Use these links to rapidly review the documentFORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014 TABLE OF CONTENTS TABLE OF CONTENTS PART IV

Table of Contents





UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K



ý

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2014o

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




Commission File Number

Exact name of registrant as specified in its charter,
addresses of principal executive offices, telephone numbers
and states or other jurisdictions of incorporation or organization

I.R.S. Employer
Identification Number814-00832

New Mountain Finance Corporation787 Seventh Avenue, 48th Floor
New York, New York 10019
Telephone: (212) 720-0300
State of Incorporation: Delaware

27-2978010




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

Title of each class

Name of each exchange on which registeredCommon stock, $0.01 par value

The New York Stock Exchange


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

Title of each classNone




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ý

Accelerated filer oNon-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý

The aggregate market value of common stock held by non-affiliates of New Mountain Finance Corporation on June 30, 2014, based on the closing price on that
date of $14.86, on the New York Stock Exchange was $728.3 million. For the purposes of calculating this amount only, all directors and executive officers of the registrant have been treated as
affiliates.

Description

Shares as of March 2, 2015Common stock, $0.01 par value

57,997,890


Portions
of the Registrants' Proxy Statement for its 2015 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this
Annual Report on this Form 10-K are incorporated by reference into Part III on this Form 10-K.





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Table of Contents



FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014  TABLE OF CONTENTS



PAGEPART IItem 1.

Business


1Item 1A.

Risk Factors


29Item 1B.

Unresolved Staff Comments


61Item 2.

Properties


61Item 3.

Legal Proceedings


61Item 4.

Mine Safety Disclosures


61PART IIItem 5.

Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


62Item 6.

Selected Financial Data


66Item 7.

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


70Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


103Item 8.

Financial Statements and Supplementary Data


105Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


170Item 9A.

Controls and Procedures


170Item 9B.

Other Information


173PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


174Item 11.

Executive Compensation


174Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


174Item 13.

Certain Relationships and Related Transactions, and Director Independence


174Item 14.

Principal Accountant Fees and Services


174PART IVItem 15.

Exhibits and Financial Statement Schedules


175


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Table of Contents

PART I

Item 1.    Business

New Mountain Finance Corporation

New Mountain Finance Corporation ("NMFC", the "Company", "we", "us" or "our") 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 regulated as a business development company ("BDC") under the
Investment Company Act of 1940, as amended (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"). NMFC is also
registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act").

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 (defined as New Mountain Capital Group, L.L.C. and its affiliates) 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 (as defined below). In connection with NMFC's
IPO and through a series of transactions, New Mountain Finance Holdings, L.L.C. ("NMF Holdings" or the "Predecessor Operating Company") acquired all of the operations of the Predecessor Entities,
including all of the assets and liabilities related to such operations.

New Mountain Finance Holdings, L.L.C.

NMF Holdings is a Delaware limited liability company. Until May 8, 2014, NMF Holdings was externally managed and was regulated
as a BDC under the 1940 Act. As such, NMF Holdings was obligated to comply with certain regulatory requirements. NMF Holdings was treated as a partnership for United States ("U.S.") federal income tax
purposes for so long as it had at least two members. With the completion of the underwritten secondary offering on February 3, 2014, NMF Holdings' existence as a partnership for U.S. federal
income tax purposes terminated and NMF Holdings became an entity that is disregarded as a separate entity from its owner for U.S. federal tax purposes. For additional information on the Company's
organizational structure prior to May 8, 2014, see "Restructuring".

Until
May 8, 2014, NMF Holdings was externally managed by New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser"). As of May 8, 2014, the Investment Adviser
serves as the external
investment adviser to NMFC. 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. New Mountain Capital is a firm with a track record of investing in the middle market and with assets under management totaling more than
$15.0 billion(1), which includes total assets held by the Company. New Mountain Capital focuses on investing in defensive growth companies across its private equity, public equity and credit
investment vehicles. NMF Holdings, 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



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$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".

Prior
to December 18, 2014, New Mountain Finance SPV Funding, L.L.C. ("NMF SLF") was a Delaware limited liability company. NMF SLF was a wholly-owned subsidiary of NMF Holdings
and thus a wholly-owned indirect subsidiary of the Company. NMF SLF was bankruptcy-remote and non-recourse to NMFC. As part of an amendment to the Company's existing credit facilities with Wells Fargo
Bank, National Association, NMF SLF merged with and into NMF Holdings on December 18, 2014. SeeItem 8.Financial Statements and Supplementary
DataNote 7, Borrowingsfor additional information on the Company's credit facilities.

New Mountain Finance AIV Holdings Corporation

Until April 25, 2014, New Mountain Finance AIV Holdings Corporation ("AIV Holdings") was a Delaware corporation that was
originally incorporated on March 11, 2011. AIV Holdings was dissolved on April 25, 2014. Guardian AIV, a Delaware limited partnership, was AIV Holdings' sole stockholder. AIV Holdings
was a closed-end, non-diversified management investment company that was regulated as a BDC under the 1940 Act. As such, AIV Holdings was obligated to comply with certain regulatory requirements. AIV
Holdings was treated, and complied with the requirements to qualify annually, as a RIC under the Code.

Structure

Prior to the Restructuring (as defined below) on May 8, 2014, NMFC and AIV Holdings were holding companies with no direct
operations of their own, and their sole asset was their ownership in NMF Holdings. In connection with the IPO, NMFC and AIV Holdings each entered into a joinder agreement with respect to the Limited
Liability Company Agreement, as amended and restated (the "Operating Agreement"), of NMF Holdings, pursuant to which NMFC and AIV Holdings were admitted as members of NMF Holdings. NMFC acquired from
NMF Holdings, with the gross proceeds of the IPO and the Concurrent Private Placement, common membership units ("units") of NMF Holdings (the number of units were 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 NMF Holdings 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 NMF Holdings prior to the IPO and, as a result of the transactions completed in connection with the IPO, obtained
units in NMF Holdings. Guardian AIV contributed its units in NMF Holdings to its newly formed subsidiary, AIV Holdings, in exchange for common stock of AIV Holdings. AIV Holdings had the right to
exchange all or any portion of its units in NMF Holdings for shares of NMFC's common stock on a one-for-one basis at any time.

The
original 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 was that any distributions made to NMFC's stockholders that were attributable to such
gains generally were not treated as taxable dividends but rather as return of capital.

Since
NMFC's IPO, and through December 31, 2014, NMFC raised approximately $374.6 million in net proceeds from additional offerings of common stock and issued shares of its
common stock valued at approximately $288.4 million on behalf of AIV Holdings for exchanged units. NMFC

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acquired
from NMF Holdings units of NMF Holdings equal to the number of shares of NMFC's common stock sold in additional offerings. With the completion of the final secondary offering on
February 3, 2014, NMFC owned 100.0% of the units of NMF Holdings, which became a wholly-owned subsidiary of NMFC.

Restructuring

As a BDC, AIV Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after
careful consideration of the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of AIV Holdings' business model, AIV Holdings' board of directors
determined that continuation as a BDC was not in the best interests of AIV Holdings and Guardian AIV. Specifically, given that AIV Holdings was formed for the sole purpose of holding units of NMF
Holdings and AIV Holdings had disposed of all of the units of NMF Holdings that it was holding as of February 3, 2014, the board of directors of AIV Holdings approved and declared advisable at
an in-person meeting held on March 25, 2014 the withdrawal of AIV Holdings' election to be regulated as a BDC under the 1940 Act. In addition, the board of directors of AIV Holdings approved
and declared advisable for AIV Holdings to terminate its registration under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and to dissolve AIV Holdings
under the laws of the State of Delaware.

Upon
receipt of the necessary stockholder consent to authorize the board of directors of AIV Holdings to withdraw AIV Holdings' election to be regulated as a BDC, the withdrawal was
filed and became effective upon receipt by the U.S. Securities and Exchange Commission ("SEC") of AIV Holdings' notification of withdrawal on Form N-54C on April 15, 2014. The board of
directors of AIV Holdings believed that AIV Holdings met the requirements for filing the notification to withdraw its election to be regulated as a BDC, upon the receipt of the necessary stockholder
consent. After the notification of
withdrawal of AIV Holdings' BDC election was filed with the SEC, AIV Holdings was no longer subject to the regulatory provisions of the 1940 Act applicable to BDCs generally, including regulations
related to insurance, custody, composition of its board of directors, affiliated transactions and any compensation arrangements.

In
addition, on April 15, 2014, AIV Holdings filed a Form 15 with the SEC to terminate AIV Holdings' registration under Section 12(g) of the Exchange Act. After
these SEC filings and any other federal or state regulatory or tax filings were made, AIV Holdings proceeded to dissolve under Delaware law by filing a certificate of dissolution in Delaware on
April 25, 2014.

Until
May 8, 2014, as a BDC, NMF Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after careful consideration of
the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of NMF Holdings' current business model, NMF Holdings' board of directors determined at an
in-person meeting held on March 25, 2014 that continuation as a BDC was not in the best interests of NMF Holdings.

At
the 2014 joint annual meeting of the stockholders of NMFC and the sole unit holder of NMF Holdings held on May 6, 2014, the stockholders of NMFC and the sole unit holder of NMF
Holdings approved a proposal which authorized the board of directors of NMF Holdings to withdraw NMF Holdings' election to be regulated as a BDC. Additionally, the stockholders of NMFC approved a new
investment advisory and management agreement between NMFC and the Investment Adviser. Upon receipt of the necessary stockholder/unit holder approval to authorize the board of directors of NMF Holdings
to withdraw NMF Holdings' election to be regulated as a BDC, the withdrawal was filed and became effective upon receipt by the SEC of NMF Holdings' notification of withdrawal on Form N-54C on
May 8, 2014.

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Effective
May 8, 2014, NMF Holdings amended and restated its Operating Agreement such that the board of directors of NMF Holdings was dissolved and NMF Holdings remained a
wholly-owned subsidiary of NMFC with the sole purpose of serving as a special purpose vehicle for NMF Holdings' credit facility, and NMFC assumed all other operating activities previously undertaken
by NMF Holdings under the management of the Investment Adviser (collectively, the "Restructuring"). After the Restructuring, all wholly-owned direct and indirect subsidiaries of NMFC are consolidated
with NMFC for both 1940 Act and financial statement reporting purposes, subject to any financial statement adjustments required in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). NMFC continues to remain a BDC under the 1940 Act.

Also,
on May 8, 2014, NMF Holdings filed Form 15 with the SEC to terminate NMF Holdings' registration under Section 12(g) of the Exchange Act. As a special purpose
entity, NMF Holdings is bankruptcy-remote and non-recourse to NMFC. In addition, the assets held at NMF Holdings will continue to be used to secure NMF Holdings' credit facility.

Current Organization

During the year ended December 31, 2014, the Company established wholly-owned subsidiaries, NMF Ancora Holdings Inc.
("NMF Ancora") and NMF YP Holdings Inc. ("NMF YP"), which are structured as Delaware entities that serve as tax blocker corporations which hold equity or equity-like investments in portfolio
companies organized as limited liability companies (or other forms of pass-through entities). Tax blocker corporations are not consolidated for income tax purposes and may incur income tax expense as
a result of their ownership of portfolio companies. Additionally, the Company has a wholly-owned subsidiary, New Mountain Finance Servicing, L.L.C. ("NMF Servicing") that serves as the administrative
agent on certain investment transactions. New Mountain Finance SBIC, L.P. ("SBIC LP"), and its general partner, New Mountain Finance SBIC G.P., L.L.C. ("SBIC GP"), were
organized in Delaware as a limited partnership and limited liability company, respectively. SBIC LP and SBIC GP are consolidated wholly-owned direct and indirect subsidiaries of the
Company. SBIC LP received a license from the U.S. Small Business Association (the "SBA") to operate as a small business investment company ("SBIC") under Section 301(c) of the Small
Business Investment Act of 1958, as amended (the "1958 Act").

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The
diagram below depicts the Company's organizational structure as of December 31, 2014.

GRAPHIC

---

New Mountain Finance Advisers BDC, L.L.C.

The Investment Adviser manages the Company's day-to-day operations and provides it with investment advisory and management services. In
particular, the Investment Adviser is responsible for identifying attractive investment opportunities, conducting research and due diligence on prospective investments, structuring the Company's
investments and monitoring and servicing the Company's investments. The Investment Adviser is managed by a five member investment committee, which is responsible for approving purchases and sales of
the Company's investments above $10.0 million in aggregate by issuer. For additional information on the investment committee, see "Investment Committee" section.

New Mountain Finance Administration, L.L.C.

The Administrator provides the administrative services necessary to conduct our day-to-day operations. The Administrator also performs,
or oversees the performance of, our financial records, our reports to stockholders and reports filed with the SEC. The Administrator performs the calculation and publication of our net asset values,
the payment of our expenses and oversees the performance of various third-party service providers and the preparation and filing of our tax returns. The Administrator may also provide, on the
Company's behalf, managerial assistance to its portfolio companies.

Competition

The Company competes for investments with a number of BDCs and investment funds (including private equity and hedge funds), as well as
traditional financial services companies such as commercial

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banks
and other sources of financing. Many of these entities have greater financial and managerial resources than we do. We believe the Company is able to be competitive with these entities primarily
on the basis of the experience and contacts of its management team, the Company's responsive and efficient investment analysis and decision-making processes, the investment terms the Company offers,
the leveraged model that the Company employs to perform its due diligence with the broader New Mountain Capital team and the Company's model of investing in companies and industries it knows well.

We
believe that some of the Company's competitors may make investments with interest rates and returns that are comparable to or lower than the rates and returns that the Company
targets. Therefore, the Company does not seek to compete solely on the interest rates and returns that it offers to potential portfolio companies. For additional information concerning the competitive
risks we face, seeItem 1A.Risk Factors.

Investment Objectives and Portfolio

The 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 Company's investments may also include equity
interests such as preferred stock, common stock, warrants or options received in connection with the Company's debt investments or may include a direct investment in the equity of private companies.

The
Company makes investments through both primary originations and open-market secondary purchases. The Company primarily targets loans to, and invests in, U.S. middle market
businesses, a market segment we believe continues to be underserved by other lenders. We define middle market businesses as those businesses with annual earnings before interest, taxes, depreciation,
and amortization ("EBITDA") between $20.0 million and $200.0 million. 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. Similar to the Company, SBIC LP's investment objective is to generate current income and capital appreciation
under the investment criteria used by the Company, however, SBIC LP's investments must be SBA eligible companies. The Company's portfolio may be concentrated in a limited number of industries.
As of December 31, 2014, the Company's top five industry concentrations were software, business services, education, federal services and healthcare services. The Company's targeted investments
typically have maturities of between five and ten years and generally range in size between $10.0 million and $50.0 million. This investment size may vary proportionately as the size of
the Company's capital base changes. At December 31, 2014, the Company's portfolio consisted of 71 portfolio companies and was invested 47.6% in first lien loans, 42.4% in second lien
loans, 4.3% in subordinated debt and 5.7% in equity and other, as measured at fair value versus the Predecessor Operating Company's portfolio which consisted of 59 portfolio companies invested 49.6%
in first lien loans, 42.0% in second lien loans, 2.4% in subordinated debt and 6.0% in equity and other at December 31, 2013.

The
fair value of the Company's investments was approximately $1,424.7 million in 71 portfolio companies at December 31, 2014. At December 31, 2013 and
December 31, 2012, the Company's only investment was its investment in the Predecessor Operating Company. The fair value of the Predecessor Operating Company's investments was approximately
$1,115.7 million in 59 portfolio companies at December 31, 2013 and $989.8 million in 63 portfolio companies at December 31, 2012.

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The following table shows the Company's portfolio and investment activity for the year ended December 31, 2014 and the Predecessor Operating Company's
portfolio and investment activity for the years ended December 31, 2013 and December 31, 2012:

Years ended December 31,(in millions)

2014(1)

2013

2012New investments in 43, 34 and 45 portfolio companies, respectively

$
720.9

$
529.3

$
673.2Debt repayments in existing portfolio companies


267.5


395.4


299.2Sales of securities in 14, 12 and 22 portfolio companies, respectively


117.0


31.2


124.7Change in unrealized appreciation on 20, 45 and 48 portfolio companies, respectively


21.2


27.9


27.0Change in unrealized depreciation on 60, 29 and 30 portfolio companies, respectively


(63.9
)

(19.9
)

(17.1
)


(1)For
the year ended December 31, 2014, amounts represent the investment activity of the Predecessor Operating Company through and including
May 7, 2014 and the investment activity of the Company from May 8, 2014 through December 31, 2014.


At
December 31, 2014, the Company's weighted average Yield to Maturity at Cost was approximately 10.7%. At December 31, 2013, the Predecessor Operating Company's weighted
average Yield to Maturity at Cost and weighted average Yield to Maturity was approximately 11.0% and 10.6%, respectively. The Yield to Maturity at Cost ("Yield to Maturity at Cost") calculation
assumes that all investments, including secured collateralized agreements, not on non-accrual are purchased at the adjusted cost on the quarter end date and held until their respective maturities with
no prepayments or losses and exited at par at maturity. Adjusted cost reflects the GAAP cost for post-IPO investments and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair
market value occurred on the IPO date). This calculation excludes the impact of existing leverage. Yield to Maturity at Cost uses the London Interbank Offered Rate ("LIBOR") curves at each quarter's
end date. The actual yield to maturity may be higher or lower due to the future selection of the LIBOR contracts by the individual companies in the Company's portfolio or other factors. The Yield to
Maturity calculation used in prior years for the Predecessor Operating Company assumed that all investments not on non-accrual were purchased at fair value on December 31, 2013 and held until
their respective maturities with no prepayments or losses and exited at par at maturity.

The
following summarizes the Company's ten largest portfolio company investments and top ten industries in which the Company was invested as of December 31, 2014, calculated as a
percentage of total assets as of December 31, 2014.

Portfolio Company

Percent of Total AssetsGlobal Knowledge Training LLC


3.4
%Ascend Learning, LLC


2.9
%TIBCO Software Inc.


2.9
%Tenawa Resource Holdings LLC


2.8
%Deltek, Inc.


2.7
%Kronos Incorporated


2.5
%McGraw-Hill Global Education Holdings, LLC


2.4
%Tolt Solutions, Inc.


2.4
%Crowley Holdings Preferred, LLC


2.4
%Acrisure, LLC


2.3
%


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Industry

Percent of Total AssetsSoftware


19.0
%Business Services


17.2
%Education


16.6
%Federal Services


8.2
%Healthcare Services


7.6
%Distribution & Logistics


6.4
%Energy


5.5
%Media


4.0
%Consumer Services


3.5
%Business Products


1.7
%


Investment Criteria

The Investment Adviser has identified the following investment criteria and guidelines for use in evaluating prospective portfolio
companies. However, not all of these criteria
and guidelines were, or will be, met in connection with each of the Company's investments.



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Investment Selection and Process

The Investment Adviser believes it has developed a proven, consistent and replicable investment process to execute the Company's
investment strategy. The Investment Adviser seeks to identify the most attractive investment sectors from the top down and then works to become the most advantaged investor in these sectors. The steps
in the Investment Adviser's process include:



Investment Committee

The Investment Adviser's investment committee (the "Investment Committee") currently consists of Steven B. Klinsky, Robert A. Hamwee,
Adam B. Weinstein, Michael B. Ajouz and John R. Kline. In addition, the executive officers and certain investment professionals are invited to all Investment Committee meetings. The Investment
Committee is responsible for approving all of the Company's investment purchases above $10.0 million. The Investment Committee also approves all asset dispositions above $10.0 million.
Purchases and dispositions below $10.0 million may be approved by the Company's Chief Executive Officer. These approval thresholds are subject to change over time. We expect to benefit from the
extensive and varied relevant experience of the investment professionals serving on the Investment Committee, which includes expertise in private equity, primary and secondary leveraged credit,
private mezzanine finance and distressed debt.

The
purpose of the Investment Committee is to evaluate and approve, as deemed appropriate, all investments by the Investment Adviser, subject to certain thresholds. The Investment
Committee process is intended to bring the diverse experience and perspectives of the Investment Committee's members to the analysis and consideration of every investment. The Investment Committee
also serves to provide investment consistency and adherence to the Investment Adviser's investment philosophies and policies. The Investment Committee also determines appropriate investment sizing.

In
addition to reviewing investments, the Investment Committee meetings serve as a forum to discuss credit views and outlooks. Potential transactions and investment opportunities are
also reviewed on a regular basis. Members of the Company's investment team are encouraged to share information and views on credits with the committee early in their analysis. This process improves
the quality of the analysis and enables the deal team members to work more efficiently.

Investment Structure

The Company targets debt investments that will yield meaningful current income and occasionally provide the opportunity for capital
appreciation through equity securities. The Company's debt investments are typically structured with the maximum seniority and collateral that the Company can reasonably obtain while seeking to
achieve its total return target.

Debt Investments

The terms of the Company's debt investments are tailored to the facts and circumstances of the transaction and prospective portfolio
company and structured to protect its rights and manage its risk while creating incentives for the portfolio company to achieve its business plan. A substantial source of return is the cash interest
that the Company collects on its debt investments.



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In
addition, from time to time the Company may also enter into revolving credit facilities, bridge financing commitments, delayed draw commitments or other commitments which can result
in providing future financing to a portfolio company.

Equity Investments

When the Company makes a debt investment, it may be granted equity in the portfolio company in the same class of security as the
sponsor receives upon funding. In addition, the Company may from time to time make non-control, equity co-investments in conjunction with private equity sponsors. The Company generally seeks to
structure its equity investments, such as direct equity co-investments, to provide it with minority rights provisions and event-driven put rights. The Company also seeks to obtain limited registration
rights in connection with these investments, which may include "piggyback" registration rights.

Portfolio Company Monitoring

The Company monitors the performance and financial trends of its portfolio companies on at least a quarterly basis. The Company
attempts to identify any developments within the portfolio company, the industry or the macroeconomic environment that may alter any material element of its original investment strategy. The Company
uses several methods of evaluating and monitoring the performance of its investments, including but not limited to, the following:



The
Company uses an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio. The Company uses a
four-level numeric rating scale as follows:



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The
following table shows the distribution of the Company's investments on the 1 to 4 investment rating scale at fair value as of December 31, 2014:

As of December 31, 2014(in millions)
Investment Rating

Par Value(1)

Percent

Fair Value

PercentInvestment Rating 1

$
255.7


18.1
%
$
277.4


19.5
%Investment Rating 2


1,061.6


75.0
%

1,089.7


76.5
%Investment Rating 3


82.9


5.9
%

48.3


3.4
%Investment Rating 4


14.2


1.0
%

9.3


0.6
%​
​
​
​
​
​
​
​
​
​
​
​
​
​$
1,414.4


100.0
%
$
1,424.7


100.0
%


(1)Excludes
shares and warrants.


Exit Strategies/Refinancing

The Company exits its investments typically through one of four scenarios: (i) the sale of the portfolio company itself
resulting in repayment of all outstanding debt, (ii) the recapitalization of the portfolio company in which the Company's loan is replaced with debt or equity from a third party or parties (in
some cases, the Company may choose to participate in the newly issued loan(s)), (iii) the repayment of the initial or remaining principal amount of the Company's loan then outstanding at
maturity or (iv) the sale of the debt investment by the Company. In some investments, there may be scheduled amortization of some portion of the Company's loan which would result in a partial
exit of its investment prior to the maturity of the loan.

Valuation

At all times consistent with GAAP and the 1940 Act, the Company conducts a valuation of assets, which impacts its net asset value.

The
Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, the Company's board of directors is ultimately and solely responsible
for determining the fair value of its 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 Company's quarterly valuation procedures
are set forth in more detail below:



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For
investments in revolving credit facilities and delayed draw commitments, the cost basis of the funded investments purchased is offset by any costs/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 Company's investments may fluctuate from period to period and the fluctuations could be material.

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Operating and Regulatory Environment

As with other companies regulated by the 1940 Act, a BDC must adhere to certain regulatory requirements. The 1940 Act contains
prohibitions and restrictions relating to investments by a BDC in another investment company as well as transactions between BDCs and their affiliates, principal underwriters and affiliates of those
affiliates or underwriters. A BDC must be organized in the U.S. for the purpose of investing in or lending to primarily private companies and making significant managerial assistance available to
them. A BDC may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses. A BDC provides stockholders the ability to retain the liquidity
of a publicly traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned companies.

The
Company has a board of directors. A majority of the Company's board of directors must be persons who are not interested persons, as that term is defined in the 1940 Act. As a BDC, we
are prohibited from protecting any director or officer against any liability to us or the Company's stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC.

As
a BDC, the Company is required to meet a coverage ratio of the value of total assets to total senior securities, which include all of its borrowings, excluding SBA-guaranteed
debentures, and any preferred stock we may issue in the future, of at least 200.0% (i.e., the amount of debt may not exceed 50.0% of the value of the Company's total assets or the Company may
borrow an amount equal to 100.0% of net assets). The Company monitors its compliance with this coverage ratio on a regular basis.

The
Company may, to the extent permitted under the 1940 Act, issue additional equity capital. The Company is generally not able to issue and sell its common stock at a price below net
asset value per share. The Company may, however, sell its common stock, or warrants, options or rights to acquire its common stock, at a price below the then-current net asset value of its common
stock if its board of directors determines that such sale is in the best interests of the Company and the best interests of its stockholders, and its stockholders approve such sale. In addition, the
Company may generally issue new shares of its common stock at a price below net asset value in rights offerings to existing stockholders and in certain other limited circumstances.

As
a BDC, the Company is generally not permitted to invest in any portfolio company in which the Investment Adviser or any of its affiliates currently have an investment or to make any
co-investments with the Investment Adviser or its affiliates without an exemptive order from the SEC.

We
may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority of the outstanding voting securities, as
required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67.0% or more of such company's voting securities
present at a meeting if more than 50.0% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50.0% of the outstanding voting securities of
such company. We do not anticipate any substantial change in the nature of our business.

In
addition, as a BDC, the Company is not permitted to issue stock in consideration for services.

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Taxation as a Regulated Investment Company

The Company has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a RIC under
Subchapter M of the Code. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that it timely distributes to
its stockholders as dividends. Rather, dividends distributed by the Company generally will be taxable to its stockholders, and any net operating losses, foreign tax credits and other tax attributes of
the Company generally will not pass through to its stockholders, subject to special rules for certain items such as net capital gains and qualified dividend income recognized by the Company.

To
qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify as a RIC, the Company must
distribute to its stockholders, for each taxable year, at least 90.0% of its "investment company taxable income", which is generally its net ordinary income plus the excess of realized net short-term
capital gains over realized net long-term capital losses (the "Annual Distribution Requirement").

The
Company will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless it distributes in a timely manner an amount at least equal to the sum of
(1) 98.0% of its respective net ordinary income for each calendar year, (2) 98.2% of its respective capital gain net income for the one-year period ending October 31 in that
calendar year and (3) any income recognized, but not distributed, in preceding years (the "Excise Tax Avoidance Requirement"). While the Company intends to make distributions to its
stockholders in each taxable year that will be sufficient to avoid any federal excise tax on its earnings, there can be no assurance that the Company will be successful in entirely avoiding this tax.

In
order to qualify as RICs for U.S. federal income tax purposes, the Company must, among other things:



A
RIC is limited in its ability to deduct expenses in excess of its "investment company taxable income" (which is, generally, net ordinary income plus the excess of realized net
short-term capital gains over realized net long-term capital losses). If the Company's expenses in a given year exceed its investment company taxable income, the Company would experience a net
operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years and such net operating losses do not pass through to its stockholders. In
addition, expenses can be used only to

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offset
investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC's
investment company taxable income, but may carry forward such losses, and use them to offset capital gains, indefinitely. Due to these limits on the deductibility of expenses and net capital losses,
the Company may for tax purposes have aggregate taxable income for several years that it is required to distribute and that is taxable to its stockholders even if such income is greater than the
aggregate net income the Company actually earned during those years.

Failure to Qualify as a Regulated Investment Company

If the Company fails to satisfy the 90.0% Income Test or the Diversification Tests for any taxable year or quarter of such taxable
year, it may nevertheless continue to qualify as a RIC for such year if certain relief provisions of the Code apply (which may, among other things, require it to pay certain
corporate-level U.S. federal income taxes or to dispose of certain assets). If the Company fails to qualify for treatment as a RIC and such relief provisions do not apply, the Company will be
subject to U.S. federal income tax on all of its taxable income at regular corporate rates (and also will be subject to any applicable state and local taxes), regardless of whether the Company makes
any distributions to its stockholders. Distributions would not be required. However, if distributions were made, any such distributions would be taxable to its stockholders as ordinary dividend income
and, subject to certain limitations under the Code, any such distributions would be eligible for the 20.0% maximum rate applicable to non-corporate taxpayers to the extent of the Company's current or
accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends-received deduction. Distributions in
excess of the Company's current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder's tax basis, and any remaining distributions would
be treated as a capital gain.

Subject
to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC
no later than the second year following the non-qualifying year, the Company could be subject to tax on any unrealized net built-in gains in the assets held by the Company during the period in which
it failed to qualify as a RIC that are recognized during the ten-year period (or five-year period for taxable years beginning during 2013) after its requalification as a RIC, unless the Company made a
special election to pay corporate-level U.S. federal income tax on such built-in gain at the time of the Company's requalification as a RIC. The Company may decide to be taxed as a regular
corporation even if it would otherwise qualify as a RIC if the Company determines that treatment as a corporation for a particular year would be in its best interests.

SBA Regulation

On August 1, 2014, the Company's wholly-owned direct and indirect subsidiary, SBIC LP received a license from the SBA to
operate as a SBIC under Section 301(c) of the 1958 Act. SBIC LP has an investment strategy and philosophy substantially similar to the Company and makes similar types of investments in
accordance with SBA regulations.

A
license allows SBIC LP to incur leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment and certain approvals by the SBA and customary
procedures. SBA-guaranteed debentures carry long-term fixed rates that are generally lower than rates on comparable bank and other debt. Under the regulations applicable to SBICs, a standard debenture
licensed SBIC is eligible for two tiers of leverage capped at $150.0 million, where each tier is equivalent to the SBIC's regulatory capital, which generally equates to the amount of equity
capital in the SBIC. Debentures guaranteed by the SBA have a maturity of ten years, require semi-annual payments of interest and do not require any principal payments prior to maturity. As of
December 31, 2014, SBIC LP had $37.5 million of outstanding SBA-guaranteed debentures. SBIC LP is subject to

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regulation
and oversight by the SBA, including requirements with respect to reporting financial information, such as the extent of capital impairment if applicable, on a regular basis and annual
examinations conducted by the SBIC. The SBA, as a creditor, will have a superior claim to SBIC LP's
assets over the Company's stockholders in the event SBIC LP is liquidated or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP upon an event of
default.

On
November 5, 2014, the Company received exemptive relief from the SEC to permit the Company to exclude the SBA-guaranteed debentures of SBIC LP from the Company's 200.0%
asset coverage test under the 1940 Act. As such, the Company's ratio of total consolidated assets to outstanding indebtedness may be less than 200.0%. This provides the Company with increased
investment flexibility but also increases the Company's risks related to leverage.

SBICs
are designed to stimulate the flow of private investor capital to eligible small businesses as defined by the SBA. Under SBA regulations, SBICs may make loans to eligible small
businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. Under present SBA regulations, eligible small businesses generally include
businesses that (together with their affiliates) have a tangible net worth not exceeding $19.5 million for the most recent fiscal year and have average annual net income after U.S. federal
income taxes not exceeding $6.5 million (average net income to be computed without benefit of any carryover loss) for the two most recent fiscal years. In addition, an SBIC must invest 25.0% of
its investment capital to "smaller business", as defined by the SBA. The definition of a smaller business generally includes businesses that have a tangible net worth not exceeding $6.0 million
for the most recent fiscal year and have average annual net income after U.S. federal income taxes not exceeding $2.0 million (average net income to be computed without benefit of any net
carryover loss) for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility for designation as an eligible small business or smaller
concern, which criteria depend on the primary industry in which the business is engaged and is based on such factors as the number of employees and gross revenue. However, once an SBIC has invested in
an eligible small business, it may continue to make follow on investments in the company, regardless of the size of the company at the time of the follow on investment.

The
SBA prohibits an SBIC from providing funds to small businesses with certain characteristics, such as businesses with the majority of their employees located outside the U.S., or from
investing in project finance, real estate, farmland, financial intermediaries or "passive" (i.e. non-operating) businesses. Without prior SBA approval, an SBIC may not invest an amount equal to
more than approximately 30.0% of the SBIC's regulatory capital in any one company and its affiliates.

The
SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies (such as limiting the permissible interest rate on debt securities held by an
SBIC in a portfolio company). An SBIC may exercise control over a small business for a period of up to seven years from the date on which the SBIC initially acquires its control position. This control
period may be extended for an additional period of time with the SBA's prior written approval.

The
SBA restricts the ability of an SBIC to lend money to any of its officers, directors and employees or to invest in associates thereof. The SBA also prohibits, without prior SBA
approval, a "change of control" of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC. A
"change of control" is
any event which would result in the transfer of the power, direct or indirect, to direct the management and policies of a SBIC, whether through ownership, contractual arrangements or otherwise.

The
SBA regulations require, among other things, an annual periodic examination of a licensed SBIC by an SBA examiner to determine the SBIC's compliance with the relevant SBA
regulations, and the performance of a financial audit by an independent auditor.

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Investment Management Agreement

The Company is a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940
Act. The Company is externally managed by the Investment Adviser and pays the Investment Adviser a fee for its services. The following summarizes the arrangements between the Company and the
Investment Adviser pursuant to an investment advisory and management agreement (the "Investment Management Agreement").

Management Services

The Investment Adviser is registered as an Investment Adviser under the Advisers Act. The Investment Adviser serves pursuant to the
Investment Management Agreement in accordance with the 1940 Act. Subject to the overall supervision of the Company's board of directors,
the Investment Adviser manages the Company's day-to-day operations and provides it with investment advisory and management services. Under the terms of the Investment Management Agreement, the
Investment Adviser:



The
Investment Adviser's services under the Investment Management Agreement are not exclusive, and the Investment Adviser (so long as its services to the Company are not impaired) and/or
other entities affiliated with New Mountain Capital are permitted to furnish similar services to other entities.

Management Fees

Pursuant to the Investment Management Agreement, the Company has agreed to pay the Investment Adviser a fee for investment advisory and
management services consisting of two componentsa base management fee and an incentive fee. The cost of both the base management fee payable to the Investment Adviser and any incentive
fees paid in cash to the Investment Adviser are borne by the Company and, as a result, are indirectly borne by NMFC's common stockholders.

Base Management Fees

The base management fee is calculated at an annual rate of 1.75% of the Company's gross assets less (i) the borrowings under the
Company's senior loan fund's Loan and Security Agreement with Wells Fargo Bank, National Association, dated October 27, 2010, as amended, (the "SLF Credit Facility") 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 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 Company has not invested, and currently is not

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invested,
in derivatives. To the extent the Company invests in derivatives in the future, the Company will use the actual value of the derivatives, as reported on its Consolidated Statements of Assets
and Liabilities, for purposes of calculating its base management fee.

Since
IPO, the base management fee calculation has deducted the borrowings under the SLF Credit Facility. The SLF Credit Facility has historically consisted of primarily lower yielding
assets at higher advance rates. As part of an amendment to the Company's existing credit facilities with Wells Fargo Bank, National Association, the SLF Credit Facility merged with NMF Holdings' Loan
and Security Agreement with Wells Fargo Bank, National Association, dated May 19, 2011, as amended and restated, (the "Predecessor Holdings Credit Facility") and into the Second Amended and
Restated Loan and Security Agreement with Wells Fargo Bank, National Association (the "Holdings Credit Facility") on December 18, 2014. See Item 8.Financial Statements and Supplementary DataNote 7,
Borrowingsfor additional information on the Company's
credit facilities. Post credit facility merger and to be consistent with the methodology since IPO, the Investment Advisor will waive management fees on the leverage associated with those assets that
share the same underlying yield characteristics with investments leveraged under the legacy SLF Credit Facility. The Investment Advisor cannot recoup management fees that the Investment Advisor has
previously waived. For the year ended December 31, 2014, total management fees waived were approximately $0.7 million.

Incentive Fees

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20.0% of the
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 Company receives from portfolio companies) accrued during the calendar quarter, minus the 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 stock (of which there are none as of December 31, 2014), 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 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 Predecessor Operating Company's existing investments to fair market value at the IPO date. Since the total value of the
Predecessor Operating Company's investments at the time of the IPO was greater than the investments' cost basis, a larger amount of 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, repaid or mature in the future. The 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 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 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

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

In
accordance with GAAP, the 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.

Example 1: Income Related Portion of Incentive Fee for Each Calendar Quarter*:



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Pre-Incentive
Fee Adjusted Net Investment Income does not exceed the hurdle rate, therefore there is no income related incentive fee.



Pre-Incentive
Fee Adjusted Net Investment Income exceeds the hurdle rate, but does not fully satisfy the "catch-up" provision, therefore the income related portion of the incentive fee
is 0.26%.



Pre-Incentive
Fee Adjusted Net Investment Income exceeds the hurdle rate, and fully satisfies the "catch-up" provision, therefore the income related portion of the incentive fee is
0.57%.

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Example 2: Capital Gains Portion of Incentive Fee*:



The
capital gains portion of the incentive fee would be:



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The
capital gains incentive fee, if any, would be:



Payment of Expenses

The Company's primary operating expenses are the payment of a base management fee and any incentive fees under the Investment
Management Agreement and the allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to the Company under the Administration Agreement. The Company
bears all other expenses of its operations and transactions, including (without limitation) fees and expenses relating to:



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Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which
are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70.0% of the BDC's total assets. The principal categories of qualifying assets
relevant to our business are any of the following:



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In
addition, a BDC must have been organized and have its principal place of business in the U.S. and must be operated for the purpose of making investments in the types of securities
described in (1), (2) or (3) above.

As
of December 31, 2014, 9.4% of the Company's total assets were not qualifying assets.

Managerial Assistance to Portfolio Companies

BDCs generally must offer to make available to the issuer of the securities significant managerial assistance, except in circumstances
where either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other
persons in the group makes available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC offers to provide, and, if accepted,
does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. The Administrator or its affiliate provides such
managerial assistance on the Company's behalf to portfolio companies that request this assistance.

Temporary Investments

Pending investments in other types of qualifying assets, the Company's investments may consist of cash, cash equivalents, U.S.
government securities or high-quality debt securities maturing in one year or less from the time of investment (collectively, as "temporary investments"), so that 70.0% of the Company's assets are
qualifying assets. Typically, the Company will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the
U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as the Company, of a specified security and the simultaneous agreement by the seller to repurchase it
at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of
the Company's assets that may be invested in such repurchase agreements. However, if more than

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25.0%
of the Company's total assets constitute repurchase agreements from a single counterparty, the Company would not meet the Diversification Tests in order to qualify as a RIC for U.S. federal
income tax purposes. Thus, the Company does not intend to enter into repurchase agreements with a single counterparty in excess of this limit. The Investment Adviser will monitor the creditworthiness
of the counterparties with which the Company enters into repurchase agreement transactions.

Senior Securities

The Company is permitted, under specified conditions, to issue multiple classes of debt if the Company's asset coverage, as defined in
the 1940 Act, is at least equal to 200.0% immediately after each such issuance. In addition, while any senior securities remain outstanding (other than any indebtedness issued in consideration of a
privately arranged loan, such as any indebtedness outstanding under the Holdings Credit Facility, or the Senior Secured Revolving Credit Agreement with Goldman Sachs Bank USA and Morgan Stanley, N.A.,
dated June 4, 2014, as amended (together with the related guarantee and security agreement) (the "NMFC Credit Facility") or the convertible notes issued on June 3, 2014 under an
indenture between the Company and U.S. Bank National Association (the "Convertible Notes")), the Company must make provisions to prohibit any distribution to its stockholders or the repurchase of its
equity securities unless the Company meets the applicable asset coverage ratios at the time of the distribution or repurchase. The Company may also borrow amounts up to 5.0% of the value of its total
assets for temporary or emergency purposes without regard to its
asset coverage. The Company will include the assets and liabilities of NMFC and all of its wholly-owned direct and indirect subsidiaries for purposes of calculating the asset coverage ratio. The
Company received exemptive relief from the SEC on November 5, 2014, allowing the Company to modify the asset coverage requirement to exclude SBA-guaranteed debentures from this calculation. For
a discussion of the risks associated with leverage, seeItem 1A.Risk Factors.

Code of Ethics

The Company has adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal
investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be
purchased or held by the Company so long as such investments are made in accordance with the code's requirements. You may read and copy the code of ethics at the SEC's Public Reference Room located at
100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330, and copies of the code of ethics may
be obtained, after paying a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov. In addition, the code of ethics is available on the SEC's Internet site at http://www.sec.gov.

Compliance Policies and Procedures

The Company and the Investment Adviser have adopted and implemented written policies and procedures reasonably designed to prevent
violation of the federal securities laws and the Company is required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. The
Company's chief compliance officer is responsible for administering these policies and procedures.

Proxy Voting Policies and Procedures

The Company has delegated its proxy voting responsibility to the Investment Adviser. The proxy voting policies and procedures of the
Investment Adviser are set forth below. The guidelines will be reviewed periodically by the Investment Adviser and the Company's non-interested directors, and, accordingly, are subject to change.

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Introduction

As an investment adviser registered under the Advisers Act, the Investment Adviser has a fiduciary duty to act solely in the best
interests of its clients. As part of this duty, it recognizes that it must vote the Company's securities in a timely manner free of conflicts of interest and in the best interests of the Company.

The
policies and procedures for voting proxies for the investment advisory clients of the Investment Adviser are intended to comply with Section 206 of, and Rule 206(4)-6
under, the Advisers Act.

Proxy policies

The Investment Adviser will vote proxies relating to the Company's securities in the best interest of the Company. It will review on a
case-by-case basis each proposal submitted for a stockholder vote to determine its impact on the portfolio securities held by the Company. Although the Investment Adviser will generally vote against
proposals that may have a negative impact on its clients' portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.

The
proxy voting decisions of the Investment Adviser are made by the senior officers who are responsible for monitoring each of its clients' investments. To ensure that its vote is not
the product of a conflict of interest, it will require that: (a) anyone involved in the decision making process disclose to its chief compliance officer any potential conflict that he or she is
aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (b) employees involved in the decision making process or vote administration are prohibited
from revealing how the Investment Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.

Proxy voting records

You may obtain, without charge, information regarding how the Company voted proxies with respect to the Company's portfolio securities
by making a written request for proxy voting information to: Chief Compliance Officer, 787 Seventh Avenue, 48th Floor, New York, New York 10019.

