CION Investment Corp 10-K

10-K 1 cion2021123110k.htm 2021 YEAR END FINANCIALS Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 000-54755 CĪON Investment Corporation (Exact name of registrant as specified in its charter) Maryland 45-3058280 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3 Park Avenue, 36 th Floor New York, New York 10016 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (212) 418-4700 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, par value $0.001 per share CION The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [x] No [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [x] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [x] Smaller reporting company [ ] Emerging growth company [ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [x] The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of March 3, 2022 was 56,958,440. Documents Incorporated by Reference None CĪON INVESTMENT CORPORATION FORM 10-K TABLE OF CONTENTS Page PART I Item 1. Business 4 Item 1A. Risk Factors 27 Item 1B. Unresolved Staff Comments 48 Item 2. Properties 48 Item 3. Legal Proceedings 48 Item 4. Mine Safety Disclosures 48 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 49 Item 6. [ RESERVED ] 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 55 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 69 Item 8. Consolidated Financial Statements and Supplementary Data 70 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 135 Item 9A. Controls and Procedures 135 Item 9B. Other Information 136 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 136 PART III Item 10. Directors, Executive Officers and Corporate Governance 137 Item 11. Executive Compensation 143 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 144 Item 13. Certain Relationships and Related Transactions, and Director Independence 145 Item 14. Principal Account ant Fees and Services 147 PART IV Item 15. Exhibits and Financial Statement Schedules 150 Item 16. Form 10-K Summary 153 Signatures 154 PART I Forward-Looking Statements Some of the statements within this Annual Report on Form 10-K constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Annual Report on Form 10-K involve numerous risks and uncertainties, including statements as to: • our future operating results; • our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of COVID-19; • the impact of the investments that we expect to make; • the ability of our portfolio companies to achieve their objectives; • our current and expected financings and investments; • the adequacy of our cash resources, financing sources and working capital; • the use of borrowed money to finance a portion of our investments; • the timing of cash flows, if any, from the operations of our portfolio companies; • our contractual arrangements and relationships with third parties; • the actual and potential conflicts of interest with our investment adviser, CION Investment Management, LLC, or CIM, a registered investment adviser and our affiliate, and CIM's affiliates; • the ability of CIM's investment professionals to locate suitable investments for us and the ability of CIM to monitor and administer our investments; • the ability of CIM and its affiliates to attract and retain highly talented professionals; • the dependence of our future success on the general economy and its impact on the industries in which we invest, including COVID-19 and the related economic disruptions caused thereby; • the effects of a changing interest rate environment; • our ability to source favorable private investments; • our tax status; • the effect of changes to tax legislation and our tax position; • the tax status of the companies in which we invest; and • the timing and amount of distributions and dividends from the companies in which we invest. In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K. Other factors that could cause actual results to differ materially include: • changes in the economy; • risks associated with possible disruption in our operations or the economy generally due to terrorism, pandemics, or natural disasters; • future changes in laws or regulations and conditions in our operating areas; • the price at which shares of our common stock may trade on and volume fluctuations in the New York Stock Exchange, or the NYSE; and • the costs associated with being a publicly traded company. We have based the forward-looking statements on information available to us on the date of this Annual Report on Form 10-K. Except as required by the federal securities laws, 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 review any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this Annual Report on Form 10-K are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. 1 Summary of Risk Factors Investing in our securities involves a high degree of risk and may be considered speculative. Some, but not all, of the risks and uncertainties that we face are related to: Risks Relating to Our Business and Structure • our ability to achieve our investment objective depends on the ability of CIM to manage and support our investment process and if CIM was to lose any members of its senior management team, our ability to achieve our investment objective could be significantly harmed; • because our business model depends to a significant extent upon relationships with public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), investment banks and commercial banks, the inability of CIM or its affiliates to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business; • we may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses; • as required by the Investment Company Act of 1940, as amended, or the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments; • there is a risk that investors in our common stock may not receive distributions or that our distributions may not grow over time; • changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy; • any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distributions; Risks Relating to CIM and its Affiliates • CIM and its affiliates, including our officers and some of our directors, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders; • we may be obligated to pay CIM incentive compensation even if we incur a net loss due to a decline in the value of our portfolio; • there may be conflicts of interest related to obligations that CIM’s senior management and investment teams have to other clients; • our base management and incentive fees may induce CIM to make and identify speculative investments or to incur additional leverage; • the compensation we pay to CIM was determined without independent assessment on our behalf, and these terms may be less advantageous to us than if such terms had been the subject of arm’s-length negotiations; Risks Relating to Business Development Companies • the requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a business development company, or BDC; • failure to maintain our status as a BDC would reduce our operating flexibility; • regulations governing our operation as a BDC and as a regulated investment company, or RIC, will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth; • our ability to enter into transactions with our affiliates is restricted; • we are subject to risks related to corporate social responsibility; Risks Relating to Our Investments • our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment; • our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies; • there may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims; • we will be exposed to risks associated with changes in interest rates; • the discontinuation of the London InterBank Offered Rate, or LIBOR, benchmark interest rate could adversely affect the value of LIBOR-indexed, floating rate debt securities in our portfolio or the cost of our borrowings, resulting in an adverse effect on our business, financial condition, and results of operations; 2 • second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us; • inflation may adversely affect the business, results of operations and financial condition of our portfolio companies. • economic recessions or downturns could impair our portfolio companies and adversely affect our operating results; • a covenant breach or other defaults by our portfolio companies may adversely affect our operating results; • investing in middle-market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results; • a lack of liquidity in certain of our investments may adversely affect our business; • we may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded debt commitments; • prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity; • the effect of global climate change may impact the operations of our portfolio companies; Risks Relating to Our Debt Financings • our shareholders have approved a proposal permitting us to incur additional leverage, effective December 31, 2021; • since we have borrowed money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available for distribution to our shareholders, and result in losses; Federal Income Tax Risks • we will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code, or to satisfy RIC distribution requirements; Risks Relating to an Investment in Our Common Stock • the market price of our common stock may fluctuate significantly; • we cannot assure you that a market for shares of our common stock will be maintained or the market price of our shares will trade close to NAV; • sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock; • we may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock; • we may incur significant costs as a result of being a public company; • in 2021 we obtained, and in 2022 we intend to seek, the approval of our shareholders to issue shares of our common stock at prices below the then current net asset value, or NAV, per share of our common stock. If we issue such shares and again receive such approval from shareholders in the future, we may issue shares of our common stock at a price below the then current NAV per share of common stock. Any such issuance could materially dilute your interest in our common stock and reduce our NAV per share and potentially the trading price of our common stock; • a shareholder’s interest in us will be diluted if we issue additional securities, which could reduce the overall value of an investment in us; General Risk Factors • global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability; • political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks; • the capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations; and • we are subject to risks associated with cybersecurity and cyber incidents. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition and/or operating results. For a more detailed discussion of the risks that you should consider prior to investing in our securities, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K. 3 Amounts and percentages presented herein may have been rounded for presentation and all dollar amounts, excluding share and per share amounts, are presented in thousands unless otherwise noted. In addition, all share and per share amounts have been retroactively adjusted to reflect the two-to-one reverse stock split, which became effective on September 21, 2021, or the Reverse Stock Split. Item 1. Business Overview CĪON Investment Corporation, or the Company, was incorporated under the general corporation laws of the State of Maryland on August 9, 2011. When used in this Annual Report on Form 10-K, the terms “we,” “us,” “our” or similar terms refer to the Company and its consolidated subsidiaries. In addition, the term “portfolio companies” refers to companies in which we have invested, either directly or indirectly through our consolidated subsidiaries. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We elected to be treated for U.S. federal income tax purposes as a RIC, as defined under Subchapter M of the Code. We are managed by CIM, our affiliate and a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act. Pursuant to an investment advisory agreement with us, CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. CIM is a controlled and consolidated subsidiary of CION Investment Group, LLC, or CIG, our affiliate. As a member of CIM, CIG’s investment professionals provide investment advisory services, including advice, evaluation and recommendations with respect to our investments. Additionally, Apollo Investment Management, L.P., or AIM, a subsidiary of Apollo Global Management, Inc. (NYSE: APO), or Apollo, also a member of CIM and a registered investment adviser under the Advisers Act, performs certain services for CIM, which include, among other services, providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM may also, from time to time, provide us with access to potential investment opportunities made available on Apollo’s credit platform on a similar basis as other third-party market participants. All of our investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM’s investment committee, which consists entirely of CIG senior personnel. Our investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. We seek to meet our investment objective by utilizing the experienced management team of CIM, which includes its access to the relationships and human capital of its affiliates in sourcing, evaluating and structuring transactions, as well as monitoring and servicing our investments. Our portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt, and equity, of private and thinly-traded U.S. middle-market companies. See “Item 1. Business – Investment Types” below for a detailed description of the types of investments that may comprise our portfolio. We define middle-market companies as companies that generally possess annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of $75 million or less, with experienced management teams, significant free cash flow, strong competitive positions and potential for growth. In addition, we may from time to time invest up to 30% of our assets opportunistically in other types of investments, including collateralized securities, structured products and other similar securities and the securities of larger public companies and foreign securities, which may be deemed “non-qualifying assets” for the purpose of complying with investment restrictions under the 1940 Act. See “Item 1. Business - Qualifying Assets” below. In connection with our debt investments, we may receive equity interests such as warrants or options as additional consideration. We may also purchase equity interests in the form of common or preferred stock in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor. We expect that our investments will generally range between $5 million and $50 million each, although investments may vary as the size of our capital base changes and will ultimately be at the discretion of CIM subject to oversight by our board of directors. We have made and intend to make smaller investments in syndicated loan opportunities, which typically include investments in companies with annual EBITDA of greater than $75 million, subject to liquidity and diversification constraints. To enhance our opportunity for gain, we employ leverage as market conditions permit and at the discretion of CIM. On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC's debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%, which allows us to increase the maximum amount of leverage that we are permitted to incur. Such asset coverage ratio became effective on December 31, 2021. We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. 4 As a BDC, we are subject to certain regulatory restrictions in negotiating or investing in certain investments with entities with which we may be prohibited from doing so under the 1940 Act, such as CIM and its affiliates, unless we obtain an exemptive order from the SEC. We have filed an application with the SEC seeking an exemptive order from such restrictions, but there can be no assurances the SEC will ultimately grant the relief sought in the exemptive application. Co-investments made under the exemptive relief, if granted, would be subject to compliance with the conditions and other requirements contained in the exemptive relief provided by the SEC. We are limited in our ability to engage in co-investment transactions with CIM and its affiliates without exemptive relief from the SEC. Even if we receive exemptive relief, CIM’s investment committee may determine that we should not participate in a co-investment transaction. Portfolio and Investment Activity As of December 31, 2021, we engaged in the direct purchase of debt and equity securities primarily issued by portfolio companies and lend directly to portfolio companies. The following table summarizes the composition of our investment portfolio at amortized cost and fair value as of December 31, 2021: December 31, 2021 Investments Cost(1) Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,564,891 $ 1,526,989 91.6 % Senior secured second lien debt 55,455 38,583 2.3 % Collateralized securities and structured products - equity 3,885 2,998 0.2 % Unsecured debt 26,777 26,616 1.6 % Equity 53,379 70,936 4.3 % Subtotal/total percentage 1,704,387 1,666,122 100.0 % Short term investments(2) 87,917 87,917 Total investments $ 1,792,304 $ 1,754,039 Number of portfolio companies 113 Purchased at a weighted average price of par 98.13 % Gross annual portfolio yield based upon the purchase price(3) 8.62 % (1) Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments. (2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. Status of Our Continuous Public Offerings and the NYSE Listing On December 17, 2012, we met our minimum offering requirement of $2,500 in capital raised from persons not affiliated with us, admitted our initial public investors as shareholders and officially commenced operations. Our initial continuous public offering ended on December 31, 2015, and our follow-on continuous public offering commenced on January 25, 2016 and ended on January 25, 2019, the date on which we closed the public offering of our shares. On October 5, 2021, our shares of common stock commenced trading on the NYSE under the ticker symbol “CION”, or the Listing. Since commencing our initial continuous public offering on July 2, 2012 and through such initial Listing date, we sold 56,958,440 shares of common stock for corresponding net proceeds of $1,160,307 at an average price per share of $20.37, including shares purchased by our affiliates. The net proceeds received include gross proceeds received from reinvested shareholder distributions of $237,451 pursuant to our pre-Listing distribution reinvestment plan, for which we issued 13,523,489 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $232,430 pursuant to our pre-Listing share repurchase program, for which we repurchased 13,310,927 shares of common stock. For a complete description of our pre-Listing distribution reinvestment plan and pre-Listing share repurchase program, refer to Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities in this report. 5 Distributions In January 2013, we began authorizing monthly distributions to our shareholders. 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 are ratified by our board of directors, each on a quarterly basis. Beginning on March 19, 2020, we 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. On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020. On September 15, 2021, we changed the timing of declaring and paying regular distributions to shareholders from monthly to quarterly commencing with the fourth quarter of 2021. Distributions in respect of future quarters will be evaluated by management and the board of directors based on circumstances and expectations existing at the time of consideration. Declared distributions are paid quarterly. Our board of directors declared or ratified distributions for 11, 19 and 53 record dates during the years ended December 31, 2021, 2020 and 2019, respectively. The following table presents distributions per share that were declared during the years ended December 31, 2021, 2020 and 2019: Distributions Three Months Ended Per Share Amount 2019 March 31, 2019 (thirteen record dates) $ 0.3657 $ 20,772 June 30, 2019 (thirteen record dates) 0.3657 20,801 September 30, 2019 (thirteen record dates) 0.3657 20,798 December 31, 2019 (fourteen record dates) 0.3939 22,401 Total distributions for the year ended December 31, 2019 $ 1.4910 $ 84,772 2020 March 31, 2020 (thirteen record dates) $ 0.3657 $ 20,793 June 30, 2020 (no record dates) — — September 30, 2020 (two record dates) 0.1765 10,011 December 31, 2020 (four record dates) 0.5684 32,479 Total distributions for the year ended December 31, 2020 $ 1.1106 $ 63,283 2021 March 31, 2021 (three record dates) $ 0.2648 $ 15,029 June 30, 2021 (three record dates) 0.2648 15,000 September 30, 2021 (three record dates) 0.2648 15,027 December 31, 2021 (two record dates) 0.4648 26,474 Total distributions for the year ended December 31, 2021 $ 1.2592 $ 71,530 On November 12, 2021, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the first quarter of 2022 payable on March 30, 2022 to shareholders of record as of March 23, 2022. On March 8, 2022, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the second quarter of 2022 payable on June 8, 2022 to shareholders of record as of June 1, 2022. About CIM CIM is a registered investment adviser and our affiliate. CIM is a controlled and consolidated subsidiary of CIG and part of the CION Investments group of companies, or CION Investments. We believe that CION Investments is a leading manager of alternative investment solutions that focuses on alternative credit strategies for individual investors. CION Investments is headquartered in New York, with offices in Los Angeles and Boston. Mark Gatto and Michael A. Reisner, together with Keith S. Franz, Gregg A. Bresner, Stephen Roman and Eric A. Pinero, form the senior management team of CIM. Both Messrs. Gatto and Reisner have significant managerial and investing experience and serve as our co-chairmen and co-chief executive officers. 6 CIM’s senior management team has extensive experience in lending to private U.S. middle-market companies and has developed an expertise in using all levels of a firm’s capital structure to produce income-generating investments, focusing on risk management and delivering risk-adjusted returns that typically are collateralized by a company’s business-essential equipment or corporate infrastructure. Pursuant to an administration agreement, CIM furnishes us with office facilities and equipment, and clerical, bookkeeping and record keeping services. CIM also oversees our financial records and prepares our reports to shareholders and reports filed with the SEC. CIM also performs the calculation and publication of our NAV, and oversees the preparation and filing of our tax returns, the payment of our expenses and the performance of various third party service providers. Furthermore, CIM provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. On November 11, 2021, our board of directors, including a majority of the board of directors who are not interested persons, approved the renewal of the administration agreement with CIM for a period of twelve months commencing December 17, 2021. About CION Investments CION Investments is a leading manager of investment solutions designed to redefine the way individual investors can build their portfolios and help meet their long-term investment goals. With more than 30 years of experience in the alternative asset management industry, CION Investments strives to level the playing field by giving investors direct access to asset management historically only available to the largest institutions. CION Investments provides distribution services as well through CION Securities, LLC, or CION Securities, one of our affiliates. Market Opportunity We believe that the market for lending to private U.S. middle-market companies continues to present a compelling investment opportunity. CIM’s management team has witnessed significant demand for debt capital among middle-market companies that have the characteristics we target. We believe that this demand, coupled with the fragmented availability of funding within our target market, will continue to enable us to achieve favorable transaction pricing. We believe that the following characteristics and market trends support our belief: • The middle-market is a large addressable market. According to GE Capital’s National Center for the Middle Market 2nd Quarter 2021 Middle Market Indicator, there are approximately 200,000 U.S. middle-market companies employing approximately 48 million people. The U.S. middle-market accounts for approximately one-third of private sector gross domestic product, or GDP, which, measured on a global scale, would be the fifth largest global economy. Collectively, the U.S. middle market generates more than $10 trillion in annual revenue. GE defines middle-market companies as those with $10 million to $1 billion in annual revenue, which we believe has significant overlap with our definition of middle-market companies that generally possess EBITDA of $75 million or less. • There have been secular changes in ownership structures of U.S. middle-market companies. We believe that there has been a transformation in the ownership structures of private and public companies. The number of U.S. private-equity companies is at its highest level since 2000. Conversely, the number of listed U.S. domestic companies has dramatically declined over the same period, yet the average market capitalization of listed U.S. companies has grown. As a result, we believe that there has been a shift in the ownership of U.S. middle-market companies and thus creating a larger market opportunity for us to provide debt capital to the companies that we target. • Changes in business strategy by banks have further reduced the supply of capital to U.S. middle-market companies. The trend of consolidation of regional banks into money center banks has reduced the focus of these businesses on middle-market lending. Money center banks traditionally focus on lending and providing other services to large corporate clients to whom they can deploy larger amounts of capital more efficiently. We believe that this has resulted in fewer bank lenders to U.S. middle-market companies and reduced the availability of debt capital to the companies that we expect to target. As a result, we believe there is an increasing trend for middle-market companies to seek financing from other sources, such as us. • It is difficult for new direct lending platforms to enter the middle market and fill the capital void because it is very fragmented. While the middle market is a very large component of the U.S. economy, it is a highly fragmented space with thousands of companies operating in many different geographies and industries. Typically, companies that need capital find lenders and investors based on pre-existing relationships, referrals and word of mouth. Developing the many relationships and wide-spread recognition required to become source of capital to the middle market is a time consuming, highly resource-intensive endeavor. As a result, we believe that it is difficult for new lending platforms to successfully enter the middle market, thereby providing insulation from rapid shifts in the supply of capital to the middle market that might otherwise disrupt pricing of capital. • There is a large pool of uninvested private equity capital likely to seek additional senior debt capital to finance strategic transactions. We expect that middle-market private equity firms will continue to invest the nearly $1 trillion raised since 2010 in middle-market companies, as reported in Pitchbook’s 3Q 2021 U.S. PE Middle Market Report, and that these private equity firms will seek to support their investments with senior loans from other sources, such as us. 7 • Specialized lending and unfunded private equity commitments drive demand for debt capital . Lending to small- and middle-market companies requires in-depth diligence, credit expertise, structuring experience and active portfolio management. In addition, middle-market companies may require more active monitoring and participation on the lender’s part. As such, we believe that, of the U.S. financial institutions that are not liquidity constrained, few are capable of pursuing a sustained lending strategy successfully. We believe this creates a significant supply/demand imbalance for small and middle-market credit. We also expect that private equity firms will continue to pursue acquisitions and will seek to leverage their equity investments with debt financing, including senior debt, unitranche debt, and mezzanine loans provided by companies such as ours. Historically, according to the S&P LCD Leveraged Lending Review, such leverage has represented approximately 62% of a private equity acquisition. Therefore, adding to the imbalance in the availability of credit is the significant amount of unallocated private equity capital raised since 2010 described above, much of which will require debt financing in the coming years. As depicted in the chart below, almost $1.4 trillion of unfunded private equity commitments were outstanding through the second quarter of 2021 (Source: Pitchbook's 2021 Annual Private Fund Strategies Report). U.S. PE Capital Overhang ($B) by Year * As of 6/30/2021 • Active private equity focus on small- and middle-market firms. Private equity firms have continued their active roles investing in small- and middle-market companies, and CIM expects this trend to continue. Private equity funds often seek to leverage their investments by combining equity capital with senior secured and mezzanine loans from other sources. Thus, we believe that significant private equity investment in middle-market firms will create substantial investment opportunities for us to fill the role of leverage provider. We believe that the network of relationships between CIM’s senior management team and the private equity community will be a key channel through which we will seek to access significant investment opportunities. • Attractive market segment. We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment. In particular, we believe that middle-market companies are more likely to offer attractive economics in terms of transaction pricing (including higher debt yields), upfront and ongoing fees, prepayment penalties and more attractive security features in the form of stricter covenants and quality collateral. In addition, as compared to larger companies, middle-market companies often have simpler capital structures and carry less leverage, thus aiding the structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions. 8 Average Nominal Spread of Leveraged Loans 1 1 Excludes all facilities in default. Source: S&P Capital IQ LCD and S&P/LSTA Leveraged Loan Index. 9 Average Discounted Spread of Leveraged Loans 2 2 Excludes all facilities in default. Spread calculations have been adjusted to be based off of the bid rather than par (that is assuming that the discounted margin is as a percent of the current market value rather than the par amount of the loan). Source: S&P Capital IQ LCD and S&P/LSTA Leveraged Loan Index. Characteristics of and Risks Related to Investments in Private Companies We have invested and continue to invest primarily in the debt of privately held companies. Investments in private companies pose significantly greater risks as compared to investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand financial distress. Second, the investments themselves are often illiquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. In addition, little public information generally exists about private companies. Finally, these companies often do not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of CIM to obtain adequate information through their due diligence efforts to evaluate the creditworthiness of, and risks involved with, investing in these companies. These companies and their financial information will also generally not be subject to the Sarbanes-Oxley Act, and other rules and regulations that govern public companies that are designed to protect investors. Investment Strategy When evaluating an investment, we use the resources of CIM to develop an investment thesis and a proprietary view of a potential company’s value. When identifying prospective portfolio companies, we focus primarily on the following attributes, which we believe will help us generate higher total returns with an acceptable level of risk. These attributes are: • Leading, defensible market positions that present attractive growth opportunities. We seek to invest in companies that we believe possess advantages in scale, scope, customer loyalty, product pricing or product quality versus their competitors, minimizing sales risk and protecting profitability. • Companies with leading market positions and strong free cash flows. We seek to invest in the debt of companies that have a leading market position or other significant competitive advantages and significant free cash flow. We believe that such companies are able to maintain consistent cash flow to service and repay our loans and maintain growth or market share. • Investing in middle-market, private companies. We seek to invest in middle-market, private companies that generally possess annual EBITDA of $75 million or less at the time of investment. We do not intend to invest in start-up companies, turnaround situations or companies with speculative business plans. 