CION Investment Corp 10-K

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our shares are not listed on an exchange or quoted through a quotation system. There is currently no market for our common stock, and we do not expect that a market for our shares will develop in the future. No shares have been authorized for issuance under any equity compensation plans. Under Maryland law, our shareholders generally will not be personally liable for our debts or obligations. On January 25, 2019, we closed our continuous follow-on public offering of shares to new investors. Following the closing of our continuous follow-on public offering, we have continued to issue shares pursuant to our distribution reinvestment plan, as amended and restated. Although our shares are not currently listed for trading on a national securities exchange, we intend to seek to complete a liquidity event by listing on such an exchange within nine to eighteen months following the date on which this Annual Report on Form 10-K was filed with the SEC, or at such earlier or later time as our board of directors may determine, taking into consideration market conditions and other factors. However, there can be no assurance that we will be able to complete a liquidity event. Set forth below is a chart describing the classes of our securities outstanding as of March 11, 2021: Title of Class Amount Authorized Amount Held by Us or for Our Account Amount Outstanding Exclusive of Amount Held by Us or for Our Account Common stock 500,000,000 — 113,753,484 As of March 11, 2021, we had 21,976 record holders of our common stock. Share Repurchase Program Our common stock is not currently listed on any securities exchange. It is unlikely that shareholders will be able to sell their common stock when desired or at a desired price. No shareholder will have the right to require us to repurchase his or her common stock or any portion thereof. Because no public market currently exists for our common stock, shareholders will not be able to liquidate their investment prior to our liquidation or other liquidity event, other than through our share repurchase program, or, in limited circumstances, as a result of transfers of common stock to other eligible investors. Beginning in the first quarter of 2014, we began offering, and on a quarterly basis thereafter we intend to continue offering, to repurchase common stock on such terms as may be determined by our board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of our board of directors, such repurchases would not be in the best interests of our shareholders or would violate applicable law. We conduct such repurchase offers in accordance with the requirements of Rule 13e-4 of the Exchange Act and the 1940 Act. In months in which we repurchase common stock, we generally conduct repurchases on the last Wednesday in a calendar month. The offer to repurchase common stock is conducted solely through tender offer materials made available to each shareholder. The board also considers the following factors, among others, in making its determination regarding whether to cause us to continue offering to repurchase shares and under what terms: · the effect of such repurchases on our qualification as a RIC (including the consequences of any necessary asset sales); · the liquidity of our assets (including fees and costs associated with disposing of assets); · our investment plans and working capital requirements; · the relative economies of scale with respect to our size; · our history in repurchasing shares or portions thereof; and · the condition of the securities markets. On December 8, 2016, we further amended the terms of the share repurchase program, effective as of our quarterly repurchase offer for the fourth quarter of 2016. Under the further amended share repurchase program, we will offer to repurchase shares of common stock at a price equal to the estimated net asset value per share determined on each date of repurchase. On March 19, 2020, our board of directors, including the independent directors, temporarily suspended our share repurchase program commencing with the second quarter of 2020 and included the third quarter of 2020. On November 13, 2020, we recommenced our share repurchase program for the fourth quarter of 2020. Share repurchases for future quarters will be evaluated by the board of directors based on circumstances and expectations existing at the time of consideration. 46 We currently limit the number of shares of common stock to be repurchased during any calendar year to the number of shares of common stock we can repurchase with the proceeds we receive from the issuance of shares of our common stock pursuant to our fifth amended and restated distribution reinvestment plan. At the discretion of our board of directors, we may also use cash on hand, cash available from borrowings and cash from liquidation of investments as of the end of the applicable period to repurchase common stock. We offer to repurchase such common stock on each date of repurchase at a price equal to the estimated net asset value per share on each date of repurchase. We do not repurchase common stock, or fractions thereof, if such repurchase causes us to be in violation of the securities or other laws of the U.S., Maryland or any other relevant jurisdiction. While we have conducted quarterly tender offers as described above, we are not required to do so and may suspend or terminate the share repurchase program at any time, upon 30 days’ notice. The table below provides information concerning our repurchases of shares of our common stock during the quarter ended December 31, 2020 pursuant to our share repurchase program. Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs October 1 to October 31, 2020 — $ — — — November 1 to November 30, 2020 — — — — December 1 to December 31, 2020 2,001,960 7.60 2,001,960 (1) Total 2,001,960 $ 7.60 2,001,960 (1) (1) See above for a description of the maximum number of shares of our common stock that may be repurchased under our share repurchase program. In the event that CIM or any of its affiliates holds common stock in the capacity of a shareholder, any such affiliates may tender common stock for repurchase in connection with any repurchase offer we make on the same basis as any other shareholder. CIG will not tender its common stock for repurchase as long as CIM remains our investment adviser. Distributions We did not declare or pay any distributions during 2012. In January 2013, we began authorizing monthly distributions to our shareholders. On February 1, 2014, we changed from semi-monthly closings to weekly closings for the sale of our shares. As a result, from February 1, 2014 through July 17, 2017, our board of directors authorized and declared on a monthly basis a weekly distribution amount per share of our common stock. On July 18, 2017, our board of directors authorized and declared on a quarterly basis a weekly distribution amount per share of our common stock. Effective September 28, 2017, our board of directors delegated to management the authority to determine the amount, record dates, payment dates and other terms of distributions to shareholders, which will be ratified by our board of directors, each on a quarterly basis. Beginning on March 19, 2020, management changed the timing of declaring distributions from quarterly to monthly and temporarily suspended the payment of distributions to shareholders commencing with the month ended April 30, 2020, whether in cash or pursuant to our distribution reinvestment plan, as amended and restated. On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020. Distributions in respect of future months will be evaluated by management and the board of directors based on circumstances and expectations existing at the time of consideration. Subject to our board of directors’ discretion and applicable legal restrictions, our management intends to continue to authorize and declare, and our board of directors intends to continue to ratify a monthly distribution amount per share of our common stock. Declared distributions are paid monthly. We will calculate each shareholder’s specific distribution amount for the period using record and declaration dates and each shareholder’s distributions will begin to accrue on the date we accepted each shareholder’s subscription for shares of our common stock. From time to time, we may also pay interim special distributions in the form of cash or shares of common stock at the discretion of our board of directors. Each year, information regarding the sources of our distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, the latter of which is a nontaxable distribution) will be provided to our shareholders. Our distributions may exceed our earnings. As a result, a portion of the distributions we make may represent a return of capital. We elected to be treated for federal income tax purposes as a RIC, as defined under Subchapter M of the Code, beginning in 2012. 47 To qualify for and maintain RIC tax treatment, we must, among other things, distribute in respect of each taxable year at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. In order to avoid certain excise taxes imposed on RICs, we are required to distribute in respect of each calendar year an amount at least equal to the sum of (1) 98.0% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses, or capital gain net income (adjusted for certain ordinary losses), for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gain net income from preceding years that were not distributed during such years and on which we paid no federal income tax. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. Our board of directors declared or ratified distributions for 19, 53 and 52 record dates during the years ended December 31, 2020, 2019 and 2018, respectively. The following table presents cash distributions per share that were declared during the years ended December 31, 2020, 2019 and 2018: Distributions Three Months Ended Per Share Amount 2018 March 31, 2018 (thirteen record dates) $ 0.1829 $ 21,002 June 30, 2018 (thirteen record dates) 0.1829 21,004 September 30, 2018 (thirteen record dates) 0.1829 20,776 December 31, 2018 (thirteen record dates) 0.1829 20,701 Total distributions for the year ended December 31, 2018 $ 0.7316 $ 83,483 2019 March 31, 2019 (thirteen record dates) $ 0.1829 $ 20,772 June 30, 2019 (thirteen record dates) 0.1829 20,801 September 30, 2019 (thirteen record dates) 0.1829 20,798 December 31, 2019 (fourteen record dates) 0.1969 22,401 Total distributions for the year ended December 31, 2019 $ 0.7456 $ 84,772 2020 March 31, 2020 (thirteen record dates) $ 0.1829 $ 20,793 June 30, 2020 (no record dates) — — September 30, 2020 (two record dates) 0.0883 10,011 December 31, 2020 (four record dates) 0.2842 32,479 Total distributions for the year ended December 31, 2020 $ 0.5554 $ 63,283 On December 17, 2020, our co-chief executive officers declared special cash distributions of $0.15180 per share for the year ended December 31, 2020. The one-time special distributions are in addition to our regular monthly cash distributions that were paid on December 29, 2020. The special distributions were paid on December 22, 2020 to shareholders of record as of December 21, 2020. Shareholders who previously elected to receive distributions in additional shares of our common stock pursuant to our distribution reinvestment plan were issued additional shares for the special distributions on December 22, 2020. On December 17, 2020, our co-chief executive officers also declared regular monthly cash distributions of $0.04413 per share for January 2021. The distributions were paid on January 27, 2021 to shareholders of record as of January 26, 2021. Shareholders who previously elected to receive distributions in additional shares of our common stock pursuant to our distribution reinvestment plan were issued additional shares for the January 2021 distributions on January 27, 2021. On January 15, 2021, our co-chief executive officers declared regular monthly cash distributions of $0.04413 per share for February 2021. The distributions were paid on February 24, 2021 to shareholders of record as of February 23, 2021. Shareholders who previously elected to receive distributions in additional shares of our common stock pursuant to our distribution reinvestment plan were issued additional shares for the February 2021 distributions on February 24, 2021. On February 16, 2021, our co-chief executive officers declared regular monthly cash distributions of $0.04413 per share for March 2021. The distributions will be paid on March 24, 2021 to shareholders of record as of March 23, 2021. Shareholders who previously elected to receive distributions in additional shares of our common stock pursuant to our distribution reinvestment plan will be issued additional shares for the March 2021 distributions on March 24, 2021. 48 We have adopted an “opt in” distribution reinvestment plan for our shareholders. As a result, if we make a distribution, our shareholders will receive distributions in cash unless they specifically “opt in” to the fifth amended and restated distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of our common stock. We have made and intend to make our distributions in the form of cash, out of assets legally available for such purpose, unless shareholders elect to receive their distributions in the form of additional shares of common stock pursuant to our fifth amended and restated distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to U.S. shareholders. We may fund our cash distributions to shareholders in the future from any sources of funds available to us, including borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and expense support from CIM. On January 2, 2018, we entered into an expense support and conditional reimbursement agreement with CIM for the primary purpose of replacing CIG and AIM with CIM as the expense support provider pursuant to the terms of the expense support and conditional reimbursement agreement. On December 9, 2020, we amended and restated the expense support and conditional reimbursement agreement with CIM for purposes of extending the termination date from December 31, 2020 to December 31, 2021. For the years ended December 31, 2018, 2019 and 2020, none of our distributions resulted from expense support from CIM. The amount of the distribution for shareholders receiving our common stock will be equal to the fair market value of the stock received. If shareholders hold common stock in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive distributions in the form of additional common stock. The following table reflects the sources of cash distributions on a GAAP basis that were declared during the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 Source of Distribution Per Share Amount Percentage Per Share Amount Percentage Per Share Amount Percentage Net investment income $ 0.5554 $ 63,283 100.0 % $ 0.7456 $ 84,772 100.0 % $ 0.7316 $ 83,483 100.0 % Total distributions $ 0.5554 $ 63,283 100.0 % $ 0.7456 $ 84,772 100.0 % $ 0.7316 $ 83,483 100.0 % 49 Item 6. Selected Financial Data The following selected financial data for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 is derived from our audited consolidated financial statements. The data for the years ended December 31, 2020, 2019 and 2018 should be read in conjunction with our consolidated financial statements and related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report. Certain reclassifications have been made to conform to the current presentation. Years Ended December 31, 2020 2019 2018 2017 2016 Statement of operations data: Total investment income $ 163,842 $ 201,103 $ 188,138 $ 152,432 $ 82,276 Operating expenses Total operating expenses 85,114 113,791 97,961 65,122 32,212 Recoupment of expense support from CIG — — — — 667 Net operating expenses 85,114 113,791 97,961 65,122 32,879 Net investment income 78,728 87,312 90,177 87,310 49,397 Net realized and unrealized (loss) gain on investments, foreign currency and total return swap (89,750) (35,468) (58,867) (1,411) 70,276 Net (decrease) increase in net assets resulting from operations $ (11,022) $ 51,844 $ 31,310 $ 85,899 $ 119,673 Weighted average shares of common stock outstanding(1) 113,635,682 113,708,479 114,140,434 112,256,276 105,951,017 Per share data:(1) Net investment income(2) $ 0.69 $ 0.77 $ 0.79 $ 0.78 $ 0.47 Net (decrease) increase in net assets resulting from operations $ (0.10) $ 0.46 $ 0.27 $ 0.77 $ 1.13 Distributions declared $ 0.56 $ 0.75 $ 0.73 $ 0.73 $ 0.73 Balance sheet data: Net assets at beginning of year $ 952,563 $ 979,271 $ 1,058,691 $ 999,763 $ 904,326 Net assets at end of year $ 878,256 $ 952,563 $ 979,271 $ 1,058,691 $ 999,763 Net asset value per share of common stock at beginning of year $ 8.40 $ 8.69 $ 9.14 $ 9.11 $ 8.71 Net asset value per share of common stock at end of year $ 7.75 $ 8.40 $ 8.69 $ 9.14 $ 9.11 Other data: Distributions declared $ 63,283 $ 84,772 $ 83,483 $ 82,061 $ 77,459 Total investment return - net asset value(3) (0.94) % 5.55 % 2.98 % 8.76 % 13.51 % Number of investments at end of year 195 199 191 186 123 Total portfolio investment purchases during the year(4) $ 359,633 $ 563,884 $ 1,280,187 $ 1,420,747 $ 569,893 Total portfolio investment sales and prepayments during the year(4) $ 543,177 $ 668,789 $ 895,670 $ 951,044 $ 229,075 (1) The per share data was derived by using the weighted average shares of common stock outstanding for the years ended December 31, 2020, 2019, 2018, 2017 and 2016, respectively. (2) There was no expense support from CIM for the years ended December 31, 2020, 2019 or 2018. There was no expense support from CIG or AIM for the years ended December 31, 2017 or 2016. Net investment income per share also includes expense support recoupments by CIG of $0.01 per share for the year ended December 31, 2016. There were no expense support recoupments by CIG for the years ended December 31, 2020, 2019, 2018 or 2017. 50 (3) Total investment return-net asset value is a measure of the change in total value for shareholders who held our common stock at the beginning and end of the period, including distributions paid or payable during the period. Total investment return-net asset value is based on (i) the beginning period net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions, and (iii) the value of distributions payable, if any, on the last day of the period. The total investment return-net asset value calculation assumes that monthly cash distributions are reinvested in accordance with our distribution reinvestment plan then in effect as described in Note 5 to our consolidated financial statements included in this report. The total investment return-net asset value does not consider the effect of the sales load from the sale of our common stock. The total investment return-net asset value includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. Total returns covering less than a full year are not annualized. (4) Excludes our short term investments. 51