Staffing

The Company does not have any employees. Day-to-day investment operations that are conducted by the Company are managed by the
Investment Adviser. See "Investment Management Agreement". The Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its
obligations to the Company under the Administration Agreement, including the compensation of the Company's chief financial officer and chief compliance officer, and their respective staffs. For a more
detailed discussion of the Administration Agreement, seeItem 8.Financial Statements and Supplementary DataNote 5,
Agreements.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 imposes a variety of regulatory requirements on publicly-held companies and their insiders. Many of
these requirements affect the Company. For example:



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The
Sarbanes-Oxley Act of 2002 requires the Company to review its current policies and procedures to determine whether they comply with the Sarbanes-Oxley Act of 2002 and the regulations
promulgated thereunder. The Company intends to monitor its compliance with all regulations that are adopted under the Sarbanes-Oxley Act of 2002 and will take actions necessary to ensure that it is in
compliance therewith.

Available Information

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information as required by
the 1940 Act. You may inspect and copy any materials we file with the SEC at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 or by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site
that contains reports, proxy and information statements and other information filed electronically by us with the SEC athttp://www.sec.gov.

We
make available free of charge on our website,http://www.newmountainfinance.com, our reports, proxies and information statements and
other information as soon as reasonably practicable after we electronically file such materials with, or furnish to, the SEC. Information contained on our website or on the SEC's website about us is
not incorporated into this annual report and should not be considered to be a part of this annual report.

Privacy Notice

Your privacy is very important to us. This Privacy Notice sets forth our policies with respect to non-public personal information about
our stockholders and prospective and former stockholders. These policies apply to stockholders of the Company and may be changed at any time, provided a notice of such change is given to you. This
notice supersedes any other privacy notice you may have received from us.

We
will safeguard, according to strict standards of security and confidentiality, all information we receive about you. The only information we collect from you is your name, address,
number of shares you hold and your social security number. This information is used only so that we can send you annual reports and other information about us, and send you proxy statements or other
information required by law.

We
do not share this information with any non-affiliated third party except as described below.



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We
seek to carefully safeguard your private information and, to that end, restrict access to non-public personal information about you to those employees and other persons who need to
know the information to enable us to provide services to you. We maintain physical, electronic and procedural safeguards to protect your non-public personal information.

If
you have any questions regarding this policy or the treatment of your non-public personal information, please contact our Chief Compliance Officer at (212) 655-0024.

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Item 1A.    Risk Factors

You should carefully consider the significant risks described below, together with all of the other information
included in this Form 10-K, including our consolidated financial statements and the related notes, before making an investment decision in the Company. The risks set forth below are not the
only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially affect our business, our structure, our financial
condition, our investments and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In
such case, our net asset value and the trading price of NMFC's common stock could decline. There can be no assurance that we will achieve our investment objective and you may lose all or part of your
investment.

RISKS RELATED TO OUR BUSINESS AND STRUCTURE

Uncertainty about the financial stability of the United States (U.S.) and of several countries in
the European Union (EU) could have a significant adverse effect on the Company's business, results of operations and financial condition, thus affecting the Company's financial condition and earnings.

Due to federal budget deficit concerns, S&P downgraded the federal government's credit rating from AAA to AA+ for the first time in
history on August 5, 2011. Further, Moody's and Fitch have warned that they may downgrade the federal government's credit rating. Further downgrades or warnings by S&P or other rating agencies,
and the government's credit and deficit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with the
Company's debt portfolio and the Company's ability to access the debt markets on favorable terms. In addition, a decreased credit rating could create broader financial turmoil and uncertainty, which
may weigh heavily on the Company's financial performance and the value of NMFC's common stock.

In
2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in Greece, Ireland, Italy, Portugal and Spain, which
created concerns about the ability of these nations to continue to service their sovereign debt obligations. Risks and ongoing concerns resulting from the debt crisis in Europe could have a
detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions. Market and economic disruptions
have affected, and may continue to affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors.
We cannot assure you that the market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not spread, and we cannot assure you that
future assistance packages will be available, or if available, sufficient to stabilize the affected countries and markets in Europe or elsewhere. To the extent uncertainty regarding any economic
recovery in Europe continues to negatively impact consumer confidence and consumer credit factors, the Company's business and results of operations could be significantly and adversely affected.

In
October 2014, the U.S. Federal Reserve announced that it has terminated its bond-buying program, or quantitative easing, which was designed to stimulate the economy and expand the
Federal Reserve's holdings of long-term securities until key economic indicators, such as the unemployment rate, showed signs of improvement. It is unclear what effect, if any, the Federal Reserve's
termination of quantitative easing will have on the value of the Company's investments. However, it is possible that without quantitative easing by the Federal Reserve, these developments, along with
the European sovereign
debt crisis, could cause interest rates and borrowing costs to rise, which may negatively impact the Company's ability to access the debt markets on favorable terms.

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The Company may suffer credit losses.

Investments in small and middle market businesses are highly speculative and involve a high degree of risk of credit loss. These risks
are likely to increase during volatile economic periods, such as the U.S. and many other economies have recently been experiencing.

The Company does not expect to replicate the Predecessor Entities' historical performance or the
historical performance of other entities managed or supported by New Mountain Capital.

The Company does not expect to replicate the Predecessor Entities' historical performance or the historical performance of New Mountain
Capital's investments. The Company's investment returns may be substantially lower than the returns achieved by the Predecessor Entities. Although the Predecessor Entities commenced operations during
otherwise unfavorable economic conditions, this was a favorable environment in which the Predecessor Operating Company could conduct its business in light of its investment objectives and strategy. In
addition, the Company's investment strategies may differ from those of New Mountain Capital or its affiliates. The Company, as a BDC and as a RIC, is subject to certain regulatory restrictions that do
not apply to New Mountain Capital or its affiliates.

The
Company is generally not permitted to invest in any portfolio company in which New Mountain Capital or any of its affiliates currently have an investment or to make any
co-investments with New Mountain Capital or its affiliates, except to the extent permitted by the 1940 Act. This may adversely affect the pace at which the Company makes investments. Moreover, the
Company may operate with a different leverage profile than the Predecessor Entities. Furthermore, none of the prior results from the Predecessor Entities were from public reporting companies, and all
or a portion of these results were achieved in particularly favorable market conditions for the Predecessor Operating Company's investment strategy which may never be repeated. Finally, we can offer
no assurance that the Company's investment team will be able to continue to implement its investment objective with the same degree of success as it has had in the past.

There is uncertainty as to the value of the Company's portfolio investments because most of its
investments are, and may continue to be in private companies and recorded at fair value. In addition, the fair values of the Company's investments are determined by the Company's board of directors in
accordance with the Company's valuation policy.

Some of the Company's investments are and may be in the form of securities or loans that are not publicly traded. The fair value of
these investments may not be readily determinable. Under the 1940 Act, the Company is required to carry its portfolio investments at market value or, if there is no readily available market value, at
fair value as determined in good faith by its board of directors, including to reflect significant events affecting the value of its securities. The Company values its investments for which it does
not have readily available market quotations quarterly, or more frequently as circumstances require, at fair value as determined in good faith by its board of directors in accordance with its
valuation policy, which is at all times consistent with GAAP. SeeItem 8.Financial Statements and Supplementary DataNote 2, Summary of
Significant Accounting PoliciesorNote 4, Fair Valuefor additional information on around valuations.

The
Company's board of directors utilizes the services of one or more independent third-party valuation firms to aid it in determining the fair value with respect to its material
unquoted assets in accordance with its valuation policy. The inputs into the determination of fair value of these investments may require significant management judgment or estimation. Even if
observable market data is available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price
in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information.

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The
types of factors that the board of directors takes into account in determining the fair value of its investments generally include, as appropriate: available market data, including
relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and
realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows and the markets in which it does business, comparisons of financial ratios
of peer companies that are public, comparable merger and acquisition transactions and the principal market and enterprise values. Since these valuations, and particularly valuations of private
securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, the Company's determinations of fair value may differ materially
from the values that would have been used if a ready market for these securities existed.

Due
to this uncertainty, the Company's fair value determinations may cause its net asset value, on any given date, to be materially understated or overstated. In addition, investors
purchasing NMFC's common stock based on an overstated net asset value would pay a higher price than the realizable value that the Company's investments might warrant.

The
Company may adjust quarterly the valuation of its portfolio to reflect its board of directors' determination of the fair value of each investment in its portfolio. Any changes in
fair value are recorded in the Company's statement of operations as net change in unrealized appreciation or depreciation.

The Company's ability to achieve its investment objective depends on key investment personnel of the
Investment Adviser. If the Investment Adviser were to lose any of its key investment personnel, the Company's ability to achieve its investment objective could be significantly harmed.

The Company depends on the investment judgment, skill and relationships of the investment professionals of the Investment Adviser,
particularly Steven B. Klinsky and Robert A. Hamwee, as well as other key personnel to identify, evaluate, negotiate, structure, execute, monitor and service its investments. The Investment Adviser,
as an affiliate of New Mountain Capital, is supported by New Mountain Capital's team, which as of December 31, 2014 consisted of approximately 100 staff members of New Mountain Capital and its
affiliates to fulfill its obligations to the Company under the Investment Management Agreement. The Investment Adviser may also depend upon New Mountain Capital to obtain access to investment
opportunities originated by the professionals of New Mountain Capital and its affiliates. The Company's future success depends to a significant extent on the continued service and coordination of the
key investment personnel of the Investment Adviser. The departure of any of these individuals could have a material adverse effect on the Company's ability to achieve its investment objective.

The
Investment Committee, which provides oversight over the Company's investment activities, is provided by the Investment Adviser. The Investment Committee currently consists of five
members. The loss of any member of the Investment Committee or of other senior professionals of the Investment Adviser and its affiliates without suitable replacement could limit the Company's ability
to achieve its investment objective and operate as we anticipate. This could have a material adverse effect on our financial condition, results of operation and cash flows. To achieve the Company's
investment objective, the Investment Adviser may hire, train, supervise and manage new investment professionals to participate in its investment selection and monitoring process. If the Investment
Adviser is unable to find investment professionals or do so in a timely manner, our business, financial condition and results of operations could be adversely affected.

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The Investment Adviser has limited experience managing a BDC or a RIC, which could adversely affect
our business.

Other than the Company, the Investment Adviser has not previously managed a BDC or a RIC. The 1940 Act and the Code impose numerous
constraints on the operations of BDCs and RICs that do not apply to the other investment vehicles previously managed by the investment professionals of the Investment Adviser. For example, under the
1940 Act, BDCs are required to invest at least 70.0% of their total assets primarily in securities of qualifying U.S. private or thinly traded companies, cash, cash equivalents, U.S. government
securities and other high quality debt investments that mature in one year or less. Moreover, qualification for taxation as a RIC under subchapter M of the Code requires satisfaction of
source-of-income, asset diversification and annual distribution requirements. The failure to comply with these provisions in a timely manner could prevent the Company from qualifying as a BDC or as a
RIC and could force us to pay unexpected taxes and penalties, which would have a material adverse effect on our performance. The Investment Adviser's lack of experience in managing a portfolio of
assets under the constraints applicable to BDCs and RICs may hinder its ability to take advantage of attractive investment opportunities and, as a result, achieve the Company's investment objective.
If the Company fails to maintain its status as a BDC or as a RIC, its operating flexibility could be significantly reduced.

The Company operates in a highly competitive market for investment opportunities and may not be able
to compete effectively.

The Company competes for investments with other BDCs and investment funds (including private equity and hedge funds), as well as
traditional financial services companies such as commercial banks and other sources of funding. Many of its competitors are substantially larger and have considerably greater financial, technical and
marketing resources than it does. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to the Company. In addition, some of the Company's
competitors may have higher risk tolerances or different risk assessments than the Company has. Furthermore, many of the Company's competitors have greater experience operating under, or are not
subject to, the regulatory restrictions that the 1940 Act imposes on the Company as a BDC or the source-of-income, asset diversification and distribution requirements that it must satisfy to maintain
its RIC status. These characteristics could allow the Company's competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible
structuring than the Company is able to do. There are a number of new BDCs that have recently completed their IPO or that have filed registration statements with the SEC, which could create increased
competition for investment opportunities.

The
Company may lose investment opportunities if it does not match its competitors' pricing, terms and structure. With respect to the investments the Company makes, it does not seek to
compete based primarily on the interest rates it may offer, and we believe that some of the Company's competitors may make loans with interest rates that may be lower than the rates it offers. In the
secondary market for acquiring existing loans, we expect the Company to compete generally on the basis of pricing terms. If the Company matches its competitors' pricing, terms and structure, it may
experience decreased net interest income, lower yields and increased risk of credit loss. If the Company is forced to match its competitors' pricing, terms and structure, it may not be able to achieve
acceptable returns on its investments or may bear substantial risk of capital loss. Part of the Company's competitive advantage stems from the fact that we believe the market for middle-market lending
is underserved by traditional bank lenders and other financial sources. A significant increase in the number and/or the size of the Company's competitors in this target market could force it to accept
less attractive investment terms. The Company may also compete for investment opportunities with accounts managed by the Investment Adviser or its affiliates. Although the Investment Adviser allocates
opportunities in accordance with its policies and procedures, allocations to such other accounts reduces the amount and frequency of opportunities available to the Company and may not be in the best

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interests
of the Company and, consequently, NMFC's stockholders. Moreover, the performance of investment opportunities is not known at the time of allocation. If the Company is not able to compete
effectively, its business, financial condition and results of operations may be adversely affected, thus affecting the business, financial condition and results of operations. Because of this
competition, there can be no assurance that the Company will be able to identify and take advantage of attractive investment opportunities that it identifies or that it will be able to fully invest
its available capital.

Our business, results of operations and financial condition depends on the Company's ability to
manage future growth effectively.

The Company's ability to achieve its investment objective and to grow depends on the Investment Adviser's ability to identify, invest
in and monitor companies that meet the Company's investment criteria. Accomplishing this result on a cost-effective basis is largely a function of the Investment Adviser's structuring of the
investment process, its ability to provide competent, attentive and efficient services to the Company and its ability to access financing on acceptable terms. The Investment Adviser has substantial
responsibilities under the Investment Management Agreement and may also be called upon to provide managerial assistance to the Company's portfolio companies. These demands on the time of the
Investment Adviser and its investment professionals may distract them or slow the Company's rate of investment. In order to grow, the Company and the Investment Adviser may need to retain, train,
supervise and manage new investment professionals. However, these investment professionals may not be able to contribute effectively to the work of the Investment
Adviser. If the Company is unable to manage its future growth effectively, our business, results of operations and financial condition could be materially adversely affected.

The incentive fee may induce the Investment Adviser to make speculative investments.

The incentive fee payable to the Investment Adviser may create an incentive for the Investment Adviser to pursue investments that are
risky or more speculative than would be the case in the absence of such compensation arrangement, which could result in higher investment losses, particularly during cyclical economic downturns. The
incentive fee payable to the Investment Adviser is calculated based on a percentage of the Company's return on investment capital. This may encourage the Investment Adviser to use leverage to increase
the return on the Company's investments. In addition, because the base management fee is payable based upon the Company's gross assets, which includes any borrowings for investment purposes, but
excludes borrowings under the SLF Credit Facility and cash and cash equivalents for investment purposes, the Investment Adviser may be further encouraged to use leverage to make additional
investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of NMFC's common stock.

The
incentive fee payable to the Investment Adviser also may create an incentive for the Investment Adviser to invest in instruments that have a deferred interest feature, even if such
deferred payments would not provide the cash necessary to pay current distributions to NMFC's stockholders. Under these investments, the Company would accrue the interest over the life of the
investment but would not receive the cash income from the investment until the end of the investment's term, if at all. The Company's net investment income used to calculate the income portion of the
incentive fee, however, includes accrued interest. Thus, a portion of the incentive fee would be based on income that the Company has not yet received in cash and may never receive in cash if the
portfolio company is unable to satisfy such interest payment obligations. In addition, the "catch-up" portion of the incentive fee may encourage the Investment Adviser to accelerate or defer interest
payable by portfolio companies from one calendar quarter to another, potentially resulting in fluctuations in timing and dividend amounts.

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The Company may be obligated to pay the Investment Adviser incentive compensation even if the
Company incurs a loss.

The Investment Adviser is entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess
of the Company's Pre-Incentive Fee Adjusted Net Investment Income for that quarter (before deducting incentive compensation) above a performance threshold for that quarter. Accordingly, since the
performance threshold is based on a percentage of the Company's net asset value, decreases in the Company's net asset value makes it easier to achieve the performance threshold. The Company's
Pre-Incentive Fee Adjusted Net Investment Income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation that it may incur in the fiscal quarter, even if
such capital losses or depreciation result in a net loss on the Company's statement of operations for that quarter. Thus, the Company may be required to pay the Investment Adviser incentive
compensation for a fiscal quarter even if there is a decline in the value of its portfolio or the Company incurs a net loss for that quarter.

The Company borrows money, which could magnify the potential for gain or loss on amounts invested in
us and increase the risk of investing in us.

The Company borrows money as part of its business plan. Borrowings, also known as leverage, magnify the potential for gain or loss on
invested equity capital and may, consequently, increase the risk of investing in us. We expect the Company to continue to use leverage to finance its investments through senior securities issued by
banks and other lenders. Lenders of these senior securities have fixed dollar claims on the Company's assets that are superior to claims of NMFC's common stockholders. If the value of the Company's
assets decreases, leveraging would cause its net asset value to decline more sharply than it otherwise would have had it not leveraged. Similarly, any decrease in the Company's income would cause its
net income to decline more sharply than they would have had it not borrowed. Such a decline could adversely affect the Company's ability to make common stock dividend payments. In addition, because
the Company's investments may be illiquid, the Company may be unable to dispose of them or to do so at a favorable price in the event it needs to do so if it is unable to refinance any indebtedness
upon maturity and, as a result, we may suffer losses. Leverage is generally considered a speculative investment technique.

The
Company's ability to service any debt that it incurs depends largely on its financial performance and is subject to prevailing economic conditions and competitive pressures.
Moreover, as the Investment Adviser's management fee is payable to the Investment Adviser based on gross assets, including those assets acquired through the use of leverage, the Investment Adviser may
have a financial incentive to incur leverage which may not be consistent with the Company's interests and the interests of its common stockholders. In addition, holders of NMFC's common stock will,
indirectly, bear the burden of any increase in the Company's expenses as a result of leverage, including any increase in the management fee payable to the Investment Adviser.

At
December 31, 2014, the Company had $468.1 million, $50.0 million, $115.0 million and $37.5 million of indebtedness outstanding under the Holdings
Credit Facility, the NMFC Credit Facility, the Convertible Notes and the SBA-guaranteed debentures, respectively. The Holdings Credit Facility had a weighted average interest rate of 2.9% for the year
ended December 31, 2014 and the NMFC Credit Facility had a weighted average interest rate of 2.7% for the year ended December 31, 2014. The interest rate on the Convertible Notes is 5.0%
per year.

We may need to raise additional capital to grow the Company.

The Company may need additional capital to fund new investments and grow. The Company may access the capital markets periodically to
issue equity securities. In addition, the Company may also issue debt securities or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could
increase the Company's funding costs and limit its access to the

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capital
markets or result in a decision by lenders not to extend credit to the Company. A reduction in the availability of new capital could limit the Company's ability to grow. In addition, the
Company is required to distribute at least 90.0% of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to its stockholders to maintain its RIC
status. As a result, these earnings will not be available to fund new investments. If the Company is unable to access the capital markets or if the Company is unable to borrow from financial
institutions, the Company may be unable to grow its business and execute its business strategy fully, and earnings, if any, could decrease, which could have an adverse effect on the value of the
Company's securities.

If the Company is unable to comply with the covenants or restrictions in its borrowings, our
business could be materially adversely affected.

The Holdings Credit Facility include covenants that, subject to exceptions, restrict the Company's ability to pay distributions, create
liens on assets, make investments, make acquisitions and engage in mergers or consolidations. The Holdings Credit Facility also includes a change of control provision that accelerates the indebtedness
under the facility in the event of certain change of control events. Complying with these restrictions may prevent the Company from taking actions that we believe would help it to grow its business or
are otherwise consistent with its investment
objective. These restrictions could also limit the Company's ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. In
addition, the restrictions contained in the Holdings Credit Facility could limit the Company's ability to make distributions to its stockholders in certain circumstances, which could result in the
Company failing to qualify as a RIC and thus becoming subject to corporate-level U.S. federal income tax (and any applicable state and local taxes).

The
NMFC Credit Facility includes customary covenants, including certain financial covenants related to asset coverage and liquidity and other maintenance covenants, as well as customary
events of default.

The
Company's Convertible Notes are subject to certain covenants, including covenants requiring the Company to provide financial information to the holders of the Convertible Notes and
the trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions.

The
breach of any of the covenants or restrictions, unless cured within the applicable grace period, would result in a default under the applicable credit facility that would permit the
lenders thereunder to declare all amounts outstanding to be due and payable. In such an event, the Company may not have sufficient assets to repay such indebtedness. As a result, any default could
have serious consequences to our financial condition. An event of default or an acceleration under the credit facilities could also cause a cross-default or cross-acceleration of another debt
instrument or contractual obligation, which would adversely impact the Company's liquidity. The Company may not be granted waivers or amendments to the credit facilities if for any reason it is unable
to comply with it, and the Company may not be able to refinance the credit facilities on terms acceptable to it, or at all.

The Company may enter into reverse repurchase agreements, which are another form of leverage.

The Company may enter into reverse repurchase agreements as part of its management of its investment portfolio. Under a reverse
repurchase agreement, the Company will effectively pledge its assets as collateral to secure a short-term loan. Generally, the other party to the agreement makes the loan in an amount equal to a
percentage of the fair value of the pledged collateral. At the maturity of the reverse repurchase agreement, the payor will be required to repay the loan and correspondingly receive back its
collateral. While used as collateral, the assets continue to pay principal and interest which are for the benefit of the Company.

The
Company's use of reverse repurchase agreements, if any, involves many of the same risks involved in its use of leverage, as the proceeds from reverse repurchase agreements generally
will be

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invested
in additional securities. There is a risk that the market value of the securities acquired with the proceeds of a reverse repurchase agreement may decline below the price of the securities
that it has sold but remains obligated to repurchase under the reverse repurchase agreement. In addition, there is a risk that the market value of the securities effectively pledged by the Company may
decline. If a buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experience insolvency, the Company may be adversely affected. Also, in entering into reverse
repurchase agreements, the Company would bear the risk of loss to the extent that the proceeds of such agreements at settlement are more than the fair value of the underlying securities being pledged.
In addition, due to the interest costs associated with reverse repurchase agreements transactions, the Company's net asset value would decline, and, in some cases, we may be worse off than if such
instruments had not been used.

If the Company is unable to obtain additional debt financing, or if its borrowing capacity is
materially reduced, our business could be materially adversely affected.

The Company may want to obtain additional debt financing, or need to do so upon maturity of its credit facilities, in order to obtain
funds which may be made available for investments. The revolving period under the Holdings Credit Facility ends on December 18, 2017, and the Holdings Credit Facility matures on
December 18, 2019. The NMFC Credit Facility, the Convertible Notes and the SBA-guaranteed debentures mature on June 4, 2019, June 15, 2019 and March 1, 2025, respectively.
If the Company is unable to increase, renew or replace any such facilities and enter into new debt financing facilities or other debt financing on commercially reasonable terms, its liquidity may be
reduced significantly. In addition, if the Company is unable to repay amounts outstanding under any such facilities and is declared in default or is unable to renew or refinance these facilities, it
may not be able to make new investments or operate our business in the normal course. These situations may arise due to circumstances that the Company may be unable to control, such as lack of access
to the credit markets, a severe decline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or the Company, and could materially damage
the Company's business operations, results of operations and financial condition.

A renewed disruption in the capital markets and the credit markets could adversely affect our
business.

As a BDC, the Company must maintain its ability to raise additional capital for investment purposes. If the Company is unable to access
the capital markets or credit markets, the Company may be forced to curtail its business operations and may be unable to pursue new investment opportunities. The capital markets and the credit markets
have experienced extreme volatility in recent periods, and, as a result, there has been and will likely continue to be uncertainty in
the financial markets in general. Disruptions in the capital markets in recent years increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity
in parts of the capital markets. In addition, a prolonged period of market illiquidity may cause the Company to reduce the volume of loans it originates and/or funds and adversely affect the value of
our portfolio investments. Unfavorable economic conditions could also increase the Company's funding costs, limit its access to the capital markets or result in a decision by lenders not to extend
credit to the Company. These events could limit the Company's investment originations, limit its ability to grow and negatively impact our operating results. Ongoing disruptive conditions in the
financial industry and the impact of new legislation in response to those conditions could restrict the Company's business operations and, consequently, could adversely impact the Company's business,
results of operations and financial condition.

If
the fair value of the Company's assets declines substantially, it may fail to maintain the asset coverage ratios imposed upon it by the 1940 Act and contained in its Holding Credit
Facility and NMFC Credit Facility. Any such failure would affect the Company's ability to issue senior securities, including borrowings, draw on its Holdings Credit Facility and NMFC Credit Facility
and pay

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distributions,
which could materially impair its business operations. The Company's liquidity could be impaired further by the Company's inability to access the capital or credit markets. For example,
we cannot be certain that the Company will be able to renew its credit facilities as they mature, to consummate new borrowing facilities to provide capital for normal operations, including new
originations, or reapply for SBIC licenses. In recent years, reflecting concern about the stability of the financial markets, many lenders and institutional investors have reduced or ceased providing
funding to borrowers. This market turmoil and tightening of credit have led to increased market volatility and widespread reduction of business activity generally in recent years. In addition, adverse
economic conditions due to these disruptive conditions could materially impact the Company's ability to comply with the financial and other covenants in any existing or future credit facilities. If
the Company is unable to comply with these covenants, this could materially adversely affect the Company's business, results of operations and financial condition.

Changes in interest rates may affect the Company's cost of capital and net investment income.

To the extent the Company borrows money to make investments, the Company's net investment income depends, in part, upon the difference
between the rate at which it borrows funds and the rate at which it invests those funds. As a result, a significant change in market interest rates may have a material adverse effect on the Company's
net investment income in the event it uses debt to finance its investments. In periods of rising interest rates, the Company's cost of funds would increase, which could reduce its net investment
income. The Company may use interest rate risk
management techniques in an effort to limit its exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

The incentive fee the Company pays to the Investment Adviser with respect to capital gains may be
effectively greater than 20.0%.

As a result of the operation of the cumulative method of calculating the capital gains portion of the incentive fee the Company pays to
the Investment Adviser, the cumulative aggregate capital gains fee received by the Investment Adviser could be effectively greater than 20.0%, depending on the timing and extent of subsequent net
realized capital losses or net unrealized depreciation. We cannot predict whether, or to what extent, this payment calculation would affect your investment in NMFC's common stock.

SBIC LP is licensed by the SBA and is subject to SBA regulations.

On August 1, 2014, the Company's wholly-owned direct and indirect subsidiary, SBIC LP, received its license to operate as
an SBIC under the 1958 Act and is regulated by the SBA. The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies, regulates the types of financings,
prohibits investing in small businesses with certain characteristics or in certain industries and requires capitalization thresholds that limit distributions to the Company. Compliance with SBIC
requirements may cause SBIC LP to invest at less competitive rates in order to find investments that qualify under the SBA regulations.

The
SBA regulations require, among other things, an annual periodic examination of a licensed SBIC by an SBA examiner to determine the SBIC's compliance with the relevant SBA
regulations, and the performance of a financial audit by an independent auditor. If SBIC LP fails to comply with applicable regulations, the SBA could, depending on the severity of the
violation, limit or prohibit SBIC LP's use of the debentures, declare outstanding debentures immediately due and payable, and/or limit SBIC LP from making new investments. In addition,
the SBA could revoke or suspend SBIC LP's license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the 1958 Act or any rule or regulation
promulgated thereunder. These actions by the SBA would, in turn, negatively affect the Company because SBIC LP is a wholly-owned direct and indirect subsidiary of the Company.

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SBA-guaranteed
debentures are non-recourse to the Company, have a ten year maturity, and may be prepaid at any time without penalty. Pooling of issued SBA-guaranteed debentures occurs in
March and September of each year. The interest rate of SBA-guaranteed debentures is fixed at the time of pooling at a market-driven spread over ten year U.S. Treasury Notes. The interest rate on
debentures issued prior to the next pooling date is LIBOR plus 30 basis points. Leverage through SBA-guaranteed debentures is subject to required capitalization thresholds. Current SBA regulations
limit the amount that any SBIC may borrow to two tiers of leverage capped at $150.0 million, where each tier is equivalent to the SBIC's regulatory capital, which generally equates to the
amount of equity capital in the SBIC.

RISKS RELATED TO OUR OPERATIONS

Because the Company intends to distribute substantially all of its income to its stockholders to
maintain its status as a RIC, the Company will continue to need additional capital to finance its growth. If additional funds are unavailable or not available on favorable terms, the Company's ability
to grow may be impaired.

In order for the Company to qualify for the tax benefits available to RICs and to avoid payment of excise taxes, the Company intends to
distribute to its stockholders substantially all of its annual taxable income. As a result of these requirements, the Company may need to raise capital from other sources to grow its business.

As
a BDC, the Company is required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities and excluding SBA-guaranteed debentures
as permitted by exemptive relief obtained from the SEC, to total senior securities, which includes all of the Company's borrowings with the exception of SBA-guaranteed debentures, of at least 200.0%.
This requirement limits the amount that the Company may borrow. Since the Company continues to need capital to grow its investment portfolio, these limitations may prevent the Company from incurring
debt and require the Company to raise additional equity at a time when it may be disadvantageous to do so. While we expect the Company will be able to borrow and to issue additional debt securities
and expect that the Company will be able to issue additional equity securities, which would in turn increase the equity capital available to the Company, we cannot assure you that debt and equity
financing will be available to the Company on favorable terms, or at all. In addition, as a BDC, the Company generally is not permitted to issue equity securities priced below net asset value without
stockholder approval. If additional funds are not available to the Company, the Company may be forced to curtail or cease new investment activities, and the Company's net asset value could decline.

SBIC LP may be unable to make distributions to the Company that will enable the Company to
meet or maintain RIC status.

In order for the Company to continue to qualify for tax benefits available to RICs and to minimize corporate-level U.S. federal
income tax, the Company must distribute to its stockholders, for each taxable year, at least 90.0% of its "investment company taxable income", which is generally its net ordinary income plus the
excess of realized net short-term capital gains over realized net long-term capital losses, including investment company taxable income from SBIC LP. The Company will be partially dependent on
SBIC LP for cash distributions to enable the Company to meet the RIC distribution requirements. SBIC LP may be limited by SBA regulations governing SBICs from making certain
distributions to the Company that may be necessary to maintain the Company's status as a RIC. The Company may have to request a waiver of the SBA's restrictions for SBIC LP to make certain
distributions to maintain the Company's RIC status. The Company cannot assure you that the SBA will grant such waiver and if SBIC LP is unable to obtain a waiver, compliance with the SBA
regulations may result in corporate-level U.S. federal income tax on the Company.

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Our ability to enter into transactions with our affiliates is restricted.

As a BDC, the Company is prohibited under the 1940 Act from participating in certain transactions with its respective affiliates
without the prior approval of its respective independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5.0% or more of the Company's outstanding voting
securities is an affiliate of the Company for purposes of the 1940 Act. The Company is generally prohibited from buying or selling any securities (other than its respective securities) from or to an
affiliate. The 1940 Act also prohibits certain "joint" transactions with an affiliate, which could include investments in the same portfolio company (whether at the same or different times), without
prior approval of independent directors and, in some cases, the SEC. If a person acquires more than 25.0% of the Company's voting securities, the Company is prohibited from buying or selling any
security (other than its respective securities) from or to such person or certain of that person's affiliates, or entering into prohibited joint transactions with such persons, absent the prior
approval of the SEC. Similar restrictions limit the Company's ability to transact business with its respective officers or directors or its affiliates. As a result of these restrictions, the Company
may be prohibited from buying or selling any security from or to any portfolio company of a private equity fund managed by any affiliate of the Investment Adviser without the prior approval of the
SEC, which may limit the scope of investment opportunities that would otherwise be available to the Company.

The Investment Adviser has significant potential conflicts of interest with the Company and,
consequently, your interests as stockholders which could adversely impact our investment returns.

The Company's executive officers and directors, as well as the current or future investment professionals of the Investment Adviser,
serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by the Company's affiliates.
Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in your interests as stockholders. Although we are currently New Mountain Capital's only
vehicle focused primarily on investing in the investments that we target, in the future, the investment professionals of the Investment Adviser and/or New Mountain Capital employees that provide
services pursuant to the Investment Management Agreement may manage other funds which may from time to time have overlapping investment objectives with our own and, accordingly, may invest in, whether
principally or secondarily, asset classes similar to those targeted by us. If this occurs, the Investment Adviser may face conflicts of interest in allocating investment opportunities to the Company
and such other funds. Although the investment professionals endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that the Company may not be given the
opportunity to participate in certain investments made by the Investment Adviser or persons affiliated with the Investment Adviser or that certain of these investment funds may be favored over the
Company. When these investment professionals identify an investment, they may be forced to choose which investment fund should make the investment.

If
the Investment Adviser forms other affiliates in the future, the Company may co-invest on a concurrent basis with such other affiliate, subject to compliance with applicable
regulations and regulatory guidance or an exemptive order from the SEC and the Company's allocation procedures. In addition, the Company pays management and incentive fees to the Investment Adviser
and reimburses the Investment Adviser for certain expenses it incurs. As a result, investors in the Company's common stock invest in the Company on a "gross" basis and receive distributions on a "net"
basis after the Company's expenses. Also, the incentive fee payable to the Investment Adviser may create an incentive for the Investment Adviser to pursue investments that are riskier or more
speculative than would be the case in the absence of such compensation arrangements. Any potential conflict of interest arising as a result of the arrangements with the Investment Adviser could have a
material adverse effect on our business, results of operations and financial condition.

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The Investment Committee, the Investment Adviser or its affiliates may, from time to time, possess
material non-public information, limiting the Company's investment discretion.

The Investment Adviser's investment professionals, Investment Committee or their respective affiliates may serve as directors of, or in
a similar capacity with, companies in which we invest. In the event that material non-public information is obtained with respect to such companies, or we become subject to trading restrictions under
the internal trading policies of those companies or as a result of applicable law or regulations, the Company could be prohibited for a period of time from purchasing or selling the securities of such
companies, and this prohibition may have an adverse effect on the Company and your interests as stockholders.

The valuation process for certain of the Company's portfolio holdings creates a conflict of
interest.

Some of the Company's portfolio investments are made in the form of securities that are not publicly traded. As a result, the Company's
board of directors determines the fair value of these securities in good faith. In connection with this determination, investment professionals from the Investment Adviser may provide the Company's
board of directors with portfolio company valuations based upon the most recent portfolio company financial statements available and projected financial results of each portfolio company. In addition,
Steven B. Klinsky, a member of the Company's board of directors, has an indirect pecuniary interest in the Investment Adviser. The participation of the Investment Adviser's investment professionals in
the Company's valuation process, and the indirect pecuniary interest in the Investment Adviser by a member of the Company's board of directors, could result in a conflict of interest as the Investment
Adviser's management fee is based, in part, on the Company's gross assets and incentive fees are based, in part, on unrealized gains and losses.

Conflicts of interest may exist related to other arrangements with the Investment Adviser or its
affiliates.

The Company has entered into a royalty-free license agreement with New Mountain Capital under which New Mountain Capital has agreed to
grant the Company a non-exclusive, royalty-free license to use the name "New Mountain". In addition, the Company reimburses the Administrator for the allocable portion of overhead and other expenses
incurred by the Administrator in performing its obligations to the Company under the Administration Agreement, such as the allocable portion of the cost of the Company's chief financial officer and
chief compliance officer and their respective staffs. This could create conflicts of interest that the Company's board of directors must monitor.

The Investment Management Agreement with the Investment Adviser and the Administration Agreement
with the Administrator were not negotiated on an arm's length basis.

The Investment Management Agreement and the Administration Agreement were negotiated between related parties. In addition, the Company
may choose not to enforce, or to enforce less vigorously, its respective rights and remedies under these agreements because of its desire to maintain its ongoing relationship with the Investment
Adviser, the Administrator and its respective affiliates. Any such decision, however, could cause the Company to breach its fiduciary obligations to its stockholders.

The Investment Adviser's liability is limited under the Investment Management Agreement, and the
Company has agreed to indemnify the Investment Adviser against certain liabilities, which may lead the Investment Adviser to act in a riskier manner than it would when acting for its own account.

Under the Investment Management Agreement, the Investment Adviser does not assume any responsibility other than to render the services
called for under that agreement, and it is not responsible for any action of the Company's board of directors in following or declining to follow the Investment Adviser's advice or recommendations.
Under the terms of the Investment Management Agreement, the Investment Adviser, its officers, members, personnel, any person controlling or

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controlled
by the Investment Adviser are not liable for acts or omissions performed in accordance with and pursuant to the Investment Management Agreement, except those resulting from acts
constituting gross negligence, willful misconduct, bad faith or reckless disregard of the Investment Adviser's duties under the Investment Management Agreement. In addition, the Company has agreed to
indemnify the Investment Adviser and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses
reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted pursuant to authority granted by the Investment Management Agreement, except where
attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person's duties under the Investment Management Agreement. These protections may lead the Investment
Adviser to act in a riskier manner than it would when acting for its own account.

The Investment Adviser can resign upon 60 days' notice, and a suitable replacement may not be
found within that time, resulting in disruptions in the Company's operations that could adversely affect our business, results of operations and financial condition.

Under the Investment Management Agreement, the Investment Adviser has the right to resign at any time upon 60 days' written
notice, whether a replacement has been found or not. If the Investment Adviser resigns, the Company may not be able to find a new investment adviser or hire internal management with similar expertise
and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If a replacement is not able to be found on a timely basis, our business, results of
operations and financial condition and the Company's ability to pay distributions are likely to be materially adversely affected and the market price of its common stock may decline. In addition, if
the Company is unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Investment Adviser and its affiliates, the coordination
of its internal management and investment activities is likely to suffer. Even if the Company is able to retain comparable management, whether internal or external, their integration into the
Company's business and lack of familiarity with the Company's investment objective may result in additional costs and time delays that may materially adversely affect our business, results of
operations and financial condition.

The Administrator can resign upon 60 days' notice from its role as Administrator under the
Administration Agreement, and a suitable replacement may not be found, resulting in disruptions that could adversely affect our business, results of operations and financial condition.

The Administrator has the right to resign under the Administration Agreement upon 60 days' written notice, whether a replacement
has been found or not. If the Administrator resigns, it may be difficult to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent
services on acceptable terms, or at all. If a replacement is not found quickly, our business, results of operations and financial condition, as well as the Company's ability to pay distributions, are
likely to be adversely affected, and the market price of its common stock may decline. In addition, the coordination of the Company's internal management and administrative activities is likely to
suffer if they are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by the Administrator. Even if a comparable service provider or
individuals to perform such services are retained, whether internal or external, their integration into the Company's business and lack of familiarity with the Company's investment objective may
result in additional costs and time delays that may materially adversely affect our business, results of operations and financial condition.

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If the Company fails to maintain its status as a BDC, our business and operating flexibility could
be significantly reduced.

The Company qualifys as a BDC under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs. For example,
BDCs are required to invest at least 70.0% of their total assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S.
government securities and other high quality debt investments that mature in one year or less. Failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an
enforcement action against the Company and/or expose the Company to claims of private litigants. In addition, upon approval of a majority of the Company's stockholders, the Company may elect to
withdraw its respective election as a BDC. If the Company decides to withdraw its election, or if the Company otherwise fails to qualify, or maintain its qualification, as a BDC, the Company may be
subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with these regulations would significantly decrease our operating flexibility and
could significantly increase our cost of doing business.

If the Company does not invest a sufficient portion of its assets in qualifying assets, it could be
precluded from investing in certain assets or could be required to dispose of certain assets, which could have a material adverse effect on our business, financial condition and results of operations.

As a BDC, the Company is prohibited from acquiring any assets other than "qualifying assets" unless, at the time of and after giving
effect to such acquisition, at least 70.0% of our total assets are qualifying assets. We may acquire in the future other investments that are not "qualifying assets" to the extent permitted by the
1940 Act. If the Company does not invest a sufficient portion of its assets in qualifying assets, it would be prohibited from investing in additional assets, which could have a material adverse effect
on our business, financial condition and results of operations. Similarly, these rules could prevent the Company from making follow-on investments in existing portfolio companies (which could result
in the dilution of its position) or could require the Company to dispose of investments at inopportune times in order to come into compliance with the 1940 Act. If the Company needs to dispose of
these investments quickly, it may be difficult to dispose of such investments on favorable terms. For example, the Company may have difficulty in finding a buyer and, even if a buyer is found, it may
have to sell the investments at a substantial loss.

The Company's ability to invest in public companies may be limited in certain circumstances.

To maintain the Company's status as a BDC, the Company is not permitted to 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). Subject to certain exceptions for follow-on
investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange may be treated as qualifying assets only if such issuer has a
common equity market capitalization that is less than $250.0 million at the time of such investment.

Regulations governing the operations of BDCs will affect the Company's ability to raise additional
equity capital as well as the Company's ability to issue senior securities or borrow for investment purposes, any or all of which could have a negative effect on our investment objectives and
strategies.

The Company's business requires a substantial amount of capital. The Company may acquire additional capital from the issuance of senior
securities, including borrowing under a credit facility or other indebtedness. In addition, the Company may also issue additional equity capital, which would in turn increase the equity capital
available to the Company. However, the Company may not be able to raise additional capital in the future on favorable terms or at all.

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The
Company may issue debt securities, preferred stock, and it may borrow money from banks or other financial institutions, which we refer to collectively as "senior securities", up to
the maximum amount permitted by the 1940 Act. The 1940 Act permits the Company to issue senior securities in amounts such that its asset coverage, as defined in the 1940 Act, equals at least 200.0%
after each issuance of senior securities. If the Company's asset coverage ratio is not at least 200.0%, it would be unable to issue senior securities, and if it had senior securities outstanding
(other than any indebtedness issued in consideration of a privately arranged loan, such as any indebtedness outstanding under the Holdings Credit Facility and NMFC Credit Facility), it would be unable
to make distributions to its stockholders. However, at December 31, 2014, the only senior securities outstanding were indebtedness under the Holdings Credit Facility, NMFC Credit Facility and
Convertible Notes and therefore at December 31, 2014, the Company would not have been precluded from paying distributions. If the value of the Company's assets declines, the Company may be
unable to satisfy this test. If that happens, the Company may be required to liquidate a portion of its investments and repay a portion of its indebtedness at a time when such sales may be
disadvantageous.

