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CION Investment Corp - Quarter Report: 2017 September (Form 10-Q)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 

[x]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
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, 36th Floor
New York, New York
 
10016
(Address of principal executive offices)
 
(Zip Code)
 
(212) 418-4700
 
 
(Registrant’s telephone number, including area code)
 
 
 
 
 
Not applicable
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post 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] (Do not check if a smaller reporting company)
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Yes [ ] No [x]
The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of November 8, 2017 was 114,398,359.




CĪON INVESTMENT CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CĪON Investment Corporation
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
 
September 30,
2017
 
December 31,
2016
 
 
(unaudited)
 
 
Assets
Investments, at fair value (amortized cost of $1,688,414 and $1,096,948, respectively)
 
$
1,691,855

 
$
1,089,478

Derivative asset (cost of $0 and $229, respectively)
 

 
46

Cash
 
21,915

 
15,046

Restricted cash
 

 
2,000

Due from counterparty(1)
 
3,620

 
143,335

Interest receivable on investments
 
8,886

 
6,689

Receivable due on investments sold
 
12,147

 

Receivable due on total return swap(1)
 

 
4,187

Prepaid expenses and other assets
 
1,030

 
282

   Total assets
 
$
1,739,453

 
$
1,261,063

Liabilities and Shareholders' Equity
Liabilities
 
 
 
 
Payable for investments purchased
 
$
55,706

 
$
15,837

Financing arrangements (net of unamortized debt issuance costs of $5,736 and $3,212, respectively)
 
625,385

 
221,211

Accounts payable and accrued expenses
 
1,267

 
1,476

Interest payable
 
1,977

 
864

Commissions payable for common stock purchased
 

 
2

Accrued management fees
 
7,821

 
5,781

Accrued administrative services expense
 
83

 
682

Due to CIG - offering costs
 
27

 
45

Unrealized depreciation on total return swap(1)
 

 
15,402

Total liabilities
 
692,266

 
261,300

 
 
 
 
 
Commitments and contingencies (Note 4 and Note 11)
 
 
 
 
 
 
 
 
 
Shareholders' Equity
 
 
 
 
Common stock, $0.001 par value; 500,000,000 shares authorized;
 
 
 
 
114,440,741 and 109,787,557 shares issued and outstanding, respectively
 
114

 
110

Capital in excess of par value
 
1,064,037

 
1,021,280

Undistributed net investment income
 
4,314

 
1,428

Accumulated net realized loss from investments
 
(4,983
)
 

Accumulated net unrealized appreciation (depreciation) on investments
 
3,441

 
(7,653
)
Accumulated net realized loss from total return swap(1)
 
(19,736
)
 

Accumulated net unrealized depreciation on total return swap(1)
 

 
(15,402
)
Total shareholders' equity
 
1,047,187

 
999,763

Total liabilities and shareholders' equity
 
$
1,739,453

 
$
1,261,063

Net asset value per share of common stock at end of period
 
$
9.15

 
$
9.11

(1) See Note 7 for a discussion of the Company’s total return swap agreement.
See accompanying notes to consolidated financial statements.

1



CĪON Investment Corporation
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2017

2016
 
2017
 
2016
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Investment income
 
 
 
 
 
 
 
 
Interest income
 
$
37,212

 
$
18,579

 
$
99,117

 
$
53,385

Fee and other income
 
1,166

 
154

 
2,651

 
449

Total investment income
 
38,378

 
18,733

 
101,768

 
53,834

Operating expenses
 
 
 
 
 
 
 
 
Management fees
 
7,820

 
5,187

 
21,724

 
14,311

Administrative services expense
 
433

 
425

 
1,204

 
1,151

General and administrative(1)
 
1,803

 
1,892

 
5,220

 
4,944

Interest expense
 
6,920

 
534

 
15,543

 
761

Total operating expenses
 
16,976

 
8,038

 
43,691

 
21,167

Recoupment of expense support from CIG(2)
 

 

 

 
667

Net operating expenses
 
16,976

 
8,038

 
43,691

 
21,834

Net investment income
 
21,402

 
10,695

 
58,077

 
32,000

Realized and unrealized (losses) gains
 
 
 
 
 
 
 
 
Net realized (loss) gain on investments
 
(2,800
)
 
379

 
(5,142
)
 
1,078

Net realized gain on foreign currency
 
12



 
159

 

Net change in unrealized appreciation on investments
 
1,700

 
14,948

 
11,094

 
16,587

Net realized gain (loss) on total return swap(3)
 
67

 
8,188

 
(13,789
)
 
23,799

Net change in unrealized appreciation on total return swap(3)
 

 
9,527

 
15,402

 
16,826

Total net realized and unrealized (losses) gains
 
(1,021
)
 
33,042

 
7,724

 
58,290

Net increase in net assets resulting from operations
 
$
20,381

 
$
43,737

 
$
65,801

 
$
90,290

Per share information—basic and diluted
 
 
 
 
 
 
 
 
Net increase in net assets per share resulting from operations
 
$
0.18

 
$
0.41

 
$
0.59

 
$
0.86

Weighted average shares of common stock outstanding
 
112,954,234

 
106,581,390

 
111,504,552

 
105,130,208

(1)  See Note 10 for details of the Company's general and administrative expenses.
(2)  See Note 4 for a discussion of expense support from CIG and recoupment of expense support.
(3)  See Note 7 for a discussion of the Company's total return swap agreement.
See accompanying notes to consolidated financial statements.


2



CĪON Investment Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except share and per share amounts)
 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
 
 
(unaudited)
 
(unaudited)
Changes in net assets from operations:
 
 
 
 
Net investment income
 
$
58,077

 
$
32,000

Net realized (loss) gain on investments
 
(5,142
)
 
1,078

Net realized gain on foreign currency
 
159

 

Net change in unrealized appreciation on investments
 
11,094

 
16,587

Net realized (loss) gain on total return swap(1)
 
(13,789
)
 
23,799

Net change in unrealized appreciation on total return swap(1)
 
15,402

 
16,826

Net increase in net assets resulting from operations
 
65,801

 
90,290

Changes in net assets from shareholders' distributions:(2)
 
 
 
 
Net investment income
 
(55,191
)
 
(31,744
)
Net realized gain on total return swap
 
 
 
 
Net interest and other income from TRS portfolio
 
(3,661
)
 
(22,386
)
Net gain on TRS loan sales(3)
 
(2,286
)
 
(2,443
)
Net realized gain on investments and foreign currency
 

 
(1,078
)
Net decrease in net assets from shareholders' distributions
 
(61,138
)
 
(57,651
)
Changes in net assets from capital share transactions:
 
 
 
 
Issuance of common stock, net of issuance costs of $1,713 and $1,739, respectively
 
43,227

 
19,278

Reinvestment of shareholders' distributions
 
29,701

 
29,179

Repurchase of common stock
 
(30,167
)
 
(12,231
)
Net increase in net assets resulting from capital share transactions
 
42,761

 
36,226

 
 
 
 
 
Total increase in net assets
 
47,424

 
68,865

Net assets at beginning of period
 
999,763

 
904,326

Net assets at end of period
 
$
1,047,187

 
$
973,191

 
 
 
 
 
Net asset value per share of common stock at end of period
 
$
9.15

 
$
9.02

Shares of common stock outstanding at end of period
 
114,440,741

 
107,920,075

 
 
 
 
 
Undistributed net investment income at end of period
 
$
4,314

 
$
256

(1)
See Note 7 for a discussion of the Company’s total return swap agreement.
(2)
This table presents changes in net assets from shareholders' distributions on a GAAP basis. See Note 5 for a discussion of the sources of distributions paid by the Company.
(3)
During the nine months ended September 30, 2017 and 2016, the Company realized losses on TRS loans of $19,736 and $1,030, respectively, which are not currently deductible on a tax-basis. 
See accompanying notes to consolidated financial statements.


3



CĪON Investment Corporation
Consolidated Statements of Cash Flows
(in thousands)
 
 
Nine Months Ended
September 30,
 
 
2017

2016
 
 
(unaudited)
 
(unaudited)
Operating activities:
 
 
 
 
Net increase in net assets resulting from operations
 
$
65,801

 
$
90,290

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in
 
 
 
 
  operating activities:
 
 
 
 
Net accretion of discount on investments
 
(6,799
)
 
(1,442
)
Proceeds from principal repayment of investments
 
403,098

 
126,908

Purchase of investments
 
(1,139,000
)
 
(450,390
)
Paid-in-kind interest
 
(1,704
)
 
(596
)
Increase in short term investments, net
 
(70,312
)
 
(37,879
)
Proceeds from sale of investments
 
218,395

 
14,462

Net realized loss (gain) on investments
 
5,142

 
(1,078
)
Net unrealized appreciation on investments
 
(11,094
)
 
(16,587
)
Net unrealized appreciation on total return swap(1)
 
(15,402
)
 
(16,826
)
Amortization of deferred financing costs
 
1,272

 
258

(Increase) decrease in due from counterparty(1)
 
139,715

 
82,981

(Increase) decrease in interest receivable on investments
 
(2,254
)
 
(170
)
(Increase) decrease in receivable due on investments sold
 
(12,147
)
 
(16
)
(Increase) decrease in receivable due on total return swap(1)
 
4,187

 
881

(Increase) decrease in prepaid expenses and other assets
 
(812
)
 
(197
)
Increase (decrease) in payable for investments purchased
 
39,869

 
(9,800
)
Increase (decrease) in accounts payable and accrued expenses
 
(209
)
 
949

Increase (decrease) in interest payable
 
1,113

 
272

Increase (decrease) in accrued management fees
 
2,040

 
756

Increase (decrease) in accrued administrative services expense
 
(599
)
 
(192
)
Increase (decrease) in accrued recoupment of expense support from CIG(2)
 

 
(480
)
Increase (decrease) in due to CIG - offering costs
 
(18
)
 
(16
)
Net cash used in operating activities
 
(379,718
)
 
(217,912
)
Financing activities:
 
 
 
 
Gross proceeds from issuance of common stock
 
44,940

 
26,476

Commissions and dealer manager fees paid
 
(1,715
)
 
(2,213
)
Repurchase of common stock
 
(30,167
)
 
(12,231
)
Shareholders' distributions paid(3)
 
(31,437
)
 
(28,472
)
Borrowings under financing arrangements(4)
 
406,698

 
242,423

Repayment of financing arrangements
 

 
(18,000
)
Debt issuance costs paid
 
(3,732
)
 
(3,322
)
Net cash provided by financing activities
 
384,587

 
204,661

Net increase (decrease) in cash and restricted cash
 
4,869

 
(13,251
)
Cash and restricted cash, beginning of period
 
17,046

 
41,741

Cash and restricted cash, end of period
 
$
21,915

 
$
28,490

Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for interest
 
$
13,075

 
$
232

Supplemental non-cash financing activities:
 
 
 
 
Reinvestment of shareholders' distributions(3)
 
$
29,701

 
$
29,179

(1)
See Note 7 for a discussion of the Company’s total return swap agreement.
(2)
See Note 4 for a discussion of expense support from CIG and recoupment of expense support.
(3)
See Note 5 for a discussion of the sources of distributions paid by the Company.
(4)
See Note 8 for a discussion of the Company’s financing arrangements.
See accompanying notes to consolidated financial statements.

4



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Senior Secured First Lien Debt - 103.1%
 
 
 
 
 
 
 
 
 
 
AbelConn, LLC / Atrenne Computing Solutions, LLC / Airco Industries, LLC, L+875, 1.00% LIBOR Floor, 7/17/2019 (j)(n)(p)
 
3 Month LIBOR
 
Aerospace & Defense
 
$
19,291

 
$
19,031

 
$
19,243

Academy, Ltd., L+400, 1.00% LIBOR Floor, 7/1/2022 (o)
 
Various
 
Retail
 
14,611

 
11,619

 
9,950

Access CIG, LLC, L+500, 1.00% LIBOR Floor, 10/18/2021 (o)
 
1 Month LIBOR
 
Services: Business
 
6,746

 
6,788

 
6,791

Accruent, LLC, L+475, 1.00% LIBOR Floor, 7/28/2023
 
3 Month LIBOR
 
High Tech Industries
 
3,887

 
3,822

 
3,829

Accruent, LLC, 0.75% Unfunded, 7/28/2018
 
None
 
High Tech Industries
 
2,866

 

 
(15
)
Adams Publishing Group, LLC, L+700, 1.00% LIBOR Floor, 11/3/2020 (n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
4,396

 
4,344

 
4,352

Adams Publishing Group, LLC, 0.50% Unfunded, 6/2/2018
 
None
 
Media: Advertising, Printing & Publishing
 
1,136

 

 
(11
)
Advanced Integration Technology LP, L+475, 1.00% LIBOR Floor, 4/3/2023 (o)
 
1 Month LIBOR
 
Aerospace & Defense
 
3,980

 
4,014

 
3,970

ALM Media, LLC, L+450, 1.00% LIBOR Floor, 7/31/2020 (o)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
7,580

 
7,278

 
6,936

Alvogen Pharma US, Inc., L+500, 1.00% LIBOR Floor, 4/1/2022 (o)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
8,313

 
8,275

 
8,296

American Clinical Solutions LLC, L+950, 1.00% LIBOR Floor, 6/11/2020
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
8,834

 
8,733

 
8,547

American Dental Partners, Inc., L+475, 1.00% LIBOR Floor, 8/29/2021 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,694

 
10,241

 
10,641

American Energy - Marcellus, LLC, L+425, 1.00% LIBOR Floor, 8/4/2020 (r)
 
1 Month LIBOR
 
Energy: Oil & Gas
 
4,033

 
2,963

 
3,014

American Media, Inc., L+900, 1.00% LIBOR Floor, 8/24/2020 (n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
16,148

 
15,809

 
16,552

American Media, Inc., 9.00% Unfunded, 8/24/2020 (e)
 
None
 
Media: Advertising, Printing & Publishing
 
154

 

 
4

American Media, Inc., 0.50% Unfunded, 8/24/2020
 
None
 
Media: Advertising, Printing & Publishing
 
143

 

 
4

American Teleconferencing Services, Ltd., L+650, 1.00% LIBOR Floor, 12/8/2021 (n)(o)(p)
 
1 Month LIBOR
 
Telecommunications
 
21,617

 
19,866

 
20,968

AMPORTS, Inc., L+500, 1.00% LIBOR Floor, 5/19/2020 (j)(n)(p)
 
3 Month LIBOR
 
Automotive
 
18,943

 
18,661

 
18,753

AMZ Holding Corp., L+500, 1.00% LIBOR Floor, 6/27/2022
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
6,740

 
6,644

 
6,639

AP Exhaust Acquisition, LLC, L+500, 1.00% LIBOR Floor, 5/10/2024 (o)
 
3 Month LIBOR
 
Automotive
 
5,627

 
5,431

 
5,514

ASG Technologies Group, Inc., L+475, 1.00% LIBOR Floor, 7/31/2024 (o)
 
1 Month LIBOR
 
High Tech Industries
 
5,000

 
4,975

 
5,063

Associated Asphalt Partners, LLC, L+525, 1.00% LIBOR Floor, 4/5/2024 (o)
 
1 Month LIBOR
 
Construction & Building
 
1,259

 
1,254

 
1,241

Avaya Inc., L+750, 1.00% LIBOR Floor, 1/24/2018
 
1 Month LIBOR
 
Telecommunications
 
3,509

 
3,497

 
3,544

Avaya Inc., L+525, 1.00% LIBOR Floor, 5/29/2020 (o)
 
3 Month LIBOR
 
Telecommunications
 
14,689

 
11,941

 
12,480

Azure Midstream Energy, LLC, L+650, 1.00% LIBOR Floor, 11/15/2018 (o)
 
1 Month LIBOR
 
Energy: Oil & Gas
 
2,188

 
2,117

 
1,958

Bakemark Holdings, Inc., L+525, 1.00% LIBOR Floor, 8/14/2023
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
2,314

 
2,246

 
2,245

Caraustar Industries, Inc., L+550, 1.00% LIBOR Floor, 3/14/2022 (o)
 
3 Month LIBOR
 
Forest Products & Paper
 
5,591

 
5,655

 
5,598

Central Security Group, Inc., L+563, 1.00% LIBOR Floor, 10/6/2021 (o)
 
1 Month LIBOR
 
Services: Consumer
 
17,945

 
17,978

 
18,034

CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/2023 (n)(p)
 
6 Month LIBOR
 
Media: Diversified & Production
 
50,000

 
49,070

 
49,625

CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/2023
 
6 Month LIBOR
 
Media: Diversified & Production
 
15,000

 
14,721

 
14,963

CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/2023
 
6 Month LIBOR
 
Media: Diversified & Production
 
7,500

 
7,500

 
7,463

CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/2023
 
6 Month LIBOR
 
Media: Diversified & Production
 
5,000

 
4,813

 
4,963

CF Entertainment Inc., 2.00% Unfunded, 1/28/2019
 
None
 
Media: Diversified & Production
 
5,000

 

 
(38
)
Charming Charlie, LLC, L+800, 1.00% LIBOR Floor, 12/24/2019 (r)(s)
 
3 Month LIBOR
 
Retail
 
7,791

 
4,388

 
3,701

Command Alkon Inc., L+500, 1.00% LIBOR Floor, 9/1/2023
 
1 Month LIBOR
 
High Tech Industries
 
7,560

 
7,470

 
7,408

See accompanying notes to consolidated financial statements.

5



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Confie Seguros Holding II Co., L+550, 1.00% LIBOR Floor, 4/16/2022 (o)
 
1 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
14,942

 
14,832

 
14,634

Covenant Surgical Partners, Inc., L+475, 0.00% LIBOR Floor, 10/4/2024 (i)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
1,874

 
1,869

 
1,888

Covenant Surgical Partners, Inc., 0.00% Unfunded, 10/4/2018 (e)
 
None
 
Healthcare & Pharmaceuticals
 
562

 
(1
)
 
4

CSP Technologies North America, LLC, L+525, 1.00% LIBOR Floor, 1/29/2022 (p)
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
13,553

 
13,307

 
13,587

David's Bridal, Inc., L+400, 1.25% LIBOR Floor, 10/11/2019 (o)
 
3 Month LIBOR
 
Retail
 
3,477

 
2,990

 
2,738

DBRS, Inc., L+525, 1.00% LIBOR Floor, 3/4/2022 (h)(o)
 
3 Month LIBOR
 
Services: Business
 
5,922

 
5,724

 
5,878

Deluxe Entertainment Services Group Inc., L+550, 1.00% LIBOR Floor, 2/28/2020 (o)
 
3 Month LIBOR
 
Media: Diversified & Production
 
9,865

 
9,826

 
9,933

DFC Global Facility Borrower II LLC, L+1075, 1.00% LIBOR Floor, 9/27/2022
 
1 Month LIBOR
 
Services: Consumer
 
37,200

 
36,901

 
37,014

DFC Global Facility Borrower II LLC, 0.50% Unfunded, 9/27/2019 (e)
 
None
 
Services: Consumer
 
22,800

 

 
(114
)
Dodge Data & Analytics, LLC / Skyline Data News and Analytics, LLC, L+875, 1.00% LIBOR Floor, 10/31/2019 (n)
 
3 Month LIBOR
 
Construction & Building
 
10,012

 
9,907

 
9,849

DXP Enterprises, Inc., L+550, 1.00% LIBOR Floor, 8/29/2023 (h)(o)
 
1 Month LIBOR
 
Energy: Oil & Gas
 
10,000

 
9,901

 
9,963

EagleTree-Carbide Acquisition Corp., L+475, 1.00% LIBOR Floor, 9/27/2024 (i)
 
3 Month LIBOR
 
Consumer Goods: Durable
 
10,000

 
9,900

 
10,006

Eastman Kodak Company, L+625, 1.00% LIBOR Floor, 9/3/2019 (h)(o)
 
3 Month LIBOR
 
Consumer Goods: Durable
 
1,996

 
1,991

 
1,972

Elemica, Inc., L+800, 1.00% LIBOR Floor, 7/7/2021 (n)(p)
 
1 Month LIBOR
 
High Tech Industries
 
17,281

 
16,928

 
17,065

Elemica, Inc., 0.50% Unfunded, 7/7/2021 (e)
 
None
 
High Tech Industries
 
2,500

 
(47
)
 
(31
)
Emmis Operating Company, L+700, 1.00% LIBOR Floor, 4/18/2019 (o)
 
1 Month LIBOR
 
Media: Broadcasting & Subscription
 
3,627

 
3,439

 
3,522

Entertainment Studios P&A LLC, 5.00%, 5/18/2037
 
None
 
Media: Diversified & Production
 
15,000

 
14,704

 
21,216

Entertainment Studios P&A LLC, 15.00%, 9/1/2037
 
None
 
Media: Diversified & Production
 
7,500

 
7,352

 
4,613

EnTrans International, LLC, L+750, 1.00% LIBOR Floor, 6/4/2020
 
3 Month LIBOR
 
Capital Equipment
 
13,312

 
10,366

 
11,449

Evergreen Skills Lux S.À.R.L., L+475, 1.00% LIBOR Floor, 4/28/2021 (h)(o)
 
1 Month LIBOR
 
High Tech Industries
 
10,236

 
9,566

 
9,705

Everi Payments Inc., L+450, 1.00% LIBOR Floor, 5/9/2024 (o)
 
1 Month LIBOR
 
Hotel, Gaming & Leisure
 
4,183

 
4,163

 
4,223

F+W Media, Inc., L+1000, 1.50% LIBOR Floor, 5/24/2022 (n)(r)(s)
 
1 Month LIBOR
 
Media: Diversified & Production
 
2,661

 
2,665

 
2,113

F+W Media, Inc., L+650, 1.50% LIBOR Floor, 5/24/2022
 
1 Month LIBOR
 
Media: Diversified & Production
 
1,106

 
1,106

 
1,162

Forbes Media LLC, L+675, 1.00% LIBOR Floor, 9/12/2019 (j)(p)
 
1 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
15,000

 
14,717

 
14,888

Frontline Technologies Group Holding LLC, L+650, 1.00% LIBOR Floor, 9/18/2023
 
3 Month LIBOR
 
High Tech Industries
 
2,755

 
2,722

 
2,722

Frontline Technologies Group Holding LLC, 1.00% Unfunded, 9/18/2019 (e)
 
None
 
High Tech Industries
 
540

 

 
(6
)
FWR Holding Corp., L+600, 1.00% LIBOR Floor, 8/21/2023
 
1 Month LIBOR
 
Hotel, Gaming & Leisure
 
1,062

 
1,036

 
1,035

Global Franchise Group, LLC, L+575, 1.00% LIBOR Floor, 12/18/2019
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
2,166

 
2,145

 
2,145

GTCR-Ultra Acquisition, Inc., L+600, 1.00% LIBOR Floor, 8/1/2024 (e)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,432

 
5,300

 
5,323

Harland Clarke Holdings Corp., L+550, 1.00% LIBOR Floor, 2/9/2022 (o)
 
3 Month LIBOR
 
Services: Business
 
14,724

 
14,835

 
14,830

Healogics, Inc., L+425, 1.00% LIBOR Floor, 7/1/2021 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
4,862

 
4,583

 
4,011

Heartland Dental, LLC, L+475, 1.00% LIBOR Floor, 7/31/2023 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
4,000

 
3,981

 
4,030

Help/Systems Holdings, Inc., L+450, 1.00% LIBOR Floor, 10/8/2021 (o)
 
3 Month LIBOR
 
Services: Business
 
11,939

 
11,926

 
12,018

Infinity Sales Group, LLC, L+1050, 1.00% LIBOR Floor, 11/21/2018 (n)
 
1 Month LIBOR
 
Services: Business
 
7,806

 
7,402

 
7,201

Infogroup Inc., L+500, 1.00% LIBOR Floor, 4/3/2023 (o)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
9,453

 
9,487

 
9,216

International Seaways, Inc., L+550, 1.00% LIBOR Floor, 6/22/2022 (h)(o)
 
1 Month LIBOR
 
Transportation: Cargo
 
10,000

 
9,807

 
9,844

Intertain Group Ltd., L+650, 1.00% LIBOR Floor, 4/8/2022 (h)(n)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
1,610

 
1,586

 
1,630

See accompanying notes to consolidated financial statements.

6



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
iPipeline, Inc., L+625, 1.00% LIBOR Floor, 8/4/2022
 
1 Month LIBOR
 
High Tech Industries
 
8,874

 
8,684

 
8,697

Ipsen, Inc., L+700, 1.00% LIBOR Floor, 9/30/2019 (j)(p)
 
1 Month LIBOR
 
Capital Equipment
 
8,095

 
8,021

 
8,075

Ipsen International GmbH, L+800, 1.00% LIBOR Floor, 9/30/2019 (h)(j)
 
1 Month LIBOR
 
Capital Equipment
 
1,295

 
1,299

 
1,295

Island Medical Management Holdings, LLC, L+550, 1.00% LIBOR Floor, 9/1/2022 (p)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,743

 
13,569

 
13,568

Island Medical Management Holdings, LLC, 1.00% Unfunded, 9/1/2022 (e)
 
None
 
Healthcare & Pharmaceuticals
 
1,188

 

 
(15
)
ITC Service Group Acquisition LLC, L+950, 0.50% LIBOR Floor, 5/26/2021 (j)(p)
 
1 Month LIBOR
 
High Tech Industries
 
11,250

 
11,065

 
11,109

Kingpin Intermediate Holdings LLC, L+425, 1.00% LIBOR Floor, 6/29/2024 (o)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
9,975

 
9,925

 
10,044

KLO Intermediate Holdings, LLC, L+775, 1.25% LIBOR Floor, 4/7/2022 (p)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
4,412

 
4,361

 
4,357

KLO Intermediate Holdings, LLC, L+775, 1.25% LIBOR Floor, 4/7/2022 (p)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
7,621

 
7,532

 
7,526

KNB Holdings Corp., L+550, 1.00% LIBOR Floor, 4/26/2024 (o)
 
3 Month LIBOR
 
Consumer Goods: Durable
 
16,000

 
15,691

 
15,920

Labvantage Solutions Inc., L+800, 1.00% LIBOR Floor, 12/29/2020 (p)
 
1 Month LIBOR
 
High Tech Industries
 
4,688

 
4,651

 
4,734

Labvantage Solutions Ltd., E+800, 1.00% EURIBOR Floor, 12/29/2020 (h)
 
1 Month EURIBOR
 
High Tech Industries
 
4,294

 
4,790

 
5,124

Lift Brands, Inc., L+800, 1.00% LIBOR Floor, 12/23/2019 (n)
 
3 Month LIBOR
 
Services: Consumer
 
9,226

 
9,143

 
9,203

Logix Communications, LP, L+575, 1.00% LIBOR Floor, 8/9/2024 (i)(o)
 
(u)
 
Telecommunications
 
5,250

 
5,198

 
5,198

Lonestar Prospects, Ltd., 0.00% Unfunded, 12/31/2017 (e)
 
None
 
Energy: Oil & Gas
 
18,985

 
(363
)
 
(380
)
LTCG Holdings Corp., L+500, 1.00% LIBOR Floor, 6/6/2020 (o)
 
1 Month LIBOR
 
Services: Business
 
5,911

 
5,582

 
5,793

MB2 Dental Solutions, LLC, L+475, 1.00% LIBOR Floor, 9/29/2023
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
2,191

 
2,163

 
2,163

Ministry Brands, LLC, L+500, 1.00% LIBOR Floor, 12/2/2022 (n)
 
1 Month LIBOR
 
Services: Business
 
4,960

 
4,777

 
4,960

Ministry Brands, LLC, L+500, 1.00% LIBOR Floor, 12/2/2022
 
1 Month LIBOR
 
Services: Business
 
1,097

 
1,097

 
1,097

Ministry Brands, LLC, L+100, 1.00% LIBOR Floor, Unfunded, 2/22/2019 (e)
 
1 Month LIBOR
 
Services: Business
 
2,795

 

 

Moss Holding Company, L+675, 1.00% LIBOR Floor, 4/17/2023 (n)(p)
 
3 Month LIBOR
 
Services: Business
 
18,924

 
18,607

 
18,640

Moss Holding Company, 0.75% Unfunded, 5/7/2018 (e)
 
None
 
Services: Business
 
1,046

 

 
(16
)
Moss Holding Company, 0.50% Unfunded, 4/17/2023 (e)
 
None
 
Services: Business
 
2,232

 

 
(33
)
MSHC, Inc., L+425, 1.00% LIBOR Floor, 7/31/2023
 
3 Month LIBOR
 
Services: Business
 
2,853

 
2,839

 
2,839

Murray Energy Corp., L+725, 1.00% LIBOR Floor, 4/16/2020 (o)
 
3 Month LIBOR
 
Metals & Mining
 
3,639

 
3,548

 
3,341

Nathan's Famous Inc., 10.00%, 3/15/2020 (h)(n)
 
None
 
Beverage, Food & Tobacco
 
6,000

 
6,000

 
6,311

Navex Global, Inc., L+425, 1.00% LIBOR Floor, 11/19/2021 (o)
 
1 Month LIBOR
 
High Tech Industries
 
17,957

 
18,010

 
17,979

Nextech Systems, LLC, L+725, 1.00% LIBOR Floor, 6/22/2021 (j)(n)
 
1 Month LIBOR
 
High Tech Industries
 
15,242

 
14,747

 
14,938

Opal Acquisition, Inc., L+400, 1.00% LIBOR Floor, 11/27/2020 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,235

 
9,680

 
9,682

Orbcomm Inc., 8.00%, 4/1/2024 (n)
 
None
 
Telecommunications
 
9,237

 
9,237

 
9,912

P.F. Chang's China Bistro, Inc., L+500, 1.00% LIBOR Floor, 9/1/2022 (i)(o)
 
1 Month LIBOR
 
Beverage, Food & Tobacco
 
10,000

 
9,700

 
9,600

Paris Presents Inc., L+500, 1.00% LIBOR Floor, 12/31/2020 (p)
 
1 Month LIBOR
 
Consumer Goods: Durable
 
8,954

 
8,874

 
8,954

PDI TA Holdings, Inc., L+475, 1.00% LIBOR Floor, 8/25/2023 (n)
 
3 Month LIBOR
 
High Tech Industries
 
5,667

 
5,554

 
5,552

PDI TA Holdings, Inc., 0.50% Unfunded, 8/24/2018 (e)
 
None
 
High Tech Industries
 
1,283

 

 
(20
)
Petroflow Energy Corp., L+800, 1.00% LIBOR Floor, 6/29/2019 (n)(r)(s)
 
1 Month LIBOR
 
Energy: Oil & Gas
 
4,028

 
3,863

 
3,705

See accompanying notes to consolidated financial statements.

