrator will continue to support part of the expense burden of the Operating Company in the near future.

The
Companies, the Investment Adviser and the Administrator have entered into a royalty-free Trademark License Agreement, as amended, with New Mountain Capital, L.L.C., pursuant to which
New Mountain Capital, L.L.C. has agreed to grant the Companies, the Investment Adviser and the Administrator, a non-exclusive, royalty-free license to use the name "New Mountain" and "New Mountain
Finance".

The
Companies have adopted a formal code of ethics that governs the conduct of their respective officers and directors. These officers and directors also remain subject to the duties
imposed by the 1940 Act, the Delaware General Corporation Law and the Delaware Limited Liability Company Act.

The
Investment Adviser and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with the Operating Company'
investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for the Operating Company 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 the Operating Company should invest side-by-side with one or
more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the Securities and Exchange Commission and its staff, and consistent
with the Investment Adviser's allocation procedures.

58

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 6. Related Parties (Continued)

Concurrently
with the IPO, NMFC sold an additional 2,172,000 shares of its common stock to certain executives and employees of, and other individuals affiliated with, New Mountain
Capital in the Concurrent Private Placement.

Note 7. Borrowing Facilities

Holdings Credit FacilityThe Loan and Security Agreement, as amended and restated, dated May 19, 2011 (the "Holdings Credit Facility") among
the Operating Company as the Borrower and Collateral Administrator, Wells Fargo Securities, L.L.C. as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral Custodian,
is structured as a revolving credit facility and matures on October 27, 2016, as amended on May 8, 2012. The Operating Company became a party to the Holdings Credit Facility upon the IPO
of NMFC. The Holdings Credit Facility amends and restates the credit facility of the Predecessor Entities (the "Predecessor Credit Facility").

The
maximum amount of revolving borrowings available under the Holdings Credit Facility is $280,000, as amended on October 28, 2013. As of December 31, 2013, the Operating
Company was permitted to borrow up to 45.0% or 25.0% of the purchase price of pledged first lien or non-first lien debt securities, and up to 70.0% and 45.0% of the purchase price of specified first
lien debt securities and specified non-first lien debt securities, respectively, subject to approval by Wells Fargo Bank, National Association. The Holdings Credit Facility is collateralized by all of
the investments of the Operating Company on an investment by investment basis. All fees associated with the origination or upsizing of the Holdings Credit Facility are capitalized on the Operating
Company's Consolidated Statement of Assets, Liabilities, and Members' Capital and charged against income as other credit facility expenses over the life of the Holdings Credit Facility. The Holdings
Credit Facility contains certain customary affirmative and negative covenants and events of default, including the occurrence of a change in control. In addition, the Holdings Credit Facility requires
the Operating Company to maintain a minimum asset coverage ratio. However, the covenants are generally not tied to mark to market fluctuations in the prices of the Operating Company's investments, but
rather to the performance of the underlying portfolio companies.

The
Holdings Credit Facility bears interest at a rate of the London Interbank Offered Rate ("LIBOR") plus 2.75% per annum, as amended on May 8, 2012, and charges a non-usage fee,
based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the credit agreement).

59

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 7. Borrowing Facilities (Continued)

The
following table summarizes the interest expense and non-usage fees incurred by the Operating Company on the Holdings Credit Facility for the years ended December 31, 2013,
December 31, 2012 and December 31, 2011.

Years ended December 31,2013

2012

2011Interest expense

$
5,487

$
4,172

$
2,043Non-usage fee

$
367

$
281

$
608Weighted average interest rate


2.9
%

3.1
%

3.2
%Average debt outstanding

$
184,124

$
133,600

$
61,561


The
outstanding balance of Holdings Credit Facility as of December 31, 2013, December 31, 2012 and December 31, 2011 was $221,849, $206,938 and $129,038,
respectively, and the Operating Company was not aware of any instances of non-compliance related to the Holdings Credit Facility on such dates.