The
Holdings Credit Facility matures on December 18, 2019 and permits borrowings of $495.0 million as of December 31, 2014. The Holdings Credit Facility had
$468.1 million in debt outstanding as of December 31, 2014. The NMFC Credit Facility matures on June 4, 2019 and permits borrowings of $80.0 million as of
December 31, 2014. The NMFC Credit Facility had $50.0 million in debt outstanding as of December 31, 2014. The Convertible Notes mature on June 15, 2019. The Convertible
Notes had $115.0 million in debt outstanding as of December 31, 2014.

In
addition, the Company may in the future seek to securitize other portfolio securities to generate cash for funding new investments. To securitize loans, the Company would likely
create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. The Company would then sell interests in the subsidiary on a non-recourse basis to purchasers and it would retain all
or a portion of the equity in the subsidiary. If the Company is unable to successfully securitize its loan portfolio, which must be done in compliance with the relevant restrictions in the Holdings
Credit Facility, its ability to grow its business or fully execute its business strategy could be impaired and our earnings, if any, could decrease. The securitization market is subject to changing
market conditions and the Company may not be able to access this market when it would otherwise deem appropriate. Moreover, the successful securitization of the Company's portfolio might expose the
Company to losses as the residual investments in which it does not sell interests will tend to be those that are riskier and more apt to generate losses. The 1940 Act also may impose restrictions on
the structure of any securitization.

The
Company may also obtain capital through the issuance of additional equity capital. As a BDC, the Company generally is not able to issue or sell its common stock at a price below net
asset value per share. If the Company's common stock trades at a discount to its net asset value per share, this restriction could adversely affect its ability to raise equity capital. The Company
may, however, sell its common stock, or warrants, options or rights to acquire its common stock, at a price below its net asset value per share of the common stock if its board of directors and
independent directors determine that such sale is in its best interests and the best interests of its stockholders, and its stockholders approve such sale. In any such case, the price at which the
Company's securities are to be issued and sold may not be less than a price that, in the determination of the Company's board of directors, closely approximates the market value of such securities
(less any underwriting commission or discount). If the Company raises additional funds by issuing more shares of its common stock or if the Company issues senior securities convertible into, or
exchangeable for, the Company's common stock, the percentage ownership of the stockholders may decline and you may experience dilution.

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The Company's business model in the future may depend to an extent upon our referral relationships
with private equity sponsors, and the inability of the investment professionals of the Investment Adviser to maintain or develop these relationships, or the failure of these relationships to generate
investment opportunities, could adversely affect its business strategy.

If the investment professionals of the Investment Adviser fail to maintain existing relationships or develop new relationships with
other sponsors or sources of investment opportunities, the Company may not be able to grow its investment portfolio. In addition, individuals with whom the investment professionals of the Investment
Adviser have relationships are not obligated to provide the Company with investment opportunities, and, therefore, there is no assurance that any relationships they currently or may in the future have
will generate investment opportunities for the Company.

We may experience fluctuations in our annual and quarterly results due to the nature of our
business.

We could experience fluctuations in our annual and quarterly operating results due to a number of factors, some of which are beyond our
control, including the ability or inability of the Company to make investments in companies that meet its investment criteria, the interest rate payable on the debt securities acquired and the default
rate on such securities, the level of the Company's expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters
competition in the markets in which it operates and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in
future periods.

The Company's board of directors may change its investment objective, operating policies and
strategies without prior notice or stockholder approval, the effects of which may be adverse to your interest as a stockholder.

The Company's board of directors has the authority, except as otherwise provided in the 1940 Act, to modify or waive certain of its
operating policies and strategies without prior notice and without stockholder approval. As a result, the Company's board of directors may be able to change its investment policies and objectives
without any input from its stockholders. However, absent stockholder approval, the Company may not change the nature of its business so as to cease to be, or withdraw its election as, a BDC. Under
Delaware law, the Company also cannot be dissolved without prior stockholder approval. We cannot predict the effect any changes to the Company's current operating policies and strategies would have on
our business, operating results and the market price of NMFC's common stock. Nevertheless, any such changes could adversely affect our business and impair the Company's ability to make distributions
to its stockholders.

The Company will be subject to corporate-level U.S. federal income tax on all of its
respective income if it is unable to maintain RIC status under Subchapter M of the Code, which would have a material adverse effect on its financial performance.

Although the Company intends to continue to qualify annually as a RIC under Subchapter M of the Code, no assurance can be given
that the Company will be able to maintain its RIC status. To maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to its stockholders, the Company must meet
the annual distribution, source-of-income and asset diversification requirements described below.



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If
the Company fails to qualify for or maintain its RIC status for any reason, and it does not qualify for certain relief provisions under the Code, the Company would be subject to
certain corporate-level U.S. federal income tax (and any applicable state and local taxes). In this event, the resulting taxes could substantially reduce the Company's net assets, the amount of
income available for distribution and the amount of its distributions, which would have a material adverse effect on its financial performance.

You may have current tax liabilities on distributions you reinvest in common stock of NMFC.

Under the dividend reinvestment plan, if you own shares of common stock of NMFC registered in your own name, you will have all cash
distributions automatically reinvested in additional shares of common stock of NMFC unless you opt out of the dividend reinvestment plan by delivering notice by phone, internet or in writing to the
plan administrator at least three days prior to the payment date of the next dividend or distribution. If you have not "opted out" of the dividend reinvestment plan, you will be deemed to have
received, and for U.S. federal income tax purposes will be taxed on, the amount reinvested in common stock of NMFC to the extent the amount reinvested was not a tax-free return of capital. As a
result, you may have to use funds from other sources to pay your U.S. federal income tax liability on the value of the common stock received.

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The Company may not be able to pay you distributions on its common stock, its distributions to you
may not grow over time and a portion of its distributions to you may be a return of capital for U.S. federal income tax purposes.

The Company intends to pay quarterly distributions to its stockholders out of assets legally available for distribution. We cannot
assure you that we will continue to achieve investment results that will allow the Company to make a specified level of cash distributions or year-to-year increases in cash distributions. If the
Company is unable to satisfy the asset coverage test applicable to it as a BDC, or if it violates certain covenants under the Holdings Credit Facility and the NMFC Credit Facility, the Company's
ability to pay distributions to its stockholders could be limited. All distributions are paid at the discretion of the Company's board of directors and depend on its earnings, financial condition,
maintenance of the Company's RIC status, compliance with applicable BDC regulations, compliance with covenants under the Holdings Credit Facility and NMFC Credit Facility, and such other factors as
the Company's board of directors may deem relevant from time to time. The distributions that the Company pays to its stockholders in a year may exceed its taxable income for that year and,
accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.

The Company may have difficulty paying its required distributions if the Company recognizes taxable
income before or without receiving cash representing such income.

For U.S. federal income tax purposes, the Company includes in its taxable income its allocable share of certain amounts that the
Company has not yet received in cash, such as original issue discount or accruals on a contingent payment debt instrument, which may occur if the Company receives warrants in connection with the
origination of a loan or possibly in other circumstances or contracted payment-in-kind ("PIK") interest, which generally represents contractual interest added to the loan balance and due at the end of
the loan term. The Company's allocable share of such original issue discount and PIK interest are included in its taxable income before the Company receives any corresponding cash payments. The
Company also may be required to include in its taxable income its allocable share of certain other amounts that the Company will not receive in cash.

Because
in certain cases the Company may recognize taxable income before or without receiving cash representing such income, the Company may have difficulty making distributions to its
stockholders that will be sufficient to enable the Company to meet the annual distribution requirement necessary to
qualify as a RIC. Accordingly, the Company may need to sell some of its assets at times and/or at prices that it would not consider advantageous, the Company may need to raise additional equity or
debt capital, or the Company may need to forego new investment opportunities or otherwise take actions that are disadvantageous to its business (or be unable to take actions that are advantageous to
its business) to enable the Company to make distributions to its stockholders that will be sufficient to enable the Company to meet the annual distribution requirement. If the Company is unable to
obtain cash from other sources to enable it to meet the annual distribution requirement, the Company may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become
subject to certain corporate-level U.S. federal income tax (and any applicable state and local taxes).

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Changes in laws or regulations governing the Company's operations may adversely affect our business
or cause the Company to alter its business strategy.

Changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository
commercial lenders could significantly affect our operations and our cost of doing business. The Company's portfolio companies are subject to U.S. federal, state and local laws and regulations. New
legislation may be enacted or new interpretations, rulings or regulations could be adopted, any of which could materially adversely affect our business, including with respect to the types of
investments the Company is permitted to make, and your interest as a stockholder potentially with retroactive effect. In addition, any changes to the laws and regulations governing the Company's
operations relating to permitted investments may cause the Company to alter its investment strategy in order to avail itself of new or different opportunities. These changes could result in material
changes to the strategies and may result in the Company's investment focus shifting from the areas of expertise of the Investment Adviser to other types of investments in which the Investment Adviser
may have less expertise or little or no experience. Any such changes, if they occur, could have a material adverse effect on our business, results of operations and financial condition and,
consequently, the value of your investment in us.

On
July 21, 2010, the Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, was signed into law. Although passage of the Dodd-Frank Act has resulted in extensive
rulemaking and regulatory changes that affect the Company and the financial industry as a whole, many of its provisions remain subject to extended implementation periods and delayed effective dates
and will require extensive rulemaking by regulatory authorities. While the full impact of the Dodd-Frank Act on the Company and the Company's portfolio companies may not be known for an extended
period of time, the Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the
financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact the Company's or the Company's portfolio companies operations, cash flows or
financial condition, impose additional costs on the Company or the Company's portfolio companies, intensify the regulatory supervision of the Company or the Company's portfolio companies or otherwise
adversely affect the Company's business or the business of the Company's portfolio companies.

Over
the last several years, there has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some
portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether these regulations will be implemented or what form they will take, increased
regulation of non-bank credit extension could negatively impact the Company's operations, cash flows or financial condition, impose additional costs on the Company, intensify the regulatory
supervision of the Company or otherwise adversely affect the Company's business.

The effect of global climate change may impact the operations of the Company's portfolio companies.

There may be evidence of global climate change. Climate change creates physical and financial risk and some of the Company's portfolio
companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather
conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost
of operations of the Company's portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of the
Company's portfolio companies' financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased
system stresses, including service interruptions.

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Pending legislation may allow the Company to incur additional leverage.

As a BDC, under the 1940 Act the Company generally is not permitted to incur indebtedness unless immediately after such borrowing the
Company has an asset coverage for total borrowings of at least 200.0% (i.e., the amount of debt may not exceed 50.0% of the value of the Company's total assets or the Company may borrow an
amount equal to 100.0% of net assets). Legislation introduced in Congress, if passed, would modify this section of the 1940 Act and increase the amount of debt that BDCs may incur by modifying the
percentage from 200.0% to 150.0%. As a result, the Company may be able to incur additional indebtedness in the future and therefore your risk of an investment in the Company's common stock may
increase.

The Company incurs significant costs as a result of being a publicly traded company.

As a publicly traded company, the Company incurs legal, accounting and other expenses, which are paid by the Company, including costs
associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including
requirements under the Sarbanes-Oxley Act of 2002, or the "Sarbanes-Oxley Act," and other rules implemented by the SEC.

Efforts to comply with Section 404 of the Sarbanes-Oxley Act involve significant
expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act may adversely affect the Company and the market price of its common stock.

The Company is subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Under current SEC rules
since its fiscal year ended December 31, 2012, the Company's management has been required to report on its internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, and rules and regulations of the SEC thereunder. The Company is required to review on an annual basis its internal control over financial reporting, and on a quarterly and annual
basis to evaluate and disclose changes in its internal control over financial reporting. As a result, the Company expects to continue to incur additional expenses, which may negatively impact the
Company's financial performance and the Company's ability to make distributions to its stockholders. This process also may result in a diversion of management's time and attention. We cannot be
certain as to the timing of completion of any evaluation, testing and remediation actions or the impact of the same on our operations, and the Company is not able to ensure that the process is
effective or that its internal control over financial reporting is or will continue to be effective in a timely manner. In the event that the Company is unable to maintain or achieve compliance with
Section 404 of the Sarbanes-Oxley Act and related rules, the Company and, consequently, the market price of its common stock may be adversely affected.

The Company's business is highly dependent on information systems and systems failures could
significantly disrupt our business, which may, in turn, negatively affect the market price of the Company's common stock and its ability to pay dividends.

The Company's business is highly dependent on the communications and information systems of the Investment Adviser and its affiliates.
Any failure or interruption of such systems could cause delays or other problems in the Company's activities. This, in turn, could have a material adverse effect on the Company's operating results
and, consequently, negatively affect the market price of its common stock and its ability to pay dividends to its stockholders. In addition, because many of the Company's portfolio companies operate
and rely on network infrastructure and enterprise applications and internal technology systems for development, marketing, operational, support and other business activities, a disruption or failure
of any or all of these systems in the event of a major telecommunications failure, cyber-attack, fire, earthquake, severe weather conditions or other catastrophic event could cause system

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interruptions,
delays in product development and loss of critical data and could otherwise disrupt their business operations.

The failure in cyber security systems, as well as the occurrence of events unanticipated in the
Company's disaster recovery systems and management continuity planning could impair the Company's ability to conduct business effectively.

The occurrence of a disaster such as a cyber attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events
unanticipated in the Company's disaster recovery systems, or a support failure from external providers, could have an adverse effect on the Company's ability to conduct business and on the Company's
results of operations and financial condition, particularly if those events affect the Company's computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a
significant number of the Company's managers were unavailable in the event of a disaster, the Company's ability to effectively conduct its business could be severely compromised.

We
depend heavily upon computer systems to perform necessary business functions. Despite the Company's implementation of a variety of security measures, its computer systems could be
subject to cyber attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, the Company may experience threats to its data and systems,
including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary
and other information processed and stored in, and transmitted through, the Company's computer systems and networks, or otherwise cause interruptions or malfunctions in its operations, which could
result in damage to the Company's reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

RISKS RELATING TO THE COMPANY'S INVESTMENTS

The Company's investments in portfolio companies may be risky, and the Company could lose all or
part of any of its investments.

Investments in small and middle market businesses are highly speculative and involve a high degree of risk of credit loss. These risks
are likely to increase during volatile economic periods, such as the U.S. and many other economies have recently experienced. Among other things, these
companies:



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In
addition, in the course of providing significant managerial assistance to certain of the Company's portfolio companies, certain of the Company's officers and directors may serve as
directors on the boards of such companies. To the extent that litigation arises out of the Company's investments in these companies, the Company's officers and directors may be named as defendants in
such litigation, which could result in an expenditure of funds (through the Company's indemnification of such officers and directors) and the diversion of management time and resources.

The Company's investment strategy, which is focused primarily on privately held companies, presents
certain challenges, including the lack of available information about these companies.

The Company invests primarily in privately held companies. There is generally little public information about these companies, and, as
a result, the Company must rely on the ability of the Investment Adviser to obtain adequate information to evaluate the potential returns from, and risks related to, investing in these companies. If
the Company is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and it may lose money on its investments. Also, privately held
companies frequently have less diverse product lines and smaller market presence than larger competitors. They are, thus, generally more vulnerable to economic downturns and may experience substantial
variations in operating results. These factors could adversely affect the Company's investment returns.

The Company's investments in securities rated below investment grade are speculative in nature and
are subject to additional risk factors such as increased possibility of default, illiquidity of the security, and changes in value based on changes in interest rates.

The Company's investments are typically rated below investment grade. Securities rated below investment grade are often referred to as
"leveraged loans," "high yield" or "junk" securities, and may be considered "high risk" compared to debt instruments that are rated investment grade. High yield securities are regarded as having
predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure to
adverse conditions. In addition, high yield securities generally offer a higher current yield than that available from higher grade issues, but typically involve greater risk. These securities are
especially sensitive to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuation in response to changes in interest rates. During
periods of economic downturn or rising interest rates, issuers of below investment grade instruments may experience financial stress that could adversely affect their ability to make payments of
principal and interest and increase the possibility of default.

The Company's portfolio may be concentrated in a limited number of industries, which may subject the
Company to a risk of significant loss if there is a downturn in a particular industry in which a number of its investments are concentrated.

The Company's portfolio may be concentrated in a limited number of industries. For example, as of December 31, 2014, the
Company's investments in the software, the business services and the education industries represented approximately 20.2%, 18.3% and 17.7%, respectively, of the fair value of the Company's portfolio.
A downturn in any particular industry in
which the Company is invested could significantly impact the portfolio companies operating in that industry, and accordingly, the aggregate returns that the Company realizes from its investment in
such portfolio companies.

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Specifically,
companies in the software industry often have narrow product lines and small market shares. Because of rapid technological change, the average selling prices of products
and some services provided by software companies have historically decreased over their productive lives. As a result, the average selling prices of products and services offered by software companies
in which we invest may decrease over time. In addition, companies in the business services industry are subject to general economic downturns and business cycles, and will often suffer reduced
revenues and rate pressures during periods of economic uncertainty. Likewise, companies in the education industry are required to comply with extensive regulatory and accreditation requirements, which
could be subject to change by Congress, and which can limit their access to federal aid or similar loan programs, or otherwise increase their compliance costs. If an industry in which the Company has
significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of its investment portfolio could be affected adversely,
which, in turn, could adversely affect the Company's financial position and results of operations.

Continuation of the current decline in oil and natural gas prices for a prolonged period of time
could have a material adverse effect on the Company.

Approximately 5.9% of the Company's portfolio at fair value is invested in energy-related businesses. A decline in oil and natural gas
prices would adversely affect the credit quality of these investments. A decrease in credit quality would, in turn, negatively affect the fair value of these investments, which would consequently
negatively affect the Company's financial position and results of operations. Should the current decline in oil and natural gas prices persist, it is likely that the Company's energy-related portfolio
companies' abilities to satisfy financial or operating covenants imposed by the Company or other lenders will be adversely affected, thereby negatively impacting the Company's financial condition and
their ability to satisfy their debt service and other obligations to the Company.

If the Company makes unsecured investments, those investments might not generate sufficient cash
flow to service its debt obligations to the Company.

The Company may make unsecured investments. Unsecured investments may be subordinated to other obligations of the obligor. Unsecured
investments often reflect a greater possibility that adverse changes in the financial condition of the obligor or general economic conditions (including, for example, a substantial period of rising
interest rates or declining earnings) or both may impair the ability of the obligor to make payment of principal and interest. If the Company makes an unsecured investment in a portfolio company, that
portfolio company may be highly leveraged, and its relatively high debt-to-equity ratio may increase the risk that its operations might not generate sufficient cash to service its debt obligations.

If the Company invests in the securities and obligations of distressed and bankrupt issuers, it
might not receive interest or other payments.

From time to time, the Company may invest in other types of investments which are not its primary focus, including investments in the
securities and obligations of distressed and bankrupt issuers, including debt obligations that are in covenant or payment default. Such investments generally are considered speculative. The repayment
of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer of those
obligations might not make any interest or other payments.

The lack of liquidity in the Company's investments may adversely affect our business.

The Company invests, and will continue to invest, in companies whose securities are not publicly traded and whose securities will be
subject to legal and other restrictions on resale or will otherwise be

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less
liquid than publicly traded securities. The illiquidity of these investments may make it difficult for the Company to sell these investments when desired. In addition, if the Company is required
or otherwise chooses to liquidate all or a portion of its portfolio quickly, it may realize significantly less than the value at which it had previously recorded these investments. The Company's
investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. Because most of
the Company's investments are illiquid, the Company may be unable to dispose of them in which case the Company could fail to qualify as a RIC and/or a BDC, or the Company may be unable to do so at a
favorable price, and, as a result, the Company may suffer losses.

Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of
the Company's portfolio investments, reducing the Company's net asset value through increased net unrealized depreciation.

As a BDC, the Company is required to carry its investments at market value or, if no market value is ascertainable, at fair value as
determined in good faith by its board of directors. As part of the valuation process, the Company may take into account the following types of factors, if relevant, in determining the fair value of
its investments:



When
an external event such as a purchase transaction, public offering or subsequent sale occurs, the Company will use the pricing indicated by the external event to corroborate its
valuation. The Company will record decreases in the market values or fair values of its investments as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets may
result in significant net unrealized depreciation in its portfolio. The effect of all of these factors on the Company's portfolio may reduce the Company's net asset value by increasing net unrealized
depreciation in the Company's portfolio. Depending on market conditions, the Company could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could
have a material adverse effect on its business, financial condition, results of operations and cash flows.

If the Company is unable to make follow-on investments in its portfolio companies, the value of the
Company's investment portfolio could be adversely affected.

Following an initial investment in a portfolio company, the Company may make additional investments in that portfolio company as
"follow-on" investments, in order to (i) increase or maintain in whole or in part its equity ownership percentage, (ii) exercise warrants, options or convertible securities that were
acquired in the original or subsequent financing or (iii) attempt to preserve or enhance the value of its investment. The Company may elect not to make follow-on investments or may otherwise
lack sufficient funds to make these investments. The Company has the discretion to make follow-on investments, subject to the availability of capital resources. If the Company fails to make follow-on
investments, the continued viability of a portfolio company and its investment may, in some circumstances, be jeopardized and we could miss an opportunity for the Company to increase its participation
in a successful operation. Even if the Company has sufficient capital to make a desired

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follow-on
investment, it may elect not to make a follow-on investment because it may not want to increase its concentration of risk, either because it prefers other opportunities or because it is
subject to BDC requirements that would prevent such follow-on investments or such follow-on investments would adversely impact its ability to maintain its RIC status.

The Company's portfolio companies may incur debt that ranks equally with, or senior to, its
investments in such companies.

The Company invests in portfolio companies at all levels of the capital structure. The Company's portfolio companies may have, or may
be permitted to incur, other debt that ranks equally with, or senior to, the debt in which the Company invests. By their terms, these debt instruments may entitle the holders to receive payment of
interest or principal on or before the dates on which the Company is entitled to receive payments with respect to the debt instruments in which it invests. In addition, in the event of insolvency,
liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to the Company's investment in that portfolio company would typically be
entitled to receive payment in full before it receives any distribution. After repaying the senior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation
to the Company. In the case of debt ranking equally with debt instruments in which the Company invests, it would have to share on an equal basis any distributions with other creditors holding such
debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

The disposition of the Company's investments may result in contingent liabilities.

Most of the Company's investments will involve private securities. In connection with the disposition of an investment in private
securities, the Company may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. The
Company may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities.
These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through the Company's return of certain distributions previously made to it.

There may be circumstances where the Company's debt investments could be subordinated to claims of
other creditors or the Company could be subject to lender liability claims.

Even though the Company may have structured certain of its investments as senior loans, if one of its portfolio companies were to go
bankrupt, depending on the facts and circumstances, including the extent to which the Company actually provided managerial assistance to that portfolio company, a bankruptcy court might
re-characterize its debt investment and subordinate all or a portion of the Company's claim to that of other creditors. The Company may also be subject to lender liability claims for actions taken by
it with respect to a borrower's business or instances where it exercises control over the borrower. It is possible that the Company could become subject to a lender's liability claim, including as a
result of actions taken in rendering significant managerial assistance.

Second priority liens on collateral securing loans that the Company makes to its portfolio companies
may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and
the Company.

Certain loans to portfolio companies will be secured on a second priority basis by the same collateral securing senior secured debt of
such companies. The first priority liens on the collateral will secure the portfolio company's obligations under any outstanding senior debt and may secure certain other future debt that may be
permitted to be incurred by the portfolio company under the agreements

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governing
the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization
of the collateral to repay their obligations in full before the Company. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the
availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations
secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding
under the loan obligations secured by the second priority liens, then the Company, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against
the portfolio company's remaining assets, if any.

The
rights the Company may have with respect to the collateral securing the loans it makes to its portfolio companies with senior debt outstanding may also be limited pursuant to the
terms of one or more intercreditor agreements entered into with the holders of first priority senior debt. Under an intercreditor agreement, at any time that obligations that have the benefit of the
first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first
priority liens: the ability to cause the commencement of enforcement proceedings against the collateral, the ability to control the conduct of such proceedings, the approval of amendments to
collateral documents; releases of liens on the collateral and waivers of past defaults under collateral documents. The Company may not have the ability to control or direct these actions, even if its
rights are adversely affected.

The Company generally does not control its portfolio companies.

The Company does not, and does not expect to, control most of its portfolio companies, even though the Company may have board
representation or board observation rights, and its debt agreements may contain certain restrictive covenants that limit the business and operations of its portfolio companies. As a result, the
Company is subject to the risk that a portfolio company may make business decisions with which the Company disagrees and the management of such company, may take risks or otherwise act in ways that do
not serve the Company's interests as debt investors. Due to the lack of liquidity of the investments that the Company typically holds in its portfolio companies, it may not be able to dispose of its
investments in the event that the Company disagrees with the actions of a portfolio company as readily as it would otherwise like to or at favorable prices which could decrease the value of its
investments.

Economic recessions, downturns or government spending cuts could impair the Company's portfolio
companies and harm its operating results.

Many of the Company's portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay its debt
investments during these periods. Therefore, the Company's non-performing assets are likely to increase, and the value of the Company's portfolio is likely to decrease during these periods. Adverse
economic conditions also may decrease the value of collateral securing some of the Company's debt investments and the value of its equity investments. Economic slowdowns or recessions could lead to
financial losses in the Company's portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase the Company's funding costs, limit the Company's
access to the capital markets or result in a decision by lenders not to extend credit to the Company. These events could prevent the Company from increasing investments and harm its operating results.

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A number of the Company's portfolio companies provide services to the U.S. government. Changes in
the U.S. government's priorities and spending, or significant delays or reductions in appropriations of the U.S. government's funds, could have a material adverse effect on the financial position,
results of operations and cash flows of such portfolio companies.

A number of the Company's portfolio companies derive a substantial portion of their revenue from the U.S. government. Levels of the
U.S. government's spending in future periods are very difficult to predict and subject to significant risks. In addition, significant budgetary constraints may result in further reductions to
projected spending levels. In particular, U.S. government expenditures are subject to the potential for automatic reductions, generally referred to as "sequestration." Sequestration occurred during
2013, and may occur again in the future, resulting in significant additional reductions to spending by the U.S. government on both existing and new contracts as well as disruption of ongoing programs.
Even if sequestration does not occur again in the future, we expect that budgetary constraints and ongoing concerns regarding the U.S. national debt will continue to place downward pressure on U.S.
government spending levels. Due to these and other factors, overall U.S. government spending could decline, which could result in significant reductions to the revenues, cash flow and profits of the
Company's portfolio companies that provide services to the U.S. government.

Defaults by the Company's portfolio companies may harm its operating results.

A portfolio company's failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to
defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company's ability to
meet its obligations under the debt or equity securities that the Company holds.

The
Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a
defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower's business or
exercise control over a borrower. It is possible that the Company could become subject to a lender's liability claim, including as a result of actions taken if it renders significant managerial
assistance to the borrower. Furthermore, if one of the Company's portfolio companies were to file for bankruptcy protection, even though the Company
may have structured its investment as senior secured debt, depending on the facts and circumstances, including the extent to which the Company provided managerial assistance to that portfolio company,
a bankruptcy court might re-characterize its debt holding and subordinate all or a portion of the Company's claim to claims of other creditors.

Prepayments of the Company's debt investments by its portfolio companies could adversely impact the
Company's results of operations and reduce its return on equity.

The Company is subject to the risk that the investments it makes in its portfolio companies may be repaid prior to maturity. When this
occurs, subject to maintenance of the Company's RIC status, the Company will generally reinvest these proceeds in temporary investments, pending its future investment in new portfolio companies. These
temporary investments will typically have substantially lower yields than the debt being prepaid and the Company could experience significant delays in reinvesting these amounts. Any future investment
in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, the Company's results of operations could be materially adversely affected if one or more of its
portfolio companies elect to prepay amounts owed to the Company. Additionally, prepayments could negatively impact the Company's return on equity, which could result in a decline in the market price
of its common stock.

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The Company may not realize gains from its equity investments.

When the Company invests in portfolio companies, it may acquire warrants or other equity securities of portfolio companies as well. The
Company may also invest in equity securities directly. To the extent the Company holds equity investments, it will attempt to dispose of them and realize gains upon its disposition of them. However,
the equity interests the Company receives may not appreciate in value and, in fact, may decline in value. As a result, the Company may not be able to realize gains from its equity interests, and any
gains that it does realize on the disposition of any equity interests may not be sufficient to offset any other losses it experiences. The Company also may be unable to realize any value if a
portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow the Company to sell the underlying equity interests.

The performance of the Company's portfolio companies may differ from its historical performance as
its current investment strategy includes significantly more primary originations in addition to secondary market purchases.

Historically, the Company's investment strategy consisted primarily of secondary market purchases in debt securities. The Company
adjusted its investment strategy to also include significantly more primary originations. While loans the Company originates and loans it purchases in the secondary market face many of the same risks
associated with the financing of leveraged companies, the Company may be exposed to different risks depending on specific business considerations for secondary market purchases or origination of
loans. Primary originations require substantially more time and resources for sourcing, diligencing and monitoring investments, which may consume a significant portion of the Company's resources.
Further, the valuation process for primary originations may be more cumbersome and uncertain due to the lack of comparable market quotes for the investment and would likely require more frequent
review by a third-party valuation firm. This may result in greater costs for the Company and fluctuations in the quarterly valuations of investments that are primary originations. As a result, this
strategy may result in different returns from these investments than the types of returns the Company has historically experienced from secondary market purchases of debt securities.

The Company may be subject to additional risks if it invests in foreign securities and/or engages in
hedging transactions.

The 1940 Act generally requires that 70.0% of the Company's investments be in issuers each of whom is organized under the laws of, and
has its principal place of business in, any state of the U.S., the District of Columbia, Puerto Rico, the Virgin Islands or any other possession of the U.S. The Company's investment strategy does not
presently contemplate significant investments in securities of non-U.S. companies. However, the Company may desire to make such investments in the future, to the extent that such transactions and
investments are permitted under the 1940 Act. The Company expects that these investments would focus on the same types of investments that it makes in U.S. middle market companies and accordingly
would be complementary to its overall strategy and enhance the diversity of its holdings. Investing in foreign companies could expose the Company to additional risks not typically associated with
investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less
available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in
enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Investments denominated in foreign currencies would be subject to the risk that the
value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates,
differences in relative values of similar assets in different currencies, long-term opportunities for

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investment
and capital appreciation and political developments. The Company may employ hedging techniques to minimize these risks, but it can offer no assurance that it will, in fact, hedge currency
risk, or that if it does, such strategies will be effective.

Engaging
in hedging transactions would also, indirectly, entail additional risks to the Company's stockholders. Although it is not currently anticipated that the Company would engage in
hedging transactions as a principal investment strategy, if the Company determined to engage in hedging transactions it generally would seek to hedge against fluctuations of the relative values of its
portfolio positions from changes in market interest rates or currency exchange rates. Hedging against a decline in the values of the Company's portfolio positions would not eliminate the possibility
of fluctuations in the values of such positions or prevent losses if the values of the positions declined. However, such hedging could establish other positions designed to gain from those same
developments, thereby offsetting the decline in the value of such portfolio positions.

These
hedging transactions could also limit the opportunity for gain if the values of the underlying portfolio positions increased. Moreover, it might not be possible to hedge against an
exchange rate or interest rate fluctuation that was so generally anticipated that the Company would not be able to enter into a hedging transaction at an acceptable price. If the Company chooses to
engage in hedging transactions, there can be no assurances that the Company will achieve the intended benefits of such transactions and, depending on the degree of exposure such transactions could
create, such transactions may expose the Company to risk of loss.

While
the Company may enter into these types of transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or
interest rates could result in poorer overall investment performance than if it had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the
instruments used in a hedging strategy and price movements in the portfolio positions being hedged could vary. Moreover, for a variety of reasons, the Company might not seek to establish a perfect
correlation between the hedging instruments and the portfolio holdings being hedged. Any imperfect correlation could prevent the Company from achieving the intended hedge and expose the Company to
risk of loss. In addition, it might not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of
those securities would likely fluctuate as a result of factors not related to currency fluctuations.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of the
Company's portfolio of LIBOR-indexed, floating-rate debt securities.

Concerns have been publicized that some of the member banks surveyed by the British Bankers' Association ("BBA") in connection with the
calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their
derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those
they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations
by regulators and governmental authorities in various jurisdictions are ongoing.

Actions
by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may
adversely affect the market for LIBOR-based securities, including the Company's portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the
determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR,

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which
could have an adverse impact on the market for LIBOR-based securities or the value of the Company's portfolio of LIBOR-indexed, floating-rate debt securities.

RISKS RELATING TO THE COMPANY'S SECURITIES

The market price of the Company's common stock may fluctuate significantly.

The market price and liquidity of the market for shares of the Company's common stock may be significantly affected by numerous
factors, some of which are beyond our control and may not be directly related to the Company's operating performance. These factors include:



In
addition, the Company is required to continue to meet certain listing standards in order for its common stock to remain listed on the New York Stock Exchange ("NYSE"). If the Company
were to be delisted by the NYSE, the liquidity of its common stock would be materially impaired.

Investing in the Company's common stock may involve an above average degree of risk.

The investments the Company may make may result in a higher amount of risk, volatility or loss of principal than alternative investment
options. These investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in the Company's common stock may not be suitable for investors with lower risk
tolerance.

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Sales of substantial amounts of the Company's common stock in the public market may have an adverse
effect on the market price of its common stock.

Sales of substantial amounts of the Company's common stock could materially adversely affect the prevailing market prices for its
common stock. If substantial amounts of
the Company's common stock were sold, this could impair its ability to raise additional capital through the sale of securities should the Company desire to do so.

Certain provisions of the Company's certificate of incorporation and bylaws, as well as aspects of
the Delaware General Corporation Law could deter takeover attempts and have an adverse impact on the price of the Company's common stock.

The Company's certificate of incorporation and bylaws as well as the Delaware General Corporation Law contain provisions that may have
the effect of discouraging a third party from making an acquisition proposal for us. Among other things, the Company's certificate of incorporation and
bylaws:



These
anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of the Company's common stock the opportunity to realize a premium over the
market price for its common stock. The Holdings Credit Facility and NMFC Credit Facility also include covenants that, among other things, restrict its ability to dispose of assets, incur additional
indebtedness, make restricted payments, create liens on assets, make investments, make acquisitions and engage in mergers or consolidations. The Holdings Credit Facility and NMFC Credit Facility also
include change of control provisions that accelerate the indebtedness under these facilities in the event of certain change of control events.

Shares of the Company's common stock have traded at a discount from net asset value and may do so in
the future.

Shares of closed-end investment companies have frequently traded at a market price that is less than the net asset value that is
attributable to those shares. In part as a result of adverse economic conditions and increasing pressure within the financial sector of which the Company is a part, its common stock has at times
traded below its net asset value per share since the Company's IPO on May 19, 2011. The Company's shares could once again trade at a discount to net asset value. The possibility that its shares
of common stock may trade at a discount from net asset value over the long term is separate and distinct from the risk that the Company's net asset value will decrease. The Company cannot predict
whether shares of its common stock will trade above, at or below its net asset

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value.
If its common stock trades below its net asset value, the Company will generally not be able to issue additional shares of its common stock at its market price without first obtaining the
approval for such issuance from its stockholders and its independent directors. If additional funds are not available to the Company, the Company could be forced to curtail or cease the Company's new
lending and investment activities, and the Company's net asset value could decrease and the Company's level of distributions could be impacted.

You may not receive dividends or the Company's dividends may decline or may not grow over time.

The Company cannot assure you that the Company will achieve investment results or maintain a tax status that will allow or require any
specified level of cash distributions or year-to-year increases in cash distributions. In particular, the Company's future dividends are dependent upon the investment income it receives on the
Company's portfolio investments. To the extent such investment income declines, the Company's ability to pay future dividends may be harmed.

If the Company issues preferred stock, the net asset value and market value of its common stock will
likely become more volatile.

We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the Company's
common stock. The issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the dividend rate on the preferred stock were to
approach the net rate of return on the Company's investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock were to
exceed the net rate of return on the Company's portfolio, the leverage would result in a lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in
the net asset value of the Company's investments would be borne entirely by the holders of common stock. Therefore, if the market value of the Company's portfolio were to decline, the leverage would
result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also
tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings, if
any, on the preferred stock or, in an extreme case, the Company's current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract
such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all
costs and expenses relating to the issuance and ongoing maintenance
of the preferred stock, including higher advisory fees if the Company's total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than
holders of common stock and may at times have disproportionate influence over our affairs.

Holders of any preferred stock the Company might issue would have the right to elect members of our
board of directors and class voting rights on certain matters.

Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of our
board of directors at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In
addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any
such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of the Company's common stock and preferred stock, both by the 1940 Act and by
requirements imposed by rating agencies, if any, or the terms of the Company's credit facilities, if any, might impair the Company's ability to maintain its qualification as a

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RIC
for U.S. federal income tax purposes. While we would intend to redeem the Company's preferred stock to the extent necessary to enable the Company to distribute its income as required to maintain
our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.

Item 1B.    Unresolved Staff Comments

Not applicable.

Item 2.    Properties

We do not own any real estate or other physical properties materially important to our operations. Our principal executive offices are
located at 787 Seventh Avenue, 48th Floor, New York, New York 10019, where we occupy our office space pursuant to our Administration Agreement with the Administrator. The office space is
shared with our Investment Adviser, our Administrator and New Mountain Capital. We believe that our current office facilities are suitable and adequate for our business as currently conducted.

Item 3.    Legal Proceedings

The Company, the Company's consolidated subsidiaries, the Investment Adviser and the Administrator are not currently subject to any
material pending legal proceedings threatened against us as of December 31, 2014. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our
business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that
these proceedings will have a material effect upon our business, financial condition or results of operations.

Item 4.    Mine Safety Disclosures

Not applicable.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock and Distributions

New Mountain Finance Corporation's ("NMFC", the "Company", "we", "us" or "our") common stock is traded on the New York Stock Exchange
("NYSE") under the symbol "NMFC". The following table sets forth the net asset value ("NAV") per share of NMFC's common stock, the high and low closing sale price for NMFC's common stock, the closing
sale price as a percentage of NAV and the quarterly dividend distributions per share for each fiscal quarter since the Company's initial public offering ("IPO") on May 19, 2011.

Closing Sales
Price(3)

Premium or
Discount of
High Closing
Sales to
NAV(4)

Premium or
Discount of
Low Closing
Sales to
NAV(4)NAV Per
Share(2)

Declared
Dividends
Per Share(5)Fiscal Year Ended

High

LowDecember 31, 2014Fourth Quarter

$
13.83

$
15.09

$
14.14


9.11
%

2.24
%
$
0.34Third Quarter

$
14.33

$
15.39

$
14.48


7.40
%

1.05
%
$
0.46
(7)Second Quarter

$
14.65

$
14.89

$
13.91


1.64
%

(5.05
)%
$
0.34First Quarter

$
14.53

$
15.19

$
14.46


4.54
%

(0.48
)%
$
0.34December 31, 2013Fourth Quarter

$
14.38

$
15.19

$
14.05


5.63
%

(2.29
)%
$
0.34Third Quarter

$
14.32

$
14.90

$
14.21


4.05
%

(0.77
)%
$
0.46
(8)Second Quarter

$
14.32

$
15.60

$
13.82


8.94
%

(3.49
)%
$
0.34First Quarter

$
14.31

$
15.45

$
14.30


7.97
%

(0.07
)%
$
0.34December 31, 2012Fourth Quarter

$
14.06

$
15.18

$
13.75


7.97
%

(2.20
)%
$
0.48
(9)Third Quarter

$
14.10

$
15.50

$
14.18


9.93
%

0.57
%
$
0.34Second Quarter

$
13.83

$
14.29

$
13.28


3.33
%

(3.98
)%
$
0.57
(10)First Quarter

$
14.05

$
13.75

$
13.14


(2.14
)%

(6.48
)%
$
0.32December 31, 2011(1)Fourth Quarter

$
13.60

$
13.41

$
12.27


(1.40
)%

(9.78
)%
$
0.30Third Quarter

$
13.32

$
13.37

$
10.77


0.38
%

(19.14
)%
$
0.29Second Quarter(6)

$
14.25

$
13.55

$
12.35


(4.91
)%

(13.33
)%
$
0.27


(1)The
Company was not unitized until the IPO date of May 19, 2011.(2)NAV
is determined as of the last date in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices.
The NAVs shown are based on outstanding shares at the end of each period.(3)Closing
sales price is determined as the high or low closing sales price noted within the respective quarter, not adjusted for dividends.(4)Calculated
as of the respective high or low closing sales price divided by the quarter end NAV.(5)Represents
the dividend declared for the specified quarter.(6)Period
from May 19, 2011 through June 30, 2011 (excludes IPO price of $13.75).(7)Includes
a special dividend of $0.12 per share paid on September 3, 2014 and a third quarter dividend of $0.34 per share paid on September 30,
2014.


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Table of Contents

(8)Includes
a special dividend of $0.12 per share paid on August 30, 2013 and a third quarter dividend of $0.34 per share paid on September 30,
2013.(9)Includes
a fourth quarter dividend of $0.34 per share paid on December 28, 2012 and a special dividend of $0.14 per share paid on January 31,
2013.(10)Includes
a special dividend of $0.23 per share paid on May 31, 2012 and a second quarter dividend of $0.34 per share paid on June 29, 2012.


On
February 27, 2015, the last reported sales price of NMFC's common stock was $14.89 per share. As of February 27, 2015, the Company had approximately 27 stockholders of
record and one beneficial owner whose shares are held in the names of brokers, dealers, funds, trusts and clearing agencies.

Dividends

The Company intends to pay quarterly distributions to its stockholders and to maintain its status as a regulated investment company
("RIC"). The Company intends to
distribute approximately its entire Adjusted Net Investment Income (defined as net investment income adjusted to reflect income as if the cost basis of investments held at the IPO date had stepped-up
to fair market value as of the IPO date) on a quarterly basis and substantially all of its taxable income on an annual basis, except that the Company may retain certain net capital gains for
reinvestment.

The
Company maintains an "opt out" dividend reinvestment plan for its common stockholders. As a result, the Company's stockholders' cash dividends will be automatically reinvested in
additional shares of common stock, unless the stockholder elects to receive cash. Cash dividends reinvested in additional shares of the Company's common stock will be automatically reinvested by the
Company into additional shares of the Company's common stock.

The
Company 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 NAV of the shares, the Company 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 the Company's common stock on the 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
the price at which newly issued shares are to be credited to stockholders' accounts is less than 110.0% of the last determined NAV of the shares, the Company 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
the Company'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 its stockholders have been tabulated. SeeItem 8.Financial Statements and Supplementary DataNote 2, Summary
of Significant Accounting Policiesfor additional information.

