UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549 FORM10-K x
 ANNUAL REPORT PURSUANT TO SECTION 13 OR
  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year endedDecember 31,
2013 OR o
 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) Securities registered pursuant to Section 12(b) of
the Act:None Securities registered pursuant to Section 12(g) of
the Act:Common Stock, par value $0.001 per share Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YesoNox Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YesoNox 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. YesxNoo Indicate by check mark whether the registrant has submittedelectronicallyand 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). YesoNoo Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. Large accelerated filero
 
 Accelerated fileroNon-accelerated
  filerx(Do not check if a smaller reporting company)
 
 Smaller reporting companyo
 Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). YesoNox


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There is no established market for the Registrant’s
shares of common stock. The Registrant is currently conducting an ongoing
public offering of its shares of common stock pursuant to a Registration
Statement on Form N-2, which shares are being sold at $10.45 per share, with
discounts available for certain categories of purchasers, or at a price
necessary to ensure that shares are not sold at a price below net asset value
per share. The number of shares of the Registrant’s common stock, $0.001 par value,
outstanding as of March 19, 2014 was 23,414,958. Documents Incorporated by Reference Portions of the Registrant’s definitive Proxy Statement relating to the
Registrant’s 2014 Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of the
Registrant’s fiscal year, are incorporated by reference in Part III of this
Annual Report on Form 10-K as indicated herein.


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CĪON
INVESTMENT CORPORATION TABLE OF CONTENTS FORM 10-K PagePART IItem
  1. Business
 2Item
  1A. Risk Factors
 26Item
  1B. Unresolved Staff Comments
 50Item
  2. Properties
 50Item
  3. Legal Proceedings
 50Item
  4. Mine Safety Disclosures
 50PART IIItem 5. Market for Registrant’s Common Equity,
  Related Shareholder Matters and Issuer Purchases of Equity Securities
 51Item
  6. Selected Financial Data
 54Item
  7. Management’s Discussion and Analysis of Financial Condition and Results of
  Operations
 55Item
  7A. Quantitative and Qualitative Disclosures about Market Risk
 75Item
  8. Consolidated Financial Statements and Supplementary Data
 76Item 9.
  Changes in and Disagreements With Accountants on Accounting and Financial
  Disclosure
 108Item 9A.
  Controls and Procedures
 108Item 9B.
  Other Information
 109PART IIIItem 10.
  Directors, Executive Officers and Corporate Governance
 110Item 11.
  Executive Compensation
 110Item 12.
  Security Ownership of Certain Beneficial Owners and Management and Related
  Shareholder Matters
 110Item 13.
  Certain Relationships and Related Transactions, and Director Independence
 110Item 14.
  Principal Accounting Fees and Services
 110PART IVItem 15.
  Exhibits, Financial Statement Schedules
 111Signatures
 113


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PART I  Forward-Looking Statements  Some of the statements within this Annual
Report on Form 10-K constitute forward-looking statements because they relate
to future events or our future performance or financial condition. The
forward-looking statements contained in this Annual Report on Form 10-K 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 CĪON Investment Management, LLC, or CIM, and Apollo
Global Management, LLC, or Apollo, and their respective affiliates; ·the ability of CIM and Apollo
Investment Management, L.P., or AIM, a subsidiary of Apollo and a registered
investment adviser under the Investment Advisers Act of 1940, as amended, or
the Advisers Act, 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; ·our ability to
source favorable private investments; ·our tax status; ·the effect of
changes to tax legislation and our tax position; ·the tax status of
the companies in which we invest; and ·the timing and
amount of distributions and dividends from the companies in which we invest.  In addition, words such as “anticipate,”
“believe,” “expect” and “intend” indicate a forward-looking statement, although
not all forward-looking statements include these words. The forward-looking
statements contained in this Annual Report on Form 10-K involve risks and
uncertainties. Our actual results could differ materially from those implied or
expressed in the forward-looking statements for any reason, including the
factors set forth in “Risk Factors” in Item 1A of Part I of this Annual Report
on Form 10-K. Other factors that could cause actual results to differ
materially include:  ·changes in the
economy; ·risks associated with possible
disruption in our operations or the economy generally due to terrorism 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 Annual Report on
Form 10-K. Except as required by the federal securities laws, we undertake no
obligation to revise or update any forward-looking statements, whether as a
result of new information, future events or otherwise. You are advised to
review any additional disclosures that we may make directly to you or through
reports that we in the future may file with the Securities and Exchange
Commission, or SEC, including annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K. The forward-looking statements
contained in this Annual Report on Form 10-K are excluded from the safe harbor
protection provided by Section 27A of the Securities Act of 1933, as amended,
or the Securities Act, and Section 21E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. 1


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Item 1.
Business  CĪON Investment Corporation, or the
Company, was incorporated under the general corporation laws of the State of
Maryland on August 9, 2011. When used in this Annual Report on Form 10-K, the
terms “we,” “us,” “our” or similar terms refer to the Company and its
consolidated subsidiaries. In addition, the term “portfolio companies” refers
to companies in which we have invested.  We are 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 Investment
Company Act of 1940, as amended, or the 1940 Act. We 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. On December 17, 2012, we successfully raised gross proceeds of at
least $2,500,000, or the minimum offering requirement, from persons who are not
affiliated with us, our investment adviser, CIM, or Apollo and commenced
operations.  Our investment objective is to generate
current income and, to a lesser extent, capital appreciation for investors. We
anticipate that our portfolio will be comprised primarily of investments in
senior secured loans, including unitranche loans, and, to a lesser extent,
second lien loans and long-term subordinated loans, referred to as mezzanine
loans, of private and thinly traded U.S. middle-market companies. We define
middle-market companies as companies that generally possess annual earnings
before interest, taxes, depreciation and amortization, or EBITDA, of $50
million or less, with experienced management teams, significant free cash flow,
strong competitive positions and potential for growth.  In addition, we may from time to time
invest up to 30% of our assets opportunistically in other types of investments,
including the securities of larger public companies and foreign securities,
which may be deemed “non-qualifying assets” for the purpose of complying with
investment restrictions under the 1940 Act. See “Item 1. Business – Regulation
– Qualifying Assets” below.  In connection with our debt investments, we
may receive equity interests such as warrants or options as additional
consideration. We may also purchase minority interests in the form of common or
preferred equity in our target companies, typically in conjunction with one of
our debt investments or through a co-investment with a financial sponsor. In
addition, a portion of our portfolio may be comprised of corporate bonds and
other debt securities. However, such investments are not expected to be
significant. Once we raise sufficient capital, we expect that our investments
will generally range between $5 million and $50 million each, although
investments may vary as the size of our capital base changes and will
ultimately be at the discretion of CIM subject to oversight by our board of
directors. Prior to raising sufficient capital, we have made and intend to make
smaller investments in syndicated loan opportunities, which typically include
investments in companies with EBITDA of greater than $50 million, subject to
liquidity and diversification constraints.  We are managed by CIM, our affiliate and a
registered investment adviser under the Advisers Act. CIM oversees the
management of our activities and is responsible for making investment decisions
for our portfolio. We and CIM engaged AIM to act as our investment sub-adviser.
AIM only assists us with identifying investment opportunities and making
investment recommendations for approval by CIM, according to pre-established
investment guidelines. All of our investment decisions are the sole
responsibility of, and are made at the sole discretion of, CIM. Pursuant to the
terms of the investment sub-advisory agreement among us, CIM and AIM, AIM is
not responsible or liable for any such investment decision, only provides the
investment advisory services expressly set forth in the investment sub-advisory
agreement and is not responsible or liable for the provision of any other
service.  During the year ended December 31, 2013, we
invested $94,331,717 in forty two portfolio companies and received sale
proceeds and principal repayments of $2,176,929 and $2,157,915, respectively,
of which we realized gains of $33,637. As of December 31, 2013, our investment
portfolio, excluding our short term investments and total return swap, or TRS, consisted
of interests in thirty nine portfolio companies (67% in first lien senior
secured term loans, 24% in second lien senior secured term loans, 4% in collateralized
loan obligations and 5% in subordinated debt) with a total fair value of $93,135,244
with an average and median portfolio company annual EBITDA of $50.8 million and
$47.7 million, respectively, at initial investment. As of December 31, 2013, investments
in our portfolio were purchased at a weighted average price of 98.57% of par
value. Our estimated gross annual portfolio yield was 7.86% based upon the
purchase price of our investments.  During the period from December 17, 2012,
or the Commencement of Operations, to December 31, 2012, we invested $1,972,500
in two portfolio companies and received principal repayments of $2,500, of
which we realized immaterial gains. As of December 31, 2012, our investment
portfolio, excluding our short term investments and TRS, consisted of interests
in two portfolio companies (100% in first lien senior secured term loans) with
a total fair value of $1,980,044 with an average and median portfolio company annual
EBITDA of $26.6 million and $26.5 million, respectively, at initial investment.
As of December 31, 2012, the investments in our portfolio were purchased at a
weighted average price of 98.63% of par value. Our estimated gross annual
portfolio yield was 6.55% based upon the purchase price of our investments.  The portfolio yield does not represent an
actual investment return to shareholders.  Through our TRS (described in further detail
under “Item 1. Business – Financing Arrangements” below), we obtain the
economic benefit of owning investments in senior secured floating-rate loans. As
of December 31, 2013, we, through our TRS, obtained the economic benefit
of owning investments in sixty two portfolio companies with a total notional
value of $148,199,937. As of December 31, 2012, we, through our TRS, obtained
the economic benefit of owning investments in five portfolio companies with a
total notional value of $2,883,100. 2


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As
a BDC, we are subject to certain regulatory restrictions in negotiating or
investing in certain investments with entities with which we may be restricted
from doing so under the 1940 Act, such as CIM, AIM and their respective
affiliates, unless we obtain an exemptive order from the Securities and
Exchange Commission, or the SEC, or co-invest alongside such affiliates in
accordance with existing regulatory guidance. We have not applied for an
exemptive order from the SEC and, if we apply, there can be no assurance that
we will be able to obtain such exemptive relief. Even if we receive exemptive
relief, neither CIM, AIM nor their respective affiliates are obligated to offer
us the right to participate in any transactions.  To enhance our opportunity for gain, we
employ leverage as market conditions permit and at the discretion of CIM, but
in no event can leverage employed exceed 50% of the value of our assets as
required by the 1940 Act.  We do not currently intend to list our
securities on an exchange and do not expect a public market to develop for them
in the foreseeable future. We believe that an unlisted structure is appropriate
for the long-term nature of the assets in which we invest. In addition, because
our common stock will not be listed on a national securities exchange, we will be
able to pursue our investment objective without subjecting our investors to the
daily share price volatility associated with the public markets. To provide our
shareholders with limited liquidity, we began conducting quarterly tender
offers pursuant to our share repurchase program in the first quarter of 2014. In
connection with that program, we intend, but are not required, to continue
conducting quarterly repurchase offers. This is the only method of liquidity
that we will offer prior to a liquidity event. Until we complete a liquidity
event, it is unlikely that shareholders will be able to sell their common stock
when desired or at a desired price.  Although we do not currently intend to list
our common stock on an exchange and do not expect a public market to develop
for in the foreseeable future, we intend to seek to complete a liquidity event
within three to five years following the completion of our offering stage or at
such earlier time as our board of directors may determine, taking into
consideration market conditions and other factors; however, our offering of
common stock may extend for an indefinite period. We will view our offering
stage as complete as of the termination date of our most recent public equity
offering if we have not conducted a public equity offering in any continuous
two-year period. However, there can be no assurance that we will be able to
complete a liquidity event. Status of Our Continuous Public Offering  On December 17, 2012, we met our minimum
offering requirement of $2,500,000 in capital raised from persons not
affiliated with us, admitted our initial public investors as shareholders and
officially commenced operations. Since commencing our continuous public
offering on July 2, 2012 through March 19, 2014, we received and accepted
subscriptions for 23,414,958 shares for gross corresponding proceeds of
$238,474,948 at an average price per share of $10.18, including shares
purchased by our affiliates.  The gross proceeds received include reinvested
shareholder distributions of $3,179,729 pursuant to our second amended and
restated distribution reinvestment plan, for which we issued 337,506 shares of
common stock. Distributions  In January 2013, we began authorizing
monthly distributions to our shareholders. Our board of directors declared
distributions for twenty four record dates during the year ended December 31,
2013 for a total of $3,974,317, or $0.7162 per share.  On February 1, 2014, we changed
from semi-monthly closings to weekly closings for the sale of sharespursuant to our continuous public
offering. As a result, our board of directors authorizes and declares on a
monthly basis a weekly distribution
amount per share of our common stock.  On January 15,
2014, our board of directors declared one cash distribution of $0.030100 per
share and a second cash distribution of $0.039375 per share, which were paid on
February 5, 2014 to shareholders of record on January 15 and February 4,
2014, respectively. The amount of the second cash distribution of $0.039375 per
share included four additional distribution days through February 4, 2014 in
connection with our change from semi-monthly to weekly closings on the sale of
our shares. On February 4, 2014, our board of directors declared three weekly
cash distributions of $0.014067 per share, which were paid on February 26, 2014
to shareholders of record on February 11, February 18 and February 25, 2014. On
February 14, 2014, our board of directors declared four weekly cash
distributions of $0.014067 per share, payable on March 26, 2014 to shareholders
of record on March 4, March 11, March 18 and March 25, 2014. On
March 14, 2014, our board of directors declared five weekly cash
distributions of $0.014067 per share, payable on April 30, 2014 to shareholders
of record on April 1, April 8, April 15, April 22 and April 29, 2014. 3


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About CIM  CIM is a registered investment adviser. CIM
is a subsidiary of ICON Investment Group, LLC, or IIG, and part of the ICON
group of companies, or ICON. ICON is a leading asset manager that provides
innovative alternative investment products to individual and institutional
investors through publicly-registered programs, private funds and separately
managed accounts. ICON is headquartered in New York, with offices in Boston,
London and Singapore.  Mark Gatto and Michael A. Reisner, together
with Sean Connor, Harry Giovani, Keith S. Franz and David J. Verlizzo, form the
senior management team of CIM. Both Messrs. Gatto and Reisner have significant
managerial and investing experience and serve as our co-chairmen, co-presidents
and co-chief executive officers.  CIM’s senior management team has extensive
experience in lending to private U.S. middle-market companies and has developed
an expertise in using all levels of a firm’s capital structure to produce
income-generating investments, focusing on risk management and delivering
risk-adjusted returns that typically are collateralized by a company’s
business-essential equipment or corporate infrastructure.  About ICON  With more than 25 years of experience in
the alternative asset management industry, ICON and its affiliates have managed
investments for more than 63,000 investors and made approximately $4.0 billion
in total investments. ICON, through its managed funds, provides direct
financing to private and public companies worldwide. ICON primarily provides
secured financing to businesses in industries such as marine, manufacturing,
transportation, automotive, energy and power, telecommunications, industrial
and mining. ICON and its affiliated entities also provide distribution
services.  Pursuant to an administration agreement,
ICON Capital, LLC, or ICON Capital, furnishes us with office facilities and
equipment, and clerical, bookkeeping and record keeping services. ICON Capital
also oversees our financial records and prepares our reports to shareholders
and reports filed with the SEC. ICON Capital also performs the calculation and
publication of our net asset value, oversees the preparation and filing of our
tax returns, the payment of our expenses and the performance of various third
party service providers. Furthermore, ICON Capital will provide on our behalf
managerial assistance to those portfolio companies to which we are required to
provide such assistance.  About AIM  We and CIM have engaged AIM to act as our
investment sub-adviser, as AIM possesses skills that we believe will aid us in
achieving our investment objective. AIM is a subsidiary of Apollo (NYSE: APO)
and is the investment adviser to Apollo Investment Corporation (NASDAQ: AINV),
or AINV, a publicly-traded BDC.  AIM assists CIM in identifying investment
opportunities and makes investment recommendations for approval by CIM,
according to pre-established investment guidelines. AIM is not responsible or
liable for any such investment decision. Further, AIM only provides the
investment advisory services expressly set forth in the investment sub-advisory
agreement among AIM, CIM and us. Investment recommendations made by AIM are
made in a manner that we expect to be consistent with the investment processes
developed for the advisory services provided to AINV since its inception in
2004. 4


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Market Opportunity  We believe that the market for lending to private U.S.
middle-market companies is underserved and presents a compelling investment
opportunity. CIM’s management team has witnessed significant demand for debt
capital among middle-market companies that have the characteristics we target.
We believe that this demand, coupled with the limited and fragmented
availability of funding within our target market, will enable us to achieve
favorable transaction pricing. We are raising funds in an attempt to capitalize
on what we believe is a favorable environment. We believe that the following
characteristics and market trends support our belief:  ·The middle market is
a large addressable market.  According
to GE Capital’s National Center for the Middle Market 4th Quarter
2013 Middle Market Indicator, there are approximately 200,000 U.S.
middle-market companies, which represent approximately $9 trillion in aggregate
revenue and approximately 44.5 million aggregate employees. The U.S. middle
market accounts for approximately one-third of private sector gross domestic
product, or GDP, which, measured on a global scale, would be the fifth largest
global economy. GE defines middle-market companies as those with $10 million to $1
billion in annual revenue, which we believe has significant overlap with our
definition of middle-market companies that generally possess EBITDA of $50
million or less.  ·Greater demand for
non-traditional sources of debt financing.We believe that commercial banks in the U.S.,
which have traditionally been the primary source of capital to middle-market
companies, have experienced consolidation, unprecedented loan losses, capital
impairments and stricter regulatory scrutiny. These factors have led to
substantially reduced loan volume to middle-market companies. For example,
according to the Board of Governors of the Federal Reserve System, Assets and
Liabilities of Commercial Banks in the United States (Release
Date – January 4, 2013), commercial banks in the U.S. reduced their
commercial and industrial loans by approximately $105 billion from 2008 to
2012. Consequently, we believe there is an increasing trend for middle-market
companies to seek financing from other sources, such as us.  ·Disruptions within
the credit markets have reduced middle-market companies’ access to the capital
markets for senior debt.  While
many middle-market companies were previously able to raise senior debt
financing through traditional large financial institutions, we believe this
approach to financing will become more difficult as implementation of U.S. and
international financial reforms, such as Basel III, are expected to limit the
capacity of large financial institutions to hold leveraged loans of
middle-market companies on their balance sheets.  ·There is a large
pool of uninvested private equity capital likely to seek additional senior debt
capital to finance strategic transactions.We expect that middle-market private equity
firms will continue to invest the approximately $459 billion raised since 2009
in middle-market companies, as reported in Pitchbook’s 2H 2013 Fundraising and
Capital Overhang Report, and that these private equity firms will seek to
support their investments with senior loans from other sources, such as us.
Additionally, as reported in Pitchbook’s 2H 2013 Fundraising and Capital
Overhang Report, the $73 billion raised by middle-market sponsors in the first
half of 2013 represents approximately 66% of the total amount raised in 2012.
We believe this demonstrates the continued appetite for middle-market
acquisitions that will need senior debt financing.  ·General reduction in
supply of corporate debt.The
credit crisis that began in 2007 and other more recent market events have
significantly impacted traditional sources of credit, reducing the ability of
such sources to provide financing. We believe that the disruption in the credit
markets has created an environment where liquidity and capital resources are
scarce while the financing requirements of companies remain high. We believe
that the scarcity of capital and the continuing need for financing will allow
us to pursue more favorable economic terms, governance terms and covenants in
comparison to those that existed in other periods.  ·Specialized lending
and unfunded private equity commitments drive demand for debt capital.  Lending to small- and
middle-market companies requires in-depth diligence, credit expertise,
structuring experience and active portfolio management. In addition,
middle-market companies may require more active monitoring and participation on
the lender’s part. As such, we believe that, of the U.S. financial institutions
that are not liquidity constrained, few are capable of pursuing a sustained
lending strategy successfully. We believe this creates a significant
supply/demand imbalance for small and middle-market credit. We also expect that
private equity firms will continue to pursue acquisitions and will seek to
leverage their equity investments with debt financing, including senior debt,
unitranche debt, and mezzanine loans provided by companies such as ours.
Historically, according to the S&P LCD Leveraged Lending Review, such
leverage has represented approximately 62% of a private equity acquisition.
Therefore, adding to the imbalance in the availability of credit is the
significant amount of unallocated private equity capital raised since 2009
described above, much of which will require debt financing in the coming years.
As depicted in the chart below, almost $328.4 billion of unfunded private
equity commitments were outstanding through the first half of 2013. Based upon
the historical proportion of leverage to total investment size, this represents
potential demand of approximately $535 billion. 5


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PE Capital Overhang    ·Active private
equity focus on small- and middle-market firms.Private equity firms have
continued their active roles investing in small- and middle-market companies,
and CIM expects this trend to continue. Private equity funds often seek to
leverage their investments by combining equity capital with senior secured and
mezzanine loans from other sources. Thus, we believe that significant private
equity investment in middle-market firms will create substantial investment
opportunities for us to fill the role of leverage provider. We believe that the
network of relationships between CIM’s senior management team, Apollo’s
management team and the private equity community will be a key channel through
which we will seek to access significant investment opportunities.  ·Middle-market
companies compared to larger companies.We believe that middle-market companies compare
favorably to larger companies with respect to our investment objective and
strategy. According to the GE Capital 2012 National Middle Market Summit
Report, almost 70% of middle-market companies have been in business for more
than 20 years and are, on average, less financially leveraged than large
companies. During the economic downturn from 2007 to 2010, surviving
middle-market companies created more than 2 million jobs, as compared to nearly
4 million jobs eliminated by larger companies.  ·Attractive market
segment.We
believe that the underserved nature of such a large segment of the market can
at times create a significant opportunity for investment. In particular, we
believe that middle-market companies are more likely to offer attractive
economics in terms of transaction pricing (including higher debt yields),
upfront and ongoing fees, prepayment penalties and more attractive security
features in the form of stricter covenants and quality collateral. In addition,
as compared to larger companies, middle-market companies often have simpler
capital structures and carry less leverage, thus aiding the structuring and
negotiation process and allowing us greater flexibility in structuring
favorable transactions. 6


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Average Nominal Spread of Leveraged Loans1    1Excludes
all facilities in default.  Source: Standard and Poor’s Capital IQ LCD and S&P/LSTA
Leveraged Loan Index. 7


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Average Discounted Spread of Leveraged Loans2  2Excludes all facilities in default and assumes discount from
par is amortized evenly over a three-year life. Spread calculation has been
adjusted to be based off the bid rather than par (that is assuming that the
discounted margin is as a percent of the current market value rather than the
par amount of the loan). Source: Standard and Poor’s Capital IQ LCD
and S&P/LSTA Leveraged Loan Index. Characteristics of and Risks Related to
Investments in Private Companies  We invest primarily in the debt of
privately held companies. Investments in private companies pose significantly
greater risks as compared to investments in public companies. First, private
companies have reduced access to the capital markets, resulting in diminished
capital resources and ability to withstand financial distress. Second, the
investments themselves are often illiquid. As such, we may have difficulty
exiting an investment promptly or at a desired price prior to maturity or
outside of a normal amortization schedule. In addition, little public
information generally exists about private companies. Finally, these companies
often do not have third-party debt ratings or audited financial statements. We
must therefore rely on the ability of CIM and/or AIM to obtain adequate
information through their due diligence efforts to evaluate the
creditworthiness of, and risks involved with, investing in these companies.
These companies and their financial information will also generally not be
subject to the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley
Act, and other rules and regulations that govern public companies that are
designed to protect investors. 8


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Investment Strategy  When evaluating an investment, we use the resources of
CIM and AIM to develop an investment thesis and a proprietary view of a
potential company’s value. When identifying prospective portfolio companies, we
focus primarily on the following attributes, which we believe will help us
generate higher total returns with an acceptable level of risk. These
attributes are:  ·Leading, defensible
market positions that present attractive growth opportunities.We seek to invest in companies
that we believe possess advantages in scale, scope, customer loyalty, product
pricing or product quality versus their competitors, minimizing sales risk and
protecting profitability.  ·Companies with
leading market positions and strong free cash flows.We seek to invest in the debt
of companies that have a leading market position or other significant
competitive advantages and significant free cash flow. We believe that such
companies are able to maintain consistent cash flow to service and repay our
loans and maintain growth or market share.  ·Investing in
middle-market, private companies.We seek to invest in private companies that generally
possess annual EBITDA of $50 million or less at the time of investment. We do
not intend to invest in start-up companies, turnaround situations or companies
with speculative business plans.  ·Proven management
teams with meaningful equity ownership.We focus on investments in which the target company
has an experienced management team with an established track record of success.
We typically require the portfolio companies to have in place proper incentives
to align management’s goals with ours. Generally, we focus on companies in
which the management teams have significant equity interests.  ·Private equity
sponsorship.Often
we seek to participate in transactions sponsored by what we believe to be high-quality
private equity firms. CIM’s management team believes that a private equity
sponsor’s willingness to invest significant sums of equity capital into a
company provides an additional level of due diligence investigation and is an
implicit endorsement of the quality of the investment. Further, by co-investing
with quality private equity firms that commit significant sums of equity
capital with junior priority to our debt investments, we may benefit from
having due diligence on our investments performed by both parties. Further,
strong private equity sponsors with significant investments at risk have the
ability and a strong incentive to contribute additional capital in difficult
economic times should operational or financial issues arise.  ·Broad portfolio.We seek to create a portfolio of
portfolio companies engaged in a variety of industries and located in a variety
of geographic locations, thereby potentially reducing the risk of a downturn in
any one industry or geographic location having a disproportionate impact on the
value of our portfolio. Because we are a BDC, we focus on and invest at least
70% of our total assets in U.S. companies, but seek to maintain investments across
the various geographic regions of the U.S. To the extent that we invest in
foreign companies, we intend to do so in accordance with the limitations under
the 1940 Act and only in jurisdictions with established legal frameworks and a
history of respecting creditor rights, including countries that are members of
the European Union, as well as Canada, Australia and Japan. We cannot assure
investors that we will be successful in our efforts to maintain a broad
portfolio of investments.  ·Viable exit
strategy.We
focus our investment activity primarily in companies whose business models and
growth prospects offer attractive exit possibilities, including repayment of
our investments, with the potential for capital gain on any equity interest we
hold through an initial public offering of common stock, a merger, a sale or
other recapitalization.  Moreover, we may acquire investments in the
secondary loan market, and, in analyzing such investments, we will employ the
same analytical process that we use for our primary investments. 9


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Competitive Advantages  We believe that we offer to our investors the following
competitive advantages over other capital providers to private U.S.
middle-market companies:  ·Proven ability to
invest in middle-market companies.   With AIM as our sub-adviser, we are partnered with a
team that we believe has proven its ability to source, structure and manage
private investments for a publicly-traded BDC, AINV. In addition to its ability
to call on its resources, AIM is able to draw upon Apollo’s team of
approximately 277 investment professionals that have approximately $161 billion
of assets under management as of December 31, 2013. Apollo has developed an
expertise in sourcing and investing in debt issued by middle-market companies.
We leverage this expertise, which we believe enables us to make investments
that offer the most favorable risk/reward characteristics.  ·Global platform with
seasoned investment professionals.CIM’s senior management team believes that the breadth
and depth of its experience, together with the wider resources of the Apollo
investment team, who source, structure, execute, monitor and realize upon a
broad range of private investments on behalf of Apollo, as well as the specific
expertise of Apollo in the BDC arena, provides us with a significant competitive
advantage in sourcing attractive investment opportunities worldwide.  ·Long-term investment
horizon.  We
believe that our flexibility to make investments with a long-term view provides
us with the opportunity to generate favorable returns on invested capital and
expands the types of investments that we may consider. The long-term nature of
our capital helps us avoid disposing of assets at unfavorable prices and we
believe makes us a better partner for portfolio companies.  ·Transaction sourcing
capability.  CIM
and AIM seek to identify attractive investment opportunities both through
active origination channels and through their long-term relationships with
numerous corporate and fund management teams, members of the financial
community and potential corporate partners. We also have access to the
experience of CIM’s officers in sourcing middle-market transactions through
such persons’ network of originators and underwriters. In addition, CIM seeks
to leverage Apollo’s significant access to transaction flow. We believe that
the broad networks of CIM and Apollo and their respective affiliates will
produce a significant amount of investment opportunities for us.  ·Disciplined,
income-oriented investment philosophy.  CIM employs a defensive investment approach focused
on long-term credit performance and principal protection. This investment
approach involves a multi-stage selection process for each investment
opportunity as well as ongoing monitoring by CIM of each investment made, with
particular emphasis on early detection of credit deterioration. This strategy
is designed to maximize current yield and minimize the risk of capital loss
while maintaining potential for long-term capital appreciation.  ·Ability to utilize a
wide range of transaction structures.  We believe that each of CIM’s and Apollo’s broad
expertise and experience in transaction structuring at all levels of a
company’s capital structure affords us numerous tools to manage risk while
preserving the opportunity for returns on investments. We attempt to capitalize
on this expertise in an effort to produce an investment portfolio that will
perform in a broad range of economic conditions. In addition, we believe that
the ability to offer several forms of financing makes us an attractive provider
of capital to prospective portfolio companies. Such flexible transaction
structuring allows a prospective portfolio company to forego the substantial
cost of conducting multiple negotiations and undergoing multiple due diligence
processes to secure the different types of capital it requires. 10


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Investment Types  There are a number of investment types
corresponding to a company’s capital structure. Typically, investors determine
the appropriate type of investment based upon their risk and return
requirements. Below is a diagram illustrating where these investments lie in a
typical target company’s capital structure. Senior debt is situated at the top
of the capital structure, and typically has the first claim on the assets and
cash flows of the company, followed by second lien debt, mezzanine debt,
preferred equity and finally common equity. Due to this priority of cash flows
and claims on assets, an investment’s risk increases as it moves further down
the capital structure. Investors are usually compensated for this risk
associated with junior status in the form of higher returns, either through
higher interest payments or potentially higher capital appreciation.  We focus primarily on investments in debt
securities, including senior secured loans, including unitranche loans and, to
a lesser extent, second lien and mezzanine loans. Nevertheless, the mix of
investments in our portfolio and other aspects regarding the implementation of
our strategy may change materially over time.  CIM seeks to tailor our investment focus as
market conditions evolve. Depending on market conditions and other factors, we
may, as noted above, increase or decrease our exposure to less senior portions
of the capital structure, where returns tend to be stronger in a more stable or
growing economy, but less secure in weak economic environments. We rely on
CIM’s and AIM’s experience to structure investments, potentially using all
levels of the capital structure, which we believe will perform in a broad range
of economic environments.  Typical Leveraged Capital Structure Diagram  [GRAPHIC MISSING]  Senior Secured Loans  Senior secured loans are situated at the
top of the capital structure. Because these loans have priority in payment,
they carry the least risk among all investments in a company. Generally, our
senior secured loans are expected to have maturities of three to seven years,
offer some form of amortization, and have first priority security interests in
the assets of the borrower. We expect that our senior secured loans typically
will have variable interest rates ranging between 2.0% and 6.0% over a standard
benchmark, such as the prime rate or the London InterBank Offered Rate, or
LIBOR. In some cases, a portion of the total interest may accrue or be paid in
kind.  Unitranche Loans  Unitranche loans provide all of the debt
needed to finance a leveraged buyout or other corporate transaction, both
senior and subordinated, but generally in a first lien position, while the
borrower generally pays a blended, uniform interest rate rather than different
rates for different tranches. Unitranche loans generally require payments of
both principal and interest throughout the life of the loan. Unitranche loans
generally have contractual maturities of five to six years and interest is
generally paid quarterly. Generally, we expect these securities to carry a
blended yield that is between senior secured and subordinated debt interest
rates. Unitranche loans provide a number of advantages for borrowers, including
the following: simplified documentation, greater certainty of execution and
reduced decision-making complexity throughout the life of the loan. In
addition, we may receive additional returns from any warrants we may receive in
connection with these investments. In some cases, a portion of the total interest
may accrue or be paid in kind.  Second Lien Loans  Second lien secured loans are immediately
junior to senior secured loans and have substantially the same maturities,
collateral and covenant structures as senior secured loans. Second lien secured
loans, however, are granted a second priority security interest in the assets
of the borrower. In return for this junior ranking, second lien secured loans
generally offer higher returns compared to senior secured debt. These higher
returns come in the form of higher interest and in some cases the potential for
equity participation through warrants, though to a lesser extent than with
mezzanine loans. Generally, we expect these loans to carry a fixed rate of 6%
to 10% or a floating current yield of 4.0% to 8.0% over the prime rate or
LIBOR. In addition, we may receive additional returns from any warrants we may
receive in connection with these investments. In some cases, a portion of the
total interest may accrue or be paid in kind. 11


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Subordinated Debt/Mezzanine Loans  In addition to senior secured and second
lien loans, we also may invest a portion of our assets in subordinated debt.
Subordinated debt investments usually rank junior in priority of payment to
senior secured loans and second lien loans and are often unsecured, but are
situated above preferred equity and common stock in the capital structure. In
return for their junior status compared to senior secured loans and second lien
loans, subordinated debt investments typically offer higher returns through
both higher interest rates and possible equity ownership in the form of
warrants, enabling the lender to participate in the capital appreciation of the
borrower. These warrants typically require only a nominal cost to exercise. We
intend to generally target subordinated debt with interest-only payments
throughout the life of the security, with the principal due at maturity.
Typically, subordinated debt investments have maturities of five to ten years.
Generally, we expect these securities to carry a fixed rate of 10% to 15%. In
addition, we may receive additional returns from any warrants we may receive in
connection with these investments. In some cases, a portion of the total
interest may accrue or be paid in kind.  Equity and Equity-Related Securities  While we intend to maintain our focus on
investments in debt securities, from time to time, when we see the potential
for significant gains, or in connection with securing particularly favorable
terms in a debt investment, we may make non-control investments in preferred or
common equity, typically in conjunction with a private equity sponsor we
believe to be of high quality. Alternatively, we may hold equity-related
securities consisting primarily of warrants or other equity interests generally
obtained in connection with our subordinated debt investments. In the future,
we may achieve liquidity through a merger or acquisition of a portfolio
company, a public offering of a portfolio company’s stock or by exercising our
right, if any, to require a portfolio company to repurchase the equity-related
securities we hold. With respect to any preferred or common equity investments,
we expect to target an annual investment return of at least 20%.  Non-U.S. Securities  We may invest in non-U.S. securities, which
may include securities denominated in U.S. dollars or in non-U.S. currencies,
to the extent permitted by the 1940 Act.  Cash and Cash Equivalents  We may maintain a certain level of cash or
equivalent instruments to make follow-on investments if necessary in existing
portfolio companies or to take advantage of new opportunities.  Comparison of Targeted Debt Investments to
Corporate Bonds  Loans to private companies are debt
instruments that can be compared to corporate bonds to aid an investor’s
understanding. As with corporate bonds, loans to private companies can range in
credit quality depending on security-specific factors, including total
leverage, amount of leverage senior to the security in question, variability in
the issuer’s cash flows, the quality of assets securing debt and the degree to
which such assets cover the subject company’s debt obligations. As is the case
in the corporate bond market, we will require greater returns for securities
that we perceive to carry increased risk. The companies in which we invest may
be leveraged, often as a result of leveraged buyouts or other recapitalization
transactions, and, in certain cases, will not be rated by national rating
agencies. We believe that our targeted debt investments typically will carry
ratings from a nationally recognized statistical ratings organization, or
NRSRO, and that such ratings generally will be below investment grade (rated
lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). To the extent we
make unrated investments, we believe that such investments would likely receive
similar ratings if they were to be examined by an NRSRO. Compared to
below-investment grade corporate bonds that are typically available to the
public, our targeted senior secured and second lien secured loan investments
are higher in the capital structure, have priority in receiving payment, are
secured by the issuer’s assets, allow the lender to seize collateral if
necessary, and generally exhibit higher rates of recovery in the event of
default. Corporate bonds, on the other hand, are often unsecured obligations of
the issuer.  The market for loans to private companies
possesses several key differences compared to the corporate bond market. For
instance, due to a possible lack of debt ratings for certain middle market
firms, and also due to the reduced availability of information for private
companies, investors must conduct extensive due diligence investigations before
committing to an investment. This intensive due diligence process gives the
investor significant access to management, which is often not possible in the
case of corporate bondholders, who rely on underwriters, debt rating agencies
and publicly available information for due diligence reviews and monitoring of
corporate issuers. While holding these investments, private debt investors
often receive monthly or quarterly updates on the portfolio company’s financial
performance, along with possible representation on the company’s board of
directors, which allows the investor to take remedial action quickly if
conditions happen to deteriorate. Due to reduced liquidity, the relative
scarcity of capital and extensive due diligence and expertise required on the
part of the investor, we believe that private debt securities typically offer
higher returns than corporate bonds of equivalent credit quality. 12


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Operating and Regulatory
Structure  Our investment activities are managed by CIM and
supervised by our board of directors, a majority of whom are independent.
Pursuant to our investment advisory agreement, we pay CIM an annual base
management fee based on our gross assets as well as incentive fees based on our
performance.  Pursuant to an administration agreement, ICON Capital
provides us with general ledger accounting, fund accounting, investor relations
and other administrative services. In addition, we have contracted with U.S.
Bancorp Fund Services, LLC to provide additional accounting and administrative
services.  As a BDC, we are required to comply with certain
regulatory requirements. Also, while we are permitted to finance investments
using debt, our ability to use debt is limited in certain significant respects
pursuant to the 1940 Act. Within the limits of existing regulation, we will
adjust our use of debt, according to market conditions, to the level we believe
will allow us to generate maximum risk-adjusted returns. We elected to be
treated for federal income tax purposes, and intend to qualify annually
thereafter, as a RIC under Subchapter M of the Code.  Sources
of Income  The primary means through which our shareholders will
receive a return of value is through interest income, dividends and capital
gains generated by our investments. In addition to these sources of income, we
may receive fees paid by our portfolio companies, including one-time closing
fees paid at the time an investment is made and/or monitoring fees paid
throughout the term of our investments. Closing fees typically range from 1.0%
to 2.0% of the purchase price of an investment, while annual monitoring fees
generally range from 0.25% to 1.0% of the purchase price of an investment. In
addition, we may generate revenue in the form of commitment, origination,
structuring or diligence fees, monitoring fees, fees for providing managerial
assistance and possibly consulting fees and performance-based fees.  Risk
Management  We seek to limit the downside potential of our
investment portfolio by: ·applying our investment strategy
guidelines for portfolio investments; ·requiring a total return on
investments (including both interest and potential appreciation) that
adequately compensates us for credit risk; ·creating and maintaining a broad
portfolio of investments, size permitting, with an adequate number of
companies, across different industries, with different types of collateral; and ·negotiating or seeking debt
investments with covenants or features that protect us while affording
portfolio companies flexibility in managing their businesses consistent with
preservation of capital. Such restrictions may include affirmative
and negative covenants, default penalties, lien protection, change of control
provisions and board rights. We may also enter into interest rate hedging
transactions at the sole discretion of CIM. Such transactions will enable us to
selectively modify interest rate exposure as market conditions dictate.
Furthermore, our ability to engage in hedging transactions may be adversely
affected by recent rules adopted by the U.S. Commodity Futures Trading
Commission, or CFTC.  Affirmative Covenants  Affirmative covenants require borrowers to take actions
that are meant to ensure the solvency of the company, facilitate the lender’s
monitoring of the borrower, and ensure payment of interest and loan principal
due to lenders. Examples of affirmative covenants include covenants requiring
the borrower to maintain adequate insurance, accounting and tax records, and to
produce frequent financial reports for the benefit of the lender.  Negative Covenants  Negative covenants impose restrictions on the borrower
and are meant to protect lenders from actions that the borrower may take that
could harm the credit quality of the lender’s investment. Examples of negative
covenants include restrictions on the payment of distributions and restrictions
on the issuance of additional debt without the lender’s approval. In addition,
certain covenants restrict a borrower’s activities by requiring it to meet
certain earnings interest coverage ratio and leverage ratio requirements. These
covenants are also referred to as financial or maintenance covenants. 13


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Investment Process  The
investment professionals employed by CIM and AIM have spent their careers
developing the resources necessary to make investments in private companies.
Our transaction process is highlighted below.  Our Transaction Process  [GRAPHIC MISSING]  Sourcing  CIM utilizes its access to transaction flow and seeks
to leverage AIM’s significant access to transaction flow as well to source
transactions. With respect to CIM’s origination channel, CIM seeks to leverage
ICON’s significant industry relationships and investment personnel that
actively source new investments. With respect to AIM’s origination channel, CIM
seeks to leverage the global presence of Apollo to generate access to
originated transactions with attractive investment characteristics. We believe
that CIM’s and AIM’s broad networks have and will continue to produce a
significant pipeline of investment opportunities for us.  Evaluation  Initial Review.  In
its initial review of an investment opportunity to present to us, CIM’s or
AIM’s transaction team, as applicable, examines information furnished by the
target company and external sources, including rating agencies, if applicable,
to determine whether the investment meets our basic investment criteria and
other guidelines, within the context of creating and maintaining a broad
portfolio of investments, and offers an acceptable probability of attractive
returns with identifiable downside risk.  Credit Analysis/Due Diligence.  Before undertaking an investment, the
transaction team conducts a thorough due diligence review of the opportunity to
ensure the company fits our investment strategy, which may include: ·a full operational
analysis to identify the key risks and opportunities of the target’s business,
including a detailed review of historical and projected financial results; ·a detailed analysis of
industry dynamics, competitive position, regulatory, tax and legal matters; ·on-site visits, if
deemed necessary, as well as telephone calls and meetings with management and
other key personnel; ·background checks to
further evaluate management and other key personnel; ·a review by legal and
accounting professionals, environmental or other industry consultants, if
necessary; ·financial sponsor due
diligence, including portfolio company and lender reference checks, if
necessary; and ·a review of
management’s experience and track record. When possible, our advisory team seeks to
structure transactions in such a way that our target companies are required to
bear the costs of due diligence, including those costs related to any outside
consulting work we may require.  Execution  Recommendation.  We
and CIM have engaged AIM to identify and recommend investment opportunities for
CIM’s approval. We believe that AIM seeks to maintain a defensive approach
toward its investment recommendations by emphasizing risk control in its
transaction process, which includes (1) the pre-review of each opportunity by
one of its portfolio managers to assess the general quality, value and fit
relative to our portfolio, (2) where possible, transaction structuring with a
focus on preservation of capital in varying economic environments and (3)
ultimate approval of investment recommendations by AIM’s investment committee.  Approval.  After
completing its internal transaction process, subject to the terms of the
investment sub-advisory agreement, the applicable CIM or AIM transaction team
makes formal recommendations for review and approval by CIM. In connection with
its recommendation, it transmits any relevant underwriting material and other
information pertinent to the decision-making process. In addition, AIM makes
its staff available to answer inquiries by CIM in connection with its
recommendations. The consummation of a transaction requires unanimous approval
of the members of CIM’s investment committee.  14


