UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarter Ended June 30, 2011

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

Commission File Number: 814-00902

NEW MOUNTAIN FINANCE AIV HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		80-0721242
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

787 Seventh Avenue 48th Floor New York, N.Y.		10019
(Address of principal executive offices)		(Zip Code)

(212) 730-0300

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		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 x

The number of shares of the registrant’s Common Stock, $.01 par value outstanding as of August 23, 2011 was 100.

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NEW MOUNTAIN FINANCE AIV HOLDINGS CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2011

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		PAGE

PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Statement of Assets and Liabilities as of June 30, 2011 (unaudited)	1

	Statement of Operations from May 19, 2011 (commencement of operations) to June 30, 2011 (unaudited)	2

	Statement of Changes in Net Assets from May 19, 2011 (commencement of operations) to June 30, 2011 (unaudited)	3

	Statement of Cash Flows from May 19, 2011 (commencement of operations) to June 30, 2011 (unaudited)	4

	Notes to the Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
Appendix A	New Mountain Finance Holdings, L.L.C Form 10-Q	A-1

PART II. OTHER INFORMATION		II-1

Item 1.	Legal Proceedings	II-1
Item 1A.	Risk Factors	II-1
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	II-1
Item 3.	Defaults upon Senior Securities	II-1
Item 4.	Reserved	II-1
Item 5.	Other Information	II-1
Item 6.	Exhibits	II-1
	Signatures	II-3

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

New Mountain Finance AIV Holdings Corporation

Statement of Assets and Liabilities

June 30, 2011

(unaudited)

Assets
Investment in New Mountain Finance Holdings, L.L.C., at fair value (cost $290,923,983)	$	288,162,998
Total assets	$	288,162,998

Net Assets
Common stock, par value $0.01 per share 100 shares issued and outstanding	1
Paid in capital in excess of par	290,923,982
Net unrealized depreciation	(2,760,985		)
Total Net Assets	$	288,162,998

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

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New Mountain Finance AIV Holdings Corporation

Statement of Operations

from May 19, 2011 (commencement of operations) to June 30, 2011

(unaudited)

Net investment income allocated from New Mountain Finance Holdings, L.L.C.
Interest income	$	4,581,339
Other income	200,223
Total expenses	(1,787,065		)
Net investment income allocated from New Mountain Finance Holdings, L.L.C.	2,994,497

Realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.
Realized losses on investments	(262,916		)
Net change in unrealized appreciation of investments	719,567

Realized and unrealized gain (loss) allocated from New Mountain Finance Holdings, L.L.C.	456,651

Total net increase in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.	3,451,148

Unrealized depreciation in New Mountain Finance Holdings, L.L.C. resulting from public offering price	(6,212,133		)

Net decrease in net assets resulting from operations	$	(2,760,985	)

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

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New Mountain Finance AIV Holdings Corporation

Statement of Changes in Net Assets

from May 19, 2011 (commencement of operations) to June 30, 2011

(unaudited)

Increase (Decrease) in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.:
Net investment income	$	2,994,497
Realized losses on investments	(262,916		)
Net change in unrealized appreciation of investments	719,567
Total net increase in net assets resulting from operations allocated from New Mountain Finance Holdings, L.L.C.	3,451,148

Unrealized depreciation in New Mountain Finance Holdings, L.L.C. resulting from public offering price	(6,212,133		)
Total net decrease in net assets resulting from operations	(2,760,985		)

Capital Transactions
Deferred Offering Costs allocated from New Mountain Finance Holdings, L.L.C.	(7,482,550		)
Contributions from Exchanged Shares	298,406,533
Total net increase in net assets resulting from capital transactions	290,923,983

Net increase in net assets	288,162,998
Net assets at beginning of period	—
Net assets at end of period	$	288,162,998

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

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New Mountain Finance AIV Holdings Corporation

Statement of Cash Flows

from May 19, 2011 (commencement of operations) to June 30, 2011

(unaudited)

Cash flows from operating activities:

Net decrease in net assets resulting from operations	$	(2,760,985	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net investment income allocated from New Mountain Finance Holdings, L.L.C.	(2,994,497		)
Total realized and unrealized (gain) allocated from New Mountain Finance Holdings, L.L.C.	(456,651		)
Unrealized depreciation in New Mountain Finance Holdings, L.L.C. resulting from public offering price	6,212,133
Net cash flows used in operating activities	—

Net increase (decrease) in cash and cash equivalents	—
Cash and cash equivalents at the beginning of the period	—
Cash and cash equivalents at the end of the period	$	—

Non-cash financing activities:
New Mountain Guardian AIV, L.P. contribution of New Mountain Finance Holdings, L.L.C units for shares of New Mountain Finance AIV Holdings, L.L.C.	$	298,406,533
Deferred Offering Costs allocated from New Mountain Finance Holdings, L.L.C.	$	(7,482,550	)

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

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New Mountain Finance AIV Holdings Corporation

Notes to the Financial Statements

As of June 30, 2011 and for the period from May 19, 2011 (commencement of operations) to June 30, 2011

(unaudited)

1. Formation and Business Purpose

New Mountain Finance AIV Holdings Corporation (“AIV Holdings”, the “Company”, “we”, “us”, or “our”) is a Delaware corporation that was originally incorporated on March 11, 2011. New Mountain Guardian AIV, L.P. (“Guardian AIV”), a Delaware limited partnership, is our sole stockholder. AIV Holdings is a closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). As such, the Company is obligated to comply with certain regulatory requirements. AIV Holdings intends to be treated, and intends to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended, (the “Code”) commencing with its taxable year ending December 31, 2011.

New Mountain Finance Corporation (“New Mountain Finance”) is a Delaware corporation that was originally incorporated on June 29, 2010. New Mountain Finance is a closed-end, non-diversified management investment company that has elected to be treated as a business development company under the 1940 Act. New Mountain Finance intends to be treated, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code commencing with its taxable year ending December 31, 2011. On May 19, 2011, New Mountain Finance 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 offering and at the public offering price of $13.75 per share, New Mountain Finance 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 separate private placement. New Mountain Finance entered into a joinder agreement with respect to the amended and restated limited liability company agreement of New Mountain Finance Holdings, L.L.C. (the “Operating Company”), pursuant to which New Mountain Finance was admitted as a member of the Operating Company and acquired from the Operating Company, with the gross proceeds of the IPO and the concurrent private placement, common membership units (“units”) of the Operating Company (the number of units are equal to the number of shares of New Mountain Finance’s common stock sold in the IPO and the concurrent private placement).

AIV Holdings and New Mountain Finance are holding companies with no direct operations of their own, and their only business and sole asset is their ownership of units of the Operating Company. The Operating Company is externally managed and has elected to be treated as a business development company under the 1940 Act. As such, the Operating Company is obligated to comply with certain regulatory requirements. The Operating Company intends to be treated as a partnership for federal income tax purposes for so long as it has at least two members. The Operating Company, formerly known as New Mountain Guardian (Leveraged), L.L.C., was originally formed as a subsidiary of Guardian AIV by New Mountain Capital in October 2008. Guardian AIV was formed through an allocation of approximately $300 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.” In connection with New Mountain Finance’s IPO and through a series of transactions, the Operating Company owns all of the operations of the Predecessor Entities, including all of the assets and liabilities related to such operations.

Guardian AIV was the parent of the Operating Company prior to the IPO and as a result of the offering and the transactions contemplated thereby obtained units in the Operating Company. Guardian AIV contributed its units in the Operating Company to its newly formed subsidiary, AIV Holdings, in exchange for common stock of AIV Holdings. AIV Holdings has the right to exchange all or any portion of its units in the Operating Company for shares of New Mountain Finance’s common stock on a

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one-for-one basis. At June 30, 2011, New Mountain Finance and AIV Holdings owned approximately 34.6% and 65.4%, respectively, of the units of the Operating Company.

The diagram below depicts our current organizational structure.

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

2. Summary of Significant Accounting Policies

Basis of accounting — The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company does not consolidate the Operating Company. AIV Holdings applies investment company master-feeder financial statement preparation, as described in Accounting Standards Codification 946, Financial Services — Investment Companies, (“ASC 946”) to its interest in the Operating Company (or the “Master Fund”). AIV Holdings observes that it is industry practice to follow the presentation prescribed for a Master Fund-Feeder fund structure in ASC 946 in instances in which a Master Fund is owned by more than one Feeder Fund and that such presentation provides stockholders of AIV Holdings with a clearer depiction of its investment in the Master Fund. The Operating Company’s Form 10-Q for the quarter ended June 30, 2011 is included in this report and should be read in conjunction with that of AIV Holdings.

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Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the period ending December 31, 2011.

Investments — AIV Holdings is a holding company with no direct operations of its own, and its sole asset is its ownership in the Operating Company. AIV Holdings’ investment in the Operating Company is carried at fair value and represents the pro-rata interest in the net assets of the Operating Company as of the applicable reporting date. AIV Holdings values its ownership interest on a quarterly basis, or more frequently if required under the 1940 Act. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

Cash and cash equivalents — Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of three months or less.

Revenue, Expenses, and Capital Gains (Losses) — At each quarterly valuation date, the Operating Company’s investment income, expenses, net realized gains (losses), and net increase (decrease) in unrealized appreciation (depreciation) are allocated to AIV Holdings based on its pro-rata interest in the net assets of the Operating Company. This is recorded on AIV Holdings’ Statement of Operations. New Mountain Finance used the proceeds from its IPO and concurrent private placement to purchase units in the 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 Operating Company. As a result, AIV Holdings experienced immediate unrealized depreciation on its investment in the Operating Company equal to the difference between New Mountain Finance’s initial public offering price of $13.75 per unit and the actual net asset value per unit. Concurrently, New Mountain Finance experienced immediate unrealized appreciation on its investment. This unrealized depreciation is shown separately on the Statement of Operations of AIV Holdings. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

With respect to the expenses incident to any registration of shares of New Mountain Finance’s common stock issued in exchange for units of the Operating Company, AIV Holdings is responsible for the expenses of any demand registration (including underwriters’ discounts or commissions) and their pro rata share of any “piggyback” registration expenses. No shares have been exchanged since formation.

Income taxes — AIV Holdings intends to elect to be treated, and intends to comply with the requirements to qualify annually, as a RIC under subchapter M of the Code commencing with its taxable year ending on December 31, 2011. As a RIC, the Company will not be subject to federal income tax on the portion of taxable income and gains timely distributed to stockholders; therefore, no provision for income taxes has been recorded.

To qualify as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90% of its investment company taxable income and net capital gains, as defined by the Code. Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes.

The Company will be subject to a 4% 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% 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.

The Company has adopted the Income Taxes topic of the Codification (“ASC 740”). ASC 740 provides guidance for how uncertain income tax positions should be recognized, measured, and disclosed in the financial statements. Based on its analysis, the Company has determined that the adoption of ASC 740 did not have a material impact to the Company’s financial statements.

Dividends — Dividends and distributions to common stockholders are recorded on the record date. Quarterly dividend payments are determined by the board of directors. Since AIV Holdings is a holding company, all its distributions on its common stock are paid from distributions received from the Operating Company. The Operating Company intends to make distributions to its members that will be sufficient to enable New Mountain Finance and AIV Holdings to pay quarterly distributions to their stockholders and to enable New Mountain Finance to obtain and maintain its status as a RIC. Under certain circumstances, the distributions that the Operating Company makes to its members may not be sufficient for AIV Holdings to satisfy the annual distribution requirement necessary for AIV Holdings to qualify as a RIC. In that case, it is

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expected that Guardian AIV would consent to be treated as if it received distributions from AIV Holdings sufficient to satisfy the annual distribution requirement. Guardian AIV would be required to include the consent dividend in its taxable income as a dividend from AIV Holdings, which would result in phantom (i.e., non-cash) taxable income to Guardian AIV. AIV Holdings intends to make quarterly distributions to Guardian AIV, its sole stockholder, out of assets legally available for distribution each quarter. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

AIV Holdings does not intend to reinvest any distributions received from the Operating Company in additional units of the Operating Company.

Use of estimates — The preparation of the 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 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.

3. Agreements

On May 19, 2011, in connection with the contribution by Guardian AIV of its units to AIV Holdings, AIV Holdings entered into a joinder agreement with respect to the amended and restated limited liability company agreement of the Operating Company pursuant to which AIV Holdings was admitted as a member of the Operating Company. In addition, New Mountain Finance entered into a joinder agreement with respect to the amended and restated limited liability company agreement of the Operating Company pursuant to which New Mountain Finance was admitted as a member of the Operating Company and agreed to acquire from the Operating Company a number of units of the Operating Company equal to the number of shares of common stock outstanding of New Mountain Finance.

The Operating Company entered into an Investment Management Agreement with New Mountain Finance Advisers BDC, L.L.C. (the “Investment Adviser”). Under the Investment Management Agreement, the Investment Adviser provides investment advisory services to the Operating Company. For providing these services, the Investment Adviser receives a fee from the Operating Company, consisting of two components — a base management fee and an incentive fee. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

AIV Holdings entered into a Registration Rights Agreement with New Mountain Finance, Steven B. Klinsky (the Chairman of our board of directors), an entity related to Steven B. Klinsky and the Investment Adviser. Subject to several exceptions, AIV Holdings and the Investment Adviser have the right to require New Mountain Finance 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 New Mountain Finance’s common stock issued or issuable in exchange for units and any other shares of New Mountain Finance’s common stock held by AIV Holdings, the Investment Adviser and any of their transferees. The rights under the Registration Rights Agreement can be conditionally exercised by AIV Holdings or the Investment Adviser, meaning that prior to the effectiveness of the registration statement related to the shares, AIV Holdings or the Investment Adviser can withdraw their request to have the shares registered. AIV Holdings and the Investment Adviser may each assign their rights to any person that acquires registerable securities subject to the Registration Rights Agreement and who agrees to be 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 registrable securities in such a registration.

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

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

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

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

New Mountain Finance and the Operating Company have entered into an Administration Agreement with New Mountain Finance Administration, L.L.C. (the “Administrator”) under which the Administrator provides administrative services to New Mountain Finance and the Operating Company. The Administrator oversees New Mountain Finance and the Operating Company’s financial records, prepares reports filed with the SEC, generally monitors the payment of New Mountain Finance and the Operating Company’s expenses, and watches the performance of administrative and professional services rendered by others. The Operating Company will reimburse the Administrator for New Mountain Finance’s and the Operating Company’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to New Mountain Finance and the Operating Company under the Administration Agreement. During the first year of operations, the Operating Company has capped its direct and indirect expenses at $3 million.

4. Regulation

The Company intends to elect to be treated, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. In order to qualify as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, intends to make and continue to make the requisite distributions to Guardian AIV, its sole stockholder, 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). However, under certain circumstances, the distributions that the Operating Company makes to its members may not be sufficient for AIV Holdings to satisfy the annual distribution requirement necessary for AIV Holdings to qualify as a RIC. In that case, it is expected that Guardian AIV would consent to be treated as if it received distributions from AIV Holdings sufficient to satisfy the annual distribution requirement. Guardian AIV would be required to include the consent dividend in its taxable income as dividend from AIV Holdings, which would result in phantom (i.e., non-cash) taxable income to Guardian AIV.

Additionally, as a business development company, both AIV Holdings and the Operating 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% of its total assets are qualifying assets (with certain limited exceptions).

5. Related Parties

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

· Together, New Mountain Finance and AIV Holdings own all the outstanding units of the Operating Company. As of June 30, 2011, New Mountain Finance and AIV Holdings owned approximately 34.6% and 65.4%, respectively, of the units of the Operating Company.

· The Operating Company has entered into an Investment Management Agreement with the Investment Adviser, a wholly-owned subsidiary of New Mountain Capital. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

· New Mountain Finance and the Operating Company have entered into an Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Operating Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to the Operating Company and New Mountain Finance under the Administration Agreement. During the first year of operations, the Operating Company has capped its direct and indirect expenses at $3 million. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

· AIV Holdings, New Mountain Finance and the Operating Company have adopted a formal code of ethics that governs the conduct of their respective officers and directors. These officers and directors also remain subject to the duties imposed by the 1940 Act, the Delaware General Corporation Law and the Delaware Limited Liability Company Act.

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· New Mountain Finance and the Operating Company have entered into a royalty-free license agreement with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant New Mountain Finance and the Operating Company a non-exclusive, royalty-free license to use the name “New Mountain”.

Concurrently with the IPO, New Mountain Finance sold an additional 2,172,000 shares of its common stock to certain executives and employees of, and other individuals affiliated with, New Mountain Capital in a separate private placement.

6. 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 may provide general indemnifications.

7. Stockholders’ Equity

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

				Paid in Capital						Total
	Common Stock			in Excess			Net Unrealized			Stockholders’
	Shares	Par Amount		of Par			Depreciation			Equity

Balance at December 31, 2010	—	$	—	$	—		$	—		$	—

Issuances of common stock to New Mountain Guardian AIV, L.P.(1)	100	1		298,406,532			—			298,406,533
Deferred Offering Costs allocated from New Mountain Finance Holdings, L.L.C.	—	—		(7,482,550		)	—			(7,482,550		)
Net increase in stockholders’ equity resulting from operations	—	—		—			(2,760,985		)	(2,760,985		)

Balance at June 30, 2011	100	$	1	$	290,923,982		$	(2,760,985	)	$	288,162,998

(1) On May 19, 2011, AIV Holdings issued 100 shares of common stock to New Mountain Guardian AIV, L.P. for their respective ownership interest in the Predecessor Entities.

8. Financial Highlights

The following information sets forth the financial highlights for the period May 19, 2011 to June 30, 2011. The ratios to average net assets have been annualized.

	Period Ended
	June 30, 2011

Total Return (a)	(0.95		)%

Average net assets for the period	$	286,437,425
Ratio to average net assets:
Total expenses	5.42		%
Net investment income	9.09		%

(a) Total Return is calculated as the total net assets as of June 30, 2011 less the initial cost basis over the initial cost basis.

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9. Recent Accounting Standards Updates

In May 2011, the FASB issued Accounting Standards Update No. 2011-04 (“ASU 2011-04”), which provides clarification about how to measure fair value and improves comparability of fair value measurements presented and disclosed in accordance with U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 is effective for annual periods beginning after December 15, 2011. The Company is currently assessing the impact that adoption of ASU 2011-04 will have on the financial statements.

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

The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in the report. See ‘‘Risk Factors’’ for 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 financial statements and notes thereto appearing elsewhere in this quarterly report. In addition, 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 New Mountain Finance AIV Holdings Corporation (“AIV Holdings”, the “Company”, “we”, “us”, or “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including:

· statements concerning the impact of a protracted decline in the liquidity of credit markets;

· the general economy, including interest and inflation rates, and its impact on the industries in which New Mountain Finance Holdings, L.L.C. (the “Operating Company”) invests;

· the ability of the Operating Company’s portfolio companies to achieve their objectives;

· the Operating Company’s ability to make investments consistent with its investment objectives, including with respect to the size, nature and terms of its investments;

· the ability of New Mountain Finance Advisers BDC, L.L.C. (the “Investment Adviser”) or its affiliates to attract and retain highly talented professionals;

· actual and potential conflicts of interest with the Investment Adviser and other affiliates of New Mountain Capital Group, L.L.C.;

· the impact of AIV Holdings’ ownership of a majority of the outstanding common membership units of the Operating Company, AIV Holdings’ only asset; and

· other factors, including those discussed in the disclosure document filed as an exhibit to our Registration Statement on Form 10, filed with the Securities and Exchange Commission (the “SEC”) on May 19, 2011.