10 • Proven management teams with meaningful equity ownership. We focus on investments in which the target company has an experienced management team with an established track record of success. We typically require the portfolio companies to have in place proper incentives to align management’s goals with ours. Generally, we focus on companies in which the management teams have significant equity interests. • Private equity sponsorship. Often we seek to participate in transactions sponsored by what we believe to be high-quality private equity firms. CIM’s management team believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company provides an additional level of due diligence investigation and is an implicit endorsement of the quality of the investment. Further, by co-investing with quality private equity firms that commit significant sums of equity capital with junior priority to our debt investments, we may benefit from having due diligence on our investments performed by both parties. Further, strong private equity sponsors with significant investments at risk have the ability and a strong incentive to contribute additional capital in difficult economic times should operational or financial issues arise. • Broad portfolio. We seek to create a portfolio of companies engaged in a variety of industries and located in a variety of geographic locations, thereby potentially reducing the risk of a downturn in any one industry, including, without limitation, as a result of COVID-19, or geographic location having a disproportionate impact on the value of our portfolio. We are not a “diversified company” as such term is defined under the 1940 Act. Because we are a BDC, we focus on and invest at least 70% of our total assets in U.S. companies, but seek to maintain investments across the various geographic regions of the U.S. To the extent that we invest in foreign companies, we intend to do so in accordance with the limitations under the 1940 Act and only in jurisdictions with established legal frameworks and a history of respecting creditor rights, including the United Kingdom and countries that are members of the European Union, as well as Canada, Australia and Japan. We cannot assure investors that we will be successful in our efforts to maintain a broad portfolio of investments. • Viable exit strategy. We focus our investment activity primarily in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, with the potential for capital gain on any equity interest we hold through an initial public offering of common stock, a merger, a sale or other recapitalization. Moreover, we may acquire investments in the secondary loan market, and, in analyzing such investments, we will employ the same analytical process that we use for our primary investments. Potential Competitive Advantages We believe that we offer to our investors the following potential competitive advantages over other capital providers to private U.S. middle-market companies: • Proven ability to invest in middle-market companies. We believe that CIM has proven its ability to source, structure and manage private investments for us since our inception in 2012. In addition, CIM maintains a deep and diverse network of highly experienced and like-minded partners including, without limitation, public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), and lightly syndicated loans. We leverage these proprietary relationships and CIM’s expertise, which we believe enables us to be highly selective with a diverse array of investment opportunities that offer the most favorable risk/reward characteristics. • We are CIM’s only client resulting its investment professionals sourcing for and managing a single investment platform. Since we are CIM’s only client, its investment professionals solely source for and manage our investment portfolio, which we believe results in sourcing focus and efficiencies. CIM’s investment professionals do not source and monitor the investments of other funds within a larger platform, which we believe provides for a more efficient, focused, and responsive investment process. This allows CIM’s investment professionals to provide timely, candid feedback to potential borrowers and deal partners, and to solely focus on one investment portfolio building the knowledge and expertise from sourcing, to monitoring, to exit. All investment opportunities are sourced and underwritten by CIM only with our risk and return objectives in mind, which we believe mitigates the potential risk of conflict among numerous portfolio managers within a larger platform. • First lien investment focus rather than relying on the capital structure to generate risk-adjusted returns. Although CIM will selectively target higher return/special situation investments in the secondary loan market through the purchase of illiquid, lightly syndicated loans, CIM focuses primarily on senior secured first lien loans to private U.S. middle-market companies rather than relying on such borrower’s capital structure to generate risk-adjusted returns from junior debt or equity investments. In addition to providing us with favorable returns, we believe that this first lien investment focus allows us to mitigate risk in the event of a borrower’s default since we will be in a senior secured first lien position with respect to such borrower’s assets. • Long-term investment horizon . We believe that our flexibility to make investments with a long-term view provides us with the opportunity to generate favorable returns on invested capital and expands the types of investments that we may consider. The long-term nature of our capital structure helps us avoid disposing of assets at unfavorable prices and we believe makes us a better partner for portfolio companies. 11 • Transaction sourcing capability . CIM seeks to identify attractive investment opportunities both through active origination channels and through its long-term relationships with numerous corporate and fund management teams, members of the financial community and potential corporate partners. We also have access to the experience of CIM’s officers in sourcing middle-market transactions through such persons’ network of originators and underwriters. We believe that the broad networks of CIM and its affiliates will continue to produce a significant amount of investment opportunities for us. • Disciplined, income-oriented investment philosophy . CIM employs a defensive investment approach focused on long-term credit performance and principal protection. This investment approach involves a multi-stage selection process for each investment opportunity as well as ongoing monitoring by CIM of each investment made, with particular emphasis on early detection of credit deterioration. This strategy is designed to maximize current yield and minimize the risk of capital loss while maintaining potential for long-term capital appreciation. • Ability to utilize a wide range of transaction structures . Although CIM focuses primarily on senior secured first lien debt, we believe that CIM’s broad expertise and experience in transaction structuring at all levels of a company’s capital structure affords us numerous tools to manage risk while preserving the opportunity for returns on investments. We attempt to capitalize on this expertise in an effort to produce an investment portfolio that will perform in a broad range of economic conditions. In addition, we believe that the ability to offer several forms of financing makes us an attractive provider of capital to prospective portfolio companies. Such flexible transaction structuring allows a prospective portfolio company to forego the substantial cost of conducting multiple negotiations and undergoing multiple due diligence processes to secure the different types of capital it requires. Investment Types There are a number of investment types corresponding to a company’s capital structure. Typically, investors determine the appropriate type of investment based upon their risk and return requirements. Below is a diagram illustrating where these investments lie in a typical target company’s capital structure. First lien debt is situated at the top of the capital structure, and typically has the first claim on the assets and cash flows of the company, followed by second lien debt, mezzanine debt, preferred equity and finally common equity. Due to this priority of cash flows and claims on assets, an investment’s risk increases as it moves further down the capital structure. Investors are usually compensated for this risk associated with junior status in the form of higher returns, either through higher interest payments or potentially higher capital appreciation. We focus primarily on investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt, including corporate bonds and long-term subordinated loans, referred to as mezzanine loans, and equity. The mix of investments in our portfolio and other aspects regarding the implementation of our strategy may change materially over time. Although CIM focuses primarily on senior secured first lien debt, CIM can tailor our investment focus as market conditions evolve. Depending on market conditions and other factors, we may, as noted above, increase or decrease our exposure to less senior portions of the capital structure, where returns tend to be stronger in a more stable or growing economy, but less secure in weak economic environments. We rely on CIM’s experience to structure investments, potentially using all levels of the capital structure, which we believe will perform in a broad range of economic environments. Typical Leveraged Capital Structure Diagram 12 Senior Secured Debt First Lien Loans First lien secured loans are situated at the top of the capital structure. Because these loans have priority in payment, they carry the least risk among all investments in a company. Generally, our first lien secured loans are expected to have maturities of three to seven years, offer some form of amortization, and have first priority security interests in the assets of the borrower. We expect that our first lien secured loans typically will have variable interest rates ranging between 4.0% and 9.0% over a standard benchmark, such as the prime rate or LIBOR. In some cases, a portion of the total interest may accrue or be paid in kind. Unitranche Loans Unitranche loans provide all of the debt needed to finance a leveraged buyout or other corporate transaction, both senior and subordinated, but generally in a first lien position, while the borrower generally pays a blended, uniform interest rate rather than different rates for different tranches. Unitranche loans generally require payments of both principal and interest throughout the life of the loan. Unitranche loans generally have contractual maturities of five to seven years and interest is generally paid quarterly. Generally, we expect these securities to carry a blended yield that is between first lien secured and subordinated debt interest rates. Unitranche loans provide a number of advantages for borrowers, including the following: simplified documentation, greater certainty of execution and reduced decision-making complexity throughout the life of the loan. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid in kind. Second Lien Loans Second lien secured loans are immediately junior to first lien secured loans and have substantially the same maturities, collateral and covenant structures as first lien secured loans. Second lien secured loans, however, are granted a second priority security interest in the assets of the borrower. In return for this junior ranking, second lien secured loans generally offer higher returns compared to first lien secured debt. These higher returns come in the form of higher interest and in some cases the potential for equity participation through warrants, though to a lesser extent than with mezzanine loans. Generally, we expect these loans to carry a fixed rate of 10.0% to 13.0% or a floating current yield of 7.0% to 12.0% over the prime rate or LIBOR. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid in kind. Unsecured Debt In addition to first lien loans and second lien loans, we also may invest a portion of our assets in unsecured debt, including corporate bonds and subordinated debt. Unsecured debt investments usually rank junior in priority of payment to first lien loans and second lien loans, but are situated above preferred equity and common stock in the capital structure. In return for their junior status compared to first lien loans and second lien loans, unsecured debt investments typically offer higher returns through both higher interest rates and possible equity ownership in the form of warrants, enabling the lender to participate in the capital appreciation of the borrower. These warrants typically require only a nominal cost to exercise. We intend to generally target unsecured debt with interest-only payments throughout the life of the security, with the principal due at maturity. Typically, unsecured debt investments have maturities of five to ten years. Generally, we expect these securities to carry a fixed rate of 10% to 15%. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid in kind. Collateralized Securities, Structured Products and Other We may also invest in collateralized securities, structured products and other similar securities, which may include collateralized debt obligations, or CDOs, collateralized bond obligations, or CBOs, collateralized loan obligations, or CLOs, structured notes and credit-linked notes. These investments may be structured as trusts or other types of pooled investment vehicles. They may also involve the deposit with or purchase by an entity of the underlying investments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying investments or referencing an indicator related to such investments. CDOs, CBOs and CLOs are types of asset-backed securities issued by special purpose vehicles created to reapportion the risk and return characteristics of a pool of assets. The underlying pool for a CLO, for example, may include domestic and foreign senior loans, senior unsecured loans and subordinate corporate loans. 13 Equity and Equity-Related Securities While we intend to maintain our focus on investments in debt securities, from time to time, when we see the potential for significant gains, or in connection with securing particularly favorable terms in a debt investment, we may make non-control investments in preferred or common equity, typically in conjunction with a private equity sponsor we believe to be of high quality. Alternatively, we may hold equity-related securities consisting primarily of warrants or other equity interests generally obtained in connection with our unsecured debt investments. In the future, we may achieve liquidity through a merger or acquisition of a portfolio company, a public offering of a portfolio company’s stock or by exercising our right, if any, to require a portfolio company to repurchase the equity-related securities we hold. With respect to any preferred or common equity investments, we expect to target an annual investment return of at least 20%. Non-U.S. Securities We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies, to the extent permitted by the 1940 Act. Cash and Cash Equivalents We may maintain a certain level of cash or equivalent instruments to make follow-on investments if necessary, in existing portfolio companies or to take advantage of new opportunities. Comparison of Targeted Debt Investments to Corporate Bonds Loans to private companies are debt instruments that can be compared to corporate bonds to aid an investor’s understanding. As with corporate bonds, loans to private companies can range in credit quality depending on security-specific factors, including total leverage, amount of leverage senior to the security in question, variability in the issuer’s cash flows, the quality of assets securing debt and the degree to which such assets cover the subject company’s debt obligations. As is the case in the corporate bond market, we will require greater returns for securities that we perceive to carry increased risk. The companies in which we invest may be leveraged, often as a result of leveraged buyouts or other recapitalization transactions, and, in certain cases, will not be rated by national rating agencies. We believe that our targeted debt investments typically will carry ratings from a nationally recognized statistical ratings organization, or NRSRO, and that such ratings generally will be below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). To the extent we make unrated investments, we believe that such investments would likely receive similar ratings if they were to be examined by an NRSRO. Compared to below-investment grade corporate bonds that are typically available to the public, our targeted first lien secured and second lien secured loan investments are higher in the capital structure, have priority in receiving payment, are secured by the issuer’s assets, allow the lender to seize collateral if necessary, and generally exhibit higher rates of recovery in the event of default. Corporate bonds, on the other hand, are often unsecured obligations of the issuer. The market for loans to private companies possesses several key differences compared to the corporate bond market. For instance, due to a possible lack of debt ratings for certain middle market firms, and also due to the reduced availability of information for private companies, investors must conduct extensive due diligence investigations before committing to an investment. This intensive due diligence process gives the investor significant access to management, which is often not possible in the case of corporate bondholders, who rely on underwriters, debt rating agencies and publicly available information for due diligence reviews and monitoring of corporate issuers. While holding these investments, private debt investors often receive monthly or quarterly updates on the portfolio company’s financial performance, along with possible representation on the company’s board of directors, which allows the investor to take remedial action quickly if conditions happen to deteriorate. Due to reduced liquidity, the relative scarcity of capital and extensive due diligence and expertise required on the part of the investor, we believe that private debt securities typically offer higher returns than corporate bonds of equivalent credit quality. Operating and Regulatory Structure Our investment activities are managed by CIM and supervised by our board of directors, a majority of whom are independent. Pursuant to our investment advisory agreement, as amended and restated, we pay CIM an annual base management fee based on our gross assets as well as incentive fees based on our performance. The annual base management fee is calculated at a rate of 1.5% of the average value of our gross assets (including cash pledged as collateral for our secured financing arrangements, but excluding other cash and cash equivalents so that investors do not pay the base management fee on such assets) to the extent that our asset coverage ratio is greater than or equal to 200% (i.e., $1 of debt outstanding for each $1 of equity); provided that, the annual base management fee is reduced to 1.0% of the average value of our gross assets (including cash pledged as collateral for our secured financing arrangements, but excluding other cash and cash equivalents so that investors do not pay the base management fee on such assets) purchased with leverage resulting in our asset coverage ratio dropping below 200%. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%. Such asset coverage ratio became effective on December 31, 2021. The annual base management fee is payable to CIM quarterly in arrears and is calculated based on the two most recently completed calendar quarters. 14 The incentive fee consists of two parts. • The first part, which we refer to as the subordinated incentive fee on income, is calculated and payable to CIM quarterly in arrears based upon our “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, measured quarterly and expressed as a rate of return on our net assets at the beginning of the calendar quarter, equal to 1.625% per quarter, or an annualized rate of 6.5%, or the hurdle rate. We pay to CIM (x) 100.0% of our pre-incentive fee net investment income, if any, that exceeds the hurdle rate, but is less than or equal to 1.970% in any calendar quarter (7.879% annualized) and (y) 17.5% of the amount of our pre-incentive fee net investment income, if any, that exceeds 1.970% in any calendar quarter (7.879% annualized); and • The second part of the incentive fee, which we refer to as the incentive fee on capital gains, is an incentive fee on capital gains earned on liquidated investments from our investment portfolio during operations and is determined and payable to CIM in arrears as of the end of each calendar year (or upon termination of the investment advisory agreement). This fee equals 17.5% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid incentive fees on capital gains. On July 11, 2017, the members of CIM entered into the third amended and restated limited liability company agreement of CIM, or the Third Amended CIM LLC Agreement, for the purpose of creating a joint venture between AIM and CIG. Under the Third Amended CIM LLC Agreement, AIM became a member of CIM and was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, shares in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the Third Amended CIM LLC Agreement, which results in CIG and AIM each owning a 50% economic interest in CIM. On July 10, 2017, our independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017. Although the investment sub-advisory agreement and AIM's engagement as our investment sub-adviser were terminated, AIM continues to perform certain services for CIM and our company. AIM is not paid a separate fee in exchange for such services, but is entitled to receive distributions as a member of CIM as described above. On December 4, 2017, the members of CIM entered into the fourth amended and restated limited liability company agreement of CIM, or the Fourth Amended CIM LLC Agreement, under which AIM performs certain services for CIM, which include, among other services, providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM may also, from time to time, provide us with access to potential investment opportunities made available on Apollo’s credit platform on a similar basis as other third-party market participants. All of our investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM's investment committee, which consists entirely of CIG senior personnel. Pursuant to an administration agreement, CIM provides us with general ledger accounting, fund accounting, investor relations, employee compensation and benefit-related services, and other administrative services. In addition, we have contracted with U.S. Bancorp Fund Services, LLC to provide additional accounting and administrative services. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements. Also, while we are permitted to finance investments using debt, our ability to use debt is limited in certain significant respects pursuant to the 1940 Act. Within the limits of existing regulation, we will adjust our use of debt, according to market conditions, to the level we believe will allow us to generate maximum risk-adjusted returns. We elected to be treated for federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code. Sources of Income The primary means through which our shareholders will receive a return of value is through interest income, dividends and capital gains generated by our investments. In addition to these sources of income, we may receive fees paid by our portfolio companies, including one-time closing fees paid at the time an investment is made and/or monitoring fees paid throughout the term of our investments. Closing fees typically range from 1.0% to 3.0% of the purchase price of an investment, while annual monitoring fees generally range from 0.25% to 1.0% of the purchase price of an investment. In addition, we may generate revenue in the form of commitment or capital structuring fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. 15 Risk Management We seek to limit the downside potential of our investment portfolio by: • applying our investment strategy guidelines for portfolio investments; • requiring a total return on investments (including both interest and potential appreciation) that adequately compensates us for credit risk; • creating and maintaining a broad portfolio of investments, size permitting, with an adequate number of companies, across different industries, with different types of collateral; and • negotiating or seeking debt investments with covenants or features that protect us while affording portfolio companies flexibility in managing their businesses consistent with preservation of capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights. We may also enter into interest rate hedging transactions at the sole discretion of CIM. Such transactions will enable us to selectively modify interest rate exposure as market conditions dictate. Furthermore, our ability to engage in hedging transactions may be adversely affected by recent rules adopted by the U.S. Commodity Futures Trading Commission, or CFTC. Affirmative Covenants Affirmative covenants require borrowers to take actions that are meant to ensure the solvency of the company, facilitate the lender’s monitoring of the borrower, and ensure payment of interest and loan principal due to lenders. Examples of affirmative covenants include covenants requiring the borrower to maintain adequate insurance, accounting and tax records, and to produce frequent financial reports for the benefit of the lender. Negative Covenants Negative covenants impose restrictions on the borrower and are meant to protect lenders from actions that the borrower may take that could harm the credit quality of the lender’s investment. Examples of negative covenants include restrictions on the payment of distributions and restrictions on the issuance of additional debt without the lender’s approval. In addition, certain covenants restrict a borrower’s activities by requiring it to meet certain earnings interest coverage ratio and leverage ratio requirements. These covenants are also referred to as financial or maintenance covenants. Investment Process The investment professionals employed by CIM have spent their careers developing the resources necessary to make investments in private companies. Our transaction process is highlighted below. Our Transaction Process Sourcing CIM utilizes its access to transaction flow to source transactions. With respect to CIM’s origination channel, CIM seeks to leverage CION Investments' significant industry relationships and investment personnel that actively source new investments. We believe that CIM’s broad networks have produced and will continue to produce a significant pipeline of investment opportunities for us. Evaluation Initial Review . In its initial review of an investment opportunity to present to us, CIM’s transaction team examines information furnished by the target company and external sources, including rating agencies, if applicable, to determine whether the investment meets our basic investment criteria and other guidelines, within the context of creating and maintaining a broad portfolio of investments, and offers an acceptable probability of attractive returns with identifiable downside risk. 16 Credit Analysis/Due Diligence . Before undertaking an investment, the transaction team from CIM conducts a thorough due diligence review of the opportunity to ensure the company fits our investment strategy, which may include: • a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results; • a detailed analysis of industry dynamics, competitive position, regulatory, tax and legal matters; • on-site visits, if deemed necessary, as well as telephone calls and meetings with management and other key personnel; • background checks to further evaluate management and other key personnel; • a review by legal and accounting professionals, environmental or other industry consultants, if necessary; • financial sponsor due diligence, including portfolio company and lender reference checks, if necessary; and • a review of management’s experience and track record. When possible, our advisory team seeks to structure transactions in such a way that our target companies are required to bear the costs of due diligence, including those costs related to any outside consulting work we may require. CIM may integrate environmental, social and governance, or ESG, risk considerations within its process for originating loans to U.S. middle market companies. As part of its due diligence process, CIM may consider, alongside other relevant factors, ESG risks, events or conditions that have or could have a material negative impact on the operating and performance metrics of these borrowers in the portfolio. Depending on the circumstances, examples of ESG risks can include physical environmental risks, climate change transition risks, supply chain disruptions, improper labor practices, lack of board diversity and corruption. CIM may utilize proprietary research to assess ESG risks that are relevant to our investment. Execution Recommendation . CIM seeks to maintain a defensive approach toward its investment recommendations by emphasizing risk control in its transaction process, which includes (1) the pre-review of each opportunity by one of its portfolio managers to assess the general quality, value and fit relative to our portfolio, (2) where possible, transaction structuring with a focus on preservation of capital in varying economic environments and (3) ultimate approval of investment recommendations by CIM’s investment committee. Approval . After completing its internal transaction process, the CIM transaction team makes formal recommendations for review and approval by CIM's investment committee. In connection with its recommendation, it transmits any relevant underwriting material and other information pertinent to the decision-making process. Each new investment that we make requires the approval of a majority of members of CIM's investment committee. Monitoring Portfolio Monitoring . CIM closely monitors our portfolio companies on an ongoing basis, as well as monitors the financial trends of each portfolio company to determine if each is meeting its respective business plans and to assess the appropriate course of action for each company. In addition, depending on the size, nature and performance of the transaction, senior investment professionals of CIM may take board seats or obtain board observation rights for our portfolio companies. CIM has several methods of evaluating and monitoring the performance and fair value of our investments, which includes, but are not limited to, the assessment of success in adhering to a portfolio company’s business plan and compliance with covenants; periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments; comparisons to other portfolio companies in the industry; attendance at and participation in board meetings; and review of monthly and quarterly financial statements and financial projections for portfolio companies. CIM uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio. These ratings are just one of several factors that CIM uses to monitor our portfolio, are not in and of themselves determinative of fair value or revenue recognition and are presented for indicative purposes. CIM rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. 17 The following is a description of the conditions associated with each investment rating used in this ratings system: Investment Rating Description 1 Indicates the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. 2 Indicates a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing in accordance with our analysis of its business and the full return of principal and interest or dividend is expected. 3 Indicates that the risk to our ability to recoup the cost of such investment has increased since origination or acquisition, but full return of principal and interest or dividend is expected. A portfolio company with an investment rating of 3 requires closer monitoring. 4 Indicates that the risk to our ability to recoup the cost of such investment has increased significantly since origination or acquisition, including as a result of factors such as declining performance and noncompliance with debt covenants, and we expect some loss of interest, dividend or capital appreciation, but still expect an overall positive internal rate of return on the investment. 5 Indicates that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition and the portfolio company likely has materially declining performance. Loss of interest or dividend and some loss of principal investment is expected, which would result in an overall negative internal rate of return on the investment. For investments rated 3, 4 or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company. CIM monitors and, when appropriate, changes investment ratings assigned to each investment in our portfolio. In connection with our valuation process, CIM reviews these investment ratings on a quarterly basis. The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of December 31, 2021 and 2020, excluding short term investments of $87,917 and $73,597, respectively: December 31, 2021 December 31, 2020 Investment Rating Investments Fair Value Percentage of Investment Portfolio Investments Fair Value Percentage of Investment Portfolio 1 $ 47,221 2.8 % $ 2,997 0.2 % 2 1,373,509 82.5 % 1,173,191 78.5 % 3 233,223 14.0 % 309,930 20.7 % 4 8,201 0.5 % 9,210 0.6 % 5 3,968 0.2 % 446 — $ 1,666,122 100.0 % $ 1,495,774 100.0 % The amount of the investment portfolio in each rating category may vary substantially from period to period resulting primarily from changes in the composition of such portfolio as a result of new investment, repayment and exit activities. In addition, changes in the rating of investments may be made to reflect our expectation of performance and changes in investment values. Valuation Process . Each quarter, we value investments in our portfolio, and such values are disclosed each quarter in reports filed with the SEC. Investments for which market quotations are readily available are recorded at such market quotations. With respect to investments for which market quotations are not readily available, our board of directors determines the fair value of investments in good faith utilizing the input of our audit committee, CIM, and any other professionals or materials that our board of directors deems worthy and relevant, including independent third-party valuation firms, if applicable. Managerial Assistance . As a BDC, we must offer, and provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Depending on the nature of the assistance required, CIM will provide such managerial assistance on our behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than CIM, will retain any fees paid for such assistance. 18 Exit Exit Transactions. We seek to invest in companies that can generate consistent cash flow to repay their loans while maintaining growth in their businesses. We expect this internally generated cash flow to be a key means through which we will receive timely payment of interest and loan principal. Additionally, we attempt to invest in portfolio companies whose business models and growth prospects offer attractive exit possibilities via third-party transactions, including sales to strategic or other buyers and initial public offerings of common stock. Such third-party transactions may be particularly important in realizing capital gains through the equity portions of our investments. We also seek to exit investments in secondary market transactions when price targets are achieved or circumstances otherwise warrant. Financing Arrangements To seek to enhance our returns, we employ leverage as market conditions permit and at the discretion of CIM. Our (i) $575 million senior secured credit facility, or the JPM Credit Facility, with JPMorgan Chase Bank, National Association, or JPM, (ii) $150 million repurchase agreement, or the UBS Facility, with UBS AG, or UBS, (iii) $125 million senior unsecured notes due in 2026, or the 2026 Notes, and (iv) $30 million unsecured term loan, or the More Term Loan, with More Provident Funds Ltd., or More, allow us to borrow money and lever our investment portfolio, subject to the limitations of the 1940 Act, with the objective of increasing our yield. This is known as “leverage” and could increase or decrease returns to our shareholders. See Note 8 to our consolidated financial statements contained in this annual report on Form 10-K for additional information regarding our financing arrangements. On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC's debt to equity from a maximum of 1-to-1 to a maximum 2-to-1, so long as certain approval and disclosure requirements are satisfied. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%, which allows us to increase the maximum amount of leverage that we are permitted to incur. Such asset coverage ratio became effective on December 31, 2021. We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As of December 31, 2021 and 2020, our asset coverage ratio based on the aggregate amount outstanding of our senior securities was 212% and 221%, respectively. Determination of Net Asset Value The value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940 Act, which requires that we value our assets as follows: (i) the market price for those securities for which a market quotation is readily available, and (ii) for all other securities and assets, at fair value, as determined in good faith by our board of directors. As a BDC, Section 2(a)(41) of the 1940 Act requires the board of directors to determine in good faith the fair value of portfolio securities for which a market price is not readily available, and it does so in conjunction with the application of our valuation procedures by CIM. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations in our consolidated financial statements. Regulation We have elected to be regulated as a BDC under the 1940 Act. A BDC is a special category of investment company under the 1940 Act that was added by Congress to facilitate the flow of capital to private companies and small public companies that do not have efficient or cost-effective access to public capital markets or other conventional forms of corporate financing. BDCs make investments in private or thinly-traded public companies in the form of long-term debt and/or equity capital, with the goal of generating current income or capital growth. BDCs are closed-end funds that elect to be regulated as BDCs under the 1940 Act. As such, BDCs are subject to only certain provisions of the 1940 Act, as well as the Securities Act and the Exchange Act. BDCs are provided greater flexibility under the 1940 Act than are other investment companies in dealing with their portfolio companies, issuing securities, and compensating their managers. BDCs can be internally or externally managed and may qualify to elect to be taxed as RICs for federal tax purposes. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters, and affiliates of those affiliates or underwriters. The 1940 Act requires that a majority of a BDC’s directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or withdraw our election as a BDC, unless approved by a majority of our outstanding voting securities. 19 The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) a majority of our outstanding voting securities. We are generally not able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our shareholders, and our shareholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing shareholders, in payment of distributions and in certain other limited circumstances. At our reconvened Annual Meeting of Shareholders held on August 9, 2021, our shareholders approved our ability to sell or otherwise issue during the next year shares of our common stock at a price below our then current NAV per share in one or more public or private offerings of our common stock not exceeding 25% of such then outstanding shares. If we issue such shares and again receive such approval from shareholders in the future, we may issue shares of our common stock at a price below the then current NAV per share of common stock. As a BDC, we are subject to certain regulatory restrictions in negotiating or investing in certain investments. For example, we generally are not permitted to co-invest with certain entities affiliated with CIM in transactions originated by CIM or its affiliates unless we obtain an exemptive order from the SEC. We have filed an application with the SEC seeking an exemptive order from such restrictions, but there can be no assurances the SEC will ultimately grant the relief sought in the exemptive application. Co-investments made under the exemptive relief, if granted, would be subject to compliance with the conditions and other requirements contained in the exemptive relief provided by the SEC. We are limited in our ability to engage in co-investment transactions with CIM and its affiliates without exemptive relief from the SEC. Even if we receive exemptive relief, CIM’s investment committee may determine that we should not participate in a co-investment transaction. We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act. We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might indirectly subject our shareholders to additional expenses as they will indirectly be responsible for the costs and expenses of such companies. None of our investment policies are fundamental and any may be changed without shareholder approval. Qualifying Assets Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following: 1. Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer that: a. is organized under the laws of, and has its principal place of business in, the U.S.; b. is not an investment company (other than a small business investment company wholly-owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and c. satisfies any of the following: i. does not have any class of securities that is traded on a national securities exchange; ii. has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million; iii. is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or iv. is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million. 2. Securities of any eligible portfolio company that we control. 20 3. Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. 4. Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. 5. Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. 6. Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. In addition, a BDC must have been organized and have its principal place of business in the U.S. and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. Managerial Assistance to Portfolio Companies In order to count portfolio securities as qualifying assets for the purpose of the 70% test, we must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where we purchase such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. Depending on the nature of the assistance required, CIM will provide such managerial assistance on our behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than CIM, will retain any fees paid for such assistance. Temporary Investments Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we may not meet the RIC diversification tests, as further described in the “Taxation as a Regulated Investment Company” section below, in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. CIM will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions. Senior Securities We were permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, was at least equal to 200% immediately after each such issuance. Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. On December 30, 2021, we received approval from our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act. Such asset coverage ratio became effective on December 31, 2021. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. See “Item 1A. Risk Factors - Risks Related to Business Development Companies - Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.” 21 Code of Ethics We and CIM have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. The code of ethics is attached as an exhibit to our Current Report on Form 8-K filed with the SEC on May 3, 2019, which is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov . Shareholders may also obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov . Compliance Policies and Procedures We and CIM have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. Our Chief Compliance Officer, or CCO, is responsible for administering our policies and procedures and CIM’s chief compliance officer is responsible for administering its policies and procedures. Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to CIM. The proxy voting policies and procedures of CIM are set forth below. The guidelines are reviewed periodically by CIM and our non-interested directors, and, accordingly, are subject to change. Introduction As an investment adviser registered under the Advisers Act, CIM has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients. These policies and procedures for voting proxies for the investment advisory clients of CIM are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. Proxy Policies CIM will vote proxies relating to our securities in a manner that it believes, in its discretion, to be in the best interest of our shareholders. It will review on a case-by-case basis each proposal submitted for a shareholder vote to determine its impact on the portfolio securities held by its clients. Although CIM will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so. The proxy voting decisions of CIM are made by the senior officers who are responsible for monitoring each of its clients’ investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision-making process disclose to the chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote and (b) officers and employees involved in the decision making process or vote administration are prohibited from revealing how CIM intends to vote on a proposal in order to reduce any attempted influence from interested parties. The CCO of CIM will work with the appropriate senior officers to resolve any conflict that may arise. Proxy Voting Records Shareholders may obtain information, without charge, regarding how CIM voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, c/o CĪON Investment Corporation, 3 Park Avenue, 36th Floor, New York, NY 10016. Privacy The following information is provided to help investors understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties. 22 We generally will not receive any nonpublic personal information relating to shareholders who purchase our common stock. We may collect nonpublic personal information regarding our existing investors from sources such as subscription agreements, investor questionnaires and other forms; individual investors’ account histories; and correspondence between us and individual investors. We may share information that we collect regarding an investor with our affiliates and the employees of such affiliates for everyday business purposes, for example, to service the investor’s accounts and, unless an investor opts out, provide the investor with information about other products and services offered by us or our affiliates that may be of interest to the investor. In addition, we may disclose information that we collect regarding investors to third parties who are not affiliated with us (i) as authorized by our investors in investor subscription agreements; (ii) as required by applicable law or in connection with a properly authorized legal or regulatory investigation, subpoena or summons, or to respond to judicial process or government regulatory authorities having property jurisdiction; (iii) as required to fulfill investor instructions; or (iv) as otherwise permitted by applicable law to perform support services for investor accounts or process investor transactions with us or our affiliates. Any party not affiliated with us that receives nonpublic personal information relating to investors from us is required to adhere to confidentiality agreements and to maintain appropriate safeguards to protect your information. Additionally, for officers, employees and agents of ours and our affiliates, access to such information is restricted to those who need such access to provide services to us and investors. We maintain physical, electronic and procedural safeguards to seek to guard investor nonpublic personal information. For a discussion of the risks associated with cyber incidents, see “Item 1A—Risk Factors—General Risk Factors—We are subject to risks associated with cybersecurity and cyber incidents” in this report. Election to be Taxed as a Regulated Investment Company We elected to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally will not be subject to corporate-level federal income taxes on any income that we distribute to our shareholders from our tax earnings and profits. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to maintain RIC tax treatment, we must distribute to our shareholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for distributions paid. We refer to this as the Annual Distribution Requirement. Taxation as a Regulated Investment Company If we: • qualify as a RIC; and • satisfy the Annual Distribution Requirement, then we will not be subject to federal income tax on the portion of our income we distribute (or are deemed to distribute) to shareholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our shareholders. We will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless we distribute in a timely manner 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 each calendar year, (2) 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one-year period ending October 31 in that calendar year and (3) any ordinary income and capital gain net income recognized, but not distributed, in preceding years and on which we paid no federal income tax, or the Excise Tax Avoidance Requirement. In order to qualify as a RIC for federal income tax purposes, we must, among other things: • continue to qualify as a BDC under the 1940 Act at all times during each taxable year; • derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities, loans, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities, or the 90% Income Test; and • diversify our holdings so that at the end of each quarter of the taxable year: ◦ at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and ◦ no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships,” or the Diversification Tests. 23 For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with contractual “payment-in-kind,” or PIK, interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each taxable year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to qualify for and maintain RIC tax treatment under the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forego new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. Our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous. Under the 1940 Act, we are not permitted to make distributions to our shareholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. As a result, we may be prohibited from making distributions necessary to satisfy the Annual Distribution Requirement. Even if we are not prohibited from making distributions, our ability to raise additional capital to satisfy the Annual Distribution Requirement may be limited. If we are not able to make sufficient distributions to satisfy the Annual Distribution Requirement, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. Certain of our investment practices may be subject to special and complex federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (5) cause us to recognize income or gain without receipt of a corresponding distribution of cash, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the characterization of certain complex financial transactions and (8) produce income that will not be qualifying income for purposes of the 90% Income Test. We intend to monitor our transactions and may make certain tax elections to mitigate the potential adverse effect of these provisions, but there can be no assurance that any adverse effects of these provisions will be mitigated. If we purchase shares in a passive foreign investment company, or a PFIC, we may be subject to federal income tax on its allocable share of a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if our allocable share of such income is distributed as a taxable dividend to our shareholders. Additional charges in the nature of interest generally will be imposed on us in respect of deferred taxes arising from any such excess distribution or gain. If we invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code, or a QEF, in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF. Alternatively, we may be able to elect to mark-to-market at the end of each taxable year our shares in a PFIC; in this case, we will recognize as ordinary income our allocable share of any increase in the value of such shares, and as ordinary loss our allocable share of any decrease in such value to the extent that any such decrease does not exceed prior increases included in our income. Under either election, we may be required to recognize in a year income in excess of distributions from PFICs and proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of the 4% excise tax. Exchange Act and Sarbanes-Oxley Act Compliance We are subject to the reporting and disclosure requirements of the Exchange Act, including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the Sarbanes-Oxley Act, which imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example: • pursuant to Rule 13a-14 of the Exchange Act, our co-chief executive officers and our chief financial officer are required to certify the accuracy of the financial statements contained in our periodic reports; • pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures; and • pursuant to Rule 13a-15 of the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting. 24 The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We intend to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith. As a non-accelerated filer, we are currently exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. This may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected. Due to our Listing, we will no longer be a “non-accelerated filer” as defined in Rule 12b-2 of the Exchange Act and as a result, commencing with our Annual Report on Form 10-K for the year ending December 31, 2022, we will be required to comply with the independent auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Complying with Section 404(b) requires a rigorous compliance program as well as adequate time and resources. We will be subject to significant documentation and administrative burdens as a result of being required to comply with Section 404(b), which will require us to utilize additional resources, and our internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our securities. Competition Our primary competitors provide financing to middle-market companies and include other BDCs, commercial and investment banks, commercial financing companies, CLOs, private funds, including hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Some of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. We do not seek to compete primarily based on the interest rates we offer and CIM believes that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we compete with our competitors based on our reputation in the market, our existing investment platform, the seasoned investment professionals of CIM, our experience and focus on middle-market companies, our disciplined investment philosophy, our extensive industry focus and relationships and our flexible transaction structuring. Compliance with NYSE Listing Requirements Our common stock is listed on the NYSE under the symbol “CION”. As a listed company on the NYSE, we are subject to various listing standards including corporate governance listing standards. We believe we are in compliance with these rules and standards. Other We are periodically examined by the SEC for compliance with the 1940 Act. We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful misconduct, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. Employees We do not currently have any employees and we do not currently intend to hire any in the future. The compensation of our chief financial officer and treasurer, Keith S. Franz, and our chief compliance officer and secretary, Stephen Roman, is paid by CIM. We reimburse CIM for the compensation paid to our chief financial officer and his staff and our chief compliance officer and his staff. In the future, CIM may retain additional investment personnel based upon its needs. 25 Recent Developments Joint Venture with EagleTree Capital, LP On December 21, 2021, we formed CION/EagleTree Partners, LLC, or CION/EagleTree, an off-balance sheet joint venture partnership, with an affiliate of EagleTree Capital, LP, or EagleTree, through which EagleTree made a Firm-level investment with proprietary capital. CION/EagleTree will jointly pursue debt opportunities and special situation, crossover, subordinated and other junior capital investments that leverage our and EagleTree's combined sourcing and portfolio management capabilities. The initial holdings of CION/EagleTree consisted of a diversified portfolio of approximately $97 million of second lien loans and equity investments that were held by us immediately prior to closing and approximately $15 million of proprietary Firm-level cash contributed by an affiliate of EagleTree. The initial equity ownership of CION/EagleTree is 85% by us and 15% by an affiliate of EagleTree. Each of us and EagleTree will have equal voting rights on the board of directors of CION/EagleTree. Expense Support Agreement with CIM Pursuant to an expense support and conditional reimbursement agreement entered into on January 2, 2018 between us and CIM, CIM agreed to provide expense support to us in an amount that was sufficient to: (i) ensure that no portion of our distributions to shareholders was paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we achieved economies of scale sufficient to ensure that we bore a reasonable level of expense in relation to our investment income. Under certain conditions, CIM would have been entitled to reimbursement of such expense support. On December 31, 2021, we and CIM allowed the expense support and conditional reimbursement agreement to expire in accordance with its terms. COVID-19 The rapid spread of COVID-19, and associated impacts on the U.S. and global economies and the financial and credit markets, initially had negatively impacted, and may again negatively impact, our business operations and the business operations of some of our portfolio companies. We cannot at this time fully predict the impact of COVID-19, including new variants, such as Delta and Omicron, on our business or the business of our portfolio companies, its duration or magnitude or the extent to which it will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition, including, without limitation, our ability to pay distributions to our shareholders. We expect that certain of our portfolio companies will continue to experience economic distress for the foreseeable future and may significantly limit business operations if subjected to prolonged economic distress. These developments could result in a decrease in the value of certain of our investments. COVID-19 initially had adverse effects on our investment income and may again have adverse effects in the future. These adverse effects may require us to restructure certain of our investments, which could result in further reductions to our investment income or in impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity initially had an adverse effect on our business, financial condition, results of operations and cash flows. These events initially limited our investment originations, which may occur again in the future and may also have a material negative impact on our operating results. We will continue to carefully monitor the impact of COVID-19 on our business and the business of our portfolio companies. Because the full effects of COVID-19 are not capable of being known at this time, we cannot estimate the impacts of COVID-19 on our future financial condition, results of operations or cash flows, including its effects on us with respect to our compliance with covenants in our financing arrangements with lenders. Available Information We file with or submit to the SEC annual, quarterly and current reports, proxy statements and other information meeting the informational requirements of the Exchange Act. We maintain a website at www.cionbdc.com and make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through our website. Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K and shareholders should not consider information contained on our website to be part of this Annual Report on Form 10-K. You may also obtain such information by contacting us, in writing at: 3 Park Avenue, 36th Floor, New York, New York 10016, or toll free at 1-877-822-4276 or collect at (212) 418-4700. The SEC maintains an Internet site that contains reports, proxy statements and other information filed electronically by us with the SEC which are available on the SEC’s Internet site at http://www.sec.gov. Copies of these reports, proxy statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov. 26 Item 1A. Risk Factors Investing in our securities involves certain risks relating to our structure and investment objective. You should carefully consider these risk factors, together with all of the other information included in this report, before you decide whether to make an investment in our securities. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our NAV and the trading price of our shares of common stock could decline, and you may lose all or part of your investment. Risks Relating to Our Business and Structure Our board of directors may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to our results of operations and financial condition. Our board of directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without shareholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and trading price of our stock. However, the effects might be adverse, which could negatively impact our ability to pay shareholders distributions and cause shareholders to lose all or part of their investment. Price declines in the medium- and large-sized U.S. corporate debt market may adversely affect the fair value of our portfolio, reducing our net asset value through increased net unrealized depreciation. Conditions in the medium- and large-sized U.S. corporate debt market may deteriorate, as seen during the 2008 financial crisis and the 2020 outbreak of the COVID-19 pandemic, which may cause pricing levels to similarly decline or be volatile. During the financial crisis and the 2020 outbreak of the COVID-19 pandemic, many institutions were forced to raise cash by selling their interests in performing assets in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders and/or, in the case of hedge funds and other investment vehicles, to satisfy widespread redemption requests. This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with falling underlying credit values, and other constraints resulting from the credit crisis generating further selling pressure. If similar events occurred in the medium- and large-sized U.S. corporate debt market, our net asset value could decline through an increase in unrealized depreciation and incurrence of realized losses in connection with the sale of our investments, which could have a material adverse impact on our business, financial condition and results of operations. Our ability to achieve our investment objective depends on the ability of CIM to manage and support our investment process. If CIM was to lose any members of its senior management team, our ability to achieve our investment objective could be significantly harmed. Since we have no employees, we depend on the investment expertise, skill and network of business contacts of the broader networks of CIM and its affiliates. CIM evaluates, negotiates, structures, executes, monitors and services our investments. Our future success depends to a significant extent on the continued service and coordination of CIM and its senior management team. The departure of any members of CIM’s senior management team could have a material adverse effect on our ability to achieve our investment objective. Our ability to achieve our investment objective depends on CIM’s ability to identify and analyze, and to invest in, finance and monitor companies that meet our investment criteria. CIM’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objective, CIM may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. CIM may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations. The investment advisory agreement between CIM and us has been approved pursuant to Section 15 of the 1940 Act. In addition, the investment advisory agreement has termination provisions that allow the parties to terminate the agreement. The investment advisory agreement may be terminated at any time, without penalty, by us or by CIM, upon 60 days' notice. If the agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event such agreement is terminated, it may be difficult for us to replace CIM. Because our business model depends to a significant extent upon relationships with public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), investment banks and commercial banks, the inability of CIM or its affiliates to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. CIM depends on its broader organizations’ relationships with public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), investment banks and commercial banks, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If CIM or its affiliates fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom CIM has relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us. 27 We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses. We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, have invested in areas in which they have not traditionally invested, including making investments in small to mid-sized private U.S. companies. As a result of these new entrants, competition for investment opportunities in small and middle-market private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms or structure. If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant increase in the number and/or the size of our competitors in our target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC. As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments. Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by our board of directors. There is not a public market for the securities of the privately-held companies in which we invest. Most of our investments will not be publicly traded or actively traded on a secondary market. As a result, we value these securities quarterly at fair value as determined in good faith by our board of directors as required by the 1940 Act. Certain factors that may be considered in determining the fair value of our investments include investment dealer quotes for securities traded on the secondary market for institutional investors, the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. As a result, our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially differ from the value that we may ultimately realize upon the sale of one or more of our investments. There is a risk that investors in our common stock may not receive distributions or that our distributions may not grow over time. We may not maintain investment results that will allow us to make a specified level of distributions or year-to-year increases in distributions. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. The amount of any distributions we may make is uncertain and our distributions may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to shareholders that will lower their tax basis in their common stock and reduce the amount of funds we have for investment in targeted assets. We may fund our distributions to shareholders 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, and dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies. Pursuant to an expense support and conditional reimbursement agreement entered into on January 2, 2018 between us and CIM, CIM agreed to provide expense support to us in an amount that was sufficient to: (i) ensure that no portion of our distributions to shareholders was paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we achieved economies of scale sufficient to ensure that we bore a reasonable level of expense in relation to our investment income. On December 31, 2021, we and CIM allowed the expense support and conditional reimbursement agreement to expire in accordance with its terms. For the years ended December 31, 2019, 2020 and 2021, none of our distributions resulted from expense support from CIM. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this section. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC may limit our ability to pay distributions. All distributions are and will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, compliance with the terms, conditions and covenants in our financing arrangements, and such other factors as our board of directors may deem relevant from time to time. We cannot assure investors that we will continue to pay distributions to our shareholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of our borrowings in anticipation of future cash flow, which may constitute a return of shareholders’ capital. A return of capital is a return of shareholders’ investment, rather than a return of earnings or gains derived from our investment activities. A shareholder will not be subject to immediate taxation on the amount of any distribution treated as a return of capital to the extent of the shareholder’s basis in its shares; however, the shareholder's basis in its shares will be reduced (but not below zero) by the amount of the return of capital, which will result in the shareholder recognizing additional gain (or a lower loss) when the shares are sold. To the extent that the amount of the return of capital exceeds the shareholder's basis in its shares, such excess amount will be treated as gain from the sale of the shareholder’s shares. A shareholder’s basis in the investment will be reduced by the nontaxable amount, which will result in additional gain (or a lower loss) when the shares are sold. Distributions from the proceeds of our borrowings also could reduce the amount of capital we ultimately invest in our portfolio companies. 28 Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy. We and our portfolio companies are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our shareholders, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans as set forth herein and may result in our investment focus shifting from the areas of expertise of CIM to other types of investments in which CIM may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our financial condition and results of operations and the value of a shareholder’s investment. As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us. As a public company, we are subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. Maintaining an effective system of internal controls may require significant expenditures, which may negatively impact our financial performance and our ability to make distributions. This process also will result in a diversion of our management’s time and attention. We cannot be certain of when our evaluation, testing, and remediation actions will be completed or the impact of the same on our operations. In addition, we may be unable to ensure that the process is effective or that our internal controls over financial reporting are or will be effective in a timely manner. In the event that we are unable to develop or maintain an effective system of internal controls and maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected. Due to our Listing, we will no longer be a “non-accelerated filer” as defined in Rule 12b-2 of the Exchange Act and as a result, commencing with our Annual Report on Form 10-K for the year ending December 31, 2022, we will be required to comply with the independent auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Complying with Section 404(b) requires a rigorous compliance program as well as adequate time and resources. We will be subject to significant documentation and administrative burdens as a result of being required to comply with Section 404(b), which will require us to utilize additional resources, and our internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our securities. We may experience fluctuations in our quarterly results. We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of our expenses (including our borrowing costs), variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution. As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by our board of directors. Decreases in the market value or fair value of our investments relative to amortized cost will be recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods. In addition, decreases in the market value or fair value of our investments will reduce our net asset value. Risks Relating to CIM and its Affiliates CIM and its affiliates, including our officers and some of our directors, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders. CIM and its affiliates receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. Among other matters, the decision to utilize leverage will increase our assets and, as a result, will increase the amount of management fees payable to CIM and may increase the amount of subordinated income incentive fees payable to CIM. 29 We may be obligated to pay CIM incentive compensation even if we incur a net loss due to a decline in the value of our portfolio. Our investment advisory agreement entitles CIM to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay CIM incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter. Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued, but not yet received, including original issue discount, which may arise if we receive warrants in connection with the origination of a loan or possibly in other circumstances, or contractual PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. To the extent we do not distribute accrued PIK interest, the deferral of PIK interest has the simultaneous effects of increasing the assets under management and increasing the base management fee at a compounding rate, while generating investment income and increasing the incentive fee at a compounding rate. In addition, the deferral of PIK interest would also increase the loan-to-value ratio at a compounding rate if the issuer’s assets do not increase in value, and investments with a deferred interest feature, such as PIK interest, may represent a higher credit risk than loans on which interest must be paid in full in cash on a regular basis. For example, if a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. CIM is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received. There may be conflicts of interest related to obligations that CIM’s senior management and investment teams have to other clients. The members of the senior management and investment teams of CIM serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our shareholders. Our investment objective may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. In particular, we rely on CIM to manage our day-to-day activities and to implement our investment strategy. CIM and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, CIM, its officers and employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of its affiliated funds. CIM and its officers and employees will devote only as much of its or their time to our business as CIM and its officers and employees, in their judgment, determine is reasonably required, which may be substantially less than their full time. Our base management and incentive fees may induce CIM to make and identify speculative investments or to incur additional leverage. The incentive fee payable by us to CIM may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to CIM is determined may encourage it to use leverage to increase the return on our investments. The part of the management and incentive fees payable to CIM that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities. This fee structure may be considered to involve a conflict of interest for CIM to the extent that it may encourage CIM to favor debt financings that provide for deferred interest, rather than current cash payments of interest. In addition, the fact that our base management fee is payable based upon our gross assets, which would include any borrowings for investment purposes, may encourage CIM to use leverage to make additional investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor holders of our common stock. Such a practice could result in our investing in more speculative securities than would otherwise be in our best interests, which could result in higher investment losses, particularly during cyclical economic downturns. CIM relies on key personnel, the loss of any of whom could impair its ability to successfully manage us. Our future success depends, to a significant extent, on the continued services of the officers and employees of CIM or its affiliates. The loss of services of one or more members of CIM’s management team, including members of our investment committee, could adversely affect our financial condition, business and results of operations. The compensation we pay to CIM was determined without independent assessment on our behalf, and these terms may be less advantageous to us than if such terms had been the subject of arm’s-length negotiations. The compensation we pay to CIM was not entered into on an arm’s-length basis with an unaffiliated third party. As a result, the form and amount of such compensation may be less favorable to us than they might have been had these been entered into through arm’s-length transactions with an unaffiliated third party. 30 CIM’s influence on conducting our operations gives it the ability to increase its fees, which may reduce the amount of cash flow available for distribution to our shareholders. CIM is paid a base management fee calculated as a percentage of our gross assets and unrelated to net income or any other performance base or measure. CIM may advise us to consummate transactions or conduct our operations in a manner that, in CIM’s reasonable discretion, is in the best interests of our shareholders. These transactions, however, may increase the amount of fees paid to CIM. CIM’s ability to influence the base management fee paid to it by us could reduce the amount of cash flow available for distribution to our shareholders. Risks Relating to Business Development Companies The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC. As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Business – Regulation.” Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Conversely, if we fail to invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments. Failure to maintain our status as a BDC would reduce our operating flexibility. If we do not remain a BDC, we might be regulated as a registered closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility. Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a result of the annual distribution requirement to qualify as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” as defined under the 1940 Act, including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance (effective on December 31, 2021 after we obtained the requisite shareholder approval on December 30, 2021 and otherwise continue to satisfy disclosure requirements in accordance with the 1940 Act). Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. We have borrowed for investment purposes. If the value of our assets declines, we may be unable to satisfy the asset coverage test, which would prohibit us from paying distributions and could prevent us from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price per share, after deducting selling commissions and dealer manager fees, that is below our net asset value per share, which may be a disadvantage as compared with other public companies. However, in 2021 we obtained, and in 2022 we intend to seek, the approval of our shareholders to issue shares of our common stock at prices below the then current NAV per share of our common stock in accordance with the 1940 Act. We may also, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the current net asset value of our common stock if our board of directors, including our independent directors, determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, as well as those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the fair value of such securities. 31 Our ability to enter into transactions with our affiliates is restricted. We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of the independent members of our board of directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and generally we will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of our board of directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of our board of directors and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers, directors, CIM or their respective affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any fund or any portfolio company of a fund managed by CIM or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us. We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. The net proceeds from the sale of common stock was used for our investment opportunities, operating expenses and for payment of various fees and expenses such as base management fees, incentive fees and other expenses. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require additional debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to create and maintain a broad portfolio of investments and achieve our investment objective, which may negatively impact our results of operations and reduce our ability to make distributions to our shareholders. We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer. We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers, or within a particular industry, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company or to a general downturn in the economy. However, we will be subject to the diversification requirements applicable to RICs under Subchapter M of the Code. We are subject to risks related to corporate social responsibility. Our business faces increasing public scrutiny related to environmental, social and governance, or ESG, activities, which are increasingly considered to contribute to the long-term sustainability of a company’s performance. A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions. Our brand and reputation may be negatively impacted if we fail to act responsibly in a number of areas, such as considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand and our relationships with investors, which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business. For example, the SEC has announced that it may require disclosure of certain ESG-related matters. There is a risk that a significant reorientation in the market following the implementation of these and further measures could be adverse to our portfolio companies if they are perceived to be less valuable as a consequence of, e.g., their carbon footprint or “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case). At this time, there is uncertainty regarding the scope of such proposals or when they would become effective (if at all). Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our profitability. 32 Risks Relating to Our Investments Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment. We invest and intend to invest in the following types of loans of private and thinly-traded U.S. middle-market companies. Senior Secured Debt. First Lien Loans and Second Lien Loans . When we invest in senior secured term debt, including first lien loans and second lien loans, we will generally take a security interest in the available assets of these portfolio companies, including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in some circumstances, our security interest could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies. Unitranche Loans. We also expect to invest in unitranche loans, which are loans that combine both senior and subordinated financing, generally in a first-lien position. Unitranche loans provide all of the debt needed to finance a leveraged buyout or other corporate transaction, both senior and subordinated, but generally in a first lien position, while the borrower generally pays a blended, uniform interest rate rather than different rates for different tranches. Unitranche debt generally requires payments of both principal and interest throughout the life of the loan. Unitranche debt generally has contractual maturities of five to six years and interest is typically paid quarterly. Generally, we expect these securities to carry a blended yield that is between senior secured and subordinated debt interest rates. Unitranche loans provide a number of advantages for borrowers, including the following: simplified documentation, greater certainty of execution and reduced decision-making complexity throughout the life of the loan. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid in kind. Because unitranche loans combine characteristics of senior and subordinated financing, unitranche loans have risks similar to the risks associated with senior secured debt, including first lien loans and second lien loans, and subordinated debt in varying degrees according to the combination of loan characteristics of the unitranche loan. Unsecured Debt. Our unsecured debt, including corporate bonds and subordinated, or mezzanine, investments will generally rank junior in priority of payment to senior debt. This may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our shareholders to non-cash income, including PIK interest and original issue discount. Loans structured with these features may represent a higher level of credit risk than loans that require interest to be paid in cash at regular intervals during the term of the loan. Since we generally will not receive any principal repayments prior to the maturity of some of our unsecured debt investments, such investments will have greater risk than amortizing loans. Collateralized Securities, Structured Products and Other. We may also invest in collateralized securities, structured products and other similar securities, which may include CDOs, CBOs, CLOs, structured notes and credit-linked notes. Investments in such securities and products involve risks, including, without limitation, credit risk and market risk. Certain of these securities and products may be thinly traded or have a limited trading market. Where our investments in collateralized securities, structured products and other similar securities are based upon the movement of one or more factors, including currency exchange rates, interest rates, reference bonds (or loans) and stock indices, depending on the factor used and the use of multipliers or deflators, changes in interest rates and movement of any factor may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest rate on such a security or product to be reduced to zero, and any further changes in the reference instrument may then reduce the principal amount payable on maturity of the security or product. Collateralized securities, structured products and other similar securities may be less liquid than other types of securities and more volatile than the reference instrument or security underlying the product. Equity Investments. We make selected equity investments. In addition, when we invest in senior secured debt, including first lien loans and second lien loans, or unsecured debt, we may acquire warrants to purchase equity securities. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. 33 Non-U.S. Securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies, to the extent permitted by the 1940 Act. Because evidence of ownership of such securities usually are held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. Since non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in current rates and exchange control regulations. Below-Investment Grade Debt Securities . In addition, we invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Debt securities rated below investment grade quality are generally regarded as having predominantly speculative characteristics and may carry a greater risk with respect to a borrower’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. To the extent original issue discount constitutes a portion of our income, we will be exposed to risks associated with the deferred receipt of cash representing such income. Our investments may include original issue discount instruments. To the extent original issue discount constitutes a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash, including the following: • Original issue discount instruments may have unreliable valuations because the accruals require judgments about collectability. • Original issue discount instruments may create heightened credit risks because the inducement to trade higher rates for the deferral of cash payments typically represents, to some extent, speculation on the part of the borrower. • For accounting purposes, distributions to shareholders representing original issue discount income do not come from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of original issue discount income comes from the cash invested by shareholders, the 1940 Act does not require that shareholders be given notice of this fact. • In the case of PIK “toggle” debt, the PIK election has the simultaneous effects of increasing the assets under management, thus increasing the base management fee, and increasing the investment income, thus increasing the potential for realizing incentive fees. • Since original issue discount will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement applicable to RICs, even if we will not have received any corresponding cash amount. As a result, we may have difficulty meeting such annual distribution requirement necessary to obtain and maintain RIC tax treatment under the Code. If we are not able to obtain cash from other sources, and choose not to make a qualifying share distribution, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. • Original issue discount creates risk of non-refundable cash payments to the advisor based on non-cash accruals that may never be realized. Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies. We intend to invest primarily in senior secured debt, including first lien loans, second lien loans and unitranche loans of private and thinly-traded U.S. middle-market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any payment or distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any payments or distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. If one of our portfolio companies were to file for bankruptcy, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. 34 We generally will not control our portfolio companies. We do not expect to control most of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements with such portfolio companies may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of the company’s common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings. We will be exposed to risks associated with changes in interest rates. We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, have a material adverse effect on our ability to achieve our investment objective and our target rate of return on invested capital. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs, if any. Interest rates in the United States are currently at historically low levels. Certain countries have experienced negative interest rates on certain fixed-income instruments. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility. The Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022. However, the timing, number and amount of any such future interest rate increases are uncertain. The discontinuation of the LIBOR benchmark interest rate could adversely affect the value of LIBOR‑indexed, floating‑rate debt securities in our portfolio or the cost of our borrowings, resulting in an adverse effect on our business, financial condition, and results of operations. National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices that are deemed to be “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority, or the FCA, which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020, ICE Benchmark Administration, or the IBA, the administrator of LIBOR tenors, with the support of the U.S. Federal Reserve and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one-week and two-month USD LIBOR, and on June 30, 2023 for all other USD LIBOR tenors. The U.S. Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. On March 5, 2021, the IBA confirmed its intention to cease publication of (i) one-week and two-month USD LIBOR tenors after December 31, 2021 and (ii) remaining USD LIBOR tenors after June 30, 2023. On the same day, the FCA, as supervisor of IBA, made its announcement on the future cessation and loss of representativeness of the LIBOR benchmarks. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is expected to replace U.S. dollar LIBOR with a new index calculated by short‑term repurchase agreements, backed by Treasury securities, the “Secured Overnight Financing Rate”, or SOFR, plus a recommended spread adjustment as LIBOR’s replacement. Although there have been certain issuances utilizing SOFR or the Sterling Over Night Index Average (an alternative reference rate that is based on transactions), it is unknown whether SOFR or any other alternative reference rates will attain market acceptance as replacements for LIBOR. Given the inherent differences between LIBOR and SOFR, or any other alternative reference rates that may be established, the transition from LIBOR may disrupt the overall financial markets and adversely affect the market for LIBOR‑based securities, including our portfolio of LIBOR‑indexed, floating‑rate debt securities, or the cost of our borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR‑based securities, including the value and/or transferability of the LIBOR‑indexed, floating‑rate debt securities in our portfolio, or the cost of our borrowings. The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our accounting, financial reporting, loan servicing, liability management and other aspects of our business. We are assessing the impact of a transition from LIBOR; however, we cannot reasonably estimate the impact of the transition at this time. Additionally, the phase-out or replacement of LIBOR may decrease the demand for floating-rate loans, which could adversely impact our business and financial condition. We may need to renegotiate the credit agreements extending beyond June 30, 2023 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with SOFR or other alternative reference rates, which could require us to incur significant expense and may subject us to disputes or litigation over the appropriateness or comparability to the relevant replacement reference index. 35 Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies. Certain of our portfolio companies may be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and impact their ability to pay interest and principal on our loans. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations. International investments create additional risks. We have made, and expect to continue to make, investments in portfolio companies that are domiciled outside of the United States. We anticipate that up to 30% of our investments may be in assets located in jurisdictions outside the United States. Our investments in foreign portfolio companies are deemed “non-qualifying assets,” which means, as required by the 1940 Act, they may not constitute more than 30% of our total assets at the time of our acquisition of any asset, after giving effect to the acquisition. Notwithstanding that limitation on our ownership of foreign portfolio companies, those investments subject us to many of the same risks as our domestic investments, as well as certain additional risks including the following: • foreign governmental laws, rules and policies, including those restricting the ownership of assets in the foreign country or the repatriation of profits from the foreign country to the United States; • foreign currency devaluations that reduce the value of and returns on our foreign investments; • adverse changes in the availability, cost and terms of investments due to the varying economic policies of a foreign country in which we invest; • adverse changes in tax rates, the tax treatment of transaction structures and other changes in operating expenses of a particular foreign country in which we invest; • the assessment of foreign-country taxes (including withholding taxes, transfer taxes and value added taxes, any or all of which could be significant) on income or gains from our investments in the foreign country; • adverse changes in foreign-country laws, including those relating to taxation, bankruptcy and ownership of assets; • changes that adversely affect the social, political and/or economic stability of a foreign country in which we invest; • high inflation in the foreign countries in which we invest, which could increase the costs to us of investing in those countries; • deflationary periods in the foreign countries in which we invest, which could reduce demand for our assets in those countries and diminish the value of such investments and the related investment returns to us; and • legal and logistical barriers in the foreign countries in which we invest that materially and adversely limit our ability to enforce our contractual rights with respect to those investments. In addition, we may make investments in countries whose governments or economies may prove unstable. Certain of the countries in which we may invest may have political, economic and legal systems that are unpredictable, unreliable or otherwise inadequate with respect to the implementation, interpretation and enforcement of laws protecting asset ownership and economic interests. In some of the countries in which we may invest, there may be a risk of nationalization, expropriation or confiscatory taxation, which may have an adverse effect on our portfolio companies in those countries and the rates of return we are able to achieve on such investments. We may also lose the total value of any investment which is nationalized, expropriated or confiscated. The financial results and investment opportunities available to us, particularly in developing countries and emerging markets, may be materially and adversely affected by any or all of these political, economic and legal risks. 36 Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us. Certain debt investments that we make to portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any. The rights we may have with respect to the collateral securing the debt investments we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected. Economic recessions or downturns could impair our portfolio companies and adversely affect our operating results. Many of our portfolio companies may be susceptible to economic recessions or downturns and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our senior secured debt. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income and net asset value. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and adversely affect our operating results. A covenant breach or other defaults by our portfolio companies may adversely affect our operating results. A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. Investing in middle-market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results. Investments in middle-market companies involve the same risks that apply generally to investments in larger, more established companies. However, such investments have more pronounced risks in that middle-market companies: • may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing on any guarantees we may have obtained in connection with our investment; • have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns; • are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; • generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and members of CIM may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and • may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. 37 We may not realize gains from our equity investments. Certain investments that we may make could include warrants or other equity securities. In addition, we may make direct equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We intend to seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress. An investment strategy focused primarily on privately-held companies presents certain challenges, including, but not limited to, the lack of available information about these companies. We have invested and continue to invest primarily in privately-held companies. Investments in private companies pose significantly greater risks than investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and the ability to withstand financial distress. Second, the depth and breadth of experience of management in private companies tends to be less than that at public companies, which makes such companies more likely to depend on the management talents and efforts of a smaller group of persons and/or persons with less depth and breadth of experience. Therefore, the decisions made by such management teams and/or the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our investments and, in turn, on us. Third, the investments themselves tend to be less liquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns. Fourth, little public information generally exists about private companies. Further, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of CIM to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. A lack of liquidity in certain of our investments may adversely affect our business. We have invested and continue to invest in certain companies whose securities are not publicly traded or actively traded on the secondary market, and whose securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of certain of our investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. The reduced liquidity of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses. We may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded debt commitments. We may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded debt commitments. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment. We may acquire various financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce our cash available for distribution to our shareholders. We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. These financial instruments may be purchased on exchanges or may be individually negotiated and traded in over-the-counter markets. Use of such financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to pay distributions to our shareholders. 38 Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity. We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity. The effect of global climate change may impact the operations of our portfolio companies. There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition through, for example, decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions. Risks Relating to Our Debt Financings The Small Business Credit Availability Act of 2018 allows us to incur additional leverage and our shareholders have approved a proposal permitting us to incur additional leverage, effective December 31, 2021. As a BDC, we were generally not permitted to incur indebtedness unless immediately after such borrowings we had an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). On March 23, 2018, the Small Business Credit Availability of 2018, which amended Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum 2-to-1, so long as certain approval and disclosure requirements are satisfied. Specifically, a BDC is permitted to apply a lower minimum asset coverage ratio of 150% if: (1) the BDC complies with certain additional asset coverage disclosure requirements; and (2)(A) a “required majority” of the BDC’s directors, as defined in Section 57(o) of the 1940 Act, approves the application of such a lower minimum asset coverage ratio to the BDC, in which case the 150% minimum asset coverage ratio will become effective on the date that is one year after the date of such independent director approval; or (B) the BDC obtains, at a special or annual meeting of its shareholders at which a quorum is present, the approval of more than 50% of the votes cast for the application of such a lower minimum asset coverage ratio to the BDC, in which case the 150% minimum asset coverage ratio will become effective on the first day after the date of such shareholder approval. On December 30, 2021, we received approval from our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act, effective December 31, 2021. We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. We are also subject to asset coverage requirements for total borrowings under our financing arrangements. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock distributions, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. Because we borrow money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us. Since we have borrowed money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available for distribution to our shareholders, and result in losses. The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for loss on invested equity capital. Since we have used leverage to partially finance our investments, through borrowing from banks and other institutional investors, shareholders experience increased risks of investing in our common stock. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make distributions to our shareholders. In addition, our shareholders bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the management or incentive fees payable to CIM. 39 We may continue to use leverage to finance our investments. The amount of leverage that we employ will depend on CIM’s and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. There can be no assurance that leveraged financing will be available to us on favorable terms or at all. However, to the extent that we continue to use leverage to finance our assets, our financing costs will reduce cash available for distributions to shareholders. Moreover, we may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses. As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future. Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. See "Recent legislation may allow us to incur additional leverage” above for more information. On December 30, 2021, we received approval from our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act, which allows us to increase the maximum amount of leverage that we are permitted to incur. If this ratio declines below 150%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so. This could have a material adverse effect on our operations and investment activities. Moreover, our ability to make distributions to shareholders may be significantly restricted or we may not be able to make any such distributions whatsoever. The amount of leverage that we will employ will be subject to oversight by our board of directors, a majority of whom are independent directors with no material interests in such transactions. At December 31, 2021, 2020 and 2019, our borrowings for the BDC coverage ratio were $830,000, $725,000 and $841,042, respectively, and resulted in coverage ratios of 212%, 221% and 213%, respectively. For a detailed discussion on the coverage ratio calculation, refer to Note 13 to our consolidated financial statements included in this report. Illustration . Th e following table illus trates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $1.78 billion in total assets as of December 31, 2021, (ii) a weighted average cost of funds of 3.64%, (iii) $830 million in debt outstanding (i.e., assumes that 93% of the $880 million available to us as of December 31, 2021 under our financing arrangements as of such date is outstanding) and (iv) $931 million in shareholders’ equity. In order to compute the “Corresponding return to shareholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds times the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to shareholders. The return available to shareholders is then divided by our shareholders’ equity to determine the “Corresponding return to shareholders.” Actual interest payments may be different. Assumed Return on Our Portfolio (net of expenses) -10% -5% 0% 5% 10% Corresponding return to shareholders (25.35)% (14.72)% (4.10)% 6.53% 17.16% Similarly, assuming (i) $1.78 billion in total assets as of December 31, 2021, (ii) a weighted average cost of funds of 3.64% and (iii) $830 million in debt outstanding (i.e., assumes that 93% of the $880 million available to us as of December 31, 2021 under our financing arrangements as of such date is outstanding), our assets would need to yield an annual return (net of expenses) of approximately 1.73% in order to cover the annual interest payments on our outstanding debt. Changes in interest rates may affect our cost of capital and net investment income. Since we have used debt to finance a portion of our investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to CIM with respect to pre-incentive fee net investment income. 40 The 2026 Notes and the More Term Loan are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future. The 2026 Notes and the More Term Loan are generally not secured by any of our assets or any of the assets of our subsidiaries. As a result, the 2026 Notes the More Term Loan are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2026 Notes. As a result, the indebtedness under the JPM Credit Facility and the UBS facility is therefore effectively senior in right of payment to our 2026 Notes and More Term Loan to the extent of the value of such assets. Federal Income Tax Risks We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements. To qualify for and maintain RIC tax treatment under Subchapter M of the Code, we must, among other things, meet the following annual distribution, income source and asset diversification requirements. • The annual distribution requirement for a RIC will be satisfied if we distribute to our shareholders on an annual basis 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. Because we use debt financing, we are subject to an asset coverage ratio requirement under the 1940 Act and are subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. • The income source requirement will be satisfied if we obtain at least 90% of our income for each taxable year from dividends, interest, gains from the sale of common stock or securities or similar sources. • The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly-traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. If we fail to qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income. For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for or maintain RIC tax treatment and thus become subject to corporate-level income tax. 41 Deferred PIK interest instruments may have less reliable valuations because these instruments have continuing accruals that require continuing judgment about the collectability of the deferred payments and the value of any associated collateral. In addition, deferred PIK interest instruments create the risk of non-refundable cash payments to our investment adviser based on non-cash accruals that ultimately may not be realized. For accounting purposes, any distributions to shareholders representing deferred PIK interest income are not treated as coming from paid-in capital, even though the cash to pay these distributions may come from offering proceeds. Thus, although a distribution of deferred PIK interest may come from the cash invested by shareholders, the 1940 Act does not require that shareholders be given notice of this fact by reporting it as a return of capital. If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, shareholders will be taxed as though they received a distribution of some of our expenses. A “publicly offered regulated investment company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering within the meaning of Section 4 of the Securities Act, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the taxable year. If we are not a publicly offered RIC for any period, a non-corporate shareholder’s allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the shareholder and will be deductible by such shareholder only to the extent permitted under the limitations described below. For non-corporate shareholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered RIC, including advisory fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a shareholder’s adjusted gross income, and are not deductible for alternative minimum tax purposes. While we anticipate that we will constitute a publicly offered RIC, there can be no assurance that we will in fact so qualify for any of our taxable years. Risks Relating to an Investment in Our Common Stock The market price of our common stock may fluctuate significantly. The market price and liquidity of the market for shares of our common stock that will prevail in the market may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include: • significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • price and volume fluctuations in the overall stock market from time to time; • the inclusion or exclusion of our stock from certain indices; • changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs; • any loss of RIC or BDC status; • changes in earnings or perceived changes or variations in operating results; • changes or perceived changes in the value of our portfolio of investments; • changes in accounting guidelines governing valuation of our investments; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • the inability of CIM to employ additional experienced investment professionals or the departure of any of CIM’s key personnel; • short-selling pressure with respect to shares of our common stock or BDCs generally; • future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities; • uncertainty surrounding the strength of the U.S. economy; • concerns regarding European sovereign debt and economic activity generally; • operating performance of companies comparable to us; • general economic trends and other external factors; and • loss of a major funding source. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price fluctuates significantly, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business. 42 We cannot assure you that a market for shares of our common stock will be maintained or the market price of our shares will trade close to NAV. We cannot assure you that a trading market for our common stock can be sustained. In addition, we cannot predict the prices at which our common stock will trade, whether at, above or below NAV. Shares of closed-end investment companies, including BDCs, frequently trade at a discount from NAV, and our common stock may also be discounted in the market. In addition, if our common stock trades below its NAV, we will generally not be able to sell additional shares of our common stock to the public at its market price without, among other things, the requisite shareholders approve such a sale. Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock. Sales of substantial amounts of our common stock, or the availability of such shares for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so. We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock. The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms more favorable to the holders of preferred stock than to our common shareholders could adversely affect the market price for our common stock by making an investment in the common stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any distributions or other payments to our common shareholders, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock). In addition, under the 1940 Act, participating preferred stock and preferred stock constitutes a “senior security” for purposes of the asset coverage test. We may incur significant costs as a result of being a public company. Public companies incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act. Accordingly, we may incur significant additional costs as a result of being a public company. These requirements may place a strain on our systems and resources. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls, significant resources and management oversight may be required. We may be implementing additional procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We may incur significant additional annual expenses related to these steps and, among other things, directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, additional administrative expenses payable to CIM, as our administrator, to compensate it for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We are obligated to maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or our internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock. Since our shares of common stock listed on the NYSE on October 5, 2021, we are now required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2022. Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources. We may not be able to complete our internal control evaluation, testing and any required remediation in a timely fashion. Additionally, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to attest to management’s report on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock. 43 In 2021 we obtained, and in 2022 we intend to seek, the approval of our shareholders to issue shares of our common stock at prices below the then current NAV per share of our common stock. If we issue such shares and again receive such approval from shareholders in the future, we may issue shares of our common stock at a price below the then current NAV per share of common stock. Any such issuance could materially dilute your interest in our common stock and reduce our NAV per share and potentially the trading price of our common stock. In August 2021, we obtained approval from our shareholders authorizing us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period. We have not issued any such shares as of the date of this report. In 2022, we intend to seek to obtain from our shareholders and they may approve a proposal that again authorizes us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period. Such approval would allow us to access the capital markets in a way that we were previously unable to do as a result of restrictions that, absent shareholder approval, apply to BDCs under the 1940 Act. Any sale or other issuance of shares of our common stock at a price below NAV per share will result in an immediate dilution to your interest in our common stock and a reduction of our NAV per share and potentially the trading price of our common stock. This dilution would occur as a result of a proportionately greater decrease in a shareholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stock that may be issued below our NAV per share and the price and timing of such issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance. We also cannot determine the resulting reduction in our NAV per share or the trading price of our common stock of any such issuance at this time. We caution you that such effects may be material, and we undertake to describe all the material risks and dilutive effects of any actual offerings we may make at a price below our then current NAV in the future. The determination of NAV in connection with an offering of shares of common stock will involve the determination by our board of directors or a committee thereof that we are not selling shares of our common stock at a price below the then current NAV of our common stock at the time at which the sale is made or otherwise in violation of the 1940 Act, unless we have previously received the consent of the majority of our shareholders to do so and the board of directors decides such an offering is in the best interests of our shareholders. Whenever we do not have current shareholder approval to issue shares of our common stock at a price per share below our then current NAV per share, the offering price per share (after any sales commission or discounts (if applicable)) will equal or exceed our then current NAV per share, based on the value of our portfolio securities and other assets determined in good faith by our board of directors. A shareholder’s interest in us will be diluted if we issue additional shares of common stock, which could reduce the overall value of an investment in us. Potential investors will not have preemptive rights to any common stock we issue in the future. Our articles of incorporation authorize us to issue 500,000,000 shares of common stock. Pursuant to our articles of incorporation, a majority of our entire board of directors may amend our articles of incorporation to increase the number of authorized shares of common stock without shareholder approval. To the extent that we issue additional shares of common stock at or below net asset value after an investor purchases shares of our common stock, an investor’s percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, an investor may also experience dilution in the book value and fair value of his or her shares of common stock. Certain provisions of our articles of incorporation and bylaws could deter takeover attempts and have an adverse impact on the value of our common stock. Our bylaws exempt us from the Maryland Control Share Acquisition Act, which significantly restricts the voting rights of control shares of a Maryland corporation acquired in a control share acquisition. If our board of directors were to amend our bylaws to repeal this exemption from the Maryland Control Share Acquisition Act, that statute may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. There can be no assurance, however, that we will not so amend our bylaws in such a manner at some time in the future. We will not, however, amend our bylaws to make us subject to the Maryland Control Share Acquisition Act without our board of directors determining that doing so would not conflict with the 1940 Act and obtaining confirmation from the SEC that it does not object to such determination. Our articles of incorporation and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Our board of directors may, without shareholder action, authorize the issuance of shares in one or more classes or series, including preferred shares; and our board of directors may, without shareholder action, amend our articles of incorporation to increase the number of our shares, of any class or series, that we have authority to issue. These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock. 44 Investing in our common stock involves a high degree of risk. The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance. The net asset value of our common stock may fluctuate significantly. The net asset value and liquidity, if any, of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include: • changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs; • loss of RIC or BDC status; • changes in earnings or variations in operating results; • changes in the value of our portfolio of investments; • changes in accounting guidelines governing valuation of our investments; • any shortfall in revenue or net income or any increase in losses from levels expected by investors; • departure of either of our adviser or certain of its key personnel; • general economic trends and other external factors; and • loss of a major funding source. General Risk Factors Global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability. The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, have contributed and may continue to contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so. Our business is directly influenced by the economic cycle and could be negatively impacted by a downturn in economic activity in the U.S. as well as globally. Fiscal and monetary actions taken by U.S. and non-U.S. government and regulatory authorities could have a material adverse impact on our business. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be adversely affected. Moreover, Federal Reserve policy, including with respect to certain interest rates, along with the general policies of the current Presidential administration, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. These conditions, government actions and future developments may cause interest rates and borrowing costs to rise, which may adversely affect our ability to access debt financing on favorable terms and may increase the interest costs of our borrowers, hampering their ability to repay us. Continued or future adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations. If key economic indicators, such as the unemployment rate or inflation, do not progress at a rate consistent with the Federal Reserve’s objectives, the target range for the federal funds rate may increase and cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms and may also increase the costs of our borrowers, hampering their ability to repay us. The Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022. However, the timing, number and amount of any such future interest rate increases are uncertain. Legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and the authority of the Federal Reserve and the Financial Stability Oversight Council. These or other regulatory changes could result in greater competition from banks and other lenders with which we compete for lending and other investment opportunities. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a material adverse effect on our business, financial condition and results of operations. 45 Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks. The COVID-19 pandemic has created disruptions in supply chains and economic activity, contributed to labor difficulties and is having a particularly adverse impact on transportation, hospitality, tourism, entertainment and other industries, which may in the future adversely affect our financial condition, liquidity and results of operations. The extent to which the COVID-19 pandemic will negatively affect our financial condition, liquidity and results of operations will depend on future developments, including the emergence of new variants of COVID-19, such as Delta and Omicron, and the effectiveness of vaccines and treatments over the long term and against new variants, which are highly uncertain and cannot be predicted. While financial markets have rebounded from the significant declines that occurred early in the pandemic and global economic conditions generally improved in 2021, certain of the circumstances that arose or became more pronounced after the onset of the COVID-19 pandemic persisted in 2021, including (i) relatively weak consumer confidence; (ii) low levels of the federal funds rate and yields on U.S. Treasury securities which, at times, were near zero; (iii) ongoing heightened credit risk with regard to industries that have been most severely impacted by the pandemic, including, at times, oil and gas, gaming and lodging, and airlines; (iv) higher cyber security, information security and operational risks; and (v) interruptions in the supply chain that have adversely affected many businesses and have contributed to higher rates of inflation. Depending on the duration and severity of the pandemic going forward, as well as the effects of the pandemic on consumer and corporate confidence, the conditions noted above could continue for an extended period and other adverse developments may occur or reoccur, including (i) the decline in value and performance of us and our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments, (iii) our ability to comply with the covenants and other terms of our debt obligations and to repay such obligations, on a timely basis or at all, (iv) our ability to comply with certain regulatory requirements, such as asset coverage requirements under the 1940 Act, (v) our ability maintain our distributions at their current level or to pay them at all or (vi) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us. We will also be negatively affected if the operations and effectiveness of any of our portfolio companies (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted. Governmental authorities worldwide have taken increased measures to stabilize the markets and support economic growth. The continued success of these measures is unknown and they may not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our investments. The capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations. The U.S. capital markets have experienced extreme disruption since the global outbreak of COVID-19. Such disruptions have been evidenced by volatility in global stock markets as a result of, among other things, uncertainty regarding the COVID-19 pandemic and the fluctuating price of commodities such as oil. Despite actions of the U.S. federal government and foreign governments, these events have contributed to worsening general economic conditions that are materially and adversely impacting broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole. These conditions could continue for a prolonged period of time or worsen in the future. Significant changes or volatility in the capital markets may negatively affect, the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan to hold an investment to maturity). Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not reflect the full impact of the COVID-19 pandemic and measures taken in response thereto. Any public health emergency, including the COVID-19 pandemic or an outbreak of other existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies. Significant changes in the capital markets, such as the disruption in economic activity caused by the COVID-19 pandemic, could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments. Additionally, the recent disruption in economic activity caused by the COVID-19 pandemic has had, and may continue to have, a negative effect on the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital, if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them to increase our liquidity. An inability on our part to raise incremental capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations. 46 Further, current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt and such debt may need to be incurred in a rising interest rate environment. If we are unable to raise new debt or refinance our existing debt, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage, and we may be unable to make new commitments or to fund existing commitments to our portfolio companies. Any inability to extend the maturity of or refinance our existing debt, or to obtain new debt, could have a material adverse effect on our business, financial condition or results of operations. Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition. Terrorist acts, acts of war, including Russia’s invasion of Ukraine in 2022, global health emergencies or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, global health emergencies or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks, global health emergencies and natural disasters are generally uninsurable. We are subject to risks associated with cybersecurity and cyber incidents. Our business relies on secure information technology systems. These systems are subject to potential attacks, including through adverse events that threaten the confidentiality, integrity, or availability of our information resources (i.e., cyber incidents). These attacks could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by CIM and third-party service providers. We, along with CIM, have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident. In addition, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Furthermore, cybersecurity has become a top priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention, or reputational damage. 47 Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties We do not own any real estate or other physical properties materially important to our operations. Our executive offices are located at 3 Park Avenue, 36th Floor, New York, NY 10016. We believe that our current office facilities are adequate for our business as it is presently conducted. Item 3. Legal Proceedings We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies and other third parties. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 48 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Price Range of Common Stock Our common stock has been listed on the NYSE under the ticker symbol "CION" since October 5, 2021. Prior to October 5, 2021, our shares were not listed on an exchange or quoted through a quotation system. The following table sets forth, for each fiscal quarter commencing September 30, 2021, the NAV per share of our common stock, the range of high and low closing sales prices of our common stock reported on the NYSE, the closing sales price as a premium (discount) to NAV and distributions declared by us. On March 3, 2022, the last reported closing sales price of our common stock on the NYSE was $12.21 per share, which represented a discount of approximately (25.3)% to the NAV per share reported by us as of December 31, 2021. Closing Sales Price Premium (Discount) of High Sales Price to NAV (2) Premium (Discount) of Low Sales Price to NAV (2) Declared Distributions (3) NAV (1) High Low Fiscal Year Ending December 31, 2022 First Fiscal Quarter (4) * $ 13.08 $ 11.80 * * $ 0.28 Fiscal Year Ended December 31, 2021 Fourth Fiscal Quarter $ 16.34 $ 14.86 $ 11.80 (9.1) % (27.8) % $ 0.46 (1) NAV per share will be determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low closing sales prices. The NAV to be shown will be based on outstanding shares at the end of the relevant quarter. (2) Will be c alculated as the respective high or low closing sales price less NAV divided by NAV as of the last day in the relevant quarter. (3) Represents the distributions declared in the relevant quarter. (4) Through March 3, 2022 . * NAV has not yet been calculated for this period. Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term is separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock may trade at a premium to NAV and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether shares of our common stock will trade at, above or below our net asset value in the future. See “Risk Factors—Risks Related to an Investment in Our Common Stock—We cannot assure you that a market for shares of our common stock will be maintained or the market price of our shares will trade close to NAV." Holders As of March 3, 2022, we had 22,328 record holders of our common stock, which includes Cede & Co. but does not include beneficial owners of shares of common stock held in “street name” by brokers and other institutions on behalf of shareholders. Distributions and Distribution Reinvestment Plan We did not declare or pay any distributions during 2012. In January 2013, we began authorizing monthly distributions to our shareholders. 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 are 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. On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020. On September 15, 2021, management changed the timing of declaring and paying regular distributions to shareholders from monthly to quarterly commencing with the fourth quarter of 2021. Distributions in respect of future quarters will be evaluated by management and the board of directors based on circumstances and expectations existing at the time of consideration. 49 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 quarterly distribution amount per share of our common stock. Declared distributions are paid quarterly. 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 such shareholder first owns 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. As required under the 1940 Act, a quarterly estimate of the tax attributes of our distributions will be disclosed to our shareholders on our website at www.cionbdc.com ; however, actual determinations of such tax attributes, including determinations from return of capital, will be made available annually as of the end of our fiscal year, based upon our taxable income and distributions paid for the full year. Each year, information regarding the source of our distributions (i.e., whether 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 disclosed to our shareholders on our website at www.cionbdc.com . 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 U.S. federal income tax purposes as a RIC, as defined under Subchapter M of the Code, beginning in 2012. To qualify for and maintain RIC tax treatment, we must, among other things, meet certain source of income and asset diversification requirements and distribute in respect of each taxable year at least 90% of our “investment company taxable income”, which is generally equal to the sum of our net ordinary income plus the excess, if any, of realized net short-term capital gains over 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 intend to continue to pay quarterly distributions to our shareholders out of assets legally available for distribution in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. However, we can offer no assurance that (i) we will maintain results that will permit the payment of any distributions, and (ii) we will not 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 11, 19 and 53 record dates during the years ended December 31, 2021, 2020 and 2019, respectively. The following table presents distributions per share that were declared during the years ended December 31, 2021, 2020 and 2019: Distributions Three Months Ended Per Share Amount 2019 March 31, 2019 (thirteen record dates) $ 0.3657 $ 20,772 June 30, 2019 (thirteen record dates) 0.3657 20,801 September 30, 2019 (thirteen record dates) 0.3657 20,798 December 31, 2019 (fourteen record dates) 0.3939 22,401 Total distributions for the year ended December 31, 2019 $ 1.4910 $ 84,772 2020 March 31, 2020 (thirteen record dates) $ 0.3657 $ 20,793 June 30, 2020 (no record dates) — — September 30, 2020 (two record dates) 0.1765 10,011 December 31, 2020 (four record dates) 0.5684 32,479 Total distributions for the year ended December 31, 2020 $ 1.1106 $ 63,283 2021 March 31, 2021 (three record dates) $ 0.2648 $ 15,029 June 30, 2021 (three record dates) 0.2648 15,000 September 30, 2021 (three record dates) 0.2648 15,027 December 31, 2021 (two record dates) 0.4648 26,474 Total distributions for the year ended December 31, 2021 $ 1.2592 $ 71,530 On November 12, 2021, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the first quarter of 2022 payable on March 30, 2022 to shareholders of record as of March 23, 2022. On March 8, 2022, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the second quarter of 2022 payable on June 8, 2022 to shareholders of record as of June 1, 2022. 50 In connection with the Listing of our shares of common stock on the NYSE, on September 15, 2021, we terminated our previous fifth amended and restated distribution reinvestment plan, or the Old DRP. The final distribution reinvestment under the Old DRP was made as part of the regular monthly distribution paid on September 14, 2021 to shareholders of record as of September 13, 2021. On September 15, 2021, we adopted a new distribution reinvestment plan, or the New DRP, which became effective as of the Listing, and first applied to the reinvestment of distributions paid after October 5, 2021. Under the Old DRP and prior to the Listing, distributions to participating shareholders who “opted in” to the Old DRP were reinvested in additional shares of our common stock at a purchase price equal to the estimated net asset value per share of common stock as of the date of issuance. The New DRP is an “opt out” distribution reinvestment plan for our shareholders. As a result, unless shareholders specifically elect to receive their distributions in cash, distributions will automatically be reinvested in additional shares of our common stock. Under the New DRP, we reserve the right, subject to the provisions of the 1940 Act, to either issue new shares or cause the plan administrator to purchase shares in the open market for the accounts of plan participants in connection with implementation of the New DRP. We intend to use primarily newly issued shares of our common stock to implement the distribution reinvestment plan, so long as such shares are trading at or above NAV. If shares of our common stock are trading below NAV, we intend to cause the plan administrator or its designee, to the extent permitted by law and after taking into account any additional expenses related to open market purchases, to purchase shares of our common stock in the open market in connection with the implementation of the distribution reinvestment plan. However, we reserve the right to issue new shares of our common stock in connection with our obligations under the distribution reinvestment plan even if such shares are trading below NAV. Any distributions reinvested under the plan will nevertheless remain taxable to U.S. shareholders. We may fund our 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, and dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies. 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 cash. Pursuant to an expense support and conditional reimbursement agreement entered into on January 2, 2018 between us and CIM, CIM agreed to provide expense support to us in an amount that was sufficient to: (i) ensure that no portion of our distributions to shareholders was paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we achieved economies of scale sufficient to ensure that we bore a reasonable level of expense in relation to our investment income. Under certain conditions, CIM would have been entitled to reimbursement of such expense support. On December 9, 2020, we and CIM amended and restated the expense support and conditional reimbursement agreement to extend the termination date of such agreement from December 31, 2020 to December 31, 2021. On December 31, 2021, we and CIM allowed the amended and restated expense support and conditional reimbursement agreement to expire in accordance with its terms. For the years ended December 31, 2019, 2020 and 2021, none of our distributions resulted from expense support from CIM. The following table reflects the sources of distributions on a GAAP basis that were declared during the years ended December 31, 2021, 2020 and 2019: Years Ended December 31, 2021 2020 2019 Source of Distribution Per Share Amount Percentage Per Share Amount Percentage Per Share Amount Percentage Net investment income $ 1.2592 $ 71,530 100.0 % $ 1.1106 $ 63,283 100.0 % $ 1.4910 $ 84,722 100.0 % Total distributions $ 1.2592 $ 71,530 100.0 % $ 1.1106 $ 63,283 100.0 % $ 1.4910 $ 84,722 100.0 % Share Repurchases Pre-Listing Share Repurchase Program Prior to October 5, 2021, our common stock was not listed on any securities exchange. In order to provide shareholders with a measure of liquidity, beginning in the first quarter of 2014, we began offering to repurchase common stock on such terms as were 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 have been in the best interests of our shareholders or would have violated applicable law. We conducted 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 repurchased common stock, we generally conducted repurchases on the last Wednesday in a calendar month. The offer to repurchase common stock was conducted solely through tender offer materials made available to each shareholder. 