What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-10 compared with 2021-03-16 · 128 added, 105 removed, 307 unchanged (43% of the section changed)

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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.

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 Apollo.

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.

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.

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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.

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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.

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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's investment professionals continue to perform certain services for CIM and us, including, without limitation, identifying investment opportunities for approval by CIM's investment committee.

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 the Fourth Amended CIM LLC Agreement.

AIM’s investment professionals perform certain services for CIM, which include, among other services, (i) assistance with identifying and providing information about potential investment opportunities for approval by CIM’s investment committee;

and (ii) providing (a) trade and settlement support;

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;

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and (d) monthly valuation reports and support for all broker-quoted investments.

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 personnel.

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.

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.

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Operating Expenses

Our primary operating expenses are the payment of advisory fees and subordinated incentive fees on income under the investment advisory agreement and interest expense on our financing arrangements.

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.

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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.

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.

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 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 and repurchase shares from our shareholders.

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.

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These market disruptions and illiquidity initially had an adverse effect on our business, financial condition, results of operations and cash flows.

Unfavorable economic conditions caused by COVID-19 can also be expected to increase our funding costs and limit our access to the capital markets.

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.

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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.

We do, however, expect that it will continue to have a negative impact on our business and the financial condition of certain of our portfolio companies.

On February 11, 2021, we entered into the Note Purchase Agreement with certain purchasers, in connection with our issuance of $125,000 aggregate principal amount of our 4.50% senior unsecured notes due in 2026.

The net proceeds to us were approximately $122,300, after the deduction of placement agent fees and other financing expenses, which we used to repay debt under our secured financing arrangements.

See Note 16 to our consolidated financial statements contained in this annual report on Form 10-K for additional information regarding our 2026 Notes.

Reclassification

In 2018, unamortized original issue discounts, or OID, and market discounts/premiums received upon the early repayment of debt investments were reclassified from net realized gains on investments to interest income.

Portfolio Investment Activity for the Years Ended December 31, 2021 and 2020

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Senior secured second lien debt 171,480 151,506 10.1 %

Collateralized securities and structured products - debt 7,212 7,212 0.4 %

Collateralized securities and structured products - equity 15,305 12,131 0.8 %

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Fixed interest rate investments 176,326 172,162 10.3 % 126,962 124,816 8.3 %

Non-income producing equity 66,086 52,505 3.5 % 51,887 45,213 2.6 %

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 %

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Business 240,316 14.4 % 211,572 14.0 %

Chemicals, Plastics & Rubber 141,654 9.5 % 102,906 5.9 %

Advertising, Printing & Publishing 110,083 7.4 % 120,810 7.0 %

Diversified & Production 139,399 8.4 % 108,078 7.2 %

Consumer 119,365 7.2 % 85,254 5.7 %

Beverage, Food & Tobacco 69,975 4.7 % 68,440 3.9 %

Chemicals, Plastics & Rubber 109,860 6.6 % 141,654 9.5 %

Diversified Financials 101,032 6.1 % 37,214 2.5 %

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 %

Telecommunications 46,638 3.1 % 61,577 3.6 %

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 %

Diversified Financials 37,214 2.5 % 66,897 3.9 %

Aerospace & Defense 38,279 2.3 % 35,751 2.4 %

Construction & Building 34,653 2.3 % 37,096 2.1 %

Retail 29,312 2.0 % 53,599 3.1 %

Oil & Gas 32,164 1.9 % 28,136 1.9 %

Hotel, Gaming & Leisure 21,920 1.5 % 25,081 1.4 %

Forest Products & Paper 21,686 1.4 % 24,217 1.4 %

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 %

Consumer Goods:

Non-Durable 15,757 1.1 % 33,609 1.9 %

Metals & Mining 10,927 0.7 % 10,147 0.7 %

Consumer Goods:

Durable 7,417 0.5 % 31,705 1.8 %

Automotive — — 10,013 0.6 %

Forest Products & Paper — — 21,686 1.4 %

Subtotal/total percentage 1,666,122 100.0 % 1,495,774 100.0 %

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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 and Off-Balance Sheet Arrangements” for further details on our unfunded commitments.