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Table of Contents

The following table reflects the Company's cash distributions, including dividends and returns of capital, if any, per share that have been declared by the
Company's board of directors since the Company's IPO:

Date Declared

Record Date

Payment Date

AmountNovember 4, 2014

December 16, 2014

December 30, 2014

$
0.34August 5, 2014

September 16, 2014

September 30, 2014


0.34July 30, 2014

August 20, 2014

September 3, 2014


0.12
(1)May 6, 2014

June 16, 2014

June 30, 2014


0.34March 4, 2014

March 17, 2014

March 31, 2014


0.34​
​
​
​
​
​
​
​
​$
1.48November 8, 2013

December 17, 2013

December 31, 2013

$
0.34August 7, 2013

September 16, 2013

September 30, 2013


0.34August 7, 2013

August 20, 2013

August 30, 2013


0.12
(2)May 6, 2013

June 14, 2013

June 28, 2013


0.34March 6, 2013

March 15, 2013

March 28, 2013


0.34​
​
​
​
​
​
​
​
​$
1.48December 27, 2012

December 31, 2012

January 31, 2013

$
0.14
(3)November 6, 2012

December 14, 2012

December 28, 2012


0.34August 8, 2012

September 14, 2012

September 28, 2012


0.34May 8, 2012

June 15, 2012

June 29, 2012


0.34May 8, 2012

May 21, 2012

May 31, 2012


0.23
(4)March 7, 2012

March 15, 2012

March 30, 2012


0.32​
​
​
​
​
​
​
​
​$
1.71November 8, 2011

December 15, 2011

December 30, 2011

$
0.30August 10, 2011

September 15, 2011

September 30, 2011


0.29August 10, 2011

August 22, 2011

August 31, 2011


0.27​
​
​
​
​
​
​
​
​$
0.86​
​
​
​
​
​
​
​
​Total





$
5.53​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​


(1)Special
dividend related to realized capital gains attributable to the Company's warrant investments in Learning Care Group (US), Inc.(2)Special
dividend related to a distribution received attributable to New Mountain Finance Holdings, L.L.C.'s ("NMF Holdings" or the "Predecessor Operating
Company") investment in YP Equity Investors LLC.(3)Special
dividend intended to minimize to the greatest extent possible the Company's U.S. federal income or excise tax liability.(4)Special
dividend related to estimated realized capital gains attributable to the Predecessor Operating Company's investments in Lawson Software, Inc.
and Infor Lux Bond Company.


Tax
characteristics of all dividends paid by the Company were reported to stockholders on Form 1099 after the end of the calendar year. Future quarterly dividends, if any, for the
Company will be determined by the board of directors.

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Table of Contents

Unregistered Sales of Equity Securities

We did not engage in unregistered sales of securities during the year ended December 31, 2014.

Issuer Purchases of Equity Securities

For the year ended December 31, 2014, the Company did not purchase any of its common stock in the open market.

Stock Performance Graph

This graph compares the return on the Company's common stock with that of the Standard & Poor's 500 Total Return Index
("S&P 500 TR") and the Russell 2000 Index Total Return ("Russell 2000 TR") as we do not believe that there is an appropriate index of companies with an investment strategy similar to our
own with which to compare the return on the Company's common stock, for the period May 19, 2011 (commencement of operations) to December 31, 2014. The graph assumes that, on
May 19, 2011, a person invested $100 in each of the Company's common stock, the S&P 500 TR and the Russell 2000 TR. The graph measures total stockholder return, which takes into account
both changes in stock price and dividends. It assumes that dividends paid are invested in like securities.

Comparison of Cumulative Total Return Among NMFC, S&P 500 TR and Russell 2000 TR

GRAPHIC

The
graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be "soliciting material" or to be filed with the United
States Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the "1934" Act. The stock price performance included in the above
graph is not necessarily indicative of future stock performance.

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Table of Contents

Item 6.    Selected Financial Data

The selected financial data should be read in conjunction with the consolidated financial statements and related notes thereto and Item 7.Management's
Discussion and Analysis of Financial Condition and Results of Operationsincluded in this report. Financial
information for the years ended December 31, 2014, December 31, 2013, December 31, 2012, December 31, 2011, December 31, 2010 and December 31, 2009, has been
derived from the Company's consolidated financial statements that were audited by Deloitte & Touche LLP ("Deloitte"), an independent registered public accounting firm.

The
below selected financial and other data is for NMFC.



Period from
May 19, 2011
(commencement
of operations)
to December 31,
2011Years ended December 31,New Mountain Finance Corporation

2014

2013

2012Statement of Operations Data:Investment income

$
91,923

$


$


$
Investment income allocated from NMF Holdings


43,678


90,876

$
37,511

$
13,669Net expenses


34,727








Net expenses allocated from NMF Holdings


20,808


40,355


17,719


5,324Net investment income


80,066


50,521


19,792


8,345Net realized gains on investments


357








Net realized and unrealized gains (losses) allocated from NMF Holdings


9,508


11,443


12,087


(4,235
)Net change in unrealized (depreciation) appreciation of investments


(43,863
)







Provision for taxes


(493
)







Net change in unrealized (depreciation) appreciation of investment in NMF Holdings





(44
)

(95
)

6,221Net increase in net assets resulting from operations


45,575


61,920


31,784


10,331Per share data:Net asset value

$
13.83

$
14.38

$
14.06

$
13.60Net increase in net assets resulting from operations (basic)


0.88


1.76


2.14


0.97Net increase in net assets resulting from operations (diluted)(1)


0.86


1.76


2.14


0.38Dividends declared(2)


1.48


1.48


1.71


0.86Balance sheet data:Total assets

$
1,514,920

$
650,107

$
345,331

$
145,487Holdings Credit Facility


468,108


N/A


N/A


N/AConvertible Notes


115,000


N/A


N/A


N/ANMFC Credit Facility


50,000


N/A


N/A


N/ASBA-guaranteed debentures


37,500


N/A


N/A


N/ATotal net assets


802,170


650,107


341,926


145,487Other data:Total return at market value(3)


9.66
%

11.62
%

24.84
%

4.16
%Total return at net asset value(4)


6.56
%

13.27
%

16.61
%

2.82
%Number of portfolio companies at period end


71


N/A


N/A


N/ATotal new investments for the period(5)

$
720,871


N/A


N/A


N/AInvestment sales and repayments for the period(5)

$
384,568


N/A


N/A


N/AWeighted average Yield to Maturity at Cost on debt portfolio at period end (unaudited)(6)


10.70
%

N/A


N/A


N/AWeighted average shares outstanding for the period (basic)


51,846,164


35,092,722


14,860,838


10,697,691Portfolio turnover(5)


29.51
%

N/A


N/A


N/A


(1)In
applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive.
For the year ended December 31, 2014, there was no anti-dilution. For the years ended December 31, 2013 and December 31, 2012, due to reflecting earnings for the full year of operations of the
Predecessor Operating Company assuming 100.0% NMFC ownership of Predecessor Operating Company and assuming all of New Mountain Finance AIV Holdings Corporation's ("AIV Holdings") units in the
Predecessor Operating Company were


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Table of Contents

exchanged
for public shares of NMFC during the years then ended, the earnings per share would be $1.79 and $2.18, respectively. (2)Dividends
declared in the year ended December 31, 2014 include a $0.12 per share special dividend related to realized capital gains attributable to
the Company's warrant investments in Learning Care Group (US), Inc. Dividends declared in the year ended December 31, 2013 include a $0.12 per share special dividend related to a
distribution received attributable to the Predecessor Operating Company's investment in YP Equity Investors LLC. Dividends declared in the year ended December 31, 2012 include a $0.23
per share special dividend related to estimated realized capital gains attributable to the Predecessor Operating Company's investments in Lawson Software, Inc. and Infor Lux Bond Company and a
$0.14 per share special dividend intended to minimize to the greatest extent possible NMFC's U.S. federal income or excise tax liability.(3)For
the years ended December 31, 2014, 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 year and assuming a purchase of common stock at initial purchase
offering ("IPO"), respectively, and a sale on the closing of the last day of the respective period ends. Dividends and distributions, if any, are assumed for purposes of this calculation, to be
reinvested at prices obtained under the Company's dividend reinvestment plan.(4)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.(5)For
the year ended December 31, 2014, amounts include the investment activity of the Predecessor Operating Company and the Company.(6)The
weighted average Yield to Maturity at Cost calculation assumes that all investments, including secured collateralized agreements, not on non-accrual are
purchased at the adjusted cost on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the cost for
post-IPO investments in accordance with accounting principles generally accepted in the United States of America ("GAAP") and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair
market value occurred on the IPO date).


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Table of Contents

As
of May 8, 2014, NMFC assumed all operating activities previously undertaken by NMF Holdings. The following table sets forth selected financial and other data for NMF Holdings
when it was the Predecessor Operating Company.



Years ended December 31,New Mountain Finance Holdings, L.L.C.

2013

2012

2011

2010

2009Statement of Operations Data:Total investment income

$
114,912

$
85,786

$
56,523

$
41,375

$
21,767Net expenses


51,235


40,569


17,998


3,911


1,359Net investment income


63,677


45,217


38,525


37,464


20,408Net realized and unrealized gains (losses)


15,247


28,779


(6,848
)

26,328


105,272Net increase (decrease) in net assets resulting from operations


78,924


73,996


31,677


63,792


125,680Per unit data:Net asset value

$
14.38

$
14.06

$
13.60


N/A


N/ANet increase (decrease) in net assets resulting from operations (basic and diluted)


1.79


2.18


1.02


N/A


N/ADividends declared(1)


1.48


1.71


0.86


N/A


N/ABalance sheet data:Total assets

$
1,147,841

$
1,025,564

$
730,579

$
460,224

$
330,558Holdings Credit Facility


221,849


206,938


129,038


59,697


77,745SLF Credit Facility


214,668


214,262


165,928


56,936


Total net assets


688,516


569,939


420,502


241,927


239,441Other data:Total return at net asset value(2)


13.27
%

16.61
%

10.09
%

26.54
%

76.38
%Number of portfolio companies at period end


59


63


55


43


24Total new investments for the period

$
529,307

$
673,218

$
493,331

$
332,708

$
268,382Investment sales and repayments for the period

$
426,561

$
423,874

$
231,962

$
258,202

$
125,430Weighted average Yield to Maturity at Cost on debt portfolio at period end (unaudited)(3)


11.0
%

10.3
%

10.3
%




Weighted average Yield to Maturity on debt portfolio at period end (unaudited)(4)


10.6
%

10.1
%

10.7
%


(5)


(5)Weighted average Adjusted Yield to Maturity on debt portfolio at period end (unaudited)



(6)


(6)

13.1
%

12.5
%

12.7
%Weighted average common membership units outstanding for the period


44,021,920


34,011,738


30,919,629
(7)

N/A


N/APortfolio turnover


40.52
%

52.02
%

42.13
%

76.69
%

57.50
%


N/AFund
was not unitized as of December 31, 2010 and December 31, 2009. (1)Dividends
declared in the year ended December 31, 2013 include a $0.12 per unit special dividend related to a distribution received attributable to
NMF Holdings' investment in YP Equity Investors LLC. Dividends declared in the year ended December 31, 2012 include a $0.23 per unit special dividend related to estimated realized
capital gains attributable to NMF Holdings' investments in Lawson Software, Inc. and Infor Lux Bond Company and a $0.14 per unit special dividend intended to minimize to the greatest extent
possible NMFC's U.S. federal income or excise tax liability. Actual cash


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payments
on the dividends declared to AIV Holdings only, for the quarters ended March 31, 2012, June 30, 2012, December 31, 2012 and March 31, 2013, were made on
April 4, 2012, July 9, 2012, January 7, 2013 and April 5, 2013 respectively. (2)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 period ends. 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.(3)The
weighted average Yield to Maturity at Cost calculation assumes that all investments not on non-accrual are purchased at the adjusted cost on the
respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the GAAP cost for post-IPO investments and a
stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date). The weighted average Yield to Maturity at Cost was not calculated prior to NMFC's IPO.(4)The
weighted average Yield to Maturity calculation assumes that all investments not on non-accrual are purchased at fair value on the respective period ends
and held until their respective maturities with no prepayments or losses and exited at par at maturity. The weighted average Yield to Maturity was not calculated subsequent to December 31,
2013.(5)Prior
to NMFC's IPO, for yield calculation purposes, New Mountain Finance SPV Funding, L.L.C. ("NMF SLF") was treated as a fully levered asset of NMF
Holdings with NMF SLF's net asset value being included in the yield to maturity calculations. Since NMF SLF is consolidated in accordance with GAAP, at the time of the IPO, NMF Holdings began using
the weighted average Yield to Maturity concept instead of the "Adjusted Yield to Maturity" concept for yield calculation purposes.(6)"Adjusted
Yield to Maturity" assumes that the investments in NMF Holdings' portfolio are purchased at fair value on the respective period ends and held
until their respective maturities with no prepayments or losses and exited at par at maturity. This calculation excludes the impact of existing leverage, except for the non-recourse debt of NMF SLF.
NMF SLF is treated as a fully levered asset of NMF Holdings, with NMF SLF's net asset value being included for yield calculation purposes.(7)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.


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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The information in management's discussion and analysis of financial condition and results of operations relates to New Mountain
Finance Corporation, including its wholly-owned direct and indirect subsidiaries (collectively, "we", "us", "our", "NMFC" or the "Company").

The
following analysis of our financial condition and results of operations should be read in conjunction with our financial data and our financial statements and the notes thereto
contained inItem 8.Financial Statements and Supplementary Data, in this report. See Item 1A.Risk Factorsfor a discussion of the
uncertainties, risks and assumptions associated with these statements.

Forward-Looking Statements

The information contained in this section should be read in conjunction with the financial data and consolidated financial statements
and notes thereto appearing elsewhere in this report. Some of the statements in this report (including in the following discussion) constitute forward-looking statements, which relate to future events
or the future performance or financial condition of the Company. The forward-looking statements contained in this section involve a number of risks and uncertainties,
including:



Forward-looking
statements are identified by their use of such terms and phrases such as "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "plan",
"potential", "project", "seek", "should", "target", "will", "would" or similar expressions. Actual results could differ materially from those projected in the forward-looking statements for any
reason, including the factors set forth inItem 1A.Risk Factorscontained in this annual report.

We
have based the forward-looking statements included in this report on information available to us on the date of this report. We assume no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we undertake no obligation to revise or update any forward-looking
statements, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the United States Securities and
Exchange Commission ("SEC"), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

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 regulated as a BDC

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under
the Investment Company Act of 1940, as amended (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"). NMFC is also registered as an investment adviser under the Investment Advisers Act of 1940, as amended
(the "Advisers Act").

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 (defined as New Mountain Capital Group, L.L.C. and its affiliates) 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 (as defined below). In connection with NMFC's
IPO and through a series of transactions, New Mountain Finance Holdings, L.L.C. ("NMF Holdings" or the "Predecessor Operating Company") acquired all of the operations of the Predecessor Entities,
including all of the assets and liabilities related to such operations.

NMF
Holdings is a Delaware limited liability company. Until May 8, 2014, NMF Holdings was externally managed and was regulated as a BDC under the 1940 Act. As such, NMF Holdings
was obligated to comply with certain regulatory requirements. NMF Holdings was treated as a partnership for United States ("U.S.") federal income tax purposes for so long as it had at least two
members. With the completion of the underwritten secondary offering on February 3, 2014, NMF Holdings' existence as a partnership for U.S. federal income tax purposes terminated and NMF
Holdings became an entity that is disregarded as a separate entity from its owner for U.S. federal tax purposes. For additional information on our organizational structure prior to May 8, 2014,
see "Restructuring".

Until
May 8, 2014, NMF Holdings was externally managed by the Investment Adviser. As of May 8, 2014, the Investment Adviser serves as the external investment adviser to
NMFC. 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. New Mountain Capital is a firm with a track record of investing in the middle market and with assets under management totaling more than $15.0 billion(1),
which includes total assets held by the Company. New Mountain Capital focuses on investing in defensive growth companies across its private equity, public equity and credit investment vehicles. NMF
Holdings, 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".

Prior
to December 18, 2014, New Mountain Finance SPV Funding, L.L.C. ("NMF SLF") was a Delaware limited liability company. NMF SLF was a wholly-owned subsidiary of NMF Holdings
and thus a wholly-owned indirect subsidiary of the Company. NMF SLF was bankruptcy-remote and
non-recourse to NMFC. As part of an amendment to the Company's exisiting credit facilities with Wells Fargo Bank, National Association, NMF SLF merged with and into NMF Holdings on



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December 18, 2014.
SeeItem 8.Financial Statements and Supplementary DataNote 7, Borrowingsfor
additional information on the Company's credit facilities.

Until
April 25, 2014, New Mountain Finance AIV Holdings Corporation ("AIV Holdings") was a Delaware corporation that was originally incorporated on March 11, 2011. AIV
Holdings was dissolved on April 25, 2014. Guardian AIV, a Delaware limited partnership, was AIV Holdings' sole stockholder. AIV Holdings was a closed-end, non-diversified management investment
company that was regulated as a BDC under the 1940 Act. As such, AIV Holdings was obligated to comply with certain regulatory requirements. AIV Holdings was treated, and complied with the requirements
to qualify annually, as a RIC under the Code.

Prior
to the Restructuring (as defined below) on May 8, 2014, NMFC and AIV Holdings were holding companies with no direct operations of their own, and their sole asset was their
ownership in NMF Holdings. In connection with the IPO, NMFC and AIV Holdings each entered into a joinder agreement with respect to the Limited Liability Company Agreement, as amended and restated (the
"Operating Agreement"), of NMF Holdings, pursuant to which NMFC and AIV Holdings were admitted as members of NMF Holdings. NMFC acquired from NMF Holdings, with the gross proceeds of the IPO and the
Concurrent Private Placement, common membership units ("units") of NMF Holdings (the number of units were 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 NMF Holdings 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 NMF Holdings prior to the IPO and, as a result of the transactions completed in connection with the IPO, obtained units in NMF Holdings. Guardian AIV contributed its
units in NMF Holdings to its newly formed subsidiary, AIV Holdings, in exchange for common stock of AIV Holdings. AIV Holdings had the right to exchange all or any portion of its units in NMF Holdings
for shares of NMFC's common stock on a one-for-one basis at any time.

The
original 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 was that any distributions made to NMFC's stockholders that were attributable to such
gains generally were not treated as taxable dividends but rather as return of capital.

Since
NMFC's IPO, and through December 31, 2014, NMFC raised approximately $374.6 million in net proceeds from additional offerings of common stock and issued shares of its
common stock valued at approximately $288.4 million on behalf of AIV Holdings for exchanged units. NMFC acquired from NMF Holdings units of NMF Holdings equal to the number of shares of NMFC's
common stock sold in additional offerings. With the completion of the final secondary offering on February 3, 2014, NMFC owned 100.0% of the units of NMF Holdings, which became a wholly-owned
subsidiary of NMFC.

Restructuring

As a BDC, AIV Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after
careful consideration of the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of AIV Holdings' business model, AIV Holdings' board of directors had
determined that continuation as a BDC was not in the best interests of AIV Holdings and Guardian AIV at the present time. Specifically, given that AIV Holdings was formed for the sole purpose of
holding units of NMF Holdings and AIV Holdings had disposed of all of the units of NMF Holdings that it was holding as of February 3, 2014, the board of directors of AIV Holdings approved and
declared advisable at an in-person meeting held on March 25, 2014 the withdrawal of AIV Holdings' election to be regulated as a BDC under the 1940 Act. In addition, the

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board
of directors of AIV Holdings approved and declared advisable for AIV Holdings to terminate its registration under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and to dissolve AIV Holdings under the laws of the State of Delaware.

Upon
receipt of necessary stockholder consent to authorize the board of directors of AIV Holdings to withdraw AIV Holdings' election to be regulated as a BDC, the withdrawal was filed
and became effective upon receipt by the U.S. SEC of AIV Holdings' notification of withdrawal on Form N-54C on April 15, 2014. The board of directors of AIV Holdings believed that AIV
Holdings met the requirements for filing the notification to withdraw its election to be regulated as a BDC, upon the receipt of the necessary stockholder consent. After the notification of withdrawal
of AIV Holdings' BDC election was filed with the SEC, AIV Holdings was no longer subject to the regulatory provisions of the 1940 Act applicable to BDCs generally, including regulations related to
insurance, custody, composition of its board of directors, affiliated transactions and any compensation arrangements.

In
addition, on April 15, 2014, AIV Holdings filed a Form 15 with the SEC to terminate AIV Holdings' registration under Section 12(g) of the Exchange Act. After
these SEC filings and any other federal or state regulatory or tax filings were made, AIV Holdings proceeded to dissolve under Delaware law by filing a certificate of dissolution in Delaware on
April 25, 2014.

Until
May 8, 2014, as a BDC, NMF Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after careful consideration of
the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of NMF Holdings' current business model, NMF Holdings' board of directors determined at an
in-person meeting held on March 25, 2014 that continuation as a BDC was not in the best interests of NMF Holdings at the present time.

At
the 2014 joint annual meeting of the stockholders of NMFC and the sole unit holder of NMF Holdings held on May 6, 2014, the stockholders of NMFC and the sole unit holder of NMF
Holdings approved a proposal which authorized the board of directors of NMF Holdings to withdraw NMF Holdings' election to be regulated as a BDC. Additionally, the stockholders of NMFC approved a new
investment advisory and management agreement between NMFC and the Investment Adviser. Upon receipt of the necessary stockholder/unit holder approval to authorize the board of directors of NMF Holdings
to withdraw NMF Holdings' election to be regulated as a BDC, the withdrawal was filed and became effective upon receipt by the SEC of NMF Holdings' notification of withdrawal on Form N-54C on
May 8, 2014.

Effective
May 8, 2014, NMF Holdings amended and restated its Operating Agreement such that the board of directors of NMF Holdings was dissolved and NMF Holdings remained a
wholly-owned subsidiary of NMFC with the sole purpose of serving as a special purpose vehicle for NMF Holdings' credit facility, and NMFC assumed all other operating activities previously undertaken
by NMF Holdings under the management of the Investment Adviser (collectively, the "Restructuring"). After the Restructuring, all wholly-owned direct and indirect subsidiaries of NMFC are consolidated
with NMFC for both 1940 Act and financial statement reporting purposes, subject to any financial statement adjustments required in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). NMFC continues to remain a BDC under the 1940 Act.

Also,
on May 8, 2014, NMF Holdings filed Form 15 with the SEC to terminate NMF Holdings' registration under Section 12(g) of the Exchange Act. As a special purpose
entity, NMF Holdings is bankruptcy-remote and non-recourse to NMFC. In addition, the assets held at NMF Holdings will continue to be used to secure NMF Holdings' credit facility.

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Current Organization

During the year ended December 31, 2014, the Company established wholly-owned subsidiaries, NMF Ancora Holdings Inc.
("NMF Ancora") and NMF YP Holdings Inc. ("NMF YP"), which are structured as Delaware entities that serve as tax blocker corporations which hold equity or equity-like investments in portfolio
companies organized as limited liability companies (or other forms of pass-through entities). Tax blocker corporations are not consolidated for income tax purposes and may incur income tax expense as
a result of their ownership of portfolio companies. Additionally, the Company has a wholly-owned subsidiary, New Mountain Finance Servicing, L.L.C. ("NMF Servicing") that serves as the administrative
agent on certain investment transactions. New Mountain Finance SBIC, L.P. ("SBIC LP"), and its general partner, New Mountain Finance SBIC G.P., L.L.C. ("SBIC GP"), were
organized in Delaware as a limited partnership and limited liability company, respectively. SBIC LP and SBIC GP are consolidated wholly-owned direct and indirect subsidiaries of the
Company. SBIC LP received a license from the U.S. Small Business Administration (the "SBA") to operate as a small business investment company ("SBIC") under Section 301(c) of the Small
Business Investment Act of 1958, as amended (the "1958 Act").

The
diagram below depicts the Company's organizational structure as of December 31, 2014.

GRAPHIC

---

The
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 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. Similar to the Company, SBIC LP's
investment objective is to generate current income and capital appreciation under

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the
investment criteria used by the Company, however, SBIC LP's investments must be SBA eligible companies. Our portfolio may be concentrated in a limited number of industries. As of
December 31, 2014, our top five industry concentrations were software, business services, education, federal services and healthcare services.

As
of December 31, 2014, the Company's net asset value was $802.2 million and its portfolio had a fair value of approximately $1,424.7 million in 71 portfolio
companies, with a weighted average Yield to Maturity at Cost of approximately 10.7%. This Yield to Maturity at Cost ("Yield to Maturity at Cost") calculation assumes that all investments, including
secured collateralized agreements, not on non-accrual are purchased at the adjusted cost on the quarter end date and held until their respective maturities with no prepayments or losses and exited at
par at maturity. Adjusted cost reflects the GAAP cost for post-IPO investments and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).
This calculation excludes the impact of existing leverage. Yield to Maturity at Cost uses the London Interbank Offered Rate ("LIBOR") curves at each quarter's end date. The actual yield to maturity
may be higher or lower due to the future selection of the LIBOR contracts by the individual companies in the Company's portfolio or other factors.

Recent Developments

On December 31, 2014 and continuing subsequent to the year then ended, the Company's portfolio investment in Edmentum, Inc.
disclosed its projected substantial financial deterioration. The Company reflects this information in the valuation of this portfolio investment as of December 31, 2014. All interest due to the
Company through the year ended December 31, 2014 has been paid. As more information becomes available, the Company may experience a further mark down of the fair value of this investment. This
investment may be placed on non-accrual status in the future. The investment represents 1.1% of the total portfolio at fair value as of December 31, 2014.

In
January 2015, UniTek emerged from "Pre-Packaged" Chapter 11 Bankruptcy and completed its restructuring.

On
February 23, 2015, the Company's board of directors declared a first quarter 2015 distribution of $0.34 per share payable on March 31, 2015 to holders of record as of
March 17, 2015.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the
periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Basis of Accounting

The Company consolidates its wholly-owned direct and indirect subsidiaries: NMF Holdings, NMF Servicing, SBIC LP,
SBIC GP, NMF Ancora and NMF YP. Previously, the Company consolidated its wholly-owned indirect subsidiary NMF SLF until it merged with and into NMF Holdings on December 18, 2014. See Item 8.Financial
Statements and Supplementary DataNote 7, Borrowingsfor additional information on the Company's
credit facilities. The Company is an investment company following accounting and reporting guidance as described in Accounting Standards Codification Topic 946, Financial ServicesInvestment Companies, ("ASC 946"). Prior to the Restructuring, the Predecessor Operating Company consolidated its
wholly-owned subsidiary, NMF SLF. NMFC and AIV Holdings did not consolidate the Predecessor Operating Company. Prior to the Restructuring, NMFC and AIV Holdings applied investment company
master-feeder financial statement presentation, as described in ASC 946 to their interest in the Predecessor Operating Company. NMFC and AIV

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Holdings
observed that it is also 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 provided stockholders of NMFC and AIV Holdings with a clearer depiction of their investment in the master fund.

Valuation and Leveling of Portfolio Investments

At all times consistent with GAAP and the 1940 Act, the Company conducts a valuation of assets, which impacts its net asset value.

The
Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, the Company's board of directors is ultimately and solely responsible
for determining the fair value of its 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 Company's quarterly valuation procedures are set forth in more detail below:



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For
investments in revolving credit facilities and delayed draw commitments, the cost basis of the funded investments purchased is offset by any costs/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 Company's investments may fluctuate from period to period and the fluctuations could be material.

GAAP
fair value measurement guidance classifies the inputs used in measuring fair value into three levels as follows:



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).

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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.

The
following table summarizes the levels in the fair value hierarchy that the Company's portfolio investments fall into as of December 31, 2014:

(in thousands)

Total

Level I

Level II

Level IIIFirst lien

$
677,901

$


$
508,721

$
169,180Second lien


604,158





469,752


134,406Subordinated


61,987





26,517


35,470Equity and other


80,625








80,625​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investments

$
1,424,671

$


$
1,004,990

$
419,681​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


The
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. The
Company typically determines the fair value of its performing debt investments utilizing an income approach. Additional consideration is given using a market based approach, as well as reviewing the
overall underlying portfolio company's performance and associated financial risks. The following outlines additional details on the approaches considered:

Company Performance, Financial Review, and Analysis:Prior to investment, as part of its due diligence process, the Company
evaluates the overall
performance and financial stability of the portfolio company. Post investment, the 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 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 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 Company
will consider the pricing indicated by the external event to corroborate the private valuation.

Market Based Approach:The Company may estimate the total enterprise value of each portfolio company by utilizing market value
cash flow (EBITDA)
multiples of publicly traded comparable companies. The 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
Company may apply 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. Significant increases or decreases in the multiple will result in an increase or decrease in enterprise value, resulting in an increase or decrease in the fair value estimate of the
investment. In applying the market based approach as of December 31, 2014, the Company used the relevant EBITDA multiple ranges set forth in the table below to determine the enterprise value of
investments in twelve of its portfolio companies.

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The
Company believes this was a reasonable range in light of current comparable company trading levels and the specific companies involved.

Income Based Approach:The Company also may use 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. Significant increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement. In
applying the income based approach as of December 31, 2014, the Company used the discount ranges set forth in the table below to value investments in seventeen of its portfolio companies.

Range(in thousands)
Type

Fair Value

Approach

Unobservable Input

Low

High

Weighted
AverageFirst lien

$
169,180

Market approach

EBITDA multiple


6.5x


12.0x


8.6xIncome approach

Discount rate


8.2
%

16.5
%

12.0
%Second lien


134,406

Market approach

EBITDA multiple


5.5x


15.5x


10.6xIncome approach

Discount rate


11.0
%

16.0
%

12.7
%Other

N/A(1)


N/A
(1)

N/A
(1)

N/A
(1)Subordinated


35,470

Market approach

EBITDA multiple


8.0x


12.0x


10.0xIncome approach

Discount rate


10.7
%

17.7
%

14.7
%Equity and other


80,625

Market approach

EBITDA multiple


7.0x


12.0x


8.1xIncome approach

Discount rate


8.0
%

15.0
%

12.9
%Other

N/A(1)


N/A
(1)

N/A
(1)

N/A
(1)Black Scholes analysis

Expected life in years


11.3


11.3


11.3Volatility


31.6
%

31.6
%

31.6
%Discount rate


2.3
%

2.3
%

2.3
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​$
419,681​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Fair
value was determined based on transaction pricing or recent acquisition or sale as the best measure of fair value with no material changes in
operations of the related portfolio company since the transaction date.


NMFC Senior Loan Program I, LLC

On June 10, 2014, NMFC Senior Loan Program I, LLC ("SLP I") was formed as a Delaware limited liability company. SLP I is
a portfolio company held by the Company. SLP I is structured as a private investment fund, in which all of the investors are qualified purchasers, as such term is defined under the 1940 Act. Transfer
of interests in SLP I is subject to restrictions, and as a result, such interests are not readily marketable. SLP I operates under a limited liability company agreement (the "Agreement") and will
continue in existence until June 10, 2019, subject to earlier termination pursuant to certain terms of the Agreement. The term may be extended for up to one year pursuant to certain terms of
the Agreement. SLP I has a three year re-investment period.

SLP
I is capitalized with $93.0 million of capital commitments, $275.0 million of debt from a revolving credit facility and is managed by the Company. The Company's capital
commitment is $23.0 million, representing less than 25.0% ownership, with third party investors representing the remaining capital commitment. As of December 31, 2014, SLP I had total
investments with an

79

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aggregate
fair value of approximately $369.2 million, debt outstanding of $266.9 million and capital that had been called and funded of $93.0 million. The Company's investment in
SLP I is disclosed on the December 31, 2014 Consolidated Schedule of Investments.

The
Company, as an investment adviser registered under the Advisers Act, acts as the collateral manager to SLP I and is entitled to receive a management fee for its investment management
services provided to SLP I. As a result, SLP I is classified as an affiliate of the Company. For the year ended December 31, 2014, the Company earned approximately $0.5 million in
management fees related to SLP I which is included in other income. As of December 31, 2014, approximately $0.5 million of management fees related to SLP I was included in receivable
from affiliates. For the year ended December 31, 2014, the Company earned approximately $1.1 million of dividend income related to SLP I, which is included in dividend income. As
of December 31, 2014, approximately $0.8 million of dividend income related to SLP I was included in interest and dividend receivable.

SLP
I invests in senior secured loans issued by companies within the Company's core industry verticals. These investments are typically broadly syndicated first lien loans.

Collateralized agreements or repurchase financings

The Company follows the guidance in Accounting Standards Codification Topic 860, Transfers and ServicingSecured
Borrowing and Collateral, (``ASC 860") when accounting for transactions involving the purchases of securities under collateralized agreements to resell (resale agreements). These transactions are
treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts, as specified in the respective agreements. Interest on collateralized agreements is
accrued and recognized over the life of the transaction and included in interest income. As of December 31, 2014, the Company held one collateralized agreement to resell with a carrying value of $30.0
million, collateralized by a security with a fair value of $30.0 million and guaranteed by the counterparty. The counterparty has the option to repurchase the collateral from the Company at the par
value of the collateralized agreement within a year. The collateralized agreement earns interest at a rate of 15.0% per annum as of December 31, 2014. The Predecessor Operating Company did not have
any collateralized agreements as of the year ended December 31, 2013.

Revenue Recognition

The Company's revenue recognition policies are as follows:

Sales and paydowns of investments:Realized gains and losses on investments are determined on the specific identification method.

Interest income:Interest income, including amortization of premium and discount using the effective interest method, is recorded on
the accrual
basis and periodically assessed for collectability. Interest income also includes interest earned from cash on hand. Upon the prepayment of a loan or debt security, any prepayment penalties are
recorded as part of interest income. The Company has loans in the portfolio that contain a payment-in-kind ("PIK") provision. PIK represents interest that is accrued and recorded as interest income at
the contractual rates, if deemed collectible, added to the loan principal on the respective capitalization dates, and generally due at maturity.

Non-accrual income:Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and
when there is
reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is reversed when a loan is placed on non-accrual status. Previously capitalized PIK interest
is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's
judgment of the ultimate outcome. Non-accrual

80

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loans
are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

Dividend income:Dividend income is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly
traded
portfolio companies.

Other income:Other income represents delayed compensation, consent or amendment fees, revolver fees, structuring fees, management fees
from a
non-controlled/affiliated investment and other miscellaneous fees received and are typically non-recurring in nature. Delayed compensation is income earned from counterparties on trades that do not
settle within a set number of business days after trade date. Other income may also include fees from bridge loans. The Company may from time to time enter into bridge financing commitments, an
obligation to provide interim financing to a counterparty until permanent credit can be obtained. These commitments are short-term in nature and may expire unfunded. A fee is received by the Company
for providing such commitments. Structuring fees are recognized as income when earned, usually when paid at the closing of the investment and are non-refundable.

Prior
to the Restructuring, NMFC's revenue recognition policies were as follows:

Revenue, expenses, and capital gains (losses):At each quarterly valuation date, the Predecessor Operating Company's investment income,
expenses, net
realized gains (losses), and net increase (decrease) in unrealized appreciation (depreciation) were allocated to NMFC based on its pro-rata interest in the net assets of the Predecessor Operating
Company. This was recorded on NMFC's Statements of Operations. Realized gains and losses are recorded upon sales of NMFC's investments in the Predecessor Operating Company. Net change in unrealized
appreciation (depreciation) of investment in New Mountain Finance Holdings, L.L.C. is the difference between the net asset value per share and the closing price per share for shares issued as part of
the dividend reinvestment plan on the dividend payment date. This net change in unrealized appreciation (depreciation) of investment in New Mountain Finance Holdings, L.L.C. includes the unrealized
appreciation (depreciation) from the IPO. NMFC used the proceeds from its IPO and Concurrent Private Placement to purchase units in the Predecessor Operating Company at $13.75 per unit (its IPO price
per share). At the IPO date, $13.75 per unit represented a discount to the actual net asset value per unit of the Predecessor Operating Company. As a result, NMFC experienced immediate unrealized
appreciation on its investment.

All
expenses, including those of NMFC, were paid and recorded by the Predecessor Operating Company. Expenses were allocated to NMFC based on pro-rata ownership interest. In addition, the
Predecessor Operating Company paid all of the offering costs related to the IPO and subsequent offerings. NMFC recorded its portion of the offering costs as a direct reduction to net assets and the
cost of their investment in the Predecessor Operating Company.

Monitoring of Portfolio Investments

The Company monitors the performance and financial trends of its portfolio companies on at least a quarterly basis. The Company
attempts to identify any developments within the portfolio company, the industry or the macroeconomic environment that may alter any material element of its original investment strategy.

The
Company uses an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio. The Company uses a
four-level numeric rating scale as follows:



81

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As
of December 31, 2014, all investments in the Company's portfolio had an Investment Rating of 1 or 2 with the exception of five portfolio company names; four portfolio companies
with an Investment Rating of 3 and two portfolio companies with an Investment Rating of 4. As of December 31, 2014, a portion of the Company's investment in one portfolio company had an
Investment Rating of 3 and a portion had an Investment Rating of 4.

As
of December 31, 2014, the Company's two super priority first lien positions in ATI Acquisition Company and related equity positions in Ancora Acquisition LLC had an
Investment Rating of 4 due to the underlying business encountering significant regulatory constraints which have led to the portfolio company's underperformance. As of December 31, 2014, the
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 payments for the year
then ended and uncertainty about its ability to pay such amounts in the future. During the third quarter of 2013, the 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, 2014, the Company's investment in ATI Acquisition Company and Ancora
Acquisition LLC had an aggregate cost basis of $1.6 million, an aggregate fair value of $0.4 million and total unearned interest income of $0.3 million for the year then
ended. Unrealized gains (losses) include a fee that the Company would receive upon maturity of the two super priority first lien debt investments.

During
the third quarter of 2014, the Company placed a portion of its first lien position in UniTek Global Services, Inc. ("UniTek") on non-accrual status in anticipation of a
voluntary petition for a "Pre-Packaged" Chapter 11 Bankruptcy in the U.S. Bankruptcy Court for the District of Delaware which was filed on November 3, 2014. As of December 31,
2014, the portion of the UniTek first lien position placed on non-accrual status represented an aggregate cost basis of $12.1 million, an aggregate fair value of $8.8 million and total
unearned interest income of $1.0 million for the year then ended.

Portfolio and Investment Activity

The fair value of the Company's investments was approximately $1,424.7 million in 71 portfolio companies at December 31,
2014. At December 31, 2013 and December 31, 2012, the Company's only investment was its investment in the Predecessor Operating Company. The fair value of the Predecessor Operating
Company's investments was approximately $1,115.7 million in 59 portfolio companies at December 31, 2013 and $989.8 million in 63 portfolio companies at December 31, 2012.

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The
following table shows the Company's portfolio and investment activity for the year ended December 31, 2014 and the Predecessor Operating Company's portfolio and investment
activity for the years ended December 31, 2013 and December 31, 2012:

Years ended December 31,(in millions)

2014(1)

2013

2012New investments in 43, 34 and 45 portfolio companies, respectively

$
720.9

$
529.3

$
673.2Debt repayments in existing portfolio companies


267.5


395.4


299.2Sales of securities in 14, 12 and 22 portfolio companies, respectively


117.0


31.2


124.7Change in unrealized appreciation on 20, 45 and 48 portfolio companies, respectively


21.2


27.9


27.0Change in unrealized depreciation on 60, 29 and 30 portfolio companies, respectively


(63.9
)

(19.9
)

(17.1
)


(1)For
the year ended December 31, 2014, amounts represent the investment activity of the Predecessor Operating Company through and including
May 7, 2014 and the investment activity of the Company from May 8, 2014 through December 31, 2014.


At
December 31, 2014, the Company's weighted average Yield to Maturity at Cost was approximately 10.7%. At December 31, 2013, the Predecessor Operating Company's weighted
average Yield to Maturity at Cost and weighted average Yield to Maturity was approximately 11.0% and 10.6%, respectively. The Yield to Maturity calculation used in prior years for the Predecessor
Operating Company assumed that all investments not on non-accrual were purchased at fair value on December 31, 2013 and held until their respective maturities with no prepayments or losses and
exited at par at maturity.

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 Company is an investment company that is applying
the specialized guidance in Topic 946 as of January 1, 2014.

In
May 2014, the FASB issued Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers Topic 606Summary and Amendments
that Create Revenue from Contracts with Customers and Other Assets and Deferred Costs('ASU 2014-09"). ASU 2014-09 establishes a comprehensive and converged standard on revenue
recognition to enable financial statement users to better understand and consistently analyze an entity's revenue across industries, transactions and geographies. The core principle of the new
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and
(5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also specifies the accounting for certain costs to obtain or fulfill a contract with a
customer. The new guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Qualitative
and quantitative information is

83

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Table of Contents

required
to be disclosed about: (1) contracts with customers, (2) significant judgments and changes in judgments, and (3) assets recognized from costs to obtain or fulfill a
contract. The new guidance will apply to all entities. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early application is
not permitted. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements and disclosures.

In
June 2014, the FASB issued Accounting Standards Update No. 2014-11,Transfers and Servicing Topic 860Repurchase-to-Maturity Transactions,
Repurchase Financings, and Disclosures("ASU 2014-11"). ASU 2014-11 changes the accounting for repurchase- and resale-to-maturity agreements by requiring that such
agreements be recognized as financing arrangements, and requires that a transfer of a financial asset and a repurchase agreement entered into contemporaneously be accounted for separately. ASU 2014-11
requires additional disclosures about certain transferred financial assets accounted for as sales and certain securities financing transactions. The accounting changes and additional disclosures about
certain transferred financial assets accounted for as sales are effective for the first interim and annual reporting periods beginning after December 15, 2014. The additional disclosures for
securities financing transactions are required for annual reporting periods beginning after December 15, 2014 and for interim reporting periods beginning after March 15, 2015. The
Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements and disclosures.

In
August 2014, the FASB issued Accounting Standards Update No. 2014-15,Presentation of Financial StatementsGoing Concern Subtopic
205-40Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern("ASU 2014-15"). ASU 2014-15 will explicitly require management
to assess an entity's ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the first
annual period ending after December 15, 2016. Earlier adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on the Company's consolidated financial
statements and disclosures.

Results of Operations

Under GAAP, NMFC's IPO did not step-up the cost basis of the Predecessor Operating Company's existing investments to fair market value
at the IPO date. Since the total value of the Predecessor Operating Company's investments at the time of the IPO was greater than the investments' cost basis, a larger amount of amortization of
purchase or original issue discount, and 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, repaid or mature in the future. The Company tracks the transferred (or fair market) value of each of the Predecessor Operating Company's investments as of the time of the IPO and, for purposes
of the incentive fee calculation, adjusts income as if each investment was purchased at the date of the IPO (or stepped up to fair market value). The respective "Adjusted Net Investment Income"
(defined as net investment income adjusted to reflect income as if the cost basis of investments held at the IPO date had stepped-up to fair market value as of the IPO date) is used in calculating
both the incentive fee and dividend payments. SeeItem 8.Financial Statements and Supplementary DataNote 5,
Agreementsfor additional details.

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The
following table for the Company for the year ended December 31, 2014 is adjusted to reflect the step-up to fair market value and the allocation of the incentive fees related
to hypothetical capital gains out of the adjusted post-incentive fee net investment income.

(in thousands)

Year Ended
December 31,
2014

Stepped-up
Cost Basis
Adjustments

Incentive Fee
Adjustments(1)

Adjusted
Year Ended
December 31,
2014Investment incomeInterest income

$
85,123

$
(193
)
$


$
84,930Dividend income


2,309








2,309Other income


4,491








4,491Investment income allocated from NMF HoldingsInterest income


40,515








40,515Dividend income


2,368








2,368Other income


795








795​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income(2)


135,601


(193
)




135,408​
​
​
​
​
​
​
​
​
​
​
​
​
​Total expenses pre-incentive fee(3)


43,766








43,766​
​
​
​
​
​
​
​
​
​
​
​
​
​Pre-Incentive Fee Net Investment Income


91,835


(193
)




91,642​
​
​
​
​
​
​
​
​
​
​
​
​
​Incentive fee


11,769





6,549


18,318​
​
​
​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


80,066


(193
)

(6,549
)

73,324​
​
​
​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


357


(456
)




(99
)Net realized gains on investments allocated from NMF Holdings


8,568








8,568Net change in unrealized (depreciation) appreciation of investments(4)


(43,863
)

649





(43,214
)Net change in unrealized appreciation (depreciation) of investments allocated from NMF Holdings


940








940Provision for taxes


(493
)







(493
)Capital gains incentive fees








6,549


6,549​
​
​
​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations

$
45,575







$
45,575​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)For
the year ended December 31, 2014, the Company incurred total incentive fees of $11.8 million, of which $(6.5) million related to the
reduction of the capital gains incentive fee accrual on a hypothetical liquidation basis.(2)Includes
income from non-controlled/non-affiliated investments and non-controlled/affiliated investments.(3)Includes
expense waivers and reimbursements of $1.1 million and management fee waivers of $0.7 million.(4)Includes
net change in unrealized (depreciation) appreciation of investments from non-controlled/non-affiliated investments and non-controlled/affiliated
investments.


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For the year ended December 31, 2014, the Company had a $0.2 million adjustment to interest income for amortization, a decrease of
$0.5 million to net realized gains and an increase of $0.7 million to net change in unrealized depreciation to adjust for the stepped-up cost basis of the transferred investments as
discussed above. For the year ended December 31, 2014, total adjusted investment income of $135.4 million consisted of approximately $114.5 million in cash interest from
investments, approximately $4.6 million in PIK interest from investments, approximately $3.9 million in prepayment fees, net amortization of purchase premiums and discounts and
origination fees of approximately $2.5 million, approximately $4.6 million in dividend income and approximately $5.3 million in other income. The Company's Adjusted Net Investment
Income was $73.3 million for the year ended December 31, 2014.

In
accordance with GAAP, for the year ended December 31, 2014, the Company decreased its hypothetical capital gains incentive fee accrual by $6.5 million 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. As of December 31, 2014, no actual capital gains incentive fee was owed under the Investment Management Agreement by the Company, as cumulative net Adjusted
Realized Gains did not exceed cumulative Adjusted Unrealized Depreciation.

At
December 31, 2013, the Company's only investment was its investment in the Predecessor Operating Company. The following table for the Predecessor Operating Company for the year
ended December 31, 2013 is adjusted to reflect the step-up to fair market value and the allocation of the incentive fees related to hypothetical capital gains out of the adjusted post-incentive
fee net investment income.

(in thousands)

Year Ended
December 31,
2013

Stepped-up
Cost Basis
Adjustments

Incentive Fee
Adjustments(1)

Adjusted
Year Ended
December 31,
2013Investment incomeInterest income

$
107,027

$
(896
)
$


$
106,131Dividend income


5,049








5,049Other income


2,836








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


114,912


(896
)




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


31,504








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


83,408


(896
)




82,512​
​
​
​
​
​
​
​
​
​
​
​
​
​Incentive fee


19,731





(3,229
)

16,502​
​
​
​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


63,677


(896
)

3,229


66,010​
​
​
​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


7,253


(3,158
)




4,095Net change in unrealized appreciation (depreciation) of investments


7,994


4,054





12,048Capital gains incentive fees








(3,229
)

(3,229
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
78,924







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


(1)For
the year ended December 31, 2013, the Predecessor Operating Company incurred total incentive fees of $19.7 million, of which
$3.2 million related to capital gains incentive fees on a hypothetical liquidation basis.(2)Includes
expense waivers and reimbursements of $3.2 million.


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For
the year ended December 31, 2013, the Predecessor Operating Company had a $0.9 million adjustment to interest income for amortization, a decrease of $3.2 million
to net realized gains and an increase of $4.1 million to net change in unrealized appreciation to adjust for the stepped-up cost basis of the transferred investments as discussed above. For the
year ended December 31, 2013, total adjusted investment income of $114.0 million consisted of approximately $94.5 million in cash interest from investments, approximately
$3.4 million in PIK interest from investments, approximately $5.8 million in prepayment fees, net amortization of purchase premiums and discounts and origination fees of approximately
$2.5 million, approximately $5.0 million in dividend income and approximately $2.8 million in other income. The Predecessor Operating Company's Adjusted Net Investment Income was
$66.0 million for the year ended December 31, 2013.

In
accordance with GAAP, for the year ended December 31, 2013, the Predecessor Operating Company accrued $3.2 million of 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. As of December 31, 2013, approximately $1.1 million of capital gains incentive fees was owed under the Investment Management Agreement by the
Predecessor Operating Company, as cumulative net Adjusted Realized Gains exceeded cumulative Adjusted Unrealized Depreciation and was paid during the year ended December 31, 2014.

At
December 31, 2012, the Company's only investment was its investment in the Predecessor Operating Company. The following table for the Predecessor Operating Company for the year
ended December 31, 2012 is adjusted to reflect the step-up to fair market value and the allocation of the

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incentive
fees related to hypothetical capital gains out of the adjusted post-incentive fee net investment income.

(in thousands)

Year Ended
December 31,
2012

Stepped-up
Cost Basis
Adjustments

Incentive Fee
Adjustments(1)

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(2)


24,625








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


61,161


(3,476
)




57,685​
​
​
​
​
​
​
​
​
​
​
​
​
​Incentive fee


15,944





(4,407
)

11,537​
​
​
​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


45,217


(3,476
)

4,407


46,148​
​
​
​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


18,851


(6,958
)




11,893Net change in unrealized appreciation (depreciation) of investments


9,928


10,434





20,362Capital gains incentive fees








(4,407
)

(4,407
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net increase in members' capital resulting from operations

$
73,996







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


(1)For
the year ended December 31, 2012, the Predecessor Operating Company incurred total incentive fees of $15.9 million, of which
$4.4 million related to capital gains incentive fees on a hypothetical liquidation basis.(2)Includes
expense waivers and reimbursements of $2.5 million.


For
the year ended December 31, 2012, the Predecessor Operating Company had a $3.5 million adjustment to interest income for amortization, a decrease of $6.9 million
to net realized gains and an increase of $10.4 million to net change in unrealized appreciation to adjust for the stepped-up cost basis of the transferred investments as discussed above. For
the year ended December 31, 2012, total adjusted interest income of $80.2 million consisted of approximately $71.9 million in cash interest from investments, approximately
$2.2 million in PIK interest from investments, approximately $3.6 million in prepayment fees and net amortization of purchase premiums and discounts and origination fees of approximately
$2.5 million. The Predecessor Operating Company's Adjusted Net Investment Income was $46.1 million for the year ended December 31, 2012.

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Results of Operations for the Company for the Year Ended December 31, 2014 and the
Predecessor Operating Company for the Years Ended December 31, 2013 and December 31, 2012

Revenue

Years ended December 31,(in thousands)

2014

2013

2012Interest income

$
85,123

$
107,027

$
83,646Interest income allocated from the Predecessor Operating Company


40,515





​
​
​
​
​
​
​
​
​
​
​Total interest income


125,638


107,027


83,646Dividend income


2,309


5,049


812Dividend income allocated from the Predecessor Operating Company


2,368





​
​
​
​
​
​
​
​
​
​
​Total dividend income


4,677


5,049


812Other income


4,491


2,836


1,328Other income allocated from the Predecessor Operating Company


795





​
​
​
​
​
​
​
​
​
​
​Total other income


5,286


2,836


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

$
135,601

$
114,912

$
85,786​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


The
Company's total investment income increased by approximately $20.7 million for the year ended December 31, 2014 as compared to the Predecessor Operating Company's total
investment income for the year ended December 31, 2013. The 18.0% increase in total investment income primarily results from an increase in interest income of approximately $18.6 million
from the year ended December 31, 2013 to the year ended December 31, 2014 which is attributable to larger invested balances, driven by the proceeds from the October 2013, April 2014 and
October 2014 primary offerings of the Company's common stock and the June 2014 offering of the Company's convertible notes, the Company's use of leverage from its revolving credit facilities to
originate new investments and prepayment fees received associated with the early repayments or partial repayments of ten different portfolio companies held by the Predecessor Operating Company as of
December 31, 2013. The increase in other income of approximately $2.5 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013, which
represents fees that are non-recurring in nature, was primarily attributable to structuring, amendment and consent fees received from twenty different portfolio companies and management fees from a
non-controlled affiliated portfolio company. The decrease in dividend income during the year ended December 31, 2014 as compared to the year ended December 31, 2013 was primarily
attributable to a large distribution from one of the Predecessor Operating Company's warrant investments in the prior year.

The
Predecessor Operating Company's total investment income increased by $29.1 million for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The 34.0% increase in investment income results from the increase in interest and other income for the year ended
December 31, 2013, which was primarily attributable to larger invested balances, driven by the proceeds from the 2012 and 2013 primary offerings of NMFC's common stock, the Predecessor
Operating Company's use of leverage for its revolving credit facilities to originate new investments and prepayment fees received associated with the early repayments or partial repayments of twenty
different portfolio companies held by the Predecessor Operating Company as of December 31, 2012. Additionally, the Predecessor Operating Company's other income, which represents fees that are
non-recurring in nature, increased due to commitment fees received from three bridge facilities and

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consent,
amendment and forbearance fees received associated with ten different portfolio companies held by the Predecessor Operating Company as of December 31, 2012. The increase in dividend
income for the year ended December 31, 2013 was attributable to distributions received from two portfolio companies, which was recorded as dividend income.

Operating Expenses

Years ended December 31,(in thousands)

2014

2013

2012Management fee

$
13,593

$
14,905

$
11,109Management fee allocated from Predecessor Operating Company


5,983





Less: management fee waiver


(686
)




​
​
​
​
​
​
​
​
​
​
​Total Management fee


18,890


14,905


11,109Incentive fee


12,070


16,502


11,537Incentive fee allocated from Predecessor Operating Company


6,248





​
​
​
​
​
​
​
​
​
​
​Total Incentive fee


18,318


16,502


11,537Capital gains incentive fee(1)


(8,573
)

3,229


4,407Capital gains incentive fee allocated from Predecessor Operating Company(1)


2,024





​
​
​
​
​
​
​
​
​
​
​Total Capital gains incentive fee(1)


(6,549
)

3,229


4,407Interest and other financing expenses


13,269


12,470


10,085Interest and other financing expenses allocated from Predecessor Operating Company


4,764





​
​
​
​
​
​
​
​
​
​
​Total Interest and other financing expenses


18,033


12,470


10,085Professional fees


2,390


2,349


2,091Professional fees allocated from Predecessor Operating Company


1,238





​
​
​
​
​
​
​
​
​
​
​Total Professional fees


3,628


2,349


2,091Administrative fees


1,470


3,429


2,426Administrative expenses allocated from Predecessor Operating Company


761





​
​
​
​
​
​
​
​
​
​
​Total Administrative expenses


2,231


3,429


2,426Other general and administrative expenses


1,138


1,584


1,374Other general and administrative expenses allocated from Predecessor Operating Company


555





​
​
​
​
​
​
​
​
​
​
​Total other general and administrative expenses


1,693


1,584


1,374​
​
​
​
​
​
​
​
​
​
​Total expenses


56,244


54,468


43,029​
​
​
​
​
​
​
​
​
​
​Less: expenses waived and reimbursed


(1,145
)

(3,233
)

(2,460
)​
​
​
​
​
​
​
​
​
​
​Net expenses before income taxes


55,099


51,235


40,569Income tax expense


436





​
​
​
​
​
​
​
​
​
​
​Net expenses after income taxes

$
55,535

$
51,235

$
40,569​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Capital
gains incentive fee accrual assumes a hypothetical liquidation basis.


The
Company's total net operating expenses increased by approximately $4.3 million for the year ended December 31, 2014 as compared to the Predecessor Operating Company's
year ended December 31, 2013. The Company's management fee increased by approximately $4.0 million, net of a management
fee waiver, and incentive fees increased by approximately $1.8 million for the year ended December 31, 2014 as compared to the Predecessor Operating Company's year ended
December 31,

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2013.
The increase in management fee and incentive fee from the Predecessor Operating Company's year ended December 31, 2013 to the Company's year ended December 31, 2014 was
attributable to larger invested balances, driven by the proceeds from the October 2013, April 2014 and October 2014 primary offerings of NMFC's common stock, the June 2014 offering of NMFC's
convertible notes and the Company's use of leverage from its revolving credit facilities to originate new investments. The Company's capital gains incentive fee accrual decreased by approximately
$9.8 million for the year ended December 31, 2014 as compared to the Predecessor Operating Company's year ended December 31, 2013, which was attributable to lower net Adjusted
Realized Capital Gains (Losses) and net Adjusted Unrealized Capital Depreciation of investments during the period due to lower marks on the broader portfolio. As of December 31, 2014, no actual
capital gains incentive fee was owed under the Investment Management Agreement by the Company, as cumulative net Adjusted Realized Gains did not exceed cumulative Adjusted Unrealized Depreciation.

Interest
and other financing expenses increased by approximately $5.6 million during the year ended December 31, 2014, primarily due to the increase of average debt
outstanding from $184.1 million to $244.6 million for the Holdings Credit Facility (as defined below) for the year ended December 31, 2013 compared to December 31, 2014. In
addition, during the year ended December 31, 2014, the Company issued $115.0 million of convertible notes, closed the NMFC Credit Facility (as defined below) and began to draw on
SBA-guaranteed debentures. The Company's total professional fees, total administrative expenses and total other general and administrative expenses marginally increased by approximately
$0.2 million for the year ended December 31, 2014 as compared to the Predecessor Operating Company's year ended December 31, 2013. During the year ended December 31, 2014,
the Company incurred $10.9 thousand in other expenses that were not subject to the expense cap pursuant to the administration agreement, as amended and restated (the "Administration
Agreement"), with the Administrator, and further restricted by the Company. For the year ended December 31, 2014, approximately $1.4 million of indirect administrative expenses were
included in administrative expenses, of which $0.8 million were waived by the Administrator. The Company's expenses waived and reimbursed decreased by approximately $2.1 million for the
year ended December 31, 2014 as compared to the Predecessor Operating Company's year ended December 31, 2013 due to the expiration of the expense cap on March 31, 2014 and the
decrease of waived indirect administrative expenses by the Administrator during the year ended December 31, 2014.

The
Predecessor Operating Company's total net operating expenses increased by approximately $10.7 million for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The Predecessor Operating Company's management fees increased by approximately $3.8 million and incentive fees increased by approximately $5.0 million for the
year ended December 31, 2013 as compared to the year ended December 31, 2012. The increase in management and incentive fees from the year ended December 31, 2012 to the year ended
December 31, 2013 was attributable to larger invested balances, driven by the proceeds from the 2012 and 2013 primary offerings of NMFC's
common stock, the Predecessor Operating Company's use of leverage from its revolving credit facilities to originate new investments and the receipt of a dividend distribution from one of the
Predecessor Operating Company's warrant investments. The Predecessor Operating Company's capital gains incentive fees decreased approximately $1.2 million for the year ended December 31,
2013 as compared to the year ended December 31, 2012, which was attributable to lower net Adjusted Realized Capital Gains (Losses) and Adjusted Unrealized Capital Appreciation (Depreciation) of
investments during the period. As of December 31, 2013, approximately $1.1 million of capital gains incentive fees was owed under the Investment Management Agreement by the Predecessor
Operating Company, as cumulative net Adjusted Realized Gains exceeded cumulative Adjusted Unrealized Depreciation and was paid during the year ended December 31, 2014.

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Interest and other credit facility expenses increased by approximately $2.4 million during the year ended December 31, 2013, primarily due to the
increase of average debt outstanding from $133.6 million to $184.1 million for the Holdings Credit Facility and from $181.4 million to $214.3 million for the SLF Credit Facility for the year ended
December 31, 2012 compared to December 31, 2013. For the year ended December 31, 2013, the Predecessor Operating Company incurred approximately $0.1 million in other expenses that
were not subject to the expense cap pursuant to the Administration Agreement with the Administrator and further restricted by the Predecessor Operating Company.

Net Realized Gains and Net Change in Unrealized Appreciation (Depreciation)

Years ended December 31,(in thousands)

2014

2013

2012Net realized gains on investments

$
357

$
7,253

$
18,851Net realized gains on investments allocated from Predecessor Operating Company


8,568





​
​
​
​
​
​
​
​
​
​
​Total realized gains on investments


8,925


7,253


18,851Net change in unrealized (depreciation) appreciation of investments


(43,863
)

7,994


9,928Net change in unrealized appreciation (depreciation) of investments allocated from Predecessor Operating Company


940





​
​
​
​
​
​
​
​
​
​
​Total change in unrealized (depreciation) appreciation of investments


(42,923
)

7,994


9,928Provision for taxes


(493
)




​
​
​
​
​
​
​
​
​
​
​Total net realized gains and net change in unrealized (depreciation) appreciation of investments

$
(34,491
)
$
15,247

$
28,779​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


The
Company's net realized and unrealized losses resulted in a net loss of approximately $34.5 million for the year ended December 31, 2014 compared to the Predecessor Operating
Company's net realized and unrealized gains resulting in a net gain of approximately $15.2 million for the same period in 2013. We look at net realized and unrealized gains or losses together
as movement in unrealized appreciation or depreciation can be the result of realizations. The net loss for the year ended December 31, 2014 was primarily driven by the overall decrease in the
market prices of the Company's investments during the period and the partial write-down related to two portfolio companies. These losses were partially offset by a $5.6 million gain from the
sale of the Company's warrant investments in one portfolio company and sales or repayments of investments with fair values in excess of December 31, 2013 valuations resulting in net realized
gains being greater than the reversal of the cumulative net unrealized gains for those investments. The provision for income taxes was attributable to one warrant investment that is held as of
December 31, 2014 in one of the Company's corporate subsidiaries.

The
net gain for the year ended December 31, 2013 was primarily driven by sales or repayment of investments with fair values in excess of December 31, 2012 valuations,
resulting in net realized gains being greater than the reversal of the cumulative net unrealized gains for those investments. Additionally, during the year ended December 31, 2013, a
distribution from a warrant investment resulted in a realized gain of approximately $1.1 million, the modification of terms on one debt investment that was accounted for as an extinguishment
resulted in a realized gain of $1.7 million and the sale of the first lien position in ATI Acquisition Company resulted in a realized loss of $4.3 million.

The
total net gain for the year ended December 31, 2012 was primarily related to the overall increase in the market and the quality of the Predecessor Operating Company's
portfolio, directly impacting the prices of the Predecessor Operating Company's portfolio. The appreciation of the Predecessor Operating Company's portfolio and the sale or repayment of investments
with fair values

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in
excess of December 31, 2011 valuations, resulted in net realized gains being greater than the reversal of the cumulative net unrealized gains for those investments.

Liquidity and Capital Resources

The primary use of existing funds and any funds raised in the future is expected to be for the Company's repayment of indebtedness, the
Company's investments in portfolio companies, cash distributions to the Company's stockholders or for other general corporate purposes.

Since
NMFC's IPO, and through December 31, 2014, NMFC raised approximately $374.6 million in net proceeds from additional offerings of common stock and issued shares valued
at approximately $288.4 million on behalf of AIV Holdings for exchanged units. NMFC acquired from the Predecessor Operating Company units of the Predecessor Operating Company equal to the
number of shares of NMFC's common stock sold in the additional offerings.

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 Predecessor 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 Predecessor Operating Company and NMFC owns 100.0% of the outstanding units of the Predecessor Operating Company, which is now a
wholly-owned subsidiary of NMFC.

On
April 15, 2014, NMFC completed a public offering of 3,500,000 shares of its common stock at a public offering price of $14.30 per share, which resulted in net proceeds of
$51.0 million, or $14.57 per share. NMFC's Investment Adviser agreed to pay the underwriting discounts and commissions in connection with this offering and an additional supplemental payment to
the underwriters of $0.9 million, or $0.27 per share, which reflects the difference between the public offering price and the proceeds per share received by NMFC. In connection with the public
offering, the underwriters purchased an additional 525,000 shares of NMFC's common stock with the exercise of the overallotment option to purchase up to an additional 525,000 shares of NMFC's common
stock, resulting in additional net proceeds of $7.6 million. NMFC's Investment Adviser agreed to pay the underwriting discounts and commissions in connection with this exercise of the
overallotment option and an additional supplemental payment to the underwriters of $0.1 million, or $0.27 per share, which reflects the difference between the public offering price and the
proceeds per share received by NMFC in this exercise of the overallotment option.

On
October 28, 2014, the Company completed a public offering of 5,000,000 shares of its common stock at a public offering price of $14.53 per share, which resulted in net proceeds
of $71.8 million. In connection with the public offering, the underwriters purchased an additional 750,000 shares of the Company's common stock with the exercise of the overallotment option to
purchase up to an additional 750,000 shares of the Company's common stock, which resulted in additional net proceeds of $10.8 million.

The
Company's liquidity is generated and generally available through advances from the revolving credit facilities, from cash flows from operations, and, we expect, through periodic
follow-on equity offerings. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including
unsecured debt and/or debt securities convertible into common stock. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and
regulatory restrictions and other factors. In

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accordance
with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, is at least 200.0% after such
borrowing.

At
December 31, 2014, the Company had cash and cash equivalents of approximately $23.4 million and at December 31, 2013 and December 31, 2012, the Predecessor
Operating Company had cash and cash equivalents of approximately $15.0 million and $12.8 million, respectively. Cash used in operating activities for the Company during the year ended
December 31, 2014 was approximately $(289.6) million, which includes the activity allocated from NMF Holdings, and cash used in operating activities for the Predecessor Operating Company for
the years ended December 31, 2013 and December 31, 2012 was approximately $(40.4) million and $(212.6) million, respectively. Refer to the Predecessor Operating Company's Consolidated
Statements of Cash Flows for the period January 1, 2014 to May 7, 2014 included in an exhibit attached hereto. We expect that all current liquidity needs by the Company will be met with
cash flows from operations and other activities.

Borrowings

Holdings Credit FacilityOn December 18, 2014 the Company entered into the Second Amended and Restated Loan and Security Agreement (the
"Holdings Credit Facility"), among the Company, as the Collateral Manager, NMF Holdings as the Borrower, Wells Fargo Securities, LLC as the Administrative Agent and Wells Fargo Bank, National
Association, as the Lender and Collateral Custodian, which is structured as a revolving credit facility and matures on December 18, 2019.

Immediately
prior to amending the Holdings Credit Facility, NMF SPV merged with and into NMF Holdings. The Holdings Credit Facility effectively amended and restated the Predecessor
Holdings Credit Facility (as defined below), merged with the SLF Credit Facility (as defined below), and combined the amount of borrowings previously available.

The
maximum amount of revolving borrowings available under the Holdings Credit Facility is $495.0 million, which is the aggregate of the $280.0 million previously available under
the Predecessor Holdings Credit Facility (as defined below) and the $215.0 million previously available under the SLF Credit Facility (as defined below). Under the Holdings Credit Facility, NMF
Holdings is still permitted to borrow up to 25.0%, 45.0% or 70.0% of the purchase price of pledged assets, subject to approval by the Wells Fargo Securities, LLC. The Holdings Credit Facility
is non-recourse to the Company and is collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with the origination or upsizing of the
Holdings Credit Facility are capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the Holdings Credit
Facility. The Holdings Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the Holdings Credit Facility requires the Company to maintain a
minimum asset coverage ratio. The covenants are generally not tied to mark to market fluctuations in the prices of NMF Holdings investments, but rather to the performance of the underlying portfolio
companies.

The
Holdings Credit Facility bears interest at a rate of the LIBOR plus 2.00% per annum for Broadly Syndicated Loans (as defined in the Loan and Security Agreement) and LIBOR plus 2.75%
per annum for all other investments. The Holdings Credit Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and
Security Agreement).

Prior
to December 18, 2014, the Loan and Security Agreement, as amended and restated, dated May 19, 2011 (the "Predecessor Holdings Credit Facility") among NMF Holdings as
the Borrower and Collateral Administrator, Wells Fargo Securities, LLC as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral Custodian, was structured as a
revolving credit facility and would mature on October 27, 2016.

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The
maximum amount of revolving borrowings available under the Predecessor Holdings Credit Facility was $280.0 million. Until December 18, 2014, NMF Holdings 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 Predecessor Holdings Credit Facility was amended and restated on
May 6, 2014 and as a result, it was non-recourse to the Company and was collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with
the origination or upsizing of the Predecessor Holdings Credit Facility were capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing
expenses over the life of the Predecessor Holdings Credit Facility. The Predecessor Holdings Credit Facility contained certain customary affirmative and negative covenants and events of default,
including the occurrence of a change in control. In addition, the Predecessor Holdings Credit Facility required the Company to maintain a minimum asset coverage ratio. However, the covenants were
generally not tied to mark to market fluctuations in the prices of NMF Holdings' investments, but rather to the performance of the underlying portfolio companies.

The
Predecessor Holdings Credit Facility bore interest at a rate of the LIBOR plus 2.75% per annum and charged a non-usage fee, based on the unused facility amount multiplied by the
Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

The
following table summarizes the interest expense and non-usage fees incurred, together, on the Holdings Credit Facility and the Predecessor Holdings Credit Facility for the years
ended December 31, 2014, December 31, 2013 and December 31, 2012.

Years ended December 31,(in millions)

2014

2013

2012Interest expense

$
7.1

$
5.5

$
4.2Non-usage fee

$
0.2

$
0.4

$
0.3Amortization of financing costs

$
0.9

$
0.7

$
0.4Weighted average interest rate


2.9
%

2.9
%

3.1
%Effective interest rate


3.4
%

3.6
%

3.6
%Average debt outstanding

$
244.6

$
184.1

$
133.6


The
outstanding balance of Holdings Credit Facility as of December 31, 2014 was $468.1 million and the outstanding balance of the Predecessor Holdings Credit Facility as of
December 31, 2013 and December 31, 2012 was $221.8 million and $206.9 million, respectively and NMF Holdings was in compliance with the applicable covenants in the Holdings
Credit Facility or Predecessor 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, NMF Holdings as the Collateral Administrator, Wells Fargo Securities, LLC as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral
Custodian, was structured as a revolving credit facility and would mature on October 27, 2016. The maximum amount of revolving borrowings available under the SLF Credit Facility was
$215.0 million. The SLF Credit Facility was non-recourse to the Company and secured by all assets of NMF SLF on an investment by investment basis. All fees associated with the origination or
upsizing of the SLF Credit Facility were capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the SLF
Credit Facility. The SLF Credit Facility contained certain customary affirmative and negative covenants and events of default, including the occurrence of a change in control. The covenants were
generally not tied to mark to market fluctuations in the prices of the NMF SLF's investments, but rather to the performance of the underlying portfolio companies. NMF SLF was not

95

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restricted
from the purchase or sale of loans with an affiliate. Therefore, specified first lien loans could be moved as collateral between the Holdings Credit Facility and the SLF Credit Facility.
The SLF Credit Facility merged with the Holdings Credit Facility on December 18, 2014.

Until
December 18, 2014, the SLF Credit Facility permitted 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 was allowed to be derived from second
lien loans, subject to approval by Wells Fargo Bank, National Association.

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

The
following table summarizes the interest expense and non-usage fees incurred on the SLF Credit Facility for the period January 1, 2014 to December 17, 2014 (date of SLF Credit
Facility merger with and into the Holdings Credit Facility) and for the years ended December 31, 2013 and December 31, 2012.

January 1,
2014 to
December 17,
2014 (date of
merger)

Years ended
December 31,(in millions)

2013

2012Interest expense

$
4.5

$
4.9

$
4.2Non-usage fee

$

(1)
$

(1)
$

(1)Amortization of financing costs

$
0.8

$
0.9

$
0.7Weighted average interest rate


2.2
%

2.3
%

2.3
%Effective interest rate


2.6
%

2.7
%

2.8
%Average debt outstanding

$
209.3

$
214.3

$
181.4


(1)For
the years ended December 31, 2014, December 31, 2013 and December 31, 2012, the total non-usage fee was less than
$50 thousand.


The
SLF Credit Facility merged with the Holdings Credit Facility on December 18, 2014. The outstanding balance as of December 31, 2013 and December 31, 2012 was
$214.7 million and $214.3 million, respectively, and NMF SLF was in compliance with the applicable covenants in the SLF Credit Facility on such dates.

NMFC Credit FacilityThe Senior Secured Revolving Credit Agreement, as amended, dated June 4, 2014 (together with the related guarantee and
security agreement, the "NMFC Credit Facility"), among the Company as the Borrower and Goldman Sachs Bank USA as the Administrative Agent and Collateral Agent, and Goldman Sachs Bank USA and Morgan
Stanley, N.A. as Lenders, is structured as a senior secured revolving credit facility and matures on June 4, 2019. The NMFC Credit Facility is guaranteed by certain domestic subsidiaries of the
Company and proceeds from the NMFC Credit Facility may be used for general corporate purposes, including the funding of portfolio investments.

The
maximum amount of revolving borrowings available under the NMFC Credit Facility is $80.0 million, as amended on December 29, 2014. The Company is permitted to borrow at
various advance rates depending on the type of portfolio investment as outlined in the Senior Secured Revolving Credit Agreement. All fees associated with the origination of the NMFC Credit Facility
are capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the NMFC Credit Facility. The NMFC Credit
Facility contains certain customary affirmative and negative covenants and events of default, including certain financial covenants related to asset coverage and liquidity and other maintenance
covenants.

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The NMFC Credit Facility will generally bear interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment
fee, based on the unused facility amount multiplied by 0.375% (as defined in the Senior Secured Revolving Credit Agreement).

The
following table summarizes the interest expense and non-usage fees incurred on the NMFC Credit Facility for the period June 4, 2014 (commencement of the NMFC Credit Facility) to
December 31, 2014 and for the years ended December 31, 2013 and December 31, 2012.

Years ended December 31,June 4, 2014
(commencement of
facility) to
December 31, 2014(in millions)

2013(1)

2012(1)Interest expense

$
0.2

$


$
Non-usage fee

$
0.1

$


$
Amortization of financing costs

$
0.1

$


$
Weighted average interest rate


2.7
%


%


%Effective interest rate


3.4
%


%


%Average debt outstanding

$
11.2

$


$



(1)Not
applicable, as the NMFC Credit Facility commenced on June 4, 2014.


As
of December 31, 2014, the outstanding balance on the NMFC Credit Facility was $50.0 million and NMFC was in compliance with the applicable covenants in the NMFC Credit
Facility on such dates.

Convertible NotesOn June 3, 2014, the Company closed a private offering of $115.0 million aggregate principal amount of senior
unsecured convertible notes (the "Convertible Notes"), pursuant to an indenture, dated June 3, 2014 (the "Indenture"). The Convertible Notes were issued in a private placement only to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes bear interest at an annual rate of 5.0%, payable semi-annually in arrears on June 15
and December 15 of each year, commencing on December 15, 2014. The Convertible Notes will mature on June 15, 2019 unless earlier converted or repurchased at the holder's option.
The Convertible Notes will be convertible by the holders into shares of common stock, initially at a conversion rate of 62.7746 shares of the Company's common stock per $1.0 thousand principal
amount of Convertible Notes (7,219,083 common shares) corresponding to an initial conversion price per share of approximately $15.93, which represents a premium of 12.5% to the $14.16 per share
closing price of the Company's common stock on May 28, 2014. The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs,
increases in dividends in excess of $0.34 per share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in dividends, are subject to a
conversion price floor of $14.16 per share. In no event will the total number of shares of common stock issuable upon conversion exceed 70.6214 per $1.0 thousand principal amount of the
Convertible Notes. The Company has determined that the embedded conversion option in the Convertible Notes is not required to be separately accounted for as a derivative under GAAP.

The
Convertible Notes are senior unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to
the Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured
indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and
future indebtedness (including trade payables) incurred by our subsidiaries and financing vehicles. The issuance is considered part of the if-converted method for calculation of diluted earnings per
share.

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The
Company may not redeem the Convertible Notes prior to maturity. No sinking fund is provided for the Convertible Notes. In addition, if certain corporate events occur in respect of
the Company, holders of the Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the
Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date.

The
Indenture contains certain covenants, including covenants requiring the Company to provide financial information to the holders of the Convertible Note and the Trustee if the Company
ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the Indenture. As of December 31, 2014,
the Company was in compliance with the terms of the Indenture.

Interest
expense and amortization of financing costs incurred on the Convertible Notes for the year ended December 31, 2014 was $3.3 million and $0.4 million,
respectively. The effective interest rate for the year ended December 31, 2014 was 5.6%.

SBA-guaranteed debenturesOn August 1, 2014, SBIC LP received an SBIC license from the SBA.

The
SBIC license allows SBIC LP to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures.
SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required
to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury
Notes with ten year maturities. The SBA, as a creditor, will have a superior claim to the assets of SBIC LP over the Company's stockholders in the event SBIC LP is liquidated or the SBA
exercises remedies upon an event of default.

The
maximum amount of borrowings available under current SBA regulations is $150.0 million as long as the licensee has at least $75.0 million in regulatory capital,
receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing.

As
of December 31, 2014, SBIC LP had regulatory capital of $42.2 million and SBA-guaranteed debentures outstanding of $37.5 million. The SBA-guaranteed
debentures incur upfront fees of 3.43%, which consists of a 1.00% commitment fee and a 2.43% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. As of
December 31, 2014, SBIC LP's SBA-guaranteed debentures are set to pool in March 2015 and until pooling bear interest at an interim floating rate of LIBOR plus 0.30%. Interest expense and
amortization of financing costs incurred on the
SBA-guaranteed debentures for the year ended December 31, 2014 was $34 thousand and $12 thousand, respectively.

The
SBIC program is designed to stimulate the flow of private investor capital into eligible small businesses, as defined by the SBA. Under SBA regulations, SBIC LP is subject to
regulatory requirements, including making investments in SBA-eligible businesses, investing at least 25.0% of its investment capital in eligible smaller businesses, as defined under the 1958 Act,
placing certain limitations on the financing terms of investments, regulating the types of financing, prohibiting investments in small businesses with certain characteristics or in certain industries
and requiring capitalization thresholds that limit distributions to the Company. SBIC LP is subject to an annual periodic examination by an SBA examiner to determine SBIC LP's compliance with the
relevant SBA regulations and an annual financial audit of its financial statements that are prepared on a basis of accounting other than GAAP (such as ASC 820) by an independent auditor. As of
December 31, 2014, SBIC LP was in compliance with SBA regulatory requirements.

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Off-Balance Sheet Arrangements

The Company may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the
financial needs of its portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount
recognized in the balance sheet. As of December 31, 2014, the Company had outstanding commitments to third parties to fund investments totaling $27.4 million and as of
December 31, 2013, the Predecessor Operating Company had outstanding commitments to third parties to fund investments totaling $15.5 million, under various undrawn revolving credit
facilities, delayed draw commitments or other future funding commitments.

The
Company may from time to time enter into financing commitment letters or bridge financing commitments, which could require funding in the future. As of December 31, 2014, the
Company did not enter into any commitment letters to purchase debt investments. As of December 31, 2013, the Predecessor Operating Company did not enter into any commitment letters to purchase
debt investments. As of December 31, 2014, the Company had not entered into any bridge financing commitments which could require funding in the future. As of December 31, 2013, the
Predecessor Operating Company had not entered into any bridge financing commitments which could require funding in the future.

Contractual Obligations

A summary of the Company's significant contractual payment obligations as of December 31, 2014 is as follows:

Contractual Obligations Payments
Due by Period (in millions)Total

Less than
1 Year

1 - 3 Years

3 - 5 Years

More than
5 YearsHoldings Credit Facility(1)

$
468.1

$


$


$
468.1

$
Convertible Notes(2)


115.0








115.0


NMFC Credit Facility(3)


50.0








50.0


SBA-guaranteed debentures(4)


37.5











37.5​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Contractual Obligations

$
670.6

$


$


$
633.1

$
37.5


(1)Under
the terms of the $495.0 million Holdings Credit Facility, all outstanding borrowings under that facility ($468.1 million as of
December 31, 2014) must be repaid on or before December 18, 2019. As of December 31, 2014, there was approximately $26.9 million of possible capacity remaining under the
Holdings Credit Facility.(2)The
$115.0 million Convertible Notes will mature on June 15, 2019 unless earlier converted or repurchased at the holder's option.(3)Under
the terms of the $80.0 million NMFC Credit Facility, all outstanding borrowings under that facility ($50.0 million as of
December 31, 2014) must be repaid on or before June 4, 2019. As of December 31, 2014, there was approximately $30.0 million of possible capacity remaining under the NMFC
Credit Facility.(4)The
SBA-guaranteed debentures will mature on March 1, 2025.


The
Company has certain contracts under which it has material future commitments. The Company has $27.4 million of undrawn funding commitments as of December 31, 2014
related to its participation as a lender in revolving credit facilities, delayed draw commitments or other future funding commitments of the Company's portfolio companies. As of December 31,
2014, the Company did not enter into any bridge financing commitments which could require funding in the future.

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We
have entered into the Investment Management Agreement with the Investment Adviser in accordance with the 1940 Act. Under the Investment Management Agreement, the Investment Adviser
has agreed to provide the Company with investment advisory and management services. We have agreed to pay for these services (1) a management fee and (2) an incentive fee based on its
performance.

We
have also entered into an Administration Agreement with the Administrator. Under the Administration Agreement, the Administrator has agreed to arrange office space for us and provide
office equipment and clerical, bookkeeping and record keeping services and other administrative services necessary to conduct our respective day-to-day operations. The Administrator has also agreed to
perform, or oversee the performance of, our financial records, our reports to stockholders and reports filed with the SEC.

If
any of the contractual obligations discussed above are terminated, our costs under any new agreements that are entered into may increase. In addition, we would likely incur
significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Management Agreement and the Administration Agreement.

Distributions and Dividends

Dividends declared and paid to stockholders of the Company for the year ended December 31, 2014 totaled $77.6 million.

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The
following table summarizes the Company's quarterly cash distributions, including dividends and returns of capital, if any, per share that have been declared by the Company's board of
directors since the Company's IPO:

Fiscal Year Ended

Date Declared

Record Date

Payment Date

Per Share
AmountDecember 31, 2014Fourth Quarter

November 4, 2014

December 16, 2014

December 30, 2014

$
0.34Third Quarter

August 5, 2014

September 16, 2014

September 30, 2014


0.34Third Quarter

July 30, 2014

August 20, 2014

September 3, 2014


0.12
(1)Second Quarter

May 6, 2014

June 16, 2014

June 30, 2014


0.34First Quarter

March 4, 2014

March 17, 2014

March 31, 2014


0.34​
​
​
​
​
​
​
​
​
​
​$
1.48December 31, 2013Fourth Quarter

November 8, 2013

December 17, 2013

December 31, 2013

$
0.34Third Quarter

August 7, 2013

September 16, 2013

September 30, 2013


0.34Third Quarter

August 7, 2013

August 20, 2013

August 30, 2013


0.12
(2)Second Quarter

May 6, 2013

June 14, 2013

June 28, 2013


0.34First Quarter

March 6, 2013

March 15, 2013

March 28, 2013


0.34​
​
​
​
​
​
​
​
​
​
​$
1.48December 31, 2012Fourth Quarter

December 27, 2012

December 31, 2012

January 31, 2013

$
0.14
(3)Fourth Quarter

November 6, 2012

December 14, 2012

December 28, 2012


0.34Third Quarter

August 8, 2012

September 14, 2012

September 28, 2012


0.34Second Quarter

May 8, 2012

June 15, 2012

June 29, 2012


0.34Second Quarter

May 8, 2012

May 21, 2012

May 31, 2012


0.23
(4)First Quarter

March 7, 2012

March 15, 2012

March 30, 2012


0.32​
​
​
​
​
​
​
​
​
​
​$
1.71December 31, 2011Fourth Quarter

November 8, 2011

December 15, 2011

December 30, 2011

$
0.30Third Quarter

August 10, 2011

September 15, 2011

September 30, 2011


0.29Second Quarter

August 10, 2011

August 22, 2011

August 31, 2011


0.27​
​
​
​
​
​
​
​
​
​
​$
0.86​
​
​
​
​
​
​
​
​
​
​Total







$
5.53​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Special
dividend related to realized capital gains attributable to the Company's warrant investments in Learning Care Group (US), Inc.(2)Special
dividend related to a distribution received attributable to the Predecessor Operating Company's investment in YP Equity Investors LLC.(3)Special
dividend intended to minimize to the greatest extent possible the Company's U.S. federal income or excise tax liability.(4)Special
dividend related to estimated realized capital gains attributable to the Predecessor Operating Company's investments in Lawson Software, Inc.
and Infor Lux Bond Company.


Tax
characteristics of all dividends paid by the Company were reported to stockholders on Form 1099 after the end of the calendar year. Future quarterly dividends, if any, for the
Company will be determined by the board of directors.

The
Company intends to pay quarterly distributions to its stockholders and to maintain its status as a RIC. The Company intends to distribute approximately its entire portion of Adjusted
Net Investment Income on a quarterly basis and substantially its entire taxable income on an annual basis, except that it may retain certain net capital gains for reinvestment.

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The
Company maintains an "opt out" dividend reinvestment plan for its common stockholders. As a result, the Company's stockholders' cash dividends will be automatically reinvested in
additional shares of common stock, unless the stockholder elects to receive cash. Cash dividends reinvested in additional
shares of the Company's common stock will be automatically reinvested by the Company into additional shares of the Company's common stock. See Item 8Financial Statements and Supplementary DataNote 2,
Summary of Significant Accounting Policiesfor
additional details regarding the Company's dividend reinvestment plan.

Related Parties

The Company has entered into a number of business relationships with affiliated or related parties, including the
following:



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Table of Contents



In
addition, the Company has 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 Company's
investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for the 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 we should invest side-by-side with one or more other funds. Any such
investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser's allocation procedures.

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.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain financial market risks, such as interest rate fluctuations. During the year ended December 31,
2014, certain of the loans held in the Company's portfolio had floating interest rates. As of December 31, 2014, approximately 87.7% of investments at fair value (excluding investments on
non-accrual, revolvers, delayed draws and non-interest bearing equity investments) represent floating-rate investments with a LIBOR floor (includes investments bearing prime interest rate contracts)
and approximately 12.3% of investments at fair value represent fixed-rate investments. Additionally, the Company's senior secured revolving credit facilities are also subject to floating interest
rates and are currently paid based on one-month floating LIBOR rates.

The
following table estimates the potential changes in net cash flow generated from interest income and expenses, should interest rates increase by 100, 200 or 300 basis points, or
decrease by 25 basis points. Interest income is calculated as revenue from interest generated from the Company's portfolio of investments held on December 31, 2014. Interest expense is
calculated based on the terms of the Company's outstanding revolving credit facilities and convertible notes. For the Company's floating rate credit facilities, the Company uses the outstanding
balance as of December 31, 2014. Interest expense on the Company's floating rate credit facilities are calculated using the interest rate as of December 31, 2014, adjusted for the
hypothetical changes in rates, as shown below. The base interest rate case assumes the rates on the Company's portfolio investments remain unchanged from the actual effective interest rates as of
December 31, 2014. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2014, and are only adjusted for assumed changes in
the underlying base interest rates.

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Table of Contents

Actual
results could differ significantly from those estimated in the table.

Change in Interest Rates

Estimated Percentage
Change in Interest
Income Net of
Interest Expense
(unaudited)25 Basis Points


0.69
%(1)Base Interest Rate



%+100 Basis Points


(2.98
)%+200 Basis Points


2.73
%+300 Basis Points


9.16
%


(1)Limited
to the lesser of the December 31, 2014 LIBOR rates or a decrease of 25 basis points.


The
Company was not exposed to any foreign currency exchange risks as of December 31, 2014.

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Table of Contents

Item 8.    Financial Statements and Supplementary Data

TABLE OF CONTENTS



PAGEAUDITED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm


106New Mountain Finance CorporationConsolidated Statements of Assets and Liabilities as of December 31, 2014 and December 31, 2013


107Consolidated Statements of Operations for the years ended December 31, 2014, December 31, 2013 and December 31,
2012


108Consolidated Statements of Changes in Net Assets for the years ended December 31, 2014, December 31, 2013 and
December 31, 2012


109Consolidated Statements of Cash Flows for the years ended December 31, 2014, December 31, 2013 and December 31,
2012


110Consolidated Schedule of Investments as of December 31, 2014


111Consolidated Schedule of Investments as of December 31, 2013


118Notes to the Consolidated Financial Statements of New Mountain Finance Corporation


123


105

---



Table of Contents

GRAPHIC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Boards of Directors and Stockholders of
New Mountain Finance Corporation
New York, New York

We
have audited the accompanying consolidated statements of assets and liabilities of New Mountain Finance Corporation and subsidiaries (the "Company") including the consolidated
schedules of investments as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period
ended December 31, 2014 and the consolidated financial highlights for the period from May 19, 2011 (commencement of operations) to December 31, 2011 and for the years ended
December 31, 2014, 2013 and 2012. These financial statements and financial highlights are the responsibility of the management of the Company. 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). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. 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. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements and consolidated financial highlights referred to above present fairly, in all material respects, the financial position of New
Mountain Finance Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations, the changes in their net assets, and their cash flows for each of the three
years in the period ended December 31, 2014 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, 2014, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 1 to the consolidated financial statements, the Company completed a restructuring during the year ended December 31, 2014.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2014, based on the criteria established inInternal ControlIntegrated Framework(2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2015, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP

New
York, New York
March 2, 2015

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New Mountain Finance Corporation        Consolidated Statements of Assets and Liabilities        (in thousands, except shares and per share data)

December 31,
2014

December 31,
2013AssetsInvestments at fair valueNon-controlled/non-affiliated investments (cost of $1,422,891 and $0, respectively)

$
1,402,210

$
Non-controlled/affiliated investments (cost $23,000 and $0, respectively)


22,461


Investment in New Mountain Finance Holdings, L.L.C. (cost of $0 and $633,835, respectively)





650,107​
​
​
​
​
​
​
​Total investments at fair value (cost $1,445,891 and $633,835, respectively)


1,424,671


650,107Securities purchased under collateralized agreements to resell


30,000


Cash and cash equivalents


23,445


Deferred financing costs (net of accumulated amortization of $5,867 and $0, respectively)


14,052


Interest and dividend receivable


11,744


Receivable from unsettled securities sold


8,912


Receivable from affiliates


490


Other assets


1,606


​
​
​
​
​
​
​
​Total assets

$
1,514,920

$
650,107​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​LiabilitiesHoldings Credit Facility

$
468,108

$
Convertible Notes


115,000


NMFC Credit Facility


50,000


SBA-guaranteed debentures


37,500


Payable for unsettled securities purchased


26,460


Management fee payable


5,144


Incentive fee payable


4,803


Interest payable


1,352


Payable to affiliates


822


Deferred tax liability


493


Other liabilities


3,068


​
​
​
​
​
​
​
​Total liabilities


712,750


Commitments and contingencies (See Note 9)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 57,997,890 and 45,224,755 shares issued and outstanding,
respectively


580


452Paid in capital in excess of par


817,129


633,383Accumulated undistributed net investment income


2,530


Accumulated undistributed net realized gains on investments


14,131


5,056Net unrealized (depreciation) appreciation of investments (net of provision for taxes of $493 and $0, respectively)


(32,200
)

11,216​
​
​
​
​
​
​
​Total net assets

$
802,170

$
650,107​
​
​
​
​
​
​
​Total liabilities and net assets

$
1,514,920

$
650,107​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Number of shares outstanding


57,997,890


45,224,755Net asset value per share

$
13.83

$
14.38




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

107

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Table of Contents



New Mountain Finance Corporation        Consolidated Statements of Operations        (in thousands, except shares and per share data)

Years ended December 31,2014

2013

2012Investment income(1)From non-controlled/non-affiliated investments:Interest income

$
85,123

$


$
Dividend income


1,243





Other income


4,023





From non-controlled/affiliated investments:Dividend income


1,066





Other income


468





Investment income allocated from New Mountain Finance Holdings, L.L.C.(2)Interest income


40,515


84,925


36,439Dividend income


2,368


3,567


455Other income


795


2,384


617​
​
​
​
​
​
​
​
​
​
​Total investment income


135,601


90,876


37,511​
​
​
​
​
​
​
​
​
​
​ExpensesIncentive fee(1)


12,070





Capital gains incentive fee(1)


(8,573
)




​
​
​
​
​
​
​
​
​
​
​Total incentive fees(1)


3,497





Management fee(1)


13,593





Interest and other financing expenses(1)


13,269





Professional fees(1)


2,390





Administrative expenses(1)


1,470





Other general and administrative expenses(1)


1,138





Net expenses allocated from New Mountain Finance Holdings, L.L.C.(2)


20,808


40,355


17,719​
​
​
​
​
​
​
​
​
​
​Total expenses


56,165


40,355


17,719Less: management fee waived (see Note 5)(1)


(686
)




Less: expenses waived and reimbursed (see Note 5)(1)


(380
)




​
​
​
​
​
​
​
​
​
​
​Net expenses


55,099


40,355


17,719​
​
​
​
​
​
​
​
​
​
​Net investment income before income taxes


80,502


50,521


19,792Income tax expense(1)


436





​
​
​
​
​
​
​
​
​
​
​Net investment income


80,066


50,521


19,792Net realized gains (losses):Non-controlled/non-affiliated investments(1)


357





Investments allocated from New Mountain Finance Holdings, L.L.C.(2)


8,568


5,427


7,593Net change in unrealized (depreciation) appreciation:Non-controlled/non-affiliated investments(1)


(43,324
)




Non-controlled/affiliated investments(1)


(539
)




Investments allocated from New Mountain Finance Holdings, L.L.C.(2)


940


6,016


4,494Investment in New Mountain Finance Holdings, L.L.C.(2)





(44
)

(95
)Provision for taxes(1)


(493
)




​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations

$
45,575

$
61,920

$
31,784​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Basic earnings per share

$
0.88

$
1.76

$
2.14Weighted average shares of common stock outstandingbasic (See Note 12)


51,846,164


35,092,722


14,860,838Diluted earnings per share

$
0.86

$
1.76

$
2.14Weighted average shares of common stock outstandingdiluted (See Note 12)


56,157,835


35,092,722


14,860,838Dividends declared and paid per share

$
1.48

$
1.48

$
1.71


(1)For
the year ended December 31, 2014, the amounts reported relate to the period from May 8, 2014 to December 31, 2014.(2)For
the year ended December 31, 2014, the amounts reported relate to the period from January 1, 2014 to May 7, 2014.




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

108

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Table of Contents



New Mountain Finance Corporation        Consolidated Statements of Changes in Net Assets        (in thousands)

Years ended December 31,2014

2013

2012Increase (decrease) in net assets resulting from operations:Net investment income(1)

$
57,196

$


$
Net investment income allocated from New Mountain Finance Holdings, L.L.C.(2)


22,870


50,521


19,792Net realized gains on investments(1)


357





Net realized gains on investments allocated from New Mountain Finance Holdings, L.L.C.(2)


8,568


5,427


7,593Net change in unrealized (depreciation) appreciation of investments(1)


(43,863
)




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


940


6,016


4,494Net change in unrealized (depreciation) appreciation of investment in New Mountain Finance Holdings, L.L.C.(2)





(44
)

(95
)Provision for taxes(1)


(493
)




​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations


45,575


61,920


31,784Capital transactionsNet proceeds from shares sold


141,157


100,040


133,428Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.(2)


(250
)

(281
)

(323
)Deferred offering costs(1)


(476
)




Value of shares issued for exchanged units


38,840


193,262


56,314Dividends declared to stockholders from net investment income


(71,365
)

(50,521
)

(19,792
)Dividends declared to stockholders from net realized gains


(6,247
)

(1,323
)

(6,927
)Reinvestment of dividends


4,829


5,084


1,955​
​
​
​
​
​
​
​
​
​
​Total net increase in net assets resulting from capital transactions


106,488


246,261


164,655​
​
​
​
​
​
​
​
​
​
​Net increase in net assets


152,063


308,181


196,439Net assets at the beginning of the period


650,107


341,926


145,487​
​
​
​
​
​
​
​
​
​
​Net assets at the end of the period

$
802,170

$
650,107

$
341,926​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)For
the year ended December 31, 2014, the amounts reported relate to the period from May 8, 2014 to December 31, 2014.(2)For
the year ended December 31, 2014, the amounts reported relate to the period from January 1, 2014 to May 7, 2014.




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

109

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Table of Contents



New Mountain Finance Corporation        Consolidated Statements of Cash Flows        (in thousands)

Years ended December 31,2014

2013

2012Cash flows from operating activitiesNet increase in net assets resulting from operations

$
45,575

$
61,920

$
31,784Adjustments 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.(2)


(22,870
)

(50,521
)

(19,792
)Net realized gains on investments(1)


(357
)




Net realized gains on investments allocated from New Mountain Finance Holdings, L.L.C.(2)


(8,568
)

(5,427
)

(7,593
)Net change in unrealized depreciation (appreciation) of investments(1)


43,863





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


(940
)

(6,016
)

(4,494
)Net change in unrealized depreciation (appreciation) in New Mountain Finance Holdings, L.L.C.(2)





44


95Amortization of purchase discount(1)


(1,721
)




Amortization of deferred financing costs(1)


1,713





Non-cash investment income(1)


(3,479
)




(Increase) decrease in operating assets:Cash and cash equivalents from New Mountain Finance Holdings, L.L.C.(3)


957





Purchase of investments and delayed draw facilities(1)


(529,540
)




Proceeds from sales and paydowns of investments(1)


261,747





Cash received for purchase of undrawn portion of revolving credit or delayed draw facilities(1)


29





Cash paid for purchase of drawn portion of revolving credit facilities(1)


(2,548
)




Cash repayments on drawn revolvers(1)


380





Cash paid for securities purchased under collateralized agreements to resell(1)


(30,000
)




Interest and dividend receivable(1)


(207
)




Receivable from unsettled securities sold(1)


(8,912
)




Receivable from affiliates(1)


(106
)




Other assets(1)


196





Purchase of investment in New Mountain Finance Holdings, L.L.C.(2)


(58,644
)

(100,040
)

(133,428
)Distributions from New Mountain Finance Holdings, L.L.C.(2)


15,247


50,165


23,314Increase (decrease) in operating liabilities(1):Payable for unsettled securities purchased


17,054





Management fee payable


(911
)




Incentive fee payable


(1,522
)




Capital gains incentive fee payable


(8,573
)




Interest payable


1,259





Payable to affiliates


589





Deferred tax liability


493





Other liabilities


225





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


(289,571
)

(49,875
)

(110,114
)​
​
​
​
​
​
​
​
​
​
​Cash flows from financing activitiesNet proceeds from shares sold


141,157


100,040


133,428Dividends paid


(72,783
)

(50,165
)

(23,314
)Offering costs paid(1)


(478
)




Proceeds from Holdings Credit Facility(1)


384,721





Repayment of Holdings Credit Facility(1)


(314,400
)




Proceeds from SLF Credit Facility(1)


21,255





Repayment of SLF Credit Facility(1)


(37,700
)




Proceeds from Convertible Notes(1)


115,000





Proceeds from NMFC Credit Facility(1)


72,000





Repayment of NMFC Credit Facility(1)


(22,000
)




Proceeds from SBA-guaranteed debentures(1)


37,500





Deferred financing costs paid(1)


(11,256
)




​
​
​
​
​
​
​
​
​
​
​Net cash flows provided by financing activities


313,016


49,875


110,114​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in cash and cash equivalents


23,445





Cash and cash equivalents at the beginning of the period








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

$
23,455

$


$
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​Supplemental disclosure of cash flow informationCash interest paid

$
9,924

$


$
Income taxes paid


437





Distribution receivable from New Mountain Finance Holdings, L.L.C.








3,405Non-cash financing activities:Dividends declared and payable

$


$


$
(3,405
)New Mountain Finance AIV Holdings Corporation exchange of New Mountain Finance Holdings, L.L.C. units for shares


38,840


193,262


56,314Value of shares issued in connection with dividend reinvestment plan


4,829


5,084


1,955Accrual for offering costs(1)


516





Accrual for deferred financing costs(1)


375





Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C(2)


(250
)

(281
)

(323
)SLF Credit Facility merger with the Holdings Credit Facility(1)


198,555








(1)For
the year ended December 31, 2014, the amounts reported relate to the period from May 8, 2014 to December 31, 2014.(2)For
the year ended December 31, 2014, the amounts reported relate to the period from January 1, 2014 to May 7, 2014.(3)Represents
the cash and cash equivalent balance of New Mountain Finance Holdings, L.L.C.'s at the date of restructuring. See Note 1, Formation and Business Purpose.




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

110

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Table of Contents



New Mountain Finance Corporation        Consolidated Schedule of Investments        December 31, 2014        (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
Net
AssetsNon-Controlled/Non-Affiliated InvestmentsFunded Debt InvestmentsAustraliaProject Sunshine IV Pty Ltd**Media

First lien(2)

8.00% (Base Rate + 7.00%)

9/23/2019

$
17,689

$
17,594

$
17,888


2.23
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsAustralia







$
17,689

$
17,594

$
17,888


2.23
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsLuxembourgPinnacle Holdco S.à.r.l. / Pinnacle (US) Acquisition Co Limited**Software

Second lien(2)

10.50% (Base Rate + 9.25%)

7/30/2020

$
24,630

$
24,319

$
22,905Second lien(3)

10.50% (Base Rate + 9.25%)

7/30/2020


8,204


8,317


7,629​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​32,834


32,636


30,534


3.80
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Evergreen Skills Lux S.À.R.L.**Education

Second lien(3)

9.25% (Base Rate + 8.25%)

4/28/2022


5,000


4,877


4,737


0.59
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsLuxembourg







$
37,834

$
37,513

$
35,271


4.39
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Funded Debt InvestmentsUnited StatesAscend Learning, LLCEducation

First lien(2)

6.00% (Base Rate + 5.00%)

7/31/2019

$
14,888

$
14,824

$
14,813Second lien(3)

9.50% (Base Rate + 8.50%)

11/30/2020


29,000


28,881


28,855​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​43,888


43,705


43,668


5.44
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TIBCO Software Inc**.Software

First lien(2)

6.50% (Base Rate + 5.50%)

12/4/2020


30,000


28,512


29,100Subordinated(3)

11.38%

12/1/2021


15,000


14,567


14,550​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​45,000


43,079


43,650


5.44
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Global Knowledge Training LLCEducation

Second lien(2)

12.00% (Base Rate + 8.75%)

10/21/2018


41,450


41,137


41,786


5.21
%Deltek, Inc.Software

Second lien(2)

10.00% (Base Rate + 8.75%)

10/10/2019


40,000


39,989


40,300Second lien(3)

10.00% (Base Rate + 8.75%)

10/10/2019


1,000


990


1,008​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​41,000


40,979


41,308


5.15
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Tenawa Resource Holdings LLC(16)Tenawa Resource Management LLCEnergy

First lien(3)

10.50% (Base Rate + 8.00%)

5/12/2019


40,000


39,838


39,820


4.96
%Kronos IncorporatedSoftware

Second lien(2)

9.75% (Base Rate + 8.50%)

4/30/2020


32,641


32,407


33,355Second lien(3)

9.75% (Base Rate + 8.50%)

4/30/2020


5,000


4,955


5,109​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​37,641


37,362


38,464


4.80
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​McGraw-Hill Global Education Holdings, LLCEducation

First lien(2)(9)

9.75%

4/1/2021


24,500


24,362


27,195First lien(2)

5.75% (Base Rate + 4.75%)

3/22/2019


9,863


9,641


9,830​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​34,363


34,003


37,025


4.62
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Tolt Solutions, Inc.(15)Business Services

First lien(2)

7.00% (Base Rate + 6.00%)

3/7/2019


18,537


18,538


18,075First lien(2)

12.00% (Base Rate + 11.00%)

3/7/2019


18,800


18,800


18,540​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​37,337


37,338


36,615


4.56
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Acrisure, LLCBusiness Services

Second lien(2)

11.50% (Base Rate + 10.50%)

3/31/2020


35,175


34,848


35,471


4.42
%




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

111

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Table of Contents

New Mountain Finance Corporation

Consolidated Schedule of Investments (Continued)

December 31, 2014

(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
Net
AssetsUniTek Global Services, Inc.Business Services

First lien(2)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018

$
20,596

$
20,104

$
14,706First lien(3)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018


7,772


7,552


5,550First lien(2)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018


6,271


6,116


4,478First lien(3)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018


597


580


426First lien(2)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018


5,213


5,083


3,722First lien(3)

15.00% PIK (Base Rate + 13.50% PIK)(7)*

4/15/2018


496


482


354First lien(3)(11)Drawn

9.50% (Base Rate + 7.50% + 1.00% PIK)*

1/21/2015


3,381


3,381


3,381First lien(3)(11)Drawn

10.25% (Base Rate + 4.00% + 5.25% PIK)*

4/15/2016


2,610


2,610


2,610​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​46,936


45,908


35,227


4.39
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Envision Acquisition Company, LLCHealthcare Services

Second lien(2)

9.75% (Base Rate + 8.75%)

11/4/2021


26,000


25,603


25,772Second lien(3)

9.75% (Base Rate + 8.75%)

11/4/2021


9,250


9,305


9,169​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​35,250


34,908


34,941


4.37
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Hill International, Inc.Business Services

First lien(2)

7.75% (Base Rate + 6.75%)

9/26/2020


34,913


34,574


34,215


4.27
%Meritas Schools Holdings, LLCEducation

First lien(2)

7.00% (Base Rate + 5.75%)

6/25/2019


21,658


21,487


21,549Second lien(2)

10.00% (Base Rate + 9.00%)

1/23/2021


12,000


11,943


11,820​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​33,658


33,430


33,369


4.16
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TASC, Inc.Federal Services

First lien(2)

6.50% (Base Rate + 5.50%)

5/22/2020


30,860


30,454


30,108Second lien(3)

12.00%

5/21/2021


2,000


1,960


1,960​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​32,860


32,414


32,068


4.00
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​SRA International, Inc.Federal Services

First lien(2)

6.50% (Base Rate + 5.25%)

7/20/2018


31,765


31,059


31,805


3.96
%Navex Global,Inc.Software

First lien(4)

5.75% (Base Rate + 4.75%)

11/19/2021


10,547


10,442


10,441First lien(2)

5.75% (Base Rate + 4.75%)

11/19/2021


4,453


4,409


4,409Second lien(4)

9.75% (Base Rate + 8.75%)

11/18/2022


11,953


11,834


11,775Second lien(3)

9.75% (Base Rate + 8.75%)

11/18/2022


5,047


4,997


4,970​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​32,000


31,682


31,595


3.94
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Rocket Software, Inc.Software

Second lien(2)

10.25% (Base Rate + 8.75%)

2/8/2019


30,875


30,756


30,875


3.85
%KeyPoint Government Solutions, Inc.Federal Services

First lien(2)

7.75% (Base Rate + 6.50%)

11/13/2017


29,342


28,937


29,359


3.66
%CompassLearning, Inc.(14)Education

First lien(2)

8.00% (Base Rate + 6.75%)

11/26/2018


30,000


29,391


29,184


3.64
%Aderant North America, Inc.Software

Second lien(2)

10.00% (Base Rate + 8.75%)

6/20/2019


24,000


23,767


23,940Second lien(3)

10.00% (Base Rate + 8.75%)

6/20/2019


5,000


5,070


4,988​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​29,000


28,837


28,928


3.61
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Transtar Holding CompanyDistribution & Logistics

Second lien(2)

10.00% (Base Rate + 8.75%)

10/9/2019


28,300


27,906


27,946


3.48
%Pelican Products, Inc.Business Products

Second lien(3)

9.25% (Base Rate + 8.25%)

4/9/2021


15,500


15,531


15,306Second lien(2)

9.25% (Base Rate + 8.25%)

4/9/2021


10,000


10,123


9,875​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​25,500


25,654


25,181


3.14
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




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

112

---



Table of Contents

New Mountain Finance Corporation

Consolidated Schedule of Investments (Continued)

December 31, 2014

(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
Net
AssetsYP Holdings LLC(10)YP LLCMedia

First lien(2)

8.00% (Base Rate + 6.75%)

6/4/2018

$
24,936

$
24,678

$
25,029


3.12
%CRGT Inc.Federal Services

First lien(2)

7.50% (Base Rate + 6.50%)

12/19/2020


25,000


24,750


24,750


3.09
%Confie Seguros Holding II Co.Consumer Services

Second lien(2)

10.25% (Base Rate + 9.00%)

5/8/2019


18,886


18,786


18,877Second lien(3)

10.25% (Base Rate + 9.00%)

5/8/2019


5,571


5,647


5,569​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​24,457


24,433


24,446


3.05
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​PetVet Care Centers LLCConsumer Services

Second lien(3)

9.75% (Base Rate + 8.75%)

6/17/2021


24,000


23,761


23,760


2.96
%Sierra Hamilton LLC / Sierra Hamilton Finance, Inc.Energy

First lien(2)

12.25%

12/15/2018


25,000


25,000


23,250


2.90
%Aricent TechnologiesBusiness Services

Second lien(2)

9.50% (Base Rate + 8.50%)

4/14/2022


20,000


19,871


20,162Second lien(3)

9.50% (Base Rate + 8.50%)

4/14/2022


2,550


2,556


2,571​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​22,550


22,427


22,733


2.83
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​McGraw-Hill School Education Holdings, LLCEducation

First lien(2)

6.25% (Base Rate + 5.00%)

12/18/2019


21,780


21,594


21,771


2.71
%Weston Solutions, Inc.Business Services

Subordinated(4)

16.00% (11.50% + 4.50% PIK)*

7/3/2019


20,458


20,458


20,828


2.60
%Aspen Dental Management, Inc.Healthcare Services

First lien(2)

7.00% (Base Rate + 5.50%)

10/6/2016


20,862


20,697


20,732


2.58
%TWDiamondback Holdings Corp.(18)Diamondback Drugs of Delaware, L.L.C.(TWDiamondback II Holdings LLC)Distribution & Logistics

First lien(4)

9.75% (Base Rate + 8.75%)

11/19/2019


19,895


19,895


19,895


2.48
%American Pacific Corporation**Specialty Chemicals and Materials

First lien(2)

7.00% (Base Rate + 6.00%)

2/27/2019


19,850


19,722


19,825


2.47
%Novitex Acquisition, LLC (fka ARSloane Acquisition, LLC)Business Services

First lien(2)

7.50% (Base Rate + 6.25%)

7/7/2020


19,950


19,592


19,152


2.39
%eResearchTechnology, Inc.Healthcare Services

First lien(2)

6.00% (Base Rate + 4.75%)

5/2/2018


19,059


18,521


19,083


2.38
%First American Payment Systems, L.P.Business Services

Second lien(2)

10.75% (Base Rate + 9.50%)

4/12/2019


18,643


18,369


18,457


2.30
%Permian Tank & Manufacturing, Inc.Energy

First lien(2)

10.50%

1/15/2018


24,357


24,555


18,390


2.29
%AgKnowledge Holdings Company, Inc.Business Services

Second lien(2)

9.25% (Base Rate + 8.25%)

7/23/2020


18,500


18,326


17,814


2.22
%Vertafore, Inc.Software

Second lien(2)

9.75% (Base Rate + 8.25%)

10/27/2017


13,855


13,852


13,959Second lien(3)

9.75% (Base Rate + 8.25%)

10/27/2017


2,000


2,017


2,015​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​15,855


15,869


15,974


1.99
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​MailSouth, Inc. (d/b/a Mspark)Media

First lien(2)

6.75% (Base Rate + 4.99%)

12/14/2016


16,778


16,190


15,771


1.97
%Edmentum, Inc.(fka Plato, Inc.)Education

Second lien(2)

11.25% (Base Rate + 9.75%)

5/17/2019


25,000


24,713


12,500Second lien(3)

11.25% (Base Rate + 9.75%)

5/17/2019


6,150


6,040


3,075​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​31,150


30,753


15,575


1.94
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​GSDM Holdings Corp.Healthcare Services

Subordinated(4)

10.00%

6/23/2020


15,000


14,860


14,642


1.83
%Smile Brands Group Inc.Healthcare Services

First lien(2)

7.50% (Base Rate + 6.25%)

8/16/2019


14,319


14,154


13,746


1.71
%Vision Solutions, Inc.Software

Second lien(2)

9.50% (Base Rate + 8.00%)

7/23/2017


14,000


13,966


13,580


1.69
%Harley Marine Services, Inc.Distribution & Logistics

Second lien(2)

10.50% (Base Rate + 9.25%)

12/20/2019


9,000


8,843


8,910


1.11
%Vitera Healthcare Solutions, LLCSoftware

First lien(2)

6.00% (Base Rate + 5.00%)

11/4/2020


1,980


1,964


1,970Second lien(2)

9.25% (Base Rate + 8.25%)

11/4/2021


7,000


6,906


6,825​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​8,980


8,870


8,795


1.10
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




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

113

---



Table of Contents

New Mountain Finance Corporation

Consolidated Schedule of Investments (Continued)

December 31, 2014

(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
Net
AssetsMcKissock, LLCQC McKissock Investment, LLCEducation

First lien(2)

7.50% (Base Rate + 6.50%)

8/5/2019

$
4,923

$
4,877

$
4,844First lien(2)

7.50% (Base Rate + 6.50%)

8/5/2019


3,178


3,149


3,127First lien(2)(11)Drawn

7.50% (Base Rate + 6.50%)

8/5/2019


576


570


567​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​8,677


8,596


8,538


1.06
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Asurion, LLC (fka Asurion Corporation)Business Services

Second lien(3)

8.50% (Base Rate + 7.50%)

3/3/2021


5,000


4,934


4,987Second lien(2)

8.50% (Base Rate + 7.50%)

3/3/2021


3,000


2,957


2,993​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​8,000


7,891


7,980


0.99
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Physio-Control International, Inc.Healthcare Products

First lien(2)

9.88%

1/15/2019


6,651


6,651


7,083


0.88
%Sotera Defense Solutions, Inc. (Global Defense Technology & Systems, Inc.)Federal Services

First lien(2)

9.00% (Base Rate + 7.50%)

4/21/2017


7,445


7,387


6,626


0.83
%Brock Holdings III, Inc.Industrial Services

Second lien(2)

10.00% (Base Rate + 8.25%)

3/16/2018


7,000


6,934


5,548


0.69
%Immucor, Inc.Healthcare Services

Subordinated(2)(9)

11.13%

8/15/2019


5,000


4,957


5,425


0.68
%Virtual Radiologic CorporationHealthcare Information Technology

First lien(2)

7.25% (Base Rate + 5.50%)

12/22/2016


5,963


5,931


4,979


0.62
%Packaging Coordinators, Inc.(12)Healthcare Products

Second lien(3)

9.00% (Base Rate + 8.00%)

8/1/2022


5,000


4,952


4,925


0.61
%LM U.S. Member LLC (and LM U.S. Corp Acquisition Inc.)Business Services

Second lien(2)

8.25% (Base Rate + 7.25%)

1/25/2021


5,000


4,940


4,867


0.61
%Learning Care Group (US) Inc.(17)Learning Care Group (US) No. 2 Inc.Education

First lien(2)

5.50% (Base Rate + 4.50%)

5/5/2021


4,465


4,424


4,476


0.56
%CRC Health CorporationHealthcare Services

Second lien(3)

9.00% (Base Rate + 8.00%)

9/28/2021


4,000


3,925


4,098


0.51
%GCA Services Group, Inc.Business Services

Second lien(3)

9.25% (Base Rate + 8.00%)

11/1/2020


4,000


3,968


3,955


0.49
%Sophia Holding Finance LP / Sophia Holding Finance Inc.Software

Subordinated(3)

9.63%

12/1/2018


3,500


3,502


3,531


0.44
%York Risk Services Holding Corp.Business Services

Subordinated(3)

8.50%

10/1/2022


3,000


3,000


3,011


0.38
%Winebow Holdings, Inc. (Vinter Group, Inc., The)Distribution & Logistics

Second lien(3)

8.50% (Base Rate + 7.50%)

1/2/2022


3,000


2,979


2,910


0.36
%Synarc-Biocore Holdings, LLCHealthcare Services

Second lien(3)

9.25% (Base Rate + 8.25%)

3/10/2022


2,500


2,477


2,250


0.28
%Education Management LLC**Education

First lien(2)

9.25% PIK (Base Rate + 8.00% PIK)*

3/30/2018


1,944


1,902


880First lien(3)

9.25% PIK (Base Rate + 8.00% PIK)*

3/30/2018


1,097


1,085


496​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​3,041


2,987


1,376


0.17
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​ATI Acquisition Company (fka Ability Acquisition, Inc.)(13)Education

First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(7)*

6/30/2012Past Due


1,665


1,434


216First lien(2)

17.25% (Base Rate + 10.00% + 4.00% PIK)(7)*

6/30/2012Past Due


103


94


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


1,528


319


0.04
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt InvestmentsUnited States







$
1,338,642

$
1,325,057

$
1,291,305


160.98
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Debt Investments







$
1,394,165

$
1,380,164

$
1,344,464


167.60
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




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

114

---



Table of Contents

New Mountain Finance Corporation

Consolidated Schedule of Investments (Continued)

December 31, 2014

(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
Net
AssetsEquityUnited KingdomPackaging Coordinators, Inc.(12)PCI Pharma Holdings UK Limited**Healthcare Products

Ordinary shares(2)






19,427

$
580

$
1,193


0.15
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total SharesUnited Kingdom










$
580

$
1,193


0.15
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​EquityUnited StatesCrowley Holdings Preferred, LLCDistribution & Logistics

Preferred shares(3)

12.00% (10.00% + 2.00% PIK)*




35,721

$
35,721

$
35,721


4.45
%Global Knowledge Training LLCEducation

Ordinary shares(2)






2





8Preferred shares(2)






2,423





9,739​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


9,747


1.22
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Tenawa Resource Holdings LLC(16)QID NGL LLCEnergy

Ordinary shares(3)






3,000,000


3,000


2,430


0.30
%TWDiamondback Holdings Corp.(18)Distribution & Logistics

Preferred shares(4)






200


2,000


2,000


0.25
%Ancora Acquisition LLC(13)Education

Preferred shares(6)






372


83


83


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










$
40,804

$
49,981


6.23
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Shares










$
41,384

$
51,174


6.38
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​WarrantsUnited StatesStorapod Holding Company, Inc.Consumer Services

Warrants(3)






360,129

$
156

$
4,142


0.51
%YP Holdings LLC(10)YP Equity Investors LLCMedia

Warrants(5)






5





2,549


0.32
%Learning Care Group (US) Inc.(17)ASP LCG Holdings, Inc.Education

Warrants(3)






622


37


299


0.04
%UniTek Global Services, Inc.Business Services

Warrants(3)






1,014,451
(8)

1,449






%Alion Science and Technology CorporationFederal Services

Warrants(3)






6,000


293






%Ancora Acquisition LLC(13)Education

Warrants(6)






20








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










$
1,935

$
6,990


0.87
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Funded Investments










$
1,423,483

$
1,402,628


174.85
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unfunded Debt InvestmentsUnited StatesTWDiamondback Holdings Corp.(18)Diamondback Drugs of Delaware, L.L.C. (TWDiamondback II Holdings LLC)Distribution & Logistics

First lien(4)(11)Undrawn



5/19/2015

$
2,763

$


$




%UniTek Global Services, Inc.Business Services

First lien(3)(11)Undrawn



1/21/2015


5,425





First lien(3)(11)Undrawn



1/21/2015


2,048





First lien(3)(11)Undrawn



1/21/2015


758





​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​






%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​McKissock, LLCEducation

First lien(2)(11)Undrawn



8/5/2019


2,304


(23
)

(37
)


%MailSouth, Inc. (d/b/a Mspark)Media

First lien(3)(11)Undrawn



12/14/2015


1,900


(181
)

(156
)

(0.02
)%




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

115

---



Table of Contents

New Mountain Finance Corporation

Consolidated Schedule of Investments (Continued)

December 31, 2014

(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
Net
AssetsAspen Dental Management, Inc.Healthcare Services

First lien(3)(11)Undrawn



4/6/2016

$
5,000

$
(388
)
$
(225
)

(0.03
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Unfunded Debt Investments







$
20,198

$
(592
)
$
(418
)

(0.05
)%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Non-Controlled/Non-Affiliated Investments










$
1,422,891

$
1,402,210


174.80
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Non-Controlled/Affiliated Investments(19)EquityUnited StatesNMFC Senior Loan Program I LLC**Investment in Fund

Membership interest(3)








$
23,000

$
22,461


2.80
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Non-Controlled/Affiliated Investments










$
23,000

$
22,461


2.80
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Investments










$
1,445,891

$
1,424,671


177.60
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)New
Mountain Finance Corporation (the "Company") generally acquires its investments in private transactions exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed to be "restricted securities" under the Securities Act.(2)Investment
is pledged as collateral for the Holdings Credit Facility, a revolving credit facility among the Company as Collateral Manager, New Mountain
Finance Holdings, L.L.C. ("NMF Holdings") as the Borrower, Wells Fargo Securities, LLC as the Administrative Agent, and Wells Fargo Bank, National Association, as the Lender and Collateral
Custodian. See Note 7,Borrowings, for details.(3)Investment
is pledged as collateral for the NMFC Credit Facility, a revolving credit facility among the Company as the Borrower and Goldman Sachs Bank USA
as the Administrative Agent and the Collateral Agent and Goldman Sachs Bank USA and Morgan Stanley, N.A. as Lenders. See Note 7,Borrowings, for
details.(4)Investment
is held in New Mountain Finance SBIC, L.P.(5)Investment
is held in NMF YP Holdings, Inc.(6)Investment
is held in NMF Ancora Holdings, Inc.(7)Investment
or a portion of the investment is on non-accrual status. See Note 3,Investments, for
details.(8)The
Company holds 1,014,451 warrants in UniTek Global Services, Inc., which represents a 4.41% equity ownership on a fully diluted basis.(9)Securities
are registered under the Securities Act.(10)The
Company holds investments in two related entities of YP Holdings LLC. The 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.(11)Par
Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities or delayed draws. Cost amounts
represent the cash received at settlement date net the impact of paydowns and cash paid for drawn revolvers or delayed draws.(12)The
Company holds investments in Packaging Coordinators, Inc. and one related entity of Packaging Coordinators, Inc. The Company has a debt
investment in Packaging Coordinators, Inc. and holds ordinary equity in PCI Pharma Holdings UK Limited, a wholly-owned subsidiary of Packaging Coordinators, Inc.(13)The
Company holds investments in ATI Acquisition Company and Ancora Acquisition LLC. The Company has debt investments in ATI Acquisition Company and
preferred equity and warrants to purchase units of common membership interests of Ancora Acquisition LLC. The Company received its investments in Ancora Acquisition LLC as a result of
its investments in ATI Acquisition Company.(14)The
Company holds an investment in CompassLearning, Inc. that is structured as a first lien last out term loan.(15)The
Company holds two first lien investments in Tolt Solutions, Inc. The debt investment with an interest rate at base rate + 6.00% is
structured as a first lien first out debt investment. The debt investment with an interest rate at base rate + 11.00% is structured as a first lien last out debt investment.(16)The
Company holds investments in two related entities of Tenawa Resource Holdings LLC. The Company holds 4.76% of the common units in QID
NGL LLC (which at closing represented 98.1% of the ownership in the common units in Tenawa Resource Holdings LLC) and holds a first lien investment in Tenawa Resource
Management LLC, a wholly-owned subsidiary of Tenawa Resource Holdings LLC.(17)The
Company holds investments in two wholly-owned subsidiaries of Learning Care Group (US) Inc. The Company has a debt investment in Learning Care
Group (US) No. 2 Inc. and holds warrants to purchase common stock of ASP LCG Holdings, Inc.(18)The
Company holds investments in TWDiamondback Holdings Corp. and one related entity of TWDiamondback Holdings Corp. The Company holds preferred equity in
TWDiamondback Holdings Corp. and holds a first lien last out term loan and a delayed draw term loan in Diamondback Drugs of Delaware LLC, a wholly-owned subsidiary of TWDiamondback Holdings
Corp.(19)Denotes
investments in which the Company is an "Affiliated Person", as defined in the Investment Company Act of 1940, as amended, due to owning or holding
the power to vote 5.0% or more of the outstanding voting securities of the investment but not controlling the company.*All
or a portion of interest contains payments-in-kind ("PIK").**Indicates
assets that the 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 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.

116

---





Table of Contents

New Mountain Finance Corporation        Consolidated Schedule of Investments (Continued)        December 31, 2014

December 31, 2014Investment Type

Percent of Total
Investments at Fair ValueFirst lien


47.58
%Second lien


42.41
%Subordinated


4.35
%Equity and other


5.66
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




December 31, 2014Industry Type

Percent of Total
Investments at Fair ValueSoftware


20.16
%Business Services


18.27
%Education


17.68
%Federal Services


8.75
%Healthcare Services


8.05
%Distribution & Logistics


6.83
%Energy


5.89
%Media


4.29
%Consumer Services


3.67
%Business Products


1.77
%Investment in Fund


1.58
%Specialty Chemicals and Materials


1.39
%Healthcare Products


0.93
%Industrial Services


0.39
%Healthcare Information Technology


0.35
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




December 31, 2014Interest Rate Type

Percent of Total
Investments at Fair ValueFloating rates


12.32
%Fixed rates


87.68
%​
​
​
​
​Total investments


100.00
%​
​
​
​
​​
​
​
​
​​
​
​
​
​




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

117

---





Table of Contents



New Mountain Finance Corporation        Consolidated Schedule of Investments        December 31, 2013        (in thousands, except shares)

Cost

Fair Value

Percent of
Net AssetsInvestmentsInvestment in New Mountain Finance Holdings, L.L.C.(1)

$
633,835

$
650,107


100.00
%​
​
​
​
​
​
​
​
​
​
​Total Investments

$
633,835

$
650,107


100.00
%​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)At
December 31, 2013, New Mountain Finance Corporation's only investment was its investment in New Mountain Finance Holdings, L.L.C. Refer below for
New Mountain Finance Holdings, L.L.C.'s Consolidated Schedule of Investments as of December 31, 2013.


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
%




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

118

---



Table of Contents

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'
CapitalRocket 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
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​JHCI 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
%First 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
%




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

119

---



Table of Contents

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'
CapitalOpenLink 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
%Alion 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
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




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

120

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Table of Contents

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'
CapitalEquity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
%Ancora 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. ("NMF Holdings") 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.




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

121

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Table of Contents

New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (Continued)

December 31, 2013

(in thousands, except shares)



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

122

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Table of Contents



Notes to the Consolidated Financial Statements of  New Mountain Finance Corporation        December 31, 2014  (in thousands, except share data)

Note 1. Formation and Business Purpose

New Mountain Finance Corporation ("NMFC" or the "Company") 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 regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (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"). NMFC is also registered as an investment adviser under the Investment Advisers Act of 1940, as amended
(the "Advisers Act").

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 (defined as New Mountain Capital Group, L.L.C. and its affiliates) 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 (as defined below). In connection with NMFC's
IPO and through a series of transactions, New Mountain Finance Holdings, L.L.C. ("NMF Holdings" or the "Predecessor Operating
Company") acquired all of the operations of the Predecessor Entities, including all of the assets and liabilities related to such operations.

NMF
Holdings is a Delaware limited liability company. Until May 8, 2014, NMF Holdings was externally managed and was regulated as a BDC under the 1940 Act. As such, NMF Holdings
was obligated to comply with certain regulatory requirements. NMF Holdings was treated as a partnership for United States ("U.S.") federal income tax purposes for so long as it had at least two
members. With the completion of the underwritten secondary offering on February 3, 2014, NMF Holdings' existence as a partnership for U.S. federal income tax purposes terminated and NMF
Holdings became an entity that is disregarded as a separate entity from its owner for U.S. federal tax purposes. For additional information on the Company's organizational structure prior to
May 8, 2014, see "Restructuring".

Until
May 8, 2014, NMF Holdings was externally managed by New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser"). As of May 8, 2014, the Investment Adviser
serves as the external investment adviser to NMFC. 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. New Mountain Capital is a firm with a track record of investing in the middle market. New Mountain Capital focuses on
investing in defensive growth companies across its private equity, public equity and credit investment vehicles. NMF Holdings, 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

123

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 1. Formation and Business Purpose (Continued)

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".