We use words such as “anticipates”, “believes”, “expects”, “intends”, “will”, “should”, “may” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” section in the disclosure document filed as an exhibit to our Registration Statement on Form 10, filed with the SEC on May 19, 2011.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

The following structure is expected to generally result in AIV Holdings being allocated taxable income in respect of unrecognized gains in the Predecessor Entities’ (defined below) assets, with the result that any distributions made to AIV Holdings’ sole stockholder, Guardian AIV, that are attributable to such gains generally will be treated as taxable dividends.

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2011. On May 19, 2011, New Mountain Finance 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 offering and at the public offering price of $13.75 per share, New Mountain Finance 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 separate private placement. New Mountain Finance entered into a joinder agreement with respect to the amended and restated limited liability company agreement of New Mountain Finance Holdings, L.L.C. (the “Operating Company”), pursuant to which New Mountain Finance was admitted as a member of the Operating Company and acquired from the Operating Company, with the gross proceeds of the IPO and the concurrent private placement, common membership units (“units”) of the Operating Company (the number of units are equal to the number of shares of New Mountain Finance’s common stock sold in the IPO and the concurrent private placement).

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The diagram below depicts our current organizational structure.

As of June 30, 2011, the Operating Company’s net asset value was $440.6 million and its portfolio had a fair value of approximately $544.3 million in 47 portfolio companies, with a weighted average Unadjusted and Adjusted Yield to Maturity of approximately 10.4% and 12.7%, respectively. “Adjusted Yield to Maturity” assumes that the investments in the Operating Company’s portfolio are purchased at fair value on June 30, 2011 and held until their respective maturities with no prepayments or losses and are exited at par at maturity. This calculation excludes the impact of existing leverage, except for the non-recourse debt of New Mountain Finance SPV Funding, L.L.C. (“NMF SLF”). NMF SLF is treated as a fully levered asset of the Operating Company, with NMF SLF’s net asset value being included for yield calculation purposes. The actual yield to maturity may be higher or lower due to the future selection of LIBOR contracts by the individual companies in the portfolio or other factors. References to “Unadjusted Yield to Maturity” have the same assumptions as Adjusted Yield to Maturity except that NMF SLF is not treated as a fully levered asset of the Operating Company, but rather the assets themselves are consolidated into the Operating Company.

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Recent Developments

On August 10, 2011, Daniel Hébert and Adam J. Collins were appointed to the board of directors of New Mountain Finance, the Operating Company, and AIV Holdings.

Dividend

On August 10, 2011, the Operating Company’s board of directors declared a second quarter 2011 distribution of $0.27 per unit payable on August 31, 2011 to holders of record as of August 22, 2011. As of this record date, AIV Holdings owns 20,221,938 units of the Operating Company and therefore will receive a total dividend of $5,459,923.26. Subsequently, AIV Holdings’ board of directors declared a total dividend of $5,459,923.26 payable on August 31, 2011 to holders of record as of August 22, 2011.

Additionally, on August 10, 2011, the Operating Company’s board of directors declared a third quarter 2011 distribution of $0.29 per unit payable on September 30, 2011 to holders of record as of September 15, 2011. As of this record date, AIV Holdings owns 20,221,938 units of the Operating Company and therefore will receive a total dividend $5,864,362.02. Subsequently, AIV Holdings’ board of directors declared a total dividend of $5,864,362.02 payable on September 30, 2011 to holders of record as of September 15, 2011.

Since AIV Holdings is a holding company, all distributions on its common stock will be paid from distributions received from the Operating Company. The Operating Company intends to make distributions to its members that will be sufficient to enable AIV Holdings and New Mountain Finance to pay quarterly distributions to their stockholders and to enable New Mountain Finance to obtain and maintain its status as a RIC. Under certain circumstances, the distributions that the Operating Company makes to its members may not be sufficient for AIV Holdings to satisfy the annual distribution requirement necessary for AIV Holdings to qualify as a RIC. In that case, it is expected that Guardian AIV would consent to be treated as if it received distributions from AIV Holdings sufficient to satisfy the annual distribution requirement. Guardian AIV would be required to include the consent dividend in its taxable income as a dividend from AIV Holdings, which would result in phantom (i.e., non-cash) taxable income to Guardian AIV. AIV Holdings intends to make quarterly distributions to Guardian AIV out of assets legally available for distribution each quarter. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

AIV Holdings does not intend to reinvest any distributions received from the Operating Company in additional units of the Operating Company.

Critical Accounting Policies

Basis of Accounting

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“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.

The Company does not consolidate the Operating Company. AIV Holdings applies investment company master-feeder financial statement preparation, as described in Accounting Standards Codification 946, Financial Services — Investment Companies, (“ASC 946”) to its interest in the Operating Company (or the “Master Fund”). AIV Holdings believes that it is industry practice to follow the presentation prescribed for a Master Fund-Feeder fund structure in ASC 946 in instances in which a Master Fund is owned by more than one Feeder Fund and that such presentation provides stockholders of AIV Holdings with a clearer depiction of its investment in the Master Fund. The Operating Company’s Form 10-Q for the quarter ended June 30, 2011 is included in this report and should be read in conjunction with that of AIV Holdings.

Valuation of Portfolio Investments

The Operating Company conducts the valuation of its assets, pursuant to which its net asset value and consequently AIV Holdings’ net asset value is determined, at all times consistent with GAAP and the 1940 Act.

AIV Holdings is a holding company with no direct operations of its own, and its sole asset is its ownership in the Operating Company. AIV Holdings’ investment in the Operating Company is carried at fair value and represents the pro-rata interest in the net assets of the Operating Company as of the applicable reporting date. AIV Holdings values its ownership interest on a quarterly basis, or more frequently if required under the 1940 Act. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

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Revenue Recognition

At each quarterly valuation date, the Operating Company’s investment income, expenses, net realized gains (losses), and net increase (decrease) in unrealized appreciation (depreciation) are allocated to AIV Holdings based on its pro-rata interest in the net assets of the Operating Company. This is recorded on AIV Holdings’ Statement of Operations. New Mountain Finance used the proceeds from its IPO and concurrent private placement to purchase units in the 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 Operating Company. As a result, AIV Holdings experienced immediate unrealized depreciation on its investment in the Operating Company equal to the difference between New Mountain Finance’s initial public offering price of $13.75 per unit and the actual net asset value per unit. Concurrently, New Mountain Finance experienced immediate unrealized appreciation on its investment. This unrealized depreciation is shown separately on the Statement of Operations of AIV Holdings. See the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

Results of Operations

As a result of the Master Fund-Feeder fund structure, AIV Holdings’ results of operations are a function of their pro-rata ownership interest in the Operating Company. Additionally, AIV Holdings commenced operations on May 19, 2011 and therefore has no comparative periods of results of operations. See the Operating Company’s Management Discussion and Analysis of Financial Condition and Results of Operations in its Form 10-Q for the quarter ended June 30, 2011 included in this filing for further details.