Refer to the section “Commitments and Contingencies” for further details on our unfunded commitments.

Investment Portfolio Asset Quality

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Investment income $ 157,348 $ 163,842

Net operating expenses 85,114 113,791

Net operating expenses and income taxes 83,041 85,114

Net investment income 74,307 78,728

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

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

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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 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.

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.

Operating Expenses

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Total operating expenses $ 82,699 $ 84,846

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.

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:

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Transfer agent expense 1,290 1,189

Printing and marketing expense 990 378

Valuation expense 904 999

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Director fees and expenses 516 450

Printing and marketing expense 378 102

Dues and subscriptions 411 342

Due diligence fees — 61

Other expenses 109 68

Total general and administrative expense $ 9,805 $ 6,085

Net Investment Income

Our net investment income totaled $78,728 and $87,312 for the years ended December 31, 2020 and 2019, respectively.

The decrease in net investment income 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 Loss on Investments and Foreign Currency

Our net realized loss 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.

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.

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

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Investment income $ 163,842 $ 201,103

Net operating expenses 113,791 97,961

Net operating expenses and income taxes 85,114 113,791

Net investment income 78,728 87,312

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Net change in unrealized depreciation on investments (19,878) (10,551)

Net increase in net assets resulting from operations $ 51,844 $ 31,310

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, increased $113,948, from $1,680,211 during the year ended December 31, 2018 to $1,794,159 during the year ended December 31, 2019, as we deployed the net proceeds from our financing arrangements and the net proceeds from our follow-on continuous public offering, which commenced on January 25, 2016 and ended on January 25, 2019.

During 2018, our investment portfolio continued to grow due to equity available to us for investment from our follow-on continuous public offering and amounts borrowed under our financing arrangements.

As a result, we believe that reported investment income for the year ended December 31, 2018 is not representative of our stabilized or future performance.

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

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Total operating expenses $ 84,846 $ 113,779

During the year ended December 31, 2019, the increase in interest expense was primarily the result of additional borrowings on our existing financing arrangements, which resulted in an increase in net assets and an increase in management fees.

The increase in subordinated incentive fee on income was a result of exceeding our hurdle rate of 1.875% for pre-incentive fee net investment income for each quarter during the year ended December 31, 2019, whereas for the year ended December 31, 2018, we only exceeded our hurdle rate for the three month periods ended September 30, 2018 and December 31, 2018.

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 composition of our general and administrative expenses for the years ended December 31, 2020 and 2019 was as follows:

Years Ended December 31,

Transfer agent expense $ 1,289 $ 1,315

Professional fees $ 1,490 $ 996

Transfer agent expense 1,189 1,289

Valuation expense 999 722

Accounting and administrative costs 680 567

Director fees and expenses 472 444

Insurance expense 489 421

Dues and subscriptions 343 667

Director fees and expenses 450 472

Printing and marketing expense 378 102

Due diligence fees 61 182

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

Our net investment income totaled $87,312 and $90,177 for the years ended December 31, 2019 and 2018, respectively.

The decrease in net investment income was primarily due to an increase in our subordinated incentive fees and interest expense for the year ended December 31, 2019, partially offset by an increase in investment income during the year ended December 31, 2019 compared to the year ended December 31, 2018.

Net Realized Loss on Investments and Foreign Currency

Our net realized loss on investments and foreign currency totaled $(24,917) and $(5,619) for the years ended December 31, 2019 and 2018, respectively.

This change was mainly due to an increase in investment restructurings and the liquidation of certain portfolio companies during the year ended December 31, 2019 compared to the year ended December 31, 2018.

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.

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.

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 by a tightening of credit spreads during the year ended December 31, 2019 that positively impacted the fair value of certain of our investments compared to a widening of credit spreads during the year ended December 31, 2018.

This change was partially offset by unrealized losses on certain underperforming investments during the year ended December 31, 2019.

Net Increase in Net Assets Resulting from Operations

For the years ended December 31, 2019 and 2018, we recorded a net increase in net assets resulting from operations of $51,844 and $31,310, respectively, as a result of our operating activity for the respective periods.