7



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Photonis Technologies SAS, L+750, 1.00% LIBOR Floor, 9/18/2019 (h)(o)
 
3 Month LIBOR
 
Aerospace & Defense
 
6,397

 
5,552

 
5,598

Plano Molding Company, LLC, L+750, 1.00% LIBOR Floor, 5/12/2021 (n)
 
1 Month LIBOR
 
Consumer Goods: Non-Durable
 
8,774

 
8,687

 
8,160

Practice Insight, LLC, L+500, 1.00% LIBOR Floor, 8/23/2022 (n)
 
1 Month LIBOR
 
High Tech Industries
 
6,567

 
6,405

 
6,402

Project Leopard Holdings, Inc., L+550, 1.00% LIBOR Floor, 7/7/2023 (o)
 
3 Month LIBOR
 
High Tech Industries
 
4,000

 
3,991

 
4,050

PSC Industrial Holdings Corp., L+475, 1.00% LIBOR Floor, 12/5/2020 (o)
 
3 Month LIBOR
 
Services: Business
 
4,863

 
4,649

 
4,863

Radio One, Inc., L+400, 1.00% LIBOR Floor, 4/18/2023 (o)
 
3 Month LIBOR
 
Media: Broadcasting & Subscription
 
2,973

 
2,945

 
2,928

Rimini Street, Inc., 15.00%, 6/24/2020 (s)
 
None
 
High Tech Industries
 
13,773

 
13,539

 
16,073

Robertshaw US Holding Corp., L+450, 0.00% LIBOR Floor, 8/10/2024 (o)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
3,155

 
3,131

 
3,186

Russell Investments US Institutional Holdco, Inc., L+425, 1.00% LIBOR Floor, 6/1/2023 (o)
 
1 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
3,970

 
4,022

 
4,032

Sequoia Healthcare Management, LLC, 16.00%, 7/17/2019 (n)(s)
 
None
 
Healthcare & Pharmaceuticals
 
5,935

 
5,885

 
5,935

SFE Intermediate Holdco LLC, L+500, 1.00% LIBOR Floor, 7/31/2023 (n)
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
4,782

 
4,687

 
4,686

SG Acquisition, Inc., L+500, 1.00% LIBOR Floor, 3/29/2024 (o)
 
3 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
4,159

 
4,121

 
4,133

Shift PPC LLC, L+600, 1.00% LIBOR Floor, 12/22/2021 (p)
 
3 Month LIBOR
 
High Tech Industries
 
4,878

 
4,775

 
4,878

SI Organization, Inc., L+475, 1.00% LIBOR Floor, 11/23/2019 (o)
 
3 Month LIBOR
 
Services: Business
 
7,693

 
7,785

 
7,810

Southcross Holdings Borrower LP, 9.00%, 4/13/2023 (s)
 
None
 
Energy: Oil & Gas
 
179

 
158

 
156

Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 1/21/2020 (n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,758

 
12,692

 
12,662

Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 7/21/2020 (s)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
252

 
250

 
249

Sprint Industrial Holdings, LLC, L+575, 1.25% LIBOR Floor, 5/14/2019 (n)
 
3 Month LIBOR
 
Energy: Oil & Gas
 
8,045

 
7,656

 
7,361

STG-Fairway Acquisitions, Inc., L+525, 1.00% LIBOR Floor, 6/30/2022 (o)
 
3 Month LIBOR
 
Services: Business
 
3,929

 
3,821

 
3,826

Studio Movie Grill Holdings, LLC, L+725, 1.00% LIBOR Floor, 9/30/2020 (e)(n)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
16,925

 
16,811

 
16,925

Survey Sampling International, LLC, L+500, 1.00% LIBOR Floor, 12/16/2020 (o)
 
3 Month LIBOR
 
Services: Business
 
7,820

 
7,854

 
7,703

Teladoc, Inc., L+725, 1.00% LIBOR Floor, 7/14/2022 (h)
 
1 Month LIBOR
 
High Tech Industries
 
15,000

 
14,855

 
15,300

Teladoc, Inc., 0.50% Unfunded, 7/14/2020 (e)(h)
 
None
 
High Tech Industries
 
1,250

 
(47
)
 
25

Telestream Holdings Corp., L+677, 1.00% LIBOR Floor, 1/15/2020 (j)(n)
 
3 Month LIBOR
 
High Tech Industries
 
8,662

 
8,472

 
8,402

Tenere Inc., L+1000, 1.00% LIBOR Floor, 12/23/2021 (n)(p)
 
3 Month LIBOR
 
Capital Equipment
 
31,840

 
31,671

 
31,044

Tensar Corp., L+475, 1.00% LIBOR Floor, 7/9/2021 (o)
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
13,236

 
12,429

 
12,475

Therapure Biopharma Inc., L+875, 0.50% LIBOR Floor, 12/1/2021 (h)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
15,000

 
14,935

 
15,713

U.S. Renal Care, Inc., L+425, 1.00% LIBOR Floor, 12/30/2022 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
7,967

 
7,780

 
7,740

Vero Parent, Inc., L+500, 1.00% LIBOR Floor, 8/16/2024 (o)
 
3 Month LIBOR
 
High Tech Industries
 
15,000

 
14,851

 
14,906

Vince, LLC, L+700, 1.00% LIBOR Floor, 11/27/2019 (h)(o)
 
3 Month LIBOR
 
Retail
 
901

 
864

 
789

Visual Edge Technology, Inc., L+575, 1.00% LIBOR Floor, 8/31/2022
 
3 Month LIBOR
 
Services: Business
 
12,469

 
12,222

 
12,220

Visual Edge Technology, Inc., L+575, 1.00% LIBOR Floor, 8/31/2022
 
3 Month LIBOR
 
Services: Business
 
1,918

 
1,871

 
1,899

Visual Edge Technology, Inc., 0.75% Unfunded, 2/28/2019 (e)
 
None
 
Services: Business
 
2,878

 

 
(29
)
WD Wolverine Holdings, LLC, L+550, 1.00% LIBOR Floor, 8/16/2022 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
14,319

 
14,016

 
13,961

Western Dental Services, Inc., L+525, 1.00% LIBOR Floor, 6/30/2023 (o)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
2,191

 
2,170

 
2,210

See accompanying notes to consolidated financial statements.

8



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Woodstream Corp., L+625, 1.00% LIBOR Floor, 5/29/2022
 
3 Month LIBOR
 
Consumer Goods: Non-Durable
 
7,896

 
7,862

 
7,896

Woodstream Corp., 0.75% Unfunded, 5/29/2021 (e)
 
None
 
Consumer Goods: Non-Durable
 
1,553

 

 

Total Senior Secured First Lien Debt
 

 

 

 
1,069,271

 
1,079,520

Senior Secured Second Lien Debt - 38.4%
 
 
 
 
 
 
 
 
 
 
ABG Intermediate Holdings 2 LLC, L+775, 1.00% LIBOR Floor, 9/29/2025 (i)(n)
 
3 Month LIBOR
 
Retail
 
6,475

 
6,427

 
6,556

Access CIG, LLC, L+875, 1.00% LIBOR Floor, 10/17/2022 (p)
 
1 Month LIBOR
 
Services: Business
 
16,030

 
15,512

 
15,709

Accruent, LLC, L+875, 1.00% LIBOR Floor, 7/28/2024
 
3 Month LIBOR
 
High Tech Industries
 
749

 
717

 
738

Accruent, LLC, 0.75% Unfunded, 7/28/2018 (e)
 
None
 
High Tech Industries
 
1,414

 

 
(7
)
ALM Media, LLC, L+800, 1.00% LIBOR Floor, 7/30/2021 (n)(p)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
10,344

 
10,231

 
9,206

American Residential Services LLC, L+800, 1.00% LIBOR Floor, 12/31/2022 (n)
 
1 Month LIBOR
 
Construction & Building
 
4,933

 
4,894

 
4,958

American Seafoods Group LLC, L+813, 1.00% LIBOR Floor, 2/21/2024
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
18,233

 
17,874

 
17,869

Avalign Technologies, Inc., L+825, 1.00% LIBOR Floor, 7/15/2022
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,500

 
5,447

 
5,445

Command Alkon Inc., L+900, 1.00% LIBOR Floor, 3/1/2024
 
1 Month LIBOR
 
High Tech Industries
 
2,440

 
2,404

 
2,404

Confie Seguros Holding II Co., L+975, 1.25% LIBOR Floor, 5/8/2019
 
1 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
4,577

 
4,471

 
4,497

Conisus, LLC, L+875, 1.00% LIBOR Floor, 6/23/2021
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
11,750

 
9,868

 
9,400

Drew Marine Group, Inc., L+700, 1.00% LIBOR Floor, 5/19/2021 (h)(n)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
9,500

 
9,462

 
9,500

EagleTree-Carbide Acquisition Corp., L+825, 1.00% LIBOR Floor, 8/28/2025 (i)
 
3 Month LIBOR
 
Consumer Goods: Durable
 
20,000

 
19,700

 
19,800

Elements Behavioral Health, Inc., L+1200, 1.00% LIBOR Floor, 2/11/2020 (r)(s)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
6,287

 
6,054

 
4,841

Emerald 3 Ltd., L+700, 1.00% LIBOR Floor, 5/16/2022 (h)(n)
 
3 Month LIBOR
 
Environmental Industries
 
3,000

 
2,981

 
2,813

Evergreen Skills Lux S.À.R.L., L+825, 1.00% LIBOR Floor, 4/28/2022 (h)(n)
 
1 Month LIBOR
 
High Tech Industries
 
9,999

 
7,158

 
8,249

Flexera Software LLC, L+700, 1.00% LIBOR Floor, 4/2/2021 (p)
 
3 Month LIBOR
 
High Tech Industries
 
9,385

 
9,166

 
9,421

Genex Holdings, Inc., L+775, 1.00% LIBOR Floor, 5/30/2022 (n)(p)
 
1 Month LIBOR
 
Services: Business
 
11,410

 
11,331

 
11,324

GHX Ultimate Parent Corp., L+800, 1.00% LIBOR Floor, 6/30/2025
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,926

 
13,517

 
13,508

Global Tel*Link Corp., L+775, 1.25% LIBOR Floor, 11/23/2020 (p)
 
3 Month LIBOR
 
Telecommunications
 
9,500

 
9,492

 
9,488

GOBP Holdings, Inc., L+825, 1.00% LIBOR Floor, 10/21/2022 (o)
 
3 Month LIBOR
 
Retail
 
4,000

 
4,020

 
4,045

Institutional Shareholder Services Inc., L+850, 1.00% LIBOR Floor, 4/30/2022 (n)
 
1 Month LIBOR
 
Services: Business
 
10,648

 
10,543

 
10,648

Medical Solutions Holdings, Inc., L+825, 1.00% LIBOR Floor, 6/16/2025 (n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,000

 
9,856

 
9,950

Ministry Brands, LLC, L+925, 1.00% LIBOR Floor, 6/2/2023 (n)
 
1 Month LIBOR
 
Services: Business
 
7,000

 
6,902

 
7,000

Ministry Brands, LLC, L+925, 1.00% LIBOR Floor, 6/2/2023
 
1 Month LIBOR
 
Services: Business
 
292

 
292

 
292

Ministry Brands, LLC, L+100, 1.00% LIBOR Floor, Unfunded, 2/22/2019 (e)
 
1 Month LIBOR
 
Services: Business
 
742

 

 

Mitchell International, Inc., L+750, 1.00% LIBOR Floor, 10/11/2021 (n)(o)
 
3 Month LIBOR
 
High Tech Industries
 
14,909

 
14,533

 
15,105

MSHC, Inc., L+825, 1.00% LIBOR Floor, 7/31/2024
 
2 Month LIBOR
 
Services: Business
 
2,081

 
2,015

 
2,013

Niacet Corp., E+875, 1.00% EURIBOR Floor, 8/1/2024 (h)
 
3 Month EURIBOR
 
Chemicals, Plastics & Rubber
 
7,489

 
7,938

 
8,671

Onex Carestream Finance LP, L+850, 1.00% LIBOR Floor, 12/7/2019 (o)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,030

 
11,014

 
11,767

Onex TSG Holdings II Corp., L+850, 1.00% LIBOR Floor, 7/31/2023 (n)(o)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,249

 
12,143

 
12,180

Paris Presents Inc., L+875, 1.00% LIBOR Floor, 12/31/2021 (n)
 
1 Month LIBOR
 
Consumer Goods: Durable
 
3,500

 
3,435

 
3,465

See accompanying notes to consolidated financial statements.

9



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Patterson Medical Supply, Inc., L+850, 1.00% LIBOR Floor, 8/28/2023 (n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,500

 
13,379

 
13,163

PDI TA Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/25/2024
 
1 Month LIBOR
 
High Tech Industries
 
2,500

 
2,447

 
2,447

PDI TA Holdings, Inc., 0.50% Unfunded, 8/24/2018 (e)
 
None
 
High Tech Industries
 
550

 

 
(12
)
Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/2021 (o)
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
3,469

 
3,458

 
3,469

PetroChoice Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/21/2023 (n)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
15,000

 
14,719

 
14,738

PFS Holding Corp., L+725, 1.00% LIBOR Floor, 1/31/2022 (o)
 
1 Month LIBOR
 
Retail
 
4,998

 
4,680

 
4,273

Premiere Global Services, Inc., L+950, 1.00% LIBOR Floor, 6/6/2022 (n)
 
1 Month LIBOR
 
Telecommunications
 
3,000

 
2,892

 
2,895

PSC Industrial Holdings Corp., L+825, 1.00% LIBOR Floor, 12/5/2021 (n)
 
1 Month LIBOR
 
Services: Business
 
10,000

 
9,862

 
10,000

Robertshaw US Holding Corp., L+900, 0.00% LIBOR Floor, 2/10/2025
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
5,000

 
4,855

 
4,994

Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021 (o)(p)
 
3 Month LIBOR
 
Telecommunications
 
5,500

 
5,478

 
5,514

Securus Technologies Holdings, Inc., L+825, 1.00% LIBOR Floor, 6/20/2025 (i)(p)
 
1 Month LIBOR
 
Telecommunications
 
2,942

 
2,913

 
2,968

SMG, L+825, 1.00% LIBOR Floor, 2/27/2021 (n)
 
1 Month LIBOR
 
Hotel, Gaming & Leisure
 
6,142

 
6,142

 
6,126

STG-Fairway Acquisitions, Inc., L+925, 1.00% LIBOR Floor, 6/30/2023 (n)(o)
 
3 Month LIBOR
 
Services: Business
 
10,000

 
9,879

 
9,000

Survey Sampling International, LLC, L+900, 1.00% LIBOR Floor, 12/16/2021 (n)
 
3 Month LIBOR
 
Services: Business
 
5,000

 
4,931

 
4,950

TexOak Petro Holdings LLC, 8.00%, 12/29/2019 (r)(s)
 
None
 
Energy: Oil & Gas
 
7,137

 
2,360

 

TMK Hawk Parent, Corp., L+800, 1.00% LIBOR Floor, 8/28/2025 (n)
 
3 Month LIBOR
 
Services: Business
 
13,393

 
13,061

 
13,058

TouchTunes Interactive Networks, Inc., L+825, 1.00% LIBOR Floor, 5/29/2022 (p)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
6,000

 
5,949

 
6,007

U.S. Anesthesia Partners, Inc., L+725, 1.00% LIBOR Floor, 6/23/2025
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,235

 
10,085

 
10,081

U.S. Renal Care, Inc., L+800, 1.00% LIBOR Floor, 12/29/2023 (n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,000

 
4,917

 
4,875

Wand Intermediate I LP, L+725, 1.00% LIBOR Floor, 9/19/2022 (n)
 
3 Month LIBOR
 
Automotive
 
16,000

 
15,875

 
16,080

Winebow Holdings, Inc., L+750, 1.00% LIBOR Floor, 1/2/2022 (n)
 
1 Month LIBOR
 
Beverage, Food & Tobacco
 
12,823

 
12,577

 
11,990

Zywave Inc., L+900, 1.00% LIBOR Floor, 11/17/2023 (n)
 
3 Month LIBOR
 
High Tech Industries
 
5,000

 
4,932

 
4,988

Total Senior Secured Second Lien Debt
 
 
 
 
 
 
 
404,788

 
402,459

Collateralized Securities and Structured Products - Debt - 2.7%
 
 
 
 
 
 
 
 
 
 
Deutsche Bank AG Frankfurt CRAFT 2014-1 Class Credit Linked Note, L+965, 5/15/2019 (h)
 
3 Month LIBOR
 
Diversified Financials
 
4,304

 
4,304

 
4,200

Deutsche Bank AG Frankfurt CRAFT 2015-2 Class Credit Linked Note, L+925, 1/16/2022 (h)
 
3 Month LIBOR
 
Diversified Financials
 
15,500

 
15,500

 
14,993

Ivy Hill Middle Market Credit Fund VII, Ltd. Class E Notes, L+565, 10/20/2025 (g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
2,000

 
1,887

 
1,931

NXT Capital CLO 2014-1, LLC Class E Notes, L+550, 4/23/2026 (g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
7,500

 
7,127

 
7,160

Total Collateralized Securities and Structured Products - Debt
 
 
 
 
 
 
 
28,818

 
28,284

Collateralized Securities and Structured Products - Equity - 2.8%
 
 
 
 
 
 
 
 
 
 
Anchorage Capital CLO 2012-1, Ltd. Subordinated Notes, 2.82% Estimated Yield, 1/13/2025 (h)
 
(f)
 
Diversified Financials
 
4,000

 
2,621

 
2,244

APIDOS CLO XVI Subordinated Notes, 11.84% Estimated Yield, 1/19/2025 (h)
 
(f)
 
Diversified Financials
 
9,000

 
4,140

 
3,569

CENT CLO 19 Ltd. Subordinated Notes, 6.47% Estimated Yield, 10/29/2025 (h)
 
(f)
 
Diversified Financials
 
2,000

 
1,305

 
1,087

Galaxy XV CLO Ltd. Class A Subordinated Notes, 4.60% Estimated Yield, 4/15/2025 (h)
 
(f)
 
Diversified Financials
 
4,000

 
2,356

 
2,189

See accompanying notes to consolidated financial statements.

10



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(m)
 
Fair
Value(c)
Ivy Hill Middle Market Credit Fund VII, Ltd. Subordinated Notes, 10.40% Estimated Yield, 10/20/2025 (h)
 
(f)
 
Diversified Financials
 
2,000

 
1,581

 
1,479

Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan, 10.35% Estimated Yield, 2/2/2026 (e)(h)
 
(f)
 
Diversified Financials
 
10,000

 
9,857

 
9,662

Ivy Hill Middle Market Credit Fund IX, Ltd. Subordinated Notes, 14.21% Estimated Yield, 10/18/2025 (h)
 
(f)
 
Diversified Financials
 
8,146

 
5,933

 
5,885

Ivy Hill Middle Market Credit Fund X, Ltd., 10.06% Estimated Yield, 7/24/2027 (h)
 
(f)
 
Diversified Financials
 
4,760

 
3,744

 
3,473

Total Collateralized Securities and Structured Products - Equity
 
 
 
 
 
 
 
31,537

 
29,588

Unsecured Debt - 0.7%
 
 
 
 
 
 
 
 
 
 
Visual Edge Technology, Inc., 12.50%, 8/31/2024
 
None
 
Services: Business
 
7,519

 
7,333

 
7,331

Total Unsecured Debt
 
 
 
 
 
 
 
7,333

 
7,331

Equity - 0.4%
 
 
 
 
 
 
 
 
 
 
Commerce Topco, LLC (q)
 
 
 
Healthcare & Pharmaceuticals
 
87 Units

 
85

 
85

Commerce Parent, Inc. (q)
 
 
 
Healthcare & Pharmaceuticals
 
87 Units

 
87

 
87

F+W Media, Inc. (q)
 
 
 
Media: Diversified & Production
 
31,211 Units

 

 

Mooregate ITC Acquisition, LLC, Class A Units (q)
 
 
 
High Tech Industries
 
500 Units

 
563

 
450

NS NWN Acquisition, LLC (q)
 
 
 
High Tech Industries
 
404 Units

 
393

 
450

NSG Co-Invest (Bermuda) LP (h)(q)
 
 
 
Consumer Goods: Durable
 
1,575 Units

 
1,000

 
875

Spinal USA, Inc. / Precision Medical Inc., Warrants (q)
 
 
 
Healthcare & Pharmaceuticals
 
1,551,569 Units

 
853

 
853

Southcross Holdings LP, Class A-II Units (q)
 
 
 
Energy: Oil & Gas
 
188 Units

 
75

 
127

Southcross Holdings GP, LLC, Units (q)
 
 
 
Energy: Oil & Gas
 
188 Units

 

 

Speed Commerce Investment Part, LLC (q)
 
 
 
High Tech Industries
 
629 Units

 
2,640

 
900

Tenere Inc. Warrant (q)
 
 
 
Capital Equipment
 
N/A

 
161

 
36

TexOak Petro Holdings LLC (q)
 
 
 
Energy: Oil & Gas
 
60,000 Units

 

 

Total Equity
 
 
 
 
 
 
 
5,857

 
3,863

Short Term Investments - 13.5%(k)
 
 
 
 
 
 
 
 
 
 
First American Treasury Obligations Fund, Class Z Shares, 0.89% (l)
 
 
 
 
 
 
 
140,810

 
140,810

Total Short Term Investments
 
 
 
 
 
 
 
140,810

 
140,810

TOTAL INVESTMENTS - 161.6%
 
 
 
 
 
 
 
$
1,688,414

 
1,691,855

LIABILITIES IN EXCESS OF OTHER ASSETS - (61.6%)
 
 
 
 
 
 
 
 
 
(644,668
)
NET ASSETS - 100%
 
 
 
 
 
 
 
 
 
$
1,047,187

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. The Company does not control and is not an affiliate of any of the portfolio companies in its investment portfolio. Unless specifically identified in note s. below, investments do not contain a paid-in-kind, or PIK, interest provision.
b.
The 1, 2, 3, and 6 month London Interbank Offered Rate, or LIBOR, rates were 1.24%, 1.27%, 1.34%, and 1.51%, respectively, as of September 30, 2017.  The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of September 30, 2017, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to September 30, 2017. The 3 month Euro Interbank Offered Rate, or EURIBOR, rate was (0.38%) as of September 30, 2017.
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.
Denominated in U.S. dollars unless otherwise noted.
e.
As discussed in Note 11, on September 30, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $2,156, $1,111 and $992 to Studio Movie Grill Holdings, LLC, Ivy Hill Middle Market Credit Fund VIII, Ltd. and    GTCR-Ultra Acquisition, Inc., respectively. On November 9, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $22,800, $18,985, $3,278, $2,500, $1,865, $1,608, $1,553, $1,250, $1,188, $1,151, $1,111, $992, $815, $540, $459, $157, and $154 to DFC Global Facility Borrower II LLC, Lonestar Prospects, Ltd., Moss Holding Company, Elemica Holdings, Inc., Ministry Brands, LLC, Studio Movie Grill Holdings, LLC, Woodstream Corp., Teledoc, Inc., Island Medical Management Holdings, LLC, Visual Edge Technology, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd., GTCR-Ultra Acquisition, Inc., PDI TA Holdings, Inc., Frontline Technologies Group Holdings LLC, Covenant Surgical Partners, Inc., Accruent, LLC, and American Media, Inc., respectively.
See accompanying notes to consolidated financial statements.


11



CĪON Investment Corporation
Consolidated Schedule of Investments (unaudited)
September 30, 2017
(in thousands)
f.
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.
g.
Ivy Hill Middle Market Credit Fund VII Class E Notes and NXT Capital CLO 2014-1 Class E Notes were rated Ba2 on Moody's credit scale as of September 30, 2017.
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 September 30, 2017, 89.4% of the Company’s total assets represented qualifying assets.
i.
Position or a portion thereof unsettled as of September 30, 2017.
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 amounts as a result of an arrangement between the Company and other lenders in the syndication in exchange for lower payment priority.
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 September 30, 2017.
m.
Represents amortized cost for debt securities and cost for equity investments.
n.
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 September 30, 2017 (see Note 8).
o.
Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Flatiron Funding II, LLC, or Flatiron Funding II, and was pledged as collateral supporting the amounts outstanding under the credit facility with Citibank N.A., or Citibank, as of September 30, 2017 (see Note 8).
p.
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 September 30, 2017 (see Note 8).
q.
Non-income producing security.
r.
Investment or a portion thereof was on non-accrual status as of September 30, 2017.
s.
For the nine months ended September 30, 2017, 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
 
Interest Amount
Portfolio Company
 
Investment Type
 
Cash
 
PIK
 
All-in-Rate
 
Cash
 
PIK
 
Total
Charming Charlie, LLC(t)
 
Senior Secured First Lien Debt
 
7.50%
 
1.50%
 
9.00%
 
$
369

 
$

 
$
369

Elements Behavioral Health, Inc.(t)
 
Senior Secured Second Lien Debt
 
 
13.00%
 
13.00%
 
$

 
$
365

 
$
365

F+W Media, Inc.(t)
 
Senior Secured First Lien Debt
 
1.50%
 
10.00%
 
11.50%
 
$
19

 
$
93

 
$
112

Petroflow Energy Corp.(t)
 
Senior Secured First Lien Debt
 
3.00%
 
6.00%
 
9.00%
 
$
99

 
$
187

 
$
286

Rimini Street, Inc.
 
Senior Secured First Lien Debt
 
12.00%
 
3.00%
 
15.00%
 
$
1,469

 
$
403

 
$
1,872

Sequoia Healthcare Management, LLC
 
Senior Secured First Lien Debt
 
12.00%
 
4.00%
 
16.00%
 
$
531

 
$
211

 
$
742

Southcross Holdings Borrower LP
 
Senior Secured First Lien Debt
 
3.50%
 
5.50%
 
9.00%
 
$
6

 
$
7

 
$
13

Spinal USA, Inc. / Precision Medical Inc.
 
Senior Secured First Lien Debt
 
 
10.50%
 
10.50%
 
$

 
$
124

 
$
124

TexOak Petro Holdings LLC(t)
 
Senior Secured Second Lien Debt
 
 
8.00%
 
8.00%
 
$

 
$
314

 
$
314

t.
The PIK interest portion of the investment was on non-accrual status as of September 30, 2017.
u.
As of November 9, 2017, no interest rate option had been elected as the entire position remained unsettled.
See accompanying notes to consolidated financial statements.