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Monitoring  Portfolio Monitoring.  CIM closely monitors our portfolio companies on an ongoing
basis, as well as monitors the financial trends of each portfolio company to
determine if each is meeting its respective business plans and to assess the
appropriate course of action for each company. In addition, depending on the
size, nature and performance of the transaction, senior investment
professionals of CIM may take board seats or obtain board observation rights
for our portfolio companies.  CIM has several methods of evaluating and monitoring
the performance and fair value of our investments, which includes, but are not
limited to, the assessment of success in adhering to a portfolio company’s
business plan and compliance with covenants; periodic and regular contact with
portfolio company management and, if appropriate, the financial or strategic
sponsor, to discuss financial position, requirements and accomplishments;
comparisons to other portfolio companies in the industry; attendance at and
participation in board meetings; and review of monthly and quarterly financial
statements and financial projections for portfolio companies.  CIM uses an investment rating system to characterize
and monitor our expected level of returns on each investment in our portfolio.
These ratings are just one of several factors that CIM uses to monitor our
portfolio, are not in and of themselves determinative of fair value or revenue
recognition and are presented for indicative purposes. CIM grades the credit
risk of all investments on a scale of 1 to 5 no less frequently than quarterly.
This system is intended primarily to reflect the underlying risk of a portfolio
investment relative to our initial cost basis in respect of such portfolio
investment (i.e., at the time of acquisition), although it may also take into
account under certain circumstances the performance of the portfolio company’s
business, the collateral coverage of the investment and other relevant factors.  The following is a description of the conditions
associated with each investment rating used in this ratings system:  Investment Grade
 Description1
 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
  grade 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 graded 3, 4 or 5, CIM enhances its
level of scrutiny over the monitoring of such portfolio company.  CIM monitors and, when appropriate, changes investment
ratings assigned to each investment in our portfolio. In connection with our
valuation process, CIM reviews these investment ratings on a quarterly basis. The following table summarizes the composition of our
investment portfolio based on the 1 to 5 investment rating scale at fair value
as of December 31, 2013 and 2012, excluding short term investments of $11,383,669
and $1,817,762, respectively:  December 31, 2013
 
 December 31, 2012Investment
  Rating
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio1
 
 $
 -
 
 -
 
 $
 -
 
 -2
 
 
 93,135,244
 
 100.0%
 
 
 1,980,044
 
 100.0%3
 
 
 -
 
 -
 
 
 -
 
 -4
 
 
 -
 
 -
 
 
 -
 
 -5
 
 
 -
 
 -
 
 
 -
 
 -Total
 
 $
 93,135,244
 
 100.0%
 
 $
 1,980,044
 
 100.0%
 15


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The following table
summarizes the composition of our underlying TRS loans based on the 1 to 5
investment rating scale at fair value as of December 31, 2013 and 2012:  December 31, 2013
 
 December 31, 2012Investment
  Rating
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS Loans
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS Loans1
 
 $
 -
 
 -
 
 $
 -
 
 -2
 
 
 149,748,554
 
 100.0%
 
 
 2,895,495
 
 100.0%3
 
 
 -
 
 -
 
 
 -
 
 -4
 
 
 -
 
 -
 
 
 -
 
 -5
 
 
 -
 
 -
 
 
 -
 
 -Total
 
 $
 149,748,554
 
 100.0%
 
 $
 2,895,495
 
 100.0%
 The amount of the
portfolio and underlying TRS loans in each grading category may vary
substantially from period to period resulting primarily from changes in the
composition of the portfolio as a result of new investment, repayment and exit
activities. In addition, changes in the grade of investments may be made to
reflect our expectation of performance and changes in investment values.  Valuation Process.  Each quarter, we value
investments in our portfolio, and such values are disclosed each quarter in
reports filed with the SEC. Investments for which market quotations are readily
available are recorded at such market quotations. With respect to investments
for which market quotations are not readily available, our board of directors
determines the fair value of investments in good faith utilizing the input of
our audit committee, CIM, and any other professionals or materials that our
board of directors deem worthy and relevant, including independent third-party
valuation firms, if applicable.  Managerial Assistance.  As a BDC, we must offer, and
provide upon request, managerial assistance to certain of our portfolio
companies. This assistance could involve, among other things, monitoring the
operations of our portfolio companies, participating in board and management
meetings, consulting with and advising officers of portfolio companies and
providing other organizational and financial guidance. Depending on the nature
of the assistance required, CIM will provide such managerial assistance on our
behalf to portfolio companies that request this assistance. To the extent fees
are paid for these services, we, rather than CIM, will retain any fees paid for
such assistance. 16


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Exit  Exit Transactions.We seek to invest in companies
that can generate consistent cash flow to repay their loans while maintaining
growth in their businesses. We expect this internally generated cash flow to be
a key means through which we will receive timely payment of interest and loan
principal. Additionally, we attempt to invest in portfolio companies whose
business models and growth prospects offer attractive exit possibilities via
third-party transactions, including sales to strategic or other buyers and
initial public offerings of common stock. Such third-party transactions may be
particularly important in realizing capital gains through the equity portions
of our investments. We also seek to exit investments in secondary market
transactions when price targets are achieved or circumstances otherwise
warrant. Financing Arrangements Total Return Swap  On December 17, 2012, Flatiron Funding,
LLC, or Flatiron, our wholly-owned financing subsidiary, entered into a TRS
with Citibank, N.A., or Citibank. Effective December 9, 2013, Flatiron and
Citibank amended the TRS to, among other things, extend the termination or call
date from December 17, 2013 to December 17, 2014, increase the maximum
aggregate market value of the portfolio of loans subject to the TRS (determined
at the time each such loan becomes subject to the TRS) from $150 million to
$225 million, and increase the interest rate payable by Flatiron to Citibank
with respect to each loan included in the TRS by increasing the spread over the
floating rate index specified for each such loan from 1.25% to 1.35% per year. Effective
February 6, 2014, Flatiron and Citibank further amended the TRS to increase the
maximum aggregate market value of the portfolio of loans subject to the TRS
from $225 million to $275 million. The agreements between Flatiron and
Citibank, which collectively establish the TRS, are referred to herein as the
TRS Agreement.  A TRS is a contract in which one party
agrees to make periodic payments to another party based on the change in the
market value of the assets underlying the TRS and interest payments in return
for periodic payments based on a fixed or variable interest rate. A TRS
effectively adds leverage to a portfolio by providing investment exposure to a
security or market without owning or taking physical custody of such security
or investing directly in such market. Because of the unique structure of a TRS,
a TRS typically offers lower financing costs than are offered through more
traditional borrowing arrangements.  The TRS with Citibank enables us, through
our ownership of Flatiron, to obtain the economic benefit of owning the loans
subject to the TRS, without actually owning them, in return for an
interest-type payment to Citibank. As such, the TRS is analogous to Flatiron
borrowing funds to acquire loans and incurring interest expense to a lender.  The obligations of Flatiron under the TRS
are non-recourse to us and our exposure under the TRS is limited to the value
of our investment in Flatiron, which generally will equal the value of cash
collateral provided by Flatiron under the TRS. Pursuant to the terms of the
TRS, Flatiron may select loans with a maximum aggregate market value of $275,000,000
(determined at the time each such loan becomes subject to the TRS). Flatiron is
required to initially cash collateralize a specified percentage of each loan
(generally 25% of the market value of such loan) included under the TRS in
accordance with margin requirements described in the TRS Agreement. Under the
terms of the TRS, Flatiron agreed not to draw upon, or post as collateral, such
cash collateral in respect of other financings or operating requirements prior
to the termination of the TRS. Neither the cash collateral required to be
posted with Citibank nor any other assets of Flatiron are available to pay our
debts.  Each individual loan must meet criteria
described in the TRS Agreement, including a requirement that substantially all
of the loans be rated by Moody’s and S&P and quoted by a
nationally-recognized pricing service. Under the terms of the TRS, Citibank, as
calculation agent, determines whether there has been a failure to satisfy the
portfolio criteria in the TRS. If such failure continues for 30 days following
the delivery of notice thereof, then Citibank has the right, but not the
obligation, to terminate the TRS. Flatiron receives from Citibank all interest
and fees payable in respect of the loans included in the TRS. Flatiron pays to
Citibank interest at a rate equal to, in respect of each loan included in the
TRS, the floating rate index specified for such loan plus 1.35% per year. In
addition, upon the termination or repayment of any loan subject to the TRS,
Flatiron will either receive from Citibank the appreciation in the value of
such loan or pay to Citibank any depreciation in the value of such loan.  Under the terms of the TRS, Flatiron may be
required to post additional cash collateral, on a dollar-for-dollar basis, in
the event of depreciation in the value of the underlying loans after such value
decreases below a specified amount. The limit on the additional collateral that
Flatiron may be required to post pursuant to the TRS is equal to the difference
between the full notional amount of the loans underlying the TRS and the amount
of cash collateral already posted by Flatiron. The amount of collateral
required to be posted by Flatiron is determined primarily on the basis of the
aggregate value of the underlying loans.  We have no contractual obligation to post
any such additional collateral or to make any interest payments to Citibank on
behalf of Flatiron. We may, but are not obligated to, increase our investment
in Flatiron for the purpose of funding any additional collateral or payment
obligations for which Flatiron may become obligated during the term of the TRS.
If we do not make any such additional investment in Flatiron and Flatiron fails
to meet its obligations under the TRS, then Citibank will have the right to
terminate the TRS and seize the cash collateral posted by Flatiron under the TRS.
In the event of an early termination of the TRS, Flatiron would be required to
pay an early termination fee.  17


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Citibank may terminate the TRS on or after December
17, 2014, or the call date. Flatiron may terminate the TRS at any time upon
providing no more than 30 days prior notice to Citibank. Any termination prior
to the call date will result in payment of an early termination fee to Citibank
based on the maximum portfolio amount of the TRS. Under the terms of the TRS,
the early termination fee will equal the present value of a stream of monthly
payments that would be owed by Flatiron to Citibank for the period from the
termination date through and including the call date. Such monthly payments
will equal the product of 80% of the maximum portfolio amount, multiplied by 1.35%
per year.  We estimate the early termination fee would have been approximately $2,328,600
as of December 31, 2013.  Other than during the first nine months and last 180
days of the term of the TRS, Flatiron may be required to pay a minimum usage
fee in connection with the TRS. At December 31, 2013, Flatiron was not subject
to a minimum usage fee.  In connection with the TRS, Flatiron is
required to comply with various covenants and reporting requirements as defined
in the TRS Agreement. As of December 31, 2013, Flatiron was in compliance with
these covenants and reporting requirements.  For purposes of computing the capital gains
incentive fee, we treat net realized gains or losses on the sale or maturity of
the underlying TRS loans as realized gains or losses on the TRS, which CIM
becomes entitled to upon the disposition of the TRS. For purposes of computing
the subordinated incentive fee on income, we treat the interest spread, which
represents the difference between (i) the interest and fees received on the
underlying TRS loans and (ii) the interest paid to Citibank on the settled
notional value of the TRS loans, as pre-incentive fee net investment income on
the TRS. Accordingly, all realized economic benefits associated with the
underlying TRS loans, if any, are included in the computation of either the
capital gains incentive fee or the subordinated incentive fee on income. Any
unrealized gains on the TRS is reflected in total assets on our consolidated
balance sheets and included 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,
we accrue capital gains incentive fees on unrealized gains. This accrual
reflects the incentive fees that would be payable to CIM if our 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.  The value of the TRS is based primarily on
the valuation of the underlying portfolio of loans subject to the TRS. Pursuant
to the terms of the TRS, on each business day, Citibank values each underlying
loan in good faith on a mark-to-market basis by determining how much Citibank
would receive on such date if it sold the loan in the open market. Citibank
reports the mark-to-market value on the underlying loans to Flatiron.  As of December 31, 2013 and 2012, the fair
value of the TRS was $1,548,617 and $12,395, respectively. The fair value of
the TRS is reflected as unrealized appreciation on total return swap on our
consolidated balance sheets. The change in value of the TRS is reflected in our
consolidated statements of operations as net change in unrealized appreciation
on total return swap. As of December 31, 2013 and 2012, Flatiron had selected
sixty three and five underlying loans with a total notional amount of
$148,199,937 and $2,883,100, respectively. For the same periods, Flatiron
posted $40,703,777 and $729,325 in cash collateral held by Citibank (of which
only $39,285,408 and $720,775 was required to be posted), which is reflected in
due from counterparty on our consolidated balance sheets.  Realized gains and losses on the TRS are
composed of any gains or losses on loans underlying the TRS as well as net
interest earned during the period. For the year ended December 31, 2013, we
recorded net realized gains of $3,489,036, which consisted of $1,128,186 in net
gains from sales and principal repayments and $2,360,850 in net gains from net
interest earned. For the period from January 31, 2012 (Inception) through
December 31, 2012, we recorded net realized gains of $98, which consisted of
net gains from net interest earned. Net realized gains are reflected in net
realized gain on total return swap on our consolidated statements of
operations.  Receivable due on total return swap on our
consolidated balance sheets is composed of any amounts due from Citibank that
consist of earned but not yet collected net interest and net gains on sales and
principal repayments of underlying loans of the TRS. As of December 31, 2013,
our receivable due on the TRS was $1,801,665, which consisted of earned but not
yet collected net interest and net gains of $1,293,582 and $508,083,
respectively.  For purposes of the asset coverage ratio
test applicable to us as a BDC, we treat the outstanding notional amount of the
TRS, less any cash collateral required to be posted by Flatiron under the TRS,
as a senior security for the life of that instrument. We may, however, accord
different treatment to the TRS in the future in accordance with any applicable
new rules or interpretations adopted by the staff of the SEC.  Further, for purposes of Section 55(a)
under the 1940 Act, we treat each loan underlying the TRS as a qualifying asset
if the obligor on such loan is an eligible portfolio company and as a
non-qualifying asset if the obligor is not an eligible portfolio company. We
may, however, accord different treatment to the TRS in the future in accordance
with any applicable new rules or interpretations adopted by the staff of the
SEC. 18


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Determination of Net Asset Value  The value of our assets is determined
quarterly and at such other times that an event occurs that materially affects
the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940
Act, which requires that we value our assets as follows: (i) the market price
for those securities for which a market quotation is readily available, and
(ii) for all other securities and assets, 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.  Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosure, or ASC Topic 820, clarifies the
definition of fair value and requires companies to expand their disclosure
about the use of fair value to measure assets and liabilities in interim and
annual periods subsequent to initial recognition. ASC Topic 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 Topic 820 also establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such as quoted prices in
active markets; Level 2, defined as observable inputs such as quoted prices for
similar securities in active markets and quoted prices for identical securities
where there is little or no activity in the market; and Level 3, defined as
unobservable inputs for which little or no market data exists, therefore
requiring an entity to develop its own assumptions.  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. 19


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Regulation  We have elected to be regulated as a BDC
under the 1940 Act. A BDC is a special category of investment company under the
1940 Act that was added by Congress to facilitate the flow of capital to
private companies and small public companies that do not have efficient or
cost-effective access to public capital markets or other conventional forms of
corporate financing. BDCs make investments in private or thinly-traded public
companies in the form of long-term debt and/or equity capital, with the goal of
generating current income or capital growth.  BDCs are closed-end funds that elect to be
regulated as BDCs under the 1940 Act. As such, BDCs are subject to only certain
provisions of the 1940 Act, as well as the Securities Act and the Exchange Act.
BDCs are provided greater flexibility under the 1940 Act than are other
investment companies in dealing with their portfolio companies, issuing
securities, and compensating their managers. BDCs can be internally or
externally managed and may qualify to elect to be taxed as RICs for federal tax
purposes. The 1940 Act contains prohibitions and restrictions relating to
transactions between BDCs and their affiliates, principal underwriters, and
affiliates of those affiliates or underwriters. The 1940 Act requires that a
majority of a BDC’s directors be persons other than “interested persons,” as
that term is defined in the 1940 Act. In addition, the 1940 Act provides that
we may not change the nature of our business so as to cease to be, or withdraw
our election as a BDC unless approved by a majority of our outstanding voting
securities.  The 1940 Act defines “a majority of the
outstanding voting securities” as the lesser of (i) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of our
outstanding voting securities are present or represented by proxy or (ii) 50%
of our voting securities.  We are generally not able to issue and sell
our common stock at a price below net asset value per share. We may, however,
sell our common stock, or warrants, options or rights to acquire our common
stock, at a price below the then-current net asset value of our common stock if
our board of directors determines that such sale is in our best interests and
the best interests of our shareholders, and our shareholders approve such sale.
In addition, we may generally issue new shares of our common stock at a price
below net asset value in rights offerings to existing shareholders, in payment
of distributions and in certain other limited circumstances.  As a BDC, we are subject to certain
regulatory restrictions in negotiating or investing in certain investments. For
example, we generally are not permitted to co-invest with certain entities
affiliated with CIM or AIM in transactions originated by CIM, AIM or their
respective affiliates unless we obtain an exemptive order from the SEC. We have
not applied for an exemptive order from the SEC and, if we apply, there can be
no assurance that we will be able to obtain such exemptive relief. Under the
investment sub-advisory agreement, AIM only assists CIM in identifying
investment opportunities and making investment recommendations for approval by
CIM. AIM is not be responsible or liable for any such investment decision.  We may invest up to 100% of our assets in
securities acquired directly from issuers in privately negotiated transactions.
With respect to such securities, we may, for the purpose of public resale, be
deemed an “underwriter” as that term is defined in the Securities Act. We do
not intend to acquire securities issued by any investment company that exceed
the limits imposed by the 1940 Act. Under these limits, except for registered
money market funds, we generally cannot acquire more than 3% of the voting stock
of any investment company, invest more than 5% of the value of our total assets
in the securities of one investment company or invest more than 10% of the
value of our total assets in the securities of more than one investment
company. With regard to that portion of our portfolio invested in securities
issued by investment companies, it should be noted that such investments might
indirectly subject our shareholders to additional expenses as they will
indirectly be responsible for the costs and expenses of such companies. None of
our investment policies are fundamental and any may be changed without
shareholder approval. 20


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Qualifying Assets  Under the 1940 Act, a BDC may not acquire any asset
other than assets of the type listed in Section 55(a) of the 1940 Act, which
are referred to as qualifying assets, unless, at the time the acquisition is
made, qualifying assets represent at least 70% of the company’s total assets.
The principal categories of qualifying assets relevant to our business are any
of the following:  1.Securities purchased in
transactions not involving any public offering from the issuer of such
securities, which issuer (subject to certain limited exceptions) is an eligible
portfolio company, or from any person who is, or has been during the preceding
13 months, an affiliated person of an eligible portfolio company, or from any
other person, subject to such rules as may be prescribed by the SEC. An
eligible portfolio company is defined in the 1940 Act as any issuer that:  a.is organized under the
laws of, and has its principal place of business in, the U.S.;  b.is not an investment
company (other than a small business investment company wholly-owned by the
BDC) or a company that would be an investment company but for certain
exclusions under the 1940 Act; and  c.satisfies any of the
following:  i.does not have any class
of securities that is traded on a national securities exchange;  ii.has a class of
securities listed on a national securities exchange, but has an aggregate
market value of outstanding voting and non-voting common equity of less than
$250 million;  iii.is controlled by a BDC
or a group of companies including a BDC and the BDC has an affiliated person
who is a director of the eligible portfolio company; or  iv.is a small and solvent
company having total assets of not more than $4.0 million and capital and
surplus of not less than $2.0 million.  2.Securities of any
eligible portfolio company that we control.  3.Securities purchased in
a private transaction from a U.S. issuer that is not an investment company or
from an affiliated person of the issuer, or in transactions incident thereto,
if the issuer is in bankruptcy and subject to reorganization or if the issuer,
immediately prior to the purchase of its securities, was unable to meet its
obligations as they came due without material assistance other than
conventional lending or financing arrangements.  4.Securities of an
eligible portfolio company purchased from any person in a private transaction
if there is no ready market for such securities and we already own 60% of the
outstanding equity of the eligible portfolio company.  5.Securities received in
exchange for or distributed on or with respect to securities described in (1)
through (4) above, or pursuant to the exercise of warrants or rights relating
to such securities.  6.Cash, cash equivalents,
U.S. government securities or high-quality debt securities maturing in one year
or less from the time of investment.  In addition, a BDC must have been organized and have
its principal place of business in the U.S. and must be operated for the
purpose of making investments in the types of securities described in (1), (2)
or (3) above. 21


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Managerial Assistance to Portfolio Companies  In order to count portfolio securities as
qualifying assets for the purpose of the 70% test, we must either control the
issuer of the securities or must offer to make available to the issuer of the
securities (other than small and solvent companies described above) significant
managerial assistance; except that, where we purchase such securities in
conjunction with one or more other persons acting together, one of the other
persons in the group may make available such managerial assistance. Making
available managerial assistance means, among other things, any arrangement
whereby the BDC, through its directors, officers or employees, offers to
provide, and, if accepted, does so provide, significant guidance and counsel
concerning the management, operations or business objectives and policies of a
portfolio company. Depending on the nature of the assistance required, CIM will
provide such managerial assistance on our behalf to portfolio companies that
request this assistance. To the extent fees are paid for these services, we,
rather than CIM, will retain any fees paid for such assistance.  Temporary Investments  Pending investment in other types of
“qualifying assets,” as described above, our investments may consist of cash,
cash equivalents, U.S. government securities or high-quality debt securities
maturing in one year or less from the time of investment, which we refer to,
collectively, as temporary investments, so that 70% of our assets are
qualifying assets. Typically, we will invest in U.S. Treasury bills or in
repurchase agreements, provided that such agreements are fully collateralized
by cash or securities issued by the U.S. government or its agencies. A
repurchase agreement involves the purchase by an investor, such as us, of a
specified security and the simultaneous agreement by the seller to repurchase
it at an agreed-upon future date and at a price that is greater than the
purchase price by an amount that reflects an agreed-upon interest rate. There
is no percentage restriction on the proportion of our assets that may be
invested in such repurchase agreements. However, if more than 25% of our total
assets constitute repurchase agreements from a single counterparty, we may not
meet the RIC diversification tests, as further defined in the “Taxation as a
Regulated Investment Company” section below, in order to qualify as a RIC for
federal income tax purposes. Thus, we do not intend to enter into repurchase
agreements with a single counterparty in excess of this limit. CIM will monitor
the creditworthiness of the counterparties with which we enter into repurchase
agreement transactions.  Senior Securities  We are permitted, under specified
conditions, to issue multiple classes of debt and one class of stock senior to
our common stock if our asset coverage, as defined in the 1940 Act, is at least
equal to 200% immediately after each such issuance. In addition, while any
senior securities remain outstanding, we must make provisions to prohibit any
distribution to our shareholders or the repurchase of such securities or shares
unless we meet the applicable asset coverage ratios at the time of the
distribution or repurchase. We may also borrow amounts up to 5% of the value of
our total assets for temporary or emergency purposes without regard to asset
coverage. See “Item 1A. Risk Factors - Risks Related to Business
Development Companies - Regulations governing our operation as a BDC
and RIC will affect our ability to raise, and the way in which we raise,
additional capital or borrow for investment purposes, which may have a negative
effect on our growth.”  Code of Ethics  We and CIM have adopted a code of ethics
pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for
personal investments and restricts certain personal securities transactions.
Personnel subject to the code may invest in securities for their personal
investment accounts, including securities that may be purchased or held by us,
so long as such investments are made in accordance with the code’s
requirements. Shareholders may read and copy the code of ethics at the SEC’s
Public Reference Room in Washington, D.C. Shareholders may obtain information
on the operation of the Public Reference Room by calling the SEC at (202)
551-8090. In addition, the code of ethics is available on the EDGAR Database on
the SEC’s Internet site athttp://www.sec.gov. Shareholders may also
obtain copies of the code of ethics, after paying a duplicating fee, by
electronic request at the following e-mail address:publicinfo@sec.gov,
or by writing the SEC’s Public Reference Section, 100 F Street, N.E.,
Washington, D.C. 20549. 22


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Compliance
Policies and Procedures  We and CIM have adopted and implemented
written policies and procedures reasonably designed to prevent violation of the
federal securities laws and are required to review these compliance policies
and procedures annually for their adequacy and the effectiveness of their
implementation. Our Chief Compliance Officer, or CCO, is responsible for
administering our policies and procedures and CIM’s chief compliance officer is
responsible for administering its policies and procedures.  Proxy Voting Policies and Procedures  We have delegated our proxy voting
responsibility to CIM. The proxy voting policies and procedures of CIM are set
forth below. The guidelines are reviewed periodically by CIM and our
non-interested directors, and, accordingly, are subject to change.  Introduction  As an investment adviser registered under
the Advisers Act, CIM has a fiduciary duty to act solely in the best interests
of its clients. As part of this duty, it recognizes that it must vote client
securities in a timely manner free of conflicts of interest and in the best
interests of its clients. These policies and procedures for voting proxies for
the investment advisory clients of CIM are intended to comply with Section 206
of, and Rule 206(4)-6 under, the Advisers Act.  Proxy
Policies  CIM will vote proxies relating to our
securities in a manner that it believes, in its discretion, to be in the best
interest of our shareholders. It will review on a case-by-case basis each
proposal submitted for a shareholder vote to determine its impact on the
portfolio securities held by its clients. Although CIM will generally vote
against proposals that may have a negative impact on its clients’ portfolio
securities, it may vote for such a proposal if there exists compelling
long-term reasons to do so.  The proxy voting decisions of CIM are made
by the senior officers who are responsible for monitoring each of its clients’
investments. To ensure that its vote is not the product of a conflict of interest,
it will require that: (a) anyone involved in the decision-making process
disclose to the chief compliance officer any potential conflict that he or she
is aware of and any contact that he or she has had with any interested party
regarding a proxy vote and (b) officers and employees involved in the decision
making process or vote administration are prohibited from revealing how CIM
intends to vote on a proposal in order to reduce any attempted influence from
interested parties. The CCO of CIM will work with the appropriate senior
officers to resolve any conflict that may arise.  Proxy
Voting Records  Shareholders may obtain information,
without charge, regarding how CIM voted proxies with respect to our portfolio
securities by making a written request for proxy voting information to: Chief
Compliance Officer c/o CĪON Investment Corporation, 3 Park Avenue, 36th
Floor, New York, NY 10016.  Election to be Taxed as a Regulated Investment Company  We elected to be treated as a RIC under
Subchapter M of the Code. As a RIC, we generally will not have to pay
corporate-level federal income taxes on any income that we distribute to our
shareholders from our tax earnings and profits. To qualify as a RIC, we must,
among other things, meet certain source-of-income and asset diversification
requirements (as described below). In addition, in order to maintain RIC tax
treatment, we must distribute to our shareholders, for each taxable year, at
least 90% of our “investment company taxable income,” which is generally our net
ordinary income plus the excess, if any, of realized net short-term capital
gains over realized net long-term capital losses. We refer to this as the Annual
Distribution Requirement. 23


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Taxation as a Regulated
Investment Company  If we: ·qualify as a RIC; and ·satisfy the Annual Distribution
Requirement, then we will not be subject to federal income tax on
the portion of our income we distribute (or are deemed to distribute) to
shareholders. We will be subject to U.S. federal income tax at the regular
corporate rates on any income or capital gains not distributed (or deemed
distributed) to our shareholders.  We will be subject to a 4.0% nondeductible federal
excise tax on certain undistributed income unless we distribute in a timely
manner an amount at least equal to the sum of (1) 98.0% of our net ordinary
income for each calendar year, (2) 98.2% of our capital gain net income for the
one-year period ending October 31 in that calendar year and (3) any income
recognized, but not distributed, in preceding years and on which we paid no
federal income tax, or the Excise Tax Avoidance Requirement.  In order to qualify as a RIC for federal income tax
purposes, we must, among other things: ·continue to qualify as a BDC under
the 1940 Act at all times during each taxable year; ·derive in each taxable year at
least 90% of our gross income from dividends, interest, payments with respect
to certain securities, loans, gains from the sale of stock or other securities,
net income from certain “qualified publicly traded partnerships,” or other
income derived with respect to our business of investing in such stock or
securities, or the 90% Income Test; and ·diversify our holdings so that at
the end of each quarter of the taxable year: ·at least 50% of the value of our
assets consists of cash, cash equivalents, U.S. Government securities,
securities of other RICs, and other securities if such other securities of any
one issuer do not represent more than 5% of the value of our assets or more
than 10% of the outstanding voting securities of the issuer; and ·no more than 25% of the value of
our assets is invested in the securities, other than U.S. government securities
or securities of other RICs, of one issuer, of two or more issuers that are
controlled, as determined under applicable Code rules, by us and that are
engaged in the same or similar or related trades or businesses or of certain
“qualified publicly traded partnerships,” or the Diversification Tests. For federal income tax purposes, we may be
required to recognize taxable income in circumstances in which we do not
receive a corresponding payment in cash. For example, if we hold debt
obligations that are treated under applicable tax rules as having original
issue discount (such as debt instruments with contractual “payment-in-kind,” or
PIK, interest or, in certain cases, increasing interest rates or debt
instruments that were issued with warrants), we must include in income each
year a portion of the original issue discount that accrues over the life of the
obligation, regardless of whether cash representing such income is received by
us in the same taxable year. We may also have to include in income other
amounts that we have not yet received in cash, such as deferred loan
origination fees that are paid after origination of the loan or are paid in
non-cash compensation such as warrants or stock. We anticipate that a portion
of our income may constitute original issue discount or other income required
to be included in taxable income prior to receipt of cash.  Because any original issue discount or other amounts
accrued will be included in our investment company taxable income for the year
of the accrual, we may be required to make a distribution to our shareholders
in order to satisfy the Annual Distribution Requirement, even though we will
not have received any corresponding cash amount. As a result, we may have
difficulty meeting the annual distribution requirement necessary to qualify for
and maintain RIC tax treatment under the Code. We may have to sell some of our
investments at times and/or at prices we would not consider advantageous, raise
additional debt or equity capital or forego new investment opportunities for
this purpose. If we are not able to obtain cash from other sources, we may fail
to qualify for RIC tax treatment and thus become subject to corporate-level
income tax. Our ability to dispose of assets to meet our distribution
requirements may be limited by (1) the illiquid nature of our portfolio and/or
(2) other requirements relating to our status as a RIC, including the
Diversification Tests. If we dispose of assets in order to meet the Annual
Distribution Requirement or the Excise Tax Avoidance Requirement, we may make
such dispositions at times that, from an investment standpoint, are not
advantageous. 24


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Exchange Act and
Sarbanes-Oxley Act Compliance  We are subject to the reporting and disclosure
requirements of the Exchange Act, including the filing of quarterly, annual and
current reports, proxy statements and other required items. In addition, we are
subject to the Sarbanes-Oxley Act, which imposes a wide variety of regulatory
requirements on publicly-held companies and their insiders. Many of these
requirements affect us. For example:  ·pursuant to Rule 13a-14 of the
Exchange Act, our co-chief executive officers and our chief financial officer are
required to certify the accuracy of the financial statements contained in our
periodic reports; ·pursuant to Item 307 of Regulation
S-K, our periodic reports are required to disclose our conclusions about the effectiveness
of our disclosure controls and procedures; and ·pursuant to Rule 13a-15 of the
Exchange Act, our management is required to prepare a report regarding its
assessment of our internal control over financial reporting.  The Sarbanes-Oxley Act requires us to review our
current policies and procedures to determine whether we comply with the
Sarbanes-Oxley Act and the regulations promulgated thereunder. We intend to
monitor our compliance with all regulations that are adopted under the
Sarbanes-Oxley Act and will take actions necessary to ensure that we are in
compliance therewith.  Under
the Jumpstart Our Business Startups Act, or JOBS Act, we are exempt from the
provisions of Section 404(b) of the Sarbanes-Oxley Act, which would require
that our independent registered public accounting firm provide an attestation
report on the effectiveness of our internal control over financial reporting.
This may increase the risk that material weaknesses or other deficiencies in
our internal control over financial reporting go undetected.  Other  We will be periodically examined by the SEC for
compliance with the 1940 Act.  We are required to provide and maintain a bond issued
by a reputable fidelity insurance company to protect us against larceny and
embezzlement. Furthermore, as a BDC, we are prohibited from protecting any
director or officer against any liability to us or our shareholders arising
from willful misconduct, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person’s office.  Employees  We do not currently have any employees and we do not
currently intend to hire any in the future. The compensation of our chief
financial officer, Keith S. Franz, and our chief compliance officer, David J.
Verlizzo, is paid by CIM. We reimburse CIM for the compensation paid to our
chief financial officer and his staff and our chief compliance officer and his
staff.  In the future, CIM may retain additional investment personnel based
upon its needs.  Available
Information  Within 60 days after the end of each fiscal quarter, we
distribute our quarterly report on Form 10-Q to all shareholders of record. In
addition, we distribute our annual report on Form 10-K to all shareholders
within 120 days after the end of each fiscal year. These reports are available
on our website at www.cioninvestmentcorp.com and on the SEC’s website at
www.sec.gov. Information contained on our website is not incorporated by
reference into this Annual Report on Form 10-K and shareholders should not
consider information contained on our website to be part of this Annual Report
on Form 10-K.  We file with or submit to the SEC annual, quarterly and
current reports, proxy statements and other information meeting the
informational requirements of the Exchange Act. Shareholders may inspect and
copy these reports, proxy statements and other information, as well as related
exhibits and schedules, at the Public Reference Room of the SEC at 100 F
Street, N.E., Washington, DC 20549. Shareholders may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information
statements and other information filed electronically by us with the SEC, which
are available on the SEC’s website at www.sec.gov. Copies of these reports,
proxy and information statements and other information may be obtained, after
paying a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section,
100 F Street, N.E., Washington, DC 20549. 25


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Item 1A. Risk Factors
 Investing in our common stock involves a
number of significant risks. In addition to the other information contained in
this Annual Report on Form 10-K, investors should consider carefully the
following information before making an investment in our common stock. If any
of the following events occur, our business, financial condition and results of
operations could be materially and adversely affected. In such case, the net
asset value of our common stock could decline, and investors may lose all or
part of their investment.  Risks
Relating to Our Business and Structure  We
are a relatively new company and have a limited operating history.  We were formed on August 9, 2011 and met our minimum
offering requirement of $2.5 million in common stock in December 2012. We are
subject to all of the business risks and uncertainties associated with any new
business, including the risk that we will not achieve our investment objective
and that the value of our common stock could decline substantially.  As
a company with relatively few investments, our continuous public offering may
be deemed to be a “blind pool” offering. An investor may not have the
opportunity to evaluate historical data or assess investments prior to
purchasing our shares.  Other than those investments currently reflected in our
portfolio, CIM generally has not identified, made or contracted to make
specific investments on our behalf with the proceeds from our continuous public
offering. As a result, investors will not be able to evaluate the economic
merits, transaction terms or other financial or operational data concerning
future investments we make using the proceeds from our continuous public
offering prior to making a decision to purchase our shares. Investors must rely
on CIM to implement our investment policies, to evaluate our investment
opportunities and to structure the terms of our investments rather than
evaluating our investments in advance of purchasing shares of our common stock.
Because investors are not able to evaluate all of our investments in advance of
purchasing our shares, our public offering may entail more risk than other
types of offerings. This additional risk may hinder investors’ ability to
achieve their own personal investment objectives related to portfolio
diversification, risk-adjusted investment returns and other objectives.  Our
board of directors may change our operating policies and strategies without
prior notice or shareholder approval, the effects of which may be adverse to
our results of operations and financial condition.  Our board of directors has the authority to modify or
waive our current operating policies, investment criteria and strategies
without prior notice and without shareholder approval. We cannot predict the
effect any changes to our current operating policies, investment criteria and
strategies would have on our business, net asset value, operating results and
value of our stock. However, the effects might be adverse, which could
negatively impact our ability to pay investors distributions and cause
investors to lose all or part of their investment. Moreover, we have
significant flexibility in investing the net proceeds from our continuous
offering and may use the net proceeds from our continuous offering in ways with
which investors may not agree or for purposes other than those contemplated in
our prospectus.  Price
declines in the medium- and large-sized corporate leveraged loan market may
adversely affect the fair value of our portfolio, reducing our net asset value
through increased net unrealized depreciation.  Prior to the onset of the financial crisis that began
in 2007, securitized investment vehicles, hedge funds and other highly
leveraged non-bank financial institutions comprised the majority of the market
for purchasing and holding senior and subordinated debt. As the trading price
of the loans underlying these portfolios began to deteriorate beginning in the
first quarter of 2007, we believe that many institutions were forced to raise
cash by selling their interests in performing assets in order to satisfy margin
requirements or the equivalent of margin requirements imposed by their lenders
and/or, in the case of hedge funds and other investment vehicles, to satisfy
widespread redemption requests. This resulted in a forced deleveraging cycle of
price declines, compulsory sales, and further price declines, with falling
underlying credit values, and other constraints resulting from the credit
crisis generating further selling pressure.  Conditions in the medium- and large-sized U.S.
corporate debt market may experience similar disruption or deterioration in the
future, which may cause pricing levels to similarly decline or be volatile. As
a result, our net asset value could decline through an increase in unrealized
depreciation and incurrence of realized losses in connection with the sale of
our investments, which could have a material adverse impact on our business,
financial condition and results of operations. 26


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Economic
activity in the U.S. was adversely impacted by the global financial crisis that
began in 2007 and has yet to fully recover.  Beginning in the third quarter of 2007,
global credit and other financial markets suffered substantial stress,
volatility, illiquidity and disruption. These forces reached extraordinary
levels in late 2008, resulting in the bankruptcy of, the acquisition of, or
government intervention in, the affairs of several major domestic and
international financial institutions. In particular, the financial services
sector was negatively impacted by significant write-offs as the value of the
assets held by financial firms declined, impairing their capital positions and
abilities to lend and invest. We believe that such value declines were
exacerbated by widespread forced liquidations as leveraged holders of financial
assets, faced with declining prices, were compelled to sell to meet margin
requirements and maintain compliance with applicable capital standards. Such
forced liquidations also impaired or eliminated many investors and investment
vehicles, leading to a decline in the supply of capital for investment and
depressed pricing levels for many assets. These events significantly diminished
overall confidence in the debt and equity markets, engendered unprecedented
declines in the values of certain assets, and caused extreme economic
uncertainty. These conditions may reoccur for a prolonged period of time again
or materially worsen in the future, including as a result of the U.S.
government spending cuts that took effect March 1, 2013, the recent government
shutdown in October 2013, or any further spending cuts or shutdowns.  Economic activity continues to be somewhat
subdued as unemployment rates remain high. As a result, corporate interest rate
risk premiums, otherwise known as credit spreads, declined significantly
throughout most of 2009 and 2010. However, credit spreads remain slightly above
historical averages, particularly in the loan market. The improving economic
and market conditions that have driven these declines in credit spreads may
reverse themselves if uncertainty returns to the markets. Such a reversal could
negatively impact credit spreads as well as our ability to obtain financing,
particularly from the debt markets.  The downgrade in the U.S. credit rating and
the economic crisis in Europe could materially adversely affect our business,
financial condition and results of operations.  On August 5, 2011, Standard & Poor’s
downgraded the U.S. credit rating to AA+ from its top rank of AAA. The current
U.S. debt ceiling and budget deficit concerns have increased the possibility of
further credit-rating agency downgrades and an economic slowdown. The downgrade
of the U.S. credit rating could have a material adverse effect on the financial
markets and economic conditions in the U.S. and throughout the world.
Additionally, any potential austerity measures necessary to reduce the deficit
could accelerate an already slowing economy in the near term. In January 2012,
Standard & Poor’s lowered its long-term sovereign credit rating for France,
Italy, Spain and six other European countries, which has negatively impacted
global markets and economic conditions. In addition, in April 2012, Standard
& Poor’s further lowered its long-term sovereign credit rating for Spain.
In December 2013, Standard & Poor’s lowered its long-term sovereign credit
rating of the European Union, citing deteriorating creditworthiness of the
bloc’s 28 member nations. Though austerity measures and bailout administration
have generally tempered some concerns over the short-term collapse of these
countries’ governments and their respective banking systems, the underlying
long-term and systemic risks and concerns have not been eliminated.  The U.S. credit rating downgrade could
negatively impact the trading market for U.S. government securities and would
likely impact the credit risk associated with our investments in U.S. Treasury
securities. This could reduce the value of the U.S. Treasury securities that we
may hold in our portfolio. In addition, adverse market and economic conditions
that could occur due to a downgrade of the credit rating on the debt of the
United States could result in rapidly rising interest rates, a falling dollar,
shakier financial markets and slowing or negative economic growth in the near term.
The impact of the August 2011 downgrade or any further downgrade to the U.S.
government’s sovereign credit rating, or its perceived creditworthiness, and
the impact of the current crisis in Europe with respect to the ability of
certain European Union countries to continue to service their sovereign debt
obligations is inherently unpredictable and could adversely affect the U.S. and
global financial markets and economic conditions. These events could adversely
affect our business in many ways, including, but not limited to, adversely
impacting our portfolio companies’ ability to obtain financing, or obtaining
financing but at significantly lower valuations than the preceding financing
rounds. If any of these events were to occur, it could materially adversely
affect our business, financial condition and results of operations. 27