SLF Credit FacilityNMF SLF's Loan and Security Agreement, as amended and restated, dated October 27, 2010 (the "SLF Credit Facility") among
NMF SLF as the Borrower, the Operating Company as the Collateral Administrator, Wells Fargo Securities, L.L.C. as the Administrative Agent, and Wells Fargo Bank, National Association, as the
Collateral Custodian, is structured as a revolving credit facility and matures on October 27, 2016, as amended on May 8, 2012. The maximum amount of revolving borrowings available under
the SLF Credit Facility is $215,000, as amended on December 18, 2012. The loan is non-recourse to the Operating Company and secured by all assets owned by the borrower on an investment by
investment basis. All fees associated with the origination or upsizing of the SLF Credit Facility are capitalized on the Consolidated Statement of Assets, Liabilities, and Members' Capital and charged
against income as other credit facility expenses over the life of the SLF Credit Facility. The SLF Credit Facility contains certain customary affirmative and negative covenants and events of default,
including the occurrence of a change in control. The covenants are generally not tied to mark to market fluctuations in the prices of our investments, but rather to the performance of
the underlying portfolio companies. Due to an amendment to the SLF Credit Facility on October 27, 2011, NMF SLF is no longer restricted from the purchase or sale of loans with an affiliate.
Therefore, specified loans can be moved as collateral between the Holdings Credit Facility and the SLF Credit Facility.

As
of December 31, 2013, the SLF Credit Facility permits borrowings of up to 70.0% of the purchase price of pledged first lien debt securities and up to 25.0% of the purchase
price of specified second lien loans, of which, up to 25.0% of the aggregate outstanding loan balance of all pledged debt securities in the SLF Credit Facility is allowed to be derived from second
lien loans, subject to approval by Wells Fargo Bank, National Association, as amended on March 11, 2013.

The
SLF Credit Facility bears interest at a rate of LIBOR plus 2.00% per annum for first lien loans and 2.75% for second lien loans, respectively, as amended on March 11, 2013. A
non-usage fee is paid, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the credit agreement).

60

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 7. Borrowing Facilities (Continued)

The
following table summarizes the interest expense and non-usage fees incurred by the Operating Company on the SLF Credit Facility for the years ended December 31, 2013,
December 31, 2012 and December 31, 2011.

Years ended December 31,2013

2012

2011Interest expense

$
4,891

$
4,274

$
3,369Non-usage fee

$
3

$
22

$
94Weighted average interest rate


2.3
%

2.3
%

2.5
%Average debt outstanding

$
214,317

$
181,395

$
133,825


The
outstanding balance as of December 31, 2013, December 31, 2012 and December 31, 2011 was $214,668, $214,262 and $165,928, respectively, and NMF SLF was not aware
of any instances of non-compliance related to the SLF Credit Facility on such dates.

Leverage risk factorsThe Operating Company utilizes and may utilize leverage to the maximum extent permitted by the law for investment and other
general business purposes. The Operating Company's lenders will have fixed dollar claims on certain assets that are superior to the claims of the Operating Company's unit holders, and therefore NMFC's
common stockholders, and the Operating Company would expect such lenders to seek recovery against these assets in the event of a default. The use of leverage also magnifies the potential for gain or
loss on amounts invested. Leverage may magnify interest rate risk (particularly on the Operating Company's fixed-rate investments), which is the risk that the prices of portfolio investments will fall
or rise if market interest rates for those types of securities rise or fall. As a result, leverage may cause greater changes in the Operating Company's net asset value. Similarly, leverage may cause a
sharper decline in the Operating Company's income than if the Operating Company had not borrowed. Such a decline could negatively affect the Operating Company's ability to make dividend payments to
its unit holders. Leverage is generally considered a speculative investment technique. The Operating Company's ability to service any debt incurred will
depend largely on financial performance and will be subject to prevailing economic conditions and competitive pressures.

Note 8. Regulation

NMFC and AIV Holdings have elected to be treated, and intend to comply with the requirements to continue to qualify annually, as RICs under Subchapter M of the Code. In order to
continue to qualify as RICs, among other things, NMFC and AIV Holdings are required to timely distribute to their stockholders at least 90.0% of investment company taxable income, as defined by the
Code, for each year. NMFC and AIV Holdings, among other things, intend to make and continue to make the requisite distributions to their stockholders, which will generally relieve NMFC and AIV
Holdings from U.S. federal, state, and local income taxes (excluding excise taxes which may be imposed under the Code). However, under certain circumstances, the distributions that the Operating
Company makes to its members may not be sufficient for AIV Holdings to satisfy the annual distribution requirement necessary for AIV Holdings to continue to qualify as a RIC. In that case, it is
expected that Guardian

61

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 8. Regulation (Continued)

AIV
would consent to be treated as if it received distributions from AIV Holdings sufficient to satisfy the annual distribution requirement. Guardian AIV would be required to include the consent
dividend in its taxable income as dividend from AIV Holdings, which would result in phantom (i.e., non-cash) taxable income to Guardian AIV.