12



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(p)
 
Fair
Value(c)
Senior Secured First Lien Debt - 49.0%
 
 
 
 
 
 
 
 
 
 
AbelConn, LLC / Atrenne Computing Solutions, LLC / Airco Industries, LLC, L+850, 1.00% LIBOR Floor, 7/17/2019(j)
 
3 Month LIBOR
 
Aerospace & Defense

 
$
22,112

 
$
21,702

 
$
21,780

Adams Publishing Group, LLC, L+700, 1.00% LIBOR Floor, 11/3/2020(n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
3,892

 
3,818

 
3,833

American Clinical Solutions LLC, L+950, 1.00% LIBOR Floor, 6/11/2020
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
9,034

 
8,908

 
8,492

American Media, Inc., L+750, 1.00% LIBOR Floor, 8/24/2020(n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
11,467

 
11,150

 
11,123

American Media, Inc., 0.50% Unfunded, 8/24/2020(e)
 
None
 
Media: Advertising, Printing & Publishing
 
505

 
(15
)
 
(15
)
American Media, Inc., 7.50%, 8/24/2020(e)
 
None
 
Media: Advertising, Printing & Publishing
 
206

 
(6
)
 
(6
)
American Teleconferencing Services, Ltd., L+650, 1.00% LIBOR Floor, 12/8/2021(n)
 
3 Month LIBOR
 
Telecommunications
 
19,248

 
17,475

 
18,863

AMPORTS, Inc., L+500, 1.00% LIBOR Floor, 5/19/2020(j)
 
3 Month LIBOR
 
Automotive
 
19,100

 
18,743

 
18,718

Blue Ribbon, LLC, L+400, 1.00% LIBOR Floor, 11/15/2021(i)
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
9,975

 
9,975

 
9,972

CF Entertainment Inc., L+1100, 1.00% LIBOR Floor, 6/26/2020(n)
 
3 Month LIBOR
 
Media: Diversified & Production
 
17,094

 
17,057

 
17,094

Dodge Data & Analytics, LLC / Skyline Data News and Analytics, LLC, L+875, 1.00% LIBOR Floor, 10/31/2019(n)
 
3 Month LIBOR
 
Construction & Building
 
10,387

 
10,241

 
10,218

ECI Acquisition Holdings, Inc., L+625, 1.00% LIBOR Floor, 3/11/2019(n)
 
3 Month LIBOR
 
High Tech Industries
 
8,517

 
8,493

 
8,517

Elemica, Inc., L+800, 1.00% LIBOR Floor, 7/7/2021(n)
 
1 Month LIBOR
 
High Tech Industries
 
17,413

 
17,005

 
16,977

Elemica, Inc., 0.50% Unfunded, 7/7/2021(e)
 
None
 
High Tech Industries
 
2,500

 
(57
)
 
(62
)
EnTrans International, LLC, L+750, 1.00% LIBOR Floor, 6/4/2020
 
3 Month LIBOR
 
Capital Equipment
 
13,594

 
9,977

 
10,331

F+W Media, Inc., L+950, 1.25% LIBOR Floor, 6/30/2019(n)
 
3 Month LIBOR
 
Media: Diversified & Production
 
7,280

 
7,092

 
6,006

Forbes Media LLC, L+675, 1.00% LIBOR Floor, 9/12/2019(j)
 
1 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
15,000

 
14,621

 
14,400

Ignite Restaurant Group, Inc., L+700, 1.00% LIBOR Floor, 2/13/2019(n)
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
10,482

 
10,400

 
10,167

Infinity Sales Group, LLC, L+1050, 1.00% LIBOR Floor, 11/21/2018(n)
 
1 Month LIBOR
 
Services: Business
 
8,214

 
7,550

 
7,372

Infogroup Inc., L+550, 1.50% LIBOR Floor, 5/26/2018(n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
15,578

 
15,277

 
15,451

InterGen N.V., L+450, 1.00% LIBOR Floor, 6/12/2020(h)(i)
 
3 Month LIBOR
 
Energy: Electricity
 
1,182

 
1,156

 
1,153

Intertain Group Ltd., L+650, 1.00% LIBOR Floor, 4/8/2022(h)(n)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
1,765

 
1,736

 
1,780

Ipsen International GmbH, L+800, 1.00% LIBOR Floor, 9/30/2019(h)(j)
 
1 Month LIBOR
 
Capital Equipment
 
1,422

 
1,429

 
1,429

Ipsen, Inc., L+700, 1.00% LIBOR Floor, 9/30/2019(j)
 
1 Month LIBOR
 
Capital Equipment
 
8,095

 
8,002

 
8,035

ITC Service Group Acquisition LLC, L+950, 0.50% LIBOR Floor, 5/26/2021(j)
 
1 Month LIBOR
 
High Tech Industries
 
11,250

 
11,035

 
11,081

KPC Health Care, Inc., L+925, 1.00% LIBOR Floor, 8/28/2020(n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
7,544

 
7,401

 
7,809

Labvantage Solutions Inc., L+800, 1.00% LIBOR Floor, 12/29/2020(n)
 
3 Month LIBOR
 
High Tech Industries
 
4,875

 
4,829

 
4,863

Labvantage Solutions Ltd., E+800, 1.00% EURIBOR Floor, 12/29/2020(h)
 
3 Month EURIBOR
 
High Tech Industries
 
4,495

 
5,005

 
4,728

Lift Brands, Inc., L+800, 1.00% LIBOR Floor, 12/23/2019(n)
 
3 Month LIBOR
 
Services: Consumer
 
9,548

 
9,438

 
9,477

Ministry Brands, LLC, L+500, 1.00% LIBOR Floor, 12/2/2022(e)
 
3 Month LIBOR
 
Services: Business
 
9,994

 
9,587

 
9,894

Nathan's Famous Inc., 10.00%, 3/15/2020(h)(n)
 
None
 
Beverage, Food & Tobacco
 
6,000

 
6,000

 
6,540

Nextech Systems, LLC, L+725, 1.00% LIBOR Floor, 6/22/2021(j)(n)
 
1 Month LIBOR
 
High Tech Industries
 
15,642

 
15,062

 
15,330

NWN Acquisition Holding Company LLC, L+1000, 1.00% LIBOR Floor, 10/16/2020(j)
 
3 Month LIBOR
 
High Tech Industries
 
13,717

 
13,357

 
13,271

Pacific Coast Holding Investment LLC, L+970, 2.00% LIBOR Floor, 2/14/2017
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,250

 
5,242

 
5,250

Petroflow Energy Corporation, L+800, 1.00% LIBOR Floor, 6/29/2019(q)
 
3 Month LIBOR
 
Energy: Oil & Gas
 
4,895

 
4,618

 
4,601

See accompanying notes to consolidated financial statements.

13



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(p)
 
Fair
Value(c)
Plano Molding Company, LLC, L+700, 1.00% LIBOR Floor, 5/12/2021(n)
 
2 Month LIBOR
 
Consumer Goods: Non-Durable
 
8,840

 
8,772

 
8,611

Rimini Street, Inc., 15.00%, 6/24/2020(m)(q)
 
None
 
High Tech Industries
 
19,822

 
19,556

 
19,426

Sequoia Healthcare Management, LLC, 16.00%, 7/17/2019(n)(q)
 
None
 
Healthcare & Pharmaceuticals
 
6,511

 
6,405

 
6,397

Shift PPC LLC, L+600, 1.00% LIBOR Floor, 12/22/2021
 
3 Month LIBOR
 
High Tech Industries
 
9,500

 
9,266

 
9,265

SmartBear Software Inc., L+750, 1.00% LIBOR Floor, 12/30/2020(n)
 
3 Month LIBOR
 
High Tech Industries
 
18,588

 
18,271

 
18,727

Southcross Holdings Borrower LP, 9.00%, 4/13/2023(q)
 
None
 
Energy: Oil & Gas
 
172

 
151

 
135

Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 1/21/2020(n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,281

 
12,194

 
12,158

Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 7/21/2020(q)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
128

 
126

 
127

Sprint Industrial Holdings, LLC, L+575, 1.25% LIBOR Floor, 5/14/2019(n)
 
3 Month LIBOR
 
Energy: Oil & Gas
 
7,306

 
6,849

 
5,406

Studio Movie Grill Holdings, LLC, L+725, 1.00% LIBOR Floor, 9/30/2020(e)(n)
 
1 Month LIBOR
 
Hotel, Gaming & Leisure
 
15,143

 
15,004

 
15,143

Telestream Holdings Corp., L+677, 1.00% LIBOR Floor, 1/15/2020(j)(n)
 
3 Month LIBOR
 
High Tech Industries
 
7,154

 
7,027

 
7,011

Tenere Inc., L+1000, 1.00% LIBOR Floor, 12/23/2021
 
3 Month LIBOR
 
Capital Equipment
 
32,000

 
31,219

 
31,199

Therapure Biopharma Inc., L+875, 0.50% LIBOR Floor, 12/1/2021(h)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
15,000

 
14,925

 
14,925

WD Wolverine Holdings, LLC, L+550, 1.00% LIBOR Floor, 10/17/2023(i)
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
2,000

 
1,960

 
1,946

Worley Claims Services, LLC, L+800, 1.00% LIBOR Floor, 10/31/2020(n)
 
1 Month LIBOR
 
Services: Business
 
20,115

 
19,925

 
20,015

Zywave Inc., L+500, 1.00% LIBOR Floor, 11/17/2022
 
3 Month LIBOR
 
High Tech Industries
 
5,000

 
4,951

 
4,950

Total Senior Secured First Lien Debt
 
 
 
 
 
 

 
489,904

 
489,913

Senior Secured Second Lien Debt - 43.4%
 
 
 
 
 
 

 
 

 
 
ABG Intermediate Holdings 2 LLC, L+850, 1.00% LIBOR Floor, 5/27/2022(e)(m)(n)
 
3 Month LIBOR
 
Retail
 
18,666

 
18,365

 
18,852

Access CIG, LLC, L+875, 1.00% LIBOR Floor, 10/17/2022(m)
 
3 Month LIBOR
 
Services: Business
 
16,030

 
15,460

 
15,549

ALM Media, LLC, L+800, 1.00% LIBOR Floor, 7/30/2021(n)
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
10,344

 
10,205

 
9,568

American Residential Services LLC, L+800, 1.00% LIBOR Floor, 12/31/2021(n)
 
3 Month LIBOR
 
Construction & Building
 
4,933

 
4,889

 
4,983

AmWINS Group, LLC, L+850, 1.00% LIBOR Floor, 9/4/2020(n)
 
1 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
3,825

 
3,852

 
3,878

Confie Seguros Holding II Co., L+900, 1.25% LIBOR Floor, 5/8/2019
 
1 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
13,827

 
13,365

 
13,758

Conisus, LLC, L+875, 1.00% LIBOR Floor, 6/23/2021
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
11,750

 
9,604

 
9,517

Drew Marine Group, Inc., L+700, 1.00% LIBOR Floor, 5/19/2021(h)
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
9,500

 
9,460

 
9,120

EISI LLC, L+850, 1.00% LIBOR Floor, 9/23/2020(m)(n)
 
3 Month LIBOR
 
High Tech Industries
 
20,000

 
19,761

 
19,400

Elements Behavioral Health, Inc., L+1200, 1.00% LIBOR Floor, 2/11/2020(q)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,701

 
5,668

 
4,561

Emerald 3 Ltd., L+700, 1.00% LIBOR Floor, 5/16/2022(h)(n)
 
3 Month LIBOR
 
Environmental Industries
 
3,000

 
2,978

 
2,595

Flexera Software LLC, L+700, 1.00% LIBOR Floor, 4/2/2021
 
1 Month LIBOR
 
High Tech Industries
 
9,385

 
9,128

 
9,291

Genex Holdings, Inc., L+775, 1.00% LIBOR Floor, 5/30/2022(n)
 
1 Month LIBOR
 
Services: Business
 
11,410

 
11,331

 
11,011

Global Tel*Link Corp., L+775, 1.25% LIBOR Floor, 11/23/2020
 
3 Month LIBOR
 
Telecommunications
 
9,500

 
9,488

 
9,254

Infiltrator Water Technologies, LLC, L+875, 1.00% LIBOR Floor, 5/26/2023(n)
 
3 Month LIBOR
 
Construction & Building
 
13,917

 
13,732

 
13,986

Institutional Shareholder Services Inc., L+850, 1.00% LIBOR Floor, 4/30/2022(i)(n)
 
2 Month LIBOR
 
Services: Business
 
10,648

 
10,534

 
10,542

Mergermarket USA, Inc., L+650, 1.00% LIBOR Floor, 2/4/2022(n)
 
3 Month LIBOR
 
Services: Business
 
3,380

 
3,328

 
3,304

Ministry Brands, LLC, L+925, 1.00% LIBOR Floor, 6/2/2023(e)
 
3 Month LIBOR
 
Services: Business
 
5,488

 
5,385

 
5,406

Mississippi Sand, LLC, L+1000, 1.00% LIBOR Floor, 11/21/2019
 
3 Month LIBOR
 
Metals & Mining
 
13,196

 
10,899

 
11,349

See accompanying notes to consolidated financial statements.

14



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(p)
 
Fair
Value(c)
Mitchell International, Inc., L+750, 1.00% LIBOR Floor, 10/11/2021(m)(n)
 
1 Month LIBOR
 
High Tech Industries
 
14,909

 
14,476

 
14,825

MSC.Software Corp., L+750, 1.00% LIBOR Floor, 6/1/2021(m)
 
3 Month LIBOR
 
High Tech Industries
 
15,000

 
14,832

 
15,019

MWI Holdings, Inc., L+925, 1.00% LIBOR Floor, 12/28/2020(n)
 
3 Month LIBOR
 
Construction & Building
 
10,000

 
9,773

 
9,950

Navex Global, Inc., L+875, 1.00% LIBOR Floor, 11/18/2022(m)(n)
 
12 Month LIBOR
 
High Tech Industries
 
16,245

 
16,031

 
15,920

Onex TSG Holdings II Corp., L+850, 1.00% LIBOR Floor, 7/31/2023(n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,249

 
12,136

 
12,065

Patterson Medical Supply, Inc., L+850, 1.00% LIBOR Floor, 8/28/2023(n)
 
2 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,500

 
13,378

 
13,095

Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/2021(m)
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
3,469

 
3,478

 
3,396

PetroChoice Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/21/2023(n)
 
1 Month LIBOR
 
Chemicals, Plastics & Rubber
 
15,000

 
14,729

 
14,737

PetVet Care Centers, LLC, L+850, 1.00% LIBOR Floor, 6/17/2021
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,500

 
13,097

 
13,095

Pike Corp., L+850, 1.00% LIBOR Floor, 6/22/2022(n)
 
1 Month LIBOR
 
Energy: Electricity
 
12,500

 
12,354

 
12,562

Premiere Global Services, Inc., L+950, 1.00% LIBOR Floor, 6/6/2022
 
3 Month LIBOR
 
Telecommunications
 
3,000

 
2,882

 
2,895

PSC Industrial Holdings Corp., L+825, 1.00% LIBOR Floor, 12/5/2021(n)
 
3 Month LIBOR
 
Services: Business
 
10,000

 
9,842

 
9,450

Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021
 
3 Month LIBOR
 
Telecommunications
 
4,500

 
4,479

 
4,399

SMG, L+825, 1.00% LIBOR Floor, 2/27/2021(n)
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
6,142

 
6,142

 
6,126

Sterling Midco Holdings, Inc., L+775, 1.00% LIBOR Floor, 6/19/2023(n)
 
3 Month LIBOR
 
Services: Business
 
10,462

 
10,432

 
10,226

STG-Fairway Acquisitions, Inc., L+925, 1.00% LIBOR Floor, 6/30/2023(n)
 
3 Month LIBOR
 
Services: Business
 
10,000

 
9,869

 
9,400

Survey Sampling International, LLC, L+900, 1.00% LIBOR Floor, 12/16/2021(m)
 
3 Month LIBOR
 
Services: Business
 
15,000

 
14,763

 
14,700

Telecommunications Management, LLC, L+800, 1.00% LIBOR Floor, 10/30/2020(n)
 
3 Month LIBOR
 
Media: Broadcasting & Subscription
 
1,606

 
1,573

 
1,564

TexOak Petro Holdings LLC, 8.00%, 12/29/2019(q)
 
None
 
Energy: Oil & Gas
 
6,728

 
1,549

 
2,590

TMK Hawk Parent, Corp., L+750, 1.00% LIBOR Floor, 10/1/2022(n)
 
3 Month LIBOR
 
Beverage, Food & Tobacco
 
15,000

 
14,880

 
14,925

TouchTunes Interactive Networks, Inc., L+825, 1.00% LIBOR Floor, 5/29/2022
 
3 Month LIBOR
 
Hotel, Gaming & Leisure
 
6,000

 
5,943

 
5,925

U.S. Renal Care, Inc., L+800, 1.00% LIBOR Floor, 12/29/2023(n)
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,000

 
9,819

 
8,900

Wand Intermediate I LP, L+725, 1.00% LIBOR Floor, 9/19/2022(n)
 
3 Month LIBOR
 
Automotive
 
16,000

 
15,881

 
15,680

Winebow Holdings, Inc., L+750, 1.00% LIBOR Floor, 1/2/2022(n)
 
1 Month LIBOR
 
Beverage, Food & Tobacco
 
12,823

 
12,544

 
12,054

Zywave Inc., L+900, 1.00% LIBOR Floor, 11/17/2023
 
3 Month LIBOR
 
High Tech Industries
 
5,000

 
4,926

 
4,925

Total Senior Secured Second Lien Debt
 
 
 
 
 
 

 
437,240

 
434,347

Collateralized Securities and Structured Products - Debt - 3.8%
 
 
 
 

 
 

 
 

Deutsche Bank AG Frankfurt CRAFT 2013-1A Class Credit Linked Note, L+925, 4/17/2020(h)
 
3 Month LIBOR
 
Diversified Financials
 
2,000

 
2,022

 
1,980

Deutsche Bank AG Frankfurt CRAFT 2013-1X Class Credit Linked Note, L+925, 4/17/2020(h)
 
3 Month LIBOR
 
Diversified Financials
 
610

 
616

 
604

Deutsche Bank AG Frankfurt CRAFT 2014-1 Class Credit Linked Note, L+965, 5/15/2019(h)
 
3 Month LIBOR
 
Diversified Financials
 
5,400

 
5,400

 
5,292

Deutsche Bank AG Frankfurt CRAFT 2015-2 Class Credit Linked Note, L+925, 1/16/2022(h)
 
3 Month LIBOR
 
Diversified Financials
 
15,500

 
15,500

 
14,880

Great Lakes CLO 2014-1, Ltd. Class E Notes, L+525, 4/15/2025(g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
5,000

 
4,615

 
4,484

Ivy Hill Middle Market Credit Fund VII, Ltd. Class E Notes, L+565, 10/20/2025(g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
2,000

 
1,879

 
1,799

JFIN CLO 2014, Ltd. Class E Notes, L+500, 4/20/2025(g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
2,500

 
2,345

 
2,303

NXT Capital CLO 2014-1, LLC Class E Notes, L+550, 4/23/2026(g)(h)
 
3 Month LIBOR
 
Diversified Financials
 
7,500

 
7,094

 
6,772

Total Collateralized Securities and Structured Products - Debt
 
 
 
 

 
39,471

 
38,114

See accompanying notes to consolidated financial statements.


15



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
Portfolio Company(a)
 
Index Rate(b)
 
Industry
 
Principal/
Par Amount/
Units(d)
 
Cost(p)
 
Fair
Value(c)
Collateralized Securities and Structured Products - Equity - 3.5%
 
 
 
 
 
 
 
 

 
 

Anchorage Capital CLO 2012-1, Ltd. Subordinated Notes, 4.57% Estimated Yield, 1/13/2025(h)
 
(f)
 
Diversified Financials
 
4,000
 
2,882

 
2,622

APIDOS CLO XVI Subordinated Notes, 3.28% Estimated Yield, 1/19/2025(h)
 
(f)
 
Diversified Financials
 
9,000
 
4,704

 
3,099

CENT CLO 19 Ltd. Subordinated Notes, 8.68% Estimated Yield, 10/29/2025(h)
 
(f)
 
Diversified Financials
 
2,000
 
1,330

 
1,182

Dryden XXIII Senior Loan Fund Subordinated Notes, 1.40% Estimated Yield, 7/17/2023(h)
 
(f)
 
Diversified Financials
 
9,250
 
4,726

 
4,135

Galaxy XV CLO Ltd. Class A Subordinated Notes, 8.72% Estimated Yield, 4/15/2025(h)
 
(f)
 
Diversified Financials
 
4,000
 
2,424

 
2,323

Ivy Hill Middle Market Credit Fund VII, Ltd. Subordinated Notes, 8.80% Estimated Yield, 10/20/2025(h)
 
(f)
 
Diversified Financials
 
2,000
 
1,654

 
1,478

Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan, 10.35% Estimated Yield, 2/2/2026(e)(h)
 
(f)
 
Diversified Financials
 
10,000
 
9,940

 
9,773

Ivy Hill Middle Market Credit Fund IX, Ltd. Subordinated Notes, 14.59% Estimated Yield, 10/18/2025(h)
 
(f)
 
Diversified Financials
 
8,146
 
6,106

 
6,239

Ivy Hill Middle Market Credit Fund X, Ltd. Subordinated Notes, 11.50% Estimated Yield, 7/24/2027(h)
 
(f)
 
Diversified Financials
 
4,760
 
3,947

 
3,797

Total Collateralized Securities and Structured Products - Equity
 
 
 
 
 
37,713

 
34,648

Unsecured Debt -  1.7%
 
 
 
 
 
 

 
 

American Tire Distributors, Inc., 10.25%, 3/1/2022
 
None
 
Automotive
 
5,000
 
4,871

 
4,794

Flex Acquisition Company, Inc., L+700, 1.00% LIBOR Floor, 12/29/2017
 
1 Month LIBOR
 
Containers, Packaging & Glass
 
3,833
 
3,814

 
3,845

Radio One, Inc., 9.25%, 2/15/2020
 
None
 
Media: Broadcasting & Subscription
 
9,000
 
8,605

 
8,212

Total Unsecured Debt
 
 
 
 
 
17,290

 
16,851

Equity - 0.5%
 
 
 
 
 
 
 
 
Mooregate ITC Acquisition, LLC, Class A Units(o)
 

 
High Tech Industries
 
500 Units
 
563

 
538

NS NWN Acquisition, LLC(o)
 

 
High Tech Industries
 
346 Units
 
393

 
337

NSG Co-Invest (Bermuda), LP(h)(o)
 

 
Consumer Goods: Durable
 
1,575 Units
 
1,000

 
1,000

Southcross Holdings GP, LLC, Units(o)
 

 
Energy: Oil & Gas
 
188 Units
 

 

Southcross Holdings LP, Class A-II Units(o)
 

 
Energy: Oil & Gas
 
188 Units
 
75

 
71

Speed Commerce Investment Part, LLC(o)
 

 
High Tech Industries
 
629 Units
 
2,640

 
3,000

Tenere Inc. Warrant(o)
 

 
Capital Equipment
 
N/A
 
161

 
161

TexOak Petro Holdings, LLC(o)
 

 
Energy: Oil & Gas
 
60,000 Units
 

 

Total Equity
 
 
 
 
 
4,832

 
5,107

Short Term Investments - 7.1%(k)
 
 
 
 
 
 
 
 
First American Treasury Obligations Fund, Class Z Shares, 0.39%(l)
 
 
 
 
 
70,498

 
70,498

Total Short Term Investments
 
 
 
 
 
70,498

 
70,498

TOTAL INVESTMENTS - 109.0%
 
 
 
 
 
$
1,096,948

 
1,089,478

LIABILITIES IN EXCESS OF OTHER ASSETS - (9.0%)
 
 
 
 
 
 
 
(89,715
)
NET ASSETS - 100%
 
 
 
 
 
 
 
$
999,763


See accompanying notes to consolidated financial statements.

16



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
Counterparty
 
Instrument
 
Maturity Date
 
Notional Amount (d)
 
Cost(p)
 
Fair Value(c)
Derivative Asset - 0.0%
 
 
 
 
 
 
 
 
 
 
Credit Default Swap
 
 
 
 
 
 
 
 
 
 
JPMorgan Chase Bank, N.A.
 
Deutsche Bank AG Credit Default Swap
 
3/20/2017
 
22,000

 
$
229

 
$
46

Derivative Liability - (1.5%)
 
 
 
 
 
 
 
 
 
 
Total Return Swap
 
 
 
 
 
 
 
 
 
 
Citibank, N.A.
 
See Note 7
 
2/18/2017
 
$
407,847

 
N/A

 
$
(15,402
)

a.
All of the Company’s investments are issued by eligible U.S. portfolio companies, as defined in the 1940 Act, except for investments specifically identified as non-qualifying per note h. below. The Company does not control and is not an affiliate of any of the portfolio companies in its investment portfolio. Unless specifically identified in note q. below, investments do not contain a PIK interest provision.
b.
The 1, 2, 3 and 12 month LIBOR rates were 0.77%, 0.82%, 1.00% and 1.69%, respectively, as of December 31, 2016.  The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2016, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2016. The 3 month EURIBOR rate was (0.34%) as of December 31, 2016.
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.
Denominated in U.S. dollars unless otherwise noted.
e.
As discussed in Note 11, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $1,119, $711, $2,500, $1,111, $5,274 and $4,127 as of December 31, 2016 to ABG Intermediate Holdings 2 LLC, American Media, Inc., Elemica Holdings, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd., Ministry Brands, LLC and Studio Movie Grill Holdings, LLC, respectively. As of March 9, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $1,119, $415, $10,000, $2,500, $1,111 and $4,127 to ABG Intermediate Holdings 2 LLC, American Media, Inc., CF Entertainment Inc., Elemica Holdings, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd. and Studio Movie Grill Holdings, LLC, respectively.
f.
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.
g.
Great Lakes CLO 2014-1 Class E Notes, Ivy Hill Middle Market Credit Fund VII Class E Notes and NXT Capital CLO 2014-1 Class E Notes were rated Ba2 on Moody's credit scale as of December 31, 2016. JFIN CLO 2014 Class E Notes were rated BB on S&P's credit scale as of December 31, 2016.
h.
The investment 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, 2016, 90.5% of the Company’s total assets represented qualifying assets. In addition, as described in Note 7, the Company calculates its compliance with the qualifying asset test on a “look through” basis by treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 89.1% of the Company’s total assets represented qualifying assets as of December 31, 2016.
i.
Position or a portion thereof unsettled as of December 31, 2016.
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 amounts as a result of an arrangement between the Company and other lenders in the syndication in exchange for lower payment priority.
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, 2016.
m.
Investment or a portion thereof was pledged as collateral supporting the amounts outstanding, if any, under the revolving credit facility with East West Bank as of December 31, 2016 (see Note 8).
n.
Investment or a portion thereof held within 34th Street and was pledged as collateral supporting the amounts outstanding under the credit facility with JPM as of December 31, 2016 (see Note 8).
o.
Non-income producing security.
p.
Represents amortized cost for debt investments, cost for equity investments and premium paid for derivatives.

See accompanying notes to consolidated financial statements.

17



CĪON Investment Corporation
Consolidated Schedule of Investments
December 31, 2016
(in thousands)
q.
For the year ended December 31, 2016, 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
 
Interest Amount
Portfolio Company
 
Investment Type
 
Cash
 
PIK
 
All-in-Rate
 
Cash
 
PIK
 
Total
Elements Behavioral Health, Inc.
 
Senior Secured Second Lien Debt
 
 
13.00%
 
13.00%
 
$

 
$
700

 
$
700

Petroflow Energy Corp.
 
Senior Secured First Lien Debt
 
3.00%
 
6.00%
 
9.00%
 
$
14

 
$
99

 
$
113

Rimini Street, Inc.
 
Senior Secured First Lien Debt
 
12.00%
 
3.00%
 
15.00%
 
$
1,286

 
$
164

 
$
1,450

Sequoia Healthcare Management, LLC
 
Senior Secured First Lien Debt
 
12.00%
 
4.00%
 
16.00%
 
$
206

 
$
68

 
$
274

Smile Brands Group, Inc.(r)
 
Senior Secured First Lien Debt
 
7.50%
 
1.50%
 
9.00%
 
$
187

 
$
34

 
$
221

Southcross Holdings Borrower LP(s)
 
Senior Secured First Lien Debt
 
3.50%
 
5.50%
 
9.00%
 
$
2

 
$
6

 
$
8

Spinal USA, Inc. / Precision Medical Inc.
 