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Our
ability to achieve our investment objective depends on the ability of CIM and
AIM to manage and support our investment process. If either CIM or AIM were to
lose any members of their respective senior management teams, our ability to
achieve our investment objective could be significantly harmed.  Since we have no employees, we depend on
the investment expertise, skill and network of business contacts of the broader
networks of CIM and Apollo and their affiliates. CIM, with the assistance of
AIM, evaluates, negotiates, structures, executes, monitors and services our
investments. Our future success depends to a significant extent on the
continued service and coordination of CIM and its senior management team. The
departure of any members of CIM’s senior management team could have a material
adverse effect on our ability to achieve our investment objective. Likewise,
the departure of any key employees of AIM may impact its ability to render
services to us under the terms of its sub-advisory agreement with CIM and us.  Our ability to achieve our investment
objective depends on CIM’s ability, with the assistance of AIM, to identify and
analyze, and to invest in, finance and monitor companies that meet our
investment criteria. CIM’s capabilities in structuring the investment process,
providing competent, attentive and efficient services to us, and facilitating
access to financing on acceptable terms depend on the employment of investment professionals
in an adequate number and of adequate sophistication to match the corresponding
flow of transactions. To achieve our investment objective, CIM may need to
hire, train, supervise and manage new investment professionals to participate
in our investment selection and monitoring process. CIM may not be able to find
investment professionals in a timely manner or at all. Failure to support our
investment process could have a material adverse effect on our business,
financial condition and results of operations.  Both the investment advisory agreement
between CIM and us and the investment sub-advisory agreement that we and CIM
have entered into with AIM have been approved pursuant to Section 15 of the
1940 Act. In addition, both the investment advisory agreement and the
investment sub-advisory agreement have termination provisions that allow the
parties to terminate the agreements. The investment advisory agreement may be
terminated at any time, without penalty, by us or by CIM, upon 60 days notice.
The investment sub-advisory agreement may be terminated at any time, upon 60
days’ written notice by AIM or, if a majority of the independent directors of
our board of directors or the holders of a majority of our outstanding voting
securities determine that the investment sub-advisory agreement with AIM should
be terminated, by us. If either agreement is terminated, it may adversely
affect the quality of our investment opportunities. In addition, in the event
such agreements are terminated, it may be difficult for us to replace CIM
and/or AIM.  The investment sub-advisory agreement
provides that if AIM terminates the agreement other than for good reason or the
agreement is not renewed or is terminated for cause (as defined in the
investment sub-advisory agreement), then (x) AIM will be entitled to receive
all amounts and any accrued, but unreimbursed, expenses payable to it and not
yet paid pursuant to the investment sub-advisory agreement and (y) CIM may
elect to subject AIM to an exclusivity restriction contained in the investment
sub-advisory agreement, which survives until three years from the date that we
met our minimum offering requirement. The term “good reason,” as used in the
investment sub-advisory agreement, is defined to include any of the following:
(A) those instances in which CIM would be prohibited from acting as an
investment adviser to us under Section 9(a) of the 1940 Act on account of
action by itself or a person subject to its supervision in the absence of
receiving an exemptive order under Section 9(c) of the 1940 Act; (B) those
instances in which CIM becomes subject to a prohibition under Section 9(a) or
(b) of the 1940 Act; or (C) CIM or we breach the investment sub-advisory
agreement in any material respect and fail to cure such breach within 30 days
after notice by AIM.  The investment sub-advisory agreement also
provides that if the agreement is terminated by AIM for good reason or the
agreement is not renewed or is terminated otherwise without cause by us or our
shareholders, as applicable, AIM will be entitled to the payment of all amounts
and any accrued but unreimbursed expenses payable to it and not yet paid, as
well as an amount equal to 37.5% of the gross amount of management fees and
incentive fees paid by us over the three year period commencing in the calendar
quarter following the calendar quarter in which such termination occurs.
Pursuant to the terms of the investment sub-advisory agreement, CIM is
obligated to make all such payments to AIM and we are not obligated to pay in
the event that CIM is unable or unwilling to pay. In addition, the restriction
on the ability of CIM and its affiliates from directly or indirectly acting as
an investment adviser or sub-adviser and/or as a sponsor (or engaging any other
person for the purpose of acting as an investment adviser or sub-adviser) to
any other business development company that engages primarily in the business
of providing senior, unitranche and/or mezzanine financing to private, U.S.
businesses, and (other than us) whose securities are listed on a public
securities exchange will survive indefinitely. 28


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Because
our business model depends to a significant extent upon relationships with
private equity sponsors, investment banks and commercial banks, the inability
of CIM and AIM to maintain or develop these relationships, or the failure of
these relationships to generate investment opportunities, could adversely
affect our business.  CIM and AIM depend on their broader
organizations’ relationships with private equity sponsors, investment banks and
commercial banks, and we rely to a significant extent upon these relationships
to provide us with potential investment opportunities. If CIM or Apollo or
their organizations, as applicable, fail to maintain their existing relationships
or develop new relationships with other sponsors or sources of investment
opportunities, we may not be able to grow our investment portfolio. In
addition, individuals with whom CIM and Apollo or their respective broader
organizations have relationships are not obligated to provide us with
investment opportunities, and, therefore, there is no assurance that such
relationships will generate investment opportunities for us.  We may face increasing competition for
investment opportunities, which could delay deployment of our capital, reduce
returns and result in losses.  We compete for investments with other BDCs
and investment funds (including private equity funds, mezzanine funds and
collateralized loan obligation funds), as well as traditional financial
services companies such as commercial banks and other sources of funding.
Moreover, alternative investment vehicles, such as hedge funds, have begun to
invest in areas in which they have not traditionally invested, including making
investments in small to mid-sized private U.S. companies. As a result of these
new entrants, competition for investment opportunities in small and
middle-market private U.S. companies may intensify. Many of our competitors are
substantially larger and have considerably greater financial, technical and
marketing resources than we do. For example, some competitors may have a lower
cost of capital and access to funding sources that are not available to us. In
addition, some of our competitors may have higher risk tolerances or different
risk assessments than we have. These characteristics could allow our
competitors to consider a wider variety of investments, establish more
relationships and offer better pricing and more flexible structuring than we
are able to do. We may lose investment opportunities if we do not match our
competitors’ pricing, terms or structure. If we are forced to match our
competitors’ pricing, terms or structure, we may not be able to achieve
acceptable returns on our investments or may bear substantial risk of capital
loss. A significant part of our competitive advantage stems from the fact that
the market for investments in small and middle-market private U.S. companies is
underserved by traditional commercial banks and other financial sources. A
significant increase in the number and/or the size of our competitors in this
target market could force us to accept less attractive investment terms.
Furthermore, many of our competitors have greater experience operating under,
or are not subject to, the regulatory restrictions that the 1940 Act imposes on
us as a BDC.  As required by the 1940 Act, a significant
portion of our investment portfolio is and will be recorded at fair value as determined
in good faith by our board of directors and, as a result, there is and will be
uncertainty as to the value of our portfolio investments.  Under the 1940 Act, we are required to
carry our portfolio investments at market value or, if there is no readily
available market value, at fair value as determined by our board of directors.
There is not a public market for the securities of the privately-held companies
in which we invest. Many of our investments will not be publicly traded or
actively traded on a secondary market. As a result, we value these securities
quarterly at fair value as determined in good faith by our board of directors
as required by the 1940 Act.  Certain factors that may be considered in
determining the fair value of our investments include investment dealer quotes
for securities traded on the secondary market for institutional investors, the
nature and realizable value of any collateral, the portfolio company’s earnings
and its ability to make payments on its indebtedness, the markets in which the
portfolio company does business, comparison to comparable publicly-traded
companies, discounted cash flow and other relevant factors. As a result, our
determinations of fair value may differ materially from the values that would
have been used if a ready market for these non-traded securities existed. Due
to this uncertainty, our fair value determinations may cause our net asset
value on a given date to materially differ from the value that we may
ultimately realize upon the sale of one or more of our investments.  There is a risk that investors in our
common stock may not receive distributions or that our distributions may not
grow over time.  We may not achieve investment results that
will allow us to make a specified level of cash distributions or year-to-year
increases in cash distributions. In addition, due to the asset coverage test
applicable to us as a BDC, we may be limited in our ability to make
distributions. 29


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The
amount of any distributions we may make is uncertain. Our distributions may
exceed our earnings, particularly during the period before we have
substantially invested the net proceeds from our public offering. Therefore,
portions of the distributions that we make may represent a return of capital to
shareholders for tax purposes that will lower their tax basis in their common
stock and reduce the amount of funds we have for investment in targeted assets.  We may fund our cash distributions to
shareholders from any sources of funds available to us, 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 us on account of preferred and
common equity investments in portfolio companies, and expense reimbursements
from IIG, which are subject to recoupment. In addition, a substantial portion
of our distributions have resulted, and future distributions may result, from
expense reimbursements from IIG, which are subject to repayment by us. Our
ability to pay distributions might be adversely affected by, among other
things, the impact of one or more of the risk factors described in this
section. In addition, the inability to satisfy the asset coverage test
applicable to us as a BDC may limit our ability to pay distributions. All
distributions are and will be paid at the discretion of our board of directors
and will depend on our earnings, our financial condition, maintenance of our
RIC status, compliance with applicable BDC regulations and such other factors
as our board of directors may deem relevant from time to time. We cannot assure
investors that we will continue to pay distributions to our shareholders in the
future. In the event that we encounter delays in locating suitable investment
opportunities, we may pay all or a substantial portion of our distributions
from the proceeds of our public offering or from borrowings in anticipation of
future cash flow, which may constitute a return of shareholders’ capital. A
return of capital is a return of shareholders’ investment, rather than a return
of earnings or gains derived from our investment activities. A shareholder will
not be subject to immediate taxation on the amount of any distribution treated
as a return of capital to the extent of the shareholder’s basis in its shares;
however, the shareholder's basis in its shares will be reduced (but not below
zero) by the amount of the return of capital, which will result in the
shareholder recognizing additional gain (or a lower loss) when the shares are
sold. To the extent that the amount of the return of capital exceeds the
shareholder's basis in its shares, such excess amount will be treated as gain
from the sale of the shareholder’s shares. A shareholder’s basis in the
investment will be reduced by the nontaxable amount, which will result in
additional gain (or a lower loss) when the shares are sold. Distributions from
the proceeds of our public offering or from borrowings also could reduce the
amount of capital we ultimately invest in our portfolio companies.  We have not established any limit on the amount of funds we may
use from available sources, such as borrowings, if any, or proceeds from our
offering, to fund distributions (which may reduce the amount of capital we
ultimately invest in assets).  A substantial portion of our distributions
have resulted, and future distributions may result, from expense reimbursements
from IIG, which are subject to repayment by us within three years. The purpose
of this arrangement is to reduce our operating expenses and to avoid such
distributions being characterized as a return of capital for tax purposes.
Shareholders should understand that any such distributions are not based on our
investment performance, and can only be sustained if we achieve positive
investment performance in future periods and/or IIG continues to make such
expense reimbursements. Shareholders should also understand that our future
repayments to IIG will reduce the distributions that they would otherwise
receive. There can be no assurance that we will achieve such performance in
order to sustain these distributions, or be able to pay distributions at all.
IIG has no obligation to provide expense reimbursements to us in future
periods.  Changes in laws or regulations governing
our operations may adversely affect our business or cause us to alter our
business strategy.  We and our portfolio companies are subject
to regulation at the local, state and federal level. New legislation may be
enacted or new interpretations, rulings or regulations could be adopted,
including those governing the types of investments we are permitted to make,
any of which could harm us and our shareholders, potentially with retroactive
effect.  Additionally, any changes to the laws and
regulations governing our operations relating to permitted investments may
cause us to alter our investment strategy to avail ourselves of new or
different opportunities. Such changes could result in material differences to
our strategies and plans as set forth herein and may result in our investment
focus shifting from the areas of expertise of CIM and AIM to other types of
investments in which CIM and AIM may have less expertise or little or no
experience. Thus, any such changes, if they occur, could have a material
adverse effect on our financial condition and results of operations and the
value of a shareholder’s investment. 30


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As a public company, we are subject to regulations not applicable
to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to
comply with such regulations will involve significant expenditures, and
non-compliance with such regulations may adversely affect us.  As a public company, we are subject to the
Sarbanes-Oxley Act, and the related rules and regulations promulgated by the
SEC. Our management is required to report on our internal control over
financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are
required to review on an annual basis our internal control over financial
reporting, and on a quarterly and annual basis to evaluate and disclose changes
in our internal control over financial reporting. As a relatively new company,
developing and maintaining an effective system of internal controls may require
significant expenditures, which may negatively impact our financial performance
and our ability to make distributions. This process also will result in a diversion
of our management’s time and attention. We cannot be certain of when our
evaluation, testing, and remediation actions will be completed or the impact of
the same on our operations. In addition, we may be unable to ensure that the
process is effective or that our internal controls over financial reporting are
or will be effective in a timely manner. In the event that we are unable to
develop or maintain an effective system of internal controls and maintain or
achieve compliance with the Sarbanes-Oxley Act and related rules, we may be
adversely affected.  The impact of financial reform legislation
on us is uncertain.  In light of recent conditions in the U.S.
and global financial markets and the U.S. and global economy, legislators, the
presidential administration and regulators have increased their focus on the
regulation of the financial services industry. The Dodd-Frank Wall Street
Reform and Consumer Protection Act, or the Dodd-Frank Act, institutes a wide
range of reforms that will have an impact on all financial institutions. Many
of the requirements called for in the Dodd-Frank Act will be implemented over
time, most of which will be subject to implementing regulations over the course
of the next several years. Given the uncertainty associated with the manner in
which the provisions of the Dodd-Frank Act will be implemented by the various
regulatory agencies and through regulations, the full impact such requirements
will have on our business, results of operations or financial condition is unclear.
The changes resulting from the Dodd-Frank Act may require us to invest
significant management attention and resources to evaluate and make necessary
changes in order to comply with new statutory and regulatory requirements.
Failure to comply with any such laws, regulations or principles, or changes
thereto, may negatively impact our business, results of operations and
financial condition. While we cannot predict what effect any changes in the
laws or regulations or their interpretations would have on us as a result of
the Dodd-Frank Act, these changes could be materially adverse to us and our
shareholders.  We may experience fluctuations in our
quarterly results.  We could experience fluctuations in our
quarterly operating results due to a number of factors, including our ability
or inability to make investments in companies that meet our investment
criteria, the interest rate payable on the debt securities we acquire, the
level of our expenses (including our borrowing costs), variations in and the timing
of the recognition of realized and unrealized gains or losses, the degree to
which we encounter competition in our markets and general economic conditions.
As a result of these factors, results for any previous period should not be
relied upon as being indicative of performance in future periods.  Any unrealized losses we experience on our portfolio may be an
indication of future realized losses, which could reduce our income available
for distribution.  As a BDC, we are required to carry our investments
at market value or, if no market value is ascertainable, at the fair value as
determine in good faith by our board of directors. Decreases in the market
value or fair value of our investments relative to amortized cost will be
recorded as unrealized depreciation. Any unrealized losses in our portfolio
could be an indication of a portfolio company’s inability to meet its repayment
obligations to us with respect to the affected loans. This could result in
realized losses in the future and ultimately in reductions of our income
available for distribution in future periods. In addition, decreases in the
market value or fair value of our investments will reduce our net asset value.  31


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Risks
Related to CIM and its Affiliates; Risks Related to AIM and its Affiliates  CIM has limited prior
experience managing a BDC or a RIC.  CIM has limited experience managing a BDC
or a RIC and may not be able to successfully operate our business or achieve
our investment objective. As a result, an investment in our shares of common
stock may entail more risk than the shares of common stock of a comparable
company with a substantial operating history.  The 1940 Act and the Code impose numerous
constraints on the operations of BDCs and RICs that do not apply to the other
types of investment vehicles previously managed by CIM’s management team. For
example, under the 1940 Act, BDCs are required to invest at least 70% of their
total assets primarily in securities of qualifying U.S. private or
thinly-traded public companies. Moreover, qualification for RIC tax treatment
under Subchapter M of the Code requires, among other things, satisfaction of
source-of-income, diversification and other requirements. The failure to comply
with these provisions in a timely manner could prevent us from qualifying as a
BDC or RIC or could force us to pay unexpected taxes and penalties, which could
be material. CIM’s limited experience in managing a portfolio of assets under such
constraints may hinder its ability to take advantage of attractive investment
opportunities and, as a result, achieve our investment objective.  CIM and its affiliates, including our officers and some of our
directors, will face conflicts of interest caused by compensation arrangements
with us and our affiliates, which could result in actions that are not in the
best interests of our shareholders.  CIM and its affiliates receive substantial
fees from us in return for their services, and these fees could influence the
advice provided to us. Among other matters, the compensation arrangements could
affect their judgment with respect to public offerings of equity by us, which
allow the dealer manager to earn additional dealer manager fees and CIM to earn
increased asset management fees. In addition, the decision to utilize leverage
will increase our assets and, as a result, will increase the amount of
management fees payable to CIM and may increase the amount of subordinated
income incentive fees payable to CIM.  We may be obligated to pay
CIM incentive compensation even if we incur a net loss due to a decline in the
value of our portfolio.  Our investment advisory agreement entitles
CIM to receive incentive compensation on income regardless of any capital
losses. In such case, we may be required to pay CIM incentive compensation for
a fiscal quarter even if there is a decline in the value of our portfolio or if
we incur a net loss for that quarter.  Any incentive fee payable by us that
relates to our net investment income may be computed and paid on income that
may include interest that has been accrued, but not yet received, including
original issue discount, which may arise if we receive warrants in connection
with the origination of a loan or possibly in other circumstances, or
contractual PIK interest, which represents contractual interest added to the
loan balance and due at the end of the loan term. To the extent we do not
distribute accrued PIK interest, the deferral of PIK interest has the simultaneous
effects of increasing the assets under management and increasing the base
management fee at a compounding rate, while generating investment income and
increasing the incentive fee at a compounding rate. In addition, the deferral
of PIK interest would also increase the loan-to-value ratio at a compounding
rate if the issuer’s assets do not increase in value, and investments with a
deferred interest feature, such as PIK interest, may represent a higher credit
risk than loans on which interest must be paid in full in cash on a regular
basis.  For example, if a portfolio company
defaults on a loan that is structured to provide accrued interest, it is
possible that accrued interest previously included in the calculation of the
incentive fee will become uncollectible. CIM is not under any obligation to
reimburse us for any part of the incentive fee it received that was based on
accrued income that we never received as a result of a default by an entity on
the obligation that resulted in the accrual of such income, and such
circumstances would result in our paying an incentive fee on income we never
received.  There may be conflicts of
interest related to obligations that CIM’s and Apollo’s respective senior
management and investment teams have to other clients.  The members of the senior management and
investment teams of both CIM and Apollo serve or may serve as officers,
directors or principals of entities that operate in the same or a related line
of business as we do, or of investment funds managed by the same personnel. In
serving in these multiple capacities, they may have obligations to other
clients or investors in those entities, the fulfillment of which may not be in
our best interests or in the best interest of our shareholders. Our investment
objective may overlap with the investment objectives of such investment funds,
accounts or other investment vehicles. In particular, we rely on CIM to manage
our day-to-day activities and to implement our investment strategy. CIM and
certain of its affiliates are presently, and plan in the future to continue to
be, involved with activities that are unrelated to us. As a result of these
activities, CIM, its officers and employees and certain of its affiliates will
have conflicts of interest in allocating their time between us and other
activities in which they are or may become involved, including the management
of its affiliated equipment funds. CIM and its officers and employees will
devote only as much of its or their time to our business as CIM and its officers
and employees, in their judgment, determine is reasonably required, which may
be substantially less than their full time. 32


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We rely, in part, on AIM to assist with identifying investment
opportunities and making investment recommendations to CIM. AIM, its affiliates
and their respective members, partners, officers and employees will devote as
much of their time to our activities as they deem necessary and appropriate.
Apollo and its affiliates are not restricted from forming additional investment
funds, entering into other investment advisory relationships, except in certain
limited circumstances as set forth in the investment sub-advisory agreement, or
engaging in other business activities, even though such activities may be in
competition with us and/or may involve substantial time and resources of AIM.
These activities could be viewed as creating a conflict of interest in that the
time and effort of the members of AIM, its affiliates and their officers and
employees will not be devoted exclusively to our business, but will be
allocated between us and such other business activities of Apollo and its
affiliates in a manner that Apollo deems necessary and appropriate.  AIM currently acts as investment adviser to
AINV, which is also a BDC and is authorized to invest in the same kinds of
securities we invest or may invest in, although AINV primarily focuses on
providing senior and subordinated debt to companies that are expected to have
greater EBITDA than those that are our primary focus. Also, in connection with
such business activities, AIM and its affiliates may have existing business
relationships or access to material, non-public information that may prevent it
from recommending investment opportunities that would otherwise fit within our
investment objective. These activities could be viewed as creating a conflict
of interest in that the time, effort and ability of the members of AIM, its
affiliates and their officers and employees will not be devoted exclusively to
our business, but will be allocated between us and such other accounts managed
by AIM and its affiliates as AIM deems necessary and appropriate.  It is possible that conflicts of interest
will arise from time to time in connection with our prospective and existing
investments and AINV or other funds or accounts managed or advised by Apollo,
including, without limitation, in circumstances giving rise to the
restructuring of an issuer in which we and AINV are investors, as well as
follow-on investments or dispositions with respect to such issuer. In such
circumstance, it is likely that we and CIM, on the one hand, will be walled off
from Apollo and AINV, on the other hand, and accordingly the parties will not
collectively discuss or participate in, for example, the restructuring with
respect to such issuer. Further, there may also arise instances in which we and
AINV are invested in the same issuer and we and/or AINV seeks to dispose of
such investment in a transaction that may otherwise require exemptive relief,
in which case the parties may need to obtain an exemptive order, the receipt of
which cannot be assured.  In addition, there are no information
barriers amongst AIM and certain of its affiliates. If AIM or its affiliates
were to receive material non-public information about a particular company, or
have an interest in investing in a particular company, we may be prevented from
investing in such company.  Furthermore, it is possible that AINV or
other funds managed or advised by Apollo may own or make investments in the
same or similar securities at different times and on different terms than we
do. From time to time, we and AINV or other funds managed or advised by Apollo
may make investments at different levels of an issuer’s capital structure or
otherwise in different classes of an issuer’s securities. Such investments may
inherently give rise to conflicts of interest or perceived conflicts of
interest between or among the various classes of securities that may be held by
such entities. Conflicts may also arise because portfolio decisions regarding
us may benefit AINV or other funds managed or advised by Apollo. Apollo and its
managed funds may pursue or enforce rights with respect to an issuer in which
we have invested, and those activities may have an adverse effect on us. As a
result, prices, availability, liquidity, and terms of our investments may be
negatively impacted by the activities of Apollo or its managed funds, and
transactions for us may be impaired or effected at prices or terms that may be
less favorable than would otherwise have been the case.  The time and resources that
individuals employed by CIM and Apollo devote to us may be diverted and we may
face additional competition due to the fact that individuals employed by CIM
and Apollo are not prohibited from raising money for or managing other entities
that make the same types of investments that we target.  Neither CIM nor AIM, nor individuals
employed by CIM or AIM, are generally prohibited from raising capital for and
managing other investment entities that make the same types of investments as
those we target. As a result, the time and resources that these individuals may
devote to us may be diverted. In addition, we may compete with any such
investment entity for the same investors and investment opportunities. We will
be unable to participate in certain transactions originated by CIM or its
affiliates unless we seek and receive exemptive relief from the SEC. Affiliates
of Apollo, whose primary business includes the origination of investments,
engage in investment advisory business with accounts that compete with us.
Affiliates of AIM have no obligation to make their originated investment
opportunities available to AIM or to us.  33


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Our
base management and incentive fees may induce CIM to make, and AIM to
recommend, speculative investments or to incur leverage.  The incentive fee payable by us to CIM may create an
incentive for it to make investments on our behalf that are risky or more
speculative than would be the case in the absence of such compensation
arrangement. The way in which the incentive fee payable to CIM is determined
may encourage it to use leverage to increase the return on our investments.The part of the management and incentive fees payable to
CIM that relates to our net investment income is computed and paid on income
that may include interest income that has been accrued but not yet received in
cash, such as market discount, debt instruments with PIK interest, preferred
stock with PIK dividends and zero coupon securities. This fee structure may be
considered to involve a conflict of interest for CIM to the extent that it may
encourage CIM to favor debt financings that provide for deferred interest,
rather than current cash payments of interest.In addition, the fact
that our base management fee is payable based upon our gross assets, which
would include any borrowings for investment purposes, may encourage CIM to use
leverage to make additional investments. Under certain circumstances, the use
of leverage may increase the likelihood of default, which would disfavor
holders of our common stock. Such a practice could result in our investing in
more speculative securities than would otherwise be in our best interests,
which could result in higher investment losses, particularly during cyclical
economic downturns. In addition, since AIM will receive a portion of the
incentive fees paid to CIM, AIM may have an incentive to recommend investments
that are riskier or more speculative.  Shares
of our common stock may be purchased by CIM, Apollo or their affiliates.  CIM, Apollo and their respective affiliates may
purchase shares of our common stock for any reason deemed appropriate;
provided, however, that it is intended that once our offering of common stock
is completed, neither CIM, Apollo nor their respective affiliates will hold 5%
or more of our outstanding shares of common stock. CIM, Apollo and their
respective affiliates will not acquire any shares of our common stock with the
intention to resell or re-distribute such shares. The purchase of common stock
by CIM, Apollo and their respective affiliates could create certain risks,
including, but not limited to, the following:  ·CIM, Apollo and their respective
affiliates may have an interest in disposing of our assets at an earlier date
so as to recover their investment in our common stock; and ·substantial purchases of shares by
CIM, Apollo and their respective affiliates may limit CIM’s or AIM’s ability to
fulfill any financial obligations that it may have to us or incurred on our
behalf.  CIM relies on key
personnel, the loss of any of whom could impair its ability to successfully
manage us.  Our future success depends, to a significant extent, on
the continued services of the officers and employees of CIM or its affiliates.
The loss of services of one or more members of CIM’s management team, including
members of our investment committee, could adversely affect our financial
condition, business and results of operations.  The
compensation we pay to CIM was determined without independent assessment on our
behalf, and these terms may be less advantageous to us than if such terms had
been the subject of arm’s-length negotiations.  The compensation we pay to CIM was not entered into on
an arm’s-length basis with an unaffiliated third party. As a result, the form
and amount of such compensation may be less favorable to us than they might
have been had these been entered into through arm’s-length transactions with an
unaffiliated third party.  CIM’s
influence on conducting our operations gives it the ability to increase its
fees, which may reduce the amount of cash flow available for distribution to
our shareholders.  CIM is paid a base management fee calculated as a
percentage of our gross assets and unrelated to net income or any other
performance base or measure. CIM may advise us to consummate transactions or
conduct our operations in a manner that, in CIM’s reasonable discretion, is in
the best interests of our shareholders. These transactions, however, may
increase the amount of fees paid to CIM. CIM’s ability to influence the base
management fee paid to it by us could reduce the amount of cash flow available
for distribution to our shareholders.  34


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Risks Related to Business Development
Companies  The requirement that we
invest a sufficient portion of our assets in qualifying assets could preclude
us from investing in accordance with our current business strategy; conversely,
the failure to invest a sufficient portion of our assets in qualifying assets
could result in our failure to maintain our status as a BDC.  As a BDC, we may not acquire any assets
other than “qualifying assets” unless, at the time of and after giving effect
to such acquisition, at least 70% of our total assets are qualifying assets.
See “Item 1. Business–Regulation.”
Therefore, we may be precluded from investing in what we believe are attractive
investments if such investments are not qualifying assets. Conversely, if we
fail to invest a sufficient portion of our assets in qualifying assets, we
could lose our status as a BDC, which would have a material adverse effect on
our business, financial condition and results of operations. Similarly, these
rules could prevent us from making additional investments in existing portfolio
companies, which could result in the dilution of our position, or could require
us to dispose of investments at an inopportune time to comply with the 1940
Act. If we were forced to sell non-qualifying investments in the portfolio for
compliance purposes, the proceeds from such sale could be significantly less
than the current value of such investments.  Failure to maintain our
status as a BDC would reduce our operating flexibility.  If we do not remain a BDC, we might be
regulated as a registered closed-end investment company under the 1940 Act,
which would subject us to substantially more regulatory restrictions under the
1940 Act and correspondingly decrease our operating flexibility.  Regulations governing our
operation as a BDC and RIC will affect our ability to raise, and the way in
which we raise, additional capital or borrow for investment purposes, which may
have a negative effect on our growth.  As a result of the annual distribution
requirement to qualify as a RIC, we may need to periodically access the capital
markets to raise cash to fund new investments. We may issue “senior
securities,” as defined under the 1940 Act, including borrowing money from
banks or other financial institutions only in amounts such that our asset
coverage, as defined in the 1940 Act, equals at least 200% after such
incurrence or issuance. Our ability to issue different types of securities is
also limited. Compliance with these requirements may unfavorably limit our investment
opportunities and reduce our ability in comparison to other companies to profit
from favorable spreads between the rates at which we can borrow and the rates
at which we can lend. As a BDC, therefore, we intend to continuously issue
equity at a rate more frequent than our privately owned competitors, which may
lead to greater shareholder dilution.  We expect to borrow for investment
purposes. If the value of our assets declines, we may be unable to satisfy the
asset coverage test, which would prohibit us from paying distributions and
could prevent us from qualifying as a RIC. If we cannot satisfy the asset
coverage test, we may be required to sell a portion of our investments and,
depending on the nature of our debt financing, repay a portion of our indebtedness
at a time when such sales may be disadvantageous.  Under the 1940 Act, we generally are
prohibited from issuing or selling our common stock at a price per share, after
deducting selling commissions and dealer manager fees, that is below our net
asset value per share, which may be a disadvantage as compared with other
public companies. We may, however, sell our common stock, or warrants, options
or rights to acquire our common stock, at a price below the current net asset
value of our common stock if our board of directors, including our independent
directors, determine that such sale is in our best interests and the best
interests of our shareholders, and our shareholders, as well as those
shareholders that are not affiliated with us, approve such sale. In any such
case, the price at which our securities are to be issued and sold may not be
less than a price that, in the determination of our board of directors, closely
approximates the fair value of such securities.  35


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Our ability to enter into transactions with our affiliates is
restricted.  We are prohibited under the 1940 Act from
participating in certain transactions with certain of our affiliates without
the prior approval of a majority of the independent members of our board of
directors and, in some cases, the SEC. Any person that owns, directly or
indirectly, 5% or more of our outstanding voting securities will be our
affiliate for purposes of the 1940 Act and generally we will be prohibited from
buying or selling any securities from or to such affiliate, absent the prior
approval of our board of directors. The 1940 Act also prohibits certain “joint”
transactions with certain of our affiliates, which could include investments in
the same portfolio company (whether at the same or closely related times),
without prior approval of our board of directors and, in some cases, the SEC.
If a person acquires more than 25% of our voting securities, we will be
prohibited from buying or selling any security from or to such person or
certain of that person’s affiliates, or entering into prohibited joint
transactions with such persons, absent the prior approval of the SEC. Similar
restrictions limit our ability to transact business with our officers,
directors, investment advisers, sub-advisers or their affiliates. As a result
of these restrictions, we may be prohibited from buying or selling any security
from or to any fund or any portfolio company of a fund managed by CIM or
Apollo, or entering into joint arrangements such as certain co-investments with
these companies or funds without the prior approval of the SEC, which may limit
the scope of investment opportunities that would otherwise be available to us.  We are uncertain of our
sources for funding our future capital needs; if we cannot obtain debt or equity
financing on acceptable terms, our ability to acquire investments and to expand
our operations will be adversely affected.  The net proceeds from the sale of common
stock will be used for our investment opportunities, operating expenses and for
payment of various fees and expenses such as base management fees, incentive
fees and other expenses. Any working capital reserves we maintain may not be
sufficient for investment purposes, and we may require debt or equity financing
to operate. Accordingly, in the event that we develop a need for additional
capital in the future for investments or for any other reason, these sources of
funding may not be available to us. Consequently, if we cannot obtain debt or
equity financing on acceptable terms, our ability to acquire investments and to
expand our operations will be adversely affected. As a result, we would be less
able to create and maintain a broad portfolio of investments and achieve our
investment objective, which may negatively impact our results of operations and
reduce our ability to make distributions to our shareholders.  We are a non-diversified
investment company within the meaning of the 1940 Act, and therefore we are not
limited with respect to the proportion of our assets that may be invested in
securities of a single issuer.  We are classified as a non-diversified
investment company within the meaning of the 1940 Act, which means that we are
not limited by the 1940 Act with respect to the proportion of our assets that
we may invest in securities of a single issuer. To the extent that we assume
large positions in the securities of a small number of issuers, or within a
particular industry, our net asset value may fluctuate to a greater extent than
that of a diversified investment company as a result of changes in the
financial condition or the market’s assessment of the issuer. We may also be
more susceptible to any single economic or regulatory occurrence than a
diversified investment company. However, we will be subject to the diversification
requirements applicable to RICs under Subchapter M of the Code.  Risks Related to Our Investments  Our investments in
prospective portfolio companies may be risky, and we could lose all or part of
our investment.  We invest or intend to invest in the
following types of loans of private and thinly traded U.S. middle market
companies.  Senior Secured Loans and Second Lien Loans.When we invest in senior
secured term loans and second lien loans, we will generally take a security
interest in the available assets of these portfolio companies, including the
equity interests of their subsidiaries. We expect this security interest to
help mitigate the risk that we will not be repaid. However, there is a risk
that the collateral securing our loans may decrease in value over time or lose
its entire value, may be difficult to sell in a timely manner, may be difficult
to appraise and may fluctuate in value based upon the success of the business
and market conditions, including as a result of the inability of the portfolio
company to raise additional capital. Also, in some circumstances, our security
interest could be subordinated to claims of other creditors. In addition,
deterioration in a portfolio company’s financial condition and prospects, including
its inability to raise additional capital, may be accompanied by deterioration
in the value of the collateral for the loan. Consequently, the fact that a loan
is secured does not guarantee that we will receive principal and interest
payments according to the loan’s terms, or at all, or that we will be able to
collect on the loan should we be forced to enforce our remedies. 36


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Unitranche
Loans.We also expect to
invest in unitranche loans, which are loans that combine both senior and
subordinated financing, generally in a first-lien position. Unitranche loans
provide all of the debt needed to finance a leveraged buyout or other corporate
transaction, both senior and subordinated, but generally in a first lien
position, while the borrower generally pays a blended, uniform interest rate
rather than different rates for different tranches. Unitranche debt generally
requires payments of both principal and interest throughout the life of the
loan. Unitranche debt generally has contractual maturities of five to six years
and interest is typically paid quarterly. Generally, we expect these securities
to carry a blended yield that is between senior secured and subordinated debt
interest rates. Unitranche loans provide a number of advantages for borrowers,
including the following: simplified documentation, greater certainty of
execution and reduced decision-making complexity throughout the life of the
loan. In addition, we may receive additional returns from any warrants we may
receive in connection with these investments. In some cases, a portion of the
total interest may accrue or be paid in kind. Because unitranche loans combine
characteristics of senior and subordinated financing, unitranche loans have
risks similar to the risks associated with senior secured and second lien loans
and subordinated debt in varying degrees according to the combination of loan
characteristics of the unitranche loan.  Subordinated Debt.Our subordinated, or mezzanine, debt investments will
generally rank junior in priority of payment to senior loans and will generally
be unsecured. This may result in a heightened level of risk and volatility or a
loss of principal, which could lead to the loss of the entire investment. These
investments may involve additional risks that could adversely affect our
investment returns. To the extent interest payments associated with such debt
are deferred, such debt may be subject to greater fluctuations in valuations,
and such debt could subject us and our shareholders to non-cash income,
including PIK interest and original issue discount. Loans structured with these
features may represent a higher level of credit risk than loans that require
interest to be paid in cash at regular intervals during the term of the loan.
Since we generally will not receive any principal repayments prior to the
maturity of some of our subordinated debt investments, such investments will
have greater risk than amortizing loans.  Equity Investments.We expect to make selected equity investments. In addition,
when we invest in senior secured and second lien secured loans or subordinated
debt, we may acquire warrants to purchase equity securities. Our goal is
ultimately to dispose of these equity interests and realize gains upon our
disposition of such interests. However, the equity interests we receive may not
appreciate in value and, in fact, may decline in value. Accordingly, we may not
be able to realize gains from our equity interests, and any gains that we do
realize on the disposition of any equity interests may not be sufficient to
offset any other losses we experience.  Non-U.S. Securities.We may invest in non-U.S. securities, which may include
securities denominated in U.S. dollars or in non-U.S. currencies, to the extent
permitted by the 1940 Act. Because evidence of ownership of such securities
usually are held outside the United States, we would be subject to additional
risks if we invested in non-U.S. securities, which include possible adverse
political and economic developments, seizure or nationalization of foreign
deposits and adoption of governmental restrictions which might adversely affect
or restrict the payment of principal and interest on the non-U.S. securities to
investors located outside the country of the issuer, whether from currency
blockage or otherwise. Since non-U.S. securities may be purchased with and
payable in foreign currencies, the value of these assets as measured in U.S.
dollars may be affected unfavorably by changes in current rates and exchange
control regulations.  In addition, we invest in debt securities that are
rated below investment grade by rating agencies or that would be rated below
investment grade if they were rated. Debt securities rated below investment
grade quality are generally regarded as having predominantly speculative
characteristics and may carry a greater risk with respect to a borrower’s
capacity to pay interest and repay principal. They may also be difficult to
value and illiquid.  To the extent
original issue discount constitutes a portion of our income, we will be exposed
to risks associated with the deferred receipt of cash representing such income.  Our
investments may include original issue discount instruments. To the extent
original issue discount constitutes a portion of our income, we will be exposed
to typical risks associated with such income being required to be included in
taxable and accounting income prior to receipt of cash, including the
following:  ·Original issue discount instruments
may have unreliable valuations because the accruals require judgments about
collectability. ·Original issue discount instruments
may create heightened credit risks because the inducement to trade higher rates
for the deferral of cash payments typically represents, to some extent,
speculation on the part of the borrower. ·For accounting purposes, cash
distributions to shareholders representing original issue discount income do
not come from paid-in capital, although they may be paid from the offering
proceeds. Thus, although a distribution of original issue discount income comes
from the cash invested by the shareholders, the 1940 Act does not require that
shareholders be given notice of this fact. ·In the case of PIK “toggle” debt,
the PIK election has the simultaneous effects of increasing the assets under
management, thus increasing the base management fee, and increasing the
investment income, thus increasing the potential for realizing incentive fees. ·Original issue discount creates
risk of non-refundable cash payments to the advisor based on non-cash accruals
that may never be realized.   37


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Our portfolio companies may incur
debt that ranks equally with, or senior to, our investments in such companies.  We intend to invest primarily in senior secured loans,
including unitranche loans and, to a lesser extent, second lien loans and
long-term subordinated loans, referred to as mezzanine loans, of private and
thinly traded U.S. middle market companies. Our portfolio companies may have,
or may be permitted to incur, other debt that ranks equally with, or senior to,
the debt in which we invest. By their terms, such debt instruments may entitle
the holders to receive payment of interest or principal on or before the dates
on which we are entitled to receive payments with respect to the debt
instruments in which we invest. Also, in the event of insolvency, liquidation,
dissolution, reorganization or bankruptcy of a portfolio company, holders of
debt instruments ranking senior to our investment in that portfolio company
would typically be entitled to receive payment in full before we receive any
payment or distribution. After repaying such senior creditors, such portfolio
company may not have any remaining assets to use for repaying its obligation to
us. In the case of debt ranking equally with debt instruments in which we
invest, we would have to share on an equal basis any payments or distributions
with other creditors holding such debt in the event of an insolvency,
liquidation, dissolution, reorganization or bankruptcy of the relevant
portfolio company.  There
may be circumstances where our debt investments could be subordinated to claims
of other creditors or we could be subject to lender liability claims.  If one of our portfolio companies were to file for
bankruptcy, depending on the facts and circumstances, including the extent to
which we actually provided managerial assistance to that portfolio company, a
bankruptcy court might recharacterize our debt investment and subordinate all
or a portion of our claim to that of other creditors. We may also be subject to
lender liability claims for actions taken by us with respect to a borrower’s
business or instances where we exercise control over the borrower.  We
generally will not control our portfolio companies.  We do not expect to control most of our portfolio companies,
even though we may have board representation or board observation rights, and
our debt agreements with such portfolio companies may contain certain
restrictive covenants. As a result, we are subject to the risk that a portfolio
company in which we invest may make business decisions with which we disagree
and the management of such company, as representatives of the holders of the
company’s common equity, may take risks or otherwise act in ways that do not
serve our interests as debt investors. Due to the lack of liquidity for our
investments in non-traded companies, we may not be able to dispose of our
interests in our portfolio companies as readily as we would like or at an
appropriate valuation. As a result, a portfolio company may make decisions that
could decrease the value of our portfolio holdings.  We
will be exposed to risks associated with changes in interest rates.  We are subject to financial market risks, including
changes in interest rates. General interest rate fluctuations may have a substantial
negative impact on our investments and investment opportunities and,
accordingly, have a material adverse effect on our ability to achieve our
investment objective and our target rate of return on invested capital. In
addition, an increase in interest rates would make it more expensive to use
debt for our financing needs, if any. 38


