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  June 30, 2017


OR


[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from __________ to __________


Commission File Number  000-54755


CĪON Investment Corporation(Exact name of registrant as specified in its charter)





Maryland45-3058280(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)3 Park Avenue, 36thFloorNew York, New York10016(Address of principal executive offices)(Zip Code)


(212) 418-4700(Registrant’s telephone number, including area code)Not applicable(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes [x] No [ ]


Indicate by check mark whether the registrant has submitted  electronically  and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes [ ] No [ ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer [ ]Accelerated filer [ ]Non-accelerated filer [x](Do not check if a smaller reporting company)Smaller reporting company [ ]Emerging growth company [ ]


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


[ ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes [ ] No [x]


The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of August 9, 2017 was 112,767,948 .







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CĪON INVESTMENT CORPORATION


FORM 10-Q


TABLE OF CONTENTS


PagePART I - FINANCIAL INFORMATIONItem 1. Financial Statements1Consolidated Balance Sheets1Consolidated Statements of Operations2Consolidated Statements of Changes in Net Assets3Consolidated Statements of Cash Flows4Consolidated Schedules of Investments5Notes to Consolidated Financial Statements18Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations45Item 3. Quantitative and Qualitative Disclosures About Market Risk62Item 4. Controls and Procedures62PART II – OTHER INFORMATIONItem 1. Legal Proceedings64Item 1A. Risk Factors64Item 2. Unregistered Sales of Equity Securities and Use of Proceeds64Item 3. Defaults Upon Senior Securities64Item 4. Mine Safety Disclosures64Item 5. Other Information64Item 6. Exhibits65Signatures67










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PART I – FINANCIAL INFORMATION





Item 1. Financial Statements





CĪON Investment Corporation


Consolidated Balance Sheets


(in thousands, except share and per share amounts)


June 30,2017December 31,2016(unaudited)AssetsInvestments, at fair value (amortized cost of $1,671,817 and $1,096,948, respectively)$1,673,558$1,089,478Derivative asset (cost of $229)—46Cash19,47315,046Restricted cash—2,000Due from counterparty(1)3,620143,335Interest receivable on investments7,7256,689Receivable due on total return swap(1)1514,187Prepaid expenses and other assets992282Total assets$1,705,519$1,261,063


Liabilities and Shareholders' EquityLiabilitiesPayable for investments purchased$86,420$15,837Financing arrangements (net of unamortized debt issuance costs of $6,240 and $3,212, respectively)574,881221,211Accounts payable and accrued expenses1,1671,476Interest payable1,792864Commissions payable for common stock purchased—2Accrued management fees7,4225,781Accrued administrative services expense95682Due to CIG - offering costs645Unrealized depreciation on total return swap(1)—15,402Total liabilities671,783261,300Commitments and contingencies (Note 4 and Note 11)Shareholders' EquityCommon stock, $0.001 par value; 500,000,000 shares authorized;112,958,698 and 109,787,557 shares issued and outstanding, respectively113110Capital in excess of par value1,050,3241,021,280Undistributed net investment income6,9751,428Accumulated net realized loss from investments(4,428)—Accumulated net unrealized appreciation (depreciation) on investments1,741(7,653)Accumulated net realized loss from total return swap(1)(20,989)—Accumulated net unrealized depreciation on total return swap(1)—(15,402)Total shareholders' equity1,033,736999,763Total liabilities and shareholders' equity$1,705,519$1,261,063Net asset value per share of common stock at end of period$9.15$9.11


(1) See Note 7 for a discussion of the Company’s total return swap agreement.


See accompanying notes to consolidated financial statements.





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CĪON Investment Corporation


Consolidated Statements of Operations


(in thousands, except share and per share amounts)


Three Months EndedJune 30,Six Months EndedJune 30,2017201620172016(unaudited)(unaudited)(unaudited)(unaudited)Investment incomeInterest income$34,407$17,727$61,905$34,806Fee and other income9381031,485295Total investment income35,34517,83063,39035,101Operating expensesManagement fees7,4224,61213,9049,124Administrative services expense425434771726General and administrative(1)1,6711,2993,4173,052Interest expense5,6971078,623227Total operating expenses15,2156,45226,71513,129Recoupment of expense support from CIG(2)—548—667Net operating expenses15,2157,00026,71513,796Net investment income20,13010,83036,67521,305Realized and unrealized gainsNet realized (loss) gain on investments(3,082)707(2,342)699Net realized gain on foreign currency3—147—Net change in unrealized appreciation on investments12,21114,2449,3941,639Net realized gain (loss) on total return swap(3)4137,249(13,856)15,611Net change in unrealized (depreciation) appreciation on total return swap(3)(134)8,90715,4027,299Total net realized and unrealized gains9,41131,1078,74525,248Net increase in net assets resulting from operations$29,541$41,937$45,420$46,553Per share information—basic and dilutedNet increase in net assets per share resulting from operations$0.27$0.40$0.41$0.45Weighted average shares of common stock outstanding111,447,448104,835,705110,767,684104,396,643


(1)  See Note 10 for details of the Company's general and administrative expenses.


(2)  See Note 4 for a discussion of expense support from CIG and recoupment of expense support.


(3)  See Note 7 for a discussion of the Company's total return swap agreement.


See accompanying notes to consolidated financial statements.








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CĪON Investment Corporation


Consolidated Statements of Changes in Net Assets


(in thousands, except share and per share amounts)


Six Months EndedJune 30,20172016(unaudited)(unaudited)Changes in net assets from operations:Net investment income$36,675$21,305Net realized (loss) gain on investments(2,342)699Net realized gain on foreign currency147—Net change in unrealized appreciation on investments9,3941,639Net realized (loss) gain on total return swap(1)(13,856)15,611Net change in unrealized appreciation on total return swap(1)15,4027,299Net increase in net assets resulting from operations45,42046,553Changes in net assets from shareholders' distributions:(2)Net investment income(31,128)(20,831)Net realized gain on total return swapNet interest and other income from TRS portfolio(3,594)(16,225)Net gain on TRS loan sales(3)(3,539)(416)Net realized gain on investments and foreign currency(2,233)(699)Net decrease in net assets from shareholders' distributions(40,494)(38,171)Changes in net assets from capital share transactions:Issuance of common stock, net of issuance costs of $1,047 and $736, respectively26,9987,998Reinvestment of shareholders' distributions19,79119,403Repurchase of common stock(17,742)(8,264)Net increase in net assets resulting from capital share transactions29,04719,137Total increase in net assets33,97327,519Net assets at beginning of period999,763904,326Net assets at end of period$1,033,736$931,845Net asset value per share of common stock at end of period$9.15$8.79Shares of common stock outstanding at end of period112,958,698106,020,384Undistributed net investment income at end of period$6,975$474


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|(1) | See Note 7 for a discussion of the Company’s total return swap agreement.

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|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This table presents changes in net assets from shareholders' distributions on a GAAP basis. See Note 5 for a discussion of the sources of distributions paid by the Company.

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|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(3) | During thesix months ended June 30, 2017, the Company realized losses of$25,417, which are not currently deductible on a tax-basis.

See accompanying notes to consolidated financial statements.








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CĪON Investment Corporation


Consolidated Statements of Cash Flows


(in thousands)


Six Months EndedJune 30,20172016(unaudited)(unaudited)Operating activities:Net increase in net assets resulting from operations$45,420$46,553Adjustments to reconcile net increase in net assets resulting from operations to net cash used inoperating activities:Net accretion of discount on investments(4,269)(836)Proceeds from principal repayment of investments259,72987,356Purchase of investments(854,156)(149,048)Paid-in-kind interest(1,389)(367)Increase in short term investments, net(64,000)(13,201)Proceeds from sale of investments87,11612,415Net realized loss (gain) on investments2,342(699)Net unrealized appreciation on investments(9,394)(1,639)Net unrealized appreciation on total return swap(1)(15,402)(7,299)Amortization of deferred financing costs729125(Increase) decrease in due from counterparty(1)139,7158,485(Increase) decrease in interest receivable on investments(1,049)1,015(Increase) decrease in receivable due on investments sold—(1,446)(Increase) decrease in receivable due on total return swap(1)4,036(401)(Increase) decrease in prepaid expenses and other assets(774)(402)Increase (decrease) in payable for investments purchased70,5832,094Increase (decrease) in accounts payable and accrued expenses(638)255Increase (decrease) in interest payable928—Increase (decrease) in accrued management fees1,641182Increase (decrease) in accrued administrative services expense(587)(183)Increase (decrease) in accrued recoupment of expense support from CIG(2)—68Increase (decrease) in due to CIG - offering costs(39)17Net cash used in operating activities(339,458)(16,956)Financing activities:Gross proceeds from issuance of common stock28,04514,193Commissions and dealer manager fees paid(1,049)(1,131)Repurchase of common stock(17,742)(8,264)Shareholders' distributions paid(3)(20,703)(18,768)Borrowings under credit facilities(4)231,698—Borrowings under repurchase agreement(4)125,000—Deferred financing costs paid(3,364)(400)Net cash provided by (used in) financing activities341,885(14,370)Net increase (decrease) in cash and restricted cash2,427(31,326)Cash and restricted cash, beginning of period17,04641,741Cash and restricted cash, end of period$19,473$10,415Supplemental disclosure of cash flow information:Cash paid for interest$6,923$101Supplemental non-cash financing activities:Reinvestment of shareholders' distributions(3)$19,791$19,403


|    |                                                                          
|--- | -------------------------------------------------------------------------
|(1) | See Note 7 for a discussion of the Company’s total return swap agreement.

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|--- | ------------------------------------------------------------------------------------------
|(2) | See Note 4 for a discussion of expense support from CIG and recoupment of expense support.

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|--- | --------------------------------------------------------------------------------
|(3) | See Note 5 for a discussion of the sources of distributions paid by the Company.

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|(4) | See Note 8 for a discussion of the Company’s financing arrangements.

See accompanying notes to consolidated financial statements.





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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands) Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)Senior Secured First Lien Debt - 102.8%AbelConn, LLC / Atrenne Computing Solutions, LLC / Airco Industries, LLC, L+875, 1.00% LIBOR Floor, 7/17/2019 (j)(n)(p)3 Month LIBORAerospace & Defense$20,677$20,368$20,626Academy, Ltd., L+400, 1.00% LIBOR Floor, 7/1/2022 (o)VariousRetail14,65111,59011,465Access CIG, LLC, L+500, 1.00% LIBOR Floor, 10/18/2021 (o)3 Month LIBORServices: Business6,7646,8086,802Adams Publishing Group, LLC, L+700, 1.00% LIBOR Floor, 11/3/2020 (n)3 Month LIBORMedia: Advertising, Printing & Publishing4,6254,5664,579Adams Publishing Group, LLC, 0.50% Unfunded, 6/2/2018 (e)(i)(n)NoneMedia: Advertising, Printing & Publishing1,136——Advanced Integration Technology LP, L+550, 1.00% LIBOR Floor, 4/3/2023 (i)(o)1 Month LIBORAerospace & Defense3,9904,0254,015ALM Media, LLC, L+450, 1.00% LIBOR Floor, 7/31/2020 (o)3 Month LIBORMedia: Advertising, Printing & Publishing7,6327,3037,097Alvogen Pharma US, Inc., L+500, 1.00% LIBOR Floor, 4/1/2022 (o)1 Month LIBORHealthcare & Pharmaceuticals8,4628,4228,336American Clinical Solutions LLC, L+950, 1.00% LIBOR Floor, 6/11/20203 Month LIBORHealthcare & Pharmaceuticals8,9848,8758,804American Dental Partners, Inc., L+475, 1.00% LIBOR Floor, 8/29/2021 (o)3 Month LIBORHealthcare & Pharmaceuticals10,69410,22710,213American Energy - Marcellus, LLC, L+425, 1.00% LIBOR Floor, 8/4/2020 (r)1 Month LIBOREnergy: Oil & Gas4,0332,8832,591American Media, Inc., L+750, 1.00% LIBOR Floor, 8/24/2020 (n)3 Month LIBORMedia: Advertising, Printing & Publishing16,31115,95516,311American Media, Inc., 7.50% Unfunded, 8/24/2020 (e)(i)NoneMedia: Advertising, Printing & Publishing154(5)—American Media, Inc., 0.50% Unfunded, 8/24/2020 (e)(i)NoneMedia: Advertising, Printing & Publishing379(11)—American Residential Services, LLC, L+400, 1.00% LIBOR Floor, 6/30/2022 (o)1 Month LIBORConstruction & Building16,94716,99317,032American Teleconferencing Services, Ltd., L+650, 1.00% LIBOR Floor, 12/8/2021 (i)(n)(o)(p)1 Month LIBORTelecommunications21,95220,34221,924AMPORTS, Inc., L+500, 1.00% LIBOR Floor, 5/19/2020 (j)(p)3 Month LIBORAutomotive18,94318,63718,611AMZ Holding Corp., L+500, 1.00% LIBOR Floor, 6/27/20221 Month LIBORChemicals, Plastics & Rubber6,7406,6396,639AP Exhaust Acquistion, LLC, L+500, 1.00% LIBOR Floor, 5/10/2024 (o)2 Month LIBORAutomotive5,6415,4395,556Aquilex, LLC, L+400, 1.00% LIBOR Floor, 12/31/2020 (o)1 Month LIBORChemicals, Plastics & Rubber1,8131,7621,785Associated Asphalt Partners, LLC, L+525, 1.00% LIBOR Floor, 4/5/2024 (o)1 Month LIBORConstruction & Building2,9462,9312,990Avaya Inc., L+750, 1.00% LIBOR Floor, 1/24/20181 Month LIBORTelecommunications3,5093,4883,630Avaya Inc., L+525, 1.00% LIBOR Floor, 5/29/2020 (o)3 Month LIBORTelecommunications14,68911,73111,811Azure Midstream Energy, LLC, L+650, 1.00% LIBOR Floor, 11/15/2018 (o)1 Month LIBOREnergy: Oil & Gas2,1882,1022,056Blue Ribbon, LLC, L+400, 1.00% LIBOR Floor, 11/15/2021 (o)3 Month LIBORBeverage, Food & Tobacco9,9259,9259,695California Pizza Kitchen, Inc., L+600, 1.00% LIBOR Floor, 8/23/2022 (i)(o)3 Month LIBORBeverage, Food & Tobacco9,98710,01210,000Caraustar Industries, Inc., L+550, 1.00% LIBOR Floor, 3/14/2022 (o)3 Month LIBORForest Products & Paper5,6065,6735,619Central Security Group, Inc., L+563, 1.00% LIBOR Floor, 10/6/2021 (i)(o)1 Month LIBORServices: Consumer17,99118,02718,002CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/2023 (n)(p)3 Month LIBORMedia: Diversified & Production50,00049,04349,500CF Entertainment Inc., L+850, 1.00% LIBOR Floor, 1/27/20233 Month LIBORMedia: Diversified & Production15,00014,71314,962CF Entertainment Inc., 2.00% Unfunded, 1/28/2019 (e)(i)NoneMedia: Diversified & Production10,000(196)(100)Charming Charlie, LLC, L+800, 1.00% LIBOR Floor, 12/24/20193 Month LIBORRetail7,7724,1813,964Confie Seguros Holding II Co., L+550, 1.00% LIBOR Floor, 4/16/2022 (i)(o)1 Month LIBORBanking, Finance, Insurance & Real Estate7,9877,9557,903Cozzini Bros., Inc., L+550, 1.00% LIBOR Floor, 3/10/20231 Month LIBORServices: Business2,9932,9352,933CSP Technologies North America, LLC, L+525, 1.00% LIBOR Floor, 1/29/2022 (p)3 Month LIBORChemicals, Plastics & Rubber13,58813,33013,622


See accompanying notes to consolidated financial statements.





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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)CT Technologies Intermediate Holdings, Inc., L+425, 1.00% LIBOR Floor, 12/1/2021 (p)1 Month LIBORHealthcare & Pharmaceuticals14,67613,97914,630David's Bridal, Inc., L+400, 1.25% LIBOR Floor, 10/11/2019 (o)3 Month LIBORRetail3,4772,9382,651DBRS, Inc., L+525, 1.00% LIBOR Floor, 3/4/2022 (h)(o)2 Month LIBORServices: Business12,93812,48512,679Deluxe Entertainment Services Group Inc., L+550, 1.00% LIBOR Floor, 2/28/2020 (o)1 Month LIBORMedia: Diversified & Production9,9329,8999,939DFS Holding Company, Inc., L+500, 1.00% LIBOR Floor, 2/17/20223 Month LIBORCapital Equipment3,8303,7863,782Dodge Data & Analytics, LLC / Skyline Data News and Analytics, LLC, L+875, 1.00% LIBOR Floor, 10/31/2019 (n)3 Month LIBORConstruction & Building10,0129,8989,849Dorner Holding Corp., L+575, 1.00% LIBOR Floor, 3/15/20233 Month LIBORCapital Equipment1,1151,0871,087ECI Acquisition Holdings, Inc., L+625, 1.00% LIBOR Floor, 3/11/2019 (n)3 Month LIBORHigh Tech Industries8,2968,2788,296EIG Investors Corp., L+400, 1.00% LIBOR Floor, 2/9/2023 (h)(o)2 Month LIBORServices: Business1,3941,4021,399Elemica, Inc., L+800, 1.00% LIBOR Floor, 7/7/2021 (n)(p)1 Month LIBORHigh Tech Industries17,32516,95016,978Elemica, Inc., 0.50% Unfunded, 7/7/2021 (e)(i)NoneHigh Tech Industries2,500(51)(50)Emmis Operating Company, L+700, 1.00% LIBOR Floor, 4/18/2019 (o)3 Month LIBORMedia: Broadcasting & Subscription7,2706,8747,198Entertainment Studios P&A LLC, 5.00%, 5/18/2037NoneMedia: Diversified & Production15,00014,70018,150EnTrans International, LLC, L+750, 1.00% LIBOR Floor, 6/4/20203 Month LIBORCapital Equipment13,31210,15610,783Evergreen Skills Lux S.À.R.L., L+475, 1.00% LIBOR Floor, 4/28/2021 (h)(i)(o)1 Month LIBORHigh Tech Industries10,2369,5299,690Everi Payments Inc., L+450, 1.00% LIBOR Floor, 5/9/2024 (o)2 Month LIBORHotel, Gaming & Leisure4,1944,1734,239F+W Media, Inc., L+650, 1.50% LIBOR Floor, 5/24/20221 Month LIBORMedia: Diversified & Production1,1061,1061,162F+W Media, Inc., L+1000, 1.50% LIBOR Floor, 5/24/2022 (n)(r)(s)1 Month LIBORMedia: Diversified & Production2,5902,5912,478Forbes Media LLC, L+675, 1.00% LIBOR Floor, 9/12/2019 (j)(p)1 Month LIBORMedia: Advertising, Printing & Publishing15,00014,68414,737Harland Clarke Holdings Corp., L+550, 1.00% LIBOR Floor, 2/9/2022 (o)3 Month LIBORServices: Business14,81814,93514,855Healogics, Inc., L+425, 1.00% LIBOR Floor, 7/1/2021 (o)3 Month LIBORHealthcare & Pharmaceuticals4,8754,5793,892Help/Systems Holdings, Inc., L+450, 1.00% LIBOR Floor, 10/8/2021 (o)3 Month LIBORServices: Business11,97011,95612,037Ignite Restaurant Group, Inc., L+700, 1.00% LIBOR Floor, 2/13/2019 (n)(r)3 Month LIBORBeverage, Food & Tobacco10,48210,4185,241Infinity Sales Group, LLC, L+1050, 1.00% LIBOR Floor, 11/21/2018 (n)1 Month LIBORServices: Business8,0827,5827,456Infogroup Inc., L+500, 1.00% LIBOR Floor, 4/3/2023 (i)(o)1 Month LIBORMedia: Advertising, Printing & Publishing9,4869,5229,492International Seaways, Inc., L+550, 1.00% LIBOR Floor, 6/22/2022 (h)(i)(o)3 Month LIBORTransportation: Cargo10,0009,8009,950Intertain Group Ltd., L+650, 1.00% LIBOR Floor, 4/8/2022 (h)(n)3 Month LIBORHotel, Gaming & Leisure1,6611,6361,678iPipeline, Inc., L+625, 1.00% LIBOR Floor, 8/4/20221 Month LIBORHigh Tech Industries7,9557,7777,776Ipsen International GmbH, L+800, 1.00% LIBOR Floor, 9/30/2019 (h)(j)2 Month LIBORCapital Equipment1,3381,3421,338Ipsen, Inc., L+700, 1.00% LIBOR Floor, 9/30/2019 (j)(p)2 Month LIBORCapital Equipment8,0958,0138,075Island Medical Management Holdings, LLC, L+550, 1.00% LIBOR Floor, 9/1/2022 (p)3 Month LIBORHealthcare & Pharmaceuticals13,77813,60513,602Island Medical Management Holdings, LLC, 1.00% Unfunded, 9/1/2022 (e)(i)NoneHealthcare & Pharmaceuticals1,188—(15)ITC Service Group Acquisition LLC, L+950, 0.50% LIBOR Floor, 5/26/2021 (j)(p)1 Month LIBORHigh Tech Industries11,25011,05711,109JDC Healthcare Management, LLC, L+625, 1.00% LIBOR Floor, 4/10/20231 Month LIBORHealthcare & Pharmaceuticals6,2766,1546,150Kingpin Intermediate Holdings LLC, L+425, 1.00% LIBOR Floor, 6/29/2024 (i)(o)1 Month LIBORHotel, Gaming & Leisure10,0009,95010,044KLO Intermediate Holdings, LLC, L+775, 0.75% LIBOR Floor, 4/7/2022 (p)1 Month LIBORChemicals, Plastics & Rubber4,4404,3874,384KLO Intermediate Holdings, LLC, L+775, 0.75% LIBOR Floor, 4/7/2022 (p)1 Month LIBORChemicals, Plastics & Rubber7,6697,5777,573


See accompanying notes to consolidated financial statements.





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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands) Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)KMG Chemicals, Inc., L+425, 1.00% LIBOR Floor, 6/15/2024 (h)(i)(o)1 Month LIBORChemicals, Plastics & Rubber1,8861,8761,909KNB Holdings Corp., L+550, 1.00% LIBOR Floor, 4/26/2024 (o)6 Month LIBORConsumer Goods: Durable16,00015,68315,920KPS Global LLC, L+250, 1.00% LIBOR Floor, 4/5/20223 Month LIBORCapital Equipment685671675KPS Global LLC, L+690, 1.00% LIBOR Floor, 4/5/20223 Month LIBORCapital Equipment5,4485,3395,367Labvantage Solutions Inc., L+800, 1.00% LIBOR Floor, 12/29/2020 (n)3 Month LIBORHigh Tech Industries4,7504,7114,750Labvantage Solutions Ltd., E+800, 1.00% EURIBOR Floor, 12/29/2020 (h)(p)3 Month EURIBORHigh Tech Industries€4,3514,8524,972LBP Intermediate Holdings LLC, L+550, 1.00% LIBOR Floor, 7/10/20203 Month LIBORContainers, Packaging & Glass1,9701,9191,916Liaison Acquisition, LLC, L+525, 1.00% LIBOR Floor, 2/8/20231 Month LIBORHigh Tech Industries5,0004,9294,925Lift Brands, Inc., L+800, 1.00% LIBOR Floor, 12/23/2019(n)3 Month LIBORServices: Consumer9,2909,2019,244LTCG Holdings Corp., L+500, 1.00% LIBOR Floor, 6/6/2020 (o)2 Month LIBORServices: Business5,9115,5545,586Ministry Brands, LLC, L+500, 1.00% LIBOR Floor, 12/2/2022 (n)1 Month LIBORServices: Business12,72212,35512,413Ministry Brands, LLC, L+150 Unfunded, 1.00% LIBOR Floor, 10/6/2018 (e)(i)1 Month LIBORServices: Business180—(4)Moss Holding Company, L+675, 1.00% LIBOR Floor, 4/17/2023 (p)3 Month LIBORServices: Business18,97218,64518,687Moss Holding Company, 0.75% Unfunded, 5/7/2018 (e)(i)NoneServices: Business1,046—(16)Moss Holding Company, 0.50% Unfunded, 4/17/2023 (e)(i)NoneServices: Business2,232—(33)Murray Energy Corp., L+725, 1.00% LIBOR Floor, 4/16/2020 (o)3 Month LIBORMetals & Mining3,6493,5503,589Nathan's Famous Inc., 10.00%, 3/15/2020 (h)(n)NoneBeverage, Food & Tobacco6,0006,0006,418Navex Global, Inc., L+425, 1.00% LIBOR Floor, 11/19/2021 (o)3 Month LIBORHigh Tech Industries18,00318,06018,070Nextech Systems, LLC, L+725, 1.00% LIBOR Floor, 6/22/2021 (j)(n)1 Month LIBORHigh Tech Industries15,34214,82315,036NWN Acquisition Holding Company LLC, L+900, 1.00% LIBOR Floor, 10/16/2020 (j)(n)3 Month LIBORHigh Tech Industries13,49813,16713,566Onex TSG Holdings II Corp., L+400, 1.00% LIBOR Floor, 7/29/2022 (o)1 Month LIBORHealthcare & Pharmaceuticals3,4093,4303,426Opal Acquisition, Inc., L+400, 1.00% LIBOR Floor, 11/27/2020 (o)3 Month LIBORHealthcare & Pharmaceuticals10,2629,6709,524Orbcomm Inc., 8.00%, 4/1/2024NoneTelecommunications9,2379,2379,837Paris Presents Inc., L+500, 1.00% LIBOR Floor, 12/31/2020 (p)1 Month LIBORConsumer Goods: Durable8,9778,8918,977Pelican Products, Inc., L+425, 1.00% LIBOR Floor, 4/10/2020 (o)3 Month LIBORChemicals, Plastics & Rubber2,4902,4932,503Petroflow Energy Corp., L+800, 1.00% LIBOR Floor, 6/29/2019 (s)1 Month LIBOREnergy: Oil & Gas4,2314,0404,030Photonis Technologies SAS, L+750, 1.00% LIBOR Floor, 9/18/2019 (h)(o)3 Month LIBORAerospace & Defense6,3975,4635,758Plano Molding Company, LLC, L+750, 1.00% LIBOR Floor, 5/12/2021 (n)1 Month LIBORConsumer Goods: Non-Durable8,7968,7318,479Professional Datasolutions, Inc., L+550, 1.00% LIBOR Floor, 5/20/20221 Month LIBORHigh Tech Industries4,6284,5614,559Project Leopard Holdings, Inc., L+550, 1.00% LIBOR Floor, 7/7/2023 (i)(o)3 Month LIBORHigh Tech Industries4,0003,9904,016PSC Industrial Holdings Corp., L+475, 1.00% LIBOR Floor, 12/5/2020 (o)3 Month LIBORServices: Business4,8754,6464,717Radio One, Inc., L+400, 1.00% LIBOR Floor, 4/18/2023 (o)3 Month LIBORMedia: Broadcasting & Subscription8,9578,8718,913Retriever Medical/Dental Payments LLC, L+475, 1.00% LIBOR Floor, 2/3/20233 Month LIBORServices: Business4,9884,8824,875


See accompanying notes to consolidated financial statements.





7


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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)Rimini Street, Inc., 15.00%, 6/24/2020 (s)NoneHigh Tech Industries14,98414,74716,148Russell Investments US Institutional Holdco, Inc., L+575, 1.00% LIBOR Floor, 6/1/2023 (o)1 Month LIBORBanking, Finance, Insurance & Real Estate3,9804,0354,026Scientific Games International, Inc., L+400, 0.75% LIBOR Floor, 10/1/2021 (h)(o)2 Month LIBORHotel, Gaming & Leisure8,2468,3418,339Sequoia Healthcare Management, LLC, 16.00%, 7/17/2019 (n)(s)NoneHealthcare & Pharmaceuticals6,0185,9406,018SG Acquisition, Inc., L+500, 1.00% LIBOR Floor, 3/29/2024 (o)3 Month LIBORBanking, Finance, Insurance & Real Estate4,1854,1464,159Shift PPC LLC, L+600, 1.00% LIBOR Floor, 12/22/2021 (p)1 Month LIBORHigh Tech Industries4,9104,7994,910SI Organization, Inc., L+475, 1.00% LIBOR Floor, 11/23/2019 (o)3 Month LIBORServices: Business7,7137,8167,797Southcross Holdings Borrower LP, 9.00%, 4/13/2023 (s)NoneEnergy: Oil & Gas177156156Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 1/21/2020 (n)3 Month LIBORHealthcare & Pharmaceuticals12,18812,11512,066Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 7/21/2020 (s)3 Month LIBORHealthcare & Pharmaceuticals252250250Sprint Industrial Holdings, LLC, L+575, 1.25% LIBOR Floor, 5/14/2019 (n)3 Month LIBOREnergy: Oil & Gas7,2686,9006,287STG-Fairway Acquisitions, Inc., L+525, 1.00% LIBOR Floor, 6/30/2022 (o)2 Month LIBORServices: Business3,9293,8163,619Studio Movie Grill Holdings, LLC, L+725, 1.00% LIBOR Floor, 9/30/2020 (e)(n)3 Month LIBORHotel, Gaming & Leisure14,95414,83214,954Survey Sampling International, LLC, L+500, 1.00% LIBOR Floor, 12/16/2020 (o)3 Month LIBORServices: Business7,8207,8577,839Telestream Holdings Corp., L+677, 1.00% LIBOR Floor, 1/15/2020 (j)(n)3 Month LIBORHigh Tech Industries8,6848,4838,510Tenere Inc., L+1000, 1.00% LIBOR Floor, 12/23/2021 (n)(p)3 Month LIBORCapital Equipment31,84031,46931,245Tensar Corp., L+475, 1.00% LIBOR Floor, 7/9/2021 (i)(o)3 Month LIBORChemicals, Plastics & Rubber8,2367,6827,700Therapure Biopharma Inc., L+875, 0.50% LIBOR Floor, 12/1/2021 (h)1 Month LIBORHealthcare & Pharmaceuticals15,00014,93115,338TIBCO Software Inc., L+450, 1.00% LIBOR Floor, 12/4/2020 (o)1 Month LIBORHigh Tech Industries17,79617,95717,919U.S. Renal Care, Inc., L+425, 1.00% LIBOR Floor, 12/30/2022 (i)(o)3 Month LIBORHealthcare & Pharmaceuticals4,9874,8914,828Vince, LLC, L+500, 1.00% LIBOR Floor, 11/27/2019 (h)(o)3 Month LIBORRetail1,1271,0751,025VRC Companies, LLC, L+650, 1.00% LIBOR Floor, 3/31/20233 Month LIBORServices: Business1,5081,4761,508WD Wolverine Holdings, LLC, L+550, 1.00% LIBOR Floor, 8/16/2022 (o)3 Month LIBORHealthcare & Pharmaceuticals14,40914,09013,806Western Dental Services, Inc., L+525, 1.00% LIBOR Floor, 6/30/2023 (i)(o)1 Month LIBORHealthcare & Pharmaceuticals2,1972,1752,188Woodstream Corporation, L+625, 1.00% LIBOR Floor, 5/29/20223 Month LIBORConsumer Goods: Non-Durable7,9167,8807,880Woodstream Corporation, 0.75% Unfunded, 5/29/2021 (e)(i)NoneConsumer Goods: Non-Durable1,553—(7)Worley Claims Services, LLC, L+800, 1.00% LIBOR Floor, 10/31/2020 (n)1 Month LIBORServices: Business18,29718,14318,114Total Senior Secured First Lien Debt1,057,6641,062,513Senior Secured Second Lien Debt - 40.0%ABG Intermediate Holdings 2 LLC, L+850, 1.00% LIBOR Floor, 5/27/2022 (i)(n)(p)3 Month LIBORRetail19,48819,20819,732Access CIG, LLC, L+875, 1.00% LIBOR Floor, 10/17/2022 (p)1 Month LIBORServices: Business16,03015,48915,549ALM Media, LLC, L+800, 1.00% LIBOR Floor, 7/30/2021 (n)(p)3 Month LIBORMedia: Advertising, Printing & Publishing10,34410,2219,309American Residential Services LLC, L+800, 1.00% LIBOR Floor, 12/31/2021 (n)3 Month LIBORConstruction & Building4,9334,8944,958Asurion, LLC, L+750, 1.00% LIBOR Floor, 3/3/2021 (o)1 Month LIBORServices: Consumer7,8917,9907,940


See accompanying notes to consolidated financial statements.





8


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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)Confie Seguros Holding II Co., L+900, 1.25% LIBOR Floor, 5/8/2019 (p)3 Month LIBORBanking, Finance, Insurance & Real Estate8,8278,5928,695Conisus, LLC, L+875, 1.00% LIBOR Floor, 6/23/20213 Month LIBORHealthcare & Pharmaceuticals11,7509,7758,812Drew Marine Group, Inc., L+700, 1.00% LIBOR Floor, 5/19/2021 (h)(n)1 Month LIBORChemicals, Plastics & Rubber9,5009,4619,500Elements Behavioral Health, Inc., L+1200, 1.00% LIBOR Floor, 2/11/2020 (s)3 Month LIBORHealthcare & Pharmaceuticals6,0836,0524,988Emerald 3 Ltd., L+700, 1.00% LIBOR Floor, 5/16/2022 (h)(n)3 Month LIBOREnvironmental Industries3,0002,9802,775Evergreen Skills Lux S.À.R.L., L+825, 1.00% LIBOR Floor, 4/28/2022 (h)1 Month LIBORHigh Tech Industries9,9997,0648,299Flexera Software LLC, L+700, 1.00% LIBOR Floor, 4/2/2021 (p)3 Month LIBORHigh Tech Industries9,3859,1519,362Genex Holdings, Inc., L+775, 1.00% LIBOR Floor, 5/30/2022 (n)(p)1 Month LIBORServices: Business11,41011,33111,282GHX Ultimate Parent Corp., L+800, 1.00% LIBOR Floor, 6/30/20253 Month LIBORHealthcare & Pharmaceuticals13,92613,50813,508Global Tel*Link Corp., L+775, 1.25% LIBOR Floor, 11/23/2020 (p)3 Month LIBORTelecommunications9,5009,4949,488GOBP Holdings, Inc., L+825, 1.00% LIBOR Floor, 10/21/2022 (o)3 Month LIBORRetail4,0004,0214,040Institutional Shareholder Services Inc., L+850, 1.00% LIBOR Floor, 4/30/2022 (n)3 Month LIBORServices: Business10,64810,54410,702Medical Solutions Holdings, Inc., L+825, 1.00% LIBOR Floor, 6/16/2025 (n)3 Month LIBORHealthcare & Pharmaceuticals10,0009,8509,950Mergermarket USA, Inc., L+650, 1.00% LIBOR Floor, 2/4/2022 (n)(o)1 Month LIBORServices: Business10,38010,28210,380Ministry Brands, LLC, L+925, 1.00% LIBOR Floor, 6/2/2023 (n)1 Month LIBORServices: Business7,0006,9006,930Mississippi Sand, LLC, L+1000, 1.00% LIBOR Floor, 11/21/20193 Month LIBORMetals & Mining13,19611,06111,943Mitchell International, Inc., L+750, 1.00% LIBOR Floor, 10/11/2021 (n)(o)1 Month LIBORHigh Tech Industries14,90914,51615,068Navex Global, Inc., L+875, 1.00% LIBOR Floor, 11/18/2022 (n)3 Month LIBORHigh Tech Industries10,27810,15410,227Niacet Corp., E+875, 1.00% EURIBOR Floor, 8/1/2024 (h)3 Month EURIBORChemicals, Plastics & Rubber€7,4897,9328,386Onex Carestream Finance LP, L+850, 1.00% LIBOR Floor, 12/7/2019 (o)3 Month LIBORHealthcare & Pharmaceuticals13,63612,37213,405Onex TSG Holdings II Corp., L+850, 1.00% LIBOR Floor, 7/31/2023 (n)(o)1 Month LIBORHealthcare & Pharmaceuticals12,24912,13912,180Paris Presents Inc., L+875, 1.00% LIBOR Floor, 12/31/2021 (n)1 Month LIBORConsumer Goods: Durable3,5003,4323,465Patterson Medical Supply, Inc., L+850, 1.00% LIBOR Floor, 8/28/2023 (n)1 Month LIBORHealthcare & Pharmaceuticals13,50013,37713,230Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/2021 (o)3 Month LIBORChemicals, Plastics & Rubber3,4693,4573,469PetroChoice Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/21/2023 (n)1 Month LIBORChemicals, Plastics & Rubber15,00014,70914,737PFS Holding Corp., L+725, 1.00% LIBOR Floor, 1/31/2022 (o)1 Month LIBORRetail4,9984,6664,611Premiere Global Services, Inc., L+950, 1.00% LIBOR Floor, 6/6/2022 (n)1 Month LIBORTelecommunications3,0002,8892,955PSC Industrial Holdings Corp., L+825, 1.00% LIBOR Floor, 12/5/2021 (n)3 Month LIBORServices: Business10,0009,8558,850Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/2021 (o)(p)1 Month LIBORTelecommunications5,5005,4865,473Securus Technologies Holdings, Inc., L+825, 1.00% LIBOR Floor, 6/20/2025 (i)1 Month LIBORTelecommunications2,9422,9132,968SMG, L+825, 1.00% LIBOR Floor, 2/27/2021 (n)3 Month LIBORHotel, Gaming & Leisure6,1426,1426,134STG-Fairway Acquisitions, Inc., L+925, 1.00% LIBOR Floor, 6/30/2023 (n)(o)3 Month LIBORServices: Business10,0009,8748,800Survey Sampling International, LLC, L+900, 1.00% LIBOR Floor, 12/16/20213 Month LIBORServices: Business5,0004,9274,925TexOak Petro Holdings LLC, 8.00%, 12/29/2019 (s)NoneEnergy: Oil & Gas6,9932,1213,007TMK Hawk Parent, Corp., L+750, 1.00% LIBOR Floor, 10/1/2022 (n)1 Month LIBORBeverage, Food & Tobacco15,00014,88115,000TouchTunes Interactive Networks, Inc., L+825, 1.00% LIBOR Floor, 5/29/2022 (p)3 Month LIBORHotel, Gaming & Leisure6,0005,9475,992U.S. Anesthesia Partners, Inc., L+725, 1.00% LIBOR Floor, 6/23/2025 (i)1 Month LIBORHealthcare & Pharmaceuticals10,23510,08010,081


See accompanying notes to consolidated financial statements.





9


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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(m)FairValue(c)U.S. Renal Care, Inc., L+800, 1.00% LIBOR Floor, 12/29/2023 (n)3 Month LIBORHealthcare & Pharmaceuticals10,0009,8299,500Wand Intermediate I LP, L+725, 1.00% LIBOR Floor, 9/19/2022 (n)2 Month LIBORAutomotive16,00015,87716,120Winebow Holdings, Inc., L+750, 1.00% LIBOR Floor, 1/2/2022 (n)1 Month LIBORBeverage, Food & Tobacco12,82312,56511,990Zywave Inc., L+900, 1.00% LIBOR Floor, 11/17/20233 Month LIBORHigh Tech Industries5,0004,9324,975Total Senior Secured Second Lien Debt412,940413,690Collateralized Securities and Structured Products - Debt - 2.8%Deutsche Bank AG Frankfurt CRAFT 2014-1 Class Credit Linked Note, L+965, 5/15/2019 (h)3 Month LIBORDiversified Financials5,4005,4005,329Deutsche Bank AG Frankfurt CRAFT 2015-2 Class Credit Linked Note, L+925, 1/16/2022 (h)3 Month LIBORDiversified Financials15,50015,50014,840Ivy Hill Middle Market Credit Fund VII, Ltd. Class E Notes,L+565, 10/20/2025 (g)(h)3 Month LIBORDiversified Financials2,0001,8841,903NXT Capital CLO 2014-1, LLC Class E Notes, L+550, 4/23/2026 (g)(h)3 Month LIBORDiversified Financials7,5007,1167,041Total Collateralized Securities and Structured Products - Debt29,90029,113Collateralized Securities and Structured Products - Equity - 2.9%Anchorage Capital CLO 2012-1, Ltd. Subordinated Notes, 7.45% Estimated Yield, 1/13/2025 (h)(f)Diversified Financials4,0002,7072,310APIDOS CLO XVI Subordinated Notes, 0.00% Estimated Yield, 1/19/2025 (h)(f)Diversified Financials9,0004,2053,974CENT CLO 19 Ltd. Subordinated Notes, 10.50% Estimated Yield, 10/29/2025 (h)(f)Diversified Financials2,0001,3111,127Galaxy XV CLO Ltd. Class A Subordinated Notes, 13.94% Estimated Yield, 4/15/2025 (h)(f)Diversified Financials4,0002,3561,995Ivy Hill Middle Market Credit Fund VII, Ltd. Subordinated Notes, 10.29% Estimated Yield, 10/20/2025 (h)(f)Diversified Financials2,0001,5991,480Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan, 10.35% Estimated Yield, 2/2/2026 (e)(h)(f)Diversified Financials10,0009,8859,788Ivy Hill Middle Market Credit Fund IX, Ltd. Subordinated Notes, 15.54% Estimated Yield, 10/18/2025 (h)(f)Diversified Financials8,1465,9455,998Ivy Hill Middle Market Credit Fund X, Ltd., 11.20% Estimated Yield, 7/24/2027 (h)(f)Diversified Financials4,7603,8033,518Total Collateralized Securities and Structured Products - Equity31,81130,190Equity - 0.4%Commerce Topco, LLC (q)Healthcare & Pharmaceuticals87 Units8787Commerce Parent, Inc. (q)Healthcare & Pharmaceuticals87 Units8585F+W Media, Inc. (n)(q)Media: Diversified & Production31,211 Units——Mooregate ITC Acquisition, LLC, Class A Units (q)High Tech Industries500 Units563475NS NWN Acquisition, LLC (q)High Tech Industries404 Units393463NSG Co-Invest (Bermuda) LP (h)(q)Consumer Goods: Durable1,575 Units1,0001,025Southcross Holdings GP, LLC, Units (q)Energy: Oil & Gas188 Units——Southcross Holdings LP, Class A-II Units (q)Energy: Oil & Gas188 Units75111Speed Commerce Investment Part, LLC (q)High Tech Industries629 Units2,6401,200Tenere Inc. Warrant (q)Capital EquipmentN/A161108Texoak Petro Holdings LLC (q)Energy: Oil & Gas60,000 Units——Total Equity5,0043,554Short Term Investments - 13.0%(k)First American Treasury Obligations Fund, Class Z Shares, 0.78% (l)134,498134,498Total Short Term Investments134,498134,498TOTAL INVESTMENTS - 161.9%$1,671,8171,673,558LIABILITIES IN EXCESS OF OTHER ASSETS - (61.9%)(639,822)NET ASSETS - 100%$1,033,736


See accompanying notes to consolidated financial statements.





10


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CĪON Investment Corporation


Consolidated Schedule of Investments (unaudited)


June 30, 2017


(in thousands)


|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | All of the Company’s investments are issued by eligible U.S. portfolio companies, as defined in the Investment Company Act of 1940, as amended, or the 1940 Act, except for investments specifically identified as non-qualifying per note h. below. The Company does not control and is not an affiliate of any of the portfolio companies in its investment portfolio. Unless specifically identified in note s. below, investments do not contain a paid-in-kind, or PIK, interest provision.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | The 1, 2, 3, and 6 month London Interbank Offered Rate, or LIBOR, rates were1.22%,1.25%,1.30%, and1.45%, respectively, as of June 30, 2017.  The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of June 30, 2017, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to June 30, 2017. The 3 month Euro Interbank Offered Rate, or EURIBOR, rate was (0.37%) as of June 30, 2017.

|   |                                                                                      
|-- | -------------------------------------------------------------------------------------
|c. | Fair value determined in good faith by the Company’s board of directors (see Note 9).

|   |                                                    
|-- | ---------------------------------------------------
|d. | Denominated in U.S. dollars unless otherwise noted.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|e. | As discussed in Note 11, on June 30, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $4,126 and $1,111 to Studio Movie Grill Holdings, LLC and Ivy Hill Middle Market Credit Fund VIII, Ltd., respectively. On August 7, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $10,000, $4,127, $3,278, $2,500, $1,553, $1,188, $1,136, $1,111, $533, and $57 to CF Entertainment Inc., Studio Movie Grill Holdings, LLC, Moss Holding Company, Elemica, Inc., Woodstream Corp., Island Medical Management Holdings, LLC, Adams Publishing Group, LLC, Ivy Hill Middle Market Credit Fund VIII, Ltd., American Media, Inc., and Ministry Brands, LLC, respectively.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|f. | The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.

|   |                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|g. | Ivy Hill Middle Market Credit Fund VII Class E Notes and NXT Capital CLO 2014-1 Class E Notes were rated Ba2 on Moody's credit scale as of June 30, 2017.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|h. | The investment or a portion thereof is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets as defined under Section 55 of the 1940 Act. As of June 30, 2017, 89.5% of the Company’s total assets represented qualifying assets.

|   |                                                             
|-- | ------------------------------------------------------------
|i. | Position or a portion thereof unsettled as of June 30, 2017.

|   |                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|j. | In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company may be entitled to receive additional amounts as a result of an arrangement between the Company and other lenders in the syndication in exchange for lower payment priority.

|   |                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|k. | Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.

|   |                                           
|-- | ------------------------------------------
|l. | 7-day effective yield as of June 30, 2017.

|   |                                                                               
|-- | ------------------------------------------------------------------------------
|m. | Represents amortized cost for debt securities and cost for equity investments.

|   |                                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|n. | Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, 34th Street Funding, LLC, or 34th Street, and was pledged as collateral supporting the amounts outstanding under the credit facility with JPMorgan Chase Bank, National Association, or JPM, as of June 30, 2017 (see Note 8).

|   |                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o. | Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Flatiron Funding II, LLC, or Flatiron Funding II, and was pledged as collateral supporting the amounts outstanding under the credit facility with Citibank N.A., or Citibank, as of June 30, 2017 (see Note 8).

|   |                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|p. | Investment or a portion thereof held within the Company’s wholly-owned consolidated subsidiary, Murray Hill Funding II, LLC, or Murray Hill Funding II, and was pledged as collateral supporting the amounts outstanding under the repurchase agreement with UBS AG, or UBS, as of June 30, 2017 (see Note 8).

|   |                               
|-- | ------------------------------
|q. | Non-income producing security.

|   |                                                          
|-- | ---------------------------------------------------------
|r. | Investment was on non-accrual status as of June 30, 2017.

|   |                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|s. | For the six months ended June 30, 2017, the following investments contain a PIK interest provision whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities:

Interest RateInterest AmountPortfolio CompanyInvestment TypeCashPIKAll-in-RateCashPIKTotalElements Behavioral Health, Inc.Senior Secured Second Lien Debt—13.00%13.00%$—$392$392F+W Media, Inc.(r)Senior Secured First Lien Debt1.50%10.00%11.50%$—$—$—Petroflow Energy Corp.Senior Secured First Lien Debt3.00%6.00%9.00%$70$142$212Rimini Street, Inc.Senior Secured First Lien Debt12.00%3.00%15.00%$1,003$331$1,334Sequoia Healthcare Management, LLCSenior Secured First Lien Debt12.00%4.00%16.00%$345$130$475Southcross Holdings Borrower LPSenior Secured First Lien Debt3.50%5.50%9.00%$3$5$8Spinal USA, Inc. / Precision Medical Inc.Senior Secured First Lien Debt—10.50%10.50%$—$123$123TexOak Petro Holdings LLCSenior Secured Second Lien Debt—8.00%8.00%$—$266$266


See accompanying notes to consolidated financial statements.





11


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands) Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(p)FairValue(c)Senior Secured First Lien Debt - 49.0%AbelConn, LLC / Atrenne Computing Solutions, LLC / Airco Industries, LLC, L+850, 1.00% LIBOR Floor, 7/17/2019(j)3 Month LIBORAerospace & Defense$22,112$21,702$21,780Adams Publishing Group, LLC, L+700, 1.00% LIBOR Floor, 11/3/2020(n)3 Month LIBORMedia: Advertising, Printing & Publishing3,8923,8183,833American Clinical Solutions LLC, L+950, 1.00% LIBOR Floor, 6/11/20203 Month LIBORHealthcare & Pharmaceuticals9,0348,9088,492American Media, Inc., L+750, 1.00% LIBOR Floor, 8/24/2020(n)3 Month LIBORMedia: Advertising, Printing & Publishing11,46711,15011,123American Media, Inc., 0.50% Unfunded, 8/24/2020(e)NoneMedia: Advertising, Printing & Publishing505(15)(15)American Media, Inc., 7.50%, 8/24/2020(e)NoneMedia: Advertising, Printing & Publishing206(6)(6)American Teleconferencing Services, Ltd., L+650, 1.00% LIBOR Floor, 12/8/2021(n)3 Month LIBORTelecommunications19,24817,47518,863AMPORTS, Inc., L+500, 1.00% LIBOR Floor, 5/19/2020(j)3 Month LIBORAutomotive19,10018,74318,718Blue Ribbon, LLC, L+400, 1.00% LIBOR Floor, 11/15/2021(i)3 Month LIBORBeverage, Food & Tobacco9,9759,9759,972CF Entertainment Inc., L+1100, 1.00% LIBOR Floor, 6/26/2020(n)3 Month LIBORMedia: Diversified & Production17,09417,05717,094Dodge Data & Analytics, LLC / Skyline Data News and Analytics, LLC, L+875, 1.00% LIBOR Floor, 10/31/2019(n)3 Month LIBORConstruction & Building10,38710,24110,218ECI Acquisition Holdings, Inc., L+625, 1.00% LIBOR Floor, 3/11/2019(n)3 Month LIBORHigh Tech Industries8,5178,4938,517Elemica, Inc., L+800, 1.00% LIBOR Floor, 7/7/2021(n)1 Month LIBORHigh Tech Industries17,41317,00516,977Elemica, Inc., 0.50% Unfunded, 7/7/2021(e)NoneHigh Tech Industries2,500(57)(62)EnTrans International, LLC, L+750, 1.00% LIBOR Floor, 6/4/20203 Month LIBORCapital Equipment13,5949,97710,331F+W Media, Inc., L+950, 1.25% LIBOR Floor, 6/30/2019(n)3 Month LIBORMedia: Diversified & Production7,2807,0926,006Forbes Media LLC, L+675, 1.00% LIBOR Floor, 9/12/2019(j)1 Month LIBORMedia: Advertising, Printing & Publishing15,00014,62114,400Ignite Restaurant Group, Inc., L+700, 1.00% LIBOR Floor, 2/13/2019(n)3 Month LIBORBeverage, Food & Tobacco10,48210,40010,167Infinity Sales Group, LLC, L+1050, 1.00% LIBOR Floor, 11/21/2018(n)1 Month LIBORServices: Business8,2147,5507,372Infogroup Inc., L+550, 1.50% LIBOR Floor, 5/26/2018(n)3 Month LIBORMedia: Advertising, Printing & Publishing15,57815,27715,451InterGen N.V., L+450, 1.00% LIBOR Floor, 6/12/2020(h)(i)3 Month LIBOREnergy: Electricity1,1821,1561,153Intertain Group Ltd., L+650, 1.00% LIBOR Floor, 4/8/2022(h)(n)3 Month LIBORHotel, Gaming & Leisure1,7651,7361,780Ipsen International GmbH, L+800, 1.00% LIBOR Floor, 9/30/2019(h)(j)1 Month LIBORCapital Equipment1,4221,4291,429Ipsen, Inc., L+700, 1.00% LIBOR Floor, 9/30/2019(j)1 Month LIBORCapital Equipment8,0958,0028,035ITC Service Group Acquisition LLC, L+950, 0.50% LIBOR Floor, 5/26/2021(j)1 Month LIBORHigh Tech Industries11,25011,03511,081KPC Health Care, Inc., L+925, 1.00% LIBOR Floor, 8/28/2020(n)3 Month LIBORHealthcare & Pharmaceuticals7,5447,4017,809Labvantage Solutions Inc., L+800, 1.00% LIBOR Floor, 12/29/2020(n)3 Month LIBORHigh Tech Industries4,8754,8294,863Labvantage Solutions Ltd., E+800, 1.00% EURIBOR Floor, 12/29/2020(h)3 Month EURIBORHigh Tech Industries€4,4955,0054,728Lift Brands, Inc., L+800, 1.00% LIBOR Floor, 12/23/2019(n)3 Month LIBORServices: Consumer9,5489,4389,477Ministry Brands, LLC, L+500, 1.00% LIBOR Floor, 12/2/2022(e)3 Month LIBORServices: Business9,9949,5879,894Nathan's Famous Inc., 10.00%, 3/15/2020(h)(n)NoneBeverage, Food & Tobacco6,0006,0006,540Nextech Systems, LLC, L+725, 1.00% LIBOR Floor, 6/22/2021(j)(n)1 Month LIBORHigh Tech Industries15,64215,06215,330NWN Acquisition Holding Company LLC, L+1000, 1.00% LIBOR Floor, 10/16/2020(j)3 Month LIBORHigh Tech Industries13,71713,35713,271Pacific Coast Holding Investment LLC, L+970, 2.00% LIBOR Floor, 2/14/20171 Month LIBORHealthcare & Pharmaceuticals5,2505,2425,250Petroflow Energy Corporation, L+800, 1.00% LIBOR Floor, 6/29/2019(q)3 Month LIBOREnergy: Oil & Gas4,8954,6184,601


See accompanying notes to consolidated financial statements.





12


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(p)FairValue(c)Plano Molding Company, LLC, L+700, 1.00% LIBOR Floor, 5/12/2021(n)2 Month LIBORConsumer Goods: Non-Durable8,8408,7728,611Rimini Street, Inc., 15.00%, 6/24/2020(m)(q)NoneHigh Tech Industries19,82219,55619,426Sequoia Healthcare Management, LLC, 16.00%, 7/17/2019(n)(q)NoneHealthcare & Pharmaceuticals6,5116,4056,397Shift PPC LLC, L+600, 1.00% LIBOR Floor, 12/22/20213 Month LIBORHigh Tech Industries9,5009,2669,265SmartBear Software Inc., L+750, 1.00% LIBOR Floor, 12/30/2020(n)3 Month LIBORHigh Tech Industries18,58818,27118,727Southcross Holdings Borrower LP, 9.00%, 4/13/2023(q)NoneEnergy: Oil & Gas172151135Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 1/21/2020(n)3 Month LIBORHealthcare & Pharmaceuticals12,28112,19412,158Spinal USA, Inc. / Precision Medical Inc., L+950, 1.00% LIBOR Floor, 7/21/2020(q)3 Month LIBORHealthcare & Pharmaceuticals128126127Sprint Industrial Holdings, LLC, L+575, 1.25% LIBOR Floor, 5/14/2019(n)3 Month LIBOREnergy: Oil & Gas7,3066,8495,406Studio Movie Grill Holdings, LLC, L+725, 1.00% LIBOR Floor, 9/30/2020(e)(n)1 Month LIBORHotel, Gaming & Leisure15,14315,00415,143Telestream Holdings Corp., L+677, 1.00% LIBOR Floor, 1/15/2020(j)(n)3 Month LIBORHigh Tech Industries7,1547,0277,011Tenere Inc., L+1000, 1.00% LIBOR Floor, 12/23/20213 Month LIBORCapital Equipment32,00031,21931,199Therapure Biopharma Inc., L+875, 0.50% LIBOR Floor, 12/1/2021(h)1 Month LIBORHealthcare & Pharmaceuticals15,00014,92514,925WD Wolverine Holdings, LLC, L+550, 1.00% LIBOR Floor, 10/17/2023(i)1 Month LIBORHealthcare & Pharmaceuticals2,0001,9601,946Worley Claims Services, LLC, L+800, 1.00% LIBOR Floor, 10/31/2020(n)1 Month LIBORServices: Business20,11519,92520,015Zywave Inc., L+500, 1.00% LIBOR Floor, 11/17/20223 Month LIBORHigh Tech Industries5,0004,9514,950Total Senior Secured First Lien Debt489,904489,913Senior Secured Second Lien Debt - 43.4%ABG Intermediate Holdings 2 LLC, L+850, 1.00% LIBOR Floor, 5/27/2022(e)(m)(n)3 Month LIBORRetail18,66618,36518,852Access CIG, LLC, L+875, 1.00% LIBOR Floor, 10/17/2022(m)3 Month LIBORServices: Business16,03015,46015,549ALM Media, LLC, L+800, 1.00% LIBOR Floor, 7/30/2021(n)3 Month LIBORMedia: Advertising, Printing & Publishing10,34410,2059,568American Residential Services LLC, L+800, 1.00% LIBOR Floor, 12/31/2021(n)3 Month LIBORConstruction & Building4,9334,8894,983AmWINS Group, LLC, L+850, 1.00% LIBOR Floor, 9/4/2020(n)1 Month LIBORBanking, Finance, Insurance & Real Estate3,8253,8523,878Confie Seguros Holding II Co., L+900, 1.25% LIBOR Floor, 5/8/20191 Month LIBORBanking, Finance, Insurance & Real Estate13,82713,36513,758Conisus, LLC, L+875, 1.00% LIBOR Floor, 6/23/20213 Month LIBORHealthcare & Pharmaceuticals11,7509,6049,517Drew Marine Group, Inc., L+700, 1.00% LIBOR Floor, 5/19/2021(h)3 Month LIBORChemicals, Plastics & Rubber9,5009,4609,120EISI LLC, L+850, 1.00% LIBOR Floor, 9/23/2020(m)(n)3 Month LIBORHigh Tech Industries20,00019,76119,400Elements Behavioral Health, Inc., L+1200, 1.00% LIBOR Floor, 2/11/2020(q)3 Month LIBORHealthcare & Pharmaceuticals5,7015,6684,561Emerald 3 Ltd., L+700, 1.00% LIBOR Floor, 5/16/2022(h)(n)3 Month LIBOREnvironmental Industries3,0002,9782,595Flexera Software LLC, L+700, 1.00% LIBOR Floor, 4/2/20211 Month LIBORHigh Tech Industries9,3859,1289,291Genex Holdings, Inc., L+775, 1.00% LIBOR Floor, 5/30/2022(n)1 Month LIBORServices: Business11,41011,33111,011Global Tel*Link Corp., L+775, 1.25% LIBOR Floor, 11/23/20203 Month LIBORTelecommunications9,5009,4889,254Infiltrator Water Technologies, LLC, L+875, 1.00% LIBOR Floor, 5/26/2023(n)3 Month LIBORConstruction & Building13,91713,73213,986Institutional Shareholder Services Inc., L+850, 1.00% LIBOR Floor, 4/30/2022(i)(n)2 Month LIBORServices: Business10,64810,53410,542Mergermarket USA, Inc., L+650, 1.00% LIBOR Floor, 2/4/2022(n)3 Month LIBORServices: Business3,3803,3283,304Ministry Brands, LLC, L+925, 1.00% LIBOR Floor, 6/2/2023(e)3 Month LIBORServices: Business5,4885,3855,406Mississippi Sand, LLC, L+1000, 1.00% LIBOR Floor, 11/21/20193 Month LIBORMetals & Mining13,19610,89911,349


See accompanying notes to consolidated financial statements.





13


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands) Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(p)FairValue(c)Mitchell International, Inc., L+750, 1.00% LIBOR Floor, 10/11/2021(m)(n)1 Month LIBORHigh Tech Industries14,90914,47614,825MSC.Software Corp., L+750, 1.00% LIBOR Floor, 6/1/2021(m)3 Month LIBORHigh Tech Industries15,00014,83215,019MWI Holdings, Inc., L+925, 1.00% LIBOR Floor, 12/28/2020(n)3 Month LIBORConstruction & Building10,0009,7739,950Navex Global, Inc., L+875, 1.00% LIBOR Floor, 11/18/2022(m)(n)12 Month LIBORHigh Tech Industries16,24516,03115,920Onex TSG Holdings II Corp., L+850, 1.00% LIBOR Floor, 7/31/2023(n)3 Month LIBORHealthcare & Pharmaceuticals12,24912,13612,065Patterson Medical Supply, Inc., L+850, 1.00% LIBOR Floor, 8/28/2023(n)2 Month LIBORHealthcare & Pharmaceuticals13,50013,37813,095Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/2021(m)3 Month LIBORChemicals, Plastics & Rubber3,4693,4783,396PetroChoice Holdings, Inc., L+875, 1.00% LIBOR Floor, 8/21/2023(n)1 Month LIBORChemicals, Plastics & Rubber15,00014,72914,737PetVet Care Centers, LLC, L+850, 1.00% LIBOR Floor, 6/17/20213 Month LIBORHealthcare & Pharmaceuticals13,50013,09713,095Pike Corp., L+850, 1.00% LIBOR Floor, 6/22/2022(n)1 Month LIBOREnergy: Electricity12,50012,35412,562Premiere Global Services, Inc., L+950, 1.00% LIBOR Floor, 6/6/20223 Month LIBORTelecommunications3,0002,8822,895PSC Industrial Holdings Corp., L+825, 1.00% LIBOR Floor, 12/5/2021(n)3 Month LIBORServices: Business10,0009,8429,450Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/20213 Month LIBORTelecommunications4,5004,4794,399SMG, L+825, 1.00% LIBOR Floor, 2/27/2021(n)3 Month LIBORHotel, Gaming & Leisure6,1426,1426,126Sterling Midco Holdings, Inc., L+775, 1.00% LIBOR Floor, 6/19/2023(n)3 Month LIBORServices: Business10,46210,43210,226STG-Fairway Acquisitions, Inc., L+925, 1.00% LIBOR Floor, 6/30/2023(n)3 Month LIBORServices: Business10,0009,8699,400Survey Sampling International, LLC, L+900, 1.00% LIBOR Floor, 12/16/2021(m)3 Month LIBORServices: Business15,00014,76314,700Telecommunications Management, LLC, L+800, 1.00% LIBOR Floor, 10/30/2020(n)3 Month LIBORMedia: Broadcasting & Subscription1,6061,5731,564TexOak Petro Holdings LLC, 8.00%, 12/29/2019(q)NoneEnergy: Oil & Gas6,7281,5492,590TMK Hawk Parent, Corp., L+750, 1.00% LIBOR Floor, 10/1/2022(n)3 Month LIBORBeverage, Food & Tobacco15,00014,88014,925TouchTunes Interactive Networks, Inc, L+825, 1.00% LIBOR Floor, 5/29/20223 Month LIBORHotel, Gaming & Leisure6,0005,9435,925U.S. Renal Care, Inc., L+800, 1.00% LIBOR Floor, 12/29/2023(n)3 Month LIBORHealthcare & Pharmaceuticals10,0009,8198,900Wand Intermediate I LP, L+725, 1.00% LIBOR Floor, 9/19/2022(n)3 Month LIBORAutomotive16,00015,88115,680Winebow Holdings, Inc., L+750, 1.00% LIBOR Floor, 1/2/2022(n)1 Month LIBORBeverage, Food & Tobacco12,82312,54412,054Zywave Inc., L+900, 1.00% LIBOR Floor, 11/17/20233 Month LIBORHigh Tech Industries5,0004,9264,925Total Senior Secured Second Lien Debt437,240434,347Collateralized Securities and Structured Products - Debt - 3.8%Deutsche Bank AG Frankfurt CRAFT 2013-1A Class Credit Linked Note, L+925, 4/17/2020(h)3 Month LIBORDiversified Financials2,0002,0221,980Deutsche Bank AG Frankfurt CRAFT 2013-1X Class Credit Linked Note, L+925, 4/17/2020(h)3 Month LIBORDiversified Financials610616604Deutsche Bank AG Frankfurt CRAFT 2014-1 Class Credit Linked Note, L+965, 5/15/2019(h)3 Month LIBORDiversified Financials5,4005,4005,292Deutsche Bank AG Frankfurt CRAFT 2015-2 Class Credit Linked Note, L+925, 1/16/2022(h)3 Month LIBORDiversified Financials15,50015,50014,880Great Lakes CLO 2014-1, Ltd. Class E Notes, L+525, 4/15/2025(g)(h)3 Month LIBORDiversified Financials5,0004,6154,484Ivy Hill Middle Market Credit Fund VII, Ltd. Class E Notes, L+565, 10/20/2025(g)(h)3 Month LIBORDiversified Financials2,0001,8791,799JFIN CLO 2014, Ltd. Class E Notes, L+500, 4/20/2025(g)(h)3 Month LIBORDiversified Financials2,5002,3452,303NXT Capital CLO 2014-1, LLC Class E Notes, L+550, 4/23/2026(g)(h)3 Month LIBORDiversified Financials7,5007,0946,772Total Collateralized Securities and Structured Products - Debt39,47138,114


See accompanying notes to consolidated financial statements.








14


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands)


Portfolio Company(a)Index Rate(b)IndustryPrincipal/Par Amount/Units(d)Cost(p)FairValue(c)Collateralized Securities and Structured Products - Equity - 3.5%Anchorage Capital CLO 2012-1, Ltd. Subordinated Notes, 4.57% Estimated Yield, 1/13/2025(h)(f)Diversified Financials4,0002,8822,622APIDOS CLO XVI Subordinated Notes, 3.28% Estimated Yield, 1/19/2025(h)(f)Diversified Financials9,0004,7043,099CENT CLO 19 Ltd. Subordinated Notes, 8.68% Estimated Yield, 10/29/2025(h)(f)Diversified Financials2,0001,3301,182Dryden XXIII Senior Loan Fund Subordinated Notes, 1.40% Estimated Yield, 7/17/2023(h)(f)Diversified Financials9,2504,7264,135Galaxy XV CLO Ltd. Class A Subordinated Notes, 8.72% Estimated Yield, 4/15/2025(h)(f)Diversified Financials4,0002,4242,323Ivy Hill Middle Market Credit Fund VII, Ltd. Subordinated Notes, 8.80% Estimated Yield, 10/20/2025(h)(f)Diversified Financials2,0001,6541,478Ivy Hill Middle Market Credit Fund VIII, Ltd. Subordinated Loan, 10.35% Estimated Yield, 2/2/2026(e)(h)(f)Diversified Financials10,0009,9409,773Ivy Hill Middle Market Credit Fund IX, Ltd. Subordinated Notes, 14.59% Estimated Yield, 10/18/2025(h)(f)Diversified Financials8,1466,1066,239Ivy Hill Middle Market Credit Fund X, Ltd. Subordinated Notes, 11.50% Estimated Yield, 7/24/2027(h)(f)Diversified Financials4,7603,9473,797Total Collateralized Securities and Structured Products - Equity37,71334,648Unsecured Debt -  1.7%American Tire Distributors, Inc., 10.25%, 3/1/2022NoneAutomotive5,0004,8714,794Flex Acquisition Company, Inc., L+700, 1.00% LIBOR Floor, 12/29/20171 Month LIBORContainers, Packaging & Glass3,8333,8143,845Radio One, Inc., 9.25%, 2/15/2020NoneMedia: Broadcasting & Subscription9,0008,6058,212Total Unsecured Debt17,29016,851Equity - 0.5%Mooregate ITC Acquisition, LLC, Class A Units(o)High Tech Industries500 Units563538NS NWN Acquisition, LLC(o)High Tech Industries346 Units393337NSG Co-Invest (Bermuda), LP(h)(o)Consumer Goods: Durable1,575 Units1,0001,000Southcross Holdings GP, LLC, Units(o)Energy: Oil & Gas188 Units——Southcross Holdings LP, Class A-II Units(o)Energy: Oil & Gas188 Units7571Speed Commerce Investment Part, LLC(o)High Tech Industries629 Units2,6403,000Tenere Inc. Warrant(o)Capital EquipmentN/A161161TexOak Petro Holdings, LLC(o)Energy: Oil & Gas60,000 Units——Total Equity4,8325,107Short Term Investments - 7.1%(k)First American Treasury Obligations Fund, Class Z Shares, 0.39%(l)70,49870,498Total Short Term Investments70,49870,498TOTAL INVESTMENTS - 109.0%$1,096,9481,089,478LIABILITIES IN EXCESS OF OTHER ASSETS - (9.0%)(89,715)NET ASSETS - 100%$999,763





See accompanying notes to consolidated financial statements.





15


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands)


CounterpartyInstrumentMaturity DateNotional Amount (d)Cost(p)Fair Value(c)Derivative Asset - 0.0%Credit Default SwapJPMorgan Chase Bank, N.A.Deutsche Bank AG Credit Default Swap3/20/2017€22,000$229$46Derivative Liability - (1.5%)Total Return SwapCitibank, N.A.See Note 72/18/2017$407,847N/A$(15,402)





|   |                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | All of the Company’s investments are issued by eligible U.S. portfolio companies, as defined in the 1940 Act, except for investments specifically identified as non-qualifying per note h. below. The Company does not control and is not an affiliate of any of the portfolio companies in its investment portfolio. Unless specifically identified in note q. below, investments do not contain a PIK interest provision.

|   |                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | The 1, 2, 3 and 12 month LIBOR rates were0.77%,0.82%,1.00%and1.69%, respectively, as ofDecember 31, 2016.  The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as ofDecember 31, 2016, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent toDecember 31, 2016. The 3 month EURIBOR rate was(0.34%)as of December 31, 2016.

|   |                                                                                      
|-- | -------------------------------------------------------------------------------------
|c. | Fair value determined in good faith by the Company’s board of directors (see Note 9).

|   |                                                    
|-- | ---------------------------------------------------
|d. | Denominated in U.S. dollars unless otherwise noted.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|e. | As discussed in Note 11, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $1,119, $711, $2,500, $1,111, $5,274 and $4,127 as of December 31, 2016 to ABG Intermediate Holdings 2 LLC, American Media, Inc., Elemica Holdings, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd., Ministry Brands, LLC and Studio Movie Grill Holdings, LLC, respectively. As of March 9, 2017, the Company was committed, upon the satisfaction of certain conditions, to fund an additional $1,119, $415, $10,000, $2,500, $1,111 and $4,127 to ABG Intermediate Holdings 2 LLC, American Media, Inc., CF Entertainment Inc., Elemica Holdings, Inc., Ivy Hill Middle Market Credit Fund VIII, Ltd. and Studio Movie Grill Holdings, LLC, respectively.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|f. | The CLO subordinated notes are considered equity positions in the CLO vehicles and are not rated. Equity investments are entitled to recurring distributions, which are generally equal to the remaining cash flow of the payments made by the underlying vehicle's securities less contractual payments to debt holders and expenses. The estimated yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.

|   |                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|g. | Great Lakes CLO 2014-1 Class E Notes, Ivy Hill Middle Market Credit Fund VII Class E Notes and NXT Capital CLO 2014-1 Class E Notes were rated Ba2 on Moody's credit scale as ofDecember 31, 2016. JFIN CLO 2014 Class E Notes were rated BB on S&P's credit scale as of December 31, 2016.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|h. | The investment is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets as defined under Section 55 of the 1940 Act. As ofDecember 31, 2016,90.5%of the Company’s total assets represented qualifying assets. In addition, as described in Note 7, the Company calculates its compliance with the qualifying asset test on a “look through” basis by treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis,89.1%of the Company’s total assets represented qualifying assets as ofDecember 31, 2016.

|   |                                                                
|-- | ---------------------------------------------------------------
|i. | Position or a portion thereof unsettled as ofDecember 31, 2016.

|   |                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|j. | In addition to the interest earned based on the stated interest rate of this loan, which is the amount reflected in this schedule, the Company may be entitled to receive additional amounts as a result of an arrangement between the Company and other lenders in the syndication in exchange for lower payment priority.

|   |                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|k. | Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.

|   |                                              
|-- | ---------------------------------------------
|l. | 7-day effective yield as ofDecember 31, 2016.

|   |                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|m. | Investment or a portion thereof was pledged as collateral supporting the amounts outstanding, if any, under the revolving credit facility with East West Bank as ofDecember 31, 2016(see Note 8).

|   |                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|n. | Investment or a portion thereof held within 34th Street and was pledged as collateral supporting the amounts outstanding under the credit facility with JPM as of December 31, 2016 (see Note 8).

|   |                               
|-- | ------------------------------
|o. | Non-income producing security.

|   |                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------
|p. | Represents amortized cost for debt investments, cost for equity investments and premium paid for derivatives.




See accompanying notes to consolidated financial statements.





16


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CĪON Investment Corporation


Consolidated Schedule of Investments


December 31, 2016


(in thousands)


|   |                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|q. | For the year endedDecember 31, 2016, the following investments contain a PIK interest provision whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities:

Interest RateInterest AmountPortfolio CompanyInvestment TypeCashPIKAll-in-RateCashPIKAll-in-RateElements Behavioral Health, Inc.Senior Secured Second Lien Debt—13.00%13.00%$—$700$700Petroflow Energy Corp.Senior Secured First Lien Debt3.00%6.00%9.00%$14$99$113Rimini Street, Inc.Senior Secured First Lien Debt12.00%3.00%15.00%$1,286$164$1,450Sequoia Healthcare Management, LLCSenior Secured First Lien Debt12.00%4.00%16.00%$206$68$274Smile Brands Group, Inc.(r)Senior Secured First Lien Debt7.50%1.50%9.00%$187$34$221Southcross Holdings Borrower LP(s)Senior Secured First Lien Debt3.50%5.50%9.00%$2$6$8Spinal USA, Inc. / Precision Medical Inc.Senior Secured First Lien Debt—10.50%10.50%$—$3$3TexOak Petro Holdings LLCSenior Secured Second Lien Debt—8.00%8.00%$—$181$181


|   |                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------
|r. | Outstanding principal and accrued interest of the underlying loan was fully repaid on August 17, 2016.

|   |                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------
|s. | Prior to December 31, 2016, the underlying loan was assigned to the Company and removed from the TRS.




See accompanying notes to consolidated financial statements.





17


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











Note 1. Organization and Principal Business


CĪON Investment Corporation, or the Company, was incorporated under the general corporation laws of the State of Maryland on August 9, 2011. On December 17, 2012, the Company successfully raised gross proceeds from unaffiliated outside investors of at least $2,500, or the minimum offering requirement, and commenced operations. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the 1940 Act. The Company elected to be treated for federal income tax purposes as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.


The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. The Company’s portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, and equity, of private and thinly traded U.S. middle-market companies.


The Company is managed by CION Investment Management, LLC, or CIM, a registered investment adviser and an affiliate of the Company. CIM oversees the management of the Company’s activities and is responsible for making investment decisions for the Company’s investment portfolio. The Company and CIM previously engaged Apollo Investment Management, L.P., or AIM, a subsidiary of Apollo Global Management, LLC, or, together with its subsidiaries, Apollo, a leading global alternative investment manager, to act as the Company’s investment sub-adviser.  On November 1, 2016, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the investment sub-advisory agreement with AIM for a period of twelve months commencing December 17, 2016.


On July 11, 2017, the members of CIM entered into a third amended and restated limited liability company agreement, or the CIM LLC Agreement, with AIM for the purpose of creating a joint venture between AIM and CION Investment Group, LLC, or CIG. Under the CIM LLC Agreement, AIM was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, will share in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the CIM LLC Agreement, which will ultimately result in CIG and AIM each owning a 50% economic interest in CIM.


On July 10, 2017, the Company’s independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017. Although the investment sub-advisory agreement and AIM's engagement as the Company’s investment sub-adviser was terminated, AIM continues to perform identical services for CIM and the Company, including, without limitation, identifying investment opportunities and making investment recommendations for approval by CIM. AIM will not be paid a separate fee in exchange for such services, but will be entitled to receive distributions as a member of CIM as described above.





Note 2. Summary of Significant Accounting Policies


Basis of Presentation and Consolidation


The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and pursuant to the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of December 31, 2016 and for the year then ended included in the Company’s Annual Report on Form 10-K. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017 . The consolidated balance sheet and the consolidated schedule of investments as of December 31, 2016 are derived from the 2016 audited consolidated financial statements and include the accounts of the Company’s wholly-owned subsidiaries.


The Company is considered an investment company as defined in Accounting Standards Update Topic 946, Financial Services - Investment Companies , or ASU 946. Accordingly, the required disclosures as outlined in ASU 946 are included in the Company’s consolidated financial statements.


The Company evaluates subsequent events through the date that the consolidated financial statements are issued.


Recently Announced Accounting Standards


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





18


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





In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business , or ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is expected to reduce the number of transactions that need to be further evaluated as businesses. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for certain types of transactions. The Company will apply this guidance to its assessment of applicable transactions consummated after the adoption date.


In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities , which shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. ASU 2017-08 is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption during an interim period. If the Company early adopts the amendments during an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes such interim period.


Cash and Cash Equivalents


Cash and cash equivalents include cash in banks and highly liquid investments with original maturity dates of three months or less. The Company’s cash and cash equivalents are held principally at one financial institution and at times may exceed insured limits. The Company periodically evaluates the creditworthiness of this institution and has not experienced any losses on such deposits.


Foreign Currency Translations


The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated to U.S. dollars based on the foreign exchange rate on the date of valuation. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.


Short Term Investments


Short term investments include an investment in a U.S. Treasury obligations fund, which seeks to provide current income and daily liquidity by purchasing U.S. Treasury securities and repurchase agreements that are collateralized by such securities. The Company had $134,498  and $70,498 of such investments at June 30, 2017 and December 31, 2016 , respectively, which are included in investments, at fair value on the accompanying consolidated balance sheets and on the consolidated schedules of investments.


Offering and Organizational Costs


Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the Company’s registration statements in connection with the continuous public offerings of the Company’s shares. Certain initial offering costs that were funded by CIG on behalf of the Company were submitted by CIG for reimbursement upon meeting the minimum offering requirement on December 17, 2012. These costs were capitalized and amortized over a twelve month period as an adjustment to capital in excess of par value. All other offering costs are expensed as incurred by the Company.


Organizational costs include, among other things, the cost of organizing the Company as a Maryland corporation, including the cost of legal services and other fees pertaining to the organization of the Company. All organizational costs were funded by CIG and its affiliates and there was no liability for these organizational costs to the Company until CIG and its affiliates submitted such costs for reimbursement.


Income Taxes


The Company elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. To qualify and maintain qualification as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements and distribute to shareholders, for each taxable year, at least 90% of the Company’s “investment company taxable income”, which is generally equal to the sum of the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. If the Company continues to qualify as a RIC and continues to satisfy the annual distribution requirement, the Company will not be subject to corporate level federal income taxes on any income that the Company distributes to its shareholders. The Company intends to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. The Company will also be subject to nondeductible federal excise taxes if the Company does not distribute at least 98.0% of net ordinary income, 98.2% of capital gains, if any, and any recognized and undistributed income from prior years for which it paid no federal income taxes.


Two of the Company’s wholly-owned consolidated subsidiaries, View ITC, LLC and View Rise, LLC, or collectively the Taxable Subsidiaries, have elected to be treated as taxable entities for U.S. federal income tax purposes. The Taxable Subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense or benefit, and the related tax assets and liabilities, as a result of its ownership of certain portfolio investments. The income tax expense or benefit, if any, and related tax assets and liabilities, where material, are reflected in the Company’s consolidated financial statements. There were no deferred tax assets or liabilities as of June 30, 2017.


Book/tax differences relating to permanent differences are reclassified among the Company’s capital accounts, as appropriate. Additionally, the tax character of distributions is determined in accordance with income tax regulations that may differ from GAAP (see Note 5).





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





Uncertainty in Income Taxes


The Company evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold for the purposes of measuring and recognizing tax liabilities in the consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by the taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. The Company did not have any uncertain tax positions during the periods presented herein.


The Company is subject to examination by U.S. federal, New York State, New York City and Maryland income tax jurisdictions for 2013 , 2014 , and 2015 .


Use of Estimates


The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may materially differ from those estimates.


Valuation of Portfolio Investments


The fair value of the Company’s investments is determined quarterly in good faith by the Company’s board of directors pursuant to its consistently applied valuation procedures and valuation process in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure , or ASC 820. ASC 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-tier fair value hierarchy that prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Inputs used to measure these fair values are classified into the following hierarchy:


|          |                                                                                                                        
|--------- | -----------------------------------------------------------------------------------------------------------------------
|Level 1 - | Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.

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|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 2 - | Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 3 - | Unobservable inputs for the asset or liability. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes that include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by the disclaimer would result in classification as a Level 3 asset, assuming no additional corroborating evidence.

Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.


Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The level in the fair value hierarchy for each fair value measurement has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The level assigned to the investment valuations may not be indicative of the risk or liquidity associated with investing in such investments. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may differ materially from the value that would be received upon an actual sale of such investments. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses that the Company ultimately realizes on these investments to materially differ from the valuations currently assigned.


The Company’s investments, excluding short term investments, consist primarily of debt securities that are traded on a private over-the-counter market for institutional investments. CIM attempts to obtain market quotations from at least two brokers or dealers for each investment (if available, otherwise from a principal market maker or a primary market dealer or other independent pricing service). CIM utilizes mid-market pricing to determine fair value unless a different point within the range is more representative. Because of the private nature of this marketplace (meaning actual transactions are not publicly reported) and the non-binding nature of consensus pricing and/or quotes, the Company believes that these valuation inputs result in Level 3 classification within the fair value hierarchy.


Notwithstanding the foregoing, if in the reasonable judgment of CIM, the price of any investment held by the Company and determined in the manner described above does not accurately reflect the fair value of such investment, CIM will value such investment at a price that reflects such investment’s fair value and report such change in the valuation to the board of directors or its designee as soon as practicable. Investments that carry certain restrictions on sale will typically be valued at a discount from the public market value of the investment.





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





Any investments that are not publicly traded or for which a market price is not otherwise readily available are valued at a price that reflects its fair value. With respect to such investments, if CIM is unable to obtain market quotations, the investments are reviewed and valued using one or more of the following types of analyses:


|   |                                                                                                                                                                       
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|i. | Market comparable statistics and public trading multiples discounted for illiquidity, minority ownership and other factors for companies with similar characteristics.

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|--- | ------------------------------------------------------------------------------------
|ii. | Valuations implied by third-party investments in the applicable portfolio companies.

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|---- | ---------------------------------------------------------------------------
|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;

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|- | ----------------------------------------------
|• | prevailing interest rates for like securities;

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|- | ---------------------------------------------
|• | expected volatility in future interest rates;

|  |          
|- | ---------
|• | leverage;

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|- | -----------------------------------------------------------------
|• | call features, put features and other relevant terms of the debt;

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|- | ------------------------------------------------------
|• | the borrower’s ability to adequately service its debt;

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|- | ------------------------------------------------------------------------------------------------------
|• | the fair market value of the portfolio company in relation to the face amount of its outstanding debt;

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|- | ------------------------------------------------------------------
|• | the quality of collateral securing the Company’s debt investments;

|  |                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in some cases, book value or liquidation value; and

|  |                                 
|- | --------------------------------
|• | other factors deemed applicable.

All of these factors may be subject to adjustment based upon the particular circumstances of a portfolio company or the Company’s actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners, or acquisition, recapitalization, and restructuring expenses or other related or non-recurring items. The choice of analyses and the weight assigned to such factors may vary across investments and may change within an investment if events occur that warrant such a change.


The discounted cash flow model deemed appropriate by CIM is prepared for the applicable investments and reviewed by the Company’s valuation committee consisting of senior management. Such models are prepared at least quarterly or on an as needed basis. The model uses the estimated cash flow projections for the underlying investments and an appropriate discount rate is determined based on the latest financial information available for the borrower, prevailing market trends, comparable analysis and other inputs. The model, key assumptions, inputs, and results are reviewed by the Company’s valuation committee with final approval from the board of directors.


Consistent with the Company’s valuation policy, the Company evaluates the source of inputs, including any markets in which the Company’s investments are trading, in determining fair value.


The Company periodically benchmarks the broker quotes from the brokers or dealers against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these quotes are reliable indicators of fair value. The Company may also use other methods to determine fair value for securities for which it cannot obtain market quotations through brokers or dealers, including the use of an independent valuation firm. The Company’s valuation committee and board of directors review and approve the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation process.


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





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





Revenue Recognition


Securities transactions are accounted for on the trade date. The Company records interest and dividend income on an accrual basis beginning on the trade settlement date or the ex-dividend date, respectively, to the extent that the Company expects to collect such amounts.  For investments in equity tranches of collateralized loan obligations, the Company records income based on the effective interest rate determined using the amortized cost and estimated cash flows, which is updated periodically. Loan origination fees, original issue discounts, and market discounts/premiums are recorded and such amounts are amortized as adjustments to interest income over the respective term of the loan using the effective interest method. The Company records prepayment premiums on loans and debt securities as interest income when it receives such amounts. In addition, the Company may generate revenue in the form of commitment, amendment, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with investments are recognized when earned.


The Company may have investments in its investment portfolio that contain a PIK interest provision. PIK interest is accrued as interest income if the portfolio company valuation indicates that such PIK interest is collectible and recorded as interest receivable up to the interest payment date. On the interest payment dates, the Company will capitalize the accrued interest receivable attributable to PIK as additional principal due from the borrower. Additional PIK securities typically have the same terms, including maturity dates and interest rates, as the original securities. In order to maintain RIC status, substantially all of this income must be paid out to shareholders in the form of distributions, even if the Company has not collected any cash. For additional information on investments that contain a PIK interest provision, see the consolidated schedules of investments as of June 30, 2017 and December 31, 2016 .


Loans and debt securities, including those that are individually identified as being impaired under Accounting Standards Codification 310, Receivables , or ASC 310, are generally placed on non-accrual status immediately if, in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the debt agreement, or when principal or interest is past due 90 days or more. Interest accrued but not collected at the date a loan or security is placed on non-accrual status is reversed against interest income. Interest income is recognized on non-accrual loans or debt securities only to the extent received in cash. However, where there is doubt regarding the ultimate collectibility of principal, cash receipts, whether designated as principal or interest, are thereafter applied to reduce the carrying value of the loan or debt security. Loans or securities are restored to accrual status only when interest and principal payments are brought current and future payments are reasonably assured.


Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation


Gains or losses on the sale of investments are calculated by using the weighted-average method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the weighted-average amortized cost of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.


Derivative Instrument


The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through current period earnings.


Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. Derivative instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity and operational risks. For additional information on the Company's derivative instruments, see Note 7.


Capital Gains Incentive Fee


Pursuant to the terms of the investment advisory agreement the Company entered into with CIM, the incentive fee on capital gains earned on liquidated investments of the Company’s investment portfolio during operations is determined and payable in arrears as of the end of each calendar year. Such fee equals 20% of the Company’s incentive fee capital gains (i.e., the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a cumulative basis and to the extent that all realized capital losses and unrealized capital depreciation exceed realized capital gains as well as the aggregate realized net capital gains for which a fee has previously been paid, the Company would not be required to pay CIM a capital gains incentive fee. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.


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





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





While the investment advisory agreement with CIM neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the American Institute for Certified Public Accountants, or AICPA, Technical Practice Aid for investment companies, the Company accrues capital gains incentive fees on unrealized gains. This accrual reflects the incentive fees that would be payable to CIM if the Company’s entire investment portfolio was liquidated at its fair value as of the balance sheet date even though CIM is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.


Net Increase in Net Assets per Share


Net increase in net assets per share is calculated based upon the daily weighted average number of shares of common stock outstanding during the reporting period.


Distributions


Distributions to shareholders are recorded as of the record date. The amount to be paid as a distribution is determined by the board of directors on a quarterly basis. Net realized capital gains, if any, are distributed at least annually.





Note 3. Share Transactions


The Company’s initial continuous public offering commenced on July 2, 2012 and ended on December 31, 2015. The Company’s follow-on continuous public offering commenced on January 25, 2016.


The following table summarizes transactions with respect to shares of the Company’s common stock during the six months ended June 30, 2017 and 2016 :


Six Months EndedJune 30,20172016SharesAmountSharesAmountGross shares/proceeds from the offering2,952,097$28,045914,192$8,734Reinvestment of distributions2,170,50119,7912,238,40719,403Total gross shares/proceeds5,122,59847,8363,152,59928,137Sales commissions and dealer manager fees—(1,047)—(736)Net shares/proceeds5,122,59846,7893,152,59927,401Share repurchase program(1,951,457)(17,742)(946,576)(8,264)Net shares/proceeds from share transactions3,171,141$29,0472,206,023$19,137


During the six months ended June 30, 2017 and 2016 , the Company sold 5,122,598 and 3,152,599 shares, respectively, at an average price per share of $9.34 and $8.93 , respectively.


Since commencing its initial continuous public offering on July 2, 2012 and through June 30, 2017 , the Company sold 112,958,698 shares of common stock for net proceeds of $ 1,147,661 at an average price per share of $10.16 . The net proceeds include gross proceeds received from reinvested shareholder distributions of $ 104,264 , for which the Company issued 11,452,165 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $ 43,156 , for which the Company repurchased 4,778,549 shares of common stock.


During the period from July 1, 2017 to August 9, 2017 , the Company sold 842,278 shares of common stock pursuant to its follow-on continuous public offering for gross proceeds of $ 8,041 at an average price per share of $9.55 . The Company also received gross proceeds of $3,042 from reinvested shareholder distributions, for which the Company issued 332,140 shares of common stock, and paid $12,425 for shares of common stock tendered for repurchase, for which the Company repurchased 1,365,168 shares of common stock.


Since commencing its initial continuous public offering on July 2, 2012 and through August 9, 2017 , the Company sold 112,767,948 shares of common stock for net proceeds of $1,146,319 at an average price per share of $10.17 . The net proceeds include gross proceeds received from reinvested shareholder distributions of $107,306 , for which the Company issued 11,784,305 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $55,581 , for which the Company repurchased 6,143,717 shares of common stock.


To ensure that the offering price per share, net of sales commissions and dealer manager fees, equaled or exceeded the net asset value per share on each subscription closing date and distribution reinvestment date, certain of the Company’s directors increased the offering price per share of common stock on certain dates. Due to a decline in the Company’s net asset value per share to an amount more than 2.5% below the Company’s then-current net offering price, certain of the Company’s directors decreased the offering price per share of common stock on certain dates.





23


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





The changes to our offering price per share since the commencement of our initial continuous public offering and the associated approval and effective dates of such changes were as follows:


Approval DateEffective DateNew Offering Price Per ShareDecember 28, 2012January 2, 2013$10.04January 31, 2013February 1, 2013$10.13March 14, 2013March 18, 2013$10.19May 15, 2013May 16, 2013$10.24August 15, 2013August 16, 2013$10.32February 4, 2014February 5, 2014$10.45October 6, 2015October 7, 2015$10.20November 24, 2015November 25, 2015$10.05December 22, 2015December 23, 2015$9.95March 8, 2016March 9, 2016$9.40March 15, 2016March 16, 2016$9.45March 22, 2016March 23, 2016$9.50March 29, 2016March 30, 2016$9.55April 5, 2016April 6, 2016$9.60April 26, 2016April 27, 2016$9.65May 3, 2016May 4, 2016$9.70May 10, 2016May 11, 2016$9.75May 31, 2016June 1, 2016$9.80July 19, 2016July 20, 2016$9.85July 26, 2016July 27, 2016$9.90August 9, 2016August 10, 2016$9.95August 23, 2016August 24, 2016$10.00October 4, 2016October 5, 2016$10.05October 11, 2016October 12, 2016$10.10January 3, 2017January 4, 2017$9.57(1)January 24, 2017January 25, 2017$9.60March 7, 2017March 8, 2017$9.65


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|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On December 28, 2016, the Company entered into an amended and restated follow-on dealer manager agreement pursuant to which, among other things, the dealer manager fee was reduced to up to 2% and selling commissions were reduced to up to 3%. As a result, the Company adjusted its public offering price from $10.10 per share to $9.57 per share in order to maintain its net offering price of $9.09 per share (net of selling commissions and dealer manager fees).

Share Repurchase Program


Beginning in the first quarter of 2014, the Company began offering, and on a quarterly basis thereafter it intends to continue offering, to repurchase shares on such terms as may be determined by the Company’s board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of the Company’s board of directors, such repurchases would not be in the best interests of the Company’s shareholders or would violate applicable law.


The Company limits the number of shares to be repurchased during any calendar year to the number of shares it can repurchase with the proceeds it receives from the issuance of shares pursuant to its fifth amended and restated distribution reinvestment plan. At the discretion of the Company’s board of directors, it may also use cash on hand, cash available from borrowings and cash from liquidation of investments as of the end of the applicable period to repurchase shares. In addition, the Company limits the number of shares to be repurchased in any calendar year to 15% of the weighted average number of shares outstanding in the prior calendar year, or 3.75% in each quarter, though the actual number of shares that it offers to repurchase may be less in light of the limitations noted above. The Company currently offers to repurchase such shares at a price equal to the estimated net asset value per share on each date of repurchase.


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





24


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





On January 22, 2016, the Company further amended the terms of the quarterly share repurchase program, effective as of the Company’s quarterly repurchase offer for the first quarter of 2016, which commenced in February 2016 and was completed in April 2016. Under the further amended share repurchase program, the Company offered to repurchase shares of common stock at a price equal to 90% of the public offering price in effect on each date of repurchase.


On December 8, 2016, the Company further amended the terms of the quarterly share repurchase program, effective as of the Company's quarterly repurchase offer for the fourth quarter of 2016, which commenced in November 2016 and was completed in January 2017. Under the further amended share repurchase program, the Company will offer to repurchase shares of common stock at a price equal to the estimated net asset value per share determined on each date of repurchase.


Any periodic repurchase offers are subject in part to the Company’s available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While the Company conducts quarterly tender offers as described above, it is not required to do so and may suspend or terminate the share repurchase program at any time, upon 30 days’ notice.


The following table summarizes the share repurchases completed during the six months ended June 30, 2017 :


Three Months EndedRepurchase DateShares RepurchasedPercentage of Shares Tendered That Were RepurchasedRepurchase Price Per ShareAggregate Consideration for Repurchased SharesMarch 31, 2017January 4, 2017814,223100%9.05$7,370June 30, 2017April 5, 20171,137,234100%9.1210,372Total1,951,457$17,742





Note 4. Transactions with Related Parties


For the three and six months ended June 30, 2017 and 2016 , fees and other expenses incurred by the Company related to CIM and its affiliates were as follows:


Three Months EndedJune 30,Six Months EndedJune 30,EntityCapacityDescription2017201620172016CION Securities, LLCDealer managerDealer manager fees(1)$282$242$492$257CIMInvestment adviserManagement fees(2)7,4224,61213,9049,124ICON Capital, LLCAdministrative services providerAdministrative services expense(2)425434771726CIGSponsorRecoupment of expense support(2)—548—667$8,129$5,836$15,167$10,774


|    |                                    
|--- | -----------------------------------
|(1) | Amounts charged directly to equity.

|    |                                        
|--- | ---------------------------------------
|(2) | Amounts charged directly to operations.

On December 28, 2016, the Company entered into an amended and restated follow-on dealer manager agreement with CIM and CION Securities, LLC (formerly, ICON Securities, LLC), or CION Securities, in connection with the Company's follow-on continuous public offering. Under the amended and restated dealer manager agreement, the dealer manager fee was reduced from up to 3% to up to 2% of gross offering proceeds and selling commissions to the selling dealers were reduced from up to 7% to up to 3% of gross offering proceeds. Such costs are charged against capital in excess of par value when incurred. Since commencing its initial continuous public offering on July 2, 2012 and through August 9, 2017 , the Company paid or accrued sales commissions of $63,669 to the selling dealers and dealer manager fees of $31,343 to CION Securities.





The Company has entered into an investment advisory agreement with CIM. On November 1, 2016, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the investment advisory agreement for a period of twelve months commencing December 17, 2016.  Pursuant to the investment advisory agreement, CIM is paid an annual base management fee equal to 2.0% of the average value of the Company’s gross assets, less cash and cash equivalents, and an incentive fee based on the Company’s performance, as described below. The base management fee is payable quarterly in arrears and is calculated based on the two most recently completed calendar quarters. The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, measured quarterly and expressed as a rate of return on adjusted capital, as defined in the investment advisory agreement, equal to 1.875% per quarter, or an annualized rate of 7.5%. The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is described in Note 2.


The Company accrues the capital gains incentive fee based on net realized gains and net unrealized appreciation; however, under the terms of the investment advisory agreement, the fee payable to CIM is based on net realized gains and unrealized depreciation and no such fee is payable with respect to unrealized appreciation unless and until such appreciation is actually realized. For the three and six months ended June 30, 2017 , the Company had no liability for and did not record any capital gains incentive fees.





25


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





With respect to the TRS, CIM became entitled to receive a capital gains incentive fee upon the termination of the TRS, at which point all net gains and losses of the underlying loans constituting the reference assets of the TRS were realized. See Note 2 for an additional discussion of CIM’s entitlement to receive payment of incentive fees and the Company’s accrual of the incentive fee on capital gains with respect to the TRS.





The Company entered into an administration agreement with CIM’s affiliate, ICON Capital, LLC, or ICON Capital, pursuant to which ICON Capital furnishes the Company with administrative services including accounting, investor relations and other administrative services necessary to conduct its day-to-day operations. On November 1, 2016, the board of directors of the Company, including a majority of the board of directors who are not interested persons, approved the renewal of the administration agreement for a period of twelve months commencing December 17, 2016. ICON Capital is reimbursed for administrative expenses it incurs on the Company’s behalf in performing its obligations, provided that such reimbursement will be for the lower of ICON Capital’s actual costs or the amount that the Company would be required to pay for comparable administrative services in the same geographic location. Such costs will be reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. The Company will not reimburse ICON Capital for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a person with a controlling interest in ICON Capital.





Under the terms of the investment advisory agreement, CIM and certain of its affiliates, which includes CIG, are entitled to receive reimbursement of up to 1.5% of the gross proceeds raised until all offering and organizational costs have been reimbursed. The Company’s payment of offering and organizational costs will not exceed 1.5% of the actual gross proceeds raised from the offerings (without giving effect to any potential expense support from CIG and its affiliates). If the Company sells the maximum number of shares at its latest public offering price of $9.65 per share, the Company estimates that it may incur up to approximately $29,827 of expenses. With respect to any reimbursements for offering and organizational costs, the Company will interpret the 1.5% limit based on actual gross proceeds raised at the time of such reimbursement.  In addition, the Company will not issue any of its shares or other securities for services or for property other than cash or securities except as a dividend or distribution to its security holders or in connection with a reorganization.


From inception through December 31, 2012, CIG and its affiliates incurred offering, organizational and other pre-effective costs of $2,012. Of these costs, $1,812 represented offering and organizational costs, all of which have been submitted to the Company for reimbursement. The Company paid $450 in October 2013, $550 in March 2014, $592 in May 2014 and $420 in March 2015.  No additional material offering, organizational or other pre-effective costs have been incurred by CIG or its affiliates subsequent to December 31, 2012.


Reinvestment of shareholder distributions and share repurchases are excluded from the gross proceeds from the Company’s offerings for purposes of determining the total amount of offering and organizational costs that can be paid by the Company. As of June 30, 2017 , the Company raised gross offering proceeds of $1,086,552 , of which it can pay up to $16,298 in offering and organizational costs (which represents 1.5% of the actual gross offering proceeds raised). Through June 30, 2017 , the Company paid $9,763 of such costs, leaving an additional $6,535 that can be paid. As of August 9, 2017 , the Company raised gross offering proceeds of $1,094,594 , of which it can pay up to $16,419 in offering and organizational costs (which represents 1.5% of the actual gross offering proceeds raised). Through August 9, 2017 , the Company paid $9,784 of such costs, leaving an additional $6,635 that can be paid.


On January 30, 2013, the Company entered into the expense support and conditional reimbursement agreement with CIG, whereby CIG agreed to provide expense support to the Company in an amount that is sufficient to: (1) ensure that no portion of the Company’s distributions to shareholders will be paid from its offering proceeds or borrowings, and/or (2) reduce the Company’s operating expenses until it has achieved economies of scale sufficient to ensure that it bears a reasonable level of expense in relation to its investment income. On December 13, 2013 and January 16, 2015, the Company and CIG amended the expense support and conditional reimbursement agreement to extend the termination date of such agreement from January 30, 2014 to January 30, 2015 and from January 30, 2015 to December 31, 2015, respectively. On December 16, 2015 and December 14, 2016, the Company further amended and restated the expense support and conditional reimbursement agreement for purposes of including AIM as a party to the agreement and extending the termination date from December 31, 2016 to December 31, 2017, respectively. Commencing with the quarter beginning January 1, 2016, CIG and AIM each agreed to provide expense support to the Company for 50% of its expenses as described above.


For the three and six months ended June 30, 2017 and 2016 , the Company did not receive any expense support from CIG or AIM.


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





26


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





Expense support, if any, will be determined as appropriate to meet the objectives of the expense support and conditional reimbursement agreement. During the three and six months ended June 30, 2016 , the Company recorded obligations to repay expense support from CIG of $548 and $667 , respectively. The Company did not record any obligation to repay expense support from CIG during the three or six months ended June 30, 2017 . During the three and six months ended June 30, 2016 , the Company repaid expense support to CIG of $119 and $599 , respectively. The Company did not repay any expense support to CIG or AIM during the three or six months ended June 30, 2017 . The Company may or may not be requested to reimburse any future expense support provided by CIG or AIM.


The Company, AIM, or CIG may terminate the expense support and conditional reimbursement agreement at any time. CIG and AIM have indicated that they expect to continue such expense support until they believe that the Company has achieved economies of scale sufficient to ensure that it bears a reasonable level of expenses in relation to its income. If the Company terminates the investment advisory agreement with CIM, the Company may be required to repay CIG and AIM all unreimbursed expense support funded by CIG and AIM within three years of the date of termination. The specific amount of expense support provided by CIG and AIM, if any, will be determined at the end of each quarter. There can be no assurance that the expense support and conditional reimbursement agreement will remain in effect or that CIG and AIM will support any portion of the Company’s expenses in future quarters.


As of June 30, 2017 and December 31, 2016 , the total liability payable to CIM and its affiliates was $7,523 and $6,508 , respectively, which primarily related to fees earned by CIM during the three months ended June 30, 2017 and December 31, 2016 , respectively.


Because CIM’s senior management team is comprised of substantially the same personnel as the senior management team of the Company’s affiliate, ICON Capital, which is the investment manager to certain equipment finance funds, or equipment funds, such members of senior management provide investment advisory and management services to the equipment funds in addition to the Company. In the event that CIM undertakes to provide investment advisory services to other clients in the future, it will strive to allocate investment opportunities in a fair and equitable manner consistent with the Company’s investment objective and strategies so that the Company will not be disadvantaged in relation to any other client of the investment adviser or its senior management team. However, it is currently possible that some investment opportunities will be provided to the equipment funds or other clients of CIM rather than to the Company.


I ndemnifications


The investment advisory agreement, the administration agreement and the dealer manager agreement each provide certain indemnifications from the Company to the other relevant parties to such agreements.  The Company’s maximum exposure under these agreements is unknown. However, the Company has not experienced claims or losses pursuant to these agreements and believes the risk of loss related to such indemnifications to be remote.





Note 5. Distributions


From February 1, 2014 through July 17, 2017, the Company’s board of directors authorized and declared on a monthly basis a weekly distribution amount per share of common stock. On July 18, 2017, the Company's board of directors authorized and declared on a quarterly basis a weekly distribution amount per share of common stock.


During the year ended December 31, 2016 and the six months ended June 30, 2017 , the Company’s board of directors declared distributions for 52 and 26 record dates, respectively. Declared distributions are paid monthly.


The following table presents cash distributions per share that were declared during the year ended December 31, 2016 and the six months ended June 30, 2017 :


DistributionsThree Months EndedPer ShareAmount2016March 31, 2016 (thirteen record dates)$0.1829$19,004June 30, 2016 (thirteen record dates)0.182919,167September 30, 2016 (thirteen record dates)0.182919,480December 31, 2016 (thirteen record dates)0.182919,808Total distributions for the year ended December 31, 2016$0.7316$77,4592017March 31, 2017 (thirteen record dates)$0.1829$20,123June 30, 2017 (thirteen record dates)0.182920,371Total distributions for the six months ended June 30, 2017$0.3658$40,494





27


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





On June 20, 2017, the Company’s board of directors declared four weekly cash distributions of $0.014067 per share, which were paid on July 26, 2017 to shareholders of record on July 4, July 11, July 18, and July 25, 2017.  On July 18, 2017, the Company's board of directors declared regular weekly cash distributions of $0.014067 per share for August 2017 through September 2017. Each distribution will be paid monthly to shareholders of record as of the weekly record dates set forth below.


Record DatePayment DateDistribution Amount Per ShareAugust 1, 2017August 30, 2017$0.014067August 8, 2017August 30, 2017$0.014067August 15, 2017August 30, 2017$0.014067August 22, 2017August 30, 2017$0.014067August 29, 2017August 30, 2017$0.014067September 5, 2017September 27, 2017$0.014067September 12, 2017September 27, 2017$0.014067September 19, 2017September 27, 2017$0.014067September 26, 2017September 27, 2017$0.014067





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





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





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


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


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





28


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





The following table reflects the sources of cash distributions on a GAAP basis that the Company has declared on its shares of common stock during the six months ended June 30, 2017 and 2016 :


Six Months EndedJune 30,20172016Source of DistributionPer ShareAmountPercentagePer ShareAmountPercentageNet investment income$0.2812$31,12876.9%$0.1996$20,83154.6%Net realized gain on total return swapNet interest and other income from TRS portfolio0.03243,5948.9%0.155516,22542.5%Net gain on TRS loan sales(1)0.03203,5398.7%0.00404161.1%Net realized gain on investments and foreign currency(1)0.02022,2335.5%0.00676991.8%Total distributions$0.3658$40,494100.0%$0.3658$38,171100.0%


|    |                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During thesixmonths endedJune 30, 2017, the Company realized losses of $25,417primarily due to the purchase of loans by Flatiron Funding II, LLC that were previously held in the TRS and are not currently deductible on a tax-basis. See Note 8 for an additional discussion regarding this purchase.

It is the Company's policy to comply with all requirements of the Code applicable to RICs and to distribute substantially all of its taxable income to its shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, the Company intends not to be subject to corporate level federal income tax or federal excise taxes. Accordingly, no federal income tax provision was required.


Income and capital gain distributions are determined in accordance with the Code and federal tax regulations, which may differ from amounts determined in accordance with GAAP. These book/tax differences, which could be material, are primarily due to differing treatments of income and gains on various investments held by the Company. Permanent book/tax differences result in reclassifications to capital in excess of par value, accumulated undistributed net investment income, accumulated undistributed realized gain on investments, and accumulated undistributed realized gain on total return swap. During 2016 , permanent book/tax differences primarily due to the treatment of the TRS and non-deductible offering costs resulted in a net decrease in distributions in excess of net investment income, a net decrease in accumulated realized gains and a net decrease to capital in excess of par value. These reclassifications had no effect on net assets.


The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. The tax characteristics of distributions to shareholders are reported to shareholders annually on Form 1099-DIV. Except for long term capital gains of $906, all distributions for 2016 were characterized as ordinary income distributions for federal income tax purposes.


The tax components of accumulated earnings for the current year will be determined at year end. As of December 31, 2016 , the components of accumulated earnings on a tax basis were as follows:


December 31, 2016Undistributed ordinary income$3,847Undistributed long term capital gains924Net unrealized depreciation on investments and total return swap(26,398)Total accumulated earnings$(21,627)


As of June 30, 2017 , the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $19,741 ; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $46,761 ; the net unrealized depreciation was $27,020 ; and the aggregate cost of securities for Federal income tax purposes was $1,700,577 .


As of December 31, 2016 , the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $9,389 ; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $20,202 ; the net unrealized depreciation was $10,813 ; and the aggregate cost of securities for Federal income tax purposes was $1,100,291 .





29


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





Note 6. Investments


The composition of the Company’s investment portfolio as of June 30, 2017 and December 31, 2016 at amortized cost and fair value was as follows:


June 30, 2017December 31, 2016Cost(1)FairValuePercentage ofInvestmentPortfolioCost(1)FairValuePercentage ofInvestmentPortfolioSenior secured first lien debt$1,057,664$1,062,51369.0%$489,904$489,91348.1%Senior secured second lien debt412,940413,69026.9%437,240434,34742.6%Collateralized securities and structured products - debt29,90029,1131.9%39,47138,1143.7%Collateralized securities and structured products - equity31,81130,1902.0%37,71334,6483.4%Unsecured debt———17,29016,8511.7%Equity5,0043,5540.2%4,8325,1070.5%Subtotal/total percentage1,537,3191,539,060100.0%1,026,4501,018,980100.0%Short term investments(2)134,498134,49870,49870,498Total investments$1,671,817$1,673,558$1,096,948$1,089,478


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

|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.




30


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





The following tables show the composition of the Company’s investment portfolio by industry classification and geographic dispersion, and the percentage, by fair value, of the total investment portfolio assets in such industries and geographies as of June 30, 2017 and December 31, 2016 :


June 30, 2017December 31, 2016Industry ClassificationInvestments atFair ValuePercentage ofInvestment PortfolioInvestments atFair ValuePercentage ofInvestment PortfolioHealthcare & Pharmaceuticals$228,88214.9%$118,33711.6%High Tech Industries221,24914.4%217,33921.3%Services: Business220,68114.3%126,86912.5%Media: Diversified & Production96,0916.2%23,1002.3%Chemicals, Plastics & Rubber82,2075.3%27,2532.7%Telecommunications68,0864.4%35,4113.5%Capital Equipment62,4604.1%51,1555.0%Media: Advertising, Printing & Publishing61,5254.0%54,3545.3%Diversified Financials59,3033.9%72,7627.1%Beverage, Food & Tobacco58,3443.8%53,6585.3%Hotel, Gaming & Leisure51,3803.3%28,9742.8%Retail47,4883.1%18,8521.9%Automotive40,2872.6%39,1923.9%Services: Consumer35,1862.3%9,4770.9%Construction & Building34,8292.3%39,1373.8%Aerospace & Defense30,3992.0%21,7802.1%Consumer Goods: Durable29,3871.9%1,0000.1%Banking, Finance, Insurance & Real Estate24,7831.6%17,6361.7%Energy: Oil & Gas18,2381.2%12,8031.3%Consumer Goods: Non-Durable16,3521.1%8,6110.8%Media: Broadcasting & Subscription16,1111.0%9,7761.0%Metals & Mining15,5321.0%11,3491.1%Transportation: Cargo9,9500.6%——Forest Products & Paper5,6190.4%——Environmental Industries2,7750.2%2,5950.3%Containers, Packaging & Glass1,9160.1%3,8450.4%Energy: Electricity——13,7151.3%Subtotal/total percentage1,539,060100.0%1,018,980100.0%Short term investments134,49870,498Total investments$1,673,558$1,089,478


June 30, 2017December 31, 2016Geographic Dispersion(1)Investments atFair ValuePercentage ofInvestment PortfolioInvestments atFair ValuePercentage ofInvestment PortfolioUnited States$1,425,60192.6%$916,26089.9%Cayman Islands32,0932.1%43,2344.2%Canada24,5891.6%16,7051.6%Germany20,1691.3%24,1852.4%Netherlands17,8861.2%10,2731.0%Marshall Islands9,9500.6%——Cyprus4,9720.3%4,7280.5%United Kingdom2,7750.2%2,5950.3%Bermuda1,0250.1%1,0000.1%Subtotal/total percentage1,539,060100.0%1,018,980100.0%Short term investments134,49870,498Total investments$1,673,558$1,089,478


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

As of June 30, 2017 , investments on non-accrual status represented 0.7% of total investments on a fair value basis. As of December 31, 2016 , there were no investments on non-accrual status.





31


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





The Company does not “control” and is not an “affiliate” of any of its portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company or issuer if the Company owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company or issuer if the Company owned 5% or more of its voting securities.


The Company’s investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require the Company to provide funding when requested in accordance with the terms of the underlying agreements. As of June 30, 2017 and December 31, 2016 , the Company’s unfunded commitments amounted to $25,606 and $25,096 , respectively. As of August 7, 2017 , the Company’s unfunded commitments amounted to $67,938 . Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company.  Refer to Note 11 for further details on the Company’s unfunded commitments.





Note 7. Derivative Instruments





In the normal course of business and subject to the requirements of the 1940 Act, the Company enters into derivative instruments as part of its investment strategy.


Credit Default Swap





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





Total Return Swap





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





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


Receivable on total return swap is composed of any amounts due from Citibank that consist of earned but not yet collected net interest and fees and net gains on sales and principal repayments of the underlying loans of the TRS. As of June 30, 2017 and December 31, 2016 , the (payable)/receivable on total return swap consisted of the following:


June 30, 2017December 31, 2016Interest and other income from TRS portfolio$423$5,620Interest and other expense from TRS portfolio(123)(1,928)Net (loss) gain on TRS loan sales(149)495Receivable on total return swap$151$4,187


Realized gains and losses on the TRS are composed of any gains or losses on loans underlying the TRS as well as net interest and fees earned during the period. For the three and six months ended June 30, 2017 and 2016 , the net realized gain (loss) on the TRS consisted of the following:


Three Months EndedJune 30,Six Months EndedJune 30,2017201620172016Interest and other income from TRS portfolio$584$11,621$6,543$23,267Interest and other expense from TRS portfolio(305)(3,589)(2,949)(7,042)Net gain (loss) on TRS loan sales134(783)(17,450)(614)Net realized gain (loss)(1)$413$7,249$(13,856)$15,611


|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net realized gain (loss) is reflected in net realized gain (loss) on total return swap on the Company's consolidated statements of operations.




32


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





On March 29, 2017, Flatiron Funding II, LLC, or Flatiron Funding II, a newly-formed, wholly-owned, consolidated, special purpose financing subsidiary of the Company, purchased certain loans underlying the TRS with a notional value of $363,860. See Note 8 for additional information on Flatiron Funding II.


The following is a summary of the underlying loans subject to the TRS as of December 31, 2016 :


Underlying Loans(a)Index Rate(b)IndustryNotionalAmountFairValue(c)UnrealizedAppreciation /(Depreciation)Senior Secured First Lien DebtAcademy, Ltd., L+400, 1.00% LIBOR Floor, 7/1/2022VariousRetail$14,564$13,653$(911)Access CIG, LLC, L+500, 1.00% LIBOR Floor, 10/18/20213 Month LIBORServices: Business6,7516,79847ALM Media, LLC, L+450, 1.00% LIBOR Floor, 7/31/20203 Month LIBORMedia: Advertising, Printing & Publishing7,6797,328(351)Alvogen Pharma US, Inc., L+500, 1.00% LIBOR Floor, 4/1/20223 Month LIBORHealthcare & Pharmaceuticals9,4309,150(280)American Dental Partners, Inc., L+475, 1.00% LIBOR Floor, 8/29/20213 Month LIBORHealthcare & Pharmaceuticals12,15812,21961American Energy - Marcellus, LLC, L+425, 1.00% LIBOR Floor, 8/4/20203 Month LIBOREnergy: Oil & Gas4,2542,370(1,884)American Residential Services, LLC, L+450, 1.00% LIBOR Floor, 6/30/20213 Month LIBORConstruction & Building14,06714,269202Aquilex, LLC, L+400, 1.00% LIBOR Floor, 12/31/20203 Month LIBORChemicals, Plastics & Rubber1,8101,778(32)Avaya Inc., L+525, 1.00% LIBOR Floor, 5/29/20203 Month LIBORTelecommunications14,54212,798(1,744)Azure Midstream Energy, LLC, L+650, 1.00% LIBOR Floor, 11/15/20181 Month LIBOREnergy: Oil & Gas2,3752,200(175)Caraustar Industries, Inc., L+675, 1.25% LIBOR Floor, 5/1/20193 Month LIBORForest Products & Paper11,95412,521567Central Security Group, Inc., L+563, 1.00% LIBOR Floor, 10/6/20201 Month LIBORServices: Consumer12,91513,058143Charming Charlie, LLC, L+800, 1.00% LIBOR Floor, 12/24/20193 Month LIBORRetail7,7234,314(3,409)CSP Technologies North America, LLC, L+600, 1.00% LIBOR Floor, 1/29/20223 Month LIBORChemicals, Plastics & Rubber13,38513,590205CT Technologies Intermediate Holdings, Inc., L+425, 1.00% LIBOR Floor, 12/1/20211 Month LIBORHealthcare & Pharmaceuticals14,68114,160(521)David's Bridal, Inc., L+400, 1.25% LIBOR Floor, 10/11/20193 Month LIBORRetail3,3393,095(244)DBRS, Inc., L+525, 1.00% LIBOR Floor, 3/4/2022(d)3 Month LIBORServices: Business12,87412,094(780)EIG Investors Corp., L+548, 1.00% LIBOR Floor, 11/9/2019(d)3 Month LIBORServices: Business1,7731,772(1)Emmis Operating Company, L+600, 1.00% LIBOR Floor, 6/10/20213 Month LIBORMedia: Broadcasting & Subscription7,5087,075(433)Evergreen Skills Lux S.À.R.L., L+475, 1.00% LIBOR Floor, 4/28/2021(d)6 Month LIBORHigh Tech Industries7,1746,821(353)Global Cash Access, Inc., L+525, 1.00% LIBOR Floor, 12/18/20202 Month LIBORHotel, Gaming & Leisure10,48310,406(77)Healogics, Inc., L+425, 1.00% LIBOR Floor, 7/1/20213 Month LIBORHealthcare & Pharmaceuticals4,8294,520(309)IMG Worldwide Holdings, LLC, L+425, 1.00% LIBOR Floor, 5/6/20213 Month LIBORMedia: Diversified & Production7,1117,277166LTCG Holdings Corp., L+500, 1.00% LIBOR Floor, 6/6/20201 Month LIBORServices: Business5,8825,409(473)Murray Energy Corp., L+725, 1.00% LIBOR Floor, 4/16/20203 Month LIBORMetals & Mining3,5883,528(60)Navex Global, Inc, L+475, 1.00% LIBOR Floor, 11/19/20216 Month LIBORHigh Tech Industries13,59713,61720Nielsen & Bainbridge, LLC, L+500, 1.00% LIBOR Floor, 8/15/20206 Month LIBORConsumer Goods: Durable15,84315,94299Oasis Outsourcing Holdings, Inc., L+475, 1.00% LIBOR Floor, 12/26/20211 Month LIBORServices: Business9,3199,472153Onex TSG Holdings II Corp., L+400, 1.00% LIBOR Floor, 7/29/20223 Month LIBORHealthcare & Pharmaceuticals3,4083,44133Opal Acquisition, Inc., L+400, 1.00% LIBOR Floor, 11/27/20203 Month LIBORHealthcare & Pharmaceuticals10,2369,802(434)Pelican Products, Inc., L+425, 1.00% LIBOR Floor, 4/10/20203 Month LIBORChemicals, Plastics & Rubber2,4932,50310Photonis Technologies SAS, L+750, 1.00% LIBOR Floor, 9/18/2019(d)3 Month LIBORAerospace & Defense6,3375,564(773)PSC Industrial Holdings Corp., L+475, 1.00% LIBOR Floor, 12/5/20203 Month LIBORServices: Business4,8514,741(110)Scientific Games International, Inc., L+500, 1.00% LIBOR Floor, 10/1/2021(d)VariousHotel, Gaming & Leisure10,40010,665265SESAC Holdco II LLC, L+425, 1.00% LIBOR Floor, 2/7/20191 Month LIBORMedia: Broadcasting & Subscription2,9352,9383SG Acquisition, Inc., L+525, 1.00% LIBOR Floor, 8/19/20213 Month LIBORBanking, Finance, Insurance & Real Estate11,41411,547133SI Organization, Inc., L+475, 1.00% LIBOR Floor, 11/23/20193 Month LIBORServices: Business7,7467,866120STG-Fairway Acquisitions, Inc., L+525, 1.00% LIBOR Floor, 6/30/20223 Month LIBORServices: Business3,8453,840(5)Survey Sampling International, LLC, L+500, 1.00% LIBOR Floor, 12/16/20203 Month LIBORServices: Business7,7817,899118TIBCO Software Inc., L+550, 1.00% LIBOR Floor, 12/4/20201 Month LIBORHigh Tech Industries16,82717,319492Travel Leaders Group, LLC, L+600, 1.00% LIBOR Floor, 12/7/20201 Month LIBORServices: Consumer5,1695,1767Vince, LLC, L+500, 1.00% LIBOR Floor, 11/27/2019(d)3 Month LIBORRetail1,1241,093(31)Western Dental Services, Inc., L+650, 1.00% LIBOR Floor, 11/1/20183 Month LIBORHealthcare & Pharmaceuticals5,5735,566(7)Total Senior Secured First Lien Debt351,747341,194(10,553)





33


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





Underlying Loans(a)Index Rate(b)IndustryNotionalAmountFairValue(c)UnrealizedAppreciation /(Depreciation)Senior Secured Second Lien DebtAsurion, LLC, L+750, 1.00% LIBOR Floor, 3/3/20211 Month LIBORServices: Consumer7,7728,044272Evergreen Skills Lux S.À.R.L., L+825, 1.00% LIBOR Floor, 4/28/2022(d)6 Month LIBORHigh Tech Industries9,7987,594(2,204)GOBP Holdings, Inc., L+825, 1.00% LIBOR Floor, 10/21/20223 Month LIBORRetail3,9404,01070Mergermarket USA, Inc., L+650, 1.00% LIBOR Floor, 2/4/20223 Month LIBORServices: Business6,9656,842(123)Onex Carestream Finance LP, L+850, 1.00% LIBOR Floor, 12/7/20193 Month LIBORHealthcare & Pharmaceuticals13,60011,318(2,282)Pelican Products, Inc., L+825, 1.00% LIBOR Floor, 4/11/20213 Month LIBORChemicals, Plastics & Rubber8,0507,830(220)PFS Holding Corp., L+725, 1.00% LIBOR Floor, 1/31/20221 Month LIBORRetail4,9734,636(337)Securus Technologies Holdings, Inc., L+775, 1.25% LIBOR Floor, 4/30/20213 Month LIBORTelecommunications1,002977(25)Total Senior Secured Second Lien Debt56,10051,251(4,849)Total$407,847$392,445$(15,402)


|    |                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | All of the underlying loans subject to the TRS are issued by eligible U.S. portfolio companies, as defined in the 1940 Act, except for investments specifically identified as non-qualifying per note (d) below. The Company 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) | The 1, 2, 3, and 6 month LIBOR rates were0.77%,0.82%,1.00%and1.32%, respectively, as ofDecember 31, 2016. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as ofDecember 31, 2016, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent toDecember 31, 2016.

|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(c) | Fair value determined in good faith by the Company’s board of directors (see Note 9).

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | All or a portion of the underlying loan subject to the TRS is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least70%of the company’s total assets as defined under Section 55 of the 1940 Act. As ofDecember 31, 2016,90.5%of the Company’s total assets represented qualifying assets. In addition, as described in this Note 7, the Company calculates its compliance with the qualifying asset test on a “look through” basis by treating each loan underlying the TRS as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis,89.1%of the Company’s total assets represented qualifying assets as ofDecember 31, 2016.

|    |                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | For the year endedDecember 31, 2016, the following underlying loans subject to the TRS contain a PIK interest provision whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities:

Interest RateInterest AmountIssuer of Underlying LoanInvestment TypeCashPIKAll-in-RateCashPIKAll-in-RateSmile Brands Group, Inc.(f)Senior Secured First Lien Debt7.50%1.50%9.00%$233$41$274Southcross Holdings Borrower LP(g)Senior Secured First Lien Debt3.50%5.50%9.00%$1$1$2


|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(f) | Outstanding principal and accrued interest of the underlying loan was fully repaid on August 17, 2016.

|    |                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------
|(g) | Prior to December 31, 2016, the underlying loan was assigned to the Company and removed from the TRS.




Note 8. Financing Arrangements





The following table presents summary information with respect to the Company’s outstanding financing arrangements as of June 30, 2017:


ArrangementType of ArrangementRateAmount OutstandingAmount AvailableMaturity DateCitibank Credit FacilityRevolving Credit FacilityL+2.00%$231,698$93,302March 29, 2019JPM Credit FacilityTerm Loan Credit FacilityL+3.50%224,423577August 23, 2020UBS FacilityRepurchase AgreementL+3.50%125,000—May 19, 2020





Citibank Credit Facility





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





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





34


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





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





The Company incurred debt issuance costs of $1,816 in connection with obtaining the Citibank Credit Facility, which were recorded as a direct reduction to the outstanding balance of the Amended Citibank Credit Facility, which is included in the Company’s consolidated balance sheet as of June 30, 2017 and will amortize to interest expense over the term of the Amended Citibank Credit Facility. At June 30, 2017, the unamortized portion of the debt issuance costs was $1,660.





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





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





For the three months ended June 30, 2017 and the period from March 29, 2017 through June 30, 2017 , the components of interest expense, average borrowings, and weighted average interest rate for the Amended Citibank Credit Facility were as follows:


Three Months EndedJune 30, 2017Period from March 29, 2017 to June 30, 2017Stated interest expense$1,846$1,907Non-usage fee177183Amortization of deferred financing costs151156Total interest expense$2,174$2,246Weighted average interest rate(1)3.46%3.45%Average borrowings$231,698$231,698


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




JPM Credit Facility





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





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





35


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





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





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





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





The Company incurred debt issuance costs of $3,514 in connection with obtaining and amending the JPM Credit Facility, which were recorded as a direct reduction to the outstanding balance of the Amended JPM Credit Facility, which is included in the Company’s consolidated balance sheets and will amortize to interest expense over the term of the Amended JPM Credit Facility. At June 30, 2017, the unamortized portion of the debt issuance costs was $2,775.





For the three and six months ended June 30, 2017 , the components of interest expense, average borrowings, and weighted average interest rate for the Amended JPM Credit Facility were as follows:


Three Months EndedJune 30, 2017Six Months EndedJune 30, 2017Stated interest expense$2,673$5,208Non-usage fee12Amortization of deferred financing costs220438Total interest expense$2,894$5,648Weighted average interest rate(1)4.71%4.62%Average borrowings$224,423$224,423


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




UBS Facility





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





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





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





36


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





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





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





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





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





Murray Hill Funding paid an upfront fee and incurred certain other customary costs and expenses totaling $1,877 in connection with obtaining the UBS Facility, which were recorded as a direct reduction to the outstanding balance of the UBS Facility, which is included in the Company’s consolidated balance sheets and will amortize to interest expense over the term of the UBS Facility. At June 30, 2017, the unamortized portion of the upfront fee and other expenses was $1,805.





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





As of June 30, 2017, the fair value of assets held by Murray Hill Funding II was $248,978.





For the period from May 19, 2017 through June 30, 2017 , the components of interest expense, average borrowings, and weighted average interest rate for the UBS Facility were as follows:


Stated interest expense$529Amortization of deferred financing costs72Total interest expense$601Weighted average interest rate(1)4.98%Average borrowings$88,953


|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the stated interest expense and non-usage fee, if any, on the unused portion of the UBS Facility and is annualized for periods covering less than one year.

East West Bank Credit Facility


On April 30, 2015, the Company entered into a revolving credit facility, or the EWB Credit Facility, with East West Bank, or EWB. The EWB Credit Facility provided for borrowings in an aggregate principal amount of up to $40,000, subject to certain conditions, and the Company was required to maintain $2,000 in a demand deposit account with EWB at all times. On April 27, 2017, the EWB Credit Facility expired in accordance with its terms. Through the expiration date, the Company was in compliance with all covenants and reporting requirements under the EWB Credit Facility.





37


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





For the three and six months ended June 30, 2017 and 2016, the components of interest expense and average borrowings for the EWB Credit Facility were as follows:


Three Months EndedJune 30,Six Months EndedJune 30,2017201620172016Non-usage fee$15$51$65$102Amortization of deferred financing costs135663125Total interest expense$28$107$128$227Average borrowings$—$—$—$—





Note 9. Fair Value of Financial Instruments





The following table presents fair value measurements of the Company’s portfolio investments and TRS as of June 30, 2017 and December 31, 2016 , according to the fair value hierarchy:


June 30, 2017December 31, 2016Level 1Level 2Level 3TotalLevel 1Level 2Level 3TotalSenior secured first lien debt$—$—$1,062,513$1,062,513$—$—$489,913$489,913Senior secured second lien debt——413,690413,690——434,347434,347Collateralized securities and structured products - debt——29,11329,113——38,11438,114Collateralized securities and structured products - equity——30,19030,190——34,64834,648Unsecured debt——————16,85116,851Equity——3,5543,554——5,1075,107Short term investments134,498——134,49870,498——70,498Total Investments$134,498$—$1,539,060$1,673,558$70,498$—$1,018,980$1,089,478Total return swap$—$—$—$—$—$—$(15,402)$(15,402)Credit default swap—————46—46Total Derivatives$—$—$—$—$—$46$(15,402)$(15,356)Total Investments and Derivatives$134,498$—$1,539,060$1,673,558$70,498$46$1,003,578$1,074,122


The following tables provide a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three and six months ended June 30, 2017 and 2016 :


Three Months EndedJune 30, 2017Senior Secured First Lien DebtSenior Secured Second Lien DebtCollateralized Securities and Structured Products - DebtCollateralized Securities and Structured Products - EquityUnsecured DebtEquityTotal ReturnSwapTotalBeginning balance, March 31, 2017$866,480$443,637$38,586$31,159$3,890$3,736$134$1,387,622Investments purchased290,50655,812———172—346,490Net realized (loss) gain(3,500)8147(451)48—413(2,669)Net change in unrealized appreciation (depreciation)10,713901125880(54)(354)(134)12,077Accretion of discount1,74968320————2,452Sales and principal repayments(103,435)(88,157)(9,625)(1,398)(3,884)—(413)(206,912)Ending balance, June 30, 2017$1,062,513$413,690$29,113$30,190$—$3,554$—$1,539,060Change in net unrealized appreciation (depreciation) on investments still held as of June 30, 2017(1)$7,286$1,340$(23)$(428)$—$(354)$—$7,821


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




38


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





Six Months EndedJune 30, 2017Senior Secured First Lien DebtSenior Secured Second Lien DebtCollateralized Securities and Structured Products - DebtCollateralized Securities and Structured Products - EquityUnsecured DebtEquityTotal ReturnSwapTotalBeginning balance, December 31, 2016$489,913$434,347$38,114$34,648$16,851$5,107$(15,402)$1,003,578Investments purchased735,988118,309——1,089172—855,558Net realized (loss) gain(3,283)1,4517(451)163—(13,856)(15,969)Net change in unrealized appreciation (depreciation)4,8403,6435701,444439(1,725)15,40224,613Accretion of discount2,9431,25047—29——4,269Sales and principal repayments(167,888)(145,310)(9,625)(5,451)(18,571)—13,856(332,989)Ending balance, June 30, 2017$1,062,513$413,690$29,113$30,190$—$3,554$—$1,539,060Change in net unrealized appreciation (depreciation) on investments still held as of June 30, 2017(1)$4,800$3,823$343$853$—$(1,725)$—$8,094


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




Three Months EndedJune 30, 2016Senior Secured First Lien DebtSenior Secured Second Lien DebtCollateralized Securities and Structured Products - DebtCollateralized Securities and Structured Products - EquityUnsecured DebtEquityTotal ReturnSwapTotalBeginning balance, March 31, 2016$125,948$440,958$38,739$21,793$26,603$—$(36,508)$617,533Investments purchased51,37450,939—10,000—75—112,388Net realized gain70637————7,2497,956Net change in unrealized (depreciation) appreciation(192)7,9571,5213,3201,641(3)8,90723,151Accretion of discount18718128—31——427Sales and principal repayments(8,589)(68,797)—(716)——(7,249)(85,351)Ending balance, June 30, 2016$168,798$431,875$40,288$34,397$28,275$72$(27,601)$676,104Change in net unrealized (depreciation) appreciation on investments still held as of June 30, 2016(1)$(763)$7,200$1,521$3,320$1,641$(3)$8,073$20,989


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




39


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





Six Months EndedJune 30, 2016Senior Secured First Lien DebtSenior Secured Second Lien DebtCollateralized Securities and Structured Products - DebtCollateralized Securities and Structured Products - EquityUnsecured DebtEquityTotal ReturnSwapTotalBeginning balance, December 31, 2015$104,187$453,713$41,663$24,604$26,740$—$(34,900)$616,007Investments purchased81,79354,823—10,0002,70475—149,395Net realized gain115573——11—15,61116,310Net change in unrealized (depreciation) appreciation(1,381)1,659(1,430)1,3211,473(3)7,2998,938Accretion of discount35336655—62——836Sales and principal repayments(16,269)(79,259)—(1,528)(2,715)—(15,611)(115,382)Ending balance, June 30, 2016$168,798$431,875$40,288$34,397$28,275$72$(27,601)$676,104Change in net unrealized (depreciation) appreciation on investments still held as of June 30, 2016(1)$(1,777)$223$(1,430)$1,321$1,473$(3)$6,757$6,564


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

Significant Unobservable Inputs


The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of investments as of June 30, 2017 and December 31, 2016 were as follows:


June 30, 2017Fair ValueValuation Techniques/MethodologiesUnobservableInputsRangeWeighted Average(1)Senior secured first lien debt$625,628Discounted Cash FlowDiscount Rates4.8%—57.9%10.4%408,897Broker QuotesBroker QuotesN/AN/A27,988Market Comparable ApproachEBITDA Multiple4.75x—9.00x7.59xRevenue Multiple0.73x—1.00x0.73xSenior secured second lien debt247,610Discounted Cash FlowDiscount Rates7.8%—22.6%10.9%163,073Broker QuotesBroker QuotesN/AN/A3,007Market Comparable ApproachEBITDA Multiple6.50x—9.50x8.01xCollateralized securities and structured products - debt29,113Discounted Cash FlowDiscount Rates8.0%—11.0%10.1%Collateralized securities and structured products - equity30,190Discounted Cash FlowDiscount Rates9.2%—15.0%12.8%Equity3,335Market Comparable ApproachEBITDA Multiple3.75x—20.00x8.72xRevenue Multiple0.50x—0.75x0.63x108Options Pricing ModelExpected Volatility30.0%—31.0%30.5%111Broker QuotesBroker QuotesN/AN/ATotal$1,539,060


|    |                                                                 
|--- | ----------------------------------------------------------------
|(1) | Weighted average amounts are based on the estimated fair values.




40


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





December 31, 2016Fair ValueValuation Techniques/MethodologiesUnobservableInputsRangeWeighted Average(1)Senior secured first lien debt$417,736Discounted Cash FlowDiscount Rates6.0%-21.3%16.5%61,846Broker QuotesBroker QuotesN/AN/A10,331Market Comparable ApproachEBITDA Multiple4.00x-6.00x4.78xSenior secured second lien debt291,189Discounted Cash FlowDiscount Rates8.5%-20.6%10.5%129,219Broker QuotesBroker QuotesN/AN/A13,939Market Comparable ApproachEBITDA Multiple6.50x-9.50x8.09xRevenue Multiple0.65x-0.90x0.65xCollateralized securities and structured products - debt38,114Discounted Cash FlowDiscount Rates7.8%-11.0%10.1%Collateralized securities and structured products - equity34,648Discounted Cash FlowDiscount Rates9.3%-17.0%13.8%Unsecured debt16,851Broker QuotesBroker QuotesN/AN/AEquity4,946Market Comparable ApproachEBITDA Multiple3.75x-10.50x7.23x161Options Pricing ModelExpected VolatilityN/A36.2%Total return swap(1,002)Discounted Cash FlowDiscount Rates5.1%-14.6%7.3%(14,400)Broker QuotesBroker QuotesN/AN/ATotal$1,003,578


|    |                                                                 
|--- | ----------------------------------------------------------------
|(1) | Weighted average amounts are based on the estimated fair values.

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





Note 10. General and Administrative Expense


General and administrative expense consisted of the following items for the three and six months ended June 30, 2017 and 2016 :


Three Months EndedJune 30,Six Months EndedJune 30,2017201620172016Professional fees$228$52$796$604Transfer agent expense312277626619Valuation expense327126526225Dues and subscriptions237197407444Printing and marketing expense126253232343Insurance expense10484207166Director fees and expenses11671202138Due diligence fees311958281Other expenses218120363232Total general and administrative expense$1,671$1,299$3,417$3,052





41


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





Note 11. Commitments and Contingencies


The Company entered into certain contracts with other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to such indemnifications to be remote.


As of June 30, 2017 and December 31, 2016 , the Company’s unfunded commitments were as follows:


Unfunded CommitmentsJune 30, 2017(1)December 31, 2016(1)CF Entertainment Inc.(2)$10,000$—Studio Movie Grill Holdings, LLC(2)4,1274,127Moss Holding Company(2)3,278—Elemica Holdings, Inc.(2)2,5002,500Woodstream Group, Inc.(2)1,553—Island Medical Management Holdings, LLC(2)1,188—Adams Publishing Group, LLC(2)1,136—Ivy Hill Middle Market Credit Fund VIII, Ltd.(2)1,1111,111American Media, Inc.(2)533711Ministry Brands, LLC(2)1805,274Tennessee Merger Sub, Inc.(3)—10,254ABG Intermediate Holdings 2 LLC—1,119Total$25,606$25,096


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

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | As ofAugust 7, 2017, the Company's unfunded commitments were to portfolio companies CF Entertainment Inc., Studio Movie Grill Holdings, LLC, Moss Holding Company, Elemica Holdings, Inc., Woodstream Group, Inc., Island Medical Management Holdings, LLC, Adams Publishing Group, LLC, Ivy Hill Middle Market Credit Fund VIII, Ltd., American Media, Inc., and Ministry Brands, LLC, in the amount of $10,000, $4,127, $3,278, $2,500, $1,553, $1,188, $1,136, $1,111, $533, and $57, respectively. In addition, subsequent to June 30, 2017, the Company entered into unfunded commitments of $18,985, $16,934, $4,293, $1,250, and $992 to Lonestar Prospects, Ltd., Staples, Inc., Accruent, LLC, Teledoc, Inc., andGTCR-Ultra Acquisition, Inc., respectively.

|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | As of December 31, 2016, such commitment was subject to the execution of a definitive loan agreement and the consummation of the underlying corporate transaction, and conditional upon receipt of all necessary shareholder, regulatory and other applicable approvals.Prior to June 30, 2017, the unfunded commitment was terminated.

Unfunded commitments to provide funds to companies are not recorded on the Company’s consolidated balance sheets. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. The Company intends to use cash on hand, short-term investments, proceeds from borrowings, and other liquid assets to fund these commitments should the need arise. For information on the companies to which the Company is committed to fund additional amounts as of June 30, 2017 and December 31, 2016 , refer to the table above and the consolidated schedules of investments.


The Company will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (i.e., advances from its financing arrangements and/or cash flows from operations). The Company will not fund its unfunded commitments from future net proceeds generated by securities offerings. The Company follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments. Specifically, the Company prepares detailed analyses of the level of its unfunded commitments relative to its then available liquidity on a daily basis. These analyses are reviewed and discussed on a weekly basis by the Company’s executive officers and senior members of CIM (including members of the investment committee) and are updated on a “real time” basis in order to ensure that the Company has adequate liquidity to satisfy its unfunded commitments.





Note 12. Fee Income


Fee income consists of commitment fees and amendment fees. The following table summarizes the Company’s fee income for the three and six months ended June 30, 2017 and 2016 :


Three Months EndedJune 30,Six Months EndedJune 30,2017201620172016Amendment fees$740$3$995$44Commitment fees198100490251Total$938$103$1,485$295


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





42


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





Note 13. Financial Highlights





The following is a schedule of financial highlights as of and for the six months ended June 30, 2017 and 2016 :


Six Months EndedJune 30,20172016Per share data:(1)Net asset value at beginning of period$9.11$8.71Results of operations:Net investment income(2)0.330.20Net realized gain and net change in unrealized appreciation on investments(3)0.070.03Net realized gain and net change in unrealized appreciation on total return swap0.010.22Net increase in net assets resulting from operations(3)0.410.45Shareholder distributions:Distributions from net investment income(0.31)(0.20)Distributions from net realized gains(0.06)(0.17)Net decrease in net assets from shareholders' distributions(0.37)(0.37)Capital share transactions:Issuance of common stock above net asset value(4)——Repurchases of common stock(5)——Net increase in net assets resulting from capital share transactions——Net asset value at end of period$9.15$8.79Shares of common stock outstanding at end of period112,958,698106,020,384Total investment return-net asset value(6)4.60%5.23%Net assets at beginning of period$999,763$904,326Net assets at end of period$1,033,736$931,845Average net assets$1,011,351$905,479Ratio/Supplemental data:Ratio of net investment income to average net assets(7)3.63%2.35%Ratio of gross operating expenses to average net assets(8)2.64%1.52%Ratio of expenses (before recoupment of expense support) to average net assets(9)2.64%1.45%Ratio of net expense recoupments to average net assets(10)—0.07%Ratio of net operating expenses to average net assets2.64%1.52%Portfolio turnover rate(11)27.34%15.09%Asset coverage ratio(12)2.782.97


|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The per share data for thesixmonths endedJune 30, 2017and2016was derived by using the weighted average shares of common stock outstanding during each period.

|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(2) | Net investment income per share includes expense support recoupments to CIG of$0.01per share for thesixmonths ended June 30,2016.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The amount shown for net realized gain and net change in unrealized appreciation on investments is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio securities for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating market values for the portfolio. As a result, net increase in net assets resulting from operations in this schedule may vary from the consolidated statements of operations.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The continuous issuance of shares of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share impact of the continuous issuance of shares of common stock was an increase to net asset value of less than$0.01per share during thesixmonths endedJune 30, 2017and 2016.

|    |                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Repurchases of common stock may cause an incremental decrease in net asset value per share due to the repurchase of shares at a price in excess of net asset value per share on each repurchase date. The per share impact of repurchases of common stock was a decrease to net asset value of less than$0.01per share during thesixmonths endedJune 30, 2017and2016.




43


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








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Total investment return-net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions paid or payable during the period. Total investment return-net asset value is based on (i) the beginning period net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions, and (iii) the value of distributions payable, if any, on the last day of the period. The total investment return-net asset value calculation assumes that monthly cash distributions are reinvested in accordance with the Company's distribution reinvestment plan then in effect as described in Note 5. The total investment return-net asset value does not consider the effect of the sales load from the sale of the Company’s common stock. The total investment return-net asset value includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. Total returns covering less than a full year are not annualized.

|    |                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Excluding the impact of the recoupment of expense support by CIG during the period, the ratio of net investment income to average net assets would have been 3.63% and 2.43% for thesixmonths endedJune 30, 2017and2016, respectively.

|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(8) | Ratio of gross operating expenses to average net assets does not include expense support provided by CIG and/or AIM, if any.

|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(9) | The ratio of gross expense recoupments to CIG to average net assets for thesixmonths endedJune 30, 2017and2016was 0.00% and (0.07%), respectively.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | In order to record an obligation to reimburse CIG for expense support provided, the ratio of gross operating expenses to average net assets, when considering the recoupment, in the period in which recoupment is sought, cannot exceed the ratio of gross operating expenses to average net assets for the period when the expense support was provided. For purposes of this calculation, gross operating expenses include all expenses borne by the Company, except for offering and organizational costs, base management fees, incentive fees, administrative services expenses, other general and administrative expenses owed to CIM and its affiliates and interest expense. For thesixmonths endedJune 30, 2017and2016, the ratio of gross operating expenses to average net assets, when considering recoupment of expense support to CIG, was 0.30% and 0.26%, respectively.

|     |                                                                                                                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | Portfolio turnover rate is calculated using the lesser of year-to-date sales or purchases over the average of the invested assets at fair value, excluding short term investments, and is not annualized.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | Asset coverage ratio is equal to (i) the sum of (a) net assets at the end of the period and (b) total senior securities outstanding at the end of the period (excluding unfunded commitments), divided by (ii) total senior securities outstanding at the end of the period. For purposes of the asset coverage ratio test applicable to the Company as a BDC, the Company treated the outstanding TRS notional amount at the end of the period, less the total amount of cash collateral posted by Flatiron under the TRS, as senior securities.




44


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include CĪON Investment Corporation and its consolidated subsidiaries.


The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. In addition to historical information, the following discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking information that involves risks and uncertainties. Amounts and percentages presented herein may have been rounded for presentation and all dollar amounts, excluding share and per share amounts, are presented in thousands unless otherwise noted.





Forward-Looking Statements


Some of the statements within this Quarterly Report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Quarterly Report on Form 10-Q may include statements as to:


|  |                              
|- | -----------------------------
|• | our future operating results;

|  |                                                                     
|- | --------------------------------------------------------------------
|• | our business prospects and the prospects of our portfolio companies;

|  |                                                      
|- | -----------------------------------------------------
|• | the impact of the investments that we expect to make;

|  |                                                                    
|- | -------------------------------------------------------------------
|• | the ability of our portfolio companies to achieve their objectives;

|  |                                                     
|- | ----------------------------------------------------
|• | our current and expected financings and investments;

|  |                                                                           
|- | --------------------------------------------------------------------------
|• | the adequacy of our cash resources, financing sources and working capital;

|  |                                                                   
|- | ------------------------------------------------------------------
|• | the use of borrowed money to finance a portion of our investments;

|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|• | the timing of cash flows, if any, from the operations of our portfolio companies;

|  |                                                                   
|- | ------------------------------------------------------------------
|• | our contractual arrangements and relationships with third parties;

|  |                                                                                                    
|- | ---------------------------------------------------------------------------------------------------
|• | the actual and potential conflicts of interest with CIM and Apollo and their respective affiliates;

|  |                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------
|• | the ability of CIM and AIM to locate suitable investments for us and the ability of CIM to monitor and administer our investments;

|  |                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------
|• | the ability of CIM and AIM and their respective affiliates to attract and retain highly talented professionals;

|  |                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------
|• | the dependence of our future success on the general economy and its impact on the industries in which we invest;

|  |                                                     
|- | ----------------------------------------------------
|• | the effects of a changing interest rate environment;

|  |                                                     
|- | ----------------------------------------------------
|• | our ability to source favorable private investments;

|  |                
|- | ---------------
|• | our tax status;

|  |                                                               
|- | --------------------------------------------------------------
|• | the effect of changes to tax legislation and our tax position;

|  |                                                        
|- | -------------------------------------------------------
|• | the tax status of the companies in which we invest; and

|  |                                                                                            
|- | -------------------------------------------------------------------------------------------
|• | the timing and amount of distributions and dividends from the companies in which we invest.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. Other factors that could cause actual results to differ materially include:


|  |                        
|- | -----------------------
|• | changes in the economy;

|  |                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------
|• | risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and

|  |                                                                             
|- | ----------------------------------------------------------------------------
|• | future changes in laws or regulations and conditions in our operating areas.

We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to review any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.





45


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Overview


We were incorporated under the general corporation laws of the State of Maryland on August 9, 2011 and commenced operations on December 17, 2012 upon raising proceeds of $2,500 from persons not affiliated with us, CIM or Apollo. We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We elected to be treated for federal income tax purposes as a RIC, as defined under Subchapter M of the Code.


Our investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. Our portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, and equity, of private and thinly traded U.S. middle-market companies. In connection with our debt investments, we may receive equity interests such as warrants or options as additional consideration. We may also purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor.


We are managed by CIM, our affiliate and a registered investment adviser. CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. We and CIM previously engaged AIM to act as our investment sub-adviser. On November 1, 2016, our board of directors, including a majority of directors who are not interested persons, approved the renewal of the investment advisory agreement with CIM and the investment sub-advisory agreement with AIM, each for a period of twelve months commencing December 17, 2016.


On July 11, 2017, the members of CIM entered into the CIM LLC Agreement with AIM for the purpose of creating a joint venture between AIM and CIG. Under the CIM LLC Agreement, AIM was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, will share in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the CIM LLC Agreement, which will ultimately result in CIG and AIM each owning a 50% economic interest in CIM.


On July 10, 2017, our independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017. Although the investment sub-advisory agreement and AIM's engagement as our investment sub-adviser was terminated, AIM continues to perform identical services for CIM and us, including, without limitation, identifying investment opportunities and making investment recommendations for approval by CIM. AIM will not be paid a separate fee in exchange for such services, but will be entitled to receive distributions as a member of CIM as described above.


We seek to meet our investment objective by utilizing the experienced management teams of both CIM and AIM, which includes their access to the relationships and human capital of Apollo, CIG and ICON Capital, in sourcing, evaluating and structuring transactions, as well as monitoring and servicing our investments. We focus primarily on the senior secured debt of private and thinly-traded U.S. middle-market companies, which we define as companies that generally possess annual EBITDA of $50 million or less, with experienced management teams, significant free cash flow, strong competitive positions and potential for growth.


Revenue


We primarily generate revenue in the form of interest income on the debt securities that we hold and capital gains on debt or other equity interests that we acquire in portfolio companies. The majority of our senior debt investments bear interest at a floating rate. Interest on debt securities is generally payable quarterly or monthly. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued, but unpaid, interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned.


Operating Expenses


Our primary operating expenses are the payment of advisory fees 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. We bear all other expenses of our operations and transactions.





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Portfolio Investment Activity for the Three Months Ended June 30, 2017 and 2016


The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three months ended June 30, 2017 and 2016 :


Three Months EndedJune 30,20172016Net Investment ActivityInvestment PortfolioTotal Return SwapTotalInvestment PortfolioTotal Return SwapTotalPurchases and drawdownsSenior secured first lien debt$290,167$—$290,167$51,374$6,010$57,384Senior secured second lien debt55,478—55,47850,939—50,939Collateralized securities and structured products - equity———10,000—10,000Equity172—17275171246Sales and principal repayments(206,499)(13,924)(220,423)(78,102)(37,562)(115,664)Net portfolio activity$139,318$(13,924)$125,394$34,286$(31,381)$2,905


The following table summarizes the composition of our investment portfolio at amortized cost and fair value as of June 30, 2017 :


June 30, 2017Investments Cost(1)Investments FairValuePercentage ofInvestmentPortfolioSenior secured first lien debt$1,057,664$1,062,51369.0%Senior secured second lien debt412,940413,69026.9%Collateralized securities and structured products - debt29,90029,1131.9%Collateralized securities and structured products - equity31,81130,1902.0%Equity5,0043,5540.2%Subtotal/total percentage1,537,3191,539,060100.0%Short term investments(2)134,498134,498Total investments$1,671,817$1,673,558Number of portfolio companies156Average annual EBITDA of portfolio companies$95.4 millionMedian annual EBITDA of portfolio companies$49.0 millionPurchased at a weighted average price of par95.94%Gross annual portfolio yield based upon the purchase price(3)8.99%


|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments.

|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.

|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.




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The following table summarizes the composition of our investment portfolio at amortized cost and fair value and our underlying TRS loans portfolio at notional amount and fair value as of December 31, 2016:


December 31, 2016Investment PortfolioTotal Return SwapTotalInvestments Cost(1)Investments FairValuePercentage ofInvestmentPortfolioNotional Amount of Underlying TRS LoansFair Value of Underlying TRS LoansPercentage of Underlying TRS LoansCost/Notional Amount(1)Fair ValuePercentageSenior secured first lien debt$489,904$489,91348.1%$351,747$341,19486.9%$841,651$831,10758.9%Senior secured second lien debt437,240434,34742.6%56,10051,25113.1%493,340485,59834.4%Collateralized securities and structured products - debt39,47138,1143.7%———39,47138,1142.7%Collateralized securities and structured products - equity37,71334,6483.4%———37,71334,6482.5%Unsecured debt17,29016,8511.7%———17,29016,8511.1%Equity4,8325,1070.5%———4,8325,1070.4%Subtotal/total percentage1,026,4501,018,980100.0%407,847392,445100.0%1,434,2971,411,425100.0%Short term investments(2)70,49870,498——70,49870,498Total investments$1,096,948$1,089,478$407,847$392,445$1,504,795$1,481,923Number of portfolio companies10349141(3)Average annual EBITDA of portfolio companies$49.9 million$200.7 million$94.7 millionMedian annual EBITDA of portfolio companies$42.7 million$66.0 million$50.4 millionPurchased at a weighted average price of par95.87%98.96%96.73%Gross annual portfolio yield based upon the purchase price(4)9.99%6.73%9.07%


|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments.

|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.

|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The sum of investment portfolio and TRS portfolio companies does not equal the total number of portfolio companies. This is due to 11 portfolio companies being in both the investment and TRS portfolios.

|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage.

The following table summarizes the composition of our investment portfolio by the type of interest rate as of June 30, 2017 , excluding short term investments of $134,498 :


June 30, 2017Interest Rate AllocationInvestments CostInvestments FairValuePercentage ofInvestmentPortfolioFloating interest rate investments$1,447,866$1,445,80393.9%Fixed interest rate investments52,63859,5133.9%Other income producing investments31,81130,1902.0%Non-income producing equity5,0043,5540.2%Total investments$1,537,319$1,539,060100.0%





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The following table summarizes the composition of our investment portfolio and our underlying TRS loans portfolio by the type of interest rate as of December 31, 2016 , excluding short term investments of $70,498 :


December 31, 2016Investment PortfolioTotal Return SwapTotalInterest Rate AllocationInvestments CostInvestments FairValuePercentage ofInvestmentPortfolioNotional Amount of Underlying TRS LoansFair Value of Underlying TRS LoansPercentage of Underlying TRS LoansCost/Notional AmountFair ValuePercentageFloating interest rate investments$936,846$931,21491.4%$407,847$392,445100.0%$1,344,693$1,323,65993.8%Fixed interest rate investments47,05948,0114.7%———47,05948,0113.4%Other income producing investments37,71334,6483.4%———37,71334,6482.4%Non-income producing equity4,8325,1070.5%———4,8325,1070.4%Total investments$1,026,450$1,018,980100.0%$407,847$392,445100.0%$1,434,297$1,411,425100.0%


The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of June 30, 2017 :


June 30, 2017Industry ClassificationInvestments atFair ValuePercentage ofInvestment PortfolioHealthcare & Pharmaceuticals$228,88214.9%High Tech Industries221,24914.4%Services: Business220,68114.3%Media: Diversified & Production96,0916.2%Chemicals, Plastics & Rubber82,2075.3%Telecommunications68,0864.4%Capital Equipment62,4604.1%Media: Advertising, Printing & Publishing61,5254.0%Diversified Financials59,3033.9%Beverage, Food & Tobacco58,3443.8%Hotel, Gaming & Leisure51,3803.3%Retail47,4883.1%Automotive40,2872.6%Services: Consumer35,1862.3%Construction & Building34,8292.3%Aerospace & Defense30,3992.0%Consumer Goods: Durable29,3871.9%Banking, Finance, Insurance & Real Estate24,7831.6%Energy: Oil & Gas18,2381.2%Consumer Goods: Non-Durable16,3521.1%Media: Broadcasting & Subscription16,1111.0%Metals & Mining15,5321.0%Transportation: Cargo9,9500.6%Forest Products & Paper5,6190.4%Environmental Industries2,7750.2%Containers, Packaging & Glass1,9160.1%Subtotal/total percentage1,539,060100.0%Short term investments134,498Total investments$1,673,558





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The following table shows the composition of our investment portfolio and our underlying TRS loans portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of December 31, 2016 :


December 31, 2016Investment PortfolioTotal Return SwapTotalIndustry ClassificationInvestments Fair ValuePercentage ofInvestment PortfolioFair Value ofUnderlyingTRS LoansPercentage ofUnderlyingTRS LoansFair ValuePercentageHigh Tech Industries$217,33921.3%$45,35111.6%$262,69018.6%Services: Business126,86912.5%66,73317.0%193,60213.7%Healthcare & Pharmaceuticals118,33711.6%70,17617.9%188,51313.4%Diversified Financials72,7627.1%——72,7625.2%Media: Advertising, Printing & Publishing54,3545.3%7,3281.9%61,6824.4%Beverage, Food & Tobacco53,6585.3%——53,6583.8%Construction & Building39,1373.8%14,2693.6%53,4063.8%Chemicals, Plastics & Rubber27,2532.7%25,7016.5%52,9543.7%Capital Equipment51,1555.0%——51,1553.6%Hotel, Gaming & Leisure28,9742.8%21,0715.4%50,0453.5%Retail18,8521.9%30,8017.8%49,6533.5%Telecommunications35,4113.5%13,7753.5%49,1863.5%Automotive39,1923.9%——39,1922.8%Services: Consumer9,4770.9%26,2786.7%35,7552.5%Media: Diversified & Production23,1002.3%7,2771.8%30,3772.1%Banking, Finance, Insurance & Real Estate17,6361.7%11,5472.9%29,1832.1%Aerospace & Defense21,7802.1%5,5641.4%27,3441.9%Media: Broadcasting & Subscription9,7761.0%10,0132.6%19,7891.4%Energy: Oil & Gas12,8031.3%4,5701.2%17,3731.2%Consumer Goods: Durable1,0000.1%15,9424.1%16,9421.2%Metals & Mining11,3491.1%3,5280.9%14,8771.1%Energy: Electricity13,7151.3%——13,7151.0%Forest Products & Paper——12,5213.2%12,5210.9%Consumer Goods: Non-Durable8,6110.8%——8,6110.6%Containers, Packaging & Glass3,8450.4%——3,8450.3%Environmental Industries2,5950.3%——2,5950.2%Subtotal/total percentage1,018,980100.0%392,445100.0%1,411,425100.0%Short term investments70,498—70,498Total investments$1,089,478$392,445$1,481,923


We do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would be presumed to “control” a portfolio company or issuer if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company or issuer if we owned 5% or more of its voting securities.


Our investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. As of June 30, 2017 and December 31, 2016 , our  unfunded commitments amounted to  $25,606  and  $25,096 , respectively. As of  August 7, 2017 , our unfunded commitments amounted to  $67,938 . Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. For additional information on our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.





Investment Portfolio Asset Quality


CIM uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio. These ratings are just one of several factors that CIM uses to monitor our portfolio, are not in and of themselves determinative of fair value or revenue recognition and are presented for indicative purposes. CIM rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors.





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The following is a description of the conditions associated with each investment rating used in this ratings system:


Investment RatingDescription1Indicates 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.2Indicates 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.3Indicates that the risk to our ability to recoup the cost of such investment has increased since origination or acquisition, but full return of principal and interest or dividend is expected. A portfolio company with an investment rating of 3 requires closer monitoring.4Indicates 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.5Indicates that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition and the portfolio company likely has materially declining performance. Loss of interest or dividend and some loss of principal investment is expected, which would result in an overall negative internal rate of return on the investment.


For investments rated 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company.


The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of June 30, 2017 , excluding short term investments of $134,498 :


June 30, 2017Investment RatingInvestmentsFair ValuePercentage ofInvestment Portfolio1$——21,305,18484.8%3185,08612.0%439,7582.6%59,0320.6%$1,539,060100.0%


The following table summarizes the composition of our investment portfolio and our underlying TRS loans portfolio based on the 1 to 5 investment rating scale at fair value as of December 31, 2016, excluding short term investments of $70,498 :


December 31, 2016Investment PortfolioTotal Return SwapTotalInvestment RatingInvestmentsFair ValuePercentage ofInvestment PortfolioFair Value of Underlying TRS LoansPercentage of Underlying TRS LoansFair ValuePercentage1$——$——$——2963,47794.6%342,62087.3%1,306,09792.5%350,9425.0%34,6578.8%85,5996.1%44,5610.4%12,7983.3%17,3591.2%5——2,3700.6%2,3700.2%$1,018,980100.0%$392,445100.0%$1,411,425100.0%


The amount of the investment portfolio in each rating category may vary substantially from period to period resulting primarily from changes in the composition of such portfolio as a result of new investment, repayment and exit activities. In addition, changes in the rating of investments may be made to reflect our expectation of performance and changes in investment values.





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Current Investment Portfolio





As of August 7, 2017, our investment portfolio, excluding our short term investments, consisted of interests in 157 portfolio companies (69% in senior secured first lien debt, 27% in senior secured second lien debt, 4% in collateralized securities and structured products (comprised of 1% invested in rated debt, 1% invested in non-rated debt and 2% invested in non-rated equity of such securities and products), and less than 1% in equity) with a total fair value of $1,516,998 with an average and median portfolio company annual EBITDA of $87.8 million and $48.1 million, respectively, at initial investment. As of August 7, 2017, investments in our portfolio, excluding our short term investments, were purchased at a weighted average price of 91.31% of par value. Our estimated gross annual portfolio yield was 8.91% based upon the purchase price of such investments. The estimated gross portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees. For the quarter ended June 30, 2017, our total investment return-net asset value was 4.60%. Total investment return-net asset value does not represent and may be higher than an actual investment return to shareholders because it excludes all sales commissions and dealer manager fees. Total investment return-net asset value is a measure of the change in total value for shareholders who held our common stock at the beginning and end of the period, including distributions paid or payable during the period, and is described further in Note 13 of our consolidated financial statements.


As of August 7, 2017, our only short term investment was an investment in a U.S. Treasury Obligations Fund of $93,617.





Results of Operations for the Three Months Ended June 30, 2017 and 2016


Our results of operations for the three months ended June 30, 2017 and 2016 were as follows:


Three Months EndedJune 30,20172016Investment income$35,345$17,830Net operating expenses15,2157,000Net investment income20,13010,830Net realized (loss) gain on investments and foreign currency(3,079)707Net change in unrealized appreciation on investments12,21114,244Net realized gain on total return swap4137,249Net change in unrealized (depreciation) appreciation on total return swap(134)8,907Net increase in net assets resulting from operations$29,541$41,937


Investment Income


For the three months ended June 30, 2017 and 2016 , we generated investment income of $35,345 and $17,830 , respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities, structured products, and unsecured debt of 158 and 89 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments and TRS, increased $784,401, from $678,873 for the three months ended June 30, 2016 to $1,463,274 for the three months ended June 30, 2017 , as we deployed the net proceeds from our financing arrangements and the net proceeds from our follow-on continuous public offering, which commenced on January 25, 2016. We expect our investment portfolio to continue to grow due to the anticipated equity available to us for investment from our follow-on continuous public offering and amounts available under our financing arrangements. As a result, we believe that reported investment income for the three months ended June 30, 2017 and 2016 is not representative of our stabilized or future performance. Interest income earned by loans underlying the TRS is not included in investment income in the consolidated statements of operations, but rather it is recorded as part of net realized gain (loss) on total return swap. In lieu of extending the expiration date of the TRS beyond April 18, 2017, we entered into a traditional credit facility with Citibank on March 29, 2017.


Operating Expenses


The composition of our operating expenses for the three months ended June 30, 2017 and 2016 was as follows:


Three Months EndedJune 30,20172016Management fees$7,422$4,612Administrative services expense425434General and administrative1,6711,299Interest expense5,697107Total operating expenses15,2156,452Recoupment of expense support from CIG—548Net operating expenses$15,215$7,000





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


The composition of our general and administrative expenses for the three months ended June 30, 2017 and 2016 was as follows:


Three Months EndedJune 30,20172016Valuation expense$327$126Transfer agent expense312277Dues and subscriptions237197Professional fees22852Printing and marketing expense126253Director fees and expenses11671Insurance expense10484Due diligence fees3119Other expenses218120Total general and administrative expense$1,671$1,299





Expense Support and Recoupment of Expense Support





For the three months ended June 30, 2017, CIG and AIM did not provide any expense support or recoup any previously provided expense support. For the three months ended June 30, 2016 , CIG recouped $548 of expense support made during the three months ended December 31, 2014 in connection with the expense support and conditional reimbursement agreement.





Recoupment of such support will be determined as appropriate to meet the objectives of the expense support and conditional reimbursement agreement. As a result, we may or may not be requested to reimburse CIG and AIM for any expense support that may be received from CIG and AIM in the future. See Note 4 to our consolidated financial statements for additional disclosure regarding expense support from CIG and AIM.


Net Investment Income


Our net investment income totaled $20,130 and $10,830 for the three months ended June 30, 2017 and 2016 , respectively. The increase in net investment income was primarily due to an increase in the size of our investment portfolio relative to our expenses as we continued to achieve economies of scale due to proceeds received from our follow-on continuous public offering and our financing arrangements.


Net Realized (Loss) Gain on Investments and Foreign Currency


Our net realized (loss) gain on investments and foreign currency totaled ($3,079) and $707 for the three months ended June 30, 2017 and 2016, respectively.  This change was mainly due to losses realized on certain investments, which were partially offset by an increase in sales and principal repayment activity during the three months ended June 30, 2017 compared to the three months ended June 30, 2016 . During the three months ended June 30, 2017 , we received sale proceeds of $56,213 and principal repayments of $150,286, resulting in net realized losses of ($3,082) . During the three months ended June 30, 2016 , we received sale proceeds of $1,495 and principal repayments of $76,607, resulting in net realized gains of $707.


Net Change in Unrealized Appreciation on Investments


The net change in unrealized appreciation on our investments totaled $12,211 and $14,244 for the three months ended June 30, 2017 and 2016 , respectively. This change was driven primarily by a greater degree of credit spread tightening for middle market loans during the three months ended June 30, 2016 compared to the three months ended June 30, 2017 that positively impacted the fair value of certain investments.





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Net Realized Gain on TRS


Our net realized gain on the TRS totaled $413 and $7,249 for the three months ended June 30, 2017 and 2016 , respectively. The components of net realized gain on the TRS are summarized below:


Three Months EndedJune 30,20172016Interest and other income from TRS portfolio$584$11,621Interest and other expense from TRS portfolio(305)(3,589)Net gain (loss) on TRS loan sales134(783)Total$413$7,249


The net realized gain on TRS decreased primarily due to the sale of a majority of loans underlying the TRS to Flatiron Funding II on March 29, 2017.


Net Change in Unrealized (Depreciation) Appreciation on TRS


The net change in unrealized (depreciation) appreciation on the TRS totaled ($134) and $8,907 for the three months ended June 30, 2017 and 2016 , respectively. This change was driven primarily by the sale of a majority of loans underlying the TRS to Flatiron Funding II on March 29, 2017.


Net Increase in Net Assets Resulting from Operations


For the three months ended June 30, 2017 and 2016 , we recorded a net increase in net assets resulting from operations of $29,541 and $41,937 , respectively, as a result of our operating activity for the respective periods.


Results of Operations for the Six Months Ended June 30, 2017 and 2016


Our results of operations for the six months ended June 30, 2017 and 2016 were as follows:


Six Months EndedJune 30,20172016Investment income$63,390$35,101Net operating expenses26,71513,796Net investment income36,67521,305Net realized (loss) gain on investments and foreign currency(2,195)699Net change in unrealized appreciation on investments9,3941,639Net realized (loss) gain on total return swap(13,856)15,611Net change in unrealized appreciation on total return swap15,4027,299Net increase in net assets resulting from operations$45,420$46,553


Investment Income


For the six months ended June 30, 2017 and 2016 , we generated investment income of $63,390 and $35,101 , respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities, structured products, and unsecured debt of 167 and 94 portfolio companies held during each respective period. Our average investment portfolio size, excluding our short term investments and TRS, increased $601,714, from $677,306 for the six months ended June 30, 2016 to $1,279,020 for the six months ended June 30, 2017 , as we deployed the net proceeds from our financing arrangements and the net proceeds from our follow-on continuous public offering, which commenced on January 25, 2016. We expect our investment portfolio to continue to grow due to the anticipated equity available to us for investment from our follow-on continuous public offering. As a result, we believe that reported investment income for the six months ended June 30, 2017 and 2016 is not representative of our stabilized or future performance. Interest income earned by loans underlying the TRS is not included in investment income in the consolidated statements of operations, but rather was recorded as part of net realized (loss) gain on total return swap. In lieu of extending the expiration date of the TRS beyond April 18, 2017, we entered into a traditional credit facility with Citibank on March 29, 2017.





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Operating Expenses


The composition of our operating expenses for the six months ended June 30, 2017 and 2016 was as follows:


Six Months EndedJune 30,20172016Management fees$13,904$9,124Administrative services expense771726General and administrative3,4173,052Interest expense8,623227Total operating expenses26,71513,129Recoupment of expense support from CIG—667Net operating expenses$26,715$13,796


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


The composition of our general and administrative expenses for the six months ended June 30, 2017 and 2016 was as follows:


Six Months EndedJune 30,20172016Professional fees$796$604Transfer agent expense626619Valuation expense526225Dues and subscriptions407444Printing and marketing expense232343Insurance expense207166Director fees and expenses202138Due diligence fees58281Other expenses363232Total general and administrative expense$3,417$3,052





Expense Support and Recoupment of Expense Support





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





Recoupment of such support will be determined as appropriate to meet the objectives of the expense support and conditional reimbursement agreement. As a result, we may or may not be requested to reimburse CIG and AIM for any expense support that may be received from CIG and AIM in the future.


Net Investment Income


Our net investment income totaled $36,675 and $21,305 for the six months ended June 30, 2017 and 2016 , respectively. The increase in net investment income was primarily due to an increase in the size of our investment portfolio relative to our expenses as we continued to achieve economies of scale due to proceeds received from our follow-on continuous public offering and our financing arrangements.


Net Realized (Loss) Gain on Investments and Foreign Currency


Our net realized (loss) gain on investments and foreign currency totaled ($2,195) and $699 for the six months ended June 30, 2017 and 2016, respectively.  This change was mainly due to losses realized on certain investments, which were partially offset by an increase in sales and principal repayment activity during the six months ended June 30, 2017 compared to the six months ended June 30, 2016 . During the six months ended June 30, 2017 , we received sale proceeds of $87,116 and principal repayments of $259,729 , resulting in net realized losses of ($2,342) . During the six months ended June 30, 2016 , we received sale proceeds of $12,415 and principal repayments of $87,356, resulting in net realized gains of $699.





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Net Change in Unrealized Appreciation on Investments


The net change in unrealized appreciation on our investments totaled $9,394 and $1,639 for the six months ended June 30, 2017 and 2016 , respectively. This change was driven primarily by a tightening of credit spreads during the six months ended June 30, 2017 as well as the reversal of  unrealized depreciation for certain investments that were realized during the six months ended June 30, 2017 .


Net Realized (Loss) Gain on TRS


Our net realized (loss) gain on the TRS totaled ($13,856) and $15,611 for the six months ended June 30, 2017 and 2016 , respectively. The components of net realized (loss) gain on the TRS are summarized below:


Six Months EndedJune 30,20172016Interest and other income from TRS portfolio$6,543$23,267Interest and other expense from TRS portfolio(2,949)(7,042)Net loss on TRS loan sales(17,450)(614)Total$(13,856)$15,611


Net Change in Unrealized Appreciation on TRS


The net change in unrealized appreciation on the TRS totaled $15,402 and $7,299 for the six months ended June 30, 2017 and 2016 , respectively. This change was driven primarily by a reversal of unrealized depreciation on the loans underlying the TRS upon the expiration of the TRS.


Net Increase in Net Assets Resulting from Operations


For the six months ended June 30, 2017 and 2016 , we recorded a net increase in net assets resulting from operations of $45,420 and $46,553 , respectively, as a result of our operating activity for the respective periods.





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


Our net asset value per share was $9.15 and $9.11 on June 30, 2017 and December 31, 2016, respectively. After considering (i) the overall changes in net asset value per share, (ii) paid distributions of approximately $0.3658 per share during the six months ended June 30, 2017 , and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan then in effect, the total investment return was 4.60% for the six month period ended June 30, 2017 . Total investment return-net asset value does not represent and may be higher than an actual return to shareholders because it excludes all sales commissions and dealer manager fees. Total investment return-net asset value is a measure of the change in total value for shareholders who held our common stock at the beginning and end of the period, including distributions paid or payable during the period, and is described further in Note 13 to our consolidated financial statements included in this report.


Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $9.00 per share (public offering price net of sales load) have seen an annualized return of 8.48% and a cumulative total return of 44.69% through June 30, 2017 (see chart below). Initial shareholders who subscribed to the offering in December 2012 with an initial investment of $10,000 and an initial purchase price equal to $10.00 per share (the initial public offering price including sales load) have seen an annualized return of 5.99% and a cumulative total return of 30.22% through June 30, 2017 . Over the same time period, the S&P/LSTA Leveraged Loan Index, a primary measure of senior debt covering the U.S. leveraged loan market, which currently consists of approximately 1,000 credit facilities throughout numerous industries, recorded an annualized return of 4.14% and a cumulative total return of 20.20%. In addition, the BofA Merrill Lynch US High Yield Index, a primary measure of short-term US dollar denominated below investment grade corporate debt publicly issued in the US domestic market, recorded an annualized return of 5.88% and a cumulative total return of 29.63% over the same period.





(1) Cumulative performance: December 17, 2012 to June 30, 2017


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





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Financial Condition, Liquidity and Capital Resources


We generate cash primarily from the net proceeds from our follow-on continuous public offering and from cash flows from interest, fees and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. We also employ leverage to seek to enhance our returns as market conditions permit and at the discretion of CIM, but in no event will leverage employed exceed 50% of the value of our total assets, as required by the 1940 Act. We are engaged in a follow-on continuous public offering of shares of our common stock. Our initial continuous public offering commenced on July 2, 2012 and ended on December 31, 2015. Our follow-on continuous public offering commenced on January 25, 2016. We accept subscriptions on a continuous basis and issue shares at weekly closings at prices that, after deducting selling commissions and dealer manager fees, are at or above our net asset value per share.


We will sell our shares on a continuous basis at our latest public offering price of $9.65 per share; however, to the extent that our net asset value fluctuates, we will sell at a price necessary to ensure that shares are sold at a price, after deduction of selling commissions and dealer manager fees, that is above and within 2.5% of net asset value per share.


Since commencing our initial continuous public offering on July 2, 2012 and through June 30, 2017 , we sold 112,958,698 shares of common stock for net proceeds of $ 1,147,661 at an average price per share of $10.16 . The net proceeds include gross proceeds received from reinvested shareholder distributions of $ 104,264 , for which we issued 11,452,165 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $ 43,156 , for which we repurchased 4,778,549 shares of common stock. Since commencing our initial continuous public offering on July 2, 2012 and through June 30, 2017 , sales commissions and dealer manager fees related to the sale of our common stock were $63,492 and $31,205, respectively.


As of August 9, 2017 , we sold 112,767,948 shares of common stock for net proceeds of $ 1,146,319 at an average price per share of $10.17 . The net proceeds include gross proceeds received from reinvested shareholder distributions of $ 107,306 , for which we issued 11,784,305 shares of common stock, and gross proceeds paid for shares of common stock tendered for repurchase of $ 55,581 , for which we repurchased 6,143,717 shares of common stock. Since commencing our initial continuous public offering on July 2, 2012 and through August 9, 2017 , sales commissions and dealer manager fees related to the sale of our common stock were $63,669 and $31,343, respectively.


The net proceeds from our follow-on continuous public offering will be invested primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less prior to being invested in debt securities of private U.S. middle-market companies.


As of June 30, 2017 and December 31, 2016, we had $ 134,498 and $70,498 in short term investments, respectively, invested in a fund that primarily invests in U.S. government securities.





Citibank Credit Facility





As of June 30, 2017 and August 7, 2017 , our outstanding borrowings under the Citibank Credit Facility were $231,698 and the aggregate unfunded principal amount in connection with the Citibank Credit Facility was $93,302. For a detailed discussion of our Citibank Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.





JPM Credit Facility


As of June 30, 2017 and August 7, 2017 , our outstanding borrowings under the JPM Credit Facility were $224,423 and the aggregate principal amount available in connection with the JPM Credit Facility was $577. For a detailed discussion of our JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report.





UBS Facility


As of June 30, 2017 and August 7, 2017 , our outstanding borrowings under the UBS Facility were $125,000 and no additional principal amount was available in connection with the UBS Facility. For a detailed discussion of our UBS Facility, refer to Note 8 to our consolidated financial statements included in this report.


Unfunded Commitments


As of June 30, 2017 and August 7, 2017 , our unfunded commitments amounted to $25,606 a nd  $67,938 , respectively. For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report.





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RIC Status and Distributions


Prior to the expiration of the TRS, our total investment portfolio includes loans and other securities on our consolidated balance sheets and loans underlying the TRS. Accordingly, we treat net interest and other income earned on all investments, including the loans underlying the TRS, as a component of investment company taxable income when determining our sources of distributions. The sources of our distributions for the six months ended June 30, 2017 were as follows:


Three Months EndedJune 30, 2017Six Months EndedJune 30, 2017Investment PortfolioTotal Return Swap PortfolioTotal Investment PortfolioPercentageInvestment PortfolioTotal Return Swap PortfolioTotal Investment PortfolioPercentageNet investment income$15,842$278$16,12079.1%$31,275$3,594$34,86986.1%Capital gains from the sale of assets(1)(2)1,3462,9054,25120.9%2,0863,5395,62513.9%Total$17,188$3,183$20,371100.0%$33,361$7,133$40,494100.0%


|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For thethree and sixmonths endedJune 30, 2017, we estimate that we had no net capital gains classified as long-term. The final determination of the tax attributes of our distributions is made annually as of the end of the year.

|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | During thethree and sixmonths endedJune 30, 2017, the Company realized losses of $4,271 and$25,417, respectively, which are not currently deductible on a tax-basis.

For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, to our consolidated financial statements included in this report.





Recent Accounting Pronouncements





See Note 2 to our consolidated financial statements included in this report for a discussion of recent accounting pronouncements that are applicable to us.





Critical Accounting Policies


Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, we also utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming our estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.





Valuation of Portfolio Investments


The value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940 Act, which requires that we value our assets as follows: (i) the market price for those securities for which a market quotation is readily available, and (ii) for all other securities and assets, at fair value, as determined in good faith by our board of directors. As a BDC, Section 2(a)(41) of the 1940 Act requires the board of directors to determine in good faith the fair value of portfolio securities for which a market price is not readily available, and it does so in conjunction with the application of our valuation procedures by CIM.


There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations in our consolidated financial statements.





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Valuation Methods


With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:


|  |                                                                                                                                                                                                                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | our quarterly valuation process begins with each portfolio company or investment being initially valued by certain of CIM’s investment professionals and certain members of its management team, with such valuation taking into account information received from various sources, including independent valuation firms and AIM, if applicable;

|  |                                                                                                    
|- | ---------------------------------------------------------------------------------------------------
|• | preliminary valuation conclusions are then documented and discussed with CIM’s valuation committee;

|  |                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | CIM’s valuation committee reviews the preliminary valuation, and, if applicable, delivers such preliminary valuation to an independent valuation firm for its review;

|  |                                                                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | CIM’s valuation committee, or its designee, and, if appropriate, the relevant investment professionals meet with the independent valuation firm to discuss the preliminary valuation;

|  |                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | designated members of CIM’s management team respond and supplement the preliminary valuation to reflect any comments provided by the independent valuation firm;

|  |                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | our audit committee meets with members of CIM’s management team and the independent valuation firm to discuss the assistance provided and the results of the independent valuation firm’s review; and

|  |                                                                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | our board of directors discusses the valuation and determines the fair value of each investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of CIM, the audit committee and any third-party valuation firm, if applicable.

In addition to the foregoing, certain investments for which a market price is not readily available are evaluated on a quarterly basis by an independent valuation firm and certain other investments are on a rotational basis reviewed once over a twelve-month period by an independent valuation firm. Finally, certain investments are not evaluated by an independent valuation firm unless the net asset value and other aspects of such investments in the aggregate exceed certain thresholds.


Given the expected types of investments, excluding short term investments that are classified as Level 1, management expects our portfolio holdings to be classified as Level 3. Due to the uncertainty inherent in the valuation process, particularly for Level 3 investments, such fair value estimates may differ significantly from the values that would have been used had an active market for the investments existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses that we ultimately realize on these investments to materially differ from the valuations currently assigned. Inputs used in the valuation process are subject to variability in the future and can result in materially different fair values.


For an additional discussion of our investment valuation process, refer to Note 2 to our consolidated financial statements included in this report.





Related Party Transactions





For a discussion of our relationship with related parties including CION Securities, CIM, ICON Capital, CIG, and AIM and amounts incurred under agreements with such related parties, refer to Note 4 to our consolidated financial statements included in this report.





Contractual Obligations





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





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





On May 19, 2017, Murray Hill Funding II entered into the UBS Facility with UBS. See Note 8 to our consolidated financial statements for a more detailed description of the UBS Facility.





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Commitments and Contingencies and Off-Balance Sheet Arrangements


Commitments and Contingencies


We have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote.


Our investment portfolio may contain debt investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or other unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreement. For further details on such debt investments, refer to Note 11 to our consolidated financial statements included in this report.


Off-Balance Sheet Arrangements





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





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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 June 30, 2017, 93.9% of our investments paid variable interest rates. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments, especially to the extent that we hold variable rate investments, and to declines in the value of any fixed rate investments we may hold. To the extent that a majority of our investments may be in variable rate investments, an increase in interest rates could make it easier for us to meet or exceed our incentive fee hurdle rate, as defined in our investment advisory agreement, and may result in a substantial increase in our net investment income, and also to the amount of incentive fees payable to CIM with respect to our pre-incentive fee net investment income.


Under the terms of the JPM Credit Facility, advances bear interest at a floating rate equal to the three-month LIBOR, plus a spread of 3.50% per year. Under the terms of the Citibank Credit Facility, advances bear interest at a floating rate equal to (1) the higher of (a) the Citibank prime rate, (b) the federal funds rate plus 1.5% or (c) the three-month LIBOR plus 1.0%, plus (2) a spread of (a) 2% per year during the period from and including March 29, 2017 and the earlier of March 29, 2019 and the date the Citibank Credit Facility matures, or (b) 3% per year during the period from the date the Citibank Credit Facility matures until all obligations under the Citibank Credit Facility have been paid in full. Pursuant to the terms of the UBS Facility, we pay a financing fee equal to the three-month LIBOR plus a spread of up to 3.50%, which was 3.50% at June 30, 2017. 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 material adverse effect on our business, financial condition and results of operations.


The following table shows the effect over a twelve month period of changes in interest rates on our net interest income, excluding short term investments, assuming no changes in our investment portfolio, the Citibank Credit Facility, the JPM Credit Facility, or the UBS Facility in effect as of June 30, 2017:


Change in Interest RatesIncrease in Net Interest Income(1)Percentage Change in Net Interest IncomeDown 100 basis points$2,7822.7%Down 50 basis points750.1%Current base interest rate——Up 50 basis points4,5114.4%Up 100 basis points9,0728.8%Up 200 basis points18,19517.7%Up 300 basis points27,31826.5%


|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | This table assumes no change in defaults or prepayments by portfolio companies over the next twelve months.

The interest rate sensitivity analysis presented above does not consider the potential impact of the changes in fair value of our fixed rate debt investments and the net asset value of our common stock in the event of sudden increases in interest rates. Approximately 3.9% of our investments paid fixed interest rates as of June 30, 2017. Rising market interest rates will most likely lead to fair value declines for fixed interest rate investments and a decline in the net asset value of our common stock, while declining market interest rates will most likely lead to an increase in the fair value of fixed interest rate investments and an increase in the net asset value of our common stock.


In addition, we may have risk regarding portfolio valuation as discussed in Note 2 to our consolidated financial statements included in this report.





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 June 30, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) and Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.


In designing and evaluating our disclosure controls and procedures, we recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.  Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Disclosure controls and procedures cannot detect or prevent all error and fraud. Some inherent limitations in disclosure controls and procedures include costs of implementation, faulty decision-making, simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of





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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 June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





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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 and other third parties. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations.





Item 1A. Risk Factors


There have been no material changes from the risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016.





Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


Our registration statement on Form N-2, as amended, in connection with our follow-on continuous public offering was declared effective by the SEC on January 25, 2016 (SEC File No. 333-203683). Our follow-on continuous public offering commenced on January 25, 2016.


We did not engage in any unregistered sales of equity securities during the three months ended June 30, 2017.


The table below provides information concerning our repurchases of shares of our common stock during the three months ended June 30, 2017 pursuant to our share repurchase program.


PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares That May Yet Be Purchased Under the Plans or ProgramsApril 1 to April 30, 20171,137,234$9.121,137,234(1)May 1 to May 31, 2017————June 1 to June 30, 2017————Total1,137,234$9.121,137,234(1)


|    |                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A description of the maximum number of shares of our common stock that may be repurchased is set forth in a detailed discussion of the terms of our share repurchase program in Note 3 to our unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.




Item 3. Defaults Upon Senior Securities


Not applicable.





Item 4. Mine Safety Disclosures


Not applicable.





Item 5. Other Information


Not applicable.








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Item 6. Exhibits


ExhibitNumberDescription of Document2.1Purchase and Sale Agreement, dated as of September 30, 2016, by and between Park South Funding, LLC and Credit Suisse Alternative Capital, LLC (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2016 (File No. 814-00941)).3.1Articles 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)).3.2Second 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)).3.3Bylaws 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)).4.1Form of Follow-On Subscription Agreement (Incorporated by reference to Appendix A to Post-Effective Amendment No. 4 to Registrant’s Registration Statement on Form N-2 filed with the SEC on April 26, 2017 (File No. 333-203683)).4.2Fifth Amended and Restated Distribution Reinvestment Plan of CĪON Investment Corporation (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the SEC on December 8, 2016 (File No. 814-00941)).10.1Investment Advisory Agreement by and between CĪON Investment Corporation and CION 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)).10.2Investment Sub-Advisory Agreement by and among CION 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)).10.3Administration 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)).10.4Custody 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)).10.5Escrow 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)).10.6Dealer Manager Agreement by and among CĪON Investment Corporation, CION 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)).10.7ISDA 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 (File No. 814-00941)).10.8Thirteenth Amended and Restated Confirmation Letter Agreement, dated as of February 18, 2017, by and between Flatiron Funding, LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2017 (File No. 814-00941)).10.9Third Amended and Restated Expense Support and Conditional Reimbursement Agreement, dated as of December 14, 2016, by and among CĪON Investment Corporation, Apollo Investment Management, L.P. and CION Investment Group, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on December 14, 2016 (File No. 814-00941)).10.10Amended and Restated Follow-On Dealer Manager Agreement, dated as of December 28, 2016, by and among CĪON Investment Corporation, CION Investment Management, LLC and CION Securities, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on January 4, 2017 (File No. 814-00941)).10.11Form of Follow-On Selected Dealer Agreement (Incorporated by reference to Exhibit (H)(4) to Registrant’s Registration Statement on Form N-2 filed with the SEC on April 28, 2015 (File No. 333-203683)).10.12Loan and Security Agreement, dated as of April 30, 2015, by and between CĪON Investment Corporation and East West Bank (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015 (File No. 814-00941)).10.13First Amendment to Loan and Security Agreement, dated as of January 28, 2016, by and between CĪON Investment Corporation and East West Bank (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on February 3, 2016 (File No. 814-00941)).10.14Second Amendment to Loan and Security Agreement, dated as of April 21, 2016, by and between CĪON Investment Corporation and East West Bank (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on April 27, 2016 (File No. 814-00941)).10.15Custody Control Agreement, dated as of April 30, 2015, by and among CĪON Investment Corporation, East West Bank and U.S. Bank National Association (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015 (File No. 814-00941)).10.16Limited Liability Company Agreement of CION / Capitala Senior Loan Fund I, LLC, dated as of June 24, 2015, by and between CĪON Investment Corporation and Capitala Finance Corp. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on June 26, 2015 (File No. 814-00941)).





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ExhibitNumberDescription of Document10.17Loan and Security Agreement, dated as of August 26, 2016, by and among 34th Street Funding, LLC, JPMorgan Chase Bank, National Association, U.S. Bank National Association and CION Investment Management, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on September 1, 2016 (File No. 814-00941)).10.18Sale and Contribution Agreement, dated as of August 26, 2016, by and between 34th Street Funding, LLC and CĪON Investment Corporation (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on September 1, 2016 (File No. 814-00941)).10.19Master Participation Agreement, dated as of August 26, 2016, by and between 34th Street Funding, LLC and CĪON Investment Corporation (Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on September 1, 2016 (File No. 814-00941)).10.20Portfolio Management Agreement, dated as of August 26, 2016, by and between 34th Street Funding, LLC and CION Investment Management, LLC (Incorporated by reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed with the SEC on September 1, 2016 (File No. 814-00941)).10.21Guarantee of CĪON Investment Corporation dated as of August 26, 2016 (Incorporated by reference to Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed with the SEC on September 1, 2016 (File No. 814-00941)).10.22Amended and Restated Loan and Security Agreement, dated as of September 30, 2016, by and among 34th Street Funding, LLC, JPMorgan Chase Bank, National Association, U.S. Bank National Association and CION Investment Management, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2016 (File No. 814-00941)).10.23Release and Termination Agreement, dated as of September 30, 2016, by and among CĪON Investment Corporation, 34th Street Funding, LLC and JPMorgan Chase Bank, National Association (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2016 (File No. 814-00941)).10.24Amended and Restated Portfolio Management Agreement, dated as of September 30, 2016, by and among 34th Street Funding, LLC, CION Investment Management, LLC and JPMorgan Chase Bank, National Association (Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2016 (File No. 814-00941)).10.25Credit and Security Agreement, dated as of March 29, 2017, by and among Flatiron Funding II, LLC, CION Investment Management, LLC, CĪON Investment Corporation, Citibank, N.A. and U.S. Bank National Association (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2017 (File No. 814-00941)).10.26Account Control Agreement, dated as of March 29, 2017, by and among Flatiron Funding II, LLC, CION Investment Management, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2017 (File No. 814-00941)).10.27Master Participation and Assignment Agreement, dated as of March 29, 2017, by and between 15th Street Loan Funding LLC and Flatiron Funding II, LLC (Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2017 (File No. 814-00941)).10.28Master Participation and Assignment Agreement, dated as of March 29, 2017, by and between 15th Street Loan Funding 2 LLC and Flatiron Funding II, LLC (Incorporated by reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2017 (File No. 814-00941)).10.29Contribution Agreement, dated as of May 19, 2017, by and among CÎON Investment Corporation, Murray Hill Funding, LLC and Murray Hill Funding II, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.30Indenture, dated as of May 19, 2017, by and between Murray Hill Funding II, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.31Murray Hill Funding II, LLC Class A Notes Due 2027 (Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.32Contribution Agreement, dated as of May 19, 2017, by and among UBS AG, London Branch, Murray Hill Funding II, LLC, U.S. Bank National Association, Murray Hill Funding, LLC and CION Investment Management, LLC (Incorporated by reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.33October 2000 Version Global Master Repurchase Agreement, by and between UBS AG and Murray Hill Funding, LLC, together with the related Annex and Master Confirmation thereto, each dated as of May 19, 2017 (Incorporated by reference to Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.34Collateral Management Agreement, dated as of May 19, 2017, by and between CION Investment Management, LLC and Murray Hill Funding II, LLC (Incorporated by reference to Exhibit 10.6 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).10.35Collateral Administration Agreement, dated as of May 19, 2017, by and among Murray Hill Funding II, LLC, CION Investment Management, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 10.7 to Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 814-00941)).31.1Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.31.2Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.31.3Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32.1Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.3Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





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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: August 11, 2017


CĪON Investment Corporation


(Registrant)


By:/s/ Michael A. ReisnerMichael A. ReisnerCo-Chief Executive Officer(Principal Executive Officer)


By:/s/ Mark GattoMark GattoCo-Chief Executive Officer(Principal Executive Officer)


By:/s/ Keith S. FranzKeith S. FranzChief Financial Officer(Principal Financial and Accounting Officer)








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