Senior Secured First Lien Debt
 
 
10.50%
 
10.50%
 
$

 
$
3

 
$
3

TexOak Petro Holdings LLC
 
Senior Secured Second Lien Debt
 
 
8.00%
 
8.00%
 
$

 
$
181

 
$
181

r.
Outstanding principal and accrued interest of the underlying loan was fully repaid on August 17, 2016.
s.
Prior to December 31, 2016, the underlying loan was assigned to the Company and removed from the TRS.

See accompanying notes to consolidated financial statements.

18

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)


Note 1. Organization and Principal Business
CĪON Investment Corporation, or the Company, was incorporated under the general corporation laws of the State of Maryland on August 9, 2011. On December 17, 2012, the Company successfully raised gross proceeds from unaffiliated outside investors of at least $2,500, or the minimum offering requirement, and commenced operations. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the 1940 Act. The Company elected to be treated for federal income tax purposes as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.
The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. The Company’s 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, including corporate bonds and long-term subordinated loans, referred to as mezzanine loans, and equity, of private and thinly traded U.S. middle-market companies.
The Company is managed by CION Investment Management, LLC, or CIM, a registered investment adviser and an affiliate of the Company. CIM oversees the management of the Company’s activities and is responsible for making investment decisions for the Company’s investment portfolio. The Company and CIM previously engaged Apollo Investment Management, L.P., or AIM, a subsidiary of Apollo Global Management, LLC, or, together with its subsidiaries, Apollo, a leading global alternative investment manager, to act as the Company’s investment sub-adviser.  On November 1, 2016, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the investment sub-advisory agreement with AIM for a period of twelve months commencing December 17, 2016.
On July 11, 2017, the members of CIM entered into a third amended and restated limited liability company agreement, or the CIM LLC Agreement, with AIM for the purpose of creating a joint venture between AIM and CION Investment Group, LLC, or CIG. Under the CIM LLC Agreement, AIM was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, will share in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the CIM LLC Agreement, which will ultimately result in CIG and AIM each owning a 50% economic interest in CIM.
On July 10, 2017, the Company’s 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 the Company’s investment sub-adviser were terminated, AIM continues to perform identical services for CIM and the Company, including, without limitation, identifying investment opportunities for approval by CIM. AIM will not be paid a separate fee in exchange for such services, but will be entitled to receive distributions as a member of CIM as described above.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and pursuant to the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of December 31, 2016 and for the year then ended included in the Company’s Annual Report on Form 10-K. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017. The consolidated balance sheet and the consolidated schedule of investments as of December 31, 2016 are derived from the 2016 audited consolidated financial statements and include the accounts of the Company’s wholly-owned subsidiaries.
The Company is considered an investment company as defined in Accounting Standards Update Topic 946, Financial Services - Investment Companies, or ASU 946. Accordingly, the required disclosures as outlined in ASU 946 are included in the Company’s consolidated financial statements.
The Company evaluates subsequent events through the date that the consolidated financial statements are issued.
Recently Announced Accounting Standards
In May 2014, the Financial Accounting Standards Board, or the FASB, issued ASU 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which establishes a comprehensive and converged standard on revenue recognition to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions and geographies. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As such, ASU 2014-09 could impact the timing of revenue recognition. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized. ASU 2014-09 will apply to all entities. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, or ASU 2015-14, which amended the effective date of ASU 2014-09. ASU 2015-14 defers the effective date of ASU 2014-09 to interim reporting periods within annual reporting periods beginning after December 15, 2017 and early adoption is permitted, but not before the original effective date. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

19

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), or ASU 2016-15, which intends to reduce diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements and distributions from certain equity method investments. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The adoption of this guidance may impact the presentation of cash flows, but will not otherwise have a material impact on the Company's consolidated balance sheets or statements of operations.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, or ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is expected to reduce the number of transactions that need to be further evaluated as businesses. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for certain types of transactions. The Company will apply this guidance to its assessment of applicable transactions consummated after the adoption date.
In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. ASU 2017-08 is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption during an interim period. If the Company early adopts the amendments during an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes such interim period.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid investments with original maturity dates of three months or less. The Company’s cash and cash equivalents are held principally at one financial institution and at times may exceed insured limits. The Company periodically evaluates the creditworthiness of this institution and has not experienced any losses on such deposits.
Foreign Currency Translations
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated to U.S. dollars based on the foreign exchange rate on the date of valuation. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Short Term Investments
Short term investments include an investment in a U.S. Treasury obligations fund, which seeks to provide current income and daily liquidity by purchasing U.S. Treasury securities and repurchase agreements that are collateralized by such securities. The Company had $140,810 and $70,498 of such investments at September 30, 2017 and December 31, 2016, respectively, which are included in investments, at fair value on the accompanying consolidated balance sheets and on the consolidated schedules of investments.  
Offering and Organizational Costs
Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the Company’s registration statements in connection with the continuous public offerings of the Company’s shares. Certain initial offering costs that were funded by CIG on behalf of the Company were submitted by CIG for reimbursement upon meeting the minimum offering requirement on December 17, 2012. These costs were capitalized and amortized over a twelve month period as an adjustment to capital in excess of par value. All other offering costs are expensed as incurred by the Company.
Organizational costs include, among other things, the cost of organizing the Company as a Maryland corporation, including the cost of legal services and other fees pertaining to the organization of the Company. All organizational costs were funded by CIG and its affiliates and there was no liability for these organizational costs to the Company until CIG and its affiliates submitted such costs for reimbursement.
Income Taxes
The Company elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. To qualify and maintain qualification as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements and distribute to shareholders, for each taxable year, at least 90% of the Company’s “investment company taxable income”, which is generally equal to the sum of the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. If the Company continues to qualify as a RIC and continues to satisfy the annual distribution requirement, the Company will not be subject to corporate level federal income taxes on any income that the Company distributes to its shareholders. The Company intends to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. The Company will also be subject to nondeductible federal excise taxes if the Company does not distribute at least 98.0% of net ordinary income, 98.2% of capital gains, if any, and any recognized and undistributed income from prior years for which it paid no federal income taxes. 

20

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Two of the Company’s wholly-owned consolidated subsidiaries, View ITC, LLC and View Rise, LLC, or collectively the Taxable Subsidiaries, have elected to be treated as taxable entities for U.S. federal income tax purposes. The Taxable Subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense or benefit, and the related tax assets and liabilities, as a result of its ownership of certain portfolio investments. The income tax expense or benefit, if any, and related tax assets and liabilities, where material, are reflected in the Company’s consolidated financial statements. There were no deferred tax assets or liabilities as of September 30, 2017.
Book/tax differences relating to permanent differences are reclassified among the Company’s capital accounts, as appropriate. Additionally, the tax character of distributions is determined in accordance with income tax regulations that may differ from GAAP (see Note 5).
Uncertainty in Income Taxes
The Company evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold for the purposes of measuring and recognizing tax liabilities in the consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by the taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. The Company did not have any uncertain tax positions during the periods presented herein. 
The Company is subject to examination by U.S. federal, New York State, New York City and Maryland income tax jurisdictions for 2013, 2014, 2015, and 2016.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company 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 period. Actual results may materially differ from those estimates.
Valuation of Portfolio Investments
The fair value of the Company’s investments is determined quarterly in good faith by the Company’s board of directors pursuant to its consistently applied valuation procedures and valuation process in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC 820. ASC 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-tier fair value hierarchy that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Inputs used to measure these fair values are classified into the following hierarchy:
Level 1 -
Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.
Level 2 -
Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3 -
Unobservable inputs for the asset or liability. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes that include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by the disclaimer would result in classification as a Level 3 asset, assuming no additional corroborating evidence.
Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The level in the fair value hierarchy for each fair value measurement has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The level assigned to the investment valuations may not be indicative of the risk or liquidity associated with investing in such investments. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may differ materially from the value that would be received upon an actual sale of such investments. 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 the Company ultimately realizes on these investments to materially differ from the valuations currently assigned.

21

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The Company’s investments, excluding short term investments, consist primarily of debt securities that are traded on a private over-the-counter market for institutional investments. CIM attempts to obtain market quotations from at least two brokers or dealers for each investment (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). CIM utilizes mid-market pricing to determine fair value unless a different point within the range is more representative. Because of the private nature of this marketplace (meaning actual transactions are not publicly reported) and the non-binding nature of consensus pricing and/or quotes, the Company believes that these valuation inputs result in Level 3 classification within the fair value hierarchy.
Notwithstanding the foregoing, if in the reasonable judgment of CIM, the price of any investment held by the Company and determined in the manner described above does not accurately reflect the fair value of such investment, CIM will value such investment at a price that reflects such investment’s fair value and report such change in the valuation to the board of directors or its designee as soon as practicable. Investments that carry certain restrictions on sale will typically be valued at a discount from the public market value of the investment.

Any investments that are not publicly traded or for which a market price is not otherwise readily available are valued at a price that reflects its fair value. With respect to such investments, if CIM is unable to obtain market quotations, the investments are reviewed and valued using one or more of the following types of analyses:
i.
Market comparable statistics and public trading multiples discounted for illiquidity, minority ownership and other factors for companies with similar characteristics.
ii.
Valuations implied by third-party investments in the applicable portfolio companies.
iii.
Discounted cash flow analysis, including a terminal value or exit multiple.
 
Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the Company’s consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s consolidated financial statements. Below is a description of factors that the Company’s board of directors may consider when valuing the Company’s equity and debt investments where a market price is not readily available:
the size and scope of a portfolio company and its specific strengths and weaknesses;
prevailing interest rates for like securities;
expected volatility in future interest rates;
leverage;
call features, put features and other relevant terms of the debt;
the borrower’s ability to adequately service its debt;
the fair market value of the portfolio company in relation to the face amount of its outstanding debt;
the quality of collateral securing the Company’s debt investments;
multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in some cases, book value or liquidation value; and
other factors deemed applicable.
All of these factors may be subject to adjustment based upon the particular circumstances of a portfolio company or the Company’s actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners, or acquisition, recapitalization, and restructuring expenses or other related or non-recurring items. The choice of analyses and the weight assigned to such factors may vary across investments and may change within an investment if events occur that warrant such a change.
The discounted cash flow model deemed appropriate by CIM is prepared for the applicable investments and reviewed by the Company’s valuation committee consisting of senior management. Such models are prepared at least quarterly or on an as needed basis. The model uses the estimated cash flow projections for the underlying investments and an appropriate discount rate is determined based on the latest financial information available for the borrower, prevailing market trends, comparable analysis and other inputs. The model, key assumptions, inputs, and results are reviewed by the Company’s valuation committee with final approval from the board of directors.
Consistent with the Company’s valuation policy, the Company evaluates the source of inputs, including any markets in which the Company’s investments are trading, in determining fair value.
The Company periodically benchmarks the broker quotes from the brokers or dealers against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these quotes are reliable indicators of fair value. The Company may also use other methods to determine fair value for securities for which it cannot obtain market quotations through brokers or dealers, including the use of an independent valuation firm. The Company’s valuation committee and board of directors review and approve the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation process.

22

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The value of the total return swap, or TRS, was primarily based on the increase or decrease in the value of the loans underlying the TRS, as determined by the Company. The loans underlying the TRS were valued in the same manner as loans owned by the Company. As in all cases, the level in the fair value hierarchy for each instrument is determined based on the lowest level of inputs that are significant to the fair value measurement. The Company classified the TRS as Level 3 within the fair value hierarchy based on the lowest level of significant inputs. For additional information on the TRS, see Note 7.

Revenue Recognition
Securities transactions are accounted for on the trade date. The Company records interest and dividend income on an accrual basis beginning on the trade settlement date or the ex-dividend date, respectively, to the extent that the Company expects to collect such amounts.  For investments in equity tranches of collateralized loan obligations, the Company records income based on the effective interest rate determined using the amortized cost and estimated cash flows, which is updated periodically. Loan origination fees, original issue discounts, and market discounts/premiums are recorded and such amounts are amortized as adjustments to interest income over the respective term of the loan using the effective interest method. The Company records prepayment premiums on loans and debt securities as interest income when it receives such amounts. In addition, the Company may generate revenue in the form of commitment, amendment, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with investments are recognized when earned.
The Company may have investments in its investment portfolio that contain a PIK interest provision. PIK interest is accrued as interest income if the portfolio company valuation indicates that such PIK interest is collectible and recorded as interest receivable up to the interest payment date. On the interest payment dates, the Company will capitalize the accrued interest receivable attributable to PIK as additional principal due from the borrower. Additional PIK securities typically have the same terms, including maturity dates and interest rates, as the original securities. In order to maintain RIC status, substantially all of this income must be paid out to shareholders in the form of distributions, even if the Company has not collected any cash. For additional information on investments that contain a PIK interest provision, see the consolidated schedules of investments as of September 30, 2017 and December 31, 2016.
Loans and debt securities, including those that are individually identified as being impaired under Accounting Standards Codification 310, Receivables, or ASC 310, are generally placed on non-accrual status immediately if, in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the debt agreement, or when principal or interest is past due 90 days or more. Interest accrued but not collected at the date a loan or security is placed on non-accrual status is reversed against interest income. Interest income is recognized on non-accrual loans or debt securities only to the extent received in cash. However, where there is doubt regarding the ultimate collectibility of principal, cash receipts, whether designated as principal or interest, are thereafter applied to reduce the carrying value of the loan or debt security. Loans or securities are restored to accrual status only when interest and principal payments are brought current and future payments are reasonably assured.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Gains or losses on the sale of investments are calculated by using the weighted-average method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the weighted-average amortized cost of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Derivative Instrument
The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through current period earnings.
Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. Derivative instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity and operational risks. For additional information on the Company's derivative instruments, see Note 7.
Capital Gains Incentive Fee
Pursuant to the terms of the investment advisory agreement the Company entered into with CIM, the incentive fee on capital gains earned on liquidated investments of the Company’s investment portfolio during operations is determined and payable in arrears as of the end of each calendar year. Such fee equals 20% of the Company’s incentive fee capital gains (i.e., the Company’s 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 capital gains incentive fees. On a cumulative basis and to the extent that all realized capital losses and unrealized capital depreciation exceed realized capital gains as well as the aggregate realized net capital gains for which a fee has previously been paid, the Company would not be required to pay CIM a capital gains incentive fee. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

23

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

CIM did not take any incentive fees with respect to the Company’s TRS. For purposes of computing the capital gains incentive fee, CIM became entitled to a capital gains incentive fee upon the termination of the TRS, at which point all gains and losses of the underlying loans constituting the reference assets of the TRS were realized. However, realized losses exceeded realized gains on the underlying loans, resulting in no capital gains incentive fees on the TRS. Any net unrealized gains on the TRS were reflected in total assets on the Company’s consolidated balance sheets and included in the computation of the base management fee. Any net unrealized losses on the TRS were reflected in total liabilities on the Company’s consolidated balance sheets and excluded in the computation of the base management fee.

While the investment advisory agreement with CIM neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the American Institute for Certified Public Accountants, or AICPA, Technical Practice Aid for investment companies, the Company accrues capital gains incentive fees on unrealized gains. This accrual reflects the incentive fees that would be payable to CIM if the Company’s entire investment portfolio was liquidated at its fair value as of the balance sheet date even though CIM is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.
Net Increase in Net Assets per Share
Net increase in net assets per share is calculated based upon the daily weighted average number of shares of common stock outstanding during the reporting period.
Distributions
Distributions to shareholders are recorded as of the record date. The amount paid as a distribution is ratified by the board of directors on a quarterly basis. Net realized capital gains, if any, are distributed at least annually.
Note 3. Share Transactions
The Company’s initial continuous public offering commenced on July 2, 2012 and ended on December 31, 2015. The Company’s follow-on continuous public offering commenced on January 25, 2016 and will continue until no later than January 25, 2019.
The following table summarizes transactions with respect to shares of the Company’s common stock during the nine months ended September 30, 2017 and 2016:
 
Nine Months Ended
September 30,
 
2017
 
2016
 
Shares
 
Amount
 
Shares
 
Amount
Gross shares/proceeds from the offering
4,718,559

 
$
44,940

 
2,173,945

 
$
21,017

Reinvestment of distributions
3,251,250

 
29,701

 
3,328,161

 
29,179

Total gross shares/proceeds
7,969,809

 
74,641

 
5,502,106

 
50,196

Sales commissions and dealer manager fees

 
(1,713
)
 

 
(1,739
)
    Net shares/proceeds
7,969,809

 
72,928

 
5,502,106

 
48,457

Share repurchase program
(3,316,625
)
 
(30,167
)
 
(1,396,392
)
 
(12,231
)
    Net shares/proceeds from share transactions
4,653,184

 
$
42,761

 
4,105,714

 
$
36,226

During the nine months ended September 30, 2017 and 2016, the Company sold 7,969,809 and 5,502,106 shares, respectively, at an average price per share of $9.37 and $9.12, respectively.
Since commencing its initial continuous public offering on July 2, 2012 and through September 30, 2017, the Company sold 114,440,741 shares of common stock for net proceeds of $1,162,041 at an average price per share of $10.15. The net proceeds include gross proceeds received from reinvested shareholder distributions of $114,174, for which the Company issued 12,532,914 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $55,581, for which the Company repurchased 6,143,717 shares of common stock.
During the period from October 1, 2017 to November 8, 2017, the Company sold 658,050 shares of common stock pursuant to its follow-on continuous public offering for gross proceeds of $6,302 at an average price per share of $9.58. The Company also received gross proceeds of $3,824 from reinvested shareholder distributions, for which the Company issued 417,698 shares of common stock, and paid $10,240 for shares of common stock tendered for repurchase, for which the Company repurchased 1,118,130 shares of common stock.
Since commencing its initial continuous public offering on July 2, 2012 and through November 8, 2017, the Company sold 114,398,359 shares of common stock for net proceeds of $1,161,927 at an average price per share of $10.16. The net proceeds include gross proceeds received from reinvested shareholder distributions of $117,998, for which the Company issued 12,950,612 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $65,821, for which the Company repurchased 7,261,847 shares of common stock.

24

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

To ensure that the offering price per share, net of sales commissions and dealer manager fees, equaled or exceeded the net asset value per share on each subscription closing date and distribution reinvestment date, certain of the Company’s directors increased the offering price per share of common stock on certain dates. Due to a decline in the Company’s net asset value per share to an amount more than 2.5% below the Company’s then-current net offering price, certain of the Company’s directors decreased the offering price per share of common stock on certain dates.  
The changes to our offering price per share since the commencement of our initial continuous public offering and the associated approval and effective dates of such changes were as follows:  
Approval Date
 
Effective Date
 
New Offering Price Per Share
December 28, 2012
 
January 2, 2013
 
$10.04
January 31, 2013
 
February 1, 2013
 
$10.13
March 14, 2013
 
March 18, 2013
 
$10.19
May 15, 2013
 
May 16, 2013
 
$10.24
August 15, 2013
 
August 16, 2013
 
$10.32
February 4, 2014
 
February 5, 2014
 
$10.45
October 6, 2015
 
October 7, 2015
 
$10.20
November 24, 2015
 
November 25, 2015
 
$10.05
December 22, 2015
 
December 23, 2015
 
$9.95
March 8, 2016
 
March 9, 2016
 
$9.40
March 15, 2016
 
March 16, 2016
 
$9.45
March 22, 2016
 
March 23, 2016
 
$9.50
March 29, 2016
 
March 30, 2016
 
$9.55
April 5, 2016
 
April 6, 2016
 
$9.60
April 26, 2016
 
April 27, 2016
 
$9.65
May 3, 2016
 
May 4, 2016
 
$9.70
May 10, 2016
 
May 11, 2016
 
$9.75
May 31, 2016
 
June 1, 2016
 
$9.80
July 19, 2016
 
July 20, 2016
 
$9.85
July 26, 2016
 
July 27, 2016
 
$9.90
August 9, 2016
 
August 10, 2016
 
$9.95
August 23, 2016
 
August 24, 2016
 
$10.00
October 4, 2016
 
October 5, 2016
 
$10.05
October 11, 2016
 
October 12, 2016
 
$10.10
January 3, 2017
 
January 4, 2017
 
$9.57(1)
January 24, 2017
 
January 25, 2017
 
$9.60
March 7, 2017
 
March 8, 2017
 
$9.65
August 22, 2017
 
August 23, 2017
 
$9.70
(1)
On December 28, 2016, the Company entered into an amended and restated follow-on dealer manager agreement pursuant to which, among other things, the dealer manager fee was reduced to up to 2% and selling commissions were reduced to up to 3%. As a result, the Company adjusted its public offering price from $10.10 per share to $9.57 per share in order to maintain its net offering price of $9.09 per share (net of selling commissions and dealer manager fees).
Share Repurchase Program
Beginning in the first quarter of 2014, the Company began offering, and on a quarterly basis thereafter it intends to continue offering, to repurchase shares on such terms as may be determined by the Company’s board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of the Company’s board of directors, such repurchases would not be in the best interests of the Company’s shareholders or would violate applicable law.
The Company limits the number of shares to be repurchased during any calendar year to the number of shares it can repurchase with the proceeds it receives from the issuance of shares pursuant to its fifth amended and restated distribution reinvestment plan. At the discretion of the Company’s board of directors, it may also use cash on hand, cash available from borrowings and cash from liquidation of investments as of the end of the applicable period to repurchase shares. In addition, the Company limits the number of shares to be repurchased in any calendar year to 15% of the weighted average number of shares outstanding in the prior calendar year, or 3.75% in each quarter, though the actual number of shares that it offers to repurchase may be less in light of the limitations noted above. The Company currently offers to repurchase such shares at a price equal to the estimated net asset value per share on each date of repurchase.

25

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

On November 2, 2015, the Company amended the terms of the quarterly share repurchase program, effective as of the Company’s quarterly repurchase offer for the fourth quarter of 2015, which commenced in November 2015 and was completed in January 2016. Under the amended share repurchase program, the Company offered to repurchase shares of common stock at a price per share of $8.96, which was (i) not less than the net asset value per share immediately prior to January 4, 2016 and (ii) not more than 2.5% greater than the net asset value per share as of such date.

On January 22, 2016, the Company further amended the terms of the quarterly share repurchase program, effective as of the Company’s quarterly repurchase offer for the first quarter of 2016, which commenced in February 2016 and was completed in April 2016. Under the further amended share repurchase program, the Company offered to repurchase shares of common stock at a price equal to 90% of the public offering price in effect on each date of repurchase.
On December 8, 2016, the Company further amended the terms of the quarterly share repurchase program, effective as of the Company's quarterly repurchase offer for the fourth quarter of 2016, which commenced in November 2016 and was completed in January 2017. Under the further amended share repurchase program, the Company will offer to repurchase shares of common stock at a price equal to the estimated net asset value per share determined on each date of repurchase.
Any periodic repurchase offers are subject in part to the Company’s available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While the Company conducts quarterly tender offers as described above, it is not required to do so and may suspend or terminate the share repurchase program at any time, upon 30 days’ notice.
The following table summarizes the share repurchases completed during the nine months ended September 30, 2017:
Three Months Ended
 
Repurchase Date
 
Shares Repurchased
 
Percentage of Shares Tendered That Were Repurchased
 
Repurchase Price Per Share
 
Aggregate Consideration for Repurchased Shares
March 31, 2017
 
January 4, 2017
 
814,223

 
100
%
 
9.05

 
$
7,370

June 30, 2017
 
April 5, 2017
 
1,137,234

 
100
%
 
9.12

 
10,372

September 30, 2017
 
July 5, 2017
 
1,365,168

 
100
%
 
9.10

 
12,425

   Total
 
 
 
3,316,625

 
 
 
 
 
$
30,167

Note 4. Transactions with Related Parties
For the three and nine months ended September 30, 2017 and 2016, fees and other expenses incurred by the Company related to CIM and its affiliates were as follows:
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Entity
 
Capacity
 
Description
 
2017
 
2016
 
2017
 
2016
CION Securities, LLC
 
Dealer manager
 
Dealer manager fees(1)
 
$
290

 
$
331

 
$
782

 
$
588

CIM
 
Investment adviser
 
Management fees(2)
 
7,820

 
5,187

 
21,724

 
14,311

ICON Capital, LLC
 
Administrative services provider
 
Administrative services expense(2)
 
433

 
425

 
1,204

 
1,151

CIG
 
Sponsor
 
Recoupment of expense support(2)
 

 

 

 
667

 
 
 
 
 
 
$
8,543

 
$
5,943

 
$
23,710

 
$
16,717

(1)
Amounts charged directly to equity.
(2)
Amounts charged directly to operations.
On December 28, 2016, the Company entered into an amended and restated follow-on dealer manager agreement with CIM and CION Securities, LLC (formerly, ICON Securities, LLC), or CION Securities, in connection with the Company's follow-on continuous public offering. Under the amended and restated dealer manager agreement, the dealer manager fee was reduced from up to 3% to up to 2% of gross offering proceeds and selling commissions to the selling dealers were reduced from up to 7% to up to 3% of gross offering proceeds. Such costs are charged against capital in excess of par value when incurred. Since commencing its initial continuous public offering on July 2, 2012 and through November 8, 2017, the Company paid or accrued sales commissions of $64,317 to the selling dealers and dealer manager fees of $31,878 to CION Securities. 


26

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The Company has entered into an investment advisory agreement with CIM. On November 1, 2017, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the investment advisory agreement for a period of twelve months commencing December 17, 2017.  Pursuant to the investment advisory agreement, CIM is paid an annual base management fee equal to 2.0% of the average value of the Company’s gross assets, less cash and cash equivalents, and an incentive fee based on the Company’s performance, as described below. The base management fee is payable quarterly in arrears and is calculated based on the two most recently completed calendar quarters. The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on “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 adjusted capital, as defined in the investment advisory agreement, equal to 1.875% per quarter, or an annualized rate of 7.5%. The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is described in Note 2.
The Company accrues the capital gains incentive fee based on net realized gains and net unrealized appreciation; however, under the terms of the investment advisory agreement, the fee payable to CIM is based on net realized gains and unrealized depreciation and no such fee is payable with respect to unrealized appreciation unless and until such appreciation is actually realized. For the three and nine months ended September 30, 2017, the Company had no liability for and did not record any capital gains incentive fees.
With respect to the TRS, CIM became entitled to receive a capital gains incentive fee upon the termination of the TRS, at which point all net gains and losses of the underlying loans constituting the reference assets of the TRS were realized. See Note 2 for an additional discussion of CIM’s entitlement to receive payment of incentive fees and the Company’s accrual of the incentive fee on capital gains with respect to the TRS.

The Company entered into an administration agreement with CIM’s affiliate, ICON Capital, LLC, or ICON Capital, pursuant to which ICON Capital furnishes the Company with administrative services including accounting, investor relations and other administrative services necessary to conduct its day-to-day operations. On November 1, 2017, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the administration agreement for a period of twelve months commencing December 17, 2017. ICON Capital is reimbursed for administrative expenses it incurs on the Company’s behalf in performing its obligations, provided that such reimbursement will be for the lower of ICON Capital’s actual costs or the amount that the Company would be required to pay for comparable administrative services in the same geographic location. Such costs will be reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. The Company will not reimburse ICON Capital for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a person with a controlling interest in ICON Capital. 

Under the terms of the investment advisory agreement, CIM and certain of its affiliates, which includes CIG, are entitled to receive reimbursement of up to 1.5% of the gross proceeds raised until all offering and organizational costs have been reimbursed. The Company’s payment of offering and organizational costs will not exceed 1.5% of the actual gross proceeds raised from the offerings (without giving effect to any potential expense support from CIG and its affiliates). If the Company sells the maximum number of shares at its latest public offering price of $9.70 per share, the Company estimates that it may incur up to approximately $29,894 of expenses. With respect to any reimbursements for offering and organizational costs, the Company will interpret the 1.5% limit based on actual gross proceeds raised at the time of such reimbursement.  In addition, the Company will not issue any of its shares or other securities for services or for property other than cash or securities except as a dividend or distribution to its security holders or in connection with a reorganization. 
From inception through December 31, 2012, CIG and its affiliates incurred offering, organizational and other pre-effective costs of $2,012. Of these costs, $1,812 represented offering and organizational costs, all of which have been submitted to the Company for reimbursement. The Company paid $450 in October 2013, $550 in March 2014, $592 in May 2014 and $420 in March 2015.  No additional material offering, organizational or other pre-effective costs have been incurred by CIG or its affiliates subsequent to December 31, 2012.
Reinvestment of shareholder distributions and share repurchases are excluded from the gross proceeds from the Company’s offerings for purposes of determining the total amount of offering and organizational costs that can be paid by the Company. As of September 30, 2017, the Company raised gross offering proceeds of $1,103,448, of which it can pay up to $16,552 in offering and organizational costs (which represents 1.5% of the actual gross offering proceeds raised). Through September 30, 2017, the Company paid $9,876 of such costs, leaving an additional $6,676 that can be paid. As of November 8, 2017, the Company raised gross offering proceeds of $1,109,750, of which it can pay up to $16,646 in offering and organizational costs (which represents 1.5% of the actual gross offering proceeds raised). Through November 8, 2017, the Company paid $9,914 of such costs, leaving an additional $6,732 that can be paid.
On January 30, 2013, the Company entered into the expense support and conditional reimbursement agreement with CIG, whereby CIG agreed to provide expense support to the Company in an amount that is sufficient to: (1) ensure that no portion of the Company’s distributions to shareholders will be paid from its offering proceeds or borrowings, and/or (2) reduce the Company’s operating expenses until it has achieved economies of scale sufficient to ensure that it bears a reasonable level of expense in relation to its investment income. On December 13, 2013 and January 16, 2015, the Company and CIG amended the expense support and conditional reimbursement agreement to extend the termination date of such agreement from January 30, 2014 to January 30, 2015 and from January 30, 2015 to December 31, 2015, respectively. On December 16, 2015 and December 14, 2016, the Company further amended and restated the expense support and conditional reimbursement agreement for purposes of including AIM as a party to the agreement and extending the termination date from December 31, 2016 to December 31, 2017, respectively. Commencing with the quarter beginning January 1, 2016, CIG and AIM each agreed to provide expense support to the Company for 50% of its expenses as described above.
For the three and nine months ended September 30, 2017 and 2016, the Company did not receive any expense support from CIG or AIM.

27

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Pursuant to the expense support and conditional reimbursement agreement, the Company will have a conditional obligation to reimburse CIG for any amounts funded by CIG under such agreement (i) if expense support amounts funded by CIG exceed operating expenses incurred during any fiscal quarter, (ii) if the sum of the Company’s net investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent not included in net investment income or net capital gains for tax purposes) exceeds the distributions paid by the Company to shareholders, and (iii) during any fiscal quarter occurring within three years of the date on which CIG funded such amount. Pursuant to the second amended and restated expense support and conditional reimbursement agreement, the Company will have a conditional obligation to reimburse CIG and AIM for any amounts funded by CIG and AIM under the same circumstances described above. The obligation to reimburse CIG and AIM for any expense support provided by CIG and AIM under such agreement is further conditioned by the following: (i) in the period in which reimbursement is sought, the ratio of operating expenses to average net assets, when considering the reimbursement, cannot exceed the ratio of operating expenses to average net assets, as defined, for the period when the expense support was provided; (ii) in the period when reimbursement is sought, the annualized distribution rate cannot fall below the annualized distribution rate for the period when the expense support was provided; and (iii) the expense support can only be reimbursed within three years from the date the expense support was provided.

Expense support, if any, will be determined as appropriate to meet the objectives of the expense support and conditional reimbursement agreement. During the three months ended September 30, 2016, the Company did not record an obligation to repay expense support from CIG or AIM. During the nine months ended September 30, 2016, the Company recorded an obligation to repay expense support from CIG of $667. The Company did not record any obligation to repay expense support from CIG or AIM during the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, the Company repaid expense support to CIG of $548 and $1,147, respectively. The Company did not repay any expense support to CIG or AIM during the three or nine months ended September 30, 2017. The Company may or may not be requested to reimburse any future expense support provided by CIG or AIM.
The Company, AIM, or CIG may terminate the expense support and conditional reimbursement agreement at any time. CIG and AIM have indicated that they expect to continue such expense support until they believe that the Company has achieved economies of scale sufficient to ensure that it bears a reasonable level of expenses in relation to its income. If the Company terminates the investment advisory agreement with CIM, the Company may be required to repay CIG and AIM all unreimbursed expense support funded by CIG and AIM within three years of the date of termination. The specific amount of expense support provided by CIG and AIM, if any, will be determined at the end of each quarter. There can be no assurance that the expense support and conditional reimbursement agreement will remain in effect or that CIG and AIM will support any portion of the Company’s expenses in future quarters.
As of September 30, 2017 and December 31, 2016, the total liability payable to CIM and its affiliates was $7,931 and $6,508, respectively, which primarily related to fees earned by CIM during the three months ended September 30, 2017 and December 31, 2016, respectively.
Because CIM’s senior management team is comprised of substantially the same personnel as the senior management team of the Company’s affiliate, ICON Capital, which is the investment manager to certain equipment finance funds, or equipment funds, such members of senior management provide investment advisory and management services to the equipment funds in addition to the Company. In the event that CIM undertakes to provide investment advisory services to other clients in the future, it will strive to allocate investment opportunities in a fair and equitable manner consistent with the Company’s investment objective and strategies so that the Company will not be disadvantaged in relation to any other client of the investment adviser or its senior management team. However, it is currently possible that some investment opportunities will be provided to the equipment funds or other clients of CIM rather than to the Company.
Indemnifications
The investment advisory agreement, the administration agreement and the dealer manager agreement each provide certain indemnifications from the Company to the other relevant parties to such agreements.  The Company’s maximum exposure under these agreements is unknown. However, the Company has not experienced claims or losses pursuant to these agreements and believes the risk of loss related to such indemnifications to be remote.
Note 5. Distributions
From February 1, 2014 through July 17, 2017, the Company’s board of directors authorized and declared on a monthly basis a weekly distribution amount per share of common stock. On July 18, 2017, the Company's board of directors authorized and declared on a quarterly basis a weekly distribution amount per share of common stock. Effective September 28, 2017, the Company's board of directors delegated to the Company's executive officers the authority to determine the amount, record dates, payment dates and other terms of distributions to shareholders, which will be ratified by the board of directors on a quarterly basis.
During the year ended December 31, 2016 and the nine months ended September 30, 2017, the Company’s board of directors declared distributions for 52 and 39 record dates, respectively. Declared distributions are paid monthly.

28

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The following table presents cash distributions per share that were declared during the year ended December 31, 2016 and the nine months ended September 30, 2017:
 
 
Distributions
Three Months Ended
 
Per Share
 
Amount
2016
 
 
 
 
March 31, 2016 (thirteen record dates)
 
$
0.1829

 
$
19,004

June 30, 2016 (thirteen record dates)
 
0.1829

 
19,167

September 30, 2016 (thirteen record dates)
 
0.1829

 
19,480

December 31, 2016 (thirteen record dates)
 
0.1829

 
19,808

Total distributions for the year ended December 31, 2016
 
$
0.7316

 
$
77,459

 
 
 
 
 
2017
 
 
 
 
March 31, 2017 (thirteen record dates)
 
$
0.1829

 
$
20,123

June 30, 2017 (thirteen record dates)
 
0.1829

 
20,371

September 30, 2017 (thirteen record dates)
 
0.1829

 
20,644

Total distributions for the nine months ended September 30, 2017
 
$
0.5487

 
$
61,138


On September 28, 2017, the Company’s co-chief executive officers declared regular weekly cash distributions of $0.014067 per share for October 2017 through December 2017. Each distribution will be paid monthly to shareholders of record as of the weekly record dates set forth below.
Record Date
 
Payment Date
 
Distribution Amount Per Share
October 3, 2017
 
November 1, 2017
 
$0.014067
October 10, 2017
 
November 1, 2017
 
$0.014067
October 17, 2017
 
November 1, 2017
 
$0.014067
October 24, 2017
 
November 1, 2017
 
$0.014067
October 31, 2017
 
November 1, 2017
 
$0.014067
November 7, 2017
 
November 29, 2017
 
$0.014067
November 14, 2017
 
November 29, 2017
 
$0.014067
November 21, 2017
 
November 29, 2017
 
$0.014067
November 28, 2017
 
November 29, 2017
 
$0.014067
December 5, 2017
 
December 27, 2017
 
$0.014067
December 12, 2017
 
December 27, 2017
 
$0.014067
December 19, 2017
 
December 27, 2017
 
$0.014067
December 26, 2017
 
December 27, 2017
 
$0.014067

The Company has adopted an “opt in” distribution reinvestment plan for shareholders. As a result, if the Company makes a distribution, shareholders will receive distributions in cash unless they specifically “opt in” to the fifth amended and restated distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of the Company’s common stock.

On November 2, 2015, the Company further amended and restated its distribution reinvestment plan pursuant to the third amended and restated distribution reinvestment plan, or the Third Amended DRIP. The Third Amended DRIP was effective as of, and first applied to the reinvestment of cash distributions paid on or after, the closing of the Company’s initial continuous public offering on December 31, 2015. Under the Third Amended DRIP, cash distributions to participating shareholders were reinvested in additional shares of common stock at a purchase price determined by the Company’s board of directors or a committee thereof, in its sole discretion, that was (i) not less than the net asset value per share determined in good faith by the board of directors or a committee thereof, in their sole discretion, immediately prior to the payment of the distribution, or the NAV Per Share, and (ii) not more than 2.5% greater than the NAV Per Share as of such date. 

On January 22, 2016, the Company further amended and restated its distribution reinvestment plan pursuant to the fourth amended and restated distribution reinvestment plan, or the Fourth Amended DRIP.  The Fourth Amended DRIP became effective as of, and first applied to the reinvestment of cash distributions paid on, March 30, 2016. Under the Fourth Amended DRIP, cash distributions to participating shareholders were reinvested in additional shares of common stock at a purchase price equal to 90% of the public offering price per share in effect as of the date of issuance.
On December 8, 2016, the Company further amended and restated its distribution reinvestment plan pursuant to the fifth amended and restated distribution reinvestment plan, or the Fifth Amended DRIP. The Fifth Amended DRIP became effective as of, and first applied to the reinvestment of cash distributions paid on, February 1, 2017.  Under the Fifth Amended DRIP, cash distributions to participating shareholders will be reinvested in additional shares of common stock at a purchase price equal to the estimated net asset value per share of common stock as of the date of issuance.

29

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The Company may fund its cash distributions to shareholders from any sources of funds available to the Company, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies and expense support from CIG and AIM, which is subject to recoupment. The Company has not established limits on the amount of funds it may use from available sources to make distributions. Through December 31, 2014, a portion of the Company’s distributions resulted from expense support from CIG, and future distributions may result from expense support from CIG and AIM, each of which is subject to repayment by the Company within three years. For the years ended December 31, 2015 and 2016, none of the Company's distributions resulted from expense support from CIG or AIM. The purpose of this arrangement is to avoid such distributions being characterized as a return of capital. Shareholders should understand that any such distributions are not based on the Company’s investment performance, and can only be sustained if the Company achieves positive investment performance in future periods and/or CIG and AIM continue to provide such expense support. Shareholders should also understand that the Company’s future repayments of expense support will reduce the distributions that they would otherwise receive. There can be no assurance that the Company will achieve such performance in order to sustain these distributions, or be able to pay distributions at all. CIG and AIM have no obligation to provide expense support to the Company in future periods.

The following table reflects the sources of cash distributions on a GAAP basis that the Company has declared on its shares of common stock during the nine months ended September 30, 2017 and 2016:
 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
Source of Distribution
 
Per Share
 
Amount
 
Percentage
 
Per Share
 
Amount
 
Percentage
Net investment income
 
$
0.4953

 
$
55,191

 
90.3
%
 
$
0.3021

 
$
31,744

 
55.1
%
Net realized gain on total return swap
 
 
 
 
 
 
 
 
 
 
 
 
   Net interest and other income from TRS portfolio
 
0.0329

 
3,661

 
6.0
%
 
0.2131

 
22,386

 
38.8
%
   Net gain on TRS loan sales(1)
 
0.0205

 
2,286

 
3.7
%
 
0.0232

 
2,443

 
4.2
%
Net realized gain on investments and foreign currency
 

 

 

 
0.0103

 
1,078

 
1.9
%
Total distributions
 
$
0.5487

 
$
61,138

 
100.0
%
 
$
0.5487

 
$
57,651

 
100.0
%
(1)
During the nine months ended September 30, 2017, the Company realized losses on TRS loans of $19,736 primarily due to the purchase of loans by Flatiron Funding II, LLC in connection with the TRS refinancing that were previously held in the TRS and are not currently deductible on a tax-basis. See Note 8 for an additional discussion regarding this purchase. During the nine months ended September 30, 2016, the Company realized losses on TRS loans of $1,030, which are not currently deductible on a tax-basis.
It is the Company's policy to comply with all requirements of the Code applicable to RICs and to distribute substantially all of its taxable income to its shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, the Company intends not to be subject to corporate level federal income tax or federal excise taxes. Accordingly, no federal income tax provision was required.  
Income and capital gain distributions are determined in accordance with the Code and federal tax regulations, which may differ from amounts determined in accordance with GAAP. These book/tax differences, which could be material, are primarily due to differing treatments of income and gains on various investments held by the Company. Permanent book/tax differences result in reclassifications to capital in excess of par value, accumulated undistributed net investment income, accumulated undistributed realized gain on investments, and accumulated undistributed realized gain on total return swap. During 2016, permanent book/tax differences primarily due to the treatment of the TRS and non-deductible offering costs resulted in a net decrease in distributions in excess of net investment income, a net decrease in accumulated realized gains and a net decrease to capital in excess of par value. These reclassifications had no effect on net assets.
The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. The tax characteristics of distributions to shareholders are reported to shareholders annually on Form 1099-DIV. Except for long term capital gains of $906, all distributions for 2016 were characterized as ordinary income distributions for federal income tax purposes.
The tax components of accumulated earnings for the current year will be determined at year end. As of December 31, 2016, the components of accumulated earnings on a tax basis were as follows:
 
December 31, 2016
Undistributed ordinary income
$
3,847

Undistributed long term capital gains
924

Net unrealized depreciation on investments and total return swap
(26,398
)
Total accumulated earnings
$
(21,627
)

30

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

As of September 30, 2017, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $23,788; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $47,854; the net unrealized depreciation was $24,066; and the aggregate cost of securities for Federal income tax purposes was $1,715,921.
As of December 31, 2016, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $9,389; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $20,202; the net unrealized depreciation was $10,813; and the aggregate cost of securities for Federal income tax purposes was $1,100,291.
Note 6. Investments
The composition of the Company’s investment portfolio as of September 30, 2017 and December 31, 2016 at amortized cost and fair value was as follows:
 
 
September 30, 2017
 
December 31, 2016
 
 
Cost(1)
 
Fair
Value
 
Percentage of
Investment
Portfolio
 
Cost(1)
 
Fair
Value
 
Percentage of
Investment
Portfolio
Senior secured first lien debt
 
$
1,069,271

 
$
1,079,520

 
69.6
%
 
$
489,904

 
$
489,913

 
48.1
%
Senior secured second lien debt
 
404,788

 
402,459

 
26.0
%
 
437,240

 
434,347

 
42.6
%
Collateralized securities and structured products - debt
 
28,818

 
28,284

 
1.8
%
 
39,471

 
38,114

 
3.7
%
Collateralized securities and structured products - equity
 
31,537

 
29,588

 
1.9
%
 
37,713

 
34,648

 
3.4
%
Unsecured debt
 
7,333

 
7,331

 
0.5
%
 
17,290

 
16,851

 
1.7
%
Equity
 
5,857

 
3,863

 
0.2
%
 
4,832

 
5,107

 
0.5
%
Subtotal/total percentage
 
1,547,604

 
1,551,045

 
100.0
%
 
1,026,450

 
1,018,980

 
100.0
%
Short term investments(2)
 
140,810

 
140,810

 
 
 
70,498

 
70,498

 
 
Total investments
 
$
1,688,414

 
$
1,691,855

 
 
 
$
1,096,948

 
$
1,089,478

 
 
(1)
Cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, for debt investments and cost for equity 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.

31

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The following tables show the composition of the Company’s investment portfolio by industry classification and geographic dispersion, and the percentage, by fair value, of the total investment portfolio assets in such industries and geographies as of September 30, 2017 and December 31, 2016:
 
 
September 30, 2017
 
December 31, 2016
Industry Classification
 
Investments at
Fair Value
 
Percentage of
Investment Portfolio
 
Investments at
Fair Value
 
Percentage of
Investment Portfolio
High Tech Industries

$
229,022

 
14.8
%
 
$
217,339

 
21.3
%
Healthcare & Pharmaceuticals

222,843

 
14.4
%
 
118,337

 
11.6
%
Services: Business

209,615

 
13.5
%
 
126,869

 
12.5
%
Media: Diversified & Production

116,013

 
7.5
%
 
23,100

 
2.3
%
Chemicals, Plastics & Rubber

89,142

 
5.8
%
 
27,253

 
2.7
%
Telecommunications

72,967

 
4.7
%
 
35,411

 
3.5
%
Services: Consumer

64,137

 
4.1
%
 
9,477

 
0.9
%
Media: Advertising, Printing & Publishing

61,147

 
3.9
%
 
54,354

 
5.3
%
Consumer Goods: Durable

60,992

 
3.9
%
 
1,000

 
0.1
%
Diversified Financials

57,872

 
3.7
%
 
72,762

 
7.1
%
Beverage, Food & Tobacco

54,846

 
3.5
%
 
53,658

 
5.3
%
Capital Equipment

51,899

 
3.3
%
 
51,155

 
5.0
%
Hotel, Gaming & Leisure

45,990

 
3.0
%
 
28,974

 
2.8
%
Automotive

40,347

 
2.6
%
 
39,192

 
3.9
%
Retail

32,052

 
2.1
%
 
18,852

 
1.9
%
Aerospace & Defense

28,811

 
1.9
%
 
21,780

 
2.1
%
Banking, Finance, Insurance & Real Estate

27,296

 
1.8
%
 
17,636

 
1.7
%
Energy: Oil & Gas

25,904

 
1.7
%
 
12,803

 
1.3
%
Consumer Goods: Non-Durable

16,056

 
1.0
%
 
8,611

 
0.8
%
Construction & Building

16,048

 
1.0
%
 
39,137

 
3.8
%
Transportation: Cargo
 
9,844

 
0.6
%
 

 

Media: Broadcasting & Subscription

6,450

 
0.4
%
 
9,776

 
1.0
%
Forest Products & Paper

5,598

 
0.4
%
 

 

Metals & Mining

3,341

 
0.2
%
 
11,349

 
1.1
%
Environmental Industries

2,813

 
0.2
%
 
2,595

 
0.3
%
Energy: Electricity
 

 

 
13,715

 
1.3
%
Containers, Packaging & Glass
 

 

 
3,845

 
0.4
%
Subtotal/total percentage
 
1,551,045

 
100.0
%
 
1,018,980

 
100.0
%
Short term investments
 
140,810

 
 
 
70,498

 
 
Total investments
 
$
1,691,855

 
 
 
$
1,089,478

 
 
 
 
September 30, 2017
 
December 31, 2016
Geographic Dispersion(1)
 
Investments at
Fair Value
 
Percentage of
Investment Portfolio
 
Investments at
Fair Value
 
Percentage of
Investment Portfolio
United States
 
$
1,407,912

 
90.8
%
 
$
916,260

 
89.9
%
Cayman Islands
 
31,519

 
2.0
%
 
43,234

 
4.2
%
Canada
 
30,747

 
2.0
%
 
16,705

 
1.6
%
Germany
 
20,488

 
1.3
%
 
24,185

 
2.4
%
Netherlands
 
18,171

 
1.2
%
 
10,273

 
1.0
%
Luxembourg
 
17,954

 
1.1
%
 

 

Marshall Islands
 
9,844

 
0.6
%
 

 

France
 
5,598

 
0.4
%
 

 

Cyprus
 
5,124

 
0.3
%
 
4,728

 
0.5
%
United Kingdom
 
2,813

 
0.2
%
 
2,595

 
0.3
%
Bermuda
 
875

 
0.1
%
 
1,000

 
0.1
%
Subtotal/total percentage
 
1,551,045

 
100.0
%
 
1,018,980

 
100.0
%
Short term investments
 
140,810

 
 
 
70,498

 
 
Total investments
 
$
1,691,855

 
 
 
$
1,089,478

 
 
(1)
The geographic dispersion is determined by the portfolio company's country of domicile.

32

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

As of September 30, 2017, investments on non-accrual status represented 0.9% of the Company's investment portfolio on a fair value basis. As of December 31, 2016, there were no investments on non-accrual status.

The Company does not “control” and is not an “affiliate” of any of its portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company or issuer if the Company owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company or issuer if the Company owned 5% or more of its voting securities.
The Company’s 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 the Company to provide funding when requested in accordance with the terms of the underlying agreements. As of September 30, 2017 and December 31, 2016, the Company’s unfunded commitments amounted to $75,833 and $25,096, respectively. As of November 9, 2017, the Company’s unfunded commitments amounted to $83,077. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company.  Refer to Note 11 for further details on the Company’s unfunded commitments.
Note 7. Derivative Instruments
    
In the normal course of business and subject to the requirements of the 1940 Act, the Company enters into derivative instruments as part of its investment strategy.

Credit Default Swap

On October 14, 2016, the Company entered into a credit default swap with JPMorgan Chase Bank N.A. with a base notional amount of €22,000, to purchase protection with respect to Deutsche Bank AG exposure. As of December 31, 2016, the fair value of the credit default swap was $46, which is presented as derivative asset on the consolidated balance sheet. The swap terminated on March 20, 2017.

Total Return Swap

On December 17, 2012, the Company, through its wholly-owned consolidated subsidiary, Flatiron Funding, LLC, or Flatiron, entered into a TRS with Citibank, N.A., or Citibank.  Flatiron and Citibank amended the TRS on several occasions, most recently on February 18, 2017 to extend the termination or call date from February 18, 2017 to April 18, 2017. Prior to the call date, the maximum aggregate market value of the portfolio of loans subject to the TRS (determined at the time each such loan became subject to the TRS) was $800,000 and the interest rate payable by Flatiron to Citibank with respect to each loan included in the TRS was a spread of 1.40% per year over the floating rate index specified for each such loan, which would not be less than zero.  On April 18, 2017, the TRS expired in accordance with its terms. The agreements between Flatiron and Citibank, which collectively established the TRS, are referred to herein as the TRS Agreement.     

The value of the TRS was based on the increase or decrease in the value of the loans underlying the TRS, as determined by the Company. The loans underlying the TRS were valued in the same manner as loans owned by the Company.  As of December 31, 2016, the fair value of the TRS was ($15,402). The fair value of the TRS was reflected as unrealized depreciation on total return swap on the Company’s consolidated balance sheets. The change in value of the TRS was reflected in the Company’s consolidated statements of operations as net change in unrealized depreciation on total return swap. As of December 31, 2016, Flatiron had selected 51 underlying loans with a total notional amount of $407,847 and posted $143,335 in cash collateral held by Citibank (of which only $131,073 was required to be posted). As of September 30, 2017, Flatiron had posted $3,620 in cash collateral held by Citibank, which is reflected in due from counterparty on the Company`s consolidated balance sheets.

33

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Receivable on total return swap is composed of any amounts due from Citibank that consist of earned but not yet collected net interest and fees and net gains on sales and principal repayments of the underlying loans of the TRS. As of December 31, 2016, the receivable on total return swap consisted of the following:
 
 
December 31, 2016
Interest and other income from TRS portfolio
 
$
5,620

Interest and other expense from TRS portfolio
 
(1,928
)
Net gain on TRS loan sales
 
495

Receivable on total return swap
 
$
4,187


Realized gains and losses on the TRS are composed of any gains or losses on loans underlying the TRS as well as net interest and fees earned during the period. For the three and nine months ended September 30, 2017 and 2016, net realized gain (loss) on the TRS consisted of the following:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2017
 
2016
 
2017
 
2016
Interest and other income from TRS portfolio
 
$
67

 
$
9,426

 
$
6,610

 
$
32,693

Interest and other expense from TRS portfolio
 

 
(3,265
)
 
(2,949
)
 
(10,307
)
Net gain (loss) on TRS loan sales
 

 
2,027

 
(17,450
)
 
1,413

Net realized gain (loss)(1)
 
$
67

 
$
8,188

 
$
(13,789
)
 
$
23,799

(1)
Net realized gain (loss) is reflected in net realized gain (loss) on total return swap on the Company's consolidated statements of operations.
On March 29, 2017, Flatiron Funding II, LLC, or Flatiron Funding II, a newly-formed, wholly-owned, consolidated, special purpose financing subsidiary of the Company, purchased certain loans underlying the TRS with a notional value of $363,860 in connection with the TRS refinancing. See Note 8 for additional information on Flatiron Funding II.

34

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The following is a summary of the underlying loans subject to the TRS as of December 31, 2016:
Underlying Loans(a)
 
Index Rate(b)
 
Industry
 
Notional
Amount
 
Fair
Value(c)
 
Unrealized
Appreciation /
(Depreciation)
Senior Secured First Lien Debt
 
 
 
 
 
 
 
 
 
 
Academy, Ltd., L+400, 1.00% LIBOR Floor, 7/1/2022
 
Various
 
Retail
 
$
14,564

 
$
13,653

 
$
(911
)
Access CIG, LLC, L+500, 1.00% LIBOR Floor, 10/18/2021
 
3 Month LIBOR
 
Services: Business
 
6,751

 
6,798

 
47

ALM Media, LLC, L+450, 1.00% LIBOR Floor, 7/31/2020
 
3 Month LIBOR
 
Media: Advertising, Printing & Publishing
 
7,679

 
7,328

 
(351
)
Alvogen Pharma US, Inc., L+500, 1.00% LIBOR Floor, 4/1/2022
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
9,430

 
9,150

 
(280
)
American Dental Partners, Inc., L+475, 1.00% LIBOR Floor, 8/29/2021
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
12,158

 
12,219

 
61

American Energy - Marcellus, LLC, L+425, 1.00% LIBOR Floor, 8/4/2020
 
3 Month LIBOR
 
Energy: Oil & Gas
 
4,254

 
2,370

 
(1,884
)
American Residential Services, LLC, L+450, 1.00% LIBOR Floor, 6/30/2021
 
3 Month LIBOR
 
Construction & Building
 
14,067

 
14,269

 
202

Aquilex, LLC, L+400, 1.00% LIBOR Floor, 12/31/2020
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
1,810

 
1,778

 
(32
)
Avaya Inc., L+525, 1.00% LIBOR Floor, 5/29/2020
 
3 Month LIBOR
 
Telecommunications
 
14,542

 
12,798

 
(1,744
)
Azure Midstream Energy, LLC, L+650, 1.00% LIBOR Floor, 11/15/2018
 
1 Month LIBOR
 
Energy: Oil & Gas
 
2,375

 
2,200

 
(175
)
Caraustar Industries, Inc., L+675, 1.25% LIBOR Floor, 5/1/2019
 
3 Month LIBOR
 
Forest Products & Paper
 
11,954

 
12,521

 
567

Central Security Group, Inc., L+563, 1.00% LIBOR Floor, 10/6/2020
 
1 Month LIBOR
 
Services: Consumer
 
12,915

 
13,058

 
143

Charming Charlie, LLC, L+800, 1.00% LIBOR Floor, 12/24/2019
 
3 Month LIBOR
 
Retail
 
7,723

 
4,314

 
(3,409
)
CSP Technologies North America, LLC, L+600, 1.00% LIBOR Floor, 1/29/2022
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
13,385

 
13,590

 
205

CT Technologies Intermediate Holdings, Inc., L+425, 1.00% LIBOR Floor, 12/1/2021
 
1 Month LIBOR
 
Healthcare & Pharmaceuticals
 
14,681

 
14,160

 
(521
)
David's Bridal, Inc., L+400, 1.25% LIBOR Floor, 10/11/2019
 
3 Month LIBOR
 
Retail
 
3,339

 
3,095

 
(244
)
DBRS, Inc., L+525, 1.00% LIBOR Floor, 3/4/2022(d)
 
3 Month LIBOR
 
Services: Business
 
12,874

 
12,094

 
(780
)
EIG Investors Corp., L+548, 1.00% LIBOR Floor, 11/9/2019(d)
 
3 Month LIBOR
 
Services: Business
 
1,773

 
1,772

 
(1
)
Emmis Operating Company, L+600, 1.00% LIBOR Floor, 6/10/2021
 
3 Month LIBOR
 
Media: Broadcasting & Subscription
 
7,508

 
7,075

 
(433
)
Evergreen Skills Lux S.À.R.L., L+475, 1.00% LIBOR Floor, 4/28/2021(d)
 
6 Month LIBOR
 
High Tech Industries
 
7,174

 
6,821

 
(353
)
Global Cash Access, Inc., L+525, 1.00% LIBOR Floor, 12/18/2020
 
2 Month LIBOR
 
Hotel, Gaming & Leisure
 
10,483

 
10,406

 
(77
)
Healogics, Inc., L+425, 1.00% LIBOR Floor, 7/1/2021
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
4,829