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International investments create additional risks.  We have made, and expect to continue to make,
investments in portfolio companies that are domiciled outside of the United
States. We anticipate that up to 30% of our investments may be in assets
located in jurisdictions outside the United States. Our investments in foreign
portfolio companies are deemed “non-qualifying assets,” which means, as
required by the 1940 Act, they may not constitute more than 30% of our total
assets at the time of our acquisition of any asset, after giving effect to the
acquisition. Notwithstanding that limitation on our ownership of foreign
portfolio companies, those investments subject us to many of the same risks as
our domestic investments, as well as certain additional risks including the
following:  ·foreign governmental laws, rules
and policies, including those restricting the ownership of assets in the
foreign country or the repatriation of profits from the foreign country to the
United States; ·foreign currency devaluations that
reduce the value of and returns on our foreign investments; ·adverse changes in the
availability, cost and terms of investments due to the varying economic policies
of a foreign country in which we invest; ·adverse changes in tax rates, the
tax treatment of transaction structures and other changes in operating expenses
of a particular foreign country in which we invest; ·the assessment of foreign-country
taxes (including withholding taxes, transfer taxes and value added taxes, any
or all of which could be significant) on income or gains from our investments
in the foreign country; ·adverse changes in foreign-country
laws, including those relating to taxation, bankruptcy and ownership of assets; ·changes that adversely affect the
social, political and/or economic stability of a foreign country in which we
invest; ·high inflation in the foreign
countries in which we invest, which could increase the costs to us of investing
in those countries; ·deflationary periods in the foreign
countries in which we invest, which could reduce demand for our assets in those
countries and diminish the value of such investments and the related investment
returns to us; and ·legal and logistical barriers in
the foreign countries in which we invest that materially and adversely limit
our ability to enforce our contractual rights with respect to those
investments.  In addition, we may make investments in countries whose
governments or economies may prove unstable. Certain of the countries in which
we may invest may have political, economic and legal systems that are
unpredictable, unreliable or otherwise inadequate with respect to the
implementation, interpretation and enforcement of laws protecting asset
ownership and economic interests. In some of the countries in which we may
invest, there may be a risk of nationalization, expropriation or confiscatory
taxation, which may have an adverse effect on our portfolio companies in those
countries and the rates of return we are able to achieve on such investments.
We may also lose the total value of any investment which is nationalized,
expropriated or confiscated. The financial results and investment opportunities
available to us, particularly in developing countries and emerging markets, may
be materially and adversely affected by any or all of these political, economic
and legal risks.  We
have entered into the TRS Agreement that exposes us to certain risks, including
market risk, liquidity risk and other risks similar to those associated with
the use of leverage.  A TRS is a contract in which one party agrees to make
periodic payments to another party based on the change in the market value of
the assets underlying the TRS, which may include a specified security, basket
of securities or securities indices during the specified period, in return for
periodic payments based on a fixed or variable interest rate. A TRS is
typically used to obtain exposure to a security or market without owning or taking
physical custody of such security or investing directly in such market. A TRS
may effectively add leverage to our portfolio because, in addition to our total
net assets, we would be subject to investment exposure on the amount of
securities subject to the TRS. A TRS is also subject to the risk that a
counterparty will default on its payment obligations thereunder or that we will
not be able to meet our obligations to the counterparty. In addition, because a
TRS is a form of synthetic leverage, such arrangements are subject to risks
similar to those associated with the use of leverage. See “Risks Relating to
Debt Financing” below and “Item 1. Business – Financing Arrangements – Total
Return Swap.”  39


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Second priority liens
on collateral securing debt investments that we make to our portfolio companies
may be subject to control by senior creditors with first priority liens. If
there is a default, the value of the collateral may not be sufficient to repay
in full both the first priority creditors and us.  Certain debt investments that we make to
portfolio companies may be secured on a second priority basis by the same
collateral securing first priority debt of such companies. The first priority
liens on the collateral will secure the portfolio company’s obligations under
any outstanding senior debt and may secure certain other future debt that may
be permitted to be incurred by the company under the agreements governing the
loans. The holders of obligations secured by the first priority liens on the
collateral will generally control the liquidation of and be entitled to receive
proceeds from any realization of the collateral to repay their obligations in
full before us. In addition, the value of the collateral in the event of
liquidation will depend on market and economic conditions, the availability of
buyers and other factors. There can be no assurance that the proceeds, if any,
from the sale or sales of all of the collateral would be sufficient to satisfy
the debt obligations secured by the second priority liens after payment in full
of all obligations secured by the first priority liens on the collateral. If
such proceeds are not sufficient to repay amounts outstanding under the debt
obligations secured by the second priority liens, then we, to the extent not
repaid from the proceeds of the sale of the collateral, will only have an
unsecured claim against the company’s remaining assets, if any.  The rights we may have with respect to the
collateral securing the debt investments we make to our portfolio companies
with senior debt outstanding may also be limited pursuant to the terms of one
or more intercreditor agreements that we enter into with the holders of senior
debt. Under such an intercreditor agreement, at any time that obligations that
have the benefit of the first priority liens are outstanding, any of the
following actions that may be taken in respect of the collateral will be at the
direction of the holders of the obligations secured by the first priority
liens: the ability to cause the commencement of enforcement proceedings against
the collateral; the ability to control the conduct of such proceedings; the
approval of amendments to collateral documents; releases of liens on the
collateral; and waivers of past defaults under collateral documents. We may not
have the ability to control or direct such actions, even if our rights are
adversely affected.  Economic recessions or
downturns could impair our portfolio companies and harm our operating results.  Many of our portfolio companies may be
susceptible to economic slowdowns or recessions and may be unable to repay our
debt investments during these periods. Therefore, our non-performing assets are
likely to increase, and the value of our portfolio is likely to decrease during
these periods. Adverse economic conditions may also decrease the value of any
collateral securing our senior secured or second lien secured loans. A
prolonged recession may further decrease the value of such collateral and
result in losses of value in our portfolio and a decrease in our revenues, net
income and net asset value. Unfavorable economic conditions also could increase
our funding costs, limit our access to the capital markets or result in a
decision by lenders not to extend credit to us on terms we deem acceptable.
These events could prevent us from increasing investments and harm our
operating results.  A covenant breach or other defaults by our portfolio companies may
harm our operating results.  A portfolio company’s failure to satisfy
financial or operating covenants imposed by us or other lenders could lead to
defaults and, potentially, termination of its loans and foreclosure on its
secured assets, which could trigger cross-defaults under other agreements and
jeopardize a portfolio company’s ability to meet its obligations under the debt
or equity securities that we hold. We may incur expenses to the extent
necessary to seek recovery upon default or to negotiate new terms, which may
include the waiver of certain financial covenants, with a defaulting portfolio
company.  40


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Investing in
middle-market companies involve a number of significant risks, any one of which
could have a material adverse effect on our operating results.  Investments in middle-market companies involve the same
risks that apply generally to investments in larger, more established
companies. However, such investments have more pronounced risks in that
middle-market companies:  ·may have limited financial resources
and may be unable to meet their obligations under their debt securities that we
hold, which may be accompanied by a deterioration in the value of any
collateral and a reduction in the likelihood of us realizing on any guarantees
we may have obtained in connection with our investment; ·have shorter operating histories,
narrower product lines and smaller market shares than larger businesses, which
tends to render them more vulnerable to competitors’ actions and changing
market conditions, as well as general economic downturns; ·are more likely to depend on the
management talents and efforts of a small group of persons; therefore, the
death, disability, resignation or termination of one or more of these persons
could have a material adverse impact on our portfolio company and, in turn, on
us; ·generally have less predictable
operating results, may from time to time be parties to litigation, may be
engaged in rapidly changing businesses with products subject to a substantial
risk of obsolescence, and may require substantial additional capital to support
their operations, finance expansion or maintain their competitive position. In
addition, our executive officers, directors and members of CIM may, in the
ordinary course of business, be named as defendants in litigation arising from
our investments in the portfolio companies; and ·may have difficulty accessing the
capital markets to meet future capital needs, which may limit their ability to
grow or to repay their outstanding indebtedness upon maturity.  We may not
realize gains from our equity investments.  Certain investments that we may make could include
warrants or other equity securities. In addition, we may make direct equity
investments in portfolio companies. Our goal is ultimately to realize gains
upon our disposition of such equity interests. However, the equity interests we
receive may not appreciate in value and, in fact, may decline in value.
Accordingly, we may not be able to realize gains from our equity interests, and
any gains that we do realize on the disposition of any equity interests may not
be sufficient to offset any other losses we experience. We also may be unable
to realize any value if a portfolio company does not have a liquidity event,
such as a sale of the business, recapitalization or public offering, which
would allow us to sell the underlying equity interests. We intend to seek puts
or similar rights to give us the right to sell our equity securities back to
the portfolio company issuer. We may be unable to exercise these put rights for
the consideration provided in our investment documents if the issuer is in
financial distress.  41


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An investment strategy focused primarily on privately-held
companies presents certain challenges, including, but not limited to, the lack
of available information about these companies.  We invest primarily in privately-held
companies. Investments in private companies pose significantly greater risks
than investments in public companies. First, private companies have reduced
access to the capital markets, resulting in diminished capital resources and
the ability to withstand financial distress. Second, the depth and breadth of
experience of management in private companies tends to be less than that at
public companies, which makes such companies more likely to depend on the
management talents and efforts of a smaller group of persons and/or persons
with less depth and breadth of experience. Therefore, the decisions made by
such management teams and/or the death, disability, resignation or termination
of one or more of these persons could have a material adverse impact on our
investments and, in turn, on us. Third, the investments themselves tend to be
less liquid. As such, we may have difficulty exiting an investment promptly or
at a desired price prior to maturity or outside of a normal amortization
schedule. As a result, the relative lack of liquidity and the potential
diminished capital resources of our target portfolio companies may affect our
investment returns. Fourth, little public information generally exists about
private companies. Further, these companies may not have third-party debt
ratings or audited financial statements. We must therefore rely on the ability
of CIM and/or AIM to obtain adequate information through due diligence to evaluate
the creditworthiness and potential returns from investing in these companies.
These companies and their financial information will generally not be subject
to the Sarbanes-Oxley Act and other rules that govern public companies. If we
are unable to uncover all material information about these companies, we may
not make a fully informed investment decision, and we may lose money on our
investments.  A lack of liquidity in
certain of our investments may adversely affect our business.  We invest in certain companies whose
securities are not publicly traded or actively traded on the secondary market,
and whose securities are subject to legal and other restrictions on resale or
will otherwise be less liquid than publicly-traded securities. The illiquidity
of certain of our investments may make it difficult for us to sell these
investments when desired. In addition, if we are required to liquidate all or a
portion of our portfolio quickly, we may realize significantly less than the
value at which we had previously recorded these investments. The reduced
liquidity of our investments may make it difficult for us to dispose of them at
a favorable price, and, as a result, we may suffer losses.  We may not have the funds or
ability to make additional investments in our portfolio companiesor
to fund our unfunded commitments.  We may not have the funds or ability to
make additional investments in our portfolio companies or to fund our unfunded
debt commitments. After our initial investment in a portfolio company, we may
be called upon from time to time to provide additional funds to such company or
have the opportunity to increase our investment through the exercise of a
warrant to purchase common stock. There is no assurance that we will make, or
will have sufficient funds to make, follow-on investments. Any decisions not to
make a follow-on investment or any inability on our part to make such an
investment may have a negative impact on a portfolio company in need of such an
investment, may result in a missed opportunity for us to increase our
participation in a successful operation or may reduce the expected return on
the investment.  We may acquire various
structured financial instruments for purposes of “hedging” or reducing our
risks, which may be costly and ineffective and could reduce our cash available
for distribution to our shareholders.  We may seek to hedge against interest rate
and currency exchange rate fluctuations and credit risk by using structured
financial instruments such as futures, options, swaps and forward contracts,
subject to the requirements of the 1940 Act. Use of structured financial
instruments for hedging purposes may present significant risks, including the
risk of loss of the amounts invested. Defaults by the other party to a hedging
transaction can result in losses in the hedging transaction. Hedging activities
also involve the risk of an imperfect correlation between the hedging
instrument and the asset being hedged, which could result in losses both on the
hedging transaction and on the instrument being hedged. Use of hedging
activities may not prevent significant losses and could increase our losses.
Further, hedging transactions may reduce cash available to pay distributions to
our shareholders.  42


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Prepayments of our debt investments by our portfolio companies
could adversely impact our results of operations and reduce our return on
equity.  We are subject to the risk that the
investments we make in our portfolio companies may be repaid prior to maturity.
When this occurs, we will generally reinvest these proceeds in temporary
investments, pending their future investment in new portfolio companies. These
temporary investments will typically have substantially lower yields than the
debt being prepaid and we could experience significant delays in reinvesting
these amounts. Any future investment in a new portfolio company may also be at
lower yields than the debt that was repaid. As a result, our results of
operations could be materially adversely affected if one or more of our
portfolio companies elect to prepay amounts owed to us. Additionally,
prepayments, net of prepayment fees, could negatively impact our return on
equity.  Risks Relating to Debt Financing  If we borrow money, the
potential for loss on amounts invested in us will be magnified and may increase
the risk of investing in us. Borrowed money may also adversely affect the
return on our assets, reduce cash available for distribution to our
shareholders, and result in losses.  The use of borrowings, also known as
leverage, increases the volatility of investments by magnifying the potential
for loss on invested equity capital. If we use leverage to partially finance
our investments, through borrowing from banks and other lenders, shareholders
will experience increased risks of investing in our common stock. If the value
of our assets decreases, leveraging would cause net asset value to decline more
sharply than it otherwise would have had we not leveraged. Similarly, any
decrease in our income would cause net income to decline more sharply than it
would have had we not borrowed. Such a decline could negatively affect our
ability to make distributions to our shareholders. In addition, our
shareholders will bear the burden of any increase in our expenses as a result
of our use of leverage, including interest expenses and any increase in the
management or incentive fees payable to CIM.  We may use leverage to finance our
investments. The amount of leverage that we employ will depend on CIM’s and our
board of directors’ assessment of market and other factors at the time of any
proposed borrowing. There can be no assurance that leveraged financing will be
available to us on favorable terms or at all. However, to the extent that we
use leverage to finance our assets, our financing costs will reduce cash
available for distributions to shareholders. Moreover, we may not be able to
meet our financing obligations and, to the extent that we cannot, we risk the
loss of some or all of our assets to liquidation or sale to satisfy the
obligations. In such an event, we may be forced to sell assets at significantly
depressed prices due to market conditions or otherwise, which may result in
losses.  As a BDC, we generally are required to meet
a coverage ratio of total assets to total borrowings and other senior
securities, which include all of our borrowings and any preferred stock that we
may issue in the future, of at least 200%. If this ratio declines below 200%,
we cannot incur additional debt and could be required to sell a portion of our
investments to repay some debt when it is disadvantageous to do so. This could
have a material adverse effect on our operations, and we may not be able to
make distributions. The amount of leverage that we will employ will be subject
to oversight by our board of directors, a majority of whom are independent
directors with no material interests in such transactions.  At December 31, 2013 and 2012, our
borrowings for the BDC coverage ratio were $107,496,160 and $2,226,457, respectively,
which included the non-collateralized TRS notional amount and the financing
arrangement in connection with our directors and officers insurance.  Illustration.  The following
table illustrates the effect of leverage on returns from an investment in our
common stock assuming various annual returns, net of expenses. The calculations
in the table below are hypothetical and actual returns may be higher or lower
than those appearing below. The calculation assumes (i) we sell an aggregate of
$750 million worth of our common stock, (ii) our net offering proceeds from
such sales equal $663.75 million, (iii) our average net assets during such
period equals one-half of the net offering proceeds, or $331.875 million, (iv)
we have $829.69 million in total assets, (v) we borrow funds equal to 50% of
our average net assets during such period, or $165.9375 million, and (vi) a
weighted average cost of funds of 3%. Actual expenses will depend on the number
of shares of common stock we sell in our offering and the amount of leverage we
employ. For example, if we were to raise proceeds significantly less than this
amount over the next twelve months, our expenses as a percentage of our average
net assets would be significantly higher. There can be no assurance that we will
sell an aggregate of $750 million worth of our common stock during the
following twelve months. In order to compute the “Corresponding return to
shareholders,” the “Assumed Return on Our Portfolio (net of expenses)” is
multiplied by the assumed total assets to obtain an assumed return to us. From
this amount, the interest expense is calculated by multiplying the assumed
weighted average cost of funds times the assumed debt outstanding, and the
product is subtracted from the assumed return to us in order to determine the
return available to shareholders. The return available to shareholders is then
divided by our shareholders’ equity to determine the “Corresponding return to
shareholders.” Actual interest payments may be different.  Assuming
  Return on Our Portfolio(Net of
  Expenses)
 
 -10%
 
 -5%
 
 0%
 
 5%
 
 10%Corresponding
  return to shareholders
 
 -13.25%
 
 -7.00%
 
 -0.75%
 
 5.50%
 
 11.75%
  Similarly, assuming (i) $829.69 million in
total assets, (ii) a weighted average cost of funds of 3%, and (iii) $165.9375
million in debt outstanding, our assets would need to yield an annual return
(net of expenses) of approximately 0.60% in order to cover the annual interest
payments on our outstanding debt.  43


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Changes in
interest rates may affect our cost of capital and net investment income.  Since we intend to use debt to finance a portion of our
investments, our net investment income will depend, in part, upon the
difference between the rate at which we borrow funds and the rate at which we
invest those funds. As a result, we can offer no assurance that a significant
change in market interest rates will not have a material adverse effect on our
net investment income. In periods of rising interest rates when we have debt
outstanding, our cost of funds will increase, which could reduce our net
investment income. We expect that our long-term fixed-rate investments will be
financed primarily with equity and long-term debt. We may use interest rate
risk management techniques in an effort to limit our exposure to interest rate
fluctuations. These techniques may include various interest rate hedging
activities to the extent permitted by the 1940 Act. These activities may limit
our ability to participate in the benefits of lower interest rates with respect
to the hedged portfolio. Adverse developments resulting from changes in
interest rates or hedging transactions could have a material adverse effect on
our business, financial condition and results of operations. Also, we have
limited experience in entering into hedging transactions, and we will initially
have to purchase or develop such expertise. Furthermore, our ability to engage
in hedging transactions may be adversely affected by recent rules adopted by
the CFTC.  A rise in the general level of interest rates can be
expected to lead to higher interest rates applicable to our debt investments.
Accordingly, an increase in interest rates would make it easier for us to meet
or exceed the incentive fee preferred return and may result in a substantial
increase in the amount of incentive fees payable to CIM with respect to
pre-incentive fee net investment income.  Federal Income Tax Risks  We
will be subject to corporate-level income tax if we are unable to qualify as a
RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.  To obtain and maintain RIC tax treatment under
Subchapter M of the Code, we must, among other things, meet the following
annual distribution, income source and asset diversification requirements.  ·The annual distribution requirement
for a RIC will be satisfied if we distribute to our shareholders on an annual
basis at least 90% of our net ordinary income and realized net short-term
capital gains in excess of realized net long-term capital losses, if any.
Because we may use debt financing, we are subject to an asset coverage ratio
requirement under the 1940 Act and may in the future become subject to certain
financial covenants under loan and credit agreements that could, under certain
circumstances, restrict us from making distributions necessary to satisfy the
distribution requirement. If we are unable to obtain cash from other sources,
we could fail to qualify for RIC tax treatment and thus become subject to
corporate-level income tax. ·The income source requirement will
be satisfied if we obtain at least 90% of our income for each year from
dividends, interest, gains from the sale of common stock or securities or similar
sources. ·The asset diversification
requirement will be satisfied if we meet certain asset diversification
requirements at the end of each quarter of our taxable year. To satisfy this
requirement, at least 50% of the value of our assets must consist of cash, cash
equivalents, U.S. government securities, securities of other RICs, and other
securities if such other securities of any one issuer do not represent more
than 5% of the value of our assets or more than 10% of the outstanding voting
securities of the issuer; and no more than 25% of the value of our assets can
be invested in the securities, other than U.S. government securities or
securities of other RICs, of one issuer, of two or more issuers that are
controlled, as determined under applicable Code rules, by us and that are
engaged in the same or similar or related trades or businesses or of certain
“qualified publicly-traded partnerships.” Failure to meet these requirements
may result in our having to dispose of certain investments quickly in order to
prevent the loss of RIC status. Because most of our investments will be in
private companies, and therefore will be relatively illiquid, any such
dispositions could be made at disadvantageous prices and could result in
substantial losses.  If we fail to qualify for or maintain RIC tax treatment
for any reason and are subject to corporate income tax, the resulting corporate
taxes could substantially reduce our net assets, the amount of income available
for distribution and the amount of our distributions.  44


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We
may have difficulty paying our required distributions if we recognize income
before or without receiving cash representing such income.  For federal income tax purposes, we may be
required to recognize taxable income in circumstances in which we do not
receive a corresponding payment in cash. For example, if we hold debt
obligations that are treated under applicable tax rules as having original
issue discount (such as debt instruments with PIK interest or, in certain
cases, increasing interest rates or debt instruments that were issued with
warrants), we must include in income each year a portion of the original issue
discount that accrues over the life of the obligation, regardless of whether
cash representing such income is received by us in the same taxable year. We
may also have to include in income other amounts that we have not yet received
in cash, such as deferred loan origination fees that are paid after origination
of the loan or are paid in non-cash compensation such as warrants or stock. We
anticipate that a portion of our income may constitute original issue discount
or other income required to be included in taxable income prior to receipt of
cash. Further, we may elect to amortize market discounts and include such
amounts in our taxable income in the current year, instead of upon disposition,
as an election not to do so would limit our ability to deduct interest expenses
for tax purposes.  Because any original issue discount or
other amounts accrued will be included in our investment company taxable income
for the year of the accrual, we may be required to make a distribution to our
shareholders in order to satisfy the annual distribution requirement, even
though we will not have received any corresponding cash amount. As a result, we
may have difficulty meeting the annual distribution requirement necessary to
qualify for and maintain RIC tax treatment under Subchapter M of the Code. We
may have to sell some of our investments at times and/or at prices we would not
consider advantageous, raise additional debt or equity capital or forgo new
investment opportunities for this purpose. If we are not able to obtain cash
from other sources, we may fail to qualify for or maintain RIC tax treatment
and thus become subject to corporate-level income tax.  Any deferred PIK interest income that we accrue and distribute to
our shareholders may create issues regarding our distributions.  Deferred PIK interest instruments may have
less reliable valuations because these instruments have continuing accruals
that require continuing judgment about the collectability of the deferred
payments and the value of any associated collateral. In addition, deferred PIK
interest instruments create the risk of non-refundable cash payments to our
investment adviser based on non-cash accruals that ultimately may not be
realized. For accounting purposes, any cash distributions to shareholders
representing deferred PIK interest income are not treated as coming from
paid-in capital, even though the cash to pay these distributions may come from
offering proceeds. Thus, although a distribution of deferred PIK interest may
come from the cash invested by shareholders, the 1940 Act does not require that
shareholders be given notice of this fact by reporting it as a return of
capital.  If we do not qualify as a “publicly offered regulated investment
company,” as defined in the Code, shareholders will be taxed as though they
received a distribution of some of our expenses.  A “publicly offered regulated investment
company” is a RIC whose shares are either (i) continuously offered pursuant to
a public offering, (ii) regularly traded on an established securities market or
(iii) held by at least 500 persons at all times during the taxable year. If we
are not a publicly offered RIC for any period, a non-corporate shareholder’s
allocable portion of our affected expenses, including our management fees, will
be treated as an additional distribution to the shareholder and will be
deductible by such shareholder only to the extent permitted under the
limitations described below. For non-corporate shareholders, including
individuals, trusts, and estates, significant limitations generally apply to
the deductibility of certain expenses of a non-publicly offered RIC, including
advisory fees. In particular, these expenses, referred to as miscellaneous
itemized deductions, are deductible to an individual only to the extent they
exceed 2% of such a shareholder’s adjusted gross income, and are not deductible
for alternative minimum tax purposes. While we anticipate that we will
constitute a publicly offered RIC, there can be no assurance that we will in
fact so qualify for any of our taxable years.  45


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Risks Relating to an Investment in our
Common Stock  Investors
will not know the purchase price per share at the time they submit their
subscription agreements and could pay a premium for their common stock if our
board of directors does not decrease the offering price in the event of a
decline in our net asset value per share.  The purchase price at which shareholders
purchase common stock will be determined at each weekly closing date to ensure
that the sales price, after deducting selling commissions and dealer manager
fees, is equal to or greater than the net asset value of our common stock. In
the event of a decrease to our net asset value per share, shareholders could
pay a premium of more than 2.5% for their common stock if our board of
directors does not decrease the offering price. A decline in our net asset
value per share to an amount more than 2.5% below our current offering price,
net of selling commissions and dealer manager fees, creates a rebuttable
presumption that there has been a material change in the value of our assets
such that a reduction in the offering price per share is warranted. This
presumption may only be rebutted if our board of directors, in consultation
with our management, reasonably and in good faith determines that the decline
in net asset value per share is the result of a temporary movement in the
credit markets or the value of our assets, rather than a more fundamental shift
in the valuation of our portfolio. In the event that (i) net asset value per
share decreases to more than 2.5% below our current net offering price and (ii)
our board of directors believes that such decrease in net asset value per share
is the result of a non-temporary movement in the credit markets or the value of
our assets, our board of directors will undertake to establish a new net
offering price that is not more than 2.5% above our net asset value per share.
If our board of directors determines that the decline in our net asset value
per share is the result of a temporary movement in the credit markets or the
value of our assets, investors will purchase common stock at an offering price
per share, net of selling commissions and dealer manager fees, which represents
a premium to the net asset value per share of greater than 2.5%.  Our offering is being made on a “best efforts” basis, and if we
are unable to raise substantial funds, then we will be more limited in the
number and type of investments we may make, and the value of a shareholder’s
investment in us may be reduced in the event our assets under-perform.  Our offering is being made on a “best efforts”
basis, whereby the dealer manager and selected broker-dealers participating in
the offering are only required to use their best efforts to sell our common
stock and have no firm commitment or obligation to purchase any of our common
stock. Amounts that we raise may not be sufficient for us to purchase a broad
portfolio of investments. To the extent that less than the maximum number of
shares of common stock is subscribed for, the opportunity for us to purchase a
broad portfolio of investments may be decreased and the returns achieved on
those investments may be reduced as a result of allocating all of our expenses
among a smaller capital base.  The common stock sold in our offering will not be listed on an
exchange or quoted through a quotation system for the foreseeable future, if
ever. Therefore, if shareholders purchase common stock in our offering,
shareholders will have limited liquidity and may not receive a full return of
shareholder invested capital if shareholders sell their common stock. We are
not obligated to complete a liquidity event by a specified date;
therefore, until we complete a liquidity event, it is unlikely that you will be
able to sell your common stock.  The common stock offered by us are illiquid
assets for which there is not expected to be any secondary market nor is it
expected that any will develop in the foreseeable future. Prior to the
completion of a liquidity event, our share repurchase program provides a
limited opportunity for investors to achieve liquidity, subject to certain
restrictions and limitations, at a price which may reflect a discount from the
purchase price paid for the common stock being repurchased. However, there can
be no assurance that we will complete a liquidity event within such time or at
all. See “Item 5. Market for Registrant’s Common Equity, Related Shareholder
Matters and Issuer Purchases of Equity Securities – Share Repurchase Program”
for a detailed description of our share repurchase program.  In making the decision to apply for listing
of our common stock, our board of directors will try to determine whether
listing our common stock or liquidating our assets will result in greater value
for our shareholders. In making a determination of what type of liquidity event
is in the best interest of our shareholders, our board of directors, including
our independent directors, may consider a variety of criteria, including, but
not limited to, maintaining a broad portfolio of investments, portfolio
performance, our financial condition, potential access to capital as a listed
company, the investment advisory experience of CIM and market conditions for
the sale of our assets or listing of our common stock and the potential for
shareholder liquidity. If we determine to pursue a listing of our common stock
on a national securities exchange in the future, at that time we may consider
either an internal or an external management structure. There can be no
assurance that we will complete a liquidity event. Until we complete a
liquidity event, it is unlikely that you will be able to sell your shares. If
our common stock is listed, we cannot assure shareholders that a public trading
market will develop. Further, even if we do complete a liquidity event,
shareholders may not receive a return of all of their invested capital.  46


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The
dealer manager in our continuous offering may be unable to sell a sufficient
number of shares of common stock for us to achieve our investment objective.  The dealer manager for our continuous
offering is ICON Securities, LLC, or ICON Securities, one of our affiliates.
The dealer manager has no experience selling shares on behalf of a BDC. There
is no assurance that it will be able to sell a sufficient number of shares of
common stock to allow us to have adequate funds to purchase a diversified
portfolio of investments and generate income sufficient to cover our expenses.
As a result, we may be unable to achieve our investment objective, and
shareholders could lose some or all of the value of their investment.  Because the dealer manager is one of our affiliates, shareholders
will not have the benefit of an independent due diligence review of us, which
is customarily performed in firm commitment underwritten offerings; the absence
of an independent due diligence review increases the risks and uncertainty
faced as a shareholder.  As a result of ICON Securities being one of
our affiliates, its due diligence review and investigation of us and our
prospectus cannot be considered an independent review. Therefore, shareholders
do not have the benefit of an independent review and investigation of our
offering of the type normally performed by an unaffiliated, independent
underwriter in a firm commitment underwritten public securities offering. A
shareholder may be able to rely on his or her own broker-dealer to make an
independent review and investigation of the terms of the offering. If a
shareholder is unable to so rely on his or her broker-dealer, however, he or
she will not have the benefit of any independent review and evaluation of the
terms of the offering by the dealer manager. In addition, we do not, and do not
expect to, have research analysts reviewing our performance or our securities
on an ongoing basis. Therefore, shareholders will not have an independent
review of our performance and the value of our common stock relative to other
publicly-traded companies.  Our ability to successfully conduct our continuous offering is
dependent, in part, on the ability of the dealer manager to successfully
establish, operate and maintain a network of selected broker-dealers.  The success of our continuous offering, and
correspondingly our ability to implement our business strategy, is dependent
upon the ability of the dealer manager to establish, operate and maintain a
network of licensed securities broker-dealers and other agents to sell our
common stock. If the dealer manager fails to perform, we may not be able to
raise adequate proceeds through our public offering to implement our investment
strategy. If we are unsuccessful in implementing our investment strategy,
shareholders could lose all or a part of their investment.  Beginning in the first quarter of 2014 we began offering to
repurchase shares of our common stock. As a result, shareholders have limited
opportunities to sell their shares of our common stock and, to the extent they
are able to sell their shares of our common stock under the program, they may
not be able to recover the amount of their investment in our common stock.  Beginning in the first quarter of 2014, we
commenced tender offers to allow shareholders to tender their shares of common
stock on a quarterly basis at a price equal to 90% of our public offering price
in effect on the date of repurchase. The share repurchase program includes
numerous restrictions that limit shareholders’ ability to sell their shares of
common stock. We limit the number of shares of common stock repurchased
pursuant to our share repurchase program as follows: (1) we currently limit the
number of shares of common stock to be repurchased during any calendar year to
the number of shares of common stock we can repurchase with the proceeds we
receive from the issuance of shares of our common stock pursuant to our second
amended and restated distribution reinvestment plan, although at the discretion
of our board of directors, we may also use cash on hand, cash available from
borrowings and cash from liquidation of securities investments as of the end of
the applicable period to repurchase shares of common stock; (2) we will not
repurchase shares of common stock in any calendar year in excess of 15% of the
weighted average number of shares of common stock outstanding in the prior
calendar year, or 3.75% in each quarter; (3) unless a shareholder tenders all
of his or her shares of common stock, he or she must tender at least 25% of the
amount of common stock the shareholder purchased in the offering and must generally
maintain a minimum balance of $5,000 subsequent to submitting a portion of his
or her shares of common stock for repurchase by us; and (4) to the extent that
the number of shares of common stock put to us for repurchase exceeds the
number of shares of common stock that we are able to purchase, we will
repurchase shares of common stock on a pro rata basis, not on a first-come, first-served
basis. Further, we have no obligation to repurchase shares of common stock if
the repurchase would violate the restrictions on distributions under federal
law or Maryland law.  47


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Although
we have adopted a share repurchase program, we have discretion to not
repurchase shares of common stock, to suspend the program, and to cease
repurchases.  Our board of directors may amend, suspend
or terminate the share repurchase program upon 30 days’ notice. Shareholders
may not be able to sell their shares at all in the event our board of directors
amends, suspends or terminates the share repurchase program, absent a liquidity
event. We will notify shareholders of such developments (1) in our quarterly
reports or (2) by means of a separate mailing to shareholders, accompanied by
disclosure in a current or periodic report under the Exchange Act. The share
repurchase program has many limitations and should not be relied upon as a
method to sell shares of common stock promptly or at a desired price.  The timing of our repurchase offers pursuant to our share
repurchase program may be at a time that is disadvantageous to our
shareholders.  When we make quarterly repurchase offers
pursuant to the share repurchase program, the repurchase price will be lower than
the price that investors paid for common stock in our offering, unless we
experience substantial capital appreciation and capital gains. As a result, to
the extent investors have the ability to sell their common stock to us as part
of our share repurchase program, the price at which an investor may sell common
stock, which will be 90% of the offering price in effect on the date of
repurchase, may be lower than what an investor paid in connection with the
purchase of common stock in our offering.  In addition, in the event an investor
chooses to participate in our share repurchase program, the investor will be
required to provide us with notice of intent to participate prior to knowing
what the net asset value per share will be on the repurchase date. Although an
investor will have the ability to withdraw a repurchase request prior to the
repurchase date, to the extent an investor seeks to sell common stock to us as
part of our periodic share repurchase program, the investor will be required to
do so without knowledge of what the repurchase price of our common stock will
be on the repurchase date.  We may be unable to invest a significant portion of the net
proceeds of our offering on acceptable terms in an acceptable timeframe.  Delays in investing the net proceeds of our
offering may impair our performance. We cannot assure shareholders that we will
be able to identify any investments that meet our investment objective or that
any investment that we make will produce a positive return. We may be unable to
invest the net proceeds of our offering on acceptable terms within the time
period that we anticipate or at all, which could harm our financial condition
and operating results.  In addition, even if we are able to raise
significant proceeds, we will not be permitted to use such proceeds to
co-invest with certain entities affiliated with CIM or Apollo in transactions
originated by CIM or Apollo or their respective affiliates unless we first
obtain an exemptive order from the SEC or co-invest alongside CIM or Apollo or
their respective affiliates in accordance with existing regulatory guidance.
However, we will be permitted to and may co-invest in syndicated deals and
secondary loan market transactions where price is the only negotiated point.
When we consider it necessary, we intend to seek exemptive relief from the SEC
to engage in co-investment transactions with CIM or Apollo and/or their
respective affiliates. However, there can be no assurance that we will obtain
such exemptive relief. Even if we receive exemptive relief, neither CIM nor
Apollo or their respective affiliates are obligated to offer us the right to
participate in any transactions.  Before making investments, we will invest
the net proceeds of our offering primarily in cash, cash equivalents, U.S.
government securities, repurchase agreements and high-quality debt instruments
maturing in one year or less from the time of investment, which may produce
returns that are significantly lower than the returns that we expect to achieve
when our portfolio is fully invested in securities meeting our investment
objective. As a result, any distributions that we pay while our portfolio is
not fully invested in securities meeting our investment objective may be lower
than the distributions that we may be able to pay when our portfolio is fully
invested in securities meeting our investment objective.  A shareholder’s interest in us will be diluted if we issue
additional shares of common stock, which could reduce the overall value of an
investment in us.  Potential investors will not have
preemptive rights to any common stock we issue in the future. Our articles of
incorporation authorize us to issue 500,000,000 shares of common stock.
Pursuant to our articles of incorporation, a majority of our entire board of
directors may amend our articles of incorporation to increase the number of
authorized shares of common stock without shareholder approval. After an
investor purchases shares of common stock, we intend to continuously sell
additional shares of common stock in our offering and any other follow-on
offering or issue equity interests in private offerings. To the extent that we
issue additional shares of common stock at or below net asset value (including
if our net asset value drops more than 2.5% below our offering price) after an
investor purchases shares of our common stock, an investor’s percentage
ownership interest in us will be diluted. In addition, depending upon the terms
and pricing of any additional offerings and the value of our investments, an
investor may also experience dilution in the book value and fair value of his
or her shares of common stock.  48


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Certain
provisions of our articles of incorporation and bylaws could deter takeover
attempts and have an adverse impact on the value of our common stock.  Our bylaws exempt us from the Maryland Control Share
Acquisition Act, which significantly restricts the voting rights of control
shares of a Maryland corporation acquired in a control share acquisition. If
our board of directors were to amend our bylaws to repeal this exemption from
the Maryland Control Share Acquisition Act, that statute may make it more
difficult for a third party to obtain control of us and increase the difficulty
of consummating such a transaction. There can be no assurance, however, that we
will not so amend our bylaws in such a manner at some time in the future. We
will not, however, amend our bylaws to make us subject to the Maryland Control
Share Acquisition Act without our board of directors determining that doing so
would not conflict with the 1940 Act and obtaining confirmation from the SEC
that it does not object to the determination.  Our articles of incorporation and bylaws, as well as
certain statutory and regulatory requirements, contain certain provisions that
may have the effect of discouraging a third party from attempting to acquire
us. Our board of directors may, without shareholder action, authorize the
issuance of shares in one or more classes or series, including preferred
shares; and our board of directors may, without shareholder action, amend our
articles of incorporation to increase the number of our shares, of any class or
series, that we have authority to issue. These anti-takeover provisions may
inhibit a change of control in circumstances that could give the holders of our
common stock the opportunity to realize a premium over the value of our common
stock.  Investing
in our common stock involves a high degree of risk.  The investments we make in accordance with our
investment objective may result in a higher amount of risk than alternative
investment options and volatility or loss of principal. Our investments in
portfolio companies may be highly speculative and aggressive and, therefore, an
investment in our common stock may not be suitable for someone with lower risk
tolerance.  The
net asset value of our common stock may fluctuate significantly.  The net asset value and liquidity, if any, of the
market for shares of our common stock may be significantly affected by numerous
factors, some of which are beyond our control and may not be directly related
to our operating performance. These factors include:  ·changes in regulatory policies or
tax guidelines, particularly with respect to RICs or BDCs; ·loss of RIC or BDC status; ·changes in earnings or variations
in operating results; ·changes in the value of our
portfolio of investments; ·changes in accounting guidelines
governing valuation of our investments; ·any shortfall in revenue or net
income or any increase in losses from levels expected by investors; ·departure of either of our adviser,
our sub-adviser or certain of their respective key personnel; ·general economic trends and other
external factors; and ·loss of a major funding source.  49


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Item 1B. Unresolved Staff Comments  Not applicable.  Item
2. Properties  We do not own any real estate or other
physical properties materially important to our operation. Our executive
offices are located at 3 Park Avenue, 36th Floor, New York, NY 10016. We
believe that our current office facilities are adequate for our business as it
is presently conducted.  Item 3. Legal Proceedings  We are not currently subject to any
material legal proceedings, nor, to our knowledge, is any material legal
proceeding threatened against us. From time to time, we may be party to certain
legal proceedings in the ordinary course of business, including proceedings
relating to the enforcement of our rights under contracts with our portfolio
companies. While the outcome of these legal proceedings cannot be predicted
with certainty, we do not expect that any such proceedings will have a material
effect upon our financial condition or results of operations.  Item 4. Mine Safety Disclosures  Not applicable.  50


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PART II  Item 5. Market for Registrant’s Common
Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities  Our shares are not listed
on an exchange or quoted through a quotation system. There is currently no
market for our common stock, and we do not expect that a market for our shares
will develop in the future. No shares have been authorized for issuance under
any equity compensation plans. Under Maryland law, our shareholders generally
will not be personally liable for our debts or obligations.  We are currently selling
our shares on a continuous basis at an offering price of $10.45 per share;
however, to the extent that our net asset value per share increases, we will
sell at a price necessary to ensure that shares are not sold at a price, after
deduction of selling commissions and dealer manager fees, that is below net
asset value per share. In connection with each weekly closing on the sale of
shares of our common stock pursuant to our prospectus, as amended or
supplemented, which relates to our public offering of common stock on a
continuous basis, our board of directors has delegated to management the
authority to conduct such closings so long as there is no change to our public
offering price. In the event of a change to our public offering price in
connection with any weekly closing, our board of directors will approve the
change prior to management conducting such closing.  A decline in our net asset value per share
to an amount more than 2.5% below our current offering price, net of selling
commissions and dealer manager fees, creates a rebuttable presumption that
there has been a material change in the value of our assets such that a
reduction in the offering price per share is warranted. This presumption may
only be rebutted if our board of directors, in consultation with our
management, reasonably and in good faith determines that the decline in net
asset value per share is the result of a temporary movement in the credit markets
or the value of our assets, rather than a more fundamental shift in the
valuation of our portfolio. In the event that (i) net asset value per share
decreases to more than 2.5% below our current net offering price and (ii) our
board of directors believes that such decrease in the net asset value per share
is the result of a non-temporary movement in the credit markets or the value of
our assets, our board of directors will undertake to establish a new net
offering price that is not more than 2.5% above our net asset value per share.
If our board of directors determines that the decline in our net asset value
per share is the result of a temporary movement in the credit markets or the
value of our assets, investors will purchase common stock at an offering price
per share, net of selling commissions and dealer manager fees, which represents
a premium to the net asset value per share of greater than 2.5%.  Set forth below is a chart describing the
classes of our securities outstanding as of March 19, 2014:  (1)
  Title of Class
 
 (2)
  Amount Authorized
 
 (3)
  Amount Held by Us or for Our Account
 
 (4)
  Amount Outstanding Exclusive of Amount Under Column (3)Common stock
 
 500,000,000
 
 -
 
 23,414,958
 As of March 19, 2014, we had 5,202 record holders of
our common stock.  Share
Repurchase Program  We do not currently intend to list our common stock on
any securities exchange and do not expect a public market for them to develop
in the foreseeable future. It is unlikely that shareholders will be able to
sell their common stock when desired or at a desired price. No shareholder will
have the right to require us to repurchase his or her common stock or any
portion thereof. Because no public market will exist for our common stock, and
none is expected to develop, shareholders will not be able to liquidate their
investment prior to our liquidation or other liquidity event, other than
through our share repurchase program, or, in limited circumstances, as a result
of transfers of common stock to other eligible investors.  Beginning in the first quarter of 2014 we began
offering, and on a quarterly basis thereafter we intend to continue offering,
to repurchase common stock on such terms as may be determined by our board of
directors in its complete and absolute discretion unless, in the judgment of
the independent directors of our board of directors, such repurchases would not
be in the best interests of our shareholders or would violate applicable law.
We conduct such repurchase offers in accordance with the requirements of Rule
13e-4 of the Exchange Act and the 1940 Act. In months in which we repurchase
common stock, we conduct repurchases on the same date that we hold the first weekly
closing in a calendar month for the sale of common stock in our offering. The
offer to repurchase common stock is conducted solely through tender offer
materials mailed to each shareholder.  The board also considers the following factors, among
others, in making its determination regarding whether to cause us to continue
offering to repurchase shares and under what terms:  ·the effect of such repurchases on
our qualification as a RIC (including the consequences of any necessary asset
sales); ·the liquidity of our assets
(including fees and costs associated with disposing of assets); 51