51 The board considered 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 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. On July 30, 2021, our board of directors, including the independent directors, determined to suspend our share repurchase program commencing with the third quarter of 2021 in anticipation of the Listing and the concurrent enhanced liquidity the Listing was expected to provide. The share repurchase program ultimately terminated upon the Listing. We do not expect to implement a new quarterly share repurchase program in the future. We limited the number of shares of common stock to be repurchased during any calendar year to the number of shares of common stock we could repurchase with the proceeds we received from the issuance of shares of our common stock pursuant to the Old DRP. At the discretion of our board of directors, we could have used 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 offered 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. Post-Listing Share Repurchase Policy On September 15, 2021, our board of directors, including the independent directors, approved a share repurchase policy, or the Post-Listing Share Repurchase Policy. Under the Post-Listing Share Repurchase Policy, we are authorized to repurchase up to $50 million of our outstanding common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at our discretion. Factors are expected to include, but are not limited to, share price, trading volume and general market conditions, along with our general business conditions. The policy may be suspended or discontinued at any time and does not obligate us to acquire any specific number of shares of its common stock. As part of the share repurchase policy, the we intend to enter into a trading plan in the near future adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, based in part on historical trading data with respect to our shares. The 10b5-1 trading plan would permit common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan will be administered by an independent broker and will be subject to price, market volume and timing restrictions. Since we have not yet entered into a 10b5-1 trading plan, during the period from September 15, 2021 to March 3, 2022, we did not repurchase any shares of common stock pursuant to the share repurchase policy. Fees and Expenses The following table is intended to assist you in understanding the various fees and expenses that an investor in our common stock will bear, directly or indirectly, based on the assumptions set forth below. We caution you that some of the percentages indicated in the table below are estimates and may vary. The expenses shown in the table under “annual expenses” are based on amounts incurred during the year ended December 31, 2021. The following table and example should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this report contains a reference to fees or expenses paid by “you,” “us” or “the Company,” or that “we” will pay fees or expenses, the holders of our common stock will indirectly bear such fees or expenses as investors in us. 52 Shareholder transaction expenses (as a percentage of offering price): Sales load (1) — % Offering costs (2) — % Distribution reinvestment plan fees — % Total shareholder transaction expenses (as a percentage of offering price) (2) — % Estimated annual expenses (as a percentage of average net assets attributable to common stock): (3) Base management fees (4) 3.39 % Accrued incentive fees pursuant to our investment advisory agreement (17.5% of investment income, subject to a hurdle rate, and capital gains fee) (5) 0.75 % Interest payments on borrowed funds (6) 3.46 % Other expenses (7) 1.44 % Total estimated annual expenses 9.04 % (1) In the event that the securities are sold to or through underwriters or agents, a prospectus supplement and any related free writing prospectus will disclose the applicable sales load (underwriting discount or commission) and the example will be updated accordingly. (2) The applicable prospectus supplement and any related free writing prospectus will disclose the applicable amount of offering costs and total shareholder transaction expenses that will supersede the information included in this report. (3) Average net assets attributable to common stock used to calculate the percentages in this table equals our average net assets of approximately $919 million for the year ended December 31, 2021. (4) Effective upon the Listing on October 5, 2021, our base management fee payable to CIM pursuant to our investment advisory agreement was reduced from an annual rate of 2.0% to an annual rate of 1.5% of the average value of our gross assets (including cash pledged as collateral for our secured financing arrangements, but excluding other cash and cash equivalents so that investors do not pay the base management fee on such assets) to the extent that our asset coverage ratio is greater than or equal to 200% (i.e., $1 of debt outstanding for each $1 of equity); provided that, the annual base management fee is further reduced to 1.0% of the average value of our gross assets (including cash pledged as collateral for our secured financing arrangements, but excluding other cash and cash equivalents so that investors do not pay the base management fee on such assets) purchased with leverage resulting in our asset coverage ratio dropping below 200%. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150% (i.e., $2 of debt outstanding for each $1 of equity). Such asset coverage ratio became effective on December 31, 2021. The annual base management fee is payable to CIM quarterly in arrears and is calculated based on the two most recently completed calendar quarters. The base management fee for any partial quarter will be appropriately prorated based on the actual number of days elapsed relative to the total number of days in such calendar quarter. The base management fee referenced in the table above is based upon the actual amounts incurred during the year ended December 31, 2021. For more detailed information about our base management fee payable to CIM under the terms of the investment advisory agreement, please also see Note 4 “Transactions with Related Parties” of our consolidated financial statements included in this report. (5) The incentive fees payable to CIM are based on the actual amount of the subordinated incentive fee on income recorded during the year ended December 31, 2021. For the year ended December 31, 2021, we had no liability for and did not record any capital gains incentive fees. As we cannot predict whether we will meet the thresholds for incentive fees payable to CIM under the investment advisory agreement, the incentive fees paid in subsequent periods, if any, may be substantially different than the fees incurred during the year ended December 31, 2021. The incentive fee consists of two parts. The first part, which we refer to as the subordinated incentive fee on income, is calculated and payable to CIM quarterly in arrears based upon our “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate. Effective upon the Listing on October 5, 2021, the hurdle rate was reduced from 1.875% per quarter to 1.625% per quarter, or from an annualized hurdle rate of 7.5% to an annualized hurdle rate of 6.5%. The subordinated incentive fee on income for any partial quarter will be appropriately prorated based on the actual number of days elapsed relative to the total number of days in such calendar quarter. The amount in the table is based on our most recent financial performance for the year ended December 31, 2021. The second part of the incentive fee, which we refer to as the incentive fee on capital gains, is determined and payable to CIM in arrears as of the end of each calendar year (or upon termination of the investment advisory agreement). Effective upon the Listing on October 5, 2021, this fee was reduced from 20.0% to 17.5% of our incentive fee capital gains, which equal our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. The amount in the table assumes that the incentive fee on capital gains will be 0.0% of average net assets and is based on actual and projected realized capital gains on our investments through December 31, 2021 and the unrealized appreciation or depreciation of our investments and assumed converted to realized capital gains or losses on such date. See Note 4 “Transactions with Related Parties” of our consolidated financial statements included in this report. 53 (6) We have borrowed funds to make investments. The costs associated with such borrowings are indirectly borne by our shareholders. Interest payments on borrowed funds includes our interest expense based on borrowings under our $125 million 2026 Notes and our $30 million More Term Loan for the twelve months ended December 31, 2021, which pay interest at 4.5% and 5.2% per year, respectively. In addition, interest payments on borrowed funds includes our interest expense based on borrowings under the $575 million JPM Credit Facility and the $150 million UBS Facility for the twelve months ended December 31, 2021, which bore weighted average interest rates of 3.36% and 3.86%, respectively. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. We may also issue additional debt securities or preferred stock, subject to our compliance with applicable requirements under the 1940 Act. Our ability to incur additional leverage during 2022 depends, in large part, on our ability to locate additional debt financing on attractive terms or at all, and there is no guarantee we will do so or that such financing will be at the cost noted in the table above. (7) Other expenses include accounting, legal and auditing fees as well as the reimbursement of the compensation of our chief financial officer, chief compliance officer and their respective staff and other administrative personnel and fees payable to our independent directors. The amount presented in the table includes the amounts incurred during 2021. There have been no “acquired fund fees and expenses.” Example The below example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the below expense amounts, we have assumed our annual operating expenses would remain at the percentage levels set forth in the table above and have excluded the subordinated incentive fee on income. In the event that shares are sold to or through underwriters or agents, a corresponding prospectus supplement and any related free writing prospectus will restate this example to reflect the applicable sales load. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return (none of which is subject to a capital gains incentive fee): $ 87 $ 252 $ 404 $ 739 The example is designed to assist shareholders in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. Assuming a 5% annual return, and considering our performance will vary, the incentive fees under the investment advisory agreement may not be earned or payable and are not included in the example. This illustration assumes that we will not realize any capital gains computed net of all realized capital losses and gross unrealized capital depreciation in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses would be higher. Assuming, however, that the incentive fee on capital gains under the investment advisory agreement is earned and payable and the subordinated incentive fee on income is not earned and payable the following example demonstrates the projected dollar amount of total expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock: 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return solely from realized capital gains (all of which is subject to a capital gains incentive fee): $ 96 $ 274 $ 437 $ 783 The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown. In addition, the example assumes no sales load. Also, while the example assumes reinvestment of all distributions at NAV, participants in our distribution reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the distribution payment date, which may be at, above or below net asset value. Item 6. [RESERVED]. 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion and other parts of this Annual Report on Form 10-K contain forward-looking information that involves risks and uncertainties (see “Forward-Looking Statements” in this report). Amounts and percentages presented herein may have been rounded for presentation and all dollar amounts, excluding share and per share amounts, are presented in thousands unless otherwise noted. In addition, all share and per share amounts have been retroactively adjusted to reflect the Reverse Stock Split, which became effective on September 21, 2021. Overview We were incorporated under the general corporation laws of the State of Maryland on August 9, 2011 and commenced operations on December 17, 2012 upon raising proceeds of $2,500 from persons not affiliated with us, CIM or its affiliates. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We elected to be treated for federal income tax purposes as a RIC, as defined under Subchapter M of the Code. Our investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. Our portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt, and equity, of private and thinly-traded U.S. middle-market companies. In connection with our debt investments, we may receive equity interests such as warrants or options as additional consideration. We may also purchase equity interests in the form of common or preferred stock in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor. On October 5, 2021, shares of our common stock began trading on the NYSE under the ticker symbol “CION”. The Listing accomplished our goal of providing our shareholders with greatly enhanced liquidity. We are managed by CIM, our affiliate and a registered investment adviser. Pursuant to an investment advisory agreement with us, CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. On November 13, 2020, our board of directors, including a majority of directors who are not interested persons, approved the renewal of the investment advisory agreement with CIM for a period of twelve months commencing December 17, 2020. On April 5, 2021, our board of directors, including a majority of directors who are not interested persons, approved the amended and restated investment advisory agreement with CIM for a period of twenty four months, which was subsequently approved by shareholders on August 9, 2021 (as described in further detail below). We and CIM previously engaged AIM to act as our investment sub-adviser. On July 11, 2017, the members of CIM entered into the Third Amended CIM LLC Agreement for the purpose of creating a joint venture between AIM and CIG. Under the Third Amended CIM LLC Agreement, AIM became a member of CIM and was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, shares in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the Third Amended CIM LLC Agreement, which results in CIG and AIM each owning a 50% economic interest in CIM. On July 10, 2017, our independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017, as part of the new and ongoing relationship among us, CIM and AIM. Although the investment sub-advisory agreement and AIM's engagement as our investment sub-adviser were terminated, AIM continues to perform certain services for CIM and us. AIM is not paid a separate fee in exchange for such services, but is entitled to receive distributions as a member of CIM as described above. On December 4, 2017, the members of CIM entered into the Fourth Amended CIM LLC Agreement under which AIM performs certain services for CIM, which include, among other services, providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM may also, from time to time, provide us with access to potential investment opportunities made available on Apollo's credit platform on a similar basis as other third-party market participants. All of our investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM's investment committee, which consists entirely of CIG senior personnel. The amended and restated investment advisory agreement was approved by shareholders on August 9, 2021 at our reconvened 2021 annual meeting of shareholders. As a result, on August 10, 2021, we and CIM entered into the amended and restated investment advisory agreement in order to implement the change to the calculation of the subordinated incentive fee payable from us to CIM that expresses the hurdle rate required for CIM to earn, and be paid, the incentive fee as a percentage of our net assets rather than adjusted capital. 55 Upon the occurrence of the Listing on October 5, 2021, we and CIM entered into the second amended and restated investment advisory agreement in order to implement the changes to the advisory fees payable from us to CIM that (i) reduced the annual base management fee, (ii) amended the structure of the subordinated incentive fee on income payable from us to CIM and reduced the hurdle and incentive fee rates, and (iii) reduced the incentive fee on capital gains payable from us to CIM (as described in further detail in Notes 2 and 4 to our consolidated financial statements included in this report). Also, a complete description of the second amended and restated investment advisory agreement is set forth in Proposal No. 3 in our definitive proxy statement filed on May 13, 2021. On September 21, 2021, we effected a 2 to 1 reverse split of our shares of common stock under which every two shares of our common stock issued and outstanding were automatically combined into one share of our common stock, with the number of issued and outstanding shares reduced from 113,916,869 to 56,958,440. The Reverse Stock Split Amendment also provided that there was no change in the par value of $0.001 per share as a result of the Reverse Stock Split. The Reverse Stock Split did not modify the rights or preferences of our common stock. We seek to meet our investment objective by utilizing the experienced management team of CIM, which includes its access to the relationships and human capital of its affiliates in sourcing, evaluating and structuring transactions, as well as monitoring and servicing our investments. We focus primarily on the senior secured debt of private and thinly-traded U.S. middle-market companies, which we define as companies that generally possess annual EBITDA of $75 million or less, with experienced management teams, significant free cash flow, strong competitive positions and potential for growth. Revenue We primarily generate revenue in the form of interest income on the debt securities that we hold and capital gains on debt or other equity interests that we acquire in portfolio companies. The majority of our senior debt investments bear interest at a floating rate. Interest on debt securities is generally payable quarterly or monthly. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued, but unpaid, interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and capital structuring fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned. Operating Expenses Our primary operating expenses are the payment of management fees and subordinated incentive fees on income under the investment advisory agreement and interest expense on our financing arrangements. Our investment advisory fees compensate CIM for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. We bear all other expenses of our operations and transactions. Recent Developments Joint Venture with EagleTree Capital, LP On December 21, 2021, we formed CION/EagleTree, an off-balance sheet joint venture partnership with an affiliate of EagleTree through which EagleTree made a Firm-level investment with proprietary capital. CION/EagleTree will jointly pursue debt opportunities and special situation, crossover, subordinated and other junior capital investments that leverage our and EagleTree's combined sourcing and portfolio management capabilities. The initial holdings of CION/EagleTree consisted of a diversified portfolio of approximately $97 million of second lien loans and equity investments that were held by us immediately prior to closing and approximately $15 million of proprietary Firm-level cash contributed by an affiliate of EagleTree. The initial equity ownership of CION/EagleTree is 85% by us and 15% by an affiliate of EagleTree. Each of us and EagleTree will have equal voting rights on the board of directors of CION/EagleTree. Expense Support Agreement with CIM Pursuant to an expense support and conditional reimbursement agreement entered into on January 2, 2018 between us and CIM, CIM agreed to provide expense support to us in an amount that was sufficient to: (i) ensure that no portion of our distributions to shareholders was paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we achieved economies of scale sufficient to ensure that we bore a reasonable level of expense in relation to our investment income. Under certain conditions, CIM would have been entitled to reimbursement of such expense support. On December 31, 2021, we and CIM allowed the expense support and conditional reimbursement agreement to expire in accordance with its terms. 56 Shareholder Approval of Increased Leverage Capacity On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC's debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%. As a result, commencing on December 31, 2021, we are required to maintain asset coverage for our senior securities of 150% (i.e., $2 of debt outstanding for each $1 of equity) rather than 200% (i.e., $1 of debt outstanding for each $1 of equity), which allows us to increase the maximum amount of leverage that we are permitted to incur. COVID-19 The rapid spread of COVID-19, and associated impacts on the U.S. and global economies and the financial and credit markets, initially had negatively impacted, and may again negatively impact, our business operations and the business operations of some of our portfolio companies. We cannot at this time fully predict the impact of COVID-19, including new variants, such as Delta and Omicron, on our business or the business of our portfolio companies, its duration or magnitude or the extent to which it will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition, including, without limitation, our ability to pay distributions to our shareholders. We expect that certain of our portfolio companies will continue to experience economic distress for the foreseeable future and may significantly limit business operations if subjected to prolonged economic distress. These developments could result in a decrease in the value of certain of our investments. COVID-19 initially had adverse effects on our investment income and may again have adverse effects in the future. These adverse effects may require us to restructure certain of our investments, which could result in further reductions to our investment income or in impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity initially had an adverse effect on our business, financial condition, results of operations and cash flows. These events initially limited our investment originations, which may occur again in the future, and may also have a material negative impact on our operating results. We will continue to carefully monitor the impact of COVID-19 on our business and the business of our portfolio companies. Because the full effects of COVID-19 are not capable of being known at this time, we cannot estimate the impacts of COVID-19 on our future financial condition, results of operations or cash flows, including its effects on us with respect to our compliance with covenants in our financing arrangements with lenders. Portfolio Investment Activity for the Years Ended December 31, 2021 and 2020 The following table summarizes our investment activity, excluding short term investments and PIK securities, for the years ended December 31, 2021 and 2020: Years Ended December 31, Net Investment Activity 2021 2020 Purchases and drawdowns Senior secured first lien debt $ 868,031 $ 347,992 Senior secured second lien debt — 4,375 Unsecured debt 20,000 — Equity 32,008 7,266 Sales and principal repayments (827,958) (543,167) Net portfolio activity $ 92,081 $ (183,534) 57 The following tables summarize the composition of our investment portfolio at amortized cost and fair value as of December 31, 2021 and 2020: December 31, 2021 Investments Cost(1) Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,564,891 $ 1,526,989 91.6 % Senior secured second lien debt 55,455 38,583 2.3 % Collateralized securities and structured products - equity 3,885 2,998 0.2 % Unsecured debt 26,777 26,616 1.6 % Equity 53,379 70,936 4.3 % Subtotal/total percentage 1,704,387 1,666,122 100.0 % Short term investments(2) 87,917 87,917 Total investments $ 1,792,304 $ 1,754,039 Number of portfolio companies 113 Average annual EBITDA of portfolio companies $50.4 million Median annual EBITDA of portfolio companies $36.3 million Purchased at a weighted average price of par 98.13 % Gross annual portfolio yield based upon the purchase price(3) 8.62 % (1) Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments. (2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. December 31, 2020 Investments Cost(1) Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,266,564 $ 1,223,268 81.8 % Senior secured second lien debt 171,480 151,506 10.1 % Collateralized securities and structured products - equity 15,305 12,131 0.8 % Unsecured debt 5,668 5,464 0.4 % Equity 118,638 103,405 6.9 % Subtotal/total percentage 1,577,655 1,495,774 100.0 % Short term investments(2) 73,597 73,597 Total investments $ 1,651,252 $ 1,569,371 Number of portfolio companies 119 Average annual EBITDA of portfolio companies $67.3 million Median annual EBITDA of portfolio companies $53.2 million Purchased at a weighted average price of par 98.18 % Gross annual portfolio yield based upon the purchase price(3) 8.28 % (1) Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments. (2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. 58 The following table summarizes the composition of our investment portfolio by the type of interest rate as of December 31, 2021 and 2020, excluding short term investments of $87,917 and $73,597, respectively: December 31, 2021 2020 Interest Rate Allocation Investments Cost Investments Fair Value Percentage of Investment Portfolio Investments Cost Investments Fair Value Percentage of Investment Portfolio Floating interest rate investments $ 1,454,429 $ 1,403,097 84.2 % $ 1,347,194 $ 1,284,282 85.9 % Fixed interest rate investments 176,326 172,162 10.3 % 126,962 124,816 8.3 % Non-income producing investments 49,845 67,532 4.1 % 66,086 52,505 3.5 % Other income producing investments 23,787 23,331 1.4 % 37,413 34,171 2.3 % Total investments $ 1,704,387 $ 1,666,122 100.0 % $ 1,577,655 $ 1,495,774 100.0 % The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of December 31, 2021 and 2020: December 31, 2021 2020 Industry Classification Investments Fair Value Percentage of Investment Portfolio Investments Fair Value Percentage of Investment Portfolio Healthcare & Pharmaceuticals $ 250,049 15.0 % $ 298,944 19.9 % Services: Business 240,316 14.4 % 211,572 14.0 % Media: Diversified & Production 139,399 8.4 % 108,078 7.2 % Services: Consumer 119,365 7.2 % 85,254 5.7 % Chemicals, Plastics & Rubber 109,860 6.6 % 141,654 9.5 % Diversified Financials 101,032 6.1 % 37,214 2.5 % Media: Advertising, Printing & Publishing 94,610 5.7 % 110,083 7.4 % Capital Equipment 82,795 5.0 % 65,752 4.4 % High Tech Industries 65,544 3.9 % 55,619 3.7 % Consumer Goods: Durable 58,124 3.5 % 7,417 0.5 % Retail 56,726 3.4 % 29,312 2.0 % Hotel, Gaming & Leisure 50,855 3.0 % 21,920 1.5 % Beverage, Food & Tobacco 49,054 2.9 % 69,975 4.7 % Consumer Goods: Non-Durable 45,682 2.7 % 15,757 1.1 % Banking, Finance, Insurance & Real Estate 40,634 2.4 % 41,211 2.8 % Aerospace & Defense 38,279 2.3 % 35,751 2.4 % Energy: Oil & Gas 32,164 1.9 % 28,136 1.9 % Construction & Building 27,585 1.7 % 34,653 2.3 % Telecommunications 24,649 1.5 % 46,638 3.1 % Automotive 14,367 0.9 % — — Transportation: Cargo 14,106 0.8 % 19,001 1.3 % Metals & Mining 10,927 0.7 % 10,147 0.7 % Forest Products & Paper — — 21,686 1.4 % Subtotal/total percentage 1,666,122 100.0 % 1,495,774 100.0 % Short term investments 87,917 73,597 Total investments $ 1,754,039 $ 1,569,371 59 Our investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. As of December 31, 2021 and 2020, our unfunded commitments amounted to $107,247 and $43,130, respectively. As of March 3, 2022, our unfunded commitments amounted to $104,456. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. Refer to the section “Commitments and Contingencies” for further details on our unfunded commitments. Investment Portfolio Asset Quality CIM uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio. These ratings are just one of several factors that CIM uses to monitor our portfolio, are not in and of themselves determinative of fair value or revenue recognition and are presented for indicative purposes. CIM rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors. The following is a description of the conditions associated with each investment rating used in this ratings system: Investment Rating Description 1 Indicates the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. 2 Indicates a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing in accordance with our analysis of its business and the full return of principal and interest or dividend is expected. 3 Indicates that the risk to our ability to recoup the cost of such investment has increased since origination or acquisition, but full return of principal and interest or dividend is expected. A portfolio company with an investment rating of 3 requires closer monitoring. 4 Indicates that the risk to our ability to recoup the cost of such investment has increased significantly since origination or acquisition, including as a result of factors such as declining performance and noncompliance with debt covenants, and we expect some loss of interest, dividend or capital appreciation, but still expect an overall positive internal rate of return on the investment. 5 Indicates that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition and the portfolio company likely has materially declining performance. Loss of interest or dividend and some loss of principal investment is expected, which would result in an overall negative internal rate of return on the investment. For investments rated 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company. The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of December 31, 2021 and 2020, excluding short term investments of $87,917 and $73,597, respectively: December 31, 2021 2020 Investment Rating Investments Fair Value Percentage of Investment Portfolio Investments Fair Value Percentage of Investment Portfolio 1 $ 47,221 2.8 % $ 2,997 0.2 % 2 1,373,509 82.5 % 1,173,191 78.5 % 3 233,223 14.0 % 309,930 20.7 % 4 8,201 0.5 % 9,210 0.6 % 5 3,968 0.2 % 446 — $ 1,666,122 100.0 % $ 1,495,774 100.0 % The amount of the investment portfolio in each rating category may vary substantially from period to period resulting primarily from changes in the composition of such portfolio as a result of new investment, repayment and exit activities. In addition, changes in the rating of investments may be made to reflect our expectation of performance and changes in investment values. 60 Current Investment Portfolio The following table summarizes the composition of our investment portfolio at fair value as of March 3, 2022: Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,536,402 91.8 % Senior secured second lien debt 38,658 2.3 % Collateralized securities and structured products - equity 2,998 0.2 % Unsecured debt 26,616 1.6 % Equity 68,935 4.1 % Subtotal/total percentage 1,673,609 100.0 % Short term investments(2) 75,727 Total investments $ 1,749,336 Number of portfolio companies 113 Average annual EBITDA of portfolio companies $50.3 million Median annual EBITDA of portfolio companies $36.3 million Purchased at a weighted average price of par 97.87 % Gross annual portfolio yield based upon the purchase price(2) 8.74 % (1) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (2) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. Results of Operations for the Years Ended December 31, 2021 and 2020 Our results of operations for the years ended December 31, 2021 and 2020 were as follows: Years Ended December 31, 2021 2020 Investment income $ 157,348 $ 163,842 Net operating expenses and income taxes 83,041 85,114 Net investment income 74,307 78,728 Net realized gain (loss) on investments and foreign currency 840 (69,872) Net change in unrealized appreciation (depreciation) on investments 43,617 (19,878) Net increase (decrease) in net assets resulting from operations $ 118,764 $ (11,022) Investment Income For the years ended December 31, 2021 and 2020, we generated investment income of $157,348 and $163,842, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 153 and 137 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments, decreased $34,712, from $1,615,660 during the year ended December 31, 2020 to $1,580,948 during the year ended December 31, 2021. Additionally, the higher average LIBOR during the year ended December 31, 2020 as compared to the year ended December 31, 2021 also contributed to the decrease in interest income. 