Net Asset Value per Share, Annual Investment Return and Total Return Since Inception

Our net asset value per share was $7.75 and $8.40 on December 31, 2020 and 2019, respectively.

After considering (i) the overall changes in net asset value per share, (ii) paid distributions of approximately $0.5554 per share during the year ended December 31, 2020, and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan then in effect, the total investment return-net asset value was (0.94)% for the twelve-month period ended December 31, 2020.

Total investment return-net asset value does not represent and may be higher than an actual return to shareholders because it excludes all sales commissions and dealer manager fees.

Total investment return-net asset value is a measure of the change in total value for shareholders who held our common stock at the beginning and end of the period, including distributions paid or payable during the period, and is described further in Note 13 to our consolidated financial statements included in this report.

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $9.00 per share (public offering price excluding sales load) have seen an annualized return of 6.18% and a cumulative total return of 61.99% through December 31, 2020 (see chart below).

Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $10.00 per share (the initial public offering price including sales load) have seen an annualized return of 4.80% and a cumulative total return of 45.79% through December 31, 2020.

Over the same time period, the S&P/LSTA Leveraged Loan Index, a primary measure of senior debt covering the U.S.

leveraged loan market, which currently consists of approximately 1,000 credit facilities throughout numerous industries, recorded an annualized return of 4.10% and a cumulative total return of 38.19%.

In addition, the BofA Merrill Lynch US High Yield Index, a primary measure of short-term US dollar denominated below investment grade corporate debt publicly issued in the US domestic market, recorded an annualized return of 5.82% and a cumulative total return of 57.67% over the same period.

(1) Cumulative performance:

December 17, 2012 to December 31, 2020

The calculations for the Growth of $10,000 Initial Investment are based upon (i) an initial investment of $10,000 in our common stock at the beginning of the period, at a share price of $10.00 per share (including sales load) and $9.00 per share (excluding sales load), (ii) assumes reinvestment of monthly distributions in accordance with our distribution reinvestment plan then in effect, (iii) the sale of the entire investment position at the net asset value per share on the last day of the period, and (iv) the distributions declared and payable to shareholders, if any, on the last day of the period.

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

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.

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.

In 2021, we intend to seek the approval of our shareholders to reduce our minimum “asset coverage” ratio from 200% to 150% in accordance with the 1940 Act.

At our Special Meeting of Shareholders on December 30, 2021, shareholders approved a proposal to reduce our asset coverage ratio to 150%.

The outbreak and spread of COVID-19 have caused severe stress and uncertainty in the U.S.

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On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020.

Distributions in respect of future months will be evaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration.

On March 19, 2020, our board of directors, including the independent directors, also determined to temporarily suspend our share repurchase program commencing with the second quarter of 2020 and included the third quarter of 2020.

On November 13, 2020, we recommenced our share repurchase program for the fourth quarter of 2020.

Share repurchases for future quarters will be evaluated by our board of directors based on circumstances and expectations existing at the time of consideration.

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.

1 unchanged sentence

JPM Credit Facility

As of December 31, 2020, our outstanding borrowings under the Second Amended JPM Credit Facility were $625,000 and the aggregate unfunded principal amount in connection with the Second Amended JPM Credit Facility was $75,000.

On February 26, 2021, we entered into the Third Amended JPM Credit Facility with JPM.

As of March 11, 2021, our outstanding borrowings under the Third Amended JPM Credit Facility were $500,000 and the aggregate unfunded principal amount in connection with the Third Amended JPM Credit Facility was $75,000.

For a detailed discussion of our Second Amended JPM Credit Facility and Third Amended JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.

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.

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.

On February 11, 2021, we issued $125,000 in aggregate principal amount of 4.50% fixed-rate senior unsecured notes due on February 11, 2026.

As of March 11, 2021, the Company had $125,000 in aggregate principal amount of 2026 Notes outstanding.

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

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See Note 16 to our consolidated financial statements for a more detailed description of the 2026 Notes.

Commitments and Contingencies and Off-Balance Sheet Arrangements

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

4 unchanged sentences

For further details on such debt investments, refer to Note 11 to our consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, except for those discussed in Note 11 to our consolidated financial statements included in this report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis