NMF SLF I, Inc. Annual Report - A Deep Dive for Investors

Welcome to your straightforward guide to NMF SLF I, Inc.'s performance over the past year. We cut through the jargon to give you a clear picture of what matters most for your investment.

Business Overview (What NMF SLF I, Inc. Does): NMF SLF I, Inc. operates as a specialty finance company, primarily lending money to middle-market companies across various industries. We achieve this by investing in direct loans we provide to businesses, often to support their growth, acquisitions, or recapitalizations. These are not publicly traded bonds; they are privately negotiated debt instruments.

A significant portion of our portfolio, approximately 85%, consists of First Lien loans. This means NMF SLF I, Inc. holds the primary claim on a borrower's assets. If a company faces financial distress, we are among the first creditors repaid from the sale of those assets, which significantly reduces our risk compared to other lenders. The remaining 15% typically comprises Subordinated loans. These carry higher risk because we repay them only after First Lien holders. However, these loans often come with higher interest rates to compensate for that increased risk.

We also provide Revolving Credit Facilities, which are flexible lines of credit that borrowers can draw upon as needed. The fact that these facilities are "drawn" indicates that our borrowers actively use the committed capital, reflecting ongoing business operations and contributing to NMF SLF I, Inc.'s interest income.

Financial Performance (Key Financial Highlights for the Past Year - Fiscal Year Ended December 31, 2023):

• Net Investment Income (NII): NMF SLF I, Inc. generated a robust $75.2 million in Net Investment Income, marking a 12% increase from the previous year. An expanded investment portfolio and favorable interest rate environments primarily drove this growth.
• Total Investment Income: Gross income from interest and fees reached $125.5 million, up from $110.3 million in the prior year, demonstrating strong revenue generation from our lending activities.
• Net Asset Value (NAV) per Share: The company maintained a stable NAV of $18.50 per share at year-end, reflecting sound asset valuation and effective management of our investment portfolio.
• Portfolio Growth: Total investments at fair value grew by 10% to $1.2 billion. New investment commitments totaled $350 million during the year, showcasing continued capital deployment.
• Dividends: NMF SLF I, Inc. paid quarterly dividends totaling $1.60 per share for the year, representing a 9.5% yield on the average share price. This underscores our commitment to shareholder returns.

Management Discussion and Analysis (MD&A Highlights): Management attributes the robust 12% increase in Net Investment Income to several factors. These include the strategic expansion of our investment portfolio and a favorable interest rate environment, which benefited the company's predominantly floating-rate assets. The growth in Total Investment Income reflects our successful deployment of capital into new investment commitments, totaling $350 million during the year.

Despite market fluctuations, the company maintained a stable Net Asset Value per share, underscoring effective portfolio management and asset valuation practices. Our low non-accrual rate of 1.5% demonstrates the rigorous underwriting standards and proactive credit monitoring we apply across our diversified portfolio.

A prudent debt-to-equity ratio of 0.8x and substantial available liquidity position the company to seize new investment opportunities while maintaining financial flexibility. Management continues to focus on optimizing funding costs and enhancing operational efficiency to further improve shareholder returns.

Financial Health (Capital Structure and Liquidity): NMF SLF I, Inc. maintains a prudent capital structure with a debt-to-equity ratio of 0.8x. This ratio remains well within regulatory limits and provides flexibility for future growth. We ended the year with $50 million in cash and equivalents and $200 million available under our revolving credit facility, ensuring ample liquidity for operations and new investment opportunities.

Portfolio Health and Credit Quality: The overall credit quality of our portfolio remains strong. Non-accrual loans (loans with significantly past-due interest payments) represented a low 1.5% of the total portfolio at fair value, a slight improvement from 1.8% last year. This indicates our effective underwriting and monitoring of borrowers. We diversify the portfolio across over 20 industries, with no single industry representing more than 10% of total investments, which mitigates concentration risk.

Risk Factors (Key Risks to Consider): While the company has performed well, investors should be aware of inherent risks:

• Credit Risk: The primary risk is that borrowers may default on their loans, which would impact NMF SLF I, Inc.'s income and asset value.
• Interest Rate Risk: A significant portion of our loans are floating-rate. While rising rates can increase income, a sharp decline could reduce profitability.
• Economic Downturn: A broad economic slowdown could negatively impact the financial health of our borrowers, potentially leading to increased defaults.
• Valuation Risk: The fair value of our private debt investments relies on management's judgment and prevailing market conditions.
• Regulatory Risk: Changes in regulations governing business development companies (BDCs) or financial institutions could impact our operations and profitability.
• Competition: Intense competition for investment opportunities could lead to lower yields or less favorable terms.

Future Outlook (Strategy and Outlook): Looking ahead, NMF SLF I, Inc. plans to continue its disciplined investment strategy, focusing on senior secured loans to established middle-market companies. We aim to capitalize on market opportunities while maintaining strong credit underwriting standards. Management anticipates continued steady growth in Net Investment Income, supported by a robust pipeline of potential investments and a focus on managing portfolio credit quality in a dynamic economic environment. We are also exploring opportunities to optimize our funding structure to enhance shareholder value.

Competitive Position: The specialty finance market for middle-market companies is highly competitive. NMF SLF I, Inc. competes against a diverse group of financial institutions, including other business development companies (BDCs), private debt funds, commercial banks, and other non-bank lenders. Key competitive factors in this market include:

• Access to Capital: The ability to raise and deploy capital efficiently is crucial.
• Underwriting Expertise: Strong credit analysis and risk management capabilities are essential for identifying and structuring attractive investment opportunities.
• Relationship Networks: Established relationships with private equity sponsors, intermediaries, and management teams are vital for sourcing deals.
• Speed and Flexibility: The ability to execute transactions quickly and offer flexible financing solutions can be a significant advantage.
• Reputation and Track Record: A proven history of successful investments and reliable partnerships can attract high-quality borrowers.

NMF SLF I, Inc. believes its disciplined investment strategy, focus on senior secured lending, and experienced management team provide a competitive advantage in sourcing and managing its portfolio.

In summary, NMF SLF I, Inc. delivered a solid performance this past year, marked by increased investment income, stable asset values, and a healthy credit portfolio, all while providing consistent dividends to shareholders. Our strategic focus on senior secured lending and disciplined risk management positions us for continued stability.