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·our investment plans and working
capital requirements; ·the relative economies of scale
with respect to our size; ·our history in repurchasing shares
or portions thereof; and ·the condition of the securities
markets.  We currently limit the number of shares of common stock
to be repurchased during any calendar year to the number of shares of common
stock we can repurchase with the proceeds we receive from the issuance of
shares of our common stock pursuant to our second amended and restated
distribution reinvestment plan. At the discretion of our board of directors, we
may also use cash on hand, cash available from borrowings and cash from
liquidation of securities investments as of the end of the applicable period to
repurchase common stock. In addition, we limit the number of shares of common
stock to be repurchased in any calendar year to 15% of the weighted average
number of shares of common stock outstanding in the prior calendar year, or
3.75% in each quarter, though the actual number of shares of common stock that
we offer to repurchase may be less in light of the limitations noted above. We
offer to repurchase such common stock on each date of repurchase at a price
equal to 90% of the current offering price in effect on each date of
repurchase.  We do not repurchase common stock, or fractions
thereof, if such repurchase causes us to be in violation of the securities or
other laws of the U.S., Maryland or any other relevant jurisdiction.  While we conduct, and intend to continue conducting, quarterly
tender offers as described above, we are not required to do so and may suspend
or terminate the share repurchase program at any time, upon 30 days’ notice.  In the event that CIM or any of its affiliates holds
common stock in the capacity of a shareholder, any such affiliates may tender
common stock for repurchase in connection with any repurchase offer we make on
the same basis as any other shareholder. IIG will not tender its common stock
for repurchase as long as CIM remains our investment adviser.  Distributions  We did not declare or pay any distributions during
2012. In January 2013, we began authorizing monthly distributions to our
shareholders. Subject to our board of directors’ discretion and applicable
legal restrictions, our board of directors intends to authorize and declare on
a monthly basis a weekly distribution amount per share of our common stock. We
will calculate each shareholder’s specific distribution amount for the period
using record and declaration dates and each shareholder’s distributions will
begin to accrue on the date we accept each shareholder’s subscription for
shares of our common stock. From time to time, we may also pay interim special
distributions in the form of cash or shares of common stock at the discretion
of our board of directors. Each year a statement on Form 1099-DIV identifying
the source of the distribution (i.e., paid from ordinary income, paid from net
capital gains on the sale of securities, and/or a return of paid-in capital
surplus, which is a nontaxable distribution) will be mailed to our
shareholders. Our distributions may exceed our earnings, especially during the
period before we have substantially invested the proceeds from our offering. As
a result, a portion of the distributions we make may represent a return of
capital for tax purposes.  To qualify for and maintain RIC tax treatment, we must,
among other things, distribute at least 90% of our net ordinary income and
realized net short-term capital gains in excess of realized net long-term
capital losses, if any. In order to avoid certain excise taxes imposed on RICs,
we currently intend to distribute during each calendar year an amount at least
equal to the sum of (1) 98.0% of our net ordinary income for the calendar
year, (2) 98.2% of our capital gains in excess of capital losses for the
one-year period ending on October 31 of the calendar year and (3) any
net ordinary income and net capital gains for preceding years that were not
distributed during such years and on which we paid no federal income tax. We
can offer no assurance that we will achieve results that will permit the
payment of any cash distributions and, if we issue senior securities, we will
be prohibited from making distributions if doing so causes us to fail to
maintain the asset coverage ratios stipulated by the 1940 Act or if distributions
are limited by the terms of any of our borrowings. We elected to be treated for federal income
tax purposes as a RIC, as defined under Subchapter M of the Code, beginning in
2012. Our board of directors declared
distributions for twenty four record dates during the year ended December 31,
2013.  Declared distributions are paid monthly.  The following table presents
cash distributions per share that were declared during the year ended December
31, 2013:  DistributionsThree Months
  Ended
 
 Per Share
 
 AmountMarch 31, 2013
  (six record dates)
 
 $
 0.1769
 
 $
 208,766June 30, 2013
  (six record dates)
 
 
 0.1788
 
 
 518,630September 30,
  2013 (six record dates)
 
 
 0.1799
 
 
 1,089,797December 31,
  2013 (six record dates)
 
 
 0.1806
 
 
 2,157,124Total
  distributions for the year ended December 31, 2013
 
 $
 0.7162
 
 $
 3,974,317
 52


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On February 1, 2014, we changed
from semi-monthly closings to weekly closings for the sale of our sharespursuant to our continuous public
offering. As a result, our board of directors authorizes and declares on a
monthly basis a weekly distribution
amount per share of our common stock.  On January 15,
2014, our board of directors declared one cash distribution of $0.030100 per
share and a second cash distribution of $0.039375 per share, which were paid on
February 5, 2014 to shareholders of record on January 15 and February 4,
2014, respectively. The amount of the second cash distribution of $0.039375 per
share included four additional distribution days through February 4, 2014 in
connection with our change from semi-monthly to weekly closings on the sale of
our shares. On February 4, 2014, our board of directors declared three weekly
cash distributions of $0.014067 per share, which were paid on February 26, 2014
to shareholders of record on February 11, February 18 and February 25, 2014. On
February 14, 2014, our board of directors declared four weekly cash
distributions of $0.014067 per share, payable on March 26, 2014 to shareholders
of record on March 4, March 11, March 18 and March 25, 2014. On
March 14, 2014, our board of directors declared five weekly cash
distributions of $0.014067 per share, payable on April 30, 2014 to shareholders
of record on April 1, April 8, April 15, April 22 and April 29, 2014. We have adopted an
“opt in” distribution reinvestment plan for our shareholders. As a result, if
we make a distribution, our shareholders will receive distributions in cash
unless they specifically “opt in” to the second amended and restated
distribution reinvestment plan so as to have their cash distributions
reinvested in additional shares of our common stock.  We make and intend to make our
distributions in the form of cash, out of assets legally available for such
purpose, unless shareholders elect to receive their distributions in the form
of additional shares of common stock pursuant to our second amended and
restated distribution reinvestment plan. Any distributions reinvested under the
plan will nevertheless remain taxable to U.S. shareholders. We may fund our
cash distributions to shareholders in the future from any sources of funds
available to us, including 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 us on account of preferred and common equity investments in portfolio
companies and expense reimbursements from IIG. A substantial portion of our
distributions have resulted, and future distributions may result, from expense
reimbursements from IIG, which are subject to repayment by us. The amount of
the distribution for shareholders receiving our common stock will be equal to
the fair market value of the stock received. If shareholders hold common stock
in the name of a broker or financial intermediary, they should contact the
broker or financial intermediary regarding their election to receive
distributions in the form of additional common stock.  The following table reflects the sources of
cash distributions per share that were declared during the year ended December
31, 2013:  DistributionsSource of Distribution
 
 
 Per Share
 
 Amount
 
 PercentageRealized gain on
  investments and total return swap(1)
 
 $
 0.6348
 
 $
 3,522,815
 
 88.6%From other
  sources(2)
 
 
 0.0814
 
 
 451,502
 
 11.4%Total
  distributions for the year ended December 31, 2013
 
 $
 0.7162
 
 $
 3,974,317
 
 100.0%(1) Includes
  interest income and fees, net of financing amounts paid to Citibank,
  generated on the loans underlying the TRS of $2,360,850.(2) Includes
  adjustments made to net investment income to arrive at taxable income
  available for distributions, as more fully described in Note 13.
   53


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Item 6.
Selected Financial Data  The following selected financial data as of and
for the year ended December 31, 2013 and as of December 31, 2012 and for the
period from January 31, 2012 (Inception) through December 31, 2012 is derived
from our audited consolidated financial statements. The data should be read in
conjunction with our consolidated financial statements and related notes
thereto and “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included elsewhere in this report. As ofDecember 31, 2012 andfor the Period fromAs of and for the
 
 January 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Statement of
  operations data:Investment
  income
 $
 1,862,602
 
 $
 2,692Operating
  expensesTotal expenses
 
 5,872,820
 
 
 116,706Less: expense
  reimbursement from IIG
 
 (3,958,903)
 
 
 (116,706)Net operating
  expenses
 
 1,913,917
 
 
 -Net investment
  (loss) income
 
 (51,315)
 
 
 2,692Realized and
  unrealized gains on investments and total return swap
 
 6,153,190
 
 
 22,470Net increase in
  net assets resulting from operations
 $
 6,101,875
 
 $
 25,162Weighted average
  shares of common stock outstanding(1)
 
 5,522,797
 
 
 500,338Per share
  data:(1)Net investment
  (loss) income(2)
 $
 (0.01)
 
 $
 0.01Net increase in
  net assets per share resulting from operations
 $
 1.10
 
 $
 0.05Distributions
  declared
 $
 0.72
 
 $
 -Balance sheet
  data:Net assets at
  the beginning of period
 $
 4,487,115
 
 $
 -Net assets at
  end of period
 $
 144,570,485
 
 $
 4,487,115Net asset value
  per share of common stock at beginning of period
 $
 8.97
 
 $
 -Net asset value
  per share of common stock at end of period
 $
 9.32
 
 $
 8.97Other data:Distributions declared
 $
 3,974,317
 
 $
 -Total return(3)
 
 11.96%
 
 
 (0.35%)Number of
  investments at period end
 
 42
 
 
 2Total portfolio
  investment purchases during the period(4)
 $
 94,331,717
 
 $
 1,972,500Total portfolio
  investment sales and prepayments during the period(4)
 $
 4,334,844
 
 $
 2,500
  (1)
 The per share data was derived by using the weighted average
  shares of common stock outstanding for the year ended December 31, 2013 and
  from the commencement of operations on December 17, 2012 through December 31,
  2012, respectively.(2)
 Net investment (loss)
  income per share includes the expense reimbursement from IIG of $0.72 and
  $0.23 per share for the year ended December 31, 2013 and for the period from
  January 31, 2012 (Inception) through December 31, 2012, respectively.(3)
 Total investment return-net asset value is a measure of the
  change in total value for shareholders who held our common stock at the
  beginning and end of the period, including distributions paid or payable
  during the period. Total investment return-net asset value is based on (i)
  the beginning period net asset value per share on the first day of the
  period, (ii) the net asset value per share on the last day of the period of
  (A) one share plus (B) any fractional shares issued in connection with the
  reinvestment of monthly distributions, and (iii) the value of distributions
  payable, if any, on the last day of the period. The total investment
  return-net asset value calculation assumes that (i) monthly cash
  distributions are reinvested in accordance with our distribution reinvestment
  plan and amended and restated distribution reinvestment plan and (ii) the
  fractional shares issued pursuant to the distribution reinvestment plan and
  amended and restated distribution reinvestment plan are issued at 95% (from
  January 1, 2013 through September 30, 2013) and 90% (from October 1, 2013
  through December 31, 2013) of the then public offering price on the date of
  purchase, respectively. The total investment return-net asset value for the
  period from January 31, 2012 (Inception) through December 31, 2012 was
  calculated by taking the difference between (i) the net asset value per share
  as of December 31, 2012 and (ii) the net asset value per share on the day we
  commenced operations (December 17, 2012), and dividing such difference by the
  net asset value per share on the day we commenced
  operations. The total investment return-net asset value does not consider the
  effect of the sales load from the sale of our common stock. The total
  investment return-net asset value includes the effect of the issuance of
  shares at a net offering price that is greater than net asset value per
  share, which causes an increase in net asset value per share. Total returns
  covering less than a full period are not annualized.(4)
 Excludes our short term investments.
 54


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Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations  The following discussion should be read in conjunction
with our consolidated financial statements and related notes and other
financial information appearing elsewhere in this Annual Report on
Form 10-K. In addition to historical information, the following discussion
and other parts of this Annual Report on Form 10-K contain forward-looking
information that involves risks and uncertainties.  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 $2,500,000 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. We anticipate that
our portfolio will be comprised primarily of investments in senior secured
loans and, to a lesser extent, second lien loans and long-term subordinated
loans, referred to as mezzanine loans, 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. In
addition, a portion of our portfolio may be comprised of corporate bonds and
other debt securities. However, such investments are not expected to comprise a
significant portion of our portfolio.  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 have
engaged AIM to act as our investment sub-adviser.  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, IIG and ICON Capital,
in sourcing, evaluating and structuring transactions. 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. Our senior debt
investments bear interest at a floating rate. Interest on debt securities is
generally payable quarterly or semiannually. 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, origination, 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 and other expenses under the investment advisory and
administration agreements. Our investment advisory fee compensates CIM for its
work in identifying, evaluating, negotiating, executing, monitoring and
servicing our investments. CIM is responsible for compensating AIM for its
services pursuant to the investment sub-advisory agreement. We bear all other
expenses of our operations and transactions, including, without limitation: ·corporate expenses relating to
borrowings and costs associated with the offering of our common stock, subject
to limitations included in the administration agreement; ·the costs of calculating our net
asset value, including the cost of any third-party valuation services; ·investment advisory fees; ·fees payable to third parties
relating to, or associated with, making, monitoring and disposing of
investments and valuing investments and enforcing our contractual rights,
including fees and expenses associated with performing due diligence reviews of
prospective investments; ·transfer agent and custodial fees; ·fees and expenses associated with
our marketing efforts; 55


---



·interest payable on debt, if any,
incurred to finance our investments; ·federal and state registration
fees; ·federal, state and local taxes; ·independent directors’ fees and
expenses; ·costs of proxy statements,
shareholders’ reports and notices; ·fidelity bond, directors and
officers/errors and omissions liability insurance and other insurance premiums; ·direct costs such as printing,
mailing, long distance telephone and staff; ·fees and expenses associated with
independent audits and outside legal costs, including compliance with the
Sarbanes-Oxley Act of 2002; ·costs associated with our reporting
and compliance obligations under the 1940 Act and applicable federal and state
securities laws; ·brokerage commissions for our
investments; and ·all other expenses incurred by CIM,
AIM or us in connection with administering our business, including expenses
incurred by CIM or AIM in performing its obligations, and the reimbursement of
the compensation of our chief financial officer and chief compliance officer
and their respective staffs paid by CIM, to the extent that they are not a
person with a controlling interest in CIM or any of its affiliates, in each
case subject to the limitations included in the investment advisory and
administration agreements, as applicable.  Portfolio
Investment Activity for the Year Ended December 31, 2013 and for the Period
from January 31, 2012 (Inception) through December 31, 2012  During the year ended December 31, 2013, we invested
$94,331,717 in forty two portfolio companies and received sale proceeds and
principal repayments of $2,176,929 and $2,157,915, respectively, of which we
realized gains of $33,637. As of December 31, 2013, our investment portfolio,
excluding our short term investments and total return swap, or TRS, consisted
of interests in thirty nine portfolio companies (67% in first lien senior
secured term loans, 24% in second lien senior secured term loans, 4% in
collateralized loan obligations and 5% in subordinated debt) with a total fair
value of $93,135,244 with an average and median portfolio company annual EBITDA
of $50.8 million and $47.7 million, respectively, at initial investment. As of
December 31, 2013, investments in our portfolio were purchased at a weighted
average price of 98.57% of par value. Our estimated gross annual portfolio yield
was 7.86% based upon the purchase price of our investments.  During the period from December 17, 2012, or the
Commencement of Operations, to December 31, 2012, we invested $1,972,500 in two
portfolio companies and received principal repayments of $2,500, of which we
realized immaterial gains. As of December 31, 2012, our investment portfolio,
excluding our short term investments and TRS, consisted of interests in two
portfolio companies (100% in first lien senior secured term loans) with a total
fair value of $1,980,044 with an average and median portfolio company annual
EBITDA of $26.6 million and $26.5 million, respectively, at initial investment.
As of December 31, 2012, the investments in our portfolio were purchased at a
weighted average price of 98.63% of par value. Our estimated gross annual
portfolio yield was 6.55% based upon the purchase price of our investments.  The portfolio yield does not represent an actual
investment return to shareholders.  As of December 31, 2013 and 2012, our short term investments
included an investment in a U.S. Treasury Obligations Fund of $11,383,669 and
$1,817,762, respectively, which is included in investments, at fair value on
the accompanying consolidated balance sheets and on the consolidated schedule
of investments.  Through our TRS (described in further detail under
“Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Financial Condition, Liquidity and Capital Resources”
below), we obtain the economic benefit of owning investments in senior secured
floating-rate loans. As of December 31, 2013, we, through our TRS,
obtained the economic benefit of owning investments in sixty two portfolio
companies with a total notional value of $148,199,937. As of December 31, 2012,
we, through our TRS, obtained the economic benefit of owning investments in
five portfolio companies with a total notional value of $2,883,100. The following table summarizes the composition of our
investment portfolio at amortized cost and fair value as of December 31, 2013
and 2012:  December 31, 2013
 
 December 31, 2012Amortized
  Cost(1)
 
 Fair
  Value
 
 Percentage of
  Investment
  Portfolio
 
 Amortized
  Cost(1)
 
 Fair
  Value
 
 Percentage of
  Investment
  PortfolioSenior secured
  term loans - first lien
 
 $
 61,095,685
 
 $
 61,787,430
 
 59.1%
 
 $
 1,970,111
 
 $
 1,980,044
 
 52.1%Senior secured term loans - second lien
 
 
 22,189,331
 
 
 22,552,214
 
 21.6%
 
 
 -
 
 
 -
 
 -Collateralized
  loan obligations
 
 
 3,746,000
 
 
 3,795,600
 
 3.6%
 
 
 -
 
 
 -
 
 -Subordinated
  debt
 
 
 5,000,000
 
 
 5,000,000
 
 4.8%
 
 
 -
 
 
 -
 
 -Short term
  investments(2)
 
 
 11,383,669
 
 
 11,383,669
 
 10.9%
 
 
 1,817,762
 
 
 1,817,762
 
 47.9%Total
  investments
 
 $
 103,414,685
 
 $
 104,518,913
 
 100.0%
 
 $
 3,787,873
 
 $
 3,797,806
 
 100.0%(1) 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 original maturity dates of three months or less.
 56


---



The following table summarizes the
composition of our underlying TRS loans at notional amount and fair value as of
December 31, 2013 and 2012:  December 31, 2013
 
 December 31, 2012Notional
  Amount
 
 Fair
  Value
 
 Percentage of
  Underlying TRS Loans
 
 Notional
  Amount
 
 Fair
  Value
 
 Percentage of
  Underlying TRS LoansSenior secured
  term loans - first lien
 
 $
 128,420,410
 
 $
 129,609,512
 
 86.6%
 
 $
 2,883,100
 
 $
 2,895,495
 
 100.0%Senior secured
  term loans - second lien
 
 
 19,779,527
 
 
 20,139,042
 
 13.4%
 
 
 -
 
 
 -
 
 -Total
  investments
 
 $
 148,199,937
 
 $
 149,748,554
 
 100.0%
 
 $
 2,883,100
 
 $
 2,895,495
 
 100.0%
 The following table summarizes the composition of our
investment portfolio by the type of interest rate as of December 31, 2013 and
2012, excluding short term investments of $11,383,669 and $1,817,762,
respectively: December 31, 2013
 
 December 31, 2012Interest Rate
  Allocation
 
 
 Amortized
  Cost
 
 Fair
  Value
 
 Percentage of
  Investment
  Portfolio
 
 Amortized
  Cost
 
 Fair
  Value
 
 Percentage of
  Investment
  PortfolioFloating
  interest rate investments
 
 $
 92,031,016
 
 $
 93,135,244
 
 100.0%
 
 $
 1,970,111
 
 $
 1,980,044
 
 100.0%Fixed interest
  rate investments
 
 
 -
 
 
 -
 
 -
 
 
 -
 
 
 -
 
 -Total
  investments
 
 $
 92,031,016
 
 $
 93,135,244
 
 100.0%
 
 $
 1,970,111
 
 $
 1,980,044
 
 100.0%
  The following table summarizes the composition of our underlying
TRS loans by the type of interest rate as of December 31, 2013 and 2012: December 31, 2013
 
 December 31, 2012Interest Rate
  Allocation
 
 
 Notional
  Amount
 
 Fair
  Value
 
 Percentage of
  Underlying TRS Loans
 
 Notional
  Amount
 
 Fair
  Value
 
 Percentage of
  Underlying TRS LoansFloating
  interest rate investments
 
 $
 148,199,937
 
 $
 149,748,554
 
 100.0%
 
 $
 2,883,100
 
 $
 2,895,495
 
 100.0%Fixed interest
  rate investments
 
 
 -
 
 
 -
 
 -
 
 
 -
 
 
 -
 
 -Total
  investments
 
 $
 148,199,937
 
 $
 149,748,554
 
 100.0%
 
 $
 2,883,100
 
 $
 2,895,495
 
 100.0%
  The following table shows the composition of our investment
portfolio by industry classification and the percentage, by fair value, of the
total investment portfolio assets in such industries as of December 31, 2013
and 2012: December 31, 2013
 
 December 31, 2012Industry Classification
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at
  Fair Value
 
 Percentage of
  Investment PortfolioServices:
  Business
 
 $
 15,754,714
 
 15.1%
 
 $
 -
 
 -Banking,
  Finance, Insurance & Real Estate
 
 
 11,223,010
 
 10.7%
 
 
 980,044
 
 25.8%Consumer Goods:
  Non-Durable
 
 
 9,527,245
 
 9.1%
 
 
 -
 
 -Healthcare & Pharmaceuticals
 
 
 8,968,804
 
 8.6%
 
 
 -
 
 -Automotive
 
 
 7,473,560
 
 7.2%
 
 
 -
 
 -Chemicals, Plastics & Rubber
 
 
 6,797,514
 
 6.5%
 
 
 1,000,000
 
 26.3%Services:
  Consumer
 
 
 5,628,126
 
 5.3%
 
 
 -
 
 -Telecommunications
 
 
 3,973,040
 
 3.8%
 
 
 -
 
 -Energy: Oil
  & Gas
 
 
 3,629,300
 
 3.5%
 
 
 -
 
 -Media: Broadcasting & Subscription
 
 
 3,544,422
 
 3.4%
 
 
 -
 
 -Construction
  & Building
 
 
 3,415,256
 
 3.3%
 
 
 -
 
 -Capital Equipment
 
 
 3,014,850
 
 2.9%
 
 
 -
 
 -High Tech
  Industries
 
 
 2,876,400
 
 2.8%
 
 
 -
 
 -Media: Diversified & Production
 
 
 1,920,350
 
 1.8%
 
 
 -
 
 -Environmental
  Industries
 
 
 1,909,952
 
 1.8%
 
 
 -
 
 -Containers, Packaging & Glass
 
 
 1,500,000
 
 1.4%
 
 
 -
 
 -Aerospace &
  Defense
 
 
 1,463,701
 
 1.4%
 
 
 -
 
 -Hotel, Gaming & Leisure
 
 
 515,000
 
 0.5%
 
 
 -
 
 -U.S. Treasury Securities
 
 
 11,383,669
 
 10.9%
 
 
 1,817,762
 
 47.9%Total
 
 $
 104,518,913
 
 100.0%
 
 $
 3,797,806
 
 100.0%
 57


---



The following table
shows the composition of our underlying TRS loans portfolio by industry
classification and the percentage, by fair value, of the total investment
portfolio assets in such industries as of December 31, 2013 and 2012: December 31, 2013
 
 December 31, 2012Industry
  Classification
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS Loans
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS LoansHealthcare &
  Pharmaceuticals
 
 $
 28,520,188
 
 19.0%
 
 $
 -
 
 -Services: Business
 
 
 21,710,669
 
 14.5%
 
 
 1,000,625
 
 34.6%Banking,
  Finance, Insurance & Real Estate
 
 
 15,399,479
 
 10.3%
 
 
 905,340
 
 31.3%Chemicals, Plastics & Rubber
 
 
 12,767,942
 
 8.5%
 
 
 -
 
 -Media:
  Broadcasting & Subscription
 
 
 9,713,966
 
 6.6%
 
 
 -
 
 -Beverage, Food & Tobacco
 
 
 8,597,752
 
 5.7%
 
 
 -
 
 -Consumer Goods:
  Non-Durable
 
 
 8,353,950
 
 5.6%
 
 
 -
 
 -Aerospace & Defense
 
 
 6,796,190
 
 4.5%
 
 
 502,655
 
 17.3%Retail
 
 
 6,661,756
 
 4.4%
 
 
 -
 
 -Energy: Oil & Gas
 
 
 6,286,404
 
 4.2%
 
 
 -
 
 -Telecommunications
 
 
 5,502,732
 
 3.7%
 
 
 -
 
 -Containers, Packaging & Glass
 
 
 4,488,750
 
 3.0%
 
 
 -
 
 -High Tech
  Industries
 
 
 4,353,293
 
 2.9%
 
 
 -
 
 -Hotel, Gaming & Leisure
 
 
 4,336,815
 
 2.9%
 
 
 486,875
 
 16.8%Environmental
  Industries
 
 
 3,554,920
 
 2.4%
 
 
 -
 
 -Services: Consumer
 
 
 1,965,000
 
 1.3%
 
 
 -
 
 -Forest Products
  & Paper
 
 
 738,748
 
 0.5%
 
 
 -
 
 -Total
 
 $
 149,748,554
 
 100.0%
 
 $
 2,895,495
 
 100.0%
 We do not “control”
and are not an “affiliate” of any of our portfolio companies or any of the
companies of the loans underlying the TRS, 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. 58


---



Our
investment portfolio may contain senior secured investments that are in the
form of lines of credit, unfunded delayed drawdown loan commitments, or
revolving credit facilities, which require us to provide funding when requested
by portfolio companies in accordance with the terms of the underlying loan
agreements. As of December 31, 2013 and 2012, our unfunded loan commitments
amounted to $2,450,758 and $0, respectively.  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 grades the credit
risk of all investments on a scale of 1 to 5 no less frequently than quarterly.
This system is intended primarily to reflect the underlying risk of a portfolio
investment relative to our initial cost basis in respect of such portfolio
investment (i.e., at the time of acquisition), although it may also take into
account under certain circumstances the performance of the portfolio company’s
business, the collateral coverage of the investment and other relevant factors.  The following is a description of the conditions
associated with each investment rating used in this ratings system:  Investment Grade
 Description1
 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
  grade 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 graded 3, 4, or 5, CIM
enhances its level of scrutiny over the monitoring of such portfolio company. The following table summarizes the
composition of our investment portfolio based on the 1 to 5 investment rating
scale at fair value as of December 31, 2013 and 2012, excluding short term
investments of $11,383,669 and $1,817,762, respectively:  December 31, 2013
 
 December 31, 2012Investment Rating
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio1
 
 $
 -
 
 -
 
 $
 -
 
 -2
 
 
 93,135,244
 
 100%
 
 
 1,980,044
 
 100%3
 
 
 -
 
 -
 
 
 -
 
 -4
 
 
 -
 
 -
 
 
 -
 
 -5
 
 
 -
 
 -
 
 
 -
 
 -$
 93,135,244
 
 100%
 
 $
 1,980,044
 
 100%
  The following table
summarizes the composition of our underlying TRS loans based on the 1 to 5
investment rating scale at fair value as of December 31, 2013 and 2012:  December 31, 2013
 
 December 31, 2012Investment Rating
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS Loans
 
 Fair Value of
  Underlying
  TRS Loans
 
 Percentage of
  Underlying
  TRS Loans1
 
 $
 -
 
 -
 
 $
 -
 
 -2
 
 
 149,748,554
 
 100%
 
 
 2,895,495
 
 100%3
 
 
 -
 
 -
 
 
 -
 
 -4
 
 
 -
 
 -
 
 
 -
 
 -5
 
 
 -
 
 -
 
 
 -
 
 -$
 149,748,554
 
 100%
 
 $
 2,895,495
 
 100%
 59


---



The amount of the portfolio and underlying
TRS loans in each grading category may vary substantially from period to period
resulting primarily from changes in the composition of the portfolio as a
result of new investment, repayment and exit activities. In addition, changes
in the grade of investments may be made to reflect our expectation of
performance and changes in investment values.  Current Investment Portfolio  As of March 13, 2014, our investment
portfolio, excluding our short term investments and TRS, consisted of interests
in forty portfolio companies (62% in first lien senior secured term loans, 31%
in second lien senior secured term loans, 4% in collateralized loan obligations
and 3% in subordinated debt) with a total fair value of $146,750,528 with an
average and median portfolio company annual EBITDA of $46.3 million and $47.7
million, respectively, at initial investment. As of March 13, 2014, investments
in our portfolio were purchased at a weighted average price of 98.67% of par
value. Our estimated gross annual portfolio yield was 7.95% based upon the
purchase price of our investments. The portfolio yield does not represent an
actual investment return to shareholders.  As of March 13, 2014, our short term
investments included an investment in a U.S. Treasury Obligations Fund of
$12,647,077.  Further, as of March 13, 2014, through
a TRS (described further in “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations-Financial Condition, Liquidity
and Capital Resources” below), we obtained the economic benefit of owning
investments in first lien senior secured and second lien senior secured
floating-rate loans of seventy four portfolio companies.  Results of Operations  Our results of operations for
the year ended December 31, 2013 and for the period from January 31, 2012
(Inception) through December 31, 2012 were as follows:  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Investment income
 $
 1,862,602
 
 $
 2,692Net operating expenses
 
 1,913,917
 
 
 -Net investment (loss) income
 (51,315)
 
 
 2,692Net realized gain on investments
 33,637
 
 
 44Net change in unrealized appreciation on investments
 1,094,295
 
 
 9,933Net realized gain on total return swap
 3,489,036
 
 
 98Net change in unrealized appreciation on total return swap
 1,536,222
 
 
 12,395Net increase in net assets resulting from operations
 $
 6,101,875
 
 $
 25,162
 60


---



Investment Income  For the year ended December 31, 2013, we
generated investment income of $1,862,602, consisting primarily of interest
income on investments in senior secured loans, of forty three portfolio
companies held during the period. Our investment portfolio, excluding short
term investments and the TRS, increased approximately $91,155,000 during the
period as we continued to deploy the net proceeds from our continuous offering
during the year ended December 31, 2013. From the Commencement of Operations
through December 31, 2012, we engaged in limited operations and generated
limited investment income of $2,692, which was attributable to $1,972,500 of
investments in two portfolio companies. We expect our investment portfolio to
continue to grow due to the anticipated increase in equity available to us for
investment from our continuous offering. As a result, we believe that reported
investment income for the year ended December 31, 2013 and for the period from
January 31, 2012 (Inception) through December 31, 2012 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 it is recorded as part of net realized
gain on total return swap.  Operating Expenses  The composition of our operating expenses
for the year ended December 31, 2013 and for the period from January 31, 2012
(Inception) through December 31, 2012 was as follows:  For the Period fromJanuary 1, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Management fees
 $
 922,467
 
 $
 1,567Administrative services expense
 
 1,158,915
 
 
 38,966Capital gains incentive fee
 
 753,247
 
 
 4,494General and administrative
 
 3,038,191
 
 
 71,679Total expenses
 
 5,872,820
 
 
 116,706Less: expense reimbursement from IIG
 
 (3,958,903)
 
 
 (116,706)Net operating expenses
 $
 1,913,917
 
 $
 -
  The composition of our general and
administrative expenses for the year ended December 31, 2013 and for the period
from January 31, 2012 (Inception) through December 31, 2012 was as follows:  For the Period fromJanuary 31, 2012Year ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Professional
  fees expense
 $
 858,842
 
 $
 33,298Due diligence
  fees
 607,599
 
 1,812Marketing
  expense
 592,311
 
 -Insurance
  expense
 211,824
 
 8,625Transfer agent expense
 172,693
 
 2,900Printing and
  mailing expense
 158,166
 
 4,329Dues and
  subscriptions
 137,916
 
 1,126Filing fees
 104,773
 
 -Director fees
  and expenses
 56,741
 
 1,050Other expenses
 137,326
 
 18,539Total general
  and administrative expense
 $
 3,038,191
 
 $
 71,679
 61


---



Expense Reimbursement  Our affiliate, IIG, has agreed to reimburse
us commencing with the quarter ended December 31, 2012 for certain expenses
pursuant to the expense support and conditional reimbursement agreement. Refer
to the discussion under “Related Party Transactions” below for further details
about the expense support and conditional reimbursement agreement. Also, see
Note 3 to our consolidated financial statements for additional disclosure
regarding the expense reimbursements from IIG.  For the year ended December 31, 2013 and
for the period from January 31, 2012 (Inception) through December 31, 2012, we
recorded $3,958,903 and $116,706 of expense reimbursement from IIG in
connection with the expense support and conditional reimbursement agreement,
respectively. As of December 31, 2013 and 2012, all expense reimbursements made
by IIG are eligible to be reimbursed by us through December 31, 2016 and 2015,
respectively.  Reimbursement of such costs 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 any further costs by IIG.  The table below presents a summary of all
expenses supported by IIG and the associated dates through which such expenses
are eligible for reimbursement by us for the following three month periods. Three Months
  Ended
 
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Ratio of Operating Expense to Average Net
  Assets for the Period(1)
 
 Annualized Distribution Rate for the
  Period(3)
 
 
 Eligible for Reimbursement throughDecember 31,
  2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 0.93%
 
 0.00%
 (2)
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 2.75%
 
 7.00%
 
 
 March 31, 2016June 30, 2013
 
 
 1,147,536
 
 
 -
 
 
 1,147,536
 
 1.43%
 
 7.00%
 
 
 June 30, 2016September 30,
  2013
 
 
 1,296,834
 
 
 -
 
 
 1,296,834
 
 0.49%
 
 7.00%
 
 
 September 30, 2016December 31,
  2013
 
 
 695,160
 
 
 -
 
 
 695,160
 
 0.31%
 
 7.00%
 
 
 December 31, 2016Total
 
 $
 4,075,609
 
 $
 -
 
 $
 4,075,609
  (1)
 Operating expenses include all expenses borne by us, except for
  organizational and offering expenses, base management fees, incentive fees,
  administrative services expenses and other general and administrative
  expenses owed to CIM and its affiliates and interest expense.(2)
 We did not declare any distributions during the three months
  ended December 31, 2012.(3)
 Annualized Distribution Rate equals the annualized rate of
  distributions paid to shareholders based on the amount of the regular cash
  distributions paid immediately prior to the date the expense support payment
  obligation was incurred by CIM. Annualized Distribution Rate does not include
  special cash or stock distributions paid to shareholders.
 62


---



Net Investment (Loss) Income  Our net investment (loss) income totaled
($51,315) and $2,692 for the year ended December 31, 2013 and for the period
from January 31, 2012 (Inception) through December 31, 2012, respectively. The
net investment loss during 2013, compared to the net investment income during
2012, was primarily due to higher operating expenses incurred in 2013 due to
our accelerated growth, partially offset by an increase in investment income and
expense support from IIG.  Net Realized Gain on Investments  For the year ended December 31, 2013, we
received sale proceeds and principal repayments of $2,176,929 and $2,157,915,
respectively, for gains of $10,606 and $23,031, respectively, from which we
recorded net realized gains from investments of $33,637. Realized gain on
investments for the period from January 31, 2012 (Inception) through December
31, 2012 was immaterial.  Net Change in Unrealized Appreciation on
Investments  For the year ended December 31, 2013 and for
the period from January 31, 2012 (Inception) through December 31, 2012, the net
change in unrealized appreciation on our investments totaled $1,094,295 and
$9,933, respectively. This change was primarily due to the growth and increase
in the fair value of the investments in our investment portfolio.  Net Realized Gain on TRS  For the year ended December 31, 2013, we
recorded net realized gains on the TRS of $3,489,036. The realized gain was
primarily due to interest income and fees, net of expenses, of $2,360,850. Realized
gain on the TRS for the period from January 31, 2012 (Inception) through
December 31, 2012 was immaterial.  Net Change in Unrealized Appreciation on
TRS  For the year ended December
31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, the net change in unrealized appreciation on the TRS totaled
$1,536,222 and $12,395, respectively. This change was primarily due to the
growth and increase in the fair value of the underlying loans subject to the
TRS.  Net Increase in Net Assets Resulting from
Operations  For the year ended December
31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, we recorded a net increase in net assets resulting from operations of
$6,101,875 and $25,162, respectively. 63


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Net Asset Value per
Share, Annual Investment Return and Total Return since Inception  Our net asset value per share was $9.32 and $8.97 on
December 31, 2013 and 2012, respectively. After considering (i) the overall changes
in net asset value per share, (ii) paid distributions of approximately $0.72
per share during the year ended December 31, 2013, and (iii) the assumed
reinvestment of those distributions (at 95% from January 1, 2013 through
September 30, 2013 and 90% from October 1, 2013 through December 31, 2013) of
the prevailing offering price per share, then the total investment return was
11.96% for shareholders who held our shares over the entire twelve-month period
ended December 31, 2013.  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 11.10% and the value of their investment grow by
11.58% (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) have seen
an annualized return of 0.41% and the value of their investment grow by 0.43%.
Over the same time period the S&P/LSTA Leverage 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, had an annualized return of approximately 5.87% and a total return
of approximately 6.12%.  
 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 second amended and
restated distribution reinvestment plan (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 cash payment for distributions payable to shareholders, if any, on the
last day of the period. 64


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Financial Condition, Liquidity and Capital Resources  We generate cash primarily from the net
proceeds of our continuous public offering and from cash flows from fees,
interest and dividends earned from our investments as well as principal
repayments and proceeds from sales of our investments. We are engaged in a
continuous offering of shares of our common stock. We accept subscriptions on a
continuous basis and, as of February 1, 2014, 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 $10.45 per share; however, to the
extent that our net asset value increases, we will sell at a price necessary to
ensure that shares are not sold at a price, after deduction of selling
commissions and dealer manager fees, that is below net asset value. In the
event of a material decline in our net asset value per share, which we consider
to be a 2.5% decrease below our current net offering price, and subject to
certain conditions, we will reduce our offering price accordingly. Therefore,
persons who tender subscriptions for shares of our common stock in the offering
must submit subscriptions for a certain dollar amount, rather than a number of
shares of common stock and, as a result, may receive fractional shares of our
common stock. In connection with each weekly closing on the sale of shares of
our common stock, our board of directors has delegated to management the
authority to conduct such closings so long as there is no change to our public
offering price. In the event of a change to our public offering price in
connection with any weekly closing, our board of directors will approve the
change prior to management conducting such closing. In connection with each weekly
closing, we will, in each case if necessary, update the information contained
in our prospectus by filing a prospectus supplement with the SEC, and we will
also post any updated information to our website. As of December 31,
2013, we sold 15,510,178 shares for gross proceeds of $157,132,225 at an
average price per share of $10.13. The gross proceeds received include reinvested
shareholder distributions of $1,543,014, for which we issued 162,880 shares of
common stock. Since commencing our continuous public offering on July 2, 2012
and through December 31, 2013, sales commissions and dealer manager fees
related to the sale of our common stock were $9,285,505 and $4,428,955,
respectively. As of March 19,
2014, we sold 23,414,958 shares of common stock for gross proceeds of
$238,474,948 at an average price per share of $10.18. The gross proceeds
received include reinvested shareholder distributions of $3,179,729, for which
we issued 337,506 shares of common stock. Since commencing our continuous
public offering on July 2, 2012 and through March 19, 2014, sales commissions
and dealer manager fees related to the sale of our common stock were
$14,176,684 and $6,796,953, respectively.  The net proceeds from our continuous
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. companies. As of December 31,
2013 and 2012, we had $11,383,669 and $1,817,762 in short term investments,
respectively, invested in a fund that primarily invested in U.S. government
securities.  Total Return Swap  For a detailed discussion of our TRS, refer
to Note 6 of our consolidated financial statements included in this report.  RIC Status and Distributions For a detailed
discussion of our RIC status and distributions, refer to Note 2 and Note 4,
respectively, of our consolidated financial statements included in this report.  Recent Accounting Pronouncements We do not believe
any recently issued, but not yet effective, accounting pronouncements, if
currently adopted, would have a material adverse effect on our consolidated
financial statements. 65


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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.  ASC Topic 820 clarifies the definition of
fair value and requires companies to expand their disclosure about the use of
fair value to measure assets and liabilities in interim and annual periods
subsequent to initial recognition. ASC Topic 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 Topic 820 also establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such as quoted prices in
active markets; Level 2, defined as observable inputs such as quoted prices for
similar securities in active markets and quoted prices for identical securities
where there is little or no activity in the market; and Level 3, defined as
unobservable inputs for which little or no market data exists, therefore
requiring an entity to develop its own assumptions.  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.  In making fair value determinations, the following guidelines are
generally used.  Valuation Methods  Investments
where a market price is readily available  Generally, the value of our equity
interests in public companies for which market quotations are readily available
will be based upon the most recent closing public market price. If no sales of
such interests occurred on the determination date, such interests shall be
valued at the midpoint of the “bid” and the “ask” price at the close of
business on such day. Portfolio securities that carry certain restrictions on
sale will typically be consistently valued at a discount from the public market
value of the security. Loans or investments traded over the counter and not
listed on an exchange are valued at a price obtained from third-party pricing
services, including, where appropriate, multiple broker dealers, as determined
by CIM.  Notwithstanding the foregoing, if in the
reasonable judgment of CIM, the price for any securities held by us and
determined in the manner described above does not accurately reflect the fair
value of such security, CIM values such security at a price that reflects such
security’s fair value and report such change in the valuation to the board of
directors or its designee as soon as practicable. 66