 
4,520

 
(309
)
IMG Worldwide Holdings, LLC, L+425, 1.00% LIBOR Floor, 5/6/2021
 
3 Month LIBOR
 
Media: Diversified & Production
 
7,111

 
7,277

 
166

LTCG Holdings Corp., L+500, 1.00% LIBOR Floor, 6/6/2020
 
1 Month LIBOR
 
Services: Business
 
5,882

 
5,409

 
(473
)
Murray Energy Corp., L+725, 1.00% LIBOR Floor, 4/16/2020
 
3 Month LIBOR
 
Metals & Mining
 
3,588

 
3,528

 
(60
)
Navex Global, Inc, L+475, 1.00% LIBOR Floor, 11/19/2021
 
6 Month LIBOR
 
High Tech Industries
 
13,597

 
13,617

 
20

Nielsen & Bainbridge, LLC, L+500, 1.00% LIBOR Floor, 8/15/2020
 
6 Month LIBOR
 
Consumer Goods: Durable
 
15,843

 
15,942

 
99

Oasis Outsourcing Holdings, Inc., L+475, 1.00% LIBOR Floor, 12/26/2021
 
1 Month LIBOR
 
Services: Business
 
9,319

 
9,472

 
153

Onex TSG Holdings II Corp., L+400, 1.00% LIBOR Floor, 7/29/2022
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
3,408

 
3,441

 
33

Opal Acquisition, Inc., L+400, 1.00% LIBOR Floor, 11/27/2020
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
10,236

 
9,802

 
(434
)
Pelican Products, Inc., L+425, 1.00% LIBOR Floor, 4/10/2020
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
2,493

 
2,503

 
10

Photonis Technologies SAS, L+750, 1.00% LIBOR Floor, 9/18/2019(d)
 
3 Month LIBOR
 
Aerospace & Defense
 
6,337

 
5,564

 
(773
)
PSC Industrial Holdings Corp., L+475, 1.00% LIBOR Floor, 12/5/2020
 
3 Month LIBOR
 
Services: Business
 
4,851

 
4,741

 
(110
)
Scientific Games International, Inc., L+500, 1.00% LIBOR Floor, 10/1/2021(d)
 
Various
 
Hotel, Gaming & Leisure
 
10,400

 
10,665

 
265

SESAC Holdco II LLC, L+425, 1.00% LIBOR Floor, 2/7/2019
 
1 Month LIBOR
 
Media: Broadcasting & Subscription
 
2,935

 
2,938

 
3

SG Acquisition, Inc., L+525, 1.00% LIBOR Floor, 8/19/2021
 
3 Month LIBOR
 
Banking, Finance, Insurance & Real Estate
 
11,414

 
11,547

 
133

SI Organization, Inc., L+475, 1.00% LIBOR Floor, 11/23/2019
 
3 Month LIBOR
 
Services: Business
 
7,746

 
7,866

 
120

STG-Fairway Acquisitions, Inc., L+525, 1.00% LIBOR Floor, 6/30/2022
 
3 Month LIBOR
 
Services: Business
 
3,845

 
3,840

 
(5
)
Survey Sampling International, LLC, L+500, 1.00% LIBOR Floor, 12/16/2020
 
3 Month LIBOR
 
Services: Business
 
7,781

 
7,899

 
118

TIBCO Software Inc., L+550, 1.00% LIBOR Floor, 12/4/2020
 
1 Month LIBOR
 
High Tech Industries
 
16,827

 
17,319

 
492

Travel Leaders Group, LLC, L+600, 1.00% LIBOR Floor, 12/7/2020
 
1 Month LIBOR
 
Services: Consumer
 
5,169

 
5,176

 
7

Vince, LLC, L+500, 1.00% LIBOR Floor, 11/27/2019(d)
 
3 Month LIBOR
 
Retail
 
1,124

 
1,093

 
(31
)
Western Dental Services, Inc., L+650, 1.00% LIBOR Floor, 11/1/2018
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
5,573

 
5,566

 
(7
)
Total Senior Secured First Lien Debt
 
 
 
 
 
351,747

 
341,194

 
(10,553
)

35

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Underlying Loans(a)
 
Index Rate(b)
 
Industry
 
Notional
Amount
 
Fair
Value(c)
 
Unrealized
Appreciation /
(Depreciation)
Senior Secured Second Lien Debt
 
 
 
 
 
 
 
 
 
 
Asurion, LLC, L+750, 1.00% LIBOR Floor, 3/3/2021
 
1 Month LIBOR
 
Services: Consumer
 
7,772

 
8,044

 
272

Evergreen Skills Lux S.À.R.L., L+825, 1.00% LIBOR Floor, 4/28/2022(d)
 
6 Month LIBOR
 
High Tech Industries
 
9,798

 
7,594

 
(2,204
)
GOBP Holdings, Inc., L+825, 1.00% LIBOR Floor, 10/21/2022
 
3 Month LIBOR
 
Retail
 
3,940

 
4,010

 
70

Mergermarket USA, Inc., L+650, 1.00% LIBOR Floor, 2/4/2022
 
3 Month LIBOR
 
Services: Business
 
6,965

 
6,842

 
(123
)
Onex Carestream Finance LP, L+850, 1.00% LIBOR Floor, 12/7/2019
 
3 Month LIBOR
 
Healthcare & Pharmaceuticals
 
13,600

 
11,318

 
(2,282
)
Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/2021
 
3 Month LIBOR
 
Chemicals, Plastics & Rubber
 
8,050

 
7,830

 
(220
)
PFS Holding Corp., L+725, 1.00% LIBOR Floor, 1/31/2022
 
1 Month LIBOR
 
Retail
 
4,973

 
4,636

 
(337
)
Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021
 
3 Month LIBOR
 
Telecommunications
 
1,002

 
977

 
(25
)
Total Senior Secured Second Lien Debt
 
 
 
 
 
56,100

 
51,251

 
(4,849
)
Total
 
 
 
 
 
$
407,847

 
$
392,445

 
$
(15,402
)
(a)
All of the underlying loans subject to the TRS were issued by eligible U.S. portfolio companies, as defined in the 1940 Act, except for investments specifically identified as non-qualifying per note (d) below. The Company did not control and was not an affiliate of any of the companies that were issuers of the underlying loans subject to the TRS.
(b)
The 1, 2, 3, and 6 month LIBOR rates were 0.77%, 0.82%, 1.00% and 1.32%, respectively, as of December 31, 2016. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2016, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2016.
(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)
All or a portion of the underlying loan subject to the TRS was 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, 2016, 90.5% of the Company’s total assets represented qualifying assets. In addition, as described in this Note 7, the Company calculated its compliance with the qualifying asset test on a “look through” basis by treating each loan underlying the TRS as either a qualifying asset or non-qualifying asset based on whether the obligor was an eligible portfolio company. On this basis, 89.1% of the Company’s total assets represented qualifying assets as of December 31, 2016.
(e)
For the year ended December 31, 2016, the following underlying loans subject to the TRS contained a PIK interest provision whereby the issuer had either the option or the obligation to make interest payments with the issuance of additional securities:
 
 
 
 
Interest Rate
 
Interest Amount
Issuer of Underlying Loan
 
Investment Type
 
Cash
 
PIK
 
All-in-Rate
 
Cash
 
PIK
 
Total
Smile Brands Group, Inc.(f)
 
Senior Secured First Lien Debt
 
7.50%
 
1.50%
 
9.00%
 
$
233

 
$
41

 
$
274

Southcross Holdings Borrower LP(g)
 
Senior Secured First Lien Debt
 
3.50%
 
5.50%
 
9.00%
 
$
1

 
$
1

 
$
2

(f)
Outstanding principal and accrued interest of the underlying loan was fully repaid on August 17, 2016.
(g)
Prior to December 31, 2016, the underlying loan was assigned to the Company and removed from the TRS.
Note 8. Financing Arrangements

The following table presents summary information with respect to the Company’s outstanding financing arrangements as of September 30, 2017: 
Arrangement
 
Type of Arrangement
 
Rate
 
Amount Outstanding
 
Amount Available
 
Maturity Date
Citibank Credit Facility
 
Revolving Credit Facility
 
L+2.00%
 
$
281,698

 
$
43,302

 
March 29, 2019
JPM Credit Facility
 
Term Loan Credit Facility
 
L+3.50%
 
224,423

 
577

 
August 23, 2020
UBS Facility
 
Repurchase Agreement
 
L+3.50%
 
125,000

 

 
May 19, 2020

Citibank Credit Facility
    
On March 29, 2017, Flatiron Funding II entered into a senior secured credit facility with Citibank. The senior secured credit facility with Citibank, or the Citibank Credit Facility, provides for a revolving credit facility in an aggregate principal amount of $325,000, subject to compliance with a borrowing base. On March 29, 2017 and September 26, 2017, Flatiron Funding II drew down $231,698 and $50,000 of borrowings under the Citibank Credit Facility, respectively.

On July 11, 2017, Flatiron Funding II amended the Citibank Credit Facility, or the Amended Citibank Credit Facility, with Citibank to make certain immaterial administrative amendments as a result of the termination of AIM as the Company's investment sub-adviser as discussed in Note 1.

36

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Advances under the Amended Citibank Credit Facility bear interest at a floating rate equal to (1) the higher of (a) the Citibank prime rate, (b) the federal funds rate plus 1.5% or (c) the three-month LIBOR plus 1.0%, plus (2) a spread of (a) 2% per year during the period from and including March 29, 2017 and the earlier of March 29, 2019 and the date the Amended Citibank Credit Facility matures, or (b) 3% per year during the period from the date the Amended Citibank Credit Facility matures until all obligations under the Amended Citibank Credit Facility have been paid in full. Interest is payable quarterly in arrears. All advances under the Amended Citibank Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, by no later than March 30, 2020. Flatiron Funding II may prepay advances pursuant to the terms and conditions of the credit and security agreement, subject to a 0.75% or 0.50% premium if the amount of the Amended Citibank Credit Facility is reduced or terminated on or prior to March 29, 2018 or March 29, 2019, respectively. In addition, Flatiron Funding II will be subject to a non-usage fee of 0.75% per year (subject to an increase to 2% in certain circumstances) on the amount, if any, of the aggregate principal amount available under the Amended Citibank Credit Facility that has not been borrowed. The non-usage fees, if any, are payable quarterly in arrears. Flatiron Funding II incurred certain customary costs and expenses in connection with obtaining the Citibank Credit Facility.

The Company incurred debt issuance costs of $1,945 in connection with obtaining the Citibank Credit Facility, which were recorded as a direct reduction to the outstanding balance of the Amended Citibank Credit Facility, which is included in the Company’s consolidated balance sheet as of September 30, 2017 and will amortize to interest expense over the term of the Amended Citibank Credit Facility. At September 30, 2017, the unamortized portion of the debt issuance costs was $1,615.

Flatiron Funding II purchased loans and other corporate debt securities with a fair value of $354,967 on the closing date pursuant to master participation and assignment agreements between Flatiron Funding II and each of 15th Street Loan Funding LLC and 15th Street Loan Funding 2 LLC, each a special purpose subsidiary of Citibank. 15th Street Loan Funding LLC and 15th Street Loan Funding 2 LLC held loans and other corporate debt securities in connection with the TRS Agreement between Citibank and Flatiron. Flatiron Funding II’s obligations to Citibank under the Amended Citibank Credit Facility are secured by a first priority security interest in all of the assets of Flatiron Funding II. The obligations of Flatiron Funding II under the Amended Citibank Credit Facility are non-recourse to the Company, and the Company’s exposure under the Amended Citibank Credit Facility is limited to the value of the Company’s investment in Flatiron Funding II. 

In connection with the Amended Citibank Credit Facility, Flatiron Funding II has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. From the inception of the Citibank Credit Facility on March 29, 2017 to September 30, 2017, Flatiron Funding II was in compliance with all covenants and reporting requirements.

For the three months ended September 30, 2017 and the period from March 29, 2017 through September 30, 2017, the components of interest expense, average borrowings, and weighted average interest rate for the Amended Citibank Credit Facility were as follows:
 
 
Three Months Ended
September 30, 2017
 
Period from March 29, 2017 to September 30, 2017
Stated interest expense
 
$
1,953

 
$
3,860

Non-usage fee
 
173

 
356

Amortization of deferred financing costs
 
174

 
330

Total interest expense
 
$
2,300

 
$
4,546

Weighted average interest rate(1)
 
3.54
%
 
3.50
%
Average borrowings
 
$
234,416

 
$
233,042

(1)
Includes the stated interest expense and non-usage fee on the unused portion of the Amended Citibank Credit Facility and is annualized for periods covering less than one year.

JPM Credit Facility

On August 26, 2016, 34th Street Funding, LLC, or 34th Street, a newly-formed, wholly-owned, consolidated, special purpose financing subsidiary of the Company, entered into a senior secured credit facility with JPMorgan Chase Bank, National Association, or JPM. The senior secured credit facility with JPM, or the JPM Credit Facility, provided for borrowings in an aggregate principal amount of $150,000, of which $25,000 may be funded as a revolving credit facility, subject to conditions described in the JPM Credit Facility. On August 26, 2016, 34th Street drew down $57,000 of borrowings under the JPM Credit Facility. 

On September 30, 2016 and July 11, 2017, 34th Street amended and restated the JPM Credit Facility, or the Amended JPM Credit Facility, with JPM. Under the Amended JPM Credit Facility entered into on September 30, 2016, the aggregate principal amount available for borrowings was increased from $150,000 to $225,000, of which $25,000 may be funded as a revolving credit facility, subject to conditions described in the Amended JPM Credit Facility. On September 30, 2016, 34th Street drew down $167,423 of additional borrowings under the Amended JPM Credit Facility, a portion of which was used to purchase the portfolio of loans from Credit Suisse Park View BDC, Inc. Under the Amended JPM Credit Facility entered into on July 11, 2017, certain immaterial administrative amendments were made as a result of the termination of AIM as the Company's investment sub-adviser as discussed in Note 1. No other material terms of the JPM Credit Facility were revised in connection with the Amended JPM Credit Facility.

37

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Advances under the Amended JPM Credit Facility bear interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.50% per year. Interest is payable quarterly in arrears. All advances under the Amended JPM Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, by no later than August 23, 2020. 34th Street may prepay advances pursuant to the terms and conditions of the Amended JPM Credit Facility, subject to a 1% premium in certain circumstances. In addition, 34th Street will be subject to a non-usage fee of 0.5% and 1.0% per year on the amount, if any, of the aggregate principal amount available under the Amended JPM Credit Facility that has not been borrowed during the period from the closing date and ending on, but excluding, May 23, 2017, or the Ramp-Up Period, and from the termination of the Ramp-Up Period and ending on, but excluding, August 23, 2019, respectively. The non-usage fees, if any, are payable quarterly in arrears.  

The Company contributed loans and other corporate debt securities to 34th Street in exchange for 100% of the membership interests of 34th Street, and may contribute additional loans and other corporate debt securities to 34th Street in the future. 34th Street’s obligations to JPM under the Amended JPM Credit Facility are secured by a first priority security interest in all of the assets of 34th Street. The obligations of 34th Street under the Amended JPM Credit Facility are non-recourse to the Company, and the Company’s exposure under the Amended JPM Credit Facility is limited to the value of the Company’s investment in 34th Street.  

In connection with the Amended JPM Credit Facility, 34th Street has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. As of and for the nine months ended September 30, 2017, 34th Street was in compliance with all covenants and reporting requirements.

The Company incurred debt issuance costs of $3,515 in connection with obtaining and amending the JPM Credit Facility, which were recorded as a direct reduction to the outstanding balance of the Amended JPM Credit Facility, which is included in the Company’s consolidated balance sheets and will amortize to interest expense over the term of the Amended JPM Credit Facility. At September 30, 2017, the unamortized portion of the debt issuance costs was $2,554.

For the three and nine months ended September 30, 2017, the components of interest expense, average borrowings, and weighted average interest rate for the Amended JPM Credit Facility were as follows:
 
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Stated interest expense
 
$
2,770

 
$
7,978

Amortization of deferred financing costs
 
222

 
660

Non-usage fee
 
1

 
3

Total interest expense
 
$
2,993

 
$
8,641

Weighted average interest rate(1)
 
4.74
%
 
4.61
%
Average borrowings
 
$
224,423

 
$
224,423

(1)
Includes the stated interest expense and non-usage fee on the unused portion of the Amended JPM Credit Facility and is annualized for periods covering less than one year.

UBS Facility

On May 19, 2017, the Company, through two newly-formed, wholly-owned, special-purpose financing subsidiaries, entered into a financing arrangement with UBS AG, London Branch, or UBS, pursuant to which up to $125,000 will be made available to the Company.

Pursuant to the financing arrangement, assets in the Company's portfolio may be contributed from time to time to Murray Hill Funding II, LLC, or Murray Hill Funding II, through Murray Hill Funding, LLC, or Murray Hill Funding, each a newly-formed, wholly-owned, special-purpose financing subsidiary of the Company. On May 19, 2017, the Company contributed assets to Murray Hill Funding II. The assets held by Murray Hill Funding II secure the obligations of Murray Hill Funding II under Class A Notes, or the Notes, issued by Murray Hill Funding II. Pursuant to an Indenture, dated May 19, 2017, between Murray Hill Funding II and U.S. Bank National Association, or U.S. Bank, as trustee, or the Indenture, the aggregate principal amount of Notes that may be issued by Murray Hill Funding II from time to time is $192,308. Murray Hill Funding purchased the Notes issued by Murray Hill Funding II at a purchase price equal to their par value. Murray Hill Funding makes capital contributions to Murray Hill Funding II to, among other things, maintain the value of the portfolio of assets held by Murray Hill Funding II.

Principal on the Notes will be due and payable on the stated maturity date of May 19, 2027. Pursuant to the Indenture, Murray Hill Funding II has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar transactions. The Indenture contains events of default customary for similar transactions, including, without limitation: (a) the failure to make principal payments on the Notes at their stated maturity or any earlier redemption date or to make interest payments on the Notes and such failure is not cured within three business days; (b) the failure to disburse amounts in accordance with the priority of payments and such failure is not cured within three business days; and (c) the occurrence of certain bankruptcy and insolvency events with respect to Murray Hill Funding II or Murray Hill Funding.

38

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Murray Hill Funding, in turn, has entered into a repurchase transaction with UBS, pursuant to the terms of a Global Master Repurchase Agreement and the related Annex and Master Confirmation thereto, each dated May 19, 2017, or collectively, the UBS Facility. Pursuant to the UBS Facility, on May 19, 2017 and June 19, 2017, UBS purchased Notes held by Murray Hill Funding for an aggregate purchase price equal to 65% of the principal amount of Notes purchased. Subject to certain conditions, the maximum principal amount of Notes that may be purchased under the UBS Facility is $192,308. Accordingly, the aggregate maximum amount payable to Murray Hill Funding under the UBS Facility will not exceed $125,000. Murray Hill Funding will repurchase the Notes sold to UBS under the UBS Facility by no later than May 19, 2020. The repurchase price paid by Murray Hill Funding to UBS will be equal to the purchase price paid by UBS for the repurchased Notes (giving effect to any reductions resulting from voluntary partial prepayment(s)). If the UBS Facility is accelerated prior to May 19, 2020 due to an event of default or a mandatory or voluntary full payment by Murray Hill Funding, then Murray Hill Funding must pay to UBS a fee equal to the present value of the spread portion of the financing fees that would have been payable to UBS from the date of acceleration through May 19, 2020 had the acceleration not occurred. The financing fee under the UBS Facility is equal to the three-month LIBOR plus a spread of up to 3.50% per year for the relevant period.

UBS may require Murray Hill Funding to post cash collateral if, without limitation, the sum of the market value of the portfolio of assets and the cash and eligible investments held by Murray Hill Funding II, together with any posted cash collateral, is less than the required margin amount under the UBS Facility; provided, however, that Murray Hill Funding will not be required to post cash collateral with UBS until such market value has declined at least 10% from the initial market value of the portfolio assets.

The Company has no contractual obligation to post any such cash collateral or to make any payments to UBS on behalf of Murray Hill Funding. The Company may, but is not obligated to, increase its investment in Murray Hill Funding for the purpose of funding any cash collateral or payment obligations for which Murray Hill Funding becomes obligated in connection with the UBS Facility. The Company’s exposure under the UBS Facility is limited to the value of the Company’s investment in Murray Hill Funding.  

Pursuant to the UBS Facility, Murray Hill Funding has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar transactions. The UBS Facility contains events of default customary for similar financing transactions, including, without limitation: (a) failure to transfer the Notes to UBS on the applicable purchase date or repurchase the Notes from UBS on the applicable repurchase date; (b) failure to pay certain fees and make-whole amounts when due; (c) failure to post cash collateral as required; (d) the occurrence of insolvency events with respect to Murray Hill Funding; and (e) the admission by Murray Hill Funding of its inability to, or its intention not to, perform any of its obligations under the UBS Facility.

Murray Hill Funding paid an upfront fee and incurred certain other customary costs and expenses totaling $1,786 in connection with obtaining the UBS Facility, which were recorded as a direct reduction to the outstanding balance of the UBS Facility, which is included in the Company’s consolidated balance sheets and will amortize to interest expense over the term of the UBS Facility. At September 30, 2017, the unamortized portion of the upfront fee and other expenses was $1,567.

As of September 30, 2017, Notes in the aggregate principal amount of $192,308 had been purchased by Murray Hill Funding from Murray Hill Funding II and subsequently sold to UBS under the UBS Facility for aggregate proceeds of $125,000. The carrying amount outstanding under the UBS Facility approximates its fair value. The Company funded each purchase of Notes by Murray Hill Funding through a capital contribution to Murray Hill Funding. As of September 30, 2017, the amount due at maturity under the UBS Facility was $125,000. The Notes issued by Murray Hill Funding II and purchased by Murray Hill Funding eliminate in consolidation on the Company’s consolidated financial statements.

As of September 30, 2017, the fair value of assets held by Murray Hill Funding II was $248,916.

For the period from May 19, 2017 through September 30, 2017, the components of interest expense, average borrowings, and weighted average interest rate for the UBS Facility were as follows:
 
 
Three Months Ended September 30, 2017
 
Period from May 19, 2017 to September 30, 2017
Stated interest expense
 
$
1,480

 
$
2,009

Amortization of deferred financing costs
 
147

 
219

Total interest expense
 
$
1,627

 
$
2,228

Weighted average interest rate(1)
 
4.74
%
 
4.72
%
Average borrowings
 
$
125,000

 
$
113,519

(1)
Includes the stated interest expense and non-usage fee, if any, on the unused portion of the UBS Facility and is annualized for periods covering less than one year.
East West Bank Credit Facility
On April 30, 2015, the Company entered into a revolving credit facility, or the EWB Credit Facility, with East West Bank, or EWB. The EWB Credit Facility provided for borrowings in an aggregate principal amount of up to $40,000, subject to certain conditions, and the Company was required to maintain $2,000 in a demand deposit account with EWB at all times. On April 27, 2017, the EWB Credit Facility expired in accordance with its terms. Through the expiration date, the Company was in compliance with all covenants and reporting requirements under the EWB Credit Facility.

39

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

For the three and nine months ended September 30, 2017 and 2016, the components of interest expense, average borrowings, and weighted average interest rate for the EWB Credit Facility were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Non-usage fee
$

 
$
46

 
$
65

 
$
147

Amortization of deferred financing costs

 
51

 
63

 
177

Stated interest expense

 
44

 

 
44

Total interest expense
$

 
$
141

 
$
128

 
$
368

Weighted average interest rate(1)

 
8.62
%
 

 
18.25
%
Average borrowings
$

 
$
4,109

 
$

 
$
1,380

(1) Includes the stated interest expense and non-usage fee on the unused portion of the EWB Credit Facility.
Note 9. Fair Value of Financial Instruments
 
The following table presents fair value measurements of the Company’s portfolio investments and TRS as of September 30, 2017 and December 31, 2016, according to the fair value hierarchy: 
 
September 30, 2017
 
December 31, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Senior secured first lien debt
$

 
$

 
$
1,079,520

 
$
1,079,520

 
$

 
$

 
$
489,913

 
$
489,913

Senior secured second lien debt

 

 
402,459

 
402,459

 

 

 
434,347

 
434,347

Collateralized securities and structured products - debt

 

 
28,284

 
28,284

 

 

 
38,114

 
38,114

Collateralized securities and structured products - equity

 

 
29,588

 
29,588

 

 

 
34,648

 
34,648

Unsecured debt

 

 
7,331

 
7,331

 

 

 
16,851

 
16,851

Equity

 

 
3,863

 
3,863

 

 

 
5,107

 
5,107

Short term investments
140,810

 

 

 
140,810

 
70,498

 

 

 
70,498

Total Investments
$
140,810

 
$

 
$
1,551,045

 
$
1,691,855

 
$
70,498

 
$

 
$
1,018,980

 
$
1,089,478

Total return swap
$

 
$

 
$

 
$

 
$

 
$

 
$
(15,402
)
 
$
(15,402
)
Credit default swap

 

 

 

 

 
46

 

 
46

Total Derivatives
$

 
$

 
$

 
$

 
$

 
$
46

 
$
(15,402
)
 
$
(15,356
)
Total Investments and Derivatives
$
140,810

 
$

 
$
1,551,045

 
$
1,691,855

 
$
70,498

 
$
46

 
$
1,003,578

 
$
1,074,122

 

40

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

The following tables provide a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended
September 30, 2017
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Collateralized Securities and Structured Products - Debt
 
Collateralized Securities and Structured Products - Equity
 
Unsecured Debt
 
Equity
 
Total Return
Swap
 
Total
Beginning balance, June 30, 2017
$
1,062,513

 
$
413,690

 
$
29,113

 
$
30,190

 
$

 
$
3,554

 
$

 
$
1,539,060

Investments purchased
215,514

 
61,505

 

 

 
7,331

 
853

 

 
285,203

Net realized (loss) gain
(5,600
)
 
2,805

 
(5
)
 

 

 

 
67

 
(2,733
)
Net change in unrealized appreciation (depreciation)
5,400

 
(3,079
)
 
253

 
(328
)
 
(2
)
 
(544
)
 

 
1,700

Accretion of discount
1,825

 
690

 
13

 

 
2

 

 

 
2,530

Sales and principal repayments
(200,132
)
 
(73,152
)
 
(1,090
)
 
(274
)
 

 

 
(67
)
 
(274,715
)
Ending balance, September 30, 2017
$
1,079,520

 
$
402,459

 
$
28,284

 
$
29,588

 
$
7,331

 
$
3,863

 
$

 
$
1,551,045

Change in net unrealized appreciation (depreciation) on investments still held as of September 30, 2017(1)
$
1,205

 
$
(1,434
)
 
$
253

 
$
(328
)
 
$
(2
)
 
$
(544
)
 
$

 
$
(850
)
(1)
Included in net change in unrealized appreciation on investments in the consolidated statements of operations except where related to the total return swap, which is included in net change in unrealized appreciation on total return swap.
 
Nine Months Ended
September 30, 2017
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Collateralized Securities and Structured Products - Debt
 
Collateralized Securities and Structured Products - Equity
 
Unsecured Debt
 
Equity
 
Total Return
Swap
 
Total
Beginning balance, December 31, 2016
$
489,913

 
$
434,347

 
$
38,114

 
$
34,648

 
$
16,851

 
$
5,107

 
$
(15,402
)
 
$
1,003,578

Investments purchased
951,502

 
179,814

 

 

 
8,420

 
1,025

 

 
1,140,761

Net realized (loss) gain
(8,883
)
 
4,256

 
2

 
(451
)
 
163

 

 
(13,789
)
 
(18,702
)
Net change in unrealized appreciation (depreciation)
10,240

 
564

 
823

 
1,116

 
437

 
(2,269
)
 
15,402

 
26,313

Accretion of discount
4,768

 
1,940

 
60

 

 
31

 

 

 
6,799

Sales and principal repayments
(368,020
)
 
(218,462
)
 
(10,715
)
 
(5,725
)
 
(18,571
)
 

 
13,789

 
(607,704
)
Ending balance, September 30, 2017
$
1,079,520

 
$
402,459

 
$
28,284

 
$
29,588

 
$
7,331

 
$
3,863

 
$

 
$
1,551,045

Change in net unrealized appreciation (depreciation) on investments still held as of September 30, 2017(1)
$
10,033

 
$
1,612

 
$
596

 
$
1,116

 
$
(2
)
 
$
(2,269
)
 
$

 
$
11,086

(1)
Included in net change in unrealized appreciation on investments in the consolidated statements of operations except where related to the total return swap, which is included in net change in unrealized appreciation on total return swap.