Liquidity and Capital Resources

AIV Holdings has the right to exchange all or any portion of its units of the Operating Company for shares of New Mountain Finance’s common stock on a one-for-one basis. If AIV Holdings exercised its right to exchange its units of the Operating Company, Guardian AIV, indirectly through AIV Holdings, would own approximately 65.4% of all outstanding shares of New Mountain Finance’s common stock as of June 30, 2011.

AIV Holdings is not required, and it does not intend, to make any additional capital contributions to the Operating Company.

At June 30, 2011, we had no cash or cash equivalents. Cash used in operating activities from May 19, 2011 (commencement of operations) to June 30, 2011 was zero. Our liquidity is dependent on dividends from the Operating Company which we intend to distribute to our stockholders.

On May 19, 2011, New Mountain Finance priced its 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 offering and at the public offering price of $13.75 per share, the Company sold an additional 2,172,000 shares of its common stock to certain executives and employees of, and other individuals affiliated with, New Mountain Capital in a separate private placement.

The Operating Company’s liquidity is generated and generally available through advances from the revolving credit facilities, from cash flows from operations, investment sales of liquid assets, repayments of senior and subordinated loans, income earned on investments and cash equivalents, and, we expect, through periodic follow-on equity offerings of New Mountain Finance.

Distributions and Dividends

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Tax characteristics of all dividends paid by AIV Holdings will be reported to Guardian AIV on Form 1099 after the end of the calendar year. Future quarterly dividends, if any, for both the Operating Company and AIV Holdings will be determined by the respective board of directors.

AIV Holdings does not intend to reinvest any distributions received from the Operating Company in additional units of the Operating Company.

Related Parties

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

Item 3. Quantitative and Qualitative Disclosure about Market Risk

See the Quantitative and Qualitative Disclosure about Market Risk in the Operating Company’s Form 10-Q for the quarter ended June 30, 2011 included in this filing.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of June 30, 2011 (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

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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 Securities and Exchange Commission (“SEC”) filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b) Changes in Internal Controls Over Financial Reporting

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the second quarter of 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

This quarterly report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

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APPENDIX A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarter Ended June 30, 2011

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

Commission File Number: 814-00839

NEW MOUNTAIN FINANCE HOLDINGS, L.L.C

(Exact name of registrant as specified in its charter)

Delaware		26-3633318
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

787 Seventh Avenue 48th Floor New York, N.Y.		10019
(Address of principal executive offices)		(Zip Code)

(212) 730-0300

(Registrant’s telephone number, including area code)

Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		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 x

The number of the registrant’s common membership units outstanding as of August 11, 2011 was 30,919,629.

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NEW MOUNTAIN FINANCE HOLDINGS, L.L.C.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2011

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		PAGE

PART I. FINANCIAL INFORMATION		A-3

Item 1.	Financial Statements	A-3

	Consolidated Statements of Assets, Liabilities and Members’ Capital as of June 30, 2011 (unaudited) and December 31, 2010	A-3

	Consolidated Statements of Operations for the three and six months ended June 30, 2011 (unaudited) and June 30, 2010 (unaudited)	A-4

	Consolidated Statements of Changes in Members’ Capital for the six months ended June 30, 2011 (unaudited) and June 30, 2010 (unaudited)	A-5

	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 (unaudited) and June 30, 2010 (unaudited)	A-6

	Consolidated Schedule of Investments as of June 30, 2011 (unaudited)	A-7

	Consolidated Schedule of Investments as of December 31, 2010	A-10

	Notes to Consolidated Financial Statements (unaudited)	A-13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	A-27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	A-39
Item 4.	Controls and Procedures	A-39

PART II. OTHER INFORMATION		A-41

Item 1.	Legal Proceedings	A-41
Item 1A.	Risk Factors	A-41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	A-41
Item 3.	Defaults upon Senior Securities	A-42
Item 4.	Reserved	A-42
Item 5.	Other Information	A-42
Item 6.	Exhibits	A-42
	Signatures	A-45

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Assets, Liabilities and Members’ Capital

	June 30, 2011		December 31, 2010
	(unaudited)
Assets
Investments, at fair value (cost $524,049,396 and $414,308,823 respectively)	$	544,336,397	$	441,057,840
Cash equivalents, at value (cost $60,000,067 and $0 respectively)	59,999,970		—
Cash	17,850,716		10,744,082
Interest receivable	4,046,499		3,007,787
Deferred credit facility costs (net of accumulated amortization of $381,192 and $69,909 respectively)	3,596,057		1,880,120
Deferred offering costs	—		3,528,110
Other assets	760,367		5,842
Total assets	$	630,590,006	$	460,223,781

Liabilities
SLF credit facility	126,917,448		56,936,000
Holdings credit facility	34,300,000		59,696,938
Payable for unsettled securities purchased	22,885,720		94,462,500
Interest payable	1,092,341		813,192
Management fee payable	807,509		—
Incentive fee payable	504,393		—
Payable to affiliates	—		2,531,319
Other liabilities	3,477,299		3,856,571
Total liabilities	189,984,710		218,296,520

Members’ Capital	440,605,296		241,927,261
Total liabilities and members’ capital	$	630,590,006	$	460,223,781
Outstanding Common Membership Units (a)	30,919,629
Capital per unit (a)	$	14.25

(a) Fund was not unitized as of December 31, 2010.