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Investments where a market price is not readily available  Any securities or other assets 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, 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.  Below
is a description of factors that our board of directors may consider when
valuing our 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
our debt investments; ·multiples of 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 adjustments
based upon the particular circumstances of a portfolio company or our 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.  Unrealized appreciation and depreciation on the total
return swap represents the change in fair value of the underlying investments.  Credit default swaps and interest rate swaps, if any,
will be valued at estimated fair value based on a pricing model that utilizes
quoted inputs, including among other things, yield curves and credit ratings. 67


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Valuation
Process  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 an independent valuation firm, if applicable; ·preliminary valuation conclusions
are then documented and discussed with CIM’s valuation committee. ·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.  Our board of directors is responsible for the valuation
of our portfolio investments at fair value as determined in good faith pursuant
to our consistently applied valuation procedures and valuation process. We
value all of our Level 3 assets by using inputs from an independent third-party
pricing service that provides prevailing bid and ask prices that are screened
for validity by the service from dealers on the date of the relevant period
end. For investments for which the third-party pricing service is unable to
obtain quoted prices, we may obtain bid and ask prices directly from dealers
that make a market in such investments. To the extent that we hold Level 3
investments for which no meaningful secondary market exists, and, therefore, no
meaningful bid and ask prices can be readily obtained, CIM’s valuation
committee utilizes an independent third-party valuation service to value such
investments as described in the next paragraph. We periodically benchmark the
bid and ask prices received from the third-party pricing service and valuations
received from the third-party valuation service, as applicable, against the
actual prices at which we purchase and sell our investments. We believe that
these prices are reliable indicators of fair value.  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 in Level 2 or Level 3. Due to the
uncertainty inherent in the valuation process, particularly for Level 2 and
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. 68


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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. Our cash and cash equivalents are held principally at one
financial institution and at times may exceed insured limits. We periodically
evaluate the creditworthiness of this institution and has not experienced any
losses on such deposits.  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. We had
$11,383,669 and $1,817,762 of such investments at December 31, 2013 and 2012,
respectively, which are included in investments, at fair value on the
accompanying consolidated balance sheets and on the consolidated schedule of
investments.  Organization Costs  Organization costs include, among other
things, the cost of organizing as a Maryland corporation, including the cost of
legal services and other fees pertaining to our organization. All organization
costs have been funded by IIG and its affiliates, and there is no liability for
these organization costs to us until IIG and its affiliates submit such costs
for reimbursement. We will expense organization costs when incurred, if and
when IIG and its affiliates submit such costs for reimbursement. At December 31,
2013, IIG and its affiliates had previously incurred approximately $192,000 of
organization costs, which may be subject to reimbursement by us. No additional
organization costs have been incurred subsequent to December 31, 2013 (see Note
3).  Offering Expenses  Offering expenses include, among other
things, legal fees and other costs pertaining to the preparation of the our
registration statement in connection with the continuous public offering of the
our shares. Certain offering expenses have been funded by IIG and its
affiliates, and there is no liability for these offering expenses to us until
IIG and its affiliates submit such costs for reimbursement. Upon meeting the
minimum offering requirement on December 17, 2012, we incurred and capitalized offering
expenses of $1,000,000 that were submitted for reimbursement by IIG (see Note
3). These expenses are amortized over a twelve month period as an adjustment to
capital in excess of par value. The unamortized balance of these expenses is
reflected in the consolidated balance sheets as deferred offering expenses,
net. We will expense any additional offering expenses incurred by IIG and its
affiliates if and when IIG and its affiliates submit such costs for
reimbursement. During the year ended December 31, 2013, weincurred $1,787,000 inoffering expenses included in
general and administrative expense in the consolidated statements of
operations. At December 31, 2013, IIG and its affiliates have incurred approximately $969,000 of unreimbursedoffering expenses,
which may be subject to reimbursement by us. No additional material offering
expenses have been incurred by IIG and its affiliates subsequent to December
31, 2013 (see Note 3).  Income Taxes  We 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, we 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 our “investment company taxable
income”, which is generally our net ordinary income plus the excess, if any, of
realized net short-term capital gains over realized net long-term capital
losses. If we continue to qualify as a RIC and continue to satisfy the annual
distribution requirement, we will not have to pay corporate level federal
income taxes on any income that we distribute to our shareholders. We intend to
make distributions in an amount sufficient to maintain RIC status each year and
to avoid any federal income taxes on income. We will also be subject to
nondeductible federal excise taxes if we do not distribute at least 98.0% of
net ordinary income, 98.2% of any capital gains, if any, and any recognized and
undistributed income from prior years for which we paid no federal income
taxes.  Book and tax differences relating to
permanent differences are reclassified among our 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 13).
During the year ended December 31, 2013, we declared distributions of
$3,974,317. We did not declare or pay any distributions in 2012. 69


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Uncertainty in Income Taxes  We evaluate our 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. We
recognize interest and penalties, if any, related to unrecognized tax benefits
as income tax expense in the consolidated statements of operations. As of and
for the year ended December 31, 2013 and as of December 31, 2012 and for the
period from January 31, 2012 (Inception) through December 31, 2012, we did not
have any uncertain tax positions.  We are subject
to examination by U.S. federal, New York State, New York City and Maryland
income tax jurisdictions for 2012.  Use of Estimates  The preparation of the consolidated
financial statements in conformity with GAAP requires us to makeestimates 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.  Revenue Recognition  Securities transactions are accounted for
on the trade date. We record interest and dividend income on an accrual basis
beginning on the trade settlement date or the ex-dividend date, respectively,
to the extent that we expect to collect such amounts. 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. Upon the prepayment of a loan
or debt security, any unamortized loan origination fees are recorded as
interest income. We record prepayment premiums on loans and debt securities as
interest income when it receives such amounts.  We may have investments in the investment
portfolio that contain a paid-in-kind, or PIK, interest provision. Any PIK
interest will be added to the principal balance of such investments and is
recorded as income, if the portfolio company valuation indicates that such PIK
interest is collectible. In order to maintain RIC status, substantially all of
this income must be paid out to shareholders in the form of distributions, even
if we have not collected any cash.  Loans and debt
securities, including those that are individually identified as being impaired
under ASC 310,Receivables, are
generally placed on nonaccrual status immediately if, in our opinion, 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
nonaccrual status is reversedagainst
interest income. Interest income is recognized on nonaccrual loans or debt
securities only to the extent received in cash. How­ever, where there is doubt
regarding the ultimate collectibility ofprincipal,
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. We
measure 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  Our only derivative instrument is the TRS.
We mark our derivative to market through net change in unrealized appreciation
on total return swap in the consolidated statements of operations. For
additional information on the TRS, see Note 6. 70


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Capital
Gains Incentive Fee  Pursuant to the terms of the investment
advisory agreement we entered into with CIM, the incentive fee on capital gains
earned on liquidated investments of our investment portfolio during operations
is determined and payable in arrears as of the end of each calendar year. Such
fee equals 20% of our incentive fee capital gains (i.e. our realized capital
gains on a cumulative basis from inception, calculated as of the end of each
calendar year, computed net of all realized capital losses and unrealized capital
depreciation on a cumulative basis), less the aggregate amount of any
previously paid 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, we would not be required to pay
CIM a capital gains incentive fee. On a quarterly basis, we accrue for the
capital gains incentive fee by calculating such fee as if it were due and
payable as of the end of such period.  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 AICPA Technical Practice Aid for investment companies, we accrue capital
gains incentive fees on unrealized gains. This accrual reflects the incentive
fees that would be payable to CIM if our entire investment portfolio was
liquidated at our 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 to be paid as a distribution is determined by
the board of directors on a monthlybasis. Net realized capital gains, if any,
are distributed or deemed distributed at least annually.  Related Party Transactions  We have entered into an agreement with CIM
to provide us with investment advisory services. Payments for investment
advisory services under the investment advisory agreement are equal to (a) an
annual base management fee of 2.0% of the average value of our gross assets,
excluding cash and cash equivalents, and (b) an incentive fee based on our
performance, as described below. ICON Capital is, and to the extent requested
to provide such services and such services are so provided, CIM and AIM and
their respective affiliates may be, reimbursed for administrative expenses
incurred on our behalf.  The incentive fee
consists of two parts. The first part, which we refer to as the subordinated
incentive fee on income, is calculated and payable quarterly in arrears based
upon our “pre-incentive fee net investment income” for the immediately
preceding quarter and is subject to a hurdle rate, measured quarterly and
expressed as a rate of return on adjusted capital, as defined in our investment
advisory agreement, equal to 1.875% per quarter, or an annualized rate of 7.5%.
The second part of the incentive fee, which we refer to as the incentive fee on
capital gains, is an incentive fee on capital gains earned on liquidated
investments from the portfolio and is determined and payable in arrears as of
the end of each calendar year (or upon termination of the investment advisory
agreement). This fee is equal 20% of our realized capital gains on a cumulative
basis from inception, calculated as of the end of each calendar year, computed
net of all realized capital losses and unrealized capital depreciation on a
cumulative basis, less the aggregate amount of any previously paid capital
gains incentive fees.  On a cumulative basis and to the extent that all
realized capital losses and unrealized capital depreciation exceeds realized capital
gains as well as the aggregate realized net capital gains for which a fee has
previously been paid, we would not be required to pay CIM a capital gains
incentive fee.  We and CIM have engaged AIM to act as our
investment sub-adviser, as AIM possesses skills that we believe will aid us in
achieving our investment objective. AIM only assists CIM with identifying
investment opportunities and making investment recommendations for approval by
CIM according to pre-established investment guidelines. On an annualized basis,
AIM receives 50% of the fees payable to CIM under the investment advisory
agreement with respect to each year, which fees are paid to AIM quarterly in
arrears by CIM. 71


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ICON Capital provides us with accounting, investor relations and
other administrative services. We entered into an administration agreement with
ICON Capital pursuant to which ICON Capital furnishes us with administrative
services necessary to conduct our day-to-day operations. ICON Capital is
reimbursed for administrative expenses it incurs on our behalf in performing
its obligations. Such costs will be reasonably allocated to us on the basis of
assets, revenues, time records or other reasonable methods. We 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. For
the year ended December 31, 2013 and for the period from January 31, 2012
(Inception) through December 31, 2012, we incurred administrative services
expenses to ICON Capital of $1,158,915 and $38,966, respectively, the majority
of which related to the allocation of costs of administrative personnel for
services rendered to us and the remainder related to other reimbursable
expenses. For the year ending December 31, 2014, we estimate that
administration services expenses to ICON Capital will be approximately
$1,500,000 to $2,000,000, the majority of which we believe will relate to the
allocation of costs of administrative personnel for services to be rendered to
us. During the 2012 and 2013 periods, all administrative expenses were
reimbursed by IIG in accordance with the expense support and conditional
reimbursement agreement.  Our payment of organization
costs and offering expenses will not exceed 1.5% of the gross proceeds from our
offering (without giving effect to any potential reimbursements from IIG and
its affiliates). If we sell the maximum number of shares at $10.45 per share,
then we estimate that we may incur up to approximately $15,675,000 of expenses.
Under the terms of the investment advisory agreement, CIM and certain of its
affiliates, which includes IIG, are entitled to receive reimbursement of up to
1.5% of the gross proceeds raised until all organization costs and offering
expenses have been reimbursed, which could be as late as December 31, 2015.
Previously, we interpreted “raised” to mean all gross proceeds that we expected
to raise through the completion of the offering of our shares, rather than
actual gross proceeds raised through the date of reimbursement. Consistent with
such application and since we believed we would raise at least $100 million
through the completion of the offering of our shares, upon commencement of
operations on December 17, 2012, we issued 111,111 shares of our common stock
at $9.00 per share to IIG in lieu of payment of $1,000,000 for organization and
offering expenses submitted for reimbursement. The transactions satisfied an
independent obligation of IIG to invest $1,000,000 in our shares.  Through that
date, we had raised gross proceeds from unaffiliated outside investors of
$2,639,439 and from affiliated investors of $2,000,000, which, applying 1.5% of
actual proceeds raised through the date of reimbursement, would have resulted
in CIM being entitled to $69,592.  As of December 31, 2013, we raised gross
proceeds of $157,132,225, of which we can pay up to $2,356,983 in organization
and offering expenses (which represents 1.5% of total gross offering proceeds
raised). Through December 31, 2013, we paid $1,950,305 for such costs, leaving
an additional $406,678 that can be paid. As of March 19, 2014, we raised gross
proceeds of $238,474,948, of which we can pay up to $3,577,124 in organization and
offering expenses (which represents 1.5% of total gross offering proceeds
raised). Through March 19, 2014, we paid $2,404,247 for such costs, leaving an
additional $1,172,877 that can be paid.  With respect to any
future reimbursements for organization and offering costs, we will interpret
the 1.5% limit based on actual gross proceeds raised at the time of such
reimbursement. In addition, we will not issue any of our shares or other
securities for services or for property other than cash or securities except as
a dividend or distribution to our security holders or in connection with a
reorganization. Consistent with this interpretation, on May 30, 2013, IIG paid
us $1,000,000, plus interest accrued at a rate of 7% per year. From inception
throughDecember 31, 2013, IIG and its affiliates incurred
organization costs and offering expenses of approximately $2,161,000, of which
$1,000,000 has been submitted to us for reimbursement. As ofDecember 31, 2013, we had an outstanding payable to IIG for
offering costs of $550,000. No additional material organization costs or
offering expenses have been incurred by IIG or its affiliates subsequent toDecember 31, 2013. The decision to fund our organization
costs and offering expenses and the decision to seek reimbursement for such
costs is solely at the discretion of IIG and its affiliates. As a result, we
may or may not be requested to reimburse any costs funded by IIG and its
affiliates.  On January 30, 2013, we
entered into the expense support and conditional reimbursement agreement with
IIG, whereby IIG agreed to reimburse us for expenses in an amount that is
sufficient to: (1) ensure that no portion of our distributions to shareholders
will be paid from our offering proceeds or borrowings, and/or (2) reduce our
operating expenses until we have achieved economies of scale sufficient to
ensure that we bear a reasonable level of expense in relation to our investment
income. Pursuant to the expense support and conditional reimbursement
agreement, we have a conditional obligation to reimburse IIG for any amounts
funded by IIG under such agreement if, during any fiscal quarter occurring
within three years of the date on which IIG funded such amount, the sum of our
net investment income for tax purposes, net capital gains and the amount of any
dividends and other distributions paid to us 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 us to
shareholders. For the year ended December 31, 2013, we recorded $3,958,903 of
expense reimbursement from IIG in connection with the expense support and
conditional reimbursement agreement.  On December 13,
2013, we and IIG entered into an amended and restated expense support and
conditional reimbursement agreement, or expense support and conditional
reimbursement agreement, to extend the termination date of such agreement from
January 30, 2014 to January 30, 2015.  During the year
ended December 31, 2013, net expense reimbursements of $2,760,997 due from IIG
were offset on our consolidated balance sheets against amounts due to
affiliates of IIG for management fees, administrative services expense,
incentive fees, and certain general and administrative expenses paid by IIG on
our behalf. As of December 31, 2013, the net reimbursement from IIG was
$545,593. As of March 6, 2014, the net amount due to us from IIG in connection
with the expense support and conditional reimbursement agreement was
approximately $310,000, for which we received a cash payment on March 14, 2014. 72


---



The table
below presents a summary of all expenses supported by IIG and the associated
dates through which such expenses are eligible for reimbursement by us for the
following three month periods.  Three Months
  Ended
 
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Ratio of Operating Expense to Average Net
  Assets for the Period(1)
 
 Annualized Distribution Rate for the
  Period(3)
 
 
 Eligible for Reimbursement throughDecember 31,
  2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 0.93%
 
 0.00%
 (2)
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 2.75%
 
 7.00%
 
 
 March 31, 2016June 30, 2013
 
 
 1,147,536
 
 
 -
 
 
 1,147,536
 
 1.43%
 
 7.00%
 
 
 June 30, 2016September 30,
  2013
 
 
 1,296,834
 
 
 -
 
 
 1,296,834
 
 0.49%
 
 7.00%
 
 
 September 30, 2016December 31,
  2013
 
 
 695,160
 
 
 -
 
 
 695,160
 
 0.31%
 
 7.00%
 
 
 December 31, 2016Total
 
 $
 4,075,609
 
 $
 -
 
 $
 4,075,609
  (1)
 Operating expenses include all expenses borne by us, except for
  organizational and offering expenses, base management fees, incentive fees, administrative
  services expenses and other general and administrative expenses owed to CIM
  and its affiliates and interest expense.(2)
 We did not declare any distributions during the three months
  ended December 31, 2012.(3)
 Annualized Distribution Rate equals the annualized rate of
  distributions paid to shareholders based on the amount of the regular cash
  distributions paid immediately prior to the date the expense support payment
  obligation was incurred by CIM. Annualized Distribution Rate does not include
  special cash or stock distributions paid to shareholders.
  Reimbursement of such costs 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 any such costs funded by IIG.  We or IIG may terminate the expense support
and conditional reimbursement agreement at any time. IIG has indicated that it
expects to continue such reimbursements until it deems that we have achieved
economies of scale sufficient to ensure that we bear a reasonable level of
expenses in relation to our income. If we terminate the investment advisory
agreement with CIM, we may be required to repay IIG all reimbursements funded
by IIG within three years of the date of termination. The specific amount of
expenses reimbursed by IIG, 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 IIG will reimburse any
portion of our expenses in future quarters.  The investment advisory agreement, the
investment sub-advisory agreement, the administration agreement and the dealer
manager agreement each provide certain indemnifications from us to the other
relevant parties to such agreements.  Our maximum exposure under these
agreements is unknown. However, we have not experienced claims or losses
pursuant to these agreements and believe the risk of loss related to such
indemnifications to be remote.  If any of our contractual obligations
discussed above are terminated, our costs may increase under any new agreements
that we enter into as replacements. We would also likely incur expenses in
locating alternative parties to provide the services that we expect to receive
pursuant to our investment advisory agreement, the investment sub-advisory
agreement, the administration agreement and the dealer manager agreement. Any
new investment advisory agreement would also be subject to approval by our
shareholders.  Contractual Obligations  In June 2012, we entered into an unsecured
financing arrangement for directors and officers insurance in an amount of
$179,180. Payments under the financing arrangement were due in 10 equal
installments, with final payment made on April 19, 2013.  On December 17, 2012, Flatiron entered into
a TRS with Citibank. Flatiron and Citibank amended the TRS, effective December
9, 2013 and February 6, 2014. See “Financial Condition, Liquidity and Capital
Resources – Total Return Swap” for a more detailed description of the TRS. 73


---



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, unfunded
delayed drawdown loan commitments, or revolving credit facilities, which
requires us to provide funding when requested by portfolio companies in
accordance with the terms of the underlying loan agreements. As of December 31,
2013 and 2012, unfunded loan commitments amounted to $2,450,758 and $0,
respectively.  Off-Balance Sheet Arrangements  We currently have no off-balance sheet arrangements.  74


---



Item 7A.   Quantitative and
Qualitative Disclosures About Market Risk  We are subject to financial market risks,
including changes in interest rates. As of December 31, 2013, 100% of our
portfolio investments and underlying loans subject to the TRS paid variable
interest rates, except for our short term investments, which are invested in
U.S. Treasury securities and repurchase agreements and have fixed 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 preferred return, 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 TRS with Citibank,
we pay fees to Citibank at a floating rate based on LIBOR (and some cases prime
rate) in exchange for the right to receive the economic benefit of a pool of
loans. In addition, in the future we may seek to borrow funds in order to make
additional investments. Our net investment income will depend, in part, upon
the difference between the rate at which we borrow funds and the rate at which
we invest those funds. As a result, we 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
materially 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 and TRS Agreement in effect as of December 31, 2013:  LIBOR Basis
  Point Change
 
 
 Increase (Decrease) in Net Interest
  Income(1)
 
 Percentage Change in Net Interest IncomeDown 26 basis
  points
 
 $
 385,823
 2.7%Current LIBOR
 
 
 -
 0.0%Up 100 basis
  points
 
 
 (1,037,709)
 (7.3%)Up 200 basis
  points
 
 
 (117,028)
 (0.8%)Up 300 basis
  points
 
 
 826,742
 5.8%(1) Includes the net effect of the change in interest rates on
  the unrealized appreciation (depreciation) on the TRS. Pursuant to the TRS,
  we receive from Citibank all interest payable in respect of the loans subject
  to the TRS and pay to Citibank interest at a rate equal to the floating rate
  index specified for each loan (typically LIBOR of varying maturities) plus
  1.35% per year on the full notional amount of the loans subject to the TRS.
  As of December 31, 2013, all of the loans subject to the TRS paid variable
  interest rates. This table assumes no change in defaults or prepayments by
  portfolio companies over the next twelve months.
  In addition, we may have risk regarding portfolio valuation.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Policies—Valuation of Portfolio
Investments.”  75


---



Item 8. Consolidated Financial Statements and Supplementary
Data PageReport of
  Independent Registered Public Accounting Firm
 
 77Consolidated Balance Sheets
 
 78Consolidated Statements of
  Operations
 
 79Consolidated Statements of
  Changes in Net Assets
 
 80Consolidated Statements of
  Cash Flows
 
 81Consolidated Schedule of
  Investments
 
 82Notes to
  Consolidated Financial Statements
 
 85
   76


---



Report of
Independent Registered Public Accounting Firm  The Board of Directors and Shareholders CĪON Investment Corporation  We have audited the accompanying
consolidated balance sheets of CĪON Investment Corporation (the “Company”),
including the consolidated schedule of investments, as of December 31, 2013 and
2012, and the related consolidated statements of operations, changes in net
assets, and cash flows for the year ended December 31, 2013 and for the period
from January 31, 2012 (Inception) through December 31, 2012. These consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.  We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2013 and 2012, by correspondence with the
custodian, counterparties and agents. We believe that our audits provide a
reasonable basis for our opinion.  In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of CĪON Investment Corporation at December
31, 2013 and 2012, the results of their operations, changes in their net
assets, and their cash flows for the year ended December 31, 2013 and for the
period from January 31, 2012 (Inception) through December 31, 2012, in
conformity with U.S. generally accepted accounting principles.    /s/
Ernst & Young LLP  New York, New York March 19, 2014   77


---



CĪON Investment Corporation Consolidated Balance Sheets December 31,
 
 December 31,2013
 
 2012AssetsInvestments, at
  fair value (amortized cost of $103,414,685and $3,787,873,
  respectively)
 $
 104,518,913
 
 $
 3,797,806Cash
 
 449,912
 
 
 -Due from
  counterparty(1)
 
 40,703,777
 
 
 729,325Reimbursement
  from IIG, net(2)
 
 545,593
 
 
 25,807Deferred
  offering expenses, net
 
 -
 
 
 958,904Prepaid expenses
 
 98,990
 
 
 105,802Interest
  receivable on investments
 
 415,416
 
 
 187Receivable due
  on investments sold
 
 535,513
 
 
 -Unrealized
  appreciation on total return swap(1)
 
 1,548,617
 
 
 12,395Receivable due
  on total return swap(1)
 
 1,801,665
 
 
 98Total assets
 $
 150,618,396
 
 $
 5,630,324Liabilities and Shareholders' EquityLiabilitiesPayable for
  investments purchased
 $
 3,462,700
 
 $
 990,000Shareholders'
  distributions payable(3)
 
 895,704
 
 
 -Accounts payable
  and accrued expenses
 
 608,938
 
 
 57,427Due to IIG -
  offering expenses(2)
 
 550,000
 
 
 -Accrued capital
  gains incentive fee on unrealized appreciation(4)
 
 530,569
 
 
 -Commissions
  payable
 
 -
 
 
 23,100Financing
  arrangement
 
 -
 
 
 72,682Total
  liabilities
 
 6,047,911
 
 
 1,143,209Commitments and
  contingencies (Note 3 and Note 11)Shareholders'
  EquityCommon stock,
  $0.001 par value; 500,000,000 shares authorized;15,510,178 and
  500,338 shares issued and outstanding, respectively(2)
 
 15,510
 
 
 500Capital in
  excess of par value
 
 142,402,255
 
 
 4,461,453Accumulated
  undistributed (distributions in excess of) net investment income
 
 (500,125)
 
 
 2,692Accumulated
  undistributed net realized gain on investments
 
 -
 
 
 44Accumulated net
  unrealized appreciation on investments
 
 1,104,228
 
 
 9,933Accumulated
  undistributed net realized gain on total return swap(1)
 
 -
 
 
 98Accumulated net
  unrealized appreciation on total return swap(1)
 
 1,548,617
 
 
 12,395Total
  shareholders' equity
 
 144,570,485
 
 
 4,487,115Total
  liabilities and shareholders' equity
 $
 150,618,396
 
 $
 5,630,324Net asset value
  per share of common stock at end of period
 $
 9.32
 
 $
 8.97Shares of common
  stock outstanding
 
 15,510,178
 
 
 500,338(1) See Note 6
  for a discussion of the Company’s total return swap agreement.(2) See Note 3
  for a discussion of expense reimbursements from ICON Investment Group, LLC,
  or IIG.(3) See Note 4
  for a discussion of the source of distributions paid by the Company.(4) See Note 2
  and Note 3 for a discussion of the methodology employed by the Company in
  calculating the capital gains incentive fee.See accompanying notes to consolidated
  financial statements.
  78


---



CĪON Investment Corporation Consolidated Statements of Operations  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Investment
  incomeInterest income
 
 $
 1,862,602
 
 $
 2,692Operating
  expensesManagement fees
 
 
 922,467
 
 
 1,567Administrative
  services expense
 
 
 1,158,915
 
 
 38,966Capital gains
  incentive fee(1)
 
 
 753,247
 
 
 4,494General and
  administrative(2)
 
 
 3,038,191
 
 
 71,679Total expenses
 
 
 5,872,820
 
 
 116,706Less: expense
  reimbursement from IIG(3)
 
 
 (3,958,903)
 
 
 (116,706)Net operating
  expenses
 
 
 1,913,917
 
 
 -Net investment
  (loss) income
 
 
 (51,315)
 
 
 2,692Realized and
  unrealized gainsNet realized
  gain on investments
 
 
 33,637
 
 
 44Net change in
  unrealized appreciation on investments
 
 
 1,094,295
 
 
 9,933Net realized
  gain on total return swap(4)
 
 
 3,489,036
 
 
 98Net change in unrealized
  appreciation on total return swap(4)
 
 
 1,536,222
 
 
 12,395Total net
  realized and unrealized gains
 
 
 6,153,190
 
 
 22,470Net increase in
  net assets resulting from operations
 
 $
 6,101,875
 
 $
 25,162Per share
  information—basic and dilutedNet increase in
  net assets per share resulting from operations
 
 $
 1.10
 
 $
 0.05Weighted average
  shares of common stock outstanding
 
 
 5,522,797
 
 
 500,338(1) See Note 2
  and Note 3 for a discussion of the methodology employed by the Company in
  calculating the capital gains incentive fee.(2) See Note 8
  for details of the Company's general and administrative expense.(3) See Note 3
  for a discussion of expense reimbursements from IIG.(4) See Note 6
  for a discussion of the Company’s total return swap agreement.See accompanying notes to consolidated
  financial statements.
  79


---



CĪON Investment Corporation Consolidated Statements of Changes in Net
Assets  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Changes in
  net assets from operations:Net investment
  (loss) income
 $
 (51,315)
 
 $
 2,692Net realized
  gain on investments
 
 33,637
 
 
 44Net change in
  unrealized appreciation on investments
 
 1,094,295
 
 
 9,933Net realized
  gain on total return swap(1)
 
 3,489,036
 
 
 98Net change in
  unrealized appreciation on total return swap(1)
 
 1,536,222
 
 
 12,395Net increase in
  net assets resulting from operations
 
 6,101,875
 
 
 25,162Shareholder
  distributions:Distributions
  from net realized gains(2)
 
 (3,522,815)
 
 
 -Other sources(2)
 
 (451,502)
 
 
 -Net decrease in
  net assets from shareholder distributions
 
 (3,974,317)
 
 
 -Changes in
  net assets from capital share transactions:Issuance of
  common stock, net of issuance costs of $13,578,070 and $136,390, respectively
 
 137,371,702
 
 
 4,503,049Reinvestment of
  shareholder distributions
 
 1,543,014
 
 
 -Amortization of
  deferred offering expenses
 
 (958,904)
 
 
 (41,096)Net increase in
  net assets resulting from capital share transactions
 
 137,955,812
 
 
 4,461,953Total increase
  in net assets
 
 140,083,370
 
 
 4,487,115Net assets at
  beginning of period
 
 4,487,115
 
 
 -Net assets at
  end of period
 $
 144,570,485
 
 $
 4,487,115Net asset value
  per share of common stock at end of period
 $
 9.32
 
 $
 8.97Shares of common
  stock outstanding at end of period
 
 15,510,178
 
 
 500,338Undistributed
  (distributions in excess of) net investment income at end of period
 $
 (500,125)
 
 $
 2,692(1) See Note 6
  for a discussion of the Company’s total return swap agreement.(2) See Note 4
  for a discussion of the source of distributions paid by the Company.See accompanying notes to consolidated
  financial statements.
  80


---



CĪON Investment Corporation Consolidated Statements of Cash Flows  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Operating
  activities:Net increase in
  net assets resulting from operations
 $
 6,101,875
 
 $
 25,162Adjustments to
  reconcile net increase in net assets resulting fromoperations to
  net cash used in operating activities:Net accretion of
  discount on investments
 
 
 
 (30,395)
 
 
 (67)Proceeds from
  principal repayment of investments
 
 
 
 2,157,915
 
 
 2,500Purchase of
  investments
 
 
 
 (94,331,717)
 
 
 (1,972,500)Increase in
  short term investments
 
 
 
 (9,565,907)
 
 
 (1,817,762)Proceeds from
  sale of investments
 
 
 
 2,176,929
 
 
 -Net realized
  gain on investments
 
 
 
 (33,637)
 
 
 (44)Net unrealized
  appreciation on investments
 
 
 
 (1,094,295)
 
 
 (9,933)Net unrealized
  appreciation on total return swap(1)
 
 (1,536,222)
 
 
 (12,395)Increase in due
  from counterparty
 
 
 
 (39,974,452)
 
 
 (729,325)Increase in
  reimbursement from IIG, net(2)
 
 (519,786)
 
 
 (25,807)Decrease
  (increase) in prepaid expenses
 
 
 
 6,812
 
 
 (105,802)Increase in
  interest receivable on investments
 
 
 
 (415,229)
 
 
 (187)Increase in
  receivable due on investments sold
 
 
 
 (535,513)
 
 
 -Increase in
  receivable due on total return swap(1)
 
 (1,801,567)
 
 
 (98)Increase in
  payable for investments purchased
 
 
 
 2,472,700
 
 
 990,000Increase in
  accrued capital gains incentive fee on unrealized appreciation
 
 
 
 530,569
 
 
 -Increase in
  accounts payable and accrued expenses
 
 
 
 551,511
 
 
 130,109Increase in due
  to IIG - offering expenses
 
 
 
 550,000
 
 
 -Net cash used in
  operating activities
 
 (135,290,409)
 
 
 (3,526,149)Financing
  activities:Gross proceeds
  from issuance of common stock
 
 
 
 150,949,772
 
 
 3,639,439Commissions and
  dealer manager fees paid
 
 
 
 (13,601,170)
 
 
 (113,290)Reinvestment of
  shareholder distributions
 
 
 
 1,543,014
 
 
 -Shareholder
  distributions paid(3)
 
 (3,078,613)
 
 
 -Repayment of
  financing arrangement
 
 
 
 (72,682)
 
 
 -Net cash
  provided by financing activities
 
 135,740,321
 
 
 3,526,149Net increase in
  cash
 
 449,912
 
 
 -Cash, beginning
  of period
 
 -
 
 
 -Cash, end of
  period
 $
 449,912
 
 $
 -Supplemental
  non-cash financing activities:Deferred
  offering expenses charged to shareholders' equity
 $
 958,904
 
 $
 41,096Shareholders'
  distributions payable
 $
 895,704
 
 $
 -Capitalization
  of deferred offering expenses
 
 
 $
 -
 
 $
 1,000,000Issuance of
  common stock to IIG
 
 
 $
 -
 
 $
 1,000,000Commissions paid
  by IIG
 
 
 $
 -
 
 $
 23,100(1) See Note 6
  for a discussion of the Company’s total return swap agreement.(2) See Note 3
  for a discussion of expense reimbursements from IIG.(3) See Note 4
  for a discussion of the source of distributions paid by the Company.See accompanying notes to consolidated
  financial statements.
  81


---



CĪON
Investment Corporation Consolidated Schedule of Investments December 31, 2013  Portfolio Company(a)
 
 Industry
 
 Principal/Par
  Amount
 
 Amortized
  Cost
 
 Fair
  Value(b)Senior
  Secured First Lien Term Loans - 42.7%ABRA, Inc.,
  L+600, 1.25% LIBOR Floor, 5/10/2018(c)
 
 Automotive
 
 $
 5,980,924
 
 $
 5,921,292
 
 $
 5,921,115Captive
  Resources Midco, LLC, L+550, 1.25% LIBOR Floor, 10/31/2018
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 987,500
 
 
 972,809
 
 
 987,500CHI Overhead
  Doors, L+425, 1.25% LIBOR Floor, 3/18/2019
 
 Construction
  & Building
 
 
 936,944
 
 
 932,772
 
 
 938,701Collision
  Holding Company, LLC, L+775, 1.25% LIBOR Floor, 5/10/2018
 
 Automotive
 
 
 1,568,127
 
 
 1,552,492
 
 
 1,552,445Custom Ecology,
  Inc., L+550, 1.25% LIBOR Floor, 6/26/2019
 
 Environmental
  Industries
 
 
 1,900,450
 
 
 1,882,554
 
 
 1,909,952Distribution
  International, Inc., L+650, 1.00% LIBOR Floor, 7/16/2019
 
 Construction
  & Building
 
 
 2,487,500
 
 
 2,468,327
 
 
 2,476,555F+W Media, Inc.,
  L+650, 1.25% LIBOR Floor, 6/30/2019
 
 Media:
  Diversified & Production
 
 
 1,990,000
 
 
 1,839,629
 
 
 1,920,350Fender Musical
  Instruments Corp., L+450, 1.25% LIBOR Floor, 4/3/2019
 
 Consumer Goods:
  Non-Durable
 
 
 447,500
 
 
 443,456
 
 
 455,193H.D. Vest, Inc.,
  L+450, 1.25% LIBOR Floor, 12/18/2018(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 597,438
 
 
 593,254
 
 
 594,450ILC Industries,
  LLC, L+650, 1.50% LIBOR Floor, 7/11/2018
 
 Consumer Goods:
  Non-Durable
 
 
 4,456,187
 
 
 4,471,616
 
 
 4,467,327Landslide
  Holdings, Inc., L+425, 1.00% LIBOR Floor, 8/9/2019
 
 Services:
  Business
 
 
 2,449,690
 
 
 2,426,101
 
 
 2,469,594Merrill Corp.,
  L+625, 1.00% LIBOR Floor, 3/8/2018
 
 Services:
  Business
 
 
 649,021
 
 
 643,301
 
 
 661,729National
  Surgical Hospitals, Inc., L+450, 1.25% LIBOR Floor, 8/1/2019
 
 Healthcare &
  Pharmaceuticals
 
 
 3,491,250
 
 
 3,456,338
 
 
 3,526,163Packaging
  Coordinators, Inc., L+425, 1.25% LIBOR Floor, 5/10/2020
 
 Containers,
  Packaging & Glass
 
 
 1,500,000
 
 
 1,492,500
 
 
 1,500,000Plano Molding
  Co., Inc., L+425, 1.00% LIBOR Floor, 10/11/2018
 
 Consumer Goods:
  Non-Durable
 
 
 2,500,000
 
 
 2,484,517
 
 
 2,500,000Prowler
  Acquisition Corp., L+475, 1.25% LIBOR Floor, 3/19/2019
 
 Energy: Oil
  & Gas
 
 
 1,925,000
 
 
 1,905,750
 
 
 1,915,375SK Spice
  S.Á.R.L, L+825, 1.25% LIBOR Floor, 9/30/2018(d)
 
 Chemicals,
  Plastics & Rubber
 
 
 1,775,550
 
 
 1,740,993
 
 
 1,760,014Smile Brands
  Group, Inc., L+625, 1.25% LIBOR Floor, 8/16/2019
 
 Healthcare &
  Pharmaceuticals
 
 
 4,987,500
 
 
 4,892,609
 
 
 4,931,391Sprint
  Industrial Holdings, LLC, L+575, 1.25% LIBOR Floor, 5/14/2019
 
 Energy: Oil
  & Gas
 
 
 1,194,000
 
 
 1,182,670
 
 
 1,208,925Survey Sampling
  International, LLC, L+450, 1.00% LIBOR Floor, 12/12/2019
 
 Services:
  Business
 
 
 9,250,000
 
 
 9,158,059
 
 
 9,157,500The TOPPS
  Company, Inc., L+600, 1.25% LIBOR Floor, 10/2/2018
 
 Consumer Goods:
  Non-Durable
 
 
 2,110,000
 
 
 2,068,064
 
 
 2,104,725Travel Leaders
  Group, LLC, L+600, 1.00% LIBOR Floor, 12/5/2018
 
 Services:
  Consumer
 
 
 4,900,000
 
 
 4,607,683
 
 
 4,814,250Wastequip, LLC,
  L+450, 1.00% LIBOR Floor, 8/9/2019
 
 Capital
  Equipment
 
 
 2,985,000
 
 
 2,970,869
 
 
 3,014,850Westway Group,
  L+400, 1.00% LIBOR Floor, 2/27/2020
 
 Services:
  Business
 
 
 992,500
 
 
 988,030
 
 
 999,326Total Senior
  Secured First Lien Term Loans
 
 
 
 
 
 
 
 61,095,685
 
 
 61,787,430Senior
  Secured Second Lien Term Loans - 15.6%The Active
  Network, Inc., L+850, 1.00% LIBOR Floor, 11/15/2021
 
 High Tech
  Industries
 
 
 2,820,000
 
 
 2,805,900
 
 
 2,876,400Camp
  International Holding Company, L+725, 1.00% LIBOR Floor, 11/30/2019
 
 Services:
  Business
 
 
 2,029,000
 
 
 2,029,000
 
 
 2,073,384Centaur Gaming,
  L+750, 1.25% LIBOR Floor, 2/20/2020
 
 Hotel, Gaming
  & Leisure
 
 
 500,000
 
 
 495,297
 
 
 515,000Digital Insight
  Corporation, L+775, 1.00% LIBOR Floor, 10/16/2020
 
 Services:
  Business
 
 
 385,000
 
 
 381,237
 
 
 393,181Drew Marine
  Group, Inc., L+700, 1.00% LIBOR Floor, 5/19/2021(d)
 
 Chemicals,
  Plastics & Rubber
 
 
 5,000,000
 
 
 5,003,467
 
 
 5,037,500GCA Services
  Group, Inc., L+800, 1.25% LIBOR Floor, 11/1/2020
 
 Services:
  Consumer
 
 
 800,000
 
 
 796,341
 
 
 813,876H.D. Vest, Inc.,
  L+800, 1.25% LIBOR Floor, 6/18/2019(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 854,000
 
 
 844,079
 
 
 845,460Healogics, Inc.,
  L+800, 1.25% LIBOR Floor, 2/5/2020
 
 Healthcare &
  Pharmaceuticals
 
 
 500,000
 
 
 495,426
 
 
 511,250Learfield
  Communications, Inc., L+775, 1.00% LIBOR Floor, 10/9/2021
 
 Media:
  Broadcasting & Subscription
 
 
 1,417,333
 
 
 1,403,174
 
 
 1,452,766LTS Buyer, LLC,
  L+675, 1.25% LIBOR Floor, 4/12/2021
 
 Telecommunications
 
 
 500,000
 
 
 495,233
 
 
 505,835Securus
  Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021(e)
 
 Telecommunications
 
 
 3,500,000
 
 
 3,461,450
 
 
 3,467,205SESAC Holdco II,
  LLC, L+875, 1.25% LIBOR Floor, 8/8/2019
 
 Media:
  Broadcasting & Subscription
 
 
 1,500,000
 
 
 1,522,110
 
 
 1,537,500Sprint
  Industrial Holdings, LLC, L+1000, 1.25% LIBOR Floor, 11/14/2019
 
 Energy: Oil
  & Gas
 
 
 500,000
 
 
 490,421
 
 
 505,000Telecommunications
  Management, LLC, L+800, 1.00% LIBOR Floor, 10/30/2020
 
 Media:
  Broadcasting & Subscription
 
 
 543,290
 
 
 538,266
 
 
 554,156WP CPP Holdings,
  LLC, L+775, 1.00% LIBOR Floor, 4/30/2021
 
 Aerospace &
  Defense
 
 
 1,435,000
 
 
 1,427,930
 
 
 1,463,701Total Senior
  Secured Second Lien Term Loans
 
 
 
 
 
 
 
 22,189,331
 
 
 22,552,214See accompanying notes to consolidated
  financial statements.
 82


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CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2013  Portfolio Company(a)
 
 Industry
 
 Principal/Par
  Amount
 
 Amortized
  Cost
 
 Fair
  Value(b)Collateralized
  Loan Obligations - 2.6%Ivy Hill Middle
  Market Credit Fund VII, Ltd. Class E Notes, L+565, 10/20/2025(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 2,000,000
 
 
 1,850,000
 
 
 1,850,000Ivy Hill Middle
  Market Credit Fund VII, Ltd. Subordinated Notes, Residual, 10/20/2025(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 2,000,000
 
 
 1,896,000
 
 
 1,945,600Total
  Collateralized Loan Obligations
 
 
 
 
 
 
 
 3,746,000
 
 
 3,795,600Subordinated
  Debt - 3.5%JPMorgan Chase
  Bank, N.A. Credit Link Note, L+1225, 12/20/2021(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 5,000,000
 
 
 5,000,000
 
 
 5,000,000Total
  Subordinated Debt
 
 
 
 
 
 
 
 5,000,000
 
 
 5,000,000Short Term
  Investments - 7.9%(f)First American
  Treasury Obligations Fund, Class Z Shares(g)
 
 
 
 
 11,383,669
 
 
 11,383,669
 
 
 11,383,669Total Short
  Term Investments
 
 
 
 
 
 
 
 11,383,669
 
 
 11,383,669TOTAL
  INVESTMENTS - 72.3%
 
 
 
 
 
 
 $
 103,414,685
 
 $
 104,518,913OTHER ASSETS
  IN EXCESS OF LIABILITIES - 27.7%
 
 
 
 
 
 
 
 
 
 $
 40,051,572NET ASSETS -
  100%
 
 
 
 
 
 
 
 
 
 $
 144,570,485TOTAL RETURN
  SWAP - 1.1%
 
 
 
 Notional
  Amount
 
 
 
 
 Unrealized AppreciationCitibank TRS
  Facility (see Note 6)
 
 
 
 $
 148,199,937
 
 
 
 
 $
 1,548,617(a)
 All of the Company's debt 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. The Company does not control and is not an affiliate of
  any of the portfolio companies in its investment portfolio.(b)
 Fair value determined by the Company’s board of directors (see
  Note 7).(c)
 The Company is
  committed to fund an additional $2,450,758 as of December 31, 2013 (see Note
  5 and Note 11). The Company is committed to fund an additional $1,330,667 as
  of March 7, 2014.(d)
 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 that company’s total assets as defined under
  Section 55 of the 1940 Act. As of December 31, 2013, 88.2% of the Company’s
  total assets represented qualifying assets. In addition, as described in Note
  6, 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, 76.1% of the
  Company’s total assets represented qualifying assets as of December 31, 2013.(e)
 Position or portion thereof unsettled as of December 31, 2013.(f)
 Short term investments represent an investment in a fund that
  invests in highly liquid investments with original maturity dates of three
  months or less.(g)
 Effective yield as of December 31, 2013 is <0.01%.See accompanying notes to consolidated
  financial statements.
 83


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CĪON Investment Corporation Consolidated Schedule of Investments December 31, 2012  Portfolio Company(a)
 
 Industry
 
 Principal/Par
  Amount
 
 Amortized
  Cost
 
 Fair
  Value(b)Senior
  Secured First Lien Term Loans - 44.1%Captive
  Resources Midco, LLC, L+550, 1.25% LIBOR Floor, 10/31/2018
 
 Banking,
  Finance, Insurance & Real Estate
 
 $
 997,500
 
 $
 980,111
 
 $
 980,044Plano Molding
  Co., Inc., L+450, 1.25% LIBOR Floor, 12/21/2017(c)
 
 Chemicals,
  Plastics & Rubber
 
 
 1,000,000
 
 
 990,000
 
 
 1,000,000Total Senior
  Secured First Lien Term Loans
 
 
 
 
 
 
 
 1,970,111
 
 
 1,980,044Short Term
  Investments - 40.5%(d)First American
  Treasury Obligations Fund, Class Z Shares(e)
 
 
 
 
 1,817,762
 
 
 1,817,762
 
 
 1,817,762Total Short
  Term Investments
 
 
 
 
 
 
 
 1,817,762
 
 
 1,817,762TOTAL
  INVESTMENTS - 84.6%
 
 
 
 
 
 
 $
 3,787,873
 
 $
 3,797,806OTHER ASSETS
  IN EXCESS OF LIABILITIES - 15.4%
 
 
 
 
 
 
 
 
 
 $
 689,309NET ASSETS -
  100%
 
 
 
 
 
 
 
 
 
 $
 4,487,115TOTAL RETURN
  SWAP - 0.3%
 
 
 
 Notional
  Amount
 
 
 
 
 Unrealized
  AppreciationCitibank TRS
  Facility (see Note 6)
 
 
 
 $
 2,883,100
 
 
 
 
 $
 12,395(a)
 All of the
  Company's debt investments are issued by eligible U.S. portfolio companies,
  as defined in the 1940 Act. The Company does not control and is not an
  affiliate of any of the portfolio companies in its investment portfolio.(b)
 Fair value
  determined by the Company’s board of directors (see Note 7).(c)
 Position or
  portion thereof unsettled as of December 31, 2012.(d)
 Short term
  investments represent an investment in a fund that invests in highly liquid
  investments with original maturity dates of three months or less.(e)
 Effective yield
  as of December 31, 2012 is <0.01%.See accompanying notes to consolidated
  financial statements.
  84


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CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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
$2,500,000, 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 anticipates that its portfolio will
be comprised primarily of investments in senior secured loans and, to a lesser
extent, second lien loans, collateralized loan obligations and long-term
subordinated loans, referred to as mezzanine loans, of private and thinly
traded U.S. middle-market companies. The Company is
managed by CĪON 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 have 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. As of December 31,
2013, the Company sold 15,510,178 shares for gross proceeds of $157,132,225 at
an average price per share of $10.13. The gross proceeds received include
reinvested shareholder distributions of $1,543,014, for which the Company
issued 162,880 shares of common stock. Since commencing its continuous public
offering on July 2, 2012 and through March 19, 2014, the Company sold
23,414,958 shares of common stock for gross proceeds of $238,474,948 at an
average price per share of $10.18. The gross proceeds received include
reinvested shareholder distributions of $3,179,729, for which the Company
issued 337,506 shares of common stock. During the year
ended December 31, 2013, the Company sold 15,009,840 shares for gross proceeds
of $152,492,786 at an average price per share of $10.16. The gross proceeds
received include reinvested shareholder distributions of $1,543,014, for which
the Company issued 162,880 shares of common stock. During the period from
January 1, 2014 to March 19, 2014, the Company sold 7,904,780 shares of common
stock for gross proceeds of $81,342,723 at an average price per share of
$10.29. The gross proceeds received include reinvested shareholder
distributions of $1,636,715, for which the Company issued 174,626 shares of
common stock. The gross proceeds from the reinvestment of shareholder
distributions are included in the gross proceeds from the Company’s offering
for purposes of determining the total amount of the organization and offering
expenses that can be paid by the Company (see Note 3).  On December 28, 2012, January 31, 2013,
March 14, 2013, May 15, 2013, August 15, 2013, and February 4, 2014, the
Company’s board of directors increased the public offering price per share of
common stock under the Company’s offering to $10.04, $10.13, $10.19, $10.24,
$10.32 and $10.45 per share, respectively, to ensure that the associated
offering price per share, net of sales commissions and dealer manager fees, equaled
or exceeded the net asset value per share on each subsequent subscription closing
date and distribution reinvestment date.  Note 2. Summary of Significant Accounting
Policies Basis of Presentation The accompanying
consolidated financial statements of the Company have been prepared in
accordance with U.S. generally accepted accounting principles, or GAAP, and
include the accounts of the Company and its wholly owned financing subsidiary
Flatiron Funding, LLC, or Flatiron. All intercompany balances and transactions
have been eliminated in consolidation. The Company evaluates subsequent events through the date that
the consolidated financial statements are issued. Certain
reclassifications have been made to the accompanying consolidated financial
statements in prior periods to conform to the current period presentation. 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. 85


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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 $11,383,669 and $1,817,762 of such investments at
December 31, 2013 and 2012, respectively, which are included in investments, at
fair value on the accompanying consolidated balance sheets and on the
consolidated schedule of investments. Organization Costs Organization 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 organization costs have been funded by IIG
and its affiliates, and there is no liability for these organization costs to
the Company until IIG and its affiliates submit such costs for reimbursement.
The Company will expense organization costs when incurred, if and when IIG and
its affiliates submit such costs for reimbursement. At December 31, 2013, IIG
and its affiliates had previously incurred approximately $192,000 of
organization costs, which may be subject to reimbursement by the Company. No
additional organization costs have been incurred subsequent to December 31,
2013 (see Note 3). Offering Expenses Offering expenses include, among other
things, legal fees and other costs pertaining to the preparation of the
Company’s registration statement in connection with the continuous public
offering of the Company’s shares. Certain offering expenses have been funded by
IIG and its affiliates, and there is no liability for these offering expenses
to the Company until IIG and its affiliates submit such costs for reimbursement.
Upon meeting the minimum offering requirement on December 17, 2012, the Company
incurred and capitalized offering expenses of $1,000,000 that were submitted
for reimbursement by IIG (see Note 3). These expenses are amortized over a
twelve month period as an adjustment to capital in excess of par value. The
unamortized balance of these expenses is reflected in the consolidated balance
sheets as deferred offering expenses, net. The Company will expense any
additional offering expenses incurred by IIG and its affiliates if and when IIG
and its affiliates submit such costs for reimbursement. During the year ended
December 31, 2013, the Companyincurred $1,787,000 inoffering expenses included in general and administrative expense in the
consolidated statements of operations. At December 31, 2013, IIG and its
affiliates have incurred approximately $969,000 of
unreimbursedoffering expenses, which may be subject to reimbursement by
the Company. No additional material offering expenses have been incurred by IIG
and its affiliates subsequent to December 31, 2013 (see Note 3).  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
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 have to pay 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 any
capital gains, if any, and any recognized and undistributed income from prior
years for which it paid no federal income taxes. Book and 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 13).
During the year ended December 31, 2013, the Company declared distributions of
$3,974,317. The Company did not declare or pay any distributions in 2012. 86


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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. As of and for the year ended December
31, 2013 and as of December 31, 2012 and for the period from January 31, 2012
(Inception) through December 31, 2012, the Company did not have any uncertain
tax positions. The Company is subject to examination by U.S. federal, New
York State, New York City and Maryland income tax jurisdictions for 2012. 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. Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosure, or ASC Topic 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 Topic 820 also establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such as quoted prices in
active markets; Level 2, defined as observable inputs such as quoted prices for
similar securities in active markets and quoted prices for identical securities
where there is little or no activity in the market; and Level 3, defined as
unobservable inputs for which little or no market data exists, therefore
requiring an entity to develop its own assumptions. The Company’s
investments as of December 31, 2013, excluding short term investments,consisted
primarily of debt securities that are traded on a private over-the-counter
market for institutional investments. Except as described below, for each
investment, CIM will attempt to obtain the most recent closing public market
price. If no sales of such investment occurred on the determination date, such
investment will be valued at the midpoint of the “bid” and the “ask” price at the
close of business on such day. Portfolio securities that carry certain
restrictions on sale will typically be consistently valued at a discount from
the public market value of the security. The Company
valued its total return swap, or TRS, in accordance with the agreements between
Flatiron and Citibank, N.A., or Citibank, which collectively establish the TRS,
or TRS Agreement. Pursuant to the TRS Agreement, the fair value of the TRS is
based on the increase or decrease in the value of the loans underlying the TRS.
The loans underlying the TRS are valued by Citibank. Citibank bases its
valuation primarily on the indicative bid prices provided by an independent
third-party pricing service. Bid prices reflect a price that market
participants may be willing to pay for an investment. These valuations are sent
to the Company for review and testing. The Company reviews and approves the
value of the TRS, as well as the value of the loans underlying the TRS, on a
quarterly basis as part of the quarterly valuation process. To the extent the
Company has any questions or concerns regarding the valuation of the loans
underlying the TRS, such valuations will be discussed or challenged pursuant to
the terms of the TRS Agreement. As a result of the private nature of this marketplace
(meaning actual transactions are not publicly reported), the Company believes
that the total fair value of the TRS should be classified as Level 3 within the
fair value hierarchy. If the Company owns identical investments in its
investment portfolio and through the TRS, the Company utilizes the TRS pricing
for consistency. For additional information on the TRS, see Note 6. Notwithstanding
the foregoing, if in the reasonable judgment of CIM, the price for any
securities held by the Company and determined in the manner described above
does not accurately reflect the fair value of such security, CIM will value
such security at a price that reflects such security’s fair value and report
such change in the valuation to the board of directors or its designee as soon
as practicable. Any securities or
other assets that are not publicly traded or for which a market price is not
otherwise readily available will be valued at a price that reflects its fair
value. With respect to such investments, the investments will be 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. 87


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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. 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 “bid” and “ask” prices it receives from the
third-party pricing services 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 prices are reliable indicators of
fair value. However, because of the private nature of this marketplace (meaning
actual transactions are not publicly reported), the Company believes that these
valuation inputs are classified as Level 2 or Level 3 within the fair value
hierarchy. Due to the
uncertainty inherent in the valuation process, particularly for Level 2 and
Level 3 investments, such fair value estimates may differ materially from the
values that would have been used had an active market for the securities
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
the Company ultimately realizes on these investments to materially differ from
the valuations currently assigned. 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. 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. Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest income. The Company
records prepayment premiums on loans and debt securities as interest income
when it receives such amounts. The Company may
have investments in the investment portfolio that contain a paid-in-kind, or
PIK, interest provision. Any PIK interest will be added to the principal
balance of such investments and is recorded as income, if the portfolio company
valuation indicates that such PIK interest is collectible. 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. 88


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Loans and debt
securities, including those that are individually identified as being impaired
under ASC 310,Receivables, are
generally placed on nonaccrual 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 nonaccrual status is reversedagainst
interest income. Interest income is recognized on nonaccrual loans or debt
securities only to the extent received in cash. How­ever, where there is doubt
regarding the ultimate collectibility ofprincipal,
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’s only
derivative instrument is the TRS. The Company marks its derivative to market
through net change in unrealized appreciation on total return swap in the
consolidated statements of operations. For additional information on the TRS,
see Note 6. 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. 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 to be paid as a
distribution is determined by the board of directors on a monthly basis. Net
realized capital gains, if any, are distributed at least annually. 89


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 3. Transactions with Related Parties  The Company has entered into an investment
advisory agreement with CIM. 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 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 began accruing fees under the
investment advisory agreement on December 17, 2012, upon the commencement of
the Company’s operations. For the year ended December 31, 2013 and for the
period from January 31, 2012 (Inception) through December 31, 2012, CIM earned $922,467
and $1,567 in management fees, respectively. During these periods, all
management fees were reimbursed to the Company by IIG in accordance with the
expense support and conditional reimbursement agreement entered into with IIG,
or the expense support and conditional reimbursement agreement.  The Company accrues the capital gains
incentive fee based on net realized and unrealized gains; however, under the
terms of the investment advisory agreement, the fee payable to CIM is based on
net realized gains and no such fee is payable with respect to unrealized gains
unless and until such gains are actually realized. For the year ended December
31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, the Company recorded capital gains incentive fees of $753,247 and
$4,494 based on the performance of its investment portfolio, of which $526,084
and $4,485 were based on net unrealized gains and $227,163 and $9 were based on
realized gains, respectively. During these periods, all incentive fees for tax
purposes were reimbursed to the Company by IIG in accordance with the expense
support and conditional reimbursement agreement.  On January 30, 2013, the Company entered
into the expense support and conditional reimbursement agreement with IIG,
whereby IIG agreed to reimburse the Company for expenses 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. Pursuant to the expense support and
conditional reimbursement agreement, the Company has a conditional obligation
to reimburse IIG for any amounts funded by IIG under such agreement if, during
any fiscal quarter occurring within three years of the date on which IIG funded
such amount, 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 exceeds the
distributions paid by the Company to its shareholders. For the year ended
December 31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, the total expense reimbursement from IIG was $3,958,903 and $116,706,
respectively, relating to certain operating expenses.  On December 13,
2013, the Company and IIG entered into an amended and restated expense support
and conditional reimbursement agreement, or expense support and conditional
reimbursement agreement, to extend the termination date of such agreement from
January 30, 2014 to January 30, 2015.  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
reimbursements from IIG, which are subject to recoupment. The Company has not
established limits on the amount of funds it may use from available sources to
make distributions. A substantial portion of the Company’s distributions
have resulted, and future distributions may result, from expense reimbursements
from IIG, which are subject to repayment by the Company within three
years. The purpose of this arrangement is to avoid such distributions
being characterized as a return of capital for tax purposes. 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 IIG continues to make
such expense reimbursements. Shareholders should also understand that the
Company’s future repayments 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.  IIG has no obligation to provide expense
reimbursements to the Company in future periods. For the year ended December
31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, if expense reimbursements from IIG were not supported, some or all of
the distributions may have been a return of capital for tax purposes. 90


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The table below presents a summary of all expenses supported by
IIG and the associated dates through which such expenses are eligible for
reimbursement by the Company for each of the following three month periods. Three Months
  Ended
 
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Ratio of Operating Expense to Average Net
  Assets for the Period(1)
 
 Annualized Distribution Rate for the
  Period(3)
 
 
 Eligible for Reimbursement throughDecember 31,
  2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 0.93%
 
 0.00%
 (2)
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 2.75%
 
 7.00%
 
 
 March 31, 2016June 30, 2013
 
 
 1,147,536
 
 
 -
 
 
 1,147,536
 
 1.43%
 
 7.00%
 
 
 June 30, 2016September 30,
  2013
 
 
 1,296,834
 
 
 -
 
 
 1,296,834
 
 0.49%
 
 7.00%
 
 
 September 30, 2016December 31,
  2013
 
 
 695,160
 
 
 -
 
 
 695,160
 
 0.31%
 
 7.00%
 
 
 December 31, 2016Total
 
 $
 4,075,609
 
 $
 -
 
 $
 4,075,609(1)
 Operating expenses include all expenses borne by the Company,
  except for organizational and offering expenses, base management fees,
  incentive fees, administrative services expenses and other general and
  administrative expenses owed to CIM and its affiliates and interest expense.(2)
 The Company did not declare any distributions during the three
  months ended December 31, 2012.(3)
 Annualized Distribution Rate equals the annualized rate of
  distributions paid to shareholders based on the amount of the regular cash
  distributions paid immediately prior to the date the expense support payment
  obligation was incurred by CIM. Annualized Distribution Rate does not include
  special cash or stock distributions paid to shareholders.
 Reimbursement of such costs will be
determined as appropriate to meet the objectives of the expense support and
conditional reimbursement agreement. As a result, the Company may or may not be
requested to reimburse any of these costs by IIG. As of December 31, 2013 and
2012, the net reimbursement from IIG was $545,593 and $25,807, respectively. As
of March 6, 2014, the net amount due to the Company from IIG in connection with
the expense support and conditional reimbursement agreement was approximately
$310,000, for which the Company received a cash payment on March 14, 2014.  The Company or IIG may terminate the
expense support and conditional reimbursement agreement at any time. IIG has
indicated that it expects to continue such reimbursements until it deems 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 IIG all reimbursements funded by IIG within three years of
the date of termination. The specific amount of expenses reimbursed by IIG, 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 IIG will reimburse any portion of the Company’s expenses in
future quarters.  The Company entered into an administration
agreement with CIM’s affiliate, ICON Capital, LLC, formerly known as ICON
Capital Corp., 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. 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. For the year ended December
31, 2013 and for the period from January 31, 2012 (Inception) through December
31, 2012, the Company incurred administrative services expenses to ICON Capital
of $1,158,915 and $38,966, respectively, the majority of which related to the
allocation of costs of administrative personnel for services rendered to the
Company and the remainder related to other reimbursable expenses. During these
periods, all administrative expenses were reimbursed by IIG in accordance with
the expense support and conditional reimbursement agreement. 91


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The
Company’s payment of organization costs and offering expenses will not exceed
1.5% of the gross proceeds from the offering (without giving effect to any
potential reimbursements from IIG and its affiliates). If the Company sells the
maximum number of shares at its latest public offering price of $10.45 per
share, then the Company estimates that it may incur up to approximately
$15,675,000 of expenses. Under the terms of the investment advisory agreement,
CIM and certain of its affiliates, which includes IIG, are entitled to receive
reimbursement of up to 1.5% of the gross proceeds raised until all organization
costs and offering expenses have been reimbursed, which could be as late as
December 31, 2015. Previously, the Company interpreted “raised” to mean all
gross proceeds that the Company expected to raise through the completion of the
offering of its shares, rather than actual gross proceeds raised through the
date of reimbursement.  Consistent with such application and since
the Company believed it would raise at least $100 million through the
completion of the offering of its shares, upon commencement of operations on
December 17, 2012, the Company issued 111,111 shares of the Company’s common
stock at $9.00 per share to IIG in lieu of payment of $1,000,000 for
organization and offering expenses submitted for reimbursement.  The transaction
satisfied an independent obligation of IIG to invest $1,000,000 in the
Company’s shares.  Through that date, the Company had raised gross
proceeds from unaffiliated outside investors of $2,639,439 and from
affiliated investors of $2,000,000, which, applying 1.5% of actual proceeds
raised through the date of reimbursement, would have resulted in CIM being
entitled to $69,592.  As of December 31, 2013, the Company raised
gross proceeds of $157,132,225, of which it can pay up to $2,356,983 in
organization and offering expenses (which represents 1.5% of total gross
offering proceeds raised). Through December 31, 2013, the Company paid
$1,950,305 for such costs, leaving an additional $406,678 that can be paid. As
of March 19, 2014, the Company raised gross proceeds of $238,474,948, of which
it can pay up to $3,577,124 in organization and offering expenses (which
represents 1.5% of total gross offering proceeds raised). Through March 19,
2014, the Company paid $2,404,247 in such costs, leaving an additional $1,172,877
that can be paid.  With respect to any future reimbursements
for organization and offering 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.  Consistent with this
interpretation, on May 30, 2013, IIG paid the Company $1,000,000, plus interest
accrued at a rate of 7% per year. From inception through December 31, 2013, IIG
and its affiliates incurred organization costs and offering expenses of
approximately $2,161,000, of which $1,000,000 has been submitted to the Company
for reimbursement. As of December 31, 2013, the Company had an outstanding
payable to IIG for offering costs of $550,000. No additional material
organization costs or offering expenses have been incurred by IIG or its
affiliates subsequent to December 31, 2013. The decision to fund the Company’s
organization costs and offering expenses and the decision to seek reimbursement
for such costs is solely at the discretion of IIG and its affiliates. As a
result, the Company may or may not be requested to reimburse any costs funded
by IIG and its affiliates.  The Company has entered into certain
agreements with CIM’s affiliate, ICON Securities, LLC, formerly known as ICON
Securities Corp., or ICON Securities, whereby the Company pays certain fees and
reimbursements. ICON Securities is entitled to receive a 3% dealer manager fee
from gross offering proceeds from the sale of the Company’s shares. The selling
dealers are entitled to receive a sales commission of up to 7% of gross
offering proceeds. Such costs are charged against capital in excess of par
value when incurred. For the year ended December 31, 2013, the Company incurred
commissions of $9,191,818 to the selling dealers and $4,386,252 to ICON
Securities. Since commencing its continuous public offering on July 2, 2012 and
through March 19, 2014, the Company paid or accrued commissions of $14,176,684
to the selling dealers and $6,796,953 to ICON Securities.  Fees and other expenses incurred by the
Company related to CIM and its affiliates were as follows:  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughEntity
 
 Capacity
 
 Description
 
 December 31, 2013
 
 December 31, 2012ICON Securities
 
 Dealer manager
 
 Dealer manager
  fees(1)
 
 $
 4,386,252
 
 $
 42,700CIM
 
 Investment
  adviser
 
 Management
  fees(2)(3)
 
 
 922,467
 
 
 1,567CIM
 
 Investment
  adviser
 
 Incentive
  fees(2)(3)
 
 
 753,247
 
 
 4,494ICON Capital
 
 Administrative
  services provider
 
 Administrative
  services expense(2)(3)
 
 
 1,158,915
 
 
 38,966$
 7,220,881
 
 $
 87,727(1)   Amount
  charged directly to equity.(2)   Amount
  charged directly to operations.(3)   All or a
  portion of the expense has been supported in connection with the expense
  support and conditional reimbursement agreement.
 92


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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
investment sub-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 4. Distributions  The Company’s board of directors declared
distributions for twenty four record dates during the year ended December 31,
2013. Declared distributions are paid monthly. The Company did not declare or
pay any distributions during the period from January 31, 2012 (Inception)
through December 31, 2012.  The following table presents cash
distributions per share that were declared during the year ended December 31,
2013:  DistributionsThree Months
  Ended
 
 Per Share
 
 AmountMarch 31, 2013
  (six record dates)
 
 $
 0.1769
 
 $
 208,766June 30, 2013
  (six record dates)
 
 
 0.1788
 
 
 518,630September 30,
  2013 (six record dates)
 
 
 0.1799
 
 
 1,089,797December 31,
  2013 (six record dates)
 
 
 0.1806
 
 
 2,157,124Total
  distributions for the year ended December 31, 2013
 
 $
 0.7162
 
 $
 3,974,317
  On February 1, 2014, the
Company changed from semi-monthly closings to weekly closings for the sale of the
Company’s shares pursuant to its continuous public offering. As result, the Company’s board of
directors authorizes and declares on a monthly basis a weekly distribution amount per share of
common stock.  On January 15,
2014, the Company’s board of directors declared one cash distribution of
$0.030100 per share and a second cash distribution of $0.039375 per share,
which were paid on February 5, 2014 to shareholders of record on
January 15 and February 4, 2014, respectively. The amount of the second
cash distribution of $0.039375 per share included four additional distribution
days through February 4, 2014 in connection with the Company’s change from
semi-monthly to weekly closings on the sale of its shares. On February 4, 2014,
the board of directors declared three weekly cash distributions of $0.014067
per share, which were paid on February 26, 2014 to shareholders of record on
February 11, February 18 and February 25, 2014. On February 14, 2014, the
board of directors declared four weekly cash distributions of $0.014067 per
share each, payable on March 26, 2014 to shareholders of record on March 4,
March 11, March 18 and March 25, 2014. On March 14, 2014, our
board of directors declared five weekly cash distributions of $0.014067 per
share, payable on April 30, 2014 to shareholders of record on April 1, April 8,
April 15, April 22 and April 29, 2014.  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 second amended and restated distribution
reinvestment plan so as to have their cash distributions reinvested in
additional shares of the Company’s common stock.  93


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The Company may fund cash distributions to shareholders in the
future from any sources of funds available, 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 the Company on account of preferred
and common equity investments in portfolio companies and expense reimbursements
from IIG. A substantial portion of the Company’s distributions have resulted,
and future distributions may result, from expense reimbursements from IIG,
which are subject to repayment by the Company. The Company has not established
limits on the amount of funds it may use from available sources to make
distributions.  The following table reflects the sources of
cash distributions that the Company has declared on its shares of common stock
during the year ended December 31, 2013:  DistributionsSource of
  Distribution
 
 
 Per Share
 
 Amount
 
 PercentageRealized gain on
  investments and total return swap(1)
 
 $
 0.6348
 
 $
 3,522,815
 
 88.6%From other
  sources(2)
 
 
 0.0814
 
 
 451,502
 
 11.4%Total
  distributions for the year ended December 31, 2013
 
 $
 0.7162
 
 $
 3,974,317
 
 100.0%(1) Includes
  interest income and fees, net of financing amounts paid to Citibank,
  generated on the loans underlying the TRS of $2,360,850.(2) Includes
  adjustments made to net investment income to arrive at taxable income
  available for distributions, as more fully described in Note 13.
  Note 5. Investments  The composition of the Company’s investment
portfolio as of December 31, 2013 and 2012 at amortized cost and fair value was
as follows:  December 31, 2013
 
 December 31, 2012Amortized
  Cost(1)
 
 Fair
  Value
 
 Percentage of
  Investment
  Portfolio
 
 Amortized
  Cost(1)
 
 Fair
  Value
 
 Percentage of
  Investment
  PortfolioSenior secured
  term loans - first lien
 
 $
 61,095,685
 
 $
 61,787,430
 
 59.1%
 
 $
 1,970,111
 
 $
 1,980,044
 
 52.1%Senior secured
  term loans - second lien
 
 
 22,189,331
 
 
 22,552,214
 
 21.6%
 
 
 -
 
 
 -
 
 -Collateralized
  loan obligations
 
 
 3,746,000
 
 
 3,795,600
 
 3.6%
 
 
 -
 
 
 -
 
 -Subordinated
  debt
 
 
 5,000,000
 
 
 5,000,000
 
 4.8%
 
 
 -
 
 
 -
 
 -Short term
  investments(2)
 
 
 11,383,669
 
 
 11,383,669
 
 10.9%
 
 
 1,817,762
 
 
 1,817,762
 
 47.9%Total
  investments
 
 $
 103,414,685
 
 $
 104,518,913
 
 100.0%
 
 $
 3,787,873
 
 $
 3,797,806
 
 100.0%(1) Amortized
  cost represents the original cost adjusted for the amortization of premiums
  and/or accretion of discounts, as applicable, on the Company’s investments.(2) Short term
  investments represent an investment in a fund that invests in highly liquid
  investments with original maturity dates of three months or less.
 94


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 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 December 31, 2013 and 2012:  December 31, 2013
 
 December 31, 2012Industry
  Classification
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at
  Fair Value
 
 Percentage of
  Investment PortfolioServices:
  Business
 
 $
 15,754,714
 
 15.1%
 
 $
 -
 
 -Banking,
  Finance, Insurance & Real Estate
 
 
 11,223,010
 
 10.7%
 
 
 980,044
 
 25.8%Consumer Goods:
  Non-Durable
 
 
 9,527,245
 
 9.1%
 
 
 -
 
 -Healthcare & Pharmaceuticals
 
 
 8,968,804
 
 8.6%
 
 
 -
 
 -Automotive
 
 
 7,473,560
 
 7.2%
 
 
 -
 
 -Chemicals, Plastics & Rubber
 
 
 6,797,514
 
 6.5%
 
 
 1,000,000
 
 26.3%Services:
  Consumer
 
 
 5,628,126
 
 5.3%
 
 
 -
 
 -Telecommunications
 
 
 3,973,040
 
 3.8%
 
 
 -
 
 -Energy: Oil
  & Gas
 
 
 3,629,300
 
 3.5%
 
 
 -
 
 -Media: Broadcasting & Subscription
 
 
 3,544,422
 
 3.4%
 
 
 -
 
 -Construction
  & Building
 
 
 3,415,256
 
 3.3%
 
 
 -
 
 -Capital Equipment
 
 
 3,014,850
 
 2.9%
 
 
 -
 
 -High Tech
  Industries
 
 
 2,876,400
 
 2.8%
 
 
 -
 
 -Media: Diversified & Production
 
 
 1,920,350
 
 1.8%
 
 
 -
 
 -Environmental
  Industries
 
 
 1,909,952
 
 1.8%
 
 
 -
 
 -Containers, Packaging & Glass
 
 
 1,500,000
 
 1.4%
 
 
 -
 
 -Aerospace &
  Defense
 
 
 1,463,701
 
 1.4%
 
 
 -
 
 -Hotel, Gaming & Leisure
 
 
 515,000
 
 0.5%
 
 
 -
 
 -U.S. Treasury Securities
 
 
 11,383,669
 
 10.9%
 
 
 1,817,762
 
 47.9%Total
 
 $
 104,518,913
 
 100.0%
 
 $
 3,797,806
 
 100.0%
  December 31, 2013
 
 December 31, 2012Geographic
  Dispersion(1)
 
 Investments at
  Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at
  Fair Value
 
 Percentage of
  Investment PortfolioUnited States
 
 $
 86,337,730
 
 82.6%
 
 $
 1,980,044
 
 52.1%Netherlands
 
 
 5,037,500
 
 4.8%
 
 
 -
 
 -Switzerland
 
 
 1,760,014
 
 1.7%
 
 
 -
 
 -U.S. Treasury Securities
 
 
 11,383,669
 
 10.9%
 
 
 1,817,762
 
 47.9%Total
 
 $
 104,518,913
 
 100.0%
 
 $
 3,797,806
 
 100.0%(1) The
  geographic dispersion is determined by the portfolio company's country of
  domicile.
 As of December 31,
2013 and 2012, there were no delinquent or non-accrual debt investments. The Company does
not “control” and is not an “affiliate” of any of the Company’s 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, unfunded delayed drawdown loan commitments, or revolving credit
facilities, which require the Company to provide funding when requested by
portfolio companies in accordance with the terms of the underlying loan
agreements. As of December 31, 2013 and 2012, the Company’s unfunded loan
commitments amounted to $2,450,758 and $0, respectively. 95


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 6. Total Return Swap  On December 17, 2012, the Company, through
its wholly-owned subsidiary, Flatiron, entered into a TRS with Citibank.  Effective
December 9, 2013, Flatiron and Citibank amended the TRS to, among other things,
extend the termination or call date from December 17, 2013 to December 17,
2014, increase the maximum aggregate market value of the portfolio of loans
subject to the TRS (determined at the time each such loan becomes subject to
the TRS) from $150 million to $225 million, and increase the interest rate
payable by Flatiron to Citibank with respect to each loan included in the TRS
by increasing the spread over the floating rate index specified for each such
loan from 1.25% to 1.35% per year. Effective February 6, 2014, Flatiron and
Citibank further amended the TRS to increase the maximum aggregate market value
of the portfolio of loans subject to the TRS from $225 million to $275 million.  A TRS is a contract in which one party
agrees to make periodic payments to another party based on the change in the
market value of the assets underlying the TRS and interest payments in return
for periodic payments based on a fixed or variable interest rate. A TRS
effectively adds leverage to a portfolio by providing investment exposure to a
security or market without owning or taking physical custody of such security
or investing directly in such market. Because of the unique structure of a TRS,
a TRS typically offers lower financing costs than are offered through more
traditional borrowing arrangements.  The TRS with Citibank enables the Company,
through its ownership of Flatiron, to obtain the economic benefit of owning the
loans subject to the TRS, without actually owning them, in return for an interest-type
payment to Citibank. As such, the TRS is analogous to Flatiron borrowing funds
to acquire loans and incurring interest expense to a lender.  The obligations of Flatiron under the TRS
are non-recourse to the Company and the Company’s exposure under the TRS is
limited to the value of the Company’s investment in Flatiron, which generally
will equal the value of cash collateral provided by Flatiron under the TRS.
Pursuant to the terms of the TRS, Flatiron may select loans with a maximum
aggregate market value (determined at the time each such loan becomes subject
to the TRS) of $275,000,000. Flatiron is required to initially cash
collateralize a specified percentage of each loan (generally 25% of the market
value of such loan) included under the TRS in accordance with margin
requirements described in the TRS Agreement. Under the terms of the TRS,
Flatiron agreed not to draw upon, or post as collateral, such cash collateral
in respect of other financings or operating requirements prior to the termination
of the TRS. Neither the cash collateral required to be posted with Citibank nor
any other assets of Flatiron are available to pay the debts of the Company.  Each individual loan must meet criteria
described in the TRS Agreement, including a requirement that substantially all
of the loans be rated by Moody’s and S&P and quoted by a
nationally-recognized pricing service. Under the terms of the TRS, Citibank, as
calculation agent, determines whether there has been a failure to satisfy the
portfolio criteria in the TRS. If such failure continues for 30 days following
the delivery of notice thereof, then Citibank has the right, but not the
obligation, to terminate the TRS. Flatiron receives from Citibank all interest
and fees payable in respect of the loans included in the TRS. Flatiron pays to
Citibank interest at a rate equal to, in respect of each loan included in the
TRS, the floating rate index specified for such loan plus 1.35% per year. In
addition, upon the termination or repayment of any loan subject to the TRS,
Flatiron will either receive from Citibank the appreciation in the value of
such loan or pay to Citibank any depreciation in the value of such loan.  Under the terms of the TRS, Flatiron may be
required to post additional cash collateral, on a dollar-for-dollar basis, in
the event of depreciation in the value of the underlying loans after such value
decreases below a specified amount. The limit on the additional collateral that
Flatiron may be required to post pursuant to the TRS is equal to the difference
between the full notional amount of the loans underlying the TRS and the amount
of cash collateral already posted by Flatiron. The amount of collateral
required to be posted by Flatiron is determined primarily on the basis of the
aggregate value of the underlying loans.  The Company has no contractual obligation
to post any such additional collateral or to make any interest payments to
Citibank on behalf of Flatiron. The Company may, but is not obligated to,
increase its investment in Flatiron for the purpose of funding any additional
collateral or payment obligations for which Flatiron may become obligated
during the term of the TRS. If the Company does not make any such additional
investment in Flatiron and Flatiron fails to meet its obligations under the
TRS, then Citibank will have the right to terminate the TRS and seize the cash
collateral posted by Flatiron under the TRS. In the event of an early
termination of the TRS, Flatiron would be required to pay an early termination
fee. 96


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Citibank may terminate the TRS on or after December 17, 2014, or
the call date. Flatiron may terminate the TRS at any time upon providing no
more than 30 days prior notice to Citibank. Any termination prior to the call
date will result in payment of an early termination fee to Citibank based on
the maximum portfolio amount of the TRS. Under the terms of the TRS, the early
termination fee will equal the present value of a stream of monthly payments
that would be owed by Flatiron to Citibank for the period from the termination
date through and including the call date. Such monthly payments will equal the
product of 80% of the maximum portfolio amount, multiplied by 1.35% per year.
The Company estimates the early termination fee would have been approximately $2,328,600
at December 31, 2013. Other than during the first nine months and last 180 days
of the term of the TRS, Flatiron may be required to pay a minimum usage fee in
connection with the TRS. At December 31, 2013, Flatiron was not subject to a
minimum usage fee.  The value of the TRS is based on the
valuation of the underlying portfolio of loans subject to the TRS. Pursuant to
the terms of the TRS, on each business day, Citibank values each underlying
loan in good faith on a mark-to-market basis by determining how much Citibank
would receive on such date if it sold such loan in the open market. As of
December 31, 2013 and 2012, the fair value of the TRS was $1,548,617 and
$12,395, respectively. The fair value of the TRS is reflected as unrealized
appreciation on total return swap on the Company’s consolidated balance sheets.
The change in value of the TRS is reflected in the Company’s consolidated
statements of operations as net change in unrealized appreciation on total
return swap. As of December 31, 2013 and 2012, Flatiron had selected sixty
three and five underlying loans with a total notional amount of $148,199,937
and $2,883,100, respectively. For the same periods, Flatiron posted $40,703,777
and $729,325 in cash collateral held by Citibank (of which only $39,285,408 and
$720,775 was required to be posted), which is reflected in due from
counterparty on the Company’s consolidated balance sheets.  Realized gains and losses on the TRS are
composed of any gains or losses on loans underlying the TRS as well as net
interest earned during the period. For the year ended December 31, 2013, the
Company recorded net realized gains of $3,489,036, which consisted of
$1,128,186 in net gains from sales and principal repayments and $2,360,850 in net
gains from net interest earned. For the period from January 31, 2012
(Inception) through December 31, 2012, the Company recorded net realized gains
of $98, which consisted of net gains from net interest earned. Net realized
gains are reflected in net realized gain on total return swap on the Company’s
consolidated statements of operations.  Receivable due on total return swap on the
Company’s consolidated balance sheets is composed of any amounts due from
Citibank that consist of earned but not yet collected net interest and net
gains on sales and principal repayments of underlying loans of the TRS. As of
December 31, 2013, the Company’s receivable due on the TRS was $1,801,665,
which consisted of earned but not yet collected net interest and net gains of
$1,293,582 and $508,083, respectively.  In connection with the TRS, Flatiron is
required to comply with various covenants and reporting requirements as defined
in the TRS Agreement. As of December 31, 2013, Flatiron was in compliance with
all covenants and reporting requirements.  For purposes of computing the capital gains
incentive fee, the Company treats net realized gains or losses on the sale or
maturity of the underlying TRS loans as realized gains or losses on the TRS,
which CIM becomes entitled to upon the disposition of the TRS. For purposes of
computing the subordinated incentive fee on income, the Company treats the
interest spread, which represents the difference between (i) the interest and
fees received on the underlying TRS loans and (ii) the interest paid to
Citibank on the settled notional value of the TRS loans, as pre-incentive fee
net investment income on the TRS. Accordingly, all net realized economic
benefits associated with the underlying TRS loans, if any, are included in the
computation of either the capital gains incentive fee or the subordinated
incentive fee on income. Any unrealized gains on the TRS is reflected in total
assets on the Company’s consolidated balance sheets and included 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 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.  For purposes of the asset coverage ratio
test applicable to the Company as a BDC, the Company treats the outstanding
notional amount of the TRS, less any cash collateral required to be posted by
Flatiron under the TRS, as a senior security for the life of that instrument.
The Company may, however, accord different treatment to the TRS in the future
in accordance with any applicable new rules or interpretations adopted by the
staff of the Securities and Exchange Commission, or SEC.  Further, for purposes of Section 55(a)
under the 1940 Act, the Company treats each loan underlying the TRS as a
qualifying asset if the obligor on such loan is an eligible portfolio company
and as a non-qualifying asset if the obligor is not an eligible portfolio
company. The Company may, however, accord different treatment to the TRS in the
future in accordance with any applicable new rules or interpretations adopted
by the staff of the SEC. 97


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The
following is a summary of the underlying loans subject to the TRS as of
December 31, 2013:  Underlying
  Loans
 (a)
 
 Industry
 
 Notional
  Amount
 
 Fair
  Value(b)
 
 Unrealized
  Appreciation /
  (Depreciation)Senior
  Secured First Lien Term LoansThe Active Network,
  Inc., L+450, 1.00% LIBOR Floor, 11/13/2020
 
 High Tech
  Industries
 
 $
 1,947,215
 
 $
 1,964,339
 
 $
 17,124Amneal
  Pharmaceuticals, LLC, L+475, 1.00% LIBOR Floor, 11/1/2019
 
 Healthcare &
  Pharmaceuticals
 
 
 3,347,710
 
 
 3,398,433
 
 
 50,723Aquilex, LLC,
  L+400, 1.00% LIBOR Floor, 12/31/2020(c)
 
 Chemicals,
  Plastics & Rubber
 
 
 4,987,500
 
 
 5,012,500
 
 
 25,000ARG IH
  Corporation, L+400, 1.00% LIBOR Floor, 11/15/2020
 
 Beverage, Food
  & Tobacco
 
 
 2,394,000
 
 
 2,410,512
 
 
 16,512Arc Document
  Solutions, Inc., L+525, 1.00% LIBOR Floor, 12/20/2018(c)(d)
 
 Services:
  Business
 
 
 4,870,600
 
 
 4,932,725
 
 
 62,125Ascensus, Inc.,
  L+400, 1.00% LIBOR Floor, 12/2/2019
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 4,975,000
 