61 Operating Expenses The composition of our operating expenses for the years ended December 31, 2021 and 2020 was as follows: Years Ended December 31, 2021 2020 Management fees $ 31,143 $ 31,828 Administrative services expense 3,069 2,465 Subordinated incentive fee on income 6,875 7,631 General and administrative 9,805 6,085 Interest expense 31,807 36,837 Total operating expenses $ 82,699 $ 84,846 The decrease in interest expense was primarily the result of lower borrowing costs incurred on our financing arrangements during the year ended December 31, 2021 as compared to the year ended December 31, 2020. The composition of our general and administrative expenses for the years ended December 31, 2021 and 2020 was as follows: Years Ended December 31, 2021 2020 Professional fees $ 4,214 $ 1,490 Transfer agent expense 1,290 1,189 Printing and marketing expense 990 378 Valuation expense 904 999 Accounting and administrative costs 759 680 Insurance expense 612 489 Director fees and expenses 516 450 Dues and subscriptions 411 342 Other expenses 109 68 Total general and administrative expense $ 9,805 $ 6,085 The increase in general and administrative expenses was primarily the result of higher nonrecurring professional fees incurred during the year ended December 31, 2021 associated with the Listing. Net Investment Income After Taxes Our net investment income after taxes to taled $74,307 and $78,728 for the years ended December 31, 2021 and 2020, respectively. The decrease in net investment income after taxes was primarily due to a decrease in our investment income during the year ended December 31, 2021 as compared to the year ended December 31, 2020, which was partially offset by a decrease in operating expenses during the year ended December 31, 2021. Net Realized Gains (Losses) on Investments and Foreign Currency Our net realized gains (losses) on investments and foreign currency totaled $840 and $(69,872) for the years ended December 31, 2021 and 2020, respectively. This change was driven primarily by fewer restructurings of our investments during the year ended December 31, 2021 as compared to the year ended December 31, 2020. Net Change in Unrealized Appreciation (Depreciation) on Investments The net change in unrealized appreciation (depreciation) on our investments totaled $43,617 and $(19,878) for the years ended December 31, 2021 and 2020, respectively. This change was driven primarily by tightening credit spreads and increased multiples in equity markets during the year ended December 31, 2021 that positively impacted the fair value of certain of our investments, as compared to the outbreak and spread of COVID-19 around the world during the year ended December 31, 2020, which caused significant uncertainty and volatility in the U.S. and global economies as well as in the financial and credit markets and negatively impacted the fair value of certain of our investments. 62 Net Increase (Decrease) in Net Assets Resulting from Operations For the year ended December 31, 2021, we recorded a net increase in net assets resulting from operations of $118,764 as compared to a net decrease in net assets resulting from operations of $(11,022) for the year ended December 31, 2020, as a result of our operating activity for the respective periods. Results of Operations for the Years Ended December 31, 2020 and 2019 Our results of operations for the years ended December 31, 2020 and 2019 were as follows: Years Ended December 31, 2020 2019 Investment income $ 163,842 $ 201,103 Net operating expenses and income taxes 85,114 113,791 Net investment income 78,728 87,312 Net realized loss on investments and foreign currency (69,872) (24,917) Net change in unrealized depreciation on investments (19,878) (10,551) Net (decrease) increase in net assets resulting from operations $ (11,022) $ 51,844 Investment Income For the years ended December 31, 2020 and 2019, we generated investment income of $163,842 and $201,103, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 137 and 171 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments, decreased $178,500, from $1,794,159 during the year ended December 31, 2019 to $1,615,660 during the year ended December 31, 2020. Additionally, the decrease in LIBOR during the year ended December 31, 2020 from the year ended December 31, 2019 also contributed to the decrease in interest income. Operating Expenses The composition of our operating expenses for the years ended December 31, 2020 and 2019 was as follows: Years Ended December 31, 2020 2019 Management fees $ 31,828 $ 36,466 Administrative services expense 2,465 2,650 Subordinated incentive fee on income 7,631 20,087 General and administrative 6,085 5,045 Interest expense 36,837 49,531 Total operating expenses $ 84,846 $ 113,779 During the year ended December 31, 2020, the decrease in interest expense was primarily the result of lower average borrowings on our existing financing arrangements, which resulted in a decrease in net assets and therefore a decrease in management fees. The decrease in interest expense was also the result of a decrease in LIBOR during the year ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease in subordinated incentive fee on income was a result of exceeding our hurdle rate of 1.875% for pre-incentive fee net investment income only for the three month periods ended March 31, 2020 and December 31, 2020, whereas we exceeded such hurdle rate for each quarter during the year ended December 31, 2019. 63 The composition of our general and administrative expenses for the years ended December 31, 2020 and 2019 was as follows: Years Ended December 31, 2020 2019 Professional fees $ 1,490 $ 996 Transfer agent expense 1,189 1,289 Valuation expense 999 722 Accounting and administrative costs 680 567 Insurance expense 489 421 Director fees and expenses 450 472 Printing and marketing expense 378 102 Dues and subscriptions 342 343 Other expenses 68 72 Due diligence fees — 61 Total general and administrative expense $ 6,085 $ 5,045 Net Investment Income After Taxes Our net investment income after taxes totaled $78,728 and $87,312 for the years ended December 31, 2020 and 2019, respectively. The decrease in net investment income after taxes was primarily due to a decrease in our investment income during the year ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease in investment income was partially offset by a decrease in subordinated incentive fees and interest expense during the year ended December 31, 2020 as compared to the year ended December 31, 2019. Net Realized Losses on Investments and Foreign Currency Our net realized losses on investments and foreign currency totaled $(69,872) and $(24,917) for the years ended December 31, 2020 and 2019, respectively. This change was mainly due to an increase in realized losses on the restructure and liquidation of certain investments during the year ended December 31, 2020 as compared to the year ended December 31, 2019. Net Change in Unrealized Depreciation on Investments The net change in unrealized depreciation on our investments totaled $(19,878) and $(10,551) for the years ended December 31, 2020 and 2019, respectively. This change was driven primarily by unrealized losses on certain underperforming investments during the year ended December 31, 2020. This change was partially offset by certain previously unrealized losses on certain underperforming investments becoming realized during the year ended December 31, 2020. Net (Decrease) Increase in Net Assets Resulting from Operations For the year ended December 31, 2020, we recorded a net decrease in net assets resulting from operations of $(11,022) as compared to a net increase in net assets resulting from operations of $51,844 for the year ended December 31, 2019 as a result of our operating activity for the respective periods. Financial Condition, Liquidity and Capital Resources We generate cash primarily from cash flows from interest, fees and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. We also employ leverage to seek to enhance our returns as market conditions permit and at the discretion of CIM and pursuant to the 1940 Act. On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied. At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%. As a result, commencing on December 31, 2021, we are required to maintain asset coverage for our senior securities of 150% (i.e., $2 of debt outstanding for each $1 of equity) rather than 200% (i.e., $1 of debt outstanding for each $1 of equity), which allows us to increase the maximum amount of leverage that we are permitted to incur. 64 The outbreak and spread of COVID-19 have caused severe stress and uncertainty in the U.S. and global economies as well as in the financial and credit markets. Given the uncertainty as to the full severity and duration of the pandemic and its effects on us with respect to our compliance with covenants in our loan facilities with lenders and our borrowers’ ability to timely meet their financial obligations to us, management and our board of directors determined that it was in the best interest of our company and all of our shareholders to take certain steps disclosed below during the three months ended March 31, 2020 that were necessary to improve our cash position and preserve financial flexibility in the short term. This “Financial Condition, Liquidity and Capital Resources” discussion should also be read in conjunction with “Recent Developments - COVID-19” above. On March 19, 2020, our co-chief executive officers determined to (i) change the timing of declaring distributions to shareholders from quarterly to monthly; and (ii) temporarily suspend 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. On July 30, 2021, our board of directors, including the independent directors, determined to suspend our pre-Listing share repurchase program commencing with the third quarter of 2021 in anticipation of the Listing. The pre-Listing share repurchase program terminated upon the Listing on October 5, 2021. On August 9, 2021, our shareholders approved a proposal that authorizes us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period following such shareholder approval. As of the date of this report, we have not issued any shares at prices below our NAV per share pursuant to this authorization. On September 15, 2021, our co-chief executive officers changed the timing of declaring and paying regular distributions to shareholders from monthly to quarterly commencing with the fourth quarter of 2021. On November 12, 2021, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the first quarter of 2022 payable on March 30, 2022 to shareholders of record as of March 23, 2022. On March 8, 2022, our co-chief executive officers declared a regular quarterly distribution of $0.28 per share for the second quarter of 2022 payable on June 8, 2022 to shareholders of record as of June 1, 2022. We intend to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. Therefore, subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to authorize, declare, and pay regular distributions on a quarterly basis. Regular and special distributions in respect of future periods will be evaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration. For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report. On September 15, 2021, our board of directors, including the independent directors, approved a share repurchase policy authorizing us to repurchase up to $50 million of our outstanding common stock after the Listing. Under the share repurchase policy, we may purchase shares of our common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at our discretion. Factors are expected to include, but are not limited to, share price, trading volume and general market conditions, along with our general business conditions. The policy may be suspended or discontinued at any time and does not obligate us to acquire any specific number of shares of our common stock. As part of the share repurchase policy, we intend to enter into a trading plan in the near future adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, based in part on historical trading data with respect to our shares. The 10b5-1 trading plan would permit common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan will be administered by an independent broker and will be subject to price, market volume and timing restrictions. Since we have not yet entered into a 10b5-1 trading plan, during the period from September 15, 2021 to March 3, 2022, we did not repurchase any shares of common stock pursuant to the share repurchase policy. As further described in Note 1 and Note 4 to our consolidated financial statements included in this report, the second amended and restated investment advisory agreement (i) reduced the annual base management fees payable by us to CIM and (ii) amended the way the subordinated incentive fee on income and the capital gains incentive fee is payable by us to CIM by reducing the hurdle and incentive fee rates and expressing the hurdle rate as a percentage of our net assets rather than our adjusted capital. These changes were effective upon the Listing on October 5, 2021, except for the change to the calculation of the subordinated incentive fee payable to CIM that expresses the hurdle rate required for CIM to earn, and be paid, the incentive fee as a percentage of our net assets rather than adjusted capital, which was effective on August 10, 2021. These changes, in the aggregate, may lead to the payment of higher advisory fees to CIM depending upon our performance. As of December 31, 2021 and March 3, 2022, we had $87,917 and $75,727 in short term investments, respectively, invested in a fund that primarily invests in U.S. government securities. 65 JPM Credit Facility As of December 31, 2021 and March 3, 2022, our outstanding borrowings under the Third Amended JPM Credit Facility were $550,000 and the aggregate unfunded principal amount in connection with the Third Amended JPM Credit Facility was $25,000. For a detailed discussion of our Third Amended JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report. UBS Facility As of December 31, 2021 and March 3, 2022, our outstanding borrowings under the Amended UBS Facility were $125,000 and the aggregate unfunded principal amount in connection with the Amended UBS Facility was $25,000. For a detailed discussion of our Amended UBS Facility, refer to Note 8 to our consolidated financial statements included in this report. 2026 Notes As of December 31, 2021 and March 3, 2022, we had $125,000 in aggregate principal amount of 2026 Notes outstanding. For a detailed discussion of our 2026 Notes, refer to Note 8 to our consolidated financial statements included in this report. More Term Loan As of December 31, 2021 and March 3, 2022, our outstanding borrowings under the More Term Loan were $30,000 and there was no unfunded principal amount in connection with the More Term Loan. For a detailed discussion of our More Term Loan, refer to Note 8 to our consolidated financial statements included in this report. Unfunded Commitments As of December 31, 2021 and March 3, 2022, our unfunded commitments amounted to $107,247 and $104,456, respectively. For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report. RIC Status and Distributions 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. We will incur certain excise taxes imposed on RICs to the extent we do not 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. For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report. Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included in this report for a discussion of certain recent accounting pronouncements that are applicable to us. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles, or GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, we also utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming our estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. 66 Valuation of Portfolio Investments The value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940 Act, which requires that we value our assets as follows: (i) the market price for those securities for which a market quotation is readily available, and (ii) for all other securities and assets, at fair value, as determined in good faith by our board of directors. As a BDC, Section 2(a)(41) of the 1940 Act requires the board of directors to determine in good faith the fair value of portfolio securities for which a market price is not readily available, and it does so in conjunction with the application of our valuation procedures by CIM. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations in our consolidated financial statements. Valuation Methods With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below: • our quarterly valuation process begins with each portfolio company or investment being initially valued by certain of CIM’s investment professionals and certain members of its management team, with such valuation taking into account information received from various sources, including independent valuation firms, if applicable; • preliminary valuation conclusions are then documented and discussed with members of CIM’s management team; • designated members of CIM’s management team review the preliminary valuation, and, if applicable, deliver such preliminary valuation to an independent valuation firm for its review; • designated members of CIM’s management team and, if appropriate, the relevant investment professionals meet with the independent valuation firm to discuss the preliminary valuation; • designated members of CIM’s management team respond and supplement the preliminary valuation to reflect any comments provided by the independent valuation firm; • our audit committee meets with members of CIM’s management team and the independent valuation firms to discuss the assistance provided and the results of the independent valuation firms' review; and • our board of directors discusses the valuation and determines the fair value of each investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of CIM, the audit committee and any third-party valuation firm, if applicable. In addition to the foregoing, certain investments for which a market price is not readily available are evaluated on a quarterly basis by an independent valuation firm and certain other investments are on a rotational basis reviewed by an independent valuation firm. Finally, certain investments are not evaluated by an independent valuation firm unless certain aspects of such investments in the aggregate meet certain criteria. Given the expected types of investments, excluding short term investments and stock of publicly traded companies that are classified as Level 1, management expects our portfolio holdings to be classified as Level 3. Due to the uncertainty inherent in the valuation process, particularly for Level 3 investments, such fair value estimates may differ significantly from the values that would have been used had an active market for the investments existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses that we ultimately realize on these investments to materially differ from the valuations currently assigned. Inputs used in the valuation process are subject to variability in the future and can result in materially different fair values. For an additional discussion of our investment valuation process, refer to Note 2 to our consolidated financial statements included in this report. Related Party Transactions For a discussion of our relationship with related parties including CION Securities, CIM, CIG, and AIA and amounts incurred under agreements with such related parties, refer to Note 4 to our consolidated financial statements included in this report. 67 Contractual Obligations On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended and restated on September 30, 2016, July 11, 2017, November 28, 2017, May 23, 2018, May 15, 2020 and February 26, 2021. See Note 8 to our consolidated financial statements for a more detailed description of the JPM Credit Facility. On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS, as amended on December 1, 2017, May 19, 2020, November 12, 2020 and December 17, 2020. See Note 8 to our consolidated financial statements for a more detailed description of the UBS Facility. On February 11, 2021, we entered into the Note Purchase Agreement with purchasers of the 2026 Notes. See Note 16 to our consolidated financial statements for a more detailed description of the 2026 Notes. On April 14, 2021, we entered into the More Term Loan with More. See Note 8 to our consolidated financial statements for a more detailed description of the More Term Loan. Commitments and Contingencies We have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote. Our investment portfolio may contain debt investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or other unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. For further details on such debt investments, refer to Note 11 to our consolidated financial statements included in this report. We currently have no off-balance sheet arrangements, except for those discussed in Note 11 to our consolidated financial statements included in this report. 68 Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. As of December 31, 2021, 84.2% of our investments paid variable interest rates. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments, especially to the extent that we hold variable rate investments, and to declines in the value of any fixed rate investments we may hold. To the extent that a majority of our investments may be in variable rate investments, an increase in interest rates could make it easier for us to meet or exceed our incentive fee hurdle rate, as defined in our investment advisory agreement, and may result in a substantial increase in our net investment income, and also to the amount of incentive fees payable to CIM with respect to our pre-incentive fee net investment income. As of December 31, 2021, under the terms of the Third Amended JPM Credit Facility, advances currently bear interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.10% per year. Pursuant to the terms of the Amended UBS Facility, we currently pay a financing fee equal to the three-month LIBOR, plus a spread of 3.375% per year. In addition, we may seek to further borrow funds in order to make additional investments. Our net investment income will be impacted, in part, by the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we would be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments. We expect that our long-term investments will be financed primarily with equity and long-term debt. Our interest rate risk management techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates could have a material adverse effect on our business, financial condition and results of operations. The following table shows the effect over a twelve month period of changes in interest rates on our net interest income, excluding short term investments, assuming no changes in our investment portfolio, the Third Amended JPM Credit Facility or the Amended UBS Facility in effect as of December 31, 2021: Basis Point Change in Interest Rates (Decrease) Increase in Net Interest Income(1) Percentage Change in Net Interest Income No change to current base rate (0.16% as of December 31, 2021) — — Up 50 basis points (2,622) (2.4) % Up 100 basis points (3,291) (3.0) % Up 200 basis points 3,108 2.8 % Up 300 basis points 10,504 9.5 % (1) This table assumes no change in defaults or prepayments by portfolio companies over the next twelve months. The interest rate sensitivity analysis presented above does not consider the potential impact of the changes in fair value of our fixed rate debt investments, our fixed rate borrowings (the 2026 Notes and the More Term Loan), or the net asset value of our common stock in the event of sudden changes in interest rates. Approximately 10.3% of our investments paid fixed interest rates as of December 31, 2021. Rising market interest rates will most likely lead to fair value declines for fixed interest rate investments and fixed interest rate borrowings and a decline in the net asset value of our common stock, while declining market interest rates will most likely lead to an increase in the fair value of fixed interest rate investments and fixed interest rate borrowings and an increase in the net asset value of our common stock. In addition, we may have risk regarding portfolio valuation. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments” and Note 2 to our consolidated financial statements included in this report. 69 Item 8. Consolidated Financial Statements and Supplementary Data Page Report of Independent Registered Public Accounting Firm 71 Consolidated Balance Sheets 73 Consolidated Statements of Operations 74 Consolidated Statements of Changes in Net Assets 76 Consolidated Statements of Cash Flows 77 Consolidated Schedules of Investments 78 Notes to Consolidated Financial Statements 98 70 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of CĪON Investment Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets, including the consolidated schedules of investments, of CĪON Investment Corporation (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in net assets and cash flows for each of the two years in the period ended December 31, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2021 and 2020, by correspondence with the custodians, loan agents or management of the underlying investments, as applicable, or by other appropriate auditing procedures where replies from these parties, as applicable, were not received. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Level 3 Investments As of December 31, 2021, the fair value of the Company’s investments classified as Level 3 investments was approximately $1.63 billion, or approximately 94.7% of total investments. As discussed in Notes 1, 2, and 9 in the financial statements, the Company invests in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt and equity, of private and thinly-traded U.S. middle-market companies, and substantially all of its investments are classified as Level 3 investments. The Company’s determination of fair value for these investments requires that management makes subjective judgments and estimates utilizing non-binding broker or dealer consensus pricing and/or quotes, a market approach, an income approach, or a combination of a market and income approach, as appropriate. These approaches require management to make subjective judgments and estimates related to significant unobservable inputs including the discount rates, EBITDA multiples, revenue multiples, broker quotes, expected volatility and expected outcome of proposed corporate transactions. We identified the valuation of Level 3 investments as a critical audit matter given the Company uses significant subjective judgments to estimate the fair value of such investments. Auditing the reasonableness of management’s selection of valuation techniques and the related unobservable inputs increased audit effort, including the use of a valuation specialist. 71 Our audit procedures related to the valuation techniques, unobservable inputs and assumptions used by management to estimate the fair value of Level 3 investments included the following, among others: • We evaluated the appropriateness of the valuation techniques used for Level 3 investments and evaluated the reasonableness of any significant changes in valuation techniques since prior periods. • We evaluated the reasonableness of the related significant unobservable inputs and the reasonableness of any significant changes in significant unobservable inputs from prior periods by comparing these inputs to external sources, including, but not limited to: ◦ Historical operating results of the investment as obtained from the Company, among other sources, the financial statements and the board of directors’ materials of the investment. ◦ Available market data for comparable companies. ◦ Subsequent events and transactions, where available. • We tested the source information used to determine the valuation input and the mathematical accuracy of the calculation used to compute the input. • With the assistance of a valuation specialists, we performed the following: ◦ For a portion of Level 3 investments, evaluated the valuation techniques compared to those of a market participant, used market information to develop a range of market yield, comparable financial performance multiples and discount rate assumptions and compared them to the assumptions used by management. ◦ For a portion of Level 3 investments, developed an independent estimate of the fair value and compared our estimates to management’s estimates. • We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to transactions subsequent to measurement date. We took into consideration changes in market or investment specific factors, where available. /s/ RSM US LLP We have served as the Company's auditor since 2019. New York, New York March 9, 2022 72 CĪON Investment Corporation Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2021 December 31, 2020 Assets Investments, at fair value: Non-controlled, non-affiliated investments (amortized cost of $1,617,126 and $1,501,529, respectively) $ 1,581,124 $ 1,440,004 Non-controlled, affiliated investments (amortized cost of $91,476 and $134,184, respectively) 81,490 116,895 Controlled investments (amortized cost of $83,702 and $15,539, respectively) 91,425 12,472 Total investments, at fair value (amortized cost of $1,792,304 and $1,651,252, respectively) 1,754,039 1,569,371 Cash 3,774 19,914 Interest receivable on investments 21,549 17,484 Receivable due on investments sold and repaid 2,854 6,193 Dividends receivable on investments — 45 Prepaid expenses and other assets 466 1,788 Total assets $ 1,782,682 $ 1,614,795 Liabilities and Shareholders' Equity Liabilities Financing arrangements (net of unamortized debt issuance costs of $7,628 and $5,044, respectively) $ 822,372 $ 719,956 Payable for investments purchased 11,327 133 Accounts payable and accrued expenses 1,922 694 Interest payable 4,339 2,500 Accrued management fees 6,673 7,668 Accrued subordinated incentive fee on income 3,942 4,323 Accrued administrative services expense 1,595 1,265 Total liabilities 852,170 736,539 Commitments and contingencies (Note 4 and Note 11) Shareholders' Equity Common stock, $0.001 par value; 500,000,000 shares authorized; 56,958,440 and 56,646,867 shares issued and outstanding, respectively(1) 57 57 Capital in excess of par value 1,059,989 1,054,967 Accumulated distributable losses (129,534) (176,768) Total shareholders' equity 930,512 878,256 Total liabilities and shareholders' equity $ 1,782,682 $ 1,614,795 Net asset value per share of common stock at end of year(1) $ 16.34 $ 15.50 (1) As discussed in Note 3, the Company completed a two-to-one reverse stock split, effective as of September 21, 2021. The issued and outstanding shares and net asset value per share reflect the reverse stock split on a retroactive basis. See accompanying notes to consolidated financial statements. 73 CĪON Investment Corporation Consolidated Statements of Operations (in thousands, except share and per share amounts) Years Ended December 31, 2021 2020 2019 Investment income Non-controlled, non-affiliated investments Interest income $ 119,792 $ 125,395 $ 187,104 Paid-in-kind interest income 17,306 17,078 2,017 Fee income 5,927 4,393 3,899 Dividend income 366 331 474 Non-controlled, affiliated investments Dividend income 5,576 3,012 4,015 Interest income 4,961 7,883 1,905 Paid-in-kind interest income 3,160 2,082 566 Fee income — 150 — Controlled investments Paid-in-kind interest income 260 — — Dividend income — 3,518 1,123 Total investment income 157,348 163,842 201,103 Operating expenses Management fees 31,143 31,828 36,466 Administrative services expense 3,069 2,465 2,650 Subordinated incentive fee on income 6,875 7,631 20,087 General and administrative 9,805 6,085 5,045 Interest expense 31,807 36,837 49,531 Total operating expenses 82,699 84,846 113,779 Net investment income before taxes 74,649 78,996 87,324 Income tax expense, including excise tax 342 268 12 Net investment income after taxes 74,307 78,728 87,312 Realized and unrealized (losses) gains Net realized (losses) gains on: Non-controlled, non-affiliated investments (4,100) (69,687) (13,594) Non-controlled, affiliated investments 8,010 (211) (11,184) Controlled investments (3,067) — — Foreign currency (3) 26 (139) Net realized gains (losses) 840 (69,872) (24,917) Net change in unrealized appreciation (depreciation) on: Non-controlled, non-affiliated investments 25,566 1,110 (19,658) Non-controlled, affiliated investments 7,261 (17,945) 9,101 Controlled investments 10,790 (3,043) 6 Net change in unrealized appreciation (depreciation) 43,617 (19,878) (10,551) Net realized and unrealized gains (losses) 44,457 (89,750) (35,468) Net increase (decrease) in net assets resulting from operations $ 118,764 $ (11,022) $ 51,844 Per share information—basic and diluted(1) Net increase (decrease) in net assets per share resulting from operations $ 2.09 $ (0.19) $ 0.91 Net investment income per share $ 1.31 $ 1.39 $ 1.54 Weighted average shares of common stock outstanding 56,808,960 56,817,920 56,855,618 (1) As discussed in Note 3, the Company completed a two-to-one reverse stock split, effective as of September 21, 2021. The weighted average shares used in the computation of the net increase (decrease) in net assets per share resulting from operations and net investment income per share reflect the reverse stock split on a retroactive basis. 74 See accompanying notes to consolidated financial statements. 75 CĪON Investment Corporation Consolidated Statements of Changes in Net Assets (in thousands, except share and per share amounts) Years Ended December 31, 2021 2020 2019 Changes in net assets from operations: Net investment income $ 74,307 $ 78,728 $ 87,312 Net realized gain (loss) on investments 843 (69,898) (24,778) Net realized (loss) gain on foreign currency (3) 26 (139) Net change in unrealized appreciation (depreciation) on investments 43,617 (19,878) (10,551) Net increase (decrease) in net assets resulting from operations 118,764 (11,022) 51,844 Changes in net assets from shareholders' distributions: Distributions to shareholders (71,530) (63,283) (84,772) Net decrease in net assets resulting from shareholders' distributions (71,530) (63,283) (84,772) Changes in net assets from capital share transactions: Issuance of common stock, net of issuance costs of $0, $0 and $296, respectively — — 6,219 Reinvestment of shareholders' distributions 15,489 23,298 35,800 Repurchase of common stock (10,467) (23,300) (35,799) Net increase (decrease) in net assets resulting from capital share transactions 5,022 (2) 6,220 Total increase (decrease) in net assets 52,256 (74,307) (26,708) Net assets at beginning of year 878,256 952,563 979,271 Net assets at end of year $ 930,512 $ 878,256 $ 952,563 Net asset value per share of common stock at end of year(1) $ 16.34 $ 15.50 $ 16.80 Shares of common stock outstanding at end of year(1) 56,958,440 56,646,867 56,690,578 (1) As discussed in Note 3, the Company completed a two-to-one reverse stock split, effective as of September 21, 2021. The shares outstanding used in the computation of net asset value per share reflect the reverse stock split on a retroactive basis. See accompanying notes to consolidated financial statements. 