Additionally
as BDCs, the Companies must not acquire any assets other than "qualifying assets" specified in the 1940 Act unless, at the time the acquisition is made, at least 70.0% of
its total assets are qualifying assets (with certain limited exceptions).

Note 9. Commitments and Contingencies

In the normal course of business, the Companies may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The
Operating Company may also enter into future funding commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments. As of December 31, 2013, the
Operating Company had unfunded commitments on revolving credit facilities of $15,500, and no outstanding bridge financing commitments or other future funding commitments. The unfunded commitments on
revolving credit facilities are disclosed on the Operating Company's Consolidated Schedule of Investments. As of December 31, 2012, the Operating Company had unfunded commitments on revolving
credit facilities of $10,500 and no outstanding bridge financing commitments or other future funding commitments, all of which are disclosed on the Operating Company's Consolidated Schedule of
Investments.

The
Operating Company also has revolving borrowings available under the Holdings Credit Facility and the SLF Credit Facility as of December 31, 2013. See Note 7, Borrowing Facilities, for details.

The
Operating Company may from time to time enter into financing commitment letters. As of December 31, 2013 and December 31, 2012, the Operating Company did not enter into
any commitment letters to purchase debt investments, which could require funding in the future.

Note 10. Distributions

Differences between taxable income and the results of operations for financial reporting purposes may be permanent or temporary in nature. Permanent differences are reclassified among
capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
During the years ended December 31, 2013, December 31, 2012 and December 31, 2011, NMFC did not have any reclassifications of amounts for book purposes arising from permanent
book/tax differences. During the years ended December 31, 2013, December 31, 2012 and December 31, 2011, AIV Holdings had

62

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 10. Distributions (Continued)

reclassifications
of amounts for book purposes arising from permanent book/tax differences related to return of capital distributions and consent dividends, respectively.

December 31, 2013

December 31, 2012

December 31, 2011NMFC

AIV
Holdings

NMFC

AIV
Holdings

NMFC

AIV
HoldingsUndistributed net investment income

$


$


$


$


$


$
Distributions in excess of net realized gains





(21,821
)




(9,707
)




(1,536
)Additional paid-in-capital





21,821





9,707





1,536


For
federal income tax purposes, distributions paid to stockholders of NMFC and AIV Holdings are reported as ordinary income, return of capital, long term capital gains or a combination
thereof. The tax character of distributions paid by NMFC and AIV Holdings for the years ended December 31, 2013, December 31, 2012 and December 31, 2011 were estimated to be as
follows:

Years ended December 31,2012

20112013AIV Holdings



AIV HoldingsNMFC

AIV Holdings

NMFC

NMFCOrdinary income(non-qualified)

$
44,778

$
19,972

$
26,218

$
40,692

$
8,944

$
14,694Ordinary income (qualified)


2,742


716











Capital gains


4,324





501


2,056


256


2,697Return of capital





181,476





48,128





​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
51,844

$
202,164

$
26,719

$
90,876

$
9,200

$
17,391


As
of December 31, 2013, the costs of investments for NMFC and AIV Holdings for tax purposes were $642,704 and $68,547, respectively. As of December 31, 2012, the costs of
investments for NMFC and AIV Holdings for tax purposes were $343,248 and $245,659, respectively. As of December 31, 2013, NMFC and AIV Holdings had capital loss carryforwards of approximately zero and
$15,772, respectively.

At
December 31, 2013, December 31, 2012 and December 31, 2011, the components of distributable earnings on a tax basis differ from the amounts reflected per NMFC's
and AIV Holdings' respective Statements of Assets and Liabilities by temporary book/tax differences primarily arising from differences between the tax and book basis of NMFC's and AIV Holdings'
respective investment in the Operating Company and undistributed income.

63

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 10. Distributions (Continued)

As of December 31, 2013, December 31, 2012 and December 31, 2011, the components of accumulated earnings / (deficit) on a tax basis were as follows:

Years ended December 31,2013

2012

2011NMFC

AIV Holdings

NMFC

AIV Holdings

NMFC

AIV HoldingsAccumulated capital gains / (losses)

$


$
(15,772
)
$


$


$


$
Other temporary differences


10,070


(4,982
)

7,942


(5,032
)




Undistributed ordinary income


3,856





528





66


1,778Unrealized (appreciation) / depreciation


2,346


(2,830
)

(2,274
)

(10,970
)

823


(886
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Components of distributable earnings

$
16,272

$
(23,584
)
$
6,196

$
(16,002
)
$
889

$
892


NMFC
and AIV Holdings are subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless NMFC and AIV Holdings distribute, in a timely manner as required by
the Code, an amount at least equal to the sum of (1) 98.0% of their respective net ordinary income earned for the calendar year and (2) 98.2% of their respective capital gain net income
for the one-year period ending October 31 in the calendar year. For the year ended December 31, 2012, both NMFC and AIV Holdings had no accrued estimated excise taxes. For the year ended
December 31, 2013, NMFC and AIV Holdings accrued estimated excise taxes of $2.3 and zero, respectively.

64

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 11. Stockholders' Equity

The table below illustrates the effect of certain transactions on the capital accounts of NMFC:

Common StockPaid in Capital
in Excess
of Par

Undistributed
Net Investment
Income

Accumulated
Undistributed Net
Realized Gains

Net Unrealized
Appreciation
(Depreciation)

Total
Stockholders'
EquityShares

Par AmountBalance at December 31, 2010




$


$


$


$


$


$
Issuances of common stock in the IPO(1)


7,272,727


73


99,927











100,000Issuances of common stock in private placement(2)


2,172,000


22


29,843











29,865Issuances of common stock to New Mountain Guardian(3)


1,252,964


12


18,477











18,489Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(3,998
)










(3,998
)Dividends declared











(8,345
)

(855
)




(9,200
)Net increase in stockholders' equity resulting from operations











8,345


1,141


845


10,331​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2011


10,697,691

$
107

$
144,249

$


$
286

$
845

$
145,487Issuances of common stock


13,628,560


136


191,561











191,697Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(323
)










(323
)Dividends declared











(19,792
)

(6,927
)




(26,719
)Net increase in stockholders' equity resulting from operations











19,792


7,593


4,399


31,784​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2012


24,326,251

$
243

$
335,487

$


$
952

$
5,244

$
341,926Issuances of common stock


20,898,504


209


298,177











298,386Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(281
)










(281
)Dividends declared











(50,521
)

(1,323
)




(51,844
)Net increase in stockholders' equity resulting from operations











50,521


5,427


5,972


61,920​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2013


45,224,755

$
452

$
633,383

$


$
5,056

$
11,216

$
650,107​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)On
May 19, 2011, NMFC priced its IPO of 7,272,727 shares of common stock at a public offering price of $13.75 per share.(2)Concurrently
with the closing of the IPO and at the public offering price of $13.75 per share, NMFC sold an additional 2,172,000 shares of its common stock
to certain executives and employees of, and other individuals affiliated with, New Mountain Capital in the Concurrent Private Placement.(3)On
May 19, 2011, NMFC issued 1,252,964 share of common stock to New Mountain Guardian Partners, L.P. for their respective ownership interest in the
Predecessor Entities.


65

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 11. Stockholders' Equity (Continued)

The
table below illustrates the effect of certain transactions on the capital accounts of AIV Holdings:

Common StockPaid in Capital
in Excess
of Par

Undistributed
Net Investment
Income

Distributions
In Excess of Net
Realized Gains

Net Unrealized
(Depreciation)
Appreciation

Total
Stockholder's
EquityShares

Par AmountBalance at December 31, 2010




$


$


$


$


$


$
Issuance of common stock to New Mountain Guardian AIV, L.P.(2)


100



(1)

298,407











298,407Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(7,559
)










(7,559
)Dividends declared











(15,775
)

(1,616
)




(17,391
)Net increase (decrease) in stockholder's equity resulting from operations











15,775


2,158


(16,375
)

1,558Tax reclassifications related to consent dividends (See Note 10)








1,536





(1,536
)




​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2011


100

$

(1)
$
292,384

$


$
(994
)
$
(16,375
)
$
275,015Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(241
)










(241
)Dividends declared











(25,426
)

(7,234
)




(32,660
)Distribution to New Mountain Guardian AIV, L.P.








(57,835
)




(381
)




(58,216
)Net increase in stockholder's equity resulting from operations











25,426


11,640


7,049


44,115Tax reclassifications related to return of capital distributions (See Note 10)








9,707





(9,707
)




​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2012


100

$

(1)
$
244,015

$


$
(6,676
)
$
(9,326
)
$
228,013Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(50
)










(50
)Dividends declared











(13,155
)

(141
)




(13,296
)Distribution to New Mountain Guardian AIV, L.P.








(203,793
)




14,925





(188,868
)Net increase (decrease) in stockholder's equity resulting from operations











13,155


(13,099
)

12,554


12,610Tax reclassifications related to return of capital distributions (See Note 10)








21,821





(21,821
)




​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2013


100

$

(1)
$
61,993

$


$
(26,812
)
$
3,228

$
38,409​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)As
of December 31, 2013, December 31, 2012 and December 31, 2011, the par amount of the total common stock was $1.(2)On
May 19, 2011, AIV Holdings issued 100 shares of common stock to New Mountain Guardian AIV, L.P. for their respective ownership interest in the
Predecessor Entities.


66

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 12. Earnings Per Share

The following information sets forth the computation of basic and diluted net increase in NMFC's net assets per share resulting from operations for the year ended December 31,
2013, December 31, 2012 and the period from May 19, 2011 (commencement of operations) to December 31, 2011:

May 19, 2011
(commencement of
operations) to
December 31,
2011Years ended December 31,2013

2012Numerator for basic earnings per share:

$
61,920

$
31,784

$
10,331Denominator for basic weighted average share:


35,092,722


14,860,838


10,697,691​
​
​
​
​
​
​
​
​
​
​Basic earnings per share:

$
1.76

$
2.14

$
0.97​
​
​
​
​
​
​
​
​
​
​Numerator for diluted earnings per share(a):

$
78,924

$
73,996

$
11,881Denominator for diluted weighted average share(b):


44,021,920


34,011,738


30,919,629​
​
​
​
​
​
​
​
​
​
​Diluted earnings per share:

$
1.79

$
2.18

$
0.38​
​
​
​
​
​
​
​
​
​
​


(a)Includes
the full income at the Operating Company for the period. For the period May 19, 2011 (commencement of operations) to December 31,
2011, NMFC's unrealized appreciation in the Operating Company resulting from the IPO is netted against AIV Holdings' unrealized depreciation in the Operating Company resulting from the IPO.(b)Assumes
all AIV Holdings units in the Operating Company were exchanged for public shares of NMFC during the years ended December 31, 2013,
December 31, 2012 and for the period from May 19, 2011 to December 31, 2011, respectively (see Note 1,Formation and Business
Purpose).


67

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 13. Financial Highlights

The following information sets forth the financial highlights for the Operating Company for the respective years ended December 31st.

Years ended December 31,2013

2012

2011

2010

2009Total return based on net asset value(a)


13.27
%

16.61
%

10.09
%

26.54
%

76.38
%Average net assets for the period

$
630,156

$
474,561

$
361,031

$
245,951

$
195,467Ratio to average net assets:Net investment income


10.10
%

9.53
%

10.67
%

15.23
%

10.44
%Total expenses (gross)


8.64
%

9.07
%

5.59
%

1.59
%

0.72
%Total expenses (net of reimbursable expenses)


8.13
%

8.55
%

4.99
%

1.59
%

0.72
%Net assets, end of year

$
688,516

$
569,939

$
420,502

$
241,927

$
239,441Average debt outstandingHoldings Credit Facility

$
184,124

$
133,600

$
61,561

$
68,343

$
65,014Average debt outstandingSLF Credit Facility

$
214,317

$
181,395

$
133,825

$
27,672


N/AWeighted average common membership units outstanding for the year


44,021,920


34,011,738


30,919,629
(b)

N/A


N/AAsset coverage ratio


257.73
%

235.31
%

242.56
%

307.43
%

407.98
%Portfolio turnover


40.52
%

52.02
%

42.13
%

76.69
%

57.50
%


N/ANot
applicable. (a)For
the years ended December 31, 2013 and December 31, 2012, total return is calculated assuming a purchase at net asset value on the opening
of the first day of the year and a sale at net asset value on the last day of the respective year. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested
at the net asset value on the last day of the respective quarter. For the year ended December 31, 2011, total return is calculated in two parts: (1) from the opening of the first day of
the year to NMFC's IPO date, total return is calculated based on net income over weighted average net assets and (2) from NMFC's IPO date to the last day of the year, total return is calculated
assuming a purchase at net asset value on NMFC's IPO date and a sale at net asset value on the last day of the year. Dividends and distributions, if any, are assumed for purposes of this calculation,
to be reinvested at the net asset value on the last day of the respective quarter. For the years ended December 31, 2010 and December 31, 2009, total return is the ratio of net income
compared to capital, adjusted for capital contributions and distributions.(b)Weighted
average common membership units outstanding presented from May 19, 2011 to December 31, 2011, as the fund became unitized on
May 19, 2011, the IPO date.


68

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 13. Financial Highlights (Continued)



Years ended December 31,

May 19, 2011
(commencement of
operations) to
December 31,
20112013

2012Per unit data for the Operating Company(a):Net asset value, January 1, 2013, January 1, 2012 and May 19, 2011(b), respectively

$
14.06

$
13.60

$
14.08Net investment income


1.45


1.33


0.78Net realized and unrealized gains (losses)


0.35


0.84


(0.40
)Dividends from net investment income


(1.48
)

(1.71
)

(0.86
)​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations


0.32


0.46


(0.48
)Net asset value, December 31, 2013, December 31, 2012 and December 31, 2011, respectively

$
14.38

$
14.06

$
13.60​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(a)Per
unit data is based on weighted average common membership units outstanding.(b)Data
presented from May 19, 2011 to December 31, 2011 as the fund became unitized on May 19, 2011, the IPO date.


69

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 13. Financial Highlights (Continued)

The
following information sets forth the financial highlights for NMFC for the year ended December 31, 2013, December 31, 2012 and the period May 19, 2011 to
December 31, 2011. The ratios to average net assets have been annualized for the period May 19, 2011 to December 31, 2011.

May 19, 2011
(commencement of
operations) to
December 31,
2011Years ended December 31,2013

2012Per share data(a):Net asset value, January 1, 2013, January 1, 2012 and May 19, 2011(b), respectively

$
14.06

$
13.60

$
13.50Net increase (decrease) in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.:Net investment income


1.45


1.33


0.78Net realized and unrealized gains (losses)


0.35


0.84


(0.40
)​
​
​
​
​
​
​
​
​
​
​Total net increase


1.80


2.17


0.38Net change in unrealized appreciation (depreciation) of investment in New Mountain Finance Holdings, L.L.C.








0.58Dividends declared


(1.48
)

(1.71
)

(0.86
)​
​
​
​
​
​
​
​
​
​
​Net asset value, December 31, 2013, December 31, 2012 and December 31, 2011, respectively

$
14.38

$
14.06

$
13.60​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Per share market value, December 31, 2013, December 31, 2012 and December 31, 2011, respectively

$
15.04

$
14.90

$
13.41​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Total return based on market value(c)


11.62
%

24.84
%

4.16
%Total return based on net asset value(d)


13.27
%

16.61
%

2.82
%Shares outstanding at end of period


45,224,755


24,326,251


10,697,691Average weighted shares outstanding for the period


35,092,722


14,860,838


10,697,691Average net assets for the period

$
502,822

$
196,312

$
147,766Ratio to average net assets(e):Total expenses allocated from New Mountain Finance Holdings, L.L.C.


8.13
%

8.55
%

5.79
%Net investment income allocated from New Mountain Finance Holdings, L.L.C.


10.10
%

9.53
%

9.08
%


(a)Per
share data is based on the summation of the per share results of operations items over the outstanding shares for the period in which the respective
line items were realized or earned.(b)Data
presented from May 19, 2011 to December 31, 2011 as the fund became unitized on May 19, 2011, the IPO date.


70

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 13. Financial Highlights (Continued)

(c)For
the years ended December 31, 2013, December 31, 2012 and for the period May 19, 2011 to December 31, 2011, total return is
calculated assuming a purchase of common stock at the opening of the first day of the years ended 2013 and 2012, and assuming a purchase of common stock at IPO, respectively, and a sale on the closing
of the last day of the respective year. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under NMFC's dividend reinvestment plan.(d)Total
return is calculated assuming a purchase at net asset value on the opening of the first day of the period and a sale at net asset value on the last
day of the period. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at the net asset value on the last day of the respective quarter.(e)Ratio
to average net assets for the years ended December 31, 2013 and December 31, 2012 is based on the summation of the results of operations
items over the net assets for the period in which the respective line items were realized or earned.


The
following information sets forth the financial highlights for AIV Holdings for the year ended December 31, 2013, December 31, 2012 and the period May 19, 2011 to
December 31, 2011. The ratios to average net assets have been annualized for the period May 19, 2011 to December 31, 2011.

Years ended
December 31,

May 19, 2011
(commencement of
operations) to
December 31,
20112013

2012Total return based on net asset value(a)


7.69
%

18.04
%

(5.44
)%Average net assets for the period

$
127,334

$
270,081

$
279,323Ratio to average net assets(b):Total expenses allocated from New Mountain Finance Holdings, L.L.C.


8.13
%

8.55
%

5.79
%Net investment income allocated from New Mountain Finance Holdings, L.L.C.


10.10
%

9.53
%

9.08
%


(a)For
the years ended December 31, 2013, December 31, 2012 and for the period May 19, 2011 to December 31, 2011, total return is
calculated assuming a purchase at net asset value on the opening of the first day of the period and a sale at net asset value on the last business day of the period. Dividends and distributions, if
any, are assumed for purposes of this calculation, to be reinvested at the net asset value on the last day of the respective quarter.(b)Ratio
to average net assets for the years ended December 31, 2013 and December 31, 2012 is based on the summation of the results of operations
items over the net assets for the period in which the respective line items were realized or earned.


71

---





Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 14. Selected Quarterly Financial Data (unaudited)

The below selected quarterly financial data is for the Operating Company.



Investment Income

Net Investment
Income

Total Net Realized
Gains and
Net Changes in
Unrealized
Appreciation
(Depreciation)
of Investments

Net Increase
(Decrease) in
Capital Resulting
from OperationsQuarter Ended

Total

Per
Unit

Total

Per
Unit

Total

Per
Unit

Total

Per
UnitDecember 31, 2013

$
28,645

$
0.60

$
15,848

$
0.33

$
3,213

$
0.07

$
19,061

$
0.40September 30, 2013


25,793


0.57


12,659


0.29


7,819


0.17


20,478


0.46June 30, 2013


35,156


0.82


23,543


0.55


(8,719
)

(0.21
)

14,824


0.34March 31, 2013


25,318


0.62


11,627


0.28


12,934


0.32


24,561


0.60December 31, 2012

$
24,713

$
0.65

$
13,522

$
0.36

$
3,478

$
0.09

$
17,000

$
0.45September 30, 2012


21,752


0.60


10,136


0.28


12,109


0.34


22,245


0.62June 30, 2012


20,299


0.66


11,646


0.38


(561
)

(0.02
)

11,085


0.36March 31, 2012


19,022


0.62


9,913


0.32


13,754


0.45


23,667


0.77December 31, 2011

$
17,127

$
0.55

$
9,540

$
0.31

$
8,317

$
0.27

$
17,857

$
0.58September 30, 2011


15,069


0.49


10,002


0.32


(21,255
)

(0.68
)

(11,253
)

(0.36
)June 30, 2011


13,116


0.42


9,554


0.31


(899
)

(0.03
)

8,655


0.28March 31, 2011


11,212


N/A


9,429


N/A


6,990


N/A


16,419


N/ADecember 31, 2010

$
9,820


N/A

$
8,335


N/A

$
7,978


N/A

$
16,313


N/ASeptember 30, 2010


13,881


N/A


13,145


N/A


5,560


N/A


18,705


N/AJune 30, 2010


8,597


N/A


7,777


N/A


(5,349
)

N/A


2,428


N/AMarch 31, 2010


9,077


N/A


8,208


N/A


18,138


N/A


26,346


N/ADecember 31, 2009

$
7,617


N/A

$
6,617


N/A

$
1,617


N/A

$
8,234


N/ASeptember 30, 2009


6,148


N/A


6,030


N/A


33,709


N/A


39,739


N/AJune 30, 2009


5,092


N/A


4,877


N/A


42,562


N/A


47,439


N/AMarch 31, 2009


2,910


N/A


2,883


N/A


27,385


N/A


30,268


N/A


N/ANot
applicable, as the Operating Company was not unitized until May 19, 2011.


72

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 14. Selected Quarterly Financial Data (unaudited) (Continued)

The
below selected quarterly financial data is for NMFC.



Net Investment
Income allocated
from the Operating
Company

Total Net Realized
and Unrealized Gains
(Losses)

Net Increase
(Decrease) in Net
Assets Resulting from
OperationsQuarter Ended

Total

Per Share

Total

Per Share

Total

Per ShareDecember 31, 2013

$
14,826

$
0.33

$
3,119

$
0.07

$
17,945

$
0.40September 30, 2013


10,803


0.29


6,664


0.17


17,467


0.46June 30, 2013


17,674


0.55


(6,682
)

(0.21
)

10,992


0.34March 31, 2013


7,218


0.28


8,298


0.33


15,516


0.61December 31, 2012

$
7,759

$
0.36

$
2,047

$
0.09

$
9,806

$
0.45September 30, 2012


4,574


0.28


5,381


0.34


9,955


0.62June 30, 2012


4,029


0.38


(194
)

(0.02
)

3,835


0.36March 31, 2012


3,430


0.32


4,758


0.45


8,188


0.77December 31, 2011

$
3,301

$
0.31

$
2,877

$
0.27

$
6,178

$
0.58September 30, 2011


3,460


0.32


(7,353
)

(0.68
)

(3,893
)

(0.36
)June 30, 2011


1,584


0.15


6,462


0.60


8,046


0.75March 31, 2011


N/A


N/A


N/A


N/A


N/A


N/A


N/ANot
applicable, as NMFC did not commence operations until May 19, 2011.


73

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 14. Selected Quarterly Financial Data (unaudited) (Continued)

The
below selected quarterly financial data is for AIV Holdings.



Quarter Ended

Net Investment
Income allocated
from the Operating
Company

Total Net Realized
and Unrealized Gains
(Losses)

Net Increase
(Decrease) in Net
Assets Resulting from
OperationsDecember 31, 2013

$
1,022

$
(1,614
)
$
(592
)September 30, 2013


1,855


1,156


3,011June 30, 2013


5,869


(3,078
)

2,791March 31, 2013


4,409


2,991


7,400December 31, 2012

$
5,764

$
1,431

$
7,195September 30, 2012


5,562


8,630


14,192June 30, 2012


7,617


(367
)

7,250March 31, 2012


6,483


8,995


15,478December 31, 2011

$
6,240

$
5,439

$
11,679September 30, 2011


6,542


(13,902
)

(7,360
)June 30, 2011


2,994


(5,755
)

(2,761
)March 31, 2011


N/A


N/A


N/A


N/ANot
applicable, as AIV Holdings did not commence operations until May 19, 2011.


Note 15. Recent Accounting Standards Updates

In June 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2013-08,Financial
ServicesInvestment Companies (Topic 946)Amendments to the Scope, Measurement and Disclosure
Requirements ("ASU 2013-08"), which contains new guidance on assessing whether an entity is an investment company, requiring non-controlling ownership interests in investment companies to be measured
at fair value and requiring certain additional disclosures. ASU 2013-08 is effective for interim and annual periods beginning after December 15, 2013. The adoption of ASU 2013-08 is not
expected to have a material impact on the Companies' financial statements.

Note 16. Subsequent Events

On January 27, 2014, NMFC announced that the U.S. Small Business Administration ("SBA") issued a "green light" letter inviting NMFC to continue its application process to obtain a
license to form and operate a Small Business Investment Company ("SBIC") subsidiary. If approved, a SBIC license would provide NMFC with an incremental source of attractive long-term capital.

Receipt
of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license, and NMFC has received no assurance or indication from the
SBA

74

---



Combined Notes to the Consolidated Financial Statements of New Mountain Finance Holdings, L.L.C.,
the Financial Statements of New Mountain Finance Corporation and the Financial Statements
of New Mountain Finance AIV Holdings Corporation (Continued)

December 31, 2013

(in thousands, except units/shares and per unit/share data)

Note 16. Subsequent Events (Continued)

that
it will receive a SBIC license, or of the timeframe in which it would receive a license, should one ultimately be granted.

On
February 3, 2014, NMFC completed an underwritten secondary public offering of 2,325,000 shares of its common stock on behalf of a selling stockholder, AIV Holdings, at a
public offering price of $14.70 per share. In connection with the underwritten secondary public offering, the underwriters purchased an additional 346,938 shares of NMFC's common stock from AIV
Holdings with the exercise of the overallotment option to purchase up to an additional 346,938 shares of common stock. NMFC did not receive any proceeds from the sale of shares of NMFC's common stock
by AIV Holdings. The Operating Company and NMFC did not bear any expenses in connection with this offering. The offering expenses were borne by the selling stockholder, AIV Holdings. As of
February 3, 2014, AIV Holdings no longer owns any units of the Operating Company and NMFC owns 100.0% of the outstanding units of the Operating Company. As a result, the Companies' current
organizational structure may be collapsed or simplified in the future.

On
March 4, 2014, the Operating Company's board of directors, and subsequently NMFC's board of directors, declared a first quarter 2014 distribution of $0.34 per unit/share
payable on March 31, 2014 to holders of record as of March 17, 2014.

75

---



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