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

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Operations

(unaudited)

	Three months ended						Six months ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Investment income

Interest income	$	12,810,147		$	8,331,777		$	23,978,194		$	17,219,965
Other income	306,144			265,192			349,817			453,934
Total investment income	13,116,291			8,596,969			24,328,011			17,673,899

Expenses

Interest and other credit facility expenses	1,534,147			556,046			3,080,900			1,221,963
Management fee	773,509			17,749			807,509			35,498
Incentive fee	504,393			—			504,393			—
Professional fees (net of reimbursable expenses of $130,186)	516,678			141,307			569,834			193,342
Administrative expenses (net of reimbursable expenses of $180,255)	62,610			84,183			203,418			196,679
Other general and administrative expenses	170,712			21,173			178,568			41,700
Total expenses	3,562,049			820,458			5,344,622			1,689,182
Net investment income	9,554,242			7,776,511			18,983,389			15,984,717

Realized gains on investments	6,659,833			8,249,823			12,552,163			29,193,602
Net change in unrealized (depreciation) appreciation of investments	(7,559,450		)	(13,598,102		)	(6,462,113		)	(16,404,095		)
Net increase in capital resulting from operations	$	8,654,625		$	2,428,232		$	25,073,439		$	28,774,224

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

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Changes in Members’ Capital

(unaudited)

	Six months ended			Six months ended
	June 30, 2011			June 30, 2010
Increase (Decrease) in members’ capital resulting from operations:
Net investment income	$	18,983,389		$	15,984,717
Realized gains on investments	12,552,163			29,193,602
Net change in unrealized (depreciation) appreciation of investments	(6,462,113		)	(16,404,095		)
Net increase (decrease) in members’ capital resulting from operations	25,073,439			28,774,224
Distributions	(10,249,155		)	(38,270,191		)
Contributions	195,294,674			12,131,014
Offering Costs	(11,440,923		)	—
Net increase in members’ capital	198,678,035			2,635,047
Members’ capital at beginning of period	241,927,261			239,440,683
Members’ capital at end of period	$	440,605,296		$	242,075,730

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

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New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Cash Flows

(unaudited)

	Six months ended
	June 30, 2011			June 30, 2010
Cash flows from operating activities
Net increase in capital resulting from operations	$	25,073,439		$	28,774,224
Adjustments to reconcile net increase (decrease) in capital resulting from operations to net cash (used in) provided by operating activities:
Realized gains on investments	(12,552,163		)	(29,193,602		)
Net change in unrealized (appreciation) depreciation of investments	6,462,113			16,404,095
Amortization of purchase discount	(3,401,906		)	(7,494,472		)
Amortization of deferred credit facility costs	311,283			—
Non-cash interest	(727,135		)	(1,011,987		)
(Increase) decrease in operating assets:
Purchase of investments	(245,993,220		)	(75,681,612		)
Proceeds from sales and paydowns of investments	152,208,584			110,581,682
Cash received for purchase of undrawn portion of revolving credit facility	1,260,000			—
Cash paid for drawn revolver	(535,593		)	—
Interest receivable	(1,038,712		)	(1,337,237		)
Receivable from unsettled securities sold	—			5,124,622
Other assets	(754,525		)	1,407
Increase (decrease) in operating liabilities:
Payable for unsettled securities purchased	(71,576,780		)	(3,482,265		)
Interest payable	279,149			(47,516		)
Management fee payable	807,509			—
Incentive fee payable	504,393			—
Payable to affiliates	(202,180		)	(173,440		)
Other liabilities	(326,040		)	258,364
Net cash flows (used in) provided by operating activities	(150,201,784		)	42,722,263
Cash flows from financing activities
Contributions	195,294,674			12,131,014
Distributions	(10,249,155		)	(38,270,191		)
Offering costs paid	(8,344,393		)	—
Proceeds from Holdings credit facility	63,281,605			21,785,175
Repayment of Holdings credit facility	(88,678,542		)	(38,419,909		)
Proceeds from SLF credit facility	92,043,800			—
Repayment of SLF credit facility	(22,062,352		)	—
Deferred credit facility costs paid	(3,977,249		)	—
Net cash flows provided by (used in) financing activities	217,308,388			(42,773,911		)
Net increase in cash and cash equivalents	67,106,604			(51,648		)
Cash and cash equivalents at the beginning of the period	10,744,082			4,110,193
Cash and cash equivalents at the end of the period	$	77,850,686		$	4,058,545
Supplemental disclosure of cash flow information
Interest paid	$	1,962,278		$	1,073,927
Non-cash financing activities:
Accrual of offering costs	3,096,530			—

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

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New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments

June 30, 2011

(unaudited)

				Principal
				Amount,					Percent of
Portfolio Company,				Par Value			Fair		Members’
Location and Industry	Type of Investment	Interest Rate	Maturity Date	or Shares	Cost		Value		Capital

United States
Stratus Technologies, Inc.
Information Technology	Ordinary shares(2)	—	—	144,270	$	65,123	$	56,324
	Preferred shares(2)	—	—	32,830	14,819		12,817
					79,942		69,141		0.02	%

Total shares					79,942		69,141		0.02	%

United States
Alion Science and Technology Corporation
Federal Services	Warrants (2)	—	—	6,000	292,851		316,560		0.07	%

Learning Care Group (US), Inc.
Education	Warrants (2)	—	—	845	193,850		90,663		0.02	%

Total warrants					486,701		407,223		0.09	%

United States
Managed Health Care Associates, Inc.
Healthcare Services	First lien (2)	3.44% (Base Rate + 3.25%)	8/1/2014	22,467,673	18,046,809		21,568,965
	Second lien (2)	6.69% (Base Rate + 6.50%)	2/1/2015	15,000,000	11,575,183		14,025,000
				37,467,673	29,621,992		35,593,965		8.08	%

Decision Resources, LLC
Business Services	First lien (3)	7.00% (Base Rate + 5.50%)	12/28/2016	17,910,000	17,658,629		17,943,580
	Second lien (2)	9.50% (Base Rate + 8.00%)	5/7/2018	14,500,000	14,357,575		14,427,500
				32,410,000	32,016,204		32,371,080		7.35	%

Novell, Inc. (fka Attachmate Corporation, NetIQ Corporation)
Software	First lien (3)	6.50% (Base Rate + 5.00%)	4/27/2017	12,000,000	11,907,570		12,062,495
	Second lien (2)	9.50% (Base Rate + 8.00%)	10/27/2017	15,000,000	14,853,966		15,199,995
				27,000,000	26,761,536		27,262,490		6.19	%

Lawson Software, Inc. (fka SoftBrands, Inc.)
Software	First lien (3)	6.75% (Base Rate + 5.25%)	7/5/2017	20,000,000	19,200,000		19,215,620
	Subordinated(2)	11.50%	7/15/2018	4,000,000	3,685,720		3,685,720
				24,000,000	22,885,720		22,901,340		5.20	%

Learning Care Group (US), Inc.
Education	First lien (2)	12.00%	4/27/2016	17,368,421	17,086,426		17,368,421
	Subordinated(2)	15.00%	6/30/2016	3,044,655	2,841,846		2,919,766
				20,413,076	19,928,272		20,288,187		4.60	%

U.S. Healthworks Holding Company, Inc.
Healthcare Services	Second lien (2)	10.50% (Base Rate + 9.00%)	6/15/2017	20,000,000	19,701,348		19,800,000		4.49	%