76 CĪON Investment Corporation Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, 2021 2020 2019 Operating activities: Net increase (decrease) in net assets resulting from operations $ 118,764 $ (11,022) $ 51,844 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash (used in) provided by operating activities: Net accretion of discount on investments (11,738) (13,214) (16,081) Proceeds from principal repayment of investments 568,907 465,547 423,091 Purchase of investments (920,039) (359,633) (563,884) Increase in short term investments, net (14,319) (44,071) (16,989) Paid-in-kind interest and dividends capitalized (21,734) (21,420) (7,072) Proceeds from sale of investments 259,050 77,630 245,698 Net realized (gain) loss on investments (843) 69,898 24,778 Net change in unrealized (appreciation) depreciation on investments (43,617) 19,878 10,551 Amortization of debt issuance costs 2,800 5,037 2,898 (Increase) decrease in due from counterparty — 3,281 (3,281) (Increase) decrease in interest receivable on investments (4,400) (1,137) 2,481 (Increase) decrease in dividends receivable on investments 45 1,061 (1,106) (Increase) decrease in receivable due on investments sold and repaid 3,339 12,359 (12,765) (Increase) decrease in prepaid expenses and other assets 1,322 (803) (796) Increase (decrease) in payable for investments purchased 11,194 (1,435) (15,283) Increase (decrease) in accounts payable and accrued expenses 1,228 (121) (124) Increase (decrease) in interest payable 1,839 (663) (797) Increase (decrease) in accrued management fees (995) (1,201) (439) Increase (decrease) in accrued administrative services expense 330 48 304 Increase (decrease) in subordinated incentive fee on income payable (381) (1,289) 3,008 Net cash (used in) provided by operating activities (49,248) 198,730 126,036 Financing activities: Gross proceeds from issuance of common stock — — 6,515 Commissions and dealer manager fees paid — — (296) Repurchase of common stock (10,467) (23,300) (35,799) Shareholders' distributions paid (56,041) (39,985) (48,972) Borrowings under financing arrangements 276,000 486,153 313,000 Repayment of financing arrangements (171,000) (602,194) (370,500) Debt issuance costs paid (5,384) (5,625) (1,428) Net cash provided by (used in) financing activities 33,108 (184,951) (137,480) Net (decrease) increase in cash and restricted cash (16,140) 13,779 (11,444) Cash and restricted cash, beginning of year 19,914 6,135 17,579 Cash and restricted cash, end of year $ 3,774 $ 19,914 $ 6,135 Supplemental disclosure of cash flow information Cash paid for interest $ 27,129 $ 32,403 $ 47,413 Supplemental non-cash financing activities: Reinvestment of shareholders' distributions $ 15,489 $ 23,298 $ 35,800 Restructuring of portfolio investments $ 5,455 $ 91,326 $ 71,445 Cash interest receivable exchanged for additional securities $ 1,304 $ — $ — See accompanying notes to consolidated financial statements. 77 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) Senior Secured First Lien Debt - 164.1% ABB/CON-CISE Optical Group LLC, L+500, 1.00% LIBOR Floor, 6/15/2023(i)(n) 6 Month LIBOR Consumer Goods: Non-Durable $ 8,473 $ 8,263 $ 8,219 Adapt Laser Acquisition, Inc., L+1200, 1.00% LIBOR Floor, 12/31/2023(t) 3 Month LIBOR Capital Equipment 11,181 11,181 9,392 Adapt Laser Acquisition, Inc., L+1000, 1.00% LIBOR Floor, 12/31/2023 3 Month LIBOR Capital Equipment 2,000 2,000 1,680 Aegis Toxicology Sciences Corp., L+550, 1.00% LIBOR Floor, 5/9/2025(m) 3 Month LIBOR Healthcare & Pharmaceuticals 7,186 7,105 7,186 Alchemy US Holdco 1, LLC, L+550, 10/10/2025(m) 1 Month LIBOR Construction & Building 2,287 2,270 2,289 Allen Media, LLC, L+550, 0.00% LIBOR Floor, 2/10/2027(n) 3 Month LIBOR Media: Diversified & Production 8,955 8,868 8,955 ALM Media, LLC, L+700, 1.00% LIBOR Floor, 11/25/2024(m)(n) 3 Month LIBOR Media: Advertising, Printing & Publishing 18,000 17,774 17,460 American Clinical Solutions LLC, 7.00%, 12/31/2022(m) None Healthcare & Pharmaceuticals 3,500 3,462 3,447 American Consolidated Natural Resources, Inc., L+1600, 1.00% LIBOR Floor, 9/16/2025(m)(t) 3 Month LIBOR Metals & Mining 379 284 389 American Health Staffing Group, Inc., L+600, 1.00% LIBOR Floor, 11/19/2026(m) 3 Month LIBOR Services: Business 16,667 16,502 16,500 American Health Staffing Group, Inc., Prime+500, 11/19/2026 Prime Services: Business 1,000 1,000 990 American Health Staffing Group, Inc., 0.50% Unfunded, 11/19/2026 None Services: Business 2,333 (33) (23) American Media, LLC, L+675, 1.50% LIBOR Floor, 12/31/2023(m) 3 Month LIBOR Media: Advertising, Printing & Publishing 9,847 9,735 9,847 American Media, LLC, 0.50% Unfunded, 12/31/2023(m) None Media: Advertising, Printing & Publishing 1,702 (17) — American Teleconferencing Services, Ltd., Prime+550, 6/8/2023(m)(q) Prime Telecommunications 16,154 15,621 3,211 American Teleconferencing Services, Ltd., Prime+550, 3/31/2022(m) Prime Telecommunications 3,116 3,033 3,116 American Teleconferencing Services, Ltd., 0.00% Unfunded, 3/31/2022(m)(o) None Telecommunications 235 — — Analogic Corp., L+525, 1.00% LIBOR Floor, 6/21/2024(m)(n) 1 Month LIBOR Healthcare & Pharmaceuticals 4,900 4,853 4,820 Ancile Solutions, Inc., L+1000, 1.00% LIBOR Floor, 6/22/2026(t) 1 Month LIBOR High Tech Industries 12,537 12,194 12,161 Anthem Sports & Entertainment Inc., L+900, 1.00% LIBOR Floor, 11/15/2026(m)(t) 3 Month LIBOR Media: Diversified & Production 37,966 37,758 36,543 Anthem Sports & Entertainment Inc., L+950, 1.00% LIBOR Floor, 11/15/2026 3 Month LIBOR Media: Diversified & Production 1,000 1,000 962 Anthem Sports & Entertainment Inc., 0.50% Unfunded, 11/15/2026 None Media: Diversified & Production 1,167 — (44) Appalachian Resource Company, LLC, L+500, 1.00% LIBOR Floor, 9/10/2023 1 Month LIBOR Metals & Mining 11,137 9,959 10,538 Appalachian Resource Company, LLC, 0.00% Unfunded, 9/10/2023(o) None Metals & Mining 500 — — Associated Asphalt Partners, LLC, L+525, 1.00% LIBOR Floor, 4/5/2024(m)(n) 1 Month LIBOR Construction & Building 14,393 14,095 12,666 Avison Young (USA) Inc., L+500, 0.00% LIBOR Floor, 1/31/2026(h)(m) 3 Month LIBOR Banking, Finance, Insurance & Real Estate 2,692 2,658 2,679 Bradshaw International Parent Corp., L+575, 1.00% LIBOR Floor, 10/21/2027(m) 1 Month LIBOR Consumer Goods: Durable 13,156 12,831 12,827 Bradshaw International Parent Corp., L+575, 1.00% LIBOR Floor, 10/21/2026 1 Month LIBOR Consumer Goods: Durable 400 387 390 Bradshaw International Parent Corp., 0.50% Unfunded, 10/21/2026 None Consumer Goods: Durable 1,445 (32) (36) Cadence Aerospace, LLC, L+850, 1.00% LIBOR Floor, 11/14/2023(m)(n)(t) 3 Month LIBOR Aerospace & Defense 38,960 38,623 38,279 Cardenas Markets LLC, L+625, 1.00% LIBOR Floor, 6/3/2027 6 Month LIBOR Retail 10,945 10,840 10,972 CB URS Holdings Corp., L+575, 1.00% LIBOR Floor, 9/1/2024(m) 6 Month LIBOR Transportation: Cargo 15,354 15,310 14,106 Celerity Acquisition Holdings, LLC, L+850, 1.00% LIBOR Floor, 5/28/2026 1 Month LIBOR Services: Business 14,925 14,925 14,944 Charming Charlie LLC, 20.00%, 4/24/2023(q)(r) None Retail 662 657 350 CHC Solutions Inc., 12.00%, 7/20/2023(n)(t) None Healthcare & Pharmaceuticals 7,966 7,966 7,916 See accompanying notes to consolidated financial statements. 78 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) CION/EagleTree Partners, LLC, 14.00%, 12/21/2026(h)(s)(t) None Diversified Financials 61,629 61,629 61,629 CircusTrix Holdings, LLC, L+800, 1.00% LIBOR Floor, 1/16/2024(m)(n)(t) 1 Month LIBOR Hotel, Gaming & Leisure 26,754 26,734 25,718 CircusTrix Holdings, LLC, L+800, 1.00% LIBOR Floor, 1/16/2024(m)(t) 1 Month LIBOR Hotel, Gaming & Leisure 2,723 2,723 2,618 CircusTrix Holdings, LLC, L+800, 1.00% LIBOR Floor, 7/16/2023(m)(t) 1 Month LIBOR Hotel, Gaming & Leisure 1,953 1,836 2,300 Country Fresh Holdings, LLC, L+500, 1.00% LIBOR Floor, 4/29/2023(q) 3 Month LIBOR Beverage, Food & Tobacco 1,020 984 168 Country Fresh Holdings, LLC, L+500, 1.00% LIBOR Floor, 4/29/2023(m)(q) 3 Month LIBOR Beverage, Food & Tobacco 414 414 68 Coyote Buyer, LLC, L+600, 1.00% LIBOR Floor, 2/6/2026(m)(n) 3 Month LIBOR Chemicals, Plastics & Rubber 34,388 34,157 34,302 Coyote Buyer, LLC, L+800, 1.00% LIBOR Floor, 8/6/2026(n) 3 Month LIBOR Chemicals, Plastics & Rubber 6,188 6,084 6,188 Coyote Buyer, LLC, 0.50% Unfunded, 2/6/2025 None Chemicals, Plastics & Rubber 2,500 — (6) Critical Nurse Staffing, LLC, L+600, 1.00% LIBOR Floor, 11/1/2026(m) 3 Month LIBOR Healthcare & Pharmaceuticals 13,059 13,059 13,059 Critical Nurse Staffing, LLC, L+600, 1.00% LIBOR Floor, 11/1/2026 3 Month LIBOR Healthcare & Pharmaceuticals 1,009 1,009 1,009 Critical Nurse Staffing, LLC, 1.00% Unfunded, 11/1/2026 None Healthcare & Pharmaceuticals 4,899 — — Critical Nurse Staffing, LLC, 0.50% Unfunded, 11/1/2026 None Healthcare & Pharmaceuticals 1,000 — — David's Bridal, LLC, L+1000, 1.00% LIBOR Floor, 6/23/2023(t) 3 Month LIBOR Retail 5,617 5,008 5,617 David's Bridal, LLC, L+1000, 1.00% LIBOR Floor, 5/23/2024(t) 3 Month LIBOR Retail 5,093 5,093 5,093 David's Bridal, LLC, L+600, 1.00% LIBOR Floor, 6/30/2023(t) 3 Month LIBOR Retail 791 719 791 Deluxe Entertainment Services, Inc., L+650, 1.00% LIBOR Floor, 3/25/2024(m)(q)(r)(t) 3 Month LIBOR Media: Diversified & Production 2,930 2,930 1,787 DMT Solutions Global Corp., L+750, 1.00% LIBOR Floor, 7/2/2024(m) (u) Services: Business 9,696 9,563 9,503 Entertainment Studios P&A LLC, 5.71%, 5/18/2037(j)(m) None Media: Diversified & Production 11,649 11,554 10,047 Entertainment Studios P&A LLC, 5.00%, 5/18/2037(j) None Media: Diversified & Production — — 2,182 EnTrans International, LLC, L+600, 0.00% LIBOR Floor, 11/1/2024(m) 1 Month LIBOR Capital Equipment 24,750 24,617 23,430 Extreme Reach, Inc., L+700, 1.25% LIBOR Floor, 3/29/2024(m)(n) 1 Month LIBOR Media: Diversified & Production 18,774 18,662 18,844 Extreme Reach, Inc., 0.50% Unfunded, 3/29/2024(m)(n) None Media: Diversified & Production 1,744 — 7 Foundation Consumer Healthcare, LLC, L+638, 1.00% LIBOR Floor, 2/12/2027(m)(n) 3 Month LIBOR Healthcare & Pharmaceuticals 30,799 30,535 31,145 Foundation Consumer Healthcare, LLC, 0.50% Unfunded, 11/2/2023 None Healthcare & Pharmaceuticals 2,094 — 24 FuseFX, LLC, L+575, 1.00% LIBOR Floor, 10/1/2024(m)(n) 1 Month LIBOR Media: Diversified & Production 20,000 19,800 19,800 Future Pak, LLC, L+800, 2.00% LIBOR Floor, 7/2/2024(m) 1 Month LIBOR Healthcare & Pharmaceuticals 33,764 33,565 33,426 Genesis Healthcare, Inc., 0.50% Unfunded, 3/6/2023(h) None Healthcare & Pharmaceuticals 35,000 — — GSC Technologies Inc., L+500, 1.00% LIBOR Floor, 9/30/2025(r) 3 Month LIBOR Chemicals, Plastics & Rubber 2,404 2,294 2,001 GSC Technologies Inc., L+500, 1.00% LIBOR Floor, 9/30/2025(r)(t) 3 Month LIBOR Chemicals, Plastics & Rubber 858 814 485 GSC Technologies Inc., L+1000, 1.00% LIBOR Floor, 9/30/2025(r)(t) 3 Month LIBOR Chemicals, Plastics & Rubber 170 170 170 H.W. Lochner, Inc., L+625, 1.00% LIBOR Floor, 7/2/2027 3 Month LIBOR Construction & Building 11,970 11,856 11,910 H.W. Lochner, Inc., L+625, 1.00% LIBOR Floor, 7/2/2027 3 Month LIBOR Construction & Building 725 715 721 H.W. Lochner, Inc., 0.50% Unfunded, 7/2/2027 None Construction & Building 275 — (1) Harland Clarke Holdings Corp., L+775, 1.00% LIBOR Floor, 6/16/2026(m) 1 Month LIBOR Services: Business 9,657 9,641 8,848 See accompanying notes to consolidated financial statements. 79 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) Heritage Power, LLC, L+600, 1.00% LIBOR Floor, 7/30/2026 6 Month LIBOR Energy: Oil & Gas 4,854 4,692 3,956 Hilliard, Martinez & Gonzales, LLP, L+1800, 2.00% LIBOR Floor, 12/17/2022(m)(t) 1 Month LIBOR Services: Consumer 22,885 22,752 21,947 Homer City Generation, L.P., 15.00%, 4/5/2023(m)(t) None Energy: Oil & Gas 10,173 10,521 7,935 Hoover Group, Inc., L+850, 1.25% LIBOR Floor, 10/1/2024(n) 3 Month LIBOR Services: Business 5,156 5,139 5,079 HUMC Holdco, LLC, 9.00%, 1/14/2022(m) None Healthcare & Pharmaceuticals 9,346 9,346 9,323 HW Acquisition, LLC, L+600, 1.00% LIBOR Floor, 9/28/2026m) 3 Month LIBOR Capital Equipment 19,067 18,885 18,828 HW Acquisition, LLC, 0.50% Unfunded, 9/28/2026 None Capital Equipment 2,933 (28) (37) Independent Pet Partners Intermediate Holdings, LLC, 6.00%, 11/20/2023(m)(t) None Retail 10,295 10,235 9,085 Independent Pet Partners Intermediate Holdings, LLC, Prime+500, 12/22/2022(m) Prime Retail 2,085 2,085 2,085 Independent Pet Partners Intermediate Holdings, LLC, L+600, 0.00% LIBOR Floor, 12/22/2022(m) 3 Month LIBOR Retail 264 264 264 InfoGroup Inc., L+500, 1.00% LIBOR Floor, 4/3/2023(m)(n) 3 Month LIBOR Media: Advertising, Printing & Publishing 15,432 15,428 14,815 Inotiv, Inc., L+625, 1.00% LIBOR Floor, 11/5/2026(m) 1 Month LIBOR Healthcare & Pharmaceuticals 9,900 9,709 9,764 Inotiv, Inc., 1.00% Unfunded, 5/5/2023 None Healthcare & Pharmaceuticals 2,100 (41) (29) Instant Web, LLC, L+650, 1.00% LIBOR Floor, 12/15/2022(m)(n) 1 Month LIBOR Media: Advertising, Printing & Publishing 36,605 36,580 34,042 Instant Web, LLC, 0.50% Unfunded, 12/15/2022 None Media: Advertising, Printing & Publishing 2,704 — — Invincible Boat Company LLC, L+650, 1.50% LIBOR Floor, 8/28/2025 3 Month LIBOR Consumer Goods: Durable 14,034 13,937 14,034 Invincible Boat Company LLC, 0.50% Unfunded, 8/28/2025 None Consumer Goods: Durable 798 — (8) INW Manufacturing, LLC, L+575, 0.75% LIBOR Floor, 5/7/2027(n) 3 Month LIBOR Services: Business 19,625 19,087 19,232 Isagenix International, LLC, L+575, 1.00% LIBOR Floor, 6/14/2025(m) 3 Month LIBOR Beverage, Food & Tobacco 16,663 15,160 15,122 Island Medical Management Holdings, LLC, L+650, 1.00% LIBOR Floor, 9/1/2023(m)(n) 3 Month LIBOR Healthcare & Pharmaceuticals 11,049 11,028 11,049 Jenny C Acquisition, Inc., L+900, 1.75% LIBOR Floor, 10/1/2024(m)(t) 3 Month LIBOR Services: Consumer 11,123 11,069 10,157 JP Intermediate B, LLC, L+550, 1.00% LIBOR Floor, 11/20/2025(m) 3 Month LIBOR Beverage, Food & Tobacco 14,355 14,160 13,458 K&N Parent, Inc., L+475, 1.00% LIBOR Floor, 10/20/2023 3 Month LIBOR Consumer Goods: Durable 11,154 10,779 10,373 KNB Holdings Corp., L+550, 1.00% LIBOR Floor, 4/26/2024(m) 6 Month LIBOR Consumer Goods: Durable 7,854 7,774 5,517 LaserAway Intermediate Holdings II, LLC, L+575, 1.00% LIBOR Floor, 10/12/2027(m) 3 Month LIBOR Services: Consumer 10,000 9,805 9,963 LAV Gear Holdings, Inc., L+750, 1.00% LIBOR Floor, 10/31/2024(m)(n)(t) 3 Month LIBOR Services: Business 26,408 26,103 24,988 LAV Gear Holdings, Inc., L+750, 1.00% LIBOR Floor, 10/31/2024(m)(n)(t) 3 Month LIBOR Services: Business 4,555 4,518 4,310 LGC US Finco, LLC, L+650, 1.00% LIBOR Floor, 12/20/2025(m) 1 Month LIBOR Capital Equipment 11,760 11,431 11,422 LH Intermediate Corp., L+750, 1.00% LIBOR Floor, 6/2/2026(m) 3 Month LIBOR Consumer Goods: Durable 14,438 14,230 14,257 Lift Brands, Inc., L+750, 1.00% LIBOR Floor, 6/29/2025(m)(n)(r) 1 Month LIBOR Services: Consumer 23,523 23,523 23,406 Lift Brands, Inc., 9.50%, 6/29/2025(m)(n)(r)(t) None Services: Consumer 5,343 5,255 5,156 Lift Brands, Inc., 6/29/2025(m)(n)(p)(r) None Services: Consumer 5,296 4,814 4,700 Longview Power, LLC, L+1000, 1.50% LIBOR Floor, 7/30/2025(r) 3 Month LIBOR Energy: Oil & Gas 4,189 2,624 4,504 MacNeill Pride Group Corp., L+625, 1.00% LIBOR Floor, 4/20/2026(m) 3 Month LIBOR Services: Consumer 14,925 14,790 14,776 MacNeill Pride Group Corp., L+625, 1.00% LIBOR Floor, 4/20/2026 3 Month LIBOR Services: Consumer 4,992 4,947 4,942 Manus Bio Inc., 11.00%, 8/20/2026 None Healthcare & Pharmaceuticals 10,000 10,000 10,000 See accompanying notes to consolidated financial statements. 80 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) Marble Point Credit Management LLC, L+600, 1.00% LIBOR Floor, 8/11/2028 1 Month LIBOR Diversified Financials 6,418 6,294 6,370 Marble Point Credit Management LLC, L+600, 1.00% LIBOR Floor, 8/11/2028 1 Month LIBOR Diversified Financials 250 241 248 Marble Point Credit Management LLC, 0.50% Unfunded, 8/11/2028 None Diversified Financials 1,250 — (9) Mimeo.com, Inc., L+640, 1.00% LIBOR Floor, 12/21/2023 3 Month LIBOR Services: Business 23,018 23,018 23,018 Mimeo.com, Inc., L+640, 1.00% LIBOR Floor, 12/21/2023 3 Month LIBOR Services: Business 256 256 256 Mimeo.com, Inc., 1.00% Unfunded, 12/21/2023 None Services: Business 5,000 — — Molded Devices, Inc., Prime + 500, 11/1/2026(m) Prime Services: Business 15,574 15,407 15,418 Molded Devices, Inc., 1.00% Unfunded, 11/1/2026 None Services: Business 1,771 (17) (18) Molded Devices, Inc., 0.50% Unfunded, 11/1/2026 None Services: Business 2,656 — (27) Moss Holding Company, L+700, 1.00% LIBOR Floor, 4/17/2024(m)(n)(t) 3 Month LIBOR Services: Business 19,641 19,506 17,922 Moss Holding Company, 0.50% Unfunded, 4/17/2024 None Services: Business 2,126 — — Moss Holding Company, 7.00% Unfunded, 4/17/2024 None Services: Business 106 — — Napa Management Services Corp., L+500, 1.00% LIBOR Floor, 4/19/2023 1 Month LIBOR Healthcare & Pharmaceuticals 5,318 5,267 5,324 NASCO Healthcare Inc., L+550, 1.00% LIBOR Floor, 6/30/2023(m) 6 Month LIBOR Services: Business 17,458 17,458 17,218 Neptune Flood Inc., L+600, 1.00% LIBOR Floor, 10/21/2026(m) 3 Month LIBOR Banking, Finance, Insurance & Real Estate 9,667 9,596 9,618 NewsCycle Solutions, Inc., L+700, 1.00% LIBOR Floor, 12/29/2022(m)(n) 3 Month LIBOR Media: Advertising, Printing & Publishing 12,064 12,020 12,049 NWN Parent Holdings LLC, L+650, 1.00% LIBOR Floor, 5/7/2026 3 Month LIBOR High Tech Industries 13,100 12,980 13,100 NWN Parent Holdings LLC, L+650, 1.00% LIBOR Floor, 5/7/2026 3 Month LIBOR High Tech Industries 420 420 421 NWN Parent Holdings LLC, 0.50% Unfunded, 5/7/2026 None High Tech Industries 1,380 (18) 3 Optio Rx, LLC, L+700, 0.00% LIBOR Floor, 6/28/2024(m)(n) 3 Month LIBOR Healthcare & Pharmaceuticals 23,344 23,255 22,994 Optio Rx, LLC, L+1000, 0.00% LIBOR Floor, 6/28/2024(n) 3 Month LIBOR Healthcare & Pharmaceuticals 2,515 2,498 2,647 Pentec Acquisition Corp., L+600, 1.00% LIBOR Floor, 10/8/2026 3 Month LIBOR Healthcare & Pharmaceuticals 25,000 24,756 24,750 PetroChoice Holdings, Inc., L+500, 1.00% LIBOR Floor, 8/20/2022 3 Month LIBOR Chemicals, Plastics & Rubber 3,896 3,836 3,725 PH Beauty Holdings III. Inc., L+500, 0.00% LIBOR Floor, 9/28/2025(m) 3 Month LIBOR Consumer Goods: Non-Durable 9,675 9,172 9,143 Playboy Enterprises, Inc., L+575, 0.50% LIBOR Floor, 5/25/2027(h)(n) 3 Month LIBOR Consumer Goods: Non-Durable 28,606 28,043 28,320 Polymer Additives, Inc., L+600, 0.00% LIBOR Floor, 7/31/2025(m) 3 Month LIBOR Chemicals, Plastics & Rubber 19,400 19,173 18,963 RA Outdoors, LLC, L+675, 1.00% LIBOR Floor, 4/8/2026(m) 3 Month LIBOR Media: Diversified & Production 15,911 15,911 15,772 RA Outdoors, LLC, 0.50% Unfunded, 4/8/2026 None Media: Diversified & Production 1,049 (170) (9) Retail Services WIS Corp., L+775, 1.00% LIBOR Floor, 5/20/2025(m) 3 Month LIBOR Services: Business 9,924 9,699 9,788 Robert C. Hilliard, L.L.P., L+1800, 2.00% LIBOR Floor, 12/17/2022(m)(t) 1 Month LIBOR Services: Consumer 1,905 1,905 1,827 Rogers Mechanical Contractors, LLC, L+650, 1.00% LIBOR Floor, 9/9/2025(m) 1 Month LIBOR Services: Business 17,250 17,250 17,250 Rogers Mechanical Contractors, LLC, 0.75% Unfunded, 9/9/2025 None Services: Business 2,885 — — Rogers Mechanical Contractors, LLC, 1.00% Unfunded, 9/9/2022 None Services: Business 1,923 — — RumbleOn, Inc., L+825, 1.00% LIBOR Floor, 8/31/2026(m)(t) 3 Month LIBOR Automotive 13,965 12,962 13,389 RumbleOn, Inc., 0.00% Unfunded, 2/28/2023(o) None Automotive 6,000 (56) — Securus Technologies Holdings, Inc., L+450, 1.00% LIBOR Floor, 11/1/2024(m) 3 Month LIBOR Telecommunications 3,908 3,201 3,908 Sequoia Healthcare Management, LLC, 12.75%, 8/21/2023(m)(n)(q) None Healthcare & Pharmaceuticals 8,525 8,457 6,394 See accompanying notes to consolidated financial statements. 81 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) SIMR, LLC, L+1700, 2.00% LIBOR Floor, 9/7/2023(r)(t) 1 Month LIBOR Healthcare & Pharmaceuticals 19,938 19,813 16,000 Sleep Opco, LLC, L+650, 1.00% LIBOR Floor, 10/12/2026(m) 3 Month LIBOR Retail 13,250 12,991 12,985 Sleep Opco, LLC, 0.50% Unfunded, 10/12/2026(m) None Retail 1,750 (34) (35) Spinal USA, Inc. / Precision Medical Inc., L+950, 10/1/2022(m) 3 Month LIBOR Healthcare & Pharmaceuticals 12,526 12,491 11,743 Spinal USA, Inc. / Precision Medical Inc., L+950, 10/1/2022(m)(t) 3 Month LIBOR Healthcare & Pharmaceuticals 1,054 1,054 991 Spinal USA, Inc. / Precision Medical Inc., L+950, 10/1/2022(m)(t) 3 Month LIBOR Healthcare & Pharmaceuticals 689 600 644 Spinal USA, Inc. / Precision Medical Inc., L+950, 10/1/2022(m)(t) 3 Month LIBOR Healthcare & Pharmaceuticals 649 647 609 Spinal USA, Inc. / Precision Medical Inc., L+950, 10/1/2022(m)(t) 3 Month LIBOR Healthcare & Pharmaceuticals 546 475 560 Tenere Inc., L+850, 1.00% LIBOR Floor, 7/1/2025(m)(n) 3 Month LIBOR Capital Equipment 18,080 18,080 18,080 Tensar Corp., L+675, 1.00% LIBOR Floor, 11/20/2025(m) 3 Month LIBOR Chemicals, Plastics & Rubber 4,950 4,850 4,982 Trademark Global, LLC, L+600, 1.00% LIBOR Floor, 7/30/2024 1 Month LIBOR Services: Business 15,346 15,278 15,250 Trademark Global, LLC, 1.00% Unfunded, 7/30/2023 None Services: Business 4,615 (21) (29) Trammell, P.C., L+1800, 2.00% LIBOR Floor, 6/25/2022(i)(t) 1 Month LIBOR Services: Consumer 18,091 18,091 18,091 USALCO, LLC, L+600, 1.00% LIBOR Floor, 10/19/2027(m) 3 Month LIBOR Chemicals, Plastics & Rubber 25,000 24,753 24,875 Vesta Holdings, LLC, L+1000, 1.00% LIBOR Floor, 2/25/2024(m)(t) 1 Month LIBOR Banking, Finance, Insurance & Real Estate 24,933 24,933 24,933 Volta Charging, LLC, 12.00%, 6/19/2024(m) None Media: Diversified & Production 12,000 11,984 13,095 Volta Charging, LLC, 12.00%, 6/19/2024(m) None Media: Diversified & Production 10,500 10,500 11,458 West Dermatology Management Holdings, LLC, L+600, 1.00% LIBOR Floor, 2/11/2025(m)(n) 3 Month LIBOR Healthcare & Pharmaceuticals 9,441 9,396 9,417 West Dermatology Management Holdings, LLC, L+600, 1.00% LIBOR Floor, 2/11/2025 3 Month LIBOR Healthcare & Pharmaceuticals 3,562 3,553 3,553 West Dermatology Management Holdings, LLC, L+750, 1.00% LIBOR Floor, 2/11/2025 3 Month LIBOR Healthcare & Pharmaceuticals 1,179 1,179 1,191 West Dermatology Management Holdings, LLC, L+600, 1.00% LIBOR Floor, 2/11/2025(m) 3 Month LIBOR Healthcare & Pharmaceuticals 1,105 1,094 1,102 West Dermatology Management Holdings, LLC, 0.50% Unfunded, 2/11/2025(m) None Healthcare & Pharmaceuticals 552 — (1) West Dermatology Management Holdings, LLC, 0.75% Unfunded, 2/11/2022 None Healthcare & Pharmaceuticals 5,755 (13) (8) Williams Industrial Services Group, Inc, L+900, 1.00% LIBOR Floor, 12/16/2025(n) 1 Month LIBOR Services: Business 9,775 9,775 9,861 Williams Industrial Services Group, Inc, 0.50% Unfunded, 12/16/2025 None Services: Business 5,000 — 44 Wind River Systems, Inc., L+675, 1.00% LIBOR Floor, 6/24/2024(n) 3 Month LIBOR High Tech Industries 23,684 23,507 23,684 Wok Holdings Inc., L+625, 0.00% LIBOR Floor, 3/1/2026(m) 1 Month LIBOR Beverage, Food & Tobacco 20,340 19,882 20,238 Xenon Arc, Inc., L+600, 0.75% LIBOR Floor, 12/17/2027(m) 3 Month LIBOR High Tech Industries 10,000 9,875 9,875 Total Senior Secured First Lien Debt 1,564,891 1,526,989 Senior Secured Second Lien Debt - 4.1% Deluxe Entertainment Services, Inc., L+850, 1.00% LIBOR Floor, 9/25/2024(m)(q)(r)(t) 3 Month LIBOR Media: Diversified & Production 10,534 10,017 — Global Tel*Link Corp., L+825, 0.00% LIBOR Floor, 11/29/2026(n) 1 Month LIBOR Telecommunications 11,500 11,356 11,471 PetroChoice Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/21/2023 3 Month LIBOR Chemicals, Plastics & Rubber 15,000 14,524 14,175 Premiere Global Services, Inc., L+950, 1.00% LIBOR Floor, 6/6/2024(q)(t) 3 Month LIBOR Telecommunications 3,775 3,435 — Securus Technologies Holdings, Inc., L+825, 1.00% LIBOR Floor, 11/1/2025 3 Month LIBOR Telecommunications 2,942 2,924 2,943 See accompanying notes to consolidated financial statements. 82 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) TMK Hawk Parent, Corp., L+800, 1.00% LIBOR Floor, 8/28/2025 1 Month LIBOR Services: Business 13,393 13,199 9,994 Total Senior Secured Second Lien Debt 55,455 38,583 Collateralized Securities and Structured Products - Equity - 0.3% APIDOS CLO XVI Subordinated Notes, 0.00% Estimated Yield, 1/19/2025(h) (g) Diversified Financials 9,000 2,136 984 Galaxy XV CLO Ltd. Class A Subordinated Notes, 5.76% Estimated Yield, 4/15/2025(h) (g) Diversified Financials 4,000 1,749 2,014 Total Collateralized Securities and Structured Products - Equity 3,885 2,998 Unsecured Debt - 2.9% Lucky Bucks Holdings LLC, 12.50%, 5/29/2028(t) None Hotel, Gaming & Leisure 20,219 20,219 20,219 WPLM Acquisition Corp., 15.00%, 11/24/2025(t) None Media: Advertising, Printing & Publishing 6,628 6,558 6,397 Total Unsecured Debt 26,777 26,616 Equity - 7.6% ARC Financial Partners, LLC, Membership Interests (25% ownership)(o)(r) Metals & Mining NA — — Ascent Resources - Marcellus, LLC, Membership Units(o) Energy: Oil & Gas 511,255 Units 1,642 639 Ascent Resources - Marcellus, LLC, Warrants(o) Energy: Oil & Gas 132,367 Units 13 3 CION/EagleTree Partners, LLC, Participating Preferred Shares(h)(o)(s) Diversified Financials 22,072,841 Units 22,073 29,796 CION/EagleTree Partners, LLC, Membership Units (85% ownership)(h)(o)(s) Diversified Financials NA — — DBI Investors, Inc., Series A1 Preferred Stock(o) Retail 20,000 Units 802 2,251 DBI Investors, Inc., Series A2 Preferred Stock(o) Retail 1,733 Units — 182 DBI Investors, Inc., Series A Preferred Stock(o) Retail 1,396 Units 140 164 DBI Investors, Inc., Series B Preferred Stock(o) Retail 4,183 Units 410 162 DBI Investors, Inc., Common Stock(o) Retail 39,423 Units — — DBI Investors, Inc., Reallocation Rights(o) Retail 7,500 Units — — GSC Technologies Inc., Common Shares(o)(r) Chemicals, Plastics & Rubber 807,268 Units — — Independent Pet Partners Intermediate Holdings, LLC, Class A Preferred Units(o) Retail 1,000,000 Units 1,000 20 Independent Pet Partners Intermediate Holdings, LLC, Class B-2 Preferred Units(o) Retail 2,632,771 Units 2,133 3,949 Independent Pet Partners Intermediate Holdings, LLC, Class C Preferred Units(o) Retail 2,632,771 Units 2,633 2,791 Independent Pet Partners Intermediate Holdings, LLC, Warrants(o) Retail 155,880 Units — — Longview Intermediate Holdings C, LLC, Membership Units(o)(r) Energy: Oil & Gas 653,989 Units 2,704 15,127 Mooregate ITC Acquisition, LLC, Class A Units(o) High Tech Industries 500 Units 562 171 Mount Logan Capital Inc., Common Stock(f)(h)(r) Banking, Finance, Insurance & Real Estate 1,075,557 Units 3,534 3,404 NS NWN Acquisition, LLC, Class A Preferred Units(o) High Tech Industries 111 Units 110 2,382 NS NWN Acquisition, LLC, Non-voting Units(o) High Tech Industries 346 Units 393 — NS NWN Holdco LLC, Voting Units (o) High Tech Industries 522 Units 504 525 NSG Co-Invest (Bermuda) LP, Partnership Interests(h)(o) Consumer Goods: Durable 1,575 Units 1,000 770 Palmetto Clean Technology, Inc., Warrants(o) High Tech Industries 724,112 Units 472 3,222 RumbleOn, Inc., Warrants(o) Automotive 60,606 Units 927 978 See accompanying notes to consolidated financial statements. 83 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) Portfolio Company(a) Industry Principal/ Par Amount/ Units(e) Cost(d) Fair Value(c) SIMR Parent, LLC, Class B Common Units(o)(r) Healthcare & Pharmaceuticals 12,283,163 Units 8,002 — SIMR Parent, LLC, Class W Units(o)(r) Healthcare & Pharmaceuticals 1,778,219 Units — — Snap Fitness Holdings, Inc., Class A Common Stock(o)(r) Services: Consumer 9,858 Units 3,078 3,131 Snap Fitness Holdings, Inc., Warrants(o)(r) Services: Consumer 3,996 Units 1,247 1,269 Total Equity 53,379 70,936 Short Term Investments - 9.5%(k) First American Treasury Obligations Fund, Class Z Shares, 0.01% (l) 87,917 87,917 Total Short Term Investments 87,917 87,917 TOTAL INVESTMENTS - 188.5% $ 1,792,304 1,754,039 LIABILITIES IN EXCESS OF OTHER ASSETS - (88.5%) (823,527) NET ASSETS - 100% $ 930,512 a. All of the Company’s investments are issued by eligible U.S. portfolio companies, as defined in the Investment Company Act of 1940, as amended, or the 1940 Act, except for investments specifically identified as non-qualifying per note h. below. Unless specifically identified in note t. below, investments do not contain a paid-in-kind, or PIK, interest provision. b. The 1, 3 and 6 month London Interbank Offered Rate, or LIBOR, rates were 0.10%, 0.21% and 0.34%, respectively, as of December 31, 2021. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2021, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2021. c. Fair value determined in good faith by the Company’s board of directors (see Note 9) using significant unobservable inputs unless otherwise noted. d. Represents amortized cost for debt securities and cost for equity investments. e. Denominated in U.S. dollars unless otherwise noted. f. Fair value determined using level 1 inputs. g. The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized. h. The investment or a portion thereof is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets as defined under Section 55 of the 1940 Act. As of December 31, 2021, 92.6% of the Company’s total assets represented qualifying assets. i. Position or a portion thereof unsettled as of December 31, 2021. j. In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company may be entitled to receive additional residual amounts. k. Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. l. 7-day effective yield as of December 31, 2021. m. Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, 34th Street Funding, LLC, or 34th Street, and was pledged as collateral supporting the amounts outstanding under the credit facility with JPMorgan Chase Bank, National Association, or JPM, as of December 31, 2021 (see Note 8). n. Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Murray Hill Funding II, LLC, or Murray Hill Funding II, and was pledged as collateral supporting the amounts outstanding under the repurchase agreement with UBS AG, or UBS, as of December 31, 2021 (see Note 8). o. Non-income producing security. p. The ultimate interest earned on this loan will be determined based on the portfolio company’s EBITDA at a specified trigger event. q. Investment or a portion thereof was on non-accrual status as of December 31, 2021. See accompanying notes to consolidated financial statements. 84 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) r. Investment determined to be an affiliated investment as defined in the 1940 Act as the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities but does not control the portfolio company. Fair value as of December 31, 2020 and 2021, along with transactions during the year ended December 31, 2021 in these affiliated investments, were as follows: Year Ended December 31, 2021 Year Ended December 31, 2021 Non-Controlled, Affiliated Investments Fair Value at December 31, 2020 Gross Additions (Cost)(1) Gross Reductions (Cost)(2) Net Unrealized Gain (Loss) Fair Value at December 31, 2021 Net Realized Gain (Loss) Interest Income(3) Dividend Income Alert 360 Opco, Inc. First Lien Term Loan $ — $ 12,240 $ (12,240) $ — $ — $ — $ 796 $ — Common Stock — 3,624 (3,624) — — (117) — — American Clinical Solutions LLC Tranche I Term Loan 3,124 35 (3,421) 262 — — 282 — First Amendment Tranche I Term Loan 242 — (250) 8 — — 18 — Class A Membership Interests 663 — (1,658) 995 — 3,542 — — ARC Financial, LLC Membership Interests — — — — — — — — BCP Great Lakes Fund LP Membership Interests 12,611 5,377 (18,241) 253 — 33 — 1,078 Charming Charlie, LLC Vendor Payment Financing Facility 350 — — — 350 — — — Conisus Holdings, Inc. Series B Preferred Stock 16,481 951 (16,094) (1,338) — — — 4,428 Common Stock 12,401 — (200) (12,201) — 19,110 — — DESG Holdings, Inc. First Lien Term Loan 3,978 48 (1,176) (1,063) 1,787 180 (291) — Second Lien Term Loan — — — — — — — — Common Stock — — (13,675) 13,675 — (13,675) — — F+W Media, Inc. First Lien Term Loan B-1 — — (1,115) 1,115 — (1,080) — — GSC Technologies Inc. Incremental Term Loan — 176 (6) — 170 — 5 — First Lien Term Loan A 2,289 18 (17) (289) 2,001 1 165 — First Lien Term Loan B 755 58 — (328) 485 — 58 — Common Shares — — — — — — — — Lift Brands, Inc. Term Loan A 23,642 — (118) (118) 23,406 — 2,036 — Term Loan B 4,751 502 — (97) 5,156 — 503 — Term Loan C 4,687 129 — (116) 4,700 — 129 — Longview Power, LLC First Lien Term Loan 2,414 2,019 (26) 97 4,504 16 581 — Longview Intermediate Holdings C, LLC Membership Units 7,988 179 — 6,960 15,127 — — — Mount Logan Capital Inc. Common Stock 2,409 — — 995 3,404 — — 70 SIMR, LLC First Lien Term Loan 13,347 3,839 — (1,186) 16,000 — 3,839 — SIMR Parent, LLC Class B Membership Units — — — — — — — — Class W Membership Units — — — — — — — — Snap Fitness Holdings, Inc. Class A Stock 3,389 — — (258) 3,131 — — — Warrants 1,374 — — (105) 1,269 — — — Totals $ 116,895 $ 29,195 $ (71,861) $ 7,261 $ 81,490 $ 8,010 $ 8,121 $ 5,576 (1) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category. See accompanying notes to consolidated financial statements. 85 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) (2) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. (3) Includes PIK interest income. s. Investment determined to be a controlled investment as defined in the 1940 Act as the Company is deemed to exercise a controlling influence over the management or policies of the portfolio company due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of such portfolio company. Fair value as of December 31, 2020 and 2021, along with transactions during the year ended December 31, 2021 in these controlled investments, were as follows: Year Ended December 31, 2021 Year Ended December 31, 2021 Controlled Investments Fair Value at December 31, 2020 Gross Additions (Cost)(1) Gross Reductions (Cost)(2) Net Unrealized Gain (Loss) Fair Value at December 31, 2021 Net Realized Gain (Loss) Interest Income(3) Dividend Income CION SOF Funding, LLC Membership Interests $ 12,472 $ — $ (15,539) $ 3,067 $ — $ (3,067) $ — $ — CION/EagleTree Partners, LLC Senior Secured Note — 61,629 — — 61,629 — 260 — Participating Preferred Shares — 22,073 — 7,723 29,796 — — — Common Shares — — — — — — — — Totals $ 12,472 $ 83,702 $ (15,539) $ 10,790 $ 91,425 $ (3,067) $ 260 $ — (1) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category. (2) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category. (3) Includes PIK interest income. See accompanying notes to consolidated financial statements. 86 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2021 (in thousands) t. As of December 31, 2021, the following investments contain a PIK interest provision whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities: Interest Rate Portfolio Company Investment Type Cash PIK All-in-Rate Adapt Laser Acquisition, Inc. Senior Secured First Lien Debt 11.00% 2.00% 13.00% American Consolidated Natural Resources, Inc. Senior Secured First Lien Debt 14.00% 3.00% 17.00% Ancile Solutions, Inc. Senior Secured First Lien Debt 8.00% 3.00% 11.00% Anthem Sports & Entertainment Inc. Senior Secured First Lien Debt 7.75% 2.25% 10.00% Cadence Aerospace, LLC Senior Secured First Lien Debt 7.50% 2.00% 9.50% CHC Solutions Inc. Senior Secured First Lien Debt 8.00% 4.00% 12.00% CION/EagleTree Partners, LLC Senior Secured Note — 14.00% 14.00% CircusTrix Holdings, LLC Senior Secured First Lien Debt 6.50% 2.50% 9.00% David's Bridal, LLC Senior Secured First Lien Debt 6.00% 5.00% 11.00% David's Bridal, LLC Senior Secured First Lien Debt 1.00% 6.00% 7.00% Deluxe Entertainment Services, Inc. Senior Secured First Lien Debt 6.00% 1.50% 7.50% Deluxe Entertainment Services, Inc. Senior Secured Second Lien Debt 7.00% 2.50% 9.50% GSC Technologies Inc. Senior Secured First Lien Debt — 6.00% 6.00% GSC Technologies Inc. Senior Secured First Lien Debt 6.00% 5.00% 11.00% Hilliard, Martinez & Gonzales, LLP Senior Secured First Lien Debt — 20.00% 20.00% Homer City Generation, L.P. Senior Secured First Lien Debt — 15.00% 15.00% Independent Pet Partners Intermediate Holdings, LLC Senior Secured First Lien Debt — 6.00% 6.00% LAV Gear Holdings, Inc. Senior Secured First Lien Debt 6.50% 2.00% 8.50% Lift Brands, Inc. Senior Secured First Lien Debt — 9.50% 9.50% Lucky Bucks Holdings LLC Unsecured Note — 12.50% 12.50% Moss Holding Company Senior Secured First Lien Debt 7.50% 0.50% 8.00% Premiere Global Services, Inc. Senior Secured Second Lien Debt 0.50% 10.00% 10.50% Robert C. Hilliard, L.L.P. Senior Secured First Lien Debt — 20.00% 20.00% RumbleOn, Inc. Senior Secured First Lien Debt 8.25% 1.00% 9.25% SIMR, LLC Senior Secured First Lien Debt 12.00% 7.00% 19.00% Spinal USA, Inc. / Precision Medical Inc. Senior Secured First Lien Debt — 9.63% 9.63% Trammell, P.C. Senior Secured First Lien Debt — 20.00% 20.00% Vesta Holdings, LLC Senior Secured First Lien Debt 7.00% 4.00% 11.00% WPLM Acquisition Corp. Unsecured Note — 15.00% 15.00% u. As of December 31, 2021, the index rate for $4,804 and $4,892 was 1 Month LIBOR and 3 Month LIBOR, respectively. See accompanying notes to consolidated financial statements. 87 CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2020 (in thousands) Portfolio Company(a) Index Rate(b) Industry Principal/ P