 
 5,018,750
 
 
 43,750ATI Holdings,
  Inc., L+400, 1.25% LIBOR Floor, 12/21/2019
 
 Healthcare &
  Pharmaceuticals
 
 
 490,050
 
 
 495,931
 
 
 5,881Avaya, Inc.,
  L+675, 1.25% LIBOR Floor, 3/31/2018
 
 Telecommunications
 
 
 1,993,401
 
 
 2,014,431
 
 
 21,030Azure Midstream
  Energy, LLC, L+550, 1.00% LIBOR Floor, 11/15/2018
 
 Energy: Oil
  & Gas
 
 
 4,380,210
 
 
 4,407,930
 
 
 27,720BBTS Borrower,
  LP, L+650, 1.25% LIBOR Floor, 6/4/2019
 
 Energy: Oil
  & Gas
 
 
 1,854,169
 
 
 1,878,474
 
 
 24,305Bluestem Brands,
  Inc., L+650, 1.00% LIBOR Floor, 12/6/2018
 
 Retail
 
 
 1,832,600
 
 
 1,832,600
 
 
 -Camp
  International Holding Company, L+375, 1.00% LIBOR Floor, 5/31/2019
 
 Services:
  Business
 
 
 1,220,000
 
 
 1,230,163
 
 
 10,163Caraustar
  Industries, Inc., L+625, 1.25% LIBOR Floor, 5/1/2019
 
 Forest Products
  & Paper
 
 
 713,584
 
 
 738,748
 
 
 25,164Charming
  Charlie, LLC, L+800, 1.00% LIBOR Floor, 12/18/2019(c)
 
 Retail
 
 
 4,289,675
 
 
 4,333,225
 
 
 43,550Cyanco
  Intermediate Corp., L+450, 1.00% LIBOR Floor, 5/1/2020
 
 Chemicals,
  Plastics & Rubber
 
 
 1,254,383
 
 
 1,265,813
 
 
 11,430Digital Insight
  Corporation, L+375, 1.00% LIBOR Floor, 10/16/2019
 
 Services:
  Business
 
 
 775,105
 
 
 779,000
 
 
 3,895Global Tel*Link
  Corporation, L+375, 1.25% LIBOR Floor, 5/23/2020
 
 Services:
  Business
 
 
 2,940,113
 
 
 2,915,814
 
 
 (24,299)Grande
  Communications Networks, LLC, L+350, 1.00% LIBOR Floor, 5/31/2020
 
 Telecommunications
 
 
 2,486,435
 
 
 2,497,471
 
 
 11,036Hemisphere Media
  Holdings, LLC, L+500, 1.25% LIBOR Floor, 7/30/2020(d)
 
 Media:
  Broadcasting & Subscription
 
 
 4,324,817
 
 
 4,349,487
 
 
 24,670Herff Jones,
  Inc., L+450, 1.00% LIBOR Floor, 6/25/2019
 
 Consumer Goods:
  Non-Durable
 
 
 1,973,732
 
 
 2,054,268
 
 
 80,536Hyperion Finance
  S.à. r.l., L+475, 1.00% LIBOR Floor, 10/17/2019(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 4,432,500
 
 
 4,471,875
 
 
 39,375Information
  Resources, Inc., L+375, 1.00% LIBOR Floor, 9/30/2020
 
 Services:
  Business
 
 
 892,269
 
 
 900,492
 
 
 8,223Insight
  Pharmaceuticals, LLC, L+500, 1.25% LIBOR Floor, 8/25/2016
 
 Healthcare &
  Pharmaceuticals
 
 
 4,002,500
 
 
 3,980,000
 
 
 (22,500)inVentiv Health,
  Inc., L+600, 1.50% LIBOR Floor, 8/4/2016
 
 Healthcare &
  Pharmaceuticals
 
 
 5,260,192
 
 
 5,228,718
 
 
 (31,474)Learfield
  Communications, Inc., L+400, 1.00% LIBOR Floor, 10/9/2020
 
 Media:
  Broadcasting & Subscription
 
 
 746,250
 
 
 757,500
 
 
 11,250Lineage
  Logistics, LLC, L+350, 1.00% LIBOR Floor, 4/26/2019
 
 Services:
  Business
 
 
 2,501,589
 
 
 2,504,769
 
 
 3,180Merrill Corp.,
  L+625, 1.00% LIBOR Floor, 3/8/2018(c)
 
 Services:
  Business
 
 
 671,827
 
 
 679,040
 
 
 7,213Mohegan Tribal
  Gaming Authority, L+450, 1.00% LIBOR Floor, 11/19/2019
 
 Hotel, Gaming
  & Leisure
 
 
 1,643,400
 
 
 1,683,871
 
 
 40,471OCI Beaumont,
  LLC, L+500, 1.25% LIBOR Floor, 8/20/2019 (B2 Term Loan)(d)
 
 Chemicals,
  Plastics & Rubber
 
 
 2,285,804
 
 
 2,333,284
 
 
 47,480Opal
  Acquisition, Inc., L+400, 1.00% LIBOR Floor, 11/27/2020(c)
 
 Healthcare &
  Pharmaceuticals
 
 
 4,580,879
 
 
 4,617,136
 
 
 36,257Packaging
  Coordinators, Inc., L+425, 1.25% LIBOR Floor, 5/10/2020
 
 Containers,
  Packaging & Glass
 
 
 1,985,025
 
 
 1,995,000
 
 
 9,975Peppermill
  Casinos, Inc., L+600, 1.25% LIBOR Floor, 11/9/2018
 
 Hotel, Gaming
  & Leisure
 
 
 977,637
 
 
 1,012,275
 
 
 34,638Photonis
  Technologies SAS, L+750, 1.00% LIBOR Floor, 9/18/2019(d)
 
 Aerospace &
  Defense
 
 
 5,764,360
 
 
 5,853,870
 
 
 89,510Polyconcept
  Finance B.V., L+475, 1.25% LIBOR Floor, 6/28/2019(d)
 
 Consumer Goods:
  Non-Durable
 
 
 2,470,979
 
 
 2,521,407
 
 
 50,428Safe-Guard
  Products International, LLC, L+600, 1.25% LIBOR Floor, 12/21/2018
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 2,222,426
 
 
 2,266,102
 
 
 43,676Salix
  Pharmaceuticals, Ltd., L+325, 1.00% LIBOR Floor, 1/2/2020(c)(d)
 
 Healthcare &
  Pharmaceuticals
 
 
 2,815,850
 
 
 2,857,423
 
 
 41,573SESAC Holdco II,
  LLC, L+400, 1.00% LIBOR Floor, 2/8/2019
 
 Media:
  Broadcasting & Subscription
 
 
 490,050
 
 
 496,856
 
 
 6,806SK Spice
  S.Á.R.L, L+825, 1.25% LIBOR Floor, 9/30/2018(d)
 
 Chemicals,
  Plastics & Rubber
 
 
 2,972,550
 
 
 2,966,316
 
 
 (6,234)SRA
  International, L+525, 1.25% LIBOR Floor, 7/20/2018
 
 High Tech
  Industries
 
 
 2,351,305
 
 
 2,388,954
 
 
 37,649Steward Health
  Care System, LLC, L+550, 1.25% LIBOR Floor, 4/10/2020
 
 Healthcare &
  Pharmaceuticals
 
 
 3,436,500
 
 
 3,478,147
 
 
 41,647Sutherland
  Global Services, L+600, 1.25% LIBOR Floor, 3/6/2019(d)
 
 Services:
  Business
 
 
 1,913,941
 
 
 1,917,307
 
 
 3,366Tech Finance & Co. S.C.A., L+600, 1.25% LIBOR Floor,
  7/11/2020(d)
 
 Media:
  Broadcasting & Subscription
 
 
 1,942,906
 
 
 1,994,750
 
 
 51,844Tervita, L+500,
  1.25% LIBOR Floor, 5/15/2018(c)(d)
 
 Environmental
  Industries
 
 
 3,533,364
 
 
 3,554,920
 
 
 21,556The TOPPS
  Company, Inc., L+600, 1.25% LIBOR Floor, 10/2/2018
 
 Consumer Goods:
  Non-Durable
 
 
 2,007,500
 
 
 1,995,000
 
 
 (12,500)Travel Leaders
  Group, LLC, L+600, 1.00% LIBOR Floor, 12/5/2018
 
 Services:
  Consumer
 
 
 1,975,000
 
 
 1,965,000
 
 
 (10,000)Travelport, LLC,
  L+500, 1.25% LIBOR Floor, 6/26/2019(d)
 
 Hotel, Gaming
  & Leisure
 
 
 1,585,383
 
 
 1,640,669
 
 
 55,286TriNet HR Corp.,
  L+400, 1.00% LIBOR Floor, 8/20/2020
 
 Services:
  Business
 
 
 1,649,167
 
 
 1,678,319
 
 
 29,152Vince, LLC,
  L+500, 1.00% LIBOR Floor, 11/27/2019(d)
 
 Consumer Goods:
  Non-Durable
 
 
 1,752,300
 
 
 1,783,275
 
 
 30,975VFH Parent, LLC,
  L+450, 1.25% LIBOR Floor, 11/8/2019
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 2,597,561
 
 
 2,624,622
 
 
 27,061W/S Packaging
  Group, Inc., L+400, 1.00% LIBOR Floor, 8/9/2019
 
 Containers,
  Packaging & Glass
 
 
 2,481,284
 
 
 2,493,750
 
 
 12,466Washington
  Inventory Services, L+450, 1.25% LIBOR Floor, 12/20/2018
 
 Retail
 
 
 492,525
 
 
 495,931
 
 
 3,406WP CPP Holdings,
  LLC, L+375, 1.00% LIBOR Floor, 12/28/2019
 
 Aerospace &
  Defense
 
 
 935,288
 
 
 942,320
 
 
 7,032Total Senior
  Secured First Lien Term Loans
 
 
 
 
 128,420,410
 
 
 129,609,512
 
 
 1,189,102
 98


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
  Underlying
  Loans
 (a)
 
 Industry
 
 Notional
  Amount
 
 Fair
  Value(b)
 
 Unrealized
  Appreciation /
  (Depreciation)Senior
  Secured Second Lien Term LoansArysta LifeScience
  SPC, LLC, L+700, 1.25% LIBOR Floor, 11/30/2020(d)
 
 Chemicals,
  Plastics & Rubber
 
 
 1,160,540
 
 
 1,190,029
 
 
 29,489Carestream
  Health, Inc., L+850, 1.00% LIBOR Floor, 12/7/2019(d)
 
 Healthcare &
  Pharmaceuticals
 
 
 980,000
 
 
 1,017,500
 
 
 37,500Del Monte Foods,
  Inc., L+725, 1.00% LIBOR Floor, 7/26/2021(c)
 
 Beverage, Food
  & Tobacco
 
 
 2,257,200
 
 
 2,299,950
 
 
 42,750Deltek, Inc.,
  L+875, 1.25% LIBOR Floor, 10/10/2019
 
 Services:
  Business
 
 
 1,619,640
 
 
 1,660,540
 
 
 40,900Ion Trading
  Technologies S.Á R.L., L+700, 1.25% LIBOR Floor, 5/22/2021(d)
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 993,125
 
 
 1,018,130
 
 
 25,005Performance Food
  Group, Inc., L+525, 1.00% LIBOR Floor, 11/14/2019
 
 Beverage, Food
  & Tobacco
 
 
 3,849,587
 
 
 3,887,290
 
 
 37,703Securus
  Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021
 
 Telecommunications
 
 
 1,002,075
 
 
 990,830
 
 
 (11,245)Sheridan
  Holdings, Inc., L+725, 1.00% LIBOR Floor, 12/20/2021
 
 Healthcare &
  Pharmaceuticals
 
 
 2,736,250
 
 
 2,750,000
 
 
 13,750TriNet HR Corp.,
  L+775, 1.00% LIBOR Floor, 2/20/2021
 
 Services:
  Business
 
 
 2,465,510
 
 
 2,512,500
 
 
 46,990U.S. Renal Care,
  Inc., L+750, 1.00% LIBOR Floor, 1/3/2020
 
 Healthcare &
  Pharmaceuticals
 
 
 676,200
 
 
 696,900
 
 
 20,700TWCC Holding
  Corp., L+600, 1.00% LIBOR Floor, 6/26/2020
 
 Media:
  Broadcasting & Subscription
 
 
 2,039,400
 
 
 2,115,373
 
 
 75,973Total Senior
  Secured Second Lien Term Loans
 
 
 
 
 19,779,527
 
 
 20,139,042
 
 
 359,515Total
 
 
 
 
 $
 148,199,937
 
 $
 149,748,554
 
 $
 1,548,617(a)
 All of the Company's debt investments are issued by eligible
  U.S. portfolio companies, as defined in the 1940 Act, except for investments
  specifically identified as non-qualifying. The Company does not control and
  is not an affiliate of any of the companies that are issuers of the
  underlying loans subject to the TRS.(b)
 Fair value determined by the Company’s board of directors (see
  Note 7).(c)
 Position or portion thereof unsettled as of December 31, 2013.(d)
 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 that company’s total assets as defined under
  Section 55 of the 1940 Act. As of December 31, 2013, 88.2% of the Company’s
  total assets represented qualifying assets. In addition, as described in Note
  6, the Company calculates 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 is an
  eligible portfolio company. On this basis, 76.1% of the Company’s total
  assets represented qualifying assets as of December 31, 2013.
 99


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The following is a summary of the underlying loans subject to the
TRS as of December 31, 2012: Underlying
  Loans
 (a)
 
 Industry
 
 Notional
  Amount
 
 Fair
  Value(b)
 
 Unrealized
  Appreciation /
  (Depreciation)Senior
  Secured First Lien Term LoansPeppermill Casinos, Inc., L+600, 1.25% LIBOR Floor, 11/9/2018
 
 Hotel, Gaming &
  Leisure
 
 $
 492,500
 
 $
 486,875
 
 $
 (5,625)Safe-Guard
  Products International, LLC, L+600, 1.25% LIBOR Floor, 12/21/2018
 
 Banking,
  Finance, Insurance & Real Estate
 
 
 900,600
 
 
 905,340
 
 
 4,740Sequa Corporation, L+400, 1.25% LIBOR Floor, 6/19/2017
 
 Aerospace &
  Defense
 
 
 497,500
 
 
 502,655
 
 
 5,155TransFirst Holdings, Inc., L+500, 1.25% LIBOR Floor, 12/27/2017
 
 Services:
  Business
 
 
 495,000
 
 
 500,000
 
 
 5,000Washington Inventory Service, L+450, 1.25% LIBOR Floor, 12/20/2018
 
 Services:
  Business
 
 
 497,500
 
 
 500,625
 
 
 3,125Total
 
 
 
 $
 2,883,100
 
 $
 2,895,495
 
 $
 12,395(a)
 All of the Company's debt investments are issued by eligible
  U.S. portfolio companies, as defined in the 1940 Act. The Company does not
  control and is not an affiliate of any of the  companies that are issuers of
  the underlying loans subject to the TRS.(b)
 Fair value determined by the Company’s board of directors (see
  Note 7).
 100


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 7. Fair Value of Financial Instruments  The Company determines the fair value of
all portfolio investments in accordance with ASC Topic 820. ASC Topic 820
requires enhanced disclosures about assets and liabilities that are measured
and reported at fair value. As defined in ASC Topic 820, fair value is the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.  ASC Topic 820 establishes a hierarchical
disclosure framework that prioritizes and ranks the level of market price
observability of inputs used in measuring investments at fair value. 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.
Investments carried at fair value are classified and disclosed in one of the following
three categories:  ·Level 1—Valuations based on quoted
prices in active markets for identical assets or liabilities that the Company
has the ability to access. The Company’s short term investments are included in
this category.  ·Level 2—Valuations based on inputs
other than quoted prices in active markets, which are either directly or
indirectly observable.  ·Level 3—Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
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.  The following table presents fair value
measurements of the Company’s portfolio investments and TRS as of December 31,
2013 and 2012, according to the fair value hierarchy:  December 31, 2013
 
 December 31, 2012Valuation
  Inputs
 
 First Lien Senior
  Secured Term Loans
 
 Second Lien Senior
  Secured Term Loans
 
 Collateralized Loan Obligations
 
 Subordinated Debt
 
 Short Term
  Investments
 
 Total Return Swap
 
 First Lien Senior
  Secured Term Loans
 
 Short Term
  Investments
 
 Total Return SwapLevel 1—Price
  quotations in active markets
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 11,383,669
 
 $
 -
 
 $
 -
 
 $
 1,817,762
 
 $
 -Level
  2—Significant other observable inputs
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -Level
  3—Significant unobservable inputs
 
 
 61,787,430
 
 
 22,552,214
 
 
 3,795,600
 
 
 5,000,000
 
 
 -
 
 
 1,548,617
 
 
 1,980,044
 
 
 -
 
 
 12,395$
 61,787,430
 
 $
 22,552,214
 
 $
 3,795,600
 
 $
 5,000,000
 
 $
 11,383,669
 
 $
 1,548,617
 
 $
 1,980,044
 
 $
 1,817,762
 
 $
 12,395
 101


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The Company’s investments as of December 31, 2013 and 2012,
excluding short term investments, primarily consisted of debt securities that
are traded on a private over-the-counter market for institutional investors.
Except for investments specifically identified, the Company valued its
portfolio investments by using market comparables, discounted cash flow models
and independent third-party pricing services, which provided prevailing bid and
ask prices that were screened for validity by the pricing service from dealers
on the determination date of the relevant period end. Four and one senior
secured loans that were purchased near December 31, 2013 and 2012,
respectively, were valued using cost at acquisition, as the Company determined that
the cost of the investments was the best indication of their current fair value.  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.  The Company periodically benchmarks the bid
and ask prices received from the third-party pricing services against the
actual prices at which it purchases and sells its investments. Based on the
results of the benchmark analysis and the Company’s experience in purchasing
and selling these investments, the Company believes that these prices are reliable
indicators of fair value. However, because of the private nature of this
marketplace (meaning actual transactions are not publicly reported), the
Company believes that these valuation inputs are classified as Level 3 within
the fair value hierarchy. The Company may also use other methods to determine
fair value for securities for which it cannot obtain prevailing bid and ask
prices through third-party pricing services or independent dealers, including
the use of an independent valuation firm. The Company periodically benchmarks
the valuations provided by the independent valuation firm against the actual
prices at which it purchases and sells its investments. 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.  The Company’s two collateralized loan
obligations and one subordinated debt investment, for which broker quotes were
not available, were valued by an independent valuation firm, which determined
the fair value of such investments by considering, among other factors, each
borrower’s ability to adequately service its debt, prevailing interest rates
for like investments, call features and other relevant terms of the debt.  The Company valued its TRS in accordance
with the TRS Agreement. Pursuant to the TRS Agreement, the fair value of the
TRS is based on the increase or decrease in the value of the loans underlying
the TRS. The loans underlying the TRS are valued by Citibank. Citibank bases
its valuation primarily on the indicative bid prices provided by an independent
third-party pricing service. Bid prices reflect a price that market participants
may be willing to pay for an investment. These valuations are sent to the
Company for review and testing. The Company reviews and approves the value of
the TRS, as well as the value of the loans underlying the TRS, on a quarterly
basis as part of the quarterly valuation process. To the extent the Company has
any questions or concerns regarding the valuation of the loans underlying the
TRS, such valuations will be discussed or challenged pursuant to the terms of
the TRS Agreement. As a result of the private nature of this marketplace
(meaning actual transactions are not publicly reported), the Company believes
that the total fair value of the TRS should be classified as Level 3 within the
fair value hierarchy.  The Company did not have any transfers between
Level 1, Level 2, and Level 3 of the fair value hierarchy during the year ended
December 31, 2013 and for the period from January 31, 2012 (Inception) through
December 31, 2012. The Company’s policy is to recognize transfers in and out as
of the actual date of the event or change in circumstances that causes the
transfer. 102


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 The following table provides a reconciliation of the beginning and
ending balances for investments that use Level 3 inputs for the period from the
period January 31, 2012 (Inception) through December 31, 2012 and for the year
ended December 31, 2013:  First Lien Senior
  Secured Term Loans
 
 Second Lien Senior
  Secured Term Loans
 
 Collateralized Loan Obligations
 
 Subordinated Debt
 
 Total Return
  Swap
 
 TotalBeginning
  balance, January 31, 2012 (Inception)
 $
 -
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 -Investments
  purchased
 1,972,500
 
 -
 
 -
 
 -
 
 -
 
 1,972,500Net realized
  gain
 44
 
 -
 
 -
 
 -
 
 -
 
 44Net change in
  unrealized appreciation(1)
 9,933
 
 -
 
 -
 
 -
 
 12,395
 
 22,328Accretion of
  discount
 
 67
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 67Sales and
  principal repayments
 (2,500)
 
 -
 
 -
 
 -
 
 -
 
 (2,500)Ending balance,
  December 31, 2012
 
 1,980,044
 
 
 -
 
 
 -
 
 
 -
 
 
 12,395
 
 
 1,992,439Investments
  purchased
 
 63,198,334
 
 
 22,387,383
 
 
 3,746,000
 
 
 5,000,000
 
 
 -
 
 
 94,331,717Net realized
  gain
 32,637
 
 1,000
 
 -
 
 -
 
 -
 
 33,637Net change in
  unrealized appreciation(1)
 681,812
 
 362,883
 
 49,600
 
 -
 
 1,536,222
 
 2,630,517Accretion of
  discount
 29,447
 
 948
 
 -
 
 -
 
 -
 
 30,395Sales and
  principal repayments
 
 (4,134,844)
 
 
 (200,000)
 
 
 -
 
 
 -
 
 
 -
 
 
 (4,334,844)Ending
  balance, December 31, 2013
 $
 61,787,430
 
 $
 22,552,214
 
 $
 3,795,600
 
 $
 5,000,000
 
 $
 1,548,617
 
 $
 94,683,861Change in
  unrealized gains or losses for the period included in changes in net assets
  for assets held at the end of the reporting period
 $
 691,812
 
 $
 362,883
 
 $
 49,600
 
 $
 -
 
 $
 1,546,377
 
 $
 2,650,672(1)
 Represents the
  amount of total gains/losses for the period included in the change in
  unrealized appreciation (depreciation) on investments and change in
  unrealized appreciation (depreciation) on total return swap still held at the
  reporting date.
 Significant Unobservable Inputs  The valuation techniques and significant
unobservable inputs used in recurring Level 3 fair value measurements of investments
as of  December 31, 2013 and 2012 were as follows:  December 31, 2013Fair Value
 
 Valuation Technique
 
 Unobservable
  Inputs
 
 Range
  (Weighted Average)(1)Senior secured
  term loans - first lien
 $
 61,787,430
 
 Discounted cash flow
 
 Discount rates
 
 4.8% - 9.7%
  (6.7%)Senior secured
  term loans - second lien
 $
 22,552,214
 
 Discounted cash flow
 
 Discount rates
 
 7.5% - 11.8%
  (8.8%)Collateralized
  loan obligations
 $
 3,795,600
 
 Discounted cash flow
 
 Discount rate
 
 10.0% - 13.0%
  (11.5%)Subordinated
  debt
 $
 5,000,000
 
 Discounted cash flow
 
 Discount rate
 
 12.0%(1) There was no
  range or weighted average of inputs for the subordinated debt investment. The
  disclosed rate represents the actual rate used in the valuation.
  December 31, 2012Fair Value
 
 Valuation Technique
 
 Unobservable
  Inputs
 
 Range
  (Weighted Average)Senior secured
  term loans - first lien
 $
 1,980,044
 
 Discounted cash flow
 
 Discount rates
 
 5.5% - 7.5%
  (6.4%)
 The significant unobservable inputs used in
the fair value measurement of the Company’s senior secured first lien and second
lien term loans, collateralized loan obligations, and subordinated debt are
discount rates. A significant increase or decrease in discount rates would
result in a significantly lower or higher fair value measurement, respectively.  103


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 8. General and Administrative Expense  General and administrative expense consisted
of the following items for the year ended December 31, 2013 and for the period
from January 31, 2012 (Inception) through December 31, 2012:  For the Period fromJanuary 31, 2012Year ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Professional
  fees expense
 $
 858,842
 
 $
 33,298Due diligence
  fees
 607,599
 
 1,812Marketing
  expense
 592,311
 
 -Insurance
  expense
 211,824
 
 8,625Transfer agent expense
 172,693
 
 2,900Printing and
  mailing expense
 158,166
 
 4,329Dues and
  subscriptions
 137,916
 
 1,126Filing fees
 104,773
 
 -Director fees
  and expenses
 56,741
 
 1,050Other expenses
 137,326
 
 18,539Total general
  and administrative expense
 $
 3,038,191
 
 $
 71,679
  Note 9. Borrowings  In June 2012, the Company entered into an
unsecured financing arrangement with Flatiron Capital, an unaffiliated third
party, for directors and officers insurance in an amount of $179,180. Payments
under the financing arrangement were due in 10 equal installments, with final
payment made on April 19, 2013.  Note 10. 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 currently 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 second 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 offers to repurchase such shares at a price equal to 90% of the
offering price in effect 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 Code and the 1940
Act. 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.  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 December 31, 2013 and
2012, the Company’s unfunded loan commitments amounted to $2,450,758 and $0,
respectively. 104


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 12. Financial Highlights  The following is a schedule of financial
highlights as of and for the year ended December 31, 2013 and as of December
31, 2012 and for the period from January 31, 2012 (Inception) through December
31, 2012:  For the Period fromJanuary 31, 2012Year Ended
 
 (Inception) throughDecember 31, 2013
 
 December 31, 2012Per share
  data:(1)Net asset value
  at beginning of period
 $
 8.97
 
 $
 -Results of
  operations:Net investment
  (loss) income(2)
 
 (0.01)
 
 
 0.01Net realized
  gain and net change in unrealized appreciation on investments
 
 0.20
 
 
 0.02Net realized
  gain and net change in unrealized appreciation on total return swap
 
 0.91
 
 
 0.02Net increase in
  net assets resulting from operations
 
 1.10
 
 
 0.05Shareholder
  distributions:Distributions
  from net realized gains
 
 (0.64)
 
 
 -Distributions
  from other sources
 
 (0.08)
 
 
 -Net decrease in
  net assets from shareholder distributions
 
 (0.72)
 
 
 -Capital share
  transactions:Issuance of
  common stock above net asset value(3)
 
 0.14
 
 
 9.00Amortization of
  deferred offering expenses
 
 (0.17)
 
 
 (0.08)Net (decrease) increase
  in net assets resulting from capital share transactions
 
 (0.03)
 
 
 8.92Net asset value
  at end of period
 $
 9.32
 
 $
 8.97Shares of common
  stock outstanding at end of period
 
 15,510,178
 
 
 500,338Total investment
  return-net asset value(4)
 
 11.96%
 
 
 (0.35%)Net assets at
  beginning of period(5)
 $
 4,487,115
 
 $
 4,503,049Net assets at
  end of period
 $
 144,570,485
 
 $
 4,487,115Average net
  assets
 $
 51,026,955
 
 $
 4,495,082Ratio/Supplemental
  data:(5)Ratio of net
  investment (loss) income to average net assets(6)
 
 (0.10%)
 
 
 0.06%Ratio of net
  operating expenses to average net assets(6)
 
 3.75%
 
 
 0.00%Ratio of gross
  operating expenses to average net assets(7)
 
 2.45%
 
 
 0.93%Ratio of total
  expenses (before expenses reimbursed) to average net assets
 
 11.51%
 
 
 2.60%Ratio of
  expenses reimbursed from IIG to average net assets
 
 7.76%
 
 
 2.60%Portfolio turnover
  rate(8)
 
 14.97%
 
 
 0.13%Asset coverage
  ratio(9)
 
 2.34
 
 
 3.02
  (1)
 The per share data for the year ended December 31, 2013 was
  derived by using the weighted average shares of common stock outstanding
  during the year. The per share data for the period from January 31, 2012
  (Inception) through December 31, 2012 was derived by using the weighted
  average shares of common stock outstanding from the commencement of
  operations on December 17, 2012 through December 31, 2012.(2)
 Net investment (loss) income per share includes the expense
  reimbursement from IIG of $0.72 and $0.23 per share for the year ended
  December 31, 2013 and for the period from January 31, 2012 (Inception)
  through December 31, 2012, respectively.(3)
 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.(4)
 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 (i) monthly cash
  distributions are reinvested in accordance with the our distribution
  reinvestment plan and amended and restated distribution reinvestment plan and
  (ii) the fractional shares issued pursuant to the distribution reinvestment
  plan and amended and restated distribution reinvestment plan are issued at
  95% (from January 1, 2013 through September 30, 2013) and 90% (from October
  1, 2013 through December 31, 2013) of the then public offering price on the
  date of purchase, respectively. The total investment return-net asset value
  for the period from January 31, 2012 (Inception) through December 31, 2012 was
  calculated by taking the difference between (i) the net asset value per share
  as of December 31, 2012 and (ii) the net asset value per share on the day the
  Company commenced operations (December 17, 2012), and dividing such
  difference by the net asset value per share on the day the Company commenced
  operations. 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 period are not annualized.(5)
 For the period from January 31, 2012 (Inception) through
  December 31, 2012, the net assets at the beginning of the period were derived
  from the net assets from the commencement of operations on December 17, 2012.(6)
 Excluding the expense reimbursement from IIG during the period,
  the ratio of net investment (loss) income to average net assets would have
  been (7.86%) for the year ended December 31, 2013 and (2.54%) for the period
  from January 31, 2012 (Inception) through December 31, 2012.(7)
 Operating expenses include all expenses borne by the Company,
  except for organizational and offering expenses, base management fees,
  incentive fees, administrative services expenses and other general and
  administrative expenses owed to CIM and its affiliates, and interest expense.(8)
 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.(9)
 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, 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 treats 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 a senior security for the life of the
  TRS.
 105


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 13. Income Taxes  It is the Company's
policy to comply with all requirements of the Internal Revenue Code applicable
to regulated investment companies 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 a federal excise tax. 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 2013, the Company did
not have any reclassifications as a result of permanent book/tax differences.  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. All
distributions for 2013 are characterized as ordinary income distributions for
federal income tax purposes. See Note 4, Distributions, for further
information.  As of December 31, 2013, the components of
accumulated earnings on a tax basis were as follows:  December 31, 2013Undistributed
  net investment income
 $
 80,044Performance-based
  incentive fee on unrealized gains
 
 (530,569)Net unrealized
  appreciation on investments and total return swap(1)
 
 2,603,245$
 2,152,720(1)
 As of December 31, 2013, the gross unrealized appreciation and
  depreciation on the Company’s investments and the underlying loans of the TRS
  was $2,726,569 and $123,324, respectively.
 The aggregate cost of the Company’s
investments for federal income tax purposes totaled $103,464,285 as of December
31, 2013. The aggregate net unrealized appreciation on the Company’s
investments and total return swap was $2,652,845 as of December 31, 2013. 106


---



CĪON Investment Corporation Notes to Consolidated

Financial Statements December

31, 2013
 Note 14. Selected Quarterly Financial Data (unaudited)  The following is the selected quarterly
financial data as of December 31, 2013 and the year then ended and as of
December 31, 2012 and for the period from January 31, 2012 (Inception) through December
31, 2012. The following information reflects all adjustments, which are of a
normal recurring nature, considered necessary for a fair presentation. The
operating results for any quarter are not necessarily indicative of results for
any future period:  Quarter Ended
 
 March 31, 2013
 
 June 30, 2013
 
 September 30, 2013
 
 December 31, 2013Investment
  income
 
 $
 68,126
 
 $
 245,494
 
 $
 494,701
 
 $
 1,054,281Net investment
  (loss) income
 
 
 (46,684)
 
 
 154,893
 
 
 602,378
 
 
 (761,902)Net realized and
  unrealized gain on investments and total return swap
 
 
 665,828
 
 
 543,737
 
 
 1,305,228
 
 
 3,638,397Net increase in
  net assets resulting from operations
 
 $
 619,144
 
 $
 698,630
 
 $
 1,907,606
 
 $
 2,876,495Net increase in
  net assets resulting from operations per share of common stock
 
 $
 0.53
 
 $
 0.24
 
 $
 0.32
 
 $
 0.24Net asset value
  per share of common stock at end of quarter
 
 $
 9.16
 
 $
 9.17
 
 $
 9.29
 
 $
 9.32Weighted average
  shares of common stock outstanding
 
 
 1,164,423
 
 
 2,878,270
 
 
 6,019,520
 
 
 11,905,290Quarter Ended
 
 March 31, 2012
 
 June 30, 2012
 
 September 30, 2012
 
 December 31, 2012Investment
  income
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 2,692Net investment
  income
 
 
 -
 
 
 -
 
 
 -
 
 
 2,692Net realized and
  unrealized gain on investments and total return swap
 
 
 -
 
 
 -
 
 
 -
 
 
 22,470Net increase in
  net assets resulting from operations
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 25,162Net increase in
  net assets resulting from operations per share of common stock
 
 $
 -
 
 $
 -
 
 $
 -
 
 $
 0.05Net asset value
  per share of common stock at end of quarter
 
 $
 9.00
 
 $
 9.00
 
 $
 9.00
 
 $
 8.97Weighted average
  shares of common stock outstanding
 
 
 111
 
 
 111
 
 
 111
 
 
 500,338
  The sum of quarterly per share amounts does
not equal per share amounts reported for the year ended December 31, 2013. This
is due to changes in the number of weighted-average shares outstanding and the effects
of rounding for each period.   107


---



Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure None. Item 9A. Controls
and Procedures Evaluation of disclosure controls and procedures In connection with the preparation of this Annual Report on
Form 10-Kfor
the year ended December 31, 2013, 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. Management's
Annual Report on Internal Control Over Financial Reporting  Our management is responsible for
establishing and maintaining adequate internal control over financial
reporting. As defined in Exchange
Act Rules 13a-15(f)
and 15d-15(f), internal control over financial reporting is a process designed
by, or under the supervision of, our principal executive and principal
financial officers, or persons performing similar functions, and effected by
our board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of consolidated financial statements for external purposes in accordance with
GAAP.  Our internal control over financial
reporting includes those policies and procedures that:  1.Pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect our transactions and our dispositions of assets;  2.Provide
reasonable assurance that our transactions are recorded as necessary to permit
preparation of consolidated financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and board
of directors; and  3.Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on the consolidated financial statements.  Because of its inherent limitations, a
system of internal control over financial reporting can provide only reasonable
assurance with respect to financial statement preparation and presentation and
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.  In
connection with the preparation of our annual consolidated financial
statements, our management has conducted an assessment of the effectiveness of
our internal control over financial reporting based on the framework set forth
inInternal Control-Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in 1992. 
Management's assessment included an evaluation of the design of our internal
control over financial reporting and testing of the operational effectiveness
of those controls. Based on this evaluation, we have concluded that, as of
December 31, 2013, our internal control over financial reporting was
effective to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Pursuant to rules established by the
SEC, this annual report does not include an attestation report of our
independent registered public accounting firm regarding internal control over
financial reporting. 108


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Changes in internal control over financial reporting  There have
been no changes in our internal control over financial reporting during the
three months ended December 31, 2013 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. Item 9B. Other Information Not applicable.  109


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PART III We will file a
definitive Proxy Statement for our 2014 Annual Meeting of Shareholders with the
SEC pursuant to Regulation 14A promulgated under the Exchange Act, not later
than 120 days after the end of our fiscal year. Accordingly, certain
information required by Part III has been omitted under General Instruction
G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that
specifically address the items set forth herein are incorporated by reference. Item 10. Directors, Executive Officers and
Corporate Governance The information required by
Item 10 is hereby incorporated by reference from our definitive Proxy Statement
relating to our 2014 Annual Meeting of Shareholders, to be filed with the SEC
within 120 days following the end of our fiscal year. Item 11. Executive Compensation The information required by
Item 11 is hereby incorporated by reference from our definitive Proxy Statement
relating to our 2014 Annual Meeting of Shareholders, to be filed with the SEC
within 120 days following the end of our fiscal year. Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Shareholder Matters The information required by
Item 12 is hereby incorporated by reference from our definitive Proxy Statement
relating to our 2014 Annual Meeting of Shareholders, to be filed with the SEC
within 120 days following the end of our fiscal year. Item 13. Certain Relationships and Related
Transactions, and Director Independence The information required by
Item 13 is hereby incorporated by reference from our definitive Proxy Statement
relating to our 2014 Annual Meeting of Shareholders, to be filed with the SEC
within 120 days following the end of our fiscal year. Item 14. Principal Accounting Fees and
Services The information required by
Item 14 is hereby incorporated by reference from our definitive Proxy Statement
relating to our 2014 Annual Meeting of Shareholders, to be filed with the SEC
within 120 days following the end of our fiscal year.  110


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PART
IV Item
15. Exhibits, Financial Statement Schedules (a)     1.     Financial
Statements See
the index to consolidated financial statements included as Item 8 to this
Annual Report on Form 10-K hereof. 2.     Financial
Statement Schedules Schedules
not listed above have been omitted because they are not applicable or the information
required to be set forth therein is included in the consolidated financial
statements or notes thereto. 3.     Exhibits Exhibit
  Number
 
 Description of Document3.1
 
 Articles of
  Amendment and Restatement of the Articles of Incorporation of CĪON
  Investment Corporation (Incorporated by reference to Exhibit (A)(2) to
  Pre-Effective Amendment No. 4 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on June 29, 2012 (File No. 333-178646)).3.2
 
 Second Articles
  of Amendment and Restatement of the Articles of Incorporation of CĪON
  Investment Corporation (Incorporated by reference to Exhibit 3.1 to
  Registrant’s Current Report on Form 8-K filed with the SEC on August 27, 2012
  (File No. 814-00941)).3.3
 
 Bylaws of
  CĪON Investment Corporation (Incorporated by reference to Exhibit (B) to
  Pre-Effective Amendment No. 4 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on June 29, 2012 (File No. 333-178646)).4.1
 
 Form of
  Subscription Agreement (Incorporated by reference to Exhibit (D) to
  Post-Effective Amendment No. 5 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on December 20, 2013 (File No. 333-178646)).4.2
 
 Second Amended
  and Restated Distribution Reinvestment Plan (Incorporated by reference to
  Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the SEC on
  December 16, 2013 (File No. 814-00941)).10.1
 
 Investment
  Advisory Agreement by and between CĪON Investment Corporation and
  CĪON Investment Management, LLC (Incorporated by reference to Exhibit
  (G)(1) to Pre-Effective Amendment No. 4 to Registrant’s Registration
  Statement on Form N-2 filed with the SEC on June 29, 2012 (File No.
  333-178646)).10.2
 
 Investment
  Sub-Advisory Agreement by and among CĪON Investment Management, LLC,
  CĪON Investment Corporation and Apollo Investment Management, L.P.
  (Incorporated by reference to Exhibit (G)(2) to Pre-Effective Amendment No. 4
  to Registrant’s Registration Statement on Form N-2 filed with the SEC on June
  29, 2012 (File No. 333-178646)).10.3
 
 Administration
  Agreement by and between CĪON Investment Corporation and ICON Capital
  Corp. (Incorporated by reference to Exhibit (K)(2) to Pre-Effective Amendment
  No. 4 to Registrant’s Registration Statement on Form N-2 filed with the SEC
  on June 29, 2012 (File No. 333-178646)).10.4
 
 Custody
  Agreement by and between CĪON Investment Corporation and U.S. Bank
  National Association. (Incorporated by reference to Exhibit (J) to
  Pre-Effective Amendment No. 4 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on June 29, 2012 (File No. 333-178646)).10.5
 
 Escrow
  Agreement by and among CĪON Investment Corporation, UMB Bank, N.A., and
  ICON Securities Corp. (Incorporated by reference to Exhibit (K)(1) to
  Pre-Effective Amendment No. 4 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on June 29, 2012 (File No. 333-178646)).
  111


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Exhibit
  Number
 
 Description of Document10.6
 
 Dealer Manager
  Agreement by and among CĪON Investment Corporation, CĪON Investment
  Management, LLC, and ICON Securities Corp. (Incorporated by reference to
  Exhibit (H)(1) to Pre-Effective Amendment No. 4 to Registrant’s Registration
  Statement on Form N-2 filed with the SEC on June 29, 2012 (File No.
  333-178646)).10.7
 
 ISDA 2002
  Master Agreement, together with the Schedule thereto and Credit Support Annex
  to such Schedule, each dated as of December 17, 2012, by and between Flatiron
  Funding, LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to
  the Registrant’s Current Report on Form 8-K filed with the SEC on December
  19, 2012).10.8
 
 Second Amended
  and Restated Confirmation Letter Agreement, dated as of February 6, 2014, by
  and between Flatiron Funding, LLC and Citibank, N.A. (Incorporated by
  reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
  filed with the SEC on February 20, 2014).10.9
 
 Amended and
  Restated Expense Support and Conditional Reimbursement Agreement dated as of
  December 13, 2013, by and between CĪON Investment Corporation and ICON
  Investment Group, LLC (Incorporated by reference to Exhibit (K)(5) to
  Post-Effective Amendment No. 5 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on December 20, 2013 (File No. 333-178646)).31.1
 
 Rule
  13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.31.2
 
 Rule
  13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.31.3
 
 Rule
  13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32.1
 
 Certification
  of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
 
 Certification
  of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002.32.3
 
 Certification
  of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002.
  112


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SIGNATURES Pursuant to the
requirements of Section 13 or 15(d) 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: March 19, 2014 CĪON
Investment Corporation
(Registrant) By:/s/ Michael A. ReisnerMichael A. Reisner
        Co-Chief Executive Officer and Co-President By:/s/ Mark GattoMark Gatto
        Co-Chief Executive Officer and Co-President Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated. Date: March 19, 2014 CĪON Investment Corporation
(Registrant) By:/s/ Michael A. ReisnerMichael A. Reisner
        Co-Chief Executive Officer, Co-President and Director(Principal Executive Officer) By:/s/ Mark GattoMark Gatto
        Co-Chief Executive Officer, Co-President and Director(Principal Executive Officer) By:/s/ Keith S. FranzKeith S. Franz
        Chief Financial Officer(Principal Financial and Accounting Officer) By:/s/ Robert A. BreakstoneRobert A. Breakstone
        Director By:/s/ James J. FlorioJames J. Florio
        Director By:/s/ Aron I. SchwartzAron I. Schwartz
        Director 113


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