Unitek Global Services, Inc.
Business Services	First lien (2)	9.00% (Base Rate + 7.50%)	4/15/2018	19,950,000	19,368,140		19,501,125		4.43	%

KeyPoint Government Solutions, Inc.
Federal Services	First lien (2)	10.00% (Base Rate + 8.00%)	12/31/2015	17,910,000	17,579,885		17,865,225		4.05	%

Smile Brands Group Inc.
Healthcare Services	First lien (3)	7.00% (Base Rate + 5.25%)	12/21/2017	17,412,500	17,165,414		17,470,536		3.97	%

Sotera Defense Solutions, Inc. (Global Defense Technology & Systems, Inc.)
Federal Services	First lien (3)	7.00% (Base Rate + 5.50%)	4/21/2017	17,000,000	16,834,586		17,042,500		3.87	%

TravelCLICK, Inc. (fka TravelCLICK Acquisition Co.)
Information Services	First lien (3)	6.50% (Base Rate + 5.00%)	3/16/2016	16,458,750	16,147,823		16,304,449		3.70	%

Brock Holdings III, Inc.
Industrial Services	Second lien (2)	10.00% (Base Rate + 8.25%)	3/16/2018	15,000,000	14,716,318		15,375,000		3.49	%

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

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New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (continued)

June 30, 2011

(unaudited)

				Principal
				Amount,					Percent of
Portfolio Company,				Par Value			Fair		Members’
Location and Industry	Type of Investment	Interest Rate	Maturity Date	or Shares	Cost		Value		Capital

Volume Services America, Inc. (Centerplate)
Consumer Services	First lien (2)	10.50% (Base Rate + 8.50%)	9/16/2016	14,887,500	$	14,519,018	$	14,961,938	3.40	%

MLM Holdings, Inc.
Software	First lien (3)	7.00% (Base Rate + 5.25%)	12/1/2016	14,887,500	14,681,208		14,924,719		3.39	%

Virtual Radiologic Corporation
Healthcare Information Technology	First lien (3)	7.75% (Base Rate + 4.50%)	12/22/2016	14,927,494	14,726,220		14,778,219		3.35	%

Pacific Architects and Engineers Incorporated
Federal Services	First lien (3)	7.50% (Base Rate + 6.00%)	4/4/2017	15,000,000	14,706,963		14,700,000		3.34	%

LANDesk Group, Inc.
Software	First lien (3)	7.02% (Base Rate + 5.17%)	3/28/2016	14,750,000	14,480,083		14,473,437		3.28	%

SonicWALL, Inc.
Software	First lien (3)	8.25% (Base Rate + 6.25%)	1/23/2016	3,485,887	3,501,650		3,503,317
	Second lien (2)	12.00% (Base Rate + 10.00%)	1/23/2017	10,000,000	9,728,753		10,150,000
				13,485,887	13,230,403		13,653,317		3.10	%

Airvana Network Solutions Inc.
Software	First lien (2)	10.00% (Base Rate + 8.00%)	3/25/2015	12,838,095	12,597,336		12,990,548		2.95	%

Vision Solutions, Inc.
Software	Second lien (2)	9.50% (Base Rate + 8.00%)	7/23/2017	12,000,000	11,884,519		12,060,000		2.74	%

Fibertech Networks, LLC (fka Firefox Merger Sub, LLC)
Telecommunication	First lien (3)	6.75% (Base Rate + 5.00%)	11/30/2016	11,940,000	11,775,068		12,051,938		2.74	%

Mailsouth, Inc
Media	First lien (3)	6.75% (Base Rate + 4.99%)	12/14/2016	11,970,000	11,802,468		11,955,038		2.71	%

Merrill Communications LLC
Business Services	First lien (2)	7.50% (Base Rate + 5.50%)	12/22/2012	11,421,788	9,782,937		11,407,511		2.59	%

PODS Holding Funding Corp.
Consumer Services	Subordinated(2)	16.64%	12/23/2015	11,664,000	10,228,016		10,311,372		2.34	%

CHG Companies Inc.
Healthcare Services	Second lien (2)	11.25% (Base Rate + 9.50%)	4/7/2017	10,000,000	9,814,942		10,300,000		2.34	%

Vertafore, Inc.
Software	Second lien (2)	9.75% (Base Rate + 8.25%)	10/29/2017	10,000,000	9,906,642		10,200,000		2.31	%

Porex Corporation
Specialty Chemicals and Materials	First lien (3)	7.14% (Base Rate + 4.73%)	3/31/2015	10,000,000	9,850,430		9,900,000		2.25	%

Merge Healthcare Inc.
Healthcare Services	First lien (2)	11.75%	5/1/2015	9,000,000	8,861,269		9,675,000		2.20	%

Sunquest Information Systems, Inc. (Misys Hospital Systems, Inc.)
Healthcare Services	Second lien (2)	9.75% (Base Rate + 8.50%)	6/16/2017	9,000,000	8,829,941		9,270,000		2.10	%

Mach Gen, LLC
Power Generation	Second lien (2)	7.76% (Base Rate + 7.50%)	2/22/2015	11,599,718	9,258,823		8,970,268		2.04	%

Research Pharmaceutical Services, Inc.
Healthcare Services	First lien (3)	6.75% (Base Rate + 5.25%)	2/18/2017	7,500,000	7,392,660		7,462,500		1.69	%

Surgery Center Holdings, Inc.
Healthcare Services	First lien (3)	6.50% (Base Rate + 5.00%)	2/6/2017	6,982,500	6,948,517		7,021,777		1.59	%

Stratus Technologies, Inc.
Information Technology	First lien (2)	12.00%	3/29/2015	6,827,000	6,459,103		6,741,663		1.53	%

Alion Science and Technology Corporation
Federal Services	First lien (2)	12.00%	11/1/2014	6,133,884	5,502,207		6,312,789		1.43	%

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

A-8

Table of Contents

New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (continued)

June 30, 2011

(unaudited)

				Principal
				Amount,							Percent of
Portfolio Company,				Par Value				Fair			Members’
Location and Industry	Type of Investment	Interest Rate	Maturity Date	or Shares	Cost			Value			Capital

Ozburn-Hessey Holding Company LLC
Logistics	Second lien (2)	10.50% (Base Rate + 8.50%)	10/8/2016	6,000,000	$	5,880,252		$	6,045,000		1.37	%

Bartlett Holdings, Inc.
Industrial Services	First lien (3)	6.75% (Base Rate + 5.00%)	11/23/2016	5,970,000	5,915,090			5,999,850			1.36	%

Datatel, Inc.
Software	Second lien (2)	8.75% (Base Rate + 7.25%)	2/19/2018	5,000,000	4,975,867			5,100,000			1.16	%

Asurion, LLC (fka Asurion Corporation)
Business Services	Second lien (2)	9.00% (Base Rate + 7.50%)	5/24/2019	5,000,000	4,975,262			5,032,030			1.14	%

ATI Acquisition Company (fka Ability Acquisition, Inc.)
Education	First lien (2)	8.25% (Base Rate + 6.00%)	12/30/2014	4,432,500	4,298,200			4,144,388			0.94	%

LVI Services, Inc.
Industrial Services	First lien (2)	9.25% (Base Rate + 7.50%)	3/31/2014	5,141,609	4,745,421			4,113,287			0.93	%

Physiotherapy Associates, Inc. / Benchmark Medical, Inc.
Healthcare Facilities	First lien (2)	7.50% (Base Rate + 4.25%)	6/28/2013	3,803,980	3,174,013			3,784,960			0.86	%

Brickman Group Holdings, Inc.
Business Services	First lien (3)	7.25% (Base Rate + 5.50%)	10/14/2016	2,985,000	3,017,796			3,029,309			0.69	%

Source Media Inc./Accuity Inc.
Business Services	First lien (3)	6.50% (Base Rate + 5.00%)	1/24/2017	1,972,414	1,954,023			1,987,204			0.45	%

Education Management LLC
Education	First lien (1), (2) - Drawn	—	6/1/2012	535,593	318,678			504,796
	First lien (1), (2) - Undrawn	—	6/1/2012	2,464,407	(998,085		)	(141,703		)
				3,000,000	(679,407		)	363,093			0.08	%

Kronos Incorporated
Software	First lien (1), (2) - Undrawn	—	6/11/2013	4,198,500	(629,775		)	(225,669		)	-0.05	%

RGIS Services, LLC
Business Services	First lien (1), (2) - Undrawn	—	4/30/2013	5,000,000	(2,850,000		)	(256,350		)	-0.06	%

Advantage Sales & Marketing Inc.
Business Services	First lien (1), (2) - Undrawn	—	12/17/2015	10,500,000	(1,260,000		)	(1,155,000		)	-0.26	%

Total United States				574,841,368	523,482,753			543,860,033			123.44	%

Total investments					$	524,049,396		$	544,336,397		123.55	%

Cash Equivalents
U.S. Treasury Bill, 0.00%, 7/20/2011
Government	Cash equivalent	0.00%	7/20/2011	60,000,000	60,000,067			59,999,970			13.62	%

Total investments and cash equivalents					$	584,049,463		$	604,336,367		137.17	%

(1)	Par Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities. Cost amounts represent the cash received at settlement date net the impact of paydowns and cash paid for drawn revolvers.

(2)	The Holdings Credit Facility is collateralized by the indicated investments.

(3)	The SLF Credit Facility is collateralized by the indicated investments.

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

A-9

Table of Contents

New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments

December 31, 2010

				Principal
				Amount,					Percent of
Portfolio Company,				Par Value			Fair		Members’
Location and Industry	Type of Investment	Interest Rate	Maturity Date	or Shares	Cost		Value		Capital

United States
Stratus Technologies, Inc.
Information Technology	Ordinary shares	—	—	103,050	$	47,063	$	45,149
	Preferred shares	—	—	23,450	10,710		10,274
					57,773		55,423		0.02	%

Total shares					57,773		55,423		0.02	%

United States
Alion Science and Technology Corporation
Federal Services	Warrants (3)	—	—	6,000	292,851		283,698		0.12	%

Learning Care Group (US), Inc.
Education	Warrants	—	—	845	193,850		193,742		0.08	%

Total warrants					486,701		477,440		0.20	%

Canada
Trident Exploration Corp. (2)
Energy	First lien (3)	12.50% (Base Rate + 9.50%)	6/30/2014	4,477,500	4,357,151		4,746,150		1.96	%

Total Canada				4,477,500	4,357,151		4,746,150		1.96	%

United States
Managed Health Care Associates, Inc.
Healthcare Services	First lien (3)	3.52% (Base Rate + 3.25%)	8/1/2014	22,467,673	17,462,237		20,557,920
	Second lien (3)	6.77% (Base Rate + 6.50%)	2/1/2015	15,000,000	11,227,497		13,200,001
				37,467,673	28,689,734		33,757,921		13.96	%

Attachmate Corporation, NetIQ Corporation
Software	Second lien (3)	7.04% (Base Rate + 6.75%)	10/13/2013	22,500,000	17,121,571		22,275,000		9.21	%

Learning Care Group (US), Inc.
Education	First lien (3)	12.00%	4/27/2016	17,368,422	17,057,656		17,192,834
	Subordinated	15.00%	6/30/2016	2,832,237	2,610,113		2,630,413
				20,200,659	19,667,769		19,823,247		8.19	%

Decision Resources, LLC
Business Services	First lien (4)	7.75% (Base Rate + 4.50%)	12/28/2016	18,000,000	17,730,000		17,820,001		7.37	%

KeyPoint Government Solutions, Inc
Federal Services	First lien (3)	10.00% (Base Rate + 8.00%)	12/31/2015	18,000,000	17,640,000		17,730,000		7.33	%

Smile Brands Group, Inc.
Healthcare Services	First lien (4)	7.50% (Base Rate + 4.25%)	12/21/2017	17,500,000	17,237,500		17,390,625		7.19	%

Volume Services America, Inc. (Centerplate)
Consumer Services	First lien (3)	10.50% (Base Rate + 8.50%)	9/16/2016	14,962,500	14,527,858		15,056,016		6.22	%

MLM Holdings, Inc.
Software	First lien (4)	7.00% (Base Rate + 5.25%)	12/1/2016	14,962,500	14,739,863		14,775,469		6.11	%

LANDesk Software, Inc.
Software	First lien (4)	7.00% (Base Rate + 5.25%)	3/28/2016	15,000,000	14,701,917		14,718,750		6.08	%

SonicWALL, Inc.
Software	First lien (4)	8.26% (Base Rate + 6.19%)	1/23/2016	4,485,887	4,507,797		4,519,531
	Second lien (3)	12.00% (Base Rate + 10.00%)	1/23/2017	10,000,000	9,712,391		10,050,000
				14,485,887	14,220,188		14,569,531		6.02	%

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

A-10

Table of Contents

New Mountain Finance Holdings, L.L.C.

Consolidated Schedule of Investments (continued)

December 31, 2010

Principal

New Mountain Finance AIV Holdings Corp 10-Q