UNITED
STATES SECURITIES
AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x]
 Quarterly Report Pursuant to Section 13 or
  15(d) of the Securities Exchange Act of 1934
 For the Quarterly
Period Ended March 31, 2013 or [  ]
 Transition Report Pursuant to Section 13 or
  15(d) of the Securities Exchange Act of 1934
 For the transition
period from ______________to_________________ Commission
File Number: 000-54755 CĪON Investment Corporation (Exact
name of registrant as specified in its charter) Maryland
 
 45-3058280(State or other
  jurisdiction of
  incorporation or organization)
 
 (I.R.S. Employer
  Identification No.)3 Park Avenue, 36th
  Floor
  New York, New York
 
 10016(Address of principal
  executive offices)
 
 (Zip Code)
 (212) 418-4700 (Registrant’s telephone
number, including area code) Not
applicable (Former
name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesxNoo Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, 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 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 Exchange Act). YesoNox The number of
shares of the registrant’s common stock, $0.001 par value, outstanding as of
May 10, 2013 was 2,699,587.


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CĪON INVESTMENT
  CORPORATION
  TABLE OF CONTENTS
  FORM 10-QPagePART I - FINANCIAL INFORMATIONItem 1.  Financial
  StatementsConsolidated Balance Sheets as
  of March 31, 2013 (unaudited) and December 31, 2012
 1Consolidated Statement of
  Operations for the three months ended March 31, 2013 (unaudited)
 2Consolidated Statements of
  Changes in Net Assets for the three months ended March 31, 2013 and for the
  Period from January 31, 2012 (Inception) through March 31, 2012 (unaudited)
 3Consolidated Statements of Cash
  Flows for the three months ended March 31, 2013 and for the Period from
  January 31, 2012 (Inception) through March 31, 2012 (unaudited)
 4Consolidated Schedule of
  Investments as of March 31, 2013 (unaudited) and December 31, 2012
 5Notes to Consolidated Financial
  Statements (unaudited)
 7Item 2. Management’s Discussion
  and Analysis of Financial Condition and Results of Operations
 27Item 3. Quantitative and
  Qualitative Disclosures About Market Risk
 43Item 4. Controls and Procedures
 43PART II – OTHER INFORMATIONItem 1. Legal Proceedings
 
 45Item 1A. Risk Factors
 
 45Item 2. Unregistered Sales of
  Equity Securities and Use of Proceeds
 45Item 3. Defaults Upon Senior
  Securities
 45Item 4. Mine Safety Disclosures
 45Item 5. Other Information
 
 45Item 6. Exhibits
 
 46Signatures
 
 48


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PART I – FINANCIAL INFORMATION  Item 1. Financial Statements  CĪON Investment CorporationConsolidated Balance SheetsMarch 31,
  2013
 
 December 31,
  2012(unaudited)AssetsInvestments, at fair value
  (amortized cost of $12,731,185 and $3,787,873, respectively)
 $
 12,865,400
 
 $
 3,797,806Cash
 
 9,550
 
 
 -Due from counterparty
 
 3,490,731
 
 
 729,325Reimbursement from IIG, net(1)
 
 336,307
 
 
 25,807Deferred offering expenses, net
 
 712,329
 
 
 958,904Prepaid expenses
 
 61,370
 
 
 105,802Interest receivable on
  investments
 
 40,737
 
 
 187Receivable due on investments
  sold and repaid
 
 519,375
 
 
 -Unrealized appreciation on total
  return swap(2)
 
 343,783
 
 
 12,493Receivable due on total return
  swap(2)
 
 334,080
 
 
 -Total assets
 $
 18,713,662
 
 $
 5,630,324Liabilities and Shareholders' EquityLiabilitiesPayable for investments
  purchased
 $
 2,487,500
 
 $
 990,000Shareholders' distributions
  payable(3)
 
 91,161
 
 
 -Accounts payable and accrued
  expenses
 
 427,096
 
 
 57,427Commissions payable
 
 -
 
 
 23,100Financing arrangement
 
 18,260
 
 
 72,682Total liabilities
 
 3,024,017
 
 
 1,143,209Commitments and
  contingencies(Note 10)Shareholders' EquityCommon stock, $0.001 par value;
  500,000,000 shares authorized;1,712,123 and 500,338 shares
  issued and outstanding, respectively
 
 1,712
 
 
 500Capital in excess of par value
 
 15,252,393
 
 
 4,461,453Accumulated undistributed net
  investment (loss) income
 
 (43,992)
 
 
 2,692Accumulated undistributed net
  realized gain from investments
 
 1,534
 
 
 44Accumulated net unrealized
  appreciation on investments
 
 134,215
 
 
 9,933Accumulated net unrealized
  appreciation on total return swap(2)
 
 343,783
 
 
 12,493Total shareholders' equity
 
 15,689,645
 
 
 4,487,115Total liabilities and
  shareholders' equity
 $
 18,713,662
 
 $
 5,630,324Net asset value per share of
  common stock at end of period
 $
 9.16
 
 $
 8.97Shares of common stock
  outstanding
 
 1,712,123
 
 
 500,338(1)See Note 3 for a discussion of expense reimbursements
  from ICON Investment Group, LLC, or IIG.(2)See Note 6 for a discussion of the Company’s total
  return swap agreement.(3)See Note 4 for a discussion of the source of
  distributions paid by the Company.See accompanying notes to consolidated financial
  statements.
  1


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CĪON Investment Corporation Consolidated
Statement of Operations (unaudited)  Three Months Ended
  March 31, 2013(1)Investment incomeInterest income
 $
 68,126Operating expensesManagement fees
 
 44,742Administrative services expense
 
 263,555Capital gains incentive fee(2)
 
 117,023General and administrative(3)
 
 508,863Total expenses
 
 934,183Less: expense reimbursement from
  IIG(4)
 
 (819,373)Net operating expenses
 
 114,810Net investment loss
 
 (46,684)Realized and unrealized gainNet realized gain from
  investments
 
 4,533Net change in unrealized
  appreciation on investments
 
 124,282Net realized gain on total
  return swap(5)
 
 205,723Net change in unrealized
  appreciation on total return swap(5)
 
 331,290Total net realized and
  unrealized gain
 
 665,828Net increase in net assets
  resulting from operations
 $
 619,144Per share information—basic
  and dilutedNet increase in net assets per
  share resulting from operations
 $
 0.53Weighted average shares of
  common stock outstanding
 
 1,164,423(1)
 The Company commenced operations
  on December 17, 2012. Accordingly, there is no consolidated statement of
  operations data available for the three months ended March 31, 2012.(2)
 See Note 2 for a discussion of
  the methodology employed by the Company in calculating the capital gains
  incentive fee.(3)
 See Note 8 for further details
  of the Company's general and administrative expenses.(4)
 See Note 3 for a discussion of
  expense reimbursements received by the Company from IIG.(5)
 See Note 6 for a discussion of
  the Company’s total return swap agreement.See accompanying notes to consolidated financial
  statements.
  2


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CĪON Investment
Corporation Consolidated
Statements of Changes in Net Assets (unaudited)  Three Months Ended
  March 31, 2013
 
 For the Period from January 31, 2012 (Inception) through
  March 31, 2012Changes in net assets from
  operations:Net investment loss
 $
 (46,684)
 
 $
 -Net realized gain from
  investments
 
 4,533
 
 
 -Net change in unrealized
  appreciation on investments
 
 124,282
 
 
 -Net realized gain on total
  return swap(1)
 
 205,723
 
 
 -Net change in unrealized
  appreciation on total return swap(1)
 
 331,290
 
 
 -Net increase in net assets
  resulting from operations
 
 619,144
 
 
 -Shareholder distributions:Distributions from net realized
  gains
 
 (208,766)
 
 
 -Net decrease in net assets from
  shareholder distributions
 
 (208,766)
 
 
 -Changes in net assets from
  capital share transactions:Issuance of common stock, net of
  issuance costs of $1,127,904 and $0, respectively
 
 11,007,314
 
 
 1,000Reinvestment of shareholder
  distributions
 
 31,413
 
 
 -Amortization of deferred
  offering expenses
 
 (246,575)
 
 
 -Net increase in net assets
  resulting from capital share transactions
 
 10,792,152
 
 
 1,000Total increase in net assets
 
 11,202,530
 
 
 1,000Net assets at beginning of
  period
 
 4,487,115
 
 
 -Net assets at end of period
 $
 15,689,645
 
 $
 1,000Net asset value per share of
  common stock at end of period
 $
 9.16
 
 $
 9.00Shares of common stock
  outstanding at end of period
 
 1,712,123
 
 
 111Undistributed net investment
  income at end of period
 $
 -
 
 $
 -(1)See Note 6 for a discussion of the Company’s total
  return swap agreement.See accompanying notes to consolidated financial
  statements.
 3


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CĪON
Investment Corporation Consolidated
Statements of Cash Flows (unaudited)  Three Months Ended
  March 31, 2013
 
 For the Period from January 31, 2012 (Inception) through
  March 31, 2012Operating activities:Net increase in net assets
  resulting from operations
 $
 619,144
 
 $
 -Adjustments to reconcile net
  increase in net assets resulting fromoperations to net cash used in
  operating activities:Net accretion of discount on
  investments
 
 (2,151)
 
 
 -Proceeds from principal repayment
  of investments
 
 15,000
 
 
 -Purchase of investments
 
 (6,653,990)
 
 
 -Net change in short term
  investments
 
 (2,802,013)
 
 
 -Proceeds from sale of
  investments
 
 504,375
 
 
 -Net realized gain from
  investments
 
 (4,533)
 
 
 -Net change in unrealized
  appreciation on investments
 
 (124,282)
 
 
 -Net change in unrealized
  appreciation on total return swap
 
 (331,290)
 
 
 -Due from counterparty
 
 (2,761,406)
 
 
 -Reimbursement from IIG, net
 
 (310,500)
 
 
 -Prepaid expenses
 
 44,432
 
 
 -Interest receivable on
  investments
 
 (40,550)
 
 
 -Receivable due on investments
  sold and repaid
 
 (519,375)
 
 
 -Receivable due on total return
  swap
 
 (334,080)
 
 
 -Payable for investments
  purchased
 
 1,497,500
 
 
 -Accounts payable and accrued
  expenses
 
 369,518
 
 
 -Net cash used in operating
  activities
 
 (10,834,201)
 
 
 -Financing activities:Gross proceeds from issuance of
  common stock
 
 12,135,218
 
 
 1,000Commissions and dealer manager
  fees paid
 
 (1,150,853)
 
 
 -Reinvestment of shareholder
  distributions
 
 31,413
 
 
 -Shareholder distributions paid
 
 (117,605)
 
 
 -Repayment of financing
  arrangement
 
 (54,422)
 
 
 -Net cash provided by financing
  activities
 
 10,843,751
 
 
 1,000Net increase in cash
 
 9,550
 
 
 1,000Cash, beginning of period
 
 -
 
 
 -Cash, end of period
 $
 9,550
 
 $
 1,000Supplemental non-cash
  financing activities:Deferred offering expenses
  charged to shareholders' equity
 $
 246,575
 
 $
 -Shareholders' distributions
  payable
 $
 91,161
 
 $
 -See accompanying notes to consolidated financial
  statements.
  4


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CĪON Investment
Corporation Consolidated Schedule
of Investments March 31, 2013 (unaudited)  Portfolio
  Company(a)
 
 Industry
 
 Principal/Par
  Amount
 
 Amortized
  Cost
 
 Fair Value(b)Senior
  Secured First Lien Term Loans - 36.4%Captive
  Resources Midco, LLC, L+550, 1.25% LIBOR Floor, 10/31/2018
 
 Insurance
 
 $
 995,000
 
 $
 978,509
 
 $
 977,588CHI Overhead
  Doors, L+425, 1.25% LIBOR Floor, 3/18/2019(c)
 
 Building
  Materials
 
 
 1,000,000
 
 
 995,000
 
 
 1,009,375Merrill Corp.,
  L+625, 1.00% LIBOR Floor, 3/8/2018
 
 Printing &
  Publishing
 
 
 701,000
 
 
 694,027
 
 
 702,577Orbitz
  Worldwide, L+675, 1.25% LIBOR Floor, 3/25/2019(d)
 
 Entertainment
  & Leisure
 
 
 500,000
 
 
 495,004
 
 
 505,938Plano Molding Co
  Inc., L+425, 1.00% LIBOR Floor, 12/21/2017
 
 Chemicals
 
 
 987,500
 
 
 978,241
 
 
 992,437Total Safety W3,
  L+450, 1.25% LIBOR Floor, 3/13/2020(c)
 
 Professional
  & Business Services
 
 
 500,000
 
 
 497,500
 
 
 505,210Westway Group,
  L+400, 1.00% LIBOR Floor, 2/27/2020
 
 Food &
  Beverage
 
 
 1,000,000
 
 
 995,101
 
 
 1,009,375Total Senior
  Secured First Lien Term Loans
 
 
 
 
 
 
 
 5,633,382
 
 
 5,702,500Senior
  Secured Second Lien Term Loans - 16.2%Centaur Gaming,
  L+750, 1.25% LIBOR Floor, 2/20/2020(c)
 
 Gaming &
  Hotels
 
 
 500,000
 
 
 495,000
 
 
 510,000GCA Services
  Group, Inc., L+800, 1.25% LIBOR Floor, 11/1/2020
 
 Professional
  & Business Services
 
 
 1,000,000
 
 
 995,335
 
 
 1,004,375Healogics, Inc,
  L+800, 1.25% LIBOR Floor, 2/5/2020
 
 Healthcare
 
 
 500,000
 
 
 495,019
 
 
 516,250SESAC Holdco II,
  LLC, L+875, 1.25% LIBOR Floor, 8/8/2019
 
 Media
 
 
 500,000
 
 
 492,674
 
 
 512,500Total Senior
  Secured Second Lien Term Loans
 
 
 
 
 
 
 
 2,478,028
 
 
 2,543,125Short Term
  Investments - 29.4%(e)First American
  Treasury Obligations Fund, Class Z Shares(f)
 
 
 
 
 4,619,775
 
 
 4,619,775
 
 
 4,619,775Total Short
  Term Investments
 
 
 
 
 
 
 
 4,619,775
 
 
 4,619,775TOTAL
  INVESTMENTS - 82.0%
 
 
 
 
 
 
 $
 12,731,185
 
 $
 12,865,400OTHER ASSETS
  IN EXCESS OF LIABILITIES - 18.0%
 
 
 
 
 
 
 
 
 
 $
 2,824,245NET ASSETS -
  100%
 
 
 
 
 
 
 
 
 
 $
 15,689,645TOTAL RETURN
  SWAP - 2.2%
 
 
 
 Notional Amount
 
 
 
 
 Unrealized AppreciationCitibank TRS
  Facility (see Note 6)
 
 
 
 $
 13,961,686
 
 
 
 
 $
 343,783(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, 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)
 Position or
  portion thereof unsettled as of March 31, 2013.(d)
 The investment
  is not a qualifying asset under the Investment Company Act of 1940, as amended.
  A business development company may not acquire any asset other than
  qualifying assets, unless, at the time the acquisition is made, qualifying
  assets represent at least 70% of the Company’s total assets as defined under
  Section 55 of the 1940 Act. As of March 31, 2013, 96.8% 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, 86.4% of the
  Company’s total assets represented qualifying assets as of March 31, 2013.(e)
 Short term
  investments represent highly liquid investments with original maturity dates
  of three months or less.(f)
 Effective yield
  as of March 31, 2013 is <0.01%.See accompanying notes to consolidated
  financial statements.
 5


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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
 
 Insurance
 
 $
 997,500
 
 $
 980,111
 
 $
 980,044Plano Molding Co
  Inc., L+450, 1.25% LIBOR Floor, 12/21/2017(c)
 
 Chemicals
 
 
 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
 
 
 
 
 $
 12,493(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. 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 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.
 6


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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 Investment
Company Act of 1940, as amended, or the 1940 Act. The Company intends to elect
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 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. Since commencing its initial public offering and through May 10, 2013,
the Company has sold 2,699,587 shares of common stock for gross proceeds of
approximately $26,735,000 at an average price per share of $9.90. As of
March 31, 2013, the Company sold 1,712,123 shares for gross proceeds of
approximately $16,806,000 at an average price per share of $9.82.  On December 28,
2012, January 31, 2013, March 14, 2013 and May 15, 2013, 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 and $10.24 per share,
respectively, to ensure that the associated net offering price per share,
exclusive of sales load ($9.04, $9.12, $9.17 and $9.22 per share, respectively)
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 unaudited consolidated financial statements of the
Company have been prepared in accordance with U.S. generally accepted
accounting principles, or GAAP, for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. For a more complete discussion of significant
accounting policies and certain other information, the Company’s interim
unaudited consolidated financial statements should be read in conjunction with
its audited consolidated financial statements as of December 31, 2012 and for
the period from January 31, 2012 (Inception) through December 31, 2012 included
in the Company’s annual report on Form 10-K. Operating results for the three months
ended March 31, 2013 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2013. The December 31,
2012 consolidated balance sheet and the consolidated schedule of investments
are derived from the 2012 audited consolidated financial statements. Prior to satisfying the minimum offering requirement on December 17,
2012, the Company had no operating activities except for matters relating to
its organization and registration as a non-diversified, closed-end management
investment company. As a result, there is no consolidated statement of
operations data for the three months ended March 31, 2012. 7


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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. 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 $4,619,775 of such
investments at March 31, 2013, 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 submits such costs for
reimbursement. The Company will expense organization costs when incurred, if
and when IIG submits such costs for reimbursement. At March 31, 2013, IIG and
its affiliates have 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 March 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 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.
These expenses are amortized over a twelve month period as an adjustment to
capital in excess of par value. The Company will expense any additional
offering expenses if and when IIG submits such costs for reimbursement. The
unamortized balance of these expenses is reflected in the consolidated balance
sheets as deferred offering expenses, net. At March 31, 2013, IIG and its
affiliates have incurred approximately $825,000 of unreimbursed offering
expenses, which may be subject to reimbursement by the Company. No additional offering
expenses have been incurred subsequent to March 31, 2013 (see Note 3). Income
Taxes The Company intends to elect 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 qualifies as a RIC and satisfies
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% of net ordinary income, 98.2%
of any capital gain net income, if any, and any recognized and undistributed
income from prior years for which it paid no federal income taxes. 8


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 Book and tax basis 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. During the
three months ended March 31, 2013, the Company declared distributions of
approximately $209,000.  Uncertainty
in Income Taxes The Company evaluates its tax positions to determine if the tax
positions taken meet the minimum recognition threshold in connection with
accounting for uncertainties in income tax positions taken or expected to be
taken 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 statement
of operations. As of and for the three months ended March 31, 2013, the Company
did not have any uncertain tax positions. 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, which includes 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. 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. 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 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 such security’s 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. 9


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 ii.Valuations implied by third-party
investments in the applicable portfolio companies. iii.Discounted cash flow analysis,
including a terminal value or exit multiple.  Determination of fair value involves subjective judgments and
estimates. Accordingly, these notes to the Company’s consolidated financial
statements refer to the uncertainty with respect to the possible effect of such
valuations, and any change in such valuations, on the Company’s consolidated
financial statements. Below is a description of factors that the Company’s
board of directors may consider when valuing the Company’s equity and debt
investments where a market price is not readily available: ·the size and
scope of a portfolio company and its specific strengths and weaknesses; ·prevailing
interest rates for like securities; ·expected
volatility in future interest rates; ·leverage; ·call features,
put features and other relevant terms of the debt; ·the borrower’s
ability to adequately service its debt; ·the fair market
value of the portfolio company in relation to the face amount of its
outstanding debt; ·the quality of
collateral securing the Company’s debt investments; ·multiples of earnings before
interest, taxes, depreciation and amortization, or EBITDA, cash flows, net
income, revenues or, in some cases, book value or liquidation value; and ·other factors
deemed applicable. All
of these factors may be subject to adjustment based upon the particular
circumstances of a portfolio company or the Company’s actual investment
position. For example, adjustments to EBITDA may take into account compensation
to previous owners, or acquisition, recapitalization, and restructuring
expenses or other related or non-recurring items. The choice of analyses and
the weight assigned to such factors may vary across investments and may change
within an investment if events occur that warrant such a change. 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. Given the expected types of investments, excluding short term
investments that are classified as Level 1, the Company expects portfolio
holdings to be classified as 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 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 settlement date to the extent that the Company expects
to collect such amounts. The Company does not accrue as a receivable interest
or dividends on loans and debt securities if it has reason to doubt the ability
to collect such income. Loan origination fees, original issue discounts, and
market discounts/premiums are capitalized and such amounts are amortized as
adjustments to interest income over the respective term of the loan. 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. 10


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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 specific identification method. The Company measures
realized gains or losses by the difference between the net proceeds from the
repayment or sale and the amortized cost basis 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 a total return swap, or
TRS. The Company marks its derivative to market through net changes in
unrealized appreciation (depreciation) on the TRS in the consolidated statement
of operations. 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 will equal 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, 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. Earnings per share Earnings 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 or deemed
distributed at least annually.  Note 3. Transactions with
Related Parties  The Company has
entered into an investment advisory agreement with CIM. Pursuant to the
investment advisory agreement, CIM will be 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. The
incentive fee consists of two parts. The first part, which is referred to as
the subordinated incentive fee on income, will be calculated and payable
quarterly in arrears based on “pre-incentive fee net investment income” for the
immediately preceding quarter and will be subject to a hurdle rate, measured
quarterly and expressed as a rate of 11


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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
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 will equal 20% of 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, the Company would not be required to pay CIM a capital gains incentive
fee.  The Company
began accruing fees under the investment advisory agreement on December 17,
2012, upon the commencement of the Company’s operations. For the three months
ended March 31, 2013, CIM earned $44,742 in management fees. For the three
months ended March 31, 2013, all management fees were reimbursed 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 three months ended March 31, 2013, the Company recorded capital gains
incentive fees of $117,023 based on the performance of its investment
portfolio, of which $74,972 was based on net unrealized gains and $42,051 was
based on realized gains. For the three months ended March 31, 2013, all
incentive fees were reimbursed 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 will
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 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 three months ended March 31, 2013, the total expense
reimbursement from IIG was $819,373 relating to certain operating expenses.  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. For a significant time after the
commencement of its offering, a substantial portion of the Company’s
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 returns
of capital. Shareholders should understand that any such distributions are not
based on the Company’s investment performance, and can only be sustained if the
Company achieves positive investment performance in future periods and/or 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 three months ended
March 31, 2013, if expense reimbursements from IIG of $819,373 were not supported,
none of the distributions would be a return of capital. 12


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  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 the
three months ended December 31, 2012 and March 31, 2013.  Three Months Ended
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Eligible for Reimbursement throughDecember 31, 2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 March 31, 2016Total
 
 $
 936,079
 
 $
 -
 
 $
 936,079
  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 March 31,
2013, the net reimbursement from IIG was $336,307.  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 three months ended March 31, 2013, the Company incurred
administrative services expense from ICON Capital of $263,555. All of these
charges were related to the cost of administrative personnel for services provided
to the Company. For the three months ended March 31, 2013, all administrative
expenses were reimbursed by IIG in accordance with the expense support and
conditional reimbursement agreement.  The Company’s payment of organization costs and
offering expenses (including reimbursement of costs incurred by IIG and its
affiliates) is capped at 1.5% of the gross proceeds from the offering. If the
Company sells the maximum number of shares at its latest public offering price
of $10.24 per share, effective as of May 16, 2013, then the Company estimates
that it may incur up to approximately $15,360,000 of expenses. Under the terms
of the investment advisory agreement, CIM and certain of its affiliates, which
includes IIG, will become entitled to receive reimbursement of up to 1.5% of
the gross proceeds raised until all organization costs and offering expenses
have been reimbursed. At March 31, 2013, IIG and its affiliates incurred
organization costs and offering expenses of approximately $2,017,000, of which
$1,000,000 have been reimbursed by the Company. No additional organization
costs or offering expenses have been incurred subsequent to March 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. To the extent that
payments of organization costs and offering expenses exceed the 1.5% cap at the
end of the offering period, any excess amounts may be recoverable from IIG and
its affiliates. 13


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  On December 17, 2012, the Company and IIG net cash
settled IIG’s purchase of 111,111 shares of the Company’s common stock at $9.00
per share and the Company’s payment to IIG of $1,000,000 for offering expenses
submitted for reimbursement.  The Company has entered into certain agreements with
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 the 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 the gross offering
proceeds. Such costs are charged against capital in excess of par value when
incurred. For the three months ended March 31, 2013, the Company paid or
accrued commissions of $769,635 to the selling dealers and $358,269 to ICON
Securities.  Fees and other expenses paid or accrued by the Company
to CIM or its affiliates were as follows:  Entity
 
 Capacity
 
 Description
 
 Three Months Ended
  March 31, 2013ICON Securities
 
 Dealer-manager
 
 Dealer-manager fees(1)
 
 $
 358,269CIM
 
 Investment adviser
 
 Management fees(2)(3)
 
 
 44,742CIM
 
 Investment adviser
 
 Incentive fees(2)(3)
 
 
 117,023ICON Capital
 
 Administrative services provider
 
 Administrative services expense(2)(3)
 
 
 263,555$
 783,589(1)Amount charged directly to equity.(2)Amount charged directly to operations.(3)Amount has been supported in connection with the expense
  support and conditional reimbursement agreement.
  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 both the Company and the equipment funds. 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 six record dates in the three
months ended March 31, 2013. Declared distributions are paid monthly. The following
table presents the cash distributions per share that were declared during the
three months ended March 31, 2013:  14


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 DistributionsThree
  Months Ended
 
 Per Share
 
 AmountMarch 31, 2013
 
 $
 0.1769
 
 $
 208,766
 On
April 15, 2013, the Company’s board of directors declared two regular
semi-monthly cash distributions of $0.029721 per share each, which were paid on
May 1, 2013 to shareholders of record on April 15, 2013 and April 30,
2013, respectively. On May 15, 2013, the Company’s board of directors declared
two regular semi-monthly cash distributions of $0.029721 per share and
$0.029867 per share, payable on June 3, 2013 to shareholders of record as
of May 15, 2013 and May 31, 2013, respectively. The timing and amount of
any future distributions to shareholders are subject to applicable legal
restrictions and the sole discretion of the Company’s board of directors.  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, 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.  The following
table reflects the sources of the cash distributions that the Company has
declared on its common stock during the three months ended March 31, 2013:  Source of Distribution
 
 Distribution Amount
 
 PercentageRealized gain on investments and
  total return swap
 
 $
 208,766
 
 100%Total
 
 $
 208,766
 
 100%
  The Company’s
net investment loss on a tax basis for the three months ended March 31, 2013
was $46,684. As of March 31, 2013, the Company had no tax-basis net investment
income earned to distribute.  There were no differences
between the Company’s GAAP-basis net investment loss and the Company’s
tax-basis net investment loss.  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.
Therefore, a determination made on a quarterly basis may not be representative
of the actual tax attributes of the Company’s distributions for a full year.
The actual tax characteristics of distributions to shareholders are reported to
shareholders annually on Form 1099-DIV.  As of March
31, 2013 and December 31, 2012, the components of accumulated earnings on a tax
basis were as follows:  March 31, 2013
  (unaudited)
 
 December 31, 2012Undistributed net investment
  income
 
 $
 -
 
 $
 2,692Undistributed net realized gain
  from investments
 
 
 1,534
 
 
 44Net unrealized appreciation on
  investments and total return swap(1)
 
 
 477,998
 
 
 22,426$
 479,532
 
 $
 25,162(1)
 As of
  March 31, 2013 and December 31, 2012, the gross unrealized appreciation on
  the Company’s investments and the underlying loans of the total return swap
  was $478,919 and $28,051, respectively. As of March 31, 2013 and December 31,
  2012, the gross unrealized depreciation on the Company’s investments and the
  underlying loans of the total return swap was $921 and $5,625, respectively.
 15


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  The aggregate
cost of the Company’s investments for federal income tax purposes totaled $12,731,185
and $3,787,873 as of March 31, 2013 and December 31, 2012, respectively. The
aggregate net unrealized appreciation on a tax basis, including the Company’s
TRS, was $477,998 and $22,426 as of March 31, 2013 and December 31, 2012,
respectively.  Note 5. Investments  The composition
of the Company’s investment portfolio as of March 31, 2013 and December 31,
2012 at amortized cost and fair value was as follows:  March 31, 2013
  (unaudited)
 
 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(2)
 
 $
 5,633,382
 
 $
 5,702,500
 
 44.3%
 
 $
 1,970,111
 
 $
 1,980,044
 
 52.1%Senior Secured Term Loans -
  Second lien(2)
 
 
 2,478,028
 
 
 2,543,125
 
 19.8%
 
 
 -
 
 
 -
 
 -%Short term investments(3)
 
 
 4,619,775
 
 
 4,619,775
 
 35.9%
 
 
 1,817,762
 
 
 1,817,762
 
 47.9%Total investments
 
 $
 12,731,185
 
 $
 12,865,400
 
 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)
 The Company does not control and
  is not an affiliate of any of the portfolio companies in its investment
  portfolio.(3)
 Short term investments represent
  highly liquid investments with original maturity dates of three months or
  less.
 16


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  The table below
shows the composition of the Company’s investment portfolio by industry
classification and the percentage, by fair value, of the total investment
portfolio assets in such industries as of March 31, 2013 and December 31, 2012:  March 31, 2013
  (unaudited)
 
 December 31, 2012Investments at Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at Fair Value
 
 Percentage of
  Investment PortfolioProfessional & Business
  Services
 
 $
 1,509,585
 
 11.7%
 
 $
 -
 
 -%Building
  Materials
 
 
 1,009,375
 
 7.8%
 
 
 -
 
 -%Food
  & Beverage
 
 
 1,009,375
 
 7.8%
 
 
 -
 
 -%Chemicals
 
 
 992,437
 
 7.7%
 
 
 1,000,000
 
 26.3%Insurance
 
 
 977,588
 
 7.6%
 
 
 980,044
 
 25.8%Printing
  & Publishing
 
 
 702,577
 
 5.5%
 
 
 -
 
 -%Healthcare
 
 
 516,250
 
 4.0%
 
 
 -
 
 -%Media
 
 
 512,500
 
 4.0%
 
 
 -
 
 -%Gaming
  & Hotels
 
 
 510,000
 
 4.0%
 
 
 -
 
 -%Entertainment
  & Leisure
 
 
 505,938
 
 4.0%
 
 
 -
 
 -%U.S.
  Treasury Securities
 
 
 4,619,775
 
 35.9%
 
 
 1,817,762
 
 47.9%Total
 
 $
 12,865,400
 
 100.0%
 
 $
 3,797,806
 
 100.0%
  Note 6. Total Return Swap  On December 17,
2012, the Company, through its wholly-owned subsidiary, Flatiron Funding, LLC,
or Flatiron, entered into a TRS with Citibank, N.A., or Citibank.  The
agreements between Flatiron and Citibank, which collectively establish the TRS,
are referred to 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 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 the lesser of (a) $150,000,000 and (b) 140%
of the aggregate amount of cash contributed to the equity capital of the
Company during the first nine months of the TRS and not withdrawn during that
period, or the maximum portfolio amount. 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 17


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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 + 1.25% per annum.
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.  Citibank may
terminate the TRS on or after December 17, 2013, 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 60% of the maximum
portfolio amount, multiplied by 1.25% per annum. The Company estimates the early
termination fee would have been approximately $132,000 at March 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 March 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 March 31, 2013,
the Company was in compliance with all covenants and reporting requirements.  For purposes of
computing the capital gains incentive fee, the Company treats the net realized
gains or losses on the sale or maturity of the underlying TRS loans as realized
gains or losses on 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 appreciation 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.  18


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 For purposes of the asset coverage ratio test applicable
to the Company as a BDC, the Company will treat the outstanding notional amount
of the TRS, less the initial amount of 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 will 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. 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.  As of March 31,
2013, the fair value of the TRS was $343,783. 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 statement of operations as net change in unrealized
appreciation on total return swap. As of March 31, 2013, Flatiron had selected
22 underlying loans with a total notional amount of $13,961,686 and posted
$3,490,731 in cash collateral held by Citibank (of which only $3,490,422 was
required to be posted), which is reflected in due from counterparty on the
Company’s consolidated balance sheets. 19


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  The following is a summary of the
underlying loans subject to the TRS as of March 31, 2013:  Underlying
  Senior Secured Term Loans(a)
 
 Industry
 
 Notional Amount
 
 Market
  Value(b)
 
 Unrealized AppreciationABB Concise
  Optical Group, LLC, L+425, 1.25% LIBOR Floor, 2/6/2019
 
 Healthcare
 
 $
 497,500
 
 $
 502,815
 
 $
 5,315American
  Petroleum Tankers Parent LLC, L+350, 1.25% LIBOR Floor, 10/2/2019
 
 Shipping &
  Ship Building
 
 
 497,500
 
 
 500,000
 
 
 2,500ATI Holdings,
  Inc, L+450, 1.25% LIBOR Floor, 12/21/2019
 
 Healthcare
 
 
 493,763
 
 
 504,361
 
 
 10,598Avaya Inc,
  L+675, 1.25% LIBOR Floor, 3/31/2018
 
 Telecommunications
 
 
 1,005,000
 
 
 1,005,630
 
 
 630Berlin Packaging
  LLC, L+350, 1.25% LIBOR Floor, 4/2/2020
 
 Chemicals
 
 
 497,500
 
 
 504,375
 
 
 6,875Centaur Gaming,
  L+400, 1.25% LIBOR Floor, 2/20/2019
 
 Gaming &
  Hotels
 
 
 497,500
 
 
 506,875
 
 
 9,375Cole Haan LLC,
  L+450, 1.25% LIBOR Floor, 2/1/2020
 
 Textile &
  Apparel Mfg.
 
 
 497,500
 
 
 505,625
 
 
 8,125EMG Utica LLC,
  L+375, 1.00% LIBOR Floor, 3/27/2020
 
 Oil & Gas
 
 
 497,500
 
 
 501,875
 
 
 4,375FairPoint
  Communications, L+625, 1.25% LIBOR Floor, 2/14/2019
 
 Telecommunications
 
 
 429,032
 
 
 439,320
 
 
 10,288Integra Telecom,
  Inc, L+475, 1.25% LIBOR Floor, 2/22/2019
 
 Telecommunications
 
 
 495,000
 
 
 506,330
 
 
 11,330Milacron, L+325,
  1.00% LIBOR Floor, 3/28/2020(c)
 
 Machinery
 
 
 497,500
 
 
 503,125
 
 
 5,625Moneygram
  International Inc, L+325, 1.00% LIBOR Floor, 3/28/2020(c)
 
 Professional
  & Business Services
 
 
 1,000,000
 
 
 1,008,750
 
 
 8,750Peppermill
  Casinos, L+600, 1.25% LIBOR Floor, 11/9/2018
 
 Gaming &
  Hotels
 
 
 985,038
 
 
 1,017,450
 
 
 32,412Safe-Guard
  Products International, LLC, L+600, 1.25% LIBOR Floor, 12/21/2018
 
 Financial
  Services
 
 
 898,349
 
 
 945,630
 
 
 47,281SESAC Holdco II,
  LLC, L+475, 1.25% LIBOR Floor, 2/8/2019
 
 Media
 
 
 493,763
 
 
 502,491
 
 
 8,728SRA
  International, L+525, 1.25% LIBOR Floor, 7/20/2018
 
 Computers &
  Electronics
 
 
 952,500
 
 
 996,250
 
 
 43,750Sutherland Global
  Services, L+600, 1.25% LIBOR Floor, 3/6/2019 (c)
 
 Professional
  & Business Services
 
 
 978,503
 
 
 984,537
 
 
 6,034Tervita, L+500,
  1.25% LIBOR Floor, 5/15/2018 (c)
 
 Ecological
 
 
 547,470
 
 
 559,570
 
 
 12,100TransFirst
  Holdings, Inc., L+500, 1.25% LIBOR Floor, 12/27/2017
 
 Computers &
  Electronics
 
 
 493,762
 
 
 505,453
 
 
 11,691Waupaca Foundry,
  Inc., L+450, 1.25% LIBOR Floor, 6/29/2017
 
 Steel
 
 
 493,750
 
 
 499,305
 
 
 5,555WideOpenWest
  Finance LLC, L+375, 1.00% LIBOR Floor, 4/1/2019
 
 Telecommunications
 
 
 717,000
 
 
 723,123
 
 
 6,123Washington
  Inventory Services, L+450, 1.25% LIBOR Floor, 12/20/2018
 
 Professional
  & Business Services
 
 
 496,256
 
 
 501,867
 
 
 5,611Total
 
 
 
 $
 13,961,686
 
 $
 14,224,757
 
 
 263,071Total Interest
  Income, Net of Expenses on TRS
 
 
 80,712Total Fair
  Value of TRS
 
 $
 343,783(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)
 The investment
  is not a qualifying asset under the Investment Company Act of 1940, as
  amended. A business development company may not acquire any asset other than
  qualifying assets, unless, at the time the acquisition is made, qualifying assets
  represent at least 70% of the Company’s total assets as defined under Section
  55 of the 1940 Act. As of March 31, 2013, 96.8% 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, 86.4% of the
  Company’s total assets represented qualifying assets as of March 31, 2013.
 20


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  The following
is a summary of the underlying loans subject to the TRS as of December 31,
2012: Underlying Senior Secured Term Loans(a)
 
 Industry
 
 Notional Amount
 
 Market
  Value(b)
 
 Unrealized Appreciation / (Depreciation)Peppermill Casinos Inc., L+600, 1.25% LIBOR Floor, 11/9/18
 
 Gaming and
  Hotels
 
 $
 492,500
 
 $
 486,875
 
 $
 (5,625)Safe-Guard
  Products International, LLC, L+600, 1.25% LIBOR Floor, 12/21/18
 
 Financial
  Services
 
 
 900,600
 
 
 905,340
 
 
 4,740Sequa Corporation, L+400, 1.25% LIBOR Floor, 6/19/17
 
 Aerospace/Defense
 
 
 497,500
 
 
 502,655
 
 
 5,155TransFirst Holdings, Inc., L+500, 1.25% LIBOR Floor, 12/27/17
 
 Computers &
  Electronics
 
 
 495,000
 
 
 500,000
 
 
 5,000Washington Inventory Service, L+450, 1.25% LIBOR Floor, 12/20/18
 
 Professional
  & Business Services
 
 
 497,500
 
 
 500,625
 
 
 3,125Total
 
 
 
 $
 2,883,100
 
 $
 2,895,495
 
 
 12,395Total
  Interest Income, Net of Expenses on TRS
 
 
 98Total Fair
  Value of TRS
 
 $
 12,493(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).
 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 March 31, 2013, according to the fair value hierarchy:  Valuation Inputs
 
 First Lien Senior Secured Term Loans
 
 Second Lien Senior Secured Term Loans
 
 Short Term Investments
 
 Total Return SwapLevel
  1—Price quotations in active markets
 
 $
 -
 
 $
 -
 
 $
 4,619,775
 
 $
 -Level 2—Significant other
  observable inputs
 
 
 -
 
 -
 
 
 -
 
 
 -Level 3—Significant unobservable
  inputs
 
 
 5,702,500
 
 2,543,125
 
 
 -
 
 
 343,783$
 5,702,500
 
 $
 2,543,125
 
 $
 4,619,775
 
 $
 343,783
 21


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
  The following
table presents fair value measurements of the Company’s portfolio investments
and TRS as of December 31, 2012, according to the fair value hierarchy:  Valuation Inputs
 
 First Lien Senior Secured Term Loans
 
 Second Lien Senior Secured Term Loans
 
 Short Term Investments
 
 Total Return SwapLevel 1—Price quotations in
  active markets
 
 $
 -
 
 $
 -
 
 $
 1,817,762
 
 $
 -Level 2—Significant other
  observable inputs
 
 
 -
 
 -
 
 
 -
 
 
 -Level 3—Significant unobservable
  inputs
 
 
 1,980,044
 
 -
 
 
 -
 
 
 12,493$
 1,980,044
 
 $
 -
 
 $
 1,817,762
 
 $
 12,493
  The Company’s
investments as of March 31, 2013, 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. The
Company’s investments as of December 31, 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. One senior secured loan that was
purchased near December 31, 2012 was valued at cost, as the Company
determined that the cost of the investment was the best indication of its 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. Such models are
prepared 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 consisting of senior management 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 intends to periodically benchmark 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
intend to review and approve the valuation determinations made with respect to
these investments in a manner consistent with the Company’s valuation process.  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, together with accrued interest
income, interest expense and certain other expenses incurred under the TRS. The
loans underlying 22


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 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. 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 for the three
months ended March 31, 2013. 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.  The following
table provides a reconciliation of the beginning and ending balances for
investments that use Level 3 inputs for the three months ended March 31, 2013:  First Lien Senior Secured Term Loans
 
 Second Lien Senior Secured Term Loans
 
 Total Return Swap
 
 TotalBalance, as of December 31,
  2012
 $
 1,980,044
 
 $
 -
 
 $
 12,493
 
 $
 1,992,537Investments purchased
 4,176,490
 
 2,477,500
 
 -
 
 6,653,990Net realized gain
 4,533
 
 -
 
 -
 
 4,533Net change in unrealized
  appreciation(1)
 59,185
 
 65,097
 
 331,290
 
 455,572Accretion of discount
 1,623
 
 528
 
 -
 
 2,151Sales and redemptions
 (519,375)
 
 -
 
 -
 
 (519,375)Balance, as of March 31, 2013
 $
 5,702,500
 
 $
 2,543,125
 
 $
 343,783
 
 $
 8,589,408(1)
 Represents the
  amount of total gains/losses for the period included in the change in
  unrealized appreciation on investments and change in unrealized appreciation
  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 assets as of March 31, 2013 were as follows:  Fair Value(1)
 
 Valuation Technique
 
 Unobservable Inputs
 
 Range
  (Weighted Average)Senior Secured First Lien Term
  Loans
 $
 5,702,500
 
 Discounted cash flow
 
 Discount rates
 
 4.75% - 7.75%
  (5.98%)Senior Secured Second Lien Term
  Loans
 $
 2,543,125
 
 Discounted cash flow
 
 Discount rates
 
 8.36% - 9.75%
  (8.96%)(1)The
  TRS was valued in accordance with the TRS Agreement as discussed above.
  The
significant unobservable inputs used in the fair value measurement of the
Company’s senior secured first lien and second lien term loans are the discount
rates. A significant increase or decrease in the discount rates would result in
a significantly lower or higher fair value measurement, respectively. 23


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 Note 8. General and
Administrative Expense  General and
administrative expense consists of the following items for the three months
ended March 31, 2013:  Professional fees expense
 $
 279,587Marketing expense
 86,640Insurance expense
 52,901Director fees and expenses
 
 7,839Other expenses
 81,896General and administrative
  expense
 $
 508,863
  Note 9. Borrowings  In 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 approximately $179,000. Payments under the financing arrangement were due in
10 equal installments, with final payment on April 19, 2013. As of March 31,
2013, approximately $18,000 was outstanding under the financing arrangement at
a fixed interest rate of 3.99%, which is included in financing arrangement on
the Company’s consolidated balance sheets. For purposes of the asset coverage
ratio test applicable to the Company as a BDC, this amount is treated as a
senior security.  Note 10. 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. 24


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 Note 11.
Financial Highlights  The following
is a schedule of financial highlights as of and for the three months ended
March 31, 2013 and as of December 31, 2012 and for the period from January 31,
2012 (Inception) through December 31, 2012: Three Months Ended March 31, 2013
 
 For the Period from January 31, 2012 (Inception) through
  December 31, 2012Per share data:(1)Net asset value at beginning of
  period
 $
 8.97
 
 $
 -Results of operations:Net investment (loss) income(2)
 
 (0.04)
 
 
 0.01Net realized and net change in
  unrealized appreciation on investments
 
 0.11
 
 
 0.02Net realized and net change in
  unrealized appreciation on total return swap
 
 0.46
 
 
 0.02Net increase in net assets
  resulting from operations
 
 0.53
 
 
 0.05Shareholder distributions:Distributions from net
  investment income
 
 -
 
 
 -Distributions from net realized
  gains
 
 (0.18)
 
 
 -Net decrease in net assets from
  shareholder distributions
 
 (0.18)
 
 
 -Capital share transactions:Issuance of common stock above
  net asset value(3)
 
 0.05
 
 
 9.00Amortization of deferred
  offering expenses
 
 (0.21)
 
 
 (0.08)Net (decrease) increase in net
  assets resulting from capital share transactions
 
 (0.16)
 
 
 8.92Net asset value at end of period
 $
 9.16
 
 $
 8.97Shares of common stock
  outstanding at end of period
 
 1,712,123
 
 
 500,338Total investment return-net
  asset value(4)
 
 4.04%
 
 
 (0.35%)Net assets at beginning of
  period(5)
 $
 4,487,115
 
 $
 4,503,049Net assets at end of period
 $
 15,689,645
 
 $
 4,487,115Average net assets
 $
 10,088,380
 
 $
 4,495,082Ratio/Supplemental data:(5)Ratio of net investment (loss)
  income to average net assets(6)
 
 (0.46%)
 
 
 0.06%Ratio of operating expenses to
  average net assets(6)
 
 1.14%
 
 
 0.00%Ratio of operating expenses to
  gross assets(6)
 
 0.61%
 
 
 0.00%Ratio of expenses reimbursed
  from IIG to average net assets
 
 8.12%
 
 
 2.60%Portfolio turnover rate(7)
 
 10.80%
 
 
 0.13%Asset coverage ratio(8)
 
 2.50
 
 
 3.02
  25


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CĪON

INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS March 31, 2013 (unaudited)
 (1)
 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 $0.70 and $0.23 per share for the three
  months ended March 31, 2013 and 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 Company’s distribution
  reinvestment plan and (ii) the fractional shares issued pursuant to the
  distribution reinvestment plan are issued at 95% of the then public offering
  price on each monthly distribution payment date. 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 it 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 ratios of net investment (loss) income and operating expenses to
  average net assets would have been (8.58%) and 9.26%, respectively, for the
  three months ended March 31, 2013, and (2.54%) and 2.60%, respectively, for
  the period from January 31, 2012 (Inception) through December 31, 2012.
  Excluding the expense reimbursement from IIG during the period, the ratio of
  operating expenses to gross assets would have been 4.99% for the three months
  ended March 31, 2013 and 2.07% for the period from January 31, 2012
  (Inception) through December 31, 2012.(7)
 Portfolio turnover rate is calculated using the
  year-to-date sales over the average of the invested assets at fair value and
  is not annualized.(8)
 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.
 26


---



Item 2. Management’s Discussion and Analysis of Financial
Condition andResults of Operations  As used in this
Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include
CĪON Investment Corporation and its consolidated subsidiaries.  The following
discussion should be read in conjunction with our unaudited consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and the audited consolidated financial statements and
related notes included in our Annual Report on Form 10-K for the period from
January 31, 2012 (Inception) through December 31, 2012. In addition to historical
information, the following discussion and other parts of this Quarterly Report
on Form 10-Q contain forward-looking information that involves risks and
uncertainties.  Forward-Looking
Statements  Some of the statements within this Quarterly
Report on Form 10-Q may constitute forward-looking statements because they
relate to future events or our future performance or financial condition. The
forward-looking statements contained in this Quarterly Report on Form 10-Q may
include statements as to: ·our
future operating results; ·our
business prospects and the prospects of the companies in which we may invest; ·the
impact of the investments that we expect to make; ·the
ability of our portfolio companies to achieve their objectives; ·our
expected financings and investments; ·the
adequacy of our cash resources, financing sources and working capital; ·the
use of borrowed money to finance a portion of our investments; ·the
timing of cash flows, if any, from the operations of our portfolio companies; ·our
contractual arrangements and relationships with third parties; ·the
actual and potential conflicts of interest with CIM and Apollo and their
respective affiliates; ·the
ability of CIM and AIM to locate suitable investments for us and the ability of
CIM to monitor and administer our investments; ·the
ability of CIM and AIM and their respective affiliates to attract and retain
highly talented professionals; ·the
dependence of our future success on the general economy and its impact on the
industries in which we invest; ·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 may invest; and ·the
timing and amount of distributions and dividends from the companies in which we
may invest. In addition, words such as “anticipate,” “believe,”
“expect” and “intend” indicate a forward-looking statement, although not all
forward-looking statements include these words. The forward-looking statements
contained in this Quarterly Report on Form 10-Q involve risks and
uncertainties. Our actual results could differ materially from those implied or
expressed in the forward-looking statements for any reason, including the
factors set forth in “Risk Factors” in Item 1A of Part II of this Quarterly
Report on Form 10-Q. Other factors that could cause actual results to differ
materially include: 27


---



·changes in the economy; ·risks
associated with possible disruption in our operations or the economy generally
due to terrorism or natural disasters; and ·future
changes in laws or regulations and conditions in our operating areas. We have based the forward-looking statements on information available to
us on the date of this Quarterly Report on Form 10-Q. Except as required by the
federal securities laws, we undertake no obligation to revise or update any
forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised to review any additional disclosures that
we may make directly to you or through reports that we in the future may file
with the SEC, including annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K. The forward-looking statements contained
in this Quarterly Report on Form 10-Q are excluded from the safe harbor
protection provided by Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.  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 a newly organized, externally managed, non-diversified closed-end
management investment company that has elected to be regulated as a BDC under
the 1940 Act. We intend to elect 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 will oversee the
management of our activities and will be responsible for making investment
decisions for our portfolio. We and CIM have engaged AIM to act as our
investment sub-adviser.  We will 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 intend to
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.  Portfolio Investment Activity
for the Three Months Ended March 31, 2013 and the Period from January 31, 2012
(Inception) through December 31, 2012 For
the three months ended March 31, 2013, we made investments in portfolio
companies totaling $6,653,990. During the same period, we sold investments
totaling $504,375 and received principal repayments of $15,000, and we recorded
realized gains of $4,533 and unrealized appreciation on investments of
$124,282. As
of March 31, 2013, our investment portfolio, excluding our short term
investments and total return swap, consisted of interests in 11 portfolio
companies (69% in first lien senior secured term loans and 31% in second lien
senior secured term loans) with a total fair value of $8,245,625 and an average
annual EBITDA of approximately $65.6 million. As of March 31, 2013, the
investments in our portfolio were purchased at a weighted average price of 28


---



99.09% of par value. Our estimated gross annual yield on
our investments was 7.23% based upon the purchase price of our investments. As
of December 31, 2012, our investment portfolio, excluding our short term
investments and total return swap, consisted of interests in two portfolio
companies (100% in first lien senior secured term loans) with a total fair
value of $1,980,044 and an average annual EBITDA of approximately $26.6 million.
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
yield on our investments was 6.55% based upon the purchase price of our
investments.  As of March 31,
2013 and December 31, 2012, our short term investments included an investment
in a U.S. Treasury Obligations Fund of $4,619,775 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. Further,
through a TRS (more fully described in “Financial Condition, Liquidity and
Capital Resources” below), we obtained the economic benefit of owning
investments in senior secured, first lien, floating-rate term loans of 22 and 5
portfolio companies as of March 31, 2013 and December 31, 2012, respectively. The following
table summarizes the composition of our investment portfolio at cost and fair
value as of March 31, 2013 and December 31, 2012:  March 31, 2013
  (unaudited)
 
 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(2)
 
 $
 5,633,382
 
 $
 5,702,500
 
 44.3%
 
 $
 1,970,111
 
 $
 1,980,044
 
 52.1%Senior Secured Term Loans -
  Second lien(2)
 
 
 2,478,028
 
 
 2,543,125
 
 19.8%
 
 
 -
 
 
 -
 
 -%Short term investments(3)
 
 
 4,619,775
 
 
 4,619,775
 
 35.9%
 
 
 1,817,762
 
 
 1,817,762
 
 47.9%Total investments
 
 $
 12,731,185
 
 $
 12,865,400
 
 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)
 We do not control and are not an
  affiliate of any of the portfolio companies in our investment portfolio.(3)
 Short term investments represent
  highly liquid investments with original maturity dates of three months or
  less.
  The following table summarizes the
type of interest rates that our investment portfolio contained as of March 31,
2013 and December 31, 2012, excluding short term investments of $4,619,775 and
$1,817,762, respectively:  March 31, 2013
  (unaudited)
 
 December 31, 2012
  (unaudited)Interest Rate Allocation
 
 Fair Value
 
 Percentage of Investment Portfolio
 
 Fair Value
 
 Percentage of Investment PortfolioFloating Interest Rate
  Investments
 
 $
 8,245,625
 
 100%
 
 $
 1,980,044
 
 100%Fixed Interest Rate Investments
 
 
 -
 
 -
 
 
 -
 
 -Total
 
 $
 8,245,625
 
 100%
 
 $
 1,980,044
 
 100%
  29


---



We do not “control” and are not an “affiliate” of any of
our portfolio companies, each as defined in the 1940 Act. In general, under the
1940 Act, we would be presumed to “control” a portfolio company if we owned 25%
or more of its voting securities and would be an “affiliate” of a portfolio
company if we owned 5% or more of its voting securities.  The table
below 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 March 31, 2013 and December 31, 2012:  March 31, 2013
  (unaudited)
 
 December 31, 2012Investments at Fair Value
 
 Percentage of
  Investment Portfolio
 
 Investments at Fair Value
 
 Percentage of
  Investment PortfolioProfessional & Business
  Services
 
 $
 1,509,585
 
 11.7%
 
 $
 -
 
 -%Building
  Materials
 
 
 1,009,375
 
 7.8%
 
 
 -
 
 -%Food
  & Beverage
 
 
 1,009,375
 
 7.8%
 
 
 -
 
 -%Chemicals
 
 
 992,437
 
 7.7%
 
 
 1,000,000
 
 26.3%Insurance
 
 
 977,588
 
 7.6%
 
 
 980,044
 
 25.8%Printing
  & Publishing
 
 
 702,577
 
 5.5%
 
 
 -
 
 -%Healthcare
 
 
 516,250
 
 4.0%
 
 
 -
 
 -%Media
 
 
 512,500
 
 4.0%
 
 
 -
 
 -%Gaming
  & Hotels
 
 
 510,000
 
 4.0%
 
 
 -
 
 -%Entertainment
  & Leisure
 
 
 505,938
 
 4.0%
 
 
 -
 
 -%U.S.
  Treasury Securities
 
 
 4,619,775
 
 35.9%
 
 
 1,817,762
 
 47.9%Total
 
 $
 12,865,400
 
 100.0%
 
 $
 3,797,806
 
 100.0%
  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.
 30


---



For investments
graded 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of
such portfolio company.  The following
table shows our debt investments on the 1 to 5 investment rating scale at fair
value as of March 31, 2013 and December 31, 2012, excluding short term
investments of $4,619,775 and $1,817,762, respectively:  March 31, 2013
  (unaudited)
 
 December 31, 2012Investment Rating
 
 Investments at Fair Value
 
 Percentage of Investment Portfolio
 
 Investments at Fair Value
 
 Percentage of Investment Portfolio1
 
 $
 -
 
 -
 %
 
 $
 -
 
 -
 %2
 
 
 8,245,625
 
 100.0
 %
 
 
 1,980,044
 
 100.0
 %3
 
 
 -
 
 -
 %
 
 
 -
 
 -
 %4
 
 
 -
 
 -
 %
 
 
 -
 
 -
 %5
 
 
 -
 
 -
 %
 
 
 -
 
 -
 %$
 8,245,625
 
 100.0
 %
 
 $
 1,980,044
 
 100.0
 %
  The amount of
the portfolio in each grading category may vary substantially from period to
period resulting primarily from changes in the composition of the investment
portfolio as a result of new investments, 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 May 10,
2013, our investment portfolio, excluding our short term investments, consists
of interests in 20 first lien and second lien secured term loans primarily to
private U.S. companies with an average annual EBITDA of $60.8 million. The
investments were purchased at a weighted average price of 99.08% of par value
and our estimated gross annual portfolio yield is 7.22%.  As of May 10,
2013, our short term investments include an investment in a U.S. Treasury
Obligations Fund of approximately $3,513,000.  Further, as
of May 10, 2013, through a TRS (more fully described in “Financial
Condition, Liquidity and Capital Resources” below), we obtained the economic
benefit of owning investments in senior secured, first and second lien,
floating-rate loans of 37 portfolio companies.  31


---



Results
of Operations  On December 17,
2012, we raised proceeds of $2,500,000 from persons not affiliated with us or
CIM and commenced operations. Prior to satisfying the minimum offering
requirement, we had no operations except for matters relating to our organization
and registration as a non-diversified, closed-end management investment
company. As a result, no comparisons with the comparable 2012 period have been
included. Operating results for the three months ended March 31, 2013 are as
follows:  Investment
  income
 $
 68,126Net
  operating expenses
 114,810Net
  investment loss
 (46,684)Net
  realized gain from investments
 4,533Net
  change in unrealized appreciation on investments
 124,282Net
  realized gain on total return swap
 205,723Net
  change in unrealized appreciation on total return swap
 331,290Net
  increase in net assets resulting from operations
 $
 619,144
  Investment Income  For the three months ended March 31,
2013, we generated investment income of $68,126, which was primarily attributable
to investments in 11 portfolio companies with a total par amount of
approximately $8,184,000 as of March 31, 2013. 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.  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 cost
associated with the offering of our common stock, subject to limitations
included in the administration agreement; ·the cost 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; 32


---



·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, or the Sarbanes-Oxley Act; ·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 each of them is not a person with a controlling interest in
CIM or any of its affiliates, subject to the limitations included in the
investment advisory and administration agreements, as applicable.   The composition
of our operating expenses for the three months ended March 31, 2013 was as
follows:  Management
  fees
 $
 44,742Administrative
  services expense
 263,555Capital
  gains incentive fee
 117,023General
  and administrative
 508,863Total
  expenses
 934,183Less:
  expense reimbursement from IIG
 (819,373)Net
  operating expenses
 $
 114,810
  Expense Reimbursement  Our affiliate,
IIG, has agreed to reimburse us commencing with the quarter ended December 31,
2012 for expenses in an amount that is sufficient to: (i) ensure that no
portion of our distributions to shareholders will be paid from our offering
proceeds or borrowings, and/or (ii) 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 will 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. 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 33


---



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. For the three months ended March 31, 2013, we recorded $819,373 of
expense reimbursement from IIG in connection with the expense support and
conditional reimbursement agreement.  The table below
presents a summary of all expenses funded by IIG and the associated dates
through which such expenses are eligible for reimbursement by us for the three
months ended December 31, 2012 and March 31, 2013.  Three Months Ended
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Eligible for Reimbursement throughDecember 31, 2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 March 31, 2016Total
 
 $
 936,079
 
 $
 -
 
 $
 936,079
  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 by IIG.  Net Investment Loss  Our net
investment loss totaled $46,684 for the three months ended March 31, 2013.  Net Realized Gain from
Investments  For the three
months ended March 31, 2013, we recorded a net realized gain from investments
of $4,533, which was primarily due to the sale of one investment for a gain of
$4,375.  Net Change in Unrealized
Appreciation on Investments  For the three
months ended March 31, 2013, the net change in unrealized appreciation on our
investments totaled $124,282. This change was primarily driven by the
tightening of credit spreads as demand for senior loans increased during the
quarter.  Net Realized Gain on TRS  For the three
months ended March 31, 2013, we recorded a net realized gain on TRS of
$205,723.  This realized gain was primarily due to 22 sale and refinancing
transactions of all or part of certain underlying loans subject to the TRS for
a gain of approximately $205,000.  Net Change in Unrealized
Appreciation on TRS  For the three
months ended March 31, 2013, our investments in the TRS had $331,290 of
unrealized appreciation. This change was primarily driven by the tightening of
credit spreads as demand for senior loans increased during the quarter.  Net Increase in Net Assets
Resulting from Operations  For the three
months ended March 31, 2013, we recorded a net increase in net assets resulting
from operations of $619,144. 34


---



Financial Condition, Liquidity and Capital Resources  We generate
cash primarily from the net proceeds of our ongoing 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 issue shares at semi-monthly
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 $10.24
per share, effective May 16, 2013; 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 semi-monthly closing on the sale of shares of our common stock, our board
of directors or a committee thereof is required to make the determination that
we are not selling shares of our common stock at a price below our then current
net asset value no later than 48 hours prior to the time that we price our
shares. In connection with each semi-monthly 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.  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 March 31, 2013, we had $4,619,775 in short term investments,
primarily invested in U.S. government securities. We may borrow funds to make investments, to the extent we determine
that additional capital would allow us to take advantage of additional
investment opportunities, if the market for debt financing presents
attractively priced debt financing opportunities, or if our board of directors
determines that leveraging our portfolio would be in our best interests and the
best interests of our shareholders. Any borrowings we make are required to be
in compliance with the provisions of the 1940 Act. We do not currently
anticipate issuing any preferred stock.  Total Return Swap On December 17, 2012, Flatiron, our
newly-formed, wholly-owned, special purpose financing subsidiary, entered into
a TRS with Citibank. 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 35


---



market
value (determined at the time each such loan becomes subject to the TRS) of the
lesser of (a) $150,000,000 and (b) 140% of the aggregate amount of cash contributed
to our equity capital during the first nine months of the TRS and not withdrawn
during that period, or the maximum portfolio amount. 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 + 1.25% per annum. 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.  Citibank may terminate the TRS on or after December
17, 2013, 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 60% of the maximum portfolio amount, multiplied by 1.25% per annum.
We estimate the early termination fee would have been approximately $132,000 as
of March 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 March 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. We are in compliance with these covenants and reporting requirements
as of March 31, 2013.  For purposes of
computing the capital gains incentive fee, we treat the net realized gains or
losses on the sale or maturity of the underlying TRS loans as realized gains or
losses on 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 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 appreciation on the TRS
is 36


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reflected in total assets on our consolidated
balance sheets and included in the computation of the base management fee.  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 values of the underlying loans to Flatiron. Each of
the loans underlying the TRS is required to be rated by Moody’s and S&P and
quoted by a nationally-recognized pricing service.  As of March 31, 2013, the fair value of the TRS was
$343,783. 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 statement of operations as net change
in unrealized appreciation on total return swap. As of March 31, 2013, Flatiron
had selected 22 underlying loans with a total notional amount of $13,961,686
and posted $3,490,731 in cash collateral held by Citibank (of which only
$3,490,422 was required to be posted), which is reflected in due from
counterparty on our consolidated balance sheets.  For purposes of the asset coverage ratio test
applicable to us as a BDC, we treat the outstanding notional amount of the TRS,
less the initial amount of 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.  RIC Status and Distributions We declared our first distribution on January 14, 2013. Subject to
the board of directors’ discretion and applicable legal restrictions, our board
of directors intends to authorize and declare on a monthly basis a semi-monthly
distribution amount per share of our common stock. From time to time, we may
also pay special interim distributions in the form of cash or shares of our
common stock at the discretion of our board of directors. During certain
quarters, our distributions may exceed our earnings. As a result, it is
possible that a portion of the distributions we make may represent a return of
capital for tax purposes. Any distributions to our shareholders will be
declared and paid from assets legally available for distribution. There can be
no assurance that we will be able to sustain distributions at any particular
level.  Our board of
directors declared distributions for six record dates in the three months ended
March 31, 2013. Declared distributions are paid monthly. The following table
presents the cash distributions per share that were declared during the three
months ended March 31, 2013:  DistributionsThree Months Ended
 
 Per Share
 
 AmountMarch 31, 2013
 
 $
 0.1769
 
 $
 208,766
  On
April 15, 2013, our board of directors declared two regular semi-monthly
cash distributions of $0.029721 per
share each, which were paid on May 1, 2013 to shareholders of record on
April 15, 2013 and April 30, 2013, respectively. On May 15, 2013, our
board of directors declared two regular semi-monthly cash distributions of $0.029721
per share and $0.029867 per share, payable on June 3, 2013 to
shareholders of record as of May 15, 2013 and May 31, 2013, respectively.  The
timing and amount of any future distributions to shareholders are subject to
applicable legal restrictions and the sole discretion of our board of
directors. We
intend to make our ordinary distributions in the form of cash out of assets
legally available for distribution, unless shareholders elect to receive their
distributions in additional shares of our common stock under 37


---



our distribution reinvestment plan. Any distributions
reinvested under the plan will nevertheless remain taxable to a U.S.
shareholder.  We intend to
elect to be treated for federal income tax purposes as a RIC under Subchapter M
of the Code. Generally, a RIC is entitled to a deduction for federal income tax
purposes for distributions paid to shareholders if it distributes at least 90%
of its “investment company taxable income,” as defined by the Code, each year.
To qualify for and maintain RIC tax treatment, we must, among other things,
distribute at least 90% of our 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, a RIC would need to
distribute during each calendar year an amount at least equal to the sum of (1)
98% of our 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 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.  Each year a statement on Internal
Revenue Service Form 1099-DIV (or such successor form) identifying the source
of the distribution (i.e., paid from ordinary income, paid from net capital
gain on the sale of securities, or a return of capital) will be mailed to our
shareholders. Our distributions may exceed our earnings, especially during the
period before we have substantially invested the proceeds from this offering.
The tax basis of shares must be reduced by the amount of any return of capital
distributions, which will result in an increase in the amount of any taxable
gain (or a reduction in any deductible loss) on the sale of shares.  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 distribution reinvestment plan so as
to have their cash distributions reinvested in additional shares of our common
stock.  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, which are subject to recoupment.
We have not established limits on the amount of funds we may use from available
sources to make distributions. The
following table reflects the sources of the cash distributions that we have
declared on our common stock during the three months ended March 31, 2013:  Source of Distribution
 
 Distribution Amount
 
 PercentageRealized gain on investments and
  total return swap
 
 $
 208,766
 
 100%Total
 
 $
 208,766
 
 100%
  Our
net investment loss on a tax basis for the three months ended March 31, 2013
was $46,684. As of March 31, 2013, we had no tax-basis net investment income
earned to distribute.  There were no differences between our GAAP-basis net investment loss
and our tax-basis net investment loss.  The determination
of the tax attributes of our distributions is made annually as of the end of
our fiscal year based upon our taxable income for the full year and
distributions paid for the full year. Therefore, a determination made on a
quarterly basis may not be representative of the actual tax attributes of our
distributions for a full year. The actual tax characteristics of distributions
to shareholders are reported to shareholders annually on Form 1099-DIV. As of March 31, 2013
and December 31, 2012, the components of accumulated earnings on a tax basis
were as follows: March 31, 2013
  (unaudited)
 
 December 31, 2012Undistributed net investment
  income
 
 $
 -
 
 $
 2,692Undistributed net realized gain
  from investments
 
 
 1,534
 
 
 44Net unrealized appreciation on
  investments and total return swap(1)
 
 
 477,998
 
 
 22,426$
 479,532
 
 $
 25,162(1)
 As of
  March 31, 2013 and December 31, 2012, the gross unrealized appreciation on
  our investments and the underlying loans of our total return swap was
  $478,919 and $28,051, respectively. As of March 31, 2013 and December 31,
  2012, the gross unrealized depreciation on our investments and the underlying
  loans of our total return swap was $921 and $5,625, respectively.
 38


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The aggregate
cost of our investments for federal income tax purposes totaled $12,731,185 and
$3,787,873 as of March 31, 2013 and December 31, 2012, respectively. The
aggregate net unrealized appreciation on a tax basis, including our TRS, was
$477,998 and $22,426 as of March 31, 2013 and December 31, 2012, respectively.  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. Critical Accounting Policies  For a detailed
discussion of our critical accounting policies, refer to “Item
7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Critical Accounting Policies”
included in our Annual Report on Form 10-K for the period from January 31,
2012 (Inception) through December 31, 2012.  We consider these accounting
policies critical because they involve management judgments and assumptions,
require estimates about matters that are inherently uncertain and because they
are important for understanding and evaluating our reported financial results.
These judgments will affect the reported amounts of assets and liabilities and
our disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses during
the reporting periods. With different estimates or assumptions, materially
different amounts could be reported in our financial statements.  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 in future periods will be 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, 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, will be calculated and payable
quarterly in arrears based upon our “pre-incentive fee net investment income”
for the immediately preceding quarter and will be 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, will be an incentive fee on
capital gains earned on liquidated investments from the portfolio and will be
determined and payable in arrears as of the end of each calendar year (or upon
termination of the investment advisory agreement). This fee will 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 exceed 39


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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 will only
assist CIM with identifying investment opportunities and will make investment recommendations
for approval by CIM according to pre-established investment guidelines. On an
annualized basis, AIM will receive 50% of the fees payable to CIM under the
investment advisory agreement with respect to each year, which fees are payable
to AIM quarterly in arrears.  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 will be 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.  In December
2012, pursuant to a private placement, IIG completed the purchase of 111,111
shares of common stock at $9.00 per share, which represents the initial public
offering price of $10.00 per share net of selling commissions and dealer
manager fees. IIG will not tender its shares for repurchase as long as CIM
remains our investment adviser. Further, in December 2012, pursuant to a
private placement, Apollo Principal Holdings III, L.P., a subsidiary of Apollo,
or APH III, completed the purchase of 111,111 shares of common stock at $9.00
per share, which represents the initial public offering price of $10.00 per
share net of selling commissions and dealer manager fees. APH III will not
tender its shares for repurchase as long as AIM remains our sub-adviser.  Our affiliate,
IIG, has agreed to reimburse us commencing with the quarter ended December 31,
2012 for expenses in an amount that is sufficient to: (i) ensure that no
portion of our distributions to shareholders will be paid from our offering
proceeds or borrowings, and/or (ii) 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 will 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. 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. For the three months
ended March 31, 2013, we recorded $819,373 of expense reimbursement from IIG in
connection with the expense support and conditional reimbursement agreement. 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.
We have not established limits on the amount of funds we may use from available
sources to make distributions. For a significant time after the commencement of
our offering, a substantial portion of our 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 avoid such
distributions being characterized as returns of capital. 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
will reduce the 40


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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. For the three months ended March 31,
2013, if expense reimbursements from IIG of $819,373 were not supported, none
of the distributions would be a return of capital.  The table below
presents a summary of all expenses funded by IIG and the associated dates
through which such expenses are eligible for reimbursement by us for the three
months ended December 31, 2012 and March 31, 2013.  Three Months Ended
 
 Expense Support Received from IIG
 
 Expense Support Reimbursed to IIG
 
 Unreimbursed Expense Support
 
 Eligible for Reimbursement throughDecember 31, 2012
 
 $
 116,706
 
 $
 -
 
 $
 116,706
 
 December 31, 2015March 31, 2013
 
 
 819,373
 
 
 -
 
 
 819,373
 
 March 31, 2016Total
 
 $
 936,079
 
 $
 -
 
 $
 936,079
  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.  Our payment of
organization costs and offering expenses (including reimbursement of costs incurred
by IIG and its affiliates) is capped at 1.5% of the gross proceeds from our
offering. If we sell the maximum number of shares at our latest public offering
price of $10.24 per share, effective May 16, 2013, then we estimate that we may
incur up to approximately $15,360,000 of expenses. Under the terms of the
investment advisory agreement, CIM and certain of its affiliates, which
includes IIG, will become entitled to receive reimbursement of up to 1.5% of
the gross proceeds raised until all organization costs and offering expenses
have been reimbursed. At March 31, 2013, IIG and its affiliates incurred
organization costs and offering expenses of approximately $2,017,000, of which
$1,000,000 have been reimbursed by us. No additional organization costs or
offering expenses have been incurred subsequent to March 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. To the extent that payments of organization
costs and offering expenses exceed the 1.5% cap at the end of the offering
period, any excess amounts may be recoverable from IIG and its affiliates.  On December 17,
2012, we and IIG net cash settled IIG’s purchase of 111,111 shares of our
common stock at $9.00 per share and our payment to IIG of $1,000,000 for
offering expenses submitted for reimbursement.  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 2012, we
entered into an unsecured financing arrangement with Flatiron Capital, an
unaffiliated third party, for directors and officers insurance in an amount of
approximately $179,000. Payments under the financing arrangement were due in 10
equal installments, with final payment on April 19, 2013. As of March 31, 2013,
approximately $18,000 was outstanding under the financing arrangement at a
fixed interest rate of 3.99%, which is 41


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included in
financing arrangement on our consolidated balance sheets. For purposes of the
asset coverage ratio test applicable to us as a BDC, this amount is treated as
a senior security.  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.  Off-Balance Sheet Arrangements  As of March 31, 2013, we did not
have any off-balance sheet arrangements. 42


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Item 3.   Quantitative and Qualitative Disclosures about
Market Risk  We are subject to financial market risks, including changes in interest
rates. As of March 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 March 31,
2013: LIBOR Basis
  Point Change
 
 Increase (Decrease) in Net Interest
  Income(1)
 
 Percentage Change in Net Interest IncomeDown 29 basis points
 
 $
 38,316
 3.4%Current LIBOR
 
 
 -
 0.0%Up 100 basis points
 
 
 (112,624)
 (9.9%)Up 200 basis points
 
 
 (38,905)
 (3.4%)Up 300 basis points
 
 
 34,814
 3.1%(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 1.25% per annum on the full notional amount
  of the loans subject to the TRS. As of March 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 Note 2 to our consolidated
financial statements included in this Quarterly Report on Form 10-Q.  Item 4.   Controls
and Procedures  Evaluation of disclosure controls and procedures  In connection with the preparation of
this Quarterly Report on Form 10-Q for the three months ended March 31, 2013,
we carried out an evaluation, under the supervision and with the participation
of our management, 43


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including our Co-Chief Executive
Officers and our Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures as of the end of the
period covered by this report pursuant to Rule 13a-15(b) and Rule 15d-15(b) of
the Securities Exchange Act of 1934, as amended. Based on the foregoing
evaluation, the Co-Chief Executive Officers and the Chief Financial Officer
concluded that our disclosure controls and procedures were effective.  In designing and evaluating our
disclosure controls and procedures, we recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Our disclosure controls and procedures have
been designed to meet reasonable assurance standards. Disclosure controls and
procedures cannot detect or prevent all error and fraud. Some inherent
limitations in disclosure controls and procedures include costs of
implementation, faulty decision-making, simple error and mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based, in part, upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all anticipated and
unanticipated future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with established
policies or procedures.  Evaluation of internal control over financial reporting  There have been
no changes in our internal control over financial reporting during the three
months ended March 31, 2013 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting. 44


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PART II - OTHER INFORMATION  Item 1. Legal
Proceedings  We are not currently subject to any
material legal proceedings, nor, to our knowledge, is any material legal
proceeding threatened against us. From time to time, we may be party to certain
legal proceedings in the ordinary course of business, including proceedings
relating to the enforcement of our rights under contracts with our portfolio
companies. While the outcome of these legal proceedings cannot be predicted
with certainty, we do not expect that any such proceedings will have a material
effect upon our financial condition or results of operations.  Item 1A. Risk Factors  There have been no material
changes from the risk factors disclosed in “Item 1A. Risk Factors” of our
Annual Report on Form 10-K for the period from January 31, 2012 (Inception)
through December 31, 2012.  Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds  Our registration statement on Form N-2, as amended, was declared
effective by the SEC on July 2, 2012 (SEC File No. 333-178646). Our offering
period commenced on July 2, 2012.  We did not engage in any unregistered sales of equity securities during the
three months ended March 31, 2013.  Item 3. Defaults Upon Senior Securities  Not applicable.  Item 4. Mine Safety Disclosures  Not applicable.  Item 5. Other Information  Not applicable.  45


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Item 6. 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. 1 to Registrant’s Registration Statement on Form
  N-2 filed with the SEC on January 31, 2013 (File No. 333-178646)).4.2
 
 Distribution
  Reinvestment Plan (Incorporated by reference to Exhibit (E) to Pre-Effective
  Amendment No. 1 to the Registrant’s Registration Statement on Form N-2 filed
  with the SEC on February 17, 2012 (File No. 333-178646)).10.1
 
 Investment Advisory Agreement 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)).10.6
 
 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).
 46


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10.8
 
 Confirmation Letter Agreement, dated as of December 17, 2012, by
  and between Flatiron Funding, LLC and Citibank, N.A. (Incorporated by
  reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
  filed with the SEC on December 19, 2012).10.9
 
 Expense
  Support and Conditional Reimbursement Agreementdated as of January 30, 2013, by and
  between CĪON Investment Corporation and ICON Investment Group, LLC
  (Incorporated by reference to Exhibit (K)(5) to Post-Effective Amendment No.1
  to Registrant’s Registration Statement on Form N-2 filed with the SECon January 31, 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.
 47


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SIGNATURES  Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.   Date: May 15, 2013CĪON Investment
  Corporation
  (Registrant)By
 /s/ Michael A. ReisnerMichael A. ReisnerCo-Chief Executive Officer and
  Co-President(Principal Executive Officer)By
 /s/ Mark GattoMark GattoCo-Chief Executive Officer and
  Co-President(Principal Executive Officer)By
 /s/ Keith S. FranzKeith S. FranzChief Financial Officer
  (Principal Financial and
  Accounting Officer)
  48


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