41

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

 
Three Months Ended
September 30, 2016
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Collateralized Securities and Structured Products - Debt
 
Collateralized Securities and Structured Products - Equity
 
Unsecured Debt
 
Equity
 
Total Return
Swap
 
Total
Beginning balance, June 30, 2016
$
168,798

 
$
431,875

 
$
40,288

 
$
34,397

 
$
28,275

 
$
72

 
$
(27,601
)
 
$
676,104

Investments purchased
255,919

 
40,108

 

 

 

 
5,540

 

 
301,567

Net realized gain
153

 
226

 

 

 

 

 
8,188

 
8,567

Net change in unrealized appreciation (depreciation)
2,372

 
8,736

 
1,625

 
848

 
1,369

 
(2
)
 
9,527

 
24,475

Accretion of discount
339

 
208

 
27

 

 
32

 

 

 
606

Sales and principal repayments
(14,022
)
 
(21,721
)
 
(5,000
)
 
(856
)
 

 

 
(8,188
)
 
(49,787
)
Ending balance, September 30, 2016
$
413,559

 
$
459,432

 
$
36,940

 
$
34,389

 
$
29,676

 
$
5,610

 
$
(18,074
)
 
$
961,532

Change in net unrealized appreciation (depreciation) on investments still held as of September 30, 2016(1)
$
1,987

 
$
8,712

 
$
1,625

 
$
848

 
$
1,369

 
$
(2
)
 
$
9,868

 
$
24,407

(1)
Included in net change in unrealized appreciation on investments in the consolidated statements of operations except where related to the total return swap, which is included in net change in unrealized appreciation on total return swap.
 
Nine Months Ended
September 30, 2016
 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Collateralized Securities and Structured Products - Debt
 
Collateralized Securities and Structured Products - Equity
 
Unsecured Debt
 
Equity
 
Total Return
Swap
 
Total
Beginning balance, December 31, 2015
$
104,187

 
$
453,713

 
$
41,663

 
$
24,604

 
$
26,740

 
$

 
$
(34,900
)
 
$
616,007

Investments purchased
337,712

 
94,931

 

 
10,000

 
2,704

 
5,615

 

 
450,962

Net realized gain
268

 
799

 

 

 
11

 

 
23,799

 
24,877

Net change in unrealized appreciation (depreciation)
991

 
10,395

 
195

 
2,169

 
2,842

 
(5
)
 
16,826

 
33,413

Accretion of discount
692

 
574

 
82

 

 
94

 

 

 
1,442

Sales and principal repayments
(30,291
)
 
(100,980
)
 
(5,000
)
 
(2,384
)
 
(2,715
)
 

 
(23,799
)
 
(165,169
)
Ending balance, September 30, 2016
$
413,559

 
$
459,432

 
$
36,940

 
$
34,389

 
$
29,676

 
$
5,610

 
$
(18,074
)
 
$
961,532

Change in net unrealized (depreciation) appreciation on investments still held as of September 30, 2016(1)
$
(421
)
 
$
8,495

 
$
135

 
$
2,169

 
$
2,842

 
$
(5
)
 
$
14,399

 
$
27,614

(1)
Included in net change in unrealized appreciation on investments in the consolidated statements of operations except where related to the total return swap, which is included in net change in unrealized appreciation on total return swap.

42

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Significant Unobservable Inputs
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of investments as of September 30, 2017 and December 31, 2016 were as follows:
 
 
September 30, 2017
 
 
Fair Value
 
Valuation Techniques/
Methodologies
 
Unobservable
Inputs
 
Range
 
Weighted Average(1)
Senior secured first lien debt
 
$
697,598

 
Discounted Cash Flow
 
Discount Rates
 
5.7%
 
-
 
51.9%
 
9.8%
 
 
361,263

 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
 
 
20,659

 
Market Comparable Approach
 
EBITDA Multiple
 
3.50x
 
-
 
9.00x
 
6.45x
 
 
 
 
 
Revenue Multiple
 
0.75x
 
-
 
1.00x
 
0.88x
Senior secured second lien debt
 
204,912

 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
 
 
188,147

 
Discounted Cash Flow
 
Discount Rates
 
8.3%
 
-
 
26.8%
 
10.4%
 
 
9,400

 
Market Comparable Approach
 
EBITDA Multiple
 
7.50x
 
-
 
8.50x
 
7.74x
Collateralized securities and structured products - debt
 
28,284

 
Discounted Cash Flow
 
Discount Rates
 
7.5%
 
-
 
11.0%
 
9.9%
Collateralized securities and structured products - equity
 
29,588

 
Discounted Cash Flow
 
Discount Rates
 
14.0%
 
-
 
15.0%
 
14.7%
Unsecured debt
 
7,331

 
Discounted Cash Flow
 
Discount Rates
 
N/A
 
13.1%
Equity
 
3,827

 
Market Comparable Approach
 
EBITDA Multiple
 
4.75x
 
-
 
20.00x
 
7.82x
 
 


 
 
Revenue Multiple
 
0.50x
 
-
 
0.75x
 
0.57x
 
 
36

 
Options Pricing Model
 
Expected Volatility
 
31.0%
 
-
 
32.0%
 
31.5%
Total
 
$
1,551,045

 
 
 
 
 
 
 
 
 
 
 
 
(1)
Weighted average amounts are based on the estimated fair values.
 
 
December 31, 2016
 
 
Fair Value
 
Valuation Techniques/
Methodologies
 
Unobservable
Inputs
 
Range
 
Weighted Average(1)
Senior secured first lien debt
 
$
417,736

 
Discounted Cash Flow
 
Discount Rates
 
6.0%
 
-
 
21.3%
 
16.5%
 
 
61,846

 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
 
 
10,331

 
Market Comparable Approach
 
EBITDA Multiple
 
4.00x
 
-
 
6.00x
 
4.78x
Senior secured second lien debt
 
291,189

 
Discounted Cash Flow
 
Discount Rates
 
8.5%
 
-
 
20.6%
 
10.5%
 
 
129,219

 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
 
 
13,939

 
Market Comparable Approach
 
EBITDA Multiple
 
6.50x
 
-
 
9.50x
 
8.09x
 
 
 
 
 
Revenue Multiple
 
0.65x
 
-
 
0.90x
 
0.65x
Collateralized securities and structured products - debt
 
38,114

 
Discounted Cash Flow
 
Discount Rates
 
7.8%
 
-
 
11.0%
 
10.1%
Collateralized securities and structured products - equity
 
34,648

 
Discounted Cash Flow
 
Discount Rates
 
9.3%
 
-
 
17.0%
 
13.8%
Unsecured debt
 
16,851

 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
Equity
 
4,946

 
Market Comparable Approach
 
EBITDA Multiple
 
3.75x
 
-
 
10.50x
 
7.23x
 
 
161

 
Options Pricing Model
 
Expected Volatility
 
N/A
 
36.2%
Total return swap
 
(1,002
)
 
Discounted Cash Flow
 
Discount Rates
 
5.1%
 
-
 
14.6%
 
7.3%
 
 
(14,400
)
 
Broker Quotes
 
Broker Quotes
 
N/A
 
N/A
Total
 
$
1,003,578

 
 
 
 
 
 
 
 
 
 
 
 
(1)
Weighted average amounts are based on the estimated fair values.
The significant unobservable inputs used in the fair value measurement of the Company’s senior secured first lien debt, senior secured second lien debt, collateralized securities and structured products, unsecured debt, equity, and total return swap are discount rates, EBITDA multiples, revenue multiples, broker quotes and expected volatility. A significant increase or decrease in discount rates would result in a significantly lower or higher fair value measurement, respectively. A significant increase or decrease in the EBITDA multiples, revenue multiples, broker quotes and expected volatility would result in a significantly higher or lower fair value measurement, respectively.

43

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Note 10. General and Administrative Expense
General and administrative expense consisted of the following items for the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Valuation expense
$
463

 
$
125

 
$
989

 
$
350

Transfer agent expense
321

 
307

 
947

 
926

Professional fees
147

 
680

 
943

 
1,284

Dues and subscriptions
223

 
177

 
630

 
621

Director fees and expenses
125

 
69

 
327

 
207

Insurance expense
102

 
105

 
309

 
271

Printing and other related costs
59

 
177

 
291

 
520

Due diligence fees
87

 
120

 
145

 
401

Other expenses
276

 
132

 
639

 
364

Total general and administrative expense
$
1,803

 
$
1,892

 
$
5,220

 
$
4,944

Note 11. Commitments and Contingencies
The Company entered into certain contracts with other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to such indemnifications to be remote.
As of September 30, 2017 and December 31, 2016, the Company’s unfunded commitments were as follows:
Unfunded Commitments
 
September 30, 2017(1)
 
December 31, 2016(1)
DFC Global Facility Borrower II LLC(2)
 
$
22,800

 
$

Lonestar Prospects, Ltd.(2)
 
18,985

 

CF Entertainment Inc.
 
5,000

 

Accruent, LLC(2)
 
4,238

 

Ministry Brands, LLC(2)
 
3,537

 
5,274

Moss Holding Company(2)
 
3,278

 

Visual Edge Technology, Inc.(2)
 
2,878

 

Elemica Holdings, Inc.(2)
 
2,500

 
2,500

Studio Movie Grill Holdings, LLC(2)
 
2,156

 
4,127

PDI TA Holdings, Inc.(2)
 
1,833

 

Woodstream Corporation(2)
 
1,553

 

Teledoc, Inc.(2)
 
1,250

 

Island Medical Management Holdings, LLC(2)
 
1,188

 

Adams Publishing Group, LLC
 
1,136

 

Ivy Hill Middle Market Credit Fund VIII, Ltd.(2)
 
1,111

 
1,111

GTCR-Ultra Acquisition, Inc.(2)
 
992

 

Covenant Surgical Partners, Inc.(2)
 
562

 

Frontline Technologies Group Holdings LLC(2)
 
540

 

American Media, Inc.(2)
 
296

 
711

Tennessee Merger Sub, Inc.(3)
 

 
10,254

ABG Intermediate Holdings 2 LLC
 

 
1,119

Total
 
$
75,833

 
$
25,096

(1)
Unless otherwise noted, the funding criteria for these unfunded commitments had not been met at the date indicated.

44

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)


(2)
As of November 9, 2017, the Company's unfunded commitments were to portfolio companies DFC Global Facility Borrower II LLC, Lonestar Prospects, Ltd., Discovery DJ Holdings, LLC, Moss Holding Company, Elemica Holdings, Inc., Ministry Brands, LLC, Studio Movie Grill Holdings, LLC, Woodstream Corp., Teladoc, Inc., Island Medical Management Holdings, LLC, Visual Edge Technology, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd., VLS Recovery Services, LLC, GTCR-Ultra Acquisition, Inc., Pathway Partners Vet Management Company, LLC, PDI TA Holdings, Inc., Frontline Technologies Group Holdings LLC, Covenant Surgical Partners, Inc., Accruent, LLC and American Media, Inc., in the amount of $22,800, $18,985, $4,706, $3,278, $2,500, $1,865, $1,608, $1,553, $1,250, $1,188, $1,151, $1,111, $1,108, $992, $906, $815, $540, $459, $157 and $154, respectively. In addition, subsequent to September 30, 2017, the Company entered into unfunded commitments of $12,171 and $3,780 to Centene Corp. and Itron, Inc., respectively.
(3)
As of December 31, 2016, such commitment was subject to the execution of a definitive loan agreement and the consummation of the underlying corporate transaction, and conditional upon receipt of all necessary shareholder, regulatory and other applicable approvals. Prior to September 30, 2017, the unfunded commitment was terminated.
Unfunded commitments to provide funds to companies are not recorded on the Company’s consolidated balance sheets. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. The Company intends to use cash on hand, short-term investments, proceeds from borrowings, and other liquid assets to fund these commitments should the need arise. For information on the companies to which the Company is committed to fund additional amounts as of September 30, 2017 and December 31, 2016, refer to the table above and the consolidated schedules of investments.
The Company will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (i.e., advances from its financing arrangements and/or cash flows from operations). The Company will not fund its unfunded commitments from future net proceeds generated by securities offerings. The Company follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments. Specifically, the Company prepares detailed analyses of the level of its unfunded commitments relative to its then available liquidity on a daily basis. These analyses are reviewed and discussed on a weekly basis by the Company’s executive officers and senior members of CIM (including members of the investment committee) and are updated on a “real time” basis in order to ensure that the Company has adequate liquidity to satisfy its unfunded commitments.
Note 12. Fee Income
Fee income consists of commitment fees and amendment fees. The following table summarizes the Company’s fee income for the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Amendment fees
$
984

 
$
112

 
$
1,979

 
$
156

Commitment fees
182

 
42

 
672

 
293

Total
$
1,166

 
$
154

 
$
2,651

 
$
449

For the three and nine months ended September 30, 2017 and 2016, all fee income was non-recurring.

45

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

Note 13. Financial Highlights

The following is a schedule of financial highlights as of and for the nine months ended September 30, 2017 and 2016:
 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
Per share data:(1)
 
 
 
 
Net asset value at beginning of period
 
$
9.11

 
$
8.71

Results of operations:
 
 
 
 
Net investment income(2)
 
0.52

 
0.30

Net realized gain and net change in unrealized appreciation on investments(3)
 
0.06

 
0.17

Net realized gain and net change in unrealized appreciation on total return swap
 
0.01

 
0.39

Net increase in net assets resulting from operations(3)
 
0.59

 
0.86

Shareholder distributions:
 
 
 
 
Distributions from net investment income
 
(0.50
)
 
(0.30
)
Distributions from net realized gains
 
(0.05
)
 
(0.25
)
Net decrease in net assets from shareholders' distributions
 
(0.55
)
 
(0.55
)
Capital share transactions:
 
 
 
 
Issuance of common stock above net asset value(4)
 

 

Repurchases of common stock(5)
 

 

Net increase in net assets resulting from capital share transactions
 

 

Net asset value at end of period
 
$
9.15

 
$
9.02

Shares of common stock outstanding at end of period
 
114,440,741

 
107,920,075

Total investment return-net asset value(6)
 
6.68
%
 
10.25
%
Net assets at beginning of period
 
$
999,763

 
$
904,326

Net assets at end of period
 
$
1,047,187

 
$
973,191

Average net assets
 
$
1,020,019

 
$
922,031

Ratio/Supplemental data:
 
 
 
 
Ratio of net investment income to average net assets(7)
 
5.69
%
 
3.47
%
Ratio of gross operating expenses to average net assets(8)
 
4.28
%
 
2.37
%
Ratio of expenses (before recoupment of expense support) to average net assets(9)
 
4.28
%
 
2.30
%
Ratio of net expense recoupments to average net assets(10)
 

 
0.07
%
Ratio of net operating expenses to average net assets
 
4.28
%
 
2.37
%
Portfolio turnover rate(11)
 
46.07
%
 
20.04
%
Asset coverage ratio(12)
 
2.66

 
2.85

(1)
The per share data for the nine months ended September 30, 2017 and 2016 was derived by using the weighted average shares of common stock outstanding during each period.
(2)
Net investment income per share includes expense support recoupments to CIG of $0.01 per share for the nine months ended September 30, 2016.
(3)
The amount shown for net realized gain and net change in unrealized appreciation on investments is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio securities for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating market values for the portfolio. As a result, net increase in net assets resulting from operations in this schedule may vary from the consolidated statements of operations.
(4)
The continuous issuance of shares of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share impact of the continuous issuance of shares of common stock was an increase to net asset value of less than $0.01 per share during the nine months ended September 30, 2017 and 2016.

46

CĪON Investment Corporation
Notes to Consolidated Financial Statements (unaudited)
September 30, 2017
(in thousands, except share and per share amounts)

(5)
Repurchases of common stock may cause an incremental decrease in net asset value per share due to the repurchase of shares at a price in excess of net asset value per share on each repurchase date. The per share impact of repurchases of common stock was a decrease to net asset value of less than $0.01 per share during the nine months ended September 30, 2017 and 2016.
(6)
Total investment return-net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions paid or payable during the period. Total investment return-net asset value is based on (i) the beginning period net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions, and (iii) the value of distributions payable, if any, on the last day of the period. The total investment return-net asset value calculation assumes that monthly cash distributions are reinvested in accordance with the Company's distribution reinvestment plan then in effect as described in Note 5. The total investment return-net asset value does not consider the effect of the sales load from the sale of the Company’s common stock. The total investment return-net asset value includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. Total returns covering less than a full year are not annualized.
(7)
Excluding the impact of the recoupment of expense support by CIG during the period, the ratio of net investment income to average net assets would have been 5.69% and 3.54% for the nine months ended September 30, 2017 and 2016, respectively.
(8)
Ratio of gross operating expenses to average net assets does not include expense support provided by CIG and/or AIM, if any.
(9)
The ratio of gross expense recoupments to CIG to average net assets for the nine months ended September 30, 2017 and 2016 was 0.00% and (0.07%), respectively.
(10)
In order to record an obligation to reimburse CIG for expense support provided, the ratio of gross operating expenses to average net assets, when considering the recoupment, in the period in which recoupment is sought, cannot exceed the ratio of gross operating expenses to average net assets for the period when the expense support was provided. For purposes of this calculation, gross operating expenses include all expenses borne by the Company, except for offering and organizational costs, base management fees, incentive fees, administrative services expenses, other general and administrative expenses owed to CIM and its affiliates and interest expense. For the nine months ended September 30, 2017 and 2016, the ratio of gross operating expenses to average net assets, when considering recoupment of expense support to CIG, if any, was 0.46% and 0.43%, respectively.
(11)
Portfolio turnover rate is calculated using the lesser of year-to-date sales or purchases over the average of the invested assets at fair value, excluding short term investments, and is not annualized.
(12)
Asset coverage ratio is equal to (i) the sum of (a) net assets at the end of the period and (b) total senior securities outstanding at the end of the period (excluding unfunded commitments), divided by (ii) total senior securities outstanding at the end of the period. For purposes of the asset coverage ratio test applicable to the Company as a BDC, the Company treated the outstanding TRS notional amount at the end of the period, less the total amount of cash collateral posted by Flatiron under the TRS, as senior securities. 

47



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include CĪON Investment Corporation and its consolidated subsidiaries.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. In addition to historical information, the following discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking information that involves risks and uncertainties. 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.
Forward-Looking Statements
Some of the statements within this Quarterly Report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Quarterly Report on Form 10-Q may include statements as to:
our future operating results;
our business prospects and the prospects of our portfolio companies;
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 CIM and Apollo and their respective affiliates;
the ability of CIM and AIM to locate suitable investments for us and the ability of CIM to monitor and administer our investments;
the ability of CIM and AIM and their respective 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;
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 Quarterly Report on Form 10-Q 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 II of this Quarterly Report on Form 10-Q. 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 or natural disasters; and
future changes in laws or regulations and conditions in our operating areas.
We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. 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 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 Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

48



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 Apollo. 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, including corporate bonds and long-term subordinated loans, referred to as mezzanine loans, 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 minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor.
We are managed by CIM, our affiliate and a registered investment adviser. CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. We and CIM previously engaged AIM to act as our investment sub-adviser. On November 1, 2017, 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, 2017. On November 1, 2016, our board of directors, including a majority of directors who are not interested persons, approved the renewal of the investment sub-advisory agreement with AIM for a period of twelve months commencing December 17, 2016.
On July 11, 2017, the members of CIM entered into the CIM LLC Agreement with AIM for the purpose of creating a joint venture between AIM and CIG. Under the CIM LLC Agreement, AIM was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, will share in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the CIM LLC Agreement, which will ultimately result 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 identical services for CIM and us, including, without limitation, identifying investment opportunities for approval by CIM. AIM will not be paid a separate fee in exchange for such services, but will be entitled to receive distributions as a member of CIM as described above.
We seek to meet our investment objective by utilizing the experienced management teams of both CIM and AIM, which includes their access to the relationships and human capital of Apollo, CIG and ICON Capital, 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 $50 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, structuring or diligence 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 advisory fees under the investment advisory agreement and interest expense on our financing arrangements. Our investment advisory fee compensates CIM for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. We bear all other expenses of our operations and transactions.

49



Portfolio Investment Activity for the Three Months Ended September 30, 2017 and 2016
The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three months ended September 30, 2017 and 2016:
 
 
Three Months Ended
September 30,
 
 
2017
 
2016
Net Investment Activity
 
Investment Portfolio
 
Total Return Swap
 
Total
 
Investment Portfolio
 
Total Return Swap
 
Total
Purchases and drawdowns
 

 

 

 

 

 

    Senior secured first lien debt
 
$
215,196

 
$

 
$
215,196

 
$
255,919

 
$
211

 
$
256,130

    Senior secured second lien debt
 
61,464

 

 
61,464

 
40,108

 

 
40,108

    Unsecured debt
 
7,331

 

 
7,331

 

 

 

    Equity
 
853

 

 
853

 
5,540

 

 
5,540

Sales and principal repayments
 
(274,648
)
 

 
(274,648
)
 
(41,599
)
 
(245,657
)
 
(287,256
)
Net portfolio activity
 
$
10,196

 
$

 
$
10,196

 
$
259,968

 
$
(245,446
)
 
$
14,522

The following table summarizes the composition of our investment portfolio at amortized cost and fair value as of September 30, 2017:
 
 
September 30, 2017
 
 
Investments Cost(1)
 
Investments Fair
Value
 
Percentage of
Investment
Portfolio
Senior secured first lien debt
 
$
1,069,271

 
$
1,079,520

 
69.6
%
Senior secured second lien debt
 
404,788

 
402,459

 
26.0
%
Collateralized securities and structured products - debt
 
28,818

 
28,284

 
1.8
%
Collateralized securities and structured products - equity
 
31,537

 
29,588

 
1.9
%
Unsecured debt
 
7,333

 
7,331

 
0.5
%
Equity
 
5,857

 
3,863

 
0.2
%
Subtotal/total percentage
 
1,547,604

 
1,551,045

 
100.0
%
Short term investments(2)
 
140,810

 
140,810

 
 
Total investments
 
$
1,688,414

 
$
1,691,855

 
 
Number of portfolio companies
 
 
 
161

Average annual EBITDA of portfolio companies
 
$82.9 million
 
Median annual EBITDA of portfolio companies
 
$49.0 million
 
Purchased at a weighted average price of par
 
 
 
 
 
95.95
%
Gross annual portfolio yield based upon the purchase price(3)
 
 
 
 
 
9.15
%
(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.

50



The following table summarizes the composition of our investment portfolio at amortized cost and fair value and our underlying TRS loans portfolio at notional amount and fair value as of December 31, 2016:
 
December 31, 2016
 
Investment Portfolio
 
Total Return Swap
 
Total
 
Investments Cost(1)
 
Investments Fair
Value
 
Percentage of
Investment
Portfolio
 
Notional Amount of Underlying TRS Loans
 
Fair Value of Underlying TRS Loans
 
Percentage of Underlying TRS Loans
 
Cost/Notional Amount(1)
 
Fair Value
 
Percentage
Senior secured first lien debt
$
489,904

 
$
489,913

 
48.1
%
 
$
351,747

 
$
341,194

 
86.9
%
 
$
841,651

 
$
831,107

 
58.9
%
Senior secured second lien debt
437,240

 
434,347

 
42.6
%
 
56,100

 
51,251

 
13.1
%
 
493,340

 
485,598

 
34.4
%
Collateralized securities and structured products - debt
39,471

 
38,114

 
3.7
%
 

 

 

 
39,471

 
38,114

 
2.7
%
Collateralized securities and structured products - equity
37,713

 
34,648

 
3.4
%
 

 

 

 
37,713

 
34,648

 
2.5
%
Unsecured debt
17,290

 
16,851

 
1.7
%
 

 

 

 
17,290

 
16,851

 
1.1
%
Equity
4,832

 
5,107

 
0.5
%
 

 

 

 
4,832

 
5,107

 
0.4
%
Subtotal/total percentage
1,026,450

 
1,018,980

 
100.0
%
 
407,847

 
392,445

 
100.0
%
 
1,434,297

 
1,411,425

 
100.0
%
Short term investments(2)
70,498

 
70,498

 
 

 

 

 
 

 
70,498

 
70,498

 
 

Total investments
$
1,096,948

 
$
1,089,478

 
 
 
$
407,847

 
$
392,445

 
 
 
$
1,504,795

 
$
1,481,923

 
 
Number of portfolio companies
 
 

 
103

 
 
 
 
 
49

 
 
 
 
 
141(3)

Average annual EBITDA of portfolio companies
 
$49.9 million
 
 
 
 
$200.7 million
 
 
 
 
$94.7 million
 
Median annual EBITDA of portfolio companies
 
$42.7 million
 
 
 
 
$66.0 million
 
 
 
 
$50.4 million
 
Purchased at a weighted average price of par
 
95.87
%
 
 
 
 
 
98.96
%
 
 
 
 
 
96.73
%
Gross annual portfolio yield based upon the purchase price(4)
 
9.99
%
 
 
 
 
 
6.73
%
 
 
 
 
 
9.07
%
(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 sum of investment portfolio and TRS portfolio companies does not equal the total number of portfolio companies. This is due to 11 portfolio companies being in both the investment and TRS portfolios.
(4)
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.
The following table summarizes the composition of our investment portfolio by the type of interest rate as of September 30, 2017, excluding short term investments of $140,810:
 
 
September 30, 2017
Interest Rate Allocation
 
Investments Cost
 
Investments Fair
Value
 
Percentage of
Investment
Portfolio
Floating interest rate investments
 
$
1,444,100

 
$
1,446,737

 
93.3
%
Fixed interest rate investments
 
66,474

 
71,233

 
4.6
%
Other income producing investments
 
31,537

 
29,588

 
1.9
%
Non-income producing equity
 
5,493

 
3,487

 
0.2
%
Total investments
 
$
1,547,604

 
$
1,551,045

 
100.0
%

51



The following table summarizes the composition of our investment portfolio and our underlying TRS loans portfolio by the type of interest rate as of December 31, 2016, excluding short term investments of $70,498:
 
 
December 31, 2016
 
 
Investment Portfolio
 
Total Return Swap
 
Total
Interest Rate Allocation
 
Investments Cost
 
Investments Fair
Value
 
Percentage of
Investment
Portfolio
 
Notional Amount of Underlying TRS Loans
 
Fair Value of Underlying TRS Loans
 
Percentage of Underlying TRS Loans
 
Cost/Notional Amount
 
Fair Value
 
Percentage
Floating interest rate investments
 
$
936,846

 
$
931,214

 
91.4
%
 
$
407,847

 
$
392,445

 
100.0
%
 
$
1,344,693

 
$
1,323,659

 
93.8
%
Fixed interest rate investments
 
47,059

 
48,011

 
4.7
%
 

 

 

 
47,059

 
48,011

 
3.4
%
Other income producing investments
 
37,713

 
34,648

 
3.4
%
 

 

 

 
37,713

 
34,648

 
2.4
%
Non-income producing equity
 
4,832

 
5,107

 
0.5
%
 

 

 

 
4,832

 
5,107

 
0.4
%
Total investments
 
$
1,026,450

 
$
1,018,980

 
100.0
%
 
$
407,847

 
$
392,445

 
100.0
%
 
$
1,434,297

 
$
1,411,425

 
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 September 30, 2017:
 
 
September 30, 2017
Industry Classification
 
Investments at
Fair Value
 
Percentage of
Investment Portfolio
High Tech Industries
 
$
229,022

 
14.8
%
Healthcare & Pharmaceuticals
 
222,843

 
14.4
%
Services: Business
 
209,615

 
13.5
%
Media: Diversified & Production
 
116,013

 
7.5
%
Chemicals, Plastics & Rubber
 
89,142

 
5.8
%
Telecommunications
 
72,967

 
4.7
%
Services: Consumer
 
64,137

 
4.1
%
Media: Advertising, Printing & Publishing
 
61,147

 
3.9
%
Consumer Goods: Durable
 
60,992

 
3.9
%
Diversified Financials
 
57,872

 
3.7
%
Beverage, Food & Tobacco
 
54,846

 
3.5
%
Capital Equipment
 
51,899

 
3.3
%
Hotel, Gaming & Leisure
 
45,990

 
3.0
%
Automotive
 
40,347

 
2.6
%
Retail
 
32,052

 
2.1
%
Aerospace & Defense
 
28,811

 
1.9
%
Banking, Finance, Insurance & Real Estate
 
27,296

 
1.8
%
Energy: Oil & Gas
 
25,904

 
1.7
%
Consumer Goods: Non-Durable
 
16,056

 
1.0
%
Construction & Building
 
16,048

 
1.0
%
Transportation: Cargo
 
9,844

 
0.6
%
Media: Broadcasting & Subscription
 
6,450

 
0.4
%
Forest Products & Paper
 
5,598

 
0.4
%
Metals & Mining
 
3,341

 
0.2
%
Environmental Industries
 
2,813

 
0.2
%
Subtotal/total percentage
 
1,551,045

 
100.0
%
Short term investments
 
140,810

 
 
Total investments
 
$
1,691,855

 
 

52



The following table shows the composition of our investment portfolio and our underlying TRS loans portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of December 31, 2016:
 
 
December 31, 2016
 
 
Investment Portfolio
 
Total Return Swap
 
Total
Industry Classification
 
Investments Fair Value
 
Percentage of
Investment Portfolio
 
Fair Value of
Underlying
TRS Loans
 
Percentage of
Underlying
TRS Loans
 
Fair Value
 
Percentage
High Tech Industries
 
$
217,339

 
21.3
%
 
$
45,351

 
11.6
%
 
$
262,690

 
18.6
%
Services: Business
 
126,869

 
12.5
%
 
66,733

 
17.0
%
 
193,602

 
13.7
%
Healthcare & Pharmaceuticals
 
118,337

 
11.6
%
 
70,176

 
17.9
%
 
188,513

 
13.4
%
Diversified Financials
 
72,762

 
7.1
%
 

 

 
72,762

 
5.2
%
Media: Advertising, Printing & Publishing
 
54,354

 
5.3
%
 
7,328

 
1.9
%
 
61,682

 
4.4
%
Beverage, Food & Tobacco
 
53,658

 
5.3
%
 

 

 
53,658

 
3.8
%
Construction & Building
 
39,137

 
3.8
%
 
14,269

 
3.6
%
 
53,406

 
3.8
%
Chemicals, Plastics & Rubber
 
27,253

 
2.7
%
 
25,701

 
6.5
%
 
52,954

 
3.7
%
Capital Equipment
 
51,155

 
5.0
%
 

 

 
51,155

 
3.6
%
Hotel, Gaming & Leisure
 
28,974

 
2.8
%
 
21,071

 
5.4
%
 
50,045

 
3.5
%
Retail
 
18,852

 
1.9
%
 
30,801

 
7.8
%
 
49,653

 
3.5
%
Telecommunications
 
35,411

 
3.5
%
 
13,775

 
3.5
%
 
49,186

 
3.5
%
Automotive
 
39,192

 
3.9
%
 

 

 
39,192

 
2.8
%
Services: Consumer
 
9,477

 
0.9
%
 
26,278

 
6.7
%
 
35,755

 
2.5
%
Media: Diversified & Production
 
23,100

 
2.3
%
 
7,277

 
1.8
%
 
30,377

 
2.1
%
Banking, Finance, Insurance & Real Estate
 
17,636

 
1.7
%
 
11,547

 
2.9
%
 
29,183

 
2.1
%
Aerospace & Defense
 
21,780

 
2.1
%
 
5,564

 
1.4
%
 
27,344

 
1.9
%
Media: Broadcasting & Subscription
 
9,776

 
1.0
%
 
10,013

 
2.6
%
 
19,789

 
1.4
%
Energy: Oil & Gas
 
12,803

 
1.3
%
 
4,570

 
1.2
%
 
17,373

 
1.2
%
Consumer Goods: Durable
 
1,000

 
0.1
%
 
15,942

 
4.1
%
 
16,942

 
1.2
%
Metals & Mining
 
11,349

 
1.1
%
 
3,528

 
0.9
%
 
14,877

 
1.1
%
Energy: Electricity
 
13,715

 
1.3
%
 

 

 
13,715

 
1.0
%
Forest Products & Paper
 

 

 
12,521

 
3.2
%
 
12,521

 
0.9
%
Consumer Goods: Non-Durable
 
8,611

 
0.8
%
 

 

 
8,611

 
0.6
%
Containers, Packaging & Glass
 
3,845

 
0.4
%
 

 

 
3,845

 
0.3
%
Environmental Industries
 
2,595

 
0.3
%
 

 

 
2,595

 
0.2
%
Subtotal/total percentage
 
1,018,980

 
100.0
%
 
392,445

 
100.0
%
 
1,411,425

 
100.0
%
Short term investments
 
70,498

 
 
 

 
 
 
70,498

 
 
Total investments
 
$
1,089,478

 
 
 
$
392,445

 
 
 
$
1,481,923

 
 
We do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would be presumed to “control” a portfolio company or issuer if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company or issuer if we owned 5% or more of its voting securities.
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 September 30, 2017 and December 31, 2016, our unfunded commitments amounted to $75,833 and $25,096, respectively. As of November 9, 2017, our unfunded commitments amounted to $83,077. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. For additional information on our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.
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.

53



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 September 30, 2017, excluding short term investments of $140,810:
 
 
September 30, 2017
Investment Rating
 
Investments
Fair Value
 
Percentage of
Investment Portfolio
1
 
$

 

2
 
1,282,461

 
82.7
%
3
 
207,746

 
13.4
%
4
 
53,223

 
3.4
%
5
 
7,615

 
0.5
%
 
 
$
1,551,045

 
100.0
%
The following table summarizes the composition of our investment portfolio and our underlying TRS loans portfolio based on the 1 to 5 investment rating scale at fair value as of December 31, 2016, excluding short term investments of $70,498:
 
 
December 31, 2016
 
 
Investment Portfolio
 
Total Return Swap
 
Total
Investment Rating
 
Investments
Fair Value
 
Percentage of
Investment Portfolio
 
Fair Value of Underlying TRS Loans
 
Percentage of Underlying TRS Loans
 
Fair Value
 
Percentage
1
 
$

 

 
$

 

 
$

 

2
 
963,477

 
94.6
%
 
342,620

 
87.3
%
 
1,306,097

 
92.5
%
3
 
50,942

 
5.0
%
 
34,657

 
8.8
%
 
85,599

 
6.1
%
4
 
4,561

 
0.4
%
 
12,798

 
3.3
%
 
17,359

 
1.2
%
5
 

 

 
2,370

 
0.6
%
 
2,370

 
0.2
%
 
 
$
1,018,980

 
100.0
%
 
$
392,445

 
100.0
%
 
$
1,411,425

 
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.

54



Current Investment Portfolio

As of November 9, 2017, our investment portfolio, excluding our short term investments, consisted of interests in 161 portfolio companies (72% in senior secured first lien debt, 24% in senior secured second lien debt, 1% in collateralized securities and structured products (comprised of 1% invested in rated debt, 1% invested in non-rated debt and 1% invested in non-rated equity of such securities and products), less than 1% in unsecured debt, and less than 1% in equity) with a total fair value of $1,568,392 with an average and median portfolio company annual EBITDA of $90.0 million and $50.0 million, respectively, at initial investment. As of November 9, 2017, investments in our portfolio, excluding our short term investments, were purchased at a weighted average price of 96.15% of par value. Our estimated gross annual portfolio yield was 9.14% based upon the purchase price of such investments. The estimated gross 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. For the quarter ended September 30, 2017, our total investment return-net asset value was 6.68%. Total investment return-net asset value does not represent and may be higher than an actual investment 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 of our consolidated financial statements.
As of November 9, 2017, our only short term investment was an investment in a U.S. Treasury Obligations Fund of $123,448.
Results of Operations for the Three Months Ended September 30, 2017 and 2016
Our results of operations for the three months ended September 30, 2017 and 2016 were as follows:
 
Three Months Ended
September 30,
 
2017
 
2016
Investment income
$
38,378

 
$
18,733

Net operating expenses
16,976

 
8,038

Net investment income
21,402

 
10,695

Net realized (loss) gain on investments and foreign currency
(2,788
)
 
379

Net change in unrealized appreciation on investments
1,700

 
14,948

Net realized gain on total return swap
67

 
8,188

Net change in unrealized appreciation on total return swap

 
9,527

Net increase in net assets resulting from operations
$
20,381

 
$
43,737

Investment Income
For the three months ended September 30, 2017 and 2016, we generated investment income of $38,378 and $18,733, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities, structured products, and unsecured debt of 176 and 108 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments and TRS, increased $703,397, from $841,656 for the three months ended September 30, 2016 to $1,545,053 for the three months ended September 30, 2017, 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. We expect our investment portfolio to continue to grow due to the anticipated equity available to us for investment from our follow-on continuous public offering and amounts available under our financing arrangements. As a result, we believe that reported investment income for the three months ended September 30, 2017 and 2016 is not representative of our stabilized or future performance. Interest income earned by loans underlying the TRS was not included in investment income in the consolidated statements of operations, but rather it was recorded as part of net realized gain (loss) on total return swap. In lieu of extending the expiration date of the TRS beyond April 18, 2017, we entered into a traditional credit facility with Citibank on March 29, 2017.
Operating Expenses
The composition of our operating expenses for the three months ended September 30, 2017 and 2016 was as follows:
 
Three Months Ended
September 30,
 
2017
 
2016
Management fees
$
7,820

 
$
5,187

Administrative services expense
433

 
425

General and administrative
1,803

 
1,892

Interest expense
6,920

 
534

Total operating expenses
16,976

 
8,038

Recoupment of expense support from CIG

 

Net operating expenses
$
16,976

 
$
8,038


55



During the three months ended September 30, 2017, the increase in management fees was a direct result of the increase in our total assets less cash and cash equivalents, while the increase in interest expense was primarily the result of entering into new financing arrangements.

The composition of our general and administrative expenses for the three months ended September 30, 2017 and 2016 was as follows:
 
Three Months Ended
September 30,
 
2017
 
2016
Valuation expense
$
463

 
$
125

Transfer agent expense
321

 
307

Dues and subscriptions
223

 
177

Professional fees
147

 
680

Director fees and expenses
125

 
69

Insurance expense
102

 
105

Due diligence fees
87

 
120

Printing and other related costs
59

 
177

Other expenses
276

 
132

Total general and administrative expense
$
1,803

 
$
1,892


Expense Support and Recoupment of Expense Support

For the three months ended September 30, 2017 and 2016, CIG and AIM did not provide any expense support or recoup any previously provided expense support. 
Net Investment Income
Our net investment income totaled $21,402 and $10,695 for the three months ended September 30, 2017 and 2016, respectively. The increase in net investment income was primarily due to an increase in the size of our investment portfolio relative to our expenses as we continued to achieve economies of scale due to proceeds received from our follow-on continuous public offering and our financing arrangements.
Net Realized (Loss) Gain on Investments and Foreign Currency
Our net realized (loss) gain on investments and foreign currency totaled ($2,788) and $379 for the three months ended September 30, 2017 and 2016, respectively. This change was mainly due to losses realized on certain investments, which were partially offset by an increase in sales and principal repayment activity during the three months ended September 30, 2017 compared to the three months ended September 30, 2016. During the three months ended September 30, 2017, we received sale proceeds of $131,279 and principal repayments of $143,369, resulting in net realized losses of ($2,800). During the three months ended September 30, 2016, we received sale proceeds of $2,047 and principal repayments of $39,552, resulting in net realized gains of $379.
Net Change in Unrealized Appreciation on Investments
The net change in unrealized appreciation on our investments totaled $1,700 and $14,948 for the three months ended September 30, 2017 and 2016, respectively. This change was driven primarily by a greater degree of credit spread tightening for middle market loans during the three months ended September 30, 2016 compared to the three months ended September 30, 2017 that positively impacted the fair value of certain investments.

Net Realized Gain on TRS
Our net realized gain on the TRS totaled $67 and $8,188 for the three months ended September 30, 2017 and 2016, respectively. The components of net realized gain on the TRS are summarized below:
 
Three Months Ended
September 30,
 
2017
 
2016
Interest and other income from TRS portfolio
$
67

 
$
9,426

Interest and other expense from TRS portfolio

 
(3,265
)
Net gain on TRS loan sales

 
2,027

   Total
$
67

 
$
8,188

The net realized gain on TRS decreased primarily due to the sale of a majority of loans underlying the TRS to Flatiron Funding II on March 29, 2017 in connection with the refinancing of the TRS into a new credit facility.

56



Net Change in Unrealized Appreciation on TRS
The net change in unrealized appreciation on the TRS totaled $0 and $9,527 for the three months ended September 30, 2017 and 2016, respectively. This change was driven primarily by the sale of a majority of loans underlying the TRS to Flatiron Funding II on March 29, 2017 in connection with the refinancing of the TRS into a new credit facility.
Net Increase in Net Assets Resulting from Operations
For the three months ended September 30, 2017 and 2016, we recorded a net increase in net assets resulting from operations of $20,381 and $43,737, respectively, as a result of our operating activity for the respective periods.
Results of Operations for the Nine Months Ended September 30, 2017 and 2016
Our results of operations for the nine months ended September 30, 2017 and 2016 were as follows:
 
Nine Months Ended
September 30,
 
2017
 
2016
Investment income
$
101,768

 
$
53,834

Net operating expenses
43,691

 
21,834

Net investment income
58,077

 
32,000

Net realized (loss) gain on investments and foreign currency
(4,983
)
 
1,078

Net change in unrealized appreciation on investments
11,094

 
16,587

Net realized (loss) gain on total return swap
(13,789
)
 
23,799

Net change in unrealized appreciation on total return swap
15,402

 
16,826

Net increase in net assets resulting from operations
$
65,801

 
$
90,290

Investment Income
For the nine months ended September 30, 2017 and 2016, we generated investment income of $101,768 and $53,834, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities, structured products, and unsecured debt of 205 and 120 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments and TRS, increased $469,756, from $815,257 for the nine months ended September 30, 2016 to $1,285,013 for the nine months ended September 30, 2017, 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. We expect our investment portfolio to continue to grow due to the anticipated equity available to us for investment from our follow-on continuous public offering and amounts available under our financing arrangements. As a result, we believe that reported investment income for the nine months ended September 30, 2017 and 2016 is not representative of our stabilized or future performance. Interest income earned by loans underlying the TRS is not included in investment income in the consolidated statements of operations, but rather was recorded as part of net realized gain (loss) on total return swap. In lieu of extending the expiration date of the TRS beyond April 18, 2017, we entered into a traditional credit facility with Citibank on March 29, 2017.

Operating Expenses
The composition of our operating expenses for the nine months ended September 30, 2017 and 2016 was as follows:
 
Nine Months Ended
September 30,
 
2017
 
2016
Management fees
$
21,724

 
$
14,311

Administrative services expense
1,204

 
1,151

General and administrative
5,220

 
4,944

Interest expense
15,543

 
761

Total operating expenses
43,691

 
21,167

Recoupment of expense support from CIG

 
667

Net operating expenses
$
43,691

 
$
21,834

During the nine months ended September 30, 2017, the increase in management fees was a direct result of the increase in our total assets less cash and cash equivalents, while the increase in interest expense was primarily the result of entering into new financing arrangements.

57



The composition of our general and administrative expenses for the nine months ended September 30, 2017 and 2016 was as follows:
 
Nine Months Ended
September 30,
 
2017
 
2016
Valuation expense
$
989

 
$
350

Transfer agent expense
947

 
926

Professional fees
943

 
1,284

Dues and subscriptions
630

 
621

Director fees and expenses
327

 
207

Insurance expense
309

 
271

Printing and other related costs
291

 
520

Due diligence fees
145

 
401

Other expenses
639

 
364

Total general and administrative expense
$
5,220

 
$
4,944


Expense Support and Recoupment of Expense Support

For the nine months ended September 30, 2017, CIG and AIM did not provide any expense support or recoup any previously provided expense support. For the nine months ended September 30, 2016, CIG recouped $667 of expense support made during the three months ended December 31, 2014 in connection with the expense support and conditional reimbursement agreement. 

Recoupment of such support will be determined as appropriate to meet the objectives of the expense support and conditional reimbursement agreement. As a result, we may or may not be requested to reimburse CIG and AIM for any expense support that may be received from CIG and AIM in the future.
Net Investment Income
Our net investment income totaled $58,077 and $32,000 for the nine months ended September 30, 2017 and 2016, respectively. The increase in net investment income was primarily due to an increase in the size of our investment portfolio relative to our expenses as we continued to achieve economies of scale due to proceeds received from our follow-on continuous public offering and our financing arrangements.
Net Realized (Loss) Gain on Investments and Foreign Currency
Our net realized (loss) gain on investments and foreign currency totaled ($4,983) and $1,078 for the nine months ended September 30, 2017 and 2016, respectively. This change was mainly due to losses realized on certain investments, which were partially offset by an increase in sales and principal repayment activity during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we received sale proceeds of $218,395 and principal repayments of $403,098, resulting in net realized losses of ($5,142). During the nine months ended September 30, 2016, we received sale proceeds of $14,462 and principal repayments of $126,908, resulting in net realized gains of $1,078.

Net Change in Unrealized Appreciation on Investments
The net change in unrealized appreciation on our investments totaled $11,094 and $16,587 for the nine months ended September 30, 2017 and 2016, respectively. This change was driven primarily by a tightening of credit spreads during the nine months ended September 30, 2017 as well as the reversal of unrealized depreciation for certain investments that were realized during the nine months ended September 30, 2017
Net Realized (Loss) Gain on TRS
Our net realized (loss) gain on the TRS totaled ($13,789) and $23,799 for the nine months ended September 30, 2017 and 2016, respectively. The components of net realized (loss) gain on the TRS are summarized below:
 
Nine Months Ended
September 30,
 
2017
 
2016
Interest and other income from TRS portfolio
$
6,610

 
$
32,693

Interest and other expense from TRS portfolio
(2,949
)
 
(10,307
)
Net (loss) gain on TRS loan sales
(17,450
)
 
1,413

   Total
$
(13,789
)
 
$
23,799


58



Net Change in Unrealized Appreciation on TRS
The net change in unrealized appreciation on the TRS totaled $15,402 and $16,826 for the nine months ended September 30, 2017 and 2016, respectively. This change was driven primarily by a reversal of unrealized depreciation on the loans underlying the TRS upon the refinancing of the TRS.
Net Increase in Net Assets Resulting from Operations
For the nine months ended September 30, 2017 and 2016, we recorded a net increase in net assets resulting from operations of $65,801 and $90,290, 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 $9.15 and $9.11 on September 30, 2017 and December 31, 2016, respectively. After considering (i) the overall changes in net asset value per share, (ii) paid distributions of approximately $0.5487 per share during the nine months ended September 30, 2017, and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan then in effect, the total investment return was 6.68% for the nine month period ended September 30, 2017. 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 net of sales load) have seen an annualized return of 8.46% and a cumulative total return of 47.58% through September 30, 2017 (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 6.10% and a cumulative total return of 32.82% through September 30, 2017. 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 4.14% and a cumulative total return of 21.45%. 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 6.01% and a cumulative total return of 32.27% over the same period.
capturea04.jpg
(1) Cumulative performance: December 17, 2012 to September 30, 2017

59



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.

Financial Condition, Liquidity and Capital Resources
We generate cash primarily from the net proceeds from our follow-on continuous public offering and 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, but in no event will leverage employed exceed 50% of the value of our total assets, as required by the 1940 Act. We are engaged in a follow-on continuous public offering of shares of our common stock. Our initial continuous public offering commenced on July 2, 2012 and ended on December 31, 2015. Our follow-on continuous public offering commenced on January 25, 2016 and will continue until no later than January 25, 2019. We accept subscriptions on a continuous basis and issue shares at weekly closings at prices that, after deducting selling commissions and dealer manager fees, are at or above our net asset value per share.
We will sell our shares on a continuous basis at our latest public offering price of $9.70 per share; however, to the extent that our net asset value fluctuates, we will sell at a price necessary to ensure that shares are sold at a price, after deduction of selling commissions and dealer manager fees, that is above and within 2.5% of net asset value per share.
Since commencing our initial continuous public offering on July 2, 2012 and through September 30, 2017, we sold 114,440,741 shares of common stock for net proceeds of $1,162,041 at an average price per share of $10.15. The net proceeds include gross proceeds received from reinvested shareholder distributions of $114,174, for which we issued 12,532,914 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $55,581, for which we repurchased 6,143,717 shares of common stock. Since commencing our initial continuous public offering on July 2, 2012 and through September 30, 2017, sales commissions and dealer manager fees related to the sale of our common stock were $64,186 and $31,776, respectively.
As of November 8, 2017, we sold 114,398,359 shares of common stock for net proceeds of $1,161,927 at an average price per share of $10.16. The net proceeds include gross proceeds received from reinvested shareholder distributions of $117,998, for which we issued 12,950,612 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $65,821, for which we repurchased 7,261,847 shares of common stock. Since commencing our initial continuous public offering on July 2, 2012 and through November 8, 2017, sales commissions and dealer manager fees related to the sale of our common stock were $64,317 and $31,878, respectively.
The net proceeds from our follow-on continuous public offering will be invested primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less prior to being invested in debt securities of private U.S. middle-market companies.
As of September 30, 2017 and December 31, 2016, we had $140,810 and $70,498 in short term investments, respectively, invested in a fund that primarily invests in U.S. government securities.

Citibank Credit Facility

As of September 30, 2017 and November 9, 2017, our outstanding borrowings under the Citibank Credit Facility were $281,698 and the aggregate unfunded principal amount in connection with the Citibank Credit Facility was $43,302. For a detailed discussion of our Citibank Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.

JPM Credit Facility
As of September 30, 2017 and November 9, 2017, our outstanding borrowings under the JPM Credit Facility were $224,423 and the aggregate principal amount available in connection with the JPM Credit Facility was $577. For a detailed discussion of our JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.

UBS Facility
As of September 30, 2017 and November 9, 2017, our outstanding borrowings under the UBS Facility were $125,000 and no additional principal amount was available in connection with the UBS Facility. For a detailed discussion of our UBS Facility, refer to Note 8 to our consolidated financial statements included in this report.
Unfunded Commitments
As of September 30, 2017 and November 9, 2017, our unfunded commitments amounted to $75,833 and $83,077, respectively. For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.

60



RIC Status and Distributions
Prior to the refinancing of the TRS, our total investment portfolio includes loans and other securities on our consolidated balance sheets and loans underlying the TRS. Accordingly, we treat net interest and other income earned on all investments, including the loans underlying the TRS, as a component of investment company taxable income when determining our sources of distributions. The sources of our distributions for the nine months ended September 30, 2017 were as follows:
 
 
Three Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2017
 
 
Investment Portfolio
 
Total Return Swap Portfolio
 
Total Investment Portfolio
 
Percentage
 
Investment Portfolio
 
Total Return Swap Portfolio
 
Total Investment Portfolio
 
Percentage
Net investment income
 
$
20,577

 
$
67

 
$
20,644

 
100.0
%
 
$
55,191

 
$
3,661

 
$
58,852

 
96.3
%
Capital gains from the sale of assets(1)(2)
 

 

 

 

 

 
2,286

 
2,286

 
3.7
%
Total
 
$
20,577

 
$
67

 
$
20,644

 
100.0
%
 
$
55,191

 
$
5,947

 
$
61,138

 
100.0
%
(1)
For the three and nine months ended September 30, 2017, we estimate that we had no net capital gains classified as long-term. The final determination of the tax attributes of our distributions is made annually as of the end of the year.
(2)
During the nine months ended September 30, 2017, the Company realized losses of $24,164 primarily in connection with the refinancing of the TRS, which are not currently deductible on a tax-basis.
For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, to 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 recent accounting pronouncements that are applicable to us.
Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with 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.
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 and AIM, if applicable;
preliminary valuation conclusions are then documented and discussed with CIM’s valuation committee;

61



CIM’s valuation committee reviews the preliminary valuation, and, if applicable, delivers such preliminary valuation to an independent valuation firm for its review;
CIM’s valuation committee, or its designee, 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 firm to discuss the assistance provided and the results of the independent valuation firm’s 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 once over a twelve-month period by an independent valuation firm. Finally, certain investments are not evaluated by an independent valuation firm unless the net asset value and other aspects of such investments in the aggregate exceed certain thresholds.
Given the expected types of investments, excluding short term investments 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, ICON Capital, CIG, and AIM and amounts incurred under agreements with such related parties, refer to Note 4 to our consolidated financial statements included in this report.
Contractual Obligations

On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended on September 30, 2016 and July 11, 2017. See Note 8 to our consolidated financial statements for a more detailed description of the JPM Credit Facility.

On March 29, 2017, Flatiron Funding II entered into the Citibank Credit Facility with Citibank, as amended on July 11, 2017. See Note 8 to our consolidated financial statements for a more detailed description of the Citibank Credit Facility.

On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS. See Note 8 to our consolidated financial statements for a more detailed description of the UBS Facility.
Commitments and Contingencies and Off-Balance Sheet Arrangements
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 agreement. 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.

62



Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. As of September 30, 2017, 93.3% 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.
Under the terms of the JPM Credit Facility, advances currently bear interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.50% per year. Under the terms of the Citibank Credit Facility, advances currently bear interest at a floating rate equal to the three-month LIBOR plus 2.0%. Pursuant to the terms of the UBS Facility, we currently pay a financing fee equal to the three-month LIBOR plus a spread of 3.50%. 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 Citibank Credit Facility, the JPM Credit Facility, or the UBS Facility in effect as of September 30, 2017:
Change in Interest Rates
 
Increase (Decrease) in Net Interest Income(1)
 
Percentage Change in Net Interest Income
Down 100 basis points
 
$
1,290

 
1.2
 %
Down 50 basis points
 
(1,585
)
 
(1.5
)%
Current base interest rate
 

 

Up 50 basis points
 
4,276

 
4.0
 %
Up 100 basis points
 
8,560

 
8.1
 %
Up 200 basis points
 
17,126

 
16.1
 %
Up 300 basis points
 
25,693

 
24.2
 %
(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 and the net asset value of our common stock in the event of sudden changes in interest rates. Approximately 4.6% of our investments paid fixed interest rates as of September 30, 2017. Rising market interest rates will most likely lead to fair value declines for fixed interest rate investments 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 an increase in the net asset value of our common stock.
In addition, we may have risk regarding portfolio valuation as discussed in Note 2 to our consolidated financial statements included in this report.

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Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures 
In connection with the preparation of this Quarterly Report on Form 10-Q for the three months ended September 30, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) and Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
In designing and evaluating our disclosure controls and procedures, we recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.  Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Disclosure controls and procedures cannot detect or prevent all error and fraud. Some inherent limitations in disclosure controls and procedures include costs of implementation, faulty decision-making, simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all anticipated and unanticipated future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with established policies or procedures.
Evaluation of internal control over financial reporting
There have been no changes in our internal control over financial reporting during the three months ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

64



PART II - OTHER INFORMATION
Item 1. 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 1A. Risk Factors
There have been no material changes from the risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our registration statement on Form N-2, as amended, in connection with our follow-on continuous public offering was declared effective by the SEC on January 25, 2016 (SEC File No. 333-203683). Our follow-on continuous public offering commenced on January 25, 2016.
We did not engage in any unregistered sales of equity securities during the three months ended September 30, 2017.
The table below provides information concerning our repurchases of shares of our common stock during the three months ended September 30, 2017 pursuant to our share repurchase program.
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1 to July 31, 2017
 
1,365,168

 
$
9.10

 
1,365,168

 
(1
)
August 1 to August 31, 2017
 

 

 

 

September 1 to September 30, 2017
 

 

 

 

Total
 
1,365,168

 
$
9.10

 
1,365,168

 
(1
)
(1)
A description of the maximum number of shares of our common stock that may be repurchased is set forth in a detailed discussion of the terms of our share repurchase program in Note 3 to our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.


65



Item 6. Exhibits
Exhibit
Number
 
Description of Document
2.1
 
3.1
 
3.2
 
3.3
 
4.1
 
4.2
 
10.1
 
10.2
 
10.3
 
10.4
 
10.5
 
10.6
 
10.7
 
10.8
 
10.9
 
10.10
 
10.11
 
10.12
 
10.13
 
10.14
 
10.15
 
10.16
 

66




Exhibit
Number
 
Description of Document
10.17
 
10.18
 
10.19
 
10.20
 
10.21
 
10.22
 
10.23
 
10.24
 
10.25
 
10.26
 
10.27
 
10.28
 
10.29
 
10.30
 
10.31
 
10.32
 
10.33
 
10.34
 
10.35
 
31.1
 
31.2
 
31.3
 
32.1
 
32.2
 
32.3
 


67



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 13, 2017
CĪON Investment Corporation
(Registrant)
By: /s/ Michael A. Reisner
Michael A. Reisner
Co-Chief Executive Officer
(Principal Executive Officer)
By: /s/ Mark Gatto
Mark Gatto
Co-Chief Executive Officer
(Principal Executive Officer)
By: /s/ Keith S. Franz
Keith S. Franz
Chief Financial Officer
(Principal Financial and Accounting Officer)


68