Prior
to December 18, 2014, New Mountain Finance SPV Funding, L.L.C. ("NMF SLF") was a Delaware limited liability company. NMF SLF was a wholly-owned subsidiary of NMF Holdings
and thus a wholly-owned indirect subsidiary of the Company. NMF SLF was bankruptcy-remote and non-recourse to NMFC. As part of an amendment to the Company's existing credit facilities with Wells Fargo
Bank, National Association, NMF SLF merged with and into NMF Holdings on December 18, 2014. See Note 7,Borrowings, for details.

Until
April 25, 2014, New Mountain Finance AIV Holdings Corporation ("AIV Holdings") was a Delaware corporation that was originally incorporated on March 11, 2011. AIV
Holdings was dissolved on April 25, 2014. Guardian AIV, a Delaware limited partnership, was AIV Holdings' sole stockholder. AIV Holdings was a closed-end, non-diversified management investment
company that was regulated as a BDC under the 1940 Act. As such, AIV Holdings was obligated to comply with certain regulatory requirements. AIV Holdings was treated, and complied with the requirements
to qualify annually, as a RIC under the Code.

Prior
to the Restructuring (as defined below) on May 8, 2014, NMFC and AIV Holdings were holding companies with no direct operations of their own, and their sole asset was their
ownership in NMF Holdings. In connection with the IPO, NMFC and AIV Holdings each entered into a joinder agreement with respect to the Limited Liability Company Agreement, as amended and restated (the
"Operating Agreement"), of NMF Holdings, pursuant to which NMFC and AIV Holdings were admitted as members of NMF Holdings. NMFC acquired from NMF Holdings, with the gross proceeds of the IPO and the
Concurrent Private Placement, common membership units ("units") of NMF Holdings (the number of units were 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 NMF Holdings 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 NMF Holdings prior to the IPO and, as a result of the transactions completed in connection with the IPO, obtained units in NMF Holdings. Guardian AIV contributed its
units in NMF Holdings to its newly formed subsidiary, AIV Holdings, in exchange for common stock of AIV Holdings. AIV Holdings had the right to exchange all or any portion of its units in NMF Holdings
for shares of NMFC's common stock on a one-for-one basis at any time.

The
original 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 was that any distributions made to NMFC's stockholders that were attributable to such
gains generally were not treated as taxable dividends but rather as return of capital.

Since
NMFC's IPO, and through December 31, 2014, NMFC raised approximately $374,625 in net proceeds from additional offerings of common stock and issued shares of its common stock
valued at approximately $288,416 on behalf of AIV Holdings for exchanged units. NMFC acquired from NMF Holdings units of NMF Holdings equal to the number of shares of NMFC's common stock sold in the

124

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 1. Formation and Business Purpose (Continued)

additional
offerings. With the completion of the final secondary offering on February 3, 2014, NMFC owned 100.0% of the units of NMF Holdings, which became a wholly-owned subsidiary of NMFC.

Restructuring

As a BDC, AIV Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after
careful consideration of the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of AIV Holdings' business model, AIV Holdings' board of directors
determined that continuation as a BDC was not in the best interests of AIV Holdings and Guardian AIV. Specifically, given that AIV Holdings was formed for the sole purpose of holding units of NMF
Holdings and AIV Holdings had disposed of all of the units of NMF Holdings that it was holding as of February 3, 2014, the board of directors of AIV Holdings approved and declared advisable at
an in-person meeting held on March 25, 2014 the withdrawal of AIV Holdings' election to be regulated as a BDC under the 1940 Act. In addition, the board of directors of AIV Holdings approved
and declared advisable for AIV Holdings to terminate its registration under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and to dissolve AIV Holdings
under the laws of the State of Delaware.

Upon
receipt of the necessary stockholder consent to authorize the board of directors of AIV Holdings to withdraw AIV Holdings' election to be regulated as a BDC, the withdrawal was
filed and became effective upon receipt by the U.S. Securities and Exchange Commission ("SEC") of AIV Holdings' notification of withdrawal on Form N-54C on April 15, 2014. The board of
directors of AIV Holdings believed that AIV Holdings met the requirements for filing the notification to withdraw its election to be regulated as a BDC, upon the receipt of the necessary stockholder
consent. After the notification of withdrawal of AIV Holdings' BDC election was filed with the SEC, AIV Holdings was no longer subject to the regulatory provisions of the 1940 Act applicable to BDCs
generally, including regulations related to insurance, custody, composition of its board of directors, affiliated transactions and any compensation arrangements.

In
addition, on April 15, 2014, AIV Holdings filed a Form 15 with the SEC to terminate AIV Holdings' registration under Section 12(g) of the Exchange Act. After
these SEC filings and any other federal or state regulatory or tax filings were made, AIV Holdings proceeded to dissolve under Delaware law by filing a certificate of dissolution in Delaware on
April 25, 2014.

Until
May 8, 2014, as a BDC, NMF Holdings had been subject to the 1940 Act, including certain provisions applicable only to BDCs. Accordingly, and after careful consideration of
the 1940 Act requirements applicable to BDCs, the cost of 1940 Act compliance and a thorough assessment of NMF Holdings' current business model, NMF Holdings' board of directors determined at an
in-person meeting held on March 25, 2014 that continuation as a BDC was not in the best interests of NMF Holdings.

At
the 2014 joint annual meeting of the stockholders of NMFC and the sole unit holder of NMF Holdings held on May 6, 2014, the stockholders of NMFC and the sole unit holder of NMF
Holdings approved a proposal which authorized the board of directors of NMF Holdings to withdraw NMF
Holdings' election to be regulated as a BDC. Additionally, the stockholders of NMFC approved a new investment advisory and management agreement between NMFC and the Investment Adviser. Upon

125

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 1. Formation and Business Purpose (Continued)

receipt
of the necessary stockholder/unit holder approval to authorize the board of directors of NMF Holdings to withdraw NMF Holdings' election to be regulated as a BDC, the withdrawal was filed and
became effective upon receipt by the SEC of NMF Holdings' notification of withdrawal on Form N-54C on May 8, 2014.

Effective
May 8, 2014, NMF Holdings amended and restated its Operating Agreement such that the board of directors of NMF Holdings was dissolved and NMF Holdings remained a
wholly-owned subsidiary of NMFC with the sole purpose of serving as a special purpose vehicle for NMF Holdings' credit facility, and NMFC assumed all other operating activities previously undertaken
by NMF Holdings under the management of the Investment Adviser (collectively, the "Restructuring"). After the Restructuring, all wholly-owned direct and indirect subsidiaries of NMFC are consolidated
with NMFC for both 1940 Act and financial statement reporting purposes, subject to any financial statement adjustments required in accordance with accounting principles generally accepted in
the United States of America ("GAAP"). NMFC continues to remain a BDC under the 1940 Act.

Also,
on May 8, 2014, NMF Holdings filed Form 15 with the SEC to terminate NMF Holdings' registration under Section 12(g) of the Exchange Act. As a special purpose
entity, NMF Holdings is bankruptcy-remote and non-recourse to NMFC. In addition, the assets held at NMF Holdings will continue to be used to secure NMF Holdings' credit facility.

Current Organization

During the year ended December 31, 2014, the Company established wholly-owned subsidiaries, NMF Ancora Holdings Inc.
("NMF Ancora") and NMF YP Holdings Inc. ("NMF YP"), which are structured as Delaware entities that serve as tax blocker corporations which hold equity or equity-like investments in portfolio
companies organized as limited liability companies (or other forms of pass-through entities). Tax blocker corporations are not consolidated for income tax purposes and may incur income tax expense as
a result of their ownership of portfolio companies. Additionally, the Company has a wholly-owned subsidiary, New Mountain Finance Servicing, L.L.C. ("NMF Servicing") that serves as the administrative
agent on certain investment transactions. New Mountain Finance SBIC, L.P. ("SBIC LP"), and its general partner, New Mountain Finance SBIC G.P., L.L.C. ("SBIC GP"), were
organized in Delaware as a limited partnership and limited liability company,
respectively. SBIC LP and SBIC GP are consolidated wholly-owned direct and indirect subsidiaries of the Company. SBIC LP received a license from the U.S. Small Business
Association (the "SBA") to operate as a small business investment company ("SBIC") under Section 301(c) of the Small Business Investment Act of 1958, as amended (the "1958 Act").

126

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 1. Formation and Business Purpose (Continued)

The
diagram below depicts the Company's organizational structure as of December 31, 2014.

GRAPHIC

---

The
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 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. Similar to the Company, SBIC LP's investment objective is to generate current income and capital appreciation under the investment criteria used by the Company, however,
SBIC LP's investments must be SBA eligible companies. The Company's portfolio may be concentrated in a limited number of industries. As of December 31, 2014, the Company's top five
industry concentrations were software, business services, education, federal services and healthcare services.

Note 2. Summary of Significant Accounting Policies

Basis of accountingThe Company's consolidated financial statements have been prepared in conformity with GAAP. The Company is an investment
company
following accounting and reporting

127

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

guidance
in Accounting Standards Codification Topic 946,Financial ServicesInvestment Companies, ("ASC 946"). NMFC
consolidates its wholly-owned direct and indirect subsidiaries: NMF Holdings, NMF Servicing, SBIC LP, SBIC GP, NMF Ancora and NMF YP. Previously, the Company consolidated its
wholly-owned indirect subsidiary NMF SLF until it merged with and into NMF Holdings on December 18, 2014. See Note 7,Borrowings, for
details. Prior to the Restructuring, the Predecessor Operating Company consolidated its wholly-owned subsidiary, NMF SLF. NMFC and AIV Holdings did not consolidate the Predecessor Operating Company.
Prior to the Restructuring, NMFC and AIV Holdings applied investment company master-feeder financial statement presentation, as
described in ASC 946 to their interest in the Predecessor Operating Company. NMFC and AIV Holdings observed that it was also industry practice to follow the presentation prescribed for a master
fund-feeder fund structure in ASC 946 in instances in which a master fund was owned by more than one feeder fund and that such presentation provided stockholders of NMFC and AIV Holdings with a
clearer depiction of their investment in the master fund.

The
Company's consolidated 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 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 Predecessor Operating Company's historical operating expenses are not comparable to its operating expenses after the completion of the IPO.

The
Company's consolidated 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 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 Company's Consolidated Statements of Assets and Liabilities
at fair value, with changes in unrealized gains and losses resulting from changes in fair value reflected in the Company's Consolidated Statements of Operations as "Net change in unrealized
appreciation (depreciation) of investments" and realizations on portfolio investments reflected in the Company's Consolidated Statements of Operations as "Net realized gains (losses) on investments".

The
Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, the 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

128

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

are
accounted for on a trade date basis. The Company's quarterly valuation procedures are set forth in more detail below:



129

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except 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 costs/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 Company's investments may fluctuate from period to period and the fluctuations could be material.

Prior
to the Restructuring, NMFC was a holding company with no direct operations of its own, and its sole asset was its ownership in the Predecessor Operating Company. Prior to the
completion of the underwritten secondary public offering on February 3, 2014, AIV Holdings was a holding company with no direct operations of its own, and its sole asset was its ownership in
the Predecessor Operating Company. NMFC's and AIV Holdings' investments in the Predecessor Operating Company were carried at fair value and represented the respective pro-rata interest in the net
assets of the Predecessor Operating Company as of the applicable reporting date. NMFC and AIV Holdings valued 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.

Collateralized agreements or repurchase financingsThe Company follows the guidance in Accounting Standards Codification Topic 860,
Transfers and ServicingSecured Borrowing and Collateral, ("ASC 860") when accounting for transactions involving the purchases of
securities under collateralized agreements to resell (resale agreements). These transactions are treated as collateralized financing transactions and are recorded at their contracted resale or
repurchase amounts, as specified in the respective agreements. Interest on collateralized agreements is accrued and recognized over the
life of the transaction and included in interest income. As of December 31, 2014, the Company held one collateralized agreement to resell with a carrying value of $30,000, collateralized by a
security with a fair value of $30,000 and guaranteed by the counterparty. The counterparty has the option to repurchase the collateral from the Company at the par value of the collateralized agreement
within a year. The collateralized agreement earns interest at a rate of 15.0% per annum as of December 31, 2014. The Predecessor Operating Company did not have any collateralized agreements as
of the year ended December 31, 2013.

Cash and cash equivalentsCash and cash equivalents include cash and short-term, highly liquid investments. The Company defines 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. These securities have original maturities of three months
or less.

130

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

Revenue recognition

The Company's revenue recognition policies are as follows:

Sales and paydowns of investments:Realized gains and losses on investments are determined on the specific identification method.

Interest income:Interest income, including amortization of premium and discount using the effective interest method, is recorded on the
accrual
basis and periodically assessed for collectability. Interest income also includes interest earned from cash on hand. Upon the prepayment of a loan or debt security, any prepayment penalties are
recorded as part of interest income. The Company has loans in the portfolio that contain a payment-in-kind ("PIK") provision. PIK represents interest that is accrued and recorded as interest income at
the contractual rates, if deemed collectible, added to the loan principal on the respective capitalization dates, and generally due at maturity.

Non-accrual income:Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and
when there is
reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is reversed when a loan is placed on non-accrual status. Previously capitalized PIK interest
is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's
judgment of the ultimate outcome. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

Dividend income:Dividend income is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly
traded
portfolio companies.

Other income:Other income represents delayed compensation, consent or amendment fees, revolver fees, structuring fees, management fees
from a
non-controlled/affiliated investment and other
miscellaneous fees received and are typically non-recurring in nature. Delayed compensation is income earned from counterparties on trades that do not settle within a set number of business days after
trade date. Other income may also include fees from bridge loans. The Company may from time to time enter into bridge financing commitments, an obligation to provide interim financing to a
counterparty until permanent credit can be obtained. These commitments are short-term in nature and may expire unfunded. A fee is received by the Company for providing such commitments. Structuring
fees are recognized as income when earned, usually when paid at the closing of the investment and are non-refundable.

Prior
to the Restructuring, NMFC's revenue recognition policies were as follows:

Revenue, expenses, and capital gains (losses):At each quarterly valuation date, the Predecessor Operating Company's investment income,
expenses, net
realized gains (losses), and net increase (decrease) in unrealized appreciation (depreciation) were allocated to NMFC based on its pro-rata interest in the net assets of the Predecessor Operating
Company. This was recorded on NMFC's Statements of Operations. Realized gains and losses were recorded upon sales of NMFC's investments in the Predecessor Operating Company. Net change in unrealized
appreciation (depreciation) of

131

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

investment
in New Mountain Finance Holdings, L.L.C. was the difference between the net asset value per share and the closing price per share for shares issued as part of the dividend reinvestment plan
on the dividend payment date. This net change in unrealized appreciation (depreciation) of investment in New Mountain Finance Holdings, L.L.C. included the unrealized appreciation (depreciation) from
the IPO. NMFC used the proceeds from its IPO and Concurrent Private Placement to purchase units in the Predecessor Operating Company at $13.75 per unit (its IPO price per share). At the IPO date,
$13.75 per unit represented a discount to the actual net asset value per unit of the Predecessor Operating Company. As a result, NMFC experienced immediate unrealized appreciation on its investment.

All
expenses, including those of NMFC, were paid and recorded by the Predecessor Operating Company. Expenses were allocated to NMFC based on its pro-rata ownership interest. In addition,
the Predecessor Operating Company paid all of the offering costs related to the IPO and subsequent offerings. NMFC recorded its portion of the offering costs as a direct reduction to net assets and
the cost of its investment in the Predecessor Operating Company.

Interest and other financing expensesInterest and other financing fees are recorded on an accrual basis by the Company. See Note 7,
Borrowings, for details.

Deferred financing costsThe deferred financing costs of the Company consists of capitalized expenses related to the origination and amending of
the
Company's borrowings. The Company amortizes these costs into expense using the straight-line method over the stated life of the related borrowing. See Note 7, Borrowings, for details.

Income taxesThe Company has elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC under
subchapter M of the Code. As a RIC, the Company is not subject to U.S. federal income tax on the portion of taxable income and gains timely distributed to its stockholders.

To
continue to qualify as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of its investment company
taxable income, as defined by the Code. Since U.S. 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
U.S. federal income tax purposes, distributions paid to stockholders of the Company are reported as ordinary income, return of capital, long term capital gains or a combination
thereof.

The
Company will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless the Company distributes, in a timely manner as required by the Code, an
amount at least equal to the sum of (1) 98.0% of its respective net ordinary income earned for the calendar year

132

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

and
(2) 98.2% of its respective capital gain net income for the one-year period ending October 31 in the calendar year.

Certain
consolidated subsidiaries of the Company are subject to U.S. federal and state income taxes. These taxable entities are not consolidated for income tax purposes and may generate
income tax liabilities or assets from permanent and temporary differences in the recognition of items for financial reporting and income tax purposes.

For
the year ended December 31, 2014, the Company recognized a total provision for income taxes of $929, for the Company's consolidated subsidiaries. The Company did not recognize
a benefit or provision for taxes during the year ended December 31, 2013. As of December 31, 2014 and December 31, 2013, the Company had $493 and $0, respectively, of deferred tax
liabilities primarily relating to deferred taxes attributable to certain differences between the computation of income for U.S. federal income tax purposes as compared to GAAP. For the year ended
December 31, 2014, the Company recorded current income tax expense of approximately $436. The Company did not recognize any income tax expense for the year ended December 31, 2013.

The
Company has adopted the Income Taxes topic of the Accounting Standards Codification Topic 740 ("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 its analysis, the Company has determined that there were no material uncertain income tax
positions through December 31, 2014. The 2011, 2012, 2013 and 2014 tax years remain subject to examination by the U.S. federal, state, and local tax authorities.

DividendsDistributions to common stockholders of the Company are recorded on the record date as set by the board of directors. The Company
intends to
make distributions to its stockholders that will be sufficient to enable the Company to maintain its status as a RIC. The Company intends to distribute approximately all of its adjusted net investment
income (see Note 5,Agreements) on a quarterly basis and substantially all of its taxable income on an annual basis, except that the Company may
retain certain net capital gains for reinvestment.

The
Company 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.

The
Company 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, the Company 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 the Company'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
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, the Company will either
issue new shares

133

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

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
the Company'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 the Company's stockholders have been tabulated.

Earnings per shareThe Company's earnings per share ("EPS") amounts have been computed based on the weighted-average number of shares of common
stock
outstanding for the period. Basic EPS is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted average number of shares of common stock outstanding
during the period of computation. Diluted EPS is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted average number of shares of common stock assuming
all potential shares had been issued, and its related net impact to net assets accounted for, and the additional shares of common stock were dilutive. Diluted EPS reflects the potential dilution,
using the as-if-converted method for convertible debt, which could occur if all potentially dilutive securities were exercised.

Foreign securitiesThe accounting records of the 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 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 Company's
Consolidated Statements of Operations.

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 Company and cannot be predicted.

Use of estimatesThe preparation of the Company's consolidated 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 Company's consolidated 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 three months ended March 31, 2014, the Predecessor Operating Company adjusted an accounting estimate related to the classification of dividend income for a distribution
received from one of the Predecessor Operating Company's warrant investments. Based on updated tax projections received

134

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 2. Summary of Significant Accounting Policies (Continued)

during
the quarter ended March 31, 2014, the Predecessor Operating Company increased dividend income by $214 and reduced the realized gain by $214 to agree to the tax treatment on the
investment. This resulted in a reclass from capital gains incentive fee to incentive fee of $43 for the quarter ended March 31, 2014.

Based
on updated tax projections received during the three months ended June 30, 2014, the Company increased dividend income by $472 and reduced the realized gain by $472 to agree
to the tax treatment of a distribution received in the first quarter of 2014 from one of the Company's warrant investments. This resulted in a reclass from capital gains incentive fee to incentive fee
of $94 for the quarter ended June 30, 2014. During the quarter ended September 30, 2013, the Predecessor 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 Predecessor Operating Company's warrant investments. Based on tax projections received during the quarter ended
September 30, 2013, the Predecessor
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
Predecessor 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, 2014, the Company's investments consisted of the following:



Cost

Fair ValueFirst lien

$
696,994

$
677,901Second lien


621,234


604,158Subordinated


61,344


61,987Equity and other


66,319


80,625​
​
​
​
​
​
​
​Total investments

$
1,445,891

$
1,424,671​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


135

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 3. Investments (Continued)



Cost

Fair ValueSoftware

$
287,538

$
287,234Business Services


273,088


260,325Education


256,522


251,916Federal Services


124,840


124,608Healthcare Services


114,111


114,692Distribution & Logistics


97,344


97,382Energy


92,393


83,890Media


58,281


61,081Consumer Services


48,350


52,348Business Products


25,654


25,181Investment in Fund


23,000


22,461Specialty Chemicals and Materials


19,722


19,825Healthcare Products


12,183


13,201Industrial Services


6,934


5,548Healthcare Information Technology


5,931


4,979​
​
​
​
​
​
​
​Total investments

$
1,445,891

$
1,424,671​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


At
December 31, 2013, NMFC's only investment was its investment in the Predecessor Operating Company. At December 31, 2013, the Predecessor 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​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


136

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except 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​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


As
of December 31, 2014, the 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 quarter then ended and uncertainty about its ability to pay such amounts in the future. During the third quarter of 2013, the Predecessor 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, 2014, the Company's investment
had an aggregate cost basis of $1,611, an aggregate fair value of $402 and total unearned interest income of $329 for the year then ended. As of December 31, 2013, the Predecessor Operating
Company's total 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, 2014 and December 31, 2013, unrealized gains (losses) include a fee that the Company would receive upon maturity of the two super
priority first lien debt investments.

During
the third quarter of 2014, the Company placed a portion of its first lien position in UniTek Global Services, Inc. ("UniTek") on non-accrual status in anticipation of a
voluntary petition for a "Pre-Packaged" Chapter 11 Bankruptcy in the U.S. Bankruptcy Court for the District of Delaware which was filed on November 3, 2014. As of December 31,
2014, the portion of the UniTek first lien position placed on non-accrual status represented an aggregate cost basis of $12,078, an aggregate fair value of $8,846 and total unearned interest income of
$975 for the year then ended.

As
of December 31, 2014, the Company had unfunded commitments on revolving credit facilities and bridge facilities of $8,948 and $0, respectively. The Company had unfunded
commitments in the form of a delayed draw or other future funding commitments of $18,475 as of December 31, 2014. The unfunded commitments on revolving credit facilities and a delayed draw are
disclosed on the Company's Consolidated Schedule of Investments as of December 31, 2014.

137

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 3. Investments (Continued)

At
December 31, 2013, NMFC's only investment was its investment in the Predecessor Operating Company. As of December 31, 2013, the Predecessor Operating Company had
unfunded commitments on revolving credit facilities and bridge facilities of $15,500 and $0, respectively. The Predecessor 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 Predecessor Operating Company's
Consolidated Schedule of Investments as of December 31, 2013.

NMFC Senior Loan Program I, LLC

On June 10, 2014, NMFC Senior Loan Program I, LLC ("SLP I") was formed as a Delaware limited liability company. SLP I is
a portfolio company held by the Company.
SLP I is structured as a private investment fund, in which all of the investors are qualified purchasers, as such term is defined under the 1940 Act. Transfer of interests in SLP I is subject to
restrictions, and as a result, such interests are not readily marketable. SLP I operates under a limited liability company agreement (the "Agreement") and will continue in existence until
June 10, 2019, subject to earlier termination pursuant to certain terms of the Agreement. The term may be extended for up to one year pursuant to certain terms of the Agreement. SLP I has a
three year re-investment period.

SLP
I is capitalized with $93,000 of capital commitments, $275,000 of debt from a revolving credit facility and is managed by the Company. The Company's capital commitment is $23,000,
representing less than 25.0% ownership, with third party investors representing the remaining capital commitment. As of December 31, 2014, SLP I had total investments with an aggregate fair
value of approximately $369,194, debt outstanding of $266,916 and capital that had been called and funded of $93,000. The Company's investment in SLP I is disclosed on the December 31, 2014
Consolidated Schedule of Investments.

The
Company, as an investment adviser registered under the Advisers Act, acts as the collateral manager to SLP I and is entitled to receive a management fee for its investment management
services provided to SLP I. As a result, SLP I is classified as an affiliate of the Company. For the year ended December 31, 2014, the Company earned approximately $468 in management fees
related to SLP I which is included in other income. As of December 31, 2014, approximately $468 of management fees related to SLP I was included in receivable from affiliates. For the year
ended December 31, 2014, the Company earned approximately $1,066 of dividend income related to SLP I, which is included in dividend income. As of December 31, 2014, approximately $828 of
dividend income related to SLP I was included in interest and dividend receivable.

SLP
I invests in senior secured loans issued by companies within the Company's core industry verticals. These investments are typically broadly syndicated first lien loans.

138

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 3. Investments (Continued)

Investment risk factorsFirst and second lien debt that the Company invests in is entirely,
or almost entirely, rated below investment grade or may be unrated. Debt investments rated below investment grade are often referred to as "leveraged loans," "high yield" or "junk" debt investments,
and may be considered "high risk" compared to debt investments that are rated investment grade. These debt investments 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 risk of default could reduce the net asset value and income
distributions of the Company. In addition, some of the Company's debt investments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid
principal and interest due upon maturity. 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 debt investments. 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.

The
Company may directly invest in the equity of private companies or in some cases, equity investments could be made in connection with a debt investment. Equity investments may or may
not appreciate in value. As a result the Company may or may not be able to recognize realized gains upon disposition.

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 Topic 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:



139

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except 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.

The
following table summarizes the levels in the fair value hierarchy that the Company's portfolio investments fall into as of December 31, 2014:

Total

Level I

Level II

Level IIIFirst lien

$
677,901

$


$
508,721

$
169,180Second lien


604,158





469,752


134,406Subordinated


61,987





26,517


35,470Equity and other


80,625








80,625​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investments

$
1,424,671

$


$
1,004,990

$
419,681​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


140

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 4. Fair Value (Continued)

At
December 31, 2013, NMFC's only investment was its investment in the Predecessor Operating Company. The following table summarizes the levels in the fair value hierarchy that
the Predecessor 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 changes in fair value of Level III portfolio investments for the year ended December 31, 2014, 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 Company at December 31, 2014:

Total

First Lien

Second Lien

Subordinated

Equity and
otherFair value, December 31, 2013

$
153,720

$
28,411

$
55,538

$
5,171

$
64,600Total gains or losses included in earnings:Net realized gains on investments


7,329


1,260


581


196


5,292Net change in unrealized (depreciation) appreciation


(20,922
)

(12,451
)

(16,043
)

(33
)

7,605Purchases, including capitalized PIK and revolver fundings


265,112


114,940


85,719


35,695


28,758Proceeds from sales and paydowns of investments


(74,968
)

(1,233
)

(42,130
)

(5,559
)

(26,046
)Transfers into Level III(1)(2)


109,610


38,253


70,941





416Transfers out of Level III(1)


(20,200
)




(20,200
)




​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fair value, December 31, 2014

$
419,681

$
169,180

$
134,406

$
35,470

$
80,625​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Unrealized (depreciation) appreciation for the period relating to those Level III assets that were still held by the Company at the end of the
period:

$
(17,254
)
$
(11,978
)
$
(15,404
)
$
163

$
9,965​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)As
of December 31, 2014, the portfolio investments were transferred into Level III from Level II or Level I and out of
Level III into Level II at fair value as of the beginning of the quarter in which the reclassifications occurred.(2)During
the year ended December 31, 2014, the valuation methodology for two portfolio companies changed due to the portfolio companies deterioration in
operating results and as such, these portfolio companies were transferred into Level III from Level II during the year then ended.


141

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 4. Fair Value (Continued)

At
December 31, 2013, NMFC's only investment was its investment in the Predecessor Operating Company. 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 Predecessor 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 Predecessor 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 Predecessor 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.


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, 2014 and December 31, 2013.
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

142

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 4. Fair Value (Continued)

Level III.
The 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.

The
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. The
Company typically determines the fair value of its performing debt investments utilizing an income approach. Additional consideration is given using a market based approach, as well as reviewing the
overall underlying portfolio company's performance and associated financial risks. The following outlines additional details on the approaches considered:

Company Performance, Financial Review, and Analysis:Prior to investment, as part of its due diligence process, the Company
evaluates the overall
performance and financial stability of the portfolio company. Post investment, the 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 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 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 Company
will consider the pricing indicated by the external event to corroborate the private valuation.

Market Based Approach:The Company may estimate the total enterprise value of each portfolio company by utilizing market value
cash flow (EBITDA)
multiples of publicly traded comparable
companies. The 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 Company may apply 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. Significant increases or
decreases in the multiple will result in an increase or decrease in enterprise value, resulting in an increase or decrease in the fair value estimate of the investment. In applying the market based
approach as of December 31, 2014, the Company used the relevant EBITDA multiple ranges set forth in the table below to determine the enterprise value of investments in twelve of its portfolio
companies. The Company believes this was a reasonable range in light of current comparable company trading levels and the specific companies involved.

Income Based Approach:The Company also may use 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

143

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 4. Fair Value (Continued)

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. Significant
increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement. In applying the income based approach as of December 31, 2014, the Company used
the discount ranges set forth in the table below to value investments in seventeen of its portfolio companies.

RangeType

Fair Value

Approach

Unobservable Input

Low

High

Weighted
AverageFirst lien

$
169,180

Market approach

EBITDA multiple


6.5x


12.0x


8.6xIncome approach

Discount rate


8.2
%

16.5
%

12.0
%Second lien


134,406

Market approach

EBITDA multiple


5.5x


15.5x


10.6xIncome approach

Discount rate


11.0
%

16.0
%

12.7
%Other

N/A(1)


N/A
(1)

N/A
(1)

N/A
(1)Subordinated


35,470

Market approach

EBITDA multiple


8.0x


12.0x


10.0xIncome approach

Discount rate


10.7
%

17.7
%

14.7
%Equity and other


80,625

Market approach

EBITDA multiple


7.0x


12.0x


8.1xIncome approach

Discount rate


8.0
%

15.0
%

12.9
%Other

N/A(1)


N/A
(1)

N/A
(1)

N/A
(1)Black Scholes analysis

Expected life in years


11.3


11.3


11.3Volatility


31.6
%

31.6
%

31.6
%Discount rate


2.3
%

2.3
%

2.3
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​$
419,681​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Fair
value was determined based on transaction pricing or recent acquisition or sale as the best measure of fair value with no material changes in
operations of the related portfolio company since the transaction date.


Based
on a comparison to similar BDC credit facilities, the terms and conditions of the Holdings Credit Facility and the NMFC Credit Facility (as defined in Note 7, Borrowings) are representative of
market. The carrying values of the Holdings Credit Facility and NMFC Credit Facility approximate fair value as of
December 31, 2014, as the facilities are continually monitored and examined by both the borrower and the lender. The carrying value of the SBA-guaranteed debentures approximate fair value as of
December 31, 2014 based on a comparision of market interest rates for the Company's borrowings and similar entities. The fair value of the Holdings Credit Facility, NMFC Credit Facility and
SBA-guaranteed debentures are considered Level III. The fair value of the Convertible Notes (as defined in Note 7,Borrowings) as of
December 31, 2014 was $117,803, which was based on quoted prices and considered Level II. See Note 7,Borrowings, for details. The
carrying value of the collateralized agreement approximates fair value as of December 31, 2014 and is considered Level III. The fair value of other financial assets and liabilities approximates their
carrying value based on the short-term nature of these items.

144

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 4. Fair Value (Continued)

Fair value risk factorsThe Company seeks investment opportunities that offer the
possibility of attaining substantial capital appreciation. Certain events particular to each industry in which the 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 Company's investments and/or on the fair value of the Company's investments. The Company's
investments are subject to the risk of non-payment of scheduled interest or principal, resulting in a reduction in income to the Company 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 Company and cannot be predicted. Furthermore, the
ability to liquidate investments and realize value is subject to uncertainties.

Note 5. Agreements

NMF Holdings entered into an investment advisory and management agreement, as amended and restated with the Investment Adviser on May 19, 2011. Until May 8, 2014, under the
investment advisory and management agreement, the Investment Adviser managed the day-to-day operations of, and provided investment advisory services to, NMF Holdings. For providing these services, the
Investment Adviser received a fee from NMF Holdings, consisting of two componentsa base management fee and an incentive fee.

On
May 6, 2014, the stockholders of NMFC approved a new investment advisory and management agreement (the "Investment Management Agreement") with the Investment Adviser which
became effective on May 8, 2014. Under the Investment Management Agreement, the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, the
Company. For providing these services, the Investment Adviser receives a fee from the 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 Company's gross assets, which equals the Company's total assets on the Consolidated Statements of Assets and
Liabilities, less (i) the borrowings under the SLF Credit Facility (as defined in Note 7,Borrowings) 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 Company's gross assets, which equals the Company's total assets, as determined
in
accordance with GAAP, 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 Company has not invested, and currently is not invested, in derivatives. To the extent the Company
invests in derivatives in the future, the Company will use the actual value of the derivatives, as reported on the Consolidated Statements of Assets and Liabilities, for purposes of calculating its
base management fee.

Since
IPO, the base management fee calculation has deducted the borrowings under the SLF Credit Facility. The SLF Credit Facility has historically consisted of primarily lower yielding
assets at higher advance rates. As part of an amendment to the Company's existing credit facilities with Wells Fargo Bank, National Association, the SLF Credit Facility merged with the Predecessor
Holdings Credit Facility and into the Holdings Credit Facility on December 18, 2014 (as defined in Note 7,Borrowings).

145

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

Post
credit facility merger and to be consistent with the methodology since IPO, the Investment Advisor will waive management fees on the leverage associated with those assets that share the same
underlying yield characteristics with investments leveraged under the legacy SLF Credit Facility. The Investment Advisor cannot recoup management fees that the Investment Advisor has previously
waived. For the year ended December 31, 2014, management fees waived were approximately $686.

The
incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20.0% of the 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
Company receives from portfolio companies) accrued during the calendar quarter, minus the 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
stock (of which there are none as of December 31, 2014), 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 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 Predecessor Operating Company's existing investments to fair market value at the IPO date. Since the total value of the
Predecessor Operating Company's investments at the time of the IPO was greater than the investments' cost basis, a
larger amount of 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, repaid or mature in the future. The 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
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 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 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

146

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

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

In
accordance with GAAP, the 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.

147

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

The
following table summarizes the management fees and incentive fees incurred by the Company for the years ended December 31, 2014, December 31, 2013 and
December 31, 2012.

Years ended December 31,2014

2013

2012Management fee

$
13,593

$


$
Management fee allocated from NMF Holdings(2)


5,983


11,812


4,849Less: management fee waiver


(686
)




​
​
​
​
​
​
​
​
​
​
​Total Management fee


18,890


11,812


4,849Incentive fee, excluding accrued capital gains incentive fees

$
12,070

$


$
Incentive fee, excluding accrued capital gains incentive fees allocated from NMF Holdings(2)


6,248


13,050


5,056​
​
​
​
​
​
​
​
​
​
​Total Incentive fee


18,318


13,050


5,056Accrued capital gains incentive fees(1)

$
(8,573
)
$


$
Accrued capital gains incentive fees allocated from NMF Holdings(1)(2)


2,024


2,351


1,977​
​
​
​
​
​
​
​
​
​
​Total Accrued capital gains incentive fees


(6,549
)

2,351


1,977


(1)As
of December 31, 2014, no actual capital gains incentive fee was owed under the Investment Management Agreement by the Company, as cumulative net
Adjusted Realized Capital Gains did not exceed cumulative Adjusted Unrealized Capital Depreciation. As of December 31, 2013, approximately $1,113 of capital gains incentive fees was owed under
the Investment Management Agreement by the Predecessor Operating Company, as cumulative net Adjusted Realized Capital Gains exceeded cumulative Adjusted Unrealized Capital Depreciation and was paid
during the year ended December 31, 2014. As of December 31, 2012, no actual capital gains incentive fee was owed under the Investment Management Agreement by the Predecessor Operating
Company, as cumulative net Adjusted Realized Capital Gains did not exceed cumulative Adjusted Unrealized Capital Depreciation.(2)For
the years ended December 31, 2013 and December 31, 2012, the Company is reflecting its proportionate share of the Predecessor Operating
Company's management, incentive and capital gains incentive fees. For the years ended December 31, 2013 and December 31, 2012, the management fees at NMF Holdings were $14,905 and
$11,109, respectively. For the years ended December 31, 2013 and December 31, 2012, the incentive fee, excluding accrued capital gains incentive fees, at NMF Holdings was $16,502 and
$11,537, respectively. For the years ended December 31, 2013, and December 31, 2012 the accrued capital gains incentive fees at NMF Holdings were $3,229 and $4,407, respectively.


The
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.

148

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

The
following Consolidated Statements of Operations for the year ended December 31, 2014 is adjusted to reflect this step-up to fair market value.

Year Ended
December 31, 2014

Stepped-up
Cost Basis
Adjustments

Adjusted Year
Ended December 31, 2014Investment incomeInterest income(1)

$
85,123

$
(193
)
$
84,930Dividend income


2,309





2,309Other income


4,491





4,491Investment income allocated from NMF HoldingsInterest income(1)


40,515





40,515Dividend income


2,368





2,368Other income


795





795​
​
​
​
​
​
​
​
​
​
​Total investment income(2)


135,601


(193
)

135,408​
​
​
​
​
​
​
​
​
​
​Total expenses pre-incentive fee(3)


43,766





43,766​
​
​
​
​
​
​
​
​
​
​Pre-Incentive Fee Net Investment Income


91,835


(193
)

91,642​
​
​
​
​
​
​
​
​
​
​Incentive fee(4)


11,769





11,769​
​
​
​
​
​
​
​
​
​
​Post-Incentive Fee Net Investment Income


80,066


(193
)

79,873​
​
​
​
​
​
​
​
​
​
​Net realized gains (losses) on investments


357


(456
)

(99
)Net realized gains on investments allocated from NMF Holdings


8,568





8,568Net change in unrealized (depreciation) appreciation of investments(5)


(43,863
)

649


(43,214
)Net change in unrealized appreciation (depreciation) of investments allocated from NMF Holdings


940





940Provision for taxes


(493
)




(493
)​
​
​
​
​
​
​
​
​
​
​Net increase in net assets resulting from operations

$
45,575




$
45,575​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


(1)Includes
$4,644 in payment-in-kind interest from investments.(2)Includes
income from non-controlled/non-affiliated investments and non-controlled/affiliated investments.(3)Includes
expense waivers and reimbursements of $1,145 and management fee waivers of $686.(4)For
the year ended December 31, 2014, the Company and Predecessor Operating Company incurred total incentive fees of $11,769, of which $(6,549) is
related to a decrease of the capital gains incentive fee accrual on a hypothetical liquidation basis.(5)Includes
net change in unrealized (deprecation) appreciation of investments from non-controlled/non-affiliated investments and non-controlled/affiliated
investments.


149

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

At
December 31, 2013, NMFC's only investment was its investment in the Predecessor Operating Company. The following Consolidated Statement of Operations of the Predecessor
Operating Company 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 (depreciation) 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 Predecessor 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.


150

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

At December 31, 2012, NMFC's only investment was its investment in the Predecessor Operating Company. The following Consolidated Statement of Operations of the Predecessor
Operating Company 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(1)

$
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(2)


24,625





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


61,161


(3,476
)

57,685​
​
​
​
​
​
​
​
​
​
​Incentive fee(3)


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 (depreciation) of investments


9,928


10,434


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

$
73,996




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


(1)Includes
$2,240 in payment-in-kind interest from investments.(2)Includes
expense waivers and reimbursements of $2,460.(3)For
the year ended December 31, 2012, the Predecessor Operating Company incurred total incentive fees of $15,944, of which $4,407 related to capital
gains incentive fees on a hypothetical liquidation basis.


The
Company has entered into an Administration Agreement with the Administrator under which the Administrator provides administrative services. The Administrator performs, or oversees
the performance of, the Company's consolidated financial records, prepares reports filed with the SEC, generally monitors the payment of the Company's expenses and watches the performance of
administrative and professional services rendered by others. The Company will reimburse the Administrator for the Company's allocable portion of overhead and other expenses incurred by the
Administrator in performing its obligations to the Company under the Administration Agreement. Pursuant to the Administration Agreement and further restricted by the Company, expenses payable to the
Administrator by the Company as well as other direct and indirect expenses (excluding interest, other financing expenses, trading expenses and management and incentive fees) had 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 expired on
March 31, 2014. Thereafter,

151

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

the
Administrator may, in its own discretion, submit to the Company for reimbursement some or all of the expenses that the Administrator has incurred on behalf of the Company during any quarterly
period. As a result, the amount of expenses for which the 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 Company for reimbursement in the future. However, it is expected that the Administrator will continue to
support part of the expense burden of the Company in the near future and may decide to not calculate and charge through certain overhead related amounts as well as continue to cover some of the
indirect costs. The Administrator cannot recoup any expenses that the Administrator has previously waived. For the year ended December 31, 2014, approximately $1,395 of indirect administrative
expenses were included in administrative expenses of which $770 of indirect administrative expenses were waived by the Administrator. As of December 31, 2014, $326 of indirect administrative
expenses were included in payable to affiliates as the expenses were payable to the Administrator.

The
Predecessor Operating Company had revised its presentation of expenses and expense waivers and reimbursements for the year ended December 31, 2012. 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
Company incurred the following expenses, which were waived by the Administrator or were in excess of the expense cap, for the years ended December 31, 2014,
December 31, 2013 and December 31, 2012:

Years ended December 31,2014

2013

2012Administrative expenses

$
380

$


$
Administrative expenses allocated from NMF Holdings


390


1,180


554Professional fees








Professional fees allocated from NMF Holdings


375


1,360


583Other general and administrative expenses








Other general and administrative expenses allocated from NMF Holdings








​
​
​
​
​
​
​
​
​
​
​Total expense reimbursement

$
1,145

$
2,540

$
1,137​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​


As
of December 31, 2014, no expense waivers and reimbursements were receivable from an affiliate. As of December 31, 2013 and December 31, 2012, $399 and $305,
respectively, of the expense waivers and reimbursements were allocated from NMF Holdings and were receivable by NMF Holdings from an affiliate.

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

152

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 5. Agreements (Continued)

names.
Under the Trademark License Agreement, as amended, subject to certain conditions, the Company, 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 Company. Other than with respect to this limited license, the Company, 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 Steven B. Klinsky (the Chairman of the Company's board of directors), an entity related to Steven B. Klinsky and the Investment
Adviser. Subject to several exceptions, the Investment Adviser has 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 the Investment Adviser and any of their transferees. The rights under the Registration Rights Agreement can
be conditionally exercised by the Investment Adviser, meaning that prior to the effectiveness of the registration statement related to the shares, the Investment Adviser can withdraw its request to
have the shares registered. Investment Adviser may assign its rights to any person that acquires registerable securities subject to the Registration Rights Agreement and who agrees to be 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 Steven B. Klinsky were registered on a shelf registration statement on Form N-2.

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, 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, 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. The Investment Adviser and Steven B. Klinsky (and a related entity) have priority over NMFC in any registration that is an
underwritten offering.

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 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. 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.

153

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 6. Related Parties

The Company has entered into a number of business relationships with affiliated or related parties.

The
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.

The
Company has entered into an Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Administrator arranges office space for the
Company and provides office equipment and administrative services necessary to conduct their respective day-to-day
operations pursuant to the Administration Agreement. The Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to
the Company under the Administration Agreement which includes the fees and expenses associated with performing administrative, finance and compliance functions, and the compensation of the Company's
chief financial officer and chief compliance officer and their respective staffs. Pursuant to the Administration Agreement and further restricted by the Company, expenses payable to the Administrator
by the Company as well as other direct and indirect expenses (excluding interest, other financing expenses, trading expenses and management and incentive fees) had 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 expired on March 31, 2014.
Thereafter, the Administrator may, in its own discretion, submit to the Company for reimbursement some or all of the expenses that the Administrator has incurred on behalf of the Company during any
quarterly period. As a result, the amount of expenses for which the 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 Company for reimbursement in the future. However, it is expected that the Administrator will
continue to support part of the expense burden of the Company in the near future and may decide to not calculate and charge through certain overhead related amounts as well as continue to cover some
of the indirect costs. The Administrator cannot recoup any expenses that the Administrator has previously waived. For the year ended December 31, 2014, approximately $1,395 of indirect
administrative expenses were included in administrative expenses of which $770 of indirect administrative expenses were waived by the Administrator. As of December 31, 2014, $326 of indirect
administrative expenses were included in payable to affiliates as the expenses were payable to the Administrator.

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

The
Company has 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 Company's
investment mandates.

154

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 6. Related Parties (Continued)

The
Investment Adviser and its affiliates may determine that an investment is appropriate for the Company or 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 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 SEC and its staff and consistent with the Investment Adviser's allocation procedures.

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. Borrowings

Holdings Credit FacilityOn December 18, 2014 the Company entered into the Second Amended and Restated Loan and Security Agreement (the
"Holdings Credit Facility"), among the Company, as the Collateral Manager, NMF Holdings as the Borrower, Wells Fargo Securities, LLC as the Administrative Agent and Wells Fargo Bank, National
Association, as the Lender and Collateral Custodian, which is structured as a revolving credit facility and matures on December 18, 2019.

Immediately
prior to amending the Holdings Credit Facility, NMF SPV merged with and into NMF Holdings. The Holdings Credit Facility effectively amended and restated the Predecessor
Holdings Credit Facility (as defined below), merged with the SLF Credit Facility (as defined below), and combined the amount of borrowings previously available.

The
maximum amount of revolving borrowings available under the Holdings Credit Facility is $495,000, which is the aggregate of the $280,000 previously available under the Predecessor
Holdings Credit Facility (as defined below) and the $215,000 previously available under the SLF Credit Facility (as defined below). Under the Holdings Credit Facility, NMF Holdings is still permitted
to borrow up to 25.0%, 45.0% or 70.0% of the purchase price of pledged assets, subject to approval by the Wells Fargo
Securities, LLC. The Holdings Credit Facility is non-recourse to the Company and is collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees
associated with the origination or upsizing of the Holdings Credit Facility are capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other
financing expenses over the life of the Holdings Credit Facility. The Holdings Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the
Holdings Credit Facility requires the Company to maintain a minimum asset coverage ratio. The covenants are generally not tied to mark to market fluctuations in the prices of NMF Holdings investments,
but rather to the performance of the underlying portfolio companies.

The
Holdings Credit Facility bears interest at a rate of the LIBOR plus 2.00% per annum for Broadly Syndicated Loans (as defined in the Loan and Security Agreement) and LIBOR plus 2.75%
per annum for all other investments. The Holdings Credit Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and
Security Agreement).

155

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

Prior
to December 18, 2014, the Loan and Security Agreement, as amended and restated, dated May 19, 2011 (the "Predecessor Holdings Credit Facility") among NMF Holdings as
the Borrower and Collateral Administrator, Wells Fargo Securities, LLC as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral Custodian, was structured as a
revolving credit facility and would mature on October 27, 2016. NMF Holdings became a party to the Predecessor Holdings Credit Facility upon the IPO of NMFC. The Predecessor Holdings Credit
Facility amended and restated the credit facility of the Predecessor Entities (the "Predecessor Credit Facility").

The
maximum amount of revolving borrowings available under the Predecessor Holdings Credit Facility was $280,000. Until December 18, 2014, NMF Holdings 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 Predecessor Holdings Credit Facility was amended and restated on May 6, 2014 and
as a result, it was non-recourse to the Company and was collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with the origination or
upsizing of the Predecessor Holdings Credit Facility was capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the
life of the Predecessor Holdings Credit Facility. The Predecessor Holdings Credit Facility contained certain customary affirmative and negative covenants and events of default, including the
occurrence of a change in control. In addition, the Predecessor Holdings Credit Facility required the Company to maintain a minimum asset coverage ratio. However, the covenants were generally not tied
to mark to market fluctuations in the prices of NMF Holdings' investments, but rather to the performance of the underlying portfolio companies.

The
Predecessor Holdings Credit Facility bore interest at a rate of the London Interbank Offered Rate ("LIBOR") plus 2.75% per annum and charged a non-usage fee, based on the unused
facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

The
following table summarizes the interest expense and non-usage fees incurred, together, on the Holdings Credit Facility and the Predecessor Holdings Credit Facility for the years
ended December 31, 2014, December 31, 2013 and December 31, 2012.

Years ended December 31,2014

2013

2012Interest expense

$
7,147

$
5,487

$
4,172Non-usage fee

$
243

$
367

$
281Amortization of financing costs

$
893

$
682

$
413Weighted average interest rate


2.9
%

2.9
%

3.1
%Effective interest rate


3.4
%

3.6
%

3.6
%Average debt outstanding

$
244,598

$
184,124

$
133,600


As
of December 31, 2014 the outstanding balance on the Holdings Credit Facility was $468,108 and as of December 31, 2013 and December 31, 2012, the outstanding
balance on the Predecessor Holdings Credit Facility was $221,849 and $206,938, respectively, and NMF Holdings was in compliance

156

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

with
the applicable covenants in the Holdings Credit Facility and Predecessor 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, NMF Holdings as the Collateral Administrator, Wells Fargo Securities, LLC as the Administrative Agent, and Wells Fargo Bank, National Association, as the Collateral
Custodian, was structured as a revolving credit facility and would mature on October 27, 2016. The maximum amount of revolving borrowings available under the SLF Credit Facility was $215,000.
The SLF Credit Facility was non-recourse to the Company and secured by all assets of NMF SLF on an investment by investment basis. All fees associated with the origination or upsizing of the SLF
Credit Facility were capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the SLF Credit Facility. The
SLF Credit Facility containd certain customary affirmative and negative covenants and events of default, including the occurrence of a change in control. The covenants were generally not tied to mark
to market fluctuations in the prices of NMF SLF's investments, but rather to the performance of the underlying portfolio companies. NMF SLF was not restricted from the purchase or sale of loans with
an affiliate. Therefore, specified loans could be moved as collateral between the Holdings Credit Facility and the SLF Credit Facility. The SLF Credit Facility merged with the Holdings Credit Facility
on December 18, 2014.

Until
December 18, 2014, the SLF Credit Facility permitted 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 was allowed to be derived from second
lien loans, subject to approval by Wells Fargo Bank, National Association.

The
SLF Credit Facility bore interest at a rate of LIBOR plus 2.00% per annum for first lien loans and LIBOR plus 2.75% per annum for second lien loans, respectively. A non-usage fee was
paid, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

The
following table summarizes the interest expense and non-usage fees incurred on the SLF Credit Facility for the period January 1, 2014 to December 17, 2014 (date of SLF
Credit Facility merger with and into the Holdings Credit Facility) and for the years ended December 31, 2013 and December 31, 2012.

January 1,
2014 to
December 17,
2014 (date of
merger)

Years ended
December 31,2013

2012Interest expense

$
4,549

$
4,891

$
4,274Non-usage fee

$
28

$
3

$
22Amortization of financing costs

$
846

$
864

$
747Weighted average interest rate


2.2
%

2.3
%

2.3
%Effective interest rate


2.6
%

2.7
%

2.8
%Average debt outstanding

$
209,333

$
214,317

$
181,395


157

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

As
of December 31, 2014, the SLF Credit Facility had merged with the Holdings Credit Facility. As of December 31, 2013 and December 31, 2012, the outstanding balance
on the SLF Credit Facility was $214,668 and $214,262, respectively, and NMF SLF was in compliance with the applicable covenants in the SLF Credit Facility on such dates.

NMFC Credit FacilityThe Senior Secured Revolving Credit Agreement, as amended, dated June 4, 2014 (together with the related guarantee and
security agreement, the "NMFC Credit Facility"), among the Company as the Borrower and Goldman Sachs Bank USA as the Administrative Agent and Collateral Agent, and Goldman Sachs Bank USA and Morgan
Stanley, N.A. as Lenders, is structured as a senior secured revolving credit facility and matures on June 4, 2019. The NMFC Credit Facility is guaranteed by certain domestic subsidiaries of the
Company and proceeds from the NMFC Credit Facility may be used for general corporate purposes, including the funding of portfolio investments.

The
maximum amount of revolving borrowings available under the NMFC Credit Facility is $80,000, as amended on December 29, 2014. The Company is permitted to borrow at various
advance rates depending on the type of portfolio investment as outlined in the Senior Secured Revolving Credit Agreement. All fees associated with the origination of the NMFC Credit Facility are
capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the NMFC Credit Facility. The NMFC Credit Facility
contains certain customary affirmative and negative covenants and events of default, including certain financial covenants related to asset coverage and liquidity and other maintenance covenants.

The
NMFC Credit Facility will generally bear interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused
facility amount multiplied by 0.375% (as defined in the Senior Secured Revolving Credit Agreement).

The
following table summarizes the interest expense and non-usage fees incurred on the NMFC Credit Facility for the period June 4, 2014 (commencement of the NMFC Credit Facility)
to December 31, 2014 and for the years ended December 31, 2013 and December 31, 2012.

Years ended
December 31,June 4, 2014
(commencement of
facility) to
December 31, 20142013(1)

2012(1)Interest expense

$
175

$


$
Non-usage fee

$
86

$


$
Amortization of financing costs

$
121

$


$
Weighted average interest rate


2.7
%


%


%Effective interest rate


3.4
%


%


%Average debt outstanding

$
11,227

$


$



(1)Not
applicable, as the NMFC Credit Facility commenced on June 4, 2014.


As
of December 31, 2014, the outstanding balance on the NMFC Credit Facility was $50,000, and NMFC was in compliance with the applicable covenants in the NMFC Credit Facility on
such dates.

158

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

Convertible NotesOn June 3, 2014, the Company closed a private offering of $115,000 aggregate principal amount of senior unsecured convertible
notes (the "Convertible Notes"), pursuant to an indenture, dated June 3, 2014 (the "Indenture"). The Convertible Notes were issued in a private placement only to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes bear interest at an annual rate of 5.0%, payable semi-annually in arrears on June 15 and December 15
of each year, commencing on December 15, 2014. The Convertible Notes will mature on June 15, 2019 unless earlier converted or repurchased at the holder's option. The Convertible Notes
will be convertible by the holders into shares of common stock, initially at a conversion rate of 62.7746 shares of the Company's common stock per $1 principal amount of Convertible Notes (7,219,083
common shares) corresponding to an initial conversion price per share of approximately $15.93, which represents a premium of 12.5% to the $14.16 per share closing price of the Company's common stock
on May 28, 2014. The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs, increases in dividends in excess of $0.34 per
share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in dividends, are subject to a conversion price floor of $14.16 per share. In no
event will the total number of shares of common stock issuable upon conversion exceed 70.6214 per $1 principal amount of the Convertible Notes. The Company has determined that the embedded conversion
option in the Convertible Notes is not required to be separately accounted for as a derivative under GAAP.

The
Convertible Notes are senior unsecured obligations and rank senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated in right of
payment to the Convertible Notes; equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of
the Company's secured indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally
junior to all existing and
future indebtedness (including trade payables) incurred by the Company's subsidiaries and financing vehicles. As more reflected in Note 12,Earnings Per
Share, the issuance is to be considered as part of the if-converted method for calculation of diluted earnings per share.

The
Company may not redeem the Convertible Notes prior to maturity. No sinking fund is provided for the Convertible Notes. In addition, if certain corporate events occur in respect of
the Company, holders of the Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the
Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date.

The
Indenture contains certain covenants, including covenants requiring the Company to provide financial information to the holders of the Convertible Note and the Trustee if the Company
ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the Indenture. As of December 31, 2014,
the Company was in compliance with the terms of the Indenture.

Interest
expense and amortization of financing costs incurred on the Convertible Notes for the year ended December 31, 2014 was $3,322 and $432, respectively. The effective
interest rate for the year ended December 31, 2014 was 5.6%.

159

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

SBA-guaranteed debenturesOn August 1, 2014, SBIC LP received an SBIC license from the SBA.

The
SBIC license allows SBIC LP to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures.
SBA-guaranteed debentures are non-recourse to the Company, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures
is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread
over U.S. Treasury Notes with ten year maturities. The SBA, as a creditor, will have a superior claim to the assets of SBIC LP over the Company's stockholders in the event SBIC LP is
liquidated or the SBA exercises remedies upon an event of default.

The
maximum amount of borrowings available under current SBA regulations is $150,000 as long as the licensee has at least $75,000 in regulatory capital, receives a capital commitment
from the SBA and has been through an examination by the SBA subsequent to licensing.

As
of December 31, 2014, SBIC LP had regulatory capital of $42,168 and SBA-guaranteed debentures outstanding of $37,500. The SBA-guaranteed debentures incur upfront fees of
3.43%, which consists of a 1.00% commitment fee and a 2.43% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. As of December 31, 2014, SBIC LP's
SBA-guaranteed debentures are set to pool in March 2015 and until pooling bear interest at an interim floating rate of LIBOR plus 0.30%. Interest expense and amortization of financing costs incurred
on the SBA-guaranteed debentures for the year ended December 31, 2014 was $34 and $12, respectively.

The
SBIC program is designed to stimulate the flow of private investor capital into eligible small businesses, as defined by the SBA. Under SBA regulations, SBIC LP is subject to
regulatory requirements, including making investments in SBA-eligible businesses, investing at least 25.0% of its investment capital in eligible smaller businesses, as defined under the 1958 Act,
placing certain limitations on the financing terms of investments, regulating the types of financing, prohibiting investments in small businesses with certain characteristics or in certain industries
and requiring capitalization thresholds that limit distributions to the Company. SBIC LP is subject to an annual periodic examination by an SBA examiner to determine SBIC LP's compliance
with the relevant SBA regulations and an annual financial audit of its financial statements that are prepared on a basis of accounting other than GAAP (such as ASC 820) by an independent
auditor. As of December 31, 2014, SBIC LP was in compliance with SBA regulatory requirements.

Leverage risk factorsThe Company utilizes and may utilize leverage to the maximum extent permitted by the law for investment and other general
business purposes. The Company's lenders will have fixed dollar claims on certain assets that are superior to the claims of the Company's common stockholders, and the 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 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 Company's net asset value. Similarly, leverage may cause a sharper decline in the
Company's income

160

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 7. Borrowings (Continued)

than
if the Company had not borrowed. Such a decline could negatively affect the Company's ability to make dividend payments to its stockholders. Leverage is generally considered a speculative
investment technique. The 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

The Company has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a RIC under Subchapter M of the Code. In order to continue
to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90.0% of investment company taxable income, as defined by the Code, for each year.
The Company, among other things, intends to make and continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal, state, and local
income taxes (excluding excise taxes which may be imposed under the Code).

Additionally
as a BDC, the Company 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 Company may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company
may also enter into future funding commitments such as revolving credit facilities, bridge financing commitments or delayed draw commitments. As of December 31, 2014, the Company had unfunded
commitments on revolving credit facilities of $8,948, no outstanding bridge financing commitments and other future funding commitments of $18,475. The unfunded commitments on revolving credit
facilities and a delayed draw are disclosed on the Company's Consolidated Schedule of Investments. As of December 31, 2013, the Company's only investment was its investment in the Predecessor
Operating Company. As of December 31, 2013, the Predecessor Operating Company had unfunded commitments on revolving credit facilities of $15,500 and no outstanding bridge financing commitments
or other future funding commitments, all of which were disclosed on NMF Holdings' Consolidated Schedule of Investments.

The
Company also has revolving borrowings available under the Holdings Credit Facility and the NMFC Credit Facility as of December 31, 2014. See Note 7, Borrowings, for details.

The
Company may from time to time enter into financing commitment letters. As of December 31, 2014, the Company did not enter into any commitment letters to purchase debt
investments, which could require funding in the future. As of December 31, 2013, the Company's only investment was its investment in the Predecessor Operating Company. As of December 31,
2013, the Predecessor Operating Company did not enter into any commitment letters to purchase debt investments, which could require funding in the future.

161

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

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, 2014, December 31, 2013 and December 31, 2012, the Company's reclassifications of amounts for book purposes arising from permanent book/tax
differences related to return of capital distributions were as follows:

Years ended December 31,2014

2013

2012Undistributed net investment income

$
(6,171
)
$


$
Distributions in excess of net realized gains


6,397





Additional paid-in-capital


(226
)







For
U.S. federal income tax purposes, distributions paid to stockholders of the Company are reported as ordinary income, return of capital, long term capital gains or a combination
thereof. The tax character of distributions paid by the Company for the years ended December 31, 2014, December 31, 2013 and December 31, 2012 were estimated to be as follows:

Years ended December 31,2014

2013

2012Ordinary income (non-qualified)

$
73,968

$
44,778

$
26,218Ordinary income (qualified)


664


2,742


Capital gains


2,754


4,324


501Return of capital


226





​
​
​
​
​
​
​
​
​
​
​Total

$
77,612

$
51,844

$
26,719


As
of December 31, 2014, December 31, 2013 and December 31, 2012, the costs of investments for the Company for tax purposes were $1,474,075, $642,704 and $343,248,
respectively.

At
December 31, 2014, December 31, 2013 and December 31, 2012, the components of distributable earnings on a tax basis differ from the amounts reflected per the
Company's Consolidated Statements of Assets and Liabilities by temporary book/tax differences primarily arising from differences between the tax and book basis of the Company's investment in
securities held directly as well as through the Predecessor Operating Company and undistributed income.

162

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 10. Distributions (Continued)

As
of December 31, 2014, December 31, 2013 and December 31, 2012, the Company's components of accumulated earnings / (deficit) on a tax basis were as follows:

Years ended December 31,2014

2013

2012Accumulated capital gains / (losses)

$


$


$
Other temporary differences


4,775


10,070


7,942Undistributed ordinary income





3,856


528Unrealized (appreciation) / depreciation


(30,383
)(1)

2,346


(2,274
)​
​
​
​
​
​
​
​
​
​
​Components of distributable earnings

$
(25,608
)
$
16,272

$
6,196


(1)Prior
to the Restructuring, the Company's only investment was its investment in the Predecessor Operating Company. After the Restructuring, the Company
directly holds the Predecessor Operating Company's investments. As a result, included in unrealized (appreciation) / depreciation is $(10,069) of timing differences attributable to deferred
offering costs, built-in gains and other book/tax differences impacting the tax basis of the Predecessor Operating Company's investments. These differences were carried over to the Company, as the new
operating company, from the Predecessor Operating Company.


The
Company is subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless the Company distributes, in a timely manner as required by the Code, an amount at
least equal to the sum of (1) 98.0% of its net ordinary income earned for the calendar year and (2) 98.2% of its capital gain net income for the one-year period ending October 31
in the calendar year. For the year ended December 31, 2014, the Company had no accrued estimated excise taxes. For the year ended December 31, 2013, the Company accrued estimated excise
taxes of $2.3. For the year ended December 31, 2012, the Company had no accrued estimated excise taxes.

163

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 11. Net Assets

The table below illustrates the effect of certain transactions on the net asset accounts of the Company:

Common StockPaid in
Capital in
Excess
of Par

Undistributed
Net
Investment
Income

Accumulated
Undistributed
Net Realized
Gains

Net
Unrealized
Appreciation
(Depreciation)Shares

Par
Amount

Total
Net AssetsBalance 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 net assets 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 net assets 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

$
650,107Issuances of common stock


12,773,135


128


184,698











184,826Deferred offering costs allocated from New Mountain Finance Holdings, L.L.C.








(250
)










(250
)Deferred offering costs








(476
)










(476
)Dividends declared











(71,365
)

(6,247
)




(77,612
)Net increase (decrease) in net assets resulting from operations











80,066


8,925


(43,416
)

45,575Tax reclassifications related to return of capital distributions (See Note 10)








(226
)

(6,171
)

6,397





​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Balance at December 31, 2014


57,997,890

$
580

$
817,129

$
2,530

$
14,131

$
(32,200
)
$
802,170​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


164

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 12. Earnings Per Share

The following information sets forth the computation of basic and diluted net increase in the Company's net assets per share resulting from operations for the years ended
December 31, 2014, December 31, 2013 and December 31, 2012:

Years ended December 31,2014

2013

2012Earnings per sharebasicNumerator for basic earnings per share:

$
45,575

$
61,920

$
31,784Denominator for basic weighted average share:


51,846,164


35,092,722


14,860,838​
​
​
​
​
​
​
​
​
​
​Basic earnings per share:

$
0.88

$
1.76

$
2.14​
​
​
​
​
​
​
​
​
​
​Earnings per sharediluted(1)Numerator for increase in net assets per share

$
45,575

$
61,920

$
31,784Adjustment for interest on Convertible Notes and incentive fees, net


2,658





​
​
​
​
​
​
​
​
​
​
​Numerator for diluted earnings per share:

$
48,233

$
61,290

$
31,784Denominator for basic weighted average share


51,846,164


35,092,722


14,860,838Adjustment for dilutive effect of Convertible Notes


4,311,671





​
​
​
​
​
​
​
​
​
​
​Denominator for diluted weighted average share


56,157,835


35,092,722


14,860,838​
​
​
​
​
​
​
​
​
​
​Diluted earnings per share

$
0.86

$
1.76

$
2.14​
​
​
​
​
​
​
​
​
​
​


(1)In
applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive.
For the year ended December 31, 2014, there was no anti-dilution. For the years ended December 31, 2013 and December 31, 2012, due to reflecting earnings for the full year of
operations of the Predecessor Operating Company assuming 100.0% NMFC ownership of Predecessor Operating Company and assuming all of AIV Holdings' units in the Predecessor Operating Company were
exchanged for public shares of NMFC during the years then ended, the earnings per share would be $1.79 and $2.18, respectively.


165

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 13. Financial Highlights

The following information sets forth the financial highlights for the Company for the years ended December 31, 2014, 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, 20112014

2013

2012Per share data(1):Net asset value, January 1, 2014, January 1, 2013, January 1, 2012 and May 19, 2011(2), respectively

$
14.38

$
14.06

$
13.60

$
13.50Net investment income


1.10








Net realized and unrealized gains (losses)(3)


(0.80
)







Net increase (decrease) in net assets resulting from operations allocated from NMF Holdings:Net investment income(4)


0.44


1.45


1.33


0.78Net realized and unrealized gains (losses)(3)(4)


0.19


0.35


0.84


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


0.93


1.80


2.17


0.38Net change in unrealized appreciation (depreciation) of investment in NMF Holdings











0.58Dividends declared to stockholders from net investment income


(1.36
)

(1.45
)

(1.28
)

(0.78
)Dividends declared to stockholders from net realized gains


(0.12
)

(0.03
)

(0.43
)

(0.08
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net asset value, December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively

$
13.83

$
14.38

$
14.06

$
13.60​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​Per share market value, December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, respectively

$
14.94

$
15.04

$
14.90

$
13.41​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​Total return based on market value(5)


9.66
%

11.62
%

24.84
%

4.16
%Total return based on net asset value(6)


6.56
%

13.27
%

16.61
%

2.82
%Shares outstanding at end of period


57,997,890


45,224,755


24,326,251


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


51,846,164


35,092,722


14,860,838


10,697,691Average net assets for the period

$
749,732

$
502,822

$
196,312

$
147,766Ratio to average net assets(7):Net investment income


10.68
%

10.10
%

9.53
%

9.08
%Total expenses, before waivers/reimbursements


7.65
%

8.53
%

9.61
%

6.62
%Total expenses, net of waivers/reimbursements


7.41
%

8.13
%

8.55
%

5.79
%


(1)Per
share data is based on weighted average shares outstanding for the respective period (except for dividends declared to stockholders which is based on
actual rate per share).(2)Data
presented from May 19, 2011 to December 31, 2011 as the fund became unitized on May 19, 2011, the IPO date.(3)Includes
the accretive effect of common stock issuances per share, which for the years ended December 31, 2014, December 31, 2013 and December 31,
2012 were $0.05, $0.04 and $0.03, respectively. No additional common stock issuances were made during 2011 after the IPO.(4)For
the years ended December 31, 2014, December 31, 2013, December 31, 2012 and December 31, 2011, 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.


166

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 13. Financial Highlights (Continued)

(5)Total
return is calculated assuming a purchase of common stock at the opening of the first day of the year and a sale on the closing of the last business
day of the period. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Company's dividend reinvestment plan.(6)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.(7)Ratio
to average net assets for the years ended December 31, 2014, December 31, 2013 and December 31, 2012 and for the period
May 19, 2011 to December 31, 2011, 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. For the year ended December 31, 2014, the Company is reflecting its net investment income and expenses as well as its proportionate share of the Predecessor Operating Company's net
investment income and expenses. For the years ended December 31, 2013 and December 31, 2012 and for the period May 19, 2011 to December 31, 2011, the Company is reflecting
its proportionate share of the Predecessor Operating Company's net investment income and expenses.


The
following information sets forth the financial highlights for the Company for the year ended December 31, 2014 and NMF Holdings for the years ended December 31, 2013,
December 31, 2012, December 31, 2011 and December 31, 2010.

NMF Holdings
Years ended December 31,NMFC
Year ended
December 31,
20142013

2012

2011

2010Average debt outstandingHoldings Credit Facility(1)

$
243,693

$
184,124

$
133,600

$
61,561

$
68,343Average debt outstandingSLF Credit Facility(2)

$
208,377

$
214,317

$
181,395

$
133,825

$
27,672Average debt outstandingConvertible Notes(3)

$
115,000

$


$


$


$
Average debt outstandingSBA-guaranteed debentures(4)

$
29,167

$


$


$


$
Average debt outstandingNMFC Credit Facility(5)

$
11,227

$


$


$


$
Asset coverage ratio(6)


226.70
%

257.73
%

235.31
%

242.56
%

307.43
%Portfolio turnover(7)


29.51
%

40.52
%

52.02
%

42.13
%

76.69
%


(1)For
the year ended December 31, 2014, average debt outstanding represents the Company's average debt outstanding as well as the Company's
proportionate share of the Predecessor Operating Company's average debt outstanding. The average debt outstanding for the year ended December 31, 2014 at the Holdings Credit Facility was
$244,598.(2)For
the year ended December 31, 2014, average debt outstanding represents the Company's average debt outstanding as well as the Company's
proportionate share of the Predecessor Operating Comapany's average debt outstanding for the period January 1, 2014 to December 17, 2014 (date of SLF Credit Facility merger with and into
the Holdings Credit Facility). The average debt outstanding for the period January 1, 2014 to December 17, 2014 at the SLF Credit Facility was $209,333.(3)For
the year ended December 31, 2014, average debt outstanding represents the period from June 3, 2014 (issuance of the Convertible Notes) to
December 31, 2014.(4)For
the year ended December 31, 2014, average debt outstanding represents the period from November 17, 2014 (date of initial SBA-guaranteed debenture
borrowing) to December 31, 2014.(5)For
the year ended December 31, 2014, average debt outstanding represents the period from June 4, 2014 (commencement of the NMFC Credit Facility) to
December 31, 2014.(6)On
November 5, 2014, the Company received exemptive relief from the SEC allowing the Company to modify the asset coverage requirement to exclude the
SBA-guaranteed debentures from this calculation.(7)For
the year ended December 31, 2014, portfolio turnover represents the investment activity of the Predecessor Operating Company and the Company.


167

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Table of Contents

Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 14. Selected Quarterly Financial Data (unaudited)

The below selected quarterly financial data is for the Company.



Total Investment
Income

Net Investment
Income

Total Net Realized
and Unrealized
(Losses) Gains

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

Total

Per Share

Total

Per Share

Total

Per Share

Total

Per ShareDecember 31, 2014

$
36,748

$
0.65

$
25,919

$
0.46

$
(34,865
)
$
(0.62
)
$
(8,946
)
$
(0.16
)September 30, 2014


34,706


0.67


20,800


0.40


(13,389
)

(0.26
)

7,411


0.14June 30, 2014


33,708


0.65


17,289


0.34


6,373


0.12


23,662


0.46March 31, 2014


30,439


0.65


16,058


0.34


7,390


0.16


23,448


0.50December 31, 2013

$
26,783

$
0.60

$
14,826

$
0.33

$
3,119

$
0.07

$
17,945

$
0.40September 30, 2013


22,012


0.58


10,803


0.29


6,664


0.17


17,467


0.46June 30, 2013


26,400


0.82


17,674


0.55


(6,682
)

(0.21
)

10,992


0.34March 31, 2013


15,681


0.62


7,218


0.28


8,298


0.33


15,516


0.61December 31, 2012

$
14,165

$
0.65

$
7,759

$
0.36

$
2,047

$
0.09

$
9,806

$
0.45September 30, 2012


9,742


0.60


4,574


0.28


5,381


0.34


9,955


0.62June 30, 2012


7,023


0.66


4,029


0.38


(194
)

(0.02
)

3,835


0.36March 31, 2012


6,581


0.62


3,430


0.32


4,758


0.45


8,188


0.77


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 Company is an investment company that is applying the specialized guidance in Topic 946 as of January 1,
2014.

In
May 2014, the FASB issued Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers Topic 606Summary and Amendments that
Create Revenue from Contracts with Customers and Other Assets and Deferred Costs("ASU 2014-09"). ASU 2014-09 establishes a comprehensive and converged standard on revenue
recognition to enable financial statement users to better understand and consistently analyze an entity's revenue across industries, transactions and geographies. The core principle of the new
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and
(5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also specifies the

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Notes to the Consolidated Financial Statements of
New Mountain Finance Corporation (Continued)

December 31, 2014
(in thousands, except share data)

Note 15. Recent Accounting Standards Updates (Continued)

accounting
for certain costs to obtain or fulfill a contract with a customer. The new guidance requires improved disclosures to help users of financial statements better understand the nature, amount,
timing, and uncertainty of revenue that is recognized. Qualitative and quantitative information is required to be disclosed about: (1) contracts with customers, (2) significant judgments
and changes in judgments, and (3) assets recognized from costs to obtain or fulfill a contract. The new guidance will apply to all entities. The guidance is effective for interim and annual
reporting periods in fiscal years beginning after December 15, 2016. Early application is not permitted. The Company is in the process of evaluating the impact that this guidance will have on
its consolidated financial statements and disclosures.

In
June 2014, the FASB issued Accounting Standards Update No. 2014-11,Transfers and Servicing Topic 860Repurchase-to-Maturity Transactions,
Repurchase Financings, and Disclosures("ASU 2014-11"). ASU 2014-11 changes the accounting for repurchase- and resale-to-maturity agreements by requiring that such
agreements be recognized as financing arrangements, and requires that a transfer of a financial asset and a repurchase agreement entered into contemporaneously be accounted for separately. ASU 2014-11
requires additional disclosures about certain transferred financial assets accounted for as sales and certain securities financing transactions. The accounting changes and additional disclosures about
certain transferred financial assets accounted for as sales are effective for the first interim and annual reporting periods beginning after December 15, 2014. The additional disclosures for
securities financing transactions are required for annual reporting periods beginning after December 15, 2014 and for interim reporting periods beginning after March 15, 2015. The Company is in the
process of evaluating the impact that this guidance will have on its consolidated financial statements and disclosures.

In
August 2014, the FASB issued Accounting Standards Update No. 2014-15,Presentation of Financial StatementsGoing Concern Subtopic
205-40Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern("ASU 2014-15"). ASU 2014-15 will explicitly require
management to assess an entity's ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the
first annual period ending after December 15, 2016. Earlier adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on the Company's consolidated
financial statements and disclosures.

Note 16. Subsequent Events

On December 31, 2014 and continuing subsequent to the year then ended, the Company's portfolio investment in Edmentum, Inc. disclosed its projected substantial financial deterioration.
The Company reflects this information in the valuation of this portfolio investment as of December 31, 2014. All interest due to the Company through the year ended December 31, 2014 has been paid. As
more information becomes available, the Company may experience a further mark down of the fair value of this investment. This investment may be placed on non-accrual status in the future. The
investment represents 1.1% of the total portfolio at fair value as of December 31, 2014.

In
January 2015, UniTek emerged from "Pre-Packaged" Chapter 11 Bankruptcy and completed its restructuring.

On
February 23, 2015, the Company's board of directors declared a first quarter 2015 distribution of $0.34 per share payable on March 31, 2015 to holders of record as of
March 17, 2015.

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The terms "we", "us", "our" and the "Company" refers to New Mountain Finance Corporation and its consolidated
subsidiaries.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures

As of December 31, 2014 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Act of 1934, as amended).
Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided
reasonable assurance that information required to be disclosed in our periodic United States Securities and Exchange Commission filings is recorded, processed, summarized and reported within the time
periods specified in the United States Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b)    Report of Management on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an
assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial
reporting includes those policies and procedures that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations
of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company
assets that could have a material effect on the financial statements.

Management
performed an assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 based upon the criteria in the 2013
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management's assessment, management determined that the
Company's internal control over financial reporting was effective as of December 31, 2014.

(c)    Attestation Report of the Registered Public Accounting Firm.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on New
Mountain Finance Corporation's internal control over financial reporting, which is set forth on the following page.

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GRAPHIC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
New Mountain Finance Corporation
New York, New York

We
have audited the internal control over financial reporting of New Mountain Finance Corporation and subsidiaries (the "Company") as of December 31, 2014, based on criteria
established inInternal ControlIntegrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting
based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal

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ControlIntegrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements as of and for the year ended
December 31, 2014 of the Company and our report dated March 2, 2015 expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph
regarding the Company's restructuring.

/s/
DELOITTE & TOUCHE LLP

New
York, New York
March 2, 2015

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(d)    Changes in Internal Controls Over Financial Reporting

Management has not identified any change in the Company's internal control over financial reporting that occurred during the quarter
ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information

None.

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The terms "we", "us", "our" and the "Company" refers to New Mountain Finance Corporation and its consolidated subsidiaries.

PART III

We will file a definitive Proxy Statement for the Company's 2015 Annual Meeting of Stockholders with the United States
Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has
been omitted under General Instruction G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that specifically address the items set forth herein are incorporated by
reference.

Item 10.    Directors, Executive Officers and Corporate Governance

The information required by Item 10 is hereby incorporated by reference from the definitive Proxy Statement relating to the
Company's 2015 Annual Meeting of Stockholders, to be filed with the United States Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.

Item 11.    Executive Compensation

The information required by Item 11 is hereby incorporated by reference from the definitive Proxy Statement relating to the
Company's 2015 Annual Meeting of Stockholders, to be filed with the United States Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is hereby incorporated by reference from the definitive Proxy Statement relating to the
Company's 2015 Annual Meeting of Stockholders, to be filed with the United States Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 is hereby incorporated by reference from the definitive Proxy Statement relating to the
Company's 2015 Annual Meeting of Stockholders, to be filed with the United States Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.

Item 14.    Principal Accountant Fees and Services

The information required by Item 14 is hereby incorporated by reference from the definitive Proxy Statement relating to the
Company's 2015 Annual Meeting of Stockholders, to be filed with the United States Securities and Exchange Commission within 120 days following the end of the Company's fiscal year.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)    Documents Filed as Part of this Report

The following financial statements are set forth in Item 8:



New Mountain Finance CorporationConsolidated Statements of Assets and Liabilities as of December 31, 2014 and December 31, 2013


107Consolidated Statements of Operations for the years ended December 31, 2014, December 31, 2013 and December 31,
2012


108Consolidated Statements of Changes in Net Assets for the years ended December 31, 2014, December 31, 2013 and
December 31, 2012


109Consolidated Statements of Cash Flows for the years ended December 31, 2014, December 31, 2013 and December 31,
2012


110Consolidated Schedule of Investments as of December 31, 2014


111Consolidated Schedule of Investments as of December 31, 2013


118Notes to the Consolidated Financial Statements of New Mountain Finance Corporation


123


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Table of Contents

(b)    Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the
United States Securities and Exchange Commission:

Exhibit Number

Description3.1
(a)
Amended and Restated Certificate of Incorporation of New Mountain Finance Corporation(2)3.1
(b)
Certificate of Change of Registered Agent and/or Registered Office of New Mountain Finance Corporation(3)3.2

Amended and Restated Bylaws of New Mountain Finance Corporation(2)4.1

Form of Stock Certificate of New Mountain Finance Corporation(1)4.2

Indenture by and between New Mountain Finance Corporation, as Issuer, and U.S. Bank National Association, as Trustee, dated June 3, 2014(7)4.3

Form of Global Note 5.00% Convertible Senior Note Due 2019 (included as part of Exhibit 4.2)(7)10.1

Second Amended and Restated Loan and Security Agreement, dated as of December 18, 2014, by and among New Mountain Finance Corporation, as the collateral manager, New Mountain Finance Holdings, L.L.C., as the
borrower, Wells Fargo Securities, LLC, as administrative agent, and Wells Fargo, National Association, as lender and custodian(9)10.2

Form of Variable Funding Note of New Mountain Finance Holdings, L.L.C., as the Borrower(1)10.3

Form of Amended and Restated Account Control Agreement among New Mountain Finance Holdings, L.L.C., Wells Fargo Securities, LLC as the Administrative Agent and Wells Fargo Bank, National Association, as
Securities Intermediary(1)10.4

Form of Senior Secured Revolving Credit Agreement, by and between New Mountain Finance Corporation, as Borrower, and Goldman Sachs Bank USA, as Administrative Agent and Syndication Agent, dated June 4,
2014(8)10.5

Form of Guarantee and Security Agreement dated June 4, 2014, among New Mountain Finance Corporation, as Borrower, and Goldman Sachs Bank USA, as Administrative Agent(8)10.6

Amendment No. 1, dated December 31, 2014, to the Senior Secured Revolving Credit Agreement dated June 4, 2014, by and among New Mountain Finance Corporation, as Borrower, and Goldman Bank USA, as
Administrative Agent and Syndication Agent(10)10.7

Investment Advisory and Management Agreement by and between New Mountain Finance Corporation and New Mountain Finance Advisers BDC, LLC(6)10.8

Form of Safekeeping Agreement among New Mountain Finance Holdings, L.L.C., Wells Fargo Securities, LLC as the Administrative Agent and Wells Fargo Bank, National Association, as Safekeeping Agent(1)10.9

Custody Agreement by and between New Mountain Finance Corporation and U.S. Bank National Association(5)10.10

Amended and Restated Administration Agreement(4)10.11

Form of Trademark License Agreement(1)


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Exhibit Number

Description10.12

Amendment No. 1 to Trademark License Agreement(4)10.13

Form of Registration Rights Agreement(1)10.14

Form of Indemnification Agreement by and between New Mountain Finance Corporation and each director(1)10.15

Dividend Reinvestment Plan(2)11.1

Computation of Per Share Earnings for New Mountain Finance Corporation (included in the notes to the financial statements contained in this report)14.1

Code of Ethics(1)21.1

Subsidiaries of New Mountain Finance Corporation:New Mountain Finance Holdings, L.L.C. (Delaware)New Mountain Finance SPV Funding, L.L.C. (Delaware)NMF Ancora Holdings, Inc. (Delaware)NMF YP Holdings, Inc. (Delaware)New Mountain Finance Servicing, L.L.C. (Delaware)New Mountain Finance SBIC G.P., L.L.C. (Delaware)New Mountain Finance SBIC, L.P. (Delaware)31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended32.1

Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)32.2

Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)99.1

Supplemental Financial Information


(1)Previously
filed in connection with New Mountain Finance Holdings, L.L.C.'s registration statement on Form N-2 Pre-Effective Amendment No. 3
(File Nos. 333-168280 and 333-172503) filed on May 9, 2011.(2)Previously
filed in connection with New Mountain Finance Corporation's quarterly report on Form 10-Q filed on August 11, 2011.(3)Previously
filed in connection with New Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation report on Form 8-K filed on
August 25, 2011.(4)Previously
filed in connection with New Mountain Finance Corporation's quarterly report on Form 10-Q filed on November 14, 2011.(5)Previously
filed in connection with New Mountain Finance Corporation's registration statement on Form N-2 Post-Effective Amendment No. 2 (File
Nos. 333-189706 and 333-189707) filed on April 11, 2014.(6)Previously
filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on May 8, 2014.


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(7)Previously
filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on June 4, 2014.(8)Previously
filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on June 10, 2014.(9)Previously
filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on December 23, 2014.(10)Previously
filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on January 5, 2015.


(c)    Financial Statement Schedules

No financial statement schedules are filed herewith because (1) such schedules are not required or (2) the information
has been presented in the aforementioned financial statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized on March 2, 2015.

NEW MOUNTAIN FINANCE CORPORATIONBy:

/s/ ROBERT A. HAMWEE Robert A. Hamwee Chief Executive Officer
(Principal Executive Officer)


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

SIGNATURE

TITLE

DATEBy:

/s/ ROBERT A. HAMWEE Robert A. Hamwee

Chief Executive Officer (Principal Executive Officer) and Director

March 2, 2015By:

/s/ DAVID M. CORDOVA David M. Cordova

Chief Financial Officer and Treasurer

March 2, 2015By:

/s/STEVEN B. KLINSKY Steven B. Klinsky

Chairman of the Board, Director

March 2, 2015By:

/s/ ADAM B. WEINSTEIN Adam B. Weinstein

Executive Vice President, Chief Administrative Officer and Director

March 2, 2015By:

/s/ ALFRED F. HURLEY, JR. Alfred F. Hurley, Jr.

Director

March 2, 2015By:

/s/ DAVID MALPASS David Malpass

Director

March 2, 2015By:

/s/ DAVID OGENS David Ogens

Director

March 2, 2015By:

/s/ KURT J. WOLFGRUBER Kurt J. Wolfgruber

Director

March 2, 2015


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